4,0 0, 4 Nqp x:S Wo 7v P 4, ,V4 V 1 I ... ....... 9 1" 1, J/ 1 -4s ... 1 yj v I V. 1;j ano 416 16 % A WO RL D B A N K C OU NT RY STU DY Argen tin a From Insolvency to Growth The World Bank Wasnton, D.C. .... -.:=,_:-' _. ... ..':- Copyright @1993 The International Bank for Reconstruction and Development/THE WORLD ANK 1818 H Street, N.W. Washington, D.C 20433, U.SA-L AU rights reserved Manufactured in the United States of America First printing August 1993 World Bank Country Studies are among the many reports orignally prepared for internal use as part of the continuing analysis by the Bank of the economic and related conditions of its developing member countries and of its dialogues with the govenments. Some of the reports are published in this series with the least possible delay for the use of governments and the academic, busiess and fmancial, and development communities. 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ISSN: 0253-2123 Library of Congress Cataloging-in-Publication Data Argetina : from insolvency to gowth. p. cmL - (World Bank country study, ISSN 0253-2123) ISBN 0-8213-2463-2 1. Argentina-Economic conditions-1983- 2. Argentina-Economic policy. L Intemational Bank for Reconstruction and Development IL Series. HC175.A8615 1993 338.982-dc2O 93-4348 CIP 'C'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C slt~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I I :~~~~~~~~~~~ 1EW I Hiii: g.tBg3ig}§8 :1 07~~~~~'iihu jj t I 'I x I- *j W> ;l gSl 14 :00~~~~~~1 dX if n j I 'jFc incl§ p1 j jA .. s B gg .S £ l ess t;~ ~ ~~~I 1 MU iMautfI I .:~~~~~~~~~~~~~~~~~~~~~~~ A .~~~~~~~~~~~~~~~~~~ ~i 58 .~~~~~~~~~I I'' .jj I S -iv - CURRENCY Dlr EXCH}ANiGER= ASLUO - USS1.A FISCAL TrEAR Junoy 1 - Deumber 31 ADBREYATIONS AFJP Peus F_hl Aiminaradra is Fondos d Jnblmida y Padums AGP Pot Antbrkv AiniisratiGaC l Gade Pers AyEE Water d SEwic Compan Ag4 y EDea% Ectc ANA Naiona Custom sMl ran. Adnuiuinratidn Natioml de Adus ANSSAL Ntionl Administradim of Heuth bmuanas Adninistmacida Naona de Segt. de Sahd ATN Discrionay Treaty Grat Aport de Tsoro NSoal BANADE NaSal Dewdopmnt BDk Banco Nat de De_amoU BCRA CAral Bank Bance Crtn BEN Natinal Housing Dak Dance ipatecrio Nation bC iaveaont ad Growt Bonds Bonus ise Inveri y Crffimto BICE Dak of lmbet ad Edaal Trade BaR de Invasions y Caemaia Eztmo DOCE Econaoie Comofdatio Band Bou de sCouolidaicn Eandmia BOCON Co Bond. B de Cansolacida BONEY Fetl lTrasusy Bonds Don Euo del Tonro CNEA ALmk Eny C sm Ci Nl de E Ain CONAE National Coamnmim for Spjue Activilm C w Naci de d ples CONFER Natioa Coammniot o Radi TConiti Natioa de Radio yT CONFES Federal Keith Cocil Consjo Fedewl de Sau CONICET Naiona Coed - Scince ad Techoog Cemaqo Naionl de Cleis y Tecnologta CRM M yRglion Arcant CQt de RegnlacadnMathoria DGI Coastal Tax Board Dwecid Gone de Inpwa DNCFP Federal CAnaimiOn ofPErjureS Direct National de Cosmo Federal de Prouint DGi)FM Geral Dwectrae for Mihbay Factos DirecciOn GCoal de Fibricaciunes Mlitarus DNC National ighway Herd Direto Nationl de Caesm DNRP Provincial Tax Boad. DirectiOn Naiona de Recandacida Provica DV1 Provincial Highwas Deatemo DireciOn de Vzaldd Provhial ENADEP National Sporas 4aw FaW Naona de Depors EAUTUR Ntonal Touism Agy Fae National de Tnisma ENTd Naional Telee Companymp Ni de FIEL Foedatisa br latin A uita Econom Remreb Pe nducida des EconOmics FONAWI Naiona Houing Fmd Foond National de Vivxmd GdE Nadonal GCa Cmpaq Ga ratido GPP Gross Provinca Prod Product BDnto Prowbcial IAF Lostitute for Fin Aid to Retired Institt pm Ayuda Finance ml P eranal Muiy Pursd ilat Resikdo INAP National htitute of Pubi Admiirion N de A P ENDER Recnsrane hnstitute Instibus de Reaegros INOS National Instite of social IsuSrance N latito Nanal de Segpr Socl NSJW Institlte of Health Insurance for Retires Istuto de Sgaro de Sau pra juilad and P _mioners y Ponsiand IrvHoIYrov us att Instito Provincil de V"iud MERCOSUR Soothe Common Main Mercado Cumin del Sr MHISA Minty fethh amd Social Action Ministerio is Saud y AcciOn Social NFPS N-hsudal Pubic Sector Sector Piblico No-Fonanciero NPS National P_enm Sptio S ;ata Naon de Pensi_n NWV PNeseNt Vabe Valor Actu Neto OSN Natona Saiatin Cospa Obrs SanhmilS de I NatiOn PAME Prag of Integra Mdca Care ProgramsaIntegra des Cidados M&Ics PAN Nanal Food Progrm Progam Nationa de AEmestaid PAYG P-As-You-Ge Sa;s de Repint QRs Q vRestictio estictione Cuantitativs SEGBA Seiy Compy of te Province Seiios E lctrio dsel Cr Bo. Airs SICE Secretaifa do lndustria. y Conem. Eztei SIDE Nt ee a de rntdgmia dd Esbdo Sim1 Sto tmaolm Pes ReeaeuhIns Ingtt Intat Stobhslme de Paz e Inesftwian SOFI Fch Customs Adm ditio AdministratiOn Frances ds Adanas SYOL Serery of Housing S de Vrieda VAT Value-Added Tax Impuesto al Valor Areud YPF state oil Compuy Yn to BP feros lrbcals This report is based on minsiom which visited Argentin in November 1991, March 1992 and October 1992. The main mission comnprised the following members: Richard Newfarmer (Mission Leader, Macro, Public Finance) Daniel Artana (Industrial Promotion, Subsidies, and Provincial Nicole Ball (MfilitaryEpedtr) Egbert Gerlen (Social Security) Shahrzad Gohari (Education and Health) Daniel HELwitn (Miltary Expenditures) Felipe Lairrain (Public Investment) Roberto Manrique (Presidency and MilitaryExedtr) Jacques Moaisst (Revenues, Public Enepie,Centmal Bank, Macroconsistency) Philip Musgrove (Education and Health) V'ictor Thuronyi (Direct Taxe) Jaime Vasquez-Caro (Tax Policy andAdnitao) Mario V-icens (Moetary Policy and Maao- gs1ecy) Matthew Vogel (Budget Analysis, Statistical Annexes, and ftrecions) The mission also benefitted from contributions from Rmil Aummendi (Tansort), James Hansn (External Debt), Antonio Martin del Campo (Budget Pi r cess),Nelson de Franco (Power), Oscar Liboatti (Fiscal Accounts) , John Stdat(ydoabn) and David Vetter (Prvinces). Alejandro Izquiardo helped reaethe Statistical Annexcs aad graphs. Jame Hanso provided valuable commnts.Diane Bievenour and Mil Divino provided secretarial. support. The misson also produced a compamon report on provncial public Il Ance gomauu Towards a New Federalism (Tume 1992), World Bank. - vii - contents EXECUTIVE SUMMARY ...................................... xi PART I - INTRODUCTION CHAPTER 1. FINANCIAL INSTABILITY AND PUBLIC FINCES .........N. 1 A. Public Sector Deficits, Inflation, and Slow Growth ................. 1 B. Main Problems in Public Finance: 1970-89 . ..................... 6 C. Post-1989 Stuctural Reforms in Public Finance . .................. 12 CHAPTER 2. THIE ARGENTINE PUBLIC SECTOR ..................... 24 A. Concepts and Definiton ................................. 24 B. Revenues and Expeaditus by Level of Govemment ................ 28 C. Budget Expnditus by Function: The Natonal Admiinistration .... ..... 31 PART 1I - REVENUES CEAPTER3. FEDERALREVENUES AND TAXPOLICY .... ..... 37 A. RevenuePlobemsn .............. .37 B. Tax Policy:TowardGreaterEfficiency . 40 C. RemainingIssues ............. 45 D. The August 1992 Agreement with Provinces .49 E Recommendatons .50 CHAPTER4. TAX ADMNISTRATION .54 A. Tax Administration:OveraEvalua.ion. 54 B. EnforcementandTax .Edu s56 C. Administtive Developments: DGI, Customs and SocidSSecurdty .61 D. Recommendations. .67 - viii - CHAPER S. EALTE ..................................... 69 A. Ovevew ......................................... 69 B. Federal Expeditue 992 .............................12 71 C. MeRoleofHealthnsurnce Funds (Obras Sodas) ............... 74 D. ProspectsandcforReform .7..................... 7 PART m - EXPEDEs CHAPIER 6. EDUCATION .................................... 83 A. Prinpal Education Iss= ............................... 83 B. TheLe IvandStructureofExpedituin Educaion .............. 84 C. University Education ................................... 89 D. Policy Options fr Reform ............................. 90 CBIAPrER 7. M ARY EXPEN RE.......................... 93 A. Inroductio ................................ 93 B. MitaryExpenditures in 984-1990 ......................... 94 C. Pesonnel, Vages,Alowances, andPPensi ..... .............. 96 D. Ovmview ofMtary Expenditure:1 -9 ................... 98 E. Personnd Re hmtPocy Options ........................ 99 F. Facilities,Assets andOperation .......................... 102 G. Condusions ...................................... 103 CH.AP'ER 8. TIBEP ENCY FRSI C1............................... 107 A. Presidency Expendiu . ............................. 1W B. Recommendons ................................... 111 CHAPIER9. PUBLICENERPRE ......... ................... 115 A. Backgrnd .......................... 115 B. be MIenem Adinistration Str y.........te........ 117 C. Rei.............................. .. 122 CHAFFER 10. PROVINCIAL GOVERNMENTS ...................... 124 A. Intrducin ...12A B. EvolutionofPwvicidd GovenmentDeficit .. .1s C. Provincial Government Reveues ..125 D. Prnvnial Govenmnt Expenditures .. 129 E. Recommendtios... 133 CHAFTER 11. SOCIAL SECURiTY (PENSION INSURANCE) ..140 A. Owrdew ..............................., 140 B. TheFiaureoftheNational Pnion Systemm ................... 141 - ix - C. Restorin gaViableP ionSystem ........................ 147 D. Cleaning Up the Old System ...152 E. Managing the Medium-Term Tansition . 156 F. Reommendations ..................... ... ... 160 CHAPTER 12. PUBLIC NVESTMENT. 162 A. Capital Stock and Reet Trdsin Investment .162 B. RecentTrendsinPublic nvestment ........................ 164 C. Public Investment Progrmming Mechanism and Project Selection .166 D. Public Investment-1992 and Beyond .167 E. Recommendations ............ 175 CHAPTER 13. THE CENTRAL BANK AND QUASI-EXPENDTURE .179 A. The Quasi-FisclDfiit ............................... 179 B. Sources of Financing of the Public Sector .. 181 C. Strengthening Monetary Authority .. . 187 D. Recmmendations .. 190 PART IV - PUBLIC FINANCE TOWARD THE YEAR 2000 CHAPTER 14. PUBIC HINANCE AND THE FUTURE OF PRICE STABILTY .. 193 A. Macroecononuic Pjections .. . 194 B. SustainabilityoftheFiscalBalance .. . 199 C. Savings from Recommended Refos ... 203 D. Conclusion . .. 208 ANNEXFS Annex 1.1 Subsidies to the Private Sector ... 211 Annex 2.1 The Public Sector: Budgeting Concepts and the S uc of the Fedeal Governmt .. 229 Annex 4.1 A Simplfied Approach to Mau Ta Eff .. 37 Annex 4.2 HEEgghts of Tax Legislation Under the Menem Administrto 241 Annex 7.1 Mlitary Facilities, Restructuring and Announced Actons.245 Annex 13.1 The Sources of Financing of the Combined Public Setor A idacrconsstency Framework ............ . . * . . . . . . 255 Annex 14.1 Generl Description of thePnetos ..................Pro j259 STATISTICAL AF1ENDIX .................................... 273 - xi - EXECUTIVE SUMARY A. Overview Three Years of Progress 1. The Menem Adniinistration assumed office in July 1989 after a decade of crisis in public finances that had culminated in hyperinflation. The new team inherited weak public institutions accustomed to deficit spending and reliance on the inflation tax. Claims on the states resources were far greater than its capacity to mobilize resources-meaning the Argentine state was insolvent. Dependence on the inflation tax had caused the macroeconomy to become progressively more unstable by shrnng the monetary base to levels that made it impossible to control inflation with even small fiscal gaps. 2. In response to the crisis, the Menem Administration enacted a series of structunal reforms in its first 42 months that progressively recast the foundations of public finance. The Government undertook difficult-to-reverse refms in the legal framework, institutions, and policies. These involved restructring the state through reforms in venue mobilizaton to increase the quantity and quality of federal revenues and expenditue rfionns that hwve redrawn the boundaries of the national government and private sector. xpenditure reforms included an administrative rfiornn to reduce the size and scope of government and improve control over expenditures, a newfederalism that made revenue-sharing with the provinces transparent and decentralized selected expenditures, and an extensive program of privatizatons and asset sales to end irreversibly subsidies through public entities and facilitate new private instment. Finally, the Government has also attempted to delink the nonfinancial public sector from the source of infationary finance through wfnoms of the Central Bank. 3. The results have been impressive: revenues increased, expenditures declined, and the noninterest balance moved into sustainable surplus for the first time in decades. Aggregate expenditures have not fallen more as a share of GDP because incrases associated with automatic transfrs to the provinces and social security offset expenditure reductions elsewhere. The transfers have helped to alleviate (at least initially) latent structural deficits in social security and the provinces as well. Progress in controlling inflation was not smooth--in part because institutional weaknesses took time to redress, and because small errors of macroeconomic management superimposed on small and skittish financial markets quickly were amplified into runs on the currency. Nonetlss, the underlying fundamentls in public finance improved steadily, as the combined deficit of the public sector fell from 10.5 percent of GDP in 1989 to a projected slight surplus in 1992. The macroecononiy has become more stable and the economy is now in its tlird year of strong exansion. The Challenges Ahead 4. Mintag balance in public finances is an essential prerequisite for continued price stability and economic expansion. This idea is now broadly accepted among Govenment officials at all levels and the public at large. Nonetaieless, .; ~~ 1r - - xii - weaknesses in the structural undexpinnings of public finance remain in social security, provincial finances, health insurance, and defense expenditures--and these pose medium- term threats to fiscal balance. Maintaining the intensity of the reform effort-with their implied sacrifices-in an environment of price stabilit, growth, and fading memories of hypeinfiation is the challenge now facing the Government. Moreover, if economic growth should slow, then tax growth will decline and demands for wage increases, new subsidies, and public spending may intensify. 5. Aware of this, the Government has shown its resolve to implement and/or consolidate the ambitious set of reforms already underway. The Government intends to consolidate the adninistrative rejbrm by implementing the recently passed Law of Public Financial Management, by improving control over the wage bill, by seeking passage of the Law of Public Procurement, and by completing the bureaucratic restructuring. Social security r.form, the linchpin of seveml other reforns, is intended to provide an adequate and reliable pension to beneficiaries and, by capitalizing the system, create a huge pool of savings available for investment, albeit at transitional cost to the Government. Social security reform also is linked to the reform of direct taxes, since income tax collection is central to funding of social security from general revenues. Also as part of the social security financing, the Government has proposed changes infederal-proWncialfiscal relations, designed to improve the balance between rvenue and expenditure responsibilities; it is also encouraging provinces to undertakl their own adjustment programs. In other areas, the Government has formulated a reform of the health insurance program that would provide universal health coverage, reduce inefficiencies in the health system, and eventually reduce wage taxes, while offering the promise of improved health status and worker productivity. Finaly, the Govenment has also begun a reform of the dfense complex, including the privatization of military-run public nterprises, restructuring personnel and revising the use of military facilities. These reforms constitute the basis of future improvements in public finance and will help eradicate the structral deficit and improve the quality of revenue mobilization and expenditures. The Government merits full extemal support in these efforts. 6. If these reforms are consummated, the public sector accounts are projected to be in approximate balance over the medium term. The remaining small financing gaps toward the end of the decade should be financeable in a world of price stability, low interest rates, steady four percent growth, and continued confidence in economic management. 7. However, public finances have little cushion in the event that favorable economic and policy assumptions do not materialize. First, slower-than-projected growth of output or unexpected incmases in inflation may reduce public sector revenues below projected levels; while the revenue problem is no longer structural, the Government still has minimal scope for offsetting adverse events through revenue increases. Second, the process of adjustment has given rise to new uncertainties that may place unanticipated claims on public resources. The Government needs to increase spedhicr on social services and investment in the near term to improve service delivery. The downsizing of the state has reduced the demand for imvestment in publ,ic goods and services but only partially; the deterioration from a decade of neglect requires new and more efficient spending. Third, the proposed new social security regime entails - xili - unknown but substandal tansition costs While the near-tam costs are to be offset by general revenues, changes in the design of the reform as it makes its way thrugh Congress may increase these costs. Fourth, levels of public sector indebtedness are still high, and fiscal accounts are vulnerable to unanticipated interest rate surges. Finally, the Government is consolidating past arrears to social security recipients, suppliers, and others with claims on the state through issue of as much as US$15-20 billion in new debt (the consolidation bond, BOCON); the service of this debt is capitalized for the first six years, but payments on the order of US$3 billion will be required in the last years of this decade. Although some of this new debt will be canceled with future asset sales, cash payments on the BOCON will come due at exactly the time when payments to commercial banks under the recent debt reduction agreement peak at about US$3 billion. These uncertainties mea-n that Argentina must not slow the pace of medium-term reforms, and the Govemment should therefore strive to exceed its current fiscal objectives. 8. With federal revenues approaching historic highs of more than 24 percent of GDP, the main outstanding issues are to improve the neutality of the tax policy framework and its pmgressivity As discussed below, reducing payroll taxes (perhaps as part of the health insurance reform) and broadening the base of the income tax would serve both ends well while at the same time contributing to revenue inc.;2ses. Ibx administration, much improved in recent years, also holds the promise of some revenue increases, mainly through vigilant administration of recent controls on costly subsidies to promoted industries. New revenues from these sources could in the future be used te eliniinate remaining small taxes and ease rates on main taxes. Fmally, provincial tax policy and administration are potential sources of additional rvnues and efflciency. 9. On the expenditure side, the stop-go austenty programs of the 1980s and the post-1989 adjustment program-notably the administrative refonn and the pnivatization program-bmught down federal public expenditures tD levels that are a tolerable burden on the economy. Public expenditures, equal to 22 percent of GDP at the federal level and 40 percent for all public ependitures, are below the averge for the industrial countries, and comparable to middle-income countries. 10. The main problems with expenditures are: (i) to buttress mechanisms that prevent surges in expenditure in the future; (ii) to increase the productivity of all public expenditures; and (iii) to reduce the excessive current expenditures of the provinces Expendittue suzges arise from spending compression, inadequate control of the wage bill and other expenditures, and precarious financing for spending authorities receiving tansfers. The administrative reform, by reducing employment in the Federal Government by over 50 percent and increasing wages, has relieved wage compression; the privatization program has had a similar effect. Also, the Government has tlan imporant stides to improve Budget Office's control over cash management, budgeting, and programming. The new Law of Financial Administration, passed in September 1992, will establish the legal basis for fiscal control, including eqpenditure authorizaton and axpost auditing. Also, regulariig financial relations with the prvces and public enterprises have reduced pessures for discretionary allocations. Nonetheless, important actions remain: fill implementation of the control and ac post auditing systems in Fmancial Administration Law, improved control of the wage bill, and gaining fiscal control over the health insurnce syStem. U. : - - . .;: 4. .0.:--0-~.. - xiv - 11. Sustaining the recovery in the private sector requires a more efficient delivery of publicly supplied goods and services, and a sound macroeconomic and regulatory framework. At the national level, expenditure compression in the 1980s reduced the already-low productivity of public expenditures. While recent employment reductions and privataions have relieved the compression, oply better management and resource allocation across programs can realize potental productivity gains. 12. At the provincial level, spending is nearly twice the noninterest expenditure of the national administration. Cunrent axpenditures are excessive and investment is low.' Most provinces, long accustomed tD a share of the inflation tax, are only now beginning the adjustment that the Federal Govemment started three years ago. While provinces are being asked to supply an increasing share of public service, they have received windfal gains in co-participated revenues, and this could reduce the incentive to adjust. For that reason, the Gwvemiiient has last year obtained proptional payment for administration of taxes, an increased share of co-participated taxes for social security, transferred responsibility for secondary education and health to the provinces, and required repayment of rediscounts. Adjustnent in the provinces-through reforms of tax systms, administration, and employment practices-is the only way ht provinces can begin to provide educational, health and other services more efficiently. Moreover, from a maroeconomic point of view, a slowdown in grw and revenue collection would generate considerable demands to increase transfers unless provincial administrations make headway in implementing their own reforms. The next section elabortes on these themes by summarzing the specific recommendations of this report IL Pblicy Options to Consolidate EIscal Stability 13. Several new policies and refrs, summarized below, could increase the fiscal surplus by an estimated 1.2-1.4 percent of GDP, and provide the cushion necessary to offset contingencies in the medium-term fiscal program. Moreover, the reforms would provide considerable improvement in the quality of public rnue mobiliztion and productivity of expenditures. This report suggests specific policy initiatives in tax policy and administration, current expenditures, and public investment as well as spending in the social security system, public enterprises and provinces. lbs Pblicy 14. The tax policy framework over the last two years has produced dramatic improvements in tax collection at the same time that it has evolved into a more efficient system. The Government has markedly increased its reliance on VAT and reduced the coverage of inefficient taxes, especially those on exports. The system now relies on four modem taxes: die general and uniform VAT, the income/assets tax, import tariffs, and excise taxes on selected final products (notably fuel, cigarettes, and alcoholic beverages). The abolition of the remaining inefficient taxes will be possible as revenues from efficient taxes become conmpatible with the cufrent public expenditures. The main 1 Prvincial public finaces are teated in summary form in dis report based on a detailed review in a separate report. See World Bank, Argeminw Towards a New Federalism, June 1992. -xv- outsanding issues are neutrality with respect to use of capital and labor and the progressivit dof the system. 15. The Government is poised to address these issues in the context of its social secuty and pension funds reforms. One proposal would be tD reduce the wage taxes by making some portion of the employers' contribution deductible against the VAT, and thus incrse social security funding from the VAT and income taxes. This would generate an important incentive for employers to declare social security contributions and help reduce evasion. The burden of the income tax on the middle and lower-middle class would be reduced by raising the minimum monthly taxable income. This proposal would be a salutary step tward reducing the bias against employment, but is only a partial solution. Although the increase in the minimum taxable income will in principle improve the progressivity because of the reduction of taxtion on low- income workers, it would effectively narrow the base for the income tax by excluding many mid- and upper-income taxpayers as well. While the annual average income per family is estimated at about US$19,000, the minimum taxable income is above US$20,000. Also, the loss of the wage taxes may require the Govnment to increase the VAT rate. 16. A more direct way of addressing both the factor bias and p is to explore ways of reducing the wage taxes and increasing taxes on income from capital. Assuming that the social secunty system is financeable through the elimination of evsion at a 26 paecent contnbution rate, the Government should consider linking a rnforn of the health insuance system with a reduction in both the family funds and the health insurance quotas. Contributions to health and family funds account fbr nearly 24 percent of gross salaries, much higher than nonpension wage taxes in all OECD countries. Health refom,-discussed at length in Chapter 5-and more efficient use of the fimily funds night penrit reductions of the payroll taxes by half. 17. At the same time, the Government could inceas the taxation of income from capital directly through modifications to the corporate and personal income tax. For the corporae income tax, the deduction of interest payments from the corporate income tax should be retained, proided that interest income is txd at the individual level. At the same time the Government should review the expensing of investment to ensue ffiat the depecation deduction is consistent with economic rates of depreciation. 18. For the personal income tax, the Government should reintroduce taxion on income from capital, which is now virtually exempt First, the Goement should disallow, the interest deduction; this would allow taxation of the interest earnigs Second, the Government should also institute taxaion of at least the real portion of capital gains. Finally, the Government should not raise the already generous minimum threshold on income subject to taxation, but, as tax administration improves, lowe it. In addition, the Gvemment should eliminate miscellaneous deductions and rview the possibility of taxation of fringe benefits. The effect of these measures wwuld be to broaden the base rather than to nairow it 19. Reducing the payroll tax through reduction of health funds contributions, which are fully deductible from the base of the pmenal income tax, will automailly inc the base of the personal .income tax. Lower contrutions can lead to an <~~~~- A ;;:X;.0:. X<- - xvi - ncrease in after-tax wages since a reduction in labor cost leads to an increase in labor demand, which in trn affects positively real wages (and can also reduce unemploy- ment). The positive impact on real wages will be reinficed if a decline in the price level occurs The price of capital would be positively influenced since labor costs directly affect the production cost of investment goods. Finally, mulaneous reductions in the wage tax, coupled with other retbrms in serce delivery, will also improve the equity of the txm sym. 20. The August 1992 agreement with provinces helps redress the eararked imbalance between the social secuity system and other demands on Ikeasury resources fixed in the coparttcipuion regime. The paclage assigns 15 percent of total copaicipated tax revenues to the socia securty system, but does not create mamum incentives for provincial governments to adjust lhx revnues allocated to provinces are projected to incase by nearly US$3.8 billion between 1992 and 1993. The agreement left in place about US$1.5 billion in tmnsters other than co-participation, inluding FONAVI, which are less effective in achieving thir stted objectives. Transfers to the prvces other than coparticipaion should be considered as an instrument of structual adjustment and in that sense should be linked to improements in the fiscal perfomance of the provinces. T Adminta 21. Reforms in tax administration have been a major cause of renue imprvement to date, and have allowed the Govemment to gain strong control of revenue streams Nonetheless, prgms to improve control of industial promotion, intnal itration, the tax court, and the customs adminisrton merit priority attention because of their high revenue potential. 22. Of these, perhaps the highest tax yield could come from the Govenment's efforts to control industial promotion. The program, implemented in November 1992, imvolves exchanging self-declared benefits or an audited tax credit applicable against future mes, cancelion of benefits not yet activated, and careful auditing of eisting beneficiaries. The DGI should devote the necessary resources to audit firms that did not pay taes during the suspension of benefits in the year following the Emergency Law; the effort to control prmincial firms has achieved only 50 percent of its targeted rate of audit thus far, but could yield evnues of more than US$300 million. In looking to the futue, the Govenmment should malk permanent the suspension of new industil promotion benefits, the suspension of which is scheduled to expie in September 1993. 23. The entie refon program of the industi promotion system will produce large fiscal sags. Esmates of D)GI stff suggest that the tax credit substitution progm ill reduce the fiscal cost of the industrial promotion from US$2.7 billion to US$1.4 billion in 1993. Current Dpe es: The Wage Bill 24. The Government has undertakn an unprecedented adinistrave rom to downsize and reoranize the Fedeml Gverment Officials r iz the main ministries and selected decentralized agencies. Employment in the national - xvii - administraion will have fallen from roughly 670,000 in 1990 to under 285,000 by end 1992; of this reduction, 105,000 employees have left the Govenment and the remainder have been transfired to the pvincial govemments. Employment reductions in the public enterpnse sector have been no less dramatic: employment has fallen from 295,000 to almost 50,000. Of this 245,000 reduction, about onethird has been trugh retrenchment, and the rest via pri-vatzion. 25. lIb complete the zeduction program, the Government should: (i) complete the restructuring process for those remaining gmental oanizations that have yet to be restructred, including CONICET, CNEA, civilian personnel in the Armed Forces, the national universities, the National Sugar Board, and health insurance funds (obras sociales), which in tDtal would reduce employment by an additional 27,000 positions; (ii) continue to work with the budget office to a reductions by jurisdiction to ensure proper accounting and budgeting in the future; (iii) realize a specal study on reductions, including the preparation of names and identification numbers for the purpose of ensuring that those who leave and receive indemnification will not reenter public service. 26. lb complete the reform of the wage payment system and pay scale, the Govemment must: (i) establish its own computeized registry of civil service and centralize the payment function directy or through the Ministries' accounts in line with the new law of Public Fnances, possibly absorbing the staff of the Office of Civil Service into the Ministry of Economy-where it was located before the Military Goverment of 1976; (A) implement a computerized check payment system through the banking system to control the wage bill, a measure that might save as much as US$200 million in administrative costs plus additional savings through reduction in wages to nonexitnt workem If the new system is well designed, it will ensure greater accountability and establish firm control over the wage bill. These actions may help reduce further the resources devoted solely to adn nisaon-amounting to a savings of nearly US$400 million spent thugh the various ministries. Health and Social Welfare 27. The Government is now begining to formulate an effective strategy for the social sectors. Ihe Federal Govement is a relatively small actor in health compared to the provinces and the quasi-public health insurance funds. Federal outays for health, housing, and welfr absorb US$800 million of the US$8 billion in nonintrest, non-transferrable expenditures-l1 percent of the national adminison's actual spending. An additional US$1.5 billion are spent as direct transfers from the federal budget-US$1 billion is tansferred to the provinces thrugh the FONAVI housing progam and US$200 million to subsidize the health insurance funds operded by the unions (obras sociaIn). 28. Health. Most publlc health expendius-whose resources flow from the wage tax as well as budgetary allocation-go through the health funds, which represent US$5.6 billion (estimated on the basis of 1986 data, the latest available) compared to federal eqpenditures of US$745 miliion by the Federal Government and perhaps US$2.0- 3.5 billion by the provincial govenments Improvement in the efficiency of ependiture i this sector must, therer, focus on imprvig the accountbility and efficieacy of . -. - --. - zcwiii - the health funds and provinces A major refonr of the social insurance funds could provide both a source of savings in 1993 as well as major improvements in productivity of health care expenditures. 29. The Government has prepared a major reform of the health insurance funds and made its main principles law ffimugh a Presidential decree in January 1993. The new program would: (1) allow contributors to choose their own proiders; (ii) allow free entry after a transition phase; (iii) reque providers to offer a minimum package of health care at a specified price; and (iv) universal coverage with subsidies for indigent individuals (as distinct from current insitutional subsidies). This would be combined with close monitoring of both the insurance system and the medical packag including limitations on admiunistrative expenditures. The new system would in effect finance universal coverage by educing the acknowledged very high costs of administration and waste in the current system. The new progrm rmais to be defined through regulaons and istitutions but should be created along the lines of the original draft law. 30. A stronger insurance system, such as that contemplated in the recetly prepared draft law on obras soiales, would also xeliee the federal bureaucracy of major expenditurs through the budget for financing the deficits of the insurance funds- through the ANSSAL (US$217 million in 1992). Remaining expenditures could be focused on core national objectives: vaccinations, prevmtive medicne, prevention of drug abuse, sanitation regulation, and targeted progams of matrnal and child health care Selected programs, such as the Mnistry of Education's Student Health Progam (US$48 million) and the Congressional Medical Plan (US$15 milon), might be less necessary in the context of a national health insurance progam. 31. Other Welfae The MHSA has welfare progams other than housing (discussed under invesunent) that collectvely amount to US$140 million. These programs should be reviewed for possible reductions in light of te Goverment decision to decentralize expenditure zesponsibility to the prvinces. In addition, other jurisdictions, especialy the Ministry of Labor, spend US$240 'niiion on several progams that merit review for effecetveness. Education 32. The Argentine educational systm, once among the best in Latin America, has become a shadow of its former preeminence. Entrenching prvileges for teachers and granting free admission and education for students beginning in the 1970s interacted with cycles of austerity in the 1980s to produce fiscally eroded public insfitutions. Under budget pressure, the primary schools were decentalized to the provinces beginning in the early 1970s, where many of the same forces continued at play. The secondary and vocational schools were transfered in 1992 by agreement, with implicit funding from the increase in the co-participated revenues. Quality, salaries, and teaching conditions now vary widely among provinces. 33. After transfeng secondary education to the provinces, the Govenment now spends about US$1.3 billion on education at the fedeal level, about half of which (US$720 million) is transferred to the federal universities. The larest potential - xix - efficiency gains in federal spending are therefore to be found at the university level. This spending has not been sufficient to prevent the decine of the quality of public university educaton in Argentina. Beause compeing private univerties can fulfill much of the demand and because low public tuition tends to be a regrssive subsidy- most graduates are fom above-average-income fimilies and go on to earn better-than- average salaies-the Govenment should consider a progam of phased divestiture of the univerty system. This would allow resources to be concentrated on subsidies designated for low-income student scholarships at universities and enrchment programs for primary and secondary education a tered at the provincial level. 34. As an inteim policy, the Government should consider the establishment of a combination of user fes Ci.e., tuition) and tageted subsidies .ae, loans and scholarships for low-income, meitoious students) to enhance financing. Adopting a needs-based, tageted student loan program would ensure that low-income students would have access to univerty education. If the systemfs 700,000 students were charged a modest tuition of US$ 100 per term plus US$20 per month (private universities charge US$250-600 for tuition plus US$300-800 month), the Government would mobilih nearly US$300 million in additional funds. Adopting a needs-based, targeted student loan progam would ensure that low-income students would have access to university education. 35. At the same time, the shift of secondary education to the provinces should fcilitate the downgsizing or even closure of the Ministry of Education. Selected programs, such as Budget and Education Policy (US$45 million), lbacher Education and raining Programs (US$83 million), the Cultual Budget (US$16 million), Technical Education Council (US$17 million), and Scientific Research (US$42 million), should be reviewed for their effectiveness. 36. In the fuhure it will be necessary to incrse educational spending to pay for the equlization of teacher salaries for secondary education, increase overall pay linied to other productivity measures, improve school materials that are woeflly out of date, and rehabilitate deteriorating plant and equipment. These demands will fall on the provinces. This cost could be at least pardally ofset by reducing the number of teachers, consistent with reasonable class sizes. At present student-teacher ratios are quite low (about 11) and highly variable across provinces (6-15). Also, paid leaves are excessive and poorly monitored. A structural reform could substantially offset costs of higher wages- Defense 37. Military expenditures absorb the second largest share of the non-intrest federal budget, and the larest share of discretionary lasury expenditures, 32 percent. Military outlays excluding pensions have fallen from over 6.0 percent of GDP in 1980- 81 to less than 2 percent at present, now among the lowest proportions of GDP in the hemisphere The Govenment has mcognized that Argennas security environment has improved significantly sinc 1983. Resolution of long-standing conficts with Chile, Brazil, and Great Britn, coupled with a reduction in the perceived heat of external support for domestic subversion following disintgrtion of the Soviet Union, has led -xx- the Gowenment to take the opportuty to reconsider levels of military spending, and at the same time redirect military spending to more effectively fiufill its function. 38. The Government has identified several imbalances that currenty hamper military efficiency to achieve this objective. First, with pesonnel costs absorbing over 70 percent of the defense budget, the military's opeational capacity has been severely curtailed. Second, as the size of the force has dereased since the mid 1980s, the taditional rank pyramid for the Army, Navy and Air Force has become distorted, with the ratio of officers to enlisted personnel rising substntially. Third, the military pension system is in urgent need of rationaliztion to remain solvent, to bring it into line with the civilian pesion system, and ensure mobility between the defense and civilian systems. Fourth, the ficilities operated by the anned forces need to be consolidated and relocated to areas from which they can most effectively defend Argentne territory. On the other hand, waMges do not appear to be a problem-militay pay is significantly higher than civilin pay, and on a par with other countries when compared to mean micoes at simila grades and length of service. 39. The reform strategy the Government has begun to implement the rationalization of the entire military sector This includes defense-industry privatization, personnel retrenchment, and facilites consolidation. Thirty defense-related public ntertpnses are currently being pnvaized. This exerise will elimnate their substantial losses and allow the Government to retire their associated debt, possibly even producing some revenue. Present plans to reduce civilian Ministry of Defense personnel by 40 pent will restore the ratio of civilian to military personnel that existed prior to 1985 and lead to an esfimated annual savings of US$80 million. 40. The Govenment is also considering retrenchment of military personneL A decrease in the leve of mility employees would enable the Ministry of Defes to firther lower personnel costs and facilitate the restoion of a more pyramid-shaped personnel structur Additionally, by using some of the funds to increase operations and maitnance, and possibly makdng some strategic capital purchases, the Goverment feels it could achieve the same level of security at a lower annual cost. One way to achieve this is, for example, to implement a program that zestored the personnel pyramid existing in 1984; this would entail a 25 percent personnel reduction and would save an esimated US$155 million annually. An important principle for militay estructurnng is that revenues frmn asset sals should be used to support the reform process-for the program of restructuring of the defense establishment, severance payments and adjustment assistance, reform for the military pension ytem, or investments in relocation and enhanced mobility of forces in line with the Govemments new strategy-instead of consumed in support of normal current expenditures. Otherw, when the revenue stream from asset sales ends, the Government will have the same spending levels and no way to support them. In other words, proceeds from asset sales should be used to reduce liabilities o for selected strategic investment consistent ith the new defense strty. Presidency 41. The Presidency has evolved into a major spending entity in the Federal Government, responsible for 14 percent of spending in the national administration. The - xxi - Argentine Constitution mandates the existence of no more than 8 Ministries in the National Administration, a limit recently zeenforced wmit the reform in 1991/92. However, govemments have used the Presidency jurisdiction as the sphere of Government where secretariats with Ministerial tank could be established. The four laest UnMts-the Communication Secrtiat (resposble for the Public Broadcsng Company), the National Iburism Agency, CONICET (the research institut program), and the nuclear power agency (CNEA) are responsible for 80 percent of staff and expenditures in the Presidency. 42. A close exmination of these agencies suggests unnecessarily high employment levels in the central administion and decentralized agencies in light of the new role of the state. The Presdency has been relatively untouched by the administrative reform, and overall employment levels are virtually the same as before the reform began. Since this is a jurisdiction that most needs reform, the Goenment should apply the same principles of downsizing to the Pesidency that were applied throughout the xest of the public sector. Specfically, for the lazgest executing units, the Gavenment might consider (i) eliminating the Communications Secretanat and eablishing a Directrate of Communications under the new General Subsecretariat of the Presidency; eventually, the National Service of Radio Telecommunications could be privatized, removing 950 positions from public sector accounts; (ii) rationalizing the National lIburism Agency and establishing a new National Diretor also under the jurisdction of the Ministry of Economy, thereby elimmating 500 positions; and mii) printizing CONICET and the Miguel Lillo Foundation, resulting in the abolition of 5,589 positions from the public sector budget, since rsearch and devlopment activties could be undertakn in public and pnvate unrversities. 43. Finally, the nuclear power company (CNEA) should be restnrctured into business and research units for pnvatation and tnsfered out of Presidency. IWo possible business units (power production and heavy water) could be established under the Secretariat of Electric Energy in the Ministry of Economy until privatization is completed. Privatization weuld lead to an erventual public sector savings of US$850 million. The rtionaliion of the Presidency jurisdiction could result in net savings of US$570 million. Public Enterprise 44. Public enterises accounted for 25 percent of total public spending in Argentina as lat as 1990, but the pivatization program has ah-eady shnmk this to 17 percent The Govenment's program of pivataon of public enterprises has produced encrmous benefits. Among them are capital revenues to support the tntion to a sustainable public finance position, relief from investment demand in the sector, an end to picing distortons, and macroeconomic shocks associted with political pricing. Assuming that the privaiation program is completed as scheduled, resources for the Goverment are at estimated between US$4-5 billion in 1992, somewhat higher hn officia projections, wbich do not take mto account the privatiaion of Encotel, Puertos A.G., OSN?, and Gas del Estado. The progam, if maintained on schedule, wiR also facilitat reductions in transfers from the federal budget -4- - xxiL - 45. Capital reenues fiom asset sales are to be used in the program to cancel liabilities. It is essential that the Goverment maintain this policy and avid using asset sales to finance current ependitumes. Because of the debt consolidation (discussed below), the indebtedness of the Government will incrse in 1993 despite the debt reduction agreement with commrcial creditoms. Therefore, any one-time extraordinary revenues thrugh asset sales should be used to reduce debt. 46. Budget transfers amount to US$2 billion annually and should be phased down in accordance with the privatination and enterprs restructuring schedule. In 1993, transfers should be scaled down to less than US$800 million-virtually all to the remaining segments of the railways and Yacyreta-and to less than US$400 million in 1994, nearly all to Yacyreta Special effort should be devoted to reductions in railway transfers, since they are economically ineflicient and costly. 47. A prerequisite for economic success in privatiaion is the enactnent of a clear regulatory framework, especially for pncing, in those sectors not subject to the discipline of price competition frm competng sellers In particular, output prices must be fixed according to their international production costs and not only according to the evolution of the benefits of the formerly public firm. Fmally, the new Law of Procrement, submitted to Congress in January 1993, vwould establish the basis for a long-term, non-discriminatory rgime for the entire public sector. Provinca fiance 48. Provinces account for about one-thid of public spending in Argenna Though preliminary estimates suggest the prvinces collectively will be in fiscal balance in 1991, in the past they have been major sources of deficit in the consolidated public sector accounts. The Government has undertaken major efforts to improve the fedral fiscal structure, and reduce the incentives to spend without regard to revenues. Severl problems exist that can prevent the new federalism from realizing its full potential. First, imbalances betwee current and capital spending wifhin provincial finances are becoming evident; proncial rea curt expenditures jumped by 41 percent between 1982 and 1990, while capital expenditures dropped by 25 percent Second, the large rise in copartipated Wes and the large federal-provincial transfers have reduced the fiscal urgency to reforn as new vnues absolve provinces of the political cost of raising taxes; for example, in 1992, the prvinces will be able to spend an estimated US$500 million more an in 1991, over and above the cost of traserred secondary education and health. A third problem is the inefficiency of provincial and municipal tax systems, characterized by distortionary taxes, poor tax administration, and poor use of the revenue potential of local tax bases. Finally, provcial governments financed more than 60 percent of their deficits in 1990 with loans through the provincial banks, and reforms initiated do not go far enough to ensure that the provincial banks will not again become a source of deficit finance and macroeconomic instability during the next economic downtun. 49. Federal Frmework. lb maintain the incentive to a4just in the context of the present prmary distribution in the Revenue Sharing Law, one option is to improve the distribution of the maiiua increases that result from improved federal tax administration or new revenue measures at the federal level. This would require seeking - xxiii - an accord to reduce the margnal transfers from future improvements andlor seeling to tr additional expenditures tD the provinces with projected "windfall gains from marginal increases from future federal revenues. This is the strategy the Govenment has followed to data Another option is to recast the US$2.2 billion of noncoparuicipated transfers in the budget. The largest of these include the FONAVI housing program (US$900 million), special aid to Buenos Aires and Ilerra del Fuego (two progams totalling US$300 million), the Ibbacco Fund (US$100 million), and the National Highway Fund (US$100 miliion). With the agreement of the provinces, some or all of these resources might be consolidated into a program of block giants to be disbursed in proportion to current savings perfonnance of provinces and/or to reimburse the cost of agreed reforms, such as severance payments to mdundant workers or provincial social security reforms. This fund could be supplemented with: (i) incremental improvements in aggregate coparticipated resomurces; and Cii) loan proceeds firom intemational financial institutions. A fund of US$2.0-3.0 billion could provide a powerfuil incentive to adjust current expenditues and revenues and provide a continuing source of much needed investment at the provincial level. The fund would be administered by a project execution unit established in the budget offlice; the unit would calculate the net present value, and would disburse against projects meeting the test of a positive net present value. 50. Revues The Government should also work with the proinces to: Ci) tansfer to the provinces the tax adinistion system now in operation at the DGI, including the computerized control of the lgest tapayrs, cross-checIcs with DGI regional offices and accounts, and improved collections of sales and land taxes; and (ji) revamp the tax policy frnework to eliminate inefficient taxes. 51. Expenditures. Provinces will be the main agents providing public services in the futwe Their efficiency in doing so will have a prfound effect on the long-term grow rate of Argentina The most pressing need is a comprehensive administrative reform to reduce public employment similar to that designed at the national level to reduce employment and raise aver salaries as well as a review of the allocation of human and fiscal resources to service delivery. Social Security 52. Social security spending, after accounting for 12-14 prcent of spending of the nonfinancial public sector during most of the 1980;S is projected to increase to 21 percent by 1992. This repesents increases in the pensions themselves, as well as payment of a ler share of accrued pensions in lieu of accumulating arrears. The August 1992 agreement with the provices ended the accumulation of arrears by inceasing paid pensions with the use of co-participated resources. The new system would create an integated pension system for workers, comprised of a public new iniimum pension for all workers, a transitional pension for reied woerrs and those about to rete, and a capitized1 privately-managed ystem. The move to a capitized vstem can, if properly managed and finamced, restore credibility to the social scurity sytem. -53. The most important issue is that te Government create sufficient fiscal s"pace" wt finance the decade-long transition to a fully capitalized system. This entails - xxiv - planning for an increased defcit in the social secut ystem @efore general revnues) to about US$5-7 billion annually in 1994-97. In 1993, general revenues more than covered the systemlls deficit because that share of the wage tax going to the capialized system would not take effect (and thereore be lost to the public system) until 1994, the date of implementation. As of that time, howeve, general revenues of US$5-7 billion are needed in 1994 and beyond, if the deficit is not to be increased. This suggests that at least the 15 percent of copartcipated revenues temporarily allocated to social security in 1993 be continued. 54. Moreover, the annual system deficit could turn out to be US$1-$2 billion higher than the Government's present projections, depending on several possible adverse developments duning the passage of the law and the transition-phase implementation: unfinanced pension increases, slow progress in controlling evasion (and therefore a slower decline of the dependency ratio), and overly generous treatment of workers during the tansition with insufficient years of contribution, who might otherwise have to delay retirement until age 70. Since the financing is so dependent on genral evnues, changes to the reform package that increase benefits could easily destabiliz public finances. 55. 1blicies to Reinforce the Reform. Tb address the risks mentioned above, the Government should: ®i) protect the new system against demands that it raise benefits for pre-reoirm pensioners beyond levels mandated by the old laws; (ii) resist demands for rasig the compesatory pension above levels established m the December modification of the draft law; Giii) lower the average levl of pension insurance from about 70 pent of the aveage wage to 55-65 percent-levels common in Western Europe; (iv) resist pressure for weakening the rues for the transition to higher minimum years of contnbution and age at retirement; instead, allow workers not qualifying under the rules to retiTe at age 65 or later with actuarially fair deductions from their pensions; (v) strengthen the audit program or disability pensions; (vi) further strengthen social security collections through systematic cross-checks with the DGI; (vii) extend mandatory affiliation to all economically active, including provicial and municipal public employees; at a miimum require provincial and municipal schemes to adopt the same criteria as tD minimum years of contribution and age at retirement 56. Pension Find Investments The Govenment must design investment rules for the pension fimds that will ensure the security of these resources, as the pension funds (as opposed to the pension system) will accumulate a large surplus in their first two decades of growth. These funds will produce investible resources of about US$3 billion annually in this decade An important step is aken in the present draft law, which prohibits any minimum investment rements particular instruments (notably Government paper); requiing the funds to invest in financing the deficit of the rest of government would have reduced confidence in the perforance of the funds. 