The Economic and Industrial Recovery for Argentina :New Opportunities for Investment Presented by His Excellency Mr

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The Economic and Industrial Recovery for Argentina :New Opportunities for Investment Presented by His Excellency Mr. Julio M. de Vido, Minister of Federal Planning, Public Investment and Services, Republic of Argentina

UNIDO DG It is a great pleasure for me to be able to introduce a very dear friend as well as distinguished representative of the Argentine Government, the Minister for Federal Planning, Julio de Vido.

A few months ago on an official visit I made to Argentina, I had the opportunity to meet the Minister once again. I had met him when he was in other positions, as a Minister of Economy, Minister of the Government of the Province of Santa Cruz, as well. A province that was under the government of governor Kirchner, who is now the President of our country following the elections that took place in the year 2003.

At that time, as you might all be aware, the government which was led by President Kirchner, inherited a very complex situation from the political and economic point of view.

Two years after that Argentina is once again able to enjoy a stable vigorous situation with well functioning democratic institutions, the function of which was never questioned, but nowadays, seems that it is being carried out in an harmonious way with a strong political leadership. It has enabled us to reorganize our economy and it has enabled the country to overcome a very profound crisis. The crisis that was experienced in the year 2001 was unprecedented.

Once he took office, as you well know, Argentina has been able to show increases in its growth rate to 8 - 9 per cent per year, and recently the country has reorganized and put an end to the foreign debt situation.

For this reason, we felt that it would be very important to invite some of the leading figures of the Argentine Government, in this case we have invited today, the Minister of Federal Planning. This way he has a chance to exchange with colleagues and officials from the various organizations and to talk about the process that is taking place in Argentina and well as prospects for the future with regard to investment and economic progress for the next few years. I would like to thank you all very very much for having come here. I know how busy you are. I know that you have very busy agendas and I am very happy to see you here sharing with in this day of debate and exchange of views. I am very sure that you will find that this reflective process is very useful because you will be able to compare the Argentine experience with that of other countries.

I am also very thankful to Minister of Federal Planning. He was visiting Europe, accompanying the President of Argentina in an official visit to Germany. He has taken a couple of days in order to share his ideas and opinions with us. Once again, I would like to say, I believe this will be very useful to all of us. I think that the experience of the Minister of Federal Planning is very broad with regard to the management of the economy and because of the varied positions he has held in the government of the Province of Santa Cruz. His portfolio nowadays includes the planning of federal public investment and the negotiation infrastructure loans to support productive development and to promote employment creation in Argentina. Minister de Vido has been working for many years in a number of prestigious positions in Argentina’s province of Santa Cruz which has enabled him to accumulate a lot of experience both from the provincial point of view, taking into account the municipalities and their peculiarities, and it has also given him the chance to interact with people in the area

This is a transcript of the English translation of the session with the Minister that took place on 15 April 2005 in UNIDO Board Room Vienna. The text has not been verified by the speakers The Economic and Industrial Recovery for Argentina :New Opportunities for Investment Presented by His Excellency Mr. Julio M. de Vido, Minister of Federal Planning, Public Investment and Services, Republic of Argentina

bringing him a better understanding of the problems of the various regions in the country. For this reason, we are very happy to have him with us today.

Thank you very much Minister, for being here today. I would like to ask you to join me in welcoming Mr. Julio de Vido to the podium.

Minister de Vido Good morning. Director-General of the United Nations Industrial Development Organization, Carlos Magariños; Ambassador of Argentina, Dr. Elsa Kelly; Ambassadors; entrepreneurs; industrialists; Europeans; citizens of the whole world who have come together in such a prestigious forum.

In my country, when we talk about something being industrious, it means that we are talking about the noble nature of that person who is capable of transforming a raw material by adding value, by generating employment and enrichment to the country. Unfortunately in my country in the past ten years, this process took place the other way around.

Happily we are now entering a phase of reconstruction in our economy. You will see from the figures that we can show you nowadays. You will see we are undergoing a process of recovery that will enable us to once again join the rest of the world, which is exactly what we are seeking.

I would like to especially greet the Ambassadors from Latin American countries, our brothers, as well as Ambassadors from Africa, from Europe, from North America, from the Arab countries, all those of you who are present here this morning. We are very proud of the fact that you have come here to listen to us for a few moments.

I would also like to express my greetings from my President, from the President of Argentina, Dr. Kirchner. I would also like to take this opportunity to make a few points about the current state of the Argentinian economy, more specifically, about the industrial activities in my country.

As I said before, Argentina has undergone, in the past years, one of the major economic crises in its history. The consequences of this crisis are very well known throughout the world. And it has affected some of the countries represented by some of you here today. For example, the need to renegotiate the conditions for foreign debt for the Argentina State, my government has had as a duty the past few months the normalization of this process.

But before we go ahead and talk about the possibilities of investment in my country, I would like to give you a brief overview of the main characteristics of Argentina today.

My country is one of the emerging countries with the highest levels of income, both in the region and compared to developing economies. We see that according to figures from the International Monetary Fund for the year 2004, per capita income and purchasing power in Argentina is approximately US$1 billion per year, around nine thousand (million) Euro. This places our economy above the average for the whole of Latin America, including even above Central Europe. Because of its structure, production is highly diversified. On the one hand, we

have the availability of approximately two hundred and fifty thousand square kilometers of arable land as well as high productivity in the agricultural areas, making Argentina one of the most important actors at the world level.

Our country is placed among the greater producers and exporters in primary agricultural products. There is also high development in all areas with regard to machinery; cultivation machinery and genetic development as well as biotechnology applied to agricultural activities.

