Oxford Analytica (OA), in its 2006 Report on Fiscal Transparency in Argentina, rates Argentina's overall compliance with this standard as "Enacted." Argentina's legal framework provides clear guidelines for fiscal management and transparency. These guidelines have been enhanced by the 2004 enactment of the Fiscal Responsibility Law (LRF). Fiscal data disclosure on the national level is adequate, but the standards of provincial information are variable. The LRF is meant to increase the fiscal efficiency of sub-national governments, limiting future spending and debt issuance by the provinces. Argentina complies with the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS). Enforcement of Argentina's comprehensive legal framework for fiscal transparency remains one of the country's top priorities. Adherence to the LRF could substantially improve fiscal data reliability and the development of homogeneous indicators. Although the lack of control over fiduciary funds continues to diminish the overall performance of fiscal transparency, progress on this front has been achieved, thanks to the publication of aggregate information on the execution of fiduciary funds. Finally, the passage of a new law which grants discretionary use of a portion of fiscal revenues to the executive has weakened fiscal transparency.

General Overview

Oxford Analytica (OA) reports that Argentina's overall compliance with this standard is rated as "Enacted," citing the passage of Fiscal Responsibility Law No. 25.917 of 2004 (LRF). The LRF provides a clear framework for fiscal transparency in Argentina. The National Constitution specifies the structure and functions of the government and pertinent information can be obtained from the Cabinet Chief office website. OA asserts that Argentina complies with the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS). The website of the Ministry of Economy and Production (MECON) website provides most of the nation's fiscal information. Although reliable, the website is not seen to be user-friendly. The availability of national-level fiscal information is appropriate and timely, but this is not true for sub-national-level data. Transparency of the fiduciary funds run by the national government has become an issue, given their relative importance. Even though control over them is still poor, there is quarterly aggregate information available as to the use of those funds. Enforcement of the legal framework for fiscal transparency is a major concern. Moreover, Law No. 26.162, which grants the executive with discretionary powers over uses of the fiscal surpluses (the so-called superpowers), compromises fiscal transparency.

The LRF aims to improve transparency practices and to control public spending at the sub-national level. To do so, the LRF requires that the provincial nominal rate of revenue growth not exceed the GDP growth. This has lead to charges that GDP growth projections have been understated to meet LRF requirements. OA, the IMF's 2005 report, and Leonardi's 2007 paper all point out deficiencies in the LRF. In addition, OA states that provincial adherence to the LRF has been ambiguous and notes serious enforcement problems, given the federal government's Constitutional limitations regarding control over provincial spending. OA cites a suggestion offered by the IMF that a new revenue-sharing accord between the federal government and the provinces is needed. However, since the government paid its debt to the IMF in January 2006, little effort on this front has been made.

OA reports that the continuously changing legal framework for fiscal activity has hampered long term stability and sustainability. The budgetary legal framework is adequate and progress in the budget consolidation of extra-budgetary funds and bodies has been noted. Information about state-owned enterprises (SOE) is available in the budget documentation, but it is presented on a consolidated basis and there is no control over SOE budget execution. Although the legal tax framework is poor, there are signs that the government is trying to enhance its transparency

Guidotti and Del Castillo, both writing in 2005, assert that many economists and experts regard the fiscal situation as the main cause of the financial crisis at the beginning of this century. There is an open debate around the main aspects of fiscal policy mismanagement, such as provincial finance, privatizations, pension reform, tax evasion, and debt management, as reported by Cetrangolo and Gomez in 2007. According to the IMF's 2006 Public Information Notice (PIN) for its Article IV Consultation of that year, Argentina enjoyed a strong fiscal recovery following the 2001-2002 crisis. However, government spending is growing very fast, eroding the fiscal surplus. Econométrica's 2007 report states that the primary fiscal surplus has declined from 3.5% of GDP in 2006 to 2.3% in 2007 (the latter figure includes the one-time transfer of balances of private pension accounts to the public pension scheme as current revenues. It therefore overestimates real figures for primary surplus). The main reasons for fiscal erosion are: (1) the new pension plan that incorporates elderly men and women that have not contributed to the system as required by law, (2) increase in the subsidies, and (3) costs to ease the energetic restrictions. The report also points out that, even though fiscal revenue has increased 33% in 2007, expenditures grew by 44%.

The IMF's 2005 report suggests that structural adjustment is needed, highlighting a number of areas where there is room for improvement. These include "the reduction of distortions in tax policy, measures to strengthen the institutional framework of intergovernmental fiscal relations, policies to reinforce the capital base of the banking system, and a strategy to ensure adequate investment and incentives to increase the participation of the private sector in the provision of public services" (p.35). In addition, the IMF report and a 2002 report by Dujovne and Guidotti claim that the development of the institutional framework is a precondition to achieve adequate levels of fiscal transparency. The IMF report states that good fiscal performance has allowed Argentina to delay making institutional changes to ensure a long-run fiscal sustainability. The report cautions that special attention should be paid to the LRF and the Law on Revenue Sharing.

