* Dollar demand rises as government tightens controls
* Firms, institutional investors buy assets traded abroad
* Gap between official peso and black-market rates growing
By Jorge Otaola
BUENOS AIRES, March 27 Argentina's peso sank to a record low on Tuesday in a market used to skirt tightened currency controls as companies and investors upset over combative government policies seek refuge in greenbacks, traders said.
The peso slid to 5.25 per dollar in the so-called blue-chip swap market, which reflects the implied exchange rate used to buy Argentine shares or bonds that can be sold for dollars overseas. The official interbank rate was 4.3725.
Center-left President Cristina Fernandez, after winning re-election in October, imposed curbs on foreign currency purchases to stem capital flight, fueling a growing gap between the interbank rate and the black market rate.
Her government has also effectively limited the transfer of profits abroad and created new import controls, complicating operations for firms involved in foreign trade.
The blue-chip swap rate has sunk 8.6 percent since the start of the year, while the parallel or black-market rate in Argentina shed about 4 percent to 4.92 per dollar. The interbank peso has weakened just 1.5 percent in the same period.
Stepped-up government pressure on the country's largest energy company, YPF , has also fed into dollar demand as worries about increased state intervention in the economy flourish.
"It's clear that capital flight is being spurred by the increasingly uncertain political and economic environment, in which the rules of the game are constantly being changed," said Marcelo Trovato, an analyst at Pronostico Bursatil consultancy.
Capital flight surged last year to $21.5 billion, nearly doubling from a year before as Argentines dumped their pesos because they expected the government to allow a sharp depreciation in the formal market, which never materialized.
High inflation has eroded the local currency's competitive edge for exporters, but a significant depreciation would only worsen inflation in the short term.
Argentina has not tapped global credit markets since a massive sovereign default in 2002 and it uses central bank reserves and loans from state agencies to keep government finances afloat. Critics say this further feeds inflation.
Consumer confidence last month dropped by the biggest percentage since April 2009, when the country's economic growth screeched to a halt due to a global financial crisis.
Fernandez's popularity also took a dive this month, hitting a 13-month low as the economy slows and restrictions imposed on dollar purchases likely rile the middle class.
While everyday Argentines use the black market to get around limits on dollar purchases, firms and institutional investors have been buying local bonds and company shares that trade abroad to get their hands on greenbacks.
"Investors and companies want dollars at any cost. They don't care if they have to pay more than 5 pesos apiece," a currency trader at a local brokerage said.
The most sought-after American Depositary Receipts (ADRs) are those of Tenaris , Grupo Financiero Galicia , and Banco Macro .
Demand for bonds has been focused on dollar-denominated Boden 12s, Pars and Discounts , traders said. (Writing by Alejandro Lifschitz and Hilary Burke; Editing by Chizu Nomiyama)