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

This paper analyzes detailed data on the pre- and post-privatization perfor mance of publicly-owned provincial banks in Argentina. It estimates fiscal savings associated with privatization and describes the technical process t hat was used. The process included the creation of residual entities for th e liabilities that private buyers found unattractive. The paper argues that the Fondo Fiduciario, which was created to convert the short-term liabilit ies 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 d esirability and feasibility of future privatizations. (C) 1999 Elsevier Sci ence Ltd. All rights reserved.