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Argentina creditor nation?
iECO
July 06, 2008

By Ismael Bermudez

The country has more assets than debts. But looking at the numbers, it is noted with attention that, for example, they include US$120 billion that Argentines hold abroad that they don't declare

Through statistical dirty tricks, Argentina is now a creditor country to the rest of the world. That, at least, is what is suggested by a quick reading of a report from INDEC that quantifies how much the Argentine government, banks, private businesses and private citizens have in assets and debts.

As foreign assets add up to US$205.059 billion and foreign debts are US$169.755 billion, the calculation tosses out "a net credit balance estimated at US$35.304 billion at the end of 2007." Compared to the end of 2006, the Argentine creditor position increased by US$21.495 billion, according to the official report known as "State of International Investment."

This means that Argentina is no longer a debtor nation? No. What happened is that there various side notes have to be made:

Among the assets are the Central Bank's international reserves of US$46.176 billion, direct investments (which include real estate holdings in the foreign private sector) for US$26.820 and other foreign assets of US$132.063 billion, which are comprised of commercial and financial assets (deposits abroad, investments in amounts emitted by non-residents and holdings in foreign currency by the private sector).

Within the balance there is US$66.008 billion corresponding to the stock of foreign direct investment in the country, foreign debt of US$92.32 billion and other obligations of US$11.427 billion, which includes investment in stock portfolios and stocks and units connected to the GDP emitted in the public debt swap of 2005.

From this de-aggregation there comes as assets, and according to international criteria, the US$120 billion that Argentines hold as "deposits abroad, in investments in amounts emitted by non-residents (like stocks and bonds) and holdings in foreign currency". During 2007, these funds grew by US$9.208 billion.

More subtractions than additions

The majority of specialists don't consider those almost US$120 billion because the large part of those assets are not declared in Argentina and would be difficult to return to the country. They are assets of Argentines, but they are not in Argentina and perhaps never will be. The laundering of capital a measure that was announced as part of the Bicentennial accord aims at attracting these funds back. This, if they are excluded, Argentina (public and private) would fall into a net debtor status of more than US$80 billion.

Those assets that are abroad are quantified in various ways. For example, "the series of deposits by residents in bank accounts, is based on the data compiled by the Bank for International Settlements (BIS), and the deposits of non-residents in the Uruguay banking system, over the base of the data proportioned by the Central Bank of Uruguay (BCU). The valuation is from the exchange rates of the U.S. dollar as of the date", says the INDEC methodology manual.

Within the assets the Central Bank reserves are added in. This asset, however, does not comport to either to the government's debts, nor those of the private sector but only from the BCRA itself and the pesos in circulation. It's a foreign asset of the BCRA that covers the major part of its own internal debt.

If these reserves are excluded, the debt balance of US$80 billion goes up to more than US$120 billion. Thus, plus other adjustments, explains why Argentina ended up at the end of 2007 with a foreign public and private debt of US$123.871 billion, "excluding accumulated interest still not required," according to official information.