Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

ARGENTINA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of June 30, 2005)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: May 14, 1968.
Exchange Arrangement
CurrencyThe currency of Argentina is the Argentine peso.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe exchange rate of the Argentine peso is determined in the free and unified foreign exchange market (MULC) in which the Central Bank of Argentina (BCRA) plays an active role.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThere are two forward markets; transactions in these markets are settled by netting in domestic currency.
Arrangements for Payments and Receipts
Prescription of currency requirementsTransactions with countries with which there are no payments agreements must be settled in freely convertible currencies.
Payments arrangements
Bilateral payments arrangements
OperativeArgentina has agreements with Cuba, Malaysia, and Russia. Payments between Argentina and these countries are settled on a voluntary basis through accounts opened at the BCRA and the other central banks concerned, with the exception of Cuba, where settlement through the accounts specified in the agreement concerned is obligatory.
Regional arrangementsWithin the framework of the multilateral clearing system of the LAIA, payments between Argentina and other LAIA countries are settled voluntarily through payments agreements and a reciprocal credit mechanism.
Clearing agreementsYes.
Administration of controlExchange regulations are established by the BCRA in accordance with the policy set by the national executive. All exchange transactions must be carried out through specially authorized entities. These authorized entities include banks, exchange agencies, exchange houses, exchange offices, and financial companies. Each type of institution is subject to separate regulations.
International security restrictions
In accordance with UN sanctionsRestrictions are imposed on current payments with respect to Iraq, Libya, and Serbia and Montenegro.
Payments arrears
OfficialYes.
PrivateNonfinancial private sector entities with unrestructured external obligations may make transfers to a U.S. dollar–denominated trust fund for a period of 60 days, with the understanding that these funds will be used to cancel debt obligations once outstanding debts have been restructured.
Controls on trade in gold (coins and/or bullion)
Controls on external tradeImports of gold bars are not restricted. Imports of gold by industrial users are subject to a statistical duty of 0.5% and a sales tax. Authorized institutions may export gold coins or bullion to entities abroad with prior BCRA authorization. Proceeds from gold exports must be received in convertible currencies. Exports of coins and precious metals exceeding US$10,000 or its equivalent require BCRA approval.
Controls on exports and imports of banknotes
On exports
Foreign currencyExports of foreign currency exceeding the equivalent of US$10,000 require prior BCRA authorization and must be made through entities subject to supervision by the Superintendency of Financial and Exchange Entities.
On imports
Domestic currencyImports of domestic currency through outward transfers of foreign exchange are subject to BCRA approval if the amount exceeds the equivalent of US$5,000 a calendar month.
Foreign currencyYes.
Resident Accounts
Foreign exchange accounts permittedAuthorized banks may open time deposit accounts in U.S. dollars and euros. Authorized banks may open deposit accounts in other foreign currencies with BCRA approval. In addition, they may accept deposits of public and private securities and term investments in U.S. dollars and euros. In all cases, the appropriate identification requirements (intended, among other things, to prevent money laundering) must be met.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedThe regulations governing resident accounts apply.
Domestic currency accountsYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresImport licenses are required for paper products and footwear.
Negative listRestrictions are in effect for security, hygiene, or public health reasons.
Open general licensesOGLs are required for a limited list of products.
Licenses with quotasTrade with Brazil in the automobile sector is subject to an administered trade agreement. Under bilateral agreements there are quotas with preferential tariffs for automobile sector products.
Other nontariff measuresNontariff barriers are not applied to intra-MERCOSUR trade. Argentina, however, applies a special regime to sugar imports with the authorization of MERCOSUR, pending agreement on a common regime for this sector. Imports of secondhand clothing, used and retreaded tires, and some used capital goods are prohibited, except by nonprofit organizations.
Import taxes and/or tariffsArgentina and MERCOSUR apply a CET to imports from the rest of the world that encompasses all products. CET rates currently range from zero to 20%. Argentina is following a timetable for convergence with the CET for a list of computer and telecommunications products by 2006. The national list of exceptions now covers 100 products, with a maximum tariff of 26%.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsExport proceeds must be repatriated and sold in the foreign exchange market within a maximum of 60 to 360 days, depending on the types of products involved (in accordance with the terms stipulated by the Secretariat of Industry, Commerce, and Mines). In addition, the BCRA may stipulate a repatriation period of 90 business days. Proceeds from exports of capital and technological goods and turnkey products may be repatriated within up to three years if they are covered by a guarantee from banks abroad in the form of an LC or letter of guarantee, or if the transaction takes place under the LAIA reciprocal payment and credit agreement. Export proceeds need not be repatriated for (1) exports that have received specific exemptions under law or executive decrees and have been contracted with the government; (2) exports that are to be used to settle export advances or service principal and interest on export financing and prefinancing loans; (3) exports that have been earmarked to service properly recorded financial contracts that include a guarantee in effect on or since November 30, 2001 (subject to BCRA approval); and (4) proceeds from exports that will be used to repay principal on financial liabilities to foreign entities outstanding on November 30, 2001, that have been restructured on terms exceeding five years on average (subject to BCRA approval).
