TL;DR: Something feels different this time. From Hong Kong to Lebanon and even Chile, it seems more people are taking advantage of modern, digital capital choices. The latest round of instances anecdotally pointing in that direction involves the South American country of Argentina. Its newly elected regime’s sweep into control caused the nation’s central bank to immediately issue limits on foreign currency purchases, in particular the US dollar.
Argentina Begins Currency Control Tango
“Given the current degree of uncertainty,” a statement issued by the Board of Directors of the Central Bank of the Republic of Argentina (BCRA) read, “decided to take a series of measures this Sunday that seek to preserve the reserves of the Central Bank. The measures announced are temporary, until December 2019. A new limit of US$200 per month is established for the purchase of dollars for individuals with a bank account and US $100 for the amount of dollars that can be purchased in cash.”
It was released ahead of BCRA President Guido Sandleris’ press conference this morning (video embedded below), in hopes of quelling fears about the country’s political transition sparking potential domestic capital flight from the Argentine peso (ARS) and into foreign currencies traditionally associated with more stable values such as the US dollar (USD). And there is plenty to worry about.
The country has a horrifying history of currency control policies, devaluations, bank runs, and rampant political corruption — all of which conspire to make Argentinians among the savviest monetary pragmatists around. They know from conversion rates and understand the importance of value, stability. The present election brought to victory a center-left party headed by now President-elect Alberto Fernández, who no doubt was given a boost through aligning with former, and once thought disgraced, President Cristina Fernández de Kirchner as his running mate — itself a soap opera worthy of many more words presently beyond the scope of this article.
Importantly, Fernández/Kirchner won with less than 50% of the vote, though their nearest rival was a full 8 points off, incumbent Mauricio Macri. He was ushered-in four years ago on the reputation wave of being a can-do businessman concerned with erasing poverty. Economic reality was harsh during his tenure, however, and inflation boomed, the ARS tanked, poverty grew by 6%, and a Macri-inspired International Monetary Fund (IMF) $57 billion loan looms large. Fernández will assume office on December 10th.
Kirchner is also widely considered to be a driving force in the new administration, and if the past is any indication a Kirchner-driven economic policy means heavy intervention. How that ultimately shakes-out on behalf of the average Argentinian is anyone’s guess. Compounding matters is that IMF invoice … with the BCRA holding only $48 billion in foreign reserves. The hope of ever paying it back, experts insist, involves protecting the USD stash at all costs.
Argentinians now have at least one more monetary option other than escaping to USD, cryptocurrency. The prohibitionist policies of the government, slamming foreign exits from $10,000 a month down to $200, means crypto is being given a fresh look. Coin Dance LocalBitcoins volume, for example, seems to imply a spike as the election drew near, and as people in the country began to realize more post-election crackdowns were coming (something of a tradition). Greater than 15 million ARS were swapped for bitcoin this week, ironic seeing as how Macri was thought to have been a crypto booster during his short reign.
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