The Central Bank reduced some of the restrictions for the access to the foreign exchange market for investments purposes

On May 17, 2007, the Argentine Central Bank (the “Central Bank”) enacted Communication “A” 4669 which authorized from May 21, 2007 to December 31, 2007, the purchase of foreign currency in the foreign exchange market (the “MULC”) for investment purposes in excess of the US$ 2,000,000 per calendar month limit provided that the funds are allocated in the subsequent year to pay imports, dividends and profits or to make direct investments outside Argentina.

Access to the MULC for investment purposes

Pursuant to Communication “A” 3722, as amended, Argentine residents can purchase foreign currency in the MULC and transfer it abroad to make investments outside Argentina up to the higher of the aggregate amount of US$ 2,000,000 per calendar month or the aggregate amount paid as export duties plus three times the amount paid to the tax authorities as tax on debits and credits during the immediately preceding calendar month. The concept of “investment” includes, inter alia, real estate investments made abroad, portfolio investments (including bank deposits, and purchases of shares, bonds or other financial investments made abroad), capital contributions and other investments made abroad by Argentine residents.

This Communication exempted from the above limit purchases of foreign currency in the MULC for portfolio investment purposes provided that the funds are applied -within 360 days following the date of access to the MULC - to make payments to non-Argentine residents of import of goods, profits and dividends and making direct investments abroad.

Such transactions will be subject to the following limitations:

(a)   Import transactions: no limit applies.

(b)   Profits and dividends: the amounts transferred abroad for such purpose shall not exceed the higher of the following: (i) the amounts paid as profits and dividends to non-Argentine residents and ADRs the previous year, or (ii) the total amount payable to non-Argentine residents and ADRs as of the current year according to quarterly audited financial statements of the company.

(c)   Direct investments abroad: the amount transferred abroad for such purposes shall not exceed the equivalent in U.S. Dollars to 30% of the net worth of the company (deducting for such purposes the participations in local and foreign companies and other portfolio investments abroad) resulting from the last annual audited financial statements of the company.

In the case of (b) and (c), the funds allocated to purchase foreign currency must not result from a foreign indebtedness incurred by the company. The Central Bank deems that this requirement is complied with if the company has not incurred in foreign financial indebtedness (except for those granted by International Organizations) in a period of 60 days prior, and 30 days after, the access to the MULC.

Argentine residents using this regime must appoint a financial entity to follow-up and supervise compliance with the above regulations and inform to the Central Bank any breach of foreign exchange rules.

Further, upon applying the funds to make payments to non-Argentine residents of import of goods, profits and dividends and making direct investments abroad, the financial entity must execute a foreign exchange form indicating the allocation of the investments to each purpose. After the term elapses, amounts not allocated to those purposes must be repatriated within 20 business days.