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Argentina Clamps Down on Loophole to Gain From FX Controls

Ignacio Olivera Doll

(Bloomberg) -- Argentina’s central bank is adding measures to curb trades aimed at profiting from capital controls.

Argentina’s central bank will require individual investors who buy dollars to hold those greenbacks for at least five days before they can buy bonds in the secondary market, according to regulation A 6780 released late Wednesday. To access FX markets, savers will have to submit a sworn declaration stating they won’t buy bonds within that timeframe.

The rule aims to curb arbitrage operations used by savers to profit from the return of capital controls, according to a person with knowledge of the matter. Argentina’s securities regulator will publish a norm Thursday to complement the Central Bank’s regulation, according to its press office. The norm will call for brokers to double-check whether they have held assets owned by individuals for at least 5 days before they can sell them.

The move follows a decision to bring back capital controls, a drastic measure taken by President Mauricio Macri after his poor showing in a presidential primary vote sparked a plunge by the peso and a drop in government reserves along with it. Argentine savers, who can buy as much as $10,000 per month, soon found arbitrage opportunities in bond prices, which they called “el rulo” or “the curl.”

Read More: Argentina’s Dollar Pile Dwindles Even With Capital Controls

Foreign investors, meanwhile, use bonds that trade locally and abroad to take their dollars abroad, through an operation known as the “blue-chip swap rate.”

Anti-Laundering Push

The central bank also conducted exchange house inspections Wednesday to ensure they comply with the new currency rules, according to a person with direct knowledge of the matter. The government is ramping up its inspections in tandem with the central bank to prevent the controls from creating opportunities for money laundering, said Mariano Federici, head of Argentina’s anti-money laundering unit.

“It’s a tough time, and the institutions we regulate may be tempted to relax their controls to keep their transactions up,” Federici said by phone. “In this context, we believe there may be a rise in reports of suspicious operations.”

(Updates with securities regulator comment in third paragraph, anti-money laundering unit in sixth paragraph.)

To contact the reporter on this story: Ignacio Olivera Doll in Buenos Aires at ioliveradoll@bloomberg.net

To contact the editors responsible for this story: Carolina Millan at cmillanronch@bloomberg.net, ;Daniel Cancel at dcancel@bloomberg.net, Robert Jameson

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