On September 1st, Argentina’s government has imposed capital controls to stop a slump in foreign currency reserves and the peso that has pushed the country to the brink of default.
The announcement comes as Argentina’s currency crisis spirals out of control. About $3 billion drained out of foreign currency reserves between 29 and 30 august alone as the government struggled to repay short-term debt and slow the drop in the peso.
The financial crisis has also been exacerbated by Macri’s defeat in a recent primary poll. The peso collapsed more than 25% last month after primary election results showed the market-friendly government of Macri has little chance of retaining power in October’s polls. President Macri has given up trying to restore investors’ confidence and has instead resorted to the policies he had criticized his predecessors for imposing.
Briefly, the central bank will now requires exporters to repatriate within 5 days earnings from sales abroad, while all companies, not just banks, must seek authorisation to sell pesos for foreign currency. Individual Argentines will be limited to dollar purchases of no more than $10,000 a month. These measures, which will be effective until December 31, 2019, were designed by the Argentine Government as a temporary emergency solution to prevent the dollarization of certain cash flows.
For now, these measures are not affecting directly our business in Argentina as we are not an export company and sale locally in peso our beef production. However, we believe this is an initial step of a return to heavy state intervention.