NOTES TO THE FINANCIAL STATEMENTS

FOR YEAR ENDED DECEMBER 31, 2001.

The Financial Statements for the period ended December 31, 2001, with amounts expressed in Pesos ($), have been elaborated according to Law # 24,156 of Financial Administration and Control Systems for the National Public Sector, and its amendments; Resolutions of the Secretariat of Financing # 25/95 (Generally Accepted Accounting Principles and General Accounting Procedures for the National Public Sector) and # 400/2001 (Procedures for the Closing of Fiscal Year 2001) and supplementary provisions.

ASSESSMENT CRITERIA:

a) Cash and other monetary assets

In domestic currency: at its face value.

In foreign currency: at the buying rate at the end of the fiscal year.

Balances in US dollars have been assessed at rate one peso ($1) equals one American dollar (U$S 1).

b) Investments, Credits and Debts

In domestic currency: at its face value.

In foreign currency: at buying rate for credit, and selling rate for debt, at closing of fiscal year. Balances in US dollars have been assessed at rate one peso ($1) = one American dollar (U$S 1).

Investments in bonds have been assessed at market value or at book value (cost or market, the least), whether they have public quotation or not.

Credits and debts with contractual conditions which foresee the right of collection or the obligation of payment of any interest rate, include said accrued interest at end of fiscal year.

In relation to interest, those cases in which there was no certainty about the recovery of the main obligation, were not accounted for, in order to be prudent.

c) Inventory and Related Property

At its cost of purchase.

d) Trust Funds

As from fiscal year 1999, Trust Funds are being assessed according to the net participation which the Nation has in the same, and thus the results originated in the variations suffered during the current fiscal year have been acknowledged.

e) Property, Plant and Equipment

Property was assessed at its cost of origin (purchase, building and/or production), less amortizations, according to the provisions of Resolution # 47/97 of the Secretariat of Financing.

Real Estate, under said Resolution, was registered according to the last known quotation or assessment performed by competent authority (National Assessment Tribunal). Nevertheless, said property and its quotation is subject to the result of the tasks undertaken by the National Accounting Office and the National Assessment Tribunal, according to the provisions of Administrative Decision # 56/99.

In relation to disaffected assets administered by the National Public Assets Administration Office, if they have not been valuated by the National Assessment Tribunal, in the terms of the aforementioned regulations, the same have been included in the Inventory for its fiscal valuation if provided by the responsible parties and at a value of $1 for the rest of them.

The book value of the property as a whole is not over its market value at the moment it is sold out.

f) Intangible assets

At its historical value, less accrued amortizations.

g) Public Debt

Due to the measures announced by the national authorities last December, 2001, the valuation criteria used for this issue are as follows:

The main balances of the marketing of public debt bonds were registered for the face value of the bonds marketed; loan contracts celebrated with bilateral or multilateral credit International Organizations, for the amounts actually paid and foreign currency liabilities, taking into account the corresponding quotation, at selling rate for December 31, 2001.

For assessment purposes, the Public Debt Administration Office, responsible for the registration of the same, used the rate provided by Reuters Agency.

In relation to bonds issued at a discount, the assessment technique adopted was “price of issuance”.

Furthermore, the implicit interest of said bonds capitalizes each year up to the rescue date.

Accrued interest not payable at closing date, have been registered and included in these Financial Statements as indicated in Note 16.

h) Legal action

According to Article 10 of Disposition # 38/2001 of the National Accounting Office, the Financial Administrative Services of the Central Government are required to present the information that follows:

1. definite judgements in the terms of Article 68 of Law # 11,672

2. adverse Appeal judgements and judgements in course;

3. adverse first instance judgements;

4. actions in course without judgement.

In order to improve the presentation, the judgements indicated in point a) were treated as acknowledged debt, including in the Current Liabilities those which are payable and included in the budget for fiscal year 2002. As for points b) and c) the corresponding accounting non-current provision was made, while the ones in point d) were revealed as “Supplementary Information to the Financial Statements”.

i) Registration of Accrued Resources

Registrations of resources of the Financial Statements have been performed on an accrual basis, according to the Generally Accepted Accounting Principles for the National Public Sector.

