1. Executive Summary
The BCRA accelerated the pace of interest rate hikes on its monetary regulation instruments and at the same time raised the minimum interest rates on fixed-term deposits. In this way, it seeks to tend towards positive returns in real terms of savings instruments in pesos and preserve monetary and exchange rate stability. Likewise, with the aim of strengthening the channel for transmitting monetary policy to the different segments of the financial system and the capital market, since mid-August, the BCRA began to offer 1-day passive passes to Mutual Funds (FCI).
The broad monetary aggregate (private M3) would have registered a monthly contraction at constant prices and adjusted for seasonality, after three months of positive variations. This contraction was explained by the behavior of means of payment and, to a lesser extent, of fixed-term deposits. Despite the lower dynamism they showed in August, fixed-term placements remained around the highest values in recent decades, measured at constant prices.
Loans in pesos to the private sector registered a decrease for the second consecutive month in real and seasonally adjusted terms, with a generalized fall at the level of the different lines of credit. Commercial lines were the ones that presented the least contraction, a dynamic that was explained by the boost of the Productive Investment Financing Line (LFIP) that offers preferential conditions for financing production.
2. Payment methods
In real and seasonally adjusted terms (s.e.), means of payment (private transactional M21) would have registered a contraction of 6.1% in August, recording seven consecutive months of decline and being the largest contraction since the end of 2018 (see Figure 2.1). This fall was due to the behavior of both non-interest-bearing demand deposits and working capital held by the public. Thus, in year-on-year terms and at constant prices, means of payment would have presented a contraction of around 13.9%. In terms of output, private transactional M2 would have stood at 8.3%, showing a decrease (0.2 p.p.) compared to last month (see Figure 2.2). In particular, the working capital held by the public remains at the lowest level in the last 15 years, while demand deposits are at values similar to those of the average of recent years.
Figure 2.1 | Private transactional M2 at constant
prices Contribution by component to the monthly vari. s.e.
Figure 2.2 | Private transactional
M2 as % of GDP
3. Savings instruments in pesos
At the beginning of the month, the Board of Directors of the BCRA decided to raise the minimum guaranteed interest rates on fixed-term deposits for the eighth time this year2. On this occasion, it increased by 8.5 p.p. the minimum guaranteed rate for placements of individuals by up to an amount of $10 million, which went from 61% n.a. to 69.5% n.a. (96.6% e.a.). For the rest of the depositors of the financial system3 , the interest rate rose by 7 p.p. to 61% n.a. (81.3% y.a.). This measure is aimed at tending towards positive real returns and thus increasing the incentive to save in pesos.
In August, fixed-term deposits in pesos of the private sector at constant prices would have registered a monthly contraction of 2.0% s.e., interrupting a period of 4 consecutive months of expansions. Even though term placements showed a drop in the month, at constant prices they still remained around the highest levels in recent decades. As a percentage of GDP, these deposits would have stood at 6.7% in August, a figure that is also among the highest in recent years.
Analyzing the evolution of term placements by strata of amount, it can be seen that, although all segments show a decrease, the monthly drop was mainly concentrated in the wholesale segment (more than $20 million; see Figure 3.1). Specifically, this contraction was explained by the behavior of investments with early cancellation options, while traditional deposits registered an increase throughout the month (see Figure 3.2). Within this type of placement, an increase was observed both in the holdings of Financial Services Providers (FSPs), mainly due to the statistical carryover left by the previous month, and in the holdings of other companies.
Figure 3.1 | Fixed-term deposits in pesos of the private
sector Var. real monthly and without seasonality by amount stratum
Figure 3.2 | Fixed-term deposits in pesos of more than $20 million
Balance at constant prices by type of instrument
Original series
The segment of fixed-term deposits with CER adjustment, after maintaining sustained growth in the first seven months of the year, also showed a contraction in real terms during August. The decrease was verified in both traditional and pre-cancellable UVA placements, whose monthly rates of change stood at -6.8% s.e. and -1.7% s.e. in real terms respectively (see Chart 3.3). Distinguishing by type of holder within the instruments with CER adjustment, it can be seen that the fall is almost entirely explained by the dynamics of placements by individuals and companies (excluding FSPs; see Chart 3.4). All in all, deposits in UVA reached a balance of $393,800 million at the end of August. It should be noted that its relative share of total term instruments remains limited (around 7% of total time deposits).
