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Practice
Report
Argentina
January 2011
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Best Practice Report
Argentina
The Best Practice Report provides a concise, comprehensive overview of a country’s status with
respect to global best practice benchmarks. The report contains a summary of compliance with
the 12 Key Standards for Sound Financial Systems in the Standards Compliance Index, as well
as a summary of performance in the Business Indicator Index and other leading global indices
addressing related aspects of the country’s economic, business, political, and social climate.
Table of contents
This report is based entirely on publicly available sources. For a list of all the sources used for the Standards Reports and the Business Indicators
please refer to the detailed reports available for each country and standard on www.estandardsforum.org.
© eStandardsForum 2010
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Best Practice Report
Argentina
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Best Practice Report
Argentina
SUMMARY
Argentina achieves low overall compliance with international standards and codes, with a score of 35.83 out of 100 in our Financial
Standards Index. Macroeconomic Policy and Data Transparency standards are for the most part observed, however, there have
been serious concerns about the independence of the Central Bank of Argentina and doubts about the accuracy of inflation data.
Credible implementation of Argentina's comprehensive legal framework for fiscal transparency remains one of the country's top
priorities. Argentina is working towards greater compliance with Institutional and Market Infrastructure standards. International
Financial Reporting Standards will be adopted by listed companies (with some exceptions) from January 1, 2012. The prospective
timeframe for adoption of International Standards on Auditing would be 2011 for entities of public interest, and 2014 for all
other entities. Although the corporate insolvency regime in Argentina is consistent with the World Bank's principles, the adoption
of a new legal mechanism instituting a consensual, out-of-court, corporate workout framework is recommended. In the area
of corporate governance, the National Securities Commission mandated listed companies in October 2007 to annually comply
or explain their adoption with a minimum set of governance standards. Compliance with Financial Regulation and Supervision
standards is low due to the scarcity of information for banking and insurance supervision.
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Fiscal Transparency: Enacted
In the last available comprehensive assessment against the IMF's Code of Good Practices on Fiscal Transparency, Oxford
Analytica (OA) in 2006 rated Argentina as "Enacted." The assessment reasoned that Argentina's legal framework provides
clear guidelines for fiscal management and transparency. These guidelines have been enhanced by the enactment of the Fiscal
Responsibility Law (LRF) in 2004. Fiscal data disclosure at the national level is adequate, but the disclosure standards at the
provincial level vary. The LRF is meant to increase the fiscal efficiency of sub-national governments and limit future spending
and debt issuance by the provinces. Enforcement of Argentina's comprehensive legal framework for fiscal transparency remains
one of the country's top priorities. Adherence to the LRF could substantially improve fiscal data reliability and the development
of homogeneous indicators. However, fiscal transparency has been negatively affected by the weak control over the use of
resources of fiduciary funds. Furthermore, in late 2009, Congress suspended the LRF for a two-year period in order to provide
relief to cash-strapped provinces hurt by the global economic downturn that year.
Accounting: No Compliance
The Argentine Federation of Professional Councils of Economic Sciences (FACPCE) coordinates the issuance of professional
accounting and auditing standards. According to a 2010 Ernst & Young report, in 1998 the FACPCE’s Governing Board
developed a plan to adapt Argentine accounting standards to International Financial Reporting Standards (IFRSs) issued by the
International Accounting Standard Board (IASB). On December 8, 2000, the FACPCE approved Technical Resolutions (TRs)
16 through 19, thus completing the first stage of the harmonization plan. Finally, on March 20, 2009, the FACPCE approved
TR 26, which adopted IFRSs as issued by the IASB in effect as of 2009. However, in order for the companies to start applying
the new standards, they have to be approved by the respective industry regulator. In December 2009, the National Securities
Commission (CNV) passed General Resolution No. 562, which incorporated TR 26 and provided for the legal implementation
of IFRSs for listed companies (except banks, financial trusts, insurance companies, and cooperatives) starting January 1, 2012,
with early application after January 1, 2011 allowed. The Resolution includes the commitment to incorporate all new IFRSs and
modifications to the existing ones as they become available in the future. In its turn, as pointed out on the Deloitte’s IAS Plus
website, the BCRA also announced its intention to require IFRSs, most likely beginning in 2014. According to a 2010 publication
by PricewaterhouseCoopers, regulators other than the CNV and the BCRA, have not yet announced any plans to introduce
IFRSs. According to Deloitte’s IAS Plus website, on December 3, 2010, through Technical Resolution No. 29 the FACPCE
adopted IFRS for Small and Medium-sized Entities (SMEs) effective January 1, 2012, with earlier application permitted for annual
financial statements beginning on or after January 1, 2011. Companies exempt from the application of IFRSs and IFRS for SMEs
may either apply the international standards or continue to follow Argentine Generally Accepted Accounting Principles issued
by the FACPCE, which differ from the international standards.
