Monday, 16 September 2019 06:30 GMT

Argentina announces end of forex restrictions

(MENAFN - AFP) Argentina said Wednesday it will eliminate the foreign exchange restrictions that have propped up the official value of the peso since 2011, setting up a potentially painful devaluation.

"The finance ministry announces that this afternoon at 6:00 pm (2100 GMT), the lifting of the currency exchange control will be announced," the ministry said in a statement.

The move comes six days after new pro-business President Mauricio Macri took office promising deep reforms for Latin America's third largest economy.

Macri, whose election ended 12 years of left-wing government, had vowed on the campaign trail to put an end to the official exchange rate from day one.

The dollar is currently worth less than 10 Argentine pesos at the official rate, but nearly 15 pesos on the black market.

President Cristina Kirchner imposed the exchange restrictions four years ago in a bid to stop capital flight and tax evasion.

Those who want to exchange pesos for dollars under the current system have to document where they got the money, and can only buy relatively small amounts.

Argentines have long seen the dollar as a safe haven, in a country where inflation has been a historic bugbear of the economy.

But the exchange controls were hurting exporters, denting productivity and distorting the economy.

Argentina is in a painful economic slowdown, with inflation forecast to come in at more than 25 percent this year and more than 35 percent next year in case of a devaluation.

Macri's administration is looking to restore investor confidence in the economy and restock foreign currency reserves that have fallen to precariously low levels -- currently less than $25 billion.

He kicked off his reforms Monday by eliminating or cutting a string of taxes on agricultural and industrial exports.

He announced the end of taxes on wheat and corn exports -- previously taxed at 23 and 20 percent, respectively -- and a tax cut on soybean exports, from 35 percent to 30.

The five-percent tax on industrial exports was also scrapped.

Kirchner had introduced steep taxes on the South American farming giant's agricultural industry in 2008, triggering angry protests by producers.

The money raised helped pay for popular social programs, which Macri has vowed to keep despite his sweeping free-market reforms.

Argentina announces end of forex restrictions

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