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Enron Mail |
I assume the issue is TGS (instead of CGS)
I will call you after sending this mail. Below is a small analysis related to the convertibility Law and TGS.=20 1. Argentina Convertibility Law No 23,928. The Convertibility Law passed on March 1991 determined the following: ? Established a fixed exchange rate between the dollar and the national=20 currency (1 dollar =3D 10,000 Australes, latter defined as equal to 1 peso) ? The Central Bank (Argentine Federal Reserve) must permanently have=20 international reserves (dollars, gold, other currencies) available to back= =20 100% of the monetary base. The Central Bank must sell all required dollars = at=20 the fixed exchange rate. ? It is forbidden any price adjustment clause by an index. ? For all transactions agreed upon before the Law, prices could not be larg= er=20 than the contractual price, adjusted by the exchange rate variation plus 12= %=20 a year (section 9). This section affected contracts in force. ? The Convertibility Law was just amended on June 22nd 2001 by the Law 2544= 5,=20 to equal 1 peso to the simple average of 1 dollar and 1 euro. Anyway,=20 according to its section 2, the new Convertibility rule will only be in for= ce=20 once the price market of 1 dollar is equal to 1 euro (to avoid a surprise= =20 devaluation). 2. Legal requirements for a devaluation To modify the exchange rate before 1 dollar =3D 1 euro, it would be necessa= ry=20 to abolish or amend again the Convertibility Law. In such regards, the Congress would have to abolish the Convertibility Law = or=20 keep the Convertibility at a different exchange rate.=20 Although in principle a devaluation should not affect contracts with prices= =20 set in dollars, even the Convertibility Law has affected contracts that wer= e=20 in force. So, there is a certain risk that a new eventual amendment of the=20 Convertibility Law could affect contracts in force. In fact I think there is a higher risk of the government breaching the=20 contracts or defaulting debt payments than devaluating the currency by=20 surprise. 3. Impact on TGS Since the privatization rules establish that TGS=01, rates are in dollars, = a=20 devaluation that respects contracts in force should not have a significant= =20 impact on TGS financial results. However, due to the social impact of a devaluation, the Congress could pass= a=20 new law establishing a new mechanism to calculate Public Utilities rates. T= he=20 higher the percentage of devaluation (and the higher the social turmoil), t= he=20 higher is the probability that this kind of Law would be passed. Richard Shapiro 07/15/2001 06:32 PM To: Guillermo Canovas/SA/Enron@Enron cc: =20 Subject: Please read- Argentina economic risk Let's discuss. ---------------------- Forwarded by Richard Shapiro/NA/Enron on 07/15/2001= =20 04:36 PM --------------------------- From: Robert Johnston/ENRON@enronXgate on 07/12/2001 10:54 AM To: Richard Shapiro/NA/Enron@Enron cc: Kevin Hannon/Enron Communications@Enron Communications, Brendan=20 Fitzsimmons/ENRON@enronXgate, Scott Tholan/ENRON@enronXgate=20 Subject: Please read- Argentina economic risk Hi Rick- Kevin Hannon asked that we contact you to coordinate some market= =20 intelligence research pertaining to the deepening financial crisis in=20 Argentina. Kevin would like us to investigate how Enron's CGS project will= =20 be treated by the Argentinean govt should a default or devaluation take=20 place. We understand that you have the contract providing more information= =20 on how the project is protected by international treaty. It would be great = if=20 we could get a copy and meet with you briefly to discuss this request. Thanks for any help you can provide during what I know is a very busy time= =20 for you! Robert Johnston Manager, Market Analysis Enron Wholesale Services x39934
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