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Corporate Governance: Enacted
Corporate governance reform started in Argentina in 2001 when Decree No. 677 was passed promoting the adoption of good
corporate governance practices for publicly-traded companies. Argentina is considered to be relatively developed in corporate
governance matters compared to similar countries, according to a paper published by the Center for Financial Stability in 2005.
However, only modest progress has been recorded since, and evidence shows that there is still a need to improve corporate
governance practices for publicly-traded companies, privately-held firms and financial institutions. Enforcement mechanisms and
the regulators’ supervisory powers also need to be strengthened. In September 2004, the Argentine Institute for Corporate
Governance published a Code of Good Practices for Corporate Governance in conjunction with KPMG and the Institute
for Enterprise Development in Argentina. The Code is primarily intended for listed companies, but can also be applied to
privately held and small and medium-sized enterprises. Its recommendations are based on the Organization for Economic Co-
operation and Development's (OECD) Principles on Corporate Governance and the recommendations of the OECD's 2003
White Paper on Corporate Governance in Latin America. The Code is voluntary in nature and companies who adhere to the
principles of the Code must make a public declaration regarding their compliance with it. In October 2007, the CNV issued
General Resolution No. 516, which mandated listed companies to annually disclose their compliance with a minimum set of
governance standards established by the CNV or to explain the reason for not doing so.
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of the jurisdictions that have undertaken to implement the FATF's recommendations, Argentina has failed to make significant
progress in terms of its AML/CFT regime. In December of 2010, the FATF gave Argentina ten months to make serious changes
to its AML/CFT regime, or else be the first G20 country to ever be placed on a blacklist of jurisdictions in which financial
transactions present a high risk of criminal activity.
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national budget for funding, and the appointment and removal of its board by the President. Also, according to a 2004 article
by Weitz, the CNV’s regulatory and supervisory powers over different market participants (stock exchanges, rating agencies,
mutual funds, open market operators, financial trusts, and the public offering of securities) are notably asymmetric. In particular,
the CNV has limited capacity to sanction stockbrokers for violation of the legal and regulatory framework, and enforcement
is mainly under the control of the stock exchanges. More recently, a 2010 study by Pasquini analyzed Argentina’s securities
market regulations’ degree of implementation of the first 13 IOSCO principles, which concern the regulator, self-regulatory
organizations, enforcement, and supervisory cooperation. The report found that when all indicators were averaged, Argentina
scores approximately 65 percent implementation, ranking third out of the four countries analyzed – behind Brazil and Chile,
and ahead of Peru. A 2010 report by the U.S. Department of Commerce notes that securities and accounting standards are
transparent and consistent with international standards.
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V. Credit Ratings
Fitch: B/Stable
Moody's: B3/Stable
Standard & Poor's: B-/Stable
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Methodology Note
I. The Financial Standards Index
This index measures a country’s level of compliance with the 12 international standards and codes. Compliance with each of the 12
standards is measured on a scale of six levels of compliance and then converted into a numerical score. The Index ranks countries
from 1 (most compliant) to 81 (least compliant) and provides a score from 0 (worst performance) to 100 (best performance).
Overall compliance is determined as follows:
The chart provided with the summary of a country’s performance against the Financial Standards Index provides the exact levels
of compliance with the 12 international standards and codes. The descending order of compliance is as follows: Full Compliance,
Compliance in Progress, Enacted, Intent Declared, No Compliance, and Insufficient Information. A exact definition of each compliance
level and the methodology used to determine them is available on the eStandardsForum website.
This section provides the executive summaries of eStandardsForum’s country compliance reports against the 12 Key international
standards and codes. The full assessments are available on the eStandardsForum website.
The three standards grouped under “Data and Macroeconomic Policy Transparency” are the IMF’s “Special (or General) Data
Dissemination Standard,” the “Code of Good Practices in Monetary and Financial Policies,” and the “Code of Good Practices on
Fiscal Transparency”.
The six standards grouped under “Institutional and Market Infrastructure” are the World Bank’s “Principles and Guidelines for
Effective Insolvency and Creditor Rights Systems,” the International Accounting Standard Board’s “International Accounting
Standards,” the OECD’s “Principles of Corporate Governance,” the International Federation of Accountants’ “International
Standards on Auditing,” the Financial Action Taskforce’s “Recommendations on Money Laundering,” and the Bank for International
Settlements’ “Core Principles for Systemically Important Payment Systems”.
The three standards grouped under the “Financial Regulation and Supervision” sub-section are the Basel Committee’s “Core
Principles for Effective Banking Supervision,” the International Organization of Securities Commissions’ “Principles of Effective
Securities Regulation,” and the International Association of Insurance Supervisors’ “Insurance Core Principles”.
This index measures a country’s attractiveness to foreign investment by analyzing various economic, legal, and political indicators.
