Blue chip swap

Commentary

We visit Argentina regularly – at least, in our calls. This is not because we like it – though it is well worth a physical visit. The regular calls are to keep track on the latest, unconventional, attempt to turn the economy round. Will it be successful? At the same time, our peers’ comments showcase perfectly how treasurers and their companies have to react to difficult, and changing, circumstances, and the complex choices they face.

There is no reason for Argentina not to be wealthy – in fact, at the end of the 19th century, it was one of the richest countries in the world. It has abundant natural resources, huge agricultural and fishing potential, and a well educated workforce. Yet, since the 1930s. it has teetered from one economic and political crisis to the next. Every time it seems progress is being made, the economy slides back.

Javier Milei’s latest austerity measures, with the help of significant currency support from his political ally in the US, Donald Trump, appear to be working so far. Peers report that access to foreign currency, while still subject to limitations, is improving, and some of the arrears are being paid down. The famous chainsaw approach to reducing the stifling red tape and bureaucracy has been less drastic than promised, but peers reported some progress. There has been a social cost, and reports indicate that the population is enduring the austerity, but is not prepared to do so indefinitely. 

The options for settling foreign currency:

• For goods imported since December 2024, the process is straightforward. Currency is made available once the goods have cleared customs, though there is still a lot of paperwork.
• For services imported from third parties, the foreign liability has to first be included in a quarterly report to the central bank –  via Communication A 6401 an external assets and liabilities survey. If this is approved, payment can be made in the following quarter, giving effective payment terms of 90 days. If there is any problem or query, payment will be delayed for another month, giving terms of at least 120 days.
• Intercompany services, royalties and dividends have to go through this same process, but approval will usually be delayed, often for long periods.

For intercompany invoices dated before December 2024:

• Buy BOPREALs. These are bonds issued by the Argentine government in pesos, but which will be settled in dollars at a predetermined maturity date. There have.....Please Register / Log In to read the rest of this commentary

   

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