Alejandro Berney, chief executive of Argentina's central depository Caja de Valores, talks to The Banker about how the country can defy the naysayers and enjoy a bright capital markets future. 


Argentina has been the source of much capital market excitement since it elected centre-right Mauricio Macri as its president in November 2015, ending over a decade of Peronist rule in the country.

Soon after taking office, Mr Macri’s government dismantled currency controls and repatriation limits on the equity market. In April this year, on the heels of a long-awaited settlement with holdout investors over the country’s 2002 defaulted debt, Argentina issued a $16.5bn bond, the largest emerging market debt sale on record.

The settlement of the bitter legal dispute did more than simply reopen the international market gates to the sovereign. It also made life significantly easier for local administrations and corporates when raising funds. The infrastructure that allows for the smooth functioning of capital markets also received a boost recently, thanks to central depository Caja de Valores establishing a direct link to international financial messaging network Swift to provide faster and more secure connections to clients.

Swift action

This is a welcome and slightly overdue agreement, according to Alejandro Berney, the depository’s chief executive. “The project started two years ago. At the time, under the previous administration the central bank had lots of restrictions [on importing the necessary encryptions] and so it took a bit longer than planned,” he says. “But once these were lifted, we were able to get on with the implementation. Local banks are interested in communicating with us via Swift because it’s much faster and secure.”

More is to come, Mr Berney says, referring to new capital markets changes that would clarify areas such as collateral netting, crucial to the development of the derivatives market, as well as the creation of tax incentives for long-term savings to strengthen the local fund industry and allow issuers to seek long-dated funds. “With the planned changes, there’s the potential to increase the capital market to three times its [current] size,” says Mr Berney.

Already Caja de Valores has seen impressive growth in assets under custody, which, based on the face value of all currency portfolios, have grown by more than 70% from September 2015 to the end of the third quarter of 2016 to reach the equivalent of 2001bn pesos ($131bn). Starting from a low base, there is scope for growth. Simply comparing a broad indicator such as market capitalisation to gross domestic product (GDP) with other countries’ ratios highlights Argentina’s situation. According to the World Bank, at the end of 2015, Mexico, Peru and Brazil all showed ratios about three times higher than their southern neighbour at 35.2%, 29.4% and 27.6%, respectively. In Argentina, market capitalisation to GDP was a slim 9.6%.

Uncertain future

Argentina’s potential, however, is rivalled by concerns over its political stability, which not even the all-star government of Mr Macri has been able to allay.

Analysts expect the economy to grow again after this year’s forecast contraction of 1.5%, but most express worries over Argentina’s volatile growth pattern. In a research note at the end of September, rating agency Moody’s said that were it not for the risks associated with its politics, Argentina’s economic development and debt metrics would be consistent with a higher rating than the B3 – or highly speculative – rating the agency assigned it. This is because it will take time for the full effect of the new policies to materialise and because of the risk that a subsequent government could reverse those policy changes.

“Argentina has a long history of not fulfilling expectations,” says Mr Berney. “But look at the [growth of] assets under custody of the central security depository. Obviously there has been more issuance, but there has been demand to meet that issuance too. It does show that some people are betting, at least in the short term, that Argentina’s forecasts will be met.”


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