The end of the “clump” I (purchase, expatriation and repatriation of foreign currency)

The Argentine Central Bank formally abrogated today an odd set of restrictions that were imposed in the local foreign exchange market by the prior administrations over the last 12 years (known in the jargon as “clamp”).

As a general principle any restrictions to freely purchase foreign currency are no longer in place: neither the prior authorization from the Central Bank (BCRA) nor that from the Tax Agency (AFIP) are necessary.

As a consequence any individual or company can freely access the exchange market to purchase foreign currency to invest in foreign assets, subject to the condition that no more than USD 2 MM are bought per month.

Restrictions for payment of foreign debt (principal or interest) and for repatriation of dividends and earnings were also abrogated.

Financial institutions could freely enter into arbitrage and foreign currency swaps with their clients. Subject to certain formal limitations the proceeds of those transactions could be freely expatriated or repatriated.

New money loans will be no longer subject to mandatory repatriation into the local exchange market within a certain time frame, except if thereafter the borrower wishes to purchase foreign currency in the local market to service principal or interest of those loans in which case the repatriation should be demonstrated.

Imports and foreign services related payments are also freed subject to a progressive timetable per importer or client (as applicable) on an individual basis: i) imports: USD 2 mm until December 31st; USD 4mm from January until May 2016, and with no restrictions from then on; ii) services: USD 2 mm US$ until March 2016; 4 m US$ up until May 2016 and with no restrictions onwards.

The compulsory deposit equivalent to 30% of any foreign investment is also abrogated.

The End of the Clump II (export duties and import restrictions)

By means of Decrees N 133/2015, 160/2015 (agricultural and industrial export duties respectively) and IRS Resolution N 3823 (import restrictions), a complex system of export duties and import restrictions that immobilized the economy in the last years was abrogated.

The Decrees reduce to zero any export duties with the exception of certain products (i.e. soya and leather). With the Resolution a complex process that required formal statements to be filed with the Secretary of Commerce prior to any import was replaced by a simpler one that sets two relevant due dates: i) any statement made by an importer will have a 180 day enforceability period, and ii) any governmental agency will have to grant or reject authorization within 10 days of its request.

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