New Regulation of the Information Regime on Direct and Real Estate Investments

By means of Communication “A” 4237 issued on November 10, 2004, the Central Bank of the Republic of Argentina (the “Central Bank”) created the Information Regime on Direct Investments to gather certain information related to foreign exchange inflows and outflows in addition to the information on investments in financial assets, obtained through Decree No 285/03, Communication “A” 3602 and other complementary regulations.

For purposes of this regime, “direct investment” means any holding of 10% or more in the capital stock of a company, while “real estate investment” means any investment in real estate that does not form part of a commercial company, the purpose of which is for personal use or lease.

On March 4, 2005, the Central Bank issued Communication “A” 4305 which set forth (i) the limit amount to determine the obligation and frequency to file the report on direct and real estate investments made abroad by Argentine residents, and by non-Argentine residents within Argentina; and (ii) the operational instructions to be followed by the entity or person filing the report and by the financial entities that have to receive the information.

In order to know the details of the guidelines required by the Central Bank for direct and/or real estate investments to be reached by this information regime, we suggest that you read the following article: “Control on direct and real estate investments by Argentine and foreign investors” published in Marval News # 34 of November 30, 2004.

1.     Limits

a) Direct investments of non-Argentine residents in Argentina

Argentine companies that register any direct investment held by non-Argentine residents and/or administrators of real estate owned by non-Argentine residents shall inform the Central Bank on such direct and/or real estate investments, respectively, provided that their value, calculated on the basis of the net worth of the company and/or the total fiscal value of the real estate, equals or exceeds the equivalent of US$ 500,000.If the relevant direct and/or real estate investment does not reach such amount, the filing of the report is optional.

b) Direct investments abroad by Argentine residents

Argentine residents shall inform the Central Bank on their direct and real estate investments provided that their value, calculated on the basis of the net worth of the relevant foreign companies and/or the fiscal value of real estate abroad, equals or exceeds the equivalent of US$ 1,000,000.If the relevant direct and/or real estate investments does not reach such amount, the filing of the report is optional.

When the value of the direct and/or real estate investments equals or exceeds the equivalent of US$ 1,000,000, and equals or does not exceed the equivalent of US$ 5,000,000, the report may be filed annually, at the end of each calendar year.

2.     Operational Instructions

Information related to direct and/or real estate investments shall be provided by the entity or person obliged to report through an electronic form developed by the Central Bank and to be provided by financial entities. Once the form is completed, it shall be filed before a financial entity, which shall process and deliver the form to the Central Bank.

The first report corresponding to the semi-annual period ended on December 31, 2004 was due before March 31, 2005.