Argentine official denies devaluation planned

[June 02, 2012]  BUENOS AIRES, Argentina (AP) -- A top Argentine official denied on Friday that the government plans to devalue the peso amid rumors that drastic official actions are looming.

"We are not going to take any explosive measures," Deputy Economy Minister Axel Kicillof said at a news conference.

Argentina's economy is under pressure from rising inflation and slowing trade, and people have been increasingly trading their pesos for U.S. dollars to shelter their earnings.

Currency controls aimed at reducing rampant tax evasion have fueled anxiety about the economy, accelerating capital flight and discouraging investment. After years of booming growth, businesses of all kinds are slowing down.

Kicillof insisted Argentina is well-positioned to confront these challenges, with nearly $47 billion in central bank reserves, more than enough to meet a $2.3 billion bond payment due in August.

He raised the issue as he accused opposition news media of trying to instill panic in a population that remembers losing two-thirds of its wealth a decade ago when the government tried to avert economic collapse by limiting what people could withdraw from their savings, and then devalued the currency.

Wealthy Argentines with overseas accounts were able to get their money out of the country ahead of that devaluation, but many others lost their life savings overnight.

Since then, many Argentines have tried to keep their money outside banks and beyond the reach of tax agents, dumping pesos for dollars whenever they can.

"This is not 2001," Kicillof said, waving a copy of a newspaper that alleged Friday that he was lobbying President Cristina Fernandez to "de-dollarize" the economy.

The supposed plan described by El Cronista Comercial would summarily change dollar-denominated contracts into pesos at official exchange rates after the August bond payment, trapping the wealth of the middle and upper classes inside Argentina.

"They're trying to say that I'm launching an atomic bomb," Kicillof complained. "It's a total invention, designed to create panic."

"When one says that the government is going to take away savings and take money from safety deposit boxes, what they're doing is instilling terror in the population, creating panic. And why? To force a devaluation, so that those who have deposits in dollars win," he added.

He blamed increasingly ominous news reports for encouraging Argentines to withdraw their savings in pesos and turn to the black market, where the demand for dollars has driven down the value of pesos 30 percent in recent weeks. A hundred pesos, Argentina's largest denomination, has slipped to $17 in illegal trading, while the official exchange rate would bring $22.

"They're saying we're going to open strongboxes, rip apart their pillows. It's all a lie. I haven't presented any proposal," Kicillof said.

"I'm asking the public here to watch what this government does" and ignore the media," Kicillof said. "They're all going to end up stuck in situations that they themselves created. They're going to end up trapped."

The president decreed in October that anyone buying foreign currency must first get authorization from Argentina's tax agency. The agency examines what the buyer has paid in wealth and income taxes, then subtracts documented living expenses from declared wealth to determine how many legally obtained pesos an individual might have available to sell.

The controls now have their first legal challenge, filed by Julio Cesar Duran, a retiree in the provincial capital of La Plata whose request to sell $10 worth of pesos for dollars to give to his grandchildren was denied. The online authorization system declared his purchase "inconsistent," without further explanation.

Theoretically, anyone who has paid his taxes and properly declared his income and wealth should be able to freely trade pesos for dollars at the official rate. But Duran is among a growing number of Argentines complaining that they've been cut off even though their taxes are up to date.

Fernandez has sought to vilify those trying to profit from the peso's unofficial decline against the dollar. She said Thursday that agricultural companies holding back grain sales to make bigger profits in the future are committing "a capital sin," and recommended that wealthy Argentines "forget for a moment the speculation and think about the country."

Meanwhile, even dogs are getting their due. The tax agency said Friday that its canine agent "Kiki" had sniffed out 135,000 pesos (about $30,000 at the official rate) that two Argentines were trying to smuggle over a bridge into Bolivia, where they hoped to buy dollars. The money was seized.

[Associated Press; By MICHAEL WARREN]

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