Thus, the concept followed was registering the transactions at the moment the patrimony and the result are considered actually affected, taking into account that in order to assign a transaction to a fiscal year, it is necessary not only that the material fact has occurred within a specific period, but also that the same could be measured.

In this context, there are resources, such as the collection of tax revenue, which can only be measured objectively when they are credited to the corresponding bank accounts, which allow for a precise measurement of the patrimony at that specific moment.

Currently, according to the applicable systems for the Public Sector, resources are accrued and registered at the moment they can be measured objectively, and when this happens at the time of collection, the time of accrual is a concomitant of the time of collection.

j) Valuation of Assets and Liabilities in Foreign Currency

Law # 25,561 of Public Emergency and Currency System Reform passed on January 7, 2002, included regulations in relation to exchange rates.

Taking into account said situation and due to the general expectations in relation to definitions connected to exchange rates to be used for the closing of fiscal year 2001, the National Accounting Office regulated on the technical criteria to be adopted by the National Administration Bodies, determining that Assets and Liabilities as of December 31, 2001 should be valuated at the exchange rate of that date, and in the case of American dollars, the exchange rate to be applied should be one peso ($1) equals one dollar (U$S 1) due to the fact that Law # 23,928 was still in force.

ASSETS

Note 1: Cash and other monetary assets

a) Banks

The balance includes bank accounts operated by:

                                                                                                                                       In Pesos ($)

Balances of the bank accounts operated by the Treasury are taken from the registrations made by said Body in the book opened to that effect, according with the information obtained from the Automatic Bank Conciliation Subsystem of the Integrated System of Financial Information (S.I.D.I.F.).

Said balances include deposits of the Single Account of the Treasury (S.A.T.), a system coordinated by the Treasury, and as of December 31, 2001, there were still certain Financial Administrative Services not incorporated to said regime.

Among the bank accounts that operate outside the S.A.T. and which are shown in the document “Result of Verifications Carried Out”, aimed at the Control Agencies, are the ones belonging to the Central Administration Services, mainly belonging to the Legislative Branch, The Judiciary Branch, the Public Ministry and the Executing Units of Foreign Loans (UEPEX).

At closing of fiscal year, the item indicated as “Treasury” includes the amount of $ 4,000,000,000.00.- deposited in account # 20530/00 of Banco Central de la República Argentina, from the 2000 Stand By Agreement entered with the International Monetary Fund, destined to the backup of reserves.

b) Revolving Funds

The balance is formed by the net of authorized amounts in the hands of each Financial-Administrative Service, under the regime for Revolving Funds and Cash in hand (Decree Law # 2380/94 and amendments) and which, being at closing time deposited in bank accounts which are not administered through the bank conciliation subsystem abovementioned, are disaggregated to the body level according to the following:

                                                                                                                   In Pesos ($)

Note 2: Financial Investments

The balance of the accounts included in this item is integrated as follows:

a) Term Investments

The amount revealed represents the funds provided by the Treasury, assigned at closing of the fiscal year, destined to the Fund provided for in Article 9 of Law # 25,152 and amendments and supplementary regulations.

b) Bonds and bills

The items included are as follows:

                                                                                                                In Pesos ($)

(1) It includes investments in Bonds of the Treasury made by the Ministries of Economy and Domestic Affairs, for the amounts of $634.955.961,00 and  $183.947.792,06, respectively.

(2) According to the information provided by the Treasury, they are intended to guarantee the interest share of financing operations within the Brady Plan, thus not being openly available.

(3) It includes several values received by the Treasury from the liquidated companies that follow:

Note 3: Short-Term Credit

The balance of the accounts is integrated, according to the following:

a) Accounts Receivable

                                                                                                              In Pesos ($)

(1) Debt born by several National Administration Bodies in relation to this item is included here, according to the amounts regulated by several Budget Laws. The amount revealed includes $ 16.836.006,28 which is owed by the Central Administration itself, thus being part of the Current Liabilities.

To this respect, we should mention that Article 40 of Law 25,401 empowers the Secretariat of Financing of the Ministry of Economy to condone those debts, in the case it is verified that the resources were lower than the calculated level. Said cancellation shall be made at the request of the debtor and with the intervention of the Ruling Bodies of said Secretariat.

