Exchange Regulations – Relaxation of Certain Rules Related to the Inflow and Outflow of Foreign Currency

Through Communication “A” 5899 dated February 4, 2016 (the “Communication”) the Central Bank introduced several changes to the existing foreign exchange regulatory framework, which is in line with to the new foreign exchange controls policy implemented as from December 17, 2015. For further information on this matter, please refer to the article published in edition #157 of Marval News of December 22, 2015, “Argentina Announces Lifting of Foreign Exchange Restrictions”.

The following is a brief summary of the most relevant changes:

1. Transfer into foreign currency local accounts of certain transactions subject to mandatory repatriation, as well as transfer of foreign currency funds abroad from foreign currency local accounts (Arbitrages and Exchanges).

Certain foreign currency funds received abroad subject to mandatory repatriation (i.e., exports of goods, advance payments or pre-export financings, exports of services, and the sale of non-produced non-financial assets) can be transferred into a foreign currency local account opened at a local financial institution without any previous conversion of the foreign currency funds into Argentine Pesos.  The financial institutions participating in the transfer of the funds to Argentina through the Foreign Exchange Market (“FX Market”) must issue the corresponding technical foreign exchange ticket (boleto técnico) using the concept codes (códigos de concepto) specifically set forth by the Communication, which specifies that, with respect to those foreign currency funds, compliance with foreign exchange regulations is still "pending". In order to fulfill the repatriation obligation, those foreign currency funds must be sold for Argentine Pesos in the FX Market within the applicable deadlines, in which case local financial institutions will use the general concept code for such purpose.

Foreign currency funds transferred into a foreign currency local account may be transferred abroad through the FX Market, in which case the local financial institution must leave record that the transfer was made through a local bank account in foreign currency. In the event the funds are transferred abroad for the payment of a foreign financial indebtedness or the repatriation of a portfolio investment of non-Argentine residents, the minimum holding period of 120 calendar days must be met.

It should be noted that the reference made in Communication “A” 5850 regarding the transfer of funds resulting from foreign financial indebtedness, non-Argentine resident investments, or repatriation of portfolio investments of Argentine residents collected in a foreign currency local account which had not been sold for Argentine Pesos in the FX Market provided that the minimum holding period is fulfilled, has been eliminated.

2. Collection for services provided to non-Argentine residents and/or resulting from the sale of non-produced non-financial assets exempted from mandatory sale in the FX Market.

Argentine residents that receive funds in foreign currency for the payment of services rendered to non-Argentine residents or for the sale of non-produced non- financial assets may receive those funds in a local foreign currency account without exchanging it for Argentine Pesos in the FX Market, provided that the following requirements are met:

a.  The transfer is made within the applicable deadline.

b.  The transfer does not exceed the monthly limit of US$ 2,000,000 set forth for the purchase of external assets by Argentine residents for investment purposes (a practice commonly referred to as “atesoramiento”).

c.  The inflow of funds under this alternative will imply a reduction in the same amount for the purchase of external assets by Argentine residents referred to in b. above.

3. Deadline for the transfer of funds to a correspondent bank account of a local financial institution (cuenta de coresponsalía).

The 10-business day period applicable for the transfer of funds collected abroad as a result of the collection of exports of goods, advance payments, and pre-export financings to a correspondent bank account of a local financial institution (cuenta de corresponsalía) has been eliminated.

4. Increase in the amounts for export transactions “subject to a collection claim”.

The Communication increases to US$ 500,000 and US$ 2,000,000 (from US$ 100.000 and US$ 200,000), the maximum annual amounts that the exporter must provide evidence that (i) claims were made against the debtor, or (ii) claims were made against the debtor by export credit insurance companies (without the transaction being covered by it), or national recovery agencies or foreign agencies hired by the exporter to such extent, respectively.

