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Amendments to Regulations on Financing to Exporters - International Law Office

International Law Office

Banking - Argentina

Amendments to Regulations on Financing to Exporters

January 27 2006

Introduction
New Advances and Pre-export Financings
Repayment of Outstanding Advances and Pre-export Financings
Repayment of New Advances and Pre-export Financings
Medium and Long-Term Credit Lines


Introduction

On November 22 2005 the Argentine Central Bank issued Communication A/4443, which replaces the regulations on financing to exporters under Communication A/4415 of September 9 2005 (for further details please see "New Regulations on Financing to Exporters").

The amendments are designed to relax some of the requirements provided by the previous regulations in order for local exporters to receive export financings. The amendments include:

  • extending the maximum terms to make shipments to be applied to the repayment of advances and pre-export financings;

  • allowing the cancellation of advances and pre-export financings by the direct application of export proceeds abroad, even if the shipments have not been made within the maximum applicable term; and

  • authorizing medium and long-term pre-export financings, provided certain requirements are met.

New Advances and Pre-export Financings

Communication A/4443 makes more flexible the two conditions that Communication A/4415 provided in order for a new debt to qualify as an advance or a pre-export financing, and adds two new requirements. If all these conditions are complied with and the new debt is actually paid out of export proceeds, the new debt proceeds can be transferred into Argentina and converted into pesos through the local exchange market without the need to make a mandatory, non-returnable 30% bank deposit, and its repayment will not be subject to a minimum waiting period.

These conditions are now as follows:

  • Either (i) each disbursement must be backed by contracts, purchase orders or provision requests between the local exporter and foreign importers, which are documented in accordance with market uses, the compliance with which will allow payment of the services of the new debt pursuant to shipments to be made within a maximum period of 90, 180, 365 or 540 days, depending on the goods exported; or (ii) the amount of the new financing, together with the aggregate outstanding amount under advances and pre-export financings with residents of foreign countries or local financial entities owed by the exporter, must represent no more than a percentage of between 25% and 50%, depending on the goods exported, calculated over the aggregate amount of the exports made by the borrower/exporter in the previous 12 months.

  • Either (i) the outstanding debt of the exporter on September 8 2005 with non-Argentine residents or local financial entities under advances and pre-export financings must be backed by contracts, purchase orders, provision requests by foreign importers or shipments enforceable against foreign importers of goods or by shipments already made, the proceeds of which will be applied to repay the debt; or (ii) the level of debt of the exporter must be within the limit referred to in (ii) of the first bullet point above.

  • The exporter must be in compliance with the maximum terms for shipments under outstanding advances and pre-export financings.

  • From March 1 2006 the exporter must not have repaid advances or pre-export financings other than by direct application of export proceeds abroad during the 60-day period prior to the date of the conversion of the funds disbursed under the new pre-export financing into pesos through the local exchange market.

Repayment of Outstanding Advances and Pre-export Financings

The priority for the repayment of advances and pre-export financings outstanding as of September 8 2005 has been maintained.

Repayment of New Advances and Pre-export Financings

The repayment of advances and pre-export financings that were converted into pesos through the local exchange market from September 9 2005 must be made out of export proceeds from shipments made within the maximum term established by the Central Bank. The maximum term for such shipments is 90, 180, 365 or 540 days, depending on the goods exported. The local financial entity in charge of the follow-up of the pre-export financing may grant an additional 30-day term for shipments to be made in the case of delays due to facts beyond the exporter's control (eg, riots, problems with domestic transport, lack of ship spaces or climatic disasters). The term begins to run from the date of conversion into pesos of the proceeds of the debt through the local exchange market.

In addition, within 45 calendar days of the date of each shipment, the exporter must either apply the proceeds to cancel the financing partially or completely, or inform the local financial entity in charge of the follow-up of the advance or pre-export financing that the proceeds of the shipment will be applied to cancel the debt. If this information is not timely provided, the exporter shall be deemed not to have made the corresponding shipment until it complies with the information requirement.

Advances and pre-export financings may be repaid out of export proceeds from shipments made once the maximum applicable terms have elapsed. Nevertheless, non-compliance with the maximum terms for shipments has consequences regarding the possibility of the exporter to transfer into Argentina and convert new advances and pre-export financings into pesos.

The repayment of advances and pre-export financings not made out of export proceeds is subject to the regulations applicable to the repayment of financial loans (including minimum waiting period and mandatory 30% deposit), and also has consequences regarding the exporter's ability to transfer into Argentina and convert into pesos new advances and pre-export financings.

Medium or Long-Term Credit Lines

Communication A/4443 includes a specific provision for the pre-export financing credit lines granted by residents of foreign countries which comply with the following requirements:

  • The credit line must be committed for no less than three years and granted by international organizations or foreign banks with representatives in Argentina registered with the Argentine Central Bank.

  • The facility agreement must provide that the lender may terminate or accelerate the financing only in case of breach by the exporter of representations, warranties, covenants and other obligations under the agreement.

  • The agreement must provide that part of the exporter's proceeds from exports will be routed through a collection account of the borrower outside Argentina identified in the agreement, in order for the exporter to prove compliance with its export activity for the benefit of the lender.

  • The local financial entity in charge of following up the pre-export financing credit line must have received a sworn statement from the borrower and the local representative of the lender in which they state that the agreement complies with the foregoing requirements.

If these requirements are met, then as long as the export proceeds credited in the collection account correspond to shipments made within the maximum terms provided in the regulations, the maximum shipment period will be considered to be complied with. Further, the transfer of the export proceeds credited in the collection account into Argentina and their conversion into pesos through the local exchange market will be deemed as a new disbursement under the credit-line financing and the maximum period to make shipments to be applied to the financing will start running again as from that date, enabling the rollover of the previously disbursed advances.


For further information on this topic please contact Gabriel G Matarasso or Cecilia Reynolds 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 cr@marval.com.ar). The Marval, O'Farrell & Mairal website can be accessed at www.marval.com.ar.



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