The government of Argentina has allowed companies that do not generate export revenues to take out loans in dollars. 

The goal is to take advantage of funds in United States currency that have recently flowed into the banking system, mainly as a result of government measures encouraging Argentines to bring their stashed dollar savings into the formal economy.

To make that possible, President Javier Milei amended a regulation that had been in place since the 2001 crisis, which restricted access to dollar-denominated credit to companies able to demonstrate income in that currency. 

The rule was intended to prevent borrowers from assuming foreign-currency liabilities without a natural hedge against exchange-rate risk.

It was created to avoid another collapse of the Argentine banking system, like the one that took place 25 years ago, sparking one of the worst economic and political crises in the country’s history.

However, the new regulation comes with a caveat: to qualify for these loans, companies must provide the backing of an export company as collateral. In the 1990s, this benefit was available to all companies. 

Until this provision took effect on June 12, the regulations required banks to verify that applicants for dollar-denominated loans had future revenue in that currency and corresponding sales during the previous year. 

This requirement excluded most companies that operate solely in the domestic market.

Putting dollars to work

Iván Cachanosky, chief economist at the right-wing think tank Fundación Libertad y Progreso, told the Herald that the measure’s goal of channeling idle liquidity into productive credit is a “step in the right direction.” 

For economist Christian Buteler, the initiative was not something businesses were necessarily asking for, but rather an idea from the government itself to promote a type of credit........

© Buenos Aires Herald