Decree 1722 Mandates Repatriation of Export Proceeds

Decree 2581/64 (04/10/1964) imposed on all Argentine exporters the obligation to transfer into Argentina the foreign currency export proceeds and sell them (“Mandatory Repatriation”) in the Argentine Foreign Exchange Market (“FX Market”). However, Decree 530/91 (03/27/1991) abrogated said obligation.
On 05/19/1993, Act 24,196 (“Mining Investment Act”) established incentives to favor mining activities. Its main benefits are tax stability for 30 years, a 3% limit to mining royalties and several tax deductions. Tax stability is also applicable to foreign exchange and tariff systems, except for foreign exchange parity and reimbursements, refunds and/or returns of taxes related to exports. Since the Mining Investment Act was enacted, many mining companies obtained the tax and foreign exchange stability, and therefore, were not subject to Mandatory Repatriation.
On 12/05/2001, Decree 530/91 was vacated by Decree 1606/01 (12/05/2001), and Decree 2581/64 recovered its effects. Therefore, Decree 1606/01 reinstated the generic obligation for Argentine exporters to transfer into Argentina their export proceeds. However, Decree 1638/01 (12/11/01) provided that those activities which were granted a special exemption from Mandatory Repatriation through a law, a contract with the Federal government or decrees dated earlier than this Decree, will not be required to comply with such obligation. Due to the fact that some mining companies obtained the benefits granted by Act 24,196, Decree 417/03 (02/27/2003) established that mining companies, which had obtained fiscal and foreign exchange stability under the Mining Investment Act during the period when Decree 530/91 was enforceable, were exempted from the Mandatory Repatriation obligation imposed by Decree 2581/64.
In addition, by means of Decree 753/04 (06/17/2004), and in order to avoid (a) special treatment for mining activity regarding the exchange regime applicable to companies under Decree 417/03; (b) free availability of foreign currency; and (c) foreign currency resulting from external financing for the development of mining activities within the country and for export; the Argentine Executive Branch exempted from Mandatory Repatriation established under Decree 2581/64, those mining companies who, after such decree became effective, obtained the benefits established under Section 8 of Act 24,196 as amended.
On 10/25/2011 the Argentine Executive Branch issued Decree 1722/2011, re-establishing Mandatory Repatriation for mining companies (including those protected by the fiscal and foreign exchange stability established by the Mining Investment Act).
The Government’s rationale for modifying the foreign exchange regime is that (a) circumstances which gave place to the enactment of the exemptions have changed; and (b) equal treatment should be given to all productive activities (many other activities are subject to Mandatory Repatriation).
Under said decree, mining companies are compelled to transfer into Argentina and sell for Argentine pesos in the FX Market the foreign currency proceeds derived from their export transactions within the applicable terms.