By: Martin Mittelman and Augusto Mancinelli
On September 1, 2019, the Argentine Government issued Executive Decree No. 609/2019 (the “Decree”) which reinstated certain foreign exchange restrictions that had been in effect prior to 2016. The Decree was supplemented by Communication “A” 6,770 of the Argentine Central Bank (the “Central Bank”), also issued on September 1, 2019 (the “Communication” and, together with the Decree, the “Regulations”).
According to the Regulations, these new restrictions are effective from September 1, 2019 and will be in force until December 31, 2019. Below you will find a summary of the main provisions of the Regulations:
- Restrictions on dividend payments
Argentine companies will need to obtain prior approval by the Central Bank to access the Argentine foreign exchange market (“FX Market”) to make dividend payments or other distributions abroad.
- Restrictions on payments of services to foreign affiliates
The transfer of funds outside Argentina to pay for services rendered by foreign affiliates will be subject to prior approval by the Central Bank, except for credit card companies on account of tourism services.
- Restrictions on the acquisition of foreign assets
The acquisition of foreign currency/assets will be subject to prior approval by the Central Bank, except for individuals who will be entitled to purchase up to US$10,000 per month.
- Repatriation of export receivables
Argentine exporters of goods will be required to transfer to Argentina and settle in Pesos in the FX Market the proceeds from exports made as of September 2, 2019, surrendering those funds to a local financial entity according to the following terms:
- Exports with affiliates (irrespective of the type of good exported) and exports of certain goods (including cereals, seeds, minerals, precious metals, among others), shall be transferred to Argentina and settled in Pesos within 15 calendar days; and
- Other exports shall be transferred to Argentina settled in Pesos, within 180 calendar days.
Irrespective of such deadlines, the obligation to transfer the funds to Argentina and settle in Pesos must be complied with within 5 business days from the actual collection thereof.
Exporters will be entitled to apply exports proceeds to repay pre-export financings granted or guaranteed by local financial entities or already settled in the FX Market, and to repay facilities in place as of August 31, 2019 that contemplate repayment through the application of exports proceeds.
- Repatriation of proceeds from services exports
Argentine residents will be required to transfer to Argentina and settle in Pesos the proceeds from services exports rendered to non-Argentine residents that are paid in foreign currency either in Argentina or abroad, within 5 business days from collection thereof.
- Restrictions on the acquisition of foreign currency by non-residents
Non-Argentine residents will require prior Central Bank approval to acquire foreign currency in excess of US$1,000 per month, except for certain bilateral or international organizations, institutions and agencies, diplomatic representations, and foreign tribunals.
- Foreign financial indebtedness
Argentine residents will have to transfer to Argentina and settle in Pesos any proceeds from financings disbursed outside Argentina as of September 1, 2019, and evidence of such repatriation will be required to access the FX Market to repay such debts.
The payment of principal of, and interest on, foreign financial indebtedness intended to be made more than 3 business days prior to the due date will require prior approval by the Central Bank.
- Restrictions on payments of imports
Payments of imports of goods and services prior to the due date will require prior approval by the Central Bank.
In addition, the payment of imports of goods from affiliates for an amount exceeding US$2,000,000 per month will be subject to Central Bank prior approval.
- Restrictions on payments of foreign currency-denominated debt 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 debt instrumented in public deeds, or registered with public registries, prior to August 30, 2019.
- Certain securities transactions
The Decree authorized the Central Bank to issue regulations aimed at preventing certain practices involving foreign currency-denominated securities intended to avoid the application of the above regulations, including acquiring bonds or other securities in Argentina, which are traded in Argentina and another country, to transfer such securities for sale in such other country, and realize such transaction in foreign currency.
- Criminal exchange regime
The violation of any of these foreign exchange restrictions will be deemed a criminal offense under the Argentine criminal exchange regime, which establishes fines of up to ten times the amount of the transaction for the first violation, fines of three to ten times the amount of the transaction or imprisonment for one to four years in the case of first time recidivism and imprisonment for one to eight years plus the maximum of the applicable fine in the case of further recidivism. The criminal exchange regime establishes that the directors, legal representatives, chief executives, managers, and members of the supervisory committee who participate in such transactions will be jointly and severally liable for any fines.