Argentina restricts internet shopping to curb capital flight

Argentina restricts internet shopping to curb capital flight

January 22, 2014 6:22 pm
By Jonathan Gilbert in Buenos Aires and John Paul Rathbone in London
Even as it seeks to regain access to international capital markets, Argentinaimposed new restrictions on online shopping on Wednesday in its latest attempt to curb capital flight and prevent a possible balance-of-payments crisis.
Anyone buying goods through international websites such as Amazon.com must now sign a declaration and produce it at a customs office, where the packages are collected. In addition, Argentines are only allowed to buy two international items annually, free of tax, up to a $25 total. Beyond that, they must pay a 50 per cent tax.
Jorge Capitanich, the head of Argentina’s cabinet of ministers, said the measure was to defend national interests by substituting national production over foreign goods. “We must ask ourselves if we want Argentine industry, Argentine workers,” he told reporters.
However, analysts said it would have little effect on stanching the country’s continued outflow of foreign reserves, which have fallen $1bn this year to stand at $29.5bn on Monday. Argentina had $40bn in reserves at the start of last year.
“The measure is a only Band-Aid,” said Ricardo Delgado, director of local consultancy Analytica Consultora. “It only addresses the symptoms of the fall in reserves, not the cause, which is high inflation.”
Private estimates put inflation at more than 28 per cent, against the official government rate of 11 per cent. High inflation has also pushed up the value of the black – oe “blue” – market exchange rate to almost 12 pesos per dollar, versus the official rate of 6.9.
The government said it is planning measures to clamp down on the blue market exchange rate, “although obviously I’m not going to say what they are before it happens,” Mr Capitanich said on Wednesday.
Argentina first introduced currency controls a week after Cristina Fernández was re-elected president by a landslide in 2011. Since then it has redoubled efforts to restrict transactions in foreign currency, including a recent 35 per cent tax on credit-card purchases made abroad.
“People are accustomed to taking refuge in the dollar, especially when they see the peso is overvalued,” said Gastón Rossi, a former vice-minister for the economy under Ms Fernández and director of LCG, a Buenos Aires consultancy. “They always find new ways to dollarise.”
People are accustomed to taking refuge in the dollar, especially when they see the peso is overvalued,” said Gastón Rossi, a former vice-minister for the economy under Ms Fernández and director of LCG, a Buenos Aires consultancy. “They always find new ways to dollarise
– Gastón Rossi
The online sales restriction comes as Argentina seeks to regain access to international capital markets through a process dubbed “financial normalisation”, 12 years after it defaulted on $100bn of international bonds.
Argentina, a G20 member, has agreed in principal to compensate Spanish oil company Repsol for the 2012 nationalisation of its majority stake in Argentine energy company YPF. It settled $677m of arbitration claims last year and is holding talks with the IMF on overhauling its statistics and so avoid censure and possible expulsion from the fund. This week, it also re-opened talks with the Paris Club to reschedule Argentina’s approximately $6.7bn of bilateral debt, not including accumulated interest.
On Tuesday, however, Axel Kicillof, the economy minister, said any Paris Club agreement remained months away and that Argentina would not submit to “any conditions”. Paris Club debt restructurings typically involve a simultaneous IMF program.
The sluggishness of the normalisation process is “ineffective against the growing stress on the balance of payments,” Siobhan Morden, head of Latin America strategy at Jefferies in New York, wrote in a note to clients on Wednesday. The nub of the problem, she said, is: “How do you motivate long-term capital flows under an unstable economic environment?”
Many had expected Argentine policy making to become less centralised in the figure of the president and more pragmatic after the government suffered a trouncing in October’s mid-term election, Ms Fernández shuffled her cabinet and appointed Mr Capitanich, an experienced state governor, as cabinet chief. But recent policies show little change of course, analysts say.
“There were expectations of change,” Mr Rossi said. “But it has become absolutely clear that the concentration of power has not been modified.”