57. Confidence in the pnvate pension fund scheme also depends on a coherent set of rules, and on the credible policing of the rules by a profsional supervisory body free of conllicts of interest and political interention. The draft law, however, lacks rules on the composition of the superntendency, and a recent agreement between the Govrment and the unIons would staff the supentendency with representatives from the slate, the unions, employers, and the affiliates rather than a proissional management - xx2r - and staff which is accountable to the Executive or Congress. This arrangement might undermine confidence that all AFJPs will be held to the strict standards of the law including application of the ultimate sanction, i.e., revocation of the AFIP license and transferof the pension fund to other AIM"& A weak superintendency risks that the state guarantee for a minimum find performance will be called. Therefore, the Government should establish a professional superintendency for AFIPs. Public Investment 58. After nearly two decades of decline, public investment in Argentina is at historic lows. Though public inetment averaged about 10 percent of GDP in the 1970s, it now has fallen to under 5 percent. The privatization progam has reduced the demand for public investment and opened many sectors to pnrvate investment-notably, telecommunicafions, hydrocarbons, and transportation. Under private stewardship, these sectors may become dynamic, even leading sectors in Argentina. These f&cts, however, do not mitigate the need for new investment in those sectors remaining in the public domain-including highways, energy (for the near term), and social infastructr 59. Although the Government of Argentina has made progress in the planning of public investment, with the appearance of public investment plans for both 1991 and 1992, the process of capital budgeting can be greatly improved, thereby increasing the efficiency of public investment. A seious shortcoming in the public imvestment process is the absence of a consistent mechanism of project evaluation that can guide investment decisons of the authorities. Out of more than 20 investment project of over US$5 million identified, economic evaluations exst for only a handfulL The govenment is now strengthening its technical group to establish the capacity to conduct proficient economic evaluations, including the calculation of relevant social pnces to be used in all these evluations. 60. Seval principles should guide this process. rist, all investments should undergo an econonic evaluation. Second, no project with a negative net present value at scial prices should be carried out; having a positive net present wiale at social prices is a necessary, but not sufficient condition to go ahead with an investment project. In Argentina, where the public sector fices significant financial constraints, it may be impossible to finance all projects with a positive net present value. Thus, ini, a piqect ranking is needed. Resources would then be allocated from the highest ranked pnoect down, until esources are fully and efficiendy allocated. Recnt improements in imvestment planning now establish the basis for a multi year progmam that would establish out-year priorties for budgetary funding. 61. RPoer. The annual investment budgets for 1992 of Atucha II and Pichi Picun Leufi were US$395 million and US$146 million, respectively. Ilken together, the two absorb over 20 percent of the total investment budget of the national govemment (including central administation, special accounts, decentrized agencies and public enterises), which was US$2.6 billion for 1992. Both of these projects have negative net present vlues at any discount rate over 12 percent. In the case of Pichi Picun Leuf, the Govenment contnrbutons are very smal and given the fiorable conditions of financing, it should be completed. The completion of Atucha II should be postponed if famcing cannot be obtained; as long as countepart funds are scarce, any finanng - xxvi - scheme for its completion should include the minimum Government contribution during the 1993-94. 62. Housing. The FONAVI housing program also appears uneconomical. Although no benefit-cost evaluation is available, there is good reason to believe that its NPV would be negative at reasonable discount rates. The program absorbed over US$900 million of resources in the budget for 1992 and has some serious flaws. An attractive and feasible option may be to phase out the program over the next two to three years. These funds have a high component of government saving, mainly because the FONAVI program does not attract any outside financing. 63. Pbssible savings from these measures would amount to some US$1.4 billion, and could be used for investments in road maintenance, acceleration of Yacyreta and Piedra de Aguila hydropower projects, and increased investments in worthwhile provincial health and education projects. Centa Bank 64. Since the conversion of short-term domestic debt into 10-year BONEX bonds in January 1990, the Government has moved vigorously to shut off the sources of finance to the nonfinancial and financial public sector through the monetary program. The trade financing facilities were closed and the function transfbrred to the new trade bank, Bank of Intemational Trade (BICE). Second, financing the social security system through the OPP account has been ended. Third, debt service on the public debt held by the Central Bank is now charged to the Teasury. Fourth, redisounts to the industrial bank (BANADE) and the Housing Bank (BHN) were gradually closed between 1987 and 1990, and net rediscount flows to the other public banks have been negative since these banks are repaying the emergency infusion of liquidity they received during the January 1991 run on the austral. 65. These events have set the stage for improving the legal framework of the Central Bank and strengthening it as an institution. The passage of the new Cental Bank Charter in September 1992 was a milestone in the creation of a modem monetary authority; the highest priority for Argentina is to implement the new Charter. The Charter provides the monetary authority with substantial independence, proscribe rediscounts-except for emergencies, and then only for limited periods against a pledge of the borrower's capital-and legaey prohibits lending to the nonfinancial public sectot This is a necessary complement to the Law of Convertibility. 66. Admintion and Management. Management should revanp the structure of the Board of Directors to relieve them of operational line responsibilities. As it stands, Board members play both roles of supervising the President and carrying out his mandate This dilutes responsibility and compromises the advice a Board member must give its President. The Government sbould use the opportunity presented by the Charter to appoint people of stature in the financial community and invest them with the responsibility of ensuring that the goals of the Charter are faithfully attained by the President and his management. Management must also devote special attention to tasks that have a high cost if not handled properly and immediately, most notably the reconciliation of the balances with extemnal creditor banls. - xxvii - 67. Accounting. Many changes carried out in recent years have significantly improved the Central Bank's accoundng system. In particular, the recalculation of the end-1989 balance sheet and the elimination of forced investments and of the Monetary Regulation Account helped to simplify the accounting system. Neverffieless, the present system is still severely deficient. Reconstitution of the accounting system must move in parallel with the reorganization process. The reconstitution of the accounting system must also be carried out with a view tD ensuring that it generate the appropiate statistics for the Central Bank-s new responsibilities F: a timely way. The Central Bank's operations must be defined precisely along with the specific ways and means by which data will be entered into the accounting system. Specific personnel would then be responsible for recording designated transactions. The fundamental question is whether the prsent system can be salvaged or if the system should be entirely replaced. Along these lines, it is noteworthy that an extemal audit of Cental Bank accounts will be required by the new Charter. 68. liquidation Fhnction. The Government in September 1992 modified the Financial Entities Law to require that all future liquidation of bankrupt financial institutions be handled directly by the court system. This leaves on the on-going liquidations with the Central Bank, many of the liquidations are more than a decade old, yet are sfill time-consuming and costly. The Central Bank should accelerate efforts to finish theproes as soon as possible. 69. Superintndency. Consistent with the new Charter of the Centrl Bank, the Government should: (i) consolidate the reform of the Superintendency of Banks by ensuring greater administrative independence and enactment of its upgraded salary and organiaional structure; (ii) assign reponsibility for issuing norms perining to banking regulation; and (iii) assign responsibility for the timely publication of financial indicators, including the balance sheets and income statement information as well as portfolio classification of banls. Also, (iv) the management relations between the Cental Bank and the Superintendency should be made clearer and more predictable; (v) more enforcement power should be attributed to the Superintendency; and (vi) instruments used to evaluate commerci bank activities should be revised. Of particular concern is the need to reduce the incentives for large banks to tak too mnny nsks (too- big-to-&I policy). One possibility may be to tie bank supevson more direcdy to the amount of bank capital. Well-capitized banks would be allowed to be the most diversified in financial services, since increasing the bank's own capital requirements is probably the most effective way of reducing moral hazard incentives. C- Conclusions 70. The Menem administraton has made the most impressive progress in improving Argentina's growth prospects of any recent administration. It has done so by improving the fimdamentals of public finance. These efforts have brought price stability within reach, and wit it the possibility of enjoying sustained high economic growth. The next three years, however, will be as critical as the last three years. As the expeece of other countries in the heniisphere has shown, only persistent, resolute and unrelenting pursimt of fiscal stability and efficient policies can realize a country's growt potenftaL Argentina has shown itself wuilling to pursue this course. *~ ~ ~ ~ D-- - xx- RESTUMEN DE LAS PRUNCIPALES ItECOMEDACIONES DE POLIMCA A. Panorama General Tres Aaos de Propeso 1. La adinMimin Mr.em lleg6 al podr en julio de 1989 despuds de una crisis de die aios en las finanzas pdblicas que culmin6 en la hirinfla. E nuevo equipo hered6 cinstucones pdblicas ddbiles, acostumbradas a gastos deficitarios y a la recurrencia al impuesto infladonaio. Los recamo por recursos estatales hon mucho mayores queola capacidad estal pamn moviliar recursos-en otras palabras, el Estado argentino era islvente. La dependencia en el impuesto inflci torn6 a la macoeconomfa cada vez mis inestable, reduciendo la base monetaria a niveles que hacfan imposible controlar la inflacidn afin con pequedias brechas fisneks. 2. En respusta a la cris, la adninistrad6n Men introdujo una serie de reforurs estructes durante los primeros 42 meses de gobierno que fien recomponimao progsvamente los pilams de las finanzas pu'blicas. El Gobiemo lloyv a cabo refoma diffcdes de revertir, tanto en el marco legal como en las insttuciones y polfticas. Estas incluyeron la estructuac6n del Estado a travds do reformas en la movilincidn de ingresos pamn acv,nmtar la cantidad y calidad de los ingresos federates y reformas en los gasbts que han redeflnio los Jfmites entre el gobiero nacional y el sector privado. Las reformas en las erogaciones incluyeron una reforima administrativa pama reducir el tamafo y la ingerencia del gobierno y mojoras en ei control de los gastos, un nuevo fedeoilismo que hizo tanspaoe la coparticipacidn de igres con las prmvincias y descentalid gastos selecionados, y un programa eixtensivo de pdvaiiones y venta de activos que asegura ireversiblemente el corte de subsidios via entidades pdblicas y facilitara nuevs inversiones privadas. Finalmente, el Gobierno tambidn ha inteatado desligar al sector pdblico no financiero de la fuente del financiamiento inflacionario a trav6s de refbnnas en el Banco Central. 3. Los resultados han sido iipresonantes los ingresos aumentaron mientras que los gatos declinaron, y el balance prmario lleg6 a ser superavitario par primeza vez en varias dt . EI gasto agregado no cay6 en mayor medida como pmporci6n del PBI debido a incromentos en las raferencias automitcas a las provincias y a la seguidad social, que contrapesaron ins reducciones en los gastos realihzads en otros sectr. Las transfermncias ayudaron (al menos incialmente) a aliviar los deficits structuale latentes tanto en la segidad social como en las provincias. El progreso en el control inflacionario no feo pareo-en parte porque algunas debilidaes institucionales tomaron dempo en subsanarse, y porque pequefios errores en el maejo maccon6mico, aplicados a mercados financieros pequefios y fluctantes, pfofltaiTite so ampLificaon produciendo conidas cambiarias. De todos modos, las variables fiudamntales subyacentes en las finanzas pdblicas mejoraron onstntemente, tal como lo indica la cada del deficit combinado, que pas- de 10.S porciento del PBI en 1989, a un pequeiio - xxx - superavit proyeetado para 1992. La macroeconomifa se ha tonado mds estable y la economfa se encuentra en su tercer ailo de fuerte expansi6n. Los Prdximos Desaffos 4. El sostenimiento de una polftica de finanzas pdblicas blanceadas constituye un prerequisito esencial para la continuidad de la estabilidad de precios y la expansidn econ6mica. Esta idea es ampliamente aceptada por los miembros del Gobierno a todo nivel asM como tambidn por el publico en general. Adn asf, subsisten todavha debilidades en los cimientos estructurales de las finanzas pdblicas, especialemente en las mreas de seguridad social, finanzas provinciales, salud y gastos de defensa-stas atentan contra el balance fiscal en el mediano plazo. El Gobiemo debe enfrentarse con el desafo que implica mantener la intnsidad en el esfuerzo de las reformas-on los sacrificios que ello presupone-en un ambiente de estabilidad de precios, crecimiento, y recuerdos hipecinflacionarios en desaparici6n. Mds aumn, si el creinmiento econonmico declina, el crecimiento en la recaudacion tributania bajard y las demandas de incrementos salariales, nuevos subsidios y gastn publico pueden intensificarse. 5. Conciente de esto, el Gobierno ha demostrado su resoluci6n pana implementar y/o consolidar el ambicioso grupo de medidas en marcha. El Gobiemno se ha propuesto consolidar la refor administrativa mediante la implementaci6n de la recientemente aprobada Ley de Administraci6n Financiera y Control de Gesti6n del Sector Piblico, mejoras en el control de la masa salaTial, buscando la sanci6n de la ley de Compre Nacional, y completando la reestructuracdn burocrtca. La reforma de la Seguridad Social, el eje de varias otras reforrnas, liene como prop6sito proveer ana adecuada y confiable peusi6n a sus beneficiarios, y mediante la capitalizaci6n del sistema, crear una amplia masa de ahorros disponible pana inversiones, aunque a un costo inicial para el Gobierno. La reforma del sistema previsional tambidn estI Iigada a la reforma de los impuestos directos, dado que la recaudaci6n del impuesto a las ganancias es crucial pana el Financiamiento de la seguridad social a partir de los ingresos generles. Ademfts, como parte del financiamiento de la seguridad social, el Gobierno ha propuesto cambios m 3as relaciones fiscales naci6n-provincias, disefiados pan mejorar el balance entre las responsabilidades de ingresos y gastos; tambidn ha alentado a las provncias pam que realicen sus propios programas de ajuste. En otras Areas, el Gobiemo ha formulado una reforma del programa de salud que proveerfa asistencia de tipo universal, reducirfa las ineficiencias en el sistema de salud, y eventualmente reducirfa las carps laborales, prometiendo mejoras en el estado del sistema en general y en ka productividad laboral. Finalmente, el Gobierno ha comenzado la reforma del complejo de defensa, fncluyendo la privaiaci6n de las empresas militres, reestrcturaci6n de personal y una revisidn del uso de las instalaciones militres. Dichas refornas constituyen la base de futuras mejoras en las finanzas pdblicas y permitirAn la erradicaci6n de d6ficits estructres, mejorando al mismo tiempo la calidad de la movilizaci6n de ingresos y de gastos. El Gobiemno merece total apoyo extemo en estos esfuerzos. 6. Si estas reforuas se ilevan a cabo, las cuentas proyectadas dcl sector pdblico podrfan estar aproximadamente equilbradas en el mediano plaw. Las pequeias brechas de financiamiento hacia el fin de la decada deberfan ser financiables en un mundo de estabilidad de -xxxi - precios, bajas am de interds, crecimento sostenido del 4 porciento, y una continua confianza en el equijpo econ6mico. 7. De todos modos, las finanzas pdblicas tienen un escaso colchdn si no se materializan los favorab!es supuestos econ6micos y de polftica mencionados. Primero, ts de crecimienta del Producto mis bajas que las proyectdas o incrementos inesperados en la ta de inflaci6n pueden reducir los ingresos proyectados del sector pdblico; aunque el problema de ingresos ya no es estructral, el Gobienmo tiene poco margen para compensar eventos adversos con aumnentos en la recaudaci6n. Segundo, cl proceso de ajuste ha dado lugar a nuevas incertidumbres que pueden implicar reclamos no anticipados sobre los recursos pudblicos. El Gobiemo necesita incremrentar el gasto en servicios sociales e inversi6n en el corto plazo para miejorar la prestaci6n de servicios. El achicamiento del estado ha reducido la demanda de inversido en bienes y servicios pudblicos, pero solo parcialmente; los deterioros, producto de una ddcada de negligencia, requieren nuevos y mis eficientes gastos. Tercero, el nuevo r6gimen de seguridad social propuesto implica costos de transici6n no conocidos pero de sustancial magnitud. Mientras que los costos de corto plazo podrian ser compensados con ingresos generales, cainbios en la legislacidn que se produzcan cuando esta reforma circule por el Congreso bien podrfan incrementar dichos costos. Cuarto, los niveles de deuda piblica son adn altos, por lo que las cuentas fiscales son vulnerables a incrementos no anticipados en las tass de interes. Finalmente, el Gobiemno estl consolidando los atrasas con jubilados, proveedores y otras, con acreencias sobre e estado, mediante la emisi6n de entre US$ 15.000 y US$ 20.000 millones de nueva deuda (el bono de consolidaci6n, BOCON); el servicio de esta deuda se capializart durante losr nmeros seis aslos, pero se requeririn pagos de alrededor de US$ 3.000 millones durante los filtimos anlos de la ddcada. Aunque parte de esta deuda se cancelard coan la yenta de aedvos, los pagos en efectivo del BOCON vencern exactamente cuando los pagos a los bancos comercals, producto del reciente acuerdo de reducci6n de deuda, lleguen a un pico de ahrededor de US$ 3.000 millones. Estas incertidumbres significan que Argentina no debe anunorar el vaso de sus refonnas de mediano plazo, y el Gobierno deberia esforzarse en sobrepasar sus objetivos fiscales. 8. Con un pico hist6rico en los ingresos federales de mls del 24 porciento del PBI, los asuntos nds importantes por atender son las mejoras en la neutralidad del marco impositivo y su progresividad. Como se discutird posteriormente, la reducci6n de las cargas laborales (quizis como parte de la reforma del sistema de salud) y el aumento de la base del impuesto a las ganancias srvirfa para ambos prop6sitos, contribuyendo al mismo tiempo en la expansi6n de la recaudaci6n. La administraci6n impositiva, muy meorada en los aiios recientes, tambitn promete algunos aumentos en los ingresos, principalmente a trav6s de una atenta administracidn sobre recientes controles efectuados a las industrias promocionadas. Los nuevos ingresas provenientes de estas fuentes podrian ser utilizados en el futuro para eimar impuestos de escasa relevancia y disminmuir las ta de los impuestos mas importantes. Finalmente, tanto la polftica como la administracion impositiva provincial son fuentes potenciales de ingresas adicionales y eficiencia. 9.- Por el lado de las erogaciones, los programas de austeridad del tipo stsopugow de los aiios ochenta y el progrma de ajuste posterior a 1989-bdsicament la refonna administrativa y eI programa de pivatizaciones-redujeron el gasto publico federal a niveles que constituyen una carga tolerable para la economfa. El gasto piblico, igual al 22 porciento del PBI a nivel federal y al 40 porciento para el gasto puiblico total, se encuentra por debajo del pomedio de los pafses industrializados, y a niveles comparables con los de los pases de medianos ingresos. 10. Los principales problemas referidos a los gastos son: (i) afianzar mecanismos que prevengan futuros aumentos en el gasto; (ii) incrementar la productividad de tods las erogaciones publicas; y Iii) reducir los excesivos gastos corrientes de las provincias. Los incrementos en el gasto surgen de la compresidn en las erogaciones, el control inadecuado de la man salarial y otros gastos, y el financiamiento precario de las autoridades de gasto que ben wansferencias. La reforma adnlmnistrativa, al reducir cl empleo federal par encima del 50 porciento e incrementar salarios, ha aliviado la compresidn salarial; el programa de privatizaciones ha provocado efectos similares. AdemIs, el Gobiemo ha dado pasos importantes en cuanto al control de la Oficina de Presupuesto sobre la admirai6n de fondos en efectvo, presupucsti6n y programaci6n. La nueva Ley de Adminracidn Financiema, promulgada en septiembre de 1992, estableceri las bases legales pam el control fiscal, incluyendo la autorizaci6n de gastos y la auditorfa ex post. Tambidn, la arizadn de las relaciones fiacieras con las provincias y las empresas publicas ha reducido las presiones de asignaciones discrecionales. De todos modos, afin quedan por tomar medidas importantes: ka total implementaci6n de los sistemas de control y auditoria ec post de la Ley de Admiisti6n Fnanciera, mejoras en el control de la masa larial y el control fiscal sobre el sistema de salud. 11. El sostenimento de la recuperacidn del setr privado requiere una eficiente provisi6n de bienes y servicios pdblicos, junto con un s6lido marco regulatorio y macroecon6mico. A nivel nacional, la compresi6n en las erogaciornes durante los anos ochenta redujo alin mas los ya bajos niveles de productividad del gasto publico. Si bien las recientes reducciones de empleo y privatizaciones han aliviado dicha compresi6n, s6lo una mejor administraci6n y asignaci6n de recursos entre programas permitirAn obtener potenciales ganancias de productividad. 12. A nivel provincial, el gasto es aproxnimadamente el doble de las erogaciones netas de intereses de la administidn nacional. Los gastos cormientes son excesivos y la invcrsi6n es baja 1'. La mayorfa de las provincias, acostumbadas durante largo tiempo a financiarse con el impuesto inflacionario, estAn comenzando el ajuste que el Gobierno Federal empez6 tres aiios atrs. Si bien se ha solicitado a las provincias que se encarguen de la provisi6n de una mayor cantdad de servicios pibl*cos, dstas han recibido ganancias inesperadas a travds de los ingresos coparticipados, lo cual puede reducir el incentivo a ajustarse. Por esta raz6n, el Gobiemo ha obtenido el aiio pasado un pago proporcional de los gastos por adminisracidn impositiva, um 1 Las finms pUblicas provinciales han sido taadas resumdamente en este informe a putir de ima rvidn detailada, descripta en un informe por sepaado. Ver Banco Mundial Arnntinr: Macia un Nuevo Fedeaismo 1992 . - - .- . .: mayor propocdn de los impuestos coparticipados para la seguridad social, ha tansferido la educaci6n secundaria y el sistena de salud a las provincias, y ha requozido ei pago de redesuentos. El ajuste en las prvincias-a travds de refonnas en los sistemas tributarios, de administaci6n, y polfticas de empleo-es el dnico camino para que estas puedan proveer sorviHos educativos, de salud y de otra indole con mayor eficiencia. Ms aMn, desde un punto de vista nmacroecon6mico, una detenci6n en el ritno de crecimiento y en la recaudaci6n podrfan generar conside ables demandas para incrementar transferencias, salvo que las administraciones provinciales avancen en la implementaci6n de su propias reformas. La secci6n siguiente analiza estos temas resumiendo las recomendacione espeefficas de esto informe. B. Opciones de Poiftica pam Consolidar la EFstabilidad Hscal 13. Varias nuevas polfticas y reformas, resumis en los pdrafos siguientes, podrfan incrementar estimativamente el supedvit fiscal en 1,2-1,4 porciento del PBI, proveyendo cl colch6n necesario para compensar lIs contingencias que pudieran ocurrr durante cl programa fiscal de mediano plazo. Mis aun, Las refornas permidrfan obtener mejoras considerbles en la calidad de la movilizacin de ingresos p6blicos y en la productividad de los gastos. Ete informe sugiere iniivas especflicas de polftica en temas tales como la adnuministracidn y polftica tWiu erogaciones conientes o invorsi6n puTblica, el gasto del sistema de seguuidad social, las empresas pu'blicas y las provncias. Poitca Tributaria 14. El marco de la politica tributaria en los dltimos dos anios ha producido notables mejoras en ia recaudaci6n y al mismo tiempo se ha transformado en un sistoma mis eficiente. El Gobierno ha incrementado macadamente su depeadencia en el IVA y ha reducido la participacdn de impujestos ineficientes, especialmente los de exportaci6n. El sistema se basa actuamento en cuatro impuestos modernos: el IVA general y uniforme, cl impuesto a las gananciaslactivos, impuestos a la importaci6n e impuestos al consumo de algunos bienes finales (espcialmente combustibles, cigarrillos y bebidas alcoh6licas). La abolicidn de impuostos ineficientes ser posible en la medid -nue los ingresos provenientes de impuestos eficientes sean compatibles con las actuales crogacicr vs pdblicas. Los asuntos mis rclevantes son la neutralidad con rosecto al uso del capital y el trabajo, y la progresiviad del sistema. 15. El Gobierno se dispone a atender estos asuntos en el contexto de la reforma de la seguridad social y de las obras sociales. Una propuesta consistira en reducir las cargas laborales ponnitendo la deduccion de una parte de las contribuciones patronales sobre los pagos de impuesto al valor agregado, e incmentar el fleanciamto do la segunidad social a trav6s del IVA y d impuesto a las ganancias. Esto genarafa un incentivo importante para que los empleadores declaren sus contnbuciones a la segaridad social, lo cual contribuirfa en la reduccidn de la evasi6n. La carga del impustoa las ganacias que recae sobre la cae media y media-baja sera reducida mediante el aumento del ingreso mensual mfnimo imponible. Esta propuesta sofa un paso saludable hacia la reduccidn del sesgo contra el empleo, pero es s6lo una soluci6n parcial. Aunque el aumento en el ingreso mnimo imponible mojorarfa, en pnincipio, - xxxiv - la progresividad al reducir las cargas correspondientes a los trabajadores de bajos ingresos, al mnismo tiempo estrecharia efectvamente la base del impuesto a las ganancias, al excluir a varios contribuyentes de ingresos medios y altos. Mientras que el ingreso promedio anual por amilia se estima en ahrededor de US$ 19.000, el ingreso minimo imponible es superior a los US$ 20.000. Adem4s, la caida en la recaudacidn de los impuestos laborales puede requerir que el Gobiemo aumente la tasa del WVA. 16. Un modo mis directo de atender tanto el sesgo en los factores como la progresividad consiste en explorar caniinos que reduzean los impuestos laborales e incrementen las cargas sobre los ingresos de capital. Asumiendo que ei sistema de seguridad social sea financiable a travds de la elimiinaci6n de la evasi6n a una ta contributiva del 26 %, el Gobierno deborfa considerar vincular Ia reforma del sistema de salud con una reducci6n en las asignaciones fanilhiarsy las cuotas del seguro de salud. Las contribuciones a los fondos de familia y salud representan aproxinadamente el 24 porciento de los salarios brutos, una proporci6n mucho nds alta que los impuestos laborales no previsionales de todos los pafses de la OECD. La reforma del sistema de salud-discutida ampliaente en el Capitulo 5-junta con una utilizaci6n mnis eficiente de las asignacions familiares podrfian pornitir una reduccidn de los impuestos sobre la nimina salarial de un 50 porciento. 17. Al mismo tienmpo, -l Gobierno podria incrementar las cargas sabre el capital directaumente mediante modificaones en los impuestos sobre los ingresos de Ias corporaciones e ingresos personales. Con respecto al impuesto a los ingresos de las corparaciones, se deborfa conservar la deduccidn de pagos de intereses, si es que tributan los ingresos por intereses a nivel personal. Al mismo dempo, el Gobierno deberfa revisar los gastos de inversion, asegurAndose que las deducciones por depreciacones sean consistentes con tasas econ6nicas de depreiac6n. 18. En to que concierne al impuesto personal a las ganancias, el Gobierno deborfa reintroducir las cargas sobre los ingresos de capital, virtualmente exentos en la actualidad. Primero, el Gobierno deberfa prohibirla deducci6n de interse; esto permitirfa cobrar impuestos sobre las pnancias de interests. Segundo, el Gobierno deberfa institucionalizar gravrnenes sobre al menos la porcid6n real de las ganancias de capital. Finalmente, el Gobierno no deborfa aumentar el ya goneroso limite minimo de ingreso imponible; en vez, a medida que mejore la administra6n impositiva, dbefa bajarlo. Adends, el Gobierno deberfa eliminar otras reducciones existentes y rever la posibildad de fijar cargas sobre beneficios adicionales. El efecto de dichas medidas contribuirfa en la expansi6n de la base del impuesto a las ganancias, en vez de contraerla 19. La reducci6n de los impuestos sobre la n6mina salarial a travds de la reducci6n de las contibuciones a los fondos de salud, que son totalmente deducibles de La base del impuesto a los ingresos personales, provocarfa autonicamente un incremento de dicta base. Menores contribuciones podrfan oler a un incremento en los salaios despu6s de impuestos, dado que las reducciones sobre los costos labarales tienden a expandir la demanda de trabajo que a su vez impacta positivamente sobre los salarios reales (pudiendo incluso reducir el desempieo). Dicho impacto sobre los salarios eIles seroa reforzedo si se produce una caida en el nivel de precios. -xxxv - El precio del capital se verfa influenciado positvamente, dado que los costos laborales afectan duxectamente al costo de producci6n de los bienes de inversidn. Finalmente, las simultineas reducciones que se efecten sobre los impuestos laboales, junto con otras reformas en la prestaci6n de servicios, mejorarfan tambidn la equidad del sistema impositivo. 20. El entendimiento de agosto de 1992 con las provincias ayuda a remediar los desequilibrios entre el sistema de seguridad social y otras demandas sobre recursos del Tesoro fijados en el rEgimen de coparticipaci6n. Dicho paquete asigna el 15 porciento dci los ingresos provenientes del IVA al sistema de seguridad social, pero no genera incentivos mnxmos para que los gobiemos provinciales se ajusten. La proyeccidn de ingresos tributarios asignados a las provincias indica un aumento de los mismos de alrededor de US$ 3.800 millones entre 1992 y 1993. El entendimiento dej6 en pie otras transf£rncias (no copartcipadas) cercanas a IJS$ 1.500 millones, incluyendo el FONAVI, que son menos efectvas en tdminos de los objeoivos fijados. Aquellas transfeoencias no coparticipadas deberlan ser consideradas como un instrumento de ajuste estrucftural y en ese sentido, deberfan estar ligadas a mejoras en el desempeiio fiscal de las provincias. Admininstracin limpositiva 21. Las reformas en la administracidn impositiva han sido una de las principales causas de las mejoras en la recaudaci6n a la fecha, y han peraitido al Gobierno obtener el control sobre los flujos de ingresos. At asi, dado el alto potencial de ingresos, progiamas pars mejorar el control de la promoci6n industrial, la adnionistracin inteina, la corte impositiva y la administracid6n de aduanas merecen especial atenci6n. 22. Entre dstos, quizs el mis alto rondimiento fiscal podria provenir de los esfuozos que cl Gobierno realice en materia de control de ka promocidn industial. El programa, implementado en noviemnbre de 1992, implica cambiar los beneficios de auditorfa propia por un crtdito fiscal auditado deducible de futuros impuestos, la cancelaci6n de los beneficios awn no activados, y una cuidadosa auditorfa de los beneficiarios existentos. La DGI deberfa asignar los recursos ncsnos para auditar a aquellas empresas que no pagaron impuestos durante la suspensi6n de los beneficios en el anlo siguiente a la Ley de Emergencia; el esfuorzo de control sobro las firmas provinciales ha logrado hasta ahora solamente el 50 porciento de la tasa de auditoria fijada como meta, aunque podrfa obtener recursos de ms do US$ 300 millones por esta vi. miando hacia el fut,ro, el Gobierno deborfa ha prmanente la upes6n de nuevos beneficios de promoci6n industrial, que expirarfa en septiembre de 1993. 23. El programa completo de reforms de la promocidn industi producirt grandes ahorros fiscales. Estmaciones del parsonal de la DGI sugieren que el programa de sustituci6n de cr6ditos fiscales reducirt el costo fiscal de la promocidn industrial de US$ 2.700 mi}lones a US$ 1.400 millones en 1993. Erogaciones Corrientes: la Mass Salaul -.Xvl - 24. El Gobiemo ha realizado una reforma admniustrativa sin precedentes para reorganizar y reducir el tamario del Gobiemo Federal. Los principales ministeios y organismos descentlizados selecconadas fueron reorg s. El empleo en la administracidn nacional habrd cafdo de aproximadamente 670.000 en 1990 a menos de 285.000 agentes hacia fines de 1992; de esta reducci6n, 105.000 empleados ban dejado el Gobiemno y el resto ha sido tansfeido a las provincias. La reduccidn de empleo en las empresas pudblicas no ha sido menos dramitica: el nivel de empleo ha pasado de 295.000 a casi 50.000. De esta reducci6n de 245.000 empleados, ahrededor de la tercera parte se debe a despidos, y el resto a privatizaciones. 25. Para completar el programa de reducciones, el Gobiemo deberfa: C) completar c proceso de reestructuraci6n en aquellas organizaiones gubemnamentales que ain no han sido reestructadas, incluyendo el CONICEr, la CNEA, el personal civil de 3as Fuerzas Armadas, las universidades nacionales, la Direccidn Nacional del Azdcar, y las obras sociales, que en total reducirfa el nivel de empleo en 27.000 empleados; Ci) continuar trabajando con la oficina de presupuesto par desagregar las reducciones por jurisdicci6n para asegurar un contabilizain y presupuestacion apropiadas en 1993; (iii) realizar un estudio especial sobre reducciones, incluyendo la proparaci6n de nombres y nimmeros de identificacidn, con el prop6sito de asegurar que aqu6llos que se retiren y reciban indemizaiones no rngesn al servicio puiblico. 26. Para completar la reforma del sistema de pago de salarios y el escalafn de pagos, el Gobierno debe () establecer su propio registro computarizado del personal y centralizr la funci6n de pago directmente o a travis de las cuentas minites de acuerdo con la nueva ley de Finanzas Publicas, tasadando posiblemente a los nijembros de la Oficina de Personal al Mnisteio de Economfa-donde se encontraba con anterioridad al gobierno militar de 1976; (ji) implementar un istema computrizado de pagos por medio de cheques a traves del sistema bancario para controlar la masa salaral, medida que ahorrarfa ahiededor de US$ 200 miliones en costas administrativos y ahorros adicionales a traves de reducciones en los salarios pagados a trabajadores inexistentes. Si el nuevo sistema es diseiiado apropiadamente, asegurard una mejor contabilizacidn y un finme control sobre la masa salarial. Estas acciones podrfmn contibuir en la reducci6n de recurws dedicados solamente a 'administraci6n"ilegado a un ahorro cercano a los US$ 400 milones actualmente gastado a travts de los diversos ministeios. Salud y Bienestar Social 27. El Gobieno estt comenazndo a forrular una estrategia efectiva para los sectores sociales. El Gobierno Federal es un actor relativamente pequeio comparado con las provincias y los fondos de salud cuasi-pu6blicos. Los gastos Federales en salud, vivienda y bienestar absorben US$ 800 millones de los US$ 8.000 millones de gastos (excluidos intereses y transferencias)-10 porciento de las actuales erogaciones de la administraci6n nacional. Una suma adicional de US$ 1.500 millones provenientes del presupuesto federal se transfiere a las provincias-US$ 1.000 millones son transferidos a las provincias a tavEs del programa de vivienda FONAVI, y US$ 200 millones se transfieren a los fondos de salud controlados por las obras sociales. -xxxvui- 28. Sahld. La mayor parte del gasto en salud-cuyos recursos provienen de impuestos al trabajo y asignaciones presupuestarias-se reaia a-travds de los fondos de salud, que gastan estimativamente US$ 5.600 mill6nes (estimados en base a datos de 1986, los uiltimos disponibles) mientras que los gastos del gobierno federal son de US$ 745 mijlones, y quizas de US$ 2.000- 3.500 millones en los gobiernos provinciales. Las niejoras en la eficiencia del gasto en este sector deberdn centrae entonces en mejoras en la contabilidad y eficiencia de los fondos de salud y de las provncias. Una reforma importante de estos fondos de cobertura social podrfa ser una fuente de ahorro en 1993 y de mejoras de envergadura en la productividad de los gastos en salud. 29. El Gobierno ha preparado una importante reforma de los fondos de salud, convirtiendo sus principios fundamentales en ley a trav6s del decreto Presidencial de enero de 1993. El nuevo programa deberfa (i) periitir a los contribuyentes elegir sus propios proveedorrs; Cii) permnitir la libre entrada despuds de una fia de transici6n; (iii) requerir a los proveedores que ofrezcan un paquete mnaimo de salud a un precio especificado; y (iv) cobertura universal con subsidios a individuos indigentes (distintos de los subsidios institucionales comentes). Esto sen'a combinado con un estricto monitoreo tanto del sistema de cobertura como del paquete medico, incluyendo liniitaciones en los gastos administrativos. El nuevo sisema financiara en efecto una cobertura universal reduciendo los altfsimos costos de administracidn existentes y malgastos del sistema vigente. 30. Un sistemna de coberta mas s6lido, contemplado en el recientemente preparado proyecto de ley de obras sociales, tambidn aliviarfa a la burocracia federal de grandes gastos realizdos a trav6s del presupuesto para e financiamiento de deficits de los fondos de salud-a travds del ANSSAL (US$ 217 millones en 1992). Los gastos restantes podrfan dedicarse a objetivos nacionales bsicos: vacunaci6n, medicina preventiva, prevenci6n en el abuso de drogas, regulaci6n sanitaria, y programas de salud para madres y niios. Puede ser que algunos progranas, como el Programa de Salud Estudiantil del Ministeno de Educai6n, (US$ 48 muiones) y el Plan Mdico del Congreso (US$ 15 millones) sean menos necesarios en el contexto de un programa nacional de salud. 31. Otras Areas de Bienestar. El Ministerio de Salud y Acci6n Social cuenta con otros progrmas ademas del de vivienda (analizado en el capftulo de inversi6n) que en conjunto suman US$ 140 millones. Estos programas deberian ser revisados con el propdsito de efectuar reducciones, teniendo en cuenta la decisidn del Gobiemno de descentralizar la responsabilidad sobre los gastos a las provincias. Ademats, otras jurisdicciones, especialmente el Mlnisterio de Trabajo, gastan US$ 240 millones en varios programas que merecen ser revisados en ttminos de efectividad. Educacidn 32. El sistema educativo argentino, alguna vez entre los mejores de Amdrica Latina, se ha transformado en una sombra de lo que fuera en 6pocas anteziores. El otorgamiento de excesivos privilegios a los educadores junto con la libre adnisidn de alumnos que comemzaron - nWii - en la d6cada del 70, nactbaron con ciclos de austmidad en la ddada del 80, dando como resultado institociones pdblicas fiscalmente cmsonadas. Bajo presi6n presupuestaia, las esculas primarias fueron trnfeidas a las provincias en los primeros aflos de la dtcada del 70, donde se siguieron repitiendo este tipo de vaivenes. Los colegios secundarios y vocacionalcs fueron transferidos en 1992 por convenic, con finanmiento implfcito a partir del incremento de los mgresos coparticipados. Tanto la calidad y condiciones educativas, asl como los salarios docentes ahora varfan ampLiamente entre las distintas provincias. 33. Despu6s de haber transferido la educaci6n secundaria a las provincas, el Gobierno gasta actualmento, US$ 1.300 minlones en educaci6n a nivel federal, de lo cual aproimadamento la niitad-US$ no0 millones-es tansferida a las unversidades fedales. Las mayoros ganancias potenciales en eficiencia se encuentran entonces a nivel universitario. Estas erogaciones no han sido suficentes pam frenar el deterioro en la calidad de la enseilaza universitaria putblica en Argentina. Dado que las universidades privadas pueden satisfacer gran pane de la demanda y dado quo la los bajos aranceles educativos en la enseiana publica denden a ser un subsidio regresivola mayorfa de los graduados provienen de familias do ingresos por encima del promedio, luego ganan salarios mejores que el promedio-el Gobicrno deberfa considerar un prograna en fases de traspaso del sistema universitario al sector pnvado. Esto le peritfa concentr2r sus recursos en subsidios especificos oomo becas universiaria por bajos ingresos y programas de ennquecuniento para a educacidn prmaia y secundania administraa a nivel provincial. 34. In ente l cI Gobiemo debera considerr la ejecucidn de una poiffica que combine el cobro de aranceles educativos y subsidios selectivos (como prdstamos y becas por bajos ingresos o por mkito estudiantil) para mejorar m finanento. La adopci6n de un programa selectivo basado en las necesidades del esuliano asegurarfa que aquwllos con bagos ingresos tengan acceso a una educaci6n uiversitaia. Si se cobrara a los 700.000 alumnos del sisterma una modesta suma de US$ 100 por perfodo lectivo mis US$ 20 por mes (las instituciones privadas cobran US$ 250-600 de matrfcula mds US$ 300-800 por mos), ci Gobienmo movilizarfa un fondo adicional de aihdedor de USS 300 millones. :35. Al mismo tienpo, el tapaso de la educacidn secundaria a las provincias debera facilitar el achicamiento o adn cl cierre del Ministeio de Educaci6n. Progranas como el de Polftica Educativa y Prosupuestauia (US$ 45 millones), el de Educad6n y Entenamiento Docente (US$ 83 millones), el Presupuesto Culturl (US$ 16 millones), el Consejo de Educaci6n T&nica (US$ 17 milones), y el de Investigaci6n Cientifica (US$ 42 millones), deberfan ser revisados en trminos de su efectividad. 36. En el future sort necesro incrementar el gasto educativo para pagar la equiparaci6n salatial de los docentes de los colegios secundarios, aumentar el pago total asociado a otms medidas de productividad, mejoamr los matiaes educativos que se encuentren calamitosamente desactuazados, y rehabilitar la planta y equipo en estado deteiorado. Estas demandas recaertn sobre las provncias. Este costo podrfa ser disinnuido parcialmente con ia reduccidn dcl ndmeto de docentes, de manera consistente con tamaiios de clase razonables. En la acualidad las -xxD - relaciones estudiantes-maestro son basunte bajas (ahrededor de 11) y altamente vaiiables entre proicias (6-15). Adonds, las licencias con goce de sueldo son excesivas y poco controladas. Una reforma estnactural podrfa compensar sustancialmente los costos de mayores salarios. Defensa 37. Los gastos militares son los segundos en volumen dentro del presupuesto federal pnmario, y la mayor parte de los gastos discrecionales del Tesoro (32 porciento). Los gastos militaes eccluyendo pensiones han caido de cifras supexiores al 6% del PBI en 1980-81 a menos del 2% en la acualidad, siendo dsta una de las menores proporciones del PBI en el hemisferio. El Gobiemno ha reconocido que el entomo de la seguridad en la Argentina ha mejorado notablemente desde la restauaci6n de la democrcia en 1983. La resoluci6n de conflictos de larga data con Chile, Brasil y Gran Bretaiia, junto con la reducci6n de las amenazas de apoyo externo a la subversidn dom6stica como consecuencia de la desintegraci6n de la Uni6n Sovi6tica, ban dado la Iportimidad al Gabierno de reconsiderar el nivel de los gastos militares, y al mismo tiempo reorientar el gasto militar pam cumplir mds efectivamente con su funci6n. 38. El Gobiemo ha identificado varios desequilibrios que actualmente obstaculizn la eficiencia militar para cumplir con este objetvo. Primreo, los costos de personal absorben mas del 70 porciento del presupuesto de defensa, con lo cual la capacidad aperativa militar ha sido severamente restringida. Segundo, dado que el tnialmo de la fuerza se ha reducido desde mediados de la d6cada del 80, la pirdmide tradicional de rangos para el Ejercito, la Marina y is Aviaci6n se ha distersionado, provocando sustmciales subas en la relacicn oficiales/personal ahistado. Tercero, el sistema militar de pensiones necesita urgentemente una caci6n para anatener su solvencia para alinearlo con el sistema civil de ponsianes y para asegurar is movlidad entre ambos sistemas. Cuarto, las instlacianes operadas por las fuerzas armadas necesitan ser consolidadas y reubicadas en ;reas en las que puedan defender el terreno argentino de una mancra mas efectiva. Por otm parte, los salanos no parecen ser un problema-los pagos a mulitares son significativamente mayores que los pagos a civiles, y son similares a los de otros pafs cuando se los compara por salarios medios par grados similares y antigiedad de servicio. 39. La esategia de reforms que el Gobiemo ha comenzado a implementar incluye la racionaiacicn de todo el sector militar. Esto incluye la pnivatizaion de las industrias de defonsa, la reduccidn de personal y la consolidaci6n de las instalaciones. En estos momentos treinta empresas del area do defensa se encuentran en proceso de privatizaci6n. Esta tarea liminarI sus sustanciaes pdrdidas y permitirt al Gobielno cancelar su deuda asociada, obtniendo quizds algdn beneficio. Los planes actales para reducir el personal civil del Ministenio de Defensa en in 40 porciento perumitii volver a la relacicn perwnal civil/personal militar existente con antenriadad a 1985, y generar ahonros anuales estimados en US$ 80 millones. 40. El Gobiemno tambidn estt considerando la reduccidn del personal militar. Un decremento en el nivel del personal militar permitirfa al Ministoio de Defensa reducir los costos - xi - de personal y contribuirfa a Ia restaunci6n de una estuctum de personal de forma m5s piramidal. Adicipnalmcne, utiizando algunos de los foados pam mejoar las operaciones y el mantnimiento y, posiblemente, efectuando algunas compras estrattcas de capital, se podrfa obtener el mismo nivel.de seguridad a un costo anual menor. Por ciemplo, un programa que restaurra la pirimie de personal a los niveles existentes en 1984 onliante una reducci6n de personal del 25 porciento, ahorfa estimativanento unos US$ 155 millones por ailo. Un pzincipio importante es que los ingresos provenientes de la venta de activos deberan ser utiizados para respaldar el prweso de reforma-para eI programa de reestnucuraci6n de la institucidn militar, el pago de indemnizaiones y.la asistencia pana el ajuste, la reforma del sistema de pensones militares, o inversiones en ha reubicacidn y mayor movilidad de las fuerzas de acuerdo con la nueva estrategia del Gobierno-en vez de ser consumidos pam hacer frente a los gastos corrientes. De otro modo, cuando i fluo de ingresos por venta de activos cese, el Gobiemo tendhi los mismos niveles de gasto y no contard con medios para financrlos. Dicho de otra manera, cuanto proviene de la venta de activos deberfa utlizarse en la reduccion de obHgaciones o en inversiones consistentes con la nueva estrategia de defensa. Presidenlcia 41. Ia presidencia se ha trnsormado en una de las entidades de mayor gasto en el Gobiemo Federal, siendo responsable por el 14 porciento del gasto de la administracidn nacional. La Constituci6n Argentina establece la existencia de no mas de 8 Ministerios en la Administraci6n Nacional, lfmite que fuera recientemente reimplantado con la reforma dmnistrativa de 1991-92. De todos modos, los gobiemos han utlizado la jurisdiccidn presidenia como la esfara de gobierno donde podfan establecer secrearfas con rango iinisterial. Las cuatro unidades mis grandes-la Secretr de Comunicaciones, a cargo de la coopaIa pu'blica de radiodifusi6n, el Ente Nacional de Turismo, el CONICB1T Qmstituto de investigaci6n), y la Comisi6n Nacional de Energfa At6mica (CNEA) representan e 80 porciento dl personal y de los gastos en la Presidencia. 42. Un examen cuidadoso de estas agencias sugiere que existen niveles inneesariamente altos de emplco en la administracid6n central y las agencias descentalizadas a la luz del nuevo rol del estado. La Presidencia pricticamene no ha sido afectada por la reforma administrativa, y el nivcl total de empleo es virualmente el mismo que el existente con anterioridad a la reforma. Dado que esta es una jurisdicci6n que realmente necesita scr reformada, el Gobierno deberfa aplicar los misinos pricipios de achicamiento que fueron empleados en ei resto del sector pdblico sobre la Presidencia. Epfficamnente, para las unidades ejecutivas mis grandes, el Gobiemo podrfa considera (1) la eiminaci6n de la Secret de Comunicaciones, y el estblecimieto de una Direccidn de Comunicaciones depondiente de la nueva Subsecretrfa General de la Presidencia; eventualmente, el Servicio Nacional de Radiotelecomunicaciones podrfa ser privatiado, quitando 950 puestos de las cuentas del sector publico; (i) la racianalizacidn del Ente Nacional de Turismo y l eslablecimiento de una nueva Direcci6n Nacional tambidn bajojurisdiccidn del Ministcio deEconomifa, eliminando asI 500 puestos; (&i) la privatizaci del CONICEr y la Fundacidn Miguel Lillo, reduciendo 5.589 puestos del -xi - presupuesto dcl sector pdblico, dado que las actividades de investigacidn y desarrollo podrfian llevarse a cabo en universidades publicas y pnvadas. 43. Finalmente, la compaAfa de energfa nuclear (CNEA) deberfa ser reestructurada, transformindola en unidades comerciales y de investigaci6n que sedan luego transferdas fuera del imbito de la Presidencia. Dos posibles unidades comerciales (productoras de onergfa y agua pesada, respectivanto) podrian pasr a manos de la Secretaria de Energfa Eldtrica del Mnistrio de Economfa hasta que se proceda a su privatizaci6n. Dicha prvatizaci6n pmitirfa al sector puiblico obtener un ahoxro eventual de US$ 850 millones. La racionalizaci6n de la juris6iin presidencial podrfa resultar en ahorros nets de US$ 570 millones. Empress P6bIicas 44. Las empresas piblicas absorbieron un cuarto del total del gasto publico de Argentina en 1990, pew el programa de privatzaciones ha reducido esta cira al 17 porciento. Dicho programa encarado por el Gobierno ha producido enonnes beneficios: ingresos de capital para apoyar la transicidn hacia una posicidn sostenible de las finanzas pdblicas, alivio en la demanda de invorsidn en el sector, y el fin de las distorsiones de precios y shocks macroecon6micos asociados con el establecimiento de precios polifticos, entre otros. Suponiendo que el progmama de Plivatzaciones fuera completado segdn lo progamado, los recursos para el Gobieno sedin del orden de los US$ 4.000-5.000 millones 1992, algo mayores que las proyecciones oficiales, que no tienen en cuenta la privazacidn de Encotel, AGP, OSN y Gas del Estado. Si el programa se ajusta al cmnograma previsto, pennird ofetuar reducciones en las transferencias del presupuesto federal 45. Los ingresos de capital producto de la venta de activos deben ser utilizados dentro del xtual programa para cancelar obligaciones. Es esencial que el Gobiemo mantenga esta polftica, evitando el uso de los fondos provenientes de la yenta de activos par el financiamiento de erogaciones corrientes. Dada la consolidaci6n de la deuda (analizada postoriormento), el endeudamiento del Gobierno so incrementard en 1993 a pesar del acuerdo de reducci6n do deuda con los bancos comerciales. Por lo tanto, todo ingreso extraordinario proveniente de la venta de activos deberfa ser utilizado en la reducci6n de deuda. 46. Las transferencias presupuestarias suman US$ 2.000 millones por anlo, y deberfan caer progresivamente de acuerdo con el crnograma de privatzaciones y reestructacidn de empresas. En 1993, estas deborfan descender a menos de US$ 800 millones-virtualmente destinadas en su totaidad a los segrientos prevalecientes de los ferrcariles y a Yacyreti-y a menos de US$ 400 nones en 1994, casi en su totalidad para Yacirett. Se deberfan realizr especiales esfuos para reducir las transferencias a los fenrocaril dado que son econ6micamente ineficientes y costosos. 47. Un prequisito pan que las pvaionos arben a buen puerto es la instumentacidn de un marco regulatorio, especialmente pan la fljacion de precios en aquellos sectores que no esttn sujetos a La competencia do precios. En particular, se deben fijar pzecios -xli - de produccidn de acuerdo con los costos intemacionales de producci6n y no sdlo segdn la evoluci6n de los beneficios de las ex-empresas pdblicas. Finalmente, la nueva Ley de Compre Nacional, enviada al Congreso en enero de 1993, establecerfa las bases de un rEgimen no discriminatorio de largo plazo para todo el sector piblico. Finauzas Provinciales 48. Las provincias participan en un tercio del total del gasto pdblico en Argentina. Aunque estimaciones preliminares sugieren que en conjunto las provincias estarn en una situacion balanceada en 1991, en el pasado ban sido una de las fuentes principales de dEficit en las cuentas consolidadas del sector pdblico. El Gobiemo ha dedicado grandes esfuerzos en mejorar la estructura fiscal federal, y en reducir los incentivos a gastar sin tener en cuenta el volumen de ingresos. Existen varios problemas que pueden frenar al nuevo federalismo en la implementacion de tado su potencial. Primero, los desajustes entre los gastos corrientes y de capital en lae finanzas provinciales son evidentes; los gatos corrientes provinciales en trnminos reales subieron un 41 porciento entre 1982 y 1990, mientras que los gastos de capital cayeron en un 25 porciento. Segundo, el importante incremento en los impuestos coparticipables y las grandes transferencias federales a las provincias han reducido la urgencia de reformas fiscales, puesto que los nuevos ingresos absuelven a las provincias del costD polftico de recolectar impuestos; por ejemplo, en 1992, las provincias podrin gastar US$ 500 millones mas que en 1991, muy por encina del costo que implica la transferencia de los colegios secundarios y los servicios de salud. Un tercr problema es la ineficiencia de los sistemas impositivos provinciales y municipales, caracterizados por distorsiones impositivas, una pobre administnci6n impositiva, y un uso pobre de los ingresos potenciales de las bases impoanibles existentes. Finalmente, los gobiernos prvnciales financiaron mAs del 60 porciento de sus deficits en 1990 con crditos de los bancos provinciales, y las refornas iniciadas no tienen el alcance necesario como pana asegurar que esto no sucederd otra vez durante pr6ximas cafdas en el nivel de actividad. 49. Estructura FederaL Para mantener el incentivo a realizar ajustes en el contexto de la actual distribucicn primaria seg6n la Ley de Coparticipacidn, una apci6n posible es meaoar la distribucidn de los incrementos marginales que resulten de ona mejor administrci6n impositiva federal o de nuevas medidas recaudatarias a nivel federal. Esto requeriria la bdsqueda de un acuerdo para reducir las transferencis marginales de futuras mejoras ylo la transferencia de gastos adicionales a las provincias con ganancias extraordinaias pravenientes de los futuros aumentos margnales de los ingresos fedeales. Esta es la estrategia que el Gobit no ha seguido a la fecha. Otra opci6n es redistribuir los US$ 2.200 mnillones de transferencias no coparticipadas canalizados a trav6s del presupuesto. Las mayores transferencias se realizan a travds del programa de vivienda FONAVI (US$ 900 millones), las ayudas especiales a Buenos Aires y Tierra del Fuego (dos programas que suman US$ 300 mnllones), el Fondo del Tabaco (US$ 100 millones), y el Fondo Nacionial de Autopistas (US$ 100 mflIones). Con el acuerdo de las provincias, parte o la ttalidad de estos recursos puede consolidarse en un pragrama de subvenciones, desembolsadas proporcionalmente al desempeilo de las provincias en la obtencidn de ahorros conientes y/o reenbolsos equivalentes al costo de las refarmas acordadas, como las -xliii- indeniniones a tabajadores redundantes o refonnas en los progamas de seguridad social. Este fondopodrfia ser suplementado con (i) mejoras incrmnentales en los recursos coparticipados, y (ii) crdditos de las instituciones financieras intern cionales. Un fondo de US$ 2.000-3.000 millones podrfa provocar fuertos incentivos pan ajustar gastos o ingresos corrientes y convertirse en una continua fuento de inversidn muy necesitada a nivel provincial. El fondo serfa admninistrado por una unidad de qjecucidn de proyectos establecida en Ia oficina de presupuesto; dicha unidad calcularfa ei valor actual neto, y desembolsarfa fondos para aquellos proyactos que cuenten con valores actuales netos positivos. 50. Ingreso. El Gobierno deberfa trabajar tambidn con las provincias pam () transferir los sistemas de administracidn impositiva (actualmente operativos en la DCiI) a las provincias, incluyendo el control computarizdo de los ir .yores contribuyentes, controles cruzados con las oficinas y cuentas regionales de la DGI, y mejoras en la recaudacidn de impuestos a las ventas y a la tierra; y Cii) renovar la estructa impositiva para elinumiar impuestos ineficientes. 51. Gastos. Las provincias serdn los principales agentes proveedores de servicios puiblicos en el futuro, y su eficiencia en este cainpo tendr( profundos efectos en la ta de crecinto de largo plazo de Argentina. Es indispensable la inrntacidn de una amplia reforma admistrativa, similar a la reforma encarada a nivel nacional, pam reducir el nivel de empleo e incrementar los salarios medios, y revisar la asignacidn de recursos humanos y fiscales dedicados a Il prestaci6n de servicios. Seguridad Social 52. Se proyecta que el gasto en Seguridad Social, estimado alrededor del 12-14 porciento del gasto del sector publico no financiero durante los aiios 80, subtid al 21 porciento en 1992. Esto reflejada los aumentos en las jubilaciones, ademds del pago de pensiones adeudadas para no acumular rotrasos. El acuerdo de agosto de 1992 con las provincias, termin6 oon la acwmulaci6n de atrasos, pues so incromontron los pagos jubilatorios con el uso de recursos coparticipados. El nuevo sistema creara n sistema de pensi6n integrada para los trabajadores, un steima de transici6n para jubilados y trabajadores por jubilarse, y un sistema capitalizado mnanejado por el sector privado. El cambio a un sistenma capitaliido puede restaurar la credibilidad del sistema do seguridad socia si es adocuadamonto admio y financiado. 