Argentine Central Bank Mandates Companies to Refinance Debt

Pursuant to Communication “A” 7106 dated September 15, 2020, the Argentine Central Bank tightened currency controls.

According to the new regulation, private sector companies and financial institutions shall reprofile at least 60% of any payment of principal scheduled between October 15, 2020 and March 31, 2021 on any external financial debt (other than intercompany debt) and dollar-denominated local securities offerings.

A refinancing plan shall be filed with the Argentine Central Bank based on the following standards:

a) Argentine debtors shall be granted access to the foreign exchange market to purchase foreign currency to make payments of services of principal for up to 40% of the principal amount due on such period only; and

b) at least 60% of the principal amount due on such period shall be refinanced with a new external indebtedness with an average life of at least 2 years.

This shall not apply to: (a) indebtedness with international organizations or their associated agencies or guaranteed by them; (b) indebtedness granted by official credit agencies or guaranteed by them; or (c) payments of principal for an amount no exceeding USD 1,000,000 per calendar month.

The refinancing plan shall be filed before the following deadlines: (a) September 30, 2020, with respect any payment due before December 31, 2020; and (b) at least 30 calendar days before the relevant payment, with respect to any payment due between January 1, 2021 and March 31, 2021.

For more information, do not hesitate to contact Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero or Francisco Molina Portela.

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Restrictions on Blue Chip Swaps and FX Market

On April 30, 2020, the Argentine Central Bank implemented certain restrictions to blue chip swap transactions, by Communication “A” 7001.

The key takeaways of the new resolution are:

1. Restrictions to Blue Chip Swaps.

In order to access the exchange market to purchase foreign currency (i.e. external indebtedness, imports of goods and services, savings, etc.), the following requirements shall be satisfied:

  • The client shall not have made sales of securities with settlement in foreign currency or transfers of these to foreign depositary entities within the last 30 days; and
  • The client shall undertake not to make sales of securities with settlement in foreign currency or transfers of these to foreign depository entities for the following 30 days.

Transactions involving sales of securities with settlement in foreign currency are those by which the client sells securities and receives dollars, either in Argentina or abroad).

2. Promotional credit lines under the COVID-19 sanitary emergency.

Clients with financings in Pesos under Communication “A” 6937 (promotional credit lines at a 24% rate under COVID-19 sanitary emergency):

  • May not access the foreign exchange market to pay services of principal or interest on external indebtedness past due before March 19, 2020, or with no specified maturity.

    Some clarifications:

    • Not applicable to performing external indebtedness.
    • Not applicable to indebtedness with local financial institutions.
    • Not applicable to external indebtedness incurred after March 19, 2020.
    • Not applicable to payments of imports of goods and services (according to BCRA newsletter dated April 30, 2020).

● May not sell securities with settlement in foreign currency or transfer those to foreign depositary entities.

3. Payments with debit or credit cards.

Clients may not purchase jewels, precious stones as well as precious metals (gold, silver, platinum, etc.) by local credit or debit cards. The following transactions with debit and credit cards were already forbidden: (a) gambling; (b) transfers to payment providers (i.e. PayPal); (c) transfers to investments accounts located abroad; (d) foreign exchange operations; and/or (e) purchases of cryptocurrencies.

4. Reporting of Foreign Exchange Operations.

The BCRA reduced the threshold of transactions that shall be reported to the BCRA with 2 business days in advance from US$ 2 million to U$S 500 thousand.

For more information please do not hesitate to contact Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero and/or Francisco Molina Portela.

In the following link, you can access the Firm’s statement on COVID-19.

For information concerning COVID-19 legal implications, please refer here.

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COVID-19: Mandatory Change of Maturities with Local Banks

As part of the national sanitary emergency imposed due to the Coronavirus (COVID-19), the Argentine Central Bank published today Communication “A” 6949 (the “Communication”), mandatorily extending the payment dates of financings granted by local financial institutions due between April 1st, 2020 and June 30, 2020.

