On September 15, 2020, through Communication “A” 7106, the Central Bank of the Republic of Argentina (the “Central Bank”), in coordination with the National Securities Commission (CNV) and the Federal Administration of Public Revenues (AFIP), established a series of regulations aimed at limiting access to the official exchange market and imposed new restrictions on the sale of securities with settlement in local and foreign currency.
Limitations on the purchase of foreign currency and transactions with credit and debit cards
The new regulation maintains the quota in force of USD 200 per month for the purchase of foreign currency by resident individuals[1]but intends to discourage the demand for foreign currency by establishing, with retroactive effect as of September 1, 2020, that payments made in foreign currency through credit or debit cards abroad will be taken as part of the monthly USD 200 quota. However, there will be no limit to payments through credit and debit cards and, if payments exceed the USD 200 quota in any given month, it will count against the quota of the following months.
In addition, the AFIP established a mechanism to collect 35% on account of income tax and personal property tax on purchases of foreign currency and credit and debit card transactions in foreign currency by residents.
Limitations on the settlement of securities against local and foreign currency
First, the CNV maintained the minimum holding period of five (5) business days as from the date of credit to the Depository Agent’s account, to carry out sales transactions of securities with settlement in foreign currency.
The minimum holding period for individuals, which was 5 (five) business days until now, was removed for securities purchases with settlement in foreign currency regardless of the form of settlement, this period being in force for legal entities only.
On the other hand, the CNV extended from five (5) to fifteen (15) business days from the date the securities are credited to the Depository Agent’s account, the minimum term for holding securities purchased locally with settlement in local currency before transferring them to depositary entities abroad. This term will not apply where the credit of securities to the Depository Agent’s account is the result of an initial offering of Argentine Treasury bonds.
Where the securities credited to the account of Caja de Valores S.A. come from foreign depositary entities, they may not be settled: i) in foreign currency through transactions in the local market until five (5) business days have elapsed from the above-mentioned credit to the local custodian’s sub-account/s, and ii) in local currency until fifteen (15) business days have elapsed from the above-mentioned credit to the local custodian’s sub-account/s. The minimum holding period of fifteen (15) business days mentioned above will not apply in the case of shares and/or Argentine Certificates of Deposit (CEDEAR) traded in markets regulated by the CNV.
On the other hand, securities transactions arranged abroad and securities acquired abroad may not be settled in local currency in Argentina, except in the case detailed in clause ii) of the preceding paragraph.
Likewise, the CNV established that the operations arranged in foreign markets as a client by the sub-accounts owned by the registered Agents must be carried out exclusively in markets authorized and regulated by a government regulatory body, which do not belong to non-cooperating countries for the purposes of tax transparency, in respect of which the CNV has signed and in force a Memorandum of Understanding for mutual assistance, collaboration and mutual information under the bilateral or multilateral modality.
Finally, non-residents may not carry out securities settlement transactions against foreign currency in Argentina.
Restructuring of private sector financial debts in foreign currency
The Central Bank has also provided that resident individuals and legal entities with principal maturities falling due between October 15, 2020 and March 31, 2021 on the following transactions:
- financial debts abroad of the non-financial private sector with a creditor that is not a counterparty related to the debtor [2], or
- financial debts abroad due to financial entities’ transactions, or
- issuance of foreign-currency denominated publicly-registered debt securities in Argentina by private sector clients or by the entities themselves,
must submit to the Central Bank a refinancing plan based on the following criteria:
- the net amount to access the foreign exchange market within the original terms must not exceed 40% of the principal amount due.
- the remaining principal must have been refinanced through new foreign debt with an average life of at least 2 years.
The foregoing will not apply where: (i) the debt is owed to international organizations or their associated agencies or guaranteed by them, or to official credit agencies or guaranteed by them, and (ii) the amount for which access to the exchange market would be gained for the repayment of the principal of these types of debt does not exceed the equivalent of USD 1,000,000 (one million US dollars) per calendar month.
For maturities to occur until December 31, 2020, the refinancing plan must be submitted to the Central Bank before September 30, 2020. For maturities to occur between 01.01.2021 and 31.03.2021, it must be submitted at least thirty (30) calendar days before the maturity of the principal amount to be refinanced.
This report should not be considered as legal or any other type of advice by Allende & Brea.
[1] This quota of USD 200 was originally set by Central Bank Communiqué “A” 6815 of 28.10.2019.
[2] Please note that according to Central Bank Communiqué “A” 7094 of 27.08.2020, prior written authorization of the Central Bank is required, until 31.10.2020 inclusive, for access to the foreign exchange market by the non-financial sector for the payment of foreign debt capital services when the creditor is a counterparty related to the debtor.
