Extension of the Line of Credit for Productive Investment

On December 16, 2014, the Central Bank of Argentina (the "Central Bank") issued Communication "A" 5681 (the "Communication"), extending the Line of Credit for Productive Investment during the first semester of 2015, concentrating all funding in micro, small and medium-sized enterprises ("MiSMEs"), particularly those enterprises of a smaller size. Please find below the analysis of the most significant modifications incorporated by Communication “A” 5681.

This financing regime, in force since 2012, is directed 100% at MiSMEs. The eligible financings are those for investment projects on the acquisition of capital goods and / or construction of facilities for the production of goods and / or services and the commercialization of goods. This regime is not applicable if the funds are allocated to the acquisition of a company as a going concern or to the purchase of land, or to finance working capital. The Central Bank may accept, exceptionally, other financings provided that they are intended to facilitate foreign trade operations in addition to those already provided by this regime.

To the effects of such regime, the Communication includes as a novelty that MiSMEs which carry out activities of financial and insurance services and/or services related to gambling and betting are not considered creditworthy (sujetos de crédito).

The Communication extended the quota placement, which was equivalent to 5% during the first semester of 2014, and 5.5% in the second quarter. Thus, during the first period of the 2015 Quota, financial institutions reached by the Communication must allocate, at least, an amount equivalent to 6.5% of the deposits in pesos from the non-financial private sector, calculated on the basis of the monthly average of the daily balances of November 2014.

In turn, all financings must be agreed to by June 30, 2015 and disbursed in a single payment prior to that date, or on a staggered basis, in which case the last disbursement shall not exceed December 31, 2015. However, staggered disbursements are only permitted when justified by the characteristics of the project to be financed. Thus, working capital loans may be considered staggered disbursements.

Additionally, the Communication requires financial institutions to grant financings of at least 30% of the total amount of the first tranche of the 2015 Quota by March 31, 2015. 

The Communication clarifies that financial institutions that made disbursements of financings equivalent to an amount greater than the one provided for the second tranche of the 2014 Quota, may apply excess amounts to the margin of financing indicated for the first tranche of the 2015 Quota. It should be noted that the maximum interest rate provided for the first tranche of the 2015 Quota will be a fixed annual rate of up to 19%.

In sum, this regime provides an additional financing alternative which MiSMEs may consider, to the extent that the funds are aimed at financing of projects under the applicable regulations and are eligible.