Document of The World Bank FOR OFFICIAL USE ONLY Report No: 38464-AR PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$ 126.7 MILLION TO THE PROVINCE OF SANTA FE – ARGENTINA WITH THE GUARANTEE OF THE ARGENTINE REPUBLIC FOR A PROVINCE OF SANTA FE ROAD INFRASTRUCTURE PROJECT January 9, 2007 Sustainable Development Department Argentina, Chile, Paraguay and Uruguay Country Management Unit Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of The World Bank
FOR OFFICIAL USE ONLY
Report No: 38464-AR
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$ 126.7 MILLION
TO THE
PROVINCE OF SANTA FE – ARGENTINA
WITH THE GUARANTEE OF THE ARGENTINE REPUBLIC
FOR A
PROVINCE OF SANTA FE ROAD INFRASTRUCTURE PROJECT
January 9, 2007
Sustainable Development Department Argentina, Chile, Paraguay and Uruguay Country Management Unit Latin America and the Caribbean Region
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective January 9, 2007)
Currency Unit = AR Peso AR$1.00 = US$0.32
=
FISCAL YEAR January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AADT Annual Average Daily Traffic AGN Argentine Supreme Auditing Institution (Auditoría General de la Nación) AUFE Rosario-Santa Fe Highway CAC Argentine Chamber of Construction CAS Country Assistance Strategy CREMA Performance-based Rehabilitation and Maintenance Contracts (Contrato de Rehabilitación
y Mantenimiento por Resultados) DNV National Directorate of Highways (Dirección Nacional de Vialidad) DPV Provincial Road Agency (Dirección Provincial de Vialidad) ESMP Environmental and Social Management Plan ERR Economic Rate of Return FAP Fiduciary Action Plan FM Financial Management FRL Federal Fiscal Responsibility Law (Régimen Federal de Responsabilidad Fiscal) GDP Gross Domestic Product GGP Gross Geographic Product GoA Government of Argentina GoP Government of the Province HDM Highway Design and Maintenance Standards Model IBRD International Bank for Reconstruction and Development IFPA Interim Financial Performance Assessment IIRSA Initiative for the Integration of Regional Infrastructure in South America INDEC National Institute of Social and Population Statistics (Instituto Nacional de Estadísticas y
Censos) IPSAS International Public Sector Accounting Standards IRI International Roughness Index IUFR Interim Unaudited Financial Report MRM Modified Rational Method NFPS Non financial Provincial Public Sector NPV Net Present Value OCCOVI Concessioned Roads Regulatory Agency (Organo de Control de Concesiones Viales) PCA Portland Cement Association PFO Fiscal Financing Programs (Programa de Financiamiento Ordenado)
PRP Provincial Road Infrastructure Project PSF Province of Santa Fe RAP Resettlement Action Plan ROW Right of Way SEA Strategic Environmental Assessment SBD Standard Bidding Document SIL Specific Investment Loan SIPAF Provincial Integrated Financial Management System SPIFE Undersecretary of Investment Projects and External Financing UG Project Implementation Unit (Unidad de Gestión)
Vice President: Pamela Cox Country Manager/Director: Axel van Trotsenburg
Sector Director: Laura Tuck Sector Manager: Jose Luis Irigoyen
Sector Leader: Juan Gaviria Task Team Leader: Tomas Serebrisky
ARGENTINA AR Santa Fe Road Infrastructure
CONTENTS
Page
A. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues..................................................................................................................... 1 2. Rationale for Bank involvement .......................................................................................................... 8 3. Higher level objectives to which the project contributes ..................................................................... 9
B. PROJECT DESCRIPTION ............................................................................................... 11 1. Lending instrument ............................................................................................................................ 11 2. Project development objective and key indicators ............................................................................. 11 3. Project components ............................................................................................................................ 12 4. Lessons learned and reflected in the project design ........................................................................... 14 5. Alternatives considered and reasons for rejection.............................................................................. 15
C. IMPLEMENTATION ........................................................................................................ 15 1. Institutional and implementation arrangements ................................................................................. 15 2. Monitoring and evaluation of outcomes/results ................................................................................. 16 3. Sustainability...................................................................................................................................... 17 4. Critical risks and possible controversial aspects ................................................................................ 18 5. Loan/credit conditions and covenants ................................................................................................ 20
Annex 9: Economic and Financial Analysis ............................................................................. 75
Annex 10: Fiscal Framework for the Implementation of a Road Infrastructure Project in the Province of Santa Fe............................................................................................................. 80
Date: January 9, 2007 Team Leader: Tomas Serebrisky Country Director: Axel van Trotsenburg Sector Director: Laura Tuck Sector Manager: Jose Luis Irigoyen
Sectors: Roads and highways (95%); General public administration sector (5%) Themes: Infrastructure services for private sector development (P); Sub-national government administration (S); Trade facilitation and market access (S)
Project ID: P099051 Environmental screening category: B Lending Instrument: Specific Investment Loan (SIL) Safeguard screening category: S2
Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Loan Currency: United States Dollars Amount of Loan: US$126.7 million Proposed Terms: Fixed-Spread Loan. Grace period (years): 5 Years to Maturity: 15 years Commitment Fee: 0.75% of undisbursed balance, subject to waiver. Front-End-Fee on Bank Loan: 1% subject to waiver
Financing Plan (US$m) Source Local Foreign Total
BORROWER 46.40 0.00 46.40 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
0.00 126.70 126.70
Total: 46.40 126.70 173.10 Borrower: Province of Santa Fe, Argentina Ministerio de Hacienda y Finanzas, Provincia de Santa Fe 3 de Febrero 2649. 1er piso Provincia de Santa Fe (3000) Responsible Agency: Unidad de Gestion del Programa de Infraestructura Vial – Santa Fe Av. Artura Illia 1153 – 8vo piso Centro Cívico Provincia de Santa Fe (3000) Argentina Tel: (54-342) 4506-865 Guarantor: Argentine Republic
Does the project depart from the CAS in content or other significant respects? Ref. PAD A.3 [ ]Yes [X] No Does the project require any exceptions from Bank policies? Ref. PAD D.7 Have these been approved by Bank management? Is approval for any policy exception sought from the Board?
[ ]Yes [X] No [ ]Yes [ ] No
[ ]Yes [X] No Does the project include any critical risks rated “substantial” or “high”? Ref. PAD C.4 [ ..]Yes [X]No Does the project meet the Regional criteria for readiness for implementation? Ref. PAD D.7 [ X]Yes [ ] No Project development objective Ref. PAD B.2, Technical Annex 4 The overall purpose of the project is to improve transport conditions along a strategic road corridor that links the Province of Santa Fe with regional and international markets. Adding capacity to National Road 19, a key component of a major bi-oceanic corridor that links the PSF and the Center Region with Chile and Brazil will reduce logistics costs, facilitate access to major regional consumption and export markets and foster the effective economic integration of the Center Region provinces. Project description Ref. PAD B.3., Technical Annex 4 Component 1: Upgrading of National Road 19 (Estimated cost, including contingencies, US$167.4 million of which US$123.9 million would be financed by the Bank Loan) Component 2: Institutional Strengthening (Estimated cost US$2.8 million, all Bank-financed). This component will consist of four subcomponents: Sub Component 2.1- Road Safety Sub Component 2.2: Systemic measurement of logistics costs in the PSF Sub Component 2.3: Strengthening the planning capacity of the PSF to elaborate a new strategic development Sub Component 2.4: Strengthening DPV’s capacity to enhance environmental and social management Sub Component 2.5:Design a capacity building program to incorporate monitoring and evaluation analysis in infrastructure projects Which safeguard policies are triggered, if any? Ref. PAD D.6, Technical Annex 11
(i) Environmental assessment; (ii) Cultural property policy; (iii) Involuntary Resettlement. Significant, non-standard conditions, if any: None Board presentation: None Loan effectiveness: The Condition of Effectiveness consists of the presentation to the Bank of a letter from DNV to the Borrower (on terms acceptable to the Bank) within the legal framework governing the Convenios whereby DNV represents and reiterates: (a) that the term “proyecto aprobado” as referred to in Article 6 of the Convenio Complementario No. 2 includes all pertinent socio-economic and environmental plans to be implemented during the carrying out of the works referred to in said Article; and (b) that it has complied to date of said letter, and its commitment to continue to comply, with the pertinent provisions of the Environmental and Social Management Plan, prior to and/or during the carrying out of the works mentioned in (a) herein, pursuant to Article 6 of the Convenio Complementario No. 2 Covenants applicable to: Implementation a) Financial management: (i) Section II, B.3 “Standard” wording for project audits. The annual audited financial
statements will be furnished to the Bank not later than six months after the end of each year.; (ii) Section II, B.2 “Standard” wording for UIFRs. Quarterly UIFRs will be submitted to the Bank not later than 45 days after the end of each calendar quarter; and (iii) Loan dated covenant: a specific line for the project will be set out in the annual budget to keep track of project’s budget execution processed in the Provincial Integrated Financial Management System (SIPAF).
Monitoring and Evaluation b) Project progress reports to be prepared by UG and furnished to the Bank on a semi-annual basis for review.
These reports should refer to progress made under the different components of the Project, and measure performance against the results indicators established in the results framework.
c) The Borrower to measure on a semi annual basis the evolution of road accidents in Provincial Roads 1 and 21 to assess the impact of road safety interventions.
d) The Borrower to conduct two additional Origin-Destination surveys to take place two and four years after the widening of Road 19 is completed in order to capture the impact of this investment. The Province will submit to the Bank the results of the studies
e) The Borrower to cause UG to prepare under terms of reference acceptable to the Bank an assessment of the
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impacts of the Project (enhanced road condition, reduced transport costs and travel times and increased road safety). UG shall present the results at the Mid-Term Review meeting and at Project end.
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A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues 1. Argentina’s recovery from the deep economic crisis of 2001-02 has been impressive. Sparked by increased exports and a gradual increase of consumption, GDP has surpassed the pre-crisis level, growing at an average rate of 9 percent between 2003 and 2005. For 2006, a growth rate of about 8.5 percent is projected. The recovery has been pro-poor as earnings of the low income segments of the population have grown faster during the upturn than the average for the population as a whole. The challenge for Argentina is to build on the strong recovery, laying the foundations for sustainable, more equitable shared economic growth. Restoring public investment in a sustainable and efficient path to remove infrastructure bottlenecks, fostering productivity and increasing competitiveness are necessary conditions to achieve sustained high rates of economic growth. 2. Given the nature of the productive activity in Argentina, with agriculture and industry generating about 45 percent of total Gross Domestic Product (GDP), the role of the transport sector in the country’s economy is of paramount relevance, enabling regional integration and facilitating access to international markets. The transport sector gained even more importance after the devaluation of 2002 given the new favorable terms of trade of Argentine commodities. The change in relative prices modified the GDP composition, accentuating the production of goods and increasing the demand for transport services. The surge in exports1, coupled with a notable recovery of domestic consumption is keeping the pressure on the transport sector, which is likely to continue if the Argentine economy keeps the high rates of growth observed since 2003. 3. As such, an important priority of the current administration at the national level is to ensure the provision of adequate transport services to support the increased production potential, enhance the overall competitiveness of the country and develop domestic markets with the ultimate objective of improving standards of living. Since it has been estimated that nearly 60 percent of logistics costs in the country are transport costs2, the key challenge is to reduce the operating and time costs linked to transport activity through an improvement of the associated assets. For this reason, complementing the increasing allocation of national and provincial budget to the transport sector, the Bank has approved in recent years several loans to the Government of Argentina to support the execution of road investment programs at the provincial level3. These projects seek to improve the reliability of essential roads that facilitate access of provincial production to markets, as a means of facilitating the return to a path of sustained economic growth and poverty alleviation. 1 In 2004 and 2005, exports accounted for 25.3 percent and 24.6 percent, respectively, of GDP (measured in dollars), a notable increase compared to an average of around 9 percent during the 1990s. Source: National Institute of Statistics (INDEC) 2 Estimates for the agricultural sector by the Rosario Chamber of Commerce (Bolsa de Comercio de Rosario) indicate a 38 percent incidence of transport in the cost structure of the agricultural commercialization chain. 3 Provincial Road Projects I and II (PRP I AR 4093 and PRP II AR 7301). These loans are under an on-lending scheme to provinces and the Province of Santa Fe has participated in both. Annex 15 presents the Bank’s road strategy in Argentina
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4. The Province of Santa Fe within the Argentine context: the Province of Santa Fe (PSF) with an area of 133,007 square kilometers and a population of 3.2 million accounts for, respectively, 4.8 percent and 8.9 percent of Argentina’s size and population. The Province’s favorable location in the Center Region (comprised of Córdoba, Entre Ríos and Santa Fe) along 700 km of navigable waterways (Hidrovía Paraguay-Paraná) provides the most convenient gateway for Argentina’s agricultural exports. Furthermore, it is in the heart of a land corridor that connects the south of Brazil with ports in the north of Chile. 5. The PSF has enjoyed, since 2003, strong economic growth and is currently the third largest provincial economy in Argentina. Table 1 compares the evolution of a series of economic indicators in the PSF and Argentina.
Table 1: Economic indicators. Province of Santa Fe and Argentina SANTA FE ARGENTINA EXPORTS US$
Industrial 952 8.8% 11,935 25% Total 7,690 7.3% 40,013 15.8% INDUSTRIAL PRODUCTION
Industrial Monthly Estimator
7.8% 7.4%
UNEMPLOYMENT (first semester 2006) Unemployment rate (average of Gran Rosario and Gran Santa Fe)
10.8%
10.9%
POVERTY (data for second semester 2005) Percentage of population under the ‘poverty line’
32.5% 33.82%
Source: Sintesis de Coyuntura Económica Provincial, Ministerio de Hacienda y Finanzas, Santa Fe
6. The PSF is making substantial progress toward diversifying its economy with the emergence of industrial clusters (Rafaela being the most frequently cited example) dedicated to the production of auto parts and agricultural machinery. However, its economy still has a clear agroindustrial profile, having the soybean oil, meat, dairy and milling processing complexes the highest share of the provincial output. The change in relative prices caused by the 2002 devaluation had a notable positive impact on the province’s primary sector and agroindustrial exports. The PSF accounts for 42 percent of Argentina’s agroindustrial exports and is the largest exporter of soybean oil in the world.
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7. All sectors of the provincial economy face serious transport and logistics problems. The competitiveness of the agro-businesses established in the center and north regions is affected by the poor condition of the road corridors to the ports of Gran Rosario and the city of Santa Fe. Given the nature of the productive activities in the PSF, the road network is heavily congested during the harvest months and the limited success of intermodal transport is creating social problems for towns located near ports. Roads are the main transportation mode of the province concentrating nearly 80 percent of total freight volumes while the remaining 20 percent is transported by train, river and a very small share by plane. As a consequence, efficiency gains achieved in the road sector are crucial to enhance the overall transport sector performance. 8. Santa Fe Government’s strategy for the road sector. In order to address transport and logistics problems, the PSF has been concentrating efforts to design and implement an agenda to increase the efficiency of the road sector4. The change started during the 90s, when the national government decided to decentralize expenditures and financing responsibilities in the road sector to the provinces. The PSF has been gradually transforming its operations within the road sector, transferring the execution of works to private contractors, focusing the capacity of its road agency towards more efficient planning, and the prioritization of investments based on cost-efficient criteria. 9. The road network in the PSF, under national and provincial jurisdiction, has a total length of about 16,600 km (37 percent paved). More than 70 percent of total traffic volume is concentrated in the paved national and provincial network (the tertiary network under municipal jurisdiction, consists of unpaved roads, access to farms and feeder roads with very low traffic volumes). Provinces in Argentina rely on four financing sources to upgrade and maintain their road network: Road Coparticipation Fund, Provincial Treasury budgetary allocations, external financing (multilateral institutions) and revenue collection from concessioned provincial toll roads. The relative weight of the Road Coparticipation Fund, a fund that is fed by gasoline taxes and is distributed by the national government, has been decreasing steadily since the 90s. Revenues from tolls have also decreased as tolls in real terms have fallen significantly since 2002. Consequently, provincial treasuries have practically become the sole responsible for provincial road network financing. The economic crises of 2002 required the PSF to halt the financing of all road construction and maintenance activities. However, in recent years the PSF has significantly increased the Provincial Road Directorate (DPV) budget, boosting it from US$ 2 million in 2002 to US$79 million in 2005. 10. The strategy adopted by the PSF to improve the condition of the road network is based on two main pillars: (i) facilitate traffic flows along the major road corridors in the province; and (ii) rehabilitate and maintain those provincial roads with the highest level of actual and potential traffic and in worse structural conditions. At the request of the PSF, the Bank, through the Provincial Road Projects I and II5 (PRPI and PRPII), is already providing financial support to achieve the second pillar. Based on a comprehensive view of the road network, the proposed
4 The PSF not only concentrates on the road sector. It is working with the national government to improve the efficiency of railways and waterways as both sectors fall under national jurisdiction. The majority of ports in the province are private but there are projects to relocate the Port of Santa Fe to provide shippers with an alternative to the Gran Rosario area. Feasibility studies are being financed by Fonplata. 5 AR 4093 and AR 7301
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project aims at helping the province accomplish the first pillar. The first corridor, measured by traffic levels is the road between Santa Fe and Rosario (continuing to Buenos Aires). This corridor does not have congestion problems because its capacity was expanded during the late 90s. The national government is currently financing the upgrading of National Road 9 –the road corridor with the second highest traffic level in the PSF- between the cities of Rosario and Córdoba6. The third most important corridor is National Road 19. By upgrading National Road 19 and taking into account that National Road 34 will also be upgraded in the next few years (through an unsolicited proposal that is in an advanced planning stage), the PSF would have upgraded all major trunk roads in its territory. 11. National Road 19. The PSF considers the upgrading of National Road 19 to a four lane road to be a fundamental step to foster regional integration in the Center Region and improve the reliability of a bi-oceanic corridor that links the province with regional and international demand centers. The investment in National Road 19 is a priority component of an infrastructure strategy being developed by the PSF, aimed at sustaining recent high rates of economic growth and position Santa Fe as the most competitive province in Argentina. The infrastructure strategy includes projects under the jurisdiction of the national government, an example being the dredging of the Paraná River, and others under provincial jurisdiction, like the relocation of the Santa Fe city port. This strategy is expected to be supported by the Bank through the project Logistics Node Rosario-Santa Fe which was included in the CAS endorsed by the Board in June 2006. The upgrading of National Road 19 falls under the jurisdiction of the national government. However, in a situation characterized by limited fiscal resources and significant infrastructure backlogs, the national government has opted to prioritize other infrastructure projects. In this context, the PSF has requested authorization from the national government to take the responsibility of financing the upgrading of National Road 19 (Annex 6 summarizes the agreements between federal and provincial agencies required for project implementation). 12. The upgrading of National Road 19 will have a notable effect on regional integration. Not only will it foster productivity and competitiveness through reductions in transport and logistics costs but it will also contribute to the effective integration of the Center Region. Although preliminary plans to form a political and economic region among the provinces of Córdoba, Santa Fe and Entre Ríos dates back to 1973, it gained momentum when the constitutional reform of 1994 authorized the provinces to form inter-provincial regions, and was officially launched in 2004. The Center Region currently accounts for 20 percent of the Argentine population, 30 percent of exports, 40 percent of total agricultural and livestock activity and 25 percent of Argentina’s GDP. The first document7 produced by the Center Region governing body analyzed the infrastructure gaps that needed to be addressed to achieve an effective integration. National Road 19 was listed as a top priority as it links the three provinces and is part of a bi-oceanic corridor that provides a gateway for the Center Region’s exports. 13. There is an ample consensus in the private sector regarding the need to upgrade National Road 19. The two main chambers of commerce in PSF8 produced a joint report9 to contribute to
6 National Road 9 and the highway between Santa Fe and Rosario have traffic levels that exceed 8,000 Average Annual Daily Traffic (AADT). 7 Región Centro: Tierra de Oportunidades. Ejes Temáticos Fundamentales. August 2004. 8 Bolsa de Comercio de Santa Fe y Bolsa de Comercio de Rosario, 2004.
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the formulation of a strategic plan for Center Region. In said report, the upgrade of National Road 19 between San Francisco and Santa Fe was recognized as a necessary infrastructure intervention to facilitate the flow of goods in the Center Region. 14. With a broader integration perspective, the Initiative for the Integration of Regional Infrastructure in South America (IIRSA), considers the Axis Mercosur-Chile as one of the ten integration hubs in South America. This axis is the main industrial area in South America, with high value added industries (automotive, construction materials, petrochemical, agroindustrial) and one of the most productive agriculture lands in the world. According to IIRSA10, interregional trade among Mercosur countries and Chile has grown more than the trade volume between the same countries and other commercial partners outside Mercosur. However, further increases in the commercial flows, which are essential to the formation of more efficient supply value chains in both ends of the Axis are threatened by the poor state and capacity of infrastructure. To this end, IIRSA prioritized the upgrade of National Road 19 as it is an integral part of the bi-oceanic corridor that constitutes the Axis Mercosur-Chile. 15. Traffic levels along National Road 19 in the territory of the PSF have been growing significantly. Between the last study conducted by the National Directorate of Highways (DNV) in 2003 and the one carried out for project preparation in March 2006, Annual Average Daily Traffic (AADT) grew approximately 40 percent. Traffic composition changed, increasing the relative importance of trucks that in some segments of the road account for more than 45 percent of total traffic. According to the latest traffic study, it is expected that the average AADT will exceed 7,500 by 2015 in all segments of the road in the PSF11, with AADT exceeding, by 2015, 10,000 in segments close to urban areas. 16. Given National Road 19 is under the jurisdiction of the national government, once the upgrading works are completed, the PSF will hand the new assets to the DNV. Maintenance of the new assets will be the sole responsibility of the national government. At present, National Road 19 is concessioned to a private operator but the concession contract allows for the public financing and execution of upgrading projects (see box 1).
9 Aportes para la Formulación del Plan Estratégico de la Región Centro de la República Argentina. Informe Técnico N2: Relevamiento de Acciones Gubernamentales y Obras de Infraestructura de Transporte y Logística a Evaluar con el Gobierno de la Provincia de Santa Fe. Bolsa de Comercio de Santa Fe y Bolsa de Comercio de Rosario, November 2004. 10 www.iirsa.org 11 In March 2006 the average AADT was 5,000. The estimated traffic levels assume the upgrading of National Road 19, which implies induced and deviated traffic.
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17. Santa Fe’s fiscal situation. Despite the merits of investment in road infrastructure, it is necessary to point out that, due to recurrent economic crises in the last few decades, investment in the Argentine road sector has been characterized by a ‘stop-and-go’ process, whereby resources are allocated to the road sector when the economic situation allows it and funds are available, or whenever urgent interventions on the road sector can not be postponed anymore. A road financing scheme, with a stable and predictable flow of dedicated resources has not been successfully designed and implemented. Accordingly, a sustainable and effective plan aimed at reducing the persistent road infrastructure backlog has never been put into practice. The main reason for the stop-and-go approach in the road sector has been the absence of fiscal space. 18. Consequently, in all infrastructure on-lending operations to the provinces after the crisis (Provincial Road Projects I and II, Buenos Aires Infrastructure and Cordoba Road Infrastructure in the road sector) the Bank has conducted a general review of each participating provincies fiscal situation. For the preparation of this operation, the PSF’s fiscal accounts were analyzed jointly with the province and a framework designed to support the fiscal space required to ensure the sustainability of infrastructure spending.12 19. The Province of Santa Fe has been historically characterized by orderly fiscal accounts and stable fiscal indicators. Even during the deep 2001-02 crisis, and unlike the majority of Argentine provinces, the PSF did not resort to provincial bond issues to cover salary and pension payments, nor did it require national government aid in restructuring its debts. Economic and 12 For a detailed description of the PSF fiscal situation see Annex 10.
Box 1: Road concessions in Argentina. National Road 19 During the early 90s, the Government of Argentina concessioned high traffic roads under its jurisdiction. The aim of this process was to leave the financing and execution of works to the private sector while DNV would be responsible for efficient planning and supervision of the primary road network. Under the original concession scheme private investment of construction works would be financed by tolls. A total of 8,878 km were concessioned to 14 consortia. In 2001, a new agency (OCCOVI) was created to regulate road concessions. Initially concession contracts involved rehabilitation and upgrading works as well as operation and maintenance. However, when these contracts expired in 2003, new operation and maintenance contracts were awarded for a 5-year period. Under the new concession scheme, the Government bears the responsibility for expansion and rehabilitation investments. Thus, public sector financing of National Road 19 capacity expansion was an event foreseen in the 2003 concession contract. Roads were regrouped in 8 corridors, being National Road 19 part of ‘Corredor Vial 3’. This corridor was awarded by Decree 1007/2003 to Vial 3 SA. The concession contract is not under renegotiation and will expire in 2008. CorredorVial 3 comprises the following roads:
National Road N9 205, 39 km National Road NºA-012 41,83 km National Road Nº11 463,84 km National Freeway NºA-009 12,06 km National Road Nº19 280, 20 km National Road Nº188 479,25 km National Freeway Rosario-Armstrong 17,563 km
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fiscal conditions did, however deteriorate significantly as national and provincial revenues fell while debt service obligations climbed. 20. Fiscal conditions in the Province of Santa Fe have improved significantly since 2002. The Province is gradually consolidating its budget balance. As a consequence of the devaluation triggered by the national crisis, the Province’s public debt sustainability indicators and fiscal framework were severely affected. In 2001, the Provincial budget showed a deficit equivalent to 11 percent of current revenues and an indebtedness that peaked at 87 percent of current revenues in 2002. Since then, the economic recovery has been solid and revenues have increased substantially. As a result of an austere budget policy, which included the suspension of automatic salary adjustments and a 40 percent reduction in public investment spending with respect to budget resources between 1999 and 2002, the provincial fiscal framework has improved dramatically. Primary surpluses of 19 percent and 12 percent of current revenues were obtained in 2004 and 2005, respectively. The improvement in the fiscal stance has translated into a reduction in the debt stock from 87 percent of current revenues in 2002 to 35 percent in 2005, and a fall in debt service as a proportion of current revenues from 11 percent in 2002 to 8.4 percent in 2005. To further strengthen its fiscal position, the PSF has created a fiscal reserve fund and has pre-paid some of its debt. 21. During project implementation, the Federal Fiscal Responsibility Law (Ley Federal de Responsabilidad Fiscal No 25.917, FRL) and a set of fiscal monitoring indicators will provide the setting for monitoring and evaluating the fiscal framework of the Province of Santa Fe.13 The Province of Santa Fe adhered to the FRL in June 2005.14 The FRL sets general rules in terms of budget management and fiscal targets linked to budget balance and to the sustainability of public debt. While current provincial economic and fiscal conditions are favorable, some risks remain. Fiscal health could be adversely affected by a number of factors, including a rapid expansion of current spending due, for example, to wage increase demands or to a significant decline in revenues linked, for example, to a slowdown in growth. More generally, there is some uncertainty with respect to the full implementation of the FRL at the national level, as well as to whether the law’s implementation will lead to sustained fiscal discipline. As the FRL is still at its early stages of implementation, the likelihood of these risks materializing is still unclear. 22. Issues to be addressed and the need for institutional strengthening. The opportunity provided by the relatively comfortable fiscal situation the PSF enjoys opens the possibility to fund key infrastructure projects necessary to sustain a process of economic growth. During the crisis investment in infrastructure fell below 1 percent of GGP (Gross Geographic Product, a proxy for provincial GDP) although it rose to 1.7 percent in 2005. It is the intention of the PSF to increase this to 2.5 percent in the near term. The PSF has requested to work jointly with the Bank in the design of institutional strengthening components aimed at (a) creating provincial capacity to better plan and implement infrastructure investments, including monitoring and evaluation and measurement of logistics cost, and (b) improve road safety, a critical area for the PSF.
