Miguel Pesce, president of Argentina’s central bank, speaks during an interview in Buenos Aires, Argentina, on Wednesday, Jan. 8, 2020. Argentina’s new central bank president pledged to further cut interest rates to boost a free-falling economy while fighting inflation through a « social pact » that would encourage companies to raise production rather than prices. Photographer: Maria Amasanti / Bloomberg (Maria Amasanti /)

The president of the Central Bank, Miguel Pesce, announced a series of measures aimed at curbing the drain of reserves in the foreign exchange market. The decisions establish more rigid limits for the purchase of foreign currency for savings, card expenses in foreign currency and exchange operations with bonds. They will also limit the ability of companies to pay debt in dollars, they will ask that they be refinanced without paying capital. On the other hand, it also facilitates the sale of dollars on the Stock Market at a parallel exchange rate in order to calm the financial prices of the currency.

« Together with the Economy and the National Securities Commission (CNV) we are going to take a series of measures to improve the circumstances that are occurring in the exchange and securities market, » Pesce said at a press conference.

“As you know, the BCRA has to sell currencies in the exchange market. The reasons for this are concurrent. Demand for dollar savings, private debt maturities that local companies are servicing with pesos. Later we also face difficulties regarding the reference dollars used by the securities market, the so-called cash settlement and MEP ”, said the central banker.

“We are going to take a series of concurrent measures with other organizations. Regarding savings dollar, withholding of income tax of the order of 35% for purchases of savings dollar and payments with credit cards abroad. We are going to, on the one hand, clearly establish what are the conditions for opening bank accounts in dollars. Until now, banks applied a simplified due diligence criterion that makes sense for accounts in pesos but not in dollars. They are going to have to make an income assessment so that the person who opens an account shows that they have their own income to be able to make savings in foreign currency ”, he added.

“Payments made by credit card abroad will be on account of the possibility of buying savings dollars. There is no limit for cards, but those purchases will be on account of future purchases they can make for dollar savings. If you have a credit of USD 1000 with the card, for example, for five months you will not be able to access the exchange market, « he said.

In addition, to limit purchases of dollar savings, « in the event that there are multiple holders, the limit of USD 200 will apply for the account and not for each person. »

“The CNV will establish transparency mechanisms that will seek that these operations are carried out through local institutional markets and authorized agents. Prohibit non-residents from being able to settle securities against foreign currency in institutionalized markets ”, he added.

“Also a limitation for those who acquire over the counter securities abroad, so that they cannot settle them in pesos in the local market. Concurrently, the CNV is going to establish a 15-day parking for the transfer of securities acquired with pesos, « the official explained.

“Also eliminate parking for the acquisition of titles in the local market. This will allow those who have dollars to be able to buy securities and sell them against pesos without waiting 5 days. This will facilitate the access of residents to the purchase of securities with foreign currency and their eventual sale against pesos in the market. The purchase with pesos maintains the parking for 5 days, also for the transfer abroad ”, added Pesce.

“The CNV is going to prohibit the Stockbrokers from carrying out operations outside the institutionalized markets within the country. So that operations with securities against dollars are transparent and are registered in the local market ”, said the central banker.

Obstacles to the payment of company debt

“Finally, from 2015 to 2019, not only the public sector debt grew, but also the external private financial debt. About 20,000 million, a growth of 84%. Our market presents 13 consecutive months of net cancellation and maturities of 3.3 billion dollars in the next 6 months. We are going to ask companies with maturities of more than USD 1 million per month to present a restructuring program for that debt, « he added.

“We are proposing that 60% of the maturities to 2 years of average life be refinanced. No postponements in the payment of interest. The intention is that the companies present us with a restructuring plan, see if these presentations improve the profile of the maturities of private financial debt. In this we have found a virtue of difficulty: the lowering of the rate has allowed many companies to take on debt in pesos to cancel debt in dollars, this is causing us difficulties in the exchange market, « he added.

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