Restrictions imposed by Argentina’s government last week left as much as $500 million in US cash stranded at the country’s main airport for three days, unnerving local bank executives amid a surge in withdrawals.
The country’s top lenders were due to receive the greenbacks from the US Federal Reserve after importing them through Bank of America, according to people familiar with the situation who asked not to be named discussing sensitive matters. The cash was shipped on cargo planes in bundles of $1.6 million, one of the people said.
Argentina’s banks have seen a sharp increase in dollar withdrawals at their branches ahead of the Oct. 22 presidential election. They’ve been forced to import cash to meet the surge in demand and a government move meant to stem “irregularities” in foreign trade compounded their concern.
The country’s tax authority, AFIP, issued a 72-hour shutdown order at the main international airport’s cargo terminal on Oct. 10, amid a sharp selloff in the peso that saw Argentina’s black market exchange rate top 1,000 per dollar. The South American nation allows savers to hold accounts in dollars.
Reserves at Argentina’s central bank have fallen sharply in recent weeks, fueling investor concerns about a possible run on the financial system in the midst of the election cycle. Net reserves, the difference between central bank dollar assets and short-term liabilities, are now approaching a record negative $10 billion, according to private consulting firms.
The hurdles at the airport in Buenos Aires didn’t disrupt liquidity operations because the shutdown order was lifted before the full term elapsed and because banks usually import more than needed to meet client demand, the people said. Banks have brought in close to $2 billion in US cash since outsider candidate Javier Milei — a libertarian economist who wants to dollarize the economy — was the surprise winner of an August primary vote, the people said.
Local lenders, such as Banco Macro SA, Banco de Galicia and Banco Santander Rio, worked with Bank of America to bring the cash into Argentina. The US financial giant has a banknote service for foreign companies and clients, and the Argentina shipment was a routine transaction.
The plane carrying the cash was also stranded for a day in Miami due to Argentina’s cargo terminal issues, one of the people said.
AFIP’s press office said the restriction was lifted after 24 hours but didn’t give further details on the situation. Bank of America declined to comment.
Officials at local Argentine banks informally alerted the central bank to the problem, so that it could relay concerns to government authorities, the people said. The banks even considered submitting a formal letter on the issue, the people added.
Argentine savers have already withdrawn nearly $2 billion — 10% of total private sector dollar holdings — since a February peak in deposits. The import of banknotes from the US is exacerbating the decline the central bank’s reserves.