Figure 3.3 | Fixed-term deposits in UVA from the private
sector Balance at constant prices by type of instrument
Original series
Figure 3.4 | Fixed-term deposits in UVA in the private
sector Balance at constant prices by type of holder
Original series
All in all, the broad monetary aggregate, private M34, at constant prices would have registered a monthly decrease of 3.1% s.e. in August. In year-on-year terms, this aggregate would have experienced a decrease of 5.0%. As a percentage of GDP, it stood at 16.8%, remaining stable compared to the previous month.
4. Monetary base
In August, the Monetary Base stood at an average of $4,287.3 billion, registering a monthly increase of 1.8% (+$75,240 million) in the original series at current prices. Adjusted for seasonality and at constant prices, it would have exhibited a contraction of 4.8% and in the last twelve months it would accumulate a fall of the order of 18.3%. As a GDP ratio, the Monetary Base would stand at 5.0%, a figure slightly lower than that of the previous month and the lowest value since 2003 (see Figure 4.1).
Figure 4.1 | Monetary Base
On the supply side, among the factors that contributed positively to the monthly variation of the monetary base are the open market operations carried out by the BCRA. However, it is worth noting that this expansion was explained by the statistical carryover from July, since in August there were practically no operations of this type. In turn, monetary regulation instruments contributed to the expansion of liquidity, mainly due to the effect of interest and premiums on these instruments. These effects were partially offset by the contractionary effect of public sector operations and the sale of foreign currency to the private sector.
The BCRA accelerated the pace of raising its benchmark interest rates in August, in order to tend towards positive real returns on investments in local currency and preserve monetary, exchange rate and financial stability. Thus, the interest rate of the LELIQ with a 28-day term was raised by 9.5 p.p., which stood at 69.5% n.a. (96.8% y.a.). For its part, the interest rate on the LELIQ with a 180-day term increased 7.9 p.p. to 76% n.a. (90.7% y.a.). As for shorter-term instruments, the interest rate on 1-day pass-by-passes increased 9.5 p.p. to 64.5% n.a. (90.5% y.a.); while the interest rate on 1-day active passes stood at 88% n.a. (140.8% y.a.). Finally, the fixed spread of the NOTALIQ in the last auction of the month was set at 8.25 p.p.
With the aim of reinforcing the transmission channel of monetary policy to the different segments of the financial system and the capital market, since mid-August, the BCRA began to offer 1-day passive passes to Mutual Funds (FCI). The rate at which the BCRA remunerates these passes corresponds to 75% of the rate of passive passes against financial institutions5.
With the current configuration of instruments, in August the remunerated liabilities were made up of around 69% by LELIQ with a 28-day term. Regarding the species with a longer term, the 180-day LELIQs significantly decreased their participation, representing only 0.1% of the total. On the other hand, the NOTALIQ gained share (17.3% of the total). The rest corresponded to 1-day pass-throughs, which accounted for 13.5% of the total, slightly less than the previous month (see Figure 4.2).
Figure 4.2 | Composition of Interest-Bearing Liabilities of the BCRA
Monthly Average
5. Loans to the private sector
At constant and seasonally adjusted prices, peso loans to the private sector would have contracted for the second consecutive month, with a generalized fall at the level of the different financing lines (see Figure 5.1). The drop recorded in August would have been 2.4% monthly, being the sharpest drop since November last year. Thus, in the last twelve months they would have accumulated a decrease of 0.4% in real terms. The ratio of loans in pesos to the private sector to GDP would have been around 6.8%, remaining largely unchanged from that recorded in the last year (see Figure 5.2).
Figure 5.1 | Loans in pesos to the private
sector Real without seasonality; contribution to monthly growth
Figure 5.2 | Loans in pesos to the private
sector In terms of GDP
Analysing the evolution of loans by type of financing, lines with essentially commercial use fell 1.4% month-on-month in real terms. In the year-on-year comparison and at constant prices, they remain at a level 8.8% higher than in August 2021. Within these lines, current account advances would have fallen 1.1% s.e. in real terms (+11.3% y.o.y.). On the other hand, the financing granted through documents would have exhibited a decrease at constant prices of 0.6% s.e. (+14.9% y.o.y.), explained both by the documents with a single signature and by the discounted documents.
The Financing Line for Productive Investment (LFIP) continued to be the main tool used to channel productive credit to Micro, Small and Medium-sized Enterprises (MSMEs). At the end of August, loans granted under the LFIP accumulated approximately $2.867 billion since its launch, an increase of 6% compared to last month (see Figure 5.3). As for the destinations of these funds, about 85% of the total disbursed corresponds to working capital financing and the rest to the line that finances investment projects. At the time of publication, the number of companies that accessed the LFIP amounted to 298,308. It should be noted that, in line with the increase in the BCRA’s reference interest rates, the maximum rate of the line to finance working capital was raised from 58% to 69% n.a.; and that corresponding to investment projects went from 50% to 59% n.a.
