New regulations regarding financing to exporters

On September 8, 2005, the Central Bank of the Republic of Argentina (“Central Bank”) issued Communication “A” 4415 establishing new requirements for indebtedness of Argentine residents for advances and pre-export financings. On September 15, 2005, the Central Bank clarified the referred regulation by means of Communication “C” 42998 and issued Communication “A” 4420 regulating a new regime for the financing of investment projects aimed at increasing the export capacity.

1.    New advances and pre-export financings

Communication “A” 4415 provides that from September 9, 2005, in order for new indebtedness to qualify as advances and pre-export financings (exempted from the mandatory deposit and the minimum waiting period), and be transferred into Argentina and converted into pesos through the local exchange market as such, the following conditions need to be met:

a)   the exporter must have contracts or purchase orders enforceable against foreign importers, the compliance which will allow payment of the services of the new debt pursuant to shipments made within a maximum period of 60, 120 or 365 days, depending on the goods exported; and

b)   the outstanding debt on September 8, 2005 with non-argentine residents or local financial entities under advances and pre-export financings must be backed by contracts or purchase orders enforceable against foreign importers of goods or by shipments already made the proceeds of which will be applied to repay the debt.

Compliance with the requirement provided for in b) above must be certified by: (i) the local financial entity in charge of the follow up of the advances and foreign pre-export financings, or (ii) the creditor in case of pre-export financings granted by local banks. In the case of pre-export financings, financial entities must state whether the indebtedness has specific allocation to future shipments.In order to issue the referred certifications, the financial entity must verify the agreement or purchase orders and receive a sworn statement from the exporter indicating that such agreements or purchase orders will not be filed with another financial entity for the same purpose.

The certifications regarding the outstanding debt on September 8, 2005 must be filed with the entity through which the new advance or pre-export financing is converted into pesos in the local exchange market, together with a sworn statement by the exporter indicating the total amount of the debt under such concepts as of that date.

If the above referred requirements are not met, prior Central bank approval is needed in order to transfer the proceeds of new indebtedness into Argentina and convert them into pesos through the local exchange market as an advance or pre-export financing.

Disbursements under advances and pre-export financings which have not been transferred into Argentina and converted into pesos through the local exchange market as of September 8, 2005 and which do not comply with the above referred requirements, may be retransferred to the foreign creditor until October 8, 2005 or may be transferred in to Argentina as financial loans.

2.    Repayment of outstanding advances and pre-export financings

Pre-export financings outstanding as of September 8, 2005 which are not explicitly tied to shipments with a specific destination (that is, to a market, client or for the export of specified goods) must be repaid before new pre-export financings entering into the local exchange market as from September 8, 2005.

When or once all debts for pre-export financings outstanding as of September 8, 2005 have been explicitly tied to shipments with a specific destination, the export proceeds must be allocated to cancel, firstly, debts for advances and pre-export financings outstanding on September 8, 2005 granted to finance shipments with the same specific destination.

If advances and pre-export financings outstanding as of September 8, 2005 are not repaid with export proceeds abroad, their repayment will be subject to the regulations applicable to the repayment of financial debt.

3.    Repayment of new advances and pre-export financings

The repayment of advances and pre-export financings that were converted in to pesos through the local exchange market as from September 9, 2005 must be made out of export proceeds from shipments made within the maximum term established by the Central Bank. The maximum term for such shipments is 60, 120 or 365 days, depending on the goods exported, such term to be counted as from the date of conversion into pesos of the proceeds of the indebtedness through the local exchange market.

Repayment of advances and pre-export financings not made out of the proceeds of exports shipped within the referred maximum term, is subject to regulations applicable to the repayment of financial loans (including minimum waiting period and mandatory 30% deposit). Therefore, export proceeds out of shipments made after the maximum term has elapsed may not be applied abroad to the repayment of new advances or pre-export financings.

4.   Financing of investment projects aimed at increasing the export capacity

As from September 16, 2005, export proceeds may be applied directly abroad to the repayment of services of principal and interest under new financial indebtedness with foreign creditors (including the issuance of securities abroad, financial indebtedness with international organizations, official credit agencies, multilateral banks and other foreign banks) and financial indebtedness with local financial entities denominated in foreign currency (including debt backed by foreign lines of credit and other sources allowed by applicable regulations), provided that all of the following requirements are met:

a)   the exporter must use the proceeds of the new financing to finance new investment projects in Argentina aimed at increasing the production of goods the majority of which are to be exported. This condition will be considered complied with if, during the three year period as from the finalization of the project, no less than two thirds of the increase of production due to the project is exported;

b)   the average maturity of the debt (taking into account both principal and interest) must be no less than three years and no less than 50% of the principal must be due after the date of finalization and beginning of operation of the project in whole;

c)   export proceeds may be maintained abroad in order to make payments under the financing and/or may be affected as security of the financing under this regime for an amount not exceeding 125% of the services of principal and interest due within the corresponding calendar month and the following six calendar month period.Funds in excess of such limit must be transferred into Argentina and converted into pesos through the local exchange market within the applicable maximum terms;

d)   the exporter must appoint a local financial entity in order to: (i) verify that the project complies with the requirements applicable under this regime, (ii) follow up the development of the project and its financing, (iii) follow up the shipments that are applied to the repayment of the financing, (iv) follow up the security of the financing and the local special accounts where the disbursed funds are to be maintained and (v) periodically inform the Central Bank in accordance with the special information regime to be indicated by the Central Bank; and

e)   no less than 45 days or more than 180 calendar days before the date of the first disbursement, a note must be filed with the Central Bank informing about the project and the financing in accordance with a form to be provided by the Central Bank. The financial entity appointed to follow up the project must certify that the project complies with the above referred requirements and, to such end, may obtain the professional opinions it deems necessary.

Exporters may access the local exchange market in order to reconvert the proceeds of the financing into foreign currency.Such funds (and their interest) must be deposited and maintained in a special account in the name of the exporter with the local financial entity appointed to follow up the project and may only be applied to make payments locally or abroad for the acquisition of goods and services directly affected to materialize the project.

Financings under the referred regime are exempted from the mandatory 30% deposit requirement. The conversion into pesos of funds deposited in the special account in order to make payments under the project will not be considered part of the US$ 2,000,000 monthly maximum amount that Argentine residents may reconvert into pesos without the need of making the mandatory 30% deposit as provided for in section 1.b of Communication “A” 4377. The other regulations applicable to financial loans are applicable to the financings under the referred regime (i.e. minimum waiting period, obligation to transfer the proceeds of the loan into Argentina and convert them into pesos through the local exchange market, requirements for repayment and recording of transactions).