Doing Business In Argentina

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Chapter 7: Trade and Project Financing
3/4/2008
How Do I Get Paid (Methods of Payment)
How Does the Banking System Operate
Foreign-Exchange Controls
U.S. Banks and Local Correspondent Banks
Project Financing
Web Resources
How Do I Get Paid (Methods of Payment) Return to top
Letters of credit (L/Cs) may be used to pay for U.S. exports to Argentina. However,
commercial bankers consulted report that only large companies importing products for
huge amounts of money are now opening irrevocable letters of credit with a foreign
bank. Even though Argentina has not yet returned to pre-crisis levels, some local banks
are starting to open letters of credit once the line of credit has been approved for that
Argentine company. Multinational firms and large Argentine companies are still the
primary customers for these L/Cs.
Another payment option may be direct payment from Argentine importers’ overseas
bank accounts. Bank drafts and documentary collections are also being used. While
they do help safeguard the U.S. exporter's title to goods until payment has been
received, all credit and country risk remains with the exporter. There is no obligation for
the bank to cover these risks. Consequently, documentary collections are less costly
than letters of credit and, where the exporter is comfortable with these risks, they offer a
practical and efficient solution, particularly for Argentine subsidiaries of U.S. companies.
Local bankers report that now the majority of sales to Argentine importers are currently
taking place on open account. At present small and medium size Argentine companies
are extremely liquid, allowing them to upgrade production lines by for example acquiring
new machinery. As a result, open account sales generally take place between small and
medium size firms. U.S. exporters should consider open account payment terms only if
they feel confident in the Argentine client's ability and willingness to pay.
How Does the Banking System Operate Return to top
In Argentina, Law No. 21,526 of 1977 governs banking activities. Under this law,
Argentina’s Central Bank (BCRA) is the implementing authority and the regulatory body,
which issues standards and controls activities of financial institutions included in the law
(authorization and operating conditions within the banking industry; definition of
permitted, prohibited and limited transactions; monetary controls; meeting certain
operating ratios; information; accounting and control systems; dissolution and liquidation;
etc.). Holdings of foreign (nonresident) individuals and legal entities in local banking
institutions with foreign capital are to exceed 30 percent of capital stock (either directly or
indirectly), or the foreign shareholder must be able to control a sufficient number of votes
to impose its decisions at shareholders’ meetings. It is also required to register with the