ARTICLE
Possibility of Acquiring Foreign Exchange in Argentina for a Specific Purpose, Using Funds from Foreign Financial Loans and Direct Investment Contributions
The Central Bank has established, until year-end, the possibility of keeping most of the foreign exchange liquidated in the foreign exchange market derived from foreign loans and direct investment contributions in foreign currency for 180 consecutive days, provided that such currency be deposited in local banks.
October 31, 2014
Through Communication "A" 5643 dated October 8, 2014, the Central Bank of Argentina (the "Central Bank") has established the possibility from October 9, 2014 up to and including December 30, 2014 -simultaneously with the liquidation of funds from foreign financial loans and direct investment contributions- to access the Foreign Exchange Market (the "FX Market") to purchase foreign currency in order to deposit it in local banks, up to the equivalent of 90% of the amount liquidated in the FX Market and for no longer than 180 consecutive days.
Both in the case of loans and contributions, inflows are subject to the applicable provisions of Decree No. 616/2005 (i.e. the rules for the nominative deposit, nontransferable, in US Dollars, of 30% of the amount involved in the relevant transaction, for a period of 365 consecutive days, known as the "mandatory deposit" or “encaje”), taken into account for financial loans, the final destination of the funds from the release of deposits formed under the regulation under analysis.
The funds in foreign currency deposited in local banks in the above conditions, may only be directed for fix-term deposit or in a special account in foreign currency, and may only be removed from the local bank for sale in the FX Market.
In each of the calendar months following the month of entrance of funds at least 80% of the net access needs of accessing the FX Market for any concept of the company should be covered by sales of the funds deposited in the special account or fix-term deposit.
Any funds that are not used within 180 consecutive days of establishment shall be sold in the FX Market within 10 business days.
The sale of the funds created by this mechanism will be exempt from the requirements of the provisions of Decree No. 616/2005.
The company that opts for this mechanism must inform through the relevant local bank, before the date of expiry of the period for liquidating of funds, having adhered to the indicated regime to acquire foreign assets for specific purposes. Likewise it must report any change of local bank where the funds are deposited.
It should be noted that since Communication "A" 5604 dated July 10, 2014 the mentioned mechanism is also applicable to new issuances of bonds and other debt securities with public offering and listing in self-regulated markets issued by local governments and/or non-financial private sector. This would only be if such issuances comply with the conditions established by the applicable regulations to be considered as external ones.
Both in the case of loans and contributions, inflows are subject to the applicable provisions of Decree No. 616/2005 (i.e. the rules for the nominative deposit, nontransferable, in US Dollars, of 30% of the amount involved in the relevant transaction, for a period of 365 consecutive days, known as the "mandatory deposit" or “encaje”), taken into account for financial loans, the final destination of the funds from the release of deposits formed under the regulation under analysis.
The funds in foreign currency deposited in local banks in the above conditions, may only be directed for fix-term deposit or in a special account in foreign currency, and may only be removed from the local bank for sale in the FX Market.
In each of the calendar months following the month of entrance of funds at least 80% of the net access needs of accessing the FX Market for any concept of the company should be covered by sales of the funds deposited in the special account or fix-term deposit.
Any funds that are not used within 180 consecutive days of establishment shall be sold in the FX Market within 10 business days.
The sale of the funds created by this mechanism will be exempt from the requirements of the provisions of Decree No. 616/2005.
The company that opts for this mechanism must inform through the relevant local bank, before the date of expiry of the period for liquidating of funds, having adhered to the indicated regime to acquire foreign assets for specific purposes. Likewise it must report any change of local bank where the funds are deposited.
It should be noted that since Communication "A" 5604 dated July 10, 2014 the mentioned mechanism is also applicable to new issuances of bonds and other debt securities with public offering and listing in self-regulated markets issued by local governments and/or non-financial private sector. This would only be if such issuances comply with the conditions established by the applicable regulations to be considered as external ones.
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