Dollars under the mattress: Argentines’ preferred savings

Dollars under the mattress: Argentines’ preferred savings
A widespread mistrust of the peso means that many Argentines prefer to take refuge in the dollar. (AFP)
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Updated 02 March 2020

Dollars under the mattress: Argentines’ preferred savings

Dollars under the mattress: Argentines’ preferred savings

BUENOS AIRES: No sooner does she receive her paycheck in Argentine pesos than 43-year-old lawyer Eugenia exchanges them for dollars and takes them home to hide away.
The fear of losing everything in a burglary pales in comparison with the mistrust she has for banks and her own country’s currency.
“I don’t trust the peso; it’s not just now, it’s always been that way,” she said.
Bludgeoned by an eighth major financial crisis since 1950, many Argentines prefer to seek refuge in the US dollar as a form of savings they can hide “under the mattress.”
Eugenia actually hides hers in the bathroom.
“I’d rather be robbed by a thief than a bank,” she said.
There’s nothing new about this mistrust.
“Historically, things didn’t go well for those who tried to save in pesos,” said Matias Rajnerman, chief economist at consultants Ecolatina.
“Those who did so in dollars, did well. It’s the consequence of a broken financial system.”
For 18 months Argentina has been in a recession provoked by a currency collapse.
The poverty rate in the country of 44 million is over 40 percent, inflation is around 55 percent and unemployment has risen over 10 percent.
The economy shrunk by 3.1 percent in 2019, and Argentine debt is more than 90 percent of GDP.
One of the country’s major problems is its citizens’ mistrust of the peso, which has deprived the government of much-needed dollars.

Currency flight
When the new government of center-left Peronist Alberto Fernandez came to power, it moved to combat currency flight by slapping a 30 percent tariff on foreign currency purchases and maintaining the previous government’s purchase cap of $200 per month.
Ahead of Fernandez’s assumption of power, 52-year-old interior decorator Sofia withdrew all her dollar savings.
“What can I do?” she asked, pointing out that the peso lost almost 40 percent of its value in 2019, after losing more than 50 percent in 2018.
Fernandez’s measures appear to be working, as the peso has stabilized at 63 to the dollar. The exchange rate was 18 to the dollar before the currency crash.
However, a black market exchange, with a rate of 83 to the dollar, has seen a surge in transactions due to the monthly limit on purchasing dollars.
But experts say it’s unlikely Argentine faith in the peso will grow.
“In this country there’s a systematic history of violating the saver’s legal security,” said Rajnerman.
“Private savings end up being seized by the government or exchanged into bonds. It happened several times, it happened in 2001,” when Argentina suffered its worst economic crisis in modern times as it defaulted on a $100 billion debt.
It was the year that then-president Fernando de la Rua limited Argentines to withdrawing 250 pesos (then worth $250) a week from banks.
De la Rua inherited a ticking time bomb from the government of Carlos Menem (1989-1999) who had linked pesos to the dollar.
Since then, many Argentines have hoarded their dollars outside the country.
However the government plans to increase taxes on personal and foreign assets, while also imposing tariffs on those who take their savings out of Argentina.
According to the country’s central bank, Argentines are holding $300 billion of savings in foreign accounts in the United States and Switzerland, among other places.
But economists say this dollar flight causes a vicious cycle.
“If we keep dollars under the mattress or take them out of the country, it reduces the financial system ... and that makes it difficult to turn things around,” said Rajnerman.

Safety deposit boxes
Financial uncertainty has led to a spike in requests for safe deposit boxes in banks, some of which even have waiting lists.
Fabiana, a 56-year-old doctor, wanted to stash her $40,000 savings in one.
“But I didn’t get it, many people got there before me,” she said.
The desperation to escape from government controls, taxes and the banks has led many Argentines to emigrate, despite their country being one of the richest in the world in terms of natural resources.
“In Argentina, no one respects your money,” said a 40-year-old businessman who moved with his family to Uruguay and declined to give his name.


Israel and Greece sign record defense deal

Israel and Greece sign record defense deal
Updated 20 min 54 sec ago

Israel and Greece sign record defense deal

Israel and Greece sign record defense deal
  • The agreement includes a $1.65 billion contract for the establishment and operation of a training center for the Hellenic Air Force

JERUSALEM: Israel and Greece have signed their biggest ever defense procurement deal, which Israel said on Sunday would strengthen political and economic ties between the countries.
The agreement includes a $1.65 billion contract for the establishment and operation of a training center for the Hellenic Air Force by Israeli defense contractor Elbit Systems over a 22-year period, Israel’s defense ministry said.
The training center will be modeled on Israel’s own flight academy and will be equipped with 10 M-346 training aircraft produced by Italian company Leonardo, the ministry said.
Elbit will supply kits to upgrade and operate Greece’s T-6 aircraft and also provide training, simulators and logistical support.
“I am certain that (this program) will upgrade the capabilities and strengthen the economies of Israel and Greece and thus the partnership between our two countries will deepen on the defense, economic and political levels,” said Israeli defense minister Benny Gantz.
The announcement follows a meeting in Cyprus on Friday between the UAE, Greek, Cypriot and Israeli foreign ministers, who agreed to deepen cooperation between their countries.


