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Ministry of Economy

A rgentina. Financial Program Year 2000. Ministry of Economy. December, 1999. Index. Introduction Fiscal Reform Financial Program 2000. Introduction. Introduction. Reduce Country Risk. Projected. Introduction. Guarantee Fiscal Solvency.

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Ministry of Economy

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  1. Argentina Financial ProgramYear2000 Ministry of Economy December, 1999

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

  3. Introduction

  4. Introduction Reduce Country Risk

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

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

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

  8. Fiscal Reform

  9. Fiscal Reform Fiscal Deficit $ million 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 “Coparticipation” Funds - Reduction of Transfers to Provinces due to ATN and Others +330 Reduction of National Government Expenditures +1,000 Deficit in Previous Administration’s Budget 7,200

  10. Highest Reduction in Nominal Primary Expenditure in the Argentina's: Includes: Social Security Reform Discretionary Expenditures Temporary Payments by National Treasury Presidency Suppressed Remaining Agencies & Other Organizations 400 175 162 60 78 • Fiscal Reform Proposal for Expenditure Reduction $ million 1,419

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

  12. Fiscal Reform Fiscal Deficit $ millions Deficit in Previous Administration Budget -7,200 Additional Expenditure Reduction +260 Federal Agreement: Net Expenditure Reduction +550 - Gross Expenditure Reduction +710 - 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

  13. Fiscal Reform Tax Reform $ million 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

  14. Financial Program 2000

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

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

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

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

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

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

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

  22. Gross Net 4,300 9,800 3,000 17,100 4,300 6,400 3,000 13,700 Pension Funds Banks Mutual Funds, Insurance Co.& Retail Projected • Financial Program 2000 Net Supply of Funds in the Domestic Market Assets under Pension Funds Management $ million $billion

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

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

  25. 19,700 17,500 • Financial Program 2000 Financing Sources 1999 2000 $ million Total Borrowing Multilaterals Liability Managment Privatization Bonds Letes (Net Increase) Promissory Note-Bond Bontes USD Globals Euros & Yens 1,400 500 2,300 15,500 1,000 1,400 1,600 4,600 6,900 1,500 1,000 700 14,300 1,000 1,500 2,000 5,000 4,800

  26. 1999 2000 Total Borrowing Amortizations Net Borrowing 19,700 11,400 8,300 17,500 12,000 5,500 Market Transactions Borrowing Amortizations Net borrowing 15,500 8,600 6,900 14,300 8,600 5,700 • Financial Program 2000 Financing Sources $ million

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

  28. To Receive Information by E-Mail Send Your Address to: oncp@mecon.ar http://www.mecon.ar http://www.infoarg.org

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