Alvarez - Argentina presentation March 0805

Argentina Economic Outlook

March 2005

Economic emergency was surpassed  Relations with the multilateral agencies reestablished  Public debt has been restructured  Exchange rate stability and recovery of international reserves  Low inflation rate achieved (hyperinflation was avoided)  Recovery of bank deposits and interest rates at low levels  Recovery of economic activity  Surplus of fiscal accounts  Improvement in the labor market and poverty conditions  External sector: record level of trade balance surplus

Argentina after the crisis EXCHANGE RATE AND INTERNATIONAL RESERVES 21,5

4.5 International reserves US Dollar

4.0

3.0

15,5

2.5 13,5

2.0

11,5

1.5

9,5

1.0

7,5

0.5

Source: CEI based on BCRA data.

(ARS x USD)

3.5

17,5

de c0 fe 1 b0 ap 2 r-0 ju 2 n0 au 2 g0 oc 2 t-0 de 2 c0 fe 2 b0 ap 3 r-0 ju 3 n0 au 3 g0 oc 3 t-0 de 3 c0 fe 3 b0 ap 4 r-0 ju 4 n04

(USD billions)

19,5

Argentina after the crisis CONSUMER PRICES 45

35 30 25 20 15 10 5

Source: CEI based on INDEC data.

4 ju l- 0

ja n04 ap r-0 4

ju l-0 3 oc t -0 3

ap r-0 3

ja n03

ju l-0 2 oc t- 0 2

ap r-0 2

0 ja n02

(Annual % var.)

40

Recovery of economic activity REAL GDP

-8% 275,0

-21% 250,0

Source: CEI based on INDEC data.

3 III 0

2 IV 0

I0 2

1 II0

0 III 0

9 IV 9

I9 9

8 II9

7 III 9

IV 9

6

225,0 I9 6

(1993 ARS billions)

300,0

Recovery of economic activity GROWTH DRIVERS (DEMAND SIDE) 20% 10.2%

15% 7.7%

10%

(% contrib. to GDP growth)

11.7% 11.2%

5.4% 5%

-0.2%

0% -5%

-2.0%

-10%

-3.4%

-4.9%

Imports Investment Consumption Exports GDP

-15% -10.5%

-9.8%

-20% -13.5% -25% -16.3% -30% I´01

II´01

III´01 IV´01

I´02

II´02

Source: CEI based on INDEC data.

III´02 IV´02

I´03

II´03

III´03 IV´03

I´04

Recovery of investment GROSS FIXED INVESTMENT

20.0%

16.0%

12.0%

Source: CEI based on INDEC data.

III 03

IV 02

I0 2

II0 1

III 00

IV 99

I9 9

II9 8

III 97

IV 96

8.0% I9 6

(% of GDP)

24.0%

ja n m - 01 a m r-0 ay 1 -0 ju 1 se l-01 p no - 0 1 v ja -01 n m - 02 a m r-0 ay 2 -0 ju 2 se l-02 p no - 0 2 v ja -02 n m - 03 a m r-0 ay 3 -0 ju 3 se l-03 p no -03 v ja -03 n m -04 a m r-0 ay 4 -0 4

(exports and imports) 32,0

24,0

Trade balance

20,0

Exports

16,0

8,0

Source: CEI based on INDEC data.

10,0

Imports 5,0

12,0

0

(trade balance)

Trade balance

(USD billions, accumulated in 12 months) 20,0

28,0 15,0

Remarkable improvement in public accounts NATIONAL PUBLIC SECTOR

3.0%

Primary result in GDP % Tax collection (acumm. in 12 months)

2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5%

Source: CEI based on Treasury Department data.

80,0 70,0 60,0 50,0 40,0 30,0

(Tax collection in ARS billions)

3.5%

90,0

ja n01 ap r-0 1 ju l-0 1 oc t-0 1 ja n02 ap r-0 2 ju l-0 2 oc t -0 2 ja n03 ap r-0 3 ju l-0 3 oc t-0 3 ja n04 ap r-0 4

(Primary result in GDP %)

4.0%

Public debt restructuring PUBLIC DEBT BURDEN 160%

1300%

Public debt (as GDP %) Public debt (as % of revenue)

1100%

(Debt as GDP %)

120% 900% 100% 700% 80% 500% 60% 300%

40% 20%

100% I´00 II´00 III´00IV´00 I´01 II´01 III´01IV´01 I´02 II´02 III´02IV´02 I´03 II´03 III´03IV´03

Source: CEI based on Treasury Department data.

(Debt as % of revenue)

140%

Improvement in the labor market UNEMPLOYMENT RATE (as % of active population)

30% 25% 20% 15% 10% 5% II 02

IV 02

I 03

Source: CEI based on INDEC data.

II 03

III 03

IV 03

I 04

Economic outlook 2003

2004

2005

GDP

% real var.

8.7

8.8

6.5

Consumption

% real var.

7.3

7.0

4.3

Investment

% real var.

38.1

29.0

13.0

Exports

% var.

14.0

12.0

4.0

Imports

% var.

54.0

49.0

12.0

Trade balance

USD billions

15.6

11

11.2

Retail prices

% var. (dec/dec)

4.0

6.5

7.0

Exchange rate

ARS per dollar

2.96

3.0

3.1

Primary result CPS (1)

GDP %

2.9

4.2

4.0

Unemployment rate

% - 4th. quarter

14.5

13.2

12.2

(1) Consolidated Public Sector (CPS): federal, provincial and municipal governments.

Source: CEI base on the Market Expectations Survey (BCRA).

Economic Program Mainstay After the economic emergency, the actual stage of the economic program aims at achieving sustainable growth.

­ Fiscal solvency ­ Prudent monetary framework Pillars

­ Exchange rate flexibility ­ Consolidation of financial system ­ Aggressive trade policy

Challenges Consolidate fiscal solvency (tax reform, improvement of tax compliance, new scheme of distribution of federal taxes)

 Achieve long term price stability (inflation targeting system)  Recovery of long term credit  International negotiations to expand trade opportunities (MERCOSUR, FTAA, European Union, CAN, WTO, bilaterals).

 Full social inclusion

Concluding remarks  Economic emergency generated by the 1998­2002 crisis has been surpassed.

 2004 ended with an expansion of the economic activity in a context of low inflation, exchange rate stability, improvement in the labor market and good fiscal performance.

 The outlook for 2005 is also very optimistic.