Implications of the Commercial Debt Registry of importers for the economic diagnosis
Today, and through the publication of its Report on Private External Debt , the Central Bank of the Argentine Republic (BCRA) reported a stock of commercial debt of importers of goods and services of USD 53,365 million, as of September 30, 2023, based on the Survey of External Assets and Liabilities (RAyPE)1 of the BCRA.
Incorporating into this stock the difference between what was imported and what was paid in the foreign exchange market until December 12, the debt of importers of goods and services would have reached a total of USD 57,800 million as of that date. Thus, from December 31, 2021 to December 12, 2023, there was an increase in the stock of debt of importers by USD 27,400 million.
On January 25, 2024, the Ministry of Economy released the results of the Commercial Debt Registry2 for Imports with Foreign Suppliers in a joint statement with the BCRA. The Registry registered a total of net debts of USD 42,600 million, after discounting about USD 8,500 million that were declared canceled without access to the exchange market. This measurement reflects the debts declared as of December 12, 2023, prior to the beginning of the current administration of the National Executive.
The greater transparency and updating of information provided by the Ministry of Commerce on the amounts of foreign commercial debt of importers is positive news in itself. The analysis of this information represents another piece of good news in order to measure the challenges of the economic situation and plan the appropriate economic policy responses.
• Compared to the estimates of commercial debt based on BCRA records (USD 57,800 million as of December 12, 2023), the amount of commercial debt recorded in the Register of the Ministry of Commerce (USD 42,600 million as of December 12, 2023) suggests that the current financial burden of debt for imports of goods and services would be USD 15,200 million less than estimated based on previously available sources.
• In turn, it is noted that the BCRA report shows that the commercial debt of importers normally oscillates around [USD 29,000 million] (average for 2017-2021). Therefore, the updated information obtained through the Registry of the Ministry of Commerce (USD 42,600 million) suggests that the commercial debt of importers that exceeds the usual amount with which the economy operates would be approximately USD 13,600 million.
• In other words, the demand for foreign currency necessary to normalize the commercial debt burden of importers turns out to be less than half (47%) of what was estimated (about USD 28,800 million) based on the sources available prior to the registry of the Ministry of Commerce. Going forward, the burden of normalizing this indebtedness will weigh heavily on the country’s balance of payments results, but the new estimate of its size is positive news.
The problem of the increase in commercial external debt between 2022-23 and its future resolution
The increase in commercial debt during 2022 and until December 12, 2023 of USD 27,400 million reported by the BCRA is equivalent to a 90% increase in less than two years, and ignores historical precedent. This rate of indebtedness originated from the misaligned incentives of the exchange rate regime in force in that period which, through the sale of the BCRA’s international reserves, was aimed at preserving an exchange rate that was visibly backward in real terms. Faced with the excessive demand for imports by the private sector, the monetary authority resorted to the increasing imposition of restrictions on access to the free exchange market for importers, thus driving the increase in the aforementioned commercial debt.
This state of private sector commercial debt implies a potential extraordinary demand for foreign currency going forward and, therefore, presents a challenge of extraordinary dimensions for the BCRA’s objectives in the current period. The situation constitutes a threat to the stability of external and internal payments of the country. In view of the shortage of foreign currency, the BCRA has established as a priority to move decisively in the resolution of this situation through auctions of new instruments, BOPREAL. These instruments allow importers to carry out, in a context of scarcity of the BCRA’s international reserves, an exchange operation (at the exchange rate currently in force) for the amount of their debt with external suppliers. Importers registered in the Commercial Debt Registry of the Ministry of Commerce have been authorized to subscribe to the tenders of these instruments.
Implications of the Commercial Debt Registry for the interpretation of the statistics of the Quarterly Report on Private External Debt (BCRA)
In the case of import debt, despite the fact that both records aim to collect information regarding the same type of passive operation abroad, differences arise between them that are reflected in the total amounts finally surveyed and published. In particular, and in view of the visible decrease suggested by the comparison of the stock of commercial debt of goods and services reported by the Ministry of Commerce (USD 42,600 million) and the update of the data reported quarterly through the RAyPE (USD 53,365 million), the BCRA considers it appropriate to make the following clarifications:
Technical and methodological explanations
1- Different cut-off dates: the report published by the BCRA today shows estimates of the Private External Debt at the end of the third quarter (09/30/2023), which differs from the cut-off date of the debt declared within the framework of the Commercial Debt Registry for Imports with Foreign Suppliers. which corresponds to debts for imports of goods or services as of December 12, 2023.
2- Different dates of origin of the debt: in the case of goods, the Ministry of Commerce’s Register includes those operations with an official date prior to December 13, 2023, i.e., the goods must have had the record of entry into the country on that date. In the BCRA report, the external debt originates based on the date on which the purchase condition agreed with the supplier or the entity that finances the import is met, which in most cases is prior to the officialization of the shipment.
3- Different types of debt included in both surveys: in the Registry of the Secretariat of Commerce, only debts with foreign suppliers are included. For its part, when talking about commercial debt, the BCRA report includes not only debt with foreign suppliers, but also any other type of financing of imports of goods or services granted by a third party outside the commercial relationship (for example, a foreign financial institution, International Organization, etc.).
