Argentine Foreign Exchange Regulations are Tightened

Communique “A” 7123

On October 1, 2020, the Argentine Central Bank (the “BCRA” after its acronym in Spanish) issued Communique “A” 7123 regulating the:

 

1. Application of collections from exports of goods and services

To the extent that certain requirements are met (which are described below), collection in foreign currencies from exports of goods and services may apply to:

 

(i) payments of capital and interest of foreign financial indebtedness with an average maturity of no less than one year; and

 

(ii) repatriation of direct investments by non-residents in companies that are not controlled by local financial institutions and to the extent that the repatriation occurs after the date of conclusion and implementation of the investment project and at least one year after the transfer and settlement of the capital contribution in the Foreign Exchange Market.

 

To this end, the following requirements must be met:

(i) Use of Funds: Funds must be used to finance investment projects in Argentina that generate:

• An increase in the production of goods that, for the most part, will be placed in external markets and/or that enable the substitution of imports. This condition is deemed to have been met when it is reasonably demonstrated that at least two thirds of the increase in the production of goods will be allocated to external markets and/or import substitution within three years of the project's completion, with a positive effect on the exchange rate balance of goods and services; and/or
• An increase in the transport capacity of exports of goods and services with the construction of infrastructure works in ports, airports and land terminals for international transport.

 

(ii) Transfer and sale of funds in Argentine Pesos in the foreign exchange market: Funds must be transferred and sold in Argentine Pesos through the foreign exchange market as of October 2, 2020.

 

 

(iii) Transactions monitored by a local financial institution: Exporters must appoint a local financial institution to verify compliance with the above requirements.

 

2. Access to the foreign exchange market by importers

Communique “A” 7123 establishes that the amount for which importers can access the foreign exchange market, within the framework of point 2 of Communique “A” 7030, as modified, will be increased by the equivalent of 50% of the amounts which as of October 2, 2020, the importer transfers and sells in Argentine Pesos in the foreign exchange market for advances or pre-financing of exports from abroad with a minimum 180-day term.

 

3. Exception for repatriation of direct investments by non-residents

Communique “A” 7123 establishes that prior BCRA approval is not required for the repatriation of direct investments in companies (other than those controlled by local financial institutions), as long as the capital contribution was transferred and sold in Argentine Pesos through the foreign exchange market as of October 2, 2020 and the repatriation takes place at least two years after the transfer and settlement of those funds.

 

4. Exception for the repayment of capital of foreign financial indebtedness with related parties

Finally, Communique “A” 7123 establishes that prior BCRA approval will not be required for payment at maturity of capital of non-financial private sector foreign indebtedness when the creditor is a related party to the debtor, as long as the funds have been transferred and sold in Argentine Pesos through the foreign exchange market as from October 2, 2020 and the indebtedness has an average maturity of no less than two years.

 

Communique “A” 7138

On October 15, 2020, the BCRA issued Communique “A” 7138 which established the following:

 

1. Amendments to Communique “A” 7123

Communique “A” 7138, dated October 15, 2020, amends Communique “A” 7123 and provides that collections from exports of goods and services may also apply to:

 

(i) payments of principal and interest of new debt securities issuances with public registry in Argentina denominated in foreign currency with an average maturity of less than a year, provided that all the funds raised from the issuance are sold and settled in Argentine Pesos through the foreign exchange market;

 

(ii) payments of principal and interest of new indebtedness or direct investment capital contributions whose funds have been transferred and sold in Argentine Pesos through the foreign exchange market and have complied with the parameters set forth in the refinancing scheme provided for in point 7 of Communique “A” 7106; and

 

(iii) payments of principal and interest of debt securities issuances with public registry in Argentina or abroad, issued as of October 9, 2020, with an average maturity of no less than two years, which delivery to creditors has made it possible to achieve the parameters set forth in the refinancing scheme.

 

 

2. Additional requirements for payments of imports of goods

Additional requirements were established to access the foreign exchange market to make payments of imports of goods with pending customs registration. In this regard, the BCRA established that, in order to grant access to the foreign exchange market, the intervening entity must verify that the importer has duly reported the transaction through the Integral Import Monitoring System (the “SIMI” after its Spanish acronym) under “OUTPUT” for the goods involved, in all cases in which reporting the transaction is required to register the application under import destination for consumption.

 

3. Changes to the delayed payment criteria of imports of goods

Communique “A” 7138 added that as from November 2, 2020, payments for imports of goods with customs entry registration pending between September 2, 2019 and October 31, 2019 for payments on demand against presentation of shipping documents, payments of foreign trade debts and cancellation of commercial guarantees for imports of goods granted by local entities that are not normalized will be considered in arrears. Importers with operations in arrears may not make advance payments for imports of goods until their situation is normalized.

 

4. Reduction in the amount for reporting “Advance Payment of Exchange Operations”

Communique “A” 7138 reduced the amount of transactions to be reported under the “Advance on Exchange Transactions” reporting regime. As a result, it was changed from US$ 500,000 to US$ 50,000 per day.