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October 22, 2014
Friday, May 2, 2014

Citizens buy US$1M less per day in April

A man rides his bicycle past the Central Bank in downtown Buenos Aires.
By Francisco Aldaya
for the Herald
Savings dollar scheme has cost Central Bank US$542.813 million in quarter

The daily rate of dollars authorized for exchange to Argentines for savings by the AFIP tax bureau dropped to an average US$7.026 million in April’s 20 working days, US$1.17 million below the daily average of US$8.196 million registered in March.

April saw the lowest number of requests made effective by the institution headed by Ricardo Echegaray for a whole month since the new dollars-for-savings scheme was instituted in late January, with 207,233 currency exchanges carried out, compared to the 233,478 in March, 303,949 in February and 178,847 in the in the four working days of January the measure was available.

The number of total transactions validated by AFIP, including those yet to be made effective, was also the lowest since the the scheme was implemented at 237,623. In January, 286,153 were validated, in February 354,516 and in March, 276,132.

At the time of the unveiling of the dollars-for-savings scheme there was concern about its potential strain on dwindling Central Bank (BCRA) foreign reserves, an issue the notorious clamp on the greenback — implemented in 2011 — had sought to address.

The slowdown in exchanges authorized seen in April may have been due to a decrease in demand, or to increased difficulty in gaining approval from the tax bureau although a severe clamp-down should not be expected in coming months due to the influx of dollars at the height of the soy harvest.

Effect on reserves

Measured up to yesterday, US$543,813,692 or 4.319 billion pesos had been exchanged as part of the scheme, meaning an average of US$8.915 million per working day.

A further US$116,090,624 of approved exchange requests have yet to be paid out.

Hypothetically, if the daily average of US$8.915 million per working day were to be upheld for the 167 working days left of 2014, the Central Bank’s reserves would be depleted a further US$1.488 billion.

In the face of a forecast record soy harvest that would bring in an estimated US$27 billion, the savings dollar’s strain on reserves seems comparatively low.

Currently steady

The scheme’s durability will also be aided by the newfound stability — at least for the near future — of the foreign exchange market, relative to last year, at least.

On the informal market, the dollar closed the week at 10.55 pesos, compared to 12.65 pesos on January 30, while the official rate traded steady at 8.01 pesos.

The final hurdle of the savings dollar implies that dollars withdrawn in cash are subjected to a technically refundable 20-percent surcharge, similar to that applied on credit card spending in foreign currencies.

At yesterday’s rates, this implied a “savings” dollar at 9.61 pesos, which logically reduces demand on the black market.

To receive authorization to purchase dollars, residents must have earned above a minimum of 7,200 pesos per month for the last 12 months, with a maximum amount of dollars per individual set at 20 percent of his or her monthly earnings, as well as a limit of US$2,000 per month per person.

When the new dollars-for-savings scheme was announced on January 27, there was much speculation over the extent to which the measure was dished out as a crowd-pleaser in a post-devaluation context of people craving hard foreign currency for savings.

Yet, although no concrete figures are available, reflecting only AFIP’s response to requests, demand for the savings dollar has seemingly waned parallel to the calming of macro-economic waters, with people and companies having adjusted to the peso’s depreciation and many opting to tie up their pesos in fixed-rate deposits after the BCRA hiked interest rates.

With the INDEC national statistics bureau having recently confirmed that 75 percent of registered workers earn less than 6,500 pesos, approximately 2.3 million out of the country’s 11,574,000 workforce meet the requirements to apply.

Furthermore, those who leave their recently-acquired dollars in a local savings or fixed-term deposit accounts for 365 days are not subject to the AFIP surcharge.

Ninety percent opt to withdraw their greenbacks in cash.

Up to yesterday, a total 1,154,424 requests had been submitted to the bureau, including those already paid out.

@franma1990
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