The Principles

Clarity of roles and responsibilities.

EN

OA's 2006 report rates Argentina's compliance with this principle as "Enacted." It notes that the division of responsibilities between central, provincial and municipal governments is established by the National Constitution. The government structure, functions, and responsibilities are described on the Cabinet Chief Office website. This website discloses comprehensive information on authorities and functions and offers information on the Executive's objectives. OA notes that the National Constitution establishes Argentina as a Federal state. The federal government possesses limited constitutional authority to regulate provincial spending. However, as a result of a system of revenue sharing known as co-participation, the federal government is entitled to collect a range of taxes and distribute them among the provinces.

Congress passed the LRF in 2004, according to OA's report. This Law aims to increase the fiscal effectiveness of sub national governments and to regulate provincial future spending and debt issuance. According to OA, "the nominal rate of increase in provincial public spending may not exceed that of GDP growth" (p. 4). Moreover, it can only be increased if tax revenues grow as well. Furthermore, the LRF mandates the incorporation of extra-budgetary activities (such as fiduciary funds, the Tax Agency and the National Pension Office) on the consolidated budget. The LRF created the Federal Council for Fiscal Responsibility to facilitate implementation and compliance of the law and to set forth sanctions when violations occur. However, there are doubts as to the provinces' technical competence to enforce the LRF provisions, and OA notes that many provinces are not complying with the Law. The IMF's 2005 report finds the LRF deficient, stating that "the legislation fails to provide hard constraints on sub national spending and borrowing, does not specify the circumstances under which the federal government may provide financing to the provinces, does not contain a mechanism to ensure that sub national budgets are consistent with aggregate fiscal objectives, and allows provinces to pledge their co-participation receipts for future debt service" (p.22). The IMF adds that the LRF should be reformed to strengthen the Federal Council and the revenue sharing regime capacity. OA cites the IMF as stating that the LRF could be improved by placing overt constraints on authorities and by clarifying its rules. According to OA, "less discretion of federal financing to provinces; better coordination of fiscal policies across different levels of government; increased budgetary transparency and consistent accounting standards at the provincial level, and a more equitable and stable intra-governmental revenue sharing" must be implemented" (p.5)

Dujovne and Guidotti's 2002 report notes that although legal tools such as the LRF are important, they are not enough to guarantee the implementation of prudent fiscal policies. The development and strengthening of democratic institutions and an adequate relationship among the branches of government are also necessary. The authors believe that the law would have greater success if the Congress becomes more actively involved in the process. For this reason they urge the creation of a Congressional Budget Office.

Leonardi reported in 2007 on the level of LRF compliance achieved for 21 out of Argentina's 24 jurisdictions. The LRF stipulates that the ratio between the provinces' debt and the consolidated revenues should not exceed 15%. Of the 21 jurisdictions, six failed to meet this target. Buenos Aires City (Ciudad Autónoma de Buenos Aires, or CABA ) and Santa Fe are among this group. Five provinces have narrowly met their targets, including Buenos Aires and Córdoba. Article 10 of the LRF requires that the growth of public spending not exceed the projection of the GDP nominal growth - 10.5% for 2007. Six districts failed to meet this target, including Córdoba, Buenos Aires Province, and CABA. Article 19 requires that the provinces preserve fiscal equilibrium. All the provinces complied with this provision. Although many jurisdictions had fiscal surpluses; few could build savings that afforded them enough liquidity to offset unanticipated expenses or lower-than-expected tax revenues. According to OA, provincial fiscal discipline is dealt with through bilateral agreements between the federal government and the individual provinces. These agreements are called Financial Assistance Programs (PAFs) and were formerly called Ordered Financing Programs (OFP). The PAFs enforce provincial adherence to spending limits by making government financing contingent on meeting spending targets.

OA reports that the National Constitution, as well as the Financial Administration Law No. 24.156 of 1992, the Federal Administration of Public Funds Law No. 25.152 of 1999 and the Federal Fiscal Responsibility, or LRF, Law No. 25.917 of 2004 set forth the mechanisms that govern the coordination and management of budgetary activities. The national budget is published by the National Budget Office on a prescribed schedule. The National Budget Office is part of the MECON. The provincial budgets are controlled by the provinces, are not public, and need not be handed over to the MECON. Congress is statutorily mandated to oversee tax and budget information, but this is not always put into practice. OA finds the legal framework underpinning budget activity to be satisfactory. Included in the budget legislation are the Budget Law No. 11.672 of 1993 and the General Budget of the Public Administration Organization Law No. 24.629 of 1996. The above mentioned Law No. 25.152 establishes limits on public spending and seeks to improve the quality of the public information. The LRF focuses on the development of transparency practices. The legal and administrative framework for fiscal management is openly available on the MECON's website.

