CONVERTIBILITY LAW

LAW 23,928

Austral Convertibility Act

(PASSED ON 3/27/91, PUBLISHED ON 3/27/91, OFFICIAL GAZETTE 3/28/91).

TITLE I – On the Convertibility of the Austral

Section 1: It is hereby established the convertibility between the austral and the United States dollar as from April 1, 1991, in a ratio of ten thousand australs (A 10,000) per each dollar ratio, selling price, under the provisions of this Law.

Section 2: The Central Bank of the Argentine Republic shall sell the currencies that may be necessary for exchange operations according to the exchange rate established in the previous Section, and shall withdraw from circulation the australs received in exchange.

Section 3: The Central Bank of the Argentine Republic may buy foreign currency at market price, out of its own resources, by order and for the account of the National Government, or by issuing the necessary australs to meet that end.

Section 4: The unrestricted reserves of the Central Bank of the Argentine Republic in gold and foreign currency shall always be equivalent to, at least, a hundred percent (100%) of the reserve money. To the purposes of this Law, whenever reserves are invested in deposits, other interest-earning operations, domestic and foreign government bonds payable in gold, precious metals, US dollars or other similarly sound currency, the estimation thereof shall be based on market values.

Section 5: The Central Bank of the Argentine Republic shall introduce the relevant changes in its balance sheet and financial statements in order to reflect, on the one hand, the amount, structure and investment of unrestricted reserves, and, on the other, the amount and structure of the reserve money.

Section 6: The assets making up the reserves mentioned in the previous section are common pledge of the reserve money, are unencumbered, and may only be applied for the purposes of this law. The reserve money stated in australs is made up of money supply plus financial institutions sight deposits in the Central Bank of the Argentine Republic, either in current accounts or in special accounts.

TITLE II – On the Law of the Convertible Austral Circulation

Section 7: A debtor shall discharge its obligation to pay a specific amount in australs by paying the debt’s nominal amount on the maturity date.

Under no circumstances shall the currency adjustment, price indexation, cost variation or debt rescheduling, of whichever origin, with or without debtor’s delinquency, be allowed after April 1, 1991, effective date of the austral convertibility.

Any legal rule or regulation to the contrary is hereby repealed, and any contractual or customary term to the contrary is not applicable.

Section 8: Monetary realignment or credit rescheduling mechanisms established by court orders regarding amounts stated in non-convertible australs shall only be applied until April 1, 1991, and after that date no new adjustment on such concepts shall accrue.

Section 9: In all legal relationships established prior to the austral convertibility, with pending obligations by both parties, or those of periodic performance including periodic payments and considerations, the price, quota or rent to be paid for the assets, work, service or subsequent period, shall be established by enforcing legal, regulatory or contractual provisions, unless said realignment exceeds in more than twelve percent (12%) the amount resulting from the evolution of the austral market price in terms of American dollars since its creation, or the month of May, 1990, whichever the latest, to April 1, 1991, under any terms established by the rules of procedure. In the last case, the obligation to pay the amount of money shall be settled by the amount of australs corresponding to the adjustment of the US dollar evolution during the mentioned period of time, plus an annual twelve percent (12%), the original terms or conditions being applicable.

Section 10: All legal rules and regulations establishing or authorizing indexation by price, monetary realignment, cost variation or any other means for potential debt structuring, tax, prices or tariffs of assets, works or services, are hereby repealed, effective as of April 1, 1991. Said decision shall also apply to existing legal relationships and circumstances, and no previous legal, regulatory, contractual or customary clause –including collective bargaining agreements- shall apply as a reason for the adjustment, after April 1, 1991, effective date of the austral convertibility.

Section 11: Sections 617, 619, and 623 of the Civil Code are amended as follows:

Section 617: If the action that created the obligation had established that payment should be made in a currency that is not the Republic’s legal tender, the obligation shall be regarded as a duty to turn over a certain amount of money.

Section 619: If the debtor had the duty to pay in a specified currency, such obligation shall be discharged upon payment in the specified currency on the maturity date.

Section 623: No interest on interest shall be paid, unless an express agreement authorizes the accrual thereof on the capital with the periodicity agreed by the parties; or, if after the judicial settlement of the debt plus interest the judge orders to pay the resulting amount and the debtor is in default. The interest capitalization realignment agreements based on the periodic evolution of the market interest rate shall be valid.

Section 12: In view of the different legal regulations applicable to the austral before and after the convertibility thereof, the same shall be regarded, to all effects, as a new currency. In order to facilitate said differentiation, the National Executive is hereby empowered to perform the future replacement of the denomination and numeric expression of the austral, in compliance with the conversion relation stated in Section 1.

Section 13: This is a mandatory law in which public interest is involved. No person may contend against its irrevocably vested rights.

Any other regulation contrary to its provisions is hereby repealed. It shall effective as of the day after its publication in the Official Gazette.

Section 14: Be noticed to the National Executive.

PIERRI – DUHALDE – PEREYRA ARANDIA DE PEREZ PARDO – LOMBAUM

Source: National Securities Commission, Argentina.