ARGENTINA’S DEBT SUSTAINABILITY FRAMEWORK...ARGENTINA’S SPREADS ARE AT VERY HIGH LEVELS, RULING OUT INTERNATIONAL MARKET ACCESS Argentina’s country risk over the last 5 years

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ARGENTINA’S DEBT SUSTAINABILITY FRAMEWORK20 MARCH 2020

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DISCLAIMER, TERMS AND CONDITIONS OF USE

This document (the “Document”) has been prepared by the Ministry of Economy of the Argentine Republic (the “Republic”) to provide, inter alia, an update on Argentina’s macroeconomic condition taking into consideration the implications of Argentina’s debt burden absent the requisite adjustments to render it sustainable and alternative adjustments that would make Argentina’s debt (taken in the aggregate) sustainable (the “ Purpose”).This Document is being made available subject to the following terms and conditions which are expressly accepted and agreed to by any person (the “Recipient”) consulting and/or reviewing this Document.While the Republic has used all reasonable efforts to ensure that the factual information contained herein is correct, accurate and complete in all material respects at the date of publication, neither the Republic, nor any of its Advisors, nor any of their respective related or affiliated bodies, or entities, nor their or their affiliates’ respective stakeholders, directors, partners, officers, employees, advisers or other representatives, if any (the “Argentine Parties”), make any warrantor representation, expressed or implied, concerning the relevance, accuracy or completeness of either the information or the analyses of information contained herein or any other written, oral or other information made available to any Recipient in connection therewith including, without limitation, any historical financial information, the estimates and projections, and any other financial information, and nothing contained in this Document is, or may be relied upon as, a promise or representation, whether as to the past or the future. Except insofar as liability under any law cannot be excluded, the Argentine Parties shall have no responsibility arising in respect of the information contained in this Document or in any other way for errors or omissions (including responsibility to any person by reason of negligence).This Document does not purport to be all inclusive or to contain all the information that a Recipient may require in its assessment of the Purpose. Further, this Document has not been prepared with regard to the investment objectives, financial situation and particular needs of any Recipient. No Recipient is thus entitled to rely on this document for any purpose whatsoever and any Recipient should conduct its own independent review and analysis of the information contained in or referred to in this Document and consult its own independent advisers as to legal, tax and accounting issues when assessing the Purpose. The information in this presentation reflects Argentina’s reasonable understanding of conditions, including economic, monetary and market prevailing as of March 2020 all of which are subject to change and are not within Argentina’s control.This Document does not constitute an offer to sell or a solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which any offer, solicitation or sale would be unlawful prior to registration or qualification of such securities under the securities laws of any such jurisdiction. This Document may contain certain forward looking statements, estimates, targets and projections prepared on the basis of information provided by the Republic. Such statements, estimates and projections involve significant subjective elements of judgment and analysis which may or may not prove to be correct. There may be differences between forecast and actual results because events and circumstances frequently do not occur as forecast and these differences may be material. There can be no assurance that any of the estimates, targets or projections will be met. Accordingly, none of the Argentine Parties shall be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in or omission from this Document and any such liability is expressly disclaimed.This Document has been prepared exclusively for information purposes. Neither this Document nor any information contained therein does or will not form part of any legal agreement that may result from the review, investigation and analysis of this Document by its Recipient and/or the Recipient’s representatives. Neither this Document nor the information contained therein does constitute any form of commitment, recommendation or offer (either expressly or impliedly) on the part of any Argentine Parties with respect to the Purpose. The Republic reserves any rights it may have in connection with any of its debt obligations and nothing contained in this Document shall be construed as a waiver or amendment of such rights. In issuing this Document, neither the Republic nor any Argentine Party undertakes to provide the Recipient or any of its representatives with access to any additional information or to update this Document or any other information provided in connection therewith or to correct any inaccuracies therein that may become apparent. Nothing in this report, or in any communication from the Republic, constitutes an acknowledgment or admission of the existence of any claim or any liability of the Republic to pay that claim or an acknowledgment that any ability to bring proceedings in any jurisdiction in respect of such claim or any limitation period relating thereto has been revived or reinstated, or an express or implied promise to pay any such claim (or part thereof). All defenses available to the Republic relating to any applicable statute of limitations or otherwise are expressly preserved for all purposes.

