New Communication Regulates Transfer of Foreign Currency to Pay Debts

Contributed by Marval O'Farrell & Mairal

On March 7 2006 the Argentine Central Bank issued Communication A/4507, which regulates the transfer of foreign currency to Argentina for the payment to local financial entities of financial debts and financial guarantees granted by foreign residents. The communication came into effect on March 8 2006.

It sets down the general principle that payments by foreign residents to local financial entities of financial debts and financial guarantees made through the local foreign exchange market shall be exempt from the mandatory 30% deposit set out in Section 4 of Decree 616/05 and Point 6 of Communication A/4359 only if the Central Bank grants prior authorization.

The communication provides the following exceptions to this general principle, under which prior Central Bank authorization is not required to exempt the payment from the deposit: (i) collections of financial debts incurred by the foreign resident before the date on which Decree 616/05 came into force (ie, June 10 2005); and (ii) collections of the following guarantees:

-- commercial guarantees;

-- financial guarantees granted by the foreign resident before June 10 2005; and

-- irrevocable financial guarantees granted by foreign banks, multilateral entities and credit agencies to cover risks of guarantees granted by local financial entities, when (i) such local guarantees have been granted to guarantee the participation of clients in local public bids or the performance of public works at national or provincial level, or (ii) the collection of funds takes place more than 365 days after the date of issuance of the guarantee.

For further information on this topic please contact Gabriel G Matarasso or Diego Juan Abelleyra at Marval, O'Farrell & Mairal by telephone (+54 11 4310 0100) or by fax (+ 54 11 4310 0200) or by email (gm@marval.com.ar or dja@marval.com.ar). The Marval, O'Farrell & Mairal website can be accessed at www.marval.com.ar.