Announcement:
Moody's: New capital markets law in Argentina will bolster economic growth
10 May 2018
Mexico, May 10, 2018 -- Argentina's recently-passed capital markets legislation will help boost economic growth by encouraging new investment and increasing lending by banks, Moody's Investors Service says in a new report.
Moody's points out that these reforms will not change the economy overnight, but by increasing investment they will help fuel long-term growth.
The law makes Argentina's securities regulator look more like the U.S. Securities and Exchange Commission and revokes its power to take over publicly traded firms. These and other reforms, including new tax breaks, will drive investment and create a larger, more diversified pool of securities that companies can use to optimize their capital structures.
The law improves the regulatory framework for securitization of mortgage loan books, enabling banks to increase mortgage lending more rapidly this year. This will help banks securitize their mortgage loan portfolios, which are mostly inflation-adjusted, addressing funding limits that curb lending.
Reforms will increase investment in mutual funds and allow for creation of ETFs and index funds, boosting managed assets industry. Asset managers will gain broad leeway to create and oversee new funds while investors will no longer be double-taxed on income from the funds. Over time, this will invigorate an industry that represents just 4.6% of GDP compared with 21% in Chile and 53% in Brazil.
New rules help smaller companies with funding, supporting economic growth. The law requires smaller companies to issue digital invoices that are akin to commercial paper and can be traded in capital markets. Firms that might not otherwise qualify for bank loans will be able swap their invoices for cash to pay bills, hire workers and invest.
Bigger capital markets are positive for Argentina's government and provinces. Bolstering capital markets will give the federal government and provinces more financing options, allowing them to tap local investors for funding. This will eventually reduce the need to issue foreign debt.
Moody's research subscribers can access the report, "Capital markets law is positive for banks, companies and investors," at
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