Changes on the Foreign Exchange Market Regulations

Central Bank Communication “A” 5099 (the “Communication”) amended the regulations governing access to the foreign exchange market (the “FX Market”), as follows. 

The Communication defines “bonds and other external debt securities” as those bonds and securities issued abroad that comply with the following requirements:

i) The issuance has been made abroad in compliance with the regulations of the country of issue and  must be regulated by foreign law;

ii) the bonds and securities are mostly offered and placed abroad;  

iii) the bonds and securities are totally purchased abroad; and

iv) the payments of principal and interest are made abroad. 

Moreover, the Communication establishes that bonds and debt securities issued in exchange for other bonds or securities which comply with the abovementioned requirements or that are issued in exchange for other obligations with non–residents in connection with Argentine external debt are also included in the abovementioned definition. 

As for service of external debt of local governments (as defined in the Communication), the Communication establishes that access to the FX Market is in the same terms applicable to external financial obligations of the non- financial private sector. 

Finally, the Communication establishes that local financial institutions are allowed to access the FX Market in their capacity of trustees of trusts created by the local governments in order to guarantee the payment of principal and interests of their external debts, provided that the following requirements are complied with: 

a) The creation of the trust must have the authorization of the national or provincial government, or by the government of the City of Buenos Aires. 

b) The local government in its capacity as settlor must assign the assets or public funds in guarantee of the payment of principal and interests of loans or debt securities issued abroad by the local government. 

c) The trustee must pay the foreign creditors or to the payment agent appointed in the relevant agreement.

d) Compliance with the requirements set by the regulation in force as of the date the FX Market is accessed for the corresponding payment.

e) The trustee’s access to the FX Market, instead of the local government’s, has no tax impact. 

For the second time since the issuance of Communication “A” 4785, the Central Bank has regulated the ability of guarantee trusts to access the FX Market in order to make payments of principal and interests.