53. El punto mas importante es que el 3obierno debe crear suficiente "espacio" fiscal como para financiar it transici6n a lo largo de la dEcada hacia un sistena totalmente apitalizado. Esto significa realizr planes part acer frente a un deficit en la seguriad social (antes de ingrosos geneoales) de alrodedor de US$ 5.000-7.000 millones en 1993-97. En 1993, los ingresos generales sobraron para cubrir c dEficit del sistema, porque la proporci6n de las contuibuciones laborales que ira al sector capitado reciEn se harh efectiva a partir de 1994, la fecha de implcmentaci6n. De todos modos, a partir de esta fecha se necesitain entre US$ 5.000 y US$ 7.000 millones anuales, si no se incrementa el dMficit Esto sugiere que la asignaidn a la seguridad social de por lo menos el 15 porciento de los ingresos cparticipados debe continuar. -xliv - 54. Adn mds, el ddficit anual del sisteina puede ilegar a ser entre US$ 1.000 y US$ 2.000 millones superior a las proyecciones presentadas por el Gobierno, dependiendo de varios cambios posiblemente adversos durante el tatanmiento legislativo del proyecto de ley yla tuse de transici6n en la implementaci6n: incrementos no financiados en las pensiones, escasos progresos en el control de la evasi6n (con menores caidas en la relaci6n de dependencia) y un trato extremadamente generoso con los trabajadores con insuficientes aiaos de contribuci6n durante la transici6n, que de otro modo deberian retrasar su jubilacion hasta el cumplimiento de 70 anlos. Dedo que el financiamiento depende tanto de los ingresos generales, cambios en el paquete de refonna que incrementen los beneficios podrfan fdcilmente desestabilizar las finanzas p6blicas. 55. Polfticas para Reforzar la Reforma. Parm atender los mencionados riesgos, el Gobierno deberfa: (i) proteger al nuevo sistema contra las demandas para que se suban los beneficios de pensionados del sistema anterior a la reforma, por encima de los niveles correspondientes a la antigua legislaci6n; (ii) resistir las demandas de aumentos de las pensiones compensatorias por encima de los niveles acordados en las r.iodificaciones efectuadas en diciembre sobre el proyecto de ley; (iii) disminuir el nivel de las pensiones de alrededor del 70 porciento del salario medio a 55-60 porciento-niveles nomales en Europa occidental; Civ) resistir la presi6n para debilitar las reglas durante la transici6n, referidas a mayores niveles del mfoimo de anios de contribucidn y la edad de jubilaci6n; al contario, permitir que se realicen deducciones actuariales razonables sobre las pensiones de aquellos trabajadores que no cumplan con las reglas de retiro a la edad de 65 aiios; (v) reforzar el prograna de auditorfa sobre las pensiones para discapacitados; (vi) reforzar ainn mAs la recaudaci6n del sistema de seguridad social a trav6s de controles por cruzantiento sitemrticos con la DGI; (vii) extender la ailiacidn obligatoria a toda la poblaci6n econ6micamente activa, incluyendo a los empleados municipales y provinciales; como nilnimo, requerir a los sistemas provinciales y municipales que adopten los mismos criterios con respecto al minimo de anios de aontribuci6n y Ja edad de rotiro. 56. llnversiones de los Fondos de Pensidn. El Gobierno debe disenlar reglas de inversi6n para los fondos de pensi6n que garanticen la seguridad de estos recursos, dado que los fondos de pensi6n (contraiaente al sistema de pensiones) acumular4n un amplio supeirvit durante las dos primeras decadas de crecimiento. Estos fondos producirin recursos de inversidn equivalentes a US$ 3.000 milones anuales en esta decada. Se ha dado un paso importante en el actul proyecto de ley, al prohibir requerimientos minimos de inversi6n en determinado tipo de instrumentos (espocialmente papeles del Gobierno); haber requerido a los fondos que invirticran en el financiamiento del deficit del resto del Gobierno hubiera reducido la confianza en el desempefio de los fondos. 57. La conflanza en el esquema de pensi6n privado tambidn depende de un grupo coherente de normas, y de un poder de policia creiblo ejercido por un cuerpo de supervisidn profesional, libre de conflictos de interes e intervenci6n polftica. De todos modos, el proyecto de ley carece de reglas sobre la composici6n de la superntendencia, y un reciente acuerdo entre el Gobierno y los sindicatos incluira dentro de la superintendencia a representantes del estdo, los sindicatos y los afiliados, en vez de contar con un gerenciamiento profesional y personal que ::~~ ~ - ' -. -xlv - resppnda al Poder Ejecutivo o al Congreso. Este acuerdo puede disniinuir la confianza sobre el control que recae sobre las AFJPs siguiendo el estricto cumplimiento de la ley, incluyendo la aplicaci6n de sanciones mniinmas, como la revocaci6n de licencias de las AFJPs y la transferencia de los fondos de pensi6n a otras AFJPs. Una superintendencia ddbil pone en riesgo que suga la necesidad de que el estado deba garandzar un beneficio minimo de los fondos. Por lo tanto, el Gobierno deberfa establecer una superintendencia profesional para las AFJPs. JIversidn Pdblica 58. Despuds de casi dos d6cadas declinantes, la inversi6n puiblica argentina se encuentra en un mfnimo hist6rico. Aunque la inversi6n piib]ica promediaba alrededor del 10 porciento del PBI en la decada del 70, actualmente dsta es inferior al 5 porciento. El programa de privatizaciones ha reducido la demanda de inversi6n publica, dejando espacio para las inversiones privadas-en especial, telecomunicaciones, hidrocarburosy transporte. Bajo direcci6n privada, estos sectores pueden transformarse en sectores dinmiicos, quizs lfderes en Argenina. Ain as, estos hechos no mitigan la necesidad de nueva inversidn en aquellos sectores que ain se encuentran bajo dominio pdblico-incluyendo autopistas, energfa (en el corto plazo), e infraestructura social. 59. Aunque el Gobierno de Argentina ha realizado progresos en el planeamiento de la inversion puiblica reflejados en los planes de inversi6n pulblica para 1991 y 1992, el proceso de presupuestaci6n de capital puede ser ampliamente mejorado, incrementando la eficiencia de la inversi6n publica. Un serio inconveniente en el proceso de inversi6n publica es la ausencia de um mecanismo consistente de evaluacid6n de proyectos que gufe las decisiones de inrversi6n de las autoridades. Sobre mis de 20 proyectos de inversi6n de mds de US$ 5 millones identificados, sdlo fue posible encontrar evaluaciones econdmicas pama unos pocos. El Gobierno estA fortiendo ahora su grupo t6cnico pama conducir las evaluaciones econ6micas con mayor capacidad, incluyendo el cMculo de los precios sociales relevantes necesarios para estas evaluaciones. 60. Varios principios deberian guiar este proceso. Primero, todas las inversiones deberfn contar con una evaluacidn econ6mica. Segundo, no se deberfa encarar ninguin proyecto cuyo valor actual neto (VAN) sea negativo a precos sociales. El hecho de contar con un valor actual neto positivo a precios sociales es una condici6n necesaia, pero no suficiente para encarar un proyecto de inversi6n. En Argentina, donde el sctor publico enfrenta restricciones financieras significativas, puede resultar imposible financr todos aquellos proyectos con un valor actual neto positivo. Entonces, tercero, se necesitart un ordenamiento de proyectos. El criterio econ6mico sona entonces el empleo de los recursos, comenzando por el proyecto mejor posicionado, continuando descendentemente hasta que los recursos se hallen plenamente asignados. Recientes avances en el planeamiento de inversiones establecen en la actualidad las bases para un programa de varios anios que establezca a su vez las prioridades por aiho pam el financiamiento presupuesmrio. -xlvi- 61. Energfa. Los presupuestos anuales de inversidn en 1992 para Atucda H y Pichi Picdn LeufG son de US$ 395 millones y US$ 146 millones, respectivamente. Ambos absorben armba del 20 porciento del presupuesto total de inversidn del gobiemno nacional (mcluyendo la administraoi6n central, cuentas especiales, organismos doscentizdos y empresas pfblicas), unos US$ 2.600 millones en 1992. Ambos proyects tien VAN negativos a cualquier ta de descuento superior al 12 porciento. En el caso de Pichi Pictin Leufd, las contribuciones del Gobierno son pequeilas y dadas las condiciones favorables de financiamionto, la obra debera ser completada. La rninaci6n de Atucha Il debera ser pospuesta si no se puede obtener financiamiento; mientras los fondos coErespondientes sean escasos, cualquier finaniento paa su terninaci6n deberia incluir minimas contribuciones del Gobierno duranto el perfodo 1993- 1994. 62. Vivienda. El programa de vivienda FONAVI no parece ser econ6mico. Aunque no hay dispomble ninguna evaluai6n de costo-beneficio, existen buenas raznes para suponer que su VAN sera negativo a tas de descuento razonables. El programa absorbe arriba de US$ 900 millones de los recursos del presupuesto de 1992, y tiene algunos serios inconvenientes. Una opci6n atractiva y asequible puede ser discontinuar el programa durante los prfximos dos o tres afios. Estos fondos tienen un alto componente de ahorro publico, bscamento porque el programa FONAVI no atr finanento externo. 63. Los ahomros posibles apartir de estas medidas podrfan ilegar a US$ 1.400 millones, y podrfan ser empleados para inversiones en antnimiento de rutas, la aceleracidn de los proyectos hidroeltctricos Yacirect y Piedra del Aguila, asf como en proyectos provinciales relevantes de reud y educacidn. Banco Central 64. Desde la conversi6n de deuda domdstica de corto pLazo en bonos (BONEX) a 10 ailos en enero de 1990, el Gobieono ha actuado vigorosamente para cortar las fuentes de financiamimento del sector pdblico no financiero y del sector pdbiico financiero a travds del programa monetario. Las facilidades de financiamiento comercial fueron corradas y la fLnci6n fue transfeida al nuevo banco comercial, Banco Iternacional de Comercio Exterior (BICE). Segundo, e3 fin;nc nto del sistema de seguridad social a travds de la cuenta de OPP ha sido cortado. Tercero, ei servicio de la deuda piblica con el Banco Central es cobrado al Tesoro. Cuarto, los redescuentos otorgados al banco mdustial (BANADE) y al banco de vivienda (BEN) fueron gradualmente eliminados entre 1987 y 1990, y el flujo neto de redescuentos hacia los otros bancos publicos ha sido negativo, ya que estos bancos estdn repagando la inyecci6n de liquidez de emergencia que recibieron durante la corrida de enero de 1991 sobre el austal. 65. Estos eventos ahora crean el esccnario necesarno para mejorar la estructura legal del Banco Central y fortecer la instituci6n. La implementaci6n de la Carta Orginica del Banco Central en septiembre de 1992 fue un hito en la crecacidn de una autoridad monetaria modrna; la mis alta prioridad para Argentina es implementar esta nueva Carta Orgiica. Dicha Carta otora a la autoidad monetaria una gran independencia, prohibe los redescuentos-excepto pars emergencias y por perfodos limitados, conta una garantfa del capital prestatario-y los prstamos al sector publico no financiero. Constituye un complemento necesaro para la Ley e Convertililidad. 66. Administacidn y Gerenciamiento. El gerencia deberfa modificar la estructura del Directoxio pam quitarle la carga de las reonsabilidades operacionales. Actualmente, los miembros del Directoxio tienen tanto el rol de supervisar al Presidente como el de ejecutar su mandato. Esto diluye las responsabilidades y compromete el asesoramiento que los miembros del Directo deben dar al Presidente. EB (obiemo deberfa utilizar la opomnidad que presenta la Carta Orgnica de nombrar personas de renombre en la comunidad financiera para otorgarles la responsabilidad de asegumr que los objetivos de dicha Carta son fehacientemente rospetados por el Presidente y su gerencia. La gerencia debe prestar especial atencidn a aquellas tareas que poseen un alto costo si no se 4jecutan adecuada y rApidamente, especialmente la reconciliacidn de balances con :os acreedores bancarios extemos. 67. Contabilidad. Varios cambios realizados en los 6ltimos anios ha mejorado de manera significativa el sistema contable del Banco Central. En particular, el recdlculo del balance de fines de 1989 y la eliminacid6n de inversiones forzosas y la Cuenta do Regulaci6n Monetaria han conitibuido en la simpliflcacidn del sitema de contabilidad. De todos modos, el sistema es ain exadmente deficiente. La nrecostituci6n del sistema de contabilidad ebe progresar panelamentto con el proceso do reoganizaci6n. Dicha reconstituci6n contable debe realizarse con mias a asegurar que esta genere las estadfsicas apropiadas en el corto plazo, dadas las nuevas responsabilidades del Banco Central. Las operaciones del Banco Cntal deben ser definidas con precisi6n junto con las formas y medios especfficos a travds de los cuales se ingrsarn blos datos en el sistema contable. Se nombrarfa entones personal especfico pam realizar deterniinadas teas. La pregunta fundamental es si el actual sistema puede ser salvado, O si el mismo deberfa ser reemplazado completamento. En sa Ifnea, es digno e menci6n que ia nueva Carta Orgnica requenrir una auditorfa extema del Banco Central. 68. Funcidn de Liquidacidn. El Gobiemo modifico la Ley de Entidades Financieras en septembre de 1992, requiriendo que todas las liquidaciones futuras de instituciones financieras en bmncarrota sean manejadas por el Poder Judicial. Esto deja las liquidaciones en proceso entro de la jurisdicci6n del Banco Central; muchas de las liquidaciones llevan ya mws de una ddcada, y adn consumen mucho tiempo y son costosas. El Banco Central deberfa acelerar sus esfueros para terminar con estos procesos lo antes posible. 69. Superintendencia. De manera consistente con la nueva Carta Orginica del Banco Central, el Gobiemo deberfa: (i) consolidar la reforma de la Superintendencia de Bancos, asegrando una mayor indpendencia administrativa, promulgando su mejorada estructura salarisl y orgaCHizac ; (ii) asignar responsabilidades para reglamentar normas relativas a la regulacidn bancaria; y (iii) asignar responsabilidades sobre la publicaci6n de indicadores financeros, iiluyendo los balances e informacidn sobre las decLaraciones de ingresos, junto con la claifcacdn portafolio de los bancos. Ademas, (iv) las relaciones gerenciales entre el Banco Central y la Superintendencia deberfan ser mws claras y predecibles; (v) se deberia asignar -xlviii - a la Superintendencia mayors poderes pam asegurar ci cumplimiento de Ia ley; y (vi) los instrumentos udlizados para evaluar las actividades comerciales de los bancos deberfan ser revisados. Es de particular intr6s reducir los incentivos que tienen los bancos rnos grandes a tomar muchos nesgos (poiftica de muy-grande-pararquebrar). Una posibilidad seda higar la supervisi6n de los bancos directamente con el tamafo de su capital. Los bancos bien capitalizdos tendrian penniso para ser los nds diversificados en servicios finanders, dado que el incremento en los requerimientos de capital de los bancos es probablemente el modo nuis efectivo de reducir los incentivos de riesgos morales. C. Conclusiones 70. La adnuinistraci6n Menem ha realizado el progreso at impresionante en mejorar las perspectivas de crecimieiato de la Argentina, comparada con cualquioa de las recientes admmistraciones. Esto fue realizado mediante mejoas en los pilares de las finanzas publicas. Estos esfuerzos trajeron consigo la estabilidad de precios, y con ella, la posibilidad de disfrutar de un alto y sostenido crecimiento econ6mico. AMn as, los pr6ximos tres aiios sern tan crfticos como los pnmeros tres. Tal como lo demuestra la expoiencia de otros pafses del hemisfeno, sdlo la persecucidn resuelta, persistente e implacable del objetivo de estabilidad fiscal y polfticas eficicates, puede hacer realidad el potencial de crecimiento de un pais. Argenina ha demostrado su resolucidn en la persecuci6n de este curso. C[APTER 1. FINANCIAL INSTABILrY AND PUBLIC FINANCES A. Public Sector Deficits, Inflation, and Slow Growth 1. Imbalances in pubfic finance have been central to Argentina's prolonged economic decline. Once among the world's most prosperous economies, Argentina has experienced slow economic growth since the 1940s. During the 1970s, the country's long-term growth rate slowed, and in the 1980s the country suffered from its longest period of stagnation in the century (Figure 1-1). Savings and inestment rates fell precipitously from the 1970s undl 1989 (Figure 1.2). Argentines, responding to the unstable macroeconomic environment, inceasingly saved and invested abroad, labor productivity fell, and poverty worened. The value of the currency plummeted as the price level increased, and the ratio of public debt to GDP rose to nearly 100 percent. Figure 1.1 Figure 1.2 GOP GrowIiU Long Trint Trend Invoat 'et and sVlngi 1970-92 (Average of Period) I' _____ -_ muwr. u.WFU fu4~,i~ S~UG17 55 2 _~ _S 151- -2- 2. Underlying this economic Figure 1.3 perfbrmance were several macroeconomic and institutional distortions that maisera themselves in chronic public sector deficits '0- and endemic inflation (Figure 1.3). Public sector deficits in the late 1970s ranged from . A, 0 5-14 percent of GDP, and in the early 1980s surpassed 15 percent oe GDP. Cental Bank losses, difficult to calculate in 1980-83, * - -V undoubtedly pushed the combined deficit to over 20 percent of GDP. After the return to constiutional democracy in 1983, public demands to control inflation were translated -a. into four major stablization programs. All In- - ca of them failed to eradicate inflation, and . . n e each ended in a more virulent inflation than the preceding one. The main reason -fr these failures was the inability of the Government to redress rapidly and pennanently the struchtral deficit of the-public sector. 3. The origin of the structural deficit was traceable to the post-war oganizaton of the economy. Economic policy from the 1940s was used to propagate rmues favoring the inrests of successive private groups with access to power, and political competition drove the expansion of the state and the prolieration of implicit subsidies. By the early 1980s, public expendiues as a share of GDP surpassed 55 percenL Implicit subsidies to unionized labor took the form of high wages, gvannteed employment, and rigid rules governing hiring and dismissals. Subsidies to industry were embodied in highly pirotcted market, tax exemptions through special promotion regimes, subsidized credit (or even effective grants since many loans were not collected), subsidized mputs from public enterprises, and high, noncompetitive prices on sales to public enterprises. Housing contactors and selected middle class home buyers benefitted from enormous public subsidies through earmarked taxes and effective grants through the Housing Bank BN. ibbacco growers benefitted from special ts, as did the sugar growers, the merchant marine, and other small interest groups- Consumers, mainly in the urban middle classes, enjoyed below-cost tariffs from public enterpris and lax collection practices. Provincial governments could avail themselves of costless credit from the provincial banks, which the Central Bank reimbursed. The militaiy enjoyed expanding budgets, especially in 1976-82, as well as management perquisites in state companies. By 1987-89, subsidies through the budget, tax exemptions, agricultural regulations, public enterprise tariffs, and central bank rediscounts were estimated to amount to some US$7 billion1 roughly 8 percent of GDP. 4. Ihe grwth of the state and concomitant rents and subsidies were financeable during the late 1970s larely because of high private savings after the 1975/76 stabilization, and then the expanding Eurodollar market with low or even negative intrnational interest rates. Tis permitted the Goverment to run debt-financed -.-I: See Annex 1.1 Subsidies to the Private Sector.' -3 - deficits of 7-8 percent of GDP with rates of inlation between 200-300 percent annually for the second half of the 1970s. However, the sudden rise in real international interest rates and the abrupt end to voluntay foreign commercial hank credit in the early 1980s provoked a financial collapse, and placed additional pressure on the economy. The economy was forced to divert domestic savings into foreign interest payments. After the public sector took over mucb of the private debt in 1980-82, the larger public interest bill only exacerbated the existing structural public deficit. 5. The public sector had difficulty extacting more resources from the private sector, since the ever-greater share of the combined public sector borowing requirement had to be financed through the domestic financial system and, eventually, money creation (Figure 1.4). The private sector, in an effoit to avoid the inflation tax, gradually withdrew its resources from the financial system and reduced its holdings of currency; this, together with the effects of infation on real zrenue collection, made the macroeconomy progressively more unstable in the 1980s, and weakened the instruments of monetary policy (Figure 1.5). Even though the level of the deficit fell from near 20 percent of GDP in the early 1980s to an average of about 10 percent in 1987-89, the base of the inflation lax had shrunk because efforts to reduce the deficit were not fast or permanent enough to convince the private sector that its savings in domestic currency would not be taxed by inflation. Inflation became high and unpredictable, and thus became the main impediment to the recovery of private savings and investment. The decade ended with two episodes of hyperinflation in 1989. Figure 1.4 Figure 1.5 - FgFa of thle P"b BYo hdIt -Rao of MtoGDP F~~hS iii PVU OuWGES at FM/ e w F4rR C-, 00 D70 IDr Is in 100 -4 - Mlacroecnomic Problems Confronting the Menem Administration 6. When the Menem administration assumed office, it confronted three macroeconomic problems grounded in public finance. First, the economic team inherited public instiutions ta for yean had incenaves favonng spending mdhout incentives to rdse revenea. The national administration, enjoying access to Central Bank financing for its bonds and resorting to arrears, bad a reduced incentive to collect taxes. Other levels of government-the decentraized agencies, public enterprises, the social security system, and provinces--were not subject to effective budget constaints and were usually able to push their deficits back onto the Treasury and ultimately the Cental Bank. Many public enterprises had evolved into nonaccountabLe fiefdoms, and the Treasury covered deficits through direct transfers and progressive assumption of their liabilities. Public banks were able to draw on rediscounts from the Central Bank. The capacity of the social security system to collect and record properly its revenues from high wage taxes dimiished and it had little incentive to reform because it relied progressively mote on earmarked taxes, central bank financing, and arrars to pensioners. Prvinces, relying on revenue-sharing and special grants fom the Federal Government, were able to increase expenditures, especially on employment and generous social security benefits; . when federal transfers prved insufflcient to finance expenditures, these governments borrowed from their provincial banls, whose deficits had been historically covered by the Central Bank. The private health insurance funds, which administered a compulsory public tax that collectively amounted to 3-4 percent of GDP, had no accountability to the public at large or minimal accountability to their beneficiaries. These institutional arrangements had important corollaries: the lack of responsibilit, based on the absence of public accountability, manifest itself in decreasing revenues and ever weaker controls on spending. 7. This sihaion created a second problem: institutionalizing reliance on the irfladon xc udtimaety made thefiscal deficit endogenous and explosive. After 1988, the causal chain of fiscal deficits to inflaiion developed strong feedbacks from inflation to deficits. The first channel was through the well-known Olivera-lmzi effect; inflation eroded real revenue collections because of lags in colltetions, a phenomenon that worsened at the higher average inflation rates of the late 1980s because evasion became easier as the currency lost meaning.2 A second channel was thmugh tariffs of public enterprises, which typically failed to keep pace with inflation. A third channel was the quasi-fiscal deficit of the Central Bank. Towards the end of the 1988 and 1989 stabilization episodes, asset holders became mor fearful of losses, remonetization slowed, inflation accelerated, and nominal interest rates rose sharply, increasing the interest payments on the liabilities of the Central Bank; this more than offset interest receipts on assets, most of which were unlinked to domestic market rates. Finally, financial markets, leery of inflation surges, rsponded to indicators of future inflation- notably movements in the exchange rate, increases in public enterpxise prices, and fiscal deficits-with rapid portfolio shifts against the austral that from time to time reduced the money base by 50 percent in a matter of days. 2 In 198, for example, Tanzi losses were siated to be 2.1 percat of GDP. See World Bank, :A rlinc Tax Policyfor Stabiizain and Econonuc Recovery (8067-AR). 8. In 1989 these pressures became intense: collection lags mattered more because of higher average inflations, and rapid price increases hung a cloak of opaqueness over tax returns and evasion became pervasive. Public enterprise prices became the indicator of success or failure of a program, and so were keep frozen so long that they became sources of deficit. The Central Bank's quasi-fiscal deficit assumed greater imporuance in the Plan Primavera and Plan Bunge Bom, and financing the Central Bank's deficit became the principal source of money creation after domestic inteest rates began to rise at the end of these programs. Finally, by the end of the decade, only professional market players dominated the market, heightening responsiveness of financial markets to increasingly skittish expectations of future inflation, and making the macroeconomy highly susceptible to even minor shocks.3 These problems were especially apparent around the end of each calendar year when the public sector required substantial financing for its heavy end-of-year payments; however, demand for financial assets decreased substanfally as individuals closed out their asset portfolios in preparation for vacation. 9. By the advent of the Menem administaton, the history of deficits had created the third problem: te stre had becomne insolve Claims on state resources were fir grater than its capacity to mobilie resources. The high ratio of foreign public debt to GDP (approaching 100 percent in 1989) was only one manitstation of insolvency; others included the unfinanced obligation of the social security system (which was not recorded in the fiscal accounts), estimated to be US$7-10 billion and rising by US$200 million per month; excessive employment in the public sector with lifetime guarantees; and acquired rights' ganted to beneficiaries of subsidies, including promoted industries with tax credits of 10-15 years' duration. A priority for the Govenmnent, therefore, was increasing revenues, reducing flow claims on the Treasury- wage payments and subsidies--as well as restructuring the stock of existing liabilities to foreigners, the financial system, social secunty recipients, and suppliers. 3 Rudiger Dombusch and Juan Carlos de Pablo formalized these relationships in a model designed to show the relationship between inflation, growth, the budget deficit, and money creation under various macroeconomic and financial conditions. The model states: r= (ag-y)I(l -); 15,Bg where -r is inflation, ac is the velocity of money under noninflationary circumstances, g is the rate of growth, and ,8 is the response of velocity to the rate of inflation. This equation states that (i) inflation will be less the higher the rate of growth because growth generates a demand for money; (ii) inflation will be greater the larger the budget deficit; and (iii) the rate of inflation depends on the parameters for velocity; the higher the velocity of money (say, associated with dollarization), the greater will be inflation associated with any level of deficit; similarly, the higher the responsiveness of financial markets and velocity of money to inflation, the greater will be inflation. See Chapter 4 of Deui Eema e inestabiad nauroeconomuca en la Argentina (Buenos Aires: Editorial Sudamericana, 1988), especially pp. 77-79 and Appendix II. -6 - BL Main Problems in Public Flnance: 1970-89 10. The insolvency problems which the Menem administration encountered were haceable to decades of public sector imbalance. The accounts of the public sector had not been in surplus in three decades. The public sector deficit averaged 14 percent of GDP in 1980-84, and fell to 8.9 percent in 1985-89 (¶ible 1.1). The noninterest or primary balance was in deficit by an average of 9 percent of tDP in the frst half of the 1980s, impmving to a deficit of 2.2 percent of GDP in the second half. These endemic deficits had their origin in an erosion of revenue capacity and an inability to contain expenditures. Rvenues 11. The tax burden as a share of GDP, which had reached 19.5 percent of GDP in 1980, fell tD 16 percent in 1989. But more important, this fal was accompanied by an icreasing reliance on inefficient stxes that discouraged growth. The Argentine tax system was fairly sophisticated and efficient in the early 1970s; however, tax exemptions were granted for various purposes beginning in 1973. As time passed, inflation, combined with the lack of political resolve to enfobre tax laws, progressively eroded the tax structure and administration. The tax system effectively collapsed during the 1989/90 hyperinflations. 12. In an attempt to maintain revnues as the tax system was eroding, the Govermnment began to rely increasingly on inefficient but easily collectable taxes-so- called tax handles. The VAT became riddled with exemptions, primarily for industial promotion. Pzvenues fmm the VAT which reached a peak of over 5 percent of GDP in 1981, had fallen to under 2 percent in 1989; their contribution to total revenues fell from some 23 percent in 1980-84 to under 15 percent in 1989. lTe income tax withered to less than one percent of GDP. The tax handles included export taxes, tas on bank checks, and excessive energy taxes. lb complicate matters, the Executive agreed to earmark selected txs to enlist support from selected reponal or special interests when negoating tax packages through Congess, and these reduced the flexibility of the Treasury to allocate resources. 13. The decline in revenues from efficient txes (VAT and income taxes) reflected three factors: improper indexing, tax adm ation and exemptions. Income tax receipts suffered particularly from the inapropriate definition of the inflation adjustments for loss carryovers as well as tax exemptions for income from interest and dividends. Improper mdexing of other taxes also lowered real rceipts in inflationary times, leading to a procyclical bias in revenue shortfalls. 4 There are difficulties in comparing public sector figures across ime, becuse of variations in accounting. For tinm series information on fiscal accounts, see FEEL El &zso Pstbiwo en la Argentina, 1960-1988 (Buenos Aires: Fundacion Ac Investigaciones Economicas Latmamedana~1990). 7- Tabb 1.1: Agnlha - scal Accunts of the Consolldadd Public Sedor, 1983 - 1192 (Acalu bas, as prcent orGDP) 1983 19B4 1985 1986 1987 198B 198 1990 1991 1992. Current Revenue al 19.3 22.4 23.1 21.7 20.0 19.1 17.6 17.7 20.4 25.0 Tax Revenue 15.7 19.1 18.7 18.6 17.8 16.8 16.3 16.6 19.1 23.8 DGlaInd Customs Revenue 11.0 16.5 15.1 14.6 14.0 12.1 13.0 11.5 13.5 15.9 Social Securty Revenue 4.7 2.6 3.6 4.0 3.9 4.7 3.3 5.0 5.7 7.9 Non-ax Revenue 3.6 3.3 4.4 3.1 2.2 23 1.3 1.1 1.3 1.2 Current Expenditures 28.0 24.4 25.2 23.5 23A 23.1 19.9 21.6 21.8 23.7 Personnel 4.8 4.8 4.1 3.6 4.1 4.1 3A 4.1 3.9 3.8 GoodsandSernces 2.9 1.9 22 2.0 2.1 2.0 1.6 1.4 1.3 1.6 Transfers 145 1Z7 13.5 14.1 13.8 14.1 11.6 13.1 14.5 16.8 Provices 7.6 5.9 6.1 6.7 6.6 7.0 6.1 5.7 7.0 82 Social Security 6.1 5.6 5.6 5.5 5.1 52 3.6 5.7 6.0 82 OthBrs 0.8 1 2 1.8 1.9 2.1 1.9 2.o 1.7 1.6 0.4 nbrest Paymnts bl 5.8 5.0 5.4 3.8 3.5 2.8 3.3 3.1 21 1.7 Domsti Cd 0.9 0.8 0.7 0.3 0.5 0.4 02 0.5 0.3 0.1 Exterl dl 4.9 42 4.7 3.5 3.0 24 3.1 26 1.8 1.6 Pubic Enterprise Non-Interest Savings -0.1 0.6 1.0 1.9 1.8 1.0 0.9 1.2 0.3 0.8 Cuferrt Revenues 11.0 10.5 13.6 12.1 11.8 128 128 8.8 6.7 6.0 CurrentNon4-nterestExpendlbtres 111 9.9 126 10.1 9.9 11.8 11.9 7.6 6.4 5.2 Savhigs *8.8 -1.4 -.1 0.1 -1.5 4.0 -1.4 -2.7 -1.1 Z1 Capita Revenue 02 02 02 0.1 0.1 0.4 0.6 02 1.7 1.3 Capl Expenditures 6.8 5.1 4.5 4.4 5.3 6.0 3.9 2.6 23 1.7 Geral Government 2.9 1.6 1.5 1.6 1.7 1.5 1.0 0.8 0.7 1.2 Publc Entrpses 3.9 3.6 2.9 28 3.6 4.5 28 1.9 1.6 0.5 Non-Financil Publc Sector Babnce -15.4 -6.3 -5.4 -42 -6x 8.6 -4.7 -5.1 -1.7 1.7 Quasi-iscal Balance of Ceulia Bank el -1.1 -25 -28 -1.6 -34 -1A -5.8 -1.0 -0.6 -0.2 Overal Balance -16.5 -8. -82 -5.8 -10.1 -10.0 -10.5 -6.1 -23 1.S Memo: Prima Suplus -9.6 -1.3 0.0 -0.4 -3.2 -5.8 -14 A -20 0.4 3A Operatlonal Primary Surplus fU -9.8 -1.5 -0.2 -0.5 -3.3 6.2 -2.0 -2.2 -1.3 2.1 Net Federal Expendihte 9g 36.0 31.4 31.5 275 302 29.4 28.7 24.0 244 24.8 Prowincial Revenue lncLtrnsfeS 11.6 10.4 10.8 112 8.0 10.3 9.4 9.0 10.3 13.2 PmvIncIal Expendiure 11A 11.9 11.4 11.1 129 12.3 10.6 132 13.5 128 Heath Funds ExpendItes h 4.4 4.1 4.3 4.4 4.6 4.7 3.8 3.8 42 437 Tobl Non-Intest Expendures 48A 44.5 46.4 43 " 46.1 48.1 40.7 40.0 39.1 38.2 Total Expendihra InCL quasIfs balance of SCRA UI 53 52.0 54.6 48.5 53.0 52.3 49.8 44.1 41.8 40.1 aI kncldes copastcpated revenuet b/Interest paymet of the efte Fedea Gevemmet c/ Real component or domnestict payFfment. fbr 1983-1991; 1992 Is nomial due to run to stabity. df Accrued Interest due. et Reel eamnigs on assets less eal Intarest costs; UMF delinion, 1983-87; IBRD-deflbn 1988-1992 (see Ch.13) fl Pimary sus less capitl revenue. gf Includes nn-nterest cuFrrnt accomut of the public enbte and quasi-fiscal babnce (- = endiure). hi 1983-187 from FlEL"Gasto Pdblco report (1988); 1968-1992 based an Bank staff estimates. If Gross expendiure of nationad goverrment, publf enterprises, proinces, healh funds and quasifcal balance of the Central Bank Soure. Secretary of Finance; Excuted Budges. 1983-1991; Cash Basis, 199Z 1iW3 ltA4OAM (BUD9MXLWBUDCONX.S -8 - 14. The capacity to administer efficient taxes eroded with inattention to management and systems development early in the decade and the sharp deterioration in public sector salaries after 1984. The General lTx Office (DGI) had an inadequate tax roll, a low rate of inspections and audits, a low level of efficiency in processing retums, and low rate of collection per audit. In 1989, an audit that cost the DGI on average US$800 produced US$35 in new revenues. The customs administration also became less reliable and effective in the 1980s. 15. The use of tax expenditures in support of industrial aiivity beginning in the late 1970s was pernicious to revenues. Fiscal incentives for industrial promotion were built around Law 21608 of 1977 to promote industrial investment and supporting the creation of industries in less developed regions of the country. Additional laws expanded the incentives for investment and production in ilerra del Fuego and in four provinces.' Inadequate control and inspection have led to widespread abuses and tax evasion. The system engendered fiscal losses without significant employment effects. The fiscal cost of the national and regional promotion schemes as well as the scheme for Tierra del Fuego was estimated to have been as much as 1.0 percent of GDP in 1989. Expenditures 16. Driven by powerful interest gIOups with minimal accountability to the electorate, total expenditures of the nonfinancial public sector as a percent of GDP increased from a level of slightly less than 30 percent in 1966-70 to a peak of over 55 percent in 1980-83. The stop-go austerity programs of the 1980s produced temporry reversals of these trends, but no sustained reduction. Noninterest expenditures fell by five percentage points of GDP to 1986, only to surge again as mid-term elections approached in late 1987. Expenditues were compressed again in 1988-89--this time by seven percent of GDP-mainly by accumulating arrears in social security and denying rsources to the pwvinces (which in turn accumulated arrears with workers and suppliers, and borwed fmn their banks). Efforts at stabilization tended to contract those expenditurs that were least objectionable politically-ivestment, the wage bill of the civil service, other public expenditures. The 1980s left public expenditures plagued with both process and composition problems. 17. Process Problems. The inability to control expenditures was the result of: (i) a fragmented fiscal administration with perverse incentives, including prolitration of decentralized agencies, unclear financial relations with the provinces, and overearmarking of zevenue streams; (ii) the complete breakdown within the budgetary process; and (iii) the institutional failure to properly control expenditures Fhgmeation with perverse incentives meant that most public expenditures occurred outside the direct control of the Executive (i.e., the Secretary of Finance), instead residing with the decentralized agencies, special accounts, public enterprises, provinces S The fiscal mnentives for industria promotion were awarded through six different instruments: (i) exemption from import duties and VAT purchases on capital goods; (ii) deferal of tax payments by investors up to a certain percentage of the amount invested; (ifi) exemption from profit taxes; (iv) exemption from capital taxes; (v) exemption from the VAT; (vi) exemption from the stamp duty; and (vii) exemptions for suppliers of promoted firms. -9 - and social security funds. In 1992, for example, the Secretary of Finance had direct responsibility for only 20 percent of al spending-and one-quarter of this was interest payments. At thlz same time, the Federal Govenmment assumed a greater responsibility for providing resources, either through taxes or the Central Bank. As the various components of government reached the limits of their budgets, they customarily arranged for ad hoc, discretionary bailouts from the central gorvernment or Central Bank-financed ultimately from the inflation tax. 18. The budget process itself weakened under the weight of unstable macroeconomic conditions. Cycles of inflation and austerity forced the DTeasury to manage short-tenm flows on the basis of the immediate priorities of continually changing quarterly fiscal trets rather than an agreed budget. High and variable inflation soon rendered budgets prpared in nominal terms meaningless. The budgetary process itself was plagued by severa other problems, including the omission from coverage of important sources of expenditures (eg., public enterprises); absence of budget programming and therefore of a regular programmatic review of public expenditures, onented towards improved rESOurce reallocation under severe resource constraints; ex- unte and ineffectual control of budget execution; inconsistent accounts and the absence of timely budget processing and therebore weak senior-level monitoring, and unenfoceable reporting requirements; the brmakdown of the public investment planning process and the absence of a link to the budget. The very 'istitutions of public financial management were inadequate.' 19. In this environment, the expenditur control strategy of the Alfonsin Admin'ittion after 1987 was to limit the access of the decentralized public sector to the lkeasury and Central Bank--attempting to force each component of government to put itself in balance. Tbus, the public enterprises were to have been put in balance by requiring the surplus companies to cross-subsidize the deficit companies, in exchange for taking over the service burden on commercial bank debt; the provinces were taken out of the consolidated public sector accounts with the passage of revenue sharing legislation, and the social security system was to be made financially independent. This stra necessarily entailed distortions-especially in the cross-subsidies in the public entewpises and in the central government absorbing a disroportionate share of the initial eWenditure reductions and liabilities of the public sector This effort ultimately filled-the decentralized components pressed claims to obtain emergency financing via the budget, provincial banks, and even issuance of quasi-money by some provinces. 6 The institutions of fiscal control were weak. The accounting function (National Accounting Office-CGN) was not fully developed, and accounts were inconsistent because there were no accounting norms for the public sector as a whole; the internal control function-expenditure recoriing-in the Executive was only effective for public enterprises (General Accounting Office for Public Entemprises-SIGEP) and partially for procurement in the rest of the public sector (National Court of Accounts-TCN); and there was no external auditing because there was inadequate intemal control. The control system emphasized formai decisions on an ex-are basis, instead of following a modem approach, which implied ex-post performanc control measured against an approved budget It also did not separate the three basic functions-accounting, internal registration/control, and external auditing-that have to be independent in a modern institutional struture on control. Finally, the TCN was charged with judicial responsibilities for prosecumon of public fraud cases that should be the sole responsibility of the judicial b anch. - 10- However, it did begin a process to regularize accounts and institutional fiscal responsibility. 20. Composition Problems (Economic Classification). As austerity programs began to take hold in the late 1980s, the fiagmentation of spending aut'iority forced a disproportionate c impression on those elements securely in the control of the Treasury-wages, service quality, and investnent of the Fedemal Govermment. This forn of adjustment distorted the composition of expenditures substantially over time as seen through an analysis of expenditures by economic classification. (A finctional analysis is discussed below.) The aggregate wage bill and investment fell as a share of the total to make room for a relative increase in interest payments and transfers to nonfederal components of government-namely, the provinces, public enterprises (primarily railways), and social security. 21. The vge bill of the national administation declined from about 4.9 percent of GDP in 1980 to about 3.4 percent in 1989, a period when overall employment in the national administration increased and GDP was contWacting. This pattern of adjustment eroded the capacity of the Government to perform its core functions as well as exacerbated exsting weaknesses in its budgetary capacity. During the 1980s, the Federal Government increased the number of public employees by 36 percent between 1980 and 1990 from about 495,000 to about 670,000 workers (see Annex libles 311-3.7)_7 By 1990, average real wages had fiaRen to under 35 percnt of their January 1984 levels, the peak for the decade. The salary compression ratio-the ratio of the highet to lowest salary--had fallen to less than 3:1 by Febnuary 1990 compared with historical levels of 10-12:1. Provincial public sector employment exhibited the same pattem with even greater distortion 22. By 1990, the Government could not attract qualified managers and technicians, had limited staff capacity to perfolm on-going programmatic functions (let alone design and implement boad rforms), and could not adequately monitor policies for compliance and effect. More important, limited human resources were badly deployed across an overextended public sector still designed with a heavily interventiomst and market-regulatng legal framework. Morale was low, and the average civil servant worked only a few hours a day because of the need for part-time work elsewhere and lack of supervisory control. 23. At the same time, the capacity of the Government to supply its workers with goods and serices necessary to perform their duties had fallen: teachers worked without adequate suppliers, hospitals were inadequately supplied and maintained, and maintenance throughout the public sector deteriorated. The balance between non-wage operating costs and wages fell to about 15 percent, down from pwevious levels of 35 percent in the 1970s. This ratio improved slightly in 1992 because of the general improvement in public finances and administrative refonn. 7 In addition, employment in the public enterprises is about 300,000, in the official banks about 33,000, and employment in the provincial govenments is estimated at about I million (excluding nonconsolidated municipalities and provincial crporations) (see Annex Table). Also, the mlitary has enlisted personnel of 86,000, paid througb the budget. "hRf*Ž 4 .OSMA it.-' - '.' ., .' .. 0 , .--, f -' ? --.~ -;. '.' - a 24. Almost thie-quarters of noninterest federal expenditures shown in Thble 1.1 were transfers to the pr6vinces, public enterpiises, social security and other. Transfers to the provinces were ad hoc and somewhat discretionary during the mid- 1980s, but the coparticipation law enacted in 1988 required the Federal Government to transfer automatically 58 percent of selected taxes to the provinces. This primary distbution formula was significantly higher than at any time in the history of the Republic, and much higher than the 34 percent prevailing in 1980-84.' The shift in the tax base toward more efficient taxes also shifted the base in fvor of coparticipated taxes. As a result, transfers to the prvinces rose from an average of 6.5 percent of GDP in 1983-85 to over 8 percent in 1992. 25. Transfers to the public enterprises were primarily to subsidize the operating losses of several money-losing enterprises, most importantly the railways. For most of the 1980s, enterprises enjoyed considerable autonomy in planning and budgeting, and deficits would be covered by the Treasury; subsidies varied inversely with stabilization programs because most programs froze enterprise ariffs, and managers bargained over the transfers and sought federally guarnteed loans from suppliers that would later revert to the Fedeml Govemment to pay. 26. The social security system was massively in deficit throughout the 1980s. _his deficit was even larger than that shown in the fiscal accounts because the arrears were not officially recorded or acknowledged until much later (1992). Revenue collections were poorly administered and benefits were generous. Other tiansfers were military pensions, universities and private education, and the housing program. 27. Public invesmem during the expenditure compression of the 1980s declined to its lowest level in history. From 5.5 percent in 1983-85, public investment as a share of GDP fell to under 4 percent in 1988. Investment in the Federal Govermment-roads, schools, hospitals, power-fell especially precipitously since their esources were linked more closely to tax performance. Investment spending in the public entrprises also declined sharply, but in response to their deteriorating savings performance and shrining borrowing capacity. As a consequence, the quality and quantity of publicly provided goods and services greatly deteriorated. Since 1990, the privafization program has partially relieved the public sector of the pent-up demand for public investment. The Quasi-Fisc Deficit 28. After its takeover of private debt in 1980-82, the Central Bank assumed the external liabilities of several failed banks as well the expenses of liquidation. In addition, the Central Bank provided subsidized exchange rates,for external payments, which added to its losses. After 1985, the Cential Bank began to finance the repayment of government bonds, to permit rediscounts to public banks that effectively financed fiscal expenditures (in the form of provincial expenditures or subsidies to housing and industry), and, of lesser importance, to finance an increasing float with the social security system. The Cental Bank also absorbed losses associated with trade financing. 8 See World Bank, Towards a New Federalism, May 1992, Chapter 2. - 12 - All these efforts produced a hugely negative capital position; writing in 1989, the current president of the Centmal Bank, Mr. Roque ermandez, estimated the recorded and umecorded losses of the Central Bank up to 1990 to be about US$67 billion. Annual recorded losses averaged 2 percent of GDP in 1983-86 and 3.5 percent in 1987-89. 29. Financing these quasi-fiscal expenditures required funds. The Central Bank increased demand for its liabilities tbrough ever-higher legal reserve requirements and 'forced investments" from the commercial banking system. It also sold its own bonds. These mechanisms in 1987-89 resulted in a substantial debt to the financial system that in itself was destabilizing because of the explosive interest bill. Since its asset portfolio was built on fixed interest loans (many of which were to the Housing and Industrial Banks and were thus nonperforming) and its liabilities composed mainly of forced investments bearing market interest maes, high ral interest rates and/or high inflation widened the donestic quasi-fiscal deficit. Tbwards the end of stabilization episodes based on fixed excbange rates, real interest rates rose as financial markets began to fear devaluations, the interest bill of the Central Bank became an endogenous and destiliing source of money creation.' This mechanism eventually led to the coiapse of the Plan Primavema (August 1988-February 1989), the Plan Bunge Borne (July 1989-December 1989), and ended the Cental Bank's capacity to carry out monetury policy. C Post-1989 Structural Reforms in Public Finance 30. The icoming Menem Administration enacted a series of stucural iefrins over 30 months that recast the basis of public finance. The Government undertook difficult-l-reverse idbnms in the legal framework, institutions, and policies. Gradually, these have begun to change Aigentine culture. This process, not unlike a bankrptcy procedure, was characterized by thme sets of actions. Firt, the Government improved rvenue mobiizdon to increase the quantity and quality of federal revenues. Second, it enacted expendrure reforms to reduce the scope and size of govermment thugh administafive reforms that reduced public employment, undertook privatizations to ensure a permanent end to subsidies thrwugh public entities, and implemented fiscal decentralization to make revenue-sharing with the provinces transparent and bring service delivery closer to local constituencies. Finally, the Governent is in the process 9 Ibese intrest rate ndes and the quasi-fiscal deficit generally are analyzed in Chapter 4 of Argeminc Rtformn for Price Stability and Grwth. Washington: World Bank, 1989. See also L. Barbone and P. Beckerman, "Argmtina's Quiscal Deficit," October 1988, and P. Beckerman, "Public Sector Debt Distress in Argentina, World Bank, WPS 902, May 1992. ~~- - 'X .-;-- = -'- .,.''' -- . - - - - 13 - of rem.nc ng is liabilities with domestic and foreign creditors to adjust them to serviceable levels. Other reforms have aided the process of activating efficient private investment, notably trade andfinanial sector reform.'0 Revenue Mobilization 31. The Government imprved igure 1.6 revenues by broadening the VAT, extending CurrenW T fRnu its coverage fist to all goods in February o 1990, and later to services in November a 1990. It also adopted an assets tax in 1990. The Government also improved the 20 / efficiency of the tax administration- establishing a control system for the lrgest taxpayers in February 1991 and rebuilding the tax mlls through more than 400,000 site inspections in late 1990. The tax penalty law, adopted by Congress in 1990, provided - _ - u sum much-needed sanctions for tax non- - w,,, ." compliance. The tax package o February - N- un a sn 1991 improved the qulty of the revenue LJXU_ -e mobilization effort because it eliminated many of the so-called tax handles-eas to collect but grwth-ihibing taes, such as export taxes, taxes on financial transactions, and several low yield taxes. These efforts cumulatively produced dramatic rises in tax collections (Figure 1.6). 10 The fiscal reforms had important antecedents. In retrospect, the mid-term elections of 1987 marked a turning point for public finance. By that time, demand management approaches had failed, the fiscal deficit had mushroomed, and the Plan Austral was unsalvageable. In the Ist two yeas of the Alfonsin Administration, the Government took seveal significant steps down the path of reform later accelerated in the Menem years. It began-slowly at first-to change incentiv -s facing the decentralized public sector. Efforts included the revenue sharing law, which purportrl to eliminate discretionary transfers to the provinces and was implemented in 1988; the idea was to compel the provinces to live within budget and preempt requests for unbudgeted federal revenues (although the new law entailed a historical high in lost ravenues. Second, interest rate liberalization in 1987-8, coupled with the payment of interest on mandatory reserves at the Central Bank, was designed to end the sequestration of resources from the financial system, and improve intermediation by reducing spreads; attaching a cost to reserves would supposedly discipline the Central Bank's practice of increasing reserve requirements to finance the nonfinancial public sector and its own deficit but the cwst of interest on the reseves added to the fiscal defidit. Third, the Govenmment ought to end disguised fiscal subsidies via rediscounts to official banks as a way to discipline the provinces, the industry and the housing banks. Fourth, the Government sought to discipline the decentralized components outside the Treasu:y-social security, public enterprises, and the provinces-by setting up clear rules cirumscribing access of these agencies to the federal treasury and to Central Bank finance. Incipient efforts at opening the economy also were begun in 1987/88. - 14- Exnditure Reduction and Restructuring 32. Administrative Reform. Because the wage bill dominated expenditures, the Government reduced the federal Figure 1.7 bureaucracy in 1990-92- Federal NmtlonSd AdMlnlutrulon Enipiyynnt L employment was cut by more than 103,000 in 1991-92, a total decline of 15 percent since 1990; in addition, 284,000 teachers and health workers were transferred to the provincial governments (Figure 1.7). Rather than simply lay off workers, this ioo X Feffort was based on a ministerial reorganization that focused on federal activities related to core objectives, and improvements in the civil service system through an improved salary structure and 200 - other efficiency measures. These efforts allowed the Government to increase average D*d E W g . INN,EiIJ salaries, salary dispersion, and still reduce -sn - wes its wage expenditures as a share of GDP and by almost 10 percent in real terms in 1992 (Table 1.2). The Government improved its control of public expenditues in earnest beginning in Febnaiy 1991; one indication was the reduction in spending jurisdictions by more than 50 percent between 1990 and 1992; the number of earmarked accounts fell from 152 in 1989 to 59 in 1992. The Government also enacted a law of Public Financial Administtion in September 1992 that will revamp national fiscal aounting, improve expenditure control systems, and establish modern auditing systems for public expenditures."' 33. Public Enterprises. The new Government adopted an accelerated timetable upon taing office in July 1989 for priwvtization or partial divestiture of nearly all its enterprises. The programs objective was reducing the budgetary burden of the enterprises on the Tleasury, making the firms more competitive, and increasing the volume and efficiency of new investment. The Government sold two television stations, ENIbI (US$214 million plus US$5 billion in external debt) and Aerolineas Argentinas (US$260 million plus US$2 billion in external debt). Remaining minority govemment shares in the new telephone company were sold for US$1.2 billion hi early 1992. The Government began a comprehensive estructurmg of the petroleum industry--the first in latin America-by auctioning off areas of YPF (realizing by end-1991 US$1.6 billion in cash). It granted road and mailroad concessions to the private sector and restuctured the railways, including the privatzation of long distance cargo lines, and reduction of 15 percent of the railway's work force. The Government intends to privatize most of the remaining public enterprises in 1992, including shares in the petroleum industry, 11 The World Bank supported reforms of both revenues and expeaditures of the Federal Government as wel as those of the Central Bank mentioned below with a US$325 million Public Sector . . . ~ ~ Q Reform Loan (PSRL) (cofinnaced by the IDB) and a US$23 million Technical Assistance Loan in July 1991. -15 - TABLE 1.2: ARGENTNA - INDICATORS OF ADMINISTRATIVE REFORM: NATINL ADMINISTRAION 1990 1991 1992 Tctb Reductnu ay-tahat Trmfln NatIl Ad _bdlatyln Pemrnned 671.479 581.53 2B4215 387.264 103.469 283795 AdniWiea Rerwm Pgrm 341.021 2B7.081 227,677 113.344 90,913 2Z431 CaIlAdmn*iISm 123.646 87.596 61.276 0.370 39.939 22f431 DamdhecApgJ 14,860D 126.133 123.391 21.209 21.209 Ohe N rAmaJv*htu 73.75 53.302 43,010 29,765 29.765 Other Prwns 330.458 314.45B 56.538 273.S20 1Z556 261.364 MOM. Amed F0c5 (AF antd Camiats 131.297 121.9A 11.594 18.703 14703 NakMTAd mnMIgaYO AdAIIAmSd Fae 802.776 703.485 396.809 US.961 12Z.172 2A3.795 Grass lay-ft (am tceumclee, Peace end AF.) 12t.600 Wage Wage B01_d(n (1W1 USS MEo) hi 32.49 3.16 3.443.05 we EMen11111s (X d GD1) l3O5 2.62 223 hukpt Awgs Wage (192 US5) d 4.742 6.320 9.58 Reado of HheuloLawsSdSyy :15 6o 10.o SwVorGwamumt Siay crat of MPr Sectr Eualt) of 20. 