Argentina — страница 3

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the nonfinancial public sector and establish it as an effective independent monetary authority. The elimination of the central bank's domestic short-term interest-bearing obligations by means of their conversion into external treasury bonds in January 1990 in effect was a first step toward recapitalizing the central bank. The Law of Convertibility established a money-creation rule that effectively limits monetary policy and central bank inflationary financing of public sector deficits. Since early 1991 the central bank has published financial statements that reveal its balance sheet; since April 1991 it has published its reserve position weekly so the public can monitor implementation of the Law of Convertibility. In September 1992 a new law strengthened the central bank's

autonomy, and further restricted its ability to extend credit to the government and the banking system. This measure reinforces the convert- ibility law, and paves the way for an independent, disciplined, monetary authority. In addition, the cen- trai bank intends to complete the process of removing functions ancillary to the functions of a monetary authority by transferring legal authority for failed institutions to the courts. Public Enterprises The government has carried out one of the most impressive privatization programs in the Western Hemisphere. The objective was to reduce the budgetary burden of the enterprises, make the firms more competitive, and increase the volume and efficiency of new investment. The privatization program began in earnest in 1990 and gained

credibility with the sale of national telecommunications company in November 1990. The program removed politics from price setting in the formerly vast segment of the economy covered by the state. The change in the institutional organization of these sectors cut off public subsidies to consumers and labor groups benefitting from high wages and excess staffing, and transfers for investment. The program also improved public finances: about $9 billion in capital receipts helped close fiscal accounts in 1991 and 1992 and external debt was reduced by $12 billion. Major privatizations included television stations, the telephone company, Aerolineas Argentinas, gas distribution and transmission, and the majority of the national oil company. It granted road and railroad concessions to the

private sector, privatized long distance cargo lines, and sharply reduced the railway's work force. The government privatized other public enterprises, including defense industries, the nation's largest distributor of electricity, ports and maritime transport, reinsurance, and the entire power sector. Future privatization plans include the national airport system. Fiscal Relationships with the Provinces The government also sought to restructure fiscal relation ships with the provinces. The Coparticipation Law of 1988, fixed the share of federal revenues automatically transferred to the provinces at 58 percent. In August 1992 a portion of tax revenues was assigned to the social security system before computing revenue sharing. At the same time, the resources provincial governments

could access were limited by progressively terminating central bank lending to provincial banks. The government also reduced extra-coparticipation transfers through the budget. To offset aggregate increases in resources as national tax collection improved, the government also transferred expenditures to provincial administrations, notably secondary education and hospitals, and to the social security system in August 1992. Debt Restructuring The final step in dealing with the government's insolvency involved restructuring its debt obligations. The government had financed its deficit through borrowing from the financial system, suspending payment to external creditors, and accumulating arrears with pensioners and suppliers. Restructuring each of these required major initiatives.

Although the government ended new rediscounts to the housing and industrial banks, and liberal rediscounts to provincial banks in 1988, the central bank continued money emission to finance the treasury and its own deficit. In late December 1989, faced with rising central bank deficits and the renewed threat of hyperinflation, the government took the drastic step of converting domestic, short-term (mainly seven-day), interest-bearing obligations of the central bank into $3.5 billion 10-year dollar-denominated treasury bonds. This virtually eliminated the central bank's quasifiscal deficit and the monetary emission necessary to finance it-at the cost of penalizing savers and reducing already low confidence in the financial system. In April 1988 the government suspended payment on