We have reached the end of the cycle of this administration that took office on December 10, 2019, but with a strong influence on the exchange market since the PASO elections of 11/8/2019.
The influence generated spread to the foreign exchange market over the following 4 years. In other words, the application of the exchange restrictions imposed on 1/09/2019 was the consequence of the election that took for granted the victory of the Fernández-Fernández formula, as confirmed in the general elections of October 2019 with more than 48% of the votes.
What followed from 10/12/2019 to date was a continuation of the application of greater restrictions on access to the free exchange market.
Restrictions
Such measures could be generally summarized as:
- Purchase of tickets or transfer abroad in foreign currency for individuals up to USD 200 per month.
- Refusal to purchase banknotes or money orders abroad in foreign currency for legal entities.
- Prohibition of transferring profits and dividends or repatriating direct investments without prior authorization from the BCRA.
- Loans must be entered into the exchange market in order to have access to repayment of capital and interest.
- Commercial debts for goods and services or financial debts may not be paid before the due date without prior authorization from the BCRA.
- Furthermore, it is not possible to operate in the free exchange market and simultaneously in the securities market against settlement in foreign currency, since there is a parking penalty of between 90 and 180 days.
- You cannot have external assets in the country or abroad for more than USD 100.000
- All foreign currency holdings must be deposited on demand in financial institutions in the country to have access to the exchange market.
For exports There is a mandatory entry of exporters' foreign currency in periods ranging from 15, 30, 60, 180 and up to 365 days at the official exchange rate, although this scheme was modified after the elections of this year 2023 allowing a percentage to enter the exchange market and the rest in cash with settlement or in the MEP dollar, which belatedly allowed an improvement in the exchange rate for exporters. At the moment, exporters must enter 50% into the exchange market and 50% in cash with settlement or in the MEP dollar, which makes an exchange rate mix of approximately 610 pesos per dollar.
All these restrictions have increased over time, as this exchange rate restriction has caused a nominal loss of the BCRA's reserves, from USD 43.785MM on 10/12/2019 to the current reserves of USD 21.343MM, that is, more than half of the reserves have been lost in 4 years.
In the second half of 2020, payments were restricted. imports of goods with the establishment of a quota by the BCRA through COM A 7030 to pay for imports taking into account what was paid for imports in the exchange market since 1/1/2020 against the shipments to the market computed from the same date in January 2020. This left many importers of goods out of the exchange market.
During 2021, exchange controls were adjusted and SIMI began to be requested in “outgoing” status to pay advances and sight payments on imports of goods.
In March 2022, a minimum payment period for imported goods was established at 180 days from the release of the goods to the market with SIMI B, making it impossible for companies that did not have financing from abroad to access the exchange market. Only a few privileged individuals obtained SIMI A or SIMI C to pay without said 180-day period.
In October 2022, there was a strict exchange control for the payment of goods and services, creating the SIRA for goods and the SIRASE for the payment of services in order to avoid “the payment of the import festival”, as had been said.
In addition, the Single Foreign Trade Current Account (CCUCE) was created on the AFIP website, where financial institutions must validate exchange transactions. In other words, there is not only online control by the BCRA to validate the import quota but also direct intervention by the AFIP in the exchange market.
The AFIP through the CCUCE began to close the trap, especially from July 2023 when the system was not working for days, or it began to throw up error messages that practically caused a virtual cessation of payments for goods and services.
Currently, and since the PASO elections, the AFIP CCUCE approves between 10% and 20% of the queries from local banks.
Likewise, obtaining approval for SIRAS for goods is very difficult, as are SIRASE for services, which were practically not approved.
The exchange rate restriction was the consequence of fiscal and monetary imbalances with high inflation rates and increasing poverty.
Social Impact
At the end of this cycle and after 4 years of exchange controls, we can conclude that exchange controls have served to:
- Losing the BCRA's reserves, both nominal and net, which are estimated to be negative by more than USD 10.000 MM.
- Discourage exports of goods and services, since exporters charge at the official market exchange rate with an average negative exchange rate gap of 100% in addition to export withholdings.
- Accumulating debts for imports of goods for more than USD 40.000 MM.
- Encourage importers to buy abroad at an exchange rate almost 100% cheaper than the real dollar.
- Generate harm to local SMEs that cannot compete with products imported from abroad with a subsidized dollar.
- In the final stretch, with the virtual cessation of payments for imports, there was a shortage of supplies for industries and, above all, a lack of medical supplies and medicines at dramatic levels. On the other hand, there were two weeks of fuel shortages due to non-payment of ships abroad.
Challenge
The new administration that triumphs in the runoff election on 19/11/2023 will have to face the challenge of sorting out fiscal, monetary and exchange imbalances. It will have to quickly strive to have a single competitive exchange rate for exporters, and try to pay off accumulated import debts, in addition to paying for the flow of new imports.
Therefore, exchange rate restrictions cannot be lifted very quickly unless the detailed macroeconomic imbalances are first addressed.
We hope that the new government will be able to resolve these imbalances so that we can once again become a normal country and reduce the dramatic level of poverty, which currently stands at almost 45% of the country's population.
Some statistical data on the end of the cycle
He is a certified public accountant from the University of Buenos Aires (UBA). He has a postgraduate degree in Finance from the Universidad Argentina de Empresas (UADE). Currently, he is Head of the Comex Technical Area at Banco Santander Argentina, since 1987. He also serves as Secretary of the Comex Commission at the Association of Argentine Banks (ABA), since 2011. He has been married for 34 years to Adriana Barsanti, and has three children aged 33, 31 and 26, all professionals.
