In one of the first reports adopted in this 2015, the General Audit Office (AGN, for its acronym in Spanish) concluded that the debt of the City of Buenos Aires "was not a risk" to the central government, and that its "full financial autonomy" the Capital has a "high level of management in its strategy" to seek financing through, for example, the issuance of bonds.

The Watchdog arrived in this observation after analyzing the debts owed by the provinces with the Federal Government -counting from 2008 until the financial year 2011-; moreover, the financial sustainability of these commitments and the possible impacts that could result in the coffers of the Nation was measured. The result of the research is a special report that, by extension, the Auditor.info summarized in two installments, detailing the main findings of the survey.

Sharing, Contributions and Transfers

The AGN explains that the central government funds the provinces through two ways: first, the so-called automatic distribution resources, which are the Federal Co and special regimes; and, on the other, the ATN or contributions from the National Treasury and transfers.

The partnership is the largest resource amount that reaches jurisdictions and originates from national tax revenues (taxes). In that sense, the three districts receiving the largest proportion are the provinces of Buenos Aires, Cordoba and Santa Fe.

During the analyzed period (2008-2011), 80% of the funds that the Federal Government was given were turned to the provinces sharing (58%) and special schemes (22%).

The remaining 19.9% corresponded to transfers, meanwhile, they were gaining ground especially since 2009, following the implementation of the Federal Solidarity Fund, better known as soy Fund.

So much so that the numbers were drawn in 2009 that 50.4% above those recorded in 2008 "and then remained stable."

Specifically, these transfers are not automatically distributed resources and experienced that quantum leap from the inclusion of 30% of export duties on soybeans and their derivatives, i.e. withholdings.

As in the case of partnership, jurisdictions that received more resources for transfers in the period studied by the AGN were the provinces of Buenos Aires (28%) and Cordoba.

The Audit completed this point by noting that "the provincial jurisdictions are determining what kind of works will be financed by this fund (soy), and must ensure the distribution of items corresponding to their municipalities."

Debt Reduction and Refinancing Program

Since 2010, and through two steps, they tried to sort provinces liabilities held with the Government.

That year the decree 660, with which the Federal Program Debt Relief (PFD), sought to cancel debt balances resulting from the Fiscal Responsibility Regime, monetary union was implemented (to remove the almost-currencies were sanctioned), and the conversion rate of Provincial Public Debt. In addition, the initiative debts resulting from the accumulation of contributions from the National Treasury were canceled.

From PFD, commitments jurisdictions became indirect debt of the nation, which awarded 228 consecutive monthly installments for the provinces canceled principal and interest of the Secured Bonds (Bogar) in 2031.

Meanwhile, the provinces guaranteed the fulfillment of the Program "by transferring the sums to be received by Federal Co", detailing the audit. The PFD "adhered 16 jurisdictions and refinanced $64,864,000.

The following year, in 2011, the Ministry of Economy signed Resolution 11 which, among other things, included agreements between the AFIP and the provinces to prevent tax evasion and increase in informal employment. Thus, after the application of the two measures, the total balance of rescheduled debt was $ 60.248 million.

There was, however, not adhered to provinces PFD. It is, on the one hand, of maintaining a low level of debt with the Nation (less than 20% relative to the total debt), and on the other, of San Luis and Formosa, the proportion of commitments in central government account for 96% and 90% respectively of their debts.

The Audit highlights the case of Formosa, "whose liabilities amounted to $ 3.564 million, and did not adhere to the Federal Debt Relief Program."

Regarding the impact that these initiatives had on regional issues, the AGN observed: "Debt Relief Plan implementation does not significantly decrease the contingency for the Nation and, from the point of view of the provinces, the PFD does not substantially vary the situation of finances and debt stock since, even without the restructuring, those jurisdictions that have kept investment income deficit are doing it in the projection period."

Risks for the Federal Government

Upon close study of auditing in 2011, "the direct debt of the 24 jurisdictions in the nation amounted to $ 74,860 million, implemented by loans from the central government, the Trust Fund for Provincial Development and the Trust Fund Federal Regional Infrastructure."

"On the same day the report continues all the provincial liabilities of Buenos Aires, Cordoba, Mendoza and Chaco explained 65.4% of total debt (jurisdictions). And also in 2011, considering only the liabilities of the province with the Nation, the provinces of Buenos Aires, Cordoba, Jujuy, Chaco and Formosa in total represents 66.5% of liabilities."

With these data, the AGN argues that "the services of the provincial debt contracted with the central government, given its low magnitude and extensive maturation do not appear to impose risks to national public finances."

And explains: "The provincial imbalances are explained by the low participation of local resources (tax revenue and royalties) in financing activities, which makes it indispensable assistance of the Nation through automatic and discretionary transfer of resources to cover financial gaps."

In opposition, the full investigation ends with "Jurisdictions that show greater financial autonomy are able to offset their imbalances by issuing bonds," as in the case of the City of Buenos Aires.

Autonomy in the Jurisdictions

Moreover, the Audit devotes a section of its report to explain that the Provincial Financial Autonomy is the "capacity to generate own resources in relation to total revenue, in order to deal with solvency of any chosen debt strategy."

This concept can be measured by relating their own tax revenues to total tax revenues (in which the national contribution is included). In this comparison, the higher the indicator is, the greater the autonomy of the jurisdiction in question.

What does this measure? It is that, according to the report, "the degree of financial autonomy of each jurisdiction may relate to the risk to the nation that each assumes debt obligations."

Using this methodology, the Watchdog concluded that the jurisdiction with full financial autonomy is the City of Buenos Aires, with 89.2%. As mentioned, this performance for AGN "does not constitute a risk to the Nation", which gives the Capital "a high level of debt management strategy."

Following to the City in terms of financial autonomy, is the province of Buenos Aires (57.3), Santa Fe (40.5%) and Cordoba (36.1%).

On the other hand, "jurisdictions with low autonomy constitute a contingent risk to the Nation when they take on debt (since) the contingent liabilities for the central government are full."

Appearing at this end of the measurement is Formosa (with a degree of autonomy of 6.4%), La Rioja (7.7%), and Santiago del Estero (10.4%).

Against this background, the Audit said: "The Province of Buenos Aires has a high level of financial autonomy, but not more than 60%, indicating that it must be handled with the support of the Federal Government. The provinces of Córdoba, Chubut, Santa Fe, Mendoza, Santa Cruz and Neuquen are in the middle levels, and debt levels should be monitored to avoid mismatches in maturity term and renewal. The rest of the provinces have a low level of financial autonomy and its debt would not be advisable; therefore managing debt more dependent on domestic support."