New term for the transfer abroad of foreign funds that entered the domestic market

Under Resolution No 292/2005, published in the Official Gazette on May 26, 2005, the Ministry of Economy and Production set the term for the transfer abroad of foreign funds that entered the domestic exchange market at 365 days.Hence, the minimum term of 180 days set by Section 2 of Decree No 285/2003 was extended (see “Temporary limits and registration requirements for transfer of funds to and from Argentina”, published in Marval News # 18, June 30, 2003).Foreign trade transactions and direct foreign investments are expressly excluded from the mentioned minimum term.

Section 3 of Decree No 285/2003, which was passed within the scope of the law of economic emergency, allows the Ministry of Economy and Production to modify the term based on changes in the macroeconomic conditions that require the minimum term to be extended or reduced.

On the same date the Central Bank of the Republic of Argentina issued Communication A 4354, which regulates Resolution No 292/2005 as follows:

1.    it extends from 180 to 365 calendar days the minimum term for the financial debts of the financial sector and the non financial private sector which are paid by the lender as from May 26, 2005 and for the renewal of financial debt agreed as from the same date;

2.    it clarifies that, regarding the financial debt that was paid by the lender before the date on which Resolution No 292/2005 entered into force and the conversion into pesos through the domestic exchange market (Mercado Único y Libre de Cambios) of which is still pending, the previous term of 180 calendar days will be applicable as long as the pay out date is certified by the intervening entity before the liquidation of the funds;

3.    it extends the minimum term for the repatriation of non-residents’ portfolio investments for new operations liquidated in the local exchange market as from May 26, 2005 from 180 to 365 calendar days;

4.    .it modifies the terms during which foreign financial debt of the non-financial private sector may be prepaid as follows:

(a).    in any moment within 365 calendar days prior to maturity, if the minimum term is complied with;

(b).    more than 365 calendar days prior to maturity, partially or totally, if the minimum term is complied with, and any of the following conditions are met:

i.    if the payment is not part of a debt restructuring process, the amount in foreign currency with which the debt will be prepaid must not be larger than the current value of the part of the debt that is being cancelled, calculated in accordance with the applicable regulations, or 100% of the prepayment is compensated with new foreign financing the current value of which, calculated in accordance with the applicable regulations, is not larger than the current value of the debt that is being cancelled; and

ii.  if the payment is part of a debt restructuring process, the new conditions of the debt and the cash payment must not imply an increase in the current value of the debt, calculated in accordance with the applicable regulations.