Surrender requirementsSurrender requirements apply only to operations settled outside the terms established in the exchange regulation, at an exchange rate in effect on the due date of the transaction if that rate is lower than the rate on the day of actual settlement.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesNo.
Without quotasLicenses are required for exports of arms, sensitive goods, and military materials.
With quotasThere are quantitative restrictions on exports of protected animal species.
Export taxesExport duties ranging from 5% to 20% apply to all exports, except for some fuels.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Investment-related paymentsAccess to the MULC is permitted for outward transfers of profit and dividend payments, provided these correspond to closed and audited balance sheets.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsProceeds from exports of services must be repatriated and either sold in the foreign exchange market or deposited in a foreign exchange account within 105 business days of receipt.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsInward and outward foreign exchange transactions on the domestic market, as well as foreign exchange sales on that market, must be registered with the BCRA. Effective May 26, 2005, foreign exchange that enters the domestic market may be transferred out 365 days (previously, 180 days) after its entry, except in the case of foreign trade operations and direct investment.
New financing in the form of financial credits to or bond issues by private borrowers must be matched by foreign exchange sales to the MULC.
The prior approval requirement for servicing nonfinancial and financial private debt is applicable only for debts of financial institutions that have opted for the BCRA’s refinancing mechanism (matching). In these cases, the financial institutions must present a restructuring plan for their external liabilities to the BCRA for approval. Once approved, payments may be made in accordance with the schedule agreed to with the creditors without further BCRA approval.
Effective December 31, 2004, the monthly ceiling for purchases of foreign exchange by residents for various transactions, across all financial institutions, was raised to the equivalent of US$2 million from US$500,000 or the peso amount paid by customers to purchase foreign exchange for these various transactions, which must not exceed the peso equivalent of the sum of export duty payments plus three times the taxes on bank current account credits and debits paid by taxpayers to the Federal Public Revenue Administration during the second to last calendar month before the reporting month. The transactions covered are real estate investments abroad, loans to nonresidents, direct investment abroad by residents, portfolio investments abroad by individuals, other investments abroad by residents, portfolio investments abroad by legal entities, purchases of foreign banknotes for domestic holdings, and purchases of traveler’s checks. The exceptions to the ceilings are purchases of foreign assets for use in the restructuring of residents’ external debts or for debt service payments within 90 days of the date of the entry of the foreign assets into the market.
Sales of foreign exchange to nonresidents exceeding US$5,000 a calendar month are subject to prior approval by the BCRA. This limit does not apply to international organizations. This limit is no longer applicable to the repatriation of foreign exchange proceeds collected domestically from the principal of national public bonds (issued either in domestic or foreign currency, provided that proof is submitted for the surrender on the exchange market of the foreign exchange received in payment). Effective December 31, 2004, this limit ceased to apply to the external debt of residents importing into Argentina goods, services, and financial items derived from external loans to nonresidents and validated by an external debt declaration; loans collected after domestic bankruptcies; and credits to the accounts of domestic institutions of export proceeds from transactions through payment and reciprocal loan agreements with the LAIA and the Dominican Republic, and bilateral arrangements with Malaysia and the Russian Federation. These loans were discounted by foreign institutions because the exporter joined the MULC and surrendered the funds received abroad from the discount.
Also, effective December 31, 2004, a monthly cap of US$2 million was placed on purchases of foreign exchange by nonresidents for the following transactions: sales of direct investments in the private sector and servicing or sale of other inward portfolio investments in foreign exchange for periods of no less than 180 consecutive days (and their rents). The rents are capped monthly at US$500,000.
Controls on capital and money market instrumentsEffective June 10, 2005, nonresident portfolio investors are required to deposit 30% of their investment in an unremunerated account for one year. Initial public offerings, foreign direct investment, and trade finance flows are excluded from this requirement.
