Argentina and Uruguay signed a bilateral treaty yesterday as part of a joint effort to stem tax evasion, reduce capital flight, and attract greater foreign investment. Argentine citizens have long used Uruguayan banks accounts to avoid tax payments. The new measure, which will likely be approved by both countries’ legislatures later this year, will allow investigators from Argentina’s tax authority, Administración Federal de Ingresos Públicos (AFIP), to access financial data on suspected tax evaders.

“This is a fundamental tool for international cooperation on tax matters,” said Uruguayan Minister of the Economy Fernando Lorenzo. The treaty also allows  Uruguay to respond to Organization of Economic Co-operation and Development (OECD) recommendations that it shore up its highly deregulated banking sector.

The treaty is very specific on how and what information on depositors can be shared. Information will only be exchanged on a case-by-case basis and a formal legal petition has to be filed by tax authorities for each individual under scrutiny. It is estimated that approximately $ 2 billion in Argentine savings have been deposited in Uruguayan banks in recent years by depositors anxious about the possibility of further currency controls.