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Any insight on getting money out of Argentina?

We have a number of customers in Argentina that have overdue royalty invoices to our US company. Given the current currency regulations in Argentina, these customers are unable to send money out of country. One option we were given involves buying dollar-denominated bonds from Argentine issuers using pesos and then immediately reselling them in America for dollars (traded on the NYSE). This process will involve the use of a broker, will typically result in a ~40% - 50% hit. Further, we do not have an entity in country to collect the pesos in the first place, so we are really struggling with how to make this option work. Does anyone else have experience with this that could provide insight? Much appreciated!

Answers

Topic Expert
Marc Schwartz
Title: Partner
Company: Schwartz International
(Partner, Schwartz International) |

Unfortunately it's extremely difficult to get money out of Argentina and their politicians certainly haven't implemented policies that have created the desired stabilization. Do you have a specific fact pattern -- that would help with potential planning.

Anonymous
(Director, International Finance) |

Hi Marc,

Thanks so much for getting back to me on this. The specifics are below:

We are a hotel franchising company. We bill hotels in Argentina from the US for royalties (use of the brand name owned by our US entity) and certain marketing initiatives. Up until now, our franchisees were paying us by using a number of Argentine credit cards to make these payments abroad. However, these credit cards are subject to a tax of 20% and the process is becoming onerous for the franchisee. We only have 2 franchisees in country hence the reason we did not go through all the legwork of migration our intellectual property overseas and setting up a legal entity in Argentina to collect revenues. Given all the compliance and political tension in country, we were not ready to set up an entity there. This is what is making it hard for us to even use a brokerage firm to buy bonds in Argentine pesos, we do not have an entity in Argentina to bring in the pesos and turn around to purchase the bonds.

Thanks again for your insights.
-Kim

Jason Chroman
Title: Vice President Finance & Controller
Company: Tubular Labs
LinkedIn Profile
(Vice President Finance & Controller, Tubular Labs) |

Can they buy Bitcoin in Argentina and send that to you?

Anonymous
(Director, International Finance) |

Jason - Wanted to thank you for the suggestion. I've read a few articles on crypto currency, but never thought to connect this with the currency issues in Argentina. Thanks for the great suggestion, definitely looking into this.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

There are also ways to move money through other SA countries and special non-profits. It is skirting their laws, that's for sure. Ours, don't know enough about it to tell.

Topic Expert
Jake Feldman
Title: Managing Director
Company: Global TaxFin Advisory Group LLC
(Managing Director, Global TaxFin Advisory Group LLC) |

In many blocked currency countries like Argentina, it has often been possible to exchange at a parallel exchange rate using so called blue chip swap transactions. Historically, this meant using pesos to buy blue chip stocks, like IBM, or gold or Argentine bonds on the local market and then selling them offshore for dollars. You could also do the reverse if you had to send money in. The effective exchange rate is the parallel or black market rate, so you suffer an exchange loss when taking money out and realize an exchange gain when sending money in. Sometimes these swaps are legal, sometimes not, and sometimes gray. You will find the same parallel rate by using bitcoins rather than bonds or stocks.

It's not clear but is the payable obligation from the customers contractually in dollars or pesos? If dollars, then you could say it's their headache and they should execute the parallel swap and deliver the full amount of dollars to you, whereby they suffer the exchange loss. If pesos, it's your problem and you will have learned a lifelong hindsight lesson about the invoicing currency in contracts with deadbeat countries like Argentina. From a more practical non-legalistic view if it's a dollar payable, you can mutually decide with the customers to wait and add interest to the payables (perhaps years) until Argentina comes to its senses, implements economic and currency reforms, devalues and then they will be able to pay but the customer will have suffered the devaluation loss. Alternatively, you can mutually decide that the customer should invest the pesos in some "hard" asset locally like real estate or stocks (without delivering the asset to you) that will maintain its value despite devaluation and then liquidate/deliver the proceeds when payment can be made to you.

If you wish to discuss, please get in touch.

Jake

Anonymous
(scientist) |

I presume it is not allowed under Argentine law, but my question refers to U.S. law. As long as they comply with US customs reporting, does the US government have a problem with Argentinians who take money out of Argentina without reporting this to Argentinian authorities?

Topic Expert
Jake Feldman
Title: Managing Director
Company: Global TaxFin Advisory Group LLC
(Managing Director, Global TaxFin Advisory Group LLC) |

Generally, I would say not but you would need to research whether US money laundering rules come into play for the Argentine party.

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