Local Currency Payment System (SML)
The Local Currency Payment System (Sistema de Pagos en Moneda Local, SML) is a bilateral payment system designed to support payments for any kind of transactions carried out between natural and legal persons. Its implementation seeks to boost foreign trade in local currencies, make the market of these currencies deeper and cut down transaction costs.
This system for cross-border clearing and transfer of funds is integrated into local payment systems. The SML is optional and supplements other cross-border payment systems. Anyone resorting to the SML makes payments and collects funds in their respective currencies, regardless of the payment instrument used. The SML exchange rate is representative of the wholesale market in both countries and is taken at an average buying-selling rate. The transactions are settled at this rate, which is published daily by the central banks. The exchange rate remains the same, regardless of the amount of the transaction settled through the SML.
No fees or expenses are charged by central banks for these services. The BCRA does not charge any expenses to financial institutions, except in the case of refunds due to errors or inaccuracies in the data provided.
Any central bank wishing to be part of the SML is required to sign an agreement and an operating regulation with another central bank. To date, the BCRA has signed three agreements: with the central banks of Brazil, Uruguay and Paraguay.
Banco Central del Paraguay (BCP)
Regulatory framework
Agreement under the Local Currency Payment System between the BCRA and the BCP
Operating Regulation of the Local Currency Payment System between the BCRA and the BCP
FAQs about the SML
What are the characteristic features of the SML?
- – It is a bilateral cross-border payment system integrated into local payment systems.
- – It is a mechanism that is optional and supplementary to the current payment systems.
- – It is a system for clearing and transferring funds.
- – SML users make payments and collect funds in their respective currencies.
- – It is not meant to be a foreign exchange hedge.
What transactions can be carried out through the SML?
The SML applies to all transactions involving the foreign trade of goods and related services documented in the local currency of the exporter (in the case of Brazil, transactions up to 360 days).
The collection of pensions and other social security benefits may also be made under a bilateral agreement signed between the social security institutions in both countries.
The SML signed between Argentina and Paraguay also covers transactions involving the trade of services not related to the foreign trade of goods (except for financial services) and family remittances. Transactions made through the SML between Argentina and Paraguay may be made in Argentine pesos or in guaranis.
Who is responsible for the execution of the SML?
The central banks and the authorized financial institutions of the relevant countries are responsible for executing the SML.
How does the SML work?
The transactions that central banks make with financial institutions authorized to use the SML and those carried out between financial institutions and their customers are made in the respective local currencies.
The SML cycle starts when an importer/sender of funds records the transaction and makes a payment in their local currency at a financial institution authorized to use the SML.
How are Argentine imports paid through the SML?
- – An importer must record the foreign trade transaction in the local currency of the exporter (in the case of Paraguay, it may be recorded in Argentine pesos) and make the transaction through an authorized financial institution.
- – The importer must inform the authorized financial institution of the bank data provided by the exporter.
- – The authorized financial institution must record the transaction with the BCRA.
- – The payment is made in Argentine pesos at the authorized financial institution at the agreed exchange rate or the SML exchange rate posted by the BCRA at the end of the day.
How are Argentine exports collected through the SML?
- – The exporter must record the foreign trade transaction in Argentine pesos (in the case of Paraguay, transactions may be recorded in guaranis).
- – The exporter must provide their bank data to the importer (the importer makes a payment through the SML at any authorized financial institution of their country).
- – The exporter will receive the amount of the transaction in Argentine pesos.
Are authorized financial institutions required to conduct transactions at the SML rate published by the BCRA?
No. Authorized financial institutions may directly arrange an exchange rate for each transaction with their customers or make the transactions at the SML exchange rate released by the BCRA.
May authorized financial institutions charge fees for recording transactions in the SML?
Yes. Fees for recording transactions in the SML are at the discretion of each authorized financial institution.
Is the SML mandatory for foreign trade transactions with Brazil, Uruguay, or Paraguay?
No. The SML is optional and supplementary to other payment systems.
Has the foreign trade documentation been changed?
There are no changes in the foreign trade documentation. The transaction must be documented in the local currency of the exporter (in the case of Paraguay, the transaction may also be documented in the local currency of the importer).
Can transactions be made in US dollars or other currencies through the SML?
No. Transactions must be recorded in local currencies. Argentine exports must be documented in Argentine pesos (or also guaranis in the case of exports to Paraguay) and Argentine imports must be documented in the currency of the exporter (reales, Uruguayan pesos or guaranis). Imports from Paraguay may also be documented in Argentine pesos.
When are payments on exports credited?
The BCRA will credit the amount to the current account of the authorized financial institution selected by the exporter no later than a business day after receiving the funds from the central bank of the importer’s country (Brazil, Paraguay or Uruguay).
What happens in case of bank holidays?
The SML is not operative on bank holidays or weekends. Bank holidays of either of the participating countries apply to the SML.
The SML between Argentina and Paraguay is neither operative on New York bank holidays.
You can check the list of bank holidays observed in Argentina, Brazil, Uruguay and Paraguay.
How is the SML exchange rate released?
The SML exchange rate is posted daily on the BCRA’s website after the markets close: SML exchange rate.
Does the SML involve a foreign exchange hedge?
No. The SML is not meant to be a foreign exchange hedge.
Do central banks guarantee any transactions made through the SML?
No. Central banks only act as intermediaries in the transactions; they assume neither reciprocal credit risk nor credit risk of any of the authorized financial institutions in their countries.
Is there any difference in the SML with regard to the Argentine foreign exchange provisions?
No. Transactions carried out through the SML are subject to the foreign exchange regulations in force, as adapted for this mechanism.
Is the amount of the transactions conducted through the SML subject to a floor or ceiling?
There are no limits to make transactions through the SML.