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Argentinians vacate their accounts

2019-09-03T10:52:23.846Z


Long queues in front of banks, the national currency under pressure: The economic crisis in Argentina is coming to a head. President Macri must fear for his office.



"All the people take off what they have, or at least part of it," said Julio Nuova. They wanted to have their money at home, said the 61-year-old bank customer. The capital controls introduced by the government have unsettled the people of Argentina. In the capital Buenos Aires, many people were standing in front of the branches of the financial institutions to withdraw their deposits.

In the midst of the economic crisis, Argentina had decided that the government would restrict foreign exchange trading in order to shore up the peso currency. The government of the economic Liberal leader Mauricio Macri published a decree on Sunday, according to which large exporters in the future must obtain a permission from the central bank for the purchase of foreign currency and for the transfer of foreign currency abroad. The measures are initially valid until 31 December.

For individuals who want to acquire the US currency, in the future, a monthly limit of $ 10,000. With this step, the government wants to fight the ongoing economic crisis in the country. The decree said that the measures were needed to "strengthen the regulation of foreign exchange and strengthen the normal functioning of the economy".

IMF loans of $ 100 billion

Argentina has been in recession since 2018. The unemployment rate in the South American country has risen recently. With more than 55 percent, Argentina has one of the highest inflation rates in the world. Since August 11, the peso lost nearly a quarter of its value against the dollar. At the time, Macri had lost a primary election against his leftist challenger Alberto Fernandez. This is now considered the favorite for the presidential election in October. After the historic preselection defeat in a panic - and showered the people with money. Among other things, he promised tax breaks and a higher minimum wage.

Nevertheless, the crisis worsened last week when Treasury Secretary Lacunza failed to re-finance expiring short-dated government bonds - and he therefore put in longer maturities. The heavily indebted country wants to get away with it financially. It is about bonds as well as loans from the International Monetary Fund with a total value of about 100 billion dollars.

Doubtful stabilization

Also the restriction of the foreign exchange trade could stabilize the economic situation now only after official reading. Although the official rate increased by 0.88 percent to the dollar. On the black market, however, it fell by 0.8 percent to a price of 63.5 per dollar. The prices for Argentine government bonds fell to record lows.

With the capital controls President Macri but again made a change of course. He had won the presidential election in 2015 with the promise of normalizing Latin America's third-largest economy, abandoning the controls preferred by its predecessor. "All these measures have stability as a central goal," Finance Minister Hernan Lacunza defended the move.

Central Bank President Guido Sandleris described the domestic financial system as strong. The central bank will maintain its strict monetary policy despite the currency restrictions. Financial experts like Michael Bolliger of UBS Wealth Management, on the other hand, interpret capital controls as more of a "sign of despair".

Source: spiegel

All business articles on 2019-09-03

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