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TABLE OF CONTENT

The Argentine economy is in the midst of a major crisis

Argentina’s debt is not sustainable

Sustainable debt principles

Next steps and logistics

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2

3

4

4

THE ARGENTINE ECONOMY IS IN THE MIDST OF A MAJOR CRISIS

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ARGENTINA AFTER YEARS OF HARDSHIPGROWTH HAS DECLINED, INFLATION HAS SURGED AND SOCIAL HARDSHIP HAS INCREASEDSocial indicators (November 2019, except for (i) Unemployment rate, 2019Q3 and (ii) Poverty rate, 2019H1)

Source: Ministry of Economy based on INDEC, BCRA and Ministry of Labour, Employment and Social Security

Key social indicators 2019 Change since 2017

ARS average real monthlysalary $ 51,324 -13%

Minimum monthly retirement and pension benefits (ARS) $ 12,935 -21%

USD average monthly salary USD 859 -42%

Unemployment rate 10.6% +2.3p.p

Poverty rate 35.4% +6.8p.p

2,7

‐2,5 ‐2,1

2017 2018 2019

Real GDP growth (in %)

25,0

48,054,0

2017 2018 2019

Inflation end of period (in %)

e

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FISCAL ADJUSTMENT THROUGH SPENDING COMPRESSIONEXPENDITURES HAVE SIGNIFICANTLY DECREASED

Federal government primary expenditures as % of GDP (excl. provinces and municipalities)

Source: Ministry of Economy

24,0% 24,0%

22,6%

20,1%

18,6%

2015 2016 2017 2018 2019

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Forecast if no further policy action is taken

WE ARE COMMITTED TO RESTORING A SUSTAINABLE REVENUE PATHTHE GOVERNMENT AIMS TO REVERSE YEARS OF DECLINES IN GOVERNMENT REVENUE

Evolution of tax revenues at the national level (AFIP) as a % of GDP


20%

21%

22%

23%

24%

25%

26%

27%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Tax Reform

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ARGENTINA DEBT IS NOT SUSTAINABLE

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OUR APPROACH TO DEBT SUSTAINABILITYOUR STRATEGY AIMS TO PUT ARGENTINA’S DEBT ON A SUSTAINABLE PATH, WHICH IN TURN REQUIRES:

Debt refinancing cost in line with:

Our primary surplus targets in the medium-to-long term

Our medium-to-long term growth trajectory

Realistic trade balance projections and foreign exchange reserve accumulation compatible with an orderly easing of capital account regulation

Debt service consistent with manageable peso and foreign currency debt rollovers over the medium-to-long term

Sufficient buffers to protect against exogenous shocks

Global trade shocks

Financial shocks

“Black swans” (e.g. Covid-19)

1

2

3

4

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CHARACTERIZING THE DEBT SITUATION

Argentina’s current public sector debt is:

Un-financeable

Unaffordable

Unsustainable

1

2

3

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The debt is un-financeable given elevated costs1

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ARGENTINA’S GOVERNMENT DEBT IS UN-FINANCEABLEARGENTINA’S SPREADS ARE AT VERY HIGH LEVELS, RULING OUT INTERNATIONAL MARKET ACCESS

Argentina’s country risk over the last 5 years (bps)

Source: EMBI J.P. Morgan

300

800

1.300

1.800

2.300

2.800

3.300

3.800

4.300

Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Mar 19 Sep 19 Mar 20

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Forecasts

ARGENTINA’S GOVERNMENT DEBT IS UN-FINANCEABLE (CONT’D) GROSS FINANCING NEEDS OVER NEXT FOUR YEARS, WITH NO ADJUSTMENT, AMOUNT TO USD 300BN

Central Government Gross financing needs (% of GDP, incl. public sector)