(2) There follows a segregation by debtor:

                                                                                                                In Pesos ($)

(3) There follows a segregation by debtor:

                                                                                                                In Pesos ($)

(*) It includes the amount of $624.387,94, corresponding to the capital instalment due and not paid at the closing of the fiscal year, $935.248,00 for capital instalments which will be due during year 2002 and $3.039.953,36 for unpaid interest on the total amount of debt. The non current amounts of credit against said company is exclusively related to capital instalments as exposed in Note 6, point a)).

(**) Completely due and unpaid balance.

(4) Credit with original due date in year 2000, extended to July 31, 2001, under Resolution # 11/2001 of the Secretariat of Energy and Mining of the Ministry of Economy, and its due date being scheduled for December 10, 2002, under Resolution # 41/2002 of the Secretariat of Energy of the Ministry of Economy.

(5) An amount of three equal instalments of $ 395.000,00, one of which is due and unpaid at closing of fiscal year.

(6) According to the information provided by the Treasury, in Note # 219/02 DPyCEF-TGN, in January 2002 there was an input of u$s 635.613,10, due to the payment in excess of the Bonds pre-cancelled on December 05, 2001.

(7) The balance corresponds to the share of 3.5% of the Judiciary Branch on the non tax revenue not transferred to that jurisdiction from the Treasury at closing time, thus being included in the current liabilities.

(8) The balance as of December 31, 2000, together with the variations operated during fiscal year 2001, has been included in Long Term Accounts Receivable – see Note 6, point a).

b) Documents Receivable

                                                                                                               In Pesos ($)

(1) The detail is as follows:

(*) Corresponds  to the original amount of the net instalment of a partial payment of $ 2.000.000,00 made during fiscal year 2001.

(2) Three documents of equal amount, for the two quarterly instalments due in year 2002 and one instalment due in year 2001, under the Agreement dated October 15, 1999, celebrated between the National Government and said company, approved by Resolution 533/2000 of the Ministry of Economy. It includes non accrued interest registered under Deferred Liabilities.

c) Imprests

                                                                                                                In Pesos ($)

(1) Payments made in excess as of December 31, 2001, with recoveries verified in January 2002.

(2) Balance to be recovered due to the AFJP, under the regulations of Decree 625 dated October 26, 1995.

(3) For the rights acquired against the goods, financed with public debt.

(4) There follows a detail by Creditor Body:

                                                                                                              In Pesos ($)

d) Loans granted

The balance corresponds to the current part of the loans granted to the electricity cooperatives through the Fondo Eléctrico del Interior (FEDEI), and includes the amount of $ 1,707,398.22 for due instalments which were unpaid as of December 31, 2001.

e) Other credits

The balance revealed in the Financial Statements is integrated as follows:

                                                                                                                In Pesos ($)

(1) It corresponds to the two instalments paid by the Treasury, as aval of a loan contract of said company with the Banco de la Nación Argentina, not cancelled for that one.

(2) It corresponds to consolidated debt on the account of Banco Central de la República Argentina, the Government of the City of Buenos Aires and the Federal Office of Public Revenue.

(3) It corresponds to debits in accounts of the Treasury in compliance with judiciary seizures, on which the National Accounting Office, through Memos 167/2002 and 193/2002, has consulted the Office of Legal Affairs of the Ministry of Economy, on the status of the same, without having the corresponding answer as of the date of issuance of these Financial Statements.

Note 4: Other Assets to be assigned in the short term

This item includes $ 433,132,969.66 from reimbursements to the Treasury informed by the Trust Fund for Provincial Development in its Financial Statements as of December 31, 2001, as a decrease of the Net Position.

Due to the fact that currently, within the records of the Integrated System of Financial Information (SIDIF), no transactions have been identified which validate said concepts, and that there is no precise information of the statements presented by said Fund by the time of the elaboration of these Financial Statements, the decision was taken to include in this item that decrease until the documents can be obtained which allows for proper registration of said concepts.

A similar concept has been adopted for the amount of $ 129,772,271.88 corresponding to the Trust Fund for the Assistance of Financial and Insurance Entities, and for $ 2,898,456.10 informed by the Trust Fund for the Banco de Inversión y Comercio Exterior, both revealed in their Financial Statements as of December 31, 2001 as reimbursements to the Treasury.

