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Argentina to relax foreign exchange controls Argentina to relax foreign exchange controls
(about 2 hours later)
Argentina has announced a relaxation of currency controls, the government has said, which experts say is likely to weaken the peso.Argentina has announced a relaxation of currency controls, the government has said, which experts say is likely to weaken the peso.
President Mauricio Macri hopes the move will boost exports and spark economic growth.President Mauricio Macri hopes the move will boost exports and spark economic growth.
Farmers in the country have been waiting for the currency to fall before selling stockpiles of soybeans.Farmers in the country have been waiting for the currency to fall before selling stockpiles of soybeans.
The official exchange rate of 10 pesos to the dollar is not matched by a much stronger black market rate.The official exchange rate of 10 pesos to the dollar is not matched by a much stronger black market rate.
Analysts expect the official rate to weaken to between 13.5 and 15.00 per dollar, in line with the black market rate.Analysts expect the official rate to weaken to between 13.5 and 15.00 per dollar, in line with the black market rate.
The Argentine finance minister, Alfonso Prat-Gay, said he accepted the rate would weaken to "close to" 14.2 to the dollar.The Argentine finance minister, Alfonso Prat-Gay, said he accepted the rate would weaken to "close to" 14.2 to the dollar.
Mr Prat-Gay also said the country was negotiating a credit line with international banks to build a credit line of more than $5bn to replenish the country's international reserves.Mr Prat-Gay also said the country was negotiating a credit line with international banks to build a credit line of more than $5bn to replenish the country's international reserves.
Analysis: Candace Piette, Americas editor In a press conference, Mr Prat-Gay said "The old system had killed the goose that laid the golden egg" by restricting the growth of the economy.
Alfonso Prat-Gay said the old system had killed the goose that laid the golden egg by restricting the growth of the economy. Now all exchange controls will end for businesses, who will be allowed to buy as many dollars as they need. The government hopes this will help trade. But ordinary Argentines will still face restrictions on the amount of dollars they can buy a month. The peso is expected to settle close to the much lower black market rate - which would mean a steep devaluation. But the central bank has been given the right to intervene if it falls too quickly. He outlined that exchange controls would end for all businesses who would be allowed to buy as many dollars as they needed.
The authorities said the move to freely float the peso was a "dirty float", meaning the central bank could still intervene if it felt it necessary. But he said, for the time being, ordinary Argentines would still face restrictions on the amount of dollars they could buy a month.
In response to concerns that there could be a steep devaluation, Mr Prat-Gay said the central bank had been given the right to intervene if the exchange rate fell to quickly.
Analysis: BBC's Ignacio de los Reyes in Buenos Aires
The Argentine economy is so dependent on US dollars that grandmothers give their grandchildren 10-dollar bills as birthday presents and adults hoard them under the mattresses. So that is why in dollar-addicted Argentina, the end of the "cepo" or exchange controls was anxiously expected.
The government of Cristina Fernandez de Kirchner tried to end the buying of dollars four years ago, but prohibition simply fuelled the black economy.
Since then, a legion of informal street sellers in Buenos Aires' main thoroughfare, Paseo Florida offer foreign currency at much higher rates than the official one which is extremely hard to buy legally.
Argentines also found other creative ways to circumvent restrictions, from organised day-trips to neighbouring Uruguay to get US dollars from cash machines to Bitcoin trading.
The new policy may satisfy middle and upper class Argentines who will now be able to get their dollars freely.
But they are also fearful of the consequences: higher prices and a potential devaluation of their currency.
The country's previous leader, Cristina Fernandez, used central bank reserves to prop up the peso.The country's previous leader, Cristina Fernandez, used central bank reserves to prop up the peso.
But Mr Macri, who was elected last month and inaugurated on Thursday, had vowed to change the policy.But Mr Macri, who was elected last month and inaugurated on Thursday, had vowed to change the policy.
He will allow businesses and individuals freer access to US dollars. Argentina has been plagued by high inflation and financial volatility in recent decades. Argentina has been plagued by financial volatility in recent decades with inflation running at around 25% according to private estimates.