333 74.1 A_ran Setuc SpVend1FVjWWJtlom 39 30 18 GoveuwtAuncs 38 38 30 SpecialAccounts 93 a6 59 inctuire ofChi Servie SecredIs 47 36 43 -u9sehetwiss 99 29 62 N.abind DOctamts 304 185 187 Soirce: MldyodEcomuiiy. Pee ttlaA neso CnreIss( a Anna Tablea31 at Toal naMy-ct bt Net d hdem _kts. prvIma bra rlinhm ar d changs h pay-se Inidps Wpayrot ovw* 13th mouth y md oe bnarl d EBtJi_e co If n eted Mt'ISAdnknltako Pmunn plu Atmed Farces Pemrninl (OmKIF canlt; icdhi hea t fund I1 . dl Dat frm MwIch 1S9 Decembr 1991. MUch 1993 fbr SNAPA rughu ef Prelmboaflur: I9=2me proected -16- defense industries, the nation's largest flgure 1.8 distributor of electricity flble 1.2 Indicators Re from Prtvatlzatcwa of Administration (SEGBA), ports and aUss mUilon) maritime transport, reinsurance, and the 2s entire power sector. Capital revenues from privatizations have provided an importanta source of transitional finance to the fiscal accounts (Figure 1.8).2- 34. Decentralization. The . Gciemment also sought to rescture fiscal relationships with the provinces. Building - on the coparticipation law of 1988, which fixed the share of federal rvenues - automatically transferred to the proices at _ ___ _ 58 percent, the Government sought to limit macro instability arising from deficits in the provinces. This entailed limiting the resources provincial govenments could access from their proncial banks by progressively terminating Cental Bank lending to provincial banks. It also meant reducing extra-coparticipation transfers through the budget. Fnally, it meant transfrring classes of expenditures to provincial administradon in 1992, notably secondary education and hospitals. 35. The aggregate decline in total public Figure 1.9 spending was mainly owing to the efforts at xpendit,'n of the Totl Non-fktanoiej the federal level in the national Publa 8ctOr (i Of GOP) administration and privatizations. * m Aujtomatic transfers to the provinces and social security increased in 1991/92 and - thus prveted aggegate expenditures from tilling more; but these-at least initially- helped to alleviate latent structuLal deficits in these areas. Overall, total expenditures g are 15 percentage points of GDP lower than in 1980, and 10 percent lower than in 1983, 10 the time of return to constitutional democracy (Figure 1.9). Including the t ' - - WE.- taco te provinces and health funds, public _111 e._ -a CM* Et. C u..im expenditures fell from near 60 percent of t_ CO H _ltit GDP in the early 1980s to about 40 percent at present. 12 'The World Bank supported this effort with the approval of a US$300 million Pblic Enterprise Reform Loa (PERAL I) and a US$23 million Technical Assistance Lo-an in Febnalry 1991, as well as with the PERAL H of US$ 300 milion approved in December 1992. A ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0 ''- - -- - -,tS .--- ;- - . -- - 17 - 36. Present levels of public Vs e 1.10 spending are below the average for the Figu Expenditures industil countries, and ar comparable to Is Of map, middle income countries. The average level of Federal Government expenditures for industial countries was 28.6 percent of K GDP in 1985; middle-income countries \ averaged 27.5 percent. Argentina's fedemal spending was about 25 percent of GDP in 1992. Combined federal and state (provincial) spending in six OECD - countries-the US, United Kingdom, Fiance, Germany, Sweden and Japan-- averaged 47 percent in 1985, with a range of 33 (Japan) to 65 (Sweden).13 In Aenfina, total public sector spending was -e 1ia m me ae m s 40 percent in 1992. Nonetheless, this Ueuen. ==S : conclusion must be somewhat tempered by public expenditures not included in the Argentine numbers-the quasi-fiscal deficit, tax expenditures for industrial promotion, and higher-than-OECD average aiffs. 37. Ibken together, the structural measures flcilitted an increase in revenues and a decrase in expenditures. On the basis of reforms enacted in 1990, revenues jumped sharply beginning in 1991. Expenditures fell sharply after 1988, especially noninterest expenditures (shown in Figure 1. 10 on a net basis). Restructuring Domestic and Foreign Debt 38. The Government's final step in dealing with its insolvency involved restructuring its financing obligations. The Govemment had financed its deficit through borrowing from the financial system (US$3.5 billion) and by accumulating arrs to external creditors (US$8 billion), social security pensioners (estimated at US$12-14 billion), and others (US$4 billion). Each of these required major initiatives. 39. Quasi-FIscal Deficit and Debt with the Financial System. Although the Government ended new rediscounts to the housing and industrial banks as well as liberal rediscounts to provincial banks in 1988, the Central Bank continued money emission to finance the Treasury as well as its own deficit. In the fourth quarters of both 1988 and 1989, the risimg interest bill of the Central Bank drove up the domestic interest bill and widened the deficit, such as occurred with foeign interest payments in the early 1980s gure 1.11). In late December 1989, faced with an exploding interest bill, rising Centmal Bank deficits and the renewed threat of hyperinflation, the Government took the drastic action of converting the domestic, short-term (mainly seven 13 See World Bank, World Developmet Report, 1988, Washington: World Bank, 1988, pp.45-46. - 18 - Figure 1.11 day), interest-bearing obligations of the Public Sector Prinmry Surplus Cental Bank into US$3.5 billion of 10- and Total Internet 1970-92 year external reasury bonds (BONX. s*9 Gap This virtually elimina the Central Bank's quasi-fiscal deficit and the monetay emission necessay to finance it-at the cost of penlalizng savers and erasing confidence in the financial system. 40. Externa Debt. In April - 1988, the Government suspended ,. w an payment on its extnal debt to commercial creditors. By 1992, it had accumulated US$8 billion in arrears as part of a US$33 billion medium-trm commercial bank debt. Public extrnal -debt was US$61 billion (Figures 1.12). The Goverment neinifiated partial payments in June 1990, and established a consistent track record of paying about 25 percent of interest due. At the same time, it allowed external debt to be used in exchange for the sale of assets, which reduced the debt stock by US$7 billion. The measures, together with the progressive imprvement in fiscal fundamentals in 1990/91, allowed the Govremment oo begin negotations with commercial banks on a debt reduction deal. In December 1992, FiguE 1.12 the Government achieved an agreement with the banks The agreenent formalizes arrears in a 12-year uncoIlatralized bond at lMOR with a 3I year grace period, after a US$700 million downpayment; it would exchange existing debt for either a colateralized par bond with a fixed interst rate (beginning at 4 percent and rising to 6 percent by the sixth year), or a collateralizddiscout bond at 65 percent of face value at W1BOR, new collatralized bonds would haVe a 12 month rolling interest guarantee. The - - --- agreement, although increasing the cash maut awdn aavi payment, will end the accumulation of arrears and pmvide for debt reduction 14 This is disced i Chapter 12. . ~ KC .-- ; f. - - 19- similar to Mexico's. Debt service paymenut would begin at US$1.5 billion in 1993 and rise to US$3.0 bilon by the cnd of the decade?1 41. Arrears to Pensioners and Supplies For the last decade, the Government has paid only about half the legally mandated pension owed to social security recipients. Arrearages were not reorded in the fiscal accounts, but are esmated to be US$7-10 billion, and accumulag at a rate of US$200 million per month. Also, the Goverment accumulated arrars in 1990 with suppliers through the forl suspension of payment for goods and services already provided. In addition, the health funds have arrears with their servioce pwviders that will also result in new debt. Finally, the Government, as part of its income tax reform, suspended the poorly designed loss-cary-forward deductions for the corporate income tax, with the agreement to issue some US$1.5-2.5 billion in compensatry bond& 42. Tb sete these claims, Congress authorized the Government to issue consolidation bonds (BOCONs) that will have tums of 10 or 16 years (with shorter terms for social security recipients) and a fiveyear grace period on principal and It is estimated that the Government will have to issue US$15-20 billion. Suppliers and pensioners will have the choice between a bond denom in local currency with a domestic interest rate and a bond denominated in US dollars at LIBOR. The service of the debt will be capitalized until 1997, but payments on the order of US$3 billion will be required in the last years of this decade. Supporting Sectoral Reforms: rahde and Finoe 43. flade Regime After October 1988, the Govenment began opening the economy to imprt competition, a process accelerated under the Menem Administration. Quantitative restrictions (QRs) were reduced from about 50 percent of domestic Figure 1.13 production coverage to 7 percent by late LOEL CF mXTNAL ppc"yuan 1990 (Figre 1.13); the ad valorem tariff band was narrowed frim 0-115 percent to o 0-24 percent, with an avera rat of about 18 percet; and the production coverage of - industrial export taxem was reduced to 30 _ pernt. In February 1991, the tauiff band was reduced further to 0-22 peret, the - Goverment announced that specific duties would be converted to ad wiorem tariffs, , and the number of tff rates was reduced to thre (i.e, 0, 1, and 22 percent). In October 1991, the statistical tax on exports was eliminated througb the decree on - _- _ - deregulation. Is The financing implications am anle yd in Chapr 13. -20 - 44. The deterioration in the trade balance, a consequence of massive capital inflows and fixed convertibility that deprived the Govemment of the exchange rate inshument, compelled the Govemment to use commercial policy to achieve an effective dewaluation. In October 1992, the Government announced measures to increase the competitiveness of exports in the form of partial tax rebate; on average, rebates would be raised from 8 to 13 percmt. The Gvermnent also decreased slightly the average tariff on imported goods but incrased the across-the-board statistical tax from 3 percent to 10 percent. Thus, while nominal average ad valoremn taxes fell slightly, the average effective tariff rose from 14.8 percent to 19.8 percent. At the same time, it lowered the maximum ad valorem tariff from 35 percent to 20 percent, thus narrowing taiff dispersion. 45. inancial System. The publicly-owned housing and development banks, long subject to political influence and dependent on government financial support, are undergoing major restructuring. The National Development Bank (RANADE) and the National Housing Bank (BHN) closed their branches in March 1990 and reduced their staff by almost 75 percent. The Govemment is now considering liudatin BANADE and closing BN's remaining retail functions. The Government also is moving to form a "second-tier" bank that will be managed and ultimately owned by the private sector for its investment needs. Macroeconomic Results 46. Fiscal performance has improved notably in the last two years. The primary balance moved into surplus in 1992 for only the second time in the last two decades. The combined deficit fell from 10.5 percent of GDP in 1989 to a projected 0.6 percent surplus in 1992. Automatic transfers to the provinces and social security increased in 1991/92, which pevented aggregate expenditures from falling more; these- at least initally-helped to alleviate latent structural deficits there as well. Interest costs also declined because of the elimination of the quasi-fiscal deficit and because of the decline in LIBOR. 47. To change expectations and increase investor confidence so as to lower inflation quicdkly, the Government enacted the Law of Convertibility, in April 1991. The law guaranteed convertibility of pesos to dollars at US$1:A$1, and effectively proscribed money creation other than thrugh increases in net foreign reserves. The Convertibility progam thus disciplined monetary policy and limited the powers of the GovermMent to finance its deficit by inflation."6 The Law markedly reduced the forign exchange rate risk to investors and the inflation risk to business and labor. 16 The Central Bank still can use reserve requirements as a iLstrument of monctay policy. It also can affect government dollar-denominated bonds in its reserve backing (though these monetary aggregates are legally limited to less than 10 percent of reserves) through open-market operaions to the extent of "excess" in intemational reserves or by varying the amount of govemment funds. - 21 - Figure 1.14 48. As a consequence, the lnv Deficit and inILLtion macroeconomic situation improved 8 - - dramatically. The elimination of the deficit on the basis of sustainable policies * , ' made it possible to bring inflation down , (igure 1.14). As inflation fell, capital -. retred, and the increased availability of credit produced an economic recovery. The creditworthiness of the Government -e -as reflected in the secondary market -/ price of private external debt-impwved (Figure 1.15). -L21 mat ~ ~ < ann - OraU Puibll laflatlan Suotar UulArm 49. Most important, the Figure 1.15 prgram initiated a strong and sustained Secondary Market Price economic recovery, rising incomes of the oa Argentine Debt poor, and new employment creation. ONthly t An US ene Because of the reforms of the public sector and consistent maeconomic policies, the economv has grown rapidly 40 sine 1990. The economic expansion has increased real GDP by more than 15 o percent (Figure 1.16). At the same time, investment rates have incrased and internatonal liquid reserves have more than tripled since 1990, and now back virtuay the entire money base. Most important, indicators of poverty sbow substantial improvement. Unemployment has ailen to less than 6.9 percent, w W despite the incorporation of new workers -22 - Figm 1.16 AverYe MoundhY Inion -(CP) mm Liquid R _wvS and Mone.y UmbEim Induabi Produ.Um ' mnt Pbl f I---uwtriv 80.0 120 14000 70.0 110 12000m"CVWG 600 100 10000 50.0 so m000 40.0 0 30.0 70 4000. 20. 0 2100 10.05 0.0 40 ahtion (gomia hid l U Lquid htmi 0 Exas et Mm y uvwe) Preihadmi hida beGiVM UdITi.s var Liquid . (19581t-1001 P__ww .~~~~~~~~~~~~~w . GDP Index O1MS-100) 120 Hmuolis b Povety (pweEnt of toe al 100 40 35 30 - 20- 40 20 10 5 19o8 1999 1lo0 189 1992 0 _ _ __ __ _ __ _ II' '' , U hweeuuunt 0Camunqad., . -23 - into the labor market. The number of households unable to achieve an income twice thatnecessary to purchase the minimum nutritonal baslkt has fallen from 25.7 percent in 1988 to 15.6 percent in 1992. While much remains to be done--and that is the subject of this report--it is worth underscoring that the last thmee yean have witnessed a major turn amay from the economic policies of the last 40 years. Outline of Study 50. The following chapter describes the organization of the Aigentine public sector. The second part of the present study examines revenues with chapters on tax policy and tax administration. The thin! part examines expenditures, with chapters on major functional expenditures at the national level-social expenditures (Chapters 5 and 6), defense expenditures (Chapter 7), and expenditures through the Presidency (Chapter 8). The economic sectors are treated as part of the discussion on public investnent in Chapter 12, except fior enditures on tax collection, treated in Chapter 4. Separate chapters are devoted to the three laest xecipiet of fedema transfers--the public enterprises (Chapter 9), povincial governments (Chapter 10), and social security systems (Chapter 1 1). Each of the chapters rvews the major problems in the sector, spending programs, and discsss their effectiveness in achieving their objectives. A- separate chapter is devoted to the quasi-fiscal deficit of the Central Bank and inflation financing of the fleasury (Cbapter 13). A final chapter projects rvenues, expenditues, and financing to the year 2000, indicates areas of uncertainty, and quantifies the fiscal impact of the recommendations in this report. - 24 - CHAPTER 2. THE ARGENTINE PUBLIC SECTOR 1. The Argentine public sector is an aggregation of several administrative jurisdictions, woven together in a complex system of transfers, often with conceptually different fiscal accounts. lb give transparency, this chapter begins witlh a discussion of concepts behind the diffewnt consolidations and accosunting methodologies used in this report. 'Ib establish comprehensiveness, the subsequent secion then disaggregates Levenue mobilization and expenditures by jurisdiction fir the whole public sector. Finally, the chapter concludes with an overview of expenditures by function for the national administration. 2. Three conclusions are worth underscoring at the outset. First, the Argentine public sector can only be understood when viewed through severai lenses- level of government, economic and functional classifications, cash and accrual accounts-- hence the importance of the fint section. Second, the provinces constitute the most important element of the Argentine public sector when measured by expenditures, a point emphasized in the second section. Third, the role of the Federal Government has shrunk dramaticallybecause of the administrative xrefnn, decentralization, and privatization-to the point where its main functions are to raise revenues, provide for defense, and provide policy orientation for the provinces; almost half of expenditures in the national budget are transfers to the provinces, public enterprises, health funds, and other spending entities over which the Federl Government exrcises only partal control. A. Concepts and Definitions jurisdiction and Level of Government 3. The Arjntine public sector is comprised of the Federal Govemment, provinces, health funds, and the financial public sector. The Federal Government includes the national administation (synonymous with the Treasury), public enterprises, and the national social security system. The national administration comprises the central administrtion (Ministries), decentalized agencies, and special accounts; it has generally not been necessary to disaggregate these accounts in this report. The provincial level of government include, 22 provinces as well as the Municipality of Buenos Aies and lerra del Fuego. Although these have their own public enterprises and social security systems, this report does not disaggregate these expenditures.' This report also includes the quasi-public health insurance funds (obras sociales) because they are funded through a fedeally mandated wage tax as well as transfers from the public budget. The financial public sector includes the Centhal Bank, 4 nationally administered banks, and 23 provincial banks. 4. As an overview, total public expenditures amounted to about 40 percent of GDP-US$60 billion in 1992. In broad strokes, federal expenditures constitute roughly 60 percent of all public expenditms in the nonfinancial public sector (lible I See World Bank, Towamd A New Federaltsm, June 1992 for a more detailed reathnt of provincia public finances. t_.....-'..,..-.-..'S. '-,.,s. - - 25 - 2.1). The national administraion (the Treasury) comprises the centmal administration (Ministries), decent agencies, and special accounts. It has accounted for about one-third of federal expenditures and one-fit of total expenditures. Also, within the fIderal administiation, public enterprises have administered expenditures roughly equal to the Tlrasury, though with the privatization program it share of expenditures is falling. The share of the -social security system, also comparable in level to the 1lzasury, has been rising in recent years, as the Govermment has inceased the percentage payment of accrued obligations. Pxrvincial spending as a share of GDP is estimated to have fallen in recent years. Even though their revenues have increased, provinces have struggled to reduce their deficits, so the gap is closing. Their collective expenditures are 50 percent lazger than the Treasury's. Finally, the quasi-public health insurance funds (obras sociaes), funded through a federally mandated wags tax as well as transfers from the public budget, are the most opaque of public expenditures; the Govermment does not require public reportng on these expenditures, which are estimated using data from the mid-1980s. Before analyzing flows in greater detail, it is important to clarify methods of consolidation and define key fiscal concepts. TabLe 2.1: Ezperdhtures Share by Level of the NonfinanciaL Pubtic Sector, 1990-92 -'s Percent of 3DP) LeveL of Goverrunent 1990 1991 1992 Federal Government 26.1 23.5 22.4 NationaL Administration-Treasury pj 11.0 9.5 8.5 Central Administration 6.8 6.4 7.2 DecentraLized Agencies 2.4 1.6 0.7 Special Accounts 1.8 1.5 0.6 Public Enterprises 9.5 8.0 5.7 Social Security 5.7 6.0 8.2 Provinces and MumicipaLities 13.2 13.5 12.8 Heatth Funds 3.8 4.2 4.7 Total 43.1 41.2 39.9 ' Net of transfers to public enterprises, social security, and provinces. Source: Government Fiscal Accounts and Bank staff estimates. Consolidations and Concepts 5. This report uses different consolidations, depending on the analytical lens. The previous chapter piesented the fiscal accounts according to intemational conventions. Only net traners to the provinces and the health funds are included, and these components of government are assumed to be in balance. The federal public enterrises in this presentation are shown in the current account as recipients of transfers as well as having either positive or negative noninterest (operating) balans, which are included in current savings; their expenditures for investment are recorded separately in the capital account. Social security taxes are shown as revenue, and social security payments appear as tansfers to the private sector. - 26 - 6. This treatment of course does not show the total revenue or expenditure activity of the public sector. For that reason, the report as appropriate uses the concept of gross federal expenditure, which includes the total expenditure of public enterprises in federal expendirs of the nonfinancial public sector. lbble 2.1 presented totwl public expendiures, including the estimated gross revenues and expenditures of the provinces, as well as revenues and expenditures of the health funds. Generally, revenues and spending by the provinces and from the health funds are not included in the totals unless otherwise specifixA. 7. in addition, tie report includes the concept of the combined public sector, which is the balance of the overall public sector including the deficit of the Central Bank and implicitly the whole financial public sector. The quasi-fiscal deficit is the earnings on Central Bank assets less interest on liabilities (deducting interest income on loans to public entities that will not be paid as uncolectable losses in the years in which they accrue). This is treated in Chapter 13 in detail. 8. The concept of primay surplus is the balance for the nonfinancial public sector before interest payments. Because the report concentrates on the governmental accounts, this concept does not include the provinces or health funds. The operational prmazy swplus excludes any capital rvenues from asset sales from the nonintewest balance of the nonfinancial public sector, and is intended to convey the underlying fiscal effort during a period of high privatization receipts. The National Budget (freasuwy) and Fscal Accounts (Savings-Investment) 9. The national budget presents the Treasury accounts, which deal solely with the national administraton. HIistorically, only the national budget was presented to Congress for its approval; in 1988, the Govenmment began to inform Congress of quasi-fiscal expnditures through the Centml Bank at the time of budget submission, but these did not require approval As will be seen below, Treasury expenditures are a niatively small portion of the Argentine state because not only are Tieasury expenditures low relative to the rest of the state, but because more than half of these are transfers to other executing units outside the jurisdiction of the state. Revenues associated with the co-participation law are not iccorled in the budget as a transfers, since these legally are the property of the state. The proposed law governing public financial administration will change Congress's role by requiring the Government to submit the consolidated public accounts to Congress and request its apprIvl to change the overall level of indebtedness. 10. The fiscal accounts presented in the (Savings-Investment presentation)(Esquerza Ahorro-Invereron) are more comprehensive since they show the gross expenditures of the F;ederal Govennment on a disaggregated basis as well as the main tansfers among principal executing units. These fiscal accounts are the basis for macroeconomic progming Since 1986 the accounts have not included the provinces, other than federal sfers to them. Pior to that date, provincial evenues and expenditures were also shown. However, the automatic provisions of the 1987 revenue- sharing law and the emphasis on insulating provincial accounts from the national accounts to enbree discipline was the justfication for taidng these out of the national accounts. 2 a - - ; , - - - 27 - 11. Another idiosyncracy of fiscal accounts in Argentina is the tatment of interes payments Since 1982, the domestic interest bill has been calculated on a real basis, meaning that only the real component of domestic interest payments is contained in the savings ivestment fiscal accountL This was done for macroeconomic programming purposes based on the belief that the Government would be able to roll over the nominal portion of its debt; in fact, this proved impossible after Igg9.2 In 1992, with the return of pnce stability and the post-Plan Bonex dollarization of the domestic debt, the Treasury changed the fiscal accounts to carry the full nominal portion of the interest bill in the accounts. Cas* and Accrual Accouns 12. Augentine accounts are maintained on different bases, and the distinction between the cash and accrual accounts is paicularly important (discussed at length in Annex 2.1). Revenues and expendiues recorded on an accrual basis that produced NFPS balances that were as much as 1.5-3.0 percent of GDP more in deficit than the cash accounts (Annex Ahble A2. 1. 1). The budget and executed expenditures are presented to Congress and the public solely on an accrued basis. Since these were presented in noir -I terms, budget limits usually soon lost their relevance, and during the late 1980s bore ittle relationship to acua spending. 13. The reasons lbr the differences were related neither to accountig for foreign iterest payments nor to social secunty. rxein interest payments in the cash accounts were recorded on an accrua basis throughout the period, perhaps in recognition that they would have tD be paid. Social security payments, the larges source of present public sector arrears, were not recorded in either set of accounts. Instead, the discrepancy bween cash and accral was attributable to tbe effects of high inflation on delayed actual revenue receipts and expenditures, ffie effects of expenditre delays associated with deferring payments (especialy of the so-called 13th month (annual bonus) salary in December into January) for macroeconomic purposes, the effects of delaying payments to suppliers, and the effects of inadequate cording in both sets of accounts. In general, rvenues in the accmal accoun were lower on a cash basis in 1987-89 (rising inflations and long collection lags) and higher after 1990 (filling inflation and shorter lags); expendiumes, parficularly in 1990, were always higher on an accrued than a cash basis. 14. The cash accounts were used in the latter part of the decade for macroeconomic programming on the theory they best reflected the effects of net balances on monetary emision. Tlis was accurawt except isofar as the public sector was incumng debt through arrears unregistred in the accounts, and which, since known to the priate sector, influenced expections about future ination and therefore present money demand. This was especially true in 1990, when the Government formally suspended payment to suppliFers The accnral accounts rgister the tot changes in 2 a f weaknesses in the Treasury's office in calculating domestic interest and thc foreign interest bill, in 1990 the IMF begpn to use the Cental Bank's calculation of these payments, usual on a nominal basis. For these sons for 1990191, dhe IMF numbers may differ from the official accounts during those years. The TLeasuy and Central Bank begn to coordinate more effectively in late 1991, so th.e discrepancy disappeared in the 1992 accounts. - 28 - indebtedness of the public sector in a given period; the deficit may be overstated, howaer, to the exent that inflation actually reduced real outlays associated with delays between the time expenditures were commited and when they were recorded. The two sets of accounts tended to converge after 1990 with reduced inflation and improved cost accounting and expenditure registation in the Treasury. 15. This report uses the accrual basis accounts, except in the Chapter 13 discussion of sources of finance, because the accrual accounts by and large present a more accurate picture of the stats total liability to the pnvate sector over the longer periods analyzed in the report, and they are consistent with the post-1992 data on the macroeconomic program. Using the accrual accounts also facilitates an understanding of the complex transfers among the public sector, the subject of the next section. B. Revenues and Expenditues by Level of Government 16. The total nonfinancial public sector in Argentina is shown in 1Tible 2.2, oqanized according to revenue sources and expenditure uses among the v-arious segments of Goverment for 1992. Revenues axe shown by source along the vertical axis of the table, and use across the horizontal axis. lbtal federal revenues are shown on the far right of the table, and total 31 percent of GDP This accounts for about three-quaters of all revenue mobilizon effort including public enterprise revenues on a gross basis. The fleasury, comprising the central administration and special accounts, accounts for 17 percent of GDP in rvenue. However, the Treasury spends only 9 percent of GDP, after netting out coparicipation transfers to the rest of the public sector (see expenditures under national administration), and only 6.4 percent after interest payments and other transfers to the private sector are subtacted. The national budget does not include revnues collectd and disbursed to the prvinces under the revenue sharing law (law of co-participation). These are legally deemed to be the property of the provinces. Expenditures of the National Administration are discussed in greater detail below. 17. The social security system receives funds from the VAT, direct taxes, and frm its own collections drawn from the wage tax in 1992. It therefore is dependent on general revenues wen as it accumulates a not insignificant Ilow deficit and a massive achuaial deficit. This would change with the proposed tax and social security reforms (see Chapter 11). Its expenditures, listed as "other', are solely for pensions. 18. Public enteprise sales and current expenditures in 1992 include most importntly the state oil company (YPIF), the coal company (YCF), the hydroelectric power generating companies (kbcreta, Hidronor, and Salto Grande), and the postal company (ENcotel). While most of their revenues are huxm sales (and hence are not shown in conventional consolidations), they collectively receive US$2 billion in transfers directly from the budget. In 1992, most of these transfers are dedicated to Yacyieta to complete the giant hydroelectric project and to the railways, the latter of which incur operain losses amounting to more than US$1 million per day. Reforms underway are deigned to reduce these transfers, and they are projected to decline in 1993 (see Chapter 9). : f - 29 - Table 22a: Arentina - Putile Sector Rs.imeaes, Enpsmdlmues and Flew of Ri." 1992 CA. percent of GDP) Federal Governmont Natonal Social Public Total Health Provinces Total Admirnitration Sacurity Enterprises Federal Funds (Treasury) Governmrent Revenues 10.1 7.9 6.0 24.0 4.7 13.2 41.9 Current Revenues 8.8 7.9 6.0 22.7 4.7 13.2 40.6 Federal Governnment 8.8 7.9 6.0 22.7 0.1 8.2 31.0 Treasury of 9.9 0.0 9.9 0.0 7.2 17.1 Tranfers to other PS bl -1.1 0.0 -1.1 0.1 1.0 0.0 Social Security 7.9 7.9 7.9 Public Enterprises 6.0 8.0 6.0 Health Funds cl 0.0 4.63 4.6 Provinces dl S.0 5.0 Financial Public Sector 0.0 Capital revenues 1.3 1.3 1.3 Expenditures 8.5 8.2 6.7 22.4 4.7 12.8 39.9 Current Expenditures 7.3 8.2 6.2 20.7 4.7 11.0 36B3 Wages 3.6 1.2 4.8 6.7 11.5 Goods 1.6 4.0 5.6 1.6 7.2 Intareat 1.7 0.0 1.7 0.1 1.8 Transfer to Pnv. Sector el 0.4 8.2 0.0 8.8 4.7 2.6 15.5 Capital Expenditures 1.2 0.6 1.7 1.9 3.S Net BalanGe 1.6 -0.3 0.3 1.5 0.0 0C4 2.0 Mermo: Expenditures 8.5 Plus:Transfars to other PS 1.1 linus: Irhterest 1.7 =Non-interest Budget 7.9 26-Jon-93 a Includes non-tax revenues and tac revenues. bh Exclodes transfers derived from tax revanues (see note all) c/ Estiaated by taking the ratio of health taxes to social security wage tax and multiplying by socia scuriy revnue. d/ Thmo figures are derived from the Federararn report, Apnl 1992. The total and the composition of prowincial revonue and ewpenditures are those of 1990 (in percent of total rvonues). In addictonm transfers from the Central Govemrrnent to provinees in 1992 (Educeaon and Health) are equivalent to a 0.76 of GDP increase in the wages bill. el Includes transfers to private and pubfic univercities. Source: Mnistry of Economy, 1992 Budget and Fiscal Accounts, January 1992. - 30 - TaMe za hg.fl - PuSh Sctor Ha_enue, Ezpanihwa. and fow Of Fulnd. 1992 (US mllion) Federal Govwnnt Noatonal Social Public Total Health Provinces Total Administration Security Enterprise. Federal Funds (TnmurI) Govement Revenues 15454 12087 8180 36721 7141 20197 64059 Current Revenues 13464 12087 S190 34732 7141 20197 62070 Federal Government 13464 12087 8180 34732 214 12545 47493 Trasury a 16147 0 0 16147 0 11016 26164 TransferztootherPSbI -1683 0 0 -1683 214 1530 61 Sociad Security 0 12087 0 12087 0 0 12087 Pubic Enterprises 0 0 9180 9180 0 0 9180 Headth Fundes e 0 0 0 0 6927 0 6927 Provinee. di 0 0 0 0 0 7650 7660 Financial Pubic Sector 0 0 0 0 0 0 0 Capital revenues 1989 0 0 1989 0 0 1989 Expenditures 13005 1254 8721 34273 7141 19661 61075 Current Expenditurme 11169 12546 7956 31672 7141 16769 55583 Wages 5608 0 1836 7344 0 10205 1756D Goods 2448 0 6120 856e 0 2433 11001 Interest 2601 0 0 2601 0 139 2800 TransferstoPriv. Sectore/ 612 12546 0 13158 7141 3932 24232 Capital Expenditures 1836 0 765 2501 0 2892 5493 Net Baence 2448 -459 4S9 2448 0 536 2984 Memo: Expenditures 13005 Plus:Tansfers to other PS 1683 Minus: Interest 2601 =Non-interes Budget 12087 26-Jan-93 a/ Includes non-tax revenues mid tax revenues. bJ Excludes transfers derived from tax rwenues (see note sO- cJ Eesmated by taking the rato of heath taxeo to social s*curity wage tax and multiplying by social security revsnuoe di These figures are derived from the Fedaraliwn report. April 1992. The total and the compoaition of provincial revenues and expenditures are those of 1990 (in parcent of total revenue). In addition, transfer from the Central Govenment to provinces in 1992 (Education and Heath) are equivlernt to a 0.75 of GDP increase in the wages bill. sJ Includes trasfers to pivato and pubic univertie. Sourcoe: lMnistr of EconomY. 1992 Budget and Rcal Accounts. January 1992. ::~~~~~~~~4 - 31 - 19. The health funds, which administer a tax on wages, are estimated to mobilize about 4.7 percent of GDP, and are the least transparent of public accounts. The funds receive some US$200 million in direct transfers from the budget to the Superintendency of Health Funds (ANSSAL), which is supposed to be sufficient to cover the deficit of the system, though it is believed that the funds are incurring arrears with their suppliers (see Chapter 5). Some portion of past arrears will be consolidated in the BOCON. 20. The provinces are coliectively the lagest net expenditure agent in the comprehensive public sector. This in itself reveals a major issue: Provinces spend 12.8 percent of GDP but themselves raise only 4.3 percent of their total required evenues The balance between federal and provincial net expenditurs (i.e., spending less revenues) is heavily weighted in favor of the provinces. Of 15 countries recently surveyed, for example, Azgentina's provincial govenunents had the lagest net expenditure and its Federal Government the largest net surplus.' This creates an incentive fbr prvinces to spend resources since they do not have to pay the political cost of raising taxes. Teasury transfers to the provinces include coparticipated revenues of 7.7 percent of GDP, which are not xecorded in the Treasury accounts, and 1.2 percent which are listed in the budget for selected programs (see Chapter 10). C. Budget Expenditures by Function: the National Administration National Buidget 21. The national budget covers about 10 percent of GDP in noninterest expenditures, about US$15 billion. The memo item in lhble 2.2 provides the statistical bridge between the comprehensive expenditure picture and the Treasury accounts in the national budget: firom the 9.1 percent in GDP in total lreasury expenditures, subtract thIe 2 percent of GDP in interest payments and then add back the transfers to the public sector of 2.7 percent of GDP shown under revenues. The Treasmry programmed noninterest expenditures of US$15 billion for 1992. 22. A disaggrgation of the national budget underscores the limited control the Federal Goverment has over spending. Of the US$15 billion in noninterest expenditures, only US$7.8 billion was spent directly by the national administration, and US$7.2 transfrred to other executing jursdictions fOIble 2.3). In other words, the national administation acually executed only 12 percent of total public sector spending in 1992. Inproving spending efficiency cannot thereore solely focus on the national admiistraion. 23. Of the US$7.8 billion in noninterest expenditures, 76 percent was spent in four areas: defnse (32 percent), economic sectors (19 percent, primarily tax collection and highway investment), the Presidency (16 percent), and social sectors (10 3 Sec Anwar Shah Perpectives on the Design of Intaegovernmental Fiscal Reations, World Bank Working Papers, July 1991, WPS 726, pp. 82-83. This survey was based on 1987 data for Argentina; the situation since then has, if anything, become more accentuated. - 32 - e percent). The Legislative and Judicial Branches absorb the remainder. The composition over the last three years has remaed relatively stable, though significant shift have occurred since the early 1980s. 24. Military spending, now about one-third of 1980-82 levels, represents an important domain for budget policy, an amount that is higher when milituy pensions of some US$900 million (shown as Treasury obligations) are included. Spending for the economic sectors, under the auspices of the Ministry of Economy, is mainly for revenue mobilization and highway expenditures. The Presidency constitutes a diverse set of activities, and because of its oversight of the nuclear power program, represents the most inestment activity of any national jurisdiction. Social sector spending is carried out through the Ministries of Health and Social Action, Education, and Labor. The largest single program is the US$900 million FONAVI housing program, an earmarked portion of the fuel tax which is transferred directly to the provinces' local housing institutes. 25. "beasury obligations" are a separate jurisdiction, though they are in fact executed through ministerial jurisdictions. Three quarters of these teasury obligations are transfers to the public enterprises and militay pensions. The rest-nearly US$900 miion-arm funds adminstered by the Treasury to improve salaries of selected labor ALble 2.3. National Budget, 1992 groups with the administration as required during the fiscal year. These are slated for phasing down as fiscal administration improves in 1993. 26. A givenjwi scdon rarely covers all expenditures in its principalfuzcton. Tne Ministry of Education, for example, is rsponsible for only about two-thirds of expenditures on education and research at the national level (lhble 24).. The table r,veals the diverse expenditures for higher education and research, evident in the proliferation of substantial expenditures for low-productivity sciendfic research. Sinilarly, the Ministry of Health and Social Action is responsible for only about three quarters of health spending. 27. On the other hand, selected ministries have spending responsibilities across several issue areas: the Presidency and the Ministry of Health and Social Acion have extremely diffuse spending authorities, with major programs in multiple areas of competence. In the case of the Presidency, these areas range from public administation to nuclear power. The Ministry of Health and Social Action spends only US$640 million of its US$1.3 billion budget on health, and the remainder is for welfare programs. Subsequent chapters of this report present the budget by jurisdiction aggregated along the broad lines in ¶ble 2A4 because jurisdictions have spending authority. . - - - - 33 - Ta 2.l Armwebw - Faedw Nan _reet Expendlbe by F _satin Grw mus WiU.o 3-FS93 Nationa Adntistratdon As peroen of- Tet TOtal Curnt Capitl Transfer Tatd Naoa Adn*dwtrsdo Leogistive nd Judidil Brmnhe 695 676 631 45 19 4.6 8.7 Sens ed Congreee 308 302 300 3 6 2.1 3.9 JuidS,y 387 374 331 42 13 2.6 4.8 Presideny m Foreign MNe 1447 1240 740 500 207 9.6 15.9 Preidency 1178 1055 514 470 123 7.8 13.8 Foreign Miisy. 269 18S 1ns 30 84 1.8 2.4 Moinvir of Ineiwr end J 951 a"4 62e B 267 6.3 8.3 Defense 2695 2470 238S Be 225 18.0 31.3 MEnist ed Joit Chief 1004 779 767 12 224 6.7 10.0 Army 743 742 734 9 0 4.9 9.S Navy 451 450 442 9 0 3.0 5.8 Ai Force 4S9 498 442 57 1 3.3 6.4 Social Setod 3310 804 704 a9 2506 22.1 10.3 Educedon el 1391 474 406 as 917 9.3 6.1 Heat 476 223 211 13 253 3.2 2.9 HOusiI di 1100 1s 19 1 1081 7.3 0.3 WelVs 141 59 42 1 8 82 0.9 0.8 Labor 202 27 27 0 174 1.3 0.4 Eoonomic Setor. 1344 1487 1173 314 357 12.3 19.1 Ta and Cu Ad _ii.traion 0867 630 6"4 16 8 4.6 8.7 Nainl Higway SYstem 321 221 Be 133 100 2.1 2.3 Awritrd of 405 294 215 7B 111 2.7 otwre 432 292 206 87 139 2.9 3.3 Treauy Obligedons ft 4068 416 416 0 3650 27.1 6.3 Saly 355 293 298 0 67 2.4 3.7 Pubic Enterprise 2100 0 0 0 2100 14.0 0.0 WMtary Pensios 897 0 0 0 817 6.0 0.0 Provine of 421 42 42 0 379 2.3 0.5 Othm 294 86 as 0 208 2.0 1.1 Tota 15009 7777 6675 1102 7232 100.0 100.0 . 'Own' spedg of namti adnisbantransfer. by sononic desiion lunisc 31. 32. end 61. b/ Tribunal de Cusses included in SemS and Congrm. c/ Incle USU724 nlre. for uvrside. di FONAVI Houing FPsd adanitradw by Minisr of Hsth d Soca Acdon. of Include MOSP expenditures n INTA. aquitwr pliy. goin stora en vai_wwy madicine fa Does nt indulde revene shai under law of oepardpau con;i_ solely of jurision 91. gl nludes id to rerra del Fuseg m,d Bue Ais and Provincia Eduosfim Fund. Source 1992 Ccnmasionll o Budget Febuay 19921) ed Ccntdurin General de la Nsoion. - 34 - Budgebty Transfers 28. JTnsfers in the Aenmtine budget4 amount to US$7.2 billion, nearly half the nonineest budget. These tansfers include US$2.1 billion for prvincial programs other than copartcition, US$2.1 billion for public enterprises, nearly US$221.0 billion for the universities and research institutes, and US$900 million for military pensions (Tble 2.5). In addition to US$10.9 billion in automatic coparticipated tax transfers, the extra-coparticipation reorces sent to the pmvinces of US$2.1 billion are transferred through 27 separate programs, ninging from the largest, FONAVI, the housing program, to the small program to help veterinary medicine. The lazest expenditures are for housing (US$900 million), aid to Buenos Aires and Tierra del Fuego (US$300 million), supplemental transfers for secondary education (US$200 million), the Tobacco Fund, benefifting primarily MLcuman, and the national highway fund (US$100 million, respectively); in addition, the Government spent US$194 million to finance the provinces through the Provincial Deficit Fund. 29. The public entepnses also receive about US$2.1 billion. In the 1992 budget, 30 percent went to the railways, 20 percent to Hidronor, and 15 percent to Yacyreta, as well as roughly 10 percent each for SEGRA, Agua y Energia, and YPF. Tmnsfers also include funds for the COVIARA housing program for the Defense Ministry and the Reinsurance Institunt (INDER). Although these transfers have risen since 1990, they are slated to be phased down t under US$400 million by 1994 (as discussed in Chapter 9). 30. Higher Educaton and Research accounts for another US$900 million in tansfers. About US$800 million is to support the tuition-free public universities, and another US$100 million is to support the technology instiutes (CONOCIT) in the Presidency. 31. Finally, the Tleasury supports pensions and heakh sysems though tanse to the respective social security systems of the militauy, coast guard, and police for Tbe obras sociales receive US$211 million through the national health regulatory agency (the ANSSAL). 4 Tnsfers sbhown under line 31-32 of the ntional budget which are di.inct from the coecept of transfers in the fiscal accounts (Savings-Investment Accounts). lhe 1nr includes coparticipated revenues not included in the budget; transfers to public enterprises, provinces (other than coparticipation), universities, and militezy pensions are common to both; while sweval less - -mpo-tnt tanusfers are included only in the budget. - 35 - T 24: Argen - Evpentws by Jwdl_ md mg _m 1132 lug$ . n@ 9-Fab-93 Adrmretradon Defen. Sowity Halth Welu Edwation Ecoande Total & Rmere I Devprmmrt Legsiature nd Judiay 64 0 0 1I a 20 0 695 SenateindCornomrs 211 0 0 16 a 20 0 308 Jucdoiwy 387 0 0 0 0 0 0 317 Prsidency mid Foreign hInisy 513 0 0 0 7 248 679 1447 Pra.ldenoybi 244 0 0 0 7 248 673 1178 Foreign Mkhsvy 269 0 0 0 0 0 0 269 Raw. ef tuikr _J Justoe u/ 320 0 571 2 5 0 0 951 Defers S I616 476 39 215 39 303 26e6 Mlnisy di 0 114 476 0 211 14 132 1000 Ann 6 729 0 3 0 5 0 743 Navy 0 383 0 24 0 a 35 451 Ai Forc 0 388 0 12 0 13 of 499 Joint Chie 0 3 0 0 0 0 0 3 Soid Setor Miberies 0 0 0 534 1433 1343 0 3311 Education l 0 0 0 48 0 1343 0 1391 Hdth nd Sold Aodon 0 0 0 485 1232 1 0 1719 Hulthf U 0 0 0 485 0 1 0 486 Socia lAfcn 0 0 0 0 132 0 0 132 Houminga) 0 0 0 0 1100 0 0 1100 LaborandSoiuSaSouty 0 0 0 0 202 0 0 202 Ecenome Sector 712 0 0 23 0 134 o96 1344 Tax cedCu.tmmAdn. 687 0 a 0 0 0 0 6s7 Natdonsa Ighway Syatwn 0 0 0 0 0 325 325 Othar mh 24 0 0 29 0 134 44 332 Tremuuy Obllgtmi 548 1t 120 22 i27 254 2176 4066 Saly Enhnoinmnts i/ 64 18 120 22 7 2 131 355 Public Etbqriaemif 55 0 0 0 0 0 2045 2100 Mi.tmyPanewic 0 0 0 0 337 0 0 897 Provicee 133 0 0 0 0 0 0 183 Othuw rk 257 0 0 0 24 251 0 532 Total 2752 1635 les 641 267 2039 4128 1S010 e/ Groupings baed on govmnrent cateoorms. excpt Eduonin A Reerck whih onsab of edtuetimn; and 'a once & toohcdegy. fnaided 8. hi Expendtures in educain & rsowch we CONICET *nd CNEA rssech prcgraw thce in eowemnonb devWopnint we in CNEA prjeos. of Reular erd Federa PeEoe foro. df Sorky expand. we th Nation end Coat Guwd.: oon. dew. pogren we Fdhioekdmmi *6tm.s welfwe is tho Nadonl mid Coet Gumd pensions. al Expendture me prknwly transfe to uiversiti end hh scboob. V Expendures for ANSSAL and genera health ows. gl Coits of three pinmm hosing projects FONAVI. Word Bw. a*nd Urban DCvoel ent h4 E _pediur in vaiou progn.m. pnnoipay the Tobaeco Fund, FEDS, aran te pg PnTA, end wtsie medicdne. iTr s fe fOm the Treaury to govnwuwrit agnces nd ministries. it Primnaly ons of trafes to Reasro. Ycpyrntb YPF, nd othar enwy sekr entpries. Wi Adminirtrdvs ependitur inchdn tnansfe to intent ionaly *ewiaties education expand, b reser aocunt fwr senodAry education. Sours 1992 Congreasmonl1yproved Budet IFebruay 1932 *nd Contedum Geral de Is Naeon - 36 - Tab 2.: Tenef sfrom to 1992 Budget CUSS mnIllions) 9-Feb-93 Total Provinces Public Educaden Obram Pensiorm Other Enterprises & Research Sociales Legllatlva andJudoiil Branches 19 0 0 0 0 13 a Senate and Congress a 6 0 0 0 0 0 6 Judiciary Panslons 13 0 0 0 0 13 0 Preldency and Foraign Min;stry 205 4 0 111 0 2 89 Preeidency b/ 121 4 0 111 0 0 6 Foroign NUrietycl 84 0 0 0 0 2 .2 Ministries of Interior and Justic d/ 255 194 0 0 0 55 17 Dsfense 225 0 0 0 5 212 7 Aniszuy of Defenso a/ 224 0 0 0 5 212 7 Army b O O O o o o Navy 0 0 0 0 0 0 0 AirFore 1 0 0 0 0 0 0 SodialSectors 2502 1229 0 838 211 174 SO Education fl 917 SB 0 838 0 0 ;3 Health g/ 269 24 0 0 211 0 35 Ht-using hi 1081 1081 0 0 0 0 0 Welfare 51 0 0 0 0 3 Laboriu 174 0 0 0 0 174 0 Economic Sectors 363 318 0 29 8 0 8 Tobacco Fund 102 102 0 0 0 0 0 National Highway Board IDNV) 100 100 0 0 0 0 0 Others 161 116 0 29 8 0 8 Troesury Obligations 3650 379 2103 0 0 897 272 Salary Enhancnments jl 184 0 0 0 0 0 184 Public Enterprises 2103 0 2103 0 0 0 0 Miritary and Porice Pensions (IAF) 897 0 0 0 0 897 0 Provinces kl 379 379 0 0 0 0 0 Pivate Sector Grants 4 0 0 0 0 0 4 Foraign Transforsa 84 0 0 0 0 0 84 Total 7231 2125 2103 978 224 1352 449 at Includes Tfibunal de Cuentas. b/ Consists primarily of grants and scholarships to research institutes and individuals from CONICET. c/ Aid to bordering countries. d/ Transfar to provinces is the ATN Provincial Defict Fund. e/ Coast Guard and National Guard Pensions. f/ Includes grants to univershies. gl Includes ANSSAL. hN Includes FONAVI. i/ Non-contributory pension system; includes old-age pension., veterans of the Malvinas, and Congressional pensions. j/ Includes Treasry progrnnn 112, 114, and 181. Ic Includee program fcr Tiarra del Fuego and Buenos Aires and Provincial Education Fund. 1 Payments for dues 25 gervices to international organizatons. Source: 1992 Congressionally-approved Budget (February 19921 and Contaduris General de la Nacron. Q;. - 37 - CHAPIER 3. FEDERAL REVENUES AND TAX POLICY 1. In general terms, a tax system should be administratively efficient, equitable, neubal on prices and on the cost of the factors of production, and flexible with respect to macroeconomic and expenditures policies. Over the last three years, the Menem Administration has increased tax collection significantly by improving the efficiency of the tax administration and by enacting some important tax policy changes such as the extension of the VAT to almost all goods and services. By broadening the base of the efficient taxes, policy changes in the last 36 months have increased revenues and made the system more efficient and economically neutral. 2. However. there is still room to improve the present tax system with regard W the equity, neutrality, and flexibility objectives. Direct taxes are almost non- existent in Argentina and labor effectively is taxed more heavily than capital. The revenue system is also inflexible because of severe constraints associated with eanrarirng- The August 1992 proposal to finance the social security system with a higber share of co-participated revenues will partially address the neutrality problem. A. Revenue Problems Hlistorical Performance 3. Over the last two decades, the tax system has performed poorly. The ratio of tax receipts to GDP between 1970 and 1991 varied widely (see lhble 2.7 of the Statistical Appendix). lbx collection virtually collapsed in 1975, but revenues steadily recovered in the ensuing years. Buoyed by a series of reform measures, they reached 18 percent of GDP in 1980. Mix revenues deteriorated markedly during the Alfonsin Administration, except during 1985 and 1986. Alx reform was an integral part of the Austrol Plan, initiated in June 1985. The anti-evasion powers of DGI were increased and VAX rates were unified at 18 percent; however, on balance, the refbnn was unsuccessful and improvements, proved to be transitory, resulting more from price staoility than from improved policy and administration. The fragmentation of the tax system was not reduced, and revenues continued to erode due to fiscal incentives and evasion. In 1989, as a result of two hyperinflations, lax evenues reached an unprecedented low level (12.7 percent of GDP). Since the beginning of the Menem Administration, tax revenues have increased s;gnificantly and are expected to be as high as 22.5 percent of GDP in 1992. 4. Tnree prominent features of Aentina's tax system chaacterzed the 1980s. First, tax revenues showed a secular tendency to a11 after 1981. Second, collections becane increasingly volatile (especially quarterly). During the 1980-89 period, the ratio of txes to GDP varied between a low of 12.7 percent in 1989 and a high of 18.7 percent in 1980. The tax system also becaman progressively more inefficient as the share of efficier-t taxes in total revues decreased. Several factors explain this volaility and deteriorating efficiency. - 38 - 5. Unstble NMacronomk Evirnment. Changes in macroeconomic conditions have affected tax revenues in Argentina through at least two channels. First, variations in GDP have afecd tax eceipts thugh changes in the taable base. In the 1980s, real economic gth avermged only 0.78 percent, thexeby depressing significantly VAT revenues. Second, tax revenues were affected by inflat'orqy volatility through the Olivema-lmzi effect. Duting the 1980s, the estimated loss of tax mvenues due t this effect was over I percent of GDP and about 2 percent of GDP in 1988. Overall, the performance of the tax system has been systematically stronger during periods of macroeconomic stability. 6. Mm Micy and Unstable Legal Fanmework. The poor performance of efficient taxes compelled the Govermnent to xely increasingly on easily attained evenues. The result was the composition of wevenues progressively shifted from modem taxes t inefficient but easily coliectable ones (tax hanl's in Figure 3.1). Modern taxs include income taxes, social security contributions, the VAT, and wealth taxes.' The contribution of tax handles to fiscal revenues inreased significantly during the second part of tie 1980s and reached 4.4 percent of GDP- in 1990. Revenues from both efficient taxes and tax handles are nestively correlated oiver the entir pernnd. Mm handles were usually established for a limited time by the legislature and their yield Flgure 3.- Argentina Tax Rurusa of National Administration (1970-) 14| 12 la OMl I 34 ON 15 ON IOU 3" 1338 36" 10 _ Elfioot Ta e Tax Hsadla 1 Modem taxs satisfy4 thce- basic conditions: (i) genealimd applicatioa on solid economic runds; () th existence of a cugret account in their adminisattion-sincc there is a separation betwe the tax miuc - and tax payments; and (iii) the daeegation of important administmtive dutiP4 to the tax- pyeriuhinself or to thind parties economically involved with the btxp-r. Tax bandie-. althoughreativldy easy to admster, arc not general txs and typically are not economicaly sound. Hawer, they shae with modem taxes condition (iii), since most of the adm-=at.ie work is prtmed by the txyer - 39 - quickly diminished as txayers devised scbemes to avoWd them. Indeed, the extensive use of tax handles may have contributed to greater variability in revenues. Their diminishing returns, coupled with legislative hiatuses between approval of new handles, resulted in sudden revenue loss and equally sudden increases, complicating the task of both tax administraon and policymakers. Moreover, tax handles tended to reduce the equity of the tax system. The burden of taxation tended to fAll disproportionately on those of medium and low incomes because these individuals are less able to avoid paying these taxes. 