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Demands for long-term financing for investments
La Nacion
July 03, 2008

While perhaps it would be difficult to find a common denominator between Juan Carlos Lascurain, Marcelo Mindlin and Eduardo Constantini, yesterday they at least shared a uniform complaint: without long-term financing, Argentina is not assured of economic growth. And for that they need signs of stability.

"I don't imagine Argentina growing at 5 or 7 percent per year without long-term financing" Lasurain said, president of the Argentine Industrial Union (UIA), before calling for the launching of a development bank.

The three shared a panel about "Development Policies in the Capital Markets: the Views of the Manufacturing Sector", in a day organized by the National Stock Commission (CNV) about the participation of the capital markets in the financing of the real economy. From different perspectives, they unfurled a forceful diagnosis before Economy Minister Carlos Fernandez closed the day of debate asking for "a democratization of credit" while never shedding light on or answering what the business leaders asked for: clear rules to foment credit that allows for maintaining a rising level of investment.

"The effort that has been made in terms of auto-financing in the past few years is impossible to keep going," Lascurain warned before a group of reporters before entering the small salon on the first floor of the Buenos Aires Stock Exchange building, making it clear that "the money cushion" which had gushed forth since 2003 is already draining away.

He then reiterated the concept along with the other two business leaders: "It's time to make a fine symphony in industrial policy to increase medium and long term financing," he said.

The UIA president explained that the rise in costs has reduced industrial competitiveness, that there are now "prices that are at undesirable levels." In particular, he mentioned the increase in the sector's salaries, which "have been 225%" since the end of the crisis and 28 to 32 percent in this year's parities.

Without losing his amiable tone, Lascurain said "to understand that the banks have better opportunities in other areas," like financing consumers, rather than in production, he defended the need to count on a "development bank" while the experience of the National Development Bank (BANADE) in the 1980s was a failure.

Against frozen capital ("encaje")

Then Mindlin started with a series of graphics that reflected the strategy of his company, Pampa Holding, to strengthen its anchoring with three successive injections of capital that allowed them to expand to energy nerve-centers of the country (Salta and Neuquen, among other provinces) and when it seemed that he was about to end with an optimistic situation he hit a sharp turn and warned that if the government didn't eliminate the "encaje" (a percentage of capital that must remain frozen for a determined period) at 30% for manufacturing investment financing "it will be a fatal wound to capital markets." This burden, used to avoid excessive fluctuation in the exchange market, "is like using a cannon to kill a fly," Mindlin said before the attentive audience, with included CNV leaders: Eduardo Hecker (president) and Alejandro Vanoli (vice-president); Stock Exchange President Adelmo Gabbi, and his mortgage market counterpart, Clarisa Estol, among other executives.

To back his ideas, Mindlin compared the emissions in the Argentine and Brazilian markets since 2004: 4 billion versions 69 billion dollars.

With similar unsteadiness, Constantini, of Consultatio, affirmed that Argentina "has a midget capital market, without long-term financing, because there are no rules and there is a perception of instability" compared to almost the entire rest of Latin America. "Nordelta (his real estate lender) does it without bank financing," he said.

Before that, the president of Credicoop, Carlos Heller, also asked for the fomenting of credit for production, and the president of the AFJP union, Sebastian Palla, said that the sector has great liquidity in hope of investment projects.

From the government, Finance Secretary Hernan Lorenzino sought to infuse calm by saying that this year the government will have no problems in paying its debts, a feeling not reflected in the incessant rise in country-risk.