structural reforms to the Federal Government, the Central Bank, public enterprises, the tax system and both the foreign exchange and foreign trade regimes. As part of this process, in June 1990 Argentina resumed partial interest payments to commercial banks.<sup>17</sup> Later on, in 1992, Argentina reached a Brady-type agreement to restructu.-e and reduce its public external debt with commercial banks. In this agreement approximately US$ 28 billion were restructured (including about US$ 20 billion of principal debt outstanding and US$ 8 billion of past due interest).

The economic reform implemented in Argentina has been extremely profound and has proceeded very fast. Among the most significant structural reforms are the following: In January 1990, the Central Bank forced the conversion of its short term interest bearing obligations with the public, mostly seven days maturity bills, into long tenn bonds with ten years maturity denominated in dollars. This step alone reduced the quasi fiscal deficit of the Central Bank by about 4/5.

. A major restructuring of the tax system, with more reliance on the VAT, and in the tax administration system. This reform has enabled the federal government (including the national social security system) to increase its tax revenues in almost 4 percentage points of GDP, from 12.9% of GDP in 1989 to 16.7% of GDP in 1992.

* An administrative reform to reduce the size and the scope of the federal goverunent and to improve the control mechanisms of public expenditures. As a result of this reform total employment in the federal govermment has fallen by more than 50% between 1990 and 1992, while the non-financial public sector balance became positive for the first time in many years in 1991 (0.2% of GDP).<sup>1</sup> 8

**A** ajor privatization program started in 1990 with the sale of public assets and enterprises, many of them non-profitable. Until end-1993 the privatization program generated almost nine (9) billion dollars in cash revenues, while foreign debt was reduced by approximately fourteen (14) billion dollars. Also, it is estimated that two tbirds of all foreign capital entering Argentina in 1992 was due to privatizations.<sup>19</sup>

* In April 1991, the Govermnent enacted the Law of Convertibility as an attempt to accelerate the stabilization of domestic prices. Under this new exchange rate regime the nominal exchange rate is used as an anchor for the domestic price level. The law fully guarantees convertibility of the local currency at a constant nominal rate and proscribes money creation except for the purchase of foreign assets.<sup>20</sup>

* In September 1992, a new Central Bank Law was enacted that made it independent of the nonfinancial public sector deficit The new Central Bank Charter prohibits lending to the non financial public sector and proscribes rediscounts (although in the latter case some special exceptions apply).

* In 1991, the govenment accelerated and completed a trade liberalization program that virtually eliminated all export taxes and all quantitative constraints on trade, except for automobiles. Also the

> 17 The government stopped these payments in March 1988. _18_ Total employment in the national adminishtaion fell-from 671,479 in 1990 to' 284,215 in 1992. However, this includes the twansfer of teachers and health personnel to the provinces. During 1989-93 the number of public employees was reduced by more than 300,000 through privatizations, attrition, and voluntary reirement

- 19 Source: "Situacion Latinoamiericana, N° 13, February 1993. 20 These assets may include dollar-denominated Argentina Govemment Bonds up to 30 percent

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