Download Financial Program 2000

Argentina
Financial Program
Year 2000
Ministry of Economy
December, 1999
Index
 Introduction
 Fiscal Reform
 Financial Program 2000
Introduction
 Introduction
Reduce Country Risk
% GDP
Country Risk
0
500
10%
1000
5%
1500
0%
2000
-5%
2500
-10%
Spread o/TB (bp)
GDP Growth (%)
15%
3000
-15%
3500
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98 1999
4
 Introduction
Guarantee Fiscal Solvency
Fiscal Deficit and National Public Debt (% of GDP)
%
%
Projected
45
3
40
2
35
1
30
25
0
1994
1995
1996
1997
Fiscal Deficit
Left Axis
1998
1999
2000
2001
2002
2003
Public Debt
Right Axis
5
 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
6
 Introduction
Stimulate the Economy:
Direct Savings to Investment
$ billion
Deposits
Loans
90
80
70
60
50
40
1994
95
96
97
98
Mar
Jun
Sep
Nov
1999
7
Fiscal Reform
 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
- Increase of Transfers to Provinces due to
-500
-830
“Coparticipation” Funds
- Reduction of Transfers to Provinces due to ATN
and Others
Reduction of National Government Expenditures
Deficit in Previous Administration’s Budget
+330
+1,000
7,200
9
 Fiscal Reform
Proposal for Expenditure Reduction
$ million
 Highest Reduction in Nominal Primary
Expenditure in the Argentina's:
Includes:
1,419
Social Security Reform
400
Discretionary Expenditures
175
Temporary Payments by National Treasury
162
Presidency
60
Suppressed Remaining Agencies &
Other Organizations
78
10
 Fiscal Reform
Federal Agreement

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
11
 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
12
 Fiscal Reform
Tax Reform
$ million
Income Tax - Individuals
Widening of Excise Taxes
Reduction in Tax Evasion
Special Income Tax Rates & Personal Assets
New Fuel Taxes
Other
900
720
450
430
210
210
Additional Tax Revenue
2920
Suppressed Tax on Cars (Education Fund)
Personal Contributions
Interest Payments
Extended VAT
Loss in Tax Revenues
-440
-300
-200
- 80
-1020
Net Result of Tax Reform
1900
13
Financial Program 2000
 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
15
 Financial Program 2000
The Argentine Case
Amortization as % of GDP
Public Debt as % of GDP
30%
90%
80%
Long-Term Public Debt
Short-Term Public Debt
70%
20%
60%
50%
40%
10%
30%
20%
10%
d
o
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Af
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a
0%
0%
16
 Financial Program 2000
Financing Strategy
Instruments:

Multilateral Organizations

Privatizations

Liability Management

Market Transactions
17
 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)
18
 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
19
 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
20
 Financial Program 2000
Net Demand for Funds
$ million
Fiscal Deficit
4,500
Privatizations
(700)
Liability Management Transactions
(1,000)
Multilateral & Bilateral Organizations(Net)
1,900
Other
1,000
5,700
21
 Financial Program 2000
Net Supply of Funds in the Domestic Market
Assets under
Pension Funds Management
$ million
$billion
Gross
Net
Pension Funds
4,300
4,300
Banks
9,800
6,400
3,000
3,000
17,100
13,700
50
45
40
35
30
25
20
Mutual Funds,
15
Insurance Co.& Retail
10
5
0
1998
1999
2000
2001
2002
2003
Projected
2004
22
 Financial Program 2000
Market Transtions


Encourage Participation of Institutional and NonInstitutional Investors
Strengthen the Market Makers’ Role
Instruments:
$ million

Scheduled Bi-Weekly Letes Auctions
(Net Increased in Outstanding Amount)
1,000

Monthly Auctions of Promissory Notes-Bonds
1,500
Scheduled Auctions for First Half Y2000
(Annual Amount)

Program for Selling Bontes
between 3 and 5 years
2,000 with Maturity
23
 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
Consolidation Bonds

Limited Reopening of Bonds in Line with Higher
Predictability Policy
1,400
24
 Financial Program 2000
Financing Sources
$ million
Total Borrowing
Multilaterals
1999
19,700
2000
17,500
1,400
1,500
500
1,000
2,300
700
15,500
14,300
Letes (Net Increase)
1,000
1,000
Promissory Note-Bond
1,400
1,500
Bontes
1,600
2,000
USD Globals
4,600
5,000
Euros & Yens
6,900
4,800
Liability Managment
Privatization
Bonds
25
 Financial Program 2000
Financing Sources
$ million
1999
2000
Borrowing
19,700
17,500
Amortizations
11,400
12,000
Net Borrowing
8,300
5,500
15,500
14,300
Amortizations
8,600
8,600
Net borrowing
6,900
5,700
Total
Market Transactions
Borrowing
26
 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
27
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