FYI- Terry is trying, at least with me.
---------------------- Forwarded by Richard Shapiro/HOU/EES on 02/10/2000 
06:04 AM ---------------------------


Terence H Thorn@ENRON_DEVELOPMENT
02/10/2000 12:17 AM
To: Richard Shapiro@EES
cc:  
Subject: Stamp Tax Dispute

We used the BIT threat once before when they tried to re-trade TGS's rates in 
violation of the sales agreement. George Wasaff  can give you all of the 
details. This time we may have to go all of the way and litigate.  Tax issues 
in Argentina have also killed trading.  The problem is that the constitution 
empowers the states with all kinds of taxing authority so if you want changes 
in policies you have to have a constitutional amendment.  You can imagine the 
eagerness of politicians to take on that battle.

I will be setting up some quality time with you the week of the 21st.  Again, 
congratulations. This is an exciting and complex part of the world and I 
can't think of anyone better to bring some focusand results here.
---------------------- Forwarded by Terence H Thorn/ENRON_DEVELOPMENT on 
02/10/2000 12:10 AM ---------------------------


Robert C Williams
02/09/2000 02:44 PM
To: Terence H Thorn/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Michelle Blaine/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Laurie 
Lee/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT 

Subject: Stamp Tax Dispute

Terry, here is the summary of the dispute.  Let me know if you would like any 
additional information, or if would would like me to put this into memo 
form.  

Argentine law imposes a stamp tax on written contracts.  In the past several 
years, the provincial governments of several of the provinces have, in an 
effort to raise desperately needed revenues, adopted a new and broader 
interpretation of the tax's application.  These provinces--Rio Negro, 
Neuquen, and Santa Cruz--have sought to apply this interpretation 
retroactively, resulting in the imposition of staggering assessments.  For 
TGS, the Enron company (40% owned) most affected, the assessments total $153 
million in taxes, $172 million in interest, and $208 million in fines.  (See 
attached chart for breakdown).

To date, court challenges to the taxes have been unsuccessful.  TGS has 
pending before the Argentine federal Supreme Court an application to declare 
the taxes unconstitutional and unlawful, but the Court has, as yet, not 
acted.  Meanwhile, the provinces are free to attempt to collect the taxes, by 
levy if necessary.  

The federal government has, in documents filed in another case, expressed the 
view that the imposition of stamp taxes in the manner folowed by the 
provinces is illegal.  Energas has also expressed its view that the taxes are 
illegal.  The federal Supreme Court, however, has recently denied an 
application (filed by another company) to enjoin collection of the taxes.
   
On November 23, 1999, Enron notified the federal government that it regarded 
the imposition of these taxes as in violation of the Bilateral Investment 
Treaty between Argentina and the U.S.  Since that notification, 
representatives of Enron and the government have held several meetings.  
Substantive discussions, however, have not yet begun.  The Treaty mandates a 
six-month cooling off period before arbitration can be initiated.  If the 
negotiations with the government are unsuccessful, Enron intends to file an 
arbitration with the International Center for the Settlement of Investment 
Disputes (ICSID) in Washington, D.C.  By way of information, Endesa currently 
has an arbitration underway at ICSID challenging the taxes, presumably under 
a BIT between Spain or Chile and Argentina.