Bank Credit in Argentina in the Aftermath of the Mexican Crisis: Supply or Demand Constrained?

by Luis Cato

After growing at an annual rate of 19 percent in real terms in the four years to end-1994, bank credit to the private sector in Argentina declined by 5 1/2 percent during 1995. This marked decline took place amidst a severe banking crisis which followed the devaluation of the Mexican peso in December 1994. Between end-November 1994 and end-May 1995, the Argentine banking system lost 17 percent of its total deposits, while the Central Bank lost close to a third of its liquid international reserves. Prime interest rates in pesos and in U.S. dollars peaked at 40 percent and 26 percent in mid-March 1995, from around 11 1/2 and 9 percent, respectively, prior to the crisis. Ten banks were closed and more than 40 financial institutions were merged or absorbed by stronger banks.

29 pages, Kindle Edition

First published March 1, 1997