Argentina Treasury & FX Update

Report date: 
25 Jul 2022


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Argentina never fails to provide a lively discussion. There seems to be a never ending supply of challenges, and we always find new angles.

The main challenge continues to be FX, with the steady, ongoing depreciation of the currency, while hedging remains expensive and difficult to obtain. The new feature this time was the way the authorities will penalise companies who use the alternatives which enable them to get round some of the issues, such as the blue-chip swaps (Contado con liqui) or borrowing to settle import invoices. In both cases, companies can find themselves barred from participating in the FX market for six months.

Interestingly, some people are using crypto currencies, or looking at doing so. While this clearly does not comply with the spirit of the regulations, it does not seem to violate any actual rule, and so should not trigger a six month trading ban, should the authorities take exception to them.

The discussion focused a lot on accounting:

  • The high rate of inflation imposes the use of hyperinflation accounting under IRFS – this involves recording gains and losses on monetary assets and liabilities in the I&E. That is a big problem for companies with large amounts of trapped cash.
  • There was some discussion around avoiding this by investing in non monetary items, such as real estate, or avoiding putting a due date on intercompany loans – this can get them treated as equity.
  • One participant felt that using the spot rate for accounting, as required by the rules, was misleading: the blue chip swap rate would be more realistic, and avoid overstating assets and revenues.
  • Inflation accounting also makes it very difficult to predict and track the equity in the local entity – given the strict rules forbidding negative equity, this can be a problem.

One unusual feature of the discussion was general praise for Citi’s FX Pulse product. Generally, Citi receive criticism for their tendency to push their own proprietary products over industry standard ones. But FX Pulse provides a convenient region-wide tool for inputting and electronically signing documentation – this was much appreciated.

Also, one participant has learned to split their FX submissions into many smaller transactions. That way, any documentary issues identified cause a smaller amount of payments to be held up.

Participants continue to have the issue of deposits which earn a negative rate of real return. Most importantly, several are looking to move their businesses to an offshore model, where the customer buys goods direct from an offshore country: this eliminates a lot of the complexities surrounding intercompany transactions.

Bottom line: Argentina continues to have a host of rules which keep changing – but which never simplify things. It remains a challenging environment – and an increasing number of companies are looking at moving to offshore models. Sadly, there seems to be little reason for optimism that things will change for the better soon.


This report was produced by Monie Lindsey based on a Treasury Peer Call chaired by Damian Glendinning

Topics covered in this report: 
FX, Hedging FX, Cash Repatriation, Funding, Inflation, Investments, Intercompany invoices, Blue chip swap, Contado con Liqui, Crypto currency
Service providers discussed in this report: 
Citi, BBVA, Santander

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