Tags: Argentina | dollar | online | purchases

Argentina Targets Online Purchases to Slow Dollar Reserve Drain

Wednesday, 22 January 2014 10:09 AM

Argentina tightened foreign currency restrictions for a second straight day by further limiting the purchases of goods online, escalating an effort to arrest a decline in dollar reserves.

Argentines will be limited to two Internet purchases abroad for delivery at home per year using credit cards, according to a resolution by the tax agency published in the official gazette. The tax agency, known as AFIP, increased paperwork on online shopping yesterday.

“Given the large increase in the use of these channels, which makes it harder for customs to control, we must implement measures to have greater information on the shipments,” the resolution said.

Argentine President Cristina Fernandez de Kirchner is running out of options to muddle through in her final two years in office as foreign reserves tumble and investors lose confidence in her ability to normalize relations with foreign creditors in a timely fashion, Jefferies strategist Siobhan Morden said today in an e-mailed report. Today’s restrictions, one of more than 30 that Fernandez has imposed since her re-election in 2011, are not credible short-term fixes, Morden wrote.

Argentina is curbing foreign purchases in order to protect local industry, Cabinet Chief Jorge Capitanich said.

“Of all Internet transactions, 65 percent are made in Hong Kong and China as part of an aggressive strategy,” Capitanich told reporters today in Buenos Aires. “If we want to defend domestic production, we need to be able to defend what’s ours.”

Sinking Reserves

Online purchases doubled to about 1.5 million last year from 2012, Buenos Aires-based newspaper La Nacion reported today, citing Patricia Jebsen, president of the Argentine Electronic Trade Chamber.

Argentina posted the largest current account deficit in the first three quarters of 2013 since 2001, when an economic crisis plunged South America’s second-largest economy into chaos resulting in a $95 billion default. Reserves, which the nation uses to pay creditors, have tumbled 31 percent in the past year to $29.5 billion, the lowest since Nov. 7, 2006.

Foreign reserves have fallen or remained unchanged for 13 consecutive business days and fell $200 million yesterday, according to central bank data.

Argentine debt is the most expensive to insure against default in the world and its average yields of 12.08 percent trail only Venezuela as the highest among more than 50 emerging market economies, according to JPMorgan Chase & Co.

Confidence Crisis

The central bank has also weakened the peso 5.3 percent this year, the fastest pace in emerging markets, in a bid to boost competitiveness of exports and to close a gap with a growing black market, where Argentines are willing to pay almost double the official rate of 6.8870.

“The next phase is an inflationary spike that deters consumption, investment and undermines FX competitiveness gains,” Jefferies’ Morden wrote in the report. “President CFK has been visibly absent with friction among her cabinet and only piecemeal measures, suggesting an imminent crisis of confidence.”

President Fernandez will appear at a public event later today for the first time since Dec. 19, Capitanich said.

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Argentina tightened foreign currency restrictions for a second straight day by further limiting the purchases of goods online, escalating an effort to arrest a decline in dollar reserves.
Wednesday, 22 January 2014 10:09 AM
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