Amid mounting capital flight, Argentine banks impose $10,000 cap for dollar purchases

[sandensea]

Facing an escalation in demand for U.S. dollars and accelerating capital flight, numerous Argentine banks have decided to limit their purchase by private parties to $10,000 a month.

The move comes amid a sharp increase this week in dollar purchases for the purpose of wiring funds overseas - part of a rapidly growing trend known in Argentina as the "financial bicycle."

Around 85% of the dollars purchased, according to Buenos Aires financial institutions, have been in transactions of between $2 million and $5 million - the legal limit in Argentina - and with scanty documentation. Of $14 billion purchased in the first half of 2017, nearly $8 billion left the country as of June.

This week, the Central Bank was forced to sell nearly $1.6 billion from its reserves to stabilize the dollar, which has jumped 12% to 18 pesos since June 19.

The 'financial bicycle' boom in carry-trade transactions began shortly after a package of financial deregulation decrees signed by President Mauricio Macri within days of taking office 20 months ago.

This trend has been largely financed by the Central Bank itself through short-term bills known as Lebacs.

Lebac debacle

Lebacs, issued in pesos and typically purchased for a 28 or 35-day term, pay an annualized 26% rate - or 10 to 15% in dollar terms. Attracting mostly domestic speculators, Lebacs are typically rolled over, with the profits used to buy dollars that are then wired overseas.

The value of Lebacs outstanding has more than tripled under Macri to 960 billion pesos ($54 billion). Investors, however, began dumping Lebacs on June 19, when a record 23% ($8 billion) were cashed in rather than rolled over.

Central Bank data show that of $60 billion in public foreign debt added in the last 18 months, $37 billion have gone to finance the bicycle and other capital flight.

Argentine Central Bank President Federico Sturzenegger denies that the "bicycle" has become unsustainable, and on July 27 ordered Piedro Biscay, the sole member of the Central Bank board to warn of a potential bubble, dismissed.

The current trend has drawn comparisons to the bubble created at the height of Argentina's last dictatorship in 1980, when the Central Bank issued Lebacs paying up to 60% interest in dollar terms to attract investment - only to end in a financial collapse in 1981 after insiders "bicycled" some $20 billion of the profits to offshore accounts.

At: https://translate.google.com/translate?sl=es&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.eldestapeweb.com%2Flos-bancos-pusieron-un-cepo-al-dolar-informal-el-aumento-demanda-n31761&edit-text=

And: https://translate.google.com/translate?sl=es&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.ambito.com%2F893324-en-semana-previa-a-las-paso-el-bcra-debio-vender-mas-de-us-1500-m-para-contener-al-dolar-cerca-de-los--18&edit-text=

[Judi Lynn]

1. Insane greed fest, isn't it? Unbelievable destruction at the hands of right-wing lunatics, again.

Almost takes one's breath away reading the information posted.

No one will ever see this kind of chicanery from honest people. The fascists always pride themselves upon their alleged high principles, and hard-working, industrious, fair-minded set of "values," too.

A little hard to swallow when you see them in action.

So much damage in Argentina, and in the US in such a short time.

Good to see your newest information. It's really appreciated.

[Marksman_91]

2. How is this worse than the control that Chavismo has imposed on Venezuelan citizens? n/t