ARGENTINE FOREIGN EXCHANGE MARKET

1. ARGENTINE FOREIGN EXCHANGE MARKET María Victoria Funes

2. Index • Foreign Exchange Market: General Features………………............. • Inflows of funds. General features…………...……………………… • Inflows of funds. Mandatory deposit …………………………………. • Inflows of funds. Financial debts: General information ………….. • Inflows of funds. Direct investment. Capital contributions ……… • Inflows of funds.Direct investments. Purchase of real estate ….. • Inflows of funds.Collection of exports of goods and services …. • Outflows of funds. Foreign currency purchase by non-Argentine residents. Repatriation ………………………………………………….. • Outflows of funds. Payment of imports of goods and services and distribution of profits and dividends ……………………………. • Outflows of funds. Payment of financial debts …………………….. • Information regime ……………………………………………............... • Criminal exchange regime – Law No. 19,359 ……………………….. 3 4 5 6 7 8 9 10 11 12 13 14

3. Foreign Exchange Market: General Features • Transactions through entities authorized to deal in the exchange market (banks, financial entities, credit institutions, foreign exchange agencies). • Inflows and outflows of currency shall be registered before the Argentine Central Bank (“ACB”) • Each foreign exchange transaction must be performed pursuant to one of the “concepts” foreseen in the ACB regulations. • If a transaction does not fit under any of the authorized “concepts”, an expressed authorization of the ACB is needed. • The entities are responsible for checking the authenticity of the transaction and the compliance with ACB regulations. • Non-compliance with ACB constitutes an infringement of the Criminal Foreign Exchange Law No. 19,359 (as amended in Decree No. 480/95).

4. Creation of mandatory interest-free deposit of 30% of the inflows into the foreign exchange market. The mandatory deposit shall be constituted in an Argentine bank during 365-day term and bears no interest. Pending such term funds cannot be disposed nor used as collateral for any transaction. Inflows of funds. General features

5. General Rule. Concepts included in the mandatory deposit: External financial debts. Inflows of currency by non-Argentine residents. Repatriation of funds by Argentine residents exceeding US$2 million. Exceptions to the mandatory deposit: Primary subscription of debt securities and of shares issued by public companies in self-regulated markets. “Direct investments” of non-Argentine residents: Capital contributions in local companies Acquisition of capital stock in local companies Purchase of real estate Financing of foreign trade transactions: advances and pre-exports financing. Inflows of funds. Mandatory deposit

6. General Rule: Funds derived from financial debts shall be entered and liquidated in the foreign exchange market within the first 365 consecutives days following the disbursement: The mandatory deposit is applicable. Exceptions: Loans exempted from the mandatory deposit: Granted by multilateral and bilateral agencies and official lending agencies. Simultaneously allocated to the repayment of external debts. For the investment in “long-term external assets”. Taken to an average life not lower than 2 years and aimed at the investment in “non-financial” assets. Includes: Investment registered in the balance sheet under “fixed assets” (machinery and equipment) Goods and services registered in the balance sheet as “inventories” (raw materials and goods) For the primary subscription of bonds and shares with public offer granted by the CNV. Inflows of funds. Financial Debts: General Information

7. Criteria for “direct investment”: 10% of the capital stock. There is no obligation to enter and liquidate the foreign currency in the foreign exchange market and no mandatory deposit is applicable. Capital Contributions. Filing of certain documentation is requested. Acquisition of capital stock. Filing of certain documentation is requested. Inflows of funds. Direct Investment. Capital Contributions

8. Transfers of funds to Argentina by non-Argentine residents for the purchase of real estate are exempted from the mandatory deposit in case: The public deed is signed simultaneously with the liquidation of the funds. Real estates under construction. The financial entity must certify that: The seller, client of the financial entity, is a company or individual which performs its activity in the building business and in the sale of real estate; and The funds are applied, together with the liquidation of the funds, to the payment of the purchase and sale agreement and expenses involved in the transaction. Inflows of funds. Direct investments. Purchase of real estate

9. Goods: Liquidation of exports. Terms set forth by the Ministry of Economy and Production’s Secretariat for Industry, Trade and Small and Medium Enterprises. Depending on the type of product the terms range between 60 and 360 consecutives days as from the approval of the loading permit. The ACB regulations provide for 120 additional business days to liquidate the transaction. Services: Liquidation of exports to services rendered to non-Argentine residents. Term: 135 business days as from the disbursement of the funds. Inflows of funds. Collection of exports of goods and services

10. Purchase of foreign currency by non- Argentine residents: is limited to a monthly cap of US$ 5,000. Repatriation of funds by non-Argentine residents: subject to prior authorization of the ACB, except for the following cases: Repatriation of direct investments: Sale of direct investments Definitive liquidation of the direct investment Capital reduction by the local company Repayment of irrevocable contributions by the local company Liquidation of portfolio investments (up to US$ 500,000 each month). Court- Compensations in favor of non-Argentine residents. Collection of imports, services, rents, recoveries of bankruptcies, payment of inheritance. Outflows of funds. Foreign currency purchase by Non-Argentine residents. Repatriation

11. Goods May be wholly paid in advance, whether by cash or deferred payment regardless of the type of good. Services There are no restrictions for the payment abroad of services rendered by non-Argentine residents regardless of the kind of services. Dividends and profits There is no restriction to pay profits and dividends abroad provided they result from audited financial statements Outflows of funds. Payment of imports of goods and services and distribution of profits and dividends

12. Interest: Access to the foreign exchange market is allowed to pay interest from financial loans provided that: Interest is accrued at any time during the current period Payments are made up to 15 consecutive days before due date of each interest installment Principal: repayment may take place only after 365 days as from the liquidation date and: At any time within 365 consecutives days before due date In advance within terms of over 365 days and provided that: a) if the payment is not part of a debt restructuring process, the amount in foreign currency to pay external debt in advance does not exceed the present value of the debt portion that is being paid; or b) if the payment is part of a debt restructuring process, the new terms and conditions and the cash payment should not imply an increase in the present value of the debt In order to repay principal and interest the informative regime set forth by Communication “A” 3602 of the ACB must be complied. Outflows of funds. Payment of financial debts

13. Information regime • Foreign Debt (Communication “A” 3602) • Includes financial and commertial debts • Each calendar quarter • Direct investment: capital and real estate investments (Communications “A” 4237 y 4305) • Includes direct investment in Argentina by non-Argentine residents and Argentine residents’ direct investment abroad (US$ 500,000 or more) • Each semester

14. Criminal exchange regime – Law No. 19,359 • Penalties: • Fines up to 10 times the aumont of the transaction • Prison from 1 to 4 years or fines from 3 to 10 times the amount of the transaction in case of first recidivism • Prison from 1 to 8 years or fine of 10 times the amount of the transaction in case of second recidivism • Suspention or cancelling of the authorization to perform foreing exchange transactions or forbiding to act as an importer, exporter or broker • The corporation and its directors, legal representatives, managers and syndics that took part in the transaction are jointly liable for the fine. 35380. mpm