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Argentine insurance companies ordered to repatriate foreign investments

Thursday, October 27th 2011 - 15:43 UTC
Full article 7 comments
Buenos Aires money exchange houses have a special fascination for Argentines Buenos Aires money exchange houses have a special fascination for Argentines

In a further attempt to ease the pressure on the dollar and decrease the outflow of the Central Bank's foreign currency reserves, the Argentine government ordered insurance companies to repatriate their foreign investments.

On Wednesday the Central Bank (BCRA) issued a special decree so that all export revenues generated by both mining and energy sectors remain in Argentina to be negotiated at the local foreign exchange market.

The measure was ratified by the national government through decree 1,722/2011 published in the Official Gazette, and aims to flood the local markets with fresh dollars in an attempt to control both late high demand of the US currency, and growing inflation.

Likewise the decree leaves without effect decree number 753 signed in 2004 by former President Néstor Kirchner authorizing mining and oil and gas companies to take their export revenues overseas, and shadowing decree 2,581 signed in 1964 by former President Arturo Illia (Radical Party) ordering energy companies to place all export revenues within the local market.

The decree, signed by President Cristina Fernández de Kirchner, Chief of Staff Aníbal Fernández, and Economy Minister Amado Boudou, establishes that “all foreign currency revenues obtained from exports made by mining and oil and gas companies must be negotiated within the local foreign exchange market.”

Furthermore, the decree explains that it seeks to achieve an equal treatment for all industries within the country. Thus, mining and energy companies will receive same treatment as the agricultural sector in terms of being force to leave all export revenues within the country.

Sources have estimated the measure will represent a boost of between 3 and 4 billion dollars.

In the build up to last Sunday’s election many Argentines turned to convert their savings in dollars, and it is estimated that the BCRA lost 3 billion dollars in reserves. However this is only the tip of the iceberg of a major drain in capital outflow that economists have estimated in 20 billion dollars so far this year, and 73 billion in the last four years.

Although the Argentine economy has been booming many agents feel the government is increasingly intervening in the economy, costs are soaring under pressure from strong unions and an adjustment to the whole system of subsidies to public utilities services, which absorbs billions of dollars is anticipated.

Categories: Economy.
Tags: Argentina.

Top Comments

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  • wesley mouch

    The Peronists are the Tony Sopranos of politicians. Everything that is in the country will be stolen and given to cronies. Just look at Ms Bonafini. Rich as Croseus on money CFK gave her.

    Oct 27th, 2011 - 04:24 pm 0
  • atk357

    Democratic elections??? may be!! but all CFK's measures are more left-socialist than anything else. Too much government intervention is contrary to basic business practices. What are they getting all this absurd ideas from?...I wonder why people with money converted their savings into dollars!!

    Oct 27th, 2011 - 05:47 pm 0
  • O gara

    too much government intervention is indeed contrary to basic business practice but too little seems to be contrary to best care for people practice.
    Argentines right now notice that government intervention has brought indudtrialization and prosperity while under De la Rua and Menem what you call good business practice led to mass poverty.
    interestingly all the counries growing rapidly over the last decade have huge government intervention in their economies with of course China being the classic example.Certainly cronyism is a precursor to certain levels of corruption but light regulation certainly did wonders for Ireland didnt it?

    Oct 27th, 2011 - 06:10 pm 0
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