Argentina: End of Banking Restrictions and Lifting of the "corralito"

Through Communication "A" 3827 (making reference to Resolution Nbr. 668/2002 of the Ministry of Economy) the Argentine Central Bank announced the end of banking restrictions in Argentina as of December 2, 2002. The so called "corralito" imposed certain banking restrictions which were set up on December 3, 2001 by Domingo Cavallo, then serving as economy minister.

The opening of the "corralito" has produced the following effects:

- holders of current accounts and saving accounts may freely dispose of their funds as of December 2, 2002, without any time (weekly or monthly) nor amount limitations on withdrawals;

- checks may be cashed at tellers by simple endorsement, except in the case of non-transferable checks or such checks in excess of $ 50.000 (in compliance with Money Laundering Regulations); and

- foreign currency may be purchased by checks (however, transactions in excess of US$ 100,000 require Central Bank prior authorization).

On the other hand, although they may be freely entered into, purchase of goods or services transactions in excess of $ 1,000 may only be cancelled though checks, credit or debit cards.

As noted above, as of December 2 both individuals and legal entities may freely dispose of the $24 billion currently deposited in current and savings accounts, which were subject to restrictions under the corralito (formerly, $ 500 weekly and $ 2,000 monthly withdrawals limits). Depositors may choose between withdrawing all their amounts deposited in transactional accounts, or keeping such amounts in the financial system with any bank, operating through ATM withdrawals, credit cards, checks and/or debit cards.

Besides, to a certain extent, the end of the corralito brings the re-establishment of the payment system in Argentina back to normal. As noted above, as of the lifting of the corralito checks may up to the amount of $ 1,000 may be cashed at a bank teller. Until December 2, all checks had to be deposited into accounts and would take 48 hours for clearing into the account. In addition, checks deposited into accounts were subject to a 6%o (six per thousand) tax on financial transactions.

On the other hand, cash payment of financings shall also be allowed, provided it is not in excess of $ 50,000, in which case the Money Laundering Regulations shall become applicable.

As of the lifting of the corralito, banks shall be authorized to charge commissions on electronic wire transfers between accounts, whilst before such type of transfers were free of charge.

Another requirement which is eliminated with the end of the corralito is that purchases of foreign currency shall no longer need to be done on a cash basis. Checks may also be used in the future to purchase US Dollars or other foreign currency. However, all applicable foreign exchange limitations imposed by the Argentine Central Bank with respect to amounts, terms and transfer of foreign currency abroad, shall remain in full force and effect.

Also as noted above, another limitation which shall remain in effect is such which avoids cash payments in excess of $ 1,000 for the purchase of goods or services. In such cases, payments must be done through such means which involve registry of the transaction, such as credit cards, debit cards or checks.

Finally, it is worth noting that the only restrictions which have been lifted are those over monies deposited in transactional accounts. Thus, such monies on certificate of deposits which were reprogrammed in February 2002 and converted into Cedros (Certificates of Reprogrammed Deposits) shall maintain their timetable of return to depositors as of next year.