Argentina’s CNV focused on reforms for the good time


Rob Dwyer
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The government is pushing structural reforms despite the economic crisis; new tax regulations aimed to bring money onshore.

Despite the economic crisis facing Argentina, the government continues to push a reform agenda to improve the functionality of the capital markets.


Marcos Ayerra,

“We haven’t seen a relevant impact from these reforms yet, due to the crisis, but we are fostering an environment that will lead to much better growth when the economy improves,” says Marcos Ayerra, chairman of the country’s securities and exchange commission, the Comisión Nacional de Valores (CNV).

Ayerra points to a wide range of reforms to securities laws that are designed to remove frictions in capital markets activity – particularly those related to the participation of international investors.

“There was a 13.5% withholding tax on the sales proceeds for any foreigner selling shares in Argentina, regardless if the trade had made a profit or loss – this was an incredible inhibitor,” Ayerra tells Euromoney.

“Because of this tax and FX restrictions, 90% of the trading of Argentine issuers took place abroad. Now that these inhibitors have been removed, we expect local volume to grow significantly.”

International investors

The corporate governance regime has also been changed to enable foreign investors to vote in shareholder meetings, and the creation of onshore accounts has been streamlined and can be established in 15 days.

Ayerra says Argentina ranked third regionally in 2017 by equity placements by Latin American issuers, after Brazil and Mexico.

He adds that there had been a strong pipeline of equity deals coming to the local stock exchange before the 2018 crisis hit, and he expects that these should look to list once the economy returns to growth.

We haven’t seen the positive impact from all these financial reforms yet, but I am sure that will come 
 - Marcos Ayerra, CNV

International investors will also be attracted by the other broader aspects of the May 2018 capital markets law.

For example, the law eliminated the regulation that gave the CNV the ability to intervene in private companies and remove board members. Corporate governance has been upgraded to international standards and was one of the reasons for MSCI to promote the country to emerging-market status.

The CNV has also overseen a swathe of markets reform, including the new regulation of trade repositories that completes the implementation of close-out netting for derivatives following international standards, as allowed by the 2018 law.

“We see an increase in activity of closed-end funds, which were also unlocked by the new law, and we enacted regulation to enhance the capital requirements and compliance standards for intermediaries,” says Ayerra. “As a result, we have fewer and more solid brokers than we had a year ago.”


The country is also modernizing: though small, the domestic capital markets have seen innovation and digitization in recent years.

The CNV has sponsored initiatives that enable small and medium-sized enterprises (SMEs) to access cheaper financing than the bank loan market through the creation of digital mini bonds that link SMEs to the mutual fund industry.

These bonds are backed by financial guarantors to standardize the credit-risk component, and despite the adverse macro conditions, the number of issues is close to 100 and growing.

“The SMEs have been able to switch from short-term bank funding to longer, cheap bond financing and removing this refinancing risk enables these companies to invest in the real economy,” says Ayerra.

“This is creating a virtuous circle for the markets in terms of creating more products and more investors.”

Capital markets

Argentine capital markets have also seen the development of digital securitizations of portfolios originated digitally, using financial trusts.

Ayerra notes that, while significant, the growth of the capital markets will be constrained by the lack of onshore liquidity – as well as the economic recession.

One proposal to increase liquidity has been to re-privatize the national pensions system, Anses. However, Ayerra stated that this is not the strategy followed by this administration.

“The government has decided it is going to rebuild the capital markets and develop liquidity by providing tax incentives to voluntary savings instruments rather than any wholescale reform of the pension system,” he says.

The government has made a very important change by starting to introduce benefits for long-term saving 
 - Senior retail banker, Buenos Aires

To this end, the government has increased in January the pre-tax deduction thresholds that incentivize individuals to invest in the insurance and mutual funds industries, setting also increasing thresholds for 2020 and 2021.

“The government has made a very important change by starting to introduce benefits for long-term saving,” says one senior retail banker in Buenos Aires.

“It’s still only for a very small amount, but the direction the government is taking shows its intention to the market and this is creating an opportunity for banks. As the country normalizes, we will see what happens today in Peru and Chile – with locals sending back the money to invest in the local market.”

To date, the tax amnesty of 2016 has been successful in increasing the amount of funds declared offshore, at $116.8 billion, and raising $9.7 billion in funds for the government, but hasn’t led to any noticeable inflow of funds to the domestic capital markets.

For that the currency needs to stabilize and, despite the introduction of the new monetary policy from the central bank that has led to very high real interest rates, this stability is proving illusive.

The currency has continued to weaken and in early March had passed 41.5 pesos to the dollar; it was at 20.5 pesos to the dollar in April 2018.

“We haven’t seen any flow of funds yet, but we are being disciplined and introducing reforms that are building the institutional frameworks that will enable Argentina to rebuild long-term financing,” says Ayerra.

“We haven’t seen the positive impact from all these financial reforms yet, but I am sure that will come. Capital markets have a role to play, and the actors should transform to be ready to deliver once the economy stabilizes.”