New Secretary of Energy in Argentina

FYI
----- Forwarded by Brent Hendry/NA/Enron on 08/29/2000 02:57 PM -----

=09Andrea Calo
=0908/29/2000 02:21 PM
=09=09=20
=09=09 To: Brent Hendry/NA/Enron@Enron
=09=09 cc:=20
=09=09 Subject: New Secretary of Energy in Argentina

FYI
---------------------- Forwarded by Andrea Calo/SA/Enron on 08/29/2000 04:2=
4=20
PM ---------------------------

Guillermo Canovas
08/28/2000 05:20 PM
To: James M Bannantine/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Diomedes=20
Christodoulou/SA/Enron@Enron, Don Black/SA/Enron@Enron, Federico=20
Cerisoli/SA/Enron@Enron, Richard Shapiro@EES, Jose=20
Bestard/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Michael=20
Guerriero/SA/Enron@Enron, Mike G Smith/NA/Enron@Enron, John J=20
Shoobridge/SA/Enron@Enron, Roberto Pensotti/NA/Enron@Enron, Rodolfo=20
Freyre/SA/Enron@Enron, Andrea Calo/SA/Enron@Enron, Fabian=20
Valle/SA/Enron@Enron, Cristian Folgar/SA/Enron@Enron, Jeff=20
Kabel/SA/Enron@Enron, Carlos Bastos/SA/Enron@Enron, Patrick=20
Hansen/SA/Enron@Enron, Julian Poole/SA/Enron@Enron, Gabriela=20
Aguilar/SA/Enron@Enron, Guillermo Atenor/SA/Enron@Enron, Guillermo=20
Mulville/SA/Enron@Enron, Maria Belen Salvador/SA/Enron@Enron, Bernardo=20
Andrews/SA/Enron@Enron, Mario Aguilar Benitez/SA/Enron@Enron, Diego=20
Hollweck/SA/Enron@Enron, Jorge Lamoure/SA/Enron@Enron, Leandro=20
Colosqui/SA/Enron@Enron, Pablo Acevedo/SA/Enron@Enron, Dan=20
Feather/SA/Enron@Enron
cc: =20
Subject: New Secretary of Energy in Argentina

This is to inform you that Montamat was replaced in the Secretariat of Ener=
gy=20
by the former Secretary of Industry, Debora Giorgi.
The new Secretary does not have former experience in the Energy sector. She=
=20
is economist and used to work in a consulting company.
Giorgi has the confidence of her boss, the Minister of Economy, Jos, Luis=
=20
Machinea. Montamat did not have that trust, since he belonged to other=20
political group, lead by the Minister-Chief of Cabinet, Rodolfo Terragno.
It is considered that the movement in the governmet was due to the followin=
g=20
in the stated order:

1. The need to improve economic expectations by bringing on board a private=
=20
sector leader as Secretary of Industry (Javier Tizado, comes from Techint, =
an=20
important private group of Argentina). Among other things, Techint is an=20
steel company with assets in gas transportation and distribution, and is=20
against opening the energy market to greater competition. However, it is=20
considered that Tizado would not try to go back to protectionist policies, =
at=20
least to a great extent. Tizado=01,s agenda includes: a) a right of first=
=20
refusal for domestic producers in the purchases of the government and=20
privatized companies (at equal price and quality, they should purchase from=
a=20
national producer); b) to extend the term for small and medium companies to=
=20
pay public services.

2. The inclusion of Tizado in the government created the need to move Debor=
a=20
Giorgi.

3. So Machinea needed a place for Giorgi, and suggested De la R?a to fire=
=20
Montamat.

4. De la R?a would have accepted to fire Montamat with the purpose of: a)=
=20
reducing the power of the Chief of Cabinet; b) confirming to the market=20
Machinea=01,s power (Machinea has been the object of strong rumours of=20
resignation during last weeks).=20

So the replacement of Montamat is mainly the consequence of an intent of=20
including Tizado in the economic team to show the government=01,s commitmen=
t=20
with industrial growth (you must have in mind that the main critic to the=
=20
government is that it gave a huge importance to the fiscal goal, forgeting=
=20
other goals as economic growth). In a lower extent, the replacement of=20
Montamat by someone without experience (Giorgi) is oriented to keep the=20
position for one member of Machinea=01,s team and to avoid the nomination o=
f=20
someone from another political group, with own ideas.

Among the implication of the nomination of Giorgi, it should be mentioned:
1. The new secretary will probably be more sensitive to any measure that=20
implies a cost reduction for industries. This is positive, since we are=20
suggesting several measures with this goal.
2. Since she does not have a background on energy, it will be very valuable=
=20
to lobby not only her but other Machinea=01,s team members who can influenc=
e her.
3. On one side, she has a reduced value since she has been moved and replac=
ed=20
by someone stronger. On the other, she has a higher value since from now on=
,=20
it will be clear that her voice is Machinea=01,s voice.
4. Enargas=01, President, Formica, can lose political support, since he bel=
ongs=20
to the group of Montamat and Terragno.
5. On the power side we will probably see a delay in the implementation of=
=20
the regulatory changes we are advocating for, and that we had already agree=
d=20
upon with Montamat=01,s team.
6. Any policy change implying a price increase will have a lower probabilit=
y=20
of success. Machinea=01,s team is highly concerned about energy prices for=
=20
end-users. So we have to be ready to prove that under the full unbunling of=
=20
energy industries prices will not increase (even after paying stranded cost=
s).

Attached are the CV of Debora Giorgi and Javier Tizado in Spanish.

Regards.
Guillermo