ministry of economy

Ministry of EconomyMinistry of Economy

December, 1999December, 1999

AArgentinargentina

Financial ProgramFinancial Program

YearYear 20002000

IndexIndex

IntroductionIntroduction

Fiscal ReformFiscal Reform

Financial Program 2000Financial Program 2000

44

Reduce Country RiskReduce Country Risk

-15%

-10%

-5%

0%

5%

10%

15%

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 1999

GD

P G

row

th (

%)

0

500

1000

1500

2000

2500

3000

3500

Sp

read

o/T

B (

bp

)

% GDP Country Risk


55

ProjectedProjected

0

1

2

3

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

25

30

35

40

45

Fiscal Deficit Public DebtLeft AxisLeft Axis Right AxisRight Axis

Fiscal Deficit and National Public Debt (% of GDP)Fiscal Deficit and National Public Debt (% of GDP)

%%%%

Guarantee Fiscal SolvencyGuarantee Fiscal Solvency


66

Consolidation of InstitutionsConsolidation of Institutions

Stable Macroeconomic ContextStable Macroeconomic Context

Private Investment as Engine for DevelopmentPrivate Investment as Engine for Development Encourage CompetitionEncourage Competition

Adecuate Regulatory FrameworkAdecuate Regulatory Framework

Improvement in the International EvironmentImprovement in the International Evironment

Sound Conditions for Economic GrowthSound Conditions for Economic Growth


77

40

50

60

70

80

90

1994 95 96 97 98 Mar Jun Sep Nov

Deposits Loans

Stimulate the Economy: Stimulate the Economy: Direct Savings to InvestmentDirect Savings to Investment

19991999


$ billion$ billion

99

$ million$ million


Fiscal Deficit before New Measures -9,100Fiscal Deficit before New Measures -9,100

Increase in Revenues due to New Measures +1,400Increase in Revenues due to New Measures +1,400

Reduction of Net Transfers to Provinces -500Reduction of Net Transfers to Provinces -500

- Increase of Transfers to Provinces due to -830- Increase of Transfers to Provinces due to -830

“ “Coparticipation” Funds Coparticipation” Funds - Reduction of Transfers to Provinces due to - Reduction of Transfers to Provinces due to ATN ATN

and Others +330 and Others +330

Reduction of National Government Expenditures +1,000Reduction of National Government Expenditures +1,000

Deficit in Previous Administration’s Budget 7,200Deficit in Previous Administration’s Budget 7,200

Fiscal DeficitFiscal Deficit

1010

$ million$ million


Proposal for Expenditure ReductionProposal for Expenditure Reduction

Highest Reduction in Nominal Primary Expenditure Highest Reduction in Nominal Primary Expenditure in the Argentina's: in the Argentina's: 1,419 1,419

Includes:Includes: Social Security Reform Social Security Reform

Discretionary ExpendituresDiscretionary Expenditures

Temporary Payments by National TreasuryTemporary Payments by National Treasury

PresidencyPresidency

Suppressed Remaining Agencies & Suppressed Remaining Agencies &

Other OrganizationsOther Organizations

400400

175175

162162

6060

7878

1111

Federal AgreementFederal Agreement

Y2000: Fixed Transfer to Provinces of $1350 millions per Y2000: Fixed Transfer to Provinces of $1350 millions per monthmonth

YY20012001:: Triennial Moving Average Triennial Moving Average

Discussion in Congress of the New “Coparticipation” LawDiscussion in Congress of the New “Coparticipation” Law

Agreement to Establish “Fiscal Responsibility Laws” for the Agreement to Establish “Fiscal Responsibility Laws” for the ProvincesProvinces

Agreement to Maintain or Reduce Expenditures in the Agreement to Maintain or Reduce Expenditures in the ProvincesProvinces

Selective Support to Highly Indebted Provinces Selective Support to Highly Indebted Provinces


1212

$ millions$ millions


Deficit in Previous Administration BudgetDeficit in Previous Administration Budget - -7,2007,200

Additional Expenditure ReductionAdditional Expenditure Reduction +260 +260

Federal Agreement: Net Expenditure Reduction Federal Agreement: Net Expenditure Reduction +550+550

- Gross Expenditure Reduction- Gross Expenditure Reduction +710 +710

- Suppressed Budgetary Items- Suppressed Budgetary Items -160 -160

Fiscal Deficit with New Measures -6,390Fiscal Deficit with New Measures -6,390

Deficit under the Fiscal Responsibility Law -4,500Deficit under the Fiscal Responsibility Law -4,500

