Boletín Monetario y Financiero

This bulletin was published quarterly between 1995 and 2001, until 2002, when an annual edition was presented. The publication included an analysis of the behavior of the international and local economy, the capital market and the main regulatory changes that occurred in the period, as well as the main developments observed in monetary variables and in the financial system.

Executive summary

Fears of an abrupt slowdown in the US economy had a negative influence on the behaviour of international financial variables during the fourth quarter of 2000. Increased risk aversion and consequent liquidity concerns in capital markets widened risk spreads, particularly for emerging market debt.

During the last quarter of 2000, there was a decline in the level of activity in the domestic economy, with a significant fall in gross fixed investment. In the same vein, the performance of Argentina’s capital market continued to reflect the negative effects of internal factors – economic and political – although in this period a less favorable international outlook was added. In particular, the main financial variables showed a deterioration during the period analyzed until the conclusion of an international financial support agreement. At the end of the period, this agreement cleared up some doubts among investors regarding the possibility of the national government meeting its financial commitments.

The behavior of monetary variables presented, in general terms, a significant change during the period analyzed. Deposits, especially term placements, and the international reserves of the financial system reversed their upward trajectories
to register declines. On the other hand, interest rates, which remained relatively stable during previous periods, experienced a significant increase, especially those agreed for loan operations between financial institutions. The movement of interest rates accompanied the increase in the country risk premium and reflected conditions of illiquidity in the market. In this context, the Central Bank decided to make the minimum liquidity requirements regime more flexible. It should be noted that, at the end of the fourth quarter, the evolution of monetary variables reacted positively to the announcement of the financial support agreement, relatively improving the financial outlook for the period.

In 2000, the growth of intermediation in the financial system remained at a relatively low level; In particular, in the last quarter there was a fall in the sector’s net assets. In the economic context of high uncertainty, during the period analyzed, the entities used the resources from the decrease in the holding of liquid assets, the increase in funds from abroad and capital contributions to cancel deposits and grant loans to the public sector. During the fourth quarter of 2000, and on a year-on-year basis, the sector’s profitability improved due to lower administrative expenses and uncollectibility charges. From an annual perspective, the improvement in the performance of the aggregate of institutions in the current year also reflected an increase in the result from the holding of financial assets. Finally, it should be noted that the high levels of solvency for banks were maintained, although there was a slight decrease compared to the previous quarter, as compared to the same period a year earlier.