Foreign exchange regulations for direct investments

Recently, the Argentine Government set forth restrictions to the transfer of funds into and from Argentina, which include the constitution of a 30% deposit or reserve in certain foreign exchange transactions. The regulations exempted direct investments without clarifying additional requirements to qualify for the exemption.

Foreign direct investments

The Central Bank set forth that the exemption applies to non-Argentine residents’ capital contributions to local companies of direct investment (code 447) and sale of shares of local companies to direct investors (code 453) provided that:

• Capital contributions: the contribution should be capitalized in accordance with current legal requirements, in which case evidence of the registration procedure before the Public Registry of Commerce (the “Registry”) must be filed; or

• Sale of shares of local companies to direct investors: the acquisition of the corresponding share capital by the allocation of the funds resulting from the foreign exchange transaction -provided that the acquisition qualifies as direct investment- must be evidenced by filing the relevant stock purchase agreement and a copy of the filing with the Registry or a copy of the transfer of shares as registered in the shares registry book, depending on the type of company.

The financial entity making the transfer will make the 30% deposit for 365 days if the documents are not filed before the foreign currency is converted into Pesos. The deposit will be released upon expiry of the 365 day term or before by filing the above mentioned documents.

Real estate located in Argentina

Funds transferred into Argentina by non-Argentine residents for the purpose of purchasing real estate located in Argentina (code 489), will be exempted from the 30% deposit requirement provided that the sale of foreign currency (the resulting funds of which should be allocated to the real estate investment) and the execution of the relevant deed are performed within the same day.Compliance with the direct investment information regime set forth by Communication “A” 4237, as amended, will be required to purchase foreign currency for purposes of repatriating funds resulting from non-Argentine direct investments in Argentina.