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Estimates that private sector credit will not increase
La Nacion
June 17, 2010

Economy Minister Amado Boudou could reach the acceptance of 60% that he wants in the debt swap to exit the default. But what isn't sure is that he'll manage to keep his promise that the swap will push up credit to private businesses, say analysts and executives interviewed by LA NACION.

And once again, Boudou repeated that "the most important thing" from this transaction was "that money arrive for the private sector" to attract "a large amount of funds at single-digit interest rates to generate more investment and to favor consumption."

Beyond the announcement of subsidized loans, the central message of those consulted was that the swap will have a marginally positive impact on interest rates and that the global crisis and local uncertainty will continue guiding demand for loans.

Maximiliano Castillo of ACM consulting said that "while the decision to go ahead with the swap is correct, its impact will be less beneficial than Boudou is saying." For that reason, self-financing, which was key for explaining the growth registered from 2003 to 2007, once again explains the strong recovery this year, said the chief economist for Banco Ciudad, Luciano Laspina. "Businesses in general are renewing maturities, not placing new debt; few are in debt and with good revenues. Without demand for credit, the investment rate will come to 21%, which doesn't allow for 8% annual growth," he explained.

For Daniel Marx, "there some inertia in investment, with the farm sector and industry that are seeing a big cash flow."

His peer Miguel Kiguel said that "if the swap ends up with an acceptance of 70% or more it would undoubtedly have had a big effect." In turn, Luis Secco said that "the lack of investments in recent years is not related to the access of financing, but with the incentives that they face, from a structure of distorted prices and the strong interventionism in foreign trade."

The financial director for Georgalos, Guillermo Rimoldi, argued that, after the swap, "there will be more clarity on the horizon and it will reopen the conditions for long-term credit, while the international situation ought to stabilize."

His peer from Grupo Pe aflor, Mart n Ramos, said that "Argentina has to have a country risk below 550 points for us to begin to see major debt placements by companies in foreign countries, and today a lot is lacking for that to happen."

In tune with that, Alfredo Guti rrez Girault, of the Argentine Institute of Finance Executives (IAEF) argued that "the recovery of investment will be slow, while the trade balance for the first quarter already reflects better conditions for commercial financing."

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