The Communication establishes in point 4 that:

  1. Banks are prohibited to charge default interests during said period, and those financings will only accrue compensatory interests at the expected contractual rate.
  1. Amortizations and maturities that fall within that said period, excluding credit card payments, shall be postponed to the month immediately following the month in which the final maturity of the financing is due. In this case, it is our understanding that if the final maturity date of the financing occurs within the above-mentioned period, then such final maturity will be postponed to the same day of the immediately following month, even if such month is part of the above-mentioned period.
  1. Credit card payments due between April 1, 2020 and April 12, 2020 may be cancelled on April 13, 2020 for the same amount and without any surcharge.
  1. This Communication excludes any credit facilities granted to the financial sector entities.

Notwithstanding the foregoing, the Communication does not affect the bank's right to accelerate payments and/or initiate legal collection actions, once each financing can be considered past due according to the regulation described above.

For further information, please contact Marcelo R. Tavarone, Federico Salim, or Julieta De Ruggiero.

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Argentine Central Bank relaxes requirements to make advance payments of imports of goods

Pursuant to Communication “A” 6903, dated February 14, 2020, the Argentine Central Bank revised the requirements to make advance payments of imports of goods. The new regulatory framework relaxes the requirements for importers with delays registered in the SEPAIMPO Information System.

Pursuant to current regulation, clients who register delays in the SEPAIMPO do not have access to the foreign exchange market to make new advance payments of imports.

Pursuant to the new regulation passed today, from March 2020, clients with registered delays will have access to the foreign exchange market to make new advance payments, subject to the following:

  • The client does not register delays with respect to advance payments made as of 02.09.19.
  • Prior Central Bank´s approval shall be required when the client registers, for transactions prior to 02.09.19, a judgement in the last 5 years or an open proceeding for violations of Article 1(c) of Law 19,359 with respect to import transactions.
  • In the event that the client is not an individual and has been incorporated up to 365 calendar days prior to the date of access to the exchange market, prior approval of the Argentine Central Bank will be required to process new payments when the amount pending regularization for advance payments of imports is more than the equivalent of US$ 5 million (five million US dollars), including the amount for which access to the exchange market is requested. In the case that the client is a joint venture, the date of incorporation of the oldest company will be taken into account.

For more information, do not hesitate to contact Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero or Francisco Molina Portela.

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Extension of regulations applicable to “Payment Service Providers” (PSPs)

On January 30, 2020, the Argentine Central Bank issued Communication “A” 6885 providing for regulations applicable to the activity of Payment Service Providers (PSPs). Below you will find a brief description of the most important features.

Communication “A” 6885 has excluded from the PSP legal framework the payment schemes that are governed by the rules of the Argentine Securities and exchange Commission (CNV) (among them, agents, markets and clearing houses’ operations) as well as such activities which main purpose is to retain and/or receive and make payments to the public sector.

Communication “A” 6885 also prohibits entities governed by the CNV (markets, clearing houses and agents) to operate as PSPs.

PSPs must be registered with the “Registry of Payment Service Providers that offer payment accounts” within 30 days since March 1, 2020. Since registration date, the PSP falls within the supervision of the Argentine Central Bank and will be liable, together with its authorities, under Sections 41 and 42 of the Financial Entities Law 21,526.

In order to register, a PSP must provide, among other information, the operational and commercial description of its payment structure and the identification of any person who holds at least 20% of share capital and/or votes of the entity or who, by other means, exercises final control, directly or indirectly, of the PSP (final beneficiaries).

Regarding customers cash management, Communication “A” 6885 made no changes, and the obligation to have the cash deposited in a local bank account (except for the sums invested in money market funds) remains.

Finally, Communication “A” 6885 creates obligations in connection with financial transparency. PSPs must indicate in all advertising that they are not financial entities and that the cash deposited (as it is not a deposit in a financial entity), does not fall within the argentine deposit guarantee system.

