Argentina Tightens Currency Controls After Fernandez Victory

(Bloomberg) --

Argentina tightened currency controls late Sunday after the opposition’s Alberto Fernandez won the presidential elections.

The central bank will restrict dollar purchases by savers to buy just $200 per month compared with the $10,000 per month previously, according to a central bank statement. Central bank chief Guido Sandleris will give a press conference Monday morning at 8:30 a.m. in Buenos Aires.

Argentina Tightens Currency Controls After Fernandez Victory

The move looks to preserve international reserves during the political transition which will culminate in the handover on Dec. 10 but risks causing the black market exchange rate to skyrocket. Last week Argentines rushed to buy dollars and withdraw deposits ahead of the vote on concern that more controls were coming amid an economic crisis.

“Restricting dollar purchases in Argentina probably won’t ease pressure on the peso, with the weaker bias for the currency likely to continue,” said Toru Nishihama, emerging-market economist at Dai-ichi Life Research Institute in Tokyo. “Concerns about a potential default and deterioration of the nation’s fiscal condition will linger.”

Fernandez, 60, swept to victory in the first-round election with 48% of the vote against 40% for Macri. His win signals the return to power by Peronism -- an anti-elite political movement that traditionally favors workers over business owners. But while voters rejected the austerity of Macri’s government, the outcome was also tighter than expected.

Macri imposed capital controls at the beginning of September after the peso plunged following August primaries in which Fernandez trounced the incumbent by 16 points. Reserves continued falling amid capital controls and now stand at $43.5 billion.

Argentina Tightens Currency Controls After Fernandez Victory

Argentina’s bonds are trading in deep distressed territory, about 40 cents on the dollar, and the government has said it wants to extend maturities both with private creditors and the International Monetary Fund.

That chore will likely fall to the incoming government though Fernandez has yet to lay out an economic plan or name his cabinet.

©2019 Bloomberg L.P.

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