Originally published in Argentine Business Law Watch1
The widely reported enactment in January of the Emergency Economic Act converted dollar-denominated bank deposits and private obligations to pesos. Since then, considerable debate has followed as to the treatment of private party debts (i.e., debts other than deposits and other financial system obligations) that were past due at the time of enactment. Should they too be "pesofied" or would that unfairly reward the non-performing debtor at the creditor’s expense?
Most Argentine scholars have concluded that, looking to the Act and the implementing decrees, these obligations should not be converted into pesos. Nonetheless, the courts have yielded varying results. Some courts have treated the obligations as converted to pesos, regardless of their status at the time the Act came into effect. Other courts have refused to convert past due claims to pesos and deemed them unaffected by the Act. A third position has converted these obligations to pesos, though ignoring the Act’s one-to-one exchange rate and adjusting the exchange rate 40% to 70% to apportion some of the cost to the debtor.
We see the judicial trend favoring creditors. Look for a unified position that private-party obligations past due as of the Act’s effective date (January 7, 2002) will be maintained in dollars.
1 "Argentine Business Law Watch" is a periodic news service provided free of charge to clients and friends of Negri, Teijeiro & Incera. To read past editions of "Argentine Business Law Watch", visit our website at www.negri.com.ar.
2 Law No. 25,561 (Ley de Emergencia Económica). Decree 214 regulating the Act converted all dollar-denominated obligations "in the financial system" (e.g. bank loans) and "between private parties" to pesos at a one-to-one exchange rate. To adjust for inflation and thus avoid the dilution of obligations by the future devaluation of the peso, Decree 214 contemplated the use of a "reference coefficient" (Coeficiente de Estabilización y Referencia) or CER.
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