Economy Minister Alfonso Prat-Gay has announced the end of currency controls in Argentina, effective immediately. The move comes after four years of restrictions.
Economy Minister Alfonso Prat Gay announces the end of currency restrictions (Photo via Prensa Argentina)
“The regulatory situation for currency exchange will return to how it was before the introduction of currency controls in November 2011,” Prat-Gay said in a press conference this afternoon. “Those who wish to export or import, to buy or sell dollars, will be able to. No-one will pursue them.”
The minister confirmed that individuals seeking to exchange currency will be able to do so without seeking prior approval from tax office AFIP, while limits for importers and exporters will also be scrapped.
He also said the 35% surcharge on travel spending with credit and debit cards will also be scrapped, though a 5% charge will remain on those buying tourism packages with case “so as to benefit those who use banks”.
The only other restriction will be a US$2m monthly limit on dollar purchases per individual.
With the controls removed, Argentina will return to having one official currency rate, which will be determined by the Central Bank in a ‘managed float’ regime.
When asked, Prat-Gay said he didn’t know what the exchange rate would be tomorrow. “The price of the dollar tomorrow will be determined by the market. But the Central Bank also has the necessary tools to intervene if it rises or falls too much.”
Local analysts expect an initial exchange rate of between US$14 and US$15, marking a devaluation of around 50% from the current level.
Campaign Promise
Prat-Gay reiterated that by lifting the currency controls – which he said had caused economic stagnation – the government will fulfilling one of the key campaign promises made by President Mauricio Macri.
In order to remove currency restrictions without causing a crisis, the minister said they had wanted a guaranteed inflow of at least US$10bn to shore up the Central Bank’s international reserves. To do this, Prat-Gay the government is negotiating several lines of financing, including foreign banks, grains producers, and local companies, and estimated that there would be an influx of US$15-25bn in the next four weeks.
The minister added that the cabinet would maintain the ‘precios cuidados‘ programme and isworking on several proposals to contain the inflationary impact of the devaluation.
However, there was criticism of the measure from the opposition. Former economy minister and legislator for the Frente para la Victora (FpV) Axel Kicillof stated that “this is a devaluation, there is no other name for it.”
Kicillof added that it was “absolutely orthodox and in accordance with what the IMF always suggests.”
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