INSIGHT-Manufacturers in Argentina starved of dollars ahead of election, hurting output
By Eliana Raszewski
BUENOS AIRES Aug 28 (Reuters) - Argentina's central bank is reducing the supply of scarce dollars to manufacturers two months ahead of a presidential election to ensure more are available for the nation's savers, hampering the import of parts and disrupting factory production lines.
Tough capital controls mean importers operating in Latin America's No. 3 economy are restricted to how many dollars they can buy each month, while savers have to apply to the tax agency to purchase greenbacks.
Two sources in the automaking industry told Reuters that in the first three weeks of August the financial regulator cut the sector's dollar allowance by almost a third. The head of an electronics assembly firm said his allocation had also fallen this month.
The central bank and industry ministry declined to comment.
The timing of the cuts for industry coincides with a spike in dollars available for the wider Argentine population, whose faith in the peso currency evaporated after a string of economic crises and who routinely seek hard currency ahead of elections to protect their savings. That is because past political change and periods of economic turmoil have led to hyperinflation, big devaluations and, in 2001, a run on banks.
The central bank's actions risk undermining a fragile recovery in Argentina's industrial sector, which grew for the first time in nearly two years in June as an economic recovery underpinned by high public spending shows sign of taking root.
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