MercoPress. South Atlantic News Agency

Do you trust this Lady to look after your dollar savings?

President Cristina Fernandez needs to recover Central bank reserves

The administration of President Cristina Fernandez sent on Wednesday to congress the tax amnesty bill to tap undeclared dollar assets, in the country and overseas, generating a cascade of critical reactions from well known economists while the ‘blue dollar’ in the parallel market seemed to ignore the announcements and kept climbing to a new record high.

Former Central Bank Governor Alfonso Prat Gay said the government of President Cristina Fernandez with the tax amnesty is trying to stop the leak of treasury reserves and making fools of those good citizens that comply with the law and pay taxes.

“The national government has just given another sign of its downfall. They are desperate for collecting reserves and they don’t care if the cash has illegal origins“, the economist told a local Buenos Aires radio.

”They are just trying to stop the abrupt fall of foreign currency reserves, which have edged down by 8 billion dollars since the start of the dollar restrictions [almost two years ago], by now trying to tempt under-the-table dollar savings.”

With Tuesday’s announcement the government was basically saying to the millions of Argentines that pay their taxes: “Hey, you are all stupid since what we really want is the greenback from those who don’t pay taxes, and now we are going to award them so they can bring their cash back”.

Likewise, an opposition leader, Deputy Ricardo Alfonsín from the Radical Party stated that “the government proves to be wrong once again. They can't announce such a thing as this ‘whitewash plan’ when reports on corruption within the government and money-laundering are piling up day after day.”

Another former Central Bank President, Martín Redrado, also questioned the tax amnesty proposed by the national government, doubting of “savers seriously willing to trust their dollar to this government.” He added there is a total sense of uncertainty which “makes people look askance at government policies”.

“Would you give your dollars to the government? Yes or no? That’s the question and the key for this plan to work or not in is the answer.”

Former Economy Minister Martín Lousteau played down the government’s tax amnesty plan by saying “It doesn’t fix the large gap between the official and parallel dollar exchange rates nor modify the dynamics of the Central Bank reserves.”

“Reserves are constantly going down, plus the problem with the so called “blue dollar” that operates in a parallel exchange market can be only solved with better investment options than the ones announced. It is known that every time Argentina goes through a period of uncertainty, the people buy certainty by acquiring foreign currency.”

“The measures proposed are just another patch that won’t solve the real problems with the economy. As far as you put patch over patch all you are doing is creating a Frankenstein economy”.

Member of Congress Carlos Heller considered said that if the whitewash bill proposed by the government “succeeds”, then restrictions for buying and saving in foreign currency “should be lifted”.

Heller, a Kirchnerite lawmaker that presides the Finance committee of the Lower House, told reporters that “if the approximately 160 billion dollars that are out of the system, meaning undeclared, get back to the country’s economy, then there shouldn’t be any restrictions for buying foreign currency.”

Likewise, the Deputy recognized that the bill as announced “generates a huge sensation of injustice as it forgives those who had not complied with the law as according to the neither bill they will be sanctioned nor pay any taxes.”

However, Heller assured that “though the project has its cons, it can be used for the benefit of the society as a whole”.

Another economist, Carlos Melconian said the bill goes against the world in two ways: “it ignores GAFI (*) recommendations” and it is hard to see Argentina integrating with Latinamerican countries which apply prudential macro measures”.

(*) GAFI or Financial Action Task Force (FATF) is an inter-governmental body established to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.