In addition, OA finds the laws on taxation to be unclear, due to the complexity of regulations and legislation. Also, implementation is difficult. The Federal Administration of Public Revenue (AFIP) maintains a website that provides accessible, understandable, and updated information on tax laws and has a section dedicated to explaining the tax and customs system. In addition, the AFIP website has a list of current national taxes and data on tax collection that is updated every month. According to OA, "some concerns have been raised regarding the lack of uniform criteria to adjust income taxes, more linked to sectorial pressures than to a comprehensive assessment" (p.7). In addition, important distortions on the tax system have been identified. Writing in 2005, Rezk highlights the asymmetry between national and sub-national government tax collection and spending which has negative effects on fiscal sustainability. In 2003, the national government collected 77-78% of all tax revenues, while sub-national government collected 50% of consolidated Current and Capital Spending. OA reports that the privatization and deregulation process of the 1990s marginalized the government's involvement in the private sector. However, the state is renewing its participation. Public utilities have been nationalized and new SOEs have been created. The government continues to participate in "residual companies" and to regulate the telecommunications and gas sectors. It owns two of the largest banks: Banco Nación and Banco de la Provincia de Buenos Aires.

Ethical standards of behavior for public servants are defined according to the Code of Conduct for Public Officials, contained in Law 25.188 of 2005. The AFIP has its own Special Code of Conduct for Public Officials for its employees. OA states that the World Economic Forum Global Competitiveness Report expresses concern regarding a lack of impartiality of public servants in their relations with the private sector. The Criminal Code reforms of 2005 have helped reduce the time required to pursue criminal prosecutions, but it also eliminated the possibility of prosecuting individuals who have left public service.

Open budget processes

CP

OA rates Argentina's compliance with this principle as "Intent Declared," which constitutes a downgrade from the previous year's assessment. OA notes that the Law on Financial Administration No. 24.156 of 1992 aligns the budget national system with international standards and adds that "budget documentation specifies clear fiscal objectives, and is presented within a consistent macroeconomic framework" (p.12). Nevertheless, OA expresses some concerns regarding Argentina's budget process: "Publicly available information on budgetary documentation is comprehensive, but annual corrections conducted by the executive are not systematically presented. The quality and timeliness of information and standards of disclosure are of a lower standard at the provincial than at the national level. Progress in budget transparency practices in several provinces has slowed during recent years. The LRF should establish a uniform system of accounting and reporting for fiscal data among provinces. However, experts concluded that unless an improvement in the provinces technical capacity occurs, these provisions are unlikely to have any impact" (p.14). Writing for the 2006 "Open Budget Index: Argentina," Pilar Arcidiacono rates Argentina's budget documentation at 39% ("minimal"), recommending that greater information be included in the Executive's Budget Proposal and the Mid-Year Review; improve the comprehensiveness of the Year-End Report to permit a comparison of objectives and outcomes; and publish an Auditor's Report at the close of the fiscal year.

OA reports that the budget comprises three sections: resources for the central government, decentralized institutions, and social security. A progress report on the draft budget is presented to Congress in June, while the final version is submitted in September. Also, a consolidated budget must be presented to Congress before March. Budgets must provide a statement of the targets to be achieved the following year and the extent of compliance with aims and goals set up the previous year. Budget data distinguishes between revenue, expenditure, and financing. OA reports that updated budget execution data are available to the public via several sources, including the MECON's website and the quarterly Fiscal Bulletin. Budgetary modifications made by the government during the fiscal year are prepared by the MECON, but these changes are not regularly analyzed. Moreover, there is no publicly available information that permits a comparison of the amounts authorized by Congress annually, nor is there access to any assessment of expenditure efficiency.