In the past 14 years, agricultural productivity increased more than one hundred per cent. And thanks to technological development, arable land increased by 50%. This shows our progress in terms of yield and productivity within the region.

With regard to industry, industry is not only diversified in Argentina, it is also well integrated within the world. We have large international companies, both Argentine in origin as well as foreign, which have been operating in our country for decades in all sectors. Thus we see that we produce six million tones of soya oil and aluminium. Five million tones of steel, seven hundred thirty two thousand tones of seamless tubes and almost 300,000 vehicles / cars are produced yearly. Grain production goes up to 80 thousand million tones with prospects for the next five years of increasing up to 100 tones. This is a national objective or target. At the international level this is also a big goal, because it is one of the most important sources of food products on the planet with regard to soy, wheat, corn etc.

The industrial profile is characterized by good coordination with the production of other products, high index of employment, high capital intensive activities and export orientation as well as the presence of companies from all countries in the world.

Some economic indicators that might be mentioned are the following, the manufactured goods exports both in agricultural areas as well as in the industrial area, represent more than 30% of GNP in the goods producing sectors and 15% of GDP. Foreign trade, that is, imports plus exports, in 2004 were almost 38% of GDP. Between 1995 and 2003, labour production increased 30%.

Our country has the basic infrastructure appropriate for development because of the following factors: half a million kilometers of roads and highway network; 35,000 kilometers of railways; maritime and river ports; 34 airports, 21 of which are international airports; a capacity for electricity generation of 20 megawatts with an annual production of more than 75 thousand xxwatts; a greater number of telephone and cellular lines and computers per capita than Brazil, Mexico or the total average for Latin America.

Up to now, I have very briefly talked to you about Argentina and its economic structure. Now, lets try to analyze the reasons for investing in Argentina today.

With regard to the protection of investment, the comparison that is carried out normally by the World Bank places us under countries of the OECD, but above the average of all emerging markets. Features offered by Argentina include: fair and equitable treatment; double taxation avoidance; open access to all economic activities and the possibility of transferring gains as well as repatriation of investment.

Special investment incentives can be grouped in the following three large groups.

Horizontal Incentives, including xxx for the promotion of exports, Instruments for the reduction of initial cost of investments, such as zero tariffs for the import of capital goods as well as measures that strengthen competitiveness.

Sectoral Incentives, here we could mention forestry, tourism and the car industry. Fiscal stability regimes for repayment of debt, and tax exemption. In the case of vehicle production, there is a compensatory regime.

Regional incentives granted by the various provinces, including tax exemption and reduction in public utilities, the support for public infrastructure and equipment and a facility for investment and acquisitions.

There are also a number of industrial parks as well as tax-free areas which support the general infrastructure for production.

Argentina is also an excellent platform that gives access to other markets. On the one hand, access to the Argentina market itself, which I said before, is one of the highest per capita income markets within the region and among the developing economies, with 38 million inhabitants with per capita income of around 9 thousand millions per year.

Our market also opens the doors to MERCOSUR, a regionally integrated market with Brazil, Uruguay and Paraguay, with a population of more than 220 million inhabitants and a GDP of US$270 trillion. MERCOSUR also has three associated countries: Chile, Bolivia and Peru. Venezuela has also joined us and Mexico is on its way to join as well. Together this represents a population of more than 270 million people with a GDP of US$670 trillion.

Furthermore, Argentina has an agreement with the Andean Community of Nations. Here we also see Ecuador, Colombia and, apart from MERCOSUR, we also see Venezuela and Mexico within this group.

On the other hand, the labour force, which is highly skilled and competitive gives Argentina a very important comparative advantage. With low international costs, in Argentina average labour cost for manufacturing industry is 60 – 70% of that which we find in North American industry. In Brazil, we find a level of 37% and the other Latin American countries it does not go above 40%.

With more than 300 university students for every 100,000 inhabitants, we have a very high schooling rate and a very low illiteracy rate, placing our country above all regional standards. This is found within a framework of human indicators that are a great concern for us and we are constantly working to improve them. But enable us to acquire a human development level which is much higher than those we find in the rest of Latin America.

We are also endowed with wonderful natural resources: 20 million hectares of forest available for exploitation; 250,000 square kilometers of arable land; privileged provisions for fishing, with more than 5,000 kilometers of coastline and a great variety of fish species. Hydrocarbon resources that enable us to cover our own needs and generate an exportable surplus that

cover the needs of the rest of the countries within the region. Argentina is a net oil exporter and we increased natural gas exports within the region last year up to nine per cent. Availability of mining resources puts Argentina in place number six in the world.

So we would have to ask ourselves, “what is the context, what are the possibilities of investment in Argentina today”?

The economic situation is one of recovery and sustained growth. Economic growth shows 11 quarters of sustained growth of GDP. In 2004, Annual growth has been above 9%, exceeding the figure for 2003, which was about 8.7%. This economic recovery has been accompanied by consumption as well as investment. Industrial activity indicators reflect an increase of more than 40% from January 2002 to date. Employment generation has grown at all urban centres, going from a rate of 35% during the first quarter in 2003 to more than 40% during the last quarter in 2004.

In that same period, the unemployment rate fell from 20.4% in 2003 to 12.1% and the prospects are that it will fall further to a two-digit figure. For the fifth consecutive year Argentina has an external trade surplus of more than 8% of GDP. This, thanks to prudence in the monetary and fiscal policy followed by the Government and a sustainable economic model based on a matrix of relative prices which has enabled us to draw on our competitive advantages.