13 This methodology to monitor the fiscal framework in a way consistent with the rules defined under the FRL is being used in other infrastructure projects recently approved by the Bank such as the Buenos Aires Infrastructure Project, and the Provincial Road Infrastructure Project. 14 Via Provincial Law No 9.237
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• Improving road safety standards. Argentina’s road network faces a serious problem with poor road safety records, revealing a road crash fatality rate three times greater than the current rate of best practice countries (Sweden, United Kingdom, the Netherlands, New Zealand). Even in a regional comparison, Argentina leads the ranking for Latin American countries with an average rate of 20 deaths per day (11 deaths per 100 million kilometers traveled). Costs directly associated with road crashes in Argentina represented 1.75 percent of the GDP in 200515. Within this context, the PSF is second in the ranking of road crash rates by province (526 deaths during 2005 with an estimated cost of US$500 million). The provincial government has recently started working on a plan to improve road safety but more has to be done to change the current trend of increasing road fatalities.
• Systemic measurement of logistics costs in the PSF. The PSF has significant competitive
advantages in the production of agroindustrial products. However, in order to gain new export markets, in particular for high value added products, the PSF needs to reduce its logistics costs. All available logistics cost estimates are aggregated at the country level which makes it difficult for provincial governments to assess their relative position through benchmarks and accordingly define an agenda with concrete and well targeted policies. The PSF is interested in creating the capacity within the provincial administration to conduct periodic surveys to measure logistics costs in the PSF (ideally to be extended to the Center Region through agreements with Córdoba and Entre Ríos). The surveys will allow the identification of infrastructure bottlenecks or trade facilitation practices that hinder the optimization of logistics costs and will provide valuable inputs for the identification of investment policies and regulations with high economic and social rates of return.
• Reinforce the planning capacity of the PSF to elaborate a new strategic development plan.
The PSF has enjoyed high rates of growth in the last three years, and the Province would like to create the conditions to make this process sustainable. The PSF has been working with the federal government providing inputs to the Strategic Plan for Territorial Development which is being prepared by the Ministry of Planning (activity that is being partially funded by the Bank). The PSF has realized that it needs to produce its own regional development plan to effectively reach those areas with the highest incidence of poverty, helping them to generate the conditions to increase local productivity and the competitiveness of local products in domestic and international markets. The main problem the PSF faces in the area of planning is lack of coordination and experience. In the context of this project the province has requested guidance to elaborate a new strategic development plan. A step that has to precede the elaboration of a plan is a diagnostic of the current institutional set up. This project will contribute to the province’s need by providing a diagnostic and proposing mechanisms to improve coordination among agencies and setting up an efficient information-sharing system.
2. Rationale for Bank involvement 23. Over the past years, the Bank has played a key role in the transformation process of the road sector in the country. Through several projects both at the federal and provincial levels, Bank engagement in Argentina’s road agenda has contributed to reduce the infrastructure
15 Source: Institute of Road Safety (ISEV).
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backlog and to strengthen technical, managerial and environmental capacities of the participating Road Agencies (DNV and six DPVs16). 24. The Bank’s strategy on infrastructure goes far beyond the financing of road assets. In recent years the Bank has worked with the three levels of governments and in those sectors with most urgent need of upgrading their infrastructure (see Annex 2 for the list of projects). In all projects, the Bank has been paying particular attention to the following areas: (i) sustainability and quality of expenditures: to place infrastructure investments within a broader fiscal framework in an attempt to ensure that investment and maintenance expenditures do not suffer the stop-and-go pattern that has often characterized them in the past, and that they are consistent with broader fiscal and debt management policy, and (ii) reducing fiduciary problems by providing incentives to avoid excessive prices and working with government agencies to improve the design of bidding documents. 25. In the road sector, at the federal level, Bank-financed operations have supported the development and implementation of CREMA contracts for the rehabilitation and maintenance of non-concessioned roads under a network-wide approach, and the gradual transformation of the DNV into an evermore results-oriented organization. Bank operations at the provincial level have supported the design and execution of more efficient road programs based on appropriate design and maintenance standards, improved the efficiency of investments in the provincial road network and financed works to upgrade and rehabilitate selected segments of the core networks under traditional ad-measurement type contracts. Since 1995 multilateral organizations have financed about 36 percent of total investments in roads under the jurisdiction of DNV (the Bank’s share of this amount being approximately 50 percent). The proposed project will further the agenda, complementing the improvement of feeder roads with the upgrading of a major road that will foster regional integration and will facilitate the flow of goods in the Center Region provinces as well as in the Mercosur Region. 3. Higher level objectives to which the project contributes 26. The overall and specific objectives of this operation are fully consistent with the Country Assistance Strategy (CAS)17 discussed by the Board on June 6, 2006. The main objective of the IBRD-IFC Joint CAS is to seek opportunities to build an investment partnership to support Government efforts to make the transition from emergency response and crisis recovery, with an emphasis on reducing the extent and severity of poverty, to sustained growth with improved equity and reductions in structural poverty and an appropriate policy framework for private sector development. The three pillars of the 2004 CAS18 sustained growth with equity, social inclusion and improved governance—have been retained as central to support the country's efforts to shift from a focus on crisis response to medium-term growth. The CAS proposes US$3.3 billion in investment lending over three years. No development policy lending is envisioned under the base case. It is a performance based program that confirms the emphasis on concrete Government action established under the 2004 CAS. The 2006 CAS also reflects an
16 Buenos Aires, Córdoba, Santa Fe, Corrientes, Neuquén y Entre Ríos. 17 Country Assistance Strategy for the Argentine Republic for the Period 2006-2008, May 4, 2006. Report No. 34015-AR. 18 Report No. 27340-AR
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emphasis on strengthening the fiduciary control environment in Argentina, and includes an innovative initiative to address fiduciary risk in Bank supported projects and support systemic improvement in the country's public investment system more broadly. The Argentina Fiduciary Action Plan has been designed to increase public information on Bank financed projects, promote civil society participation in the monitoring and evaluation of the Bank's portfolio, enhance the strategic focus and coverage of Bank supervision, and ensure increased transparency and competition practices in public procurement. 27. Improvement of pro-poor infrastructure assets is a fundamental element of the CAS pillar of sustained economic growth. Interventions in infrastructure have been developed to further a number of key objectives, including expanding assets for the poor and improving mobility, and expanding and maintaining the nation's transport system to lower logistical costs and facilitate regional trade and commerce. More than one-third of lending operations proposed in the indicative lending program in the CAS are in infrastructure, with the bulk of these in the transport sector. The substantial distribution of investments dedicated to these objectives reflects the good dialogue the Bank has enjoyed with the authorities and the solid track record of effectiveness that has been established. The proposed project complements other on-going projects in the infrastructure sector, including the road sector, aimed at preventing the deterioration of key infrastructure in Argentina, and improving infrastructure service delivery to enhance competitiveness and foster economic growth (see Annex 2.A. Other Road Sector Projects in Argentina, and Annex 2.B Other Infrastructure (outside the Road Sector) Projects in Argentina ). By increasing the capacity of the trunk network, specially of those roads that constitute major corridors, transport costs are expected to be substantially reduced thus contributing to regional productivity and competitiveness. This is of particular relevance at this time, given the favorable terms of trade of Argentine commodities. 28. The proposed project is part of an agreement between the Bank and the Government of Argentina to cancel undisbursed tranches from outstanding development policy loans and prepare new investment loans in the same provinces as appropriate. Three provincial reform loans, which were approved prior to the 2004 CAS have been closed, and undisbursed tranches totaling US$226 million were cancelled. These loans are planned to be replaced with new investment operations in the provinces concerned (Cordoba, Santa Fe and Catamarca). The commitments for these new provincial investment loans have been included within the US$3.3 billion 2006 CAS envelope. The Bank has agreed with the Government that both sides would seek to build on the experience of replacing the PRLs in deciding how to address the remaining outstanding policy loans to Argentina. 29. The overall and specific objectives of this project are consistent with the CAS pillars since improving transport conditions along key segments of the trunk road network is a means to foster regional integration, increase productivity and support a path toward sustained economic growth. Provided the National Road 19 is a key component of a bi-oceanic corridor connecting Chilean with Brazilian ports, improvements in competitiveness will not be restricted to the Province of Santa Fe and the Center Region. Brazil and Chile will also benefit from positive effects on economic growth due to the intensive use these countries make of said bi-oceanic corridor to transport their bilateral trade.
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30. It is expected that an improved National Road 19 will generate and facilitate traffic flows furthering the effective integration of the Center Region, a region that accounts for 20 percent of the Argentine population, 30 percent of exports, 40 percent of total agricultural and livestock activity and 25 percent of Argentina’s GDP19. The proposed project, jointly with other World Bank projects (AR Cordoba Road Infrastructure and AR Provincial Road Infrastructure20) will significantly increase the efficiency of the road networks in the Provinces of Santa Fe and Córdoba. A more efficient regional road network will lower logistics costs through reductions in transport costs and easier connections to demand and distribution centers. B. PROJECT DESCRIPTION 1. Lending instrument 31. The Province of Santa Fe has requested a Specific Investment Loan (SIL) for US$126.7 million to support a road investment program over the period 2007-2010. The SIL will be guaranteed by the Argentine Republic. 2. Project development objective and key indicators 32. The overall purpose of the project is to improve transport conditions along a strategic road corridor that links the Province of Santa Fe with regional and international markets. Adding capacity to National Road 19, a key component of a major bi-oceanic corridor that links the PSF and the Center Region with Chile and Brazil, will reduce logistics costs, facilitate access to major regional consumption and export markets and foster the effective economic integration of the Center Region provinces. 33. The project also aims at providing institutional support to the Province of Santa Fe to achieve the following specific objectives: (a) improve road safety by implementing a pilot intervention capable of providing valuable qualitative and quantitative information to the comprehensive road safety action plan elaborated by the Province of Santa Fe in 2005; (b) identify transport infrastructure and trade facilitation constraints by setting up a system to measure logistics costs in the Province of Santa Fe; (c) reinforce the Province’s planning capacity to foster economic growth; (d) strengthen the provincial capacity to assess and manage environmental and social impacts of large civil works; and (e) create provincial capacity to monitor and evaluate large infrastructure projects. 34. The achievement of the project’s development objectives will be assessed through the following key indicators: (i) Impact on road-user travel times derived from upgrading National Road 19, (ii) indicators measuring road safety conditions (road accidents and mortality rates) on National Road 19 and targeted segments of the provincial road network; and (iii) the Province of Santa Fe having effectively implemented a methodology for the systemic measurement of logistics costs (indicators are presented in detail in Annex 3).
19 Región Centro. Ejes Temáticos Fundamentales. Documento Conclusivo del Encuentro Oficial de Lanzamiento Institucional de la Región Centro. October 2004. 20 AR 7031
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3. Project components 35. To meet the proposed Development Objective, two main components were preliminarily identified based on a proposed Loan amount of US$126.7 million and a financing percentage of 73 percent. 36. Component 1. Upgrading of National Road 19 (Estimated cost, including contingencies, US$167.4 million, of which US$ 123.9 million will be Bank financed). This component will transform 130 kilometers of National Road 19 in the PSF into a four lane highway (Autovia) with separate two lane carriageways in each traffic direction to expand the capacity and road safety of this heavily traveled corridor. This is the first stage in upgrading the corridor, which DNV plans to transform into a limited access freeway in the future. The component entails building: (i) a two lane carriageway within the ROW that will serve East-West traffic, which in the future will become one of the main carriageways of the freeway; (ii) three four-lane bypasses of the towns of San Jerónimo del Sauce, Sa Pereyra and Frontera (and its twin city San Francisco) within the PSF; (iii) alignment improvements for three sharp curves (about 4.7km in total) on the existing two lane highway; (iv) grade separation interchanges at intersections with high traffic National Roads 34 and Rosario Santa Fe Freeway and overpasses for railroad crossings; (v) ground-level interchanges at intersections with provincial and rural roads; (vi) conversion of the existing sections of National Road 19 crossing the towns of San Jerónimo del Sauce and Sa Pereyra in urban boulevards for motor vehicles, bicycles and pedestrians; and (vii) turn lanes and returns at intervals of about 6 kilometers to facilitate safe access to properties along the corridor. The upgrading of 6 kilometers of National Road 19 in the Province of Córdoba (from the border with PSF to National Road 158), using the same design standards applied to the upgrading of this road in the PSF are not part of the project but will be carried out contemporaneously with the upgrading of works in National Road 19 by PSF. These works will be financed by DNV. 37. Component 2 – Institutional Strengthening (Estimated cost US$2.8 million all Bank-financed). This component will consist of four subcomponents:
• Sub Component 2.1- Road Safety. The PSF has elaborated a Provincial Road Safety Program that lays out a series of actions to be taken in the short (up to December 2006), medium (2007-2010) and long run (2011 and beyond). This project would support those actions focusing on one road segment that will constitute a pilot exercise and whose lessons are expected to feed the implementation of the Road Safety Provincial Program. It was agreed to take Provincial Road 21 (RP21) as a pilot because it has high levels of AADT (more than 7,500) and one of the highest rates of accidents in the PSF. The segments of RP21 (about 35 km. See Annex 4) that will be the subject of road safety interventions are located in heavily populated areas where cars, trucks, pedestrians and cyclist use the same road (see maps on Annex 17). Two types of road safety interventions are envisaged for this pilot: (a) hard: including vertical and horizontal signaling, shoulders, bus bays, and pedestrian bridges; and (b) soft: purchase of alcohol testing equipment and programs to train provincial inspectors to improve enforcement of road safety legal provisions. The final design of the pilot interventions will benefit from the
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interaction between DPV and DNV as the latter is implementing pilot programs financed by a Bank Project (National Highway Asset Management AR-7242).
• Sub Component 2.2 - Systemic measurement of logistics costs in the PSF. The PSF is
interested in creating the capacity within the provincial administration to conduct periodic surveys to measure logistics costs in the PSF (ideally to be extended to the Center Region through agreements with Córdoba and Entre Ríos). This subcomponent will include the following activities: (a) support to set up a Logistics Unit within the provincial administration, (b) training of provincial staff in logistics issues, (c) surveys to measure logistics costs in the PSF and complementary studies to identify infrastructure and trade facilitation constraints, (d) dissemination of findings in workshops organized jointly with the private sector.
• Sub Component 2.3 – Strengthening the planning capacity of the PSF to elaborate a new
strategic development. The PSF has enjoyed high rates of growth in the last three years, and the Province would like to create the conditions to make this process sustainable. The PSF has been working with the federal government providing inputs to the Strategic Plan for Territorial Development which is being prepared by the Ministry of Planning (activity that is being partially funded by the Bank). The PSF has realized that it needs to produce its own regional development plan to effectively reach those areas with the highest incidence of poverty, helping them to generate the conditions to increase local productivity and the competitiveness of local products in domestic and international markets. This component will help the PSF produce a diagnostic of the current organization of all provincial institutions involved in planning, with the ultimate objective of proposing concrete mechanisms to improve coordination among provincial agencies as a prior step to the production of a strategic development plan. Accordingly, this component will finance the studies to: (a) conduct a diagnostic of the current institutional set up with an assessment of the performance of each agency with planning responsibilities; (b) develop a framework listing all activities and a roadmap to produce a strategic development plan; and (c) Propose an information sharing system for planning purposes to be implemented in the PSF.
• Sub Component 2.4 – Strengthening DPV’s capacity to enhance environmental and
social management. The DPV has a long and proven experience in the field of civil works supervision and will take the task to supervise the civil works of National Road 19 with in house personnel. However, experience related to the assessment and management of environmental and social impacts of large civil works (like the widening of National Road 19) is somewhat limited. This component aims at strengthening DPV’s environmental unit to carry out an effective planning, design and supervision of environmental and social aspects of civil works. A series of training will be financed under this sub-component, preparation of manuals as well as the purchase of equipment to control the quality of air and measure noise levels during road construction or rehabilitation works. The strengthening program will also include a Strategic Environmental Assessment (SEA). The SEA will assess linkages between the road network and regional development scenarios and will be centered around the following
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topics: poverty and the regional hydrological patterns and floods, wetland conservation, land use, and rural development.
• Sub Component 2.5 – Design a capacity building program to incorporate monitoring and
evaluation analysis in infrastructure projects. The PSF requested Bank assistance to improve provincial capacity in the area of monitoring and evaluation. Personnel from the project implementation unit will be the initial recipients of training.
4. Lessons learned and reflected in the project design 38. Increase coordination between different levels of government. Historically, weak coordination between Federal and Provincial agencies has been an issue in implementing projects with multiple jurisdictions. This project fostered much needed collaboration between agencies belonging to different levels of government. National Road 19 is under the jurisdiction of the Federal Government. DNV and OCCOVI are the national agencies in charge of administering the road and responsible for financing capacity expansions. The widening of National Road 19 was not a priority for DNV. However, it was a priority for the PSF (see the section Santa Fe Government’s strategy for the road sector in Country and Sector Issues). This project helped DNV take into account the needs of the PSF and as a consequence allowed the PSF to take responsibility for the construction and financing of the widening of National Road 19. Engineering designs will be the outcome of a consensus building exercise between DNV and the provincial DPV. 39. Enhance competition for contracts to improve efficiency and reduce concerns regarding the possibility of collusion by designing an appropriate procurement strategy. Lessons learned in prior road projects and Bank experience in Argentina indicates that competition in road bidding processes can be improved particularly if the local construction capacity is strained by demand. The size of this project is large enough to attract national and foreign bidders with enough capacity to take the whole project and bids will be invited under alternative contract options that will attract the interest of both small and large firms, who will bid at their choice for individual contracts of about 30 km or for a group of contracts. A strong and competitive market for public works construction will benefit the provincial government and its citizens; it will also be to the advantage of the bidders. There is a well-established and relatively open construction industry in Santa Fe. A limited investigation carried out, on the basis of vocal information provided by the local Chamber of Construction (CAC), reveals that there are contractors who are willing and competent to bid for the works. However, the number of potential contractors may be limited, because of the ongoing high demand for construction works. Following this assessment, the PSF will structure the procurement of the project civil works of National Road 19 in such a way that greater competition is stimulated. 40. The need to carefully assess fiscal space for large infrastructure investments. To avoid a stop-and-go infrastructure investment process and avoid a crowding out effect of this project on other investment projects prioritized by the PSF, the Bank carefully examined the current and projected state of provincial fiscal accounts. As long as no unexpected large negative shock occurs, the burden of this project on the provincial fiscal accounts will not be significant.
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5. Alternatives considered and reasons for rejection 41. Focus exclusively on the construction of National Road 19 leaving aside the components of logistics costs, road safety and planning. This alternative was discarded because one of the main contributions of this project is expected to be the strengthening of the PSF’s capacity to identify those policies that increase the competitiveness of its economy. The systemic measurement of logistics costs plus the identification of trade facilitation and infrastructure constraints will allow the PSF to better plan its infrastructure investments. Road safety should not be left out as it has become a major problem in Argentina. The Bank is making all possible efforts to improve road safety in all its road projects in Argentina. 42. Support road safety interventions (hard and soft) throughout the provincial road network. In order to maximize the impact and facilitate the monitoring of road safety interventions it was agreed to concentrate all interventions in only one pilot area (Provincial Road 21). The pilot road has one of the highest incidence of crashes in the province. Minor interventions spread throughout the provincial road network would not be effective given the limited available resources (less than US$ 2.5 million) for this project component. C. IMPLEMENTATION 1. Institutional and implementation arrangements 43. Borrower. The Province of Santa Fe will be the recipient of the proposed IBRD Loan. 44. Project Management and Implementation. The Management Unit (Unidad de Gestión, UG) has been established under the joint jurisdiction of the Borrower’s Ministry of the Treasury and Finance (Ministerio de Hacienda y Finanzas) and Ministry of Works, Public Services and Housing (Ministerio de Obras, Servicios Públicos y Vivienda). The UG will retain overall responsibility for Project implementation, acting as a permanent link between the Bank and the Borrower. For the purpose of this Project the UG will in particular: (i) manage and monitor project implementation; (ii) elaborate pre-qualification and bidding documents for works included in Component 1 and appraise all activities included in the institutional strengthening components in terms of their technical and economic viability, prior to submitting them for the Bank’s no objection; (iii) carry out the Project’s financial management, monitoring general flow of funds, authorizing transfers of funds, managing financial and accounting information systems, and preparing Project progress financial statements and reports; and (iv) assess the impact of the Project in terms of reduction in travel times along National Road 19 and increase production potential as a means to alleviate poverty. 45. Technical staff from the DPV will be assigned to work for the UG (DPV’s Chief Engineer will be the head of the Road Projects and Procurement Unit within UG), providing it with the necessary technical skills throughout the implementation of the Project. As such, staff of DPV (assigned to the UG), will also: (i) work closely with engineering consulting firms hired by the Borrower to prepare engineering designs and bidding documents; (ii) carry out the civil works supervision of the contracts for execution of the civil works component ; (iii) measure
16
progress in the execution of works for the purpose of issuing certifications; and (iv) be responsible for the technical quality control and compliance with the technical specifications of the civil works contracts. The DPV will also be properly represented on the Evaluation Committee in charge of the bidding process for the road works contracts to be carried out under this Project. 46. The Decree that created the UG provides the appointment of two accounting staff of the Undersecretary of Investment Projects and External Financing (SPIFE) to perform the project financial management activities in the UG; comprising budgeting, accounting and reporting including preparation of Interim Unaudited Financial Reports (IUFR), internal control, disbursements and external audit hiring process. It was confirmed that project transactions will be executed through the administrative processes applied by the UG within the framework of the Province-wide financial arrangements in place. 47. The same Decree also provides the creation of an Environmental and Social unit within the UG. A full time team will be responsible for implementing the Resettlement Action Plan. The UG will be responsible for the implementation of the Environmental and Social Management Plan. This task will be carried out in close coordination with the DPV environmental unit, which was created with technical assistance provided by the Bank. 2. Monitoring and evaluation of outcomes/results 48. The monitoring and evaluation system is designed to assess whether or not the Project is being implemented in line with the proposed objectives and to measure fulfillment of agreed targets. Project progress reports will be prepared by the UG in collaboration with the DPV on a semi-annual basis and submitted to the Bank. These reports should indicate the progress made under the different components of the Project and measure performance against the results indicators established in the results framework (Annex 3). In particular, progress reports will include information regarding: (i) progress in the implementation of civil works contracts with detailed information of allocated budget, scope of the activities and results achieved; (ii) actions undertaken under the institutional strengthening components; (iii) specific actions being undertaken regarding road safety initiatives and pilot interventions; (iv) progress in the implementation of the Resettlement Action Plan and Environmental Social Management Plan laying out problems identified as well as documenting successes in improving environmental conditions along National Road 19; and (v) a section describing potential developments that could affect project implementation, which should consist of a review of the main risks and the impact of mitigation measures envisioned at appraisal (See section on risks). 49. Semiannual reports will also include information regarding disbursement levels under the period and expected disbursements for the next period, a procurement report, an updated procurement plan if changes are expected, and an environmental and social report indicating measures being undertaken to ensure compliance with Bank safeguards. An overall assessment of the impacts of the Project (enhanced road condition, reduced transport costs, measurement of logistics costs, increased road safety, etc) is to be presented at Mid-Term Review and Project ending. Baseline data need to be obtained regarding savings in travel times and road accidents along National Road 19 areas as well as data on accidents in the roads chosen as pilot for road
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safety hard and soft interventions. The UG will be responsible for collecting such data within the first six months of Project implementation. Given that the project implementation period (three years) will coincide with the time needed to complete the upgrading of Road 19, the impacts on road users travel time as well as the number of road accidents are expected to occur after the project closing date. However, the Province of Santa Fe agreed to conduct two additional surveys to take place two and four years after the upgrading of Road 19 is completed in order to capture the impact of this investment. The Province will submit to the Bank the results of the studies. 50. Finally, during Project implementation, the Province of Santa Fe will provide the information necessary to monitor the evolution of the indicators included in the Fiscal Framework agreed during appraisal (see Annex 10). 3. Sustainability 51. Project sustainability should be analyzed along two dimensions (a) sustainability of project investment (National Road 19); and (b) sustainability of the current provincial policy to upgrade its road network through a comprehensive rehabilitation and maintenance program. The latter will heavily depend on the continuation of a prudent fiscal policy that has been in place in the PSF for some years and is expected to continue. Regarding the sustainability of the investment in National Road 19, it will depend on the availability of a reliable stream of funds during construction. Provided a high share of the funds will be provided by the Bank and the counterpart funding is available thanks to the available fiscal space (see Annex 10) no major problems are expected regarding availability of funds. Closely related to sustainability is the efficient use of public financing, in particular when large investment projects, like the one being financed under this project, are involved. To address this issue, during project implementation, an analysis will be conducted to assess cost-efficiency of construction works. Said analysis will concentrate on relevant aspects during the procurement and execution phases that determine final costs of civil work contracts. A review of the extent of competition during the bidding process will aim at identifying different practices and behaviors among competing firms and its effects on bidding prices as compared to official budgets. Competition is essential to achieve cost efficiency and open space to finance other projects with high social rates of return. To carry out this analysis, relevant information about the bidding processes (such as number of firms that participated in each bidding process, value of the bids submitted by each firm, detailed description of the selection process, etc), the evolution of project costs during execution, as well as other market conditions would be required. A benchmarking exercise will be conducted to identify if cost levels are in line with best practice cases, and to determine how they compare to similar civil works contracts in Argentina. 52. Over the medium to long run, the sustainability of the investment financed under this project will depend on availability of funds to adequately maintain the National Road 19. Thus, the sustainability of this investment will remain the responsibility of the national government. However, if the concession scheme currently in place continues when the upgrading of National Road 19 is completed, maintenance will fall under the responsibility of a toll road concessionaire (see Annex 6 for a description of implementation arrangements).
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4. Critical risks and possible controversial aspects
Risk Initial Level of Risk Mitigation Residual
level of Risk
Delays in project implementation due to lack of formal agreements between national government agencies and the PSF
M
The DPV signed an agreement with OCCOVI regarding rights, obligations, and potential liability allocation of all parties, including the concessionaire. This agreement would complement OCCOVI’s (regulator of concessioned roads) opinion that expressed its no objection to the PSF to expand capacity of National Road 19. The PSF signed a series of agreements (Convenios) with DNV laying out supervision roles during construction, enforcement of environmental safeguards and DNV’s commitment to construct National Road 19 segment in the Province of Cordoba (by-pass to the city of San Francisco) at the same time the PSF starts working on the by-pass in the territory of the PSF.
L
Uncertainty with respect to accountability for project control, particularly the supervision of works.
H
The Convenios signed between DNV and the PSF include the necessary implementation agreements clearly stating the accountability of each agency for the procurement and contract supervision of the works, and confirm the need for a unified control of time, cost and quality during project implementation.
M
Lack of counterpart funds during project implementation.
M
A detailed analysis of the fiscal framework of the Province has been conducted in a joint work with PREM. A framework of fiscal monitoring indicators has been developed with the PSF allowing an early identification of an eventual deterioration in the fiscal situation of the PSF. As indicated in Annex 10, it is expected the PSF will continue its prudent fiscal policy which leaves fiscal space to provide counterpart funds to this project.
M
Lack of adequate internal financial control due to limited experience of direct implementation of WB financed investment operations
M
The project team conducted an assessment of the proposed Financial Management Arrangements. The assessment shows the arrangements are sound and the government-wide financial management system in place indicates a positive attitude by management toward control. Furthermore, external audit reports of previous WB-financed projects sub-
L
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Risk Initial Level of Risk Mitigation Residual
level of Risk implemented by the Province of Santa Fe did not show any substantial internal control issue. From the financial management perspective, after the implementation of the proposed mitigation measures, the Project is considered a modest risk operation. A detailed risk analysis is provided on the Financial Management Assessment Report (FMAR).
Higher than expected bid prices. H
Recent evidence in Argentina indicates this risk is relevant particularly if there is high demand for construction works as it is the case in the PSF. Lessons learned include (i) the need to have well defined work designs and bidding documents, (ii) the need to carefully prepare cost estimates and technical solutions, (iii) update cost estimates to a date close to the time proposals were prepared, (iv) allow firms to bid for several or all road segments (packages) to maximize competition for the market. The Loan Agreement will include Special Procurement Conditions consistent with the Fiduciary Action Plan agreed upon the Government of Argentina and the Bank
M
Uncertainty of bidders about a fair resolution of disputes during contract execution.
