The Argentine Central Bank ("ACB") has issued certain communications imposing new exchange controls in Argentina, as well as setting forth incentives for local companies indebted overseas in order to obtain debt reductions and term extensions in their negotiations with creditors.
The main aspects of the new regulations are:
- Communication "A" 3711: sets forth a 60% reduction (from US$ 500,000 to US$ 200,000) in the limit by which exporters are obliged to sell off their currency before the ACB. Thus, exporters must now settle their foreign currency for export sales in excess of US$ 200,000 directly with the ACB.
- Communication "B" 7472: reduced in an average 40% the net amounts in foreign currency which may be held by foreign exchange entities operating in the retail market on behalf of the ACB (US$ 300,000 net daily position for entities with 50 or more branches, and US$ 150,000 for entities with less than 50 branches).
- Communication "A" 3713: establishes that foreign exchange entities with currency holdings over US$ 1,500,000, shall deposit any excesses thereof in accounts with the ACB, and may not exceed such limit over a 10% daily margin.
- Communication "A" 3712: sets forth that companies indebted overseas shall have a 90 days maximum term to make their debt payments (excluding capitalization of interest), with foreign currency acquired in the local market.
In this sense, the ACB developed a rigid mechanism of incentives for such companies indebted overseas which renegotiate their debts with a 40% write off and 4 years payment term extensions, with capital reimbursement grace periods of at least 2 years. In essence, transfers of debt payments overseas to creditors accepting certain conditions shall not be subject to ACB prior authorization (currently, such transfers are subject to ACB scrutiny). Such conditions include (i) at least, quarterly interest payments, and (ii) maximum annual interest rates which may not exceed six months LIBO plus 3%.
Finally, these private debt renegotiation conditions may be interpreted as a precedent for the envisaged restructuring of the public debt.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.