Major fiscal risks are not identified or quantified. OA reports that there is no analysis of potential movement in key variables such as interest rates or GDP. No alternative scenarios on tax revenues are prepared. However, the budget law does include an assessment of fiscal sustainability. Concerns have been raised regarding the central government's discretionary right to use public funds. OA notes that Law No. 24.156 of 1992 on financial administration sets the accounting system for the government and the functions of the National Accounting Office (ONC). The ONC is responsible for keeping information regarding the accounts of the central government as well as its operational, economic, and financial outcomes. According to OA, these reports contain information about "saving investment financing accounts, financial statements of the central administration (including the general balance sheet, statement of results, statement of origin and application of funds, and statements of changes in net position), and consolidated financial performance of the national non-financial public sector" (p.15). The reports are comprehensive and are available on the ONC's website. OA adds that the National Procurement Office has been responsible of the national government's procurement management since 2000. Procurement practices include a requirement (under Decree No. 1023 of 2001) of transparency for public sector contracts. The National Procurement Office's website publishes procurement information and is available to the public. However, there are deficiencies in procurement development and assessment, and there is a suspicion that price cartels are distorting the public-works sector. The World Bank has proposed specific measures to reinforce the functioning environment for its projects.

OA finds that the National Civil Service Career System (SINAPA) is perceived to be "respectable", but notes that most recruitment of state employees' recruitment is performed outside SINAPA's established procedures. The chain of command for employees is determined at the state agency level. At the local level, most public workers are contracted. As a result, the hiring process is unclear. In addition, the supervisory system and staff assessment procedures are inadequate. Several commentators claimed that the lack of technical staff weakens government programs.

Public availability of information.

ID

OA rates Argentina's compliance with this principle as "Compliance in Progress." OA affirms that the availability of the fiscal information at the national level is adequate, but provincial performance in this regard needs improvement. Information is standardized at the national level, but there are concerns that the provinces are dragging their feet on the homogenization sub-national fiscal data. Most of the available information can be found on the MECON's website. In addition, the National Budget Office presents drafts, proposals, and consolidated reports on national budgets. Quality improvements achieved so far remain inadequate.

The OA report explains that budget documentation includes the annual budget bill and the multi-year framework, and is governed by provisions of the LRF. The budget supplies information on tax expenditures and changes in fiscal legislation, and this information is also available on the MECON's website. The multi-year framework provides two-year fiscal projections and debt servicing estimations, but includes no information as to how these goals will be achieved and is subject to numerous modifications over the course of the budget year. The administration submits the multi-year framework annual budget to Congress for approval. The LRF governs the allocation of public resources to the provinces. According to OA, the provinces must present "a three-year projection of revenues, expenditures, investment plans, debt progressions, and a description of budgetary policy sustaining these forecast" (p.10). Sub-national governments tend to provide little information on their annual budgets, even though the LRF demands it.

OA finds that the publication of fiscal information is reliable, but notes that the MECON's website is not user-friendly. According to OA: "Data are disseminated on revenue, expenditure, the current balance, the deficit/surplus (borrowing requirements) of non-financial public enterprises, the primary deficit/surplus, the overall deficit/surplus, and financing" (p.10). In addition, information on revenues and public finances are published in the Economic Report. At the end of the year a report is published with data on revenue and expenditure for the current and previous year, and for municipal public bonds. Although provincial data reporting is poor, OA notes that most of the provincial governments maintain websites that offer some fiscal information, and that 15 provinces (out of 24) are legally obliged to present information on their budgets. The information provided by the provinces is considered reliable. National data does not include the extra-budgetary activities of the central government. OA cites the IMF in noting that fiduciary funds are not included in the national consolidation of public spending, and finds this issue to be highly problematic. There has been some movement toward rectifying this omission, but progress is slow. Finally, OA reports that Law No. 25.152 requires the online publication of the advance date calendar. The MECON's website disseminates an advance release date calendar that is updated monthly.

Independent assurances of integrity.

EN

OA rates Argentina's compliance with this principle as "Enacted." Argentina is a subscriber to the IMF's SDDS and complies with its requirements. OA finds Argentina's fiscal information to be reliable. Law No. 24.156 of 1992 requires budget data to reflect recent revenues and expenditure trends. According to OA, budget data shows underlying macroeconomic developments and well-defined policy commitments. However, there is a lack of mechanisms to verify accomplishments with the objectives .OA adds that provincial data is insufficiently timely. According to OA, "following article 8 of LRF, sub-national governments subscribing to the law will have to develop homogenous public management indicators in order to allow a more structured and comprehensive comparison for tax collection efficiency and public expenditure. Some progress has been made since the approval of the LRF in the standardization of provincial budgets" (p.18). Nevertheless, the report points out that the homogenization of the system stills need to be improved.

The National Audit Office (AGN) is in charge of auditing the public sector. The AGN is an independent organization accountable to the Congress, but lacking in enforcement powers. Recent efforts have aimed at improving the AGN's efficiency, according to OA.. The National General Syndic (SIGEN) is also in charge of auditing the public sector, but its role is very limited. OA adds that the BCRA's Expectation Survey, available on the BCRA's website, allows independent experts to assess fiscal and macroeconomic forecasts on a short and medium term basis.