H
The GoA has clearly stated its decision not to include arbitration clauses in road bidding documents. The PSF follows the same policy. However, provincial agencies and institutions have good reputation for their openness and fairness with their contractors and for good faith in the management of contracts.
M
Delays in project implementation if stakeholders raise questions regarding road design parameters
H
The PSF, with the advice of the Bank team, has prepared a comprehensive and detailed Environmental and Social Management Plan (ESMP) and Resettlement Action Plan (RAP) in accordance with Bank policies OP 4.01 and OP 4.12 respectively. The ESMP and RAP evaluate the existing conditions, identify the potential environmental and social issues of concern and propose adequate mitigation measures for each negative impact identified; as well as measures for enhancing each identified positive impact. The consultation process
M
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Risk Initial Level of Risk Mitigation Residual
level of Risk designed and being implemented by the PSF with the support of the Bank is comprehensive, detailed and has included all affected communities along National Road 19. The project team has been actively involved in the consultation process. The Province has been responding to each concern from affected communities and individuals.
Possible harm to affected population along National Road 19 derived from lack of provincial experience applying Bank safeguards, in particular those policies associated with an effective implementation of the Resettlement Action Plan
M
The PSF, with the advice of the Project team, has elaborated a detailed RAP in compliance with Bank policy OP4.12. As part of project preparation, Project team has conducted an assessment of the capacity of the UG to implement the RAP. It was agreed that the UG will create a dedicated group of experts (and for that purpose will hire a full time lawyer, a social scientist and a communication expert) to implement the RAP. The Bank will pay special attention to the implementation of the RAP during project supervision
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Overall Risk Rating H/M M/L 5. Loan/credit conditions and covenants 53. Effectiveness Conditions: The Condition of Effectiveness consists of the presentation to the Bank of a letter from DNV to the Borrower (on terms acceptable to the Bank) within the legal framework governing the Convenios whereby DNV represents and reiterates: (a) that the term “proyecto aprobado” as referred to in Article 6 of the Convenio Complementario No. 2 includes all pertinent socio-economic and environmental plans to be implemented during the carrying out of the works referred to in said Article; and (b) that it has complied to date of said letter, and its commitment to continue to comply, with the pertinent provisions of the Environmental and Social Management Plan, prior to and/or during the carrying out of the works mentioned in (a) herein, pursuant to Article 6 of the Convenio Complementario No. 221.
21 For a detailed description of the Agreements between DNV and the Federal Government see Annex 6.
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54. Other Covenants: Implementation a) Financial management: (i) Section II, B.3 “Standard” wording for project audits. The annual
audited financial statements will be furnished to the Bank not later than six months after the end of each year; (ii) Section II, B.2 “Standard” wording for UIFRs. Quarterly UIFRs will be submitted to the Bank not later than 45 days after the end of each calendar quarter; and (iii) Loan dated covenant: a specific line for the project will be set out in the annual budget to keep track of project budget execution processed in the Provincial Integrated Financial Management System (SIPAF).
Monitoring and Evaluation b) Project progress reports to be prepared by UG and furnished to the Bank on a semi-annual
basis for review. These reports should refer to progress made under the different components of the Project, and measure performance against the results indicators established in the results framework.
c) The Borrower to measure on an annual basis the evolution of road accidents in Provincial Road 21 to assess the impact of road safety interventions.
d) The Borrower to conduct two additional Origin-destination surveys to take place two and four years after the widening of Road 19 is completed, in order to capture the impact of this investment. The Province will submit to the Bank the results of the studies
e) The Borrower to cause UG to prepare, under terms of reference acceptable to the Bank, an assessment of the impacts of the Project (enhanced road condition, reduced transport costs and travel times, enhanced production opportunities and increased road safety). UG shall present the results at the Mid-Term Review meeting and at Project end.
D. APPRAISAL SUMMARY 1. Economic and financial analyses Cost benefit NPV=US$ 67.1 million; ERR = 19.3 percent (see Annex 9)
55. The PSF performed the cost-benefit analysis of the improvements works on National Road 19, converting it into a four lane highway and constructing the four lane bypasses of the San Jerónimo del Sauce, Sa Pereyra and San Francisco towns. The economic evaluation covered altogether the improvement of 130 km, representing a total investment of US$140 million (excluding contingencies).
56. The PSF collected detailed road characteristics and traffic data and performed a Project level economic evaluation with the objective of ensuring that the overall investments yield a rate of return higher than 12 percent. Net benefits were evaluated using the Highway Development and Management Model (HDM-4) Version 1.3, which simulates life cycle conditions and costs and provides economic decision criteria for multiple road design and maintenance alternatives.
57. The overall Net Present Value (NPV), at 12 percent discount rate, is US$67.1 million and the Economic Rate of Return (ERR) is 19.3 percent. Compared with the without project scenario,
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the PSF will increase economic road works expenditures by US$89.4 million, in present value economic terms over the twenty eight year evaluation period, while road users will save US$ 156.5 million over the same period, which means that every dollar spent by the PSF results in around 1.75 dollars saved by road users. Under a worst-case scenario of benefits dropping to 80 percent of the current level and 20 percent increase in costs, the Project continues to yield satisfactory benefits, represented by an economic rate of return of 14.0 percent. The analysis of switching values of critical items indicates that to yield a net present value equal to zero, investment costs would need to be multiplied by 1.78 or benefits multiplied by 0.56. 2. Technical 58. The design characteristics of the project correspond to a multilane highway whose cross-section follows the typical DNV design characteristics for rural freeways, with exception of the median width. In this project the existing and new carriageway will be separated by about 49 meters in order to leave enough space to accommodate a future new carriageway with a final separation (median) of 16 meters. 59. Intersections or road junctions and town accesses have been solved with interchangers at one level (roundabouts in most of the cases), except in those cases of greater volumes of traffic (RN158, RN34, AUFE) for which overpasses have been designed. Overpasses have been also designed for existing railroad crossings. U-turns located every five to six Km in both directions of traffic have been designed to take into consideration the claims of the local population and land owners to facilitate the access to their properties, minimizing to the limit the additional length necessary to reach those properties. 60. Two types of pavement, flexible and rigid have been considered in order to select the one with lower initial cost and maximize the use of the limited available financing resources. The flexible pavement option was designed following the AASHTO 1993 methodology, and the rigid pavement option following the PCA (Portland Cement Association) methodology, considering design periods of 15 and 25 years respectively, and planning completion of works by 2009. After comparing the cost of each alternative, the rigid pavement has been selected, since it represents the lower initial cost for the three sections considered for the engineering design. However, DPV has decided to ask from bidders a quotation for both rigid and flexible pavement alternatives, which means that DPV will include both rigid an flexible designs in the bidding documents 3. Fiduciary 61. Financial Management. A review of the financial accountability arrangements in the Province and a Financial Management (FM) assessment of the arrangements proposed specifically for the project implementation were performed in line with OP.BP10.02 and guidelines issued by the Financial Management Sector Board (FMSB) on November 3, 2005. The assessment objective is to determine if the Borrower’s executing entity, Unidad de Gestion del Programa de Infraestructura Vial – Santa Fe (UG) has financial management arrangements acceptable to the Bank. A financial management assessment report is presented in Annex 7.
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62. The assessment conclusion is that the Province of Santa Fe through its Unidad de Gestión del Programa de Infraestructura Vial – Santa Fe (UG) has adequate financial management arrangements. The proposed project specific arrangements along with the Province government wide financial management in place meet minimum Bank requirements. 63. Fiduciary Risk: In general, the proposed Financial Management Arrangements for the project are sound and the government-wide financial management system in place indicates a positive attitude by management toward control. Furthermore, external audit reports of previous World Bank financed projects22 sub-implemented by the Province of Santa Fe did not show any substantial internal control issue. On the other hand, SPIFE staff has limited experience and partial knowledge of direct implementation of WB-financed investment operations. From the financial management perspective, after the implementation of the proposed mitigation measures, the Project is considered a modest risk operation. A detailed risk analysis is provided on the Financial Management Assessment Report (FMAR). 64. Procurement. With respect to procurement, an in-depth assessment of the Province’s capacity was carried out by the team and a detailed action plan was prepared to address all risks identified, as discussed in Annex 8. The overall procurement risk has been rated as Average. The key features of the procurement risk mitigation strategy for this project include: (i) Loan Agreement requires the employment of project standard bidding documents and requests for proposals agreed upon by the Bank and contracts forms based on the Bank models instead of other forms of legal agreements previously utilized (i.e. the so called “convenios”); (ii) Loan Agreement includes Special Procurement Conditions aimed at increasing transparency, competition, and social monitoring consistent with the Fiduciary Action Plan (FAP) agreed upon the Government of Argentina and the Bank (e.g. publication on the web of procurement documents and feeding the Bank publicly accessible Procurement Plans Execution System, known as SEPA23), and at addressing the aspects of domestic legislations that are not consistent with Bank procurement policy; (iii) prior review thresholds consistent with average risk projects, (iv) slices and package strategy and conditional prequalification procedures to be implemented for major works under the project, (v) the National Roads Directorate (DNV) will supervise the Provincial Road Directorate (DPV) in respect of measurements leading to payment certificates for major civil works under conditions to be established in inter-agency agreements and the Operational Manual, (vi) a Price Monitoring Mechanism for civil works consistent with the above-mentioned Fiduciary Action Plan will be implemented and (vii) joint FM-Procurement supervision missions will be conducted in order to produce Integrated Fiduciary Performance Assessments (IFPAs) in the framework of the FAP. 4. Social 65. The proposed Project will have positive social impacts. Among the major benefits the following should be highlighted: employment creation during project construction, urban improvement programs in San Jerónimo del Sauce and Sa Pereyra, improvement in road safety conditions along National Road 19 and in Provincial Road 21, better and safer access to
22 A list of WB-financed projects sub-implemented by the Province is presented on Annex 7 23 Sistema de Ejecución de Planes de Adquisiciones.
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transportation and businesses in the city of Santo Tomé and agricultural productive lands along National Road 19. 66. The road infrastructure will be located alongside the existing alignment requiring only the expansion of the right of way and acquisition of additional land. The expansion of the road affects 1,196.61 hectares. Of them, 475.74 (39.8 percent) were acquired in the early 1970s. The hectares to be acquired (701.43) are located in 234 properties along the road24. A total of 19 houses (7 with business), 6 businesses and one school will be physically displaced. Given that most of these properties will be affected partially, 13 of the 25 houses and business will be relocated into the same property. A Resettlement Plan (RAP) accordingly with OP 4.12 has been prepared. The Plan is comprised by the following programs: (i) Information and communication, (ii) land acquisition and compensation, (iii) effectiveness of former expropriations, (iv) description of legal framework governing the negotiations and judicial processes, (v) assistance for socioeconomic restoration, (v) assistance for partial affected properties, (vii) relocation of school General San Martin, and (vii) grievance mechanisms. The Land Acquisition and Resettlement Plan will be implemented in the Provinces of Santa Fe and Cordoba. An inter-institutional committee comprised by DPV, DNV and Provincial Land Office in the Province of Santa Fe (Dirección de Tierras Provincial) will be established. The cost of the Plan is approximately $2.9 million which hasl been incorporated in the cost of the project. 67. During project preparation the Bank project team identified the need to increase and strengthen the capacity of the UG to effectively implement the RAP. The actions to be taken to guarantee an effective implementation of the RAP, agreed jointly with the UG are: (i) set up a dedicated team within the UG to implement the RAP; (ii) hire (or relocate personnel within the provincial administration) a lawyer, a social scientist and a communication specialist; and (iii) for those instances where a detailed assessment is needed to solve disagreements related to the valuation of agricultural productive units an agronomist will be hired (on an ad hoc basis). The PSF has shown significant aptitude to engage stakeholders and has made all possible efforts to address their concerns, incorporating suggestions to the design of National Road 19. The Project team will work closely with the PSF to continue a close engagement with stakeholders during project implementation and supervision. 5. Environment 68. The project has been assigned a Category B according to OP 4.01. Most impacts will be circumscribed to the right of way and no significant, region-wide or precedent-setting impacts are envisioned. Most of the current and future traffic consists of long-distance, international trucks and very little incremental local traffic is expected. No major land use changes are expected in the region. 69. The road infrastructure will be located alongside the existing alignment requiring only the expansion of the right of way and acquisition of additional land. Most of the impacts identified will be managed through sound engineering design and construction practices. In addition, the project includes significant environmental enhancement measures such as a comprehensive 24 A total of 305 properties are affected. However, 69 of them correspond to properties expropriated in the early 70’s.
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landscaping and re-vegetation program. The area of the project is heavily developed with extensive and intensive cattle ranching and high-value crops such as soy and corn. There are no natural habitats or critical natural habitats along the existing or future right of way. However, there still remain some patches of native vegetation, especially in river and creek crossings that still harbor some native species albeit without any significant biodiversity value. There is no evidence of paleontological or archeological resources along the corridor. There are no indigenous peoples in the area of influence of the project. Although noise impacts from the highway was identified as not significant, special barriers and re-vegetation programs will be implemented in those household that will now be located closer to the highway (because of the expansion of the right of way). This program is included in the Resettlement Action Plan. 70. Special attention was given in project design to the management of hydraulic and hydrological interactions along the right of way. Adequate longitudinal and lateral drains and culverts will channel run-off to existing water courses and channels. Bridges over two sensitive creeks were over dimensioned in order to allow movement of local fauna. Bridges in the existing road will also be expanded in order to eliminate existing flow back-up conditions in some areas. All in all, the road will not exacerbate existing hydrological conditions and flood in its area of influence but rather improve existing conditions. 71. The project will include three major by-passes, two around rural communities and a major one in the city of San Francisco/Frontera. These by-passes will intersect an important network of rural and local roads with an important traffic of local goods and machinery, especially during harvest time. The restoration of such networks and the construction of safe crossing points will be part of the project design. 72. A detailed Environmental and Social Management Plan (ESMP) has been prepared for the project. The ESMP includes a comprehensive set of programs that will address all major environmental and social issues identified along the right of way (ROW). Most of the programs will be included as part of the engineering design and construction documents.
- Landscaping and Re-vegetation Program: this major environmental enhancement program will include reforestation and re-vegetation of ROWs including separators, with native species, restoration and augmentation of existing native-forest patches, and the construction of rest and recreation areas along the ROW. Re-vegetation with native species will create ecological corridors between two watercourses that still harbor some natural vegetation.
- Community Road Safety: complementing the engineering road safety design (bus stops, special crossings), this program will implement road safety education in communities along the ROW.
- Restoration of Rural Road Network: includes the construction of special crossings, returns, and feeder roads to allow connectivity of the existing rural road network
- Improvement in Urban Segment of Santo Tome: potentially perhaps the most challenging segment of the project, this heavily urbanized segment will be subject to a special urban restoration program including specific designs for boulevards, bicycle paths, parking spaces and traffic management measures.
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- Urban Restoration in By-passed Towns: road segments that will be abandoned because of the construction of by-passes will be reconstructed as urban boulevards, with special archways at the entrance points, reforestation, illumination, and special signs that will direct traffic to use businesses and facilities in those towns.
- Environmental Management of Construction : In order to adequately control impacts during construction, a rigorous environmental set of good environmental practices will be applied to the project. These specifications are based on the existing Environmental Specifications for Road Construction designed by the Federal Road Agency under road programs financed by the Bank. In addition to these specifications site specific guidelines and restrictions have also been incorporated such as prohibitions for construction camp and asphalt location in or near sensitive watercourses, demarcation of trees and patches of vegetation that need to be protected during construction, special traffic restrictions during harvest time, etc. Chance finding procedures for archaeological and paleontological artifacts are part of these specifications. All critical points along the ROW (either environmentally or socially) have been identified and applicable preventive and corrective actions were produced. Compliance of environmental specifications during construction will be part of the engineering supervision and will be monitored by the Environmental unit of the Provincial Road Agency.
73. The above programs will be complemented by
Institutional Strengthening in Provincial Road Agency: the environmental management capacity of the existing Environmental unit if the Provincial Road Agency will be improved in order to increase monitoring and supervision of this project.It will also include an Strategic Environmental Assessment at the regional road network level.(Sub Component 2.4) Social Communication Program:as a continuation of the consultation efforts already carried out during project preparation, a social communication and public participation program will be implemented during project construction, and Project Information Centers will be installed in key locations.
74. All programs included in the ESMP have been designed to great detail, including associated costs, responsibilities and schedule. Project bidding documents will include all specifications regarding these programs. A summary of the ESMP is presented in Annex 11. Requests for Inspection before the World Bank Inspection Panel 75. On September 11, 2006, the Inspection Panel registered a first Request for Inspection, IPN Request RQ06/05, related to the Argentina: Provincial Road Infrastructure Project which is being financed by the International Bank for Reconstruction and Development (the Bank) through Loan No. 7301-AR, and the proposed Argentina: Santa Fe Road Infrastructure Project. A second Request related to the same two projects, IPN RQ06/05-2, was registered on September 27, 2006. Both Requests concern the improvement of National Road 19 in the PSF. The main concerns raised by the First Requesters can be summarized as: (i) objection to the construction of an overpass of National Road 19 where it intersects Provincial Road 6 and (ii) objection to the amount of land to be expropriated, location of land to be expropriated and
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compensation to be paid. The Second Request objects to the same issues listed under (ii) in the First Request. The Requests contains claims that the Panel has indicated may constitute violations by the Bank of various provisions of its policies and procedures, including the following: OP/BP 4.01, Environmental Assessment, January 1999; OP/BP 4.12, Involuntary Resettlement, December 2001; OP/BP 13.05, Project Supervision, July 2001; and World Bank Policy on Disclosure of Information, September 2002. On October 18, 2006 Bank Management submitted its Response to the Panel. The Panel issued its report on November 16, 2006. Said report concludes: “The Requests and Management Responses contain conflicting assertions and interpretations about the issues, the facts, compliance with Bank policies and procedures, and harm. The Panel can only address these issues during investigation. While the Requesters are otherwise eligible to submit a Request for Inspection, the procedural criterion of paragraph 9(c) requiring that the Requesters have brought the “subject matter (…) to Management’s attention and that, in the requester’s view, management has failed to respond adequately demonstrating that it has followed or is taking steps to follow the Bank’s policies and procedures” has not been fully met. Therefore the Panel cannot make a recommendation on whether to investigate the subject matter of the Requests for Inspection”25. 76. A project preparation Bank Mission conducted in November 2006 had an opportunity to meet with Requesters that presented the two Requests for Inspection before the World Bank Inspection Panel, as well as with another potentially affected citizen who sent a letter to the Bank Office in Buenos Aires during the mission.. These meetings were chaired by the Provincial Government of Santa Fe and served as a useful forum to better understand the claimants’ concerns. The Mission also visited several areas along the road segments of National Road 19 expected to be expanded under this project. During this visit, the Mission met with the Second Requester who confirmed that his concerns have been settled to his satisfaction (a copy of the relevant agreement between the Province and the Second Requester as well as the minutes of all meetings held with Requesters are in Project Files). Consequently, the Requests filed with the Inspection Panel and its subsequent visit to the Project area in the Province of Santa Fe, served to cause a further strengthening of communication among the Province, relevant local parties and Bank Management. 6. Safeguard policies
Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [ ] [X] Pest Management (OP 4.09) [ ] [X] Cultural Property (OPN 11.03, being revised as OP 4.11) [X] [ ] Involuntary Resettlement (OP/BP 4.12) [X] [ ] Indigenous Peoples (OP/BP 4.10) [ ] [X] Forests (OP/BP 4.36) [ ] [X] Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP 7.60)* [ ] [X]
25 Extracted from: Report and Recommendation. Argentina: Santa Fe Road Infrastructure Project (proposed). The Inspection Panel. November 16, 2006..
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Projects on International Waterways (OP/BP 7.50) [ ] [X] 7. Policy Exceptions and Readiness 77. The Project does not warrant any exceptions to Bank policies and is deemed to be ready for implementation.
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Annex 1: Country and Sector or Program Background
ARGENTINA: AR Santa Fe Road Infrastructure The growing magnitude of freight transportation by road in Argentina has not been matched by other alternative transportation modes. While currently more than 80 percent of total freight is transported by road, only 6 percent is transported by rail, 5.5 percent by waterways and 0.5 percent by air. The predominance of road transportation within the freight industry is directly reflected in GDP figures, where freight transportation by road is accountable for more than 47 percent of total transport GDP, which in turn represents almost 5 percent of total national GDP. Additionally, passenger transportation by road represents over 40 percent of total transport GDP, thus accounting for almost 2 percent of total GDP. The economic relevance of the road sector in Argentina historically has never been so high. Particularly, during the 2000-2005 period, its participation as a percentage of total GDP grew constantly, triggered mainly by an important expansion of freight transportation by road. This upsurge responded to the growing significance of the market of goods vis-à-vis the service market and to the general economic reactivation experienced by the country after the crisis. Recent studies estimate that for every one percent increase in GDP, the need for roads grows between two and three percentage points. Therefore, the recent trend of GDP in Argentina, which revealed an 8 percent growth in 2004 and 9.1 percent in 2005, is exerting and will continue to exert considerable pressure on the road transportation system. Infrastructure bottlenecks are currently placing strong restraints on potential economic growth triggered by the competitive cost structure of the agricultural sector, the pattern of flows of goods within the Mercosur and the abundance of natural resources in the country. The Province of Santa Fe, with an area of 133,007 km2 and a population of 3.2 million accounts for, respectively, 4.8 percent and 8.9 percent of Argentina’s size and population. The Province favorable location in the Center Region (comprised by Córdoba, Entre Ríos and Santa Fe) along 700 km of navigable waterways (Hidrovía Paraguay-Paraná) provides the most convenient gateway for Argentina’s agricultural exports. Besides, it is in the heart of a land corridor that connects the south of Brazil with ports in the north of Chile. Santa Fe plays a key role as a logistics hub in Argentina. It not only generates a significant share of Argentina’s exports but it has the most important export node in the country (ports of Gran Rosario). As shown in Table A1-1, Santa Fe, which is the country’s main cereal producer and largest exporter of soybean oil in the world accounts for 25 percent of total exports measured in dollars. When measured in tons, Santa Fe accounts for 34 percent of total exports, more than any other province in Argentina. Its main exports are pallets, cereals, grease and oils and seeds. The relevance of Santa Fe as a logistics hub is reflected by the share of the ports located around Rosario in the country’s total exports. This share reached 58 percent of total export volume in 2004.
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Table A1-1 Exports by Provincial Origin - 2004
Weight Value Share
Origin Tons (thousand)
US$ (thousand) Tons US$
Santa Fe 22,808 7,024,245 34% 25% Buenos Aires 21,327 10,864,226 31% 39%
Source: INDEC A recent World Bank study26 estimated an origin-destination exports flow matrix for Argentina. This matrix (presented in Table A1-2) links the province where internal flows are originated with export nodes. The node of Gran Rosario is the major export gateway of Argentina, receiving virtually all exports originating in the Center Region and attracting a high share of exports originating in the Northwest (NOA) and Northeast (NEA) regions of Argentina. Thus, the condition of the road network in the PSF is essential to sustain and increase the competitiveness of the Argentine economy.
26 Argentina: el Desafío de Reducir los Costos Logísticos ante el Crecimiento del Comercio Exterior. Report 36606. June 2006.
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Table A1-2 Internal flows of goods to external markets
NOA: JUJUY, SALTA, TUCUMAN, SANTIAGO DEL ESTERO NEA: ENTRE RIOS, MISIONES, CORRIENTES, CHACO Source: Argentina: el Desafío de Reducir los Costos Logísticos ante el Crecimiento del Comercio Exterior. Report 36606. June 2006. Road sector investment and financing Road infrastructure bottlenecks are largely an expression of the financial restrictions faced by the road sector in Argentina throughout the last decades and aggravated since the recent devaluation and lasting economic recession. Overall investment in Argentina in the 2001-2003 period fell over 54 percent from its average level in the 1993-2000 period, but has recovered significantly since then, rising from 14.2 percent of GDP in 2001 to an estimated 21.5 percent in 2005.
However, real investment, that is, investment measured in physical units, still remains below the peak of the 1990s. At 1993 prices, estimated investment in 2005 was about 20 percent of GDP, which is slightly lower than the peak of over 21 percent in 1998.. Investments in road rehabilitation and construction by DNV and DPVs followed this decreasing trend falling by 35 percent in the 2000-2003 period, relative to the average investment rate for the 1993-1999 period, before resuming strongly starting in 2004. The expansion of the Argentine road network was originally funded through earmarked taxes on road users (fuels, tires, lubricants, vehicle registration and sale tax) allocated to DNV and existing DPVs through a Road Fund, specifically for the construction and maintenance of the road network. As originally envisaged, distribution of this earmarked funds between DNV and DPVs was established at 60-40 percent respectively. Growing fiscal pressures forced the GoA to divert the road sector funds to meet other needs and, as part of the economic policy reform initiated in the late 80’s, revenues from taxes on petroleum, tires and lubricants were directly transferred to the Treasury and the earmarking of revenues from taxes on vehicle registration fees and sales was removed. Therefore, earmarked revenue assignments to DNV were eliminated, leaving the sector subject to budgetary allocations from the general Treasury. At the provincial level, through the co-participation system, provincial governments receive part of the revenues collected from fuel taxes, of which 60 percent are transferred to DPVs to finance road expenditures, to account for the decentralization of responsibilities brought about with the road sector reform in 1992. However, in general terms, since the creation of these taxes the percentage of resources effectively assigned to DPVs only declined. Consequently, financing options for DPVs have been reduced, and they have few options but to rely on direct contributions from provincial Treasuries or on external financing, which only a few provinces have access to. Province of Santa Fe road network Santa Fe’s primary and secondary road network consists of 16,643 km, out of which 6,217 are paved. This network includes roads that are the responsibility of three different administrative levels, national, provincial and municipal: (i) national roads are managed by the National Road Directorate (DNV); (ii) provincial roads are under the jurisdiction of the Provincial Road Directorate (DPV); and (iii) rural and local roads remain under the responsibility of municipal governments.
Table A1 -3 Province of Santa Fe’s Primary and Secondary Road Network
Length (km) Administrative level
Paved Non-Paved Total National 2,369.7 93.52 2,463.22
Provincial 3,847.40 10,332.47 14,179.87
Total 6,217.1 10,425.99 16,643.09
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The tertiary network under municipal jurisdiction, about 110,000 km, consists of unpaved roads, access to farms and feeder roads with ill-defined features and very low-traffic volumes; these are assets that deteriorate very quickly and require constant maintenance. Average traffic volume on the paved network is around 1,000 vehicles per day, while on the unpaved roads, is between 50 to 150 vehicles per day. In terms of traffic composition, cars account for 76 percent, followed by heavy trucks 12.80 percent, light to medium trucks 7.40 percent, buses 2 percent and articulated trucks 1.80 percent. Province of Santa Fe road policy The strategy adopted by the PSF to improve the condition of the road network is based on two main pillars: (i) facilitate traffic flows along the major road corridors in the province; and (ii) rehabilitate and maintain those roads with the highest level of actual and potential traffic and in worse structural conditions. At the request of the PSF, the Bank, through the Provincial Road Projects I and II27, is already providing financial support to achieve the second pillar. Based on a comprehensive view of the road network, the proposed project aims at helping the province accomplish the first pillar. The first corridor, measured by traffic levels is the road between Santa Fe and Rosario (continuing to Buenos Aires). This corridor does not have congestion problems because its capacity was expanded during the late 90s. The national government is currently financing the capacity expansion of National Road 9 –the road corridor with the second highest traffic levels in the PSF- between the cities of Rosario and Córdoba28. The third most important corridor is National Road 19. By upgrading National Road 19 and considering that National Road 34 will also be upgraded in the next few years (through an unsolicited proposal that is in an advanced planning stage), the PSF would have upgraded all major trunk roads in its territory. An additional pillar the PSF is focusing its effort is road safety. Due to the ever-growing number of casualties and fatalities occurring on the road network, road safety has become a common and prominent concern at all levels of government in Argentina. Surveys of road accidents carried out recently show that road fatality rates are high and are still escalating, averaging about 30 deaths per 100,000 population and nearly 20 per 10,000 vehicles, compared to figures of about 12 and 2 respectively, in developed countries where comprehensive road safety programs are implemented. In bold numbers, the above ratios correspond to about 10,000 deaths, 50,000 wounded, and nearly 200,000 accidents per year. Road fatalities in Argentina are the first cause of death among the younger generation of less than 35 years old, and the third cause of death in general. According to a study made by the Engineering Department of the University of Buenos Aires, the economic cost of such staggering level of road accidents in Argentina is estimated to be nearly US$2 billion per year. World Bank-financed road projects are increasingly and aggressively addressing the issue of road safety, including it as a major objective and component of the projects. This project is no exception and would support the PSF implementing its Road Safety Provincial Program recently elaborated. Besides the road safety pilots\ proposed under this project, the engineering designs of National Road 19 foresee the inclusion of road safety features. 27 AR 4093 and AR 7301 28 National Road 9 and the highway between Santa Fe and Rosario have traffic levels that exceed 8,000 AADT.
