New exchanges between traditional banks for the dollar loans from the latest measure of the national government

The Central Bank of the Argentine Republic ( BCRA ) has made access to credit in dollars more flexible by allowing financial institutions to use their own dollars to grant loans in that currency to any person or company . The national government 's measure, which seeks to stop the fall in reserves and expand the supply of foreign currency in the market, generated a strong reaction in the banking sector, rekindling tensions between national and foreign banks.

The Argentine Banking Association (ABA), which represents foreign banks, warned about the risks involved in the BCRA's decision. "The measure opens up certain risks that had not existed until now," said sources from one of the sector's entities. In their argument, they maintain that the restriction on granting credits in dollars only to exporters was in effect since 2003 to avoid financial mismatches in companies whose income is in pesos, preventing situations such as those that occurred after the 2001 crisis.

However, the BCRA eliminated the rule that limited the use of dollars obtained through the placement of private debt or other lines of financing. Now, banks will be able to grant loans in dollars to any person, company or economic actor. The measure responds to a claim that national capital banks, grouped in the Argentine Banking Association (ADEBA), have been making for months.

ADEBA banks had submitted a proposal in September to expand the possibility of granting loans in dollars to medium and large companies, even if they were not exporters. They argued that the financial system had enough “argendólares” —dollars hoarded within the financial system as a result of various mechanisms, such as money laundering— to support this type of loans.

The Central Bank acknowledges that Communication A8202 responds to a need raised by some banking chambers, although the financial sector maintains that the measure specifically benefits ADEBA. “This communication has a name and surname: ADEBA. And it creates a lot of noise in the system, because once this possibility is enabled, no one is going to let it pass so as not to give the segment away to the competition,” said banking sources.

With this new provision, entities that have already issued dollar-denominated bonds will be able to use those funds to grant loans in foreign currency. For example, Banco Galicia issued more than 300 million dollars in October and November to finance the purchase of HSBC, thus becoming the largest private bank in the country. In December, Banco Supervielle also issued debt in foreign currency to take advantage of this new scenario.

Some banks maintain that this measure mainly benefits those entities that have stock exchanges and investment advisory services in the capital market. “There are ten banks that manage the fold from end to end,” said one of the banking chambers. Meanwhile, the Government seeks to take advantage of the credit flexibility to mitigate the shortage of dollars in the economy.

The Ministry of Economy believes that the measure could contribute to an “endogenous” dollarization of the economy, that is, a gradual process driven by the financial market rather than an imposition by the State. However, foreign banks warn that this opening could generate problems in the long term if a solid macroeconomic balance is not maintained. “To the extent that the macro fundamentals are solid, the risks are mitigated. For now, it is counter-funding in ON or own capital, but at the end of the day, money is always fungible,” analyzed a bank executive.

The president of the BCRA, Santiago Bausili , had been reluctant to relax the restrictions, but in December the Minister of Economy, Luis Caputo , made a clear position during an event at the Stock Exchange. There, he said that the Government's intention is to "develop mortgage credit in dollars for the real estate sector, since it is a dollarized activity."

Beyond the debate among banks, the measure also seeks a specific objective: to stop the fall in reserves of the Central Bank. Since January 3, the monetary authority has lost 4.3 billion dollars in gross reserves due to the outflow of dollar deposits from the private sector, debt payments and the intervention in the financial dollar.

Economists agree that the easing of dollar credit seeks to expand the supply of foreign currency in the market and maintain exchange rate stability. However, they warn that if exports are not significantly increased, the country could face a larger trade deficit in the coming months.