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Cancellatory cheques

Effective as of November 23 2010, the Argentine Central Bank approved the use of cancellatory cheques. These differ from regular cheques in that they are not a payment order but instead an instrument that has the effect of constituting payment upon delivery of the cheque to the payee.

In this manner, the Central Bank aims to reduce the amount of transactions paid in cash. In transactions for significant amounts that otherwise generally were paid in cash, through these cheque the payor now has a safer alternative than having to deliver cash, and the payee receives a cheque which should be as good as receiving cash.

Cheques can be for an amount of up to $100,000. Individuals will have the possibility of buying cancellatory cheques in pesos or in US dollars, while legal entities may only buy cheques in US dollars. Cheques in US dollars may only be used to buy real estate.

Banks will need to have cancellatory cheques available in all their branches. The cheque books will be issued and distributed by the Central Bank. Before handing the cheque to the buyer, the intervening bank will transfer the money to the Central Bank. The Central Bank will be in charge of transferring the money to the bank where the cheque is cashed.

The payee has a 90-day period from the issue date to cash the cancellatory cheque. The payee will have to present the cheque to the bank in which they have an account and prove they are the final payee of the cheque

Natural persons will have the option to deposit the cheque in their savings account or to exchange the cheque for cash, which would avoid them the 1.2% debit and credit tax. Legal entities will not have this possibility and will be required to deposit the cheque in their current account.

Legal entities may not endorse these cheques. Individuals may endorse them twice. The endorser's signature will have to be certified by a public notary, a judicial authority or a bank officer.

This instrument should allow individuals to receive and make payments safely, quickly, and with no apparent cost. Time will tell if cancellatory cheques are used and if they actually are as convenient as they appear to be.

Ricardo W Beller

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