RIO DE JANEIRO, BRAZIL – Argentina announced new measures to strengthen exchange control in the country to close the gap between the official dollar exchange rate and the selling price of the American currency in the parallel market.
The Central Bank targeted CCL transactions (Contado Con Liquidación), also called ‘blue-chip swap’ or ‘dollar cable’, used by investors and companies to buy assets in Argentine pesos and resell them abroad to obtain foreign currency.
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The measures were announced on Thursday night. The Central Bank said that the settlement of dollar-denominated securities must be made directly in the account of the holder of the papers, not in custody accounts or third-party accounts, as was previously the case.
The rules, according to the monetary authority, aim to combat money laundering and tax evasion.
In the market, however, the decision was seen as an attempt to reduce the volume of dollar operations in the financial market and contain the pressure of this movement on the dollar’s official quotation. This way, Argentina would avoid spending important dollars from its reserves to control the exchange rate.
Analysts predicted earlier this month that the Central Bank would spend US$2 billion to hold the dollar rate until the legislative elections on November 14. Maintaining exchange rate stability is seen as essential to the success of the ruling coalition in the election, at a time when annual inflation is already over 50% in the country.
With the actions of the Central Bank, the CCL “dollar cash with settlement” rate fell today by 2%, to 168 Argentine pesos. However, the so-called blue dollar, traded on the parallel market, soared and reached 181 pesos for sale. With this, the difference from the official exchange rate (97 pesos) rose to 86%.
CCL OPERATIONS
CCL is the implied rate when people use securities (bonds or stocks) priced in US dollars in the United States and pesos in Argentina to move currency between markets.
This operation is used by individuals or companies that need to move money in and out of Argentina legally. For the money currently in Argentina, this is the only way to legally move the funds out of the country such that the paper trail is obvious and declared on both ends of the transaction.
For money outside of Argentina, this is how to move funds legally into the country and take advantage of a preferable exchange rate (compared to transferring the money via a bank and only getting the official rate).
Contrary to popular belief, this transaction was not as easy as snapping one’s fingers. You need a brokerage account with a Sociedad de Bolsa in Argentina (custody accounts or third-party accounts that are now being targeted) and have to demonstrate the source of the funds as well.
The securities must be held for two to five business days before being liquidated into cash. Finally, this transaction consistently faces scrutiny from the federal government.