It’s the trust funds’ fault.

It’s the trust funds’ fault.

Since the beginning of this government and given the inheritance received, issues related to political funds have arisen that are complex and difficult to solve, but that must be resolved to give a compensatory signal to the tremendous effort made by the population. One of them are the “evil Trust Funds”, which are simply trusts created by the State that, due to their impact, became the central topic of the media debate, where unfortunately they talk about it with little or no knowledge.

Trust Fund, State or Public Trust are synonyms used by ordinary people to refer to projects where the State acts as trustor, transmitting its own assets for a purpose related to its functions. Thus, there are sectors where value could be created such as education, health, security, transportation, routes, etc. Now, in all these sectors, complaints have been filed about trusts that do not fulfill their purpose and act more as sources of handouts, hidden subsidies or political assistance.

Given this, we recommend adding to this classification the need to have a specific objective that makes the public good the primary purpose for the constitution of the fund. To do this, you must have business plans, strategy and detailed planning. This means satisfying a real and specific demand of the population where the State must unequivocally contribute value to the whole, since society will be the one who pays for it. It is not enough to indicate that a trust is based on fighting fires since, due to its sheer breadth and lack of specificity, it is naivete or mischief done on purpose and for purposes other than the public good.

But there are also other trusts that no one talks about, where the State does not trust assets, such as the “Gas Trust” or “Gasoducto Norte-Sur”, created by decree in 2004. In both, the trustors were the private companies Transportadora Gas del Norte SA and Transportadora Gas del Sur SA, with the objective of providing gas pipelines to the country. Since the provision of energy is a strategic issue for economic and social development, there is no doubt about the “public interest” and therefore, they could be included as State trusts. It should be noted that there are already similar categories given by control organizations such as the BCRA, which explain the concept of public interest related to the purpose or object of trusts.

There are many operating trust funds for infrastructure, energy, subsidies, etc. whose evolution is reported quarterly on the website of the Ministry of Economy. If we do a deep technical analysis, we see that the reports never expose the destination or timing of the funds and hide them by grouping them into “current expenses” or “capital expenses” without further detail. Obviously this is of no value to the population since they do not know what or how their money is being spent.

We must keep in mind that the vast majority of these trusts have income via taxes, rates or fees on the consumption of goods (fuels, public services, etc.) or direct transfers from State Ministries. But always, the sources of information are scarce, and there are also others, whose trustors are the provinces, municipalities or state companies that do not appear in said reports and there is no certainty of their existence in a consolidated manner.

For all this, for more than 20 years we have been studying in detail the use of trusts by the State in order to warn about the serious problems they have, both in design and management, since their constitution based on the Law. 24,441/1995 and then, with the new Civil and Commercial Code of the Nation. That is to say, the trust was legislated for private law but the abusive “Prince” has been using it, or rather “misusing” it from the beginning, under the protection of justifying himself with objectives of the common good.

As a result of our work, we have detected serious errors or weaknesses, such as lack of suitable and independent fiduciaries, absence of charts of accounts and homogeneous accounting criteria, lack of external audits of the EECC carried out by independent professionals, lack of specific legislation, delays in the rendering of accounts to the beneficiaries and control bodies and inconsistencies between the rules for creating the trusts and the contracts signed by the parties. In short, they are managed outside the budget and scare with the reckless discretion of spending, with little or no controls and emblematic cases of corruption such as Skanska (Gas Trusts created by decree 180/04 and resolution 185/04) or the “notebooks” case of work awarded to the firm Odebrecht (Transportation Infrastructure Trust decree 976/01).

These funds have as their regulatory framework the provisions of their law, decree or resolution of creation, leading to a heterogeneity of regulations that makes their monitoring and the execution of controls in the application of resources almost impossible. On the other hand, the trust law is used in a “supplementary” way for everything that is not exhaustively written in the creation law. A clear example is Decree No. 902/2012 of the PEN that created the ProCreAr Trust Fund, which provides in its modified text through Decree No. 146/2017 “in everything that is not modified by this document, it will be application of the provisions of Book Three, Title IV, Chapter. 30 and concordant of the Civil and Commercial Code of the Nation.”

From the beginning, regulatory problems arose and thus law 25,565/2002 established the requirement to establish trusts that hold assets from the National State by law. However, decree n°2209/02 establishes that a law is not required to create a public trust when Banco Nación (BNA) or Banco de Inversiones y Comercio Exterior (BICE) were the trustees. For the better, Decree No. 906/04 established the creation of the Investment Advisory Council of the Trust Funds of the National State (composed of two ministries), which was responsible for the transitory investments of the trusts and their application, this being a strict violation. to the meaning of a trust on the obligations of the fiduciary as temporary owner of the assets. All these problems of rules that contradict each other and the lack of clarity in the operation of State trusts, added to the election of trustees who in light of the facts were not up to the task, allowed redirections and abuses, denaturing its essence, generating corruption and preventing the creation of value for development.

Therefore, one of the possible solutions to this reality is to incorporate responsible and specific legislation that frames its actions and controls, but designed and discussed by experts in the matter.

At AAFyFID we promote Direct Investment Funds for all their potential at the service of the Real Economy, including from the State, to generate rapid growth and genuine development from productive activities, since it is the key lever for the reactivation that the country needs in this emergency. Incorporating into the transformative process some State assets that today remain untapped is essential help to unleash and promote the true private “productive revolution.”

We must emphasize that, despite the unique benefits of the figure, the abuse committed by the State installed a mantle of suspicion over the trust, despite the fact that there is no doubt that any instrument used by inexperience or for spurious purposes will always be a fraud or a scam, since it depends on the will of the people involved and not on the instruments.

To achieve this, we make improvement proposals so that they are adopted quickly and thus exploit the full potential of the trust, generating greater well-being for Argentines.

Dr. in Business Management. President of the AAFyFID and Full Professor of UCEMA

Source: Ambito

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