Bloomberg News

Grupo Galicia Declines Most in 12 Weeks on Capital Controls

October 31, 2011

(Updates with closing prices in second paragraph.)

Oct. 31 (Bloomberg) -- Grupo Financiero Galicia SA, Argentina’s largest consumer lender, fell the most since August after the government announced steps to tighten restrictions on currency trading to stem capital flight.

Galicia declined 9.8 percent to 4.22 pesos at the close in Buenos Aires trading, trimming this month’s gain to 7.4 percent. Today’s drop was the biggest decline since Aug. 8.

Last week, President Cristina Fernandez de Kirchner ordered gas, oil and mining companies to repatriate all future export revenue, told insurance companies to bring investments back into the country and sent tax agency inspectors into exchange houses as part of an effort to strengthen central bank controls on dollar purchases. Money taken out of the country leaves banks with less cash to lend, tightening credit for other clients, research company Ecolatina said today.

“Monetary conditions have deteriorated in the third quarter because of the increase in capital flight,” Buenos Aires-based Ecolatina said in an e-mailed note to clients. “This affects banks’ liquidity.”

The government measures announced last week may be spurring investors to sell even more pesos in anticipation of future restrictive measures, Goldman Sachs Group Inc. analyst Alberto Ramos said today.

“The increase in forex market regulations/restrictions may backfire as it may lead agents to accelerate dollar buying in anticipation of potentially even more restrictive/punitive regulations in the near future,” Ramos said in an e-mailed note to clients.

--Editors: Brendan Walsh, Marie-France Han

To contact the reporter on this story: Nathan Gill in Quito at ngill4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at Papadopoulos@bloomberg.net


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