Note 5: Long Term Financial Investments 

This item includes the following:

a) Shares:

(1) During fiscal year 2001 several amounts were assigned to that company for $ 32,500,000.00, representing 325,000,000 shares at a face value of $ 0.10, and an amount of $ 8,125,000.00 will be owed at closing date, included in the Current Liabilities – see Note 14 – due to its compromise to be integrated during fiscal year 2002.

     As the value of the shares was unknown at the date of elaboration of these Financial Statements, the information includes the shares held before the assignment, at the last book value informed and separately the assignment previously indicated at face value.

(2) Trust entered on January 8, 1995.

(3) During fiscal year 2001 the stock of the company, which represented 430,725 shares, was sold and the total amount obtained was $ 50,001,010.00, of which a 30% corresponding to ANSES was transferred for $ 14,797,056.30.

(4) Stock transferred to the Province of Mendoza.

b) Bonds and Bills

                                                                                                              In Pesos ($)

(1) According to the information provided by the Treasury, they are intended to guarantee the capital share of the financing operations under the Brady Plan, thus not being freely available.

Note 6: Long Term Credits

The balances of the accounts which are part of this item are composed as follows:

a) Accounts Receivable

                                                                                                                In Pesos ($)

(1) The balance registered as of December 31, 2000 in the account “Long Term Loans Granted” – point d) of this Note, has been reclassified and unified in this account.

(2) It includes pending balances of re-loan agreements between the Nation and the Provinces, for the financing of several programs and projects.

(3) The balance shows monies of the Banco Central de la República Argentina transferred to the Nation, according to the modification of the Statutes of the same, by Law 24,144, and it is under a reconciliation process carried on between the National Accounting Office and said entity.

(4) They correspond to loans obtained through advance payments of tax obligations due as from January 1, 2003, ruled by Decree 979/2001 and implemented by the issuance of Fiscal Credit Certificates, which were given to said Trust Fund as returnable.

(5) Dated September 19, 2001, the company has filed bankrupcy procedures, in First Instance National Court #9, Secretariat 18, and thus the balance as of December 31, 2000, together with variations operated during fiscal year 2001, have been included in this account.  The balance represents the monies in favour of the National Government in relation to Correo Argentino S.A., for the Cannon of the Concession of Mail, Monetary and Telegraphic Services, including a detail of the unpaid instalments at closing of fiscal year, for the percentage corresponding to the National Treasury (70%) plus accrued interest, according to the regulations of the Agreement:

(6) The balance arises from an agreement celebrated in December 1999, between the Nation and the Banco de la Nación Argentina, through which the first one assumed the obligation of cancellation, on behalf of the Dirección General de Fabricaciones Militares, the debt the same had with the financial entity as of that date. 

(7) The amount and elements of the balance has not presented changes during fiscal year, and it represents the monies collectible by the Nation, due to the collocation of Treasury Bonds with the purpose of financing several provinces, as follows:

(8) The balance represents the monies in favour of the Nation as a consequence of the privatizations process, and its detail by debtor is as follows:

                                                                                                           In Pesos ($)

(9) Transfers to the Treasury from the Trust Fund for the Federal Electricity Transport accrued during the fiscal year and collected in 2002.

(10) Including the amount of $ 10.184.800,00 corresponding to the Intervention Law 22,229 “Grupo Greco”, and $ 5.192.657,06 for “Various Imprests”, both having a provision under point g).

b) Documents Receivable

                                                                                                        In Pesos ($)

(1) Documents representing three quarterly instalments  due as from 2003, under the Agreement dated October 15, 2000, entered into between the National Government and said company, approved by Resolution 533/2000 of the Ministry of Economy. It includes non accrued interest registered under Deferred Liabilities.

(2) One instalment due in 2003.

c) Long Term Imprests

The balance corresponds to the imprests granted to Suppliers and Contractors of the Argentine Air Force and the Argentine Navy.

