October 30, 2014
Dollar for savings reaches US$260M record
Citizens buy more US currency in August amid sharpest devaluation since January
US dollar purchases for savings reached a record high of almost US$260 million in August as citizens flooded the official exchange market amid the highest devaluation of the peso since January.
The average size of the approved transactions was about US$667, a figure in line with previous averages for this year and the previous month.
In August, AFIP approved purchases for US$259.73 million dollars in response to 389,082 requests to purchase dollars for savings purposes. In comparison, the data for July indicates 306,930 requests were authorized for a total of US$205.74 million establishing an average of about US$670 per approval.
AFIP’s data does not discriminate the tax status of those given approval nor if the average is representative of the largest and smallest purchases. However, it does show that in 2014 the average size of the approvals was lowest in January, at about US$530 and it has slowly but steadily inched up towards the current average of US$667, an increase of about 125 percent.
In contrast, the amount of pesos being sold by Argentines in exchange for dollars has increased at much higher rate given the peso’s devaluation. In January, 760 million pesos were exchanged, an amount that increased to 2.15 billion pesos, an increase of 283 percent.
The number of requests has been on a sustained upward swing since April of this year.
Last month was punctuated not only by economic uncertainty due to the conflict with vulture funds in New York but also by the biggest devaluation of the Argentine peso since January, and there has been corresponding volatility in the “blue” dollar market. The dollar was sold last Friday at 8.40 pesos, while the “blue” dollar reached 14.05 pesos before decreasing slightly.
The peso exchange rate has steadily been devaluing at a snail’s pace over the last few months, with only small variations of a cent or less per day. However, at the end of last month the peso was losing in excess of five cents on the dollar in trading. The Central Bank first didn’t intervene to stop the devaluation but then ended up selling US$40 million in one day to bring calm back to the market.
Such amount of dollars sold by the Central Bank had an effect on the foreign reserves, which ended last week with a US$169 million drop and the month with a US$391 million plunge. The decrease in reserves during August was concentrated mainly in the third week of the month when reserves went down US$324 million. Even though the figures are provisional, so far this year reserves have registered a US$1.99 billion cumulative drop.
Dollar purchases may have also ticket up because of interest rates. August witnessed a reduction in interest rates set by the Central Bank that only lasted for a week. Interest rates were first reduced and then increased one percentage point as a way to shore up the peso in light of market pressure. Arguments have been reported between Economy Minister Axel Kicillof and Central Bank head Juan Carlos Fábrega over the right level of interest that would not affect demand.
So far this year there have been two million requests to buy US dollars for savings purposes approved, for a total of US$1.3 billion.
Although the access to the dollar at the official exchange rate is restricted, AFIP allows for the purchase of foreign exchange at the official rate for savings purposes for individuals with a demonstrated capacity for income and are up to date with their taxes. Requests are made online through an AFIP portal and are subject to approval after review. Those who want to take out the dollar bills from the bank have to pay an additional 20 percent surcharge that is voided if the customer agrees to keep the dollars in the bank for at least a year. The system also allows for the purchase of dollars for tourism purposes that has more flexible limits but is subject to different conditions and a 35 percent surcharge.