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The technical body in charge of implementing the province’s road strategy is the Provincial Roads Directorate (Dirección Provincial de Vialidad - DPV). This agency is an autonomous entity under the authority of the Ministry of Public Works. It is managed by a Administrador and under her/him activities of the Department are generally coordinated by a Chief Engineer. The DPV comprises eight Divisions, namely: Planning, Engineering, Construction, Maintenance, Workshop, Administration, Finance and Accounting, and Legal. DPV’s budget was seriously reduced during the period 1999 – 2002. Between 1998 and 1999 allocated budget to DPV fell 75 percent. Although it increased in 2003, it still lagged far behind 1998 levels, but since 2004 it has risen dramatically, reaching ARG$236 million in 2005. DPV’s budget is expected to keep growing as the PSF expects to spend approximately 2.5 percent of its GGP in infrastructure. Through the province’s participation over the last eight years in the two Bank-financed Provincial Roads Projects, the PSF (and the DPV as its technical road unit) has been able to strengthen substantially its institutional capacity in the technical, planning, procurement, financial and environmental management areas. Nevertheless, the DPV‘s environmental unit still needs to improve, in particular in the areas of inspection of environmental safeguards applied to civil works.
Table A1 - 4 DPV Budget (in US$)
World Bank experience from recent road projects in Argentina The First Provincial Roads Project (1997-2005) Background and Project Objectives. The project development objectives were:
• To develop and implement efficient road programs based on appropriate design and maintenance standards, with a view to improving the efficiency of resource use in the Provinces’ road sectors and the serviceability of the provincial road networks;
• To reorganize DPV’s operations, gradually transferring maintenance execution to private contractors or to local consortia, strengthening DPV’s technical and management capabilities and establishing clear goals and accountability for implementing their road programs;
• To strengthen DPV’s environmental management capabilities; • Overall, the project was expected to help establish an institutional and technical
framework for maintenance, rehabilitation and upgrading of provincial roads, nationwide. It would further contribute to the growth of the Provinces’ economy by reducing the cost of road transport.
Main Project Achievements. The project has been successful in many respects, as summarized below:
• Adequate Prioritization of Works: Priority was duly given to the rehabilitation of the paved network.
The rehabilitation program was consistent with the recommendations of the HDM model, as highest priority was given to roads with medium to high traffic and in poor condition: 67 percent of the total length was rehabilitated, compared to only 33 percent of roads with low traffic and poor condition; likewise, high priority was given to roads in poor condition: 57 percent, compared to 34 percent of roads in fair condition.
• Fiscal Impact. Because of project implementation, the HDM economic evaluations carried out for a 20-year analysis period, show that future costs of rehabilitation necessary to maintain a steady-state condition of the paved network will be reduced by about 25 percent to 50 percent. The fiscal impact for the six participating Provinces is summarized below.
Table A1 - 5
Fiscal Impact for Provinces in the PRP
Province
Resources needed for Rehabilitation during Project (1998-2005),
US$/km/year
Resources need for Rehabilitation after
Project (2005-2015), US$/km/year
Fiscal Impact in % Reduction in Resources needs
Buenos Aires 9,103 4,659 49% Córdoba 5,153 4,090 26% Corrientes 11,211 6,355 43% Entre Ríos 10,067 5,165 49% Neuquén 3,556 3,473 2% Santa Fe 11,290 6,154 45%
• Improvement in the Condition and Serviceability of the Paved Network. Prior to project
implementation in 1995, the proportion of roads in good condition in the participating Provinces was in the order of 48 percent, and the backlog of maintenance was nearly 20 percent. In 2004, thanks to the project, these proportions are 60 percent and 9 percent respectively. Roads in very poor to bad condition have gone down from 6 percent to 1 percent.
Had the project not been implemented, the backlog of maintenance would now 50 percent higher and the proportion of roads in very poor to bad condition would be near 20 percent. As a
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result of project execution, current road users costs, are about 10 percent less than they would have been in the absence of a project (US$0.40 per vehicle/ km, for an average IRI with project of 2.5, compared to US$0.44 per vehicle/km for an average IRI of 5 without project. As a consequence, it is estimated that road users savings are in the order of US$220 million per year.
Graph A1- 1 Evolution of Network Condition
• Institutional Strengthening. Provinces have now available a rational model for preparing their annual road maintenance program. All Provinces are now proficient in the use of the HDM model for preparing their rehabilitation and upgrading programs. All provinces are now equipped to carry out their network survey; prior to project implementation little resources and capabilities existed; altogether, a total of 9,735 trainees-weeks have been financed and achieved under the project, compared to a Mid-Term Review target of 2,638.
Downsizing of DPV has been achieved: 5,725 employees compared to a Mid-Term Review target of 6,088. Overall, during the last 5 to 6 years, workforce in the participating Vialidades has been reduced by nearly 20 percent, mainly through erosion and voluntary retirement. Outsourcing of maintenance activities has reached the Mid-Term Review target of 80 percent, except in the smaller Provinces of Neuquén, Entre Ríos and Corrientes, where force-account still prevail and progress is still possible. Prior to project implementation, the environmental divisions in the DPVs were practically non-existent. Today they are well staffed, trained and operating successfully.
• Shortcomings include: (i) excessive delays in procurement of works due to inefficient
administrative procedures; (ii) significant delays in the implementation of Inocsa/Munit
Evolution of Network Condition between 1995 and 2004 Provincial Roads Project
0%10%20%30%40%50%60%70%80%
Good Fair PoorPavement Condition
% N
etw
ork
1995 2004
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technical assistance assignment, particularly after the 2001 crisis that led to difficult negotiations in reaching an agreement on the method and amount of payment; (iii) insufficient systematic network condition surveys, due to lack of resources for that purpose by the Provinces; (iv) propensity to continue relying primarily on overlay design manuals (i.e., the AASHTO Guide) that sometimes result in overly conservative and costly solutions, as opposed to using the HDM Model for project overlay design with prioritization of solutions based on a solid economic indicator (i.e. maximizing NPV/Cost ratio); the model being sometimes used only for program evaluations or merely to confirm a minimum rate of return; and (v) no performance-based contract of the CREMA type has been executed, contrary to expectations at the Mid-Term Review and despite availability of funds (US$20 million had been re-assigned to that category of disbursement during the Mid-Term Review).
The Second Provincial Roads Project (2005-2011) The Project, approved in June 2005 and signed in April 2006, aims to improve the reliability of essential roads to facilitate market access of provincial production and the efficiency of road management as a means to support the country’s productive sector, competitiveness and economic growth. Thus, by building upon the achievements of the first Provincial Roads Project (AR-4093), the Project will further the agenda in terms of rehabilitation and maintenance of the core provincial network, to meet the following specific objectives: (i) strengthen the planning process to support the preparation and implementation of comprehensive multi-year road programs; (ii) introduce the use of performance-based contracts as a key step toward implementing a sustainable and cost effective road management strategy; and (iii) bring about the required technical capabilities of provincial road agencies in order to take on new management strategies and gradually support their transformation into results-oriented organizations with enhanced capacities (planning, administration and supervision of contracts, environmental management, road safety management). Through this loan, five CREMA contracts covering a total length of 781 km of the primary paved network are expected to be executed in the PSF. These Mallas account for 23 percent of the total length of paved roads.
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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
to private contractors; strengthening institutional and environmental management capabilities of DPVs.
• Improving DNV’s road maintenance planning and programming capabilities to cut costs and improve efficiency, eliminate rehabilitation and maintenance backlog and fostering DNV’s institutional development.
• Expansion of performance based contracts for rehabilitation and maintenance of almost the entire national road network, continuation of institutional strengthening program for DPVs, implementation of road safety pilots in selected corridors, creation of a bridge management system.
• Rehabilitating and maintaining high priority segments of the paved road network within the Province of Buenos Aires to support the reactivation of the provincial economy.
• Rehabilitating and maintaining high priority segments of the paved road network and paving of other segments or the road network within the Province of Cordoba to support the reactivation of the provincial economy
S S Signed in April 2006 S S U S S S Approved by the Board in July 2006
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Annex 2.B Other Infrastructure (outside the Road Sector) Projects in Argentina
Roads Water and Sanitation Flood Protection Federal Level Loan 7242-AR National Highway Asset Management Project CReMA contracts (performance-based) Institution Building of Federal Hwy Agency Road safety activities
Loan 4484-AR Water Sector Modernization Project Contracts for 3 provincial level water operators (Posadas, Olavarria, and Tucuman)
Provincial Level Loan 4093-AR Provincial Roads Project Road rehabilitation and maintenance contracts Closing June 30, 2006 Loan 7301-AR Provincial Roads II Project Provincial-level CREMA contracts (performance-based) Inst. Building Prov. Hwy Agencies Road Safety Component Loan 7268-AR Buenos Aires Province Sustainable Investment Development Project Road rehabilitation and maintenance Road safety component
Loan 7268-AR Buenos Aires Province Sustainable Investment Development Project Water and sanitation contracts in eligible areas of the Province with poverty focused interventions
Loan 4117-AR Flood Protection APL Flood protection and prevention contracts in six Provinces Loan 7268-AR Buenos Aires Province Sustainable Investment Development Project Small water resource management component
Municipal Level Loan 3860-AR Municipal Development Project II Closed on Dec. 31, 2005 Basic Municipal Services Project
Loan 3860-AR Municipal Development Project II Closed on Dec. 31, 2005 Basic Municipal Services Project
Loan 3860-AR Municipal Development Project II Closed on Dec. 31, 2005 Basic Municipal Services Project
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Annex 3: Results Framework and Monitoring
ARGENTINA: AR Santa Fe Road Infrastructure
Results Framework
PDO Project Outcome Indicators Use of Project Outcome Information
Improve transport conditions along a strategic road corridor (National Road 19) that links the Province of Santa Fe with regional and international markets
Road users travel time reduced and road safety improved as a result of National Road 19 (between Santo Tome and San Francisco) having four operational lanes in good condition.
Assess the impact of the improved road corridor on the competitiveness of producers that use the road corridor. Measure the impact on road safety of road widening interventions.
Road corridor along National Road 19 between Santo Tome and San Francisco upgraded.
Number of Km along National Road 19 (between Santo Tome and San Francisco) converted from a two lane road into a four lane road (two lanes in each direction)
Estimate the effects of the additional road capacity on the provincial economic activity to plan future investments in the road network
Road safety is improved in National Road 19 and selected segments of the Province of Santa Fe’s road network
Number of traffic accidents and related number of injuries and fatalities in National Road 19 and selected segments of the Province of Santa Fe’s road network
Provide an assessment of the effectiveness of road safety interventions and policies and identify potential changes to increase their impact.
Logistics Unit is created and a system to measure logistics costs in the Province of Santa Fe is developed
Personnel of Logistics Unit receive training. Logistics Unit produces annual comprehensive logistics surveys and updates and disseminates a logistics costs index.
Reports of Logistics Unit are used to identify infrastructure bottlenecks and trade facilitation constraints in the Province of Santa Fe and Center Region
Assessment of the Provincial capacity to produce a strategic development plan is conducted
Diagnostic studies completed: (among others: performance of provincial agencies in planning areas, recommendations to structure a planning process exercise) Development and implementation of a coordination mechanism to improve the effectiveness of planning processes
Diagnostic of planning capacity leads to the improvement of infrastructure planning processes in the Province of Santa Fe and helps select those infrastructure projects with the highest social rates of return.
Capacity of DPV environmental unit is strengthened
Personnel receives training and technical equipment for supervision of environmental aspects of works is purchased
Environmental and social aspects is mainstreamed in the planning and execution of infrastructure investments in the PSF
Management Unit knowledge of monitoring and evaluation techniques is increased.
Personnel of UG receives training on M&E techniques
Include in future infrastructure projects managed by UG a M&E component
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Arrangements for results monitoring Target Values Data Collection and Reporting
Project Outcome Indicators
Baseline YR1 YR2 YR3 Frequency and Reports
Data Collection Instruments
Responsibility for Data Collection
Travel time for all road user categories along National Road 19 (between Santo Tome and San Francisco) is reduced Road accidents along National Road 19 reduced
To be collected by the PIU before road works begin To be collected by the PIU before road works begin
At least 5% reduction for all road users categories Once works are completed, reduction in accidents 20% higher than average reduction of accidents in the PSF
Semi annual Origin-Destination traffic surveys
UG (Province of Santa Fe)
Intermediate Outcome Indicators
Hard and soft road safety interventions in pilot areas (Provincial Road 1 and 21) fully operational
No road safety interventions
Alcohol testing program operational
Hard interventions completed
Semi annual
Statistics provided by Ministry of Production and DPV
UG
Logistics Unit established and logistics costs measures
Logistics costs are not measured in the Province of Santa Fe
Logistics unit established
First logistics costs survey completed
Second logistics costs survey completed
Semi annual Surveys to be done by consultants and personnel from the Logistics Unit
UG
Assessment of the Provincial capacity to produce a strategic development plan is conducted
The Province of Santa Fe does not have a comprehensive strategic development plan
Assessment of current organizational structure of provincial agencies involved in planning completed
Development of a new institutional scheme to improve planning capabilities
Semi annual Progress Implementation Reports
UG
Capacity of DPV environmental unit is strengthened
DPV has an environmental unit but lacks training and equipment
Diagnostic of training needs and best equipment for the unit’s needs
Based on diagnostic, equipment is purchased and training program is organized
Training program is completed
Semi annual Progress Implementation Reports
UG (with inputs from DPV)
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Management Unit knowledge of monitoring and evaluation techniques is increased
M&E is not a component of provincial infrastructure projects
Introductory training on M&E is organized
Follow up course on M&E
Course on impact evaluation techniques is organized
Semi annual Progress Implementation Reports
UG
Given that the project implementation period (three years) will coincide with the time needed to complete the widening or Road 19, the impact on road users costs are expected to occur after the project closing date. However, the Province of Santa Fe agreed to conduct two additional surveys to take place two and four years after the widening of Road 19 is completed in order to capture the impact of this investment. The Province will submit to the Bank the results of the studies.
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Annex 4: Detailed Project Description
ARGENTINA: AR Santa Fe Road Infrastructure The project comprises two components, namely: (i) National Road 19: widening of the existing road with the construction of a parallel roadway; and (ii) Institutional Strengthening, covering road safety and capacity building of the UG, Ministry of Finance, Ministry of Public Works and DPV, including logistics, planning and environmental issues. The costs of the project by component and a brief description of each component is included in Table A-1 below and the paragraphs that follow it. The overall cost of the proposed project is now estimated at US$173.10 million of which US$167.4 million (including contingencies) correspond to the National Road 19 component, US$2.80 million to the institutional strengthening component and US$2.90 million to resettlements. The Bank would finance US$126.7 million, and the Province of Santa Fe the remaining US$46.40 million.
Table A4-1 Detailed Project Costs (US$ million)29
PROJECT COMPONENTS Bank Counterpart Total
1. Upgrading of National Road 19 (rigid pavement) 103.60 (74.0%)
(26.8%) 173.10 (*) Subject to waiver. The total amount of the Front End Fee is US$ 300,000. Project component 1: Upgrading of National Road 19: (Estimated cost: US$167.40 million including contingencies, US$ 123,9 million Bank financed) This component consists of the widening of the existing two-lane section of National Road 19 between National Road 11 (Santo Tomé, Province of Santa Fe) and National Road 158 (San Francisco, Province of Cordoba), converting it into a four-lane highway. The last 6.1 km correspond to the Cordoba province and are not part of the Project. Said works will be financed by the DNV. The improvements also include construction of three four-lane bypasses of the towns of San Jerónimo del Sauce and Sa Pereyra and the city of San Francisco. The new 29 These cost estimates are considered reliable given the preliminary project design and cost estimates by consulting firms, which were reviewed by DPV and the project team (cost estimates reflect prices of November 2006). Contingencies were estimated to be about 20% for the Upgrading of National Road 19 and 8% for the Institutional Strengthening component.
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highway configuration will be 2+2, and the proposed works would be a first step to convert National Road 19 into a freeway in the future (when it is justified by traffic volumes) with full control of accesses, according to the DPV plans. For this future conversion of National Road 19 in a freeway, a new roadway between the roadway financed by this project and the existing one would be constructed. The latter would then be left as a collector road for local traffic and to facilitate access to rural roads and properties along the freeway. Through this component the Bank would support substantial improvements in a key trunk road in the Province of Santa Fe, reducing vehicle operating costs, travel time, and accidents. DPV is in charge of preparing the corresponding engineering designs, which are being carried out by three different consultant firms and are now at the end of the ‘anteproyecto’ level. For this purpose, the section of National Road 19 to be improved under the project was divided in three (3) sections:
Section 1: National Road 11 - Provincial Road 6 (Access to San Carlos)
(Length: 29.421 km with improvements to the existing alignment in 1.954 km) Section 2: Provincial Road 6 (Access to San Carlos) - National Road 34
(Length: 46.577 Km with improvements to the existing alignment in 2.325 km) Section 3: National Road 34 - Limit of the provinces of Santa Fe and Córdoba
(Length: 54.000 Km, with improvements to the existing alignment in 0.368 km)
These three sections are within the Province of Santa Fe. In addition, the project includes a section of 6.144 Km in the Province of Córdoba connecting with National Road 158. This last section will not be financed by the project. These figures result in an overall length of 129.998 km, of road widening and by-passes, plus 4.647 Km of alignment improvements of the existing road to accommodate it to the conditions of the new roadway, which makes a total length of 134.645 Km of road works financed by the project. 1.1 Traffic Studies. In support of the proposed works, the DPV conducted a Traffic Study, from which the Average Daily Traffic (AADT) and traffic composition in year 2006 were obtained, as well as the estimate of possible future generated traffic due to the road improvements. Table A4-2 below summarizes the results.
Year 2009, the year in which the upgrading works are expected to be completed, was taken as a basis to estimate future traffic demand. Generated traffic was assumed to depend on each project section, ranging from 10 percent to 19 percent. Annual Traffic Growth Rates were considered equal for all type of vehicles and variable between periods of time, as shown in Table A4-3 below.
Table A4-3
Traffic Growth Rates 2006-2034 Period Growth Period Growth Period Growth 2006-2009 6.0 % 2013-2015 3.5 % 2025-2034 2.5% 2010-2012 5.0 % 2016-2024 3.0 % Although, at first sight, current total traffic volumes could not be enough to justify an immediate duplication of the existing road, consideration has to be given to the high percentage of heavy vehicles (up to 47 percent), which has resulted in acceptable rates of return in the economic analysis (see Annex 9). Another justification for the duplication of the existing road would be the substantial increase in road safety that will be achieved with the proposed works. For these reasons, the DPV is designing a multilane highway without control of accesses, with cross-section following, in general terms, DNV requirements. However, in this case the new roadway will be separated about 50 meters from the existing road, in order to leave enough space to accommodate U-turns with minimum curvature radius of 20 m, (as required by DNV) and a third new roadway, which, separated by a standard median of 16 m from the roadway financed by this project, and together with it, will compose the future freeway. 1.2 Urban and Semi-urban sections. The project starts with 1.4 km in an urban area in the city of Santo Tomé and continues with 8.1 km in a semi-urban one. In these two sections, the upgrade of RN 19 has been designed as a typical urban road, with 4-lanes separated by only 2 meters, and includes sidewalks and bicycle paths. 1.3 By-passes and Boulevards. The project includes bypasses of the towns of San Jerónimo del Sauce (5.138 km) and Sa Pereyra (2.706 km) and the city of San Francisco (15.6 km, out of which 6.1 km in the province of Córdoba not financed by the project). These by–passes will consist of two new roadways separated 16m. The existing sections of RN 19 crossing the towns
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of San Jerónimo (about 700 m) and Sa Pereira (about 300 m) will be converted in “boulevards” of two roadways for motor vehicles separated by a median of 6 m to be used by pedestrians and cyclists. The conversion will be financed with project counterpart funds. 1.4 Intersections, Accesses and U-turns. Intersections or road junctions and town accesses have been solved with interchanges at one level (roundabouts in most of the cases), except in those cases of greater volumes of traffic (RN158, RN34, AUFE) for which overpasses have been designed. Overpasses have been also designed for existing railroad crossings. U-turns located every five to six km in both directions of traffic have been designed to take into consideration the claims of the local population and land owners, facilitating the access to rural roads and to their properties and minimizing the length necessary to reach those properties. 1.5 Pavements. Two types of pavement, rigid and flexible, have been considered in order to select the one with lower total cost and maximize the use of the limited available financing resources. The flexible pavement option was designed following the AASHTO 1993 methodology, and the rigid pavement option following the PCA (Portland Cement Association) methodology, considering design periods of 25 and 15 years respectively, and completion of works by 2009. The two alternatives finally selected were the following:
• Rigid pavement alternative Concrete pavement (PCC) consisting of jointed plain concrete slabs 0.24m thick, with dowels and sealed joints, and 0.60 m wider (into the shoulders) than the roadway (to keep away the slab edges from the load of heavy vehicles). The slabs are supported by a soil-cement sub base of 0.15 m, and a lime-improved sub grade of 0.15 m. Concerning the remaining part of the shoulders, the pavement adopted consists of a hot mix asphalt concrete layer of 0.04 m on a 0.15 m granular base, supported by a lime-improved sub grade of 0.15 to 0.19 m, depending on traffic volumes, and soil conditions.
• Flexible pavement alternative
Surface course and base layer (0.04 m to 0.06 m and 0.07 m to 0.09 m thickness respectively, depending on traffic volumes) of hot mix asphalt concrete, over a layer of 0.20 m of soil-sand-stone-cement, a 0.20 m sub base of lime-stabilized soil and over 0.15 m to 0.30 m of lime-improved sub grade, depending on traffic and soil conditions. Shoulders will be paved with a mix asphalt concrete layer of 0.04 m on a 0.15 to 0.20 m granular base and supported by a lime-improved sub grade of 0.15m.
After performing a life-cycle analysis to compare the cost of each alternative (see Annex 9), the rigid pavement has been selected, since it represents the lower life-cycle cost for the three sections considered in the engineering design. However, DPV has decided to ask from bidders a quotation for both rigid and flexible pavement alternatives, which means that DPV will include both rigid an flexible designs in the bidding documents. This decision will increase competition
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among prospective bidders, given the lower number of qualified contractors available to build the rigid pavement alternative with the equipment required by the project technical specifications. The works will be awarded to the lowest evaluated bid no matter the offered pavement option. 1.6 Works in the existing two-lane road. The following works will be made in the existing two-lane road:
• Improving some dangerous curves, to adapt them to a design speed of 120 km/h.
About ten curves will be improved, with an overall length of 4.647 Km.
• Paving the existing shoulders in a similar way than the ones for the new roadway. These works will be included in the engineering design, but they will not be built as part of this project and will remain the responsibility of the national government (through the road agencies OCCOVI and DNV).
• Improving bridge structures of the existing road.
• Adapting the signalization, vertical and horizontal, and informative panels and safety
features to the new configuration of a four-lane highway, of which the existing road will be a roadway carrying only traffic in one direction.
1.7 Other engineering design parameters. The principal design parameters for the different elements of the new sections are as follows:
• New bypasses in towns and interchanges
Design speed: 120 Km/h (for geometrical design purposes) Number of lanes: 2 + 2 Right-of-way: 120 m Median width: 16 m Traveled way: 2 x 7.30 m (2 lanes of 3.65 m) Shoulders width: External 3.00 m (2.50 m paved)
Internal 1.00 m (0.50 m paved) Side slope: h ≤ 3.00 m 1:4
h > 3.00 m 1:2 (with guardrail) Maximum longitudinal slope: 3%
• Horizontal curvature improvements on the existing road
Same as new bypasses, but without paving shoulders (they should be paved by OCCOVI and/or DNV).
• Rampes on interchanges (6% maximum)
Traveled-way width: 4.50 m (direct ramps)
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5.00 m (loops) Shoulders width: External 2.50 m (1.50 m paved)
Internal 1.50 m (0.50 m paved) Side slope: h ≤ 3.00 m 1:4
h > 3.00 m 1:2 (with guardrail)
• U-Turns
Frequency: 5-6 km Internal radius 20.6 m Traveled-way width: 6.00 m Other features: Acceleration and deceleration lanes (30-120 Km/h)
• Bridges
Traveled way: 7.30 m (2 lanes of 3.65 m width, each direction) Shoulders width: External 2.50 m
Internal 1.00 m Sidewalk: External 0.80 m
Internal 0.60 m Barriers: New Jersey Guardrails for pedestrian safety
1.8 Rainfall Drainage. Calculations of the discharge capacity of stormwater management facilities (bridges, culverts and drain pipes) under the embankment of the new roadway have been carried out using the Modified Rational Method (MRM). This method uses the critical storm duration to calculate the maximum volume to be discharged by a facility under a road. The critical storm duration generates the greatest volume of runoff. The MRM assumes that the rainfall intensity averaging period is equal to the actual storm duration. As a basis for the calculations for this project, the statistical data concerning rainfall have been provided by INTA, the local regulatory authority, and design storm return frequencies of 50 years for bridges (the ones in the project are relatively small) and 25 years for culverts and drain pipes have been adopted. The watershed areas have been determined using topographic maps on a scale of 1:50,000. With these data and using the MRM, the design inflow for all watersheds in the area of the highway have been obtained and the corresponding embankment crossing facilities have been designed. In comparison, many of the existing drainage facilities under the existing roadway do not currently have enough capacity for the resulting runoffs. Therefore, those facilities have been enlarged in the project, to give them the same capacity of discharge as the new ones. In addition, some new drain pipes crossing the highway embankment have been designed in low points where there were none, to improve the existing drainage conditions in those points. With all these improvements, the resulting capacity of discharge flow of the highway as a whole at the end of the project will be much higher and, therefore, the fears of some land owners on both sides of the highway that the new works could produce a dam effect are not well funded. 1.9 Right-of-way (ROW). DNV, the entity in charge of the federal network, to which RN 19 belongs, has defined a right-of-way 120 m wide for existing an future freeways, in Argentina,
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including the one between Santa Fe and RN 158, because it is included in DNV’s road Category I as it is part of the bioceanic corridor.
The PSF reaffirmed the 120 meter width and planned location of ROW. It justified its decision on the following basis.
• Additional construction costs and potential negative environmental externalities. A reduced ROW would not allow sufficient lateral extraction of soil for the construction of embankments, and the remaining soil would need to be extracted from land to be purchased, and then transported to construction sites. Consultants estimated that additional soil transportation costs would double the cost of embankment construction (see below for a cost comparison with alternative ROWs). Extracting soil from sites located outside the ROW could create negative environmental liabilities. Land extraction sites, without the proper and continuous control, could become informal solid waste dumps.
• Construction of frequent returns in response to the request of affected communities to minimize restrictions on access to properties. Incorporating returns at about 6 kilometer intervals in line with the outcome of consultations with affected communities requires a wide separation between the existing carriageway and the one to be financed under the project, in order to provide enough space for acceleration lanes and returns compatible with the project design speed, without compromising road safety and the quality of the road alignment.
