"It's a serious economic policy mistake": Banks challenged Congress over a law that would affect SME financing.

The Argentine Banking Association (ADEBA), the Argentine Banking Association (ABA), and the Association of Specialized Banks (ABE) questioned the government of Javier Milei over a modification to the tax regime approved by the National Congress on July 10. The various entities described the project as "a serious economic policy error."

The project they referred to involves eliminating tax exemptions for contributors to Mutual Guarantee Societies (SGRs), which would represent a blow to the financing of SMEs , which used these funds to offset increases in salaries.

"This legislative decision negatively impacts one of the most efficient, inclusive, and federal instruments for financing small and medium-sized businesses, by affecting the funding of the SGRs, which have proven to be a key tool for facilitating access to bank credit throughout the country," the banks stated in a joint statement.

They then asserted that SGRs " represent an essential bridge " between SMEs and the financial system. "It not only expands the range of companies with access to credit, but also improves financing conditions by reducing the requirements and provisions for potential defaults," they emphasized.

Along the same lines, they added that this system "functioned for years as an efficient and transparent public-private mechanism, generating positive impacts on productive activity and tax collection." "The associated fiscal cost is largely offset by the economic benefits generated, especially in terms of investment, formalization, and growth of these companies, which in turn translate into higher tax revenues from national taxes, such as VAT, IIBB, Income Tax, etc. "

The banks analyzed the impact of the measure and considered the potential adverse effects of implementing it. "Modifying this regime without an adequate technical and impact analysis process represents a serious economic policy error and an institutional setback that weakens the predictability of the rules of the game," they stated.

To conclude the statement, the entities reaffirmed that the SGRs "are a relevant instrument for sustaining and promoting this process, and their defunding or weakening will directly affect investment, employment, and competitiveness throughout the country." "From ABA, ABE, and ADEBA, we urge the Executive Branch and Congress to take the necessary legal actions, within the framework and powers, to preserve one of the pillars of productive financing in Argentina," they concluded.