For further information, please do not hesitate to contact either Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero, Juan Pablo Bove, Federico Otero, Julián Razumny, Agustín Griffi, or Pablo Tarantino.

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The Argentine Central Bank lifts certain restrictions for the distribution of profits and dividends to Shareholders

On January 16, 2020 the Argentine Central Bank issued Communication “A” 6869 (the “Communication”). The Communication relaxed the rules for the purchase and transfer of foreign currency for the distribution of profits and dividends in foreign currency to non-Argentine shareholders.

Pursuant to the Communication, non-Argentine shareholders may access the local foreign exchange market (the “FX Market”) for the distribution of dividends and profits without prior approval of the Argentine Central Bank, provided that:

  1. Profits and dividends shall be evidenced in audited financial statements;
  2. The aggregate amount paid to non—Argentine shareholders shall not exceed the equivalent in Pesos approved by the relevant shareholders´ meeting;
  3. The aggregate amount of distributions paid through the FX Market as of January 17, 2020 shall not exceed 30% of the value of the new foreign direct investment contributions made as of such date in the Argentine company that have been repatriated and converted to Pesos through the FX Market.
  4. The payment may not be made before 30 calendar days from the repatriation and conversion to Pesos of the last capital contribution made to the company, as requested in section 3 above.
  5. The client shall provide evidence that the equity contribution has been capitalized. Alternatively, the client shall provide evidence of the filing of the request for capitalization with Public Registry of Commerce (which shall be obtained within 365 calendar days from the filing).
  6. If applicable, the relevant direct investment shall have been registered with the Argentine Central Bank under the Foreign Assets and Liabilities Reporting Regimen (“Relevamiento de activos y pasivos externos”).

For more information, do not hesitate to contact Marcelo R. Tavarone, Federico M. Salim, Julieta De Ruggiero or Francisco Molina Portela.

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Regulation of “Payment Service Providers”

On January 9, 2020, the Central Bank of the Argentine Republic issued Communication “A” 6859 (the “Communication”). The Communication establishes a partial regulation of the activities of Payment Service Providers (“PSP”), this is, of those legal persons that, without being financial entities, fulfill at least one function within a retail payment scheme, such as offering freely disposable accounts to their clients to make or receive payments, within the framework of a global payments system.

The Communication establishes the following obligations to be fulfilled by the PSP´s, which must be carried out, at most, by January 31, 2020:

  1. Provide for client funds to be, at all times, immediately available for an amount equivalent to, at least, the amount credited in the payment account, with the PSP systems having to identify and individualize the funds of each client;
  2. Deposit 100% of the funds of its clients, at all times, in peso denominated accounts located in financial institutions within Argentina;
  3. Upon the request of its clients, transfer the balance in the payment account to the realization of operations with “common money funds” in the country; and
  4. Carry out all PSP transactions (payment of suppliers, salaries, etc.) through separate accounts to those where the funds of their clients are deposited.

Likewise, the communication establishes that in the event of non-compliance with any of the aforementioned obligations, the sanctions established in articles 41 and 42 of the Financial Entities Law, and concordant provisions, will be applicable to the PSPs and the members of their administrative/control bodies.

For more information, do not hesitate to contact Juan Pablo Bove, Federico Otero, Julián Razumny, Agustín Griffi, Pablo Tarantino, or to corporate@trsym.com.

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Capital Controls in Argentina: Relevant Updates on Payments of Imports of Goods

Pursuant to Communication "A" 6818 dated October 28, 2019, the Argentine Central Bank updated the foreign exchange regulations applicable to payments of imports and other purchases of goods. The new regulatory framework introduces relevant improvements, such us the regulation of import financings, which until now were not specifically contemplated in the regulation, and the reimplementation of the SEPAIMPO, a monitoring regime of payments of imports.

Below are the key takeaways of the new regime:

  1. General Provisions

The general rule is that Argentine importers may access to the local foreign exchange market to make payments of imports of goods and other purchases of goods, subject to certain conditions provided in the regulation (for further detail, see points 3 and 4 below). The payment includes any concept that is part of the purchase condition registered in the invoice issued by the foreign supplier.

