Economy Minister Luis Caputo announced a AR$2 trillion (US$1.3 billion at the official rate) plan on Wednesday to revive mortgage lending in Argentina.
“The 2 trillion pesos we would be auctioning would provide housing solutions for 17,000 to 18,000 families,” he said at a press conference on Wednesday morning
The money will come from the Sustainability Guarantee Fund (in Spanish, FGS), which will guarantee long-term deposits at banks so those banks can, in turn, write more home loans.
The FGS is a sovereign wealth fund managed by state pension agency ANSES. It acts as a reserve to guarantee pension payments in the event of an economic crisis or a drop in tax revenue.
Commenting on the announcement, Brokerage Puente noted that the scheme is not new, as a similar initiative ran during former President Cristina Kirchner’s first term (2007-2011).
“It was done back in 2009, after the international financial crisis, when the FGS auctioned fixed-term deposits so that banks could then finance purchases of domestically made cars,” the firm said.
What it means for construction
Caputo said the plan aims to fix a structural problem in Argentine mortgage lending.
“The stock of mortgage loans in Argentina barely amounts to two points of GDP,” he said, adding that, by way of comparison, the figure in Chile is “roughly 27%.”
In the United States, that figure is 75%, which leaves “enormous room for growth.”
Caputo also pointed out that the initiative is going to be a “very significant boost for the development of this market and for the economy in general.”
Construction stands to be among the biggest beneficiaries — and it needs the help. The government’s freeze on public works has left activity 20% below its November 2023 level, according to official figures from statistics bureau Indec.
According to the Center for Argentine Political Economy (in Spanish, CEPA) research firm, the sector has lost over 1,600 companies and 80,000 jobs in that time frame.
Reviving construction was also one of the points International Monetary Fund Managing Director Kristalina Georgieva raised during her recent visit to the country.
Asked by the Herald, Argentine Chamber of Construction (CAMARCO) President Gustavo Weiss called the decision “positive,” though he acknowledged that “the volume isn’t much” so far.
Caputo said the AR$2 trillion will be allocated through auctions of AR$200 billion (US$132 million) each. The first has been provisionally set for the first week of September.
Weiss speculated that more will be created as this quota ends, adding that the plan is going to get home sales moving: as the stock of finished houses runs out, construction of new homes will begin.
Banks are upbeat, but waiting for the fine print
Weiss confirmed that banks are “enthusiastic,” a view echoed by several lenders contacted by the Herald, who asked not to be named.
“It’s a measure that’s in line with everything to do with the recovery of the economy, and it gets a lot moving,” one source said. “A lot of [small and medium companies] are tied to construction and renovation, and I think this goes in that direction.”
Others are more cautious. The Association of Public and Private Banks of Argentina (ABAPRA) said it was still assessing the announcement to determine its scope and how it would function.
They also noted that they had not had “prior conversations with the economic team about this initiative.”
The association acknowledged that the measure amounts to “a public policy intervention aimed at providing liquidity to the mortgage market.”
However, they pointed out that it was important that the program “guarantee conditions of access for all financial institutions, so that it can contribute to the development of mortgage lending in a broad and balanced way.”
Cover photo: Economy Minister Luis Caputo (center), flanked by FGS General Director Juan Cruz Micele (left) and Central Bank Second Deputy Director Baltasar Romero Krause (Credit: Argentine government).