IV - PROVINCES

IV.1 Transfer of Federal Resources to Provinces

The agreement known as the "Federal Commitment" (Compromiso Federal por el Crecimiento y la Disciplina Fiscal) signed by the Provinces, the Autonomous City of Buenos Aires, and the Federal Government, was ratified by Act No. 25,400, passed on the 7 December 2000.

This agreement establishes that during fiscal year 2001 all transfers (Shared Revenue and Earmarked Funds) to the Provinces, authorized by Act No. 23.548 and its complementary rules and regulations, and amendments, as well as Acts Nº 23.966, Nº 24.130, Nº 24.699, Nº 24.464, Nº 25.082 and any other regulation which specifically allocates or distributes revenue, shall total 1,364.0 million pesos, monthly.

This overall monthly amount, of automatic transfer on a daily basis, is guaranteed by the Nation and is both a floor and a ceiling for such transfers, and it is independent of the levels of taxes collected, both current and those to be created in the future. It should be borne in mind that the Treasury shall transfer to the Provinces the amounts required to reach the total amount stipulated.

The Federal Commitment establishes that the system for the distribution of funds shall continue to be that which is established in the current laws regarding shared revenue and transfers of earmarked funds, until the amount is reached.

Clause 20 in the Federal Commitment establishes that the funds transferred to the Autonomous City of Buenos Aires shall not be included in the amount stipulated, except for transfers to the National Housing Fund (FONAVI).

With regard to the methodology of calculation of the monthly amounts to be transferred, the same structural percentages were maintained as those for fiscal 2000 (1,350 million pesos), except for those cases in which the current regulations establish fixed amounts (Service Transfers – Act Nº 24.049; Fixed Amount Income – Act Nº 24.699, Compensation Fund for Imbalances, Greater Buenos Aires Fund, Conurbano de Rosario Fund and Transfers to Electricity Companies).

The share of each regime in the overall monthly amount, 1,350 million pesos for fiscal 2000, was established according to the average of the transfers to the Provinces during 1998-1999, keeping the transfers equivalent to fixed amounts pursuant to current legislation.

Given that fixed amounts have been established for the automatic transfers, the comparative analysis for each period shall reflect an increase equivalent to the variations of the amounts fixed as a floor and ceiling.

The following chart shows a summary of the comparative amounts transferred to the provinces, both automatic and non-automatic, during the first semester of years 2000 and 2001.

Federal Resources

In million pesos

(*) Includes A.T.N. Fund (Contributions from the Treasury Fund) and Gas Consumption Subsidy only.

Automatic transfers to the Provinces increased 75.9 million pesos in the first semester 2001, compared to the same period of the year before, which accounts for an increase of 1%.

Given that the level of tax collection was insufficient to comply with the stipulated amount for each regime, the Treasury had to transfer 611.4 million pesos in guarantee of the first semester 2001, which accounted for an increase of 102.9% compared to the same period of the previous year.

The main components of the guarantee are the Fuels Tax and the Federal Revenue Sharing System, which reflect a fall in tax funding of 9.3% and 4.7%, respectively.

With regard to the surplus, it is calculated net of the amount, which, if the Federal Commitment had not been implemented, would have been input into the SIJyP (Integrated System of Pensioners and Retirees) by application of Act Nº 25.082 and thus in both cases is not transferred to all the provinces. The surplus thus calculated totaled 630 million pesos.

According to the data analyzed above, the net surplus available to the Treasury totals 18,6 million pesos.

Moreover, the non-automatic transfers showed a fall of around 6,7%, due to a significant fall in the Gas Consumption Subsidy.

Discretionary transfers during the first semester 2001 showed a positive variation of 18 million pesos, i.e., an increase of 39%, in relation to the same period of the previous year.

The Gas Consumption Subsidy for Patagonia showed a reduction of 44.5%.

The composition of the fixed monthly amount for each regime is shown in the chart below:

Federal Commitment for Growth and Fiscal Discipline

Notes:

1. Unsatisfied Basic Needs, Greater Buenos Aires Fund, Surplus of the GBA Fund and Fixed Amount Income - Act Nº 24.699.

2. Infrastructure Works, Road Agencies, FO.NA.VI. (Includes share of the Autonomous City of Buenos Aires, pursuant to Section 21, Act Nº 25.400) and F.E.D.E.I.- Fuels

3.F.E.D.E.I.-Electricity, Compensation Fund for Electricity Rates and Transfers to Electricity Companies.