By Anthony Boadle
BUENOS AIRES Dec 3 Argentina toughened its
currency controls on Tuesday to stem a dramatic depletion of its
international reserves by making it more costly for Argentines
to travel abroad and buy foreign goods with their credit cards.
Shut out of financial markets since a massive default a
decade ago, the Argentine government for three years now has had
to burn up reserves generated mainly by grain exports to finance
its imports and pay debts.
A measure published in the official gazette by the tax
collection agency AFIP raised the tax on credit card purchases
outside the country, tourist holiday packages and plane tickets
to 35 percent from 20 percent.
The same 35 percent tax will now be levied on the limited
amounts of dollars that Argentines can buy from the government
to travel, known as the tourist dollar.
"We believe there is a drain on foreign currency through
tourism," Cabinet chief Jorge Capitanich told reporters. "We
have to manage our reserves very carefully to guarantee the flow
of industrial inputs needed to boost economic growth."
Argentina's international reserves have fallen almost 30
percent this year due to a scarcity of export dollars and
investment by foreigners who distrust President Cristina
Fernandez's heavy-handed interventionist policies.
In April, central bank reserves fell beneath $40 billion for
the first time since May 2007 and have since fallen further to
below $31 billion, down from $43.3 billion at the end of 2012.
If the government cannot stop the drain, it may find itself
without enough foreign currency to honor its debts or pay for
the country's energy imports, eventually leading to economic
collapse in the world's No. 3 corn and soybean exporter.
The government also uses dollar reserves to intervene in the
currency market to prop up the official value of the peso.
Reserves are further depleted by Argentines buying goods
overseas on trips and on-line. Strict currency controls
introduced in 2011 have led locals to shop more overseas with
credit cards, which have to be paid in U.S. dollars.
Argentines buy dollars to shield their savings against
rampant inflation - which private economists say is running at
around 25 percent - and the currency restrictions have fueled a
flourishing black market where the dollar trades at more than 50
percent higher than the official rate.
The peso closed Monday at 6.1565 to the dollar and traded at
9.22 pesos on the unofficial market. With the 35 percent
tax, the tourist dollar for travel will cost about 8.31 pesos.
Economists estimate tourism depletes the central bank's
reserves by between $600 million and $800 million a month.
But some say currency controls just create more distrust of
the government and will not solve its dollar crunch.
"This is a ridiculous step that again hurts the private
sector," said economist Jose Luis Espert, who said the root of
the problem is the third-largest fiscal deficit this decade.
"The government is financing it by printing pesos, but
Argentines don't want pesos and spend them on travel or convert
them into dollars," Espert said.
Expectations that the foreign currency drain will force the
government to devalue has led grain exporters to retain stocks
to hold out for a better rate, further depriving the central
bank of dollars.
After a decade maintaining an overvalued peso to keep the
lid on inflation, the central bank has accelerated its gradual
devaluation of the peso on the interbank market in recent weeks,
fueling further speculation that an official devaluation is on
According to government estimates, farmers are holding back
as much as $6.3 billion worth in soybean exports.