Communication "A" 1326: Foreign Exchange Market Rules for Exports, Imports, and Public Sector Operations

CENTRAL BANK OF THE ARGENTINE REPUBLIC

COMMUNICATION "A" 1326
06/02/89

TO THE ENTITIES AUTHORIZED TO OPERATE IN FOREIGN EXCHANGE AND FOREIGN EXCHANGE BROKERS:

Ref.: Circular Foreign Exchange Operations and Move- ments of Funds with Abroad CAMEX - 1 - 179.
Active Operations OPRAC - 1 - 213. External Collec- tions and Payments COPEX - 1 - 147. External Opera- tions of the Public Sector SEPEX - 1 - 19.

We address you and through you all interested parties with reference to the provisions made known by Communication "A" 1231 of 3.8.88 and complementary, to bring to your knowledge that, with effect from the opening of the Foreign Exchange Markets corresponding to the upcoming 7 February, this Institution, in accordance with the guidelines established by the economic authorities, has adopted the following provisions:

I. OFFICIAL FOREIGN EXCHANGE MARKET

1. The following concepts are settled through the Official Foreign Exchange Market at the Commercial Exchange Rate:

1.1. 100% of the FOB value of exports of the products detailed in the list set out as Annex I to Communication "A" 1321 of 31.1.89 as amended by Communication "A" 1325 of 3.2.89, which remains in force.

1.2. 90% of the FOB value of exports of the products detailed in the list set out as Annex II to Communication "A" 1321 of 31.1.89 as amended by Communication "A" 1325 of 3.2.89, which remains in force.

1.3. 50% of the FOB value of exports of the products not included in Annexes I and II indicated above.

1.4. 100% of the FOB value of imports of the products included in Chapter 28 of the N.A.D.I.

1.5. Foreign currency loans referred to in point 1.5. of Circular CO-PEX-1 and its complementary provisions, received to finance exports and the payment of their interest, up to the percentages indicated in points 1.1., 1.2. and 1.3. above as applicable.

1.6. Advance collections of exports up to the percentages indicated in points 1.1., 1.2. and 1.3. above as applicable.

1.7. The repayment of advance collections of exports and of foreign currency loans received through the Official Foreign Exchange Market in accordance with points 1.4. and 1.5. of Circular COPEX-1 and complementary provisions up to the percentages indicated in points 1.1., 1.2. and 1.3. above as applicable, when the export has not been

completed and provided that the charge established by Communication "A" 932 of 14.10.86 has been paid.

1.8. The obligations of the public sector arising from the Guaranteed Refinancing Contract signed with the international banking community.

1.9. The obligations of the public sector arising from the Restructuring Agreements entered into with official external creditors within the framework of the Paris Club.

Points 1.8. and 1.9. above do not cover the obligations of the private sector that have a guarantee from the Nation, the provinces or the municipalities, nor mixed-economy companies nor the financial public sector for its own obligations.

1.10. Transfers abroad in respect of retirement and pension benefits to countries with which there is a reciprocity agreement on the matter.

2. The following concepts are settled through the Official Foreign Exchange Market at the Special Exchange Rate:

2.1. The complement of the FOB value of the exports of subsection 1., points 1.2. and 1.3.

2.2. The complement of foreign currency loans to finance exports and their interest and of advance collections of exports points 1.5. and 1.4. of Circular COPEX-1, cited in points 1.5. and 1.6. of subsection 1., above.

2.3. Receipts of complementary funds from relending operations and capitalization of relending (does not include the outflow for the same concepts).

2.4. Payments of the concepts considered by Communication "A" 1159 of 4.3.88 (expenses for medical treatment and purchase of medicines abroad), up to the amount authorized for each application individually considered. This treatment covers submissions with certifications issued by the Ministry of Health and Social Action of the Nation or provincial or similar competent body in the matter.

2.5. The repayment of advance collections of exports and of foreign currency loans received according to point 2.2. of this subsection, in accordance with points 1.4. and 1.5. of Circular COPEX-1 and complementary provisions, when the exports have not been completed and provided that the charge established by Communication "A" 932 of 14.10.86 has been paid.

2.6. Imports of Merchandise.

2.6.1. Operations covered by documentary credits transmitted up to 3.2.89.

The FOB value of unpaid imports and their interest, covered by documentary credits in force, transmitted abroad,

COMMUNICATION "A" 1326 06/02/89

up to 3.2.89 inclusive, for original maturities not extended, cleared through customs or to be cleared within ninety days of the date of shipment or up to 20.2.89 inclusive for operations in which that period is met earlier. The obligation may be cancelled no more than two business days prior to its maturity.

