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FEDERAL REGIME OF FISCAL RESPONSIBILITY Law 25.917 Creation. Transparency and public management. Public spending. Public income. Financial balance. Indebtedness. Federal Fiscal Responsibility Council. Miscellaneous provisions. Transitional provisions. Sanctioned: August 4 of 2004 Enacted: August 24, 2004

The Senate and Chamber of Deputies of the Argentine Nation assembled in Congress, etc. sanction with force of Law:

ARTICLE 1 Consider the Federal Regime of Fiscal Responsibility with the aim of establishing general rules of fiscal behaviour and providing greater transparency to public management, which shall be subject to the provisions of this Act.

CHAPTER I

TRANSPARENCE AND PUBLIC MANAGEMENT

ARTICLE 2 The national Government shall submit to the Federal Fiscal Liability Council established by this Act before 31 August of each year, the macro-physical framework for the following period, which shall include:

(a) Expected results .primary and financial results. accrued base for the public sector of each level of government.

(b) The limits of indebtedness for all provinces, the Autonomous City of Buenos Aires and the national government.

(c) The projections of resources of national origin detailing their distribution by Régimen and by province and Autonomous City of Buenos Aires.

(d) The wage and tax policy you expect to implement and the projections of the following variables: prices, gross domestic product and nominal exchange rate.

As long as the Federal Fiscal Responsibility Council is not functioning, the national Government will submit its report to the Governors, Ministers of Provincial Economy and Head of Government of the Autonomous City of Buenos Aires who have acceded to this regime as provided for in article 34.

Article 3 The General Budget Laws of the Provincial Administrations, the Autonomous City of Buenos Aires and the National Administration shall contain the authorization of all expenses and the forecasting of all resources, of a regular and extraordinary nature, affected or not, of all centralized, decentralized and trust funds. They will also report on the forecasts for all auto-archic entities, institutes, enterprises and corporations of the State of the Non-Financial Public Sector. Resources and expenditures shall be in full amounts, without compensation. Appropriations will be made to incorporate into the Budget existing funds or agencies that do not consolidate into the General Budget or are not subject to the general rules of budget execution, within the maximum of two (2) subsequent fiscal periods, counted from the validity of this Act. The provisions of this article do not imply altering the special laws regarding their distribution or intangibility mechanisms, in which case they will not be subject to the general rules of budget execution. ARTICLE 4 On the proposal of a Commission composed of representatives of the Permanent Forum on Budget and Finance Directorates of the Argentine Republic, the converters that will be used by the provincial governments and the Autonomous City of Buenos Aires to obtain homogeneous budget classifications with those applied in the national government. The proposal in question should be prepared within 90 days of the entry into force of this law and elevated to the Federal Council for Fiscal Responsibility for approval. Each provincial government will approve the converters that correspond to it through a regulation emanating from the area with competence in the matter. ARTICLE 5o The national government will incorporate into the formulation of the projections of multi-year budgets presented in the Annual Message of Elevation of the General Budget of the National Administration, the estimates of the national resources distributed by Régimen and by province and Autonomous City of Buenos Aires and the maturity profile of the national public debt instrumented for the corresponding triennium. ARTICLE 6 Before 30 November each year, the provincial governments and the Autonomous City of Buenos Aires will present to their legislature the projections of the multi-year budgets for the next triennium, which will contain at least the following information;

(a) Resource projections per heading.

(b) Cost projections for purposes, functions and by economic nature.

(c) Investment programme for the period.

(d) Projection of tax sharing to municipalities.

(e) Programme of credit operations from multilateral agencies.

(f) Public debt maturity profile.

(g) General criteria for the capture of other sources of financing.

(h) Description of budgetary policies that support the projected economic and financial results and projections.

