- - Saturday, November 12, 2011

BUENOS AIRES — Argentine President Cristina Fernandez has placed strict controls on the foreign-exchange market and forced oil, gas and mining companies to keep their export earnings in the country.

The moves are designed to shore up foreign-currency reserves and discourage citizens from sending their assets abroad. But they have set off alarm bells among her critics, prompting comparisons to the heavy-handed economic tactics of Venezuelan President Hugo Chavez.

Mrs. Fernandez, a center-left leader known for lax fiscal and monetary policy, was re-elected last month in a landslide.

During her first term, she oversaw a booming export-based economy driven by high commodities prices. Her expansive social programs have won her political support among the working class and have been credited with creating jobs, boosting salaries and prompting the construction of homes and schools.

But with overseas holdings now as high as $160 billion — nearly half the size of Argentina’s economy — a side effect has been the decline of the peso’s value.

Until last week, the peso was depreciating at a 7 percent yearly pace, according to Boris Segura, a Latin American analyst for Nomura Securities. The peso today trades at 4.26 to the dollar; a year ago, it traded at 3.9 to the dollar.

The decline has prompted an uptick in the number of Argentines seeking to exchange pesos for dollars.

To discourage such demand, the Fernandez government on Oct. 30 began requiring people seeking to exchange pesos for any foreign currency to enter their national identification numbers into a database to show they aren’t tax scofflaws.

The government also sent 4,400 tax agents to exchange houses across the country to implement the verification system.

Meanwhile, Mrs. Fernandez is trying to keep foreign currencies in the local exchange market by requiring oil, gas and mining companies to cash in their export sales at home. The country’s central bank estimates this will keep some $3 billion in U.S. dollars in the exchange market.

Bloomberg News reported Wednesday that, as Argentina has put limits on foreign exchange purchases, nervous investors are withdrawing their money in anticipation of further controls, and Argentine dollar deposits are heading toward their first annual decline in a decade. Dollar deposits have fallen by about $300 million since the Oct. 31 decree.

“In the past, these sorts of moves have been preludes to quite severe changes to the rules of the game, such as freezes and devaluations,” said Joseph S. Tulchin of Harvard University’s Center for Latin American Studies during a phone call from Cordoba, Argentina. “That’s why this has been setting off alarm bells.”

Mrs. Fernandez won re-election with promises to “deepen the model” established in her first term.

Mr. Segura and other analysts, however, caution against taking the model too far. In a newsletter to clients earlier this year, Mr. Segura compared Mrs. Fernandez’s model to that of Venezuela’s socialist leader, Mr. Chavez.

“The market should recall what [Mr. Chavez’s] change entailed: nationalizations, expropriations, more draconian exchange controls, weakening institutions, etc.,” he wrote. “We certainly hope that a ‘deeper model’ is not in store for Argentina.”

Mrs. Fernandez showed herself capable of a heavy hand during her first term.

Resurrecting a dictatorship-era decree that forbids misleading advertising, she cracked down on private economists who published inflation statistics that were double those published by the government, which is known for cooking its books.

She also forced price caps on companies and export controls on the country’s agriculture sector.

In 2008, Mrs. Fernandez surprised markets when she nationalized the country’s private pension funds. She also stripped the central bank of its independence by firing a former bank director for refusing to make foreign reserves available to service the nation’s debt.

And, like Mr. Chavez, she has struck back at critics. When the owner of a cable news channel and the country’s largest newspaper, Grupo Clarin, denounced her handling of a standoff with agriculture interests, Mrs. Fernandez took away one of company’s operating licenses.

“There are definitely similarities between Fernandez and Chavez, including heavy state intervention in the economy, strict government controls of all kinds, and conflict with unofficial media outlets, among other things,” said Mariel Fornoni, director of the Argentina-based consultancy firm Management & Fit.

But, she said, Mrs. Fernandez will not take her statist model to extremes: “The difference is that Venezuela has large oil reserves under state control. Argentina can’t take control of the soybean industry so easily.”

Latin America expert Michael Shifter of the Inter-American Dialogue agreed.

“In practice, the model is quite different from what Chavez has pursued in Venezuela,” Mr. Shifter said. “It is less extreme and less ideological. Under Mrs. Fernandez, policies will be more pragmatic, but whether they will be coherent and sustainable is a separate question.”

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