The Central Bank of Argentina is facing accusations from importers for causing delays in the disbursement of dollar-based payments, citing high freight costs as the reason. The Argentine government now considers freight costs exceeding 15% of the imported merchandise’s value as inconsistent, leading to the withholding of dollar requests for freight payments.

Argentine economist Ignacio Olivera Doll has pointed out that the government is implementing a new limit on freight costs, which was not applied previously, to justify these actions.

In response, Customs General Manager Guillermo Michel denied the accusations and maintained that the payments system is functioning normally. However, he acknowledged that some importers may be trying to transfer transportation amounts higher than the authorized limits.

This delay in dollar disbursements has resulted in a backlog of pending payments for importers, as they are required to receive government approval in dollars due to exchange controls.

Additionally, the situation has impacted Argentina’s net reserves, which have reached historically low levels, falling to -$7 billion. As a result, the government is rationing both dollar and yuan reserves to meet importers’ already approved requirements.

Moreover, the allocation of yuan reserves to companies using it as a settlement currency for provider payments has also been affected by these measures. The daily average of yuan-based allocations has significantly decreased, going from $90 million per day to less than $10 million daily on July 14 and 17.

The potential cause for this reduction is linked to the government’s failure to reach an agreement with the International Monetary Fund (IMF) regarding the anticipated disbursement of at least $4 billion. Argentina faces the urgent need to pay $2.7 billion to the IMF by the end of July, and without a resolution, they may have to utilize part of the approved Chinese swap line, as they did last month when $1 billion in yuan was used to make a payment to the IMF.

The situation with dwindling reserves and the restrictions on disbursements has raised concerns about Argentina’s financial stability. What are your thoughts on this issue? Please share your opinions in the comments section below.

Frequently Asked Questions (FAQs) about dwindling reserves

What is the issue with the Central Bank of Argentina and importers?

Importers are accusing the Central Bank of Argentina of delaying dollar-based payments under the pretext of high freight costs. The government is now implementing a new limit on freight costs exceeding 15% of the value of imported merchandise, leading to delays in disbursements.

How is the government justifying the delay in dollar disbursements?

The Argentine government is using the argument of freight cost inconsistency to justify withholding dollar requests for freight payments.

What impact does this delay have on importers?

Due to exchange controls, importers need to receive government approval in dollars to conduct their operations. The delay in dollar disbursements has resulted in a backlog of payments for importers.

What has been the effect on Argentina’s net reserves?

The situation has led to historically low net reserves for Argentina, which have reached -$7 billion.

How are yuan-based payments also affected by the measures?

Yuan-based allocations to companies using it as a settlement currency for provider payments have also been reduced. The daily average of yuan-based allocations has significantly decreased.

What could be the reason behind the reduction in yuan-based allocations?

The reduction in yuan-based allocations might be linked to the government’s failure to reach an agreement with the International Monetary Fund (IMF) regarding an anticipated disbursement of at least $4 billion.

How is Argentina planning to address its financial obligations?

Argentina faces an urgent need to pay $2.7 billion to the IMF by the end of July. If an agreement is not reached, they might have to utilize part of the approved Chinese swap line, as they did previously.

What are the concerns raised by the situation with dwindling reserves?

The situation has raised concerns about Argentina’s financial stability and its ability to meet its financial commitments.

What is the Customs General Manager’s response to the accusations?

Customs General Manager Guillermo Michel denied the accusations and stated that the payments system is functioning normally. However, he acknowledged that some importers may be attempting to transfer transportation amounts exceeding authorized limits.

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