Payments of imports of goods are divided in two types: (i) payments of imports that have customs clearance and (ii) payments of imports with customs clearance pending. In both cases, the access to the foreign exchange market includes the payment of commercial debt incurred to finance such imports of goods, including, among others: (a) financing provided by the foreign supplier, (b) financing provided by a foreign export credit agency, and (c) financing provided by a local or foreign financial entity where disbursements are used, net of costs and expenses, to pay to the foreign supplier directly.

The regulation of import financing is a positive aspect of the new regime. Until now, the foreign exchange regulations did not distinguish between financial indebtedness and commercial indebtedness, and the direct application of the disbursement to pay the exporter was not allowed. From now on, disbursements of import financings may be used to pay to the foreign supplier directly, and the requirement to repatriate and convert the loan to Pesos will not be applicable, as it occurs with financial indebtedness.

  1. Tracking System of Payments of Imports (“SEPAIMPO”)

The SEPAIMPO is a system implemented by the Argentine Central Bank to track the payments of imports, as well as to monitor the nationalization of the goods associated with advance payments of imports. For each import, the importer shall appoint a financial institution as monitoring entity. The monitoring entity shall verify the conditions to make payments and track the nationalization of the goods associated with an advance payment.

  1. Payments of Imports with Customs Clearance

The importers may purchase foreign currency in the local exchange market for the payment of imports with customs clearance registered in the SEPAIMPO, as long as the monitoring entity verifies the following requirements, among others:

  1. Proof of customs clearance, copy of the invoice, copy of the shipping document, and verifies that the beneficiary of the payment is the foreign supplier or the financial institution or export credit agency that financed the purchase.
  2. The sale of foreign currency is made against debit to a local account of the importer.
  3. The payment is not made before the due date of the obligation. Prepayments require prior approval by the Argentine Central Bank.
  1. Payment of Imports with Customs Clearance Pending

4.1. Advance Payments

The monitoring entity may grant access to the foreign exchange market for advance payments, provided that the following requirements are met, among others:

  1. Receives documentation to determine the existence of the purchase and the requirement of advance payment prior to the date of delivery of the goods.
  2. The beneficiary of the payment is the foreign supplier.
  3. The sale of foreign currency is made against debit to a local account of the importer.
  4. Receives an affidavit from the client in which it undertakes to obtain customs clearance of the goods within 90 calendar days from the date of payment, or to repatriate and convert the payment to Pesos within such period. Prior Argentine Central Bank approval shall be obtained for advance payments to affiliates or if longer periods are required.
  5. The amount to be paid is reasonable.
  6. The client has not defaulted previous advance payments.

4.2. Payment at Sight against Shipping Documents

The monitoring entity may grant access to the foreign exchange market for payments at sight, provided that the following requirements are met, among others:

  1. Receives copy of the invoice.
  2. Receives copy of the shipping documents.
  3. Receives documentation setting forth the obligation to pay at sight against the presentation of shipping documentation.
  4. The beneficiary of the payment is the foreign supplier, the foreign financial entity or the official credit agency that financed the advance payment to the exporter.
  5. The sale of foreign currency is made against debit to a local account of the importer.
  6. Receives an affidavit from the client in which it undertakes to obtain customs clearance of the goods within 90 calendar days from the date of payment, or to repatriate and convert the funds to Pesos within such period.

For more information, do not hesitate to contact Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero or Francisco Molina Portela.

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Argentine Central Bank Tightens Capital Controls

In order to preserve the international reserves, the Argentine Central Bank implemented new restrictions on the purchase of foreign currency. It did so through Communication "A" 6815 dated October 28, 2019.