Dubai Islamic Bank sees no impact from NMC law suit

Dubai Islamic Bank sees no impact from NMC law suit
Updated 18 April 2021

Dubai Islamic Bank sees no impact from NMC law suit

Dubai Islamic Bank sees no impact from NMC law suit
  • Last week it emerged that NMC was suing a Dubai bank in the Abu Dhabi courts in a dispute that could complicate the company’s multi-billion-dollar debt restructuring

DUBAI: Dubai Islamic Bank (DIB) said on Sunday it does not expect any “negative impact” from a case against it brought by the administrators of hospital operator NMC Group.
It made the disclosure in a letter to the Dubai Financial Market posted on the website of the bourse.
Last week it emerged that NMC was suing a Dubai bank in the Abu Dhabi courts in a dispute that could complicate the company’s multi-billion-dollar debt restructuring and potentially delay payouts to creditors, Reuters reported.
It was the latest twist in the tale of the UAE ‘s biggest hospital group which last year disclosed more than $4 billion in hidden debt. Its UAE operations were placed into administration and creditor claims are understood to now exceed $6.4 billion.
“It is a matter of public record that an application has been filed by the administrators of the NMC Group in the Abu Dhabi Global Markets Court, in which Dubai Islamic Bank and 12 insurance companies and third party service providers are respondents,” DIB CEO Hassan Al-Serkal said in the statement to the Dubai financial Market, where it’s shares are listed. “DIB does not anticipate any material negative impact arising from this application. As this is an ongoing legal matter, we can comment further at this time.”


Pandemic and property prices weigh on UAE banks says S&P

Pandemic and property prices weigh on UAE banks says S&P
Updated 18 April 2021

Pandemic and property prices weigh on UAE banks says S&P

Pandemic and property prices weigh on UAE banks says S&P
  • Residential real estate prices have declined more than 40 percent since the peak in the second-quarter 2014
  • The credit ratings agency expects prices to remain under pressure in 2021

DUBAI: The COVID-19 pandemic, lower oil prices, and continued pressure on the real estate sector have increased risks for UAE banks, S&P Global Ratings said in a report on Sunday.
It expects the sector’s problem loans to increase further once current regulatory forbearance measures are lifted and banks start to account for the impact of the economic shock. However the process is expected to be gradual, minimizing the overall impact.
After the pandemic started, the UAE Central Bank (CBUAE) implemented a Targeted Economic Support Scheme (TESS), which helped ease the pressure on corporate issuers and small and mid-size enterprises, S&P said. But it did not reduce credit risk on the banking system’s balance sheet.
“The UAE has a wealthy economy with strong fiscal and external positions. The strength of the government’s net asset position has helped counteract the negative impact of lower oil prices on economic growth since late 2015,” S&P said in the report authored by credit analysts Puneet Tuli and Mohamed Damak.
It said that the pandemic has presented a new challenge to the economy and real estate sector.
S&P estimates the banking system’s total exposure to the real estate and construction sectors stood at 28 percent as of year-end 2020, assuming that one-third of personal loans for consumption purposes are channeled to real estate.
Residential real estate prices have declined more than 40 percent since the peak in the second-quarter 2014.
The credit ratings agency expects prices to remain under pressure in 2021.
Another 20 percent of the banking sector’s total lending covered sectors such as trade, transport,storage, communication, and personal loans for business purposes at year-end 2020.
A portion of these loans are at risk, which in addition to stress in real estate may lead to increased credit losses for UAE banks, it said.

 


Dubai Customs transactions reach 5 million in Q1

Dubai Customs transactions reach 5 million in Q1
Updated 18 April 2021

Dubai Customs transactions reach 5 million in Q1

Dubai Customs transactions reach 5 million in Q1
  • This high traffic “reflects the sustainability and resilience of Dubai and UAE’s economy”

DUBAI: Dubai Customs completed five million transactions in the first quarter of this year – up by 20 percent from the same period in 2020.
Customs declarations grew 24 percent over the period, with 50,000 average daily declarations.
The agency also recorded 238,400 payment requests, 141,800 certificate and report requests, 76,700 inspection service requests, and 59,600 business registration service requests, it said in a statement.
This high traffic “reflects the sustainability and resilience of Dubai and UAE’s economy,” Abdullah Mohammed Al-Khaja, executive director of the agency’s client management division, said.“We will target new international markets and attract more foreign investments to achieve Dubai vision of raising trade to $2 trillion in the next five years,” he added.

 


Saudi Arabia’s EIC buys assets from bust Belgian power firm

Saudi Arabia’s EIC buys assets from bust Belgian power firm
Updated 18 April 2021

Saudi Arabia’s EIC buys assets from bust Belgian power firm

Saudi Arabia’s EIC buys assets from bust Belgian power firm
  • The assets include machinery, equipment, inventory and software for designing transformers and mobile substations

DUBAI: Saudi Arabia's Electrical Industries Company has agreed to buy some assets of CG Power Belgium from its liquidator for about €5 million.
The assets include machinery, equipment, inventory and software for designing transformers and mobile substations, the Dammam-based company said in a stock exchange filing on Sunday.
It also revealed it was in the final process of establishing a unit in Belgium to hold the newly acquired assets.

Electrical Industries Company (EIC) is a holding company that provides electrical products and services in Saudi Arabia and the Middle East.

It owns Saudi Transformers Co, popularly known as STC and Wahah Electric Supply Company of Saudi Arabia, also known as WESCOSA.

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