Monthly Monetary Report

Monthly report on the evolution of the monetary base, international reserves and foreign exchange market.

Summary

• In the course of 2011, the Central Bank met the goals of the Monetary Program with growth rates of the means of payment that practically coincided with those projected in the base scenario. At the end
of December, the Central Bank presented its Monetary Program for 2012 which, in its base scenario, establishes an annual growth of 26.4% for the Total M2 and 26.2% for the private M2.

• Throughout 2011, the increase in credit to the private sector was the main driver of growth in means of payment, constituting the distinctive note of the year. Thus, total loans to the private sector—in pesos and in foreign currency—represented 13.9% of GDP in the last month of the year, which implies an increase of 2.2 p.p. compared to December 2010. In this context, loans in pesos ended the year with a record year-on-year rate of change of 49.2%, 13.5 p.p. higher than that recorded in December 2010. At the same time, half of the increase in the loan-to-GDP ratio for the year was explained by the increase in commercial financing. With respect to the behavior in the last month of the year, financing in pesos grew 3% ($7,040 million), highlighting those granted through credit cards, which tend to increase following the characteristic spending patterns of the end of the year.

• Fixed-term deposits in pesos in the private sector also had a prominent performance. They ended 2011 with an annual increase of 31.8% and reached the highest average monthly growth rate in recent years. In December, this type of deposit showed an average monthly growth of $1,700 million (a figure that rises to $5,000 million when comparing the balance at the end of December with that of the end of November)
which was generalized, both in the retail deposit tranche and in the wholesale tranche.

• The private sector’s foreign currency deposits ended 2011 with a balance similar to that at the end of November, since from the middle of the month they reversed the declines they had been suffering and
increased by about US$220 million. In this context, liquidity in foreign currency (calculated as the sum of cash in banks, the current account in the BCRA and net passes with the BCRA, as a percentage of deposits in that currency) increased by 1.1 p.p., to 59.4%.

• Liquidity in pesos of financial institutions (which includes current accounts at the BCRA, cash in banks, passes with the BCRA, and holdings of LEBAC and NOBAC) remained relatively stable in
December, averaging 34.8% of total deposits in pesos. Thus, in 2011, in a context of vigorous increase in loans to the private sector, bank liquidity in pesos decreased by 5.8 p.p..

• During December, the BADLAR of private banks continued the downward trajectory that it had begun to show in the middle of last month and ended the year at 17.2%, 1.8 p.p. lower than the level recorded at the end of the
previous month. For its part, the interest rate for fixed-term deposits of up to $100,000 remained at around 14.1%.

• Similarly, short-term lending rates continued to decline. In particular, interest rates on loans to commercial activities showed falls of more than 3 p.p. between the maximum values they had reached in mid-November and the level at the end of December.

• The balance of international reserves at the end of December was US$46,376 million, which implied an increase of US$314 million compared to November. Since mid-November, the Central Bank has once again been a net buyer of dollars, and in December it managed to increase international reserves by almost US$ 2,500 million, which more than compensated for the fall associated with the payment of public debt in foreign currency, through the use of the Argentine Deleveraging Fund and the Payment Fund to International Financial Organizations.