Argentina’s Central Bank is relaxing enduring limitations on dollar lending, permitting banks to provide foreign-currency credit to firms generating revenue in pesos, as President Javier Milei’s administration aims to enhance credit availability and stimulate economic activity. The measure will enable banks to extend loans amounting to 15 percent of their dollar deposits, which currently total approximately US$5.8 billion, to firms that do not produce foreign currency, as stated by Economy Minister Luis Caputo during a conference on Thursday. Historically, dollar lending was predominantly confined to exporters and enterprises supported by entities generating foreign-currency income. “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 reverses one of the financial safeguards established following Argentina’s 2001 economic collapse, a period during which dollar debts held by borrowers earning pesos led to extensive defaults as the currency regime disintegrated. Restrictions imposed in the aftermath have largely confined dollar credit to exporters and other borrowers with foreign-currency income. Milei’s administration is wagering that this change will stimulate growth by enhancing bank lending. It also complements the government’s broader initiative to channel undeclared dollar savings into the formal economy. The International Monetary Fund endorsed the measure, Deputy Economy Minister José Luis Daza stated at the conference. In the wake of a tax amnesty and various initiatives designed to incentivise Argentines to declare their savings and deposit them in banks, foreign-currency deposits have surged to approximately US$40 billion.
Although still modest for an economy of Argentina’s magnitude, this represents the highest level since the 2001 collapse. Foreign-currency loans have experienced a significant increase since Milei assumed office, currently reaching nearly US$25 billion. Nonetheless, the government assesses that banks possess billions of dollars in untapped lending capacity due to current 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 provide companies with access to financing at reasonable rates while simultaneously offering depositors a sufficient return to encourage them to transfer dollars held outside of banks.
Caputo stated that the adjustment is expected to contribute to a reduction in peso borrowing costs by providing small and medium-sized enterprises with access to more affordable dollar financing, rather than compelling them to endure elevated rates on peso loans. “We are somewhat sceptical on the actual expansion,” Ivan Stambulsky 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.”
