...Onerous Capital Controls The most significant macroeconomic challenge confronting Argentina is the accelerated pace of decline of foreign exchange reserves despite existing capital and import controls. International reserves declined to USD27 billion in March 2014 from USDD46 billion at the beginning of 2013. As reserves fall, the risks of even tighter capital controls increases, exacerbating Argentine corporates' already-high transfer and convertibility risk. Devaluation Risk The risk of additional devaluations of the Argentine peso continues to be at the forefront of concern for Argentine corporates due to declining reserve levels. This risk is highlighted by the substantial difference between the informal and formal exchange rates. Following the government's decision to let the currency devalue sharply in January, cash flow from operations has been squeezed for some corporates that are working through an adjustment period for their product prices that are dollar linked. Other corporates...
