He INDEC released the latest report on Balance of payments, international investment position and external debtupdated at the end of the first quarter of 2024. The analysis provides details on the holding of dollars in the hands of Argentines and can estimate the magnitude of the stock that is outside the local financial system.
In this sense, the INDEC detailed that the external assets of the non-financial private sector, that is, concerning companies and households, reached 400,925 million dollars at the end of March. Of this total, the majority is made up of cash denominated in foreign currency, although it is also made up of stock assets accredited abroad, properties abroad and other investments.
Specifically, the possession of Cash and foreign currency deposits in the hands of Argentines reached at the end of the first quarter USD 255,148 million -The amount arises from the concept of “Other investments”, in the international investment position of the official statistical body report-, of which USD 16,915 million were recorded by the Central Bank as private sector deposits in accounts in local banks.
Based on these figures it can then be estimated that Argentines had USD 238,233 million in cash outside the system local financial. These savings can be deposited in checking accounts abroad -even declared and subject to tax payment at the local treasury-, although they can also consist of “cash” money in safe deposit boxes in Argentine banks, private safes or, as they say in jargon, stored in “the mattress”, off the official radar and feeding the “blue” market.
Such an amount of savings in “hard cash” bills – also called “rubbery” in financial jargon – that is not invested or earns interest rates confirms, according to economists, the high degree of distrust of Argentines in official policies, in a trend that has been going on for decades, but that deepened after the “corralito” and the crisis of 2001-2002, with the collapse of convertibility. It is also an enormous mass of funds that today within the system could be available for productive credit and the growth of activity, but that unfortunately remains idle in the face of the country’s usual economic instability.
The traumatic episode of the exit from convertibility in 2002 only aggravated the distrust of savers in the financial system
If these numbers are compared with the last quarter of 2023, it is observed that at the beginning of the government of Javier Milei The concept “Banknotes and deposits” grew only by USD 554 million or 0.2% from USD 254,594 million in December 2023.
The BCRA also reported a growth in private deposits in foreign currency of approximately USD 1,114 million or 7.1% in the first quarter, from USD 15,801 million on December 29 to USD 16,915 million on March 27.
For this reason, the stock of cash dollars outside the local financial system registered between January and March a marginal reduction of USD 560 million (-0.2%), from USD 238,793 million at the end of 2023 to USD 238,233 million, an improvement that reverses the currency outflow trend that predominated in the last two decades, although it is not significant enough to to talk about a return of confidence of savers and investors in the Argentine financial system and the Government’s policies.
“In Argentina, maximizing the profitability of pesos has become a crucial practice. However, when it comes to dollars, the most common tendency among people is to choose to keep them under the mattress or in a bank savings account, where the return is 0% per year,” he said. Diego PizzulliCEO of IOL (InvertirOnline).
The stock of external debt – public and private – increased in the first months of Milei’s government and reached almost USD 290 billion. Due to this increase, and due to the deep recession that Argentina is going through, its weight on the Gross Domestic Product (GDP) also grew in the first quarter of 2024 to almost 60 percent.
According to a report published this Wednesday by the INDEC, the external debt grew by USD 2,160 million (+0.8%) compared to the last quarter of last year – when it reached USD 287,809 million – and stood at the end of March 2024 at the 289,969 million dollars.
The economy has been impacted for decades by the outflow of funds from the financial system and the dollarization of savings by households
This increase was mainly due to the increase of USD 2,371 million in the debt of the Non-financial Corporations, Households and Non-Profit Institutions Serving Households (NPISH) sector for USD 2,371 million. For its part, the general government increased its debt by only USD 886 million, given that the strong increase in the stock of public debt registered in the first quarter (+USD 32,380 million) was concentrated in the placement of bonds in pesos.
Regarding the central government debt, the nominal amount amounts to USD 143,572 million; 52.8% corresponds to obligations with international organizations (mainly IMF, IDB, IBRD and CAF) and 44% to liabilities with bondholders.
