Bankruptcy and company closures were among the unwanted side effects of the worldwide quarantine policies tIntroduction: an unintended effect of the pandemic
One unintended consequence of the lockdowns implemented to combat COVID-19 was the bankruptcy and closure of many firms. This effect was especially severe in countries with limited access to credit. In those contexts, the economic rules are different.
In economies where credit flows more freely, firms can finance periods of low revenue through bank loans. As a result, they are able to survive the downturn phase of the business cycle. When recovery arrives, they can then repay their debts.
Credit constraints and firm closures in Argentina
By contrast, in countries where credit is scarce or nearly nonexistent, firms depend heavily on self-financing. Therefore, when businesses lack prior savings, it becomes difficult to survive a prolonged drop in income. A lockdown lasting several months can be enough to force them out of the market.
This type of credit constraint has been widely documented in Argentina. In comparative terms, domestic credit to the private sector as a share of GDP remains low, limiting access to formal financing for firms (CEIC Data, n.d.).
This situation closely reflects Argentina’s experience during the pandemic. Since the start of lockdowns in mid-March 2020, an estimated 50,000 firms have disappeared over the past decade, with COVID-19 accelerating this trend (Quesada, 2023). Moreover, this figure represents close to 10 percent of all registered firms, based on the most recent available data from 2017.
SMEs and the pandemic: who exits first?
Firm closures affect more than employment and poverty levels. They also harm consumers and small producers. In particular, they place pressure on small and medium-sized enterprises, or SMEs, that managed to survive the lockdown period.
At this point, a reasonable assumption is useful. In general, the firms most affected by falling revenues and limited access to credit are the smallest ones. Large firms, by contrast, have more tools to withstand economic shocks. For example, they are more likely to obtain financing at both the domestic and international level. They also tend to have stronger collateral and greater liquidity. These advantages allow them to build reserves and rely on self-financing.
This asymmetry in access to finance between SMEs and large firms has been widely documented in international research on credit policy and firm structure (Organisation for Economic Co-operation and Development [OECD], 2025).
If this pattern holds, then the first firms to exit the market are, unsurprisingly, the smallest ones.
Market concentration and rising market share
What happens when a firm closes? Markets exist independently of individual firms. When one company disappears, its customers do not vanish. Instead, demand is redistributed among the remaining firms.
As a result, each surviving firm increases its market share. However, this redistribution is rarely even. Large firms are often better positioned to absorb new customers. Consequently, they capture a disproportionate share of the displaced demand. Over time, their market share grows faster than that of smaller competitors operating in the same market.
Market power and monopoly power in Argentina
This process tends to produce more concentrated markets. There are fewer firms, and each controls a larger share of total demand. In other words, market concentration in Argentina increases.
At the same time, large firms benefit disproportionately. Over time, both consumers and small producers become more exposed to their market power. In the extreme, this dynamic can move markets closer to monopoly power in Argentina. More realistically, it leads to oligopolistic structures with limited competition.
Conclusion: economic costs beyond the short term
In summary, the lockdowns used to combat COVID-19 did more than generate high levels of unemployment and poverty. They also produced structural effects on competition. From this perspective, the long-term outcome may be an economy with greater concentration, increased market power for large firms, and lower overall welfare for everyone else.
Monopoly flickr photo by John-Morgan shared under a Creative Commons (BY) license
Further Reading
To broaden perspectives on the structural economic constraints that shape firm survival, market concentration, and monopoly power in Argentina, as well as the broader macroeconomic context in which the COVID-19 pandemic unfolded, readers may also consult:
- Macroeconomic Stability and Poverty in Argentina — an examination of how chronic macroeconomic instability, inflation, and financial constraints affect households and firms unevenly, reinforcing structural vulnerabilities over time.
- Economic Management During the Pandemic in Argentina — a critical assessment of the policy responses adopted during COVID-19 and their effects on employment, productive activity, and business survival.
- Argentina’s Economic History — a long-run perspective on recurring economic cycles, crises, and institutional constraints that have shaped access to credit, investment patterns, and the structure of the productive sector.
Referencias
CEIC Data. (n.d.). Argentina AR: Domestic Credit: to Private Sector (% of GDP). Retrieved January 14, 2026, from https://www.ceicdata.com/en/argentina/bank-loans/ar-domestic-credit-to-private-sector–of-gdp
OECD (2025), Boosting Business in Regions: Easing Administrative Burdens and Financing Constraints, OECD Regional Development Studies, OECD Publishing, Paris, https://doi.org/10.1787/396cc7c2-en.
Quesada, R. (2023, September 29). En la última década cerraron más de 50.000 empresas. El Cronista. Retrieved January 14, 2026, from https://www.cronista.com/negocios/en-la-ultima-decada-cerraron-mas-de-50000-empresas/