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Argentina Targets Economic Terrorists Behind the ‘Shadow Banking’ Sector

Nov. 9, 2014 (EIRNS)—In a number of recent high-profile enforcement actions, the Argentine government has launched an aggressive offensive against financial speculators in the underground "shadow banking" sector, whose illegal currency operations over the past several months were aimed at creating a foreign exchange shortage and run on the dollar so severe that—they anticipated—it could only be remedied by a mega-devaluation.

Argentina’s Deputy Finance Minister Emmanuel Agis told an political economy seminar Nov. 5 that the country’s "shadow banking system," in which financial assets are traded without controls or regulation, is 110 times the size of the formal Argentine economy. Central Bank (BCRA) Governor, Alejandro Vanoli, warned at the same seminar that "there is a nest of internal vultures who tried to launch a financial [currency] run to sow fear." Chief of Staff Jorge Capitanich, speaking the same day before the Senate, charged that these are the "economic terrorists" whose "systematic speculative attacks" are intended to "destabilize governments."

Vanoli made clear, however, that "there will be no devaluation." Thus far, the government’s counterattack has prevented this, while, at the same time, through negotiations with grain producers who had withheld their crops from market for speculative purposes, it has guaranteed the influx of at least another $4 billion in foreign exchange by year’s end. The Central Bank is also expected to request a second $800 mn. tranche of its currency swap agreement with China’s Central Bank, before the end of the year. For now, the currency exchange market has been stabilized, forcing a drop in the black-market dollar to 13.10 pesos on Nov. 7, from 14.33 on Nov. 3.

Since taking over at the BCRA four weeks ago, Vanoli has coordinated with the National Securities Commission (CNV), the Financial Information Unit (UIF), and other federal regulatory and law-enforcement agencies, to target both foreign and domestic corporations, banks, and exchange houses engaged in capital flight, tax evasion, over- and under-invoicing of imports/exports, and illegal foreign currency operations. These include such large foreign corporations as Procter & Gamble and General Electric, as well as local banks and companies such as Malteria Pampa, S.A., and Monteverde S.A. On Oct. 22, the BCRA led a mega-operation in Buenos Aires and La Plata, raiding dozens of foreign currency exchange houses, stock-market traders, and other financial entities suspected of carrying out illegal operations.