4- Estimates of debt due to non-declaration: in the external debt estimated by the BCRA, the omissions of declarations by the subjects covered are treated in a specific manner and are estimated based on the latest available data of the declarant and other variables associated with the specific type of debt. In other words, if a company does not declare, its debt is not discharged, but it is estimated with a specific methodology3 for it (in the case of debt for imports of goods, the percentage of the estimated amount represents about 5% of the total debt of this type).
5- Differences in the monitoring of debts: the estimates made by the BCRA have taken into account the quarterly monitoring of the debts of the declarants, in order to obtain the necessary regularizations in the corresponding cases, over the last 6 years based on previous surveys. This situation would mean a larger universe of informants than the one who has registered, for the first and only time, their commercial debt in the Registry of the Ministry of Commerce created opportunely and specifically to address the current problem of the stock of this type of indebtedness. It should be noted that about 15,000 companies reported information in the Registry of the Ministry of Commerce.
6- Differences in the degree of cross-referencing of data with other sources and agencies: The Registry of the Ministry of Commerce is based on the declaration of importing persons and companies. On the other hand, the BCRA’s estimates not only have the information declared by the companies, but, as a complement and control of the declared records, data is cross-checked with other sources on a quarterly basis. Among them, data are validated with INDEC based on customs information and with the Information Regime of Exchange Operations. Likewise, the consistency of the estimates of the external debt for imports of goods with that arising from the BCRA’s Monitoring of Payments for Imports of Goods (SEPAIMPO) is corroborated.
Economic and exchange rate explanations
1- Differences due to incentives for the declaration of debt amounts: The motivation to report the amount of debts was surely related to the expectation of being able to access an exchange rate that was very low until the change of management of the national executive, in mid-December.
a. After it, there is a sincerity of the official exchange rate. The consequent decrease in the gap between the official exchange rate and the rest of the exchange rates dilutes the incentive to report import debts. Due to the smaller gap, the incentive to declare import debt in the Ministry of Commerce Registry is lower, and companies may have chosen not to declare debts that they had previously registered with the BCRA.
b. In turn, in situations of extraordinary and sustained exchange rate overvaluation, as was the case in the period prior to the recent change of management of the National Executive, the incentive in the invoicing of imports can produce an increase in the declared debt. These incentives are contrary to periods where an exchange rate consistent with economic fundamentals prevails and imports are vulnerable to under-invoicing, due to the taxes and charges that the State charges on them.
2- Differences due to incentives for the declaration of debt cancellations: The growing restrictions on payments for imports of goods through the official exchange market that have been registered in recent years, together with the need for importers to have to cancel debts with their suppliers in order not to cut their supply chain, may have motivated the cancellation of these debts with their own funds. These cancellations may have been made through the securities market and/or other cancellation channels, especially between October and November 2023 when the foreign exchange market was more stressed. It is feasible that importers did not report these debt cancellations to the BCRA or that they were reported in the following statement with a cut-off date of 12/31/23. These undeclared debt cancellations may reduce the stock estimated by the BCRA. The motivation for not informing the BCRA of the cancellation was surely related to the expectation of being able to access an exchange rate that was very low until the change of management of the National Executive, in mid-December.
3- Differences due to the need to capitalize debts: Some companies could have negotiated the capitalizations of their debts, so they would not declare them in the Registry of the Ministry of Commerce and this situation has not yet been reported to the BCRA.
4- Differences in the ability to subscribe to the BOPREAL: Companies may not have sufficient liquidity to subscribe to BOPREAL, the purpose for which the Registry of the Secretariat of Commerce was prepared would be lower. With which the incentive to declare their debts in it could be lower.
It should be clarified that the BCRA’s quarterly Private External Debt statistics will continue to be published in line with international standards, pointing to a continuous improvement of processes and methodologies. Consequently, this new source of information, the Registry of the Ministry of Commerce, will be used to make the cross-checking of data more efficient, as has been done with all available sources, in order to improve the quality of statistics on the external sector of our country.
Finally, the BCRA considers that a simplified, transparent, distortion-free exchange rate regime alone contributes to correcting the incentives that led to the current extraordinary situation of commercial indebtedness. Ensuring an exchange rate regime without distortions is the main deterrent by which the BCRA can influence the private sector so that in the future it does not compromise, through excessive indebtedness, macroeconomic balance and the stability of internal and external payments. To the extent that the actions of the current economic policy authorities allow stability to be restored, the BCRA will consider measures that will allow the country’s economy to be channeled in that direction.
Footnotes
1. The BCRA has estimates of private commercial debt made based on the sworn statements of the debtors, within the framework of the RAyPE released by Communication A6401 and complementary ones. Its preparation and the preparation of the relevant estimation methodologies were agreed upon and carried out jointly with the National Institute of Statistics and Censuses (INDEC) in line with international standards on the subject, such as the Sixth Edition of the Balance of Payments Manual of the International Monetary Fund, and with the Data Gaps Initiative of the G20. in which the world’s major economies recognized the existence of information gaps on which it was imperative to work.
2. The Import Statistical System (SEDI), launched at the end of December 2023 through Joint General Resolution 5466/2023 of the AFIP and the Ministry of Commerce, included the creation of the Registry of Commercial Debt for Imports with Foreign Suppliers (Affidavit of Importers’ Debt or DJDI), designed to have updated information on the commercial debt of importers with foreign suppliers. Its purpose was to collect updated information on the current private commercial debt with foreign suppliers in order to address this problem.
3. See the methodology for estimating private external debt, published in each report.
