Cash Repatriation from Argentina

Report date: 
27 Jun 2020

Sadly, Argentina continues to be a very difficult place to operate. The rules are complex, and keep changing. The currency keeps depreciating, and the cost of hedging it is prohibitive. Borrowing in ARS is very expensive – above 30% – and local currency loans can be difficult to obtain. This makes life difficult for companies who are losing money or who are short of cash. Life is also difficult for companies which are making money and generating cash: they have issues finding banks who are an acceptable counterparty risk and who are willing to accept ARS deposits. Even when these can be found, the deposit rate, at a now mandated minimum of 30%, is still lower than inflation. Added to the mix are the exchange controls, which make it difficult to remit cash out of the country – and can make it hard to send cash in, too.

Against this background, our participants use a variety of tactics to manage the situation. These are of necessity tailored to the situation of the company – there is no single solution. A constant theme is who do you turn to for advice: the general consensus is that the banks are the best people to talk to – but be sure to talk to several banks, to get a flavour for the issues.

Bottom line: companies use local funding or equity injections, depending on their business situation. It is not unusual to convert intercompany loans into equity – one participant made an equity injection to avoid recording a currency loss. Participants use the USD or the ARS as the functional currency, depending on whether they have dollar income. Most try to pass the risks on to their customers – but this does not make them disappear. It is an environment which demands a lot of management time and attention, usually just to stay afloat.

I suspect we will continue to share experiences and developments in Argentina for some time to come!

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This report is based on a Treasury Peer call chaired by Damian Glendinning

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