On capital market securities
Shares or other securities of a participating nature
Sale or issue locally by nonresidentsUnder the regulations of the National Securities Commission (CNV), foreign and Argentine issuers must meet the same requirements to make a public offering of securities in Argentina. Both must establish a permanent representative office and a domicile in Argentina to receive notices. Foreign issuers must state whether the securities are also being offered to the public in their country of origin and specify the initial and periodic information requirements to which they are subject. If the CNV believes that the regulations in the country of origin properly protect local investors and guarantee an adequate flow of information, the CNV may lower the requirements for these issuers. The CNV may authorize foreign issuers on a case-by-case basis to submit only such information as they would periodically submit to the corresponding authority in their jurisdiction of origin.
Issuers of public offerings of securities domestically and abroad must submit to the CNV all information, in Spanish, required by the entities authorizing the public offering and listing abroad.
Purchase abroad by residentsAlthough there are no specific controls on residents’ purchases of foreign securities abroad, their purchases may be limited as a result of restrictions on capital flows from Argentina to foreign jurisdictions.
Bonds or other debt securities
Sale or issue locally by nonresidentsThe regulations governing the sale or issue of shares or other securities of a participating nature apply.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On money market instrumentsThe regulations governing the foreign exchange aspects of bonds or other debt securities apply.
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsThe regulations governing domestic issuers also apply. In particular, approval by the CNV is required for public offering. In addition, commercial paper must have a minimum maturity of seven days.
Purchase abroad by residentsThe regulations governing bonds or other debt securities apply.
Sale or issue abroad by residentsYes.
On collective investment securities
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsApproval by the CNV is required for public offerings.
Purchase abroad by residentsThe regulations governing bonds or other debt securities apply.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instrumentsWithout approval by the BCRA, authorized foreign exchange dealers may engage in arbitrage and swaps only with foreign banks or holding companies located in a Bank for International Settlements member state and that have at least an A rating from one of the rating agencies registered with the BCRA, or with institutions owned by foreign governments; or with branches of Argentine state banks. There are no limits on the following foreign transactions: (1) arrangements and transfers abroad related to foreign exchange hedging contracts by financial institutions to cover their own long positions in foreign currencies and their short positions and interest rates on foreign liabilities; (2) foreign exchange arrangements and transfers under foreign exchange hedging and interest rate contracts by the nonfinancial private sector for the amounts owed in principal or interest payments on obligations; (3) arrangements or payments of commodity price hedging contracts by residents for their foreign trade transactions; (4) payments of futures and forward contract transactions in which local financial institutions owe foreign entities; (5) arrangements and payments of external financing transactions in the form of repos, provided that they are arranged at terms of no less than 365 days, as of May 26, 2005 (previously, 180 days) (payment of these transactions requires that they be validated in accordance with the rules for declaring debt); and (6) payments of premiums and/or establishment of the security margins required in hedge contracts between foreign currencies against interest rates and commodity prices (the entity has to join the MULC and sell, within the five business days following the close of the operation, the proceeds earned by the domestic customer from such operations or from the release of the established guarantees).
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsApproval by the CNV is required for public offerings.
Purchase abroad by residentsAccess to the foreign exchange market for forward and other derivatives contracts—except for currency, interest rate, and commodity swaps—is subject to BCRA approval.
Sale or issue abroad by residentsYes.
Controls on credit operations
Commercial credits
By residents to nonresidentsResidents may make advance payments on imports to their foreign suppliers of up to 360 days. Exporters may allow their customers to pay in installments, provided that they comply with the maximum time limits for surrendering foreign exchange, set by the Ministry of Industry, Trade and Mines (SICyM), based on the type of product, between 60 and 360 days, plus the additional time granted by the BCRA (now 90 business days). In the case of capital goods, technology, and turnkey exports covered, the time limits may be longer than those established by the SICyM, under certain conditions.
Financial credits
By residents to nonresidentsResidents may extend credits to nonresidents within the limit for the accumulation of external assets.
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsNonfinancial private sector residents may provide financial backing within the current limits on accumulation of foreign assets. Financial institutions may resort to the exchange market to pay for financial stand-by arrangements, if the exchange market was used to pay for the transaction these arrangements guarantee.
Controls on direct investment
Outward direct investmentResidents may access the MULC for direct investments within the limits for accumulation of external assets.
Inward direct investmentYes.
Controls on liquidation of direct investmentNonresidents may access the MULC to purchase foreign exchange to transfer to their foreign bank accounts the proceeds collected in the country from sales of direct investments in the nonfinancial private sector and the final sale of direct investments in the country in the nonfinancial private sector, without BCRA approval, if the total, including repatriated portfolio investments, does not exceed the equivalent of US$2 million monthly for each nonresident individual or legal entity.
Controls on real estate transactionsThe rules governing direct investments apply.
Purchase abroad by residentsYes.
