Economy

Infographic: Central Bank’s emergency import closure

11th June 2020

By The Essential Staff

Infographic: Central Bank’s emergency import closure

Despite the continuous tightening of the restrictions to buy foreign products (or currency) at the peso’s official exchange rate, Argentina’s Central Bank has still been struggling with massive demand for relatively cheap imports, and thus been forced to sell many of its dollar reserves every day in currency markets to stop a devaluation. With net reserves dwindling closer to zero, its head Miguel Pesce took a page from the Kirchnerite playbook in order to halt that trend before the full crash.

</p> <img class="wp-image-10192 aligncenter" src="https://gettheessential.com/wp-content/uploads/2020/06/reserves2.jpg" alt="Central Bank gross reserves recovered after the May 29 restriction on imports" width="738" height="446" srcset="https://gettheessential.com/wp-content/uploads/2020/06/reserves2.jpg 2500w, https://gettheessential.com/wp-content/uploads/2020/06/reserves2-300x181.jpg 300w, https://gettheessential.com/wp-content/uploads/2020/06/reserves2-1024x618.jpg 1024w, https://gettheessential.com/wp-content/uploads/2020/06/reserves2-768x464.jpg 768w, https://gettheessential.com/wp-content/uploads/2020/06/reserves2-1536x927.jpg 1536w, https://gettheessential.com/wp-content/uploads/2020/06/reserves2-2048x1236.jpg 2048w, https://gettheessential.com/wp-content/uploads/2020/06/reserves2-600x362.jpg 600w" sizes="(max-width: 738px) 100vw, 738px" /> <p>&nbsp;</p> <p>The graph above shows the <a href="http://bcra.gov.ar/PublicacionesEstadisticas/Principales_variables_datos.asp">Central Bank&#8217;s official figures</a> for its foreign currency reserves over the last month. Keep in mind that these are gross reserves, and only a small fraction of them can be used to sell in Argentina&#8217;s FX market to prop up the value of the peso and satisfy the country&#8217;s thirst for imports and dollars. The rest are bank reserve requirements, gold, currency swaps with other countries, and other unusable funds. (No official figures for the amount of usable foreign currency reserves exist, though different estimates put it between 2 and 6-7 billion USD)</p> <p>After a steady daily decline that was making all alarms go off, on May 29 the Central Bank announced that <a href="https://www.infobae.com/economia/2020/05/29/el-banco-central-agrego-mas-restricciones-para-las-empresas-que-quieran-comprar-dolares/">importers would now be required</a> to file an authorization request before accessing the dollars to buy products abroad. The similarity with the chaotic <a href="https://gettheessential.com/economy/2020/01/23/will-this-time-be-different-for-argentinas-import-restrictions">DJAI import permits</a> imposed during the last presidential term of Cristina Fernández de Kirchner (2011-2015) made Pesce come out to promise this could be a <a href="https://www.telam.com.ar/notas/202005/469944-banco-central-miguel-pesce-restricciones-monetarias-reestructuracion-deuda.html">temporary measure</a> until an agreement with bondholders to restructure Argentina&#8217;s debt is reached and the country recovers some macroeconomic stability, but Argentines are well versed in how long a theoretically temporary regulation can end up lasting in practice.</p> <p>For now, the Central Bank has stopped the bleeding in its coffers and reversed the trend, becoming a net buyer of exporters&#8217; dollars over the last couple of weeks instead of a net seller for importers. But with many imports now paralyzed in the country&#8217;s customs or cancelled until obtaining government authorization, this could soon turn into a new source of trouble for those trying to keep production and sales running in Argentina, with inputs and spare parts starting to prove scarce again as they did until 2015.</p> <p>

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The Essential Staff

The Essential is a premium subscription-based news platform that brings you high quality journalism and in-depth coverage in English about the changing face of Argentina’s politics and economy.