On 25 November, 24 hours before the start of ‘Black Friday’ online discounts, the Argentine central bank issued an order prohibiting the sale of holidays and foreign travel through credit-card based quotas.
Analysis
At this time of year many Argentines are planning their summer holidays. Credit card companies, airlines, and travel agents usually offer payment of foreign holidays in quotas. However, concerned over its dwindling US dollar reserves the central bank (BCRA) has banned such payments. In normal times there is a net annual foreign currency outflow of US$5bn on the tourism account, as the expenditure by Argentines travelling abroad exceeds that by foreign tourists visiting Argentina. The latest measures are intended to cut back that net outflow
- A BCRA circular says payment in quotas by credit card can no longer be offered for foreign travel items such as airline tickets, car rentals, and hotels. Holiday makers will have to make a single up-front payment, and any outstanding credit card balances relating to foreign travel items will attract a minimum interest rate of 43%.
- The decision will be unpopular with middle class families (many of whom take summer holidays in neighbouring Uruguay or Brazil) but reflects the acute shortage of foreign currency as the country continues trying to reschedule its debt to the International Monetary Fund (IMF), and to reach agreement on a multi-year economic plan.
- The government has said it will submit this plan to congress in December and aims to finalise a rescheduling deal with the IMF by March. However, the financial markets remain sceptical, with sources saying that the economy minister, Martín Guzmán, is planning only to present a list of economic targets for growth and inflation, rather than lay out a detailed economic programme.
Looking Ahead: Since the proposed rescheduling would extend well beyond the current government’s remaining two years in office, an agreement with the political opposition is seen as an essential part of the solution. There is, however, little sign of the expected cross-party talks, which increases the possibility of further delays and foreign currency restrictions.