Payment of Dollar-denominated Credit Card Charges with Pesos Does not Impede Sale of Bonds against Foreign Currency

Through “Communique "A" 7106” ("Communique 7106"), the Argentine Central Bank ( the "BCRA" after its acronym in Spanish) established that credit card expenses incurred abroad and paid through debits in local Peso bank accounts, and the foreign currency amounts acquired by individuals in the official exchange market for purposes of cancellation of obligations between Argentine residents, including payments for credit card consumption expenses denominated in foreign currency, will be deducted as from the subsequent calendar month from the maximum amount allowed to each individual for the purchase of foreign currency for each calendar month on the formation of foreign assets, wire transfer of family assistance and for derivative transactions. Financial entities must register these transactions with the relevant exchange ticket at the client’s name.

In simple terms, Communique 7106 provides that the cancellation of dollar-denominated expenses by using Pesos reduces the maximum USD 200 amount that can be freely purchased each month in the official market. A question that arose was: does this means that whoever pays with Pesos their dollar credit card balance cannot sell dollar-denominated bonds for the subsequent 90 consecutive days, as if they had bought dollars for treasury purposes?

We understand that there are solid arguments to conclude that an individual can pay the credit card's dollar consumptions with Pesos and continue to sell bonds against foreign currency without violating the applicable regulations.

In order to analyze this answer and the context in which Communique 7106 applies, it is important to go through certain regulations that we will outline.

In principle, individuals can buy up to USD 200 per month for the formation of external assets (also known as “Personal Savings” [“Atesoramiento” in Spanish]). Purchases of Dollars for Personal Saving are basically purchases of Dollars for savings. These Dollars can be used freely for any lawful purpose.

Credit card balances in Dollars are considered a debt from the individual with the bank, denominated in that same currency. Therefore, from the foreign exchange point of view, when a client pays with Pesos a credit card balance denominated in Dollars, the client is buying the necessary Dollars from the bank to pay the debt. It is not a purchase for Personal Saving.

As a general rule, when individuals buys foreign currency they must file an Affidavit by which they undertake that for the 90 subsequent calendar days, will not execute sales of bonds that are liquidated in foreign currency and will also not transfer such bonds to depositary entities out of Argentina (the "Affidavit"). This rule restricts the ability that the individual who accessed to the official foreign exchange market may acquire foreign currency through a securities transaction, the so-called “Blue chip swap transactions”.

However, Communique A 7030 that imposes the Affidavit requirement expressly states that this obligation does not apply to the payment of foreign currency credit card consumptions. This exception has not been amended by Communique 7106. On the contrary, when Dollars are purchased for Personal Savings it is necessary to present the Affidavit.

Communique 7106 computes the purchases of foreign currency made to pay balances of credit card consumptions, for purposes of the maximum monthly amount of Dollars that can be purchased for Personal Saving. It is important to point out that the “concept” (meaning the FX regulatory framework of the transaction) of the purchase of foreign currency to pay the credit card consumption does not change: it continues to be cancellation of financing with the financial entity, and therefore remains excluded from obligation to file the Affidavit. If this Affidavit filing it is not necessary, the restriction on the sale of securities for foreign currency is not applicable.

The BCRA has clarified this point in Communique "B" 12070 by stating that purchases of foreign currency to pay credit card balances correspond to the concept code P12 "Other local financing granted by the entity.

In sum, the payment in Pesos of credit card balances denominated in Dollars does not restrict the possibility of selling bonds for foreign currency, because such Dollar purchases are excluded from the obligation to present the Affidavit.