Bank loans in dollars finance just 15 days of exports

According to Central Bank statistics, the balance of foreign currency loans in the Argentine banking system fell from USD 15,498 million in December 2018 to less than USD 3,600 million four years later.

It is a phenomenon that repeats, with different intensity, the movement that the Central Bank statistics had indicated between the end of 2011 and 2015, when, as now, a clamp on foreign exchange sales, import restrictions and multiple exchange rates. In this section, bank credit in foreign currency, from foreign currency deposited by residents in sight accounts, contracted from USD 9,539 million to USD 2,904 million.

These values, compared with the data from the Argentine Commercial Exchange reported by INDEC, represent having gone from the equivalent of almost 12% of exports in 2011 to a range of barely 5% in the period in which the first exchange rate was extended; it rises to a maximum of 25% when that restriction is lifted at the end of 2015, and falls again in a sustained manner since the last four months of 2019 when economic agents warn of a return to a system of repression of currency movements with the arrival of a new government, in December of that year.

The balance of foreign currency loans in the banking system fell from USD 15,498 million in December 2018 to less than USD 3,600 million four years later

It is that, since the disastrous experience of the convertibility crisis in late 2001-early 2002, when deposits in foreign currency were pesified by those who wanted to withdraw them as such from the bank, and worse at an exchange parity much lower than that of the market, each time capital movement controls are implemented, the most sensitive variables were the withdrawal of foreign currency deposits in sight accounts -for fear of new confiscations-, and, consequently, the total amount of loans in that nomination.

Translated into terms of days of financing the external sales of local companies with deposits in dollars by residents -the only destination allowed by the Central Bank of the Argentine Republic, to ensure the repayment capacity of policyholders. loans in foreign currency, by avoiding currency mismatches, meant going from an average general assistance period of 90 days between 2017 and 2018 -highest in 20 years- to less than 15 days at the end of the last year, the worst ratio in two decades .

It is an insignificant proportion to encourage production for export with added value

It is an insignificant proportion to encourage production for export with added value, not only because manufacturing processes often take more time, but also because to be competitive with the rest of the world it is necessary to grant importers from the rest of the world deadlines extended payment terms that far exceed 60 to 90 days, and most SMEs operate with minuscule cash balances.

And it does not allow capitalizing on the opportunities offered by the international market to generate more foreign currency through foreign sales.

According to INDEC data, while the Multilateral Real Exchange Rate -BCRA series- went from levels of more than 160 points between 2003 and 2006 to less than 94 in 2022, the export price index rose from a range of less than 115 points to more than 343 last year. The combination of these two indices meant an effective improvement of almost 100% in that period and 56% compared to the moment before the first exchange rate was decreed.

Hence, the financing of exports in dollars deposited in banks has become a marginal resource, given that the relationship between the total loans in foreign currency with the universe of companies that export goods for more than USD 50,000 per year , showed a drop in the unit average of USD 617,545 for 2022, after having reached a maximum mark of USD 2,644,259 in 2018, when aggregate activity still maintained a relative dynamic higher than the current one.

The alternative, often used by the entities and the needs of the companies, such as financing with lines in pesos, is not only singularly onerous in general, but also generates the risk of being even more onerous when, as has been the case since 2021, the official wholesale exchange rate regulated by the Central Bank lags behind inflation and determines that the equivalent debt in dollars is higher each month, that is, it absorbs a greater proportion of the exports it finances.

If for a moment it were assumed that the total dollar deposits in Argentine banks are used to finance sales of local production to Brazil, it would be equivalent to 101 days of exports, well below the existing line between the Bank Argentine Nation and that of its peer, Banco do Brasil, which has a term of up to one year.

In recent weeks, the national government has sought to relaunch the bilateral relationship with Brazil, which, according to the economists from Abeceb Consulting, “had been greatly weakened by the lack of political harmony and the lack of interest that the Argentine economy (with all its problems) aroused.” in Brazil”, and emphasized the increase in the credit line of Banco Nación (BNA) with Banco do Brasil (BdB) to 366 days, through which the BdB finances Brazilian companies in reais and the BNA supports Argentine companies that make imports.

The bilateral relationship was greatly weakened by the lack of political harmony and by the lack of interest that the Argentine economy (with all its problems) aroused in Brazil (Abeceb).

A clear sign of the weakening of the commercial relationship between the two great Mercosur partners is the drastic drop in exports from Argentina to Brazil, from a record of USD 17,319 million in 2011 – when the exchange rate was in force in the last two months, to USD 9,040 million in 2016 and USD 12,665 million in 2022.

In the general aggregate, it can be seen that exports fell from the record of USD 82,981 million in 2011 to less than USD 57,000 million in 2015, and although they began to recover from the exit of the exchange rate, at the end of that year, USD 88,446 million in 2022 seem very squalid if one takes into account the improvement in the real export price (international price plus exchange rate) was more than 56% higher than that registered 11 years earlier.

From this it arises that only when exchange controls and restrictions to operate with the rest of the world are lifted, the national economy will be able to recover the level of deposits in dollars and reestablish one of the fundamental lubricants to boost exports, such as credit and increase the position of reserves in the Central Bank in a genuine way, as observed in Brazil.

Only when exchange controls are lifted will the national economy be able to recover the level of deposits in dollars and loans to exporters.

Another alternative, slower to achieve, is to restore macroeconomic balances, so that the national currency recovers its value, does not artificially appreciate with an exchange rate delay deliberately to keep inflation limited to a low range, one percentage digit per year.

In this way, it will be possible to revitalize general savings in pesos and thereby finance foreign trade, both exports and imports, without generating risks of currency mismatches.

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