From: james.bannantine@enron.com
To: joseph.sutton@enron.com
Cc: don.black@enron.com, michael.guerriero@enron.com, jose.bestard@enron.com, diomedes.christodoulou@enron.com, peter.weidler@enron.com, joe.kishkill@enron.com
Date: 2000-10-08 19:13:00+00:00
Subject: Argentina Political Analysis

In case this becomes big news in the United States, attached is a summary 
from the Argentina team of the political situation in Argentina.  It is not a 
political meltdown but it is a significant change in the executive branch and 
potential realignment of the political parties in Argentina.  The cabinet 
shuffle and resignation of the vice president are in the wake of the senate 
bribery scandal in Argentina where the opposition was supposedly bribed to 
vote for the governments changes in law (actually in favor of economic 
reform).  The cabinet shuffle was economics oriented with the economic team 
being strengthened, but potentially at the expense of the alliance that holds 
the government and a majority in Congress over Menem's party, the peronists.  
The vice president was the senior member of the second party in the alliance 
(President De La Rua is senior member of the first party in the alliance).  
Financial markets reacted slightly negatively to the shakeup with bond 
spreads widening slightly and Argentine stock prices down slightly.  As a 
minimum we will keep a close eye on the political and financial situation and 
be prepared for any more significant reaction by the financial markets.  
---------------------- Forwarded by James M Bannantine/ENRON_DEVELOPMENT on 
10/08/2000 07:04 PM ---------------------------


Don Black@ENRON
10/07/2000 08:16 AM
To: James M Bannantine/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Joe Kishkill/SA/Enron@Enron, Diomedes Christodoulou/SA/Enron@Enron, Peter 
E Weidler/NA/Enron@Enron, Michael Guerriero/SA/Enron@Enron 

Subject: Argentina Political Analysis

Mike,
Thanks for the quick turnaround on this from you and your team.

Jim,
This is as far as this distribution went.  Please edit as needed and forward 
to whomever you feel necessary.
---------------------- Forwarded by Don Black/SA/Enron on 10/07/2000 11:07 AM 
---------------------------
From: Michael Guerriero on 10/07/2000 10:13 AM
To: Don Black/SA/Enron@Enron
cc: Guillermo Canovas/SA/Enron@Enron, Cristian Folgar/SA/Enron@Enron, Maria 
Belen Salvador/SA/Enron@Enron 
Subject: Argentina Political Analysis


As reported Carlos Chacho Alvarez resigned his position Friday as Vice 
president of Argentina. 

The main reason of this resignation was a political disagreement with Cabinet 
changes announced on Thursday 5th by President De la Rua.  Alvarez
publicly noted he could no longer tolerate the political differences with the 
President over the senate bribery scandal. Particularly Alvarez disagreed 
with De la Rua's decision to promote Alberto Flamarique from Minister of 
Labor to General Secretary and to keep Fernando de Santibaez as Chief of the 
Intelligence Department.  Both Flamarique and Santibaez are suspected of 
paying bribes to Senators to vote for a new Labor Law. Alvarez has 
emotionally championed the fight against the senate scandal and has been 
strongly advocating for the resignation of Flamarique, Santibaez and all 
Senators involved in the affair. 

It was considered that the decision of De la R?a was intended to demonstrate 
that he, and not Alvarez, holds the power and that De la R?a wanted to 
demonstrate that the changes were focused on improving the economic situation 
and to move beyond the Senate scandal.

The main changes in the cabinet, announced on Thursday 5th, are the following:
Chistian Colombo (economist, in good relationship with Machinea) will replace 
Terragno as Chief of Cabinet.
Machinea (Minister of Economy) will also be responsible of the Ministry of 
Infrastructure. 
Jorge De la R?a (former General Secretary of the President and President's 
brother) will be Minister of Justice. 
Patricia Bullrich (peronist) will be Minister of Labor. 

As a consequence of Alvarez' resignation, Flamarique resigned to his position 
of General Secretary of the President.

Regarding the preliminary impact of the political changes to the economic 
situation it could be considered the following:

Before Alvarez resignation, the cabinet changes were considered positive 
intending to increase the power of  the Minister of Economy and reduce the 
internal disagreements in the Administration.
Although Alvarez (the leader of the Frepaso party) said he will be still part 
of the "Alianza" (the Radical and Frepaso party alliance) in Office, Alvarez' 
resignation could lead to the division of the Alianza and reduce the ability 
of De la Rua to pass new laws in the Congress. A breakup of the coalition 
would make the Peronist the largest party in both houses of Congress only 
compounding the potential for government gridlock  
This situation will weaken De la Rua and probably foster new re-alignments in 
the political field.
All the situation will increase economic uncertainty and will delay economic 
recovery. The market will wait to see if a conflict develops in the Alianza.
De la Rua and his team will probably be forced to take "strong" decisions to 
retain the political initiative, strength and control.
Machinea will probably try to gain the market confidence, announcing that De 
la Rua's Administration will not change the macro foundations of the economic 
agenda and even increase its commitment toward monetary and fiscal 
equilibrium, exchange rate policy, respect for vested rights, etc.

Financial analysts have viewed the situation as "an institutional crisis with 
unknown effects on the economy". The insecurity of the Argentina's political 
future caused Argentine debt paper to fall. The Argentine JP Morgan Emerging 
Market Bond Index widened 23 basis points to 685 over US Treasuries. 
Argentina's 17 year global bond fell only slightly. There does not appear to 
be a market panic as noted by the trading of Argentine ADR's in New York.  
They were down cents rather than dollars and a number of them closing 
unchanged.

We will continue to monitor the situation and update as warranted.