What does “lifting the exchange control” mean?
For years, in Argentina, it was not possible to buy dollars freely. There were restrictions, taxes, quotas, and many different exchange rates. The dollar obtained at the bank was called "official", but there was also the "card dollar", the "blue dollar", the "MEP dollar", the "Qatar dollar", and several others. It was a mess, and you could only buy 200 dollars.
Lifting the exchange control means that now anyone will be able to buy dollars at the market price, without limits or surcharges of 30%, 45%, or more that were previously added. Those multiple versions of the dollar will also be eliminated, and there will be only one value that may rise or fall, but within certain limits.
End of the USD 200 monthly limit for official purchases.
Elimination of restrictions due to subsidies, social programs, or public employment.
Simultaneous access to the official and financial markets.
End of the 30% PAIS tax collection and other surcharges, except for tourism and expenses abroad.
Implementation of a floating exchange rate within bands of $1000 to $1400.
End of the “blend dollar” for exporters.
What changes for the common citizen?
One of the major problems of the Argentine economy in recent years has been the confusion. Technical terms, multiple exchange rates, crossed restrictions, surcharges, and limitations created a financial system that was unreadable for the average citizen.
With this measure, at least in theory, access to dollars becomes simpler, more direct, and less heavily taxed. But what are the real impacts?
1. Savings in dollars
Before: buying USD 100 per month meant paying almost $150,000 in taxes.
Now: the dollar price will be between $1000 and $1400, but without taxes or restrictions. That is to say, nominally more expensive, but cheaper in real terms when compared to the price of blue or MEP dollars in the current market.
Impact: Savers will be able to dollarize without penalties. Although at a higher value, the "dollar hunt" through illegal or unclear channels comes to an end.
2. Prices and inflation
The big unknown. With a floating exchange rate, it is to be expected that prices will align with the new real dollar. The Government will try to keep the ceiling of $1400 functioning as an anchor, but if the market shoots up, prices could quickly readjust, especially in food, technology, and imported goods.
Impact: There could be a new wave of price increases in the short term. The inflationary risk does not disappear; it changes form.
3. Salaries and purchasing power
With prices that could rise and salaries still in the process of recovery, the big loser in the short term will be the average employee.
Impact: Currency freedom does not bring immediate improvements to the pocket. The benefit may be felt in stability in the medium term, but in the short term, there will be tension.
4. Tourism and expenses abroad
These will continue with taxes. The famous "card dollar" will remain. This responds to the need to curb the outflow of foreign currency without stopping the entire market.
Impact: Traveling abroad remains expensive and discouraged.
Why are they doing it?
There are several reasons:
Because the Government signed a new agreement with the International Monetary Fund (IMF) and one of the conditions was to organize the dollar market.
Because the current system had reached its limit: there were many strange rules, little trust, and no one knew how much things were really worth.
Because the dollars were insufficient, and with so many obstacles, no one wanted to sell or invest.
The underlying idea is that if there is more freedom to operate with dollars, investors will return, more dollars will enter the country, and the economy will stabilize a bit.
Will this stop inflation?
Not immediately. It may help if it brings more dollars in and the economy gets organized, but that takes time. In the meantime, prices may continue to rise, and that will affect the pocket.
The Government hopes that with this measure, a more stable phase will begin, but it also knows that the next few days will be difficult. The risk is that the dollar will become unmanageable and inflation will worsen.
Possible short and medium-term scenarios
Scenario 1: Stability with reserves
If disbursements from the IMF and multilateral organizations arrive in due time, and the BCRA can control the exchange rate within the bands, we could enter a period of relative exchange stability. This would allow:
Price stabilization.
Reduction of the exchange gap.
Recovery of reserves.
Increase in private investment.
Probability: Medium, but depends on market behavior.
Scenario 2: Flight to the dollar and inflationary pressure
If the market distrusts the new system, the dollar will tend to position itself at the ceiling ($1400) or even break it. The "managed" float could turn into a chaotic float. This would lead to:
Sharp increase in prices.
New wage tensions.
Risk of losing control of the exchange rate.Probability: High if there is no coordination between fiscal, monetary, and social policies.
Scenario 3: New monetary regime
Some analysts suggest that this is the prelude to a potential dollarization or legal bimonetarism. The government seeks, step by step, to eliminate the peso as the reference currency without announcing it formally. This would represent a paradigm shift.
Probability: Remote in the immediate term, but increasingly latent.
What does floating within bands mean?
This system, adopted by countries like Chile or Colombia, seeks to combine market discipline with limited intervention from the Central Bank.
If the dollar falls below $1000, the BCRA buys.
If the dollar rises above $1400, the BCRA sells.
In between, it lets the dollar float freely.
It is a way to "guide" the market without extreme controls. But it requires reserves and credibility. Without these two factors, it does not work.
So what now?
In summary:
You can buy dollars without obstacles, but they may be more expensive.
You will see price increases in some products.
Your salary may stretch less at first.
If you have dollars, you will benefit.
The Government hopes that this will bring stability, but the result is not immediate.
And trust?
The success of this reform depends on one key word: trust. If Argentines believe in the new system, adopt it, and respect it, the plan may solidify. If they reject it, evade it, or attack it, as has happened with previous experiences, everything could collapse.
That is why the Government's economic pedagogy will be key. It is necessary to explain, convince, train, and inform. And so far, in many areas, this has not happened.
Ending the exchange control was a necessary measure. The previous system was unsustainable. However, the transition will be painful, unequal, and risky. What is promised as economic freedom could lead to a new storm if it is not managed with seriousness and social sensitivity.
For the average citizen, the challenge is not only to understand what is happening, but to survive the adjustment. The State will need to support with clear social, labor, and communication policies. Without that, the exchange opening will only lead to opening to distress.
Comments