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
IntroductionIntroduction
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
IntroductionIntroduction
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
IntroductionIntroduction
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
IntroductionIntroduction
$ billion$ billion
99
$ million$ million
Fiscal ReformFiscal Reform
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
Fiscal ReformFiscal Reform
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
Fiscal ReformFiscal Reform
1212
$ millions$ millions
Fiscal ReformFiscal Reform
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
Fiscal ReformFiscal Reform
Tax ReformTax Reform$ $ millionmillion
1515
Financial Program 2000Financial Program 2000
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
Financial Program 2000Financial Program 2000
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
Financial Program 2000Financial Program 2000
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)
Financial Program 2000Financial Program 2000
Multilateral OrganizationsMultilateral Organizations
1919
Financial Program 2000Financial Program 2000
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
Financial Program 2000Financial Program 2000
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
Financial Program 2000Financial Program 2000
Net Demand for FundsNet Demand for Funds
2222
Assets under Assets under Pension Funds ManagementPension Funds Management
Financial Program 2000Financial Program 2000
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
Financial Program 2000Financial Program 2000
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
Financial Program 2000Financial Program 2000
Market TransactionsMarket Transactions
$ 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
Financial Program 2000Financial Program 2000
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
Financial Program 2000Financial Program 2000
Market TransactionsMarket Transactions
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
Financial Program 2000Financial Program 2000
Concluding RemarksConcluding Remarks
http://www.mecon.ar
http://www.infoarg.org
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