Payments of financial debts to non-residents

In the first place, the payment of interests on financial debts to non-resident creditors, carried out no more than fifteen days prior to their due date, does not require the Central Bank’s prior authorization.

The principle is different with respect to the payment of principal. All transfers abroad from private sector non-financial entities or individuals, financial institutions and certain public entities, for the payment of principal of financial debts, will require until August 8, 2003, the Central Bank’s prior consent.

However, this will not be necessary when payments relate to (a) new financing entered through the Free Foreign Exchange Market after February 11, 2002; (b) payments to international organizations; (c) payments to banks that are financing investment projects jointly with international organizations; (d) debts with, or guaranteed by, official credit agencies and insurance companies for export credit, members of the International Union of Credit and Investment Insurers; (e) debts with, or guaranteed by, multilateral credit organizations with governmental shareholders; (f) debts with, or guaranteed by, other multilateral credit organizations which agreements include a “most-favored-creditor” clause; or (g) debt securities issued by financial trusts, which underlying assets are loans guaranteed by mortgages.

In the case of private sector non-financial entities, or individuals the Central Bank’s prior consent is not required if the payment of principal does not exceed US$ 300,000 per month.

Notwithstanding the general principle for payment of principal, there are some exceptions to the Central Bank’s prior consent requirement, applicable only to private sector non-financial entities or individuals, for (i) payments, prior to March 31, 2003, of debts that on December 31, 2001 did not exceed US$ 1,000,000; or (ii) payments as part of a refinancing agreed with a creditor after January 2, 2003 pursuant to the terms of Communication “A” 3843, when the refinanced debt relates to (a) negotiable obligations, commercial papers and bonds; (b) loans syndicated among non-resident banks; (c) financial loans granted by non-resident banks, as long as they are not guaranteed by external assets from the debtor or other local entity or individual; and (d) financial loans granted by head offices or subsidiaries abroad. In such refinancing, cash payments may not exceed 10% of the debt, and the average duration of the refinanced debt must be at least 5 years longer than the original debt.

Transfers for the payment of debt pursuant to Communication “A” 3872 are also exempt from the Central Bank’s prior consent requirement. Such Communication authorizes access to the Free Foreign Exchange Market, up to an amount equivalent to 5% of the principal of matured debts. The foreign exchange thus acquired is transferred to a trust and used to pay creditors’ debts in the process of work-out.

Finally, Communication “A” 3709 provides that, subject to certain conditions, payments of debts that are refinanced pursuant to the Bankruptcy Law No. 24,522, are exempt from the Central Bank’s prior authorization.