In a context of a series of government measures aimed at appeasing the adverse economic effects arising as a result of the recent primary presidential elections in Argentina, the National Executive Branch issued today Emergency Decree 566/2019 (“Decree”) freezing the exchange rate and price of crude oil and fuels in the local market for 90 calendar days as from August 9 ("Term"), and requiring producing companies to guarantee the local supply.
In this regard, the Decree established that, during the Term: (i) deliveries of crude oil must be invoiced and paid at the agreed price between producers and refiners as of August 9, 2019, but applying a reference exchange rate of $ 45.19 / USD and a BRENT reference price of USD 59 / bbl; and (ii) the maximum price for gasoline and diesel in all its qualities, marketed by refiners and wholesalers or retailers may not exceed the price as of August 9, 2019. In both cases, producers, refiners and retailers must cover the total demand "in a usual and continuous way" at the fixed prices.
The reference exchange rate ($ 45.19 / USD) entails a difference of approximately 23% with respect to the current exchange rate ($ 58.50 / USD) that will be absorbed by producers. Additionally, although the BRENT is currently trading slightly below the reference price set forth by the Decree (USD 59 / bbl), producers will not be able to transfer to refiners or other members of the production chain any amount above such reference price.
Although the Decree does not provide for specific sanctions, non-compliance could imply violations of Consumer Protection Law 24,240, Provisioning Law 20,680 or the Fair Trade Emergency Decree 274/2019.
The Decree, as an emergency decree (National Constitution, art. 99, inc. 3), entered into force since its enactment and can only be abrogated with effects towards the future (no retroactive effects) if both houses of Congress issue resolutions expressly rejecting it.