At BaseFirma, we understand the challenges created by the dynamics of the foreign exchange market in Argentina, especially for companies with international operations. That is why we want to regularly provide you with an updated analysis of the situation and share some key insights.
Analyzing the Argentinian challenges allows you and your company not only to explore alternative solutions, but also to identify the opportunities that arise.
Background
In the context of foreign exchange restrictions in Argentina, exporters of goods and services are required to channel and settle at least 80% of the countervalue in the official exchange market (MULC), while the remaining 20% can be settled through transactions with securities (MEP or CCL). These MEP and CCL exchanges refer to the transaction of purchasing a bond in Argentinian pesos in the financial market and subsequently selling the bond in U.S. dollars through the same market.
Settlement periods vary according to the type of merchandise exported, with the general term being 180 calendar days from the date of shipment, except for shorter periods for certain agricultural products and/or transactions with related companies.
For importers of goods and services, on the other hand, access to the official exchange market is more flexible. Shipments of goods until 12/12/2023 continue severely limited and can only be paid if they were previously financed or have the prior approval of the Central Bank (which in practice is hard or impossible to obtain).. Since that date, shipments can be settled under more flexible conditions, depending on the type of imported product and/or the official date of the import.
This represents a significant improvement in the flow of import payments. Initially, under the current administration, in December 2023, four monthly payments of 25% of the import FOB value each were proposed, starting 30, 60, 90 and 120 calendar days from the date of import. Now, payment terms have been significantly reduced, with the general rule being the payment of 100% of the imported value at 30 days after clearance.
In addition to the above, payment requirements for imported goods were recently eased even further. Payments may be made on demand (against the bill of lading) or deferred before the legal deadlines for imports of any type of goods: (i) when using swaps or arbitrations with own funds deposited in a foreign currency account in a local bank, or (ii) when, simultaneously, a local financial institution provides the financing in foreign currency. In addition, it is possible to make advance payments for capital goods and other necessary goods (accessories, spare parts, materials) when at least 90% of the FOB value of the operation is capital goods.
Payment terms for services and loans are governed by specific rules, which include particular termsfor access to the official foreign exchange market, with stricter conditions for transactions between related companies.
Special Provisions for Services
o Payments for imports of services from independent third parties
Services provided by non-residents up until 12/12/2023 require the prior approval of the Central Bank. Those provided after that date may be paid abroad from 30 days from the date of accrual or provision of the service, without the possibility of advancing the total payment of the year in the case of an annual invoicing.
Freight services may be paid abroad 30 days after the service is rendered. For import freight, the term begins to count from the arrival of the ship or means of transport in the country, while for export freight, from the arrival of the ship or means of transport at the port of destination.
The Central Bank has recently relaxed timelines for third-party services, allowing payment within 30 days of service receipt – as long as it is through exchanges or arbitrations with own funds in foreign currency.
o Payments for services to related companies
Services provided by related companies starting 12/13/2023 may be paid once 180 days have elapsed since the provision or accrual of the service; while those rendered until 12/12/2023 also still require the prior approval of the Central Bank.
PAIS Tax
Regarding the PAIS Tax; as of September 2, 2024, imports of goods and freight are covered by the PAIS tax with a tax rate of 7.5%, which represents a reduction of 10% compared to the 17.5% that was in effect since last December. On this topic, the Argentinian tax authorities recently published the repeal of the advanced payment of the PAIS Tax on the FOB value at the time of the official customs clearance.
The import of services, in general, is covered by this same tax with an aliquot of 25%. For both goods and services, no distinction is made between imports from related parties or from third parties.
It is important to note that the PAIS Tax is currently set to expire in December 2024, as per existing regulations. This end date is a critical consideration for businesses planning to pay for goods or services abroad. Deferring such payments until after this date could result in significant financial savings.
Official currency exchange and financial markets cross-restrictions
Finally, please note that the cross-restrictions on access to the official exchange rate (MULC) and the securities market (MEP or CCL) are currently in effect and are 90 days before and after.
What are your next steps? What are your opportunities?
At BaseFirma, we can advise you on the best alternatives that fit your particular case. Our services can help you identify and analyze opportunities for the cancellation of foreign obligations (especially intercompany services) and for minimizing risks, which will allow you to normalize and optimize financial flows.
Current exchange rate opportunity: In the present-day context, the drop in the price of the exchange rate in the financial market (CCL) represents an excellent opportunity for companies with international obligations. Taking advantage of this exchange rate could generate considerable savings in the payment of commercial and financial debts or even externalize retained dividends or formation of assets abroad.
How to take advantage of this situation? We can help by analyzing the most beneficial options and structuring the best payment strategies. This is a key time to optimize international operations and strengthen your financial position.
We invite you to a meeting to discuss how these measures can be applied to your company.
Andrés Stante: andres.stante@basefirma.com
Melisa Gómez: melisa.gomez@basefirma.com
Diego Bello: comercio.exterior@basefirma.com