The Central Bank Relaxes Foreign Exchange Restrictions On Derivatives

Author:Mr Pablo Gayol
Profession:Marval O'Farrell & Mairal

Foreign exchange regulation now allows Argentine residents to enter into derivative transactions with foreign counterparties without the need for Central Bank authorization.

On August 8, 2016, the Argentine Central Bank introduced substantial changes to the foreign exchange regulations by issuing Communiqué A 6037 ("Communiqué 6037"). Communiqué 6037 collected and systematized much of the changes introduced in recent months and also amended the regulations in certain areas. In connection with derivatives, it changed the paradigm from a general rule in which residents could not enter into derivative transactions with foreign counterparties unless they could benefit from an exemption to a general rule in which they do not need such authorization.

Until Communiqué 6037, foreign exchange regulations on derivatives had been governed by Central Bank Communiqué "A" 4805 ("Communiqué 4805"), issued in 2008. Those regulations required that residents needed the Central Bank's prior authorization to enter into derivative transaction with a non-resident, whether or not the resident accessed the foreign exchange market, unless the transaction qualified for an exemption. If the resident were to access the foreign exchange market, additional requirements regarding the counterparty applied.

Derivative transactions that residents could enter with foreign residents without a specific additional authorization from the Central Bank were mainly: i) derivative transactions entered into under Argentine law and cash settled in Pesos in Argentina, and ii) certain hedging transactions mainly related to commodity prices and currency under foreign trade transactions, and hedging of interest rates and currency related to external financing.

Communiqué 4805 has been abrogated by Communiqué 6037, and this Communiqué has not introduced any restriction for residents to enter into derivative transactions. As a result, now there are no foreign exchange restrictions for residents to enter...

To continue reading