Fitch Upgrades Santiago del Estero's Series 04 & 05 Notes to 'CC'.

BUENOS AIRES, Argentina -- Fitch Ratings has upgraded the global scale foreign and local currency ratings of the Argentine Province Santiago del Estero's series 04 and 05 medium-term note program to 'CC' from 'C'. The Rating Outlook is Stable.

Series 04 of US$12 million issued in August 1998 and series 05 of US$108 million issued in November 1999 under a US$120 million medium-term notes program constitute direct and unconditional obligations of Santiago del Estero. Both series rank pari passu and share the collateral assigned to the program (10% of monthly co-participation tax revenue of the Province). Series 05 was restructured in June 2002, and the restructuring included an extension in maturity from June 2006 to June 2016, while the coupon remained fixed at a rate of 15.875% p.a. These notes make semi-annual interest payments, and semi-annual principal payments beginning on June 2005.

The rating upgrade reflects the better cash flow performance of both series in 2004 and the positive prospects for the coming months. This optimism is due to the significant growth of federal co-participation tax revenues and, consequently, the increase in the cash flows collateralizing these notes, based on growing national tax collections. Additionally, fiscal and financial improvements in the Province during 2004 resulted in a financial surplus of US$98 million, which represents excellent coverage of the debt service payments under the notes, especially in the case of possible shortfalls in the co-participation flows going forward.

Finally, the ratings upgrade considers the positive outlook generated by the new Provincial Government, which took office on March 2005 after one year of Federal Intervention, giving a more stable political and institutional environment. However, the notes are still affected by currency risk since collateralized flows are in Argentinean pesos and debt service payments are in dollars; thus, there is the devaluation risk to the notes.

In 2004, the national tax collection and the co -participation transfers to the Provinces increased significantly, growing 55% compared to the previous year. In a stable environment of both co-participation cash flows and exchange rate, the debt service coverage ratio for both series will continue improving, isolating the performance of the notes from the Province's ability to make additional transfers in order to cover the shortfalls, as occurred in the past. As of today, the collateralized funds corresponding to series 05 are sufficient to make the next debt service payment of interest and principal on June 2005 (US$10,828,019). The last series 04 payment in February 2005 was made as scheduled for US$1,065,088.

Fitch Ratings will continue monitoring cash flow performance and debt service coverage, in order to evaluate the strengthening of the structure in the medium term, as well as the development of the new Provincial Government.