Argentina’s Central Bank is easing longstanding restrictions on dollar lending, allowing banks to extend foreign-currency credit to companies with revenue in pesos, as President Javier Milei’s government seeks to boost credit and economic activity.
The measure will allow banks to lend as much as 15 percent of their dollar deposits, currently about US$5.8 billion, to companies that don’t generate foreign currency, Economy Minister Luis Caputo said at a press conference Thursday. Previously, dollar lending was largely restricted to exporters and to companies backed by firms with foreign-currency revenue.
“Today, we are extending that possibility to all companies,” Caputo said at the conference, adding that the government was responding to a request from industry.
The change rolls back one of the financial safeguards introduced after Argentina’s 2001 economic collapse, when dollar debts held by borrowers earning pesos contributed to widespread defaults after the currency regime unraveled. Restrictions imposed in the aftermath have largely confined dollar credit to exporters and other borrowers with foreign-currency income.
Milei’s administration is betting the change will spur growth by deepening bank lending. It also complements the government’s broader push to draw undeclared dollar savings into the formal economy. The International Monetary Fund gave the measure a thumbs up, Deputy Economy Minister José Luis Daza said at the conference.
Following a tax amnesty and other initiatives aimed at encouraging Argentines to bring undeclared savings into banks, foreign-currency deposits have climbed to about US$40 billion. While still small for an economy the size of Argentina’s, that’s the highest level since the 2001 collapse.
Foreign-currency loans have also surged since Milei took office and now stand at close to US$25 billion. Still, the government estimates banks have billions of dollars in unused lending capacity because of existing restrictions.
“Given the excess lending capacity in dollars – and if the fiscal-innocence programme takes off as we would like – there will be more and more deposits,” Caputo said.
The government’s goal, he added, is twofold: to give companies access to financing at reasonable rates while offering depositors enough of a return to entice them to bring dollars kept outside banks. Caputo said the change should also help push down peso borrowing costs by giving small and medium-sized businesses access to cheaper dollar financing instead of forcing them to accept high rates on peso loans.
“We are somewhat sceptical on the actual expansion,” Ivan Stambulsky, Latin America economist for Barclays, wrote in a note to investors. “Argentine banks and corporates are well aware of the risk of having a foreign-currency mismatch in their balance sheets, especially going into an election year.”
Caputo ruled out extending the measure to individuals for now, citing “problematic” precedents involving loans to individuals that he said had no parallel in lending to companies.
“It’s a partial easing because it does not include individuals,” Caputo said. “And we have set a cap of no more than 15 percent [of deposits] to make it even more prudent.”
by David Feliba & Manuela Tobias, Bloomberg