The 4% of GDP sustained as a surplus and US$12 million achieved last year are no doubt cornerstones of the current economic situation. The central bank was able to double its reserves from 2002. On the basis of these figures, the recent renegotiation of the external obligations of the Argentinian Government offers sustainability for the repayment of our obligations. We have offered our creditors the best mix of repayment of debt possible under the circumstance of the Argentinian economy. The capacity to repay our debt which was much larger than had been expected by the international financial institutions and other experts, shows that we have been able to live up to our commitments and form a basis for trust and confidence. These are sustainable commitments assumed by the Argentinan Government and in the current period we will live up to these obligations and commitments.

There will probably be a real growth of 6.5%, driven, as we were saying yesterday with our friend Carlos Magariños, by new investments and some extension work, some outreach work, to show the world that our economy is really recovering.

There are indications that not only is the government taking advantage of the perspectives and opportunities for investment, but that private agents themselves also agree with the diagnosis made of our economy and are taking appropriate action. After 2004, we have had foreign direct investment three times as high as previous fiscal years.

I am in charge of Federal Planning and Public Investment and Services and these are three sectors that are specially attractive for investment and very appropriate for development, with high social rate for investment in the coming years.

For example, road infrastructure, we have shown there are one thousand five hundred billions of dollars ……(break in translation). In the past two decades there are public works that have

been commissioned in order to attend to the needs brought about by the sustained growth of the economy so we want to make new investments in roads, in the energy sector, in other sectors of the infrastructure as well as capital goods.

In the construction of roads there is a new system that has been introduced, doing away with the subsidies. Previously there were direct subsidies for the concessionaires, now there are public bids, direct bids by the Argentine Government for this type of public works. In 70% of the road infrastructure actually existing are now being submitted to this sort of public works for expansion etc.

During this Presidential tour there was a letter of intent signed in Germany with Hochtief for the construction of a very important superhighway, which will be a very important road around the metropolitan area of Buenos Aires. This process will benefit directly 4.5 million residents and will connect the river Parana to the area around the Riena del Plata, around the Province of Buenos Aires, the largest state as far as area is concerned. This commitment is indicative of the intention of President Kirchner in expanding the road infrastructure and other important sectors. East – West corridor for instance which will permit much easier transportation of goods from one part of our country to another. From the Pacific Ocean to the great numbers of consumers in other areas is also a case in point.

In this forum, which I greatly appreciate, I would also like to present to the states that are present here and representatives of trade sectors to opportunity to participate actively in these investment projects. As we said before, there is an enabling legislation that protects investors and a Government that is dedicated and committed to generating a very solid base of services in Argentina and from Argentina to the rest of the world.

As far as mining is concerned, Argentina has still 750,000 square kilometers to be explored for mining. 75% of this 750,000 sq km, is actually still unexplored. The legislative framework and tax and fiscal measures will align Argentina to the main producers of the world because of the high geological potential, Argentina ranks sixth in the world in mining resources, and ranks second in opportunities for investment in this sector. For mining there is a stable fiscal system in place guaranteeing stability for thirty years once the concession has been granted.

There are also opportunities in the energy sector. The enormous growth that has been registered in the last eleven quarters in Argentina of course brings about certain challenges. That can also be said for other economies in the world. Our economy is growing at an accelerated rate on the basis of industrial activities which of course create great demand for energy resources.

There are four areas with great dynamism. There is oil, and gas. Argentina has a 20% surplus in both of these resources.

Natural gas demand for industrial uses is increasing considerably. (some translation from here on is not very coherent… In Brazil for instance, have unsatisfied energy demands which can be however ….. we do have enough … the company has been set up for production of energy which was not greater participation by the state, but more capacity as promotion of the national oil company and … together with Bolivia we are working on the possibility with cooperating with Brazil to incorporate part of our resources in Argentina in an agreement for

mutual cooperation in general, this with the intention that the quality of life among the population of Bolivia will be able to be improved through these measures).

We identify the great support that Argentina is giving to these countries. We have also carried out a process that could be given as an example of “compensated exchange” between Venezuela and Argentina. There is an agreement among these two countries on a mechanism through which the levels that have been attained by Argentina in the purchase of fuel oil from Venezuela enable us to take gas from electricity generating plants and pass it on to the industrial area. In the year 2005 we will be creating a trust fund through which we will be able to exchange hydrocarbons for technology as well as Argentinian industrial products that will be going to Venezuela. This a “compensated exchange” convenient for both countries and which will bring forth the development of the quality of life in both countries as well as the economic development of Venezuela and Argentina.

Last year, using this fund, Argentina exported industrial products of nuclear technology, in the case of cobalt, bombs, accelerators, technological developments with a view to improving the Venezuelan health system as well as the cattle situation in Venezuela in order to make improvements in the production of milk in that country. The transportation of natural products, now we are investing in the private sector and with the support of certain public funds, US$500 million in order to improve the whole transportation system for gas in Argentina. This is being done through a financial transfer fund system ensuring the repayment of investment with regards to the energy demands set through contracts among private parties and in the long run. (???)

In the next few weeks we will be launching the process for transportation expansion for 2006, doubling expansion in three years and granting us a possibility of expansion in our markets without taking into another project that will also be taken into account and carried out next year for the supply of gas pipelines for the north east part of the country, with a very high investment process.