DNV made years ago the appropriate land measurements for all the affected areas. For the section from Sa Pereyra to San Francisco (65 km or half the length of the works), the necessary land has been practically paid in its entirety and its ownership has already been transferred to the DNV. In addition, the right-of-way established by the DNV will allow the lateral extraction of two million cubic meters of soil for the construction of the embankments for the new roadway and the designed improvements in the existing one, a possibility which is very important, given the very flat area of the works and practically inexistent borrow pits, so saving about US$3.5 million (see Table A4-4 below). If the right-of way were to be reduced to minimize the expropriation area, to 90 m - for instance - as some landowners pretend, those two million cubic meters of soil for the embankments should be excavated from borrow pits outside more than 200 m away of the right-of-way, which would require a lot of additional acquisition of land by the contractor, according to the bidding documents, and the additional cost of its transportation to the work site.
The following table and graphics show these differences for ROWs of 90m and 100 m compared with the adopted one of 120m.
(*) Subject to drainage conditions (**) To be provided by the Contractor. Additional surface needed for extraction. (***) 1US$=3AG$
Furthermore, the 120 m ROW established by the DNV allows space for two marginal collector roads and their ditches in the last phase as a freeway, in addition to the two main roadways. It also increases road safety for the road users, given the existence of many direct accesses to the properties of the existing road. In summary, while trying to minimize the prejudices to the landowners to both sides of the existing road, neither the Borrower nor the Bank can modify the ROW as defined by the DNV, and less if it results in higher costs and lower safety. The following three cases of established ROWs are interesting comparative examples: (i) the DPV of Buenos Aires Province, has established a ROW of 100 m for two lane roads; (ii) in the highway Santa Fe – Rosario the ROW is 150 m. but in addition, there are two collector roads 20 m wide each, resulting in a total of 190 m; and (iii) the highway under construction between Rosario and Córdoba has a ROW of 120 m because it is a Category I road, as the one financed by the project. 1.10 Modifications proposed by some affected citizens. In order to minimize the possible negative effects on some properties affected by the works, several geometrical adjustments have been introduced in the engineering design, the more important ones in the by-passes of Sa Pereira and San Jerónimo and in the proximity of one existing chapel and school (the RAP presents an annex that describes all modifications to the engineering designs that resulted from consultation with affected landowners). 1.11 Access to contiguous properties. All accesses to the existing road have been left without modification. The project includes the necessary modifications of them on the side of the new
Additional volume of soilto be transported(referred to 120m)
0.02.0
4.06.0
8.010.0
12.014.0
16.0
90 100
Right-of-way (m)
Mill
ion
($)
Additional due to soiltransportation
Additional landacquisition (referred to120m)Difference in Total Cost
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roadway, but none has been eliminated. In this manner, the adjacent landowners will have full access to their properties by an asphalt road with a maximum driving distance of 5 Km from the highway, which is the longest distance between U-turns. In the case of the by-passes (completely new roads) of San Jerónimo, Sa Pereyra y San Francisco, the project includes about 50 new accesses (14 in San Jerónimo and Sa Pereira by-passes and 36 in the by-pass of San Francisco, of which 25 are within Santa Fe Province and 11 are in Córdoba Province), sufficient to cover all known needs of accesses to the adjacent properties. 1.12 Highway crosses of wildlife. In a memo dated November 27, 2006, the Bank’s Safeguards Advisory Team (SAT) recommends to reduce to about 80 kph the speed limit where the highway crosses the Cañadas del Sauce and Yeguas and the Arroyo Colastiné, to prevent wildlife road kills given the relatively high wildlife concentrations in those points. In the numerous visits to those sites during project preparation, no high wildlife concentrations have been detected other than hares, small snakes and other small reptiles. The structures in the highway to cross the mentioned water courses have a minimum free high of 2 m over them and spans in the order of 18-20 m, enough for the crossing of the existing animals and much bigger ones, which occasionally could cross. Nevertheless, while a design speed of 120 km/h has been established to determine the geometrical design characteristics of the highway, there are numerous speed limits along the highway, particularly in the proximity of accesses, U-turns etc. It is considered that with the above features, the protection recommended by SAT is well attended. 1.11 Total cost. For the selected rigid pavement alternative (approximately 10 percent lower in cost), the total cost of the duplication of RN 19 and complementary works would be the ones in Table A4-5 below.
2 (4) 22.000 26,500,000 1,204,545 Total 129.998 136,800,000 1,052,324
Land acquisition 2,900,000 Financed by the project (PSF)
Landscaping Program 2,450,000 Financed by the project (PSF)
Boulevards to access to towns 750,000 Financed by the project (PSF)
Contingencies 27,400,000 Financed by the project
Section in Province of Córdoba 16,000,000 To be financed by DNV
Total Cost 179,700,000 (1) Does not include curve improvements on existing roadway (4.647 Km). (2) Including curve improvements on existing roadway. (3) Exchange rate = 3 AG$/US$. (4) All in Province of Santa Fe (Section in Province of Córdoba costs 15,224,489 US$, which correspond to
2,478,033 US$/Km). These costs are based on the measurements from the first draft engineering design (anteproyecto) and could differ from the ones resulting from the final design. Nevertheless the anteproyecto is very detailed and, in addition, the information provided by the DPV, concerning costs of works with similar work units, is consistent with the ones shown in the Table A4-5 above. However, considering past experience in Argentina, if the bidding process coincides with a period of high demand of proposals for other works, the amount of the best bid offer could be higher than the one in Table A4-5. Project component 2: Institutional Strengthening (US$2.8 million, all Bank financed) The objective of this component is to contribute to: (a) improve road safety by implementing a pilot intervention within the comprehensive action plan elaborated by the Province of Santa Fe in 2005; (b) identify transport infrastructure and trade facilitation constraints by setting up a system to measure logistics costs in the Province of Santa Fe; (c) reinforce the Province’s planning capacity to foster economic growth; (d) strengthening institutional capabilities in the DPV’s environmental unit; and (e) design a capacity building program to incorporate monitoring and evaluation analysis in infrastructure projects. This component will consist of the following five subcomponents:
30 Costs presented in Table A4-3 might defer (slightly) from upgrading costs presented in other sections of the PAD as costs reported by DPV are being modified as new information has been provided by the engineering consulting firms
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• Sub Component 2.1- Road Safety. The Government of Santa Fe has identified road safety as an area that needs immediate policy action. The PSF is second in the ranking of road crash rates by province in Argentina (526 deaths during 2005 at an estimated cost of US$500 million). The PSF has elaborated a Road Safety Provincial Program that lays out a series of actions to be taken in the short (up to December 2006), medium (2007-2010) and long run (2011 and beyond). The proposed project, in addition to the important safety improvements introduced in RN 19 through Component 1, would support those actions but, given the limited availability of resources, it will only focus on one road segment that will constitute a pilot exercise, lessons of which are expected to feed the implementation of the Road Safety Provincial Program. The selected road for road safety improvement is Provincial Road 21 (RP21), because it has high traffic volumes (AADT more than 7,500) and the highest rates of accidents in the PSF. The segments of RP21 that will be the subject of road safety interventions are located in heavily populated areas where cars, trucks, pedestrians and cyclists use the same road (see maps on Annex 17). Initially, the project was also to include interventions in 8 km of Provincial Road 1, but finally this section will be converted in a highway, including all types of safety features, at a cost of about US$10 million financed locally and therefore, this part of the project component has been eliminated. The loan resources initially allocated to it have been assigned to other components. Two types of road safety interventions are envisaged for the remaining pilot (RP21), included as different sub-components: type ¨hard¨ (including vertical and horizontal signs, pedestrian bridges, bicycle facilities, shoulders and bus bays) and type ¨soft¨ (including inspection of vehicle fleet and equipment for control of driving conditions). Details of both subcomponents are described in the paragraphs below.
• Sub Component 2.1.1 - Road safety hard interventions: Once eliminated the safety interventions on Provincial Road 1, the activities under this subcomponent have been reduced to Provincial Road 21. This is a road with high traffic volume, located in an industrial area (hinterland of the Gran Rosario ports) and with frequent adverse climatic conditions (intense fog due to the proximity of the Paraná River), which makes this section a conflicting one concerning road safety. Initially, the section to be considered under the project included about 50 km between Intersection R.N. Nº A008 and the Interprovincial Limit (Bridge over Del Medio Creek) with about 10.000 vehicles/day. However, given that the final engineering design of the Circunvalar Project of Rosario, which affects about 15 km of this section, is still pending completion, only interventions on the remaining 34.850 km, between the Interprovincial Limit and the Seco Creek, have been included in this subcomponent, leaving the rest for a second phase, when the Circunvalar Project is completed. As a consequence, the cost of the subcomponent has also been substantially reduced. The activities to improve road safety of this section of PR 21 include:
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1. Signalization, new and improvements of the existing one, both vertical and horizontal, and installation of metallic safety barriers between 1+007 y 33+600. 2. Pavement rehabilitation between 2+034, 10+435 and 11+380 in the passenger areas of the bus stops. 3. Construction of a new paved access in 2+037 to the town of Theobald, with a length of 8 km, and the corresponding connecting branches in the intersection with RP21. 4. Signalization and lighting improvement in the accesses to industrial zones located in 2+765, 3+622 and 4+476. 5. New pedestrian pre-stressed concrete footbridge, with metallic railing for pedestrians in 5+000. In this area, in addition to the signalization improvements, rumble strips will be also installed to slow down the road speed. 6. Shoulder rehabilitation between 13+895 and 14+870. 7. Construction of a new paved access in 28+100, similar to the described above in 2+2037, to facilitate the diversion of heavy traffic and, 8. Construction of a paved path 1.20 wide for bycicles, between 31+000 and 31+500, The total cost for all the above works and installations is about US$1.08 million, well below the initial allocation for this subcomponent.
• Sub Component 2.1.2 - Road safety soft interventions. Purchase of alcohol testing
equipment and develop programs to train provincial inspectors to improve enforcement of road safety legal provisions. The final design of the pilot interventions will benefit from the interaction between DPV and DNV as the latter is implementing pilot programs financed by a Bank project (National Highway Asset Management AR-7242). Resources from this project devoted to road safety will be complemented by funds included in the PRPII. It is expected that the road safety component under this project will be implemented first and, consequently, funds from the PRP II could have a higher positive impact as lessons (and valuable data) could be already obtained. The total cost for this subcomponent is about US$0.7 million. Sub Component 2.2 - Systemic measurement of logistics costs in the PSF. The PSF has significant competitive advantages in the production of agro industrial products. However, in order to gain new export markets, in particular for high value added products, the PSF needs to reduce its logistics costs. All available logistics cost estimates are aggregated at the country level, which makes it difficult for provincial governments to assess their relative position through benchmarks and, accordingly, define an agenda with concrete and well targeted policies. The PSF is interested in creating the capacity within the provincial administration to conduct periodic surveys to measure logistics costs in the PSF (ideally to be extended to the Center Region through agreements with Córdoba and Entrerríos). This subcomponent will include the following activities: (a) support to set up a Logistics Unit within the provincial administration, (b) training of provincial staff in logistics issues, (c) surveys to measure logistics costs in the PSF and complementary studies to identify infrastructure and trade facilitation constraints, and (d) dissemination of findings in workshops organized jointly with the private sector (logistics operators,
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Bolsa de Comercio de Santa Fe, Bolsa de Comercio de Rosario). The total cost for this subcomponent is about US$0.25 million. Sub Component 2.3 – Strengthening the planning capacity of the PSF to elaborate a new strategic development. The PSF has enjoyed high rates of growth in the last three years, and the Province would like to create the conditions to make this process sustainable. The PSF has been working with the federal government providing inputs to the Strategic Plan for Territorial Development which is being prepared by the Ministry of Planning (partially funded by the Bank). The PSF has realized that it needs to produce its own regional development plan to effectively reach those areas with the highest incidence of poverty, helping them to generate the conditions to increase local productivity and the competitiveness of local products in domestic and international markets. This component will help the PSF produce a diagnostic of the current organization of all provincial institutions involved in planning, with the ultimate objective of proposing concrete mechanisms to improve coordination among provincial agencies, as a prior step to prepare a strategic development plan. Accordingly, this component will finance the studies to: (a) diagnose the current institutional set up, with an assessment of the performance of each agency with planning responsibilities; (b) develop a framework listing all activities and a roadmap to produce a strategic development plan; and (c) propose an information sharing system for planning purposes to be implemented in the PSF. The total cost for this subcomponent is about US$0.20 million.
Sub Component 2.4 – Strengthening DPV’s capacity to enhance environmental and social management. The DPV has a long and proven experience in the field of civil works supervision and will take the task to supervise the civil works of National Road 19 with in house personnel. However, experience related to the assessment and management of environmental and social impacts of large civil works (like the widening of National Road 19) is somewhat limited. This component aims at strengthening DPV’s environmental unit to carry out an effective planning, design and supervision of environmental and social aspects of civil works. A series of training will be financed under this sub-component, preparation of manuals as well as the purchase of equipment to control the quality of air and measure noise levels during road construction or rehabilitation works. The strengthening program will also include a Strategic Environmental Assessment (SEA). The SEA will assess linkages between the road network and regional development scenarios and will be centered around the following topics: poverty and the regional hydrological patterns and floods, wetland conservation, land use, and rural development.. The total cost for this subcomponent is about US$0.25 million.
Sub Component 2.5 – Design a capacity building program to incorporate monitoring and evaluation analysis in infrastructure projects. The PSF requested Bank assistance to improve provincial capacity in the area of monitoring and evaluation. Personnel from the project implementation unit will be the initial recipients of training. The ultimate goal of this component is to go one step beyond M&E, introducing principles of impact evaluation. This component will include acquisition of computers to update UG’s information systems. It might also include training in other areas that include: how to
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address resettlements in infrastructure projects, safety in construction sites and procurement methods in large infrastructure projects. The total cost for this subcomponent is about US$0.15 million.
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Annex 5: Project Costs
ARGENTINA: AR Santa Fe Road Infrastructure
Project Cost By Component and/or Activity Local US$ million
Foreign US$ million
Total US$ million
1. Upgrading of National Road 19 42.00 98.00 140.00 2. Institutional Strengthening Component2 2.00 0.80 2.80 2.1 Road Safety 1.25 0.40 1.5 2.2 Systemic measurement of logistics costs in the PSF
0.20 0.05 0.25
2.3 Strengthening the planning capacity of the PSF to elaborate a new strategic development
0.15 0.05 0.20
2.4 Strengthening DPV’s capacity to enhance environmental and social management
0.17 0.08 0.25
2.5 Design a capacity building program to incorporate monitoring and evaluation analysis in infrastructure projects
Total Project Costs1 55.00 117.80 172.80 Interest during construction
Front-end Fee (subject to waiver) 0.00 0.00 0.00 Total Financing Required 55.00 118.10 173.10
1Identifiable taxes and duties are US$33.50 million, and the total project cost, net of taxes, is US$139.60 million. Therefore, the share of project cost net of taxes is 80.65 percent. 2 Note that the subcomponents of the Institutional Strengthening program add up to US$ 2.5 million, not to the total aggregate of US$ 2.8 million reported in the table. The reason for this difference is that the Front end Fee of US$300,000, that will be waived if the project is approved before June 30, 2007, will be allocated among the subcomponents as needed during project implementation.
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Annex 6: Implementation Arrangements
ARGENTINA: AR Santa Fe Road Infrastructure
Borrower. The Province of Santa Fe will be the Borrower of the proposed Bank Loan. Project Management and Implementation. The Management Unit (Unidad de Gestión, UG) has been established under the joint jurisdiction of the Borrower’s Ministry of the Treasury and Finance (Ministerio de Hacienda y Finanzas) and Ministry of Works, Public Services and Housing (Ministerio de Obras, Servicios Públicos y Vivienda). The UG will retain overall responsibility for Project implementation, acting as a permanent link between the Bank and the Borrower
Figure A6-1: Organizational Chart. Project implementation Unit (UG)
The personnel of the UG have developed an important experience in the implementation of Bank financed projects (for instance in the implementation of the PRPI and preparation of the PRP II). So far staff assigned to the UG has managed to maintain high professional standards regarding its functions and has consolidated them during more than ten years of operations. The UG will assist the Borrower in, inter alia: (i) the carrying out of Project activities; (ii) the management, monitoring and supervision of Project implementation; (iii) the elaboration of pre-qualification and bidding documents under the civil works component and the preparation of the
General Coordination (Minister of Public Works and Housing and Minister of Finance)
Project Management Unit
Executive Coordination
Financial Mangement and Disburstment Unit
Operative Coordination
Road Projects and Acquisitions Unit
Institutional Strengthening
Component Unit Legal Unit
Environmental and Social Aspects
Follow up of project Implementation
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terms of reference of the Project activities to be carried out under the institutional strengthening component; (iv) the compliance of the Project’s financial management requirements, including the monitoring of the general flow of funds, the authorization of internal transfers of funds, the operation and maintenance of the Project’s financial management and accounting information systems; (v) the preparation of the Project progress reports and financial statements; and (vi) the assessment of the impact of the Project in terms of reduction in travel times along National Road 19 and other indicators presented in Annex 3. Technical staff from the DPV will be assigned to work for the UG (DPV’s Chief Engineer will be the head of the Road Projects and Procurement Unit within UG), providing it with the necessary technical skills throughout the implementation of the Project. As such, staff of DPV (assigned to the UG), will also: (i) work closely with engineering consulting firms hired by the Borrower to prepare engineering designs and bidding documents; (ii) carry out the civil works supervision of the contracts for execution of the civil works component ; (iii) measure progress in the execution of works for the purpose of issuing certifications; and (iv) be responsible for the technical quality control and compliance with the technical specifications of the civil works contracts. The DPV will also be properly represented on the Evaluation Committee in charge of the bidding process for the road works contracts to be carried out under this Project Coordination Arrangements under the Institutional Strengthening Component The Borrower’s Ministries and entities that will benefit from the carrying out of the Institutional Strengthening component are the Ministry of Works, Public Services and Housing, the Ministry of Planning and the DPV which is a provincial entity totally controlled by the Borrower. The UG will consult and work closely with the DPV for road safety interventions, the Transport Under-Secretariat in the Ministry of Public Works for the creation of the Logistics Unit and with the Coordinating Ministry for the activities included in the planning component (Sub Component 2.3) Implementation Agreements between the Province of Santa Fe and Federal entities in respect of the civil works component National Road 19 is a national road under the jurisdiction of the federal government, which part of said route runs within the Borrower’s territory, and is currently operated by a private concessionaire, Vial 3 SA pursuant to the terms of a concession contract that was awarded in 2003 and which will expire in 200831. The concession contract was granted by the Ministry of Federal Planning, Public Investment and Services (Ministerio de Planificación Federal, Inversión Pública y Servicios, MPF) on behalf of the Argentine Republic (the Guarantor). Compliance control of the terms of all concessioned roads under the jurisdiction of the Guarantor is vested in OCCOVI. Pursuant to Presidential Decree No. 505/1958, the National Highway Directorate (Direccion Nacional de Vialidad-DNV), is the national road entity in Argentina which is responsible for the construction, improvement, operation and maintenance of the national road network. DNV is also responsible for planning improvements in the national road network and deals with all 31 Concession awarded by Decree 1007/2003.
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technical aspects (for instance construction designs and environmental safeguards) related to roads under the national road network. Accordingly, DNV will supervise the works carried out by the Borrower during Project implementation in order to ensure that said works have been satisfactorily completed. As mentioned above, although National Route 19 is currently concessioned, the concession contract permits that works not included in the Concession Contract be carried out by the grantor of the concession (i.e. the Guarantor) or by a third party designated by the grantor.32 Given that National Road 19 is under the jurisdiction of the federal government and subject to a concession contract, in July 2005, the Borrower consulted with OCCOVI about the possibility of financing the upgrading of said National Road 19. OCCOVI indicated to the Borrower that there was no objection to provide said financing, and recommended that an agreement between the Borrower and the Guarantor be executed so as to comply with the terms of the Concession Agremeent, and that said agreement be acknowledged by the concessionaire. 33. Thereafter, three agreements (one Convenio and two Convenios Complementarios) have been signed between the Borrower and the DNV for purposes of establishing the role and responsibilities of the Borrower and DNV in connection with the financing of said road and the execution of the upgrading of National Road 19, and one agreement (the OCCOVI Agreement) has been signed between the OCCOVI and DPV (which agreement will be ratified by the Borrower and the Guarantor (through the Ministry of Federal Planning, Public Investment and Services). Under the agreements (Borrower-DNV), the Borrower will, inter alia: (a) carry out the works under the Project; and (b) expropriate and compensate the affected population as a result of the carrying out of said works.34 On the other hand, the DNV will have approval authority concerning the engineering designs of the works, and a supervisory role during Project implementation. The OCCOVI Agreement is a collaboration agreement whereby the parties reiterate their responsibilities in connection with the execution of the works. Despite the fact that the Borrower will finance the upgrading of National Road 19, said route will remain under the jurisdiction of the Guarantor. Consequently, pursuant to the terms of the Concession Contract, the upgrading works of National Route 19 will become part of the current concession if said upgrading works are completed before the expiration of the Concession Agreement (i.e. October 2008). If the upgrading works are completed after the expiration of the Concession Agreement, the Guarantor, may extend the duration of the current Concession Contract or opt for alternative schemes it considers appropriate to operate and maintain National Road 19. The successful implementation of this project requires the completion of a by-pass to the city of San Francisco that connects National Road 19 and National Road 158. This by-pass includes 6 km in the Province of Cordoba (from the Santa Fe frontier to National Road 158). DNV is
32 Please see Article 15. 10 of the Concession Contract signed in October 2003, and Chapter V of the Pliego de Condiciones Particulares (which is an integral part of the Concession Contract). 33 Please see OCCOVI’s opinion dated September 14, 2005 (in Project files). 34 Please note that all Project land affected by provincial expropriation will be thereafter registered as federal owned land.
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expected to finance the construction of this road segment and bid the works at the same time the Borrower does the bidding for the 130 km of National Road 19 in the territory of the PSF. DNV has included said road segment in its 2006/2007 budget. To reinforce the commitment of both, DNV and the PSF, to the construction of National Road 19 from Santo Tome to National Road 158, an agreement (Convenio Complementario N2) was signed between the Borrower and DNV which, inter alia, reflects said understanding.
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Annex 7: Financial Management and Disbursement Arrangements
ARGENTINA: AR Santa Fe Road Infrastructure
1. Executive Summary and Conclusion
A review of the financial accountability arrangements in the Province and a Financial Management (FM) assessment of the arrangements proposed specifically for the project implementation was performed in line with OP.BP10.02 and guidelines issued by the Financial Management Sector Board (FMSB) on November 3, 2005. The assessment objective is to determine if the Borrower’s executing entity, Subsecretaría de Proyectos de Inversión y Financiamiento (SPIFE) has financial management arrangements acceptable to the Bank. The assessment conclusion is that the Province of Santa Fe through its Unidad de Gestion del Programa de Infraestructura Vial – Santa Fe (UG) has adequate financial management arrangements. The project specific arrangements along with the Province government wide financial management in place meet Bank requirements.
2. Country and Province Issues
The Argentine CFAA indicates that overall control risk of public finances at federal level could be considered moderate. This project will be implemented at a sub-national level, the Province of Santa Fe which is an autonomous state with its own political Constitution approved in 1900/1907 and amended in 1962. Since the proposed Loan will be made to the Province of Santa Fe, a Guarantee Agreement will be signed by the Argentine Federal Government. The Country Assistance Strategy 35(CAS) states that at the sub-national level, the FM portfolio risk ranges from moderate to substantial, depending on the institutional capacity of each Province. The document also indicates that the assessment of sub-national entities is based mostly on the Bank’s fiduciary work linked to project development and implementation. Specific analytical work to provide a more systematic assessment of financial management risks at the provincial level is planned for next fiscal year. In order to better understand the institutional capacity and identify any critical issue that might affect the project, a review of the Province wide financial management systems was performed during preparation and is presented in the Section below. Fiduciary Action Plan. The Argentina CAS includes a Fiduciary Action Plan (FAP) to help strengthen the operating environment for Bank projects in Argentina. The FAP basically consists of three components: raising public awareness, bolstering Bank fiduciary monitoring and increase transparency and competition practices in public 35 Argentina Country Assistance Strategy. Period 2006-2008; May 4, 2006. B. Fiduciary Assessment. Financial Management
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procurement. Regarding FM the Plan aims at: i) improving timeliness of external audit compliance for Bank-financed operations; ii) increasing strategic focus and coverage of supervision tools assessing fiduciary risk in operations; and iii) complementary actions such as support streamlining and harmonization of fiduciary processes and reliance on country systems when these meet adequate fiduciary standards. Project fiduciary measures link to the objectives of the FAP. The following measures were taken into account in the project FM arrangements to contribute to meeting the objectives of the FAP:
• Using of the Province Integrated Financial Management System, SIPAF, Sistema Integrado Provincial de Administración Financiera for processing and recording the project transactions. The province- wide system operates under the oversight of the Province Accountant General and the Budget Office, providing an adequate control environment for the project operations.
• Increased FM supervision throughout start up period of project implementation to ensure correct understanding of the Bank fiduciary/disbursement procedures. Two FM on-site visits integrating the project team are planned for the first year.
• Copy of the control reports produced by the Tribunal de Cuentas de la Provincia (TCP) on the project operations shall be submitted quarterly along with the Interim Unaudited Financial Reports (IUFR).
3. Province Wide Financial Management System
A review of the financial accountability arrangements in the Province comprising the legal and institutional framework; budget implementation process, internal control and financial reporting was conducted by the Bank. The Government wide arrangements in place indicate a positive attitude by management toward control. A detailed description of the Province arrangements is provided on the Financial Management Assessment Report (FMAR).
4. Implementing Entity
The Management Unit, Unidad de Gestion del Programa de Infraestructura Vial – Santa Fe (UG) recently created by Provincial Decree 2011/0636 will retain overall responsibility for project implementation. The UG is integrated jointly by the Subsecretaría de Proyectos de Inversión y Financiamiento (SPIFE) in the Ministry of Finance, Ministerio de Economía y Finanzas and the Secretary of Public Works, Secretaría deObras Publicas within the Ministry of Public Works. The Decree also provides the appointment of two accounting staff of the SPIFE to perform the project financial management activities in the UG comprising budgeting, accounting and reporting including preparation of interim unaudited financial reports (IUFR), internal control, disbursements and external audit hiring process. It was confirmed that the project FM arrangements will be under the framework of the Province-wide financial arrangements in place. The accounting staff has gained some experience in project implementation because SPIFE is the provincial 36 Provincial Decree 2011/06 issued on August 8,2006
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counterpart in Bank-financed projects with sub national execution and is also the implementing agency of a direct lending operation to the Province, financed by Fondo Financiero para la Cuenca del Plata (FONPLATA). SPIFE has already participated in several Bank financed projects through sub national execution, as follows: Loan 4117-AR - (P006052) Flood Prevention Project. Loan 4093-AR - (P005980) Provincial Roads Project Loan 3860-AR - (P006060) Municipal Development Project II. Loan 3877-AR – (P006018) Provincial Development Project II.
5. Strengths and Weaknesses
Strengths: UG-SPIFE has skilled and experienced fiduciary staff that is capable of fulfilling the accounting and reporting needs of the project. The Province comprehensive integrated financial management system (SIPAF) in place which will be used to maintain project accounting records. Weaknesses: Partial knowledge of some specific Bank procedures and not complete segregation of duties in the UG. Those weaknesses will be addressed through: i) increased FM supervision during start up period to follow-up on understanding of Bank disbursement procedures by UG personnel; and ii) quarterly submission of UIFRs accompanied by a copy of mandate reports on the uses of funds produced from SIPAF and submitted monthly to the MOF and tied to project accounts.
