The President of the BCRA, Miguel Pesce, and the President of the Central Bank of Uruguay, Diego Labat, have signed a new Operating Regulation of the Local Currency Payment System (Sistema de Pagos en Moneda Local, SML) which will allow payments for goods and services in Uruguayan and Argentine pesos.
The expansion of the SML between both countries enables the payment for transactions in goods and services (except financial transactions) in local currencies. Family support, retirement and pension transactions are also included, provided that a bilateral agreement has been signed between the social security institutions of both countries.
The event took place in Montevideo, Uruguay. Sergio Woyecheszen, Vice President of the BCRA, and Jorge Christy, Secretary General of the Central Bank of Uruguay, also participated in the meeting.
Pesce highlighted the importance of the new regulation which will result in foreign currency savings, while strengthening the external positions of both countries, cushioning the fluctuation effects of the international liquidity cycles, increasing macroeconomic sustainability and fostering the economic development of the region.
“The SML promotes a reduction in transaction costs,” said the President of the BCRA. “Through the SML, a more competitive exchange rate to represent the wholesale market better will be available, regardless of the volume of the transaction, thus, avoiding the exchange rate spread for using the currency of a third country,” he added.
In turn, Labat pointed out that the agreement signed establishes that the Central Banks of both countries will work to expand eligible transactions under the SML. This commitment seeks to reduce trading transaction costs in local currencies, so as to encourage foreign trade transactions.
“After a long process, we finally reached this agreement that will make the system operational. It is an important step,” Labat added. “The main change is that the payment of services has now been included, i.e., all services are included, except financial services. The other important change is the invoice currency. Companies in Uruguay or Argentina may invoice in Uruguayan pesos or in Argentine pesos without restriction (...), and I believe that this will facilitate trade,” he said. “Our duty, as a Central Bank, is to make the system work better and better,” he concluded.
The Letter of Intent is aimed at encouraging the development of these financial instruments. It was signed by both Central Banks on July 3, during the LXII Meeting of Ministers of Economy and Central Bank Presidents of Mercosur held in Puerto Iguazú.
September 5, 2023