Subscription of Participation Certificates and/or Debt Securities of Financial Trusts for Infrastructure Works and/or Equipment Declared Critical and/or of Public Interest: Guarantees under the ALADI Reciprocal Payments and Credits Agreement

2008 - Year of the Teaching of Sciences

CENTRAL BANK OF THE ARGENTINE REPUBLIC

COMMUNICATION “A” 4838
29/08/2008

TO THE FINANCIAL INSTITUTIONS:

Ref.: Circular
OPRAC 1 - 615
LISOL 1 - 489
COPEX 1 - 269
OPASI 2 - 389

Subscription of participation certificates and/or debt securities of financial trusts destined for infrastructure works and/or equipment, declared as critical and/or of public interest. Guarantees granted within the framework of the reciprocal payments and credits agreement - ALADI . ____________________________________________________________

We address you to inform you that this Institution adopted the following reso-lution:

“1. Establish that, within the framework of the provisions of Section 4. of the rules on “Financing to the non-financial public sector”, the Central Bank of the Argentine Republic may authorize financial institutions to subscribe primarily participation certificates and/or debt securities issued, as from the date of this Communication, by financial trusts under the provisions of art. 19 of Law 24.441, whose trustee or beneficiary of the proceeds from the liquidation of the trust, determined by the respective contracts or provisions governing them, is a holder of the non-financial public sector, for which the following requirements must be met:

1.1. the aforementioned financial trust:

1.1.1. has as its purpose to finance the execution of infrastructure works and/or the acquisition of equipment -provided that, in both cases, they constitute capital investments-necessary to carry out the provisions of public services -regardless of the public or private legal nature of the provider-, which are declared as critical and/or of public interest by the competent authority.

1.1.2. has a trust asset consisting of income and/or collection rights from tariffs, rates, fees, specific charges or similar concepts, previously established by competent authority, applicable to the generation, production, transportation, distribution and provision of energy -whatever the source-or to the provision of those public services, whose application has been provided by national, provincial, of the Autonomous City of Buenos Aires law, or municipal ordinance, for which purpose the pertinent assignment of the

corresponding income and/or collection rights to the trust must be instrumented, which must not have been subject to previous assignments.

For the purposes of the declaration of criticality and/or public interest and the determination of the concepts that make up the trust's asset, as provided in the preceding paragraphs, there must be a legal framework that, in general terms, defines the regulatory and control structure of the corresponding service -national, provincial, of the Autonomous City of Buenos Aires law, municipal ordinance, according to the jurisdiction benefiting from the trust- that designates the enforcement authority with powers in matters of regulation, control, price setting, forms of financing, etc.

1.2. the financial trust contract provides that:

1.2.1. the collection of the items destined for the trust's asset according to point 1.1.2. is made effective together with the liquidation of the other concepts that must be paid to receive the corresponding provisions.

1.2.2. the effective liquidation -to the users or final recipients of the provisions- of the concepts that make up the trust's asset in accordance with point 1.1.2., is not conditioned, under any concept, to the progress of the works and/or the prior acquisition of the equipment being financed.

1.2.3. the placement of the participation certificates and/or debt securities issued by the aforementioned trust in institutionalized securities markets of the country or abroad and/or private placement is provided for, within 365 days counted from the date of the first primary subscription of such instruments.

In the cases of trusts constituted prior to this Communication, this requirement must be observed for new issues of participation certificates and/or debt securities, and the pertinent modifications must be incorporated into the original trust contract -when it does not contemplate it- so that this is provided for.

1.2.4. the flow of income destined to cancel the instruments issued by the trust does not exceed the term of 10 years counted from the date of constitution of the respective trust.

1.2.5. the trustee is authorized to make the assignment of the trust's assets for the purposes of the collateral assignment provided for in the first paragraph of point 2. of this Communication.

1.2.6. the financial institution holding participation certificates and/or debt securities issued within the framework of the financial trusts referred to in point 1. is authorized, in cases where it is depositary of the trustee's accounts, to debit directly from those accounts, at their maturity, the financial services of those instruments, corresponding to the proportion of its holding with respect to the total trust asset applied to the total balance of the trust's current or demand accounts.

1.3. in the instrumentation of the assignment of the concepts provided in point 1.1.2. in favor of the trust it is expressly established that:

1.3.1. the income to be applied to the cancellation of the collection rights assigned to the trust is received through direct transfer of the corresponding funds by whoever has the status of administrator or responsible for the corresponding collection.

1.3.2. during the period in which the participating financial institution holds the participation certificates and/or debt securities, the total projected receivables as assets of the trust shall not be less than 125% of that participation.

1.4. the obligors for payment of the rights assigned to the trust, considered individually, as of the date of constitution of the respective trust, have a participation of less than or equal to 2.5% of the total amounts corresponding to the projected demand for the relevant service.

In those service provisions in which there are companies that have the character of distributors, the assigned rights of the respective obligors for payment shall be computed without exceeding the individual participation percentage of less than or equal to that established above.

1.5. the external auditor of the participating financial institution issues a special report regarding compliance with the conditions established in the preceding points. A conclusion must be provided on each of the requirements individually; the submission by the financial institution of reports that include limitations of any kind on the scope of the tasks or statements that imply non-compliance with any of said requirements shall not be accepted.

1.6. the provisions of points 4.1.2. and 4.1.3. of Section 4. of the rules on “Financing to the non-financial public sector”.

