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At a glance

In September 2019, President Macri of Argentina reinstituted Exchange controls restricting foreign currency purchases in an attempt to stabilize Argentina’s financial markets. In October 2019, Macri lost the presidential election to Alberto Fernandez. Since that time, the “Blue Chip Swap” rate has diverged significantly from Argentina’s “official rate.” This has caused reporting entities to ask whether the Blue chip swap rate should be used for measuring Peso-denominated transactions in Argentina. In addition, it has caused reporting entities to consider additional disclosures in order to better explain the performance of their Argentinian operations.

In July 2018, Argentina became highly inflationary pursuant to US GAAP. As a result, US GAAP reporting entities whose Argentinian operations were determined to be Peso functional had to change their functional currency to a more stable currency, which was often the US Dollar.
In September 2019, President Macri of Argentina reinstituted Exchange controls restricting foreign currency purchases in an attempt to stabilize Argentina’s financial markets. In October 2019, Macri lost the presidential election to Alberto Fernandez. Since that time, the “Blue Chip Swap” rate has diverged significantly from Argentina’s “official rate” due to the economic environment as well as a reluctance of the government to allow the official rate to devalue as quickly as the informal exchange market. As of June 10, the gap between the Blue chip swap rate and the official rate is approaching 100%.
Reporting entities in Argentina, many of which are now US Dollar functional, are becoming concerned that the official rate they are using to record transactions for their Argentinian operations may not be (or likely is not) reflective of economic reality. As a result, some are asking whether the Blue chip swap rate should be used to record transactions.
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