Argentina’s government provides details on relaxing of currency controls

BUENOS AIRES, Argentina – Argentines will be able to buy up to $2,000 per month if they’re up to date with their tax payments, the government said on Monday during the release of the first details of its easing of currency controls.

Argentina announced on Friday it was relaxing restrictions on the purchase of U.S. dollars. The decision was forced by double-digit inflation and the hardest drop in the local peso’s value in 12 years.

Cabinet Chief Jorge Capitanich said on Monday that to buy dollars, Argentines must also earn a net minimum of 7,200 pesos or about $900 per month. Capitanich said the tax rate for cash purchases will be lowered to 20 per cent from the current 35 per cent. The tax rate will not be charged if the currency remains in an account for at least 365 days.

Wage-earners will also be able to save in dollars. But Capitanich cleared up that the Argentine tax rate on credit card purchases made in dollars abroad will not be lowered to 20 per cent from the current 35 per cent, as he had announced last week.

Argentina is suffering a shortage of greenbacks due to one of the world’s highest inflation rates, low foreign investment and the country’s inability to tap global credit markets after a massive debt default during its 2001-2002 economic crisis.

The centre-left government relies on Central Bank reserves to meet its debt payments abroad and finance infrastructure at home. But the reserves have plunged to about $29.5 billion, their lowest level in more than seven years.

The tough currency restrictions that began in 2011 have backfired by pushing many Argentines to the black market in search for dollars, and in turn, stoking inflation, which is estimated at around 30 per cent.

After Friday’s announcement, the black market dollar weakened to 11.8 from 13 pesos, while the official rate held roughly stable at an average 8 pesos to the dollar.