Extension of the Public Emergency

On December 21, 2011, the Federal Congress issued Law No 26,739 which states that the Laws and Decrees which declared an emergency in the social, economic, financial, administrative, exchange matters, public contracts, sanitary, occupational and alimentary fields will remain in force until December 31, 2013. The Emergency was initially declared in 2002 and since 2003 it has been successively extended by Congress. The last extension had been approved in 2009, through Law No. 26,563, to be in force until December 31, 2011.

The situation of emergency in the social, economic, administrative, financial and exchange areas was declared by section 1 of Public Emergency Law No 25,561 (the “LEP”) issued in 2002. The LEP empowered the Executive Branch to set forth the exchange relation between the Argentine peso and foreign currencies and to enact exchange regulations. It also empowered the Executive Branch to restructure the obligations affected by the modification of the exchange regime and, in relation to the measures to be adopted with respect to obligations linked to the financial system, to grant compensations to the banks. To this effect, the Executive Branch was authorized by the LEP to issue bonds that would be guaranteed with export duties to be applicable on hydrocarbons. Finally, the LEP empowered the Executive Branch to temporarily regulate prices of components, goods and critical services, with the purpose of protecting users and consumers’ rights from possible distortions of the market or from monopoly or oligopoly actions.

With regard to emergency on contracts governed by public law, the LEP set forth the conversion to Argentine pesos of the prices and tariffs fixed in the contracts entered into by the National Public Administration under public law regulations, and rendered ineffective adjustment clauses in foreign currencies and indexation clauses, authorizing the Executive Branch to renegotiate such agreements. In 2003, Law No. 25,790 extended the term to conduct the renegotiation; it was provided that it may include certain sectors of public services or certain agreements in particular. It was also decided that the new negotiations may include partial aspects of concession or license agreements, contemplate agreement adjustments or transitory amendments, as well as periodic revisions or the adjustment of quality standards.

Alimentary emergency was initially declared by Decree No. 108/2002 by which resources were allocated from the national budget for the purchasing of goods for the attention of the highly vulnerable population’s basic needs. These resources were to be allocated among the provinces and the city of Buenos Aires. On the other hand, Decrees No. 165/2002 and No. 565/2002 declared occupational emergency, establishing an economic assistance program for vulnerable sectors of the population. Finally, in the sanitary field, emergency was declared by Decree No. 486/2002, it sets forth that an emergency is necessary to guarantee the population access to goods and basic services necessary for the preservation of health. The Decree authorizes the Ministry of Health to resort to direct contracting for the agreements. It also empowers the Minister of Health to set control mechanisms for medicines and health supplies prices and allows direct imports of supplies in case of unjustified price increases.

When Public Emergency Law was issued, Argentina was enduring one of its worst political, economic and social crises. The declaration of Emergency and the delegation of powers to the Executive Branch, approved through the LEP and the other laws and decrees referred to above were aimed at coping with an exceptional and extraordinary situation. Ten years later it is acknowledged that the situation of the country has improved, but the Executive Branch justifies the extension on the grounds of the existence of an international crisis.

Law No 26,739 came into force on January 1, 2012.

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