FINANCIAL INSTITUTIONS ACT
THE CAPITAL IN THE SERVICE OF THIS ECONOMY AND SOCIAL WELFARE TO
Art . 39 - The capital must be employed by the national economy and have the main purpose of social welfare. Various forms of exploitation can not offend the purposes of common benefit of the Argentine people. (Constitution Argentina 1949)
A little history
The Argentine financial system is regulated by the Financial Institutions Act (Law 21,526), \u200b\u200benacted on February 14, 1977. was the Minister of Economy Joseph A. Martinez de Hoz, during the dictatorship of Rafael Videla, who passed this law. This "process" also contemplated the Grain Act (1976) and the Broadcasting Act (1980), three rules which together ensure the implementation of neoliberal economic model and that except for the recent New Communication Services Act Audiovisual had continued until today. no coincidence these are three very sensitive issues for Kirchner, faced with the media and the field, and worried about what might happen on stage stock despite the current financial stability, since the Law Financial Institutions of the dictatorship favors a system of accumulation based on the financial capital replacement of production and labor, which opposes the current government's economic model. Throughout its 32 years, 21,526 standard was amended 17 times, nine and eight law by presidential decree, any they changed the spirit of that bench is not committed to the development of Argentina, built in the '70s and perfected during convertibility. This law, fully liberalized financial activity, failed to be employed in productive investment and consumption sustainable, and reinforced as a purely private business that prioritized individual gain on social development. This model of deregulation, concentration, privatization, foreign ownership and financial speculation, failed repeatedly and had his great failure in the 2001 crisis - 2002. In the current context of international crisis and further claim in the process of industrialization is a need to change the rules of the financial system because, besides not fulfilling its role of channeling resources to productive activity, the messes that may occur in it, as happened in 2001 in the country and between 2007 and 2008 in the United States could move quickly to the real economy impacting on the productive sectors and employment.
Consequences
The model installed during the last military dictatorship was not a banking system with "flexibility and efficiency", as raised in their speeches Jose Alfredo Martinez de Hoz, but enhanced the instability and vulnerability of the economy, ended the process of industrialization and encouraged the chance of foreign debt. The reduction of post-convertible market, change in economic policy from 2003 and the relative "strength" that showed the banking system during the current international financial crisis does not imply that systemic risk is gone it generates.
force and hegemonic power are evident when the formation of active external (capital flight) threatens to undermine the process of product growth, employment and investment. According to economists Alan Cibils and Cecilia Allami, the three legs of the profound changes were
- Deregulation the interest rate to increase the supply of credit.
- Deregulation the interest rate to increase the supply of credit.
- The incentive to entry to a greater number of financial institutions in the market to make it "competitive."
- The capital account liberalization, allowing the free flow of capital.
The main measures implemented are highlighted:
- Any change in the specialization of financial institutions by a criterion of universality.
- The Central Bank failed to fix the interest rate that was attached to the free interplay of supply and demand.
- Commercial banks have become carriers of the exclusive right to act as intermediaries.
- High interest rates stimulated the banking business.
- was ordered extension of the Central Bank to guarantee deposits in local currency for all entities .
One of the first consequences of the reform was the merger of the financial system. The number of commercial banks increased significantly, while decreasing the number of financial institutions. This process was accompanied by an increase in the subsidiaries. Banks credit unions, an important source of SME financing in the mid-60s, were the main victims. Came to be about 1000 and today are only two and a bench (Credicoop). It also destroyed the system of public banks that went from 34 to 12 through privatizations and liquidations. Besides the concentration was a strong foreign capital: from 1977 until the currency crisis, the number of foreign financial institutions grew steadily .
theory argued that Martinez de Hoz spreads (the difference in borrowing and lending rates) is reduced with increased competition did not happen. Rodrigo Lopez The researcher explained that "something important to make clear is that need to change the law not for the high profit margins with financial institutions, but because they affect the rest of the economy almost exclusively by channeling resources towards consumption. " The lack of tools to guide the state credit allowed banks to allocate resources to those sectors that would ensure the greatest profit in the shortest time.
According to the latest data available for 99 percent of the credits awarded may not exceed 200 thousand dollars. The Central Bank data does not differentiate credit if the policyholder is an individual or a company, but from the size loan and the amount of taxable makers can be inferred that most of these are personal loans (to finance consumption and credit cards), which account for 34 percent of the total. Meanwhile, borrowing from 1 to 50 million pesos (mainly to finance foreign trade operations) are a few companies that account for 60 percent of the total.
Unlike what happens in other countries, the current law does not provide any specification on the minimal presence of institutions in different parts of the country, since the reform abolished the territorial preferences the previous legislation, from a regional system to another country. Following the demise of the regional banks and distrust after the banking crisis of 1980 saw a marked geographical concentration of branches in the provinces of Buenos Aires, Cordoba, Santa Fe and Buenos Aires City, a situation that ended up postponing the regional economies and SMEs, whose chances of access were strongly conditioned by the high level of interest rates.
The Financial Institutions Act established the dictatorship of very large functions for the universal bank so the rest of the majors, such as mortgage banks, were not developed. Article 21 states that "commercial banks may perform all operations ... they are not prohibited by this law." The rules do not provide what they can do but what should not, by waiving the State's ability to control and direct credit, and reducing its tools to control the high degree of risk that has proven over the past 32 years. ; Instead of doing everything that is not prohibited for financial legal system should provide what they can do. Different specialists emphasize the need for reform along with the Financial Institutions Act, the Central Bank Charter, as both belong to the same neo-liberal paradigm, in a way that points to secure financing at low rates of production and where the monetary authority's objective is not only low-cost clean the entities trouble, but is committed to stimulating economic growth . mid-2007, the then deputy Mercedes Marco del Pont Kirchner proposed to amend the charter of the Central. The initiative was approved by the Finance Committee of the House, but eventually the project floundered. Opposed to Wall Street and from the Central Bank itself. The head of the National Bank proposed, among other things, that the "primary and fundamental mission" contemplated in addition to price stability, sustaining a high level of growth and employment.
By this law the Central Bank failed to fix the interest rate that was attached to the free interplay of supply and demand, tipping the scales for the concentration of capital, meanwhile, the banks commercial carriers became the exclusive right to act as intermediaries. These points are only some of which the Government must change to provide a new regulatory framework for financial markets in the country.
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