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Summary of Recommendations

Currency (for immediate action)

· Officially dollarize.

· Retire from circulation all notes of the Banco Central de la República Argentina (BCRA) and

all deposits at the BCRA; replace them with dollar assets.

· Allow coins in circulation or already minted to continue, but require new dollar-denominated

coins to be issued by the U.S. Federal Reserve System or by banks.

· Reform the central bank to strip it of all monetary policy functions.

· Allow banks to issue notes (paper money) denominated in dollars .

· Convert peso interest rates into dollars.

Financial system (for action immediately or soon)

· Allow or even encourage "offshorization" of the banking system.

· To the extent possible, reverse the damage from pesofication of deposits.

· Modify the deposit freeze to allow banks that wish to pay deposits to do so. Unfreeze all

deposits within three years and make banks pay a penalty rate of interest on frozen deposits in

the meantime.

· Remove minimum liquidity requirements immediately.

· Remove interest-rate ceilings immediately.

· Sell government-owned banks.

Government finance (for action immediately or soon)

· Reduce tax rates. It is possible that lower tax rates will quickly result in higher tax revenues. In

the short term, cut the value-added tax to 15 percent; combine the payroll and income taxes

into a flat-rate tax of 25 percent with no exemptions; abolish the financial transaction tax, pre-

sumptive minimum tax, and personal assets tax. In the longer term, reduce the value-added tax

to 10 percent and reduce the personal and corporate income taxes to 20 percent.

· Introduce a transparent fiscal framework for the federal and provincial governments, including

published balance sheets and income statements using an accrual basis (not the current cash

basis); annual audits by outside firms; and adherence to generally accepted accounting princi -

ples.

· Make the provinces more responsible for their own tax revenues.

· Give priority to repaying domestic debt; repayment of foreign debt will have to wait until the

economy begins growing again.

Expected results

· Lower interest rates.

· Rising bank liabilities (deposits, bank notes, etc.) and loans.

· More seigniorage (profit from issuing notes) retained by financial system.

· A return to economic growth, though sustaining growth will require continued effort.

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