10% 11% 11%12%

9%

11%

13% 13% 14%

19%

22%

17% 17%18%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

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ARGENTINA’S GOVERNMENT DEBT IS UN-FINANCEABLE (CONT’D)FOREIGN EXCHANGES RESERVES HAVE PLUMMETED DESPITE SIGNIFICANT IMF DISBURSEMENTS

Evolution of the BCRA’s gross foreign currency reserves (USD bn)

Source: BCRA

40

45

50

55

60

65

70

75

80

Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20

The accumulation of international reserves - alongside the restoration of macroeconomic stability - is a necessary condition for the orderly easing of capital account regulation

2019Gross foreign currency

reserves / GDPExternal debt / CA

receipts

Argentina 12% 496%Mexico 14% 82%Brazil 19% 225%Colombia 18% 185%

Source: BCRA, Ministry of Economy, IMF

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The debt is unaffordable given critical social needs 2

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ARGENTINA’S GOVERNMENT DEBT IS UNAFFORDABLEINTEREST PAID BY THE GOVERNMENT HAS REACHED PRE-2001 CRISIS LEVELS

Total interest payments (incl. intra-public sector) as a % of central government revenues


20,2%

18,4%

0%

5%

10%

15%

20%

25%

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

17

0

50

100

150

200

250

0 5 10 15 20 25 30 35

ARGENTINA’S GOVERNMENT DEBT IS UNAFFORDABLE (CONT’D)ARGENTINA’S INTEREST PAYMENTS TO REVENUES RATIO HAS ALMOST DOUBLED IN JUST TWO YEARS

Debt / GDP and Interest / Revenues of all countries rated by Moody’s* and evolution for Argentina between 2017 and 2019

Source: Ministry of Economy, Moody’s Nov. 2019 Country Credit Statistical Handbook

*All countries rated by Moody’s (excl. Lebanon, Pakistan, Egypt and Sri Lanka) / Argentina’s figures based on total debt (incl. intra-public sector)

Argentina 2017

Argentina 2019

Central Government Interest Payment / Central Government Revenue

Central Government Debt/GDP

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ARGENTINA’S GOVERNMENT DEBT IS UNAFFORDABLE (CONT’D)

Central government expenditures as a % of GDP


24,0%

18,6%

1,3%

3,3%

25,3%

21,9%

2015 2019

Primary Expenditure Interest

FISCAL ADJUSTMENT CAPACITY HAS BEEN ERODED

IN JUST 4 YEARS, THE INTEREST BILL GREW 2.5 TIMES HIGHER WHILE PRIMARY EXPENDITURES DECREASED BY 5.4PP OF GDP

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The debt trajectory is unsustainable given realistic

primary balance and growth assumptions

3

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DEBT TRAJECTORY IS UNSUSTAINABLE GIVEN REALISTIC ASSUMPTIONSARGENTINA’S DEBT TO GDP RATIO IS REACHING HISTORICALLY HIGH LEVELS

Gross debt of the Central Government (EoP, % of GDP)

Source: Finance Secretary, Ministry of Economy.

118,1%

80,5%

70,6%

62,1%

53,8% 55,4%

43,5%38,9% 40,4%

43,5% 44,7%

52,6% 53,1%56,6%

86,0% 88,8%89,3%

41,4%36,8%

32,8%28,3% 29,9%

25,6% 23,4% 23,8%26,9% 29,0%

35,2% 35,8% 38,8%

65,5%69,0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Total Government Debt (Gross) Government debt in foreign currency

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DEBT TRAJECTORY IS UNSUSTAINABLE GIVEN REALISTIC ASSUMPTIONS (CONT’D)

NO PLAUSIBLE PRIMARY SURPLUS CAN STABILIZE THE DEBT TRAJECTORY UNDER CURRENT CONDITIONS


*Subject to 7% real refinancing rate on all foreign currency debt, 3.5% real refinancing rate on IFIs, 2% real refinancing rate on all other peso denominated debt

None of these debt stabilizing primary balance targets are politically and

socially achievable

Debt stabilizing primary balance (DSPB) = (r-g)*dWhere

r (real effective interest rate on existing debt) = 5.5%g (real GDP medium term growth rate) = 2.0%d (stock of debt as a % of GDP) = 89.0%

