Argentina: Currency and Capital Controls Slow Activity

LATEM Updates

Consensus Economics blog

GDP forecasts have held firm this month despite ongoing disquiet about the stuttering economy. The Fernández government’s policies are triggering further capital flight, with many conglomerates rethinking their investment plans in the wake of strict capital controls which include prohibiting foreign companies from sending profits abroad. The widening gap between the official and black-market exchange rate (where there is a 60% premium on the purchase of scarce US dollars) is also factoring into firms’ decision-making. The immediate impact of capital flight has been limited somewhat by the controls in place, but they have also heightened marked distortions in the economy. A shortage of foreign currency is illustrated by the deterioration in forex reserves, from US$40.8bn in Q1 2012 to US$34.2bn in Q1 2013, and our panel’s forecasts have fallen back this month. Argentina’s lack of access to global capital market funding has meant that the state is heavily dependent on…

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About sahriskmanager

I have worked as a Head of Risk and a risk culture builder at both Asset Management and Commercial Banking Institutions within and outside of Pakistan. Over the years I have developed exhaustive understanding of risks that exist in both Sharia and Conventional Finance related Investments and Financing/Lending Products. I have invaluable experiences to share with respect to setting up and restructuring of Financial Risk Management Departments at Islamic Banks and Asset Management Firms . This includes developing policy and procedure manuals, recruiting of staff, imparting Risk Trainings and preparing the entire SDI (System, Design & Installation) work-flow frameworks for the department itself. What I shall post on these blog pages are my personal experiences, global risk management issues and academic interests which I would like to share with academicians, students and practitioners of FRM - Financial Risk Management all over the world.
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