Argentina: Foreign Exchange News

Last Updated: 12 March 2012
Article by Juan M. Diehl Moreno and Roberto E. Silva, Jr.

During January 2012, the Argentine Central Bank issued several Communications that had an impact on the foreign exchange market in connection with services, income, financial indebtedness and payment of imports.

Through different Communications, the Argentine Central Bank (the "ACB") set amended texts of law concerning services, income, financial indebtedness and payment of imports. The following are the most important novelties introduced into these matters.

1. Services, Income and Current Transfers (Communication "A" 5264)

  1. A definition of "services" is provided on the basis of the definitions used by the international accounts and international trade.
  2. A clarification is made in connection with income in foreign currency received by Argentine residents due to insurance collections from covers hired to non-Argentine residents (in accordance with the current regulation) that are not considered to be international trade of goods. Pursuant to the communication, that income shall be transferred and liquidated in the local foreign exchange market (Mercado Único y Libre de Cambio or MULC) within a 15 (fifteen) business day term from the date of receipt of the payment either abroad or in Argentina.
  3. In the event of services granted to non-Argentine residents and charged in foreign exchange, certain concepts may be deducted from the amount to be transferred into the MULC. The deductible concepts are those amounts that are withheld or deducted abroad by international systems of compensation of transactions made in different countries, by which only the net amount compensated during the period is liquidated and offered to the resident company. These international systems shall be of ordinary use worldwide for the liquidation of the compensated concepts.
  4. Some requirements are established for donations granted to Argentine residents to be transferred to the MULC. To that end, the receiver of the funds shall be involved in not-for-profit activities (i.e. a religious or educational entity, or a local government). Additionally, the funds shall serve to support the entity's purpose, or the donor shall be an internationally prestigious entity recognized for its activities as donor of charitable, educational and religious high reputation contributions. Furthermore, some other cases are admitted when, in addition to the customer's own awareness, certain formal requirements are also fulfilled.
  5. It is stated that the general authorization to access the MULC to pay dividends includes the payment to non-resident shareholders and ADRs (American Depositary Receipts) and BDRs (Brazilian Depositary Receipts) holders, proceeding from closed financial statements certified by external auditors (with the same formalities applicable to the certification of the annual report).

2. Financial Indebtedness (Communication "A" 5265)

  1. "Foreign financial indebtedness" is defined as a debt held with non-Argentine residents and not originated in an Argentine international trade transaction; or even when originated in an Argentine international trade transaction, it does not qualify as a foreign commercial debt according to the Argentine foreign exchange regulations.
  2. The obligation to transfer to and liquidate the new foreign financial debts in the MULC is also applicable to any transaction in which the payment of funds by the foreign creditor originates a financial indebtedness with a non-resident. There is an exception in the event of mining companies benefited with foreign exchange stability which have a free availability of foreign exchange arising from foreign financings purported to develop local mining projects for exportation.
  3. The term to transfer and sell in the MULC the foreign exchange paid due to new foreign financial indebtedness is reduced from 365 to 30 consecutive days. This affects the paid transactions not yet liquidated, since the period of time to do so is shortened.

3. Payments of Imports (Communication "A" 5274)

  1. The possibility to access the MULC to pay debts (proceeding from imports of goods) in advance is limited to a maximum of 5 business days prior to the expiration date of the foreign obligation. The ACB's prior authorization is needed to access the MULC with longer anticipation.
  2. To access the MULC with the purpose of paying imports of goods, in the event of foreign exchange received in return of import payments made through the MULC (under any concept and after the fulfillment of the agreed purchase condition), the payment of imports shall be liquidated in the MULC within 10 business days as of its availability.
  3. In order to access the MULC to pay commercial import debts or to pay at sight upon submission of the shipping documentation, the requirement of the customs entrance registration is replaced by: (i) the Prior Import Sworn Statement ("DJAI") (see "New Import Restrictions in Argentina" in the current edition of Marval News) under "Exit" status, in all cases where the DJAI is required for the registration of the final destination of imports for consumption provided that the shipping date is on or after February 1, 2012, and; (ii) the importer's commitment to prove the customs entrance registration of the goods within 90 consecutive days since the date of access to the MULC in the event that payments on sight are made, or otherwise, the reentry of the foreign exchange obtained through the MULC for such payment.
  4. To access the MULC to make payments in advance at the date of delivery of the goods by the supplier, the following provisions are added: (i) the requirement to previously obtain the DJAI in the terms described above; (ii) the importer's commitment to prove the customs entrance registration of the goods within 365 consecutive days as from the date of access to the MULC or, otherwise, the reentry of the foreign exchange obtained through the MULC for such payment, and; (iii) the requirement that the importer shall not register, at the moment of access to the MULC, delays on the demonstration of the official imports clearance or, when applicable, of the reentry of the foreign exchange due to transactions carried out with access to the MULC prior to the customs entrance registration.
  5. In the event of imports using letters of credit or guaranteed bills issued or granted by local financial entities on or as of February 1, 2012, the entities will have access to the MULC for its payment abroad at its expiration provided that (regardless the submission made by the importer of the documentation required to make payments abroad) the transaction has, at the moment of the opening of the letter of credit or issuance of the guaranteed bill, the number of DJAI in "Exit" status, whenever said DJAI is a requirement for the registration of the final destination of importation for consumption.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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