Monthly Monetary Report

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

Summary

• In December, the private M3 monetary aggregate increased by 4.1%, ending the year with a growth of 27.9% YoY: credit in pesos to the private sector was the main driver of its increase, driven by public policies to promote productive credit. Non-financial public sector operations also contributed, although to a lesser extent. Meanwhile, the Central Bank’s foreign exchange sales had a contractionary monetary effect.

• Among the components of private M3, growth in December was concentrated in means of payment (private M2), which showed an increase of 6.2% (and 24.8% YoY). This behavior was motivated by seasonal factors, such as the payment of the half complementary annual salary, the higher expenses of families during the holiday period and the beginning of the summer recess, which led to an increase in the demand for transactional money and a moderation in fixed-term placements. Regarding these last taxes, although they presented a reduction of 0.6% in the month, they ended the year with a year-on-year growth of 35.3%.

• In December, bank liquidity (sum of cash in banks, the current account of entities at the Central Bank, net passes with such entity and the holding of LEBAC and NOBAC; in terms of total deposits in pesos) fell as expected in this month, and stood at 31%, 0.9 p.p. below what was observed in the previous month. In terms of composition, there was a reduction in excess liquidity (net passes with the Central Bank and holding of LEBAC and NOBAC) partially offset by the typical increase in cash in banks and in the current account of entities at the Central Bank in December.

• Loans in pesos to the private sector registered the largest increase of the year in December. In fact, they exhibited a monthly increase of 3.3% ($14,760 million) and their year-on-year growth rate was in the order of 35%. As mentioned, public policies aimed at promoting productive credit favored the dynamism of loans in pesos to the private sector.

• In December, the third stage of the Credit Line for Productive Investment (LCIP) ended: financial institutions would have met the goal of $20,000 million set for the second half of 2013. On the other hand, a new tender was held within the framework of the Bicentennial Productive Financing Program (PFPB), awarding $150 million. Thus, the resources awarded since the beginning of the program total $7,780 million, of which $5,860 million have been disbursed so far.

• For the first half of 2014, the Central Bank established a new quota for the LCIP, aimed at financing MSMEs. In this fourth stage of implementation, the financial institutions covered by the regulation must agree to loans for at least 5% of their deposits in pesos from the private sector by the end of November 2013. Unlike the previous stages, this time, the entire quota must be granted to MSMEs, for a minimum term of 36 months, establishing a maximum fixed interest rate of 17.50% for that period. However, mortgage loans granted for the purchase, construction or expansion of homes with a minimum term of 10 years and/or financing granted to customers not included in the definition of MSMEs aimed at investment projects with specific destinations may be imputed for up to a maximum equivalent to 50% of the quota.

• In December, the Central Bank began offering LEBAC in liquidable pesos at the reference exchange rate between the peso and the U.S. dollar. These bills may be subscribed only by exporters in the cereal and oil sector who are registered in the Single Registry of Operators of the Agri-Food Chain and in the Registry of Exporters and Importers, and who have settled through the Single and Free Exchange Market (MULC) on the day of subscription of the foreign currency security for up to the equivalent in dollars of the amount to be subscribed. The securities will be subscribed in pesos, with a maturity of 180 days and a predetermined cut-off rate of 3.65%. In the month, LEBACs of this type were placed for VN $1,624 million.