On the subject of the generation of electricity, the public sector in the next few years will complete an atomic energy centre (today we have an appointment with the Atomic Energy Organization) we will ask for an audit work to be carried out by the Agency in our country and in this way Argentina will be able to develop energy activities in a fashion that is transparent to the rest of the world. We are also trying to establish another electricity generating plant in our country in the private sector. We are now facing the construction of a thermal combined cycle station of 1,000 megawatts, which will be opened partially in the year 2007. Estimated investment is US$ 1billion, of which 25% will be invested by a private capital group: the electricity generating companies of Argentina. The rest of the capital will come from direct investment. The repayment of this investment has been guaranteed, as well as the expansion of gas pipelines through contracts for the short and long run. I would finally like to thank once again, those of you who organized this meeting. You have given me a wonderful opportunity to explain to you, although in a summarized way, all that we are doing in our country and some of the investment opportunities offered by Argentina today to the rest of the world. As is the case with any developing country, we need strong investment in the area of infrastructure in order to support the growth of our industry.

Argentina is opening the doors to the private sector, offering you an economy in the process of growth, healthy and stable from the fiscal point of view as well as from the point of view of financing and from the point of view of tax collection and surpluses. We offer very many opportunities for sectoral investment.

I would like to conclude with some words from President Kirchner in Berlin a few days ago, when an investor asked him “how would Argentina manage to recover confidence”? The President answered “confidence is constructed on a daily basis by complying with our promises. We are just coming out from a very severe stage in our history. The fact of not having complied with our foreign commitments has made us aware today and now we are making a greater effort so that each one of the contracts, each one of the commitments made by Argentina from now onwards will have its support. And we have to count on this and would like to receive the support of the international community, a community that we would like to join once again, slowly, on a clear decided basis, with clear goals and with a clear commitment that we will fulfill our promises. As our President usually says, speaking in more common terms, “Argentina is coming out of hell, we are in purgatory, we have just come out of hell, but we will never take a step back” We have to continue further by creating a positive atmosphere, becoming credible in an international community where we expect to play an important role, within our continent, within the rest of the world.

Thank you very much for listening to me. We are very willing to answer any questions that you might have. Carlos, thank you very much for this invitation.

Director-General Thank you very much Mr. Minister Julio de Vido. The many functions of the Ministry of Federal Planning in the Republic of Argentina includes: transportation; communications; public works; mining; and energy. I would like to express my appreciation for the presence here, accompanying the Minister, the Vice Minister for Fuel and the President of the National Commission for nuclear energy of the Republic of Argentina.

UNIDO and the Ministry for Federal Planning are discussing a series of arrangements in the field of renewable energy and hydrogen energy technology transfer. In the framework of this visit there are a series of agreements that will be signed between UNIDO and the Ministry of Federal Planning in order to implement these activities. This is a programme that will be implemented by UNIDO with the generous contribution of the Government of Italy.

I would now like to open the question and answer session. The Distinguished Delegate from China has the floor.

The Representative of the Permanent Mission of China to UNIDO. The Chinese Delegation would like to thank the UNIDO Secretariat for organizing such an important event to assist member states to understand the economic situation in Argentina. At the same time we want to thank His Excellency, Mr. Julio de Vido for your excellent presentation. We would like to use this opportunity to congratulate Argentina on its economic recovery since we are not only benefiting from the economic recovery of Argentina but we are also benefiting from economic development and maintenance of peace in the world.

First of all it will be helpful to strengthen the cooperation between Argentina and UNIDO. Mr. Chairman, there are great complementarities for economic development between China and the Latin American countries in general, Argentina in particular. China always attaches great importance to developing good cooperative and friendly relationships with Latin American countries.

In 2004, Chinese President Hu Jintao visited Brazil, Argentina, Chile and Cuba. Up to this date, we are happy to say that economic cooperation between China and the Latin America countries has achieved historical records. We are confident that the cooperation between China and Argentina will be further strengthened. The Chinese Delegation believes that under the brilliant leadership of its Government, the people of Argentina will maintain its more than 8% GDP growth rate and make greater achievements in the future. Finally, we wish that you Mr. Minister, enjoy your stay in Vienna, enjoying the good weather of Vienna’s spring season. Thank you for your kind attention.

Director-General If the Distinguished Delegates agree, I am going to give the floor to the various representatives and then I will give Mr. de Vido the opportunity to respond. Uruguay.

The Representative of the Permanent Mission of Uruguay to UNIDO. Thank you Director-General. And thank you especially for the initiative of having convened this meeting today and giving us the opportunity of listening to the Minister for Federal Planning of the Republic of Argentina, our sister state, Mr. Julio de Vido.

I have a question, I don’t really know whether it enters into the area of the mandate of Mr. de Vido, but Uruguay, a sister country of Argentina with close geographical ties, is also a country that has suffered the grave economic crisis experienced by Argentina, which had an impact in Uruguay as well. And so we are extremely pleased to see today this reinvigorated and economically recovering Argentina, because, no doubt this will also benefit Uruguay.

Just as we have gone through this very serious crisis, possibly the worst in our economy, in 2002, the growth indicators confirmed by the International Monetary Fund indicate that there has been growth of 12% in 2004 in Uruguay. Of course, this gives rise to great satisfaction and as partner countries and due to the fact that we are now here in Europe, and in Austria, which is the country which in the first half of next year will assume the Presidency of the European Union, I would like to put the following question, and I would like to excuse myself again if it is not really his sphere of competence in terms of his mandate.

I would like to hear what he thinks of the agreement that has been negotiated between MERCOSUR and the European Union. Personally, we hope that these negotiations might come to fruition within the year in course, creating one of the greatest integrated areas of the world. Thank you.

The Distinguished Delegate from Italy has the floor.

