Argentina’s reserves drop after exchange controls relaxed

Two days after the government eased controls on Argentineans’ rights to purchase dollars, the country’s reserves at the end of Tuesday stood at $28.701 billion — $188 million less than the day before, the nation’s central bank reported Wednesday.

According to the nation’s tax and currency exchange agency AFIP, Argentineans each bought an average $578 on Tuesday at different banks around the country.

President Cristina Fernández de Kirchner, who was in Havana for the Community of Latin American and Caribbean States (CELAC), cut her visit short and returned to Buenos Aires on Wednesday to deal with the dollar crisis.

The Argentinean government decided to lift controls in order to deal with the sharp devaluation of the peso, fueled in part by speculation and soaring purchases of dollars on the black market.

Fernández de Kirchner reportedly asked for support from Latin American leaders to help head off a panic and a ballooning financial crisis in her country, Buenos Aires daily La Nación reported on Wednesday. It was not immediately known what help she asked for.

At a news conference early Wednesday, Cabinet chief Jorge Capitanich played down the flurry of exchanges, saying that Argentineans purchased some $13 million of the $100 million they had originally requested to buy.

The country’s central bank explained that the drop in reserves was due to the selling of dollars. Argentina’s reserves are at their lowest since 2006.

Blasting speculators

Capitanich accused speculators of making purchases on the black market rate (the so-called “blue dollar”), which was selling for just under 13 pesos. He associated such transactions with “drug trafficking, money laundering and tax evasion.” Still, the blue dollar rate was down from last week before the government officially relaxed controls. The government’s official dollar rate closed on Tuesday at 8.01 pesos.

At the same time, the government threatened to issue higher fines — including closures — against businesses involved in price gouging.

“The speculative conduct by many storekeepers and businessmen in Argentina is disgusting,” said Capitanich, who added that the government has already issued more than 30 fines against appliance centers for selling their products at high prices.