Additional Fiscal Effort in Y2000 -1,890Additional Fiscal Effort in Y2000 -1,890

Fiscal DeficitFiscal Deficit

1313

Income Tax - Individuals Income Tax - Individuals 900 900Widening of Excise Taxes Widening of Excise Taxes 720 720Reduction in Tax EvasionReduction in Tax Evasion 450 450Special Income Tax Rates & Personal AssetsSpecial Income Tax Rates & Personal Assets 430 430New Fuel TaxesNew Fuel Taxes 210 210Other Other 210 210

Additional Tax RevenueAdditional Tax Revenue 2920 2920

Suppressed Tax on Cars (Education Fund)Suppressed Tax on Cars (Education Fund) -440-440Personal ContributionsPersonal Contributions -300-300Interest PaymentsInterest Payments -200-200Extended VATExtended VAT - 80- 80Loss in Tax RevenuesLoss in Tax Revenues -1020 -1020

Net Result of Tax ReformNet Result of Tax Reform 1900 1900


Tax ReformTax Reform$ $ millionmillion

1515


Stabilize Debt/GDP RatioStabilize Debt/GDP Ratio

Financing Strategy: Predictability, Transparency & Global Financing Strategy: Predictability, Transparency & Global Coordination Coordination

Encourage Participation of Retail and Institutional Investors Encourage Participation of Retail and Institutional Investors in the Domestic Capital Markets in the Domestic Capital Markets

Limit Short-Term BorrowingLimit Short-Term Borrowing

Smooth Debt Amortization Schedule to Avoid Heavy Smooth Debt Amortization Schedule to Avoid Heavy Concentration of Payment ObligationsConcentration of Payment Obligations

Open New Markets for Public and Private BorrowersOpen New Markets for Public and Private Borrowers

Targets:Targets:

1616

0%

10%

20%

30%

Long-Term Public Debt

Short-Term Public Debt

Amortization as % of GDPAmortization as % of GDP

The Argentine CaseThe Argentine Case


Public Debt as % of GDPPublic Debt as % of GDP

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Argen

tina

Argen

tina

Argen

tina

Argen

tina

1717


Financing StrategyFinancing Strategy

Multilateral OrganizationsMultilateral Organizations

PrivatizationsPrivatizations

Liability ManagementLiability Management

Market TransactionsMarket Transactions

Instruments:Instruments:

1818

IMF:IMF:

– Extend Current ProgramExtend Current Program

– Accumulate Rights to Have Access to Contingent Accumulate Rights to Have Access to Contingent

FinancingFinancing

IDB - World Bank:IDB - World Bank:

– Complete Disbursements under Current SSALComplete Disbursements under Current SSAL

– Negotiate New Medium-Term Loans Negotiate New Medium-Term Loans

(Project and Policy-Based Financing) (Project and Policy-Based Financing)


Multilateral OrganizationsMultilateral Organizations

1919


PrivatizationsPrivatizations

BHN (Mortgage National Bank)BHN (Mortgage National Bank)

Caja de Ahorro y Seguros Caja de Ahorro y Seguros

Energy and Gas CompaniesEnergy and Gas Companies

RailwaysRailways

National Development Bank LoansNational Development Bank Loans

Real Estates Owned by Railway Real Estates Owned by Railway CompanyCompany

Total Proceeds: $700 millionTotal Proceeds: $700 millionTotal Proceeds: $700 millionTotal Proceeds: $700 million

2020


Liability ManagementLiability Management

Debt Exchange Transactions Aiming at:Debt Exchange Transactions Aiming at:

– Reduce Short-Term LiabilitiesReduce Short-Term Liabilities

Global Impact on the 2000 Financial Program: Global Impact on the 2000 Financial Program:

$1,000 million$1,000 million

Global Impact on the 2000 Financial Program: Global Impact on the 2000 Financial Program:

$1,000 million$1,000 million

– Cancel Brady’s CollateralCancel Brady’s Collateral

– Reduce Marginal Cost of BorrowingReduce Marginal Cost of Borrowing

– Reduce Yield Curve DifferentialsReduce Yield Curve Differentials

2121

$ million$ million

Fiscal Deficit Fiscal Deficit 4,500 4,500

Privatizations Privatizations (700) (700)

Liability Management TransactionsLiability Management Transactions (1,000)(1,000)

