MercoPress. South Atlantic News Agency

Argentine government ‘dollar clamp’ suffers another court defeat

Central bank governor Marcó del Pont, the hike in the so-called “blue” dollar is “clearly a seasonal phenomenon”

A court in the Argentine province of Cordoba ordered the Banco Nación to sell US dollars to a teacher, after she was authorized by AFIP tax agency to purchase Brazilian Reais, but could not do so due to lack of currency.

Under the cumbersome ‘dollar clamp’ system imposed by the administration of President Cristina Fernandez Argentines have limited access to foreign currency and since last July are banned from saving in US dollars. The Argentine president went as far as publicly reprimanding several of her ministers for having savings in US dollars.

Because of the controversy over pending defaulted bonds Argentina remains outside the voluntary money markets and the Central bank and Treasury need to accumulate sufficient US dollars to pay for imports and to honour foreign debt, capital and interest.

However in this case the teacher from Rio Cuarto City and planning for holidays in Brazil complied with all the paperwork and finally was allowed by the AFIP tax office to buy Brazilian Reais for the equivalent of 6.745 Pesos (approx 1.200 dollars at the official rate of 4.95 Pesos to the US dollar). But no exchange bureau or bank would sell her the Brazilian currency.

Her lawyer, Mariela Fillipi filed an urgent an urgent junction in which she requested a federal court to allow the teacher to purchase dollars instead of Reais which was accepted.

In related news the Argentine Central Bank Governor Mercedes Marcó del Pont said that the hike in the so-called “blue” dollar is “clearly a seasonal phenomenon” and considered that “it should not affect the costs set by price-makers.”

Marcó del Pont highlighted that the “blue” dollar’s influence is “marginal and does not affect exchange market operations” where the Argentine government since last July 5 prohibited the purchase of foreign currency for saving purposes.

“The dollar bill has been linked to the demand due to tourism, with a high seasonal impact,” said Marcó del Pont, also linking it to “black market activity” which cannot access the official market. However, Argentine tourists who wish to travel abroad and who have obtained clearance from the AFIP tax agency to purchase foreign currency complained that when the time to purchase comes, banks or exchange offices inform them that they are not cleared for such operation.

The “blue” or parallel dollar closed on Friday at 7.30 Argentine Pesos, which compared to the price offered in banks and exchange offices of 4.96 Pesos, the difference amounts to 45.16%. In tourism destinations such as Uruguay, Chile, Brazil and Paraguay the Argentine Pesos are exchanged for the equivalent of 8 Pesos to the dollar.

In December 2010 the difference between both prices was around 2.5%, while in December 2011 it grew to 9.72%, the rising difference being due to the national government implementing more control of the foreign currency market. At the end of 2012, when the official dollar price was around 4.90 Pesos and the “blue” at 6.79 Pesos, the difference was 37.7%.

Argentine economists consider that the hike in the “blue” dollar price, which has already increased 6% in the first ten days of 2013, reflects an exchange gap which is not registered on the formal market, and which will derive in higher inflation.

However contrary to what had been strict policy, President Cristina Fernandez in her latest national broadcast, the first one of 2013 mentioned five times the word “inflation,” which came as a surprise to many.

After denying for years the increase in prices, President Cristina Fernandez and her cabinet started to recognize in a indirect manner that the national statistics bureau INDEC methods, which are severely criticized and questioned locally and internationally, do not reflect the real price situation.

One of the leaders from the main opposition Radical party Deputy Ricardo Alfonsin said in an interview that inflation in Argentina is caused by the government’s “clumsiness” and “ineptitude” plus a soaring budget deficit and profligate spending.

Buenos Aires City Cabinet Chief Horacio Rodríguez Larreta said that the recognition of an increase in prices is “good news” adding that “acknowledging the problem is part of the solution”.

Although official Indec inflation is below two digits, private sector and unions’ estimates, based on an average of several economic advisory offices and released monthly by opposition members from Congress put the index in the range of 24%, while inflationary expectations are estimated by Torcuato Di Tella University Economy and Polling Department at over 30%.

Argentina is also among the six countries with the highest inflation rate in the world, a list which includes four countries involved in violent civil strife.