7. Mix Loopholes. The expansion of tax expenditures and the associated opportunities for tax -evasion were the most important reasons for the deterioration of the efficient taxes. For example, industrial promotion laws were developed as a result of piecemeal legslaion dating as far back as the 1960s; however, these laws were substantially expanded by the end of the 1970s. At the end of 1987, virtually all investment activity was subsidied to some extent (the only exception being in the federal capital). The fiscal cost of the national and regional promotion schemes as well as the scheme for Tierma del Fuego was estimated at about 1.5 percnt of GDP in 1989. Those economic actors who ended up being fully taxed were discouraged from economic activity by the relatively higher tax burden imposed on them to compensate for the revenue lost through evasion. Some of the deficiencies were attributable to the tax laws; but by far the laest inequities arose from an uneven compliance with the laws that was not effectively countered by the tax adminison. Non-compliance led to serious inequities because those who got away without paying tax were treated beneficial I comuared with those taxpayers who, for whatever reason, ended up paying the full amount of tax due. 8. hkx Adminirtion Performance. Poor performance of the tax administrtion during these years was centrl to the erosion of tax revenues and gave rise to rampant evasion. bx administaion in Argentina was chaotic and reflexive instead of intentional and remedial. Attempts to compensate for public rewvenue shortfalls by changin the tx laws reated- an unstable legal-fiamiework that resulted in an unmanageable and inequitable tax system. The constant battle-with inatation induced a short-term aach to the administation of tax collecfion, with little attention to accuracy of compliance or implementation of remedies needed to produce an efficient tax adminsttion in tie log term. In addition to the Olivera-Tlnzi effect, high and volatile inflation greatly complicated tax administation. The excessive figmentation of the tax system, riability in legislation, and the complex, confused, and at times contradictory laws and regulations produced a legal framework difficult to enforce. Mx administation and loopholes are discussed in Chapter 4, while the remainder of this chapter focuses on the tax policy framework--its efficiency, equity, flexibility, and neutality. -40 - & Tasx Noicy: lbward Greater Efficiency 9. The Menem Administrafion, through several decrees, molutions, and regulations,2 has markedly strengthened the major efficient maxes. These included: the broadening of the VAT7 base at a uniform rate, the elimination of minor taxes, and the enactment of the gross-assets tax as a minimum income tax. While the broad thrust of tax policy has been to improve revenues and the system's efficiency, other legislation coded the income tax (repeal of capital gains, enactnent of investnent expensing) and, in some cases, tax policy has been inconsistent (repeal of net wealth tax and subsequent enactment of the tax on personal goods). Value-Added Tax 10. Th-e major achievement of tax reform legislation under the Menem Administation was broadening the base of the value-added tax. fx refonn legislation and imprvements in tax administation resulted in a significant increase in VAT collections over the last 3 years. Under the Menem Administration, VAT receipts inceased from 9.1 percent of GDP in the second quaner of 1989 to 6.6 percent of GDP in the fourth quarter of 1992 (Figu 3.2). While part of this increase is due to an improvement in macroeconomic conditions, the important effort in tax administration and tax legislation has contributed to this evolution. On average, only about 30 percent of the increase in VAT revenues is explained by the decline in inflation through the Olivera-bnzi effect.3 11. These imprveents occurred in stages, beginning with Congressional passage of the general VAT reform in December 1989. In Febnrary 1990, the VAT was implemented on goods, and the rate was reduced to 13 percent. Also, the regime for smaUl taxpayers was changed, establishing the concept of non-registred responsible persons, sales to whom were taxable at a higher rate! As part of the Industrial Promotion Regime (see Chapter 3), suppliers from prmoted fims continued to be exempt from the VA. In April 1990, this exemption regime was suspended, thereby contributing to the increase in VAT rvenues. In September 1990, the base of the VAT was broadened to include most services. (Peviously, the VAT had been applicable only to those services specificaly listed in the law; the new law contained few exemptiona) In Febnuary 1991, the general VAT mrte increased from 15.6 to 16 percent; a year later it was increased to 18 percent. In the case of sales of gas, electricity, water, and other public utilities (except sales to residences), when the purchaser is registered the rate of tax is 25 percent. An 11 percent rate applies to -the provision of telephone services to final consumers. Fnaily, in March 1992, the general VAT rate was increased from 16 to 18 percent- 2 The rumber of laws, decrees, and resolutions was 15, 36 and 3, respectively, in 1989, and 7, 53 and 33 in 1990. 3 See Annex 4.1. 4 Law 23,760 established a tax on finaneial services, based on value added calculated under the addition medhod. Wbile this is not brmally part of the VAI, it fulfills the functional role of ixaing value added of the financial sectr. d,- - - 41 - Fg. 3.2: VAT Revene Fig. 3.3: Trade Tax Revnus (1988-I-1991-IV) (1988-I-1991-IV) paint at GOP 2 4~ ~~ w 2 - _ _ I a~~~~~~~~~~~~~s mU Ahimuam ~~~Tnidm baa g 3.4: Excise and Fuel Tax Revenues Fig. 3.5: Income Tax Rwemuea (1988-i-1991-IV) (1988-1-1991-N) po f GOP qm etof a(lo . 1 2 as Sal 3mW lii sui a. _0hE SUE sit _ -, su t sia iOgi Mmiii sA u l - ~m Thu Ruamm - I"bau ba RaiimI -42 - 12. lb improve the efficiency of the tax administion, all registered value- added taxpayers are now required to file monthly returns, and the administration of the tax is to become fuUly automated to handle the extra volume of retums. Payment can now be made through the banks. The fiscal reform package of mid-Febuary 1990 required VAT and income-tax payments to be made within 10 days to reduce the collection lag; the Government also instituted an indexaion sysem, under which taxes due would be adjusted on a daily basis for estimated current inflation. In addition, the DG!,7 has made progress in improving its filing system for the country's major VAT payers. In 1991, much was done to improve tax administration and the yield of the value-added tax began to approach its full potential. In March 1992, the VAT monthly collection reached its highest level ever, about US$880 million. The intoduction of a new billing system in January 1992 was largely wsponsible for this increase since the monthly impact of this new system is estimated at about US$100 million. Trade ¶1xe 13. Agentina mostly exports commodities and imports non-competng intermedie and capital goods. The trade resime reflected an extreme overall anti- export bias. The Government made considerable progress m liberalizin trade since the change of government in July 1989. Substantial reductions in import tariff rates and in their dispersion implemented in late 1989 and early 1990 have greatly abetted the Government's medium-term goal of a tariff structure with only ree to four mtes, rangig from 10-20 percent. In Febiuary 1991, the ariff band was reduced further to 0-22 percent, it was announced that specific duties would be converned to ad wlorem tariffs, and the number of ariff tes was reduced to three (0, 1 1, and 22 percent). In October 19911 the statistical t'x on exports was eliminated and import tuxes were sightly mcreased to offset the negative impact of these measures on fiscal revenues. The average tax rate on imports probably increased about 2 percent5 Fmally, in November 1992, the Government modified its commercial policy. On the export side, these measures consisted of an increase in the tax rebates for export activities from an average of 8 percent to 13 percent and the elimination of the remaining retentions on some agricultural products. On the import side, tax rates-including that so-called statistical tax-were increased from an average of 17 percent to 13 percent. 5 Although the ates of import taxes daelid dramatically during the last Sur years it is not cear whether the effective mate of potection declined as well. The effective rate of VAT on imported goods is much higher than on domestic goods because tax evasion is less pnvalenL j,, -- , ......................, -,..,L. -43 - - Table 3.1: Tra Tax.. (in p5utt of MP) Export TaX l1rt Tax Statitic.Li Tax Total IfB o0.24 1_04 0.2 1.4a 19P 1." 0.35 0.3 2.49 19O 1-35 031 0.42 2.0O 1991 - 0. 0.41 0.41 1.02 1992 0.00 0.94 030 1.24 Snuce: vewst of Argatin". i4. As a rut of tde trade liberalization policies, export tax revenues declined over the 1985-90 period. While the ratio of export tax rvenues to GDP was about 2.2 percent in 1985, it was estimated a only 0.2 percent in 1991 and almost 0 percent in 1992. Import revenues also declined during the 1988-90 year as import duties we prrssively nduced, and import levels were historically low. Since the end of 1990, import tax rvenues incased fim 0.27 percent of GDP in the first quarter of 1991 to I percent in the thin! quarter of 1992. This increase can be explained by the boom in imports resulting from the macreconomic policies, the recent raises in inport tariffs (see aDove), and the imp nt in customs adminstation (see Chapter 4). Eeg, Excise and Mbiellanou mes 15. Under pressure to incease vnues, the Menem Administration relied on several excises and ad hoc xs in 1989 and 1990. lxation on energy-related products has become progessively momn important (see Figure 3.4) and contributed to distortions in relatve prices. Rather than being linkd to international prices, or to marginal cost, energy prices are set by the Govenment in ways that attempt to accommodate conlicting pnonties of different sectors and special intest groups, as well as a variety of macroeconomic objectives.' The gasoline tax rate incrased to 33 percent in ebruary 1991 and the revenues coflected frm the fuel lax increased from 0.4 percent of GDP in the second quartr of 1989 to 2.7 percent in the third quarter of 1991. Also, a one-time tax kwwn as the solidarity contribution and an emergency tax on the ownership F automobiles, yachts, and aiplanes were establisbed in October 1989, as well as an emergenc tax on the profits of finacial entities. In January 1990, the Government fixed the tax on bank debits (i.e., bank checks and similar tansfers) at 3 per mil, effecfive as of January 1, 1990. In Febuary 1991, the rate of the tax on debits was raised to 12 per mil, with 9 points of the tax being creditable against the txayers income tax and VAT liability (al against each).? However, in Febnry 6 For a deatiled disumion on enery taxs in Arentina, sa 'ArgentinE Tax Pblicy Stbiliztion and Economic Recovcry £ WId Bank County Study, 1990. 7 Sec Law 23,995 (publisebod Fc& 18, 1991), aL 1. Under Law 23,549 ('Ix on Bank Debits), which had been in ffect tdough 1989, 70 pet of the tax bud been creditable against the income tax. -44 - 1992, the rate was reduced to 3 per mil, with no portion being creditable against another tax. 16. The recent improvement in VAT collection permitted the elimination of some excise xs. Decree No. 2284/91, which dealt with deregulation of the economy, rpealed the Uxes on tansfers of equity s and debt 9 instruments. It exempted the issuance of certain securities from the stamp tax. It also repealed a number of misceflaneous taxes on specific products, the proceeds of which were designated for dealing with trade regulation and promotion. The progrssive elimination of ineficient taxes, such as debits and stamp taxes, is closely related to the performance of efficient taxes. If revenues of direct taxes grow satisfactorily, then inefficient taxes can be reduced further, otherwise pressure to keep the deficit low will undoubtedly lead to the retention of inefficient taxes. Dired Taes 17. Further improvement in the tax system in Argentina is closely related to the futue performance of dirct taxes. Argentina relies on direct taxation much less than other countries. Revenues collected from income taxes declined from 1.9 percent of GDP in 1987 to 0.8 percent of GDP in 1991. In countries with a comparable per capita income level, the averag income tax to GDP ratio was about 8.1 percent. In contast, Argentina re'ies more than countries of sindiar income levels on direct taxes on wages and salaries to finance social security funds. Specific recommendations are advanced below. 18. Part of this performance was attributable to poor administraion. As an illustration, between 1975 and 1986, only about 17 percent of potential taxpayers were known to the tax administation; only 8 percent bother to file a tax return; and less than 4 percent pay income tax.'0 in addition, the tax was poorly designed with improper indexing of loss carry-forwards, numerous exceptions, and the effective exemption of virtually all capital income and most labor income. 19. Over the last two years, the Government has implemented several measures to modify direct taxes. The tax reform legislation created a new tax on business assets and eliminated the taxes on company net worth, personal wealth, and capital gains-all of which were administratively costly and lpw yielding. In addition, the tax reform legislation made several changes to the personal and corporate tax laws. In Rfbruary 1990, income taxes on corporations were lowered to 20 percent from 33 percent, with a uminim tax payment of 1 percent of assets; income taxes on individuals were simplified to a new 10-30 percent rate with 5 brackets, with a withholding tax for wage eaamers. Finally, the February 1991 package raised the assets 8 Impuest Sobr las Vontas Compras, Cambio, o Nrmuta de Divisas 9 Impuest a la Tmsfamnia de Titulos Valores. '10 -S-. Agcufina: x Nhliy fbr Stahiinion and Economic Recoveiy," a World Bank Coxmtiy Study, 1990- -45 - tax frnm 1 to 2 percent for one year, and widened the income tax base by suspending loss carry-avers from the 1988-89 period. 20. In spite of all these efforts, the income tax remained clearly unsatisfctory. Under these circumstances, the Government modified the legislation on income tax in April 1992 to include the following changes: (i) an increase in the rate of the corporate income tax from 20 to 30 percent; (ii) the replacement of accumulated loss cary-overs through March 1991 by a bond exchange program; and (iii) a widening of the tax base on personal wealth to include foreign assets holdings. 21. These measures are likely to have a positive impact on ta- revenues in 1993. Official projections estimate that income tax receipts may reach 3.n percent of GDP in 1993 in comparison to 1.8 percent of GDP in 1992. However, this figure is relatively sensitive to changes in several factors. First, it is difficult to determine foreign asset holdings by Argentine residents even though the DGI has launched an aggrssive campaign over the last few months. Second, this projection does not account for provisions on the future debt service of the new bond (BOCON) that will be issued to settle the problem of loss carry-ovens. The BOCON would be peso-denominated, with 16 years maturity and 6 years' grace on capital and interest, and would carry the savings deposit rate of interest. Ihe total amount of BOCON is estimated at US$2.4 billion and Drovisioning could reach 0.3-0.5 percent of GDP in 1993. C Remaining lssues 22. The Government has made major advances in reforming the tax system. Important outcomes have been improved revenue mobilization and greater revenue efficiency. The Govermnent can now turn its attention to second-order issues: tax system progressivity, neutrality, and flexibility The Progressivity of the TAx System 23. The decline in the share of direct taxes in total revenues has adversely affected fiie progressivity of the tax system with rpect to income." While in 1970 the income tax represented 15 percent of total revenues, its share declined to 4 percent in 1991. Although some recent empirical studies have stressed that direct axes are not as progrsive as potentially expected because higher-income individuals are better able to evade direct taxation than low- and middle-income individuals, income taxes are still a major source of progrssivity of the tax system in the long run. 24. While in some cases trade taxes and VAT systems are progressive, this is debatab!e for Argentina. Assuming that the share of imported goods is more important for the highest income households, these as may contain an element of progressivity. Howevr, in the case of Agentina, imports are less than 6 percent of 11 We ale mninly concerned with the vertical :quity of the tax system, or how to tax individuals who differ in their level of incomen The question of what tax produces horizontal equity is difficult to answer. One could potentially suggest several pactical bases for taxation-income. consumption, wages, and wealth. -46 - GDP and, above all, tWade taxes have declined drmatically since 1988. Consumption is mainly composed of domestic products and, in this case, indirect taxes such as the VAT are clearly regressive with respect to income.'2 The VAT r.e increased substantially over the last two years, which bad a negative impact on the equity of the tax system. 25. There are several ways of making the tax syslem mozv progrmssive. One is to reduce the regressiity of the VAT by exempting the VAT tax base goods on which low-inoome individuals spend heavily. This approach has two major drawbacks--it would distort consumption choices and induce administtive inefficiency and it would reduce tax revenues if this measure is not offset by an increase in the VAT ate. A second method is to allow a credit against income taxes, prsumably primuily ffr low- income individuals. This method would complicate tax adminitaton. None of these options contmplate transfming the VAT into a tax like the individual income tax, which is pmgressive at the upper level of the income distribution. Therefore, the major recommendation of the rport is to 4engtien mather tan reduce the personal icome tax (see recommendations for details). The Neutralt of the 1Mi System 26. An additional remaining weakness of the tax system is its bias against labor relative to capital. While labor is heavily taxed, Stxes on capital are extremely low. 27. Mmz on labor. Wage tas represent nearly 50 percent of gross salary in Aretina Pension insurance is supported by a 26 percent tax on wages; health insurance by a 14 percent lax; and the Family Fund receives 9 percent (M7ble 3.2). 28. While social security contributions are not extremely high by international standards, payroll taxes linked to Health Insurance and the Family Fund are higher than in all developed countries (see lible 3.3). - :12 Se. :: -.A seming a Mug-AddeGd Efficieny md Equity,. 1 Gnee Tax Nots, Mh 1l98, br an illustmdvr =1arc0& A - : - : -47 - Table 3.2: Wage Taxes Cin percent of grass saLary) Eqt,yers Empteyees Totat Pawimn Insarnce 16.0 10 26.0 Payroll Taes 17.9 6 23.9 Health Insurance for: Peisiaers 2.0 3 5.0 Active Wrkemrs . 6.9 3 9.9 Family Fumd 7.5 - 7.5 Hoing Fwd b, - - Umlqo,int Iutnce. 1.5 - 1.5 Totat 33.9 16 49.9 31 Includs 0.9 pacent cotrilbtion for the adiinistration of hbelth inuiwne institutienc. b thtit ltate 1991. -Ltyers paid 11 percent for pemian insurnce ad 5 percent for the Housing Furd. Law Z3966 raisud the usicn cantribation by 5 percet id eliminated U,. usg tax fer the amsing Fuid. Source: Gove6nmet of Aratina; gank staff. Tabe 33: Payroll Taxes ard Sociat Security Paynts: An Internatiant Crisan (in percwet af gross wages) Sociat Security Country ayrotll Taxe &ptavers Epitayee TotaL Argentina 23.9 16b0 10.0 49.9 Austria 5.0 222 15_4 42Z6 France 7.1 46.4 13.9 67_4 Gervy - 18.8 17.3 36.1 LadsMg 0B 19.6 12.1 32.5 samn 5.8 30.5 - 36.3 1K 1.4 10.5 9.0 26-9 tSA - 16.0 6.7 22.7 Source: G 1MC6) ard staff estimatos. 29. However, a narw focus on social security contributions and payroll taxes overlook the faCt that indivdalW tax mtes act together to influence prive decisions so that gauging the effect of aes on incentives means understanding their inoemcton. The typical argument for Argentina is that high payroll taxes are offset by low direct taxes. For employment decisions, one must distinguish between the taxes that a finn or household pays and the totality of tax payments that would apply tD incremental employment for an extra job or an exta hour. 30. The impact of the tax system on the labor cost is generally measured by the effective rate of taxaion on labor use." This Me is defined as the difference between gross labor cost to the employer and wages net of taxes available to the worker. 13 For a description see Marginal lix Rates on the Use of Labor and Capital in OECD Countries.' by M. McKee, I Visser and P. Saunders, OECD EAonomic Svidir, Autumn 1986. - 48 - The advantage of this measure is that the impact of wage taxes is taken into account together with other direct and indirect taxes. The avenge effective mate of labor taxation appears much higher in Argentina than in most industrial countries (see ¶Lble 3.4). Table 3.4: The Effective Rate of Taxation on Labor Use Cwitry Rate ai Ar.entina 63.5 Austria 424 France 51.7 Geruan 41.3 Luxembsg 42.1 UN 42.7 USA 34.8 Total Meighted Average MEM Europe 46.3 MEM Non-Europe 33.5 (EU) ~~~~~~~43-3 M The effective rate of taxltion on labor (ERTL) is defined as: ERTL = 1 - 11 t, - t tJ/[CI * t)1 + ti, t0) where t,. ad are epLoyees' a eqtoyers sociat security certribution rates, t, is the payroLt tax, t, is the personaL iniem tax rate, ad t is the rate of indirect taxation. This catcutation used the foltauing tax rates: t, = 6.10; t = 0.30; l = 6 16; t. = 0.239; and tX = 0.116. Source: CE (1986) and Bank staff estimtes. 31. The taxation of labor is relatively high in Argentina because of payroll taxes. In addition, the high indirect tax ntes also contribute to the taxation of labor. In fact, an increase in indirect taxes may affect negatively the supply of labor because households will have less incentive to consume. Real wages may be bid up, thereby reducing the incentives for firms to hire additional workers. The effective rate of taxation is certainly overestimated in the case of Argentina since tax evasion lowers the effective avenage income tax mte relative to the legal tax iate used in the calculation. If the income tax rte were 0, the effective taxation of labor would be equal to 42.3. In such a case, the taxation of labor would not be higher than in most industrial countries-but the progressivity of the tax system would be fully eliminated. This suggests that an incrase in income taxes should be compensated by a reduction in wage taxes; otherwise the cost of labor would incrase dramatically. 32. Mix on Capital. The tax rate on capital use is extrmely low in Argentina.'4 This can be illusated by the following example. Since October 1990, 14 Measuring the tax rafe on capital use is in all iances extcemely complex. The tax code is such that the tax rate differs according to the asset and industy composition of inestment, the iorm of finance used.for the project, and whether fuids are obtained directly from households or channelle through a financial intemediary. xncy, the key is pennitting individual incentives and eliminating the role of the state in construction. Local government could be responsible for beneficiary selection and private banks could take over the management of loans. Instead of actally disbursing loans, FONAVI could make up the difference between the market rate of interest and the subsidized rate it desires. Finaly, if the individual is allowed to select his/her own housnmg from the marketplace, this would lead to a reduction in costs. It is believed that these measures would lead to a 50 percent savings of resurces, which would allow the plan to broaden its scope. Tax RebateA 14. A program that has enjoyed widespread use since the beginning of the 1970s is the return of state taxes to contractors and suppliers that worked on projects considered in the natonal inst, or which participated in international bidding. The terms of eligibility were quite specific and focus on the level of domestic content. These expenditures were practically eliminated after 1989. - 215 - ANNIEx LL TubLe £1.1 .3: FcOAvi - WoLETED HOIWO -n Loh EECWVERy CUSSf Lilie OI Loon Recoverv lIaiing Cost per FOBAVI In Z of FOUKVI tUnits Unit Year Sources us3 Souress Knvestmmntm Ceimteted hi (MS thousends) 197 681.1 --618.9 11585 53.4 1979 761.3 0.8 0.1 558.6 16086 34.7 1960 790.2 8.4 1.1 578.6 31506 18.4 1981 458.6 13.7 3.0 597.1 27130 22.0 1982 579.3 11.1 1.9 540.1 34636 15.6 1983 550.1 5.5 1.0 506.6 39516 12.8 1984 458.7 3.5 0.8 400.1 20371 19.6 1985 583.2 2.7 0.5 396.3 2016 19.5 1986 890.0 8.7 1.0 525.1 21134 27.7 1987 Sf 823.4 8.0 1.0 953.7 36223 26.5 Average 657.6 6.2 .95 564.0 25750 21.9 Torta 6576.4 62.4 .95 564.1 257502 21.9 /f Official exchange rate. hi FONAVI cons'tructs aLlf tfmi ly pubLic housing. SI As of Movember 30. Source: Secretary of NLcting, Inforetion mat tetin. Promissory Notes 15. Another popular mechanism is the use of guarantees and Treasury endorsments to ffuciltat th aces of Argentin businesse into private or international capital markets. Eligi-ble industries include those in the special tax rebate sectors and public enterprises (which were given special political csieaon. As a resul of mismnageentand moral hazard on the part of tue participants, a larg proportion of the guarantees were funded directly via Treasury resource (see Table A1. 1.5). law 23,659 was enacted in 1988 in response to expressly prohibit the granting of these notes by executive decree. -216- AM= Li Table A1.1.4: FICAL EXPBIDNTUIE 0 TUE IUTE OF TAXES FOR SPECIFIC EATIaOIL PROJECTS CUSS miifons) j/ ef It 1964 1983 19m 1967 1963 196f Certificates of tax rtata issued by the Nati0nal Treasury Z4.4 3.0 3.6 14.0 16.0 1.0 VAT CIVA) Reates 24.0 2.7 2.7 13.6 15.0 1.2 Draw Back (By the Treasury) SI - 3.9 9.2 8.6 4.5 0.4 TotaL MA 2i 5m MA I 2A / Officiat exchne rate. y/ 19g9 rebates were caleulated until Septwber, at Shich tim they' Limilted. if A restricted form of lrport tax reates Cdlacused In the next setion). Source: Staff estimtes. TabLe 1.1.5: PRONISSRY NOTES GRhTED TO PRIVATE IMESIETS AND CHARuGD Ta TOE REASIr CUSS milifon) V Notes Granted Etn Charged hi Activities 1976-US 195 1956 197 1993 1989 1990 1991 Celluloid and Papr 1481.6 41.2 45.3 49.4 Shipping 371.9 15.8 5.6 1.9 23.4 1.6 - ChemicatiPetracmemcal 490.7 15.4 4.6 1.7 - steelworks/Netalturgy 355.2 2.4 3.5 2.5 0.2 - - Fishery 76.4 - 1.2 - - Refrigeration 74.2 - 1.7 2.3 - - - Others 217.7 22.1 0.9 11.0 0.2 .otat16L1 IL 9A Hi ZL 1.6 -- g In constant US dol lar--deflated via US GDP deflator. f Law 23,669 in 1968 retricted executive power to grant endorsmnts. Source: Ninistry of Economy. - - 217 - ANNEX . 16. It is uncetain whet the overall decline in expenditures during 1985-89 has resuted due to a drop in patcpaton, new (and stricter) definitons of eigibility, changes in Argentine debt sevicing policy, different methods of fnancing, or the impact of inflatiDn. C. Tax Exemptons, Tariff Incentives and Developmeint Regimes 17. Until 1990, Argentina had simultaneously engaged in import substitution and eWrt promotion to incrase its industrial base. Juport Inetves 18. A method does not exist to disageethe various contributions of protecdonist concepts, but an overall estmate is given in Table A1.1.6. In addition, the level ofprotection becomes higher when one considers the arduous bureaucratic barers, which are impossible to measume. Tabte A1.1.6: 1998 IMPORT EXEMPTIONS CUSS millions) 1988 1989 1990 Via tariffs 620.0 585.1 57.5 Latin Aimrican Intgratiofn Assoiation (AUDI) 356.0 276.9 384.5 Tierra del Fuago 280.9 290.7 280.9 induLtrial Promotion 334.5 267.6 208.7 Tporary Exeaption 191.0 229.0 279.8 StewluorBcs 413.6 305.0 295.9 Other 195.4 151.2 197.1 Total empti 2391.3 2105.5 1704.4 Total Imports frm these Sectors 5322.0 403.2 4079.0 * Exytions as a percentage of imports U.9 50.1 41.8 Source: Ministry of Economy. 19. This sort of protection supported industries which are not disciplined by the ngors of internatonal competition and can therefore lead to inefficiency. Moreover, while the openig of certin domestic markets to ALADI imports has the potental to be beneficial, it may not be the most suitable mechanism: goods from the ALDI countres may as well be produced ineffidently. Another complication of the import incentiveprogram is that when 40 to 50 percet of imports enter the country duty free, this greatly increases the level of effective pzotection the import sectr receives and significantly adds to the indirect costs placed on the export secwor. -218- ANNEX.l Export Beefits 20. Subsidies are needed in the export sector to remove the bias agnst exporters inherent in Argenta's import substitution program and tax policy. These subsidies serve a dual purpose of export promotion and the development of specific regions within Argentna. 21. Complete or partial refund of intemal and export taxes are available to most expt of industrial goods. Rebates on domestic taxes apply to Argentne goods used in the export production process. A considerably higher rebate for unreported intermeate goods and overall export taxes can be achieved via the Draw Back promotion plan for those producers who can validate significant value-added. Table A1.1.7: COST OF THE PREFERENTIAL EXPORT PROGRAM CUSS mitlions) X Of X of X of X of 1987 Totat 1986 Total 1989 Total 1990 Total Total Tax Rebates af 333.7 56.6 380.0 54.2 595.0 85.9 550.8 87.2 Trade Rebates k. 104.0 17.6 320.0 45.6 340.2 49.1 295.3 46.7 VAT ad Other Tax Refuncis 131.0 22.2 - 0.0 237.5 34.3 249.0 39.2 Tierra del Fuego 98.7 16.7 60.0 8.6 17.3 2.5 6.5 1.2 Special Promtion Regimes 113.C 19.2 173.3 24.7 98.0 14.1 81.2 12.8 Industrial Prmotion 26.4 4.5 39.0 5.6 41.4 6.0 21.7 3.4 Patagoniu Ports 16.8 2.8 19.0 2.7 21.5 3.1 26.0 4.1 Other Refunds 1.0 0.2 59.0 8.4 33.3 4.B 2.6 0.4 Special Export Progras 68.8 11.7 56.3 8.0 1.8 0.3 30.9 4.9 Income Tax Deduction cl 77.0 13.1 85.0 12.1 0.0 0.0 632.0 0.0 Total Tax Subsidies 523.7 88.8 638.3 91.1 693.0 100.0 632.0 100.0 Total Finance Subsidy Sf 66.0 11.2 62.7 8.9 - 0.0 - 0.0 TotaL 589.7 100.0 701.0 100 693.0 100.0 632.0 100.0 A Replaced by two-year bonds in 1989. kI{ After 1988, trade rebates incLude VAT and other tax refunls. £y Selected industries enjoyed a deduction of up to 10 percent FOB on exported goods. WV SCK figures. Source: Ninistry of Economy. 22. Regional development was also promoted via additional rebates fof busiesses whose exprs oigiate m special areas and are shipped from ports or pass through customs in these locations. Exanples of special areas included ports located south of the Colorado river (Patagonian Ports) and the provices of Salta, Jujuy, and Tucuman. 23. The Central Bank also prvided tort incentives by rediscotmtng loans to exporters (either preinancing or postfinancing). The loans commanded annual interest es of around 5 percent (n dollar terms), and for durations that varied between 180 days and 3 years. The program was ehminated under the monetary reforms of March 1990. - 219 - ANNE 1.1 24. Although the subsidies were popular with exporters, it is uncertain whether or not they are effective in removing the indirect bias against them. To be effective the subsidies need to exceed these indirect taxes, estimated by the IMF to be around 19 percent. 25. Another critique of fte export subsidy program was that it favored industrial sector exports over agricultral ones. The preference was justified on the grounds that export taxes reflect the most efficient use of land.' This occurred via the conversion of agricultural land, which requires a high degree of capital intensity, into land for industrial purposes which is capital intensive. 26. The speial promotion regimes were eliminated under the economic eme-gency law of 1989, and the tax rebates were transformed into two-year bonds. Compensation for the Tmport Tax on Combustiles 27. In the 1980s, the Argentine state fixed the price consumers pay for all petroleum products, controlled the import and export of petroleum products, and was a direct participant in supply through its monopoly on crude and 60 perent market share of derivatives. In most cases the subsidy was the difference between the input pnce and actual cost, which in some cases was negative. Princpal subsidies were the Alconafta Plan (supended in 1988), royalties paid to provincial governments (frzen by the emergency laws in 1989), and preferential prices to petrochemical industries that were above comparable international grades. The complex system of compenion was eliminated with the dereguladon of the petroleum industry in 1991. Table Al.1.8: COMPENSATION FOR TAX ON COMBUSTIBLES (US$ million) Method of 1987 1988 19B9 1990 1991 Ccqpfensation al Expend. Subsidies Expend. Subsidies Expend. Subsidies Expend. Subsidies Expend. Subsidies PetrochemicaLs 65.6 62.7 86.5 85.0 35.2 62.1 - - - Contracts 40.3 - 57.3 - 124.5 - 82.1 - 13.1bJ Production 24.4 - 7.9 - 29.3 - 10.6 - - Kerosene 2.6 3.0 2.7 3.5 1.6 2.0 - - - ALcorafta 80.0 80.0 20.0 20.0 - - - - RoyaLties 336.7 174.8 443.1 279.a 206.3 14.9 99.6 16.7 28.7 Solvents - - - - - - 108.8 1D8.8 n.a. Pir Subsides are vaLued with reference to the internationaL price of the respective bypreduct. oi Eliminated in February 1991. source: Staff estimates5 ministry of Economy, and Secretary of Energy. 1 Lad is coasderd as an input eq to any other for export tx purposes. r- = -;- - - ---,3 -' -~ - - -220 - ANNEiL1I Table A1.1.9: PREFERENTIAL INPUT TARIFFS ON PETROCHEMICALS CUSS per wilt) AuWgt July Sept. 1987 195 1989 Ne"to Ccu U) Subsidized tariff 89.4 96.0 115.0 WhoLesale price 160.3 155.8 115.0 International price 155.0 140.0 115.0 Propane (ton) Subsidized tariff 86.5 74.1 81.0 SuppLy price 153.3 140.5 81.0 International price 143.0 175.0 120.0 Butane Cton) Subsidized tariff 79.4 67.3 70.8 Suiply price 118.3 140.5 70.8 International price 143.0 162.0 130.0 EthanoL Cton) Subsidized tariff 84.6 66.4 73.0 Supply price 121.8 125.8 73.0 International price 120.0 150.0 130.0 Note: The subsidized tariff reflects the price at which the Argentine Governent setls derivatives to domestic petrochemicat enterprises. Source: Staff estinates. Various Aicu Subsidies 28. A majority of Argenfina's agricultural industries existed in an et biased toward ffie industrial ocus of import substitution and expt promoion regimes. However, several sectors enjoyed subsidies through price supports above intntonal averges. The most important cases were the Special Tobacco Fund (EEl) and the sugar system. Tobacco subsidies were mainly financed by cigaret taxes to duplicate the per kilogram income received by producers in neighboring Brazil. Eighty percet of the fund's resources are distributed to provinces according to their share in production, with the remaining 20 percent used by the fund to suplement collection shortflls and address concerns in the various tobacco zones. Sugar is subsidized through import restictions and domestc production quotas that limit arbitrage qpportunities. The Emergency Laws of 1989 did not suspend these subsidies, but in 1992 the Treasmy retained 30 pacent of the Tobacco Fund. - 221 - ANNEX 1.I Table A1.1.10: VARIOUS AGRICULTURAL SUSSIDIES (USS millions) 1987 1988 1989 1990 1991 SpeclaL Tobacco Fund (FET) 93.0 67.0 97.0 76.7 126.3 FuRd for the Fora tion of Uineries 8.0 12.0 8.0 - - tapr Syste_ 194.0.W 373.0Of 136.0g/ 5.S 94.3S. Nate A - 0.4 0.3 0.2 - - W Defined as total Income for the Nate regutatory coaission. W CalcuLated with reference to an international price of US$250 per ton. St CalcuLated uith reference to an international price of USS315 per ton. CV Calculeted with roference to an international price of US$38 per ton. aI Calculated with refernce to an nterntinnal price of USS295 per ton. Source: Staff estimates nd Ministry of Econory. VAT Exeptions 29. The number of goods em=pt from Argentina's value-added tax has varied substanfally throughout the 1980s. In the reforms of 1981, the tax was extended to basic neceides; later these received exemptions. At present not only has the tax been reextended to these goods but also indudes services as well. Nevertheless, exemptions did not vary substantally between 1987 and 1989 (see table below). Table A1.1.11: SECTOS EXEMPT FROM THE VALUE-AWD TAX, 1987-89 Sector Percentage of GOP services 20.4 AgricuLtural Products 9.0 CotistibLes 8.0 Constt uction 2.1 Tobacco 1.0 Printing 0.8 Other 7.8 Totat 49.1 Source: Staff estimates. 30. To calculate the subsidy, input-output tables were used to adjust the ecxmpted base for tihe possibility that exemptions grnted to these sectors are recovred elsewhere along the production line. A significant amount of exempt produ were either inputs for, or requie inputs of, sectors which are not exempL Neverieess an adjusted exempted base of 49.1 percent of GDP creates an immense burden on those sectors to which the VAT applies. 31. The cost of these exemptions was caculated as the proportion of the VAT that would apply to the exempted base (Tm percentage of GDP). It is esmated that - 222 - ANNEX L I exmptions had a fiscal cost of US$6 billiotF in 1987, US$6.4 billion in 1988, US$4.3 billion in 1989, US$3.4 bilLion in 1990, and US$4.2 billion in 1991. These estimates are sensitive to assumptions that agents in the exempted sectors will pay punctually and without significt evasion. Development Regimes 32. The provinces of La Rioja, Catamarca, San Juan, and San Luis manage their own industrial promotion regimes while the remaining provinces are centrally adminiskred by the Ministry of Industry and nternational tade. The regimes have undergone several important adjustments in recent years: in 1988 Congress severely limited the benefits firms could receive by estmating the theoretical opportunity cost of fiscal incentives and ccordinating them with strict accounting measures which were applied only at the end of 1992 (see Chapter 4). The purpose of this program was to limit any possibility of dual benefits by means of legal fiscal exemptions and illegal evasion. In 1989 the emergency laws further reduced all previous benefits granted by 50 percent for two years. 33. In addition to regonal policies of development, Argentina has targeted severl industries for special consideration. Mining has been generously promoted by the National Secretary of Mining, but only 19 firms particiated in their tax deferral plan Procurement was promoted through the Compre Nacional Plan. The regime established a buff-er between intetional and local pnces under which Argentne firms were able to compete for govemment contracts. In 1990, the buffer was limited to 15 percent, with the objective of dealing with rising pro ent costs, and in 1991 the regme was suspended with the Deregulation Decree 2284 in October. Table A1.1.12: FISCAL COST OF INDUSTRIAL PROMOTION CUSS million) 3u 1987 1985 1989 1990 1991 VAT, Profit, and Capital 594 668 868 1123 1928 Investment Deferment 181 64 n.a. n.a. n.a. Mining 17.8 11.8 n.a. n.a. n.a. Procurement 660 870 590 734 572 M Official exchange rate. Source: Staff estimates. 2 Official dolas. 223- 1. D. Public Tariff Subsidies 34. The alternatives for measuing subsidies are discussed with a distinction drawn between those goods for which an intemnational pnce exists, and those for which no substitute (either import or export) can be defined. In the first case, the opportnity cost is obvious: it is the difference between the domestic and international price. The second ca is more difficult since the definition of acceptable substitutes and estmate actual production cost must -he broader. 35. Goods for Which Well-Defined 3 Substittes Exit. A general method for quantfying such subsidies is to multiply the difference between the domestic and international price and the quantity consumed by period. nterational price corrections are made to compensate for the tax component of prices.' Complications arise when the methodology is applied to gas oil because domestic tax policy effectively ovemtaxes gasoline to facilitate an additional subsidy on gas oil through a lower tax component To correct this, an altenative method for calculaing the gas oil subsidy is suggested: because gas and fuel oil derivatives have similar intemational prices, eliminating the tax subsidy between them should make their domestic prices mughly equivalent. Therefore, another measure of the gas oil subsidy is the difference between the domestic prices of gas oil and regular gasoline multiplied by the quantity consumed. 36. Il addition, certain industnes (fishing and electric power) and the southern zone of Argentia pay reduced pnces for these inputs, which are set roughly at the cost of production. 37. To reiterate, the technique used here measured the impact of ardficially low prices in relation to their oppotunity cost, independent of ta differences. In contrast, the subsidies in the petrochemical industry support by the 1rsy (discussed in previous sections) were counted against tax obligations; in this way producers recover from low selling (or high purchase) prices. Natural Gas 38. From Table Al. 1.13 it is evident that the Largest public tariff subsidies are those pertning to the state's provision of natural gas to industry and consumers. The method for quantifying this subsidy is severely complicated by the fact that there is no obvious substiute available competitively. It is suggested that fuel oil is a reasonable substitute beause many industnes can easily adapt to it. 3 Hem UweJl-define4 means tat the good is readly availble in a international (competitive) 4 For example, in a deregulted world a tax would contine to apply to gasoline and gs oil; dus, using tolls to inpnce roadway eostrto and insu would quiky prove tobe unfeauible. In tfis specific ta, the national trnsportaion plan of 1978 specifies t dtese d xes t shod geneae revenue of no less than 2 percent of GDP. -224 - ANNS 1.I TabLe A1. ..13: PUBLIC SUBSIDIES ON FtEL TARIFFS CUSS millIon) &/ 1987 1983 1989 1990 1991 Final Produrt W1 1107.4 218.0 774.7 0.0 0.0 si 1746.4 1417.0 744.7 1203.0 1745.0 Gwaotin (Super) 0.0 0.0 0.0 0.0 0.0 Gasoline (Regutar) 0.0 0.0 61.0 0.0 0.0 Gas Oil First Altermative V 988.0 139.0 615.0 0.0 0.0 Second ALternrtive W t827.0 1338.0 806.0 1203.0 1745.0 FueL OJI 0.0 0.0 0.0 0.0 0.0 Diesel 0i1 31.1 0.0 8.7 0.0 0.0 Kerosne W.3 79i0 70.0 0.0 0.0 Preferred Consumers yV ELectric Powerplants 106.0 199.0 110.0 0.0 0.0 commercial Fifsing 30.0 42.0 41.0 47.7 33.6 Southern Zone 14.3 16.9 8.8 0.0 0.0 aLturlt Method 1: niv taxes 363.8 71.0 789.2 474.0 60.5 Domestic 100.3 4.1 269.7 110.0 -8.0 ELectric Pawrptants 88.1 1.6 223.0 210.0 120.1 Other 175.3 1.4 276.6 154.0 9.4 Method II: IncLuding Taxes 233.8 -31.5 527.3 124.5 -701.7 Domstic 83.0 -8.4 243.4 -63.4 -371.0 ELectric Powerplants 63.3 -8.9 163.9 91.7 66.0 Other 107.5 -16.3 130.1 -152.8 -396.7 Method III: with VAT g/ 451.7 91.3 887.4 536.9 69.8 Domstic 125.6 5.0 311.1 124.3 -80.6 Electric powerpLants 1G8.7 2.1 267.0 238.0 138.2 Other 217.4 20.0 319.3 174.6 12.2 af At average officiaL exchange rate. kf Total as calculated using Gas OiL aLternative 1. cf Totat -s catcutated using Gas OiL aLternative 2. at opportunity cost is internationat price plus required tax c _onet. if Opportunity cost is domest;c price of regular gasoline. if Alternative price for coqparison is Local non-subsidized price. SI Method I with a 15 percent VAT added. Source: Staff estimtes, Secretary of Energy, PLatt's 0itgra, and inforation bulletins of various state enterprises. - 225 - ANNEX 1.1 Table A1.1.14: ELECTRICITY SIUSIDIES (USS milLfon) Contmer SEGBA AyEE DEBA EPEC TotaL Residentirl 1987 198 21 13 10 242 1988 118 15 5 3 141 1989 280 39 -4 8 323 CamerciaL 1967 22 -3 -1 -12 6 1988 -19 -8 -9 -27 -83 1989 a -1 -4 -29 -28 Industrial 1987 91 126 10 -20 208 1988 41 109 -31 -38 81 1989 45 119 -76 -100 -12 Putbic Lighting 1967 14 -1 - - 13 1988 9 -3 - - 6 1989 17 2 - - 19 Total 824 414 -97 -205 938 1987 325 143 22 -Z 468 1988 149 113 -35 -62 165 1989 350 159 -84 -121 304 Source: Staff estimtes. 39. The altenatives for estimating natural gas subsidies can be partitioned into those where the tax component is included in the price, and others where taxes are omitted. Subsidies under the first method reflect the differenc between the intatonal price of fuiel oil and 'tax free natural gas. Method II is identical to the first with the * exception that taxes remain. The third method includes a VAT of 15 percent on natural gas rather than the actual tax component. Electricity 40. The nontradable nature of electricity contributes to the complexity of subsidy quantification. Any attempt at evaluation must involve a comparison between the actual tanff per kilowatt hour and an estimate of nargnal cost. Unfortunately, no details are provided with respect to the method used to estimate marginal costs. 41. The various enterpises included in the summary of electic subsidies (Table AI.1.14) provide approximately 66.5 percent of residential, 68.4 percent of commeial, and 75.9 percent of industial electricity sold in Argenina. L Cetral Bank (BCFA) Funandal Subsidies 42. Argentina's Central Bank provided rediscount subsidies to the financial sector in a multitude of ways until their effective elimination duing the monetary reforms of 1990. Although the flow of rediscounts was stopped in 1990, a subsidy continues because the interest e on the stock of rediscounts is lower than the : -7 - 226 - ANNEX 1.I opporunity cost for the govenmment (BIC Treasury bond rates).5 The most predominant subsidy was the large percentage of rediscounts granted to public bank (approximately 78.5 percent). Another more subtle mechanism is that in which the BCRA indexed its rediscounts with a 45 day lag while liabilities caried a 2 day lag. Under a hyperinflation this diffesence alone produced a considerable deterioration in the BCRA balance. This was aggmrvated by shorter term lengths on liabilities, smaller relative spreads on rediscounts, and fiilre of public banks to repay rediscount obligations. At the onset of 1990 the government was obliged to exchange deposits for BONEX in order to delay and supplement its rediscount income. This procedure will lose its effectiveness once the BONEX mature. Table A1.1.15: REDISCUINTS VERSUS CENTRAL BANK LIABILITIES CUSS milLions) 3( Rediscountts Granted kW BCRA Liabilities Remmerated in X C1 ) (2) C1M)C2 1987 I 4094 4943 82.8 11 4533 5197 87.2 III 3787 3803 98.3 IV 4013 3729 107.6 1988 1 4377 4309 101.6 i 1 4081 4219 96.3 III 5069 6277 80.8 IV 6808 7303 93.2 1989 1 3756 3996 94.0 II 1614 169S 95.2 :11 4990 5065 98.5 IV 3836 3964 96.8 Average 4245 4548 93.4 W Current doLLars. i/ Nationat and provincial banks participate in roughly 78.5 percent of the total stock of rediscouats. Source: Staff estiuntes. 43- These complications imply that any valuation of Central Bank subsidies will be both complex and subject to several different methods of interp aton. Suggested alteratives are given in Table Al. 1.16. 5 The intuest ute oan the BIC bonds are paid by the Treasuqr. However, these bonds were issued when the monetay refonn of 1990 was deceed; these bonds have replaced remmerate legal resrve requirement. - 227 - ANNEX 1.1 Tabte A1.1.16: IMPLICIT KCRA REDISCOURTING SUBSIDIES (USS milionz) at Alternatives A B1 B2 C D E 1988 I 142 446 612 158 -98 422 I1 120 199 300 182 54 127 III -1130 -529 -409 -1065 612 -647 IV 1988 TotaL -2169 381 864 -1925 899 -120 1989 1 6558 1903 2116 6653 -312 1920 11 2740 1853 1902 2760 -1006 3307 III -2804 -2449 -2402 -2779 2137 -2321 IV 1845 375 486 1905 -63 133 1989 Total 8339 1682 2102 8539 756 3039 1988/89 TotaL _W 6170 2063 2966 6614 1655 2919 1990 n.a n.M -438 n.m n.a n.a 1991 n.a n.a 412 n.M n.a n.s Note: Rediscount opportunity cost definitions: A LIBOR pLus a 4 percent amuual spread. Si weighted average of BCRA rates on various issues, forced savings, Cedeps, and a 1 percent monthly.spread. 32 IdenticaL to BI but with a 2 percent spread. C Yield on 10 year government debt issues. D Ijeighted average of price indices plus a 2 percent monthly spread. E IdenticaL to B1 with spread determined Via adjustment for size of the monthly borrowing requirement. F Official exchange rate. If Official exchange rate. Source: Staff estimates. 44. Each alternatve is distinguished by a dffert measure of opportuity cost. To calculate the subsidy for each period, we multiply the stock of redisoDunts in perod t by the difference between the actul index used for the rediscounts and the opportunity cost specified, and divide the product by the official exchange rate for that period. Then sum the various periods for the lifetime subsidy of the rediscount. - 229 - ANN- 2.L1 THIE PIUBLIC SECTOR: BUDGETlNG CONCEPTS AND THE STRUCTURE OF THIE FEDERAL GOVERNMENT 1. With perennial public sector deficits, and the ensuing circularity of deficit financing and inflation, Argenfina's accounting of its fiscal accounts has depended greatly on the methods used to measure revenue and expenditure. Depending on the methodology employed, differences in the calculated combined public sector deficit have been as high as 2.5 percent of GDP for accrual and cash bases budgets in years such as 1990. Understanding the different budget concepts is important in order to properly measure the obligations of the public sector, how the deficit is financed, and how programs are budgeted and executed. Annex Table 2.1.1 illustrates the variance between concepts for 1991, a relatively stable year. 2. There are two entities that measure public expenditure and revenue: the Treasury (relying on Tax Administration data) and the General Accounting Office, both of which are dependent of the Ministry of Economy. The Treasury exercises the more influential role, as it coordinates planning assumptions not only for the National Administration, but also the Social Security system, Public Enteqrpises, and the reiationship of the national government wiLth the provinces. The Accounting Office records information of the National Administration only. 3. The Treasury works with two principal defiitions of the budget: cash and accrual. When looking at years already executed, the concept of executions replaces accrual. Cash basis accounts reflect al those revenues that are expected to be received effectively, and all those expenditures assumed as obligations and paid in the year of the budgetL Cash basis reflects actual movement of fimds to and from the Treasury. 4. Accrual basis (also budget basis) reflects revenues that may presumably be received, and expendiurs tat are expected to be made. Rather than actual movements in the balance of the Treasury, these numbers reflect, for exmple, actbal (or expected) contractual obligations ffiat are authorized by Congress to be assumed by the executing agency. The executed basis rfects the contracts and obligations made in the course of the fiscal year, regardless of disbursement of funds from the Treasury. One common dicrepancy in the past few years between cash and accrual has been the government's ability to pay the end-of-year, UUiirteenthU month wage bonus (aguinaldo). If the government had to move the payment to January, the cash basis deficit in year 1 will be lower than the accrual basis deficit; but the following year's cash basis deficit will be higher, given that the government wi still have to pay this obligation. - 230 - ANNEX 2.1 5. The cash basis concept is the most simple, and allows the budget exercise to be measured day-to-day, as it is always registering flows in the Treasury balance as they occur. The Accounting Office is charged with the registering of the more complicated bases that define expenditure in its various stages once credits are created in the budget. 6. Credit basis, as mentioned previously, reflects the authorization of funds as approved by the budget. These resources are allotted to the final level of execution, the programs themselves. At this point, the executing agencies (jurisdctions) review the programs and given the constraints of project implementation, make obligations to contractors, suppliers and personnel. Once the contracts are made, the budget concept "compromiso," i.e., commitment/executed basis, is validated. This "commitment3 or contract will only be fulfilled once the executing authority agrees that the terms have been met. 7. Once the government agency agrees that the terms of the contract have been met, ffie executing jurisdiction sends a payment order to the Treasury. Once this order is processed, the expenditure concept is called "sent for payment, "(nandado a pagr). This also rfers to the moment revenues are sent to the Treasury (e.g. charges collected by the Civil Registry for license plates); in the case of expenditure, this order of payment, although received by the Treasur, is not neceasrily paid. Depending on the Treasury's reserves, it may not be able to disburse flmds for payment. 8. "Paid" pagado) refers to the final stage of expenditure clasification by the Accounting Office. It is the disbursement of funds either directly to the creditor or to the payment office of the executing ministries, based on the amount fixed by the executing power in each jurisdiction. Whatever portion of the "sent for payment" amount is not "paid" is carried over to the next year's exercise as a "residual liability' (residuo pasivo). 9. Typically, about 70-80 percet of the amount of credit is contracted (compromiso), whereas the amount sent for payment is close to 100 percent of the amount contracted. If the Treasmy decides to withhold funding of a program, it may do so at various points in the budgeting process. The most favorable, of course, is before the commitnent (com ) is made. Thus no creditor has a claim on the government. Once the contact is made however, the Treasury can avoid payment of the contract by delaying processng of the services rendered, or can simply allow the obligation to fall into arrears. A. Effects of the Adminitrative Reform on the Budgetary Process 10. As numerous levels of bureaucracy have been eliminated and executing authority has been consolidated, the ability of the Treasury to manage expenditres has increased. As discussed previously, once a credit has been crated in the budget, the executing agency is authorized to make commitment funds through the programs. To the extent that executing power has been reduced, i.e. the number of jursdictions and special acowunts have been cut, cabinet level control over pgraomms has been increased. Previously, some subsecetries had been considered jursdictions, and with this podtion they had been able to manage and execute programs without any but token supervison -231- ANNEA 2.1 from the ministrial level. As the government iioves to elima al special accounts from the budget for the 1993 exercise (and their earmarked revenues), even more auditing and executing authority will fall on the central administraton. B. Categorizing Expendkure in the 1992 Budget 11. Expenditures of the Argentine Non-financial Federal Public Sector as presented in the budget are classified in two major categories: institutional and functional. The institutional representation indicates the administrative bodies which execute the expenditure, and the later esentation indicates the purpose of the expenditure. 12. Institutional Representation. The institutional hierarchy has been affected dramatically by the admistrive reform over the last two years. Central control of expenditure has increased greatly as bureaucaic divisions have been eliminated or consolidated. Table A. I displays the reductions in administrative bodies at the jurisdictional level. The importance of this to budget execution is that because only jurisdictions may authorize the commitment of resources allocated by the budget, by limiating subsecretaries as junsdictions, higher levels of administtion have greater control over programs. The following flow chart indicates the channels of budget execution. Nationat dministtrstiDn |Central Ackministr.| Special, Accounts ||DecentraL. Agencies| Jurisdiction Legislature Judiciary Tribunatl de Cuentas Presidency min. of interior Win. of Foreign Affairs Min. of Defense Army Navy Air Force Joint Chiefs of Staff Min. Eaonasy/Pub.works Win. Education Win. Justice fin. Labor & Scc. Sec. Win. Health & Soc. Action Debt Service Treasury Obligations Account CL sification by CA, SR, or DA 13. The National Administration is separated intD three divisions which define the general administrative "type" of expenditur. Decentralized agencies, such as the Nuclear Commission (CNEA) and the National Highway Board (DNV), are allotted funds without direct administrative control by the overseeing jurisdiction (usually a - 232 - ANNEX 2.1 ministry, or in the case of CNEA, the prdency). The expenditures made by the Centl Admiistation, for example, would entail the actual administrative costs of the national administaton, whereas those made through special accounts and decentrized agencies, aside from being more difficult to makn accountable, are outlays to other organizations, often outside the national administaton. Such Jarge special accounts as te Tobacco Fund and FONAVI are, in fact, simply tanfers to provincial governments. 14. Functional Representation. There are three hierarhical distinctions made when classifying expenditure in this way. The most general being what the government calls "finalidad. * The finalidades each have a unique subset of funcfones.' The program itself is the final category when defining expenditure by function. ESnalidad 1: General Admition Funcaones: Policy/Administration, Fiscal Administration, Lislation, Justice, Foreign Affairs, Protocol, Provincial Aid, and Miscellaneous Flnalidad 2: Defense Funciones: Army, Navy, Air Force, and Miscellaneous Flnalidad 3: Security Funciones: Police, National Guard, Coast Guard, Penal System, and MWiscellaneous floalidad 4: Health Funciones: Medical Care, Environmental Healt, and Mfiscellaneous fnalidad 5: Education Funciones: Culture, Elementary Education, Secondary Education, Universities, and Miscelaneous FSnalidad 6: Economic Development Funciones: Subsoil Irdgaton/Drainage, Agriculture/ivestock/Natural Resources, Energy & Fuel, Mining, Industry, Tourism, Railways, Roads, Waterways, Airways, Communications, Trade & Storage, Insurance & Finance, and Miscellaneous -c -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ - 233 - ANNEX 2.1 FSnalldad 7: Welfare Punciones: Social Security, Labor, Housing and Urban Development, Social Asistance, Sports and Recretion, Social Promotion, and Mscelneous fluaidad 8: Scienre and Tedhnolozy Funciones: Promotion and Scholarship, Research and Development, and Miellaneous 15. Understanding Categorization of Expenditure: An Example. With many groupings which share names (for example the fimucon "labor" is also ffie name a ministry), it is difficult to measure and analyze government expenditure by both its end and its executor. The case of the FONAVI housing program is an example of many Omisplaced" programs, prgrams which do not follow tasparent lines of administration becau of shifting roles of mmistries. By functional grouping, FONAVI is clarly defined: welfare filnalidad,' and housing "fimcfan." However, institutionally, it is a special account administered by the Ministry of Health and Social Action. Due to its size, of course, it is not hard to find in the Budget, but there are many smaller programs which have simila functions which are operad by different ministries. 16. Direct link between the functional representaon to the institutional reresentation are not easily made in most case. The "finalidadw health envelopes all expenditures on health programs, but cannot be equated to expenditures of the Ministry of Health and Social Action because many different jurisdictions manage progams i the health function; likise, the Ministry of Health spends the majority of its budget on non-health progams. There are separe research and technical education programs (educaton and science & technology "fiialdes) being managed by the Preidency, the Mnistry of Ecoomy and Public Works, the Armed Forces, and the Ministry of Education. Table [1, in Chapter 1, displays in matrix form, the institutional and functional classification of expenditure. - 234 - ANNIEX 2. 1 TobbA2.1.1: ARGENT1NA. FoodAJMo.ub: Cub G odAedtmal Cu puunmdnL ofGDP) 19S7 1981 1989 1990 AcenAl Cob Diir. Acuau Cub De. Ace,al Cub Dilf. Acml Cmb Dig. Cu£gR_gma 19.6 IlI 0.8 18.3 17.6 0.6 17.0 17.6 -0.7 17.7 15.1 -0.4 Tax Rewema 18.1 17.2 0.9 16.9 16.3 0.6 15.8 16.3 .0S 16.U 16.I -0.I DGI auml Caujlom 14.0 13.2 0. 