Ministry of Economy January, 2000 Argentina

 Y2000 Financial Program Agenda  Economic Agenda - Policy Objectives - Public Finances - Competitiveness

 Economic Agenda

4 Reduce Country Risk  Policy Objectives GDP Growth (%) Spread o/TB (bp)

5 Projected Guarantee Fiscal Solvency  Policy Objectives % of GDP Federal Government

6 GDP- billion pesos of 1993, s.a GDP- billion pesos of 1993, s.a. Regain Momentum * Projected  Policy Objectives * Industrial Production Index (EMI), s.a.

7 v Robust Institutions v Transparency v Stable Macroeconomic Context - Currency Board /Convertibility Regime v Private Investment as Driver of Growth v Competitive Conditions with Adequate Regulatory Framework v External Factors: Improved International Environment Strengthen Conditions for Sustainable Growth  Policy Objectives

8 Fiscal Reform v Minimize Impact on Competitiveness v Improve Tax Compliance Strengthen Enforcement and Simplify Judiciary Processes Strengthen Enforcement and Simplify Judiciary Processes Close Loopholes Close Loopholes Lookthrough Provisions Lookthrough Provisions v Eliminate Distortive Industrial & Agricultural Promotion v Tax “Privileged Pensions” v Followed by: Increase Women Retirement Age Increase Women Retirement Age Phase Out of Special Pension Regimes Phase Out of Special Pension Regimes  Public Finances Goals

9 Federal Pact v Y2000: Fixed Transfer to Provinces of $1.35 bn. per month v After Y2000: 3 -Year Moving Average v Expenditure Reduction v Provincial “Fiscal Responsibility Bills” v Limit Borrowings  Public Finances

10 v Expenditure Cuts -1.4 v Tax Reform -2.2 v Federal Pact -1.1 Projected Federal Deficit 4.5 $ billion  Public Finances 2000 Budget (1.5 % of GDP) 1999 Fiscal Deficit before Privatizations & PAMI overrun Fiscal Deficit before Privatizations & PAMI overrun 9.2

11 The Name of the Game is a More Flexible Economy v Introduce Labor Reform v Reduce Production Costs v Develop Capital Markets  Competitiveness Index 1993=100

12 Introduce Labor Reform Industrial Labor Cost (1993=100)  Competitiveness v Extend Probation Period v Enforce Wage Bargaining at Firm Level v Reduce Labor Taxes from 18% to 12% over 4 Years v Diminish Labor Taxes to 12% for New Workers

13 Reduce Production Costs v Broaden Access to Wholesale Electricity Market and Gas Network v Open Competition in Fuel Market v Promote Access, Technological Change in Communications Sector v Improve Efficiency of Public Administration $/Kw Wholesale Electricity Cost  Competitiveness Argentina

14 Develop Capital Markets Banking Sector v Strengthen Insurance Industry v Review Local Capital Market Regulations to Reduce Intermediation Cost v Adhere to International Standards of Quality & Cost v Lower Cost of Capital  Competitiveness $ billion 31%

15 Export Growth * Projected  Competitiveness $ billion v Y 2000: +13% value, +7.4 volume v VAT Reimbursement for Exports v Recovery in Brazil´s Demand for Argentine Products (1999 Surplus: $0.2bn)

16 Argentina: A Country for Doing Business FDIFDI/CA % v Regional Hub v New Opportunities, New Players v Diversified Investor Base  Competitiveness $ billion FDI FDI/CA v Mutations: From Privatizations to Expansion Investments From Privatizations to Expansion Investments From Stock Acquisition to Greenfield Projects From Stock Acquisition to Greenfield Projects

 Y2000 Financial Program

18 Amortization as % of GDP The Argentine Case: Public Debt Public Debt as % of GDP Argentina Argentina  Y2000 Financial Program Average maturity 7 years

19 The Argentine Case: International Position  Y2000 Financial Program $ billion Individuals & Corporations Banks Bonds 17 Bank Loans 14 Other 5

20 Argentina International Reserves to External Short -Term debt International Reserves to Money + Quasimoney Argentina Nov-94 Jul-97 Jul-97 Oct-98 Jul-97 Mar-97Nov-98 The Argentine Case: Financial Position  Y2000 Financial Program %

21 v Stabilize Federal Public Debt/GDP Ratio v Execute a Predictable, Transparent Financing Strategy v Encourage Domestic Participation, both Institutional & Retail v Cap Short -Term Borrowings v Avoid Concentration of Maturities Targets:  Y2000 Financial Program

22 Financing Strategy v Multilateral Organizations v Privatizations v Liability Management  Y2000 Financial Program v Market Transactions

23 v IMF: – Negotiate a Formal Precautionary Arrangement v IDB - World Bank: – Complete Disbursements under Current SSAL – Negotiate New Medium -Term Loans (Project and Policy-Based Financing) Multilateral Organizations Impact: Cash $ 1.5 bn + Precautionary Arrangement  Y2000 Financial Program

24 Privatizations v BHN (National Mortgage Bank) v Caja de Ahorro y Seguros v Energy and Gas Companies v Railways v Loan Portfolio of Former BND v Real Estate Owned by Residual National Railway Company Impact: $ 0.7 bn  Y2000 Financial Program

25 Liability Management v Debt Exchange Transactions Aiming at: Improving Debt Profile Improving Debt Profile Tightening Yield Curve Differentials Tightening Yield Curve Differentials Redeeming Brady Bond’s Collateral Redeeming Brady Bond’s Collateral Decreasing Marginal Cost of Borrowing Decreasing Marginal Cost of Borrowing Impact: $1.0 bn  Y2000 Financial Program

26 v Fiscal Deficit v Privatizations v Liability Management v Multilateral & Bilateral v Other Net Demand for Funds  Y2000 Financial Program $ billion

27 Pensions Funds Mutual Funds, Insurance Co. & Retail Banks Pension Funds: AUM Net Supply of Funds in the Domestic Market Projected  Y2000 Financial Program $ billion Gross Net

28 v Encourage Participation of Institutional and Non-Institutional Investors Market Transactions Instruments: $ billion v Letes: Bi-Weekly Auctions 1.0 (Net Increase) v PB: Monthly Auctions 1.5 v 3-5 Year Bontes 2.0  Y2000 Financial Program

29 v Global Bonds 5.0 Maturity over 5 years Maturity over 5 years Distribution in Domestic & International Markets Distribution in Domestic & International Markets Active Trading in Domestic & Int’l Markets Active Trading in Domestic & Int’l Markets v Euros & Yens 4.8 v Budgetary Limit on Consolidation Bonds 1.4 v Limit Reopenings Market Transactions  Y2000 Financial Program $ billion

30 Multilaterals Liability Management PrivatizationsBonds - Letes (Net Increase) - Letes (Net Increase) - Promissory Note-Bond - Promissory Note-Bond - Bontes - USD Globals - Euros & Yens Financing Sources  Y2000 Financial Program $ billion Total 19.7Y Y2000

31 $ billion TotalGross Less: Amortizations Net 2000 Market Transactions Gross Less: Amortizations Net Financing Sources  Y2000 Financial Program

32 v Transparency v Predictability v Performance Control v Regular and Updated Distribution of Information: Quarterly Investor Conferences Quarterly Investor Conferences Web-Sites: Web-Sites: Concluding Remarks  Y2000 Financial Program

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