Argentina - Changes in Foreign Exchange regulations
Following the announcements of the Finance Ministry, on December 16, 2015 the Argentine Central Bank issued Communiqué A 5850, establishing significant changes in the regulations of the Argentine Foreign Exchange Market (the “FX Market”) by relaxing regulatory and de facto restrictions in place until now. The most significant changes are the following:
Local savings and investments abroad in foreign currency. Purchases and transfers of foreign currency by local residents or companies (other than banks and financial entities) for (i) local savings, (ii) real estate investments abroad, (iii) loans to non-residents, (iv) direct investments abroad, and (v) portfolio investments abroad are now allowed with a cap of USD 2 million per month. Clearance by the tax authority is no longer required. Purchases of foreign currency exceeding USD 500, must be made by debits in bank accounts or wire transfers. In the case of portfolio investments abroad, transfers must be made to accounts opened under the name of the local resident or the company making the transfer, at financial entities incorporated in FAFT-GAFI compliant jurisdictions. In addition, the USD 2 million cap is increased in an amount equivalent to the foreign currency assets repatriated to Argentina by the relevant local resident or company and sold in the local FX Market as from the date hereof.
Tourism and business trips. The new rules eliminate restrictions for the purchases and transfers abroad of payments of tourism and business trips. In addition, the regulation eliminates the restriction that established that foreign currency cash withdrawals from ATMs located abroad, were only allowed against local foreign currency bank accounts.
Intercompany services and leases. Payment of intercompany services and services provided from tax heavens (including leases and rents of local assets, royalties, commissions, trademarks and patents) are no longer subject to prior Central Bank authorization.
Purchases by non-residents individuals (tourists). Purchases of foreign currency by non resident individuals, up to USD 2,500 per month, will not require prior Central Bank authorization.
Arbitrages and swaps. Banks and other entities authorized to trade with foreign currency will be allowed to perform arbitrages and swaps between foreign currencies with its clients, under the following conditions:
Foreign indebtedness. Local borrowers are no longer subject to the legal entry and mandatory conversion into Pesos in the FX Market of the proceeds from financings granted by non-residents. However, evidence of the legal entry and conversion to Pesos of the loan proceeds are still required for the local borrower to access the FX Market for the repayment of such foreign indebtedness from Argentina. New financings granted or renewals agreed as from the date hereof shall the subject to a minimum stay of 120 days as from the entry of the loan proceeds into the FX Market. Under prior regulations, the minimum term was 365 days. In addition, prepayment of foreign indebtedness is now permitted at any time, provided the applicable minimum 120- days term of the financing has elapsed.
Advance payment of imports. In the case of advance payment of imports, the term for local importer to evidence custom clearance of non-capital goods was extended from 120 to 180 days as from the date of the advance payment of the relevant import.
Payments of new imports. The payment of new imports of goods (i.e. with shipments made as from the date hereof) is permitted with no amount limits.
Payments of new services from non-residents. The payment of new services by non residents (rendered or accrued from the date hereof) is permitted with no amount limits.
Commercial debts for unpaid imports. Commercial debts for unpaid imports -with customs cleared prior to the date hereof- may be cancelled as they become due with no restrictions, in the following cases: (i) debt from federal or provincial states, including state-owned companies; (ii) imports secured by letter of credits or bonds issued or granted by local financial entities; (iii) debts owed to official or multilateral credit agencies (ECAs) and/or debts guaranteed by such parties.
Cancellation of all other commercial debts for unpaid imports (with customs cleared prior to date) will be allowed, at the prevailing market FX rate of the date of payment, pursuant the following payment schedule established by the Central Bank: (i) up to USD2 million per importer and per calendar month, until 12/31/2015; (ii) up to USD4,5 million per importer and per calendar month, from 1/01/2016 and until 5/30/2016; (iii) as from 6/01/2016, with no amount limitations.
Commercial debts for unpaid services. Cancellation of commercial debts for unpaid services by non-residents (rendered or accrued prior to date) will be allowed, at the prevailing market FX rate of the date of payment, pursuant the following payment schedule established by the Central Bank: (i) up to USD2 million per resident and per calendar month, as from 2/01/2016; (ii) up to USD4 million per resident and per calendar month, from 3/01/2016 and until 5/30/2016; (iii) as from 6/01/2016, with no amount limitations.
From 1/04/2016 and until 1/31/2016, the cancellation of debts for services rendered or accrued until December 16, 2015 will be reduced from the cap of USD 2 million cap per month established for investments.
Portfolio investments by non residents. Non residents will have access to the FX Market, without the need of prior authorization from the Central Bank, to repatriate new portfolio investments entered into the FX Market as from the date hereof, provided the applicable minimum term of stay, 120 days, has elapsed.
Securities investments by local financial entities. Central Bank has reestablished the authorization for local banks and financial institutions to purchase and transfer foreign currency abroad for: (i) repo transactions, (ii) primary subscription of foreign currency denominated sovereign securities issued by the federal government and the Central Bank, and (iii) trading locally with foreign currency denominated securities, for up to 5% of the Responsabilidad Patrimonial Computable of the relevant bank/ financial institution.
For further information on this topic please contact Jorge I. Mayora