12.1 11.5 0.6 12-S 12.9 40.4 11.6 11.6 0.0 SociSl Sourity 4.1 4.0 0.1 4.8 4.3 0.0 33 3.4 -0.1 5.2 5.2 0.0 No,ax Rmvaao 1.5 16 -0.1 1.4 1.3 0.1 1.1 1.3 -0.2 0.9 1.2 -0.3 Cunrste E2udkiu 23.4 22.1 13 23.0 21.4 1.6 19.5 17.1 2.4 21.8 18.4 3.4 PcnaDno 4.1 3.6 0.5 4.1 3.7 0.4 3.4 3.1 03 4.1 3.1 1.0 Goodmd SAim 2.1 1.3 0.7 2.0 1.2 0. 1.6 1.1 0.6 1.4 1.0 0.4 Tinmou 13.8 13.4 04 14.1 12.6 15 1t.6 I.5 0.1 13.2 11.3 1.4 Pr.vimes 6.6 6.6 0.0 6.5 5.9 0.9 5.9 6.4 4.5 S.6 5.1 0.5 Sa1Zm_sawy 5.9 5.6 0.2 h 1 6.0 0.Q 4.3 43 -0.1 6.3 6.2 03 O&aJr 1.3 1.2 0.1 1.2 0.7 0.5 15 0.1 0.7 1.1 0.5 0.6 tPbymuu 3.S 3.9 404 2.1 3.9 -1.1 2.9 1.4 1. 3.1 3.5 0.5 Domuac w OS 0.4 0.2 0.4 0.7 -0.2 0.1 -2.0 2.1 0. 0.4 0.1 Eumau 3.0 3.5 4.6 2.4 3.3 -0.9 2.7 3.4 -0.7 2.6 2.2 0.4 PE NolUimest Stvia 1.t 1.2 0.6 1.0 -1.5 2.8 0.9 -13 2 1.2 -0.2 1.4 Suvi p -2. -2.1 0.1 -3. -5.6 1.8 -1.6 -0.7 -0.9 -2.S -05 -2.4 Cptal RuVOM 0. 0.3 40.1 0.4 0.2 0.2 0.6 0.3 0.3 03 0.6 -0.3 capiwl zmdaazi S.3 3.9 1A 6.0 3.4 2.6 3.9 2.3 1.1 2.6 I.9 0.6 Caal GovWL 1.7 1.0 0.7 1.5 1.0 0.6 1.0 0.6 0.4 0.7 0.6 0.1 piMlcEnipc 3.6 2.9 0.7 4.5 i.4 2.1 2.8 2.2 0.7 1.9 1.3 05 NEFPS 1mm -7.1 -5S -1A -9.4 48 -0.6 4.9 -32 -1.7 -5.1 -1.8 -3.3 bm Piiu mSwplas -3.6 -1.9 -1.7 .6.6 -4.9 -1.7 -2.0 -1. .0. -2.0 0.8 -2.3 m1 Imai pansm lhmy ,ughbwud an amnom bis. bf Red 1mpomamtofdomu. ismtp3 auly. Smaruo: S.cr.gq ofF_m ., 0- - 235 - 235 - ~~~~ANNEX 2.1 Table A2. 1.2: Budget Concepts of the National Administration, 1991 (as percent GDP) Sent for Credit ' Accrual bl Payment " Paid ' Cash Presupuesto Comprorniso Mandado a Pagado Caja Pagar Current Revenue 15.5 14.3 14.3 14.3 14.9 Tax 14.2 13.1 13.1 13.1 13.6 Non-tax 1.3 1.2 1.2 1.2 1.3 Current Expenditures 16.5 14.5 14.2 13.5 14.2 Personnel 4.1 3.0 2.9 2.7 3.5 Goods and Services 1.3 1.0 0.8 0.7 0.9 Interest Payments 2.2 1.8 1.8 1.7 1.7 Domestic 0.3 0.4 0.4 0.4 0.3 External 1.9 1.4 1.4 1.3 1.5 External of the Treasury 0.0 0.0 0.0 0.0 0.0 Other Current Expenditures 0.0 0.0 0.0 0.0 0.0 Transfers 9.1 8.7 8.7 8.4 7.9 Provinces u 7.3 7.3 7.3 7.3 6.3 Social Security 0.8 0.9 0.8 0.7 0.8 Private Education 0.2 0.2 0.2 0.2 0.2 Others 0.8 0.3 0.3 0.2 0.6 Current Deficit of Public Enterprises 0.0 0.0 0.0 0.0 0.0 Extrabudgetary Expenditures -0. 1 0.0 0.0 0.0 0.1 Savings -1.0 -0.2 0.1 0.8 0.7 Capital Revenue 1.2 1.1 1.1 1.1 1.0 Capital Expenditures 0.7 0.7 0.7 0.5 0.5 Residual from Previous Year 0.0 0.0 0.0 0.0 0.0 Economic Emergency Financing 0.0 0.0 0.0 0.0 0.0 Intra-govemment Transfeirs Received 2.1 0.0 0.0 0.0 1.5 Intra-government Transfeirs Paid " 3.9 0.6 0.6 0.5 2.6 Financing Requirement (+ = deficit) 2.3 0.5 0.1 -0.9 -0.1 Memo: Primary Surplus of Nat'l Adnin. -0.1 1.3 1.7 2.6 1.9 GDP (Pesos Millions) 127.3 Operating Surplus of PEs -0.3 0.5 Sources: Cash basis 1991 comes from an Esquema Ahorro-Inversion August 15, 1992. Budget basis 1991 is from the 1992 budget report recently received (September 26, 1991). Compromiso, Mandado a Pagar, Pagado versions from Accounting Office. al Budget authorization by Congress/Presideacy. b/ Revenues accrued to government upon d.ue date of taxes; expenditures committed by spending jurisdiction. c/ Spending jurisdiction receives revenue and sends payment voucher to Treasury. di Payment made. el Revenue deposited in the Treasury and expenditures debited. fl Transfers to provinces by coparticipation unavailable for Accounting Office; Budge data used. gW For Accounting Office concepts, these tansfers are to public enterises. Table A2l13: A.Sr eMacm Reductions In Govenont Expenditure Jiwhdatidne * Juds. 1890 1991 1992 Number I Legielature Legislature Leogislature {f; .f Judiciary Judlciary Judiciary la Trilbunal de Cuentes Tribunal do Cuentas Tdbunas de Cuentas 20 Piesidenoy Ptesidency Presidency 30 Interior Ministry intrilor Ministry Intedor Ministry 35 Foreign Ministry Foreign Ministry Foreign Ministry 40 Justice Department 46 Mistly of Defense Minisriy of Defense Ministry of Defense 46 Army Army Army 47 Navy Navy Navy 48 Air Forea Air Force Air Force 49 Joint Chiefs of Staff Joint Chiefs of Staff Joint Chiefs of Staff o0 Minisiry of ioonomy Ministry ot Economy Ministry of Economy and Public Works 61 Secretary of Domestic Conmetca 52 Subeacretuny of Haelenda Subseaoretery of Hacienda 53 Secraetay of Mining 54 Socratary of Regional Development 55 Subsocretary of Public Finance Subsecretary of Pubil Finance 57 Subseoratary of Industry and Commerce Subeacrelary of Industry and Commerce 58 Subsecretary of Agriculture and Livestock Subseoratelry of Agriculture and Livestock 60 Subecretary of Public Works Subsecetary of Publio Works 61 Secretary of Communircationa 63 Subsecretary of Transportation Subsocrelary of Transportation 84 Subseoretery of Electric Energy Subsecretary ot Electric Energy 65 Secratary of the Maechant Marina a6 Minlstry of Education and Justile Mlnistry of Educatlon and Justice 67 Subeearatery of Education Subseoretary of Education 68 Secretary of Scienco and Technology 69 Justice Department Justice Department 70 Subsecratary of Culture Subsecretary of Culture M'iestry of Culture end Education * 15 Ministry of Labor and Social Socurity Ministry of Labor and Social Security Ministry of Labor and Jociol Security 77 Subsecratary of Social Sacurity 80 Ministty of Health and Social Action Ministry of Health and Social Aotion Ministry of Health and Social Action 81 Subsecretcry of Health Subsaecretay ot Haalth 82 Secretaries of Sports and Social Promotion 84 Subsearetary of Human Davelopment Subsacretary of Human Development 85 Subsacrelary of Housing and Environment SubsecratarV of Houslng and Environment 90 Publo DOebt Service Public Debt SerAMe Public Debt service 91 Treasury Obligations Treasury Obligations Treasury Obligations Total 29 SO 18 d.,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- - 237 - AN- 4. A SAMLIFIED PROACH TO MEASURING TAX EFFOIU 1. The purpose of the appmach presented in this Annex is to idenfify the main fictors that infuence tax revenue fluctuations in a country Mmc Agentina. In parficular, we need to elaborate on te meaning of tax effort in the context of the paper, as fhis concept is used in a somewhat unconventional way. As a starting point, tax ecpt colleced by the tax administraon can be defined as: (1) Tt = tA where T, is tax revenues collected at time t by the adminisation, t4 the averag nominal lax rate, and B, the tax base. 2. Since the iflation rate has been high and very volatile in Argentina, the Olivera-unzi effect shoud be included in equation (1). As suggested by Oiva [19671 and ¶lnzi [19781, tax revenues are infuenced negavely by the rate of inflation. OGiven that taxes are collected with a certain lag, the real value of taxation will be reduced if, duri the period between.accrual and collection, pices or real GDP incse (Argentina's l1h Report (1990), p.4). Following these authors, tax reenues can be expressed as follows: (2) T, = tt [ B*/[(1 + Gg(l + EOrJ]j where B*t is th tax base adjusted for the Olivera-luzi effect, 0 the estmated delay in collecton (days), & the growt rate of the tax base and jr the inflation rata 3. Equation (2) states that tax renues depend on the avrag tax rate and the potential tax base adjusted for the Olivera-Tanzi effect. Using this equation, we can determine the fictors explaining the varaton in tax revenues over time. Rewriting equation (2) in a log difference frm, we get: (3) dlnTo Olntt + OInB*t- in(1 + e - Oln( + OrJ 4. The percentage change in tax wevenues depends on the percentage changes in the theoretal tax base, on arage nominal taxes, and in the Olivea-unzi effect. 5. . Equation (3) can be used to derive the theoretical tax base, which is the only variable not direcly observable. Moreover, asming that the vaiatons in the tax base are attributable to changes in economic conditions or in tax administmtion, we can write the following equation: -238 - ANNEX 4.1 (4) 6nB*t = 6lnVt + b6nEt where 61nVW. is the -percentage change in the tx base owning to vaiafions in the economic environment and OlnZ the percentage change in the tax base derived from improvements in tax administiation. As an illustaion, tilnV, can be defined as GDP grwth for sales taxes or import growth for import duties and in IE1 refers to greater effort in tax collection or reduction in the evel of exmptions. The resulting change in'- the theoretical tax base is therfor the summation of both effects. -Substituting equation (4) into equation- (3), the percentage change in tax administrations effort equals: (5) OlaF1 =CdnT1- Olnt4 + OIn(1 + gJ + Ol(1 + Or3 - blnVi- 6. The percentage change in tax:effort is therfre defined as the change in tax revenues that is not explained by variations (1) in nominal tax rates; (ii) in the Olivera-bnzi effect; and CMii) in the tax base ownng to changes in economic conditons. The varable OlaE1 is assumed to reflect important changes in tax legislation (cept ihe changes in nominal taes), in t administion and in individuasw attitdes tward tax evasion. While the resls of such a simple accouning approach should be intrpreted with care, they nevertheless offer a friaework in which to appraise compatative tx effort ove a period of time. 7. The above approach has been applied to the case of Argentina over the4 1989-91 period. The main resulis are summarized in Figures 4.14.4 bf the Report. Note that more detiled results are presented in the study uMroeconomic Instability and the Efilciency of the Mix System in Argentina. The data on tax revenues, GDP, the rit o inflation and the exchange mate was obtained from the GovenmenL We also used the data collectd by the IM and the WVkd Bank Because the data were not available the averge delay in tax collection was equal to I month firm August 1989 to February 1990, 15 dqas fom March 1990 to February 1991, and 10 days from March 1991 onwards. The progressive reducfion in collection delay over the period reflects the successive tax reform packages implemented between 1989 and 1991. Finally, we defined the percent change in the tax base owning to variations in economic factrs as real GDP growth for all coparticipated taxes and as import and -- exp gowth for import and export taxES, respectwdy. -- ; 8. Unstable economic conditions may influence the taX collection effort and - the level of exemptions, therfor affecting indirecty tax revenues. In order to test this hypothesis, we examined the seness of the tax effort to changes in GDP growth zate and in the inflation rate over the last two yea Id ication of such influences, if any, on the effort in tax administraton may confirm that maceecconomic conditions are party reflected in the volatility of the tax efforL C;,.- - 239 - ANEX 4.1 9. The primnary mults presented in b3ble A4.1.1 suggest that ffie varations in tax effort are more likely to be the cons ce of political and inutonal changes, such as a rduction in empions, wather than the consequence of macroeconoic condons Th estmated mesults indicatc, hou, that the rat of inflion exeted a significant and negative influence on the tax effort, even after diounting for fr egaW Olivea-buzi effect. This result suggests tat an icrease in the rate of infl can influence the efficency of the tax system through, for example, modificatins i the collecdon mecanisms In the case of VA¶, the rate of inflatio a rs to exrt a posive impact on the tax effort, but the influence of unceainty (m ued as the percentage chang in te rate of inflaton) i clearly neative. The tax retbrm pakages intduced in February 1990 (DUMI) such as the extension of VAT to all goods and the simplificaon of the prfit tax influenced posiively tax effort Similarly, the exnsion of the VAT to services in Sqetmber 1990 (DUM2) eaxred a positve iupact an the effort of the tax ministration.' Tf A.1.t: tlatimnip an e mnc VauStes u Ta Effot (1U91:hO1919):w Dependent Variable AEw AE. mE, AiE, A., constant 6.55 19.784 -3.962 5.951 8.184 (1.44) (1.39) (-0.84) CO.53) C2.01) g -0.053 -3.392 -3.945 2.514, -0.260 (-0.08) (-1.12) C-3.77) 1.06) (-0.293 w -0.376 -1.007 0.451 -0.617 -02 c-1.94) (-1-.) (2.56) (-1.23) C-2.09) Ax - -9.334 - - (-2.86) DUI 28.370 90.86 - 159.401 28.109 (1.27) (1.39) (Z.87) (1.372) DU2 36.097 - 16.797 - - (2.12) (1.97) vdjR2 0.199 0.013 0.639 0.236 0.067 DR 1.95 2.57 2.47 2.12 2.36 Note: hE., coprticipatad tum effort, AE, a profit tax effort, LE, , VAT effort, JE_, f iport duties effort, AE, = total tax effort, a u CDP growth rate, v = rate of inflation, As = voltatiity of the rate of infatIon, dial - dny variable ihfch a*couts for the policy chanps of Fxnry 1990 a'd OM4 Shich aceunts for the policy chews of Suptaer 1990. At For iort dtite, g is the growth rate of imports rather than the GOP grcuth rats. 1 On do conruy, th impa of GDP grwth did xot r,po ugificat an h t oeff if a posifive ruimuhip betwom ODP growth .d tax eifot sihmd coio from the fad that mrt nit hs murginaes ar hiher thn avwg ou - 241 - ANNEX 4.2 HIGHILIGHIS OF LEGISLATION UNDIER TIE MENEM ADMNISTRATION 1. This Annex reviews the highlights of tax legislation dunng the 1989-91 peiod. A. Gross Aets Tax 2. The first major piece of tax legisladon during the Menem administrion was Law 23,760 of December 7, 1989. This law replaced the Inpuesto sobre los Capitales, which had been based on net assets, with a tax on gwss assets (Impuesto a los Acdvos), effective as of January 1, 1990. The rate of tax was set at one pecnt The tax was initially made creditable against the income tax. In this sense, the tax functions as a minimujm income tax, the amount of liability being the greater of the assets ax liability and the income tax liability The tax applies generally to domestic companies, to ermanent establisments of fegn companies, and to businesses operated by individuals. The rate of taxv was subsequendy raised to 2 percent, effective for the first taxable year of a company closing after February 18, 1991. For taxable years closing after Fbruary 18, 1992, the rate goes back to one percent. In 1991 the Government reversed the deduction method and made the income tax deductible from the asset tax thereby addressing concerns about qualification of the income tax for the foeign tax crit in the U.S and other countries with simila systems. B. ¶1x on Debits 3. Iw 23,760 also revised the Mu on Bank Debits, renaming it the ¶Ix on Debits to Current Account and Other Opeations ("bx on Debits') and fixing the rate at 3 per mil, efective as of January 1, 1990. In general, this tax applies to bank checks and simlr transfers effected by any person, including both individuals and businesses? As of February 21, 1991, the rate of tax was raised to 12 per mil, with 9 points of the tax being credtable against the tayees income tax and VAT liability (half against each).3 As of February 21, 1992, the rate goes back down to 3 percent, with no poron being creditable against anothe tax. I See Law 23,905 (Feb. 18, 1991). 2 This is a geneml description of dbe tax; a fidly accurae desciption woud require enteing into deails that are not necesmy to the anlysis of this paper. See Law 23,760, Title 1. 3 Sec law 23,905 (ulishd Feb. 18, 1991), ar 1. Under Iaw 23,549 (Tax on Bak Dbits), which had been in efft through 1989, 70 perct of the tax had be creditable agi the incom tm r$ x2;; ;- - - -- -242 - ANNEX 4.2 C. Income Tax 4. Law 23,760 (December 7, 1989) made major changes to the income tax. The taxation of capital gais was repeaed effectve January 1, 1990. The general rate of tax on corporations was lowered from 33 percent to 20 percent. Dividends were generally excluded from the calculation of taxable income; however a withholding tax was imposed at a rate of 10 percent for resident individuals, and 20 percent for shareholders who did not identify themselves and for foreign shareholders. (Accordingly the maximum rate of tax on distrbuted corporate income is 28 percent for resident individuals and 36 percent for foreign shreholders.) The rates applicable to individuals were also reduced, the maximum marginal rate being lowered from 35 to 30 percent. law 23,871 allowed an immediate income tax deduction for the cost of depreciable personal pperty acquired within the two-year period following the publication of the law (October 31, 1990). D. Value Added Tax S. Law 23,760 established a tax on financial services, based on value added maculated under the addition method. While this is not formally part of the VAT, it fulfills the functional role of bting VAT of the financial sector under an altrnative, more adminisle, method. 6. Law 23,765 generaized the VAT on goods and changed the regime for small taxpayers, establishing the concept of non-regid responsible persons, effective as of February 1, 1990. Law 23,765 also allowed xpayers to ediay use the credit for purchases of capital goods. 7. law 23,871, adopted September 28, 1990, broadened the base of the VAT to include most services. Prviously, the VAT had been applicable only to those services specifically listed in the law. 8. law 23,905 raised the general VAT rate from 15.6 to 16 percent, effective February 1991. In the case of sales of gas, electricity, water, and other public utilities (exept sales to residences), where the indvidual purchaser is regstered (or a non- registered), the tax rate is 25 percent. An 11 percent rate applies to the provision of telephone services to final oDnsumers. E. Mm on Wealth of Individuals 9. Law 23,769 (Decenber 7, 1989) repealed the tax on net wealth of individuals (Impuesto sobre el Patrimonio Neto), effective as of December 31, 1990. Since this tax was based on wealth as of December 31 of each year, the last time this tax was payable was with spect to wealth as of December 31, 1989. A 'tew tax on individual wealth (Mm on Personal Goods not Incorporated in the Eoonom;. Wcess) was created by Law 23,966 (August 1, 1991), effective with respect to wealth as of December 31, 1991, and December 31 of the. subsequent eight years. The tax base geney includes assets that are not subject to te Impuesto a los Acdvos It is noteworthy that assets located abroad are included in the tax base. Home mortgage debt - 243 - ANNEX 4.2 is deductible, but other debt is not. The rate is one percent of the excess of the tax base over the equivalent in australes of about US$100,000. F. Miscelneous bes 10. Law 23,740, which was enacted in October 1989, established a one-time tax known as the "contribuci6n solidaria.,' which was based on receipts obtained in 1988. 11. Law 23,760 imposed an emergency tax on the ownership of automobiles, yachts, and airplanes as of October 31, 1989, as well as an emergency tax on the profits of financial entities for the year ending on September 30, 1989. 12. Law 23,905 established a tax on transfers of real property by individuals at a rate of 1.5 percent, applicable where the transfer is not subject to inCome taX.4 Sale of the taxpayer's only residence is not taxed if the proceeds are used to purchase a new residence. 13. Most recently, Decree No. 2284/91, which dealt with deregulation of the economy, also made modifications to the tax Jaws. This decree repealed the taxes on transfers of equity and debt instruments. It exempted from income tax any gains reaized by foreign persons from the sale of shares in domestic companies. It exempted the issuance of certain securities from the stamp tax. It repealed the 3 percent tax on exports (so-called statistical tax). It also repealed a number of miscelaneous aes on specific products the proceeds of which were designated for specific funds deaing with trade regulation and prmotion. 14. The decree also repealed the withholding tax on dividends (i.e., 10 percent on dividends paid to residents and 20 percent for dividends paid abroad), although the drafting of the decree is somewhat unclear about the scope of this measure? This aspect of the decree was apparently not well thought through, and was removed by Decree 2424/91, published on November 14, 1991. G. Penalties for MIx Crimes 15. Law 23,771, which became effective on March 8, 1990, provides a special procedure for crimes involving fraud, evasion, and omission regarding both taxes and social security contributions. It applies to infractions committed both by taxpayers and by public officials, and sets forth the applicable judicial procedure. Some of the penalties provided are fines, but most are imprisonment for tenns of up to eight years. 4 Unless the taxpayer is a dealer, such trasfers will not be subject to icome tax, since capital g-ms are not taxed. 5 Impuesto Sobre las Vents Compras, Cambio, o Permuta de Divisas. 6 Impuesto a Ia Transferencia de Titulos Valores. 7 See Decree 2284191, article 79, last sentce. - 245 - AsNNEX 7.1 MILITARY FACILTIES, RESTRUCTURING AND ANNOUNCED ACTIONS 1. However, the three Armed Forces have oudined a number of proposed refonns, some of which are already underway. A number of imnxdiat measures have been set in motion by the Ministry of Defense that are designed to produce cost savings without placing an additional burden on the budget. 2. The measures include the retirement of 11 Anny generals and 74 Army colonels in early November 1991, a decline in the number of civilians ployed by the Ministry of Defense, a reduction in the number of new recrits accepteu by the service academies and the replacement of civilian teachers at these academies by military personnel, and the consolidation of anny arsenals, involving the sale of property and real estate. Army 3. The new Anny Chief of Staff has recently announced broad reform measures including asset sales, elimination of some of the existing operations, consolidation of units, agencies, commands, and directoraes and building new facilities where necessary, as well as upgrading existing ones. 4. Technical-professional training is expected to be strengthened within the existing budgetary limits, with trning and spedalized courses continuing on a limited basis. Future financial aid for courses tak in civilian istitutions by military personnel will be suspended. Reorganization of the system of personnel mobilition will involve the tansfer of 10 of the military disticts to existing barracks, and 14 of them will become delegations. 5. The current policy of self-financing of "liceos" wffl continue. These elementary and secondary institutions, which provide schooling to children of military and civilian personnel of the Ministry of Defense as well as to other civilians, are managed and financed through user fees by parents associatons. The Army provides them with trained teachers from its force to serve as instructors. 6. Other proposed measures include a review of the merit-based promotion systen, the elimination of the National Directorate of Logistics along with the diposal of its existing assets and faclies and the rationalization of nancial services. 7. The Arny proposes to continue to provide several serces to the community including nadonal health campaigns, construction of mads in remote areas, insallaton of emergency communication networks, and allowing civilians to attend the Army Engineerng School and the Army Advanced Technical Institute. Greater coodinaton -246 - ANNEX 7.1 with the Ministries may be sought in order to increase the effectiveness of these efforts. The Army will also transfer existing technology of national interest to the private sector. 8. Other proposed measures include the transfer of Army facilities from Palermo and Campo de Mayo in Buenos Aires to the province of Corrientes, the sale of housing previously occupied by the Army Chief of Staff, the sale of property abroad used by Argentine military attaches, the consolidation of military attache posts, an 83 percent reduction in the relocation allowance previously allotted to A'.rgentine military attaches serving abroad, and the dissolution of the command unit of the 4th Arny Corps. Air Force 9. The Air Force has embarked on a plan to decrease operating costs by maldng better use of existing equipment and thereby obviating the need to make additional purchases of spare parts, by eliminating less strategically impormnt flights, and by consolidating certain administrative and edlucational functions. In recent months, the Air Force has made progress in obtaining necessary spare parts from non-functioning equipment. Excess spare parts will be sold in the future. 10. 'The Air Force is -nducting a review of ight hours and will decrease or elminate flights of the Air Force Service on behalf of the Army and charge fees to the Army for future flights. In addition, operations of the commuter carrier will be funded entirely by user fees as will flights to remote areas of the country, to the extent possible. 11. Budgetary support for the Air Force secondary schools (Liceos Aeronauticos Militaes) located in the provinces of Santa Fe and Cordoba has been cut in half, and they wil become entrely self-financed in the future. Training courses provided by the National Institute of Civil Aeronautics will be eiminated and instead commercial airlines will finance training of their own pilots. Employment at the small Marmbio base, located in Antarctica, will also be reduced. Navy 12. The Navy plans to reduce the number of departments, restructure the naval education system, and centralize education facilities for enlisted personnel. Several commands and agencies will be transferred and consolidated including the exploration company, electronics workshop, and the Alfa floating dock. Others include the transfer of the Navigation Tribunal and the General Archives to the Libertad building located in downtown Buenos Aires. Buildings previously used for agenkcies currendy being phased out will be used. 13. The Naval Transport Command, the Lifeguard Service, and the National Directorte of Naval Material will restructure their existing operations. The Hydrographic Services of the Navy, which provides public services to the community, will be reorganized along with an administrative simplification. No specific details on these proposals have been provided, but minimal savings are estimated. 'I - E E\ - A t -247 - ANNEX 7.1 14. Taken together, the proposals presented by the Navy do not seem to imply cost savings, and therefore should be carefully reviewed in the context of the reform process. While some outlays may be desirable, for example procurement of spare parts to increase operational capacity, other significant capital expenditures may not be feasible within the current budgetary constraints. - 248 - AANEX 7.1 Table A7.1: MINISTRY OF DEFENSE CIVILIA PERSOBIEL, 1984-90 1984 1985 1986 1987 1988 1989 1990 MOO Administration 14,921 14,638 13,781 12,277 12,425 12,306 11,672 of which: DGFN M 12,977 12,719 11,935 10,882 11,056 lO,a72 10,268 Army 12,211 11,847 10,777 9,491 9,827 9,428 10,331 Navy 15,837 15,0B9 14,530 14,039 11,544 11,086 10,743 Air Force kI 22,000 21,200 19,900 18,500 16,800 16,700 16,571 Prefectura 595 562 566 494 426 398 436 Gendarmerie 655 702 661 527 515 497 SOO Total 66.219 64.038 60.215 55.32a S1. 506415 50.253 Meorandum: Civilian/Nilitory 0.35 0.45 0.47 0.43 0.40 0.38 0.43 CivilianNRiLitary y 0.28 0-36 0.38 0.35 0.31 0.30 0.34 31 A small fraction of uhich may be miLitary personnel. h/ Staff estimates for 1984-89. St Excludes DGFN civilian personnel. Source: Ministry of Defense, Ministry of Economy and staff estimates. :: &~: - 249 - ANNEX 7.1 Table £7.2: MILITARY EXPENDITURE BDGET, 1991-92 -------- 1991 -------- -------- 1992 -------- US$ million % of GDP US$ million X of GDP Expenditure by Category 3,255 2.56 3,669 2.40 Current Expenditure 3,057 2.40 3,422 2.24 Personnel 1,303 1.02 1,512 0.99 Operations and Maintenance 873 0.69 866 0.57 Military Pensions 881 0.69 1,044 0.68 Capital Expenditure 198 0.16 247 0.16 Procurement 156 0.12 205 0.13 Construction 22 0.02 30 0.02 Research and Development 20 0.02 12 0.01 Expenditure by Branch 3,255 2.56 3,669 2.40 MOD Adoinistration 418 0.33 461 0.30 Army 571 0.45 695 0.45 Navy 382 0.30 404 0.26 Air Force 420 0.33 431 0.28 Paramilitary 582 0.46 634 0.41 MiLitary Pensions 531 0.69 1,044 0.68 NmrwnS: TotaL Expenditure (exctuding pensions) 2,374 1.86 2,625 1.72 TotaL Expenditure (in percent of Central Government Expenditure) j 11.85 10.22 mational Administration and social security excLuding interest. Source: Ministry of Defense and staff estimates ;Table A7,3: MILITARY WAGES, ALLOWANCESt AND PENSIONS (OCTOBER 1991) (USO) late VeW1 Altoueas, Monthly seniority Pensirabh'le Worker lesideny Special Not Incame Not Irncae Eoployer Total Cost Net Avg. Nkber ;'/S e 1age Premlus Inc Contrib. PreomhL Premius (1nthly) (afuul) Contri. (armual) Pension of Tears bf el di el fI/ g hl I/ j/ 7i Served Liauteant General 436 654 1,'4 812 1,963 412 382 403 2316 29,579 707 44,121 1,609 40 a4jor Cenerst 431 641 1.077 840 1,918 405 377 399 2291 29,004 690 43,115 1,573 39 Irigodiar General 418 626 1,044 7n3 1,l6 381 365 356 2187 27,67S 654 41,135 1,490 3? Calenel 370 55S 925 611 1,536 323 324 342 180 23,774 S53 35,158 1,210 33 Lieutwnat Colonel 308 461 769 415 1,184 249 269 285 1469 18,806 t2i 27,552 971 27 Major 265 394 663 279 942 198 232 245 1221 15,401 339 22,379 772 21 Captsin 228 341 S 69 171 740 15S 199 210 994 12,510 2 17,990 606 15 First Lieutenant 1 198 297 495 109 605 127 173 183 834 10,489 215 14,969 496 11 First Lieutennt 2 174 261 455 70 505 106 152 161 712 8,940 182 12,679 414 I Second LIeutenant 147 221 368 37 405 85 129 136 sas 7,337 146 10,337 332 5 Sergeant Malor 264 395 659 409 1,068 224 231 244 1318 16,658 288 21,320 e75 31 Sergeant Principal 229 343 572 298 U70 183 200 212 1099 13,876 235 19,303 713 26 tSrgeent Adjunct 205 308 513 216 729 15l 180 190 946 11,924 197 16,473 598 21 Sergeant 1 162 243 405 131 53 114 142 150 721 9,079 141 12,468 445 1 Sergeant 148 222 369 81 450 95 129 137 622 7,816 122 10,627 369 11 Cotporal I 128 192 320 45 365 77 112 118 S10 6.506 95 8,781 299 7 Corporal 121 182 303 24 327 69 106 112 477 S,977 U8 8,018 268 4 Volunteer I 110 165 276 11 2a7 60 96 102 425 5,3Z6 77 7,11S 235 2 Gendarm_ 118 117 294 24 311 5T 103 109 473 5,808 86 7,792 261 4 Source: Ministry of Defeml ataff efat imtee. a* One hiundred and fi (Cy percent of base wage. h/ Pensionable Income less worker conlrlbution plus residen.ri arn icr-arity bj ease age plut alioances. i/ Monthly net Inc^me timea 12 plus the 13th Irncm paid In equal Instelim -e Two percent of onthly moge ti_m* the nunber of years served. In Juw ond Deceabtr, consistirg of pensionble income less worker cant di Monthly wage plus adninrity prmlu. ji lhirty six percent of pensionable Incums for officers and 27 percent of f ~~~~~el Twenty oe percent of pttlonable incom. Inca= for enlisted soldiers. fJ ,hirty five percent of monthly wage. ki Wet amual Inces plus worker an mployer contributios tlimes IJ. g1 on averege 3? percent ot monthly wage ranging Ita 10 percent for II Eighty two percent of pensiona1be inci' tlus 13. the Navy to 110 prCent for the Gci,,ermrie. Table A7.4: MINISTRY OF DEFENSE CIVIL SERVICE WAGES, ALLOWANCES, AND PENSIONS, WK'rOBER 1991 (US$) Grade Years or Base Albw* Monthly Senior Education Pension Ubrker Ntc Employer Total Pension Annual Net Service Vhge ancem a/ Wage b/ Prm. c/ Sup. dl Income Contr. Income Conlr. fl MOD h/ Income i/ el CoAts gI 30 25 240 359 599 300 ISO 1,048 220 828 254 1,305 524 10,766 29 24 215 322 S37 255 134 928 IS 733 22S 1,156 464 9,532 28 24 195 292 437 234 122 842 177 665 204 1,048 421 8.649 27 23 178 267 446 205 III 762 160 602 IS5 949 381 7.327 26 23 163 245 409 1is 102 699 147 552 169 870 349 7,176 25 22 IS3 229 381 168 95 644 135 509 156 302 322 6,618 24 22 140 210 350 154 87 591 124 467 143 736 296 6,071 23 21 130 19S 324 136 81 542 114 0,28 131 674 271 5,562 22 21 122 13 305 128 76 S10 107 403 124 635 255 5,236 21 20 116 174 290 116 73 479 101 378 116 596 239 4,916 20 20 III 167 279 III 42 432 91 341 10' Ss 216 4,436 19 19 107 161 261 102 40 410 86 324 100 511 205 4,214 18 I1 103 154 237 93 39 389 S2 307 94 434 194 3,990 17 17 100 ISO 250 B5 38 373 78 294 90 464 136 3,827 16 16 97 146 244 71 37 353 75 213 87 446 179 3,676 15 15 95 142 237 71 36 344 72 272 83 428 172 3,534 14 14 93 139 232 65 31 331 70 262 go 412 166 3,401 13 13 90 136 226 59 34 319 67 252 77 397 159 3,276 12 12 89 133 221 53 33 308 65 243 75 333 154 3,159 11 11 17 130 217 48 33 298 62 235 72 370 149 3,0S6 10 10 85 127 212 42 21 276 58 218 67 343 138 2,833 9 9 83 125 208 37 21 266 56 210 65 332 133 2,736 I 9 12 122 204 37 20 261 55 206 63 325 131 2,613 7 8 10 120 200 32 20 2S2 53 199 61 314 126 2,S92 6 1 79 119 198 32 20 249 52 197 60 310 124 2,557 5 7 78 117 195 27 20 242 51 191 59 301 121 2,485 4 7 77 116 193 27 19 239 50 189 58 297 119 2,454 3 6 76 114 190 23 19 232 49 114 56 289 116 2,386 2 6 75 113 189 23 19 230 48 182 56 236 115 2,362 1 5 74 110 184 Is IS 221 46 174 54 275 110 2,268 at Aloikwces are ISO peent ot base wage. bi Baae wag plur alkwae.e, el Tho p6asnr of monthly wage liws ounnbr of years of ervice. di ten pemena of monthly wage for a secondary echool degmue I5 pecant tfo a techakal degiee, and 25 pemer rior a unvesity degree. el Twenty-one pement of pensionbl income. V Tweny-fbut and one half pement of pensiable incotr. gi Net incm plus wo,*ar and employer contribution. hi On av.mng, 50 petcct of pesionable income with a "'u of 40 to 60 piewent. IncludA the thilteecAh moodrly salry (net incoam) paid in equal inaallmente In lunr and Dilccenber. Socs: qIs of Mas and as u eseima - 252 - ANLZ71 Tabte A7.5: ANAL MET BENEFITS PER PERSN FROMt RETRENCHMENT CUSS) Total -- ---------------- Year ------------------- Present Rank. 0 1 2 3 4 Value Lieutenant GeneraL (36,841) 11,109 10,402 9.632 8,80 1,264 Major Generat (34,963) 11,308 11,017 10,684 10,310 6,315 Brigadier General (30,915) 11,110 10.861 10,5GB 10,233 9,838 Cotor.eL (22,547) 10,368 10,606 10,816 10.997 18,173 Lieuternnt Colonel (11,152) 15,330 15,449 15,550 15,635 47,839 Major (5,256) 13,398 13,917 14,436 14,956 48,691 Captain 358 11,550 12,143 12,745 13,356 47,714 First Lieutenant 1 3,540 12,157 12,605 13,059 13,519 52,382 First Lieutawnt 2 6,569 11,598 11,960 12.326 12,697 52,792 Second Lieutennt 6,802 9,905 10,363 10,733 10,733 6.512 Sergeant Major 014,059) 7,916 8,504 8,504 8,749 17,980 Sergeant PrincipaL C7,386) 11,659 11,765 11,857 11,935 37,562 Sergeant Adjunct (3,697) 10,460 10,568 10,664 10,748 36.704 Sergeant 1 407 9,63 10,202 10,770 11,347 40,308 Sergeant 3,236 9,604 10,294 10,588 10,8K 42,588 CorporaL 1 5,604 8,964 9,226 9,490 9,757 41,225 Corporal 6.150 8,316 8,4S5 8,595 8,593 38,477 Gendrar and SatIor 6,036 8,253 8,497 8.741 8,985 38,841 Conscripts 3,5W 3,500 3,500 3,500 3,500 16,830 Soucte: Staff astimtes. -253 - ANNBX 7L1 Table A7.6: NOMINAL MIUTARY EXPENDIURES. 1984-1992 (USS) 1934 1935 1936 1937 1938 1939 1990 1991 1992 Pmi. 8udgt -M illion Aura1a.- Billion Ausuc. Triltlon Anustmim Miflino Pews PoMonc 62.7 351.3 677.1 1734.9 7.9 2"3.2 5.1 13.0 1511.9 MOD Adminismto 0.4 5.6 25.6 69.9 0.19 34.3 0.90 12 106.3 Ar-y 23.3 127.0 249.6 599.5 2.3 81.3 1.5 4.1 541.0 Navy 14.1 76.2 135.2 393.1 1.7 49.7 1.0 2.6 303.7 Air Face 14.2 83.5 149.0 405.S 1.8 4S.3 0.3 2.2 23.5 bmanmilimry 10.1 5B.9 1 17.7 286.8 1.4 39.1 1.0 Z.9 331.9 Opemtionm and .nmianune 373 332.1 647.2 1402.6 3.38 2023 3.05 i.73 365.3 MOD AdJEidKIZtic 0.7 23.3 221 60.1 2.06 55.4 0.76 1.55 t98.4 Army 10.0 84.0 166.3 343.2 1.77 43.3 0.81 I.55 145.T Navy 5.4 45.4 109.4 265.6 1.12 30.6 0.47 1.33 82.T Air Fain 11.6 10I.4 226.8 3962 1.70 42.5 0.66 1.59 142.9 PNiitiy 9.7 65.4 149.5 337.5 1.73 2S.1 0.36 2.37 296.1 PIOCUmocu 6.6 53.3 133.3 649.5 2.09 4.8 0.37 1.56 205.1 MOD Adminicia 1.2 24.6 2.1 238.7 0.76 233 0.10 1324 1445 Army 0.4 2.2 15.5 51.6 0.23 0. 0.01 0.03 2.4 Nvy 2.7 I1.S 53.3 129.3 0.49 3.1 0.10 0.05 15.6 Air Frcm 2.1 12.6 52.9 195.3 0.53 14.7 0.12 020 36.3 Panmilimay 0.2 3.0 9.5 33.6 0.08 1.9 0.03 0.04 5.S Cousttntioa 4.5 24.2 51.1 65.1 1.10 13.3 0.10 O 30.2 MOD Adminiaaiot 0.0 O.1 0.3 3. 029 2.6 0.02 0.02 4.2 Army 1.1 5.1 :4.3 52.3 036 2.0 0.01 0.01 6.1 Navy 0.4 0.1 1.3 2.0 0.01 0.0 0.00 0.00 0.0 Air oice 2.9 17.6 33.7 89.1 0.42 3.7 0.07 0.17 19.3 hnmiiraq 0.1 13 1.6 12.4 0.03 0.0 0.01 0.01 0.1 Reaench and Developmnt 1.9 5.0 3S5 20.9 0. 7.9 0.11 0.20 11.7 MOD Mmdsiniacioa 1.7 3.7 6.1 6.40 0.15 6.6 0.03 0.35 6.3 Army 0.0 0.0 0.0 .0 0.00 0.0 0.00 0.00 0.0 Navy 0.0 0.0 0.0 3.0 0.01 0.3 0.01 0.01 2.2 Air rvec 0.2 13 2.4 115 0.06 1.0 0.02 0.03 2.6 --mmiliury 0.0 0.0 0.0 0.0 0.00 0.0 0.00 0.00 0.0 Penal... 37.6 224.3 474.3 1203.1 5.9 159.4 3.3 3.8 1044.1 Total 150.5 990.7 2019.0 5196.0 25.5 635.0 12.1 32.6 3663.3 MOD Admistion 4.0 62.7 56.2 333.9 3.4 127 1.9 '.2 460.7 Army 35.2 2133 445.7 1047.0 5.2 132.9 2.3 5.7 6952 Navy 22.7 1333 299.7 793.5 3.3 83.7 1.6 3.8 4042 Air Vase 31.0 22335 464. 10982 4.5 115.1 1.6 4.2 430.6 Pimirlmy 20.1 123.6 278.3 670.4 3.2 66.1 1.4 5.8 633.9 Mhmoadum: Tac iaccludirg p_asio) 112.9 766.4 1544.7 39tL9 19.64 525.6 3.77 23.74 2624.7 Pesions PLym 37.6 224.3 4743 1203.1 5.9 159.4 33 S.5 1044.1 IA.F. 30.7 1335 383.S 973.4 4.3 129.1 2.6 6.7 3002 Tnrny pWnen 22.6 124.0 261.7 664.0 3.3 90.4 2.0 4.6 55.7 Fuad payenum 3.1 59.S 121.3 314.4 L5 3S.7 0.7 2.0 244.4 Fumajilazy 6.9 40.3 90.7 224.7 1.1 30.3 0.7 2. 244.0 Tuasypqm-a 5-1 29.6 64.7 165.2 0. 20 0.5 1.6 133.5 MOD paym 1.S 11.2 26.1 59.5 0.3 03 0.2 0.5 60.4 Memmadumr MWuiry of Dean IA.P. Cosuibuziaaal 9.2 52.7 98.5 261.3 1.2 333 0.7 1.9 212.9 Army 3.5 19.1 34.1 97.6 0.4 123 0.2 0.6 73.0 Nay 33 19.5 35.6 95.0 0.4 115 0.2 0.6 61.4 Air Fose 2.4 14.0 23.8 69.3 0.3 9.5 0.2 0.7 73.5 I1seta and Amonr3ic 26.2 238.8 299.0 719.5 2.4 106.9 D.4 32 323.2 af Woker nd Emplqer Contbluion - 255 - THE SOURCES OF FINANCING OF THE CO0MBED PUBUC SECTORT A MACROCONSISTENCY FRAMEWORK 1. The objective of tis annex is to examine the consistency bewen consolidated public sector boowing requ4irents and financing. As a starting point, the budget constraint fbr the public non-financial sector (NFPS) can be expressed as: (1) G + Is + iBg + i*B* = T + )Bp + OBf + Lg + 0B* + 0Rg where G = public current expenditures k = public investment ilk = net interest payments on domestic debt paid by the NFPS i*Bg = net inerestKpayments on freign debt paid by the NPS T = public revenues %B, = domestic bonds issued to the private sector WBf = domestic bonds issued to the Central Bank 01, = change in domestic credit extended by the Central Bmk nB*g = change in oreign credit to the NFPS OiRt = net change in foeign reserves of the NFPS Equation (1) sStas that the non financial public sector can finance its expenditures, which consists of purchases of domestic goods for consumption and ivestment purposes and interest payments on domestic and foreign debt through taxes, sales of public bonds, borowing from the Central Bank and extenal debL The net change in international reserves is influenced by the revenues from privatiztion and by the use of these revenues. 2. The budget constraint of the Centmal Bank is: (2) R ++ lR +±i*B+f + CBf B+ 1p ,+ Lg + OBL = OH where OH = change in monetary base iBf = net intrest payments on domestic debt paid by the Central Bank i*Bf net interest payments on foreign debt paid by the Cental Bank OR, = change in forein zeserves (derived from operions with the privat sector) OR, = change in foreign reserves (derived from operations with the public sector) 01, = change in credit to the privat sector n4, = change in credit to the public sector OBf = change in public bonds held by the Central Bank - 256 - ANNI 13.1 The principal assets of the Centrl Bank are net inteational reserves, domestic credit, and public bonds. These assets are bacldng the monetary liabilities of the Central Bank, i.e., the monetary base. 3. The budget constraint of the consolidated public sector is the summation of equations (1) and (2): (3) [G + I,-1] + rB + i*B*J + [i*B*f + iBa + 6Rp + oLp = nH + OBp + oB*r + 6B*f The first bracket represents the primary deficit, the second net intrest payments paid by the non-financial public sector, and the tird interest payments paid by the Central Bank? The summation of these ree brackets represets the consolidat public sector balance. lb arive at a borring requirement for the combined public sector, we add to the above balance the variations in international reserves and the net lending to the pnvate sector. The consolidated public sector deficit can be financed through monetary creation (OH), ecternal financing (OB*), and sales of public bonds to the pxivate sector (mcluding commecal banks). Note that the changes in the monetay base have been decomposed into remonefization and the infaton tax (see footnote 5 in chapter 13). 4. The framework developed above has been applied to years 1990 and 1991 on a quarely base. The first objective consists in reconciling the ex-post accounts of the public sector. The results are piesented in TIbles 13.3 and 13.4 of the report In general, the results are satisfactory in the sense that the diswrepancy between the sources of financing and the financing requirements of the consolidated public sector is relatively small. Several faItors may explain fte existence of this discrepancy: io the quality of the data; (ii) the heterogeneity of the sources used; (iii) the high inflation rate during 1990 and the first quarter of 1991; and (iv) the vaiation in the exchange rate during 1990 and the first quarter of 1991. 5. The data has been obtained from the budget published by the Mnistry of Economy, the Monetary Program of the Central Bank, and the BOF Inteest payments are presented above the line on an accrual basis. T.herefoir, arrears appear below the ine as a source of financing. The real intest payments have been used since there are no other staistical information available. The overal deficit is therefore defined as the operational deficit, which omits the inflation-induced portion of interest payments fiom the defict calculation. However, this measure is likely to underestunate the revenues from the inflation tax.? As the results are expressed in US dollars, the values expressed in local currency have been divided by the monthly aerage nominal exchange rate for each quarter. Foreign iterest payments ame shown ao an accrued basis, nd domestic interest payment me show on a nomia basi Arrears on extenal debt service are included in net foreiga borrwig. 2 For a discussion, see M. Blejer and A. Cheastay, The Mesuremt of Fiscal Deficits: Analytical and Methodological Isues, ' Journal of Economic Lrcate, December 1991. - 257 - ANNEX 13.1 6. The most interesig aspect of these results is the shift in the sources of financing used by the public sector between 1990 and 1991. This shift is described in detail in Chapter 13 of the reporL The primary surplus is projected to increase fzom US$2,002 million in 1990 to US$2,960 million in 1991. In fact, this impmvement is largely due to the exoess wevenues provided by the priation (about US$1,687 million in 1991). Note, while (accrued) externa nominal interest of the public sector is slightly lower in 1991 than in 1990, domestic interest payments increased over the last 12 months. The sum of the aboe resulted in a consolidated public deficit of about US$3,218 million in 1990 and US$2,121 million in 1991. Note, however, that about 50 percent of the total deficit in 1991 comes fm the bad results of the first quarter and that the consolidated public sector balance is projected to be positive in the last quarter of 1991. Since the second quarter of 1991, the most important part of the fiscal deficit consists in the interest payments and the amortization of domestic debt. Including the Bonex, this represents about 32 percent of the total deficit of the consolidated public sector. This illustates the fact that Argentina's government wants to preseve its creditworthiness, at least in the domestic markelt. In order to determine the financing requirement of the combined public sector, we included the variation in intemational reserves (derived from operations with the pxivate sector) and lending extended by the Central Bank to the privae sector. The net accumulation of reserves appears to be lower in 1991 than in 1990. Bltt, this result is mostly attributable to the first quarter of 1991. Overall, the borrowing rquirements declined frmn US$9,073 million in 1990 to US$6,494 million in 1991. -:-- . .-. . - 259 - ANNEX 141 GENERAL DESCRIPON OF THE PROJECTIONS 1. The generl purpose of the projections is to assess whether the proposed fiscal and monetary policy and major macroeconomic targets for inflation, reserve accumulation, and growth, are consistent with available financing for the public sector and the balance of payments. The projections are derived from a two-gap model that integraes the public sector and financial sector into a variation of the Bank's Revised Minimum Standard Model-Extended (RMSM-X). The model consists of: (i) a set of consistent macroeconomic statistics for the base year 1990 that includes public finances, balance of payments, national income accounts, the financial sector, and external and domestic debt; (ii) a series of exogenous variables and parameters which consist of assumptions based on past performance or targets; and Ciii) equations describing the relations among the variables that permit the projection of a consistnt set of accountsL 2. Because othe strong relation between public sector deficits, inflation, and poor macroeconomic perfrmance, this model differs from most Bank models by placing the public sector at the center of the analysis. The central macroeconomic issue in Agentina, especy after the assumption of external debt of the private sector, is the internal transfer problem. The model is therefore constructed so that the primary gap is in public finances rather an in the balance of payments. While the gaps are in theory closely related, positioning the gap in the public sector allows a more direct focus on public sector financing requirements, and allows the balance of payments gap to close tbrugh private capital flows that finance the residual savings-investment balance of the private sector 3. As with other RMSM-X models in the Bank, the model for Argentina has three basic markets summarized in the equations for GDP growth, money market equilibnum, and the market for foreign-denomiated securities. The goods and services market equilibrium as presented in the national accounts--the major aggregates being nvestment, consumption, and the trade balance-are a function of the rate of GDP growth. The flow equilibrium in financial markets is a function of the e ante supply of base money-the result of the supply of credit to the private sector and the Govemment as well as reserve increase-balancing wi the demand for money, which is a function of inflation and growth. The third market, that of foreign denominated secunties, is a function of demand for forign savings to finance the domestic savings- investment balances of the public and private sectors. These are described in separate sections below dealing with national accounts, the public sector, the balance of payments, financial markets, and debt stocks A. National Accounts 4. The national accounts are derived as in the conventional RMSM-X models in the Bank (1) GDP = C + I,r + + G + (X - -260 - ANNEX 14.1 Private consumption (C) and mvestnent (Ipr) and the resource balance (X - M) are functions of the growth rate of GDP. Public consumption (G) and public investment (I) are policy variables and considere in the first two year19091-92-to be exogenous The public sector and resource balance are discussed further below. B. Public Sector 5. Revenues (I) less noninterest expendihtures (G + (Id) equal the pnmary deficit (D). Revenues are a function of assumed elasticities of various taxes times their respective macroeconomic variables (e.g., trade taes for import-exports, VAT for GDP, etc.). Expenditures fbr wavs and goods and services, after adjustments for anticipated policy changes in 1991-92, are assumed constant as a share of GDP. Tbnsfers to the provinces and social security are a function of revenues in the same period. The social secunty flow deficit is assumed equal to zero. 6. To the primary deficit (D) of the consolidated nonfinancial public sector can be added the public sector intest bill-domestic and foreign-to project the financing requirment after interest payments: (2) D + iBr + i3 = nBg + nBg + nCy As outlined in the 1989 Country Economic Memorandum', equation 2 is the deficit and financing equation for the nonfinancial public sector, and states that the primary deficit (D) plus domestic (iB) and foreign (i'B,,) interest payments on public debt are financed through increases in domestic (nB) and foreign borrowing (nB) and credit to the Govenment from the Central Bank. Equation 3 is the nominal quasi-fiscal deficit of the Central Bank (QFDbI), given by the difference between earmings on its assets and interest expenses. (3) QFD = (dCC + ACi. + eR) + UMB The nominal quasi-fiscal deficit is financed through increases ir. the Central Bank's foreign and domestic liabilities; as noted below, because the domestic interest payments are zero and we have consolidated all non-IMF foreign debt with the Treasury, the quasi-fiscal deficit .,, equal to eamings on resere less IMF chargs2 7. Equation 4 represents the consolidation of the accounts. (4) d + iBg + iBg + QFD=)Bs + B CBg - C - eRb + 1MB 1 See also Anand and van 'Wijnbergen (1988) and Barbone and Beckerman (1989). 2 Also, the CenA Bak is no longer issuing in -bearing liabilide% so the tems for odter naonmonty liabilities n the 1989 CEM constency fmamework have been dropped. -261- ANNEX 14.1 Since in heory and by law the Govenment has t ensure that the money base is fully backed by international reserves, the only way money can be created is through purchases of reserves.3 This forecloses the collection of the inflation tax because: (5) 0MB + 6R. The change in the monetary base is therefore used to purchase reserves, and the last two terms are assumed equal to zero. Credit from the Central Bank to the financial system (Ch.) is also assumed to be equal to zero-otherwise net domestic asset creation would soon result in inflationary pressures that would violate the model. In practice, some small net credit creation is likely to support the unconsolidated public financial system; however, if strictly defined convertibility is to be maintained-i.e., the ratio of reserves to money base is not to be violated-then the resulting quasi-fiscal deficit will have to be financed through a higher primary surplus or increased borrowing. This may prove to be the achilles heel of the model. Finally, domestic bomowing (nB,) is constrained to zero so as to relieve pressure on financial markets to lend to the Government. This means that the financing requixement is assumed to be solely financed through the accumulation of arrears ("unidentified financing"). This then is the gap that must be filled to achieve macroeconomic consistency at international rates of inflation. The detail of the fiscal accounts is shown in Thble A14. 1.1. 8. The main assumptions for prices, interest rates, and exchange rates are shown in Uible A14.1.2. C. Balance of Payments 9. The general balance of payments is the conventional relain given in Equation 6: (6) R = X - M + in + r + oB The current account in the balance of payments is determined as a function of several exogenous aiables: export and import pnces, export grwth rates, import elasticities, and international interest rates (LABOR, i). The real value of imports is a function of import elasticiLties tmes the relevant national accounts vanables-GDP, pivate consumption, and investment. the interest bill is the product of the interest rate times the foreign debt stock as well as dividends on the stock of foreign direct investment. The price volumes and elasticity assumptions for the trade accounts are given in Tables A14.1.3 and A14.1.4. 3 In prctice, the kw couf as reserves dollar-denommatd Gvernment securies (BONEX), ad in any short period the Government can incras or decese the BONEX bacing of the base by some small portion. Hower, the BONEX component of the resve bacing has conistndy been less than 10 percent. and any large increas wuid trigge a parttlio shift in fincial market - 262 - ANNEX 14.1 10. The capital account incorpoates the projected foreign direct ivestment ) as well as debt flows based on amortztion schedules and projected disbursements (including extant and pxojected new commitments). Finally, the capital account in the balance of payments inrates the results of the unidentified financing provided to fill the intemal gap in public finances as a capital inflow; this in effect partially offsets accrued interest and amortization obligations to commercial banks. 11. Because the model links reserve accumulation to the money supply process (equation 5), reserve increases reflect the publichs willingness to hold domestic cunrency, and are estimated as a function of money demand (see below). 12. Since the unidentified financing gap closes ffirough the fiscal accounts instead of through the traditional balance of payments and because reserve changes are linked to money demand, the balance of payments can close through adjustments in the current account or in the capital account The current account could close the model through adjusting import levels (either as a function of changes in the GDP growth or import elasticities with respect to GDP, implying movements in the real exchange rate). The capital account could close via assumptions of changes in private6 non-debt creating capital movements. 'W have chosen the second alternative since the scenario makes no assumption about the real exchange rate that would alter the elasticities; in any event, we wiish to know the magitudes of necessary private savigs to close the mnacroeconomic accounts. The detailed balance of payments is shown in Table A14.1.5. U Fnancing Sector 13. The flow equilibrium in financial markets is established by the interaction of supply and demand Ar base money. The creation of ea ane base money almost exclusively through the balance of payments (since credit to the Government and financial system are, by construction, kreclosed); demand is the reflection of growth and the rate of infation. Credit expansion was then a function of prvate demand for financial assets esimated on the basis of past perfrmance of economic grwth and inflaon, and has a countepart either as prvate fign liabilities or remonetization and accumulation of reserves. 14. The financial sector accounts are given by the summation of the Central Bank asset and liabilites, and the rest of the financial sector Thus, for the Central Bank: (7) bOL + OCs (=O) + OC,, (=O) = tMB (g, Q) + ONW (=-QFD) The change in assets-net foreign reserves of the Cental Bank R,, credit to the Govenment (G.), and credit to the financial system (CJ-is equal to change in the monetary base and net worth. The change in the monetary aggregates are estimated on the basis of past willingness of the private sector to hold currency as a fimction of grwth (g) and price stability (r). We have omitted consideration of any nonmonetary, interest-bearing liabilities of the Central Bank - 263 - ANNE 14.1 since the Government has opted not to resort to this instrument as a mattr of policy. 15. Changes in the net aset position of the rst of the financial system are given by: (8) R. + 6RAS + 6C4 (=O) + C,,.= OBp, + 0M4 + 0C. (=O) + ONWb. (=O) Increased liabilities to the private sector, either from dirt borrowing abroad (OB,.f) or in the form of deposits (M4), are, after depositing reserves with the Central Bank (ORASe), channeled to the priva sector in the form of credit (6 C.,) or maintained in foreign curency reserves elsewhere- 16. In pmctice, the model works only with the consolidated finncal System. (9) 6R + iC4 (=O) + aC,. = OM1 + OQM + CiBf Capital inflows abroad find their way into the financial stem as M4 (l I+quasi-mone, QM)-Le., currency, demand deposits, savings deposits, and time deposits-and have thir counterpart changes in the stock of foreign assets of the banks and cedit to the priva sector. Priva foreign liabilities to the financial system are gie from the balance of payments. E. Debt Stoks 17. The flow equilbrium in the balance of payments and domestic financial markets also has two equations desibing the evolution of fign and domestic debt stock: (10) Bp. = B-t + OB (11) Bt =Bt1 + D =6 B (=0, 1992-95) Tne ernal public and priva debt stock in time t (Ak) is equal to the previous slock plus the debt-reating flows m the apital account of the balance of payments. This is the gapfil debt in the model. New domestic borowing is in fact constined to zero, such that the domestic debt stock is fAlling in the first five years of the model. In the out-years (to avoid the destabilizing debt payments associated with the Consolidation Bond) we have pemitted some domestic borowing to refinance !he det& payments and left domestic debt approimately constant. The projected debt flows are shown in Mibls A14.1.6 (for domestic debt) and A14.1.7 (for foreign flows). - 264 - ANNEX 14.1 E Closing the Model 18. The model can be run either with a requirements" approach or with an arailabilties" approach. A requirment approach tks as a given the objectives of GDP gmwth, inflation, and external eserve accumulation, and then uses the model to ensure that the consolidated public sector deficit (mcluding the Cential Bank) and expendiums are consistent with available financing. An availabilities approach aes as a given a projected level of available exUtnal borrowig and expected demand for money, and then adjusts the growth zate, fiscal stance, and reserve accumulation to confirn to projected financing and inflation objectives. . ~ ~ ~ ~ - -. - - 265 - ANNEX 14.i Table A14. 1.1: PUBLIC SE:CTOR ACCOUNTS 1tWl 1902 1903 100w 1005 1NG Is7 1g9 109 2000 2wi NmulnaAcbnlnstlaonCumutARuenues 10,116 25age 00.501 36.80 3z545S 36.250 42.2w 45517 40.061 s5o91 57.11o D0iandCualbm 17,33Z 24,113 2565 31.216 33.4? 3131 35.902 41,862 45 133 46152 a5524 VATW 5,055 10.570 UlAS3 1.204 17.507 1a.e4s 2043 21.901 23,720 25.45 27.750 Income bi 1.747 2.420 4.111 S,304 5.773 .15 6.571 7.015 7.405 6a014 8.506 Amsid e/ 502 507 745 eo0 853 oil 973 1.039 1.111 1.182 SasW E1 .62 2.315 2.440 2.68a 2.77 3.08 3.274 a405 373s 3.903 4,254 Fuel 2031 2.530 2.218 Z490 z700 2.0e 3.37 3.087 a3es9 nst 4.2ta Impart ml 612 1.,7 1.018 2.0i 2274 Z461 Z72 z2o0 1s10 3.424 3.660 Exporbs r 01 0 a 0 0 0 0 0 0 0 0 cOUwsI 4.631 ae40 1.570 1560 176 1646 1.904 2.153 2326 2.516 2.722 NonTaxRvaa 1.764 1.,65 1.055 Za62 z2.a 3.110 3.367 3,635 3.027 4.245 4.594 NationmlAdnddsitatinCurnrncpandliwau 20.5630 23.611 25a?4. 