According to the sector, the committed funds represented only 0.02% of GDP, but were essential to support financing lines of more than 1.2 trillion pesos (2.65 billion pounds) annually, benefiting more than 70,000 SMEs throughout the country.
The shift to the SGR regime affects access to credit for more than 70,000 SMEs and could hinder productive investment
According to the sector, the committed funds represented only 0.02% of GDP, but were essential to support financing lines of more than 1.2 trillion pesos (2.65 billion pounds) annually, benefiting more than 70,000 SMEs throughout the country.
The country's main banking chambers warned about the economic consequences of a tax modification voted in the Senate last July 10, within the framework of the pension reform. This concerns the elimination of tax benefits for contributions aimed at Reciprocal Guarantee Companies (SGR), a key tool for channeling financing to small and medium-sized enterprises.
The initiative was promoted by opposition sectors, mainly Kirchnerism, and is part of the package that will now be reviewed by the Executive Branch, which has already announced its decision to veto anything that threatens fiscal balance.
In a joint statement, the Argentine Banks Association (ADEBA), the Specialized Banking Association (ABE), and the Banks Association of Argentina (ABA) stated that "this legislative decision negatively impacts one of the most efficient, inclusive, and federal instruments for financing small and medium-sized enterprises".
The entities emphasized that SGR make it possible to reduce credit risk through high-quality guarantees, considered self-liquidating by the Central Bank, which facilitates access to credit and reduces its cost.
Until now, the regime allowed for tax exemption of contributions intended to form the risk funds that back these guarantees. With the new scheme, that tax advantage is eliminated, making it more difficult to capitalize SGR and limiting their operational capacity.
The banking entities also questioned the legislative procedure. "Modifying this regime without an adequate process of technical and impact analysis represents a serious economic policy mistake and an institutional setback that weakens the predictability of the rules of the game", they stated in the release. They added that the supposed fiscal savings "are more than offset by the economic benefits it generates, especially in terms of investment, formalization, and growth of SMEs".
The elimination of the benefit was justified in the Senate as a measure to increase revenue and reduce the pension deficit, but government officials clarified that they do not share that view.
"Productive credit in Argentina has been growing strongly, doubling in real terms over the past year, but it is still well below the levels observed in comparable countries in the region. SGR are a relevant instrument to sustain and drive this process", the banking chambers indicated.
The SME sector also expressed concern about the possible defunding of the guarantee system. Banks will have to raise their risk provisions, which will result in more expensive credit and less availability, especially affecting companies in the provinces. The entities called on Congress and the Executive Branch to review the decision and preserve the SGR regime as part of a stable productive policy.