Argentina’s Central Bank Expands Debt Cancellation Authorization With Export Revenue

Argentina’s Central Bank Expands Debt Cancellation Authorization With Export Revenue

Expanded Scope for Debt Cancellation

Argentina’s Central Bank (BCRA) has taken a significant step towards enhancing the country’s financial flexibility. Through Communication “A” 7845, the bank has broadened the authorization to cancel debts utilizing export revenues. This move allows funds generated from overseas goods sales to be deployed more effectively towards settling liabilities associated with financing imports and shipping.

Previously in May, the BCRA had enabled the use of export revenues for direct offsetting of import obligations. This step removed the requirement for funds conversion into pesos through the official foreign exchange market. The present regulation broadens this scope even further.

Improved Financial Flexibility

Under the new regulation, funds collected from exports can now be accumulated in foreign or local accounts. This move ensures the payment of debt obligations up to 125% of the capital and interest due in the current and the following six calendar months. This measure provides businesses with improved financial flexibility and security, allowing them to manage their resources more effectively.

Building Upon the Previous Payment Regime

Communication “A” 7845 is a further enhancement of the payment regime established in May through Communication “A” 7770. The earlier Communication facilitated the use of foreign currencies from goods exportation for settling the principal and interest due on specific import financing operations.

The BCRA has now expanded this scope, permitting the use of export currencies to pay off the principal and interest of debt securities publicly registered abroad or domestically and denominated in foreign currency. However, it is important to note that these debt securities should not have principal due within a minimum period of two years.

Conditions for Use of Export Funds

To utilize this mechanism, certain conditions have been laid down. All funds obtained from exports must be applied within 120 days of receipt. These funds are to be used for making payments for goods imports to the foreign supplier or freight service provider, whether advanced, on sight, or deferred. Simultaneously, these funds must be liquidated in the foreign exchange market and used to settle goods imports from the foreign supplier or in terms of goods import freights.

Implications for Businesses

The implications of this new regulation for businesses are significant. It offers businesses greater flexibility by allowing them to use export revenues to offset import obligations and other debt securities directly. This move is expected to enhance the efficiency of fund utilization, adding to the financial security of businesses that engage in overseas goods sales.