Systems of Banking and Production in Argentina
Vctor Fernndez, Carolina Lauxmann and Julio Tealdo
THE ARGENTINEAN FINANCIAL BANKING SYSTEM AND ITS LINKS WITH THE PRODUCTION SYSTEM.
IMPLICATIONS FOR THE CONFORMATION OF AN ENDOGENOUS, DECENTRALIZED AND DYNAMIC ACCUMULATION PATTERN

(Re-)Orienting of Public Credit Towards Productive Activities?

During the 1990s, as previously mentioned, the adoption of wc recipes to try to clean up problems with the Argentinean economy gave rise to, among other measures, a strong liberalization of the financial system. Mainstream representatives believed that eliminating intervention would allow for increased efficiency of the sector by not only reducing the cost structure, improving organizational operations, introducing new technologies and financial products, training employees, etc., but also by letting the market determine the destination of credit according to individual evaluation, which could avoid the drainage of funds towards non-productive activities (Bleger and Borzel, 2004).11

In this context, only top businesses had preferential access to credit, while small and medium-sized businesses (smes) 90% of the economic establishments in the country were excluded from any possibility of financial assistance12 (Fernndez, et al., 2005; Azpiazu, et al., 2001).

On the other hand, bank financing was principally oriented towards consumers and the service sector, while manufacturing activity was sidelined (Figure 10). This situation further worsened the deteriorated state of the Argentinean industrial fabric, mainly at the sme level (Azpiazu and Schorr, 2010), because they were strongly affected, as we already mentioned, by difficulties in accessing financing.

Figure 10. Relative Average Participation of Different Sectors of Economic Activity
Over Total Loans (1991-2001; 2002-2010)
*Includes loans for non-identified activities, as well as to persons related to the labor dependency.
Source: Prepared by the authors, based on information from the bcra, Loans by Activities.

Following the 2001 crisis and in the context of more active State participation in the economy through measures that tended to stimulate industrial activity to a certain extent mainly by fixing the exchange rate it is feasible to hope for a re-orientation of financial system flows towards industrial investment. However, as observed in Figure 10, the percentage of credit granted to the manufacturing sector was even lower than what was given during the convertibility era years. The almost non-existent link between the financial system and the productive system during the 1990s was maintained, and even worsened during the first decade of this century.

11 This situation was more likely to occur before the implementation of Basel norms, when risk evaluation was performed using the portfolio as a whole and financing could be administered among different productive activities and geoGraph zones (Titelman, 2003).

12 Funds were available from international financial markets as well as from large national and international economic groups, rendering a still more disproportionate advantage over small and medium firms (Azpiazu, et al., 2001; Bleger and Borzal, 2004)