2. To provide that the funds making up the assets of the trust, which have not been applied to the specific purposes for which the trusts were created, or which, having begun to be applied, remain as temporary surpluses in accordance with the financial programming in the administration of the trust, must be invested in deposits in the financial institution holding the instruments issued by the trust without exceeding the proportion of its holding with respect to the total assets of the trust, and be pledged in favor of that institution, as collateral for its participation, as long as the works or equipment that generate income to the trust through tariffs, rates, fees, and other similar concepts have not begun to be used economically.

Without prejudice to the foregoing, in the case that the trust is of the non-financial public sector of the provincial, municipal, or Autonomous City of Buenos Aires jurisdictions, those jurisdictions must additionally pledge as collateral the resources provided for in subparagraphs ii) and iii) of point 4.1.1.1. of the rules on “Financing to the non-financial public sector” - even in excess of the term established in said subparagraphs -, until reaching the sums necessary to cover all the income that the trust would receive while those works or equipment have not begun to be used economically - generating income to the trust through rates, fees, and other similar concepts - and in the proportion of the holding of the corresponding instrument with respect to the total assets of the trust.

3. To provide that the holding by financial institutions of participation certificates and/or debt securities issued by financial trusts under the provisions of point 1. of this Communication shall not be subject to the general rules in force on “Credit Grading”.

4. To increase by 15 percentage points the individual limits for operations with the non-financial public sector provided for in point 7. of Communication “A” 3911 and amendments, and by 50 percentage points the global limit established therein, to the extent that said increase is applied to the holding of participation certificates and/or debt securities issued by financial trusts under the provisions of point 1. of this Communication.

5. To increase by one time the limits established regarding risk concentration - points 2.2.1. and 2.2.2. of Annex II of Communication “A” 2140 -, setting them at 4 times and 6 times, respectively, the computable equity responsibility of the entity as of the last day of the month prior to the corresponding month, when the excesses over the limits provided for generally in said regulations originate as a consequence of the application of the provisions referred to in point 1. of this Communication.

6. To provide that, in the month prior to that in which each subscription of participation certificates and/or debt securities of the trusts referred to in point 1. of this Communication is made, the financial institution must record an excess of minimum capital integration that exceeds at least the sum of the amount corresponding to that subscription plus its accumulated holding, as of that date, of such types of instruments.

Additionally, in the Business Plan and Projections submitted by the participating financial institution, in compliance with the provisions of the reporting regime in that matter, in force at the time of consideration by the Central Bank of the Argentine Republic of the authorization request, a projected monthly excess of minimum capital integration - individual position - must appear for the reported periods, of such magnitude that it allows eventually absorbing the greater minimum capital requirement derived from the incorporation as “INC” referred to in point 7. of this Communication. When the information corresponding to said projections refers to a half-year period, the projected computation to be considered must be proportional.

7. Incorporate within the expression “INC” (minimum capital increase for credit risk) provided in point 3.1. of Section 3. of the rules on “Minimum capital of financial institutions” the holdings of participation certificates and/or debt securities of financial trusts provided in point 1. of this Communication, computed in accordance with the following schedule, which will operate from the time the works or equipment that generate income to the trust through fees, rates, tariffs, and other similar concepts have begun to be used economically.

Computation of the holding as “INC” -in % thereof-	As from the
25	First month
50	Seventh month
100	Thirteenth month

8. Authorize, with general character, within the framework of the rules on “Affectation of assets as collateral” that national public securities -which have volatility reported by this Central Bank-, and/or the monetary regulation instruments of the Banco Central de la República Argentina be pledged as collateral by financial institutions in favor of this Institution by virtue of what is required by regulation for operations instrumented through the ALADI Reciprocal Payments and Credits Agreement, to the extent that they are linked to infrastructure works or equipment -which, in both cases, constitute capital investments- referred to in point 1. of this Communication, and therefore, in accordance with the rules currently in force on the matter, they are covered by the limit provided in point 3.1.1. of the aforementioned regulations.

9. Increase by 50 percentage points the limit provided in point 4.1. of Section 4. of the rules on “Ratio for immobilized assets and other concepts” to the extent that the immobilization of the asset originates from the holding of national public securities and/or monetary regulation instruments of the Banco Central de la República Argentina pledged as collateral within the framework of the operations referred to in point 8. above.

10. Establish that the provisions contained in points 3. to 7. and 9. of this Communication must be observed by financial institutions on an individual and consolidated basis, except for the provisions of the second paragraph of point 6. of this Communication, which must be complied with on an individual basis.

11. Admit the coverage of guarantees for import operations processed through the ALADI agreement, within the framework of the provisions of point 8. of this Communication, for at least 100% of the corresponding amount, to the extent that the financial institution authorizes the Banco Central de la República Argentina to debit daily from its demand account in US dollars and, if necessary, to debit from its current account in pesos or, if the available balances in the aforementioned accounts are insufficient, that it authorizes the liquidation in the secondary market of its holdings of public securities -which have volatility reported by this Central Bank-, and/or monetary regulation instruments, deposited in the “Central de registración y liquidación de pasivos públicos y fideicomisos financieros” (CRyL) to cover the guarantee shortfall, through their pledge, which may occur due to price variation of public securities quoted in institutionalized markets or by the applicable exchange rate, it being possible to release and reinstate the excess guarantee when it exceeds 105% of the guaranteed amount.

12. Replace the second paragraph of point 1.1. of the rules on “Financing to the non-financial public sector” with the following:

“It also includes trusts and fiduciary funds whose trustee or beneficiary of the proceeds from the liquidation of the trust, determined by the respective contracts or provisions governing them, belongs to the non-financial public sector.”

In due course, we will send you the pages of the ordered texts that need to be updated.

We greet you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Darío C. Stefanelli
Gerente de Emisión de Normas

José I. Rutman
Subgerente General de Normas