Re: Please read- Argentina economic risk ,
 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
richard.shapiro@enron.com