6. Internal Control
The new PFM Law assigns internal audit functions to a new agency, the Province Internal Audit Office, Sindicatura General de la Provincia which is still in the process of being developed. The internal control function remains under the Accountant General Office until the Sindicatura is operational37. Even though, there is an effective financial management control applied to the Administration that rests on a good legal framework as well as an effective integrated financial management system (SIPAF). In addition, all the spending units are required to prepare monthly statements of uses of funds and bank account reconciliations through the SIPAF that are submitted to the Ministry of Finance. 7. External Audit Arrangements The project annual financial statements will be audited under terms of reference, auditing standards and by auditor acceptable to the Bank. The audit report shall be submitted to the Bank within six months of each fiscal year. Annual audit would cover all funding and expenditures reported in the project financial statements. For audit purposes the fiscal year will be the calendar year. The Borrower has proposed that the Tribunal de Cuentas de la Provincia (TCP) be the external auditor for the project. However, the TCP lacks of experience in auditing WB-financed operations and therefore the external audit will be
37 Art. 263 of PFM Law provides that abrogation of the previous Ley de Contabilidad Provincial will be effective as long as the Executive gradually implements the PFM Law.
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conducted by a private auditor acceptable to the Bank or by the Argentine Supreme Audit Institution, Auditoria General de la Nación (AGN). Nevertheless, the TCP will be part of the control framework of the project. The audit reports that will be required to be submitted are presented below:
Table A7-1 Audit Reports’ Schedule
Audit Report Due Date
1) Project Specific Financial Statements June 30 2) Special Opinions June 30
SOE June 30 Designated Account June 30
8. Accounting and Reporting
All of the project’s transactions will flow through the General Budget of the Province, and will be accounted for and controlled by the integrated financial management system of the Province Sistema Integrado Provincial de Administración Financiera (SIPAF) which operates under the Budget Office and the Accountant General Office. The SIPAF is mandatory for all the administration entities in the Province and integrates both budget and patrimonial accounting; the budget control distinguishes various stages in the expenditure process including commitment. A detailed description of SIPAF and its security features is presented on the FMAR. Within the SIPAF transactions and records are processed only in local currency (pesos), to keep track of movements in the Designated Account in dollars an auxiliary spreadsheet will be maintained. Transactions in SIPAF will be recorded on the accrual basis of accounting. For reporting purposes, a correspondence table has been developed to prepare IUFR and annual financial reports from SIPAF reflecting the project disbursement categories, components and sources of funding. The International Public Sector Accounting Standards (IPSAS) will be followed. UG would be responsible for keeping accounting records for Project activities and preparation of annual financial statements and quarterly Unaudited Interim Financial Reports (UIFRs) for reporting purposes, as follows: • Sources and uses of funds: sources and uses of funds, for each quarter and cumulative (uses by category), uses of funds by component and beginning and ending cash balances; along with:
a) Copy of the St. of Cash Receipts and Payments produced from SIPAF which SPIFE is required to monthly submit to MOF. (For the last month of each calendar quarter)
b) A reconciliation between SIPAF St. of Cash Receipts and Payments and the project accounts for the last month of each quarter.
c) Copy of the reports if any produced by the TCP during the reporting quarter.
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• Physical progress: Allocated budget and financial execution compared to physical progress and results achieved. Draft format of Annual and Interim Financial Statements are presented on the Financial Management Assessment Report (FMAR). 9. Disbursement Arrangements The following Disbursement Methods may be used under the Loan:
• Reimbursement • Advance • Direct Payment
Loan proceeds to be withdrawn by UG using the advance method will be deposited into a Segregated Designated Account (DA) in US$. The Designated Account will be held at Nuevo Banco de Santa Fe which is the Financial Agent of the Province. The ceiling for advances to be made into the DA would be US$5 million until disbursements reach a total of US$15 million, and US$10 million thereafter, estimated sufficient for peak disbursement periods of project execution. Supporting documentation for documenting project expenditures under advances and reimbursement method will be: Statements of Expenditures (SOEs) for all expenditures below the following thresholds: Payments for Civil Works against contract valued at US$3 million or less; payments for Goods against contracts valued at US$250,000 or less; and payments for Consultant Services against contracts valued at US$100,000 or less respectively. All consolidated SOEs documentation would be maintained by UG-SPIFE for post-review and audit purposes for up to one year after the final withdrawal from the Loan account. Direct Payments supporting documentation will consist of records (e.g.: copies of receipts, supplier/ contractors invoices).The minimum value for applications for direct payments and reimbursements will be US$1 million.
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The flow of funds is detailed in the following graphic:
Graph A7-1
New Policy Framework on Eligibility of Expenditures in World Bank Lending applies for this project since the country’s financing parameters for Argentina have been approved. The project will be eligible for retroactive reimbursement of eligible expenditures incurred up to one year prior to the date of the Loan Agreement. These expenditures should not exceed US$12 million. UG-SPIFE would request access to the Bank’s Client Connection webpage to access the 1903 Form and facilitate periodically reconciliations among its own ledgers, bank statements and the Bank disbursement records. Loan proceeds would be disbursed against the following expenditure categories:
Table A7-2
Disbursements per Expenditure Category
Category Amount of the Loan Allocated
(expressed in US$)
Percentage of Expenditures to be financed
(1) Works 104,400,000 73% (2) Goods, Consultants’ Services, Training and Audits
2,000,000 100%
(3) Front-end Fee 0 (4) Unallocated 20,300,000 TOTAL AMOUNT 126,700,000
Designated Account in USD
Project Account at Banco de Santa Fe
$
UG Account in Santa Fe
Bank
Proposed Flow of Funds
Loan Account
pesos
Suppliers or Contractors
pesos
Local Counterpart
Funds Transfers from
Santa Fe’s MOF
pesos
Direct payments in USD $
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10. Supervision Plan The initial supervision planning is presented in the table below. The supervision scope will be adjusted by the assigned FMS according to the fiduciary performance and updated risk.
Table A7-3 Financial Management Supervision Plan
Type Timing Mechanism Objective On-site Visit
General Supervision: Twice first year. Once a year afterwards.
Integrating supervision missions at least one time each semester.
♦ Review FM performance. ♦ Follow up on External Auditors rec♦ Review staffing. ♦ Update assigned risk. ♦ Transactions review as needed
IUFRs Review
Quarterly Over the IUFRs submitted to the Bank.
♦ Review IUFRs information consistency.
♦ Raise issues disclosed in IUFRs.
♦ Review TCP reports if any is attached to the IUFR
Audit i
Once a Year Over the Audit b i d
♦ Raise issues disclosed i A di
11. Action Plan Financial management actions to be completed prior to negotiations are reflected in the table below.
Table A7-4 Financial Management Action Plan
Action Responsible Entity Completion Date Status
1. Prepare the external auditing Terms of Reference to be approved by the Bank FMS
UG-SPIFE By appraisal Completed
2. Financial Sts. & IFRs format approved by the Bank FMS.
UG-SPIFE By appraisal Completed
3. Set a separate budget line in the Province annual budget to keep truck of project financial execution
UG-SPIFE First year annual budget and thereafter
Legal dated covenant
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Annex 8: Procurement Arrangements
ARGENTINA: AR Santa Fe Road Infrastructure
A. General Procurement for the proposed project would be carried out in accordance with the World Bank’s "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The project would be implemented in accordance with the Fiduciary Action Plan agreed upon the Government of Argentina and the Bank, as per the indications of this document and the pertinent provisions of the Legal Agreement. Procurement of Works: Works procured under this project would include the upgrading of National Road 19 in the Province of Santa Fe from two to four lanes. The total length of the new carriage way is approximately of 150 km, the expected contract term is of 30 months and the contract cost estimate is of $170 million. In order to maximize competition, the Province would bid under alternative contract options that would attract the interest of both small and large firms. Under this approach, bidders might at their option: (a) bid separately for any of the individual five (5) slices of approximately 30 km. each in which the works have been divided or (b) bid jointly for any possible package (combination of slices). Additionally, the Province will accept alternative bids offering a reduction of the contract term up to 24 months. The ICB process would be preceded by pre-qualification using the Bank’s Standard Pre-qualification Document and further carried out using the Spanish version of the Bank Standard Bidding Document (SBD) for the Procurement of Works under Civil Law, with the necessary amendments to make it fully consistent with the 2004 Bank Procurement Guidelines. An ad-measurements contract will be used. Procurement of Goods: Goods procured under this project would include road safety and ITC equipment. The procurement will be done using National SBD and Requests for Quotations agreed with or satisfactory to the Bank. Procurement of non-consulting services: The project will not finance non-consulting services. Selection of Consultants: Consulting services from firms and individuals required for the project would include: (a) training on road safety, logistics, environmental safeguards and monitoring and evaluation, (b) studies to identify infrastructure and trade constraints, (c) institutional assessment of the agencies involved in planning activities and development of a roadmap to produce a strategic development plan and (d) training on supervision of the environmental components of works.
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Operational Costs: The project will not finance operational costs. Training: the Project would also finance “Training”, which means expenditures (other than those for consultants’ services) incurred by the Province to finance reasonable transportation costs and per-diem of trainees and trainers (if applicable), training registration fees, and rental of training facilities and equipment under the Project up to ceiling amounts to be established biannually in the Procurement Plan. The procurement would be done using either shopping or the implementing agency’s administrative procedures, which were reviewed and found acceptable to the Bank. Others: The Project Operational Manual along with the SBDs to be used for each procurement method, the SRFP, as well as model contracts for works, goods and services procured, will be presented in the project’s web page: www.santa-fe.gov.ar/mosp/ within thirty days of receiving no-objection by the Bank. B. Assessment of the agency’s capacity to implement procurement Procurement activities will be carried out by the Management Unit (Unidad de Gestión UG). UG has been established under the joint jurisdiction of the Borrower’s Ministry of the Treasury and Finance (Ministerio de Hacienda y Finanzas) and Ministry of Works, Public Services and Housing (Ministerio de Obras, Servicios Públicos y Vivienda). The UG will retain overall responsibility for Project implementation, acting as a permanent link between the Bank and the Borrower. UG is staffed by Francisco Sobrero and Edgardo Fiol as Executive Coordinators, Claudio Vissio and Ruben Pirola as Operative Coordinators and the procurement function is headed by Carlos Borra. An assessment of the capacity of the Management Unit to implement procurement actions for the project has been carried out by Enrique Pinilla, Procurement Consultant, and by Ana María Grofsmacht, Procurement Analyst, on March 3, 2006. The assessment reviewed the organizational structure for implementing the project, the interaction between the various agencies responsible for project implementation and interviewed the staff responsible for the procurement function38. An assessment conducted by José Maria Alonso Biarge (Highways Consultant) confirmed that the Provincial Roads Directorate (DPV) has the capacity to supervise the works under the project. The following project risks concerning procurement for implementation of the project have been identified and include the following:
1. The proposed organization entails risks in respect of project management, supervision of the works and administration of the contract for National Route 19, because several actors will be involved in these activities: (i) the Secretariat of Public Works and (ii) the Sub-secretariat of Investment Projects and External Financing, with regard to project management, and (iii) the Provincial Roads Directorate (DPV) and (iv) the National
38 The Capacity Assessment Report reflects the prevalent ideas regarding the institutional arrangements as of early March 2006. It can be consulted in the project file.
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Roads Directorate (DNV), with regards to works supervision and contract administration.
2. Provincial procurement law and regulations and practices are not fully consistent with Bank rules.
The corrective measures that have been agreed to mitigate the above mentioned risks are respectively the following:
1. The organizational arrangements for project management, supervision of the works and contract administration will be clearly described in the Loan Agreement, inter-agencies agreements and the Operational Manual. The whole set of documents should be ready before Negotiations.
2. The Loan Agreement includes the Special Procurement Conditions listed in Section F. Additionally, the following country risks concerning procurement that may affect the implementation of the project have been identified and include the following:
1. During the recent implementation of infrastructure projects, it was found sometimes that bid prices were substantially higher than updated and revised cost estimates.
2. During the recent implementation of infrastructure projects, it was also found that some pre-bid cost estimates were not precise and updated enough.
3. The Government is determined not to resort on International Arbitration as a conflict resolution mechanism.
Despite the fact that some of the above-described country risks may not be present in the Province, the following additional measures have been agreed to mitigate respectively each of them:
1. The Loan Agreement will include the Special Procurement Conditions listed in Section F and consistent with the Fiduciary Action Plan agreed upon the Government of Argentina and the Bank, which are aimed at ensuring increased competition and civil society monitoring through: (a) electronic publication of procurement notices, bidding documents, requests of expressions of interest, contract award reports and Procurement Plans, and (b) feeding the Bank publicly accessible Procurement Plans Execution System (SEPA). Additionally, the slices and packages strategy described above will be implemented for bidding civil works under the project and conditional prequalification procedures will be defined in the Operational Manual.
2. The Province will implement a Price Monitoring Mechanism consistent with the FAP. The procedures for preparing, reviewing and updating pre-bid cost estimates will be included in the Operational Manual.
3. All Project Standard Bidding Documents and Requests for Proposals will include adjudicator clauses acceptable to the Bank.
The overall project risk for procurement is Average.
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C. Procurement Plan The Borrower, at appraisal, developed a Procurement Plan for project implementation that provides the basis for the procurement methods (the initial Procurement Plan). The initial Procurement Plan has been agreed between the Borrower and the Project Team on December 2006 and will be available at www.santa-fe.gov.ar/mosp/. It will also be available in the Bank’s external website. D. Frequency of Procurement Supervision In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended annual supervision missions to visit the field to carry out post review of procurement actions. Consistently with the Fiduciary Action Plan, Procurement post review work will be carried out jointly with Financial Management supervision work. E. Details of the Procurement Arrangements Involving International Competition 1. Goods, Works, and Non Consulting Services (a) List of contract packages to be procured following ICB and direct contracting:
1 2 3 4 5 6 7 8 9
Ref. No.
Contract (Description)
Estimated
Cost $ million
Procurement
Method
P-Q
Domestic
Preference (yes/no)
Review by Bank
(Prior / Post)
Expected Bid-Opening Date
Comments
1 National Road 19 - Upgrading from 2 to 4 lines.
140 ICB Yes No Prior
(b) Contracts for Works estimated to cost above $3,000,000 per contract, contracts for Goods estimated to cost above $250,000 and direct contracting above $50,000 will be subject to prior review by the Bank. (c) The first two contracts procured under each procurement method will be subject to prior review regardless of amount. 2. Consulting Services (a) The project will not finance consulting assignments with short-list of international firms, since short lists of consultants for services estimated to cost less than $500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.
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(b) Consultancy services estimated to cost above $100,000 per contract and single source selection of consultants for assignments estimated to cost above $50,000 will be subject to prior review by the Bank. (c) The first two contracts procured under each selection method will be subject to prior review regardless of amount. F. Special Procurement Provisions
The following shall apply to procurement under the project:
General
• All procurement and prequalification shall be carried out using standard bidding documents and standard requests for proposals acceptable to the Bank, which should include adjudicator clauses.
• Contractors, service providers, consultants and suppliers shall not be required: (a) to register; (b) or establish residence in Argentina or in the Province; (c) or enter into association with other local, national or international bidders as a condition for submitting bids or proposals.
• The invitations to bid or pre-qualify, bidding documents for contracts subject to post-qualification, minutes of bid opening, requests for expressions of interest and contract award reports of all goods, works and services (including consultants’ services), as the case may be, shall be published in www.santa-fe.gov.ar/mosp/ in a manner acceptable to the Bank. The bidding period shall be counted from the date of publication of the invitation to bid or the bidding documents, whichever is later, to the date of bid opening.
• The Borrower: (a) will feed the Bank publicly accessible Procurement Plans Execution System (SEPA) within 30 days of Negotiations with the information contained in the initial Procurement Plan, (b) will update the Procurement Plan at least biannually or as required to reflect the actual project implementation needs and progress and will feed the Bank Procurement Plans Execution System (SEPA) with the information contained in the updated Procurement Plan immediately thereafter.
• Bidders or consultants shall not be allowed to review or make copies or others bidders’ bids or consultants’ proposals, as the case may be.
• Witness prices shall not be used as a parameter for bid evaluation or rejection or contract award.
Goods and Works
• A two-envelope system of procurement will not be used for the procurement of
goods, services (other than consultants’ services) or works. • Contracts of goods and works shall not be awarded to the “most convenient” bid but
to the one that has been determined to be substantially responsive and the lowest evaluated bid, provided that further the bidder is determined to be qualified to perform the contract satisfactorily. No provision for preferential treatment for
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national or province domestic companies other than the one described in the Procurement Guidelines shall be applied.
• Price Adjustment in Civil Works Contracts for prices in local currency shall follow the Price Adjustment Methodology agreed between the Government of Argentina and the Bank. Prices in foreign currency shall be adjusted following the stipulations of the applicable Bank Standard Bidding Document or Request for Proposals, as the case may be.
Consultant Services
• Consultants shall not be required bid or performance securities. • Bank models of contracts will be used and the use of “Convenios” will not be
permitted.
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Annex 9: Economic and Financial Analysis
ARGENTINA: AR Santa Fe Road Infrastructure Summary of Benefits and Costs: The Province of Santa Fe (PSF) carried out a cost-benefit analysis of the construction of two additional lanes along National Road 19, converting it into a four lane road, with two lanes in each direction, and the bypasses of San Jeronimo del Sauce, Sa Pereyra and San Francisco towns. A total of 129.4 km will be constructed representing a total investment of US$138.84 million39. The main project economic benefits are savings in vehicle operating costs, travel time costs, accident costs, distance savings for the bypasses, and maintenance costs resulting from the road improvements in terms of ride quality, travel times and safety. Net economic benefits were evaluated using the Highway Development and Management Model (HDM-4) Version 1.3, which simulates life cycle conditions and costs and provides economic decision criteria for multiple road design and maintenance alternatives. The cost-benefit analysis of the project indicates that the project economic benefits are satisfactory. The Net Present Value (NPV) of the road works is estimated at US$67.1 million at a 12 percent discount rate over a twenty eight year evaluation period. The Economic Rate of Return (ERR) is estimated at 19.3 percent. Compared with the without project scenario, the road works economic expenditures will increase by US$89.4 million in present value terms over the evaluation period, while road users will save US$156.5 million over the same period, which means that every dollar spent by PSF results in around 1.75 dollars saved by road users. Table A9-1 presents the economic analysis summary.
Main Assumptions: Vehicle fleet characteristics and economic unit costs were defined for five vehicle types based on the 2005 road use cost study published by DNV, economic road user costs being on average 75 percent of financial costs. Table A9-2 presents the vehicle fleet characteristics and economic unit costs. 39 Note that the total investment amount (US$ 138.83) presents a minor difference with the total investment amount of US$ 140 million for the upgrading of National Road 19 presented in Annex 4 and other sections of this PAD. The investment amount used to prepare the economic evaluation was the best estimate at the time it was conducted (September 2006). Subsequently it was modified as updated cost data was made available. The difference in cost is not significant and consequently the impact on the NPV and ERR is negligible.
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Table A9- 2: Vehicle Fleet Characteristics and Economic Unit Costs
Medium Heavy Articulated Car Bus Truck Truck Truck Economic Unit Costs New Vehicle Cost (US$/vehicle) 7,402 140,959 27,244 53,467 93,333 New Tire Cost (US$/tire) 58.17 332.06 260.73 374.85 374.85 Fuel Cost (US$/liter) 0.38 0.32 0.32 0.32 0.32 Lubricant Cost (US$/liter) 4.40 4.40 4.40 4.40 4.40 Maintenance Labor Cost (US$/hour) 4.37 6.33 4.37 6.33 6.33 Crew Cost (US$/hour) 0.00 35.78 15.68 15.66 15.66 Overhead (US$) 1,146 22,790 6,997 11,584 11,584 Interest Rate (%) 12 12 12 12 12 Working Passenger Time (US$/hour) 4.38 2.85 0.00 0.00 0.00 Non-working Passenger Time (US$/hour) 0.00 0.00 0.00 0.00 0.00 Cargo Delay (US$/hour) 0.00 0.00 0.00 0.00 0.00 Utilization and Loading Kilometers Driven per Year (km) 28,000 128,750 84,000 119,000 119,000 Hours Driven per Year (hr) 350 1,717 1,200 1,700 1,700 Service Life (years) 10 12 12 14 14 Percent of Time for Private Use (%) 0 0 0 0 0 Number of Passengers 2 38 0 0 0 Work Related Passenger Trips (%) 48 48 100 100 100 Gross Vehicle Weight (tons) 1.20 10.00 7.50 28.00 42.00 ESA Loading Factor 0.00 0.80 1.25 4.63 5.10 Traffic Composition Average Traffic Composition (%) 71% 4% 6% 11% 8%
Table A9-3 presents typical unit economic road user costs and composition without the project, characterized by a two-lane road in fair condition, with roughness equal to 4.0 IRI, m/km, on a flat terrain and traffic equal to 4,500 vehicles per day.
Table A9- 3: Unit Road User Costs, Two-Lane, Roughness 4.0 IRI, 4,00 AADT (US$ per vehicle-km)
Medium Heavy Articulated Car Bus Truck Truck Truck Fuel and Oil 0.04 0.12 0.08 0.21 0.23 Tires 0.00 0.02 0.02 0.06 0.06 Parts and Labor 0.03 0.31 0.14 0.32 0.48 Depreciation and Interest 0.04 0.13 0.04 0.05 0.09 Crew Time 0.00 0.42 0.19 0.20 0.20 Overhead 0.04 0.15 0.07 0.08 0.09 Passenger and Cargo Time 0.05 0.60 0.00 0.00 0.00 Total 0.20 1.76 0.53 0.92 1.15
Table A9- 4 presents typical unit economic road user costs and composition with the project, characterized by a four-lane road in good condition, with roughness equal to 2.0 IRI, m/km, on a flat terrain and traffic equal to 4,500 vehicles per day. With the project, on average, there is a reduction on unit road user costs of 13 percent.
Table A9 4: Unit Road User Costs, Four-Lane, Roughness 2.0 IRI, 4,500 AADT (US$ per vehicle-km)
Medium Heavy Articulated Car Bus Truck Truck Truck Fuel and Oil 0.05 0.13 0.08 0.19 0.22 Tires 0.00 0.03 0.02 0.02 0.02 Parts and Labor 0.03 0.26 0.12 0.06 0.06 Depreciation and Interest 0.03 0.13 0.04 0.19 0.33 Crew Time 0.00 0.38 0.19 0.10 0.10 Overhead 0.03 0.14 0.07 0.00 0.00 Passenger and Cargo Time 0.04 0.55 0.00 0.05 0.09 Total 0.18 1.62 0.52 0.61 0.82
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Table A9-5 presents: (i) actual accident rates on National Road 19; (ii) estimated accident rates after the proposed investments, estimated by eliminating accidents caused by the vehicles traveling on opposite direction; and (iii) the estimated economic cost per accident type based on the findings of the socio economic study taking into account judicial compensations of road accidents.
Table A9-5: Accident Costs Data
Accident Rates (# per 100 million veh-
km) Accident Without With Types Project Project With Fatalities 5.54 1.80 With Injuries 35.80 17.80 With Damage Only 58.50 29.30 Accident Cost (US$) With Fatalities 111,000 With Injuries 15,675 With Damage Only 5,500
The annual traffic growth rate was defined for all vehicles as: (i) 6.0 percent per year for 2007-2009, (ii) 5.0 percent per year for 2010-2012, (iii) 3.5 percent per year for 2013-2015, (iv) 3.0 percent per year for 2016-2025, and (v) 2.5 percent per year for 2026-2034. The growth rate for 2007-2009 was defined based on observed traffic growth from 2003-2005, when the gross regional product of Santa Fe Province grew at around 6 percent per year. After 2010, the traffic growth rate decreases steadily to reach the historical averages in 2026. The economic evaluation did not consider the potential generated and induced traffic due to the investments. The construction period was estimated to be three years and the evaluation period was defined as twenty eight years considering twenty five years of benefits. Improvement and maintenance costs were estimated in financial and economic terms; economic costs being on average 70 percent of financial costs. Table A9- 6 presents average road works unit costs.
Table A9 6: Average Road Works Unit Costs Financial Financial Work Cost Cost Type Predominant Work Activity (US$/km) (US$/m2) Routine Maintenance 4,000 Asphalt Mix Resurfacing Asphalt Overlay 50 mm 116,484 15.96 Asphalt Overlay 80 mm 186,400 25.53 Widening Adding 2 Lanes with Asphalt Concrete 991,011 Adding 2 Lanes with Cement Concrete 893,964 Cost per km considers 7.3 m wide paved road for asphalt mix resurfacing
Upgrading of National Road 19 The upgrading of National Road 19 totals 130 km that carry 212.2 million vehicle-km per year. For the cost-benefit analysis, National Road 19 was subdivided into the following six homogeneous sections in terms of traffic, road condition and improvement type: (i) the first section is an urban section that will be widened to 4 lanes and starts at RPN 11 and ends at the point were the widening ends; (ii) the second section, in which a new parallel 2 lane carriageway will be build, starts at the end of the first section and ends at RPN 6; (iii) the third section, in which a new parallel 2 lane carriageway will be build, starts at RPN 6 and ends at RPN 34, excluding the 4 lane bypasses of San Jeronimo del Sauce and Sa Pereyra; (iv) the fourth section,
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in which a new parallel 2 lane carriageway will be build, starts at RPN 34 and ends at Angelica; (v) the fifth section corresponds to the San Jeronimo del Sauce and Sa Pereyra 4-lane bypasses that are located between RPN 6 and RPN 34 and were evaluated jointly; and (v) the sixth section corresponds to the 4-lane bypass of San Francisco. Table A9- 7 presents the basic characteristics of National Road 19 sections evaluated with the HDM-4 model.
Two project-alternatives were evaluated: adopting an asphalt concrete pavement or a cement concrete pavement. Table A9-8 presents the proposed investments per road section and investment options. The investments costs include the predominant road works activities, shoulder repair costs, and horizontal and vertical signs. The construction of a new 2-lane carriageway has an average investment of US$0.99 million per km for asphalt concrete pavement and US$0.89 million for cement concrete pavement. The construction of a new 4-lane bypass has an average investment of US$1.84 million per km for asphalt concrete pavement and US$1.66 million for cement concrete pavement.
TableA9 -8: National Road 19 Road Works Section Road Asphalt Concrete Cement Concrete Name Work (M US$) (M US$/km) (M US$) (M US$/km) RPNº 11 - End Widening Widening to 4 Lane 10.1 1.12 NA NA End Widening - RPNº 6 New 2 Lane 22.8 1.12 20.5 1.01 RPNº 6 - RNNº 34, 2-lane Sections New 2 Lane 38.7 1.03 36.0 0.96 RNNº 34 - Angelica New 2 Lane 36.9 0.83 32.2 0.72 San Jeronimo & Sa Pereyra Bypasses 4 Lane Bypass 16.8 2.03 15.6 1.88 San Franciso Bypass 4 Lane Bypass 15.5 1.65 13.5 1.44 Total 140.9 117.9
The economic analysis was done considering a without project-alternative that includes routine maintenance and rehabilitating the existing carriageway when it reaches 6.0 IRI, m/km. Table A9-9 presents the economic comparison of project-alternatives per road section. For all sections, including the urban one, the cement concrete alternative was selected, because it yielded higher economic benefits in terms of Net Present Value (NPV).
Table A9- 9: Economic Analysis Comparison of Project-Alternatives Asphalt Concrete Cement Concrete Section NPV ERR NPV ERR Name (M US$) (%) (M US$) (%) RPNº 11 - End Widening 7.6 23.0% NA NA End Widening - RPNº 6 1.8 13.3% 5.0 15.8% RPNº 6 - RNNº 34, 2-lane Sections -4.1 10.2% 1.4 12.6% RNNº 34 – Angelica 1.1 12.5% 9.2 16.2% San Jeronimo & Sa Pereyra Bypasses 2.6 14.6% 4.5 16.6% San Franciso Bypass 36.8 31.3% 39.5 34.6%
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Table A9-10 presents the economic analysis indicators for the selected project-alternatives. The economic analysis yields satisfactory economic returns. For the overall project: (i) the Net Present Value (NPV) is US$ 67.1 million; (ii) the Economic Rate of Return (ERR) is 19.3 percent; (iii) the discounted costs compared to the without project-alternative are US$ 89.4 million; and (iv) the discounted benefits compared to the without project-alternative are US$156.5 million, of which 61 percent are due to reduction on vehicle operating costs, 28 percent due to reduction on travel time costs, and 11 percent due to reduction in accident costs. All road works yield and economic rate of return higher than 12 percent.