                                                                                                           In Pesos ($)

d) Loans Granted

                                                                                                            In Pesos ($)

(1) There follows a detail segregated by Program:

                                                                                                                 In Pesos ($)

(1) The balance as of December 31, 2000 has been reclassified and unified together with the aggregate amount of credits registered under “Long Term Accounts Receivable” – point a) of this Note.

e) Trust Funds

The balance is the aggregate amount of the net positions, and the management statements were obtained from the corresponding trust funds: 

                                                                                                         In Pesos ($)

f) Other Credits Receivable

The balance disclosed in the Balance Sheet follows the detail indicated below:

                                                                                                                          In Pesos ($)

(1) According to previous balances, the Secretariat of Financing is a creditor of Parques Interama S.A., which is undergoing bankrupcy procedures.

From the liquidations carried out by the ruling body as of December 31, 2000, according to the judgement, the amount of the sentence against the ex-Municipality of the City of Buenos Aires is of around $ 4.024,2 million, which is enough to cover the monies to be paid to the National Government, being this the reason why it is kept as a long term credit.

In relation to the status of the claim, as in similar cases when the Secretariat of Financing is the plaintiff, it is not possible to include more detailed information, as the National Accounting Office has not received any answer to Memos 131/2002 and 179/2002 sent to the Legal Affairs Department of the Ministry of Economy.

(2) Both credits have been provisioned, under point g).

(3) It includes the amount of $ 21.425.268,41 for several debtors under claims, which have been provisioned according to point g).

g) Forecasts

As no changes have been suffered in the conditions of the accounts receivable, the amounts of the forecast have been kept as of December 31, 2000, according to the following detail:

Nota 7:  Property, Plant and Equipment

The control, valuation and registration of property provided for in Administrative Decision 56/1999, was carried out by the National Accounting Office and the National Assessment Tribunal, which caused an increase of $ 162.125.051,42 in the account “real estate”.

The detail of the accounts of this item are exposed in Annex A of these Financial Statements.

Nota 8: Contributions and Capital Shares

According to the dispositions of point 5, article 87 of Law # 24,156 and corresponding regulations, in the Financial Statements of the Central Administration, the following are integrated: the Net Position of Decentralized Agencies, Social Security Institutions, National Universities and Governmental Companies, which are reflected in this account as follows:

                                                                                                    In Pesos ($)

In Annex B there is a detail of the patrimony of each body and company, with information about the date of the last audited Financial Statements.

The National Accounting Office has adjusted the Net Position of the Decentralized Bodies and National Universities due to omissions of registration by said entities, as indicated in points a), b) and c) below.

a) Contributions owed to the Treasury

b) Legal Claims (Art. 10 - Disp. 38/2001 C.G.N.)

Decentralized Bodies

National Universities

c) Impertinence of credit acknowledgment   

The National Universities listed below have considered as a credit against the Central Administration the amounts of the non executed budget of several fiscal years, for the part that can be financed by said Administration.

Due to the impertinence of said acknowledgment, the corresponding Net Positions have been decreased, so as to cancel the impact of such registrations, as indicated below:

d) Decentralized Bodies: Comments on relevant issues

Apart from the variations already mentioned, it is important to comment, due to their importance, on the entities detailed below:

111 Consejo Nacional de la Niñez, Adolescencia y Familia.

The Net Position at closing of this fiscal year is $ 111.581.889,63, showing a positive variation in relation to closing of fiscal year 2000, of $ 74.552.586,86, mainly caused by the increase in the valuation of the Property, Plant and Equipment, as a consequence of the application of Administrative Decision  56/1999.

470 Instituto de Ayuda Financiera para el Pago de Retiros y Pensiones Militares

Even though there is no significant change between the adjusted Net Positions of this fiscal year and the previous one, it is worth mentioning that the Net Position informed by the Body has been reduced to the amount of $ 438.818.104,00, which mainly represents sentences and other contingencies for claims, not acknowledged by said Institute on the grounds of the application of the law by which it was created. To that respect, and until there is a legal opinion on the pertinence of said decision, the indicated adjustment will be included.

Furthermore, the global adjustment includes the amount of $ 368.788,00 for contributions owed and not acknowledged by said Institute in its Financial Statements, according to point a) of this Note. 

604 Dirección Nacional de Vialidad

The Net Position adjusted at closing of fiscal year is $ 981.593.055,05, showing a positive variation in relation to the previous fiscal year of $ 104.039.212,83, which is mainly due to the capital contributions of the Central Administration in favour of said body and applied to the construction of Infrastructure Assets and, supplementary, to the increase in the valuation of the Property, Plant and Equipment as a consequence of the application of Administrative Decision  56/1999.

