The Wall Street Journal – By Ken Parks
BUENOS AIRES–Argentina’s government will ask Congress to approve legislation that will allow Argentines to invest their undeclared U.S. dollar savings in local bonds to finance energy and construction projects, Economy Minister Hernan Lorenzino said Tuesday.
Argentines are thought to hold tens of billions of undeclared dollars in Argentina or offshore bank accounts.
Mr. Lorenzino’s announcement coincides with the weakening of the Argentine peso to historic levels against the dollar on the black market. At the same time, the central bank has struggled to rebuild its foreign currency reserves due in part to persistent capital outflows.
“People might have their cash in a safety deposit box, or under the bed, or worse, in a tax haven. This [measure] means taking those resources and incorporating them into the productive sector,” Mr. Lorenzino said in a televised press conference.
Mr. Lorenzino said the administration of President Cristina Kirchner will submit the legislation to Congress immediately.
All the senior members of Mrs. Kirchner’s economic team were present at the event: Commerce Secretary Guillermo Moreno, who is in charge of import and price controls; Deputy Economy Minister Axel Kicillof; Central Bank President Mercedes Marco del Pont; and tax chief Ricardo Echegaray.
Argentines have long viewed the dollar as a store of value due to their country’s long history of high inflation and economic crisis that frequently ended in major devaluations of the peso. The unrelenting weakness of the peso on the black market in the last six months is feeding fears that a devaluation might be in the works, and stoking even more demand for scarce dollars.
In an attempt to calm the public, Mrs. Kirchner said Monday that her administration won’t devalue the peso.
Inflation that most economists say is around 24% a year coupled with government restrictions on the dollars people and businesses can legally purchase are driving some Argentines into the arms of black market currency dealers.
The peso has lost about 64 cents this month to set a record low of around 10.04 to the dollar Tuesday, according to newspaper El Cronista, which publishes an average of underground exchange rates.
The black market is thought to be small, but does influence prices in some parts of the economy, especially real estate, which for decades has overwhelmingly used the dollar in transactions.
On the regulated currency market the dollar sold for 5.2090 pesos, though dollar rationing means that for most Argentines the official exchange rate is a mirage.
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