Argentina restricts access to U.S. dollars through financial mechanisms

RIO DE JANEIRO, BRAZIL – Argentina imposed this Monday (11) a new restriction on accessing U.S. dollars through more sophisticated financial mechanisms, seeking to avoid new escalations in the U.S. currency price in the domestic market.

The measures were adopted by the National Securities Commission (CNV), Argentina’s market regulator and the Central Bank; they will affect transactions involving purchasing and selling public bonds and shares whose final objective is to obtain US dollars.

After applying the new restrictions, the so-called “financial dollars” price quotations fell slightly this Monday.

The so-called “cash with liquidation” (CCL) dollars – those obtained by buying shares or bonds with Argentine pesos and selling them in dollars on Wall Street – fell 0.3 % to 166.69 pesos per dollar, after having reached 167.26 pesos last Thursday, its highest value this year.

Meanwhile, the “stock exchange dollar” or “MEP dollar” -which is obtained by buying assets that are quoted both in pesos and dollars, paid in pesos, and sold in dollars- fell 0.4% to 165.71 pesos per unit, after reaching 166.45 pesos per unit last week, its highest value so far this year.

According to a statement issued by the CNV on Monday, the new measures are aimed at “containing systemic risks and providing price stability in the trading of negotiable securities, within the framework of the current economic policy.”

Market analysts interpret the new restrictions as an attempt by the Argentine authorities to avoid greater exchange rate pressures ahead of the primary elections in September and the legislative elections in November, events during which the demand for dollars for hedging purposes tends to increase in the South American country.

They also expect a lower inflow of foreign currency to the country through exports, which would limit the Central Bank’s power of intervention in the exchange market.

CONTAINING THE GAP

“The tightening of exchange restrictions responds to the risks of greater pressures on the exchange rate in the coming months. The demand for hedging is growing ahead of the elections and in the midst of very deteriorated expectations regarding economic conditions as we advance,” said the firm Portfolio Personal Inversiones (PPI) in a report on Monday.

According to PPI, these measures seek to keep under control the gap between the financial dollar and the currency’s quotation in the official wholesale market, where the currency closed this Monday at 96.09 pesos per dollar.

This exchange rate gap impacts the expectations and decision-making of the different agents of the economy.

The behavior of these quotations also influences other exchange markets, such as the informal retail market, where the dollar jumped 5 pesos this Monday to 179 pesos, its highest value since October 2020.

The gap is also high between the price of the dollar in the informal market and its value in exchange houses and banks, where the sale to the public also has strong restrictions.

The dollar at the state-owned Banco Nacional closed this Monday without change, at 101 pesos.