BUENOS AIRES, Feb. 9 (UPI) -- Argentina is slashing foreign currency outflows in expectation of tougher economic times, a likely result of the drought-related drop in commodities harvests and exports and fallout from the EU debt crisis.
The foreign exchange controls followed a week of squabbling with neighbors Brazil, Chile and Uruguay over Argentina's new regulations that effectively block many import items from the Latin American region, EU and Asian trade partners from entering the country.
Critics of President Cristina Fernandez de Kirchner said the government's confrontational style would delay resolution of disputes that could be resolved amicably.
The government is facing trade disputes with foreign partners, as well as revolts within the farmer community and workers' unions.
Argentine exporters are up in arms over new regulations that they say inhibit trade and increase their tax and other financial liabilities. Importers too are unhappy over new legislation.
Officials said the government made no secret of its intention to stem currency outflows and capital flight believed to be driven by the changing regulatory environment.
An Official Gazette announcement said the government would restrict daily cash transactions per person to about $231 -- down to 1,000 pesos from 10,000 pesos.
Analysts said the restriction would directly affect activity in the stock and bond markets, investment funds and futures markets. Transactions that exceed the limit will have to be conducted through Argentine bank accounts authorized by the Central Bank.
Critics said the new curbs could discourage Argentine growth. Officials cited concern over money laundering and terrorism as among reasons for the restrictive measures, but critics said the government was worried about the flight of capital in response to its economic policies.
Argentine outflows in the first nine months of 2011 exceeded $18 billion, double the total for the comparable period in 2010. Although officials take credit for reducing outflows, critics say the curbs can backfire.
Warnings of dire consequences for traders in an unregulated currency market have also depressed demand but the government is finding its buyback of foreign currencies, mainly the U.S. dollar, has increased the amount of the pesos in circulation.
Critics said the government's policies could worsen Argentine inflationary trends.
Meanwhile, importers complain the new policies don't benefit them either. Trade representatives said the new rules disadvantaged medium-sized to large importers -- anyone importing goods worth more than $500,000 a year.
Importers' representatives said they expected a downturn in their trade because of the government's restrictive policies. Both importers and exporters now want to government to carry out a comprehensive review of its policies.