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.