Free currency competition: Dollarization of Argentine SMEs is growing strongly

Amid the new measures implemented by the Government of Javier Milei, the use of dollars by Argentine small and medium-sized enterprises is experiencing a notable increase.

According to data provided by Banco Santander, out of a universe of 215,000 SME clients, 59% already have dollar accounts. In addition, more than 64,000 companies currently manage balances in foreign currency, marking a 21% increase compared to the previous year.

The trend toward greater dollarization in SME operations is evident not only in the number of accounts but also in the amounts managed. Over the past twelve months, the total volume of dollars in these accounts increased by 88% and now exceeds 800 million dollars.

Furthermore, the pace of new account openings is accelerating: while at the beginning of the year there were about 1,000 openings per month, in the last month the figure exceeded 1,300.

"We are seeing significant growth in collections and payments in dollars," explained Ezequiel Sapia, head of the SME and Institutions segment at Santander. In this regard, dollar operations in April 2024 were 136% higher than in the same month of the previous year, showing a major shift in the financial structure of many companies.

Another aspect gaining prominence is investment in dollar-denominated financial instruments. While in April 2023 only 300 SMEs invested in dollar funds, in April of this year more than 3,000 are using this tool, with a volume exceeding 200 million dollars. This jump represents a thirteenfold increase in invested amounts.

Daniela Castaldo, head of Santander Asset Management, noted that this unit manages more than 17% of the dollar fund market in the country. "Currently, our clients can invest their dollars in both money market investment funds and fixed income funds of Argentine and Latam debt. In addition, during June we will be expanding the offering with the possibility of investing in assets from Brazil and Chile," she announced.

Dollar activity also includes financing lines for importers and exporters. According to the bank, there has been a reactivation of products such as import letters of credit and loans to cover cash flow mismatches. Interest rates in dollars for working capital are around 5% per year, while for investments they can reach 10%, depending on the term.

The growing participation of SMEs in the dollarized economy reflects a structural change in their financial strategies, driven by the free currency competition promoted by Milei's Government and new investment opportunities in a context of macroeconomic transformation.