Debt stabilizing primary balance given various values of gGrowth DSPB1.0% 4.0%1.5% 3.6%2.0% 3.1%2.5% 2.7%3.0% 2.2%

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ANY PRIMARY BALANCE TARGET SHOULD BE REALISTIC

Consolidated Primary balance (incl. provinces and municipalities), % of GDP, 1961-2018


Since 1961, only 10 years with a primary surplus equal or above 1%

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018

23


Source: INDEC

Real GDP. Start of recession = 100

75

80

85

90

95

100

105

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28Quarters

II‐71 IV‐74 III‐77 III‐80 IV‐84 III‐86 III‐87 IV‐94 II‐98 III‐08 III‐13 III‐15 I‐18

Debt crises ‘82

Hyperinflation ‘89

Convertibilitycrises ‘01

THE TIMING AND STRENGTH OF THE RECOVERY ARE HIGHLY UNCERTAIN

GIVEN THE UNCERTAINTY ASSOCIATED WITH THE COVID-19, AND THE RECESSION MAY BE PROTRACTED

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SUSTAINABLE DEBT PRINCIPLES

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SUSTAINABLE DEBT PRINCIPLES

Principles

Debt stock

Operational guidelines

Underlying macro-fiscal assumptions

Resulting debt trajectory under the baseline

1

2

3

4

5

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SUSTAINABLE DEBT PRINCIPLESARGENTINA IS COMMITTED TO A COLLABORATIVE PROCESS AIMED AT RESTORING DEBT SUSTAINABILITY

Argentina will intensify engagement with its bondholders on the

basis of:

Transparency

Good-faith efforts for a collaborative process to restore debt

sustainability

Fair treatment across eligible creditors

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Publicly-held debt (foreign currency and peso)

40%

Privately-held foreign currency

'eligible' debt26%

Privately-held foreign

currency other debt3%

Privately-held peso debt8%

IFIs23%

USD 83 bn

DEBT STOCKBREAKDOWN OF END-2019 STOCK OF CENTRAL GOVERNMENT DEBT


Total central government debt

USD 323bn

BCRA peso non-market debt11%

BCRA USD IOUs38%

BCRA peso and foreign currency market debt

14%

ANSES peso and foreign currency

market debt27%

BNA and others debt

10%

USD 130bn

Total publicly-held central government debt

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Debt owed to the Private Sector

In foreign currency – Eligible debt to be detailed hereafter

In local currency – We seek constructive discussions with holders of peso debt to rollover debt service obligations while ensuring overall debt sustainability. This will ease the pressures on monetary financing to service peso denominated debt, and provide more room to accumulate foreign currency reservesFor instance, we successfully swapped on 19 March c. ARS 310bn of debt in a major auction, allowing to roll-over a significant portion of the peso denominated debt at a sustainable interest rate (average of 1.2% in real terms)

Debt owed to Official Creditors – We are discussing with the IMF steps toward a Fund-supported program in the future, including program modalities. Discussions are ongoing with other IFIs and official bilateral creditors

Debt owed to the Public Sector (including BCRA/ANSES/BNA) – This debt will be refinanced with the aim of safeguarding monetary and financial stability

DEBT STOCK (CONT’D)OUR DEBT STRATEGY IS COMPREHENSIVE

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The eligible debt perimeter includes all privately held foreign currency denominated bonds under both

local and foreign law

DEBT STOCK (CONT’D)


TOTAL ELIGIBLE DEBT PERIMETER: USD 83bnAmount outstanding (in USDbn)

1

2

3

4

5 3,5

3,9

10,2

41,2

24,3

Local law exchange bonds(2005 indenture)

USDLetes

Local law USD Bonars

Foreign law global bonds(2016 indenture)

Foreign law exchange bonds(2005 indenture)

These figures exclude the share of thoseinstruments held by the public sector (BCRA,

ANSES, BNA and others)

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OPERATIONAL GUIDELINESOUR STRATEGY AIMS AT PUTTING ARGENTINA’S DEBT ON A SUSTAINABLE PATH, WHICH IN TURN REQUIRES:

