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 into derivative transactions with foreign counterparties.

Communiqué 6037 regulates the access by residents to the foreign exchange market for payments under derivative transactions. Residents may access the foreign exchange market to pay premiums, post collateral and cancel transactions related to forwards, futures option and other derivatives entered into in foreign exchanges or with non-resident counterparties. 

Communiqué 6037 clarifies that the following is not subject to any prior requirement under foreign exchange regulations: entering into and payment of futures in regulated markets, forwards, options and any other kind of derivatives which are settled in Pesos, subject to Argentine law and will not result in payments outside Argentina or domestic payments in foreign currency.

Local financial institutions will be able to access the foreign exchange market if the transaction is authorized under the financial regulations applicable to them. In this regard, the Central Bank has recently issued, by Communiqué "A" 6038, financial regulations on the ability of financial institutions to enter into derivative transactions (please see " Capacity of Financial Institutions to Enter Into Derivative Transactions with Foreign Counterparties" in the present edition of Marval News).

In short, foreign exchange regulation now allows Argentine residents to enter into derivative transaction with foreign counterparties without the need for the Central Bank's authorization.

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