Argentina reinstates foreign exchange control restrictions

Legal Update

On September 1, 2019, the Argentine Government issued Executive Decree No. 609/2019 (“Decree 609”) which, inter alia, reinstated certain foreign exchange restrictions, most of which had been progressively repealed as from 2015. Decree 609 was further regulated by Communiqué “A” 6770 of the Argentine Central Bank, also issued on September 1, 2019 (“Communiqué 6770”). The restrictions, which are intended to be temporary, will be in place until December 31, 2019, according to Decree 609 and Communiqué 6770.

1. Repatriation of Export Receivables

Argentine exporters of goods will need to repatriate (repatriar) into Argentina export proceeds corresponding to new exports made as from September 2, 2019 (i.e., to transfer the funds earned abroad into an account in Argentina), and to exchange those funds into Pesos by surrendering them to an entity authorized by the Argentine Central Bank to operate in foreign exchange (liquidar) within the following terms:

(a) Exports to affiliates (irrespective of the type of good exported) and/or exports of certain goods (including cereals, seeds, minerals, precious metals, vehicles, armoury and art), 15 days; and

(b) Other exports, 180 days.

The repatriation and surrender obligations are triggered irrespective of the actual collection of the exports proceeds. In addition, and notwithstanding the above terms, exporters will need to convert into Pesos the export proceeds within five (5) business days from collection.

In addition, export proceeds corresponding to exports made before September 2, 2019 will need to be repatriated and surrendered within five (5) business days from collection thereof.

Exporters will be entitled to apply exports proceeds to repay advance payments of exports and pre-export facilities granted or guaranteed by Argentine financial entities or previously repatriated and surrendered, and to repay facilities in place as of August 31, 2018 that contemplate the repayment through the application of exports proceeds.

2. Repatriation of “Export of Services”

Argentine residents will need to repatriate, if applicable, and to exchange into Pesos the collection of services rendered to non-Argentine residents that are paid in a foreign currency either in Argentina or abroad (so called, “export of services”) within five (5) business days from collection.

3. Limitation on Acquisition of "Foreign Assets"

Acquisition of foreign currency for the acquisition of “foreign assets” (i.e., foreign currency securities and assets held outside of Argentina) will require the prior approval of the Argentine Central Bank, except for individuals who will be entitled to purchase up to the equivalent of US$10,000 per month for the acquisition of foreign assets.

4. Limitation on Acquisition of Foreign Currency by Non-residents

Acquisition of foreign currency by non-Argentine residents for an amount exceeding the equivalent of US$1,000 per month will require the prior approval of the Argentine Central Bank, except for certain international and bilateral organizations and agencies, diplomatic representations, and courts.

5. Limitation on Dividend Payments

Acquisition of foreign currency by Argentine residents for the payment of dividends will require the prior approval of the Argentine Central Bank.

6. External Financial Debt

Argentine residents will need to repatriate and to exchange into Pesos funds disbursed under financings granted by non-Argentine residents (so called “external financial debt”) as from September 1, 2019, and such repatriation and exchange will be a requirement for the borrower to be able to repay such debts. No specific term for such repatriation and exchange has been established yet.

Prepayment of principal and interest of external financial debt at any time earlier than three (3) business days from the relevant payment date will require the prior approval of the Argentine Central Bank. Moreover, borrowers will need to disclose the existence and certain terms and conditions of the external financial debts through a certain information regime established by the Argentine Central Bank (i.e., a system involving the reporting of foreign liabilities and debts by residents) to make any payment.

7. Limitation on Import Payments

Payment of imports of goods and services before the relevant due date will require the prior approval of the Argentine Central Bank. In addition, payment of imports to affiliates (either at sight or due) for an amount exceeding the equivalent of US$2,000,000 per month will require the prior approval of the Argentine Central Bank

8. Limitation on Payments of Services to Non-Resident Affiliates

Payment of services rendered by non-Argentine resident affiliates will require the prior approval of the Argentine Central Bank, except for payments by credit card issuers corresponding to travel and tourism expenses.

9. Limitation on Guarantees for Derivative Transactions

Acquisition of foreign currency for the incorporation of guarantees under derivative transactions will require the prior approval of the Argentine Central Bank, except for individuals who will be entitled to purchase foreign currency for up to the equivalent of US$10,000 per month for such purpose.

10. Limitation on Foreign Currency-Denominated Debts between Residents

Acquisition of foreign currency by Argentine residents to repay foreign currency-denominated debt held by other Argentine residents will not be permitted, except for debts instrumented in deeds, or registered with public registries, as of August 30, 2019.

11. Transaction with Securities

Decree 609 authorized the Central Bank to issue regulations aimed at preventing practices and transactions with foreign-currency-denominated securities intended to elude the above regulations. These practices consist on purchasing foreign-currency-denominated securities in a foreign market and subsequently selling those securities in an Argentine market (obtaining Pesos), and conversely on purchasing securities in an Argentine market and subsequently selling those securities in a foreign market (obtaining foreign currency outside of Argentina). According to Communiqué 6770, Argentine financial entities are prevented from purchasing securities in secondary markets that are settled in foreign currencies.

12. Use of Exchange Contracts

All exchange transactions will require an exchange contract (boleto) to be executed with an entity authorized by the Argentine Central Bank to operate in foreign exchange in which the parties will need to disclose the nature of the underlying transaction (i.e., the transaction pursuant to which the currencies are exchanged, which is known as the “concept” –concepto– under which the transaction is made), and a sworn statement that all regulations and limitations are complied with.

13. Application of Criminal Exchange Law

The Criminal Exchange Law No. 19,539 (as amended) will reach transactions not complying with exchange regulations. Such law provides fines of up to ten times the amount of the transaction in infraction for the first infraction, fines of three to ten times the amount of the transaction in infraction or prison of one to four years in the case of first recidivism and prison of one to eight years plus the maximum of the applicable fine in the case of second recidivism. Furthermore, the Criminal Exchange Law establishes that the directors, legal representatives, chief executives, managers, and members of the surveillance committee who take part in the transaction are jointly and severally responsible for the fines.

Decree 609 ranks as a formal law and is subject to the review of the Congress. Decree 609 has entered into force as of the date hereof and will keep all legal effects unless both Chambers of the Congress reject it.

Should you need further information do not hesitate to contact Victoria Funes, Patricio A. Martin and/or Fermín Caride.