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Argentina Won’t Repeat 2001 Crisis, Top Fernandez Aide Says

June 01, 2012

Argentine President Cristina Fernandez de Kirchner

Argentine President Cristina Fernandez de Kirchner. Photographer: Juan Mabromata/AFP/Getty Images

A top aide to Argentine President Cristina Fernandez de Kirchner said the country isn’t heading for a repeat of its 2001 financial crisis and that there are no plans to turn dollar-denominated contracts and loans into pesos.

“This isn’t 2001, which was fueled by banks and the media,” Deputy Economy Minister Axel Kicillof, the mastermind of Fernandez’s seizure in April of Spanish-owned oil producer YPF SA (YPFD), told reporters in Buenos Aires today. “This isn’t going to happen.”

Kicillof, 40, was commenting on a report in today’s Cronista newspaper that the government was planning to “pesify” the economy by converting existing dollar-denominated loans and contracts into the national currency. There are no plans to introduce multiple exchange rates, he said.

South America’s second-biggest economy defaulted on $95 billion in bonds in late 2001 and shortly after abandoned a decade-old currency peg that fixed the peso at one per dollar. The peso lost as much as 75 percent of its value the following year, while the government forced banks to convert dollar deposits and loans into pesos.

Since her re-election in October, Fernandez tightened controls on the foreign exchange market and forced companies to repatriate money held abroad in a bid to stem capital outflows and preserve central bank reserves, which she uses to pay debt with the government shut out of foreign credit markets.

Dearth of Dollars

The restrictions, which include the need for the tax agency to approve all purchases of foreign currencies, have led to a widening gap between the official and unregulated peso exchange rates. After rising 35 percent this year, the dollar in the unregulated market now costs 6.34 pesos, a record 42 percent more than the official rate of 4.47 pesos.

Difficulties in buying dollars have led Argentines to bring court cases against the government, saying the tax agency doesn’t have the authority to forbid currency purchases. One plaintiff was a 59-year-old grandfather who was refused permission to buy $10 that he planned to give to his two grandsons.

Cabinet Chief Juan Manuel Abal Medina on May 30 told Congress that Argentines are “obsessed” with dollars and that the government is seeking to “de-dollarize” the economy.

“It’s a cultural problem,” Abal Medina said. “It’s very important that Argentines be more normal and use dollars only for the trade exchange as happens in other places.”

The president herself is among those who prefer dollars. At Los Sauces Casa Patagonica hotel, which Fernandez owns in the southern Patagonian region where she used to live, rates are quoted in dollars, according to its website. The hotel offers a three-night honeymoon package at $1,100 plus tax.

Yesterday Senator Anibal Fernandez, a former cabinet chief, said that he owns $24,000 and bought them “because I felt like it.”

Speaking to Radio Continental, he said Argentines are free to buy dollars “if they can.”

To contact the reporter on this story: Eliana Raszewski in Buenos Aires at

To contact the editor responsible for this story: Joshua Goodman at

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