The Association of Private Banks of Uruguay (ABPU) questioned the debt restructuring project of the natural persons of Open Town Hall (CA) and pointed to the effects that said law would have on legal certainty in Uruguay and in the strength of the institutions; when, according to the institution, it is not even a generalized problem of over-indebtedness, but individual issues.
According to Barbara Mainzer, executive director of ABPU, companies choose the country “because of the stability of the rules of the gamebecause they know that more than twenty years ago — no matter who is in the Presidency- the economic policy does not make riots”. And the policy of indebtedness, he added in front of the Senate Constitution Committee —that the lobbyist project has been working on—, is one of many State policies. “It is a tremendously precious asset that cost us a lot to build and that we must take care of like a treasure,” he warned, remarking that “it is one thing to change the rules of the game forward, and another to do it backwards.”
To argue the negative position that the association has, Mainzer exemplified with similar experiences internationally that did not have good results, such as Chili in 2012 or that of Paraguayan in 2015 that, despite implementing restructuring mechanisms, did not change the debt problem of people. Regarding the local level, he pointed out the experience after the 1982 crashwhich led to a retraction of credit and investment because of the laws of suspension of foreclosures and forced refinancing.
Punctual criticisms of a project that does not achieve support
Among the specific aspects, the ABPU questioned the concept of “just debt” that CA introduces in article 15 of the project and that implies that the refinancing rate of the debts may not be greater than 2% of the total amount in Indexed Units (IU). “It is less than what the Uruguayan debt pays,” Mainzer said, noting that such a low rate will be a “clear incentive not to pay.”
He also questioned article 23, which establishes that maximum rates may not exceed the equivalent of four times the Letters of Monetary Regulation (LRM) issued by the Central Bank of Uruguay (BCU), which today are 11%. Mainzer ventured the result: “the consumer credit market will completely disappear,” he said, since —according to the association’s perspective— people will go to the informal sector.
Another impact, he maintained, will be the increase in administrative procedures and the slowing down of the procedures to, precisely, restructure the debts. “We could end up having 600,000 people going to the Consumer Protection Office trying to restructure,” she stated, insisting that the incentives should be for good payers and that trust should be generated in credit providers.
Uruguay does not have over-indebtedness problems
On the other hand, the executive director of APBU pointed out that Uruguay’s levels of over-indebtedness do not appear to be widespread. To support the argument, he cited data from the World Bank, corresponding to 2021, which indicate that private credit in the country represented 27% of the Gross Domestic Product (GDP). This figure —which globally is 145%— is lower than almost all the countries in Latin America, and much less than USA wave European Union and that, globally.
“Clearly, the problem is individual“, said the ABPU representative. According to her data, the total indebtedness at the family level is about 9,700 million dollars. Of this total, 6,300 million correspond to consumer credits of which, in turn, 4,400 million are for loans granted by banks In general terms, consumer loans in Uruguay represent 9% of GDP.
Likewise, Maizner highlighted that the delinquency level in this type of credit is 5%, so it does not represent a problematic aspect either.
Source: Ambito
