Argentina: Central Bank tightens capital controls to smooth transition process
On 27 October, the Central Bank of Argentina (BCRA) significantly tightened restrictions on dollar purchases, in a bid to stabilize the exchange rate and limit outflows of foreign reserves following the victory of Alberto Fernández in general elections on the same day.
The BCRA slashed the amount of dollars individuals could buy from USD 10,000 per month to USD 200 per month. The measure will be in place until December, when the new Peronist government will take over the reins, and is meant to stabilize the exchange rate, curb dollar demand and smooth the transition process. Since 1 September, the Central Bank of Argentina (BCRA) had restricted dollar purchases to USD 10,000, in an effort to support the peso and combat financial turmoil which followed the crisis of confidence triggered by August’s primary elections.
Although measures to contain capital flight have so far helped contain the depletion of foreign reserves, there is growing evidence that they are fueling a parallel market for the USD and, in the likely event that the new government does not abolish them, will further drag on investment activity ahead.