BUENOS AIRES – Argentina announced Friday it will relax restrictions on the purchase of U.S. dollars after the sharpest slide in the value of the local peso since the 2002 economic collapse.
Analysts said the devaluation was forced by a steady decline in the country’s foreign exchange reserves, and it helped shake markets across the world by undermining confidence in emerging markets.
Argentines will be able to freely buy dollars for savings starting Monday, reversing a restriction imposed in 2012, and the surcharge on money exchanges will drop as well.
But the brief announcement by Cabinet chief Jorge Capitanich made no mention of many other restrictions imposed over the past three years, such as those that have make it hard for businesses to import supplies or repatriate profits.
Those measures were meant to stem the flood of dollars out of the country, but many economists say they undermined confidence in the peso.
Foreign reserves slipped 40 percent over the past 12 months to their lowest level in seven years.
That led the government to hold back from spending more hard currency to support the peso on the official exchange market on Wednesday and Thursday as the currency tumbled 16 percent against the dollar, falling to about 8 to 1. It had been 4.4 to 1 or better when the government began imposing the series of restrictions in 2011.
Economy Minister Axel Kicillof argued that the sharp fall was fed by speculators.
“Those interests want a dollar at 13 pesos and . . . yesterday we had a very strong speculative attack,” he told Radio Continental on Friday.
After the announcement, the black market dollar slipped to 12 from 13 pesos, while the official rate held roughly stable.
A report from international analysis firm Capital Economics said the official rate was likely to weaken further, closer to the free-market rate.
“We think that the move is another sign that the authorities have (reluctantly) accepted the need for a more flexible — and weaker — currency,” it said.
Independent economists said the effective devaluation this week will feed inflation running at near 30 percent a year. Sellers will have to raise peso prices to get the money needed to buy imported goods in dollars.
Kicillof, however, insisted, “It’s a lie from any point of view that this will carry over to prices. . . . We hope the people understand that there have been strong movements of economic destabilization to set prices that are not prices.”
The government said that under the new rules, the surcharge collected at the time of the currency exchange and on credit and debit cards abroad will fall to 20 percent from 35. The money can be recovered later with a signed tax statement.
Purchases on the legal market, though, still must be in line with the income a person has declared to tax authorities. And many Argentines say that most of what they consider legitimate requests for dollars have been refused or delayed in recent years, pushing many to the black market.
Argentina has been kept from global credit markets since defaulting on its debt during its 2001-2002 financial crisis. So officials have been trying to keep dollars in the country to meet government debt obligations and finance infrastructure programs.
This week’s developments in Argentina served as “a trigger” for a broader trend of investors shifting out of emerging markets, said Adolfo Laurenti, deputy chief economist at Mesirow Financial Holdings.
And that contributed to a sell-off in stock markets across the world Friday. Madrid’s stock market fell 3.64 percent, partly due to companies such as BBVA and Telefonica with interests in Argentina.
Alberto Ramos, who analyzes the country for Goldman Sachs, said the adjustments resulted from the government’s maverick economic strategy.
“These policies mean that everyday Argentines are getting poorer as rising inflation and a weaker domestic currency erodes disposable income in both local currency and in dollars,” he said.
The economic imbalances put pressure on both the official and unofficial exchange rates and on the central bank’s reserves, he said, adding that “the government does not have any alternative than let the currency adjust.”
Argentines are haunted by memories of the financial crisis, when banks froze deposits and the currency lost value, so they have been eager for dollars to stash in vaults or even under their mattresses in case of an emergency.
Helped by heavy government spending, Argentina’s economy grew by about 7 percent a year in many recent years. Officials projected 5.1 percent growth last year, though independent analysts said it was actually less than 3 percent.
“The high pace of government spending must be slowed down, or else the reserves will continue to be squeezed and this implies feeding inflation and a loss of reserves in a short time. The peso would also continue to appreciate,” said Aldo Abram, an economist at Buenos Aires-based Exante.