The Central Bank of the Republic of Argentina organizes exchange control regulations regarding futures, forwards and other derivative transactions

By means of this Communication, the Central Bank of the Republic of Argentina (hereinafter, the “Central Bank”) has organized, unified and harmonized the exchange controls regulations related to execution and cancellation of derivative transactions.Communication “A” 4285 (hereinafter, the “Communication”) replaces Communication “A” 4049 and its amendments (Communications “A” 4077, “A” 4164, “A” 4236 y “C” 36778, “C” 36924, “C” 37293, “C” 38203).

According to the Communication, as from January 18, 2005, the regulation in force regarding futures, forwards and other derivatives transactions, is the following:

a) As regards transactions performed and liquidated within Argentina, the Communication sets forth that execution and cancellation of future transactions in regulated markets, forwards, options and any other kind of derivative which are liquidated within Argentina by set-off in local currency, are not subject to the prior fulfillment of exchange control requirements.

b) As regards transactions performed with a foreign counterpart, the Communication establishes that the prior consent of the Central Bank regarding execution and access to the foreign exchange market for the payment of premiums, creation of encumbrances and cancellations will not be required for the following future, options, options and other derivative transactions:

(i) those performed by the financial system for the purpose of acquiring options for the hedge of term deposits with variable remuneration collected pursuant to requirements and means provided for in subsection 2.5 of the regulations of “Deposits and term investments”, provided that the required approval set forth in subsection 2.5.3 of such regulation is obtained;

(ii) hedge(“cobertura”)agreements between foreign currencies performed by financial entities for their own active positions (posición activa) forming part of their general exchange position (posición general de cambios);

(iii) hedge agreements between foreign currencies and of interest rate performed byfinancial sector and private non-financial sector entities, in connection with their obligations with a foreign counterpart, provided that they are declared and validated pursuant the informative regime set forth in Communication “A” 3602 as amended

(iv) hedge agreements of commodity prices, performed by local exporters and/or importers as long as they correspond exclusively to a specific hedge used in Argentine foreign trade;

(v) external financing transactions made under “Repos” (reverse repurchase agreement transactions with securities), as long as they are agreed for terms no shorter than 180 days. Cancellation of these transactions requires validation according to Communication “A” 3602 as amended.

c) The rest of the futures, forwards, options and other derivatives transactions undertaken with a foreign counterpart require the Central Bank’s previous consent, not only for their execution but also for their access to the foreign exchange market for their subsequent cancellation.

d) The Communication expressly provides that it is a condition to access the Single Free Exchange Market (Mercado Único y Libre de Cambios, or “MULC”), as regards transactions described therein, to undertake the commitment to enter and liquidate with the MULC, within the following 5 business days of the transaction’s closing, the funds arising in favor of the local client as a result of such transaction or as a result of the liberation of the created guarantee funds. In case of a breach of the above-mentioned condition, the entity that gave access to the market shall file the appropriate report with the Non-Financial Entity Control Management (Gerencia de Control de Entidades No Financieras), in case of non-financial private transactions, or with the Financial Entities Supervisory Management (Gerencia de Supervisón de Entidades Financieras), in case of transactions of the financial sector.

e) The transactions made with a foreign counterpart with access to the MULC for the hedge of transactions described in point b), can only be made:

(i) with institutionalized markets in international financial markets;

(ii) with foreign banks the headquarters or holding Company of which must be located in any of the countries which are members of the Basel Committee on Banking Supervision and have an international rating of at least “A” granted by one of the rating agencies registered with the Central Bank;

(iii) with financial entities duly authorized for this kind of transactions, as long as they are controlled by banks which accomplish the requirements of point (ii) above.