Client Alert | Foreign Exchange/Argentine Republic
On September 15, 2020, the Argentine Central Bank (the “Central Bank”) issued Communication “A” 7106 establishing new restrictions in the foreign exchange market. The following is a description of the main aspects of the regulation:
1. Restrictions to Payments of Financial Debts Abroad.
Those who have capital maturities scheduled between October 15, 2020 and March 31, 2021, for the following transactions:
(i) Foreign financial indebtedness of the non-financial private sector with a creditor that is not a related party of the debtor, or
(ii) Financial indebtedness abroad due to the entities’ own operations, or
(iii) Issuance of debt securities with public registration in the country, denominated in foreign currency, of clients in the private sector or of the entities themselves;
must submit to the Central Bank a detailed refinancing plan based on the following criteria:
(a) the net amount by which the foreign exchange market will be accessed in the original terms will not exceed forty percent (40%) of the amount of capital due.
(b) the remaining capital has been at least refinanced with new foreign debt with an average life of two (2) years.
In addition to the refinancing granted by the original creditor, it will be admitted the computation of new foreign financial indebtedness granted by other creditors and that are settled in the exchange market by the client.
In the case of debt securities issued in foreign currency and publicly registered in the country, the calculation of new issues that comply with certain conditions established in the regulation will also be admitted.
The above does not apply when
(i) the indebtedness is with international institutions or their associated agencies or guaranteed by them.
(ii) the indebtedness is granted to the debtor by official credit agencies or guaranteed by them.
(iii) the amount by which the exchange market would be accessed for the cancellation of the principal of these types of indebtedness shall not exceed the equivalent of one million United States dollars (USD 1,000,000) per calendar month.
For the maturities to be registered until December 31, 2020, the refinancing plan must be submitted to the Central Bank before September 30, 2020. For the maturities to be registered between January 1, 2021 and March 31, 2021, it must be submitted at least thirty (30) calendar days before the maturity of the capital to be refinanced.
2. Restrictions for Transactions in the Capital Market.
It was also established that securities transactions entered into abroad and securities acquired abroad shall not be settled in Argentine pesos in the country.
3. Restrictions for Non-residents.
Non-residents shall not enter into sales of securities with foreign currency settlement in the country.
The above shall not apply to the sale of securities acquired in the country with settlement in foreign currency as from September 16, 2020 and which have remained in the portfolio of the non-resident for a period of no less than one year.
4. Purchases Abroad.
It was established that purchases abroad with a debit card with debit in local accounts in pesos and amounts in foreign currency acquired by individuals in the exchange market as from September 1, 2020 for the cancellation of obligations between residents, including payments for purchases in foreign currency made by means of credit cards, will be discounted, as from the following calendar month, from the maximum established in the following calendar month for the purchase of foreign currency by individuals for the formation of foreign assets, remission of family aid and for operations with derivatives.
In the event that the amount acquired is greater than the maximum available for the following month or this has already been absorbed by other purchases registered since September 1, 2020, the deduction will be transferred to the maximums computable in the following months until the amount acquired is completed.
Notwithstanding the foregoing, to the extent that the conditions set forth for such purpose are met, the individual may continue to make purchases abroad with a debit card with a debit to his or her bank account in Argentine pesos and access the exchange market to cancel financing granted by other residents within the framework of the provisions of the exchange regulations.
5. Restrictions for Individuals who Benefited from the Refinancing of Certain Bank Loans and the Freezing of the Value of Installments on Certain Loans.
Furthermore, it was established that individuals who
(i) benefited from the refinancing of bank credit assistance and/or credit card financing; or
(ii) benefited from the freezing of the value of the installments of mortgage loans intended for family’s only residence and of pledge credits updated per UVA [Unidad de Valor Adquisitivo] (Purchasing Value Unit);
shall not be able, until the total cancellation of the financing or while the benefit lasts with respect to the updating of the value of the installments, as the case may be:
(a) to access the foreign exchange market to carry out transactions relating to the formation of external assets of residents, remission of family aid and for transactions with derivatives; or
(b) to enter into sales in the country of securities with settlement in foreign currency or transfer them to depositary entities abroad.
6. Other Restrictions for Individuals.
In the cases of access to the exchange market by resident individuals for the formation of external assets, remission of family aid and for operations with derivatives, in addition to the existing requirements, an affidavit must be presented in which the individual undertakes not to enter into securities transactions in the country with liquidation in foreign currency from the moment at which access is required and for the subsequent ninety (90) calendar days.