The Representative of the Permanent Mission of Italy to UNIDO. Mr. Minister, you cannot know how great our satisfaction is to see you here and to have heard these positive statements on the latest developments in the economy of Argentina which will

no doubt again become part of the international legal and financial structures. Of course you know that we have very close economic ties with your country, but also genetically I think 40% of the Argentine population have Italian origins, 50% I have just been told – Madam Ambassador from Argentina has just told me it is 50% - she must be right.

But actually I didn’t want to just come and say how satisfied about the meeting (and I would like to thank again Mr. Director-General for having convened the present session) I think it is also necessary to say on behalf of my Government that we cannot be totally content yet with the way the public debt problem is being addressed, you have mentioned, and also the Director-General mentioned it, in general terms, the restructuring, the reorganization of the debt and the successes of Argentina to restructure its public debt, well my Government feels that greater effort should be made towards this end. I am not really totally up to date with developments in this area so it would not be the proper place to discuss it here, but I think that the offers to pay less than half of the debt is something that will really promote confidence in the international community, so I would like to just finish off with that comment, that a greater effort must be made. Thank you.

Director-General The Distinguished Delegate from Iran.

The Representative of the Permanent Mission of Iran to UNIDO. Thank you, Mr. Carlos Magariños. I would like to thank you and your colleagues for convening this meeting. I would like to especially thank His Excellency, the Minister, for providing us with his very informative and comprehensive report related to the economic and industrial recovery of Argentina. His Excellency the Minister indicated the areas in which Argentina needs foreign investment. I would like to ask, what has been the reaction on behalf of the foreign companies and international companies related to investment in these areas. Then, what is the total investment so far, in terms of dollars, in Argentina, and the next question is: once the Argentinian people did have a problem and restrictions in getting money out of the banks. What is the situation now? Thank you Mr. Minister.

Director-General The Distinguished Delegate from Bolivia.

The Representative of the Permanent Mission of Bolivia to UNIDO. Thank you Mr. Director-General. Mr. Minister, Madam Ambassador from Argentina, Excellencies, colleagues. First of all I would like to thank the Director-General for the brilliant initiative of having organized within the UNIDO forum, this sort of dialogue. No doubt this is something that will benefit all of the countries that are represented here and that are involved in the development process. And I think it is very important to hear from the source what a country can do and what can be done within the programme introduced by UNIDO with sustainable development for the future. I would like to express my commitment and the commitment of all of GRULAC and thanks to the efforts of the Director-General, we have succeeded in strengthening this organization, helping us on the path towards development.

So Mr. Minister, first of all I would like to express my thanks on behalf of Bolivia and your perfectly right that Bolivia has been a country with which large scale programmes have been arranged. We have several border projects that unite us in the commercial sector and a gas

pipeline that is under ground, but in the future no doubt will help to develop a great part of the region in our territory.

And now to my concrete question. In water resources and the consultations and negotiations for the final loans within the framework of SIDATAK? Can you tell us something about the latest developments in the formalization of this project?

Director-General Brazil and Morocco have asked for the floor. If you agree, I will first give the floor to the Ambassador of Morocco, who raised his hand first and afterwards I will give the floor to the Distinguished Representative of Brazil. Mexico, and after that I will close my speakers list for this morning.

The Representative of the Permanent Mission of Morocco to UNIDO. Mr. Director-General, I would also like to thank His Excellency, Mr. de Vido for the presentation he made for us, and congratulations to the Argentinian authorities for being very successful in their recovery after a very serious economic crisis.

I took the floor just to refer to a very important event that will take place next month in Brazil. I am referring to the First Latin American – Arab Summit, which will gather next month in Brazil. This is a very important initiative taken by the Brazilian President, perhaps honorable colleagues present here are aware of the fact that last month, a Ministerial Preparatory Committee met in Morocco. One of the main targets of this process is to enhance and strengthen the relationship between the Latin American continent and the Arab world. There are many factors, strong factors, on which this relationship are based: human factors, in that many people originating from the Arab world are living in Latin America, also on the other side, in Morocco, for example, we have more than six million people speaking Spanish. Given the importance of strengthening the relationship, His Majesty the King, Mohammed the Sixth, made a very important tour in Latin America a few months ago. He went to Brazil, Argentina, Chile, Peru and elsewhere. We think there are many important perspectives to enhance our relationship.

On another side, coming back to your presentation, Mr. Minister, you gave us a very important overview concerning the evolution of your economy, but knowing that in the context of globalization, developing countries must focus on some clusters. Speaking about investments, what are in your view, the most important clusters to focus on to develop the industrial sector? This is my first question.

The second one is perhaps linked with the current situation, where we are faced with prices of oil reaching very high levels, which could create, mainly for developing countries, some difficulties. So what is the policy in your country, or the general lines aiming to have a secure energy policy? I thank you again, Mr. Minister.

Director-General I would now give the floor to the Ambassador of Brazil.

The Representative of the Permanent Mission of Brazil to UNIDO.

Thank you very much. First of all I would like to congratulate the Director-General for this wonderful initiative of inviting the Minister of Planning to this forum to talk to us about Argentina, and more especially to talk about the economic recovery of that country. Brazil is very close to our brother neighbour country, Argentina, and we are accompanying you, not only, accompanying, but also taking part in this very important process of recovery. The Argentinian success is a success also for Brazil, and that is why we also feel integrated and we feel profoundly tied to everything that happens in that country.

Mr. Minister, I would like to ask you in a very concrete fashion, what are those projects that could be beneficial for foreign investors that would bring about success and which could benefit both Brazilian and Argentinian markets, and MERCOSUR in a broader sense? Is that in the Agricultural area or is it in the industrial area? Brazil and Argentina are the first or second point of destination of imports and exports, we do a lot of trade exchange within the region. This is my question for you Mr. Minister.

