BUENOS AIRES, Argentina - Argentina's government announced new measures on Tuesday intended to suck up undeclared dollars in response to growing pressure to abruptly devalue the nation's currency.
Economy Minister Hernan Lorenzino said the new tax-free bonds and certificates of deposit will pull into the banking system the foreign currencies that Argentines have hidden under mattresses and spirited out to illegal tax havens.
Both measures are being sent to congress for approval, presumably because enabling people to declare cash without paying criminal penalties requires the force of law.
Argentines will need to deposit these undeclared dollars at the Central Bank, which will issue CDs for the entire amounts, Central Bank President Mercedes Marco del Pont said. The bonds will pay 4 per cent interest through 2017, Lorenzino said.
The money will be used to finance energy and home construction projects, generating jobs and stimulating the economy.
Both sectors have stalled, in part because speculation about future inflation and a possible devaluation has made long-term investments in Argentina too risky.
Tax chief Ricardo Echegaray said that once approved, the amnesty will last for three months, and that any person or corporation can benefit. But he also said elected officials and anyone facing money laundering probes cannot participate.
"We have a long list of people facing charges who are not eligible," Echegaray said, and named some names beginning with Lazaro Baez, a businessman close to President Cristina Fernandez and her late husband Nestor Kirchner who is the focus of a federal money laundering investigation.
Hours earlier, Fernandez ruled out any currency devaluation while she's president, and dismissed the brewing Baez scandal as election-year politics.
But many Argentines have lost faith in the peso and in her leadership as inflation soars, Central Bank reserves drop and the economy slows, hamstrung by currency controls that make doing legal business more difficult.
A closely watched sign of the country's economic future is the illegal currency market, where Argentines are increasingly desperate to ditch their pesos as inflation climbs above 25 per cent a year. Amid fears of a potential currency shock, they're now trading nearly 10 pesos for each dollar — close to half the official value of 5.2.
This "blue dollar" trading remains marginal compared to the overall economy, but it's a free market, stubbornly beyond the government's control, and as such, it's increasingly being looked at by Argentines trying to protect their pocketbooks. The central bank periodically releases dollars to rein it in, but that's risky as well, now that Argentina's reserves have dropped by more than 20 per cent, to $39.75 billion.
New polls suggest Fernandez has lost more than half the support she had when re-elected in October 2011, including a 10-point ratings drop in the days since a scandal broke on April 14 over allegations that Kirchner ally and businessman Lazaro Baez spirited millions in cash out of Argentina in private planes.
A survey by the Management
A separate survey about her personal image said 48 per cent viewed it as positive after the scandal broke, down from 57 per cent before. A total of 1,000 Argentines responded to that survey by the Ipsos-Mora firm, which had an error margin of three percentage points.
Fernandez waved away the trouble in a speech at the Casa Rosada government house Monday night.
"Those who want to make money at the cost of a devaluation that the people will have to pay for will have to wait for another government," she declared. History shows that devaluations have only hurt ordinary Argentines, while enabling the financial sector to make huge gains "off the hunger, misery and de-industrialization of the country," she warned.
"They're raising this idea again because an election period is approaching," she added. "Every time there's an election, on side there's the economy and on the other, the scandals. It's typical of every election."
That brief reference to scandals was her first comment yet about allegations that Baez, a longtime ally of the Kirchners, had used his access to the presidential couple to make huge profits that he laundered by having aides fly the cash out of the country in mysterious trips on private planes.
The allegations, made by former Baez associates in televised interviews with investigative journalist Jorge Lanata, have made for sensational television in Argentina, and a judge agreed to open a formal investigation of Baez and his associates.
Lanata struck closer still to the president on Sunday night, interviewing Kirchner's former secretary, Miriam Quiroga, who described bags full of cash in the Casa Rosada. She said they were delivered to the southern province of Santa Cruz, where Baez based his business empire and the Kirchners have several homes. Quiroga also alleged that the Kirchners had vaults built to hold the cash.
Judge Julian Ercolini subpoenaed Quiroga to testify in the widening criminal investigation by prosecutor Guillermo Marijuan, and Attorney General Alejandra Gils Carbo ordered additional police protection for the prosecutor, who reported receiving at least two threats that his young daughters will be killed if he doesn't drop the probe.
Meanwhile, Fernandez faced a new challenge on her left flank: the launching Tuesday of a new political party by her former ally, union boss Hugo Moyano, who has become one of her toughest critics. Moyano plans to run lists of candidates under his "Culture, Education and Jobs" banner in October's midterm elections.
Associated Press writer Almudena Calatrava contributed to this report.