New Rules for the Inflow of Certain Foreign Funds through the Argentine Foreign Exchange Market (Mercado Único y Libre de Cambios)

By means of Resolution No. 657/2013, in force since October 28, 2103, and Resolution No. 661/2013, effective as from November 5, 2103, the Ministry of Economy and Public Finance (the “ME”) provided new exceptions to the provisions of Article 4 of Decree N° 616/2005 which established the requirements for the inflow of foreign funds from private sector financial indebtedness and inflow of funds by non-residents, namely: (i) a minimum term for keeping the funds in Argentina, (ii) that the transaction must be made through the local financial system, and (iii) the establishment of a mandatory, nominative, non-transferable and non-remunerated deposit, of an amount equivalent to 30% of the amount involved in the relevant transaction, for a period of 365 calendar days, and which must be made in U.S. dollars in the country's financial institutions and which may not be used as security or collateral for credit operations of any kind (the "Mandatory Deposit” or “Encaje”) .

Resolution No. 657/2013 sets forth that the Mandatory Deposit, established in Article 4 of Decree No. 616/2005, does not apply to the inflow of own funds through the local exchange market to the extent that such funds are used to purchase local currency for the subsequent payment of tax obligations.

In addition, Resolution No. 661/2013 establishes that the abovementioned requirements do not apply, for the inflow of funds from foreign entities financings to be applied to the installation of industrial and technology equipment into companies established in the country, through the acquisition and subsequent delivery in “leasing” –according to the provisions of Law No. 25,248, as amended, of: (i) equipment that falls within the category of machinery and technology, and (ii) certain vehicles within an exhaustive list, namely: trucks, including the so-called semi tractors, delivery vans, buses, microbuses and buses, their trailers, agricultural machinery including tractors, combines and cranes and highway vehicles. Additionally the Resolution establishes, following the criterion of Resolution No. 365/2005 of the ME, that the inflow of funds from foreign financings should be include an average life of no less than 24 months, including in its calculation payments of principal and interest.

Both Resolutions expressly provide that the Argentine Central Bank (Banco Central de la República Argentina) will verify compliance with the application of funds for the authorized use of proceeds, and that the failure of such specific application would lead to enforcement of the Criminal Exchange Regime Law No. 19,359.

These new exceptions are additional to those provided by Resolution No. 256/2013 of the ME which set forth that the Mandatory Deposit is not applicable in the event of receipt of funds by residents who are used to subscribe instruments provided for in Articles 1 and 2 of Law No. 26,860 of voluntary externalization of holdings of foreign currency in the country and abroad (CEDIN, BAADE and PAADE).