On Tuesday, days before the presidential election, the National Securities Commission (CNV, by its Spanish acronym) launched a temporary measure limiting access to U.S. assets via the local market.

The decision affects Argentine Deposit Certificates (CEDEARs, by its Spanish acronym), financial instruments issued in Argentina that allow investments in foreign assets. The implicit foreign exchange rate in these operations is called the blue-chip swap rate.

CEDEARs are used, for example, to invest in foreign companies from Argentina. According to Galicia EMINENT, the five most-traded CEDEARs in September were in stocks of Coca-Cola, Vista Energy, Apple, Tesla, and Mercadolibre.

The CNV resolution establishes that brokers must make daily sales in pesos for higher amounts than what they purchase in CEDEARs for their portfolios. The measure does not apply small, individual investors. 

According to the resolution, the change was applied due to the country’s current economic conditions. “It is necessary to reduce the volatility of financial variables and contain the impact of the fluctuations of financial flows on the normal functioning of the real economy,” the document read.

Although the restrictions are temporary, the CNV did not clarify when they would be lifted. The communiqué stated that they will be enforced “until supervening events make its revision advisable and/or the causes that determined its adoption disappear.” 

Last week, the CNV brought in other temporary foreign currency restrictions for foreign investors in the secondary bond market, importers, and banks.

The foreign currency market is facing increasing pressures due to the traditional pre-electoral portfolio dollarization in the context of an international reserve scarcity crisis. In the first two weeks of October, the informal exchange rate, popularly known as “the blue dollar rate” went from AR$800 to AR$985, a 23.1% surge. The blue-chip swap rate increased by 16.5% in the same period.

However, after the new restriction was enforced on Tuesday morning, the blue-chip dollar rate fell by 0.5% and ended the day at AR$962.1.