Debt refinancing cost in line with:

Medium-to-long term primary surplus targets ranging between 0.8% and 1.2% of GDP

Medium-to-long term growth ranging between 1.5% and 2% per year in real terms

Realistic trade balance projections and foreign exchange reserve accumulation compatible with an orderly easing of capital account regulation

Return to USD 65 billion of gross foreign reserves by 2024

Debt service consistent with manageable peso and foreign currency debt rollovers over the medium-to-long term

Sufficient buffers to protect against exogenous shocks

Global trade shocks

Financial shocks

“Black swans” (e.g. Covid-19)

1

2

3

4

31

THE UNDERLYING MACROECONOMIC ASSUMPTIONSSUMMARY OF MACROECONOMIC ASSUMPTIONS IN 2020-2030


*The scenarios have been carried out before the COVID-19 outbreak. At this point, we are assuming that uncertainty about economic activity and fiscal balance during the initial years will not affect medium-term scenarios for debt sustainability assessments.

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Real GDP (growth yoy)

Upper bound -1.0% 3.0% 2.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%

Lower bound -1.5% 2.5% 2.0% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%

Primary balance (%GDP)

Upper bound -1.1% -0.5% 0.0% 0.5% 0.7% 0.9% 1.1% 1.2% 1.2% 1.2% 1.2%

Lower bound -1.5% -0.9% -0.4% 0.1% 0.3% 0.5% 0.7% 0.8% 0.8% 0.8% 0.8%

Trade balance (% GDP)

Upper bound 3.8% 2.8% 2.3% 2.1% 2.0% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9%

Lower bound 3.4% 2.4% 1.9% 1.7% 1.5% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4%

Gross Reserves (USDbn)

Target 50 54 58 62 65 67 70 72 74 75 77

* *

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RESULTING BASELINE DEBT TRAJECTORYABSENT ANY RESTRUCTURING, ARGENTINA’S GOVERNMENT DEBT STOCK WILL BE ON AN EXPLOSIVE PATH

Gross debt of the Central Government – Baseline scenario (% of GDP)


Note: based on upper range macroeconomic assumptions; assuming IMF loan refinanced on the markets between 2021 and 2024; market financing rates of (i) 9% (increasing to 10% in 2025 and 11% in 2030) for 10Y USD debt, (ii) 7% (increasing to 8% in 2025 and 9% in 2030) for 5Y peso USD-linked instruments, (iii) 3% over inflation for peso long-term debt, (iv) 2% over inflation for peso short term debt, (v) 5% (decreasing to 3% by 2025) for USD short term debt

50%

60%

70%

80%

90%

100%

110%

120%

130%

140%

150%

2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

Debt to GDP Debt to GDP excl. Publicly‐held debt (BCRA, ANSES, BNA and others)

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NEXT STEPS AND LOGISTICS

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NEXT STEPS

The government invites bondholders / bondholders groups to engage over the course of next week in

constructive discussions on the macroeconomic framework presented today

Bondholders / bondholders groups are invited to use the following email addresses for any interaction

request or any other inquiry they may have:

[email protected] copy to [email protected]

The government is mindful of the exceptional circumstances surrounding this process. In this regard:

Interactions will rely on video / conference call

We will prioritize interactions with bondholders / bondholders groups demonstrating significant holdings

We encourage all bondholders to continue contributing to the identification exercise conducted by

Morrow Sodali

Visit the following website https://bonds.morrowsodali.com/argentina or contact the following email

[email protected] to participate in the identification exercise

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LOGISTICS

This presentation is available in Spanish and English languages on the

Ministry of Economia website at www.argentina.gob.ar/economia

A follow-up Q&A document, including answers to questions raised in

writing during this webcast, will be posted on the Ministry of Economia

website over the course of next week

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GRACIAS

Documents

ARGENTINA’S DEBT SUSTAINABILITY FRAMEWORK...ARGENTINA’S SPREADS ARE AT VERY HIGH LEVELS, RULING OUT INTERNATIONAL MARKET ACCESS Argentina’s country risk over the last 5 years