Fitch Rates New Eurobonds Issued by the Province of Buenos Aires 'CCC+'.

BUENOS AIRES, Argentina -- Fitch Ratings has assigned a 'CCC+' global scale foreign and local currency rating to the new eurobonds that will be issued by the Province of Buenos Aires in exchange for the defaulted euro medium-term bonds (the existing bonds). The Rating Outlook is Stable. Fitch has also assigned the Province a 'D' foreign and local currency issuer rating, based on the fact that provincial debt with OECD creditors is still in default.

The Province suspended principal and interest payments on existing bonds in January 2002, following the Federal Government's default, and adopted the Federal Government's policy of rescheduling debt obligations under a sustainable development plan. With the exchange of existing bonds, the Province finalizes the debt restructuring process started in mid-2002 when the federal government issued BOGAR in exchange of provincial financial obligations and Boden 2011 to withdrawn quasi-currency instruments (Patacones).

Even though it is expected that the Province will exchange almost 94% of the outstanding existing bonds (amounting to US$2.7 billion, not including accrued interest), the Province still maintains a limited capacity to face financial obligations with its current fiscal results. Although the Province showed a better fiscal performance in the last two years, achieving primary and financial surpluses - before principal payments - in 2003 and 2004 after reporting high deficits during the crisis, the Province is still dependent on the Federal Government's financing to meet its principal payments. Given that the Province is receiving financial assistance since 2002, through the Orderly Financing Program (Programa de Financiamiento Ordenado) and the Financial Assistance agreements, the Federal Government has become the Province's largest creditor and its main source of financing since the crisis.

As of June 2005, total outstanding indebtedness of the Province amounted to P28.6 billion (US$9.898 million), 60% of which is owed to the federal government, 29% to bondholders, 8% to multilateral creditors, 1% to bi-lateral creditors (OECD) currently in default, and the remaining 2% to other creditors. Although the debt profile improved with the restructuring and shows a decreasing trend since 2002, it still represents a high debt burden (amounting to 1.7 times (x) of current revenues as of June 2005). In addition, the tight schedule of repayments for the next three years implies the Province will need additional financing, as overall fiscal surplus is not expected until 2011. As for 2006, the Province has to meet financial obligations for an estimated amount of Ps.3.450 million (Ps.798 million in interests and Ps.2.652 million of principal), which represents approxmately 17% of expected current revenues for 2006.

For 2005 the Province forecasts a decrease in the primary balance, achieving a surplus of P608 million (in nominal terms), as compared to the primary surplus of 2004 (Ps.758 million). The province expects to cover the projected Ps.106 million overall fiscal deficit with the previous year's surplus. Under the 2005 Financial Assistance Agreement, or AF 2005 (Acuerdo de Asistencia Financiera), the Province will receive a total of Ps.1.260 million in 2005 for its financing requirements. This financial assistance is expected to increase to Ps.2.250 million for 2006, as the Province has growing financing needs since it started to pay principal on the BOGAR in March 2005.

A copy of the report 'Province of Buenos Aires, Argentina' will be available on Fitch's web site 'www.fitchratings.com'.

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