Access to the foreign exchange market by companies that participate in the plan for promotion of natural gas production in Argentina

On November 19, 2020, through Communiqué No. “A” 7168, the Argentine Central Bank (the “Central Bank“) established the conditions to access to the foreign exchange market (the “FX Market“) for companies that participate in the plan for the promotion of natural gas production in Argentina, known as “Plan de Promoción de la Producción del Gas Natural Argentino – Esquema de Oferta y Demanda 2020-2024” (the “Plan“), approved by Executive Decree No. 892/2020 (the “Decree“). The Decree established that, in case there are any rules that limit the access to the FX Market, the Central Bank must provide suitable mechanisms in order to facilitate said access

In this sense, the Central Bank established that – as a result of the transfers made through the FX Market as of November 16, 2020 and allocated to the financing of projects under the Plan -, financial institutions may give access to the FX Market to such companies for the following purposes:

Distribution of profits and dividends

These companies will be allowed to access the FX Market to distribute profits and dividends abroad to non-resident shareholders, without the prior written authorization from the Central Bank, provided that the following requirements are met: (i) the profits and dividends correspond to closed and audited financial statements; (ii) the amount for which the access to the FX Market is required does not exceed the amount that corresponds according to the distribution set by the shareholders’ meeting; (iii) the access to the FX Market takes place after two years from the investment in the Plan and; and (iv) the debt was included, if applicable, in the last presentation due of the reporting information regime regarding foreign debt and direct investment (Relevamiento de activos y pasivos externos).

Repayment at maturity of principal and interests

These companies will be allowed to access the FX Market to repay, at maturity, principal and interests of foreign indebtedness to the extent that such indebtedness has an average term of not less than two (2) years and the requirements set forth in Section 3.5 of the Central Bank’s foreign exchange regulations are met.[1]

Repatriation of direct investments from non-residents

Lastly, non-residents will be allowed to access the FX Market to repatriate their direct investments up to the amount of direct investment transferred to Argentina and exchange for Argentine pesos in the FX Market as of November 16, 2020, provided that the following conditions are met:

1. The intervening financial entity is given the corresponding documentation that evidences the effective transfer of the direct investment in the local company;
2. The access to the FX Market takes place after two years since the investment was transferred and exchange for Argentine pesos in the FX Market;
3. In the case of a capital reduction and/or refund of contributions made by the local company, access to the FX Market will be allowed if the intervening financial entity is given the documentation that evidences that the company has been complied with the applicable legal mechanisms and has included, if applicable, in the last presentation due of the reporting information regime regarding foreign debt and direct investment (Relevamiento de activos y pasivos externos), the debt in Argentine pesos owed to the foreign party since the date that the contributions were rejected or the capital reduction was decided, as applicable.

Finally, the Central Bank establishes that the intervening financial entity must be given the corresponding documentation that evidences: (i) the legitimacy of the operation to be carried out; (ii) that the funds were used to finance projects included in the Plan; and (iii) the compliance with the other requirements provided in the Central Bank’s foreign exchange regulations not modified by this Communiqué.

This report should not be considered as legal or any other type of advice by Allende & Brea.

[1] (i) The funds disbursed as from September 1, 2019 were transferred to Argentina and exchanged for Argentine pesos through the FX Market; (ii) The debt was included, if applicable, in the last presentation due of the reporting information regime regarding foreign debt and direct investment (Relevamiento de activos y pasivos externos); and (iii) It does not imply a pre-payment of more than 3 business days before its maturity.