2.6.2. Operations not covered by documentary credits as of 3.2.89.

The FOB value of unpaid imports and their interest, cleared through customs from 1.1.89 and up to 31.3.89. They may access this foreign exchange market no earlier than 60 days from the date of customs clearance or the originally agreed term, whichever is greater.

2.6.3. Requirements that the operations of points 2.6.1. and 2.6.2. above must meet.

• Compliance must have been given to the External Debt Survey for shipments prior to 3.8.88. For operations not declared in accordance with the rules in force as from 3.8.88, and with original maturities falling due as from 1.3.89, the pertinent declaration must be made before 15.2.89 on form 5005 under the usual practice form, in accordance with the provisions made known by Communication "A" 433 of 12.1.84 and complementary ones.

• For the operations included in point 2.6.1., the intervening entity must have, prior to payment, an External Auditor's opinion from the company that the obligation has not been cancelled.

• For the operations included in point 2.6.2., the intervening entity shall reliably verify the existence of the debt with abroad.

• In all cases the respective documentation must remain at the disposal of this Bank.

2.6.4. Penalties

• Verification of non-compliance with the provisions on customs clearance for proceeding to payment abroad shall give rise, on the part of this Bank, to the automatic debit in the current account that the entities maintain at the Institution, for the exchange difference existing on the date of payment between the exchange rate applied and the rate reported as the selling closing rate for that day by the Banco de la Nación Argentina for the Free Exchange Market, plus the amount of 1.5 times the maximum daily

rediscount rate for temporary liquidity situations for the period between the day of payment and the day prior to the date of deposit.

• If non-compliance with the other requirements is verified, this Bank shall require the intervening entity to deposit in its current account at the Banco de la Nación Argentina, New York Branch, the amount improperly paid plus 2 times the maximum daily rediscount rate for temporary liquidity situations charged by this Bank, for the period between the date of payment and the day prior to the deposit, considering as principal the amount paid in United States dollars or its equivalent in other currencies, at the selling exchange rate of the day of payment. The final result shall be converted to United States dollars considering the selling exchange rate of that same market of the day prior to the deposit.

2.6.5. New operations arranged through documentary credits transmitted abroad or shipments of merchandise made through any other payment instrument as from 7.2.89 inclusive, which must comply with the provisions made known by Communication "A" 433 of 12.1.84 and complementary ones.

The formalization of these operations must comply with the following minimum terms for payment abroad:

• Merchandise in general, except capital goods: the FOB value may only be paid in installments of no less than 90 days counted from the date of shipment, including, where applicable, the value of the respective financing interest.

• Capital goods: the list of products included are those detailed in Annex I to Communication "A" 12 of 2.3.81 (Circular COPEX-1) and its complementary and amending ones.

For operations of up to Dls. 500,000 or its equivalent in other currencies, the FOB value may be paid at a minimum of 180 days from the date of shipment. For operations greater than that amount the minimum payment term shall be one year. Financing interest must be paid together with the principal installments.

For acquisitions exceeding Dls. 500,000 or its equivalent in other currencies, advance payments prior to shipment of up to 5% of the FOB value of the purchase shall be admitted, and there may also be paid, against delivery of the shipping documents, an additional amount to that transferred for the aforementioned formalization with which up to 15% may be totaled. In cases where this franchise is used, the import must be instrumented with a documentary credit, for an amount not less than the total

COMMUNICATION "A" 1326 06/02/89

that is paid until the delivery of the shipping documentation in which the amortization conditions of the balance being financed shall be recorded.

For the making of advance payments, in the corresponding documentary credits it shall be recorded that the exporter must deliver the respective shipping documentation within the validity period of the credit and that, otherwise, it undertakes to reimburse the amount transferred within 10 days following the expiration of said period.

Excepted from these minimum conditions are imports that have financing granted by international or national credit organizations from abroad covering 89% of the FOB value, at a minimum, in which case the conditions established by the respective loan contracts shall apply.

2.7. Operations of the public sector not included in the Official Market, section I, Commercial Exchange Rate, except for the purchases and sales of exchange for the following concepts which shall be processed through the Free Exchange Market:

• Export, import and between-port freight.

• Insurance on merchandise.

