Odds Of New Corralito (Auto Conversion Of $ Acct To Pesos)

[Joe]

What are the odds of a new Corralito where the government converts all dollar accounts into pesos? The rate would probably be the official rate prior to a major devaluation as was done in 2001.

Wikipedia article on Corralito

The motivation for doing this will be that as the foreign reserves are depleted, the government will need a new source of dollars. With the government now allowing legal conversions many people will be storing their dollars in the bank and this will provide the government with a large funding source in order to keep the government functions and social benefits running smoothly.

A variation of this that is gaining favor in Europe is being called "Bail-Ins" as contrasted with "Bail-Outs". Bail-ins are where the bank depositors are used to fund the banks bad debts - instead of the taxpayers. This has been tried in Cyprus and looks to be the trend of the future.

 

[Davidglen77]

I highly doubt this would happen again and if it did they wouldn't have much to work with. Did you know that out of all the people who bought dollars under the new program in the last few weeks, less than 10% of them deposited the money in the bank? So figure out of the 1 billion dollars sold to Argentines during January and the first few days of February 10% would be ten million dollars, which is about enough money to fuel up the Aerolineas planes for a week. Argentine debts are in the billions so a few million wouldn't do the trick for them. After 2001, people stopped depositing dollars in Argentine banks. Some people do keep them there, but in very small amounts. Pesos only - at a lovely 26% annual interest rate on a 90 day certificate of deposit.

 

[syngirl]

Anyone with any sense isn't going to trust this govt anyway, and they're not going to leave them in the bank. Only those crazies that somehow still have faith in the govt will do so. And they will be seriously disappointed when they go to withdraw and the rules change, ie in the course of the year there will be an announcement that they've increased the tax for those that withdraw immediately to 35% and for those that have left for one year it will be 20%, or the plazo is extended to 36mos or something. As I write this there's already a titulo saying changes are being made to the system...

 

[jackbower]

I highly doubt this would happen again and if it did they wouldn't have much to work with. Did you know that out of all the people who bought dollars under the new program in the last few weeks, less than 10% of them deposited the money in the bank? So figure out of the 1 billion dollars sold to Argentines during January and the first few days of February 10% would be ten million dollars, which is about enough money to fuel up the Aerolineas planes for a week. Argentine debts are in the billions so a few million wouldn't do the trick for them. After 2001, people stopped depositing dollars in Argentine banks. Some people do keep them there, but in very small amounts. Pesos only - at a lovely 26% annual interest rate on a 90 day certificate of deposit.

I think your math is off.

 

[GS_Dirtboy]

The banks were mandated last week to reduce Dollar deposits to 30% of total reserves or less.

 

[Gringoboy]

Joe, would you keep your US Dollars in an Argentine bank?

 

[AmigoArtistico]

I think your math is off.

What's US$90,000,000.00, more or less?

 

[Reneige]

I hate to say this but I think an unofficial corralito could be underway via the new dollar purchase scheme. I hope I'm wrong. Either way, I wouldn't dare keep my dollars in an Argentinian bank, regardless of the 35% tax. Commercial banks deposit their dollar holdings in the central bank, those very same reserves that are bleeding away with foreign debt payments and energy subsidies and a current account deficit. Also, shortly after the government allowed people to buy dollars, but imposing harsh conditions if they are not deposited at commercial banks (effectively adding them to foreign reserves), they have also initiated a policy that requires the banks to sell their dollars. So if the central banks foreign reserves are depleted, it doesn't seem like there will be dollars to pay out to the people who have purchased them under the new policy.

Source : http://www.reuters.com/article/2014/02/06/argentina-peso-idUSL2N0LB1WD20140206

Maybe I am pessimistic, I won't claim to be an expert on the operations of commercial banks, but I wouldn't put it beyond this government to blame the banks for not having the dollars to eventually pay out, when it was the governments very policies that forced them to reduce their holdings of the dollars people have purchased.

 

[Dublin2BuenosAires]

Not for a second did i consider buying legit dollars, first i didnt want my name on any afip "has got dollars" list and second i suspected that the govt wasnt acting altogether altruistically. So now it seems you are sending your usd to the foreign reserve bucket, that bucket has more holes than it has bucket.

Keep em tucked away elsewhere, i think the smart money with the govt and usd is "fool me once ...." Etc.

 

[AmigoArtistico]

I hate to say this but I think an unofficial corralito could be underway via the new dollar purchase scheme. I hope I'm wrong. Either way, I wouldn't dare keep my dollars in an Argentinian bank, regardless of the 35% tax. Commercial banks deposit their dollar holdings in the central bank, those very same reserves that are bleeding away with foreign debt payments and energy subsidies and a current account deficit. Also, shortly after the government allowed people to buy dollars, but imposing harsh conditions if they are not deposited at commercial banks (effectively adding them to foreign reserves), they have also initiated a policy that requires the banks to sell their dollars. So if the central banks foreign reserves are depleted, it doesn't seem like there will be dollars to pay out to the people who have purchased them under the new policy.

Source : http://www.reuters.c...N0LB1WD20140206

Maybe I am pessimistic, I won't claim to be an expert on the operations of commercial banks, but I wouldn't put it beyond this government to blame the banks for not having the dollars to eventually pay out, when it was the governments very policies that forced them to reduce their holdings of the dollars people have purchased.

Don't you read the news in Spanish? That story has been out for many days now.

Additionally, as usual for stories published in English, it has details missing and incorrect.

• The rule isn't new. It is a rule that had been in effect before, but had been suspended in 2006 when the gov't feared that the peso might be getting stronger than desired (how times have changed)
• The banks must divest themselves of dollar cash reserves by the end of the month, but have up to four months to sell off dollar denominated bonds
• There were estimates in at least one article of how many dollars need to be sold (I think it was in the order of $4,000 million)
• New dollar income from external sources (bank lines of credit, money from foreign bank holding companies, etc.) are not subject to the 30% limit

Anyway, this is what is pushing down the dollar right now, and possibly for the next few months, as the banks are flooding the market with dollars, and the selling of the soy harvest begins in March.