New foreign exchange regulations in Argentina.
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Banking & Financial Institutions Department Report | New foreign exchange regulations in Argentina.
Dear Sir or Madam,
Please find an executive summary of the recent regulation applicable to the Foreign Exchange Market in Argentina:
1) Necessity and Urgency Decree No.609/19.
Please find enclosed a copy of Necessity and Urgency Decree (DNU) No. 609/2019 issued by the National Executive Branch, dated September 1st, 2019 (the “Decree”). In summary, the Decree establishes that:
● Any collection of export of goods and services should be converted into local currency, in the terms and conditions established by the Argentinean Central Bank (“BCRA”) in the corresponding regulation (we refer to our comments below in Point 2). The obligation to exchange into pesos the foreign currency funds shall expire on December 31st, 2019.
● The BCRA shall:
o Regulate the conditions in which the acquisition of “foreign currency and precious metals (coins) and money transfers abroad shall require previous authorization”;
o Be able to “establish the regulations to avoid practices and operations to elude, through public bonds or other instruments, these provisions”. Thus, the BCRA may establish regulations to limit operations locally denominated as “contado con liquidación”.
● The decree establishes that it’s provisions shall be enforceable from the day of its publication, which occurred today (as published by www.boletinoficial.gob.ar). Please note that, among other issues, the Decree regulates certain provisions regarding the reprogramming of public debt which are not included in this report.
2). BCRA, Communication “A” 6.770.
Please find enclosed the Communication “A” 6.770 issued on September 1st, 2019 by the BCRA. In summary this provision establishes, from September 1st, 2019 and until December 31st, 2019, that:
A). Export of goods and services:
● Collection of exports that correspond to boarding permissions officialized September 2nd, 2019, must be entered (transferred to a local bank account of the local entity) and liquidated within:
o 15 calendar days (to be counted from its officialization), in the case of: (i) the goods identified in the first column of the annex of Resolution 57/2016 issued by the Subsecretariat of Commerce (find it here); and the transactions with entities of the same economic group; o 180 calendar days (to be counted from its officialization), regarding all other goods; or
o 5 business days of having collected the export transactions, in case payment happens on an earlier date than the previously mentioned scenarios.
● The exports that were officialized before 2/9/19, and remain uncollected, as well as any new advance payment or pre-finance, shall have to be entered and liquidated within 5 business days of its collection or disbursement date. Therefore, no liquidation date shall be applicable to these types of transactions.
● It is admitted the application of collection rights of exports to the cancelation of obligations of advance or pre-import finance, with certain requirements. On the contrary, it is not established an exemption for the re-payment of “financial” loans.
● The collection of export of services shall have to be entered and converted into Pesos within 5 business days of its perception abroad or in Argentina.
B). Access to the Foreign Exchange Market via Investment Instruments:
● It is established that the BCRA’s previous approval is required to access the Foreign Exchange Market for the constitution of foreign assets (concept codes informed by the BCRA as A01, A02, A03, A04, A06, A07, A08, A09, A14, A16 y A17) and for the granting of collateral related to the entering of financial derivatives operations:
o By legal persons, local governments, Investment Funds (“Fondos Comunes de Inversion”), Trusts and other entities constituted in the country, for any amount; and
o For local human persons (including the concept of “family aid” or “ayuda familiar”), when the monthly sum of US $ 10,000 is exceeded. Additionally, it is established that when the sum of US $ 1,000 per month is exceeded, operations must be carried out with debit to local accounts.
● The limit for transactions by “non-residents” is set at US $ 1,000 per month, with certain exceptions (such as multilateral agencies, embassies, etc.).
C). Financial Debt and Dividends:
● It is established an obligation to enter and convert into pesos new financial debts whose disbursement occurs after of September 1st, 2019. The regulation does not set a deadline to comply with this obligation. On another note, it is established an obligation to demonstrate compliance with this liquidation requirement in order to be able pay capital and interest services. In order to carry out pre-cancelation of these type of obligations, BCRA’s previous authorization is required.
● It is forbidden to access the Foreign Exchange Market for the repayment of debts and other type of obligations between Argentine residents denominated in foreign currency entered into after September 1st, 2019. Regarding operations entered previous said date, it is established that it is possible to enter the Foreign Exchange Market for such repayment, provided that it had been instrumented by public deed or registered.
● BCRA prior authorization is required to pay earnings and dividends.
D). Import of Goods and Services:
● BCRA prior approval must be obtained to prepay obligations related to imports of goods and services.
● Regarding advance payments of imports, it is established the requirement to file supporting documentation. Likewise, it is required to file Customs Documents (i.e. officialization of the importation of the related goods) within 180 calendar days from the payment of the advance.
● BCRA prior compliance is required to make payments to related companies as follows:
o Imports of goods that is outstanding or on demand, when the equivalent of US$ 2 million per month is exceeded; and
o Services, without minimum amount prevision.
E). Other Concepts:
● It is restored the formality to document foreign exchange currency transactions through tickets are restored.
● Regarding the case of abroad payments of financial and commercial debts, it is required to comply with the obligation to of an informative regime of declaration of foreign debt.
● The “Registry of Foreign Exchange Operators” or “Registro de Operadores de Cambio” for legal entities that intended to register, has been suspended.
● In connection with regulations exclusively applicable to financial institutions, it is established (among other issues) that:
o They cannot buy securities in the secondary market with settlement in foreign currency; and
o The limit of the Global Net Foreign Currency Position that they must maintain, goes from “5% of the RPC (the “Responsabilidad Patrimonial Computable”) of the previous month to which it corresponds”, to a limit equivalent to US $ 2,500,000 “[…] or 4% of the RPC of the previous month to which it corresponds, the biggest of both”.
Finally, we must point out that breaches and infringements of exchange regulations can be sanctioned by application of the Criminal Foreign Exchange Regime.
In case you have any doubt, please do not hesitate to contact us.
Best regards,
Pablo J. Torretta
