Updated 04:01 AM EST, Sun, Nov 17, 2019

Argentina's President-Elect Mauricio Macri Seeks to Abolish Capital Controls on the Country's Currency

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Argentina's president-elect, Mauricio Macri, is dismantling a series of capital controls to lift the country's peso currency right away.

Macri was previously mum about his detailed plans to remove outgoing president Cristina Fernández's so-called "clamp-down" on dollar purchases that has made a multi-tiered exchange rate, Reuters reported. He said that he must first take a closer inspection at the true condition of national accounts.

However, incoming finance minister Alfonso Prat-Gay said in an interview with three local dailies that Macri's plans for the currency market will be the highest priority to address after the transfer of power scheduled on Dec. 10. This is despite the looming possibility of a sharp devaluation, the news outlet noted.

"The program to unify the currency market is the first signal for the economy to start to normalize. We're going to fulfill that promise as fast and as exhaustively as possible," said Prat-Gay, as quoted by Reuters. "If we can do it the 14th, we'll do it the 14th, and if not, we'll do it once we see the right conditions."

Pray-Gay added that currency reform could only be attained if a new central bank chief takes over, Reuters further reported. He noted that there will be an adequate supply of dollars and that he expects to make an announcement soon on a new source of hard currency that will help the bank re-establish its declining reserves.

"The unification of the exchange market will be the first signal for the economy to start normalizing," he added, as quoted by Bloomberg.

Current capital controls consist of strict limits on dollar savings, restrictions on imports, and an immense tax on credit card use abroad, the news outlet listed. Prat-Gay did not reveal whether the new administration would undo the controls in a flash or do it gradually.

Macri vowed during his campaign that he will abolish import restrictions and currency controls when he takes office, Bloomberg added. Investment banks such as Morgan Stanley support an instant correction in the exchange rate system.

Abolishing currency controls would also benefit the mining industry. The Argentine Mining Chamber estimated there are at least $5 billion worth of mining projects waiting for a more supportive government to sanction ventures, with the majority of them focused on copper, Mining.com reported.

According to the central bank, Argentina's international reserves plummeted $24 million on Dec. 4 to $25 billion, Bloomberg noted. The country is currently in default on about $28 billion of foreign currency bonds after U.S. District Judge Thomas Griesa prohibited Argentina from paying the debt until it resolves matters with a group of hedge funds, including Paul Singer's Elliott Management and Aurelius Capital Management.

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