Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Argentines Make 7% Returns in Minutes Thanks to Capital Controls

Stock MarketsSep 09, 2019 04:33PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

(Bloomberg) -- Argentines are beginning to find some benefits from the capital controls that President Mauricio Macri imposed earlier this month.

One system to circumvent the controls is paying a return of 7% in a matter of minutes, and its completely legal. The profit derives from the difference between the so-called “MEP dollar” -- which entails buying and selling bonds in different currencies -- and the official exchange rate.

“We are barely keeping up,” said Federico Grand, a trader at Guardati Torti SA, a grain broker in Ciudad de Rosario. There are customers who come in three times a day to carry out the operation, he added.

The only limit is the $10,000 monthly cap that the central bank imposed on dollar purchases by individuals. Some clients spent that entire limit last week alone, Grand said.

The official exchange rate that closed last week at 58 pesos per U.S. dollar, is significantly stronger than the “MEP dollar”, which stood at 62.35 per dollar on Friday. The differential, nicknamed “rulo“ by local traders, gives rise to generous profits and is similar to operations that were made during the capital controls under former President Cristina Fernandez de Kirchner.

This is how it works, assuming the exchange rate is at 58 per dollar:

  • Step 1: A retail investor invests 58,000 pesos to obtain $1,000 in the bank
  • Step 2: With the $1,000 in their pocket, the person asks their broker to buy Bonar 2024 bonds in the market at a price of $45.24 (assuming the Sept. 6 price)
  • Step 3: Just a few minutes later, the person sells the securities and receives 62,344 pesos; the move would have allowed the person to make a 4,344 peso profit, which is equivalent to a return of 7.5% in dollar terms
  • The commission charged by the broker is 0.26% of the total amount or 150 pesos in this example, so the return is 7.25%.
The question is, how long will the government maintain an operation that can be very generous with retail investors, but at the same time causes the central bank to lose reserves?

Original Story:Argentinos aprovechan controles y ganan 7% en dólares en minutos

To contact the translation editor responsible for this story: Andrea Jaramillo at ajaramillo1@bloomberg.net

Reporter on the original story: Ignacio Olivera Doll in Buenos Aires at ioliveradoll@bloomberg.net

Editors responsible for the original story: Andrea Jaramillo at ajaramillo1@bloomberg.net, Carolina Millan, Philip Sanders

©2019 Bloomberg L.P.

Argentines Make 7% Returns in Minutes Thanks to Capital Controls
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Jose Pina
Jose Pina Sep 09, 2019 4:18PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Corralito 2.0 incoming...
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email