OVERVIEW OF CAPITAL MARKETS IN ARGENTINA

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OVERVIEW OF CAPITAL MARKETS IN ARGENTINA
Jacqueline Donaldson
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• Structure
• Regulations
• Authorization to make public offer
• Public offer vs. private offer
• Overview of securities traded in Argentina

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• Structure
• Comisión Nacional de Valores (CNV)
• Buenos Aires Stock Exchange or stock exchanges in
  other provinces
• Mercado Abierto Eléctrónico S.A. (MAE)
• Caja de Valores S.A.
• Mercado de Valores

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• Structure (cont.)
• (i) Comisión Nacional de Valores
• Created in 1968 by the Argentine Securities Law
  No. 17,811.
• Its mission is to regulate and control the
  capital markets participants, verifying that the
  transactions comply with the principles and
  objectives of the Argentine Securities Law and
  other regulations.
• 160 staff members.
• Departments
• Issuers (Gerencia de Emisoras).
• Products of Collective Investment (Gerencia de
  productos de Inversión Colectiva).
• Intermediaries Stock Exchanges and Markets
  (Gerencia de Intermediarios, Bolsas y Mercados).
• Investigation and Anti-Money Laundering (Gerencia
  de Investigación y Prev. del Lavado de Dinero).

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• The CNV is empowered to
• Authorize the public offer of securities and set
  forth the requirements issuers must comply with
  to keep such authorization in force.
• Advice the National Government on the requests of
  authorization to become stock exchanges.
• Update the list of agents and broker dealers
  registered with the securities markets.
• Keep the record of the persons authorized to make
  public offer of securities and set forth the
  regulations to which they have to comply.
• Approve the stock exchanges and security
  markets by-laws related to the public offer of
  securities.

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• Supervise and control the compliance of
  legislation and regulations regarding the public
  offer of securities
• Supervise and control corporations that make
  public offering of their shares from a
  corporations law point of view
• Authorize the constitution of mutual funds
• Control clearing agencies and approve their
  by-laws
• Authorize the constitution of futures and options
  markets and supervise their functioning
• Authorize and supervise the functioning of rating
  agencies.
• Adopt the administrative and disciplinary
  measures considered necessary to insure the
  correct application of its missions and
  functions.

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• Structure (cont.)
• (ii) Buenos Aires Stock Exchange
• There are 15 stock exchanges in Argentina, of
  which the Buenos Aires Stock Exchange is the most
  important.
• It also has four different trading sections the
  general section, the special section, the new
  projects section, and a recently created section
  for companies involved in e-commerce,
  telecommunications, internet, electronics,
  biotechnology and science.

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• Stock exchanges are empowered to
• Authorize, suspend and cancel the listing of
  securities according to the regulations issued by
  each stock exchange.
• Set forth the requirements to be met in order to
  list securities.
• Supervise and control compliance of laws and
  regulations by corporations that have securities
  listed.
• Release information on listed companies.
• Issue regulations and measures necessary to
  insure the accuracy of financial statements and
  other documents that have to be published.
• Carry out registry of operations.
• Issue regulations to insure the accuracy of the
  registry of listings and publish the same and the
  current prices.

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• (iii) Caja de Valores S.A.
• The clearing of transactions on the Buenos Aires
  Stock Exchange is carried out through Caja de
  Valores S.A., which is the Argentine clearing
  agency that provides central depository
  facilities for securities and may act as a
  transfer and paying agent.
• Over-the-counter transactions are cleared and
  settled by their respective parties, and the
  participants (known as depositors) may deposit
  traded securities with the Caja de Valores S.A.,
  which then holds them on behalf of their
  principals ("comitentes").
• Caja de Valores S.A. does not have delivery vs.
  payment system but the same effect is achieved
  with an agreement with Merval.

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• (iv) Mercados de Valores
• The only persons authorized to effect
  transactions in securities listed on the Buenos
  Aires Stock Exchange are the shareholders of
  Mercado de Valores S.A. (the "Merval").
• It is the company that oversees brokerage
  activities and transactions on the floor of that
  Stock Exchange.
• These are self-regulated organizations that
  regulate, guarantee and settle transactions.
• Must adhere to a stock exchange.
• They grant professional licenses to agents and
  brokerage firms, supervise their activity and
  carry out the broker dealers registry.

