I assume the issue is TGS (instead of CGS)
I will call you after sending this mail.
Below is a small analysis related to the convertibility Law and TGS. 


1. Argentina Convertibility Law No 23,928.

The Convertibility Law passed on March 1991 determined the following:
? Established a fixed exchange rate between the dollar and the national 
currency (1 dollar = 10,000 Australes, latter defined as equal to 1 peso)
? The Central Bank (Argentine Federal Reserve) must permanently have 
international reserves (dollars, gold, other currencies) available to back 
100% of the monetary base. The Central Bank must sell all required dollars at 
the fixed exchange rate.
? It is forbidden any price adjustment clause by an index.
? For all transactions agreed upon before the Law, prices could not be larger 
than the contractual price, adjusted by the exchange rate variation plus 12% 
a year (section 9). This section affected contracts in force.
? The Convertibility Law was just amended on June 22nd 2001 by the Law 25445, 
to equal 1 peso to the simple average of 1 dollar and 1 euro. Anyway, 
according to its section 2, the new Convertibility rule will only be in force 
once the price market of 1 dollar is equal to 1 euro (to avoid a surprise 
devaluation).

2. Legal requirements for a devaluation

To modify the exchange rate before 1 dollar = 1 euro, it would be necessary 
to abolish or amend again the Convertibility Law.
In such regards, the Congress would have to abolish the Convertibility Law or 
keep the Convertibility at a different exchange rate. 
Although in principle a devaluation should not affect contracts with prices 
set in dollars, even the Convertibility Law has affected contracts that were 
in force.
So, there is a certain risk that a new eventual amendment of the 
Convertibility Law could affect contracts in force.
In fact I think there is a higher risk of the government breaching the 
contracts or defaulting debt payments than devaluating the currency by 
surprise.

3. Impact on TGS
Since the privatization rules establish that TGS, rates are in dollars, a 
devaluation that respects contracts in force should not have a significant 
impact on TGS financial results.
However, due to the social impact of a devaluation, the Congress could pass a 
new law establishing a new mechanism to calculate Public Utilities rates. The 
higher the percentage of devaluation (and the higher the social turmoil), the 
higher is the probability that this kind of Law would be passed.





Richard Shapiro
07/15/2001 06:32 PM


To: Guillermo Canovas/SA/Enron@Enron
cc:  
Subject: Please read- Argentina economic risk

Let's discuss.
---------------------- Forwarded by Richard Shapiro/NA/Enron on 07/15/2001 
04:36 PM ---------------------------
From: Robert Johnston/ENRON@enronXgate on 07/12/2001 10:54 AM
To: Richard Shapiro/NA/Enron@Enron
cc: Kevin Hannon/Enron Communications@Enron Communications, Brendan 
Fitzsimmons/ENRON@enronXgate, Scott Tholan/ENRON@enronXgate 

Subject: Please read- Argentina economic risk

Hi Rick- Kevin Hannon asked that we contact you to coordinate some market 
intelligence research pertaining to the deepening financial crisis in 
Argentina.  Kevin would like us to investigate how Enron's CGS project will 
be treated by the Argentinean govt should a default or devaluation take 
place.  We understand that you have the contract providing more information 
on how the project is protected by international treaty. It would be great if 
we could get a copy and meet with you briefly to discuss this request.

Thanks for any help you can provide during what I know is a very busy time 
for you!

Robert Johnston
Manager, Market Analysis
Enron Wholesale Services
x39934