The Central Bank Continues Lifting Foreign Exchange Control Regulations

On December 28, 2015, the Central Bank of Argentina (“BCRA”) issued Communication "A" 5861 and abrogates Communication "A" 4864 of 2008, which provided the mandatory prior authorization of the BCRA for financial institutions in order to access the Foreign Exchange Market ("FX Market") for the purchase and sale of securities in self-regulated Securities Exchange Markets. Prior authorization was required for their own transactions or for covering transactions conducted between residents and non-residents, when it was not possible to prove that the securities traded had remained in the portfolio of the seller for at least 72 business hours, from the date of settlement of the transaction which resulted in the incorporation of the securities to the portfolio of the seller.

Consistent with this modification, on December 29, 2015, the Argentine Securities Exchange Commission (Comisión Nacional de Valores), through the General Resolution No. 651 and the securities market known as Mercado Abierto Electrónico, through Circular No. 136/2015, abrogated the regulation requiring the minimum holding period of 72 business hours.

However, although the minimum holding period of 72 business hours has been abrogated, Press Releases No. 48,496 of March 21, 2006 and No. 48,498 of March 22, 2006, issued by the Central Bank (the “Press Releases”) continue in force. Through the Press Releases, the Central Bank seems to have considered that transactions including the purchase and sale (or viceversa) of securities constitute a non-separable single unit aimed at implementing a cross-border transfer of funds in violation of Law No. 19,359 (as restated by Decree No. 480/1995, as further amended) if they have the following characteristics: (i) the purchase and the sale of the securities occur simultaneously (regardless of whether they are effected through more than one financial intermediary), and/or (ii) as a result of them, there is no change in the ownership of securities by the buyer and the seller.

The Press Releases also state that “(…) whenever pesos are held in the country and foreign currency is requested abroad, and viceversa, the only possible channel within the country’s applicable legislation is effecting a transaction through the local foreign exchange market, in accordance with the applicable legislation (…)”. Even if the Press Releases do not constitute a formal regulation and therefore, they are not binding, they do indicate the position of the Central Bank on this matter.

Payment schedule for services rendered prior to December 16, 2015 - Exclusion

Furthermore, Communication “A” 5861 excludes the following transactions from the payment schedule and the quantitative limitations to access the FX Market as set forth in paragraph 17 of Communication "A" 5850:

1. National or local public debts and/or debts from companies controlled by the national public sector.
2. Operations covered by letters of credit or guaranteed notes issued or granted by local financial institutions until December 16, 2015.
3. Debts owed to International Organizations or Official Credit Agencies and/or guaranteed by them.
4. Reinsurance prime payments to be made abroad, conducted under the provisions of Annex to Communication "A" 5264, as amended by Communication "A" 5377.
5. Fees and expenses for banking operations and other services rendered to authorized entities for FX operations, which are essential to the development of their pursuits.

Services rendered to non-resident travelers

Communication "A" 5499, as amended by Communication "A" 5539, was also abrogated. This communication established restrictions to access the FX Market for transport and local tourism companies for the purchase of foreign currency to pay services rendered to non-resident travelers.

New direct investments

For new direct investments transferred and settled in the FX Market after December 17, 2015, non-residents will have access to the FX Market to repatriate them without requiring prior approval of the BCRA.

In cases of repatriation of capital reductions or irrevocable contributions, Communication “A” 5861 introduced some amendments, which were further amended on February 4, 2016 by the BCRA through Communication "A" 5899. For more information about Communication "A" 5899, please refer to "Exchange Regulations – Relaxation of Certain Rules Related to the Inflow and Outflow of Foreign Currency" published in this edition of Marval News.