Argentina’s Central Bank lifts some foreign exchange restrictions

The Central Bank of Argentina decided on Tuesday to lift some of the many restrictions that operate in the South American country to access the foreign exchange market.

The monetary authority said in a statement that it has decided to take “a new step in the process of removing and relaxing regulations on access to the foreign exchange market, which ultimately aims to completely eliminate restrictions.”

The directory of the central bank The government decided to shorten the deadlines for companies that access the official exchange market to buy dollars to pay for imports and to increase the amount that service exporters are not required to settle on the exchange market.

It also decided to allow people who had received some assistance from the State during the Covid-19 pandemic or who benefit from state subsidies for public services consumption to now carry out foreign exchange transactions through the purchase and sale of bonds and shares in foreign currency.

These measures imply a partial relaxation of the complicated swarm of exchange restrictions, known in Argentina as ‘cepo cambiorio’, which are a source of distortion in the economy.

The complete lifting of the ‘exchange rate restrictions’ was one of the main campaign promises that led Milei to an electoral victory last year that allowed him to access the Argentine Presidency in December.

In recent weeks, Milei has been reluctant to give definitions on when it will be possible to end the ‘cepo’ and has added new conditions to do so, including a convergence between the rate of devaluation of the Argentine peso and that of inflation.

Milei had previously set out the conditions for lifting the “cepo” (tax on funds) to achieve fiscal balance – something that was achieved in just a few months thanks to a “shock” adjustment plan – and the clean-up of the Central Bank’s balance sheet, an area in which progress has been made.