ARTICLE 7 Each province, the Autonomous City of Buenos Aires and the national government will publish on their website the Annual Budget . once approved, or in its default, the Extended Budget, until it is approved . and the projections of the Multi-year Budget, after presented to the corresponding legislatures. With a stay of one (1) quarter, they will disseminate quarterly information on the budget execution (access and cash base), the stock of public debt, including the floating one, as well as bilateral financing programmes, and the payment of services, detailing in these three (3) last cases the type of creditor. To this end, methodological criteria will be used consistent with those established by law No. 24,156 and the budgetary classifications referred to in article 4 of this Act. Information will also be provided on the level of occupation of the public sector as at 31 December and as at 30 June of each year with a lag of one (1) quarter, totalling the permanent and temporary staff plant and staff recruited, including the projects financed by Multilateral Credit Agencies. The Ministry of Economy and Production should produce and publish on its website the information before detailed and the Chief of Staff of Ministers should publish on its website the consolidation of the information. ARTICLE 8 The provincial governments, the Autonomous City of Buenos Aires and the national Government, will take the necessary measures to calculate homogeneous parameters and indicators of public management that measure the efficiency and effectiveness in the collection and efficiency of public expenditure, in order to allow inter-jurisdictional comparisons, for which purpose methodological proposals will be requested to the Permanent Forum on Budget and Finance Directorates of the Argentine Republic. The proposal shall be prepared within one hundred and eighty (180) days of the entry into force of this law and its measurement shall be published in accordance with article 7 of the same. Article 9 The provincial governments and the Autonomous City of Buenos Aires will implement an Integrated Tax Information System compatible with the national. The provincial governments of the Autonomous City of Buenos Aires and the national government will modernize their financial administration, human resources administration and tax administration systems.

CHAPTER II

PUBLIC GASTO

ARTICLE 10. The nominal rate of increase in the primary public expenditure of the Budgets of the National, Provincial and the Autonomous City of Buenos Aires, understood as the sum of the current and capital expenses, excluding the interests of the public debt, the expenses financed with loans from international agencies and the capital expenses for basic social infrastructure necessary for the social economic development, financed with any use of the credit, authorized in the case of the provinces and the Autonomous City of Buenos Aires. When the nominal rate of variation of the domestic gross product is negative, primary expenditure may at most remain constant. Where it is not necessary to implement the measures provided for in article 20 or in cases where the nominal increase in resources exceeds the nominal increase in the domestic gross product, this limitation shall apply only to the primary current expenditure, without prejudice to the provisions of this law. ARTICLE 11. Expenditures included in the Budgets of the National Government, the provincial governments and the Government of the Autonomous City of Buenos Aires constitute maximum authorizations, subjecting the execution of them to the effective perception of the revenues provided for in those regulations. ARTICLE 12. The production of the sale of fixed assets of any kind and the indebtedness of the national Government, the provinces and the Autonomous City of Buenos Aires cannot be used for current expenses or generate automatic increases for the next year, except for credit operations to restructure debt in conditions more favorable to them, the financing from Multilateral Credit Agencies and the coming from national financing programmes for public works and social purposes. It is expressly established that the sale of fixed assets may be used to finance capital erogations. ARTICLE 13. Funds or agencies may not be created that involve expenditures that do not consolidate in the general budget or are not subject to the general rules of budget execution. ARTICLE 14. The higher-expenditure authorizations can only incorporate a greater collection of resources that make up the source of financing "National Treasury" or "General Interests" if the new calculation based exceeds the estimate of the entire funding source mentioned. This restriction does not include the incorporation of new resources to address an exceptional social or economic emergency and is established by law. ARTICLE 15. The national executive branch, the provincial executive branches and the one of the Autonomous City of Buenos Aires can only, during the budget execution, approve more expenses of other branches of the state provided that it was secured a financing specially for its attention. In addition, they may not approve budgetary changes involving increases in current expenditures to the detriment of capital expenditures or financial applications.

