Emerging Markets Rates and Currencies Handbook

64 Citi | Emerging Markets Currencies Handbook 2021 Argentina Options Currently there is no FX Options market. XCCY swaps Offshore swaps are traded OTC under ISDA Master Agreement definitions. Swaps are also settled in USD and have poor liquidity. Requirements to open a foreign currency account Residents are allowed to have USD denominated accounts. Remittance by residents of USD funds from onshore to offshore accounts is permitted only to individuals. Documentation Requirements Product specific Supporting documentation requirements for: • FX Spot: Instruction letter as per Citi´s forms with transaction details and mandatory information plus supporting documentation. • NDF: Local Master Agreement + Confirmation. • Offshore Derivatives: ISDA Master Agreement + Confirmation. Spot Restrictions (as of May 2021) The market has become highly regulated, and restrictions were substantially increased effective September 1, 2019 as per Decree 609/2019 and BCRA Communication “A” 6770. Several FX regulations were published thereafter. Below, we list the most important FX regulations as of May 2021. They must be read together with BCRA communications and other regulations and may be subject to change from time to time. BCRA communications and an organized summary can be found on the BCRA website. Latest summary was published on June 24, 2021. All FX transactions must be made through an authorized entity and require written instructions by the company. Banks must check the reasonability of the transaction instructed and compliance with limits and requisites established in BCRA regulations. Consequently, clients are required to provide supporting documentation to the satisfaction of the bank in accordance with the type of FX transaction instructed. Inflows Proceeds from exports of goods and services must be transferred into Argentina and converted into ARS within pre-established time limits. Proceeds from foreign financial indebtedness disbursed as of September 1, 2019 and proceeds from the issuance by Argentine residents of USD-denominated debt securities registered in Argentina as of November 29, 2019, must be transferred into Argentina and converted into ARS as a mandatory condition to access the FX Market to repay interest and principal at maturity. Outflows: The ability to purchase foreign currency is subject to strict limits. Access to foreign currency without BCRA prior approval is permitted in the cases listed below, subject to fulfillment of the requirements established in BCRA regulations (including, but not limited to those described below). Other cases require BCRA prior approval (for example, among other cases, dividend payments, prepayments and transactions with affiliates). 1. Any purchase of foreign currency, including transactions between different foreign currencies ( arbitrajes ) and the transfer of foreign currency from a local account to an offshore account ( canje ), requires the company to submit sworn statements to the bank declaring: (A) That, on the trading day, the individual or entity has not sold securities in exchange for foreign currency and has not transferred securities offshore during the 90 calendar days before the trading day and will not do so during the 90 calendar days following the trading day. (B) That, on the trading day, (i) the entity does not own “available” external liquid assets in excess of USD 100,000 (external liquid assets are, among others, physical foreign currency, gold, deposits in foreign entities and another liquid investments) and (ii) that all foreign currency holdings in Argentina are deposited in financial entities. Certain exceptions apply if the entity holds more than USD 100,000 in external liquid assets. 2. Offshore financial debt: (A) Interest payments are permitted. (B) Principal payments can, as a general rule, only be paid at maturity (or as early as 3 business days before maturity). (C) Until June 30, 2022, principal payments under offshore financial debt with affiliates cannot be paid without BCRA´s prior approval. (D) Principal payments with scheduled maturities until June 30, 2022, must be partially refinanced, as required by Communication “A” 7106 (and related and complementary FX Regulations). Access to the FX Market on the original principal payment dates within such timeframe must not exceed 40% of the original principal due. The remaining principal amount must be refinanced with new offshore financing with an average life of 2 years. The refinancing requirement is not applicable to (i) foreign financial debt with multilateral agencies; (ii) indebtedness guaranteed by multilateral agencies; and (iii) principal payments of up to USD 1,000,000 per calendar month. Restrictions and refinancing obligation described in this item 2.(D) also apply to debt securities denominated in foreign currency with public registration in Argentina, issued by the private sector and local financial entities.