Local Exporters May Keep Foreign Currency Proceeds from the Export of Goods and Services Abroad If Such Proceeds Are Used To Cancel Foreign Loans for Import Substitution

Through Communication “A” 5464, in force since July 24, 2013, the Central Bank of the Republic of Argentina (the “Central Bank”) amended the provisions of Communication “A” 5265 with regards to debts owed by Argentine exporters, allowing goods’ export proceeds to be kept abroad and used to cancel principal and interest on debts undertaken with foreign banks and other foreign entities for purposes of substituting imports. Previously, this possibility was only allowed in cases of foreign debts incurred for the financing of new investment projects for the production of exportable goods or increases in export capacity.

In addition, through Communication “A” 5465, the Central Bank incorporated a new section for the monitoring of export proceeds that will be used for the cancelation of said foreign loans.

Among the requirements provided by Communication “A” 5464 for the holding of proceeds abroad, the following are included:

a. The exporter must evidence that at least two-thirds of the increase in production of goods, as a result of the investment project for which the foreign loans have been granted, will be placed in foreign markets and/or will allow import substitutions of goods in the three-year period following the completion of the project, and that said investment project will have a positive effect on the trade balance of goods and services.
b. The average life of the financings must be a minimum of two years. Pre-payments may be made before compliance of the average life of the loan to the extent that a new foreign indebtedness is transferred through the local foreign exchange market, which implies that the decrease in the current value of the debt that is prepaid is no greater than the amount transferred.
c. The export proceeds may be accumulated in collateralized foreign accounts. The accumulated funds in these accounts shall not exceed, at any time, 125% of the principal and interest to be paid in the current month and in the following six calendar months. The excess funds must be settled in the local foreign exchange market.
d. Local financial institutions shall follow up these transactions through the information regime on pre-financing advances and loans.

Prior to the date of the first disbursement, the Central Bank must be informed of the exercise of the option for the financing of the new investment project. The Central Bank is authorized to request clarification and/or additional information, which must be responded within 20 business days and comply with the formalities set forth in Communication “A” 5464.