Argentine central bank announces “pesification” of real estate operations
Following the official new curbs on US dollar purchasing for savers, the head of the Argentine Central Bank Mercedes Marcó del Pont came on stage to defend the measure and anticipate that operations in the real estate market will have to be done in Argentine Pesos.
“Looking at it in terms of overall economic wellbeing, the accumulation of external assets in the Central Bank is clearly higher and more efficient than being put through individually by people and legalities” said Ms Marcó del Pont in reference to the reserves of the Central Bank.
Furthermore, Marcó del Pont played down the impact of measures by affirming that “those who buy dollars make up a very small minority of the Argentine population”.
The statements were made in an interview with the pro-government newspaper Página 12 on Thursday where she tried to explain the latest Central Bank decisions.
“There is a new definition of priority uses for foreign currency coming into the country generated by exports: first to pay for imports and secondly to meet debt maturities expiring in foreign currencies.”
Marcó del Pont said it was necessary to generate other forms of savings in Pesos which makes them attractive for small investors and does not diminish their purchasing power. However she also said that the measure was a “transitory limitation” and guaranteed that “spending made on credit and debit cards abroad will have no restrictions placed upon them.”
In addition, Marcó del Pont also made it clear that housing and real estate operations from now on are to be agreed, purchased and paid with prices in Argentine Pesos. She described it as “a step forward for the 'pesification' of the real estate market.”
The only ones that will continue to enjoy the benefit for some time are those who have already been granted a mortgage loan in dollars. “The only thing we contemplate until next October 31 is the possibility of having access to the open and only money exchange market is for those who have an approved mortgage loan. After that no more mortgage loans in dollars”.
The measures referred to the real estate market have caused a strong deceleration of activity in the sector and in the number of registered contracts, since in Argentina (with a past of hyperinflation) most of these operations are done in US dollars. The increase in restrictions, since last October, to operate with US dollars has virtually frozen new operations.
In support of this the chartered notaries association from Buenos Aires revealed that during May the number of contracts for the sixth consecutive month have continued to fall.
Asked about the government decision forcing top line banks to extend soft credits for productive operations, the central banker said “banks will have to learn to lend” since it is necessary “to minimize the impact of the international crisis on the local (Argentine) economy”.
“Nowadays they don’t lend for investment, except sporadic efforts and honest exceptions. Their business plans do not contemplate this kind of loans. As I said they will have to learn to lend” insisted Marcó del Pont.
It’s quite simple “we are forcing them to lend a wee-bit of their funds at a lower rate than consumer credit. In no way can this generate a misbalance in their accounts, be it in rates or time periods”.
Earlier this week Argentine president Cristina Fernandez announced that the top line banks will have to loan for investment projects the equivalent of 5% of their deposits. The new loans will have a maximum fixed rate or 15%, which works out according to a financial equation plus 400 basic points, and for a period of at least three years.
The announcement of the Pesification of the real estate market comes only a few weeks after Cabinet Chief Abal Medina denied media versions indicating the Argentine government is planning a de-dollarization of the economy.
Medina went on record to say that versions of de-dollarization were ridiculous; I thought it was a joke.
Likewise a day later Deputy Economic Minister Axel Kicillof also denied point blank the government was preparing a de-dollarization plan. “The versions and rumours are all nonsense The Argentine economy is already ‘Pesified’ as the Peso is our official currency.
Medina and Kicillof acted as spokespersons on the occasion because the firebrand Senator Anibal Fernandez who usually played that part for days had been preaching Argentines had to learn to have their savings in Pesos.
This until it was revealed he had his own savings in US dollars and “since I acquired them legally, I’ll do what I ever want with them. Selling dollars now is madness”, said Senator Fernandez who was later publicly reprimanded by President Cristina Fernandez during an official ceremony at Government House.