III – EXPENDITURE OF THE FEDERAL PUBLIC ADMINISTRATION

The level of total primary expenditure recorded during the period resulted in a reduction of 154.5 million pesos, as is shown in the chart below. With regard to the economic classification, current expenditure decreased by 239.8 million pesos, mainly due to a significant decrease in compensation expenditure and transfers, while capital expenditure increased by 85.3 million pesos. In percentages the variations for the period were –1.3% and 6.4%, respectively.

Interests rose by 25.3%, which accounts almost entirely for the rise in total expenditure of 1,039.5 million pesos compared with the same period last year.

The above-mentioned decrease was mainly due to savings derived from the application of Decree 430/00 (approximately between 100 and 120 million pesos) and the severance and/or voluntary retirement of 6,773 agents (approximately between 135 and 140 million pesos) partially offset by the growth of the median of average wages (around 45 million pesos).

Goods and Services recorded an increase of 55.5 million pesos, mainly due to the following:

• Technical and professional services (32.1 million pesos) mainly corresponding to the Federal Administration of Public Revenue (14.1 million pesos) due to delays in registration during year 2000 for customs pre-loading inspection services; the National Institute of Statistics and Census (8.1 million pesos) for tasks prior to the Population and Housing National Census, and the Secretary of Tourism (3.8 million pesos).

• Outlays to the "Correo Argentino" (Post Office) for debt contracted by the Federal Administration of Public Revenue in year 2000 (14.8 million pesos).

• Military and security equipment of the Chief of Staff of the Air Force, corresponding to the purchase of A-4M aircraft systems, incorporated progressively since 1999 (13.3 million pesos).

• Pharmaceutical and Medical Products for the following programs: Prevention and Control of Disease and Special Risks (8.6 million pesos), Detection and Treatment of Chronic Diseases and Addictive Behavior (2.5 million pesos), and AIDS and venereal disease programs (1.6 million pesos).

• Payment of royalties corresponding to the "leasing" of jail facilities (9.8 million pesos).

• Food Products (5.9 million pesos) mainly allocated to Programs of Nutrition and Family Support, "Solidaridad" Struggle against exclusion, and Compensatory Action.

• Veterinary products allocated to the Foot and Mouth outbreak (5.4 million pesos).

• Rental of photocopying machines and computer equipment in the Federal Administration of Public Revenue (3.3 million pesos).

These increases were partially offset by a reduction in expenditure of Publicity and Propaganda (-24.5 million pesos) and the effect in year 2000 of the outlays for judicial decisions arising from a debt with COMARCO S.A., in charge of the building of a hospital in the Province of Catamarca (-22.2 million pesos), and the delays in registration of Commissions of the External Public Debt (-12.0 million pesos).

Social Security Benefits remained unchanged with regard to the same period of the previous fiscal year.

Current Transfers showed a net decrease of –145.1 million pesos. The main decreases were the following:

• PAMI (-156.0 million pesos), resulting from additional financial aid from the Treasury during year 2000.

• Tertiary Public Institutes (-56.0 million pesos).

• Deferral of the Teacher’s Incentive Fund (-52.0 million pesos).

• Transfer of Social Security Taxes to the Provinces charged to ANSeS (-35.6 million pesos), unrecorded at the closing of the semester.

• Trabajar III Program (-17.5 million pesos) pursuant to the multi-year schedule, which forecasts a reduction in the disbursements established for the external loan during 2001, affecting an average of around 15,000 beneficiaries. However, this reduction was broadly offset by the increase in other temporary job programs funded with local resources, as is explained below.

• Program for the State of Emergency due to floods, which reflects a reclassification of expenditure. In the year 2001 it was allocated to transfers of capital expenditure (-30.8 million pesos).

• Social and Medical Attention to beneficiaries of Non Contributive Pensions (-14.9 million pesos).

• Special Tobacco Fund (-9.8 million pesos

• Agreement of financial aid to the Province of La Rioja, due to a higher amount transferred during the first quarter 2000 (-11.0 million pesos).

• Improvement of Neighborhoods (PROMEBA), as a result of a reclassification of expenditure. During year 2001 it was allocated to capital expenditure (-5.2 million pesos).

• National Universities (35.5 million pesos).

• Program of Employment and Training Policies (31.6 million pesos), which accounted for an average increase of around 45,600 beneficiaries of temporary employment programs.

• Subsidies allocated to the "Sistema Nacional de Medios Públicos S.E." (National System of Public Media) (23.5 million pesos) pursuant to the rules established by Decree No. 94/2001; amount not to be reimbursed to the "Empresa Neuquina de Servicios de Ingeniería" (ENSI) – a state-owned company of the Province of Neuquén – (7.0 million pesos), which was in charge of the operation of the Industrial Plant of Arroyito and the Ferrocarril Belgrano SA railway (1.0 million pesos).

• Provincial Employment Programs, as a result of agreements signed within the framework of the Federal Commitment (29.0 million pesos).

• Transfers to International Agencies (20.1 million pesos).

• Unemployment insurance (17.1 million pesos), which covered 10,760 additional subsidies.

• Transfers of the Energy Secretariat to the Electricity Rates Compensation Fund, in order to comply with the Federal Commitment corresponding to year 2000, due to a shortfall in the appropriation of the fourth quarter 2000 (14.2 million pesos).

• Agreement with Metrovías SA after the court decision of the Public Works Arbitrary Court (15.3 million pesos), the program for Forestry Improvement – Act No. 25.080 (6.5 million pesos) and subsidy of loans of the farming sector (3.2 million pesos) and for PYMES (small and medium sized companies) (1.9 million pesos).

• Execution of Elections (6.0 million pesos) and Party Fund (4.0 million pesos).

• Implementation of subsidies to unemployed women-heads-of-family with children and youngsters of low income levels in order to stimulate a return to school (3.5 million pesos), Attention of Children and Teens at Risk (PROAME II) (3.3 million pesos), funding of 154 additional projects of Social Investment (2.0 million pesos) and an increase in subsidies granted to institutions and individuals (3.0 million pesos).

Real Investment increased by 29.4 million pesos, mainly due to the start of the building of the "Paso de Jama" International Route in the province of Jujuy, started in September 2000 (19.3 million pesos), and higher levels of execution of the Highway Rosario-Córdoba project (4.8 million pesos). In addition, an increase was recorded in the Roads Directorate for the maintenance of the National Roads by means of agreements with the Provincial Road Departments, by contract with private companies, and own administration (10.9 million pesos).

Capital Transfers increased by 45.1 million pesos net. The most significant increases are the following:

- Rosario-Victoria Bridge (8.6 million pesos).

The increases mentioned above were offset by a reduction in the level of transfers allocated to maintenance and drainage of waterways (-18.0 million pesos) and to private operators of Fe.Me.S.A. (-14.7 million pesos).

Financial Investment recorded a net increase of 10.8 million pesos, due to the contribution of Aerolíneas Argentinas SA, pursuant to Section 70, Act 25,401 (24.4 million pesos), partially offset by the effect during the year 2000 of the capital contribution of the Inter American Development Bank (-13.8 million pesos) corresponding to the 1999 appropriation, which had been delayed.