Return to private credit, vital for a developing capitalist economy

The capitalist economiesare partly monetary production in which banks and other financial institutions advance money (credit) so that physical and legal subjects (companies, societies, etc.) can invest in physical capital and labor to produce goods and services, which are sold to obtain a profit and to pay the debt plus the interest that has been incurred to finance the investment. This, in turn, does not happen in isolation, but what eventually happens in one area of ​​the economy will impact the other.

This postulate or axiom occurs in economies with a certain degree of medium and long-term stability, with sustained but softened growth and where the private sector plays a key role, in a deep agreement with the public sector, for this to come to fruition. . Argentina, it is nothing like that.

First of all, it does not comply with what was described at the beginning of this article. In 2023 alone, credit to the private sector represented 8.5% of GDP, being one of the lowest in the region. According to data from the world Bankby 2023, Latin America and the Caribbean They recorded a figure of 56.3% of GDP in terms of domestic credit to the private sector, being one of the highest historical values, only behind 2020. Brazil and Chile They have high credit percentages with 71% and 112% respectively, greatly marking the difference in relation to our country, in which there has not been sustained growth for more than ten years and the generation of genuine new jobs is scarce.

In the world, private credit has a global average of 97% of GDP, a figure twelve times higher than the current figure. Argentina It is ranked 167 out of 173 countries, only ahead of countries like Angola, Congo, Sudan, Kuwait, South Sudan and Afghanistan. Most of them, suffering from situations of high armed conflict, coups d’état or similar.

In the years of uninterrupted democracy, private credit always grew as a response to existing crises, never as part of a growth policy. For example, from 83 to date, The high point was the year 1989, where the failure of the economic plans was notorious and the index was 39% of the GDP, something never recorded before in history and never repeated.. Along with banks, credit cooperatives were participants in this phenomenon. The credit, many times, was used to fill the refrigerator and the pantry.

The Families generally go into debt for consumption or to pay debts, not so to buy property or some durable good. Formal credit to individuals is concentrated in shorter-term instruments, credit cards and personal loans, with a high incidence of non-banking segments in families with lower income and labor informality, where TEA of up to 1100% and total financial costs are paid. up to 1700%. The non-bank credit card costs They quote with a CFT of up to 800% annually and this is also used by more formalized sectors, but with problems of access to regular consumption and problems in obtaining goods and services above the poverty line.

By political decision, for years, it was prioritized that banks finance the State, and then the latter carry out credit plans for durable and non-durable consumption, some for housing and others for vehicles. This is not new since the State strove to ignore the private sector’s ability to promote economic growth, although in some parts of our recent history, the private sector preferred to use its liquidity and resources to take advantage of the higher interest rate. to inflation, while leveraging with the deposits and fixed terms.

For their part, the Fintech offers credit to more than 5 million people, with exponential growth in recent years. More than 2 million were able to access a loan for the first time in their lives, which shows that financial inclusion is an outstanding debt in vernacular finance. These companies offer something that traditional banking cannot: relax conditions to access a free account, with which to finance consumer operations without the need for credit cards, approvals, or unnecessary bureaucratic structure.

Argentina urgently needs to get out of this regulatory and tax tangle where between the TNA and the CFT It can increase the cost of financing by up to 40% and makes sectors recalculate products that require accessible credit to grow, generate employment or so that families can access better goods and services. The changes in regulations, the multiplicity of fees, taxes and the excessive pressure of the States on productive sectors such as SMEsattacks the decision to go into debt to take another step in commercial life.

If inflation can be slowed to levels similar to those in the region and the macroeconomy stabilized, the next first step must be to agree with private sectors to establish a series of private credits to stimulate productivity, a necessary step to achieve sustained and harmonious growth, without dismantle the fiscal balance or the public banking programs or the consumption stimuli that exist in all mature capitalist countries.