Argentine BC freezes dollar balance in the country’s banks – 10/13/2023 – Market

Argentina’s central bank has frozen the dollar balances of the country’s banks. The monetary authority limited the amount of American currency held by financial institutions to the balance held by them until this Thursday (12).

To increase the stock, banks will need prior authorization from the BC. The rule is valid until the end of October. According to economists, the objective is to stop the devaluation of the peso and inflation until the presidential elections, on the 22nd.

What banks will be able to continue doing during this period is buying Ledivs or bonds, which are securities quoted in dollars but settled in pesos. The measure does not affect individual dollars deposited in banks.

The BC also extended foreign trade restrictions to state companies and bodies.

Now, transactions by these entities will also need to be approved by Sirase, the body that grants export licenses for the services sector, as well as those of private companies. Under Sirase, transactions have been slow to be approved or have gotten stuck.

Another change is that products that could be imported in dollars immediately will also need to wait for Sirase’s verdict. The measure could delay the purchase of medicines, petroleum products and food.

The measures are a way to contain the lack of dollars in the Argentine market, after a rush for the currency in recent months.

In August, the current candidate and Economy Minister, Sergio Massa, determined a 21% devaluation of the official currency, shortly after the primary election.

The measure had been agreed with the IMF (International Monetary Fund) to unlock disbursements of the US$44 billion loan made with the body.

Furthermore, his main opponent, Javier Milei, says that, if elected, he will dollarize Argentina, abolishing the peso and the Central Bank and adopting the United States currency as its official currency.

The ultraliberal candidate leads voting intention polls. He has between 34% and 35% of the votes, according to a survey by Opina Argentina. Massa has between 29% and 30%, while conservative candidate Patricia Bullrich has between 24% and 25%.

A survey by Synopsis Consultores showed Milei with 36.5%, followed by Massa with 29.7% and Bullrich with 23.8%. “The result is open,” said Opina Argentina analyst Facundo Nejamkis.

Most pollsters have not yet released forecasts for a possible second round on November 19th.

Milei’s success in the dispute surprised and triggered a rush by Argentines for dollars.

This Friday (12), the parallel dollar, called the blue dollar, is quoted at 980 Argentine pesos.

This Thursday, before announcing the new restrictions, the BC raised the country’s annual basic interest rate from 118% to 133% (11% effective monthly). Despite being high, the Leliq (Selic’s cousin) was still below inflation. In September, consumer prices rose 138.3%, the biggest jump since 1991.

According to the monetary authority, there has been a slowdown in prices since the peak recorded in the third week of August, which would suggest that monthly inflation may slow significantly in October.

(With Reuters)