New Leftist Argentine Government Announces Tax Hikes

Argentina's new leftist government announced Tuesday a 30 percent tax on foreign currency purchases and a six-month freeze on public utility prices as part of a raft of measures to boost growth.

The government of President Alberto Fernandez, who took office last week, had already announced increases in taxes on agricultural exports over the weekend.

The measures announced by Economy Minister Martin Guzman on Tuesday is aimed at boosting spending with a focus on social programs in the hope of reviving domestic consumption and restricting dollar outflows.

"In 2017, a reform was enacted for an economy that was going to grow and instead went into freefall," Guzman told a press conference in Buenos Aires.

"If we want to solve the crisis we have to change that. If not, our fiscal problems are going to get worse," he said. "We cannot allow the deficit to grow."

The 30 percent tax on foreign currency purchases, which remain limited to $200 a month, will include those made with credit cards.

"We need to discourage savings in dollars that we don't produce," said Guzman, who said taxes on peso savings would be scrapped.

Guzman also announced a rise in rates of personal property taxes as well as those on financial assets held abroad.

"This set of measures seeks to maintain certain balances, and change priorities to protect sectors that are highly vulnerable," the minister said.

He announced a bonus of 10,000 pesos ($160) for pensioners, to be paid in two tranches in December and January.

"This is about stopping the Argentine economy from falling while we protect those we can't ask more from," said Guzman.

Argentina's economy is expected to shrink by around 3.1 percent in 2019, as inflation hovers around 55 percent, poverty near 40 percent and unemployment rising to 10.5 percent.

Fernandez was swept to power in large part due to a public backlash over the terms of a $57 billion loan his center-right predecessor Mauricio Macri negotiated with the IMF last year.

With Argentina's rising debt came deeply unpopular austerity measures.

Fernandez vowed to put Argentina "back on its feet" after winning October's election.

Argentina has so far received $44 billion of the agreed IMF loan, taking its external debt to $315 billion, around 100 percent of gross domestic product.

Fernandez said he would reject the remaining disbursement, which was delayed until after the Argentine elections, believed to be around $11 billion.

Last week at his inauguration ceremony, Fernandez said Argentina wanted to honor its debt but wouldn't do so at the expense of the country's people.

"We want to have a good relationship with the IMF but without growth we won't be able to pay," said Fernandez, accusing Macri of leaving the country in "virtual default" following 18 months of economic turmoil triggered by a currency crisis.