BUENOS AIRES: President Cristina Fernandez, who wants Argentines to stop saving and thinking in dollars, has sent a bill to Congress that paves the way for US currency debts and contracts to be repaid in pesos.
The proposed reform of the civil and commercial codes, which was submitted to the Senate on Friday, includes a clause saying foreign currency obligations subject to Argentine law can be honored in local currency at the official rate.
Fernandez, who slapped tough controls on buying greenbacks after she was re-elected last year, has said she will not rush the reform through Congress despite controlling both houses.
Legal sources said it would take one or two years for any reform of the civil and commercial codes to take effect once approved by Congress because lawyers are given time to consider the practical implications of such broad shake-ups.
Center-left Fernandez is battling to halt capital flight and fatten the central bank foreign reserves she needs to pay government debt in order to maintain brisk spending.
Latin America's No. 3 economy has limited financing options because it has yet to return to global credit markets a decade after staging the biggest sovereign debt default in history.
Savers scarred by the 2001/02 economic crisis and hyperinflation in the 1980s see the US currency as a safer bet than the peso currency for longer-term financial planning.
Especially at times of political uncertainty, many buy dollars as a perceived safe haven, some stashing them under the mattress or in safety deposit boxes. Homebuyers normally pay for houses with stacks of dollar bills.
DE-DOLLARIZE
Some economic analysts expected the government might make further moves aimed at taming demand for dollars despite denials by senior officials.
Deputy Economy Minister Axel Kicillof denied reports last month that the government plans to "de-dollarize" the local economy or repay an upcoming Boden 2012 coupon in pesos instead of dollars.
Government allies, however, have been urging Argentines to end their love affair with the US currency and one ruling party lawmaker has drafted a bill to promote the use of the local currency in real estate deals.
"I think Argentina needs to move in that direction," said Agustin Rossi, leader of the ruling party bloc in the lower house of Congress.
"We need to provide incentives for Argentines to save in pesos ... and that their dollar holdings are as small as possible," he told local radio without referring to the proposed reform of the civil and commercial code.
Critics of the government's crackdown on foreign currency purchases and broader economic policy say annual inflation estimated privately at 25 percent explains why many Argentines want to save in dollars.
"Buying dollars is a fever, but it's not necessarily the illness. It's the manifestation of the illness," former Economy Minister Roberto Lavagna said.
Comments
Comments are closed.