Latin Finance - March/April 2010 - 70

argentine banking special report Liquid, Solid but Short-term The Argentine banking system is awash with liquidity and has stood ﬁrm through the global crisis but it struggles to ﬁnd a path to growth urn on the television in Argentina, open a newspaper or even just walk down the street and it won’t be long before you’ll see a promotion by one of the country’s big banks, o ering you, say, 20 percent o your supermarket bill on a certain day of the week, provided you pay with one of their credit or debit cards. Awash with liquidity, banks in Latin America’s third-biggest economy are falling over themselves to woo customers, but, largely out of necessity in a country with a rocky record of regular economic crisis and recurring inﬂation, no one looks too far ahead. It’s been just under a decade since Argentina’s economy collapsed in ﬂames as the government defaulted on nearly $100 billion of debt and then cut the peso currency loose after artiﬁcially pegging it to the dollar during the 1990s. A handwritten sign saying “I put in dollars and I want dollars” remains stuck to the door of one bank in downtown Buenos Aires – a stark memento of the way many Argentines were brutally stung when their dollar savings were forcibly converted into devalued pesos. Perhaps then, it’s not surprising that 98 percent of deposits today are placed for under six months and 83 percent are placed for less than one month, according to Banco Santander Río, Argentina’s top private-sector bank and the country’s second biggest in terms of deposits and loans. T Borrowing is similarly short-sighted. A third of loans are made for a month, and 37 percent for less than 12 months, Santander Río says. Argentina’s banks restructured their balance sheets after the 2001-02 crash and have proved that small is beautiful during the global ﬁnancial crisis, weathering the turmoil triggered by the collapse of Lehman Brothers in September 2008 and the sub-prime credit crunch as well as two home-made political storms that year: a lengthy conﬂict with farmers over government plans to hike export taxes and the government’s surprise nationalisation of private pension funds. Argentine mid-term elections last year heightened the ﬁnancial sector’s nervousness. But while banks teetered and fell in other parts of the world, in Argentina they remained solid. “This is the ﬁrst time in four decades that the Argentine ﬁnancial system did not fuel the crisis but helped cushion its consequences,” Mario Vicens, head of the Argentine Bankers’ Association, told reporters at an end-of-year reception. That solidity, however, is explained in part by the paucity of ﬁnancial products on o er at Argentina’s 66 banks. The ratio of loans to GDP is only about 12 percent to GDP, nearly a quarter of that in Brazil and nearly seven times lower than in Chile and the ratio for both loans and deposits is virtually half what it was a decade ago, according to Santander Río. LatinFinance Special Reports are underwritten by sponsors although LatinFinance editors retain control over the content to ensure objectivity and independence. LATINFINANCE March/April 2010
Latin Finance - March/April 2010

Table of Contents for the Digital Edition of Latin Finance - March/April 2010