Figure 5.3 | Financing granted through the Productive Investment Financing Line (LFIP)
Accumulated disbursed amounts; data at the end of the month
Figure 5.4 |Commercial Loans by Type of Debtor
Var. A.I. at constant prices of the 30-day moving average balance
The favorable conditions of the LFIP continue to contribute to sustaining the growth of financing to relatively smaller companies. In fact, differentiating trade credit by type of debtor shows that in July credit to MSMEs at constant prices would have expanded in year-on-year terms at a rate of around 26.6%, while credit to large companies showed a contraction of around 10% YoY (see Figure 5.4).
Among loans associated with consumption, financing instrumented with credit cards would have shown a decrease of 3.1% s.e. in real terms and, thus, the average balance for the month would be 8.0% below the level of a year ago. Meanwhile, personal loans would have exhibited a 2.7% monthly drop at constant prices and would be 7.9% below the level of August 2021. The interest rate corresponding to personal loans averaged 74.6% n.a. in August (106.3% y.a.), increasing 9 p.p. compared to the previous month.
With regard to lines with real guarantees, collateral loans would have registered a decrease in real terms of 1.9% s.e., although they remain 29.2% above the record of a year ago. For its part, the balance of mortgage loans would have shown a fall of 4.2% s.e. at constant prices in the month, accumulating a contraction of around 20% in the last twelve months.
6. Liquidity in pesos of financial institutions
In August, ample bank liquidity in local currency6 remained at a similar level to July, averaging 68.1% of deposits, remaining at historically high levels. In turn, the main modifications in terms of its composition refer to the BCRA’s interest-bearing liabilities. In this regard, the NOTALIQ continued to gain weight over the LELIQ and passive passes. Likewise, an increase in integration with public securities and in LELIQ was observed (see Figure 6.1).
Regarding the regulatory modifications with a potential impact on bank liquidity, it is worth mentioning that the new “Special Accounts for Exporters” were created, which will not be subject to a minimum cash requirement7 (see section “Foreign Currency”).
Figure 6.1 | Liquidity in pesos of financial institutions
7. Foreign currency
In the foreign currency segment, the main assets and liabilities of financial institutions showed negative variations. Thus, the average monthly balance of private sector deposits was around US$14,600 million, registering a fall of US$471 million compared to the previous month. Part of this drop was explained by the statistical carryover from July, with the peak variation showing a contraction of US$115 million. Demand deposits of individuals of less than US$1 million were the ones that concentrated most of the decrease observed in the month. On the other hand, the average monthly balance of loans to the private sector was US$3,714 million, which meant a drop of US$133 million compared to the previous month, explained by the behavior of single-signature deposits (see Figure 7.1).
Figure 7.1 | Balance of private sector foreign currency deposits and loans
Figure 7.2 | Liquidity in foreign currency of financial institutions
The liquidity of financial institutions in the foreign currency segment stood at 84.3 of deposits in August, showing an increase of 1.2 p.p. compared to July. The increase was explained by the performance of current accounts at the BCRA, and was partially offset by a fall in cash in banks (see Figure 7.2).
During August, a series of regulatory modifications took place in foreign exchange matters. First, incentives were designed to increase the supply of foreign currency. Thus, the deadline for entering and settling advances, pre-financing and post-financing from abroad was extended, to the extent that the foreign currency is credited to an account that registers a monthly interest in dollars8. To guarantee their remuneration, financial institutions may: use these funds to subscribe to 180-day BCRA Dollar Bills/Notes or allocate them to a demand account in US dollars opened at the Central Bank9. In the same vein, access to dollar-linked demand accounts was enabled for exporters (“Special Accounts for Exporters”) who anticipate settlement by at least thirty days with respect to the period determined for each sector10. In this case, the local financial institutions that receive these funds can use them to acquire non-transferable internal bills of the Central Bank of the Argentine Republic in pesos liquidable by the Communication Reference Exchange Rate “A” 3500 (LEDIV). Finally, access to the foreign exchange market was made more flexible for payments for imports linked to pharmaceuticals and other health-care-related goods11 and for goods necessary for the construction of infrastructure works contracted by the national public sector12.
