III – EXPENDITURE OF THE FEDERAL PUBLIC ADMINISTRATION

III.1 - Evolution of Expenditure 2001/1999 - Accrual Basis

This section deals with a comparative evolution of the accrued expenditure of the Federal Administration consolidated budget for the first quarter of fiscal years 2000 and 2001.

The level of total primary expenditure during the first quarter 2001 fell by 72.5 million pesos, as is shown in the chart below. With reference to the economic classification, current expenditure decreased by 136.7 million pesos as a result of a reduction in compensation and in transfers, while capital expenditure increased by 64.2 million pesos. The variation of ratios for the period was –1.6% and 9.7%, respectively.

Interests rose by 20.7%, which accounts for the rise in total expenditure of 448.2 million pesos compared with the same period of the previous year.

During the period under analysis, Compensation decreased by 32.7 million pesos net, compared to the same period last year. This was mainly due to the application of Decree 430/2000, which reduced salaries in the Federal Public Sector as of June 2000, and to the reduction of staff by early retirement policies and lay offs in the Federal Public Administration (Law No. 25,237 –Section 15).

However, the "Fondo de Reestructuración Organizativa" incurred expenditure totaling 90.9 million pesos.

Goods and Services recorded an increase of 11.9 million pesos, mainly as a result of the following:

- Payment of debts contracted during the year 2000 (12.9 million pesos) to the "Correo Argentino" by the Federal Administration of Public Revenue.

- Payment of royalties corresponding to the leasing system related to penitentiary infrastructure (9.7 million pesos).

- Pharmaceutical and Medical Products in the program "Struggle Against Aids and Venereal Diseases" (4.0 million pesos) and in the "Prevention and Control of Diseases and Special Risks" (3.1 million pesos).

- Military and Security equipment of the Chief of Staff of the Air Force, corresponding to the aircraft A-4M system acquired in 1999 (5.7 million pesos).

- Special Veterinary Products for Animal Health of SENASA, as a result of an outbreak of "foot and mouth" (2.7 million pesos).

The increases mentioned above were partially offset by a reduction in Publicity and Propaganda expenditure (-14.9 million pesos) and the corresponding Commissions of the External Public Debt (-15.2 million pesos). The latter were mainly due to a delay in registration corresponding to 1999, which influenced fiscal 2000.

Social Security Benefits remained at the same level as the previous year.

Current Transfers in the first quarter of 2001 showed a net decrease of –111.8 million pesos, mainly due to the following:

- PAMI ( -112.6 million pesos), mainly due to additional financial aid

from the Treasury during year 2000.

- The Emergency Program for Floods, which was due to a reclassification of expenditure. In 2001 it was allocated to capital expenditure transfers ( -13.0 million pesos).

- Federal Administration Space Programs (-12.9 million pesos), as a result of measures which cancelled the application of Decrees No. 446/2000, No. 1.140/2000 and complements, which cancelled it as a Decentralized Agency for year 2001. The appropriation was re-instated by Decree No. 270/01 (02/03/01) to the Federal Administration of Space Programs as an intervened decentralized agency, which hampered its execution.

- Agreement for Financial Aid to the Province of La Rioja, resulting from the amount transferred during the first quarter 2000 (-11.0 million pesos).

- Social and Medical Attention to beneficiaries of Non Contributive Pensions (-10.1 million pesos).

The main increases were the following:

Subsidies allocated to the National System of Public Media S.E. (11.4 million pesos) by application of Decree N0. 94/2001. Non reimbursable contribution to the "Empresa Neuquina de Servicios de Ingeniería (ENSI) – "Empresa Pública Provincial de Neuquén" – (4.0 million pesos) responsible for the operation of the industrial plant "Agua Pesada de Arroyito" and the "Ferrocarril Belgrano SA" (1.0 million pesos).

- Transfers from the Secretariat of Energy to the Compensation Fund for Subsidized Electricity Rates, to comply with the Federal Commitment corresponding to year 2000, arising from a shortfall in the allocation in the fourth quarter of same year (13.8 million pesos).

- Agreement with Metrovías SA arising from the decision of the Public Works Arbitrage Court (10.0 million pesos), and the Forestry Regime – Law No. 25.080 (3.6 million pesos).

- National Universities (7.1 million pesos).

- Provincial Employment Programs, as a result of agreements signed within the framework of the Federal Commitment (6.0 million pesos).

Real Investment increased by 20.9 million pesos, mainly due to higher levels of execution of the Rosario-Córdoba highway (3.6 million pesos) and the start up of building of the International Route through Paso de Jama in the Province of Jujuy in September 2000 (11.1 million pesos). In addition, the Roads Directorate recorded an increase due to the "Sistema de Contratos de Recuperación y Mantenimiento de Mallas Viales – C.Re.Ma. – (6.3 million pesos).

Capital Transfers showed a net increase of 48.5 million pesos. The main increases were due to transfers to:

- The Rosario-Victoria Bridge Contractors (23.7 million pesos).

- Provinces for the funding of emergencies due to flooding (19.0 million pesos)(10).

- National Housing Fund to Provinces, due to a delay during 1999 of Treasury obligations to the FONAVI guarantee by application of Decree 455/99. A part of such delay was included in the 2001 budget law and the remainder shall be included in year 2003, according to Section 30 Law 25,401, within the framework of the Federal Commitment (15.7 million pesos).

- Provincial governments for the execution of basic infrastructure works, for urban areas lacking infrastructure. PROMEBA loan – Improvement of Neighbourhoods (5.2 million pesos).

- Refurbishment of Line "A" of the Buenos Aires Subways (5.1 million pesos).

These increases were offset by a lower level of transfers to maintenance and drainage of waterways (-10.0 million pesos) and to the Private Operators of FEMESA (-9.6 million pesos).

Financial Investment fell by 5.2 million pesos, which was mainly due to the effect of the payment due the Interamerican Development Bank in year 2000, corresponding to fiscal 1999 and which had not been paid (- 13.3 million pesos). This was partially offset by a payment to Aerolíneas Argentinas SA, by application of Law 25,401 Section 70 (8.1 million pesos).