Argentina: Communications "A" 3972 & 3973 - Regulation of Decree 285/2003 (entry and leave of foreign currency) and Flexibleness for Debt Payments

Through Communications "A" 3972 and 3973, the Argentine Central Bank ("BCRA") regulated the minimum terms of permanence for short term capital in the Argentine market, in accordance with Decree 285/2003 dated June 30, 2003. In addition, the BCRA made the access to the foreign exchange market more flexible for such advance payments of debts with foreign creditors.

The referred Communications established:

Communication "A" 3972: regulated Decree 285/2003 regarding minimum terms of permanence for short term capital, establishing that any financial credit facility, assumed by the private financial and non-financial sector, shall have a term of permanence in the country of not less than 180 days. To date, the valid term was 90 days and it was only applicable to the non-financial private sector.

On the other hand, certain concepts in the Decree have been defined:

• the registry of foreign exchange negotiations comprises any agreement for the settlement of foreign exchange transactions in the local market,
• the excluded foreign trade transactions comprise payments for the export of goods and services, as well as payments for advances or loans of export pre-financings,
• the excluded direct investments comprise only such agreements for the settlement of foreign exchange purchase transactions for currency capital contributions made by non-residents in direct investment companies in Argentina,
• the registry date shall be such of the agreement for the settlement of the foreign exchange transaction.

Finally, any failure to comply with Decree 285/2003 shall be subject to the Foreign Exchange Criminal Régime.

Communication "A" 3973: it made the access to the foreign exchange market more flexible for advance payments of financial debts of the non-financial private sector, facilitating the debt negotiation processes by eliminating the prior authorization of the BCRA for such transactions made in compliance therewith.

In this sense, it allows the payment of capital services of debts from the non-financial private sector for financial loans, bond issues and other debt securities owed to foreign residents, within 15 business days prior to maturity.

In case the advance payment shall be made in a term in excess of 15 days, the current value of the debt as maximum cancellation value must be determined. Such current value shall be calculated considering as discount interest rate, such annual rate implicit for foreign exchange futures transactions in regulated markets.

Finally, in processes of debt restructurings, it allows the payment of non-matured and accrued interests for financial debts with foreign creditors of the non-financial private sector.