Table A9- 10: Selected Road Works Economic Analysis Section Selected Investment NPV ERR Name Pavement (M US$) (M US$) (%) RPNº 11 - End Widening Asphalt 10.1 7.6 23.0% End Widening - RPNº 6 Concrete 20.5 5.0 15.8% RPNº 6 - RNNº 34, 2-lane Sections Concrete 36.0 1.4 12.6% RNNº 34 – Angelica Concrete 32.2 9.2 16.2% San Jeronimo & Sa Pereyra Bypasses Concrete 15.6 4.5 16.6% San Franciso Bypass Concrete 13.5 39.5 34.6% Total 127.9 67.1 19.3%
Sensitivity Analysis of Critical Items The results are satisfactory relative to the main risks considered in the economic analysis, namely, higher investment costs and lower future benefits due mainly due to lower traffic. Under a worst-case scenario of benefits dropping to 80 of the current level and 20 percent increase in investment costs, the project yields a satisfactory rate of return of 14.0 percent. Table A9 -11 presents the sensitivity analysis results.
Table A9- 11: Sensitivity Analysis Results
Section Base ERR ERR Sensitivity Analysis (%)
Name (%) A-Costs+20% B-Benefits-20% A + B RPNº 11 - End Widening 23.0% 20.7% 20.0% 17.2% End Widening - RPNº 6 15.8% 13.6% 13.2% 11.2% RPNº 6 - RNNº 34, 2-lane Sections 12.6% 10.7% 10.3% 8.6% RNNº 34 – Angelica 16.2% 14.1% 13.6% 11.7% San Jeronimo & Sa Pereyra Bypasses 16.6% 14.2% 13.7% 11.7% San Franciso Bypass 34.6% 30.5% 29.6% 26.0% Total 19.3% 16.8% 16.3% 14.0%
The analysis of switching values of critical items indicates that to yield an overall project Net Present Value equal to zero, investment costs need to be multiplied by 1.78 or benefits multiplied by 0.56. For sections two to four, in which a new 2-lane carriageway will be constructed, investment costs need to be multiplied by 1.30 or benefits multiplied by 0.77 to yield a Net Present Value equal to zero.
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Annex 10: Fiscal Framework for the Implementation of a Road Infrastructure Project in the Province of Santa Fe
ARGENTINA: AR Santa Fe Road Infrastructure
Introduction. The objective of the Fiscal Framework developed in this annex is to assess the availability of fiscal space for the implementation and sustainability of the Road Infrastructure Project of the Province of Santa Fe. This framework has been developed with the provincial authorities as a dynamic tool to help gauge the existence of the required fiscal resources for priority infrastructure investments and asset maintenance, while enabling the detection of developments in the fiscal accounts that could affect the convergence of the province towards sustainable fiscal and debt indicators. The capacity of the province to absorb the proposed project financing is assessed in terms of the impact on a number of indicators of provincial fiscal solvency and public debt sustainability, within the framework of the Federal Fiscal Responsibility Law (Régimen Federal de Responsabilidad Fiscal). The Annex also reviews recent fiscal performance, provincial debt structure and includes medium-term budgetary and financial simulations (2006-2015). Sensitivity analysis incorporates alternative assumptions regarding key variables, such as economic growth and wage policy. The Annex highlights the efforts of the province of Santa Fe to consolidate its fiscal accounts in both the short and medium terms, including the creation of a fiscal reserve fund as well as pre-payment of provincial public debt. Structure of the provincial public sector. The analysis included in this annex refers to the Non-Financial Provincial Public Sector (NFPS) which comprises the entirety of the public sector, decentralized institutions40 and the Pension and Retirement Fund, as required under the FRL (National Decree 1031/2004). State Enterprises, the Laboratory of Medical Pharmaceuticals, the Provincial Energy Company, the Fluvial Tunnel (el Túnel Subfluvial) and the Provincial Institute of Social Health Insurance (Instituto Autárquico Provincial de Obras Sociales) are not included in the NFPS budget. Own revenues, national government transfers and debt constitute the bulk of the provincial revenues. In 2005, revenues transferred by the national government under the framework of federal co-participation and other national budgetary transfers made up 59 percent of total provincial revenues, while provincial own tax and non-tax revenues represented 29 percent. The remaining 12 percent corresponds to revenues from social security contributions, the sale of goods and services, and interest income. Own tax revenues come from three main sources: the gross receipts tax (ingresos brutos) on consumption, which accounted for 66 percent of tax receipts in 2005, the tax on real estate property (inmobiliario) and the stamp tax levied on contracts (sellos), each of which accounts for 14 percent of own tax revenues. This tax structure is completed by the automobile tax and others of lesser importance. Santa Fe does not receive oil 40 Includes: Instituto Autárquico Provincial de Industrias Penitenciarias, Ente Zona Franca Santafesina, Administración Provincial de Impuestos, Servicio de Catastro e Información Territorial, Caja de Asistencia Social – Lotería, Dirección Provincial de Vialidad, Dirección Provincial de Vivienda y Urbanismo, Aeropuerto Internacional Rosario and Ente Regulador de Servicios Sanitarios.
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royalties, and unlike some other provinces it does not levy specific taxes on energy. In an effort to reduce distortions in its tax system, the province has implemented a gradual elimination of the local 3 percent payroll tax on the industrial sector in order to reduce labor costs. As is the case in other provinces, personnel spending is the largest expenditure category, amounting to an estimated 42 percent of total NFPS spending in the province in 2005.41 Current transfers to the public sector – largely municipalities – and to the private sector come second at 19 percent of total expenditures,42 while pension payments to provincial and municipal civil servants represent 16 percent of provincial spending given that the province has not transferred its pension system to the national government.43 Capital spending (13 percent of NFPS spending) and goods and services (8 percent), follow. Figure 1 illustrates the spending structure for the NFPS in 2005. The public sector reform and modernization process that the province has undertaken is worth mentioning.44 This process includes improvements in financial management and budgetary administration, changes to tax administration and greater transparency and efficiency in the use of public resources. The Province has focused on the importance of transparency in public resource management, disseminating fiscal information on the web (see www.santafe.gov.ar). The Province has privatized its public bank and has implemented reforms to improve the efficiency and the equity in health, education and social protection programs.
41 The share of personnel spending rises to 49 percent if only the central administration and decentralized entities are considered. 42The province transfers to municipalities and communes one seventh of the resources it receives from the provincial gross receipts tax and the co-participated resources it receives in transfers, as well as half of the real estate tax and 90 percent of revenues received under the automobile tax. 43 The province of Santa Fe did not transfer its social security system to the Nation. By agreements subscribed in 1999 and thereafter with the national government, the latter agreed to finance the deficit of the Province’s social security system. While the system is in deficit, this deficit is relatively small. In 2005, for example, the balance of the Caja de Jubilaciones was AR$ 129 million, a figure substantially smaller than the deficits of other provincial social security funds such as those of Cordoba y Buenos Aires. 44 This process was supported by the Argentina-Santa Fe Provincial Reform Adjustment Loan. Loan No 4634-AR, approved by the Board of Directors of the World Bank in August 2001.
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Figure A10-1 2005 Provincial Public Expenditure Structure
Interest2%
Pensions16%
Goods & Service8%
Wages and Salaries
42%
Transfers19%
Capital Spendingl13%
Recent fiscal performance. Historically, the province of Santa Fe has been characterized by its maintenance of balanced and self-sufficient fiscal accounts, the latter in the sense that it has not required special treatment or bail-outs from the national government. There were, nevertheless, deviations from this general tendency which are largely accounted for by developments in the national economy. Declining competitiveness in the tradable sectors (particularly agriculture and livestock) during much of the 1990s led to significant losses in provincial tax collection which, when combined with the rigidity of provincial public expenditures, resulted in substantial fiscal deficits in 1998 and 1999 (see Figure A10-2). Figure A10-2 also shows the serious deterioration of the provincial public accounts during the 2001 crisis. The decline in national and provincial revenues as a result of the economic recession and the growth of the public debt service burden led to the recurrence of a large fiscal deficit in 2001. Despite serious liquidity problems, and unlike the majority of other provinces, Santa Fe did not resort to alternative financing such as issuing provincial bonds in order to pay salaries and suppliers, nor did the province renegotiate its debts with financial institutions. Instead, provincial authorities made substantial adjustments to their budgets in order to offset the increases in debt service payments, the delays in federal transfers and the difficulties in obtaining public financing. With respect to personnel expenditures, the province introduced in September 1999 the Emergency Economic and Pension System Law, which froze promotions as well as automatic seniority-based salary increases. Also as a result of this statute, the province was able to reduce the deficit of the provincial pension system by establishing an extraordinary personal contribution by both active and retired or pensioned workers. Public investment spending also had to be adjusted to the economic and fiscal realities of the crisis, with a 40 percent cut relative to the original budget. Public works were reprogrammed and payments to suppliers were delayed. Since 2001, Santa Fe has performed better than other provinces in fiscal terms, with, for instance, larger primary surpluses (Figure A 10-2).
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Figure A10-2:
Comparative Primary Balances, 1996 - 2005 in % of current revenues
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Santa Fe Other Argentine Provinces
Source: National Ministry of Economy.
Fiscal Outcome in 2005 and Perspectives for 2006. Provincial fiscal accounts achieved an overall surplus in 2005 of AR$625 million, complying with the budget equilibrium rule of the FRL (see below). The NFPS primary balance in 2005 is estimated at AR$719.6 million, equivalent to about 12 percent of current resources (Table A10-1). In 2005 total current revenues grew by 18.6 percent in nominal terms as compared to 2004, with provincial tax revenues rising by 16 percent, while transfers from the National Government grew by 19 percent. Primary spending grew more rapidly, at 31 percent with respect to 2004, overtaking nominal GDP growth which is estimated to have been 19 percent in 2005. 45 Spending on wages and salaries was the largest contributor to this expansion in spending, growing at 32 percent with respect to 2004 as a result of salary increases granted in mid-2005; contributions to the pension system also rose significantly. Interest payments, while not one of the largest components of spending, grew more rapidly than most other categories. In capital expenditures, the implementation of the most ambitious public investment program of the last decades – amounting to expenditures of $618 million during 2004-2005 – meant that public investment also showed substantial growth in the year. Sixty percent of these investments were financed with own resources. As in 2005, a primary surplus is expected for 2006, although smaller in size than surpluses obtained since 2004. The expected primary balance is AR$387 million, with an overall balance of AR$308 million.
45 This substantial growth in primary spending is not in contradiction with the rule (Rule 1 below) regarding the growth of primary spending set by the FRL. For provinces that maintain their debt service levels below 15 percent of net current revenues, the relevant expenditure growth is that of current primary spending.
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Table A10-1 Non-Financial Public Sector: Budget Execution, 2004-2005/2006
(in millions of current pesos)
2004 2005 2006 (P) 2005 / 2004 2006 / 2005 amount Var. % amount var. % Current Revenues 4,968 5,890 6,847 922 19% 957 16% - Provincial Tax Revenues 1,383 1,601 2779 221 16% 1,178 74% - National Transfers 2,699 3,220 4068 521 19% 848 26% Current Expenditures 3,704 4,665 5654 961 26% 989 21% Personnel 1,720 2,276 2923 556 32% 647 28% Goods and services 327 418 501 91 28% 83 20% Other expenditures 1.2 3.3 5 2.1 168% 2 50% Interest 62 94 79 32 51% -15 -16% Contrib. to pension system 659 832 948 173 26% 116 14% Current transfers 934 1,042 1199 108 12% 157 15% Current Savings 1,264 1,225 1192 -39 -3% -33 -3% Capital revenues 43 97 297 54 126% 200 207% Capital expenditures 374 696 1182 322 86% 486 70% - Real direct investment 330 586 998 256 78% 412 70% - Capital transfers 28 69 85 41 146% 16 24% - Financial investment 17 41 99 25 148% 57 139% Primary Balance 995 720 387 -275 -28% -332 -46% Overall Balance 933 626 308 -307 -33% -318 -51% Source: Sub-secretariat of Public Finance, Ministry of Finance of the Province of Santa Fe
The Province has also implemented precautionary measures to increase the flexibility of fiscal policy in the face of potential crises. These measures include the constitution of a fiscal reserve fund and the prepayment of debt. The Province created a fiscal reserve fund (Fondo de Estabilización Fiscal y de Inversión Pública, FEFIP) assigning to it AR$400 million from accumulated surpluses. The prepayment of debt with private banks (Nuevo Banco de Santa Fe and Nuevo Banco Suquia) generated savings exceeding AR$80 million, according to official estimates. The new intergovernmental fiscal framework. After the financial crisis of 2002, two new instruments were added to the existing intergovernmental fiscal framework: the Orderly Financing Programs (Programas de Financiamiento Ordenado, PFOs) and the FRL (Law No 25.917). The PFOs, which have since been re-named PAFs (Programas de Ayuda Financiera), called on the provinces that signed them to comply with a number of fiscal commitments such as the reduction of fiscal imbalances and floating debt46, and constraint in primary spending, in exchange for resources to cover the remaining provincial deficit and/or debt repayments. The passage of Law 25.917 (FRL) in 2004 and adherence to it by most of the provinces47 was an attempt to consolidate the gains achieved under these bilateral financing programs and to
46 Floating debt is defined as expenditure – often bills from suppliers – which has been billed but for which no checks have been issued. 47 Twenty one provinces have joined this regime to date; San Luis, La Pampa and Salta are the provinces that have not adhered to the FRL.
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establish general fiscal ground rules. The Province of Santa Fe adhered to the FRL in 2005 through Provincial Law No 12.402, and has subscribed to only one financial agreement with the National Government, in 2004.48 In addition to establishing fiscal performance indicators, the FRL also provides for the monitoring over time of fiscal results as well as for possible sanctions in the case of deviations from the provisions of the law.49 The authority for the application of the FRL resides with a Federal Council on Fiscal Responsibility (Consejo Federal de Responsabilidad Fiscal) created by the law and composed of representatives of both the National and provincial governments, namely the national Minister of Economy and Production and the provincial Ministers of Finance, in order to ensure consensus among parties and coordinated action. The Council is also empowered to apply penalties at its discretion. In addition to the requirement to prepare an annual fiscal program that includes specific fiscal targets as well as policies and projections, the new fiscal responsibility regime sets the following rules for participating provinces:
Rule 1: The nominal growth rate of budgeted primary public expenditures (excluding investments in basic social infrastructure as well as investments financed by multilaterals) must be lower than projected nominal national GDP growth. In those jurisdictions where debt service is less than 15 percent of net current revenues (see Rule 3), this restriction only applies to the growth rate of primary current expenditures. Rule 2: Provincial governments must execute their budgets preserving financial equilibrium.50 Rule 3: Provincial governments and municipalities must take the necessary measures such that their borrowing (not including overdrafts) in each fiscal year results in debt service payments that are below 15 percent of net current revenues (i.e. net of transfers to municipalities). Rule 4: In cases where debt levels generate service payments greater than 15 percent of net current revenues, provincial and municipal budgets must be presented and executed with a primary surplus, and provinces must present a transition program to reduce debt service payments over time to the 15 percent level.
The FRL also requires provinces to ensure that resources from loans or from the sale of provincial assets do not finance current expenditures. For 2005, the first year of the implementation of the FRL, the Federal Council on Fiscal Responsibility made a positive evaluation of the compliance of the Province of Santa Fe with the law.51 The FRL has a number of shortcomings, including: (i) the way in which expenditures are calculated (spending financed by international organizations and capital spending for “basic
48 See http://portal2005.santafe.gov.ar/index.php/web/content/view/full/12323 49 The possible sanctions include voting restriction in the Council, withdrawal of tax benefits granted to companies located in the province, the non-extension of the guarantees by the National Government, denial of new debt authorizations, reduction in federal budgetary transfers and publication of information regarding non-compliance. 50 This equilibrium is defined as the difference between revenues - including both current and capital revenues - and expenditures. The latter includes current expenditures net of those financed by loans from international organizations, and capital expenditures, net of those for basic social infrastructure necessary for economic and social development, whatever their source of financing. 51 See http://www2.mecon.gov.ar/cfrf/resumenes_ejecutivos/resumenes_ejecutivos.htm
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social services” are netted out), (ii) the gradual pace at which provincial debt levels are to be reduced, and (iii) a high degree of discretion with respect to sanctions in the case of non-compliance. In response to the unsuccessful implementation of previous fiscal responsibility laws, the new FRL introduced more flexibility in its application and emphasized consensus building in the decision-making process, especially with regard to sanctions. Results, however, may fall short of those achieved in some other federal countries where rules are more stringent, such as in Brazil, where the Fiscal Responsibility Law of 2000 contemplates, for example, strong enforcement provisions including sanctions at both the institutional and individual levels.52 Structure and profile of provincial debt. The level of provincial debt increased substantially as a result of the recurrent budget imbalances of the 1990s, the 2001 economic crisis and the devaluation of the Argentine peso in 2002. By the end of 2002, public debt as a share of current revenues had more than doubled its 2001 level. The debt stock, which had represented 39.3 percent of current revenues at the end of 2001, rose to 87.7 percent of revenues in 2002. Debt ratios also increased significantly in terms of GGP (gross geographical product), as shown in Figure A10-3. However, since 2003, debt levels have progressively declined as a proportion of provincial revenues, reaching pre-crisis levels in 2005.
Figure A10-3: Evolution of Public Debt
(In percent of current revenues and GGP)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1999 2000 2001 2002 2003 2004 2005
% o
f cur
rent
reve
nues
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f GG
P
% of current revenues % of GGP
The stock of provincial public debt stood, on March 31, 2006, at AR$1,827 million (Table A10-2). About 60 percent of this debt is denominated in dollars, and the remaining 40 percent in pesos. The main creditors are IFIs, holding 59 percent of provincial liabilities, followed by the
52 It should be noted that the evidence of the effects of fiscal responsibility laws is, to date, limited. For more on the subject, see Webb, S. 2004. “Fiscal Responsibility Laws for Sub national Discipline: The Latin American Experience,” mimeo, World Bank; and Braun, M. and Tommasi, M, 2002; “Fiscal Rules for Sub national Governments”, paper prepared for an IMF World Bank conference on Rule-Based Fiscal Policy in Emerging Market Economies, Oaxaca, Mexico.
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national Government, with 30 percent.53 Part of the debt stock is adjusted by CER (Coeficiente de Estabilización de Referencia), which is constructed on the basis of variations in the consumer price index. Given the recent growth of inflation, this indexation could translate into an increase in the vulnerability of provincial fiscal accounts.
Table A10-2 Debt Stock, December 2005 (Non-Financial Public Sector)
In thousand pesos
Creditor Currency Amount %
Provincial Public Debt Fiduciary Fund for Provincial Development Pesos + CER 541,003 29.60 Other Fiduciary Funds Pesos 16,074 0.88 IFIs Financing US$ 1,077.022 58.92 Bilateral Financing US$ 14,742 0.81 Bank and Financial Entities Pesos 23,942 1.31 Consolidated debt (1) Pesos 14,379 0.79 Provincial Public Bonds Pesos 25,136 1.38 Guarantees and/or Avales Pesos 115,585 6.32 Total 1,827.883 100.00 Floating Debt Personnel Pesos 184,262 28.99 Suppliers and Contractors Pesos 151,241 23.79 Other Pesos 300,174 47.22 Total Floating Debt 635,677 100.00 (1) Non-instrumented debt. Source: Contaduría General de la Provincia de Santa Fe
Short and medium term perspectives.54 The progress achieved by the province since 2001 in reducing its debt ratios translates into expectations of a relatively comfortable fiscal position under a base case scenario.55 Under such a scenario, moderate primary and overall surpluses would be projected over the coming years (Table A10-3). The estimated primary balances are on the order of 3-5 percent of current revenues. Given these, the province would be accumulating significant surpluses that, managed appropriately, could strengthen its ability to implement countercyclical fiscal policy in the event of a slow-down in economic growth or an economic crisis. Both debt stocks and debt service, as a proportion of net current revenues, would fall by
53 The degree of indebtedness with the National Government is relatively low in comparison with that of other provinces due to the fact that Santa Fe did not join the debt swap with financial institutions carried out by the National Government in 2001. 54 This section was prepared in coordination with the provincial Ministry of Economy. 55 Fiscal analysis in the base case assumes sustained economic growth, where the economy converges towards a conservative long-term growth rate. The inflation rate is also assumed to slowly converge towards international values. This would allow for moderate public revenue increases, both due to the growing level of economic activity and to improvements in provincial tax administration. Expenditures are modeled to remain constant in real terms, and the recent increase in capital spending is expected to be maintained. No changes are contemplated regarding the existing federal tax co-participation system in the medium term.
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more than half over the next five years. The analysis also indicates the existence of fiscal space for a moderate sustained growth of public investment. Investment, which has been less than 1 percent of GGP in the last years, is projected to rise to between 2.5-2.7 percent over the medium term.
Table A10-3 Base Case Scenario
in millions of constant 2005 pesos
Monitoring Indicators. Table A10-4 shows the evolution of a number of monitoring indicators which are designed to help detect divergence from the outlined fiscal framework (base case) and to assess, if necessary, the impact of any corrective measures. The evolution of the monitoring indicators reflects the assumption that the province’s own tax effort, based to a large extent on the continuity of the current tax policy, is maintained, alongside the projected growth of revenues received from the National Government. The constant relative weight of personnel spending vis-à-vis net current revenues is a reflection of the assumption that provincial authorities can sustain a wage policy that validates the increases in the consumer price index, i.e. that the wage bill will remain constant in real terms (assumptions incorporate a growth in public employment to reflect population growth). The result is a growing level of current savings as a proportion of current revenues. Table A10-4 also reflects the recovery of investment expenditures as a proportion of total expenditures during the project execution period. With respect to public debt, the fiscal analysis and monitoring indicators reflect the gradual decline in debt stocks from 35 percent of the net current revenues in 2005 to 13.8 percent in 2010, as a result of primary surpluses, of the large amortizations that the province faces in the short term and of the assumption that there are no further roll-overs of provincial debt. Debt service also follows a declining trend. The fiscal framework includes debt service payments that would remain well below the threshold of 15 percent of net current revenues established by the FRL.
In order to help assess the robustness of the fiscal framework, sensitivity exercises introducing changes in the macroeconomic variables and certain parameters used in the analysis were carried out (Table A10-5). This analysis includes simulations of: i) a more lax wage policy, in which salaries outpace the inflation rate; ii) a slower rate of GDP growth; and iii) the suspension of resources from the national government that cover the deficit of the provincial social security system56 as well as those granted to the province as compensation for not adhering to the debt swap with IFIs carried out in 2001. Annually, both transfers amount approximately to AR$300 million. The results indicate that in all cases, as would be expected, projected primary surpluses would shrink, and there would be a slowdown in investments and the need to recur to new debt in order to cover financing needs and debt repayment. The effect is largest in the case of a suspension of non-automatic national government transfers which would generate a reduction in revenues that, if adjustments are not introduced in expenditures categories, would erode the fiscal surplus of the province. With respect to a slowdown in economic growth, the impact is moderate, partly due to the fact that the basecase scenario already incorporates a conservative medium-term growth rate.
56 The funds transferred by the national government cover the deficit of the provincial pension system and are budgetary resources, dependent on the signature of an annual agreement with the National Social Security Administration (ANSeS).
Table A10-4. Santa Fe Province. Fiscal Monitoring Indicators - Non-Financial Public Sector
2005 2006 2007 2008 2009 2010 2015 2020 Own Revenues / Net Current Revenues 45% 45% 45% 45% 45% 45% 45% 45% Personnel Expenditures/Net Current Revenues 43% 46% 45% 45% 45% 45% 45% 46% Current Savings / Current Revenues 21% 18% 19% 19% 19% 19% 19% 19% Capital Expenditures / Total Expenditures 13% 17% 18% 17% 17% 16% 16% 16% Debt Service / Net Current Revenues 8% 6% 7% 6% 4% 3% 2% 1% Debt Stock / Net Current Revenues 35% 25% 22% 20% 20% 10% 4% 1% Primary Balance (million current pesos) 720 390 340 400 430 560 790 1070 Source: World Bank, based on information from the Ministry of Finance, Prov. Of Santa Fe
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Table A10-4
Provincia de Santa Fe. Sensitivity Analysis
2006 2007 2008 2009 2010
Lax wage policy Own revenues / Current Revenues NTM* 45% 45% 45% 45% 45% Personnel Spending / Current revenues NTM 47% 50% 50% 50% 50% Current savings / Current revenues 19% 16% 17% 17% 17% Capital expenditure / Total expenditure 17% 16% 15% 15% 14% Debt service / Current revenues NTM 1% 1% 1% 1% 1% Debt stock / Current revenues NTM 25% 22% 20% 20% 20% Primary balance (in million current pesos) 390.6 113.9 223.5 167.8 313.8
Lower GDP growth rate Own revenues / Current revenues NTM 45% 45% 45% 45% 45% Personnel Spending / Current revenues NTM 47% 47% 47% 47% 47% Current savings / Current revenues 18% 18% 18% 17% 17% Capital expenditure / Total expenditure 17% 17% 17% 17% 16% Debt service / Current revenues NTM 6% 7% 6% 4% 3% Debt stock / Current revenues NTM 25% 23% 22% 21% 19% Primary balance (in million current pesos) 360 230 230 260 310
Suspension of Non-automatic Federal Transfers Own revenues / Current revenues NTM 47% 47% 47% 47% 47% Personnel Spending / Current revenues NTM 49.% 47% 47% 46% 47% Current savings / Current revenues 14% 15% 16% 16.% 17% Capital expenditure / Total expenditure 4% 2% 2% 1% 1% Debt service / Current revenues NTM 7% 7% 6% 4% 3% Debt stock / Current revenues NTM 28% 24% 22% 20% 20% Primary balance (million current pesos) 140 100 220 160 310 * NTM – Net of Transfers to Municipalities Source: World Bank staff estimates
Risks. As noted above, the tough measures taken by the province to address the impact of the 2001 crisis on its fiscal accounts, combined with continued prudent fiscal management and the positive national and provincial economic developments over the past four years, have resulted in a significant decline in debt stocks and debt service payments. These developments in the case of Santa Fe help to alleviate a major source of vulnerability that characterizes a number of Argentine provinces. Despite prudent fiscal management, however, the province is not immune from large shocks at the national or international levels. The recession of the late 1990s and the 2001 crisis are two cases in point. These events led to large fiscal imbalances and to increased indebtedness of the province. The vulnerability of provincial fiscal accounts to such shocks is perhaps increased as a result of the relatively rigid composition of expenditures (a high proportion of spending going to wages, pensions and other transfers) and by the dependence on non-automatic national government transfers.