Director-General We have the last country in our list, Mexico.

The Representative of the Permanent Mission of Mexico to UNIDO. Thank you very much. I would like to thank Minister de Vido for having taken some time to come and talk to us about his country, and giving us this opportunity of approaching on of the most important subjects within the Latin American Region, that is, the prospects for economic growth. I have two very concrete questions. These are related to debates that are constantly being carried out in Mexico, and I would like to apologize if one of my questions might be too simple, but I would like to hear what you have to say about it.

First of all, with regard to investment in the energy industry, is there any type of restriction in Argentinian laws to accept foreign private investment in this sector? This would be my first question.

The second question is related to the general policy for the promotion of investments. At the Federal level, do you have any type of incentives for foreign investment, or is this a subject that is handled at the State level? Could you talk to us about these two subjects? I would be very thankful, thank you.

Director-General Thank you very much for all of your questions. After all of these questions we would now have to give the floor to the Minister for another presentation, because there are so many topics that have come up. There have been so many ideas that it would require a whole presentation.

But I would also like to point out the importance, and I will take advantage of this opportunity to ask the Minister and his group of collaborators the importance of the relationship between these areas and what we do in UNIDO, especially with regard to renewable energy, technology, with the use of hydrogen technology, a project as you know, that is being developed now between UNIDO and Turkey, with the establishment of a centre in Ankara for US$40 million. We have been listening to the Minister when he talks to us about Argentinian investments in the creation of traditional energy: nuclear, electrical energy, but I am more

familiar with the projects that are being developed in his ministry in the area of renewable energies: wind energy; solar energy; hydrogen energy, etc., so if have a few minutes left after you have answered all the questions that have been presented, I would appreciate it if were to give us an idea of the priority given by your Ministry to renewable sources of energy in the creation of policies to create enough energy to cover the needs of the country.

Minister de Vido. First of all I would like to thank you all very much for the praises that I have heard to my person and to my presence in this room today. I would like to thank you for your kind words and the questions that I will now try to answer.

I would like to answer Mr. Magariños because in my presentation I forgot to refer to renewable energies. This was an omission on my part. In Argentina today we are in the process of preparing a map for the detection of wind energy. We want do locate these points and place them correctly within our geographic map. This should be concluded in August. We also see that there are certain national industries which are developing the necessary elements and tools so as to construct the windmills that will in turn allow us to generate this very important resource. This is taking place in the southern part of the country, which is normally known as Patagonia. This is one of the areas of the world with the highest possibilities, not only with regard to drinking water, but also with regard to wind energy. I estimate that in the year 2005, this should be all in place and the agreements that will be signed today with this very important organization, will no doubt accelerate, support and give more impulse in this process, enabling us to import knowledge that might not exist today in Argentina. So I do believe that this will be extremely important agreements for our country. Once again I would like to apologize for not having mentioned this throughout my presentation.

Regarding hydrogen energy, within my province, my state, which is Santa Cruz, we are developing a small experience with the transformation of wind energy in an area called Pico Truncado, and we are working with hydrogen with the view of transforming hydrogen in concrete energy for overall domestic national use. [editor note: according to http://www.fuelcelltoday.com/FuelCellToday/IndustryInformation/IndustryInformationExternal/ NewsDisplayArticle/0,1602,5645,00.html , a pre-feasibility study is being undertaken on a project in Pico Truncado to generate 16,000MW of wind power to produce 13.3 million cubic meters a year of hydrogen]

We will take advantage of this agreement as well in order to expand this very humble experience, I say it is humble because it is a small scale experience, and not because of the level of knowledge that is required to develop it. Sometimes we also have shortages in finances and materials.

We also have an agreement with the Argentinian Army. Together with the Army we are developing a small hydrogen battery that should act as a low scale good source of energy; a renewable source of energy. This is a project that is being carried out for peaceful purposes of course. This is energy development at the national level for peaceful purposes. In the Argentinian Army there is the knowledge and the technological development necessary for us to carry out this project with some universities and with civil society. This agreement in time will enable us to accelerate the good results. We are very thankful for the agreements that will

be signed today here between Argentina and this organization. We are also very thankful on behalf of the Argentinian people because of the consequences that all this will bring to our country.

I would like to begin answering your questions, I would change the order perhaps from that in which they were asked, because of the importance of the question.

I would like to start with the question from the representative of Italy.

First of all, your Spanish is perfect, so I was able to understand you directly. First of all I would like to thank you very much for the great support given by the Italian Government within this Agreement. This is around five million dollars, if I am not mistaken, for the industrial development in Argentina. Italian industries in Argentina, Pirelli is one of the examples, have been established in our country for more than one hundred years. They have existed from the very beginning. Fiat, and there are many other industries that are historic in our country, that are part of the country, they are part of the industrial history of the country, and this contribution consolidates the presence of Italy in Argentina, not only in the industrial area.

As a descendant of Italians, I have to say that apart from this big problem that we faced of not having been able to fulfill our promises to the Italian investors during this brief period of time, and I will make another comment about that later on, at the end of the nineties, i.e. during the two last decades of the nineteenth century, three million Italians came to Argentina. They came into my country in search of a new life, in search of a new home, of a new way to support their families. We have to acknowledge the fact that the contribution: the labour work; the intellectual contribution; of Italians to Argentina reflect what Argentina is today. The present in Argentina is undeniably linked to this immigration of Italians that populated our land. They were welcome then and they continue to be welcomed. Most of them nowadays have become full fledged Argentinian citizens, and this out of free will.