Multilateral & Bilateral Organizations(Net) Multilateral & Bilateral Organizations(Net) 1,900 1,900

OtherOther 1,000 1,000

5,7005,700


Net Demand for FundsNet Demand for Funds

2222

Assets under Assets under Pension Funds ManagementPension Funds Management


Net Supply of Funds in the Domestic MarketNet Supply of Funds in the Domestic Market

0

5

10

15

20

25

30

35

40

45

50

1998 1999 2000 2001 2002 2003 2004

ProjectedProjected

$billion$billion

$ million$ million

Pension Funds Pension Funds

Banks Banks

Mutual Funds,Mutual Funds,Insurance Co.& Retail Insurance Co.& Retail

4,300 4,300

9,8009,800

3,0003,000

17,100 17,100

GrossGross

4,300 4,300

6,4006,400

3,0003,000

1313,700,700

NetNet

2323

Encourage Participation of Institutional and Non-Encourage Participation of Institutional and Non-Institutional InvestorsInstitutional Investors

Strengthen the Market Makers’ RoleStrengthen the Market Makers’ Role


Market TranstionsMarket Transtions

Instruments:Instruments: $ million$ million

Scheduled Bi-Weekly Letes AuctionsScheduled Bi-Weekly Letes Auctions 1,000 1,000 (Net Increased in Outstanding Amount)(Net Increased in Outstanding Amount)

Monthly Auctions of Promissory Notes-BondsMonthly Auctions of Promissory Notes-Bonds 1,500 1,500 Scheduled Auctions for First Half Y2000 Scheduled Auctions for First Half Y2000 (Annual (Annual

Amount)Amount)

Program for Selling BontesProgram for Selling Bontes 2,000 with 2,000 with Maturity between 3 and 5 yearsMaturity between 3 and 5 years

2424

Global BondsGlobal Bonds 5,0005,000

– Maturity over 5 yearsMaturity over 5 years

– Distribution in Domestic & International MarketsDistribution in Domestic & International Markets

– Active Trading in Domestic & Int’l MarketsActive Trading in Domestic & Int’l Markets

Euros & YensEuros & Yens 4,8004,800

– Widening Investors BaseWidening Investors Base

Budgetary Limit on the Issue of Budgetary Limit on the Issue of 1,400 1,400

Consolidation Bonds Consolidation Bonds Limited Reopening of Bonds in Line with Higher Limited Reopening of Bonds in Line with Higher

Predictability PolicyPredictability Policy



$ million$ million

2525

MultilateralsMultilaterals

Liability ManagmentLiability Managment

PrivatizationPrivatization

BondsBonds

Letes (Net Increase)Letes (Net Increase)

Promissory Note-BondPromissory Note-Bond

BontesBontes

USD GlobalsUSD Globals

Euros & Yens Euros & Yens

$ million$ million

1,5001,500

1,0001,000

700700

14,30014,300

1,0001,000

1,5001,500

2,0002,000

5,0005,000

4,8004,800

17,50017,500

1,4001,400

500500

2,3002,300

15,50015,500

1,0001,000

1,4001,400

1,6001,600

4,6004,600

6,9006,900

19,70019,700


Financing SourcesFinancing Sources

2000200019991999

Total BorrowingTotal Borrowing

2626

$ million$ million

19,70019,700

11,40011,400

8,3008,300

17,50017,500

12,00012,000

5,5005,500

19991999TotalTotal

Borrowing Borrowing

AmortizationsAmortizations

Net BorrowingNet Borrowing

20002000



Borrowing Borrowing

Amortizations Amortizations

Net borrowingNet borrowing

15,50015,500

8,6008,600

6,9006,900

14,30014,300

8,6008,600

5,7005,700

Financing SourcesFinancing Sources

2727

TransparencyTransparency

PredictabilityPredictability

Performance ControlPerformance Control

Regular and Updated Distribution of Information:Regular and Updated Distribution of Information:

Quarterly Investor’s ConferencesQuarterly Investor’s Conferences

Web-Sites:Web-Sites:

www.mecon.ar/financiamientowww.mecon.ar/financiamiento

www.infoarg.orgwww.infoarg.org


Concluding RemarksConcluding Remarks

http://www.mecon.ar

http://www.infoarg.org

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ministry of economy

Documents

net expenditure reduction

current program

gross expenditure reduction

new measures

reduction of net transfers

millionfinancial program

gdpfinancial program

tax revenues