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• (v) Broker dealers
• Broker dealers have to be shareholders
  (accionistas) of the corresponding market.
• The Mercados de Valores have disciplinary powers
  over the agents, broker dealers and brokerage
  firms.
• Individuals or brokerage firms organized as
  sole-purpose corporations (sociedades de bolsa),
  including subsidiaries of commercial banks, are
  allowed to become shareholders of the Merval.
• Value of a share of the Merval AR 3,200,000
  (November 2007).

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• (vi) Over-the-counter-markets
• The MAE is an electronic market in which only
  over-the-counter dealers (agentes de mercado
  abierto) registered with the CNV may trade
  securities.
• Financial entities and banks (both Argentine or
  foreign owned) may also be agents of the MAE.
• To become an agent of the MAE
• purchase one share (value at June 2007 AR
  50,257)
• minimum net worth AR 2,700,000.

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• Regulations
• Law No. 17,811 (Securities law)
• Decree No. 677/01 (Transparency in public offer
  regime)
• Law No. 24,083 (Mutual Funds)
• Law No. 24,241 (Pension Funds)
• Law No. 24,441 (Trusts)

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• Authorization to make public offer of securities
• Issuers and other entities involved in the
  public offer must be registered with the CNV.
• Each public offer of securities must be
  authorized by CNV.
• CNV approval of a public offer means only that
  there has been compliance with the regulations
  applicable to the offer and does not provide any
  assurance with respect to the subsequent
  performance of the particular security as an
  investment.
• Issuers must continue to observe certain
  reporting requirements as long as they are
  authorized to publicly offer securities.

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• Public offer vs. private offer
• Only the public offer of securities is subject
  to the Argentina Securities Law.
• Pursuant to law No. 17.811, a public offer is
  an invitation made to the general public, or
  certain sectors or groups thereof, to enter into
  any transaction involving securities made by
  issuers, unipersonal organizations or by
  companies dedicated to their commerce, either
  exclusively or not, by means of personal offers,
  newspaper advertisements, radio or television
  broadcasts, films billboards, signs, programs,
  circulars, printed notices or by any other
  means.
• The concept of private placement may only be
  defined by exclusion as any placement of
  securities that is not deemed a public offering.

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Reasons for trends in entry/exit to the market
over recent years

• The macro crisis of 2001, the devaluation, the
  recession, and the lack of confidence in the
  legal framework were some of the factors that
  eroded the Argentine capital market as of 2002.
• Such trend has reverted in the recent years.

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Overview of securities traded in Argentina
Listed companies at end-of-periodNumber of
listed companies
Source BCBA
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Trading volumeTrading volume (equity) in BCBA
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Trading volume of the ten most traded companies
as a percent of total market capitalization
Trading volume January-October 2006
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Companies that offer bonds on the market
In 2006, approximately 99 corporations were
offering debt securities through the public
offering regime. Additionally, 10 corporations
issued VCP (short term commercial papers, up to
365 days maturity).
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Value of corporate bond offerings
2002/2004 figures mostly due to debt
restructuring Source CNV
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Argentine Capital Markets in 2007

• Financing through Argentine Capital Markets
  (including shares, notes and financial trusts)
  amounted to US 6,232 MM (45 increase with
  respect to 2006).
• 6 new companies entered the public offer regime
  (against 2 in 2006).
• number of  public issuance of shares  approved by
  CNV 13 (against 7 in 2006).

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Argentine Capital Markets in 2007

• Financing  of  the private sector by debt
  issuance increased  81  with respect to
  2006, the highest of the last 6 years . Debt
  issues were mainly done by the Energetic Sector
  (34), Banks (22) and the Telecommunications
  sector (20).
• New notes (not part of debt reestructurings) were
   issued for US 1,353 MM (81 increase with
  respect to 2006).
• The stock of notes in december 2007 was US
  11,800 MM (27 increase between march and
  december).
• 34 issuance of notes (as part of reestructuring
  process or already approved programs), amounting
  to US 3.278 MM (4 increase with respect to
  2006).
• 244 financial trust emitted (against 201 in
  2006), amounting to US 8.667 MM in 2007.

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