Furthermore, the Communication relaxes certain requirements regarding the outflow of foreign currency:

5. Cancellation of advances and pre-export financings, and other aspects related to commercial debts.

Rules applicable to the repayment of foreign indebtedness apply to the cancellation of advances and pre-export financings which are not cancelled with export transactions, taking into account the date in which the foreign currency funds are sold in the FX Market, except in the following cases (which maintain their commercial nature):

1. The refund of export advances when the exporter, due to the suspension of shipments ordered by a state regulation that have entered into force after the date of payment of the advance, is unable to complete the shipment at the time agreed with his client,
2. The export refund advances for which the exporter fulfilled the shipment but the merchandise was rejected by the importer and re-imported into the country. In this case, prior to granting access to the FX Market the exporter must submit evidence of the re-importation of the goods to the relevant financial institution.
3. Cancellation of advances and pre-export financings: when after applying the foreign currency corresponding to a certain shipments to their cancellation, an outstanding amount from entering into the FX Market remains, not exceeding the equivalent of 5% of the amount sold in the FX Market or US$ 5,000, whichever is greater.
4. The refund to the foreign creditor of prepayments of exports of goods for amounts not exceeding the equivalent of US$ 10,000 per calendar month in all financial institutions authorized to trade in foreign exchange. This right is in addition to the one referred to in the preceding paragraph.

6. Repatriation of direct and portfolio investments by non-Argentine residents

The Communication eliminates the requirement that in the case of a repatriation of direct investments by a non-Argentine resident, the foreign investor must provide evidence of the transfer of the funds to Argentina through the FX Market. The minimum holding period of 365 calendar days is no longer a requirement for this type of investments.

The monthly limit of US$ 500,000 stated for the repatriation of portfolio investments of non-Argentine residents is no longer required. In order to have access to the FX Market local financial institutions must certify the date and the amount of the foreign currency funds transferred to Argentina through the FX Market, as well as compliance with the minimum holding period of 120 calendar days.

7. Payment of financial debts abroad without foreign exchange being transferred into the country

Institutions may grant access to the FX Market to cancel any financial debt with a non-resident originated in the purchase of direct investment or non-produced non-financial assets which loans have not been repatriated into Argentina, if: (i) all applicable requirements of the underlying transaction are met whenever the payment is made simultaneously with the acquisition of the assets , (ii) the entity can justify the existence, origin and duration of the debt at the date of access to the FX Market, and (iii) the transfer is ordered to the seller’s bank account.

8. New concepts for hoarding: donations and real estate acquisition.

The communication incorporates donations in which the recipient is not a governmental entity, international organization or its related agencies with presence in the country and with international recognition for its charities (except for donations to address natural disasters, health emergencies, or other humanitarian situations (under the previous regulation, these were the only circumstances allowed to enter the FX Market)) destined to “purchase of external assets by residents” (hoarding) up to a monthly limit of US$ 2,000,000.

Access to the FX Market over the monthly limit of US$ 2,000,000 is allowed when the funds acquired are applied simultaneously to cancel debts with residents for the acquisition of real estate in the country by deposit or transfer to the seller’s foreign currency local account.

Other minor changes are: (i) the monthly limit of US$ 5.000 for exchange transactions pursuant to Communication “A” 4834 is raised to US$ 10,000; (ii) advance import affidavits (“DJAIs”) referred to commercial debt payments or payments in sight for advanced payments in respect to cancellation of commercial guarantees granted by local institutions and certification of the import of goods with customs registration are eliminated; (iii) changes in the maximum amount of the income outstanding balance of the importer subject to the exception to demonstrate foreign currency income; (iv) access to the foreign exchange market by the national public sector entities to pay for imports of goods on behalf of third parties associated to funded projects; (v) the requirement that the disbursement of loans granted in foreign currency by local financial institutions to local residents should be made locally is eliminated. The requirement regarding the client identification in the Single Register of Taxpayers of the Federal Public Revenue Administration is also eliminated; (vi) authorized financial institutions allowed to trade in foreign currency are now permitted to pay off debts incurred abroad by the issuance of travelers check due to sales carried out in the FX Market; and (vii) the Communication incorporates that the transfer of funds which do not contain information about the issuer and the beneficiary will remain pending of registration.

Finally, the regulation states that the term to prove the customs registry of goods or to proceed on the settlement of the foreign currency funds associated with the return of the payment is unified in 365 calendar days from the date of access to the FX Market. In the event of delays in customs registration, due to reasons beyond the importer’s control, the financial institutions involved may grant an extension of the deadlines set out above, that in any case should exceed 540 calendar days from the date of access to FX Market. If, at the expiration of the aforementioned deadlines, these causes of delay persist, the importer may request the Central Bank for an extension.