In the case of the Italian investors, this was the result of a very bad policy of Italian banks, which had taken bonds at a quarter the nominal value and sold these bonds, mostly to retired people, on a one to one basis. That I think, is the origin of this problem The problem of these bonds. That is where we have to carry out an ethical evaluation of what happened. Most of these Italian bond owners, most of them are retired and received their compensation for retirement and have bought these bonds at the bank, they received a different type of treatment.

Argentina as I said before, is now leaving hell. Our hell was not to be able to fulfill our obligations with regard to the creditors or bond owners, bond holders who bought these bonds with good faith from banks that acted in bad faith, because they knew that they would never yield the return that was being promised to the bond holders.

In a word, to exchange its debt for a bond that would be credible, reliable, and compliable, I think that we have had a success, because 76% of these bond holders were able to exchange the bonds for new bonds that were positive ones.

I think that in Italy there was a very poor campaign against this policy of exchange of debt, that once again inevitably effected the bond owners or holders. But I don’t want to speak

badly about anybody, I don’t want to criticize the Italian Government, but I do think we have to be aware of the fact that some of the Italian banks acted in bad faith.

We are now trying to solve a problem, a problem that we inherited as a government and we think that the best way to do this was to go through this exchange process that was concluded a few days ago.

Regarding the presence of Italy in Argentina, we think that in 200 years of common history, this was just a faux pas, some people have been hurt as a result of this situation, but I would like to reiterate that we do not want to take on a responsibility that does not belong to us. We do want to find a solution and we are trying to find ways out in ways that benefit everybody. I don’t think it is necessary to go deeper into this subject. Needless to say, our two peoples are friends. Institutionally speaking, there are very close links between the countries. Italian industry has always been present in Argentina, and this contribution of US$ five million, is a very important factor for us because we see it as a step for the new future.

Regarding the question of the Representative of China, I would like to tell you that the official visit of your President in our country was very important. Just like the visit we made in June of 2004 with President Kirchner to Peking and Shanghai.

Recently there was a mission from our Ministry to China that just returned to Argentina. They had as an idea to talk about the creation of a new rail system in Argentina and we are about to receive a Chinese mission in Argentina. In the next few days we will be able to sign concrete agreements on this subject.

One of the nuclear agencies at the INVAP institute is developing a satellite for communications. This satellite will be launched through the Chinese Space Agency, and we will also work towards the Chinese Space Agency becoming a partner in this enterprise. This is a state satellite communications enterprise with a very small participation of our state and a very large private capital investment, especially foreign capital. China will play a singular role, because they will be the ones called upon to launch this technology developed in Argentina, with tools and parts that will also be acquired abroad, in France and in the United States.

For the emerging economies, this is a very significant fact and we would like to invite all the countries in the area to take part in this experiment, in this process. This is a satellite that will cover the whole area of North, Central and South America. This is sector 81, I think.

Regarding the oil sector, we are working with several Chinese countries in the area of services, exploration, exploitation as well, and in the next six months we might sign concrete agreements with our state company Enarsa, in order to carry out some offshore exploration and exploitation. For this reason, I believe the visits of both Presidents were very important.

Finally, I would like to tell you that we will begin in a very firm fashion, but very cautiously (we have made contact with a confederation Rio Perla) to carry out some sanitation work and cleaning of the rivers that surround the Federal Capital of Argentina. We are taking as a basis the very successful experience of the Rio Perla, on the site of which we are producing about 50% of the net world product with spectacular results that are praiseworthy).

With regard to the question posed by Uruguay, that is, the relations between MERCOSUR and the European Union. The day before yesterday, in Berlin, the Volkswagen company was talking to our President, telling him that it was necessary to create closer links between the European Union and organizations in our country. The President of Volkswagen in Argentina was stressing the fact that it was necessary to create closer links between Argentina and the European Union.

We have the problem of agricultural subsidies given by the Union, this is a very important limitation. As far as we understand, negotiations have been making progress, but there are serious problems that still have to be solved. It is clear that Argentina, Uruguay and Brazil are very important producers of agricultural products and cattle and this is something that collides with the subsidy policies that are now carried out by the European Union. We have no influence in the internal matters of countries, but the problem of subsidies does hinder the process of rapprochement between our areas. So we are expecting results. In order to make progress for our agreements I can see that for our countries, Brazil, Uruguay, Paraguay, Venezuela, we see a fate of development and economic growth that might be similar to the emerging countries within the European Community: Portugal; Spain; Poland, the new countries that have become part of the European Union that have generated great amount of recovery in general terms. So we hope negotiations will accelerate. I think that in the next two weeks perhaps, there will be meeting held in Europe. Lets hope that some progress will be made. But there are concrete difficulties and agriculture subsidies is one of them.

Now answering the question made by the Distinguished Delegate of Iran. In the nineties, investments were made basically in the public services and utilities and in oil – in general in the energy sector. They were really major investments from private investors, essentially from Europe and the USA. These investments were of a great volume, say in the order of magnitude of US$50-60 billion for the sector. But the role played by the Argentinian side was not very well defined. Instead of providing for very well ordered transition in the transfer from the public to the private sector, there was a sort of abandonment of responsibilities by the State and this gave rise to greater poverty and marginalization in the population of Argentina and there were also some failures in competition law. This gave rise to difficulties between various sectors. In rehabilitation, for instance, Argentina was in first place among Latin American countries and it has fallen in the ranking because some of the sectors that are more powerful, have some services that are greater than in the eighties, that is true, but there are other sectors that are more marginalized, and I think utilities should be as universal as possible.

