Fitch Comments on Changes in Buenos Aires' Administration.

BUENOS AIRES, Argentina -- On March 7, the city legislature voted to remove suspended mayor of the City of Buenos Aires, Anibal Ibarra, as the majority members of the commission of political judgment found him responsible for the Crogmanon Case (the fire of a Buenos Aires nightclub in December 2004). The vice-mayor Jorge Telerman, provisionally in charge of the city's administration since Nov. 14, will become the mayor of the city next Monday and complete the mandate until 2007, when the new election of local authorities will take place.

As Fitch mentioned on the last Buenos Aires's credit analysis, the rating agency believes that this political fact will not spill into a credit risk and expects continuity in general fiscal and financial policies. However, for Fitch, it is probable to expect some organizational changes, with the new administration further focusing on the infrastructure and social areas. Most of the projects started under Ibarra's administration should continue, especially the goal of capital investments for around US$400 million budgeted for 2006, since the new mayor was involved in the elaboration of budget 2006. Consequently, Fitch expects a further increase on expenditures, mainly on investments in infrastructure, which will reduce the fiscal result achieved on the last three years. Up to Dec. 31, 2005 the primary balance (excluding interests payment and amortizations) recorded US$121.3 million, whereas, the financial balance was US$27.9 million if the interest payments and amortizations are taken into account.

In 2005 the city continued reporting fiscal stability, and ended 2005 with a cash balance of US$592 million. In Fitch's opinion, the current healthy of the city's financial position will allow the new mayor to execute his plans and meet 2006 debt services of approximately US$211 million (US$61 million in interests and US$150 million of principal) in a stable scenario of exchange currency rate.

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