CHAPTER III

PUBLIC INCOME

ARTICLE 16. The calculation of resources for an exercise should be based on the budgetary performance of the previous period or on the methodology that is considered technically most appropriate and should consider the modifications of tax policy that are either promoted or planned to be implemented in the fiscal period and detail the variables and factors that are taken into account for its forecasting. ARTICLE 17. If tax policy measures involving a lesser collection are to be taken for a fiscal year, the increase in the resources to be compensated or, if not, the expenditure budgeted for such financing should be adjusted. ARTICLE 18. Within one (1) year of the validity of this law, the Provincial Budgets of the Autonomous City of Buenos Aires and National shall include estimates of the tax expense incurred by the application of tax policies, in the event that such information is not available at the date of entry into force of the present.

CHAPTER IV

FINANCIAL

ARTICLE 19. The national government, provincial governments and the Autonomous City of Buenos Aires will have to execute their budgets by preserving the financial balance. Such balance shall be measured as the difference between the perceived resources .including within the same to those of a current and capital nature . and the accrued expenses that will include the net current expenses of those financed with loans from international agencies and the net capital expenses of those for basic social infrastructure necessary for economic and social development financed with any use of credit, subject to the restrictions provided for in articles 20 and 21 of this Law. ARTICLE 20. When debt levels generate services higher than those specified in the first paragraph of Article 21 of this Law, budgets with primary surpluses (net-interest expenditure level) should be presented and executed in accordance with plans to ensure the progressive reduction of debt and the consequent convergence at the above-defined levels.

In addition, the national Government, provincial governments and the Autonomous City of Buenos Aires will constitute anticyclical tax funds starting from the validity of this law in order to improve the fulfilment of its objectives.

CHAPTER V

DEUDAMIENT

ARTICLE 21. The governments of the provinces and the Autonomous City of Buenos Aires will take the necessary measures to ensure that the level of indebtedness of their jurisdictions is such that in each fiscal year the services of the instrumented debt do not exceed fifteen percent (15%) of the net current resources of transfers per share in municipalities.

The jurisdictions, within the framework of this Act, shall establish a transitional programme to adapt the debt profile and the instruments for the implementation of the preceding paragraph.

The national Government undertakes that, after the completion of the process of restructuring its public debt, the percentage of national public debt resulting from market operations, in respect of the Internal Gross Product, is reduced in subsequent fiscal periods. For such purposes, triennial periods shall be considered.

In the event of public credit operations to restructure public debt, article 65 of Act No. 24,156 on Financial Administration and National Public Sector Control Systems will apply.

The governments of the provinces and the Autonomous City of Buenos Aires undertake not to issue substitute titles of the national currency of legal course throughout the country.

ARTICLE 22. Those jurisdictions that exceed the percentage mentioned in the previous article may not access a new indebtedness, except as a refinancing of the existing one and to the extent that such refinancing results in an improvement in the agreed terms of the applicable amount, time and/or interest rate, and/or funding from Multilateral Credit Agencies and national programmes, in all cases supported by relevant financial programming. ARTICLE 23. The national government, the provincial governments and the Autonomous City of Buenos Aires must implement, systematically update and report the status of the guarantees and guarantees granted, classified by beneficiary, on the occasion of raising to the corresponding legislatures the respective Budget Projects of the General Administration, which must contain a provision of guarantees and guarantees to grant for the budgeted exercise. ARTICLE 24. The national Government, the provincial governments and the Autonomous City of Buenos Aires will not be able to include in their respective budgets as a financial application (debt demolition) current and capital expenses that have not been allocated budgetaryly in previous years. Except for the payment of non-financial debts that are being made to the present and which has been provided by law. ARTICLE 25. The provincial governments, the Autonomous City of Buenos Aires and the municipalities to access indebtedness operations and grant guarantees and guarantees, will raise the background and documentation for the Ministry of Economy and Production, which will carry out an analysis to authorize such operations in accordance with the principles of this law.

In the case of indebtedness of the municipalities, the provinces will coordinate with the national Government and with their respective municipalities the actions to promote such authorizations.

