May 22, 2013
Supercard or supercad?
Domestic Trade Secretary Guillermo Moreno “supercard” proposal of a monopolistic supermarket credit card via the Banco Nación has been baffling economic experts and raising huge question-marks over the course of government policy ever since the idea was first floated 10 days ago (with a Malvinas referendum and the bombshell news of an Argentine pope to distract attention since then). Opinions are divided as to whether to take the initiative at face value or not. For now it looks as if the aim is muscling down bank commissions (from three percent to the one percent of Moreno’s “supercard”) rather than actual implementation. But in that event the same effect could be achieved far more directly by ramming a bill through a tame Congress — even if going against the grain of a Kirchnerite presidency, there are also some highly effective market mechanisms. At the other extreme there are fears of implementation with not so much the aim of easing supermarket credit in mind as forcing an entire nation to become Banco Nación clients — with both the Central Bank and social security funds close to exhaustion, the state would thus turn Banco Nación into a new cash cow by forcing all consumers to place their money there.
If that is indeed the aim, the end result might well be similar to the currency and import curbs — achieving the immediate objective (improving the balance of payments in the case of the curbs) but at an excessively high economic, political and electoral cost. A scheme designed to lower prices via commissions might well slash consumer sales far more. Whereas supermarkets of any size can negotiate the bank commissions well below three percent (while smaller ones, especially the Chinese, are expert at cash-only transactions and evasion), a monopolistic “supercard” would severely crimp consumer credit. While Banco Nación credit limits are notoriously low, Argentine middle-class families are surprisingly sophisticated in defending their purchasing-power by maintaining various credit cards and juggling limits, discounts, etc. — one single government credit card bringing all family finances into the open might well feed the underground economy, as well as cutting purchasing-power. And economic frustration must surely lead to political discontent.
Before going through with this move, the government needs to weigh the massive gains in state power by effectively nationalizing the 18-million-strong consumer credit market via Banco Nación against the equally huge economic and political risks in an election year.