2X.155 31.134 3241 35.704 37.871 40Z1) 4ze4 45730 W&S GButalGiwnwnt 4.512 4.e22 5,401 5.633 6.103 8.57o 7.002 7.65 8,273 6L948 9Pa82 G&S6 SgaraI Goimmunl 1,190 1,7906 1.41 1.915 2067 .110 2.258 2470 ZM9 z2o6 3217 Othm 178 0 0 0 0 0 0 0 0 0 0 Trntam 10.023 14.657 15,192 15.054 15,12 19,463 20.677 2Z394 24.043 2M,m3? 27.791 Raouhn 5.027 1a.507 13,004 1.D32 15.027 11.132 18.30 10,677 21.107 2Z262 24,357 CaGaricipuion 10.66s 11.01? 11.332 13,640 14.64 i9564 17.00 l.363 19.620 21A412 Oatng 1.022 1,987 Z300 2.367 z46 zs257 2640 2.744 Z43 2,0S COtwTrareh/ hi1.0089 50 Z1609 2423 2.168 2.001 2517 2717 Z35 3.175 3.434 Intert (Awna4 4e65so 2e8s 3,425 4.354 4,751 S,050 5,447 ',351 5,312 5.223 4.690 camntb 322 loo 400 776 026 1.026 1.325 1.262 1,-10 1,1es 1.04S ForignV 4.326 Z525 3a016 3,577 a3s 4.0e4 4,122 4.090 4.100 4,058 3.6S4 Socdi Gaily SSaInps (130) 428 (1.367) a3334) (9.12) (Zs0) (Z443) (z036) (1.355) (1.160 (422) PublcEntErwpdw NninotnuSwding 36a 311 827 t24) (5s0 (4) (40) (36 (32O c2m (26) CtmrnntRewnmu 9.116 4.83 540 466 43e 392 352 316 264 255 Crrant Non-InterestExpnbums .8604 4.066 s54 S36 461 432 36e 346 313 261 Pubic SavIg (1.211) 2.027 4.177 Z384 z449 3.270 4.083 5.57A 7.377 8.638 tixs32 CqptdRin pB 1,637 1,76M 540 0 0 0 0 0 0 0 0 Cap li Expnlr Z210 Z410 3e6 a073 3,3 4.3 4.673 5.a74 6.180 7.107 8.173 Nations Adminlaion a5 1.325 Z468 2.75S ,158 3S88 4.204 4820 5,543 6.S7 T.331 PublGcEnrrpd 1,550 1.085 901 307 346 a3a 409 SS4 637 732 842 Nonilnancidl Public SactrlrcBan (1.79) Z403 1.t20 (65) (1.0641 174) (5S0) 200 1.196 1.731 Z759 Qu.sl-FlcaISurpluscdCmnuI9a8o*qr 64 (45) 107 354 430 570 607 s50 O- 1.075 1.,17 Oveal Balanc (1.7202 Z447 1,52 (334) (5465 (224) 107 1.o06 IS4 x0ce 3,92e NsatfxtarnralFnrcing 276 115 2125 397 (4206 (1.075) (1.441) (S21 (1.526) (2410) (2.38) Oisbtxmmnlsl 4.656 3.731 5.349 3,963 3.752 4.150 4,170 4.007 3a.o 3.813 2.23 Amorlolons s 4,319 3.618 3,224 3.as 4.178 5.235 5Sa11 4.es 5.41a 6.311 4.646 NetDomumcRFnncing (897) (573) 102 473 824 920 (1.172) (1.392) (1.40i) (1.434) (1.54) Netflrowing (634 s (573) 102 473 824 020 (1.172) (M,32) (1.405) (1.434) (1,549) Bow*ing 0 0 322 sin I24 020 640 No 900 1.000 a Ramyunt e34 573 220 220 0 0 Z012 z2192 305 Z434 1.549 Notoon.udocCredltt (253) 0 0 0 0 0 0 0 0 0 0 BCN Ouybacks - goalS SeuIty Incme TaxRac*t 0 0 0 0 0 0 0 0 a 0 Governent Purchm of Ds Guwminta. LI 0 (43) Fl andJaparsae war)r. Purhasam 0 (2.965)s Cash Dampsymenton Arms 0 (700) Budgt Surplus applad to BOCON buybacki (1.900a 0 O ExdmrlAddtjnd Fhundng 2.05 (a) (44) [5e35) 248 378 z20 1,163 770 1,125 3G9 Monmm Primday Suwphmv z657 5.170 4.783 3a.6 3S.87 4,206 4.856 5,552 aso0 o,954 7.ass Opwaoal Pdmey Suwplus 1.221 32D2 4.403 3ma 3.U67 4.206 48658 55Z 6.50 8,0s4 7.8 Gash SurcmolTroaiuwywI - 266 - ANNEX.141 TabAl,4. 112: PRICES, INTEREST RATES AND EXCHANGE RATES leel 1002 1003 1004 iSs ins 19u i*w ¶ 2000 0OO1 ERb Ral Inde (5 +-drwdueIf -150% -7.3% 30% 0.1% 0.0% Oos eon IsD% 0.0% 0.o% 0.o ERn ne hidex (1987-1003 se.a so eso 1o9 OS9 059 eso ese e5.9 e5.9 es.9 ER(pesosppwlIUSS) Use4 1.00 1.00 1.00 1.W l.OD 1.01 1.01 1.01 1.01 1.01 ER (paes pr 11JS8) -endo peflod am9 1.00 1.00 1.00 1.00 1.00 1.01 1.01 1,01 1.01 1.01 ER QUSSJpatpso 1.e4D 1.001 tOO 1.000 1000 0.WO . Q995 e.o MORI Nws aga Monhly oibsoa inU(re 1.0% 0.3% 0.6% 0a% 0.8% 0.8% 0.68% 0.% 0.8% o.m 0.8% Aimuel Domuelo Inrnrt (nominal) ll3% 21.7% 17.7% 14.3%A 14.2% 142% .2% 14.2% 142% I .2% 14.2% UBCR br pnaclbn / r.Os 3.8% 4.S% U.6S a.15% ees 7.0% rn 7.0% 7.0% 7.0% UBR IMF and WaddaBikcmfmae) .1% 3,61 45s% 5.a es*s. 7.0% 7.0% 70% 7.0% 7.0% 7.0% PoputatmoneGowlh 1.5% 1.5% 1.5% 1.45 1.4% 1.4% 1.4% 1A% 1.4% 1.4% 1.4% PopWefion(Mn.) 8527 3377 34.27 34.75 35.24 3573 0.23 326.4 37.2 37.78 3.31 ONPp pwapkla 2.233 Z387 Z436 Z484 2543 z2.03 272 2.749 z202 Z915 3.036 MUV Amnnual c) bl 2.1% 4.3% 3J8% 1.91 2.7% 14% 31% 18% Me% 36% 3.6% MUVulnddx(in&LDSDabO 115.0 119.9 124.5 126.9 130.3 134.7 139.6 144.8 I49.a 1552 ls0.8 Ava. Monihbt tnlnIion 7.5S% 09% 0.% 0.3% 0.3% 0.3% 0,3* 0.3% 0.3% 0.3% 03% Comet index (anmint< >) 130,0% 11.3% 7.0% 3.% 3.5% s 38 3J% 08c 3.4 38% Domnec Index 760517 848340 90553 94090 9766 i1o M t0Siaso ouisa 1 1i32oSI 1i7sJ 122o317 lvunsntIndex(anrwi c>) 1istos 511 7.0% asis ass 3As ass J.4 34X 3.8% 3.8% Inre riiant mndot 76S01 54 905539 940930 078506 1015489 loSiOCO 1001842 113295S 1175823 1220317 of Pwad avege 118CR. I 192 ligure I 0-7 hibllon (caisurnr pdoas). - 267 - ANNEX 14.1 Table A14.1.3: EXPORTS 199V 192 1 190l4 100S 16 - 197 19 19 2000 2o 1967 Real Expos (Annual >) ffzpn of Good.s -2L% 401 6.31 41 6.6% 6.6% 6.7% 8.7% 8,7% 6.6% 6.0% Expof d GOES 2.2% 1.7% 0.3% 0.2% 6.6%. M7% 6.?% .60% 6.8% 5.6% 6,9% 1. LWncick -2.0% 4.0% 6o. 05% 22% 2.2% 22% 22% 2.2% 22% Z2% 2 Card,. -zo0% -0ow 6L% 9.51% Z2% Z2% 22% 22% 22% 22% Z2% 3. Oter Agcullue Goods -2.0% 4.0% 0.O% 1110% 7.5% 7.5% 7.5% 7.5% 7.5% 7.S% 7.5% 4 Fal & O1k -2.06% 43% 9.0% 1OS 7Ai% 7.5% 7.5% 7.5% 7.5S% 7.5% 7.5% S. Manutac. Food & Bwr. -2.0% 4.0% 0.% 10.0% e .5% C.5% G.5W 6.5% 8.5% 0.5% &.S% 6. Paolmum 0.0% 40 65% LS% 6.0% 6.0% 6.0% 6.0% a.0% 6.0% 6.0% 7. Chemcals & PlasM -3.0% 40% 9.0% 9.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.a% IL TexIlk -20% 4.0% S.0% 9.0% 5.0% 5.0% 5.0% 5.0% 5.0% s.0% 5.0% 9. Oew ManulWle -4,0% 4.0% 9.0% 0.0% 6.0% 6 L0% 0.0% 0.0% 6.0% .0% 8.0% Non Faclor Se e 6.% -% 0.0% 6.01% 7.0% 7.0% 7.% 7.0% 7.0% 7.0% 7.0% Eappri. In 1967 Mh USS 1. Uvesick 1.016 1.0W. 1.123 1=9 1.256 1254 1.312 1,341 1,371 1.401 1.432 Z Cereals 1.125 1.170 1.241 1.,50 1.38 1419 1.450 1.482 ISiS 1.546 1.5t2 3.0m rAg klfluaGoods 4 - 1.075 1.162 1.271 1,37 1.4W 1S7 t.e90 1.62s 1.9e2 4,FatsaOlh s1.165 1.22 143 1.478 1.58 1.706 1.636 1.973 Z121 Z26D Z451 S Manuiio Food&Baer. 1.912 1,9D 2,158 z384 z587 2A607 34504 3.585 3.090 4.220 0. Perolsuni 258 279 207 317 336 356 377 400 424 449 476 7.Cherrdcelu&'laslic 790 a22 896 976 1.045 1.116 1.19 1i.250 1.369 1.45 1.568 a. Tedle S70 592 64 704 739 776 01s 856 BOB W3 90 aO amr Mnufachm 2.)D8 2.6 £127 a.40s 3.681 3.975 4.2"3 4,637 5.00 S,40J 5.641 Non Faeatr Servc .4139 Z29D Z473 Z.71 Z.68 3.0585 3,272 502 3.747 .4.009 4,290 Export Prioe indee Anual >) 1. Livesbck 9% -8.3% 3.3% 1.6% 3.1% 6.5% 7.6% 7.3% 6.8% 6.3% 8.0% 2 Cera 2.1% -1t5% -0.1% 3.0% .0% 10% 3.0% 3.0% 30% 30% 3.0% 3. OlherAgda*u Goods -2.5% -6.3% 3.3% 56% 7?5% 4.5% 4.5% 45% 44.5% .5% 4.5% 4.Fab & Oil tfl 7.7% 3.8% 23% 3.9% Z% 20% 20% Z.0% ZO% 20% 5 Manuac. oFood Beevr. 21% 4.3% 3.8% 1.0% Z7% 3.5% 3.5% 3% 3.S% 3.5% .5% L Petrolum -16.4% 1.7% -1.7% A06% 3.4% 7.2% 6.7% 63% 5.9% 6S% LS5% 7.Chermical&PInsUca 21% 4. 3.6% 1.9% 27% s5% 3.5% 3.5% 3.S% as% 35% *Tdll. Z1% 4.3% 3.6% 1.0% 2.7% 3.5% 65% 6.5% 15% 3.5% 3.5% D. Oter MLantclurs Zl.% 4.3% 3.8% 1.9% 2.7% 3.5% 3.5% 3.5. 35S% 3.5% 3.5% Expet PdcIlndcas (1687-100) 1.ULlvmslodc 111.3 1021 105.4 107.1 110.5 110.5 129.2 136.6 148.0 157.3 1667 2.Cwees 133.6 131.0 131.7 135.0 139.7 10.6 141L1 1S2. 1571 M10I. 166 3.Omar AgricultureGoods 100.5 9.2 97.3 10Z9 110.7 115.8 12A0. 12.2 131.9 137.6 144.0 4.Fab&Oils 103.5 ¶11.5 11S.7 11J.3 12Z.9 125.4 127.9 130.5 133.1 135.6 136.5 5. Kanulrc Food & Ber. 10Le 124 129.4 131.9 1354 140.1 145.0 150.1 155J3 160e 166.4 . Petroleum 100E6 1023 100.6 101.2 104.7 112.2 119.6 127-3 134.9 14.6 152.9 7.ChomicolsA,Plsma 114.9 119.9 124.4 126.7 130.1 134. 139.3 144.2 149.3 154.5 159.9 a TextI 114.9 110.J 124.4 126.7 130.1 1340 139.3 144.2 149.3 154.5 150.9 9. OIer Manualcreu 114.9 119.9 124.4 125.7 130.1 134.6 139.3 144.2 149.3 154.5 159.9 Expor In Curront MbL USS 1. Livestodc 1.133 1.081 1.164 1.317 1,385 I.S39 1,66 1,80 Z026 2204 z386 2 Cereah 1.506 t.543 1t634 1.842 1.930 Z041 2148 2251 Z379 2504 2635 3. Oer Agduibure Goods 953 929 1.046 1t217 1.407 1,580 1.775 1.903 2239 2t52S Z624 4. Fab&&Oils t227 1.374 1554 1.74a 1.953 2141 2.348 Z575 Z824 3.096 3.390 S. Manuiac. Food &Bvr. 2.7 2.401 2806 3.144 3502 3.3 4.416 4.950 5.569 .2s4 7.023 6. Petroleum 270 266 299 S20 351 399 452 S0f 571 645 720 7. Chemidole & Pblans gm 965 1.114 1.237 1,9 1.505 1.66 1.,45 Z04 2263 Z507 8Teatle 635 710 603 692 961 1.045 1.130 1234 1.341 1.457 1S584 9. Oter MniLunotwe 3,170 3,43D 3,69 4.316 4,761 5,3Q11 SM03 meso 7.475 a3s8 9,340 0J00% 0.00% 0.00S 0.00% ExpofTToals In Mh. USS Eport of Gods (ConstanQ 1057 10.999 11.915 13.007 10.691 14.60 15.704 16,852 17.966 19210 20.523 Export ofG&NlFS (Cons" 13.065 13.200 14,16 15.706 16.750 17.,e7 19.06t 2035 21.735 23.219 24.012 Emport of Goods trnf 12.107 11262 14.32 16.035 17.646 10.535 21.619 23.923 28.471 21s2s5 3z.423 EporbolGaNFS(Current 14.6__ 15.,'75 17.405 19.424 21.372 23.,55 26,168 20.965 32083 35,5t1 39.32 - 268 - ANNEX 14.1 Table A14. 1.4: IMPORTS AND TERMS OF TRADE 1991 1992 1993 1994 IW5 1Wa t99? 139 1999 2)OO 201 Impat SElFtos Imprs o Goods (AnnuWl c ) 0.7% 85.5% 1.5% 3.1% 4.75 4.8% Lo% 4.9% 5.0% .1% 3.9% Impots of GLFS (Amiu c$ 16.7% 48.2% 1.2% 32.% LOS 42% LBS LB% 4.8% &fl Los importElaly(emp.wrlGDPJ 13.1 a.7 0.4 0.8 1.1 1.1 1.1 1.1 1.1 1.1 0.9 1.Food &Consum0o G 37.4 4.0 0.4 0.4 0.5 1.0 1.0 1.0 10 1.o S.0 Petoleum G 22.0 0.1 0.1 0.1 0.1 0L1 0.1 0.1 0.1 Q1 0.l 3. hnermedldteGoot Ir 9.2 0.8 0.2 D.l 0.9 09 0.9 0.09 0.9 0.9 0.9 4. Capll Goods Ir 6.2 6.7 0.2 0.6 0.9 0.9 0.9 0.9 0. 0.9 eL9 NonFactorSServe G 4LI -0.9 .1 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Improts In 1U7 Mln. USS 1. FoodS Comsumr Goods 040 600 816 829 846 81 918 CSo 9m 1.041 1057 Z Petroleum 348 350 351 352 353 354 355 356 357 350 358 B. Irntrnedlate Goods 4,055 0834 S.869 6.D10 0.2J2 64tl2 .706 6.960 7.22 7,515 7.813 4 Capital Goods Z123 4.85 5,003sl 5=1 56 5.93 6,321 6,729 7.165 7.630 7.033 Non Factor Sevices 3255 3070 3,079 3,202 334 3.470 3.616 3.758 3.930 4,103 4.2D3 Inort Price lndees (Annual c3) 1. Food & Consumer Goods -2.9% -4.75 3.4% 4.7% .6% 4.4% 4.4% *4% 4.4% 4.4% 4.4% 2. Ptroleum, -16.4% 1.7% -1.7% 0.6% 3.4% 72% 6.7% 6.3% SOs 6.5% 15% a Irnlemnedlal Goods 21% 4.3% 11% 1.9% 2.7% 3.5% 3.s% 345% 3.5% 3.5% 3.5% 4L Capltl Gods LI1% 4.3% 3.8% 1.9% 2.7% 3.5% 3.S% 3.5% 35% 35% 3.5% Import PrIa lnicas (1967-100) I.Food&Consunfw Goas 101.6 96.7 100.0 1047 111.8 lie.? 121.8 127.2 1Z7 138.6 144.6 2 Petolum I10L0 tez3 100.0 101.2 104L7 112.2 119L11 127.3 134C 1438 132.9 3.a rnwmad btte Goods 1149 119.9 124.4 128.7 130.1 134.6 139L3 144.2 14113 154.5 150.9 4.CapitllGoods 114.9 119.9 124.4 126.7 130.1 134.8 13913 144.2 1493 154.5 159.9 Imports in Cuemnt Mlii USS 1.FoodtCoruw Goods 650 7W0 BIG 88 948 11.028 1.l11 1.21 1.324 1.443 1573 a Petroleum 350 358 353 569 3 a97 425 453 461 513 541 llnwrrnadata Goods 4.80 6.995 7.301 7.615 8.107 1700 9,345 10L038 10,791 11A11 1Z493 4. CapItll Good. Z440 S4 0.223 6.618 7.245 768 6.o8 2.705 10.695 11.709 iZam5 0.00% 0.0% 0.0% ImporlToflr In Mhl. USS ImpflatGoods(Cartmeq 7.167 11.857 12,040 1Z415 13.00 13.630 14.300 11001 15.748 1t.545 17.191 Imports of GNFS (Constant 10.422 14j. 15.119 185.6t7 18,334 17.100 17,916 1tA7D 19.678 20.84 21.475 Imparnt of Goads Cwarer4 4too 1397 14,693 15.457 146.67 1811t3 19.698 21.412 23.292 2S.357 27299 tImpo of G&NFS (Current) 11.843 17,164 18.525 19.52D 21.010 2X78e 24.742 26.859 29.t78 31.723 34,185 Terms sdTrade Index (1907-1 00 1991 1992 1993 1994 1395 199 1997 199 I999 2000 2001 ExportPricelndex 114.5 116.6 12L3 12M0 127.0 131.9 136.9 142.0 147.2 1SZS 1s51 ImpoitPrloandax 113.0 117.8 122.0 124.5 128.2 1329 137.7 142.7 147.9 153.3 158La Term olTmade Index 101.3 W900 985 98.8 99.1 993 99.4 99LS 99.5 99LS 99S Term olTmdr Index (Annmul c)>) Expo.tPrice Index 1J5% 13% 3.1% 2.3% 3.3% 3a8% 3.3% 17% 3.7% 3.8% 3.% Impot Price Index 0.4% 42 2.6% 2.0% 3.0 37% 3.0% 3.6% 3.6% 3.8% 3.6% Termsof Trade lndex 1.0% -22% -0.5% 0.2%L 0.3S 0.2% 0.1% 0.1% 0.0% 0.0% -0.0% - 269 - ANNEX 14.1 Table A14. 1.5: BALANCE OF PAYMENTS 199t 19i2 -i 199 i995 low iow 19'ge 19W 2WO 2001 Tmd.Bahbl 4.007 (1.109) (3J) 578 961 1.422 1.9Zt ZS.11 3X7 3.9w 5125 E of dGaaC 12107 12.826 14021329 lO.WS 17.04 li.aS 21.119 23.92 24.471 29.295 32423 dopo dbd s 5.1W 13.9W 14.09 15.4s7 16.65 15.113 19.6W9 21.412 239 2M357 27.29 I:S_Slr (I.O) (15) 7) (a73 cr3) (SaW I" ci5) (243 (146) 10 EKpoft dCWS 2736 Z747 3.079 3.8 0.724 4,120 4.567 £083 5.612 8.2 C.1 k4pn od IWS 3,743 3.682 3J:33 4.002 4.343 4.65 5.04 a S.ate 6.6 maw RaaoureaBalanc 3,000 (2074) 1a11) ( 382 867 .444 Z125 z0 3.92 .135 NatFactor mam (5.77 (4.6S58 (.43w) (5.288) (997) (4.618) (7.48 (7.918) (551G) (.04M 9491) Facd RAcdps 378 456 604 914 1.026 1.188 1.224 1.234 1.239 .220 1.230 hlthudonFlRmrmal 378 33S e4 914 1.026 1.166 1.224 1.23 1.2 1. 1220 1230 OhwFR 0 121 0 0 0 0 0 0 0 0 0 Factor Payinant (4.155) (5.1123 (5.o2 1.2D0) (7p3) (798 (aL712) (15 (2 749) (10.8 (1.7221 DhidandRepakdonbl (1.1773 (M (1.277) 1.48 (1.661) (1.914) (2170) 1Z452 (2 ) (103) (3.475) MLTinuasg (sic. 1) (4.455 (367) (2931) (543) (3507) (4108) (4.302) (4.37 KAM (4.497) (4.3701 IMF liars nt (314) 331) (2763 (MM (37 (30 (260) (150 (106) ( (3) ST hawt (16 (220 (518) (885) 22 (6) (1.6613 MOM (2175) (.38 (2.25 (2.70) OthwFP (44) 0 0 0 0 a 0 0 0 0 0 N eCwmtGTfrs 29 (i) (47) (44 (41 (40) 1 3) ( (4 (33) (31) CQETAccourStBaSUtC (Z746) (4.779) (5582 (5 1 tSS(771 (59i) (6.0) (1628) (5.39) (5268) [4.387) NatOiraEtinftmentbi 2.481 Z481 3.240 1*25 Z.18 2033 Z5S2 2.618 3.100 3.410 3.751 DabtCorw.& Pdntlmionci 1.974 1.857 Z140 0 a o a 0 D 0 0 Other 507 2 1.100 1.925 Zle.1 2.329 Z5O2 zs2a 3.100 3.410 3.751 Net LT TFlms 1.284 5 3.347 279 (157 (44) (S12) (25) (527) (1.4163 140) lORD 138 248 738 423 23S 139 137 11S 5 (35) (275) OB&DOtrUAlwfi h 242 527 303 307 295 33332 353 378 328 (172) S:LaIsrab S97 (465) 0 2 (18o) (n (467) (14 (252 26 (524) F.nuda Midst 0 (1r27 (143) Mo15 (175) (38 p75) (4q (747) (1.503 (574) Eigibafr DebtIOh 0 0 0 0 0 a 0 0 0 0 tnuflgtblar0ab uD" MM (I13) (205) (175) (24 (224) (262) (305) (3353 (35 RarIws4dnAmW 0 0 0 0 (154) (14) (154) (4623 (1.2313 9) DbttACn,son d 0 0 0 0 a 0 0 0 0 0 0 08hw 0 (127 0 a 0 0 0 0 0 a 0 BorS 395 (233) (851) (43 (5 (46 (2373 (20 79 8 (633) DabtCorrenlon C 0 0 0 0 0 0 0 0 0 0 O ths 395 (23) (1) (436 (5W5) (46 (Zn7) (27 79 8 (30) SUppIIrC1dlI1 (die (30 ( (12) 6 3 (13) (21) (36 (81 (M)9 PrIno Nan-guwamsnaad 0 200 2ZO 210 200 167 133 100 67 33 (0 lOa. IDB, IMF& Japauas hntmrs GuarirmeE 2.655 Not ST Prifts R"of u 7.586 2.2s 4.557 428 4.a2 226 2.8z5 3.087 -2967 3.565 CAPNIE EW (67 cm (0) (a) (t a ( 0 (0) (a) *( Utideneud (No tran PublicSotr z350 ( (4) ( 248 378 2:508 .3 77n * .12t 309 Ovrm BOP Surplus Z704 3.0W9 3.aos 800 800 soo eoo Boo aw D0 60w o inN tReass (--ncJ) 1Z704) 3.093 (380 Can (8M (80 ((an (500) (0 mm00) (60) c> in Gr Rmrvs (--Inc.) t9f4) (Z667) (3.54M (1.1 11) (736) (3 4 (205) 158 392 (607) Net MF (681) 338 (265 311 () (33) (8) (SD8) (9S) (1.192) (103) PuWsa 337 1.223 11i 721 974 1.192 232 342 125 0 0 Repuhas I5) (UR5 (3623 (410) (1.039) (I.5.5 (1.034 (84 (1.03 (1.192) (l03 OtwshCRARP sars(--rM.) (400 (74) 0 0 0 0 0 0 0 0 0 .c> inNMRduetoguaraodess(--rc)Jft/ 0 (3.0a8) 0 0 0 0 0 0 0 0 mn: Gross Rsrve LwlW! 5.974 11 S.S 1S.204 16.315 17.050 17.48 17.484 17.779 17.213 17.22 17.926 IbidRussid hi 5.948 90e4 9.579 10.690 11.426 11.6W 11. 996 11.60 12301 - 270 - ANNEX 14.1 Table A14. 1.6: DOMESTIC DEBT (US$ millions) 1991 1992 1093 1994 19956 low 1997 l99 low 2000 2001 Nw CommnlmtnhMesjlnlwaatCaplwltan 0 169D 3m sw3 624 an20 6o o 900 1.000 0 SIM.DOCROCandBOCEaib i 0 a 0 0 0 0 W00 B 9w0 1.000 0 sodalSacwt J Oac/ 0 663 1e5 317 324 a3 40 0 0 0 0 St4pplm Bonds 0 5.777 110 262 349 300 0 0 0 0 0 TaxCtdtBandsC 0 da 250 48 114 1St 168 0 0 0 a 0 Now Tobl Obbumsmmtn 0 0 322 69 624 gm 840 80 90 1.000 0 SIM BOCREXand BOCE 3d bl 0 0 0 0 0 a aW0 ao 900 1.000 0 Sos Sacurtly Bonds 0 0 165 317 324 363 40 0 0 0 0 UipflomBands 0 0 110 202 349 369 0 0 0 0 0 Tax Cdlt Bond/ 0 0 4t 114 151 ISO 0 0 0 0 0 TotalAmorAWSOIm a6 573 220 220 0 0 2012 2.192 2305 Z434 1.a49 BIr BOCREX andBOCEa/bt am5 S73 220 220 0 0 0 0 0 0 0 So5Ia Sacurity Bods 0 0 0 0 0 0 1,185 1.345 1.424 1t503 863 Suppilomranfl 0 0 0 0 0 0 537 589 61S d5 am89 Tax Crdt sonds dt 0 0 0 0 0 0 250 255 261 211 298 New lvuau ToUl Inlt Iaki 308 10ea 40 776 924 1.025 1.324 1.262 1.213 1.165 1.045 BIC, BOCREXandBOCEatbi 308 160 87 84 100 105 163 250 341 431 431 SodiS- Scul SYncsof 0 0 a 65es 217 324 311 365 2m1 193 99 26 Saqziuu Bondsq/ 0 a 110 282 349 389 482 421 379 33s 268 TaCbditSondsv O 0 48 114 151 168 314 300 300 3ao 300 NawBoonowiDngamesllcCrdq 0 0 0 0 0 0 0 0 0 0 0 N wBorrowing& (n t CredSq 0 0 0 0 0 0 0 a 0 0 0 Dasbuwose bnts 0 0 0 0 a 0 0 a 0 Amaritzalons 0 0 0 0 0 0 0 0 0 Total Dobw 2300 18.8137 15.344 lS.1117 1641 17.561 la1380 1522 14,l13 12.960 11,409 8C BO13EX and BOCE a bi 2.300 1.727 1,507 1.287 1.287 127 2087 28 3787 4.767 4.737 Social Security Boned 0 8 540 5.720 5,043 6,406 52 3,914 Z490 987 124 Supoll Bonds 0 5.777 5.867 6l,49 66491 6r7 6.30 5.721 5,6 4.45S 3.767 Tax C,.itBands 0 Z50 254ti 2e661 Z812 2.980 Z730 Z730 Z730 Z730 Z730 Nswlouowlnp Pi¢onsticCredlt) 0 0 0 0 a 0 0 0 a 0 0 BOCON Cancietbon (Crota 0 3.315 0 Social Socialy CshaSavinigs lncouTa fRemipta) 0 D 0 F Vadr OfaebttRedudlon a 0 0 Budget Surpus BuybacLs 0 1.990 0 FneiValuODebt Reducifon 0 Z341 0 VPF PrivetEzalon Receipts O 0 89o Face Vlu Of Debt Reruedon 0 1.054 Discount 161 Is5 15 10 a/ Existig stck Ickxdes MC and BOCE sictuds t3 bcan in ddlar denminted honds end 65D rriton hI wspplbr crdt hi 1991. b DOD hi 1991 was reducd by US6S r0n6 owith can obn of BOCRE1 to 80E df tndudcs SS O0CON and Obrm Sodlals sme below lenrms). dlAccumuield goavmrnent bligons for los cafnyu of pd vate cmnpanies. Conwnimnes from 1997-2000 mpmntappr 50% romlover of BOCWN a/Intrest paId on U1.9R. V 5% of US$ 1.6 bllion in pratsflans. - 271 - ANNEX 14.1 Table A14.1.7: FOREIGN DEBT (USS millions) 1091 19ow 19ow 109m 19N5 1 1907 1996 1999 2000 2001 ToW Dlrburmnb 6.474 11.695 9.601 8274 850 9.455 9.292 6.5 a.046 6.197 a.427 BONEX,BOTE, BOTESO and Euobond use 1.2W 90 t0 1.2C0O i,125 1.500 1.000t,O 1.0.0 500 World Banik ao 4a1 1.m1 7 tsI ao 471 Wos 0os o 403 IDB & Other MilaWl 450 746 1.000 5S SOO 625 756 850 950 i.OOO G Pari CLub 1.122 0 .60 670 500 700 1.150 1.150 1.150 1.150 70 SupplieandolidarBlalecals 0 200 ISO ISo tSO ISO I50 IsD 150 150 150 FinancaMaikbtacb 0 0 0 0 0 0 0 0 0 0 0 Eigib for Debt Del 0 0 0 0 0 0 0 a 0 0 0 lndgib forfDebiod 0 0 0 0 0 0 0 0 0 0 0 Reflbaic.dAnare 0 0 a 0 0 0 0 0 0 0 Private Non-gubia ed 0 200 200 200 200 200 2130 200 200 200 200 IMF 337 1.22 1.170 721 974 1.102 232 342 125 a 0 ShorTrmn ZWO 7,6" 20e 4.557 4,29 4JI27 aZ25 as 3.057 Z957 aS.S Urildened Source 2.350 (0( (44) (3 246 376 2.506 1.163 779 1.125 300 Total Anmatafoin 5.46 304 3.735 3.a3 4.2S4 5.357 5.77 SOS1 S56655 6.711 SA0 1ONO. BOM BOTEBa.d EmbandE SS 1.433 i,tsi i,O5 1.7w5i 1.57 1.737 1.207 921 992 1,133 Wodd Ba 322 s33 32 3o0 253 320 334 490 597 eDs 078 09&OthrMulIdSeraI 211 n2i 222 232 205 290 426 697 572 672 772 Pas Club 425 465 40 me6 6oo 1.057 1.637 1.314 1.402 1.124 1.224 SL.ppfl ando ee0Btaala 168 StO 215 1t2 144 147 153 171 1m 3m 409 Fkianel Madkis 0 127 143 27S Ila 3S8 378 43S 767 1.s3e 574 ElglblelorDetDeal 0 .*0 0 0 0 0 0 0 0 a 0 InefglbiefrrfebtDmsl 127 143 205 1ua 24 224 281 305 JOS 305 RefkincdAras 0. 0 0 a tS4 1S4 154 482 1231 269 PuleateMNn-gu_nnmd 0 0 0 0 0 33 87 100 133 157 200 _.' mg9 5 382 410 1.03a 1.555 1.38 88 1.003 1.192 103 ShotTem *zeoo 0 0 0 0 0 0 0 0 0 0 oushni Sedstsomu U 0 0 0 0 0 0 0 0 0 0 0 Totald tt 4.934 2ess a725 4.730 5,342 609 t,541 0.730 i9O7 7.166 7.243 RONEX BOTE BOTESO end EurobondB 6S 436 Sol 570 s5o S2 549 530 525 526 502 WolddBank 209 166 220 2U 329 385 36O 351 35s 354 344 GD &O0berMsdlIalatrts 175 131 165 245 279 32 363 345 409 432 437 Pais Cub Sa4 341 ass 80 0 25 ead esi on e17 tO4 sOD Suile.endol erEmGitwaa 270 91 tW 123 125 139 143 141 139 127 106 Fi|nana Mediarkt t.e35 1.103 12 ts 1,506 1. 1.784 1,06 lii 1.616 1.761 1.616 EftbleforOmbOsaI 1,935 1.010 797 193 1.012 1.07s 1.121 1.155 1.1t9 1,189 1.o54 inhIlgli 1wrDebt0Dul 0 94 82 104 109 107 94 79 2 43 25 ReLinordAffwso 0 0 409 -o S3 582 589 s77 565 529 537 pdvaleNmu-gmuantd 127 136 171 232 258 295 317 325 331 334 335 IhL 314 331 276 300 007 s00 260 150 106 42 3 ShartTenm 166 220 SIB 8J5 1.28 1.681 1.979 Z17S 23w 2625 z20 Urnidenred Source.^ ot 1 0 (21) (02) ltt) 101 199 292 353 441 Totl Db bf2 as 73,57 7S.7a7 80.379 84.3 88.772 92288 955t2 97s974 99.480 1M073 BONEX B0rE. BOTESO and EuS bonds 7.772 8683 a.032 7.69 7.040 6.578 6.341 .134 6213 6221 5.s9 World Bank 2o7 a a037 4.404 4.e2 S,os3 S,201 533 5.454 S,4a2 5.42S UG ID3 & CO iliehr MdNfater 3.170 3AW1 4.475 4.782 5,077 A.412 5744 6.007 66475 oao3 to30 Pafl Cub 7.130 6.729 9.52 9.,31 9.371 9.004 8s17 8.352 10 8.125 7.601 Suppkl doand l oerBialraa 1.s 1.752 1.687 1.675 1,661 1.684 1,671 1.6s0 1,612 1,374 1115 Finandal Mt.ke 27.129 2.3S54 26.342 28.137 27.95D 27.601 27.223 26.768 28.021 24.48S 23.911 EIlgtefbr DebtDeal 2Zt84 2039 1a.374 16374 18374 14.374 18,374 18.374 18.374 1a.374 18.374 ineligble for Debt Dea 4.25 Z415 2272 z067 1.as8 1.68 1.481 1.160 575 570 26s POI Bond 0 0 7.106 7.906 7.ew 7-.542 7.3e6 7.234 0.77 5.541 5272 Privae Jn-guraned 3,492 3.62 3.92 4,092 4.22 4.450 4.592 4.022 4.759 4.792 4.722 IMF 1564 Low2 3.67 3,989 SS125 3.562 2.75s 2.253 1.295 103 0 ShanTemi el 1,298 89" 11.772 .330 20.6s 25.S 27.SS1 30.436 33.523 38.49D 40.0s5 Uridwened Sourcel a/ t ; 30 8.6 44 (50 M 4n 2,552 735 4.s1S 5.t41 5.960 Memor Pubic Debt 6MW 60.30 6.103 5.SQ7 S6.7a3 s5o5 60.145 80.484 %az2 S5.178 5s9 P*atO Dt 4.454 Iam tsis pa 24,390 29p64 32z43 35.128 385,1 41282 44.7 - 273 - STATISTICAL APPENDIX _D - 274 - STATISCAL APPENIX CONTENS Mreq AscMent Nationia BUgs, 1992 1.1 -1.8 Current Expenditures byJuid i .......................................Junslro. 275-2Z1 1.9-1.16 Capitd Epandiua by Jurisictio ....................................... 283-290 Fsal accoutan 193392 2.1 Consolidabd Public Secor ................................................... 291 L2 NationdAlminm ason ..................................................... 292 23 Social Se c u r i ySyS ...................................................... 29 2.4 Public Entrpris .................................................. 294 2-57M Revenu by Scare, 1977092 ............................................... 295 2.6 Efficintbs and lx Hndcs 1 9 702 ......................................... 296 2.7 Mm Retenue by Souse, quarly 193- 9 .. 297 Pablic Enpcyme ad VAg, 19093 3.1 ToI Fde.l E Np mn p l. .i n e s 299 3.2 Natknal Amininiation: Refirwm P tm .................................. ..... 300 3.3 ReknencmnntPrajain B4det and off-Bate ...................................... 301 3.4 NatioduAdmmniWaio Refrm Pam in Buds .......... 3 33 Dccentaroad Agenciev Reform Prgam in B ................................... 303 36 Refonn Prgrnp t in Buda ... 304 3.7 Public Enterprises Nonnl . 305 3.8 Naionad Admtnion VpcEM . 306 3.9 Nationa Adminsuafton Compemsaios 1990-92 . 307 3.10 Toad Public Sector Emnplq'ment196.. ..0.. ... .............. 30 ExmnIues nd othe hm of Seldcd Wmisues 4.1 Te Prsidcy. 1992 ....................................3....................309 4.2 finisy of Hldi, 196-1990 .................................... 310 43 Soci Security Conrlbuton 1992 .............................................. 311 4.4 PubIc fePuno. Fnd Dirbution, 1956 .......................... 312 4.S Mnisy ofDa a n , 11 .......................... 313 4.6 Coyosiio ofb M Exendie for Sd= Comuties ............................... 314 Public Debt 5.1 Domesic Debt, 1989-92 ..................................................... 315 5.2 vIei nDebt, 193-92 ...................................................... 316 End Account 6.1 Balae of Phymen, 1970-92 ................................................. 317 6.2 Nominl Exchage PaRes, 1970-92 ............................................. 31 Naional Accounk 1970490 7.1 GDP by Se Oigin 1970 a ............................................. 319 7.2 GDP by Scoid Origin, GrwiR ........................................... 320 73 GDP by Seiim Origi S %ofGGDP FerwCo . .................................... 321 7.4 GDP bySc al OrigfiTho, usds of Peso ; ...................................... 322 - 7.5 GDP by Sectorial Origin, S ofGDP at Carirt Prices .............. .---- 323 7.6 GDP by Eupedis, 1970Purs ............................................... 324 7.7 Grss Fixed Iestment, 1970 Psos.325 7. Grss Fixed eatment, Gwth Ras .......... 326 7.9 Gram Fixd esmen;t, % ofGDP at Cmn= Prices ...... ........................ 3... 7 2 Ptice Idicator, 1961.92 3.1 Pracipal ndcatos, AnnualoPuI c _.entg ChOae................................... 329 Monetary Indicate 9.1 Private Sector Holdbgs of FiancidAlMas, 1930.92,Thousund Pesos ....................... 330 9.2 Ewonhion ofReserves and te Monr Base, 1991.92,1US$3Ml5 ......................... 331 Pbpukat 1960-90 101P eian ....................... ................................. .. 332 - 275 - Table1.1: Argenda - Fedwa Nen-nsmrs Epenlwesinby Functmnd Kemp IUS milEeX Tota Wage G&S Transfer Leislative and Judial Branches h s0 544 87 19 Senate and Congres 306 259 41 6 Judciay 344 285 46 13 Presidency and Fonq Minisy 947 414 327 207 Prsidency 708 339 246 123 Forign Ministry 239 75 81 84 Ministrioe of miterio ind Justice 893 496 130 267 Defene 2610 1791 594 225 Minitry and Joit Chiefs 992 S02 265 224 Army 734 614 120 0 Navy 442 366 76 0 Air Force 442 308 133 1 social Sector 2144 436 268 1439 Educaion of 1321 34S 61 91S Heath 463 47 163 252 Housing di 37 2 17 19 Wdfare 122 24 19 BO LAbor 202 19 9 174 Econonmic Sector 1500 751 422 327 Tax and Custom Adminitration 672 478 196 8 National Highway System 176 64 24 as Agriculture! . 326 141 75 110 Odien 327 69 137 121 Treeury Obligadons fl 3585 397 19 3169 Salary Enhancemenft 355 289 0 67 Pinlic Enterprise 1919 0 0 1619 Militay Pension 897 0 0 897 Provine gJ 421 42 0 379 Othwr 294 87 19 208 Total 12328 4830 1845 5653 1 'Ovwn' spendig of ntional administration: trf by cononic clesfiestion inci'ot' 31. 32, and 61). bt Tribual do Cuentas inchuded in Senate md Congres. i Includes US$724 nilion for universitie. df FONAVI Housing Fund adnistered by Mintry of Hsal nd Socda Action. of Includes MOSP expenditure in INTA. agricultre pdeoy, grin storage end veteriny medine. fI Does not include revenue shing under law of copwtpstioi consit soely of judiction 9 1. gi inckides aid to ria del Fuego aid Buenos Airs and Provincial Education Fuid. Source: 1992 Congrsionally-approved Buoget (February 1992) end Cntadurio General de t Nscion. - 276 - Talbu 1.2: Auata - Ezpmws. of tho 1aslSve mu Judhil Brish. of G _ou at fUSs mnion) Currant Epwdtues TOtal Wages G&S Tranfn Legiae" 284 239 39 6 Snat 3 71 13 0 Conorss 141 119 22 0 PubEctiorn Ofles 19 1 7 2 0 Libray 19 19 0 0 Congrmionrl Medied Plan 15 13 2 0 Senate Subsldies to Nan-profit Entidam 1 0 0 1 Congres Subsidie to Non-profst Eritit 5 0 0 5 Court Systa 344 25 46 13 Supraen Court 41 41 0 0 Lower Court. bh 293 237 43 13 Court Special Investigations 8 a 0 0 Nadonal Jnmtico Fund 2 0 2 0 BuWIlmg Construction 0 0 0 0 Tnibud de Cuenta 22 20 2 0 Tot 6150 544 87 19 4/ Non-interest expenditures: aba indudes Tribua de Cuentas, the sxturnal suitor of the Trasury. hi Trotf ae are to the court systear pensioners. Source: 1992 Budget (Februery 19121 and Conteduria General de I Nacion. - 277 - Tabl 1.3: Argentbe - Expendltwee oft. Pre_wdensy end Fomeim YMtw (US$ mflion) Curren,t Expenditures To2a Wag G&S Tranfesf Presieny 708 339 246 123 Adrrninieon 49 21 22 B Personnel Adrninrsfratianf 6 5 1 0 AnTi-dn Cwnpdgn 13 2 11 0 NationS Plemin 5 3 2 0 Science &Tscb Poicy Implementatko 6 5 1 0 State hItelligenc 115 110 5 0 Entrer il Pronction bJ 20 0 0 20 Sttjsdtef Sswice 22 8 14 0 Comnmunaictioe Secreterist 18 i5 3 0 Nationd Tourism Fund 30 5 24 0 Sports Pronotion and Notionad Fund 7 1 2 4 CNEA 212 68 143 1 CNEA Rosarch and Development 29 20 8 1 CONICET Promotion and Scholamhip cd 72 0 0 72 CONICEr Rmearch and Development el 93 07 8 18 Secret Low 18.302 0 0 0 0 nigBm ration Office 0 0 0 0 NSionII Pubic Adrnistraetion bsttute 7 5 2 0 Wildrfe Reearch and Conservation 4 4 1 0 Others 0 0 0 0 Forein Miniry 239 75 81 84 Aid to bording countries dl 76 0 0 76 Forign Policy 157 75 81 2 Ministry Infrastucture 0 0 0 0 Protocol a 0 0 6 SacretLaw 18.302 0 0 0 0 Toal 947 414 327 207 Meno Selery Enhancemnht funded by the Treesury. of which: Presidency 23 23 0 0 Foreign Ministry 3 3 0 0 a/ uncii6n Publics. b/ Uncategouized trnsfers (pw4uricipia 1319,91. of Grants to indiwiduds fp.p. #31 50.801). d/ Grants to various aid progrann. Sonrwt. 1992 BudSgt (Febuory 1992I and Corntaduis Genral de Is Nadmon. - 278- TWt. 1.4: ArguSa - Eapendls of do. WMlItd of do htiem and Judo. UUS mirleon Cunm Expendiures Toal Wage G&S Trmfere irtryof lbst.1 699 3SW 91 212 Adniniradon 10 4 6 0 Elation S 3 1 2 Imdgr!01er a 7 2 0 Sniation 2 0 2 0 National Cee 14 7 7 0 Potcl Campaiwn Fw 29 0 12 17 Fedwi PaieC Force 25 20 6 0 Feder Police Ret _mes Fund 3 1 2 0 Reguar Police Force 407 354 54 0 ATN Provincial Fund bl 192 0 0 192 Mhiitry of Jus 194 100 39 55 Admimiatration 22 20 1 0 Penal Syetern S5 77 19 0 Pena System Social SommtV 55 0 0 55 Car LUweing 20 2 1s 0 Genea Inpection 2 1 1 0 National Regis" 0 0 0 0 Total E93 496 130 267 Mane Say JEhent Prournme of 120 120 0 0 af Grant to unspecified nan-profit entt_. bt Coparticipated lundn withlhd to finmae provicdi delfiita US70.2m is eanwked for Tiwrr del Fuego. oc Treunqy-maged progrm 113. 209. 247. Source: 1992 Budget Felruy 16921 and Contduri General de l. MaNin. -279 - Table 1.5: A,guudfru - M'on-lumeat. Expeiwskw af the Milktay (US$ esmlion) Current Expenditures TOWa Wages Gas Transfre. Ministy af Dafansa 989 501 253 224 AdministatIon 76 4 71 2 National Guard 254 234 20 0 Compilanos with Law 18302 'S 32 30 2 0 Coast Gu.rd/Naval Prefect 35 0 35 0 Mational Guard various 1 1 0 0 Coest Guard 180 I58 22 0 Defense hkudutriss 177 67 106 3 Defense R&D 5 3 2 0 Coast Guard Pensiors 70 0 0 70 National Guard Pmions 142 0 0 142 AF' 3 1 1 0 Antarctic Plan 1 3 3 3 7 Anny 734 614 120 0 Operations 701 603 98 0 Milftry Geographic Institute 4 3 0 0 Mriaery Schools 5 5 0 0 Saniitation 3 0 3 0 Prjecfts (Earmarked Ftsids) 22 3 1 9 0 Navy 442 356 76 0 Oparaitiom. 375 316 60 0 Economric dsvelopfment 1 2 1 1 1 0 Special Works & SoMarvs 23 10 1 3 0 Sanitation 24 23 1 0 -Miltay Schools 7 7 0 0 Ak Force 442 308 133 1 Operations 319 233 35 0 Earmarkad Funds for Opeationm 19 0 1 9 0 LADE 1 2 2 10 0 Developmernt of Civil Aviation 2 1 1 0 Development of Air Technology 3 1 1 0 Promntion of Aerospace Industry 20 0 20 0 .Airportts 46 5 41 0 Hospitals a 0 0 a Sanitation 12 9 3 0 Education 10 7 4 0 R &D 0 0 0 0 Jo"n Chiefs at Staff a 1 2 0 Total 2610 1791 594 225 Memo Salary EnhanceetProrarme 1 i is 0 0 "Treasury-managed pmragrmn #1282. Source: 1992 Buidget (Februay 1992) end Contaduria General dse laNuci.. - 280 - T bb 1. Argent - Non-teueft ExpendIture. of th llili of Health. Lasber and Education USS nmililon) Current Expenditures Totd Wooa GaS Tranfaem Minlutry of Health and Social Action 521 73 198 350 Health National Health Policy 32 119 9 4 Hospital Infrastructure 2 0 0 2 Heath Clinie Construction 0 0 0 0 General Health Care e/ 44 8 a 29 National Heath Ineurance IANSSAU bI 217 2 4 210 Preventive Health 128 6 121 2 Sanietaion RegulatIon 9 9 1 0 Provincial Aid for health care 3 0 0 3 Preventive Environmental Health 25 5 20 0 Social Cevarago in Health (ottery fundod) 3 0 0 3 Housing Housing Poliy 2 2 0 0 FONAVl c/ 25 0 14 12 Waod Bank Housing Loan d/ 5 0 3 2 Urban Development d/ I 0 0 1 Hotming Asistaence Iottery funded) 4 0 0 4 Wdfae Social Action Polay 16 13 1 2 Socia Action Construction 1 0 0 1 Social Nutrition Prograrn and PAN (lottery funded) dl 22 0 1 21 Welfre Coverage (lottery fundedi dt 24 0 a 1B Human end Family Development of 55 9 8 38 Adolescent Halfway House 4 2 2 0 Mity of Culture and Education 1321 345 61 915 Educetion Budget end Policy 45 14 30 1 Teacher Education & Training a3 83 0 0 Cultural Budget 16 12 4 0 Tranafere to Univ eritim 724 0 0 724 Fiancial Aid for Private Univerities 30 0 0 30 High School 218 206 12 0 Agricultural Education fV 70 0 0 70 Technical Education Council (CONETI 17 17 0 0 Sientific Rosearch ga 42 0 0 42 Medical assistance for students 9 5 4 0 Hospta services hi 39 0 0 39 Publio Lbray System 1 0 0 1 National Cinemanographic Instiute 5 2 2 1 Permment Student Fund 5 0 5 0 Ntional Equal Opportunity Scholarhip Insttute 2 0 1 1 Teaching Pilot Programs 6 6 0 0 Disecovery of America 1492 Fund 5 0 5 0 National Academies 6 0 0 a Ministry of Labor and Sooial Scudty 202 18 9 174 Labor Policy 24 18 6 D Non-contributory Pension System i/ 176 0 1 174 Guarantee Fund 1 0 1 0 Adrintnetion Special Acouunt 0 a 0 0 Natl. Registry of the Contruction Industry 1 0 0 0 Total 2144 436 263 1439 Mremo Salary Enhancement progrosm of MHSA iY 32 32 0 0 al Majority of transfer IUS$21ml goe to Pediatric Hospitl. b/ Oboes Sociales. cHousingFund: of US$903nino pitaL U$5S0m go toCOVIARNavy). US$12 4mtoObrSoSeies. US84lmmtoprovince.. dr Trmnufnm to provinces. e/ Nat'l. Childrens Fund, National Institute for Mutual Assistance socia emergencie prograri: trensfers to provines. fl US$34m transferred to provinces: reminder to non-profit r_esah int . g/ Transfer to universnie for sientific research. hi Transfer to universitlee for student headth ed hoepital svioes. if Consists of pensions to Congressman. vetera of the Madvine warw md other special penion funds. j' Treasury-manged proganw #36. 115. 224. Source: 1992 Budget (February 19921 end Contaduria General do la Neion. - 281 - Tble 1.7: Argenina - Non-ear_ Expeniture of the MnIstry of Euonmy an Publ ic Works Current Expenoiures Total Wages G&S Transfers Mkinitry of Esononry and PubisWiorke MIinitry Policy 42 9 32 1 Fisali Policy 22 9 a 6 National Landmwk Retoradon 3 2 1 0 GI operatns .79 240 39 0 DGI larmorksd fundg 102 0 97 5 061 bonus em 84 84 0 0 Customs operatIons 90 S9 1 0 Custms (ammorked fund) 112 e0 50 2 Customs bonus system 5 5 0 0 National Seismology Institute 1 1 1 0 Poable Water Council o 10 2 4 5 Wator Conservation a] 17 0 0 18 War Technology Insttute 6 3 2 1 Energy Develpment Fund for the Interior s/ 44 0 0 44 Grain Comniuison 0 0 0 0 Grin Storage 0 0 0 0 Agricuwrr Policy S9 38 20 4 Marado Naciand de Hacienda 0 0 0 0 Nationa Meat Board 0 0 0 0 Wino Institute 19 10 9 0 Veternary Medicdne 51 22 28 1 Foodl/Health Standards 13 a 7 1 National Fsh Market 0 0 0 0 Monitoring of Exclusive Rabing Zone. 0 0 0 0 Netional Fshing Institute 0 0 0 0 Tobacco Fund a/ 102 0 0 102 Dredging (Comision Mixta del Rio Parneila 6 0 5 0 Dredging 0 0 0 0 Waterway Polioy - 2 1 1 0 Port Madntwenos/Conmtruction 36 10 26 0 Trade Promotion 11 7 4 0 lndustial Promotion 6 4 2 0 National Highway Poliy 1 1 0 0 National Road Systern ei 175 64 24 B8 National Transpottion Fund 3 1 1 2 Air Transport Policy 2 0 0 1 National Energy Policy 34 2 31 0 Comision Naionde de Valora 1 1 0 0 Insurance Superintendency 10 2 7 1 Industril Technology Insitute bI 30 1 1 29 Agricultural Technology hIntie (INTA) 94 73 18 3 National Forestry Instute 0 0 0 0 National Seed Institute 0 0 0 0 Ntional Pwk AdnMinistrtin 7 4 2 0 National Sugar Dhasctorate 0 0 0 0 Natiend Yrbes Mat Cornanimn 0 0 0 0 Mining Policy 3 3 1 0 Taleoanuzniations Regulation 4 3 2 0 Elaetricld de Mismions, S.A. 7 0 0 7 Santa Cruz Electricity Fund c/ a 0 0 a Total 1500 751 422 327 erno Salay Enhancenent Prograran d/ 42 29 0 14 e/ Transfe to provines. hi Tranfe to non-profit organizations in the area of science and technology. sI Grant to Sat Crux for decicity distribution: Sonta Cruz is not flly itrated into the notional electricity network. d/Treasury-managed prgra #127.204. 256. Sourwc: 192 Budget (February 1992) end Contaduie Gnel de ba Naciwn - 282 - Ta 1.t: ArunIn. - Tremay Obgsldon USs niW.n. Cwrent Expenditure. Total Wag.. G&S Transfer Net AdmkWatratlon Satwvy Enhaneenbt al 355 288 0 67 Preeidanoy, Prog. 258 23 23 0 0 Custom IMOSPI. Prog. 255 28 28 0 a M0SP. Prog. 127 12 0 0 12 M10SP. Prog. 204 3 0 0 3 Foreign Mist. Prog. 219 3 3 0 0 Defense, Prog. 182 18 18 0 0 Penal Syatmn, Prog. 247 18 18 0 0 Plce., Prog. 209 8S 89 0 0 Other Security Farces. Prog. 113 14 14 0 -1 MHSA. PFro. 115 22 22 0 0 An'istry of Labor mnd Social Security. Prog. 36 7 7 0 0 MHSA, rog. 224 2 2 0 0 Unspecified Salary Enhauemnht ande Bnefits, Prog. 114W b1i 64 0 52 Transfe. -to Pduel Enteprise 1619 0 0 1619 Railrab. Prog. 23 e06 0 0 606 Energy Sectr Puic Enterprise. Prog. I 59 c/ 922 0 0 922 Yacyrete. Prog. 20 0 0 0 0 Vaious Pubic Ent. rise, Prg. 205 55 0 0 55 Argentine Telelisor Color, Prg. 26 a 0 0 6 NDER, Prog. 269 0 0 0 0 Varimue Pubic Entarpriae, Prg. 242 30 0 0 30 Odlmer. 1612 109 18 1484 Min. of Labor eid Social Security, Prog. 171 5 S 0 0 Min. of Labor end Social Secnity, Prg. 191 18 0 18 0 hIternetionel Org&anions. Prog. 6 84 0 0 84 AF IMilitry Pensions). Prog. 35 897 a 0 897 R&D, Prog. 181 13 4 0 9 ProWm 112 169 58 0 111 Private Sector. Prog. 41 4 0 0 4 Ed. Fund and Setry Enhur i., Prog. 241 di 238 42 0 196 Tirra del Fuego end Buanoe Aires, Prog. 7 183 0 0 183 of Includee peeonnel in oaargos critica.' SINAPA program id othier employee beneft p-okceg. hi Treeawy-mmaged progran of US*64m in salary rerv_ and US$52an for health mi dependent program. cl YPF, YCF, Hidronor, Ague y Energia. Ge det Eatedo. and SEGBA. il US$1 9Brn is the transer for the Provinci Educetion Fund IFondo Edwucetivo) USf42m is salay rseive. Note: univeaity trafae omd FONAVI -e administared by MniNtriew of Education and Health and Social Actien, respoecively. Source 1992 Budget (February 1992) and Contadurin General de In Nacion. - 283 - Tabl 1.St Argenn - Fads N _-ntnrt Endltrse by Fuonal Gmp 1US$ mnlion Capial Expendturew Total Good. Constrcin <> Stock Fnncial investment Leuladaie and Judoiael Brana b 45 15 14 17 0 Sete and C 3 2 1 0 0 Jucdciyr 42 13 13 17 0 Pesidency and Foreign Ministry S00 44 458 0 0 Prealdency 470 44 426 0 0 Foreign Mlnstry 30 0 30 0 0 Mniatrio al ewicrandJustice 58 47 11 0 0 Dfente 86 55 30 1 a hinIstry mid Joint Cimfa 12 8 4 0 0 Anmy 9 2 6 1 0 Nay 9 8 0 0 0 Air Force 57- 37 20 0 0 Socal Sector. le1 19 80 2 1087 Education a/ 70 14 52 2 2 Heath 13 3 10 0 1 Hotusi dl 1063 1 0 0 10B3 Welfne 1S 1 17 0 2 Labor 0 0 0 0 0 Econonic Sector 344 48 258 8 30 Tax and Cutoms Admnttion 16 9 6 0 0 National Highway System 145 2 124 7 12 Agriculturalel 79 24 54 0 0 Othes 105 12 74 1 18 Treasuy Oboiations f 481 0 0 0 481 Salwy Enhanots 0 0 0 0 0 Putio Eatwpfisi 481 0 0 0 481 Milty Pensiom- 0 0 0 0 0 Provincs gf 0 0 0 0 0 Oien 0 0 0 0 0 TOt 2681 226 848 27 1579 aI 'Own" pending of nanal admii'trJa;n trnfer by oa eoic olassifstion r'inoisr 31. 32. nd 613. bh Tribunal de Cuents incuded in Sena and Congress. c/Includes US$724 nillwi lor univarsities. dt FONAVI Hming Fund admninered by Minity of Health Od Soci Actiok e/ Include MOSP ex pndiure in NTA, agriudture policy. grain storg mid vetarinry mnesdcins. f/ Dae not include revenue siming under law of copwoipai consis solely of jurisctdon 91. g/ ildes aid to re del Fuwo nd Bueno Aires mid Provin Eduostion Fund. Sonr: 1992 Congreuionallyappraved Budget (Fuary 19923 mid Contadurien 6 de I Ncion. …. - 284 - Tabl 1 10 Arg.uuus - Epandursa of the LWagi.e snd Judlal tlranhe of Govwrnrent a/ US$ nmldrin) Cmpita Expenditr Total Goode Constuotion <> Stock Finncidl Inveaunent Lapslur- 2 1 1 0 0 Sonne 1 1 1 0 0 Congress 0 0 0 0 0 Publictions Oflio 0 0 0 0 0 Lbrwy 1 1 0 0 0 Coresional Mdifal Plan 0 0 0 0 0 Sentet Stdzaidl to Non-prokit Entities 0 0 0 0 0 Congrees Subterie to Naoit nt;ie 0 0 0 0 0 Cost Systm 42 13 13 17 0 Suprme Ccurt 0 0 0 0 0 Lower Cou bl 27 12 0 15 0 Court SpeOdl Inwetiegation 0 0 0 0 0 Netonal Justin Fund 10 1 7 2 0 Builimg Construction 6 0 6 0 0 Tibunal de CuG_tm 0 0 0 0 0 Total 45 16 14 17 0 at Non-interst eqarndbrw deo inchides Tibunal de Cuentms the external uditor of the Tremury. bl Trensfera -e to the court sybstem pensioners. Source: 1992 Budget (Febmzwy 19923 mad Conteduria General de Is Necion. - 285 - Ts 1.11: Argetn - Eapmtdlmwes of dm Prwslsc mid Foreign EBWry (US$ nilion) Capital Expenditures Total Good Consuaton <> Stock Findncial Inveetmeo Prosn 470 44 426 0 0 AMmisabion 31 30 1 0 0 Peonnel Adminietran dl 1 0 1 0 0 Aniding Caqpdgn 0 0 0 0 0 Natixnl Ptming 0 0 0 0 0 Smenc & Team. Policy lnirpl.mn 0 0 0 0 0 State lntegouce 1 1 0 0 0 EnepreneurWi Prmotn bl 0 0 0 0 0 Statiso Swic. 1 1 0 0 0 C =nmuiaatim Secrtmiat . 1 0 0 0 0 Nionl Tourism Fund 1 1 0 0 0 Spn Promotion and Nation Fudm 0 0 0 0 0 ::NEA 418 4 413 0 0 CNEA Resarch ad DewEopmn_t 9 1 8 0 0 CONICEr Pomotion ad Scholarsip cl 0 0 0 0 0 cCONICEr R_ach and D,elpunent/ a 5 3 0 0 Sent Law 18.302 0 0 0 0 0 Immigration Offloe 0 0 0 0 0 Natiand Public Admiatrmton Inwte 0 0 0 0 0 Wifa Remch md Coeration 0 0 0 0 0 Othm 0 0 0 0 0 Forign Mhidsu 30 0 30 0 0 Aid to bordenrq ouriim dl 0 0 0 0 0 Foreign Policy 30 0 30 0 0 Mnistry Infrtutre 0 0 0 0 a Protool 0 0 0 0 0 Sert Law 18.302 0 0 0 0 0 Ttl S00 44 4S6 0 0 Mmo Salry Enhancemt funded by the Treaury, of whidh: Prmiduo 0 0 0 0 0 Foreign Ministry 0 0 0 0 0 at Funwidn PfNic. bf Uncetgoried rnmra lpar.principal #31991. d Granlt to indivWub (pp. #3150.601)J d4 Grat to varios aid propgae. Source: 1992 Sudet (Fbnmry 1992) mid Contodurin Genei d Is Nidcn. j - 286 - Ta. 1.1l Armenthe - ExpndIut. of the 1Mrn1rke ofth. khir en Justioe (USt rriam Cqpt Ep9nditure, TotS Good. Ccneuamn c> Sock Fsin Mluntsy of hssdr 32 31 0 0 0 Adnintrsion 1 1 0 0 0 Eleti"ons 0 0 0 0 0 h-imdratiol 0 0 0 0 0 Sei'tatin 0 0 0 0 0 Neional CensUS 0 0 0 0 0 Poditicl Cwdgn Fundl m 0 0 0 0 0 Fedwal Polioe Force 2 2 0 0 0 Federal Polioe Retirwnent Fund 0 0 0 0 0 Regut.r Polce Force 29 29 0 0 0 ATN Provincia Fund bi 0 0 0 0 0 EIbb& of Justice 26 16 10 0 0 Adirtranom a 9 0 0 0 Pand Systm 11 1 10 0 0 Pnd Systz nSocia Secwity 0 0 0 0 0 Cr Liaririg 5 5 0 0 0 Gener Inspeton 1 1 0 0 0 Nlorid Registry 0 0 0 0 0 Told s8 47 1 1 0 0 Meni Salwy Enhencement Prorwrn el O 0 0 0 0 a/ Grnwt to unspified non-rfit entitie. bi Coprticiptd funds witheld to fitnce provinuid deficit; US4t.2m is erweiwkd for rn del Fuego. cl Tremaxy-mmoeed prgren 113. 20S. 247. Souroe: 1992 Budget (Februry 19i2J and Cotdurie Geneal do I Necion - 287 - Tabl 1.lt Arganhi - Non-lesse Expanditues ofithe Mitwy (USS nillioni Capital Expenditure Tal Gooad Consuction <> Stock Fmancial Investnent Miudety of Dahfr_ 12 7 4 0 0 Adrirtrninon 0 0 0 0 0 Nadton Guwud 3 3 0 0 0 Complianco. wimh Law 18302 'S' 0 0 0 0 0 Coat GudjNmsI Prefect 3 2 0 0 0 National Guard ov0 0 0 0 0 Coat Guard 0 0 0 0 0 Defame _Industia 5 1 4 0 0 Deanse R&D 1 1 0 0 0 Coat Buad Pension. 0 0 0 0 0 National Guard Peniors 0 0 0 0 0 IAF 0 0 0 D 0 Antwctic PI. 0 0 0 0 0 Arny 9 2 8 1 0 Opwrations 5 1 4 0 0 Mtary Geographic Isbt 3 0 3 0 0 Mitry Schoob 0 0 0 0 0 Sanitation 0- 0 0 0 0 Poc (Earmrked Ftmd 1 0 0 1 0 Navy 9 B 0 0 0 Opeation. 8 8 0 0 0 Eaonmnicd dveapmm- 0 0 0 0 0 Specidal Work. & Sevice 1 1 0 0 0 switatice 0 0 0 0 0 Mi.ery School 0 0 0 0 0 Air Foae 57 37 20 0 0 Operation. 6 1 6 0 0 Em.ke Funds fr O ppersio 2 2 0 0 0 LADE 0 0 0 0 0 Dawaloprnmtaf CvilAvition 0 0 0 0 0 Dewalopnent of Air Tecmology 0 0 0 0 0 Promotio of Aerspace Industry 22 22 1 0 0 Airports 26 12 14 0 0 Hoopita 0 0 0 0 0 Seintion 0 0 0 0 0 EduaMon 0 0 0 0 0 R&D 0 0 0 0 0 Jobit Chi.b ot St 0 0 0 0 0 Total 96 55 30 1 0 mem Salary Enhucement Proro 0 0 0 0 0 *Tro.uriy-anuagd progrem 182. Source: 1992 Budget February 1992) mid Contadurin Gnral da l Necion. - 288 - Tabl 1.14: Argetn - Non;intarat Expenditre. I oft. M1d1nita. of HUmli Labor, md Eduoutian 1US$ miNion) Capitd Expenitures Totl Good. Conanction C> Stock Fmacidal . vntment IhWwtrvof Hlalth end Soo Action 1095 4 28 0 1065 He1111 Natonad Health Polcy 0 0 0 0 0 Hospital Infrantructure a 0 8 0 0 Health Criii Construction 2 0 2 0 0 General Headth Cere 2 2 0 0 0 Naionai Halth Insurance (NSSAIJ bI 1 0 0 0 1 Preventive Health 0 0 0 0 0 Senitdi-on Regulation 0 0 0 0 0 Provincial Aid for healk care 0 0 0 0 0 Preventive Environmentd Health 0 0 0 0 0 Socia Coverage in Health ottery funded 0 0 0 0 0 Hou3g Housing Policy 0 a a 0 0 FONAVI cI 903 0 0 0 903 World Bank Housing Loan dl S1 0 0 0 S1 Urban Development dl 79 0 0 0 79 Housing Asaitnco loutey fundS) 0 0 0 0 0 Wefare Social Action Policy 0 0 0 0 0 Social Action Contuction 11 0 11 0 0 Social Nutrition Progran and PAN {lottery funded) d/ 0 0 0 0 0 Welfae Coverage olttery funded) dl 1 0 0 0 1 Human and Faily Developmrnd o 8 0 6 0 1 Addeecent Halfway House 0 0 0 0 0 Minsrf of Culture and Edueation 70 14 52 2 2 Education Budget and Polcy 62 12 50 0 0 Teacher Education & Trdinirg 0 0 0 0 0 Culturl Budget 0 0 0 0 0 Treem -rto Universitia 0 0 0 a O Finacia Aid for Private Univemitis. 00 0 0 a 0 High School 0 0 0 0 0 Agricultura Education II 0 0 0 a 0 Technical Educaton Council ICONErD 0 0 0 0 0 Scientific PABearch gf 0 0 o a a Medical aeistence for etude 0 0 0 a O Hospital service hi 0 0 0 0 0 Public 4Lbnr Swtste 0 0 a a O Netional Cinamatogrqph Insaftute 2 1 0 0 1 Permanent Student Fund 2 0 1 1 0 National Equal Opportunity Scholiship Inatitute 1 0 0 0 1 Teaching Plot Proram 0 0 0 0 0 Diecovery of America 1492 Fund 2 0 1 1 0 National Academins 0 0 0 0 0 al;ntry of Labor nd Social SBeait 0 0 0 0 0 Labor Polcy 0 0 0 0 0 Non-contributory Pinion System ii 0 0 0 0 0 Gwurentee Fund 0 0 0 0 0 Adninatration Specia Account 0 0 0 0 0 Nae Regitry of the Construction Indutry 0 0 0 0 0 Total 1166 1S s0 2 1057 Memo Salary Enhancement prograrm of MHSA if 0 0 0 0 0 af Majority af treanefr (US$21nm) goes to Pediatric Hospital. b Obras Social.e. of Houing Fund: of US*903m in capital. USSWOm goa. to COVIARA iNavyl, US$1 2A4m to Obr Sociale.. USS841 m to proviino dt Transfem to province. ef Notl. Children's Fund, Nationel nutem for Mutuad Aistance. scial mnergencie. progrwm fitrhm to provine. fI USS34m ansfwrred to province: remainder to non-profit resewarch 'eut. go Tranufer. to univnrities for scintific ra.eerch. hJ Trnafers to univertibe far atudemt hedth end hoepital servicee. it Consiet of pensiom to Congressmen, vetera of the Malvine war. mnd other epea peuicn funds. ji Tree.ury-nanaged program #36.115. 224. Sorce: 1992 Budget IFebruery 19921 end Conteduria Generd de b Naion. - 289 - Tabl 1.15: Argentin - Nanntet Expntu fote Ml Ebistfr ofoomy and Pubri Woe IIS* nilion) Capital Expenditures Total Good. Construcdoni C> Stock Financial Mbinit e f EcYm wD PubicD WVbrkm Minis Poliay 0 0 0 0 0 Fisra Poriy 25 0 24 0 0 Naional Landmk Restoration 9 0 9 0 0 DGI operation 0 0 a 0 0 061 (wmarked fund) a 5 1 0 0 DGI bonue system 0 0 0 0 0 CusLto operations 1 1 0 0 0 Custon (aermarkad fund) a 3 5 0 0 Custms bonus systen 0 0 0 0 0 National Seismology Inse 1 1 0 0 0 Potble Water Council a 19 1 0 0 18 Water Conservaton of 2- 0 1 0 0 WaterTTechnology Insue 2 0 2 0 0 Enery Development Fund for the Iterior 4 0 0 0 0 0 Grain Connion 0 0 0 0 0 Grain Storage 37 1 35 0 0 Agrouturm Peoicy 20 4 15 0 0 Mercado Necinal de Haiewnda 0 0 0 0 0 National Meat Board 0 0 0 0 0 Wine Instie 1 1 0 0 0 Veterinay Medicine 13 12 0 0 0 Foodf/-leelth St.ndsds 9 B 0 1 0 Neaonal Fih Market 0 0 0 0 0 Monitring of Exlusivne Fihing zones 0 0 O 0 0 National Fsn Institute 0 0 0 0 0 Tobacco Fund el 0 0 0 0 0 Dredg.ing (Couision Mite dl Rio Parane) 0 0 0 0 0 Dredging 33 0 33 0 0 Wstmay PoiEcy 0 0 0 0 0 Poat Meintennce/Construction 3 2 1 0 0 Trade Promotion 0 0 0 0 0 Indutrial Prmotion 0 0 0 0 0 National Highway Policy 0 0 0 0 0 National Road System a! 145 2 124 7 12 National Tranportdtion Fund 0 0 0 0 0 AirTrnpot Podicy 0 0 0 0 0 National Enery Policy 0 0 0 0 0 Comision Necional de Valores 0 0 0 0 0 Insurance Supontandancy 1 0 0 0 0 Indstrial Tedmhology Insue b/ 2- 0 1 0 0 AOriualtura TedmologDy Insti UINTAI 8 5 3 0 0 National Foratry Inttute 0 0 0 0 0 National Seed Instiute 0 0 0 0 0 Nadonal Patk Administration 1 0 0 0 0 National Sugar Diretoate 0 0 0 D 0 Naional Yerba Mate Conm Stock Financial Investment NHcL Adniitrstien Samy Enhan et a 0 0 0 0 0 Pramidency. Prog. 256 0 0 0 0 0 Cuaton (MOSP). Prog. 255 0 0 0 0 o MOSP. Prg. 127 0 0 0 0 0 MOSP. Prog. 204 0 0 0 0 0 Foreign Mliistry, Pro;. 219 0 0 0 0 0 Defene. Proc. 182 0 0 0 0 0 Penal System, Prog. 247 0 0 0 0 0 Poie, Pro. 209 0 0 0 0 0 Other Secwity Force. Prog. 113 0 0 0 0 0 MHSA. Prog. 115 0 0 0 0 0 Ministry of Labor and Social Security. Pro. 36 0 0 0 0 0 MNSA. Pro. 224 0 0 0 0 0 Unspecified Saary Enhancnt end Benefits. Prog. 114 0 0 0 0 0 Trawsas to Pubdc Entwrpri 481 0 0 0 481 RPboada. Prog. 23 0 0 0 0 0 Eny Secter Public Enterpris, Prog. 159 a/ 171 0 0 0 171 Yacyrta, Prog. 20 301 0 0 0 301 Vwiouo Pubhl Entwpries. Prg. 206 0 0 0 0 0 Argentine Tealeior Color, Prg. 28 0 0 0 0 0 INDER Prog. 269 10 0 0 0 10 Vorious Public Entuuprise. Prg. 242 0 0 0 0 0 Others 0 0 0 0 0 lAin. of Labor and Social Security. Pro. 171 0 0 0 0 0 Nl of Labor nd Socia SecuritY. Prg. 191 0 0 0 0 0 Internaional Orgen'mutone, Prog.6 0 0 0 0 0 IAF IMItary Pens-io). Prog. 35 0 0 0 0 0 R&D. Prog. 131 0 0 0 0 0 Proga 112 0 0 0 0 0 Prive Setor, Prog. 41 0 0 0 0 0 Ed. Fund and Salory Enhance.. Prog. 241 d0 0 0 0 0 0 Twrra del Fuego md Buet Aires. Prog. 7 0 0 0 0 0 Total 481 0 0 0 481 al Icludes personnel in 'caeg critice.' SINAPA ProrUa. md other employee benefit peckags. b/ Treasury-naneged progrun of USSS4m in salary reserves ed USS52m for health end dependents programs. at YPF. YCF. Hkinxr. Aoue y Energia. Ga ddl Etado, and SEGRA. dl USe1 sOm is the transfer for the Provincial Education Fund IFondo Educeivo); USS42rn i salary reserve. Note univmeity transfar end FONAVI ne adrministered by Ministries of Education nd Health ad Social Action, respectively. Source: 1992 Budget (Februry 1992) mid Contadurib Gneral deI MaNcion. - 291 - Table LI: Argentina - Fiscal Accouts ofthe Conalldat.d Public Sector, 193 -1992 (AcAt bad as percent of OP) 1983 1984 195 1985 19S7 1988 1089 1990 1991 1992e CurrentRswenuma/ 19.3 2Z-4 23.1 21.7 20.0 19.1 17.6 17.7 20.4 25.0 Tax Revenue 15.7 19.1 18.7 1&6 17.8 16.B 16.3 16.6 19.1 238 DGlandCuslomsRevee 11.0 16.5 15.1 14.6 14.0 12.1 13-D 11.5 13.5 15.9 Socil Securiy Revenue 4.7 2.5 3.6 4.0 3.9 4.7 3.3 5.0 5.7 7.9 Non-tax Revenue 3.5 3.3 4.4 3.I 22 2.3 1.3 1.1 1.3 12 Current Expendilures 28.0 244 25.2 235 234 23.1 1 99 21.6 21.8 23.7 Pesormld 4.8 4.8 4.1 3.6 4.1 4.1 3A4 4.1 3.9 3.6 GoodsandServices 29 1.9 2.2 2.0 2.1 2.0 1.6 1.4 1.3 1.6 Transfes 145 12.7 13.5 14.1 13.8 14.1 11.5 13.1 14.5 16.8 Provinces 7.6 5.9 6.1 6.7 6.6 7.0 6.1 5.7 7.0 82 Socia Secuity 6.1 5.6 5.6 55 5.1 5.2 3.6 5.7 6.0 82 oHMs 0ns 12 1.8 1.9 2.1 1.9 2.0 1.7 1.6 0.4 Inteest Paymnants. b 5.8 5.0 5.4 3.a 3.5 s8 3.3 3.1 21 1.7 Domestic o 0.9 0.8 01 0.3 0.5 0.4 02 0.5 0.3 0.1 Extemal d 4.9 42 4.7 3.5 3.0 24 3.1 26 1.8 1.6 PubicEnterprise Non4nterestaSsvng -0.1 0.6 1.0 1.9 1.8 1.0 0.9 12 0.3 0.8 Curent Revenus 11.0 10.5 13.6 12.1 11.8 12.8 12.8 8.8 6.7 6.0 CurrentfNnterestEpendures 11.1 9.9 12.6 10.1 9A 11.8 11.9 7.6 6.4 52 saings -8 -14 -1.1 0.1 -1.5 -3.0 -4 -27 -1.1 21 Capibl Revenue 02 02 02 0.1 0.1 04 0.6 0.2 1.7 1.3 Capta Epd s 6.8 5.1 4S 4.4 53 6.0 3.9 26 2.3 1.7 eneral Governmet 2.9 1.6 15 1.6 1.7 1.5 1.0 0.8 0.7 12 P:ublic Enterprises 3.9 3.6 2.9 2. 3.6 4.5 2.8 1.9 1.6 0.5 Non-Financial Patio Sector Balance -15.4 -63 -5.4 -42 -6.7 -8.6 -4.7 -5.1 -1.7 1.7 Quasdiscal Balance of Cenral Bankef -1.1 -2.5 -2.8 -1.6 -3.4 -1A -5.8 -1.0 -0.6 -02 Overall Babnce -165 -8.8 -82 -5.B -10.1 -0.0 -10.5 -6.1 -2.3 1.5 Memo: Primay Surplus -9.6 -1.3 0.0 -0.4 -32 -5.8 -1 .4 -2.0 0.4 3.4 Opertoal Primary Swplus -9.8 -1.5 -02 -0.5 -33 -62 -2.0 -2 -1.3 2.1 Net Federal Expwdlture g/ 36.0 31A 31.5 27.5 302 29A 28.7 24.0 24.4 24.3 ProvheiaRewuinld.transfems 11.6 10.4 10.8 112 8o 103 9.4 9.0 10.3 132 ProvincialE)rjendture 11.A 11.9 11.4 11.1 129 123 10.5 13;2 13.5 12;8 HealhFunds EKP t drh/ 44 4.1 4.3 44 46 4.7 3.8 3.8 42 47 Total Non-kitrest Expendilures 484 44.5 46.4 43.1 46.1 48.1 40.7 40.0 39.1 38.2 Total Expeh ind quasifisca balnce of SCRA V 55.3 52.0 5'.6 48.5 53.0 52.3 49.8 44.1 41.8 40.1 at Includes coparticipated revenues. bI Inhte payments of the entire Federal Government cl Real componenft of domestc intrest paymets for 1963-1991; 1992 is nominal due to returm to stabiLy. dC Accrued interest due. ef Real eamings on assets less renl iintest costs; IMF definfiton, 1983-87; IBRO definition 1988-1992 (see Ch.13) ft Pdmary surplus l capil revesnlu g1 Inckudes non-nterest current account orthe pubic etepris and quasi-fscal balance - eendb). hi 1983-1987 frm FIEL "Gasto POblio report (1988); 1988-1992 based on Banksaff eslhatw, if Gross expenditure of national govme pubic enterrie primn. health hunds and qusflcal babnee of He Centr Bank Source: Sec3ta.y of Finance; Eecuted BugegS, 1983-1991; Cash Bas, 1992. - l; 1i2Bltf04AM: A (BU092.XLWJBUDCON)XLS - 292 - Table 22 Arge_ta - National Adidnlstratlon Savlns-Irestment 1983-1992 at (As pomit of GDP) 1983 1984 1985 198 19 191988 1989 1990 1991 1992 Current Revenues 1456 19.8 19.5 17.7 162 144 14.3 126 14.8 17.1 TaxRevenues 11.0 16.5 15.1 14.6 14.0 121 13.0 11.5 135 15.9 Non-ax Revenues &6 3.3 4.4 3.1 22 2.3 1.3 1.1 1.3 1.2 Current Ependitures 22.0 1&8 19.6 18.0 18.4 17.8 16.4 16.0 15.9 155 Persermel Expenditures 4.8 4.8 4.1 3.6 4.1 41 3.4 4.1 a.9 3a GoCds and Seplces 2.9 1.9 22 20 2.1 20 1.6 1 A 1.3 1.6 Ire aon Debt bh 5.8 5.0 5.4 3.8 3.5 28 3.3 3.1 2.1 1.7 Domestic 0.9 0.8 0.7 0.3 0.5 0.4 02 0.5 0.3 0.1 Foreign 49 42 4.7 3.S 3.0 24 3.1 26 1.8 1.6 Oer Current Expenditures 0.0 0.0 0.0 0.0 o.0 0.0 0.0 0.0 0.0 0.0 Curent & Capital Tnemrs 8.4 7.1 7.9 8.6 8.7 8.9 8.1 7.4 .6 8.6 Ecenomes 0.0 0.0 o.O 0.0 0.0 O.D 0.0 0.0 0.0 O.D Savings -7.4 1.0 -0.1 -0.3 -2.2 -3.5 -2.1 -3.3 -1.1 1f5 Capitl Revenues 02 02 02 0.1 D.1 0.4 0.6 02 1.7 1.3 Capal Expendltures 2.9 1.6 1.5 1.6 1.7 1.5 1.0 0.8 0.7 1.2 Fbked lrwsrents 24 1A 1.3 1.3 1.5 1.3 0.9 0.6 02 0A4 Machinery and Eqtuxnent 0.6 0.3 0.3 0.3 0.3 0.3 0.1 02 0.1 0.2 Conructn . 1.8 1.1 1.0 1.0 1.2 1.1 0.7 0.5 0.1 0.2 Changes in Inventorie 0.1 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 Financial Investments OA D.1 02 0.3 0.1 02 0.1 01 0.5 0.8 Economies 0.0 0.0 O.D 0.0 0.0 0.0 0.0 0.0 0.0 0.0 T1l Revenues 14.8 2D.0 19.7 17.8 16.3 14.8 14.9 128 165 18A Total Expenditlures 24.9 20A 212 19.7 200 193 17.4 15.7 16.6 16.7 Fffancin Requirment 10.1 0.4 1.5 1.9 38 4.6 25 3.9 0.1 -1.7 aI National Adinistration ncludes Central Adinisraion, Decenbalized Agenies, and Special Accomb. bl Interest bil Icudes intrest oblgatioons or the public enterprises. Source. Secetary of Finance SavingsImestment Plans. - 293 - Table 23: ArgentEna -Socal Security Salngs4nvesbntK 1983U1Ui2 (A. percen of GDP) 1983 1984 1985 1988 1987 988 1989 1990 19i91 1992 Current Revenues 4.7 2.6 3.6 4.0 3.9 4.7 3.3 5.0 5.7 7.9 Tax Revenues 4.7 26 3.6 4.0 3.9 4.7 3.3 5.0 5.5 7.9 Non-tax Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 02 0.0 Current Expendiures 6.1 5.6 5.6 5.5 5.1 52 3.6 5.7 6.0 82 Personnel Expenditures 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Goods and Servkes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Interest on Debt 0.0 0.0 C.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Domestic 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Foreign D.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other Current Expendtures 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 O.0 0.0 Curren & Capital Transfers S1 5.6 5.6 5.5 5.1 5.2 3.6 5.7 6.0 82 Economies 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Savings -0.9 -2.9 -1.1 -1.3 -0.9 -OA -03 -0.7 -0.3 -0.3 Capial Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Capital Expenditures 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fbied Investments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 MUachiny and Equipment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Constucton 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Changes in InventDwies 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fmandal Investments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Economies 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Revenutes 4.7 26 3.6 4.0 3.9 4.7 3.3 5.0 5.7 7.9 Toa Expendtes 6.1 5.6 5.6 5.5 - 5.1 52 3.6 5.7 6.0 82 rhancingRequimreent IA 3.0 20 1.6 12 0.5 0.3 0.7 0.3 0.3 Source: Secretary of Fnmance Savings-Investment Pbns. - 294 - Taeb 24: Argsnba - Pubk Enterpris SuwIng.nesbernt 193-1992 (As peent of G) 1983 1984 19815 198 1987 1988 1989 1990 1991 1992 CufentRevenues 11.0 10.5 13.6 121 11.8 128 12i8 a8 6.7 6.0 Tax Reenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Nan-tcRevanus 11.0 10.5 13.5 121 11.8 12.8 128 as 6.7 6.0 Cunrent Expenitures 11.1 9.9 12.6 10.1 9.9 11.6 11.9 7.6 6.4 5.2 Pemonnel Expendrue 3.0 32 3.1 3.0 32 32 3.0 23 1.9 1.2 Goods and Servkes 7.1 6.4 8.9 6.5 5.6 6.8 7.9 5.3 4.5 4.0 InWteest on Debt a/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 DomesIc 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Foreign 0.0 0.0 0.0 0.O 0.0 0.0 0.0 0.0 0.0 0.0 Other Cunen Expendtrs 1.1 0.4 0.6 0.7 1.1 1.8 1.0 0.0 0.0 0.0 Cumrert & Capital Traers 0.0 0.0 0.0 O. 0.0 0.0 0.0 0.0 0.0 0.0 Economies 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Savings -0.1 0.6 1.0 1 9 1.8 1.0 0.9 1.2 0.3 0.8 Capital Revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CapItal Expendbures 3.9 3.f Z9 Za 3.6 4.5 28 1.9 1.6 0.5 Fbhed Irwvestmms 3.6 3.3 28 2.6 3.2 4.2 25 1.7 1.6 0.5 Machfrieryand EqtIpment 1.7 20 1.3 1.2 IA 1.9 1.1 0.8 0.6 0.2 Constructlon 1.9 1.4 1.5 1A 1.7 2.3 1.4 1.0 1.0 0.3 Changes In Inventories 0.0 0.0 0.0 o.o 0.0 0.0 0.0 0.0 0.0 0.0 Fiancial Investments 0.3 0.2 0.1 0.2 0.4 0.3 0.3 0.1 0.0 0.0 Econonies 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Revenues 11.0 10.5 13.6 121 11.8 128 12.8 8.8 6.7 6.0 Total Expendbures 15.0 13.5 15.5 12.9 135 16.3 14.7 9.5 8.0 5.7 Financing Reqirment 4.0 3.0 1.9 O.e 1.7 3.S 1.9 0.6 1.3 -0.3 aJ Intrest obl%gatIons of public etrpries Included in.rnaional admnlstron. Source: Seretry of Finance Sawns-Investment Plas. Table 2.6: Argentina -Tax Revenue by Source, 1970.1992 (As percent of GDPJ 1970 1971 1972 1983 1974 1976 1Q76 1977 1978 1979 1080 1081 1982 1983 1984 1985 198 1987 198 198 1990 1991 IMe ; ;Treasury Renue 16.0 14.2 12.8 13.7 17.0 11.7 13.1 15.5 16.9 17.6 19.8 17.5 15.7 16.5 15.4 1a8 13.6 It 10.5 9.2 10.8 16.1 16.9 Copaficlpated Taxes 6.4 5.7 4.8 4.7 6.6 3.5 5.2 7.0 7.5 7.3 8.6 9.6 9.0 7.9 8.0 7.7 9.1 9.8 8.4 6.1 6.3 ;1.6 13.4 . # ValueAdded Tax 1A 1.8 1.4 1.2 2.1 1.9 2.7 3.3 3.4 3.8 4.3 5.1 4.5 3.7 2.9 3.3 3.7 3.7 2.7 1.7 2.8 5.1 8.8 Proam 2.3 1.9 1.6 1.8 1.7 0.8 1.2 1.8 1.7 1.2 1.6 1.7 1.4 1.1 0.6 1-2 1.5 1.9 1.3 1.0 0.6 0.8 1.I Captal Tax 0.0 0.0 0.0 0.0 0.1 0.0 0.2 0.5 0.6 0.7 0.8 0.8 1.0 0.9 0.5 0.5 0.7 0.0 0.6 0.4 0.6 0.5 0.6 Net Woth Tax 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 0.2 0.1 0.0 0.0 0.0 0.0 0.0 Exlse Tax 1.8 1.4 1.2 1.1 1.1 0.7 0.7 1.1 1.5 1.6 1.7 1.8 1.8 1.5 1.2 1.5 1.8 1.9 1.3 1.0 1.0 1.6 1.4 Bank Debit 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.2 0.0 0.0 0.0 0.0 0.1 0.3 0.4 0.6 0.5 0.9 0. 