Further flexibilization of exchange controls

The Central Bank has (i) relaxed the requirements for mandatorily liquidating into Pesos export proceeds, also allowing the payment in advance of imports regardless of their due date; (ii) increased the amount that individuals and companies may acquire in the Foreign Exchange Market, for treasuring purposes, without requiring the Central Bank’s prior consent; and (iii) eliminated the need of its prior consent for payments of principal on financial debts to non-residents from private sector non-financial entities and financial institutions.

Below, we briefly describe the latest amendments introduced by the Central Bank on this subject:

a. Imports and exports:

i. The period to liquidate into Pesos export proceeds derived from exports of goods and services is increased from 30 to 90 working days (additional to the period for repatriation of the foreign currency). This is applicable to new exports and to exports which period for liquidation has not yet expired.

ii. The obligation to sell export proceeds to the Central Bank is eliminated. However, such obligation remains for amounts that were not liquidated into Pesos in due course, and does not apply to amounts which should have been liquidated into Pesos, prior to or on, February 1st, 2002 (Communications “A” 3473 and “A” 3608).

iii. Advance payment to non-residents of debts for imports of goods, regardless of the agreed due date, is authorized. The Central Bank determines that such debt will only be considered “debts for imports of goods” as from the shipment date.

b. Payments of principal and interests to non-residents:

i. Local governments (provinces, municipalities and the Government of the City of Buenos Aires) are authorized to pay principal of and interest on debt securities and financial debts without the Central Bank’s prior consent.

ii. The payments of principal of financial debts to non-residents from private sector non-financial entities and financial institutions does not require anymore the Central Bank’s prior consent. This requirement was established by Article 5 of Communication “A” 3471. The new regulation is also applicable to the private sector’s debts, as well as to certain public entities. However, the Central Bank’s prior consent requirement still applies to those financial institutions which have adhered to the voluntary procedure to cancel the Central Bank’s loans (‘matching’).

iii. Prior to transferring abroad any payment of principal or interests, financial institutions must confirm that the relevant debtor has informed the debt, if applicable, pursuant to the regime of Communication “A” 3602 and supplementary regulations (information regime related to external debts). Financial institutions must request a sworn statement from the debtor to the effect that payments corresponds to registered debts. Financial institutions must also require any necessary documentation to confirm that the transaction is genuine in amount and concept. These obligations are applicable for all debts, whether financial or not. Debts for import of goods originated and cancelled within a three-month term, do not need to be informed.

c. Foreign Exchange Market:

i. International Organizations do not need Central Bank’s authorization to purchase foreign currency

ii. Individuals and legal entities domiciled in the Republic of Argentina still require the Central Bank’s prior consent to purchase foreign currency under the following concepts: (i) real estate investments abroad, (ii) loans granted to non-residents, (iii) direct investments abroad of residents, (iv) portfolio investments abroad of individuals, (v) other investments abroad of residents, (vi) portfolio investments abroad of legal entities, (vii) purchase of foreign currency for treasuring in Argentina, and (viii) purchase of travelers checks.

iii. However, Central Bank’s prior consent is not required when, in a calendar month period, under all the above-mentioned concepts, and taking into account all entities authorized to transact foreign exchange, (i) the purchased amount does not exceed US$ 500,000 (the previous amount was US$ 300,000), or when (ii) the purchased amount, in Pesos, does not exceed the total amount paid to the Argentine Tax Authorities, on the calendar month prior to the one immediately preceding, for exporting rights plus three times what have been paid for the tax on credits and debits on checking accounts.

For a better understanding of the evolution of Central Bank’s regulations on this matter, we suggest you read Marval News #14 – February 28, 2003 (in particular, the following articles: “Payments of financial debts to non-residents” and “Freeing of dividends and debt payments to non-residents”) and the article “Matching regime for the cancellation of Central Bank financing” in this edition of Marval News.

This article is based on Argentine law as currently in force. Given the dynamics of regulations governing these issues we suggest verifying the legal framework from time to time, as the amendment of such regulations is a probable event.