Amendment to regulation of pre-export financing credit lines

On February 9, 2006, the Argentine Central Bank issued Communication “A” 4493 which amends with effect as from February 10, 2006 paragraphs (i) and (iv) of Section 6 of Communication “A” 4443 dated November 22, 2005, which regulates export related financings granted to Argentine exporters (please see our article about “Amendment to regulations regarding financing to exporters” in Marval News # 46 of December 22, 2005).

Among other provisions, Communication “A” 4443 regulates that repayment abroad by Argentine exporters of advances and pre-export financings converted into pesos through the local foreign exchange market must be made out of export proceeds from shipments made within the maximum terms established by the Central Bank. Such maximum terms are of 90, 180, 365 or 540 days, depending on the goods exported, counted as from the date of settlement of the financing proceeds in the local foreign exchange market.

Section 6 of Communication “A” 4443 regulates the requirements to be met by medium or long term pre-export financing credit lines granted by residents of foreign countries in order to permit that the repatriation to Argentina of the export proceeds and their conversion into pesos through the local exchange market be deemed as a new disbursement under the credit line. This would allow that the maximum regulatory term to make shipments to be applied to repayment of the financing starts running again as from that date, as would the funds applied to the repayment of the financing and the foreign creditor would have made a newdisbursement.This, in practice, enables an extension of the otherwise applicable maximum regulatory repayment term of the facility.

Communication “A” 4493 amends two of the requirements to be met by the lines of credit, related to the lender qualification and the documentation to be filed with the facility local follow up bank:

a) Lender: originally paragraph (i) of Section 6 only comprised international organizations or foreign banks with a representative registered before the Central Bank within the regulated group of foreign creditors. Communication “A” 4493 now also includes within said group foreign banks without a representative in Argentina registered before the Central Bank and foreign credit agencies.

b) Documentation to be filed with the facility local follow up bank: originally paragraph (iv) of Section 6 required that the local financial entity in charge of following up the pre-export financing credit line must have received a sworn statement from the borrower and the local representative of the foreign lender stating that the master credit line agreement complies with the requirements set forth by Section 6. Communication “A” 4993 modifies this requirement, and now also permits, alternatively to such sworn statement, the filing of a copy of the master credit line agreement with the required formalities and certifications.

The rest of the following requirements set forth by Section 6 of Communication “A” 4443 have not been amended and thus remain in force:

(i) Term: the credit line must be committed for no less than 3 years.

(ii) Termination or acceleration: the facility agreement must provide that the lender may only terminate or accelerate the financing in case of breach by the exporter of representations, warranties, covenants and other obligations of the exporter under the agreement.

(iii) Foreign collection account: the agreement must provide that part of the export proceeds of the exporter will be routed through a collection account of the borrower outside Argentina identified in the agreement, in order for the exporter to prove compliance with its export activity for the benefit of the lender.