advisory · corporate finance · 2022–2023

Trapped capital under FX controls

A corporate-finance advisory for the Argentine subsidiary of a global oilfield-services company. Argentina's exchange controls held the subsidiary's cash in pesos, with a 100%+ gap between the official and the parallel exchange rate. The engagement: assess the exposure, lay out the options, and track execution quarter by quarter.

The engagement

Economic environment — inflation above 100% and a 102% gap between official and blue-chip exchange rates — **The context.** Q1 2023: inflation above 100% annual, a 102% gap between the official and the blue-chip rate (225 vs 455 ARS/USD), no access to international credit markets, and a sudden-devaluation scenario gaining probability.

Cash evolution — peso cash position valued at official and blue-chip rates, interest achieved vs benchmark — **The problem.** The cash position valued at the two rates. Interest achieved ran at 47–64% effective annual against benchmark rates of 85–115% — and against 104% inflation.

Risk exposure — every cash position scored against inflation, devaluation and reprofiling risk — **The exposure.** Every cash position scored against three risks: 100% of cash exposed to inflation, 79% to devaluation, 65% to reprofiling.

Options by time frame with execution status — immediate, short term, medium term — **The options, tracked.** The roadmap by time frame — immediate, short, medium term — with each action carrying its execution status: rates achieved, transfers in process, imports target met, payments target missed by USD 1.15M.

Way forward — recommendations to the client — **The recommendations.** Implement the blue-chip swap while still available, hold deposits in USD and transfer to the US, manage cash actively against benchmark rates, and put all revenue under automatic adjustment formulas covering until payment date.

Slides as presented to the client, 2023. Client name and identifying marks blurred.

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