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BUENOS AIRES, Argentina -- The growth potential in the deregulated Argentinian health care and workers compensation insurance markets is prompting a $50 million investment in two local insurers.

International Managed Care Advisors' investment in two insurance subsidiaries of Banco de la Provincia de Buenos Aires will be IMCA's first investment in a company outside of the United States, said Mark H. Tabak, president and chief executive officer of IMCA in New York.

IMCA was founded last year as the health care arm of Insurance Partners L.P., a $540 million private-equity fund established in 1994 to invest in insurance-related ventures.

The investment will help boost Banco Provincia's financial strength and management, said a statement by Alberto Fernandez, president of Gerenciar, the division of Banco Provincia that oversees its insurance holdings.

"IMCA is a valued partner that will enhance the financial strength and the. . .management team of Gerenciar," the statement said.

The bulk of the new investment will be used to set up a new health care insurer, Provincia Salud.

IMCA will pay $35 million for a 40% stake in Provincia Salud, Mr. Tabak said.

The new health insurer initially will target business in the capital city and then expand to write business throughout the province of Buenos Aires, he said.

In addition to providing capital, IMCA will provide consulting to the local managers on managed care issues, Mr. Tabak said.

"We want to take advantage of the privatized health care market in Argentina and leverage the experience of IMCA," he said.

The Argentinian health care system is changing, which should mean a marked increase in the size of the private health care market, Mr. Tabak said.

About 40% of the population is covered by the state system, which provides largely hospital-based free health care, he said.

"But the costs are out of control, so the government is encouraging privatization," Mr. Tabak said.

So far, the main vehicles outside the state system have been a limited number of plans based on employee and employer payroll contributions, called Obras Sociales and Provincial Sociales, he said.

In 1997, the government allowed employees more choice among the plans, and the government is expected to deregulate the system within the next two years to allow employees to enroll in other private health care plans, Mr. Tabak said.

The remaining $15 million of IMCA's investment will be in Provincia A.R.T., a workers comp managed care company affiliated with Banco de la Provincia.

"The money will primarily be used to expand the business by enhancing the management information systems and service of A.R.T.," Mr. Tabak said.

A.R.T. has 1.1 million members, mainly in the city of Buenos Aires. Like its health insurer counterpart, the workers comp insurer intends eventually to expand throughout the province.

Argentina first introduced a U.S.-style workers compensation system in 1996 (BI, June 10, 1996).

IMCA, which to date has invested in one other company, which is in the United States, plans to increase its international expansion, Mr. Tabak said.

The investment company currently is contemplating investments in Brazil and Mexico, he added.

Latin America is potentially a fruitful area for health care investments, said Paul H. Warren, managing partner of IMCA and a partner at Insurance Partners.

"From a health care development and investment perspective, we continue to believe that Latin America holds more than a few exciting possibilities for us," he said.