Purchase locally by nonresidentsPurchases of real estate in border areas by foreign investors require prior approval for the project from the Border Superintendency of the Ministry of Defense for national security reasons.
Sale locally by nonresidentsYes.
Controls on personal capital transactionsThe rules governing legal entities apply.
Loans
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Provisions specific to commercial banks and other credit institutions
Lending to nonresidents (financial or commercial credits)Credits granted by financial intermediaries must be used in the country and must finance investment, production, commercialization, or consumption of goods and services for internal consumption or export.
Purchase of locally issued securities denominated in foreign exchangeThere are limits on the maximum amount of securities a bank may hold from a particular issuer; however, purchases of securities against delivery of assets require prior BCRA approval.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsMinimum cash requirements apply separately to each currency in which liabilities are denominated. The reserve requirement for deposit accounts denominated in foreign currencies is higher than for accounts in domestic currency.
Investment regulations
Abroad by banksTransactions are prohibited by policies on general lending.
Open foreign exchange position limitsThe components of the overall foreign exchange position of institutions are as follows: freely usable gold holdings, foreign exchange and foreign currency banknotes in the country and abroad; holdings of deposits and investments at all terms in banks abroad; investments in foreign private and public bonds; other liquid investments abroad; and debit and credit balances in correspondent accounts. Also included are purchases and sales of these assets arranged and pending settlement through foreign exchange purchases and sales to customers at terms of no more than 48 business hours. Not included in the overall foreign exchange positions are the foreign assets third parties hold in custody, correspondent balances as a result of transfers by third parties pending settlement, forward sales and purchases of foreign exchange or foreign securities, and direct investments abroad.
The upper limit of the overall foreign exchange position is recalculated monthly and the update takes effect on the first business day of each month. The upper limit is set at 10% of the U.S. dollar equivalent of the bank’s net worth at the end of the second-to-last month preceding the month of the deadline for submission of the foreign exchange to the BCRA, under the rules of the corresponding reporting regime. It will be increased by the U.S. dollar amount equivalent to 5% of the institution’s turnover of foreign exchange purchases and sales to customers in the second-to-last preceding calendar month, and to 2% of total demand and term deposits established and payable domestically in foreign exchange, excluding deposits held in custody, reported by the institution at the close of the second-to-last preceding calendar month. If the maximum calculated is less than US$1.5 million, this latter amount will be considered the lower limit of the established maximum.
The limit on banks’ U.S. dollar exposure is 10% of a bank’s net worth.
The absolute value of the overall net position in foreign exchange—as a monthly average of daily balances converted to pesos at the reference exchange rate—may not exceed 30% of the net liabilities of the preceding month.
When the net foreign exchange position is positive, the amount may not exceed that proportion of liquid own resources. Excesses may be subject to a charge of up to the equivalent of twice the nominal annual interest rate resulting from auctions of BCRA instruments in U.S. dollars or twice the 30-day LIBOR for operations in U.S. dollars, as reported for the last working day of the relevant month, whichever is greater.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsMutual funds may invest 25% in publicly offered securities issued by nonresidents; pension funds may invest up to 10%.
Limits (max.) on investment portfolio held abroadThere is a 25% limit on investment for mutual fund portfolios, but this limit does not apply to MERCOSUR countries and Chile. For diversification, no more than 10% of pension funds may be invested in securities issued by a foreign sovereign, or in securities of foreign corporations issued abroad.
Limits (min.) on investment portfolio held locallyWhen a mutual fund consists of negotiable securities, a minimum of 75% of the investment must be made in assets issued and traded in Argentina, including those issued by MERCOSUR countries and Chile.
Currency-matching regulations on assets/liabilities compositionYes.
Other controls imposed by securities lawsNo.
Changes During 2004
Capital transactionsDecember 31. The monthly limit for residents’ purchases of foreign exchange for capital transactions was raised to US$2 million from US$500,000.
December 31. The limit for residents’ purchase of foreign exchange of US$5,000 a month ceased to apply to certain specified transactions.
December 31. Nonresidents’ purchases of foreign exchange were limited to US$2 million a month.
Changes During 2005
Capital transactionsMay 26. The minimum period that nonresident investors must hold incoming capital (excluding foreign trade operations and direct investment) in the country was raised to 365 days from 180 days.
Controls on capital and money market instrumentsJune 10. A 30% unremunerated deposit requirement for one year was imposed on foreign portfolio investment, excluding initial public offerings, foreign direct investment, and trade finance flows.
Controls on derivatives and other instrumentsMay 26. The minimum maturity of external financing transactions in the form of repos was raised to 365 days from 180 days.

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