0.4 14A 0.5 Forelgn Exchange Tax 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.3 0.1 0.0 0.0 Financial SeMoes 0.0 0.0 0,0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 Tax Arrears Paymrenrs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2 0.6 Agiculturan Sale 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.3 0.3 0.3 0.2 0.0 0.0 0.0 Vaaluu Emergency 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2 0.1 0.0 0.2 0.9 0.5 0.2 0.0 0.0 Othes 0.8 0.5 0.4 0.5 0.4 0.0 0.1 0.0 0.0 0.1 0.0 0.0 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.2 0.0 0.0 NonCCopalclpated Taxes 4.1 3.7 4.0 4.1 5.2 3.6 3.9 4.5 4.8 4.5 4.7 4.7 4.7 5.6 5.6 5.1 4.8 3.1 2.0 3.1 4.5 5.5 3.5 Stamp Duty 0.4 0.4 0.3 0.4 0.4 0.2 0.2 0.3 0.3 0.4 0.4 0.3 0.3 0.2 0.2 0.2 0.3 0.2 0.2 0.1 0.1 0.2 0.3 Import Tax 1.2 1.1 1.1 0.7 0.9 0.7 0.9 1.2 1.1 1.3 1.7 1.5 1.0 0.8 0.7 1.0 14 1.7 1,0 0.6 0.3 0.4 0.9 Expfd Tx 0.7 0.6 1.2 1.4 1.0 0.8 1.5 0.5 0.3 0.2 0.2 02 0,6 1.5 1.2 22 1,3 0.4 0a2 1.6 1.3 0.2 0.0 Other Trade Tax 0.0 0.0 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0,2 0.1 0.1 0.0 0.0 0.0 0.1 0.1 0.1 0.2 0.3 0.8 0.0 0.0 Oh und Fuel Tax 1.1 1,0 0.9 1.2 2.1 1.3 0.7 1.3 1.9 1.3 1.3 2.0 2.2 2.4 3.2 1.0 0.8 0.7 .0.5 0A 0.7 2.1 1.7 Fuel 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 35 3.5 2.1 0,9 0.5 0.7 Z1 1.7 Fuel Fund TaWff 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -25 -2.7 -1.4 -1A -1.0 0.0 0.0 0.0 Tmnsfers from Fuel Fund 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.9 0.0 0.0 0.0 Forced SavIn 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.6 0.0 0.9 0.1 0.0 0.0 0.0 I Speca Lws 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 N OterTaxe 0.7 0.5 0.6 0.5 0.7 0.5 0.4 1.0 1.1 1.1 1.1 0.7 0.6 0.7 0.6 0.0 0.0 0.0 0.0 0.0 0.0 2.6 0.7 t0 Socil Securit Systern 4.7 4.7 3.9 4.6 5.5 4.4 4.1 3.6 4.5 5.0 5.4 2.5 2,3 2.4 2.9 3.6 4.0 4.0 4.3 3.5 4.4 62 5.6 Tota Revenlu 15.2 14.0 12.7 13.7 16.3 11.5 13.2 15.4 16.9 15.6 18.7 17.0 16.0 15.9 14.7 16.4 17.6 1S6 14.8 i2.7 15.2 21.4 22.5 Source: MWiny of Economy, Natinal Dlrectoratl of Budgeay Progamming. Table 2.6: Aigentina - Erliclent Taxes and Tax Handles, 1970-1992 (As percent of GQP) 1970 1971 1972 1973 1974 1975 1978 1977 1978 1979 1980 1981 1982 1983 1984 1985 19S 1987 1988 1989 1M90 1991 1992. Treasury 18.0 14.2 12,8 13.7 17.0 11.7 13.1 15.6 1 5.9 17.6 19.8 17.6 16.7 16.8 ISA 12.8 13.6 12.6 10.5 9.2 10.8 16.1 16.9 EfiientTaxes 6.0 7.2 6.3 6.0 8.1 6.4 6.4 9.1 10.1 9.7 11.3 12.C 11.9 10.4 9.1 8.6 10.1 10.6 6.4 S.0 6.3 12.1 16.0 Value Added 1.8 1.8 1.4 1.2 2.1 1.9 2.7 3.3 3.4 3.6 4.3 5.1 4.5 3.7 2.9 3.3 3.7 3.7 2.7 1.7 2.8 5.1 8.6 Bank Debi augalst VAT at 1.4 0.5 Pro!! 2.3 1.9 1.6 1.8 1.7 0.8 1.2 1.8 1.7 1.2 1.6 1.7 1.4 1.1 0.5 1.2 1.6 1.9 1.3 1.0 0.6 0.8 1.6 Capital 0.0 0.0 0, 0.0 0.1 0.0 0.2 0.5 0.6 0.7 08 0.8 1.0 0.9 0.5 0.6 0.7 0.8 0.6 0.4 0.6 0.5 0.8 Not Worth 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.1 0.0 0.0 0.0 0.0 0.0 Import 12 1.1 1.1 0.7 0.9 0.7 0.9 1.2 1.1 1.3 1.7 1.5 1.0 0.8 0.7 1.0 IA 1.7 1.0 0.6 0.3 0.4 0.9 Ful & Fuel Fund 1.1 1.0 0.9 1.2 2.1 1.3 0.7 1.3 1.9 1.3 1.3 2.0 2.2 2.4 3.2 1.0 0.8 0.7 -O.S 0.4 0.7 2.1 1.7 Tax Arrears Payents 0.0 0.0 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.2 0.2 0.6 Excse 1.6 1.4 1.2 1.1 1.1 0.7 0.7 1.1 1.5 1.6 1.7 1.8 1.8 1.5 1.2 1.6 1.8 1.9 1.3 1.0 1.0 1.5 1.A Tax Handls 1.9 1.5 1.4 1.5 1.7 0.9 1.2 1.8 1.9 1.9 1.5 1.3 1.3 1.6 1.5 2.0 2.2 1.6 3.8 26 3.1 2.9 1.0 ank Oebi a 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.2 0.0 0.0 0.0 0.0 0.1 0.3 0.4 0.6 0.8 0.9 0.8 0.4 0.0 0.0 Vad outrade taxe 0,0 0.0 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.2 0.1 0.1 0.0 0.0 0.0 0.1 0.1 0.1 0.2 0.3 0.5 0.0 0.0 Forced Savings 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.0 0.9 0.1 0.Q 0.0 0.0 Fordgn Exchange 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 o.i 0.1 0.1 0.1 0.1 0.1 0.2 0.3 0.1 0.0 0.0 Fiarncal SevIes 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0,0 0.0 Q.O 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 00 0.1 0.1 0.1 Stamp OA 0.4 0.3 0.4 0.4 0.2 0.2 0.3 0.3 0.4 0.4 0.3. 0.3 0.2 0.2 0.2 0.3 0.2 0.2 0.1 0.1 0.2 0.3 Agdouturl Saes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.3 0.3 0.3 0.2 0.0 0.0 0.0 Vadou Emegency 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2 0.1 0.0 0.2 0.9 0.5 0.2 0.0 0.0 Spea La 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 OUwr N.E.I. 1.3 1.0 0.9 1.0 1.1 0.5 OA 1.0 1.1 1.2 1.1 0.7 0.7 0.9 0.7 0.2 0.2 0.2 0.2 0.3 0.2 2.6 0.7 Socil easty System 4.7 4.7 39 4A 6.5 4A 4.1 3.8 4.5 6.0 5A 2.5 2.3 2.4 2.9 3.6 4.0 4.0 4.3 3.6 4.4 6.2 5.8 N 0' Total Tax Reveu 15.2 14.0 12.7 13.7 16.3 11.5 13.2 16.4 16.9 16.8 18.7 17.0 16.0 15.9 14.7 10.4 17.6 1e61 14.0 12.7 15.2 21.4 22.5 1 a/ Bank deS tax hI 1991 Is no onger considered tax hndl; credit for VAT and Income Tax Table 2.7: Agentina- Tax Revenue by ource, 166.1 - I M2J (As pecefnt of GDP) toni. las 1u 1903U 19m8wI imi o 8 1 9BSU 1119U lU9N IV 990i lowM 19i05il 1990NV 19011 109111 M 1U I991N 199IM 122 199 1992 IV Si i,Treseuayuewnue 11.0 11.3 10.1 10.4 5.9 7.1 9ld 14.2 9.0 12.0 10.9 11.0 0.9 16.3 14.9 112 15.4 17.3 17.6 174 It Ccpaullcpaia Tam 8.7 9.1 8.1 8,7 7.0 4.3 5.6 10.0 4.6 6.8 6.5 7.1 8.7 10.9 9.7 11.2 12.0 13.6 14.0 14.0 ValuAMded 2.9 2.8 2.4 2J 1.8 0.s 1.8 2.4 1.7 3.2 3.0 3.4 32 5.6 6.1 6.5 6.9 9.1 9.3 0.1 ;m 4 k. ome 1.3 1.3 1.4 1.2 1. 0.8 0o. 1.2 O,t 0,6 0.8 0.6 0.6 1.0 0.9 0.9 1.1 IA 2,1 2.5 OeIapI 0.4 0.8 0.5 0.7 0.4 0.4 0.2 0.6 0.2 0.9 0.8 o.e 0.4 0.7 0.6 0.4 0.5 0.1 04 06 NdWedh 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 Eauda 1.7 1.3 1.1 1.3 1.3 0.5 0.6 1.2 0.6 1.0 0.9 1.3 12 1.8 1.4 1. 1.5 1.5 12 1.3 ; ankOM 0.5 1.1 1.0 1.1 1.0 0.7 0.7 1.0 0.4 0 0.4 0.4 0.7 1.6 1.6 1.8 1.3 0.5 0.1 0.0 ; foreign E hnane 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.1 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 .O0 0.0 FInancid Srces 0.0 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0 0.1 0.1 . 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 T Pa .wus Paymani. 0.0 0.0 0t 0.0 0.0 0.0 0.0 0.0 0.2 02 0.1 02 0.2 02 02 02 0.3 0.6 0.7 0.6 Awd*a Sale 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.0 0.0 0.0 0.0 Vw:u EV nrgy 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.0 0.7 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 . 0.0 C0h bW 04 0.4 0.4 04 0.0 0.0 0.0 2.3 0.1 0.1 0.4 0.3 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 N: cculcpa Tom 2.3 2.2 1.9 1.7 1.9 28 3e 4.1 4.4 52 4.5 3.9 32 4.4 62 6.0 3.5 3.7 3.7 3.3 Stamp 02 0.1 0.1 02 0.2 0.1 0.1 0.2 0.1 0.2 02 0.2 0.1 0.2 02 0.3 0.2 0.3 0.3 0.3 hued 1,3 1.2 0.9 0.3 0.7 0.4 0.6 o.6 0.3 0.3 0.3 0.3 0.3 0.4 0.4 0.6 0.9 1.0 1.0 O.8 Epon 0.2 0.3 0.3 0.2 0.1 1.5 2.4 2.5 2.0 1.9 1.1 0.5 0.3 0.4 0.1 0.0 0.0 0.0 0,0 0.0 Oth 0.2 0,2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.7 0.5 0.4 0.3 0.6 1.3 1.7 0.0 0.0 0.0 0.0 Fue .0.5 .0.5 .0.5 .0.5 0.5 04 04 0.6 04 0.7 0. 1.0 1.6 2.1 2.7 2.0 1.7 1.7 1.6 1.6 Fuel ..1.1 0.7 03 0.9 0.6 O.4 0.3 0.6 0.4 0.7 0, 1.0 1.6 2.1 2.7 2.0 - - - - FuelFuradTuTwW 1.0 -1.2 -12 1.4 -1.2 "0.9 .0 .1.0 - - - -*1 Tnunfws trom Fuel Fund - - - 0.0 0.9 0.9 O.S - - - - _ _ _ _ _ _ _ Forcod 8ing 0.0 0.9 0.9 0.9 0.1 0.1 0.1 0.1 - - - - - - - - 0.0 0.0 0.0 0,0 5% Publ Maitwpdae Sale Tax - - - - - - - - - - - - - - - 0.0 0.0 0.0 0.0 * pecl lLon 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 1.3 1.5 1.5 1.6 0.6 0.6 0.5 0.6 O, 0.7 0.7 0.6 SclW 4Ury lyiam 4.6 3.9 4.1 4.6 6.3 2.3 2.5 3.7 2.7 4.4 6.6 6,1 62 5.9 6.7 7.1 6.7 6.6 82 &3 '0 TcWReenus 16.6 1 4.2 14. 16.4 16.1 16.0 21.2 21.6 23.4 22.1 23.9 25.8 26.6 Maw: GOP (aUS dIalmOaion) 14.7 16.6 16.9 20.1 151 10.3 15.0 14.1 15.2 21.9 26.9 306 31.5 33.1 33.9 34.4 36.0 36.7 39.3 41.2 VATInUSdolamsa(mllll) 426 461 444 630 284 67 273 339 212 706 A11 1207 1016 1631 1722 2227 2464 3324 3644 3769 TaxHandleehiUSdolta(mIUIon 7I 909 994 1079 643 4_46 821 1219 978 1169 1244 1606 1017 1549 1301 1350 338 393 408 359 a1992 fMAth quatr hbas on prelminars data. hi Inlue prguyta dBankdebt 1 ni d 192 bs rnlnger condred lax handle credit forVAT and m Tax di Sea Table 2 for breakdwm ofdtx handke. - 299 - Teal: Argens-TdlFPda PublicEmpoymui (1990.193) a -P- - R _da fleAmApu 1990 D.p. 1992Ibt Dec.1993 TaM lc Treusei dt Tda Fedrl Emnpkoymet 1128258 528495 466602 661656 217544 444112 NironAdmninlsbadn 671479 284215 26215 367264 103469 283795 Admmrsaftv Retam Pmgm 341021 227677 227677 113344 90913 22431 NIabraJ Admkhiilbn anudgetud 28246 184687 168457 83579 61148 22431 CmrblAdMmhuislaen 123646 61276 61276 62370 39 22431 DecentbregedAgencs 144600 123391 123391 21209 21209 -. OhNdanalmulbutis 72775 431 43010 29765 29765 - OJlwrPragmn 33045B 56536 565M 273920 12558 261384 Pubic Erdwpdses 293462 109686 47793 245669 85372 160317 Fuel & Energy 3513 27050 12773 70740 35123 35617 Transpolt&Conmlcdns 194901 82636 35020 1596B6 50249 109632 hndus*y&Smvcs 84 - - 84 - 84 Dedns 14964 _ _ 14984 - 14984 Publk Banking 32000 22000 22W0 10000 10000 - AMned Foa s and Conscdpb 131297 1125e4 112594 18703 18703 Soure: Bank SgcalculWtn bade n _mnicn pmAoed byte Guannweo VArguSm, OIa. ci gBudget Minby of DDene and SGEP. af Doe notbade Uniy W ech_ ea_idsdI be mund 95,000. bh NatondSAdminlatSicn fixs re for 1983 budget df Totl ned ay-os d/ Tnusbommthe NianalAdlstion - in Pmovinces; tana Pubic Eubipesn Sto ptva sectorvilbsoal t e |~~~~~~~~~~~~~~~~~~~~~~~~~~ 9:e 11~ ~ ~ ~ ~ ~ ~~~~t 'Al- 1FF: :';~~~~~~~~ ~~~ f .....5. 30~~~~~~~~~ ~~~ X j 0 SYESMgwt :~~~~~~~~ 'II 0 i - 301 - Table 3.3 - AdmInibst Reform Pgram: tiget and off-Budge a1 April 1990 1999 ReducUon Budget Tota Adminstrati Reform Program 341021 22716 113344 Budget Natonal Adrlnisfrflon 268246 184667 83579 Catls Admnisraton 123646 61276 62370 De _wftjed Agencbs 144500 123391 21209 Off-Budge Natonal Admlnlbaion 72775 43010 29765 Cerntal Admlnlsrin 0 0 0 Decenatbed Agencies 72775 43010 29765 al National Ad mninslaq covered In Decree 247690 and hI HscIa un Edasdo Modewo" rpxwL - 302 - Table 3.4 - Natoral Admlnlsrafon - Refrm Program in Budget al b/ April1990 1993 Reduction Budget National Adminitaton 258246 184667 83579 Central AdmInisnadIon 123646 61276 62370 Mln"sty of Economy and Pubklc Waks 11115 6978 4137 Mnisry of Forwgn Affairs 3082 1511 1471 Mlniry of Health 44860 12022 32838 Milnist of Labor and Sodal Security 2874 2149 725 Ministry of Defense 41298 27020 14278 Ministry of Inteior 1167 1173 T6 Minisy of Culture and Education 14157 4120 10037 Ministry of Jusie 1751 1755 -14 Presidency 3342 4438 -1096 Decentralized Agencies 144600 123391 21209 al 1993 Budget definition; because of changes in administrative structure seected agencies have been grouped differenily frorn previous layouts In orderto make dat comparabb. bf Does not Include Teaches and Miliary. - 303 - Table 35 - Decentraled Agancies - Reform Program in Budget af April 1990 1993 Reduction Budget Decentralized Agences 144600 123391 21209 INTI 271 50 221 INTA 570 4391 1397 INIDEP 301 203 98 INPRES 125 78 47 INCYTHICRAS 533 327 206 National Board of the Antarctic 249 209 40 CITEFA 411 1000 -589 CONICET 8162 7400 762 National Broadcasting Commitee 301 0 301 CNV 96 147 -51 National Insurance Superintendency 196 341 -145 CRPC Yerba Mate 46 0 46 Wine National Institte 1406 555 851 Sug National Board 207 0 207 JNG 3S29 0 3529 Cattle National Market 24S 0 245 Meat National Board 514 0 514 Cinemna National Insfftie 128 183 -55 National Construction Registry 72 0 72 INAM 112 84 28 INOS 228 0 228 Citizens National Registq 1088 898 190 National Pricng CowUt 68 51 17 COFAPYS 97 103 -6 National Public Administraion Institute QNAP) 145 165 -20 Arts National Fund 88 67 21 CUDEP 199 0 199 Data Bank 137 0 137 Mihita Geographic Institule 440 341 99 SIGEP 475 390 85 CONET 5762 53 5709 Miguel Lillo Foundation 147 247 -100 National Instht of Educational Credit 35 28 7 INDEC 1204 1499 -295 SENASA 3086 2884 202 National Parks Administration 584 608 -24 Forest National lnstitute 319 0 319 Equestrian Natonal InsWte 18 0 18 CONEA 6287 6500 -213 DNV 7356 4018 3348 Official Broadcasting Service 1244 0 1244 CENARESO 151 144 7 DGFM 13276 4456 8820 PAN 2026 0 2026 Police Pension Fund 188 155 33 Financial Aid Institue for Pension Payment 287 208 79 Social Security National Administation 1592 9405 6577 ANA 3529 6136 -2607 0GI 10445 21229 -10784 National Lottery 3388 0 3388 Fedeal Police 35777 40615 -4838 Federal Prison National Board 7842 7185 657 Space National Comissimn 0 2S4 -254 National Sanitary Institu of Vegetble Qualiy 0 578 -578 Health Insurance Natonal Admhstration 0 206 -206 at 1993 Budget definiton. - 304 - Table 3.6- Reform Program not in Budget April 1990 1993 Reductlon Budget Personnel Included in Reform Program not in Budget 72775 43010 29765 INDER 390 0 390 Horse Racig Natlonal Board 1630 0 1630 Money House 1282 0 1282 Healh Insurance Funds (Obras Sociales) 32979 15010 a/ 17969 Natonal Uniwersites [Adm. Personnel) 36494 28000 b/ 8494 at Estimates provided by the Govremment. bl Informatlon provided by the Federation of AssociatIons of Workers of the National Univeritses (FATUN). Includes personnel worldng in health centers under univeries jurisdiction. - 305 - re.ai: Argue- P.cEtSil3 Pwzmu ------ PrabpUd- TadPrgsed .sjySf. uW _ __ _ _ nA. Dm 1990 a. 1991 O. 1992 Om 1903 RtueIm 1991 109Z 1903 1991 1992 1993 ptmcliarwwus 23482 19442 1068o6 47793 Z456 405 443 . 504 28896 75415 FAd Swg y £513 6.9 275 12773 70740 18574 tas9 a4 20680 1g7 PM 365 234 12773 1273 24162 13531 10631 Gm del Estmb l s10 10094 9483 .0425 331 1e3t g . . m063 TCF 2967 27W6 140 2957 231 1306 1450 SEGBA 20271 1i29 0 - 20271 202 2403 15806 Ag- y W9S 11276 104 2271 11276 350 3121 a40 5054 2271 IItUwn 169 1550 1493 1619 69 57 - 1493 TrstW&Canwmflcam 1949I0 113299 8263 3502 15981 2962 26257 - 5764 583 46154 F.roW sAfgrds 8335 57645 45905 3 51315 17881 t8740 -_ sa - 13885 AusASmasArgan.. 10731 .. 1 - ,. 9 I . ELIA 449 2750 2750 _ 4449 1699 1056 .. 1-9s AGP 3080 2755 2758 _. 3m0 322 406 _. - _ Z352 ENTEL. 6040 _. 46040 -. 4640 ENCOTEL 3584 32275 26330 358U 3569 5945 .. 26330 OSN am 7871 1893 a. 832 491 t4o ._ 5 1893 vxdmnrf&5a¶chs 84 St- 6 - 4 OPTAR U4 .84 _ _ U ._ o0... 14964 14984 * 149s4 -1 t984 IPASAM 1366 1366 _ _. 1386 , _ ._ _ 136 SOUISA 11413 11413 ,_ 11413 _ _ - _ 11433 TANCANOR 772 772 772 772 PdAro a"I_m" 399 399 . 399 _ _ _ 399 P em*ft G nw mII 1034 1034 _ -4 1 _ 1034 5: SsMEP u i- - -- al WoA wrtsW _lt=da*t - 306 - Table 3.3: Argentn - Nadona A*a*dsrau Wage B- - Budgeted - law 1989 1990 1991 1992 199i National AdmInidratIon Current Eqmendites (llon Pesos) 29 72.0 1,574.7 3,389.8 3,410.7 4,965.2 Real Expenditures (1992 MIllon Psos) 5,366 3,92D 4,368 3,955 3,411 4,738 E dursM (us$ MUon) 3,307 1,702 3,229 3,555 3,443 4965 Personnel Expendiurs (1992 us$ Mila) W 3.953 1941 3,49 3.689 3,443 4,738 Peronnel Expenditues (Porcers of GDP) 3.7 2.8 3.1 2.6 2.2 3.0 Psnnel hI Budget W 736,597 583799 360,983 341,973 Imnplicit Averae Wage (1992 USS) 4.742 6,32D 9,538 13.854 Iplicit Montl Aveage Wage (1992US$) 36S 486 734 1,066 Source: Executed Budgets: Fiscal Savlngs-nvusbrnent Accounts (1992) Mlinistry ci Econmy. u/ Net of lindemuintiow prion for emsl rtrment and chg I pay-scales. Includes social ctbutins, annual contpemerlay salades, and oe eriebuons. h/ Buoteted Natonal Admnistation Persnndl plus Armed Foes personnel (xcludn cowncft. and unesi admninirative pesonnet including hei funds untn 1992). t - - 307 - Table 3.9: Argentina - National Administration Compensations a/ (in million Pesos) 1991 1992 Total Voluntary Retirement 88.39 B.53 96-92 Severance Regime bl 43.62 169.45 213.08 Temporary Staff 2.27 - - Total 134.28 177.98 312.26 Source: Ministry of Economy a/ Includes Central Administration. Special Accounts and Decentralized Agencies bl Personnel subject to "Disponibilidad". - 308 - Table 3-10: Argentina - Total Public Sector Employment (1960- 1992) National Public National Provinces Munia- Total Adm.nistration a/ Enterprises Total and Buenos palities Aires Municipality 1960 506.367 415,457 921,824 364,512 83,626 1.369,962 1961 496,010 408,193 904,203 388,937 85.671 1,378,811 1962 469,446 325,549 794,995 414,668 88,350 1,298,013 1963 456,000 302,754 758,754 425,736 89,507 1,273,997 1964 460,527 305,319 765,846 438,590 93,277 1,297,713 1965 475,217 326,776 801,993 441,122 97,006 1,340,121 1966 481,025 339,519 820,544 468,951 101,725 1.391,220 1967 483,028 333,950 816,978 475,953 107,911 1,400,842 1968 492,443 315,284 807,727 472,537 109,247 1,389,511 1969 498,077 306,323 804,400 474,928 111,199 1,390,527 1970 511,451 302,294 813,745 474,192 112,394 1,400,331 1971 524,330 303,031 827,361 483,743 116,052 1,427,156 1972 545,787 309,769 855,556 500,898 116,198 1,472,652 1973 557,976 342,848 900,824 518,029 124,296 1,543,149 1974 517,153 408,750 925,903 564,496 135,220 1,625,619 1975 558,684 429,551 988,235 630,849 151,865 1,770,949 1976 557,691 432,715 990,406 646,654 162,248 1,799,308 1977 496,276 389,360 885,636 661,067 137,377 1,684,080 1978 497,481 361,640 859,121 688,299 133,873 1,681,293 1979 481,048 347,811 828,859 726,867 140,148 1,695,874 1980 494,565 324,916 819,481 723,293 149,858 1,692,632 1981 524,109 307,947 832,056 722,234 151,111 1,705,401 1982 514,035 300,768 814,803 723,374 151,350 1,689,527 1983 538,861 312.269 851,130 753,027 157,554 1,761,711 1984 551.708 314,831 866,539 808,473 169,155 1,844,167 1985 569,481 304,930 874,411 843,485 169,259 1,887,155 1986 564,937 307,424 872,361 912,070 171,017 1,955,448 1987 561,748 305,160 866,908 913,569 171,298 1,951,775 1988 604,629 305,288 909,917 915,556 171,671 1,997,144 1989 638,054 299,385 937,439 923,619 173,183 2,034,241 1990 671,479 293,482 964,961 929,443 174,275 2,068.679 1991 b/ 581,539 194,742 776,281 929,443 174,275 1,879,999 1992 b/ 284,215 109,686 393,901 1,238,874 174,275 1,807,050 Source: Ministry of Economy, SIGEP, and paper by Carlos Sanchez and Osvaldo Giordano "Public Sector Employment & Wages in Argentina: Cutbacks & AHtematives" (IEERAL database). al Adjusted for under-reporting of teachers for the period 1981-89. bI Preliminary. - 309 - Table 4.1: M92 PRESIDENCY EXPENDlTURE BY ECONOMIC CLASSIFICAfION (US$ diI..s) Wages Goods and Interest Transfers CapitaL Total As a Percent of Services Expenditures Expenditures Presid. Expend. Central Acdninistration 57.9 45.9 0.0 16.4 3.2 123.4 9.3 GeneraL Administration 28.6 30.9 0.0 6.4 2.3 68.3 5.1 Other General Adminis. 8.0 13.9 0.0 0.0 0.8 22.6 1.7 Tourism 2.5 0.1 0.0 0.0 0.0 2.6 0.2 Comunications 12.5 0.0 0.0 0.0 0.0 12.5 0.9 Sports 1.3 0.1 0.0 0.0 0.0 1.4 0.1 Science & Technology 5.0 0.9 0.0 10.0 0.1 16.0 1.2 Speciat Accounts 114.8 36.4 0.0 4.1 2.7 158.0 11.9 Intelligence (SIDE) 110.0 4.5 0.0 0.0 1.2 115.7 8.7 Other Gen. Adninist. 2.0 5.0 0.0 0.0 0.0 7.0 0.5 NationaL Tourism Fund 2.8 24.1 0.0 0.1 0.7 27.7 2.1 Nat. Radiotelecom. Service 0.0 1.4 0.0 0.0 0.7 2.1 0.2 NationaL Sports Fund 0.0 1.4 0.0 4.0 0.1 5.5 0.4 centralized Agencies 165.9 163.5 188.6 92.3 434.4 1,044.8 78.8 Nat. Inst. of Putlic Admin. 5.5 1.7 0.0 0.0 0.2 7.4 0.6 CNEA (Atomic Energy Comm.) 87.9 150.9 182.8 1.7 426.5 a49.8 64.1 Fed. Com. of Radiocciarnic. 2.3 2.0 0.0 0.0 0.0 4.3 0.3 Nat. CounciL on Sci. & Tech. 66.6 8.1 5.8 15.4 7.6 106.5 5.0 other Sci. & Tech. at 3.6 0.8 0.0 72.3 0.1 76.8 5.8 Total 338.6 245.8 188.6 112.8 440.2 1,326.1 100.0 a/ Includes Miguel Lilto Foundation and National Counicil on Science and Technology. . - 310 - Table 42: MNSA EXECUTW EIUDUrrE BY PROGRAZ 198-90 (in conutat 1991 US$ thounds) Jurisdiction 1986 1987 1988 1989 1990 Type of Program 80-Ministry of Health & SociaL Accion 169234.5 216427.2 166312.5 199683.3 52733.5 006 - SociaL Action Construction *ff 5095. o 6847.0 8543.0 7077.5 2657.4 0*5 - Emergency Program 0.0 0.0 0.0 98713.4 29476.5 040 - Administration of Azar £ Hipico Lotterler/ 137082.7 154897.2 91514.9 83743.7 0.0 001 - Conducting Health & Social Action PoLicy 5780.7 8703.0 38466.9 5414.4 12404.8 003 - Social Wetfare Coverage 21275.6 24959.9 17185.0 4198.8 8007.9 011 - SociaL Justice tJ 0.0 21020.1 10602.7 535.4 186.5 81-Secretary of Heatch 635209.8 708862.7 473793.9 369371.1 511571.0 .... ......._... .....___.... ............ ..... ....... ........................... ..........................................................____.____.__ 004 - SociaL Coverage in Realth 0.0 0.0 8198.0 3078h7 117.5 015 * MedicaL Attention Service 127734.1 164791.4 84266.7 26325.7 437SC.0 026 - Preventive Actions and Control of HeaLth 33991.2 33231.8 30648.2 14131.2 22616.5 036 - Support of the HeaLth Programs of the Provinces 129803.3 7Z642.4 29626.2 3364.9 198.9 OL4 - Assistance fn Provision of Medicine 37672.1 65031.9 110XZ.O 1311.5 0.0 050 Sanitary Construction 9878.9 11685.2 3135.4 3098.3 795.7 101 - RehabiLitation of the Health Infrastructure 0.0 1940.4 5276.5 7888.4 5211.2 151 - Regulation and coordination of the "Obras Sociales" 233901.6 268760.6 171391.7 193935.8 263779.4 196 - Construction of Health Centers 0.0 0.0 0.0 0.0 0.0 318. 320, 322, 324-330 Medical Attention Service 2/ 0.0 0.0 34095.6 45140.5 6649L.1 481, 483 - Mentat Heatth Service 3V 0.0 0.0 15884.4 16715.0 25999.9 505 - DdontoLogy Attention Services 0.0 0.0 0.0 0.0 0.0 616 - Psychophysicat Rehabilitation Servrces 4/ 0.0 0.0 2101i 0 4231.5 6116.4 037 - Preventive Measures & Control of Environ. HeaLth 9538.1 19396.1 16065.7 5975.0 12798.0 010 - Formulation and Inplementation of Health Policy 39GS.7 53819.1 46600.2 31310.0 39932.2 033 - Regulation and Controt of Hygiene 11821.7 1521.6 13839.2 8841.9 1650.7 716 - Retraining of Young Drug Abusers 1403.1 1742.1 1863.1 1650.4 3713.2 069 - Recovery and Strengthening of Health Services 0.0 0.0 0.0 2372.2 113.4 83-Secretary of Sports and SociaL Promtion 389630.0 435763.2 302705.5 717277.8 21652.0. of which: 060 National Nutrition Program CPUA) 267437.3 340562.8 c237550.0 658765.3 179760.3 Of which: 009 - Social Nutrition Program 104Q5.7 77865.4 50369.3 31815.3 25818.3 84-Secretary of Human Dveloment and Family 57232.7 68909.3 37237.1 48506.0 85760.3 85-Secretary of Housing and Environrental Regulation 1476922.3 1582807.8 1179373.9 8757377.0 1153584.2 of which: 029 - Subsidized Housing 1472110.1 1560086.9 1126098.4 B04067.9 1OZ3752.2 TOTAL 27Z8229.2 3012770.1 2179423.1 2210575.3 2018301.0 emo Items: Annuat Growth Rate of Total TotaL Expeniture of MHSA 10.4 -27.7 1.4 -8.7 Notes: . After 1991 this Administration has changed into e state society & is no longer inclueded in the Nationat Ackinistratit I. n 1992 budget programs 006 and 050 are combfned 1. in 1988 the progrm was named as Democracy In Action. 2. From 1988, programs 318 CPosada Hospital), 320 CSct Lucia Hospital), and 32e (Hospitat Ferrer) & from 1989 the program 322 tRivadavia HospitaL), 326 CUdaondo Hospital), 326 CUdanado Iospitat), 328 CLagLeyZeuosptital) 330 CSmwmer Hospital) are included de to decentralization of the organizations that uere part of program 015 in the CentraL Administration. 3. From 1989 include Progrm 485 due to decentral izatlon of the "National Protected Centers for Psychiatric Relabititation". 4. From 1989 intludes Program 610 due to the decentralIzation of "Nationlt institute of PsychophysicaL RehabiLitation. Source: Ministries of Economy and Health and Social Action tr. . - 311 - Table 43: SOCIAL SECURITY CONThIUBrTONS (in peet of gos saly) Employers Employees Total Pension Insurance 16.0 [iijaI 10. 26.0 [2311 Health Insurance for Pensioners 2.0 3 5.0 Active Workers DJ 6.9 3 9.9 Family Fund 9.0 - 9.0 Housing Fund - [51 -. t51 Total 33. 316 49.9 a/ Brackets indicate situation prior to Law 23.966, 1991. k/ Includes 0.9 percent contribution to the Administration of health insurance institutions. Source: Bank Staff K - 312 - Table 4 DISTIBUTION FOR THE GAINFULLY EMPLOYED BETWEEN PUBUC PENSION INSURANCE INSTITUTIONS, 1986 (in thouads pers) Contributors Non-Contributors Total I. National System 5,302 3,668 8,970 Dependent Workers 4,227 1,962 5,919 Private Sector 3,465 1,692 5,157 Formal Sector 3,033 919 3,952 - Rural Sector 338 259 597 Households 94 514 60B Public Sector 762 - 3,051 Independent Worker 1,075 1,976 3,051 II. Security Forces 139 - 139 III. Provincial and Municipal Public Administration 961 - 961 Total 6.402 3.668 10.070 Source: Secretariat of Social Security . . - 313 - Tnbe 415 Agesne - ,liy preud. 1991 Ann Navy Air Fore Prture Gwndrnrie Total Percent by Rank Totnl 32145 19015 16410 1312 10846 98178 100.0 Total Offioer 5932 2944 2460 1437 1B20 14698 14.9 Liutent Geneal I 0 1 .. .. 2 0.0 MaorGwral 3 .. .. 17 0.0 sladeirGandal 50 31 20 9 12 122 0.1 Colonl 442 263 179 04 108 1055 1.1 Lieutenrut Cokwnl 814 397 207 159 179 1826 1.9 Maoor 1010 626 394 222 306 2558 2.o Captain 1134 eoo 5f4 291 296 2905 3.0 FretUcoaant 1 1199 478 629 34- 431 2983 3.0 FIrt Uutenet 2 7S9 266 338 144 218 1705 1.8 Sndri Utent 405 277 211 202 270 13G5 1.4 Total Enlisted 26213 16671 13W5 11725 15021 83580 85.1 Sergent Msjor 1298 322 132 68 330 2150 2.2 SeeantPrindp*a 2989 720 735 301 496 5141 5.2 Segeant Adjunmt 45F3 225S 1453 1251 10v8 10530 10.6 Swegnt 1 4302 2240 1397 2208 2601 13414 13.7 Srgearnt 4962 2146 2171 4115 2566 15952 16.2 Corpoml 1 3135 2592 1849 1714 2054 11344 11.6 Corponl 1814 1840 782 1499 2275 8210 8.4 PrIvate 111 213 .. .. . 324 0.3 Priva 2 129 337 .. .. .. 466 0.5 GendaferlSir .. .. .. 59 3554 4123 4.2 Corucrpte 3000 4000 4820 .. .. 11826 12.0 Source: Minletry of Dwue - 314 - Table 4A ArgenUn - C _mpostn of Mltry Expenxtror Selected Countre, INC qercet atd Total Expendlhn) Argon&m Avmge BSim ChUe Combi Greece al b1 Pe"tenel 60.7 52A 63.1 399 51.7 555 Operao end tUlntenonce 33.t 23.9 309 28.4 20.0 16.2 ProcunmnUConra&uctonD 62 23.6 59 31.7 282 28.3 Total 10W0 100.0 100.0 100.0 1W.0 100.0 Sourac Unitd Nation, Reduction al MAilW Dude, lWy Expdires hn Standwdked Foem Reorted by Stle. Repot of diw Secal4wmau. AI4381, Seembe 18. 1991 at Exludes mitmy penson. whkh arn presumed to be meirsig iorn the accounts cd the arcountries. r penin wem included, We proporetns would change as fotlow pesonnel 70.1 percent. opratins nd mainenance 252 percent. and capiat expendkurs 4J perconL bl E nxel.ntins. - 315 - Tab 5.1: AimmrIin - Deommfs Debt (US$ mUon) 1989 1990 1991 1992 Totl 799 2718 1562 6soo BOCREXa/ 0 406 105 148 BOCEbl 354 .829 73 6 BIC cl 352 1338 1359 1480 CNEA di 71 26 0 0 BOCATE 12 25 15 8 BIC Provinces 0 91 0 BOCON el 0 0 0 5268 Msmo: Dollar Isues BONEK fl 5894 SS68 5838 5690 BOTE and Euronotes gl 0 0 501 2857 a1 External Credit Bonds bJ Economic Consolidaton Bonds cl Investment and Growth Bonds dl Atoric Energy Comnisdon Bond. el Debt-consoldadng bonds isnued to suppfler and pension. f/ Extemal Bonds g/ External Treasury Bonds Source Central Bank of Argentina - 316 - Tabl 8.2: Agudinm - Extemnl Debt by Cred:tor.1983-1991 a1 bI (Millions of US dollar; and of period) 1983 1984 1985 9s85 19987 198 1989 1990 1991 1992 Total Debt 45069 46171 49325 514ZZ 58324 58303 55511 62974 65229 73157 Medium and Long Term 36835 39601 45140 47222 54749 54803 52900 59998 63931 64223 Shot Term 8234 6570 4186 4200 3575 3500 2611 2976 1298 8944 MLT Debt Outeanning Wnd Diburued 36835 39601 45140 47222 54749 64803 62900 59998 63931 84223 Commwral Banks af 21394 23425 33403 33188 37600 38251 38092 34590 35368 31751 BiErdtw 1654 3290 3821 5132 5809 S555 10921 11302 12287 14173 Bonds di 4208 4307 3922 3638 3528 2915 5907 65e8 7772 8583 IBRD 534 503 700 1140 1802 2101 2196 2396 2790 3037 IDB 873 936 1205 1405 2185 2263 2667 2990 3170 3697 IMF 1173 1140 2289 2719 3925 3878 3117 3082 2544 2882 MLT Disbteements (Grnn) 8593 14926 8843 7984 5027 4298 5198 4188 5675 4052 Commeral Banks 6106 12698 6584 5446 2202 2562 2391 1966 2350 0 Biateral 704 1814 S10 1238 571 477 1755 908 1122 400 Bonds 451 171 130 183 83 0 0 0 956 12W0 IBRD 70 96 144 408 795 487 316 405 460 481 IDB 89 147 326 162 123 231 503 399 450 748 IMFpurchasm 1173 0 1149 547 1253 541 233 510 337 1223 MLT Armrtixztirs 4209 11504 4778 1512 2490 2463 1891 3375 2699 3964 Commweia Baonk 3214 11057 3956 583 1226 843 0 1289 0 127 Saxuwra 510 178 179 259 187 0 483 756 610 1065 Bond. 400 72 515 467 179 656 309 226 56l 1433 IBRD 40 90 71 110 133 188 221 235 322 233 lOB 45 84 57 77 94 153 160 174 208 221 IMFrepnarhnaes 0 33 0 117 671 523 718 695 998 885 MLT Disbxeemmut INut 4384 3422 4065 6372 2537 1835 3308 812 2976 89 Commercial Banks 2892 1641 2628 4863 978 1619 2391 677 2350 -127 Bisatwra 194 1636 331 980 384 477 1272 152 512 465 Bonds 51 99 -385 -284 -96 -56e -309 -226 395 -233 IRD 30 16 73 298 e52 299 96 169 138 248 ID8 44 63 269 a5 29 78 343 225 242 $27 IMF 1173 -33 1149 430 582 18 485 -185 -681 338 Interest Pymt 5423 5537 5132 4291 4362 5198 5194 5777 4935 2954 Cornmweral Banks 4427 3802 3098 2998 3452 3359 3230 2546 1103 Bilateral 189 297 122 482 513 645 1070 937 568 BOWds . 437 449 320 490 323 232 598 588 438 IBRD 36 56 48 75 91 159 196 182 209 165 IDB 55 SO 72 108 180 158 167 193 175 131 IMF ohaes 74 90 140 159 121 282 282 243 314 331 Short Trm 258 326 409 0 311 333 201 1ee 220 at Disbummect and amortizato may not explain yaedy hange in debt stock due to valuation changes. bI Rgwgu adjusted by the chiee in cras-ates betwen US dolls and other curencies. of Commercial Bank dbt incudies wanws. df Change in debt stoak from 1988 to 1989 include BONEX conversian. Sourc IBRO staff esumatre bwed an data from tho Centra Bank of the Rqebic of Argenrine, IMF and ID. Table .1: ARGENTINA P BALANCE OF PAYMENTS, 1970-1992 ac iMlions of US ddklarn) 1 970 197 1972 1973 1974 1975 1975 1977 1971 1979 luau 1951 1952 1983 1954 1955 1985 1987 1918 1989 1990 1991 192W' Etxpos (FOB) 1773 1740 1941 3266 3930 2961 3918 6851 6401 T810 8021 9143 7624 7836 81O7 8396 6683 5358 8942 9573 12354 12019 12216 Imports (CIF) 1694 1668 1906 2230 3535 3947 3033 4162 3834 6700 10541 9430 6337 4505 4684 3614 4724 6817 5322 4202 4079 8038 13909 79 .12a 38 1038 295 -986 885 1489 2567 1110 -2520 -287 2257 3331 3523 4582 2129 541 3820 5371 6275 3963 -1691 Non-FactorSeMcus(nt) .12 -2 76 65 164 172 272 387 4100 *762 *739 -705 43 .341 .205 .231 *573 *205 -255 -265 -373 .1007 -938 R"eIpt. 424 457 458 557 851 743 8J3 1117 1314 1791 2744 2402 1901 1676 1921 1646 1U65 2112 2210 2391 2599 2736 2737 Payments 437 469 360 489 609 571 564 730 1414 2553 3483 3107 1856 2017 2125 2077 2438 2391 2465 2648 2976 3743 3675 Balanceof Goods and NFS 67 -130 114 1104 459 414 1157 1876 2467 348 -3259 W992 2330 2990 3315 4351 1558 256 33BS 5106 78a6 2978 *2629 NotFfctoreer*celncIme -223 -256 -334 4394 4333 47 -5o0 418 -81 .920 -1531 .3700 -4710 4406 -5712 *5304 .4415 *4465 4S127 U422 4203 -5740 4832 Net Interest Payrmena. -273 417 -298 460 *465 -370 -405 493 .947 -2965 -4403 *4983 -5273 -4870 -3934 -3927 4467 -5759 4724 -42aa -379 Interest Recipts , . . . .. .. 769 90? 1228 685 623 440 264 253 357 216 211 265 280 376 458 Interest Paymenl. .. .. .. . . .. .. 1174 1400 2176 3850 4925 5423 5537 5132 4201 4145 4a78 6024 6O04 5206 4135 Direct Invetmrn Inom. -60 -78 -36 -18 -27 -208 -278 .427 -584 -735 -316 *425 -439 -425 -482 -558 -880 -884 -716 .912 -963 OttrrFactorSerce .. . . 1 -15 40 .. . .. . 237 CurrentTranshrme(not) 43 -3 *4 11 0 5 1a 31 48 35 23 -22 3i 18 3 0 2 -6 0 a 71 29 .49 Balance on Current Account .1509 -39 223 721 126 -1284 667 1289 1834 -537 -4787 -4714 -2357 -2402 -2391 .063 -2858 -4237 -1762 -130a 1764 -2735 -7310 Grect Investment II 11 10 10 10 .. .. 145 273 285 786 944 257 lfl 208 919 574 -19 1147 1028 2008 2439 2441 Total MLT Loans (net) a 229 208 *1 *.135 5 -12 1230 875 907 2648 3400 8557 7401 2810 .768 2768 5763 2653 448 1444 -969 1238 -250 Total Shorti-trm Loans (net) 165 -240 -74 15? 42 226 -923 31 -1215 1635 -1780 4003 -5446 -935 2340 -2354 4186 -720 -1699 -956 365 0 7646 NotUse IdlFReRources . .. 19 .. -131 219 237 -132 -423 . . . . 1227 .. 957 148 8115 30 478 -257 490 338 Capital Transactons e.L d/ -130 19.1 273.8 83.7 44.4 4 -54 -491 503 370 -390 -131 413 -1937 480 e76 6 698 3784 -1630 164 1565 134 ChangouInOrmhRoeer -135 390 -175 435 4 857 -1157 -1717 -1679 -4381 2749 3437 758 1254 69 -2030 655 1010 *S746 1000 4076 -1938 -299.2 (- naWease) sorcme: CenWtaBarkiwS theRpubli Aro enmta (BCCR; IORD estmku-Le at For 1970-1974. prlvate sector .mractlona kicud "banM*g edor bi Prdelnlay. cr 196 51992 dat on pubic and p*ate dsbausamena and am*r tatlons uar IBRD stiumats, based on dat p tdd by the CentW Bank V Vauaton a4usinnts, BORs, chanes hI rars and aeror and omrsions - 318 - Table 6; Argentina - Nominal Official Exchange Rate, 197G-1992 (Annual Averages; Pesos/USS) Exchange Rate 1970 o.owoooo00038 1971 0.000000000045 1972 0.000000000050 1973 0.000000000050 1974 0.00DO00000050 1975 0.000000000235 1976 0.000000001400 1977 0.000000004080 1978 0.000000007960 1979 0.000000013170 1980 0.000000018560 1981 O.W0000044170 192 0.000000259000 1983 0.000001053000 1984 0.000006765000 1985 0.OW060406000 1986 0.000094303000 1987 - 0.000214509083 1988 0.000877030000 1989 0.042333960833 1990 0.487589083333 1991 0.953554416667 1992 0.990633333333 Source: IMF, intemnational Financdal Statistic OFS). Tw 7.1: ARGENTINA . OROSS $110 PRfUc T BY8SCTOM CARIG 1704WM (1it" Pa..) 1070 ORJz {072 1973 1074 1075 3767t 1377 1076 96,1 5KO 10tt I3 1 1KB 11 17g lo tOOPATMARKETPRC 06n7744 0.5160 01290 0.96470 1,0:630 1.01030 1,010M 1.07470 1.00 M11217 1.12913 1.0171 1.025 1.03t27 1.06016 1.01406 1.0721 1l634 1.006 10114 .0 NETINDIRECTTAXES 0M100O4 0.10377 0.1010 0.10997 0.11594 0.1t116 0.5t1t 0.122M 0.855 0.126 0 Q121673 0.12026 011430 0.11775 12061 0.11556 0.12223 0.2468 0,12169 0.11615 0.11W tWPATFACTOR COST o0m42 0.60673 0.6230 0.6423 0100361 0.6062 08502 0.95216 0.52144 O.9637 I.OC046 1044g6 062 0.0104 p 0.66 0.9S 0.1017046 C04490 0.20241 0.3aJ Aqtd;ul%ui 040232 OA.1 3 0.10M 11112 0.12048 0.11S? 0,12270 0.12670 0.1920 0.13213 o01m7 0.1279 0.13701 0.14026 014456 0.1421 0AMM 0.4243 0.14237 0.362 0.151W0 MMhi 0,01717 0.01016 0.01272 0.01915 O.OS:2 0.01032 0.01979 0.023145 oQr,S 0.02320 00.2462 0.02471 0.02491 0024M 0.024.61 002411 0.02 0.02327 O.8O2 0.02632 0.02601 WMSulsclur*ig 02000 0.22275 0.23110 0.24069 0.214C 0.24653 0.2400. 0.25902 0.2324S 0.2611 0.34640 020776 0.10725 0.21704 0.22669 1.20230 0.226TS 022352 0.2236 0.13121 0.16762 Conatron 0,00265m 0.0612 0,05291 0.0461t 0.06041 0.0272 0.060 0,01797 0.06474 0.06444 0.00616 0.OSt7 004373 00360 O,3041 0.028S 0.03114 0.0357 0.03064 .020 0,0137 ElKtrlcy, Os stn Woar 0,01110 0.01070 0,02174 0.02338 0.02477 0.02627 0.02724 1.0265 0.02345 0.03261 0.035M4 0.9474 0.03561 0.03668 0.04110 104175 0.0446 0.04756 0.0408 0.04022 0.04614 Commetce* Rtusrantsuarid Hcoh 0.183 0.12210 0.12420 0.12713 0.13490 013420 011970 0A4010 0.13140 0.14760 0.1191 0.14644 112612 013150 0.13727 017J03 0.13706 0.13896 0.13019 0.11066 0.11760 TrhnofWandCommurmulon 106811 009 A62 004 0,00670 0.090Q4 010953 0.10040 0.00820 0.10542 011014 0A1200 0032 010340 0.10907 0. 1041 0.11013 0.11297 0.10844 0.1062 0.11034 BonMA 0.06015 0.0602 0.0561 0,00112 006916 0.06336 0.06014 0.06915 0.07361 0.0700 003882 0.06474 007300 0.06076 0.07055 200971 0 07471 0.07668 0.07643 007450 0.07606 PbflaandPrtnhaSofAcshJ 0,11353 0.I160 0.1s 0.12413 0.12026 0.13760 0.13710 0.13003 0.14027 0.1430 0.14596 0.14926 014914 0,15141 0.144 0.156 0.15157 0,16513 0.16767 0156 0.1701 SourCe: Ctunviul Sirkt d Ii Raput d b Nptk t(SCRXM) a u1si flgutt Ir publk Bad pbta s lultotnl. July1902 WA t- l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~h .r.W; ::4 O:.WATIAARKET &A3 11 2. 5.4 -46 00 6.4 .11 6.6 1.6 41.6 -to6 SO 16 .43 6. 12 46 469 14 HUNET6NI TAI &? La is 5.4 .0.7 0.0 6.4 413 7.0 I.5 46I -t.o to6 6 44 117 12 -26 -4.6 144 * UCATFAaTONCO6 3.6 2.1 36 5.4 .0. 0.0 6.4 2 6.0 1.6 46s -4. to to -43 6. 12 -26 t4o 14 AUleat 1.6 Ii 10.7 1.7 -LT? 4.? 2.4 is6 it ,s 1.6 F.o 2.4 1I AT 46 Ui LI 46 Si ?A it .16 2.4 1.5 4 Le Ii 63 6 t6 (L6 U2 .46 46 &A 0.2 Le 3.2 .I L4 _ _ 6 40 40 66 .2.6 4.0 7.6 .lr 119 .3 .i6.7 41 1 0.0 4.0 413 12. _.0 4?I At 46 6.3 -is -¶1.7 7.M 4.6 14.6 12.2 -46 Alt 1.1 .13.0 -as -I&I -24. 47 0.? 14.? .14.6 .31.6 -16" INImBv,all udwar 6.3 6.6 1.6 06 6.1 3.7 4.6 3. to.? 718 A1. 1.4 4.6 6 0.4 7.4 6.1 Cs .3 46A : ,' ; n A elIbIhuU*U s 3e2 1. 7 is 6.0 4.0 .3.4 . 4.2 1*. 1 6o 4 -16. 4,6 46 4U 16 e.7 41. .11 ,.,-,.p.gtag~c..eu~ .1.6 42 16 2.7 47.6 0.0 6.4 -2J 7.4 C.T 46 46 4.4 U 4- 4. 2.6 -46 4.0 Q< SaTrJleg .I -2.2 4.6 13.2 44 .4.2 13.6 17 10 12O .6.3 43 11.8 ..0 12 1.2 70 is 422 3. ".04 PI.bbMiP,IvaI.SeMmbeI 2.4 is 4.1 4.1 6.4 0.3 6.6 as 10 2.0 2.s 41 1.6 t? is 1. *z 4ze7 -K *66.2 ' eww~ TaIls 7,12@ 2@ 2. ..0 a z X l1 l Z § l al e I60165w l.0 4.0 *.e *p.0 4.0 m. anata2 4 *|7 4 o e %s ss . . :4, C n.S ., .1. 7. . .e n .4 *U 4e .1 7 7 r t7 * 10 *0 b_.on r 5 7.0 e ¢1 J. 4. U eor is s.e t ze e t. r.# ss 2.s ! U C"lt"l 694h12 J afi *. 4.o J.4 zo o ns o *l§ *& u oa ¢ s.4 oa o .1 ^" , , fO_ le 4t or 17 4. 4.r ,4 .ls t t7 4~~0 o . oz . Tabe t: MaOENTINA. OROSS DOMESTIC PRODUCT BY SECIORAL CRION, 19*300 pr d q GDP 5a Pselr cost iTe e 70 1371 1e 3 9rX 10? 4 l5ts tore lol 78 Il lsK io 1W1 1942 Io I4 IS N4 too? Ion 1- iO OOPATMOAKR PRIU Ils it. t lZ 113.9 tllt 112.9 112.0 11.i 112S 11Zg 112.i t1u. 192.3 lil lit. 1le lit, 1113 1113t 1113 till NET CSECTTAXTM 1i.9 1t9 12.0 itZ It2 19 12J IZ 123 1 Ito 113 Its Itl 1to It9 12.3 ItS 12.9 Ito flu it9 ite OOP ATPFCTOR COST 100.0 100,0 100.0 100C0 tome 100.0 100.0 100.0 1000000110.010. 100.0 100.0 10. 100.0 100.0 100.01 IS APqttiu 132 123 113 137 I14 1.1 131 13.2 14.0 13J itS 3.17 I. 15.3 15.4 15.1 14. Id.? 101 151 10.7 Mkmg 2.3 2.4 .4 2.2 2.2 2 2.L Z3 2 4 24 tS 2.7 2.1 L7 le L7 24 14 27 t 1o Manuftetwt 27.0 2It 2.l 211.2 2.3 27.8 23 27.3 2.2 26.0 24.4 212 212 237 24.0 216 24.1 214 22. 21.9 20.7 C orsvct,j 8.5 61 0.4 5.5 5.6 s.9 s.s I.I 7.0 6.5 6.5 3.1 4.9 4.2 3.2 32 33 L.7 2 13 1.3 rGM*. aN Wfdm" 213 iS 16 17 t1 LI 3.0 3.0 3.2 3.3 .6 3.7 4.0 4.2 .4 4.6 4.7 4.3 5.3 6 *.4 Camem, Rmbuants end HoS 15.2 16.1 16.l 14.3 15.0 15.0 14.6 14.2 14.3 15.0 16.2 15.7 14.2 14.4 14.J 14.0 14.4 14.3 ItS 113 11.0 TiiuiPwtCw t Cwnlflflb 11.3 1.1 10.4 11.0 Ia.? 10.7 10. I 10.1 10.7 10.1 10.S 10.3 11.2 11.3 11.5 11.7 1.6 11.6 Ili 112 BSfb is 7.4 7. 7.2 7.7 t 15 7.3 8.0 *.1 46 .1 1.4 7. 7.t 7.L 7LI 7.3 11.61 1.1 12 ptAItVWdkPu dPS e of 14.a 14.4 14.5 14.5 944 104 10.4 14.5 15.2 14.5 14.8 1o0 1.s 16.5 1to 1t7 17.0 17.0 a. i3 .4 Ge: TaMe 7.1 1270i075 eet rt p cod pbe*eu mulen. IA Table 7.4: ARGENTINA - OROSS GOMeSTIC PROCIOT BY SEOTORAI OR1049 197199 dI 1970 1971 1972 1973 1974 1915 1979 igl7 -1974 -- 911 lo6 1991 1962 196 1964 IM9 I 1965 97 low6 I96 1 OROGI DMESTICPROCUICT 0.0066 0,00125 0.00207 ROM38 0.048 0.01 43 0.07687 0.20934 0J62112 1.4251 2.833 5.4752 K4.I1 68.2rA2 526.100 3968.26 7,43010 17,110.8 78,179.3266,026M 61,66,316 Agf1mibx 0.00011 000016 000031 0.00056 0.00051 0.00127 0.0063 0,0229 0.0307 0.1604 0,2436 UA490 1.7363 6.M077 66.834 0,601.07 0.940.43 2,190.61 99311 323.734 6,526.78 mINn 0Q0002 @00002] O.0004 0.00007 0.00010 0.00028 0.00148 000256 0.01012 0,0343 0,00661 0.1590 0.4514 2.698 20.886 0.1N64 0,29.66 0,684. 3,103.8 101,t67 2.039,312 MOACeCtdG 0.0026 0.003 .0006 0.00101 0.00139 0.00464 0.02805 0.0680 0.1513 0.396i 0.70192 1.3147 4.1918 21.0164 162.69 1,219.04 2,27.94 5,390.0 24,163. 787.604 16.876.420 OWMOMlllN 0.0000 000007 000012 0.00016 0.00027 0 00112 0.00548 0.01476 0.03813 0.099 0.2000 0.3306 0.7206 4.234 32.721 0,245132 0,400.42 1.071 4,66.6 158.49 3.194.92 j: Ekeorl*i 0.00092 0000 0.00004 0.00007 0.000o 0-00020 0.00191 0.0056 0,01449 0.030 0,0718 0.1632 0.2513 1.216 13.308 0,09.75 0,167.21 08436.1 1,977.2 54.447 1,299.11 f,Coffimeme 0.00015 0.0002 000M 0.00083 0.00074 0.00224 0.01320 0.03515 0.06640 0.2522 0.5106 0.0716 14499 11.2520 67.024 0,65243 1,224.61 2,682. 12932,4 431.529 6,497.132 TrcnhWod 0.000 000011 000017 0.0002 0.00036 0.00112 0.00600 0.01753 0.04431 0.1143 0 2171 0.4414 0.9244 3.8661 29.936 0,21448 0,421.23 0,961.3 4,446.7 145.006 2,623013 Bawidng0 0000097 0.00010 0.0001 0.OMS3 0M00M4 0.00118 00068 0.02341 0.066115 0.1658 0.3865 0.7563 2.134 4.3822 33,649 0,2512? 0,47348 1,103.0 6,000.6 162,991 3,266,666 Gowvior fI" 0.0012 0.00016 0.00025 0.00049 0.0007 0.0022 0,00687 0.02244 0.06744 0.163 0.4270 0.6425 1,6962 10.49M 61.145 0,60.36 1,141.79 Z,6699 12,066. 393.062 7923,104 S* im m:.m Re'4aMo :R adOOPEabbijon breadot hr ;964.1990 .te T..b 7.a: &RGENtN aRvs'aDbEST.MODUCT o 1;.j :92Pn" - .emS,; ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. i 'h,t- '; ... - _ 1970 197t 1S72 1973 Is74 1975 197a 1917- -l978 sn n" 1"1 19sa 1W3 19U 1"s Iss0 1"7 Isse 198S usb~~~~~~~~~~~~~~~~~~~~1. Tabl.5: ARGENTI-AG OSSOMST1OPROrT UVIECTORA mo. toIO.waoe 197 1971 1972 1973 174 1915 197 197 1978 199 1910 11 9l62 1 1953 I9M 16 199 1967 1991 1 9W GROSSDOMESTCPROOUOT 1000. 100.0 10w.0 100.0. 100.0 100.0 100.0 100.0 100.0 100.0 1000 100.0 100.0 96.6 100.0 1e.0 100.0 IOD. 100.0 10.O 100.0 4gkbia 122 14.4 14.8 155 136 89 110 11.0 10.1 10.6 8.6 9.0 I1.8 127 127 117 1II ItI 17 12.7 12.7 1dnm 2 10 1.6 10 2.1 20 2.0 1.2 1.9 2.4 2.4 2.6 11 3.9 40 0 4.0 4.0 4.0 4.0 4.0 hdacwki 30.1 30.2 30.7 265 28.6 32.4 33.0 31.1 26.9 27.7 26.0 24.0 '24 301 30.6 3 30. 30.a 30.m 30.m 30.u Coucmion 5. 1.0 5.7 S.1 56 7.8 7.2 7.0 7.3 70 7.1 6.0 49 1.2 62 62 12 6.2 12 02 1.2 E cy 23 2.1 2.1 Zl 2.1 1.' 2.5 2.6 2l 2 1 5 3.0 1.7 i5 2.1 25 is 2a 2.5 is i6 Comawr 16.7 16.0 18.6 14.9 15.3 15.7 17.4 18.8 16.9 17.7 15.0 17. 166 1t.5 16.5 165 11.5 II. 16.5 16.5 1i6 s Transpot 9.6 1.5 5.4 7.8 7.8 7. 7.9 8.4 6i' 60 7.7 6.1 6.3 6. 5.1 5.7 6.7 5.7 ? 5. 5.7 9aw" 8.0 7.9 7.7 9.6 9.4 62 7.7 11,2 10.7 11.6 13.7 13.8 145 5.0 1.4 6.4 1.4 1.4 6.4 14 6.4 GOwrn4e 1313 110 12.1 1.9 15.4 15.4 11.3 10.7 1.9 129 15.1 16.4 12 11.4 15.4 15.4 11.4 15.4 15.4 15.4 15.4 oWcot TMCi 7.4 dO EsbU"tnbyswlxr 1964-lWwas alsff JlI 1Ni2 Table 7.8. ARGENTINA * GROSS DOMESTIC PRODUCT BY EXPENDITURE, 1970-1990 (1970 Paso) 1970 1911 1972 1973 1974 1975 1975 1977 1916 1919 1980 1961 1952 1983 1984 198 1985d 11987 18s 19s9 199 3rMUDomestic Prduct 0.6775 0.9106 0Q9294 0,9642 1.0163 1.0103 1.0102 1.0747 1.0400 1.1122 1.1292 1.0547 1.0026 1.0328 1.0602 1.0141 1.0721 1.0953 1.0566 1.01o8 1.0230 rermsdTrade Eled 0.0000 0.0107 0.0134 0.0302 0.013a 4.0028 40,0116 0.0002 40084 0.0051 0O258 0.0328 0,0033 0.0022 0.0145 4.0010 .0.0134 -0.0471 4.046S 400552 400710 3rosaDomestltneI e 0.8776 0.9212 0.9428 0.9944 1.0301 1.0077 0.W904 1.0749 1.0316 1.1160 1.1550 1.0875 1.00D9 1.0350 1.0747 1.0131 1.0587 1.0482 1.0201 uns6 0.9520 ImportdoCoodsand WrSat 0.0789 0.0883 0.0840 0.0829 00874 0,0890 0.0703 0,04 0.W014 0.1413 0.2068 0.1869 0.1077 0.1021 0.1089 0.0931 0.1094 0.1160 0.1027 0.04o 0.01so Ext ouf GooddsandNFS a 0.0810 0.0729 0.0744 0.0648 0,08s0 0.0771 0.1014 0.1291 0.1406 0.1361 0.1291 0.1362 0.1410 0.1519 0.1508 0.1697 0.157? 0.1539 0.1824 0.1964 0.2320 Emports Adjusted byTerms d Trade 0.0610 0.0836 0.0878 0.1150 0,0968 0.0745 0.0896 0.1293 0.1322 0.1419 0.1549 0.1690 0.1443 0.1541 0.1653 0,1887 0.1443 0.1067 0.1350 0.1412 0.1610 Resourmeeapb -1.0021 0.0047 4.0038 4.0321 40,0114 0.0145 40.0193 4.0329 .0408 4,0006 0.0519 0.0179 *0.0386 4.0815 40584 40.0756 400349 o.orm -0.0333 40863 4.0760 Total Ep.mndutres 0.8764 0.9269 0.9390 0.9623 1.0187 1.0222 0.9791 1.0420 Q9908 1,1174 1.2069 1.1054 0.9693 0.9835 1.0183 0.9375 1.0239 1.0675 0.98 0.9072 0.6760 0.0000 0.0000 0.0000 0.0000 0,0000 0.0000 0.0000 0,0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0O00 0.0000 0.000O 0.0000 0.0000 0.0000 0.0000 0.0000 Consumption 0.8894 0.7195 0.7305 0.7636 0.8179 0.8176 0.7605 0.7776 0.7685 0,8724 0.9395 0.9005 0.8049 0.8345 0.8875 0.6329 0.9010 0.9138 0.8587 0.6153 0.7928 PublIc 0098 0.0949 0,0932 0.0992 01069 0.1070 0.1119 0.11i7 0.1204 0.1271 0.1288 0.1308' 0.1215 0.1248 0.1274 0.1252 0.1318 0.1371 0.1288 0.1227 0.1189 PrIvte 0.5985 0.8246 0.6373 0.6644 0.7110 0.7106 0.6486 0609 0.Q481 0.7453 0.8107 0.7697 0.6834 0.7117 0.7601 0.7077 0.7692 0.7787 0.7299 0.695 0.6739 Grora" Dorelo lnvumern 0.16(0 0.2063 0.2085 0.1987 0.2009 0.2045 0.2186 0.2644 0.2223 0.2450 0.2875 0.2049 0.1645 0.1470 0.1307 0.1046 0.1228 0.1437 0.1282 0.0889 0.0832 Changes In Inveories 4.0001 0.0051 0.0050 0.0100 0,0046 0.0070 0.0014 .O018 4.r0067 0.0005 0.0099 4.0073 0.0107 0.0012 4.0020 -0.0126 .0.0048 40018 .00WS9 -0.0003 00061 GrossDomesti Fhd Irnstment 0.1861 0.2012 0.2035 0.1887 0.1963 0.1967 0.2172 0.2826 0.2290 0.2445 0.2578 0.2122 0.1538 0.1458 0.1328 0.1172 0.1276 0.1454 0.1223 0.0892 0.0771 Public 0.0708 0.0780 0.0796 0.0881 0.0684 0.077a 0 09o9 0.1219 0.10S8 0.1017 0.1010 0.0907 0.0712 0.0671 0.0491 0.0410 0.0519 0.0623 0.0649 0.0405 0.0308 Priate 0.1153 0.1232 0.1240 0.1226 0.1279 0.1189 0.1183 0.1407 0.1222 0.1428 0.1566 0.1215 0.0w26 0.0787 0.0835 0.0762 0.0757 0.0831 0.0574 0.046 0.0462 Gross OomedstloSrigsci 0.1882 0.2016 0,2123 0,2306 0,2123 0,1900 0.2379 0.2973 0.2631 0.2456 0.2156 0.1570 0.2011 0.1985 0.1871 0.1802 0.1577 0.1344 0.1614 0.1452 0.1592 Net Factor lncome Payments 40.009 4.0039 .0.0120 4.0145 4.0117 4.0124 4.0127 4.0143 4.0174 4,0209 4.0308 -0.0620 40.0768 40.0854 4.0557 -0.0712 -0.0574 4.0576 4.0635 4.0758 *0.0707 Net Transfers 4,0001 4.0001 4,0001 0.0003 0,00O 0.0001 0.0004 0.0007 0.0010 0.0006 0.0004 40.0003 0.0004 0.0002 0.0000 0000 0.0000 0. .0001 0.0000 0.W01 0.0W0 Gross National Svigs 0.1784 0.1976 0.2002 0.2168 0,2008 0,1778 0.2256 0.2830 0.2466 0.2253 0,1852 0.1247 0.1249 0.1133 0.1014 0.1090 0.1003 0.0765 0.0979 0.0895 0.0893 Gross Natlriol Product 0.8677 0.9065 0.9173 0.9500 1.0048 0.9980 0.9979 1.0611 1.0236 1.0919 1.0987 0.W924 0.9264 0.9476 0.9745 0.9429 1.0147 1.0374 1.0031 0.9429 0.9531 Gross Natlhoalncome 0,8678 O.9172 0.9307 0,9802 1.0184 0.99S4 0,9861 1.0813 1.0152 1.0977 1.1245 1,0262 0.9297 0.9498 0.9890 0.9419 1.0014 0.9903 0.9505 0.8877 0.8821 5ource: Cential Bank of th Republic od Argenilnae (BRA) ard IBRDstaff estimates. V/ Balance of Payments ftgures deflated by respective puke Indices and conrvrled at 1970 exchanp rate (3.8 pesos per USS) bl . (Expod s adjusted by tems of trade - Imports), c/ Gros dolmi Irivnslent - resource Cap, JIy 1992 Tableb 7: ARGENINM.OGROM FIXED W MENT, 197011900 (1910 Pea) 1970 1971 1972 1973 1974 1978 1975 1371 1978 19179 1S9 19s8 19s8 1983 1984 1985 188 1191 1988 1s r 1 Gmu Fud lnwItmnt, by sor .18111 .2012 .23 .1887 .1963 .1967 .2172 2925 .290 .2445 .2515 .2122 .Is3 .1458 .1326 .1172 .1275 .1454 .1223 .0692 .0771 PubtJ .10 01070 .0m§ .0661 .0U4 0one .0069 `1214 .10"6 .1017 1910 .0907 .0712 .711 .049 .04O .al9 .02 ,0649 .0405 ,030 Afrato .1153 .1233 .1240 .1226 .1279 .118 . .1164 .412 1222 .142s .1568 .1215 .0876 .0787 . 0762 .0757 .0131 .074 .04A .082 GrossFked lnntenl,bysedor .1881 .2012 .2035 .187 .1963 .1967 .2112 .2626 .22sD .2445 .2576 .2122 .1538 .1458 .132 .1172 .1276 .1454 .223 .02 .077 Ce leG on .1161 .1244 .1221 .1089 .J172 .1226 .W03 1639 .1452 .1449 .1457 .11270 .099 .08 .0737 .0670 .0718 .0617 .0700 .0492 .0412 Public .s463 .0616 .0529 .0440 .0469 .0412 .05AM .0790 .0709 .0623 .0603 .0811 .0391 .0361 .0219 .0197 .024 .0331 .0274 .0154 .0135 PFte .068 .0729 .0692 .064O .0703 .0814 .0798 .0741 .0743 .0826 .OS4 .0768 .01s0 .0624 .0618 .0472 .l36 .048 .0426 .0328 .om UMbhcmu andlequnient .0700 .016s .0814 .0793 .0791 .0741 .0770 .1006 .0a8 .06 .1119 .0543 .0540 .0673 .69 .0602 .06661 .0637 .0623 .0400 03 pubI .0245 .0264 . .0221 .0215 .0306 .0394 .0424 .0359 .0394 .00? .0396 .0313 .0310 .0272 .0213 .0236 .0A2 .0375 .0242 .0974 Prht. .0455 .0604 .0846 .0677 .0676 .0376 ,0a .0672 .0479 .0602 .0712 .0447 .0227 .03 .0Wt7 .02k7 .0323 .045 .0148 .0150 .0168 d Wb cIk Mulrh9erhthlosnil fmlture .0482 .0527 .0o41 .0619 .0643 .0 57; .079. .s060 . 034 .0411 .8425 , .03SZ .0452 .os .0271 ,0250 Domitle .0274 .0305 .0322 .0354 .03U .0944 .0416 .0600 .0431 .0358 .0303 .0204 .0187 .9264 .0281 .0211 .0260 .0276 .0226 .0162 .148 Impeded .0206 02m .01119 .0163 .0195 .0177 .0157 .02*6 .029 .0322 .X400 .0430 .0224 .0964 .0144 .0153 .0131 .0175 .0144 .0106 .0191 TrnispaInEquI nl .0219 .0240 .0272 .0279 .0249 .0121 .0207 .0300 .0248 .0316 0316 0200 .0128 .0165 .0163 .019 .0166 .0185 .6154 .0129 .0lo Domna .0295 .0230 .0257 .0209 .024) .0900 .0106 .0244 .0?09 .0250 0252 .0147 .0115 .013o .0144 .0128 .0164 .l01 .0152 .0122 .0006 Impaled d.004 .coI1 .0015 0010 .0009 .0012 .0011 .0058 .00M8 .00o7 .0063 .00,2 .0014 .0098 .0oo9 .0091 .0002 .0004 ,C003 .0007 .0012 kt*mo um: Rauill Cenucdut .0493 .486 .0457 .0420 .0476 .0596 .0657 .0502 .0102 .0545 .0558 .0488 .9039 .0339 .0317 .0311 s . .. .. . W Nonwrsidntlh Cmabuclh .0665 .0758 .0764 .0683 .0606 .0830 .0826 .1029 .0060 .0904 .A6S9 .0791 .060e .0546 .04CO .0&5 .. .. . . .. eourT. rs l Betm of te I4pub4lc of Ngnthk (SCRA) and 19110 RaOW. g J19ym F..lW 77.t ARIIUA.ftS FUO31141 3016 ~~~~~~~~~~~~~~~~~~~~~isi : '-Io 1n7 116 9072 1973 4l7 ils0 b M Ig n 1t 1t9l02 19eT11 tZ4 1" sZe 117- 19U - I111 IMIK GmsPW4tm*sv4.bynSu 8.1 1.1 .7.3 4.0 0.2 t0.4 20.S It2 6.6 6.4 -17.5 -.5s 4.2 -t0 .11.7 as 14.0 -1.3 .27.1 -A.6 Pite 4Q10,2 t0 -16. 3.5 1t.1 27.0 2fl .110 .4.7 47 -10.2 *21.4 4.6 -2e.6 -115 256 201 4.1 -37.6 -.0 .'*- f s 6 : O,6 0.6 -1.1 4.3 -7.0 40.4 10.3 -116 1.8 S.7 -314 4Z1 4.7 1.2 46 .06 1.7 .30 -163 460 : tweFlsS* ww8 u.bycdc &I 1.1 -7.3 4.0 02 10.4 20.1 -116 6.6 63. -I7. -27.5 42 *7.1 -114. t 14.0 -113 -27. -*11e Cgm. . ecn 7,2 -1.3 -10.8 7.6 4.5 116 9.9 41 40.2 o.e 412 -210 -11,3 .167 4.2 7J3 1A -14.3 -26.8 -6 Putt9 fw: 11.4 zr -1.3 6.6 *. zf 44.2 32.9 10.3 .111 -3.2 .1S3 -21.8 46 432 -10.0 44.0 8s6 .17,3 402 -47.6 PileS 4.4 4.1 4.2 8.2 5.5 -1.6 7.2 0.3 11.2 3.4 -jUl -no .12.1 -121 -L. -i 4 1M 4123 -1i -*114 MadO. VW EdUuM&t 0.7 6.0 -to 4.9 4.3 61 40.7 23.5 fi4 13 .24.6 -30.0 6,1 15 -14.5 11.0 14.2 .1TJ *23.6 .0. Pu!. Is 0.6 -13.3 .Z7 70.2 7±7 7.6 1.3 3. 1.2 2.7 -21.0 -10 -121 -21,1 10.3 244 26.3 43 -xi PII 10.e 87 5.3 42 4-4.0 17 74.5 -23.7 25.7 112 43.2 413 1SA 2i 40 11. 6.7 47.1 t 3 117 MS*wqI bb edhmwba 0.4 27 T 4.1 4. *4.1 10.0 38.7 *25.3 14.5 1$.1 -*21.0 -.2 1.5 1.0 .14.6 71. 16J -18.4 -215 -7.3 t 1. DaA1.4 SJ to0 6.0 -11.3 20.3 20.2 43.0 6.0 -S5.4 .391 4.3 216 ¶0.1 -26.0 23.6 6T 4.311 -2.2 4L. ! hua 6.7 -1.4 .25.5 4.0 14.2 -11.3 87.3 .122 24.3 0.64 .14.0 -47t .27o -11.8 5. .14.0 343 -156 -3213 .74 T:-pod**T. 3.6 9 II Z4 .10.7 -51.4 71.1 44.3 -15.3 20.1 -0.3 43.6 4-36 21.1 12 .14J 19.6 11.5 -1? -1.2 -116 . o:emt 7.0 1Z0 4.6 -l0y -64.6 7n.6 24.6 -14.3 11.5 1.6 41.6 -21.3 Ito 47 -11.0 27.7 101 -1*.2 -194 -251 I _P.d 1504 5K0 433 -1.0o 33.3 53 406.1 43.7 66.0 4.4 *1.3 .76.2 3. 8.4 .44.0 .77J 79.2 47.2 10.0 vi RuWillCongJcuer -1.4 4.0 4.6 117 25.2 *4.0 -11.5 0.0 1.6 4 *1n5 -113 .113 46 4.6 - I ,o qegISmaOov. uSn 116 as -4132 4.0 -0.4 31.0 24.5 -7.7 4s 46 *.11 .23.2 .10.1 217 -11.6 .. o. u.: Tabi 7.7 C7 Julyl 2 Tale 79:; A.NOTlM G CROWS FPID IIE MW T, 1370.1960 (PeCIsOt GP. IGW M PtCJO ) ISo7 1371 09n 1373 1174 t135 at36 1377 910t8 IRV 160 196 1 1363 1964 1 136 197 ? S8 IS 1960 Ormt FFdhoesb, rabymegb 21.2 2Z1 219 116 19.2 9.5 21.6 24.4 2t0 22.0 228 20.1 16.2 14.1 116 1 1.6 11.3 11S R £.6 7.5 Pubi L .6 5.e 6.3 6.7 . 9.8 11.3 10.2 9.1 39 1. 7.1 S.5 4.6 4.0 4.3 6.7 a1 4.0 3.0 b 121 13.5 IS.3 It 12. 6 IZt. 11.7 1t 11S IZ6 12.S 11. 8.2 7S 7. 7.5 7.1 7.t .4 4.6 4.5 OrmFicadhoWinlbysedt7 21.2 22t 21.9 19.6 13.3 135 21.5 24.4 22.0 no 22.6 20.1 153 14.1 126 11.0 11.3 11.3 1t. U 7.5 CmlftucUn 112 1S.7 13.1 11.3 11.5 12.1 136 14.2 14 12.0 13Z9 12.1 10.0 8.4 7.0 6o 6L 7.5 6. 4.5 4.k Putt 13 57 6.7 4.6 4.6 4.1 B.; 7.3 6.8 to 53 4.6 4.0 &O6 2t 1.9 2.6 3.0 16 ti' 1 P*te ao o.0 7.4 6.7 6.0 6.1 7,9 6. 7.1 7.4 7.6 7.3 6.0 ai 4.3 4.7 4.1 4 4.0 322 z7 Machbw yrsdqumW nt 0.0 S.4 .S O.S 7.t 7.3 7.7 102 .1 0.0 e. 10 6.4 as 5.6 5.0 6.2 6.3 4,* 23 S.6 PuF Zs I 2 to 2.3 2.1 3.6 3.9 3.0 3.5 2.5 36 3.% 3.1 3.0g 23 2 12 27 2, 14 1.7 PMaW 12 5.5 5.9 6.0 0.7 17 J. 6.3 4.6 6.4 6, 4.2 13 IS 10 2t Lo 2.1 1.4 1.6 to MUd*w. oIMandF umtu 16 $'a 6.6 6.4 5.3 S.7 0.7 7.4 o.r 6.1 7.1 t0 4.1 40 4.0 3.6 27 4.1 36. t7 2-4 DMS 21 S 3.a6 27 2 2.4 4.1 4.7 2.2 3.2 27 1.0 1.3 20 .6 2.1 24 2s 11 1.6 1.5 nptod 2.4 24 14 1.7 1.5 1.6 1. 27 6s to 4.4 4.1 22 to t.4 t.6 I.a .S 1.3 1.1 1.0 Ti aldt quWlWmt 25 l6 2.3 t2 2.5 1.2 2.0 13 24 ts Is to i.3 1.6 1.5 1.4 1.6 1.7 1.4 1.3 1.1 DMe'_ Z4 b 2.6 2.5 2.4 1.1 t.9 2.3 Z0 12 22 IA4 1.1 1.3 1.4 1.2 1.5 1.7 t.4 1.2 1.0 hkod 0.0 0.1 0.2 0.1 0.1 0.1 0.5 0.3 a 0.5 0.6 0.1 0.2 0.2 nt.1 mg 0.0 ao0 0.1 a.1 RgtflCfXl tfJCSn as6 53 4,0 44 4.7 39 5.6 4.7 4.5 4.0 4.9 4.6 3.9 2.3 22 2. - .. . *. .. @ NOXFtGtgswSCOmbtxtn 7.6 13 6.2 6.0 6.8 d.2 a.2 0.6 9. I1 18.0 7.5 MI £3 3.8 3.5 N 8@UWc Table .7 J Ig?- Wv...-:. *, .Table 8.1: ArgentUna - Ptincipal Prke Indicators, Annual Percentage Change 1960-1991 a/ WHOLESALE PRICE INDEX CONSUMER CONSTRUCTION i''::, ,____________________________________________ _ PRICE INDEX COST INDEX Year Goner Total Agdculture Non-agdculture .s,. .;, . ~~~~~~~~~Domed _________________ ,emi cTcnieUo imponea 1961 8.3 8.8 5.8 9.3 10.1 (3.2) 12.1 22.0 !192 30.0 30.2 37.0 27.7 27.5 33.0 27.0 30,1 1963 28.5 29.0 38.1 28.1 26.3 21.9 25.5 24.4 1964 28.1 26.7 28.2 25.3 25.9 13.8 22.0 20.8 1965 23.9 23.7 9,5 30.5 30.5 30.1 29.2 42.3 1968 20.0 20.0 21.3 19.5 19.6 19.6 32.3 28.9 1967 25.8 25.0 25.8 25.5 24.8 41.4 29.3 28.8 o196 9.6 9.7 9.9 9.5 9.8 8.0 15.7 7.6 1969 6.1 5.9 8.0 5.3 4.9 10.7 7.6 9.6 `1970 14.1 14.0 1S.8 13.4 13.2 1i8s 13.6 11.9 1971 39.5 40.3 48.3 35.9 36.7 23.1 34.7 30.9 1972 77.0 76.0 94.8 69.1 67.2 100.6 58.7 54.3 1973 50.0 69.0 19.8 52.8 70.5 55.1 60.1 72.2 1974 20.0 5.4 30.8 25.7 11.4 43.7 29.9 38.8 1975 192.5 188.7 144.9 212.6 208.6 257.5 170.6 251.5 1978 499.0 485.2 529.8 489.0 469.2 690.4 444.1 380.6 1977 149.4 151.7 163.6 144.5 148.9 126.2 176.0 97.4 1978 148.0 152.1 141.6 147.6 158.6 75.9 * 176.6 137.0 1979 149.3 152.7 150.8 148.7 153.5 93.0 159.5 181.2 1980 75.4 75.5 a3.0 80.1 80.4 74.5 100.8 109.0 1981 109.0 106.7 91.6 113.2 109.8 170.0 104.5 97.3 1982 257.3 260.4 298.1 247.8 238.5 355.3 164.8 172.5 1983 360.9 362.9 373.5 3s5.8 358.8 335.7 343.8 435.6 1s84 573.5 575.4 552.8 5889, 588.6 568.9 626.7 647.7 1985 664.5 553.4 490.2 694.2 686,1 766.8 672.2 553.9 1988 e3.9 64.2 111.5 56.1 57.9 60.2 90.1 69.6 1987 122.9 122.1 116.2 124.0 123.1 130.7 131.3 127.5 1988 412.5 409.7 378.4 417.8 415.2 438.8 343.0 372.6 1989 3,433.1 3,397.1 3,485.6 3,594.3 3,382.7 3,748.3 3,079.1 3,602.6 1990 1,60.M7 1,669.9 1,492.0 1,701.1 1,699.7 1,098.4 2,314.1 1,615.5 1991 110.5 111.8 95.1 112.6 114.9 87.7 171.7 145.4 1992 6.0 6.6 18.2 4.5 4.8 0.4 24.9 21.3 source: INDEC. a/ change In annual average prke Indlees - 330 - Table 9.1: Argeftna - Private Sector Ioldings of Fincal Asset, Quartylfbl80-1991 al eemnber 1992 Milon Pesos; stocls at Ulie end of each quaterb) Money (Ml) Quas-Mony 142 d2 Total Currncy Demand Total Stings rlae Deposits Acuxts Deposit 1980 1 13,616 7,056 6.559 31,244 2,881 28,362 44.859 1 13,713 7,371 6,342 28,558 3,265 25,293 42,271 III 13,071 7,192 5.680 31.214 3,405 27,8W 44.285 IV 15,296 9,182 6,114 29,541 3,510 26,031 44,836 19811 10,459 6,433 4,026 28,904 3078 25,826 39.383 11 3g991 6,126 3,855 25,678 2716 23,962 36.659 II 8,781 5,185 3.596 28.603 2,803 25,800 37.384 IV 11,146 7,304 3,842 27,490 2,892 24.598 38,636 19821 8,502 4,999 3,504 29,082 2,940 26.142 37,584 11 10,904 6,622 4,203 28,935 3,786 25,149 39.839 II 9,515 5,158 4,357 19,811 2567 17,244 29,325 IV 11t605 6.820 4,784 18,314 2,324 15.990 29,919 1983 1 8,862 5,251 3,611 19,397 2,219 17,178 28,259 11 9,630 5.361 4,269 19,160 3,206 15,954 28,790 III 8,141 4.781 3,360 17,354 3,488 13,866 25.495 IV 10,233 6,779 3,454 18,087 4,512 13,575 28,320 19841 9,5: ' 6,067 3,527 19,005 4,881 14,124 28.599 11 9,646 6,171 3,477 16,515 4,330 12184 26.163 III 7,092 4,510 2,582 14,446 3.966 10,480 21.539 iV 8,072 5,818 Z254 14,085 4,460 9,625 22,157 19851 6,081 4,217 1,864 13,004 4,883 8,121 19,085 =l 65760 4,506 2,254 14,131 5,000 9,131 20,891 III 8.550 5,240 3,310 16,231 5,279 10,952 24,781 IV 11,528 7,734 3.794 17,631 5,647 11,984 29,159 19861 10,569 6.493 4,076 20,015 5,604 14,411 30Q583 II 11,476 7,311 4,165 20,615 5,832 14,784 32,091 IN 9,506 6,230 3,276 20,216 5,322 14,894 29,722 IV 11,747 8,388 3,359 22.373 5,387 16.986 34,120 19871 12,169 6,415 5,754 25,153 4,892 20,261 37,322 11 12,215 6,397 5,818 25,895 4,685 21,210 38,110 III 9,554 5,041 4,512 23,907 4,482 19,424 33,460 IV 10,696 5,878 4,818 23,299 4,149 19,150 33,995 19881 8,594 4,715 3,879 25,474 3,494 21,980 34,068 11 7.944 4,021 3,923 24.713 2,994 21,718 3Z657 III 7,316 3,758 3,558 25,093 2,790 22,303 32.409 IV 9,002 5,320 3,682 28,661 3,157 25,504 37,662 19891 8,434 4,855 3,579 30,161 Z918 27,243 38,595 11 5,633 2,718 Z915 19,004 1,380 17,624 24,637 Ili 6,247 3,267 2,980 16.676 1,544 15,132 22,923 IV 9,066 4,476 4,590 1Z699 1,352 11,347 21,766 19901 3,806 1,706 2099 Z173 2,003 170 5,979 11 5.932 2924 3,008 4,214 2875 1,339 10,146 IN 5,033 2920 2Z112 4,767 2,563 2,204 9,800 IV 6,194 3,906 Z288 5,922 Z921 3,001 12,116 1991 I 5.091 3,166 1,925 5,035 Z431 2.605 10,126 11 6,736 4,061 2675 4,940 2,017 2923 11,675 III 7,328 4,521 2807 5,176 1,932 3,244 12504 IV 9.239 5.553 3,686 5,662 2O,6 3.576 14,901 19921 9,333 5,453 3,879 6,376 2487 3,909 15,709 11 10,462 5,827 4.635 8,017 2,705 5,312 18,479 IIl 10,841 5,968 4,873 8,794 2,800 5,994 19,635 IV 11,667 6,757 4,910 8,903 2,683 8,220 20,570 San. Cuntral Bank othe pbli ot Aenta (BCRA) a Dow not hidude depaihta isaued by non-bank finankdl institutions. b/ldeaed usin the CPI, asming an annual InfbtIn of 12.2 % fr 1992. di Ml pkisquasi-ine. Tableb .2: Agum . Evokdlon o0 Rmves and Monety Me (US$ Mtlion end dof prod) 4,,''lw.>. CentaCl m*l ToMl Covwrage Rados Moneabw Resew Gold Lbuld R ALADI Truuly Bonc. O ter Uquld Reserves/ Total Ree.rveo/ .iab.lIl- TO _ Curr_ Dep (ne) Forign Cuen Ublie Uabllides Ma Ir191 4760 6482 1547 2454 28 2436 609 862 0 0.52 1.15 Jun-1991 B6o16 406 153 3261 18 3263 530 996 5 0.58 1.14 Sep.1991 6443 7Z20 1441 3947 7 3941 447 1141 294 0.61 1.13 Dc.1991 7585 gm 1433 am 22 9013 97 1067 462 0.80 1.20 Jan.199M 7992 9120 154 6040 17 60=2 408 1077 60 0.76 1.14 Mar1992 802m 940 1486 6544 26 6S18 0 1119 339 0.82 1.18 Apr1902 8m0 gm96 1465 7095 15 7061 0 1126 219 0.83 1.15 May1992 Om62 10447 1459 783 13 7703 24 1066 41 0.84 1.12 Jun;1.92 9290 10200 1476 7886 39 7846 .91 972 48 0.85 1.11 Jul.1092 me16 10624 1546 8563 12 8651 .197 876 37 0. 1.09 Aug.1962 9020 10749 1463 8722 21 8701 -296 825 34 0.66 1.06 Sep.1902 99 11361 1511 6726 4 6722 -85 1475 34 0.92 1.20 Oct.1992 9714 11661 1472 94 2 4 35 14m 33 0.93 1.20 N. N.1992 b/ 9726 11151 1446 6641 1t0 662 421 1452 33 0o 1.1S ..o.1921 c 11010 12093 1437 9611 160 9451 .401 12n6 156 0.87 1.10 6am: Ca"*u Wn of fte Republ of AM" s*u Ihcnuonml and V CilI Econdrnle u/ In FsW Cuency. .' 0eunS23,119 - 332 - Table 10.1: ARGENTINA - POPULATION. 19604990 Cenrus Mid-year Population Annual Five-year Population al (Thousands) Growth Rate Growth Rate (Thousands) (%) in Projection (%) 1960 20014 bl 20616 1.65 1.71 1965 22283 1.52 1.55 1970 23390 cl 23962 1.54 1.45 1975 26052 1.68 1.67 1980 27947 28237 1.61 1.61 19S5 30564 1.55 1.58 1990 32293 1.19 1.11 Source: INDEC.andWorld BankAllas. a/ 1980 census datm. bJ Census orrssiotm are not induded. el Results obtained from sample. 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