In the frame of COVID-19 Pandemic, Argentina is currently not only facing the worldwide economic crisis, but also an “exchange crisis”. Since August 2019, the Government has enacted a set of regulations that increasingly limited the access to the foreign exchange market, especially affecting local operations in US Dollars (this general FX restriction is locally known as “cepo cambiario”).
Many transactions in Argentina are agreed in US Dollars (particularly real estate operations). Because the access to the foreign exchange market is virtually banned, alternative ways to obtain US Dollars gained relevance (for example, buy and sell stocks and/or sovereign bonds that can be acquired in Pesos and sold in dollars provided that they are available in foreign markets -i.e. “Dólar Contado con Liqui” or “Dólar MEP”).
In the past months, the gap between these alternative exchange rates vis-à-vis the FX rate published by the official national bank enlarged substantially. This FX gap has increased disputes among debtors and creditors on whether the transactions should be settled in US dollars or in Pesos. This discussion is based on different interpretations of certain provisions of the Argentine Civil and Commercial Code. Pursuant to these interpretations, in certain specific situations the debtor of a foreign currency-denominated obligation may be allowed to opt to discharge its obligation by delivering the equivalent amount of Argentine currency, but this permit might contradict other provisions of the same code that require the debtor to deliver the agreed consideration as provided in the relevant contract.
Under this complex scenario our courts are ruling in an increasing number of cases, with different outcomes. Particularly regarding real estate auctions, the permit to debtors to make payments in Pesos has been allowed in certain circumstances. But the novelty in the current context is that the gap between different FX rates leads to new discussions between the creditor and the debtor on one side (who will presumably try to collect US Dollars) and the auction buyer (who will presumably intend to pay the equivalent in Pesos).
Different Chambers of the Commercial Court of Appeals located in Buenos Aires have recently had the opportunity to address this issue in auctions of real estate properties where the auction basis was expressed in US Dollars and ruled differently. On October 13, 2020, Chamber C decided that the bidder should make the payment in US Dollars considering that the auction basis was in US Dollars, thus, forbade the acquirer to pay the price balance in Pesos. On the contrary, in a similar situation, on October 19, 2020 Chamber A of the same Court of Appeals allowed the buyer at auction to make the payment of the price balance by delivering the equivalent amount of Pesos plus a tax enacted in December 2019 that gravels the purchase of US Dollars by savers.
The discussion is now far from having a definite solution, and it will be important to analyze how other Courts will address the matter in the future.
This is a summary on legal and judicial developments in Argentina. It is not intended to be an in-depth analysis or to provide legal advice.