ARTICLE 26. The national government, through the Ministry of Economy and Production, will be able to implement programs linked to the debt of those jurisdictions that do not have the corresponding financing, while observing guidelines for fiscal and financial behaviour consistent with this law. The programmes will be implemented through bilateral agreements, to the extent of the financial possibilities of the national Government and ensuring the sustainability of its fiscal and financial scheme, and the fulfilment of its commitments to Multilateral Credit Agencies.

The national executive branch shall implement a system of compensation of debts between the participating jurisdictions of the present Federal Regime of Fiscal Responsibility, starting from the validity of this law.

CHAPTER VI

FEDERAL COUNCIL OF FISCAL RESPONSIBILITY

ARTICLE 27. See the Federal Fiscal Responsibility Council, as the implementing body of this Act, with the basic structure, missions and functions detailed in this chapter. ARTICLE 28. The Council will have its seat in the Autonomous City of Buenos Aires and will meet alternatively in each geographical area of the country. Once the Council is constituted, it shall adopt its Internal Regulations by a two-thirds majority (2/3) of the total participations assigned to the national, provincial and Autonomous City jurisdictions of Buenos Aires, in law No. 23.548 and its amendments and with the favorable vote of at least seven provincial jurisdictions. Such participations will be recalculated according to the amount of jurisdictions adhered to.

The Internal Regulations of the Council shall provide for the veto power of the national State in the matter governed by article 31 of this Act.

ARTICLE 29. The Council shall meet on a quarterly basis and at the time of its rules of procedure, and shall validly secede with half plus one (1) of its members. ARTICLE 30. The Council shall be composed of the Ministers of Economy and/or Finance, or similar office, of the national Government, the provincial governments and the Autonomous City of Buenos Aires, to the extent that they have acceded. It will have an Executive Committee that will consist of one (1) representative of the Nation and those of eight (8) provinces and/or the Autonomous City of Buenos Aires, whose integration, representation and functions will be determined by the Internal Regulations of the Council. ARTICLE 31. The Council shall assess the compliance of the Regime established in this Act and apply the sanctions arising from its non-compliance.

CHAPTER VII

VARIAAL PROVISIONS

ARTICLE 32. Failure to comply with the obligations established by this Act will result in sanctions, which may consist of the following, without prejudice to any other that the Federal Council for Fiscal Responsibility may establish for this purpose:

I. Dissemination of the situation in all the web pages of the provinces, the Autonomous City of Buenos Aires and the national Government, in a special section created for this purpose;

ii. Restriction of the right to vote in the Council;

iii. Restrictions on the granting of new national tax benefits for the private sector within the jurisdiction that has failed;

iv. Limitation on the granting of guarantees and guarantees by the national Government;

v. Denial of authorization for the operators of new indebtedness in the terms of Article 25 of this Law;

vi. Limitation of the national Government ' s budget transfers to jurisdictions that are not originated in co-participable national automatic transfer taxes.

ARTICLE 33. Provincial governments will invite their municipalities to adhere to this rule, propose the application within such governments of principles similar to those established here and coordinate the dissemination of their information. ARTICLE 34. Invite the provinces and the Autonomous City of Buenos Aires to adhere to the regime established by this law. ARTICLE 35. The Regime established by this Act shall enter into force on 1 January 2005. For those jurisdictions that adhere subsequently, the validity will begin to govern from the date of accession.

CHAPTER VIII

TRANSITORY PROVISIONS

ARTICLE 36. Until the Regime established by this law enters into force in twelve (12) jurisdictions, the Ministry of Economy and Production shall be the Authority of Application thereof. ARTICLE 37. Contact the national executive branch.

IN THE SESSION OF THE ARGENTINE CONGRESS, IN GOOD AIRES, TO THE FOUR DAYS OF THE MONTH OF AUTHOR YEAR.

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EDUARDO O. CHANGE. . DANIEL O. SCIOLI. . Eduardo D. Rollano. . Juan Estrada.