New clarification on foreign exchange regulations

1.   Communication “C” 42882

Pursuant to Communication “C” 42271 payments of financing granted by local financial entities to Argentine residents shall be made locally, except for export pre-financings that are cancelled out of Argentina with export proceeds.

On September 9, 2005, Communication “C” 42882 clarified that the obligation to make local payments as stated above does not apply to principal and interest payments to local financial entities under (i) debt instruments issued by Argentine residents or (ii) their participation in syndicated loans granted to Argentine residents; provided that the relevant agreement provides for payments abroad.

2.   Communication “C” 42883

On September 9, 2005, the Central Bank issued Communication “C” 42883 clarifying paragraph 1 of Communication “A” 4825. The new regulation stated that the execution and settlement of forwards, futures, options and other related transactions carried out by Argentine residents with local or foreign counterparts as long as they are settled in local currency (Argentine pesos) and governed by Argentine law will not require prior Central Bank approval. Therefore, these transactions may not provide for future or current payment obligations out of Argentina.

Any transfer of funds made by non-Argentine residents into the local foreign exchange market to be applied to cancel obligations under these transactions will be subject to the 30% reserve requirement imposed by Decree No 616/05 (as regulated).

Finally, the repatriation of funds by non-Argentine residents as a result of these transactions through the local foreign exchange market do not require the Central Bank’s prior approval as long as it does not exceed the limit set forth for the sale of foreign exchange to non-Argentine residents (i.e. US$ 5,000 per calendar month).

3.   Communication “C” 42884

On September 9, 2005, the Central Bank issued Communication “C” 42884 clarifying Communication “C” 42303. The new regulation stated that foreign indebtedness granted to Argentine residents and used to make payments registered in the balance sheet of the borrower as intangible mine costs (“intangible por costo de mina”) or as research, prospecting and exploration costs, as well as agreed and repaid at an average of no less than 2 years, including payments of principal and interest, are not subject to the 30% reserve requirement imposed by Decree No 616/05 (as regulated).