At this meeting I would like to stress that our relationships with the private companies that carry out these services and provide the utilities are discussed on a daily basis within the framework of the contracts, but the process in 2001 in Argentina affected all sectors. You were speaking for instance about the difficulties at the moment of withdrawing funds from the banks. But today, the situation is completely different. If you make a deposit for the mining sector, you will be able to recover it. Those that could not be withdrawn as a result of the situation of 2001, have given rise to a process of renegotiation. 76% of the bond holders have accepted new bonds that are redeemable from the banks in Argentina.

I hope this answers the question you made in your statement. The finance system is in a state of definite recovery and the state will invest in the areas that will provide universality in the delivery of these services.

Going to the statement made by the Distinguished Representative of Bolivia, I appreciate your remarks. Until 2008 we are carrying out public works for basic infrastructure for the dam that was mentioned. We have been committed in the Republic of Paraguay, Paraguay is a country I will visit next week, I will be in Cabment de Paraná??, in Cabmacion?? and other parts of the country where construction work is already being carried out now which will enable us to increase the level of the dam and so be able to generate 100% of the power capacity which is now below 20% of the capacity because of the elevation that had been …..? There is harmonious cooperation going on between us and we have come to an agreement with the Minister of Public Works of Paraguay and the Presidents of our two states have a constant dialogue on the construction work of this dam and in the next few days we will be signing the contract for the wall that will impede the flooding of the rice paddies in the area surrounding the dam. So we will be able to put up a higher wall around the reservoir and then of course we have an aqua with two additional turbines reaching 100% of the generation capacity originally foreseen. With our brothers from Paraguay we are also studying the Corpus dam and with Brazil we are exploring the possibility of working together with the Dam of Piratuba in our state of Santa Catarina. For us, this reservoir is very interesting. It will be very beneficial.

Now speaking of Brazil, and before answering the interventions of Morocco and Mexico, from the point of view of the states beyond the relationship between members of MERCOSUR, which is of course something rather complex and which is at a state that cannot yet be compared with the level of integration attained by the member countries of the European Union, well concretely, the projects that we are dealing with are in the energy sector. With Madame Minister Rousseff, we are almost on a daily basis speaking on this project, we have a complementary function, so to speak. When winter arrives in Argentina, Brazil exports energy to Argentina and vice versa, because of the change in seasons of our two countries (that is just some information I wanted to give to the other ambassadors here present) But the gas deposits that have been found in the Santos area of Brazil, and the potential of agreements with Brazil and with Bolivia would give rise to the possibility of an interconnecting energy ring, that vis a vis, foreign investors, European countries, China and others, would be a fantastic offer for investment in the energy sector, something that would place our country, together with Uruguay and Paraguay, potentially at the seat of enormous energy complexes. This all falls within the framework of what Dr. Magariños was referring to before. Energy projects geared towards generating renewable energy.

To close, I would like to briefly respond to the intervention made by the Distinguished Representative from Morocco. I think actually I have already answered by answering the Brazilian statement. We have to concentrate on energy supply, on one hand, and we must be able to provide to the world also expertise in agricultural equipment and other sectors. I think what is very important for Argentina is development in the agricultural sector and the cattle breeding sector. I think it is there that we have to concentrate our efforts because that is where our expertise lies that we could offer other countries.

In response to the intervention made by the Distinguished Representative from Mexico. I think Argentina has unlimited possibilities for a series of activities in the energy sector: utilities; the generation of power; there are really all sorts of possibilities to enter into commercial activities and enterprise. And the repatriation of funds abroad is perfectly possible according to legislation. This has brought about a policy that genuinely promotes investment. I think this is the point to stress the fact that Argentina nowadays has I think the most liberal commercial sector in our continent, at least in the southern part of our region. With all the constraints of course, that we are still dealing with from the past, and of course this is all a process of trying to manage the advantages we have and benefit from the economy and social welfare of our country.

Carlos is telling me I have run out of time, but I thank you very much for your attention.

Director-General Actually I just wanted to ask the colleagues to give you a round of applause, but they did this before I even asked them.

As you see, Minister de Vido has given us enough time by answering all the questions that were asked, questions that sometimes were not even part of his direct responsibility and portfolio, for example, those related to debts and other problems that your have brought up that are rather in the area of international relations. I would like to thank him very much for having take the time to be with us here today.

Minister de Vido, I would you to convey to the Argentinian people, to the President of the country the great recognition of the international community in this great quest of recovering the economic situation in Argentina. Thank you very much and congratulations. END OF SESSION

The presentation took place on 15 April 2005 from 11:15 a.m. until 12:50 p.m. in UNIDO Board Room C04 and was attended by some 180 persons.

List of Participating Permanent Missions

Algeria Kenya Argentina Lebanon Austria Luxembourg Mexico Belgium Mongolia Bolivia Morocco Brazil Nambia Bulgaria Netherlands China Paraguay Colombia Philippines Croatia Poland Cuba Romania Ecuador Russian Federation Egypt Saudi Arabia Ethiopia Slovakia France Slovenia Guatemala Spain Hungary Sri Lanka Italy Syrian Arab Republic Iran Tunisia Israel Turkey Japan Ukraine Jordan United Kingdom Uruguay

List of Speakers Bolivia Brazil China Iran Italy Mexico Morocco Uruguay

This is a transcript of the English translation of the session with the Minister that took place on 15 April 2005 in UNIDO Board Room Vienna. The text has not been verified by the speakers