Why privatize? The case of Argentina's public provincial banks

This paper analyzes detailed data on the pre- and post-privatization performance of publicly-owned provincial banks in Argentina. It estimates fiscal savings associated with privatization and describes the technical process that was used. The process included the creation of residual entities for the liabilities that private buyers found unattractive. The paper argues that the Fondo Fiduciario, which was created to convert the short-term liabilities of the residual entities into long-term obligations, helped make these privatizations politically feasible. Given the substantial number of state-owned banks in developing countries, this paper provides insight into the desirability and feasibility of future privatizations. (C) 1999 Elsevier Science Ltd. All rights reserved.