On May 28, 2020, the Central Bank of the Republic of Argentina (the “Central Bank” or “BCRA“), through Communication “A” 7030 (the “Communication“), set forth additional requirements to make outflows in the local exchange currency market aimed to restricting access to legal entities and individuals residents from Argentina that hold available foreign liquid assets, as well as measures aimed to limiting the purchase of foreign currency for the payment of imports and the extension of the deadlines prior and after the date of access to the exchange market, in the event of the sale of securities with settlement in foreign currency or their transfer to depository entities abroad.
Additionally, the Communication includes a new obligation to enter and settle in case of collection abroad of funds from loans granted to third parties, fixed term deposits or sale of any assets constituted as of May 28, 2020 and established the requirement to obtain prior approval from the BCRA to access to the local exchange currency market in case of cancellation of principal of debts abroad when the creditor is a counterparty linked to the debtor.
Below are described the following measures schematically:
(i) Additional requirements to make outputs through the exchange market
In the case of exchange market outflows (i.e. payments of imports and other purchases of goods abroad; payment of services rendered by non-residents; payment of profits and dividends; payment of principal and interest on foreign indebtedness; interest payments on debts for imports of goods and services; payments of foreign currency indebtedness of residents by parties to trusts set up in the country to guarantee the payment of services; payments of publicly registered debt securities in the country denominated in foreign currency and foreign currency obligations of residents; purchase of foreign currency by resident individuals for the formation of external assets, remittances of family aid and for transactions with derivatives – except those made by individuals for the formation of external assets; purchase of foreign currency by human beings to be applied simultaneously to the purchase of real estate in the country with mortgage credit; purchase of foreign currency by other residents -excluding financial institutions- for the formation of external assets and for operations with derivatives; other purchases of foreign currency by residents with specific application and for operations of interest rate hedging contracts for obligations of residents declared and validated in the Survey of External Assets and Liabilities), the financial entity must have the prior approval of the BCRA, except that it has a affidavit from the legal entity or individual that at the time of access to the exchange market:
a) Holding foreign currency in the country and not holding available liquid foreign assets
The customer must state that all foreign currency in the country is available in accounts at financial institutions and that he/she/it has no liquid external assets available.
The Communication includes a merely enunciative list on liquid external assets, among which are mentioned the holdings of foreign currency bills and coins in foreign currency, availability in gold coins or in gold bullion delivery bars, sight deposits in foreign financial entities and other investments that allow obtaining immediate availability of foreign currency, providing as an example, investments in external public securities, funds in investment accounts in investment managers located abroad, cryptoactives, funds in accounts of payment service providers, etc.
If the legal entity or individual had liquid external assets at the beginning of the day on which it accesses the exchange market, the financial institution may also accept the affidavit if it is aware that such assets were used in full during that day to make payments that would have had access to the local exchange market.
b) New settlement obligation for collections of loans granted to third parties and time deposits or sale of any assets with acquisition and granting prior to May 28, 2020.
The customer must include in the affidavit a commitment to settle in the foreign exchange market, within five business days of its availability, those funds received from abroad originating from the collection of loans granted to third parties, the collection of a time deposit or the sale of any asset, when the asset has been acquired, the deposit constituted or the loan granted after May 28, 2020.
The filing of the affidavit is not required to make outflows in the foreign exchange market in the following cases: 1) the financial entity’s own transactions as a customer; 2) cancellations of financing in foreign currency granted by local financial entities for consumption in foreign currency by means of credit or purchase cards; and 3) payments made abroad by non-financial companies issuers of cards for the use of credit, purchasem debit or prepaid cards issued in the country.
(ii) Payment for imports of goods with access to the foreign exchange market until 30 June, 2020
In addition to complying with the filing of the affidavit described in item (i) above, legal entities and individuals to access the exchange market to make payments for imports of goods or the cancellation of principal of debts arising from the importation of goods, must have the prior approval of the BCRA, unless they file:
a) An affidavit stating that the total amount of payments associated with its imports of goods made through the foreign exchange market during 2020, including the payment whose course is being requested, does not exceed the amount stated in your name in the system for monitoring payments for imports of goods (SEPAIMPO) and which were made official between January 1, 2020 and the day prior to access to the foreign exchange market.
Likewise, in the aggregate amount of payments for imports of goods associated with the imports of the importer, payments for cancellations of credit lines and/or commercial guarantees that were made by financial entities by virtue of imports of the importer should be included.
b) The documentation that allows the verification of compliance with the remaining requirements established for the operation by the exchange regulations.
(iii) Exceptions to the filing of the affidavit for the payment of imports of goods
For the payment of imports of goods, the requirement to submit the affidavit described in point II(a) above does not apply to:
a) the public sector;
b) enterprises which, although constituted as subjects of private law, are under the control of the National State;
c) trusts set up with contributions from the national public sector;
d) legal entities that are responsible for providing critical medicines to patients when they make advance payments for such goods to be paid for by the beneficiary of such medical coverage by private request;
e) payments for imports with pending customs registration for the purchase of kits for the detection of the COVID-19 coranavirus or other goods whose tariff positions are included in the list made known by Decree No. 333/2020 and complementary ones.
f) the making of payments for imports with pending customs registration to the extent that the amount pending regularization by the client for similar payments made as of September 1, 2019 does not exceed the equivalent of US$ 250,000, including the amount for which access to the exchange market is requested.
(iv) Cancellation of principal with counterparty related to the debtor
It is set forth until June 30, 2020 to obtain the prior approval of the BCRA to access the foreign exchange market for the cancellation of principal of financial debts abroad when the creditor is a counterparty related to the debtor.
For the purposes of the definition of related party, point 6.6 applies. “Transactions with related counterparties’ of Communication ‘A’ 6844 and amendments thereto referring to point 1.2.2. of the ‘Large Credit Risk Exposure’ rules.
(v) Extension of the term to make outflows through the exchange market, in case of sale of securities with settlement in foreign currency or transfers to depository institutions abroad
In the case of outlflows throgh the exchange local market, including those that are made through swaps or arbitrage, in addition to the requirements applicable to each particular case, financial institutions must require the filing of a affidavit stating that
a) on the day it requests access to the market and in the previous 90 calendar days it has not sold securities with settlement in foreign currency or transferred them to depository institutions abroad. Until June 30, 2020, such sworn statement shall be deemed to cover only the period from April 1, 2020, inclusive.
b) undertakes not to sell securities with settlement in foreign currency or to transfer them to depository institutions abroad from the time when access is required and for 90 calendar days.
An affidavit is not required to be filed for outflows in the foreign exchange market in the following cases: 1) transactions carried out by the financial institution as a customer; 2) cancellation of financing in foreign currency granted by local financial institutions for consumption in foreign currency through credit or purchase cards; and 3) transfers abroad in the name of individuals who are beneficiaries of retirement and/or pensions paid by the ANSES, to the extent that these transfers are carried out automatically in its capacity as representative of the non-resident beneficiary.
This publication does not constitute a legal opinion on specific issues. If necessary, specialized legal advice should be sought.
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