By Cassandra Garrison and Gabriel Burin
BUENOS AIRES (Reuters) – The Argentine government authorized currency controls on Sunday in the face of President Mauricio Macri, who had previously lifted many protectionist practices from his predecessor, Cristina Fernandez de Kirchner.
The central bank now has the authority to restrict the purchase of dollars when it burns through the reserves in an attempt to support the peso currency, the government said in a decree published in its official bulletin.
The measure means that companies will need permission from the central bank to access the foreign exchange market to buy foreign currency and make transfers abroad.
The government of Latin America's third largest economy said in the decree that "the executive branch needed to adopt a series of extraordinary measures to ensure normal economy."
After opposition candidate Alberto Fernandez and Fernandez de Kirchner, now his vice presidential candidate, drew an astonishing riot in the primary vote on August 1
The central bank has burned through nearly $ 1 billion in reserves since Wednesday in an effort to support the peso. But the intervention did not have the desired effect, and the risk spread blew to levels not seen since 2005, while the local peso currency has so far expanded to 36%.
The Central Bank said in a statement that the measure did not restrict people from withdrawing dollars from their accounts. However, it restricts people from buying more than $ 10,000 a month, or making transfers that exceed that amount per month.
It also requires exporters to liquidate their foreign exchange earnings in the local market during deadlines. Companies will not be allowed to save dollars, the bank said.
"Trade is not restricted. There were restrictions before, but there are none now," said a source familiar with the new central bank measure.
"All this is to preserve the economy as well as possible in this circumstance," said the source, who requested anonymity because he was not authorized to speak to the media.
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On Friday, the central bank announced that banks would need to seek pre-approval before distributing their income to "avoid money shortages" and safeguard the liquidity of the country's economic system.
Last week, Argentine Prime Minister Hernan Lacunza said the government would negotiate with holders of its government bonds and the International Monetary Fund, which it has a $ 57 billion standby agreement, to extend the maturity of its debt obligations as a way to secure the country's ability to pay.
Concerns for Argentina's ability to meet its dollar debt obligations have risen since August 11.
"As Macri's government runs out of alternatives, it will most likely have to resort to very distasteful measures that most adult Argentines hoped they would never experience again," said Emilio Ocampo, an independent economist and consultant.
"We are in a gray area, and from Friday to today it was getting darker. It could be even darker if the confidence is not restored," Ocampo added.
Fernandez de Kirchner, in his office from 2007 to 2015, clamped on access to the US dollar in an effort to protect the central bank's precarious reserves.