In the last days of October 2011, the Argentine Government has
adopted certain regulatory measures intended to maintain the value
of the Peso against the US Dollar and adversely affecting
particularly the Hydrocarbons, Mining and Insurance Industry, and
repatriation of direct investments.
Hydrocarbons and Mining Industry
On past October 26, the Argentine Government reinstated the
obligation of hydrocarbon companies (producers of crude oil and its
derivatives, natural gas and liquid petroleum gas) and mining
companies to sell in the local foreign exchange market the foreign
currency proceeds of their exports.
In Argentina, simultaneously with the freeze of bank deposits
and the establishment of restrictions on cross border transfers in
the 2001 crisis, one of the main measures adopted by the Argentine
Government was the reinstatement of the obligation to repatriate
export proceeds (which has always been one of the first sources of
foreign currency and a tool used to maintain the value of the Peso
against the US Dollar).
However, the hydrocarbons and Mining industry were benefited by
certain exemptions to such obligation.
Since December 22, 2002, producers of crude oil, natural gas and
liquid petroleum gas were no longer required to repatriate 70% of
the foreign currency proceeds of their exports of freely disposable
crude oil and its derivatives.
Also, since February 27, 2003, any mining company which has
qualified for the foreign exchange stability regime during the
period March 27, 1991 – December 12, 2001, was exempted
from the obligation to repatriate the foreign currency proceeds of
exports of mining goods. Since June 17, 2004, mining companies that
qualified for the stability regime after June 27, 2004 were also
exempted from the obligation to repatriate to Argentina their
As from past October 26, such benefits were lifted by the
Argentine Government and therefore, hydrocarbon and mining
companies are now obliged to sell in the local foreign exchange
market the foreign currency proceeds of their exports.
Within a 50 day-period counted as from October 27, Argentine
insurance companies must transfer to Argentina any investment or
cash kept abroad. After such period, insurance companies may not
make any investment or keep cash abroad. For that purpose, the
insurance companies must submit in a 10-day period an affidavit of
any investment kept abroad.
However, investments may be kept abroad only if expressly
authorized by the Federal Superintendency of Insurance provided
that there is no local investment available to reasonably support
the commitment of the insurance company.
Repatriation of Foreign Direct Investments
As from October 28, 2011 (the
"Effective Date"), in order for a non-Argentine
investor to be allowed to have access to the local foreign exchange
market ("FX Market") to purchase foreign currency
with Argentine pesos collected in Argentina and transfer it abroad
as a result of a subsequent sale or liquidation of an investment or
capital reduction or reimbursement, the non-Argentine investor must
evidence that the funds originally paid for such investment or
disbursement for the capital contribution, as applicable, were
transferred to Argentina and sold in the FX Market (the
Until the Effective Date, a non-Argentine direct investor could
repatriate funds in Argentine pesos collected in Argentina as a
result of the sale or liquidation of its investment or a capital
reduction or reimbursement, provided only that a minimum waiting
period of 365 days had elapsed since the investment had been made.
As from the Effective Date, the Transfer Requirement has to be
complied with too.
The Communication sets a "burden" to be met by
any non-Argentine resident who eventually needs to purchase foreign
currency in the FX Market to repatriate Argentine-Peso denominated
funds collected as a result of the sale or liquidation of an
investment. Conversely, if the foreign investor believes that it
will not need to repatriate, it is not required to comply with the
Transfer Requirement, and therefore, the purchase price of such
investment and any capital contribution may be kept abroad.
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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