Argentina late on Sunday tightened currency controls after the opposition’s Alberto Fernandez won the presidential election.
The central bank is to restrict US dollar purchases by savers to US$200 per month compared with the US$10,000 per month previously, the central bank said in a statement.
Central Bank of Argentina President Guido Sandleris was expected to give a press conference at 8:30am yesterday in Buenos Aires.
The move looks to preserve international reserves during the political transition, which culminates in the handover on Dec. 10, but risks causing the black market exchange rate to skyrocket.
Last week, Argentines rushed to buy US dollars and withdraw deposits ahead of the vote on concern that more controls were coming amid an economic crisis.
“Restricting dollar purchases in Argentina probably won’t ease pressure on the peso, with the weaker bias for the currency likely to continue,” said Toru Nishihama, emerging-market economist at Dai-ichi Life Research Institute in Tokyo. “Concerns about a potential default and deterioration of the nation’s fiscal condition will linger.”
Fernandez swept to victory in the first-round election with 48 percent of the vote against 40 percent for Argentine President Mauricio Macri. His win signals the return of Peronism — an anti-elite political movement that traditionally favors workers over business owners.
However, while voters rejected the austerity of Macri’s government, the outcome was also tighter than expected.
Macri imposed capital controls at the beginning of September last year after the peso plunged following August primaries in which Fernandez trounced the incumbent by 16 points. Reserves continued falling amid capital controls and now stand at US$43.5 billion.
Argentina’s bonds are trading in deep distressed territory, about 40 cents on the US dollar, and the government has said it wants to extend maturities with private creditors and the IMF.
That chore is likely to fall to the incoming government, although Fernandez has yet to lay out an economic plan or name his cabinet.
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