Argentina’s Banco de Inversión y Comercio Exterior (Bice) has launched a financing programme to improve the competitiveness of the country’s small and medium-sized companies (SMEs), funded entirely through the capital markets.

Through Primer Crédito PyME, Argentina will finance reconversion and modernisation programmes for various sectors involved in improving the country’s competitiveness in global markets.

Individual loans will be between Ps500,000 (US$34,000) and Ps5mn (US$341,000) and have a maximum tenor of seven years, with interest rates of up to 16%.

Bice issued Ps1bn (US$68.2mn) of notes on the Buenos Aires stock market at the start of August to fund the programme – its first attempt at raising financing in the capital markets since Argentina’s renegotiation of its sovereign bond repayment.

The offer, which closed on August 10, included Ps509mn (US$34.7mn) of 18-month bonds destined exclusively to the financing of SMEs, and Ps491mn (US$33.5mn) of 36-month notes dedicated to other segments. It was handled by Banco Galicia and Banco Santander Río.

Bice plans to raise up to US$150mn in bonds now that is has access to capital markets.

Speaking to reporters upon launching the facility, the bank’s president, Pablo García, said its first bond issuance was “a very important step” and that the market showed confidence in Bice’s “new direction”.

The country was closed to capital markets from the time it defaulted on its sovereign debt in 2001 to April 2016, when it reached an agreement with a small group of bondholders that had refused the new repayment terms negotiated by the country following the default.

Edward Glossop, emerging market economist at Capital Economics, tells GTR: “The response to Argentina’s return to capital markets has been extremely positive, and the economic outlook obviously rose as a result of the bond issuance. The increase in capital inflows has helped fund the country’s current account deficit, and that’s been a key factor behind the reduction in its vulnerability to external shocks.”

He explains that emerging markets typically run current account deficits in order to grow at a faster pace, but that Argentina, being locked out of capital markets, had been running only small deficits or even surpluses in recent years. In Q1 2016, Argentina’s current account deficit was equivalent to about 3.5% of GDP.

Glossop adds that the slight decline in investor confidence observed in recent weeks is nothing to be worried about. “Some of the [positive investor] sentiment has faded a little bit on the basis that progress on the fiscal side has been a bit slower than expected and that the recession in the real economy has deepened. Our indicators suggest that the recession was quite deep in Q2 and will continue in Q3,” he says.

“Those factors have taken a bit of the gloss off at the moment, but it’s important to bear in mind that this was to be expected. It was never going to be that Macri could come in and tighten monetary and fiscal policy and escape without a recession.”