On the other hand, and according to the criteria applied to the Financial Statements of the Central Administration, according to point e) of the “Valuation Criteria”, the Net Position declared by said National Office has been incremented to the amount of $ 982.583.539,03, for the construction of Infrastructure Assets approved between January 1 and December 31, 2001.

606 Instituto Nacional de Tecnología Agropecuaria

The Net Position at closing of fiscal year is $ 74.003.209,57, showing a positive variation in relation to the previous fiscal year of $ 42.994.696,94, which is mainly explained by the increase in the valuation of the Property, Plant and Equipment as a consequence of the application of Administrative Decision 56/1999.

623 Servicio Nacional de Sanidad y Calidad Agroalimentaria

The Net Position at closing of fiscal year is $ 4.530.491,91, showing a negative variation in relation to the previous fiscal year of $ 30.614.474,30.

Said variation is mainly due to a significant decrease of the Result of the fiscal year, as a consequence of an increase of its expenses of around 71% in relation to the previous fiscal year, partly offset by an increase of its resources of around 37%.

625 Administración Federal de Ingresos Públicos

The adjusted Net Position at closing of fiscal year is a negative amount of $ 63.487.372,62, showing a decrease in relation to the previous fiscal year of $ 87.813.743,35.

This variation is mainly explained by the Result of the Fiscal Year which, in contrast with the previous fiscal year, shows a decrease of resources of $ 127 million, partly offset by a decrease in its expenses of $ 73 million.

It is also important to mention that apart from the adjustments carried out by the National Accounting Office according to points a) and b) of this Note, the Net Position informed has been decreased to the amount of $ 28.211.504,68, corresponding to the debt of said Federal Administration which was cancelled by the collocation of Bonds.

664 Órgano Regulador del Sistema Nacional de Aeropuertos

The Net Position adjusted at closing of fiscal year is $ 364.177.188,15, showing a positive variation in relation to the previous fiscal year of $ 100.511.599,12, mainly explained by the Result of the Fiscal Year.

It should be mentioned that the Net Position informed by said Ruling Body has been incremented to the amount of $ 66.637.500,00, corresponding to Contributions to the Treasury registered in its Financial Statements, which are not in force at closing date, because they are related to the actual collection of the cannon for the Privatization of the Airports System.

850 Administración Nacional de la Seguridad Social

The Net Position adjusted at closing of the fiscal year reaches a negative amount of $ 14.647.751.539,51, showing a decrease in relation to the previous fiscal year of $ 229.249.691,71, mainly explained by the Disaving of the Fiscal Year, which reached $ 235.616.865,90.

Apart from the adjustment indicated in point a) of this Note, the Net Position informed by said Administration  has been increased in the amount of $ 88.861.612,95, which represents credits against Correo Argentino S.A., for the 30% portion corresponding to the Body, which includes $ 12.792.626,67 for interest on unpaid amounts calculated as of the date said company filled for bankruptcy procedures (Sept. 19, 2001).

913 Administración de Programas Especiales

The Net Position at closing of fiscal year is $ 142.675.822,94, showing a positive variation in relation to the previous fiscal year of $ 139.996.612,60, mainly due to the acknowledgment of transfers of Bonds in National Currency, to be made by the Superintendency of Health Services in favour of this Body.

Note 9: Other Non Current Assets to the allocated

The balance includes the amount of $ 4.440.006.772,84, representing the assets transferred by Ferrocarriles Argentinos (e.l.) and Ferrocarriles Metropolitanos S.A. to the Ex Ente Nacional de Bienes Ferroviarios (ENABIEF) and to the Comisión Nacional de Regulación de Transporte (C.N.R.T.), situation which had an impact on the Financial Statements of the first two entities, but which were not included in the other two; and this is extended to this fiscal year and has not been updated by the National Assets Administration Body, as successor of the mentioned Ex ENABIEF.

Also, according to the criteria applied to fiscal year 2000, this item includes the amounts representing the positive Net Positions belonging to the liquidated and closed companies and Governmental Enterprises, until it is verified that the Central Administration has definitely assumed the assets and liabilities of said entities.

The elements of the corresponding balance are as follows:

                                                                                                             In Pesos ($)