Finally, it should be noted that at the beginning of September, the Export Increase Program13 was created, with the aim of promoting exports and strengthening International Reserves. In this way, exports of soybeans and their by-products that are settled between September 5 and 30 will do so at an exchange rate of $200 per dollar. Due to this, it was established that the delivery of the underlying asset corresponding to the fulfillment of Soybean Futures contracts and the trading called “Available” that are carried out while this program is in force will be invoiced considering this exceptional and transitory nominal exchange rate value. In turn, agricultural producers who make sales of soybeans for export with an improved or fixed price before September 30, 2022 and for at least 85% of their production referred to the 2021-2022 harvest to brokers, stockpilers, cooperatives, exporters and soybean industrialists to affect export operations of the aforementioned program will be able to access the benefits and programs established for the 2022-2023 harvest.
In August, the BCRA’s International Reserves ended with a balance of US$36,734 million, reflecting a decrease of US$1,498 million compared to the value recorded at the end of July (see Figure 7.3). The fall in the month was explained by the losses due to the valuation of net foreign assets; payments to international organizations, including interest payments to the International Monetary Fund for US$452 million; and the net sale of foreign currency to the private sector. It should be noted that the dynamic of the latter was reversed in the middle of the month, although without being able to reverse what happened in the first half.
Finally, the bilateral nominal exchange rate (TCN) against the U.S. dollar increased 5.4% in August to stand, on average, at $135.26/US$ (see Figure 7.4). Given that the rate of depreciation of the domestic currency accelerated throughout the month, the peak variation was somewhat higher (5.7%).
Figure 7.3 | International Reserves
Daily Balance
Figure 7.4 | Variation in the bilateral nominal exchange rate with the United States
Glossary
ANSES: National Social Security Administration.
BADLAR: Interest rate on fixed-term deposits for amounts greater than one million pesos and a term of 30 to 35 days.
BCRA: Central Bank of the Argentine Republic.
BM: Monetary Base, includes monetary circulation plus deposits in pesos in current account at the BCRA.
CC BCRA: Current account deposits at the BCRA.
CER: Reference Stabilization Coefficient.
NVC: National Securities Commission.
SDR: Special Drawing Rights.
EFNB: Non-Banking Financial Institutions.
EM: Minimum Cash.
FCI: Common Investment Fund.
A.I.: Year-on-year .
IAMC: Argentine Institute of Capital Markets
CPI: Consumer Price Index.
ITCNM: Multilateral Nominal Exchange Rate Index
ITCRM: Multilateral Real Exchange Rate Index
LEBAC: Central Bank bills.
LELIQ: Liquidity Bills of the BCRA.
LFIP: Financing Line for Productive Investment.
M2 Total: Means of payment, which includes working capital held by the public, cancelling cheques in pesos and demand deposits in pesos from the public and non-financial private sector.
Private M2: Means of payment, includes working capital held by the public, cancelling cheques in pesos and demand deposits in pesos from the non-financial private sector.
Private transactional M2: Means of payment, includes working capital held by the public, cancelling cheques in pesos and non-remunerated demand deposits in pesos from the non-financial private sector.
M3 Total: Broad aggregate in pesos, includes the current currency held by the public, cancelling checks in pesos and the total deposits in pesos of the public and non-financial private sector.
Private M3: Broad aggregate in pesos, includes the working capital held by the public, cancelling checks in pesos and the total deposits in pesos of the non-financial private sector.
MERVAL: Buenos Aires Stock Market.
MM: Money Market.
N.A.: Annual nominal
E.A.: Annual Effective
NOCOM: Cash Clearing Notes.
ON: Negotiable Obligation.
GDP: Gross Domestic Product.
P.B.: basis points.
p.p.: percentage points.
MSMEs: Micro, Small and Medium Enterprises.
ROFEX: Rosario Term Market.
S.E.: No seasonality
SISCEN: Centralized System of Information Requirements of the BCRA.
TCN: Nominal Exchange Rate
IRR: Internal Rate of Return.
TM20: Interest rate on fixed-term deposits for amounts greater than 20 million pesos and a term of 30 to 35 days.
TNA: Annual Nominal Rate.
UVA: Unit of Purchasing Value
References
1 Corresponds to private M2 excluding interest-bearing demand deposits from companies and financial service providers. This component was excluded since it is more similar to a savings instrument than to a means of payment.
3 Financial Services Providers, Companies and Individuals with deposits of more than $10 million.
4 Includes the working capital held by the public and the deposits in pesos of the non-financial private sector (demand, time and others).
6 Includes current accounts at the BCRA, cash in banks, balances of net passes arranged with the BCRA, holdings of LELIQ and NOTALIQ, and public bonds eligible for reserve requirements.
9 Communication “A” 7574 and Communication “A” 7578.
13 Decree 576/2022 of the National Executive Branch.
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