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To: TobagoJack who wrote (64804)	6/10/2005 3:54:26 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

Argentina defaulted and now have to tighten capital inflows? TJ, only you, from the top of your superior Confucian sapience could explain that to my small Brazilian brain. I thought capital was running away from Argentina like the devil runs away from the cross!!! Argentina tightens controls on capital inflows By Adam Thomson in Buenos Aires Published: June 9 2005 18:38 \| Last updated: June 9 2005 18:38 Argentina on Thursday announced stricter controls on capital inflows in an attempt to discourage “speculative” funds and protect the peso from strengthening further against the dollar. The measure, which is expected to come into force on Friday, obliges investors bringing capital into the country to lock away 30 per cent of the total amount for 12 months. The decision, to be enforced by decree, adds to existing rules that force inflows to remain in the country for at least one year. However, Roberto Lavagna, the economy minister, said on Thursday that there would be exemptions for trade finance and direct foreign investment in productive sectors as well as investment in primary issues of bonds and shares. He said the main objective was to prevent the peso from strengthening further, and added that maintaining a competitive exchange rate had been one of the keys to Argentina's economic recovery since it devalued the peso in January 2002. “Policies geared towards steadying flows can be used to head off a market over-reaction that puts pressure on the currency market,” said Mr Lavagna. Argentina's economic recovery since its financial collapse in December 2001 has made the task of keeping a competitive peso much harder. For example, private-sector capital flows switched from net outflows to net inflows towards the end of last year, which has placed further upward pressure on the local currency. So far, the country's central bank has taken on most of the burden of keeping the peso competitive. But recently it has had to step up intervention in the foreign exchange market with all the associated problems that involves. While many of the points detailing how the controls will be introduced are still unknown, analysts on Thursday said the new measures were a reasonable strategy for facilitating the central bank's task, and should not be seen as a return to state intervention. Vladimir Werning, an economist at JP Morgan in New York, said: “This is not something that investors will look at from the perspective of state intervention versus free market economics. Instead, they will see it as a signal of the government's emphasis on keeping a competitive exchange rate policy.”