The direct and indirect impact of bank privatization and foreign entry on access to credit in Argentina's provinces

Privatization and increased foreign ownership transformed the Argentine banking sector during the 1990s. While both improved sector efficiency, there was concern that they might reduce access to credit outside of Buenos Aires. The results in this paper suggest that these fears were exaggerated. Provinces that privatized their banks suffered only temporary reductions in credit associated with cleaning the portfolio of the privatized banks. Typically, growth in lending by the privatized entity and by other banks restored credit to pre-privatization levels within a few years. In addition, increased foreign ownership coincided with more, not less, lending outside of Buenos Aires.