Author: James Grainger
Publish date: 2023-05-25 15:39:07
Argentina’s government on Wednesday tightened the so-called ‘cepo’, removing a financial loophole used by traders to make easy money by exploiting the country’s complex web of currency controls.
In a statement issued Tuesday, the National Securities Commission (Comisión Nacional de Valores, CNV) announced Resolution RG 962, a new measure designed to cut off the short-term profiteering known locally as “rulos financieros.” Through the measure, the government banned those buying dollars at the MEP (medio electrónico de pagos) rate and from selling them for the bond-based CCL (contado con Liquidación) rate for at least 15 days before completing the transaction.
As from last Wednesday no client acquiring MEP or CCL dollars will be able to use them for the 15 following days, the CNV confirmed. This implies that any purchaser of the two rates using AL30 and GD30 bonds will not be able to buy or sell greenbacks for the next 15 days via any asset which is not an AL30 or GD30 bond.
Government officials describe the measure as a move to halt the speculative strategy of buying dollars cheap at the Bolsa rate and then reselling them dear at the cost of Central Bank reserves.
According to CNV President Sebastián Negri, the new rule “has a complex wording, but that does not allow it to be interpreted freely. RG 962 does not change the usual operations of 99 percent of those who make MEP and CCL.”
“What it does, like its predecessor, RG 907, is to avoid arbitration due to price differences between government securities and other instruments, as had been warned in recent days, distorting the market,” he said on Twitter.
Argentina’s government has strict currency controls in place and utilises a huge range of exchange rates to manage access to foreign exchange.
The move came as Argentina’s Central Bank reserves dropped to worrying levels. Gross reserves fell to US$32.9 billion on Tuesday, the monetary authority said in a statement, underlining the impact of one of the worst droughts on record.
With exports plummeting and heavy debt maturities scheduled for June and July, fears are growing about Argentina’s ability to meet payments.
The government has accelerated negotiations with the International Monetary Fund (IMF) over a reformulation of its US$44.5-billion debt deal which would see Argentina receive scheduled disbursements ahead of schedule.
Inflation is running at 108.8 percent annually and most analysts expect the country to take a recessionary path in the next few years. Around four in every 10 people were living below the poverty line at the end of last year, according to official data.