Below are the key takeaways of the new restrictions:

  • Creation of External Assets: The limit for the creation of external assets by individuals is reduced from US$ 10,000 to US$ 200 per calendar month. The transaction must be carried out with debit to an account in a local financial institution of the client, admitting the use of cash up to US$ 100 per month. These limits are not cumulative and include all transactions already performed in October. According to point 1.4 of Communication "A" 6776 and the press release issued by the Argentine Central Bank on October 28, 2018, we understand that credit cards are not subject to this limit.
  • Debit Card Cash Withdrawals: Withdrawals of foreign currency outside Argentina using local debit cards may only be made against deposits in foreign currency in local financial institutions.
  • Import Advances: Importers may access the foreign exchange market for the payment of import advances to non-affiliates. Customs clearance shall be obtained within the following 90 days. Prior Argentine Central Bank approval shall be obtained if the supplier is an affiliate of the importer. Note that, prior to this new regulation, advance payments were allowed, provided that customs clearance was obtained within the following 180 days, without any distinction between affiliates and non-affiliates.
  • New Information Regime for Transactions Over US$ 2,000,000: Financial institutions and exchange agencies shall report to the Argentine Central Bank on a daily basis of the foreign exchange transactions to be carried out in the following three (3) business days for amounts higher than US$ 2,000,000. In this regard, clients requesting such transactions shall inform their financial institution or exchange agency the proposed transactions with reasonable anticipation. On the day of the transaction, the client may use a different entity.
  • Non-residents: The limit to purchase foreign currency by non-residents, originally set at US$ 1,000, is reduced to US$ 100 per calendar month. Payments by ANSES (National Social Security Agency) to beneficiaries of old age pensions are exempt from that limit.

For more information, do not hesitate to contact Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero or Francisco Molina Portela.

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Capital Controls: Important Updates on Export Regime

Pursuant to Communication “A” 6788, dated September 19th, 2019, the Argentine Central Bank (the “BCRA”, per its acronym in Spanish) updated -again- the capital control regime imposed almost three weeks ago. In this case, the new regulation reformulates the deadlines for the settlement (repatriation and conversion to Argentine Pesos) of proceeds from the export of goods, provides for extensions and exceptions of the deadlines, and establishes a tracking regime of export transactions by financial institutions, among other updates. It is expected that the BCRA will issue further regulations in the near future.

Please find below a summary of the main amendments made by Communication “A” 6788:

  1. General Provisions

1.1. Settlement Obligation

The regulation provides for new settlement deadlines of 15, 30, 60 or 180 calendar days from shipment, up to the invoiced amount, depending on the type of good. The deadline for settlement of proceeds from exports between affiliates was extended to 60 calendar days, except a shorter deadline applies as a result of the type of good. Moreover, transactions conducted under the “EXPORTA SIMPLE” regime shall be settled within 365 calendar days from shipment.

Regardless of the new deadlines, the BCRA maintained the obligation to settle export proceeds within 5 business days from the date of collection. In addition, exporters shall select a financial institution to track each export transaction.

1.2. Exports Formalized Before September 2, 2019

The BCRA maintained the deadline of 5 business days from the date of collection for the settlement of proceeds from exports of goods formalized before the reinstitution of the capital controls.

1.3. Extension of Settlement Deadline

The new regulation establishes that the tracking bank may grant extensions to the settlement deadlines under certain circumstances, such as: (i) when the country of destination has a minimum settlement period which is longer than the deadline, the longer period shall apply; and (ii) when the transaction was prefinanced, the settlement deadline may be extended up to the maturity of the export loan.

1.4. Payment Delays by Importer

An important amendment is that an export transaction may be marked by the tracking bank as “nonperforming due to payment delay” when it has been verified that the delay on the settlement obligation of export proceeds was due to a delay on the payment by the importer, as a result of: (i) capital controls in the importer’s country; (ii) foreign importer insolvency; and (iii) debtors default.

Except for the case of capital controls in the importer’s country, export transactions may not be marked as “nonperforming due to payment delay” when exporter and importer belong to the same corporate group. Once the importer was able to make the payment, the exporter or the export credit insurance company, as the case may be, shall settle the proceeds within 5 business days from the date of collection.

