Argentina tightens currency rules, affectin dollar-denominated card purchases

</p> <p>Besides discouraging people and firms from hoarding dollars, a habit that is ingrained in Argentine society as a way to protect yourself from inflation, currently at 42 percent per year, and the devaluation of the peso, the financial authority has restricted the use of credit and debit cards for products or services from abroad as well as foreign exchange operations with bonuses.</p> <p>Dollar-denominated purchases made with credit and debit cards will be deducted from the USD-200 quota. It is possible to exceed that amount, but buyers will face limits to buy foreign currency from official channels for savings.</p> <p>Argentines who buy in dollars using cards or who purchase foreign currency for savings will also have to pay a new 35-percent tax on top of an existing 30-percent so-called “solidarity tax.” Estefanía Pozzo reported to LABS that the new levy may be later deducted from the income tax for those who pay it.</p> <div class="flourish-embed flourish-scatter" data-src="visualisation/2641242" data-url="https://flo.uri.sh/visualisation/2641242/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p>“I do not believe people will stop consuming [on cross-border e-commerce channels], they will only pay more for it,” Fausto Spotorno, an economist at the Orlando Ferreres &amp; Asociados consultancy, said in an interview with LABS.</p> <p>Payments for digital services, such as Netflix and Spotify, are also covered by the new tax and considered within the ceiling of USD 200 dollars per month, as long as they are charged in dollars. Providers may bill such subscriptions in pesos to avoid the quota. “International airline tickets could also suffer a 35-percent hike in prices, if they are charged in the American currency,” highlighted Ms. Pozzo.</p> <p>The president of the BCRA, Miguel Pesce, said that it all depends on how digital services are billed: “If the company bills in dollars, if the card bill comes to you with consumption in dollars, you pay the tax and it is included in the allowance. If the company bills in pesos, if the card arrives as consumption in pesos, it does not apply to either,” he explained on Wednesday.</p> <h2>The widening gap between official and parallel rates</h2> <p>The administration was also seeking to reduce the gap between Argentina’s official exchange rate and the parallel market, but this has backfired. According to the official rate, USD 1 fetches about ARS 80. The so-called “solidarity dollar”, which was already levied and directed for those who want to buy the foreign currency for savings, jumped from ARS 103 to ARS 131 because of the new tax. The unofficial “blue” dollar, bought and sold in the parallel market has climbed from ARS 130 to 145.&nbsp;</p> <p>Julia Strada, Ph.D. in Economic Development and a director at both Grupo Banco Provincia and the Center for Argentine Political Economy (CEPA), told LABS that there was an urgent need for the government to stop daily losses of USD 150 million of <a href="https://brazilian.report/business/2019/08/15/why-is-brazilian-central-bank-selling-dollars-after-ten-years/">central bank</a> reserves.</p> <p>Another measure is aimed at dollar assets received from abroad, which now must be held for a minimum period of 15 working days. Its goal is to prevent too much speculative money circulating in the securities market.&nbsp;</p> <p>“The aforementioned decisions will restrict speculative maneuvers by investment funds that are not resident in the country and their impact on the dynamics of the financial and exchange markets,” said the central bank. Dollar-denominated assets that settle in pesos will not need to comply with the holding period, though.</p> <p>The central bank is also compelling companies with over USD 1 million in <a href="https://brazilian.report/latin-america/2020/05/25/argentinas-long-debt-default-history-imf/">monthly foreign debt payments</a> from now until March to refinance at least 60 percent of maturities. </p> <p>Argentinian President Alberto Fernández defended the new rules on the grounds that they intend to discourage hoarding of foreign currency and speculation “in a country where dollars are needed to produce, not to save.” “We are building the logic of an economy that no longer promotes speculation and wants dollars to stop being a speculation tool,” he said.</p> <p>The South American nation is headed for a 12-percent economic contraction this year, which would mark the third straight year of recession, and is just emerging from its ninth sovereign default after restructuring nearly USD 110 billion in foreign currency debt.</p> <p>New restrictions bring to mind measures implemented by former president and current vice president Cristina Fernández de Kirchner, who also imposed hard capital controls during her second term in Casa Rosada, the presidential palace, from 2011 to 2015.</p> <p>Argentina’s standing in global markets is at risk once again. The move sparked a selloff of Argentine bonds and stocks, while the price of dollars in unofficial markets spiked, widening a large gap with the official rate – the opposite of what the government intended.&nbsp;</p> <p>“It shows total desperation,” Agustín Monteverde, an economist at consultancy Massot Monteverde &amp; Asociados, told Reuters. “They have just hung a sign around their necks that says ‘meltdown’.”</p> <p class="has-text-align-center"><em><a href="https://labsnews.com/en/articles/economy/argentinas-currency-rules-card-purchases/">This article on remote work was originally published on LABS – Latin America Business Stories, a news platform covering business, technology, and society in the region for an English-speaking audience.</a></em></p> <figure class="wp-block-image size-large"><a href="https://labsnews.com/en/"><img loading="lazy" width="1024" height="124" src="https://brazilian.report/wp-content/uploads/2020/06/labs-banner-_2x-1024x124.jpg" alt="https://labs.ebanx.com/" class="wp-image-41934" srcset="https://brazilian.report/wp-content/uploads/2020/06/labs-banner-_2x-1024x124.jpg 1024w, https://brazilian.report/wp-content/uploads/2020/06/labs-banner-_2x-300x36.jpg 300w, https://brazilian.report/wp-content/uploads/2020/06/labs-banner-_2x-768x93.jpg 768w, https://brazilian.report/wp-content/uploads/2020/06/labs-banner-_2x-610x74.jpg 610w, https://brazilian.report/wp-content/uploads/2020/06/labs-banner-_2x.jpg 1320w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure> <p>