BUENOS AIRES (Dow Jones)–Argentines withdrew $645 million in U.S. dollar-denominated deposits from private sector banks in the first week after the government made it harder for individuals and companies to buy dollars.
The numbers, published by the Central Bank of Argentina late Friday, seem to confirm that the new currency controls have made Argentines nervous and led many to do what they typically do during times of crisis–buy dollars or withdraw them from the banking system.
Private sector banks had $14.833 billion in dollar deposits before the currency controls were imposed on Oct. 31, according to the central bank. Five days later that had declined by 4.3% to $14.188 billion.
In the same week, peso deposits rose 4.2%, according to the central bank.
Government officials say the currency controls aim to curb money laundering. But most analysts say the real aim of the crack down on dollar purchases is to stem capital flight that has cut central bank reserves to $46.57 billion from $52 billion in early August.
Economists say the currency controls themselves are now contributing to the drain on central bank reserves. That’s because of the way the bank calculates its reserves, which includes a measure of how many dollars are deposited in the country’s banking system.
By making it harder to acquire dollars, the government has sparked fears that Argentina’s currency, the peso, will loose value quickly, making it even more important to obtain dollars now.
Many people have also become worried that in a worst-case scenario the government might freeze dollar deposits, making it impossible to withdraw them.
Government officials say that’s not going to happen. In fact, on Friday, the monetary authority made it easier for banks to give out dollars.
But Argentines have seen it happen before in previous crises and many of them simply don’t trust the government–or banks.
-By Taos Turner, Dow Jones Newswires; 5411-4103-6728; taos.turner@dowjones.com
Source: http://online.wsj.com