• Consular expenses

• Expenses of ships or aircraft

• Passage

• Operating income and expenses of transport companies

• Leases of spaces or deposits in ports or airports (includes container rentals).

• Leases of ships and aircraft excluding "leasing" when they have rental contracts with option to purchase and this has been irrevocably exercised prior to the start of the respective payments abroad.

• Insurance, reinsurance and claims.

2.8. Leasing of ships, aircraft or other goods when they have rental contracts with option to purchase ("leasing"), and this has been irrevocably exercised prior to the start of the respective payments abroad.

2.9. Financial income and expenditure of the public sector including those from Multilateral Credit Organizations.

2.10. Cancellations of principal and interest on loans from International Organizations to the private sector that were applied to the amortization of obligations for merchandise imports.

3. Operating Regime

3.1. The Central Bank shall set daily the Commercial and Special Exchange Rates, buying and selling, for the United States dollar, spot, normal value, at which transactions shall be conducted in the Official Exchange Market, as well as the swap rates that entities must apply to arbitrate other currencies into United States dollars.

3.2. The Official Exchange Market shall operate within the margins established for each exchange rate, with entities authorized to carry out purchase-sale operations and arbitrage among themselves. Furthermore, they may arbitrate their balances in other currencies into United States dollars directly against correspondents abroad or against holdings in the Free Exchange Market.

3.3. The net result in United States dollars for each exchange rate quoted daily in the Official Exchange Market, after entities have carried out the necessary arbitrages and possible purchase-sale operations among themselves, must be sold to or bought from this Central Bank at the close of daily operations.

II. FREE EXCHANGE MARKET

All operations corresponding to concepts not included in point I above shall be settled through the Free Exchange Market.

The supply and demand originating from the Public Sector for individual operations exceeding u$s 10,000 or its equivalent in other currencies shall be channeled by entities through the Central Bank at the buying or selling exchange rate as applicable, recorded by the Banco de la Nación Argentina at the close of operations of the previous business day. For this purpose, entities shall carry out operations with the Central Bank at normal value and pass them on under equal conditions to their clients.

III. OTHER PROVISIONS

1. Operations of Public or Private Sector entities that have guarantees from the National, Provincial or Municipal governments, as provided in points 1. and 2. above, shall remain subject to the prior approval of this Bank in accordance with the provisions of Circular SEPEX-1-1, Communication "A" 320 of 26.5.83 and complementary provisions.

2. Foreign currency loans to finance exports (point 1.5. of Circular COPEX-1) may optionally be negotiated in the Commercial Exchange Market at the Special Exchange Rate or in the Free Exchange Market, and their cancellation shall be made through the same market through which they entered, with the foreign currency from the export being negotiated in accordance with the general regime established.

3. Foreign currency loans to finance exports (point 1.5. of Circular COPEX-1) entered until 3.2.89 through the Free Exchange Market must be cancelled through that same market, with the foreign currency from the exports being negotiated in accordance with the general regime established.

4. Countertrade operations, referred to in Communication "A" 825 of 30.12.85, may be carried out as long as the collections and payments for the products or services in question are processed through the same exchange market at the same exchange rate.

COMMUNICATION "A" 1326 06/02/89

5. Communication "A" 1237 of 3.8.88 and complementary provisions are hereby revoked.

6. Foreign currency loans to finance exports (point 1.5. of Circular COPEX-1), entered until 3.2.89 through the Official Exchange Market, may be cancelled through the Official Exchange Market at the Commercial Exchange Rate, up to the maximum amount settled through that market for the operation in question at the time of export. The excess, if any, shall be cancelled at the Special Exchange Rate.

7. 100% of the FOB value from exports of products under the following NADE positions: 71.07.02.01.00 and 72.01.02.01.00 shall be settled through the Free Exchange Market.

8. The futures rate stated in point 3.3.2. of Communication "A" 229 of 24.9.82 shall continue to be determined based on the quotations recorded for the United States dollar in the Free Exchange Market.

9. The regime established by Communication "A" 1281 of 4.11.88 shall apply to operations covered by the temporary admission regime of Decree 1554/86 when such imports have been paid through the Free Exchange Market until 3.2.89 or, if pending payment, are processed through the Official Exchange Market, Special Exchange Rate, in which case the portion of the FOB value of exports consisting of foreign-origin merchandise must be settled through the latter market.

We greet you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Abelardo J. Tejada
Foreign Trade Manager
Elías Salama
General Manager