New regulations on the Reciprocal Credit and Payment Agreement between Argentina and Brazil

The Argentine Central Bank has taken a big step towards the implementation of the mechanism under which most of the trade between Argentina and Brazil will take place by issuing new rules concerning the Reciprocal Credit and Payment Agreement (“RCPA”). This agreement gives the Central Banks of Argentina and Brazil the power to deal directly with local importers and exporters and then make periodical adjustments in the respective accounts.

The process under the agreement entered into by Argentina and Brazil is the following. On the date of payment of a certain transaction, the exporter of one of the countries must be paid by its bank against the delivery of the export documents. The bank of the exporter obtains the reimbursements of the amounts paid to the exporter from its local Central Bank and the latter registers a credit in its favor and a debt in the account of the Central Bank of the importer. The Central Bank of the importer must be reimbursed by the importer through its local bank.

Pursuant to the RCPA, each of the Central Banks of Argentina and Brazil have accounts of mutual credits and debits. In such accounts, each of the Central Banks registers the payments made to its local exporters through authorized banks and on behalf of the Central Bank of the importer (i.e., its credits against such Central Bank), as well as the charges informed by the other Central Bank for payments made to its own importers (its own debits). The daily difference between credits and debits of a Central Bank is covered by the mutual credit lines established between the Central Banks.

In order to effect these transactions, the Argentine Central Bank requires financial entities acting under the RCPA to deliver a guarantee deposit in U.S. Dollars of 100% of the amount of the transaction prior to the issuance and transfer to the foreign bank (corresponsal del exterior) of the code to effect the reimbursement (Communication “A” 2770 of the Argentine Central Bank). However, the regulations exempt those transactions that do not exceed the amount of US$ 200,000 (this limit was set forth by Communication “A” 3775 of the Argentine Central Bank dated October 23, 2002) from this requirement.

On the other hand, refinancing of commercial debt for imports and services related to imports may also be traded under the RCPA with prior authorization from the Argentine Central Bank, provided that they comply with certain requirements, which include, inter alia, a firm purchase order dated no later than December 31, 2001, exported no later than June 30, 2002, principal installments in arrears, etc. The transactions can be refinanced under the terms and conditions agreed by the parties, provided that the due date is no later than December 30, 2004.