Hollywood studios have been unable to take tens of millions of dollars out of Argentina for roughly two years, a victim of the country’s ongoing financial crisis, Variety has learned.
It’s an issue that plagues all U.S. companies, but is particularly problematic to the entertainment business as it has struck one of the biggest markets for film in Latin America.
Studios have continued to release pictures in Argentina, because is is considered a “tastemaker” country, one that positions a film for a profitable run in other parts of the region. “Transformers: Age of Extinction” did $5.4 million worth of business and “X-Men: Days of Future Past” pulled in $4.8 million, according to BoxOfficeMojo.com. The impact has also been felt on the television front.
The difficulty is related to the country’s devalued currency, according to five executives at various media and exhibition companies. The Argentine government does not want to exchange pesos for dollars, because it would have to acknowledge that the official rate is far higher than the actual value of its money.
The devaluation has been sparked by dwindling foreign cash reserves and crippling inflation. In response, the country has mandated that money made by U.S. companies has to be recirculated in Argentina. That has forced U.S. studios to use various financial vehicles in an effort to extract their profits. Others have dealt with the hard currency issues by redeploying pesos to support their local television and film productions and distribution activities.
All of the studios and theater chains have continued to pay third party vendors that service them in the country, such as Imax. A spokesman for the Motion Picture Association of America said the lobbying agency is aware of problems facing foreign companies doing business in Argentina, including U.S. movie studios, but declined to comment further.
Argentina defaulted on its debt this week for the second time in 13 years.