BCRA Limits Access to FX Market to Those Who Hold Foreign Currency

As May 29, 2020, prior approval of the Argentine Central Bank (the “BCRA”, after its acronym in Spanish) will be required to access the foreign exchange (FX) market for transactions relating to the outflow of funds, including, among others, payments of imports of goods and services, foreign financial indebtedness, dividends (the latter already required prior approval but under certain conditions), except that when accessing the FX market:

(a) all holdings in foreign currency in Argentina are deposited in accounts with financial institutions and there are no “liquid external assets” available. If liquid external assets are held on the date in which access to the FX market is required, evidence that such assets were used in their entirety on such date to make payments which would have been allowed access to the Argentine FX market must be provided.

“Liquid external assets” include, among others: holdings of foreign currency bills and coins (which would include any USD received by the Company by virtue of the Capital Increase), coined or good delivery gold, demand deposits in foreign financial institutions and other investments which allow for immediate liquidity in foreign currency (such as investments in foreign government securities, funds in investment accounts held abroad, crypto-assets, funds in payment service providers, etc.).

(b) a commitment is given to settle through the FX market, within five business days of their availability, any funds received abroad in the collection of loans granted to third parties, collections of term deposits or the sale of any kind of asset, when each of such had been granted, created or purchased after May 28, 2020.

Compliance with conditions (a) and (b) above, which must result from an affidavit, is regardless of compliance with the remaining requirements established by foreign exchange regulations.

Likewise, until June 30, 2020 prior BCRA approval is required for:

 

1. access to the FX market for the payment of imports of goods in advance, deferred or on demand, or the cancellation of debts originated in the imports of goods, except that:

(a) the total amount of payments associated with the imports of goods carried through the FX market during 2020, including the payment for which access is being requested (including payments for cancellations of credit lines and/or commercial guarantees), does not exceed the amount for which the importer would have access to the FX market when computing the imports of goods that appear in his name in the monitoring system of payments for imports of goods (the “SEPAIMPO,” after its acronym in Spanish) with custom entry registrations between January 1,2020 and the day before access to the FX market.

This requirement will not apply in the case of, for instance, import payments with pending customs registration to the extent that the amount pending regularization by the customer for similar payments made as of September 1, 2019 does not exceed the equivalent of USD 250,000.

(b) the documentation that allows it to verify compliance with the remaining requirements established for the operation by the exchange regulations.

 

2. Access to the FX market for the cancellation of principal for foreign financial indebtedness when the creditor is a counterparty linked to the debtor.

Lastly, the agency established that prior BCRA approval will also be required for transactions corresponding to the outflow through the FX market, in addition to the requirements that are applicable in each case, except that:

(a) as of the date on which access to the FX market is requested it has not sold securities against foreign currency in Argentina or transferred such securities to depository entities abroad (i.e., carried out any outbound Blue Chip Swaps) in the past 90 calendar days.

Until June 30, 2020, only the period elapsed from and including April 1, 2020 will be included.

(b) undertakes not to arrange sales of securities against foreign currency in Argentina or transfers thereof to depository entities abroad from the moment it requires access and for the subsequent 90 calendar days.

In relation to the latter, we recall that in Communique “A” 7001 of April 30,2020, the BCRA had already restricted access to the FX market for those who carry out cash transactions with liquidation, although the term that now rises to 90 days It was 30 days (see in this regard https://www.marval.com/publicacion/el-bcra-y-la-cnv-dictó-medidas-vlinkdas-al-contado-con-liquidacion-y-al-mercado -of-changes-13652).

These measures are adopted in a particular context, in reference to which, in a statement issued by the BCRA late on May 28, 2020, the entity stated that “the Government is making significant efforts to assist companies affected by the crisis generated by Covid-19, through various instruments such as the Work and Production Assistance Program (ATP), the MiPyMEs credit line with a subsidized rate of 24% and the 0% line of credit for monotributistas and self-employed. The purpose of the BCRA is to guarantee that these measures stimulate local work and production and avoid their abuse in the cancellation of obligations abroad”.