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🇦🇷 Argentina /Economy & Trade

Half of delinquent borrowers were current on their payments two years ago

From La Nación · () Spanish

Translated from Spanish and summarized by DistantNews. Read the original for the full story.

At a glance

Analysis Documents & data Context piece
  • An Econviews report found that half of the nearly 6 million people struggling to keep up with debt payments already had credit and were current two years earlier.
  • Those existing borrowers accounted for 84.4% of irregular debt balances, while borrowers who previously had no debt accounted for 9.9%.
  • The report linked worsening repayment capacity to falling disposable income, higher financial burdens and costly new loans.

The main argument used by Argentina’s government to explain rising loan arrears is challenged by a private report: many of the people now behind on payments were not new borrowers who entered the credit system during its recent expansion.

Econviews analyzed official data from the Central Bank’s debtor database and found that half of the almost 6 million people who had trouble keeping their debts current already had credit and were up to date two years earlier. That group represented 84.4% of irregular balances. Borrowers who had not previously held debt accounted for just 9.9%.

The problem was not new debtors, but what happened to people who already had credit.

· EconviewsThe consultancy’s conclusion about the main source of rising arrears.

“The problem was not new debtors, but what happened to people who already had credit,” the consultancy said. It also found that the average delinquent borrower increased debt, added creditors and sought more money from non-bank lenders before stopping payments. In its assessment, the deterioration accumulated over time rather than appearing suddenly.

Many people took on debt expecting the same thing to happen again. But inflation fell quickly and the real cost of new loans became very high.

· EconviewsThe report’s explanation of why borrowers’ expectations failed.

The report acknowledged that some borrowers took on debt while expecting inflation to reduce the real value of their installments, as it had between 2021 and 2023. But inflation fell quickly, and the real cost of new loans reached between 40% and 55%, according to the report. It said delayed wage growth and formal job losses also weakened households’ ability to pay.

Disposable income, defined as what remains after fixed expenses, fell by more than 20% from 2023, while household financial burdens rose from 9.1% to 24.1% of the wage bill. Bank-credit arrears climbed from below 2% to almost 8% in two years, and non-bank arrears exceeded 30%. The report said one in four debtors now has serious payment delays, with households carrying most of the problem.

Disposable income, what remains after fixed expenses, fell by more than 20% from 2023.

· EconviewsThe report’s assessment of the pressure on household finances.
About this summary

Originally published by La Nación in Spanish. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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