Extension of the Emergency

Law No 26,456 (the “Extension Law”), by reference to previous regulations, extended until December 31, 2009 the emergency in social, economic, financial, administrative, exchange matters in agreements ruled by public laws, sanitary, occupational and food matters. This situation of emergency has been extended from the beginning of year 2002.

The main consequence of the extension of the emergency is that it implies the extension of the effects of a number of regulations that rule on the delegation of legislative powers in the Executive Branch.

The emergency situation was initially declared by Law No 25,561 (the “Emergency Law”) in January 2001 concerning social, economic, financial, administrative-financial, exchange matters in agreements ruled by public law. Afterwards, other rules declared the emergency in occupational, sanitary and food matters. As a consequence, from January 2001 the declaration of emergency was extended successively by different rules, until December 2009.

Subjects affected by the emergency

a)    Social, financial, administrative, financial and exchange matters

The situation of emergency concerning these matters was declared by section 1 of the Emergency Law. This section entitled the Executive Branch with the powers set forth therein with the following purposes: (i) to carry on the restructuring of the financial, banking and market exchange system; (ii) reactivation of the economy, the level of unemployment, the level of employment and the level of distribution of income, specially aiming at the development of the regional economies; (iii) to create conditions to develop a sustainable economic growths compatible with the restructuring of public debt; and (iv) to rule on the restructuring of the obligations affected by the new exchange legal regime.

Specifically, the Emergency Law empowered the Executive Branch to set forth the exchange relation between the Argentine peso and foreign currencies and to enact exchange regulations.

Likewise it empowered the Executive Branch to enact measures with the purpose of (i) decreasing the impact of the modification of the exchange rate between the Argentine peso and foreign currencies related to individuals or legal entities that keep debts with the financing system in foreign currencies; (ii) compensating financing entities for the measures enacted by virtue of those mentioned in (i); and (iii) preserving capital belonging to investors that have deposited in financing entities, restructuring original obligations in a way compatible with the evolution of the solvency of the financing system.

To such effects, Executive Branch was authorized by the Emergency Law to issue bonds that would be guaranteed with export rights to be applicable on hydrocarbons. The power to set forth such export rights on hydrocarbons, with that and other purposes, was extended until year 2012 by Law No 26,217.

The Emergency Law also authorized the Executive Branch to set forth the necessary requirements for the exchange of national and provincial bonds that had been issued in substitution of the legal currency.

Finally, it empowered the Executive Branch to temporarily regulate prices of components, goods and critical services, with the purpose of protecting users and consumers rights from the possible market distortion or from monopoly or oligopoly actions.

b)    Emergency in agreements ruled by public law

Initially the Emergency Law set forth the conversion to Argentine pesos of the prices and tariffs fixed in the agreements entered into by the Public Administration under public law regulations and annulled adjustment clauses in foreign currencies and indexatory clauses. The Executive Branch was authorized to renegotiate such agreements according to certain guidelines.

On October 2003, Law 25,790 extended the term to carry on the renegotiation and set forth additional guidelines. Thus, it was set forth that the renegotiation could include certain sectors of public services or certain agreements in particular. Also it was decided that the renegotiation could include partial aspects of concession or license agreements, contemplate agreement adjustments or transitory amendments, as well as revisions or the adjustment of quality guidelines.

The Extension Law, by remission to Law No 26,204, specifically extended Law No 25,790

c)    Sanitary Emergency

A national sanitary emergency was initially declared by Decree No 486, published in the Official Gazette on March 13, 2002. Decree No 486 sets forth that an emergency is declared with the purpose of guaranteeing the population the access to goods and basic services including preserving health.

This Decree No 486 authorized the utilization of proceedings of direct hiring for the agreements to be performed during sanitary emergency and even empowers National Institute of Social Services for Retired and Pensioned Personnel to set forth its own procurement rules. It also empowers the Minister of Health to set forth control mechanisms for medicines and health supplies prices and allows direct imports of supplies in case of unjustified price increases. Decree No 486 also empowers National Institute of Social Services for Retired and Pensioned Personnel to renegotiate agreements entered into before Decree No 486 was in force.

d)    Occupational Emergency

Occupational emergency was initially declared by Decree No 165 and Decree No 565 each published in the Official Gazette on January 23 and April 4, 2002.

By means of these rules an economic assistance program was created for a certain sector of the population with children under the age of eighteen.

e)    Food Emergency

A national food emergency was initially declared by Decree No 108, published in the Official Gazette on January 16, 2002.

By Decree No 108 resources were allocated from the national budget for the purchasing of goods for the attention of highly vulnerable population’s basic needs. These resources will be allocated among the provinces and the city of Buenos Aires.