In a context of inflationary deceleration and fiscal surplus, the Argentine government insists that banks must “be banks again”, channeling excess liquidity towards the private sector instead of depending on instruments of the Central Bank (BCRA) or the Treasury. However, a detailed analysis of the credit market reveals a worrying reality: Exorbitant interest rates, with total financial costs (CFT) ranging between 120% and 193% per year, are far from promoting consumption or investment. On the other hand, they act as a brake on economic growth, feeding a rising delinquency and reflecting financial despair rather than a productive dynamism.
Interest rates: an unsustainable challenge
A survey of the rates offered by the main Argentine banks for personal loans shows a discouraging panorama. Among the frontline banks, the CFT – which includes the nominal rate, commissions and taxes – varies significantly, but is always located at levels that challenge any economic logic:
These figures contrast dramatically with market expectations. According to the survey of market expectations (REM) of the BCRA, the projected inflation for the next 12 months is around 25%, while the cost of funding for banks, reflected in the fixed deadlines, is around 30% per year. Even discounting the impact of taxes, which represent a significant portion of the CFT, the banking “bank” the difference between what banks pay for capturing funds and what they charge for lending – reaches record levels, far exceeding international standards.
The current level of rates has no economic justification in a context of downward inflation and fiscal surplusbanks are taking advantage of the lack of competence and high credit demand to maintain extraordinary margins, but this is suffocating families and companies.
The credit boom: growth at the cost of sacrifice
Despite prohibitive rates, credit to the private sector has shown remarkable growth in 2024, reversing the contraction of previous years. According to BCRA data, loans to the private sector grew at a real annual rate of 90%promoted by greater liquidity in the financial system and an incipient recovery of the credit demand. However, this growth does not translate into sustained economic impulse.
With salaries that barely accompany inflation – and in some sectors, such as the informal, even pray – personal loans and the use of credit cards have become a last instance resource for many families. Taking a loan with a CFT of 150% when your income grows at 25% per year is a survival decision, not planning. This compromises future consumption and increases the risk of over -indebtedness.
Rising delinquency: the alert signal
Credit growth has been accompanied by a worrying increase in delinquency. According to the BCRA, the delinquency rate of loans to the private sector reached 4.1%, the highest level in five years. This increase is particularly alarming given the context of credit expansion: in arithmetic terms, a greater volume of loans should dilute the proportion of credits in default. That delinquency grows despite this reflects a worrying dynamic.
Mora is not limited to personal loans. Credit cards, which represent a significant part of household financing, also show a deterioration in credit quality. Even rejected checks, a financial voltage indicator in the commercial sector, have registered an increase. Money is a clear sign that borrowers are struggling to keep up with debts that accumulate at an unsustainable rhythm.
A banking system at the crossroads
The government of Javier Milei has emphasized the need to boost the economy, promoting measures such as the exit of the “Mattress dollars” To finance growth. However, current interest rates represent an equally critical obstacle. Without an accessible credit system, the economy faces more difficulty taking off. Banks are acting more as rentiers than as financial intermediaries.
The high banking “spred” not only reflects the lack of competence in the sector, but also the weight of credits taxes. For example, a consumer who finances the purchase of a good pays VAT both on the product and on the interests of the loan, which further increases the cost of financing. In addition, the funding structure of the banks, which have historically depended on instruments of the BCRA or the Treasury, does not encourage the reduction of fees.
Solutions on the horizon
The government has tools to address this problem. An option is to reduce the taxes associated with credit, relieveing the load of the CFT. Another measure would be to adjust monetary policy to promote a greater credit supply to competitive rates. For example, in the face of the elimination of fiscal liquidity letters (LEFI), the treasure could maintain the 100% debt renewal, avoiding absorbing the 10 billion pesos that banks could allocate to loans to the private sector. This would increase the available liquidity and, in theory, press the interest rates.
A more direct strategy would be to use the National Bank as a competitive actor. The government could launch a loan campaign to minor rates through the National Bankforcing private banks to adjust their conditions not to lose market share. However, any initiative of this type would require a rigorous analysis of credit risk to avoid an even greater increase in delinquency.
The road to a productive loan
Credits are a fundamental pillar for economic growth, since they facilitate the consumption, investment and creation of wealth. However, under current conditions, the Argentine credit system is far from fulfilling this function. With rates that far exceed the projected inflation and income of the borrowers, Loans have become a “lead lifeguard”, compromising the financial stability of families and companies.
So that the credit is transformed into a growth engine, It is imperative that rates align with current economic variables. This will require a combination of monetary, fiscal and regulatory policies, as well as a change in banks’ strategy, which must prioritize financial intermediation over excessive gain margins. Meanwhile, the increase in delinquency and fragility of borrowers serve as a reminder that the time to act is now.
The Government has a unique opportunity to lay the foundations of a more inclusive and productive financial system, but without reasonable rates, the dream of a dynamic economy will be more difficult.
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
