Argentina Institutes New Regulations for Mutual Fund Investments

March 25
3:16 AM 2013

The Argentine government has modified its regulations regarding mutual fund investments in locally traded securities of foreign companies. The move was to increase its investments in local companies and curb capital flight.

The regulator is reducing the proportion of securities collectively known as Cedears. These are peso-denominated shares and bonds of known foreign companies which as much as 75% of which can be held by mutual funds, With the new rules, 25% is now the existing cap as these assets are now counted as foreign investments under March 22 resolutions.

The measure is among the group of measures proposed President Cristina Fernandez de Kirchner to bring back dollars to Argentina and limit capital flight. With the peso weakens further and its reserves are used to pay for debt, the peso declined in value by 13% in the past year to just US$41 billion. Other measures include insurance companies to repatriate foreign investments and force the company to invest part of their portfolio in government owned and controlled companies and projects.

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