BMI's Executive Summary

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From Q108 we will be calculating the Commercial Banking Business Environment Rating (CBBER) for each of the countries surveyed by BMI. This will permit a more systematic and comprehensive comparison of the conditions within the banking industries of the various countries than was possible in the past. For each country, it will also facilitate a comparison of the conditions within the banking sector and conditions prevailing in other sectors.

Argentina's overall CBBER is 51.3. The equivalent figures for the USA and the eurozone are 84.8 and 81.4, respectively. Argentina's CBBER is the fifth highest of the countries surveyed in Latin America, exceeded by Brazil, Chile, Mexico and Colombia. The CBBER highlights the factors that are holding back Argentina's banking sector. One is the relatively low level of per-capita GDP (exacerbated by the uneven distribution of income). Another is a moribund bureaucracy and the pressing need for labour market reform. However, the most important constraint is the volatility of the economy over the long term. This is, to be fair to the Argentine authorities, largely the result of external risks and challenges, in addition to domestic inflationary factors.

In general terms, the Argentine economy is in much better shape than is has been for many years. While GDP is not growing at the heady rates of the early 1990s (7% growth 1991-1994), the benefits of floating the peso are truly starting to be felt throughout the economy. However, the country's foreign debt is still a pressing, unresolved issue – but, consistent with the old adage, if you owe the bank US$1000, it's your problem, but if you owe the bank US$140bn, it's the bank's problem.

While Carlos Menem's government is remembered for many reasons, it did liberalise trade, privatise many state businesses and cut red tape in a bid to foster industrial growth. It is hoped that the Fernández government, free of a currency pegged to the US dollar, can achieve as much.