Countries are ranked from 1 to 81 according to a score ranging from 0 (least attractive) to 12 (most attractive). The overall score
also determines whether a country is:
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At Standard 9 to 12
Progressing toward standard 6 to 9
Below standard 0 to 6
The three standards grouped under the “Financial Regulation and Supervision” sub-section are the Basel Committee’s “Core
Principles for Effective Banking Supervision,” the International Organization of Securities Commissions’ “Principles of Effective
Securities Regulation,” and the International Association of Insurance Supervisors’ “Insurance Core Principles”.
In this section, the rank and score of a country in nine distinct global indices is summarized. The country’s relative position in these
indices is made more comparable by calculating the quintile corresponding to the country’s rank. In addition, a short summary
interpreting the country’s performance in the nine indices is provided. The following nine indices are used:
The Freedom in the World Survey is published annually by Freedom House. The political rights and civil liberties categories contain
numerical ratings between 1 and 7 for each country or territory, with 1 representing the most free and 7 the least free. The status
designation of “Free”, “Partly Free”, or “Not Free”, which is determined by the combination of the political rights and civil liberties
ratings, indicates the general state of freedom in a country or territory.
Source: http://www.freedomhouse.org/
The Bertelsmann Transformation Status Index shows the development achieved by states on their way toward democracy and a
market economy. States with functioning democratic and market-based structures receive the highest scores. The Status Index’s
overall result represents the mean value of the scores for the dimensions “Political Transformation” and “Economic Transformation”.
The rating is based on a system of points ranging from 1 (worst score) to 10 (best score).
Source: http://www.bertelsmann-transformation-index.de/16.0.html?&L=1
The Heritage Foundation Economic Freedom Index measures economic freedom against a list of 50 independent variables divided
into 10 broad factors of economic freedom. For each factor, a country receives a 0 to 100 percentage score, indicating the degree
of economic freedom in the country.
Source: http://www.heritage.org/research/features/index/index.cfm
The Economic Freedom of the World Index, published by the Fraser Institute, covers five broad areas: size of government; legal
structure and security of property rights; access to sound money; freedom to trade internationally; regulation of credit, labor, and
business. Each component and sub-component is placed on a scale from 0 to 10 that reflects the distribution of the underlying
data. A higher value signifies greater economic freedom.
Source: http://www.freetheworld.com/index.html
The World Economic Forum Global Competitiveness Index provides an overview of factors that are critical to driving productivity and
competitiveness. These factors are grouped into nine distinct but interconnected pillars: (1) Institutions, (2) Infrastructure, (3) Macro
economy, (4) Health and primary education, (5) Higher education and training, (6) Market efficiency, (7) Technological readiness,
(8) Business sophistication, and (9) Innovation. The Index is calculated from a mixture of survey and hard data, and the data for
each pillar is converted into a scale from 1 to 7. A higher value indicates greater competitiveness.
Source: http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm
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The Milken Institute Capital Access Index scores the ability of entrepreneurs to gain access to financial capital in countries around the
world. The Index is intended to measure not only the breadth, depth, and vitality of capital markets, but also openness in providing
access without discrimination, a measure of global progress in the democratization of capital. The Index has 7 subcomponents with
a score assigned from 1 to 10 for countries ranking lowest to highest in terms of capital access. The Capital Access Index is then
calculated using the weighted average of the seven subcategories.
Source: http://www.milkeninstitute.org/research/research.taf?cat=indexes
The Human Development Index (HDI) is a comparative measure of life expectancy, literacy, education, and standard of living for
most UN member states The index has been used since 1993 by the United Nations Development Program in its annual Human
Development Report. The HDI measures the average achievements in a country in three basic dimensions (life expectancy, literacy
and standard of living) of human development. These measures are then converted into a 0 to 1 scale and each of the 177 UN
member states are ranked accordingly each year.
Source: http://hdr.undp.org/
The World Bank’s Ease of Doing Business Index provides measures of business regulations and their enforcement. The Doing Business
indicators are designed to indicate the regulatory costs of business and can be used to analyze specific regulations that enhance
or constrain investment, productivity, and growth. The Index then ranks economies. The index is calculated as the ranking on the
simple average of country percentile rankings on each of the 10 topics covered.
Source: http://www.doingbusiness.org/
The Transparency International Corruption Perception Index (CPI) ranks countries in terms of the degree to which corruption is
perceived to exist. The CPI Score relates to these perceptions of the degree of corruption as seen by business people and country
analysts from around the world, including experts who are citizens in the countries evaluated. The score ranges between 10 (highly
clean) and 0 (highly corrupt).
Source: http://www.transparency.org/
V. Credit Ratings:
Long-term foreign currency ratings and outlooks, indicating the likelihood of a sovereign default of the country, are provided as of
the last date of upgrade or downgrade by the three leading credit rating agencies.
This section provides the latest GDP and GDP per capita figures, projected GDP growth, and inflation as provided by the latest
available IMF World Economic Outlook, unemployment figures by the CIA World Factbook; the latest inward and outward foreign
investment figures as reported in UNCTAD’s annual World Investment Report; and the most recent figure for official development
assistance (ODA) received or disbursed, as reported by the OECD.
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