Argentina on Wednesday unveiled a new 35 percent tax on foreign currency purchases to prevent the public from hoarding U.S. dollars in the face of a weak peso. The Government said it would tighten currency controls to dampen the demand for U.S. dollars. Previous restrictions remain in place, including limiting citizens to buying no more than 200 U.S. dollars a month. The new tax does not apply to spending on healthcare, medication, books in any format, online education and software for educational purposes.
The Government launched the Local Supplier Development Program, with a budget of 2.5 billion pesos ($33.25 mn) and targeting strategic value chains for the national economy. In this context, global brands of agricultural machinery are added to an official plan of local suppliers to develop national parts of world quality, at competitive costs and scales of production.
The Government revealed that the deficit of the GDP projected for 2021 would be 4.5%. It will cover 40% of the deficiency by placing debt in pesos in the local market, and the remaining 60% by the transfer of profits from the Central Bank to the Treasury.
The Government issued a battery of measures with which it intends to reduce the demand for foreign currency, in which private sector companies will be able to access only 40% of their dollar requirements to pay financial debts in foreign currency and will have to present a detailed refinancing plan to initiate a process of renegotiation of their respective external liabilities. It occurs in a context in which reserves registered a notable fall to $388 million in September. So far this year, a retraction of $2.33 billion has been accumulated, while net reserves oscillate around $7 billion.
The Cauchari solar park, with 300 Mw of power, was commercially enabled, so it began to inject clean energy into the Argentine System of Interconnection (SADI). From Friday until last night, 245 Mw injected and it is very likely that by now it can reach 300 Mw. The work was executed by contractors Power China and Shanghai Electric, from the credit taken and the placement of an international bond ("green bond") by the provincial government, and is part of the range of Chinese investments in Argentina's energy.
The Government reported that as of August 31, the public sector debt as a whole, in pesos and foreign currency, amounted to the equivalent of $329.4 billion, $2.05 billion more than the previous month, as a result of placements and assistance from the Central Bank for $4.74 billion and payment of debt maturities for $2.69 billion. Total debt accumulated $16.12 billion in 9 months.
The fall in prices that Argentine exports had to face in the first half of 2020 did not prevent the trade balance from showing a 44% improvement, with a positive amount of $8.09 billion, the highest recorded since 2009. There, agro-industrial exports represented 73% of the total amount shipped.
The 30% tax for the purchase of foreign currency would provide the State with some 342.71 billion pesos next year, according to the national budget prepared by the Government. It is 82% more than the projected for this year and would represent a contribution of some $3.4 billion in income for 2021.
The production of crude steel registered in August a 22.8% decline compared to the same month in 2019, with a volume of 336,000 tons; however, it marked an improvement of 3.4% compared to July. The accumulated production in the first eight months of the year reflected a 32.8% drop against the same period in 2019.
Falabella's Argentine operation recorded a 60% drop in sales in the second quarter and announced the closure of four locations, two of Falabella's stores and two of Sodimac's stores, where it sells construction materials. Falabella shares lost 43.85% in the last 12 months, and yesterday recorded a 2.86% decline after the news about Argentina.