1.5. Allocation of Settlements to Export Transactions

The BCRA clarified that the following settlements may be allocated to export transactions: (i) proceeds of exports; (ii) self-settlements made by the exporter; (iii) settlements made through payment processing companies; and (iv) settlements made through the Sistema de Monedas Locales.

1.6. Export Advances, Pre-export Loans and Post-export Loans

The obligation to settle new export advances, pre-export loans and post-export loans is maintained. Export financings by foreign entities shall be settled within 5 business days from the disbursement date, while export financings to foreign importers by local financial institutions shall be settled on the disbursement date. Payments of exports of goods may be allocated to repay principal, interest and costs and expenses of export financings. Also, exporters may apply the proceeds of export advances to the cancelation of local and/or foreign pre-export loans.

  1. Tracking Regime of Export of Goods

2.1. Scope of the Regime

The BCRA established a monitoring regime to track the settlement of proceeds of exports of goods formalized as from September 2, 2019, except for export transactions exempted from the tracking regime (diplomatic, samples, promotional material, baggage, deficiencies, assistance and rescue, brokers, organ donation and other special regimes). The fact that an export is exempted of tracking does not mean that the proceeds of such exports are exempted from the obligation to settle the proceeds.

2.2. Tracking Entity

The exporter shall select a financial institution to track each export transaction through the SECOEXPO system provided by BCRA. The tracking entity must determine the amount and deadline to settle the export proceeds and shall register in the system the amounts allocated to each transaction.

2.3. Compliance Certificate

The tracking entity shall issue a compliance certificate for each export transaction whose settlement allocations fulfilled the required amount within the relevant deadline. The compliance certificate shall be required by the tax authority to release export promotional payments.

2.4. Non-Performing Transactions

When the exporter does not comply with the obligation to settle export proceeds within the relevant deadline, the tracking entity shall report the nonperforming transaction through the SECOEXPO system.

2.5. Admitted Allocations

The tracking entity may consider the settlement obligation as totally or partially fulfilled in the following cases and amounts: (i) concepts included in FOB value that are no part of the agreed sale condition; (ii) banking expenses associated to collections procedures; (iii) exports that by their nature are not able to generate a proceeds (EXPONOTITONEROSO or EXPOSINVALORCOM); (iv) rejected merchandise in destination or reimported; (v) missing goods, losses and deficiencies; (vi) wrecked merchandise; (vii) discounts and expenses fees payable abroad; (viii) expenses related with the placement of the goods abroad; (ix) penalties for exporter´s delay in the delivery of the goods; (x) tax withholdings in the country of destination; among others.

  1. Tracking Regime of Export Financings

The BCRA also implemented a tracking regime of export financings. The following financings are covered by this regime: (i) all settlements performed as of 02.09.19 corresponding to advance payments, pre-export loans and other financings for which the allocation of export proceeds are allowed; (ii) pre-export loans and financings of exports pending on 31.08.19 provided or guaranteed by domestic financial institutions; (iii) export advances and pre-export loans from abroad pending on 31.08.19, whether or not settled through the foreign exchange market and for which the exporter requests its allocation to exports formalized as of 02.09.19; (iv) financial indebtedness instrumented before August 31, 2019, which conditions foresee the earmarking of export proceeds and for which the exporter requests its allocation to export transactions formalized as of 02.09.19.

In the case of financings provided by domestic financial institutions, the tracking regime will be in charge of the financial institution that provided the financing. Otherwise, the tracking regime will be initially in charge of the entity that performed the settlement of the financing in the local exchange market. The exporter may subsequently change the tracking entity.

The tracking entity shall register each allocation of export proceeds and shall be responsible for the issuance of the allocation certificates that enables the allocation of export proceeds to export transactions.

For further information, please do not hesitate to contact Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero or Francisco Molina Portela.

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