6. Financial Sector
Capital Markets and Portfolio Investment
The Macri administration enacted a series of macroeconomic reforms (unifying the exchange rate, settling with holdout creditors, annulling most of the trade restrictions, lifting capital controls, to mention a few) to improve the investment climate. In May 2018, the Congress approved a new capital markets law aimed at boosting economic growth through the development and deepening of the local capital market. Argentina also signed several bilateral agreements and memoranda of understanding with other countries aimed to increase inward foreign direct investment.
The Argentine Securities and Exchange Commission (CNV or Comision Nacional de Valores) is the federal agency that regulates securities markets offerings. Securities and accounting standards are transparent and consistent with international norms. Foreign investors have access to a variety of options on the local market to obtain credit.
The Buenos Aires Stock Exchange is the organization responsible for the operation of Argentina’s primary stock exchange, located in Buenos Aires City. The most important index of the Buenos Aires Stock Exchange is the MERVAL (Mercado de Valores).
U.S. banks, securities firms, and investment funds are well-represented in Argentina and are dynamic players in local capital markets. In 2003, the government began requiring foreign banks to disclose to the public the nature and extent to which their foreign parent banks guarantee their branches or subsidiaries in Argentina. The Congress approved in May 2018 a new capital markets law that will remove over-reaching regulatory intervention provisions introduced by the previous government and ease restrictions on mutual funds and foreign portfolio investment in domestic markets.
Money and Banking System
Argentina has a relatively sound banking sector based on diversified revenues, well-contained operating costs, and a high liquidity level. The main challenge for banks is to rebuild long-term assets and liabilities. In 2017, the quantity of money available as credit to the private sector increased 22 percent in real terms, achieving the largest increase in the last 16 years. As a result, the stock of credit to the private sector (for both corporations and individuals) reached 14 percent of GDP. BCRA regulatory changes revised the permitted calculations of interest rates in home loans in 2016; as a result, in 2017, the mortgage credit market had a stellar performance by growing 118 percent in real terms. The largest bank is the Banco de la Nacion Argentina. Non-performing private sector loans constitute less than two percent of banks’ portfolios. The ten largest private banks have total assets of approximately ARS 1,656 billion (USD 66 billion). Total financial system assets are approximately ARS 3,468 billion (USD 138 billion). The Central Bank of Argentina acts as the country’s financial agent and is the main regulatory body for the banking system.
Foreign banks and branches are allowed to establish operations in Argentina. They are subject to the same regulation as local banks. Argentina’s Central Bank has many correspondent banking relationships, none of which are known to have been lost in the past three years.
The Central Bank has enacted a resolution recognizing cryptocurrencies and requiring that they comply with local banking and tax laws. No implementing regulations have been adopted. Blockchain developers report that several companies in the financial services sector are exploring or considering using blockchain-based programs externally and are using some such programs internally. One Argentine NGO, through funding from the Inter-American Development Bank (IDB), is developing blockchain-based banking applications to assist very low income populations.
Foreign Exchange and Remittances
Foreign Exchange Policies
President Macri issued a number of regulations that lifted all capital controls and reduced trade restrictions. In November 2017, the government repealed the obligation to convert hard currency earnings on exports of both goods and services to pesos in the local foreign exchange market.
Per Resolution 36,162 of October 2011, locally registered insurance companies are mandated to maintain all investments and cash equivalents in the country. In November 2017, the Argentine insurance regulator issued Resolution 41057-E/2017, amending the investment regime for insurance companies. The Resolution prohibits insurance companies from purchasing (directly or indirectly through mutual funds) short-term Central Bank debt instruments (locally known as Lebac) for their investment portfolios.
The Argentine Central Bank limits banks’ dollar-denominated asset holdings to 10 percent of their net worth.
Since December 2015, Argentina has a managed floating exchange rate regime in which the Central Bank may intervene to reduce volatility in the domestic foreign exchange market, which generally is determined by demand and supply.
According to Resolutions No. 3,819/2015 and 1/2017, companies and investors have no official restrictions on money conversion, remittances, or repatriation of their earnings.
Sovereign Wealth Funds
The Argentine Government does not maintain a Sovereign Wealth Fund.