November 11, 2011 / 7:06 PM / 6 years ago

Argentine savers speed withdrawals of U.S. dollars

BUENOS AIRES (Reuters) - Fear of restrictions on access to dollars in Argentina prompted depositors to speed up withdrawal of greenbacks from their bank accounts this week, pushing interest rates up as the state acts to slow the outflows.

A man walks out of a foreign exchange house in Buenos Aires November 8, 2011. REUTERS/Marcos Brindicci

Argentines, many of whom traditionally save in dollars, have been seeking more and more of the U.S. currency while concerns mount about the world economy. Analysts warn of possible effects on domestic consumption, which has helped drive local economic growth in recent years.

Banks contacted by Reuters say they have lost between 10 percent and 18 percent of their deposits since two weeks ago when the government applied currency controls to try to preserve dollar reserves.

The rate of withdrawals sped up from the previous week when banks bled 4.2 percent of deposits, reducing them to $15.4 billion, according to official figures released on Friday. Meanwhile, local currency deposits were unchanged.

“Withdrawals are at about 15 percent,” a spokesman for one of the country’s banking associations told Reuters, speaking on condition of anonymity.

Clients are pulling out about $150 million to $170 million a day, the source said.

A central bank spokesman declined to comment.

Soon after winning re-election on October 23, President Cristina Fernandez clamped down on access to U.S. dollars in a new bid to halt capital flight and tax evasion.

But many Argentines and economic analysts see the move as a bid to forcibly cut demand for greenbacks.

The local economy has a high degree of informality. Many transactions — such as paying rent and buying real estate — are carried out in U.S. dollars. Slowing those transactions could also have a cooling effect on the economy.

“People taking their dollars out of the bank naturally leads to an increase in interest rates,” said Eurasia Group analyst Daniel Kerner.

“That may reduce banks’ ability to lend, which in the end, could have an impact on economic activity, especially given that a big part of economic growth is driven by domestic consumption,” Kerner said.


There is concern that the exit of dollars could weaken banks’ ability to pre-finance grains and other exports, threatening to slow another motor of Argentina’s economy. The country is a major world supplier of soy, wheat and corn. Its thriving car industry exports mostly to neighboring Brazil.

Argentine banks typically lend money to export companies to pay initial shipping costs, and those companies pay the banks back once they have collected the export revenue.

“There is much less available for dollar loans,” one Buenos Aires-based exporting executive told Reuters. “And it may get worse.”

Another concern is the widening spread between Argentina’s official exchange rate and the informal one.

The difference was at 14.6 percent this week with the informal rate creeping toward 5 pesos per dollar.

Argentina’s economy expanded 9.2 percent last year and has kept growing in 2011 at an annual rate of about 8 percent.

But memories of the frantic bank runs that punctuated the country’s 2002 financial crisis remain fresh in many minds.

Investors fret that Fernandez’s unorthodox policies, which have included the state takeover of private pension funds and curbs on grains exports, will leave the country vulnerable to fallout from the troubled global economy next year, particularly if China, a key commodities client, slows down significantly.

“The shift from pesos to dollars will have a negative effect on banks’ profitability, since lending will be curtailed,” local economist Guillermo Nielsen said.

“Although the level of leverage of the Argentine economy is relatively low,” he added, “this will undoubtedly have a negative effect on overall growth.”

Reporting by Hugh Bronstein and Jorge Otaola; Additional reporting by Walter Bianchi; Editing by Jan Paschal

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