1. Ministry of Economy December, 1999 Argentina Financial Program Year 2000

2. Index 3 Introduction 3 Fiscal Reform 3 Financial Program 2000

3. 3Introduction

4. 4 Reduce Country Risk 3Introduction

5. 5 Projected Left Axis Right Axis Fiscal Deficit and National Public Debt (% of GDP) % Guarantee Fiscal Solvency 3Introduction

6. 6 v Consolidation of Institutions v Stable Macroeconomic Context v Private Investment as Engine for Development v Encourage Competition v Adecuate Regulatory Framework v Improvement in the International Evironment Sound Conditions for Economic Growth 3Introduction

7. 7 Stimulate the Economy: Direct Savings to Investment 1999 3Introduction $ billion

8. 3Fiscal Reform

9. 9 $ million 3Fiscal Reform Fiscal Deficit before New Measures -9,100 Increase in Revenues due to New Measures +1,400 Reduction of Net Transfers to Provinces -500 - Increase of Transfers to Provinces due to -830 - Increase of Transfers to Provinces due to -830 “Coparticipation” Funds - Reduction of Transfers to Provinces due to ATN “Coparticipation” Funds - Reduction of Transfers to Provinces due to ATN and Others +330 and Others +330 Reduction of National Government Expenditures +1,000 Deficit in Previous Administration’s Budget 7,200 Fiscal Deficit

10. 10 $ million 3Fiscal Reform Proposal for Expenditure Reduction v Highest Reduction in Nominal Primary Expenditure in the Argentina's: 1,419 Includes: Social Security Reform Discretionary Expenditures Temporary Payments by National Treasury Presidency Suppressed Remaining Agencies & Other Organizations Other Organizations4001751626078

11. 11 Federal Agreement v Y2000: Fixed Transfer to Provinces of $1350 millions per month v Y2001: Triennial Moving Average v Discussion in Congress of the New “Coparticipation” Law v Agreement to Establish “Fiscal Responsibility Laws” for the Provinces v Agreement to Maintain or Reduce Expenditures in the Provinces v Selective Support to Highly Indebted Provinces 3Fiscal Reform

12. 12 $ millions 3Fiscal Reform Deficit in Previous Administration Budget -7,200 Additional Expenditure Reduction +260 Federal Agreement: Net Expenditure Reduction +550 - Gross Expenditure Reduction +710 - Gross Expenditure Reduction +710 - Suppressed Budgetary Items -160 - Suppressed Budgetary Items -160 Fiscal Deficit with New Measures -6,390 Deficit under the Fiscal Responsibility Law -4,500 Additional Fiscal Effort in Y2000 -1,890 Fiscal Deficit

13. 13 Income Tax - Individuals 900 Widening of Excise Taxes 720 Reduction in Tax Evasion 450 Special Income Tax Rates & Personal Assets 430 New Fuel Taxes 210 Other 210 Additional Tax Revenue 2920 Suppressed Tax on Cars (Education Fund)-440 Personal Contributions-300 Interest Payments-200 Extended VAT - 80 Loss in Tax Revenues -1020 Net Result of Tax Reform 1900 3Fiscal Reform Tax Reform $ million

14. 3Financial Program 2000

15. 15 3Financial Program 2000 v Stabilize Debt/GDP Ratio v Financing Strategy: Predictability, Transparency & Global Coordination v Encourage Participation of Retail and Institutional Investors in the Domestic Capital Markets v Limit Short-Term Borrowing v Smooth Debt Amortization Schedule to Avoid Heavy Concentration of Payment Obligations v Open New Markets for Public and Private Borrowers Targets:

16. 16 Amortization as % of GDP The Argentine Case 3Financial Program 2000 Public Debt as % of GDP Argentina Argentina

17. 17 3Financial Program 2000 Financing Strategy v Multilateral Organizations v Privatizations v Liability Management v Market Transactions Instruments:

18. 18 v IMF: – Extend Current Program – Accumulate Rights to Have Access to Contingent Financing v IDB - World Bank: – Complete Disbursements under Current SSAL – Negotiate New Medium-Term Loans (Project and Policy-Based Financing) 3Financial Program 2000 Multilateral Organizations

19. 19 3Financial Program 2000 Privatizations v BHN (Mortgage National Bank) v Caja de Ahorro y Seguros v Energy and Gas Companies v Railways v National Development Bank Loans v Real Estates Owned by Railway Company Total Proceeds: $700 million

20. 20 3Financial Program 2000 Liability Management v Debt Exchange Transactions Aiming at: – Reduce Short-Term Liabilities Global Impact on the 2000 Financial Program: $1,000 million – Cancel Brady’s Collateral – Reduce Marginal Cost of Borrowing – Reduce Yield Curve Differentials

21. 21 $ million Fiscal Deficit 4,500 Privatizations (700) Liability Management Transactions(1,000) Multilateral & Bilateral Organizations(Net) 1,900 Other 1,000 5,700 3Financial Program 2000 Net Demand for Funds

22. 22 Assets under Pension Funds Management 3Financial Program 2000 Net Supply of Funds in the Domestic Market Projected $billion $billion $ million Pension Funds Banks Mutual Funds, Insurance Co.& Retail 4,3009,8003,00017,100Gross4,3006,4003,000 13,700 Net

23. 23 v Encourage Participation of Institutional and Non- Institutional Investors v Strengthen the Market Makers’ Role 3Financial Program 2000 Market Transtions Instruments: $ million v Scheduled Bi-Weekly Letes Auctions 1,000 (Net Increased in Outstanding Amount) v Monthly Auctions of Promissory Notes-Bonds 1,500 Scheduled Auctions for First Half Y2000 (Annual Amount) v Program for Selling Bontes 2,000 with Maturity between 3 and 5 years

24. 24 v Global Bonds 5,000 – Maturity over 5 years – Distribution in Domestic & International Markets – Active Trading in Domestic & Int’l Markets v Euros & Yens 4,800 – Widening Investors Base v Budgetary Limit on the Issue of 1,400 Consolidation Bonds v Limited Reopening of Bonds in Line with Higher Predictability Policy 3Financial Program 2000 Market Transactions $ million

25. 25 Multilaterals Liability Managment PrivatizationBonds Letes (Net Increase) Letes (Net Increase) Promissory Note-Bond Promissory Note-Bond Bontes Bontes USD Globals USD Globals Euros & Yens Euros & Yens $ million 1,5001,00070014,3001,0001,5002,0005,0004,80017,5001,4005002,30015,5001,0001,4001,6004,6006,90019,700 3Financial Program 2000 Financing Sources 20001999 Total Borrowing

26. 26 $ million 19,70011,4008,300 17,50012,0005,5001999TotalBorrowingAmortizations Net Borrowing 2000 3Financial Program 2000 Market Transactions BorrowingAmortizations Net borrowing 15,5008,6006,900 14,3008,6005,700 Financing Sources

27. 27 v Transparency v Predictability v Performance Control v Regular and Updated Distribution of Information:  Quarterly Investor’s Conferences  Web-Sites:  www.mecon.ar/financiamiento  www.infoarg.org 3Financial Program 2000 Concluding Remarks

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