Local Currency Payment System (SML)
The SML is a bilateral payment system designed with a broad scope to support payments for operations of any nature between individuals and legal entities. The implementation of the SML seeks to promote foreign trade in local currencies, deepen the market for those currencies, and reduce transaction costs.
This cross-border clearing and transfer system is integrated into local payment systems. The SML is optional and complementary to other cross-border payment systems. Those who use the SML pay and collect for their operations in their respective currencies, and there are no restrictions on the payment instruments to be used. The SML exchange rate is representative of the wholesale market in the two countries and is a buyer-seller average. This rate is used to settle transactions to the intervening banks and is published daily by the central banks. The exchange rate is uniform regardless of the volume of the transaction settled through the SML.
The intervening central banks do not charge commissions or expenses related to the procedures they carry out. The BCRA does not charge financial entities any type of expenses, unless they are returns due to errors or inaccuracies in the data provided.
To integrate the SML, it is necessary to sign an Agreement and Operating Regulations between two central banks. Currently, there are three agreements signed by the BCRA: with the Central Bank of Brazil, the Central Bank of Uruguay, and the Central Bank of Paraguay.
Banco Central Del Paraguay (BCP)
Regulatory framework
Agreement on the Local Currency Payment System between the BCRA and the BCP
Operating Regulations of the Local Currency Payment System between the BCRA and the BCP
Answers to Frequently Asked Questions about the SML
What are the characteristics of the SML?
- – It is a bilateral cross-border payment system integrated with local payment systems.
- – It is an optional and complementary mechanism to current payment systems.
- – It is a system of clearing and transferring values.
- – SML users pay and are paid in their respective currencies.
- – It is not a currency hedging mechanism.
What operations can be carried out through the SML?
The SML applies to operations related to foreign trade in goods and related services, which are documented in the local currency of the exporting party (in the case of Brazil, operations up to 360 days).
Payments of pensions and other social security benefits can also be processed when there is a bilateral agreement signed between the social security institutions of the countries.
The SML between Argentina and Paraguay, additionally, admits operations related to trade in services not related to foreign trade in goods (except financial services) and transfers as family support. Operations processed through the SML between Argentina and Paraguay may be in either Argentine pesos or guaraníes.
Who is responsible for the execution of the SML?
Those responsible for the execution of the SML are the central banks and authorized financial entities of the intervening countries.
How does the SML operate?
Transactions from central banks with financial entities authorized to operate in the SML and the entities with their clients will be carried out in the respective local currencies.
The SML cycle will be initiated by the importer/sender of the funds, who must register their operation and execute the payment in their own currency at an authorized financial institution in their country.
How are Argentine imports paid via SML?
- – The importer must document the foreign trade operation in the local currency of the exporter (in the case of Paraguay it may be documented in Argentine pesos) and channel it through an authorized financial institution.
- – The person who carries out the import must inform the authorized financial institution of the bank details provided by the exporting party.
- – The authorized financial institution must register the operation with the BCRA.
- – The payment will be made in Argentine pesos at the authorized financial institution based on the respective agreed exchange rate or the SML Rate disclosed by the BCRA at the end of the day.
How are Argentine exports collected via SML?
- – The exporting party must document the foreign trade operation in Argentine pesos (in the case of Paraguay, guaraníes may be documented).
- – The exporter must provide his bank details to the importer (payment through the SML is initiated by the importing party in an authorized financial institution in his country).
- – The exporter will receive the amount of the operation in Argentine pesos.
Are authorized financial entities required to carry out operations following the SML Rate disclosed by the BCRA?
No. Authorized financial entities can define an exchange rate for each operation directly with their clients or carry out the operations following the SML Rate disclosed by the BCRA.
Can authorized financial entities charge a commission for registering operations in the SML?
Yes. The commissions on the registration of transactions in the SML are at the discretion of each authorized financial institution.
Is the use of the SML mandatory in foreign trade transactions with Brazil, Uruguay, or Paraguay?
No. The use of the SML is optional and complementary to other payment systems.
What are the modifications in the foreign trade documentation?
There are no modifications in the foreign trade documentation, except that the operation must be documented in the local currency of the exporting party (in the case of Paraguay, the operation can also be documented in the local currency of the importing party).
Can the SML be used to carry out operations in US dollars or other currencies?
No, the operations must be registered in the local currencies. Argentine exports must be documented in Argentine pesos (or also in guaraníes in exports to Paraguay) and Argentine imports in the currency of the exporter (reais, Uruguayan pesos, or guaraníes), except for imports from Paraguay that may also be documented in Argentine pesos.
When will export payments be credited?
The BCRA will credit the current account of the authorized financial institution selected by the exporting party, at the latest, the day after receiving the funds from the central bank of the country from which the import comes (Brazil, Paraguay or Uruguay).
What happens if it is a holiday?
During a holiday, the system will be closed, as on weekends. Bank holidays in either of the two intervening countries apply to the SML.
The SML between Argentina and Paraguay also does not operate during holidays in New York.
You can consult the holidays in Argentina, Brazil, Uruguay, and Paraguay.
How is the SML rate disclosed?
The SML rate is disclosed daily on the BCRA website after the close of the markets: SML exchange rate.
Does the SML imply coverage for exchange risk?
No. The SML is not a currency risk hedging mechanism.
Do central banks act as guarantors of operations processed via SML?
No. Central banks only act as intermediaries in the operation, they do not assume reciprocal credit risk, nor credit risk of the authorized financial entities of their country.
Regarding the Argentine exchange regulations, does the SML present any difference?
No. The current exchange regulations, adapted to this operation, apply to operations processed through the SML.
Are there minimum or maximum limits in relation to the value of operations carried out through the SML?
There are no limits to carry out operations.