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Annex 11: Safeguard Policy Issues
ARGENTINA: AR Santa Fe Road Infrastructure
Introduction
When completed, the Project will build 136 km of two additional lanes parallel to National Road 19 from Santo Tome, Province of Santa Fe, to San Francisco, Province of Cordoba. This road segment constitutes an important link in a Bi-oceanic corridor that connects Mercosur countries and Chile. The project has been assigned a Category B according to OP 4.01. Most impacts will be circumscribed to the right of way and no significant, region-wide or precedent-setting impacts are envisioned. No major land use changes are expected in the region. The existing two-lane road was built over seven decades ago. Environmental Setting The new road infrastructure will be located alongside the existing alignment requiring only the expansion of the right of way (ROW) and acquisition of additional land. Most of the impacts identified will be easily managed through sound engineering design and construction practices. The area of the project is heavily developed with extensive and intensive cattle ranching and high- value crops such as soy and corn. There are no natural habitats or critical natural habitats along the existing or future right of way. However, there still remain some patches of native vegetation, especially in river and creek crossings that still harbor some native species albeit without any significant biodiversity value. There is no evidence of paleontological or archeological resources along the corridor. There are no indigenous peoples in the area of influence of the project. The project will include three major by-passes, two around rural communities and a major one in the city of San Francisco/Frontera. These by-passes will intersect an important network of rural and local roads with an important traffic of local goods and machinery, especially during harvest time. The restoration of such networks and the construction of safe crossing points will be part of the project design. Environmental Analysis in compliance with the Bank’s safeguard policies The project triggered and addressed the following Bank safeguards: Environmental Assessment (OP 4.01); Involuntary Resettlement (OP4.12); Physical Cultural Property (OP 4.11). The project design incorporates the mitigation measures for each policy, as described below. OP 4.01 Environmental Assessment (EA) Based on in-situ screening exercises, a comprehensive and detailed Environmental and Social Management Plan (ESMP) has been prepared in accordance with Bank policy. The ESMP evaluates the existing conditions, identifies the potential environmental and social issues of
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concern and proposes adequate mitigation measures for each negative impact identified; as well measures for enhancing each identified positive impact. The EA also covered the segment of National Road 19 in the Province of Córdoba (6km). DNV will take the ESMP and RAP prepared for this project and apply it as agreed in the ‘Convenios’ signed with the PSF. Environmental and Social Management Plan (ESMP) The PSF has prepared a comprehensive and detailed draft ESMP in accordance with Bank policy. The ESMP evaluates the existing conditions, identifies the potential environmental and social issues of concern and proposes adequate mitigation measures for each negative impact identified as well as measures for enhancing each identified positive impact. The ESMP includes a summary chart where all the problems encountered and proposed mitigation and enhancement measures are mentioned, and their location is provided in alignment sheets for the entire road corridor. Monitoring and supervision arrangements, as well as an institutional strengthening program for the environmental unit of DPV are also included in the ESMP. Additionally, the institutional strengthening program for the environmental unit will be financed by Component 2 of the proposed project. A summary of the draft ESMP is presented in Box 1. All programs cited in the ESMP include numerous details on design specifications, associated costs, responsibilities and schedule. Project bidding documents under preparation will include all specifications regarding these programs.
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Box 1: Environmental and Social Management Plan - Landscaping and Re-vegetation Program: This major environmental enhancement program will include
reforestation and re-vegetation of the ROW (including separators) with native species; restoration and augmentation of existing native-forest patches; and the construction of rest and recreation areas along the ROW.
- Community Road Safety: Complementing the engineering road safety design (bus stops, special crossings), this program will implement road safety education in communities along the ROW.
- Restoration of Rural Road Network: This includes the construction of special crossings and returns to allow connectivity of the existing rural road network.
- Improvement in Urban Segment of Santo Tome: Potentially perhaps the most challenging segment of the project, this heavily urbanized segment will be subject to a special urban restoration program including specific designs for boulevards, bicycle paths, parking spaces and traffic management measures.
- Urban Restoration in By-passed Towns: Road segments that will be abandoned because of the construction of by-passes will be reconstructed as urban boulevards, with special archways at the entrance points, reforestation, illumination, and special signs that will direct traffic to use businesses and facilities in those towns.
- Environmental Management of Construction: In order to adequately control impacts during construction, a rigorous set of good environmental practices will be applied in the project. These specifications are based on the existing Environmental Specifications for Road Construction designed by the Federal Road Agency under road programs financed by the Bank. In addition to these specifications, site specific guidelines and restrictions have also been incorporated such as prohibitions on construction camp and asphalt location in or near sensitive watercourses, demarcation of trees and patches of vegetation that need to be protected during construction, special traffic restrictions during harvest time, etc. Chance finding procedures for archaeological and paleontological artifacts are part of these specifications. All critical points along the ROW (either environmentally or socially) have been identified and applicable preventive and corrective actions were developed. Compliance with environmental specifications during construction will be part of the engineering supervision and will be monitored by the environmental unit of the Provincial Road Agency.
The above programs will be complemented by: - Institutional Strengthening in Provincial Road Agency: The environmental management capacity of the existing
environmental unit of the Provincial Road Agency will be improved in order to facilitate monitoring and supervision of this project.
- Social Communication Program: A social communication and public participation program has been designed and implemented for project preparation and construction to inform communities along the road about the progress of the project and establish a mechanism to respond to any question or concern.
All programs included in the ESMP have been designed to great detail, including associated costs, responsibilities and schedule. Project bidding documents will include all specifications regarding these programs. A summary of the ESMP is presented in a table at the end of this Annex. Consultation: The consultation process began on April 10, 2006. In order to receive comments and suggestions from the potentially affected communities, public consultation meetings were carried out in all communities located near the ROW. The key issues raised at the consultations included: (i) the amount of land that would be expropriated and the process the PSF would put in place to undertake the expropriation; (ii) access to properties along the road; (iii) preservation of existing trees; and (iv) construction of bicycle paths, among others. These consultations have been critical in the decision-making process, including road alignments of bypasses, location of road crossings and returns, the need for special safety measures such as bus stops, and the definition of the types of restoration programs to be carried out in urban areas. The case of Estación Josefina and the location of the bypass of Frontera is an example of how the engineering design was changed to accommodate a community’s concerns. Estación Josefina, according to the first design, was supposed to be outside the bypass but after a series of consultations, it was decided to change the bypass’ location leaving Estación Josefina inside the bypass to maintain its
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connectivity with the city of Frontera. By accepting this change, the cost of the project increased as the size of the bypass had to be increased. The final draft ESMP and RAP were also presented to and discussed with these communities. The issues raised in the consultations are summarized in the ESMP report, which also includes a complete list of participants. The ESMP presents an annex with an explanation of all changes in the engineering designs that resulted from suggestions of the affected population.
In addition to direct participation and consultation, all interested parties were provided two other means to submit concerns or comments: (i) an electronic mailbox ([email protected]); and (ii) mailboxes placed in 15 localities along the road corridor. Each communication received, electronically and in writing, was documented in the ESMP.57
The environmental and engineering consulting firms hired by the PSF have interacted on a continuous basis. This continuous interaction results from the need to adapt engineering designs as new information emerges, including feedback from communities and flooding characteristics of the land, among other project relevant features. The outcome of the interaction is reflected in changes in the engineering designs that have been and will be communicated to all communities affected through various mechanisms: meetings with mayors and other elected officials, meetings with citizens and the electronic and postal mailboxes.
The ESMP developed by the PSF with the advice of the project team goes beyond the scope of the project to be financed by the Bank, consistent with paragraph 4 of OP 4.12. The project team requested that the PSF and the national government apply the Bank’s safeguard policies to works that are outside the project but would have an important impact on its outcome, such as expanding the scope of the environmental assessment (including the ESMP and RAP) to include the upgrading of 6 kilometers of works on National Road 19 that are an integral part of the Mercosur-Chile transportation corridor but will be carried out in the Province of Córdoba by the national government.58
OP/BP 4.12 – Involuntary Resettlement
The road infrastructure will be located alongside the existing alignment, requiring only acquisition of land for the expansion of the ROW. National Road 19 is located in an area characterized by low density population and intensive agricultural and livestock productive activities. The average size of the affected properties is 100 hectares and in fifty percent of the properties less than 4 hectares will be acquired to expand the ROW. The expansion of the road affects 1,196.61 hectares. Of them, 475.74 (39.8 percent) were acquired in the early 1970s. The hectares to be acquired (701.43) are located in 234 properties along the road59. A total of 19 houses (7 with business), 6 businesses and one school will be physically displaced. Given that most of these properties will be affected partially, 13 of the 25 houses and business will be relocated into the same property, 4 will have to be displaced in a different plot and the remaining
57 Up to July 11, 2006, with follow up messages saved by the PSF. 58 The consultation process also included the communities living along the 6 kilometer national road in Córdoba, and this is reflected in the ESMP. 59 A total of 305 properties are affected. However, 69 of them were correspond to properties expropriated in the early 70’s.
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8 cases are still under analysis to determine whether it is possible to relocate within the same plot.
No squatters have been identified in the socioeconomic diagnostic conducted during preparation of the ESMP. Impacts from land acquisition have been identified and detailed for each affected plot of land.
Consistent with Bank policy, the PSF is preparing a Resettlement Action Plan (RAP) that meets the requirements of OP 4.12. It should be noted that the RAP covers not only the portion of the project in the PSF, but an additional 6 kilometers of road that traverses the neighboring Province of Córdoba. A census has been undertaken to identify project-affected persons. The RAP will be implemented prior to any physical works. Discussions have also been held with the PSF and DNV regarding compensation, with agreement that cash compensation will correspond to replacement cost at market value; and compensation will be provided before land is undertaken. The RAP also includes an information and communication program, administrative procedures to be followed to make available the previously expropriated land and legal assistance should any of the land owners need it to resolve a legal issue (i.e., tenants). For owners of land to be acquired and for households and businesses to be displaced, additional programs are included. A summary of the RAP is included in Box 2.
Box 2: Land Acquisition and Resettlement Plan - Information and Communication: Stakeholders will be informed through mass media and a newsletter which will
be distributed monthly. The project has also created an electronic address where stakeholders can send their questions and comments. Additionally, several “Community Points” will be established along the road to maintain a direct dialogue with affected communities. Two social specialists will be assigned by the Province of Santa Fe and monitored by the project PIU to manage these Community Points.
- Land Acquisition and Compensation: Through this program the land required by the project will be acquired and compensated. The method to valuate the properties will allow the replacement of the affected properties with other properties having similar characteristics.
- Implementation of Former Expropriations: This program aims at determining if the properties expropriated by the national government more than 30 years ago are ready to be used for construction of the new carriageways of National Road 19. The program includes information and communication activities, administrative procedures to be followed to make available the previously expropriated land, and legal assistance should any of the land owners need it to resolve a legal issue (i.e., tenants).
- Assistance for Socioeconomic Restoration: This program will provide support for the families and businesses that will be physical displaced to restore their socioeconomic conditions to the level that existed prior to displacement.
- Assistance for Partially Affected Properties: This program is designed to assist owners of partially affected properties, whose houses will be close to the road, to mitigate any problems related to safety, noise and privacy.
- Relocation of the school, General San Martin: A specific program was design to relocate this school. This program will be implemented with the Ministry of Culture and Education of the Province of Santa Fe.
- Grievance Mechanism: A grievance mechanism was designed to receive and respond to any grievance that could emerge during the implementation of the Plan.
OP 4.04 Natural Habitats Although the project does not trigger the policy, it has a highly positive impact on biodiversity and natural habitats. It will include enhancement of remnant and patches of natural vegetation still existing along the corridor. These enhancement measures include: (i) design of appropriate waterway crossing structures to allow proper interconnection of waterways and wetlands; (ii) restoration of deficient hydraulic infrastructure in the existing road; (iii) design of a landscaping
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and vegetation program to augment the existing natural vegetation and connect these patches along the ROW. OP 4.11 Cultural Property The area of the project has no known archaeological and palentological sites. Some sites of local historical significance (a marker for a church and an area occupied by a fort that no longer exists) were identified along the ROW. These sites will be incorporated in the landscaping design and appropriate signs leading users to them will be posted along the ROW. To comply with the Physical Cultural Property policy, chance finding procedures will be included in all construction contracts that are part of the environmental specifications for construction. The Land Acquisition and Resettlement Plan will be implemented in the Provinces of Santa Fe and Cordoba. An inter-institutional committee comprised by DPV, DNV and Provincial Land Office in the Province of Santa Fe (Dirección de Tierras Provincial) will be established. This committee will hold meetings monthly in order to coordinate the implementation of the different programs of the Plan. Several meetings have held with the local authorities, communities and owners of the affected properties to present the project and the plan. The cost of the Plan is approximately $2.5 million which is incorporated in the cost of the project. Two matrices were prepared to show compliance with Bank policies OP/BP 4.01 and OP/BP 4.12.
MATRICES OF OP/BP 4.01 AND OP/BP 4.12 APPLIED TO SANTA FE PROJECT
OP/BP 4.01 (Environmental Assessment) OP/BP ACTION OP 4.01, para 5: The Bank advises the borrower on the Bank's EA requirements. BP 4.01, para 6: During preparation of the PCD, the TT discusses with the borrower the scope of the EA and the procedures, schedule, and outline for any EA report required. For Category A projects, a field visit by an environmental specialist for this purpose is normally necessary. BP 4.01, para 7:EA is an integral part of project preparation. As necessary, the TT assists the borrower in drafting the terms of reference for any EA report.
The project team carried out a screening exercise with the PSF, identified environmental and social issues, informed the PSF as to the Bank policies that would be triggered, explained to the PSF the requirements of those policies, and assisted the PSF in the preparation of the for the EA report. The EA was an integral part of project design with continuous interaction between the EA team and the design engineers.
OP 4.01, para 5:The Bank reviews the findings and recommendations of the EA to determine whether they provide an adequate basis for processing the project for Bank financing. When the borrower has completed or partially completed EA work prior to the Bank's involvement in a project, the Bank reviews the EA to ensure its consistency with this policy. The Bank may, if appropriate, require additional EA work, including public consultation and disclosure. BP 4.01 Para 12: For Category A and B projects, the TT and the RESU review the results of the EA,
The Team reviewed a draft EA report received on July 28, made recommendations and requested additional work in some areas, and recommended yet another intensive round of consultations in communities along the ROW which the PSF carried out in August, 2006.
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OP/BP 4.01 (Environmental Assessment) ensuring that any EA report is consistent with the agreed with the borrower. OP 4.01, para 14:"For all Category A and B projects proposed for IBRD or IDA financing, during the EA process, the borrower consults project-affected groups and local nongovernmental organizations (NGOs) about the project's environmental aspects and takes their views into account. The borrower initiates such consultations as early as possible. BP 4.01, para 12: For Category A projects, and for Category B projects proposed for IDA funding that have a separate EA report, this review gives special attention to, among other things, the nature of the consultations with affected groups and local NGOs and the extent to which the views of such groups were considered; and the EMP with its measures for mitigating and monitoring environmental impacts and, as appropriate, strengthening institutional capacity.
The PSF initiated the consultation process as early as April, 2006 in the early stages of EA preparation. Additional rounds of consultation were carried out in June and August, 2006. The EA report includes a register of all consultations carried out by the PSF. The views and concerns of the affected population and local governments are reflected in the activities included in the project's draft ESMP: a road safety program, landscaping design, location of bus stops, restoration of road segments in urban areas of by-passed communities, construction management, rural road network restoration, etc. Monitoring/supervision arrangements and an institutional strengthening program for the environmental unit of the provincial road agency are included in the ESMP.
OP 4.01, para 17: Any separate Category B report for a project proposed for IDA financing is made available to project-affected groups and local NGOs. Public availability in the borrowing country and official receipt by the Bank of Category A reports for projects proposed for IBRD or IDA financing, and of any Category B EA report for projects proposed for IDA funding, are prerequisites to Bank appraisal of these projects.
The PSF posted the draft ESMP on the website of the PSF. Before appraisal: (i) the Province sent Executive Summaries to all localities; and (ii) the Province informed the communities about the availability of the ESMP on the website. A comprehensive communication program is part of the ESMP. The PSF sent the draft ESMP to the Bank on September 1. It was sent to the InfoShop on September 12.
OP4.12 (Involuntary Resettlement) OP/BP ACTION 2. (a) Involuntary resettlement should be avoided where feasible, or minimized, exploring all viable alternative project designs.
Where possible, engineering designs incorporated small realignments of right of ways, relocated ground-level interchanges a few meters and considered modifying the circularity of ground-level interchanges to minimize resettlement. Alternative analysis for overall right of way was limited given the nature of the project, which consists of construction of two new carriageways parallel to the existing alignment.
2 (b) Where it is not feasible to avoid resettlement, resettlement activities should be conceived and executed as sustainable development programs, providing sufficient investment resources to enable the persons displaced by the project to share in project benefits. Displaced persons should be meaningfully consulted and should have opportunities to participate in planning and implementing resettlement programs.
A Resettlement Action Plan (RAP) was prepared to comply with the Bank’s OP 4.12 requirements and to assist displaced population in their efforts to restore their livelihoods. Consultations have taken place since April 10, 2006.
2 (c) Displaced persons should be assisted in their efforts to improve their livelihoods and standards of living or at least to restore them, in real terms, to pre-displacement levels or to levels prevailing prior to the
The socioeconomic diagnosis identified four cases that will be relocated in different properties. Specific measures are included to ensure the achievement of the OP 4.12 objective.
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OP4.12 (Involuntary Resettlement) beginning of project implementation, whichever is higher. 3. This policy covers direct economic and social impacts that both result from Bank-assisted investment projects, and are caused by
(a) the involuntary taking of land resulting in
(i) relocation or loss of shelter;
(ii) lost of assets or access to assets; or
(iii) loss of income sources or means of livelihood, whether or not the affected persons must move to another location; or
(b) the involuntary restriction of access to legally designated parks and protected areas resulting in adverse impacts on the livelihoods of the displaced persons.
Impacts from land acquisition were identified and detailed for each affected plot.
4. This policy applies to all components of the project that result in involuntary resettlement, regardless of the source of financing. It also applies to other activities resulting in involuntary resettlement, that in the judgment of the Bank, are
(a) directly and significantly related to the Bank-assisted project,
(b) necessary to achieve its objectives as set forth in the project documents; and
(c) carried out, or planned to be carried out, contemporaneously with the project.
While Bank financing will only be provided to the PSF, 6 kilometers of National Road 19 will be constructed in the neighboring Province of Córdoba. The RAP included this portion of the road and details the legislation and institutional arrangements that apply and will be followed for resettlement.
6 To address the impacts covered under para. 3 (a) of this policy, the borrower prepares a resettlement plan or a resettlement policy framework (see paras. 25-30) that covers the following:
(a) The resettlement plan or resettlement policy framework includes measures to ensure that the displaced persons are
(i) informed about their options and rights pertaining to resettlement;
(ii) consulted on, offered choices among, and provided with technically and economically feasible resettlement alternatives; and
The RAP is being prepared by the PSF according to OP 4.12. All provisions of the policy have been followed by the PSF for preparation of the RAP. Discussions were held regarding the need to make sure compensation is provided at replacement cost, which in the RAP is presented as market value.
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OP4.12 (Involuntary Resettlement) (iii) provided prompt and effective compensation at full replacement cost for losses of assets attributable directly to the project.
(b) If the impacts include physical relocation, the resettlement plan or resettlement policy framework includes measures to ensure that the displaced persons are
(i) provided assistance (such as moving allowances) during relocation; and
(ii) provided with residential housing, or housing sites, or, as required, agricultural sites for which a combination of productive potential, locational advantages, and other factors is at least equivalent to the advantages of the old site. 8. To achieve the objectives of this policy, particular attention is paid to the needs of vulnerable groups among those displaced, especially those below the poverty line, the landless, the elderly, women and children, indigenous peoples, ethnic minorities, or other displaced persons who may not be protected through national land compensation legislation.
Families affected by physical displacement have been identified. There are no squatters in the ROW. Particular attention has been paid to the relocation of 2 families and 3 businesses, and a rural school, taking into account students’ characteristics. Relocation of this school will be conducted with the participation of the Ministry of Education of the PSF.
10. The implementation of resettlement activities is linked to the implementation of the investment component of the project to ensure that displacement or restriction of access does not occur before necessary measures for resettlement are in place.
The RAP will be implemented prior to any physical works.
12. Payment of cash compensation for lost assets may be appropriate where (a) livelihoods are land-based but the land taken for the project is a small fraction of the affected asset and the residual is economically viable; (b) active markets for land, housing, and labor exist, displaced persons use such markets, and there is sufficient supply of land and housing; or (c) livelihoods are not land-based. Cash compensation levels should be sufficient to replace the lost land and other assets at full replacement cost in local markets.
Cash compensation will correspond to replacement cost. Compensation will be provided before resettlement is undertaken. It should be noted that for 59 percent of affected plots the land taken is less than 10 percent of total plot area. For those cases where the residual land is not economically viable, the government, at the request of the affected land owner, is able by law to acquire the entire.
13. For impacts covered under para. 3(a) of this policy, the Bank also requires the following:
(a) Displaced persons and their communities, and any host communities receiving them, are provided timely and relevant information, consulted on resettlement options, and offered opportunities to participate in planning, implementing, and monitoring resettlement. Appropriate and accessible grievance mechanisms are established for these groups.
(b) In new resettlement sites or host communities,
Host effects are minimal. Most of the households will be relocated in the same plot.
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OP4.12 (Involuntary Resettlement) infrastructure and public services are provided as necessary to improve, restore, or maintain accessibility and levels of service for the displaced persons and host communities. Alternative or similar resources are provided to compensate for the loss of access to community resources (such as fishing areas, grazing areas, fuel, or fodder). 15. Criteria for Eligibility. Displaced persons may be classified in one of the following three groups:
(a) those who have formal legal rights to land (including customary and traditional rights recognized under the laws of the country);
(b) those who do not have formal legal rights to land at the time the census begins but have a claim to such land or assets--provided that such claims are recognized under the laws of the country or become recognized through a process identified in the resettlement plan (see Annex A, para. 7(f)); and
(c) those who have no recognizable legal right or claim to the land they are occupying.
Eligibility criteria in the draft RAP have followed these principles. A census to identify those affected by the project was conducted by the PSF.
17. To achieve the objectives of this policy, different planning instruments are used, depending on the type of project:
(a) a resettlement plan or abbreviated resettlement plan is required for all operations that entail involuntary resettlement unless otherwise specified (see para. 25 and Annex A).
Even though only a small number of households and businesses will be physically displaced, and in most of the cases less than 10 percent of the land will be affected, a RAP is being prepared.
18 The borrower is responsible for preparing, implementing, and monitoring a resettlement plan, a resettlement policy framework, or a process framework (the "resettlement instruments"), as appropriate, that conform to this policy. The resettlement instrument presents a strategy for achieving the objectives of the policy and covers all aspects of the proposed resettlement. Borrower commitment to, and capacity for, undertaking successful resettlement is a key determinant of Bank involvement in a project.
The PSF has prepared a draft RAP. Component 2 of the project includes capacity building programs for the provincial road agency as well as for the project implementation unit on environmental management and resettlement issues in infrastructure projects.
19. Resettlement planning includes early screening, scoping of key issues, the choice of resettlement instrument, and the information required to prepare the resettlement component or subcomponent. The scope and level of detail of the resettlement instruments vary with the magnitude and complexity of resettlement. In preparing the resettlement component, the borrower draws on appropriate social, technical, and legal expertise and on relevant community-based organizations and NGOs. The borrower informs
A screening exercise was carried out by the project team and the PSF at early stages of project preparation. This exercise allowed the identification of resettlement and land acquisition issues. The project team assisted the PSF to: (i) reach a full understanding of the objectives and requirements of Bank policy OP4.12; and (ii) provide good practice examples from other Bank financed projects in the Latin America Region.
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OP4.12 (Involuntary Resettlement) potentially displaced persons at an early stage about the resettlement aspects of the project and takes their views into account in project design. 20. The full costs of resettlement activities necessary to achieve the objectives of the project are included in the total costs of the project. The costs of resettlement, like the costs of other project activities, are treated as a charge against the economic benefits of the project; and any net benefits to resettlers (as compared to the "without-project" circumstances) are added to the benefits stream of the project. Resettlement components or free-standing resettlement projects need not be economically viable on their own, but they should be cost-effective.
RAP implementation costs are included in project costs.
22. As a condition of appraisal of projects involving resettlement, the borrower provides the Bank with the relevant draft resettlement instrument which conforms to this policy, and makes it available at a place accessible to displaced persons and local NGOs, in a form, manner, and language that are understandable to them. Once the Bank accepts this instrument as providing an adequate basis for project appraisal, the Bank makes it available to the public through its InfoShop. After the Bank has approved the final resettlement instrument, the Bank and the borrower disclose it again in the same manner.
A first version of the draft RAP was received by the project team on August 1st. The team provided comments on August 11. A second version was received on August 25, and the team provided comments on August 30. A third version was received on September 1st. As a follow up to the preparation mission of November 2006 a new version was received on December 11, 2006. During the Appraisal mission minor changes were made to the Resettlement Action Plan.
25. A draft resettlement plan that conforms to this policy is a condition of appraisal (see Annex A, paras. 2-21) for projects referred to in para. 17(a) above. However, where impacts on the entire displaced population are minor, or fewer than 200 people are displaced, an abbreviated resettlement plan may be agreed with the borrower (see Annex A, para. 22). The information disclosure procedures set forth in para. 22 apply.
Although an abbreviated resettlement plan was allowed by the policy, the project team recommended to the PSF to prepare a RAP.
During project preparation the Bank project team identified the need to increase and strengthen the capacity of the UG to effectively implement the RAP. The actions to be taken to guarantee an effective implementation of the RAP, agreed jointly with the UG are: (i) set up a dedicated team within the UG to implement the RAP; (ii) hire a lawyer, a social scientist and a communication specialist; and (iii) for those instances where a detailed assessment is needed to solve disagreements related to the valuation of agricultural productive units an agronomist will be hired (on an ad hoc basis). Requests for Inspection before the World Bank Inspection Panel On September 11, 2006, the Inspection Panel registered a first Request for Inspection, IPN Request RQ06/05 (“the First Request”), related to the Argentina: Provincial Road Infrastructure Project which is being financed by the International Bank for Reconstruction and Development (the Bank) through Loan No. 7301-AR, and the proposed Argentina: Santa Fe Road
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Infrastructure Project. A second Request (“the Second Request”) related to the same two projects, IPN RQ06/05-2, was registered on September 27, 2006.
Both Requests concern improvement of National Road 19 in the PSF. The main concerns raised by the First Requesters can be summarized as: (i) objection to the construction of an overpass of National Road 19 where it intersects Provincial Road 6 and (ii) objection to the amount of land to be expropriated, location of land to be expropriated and compensation to be paid. The Second Request objects to the same issues listed under (ii) in the First Request.
The Requests contains claims that the Panel has indicated may constitute violations by the Bank of various provisions of its policies and procedures, including the following:
• OP/BP 4.01, Environmental Assessment, January 1999;
• OP/BP 4.12, Involuntary Resettlement, December 2001;
• OP/BP 13.05, Project Supervision, July 2001; and
• World Bank Policy on Disclosure of Information, September 2002.
On October 18, 2006 Bank Management submitted a Response and on November 16 the Panel submitted to the Board of Directors the document: Report and Recommendation. Argentina: Santa Fe Road Infrastructure Project (proposed). The Panel report presents the following conclusions (quoted as they appear in the document, in italic font):
The Requests and Management Responses contain conflicting assertions and interpretations about the issues, the facts, compliance with Bank policies and procedures, and harm. The Panel can only address these issues during investigation.
While the Requesters are otherwise eligible to submit a Request for Inspection, the procedural criterion of paragraph 9(c) requiring that the Requesters have brought the “subject matter (…) to Management’s attention and that, in the requester’s view, management has failed to respond adequately demonstrating that it has followed or is taking steps to follow the Bank’s policies and procedures” has not been fully met. Therefore the Panel cannot make a recommendation on whether to investigate the subject matter of the Requests for Inspection.
If the Board of Executive Directors concurs with the foregoing, the Inspection Panel will advise the Requesters and Management accordingly.
A project preparation Bank Mission conducted in November 2006 had an opportunity to meet with Requesters that presented the two Requests for Inspection before the World Bank Inspection Panel, as well as with another potentially affected citizen who sent a letter to the Bank Office in Buenos Aires during the mission.. These meetings were chaired by the Provincial Government of Santa Fe and served as a useful forum to better understand the claimants’ concerns. The Mission also visited several areas along the road segments of National Road 19 expected to be expanded under this project. During this visit, the Mission met with the Second Requester who confirmed that his concerns have been settled to his satisfaction (a copy of the relevant agreement between the Province and the Second Requester as well as the minutes of all
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meetings held with Requesters are in Project Files). Consequently, the Requests filed with the Inspection Panel and its subsequent visit to the Project area in the Province of Santa Fe, served to cause a further strengthening of communication among the Province, relevant local parties and Bank Management.
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Summary of the Environmental and Social Management Plan
Program Social and Environmental Impacts
Budget (US$) Institutional Arrangements
Resettlement of economic activities Resettle primary school teachers and pupils through an action Plan agreed with Santa Fe Province Education and Culture Ministry
The ROW includes 26 plots with improvements that need relocation (18 houses, including 6 with shops, 6 shops and 1 school.
Responsibilities correspond to Santa Fe provincial Education and Culture Ministry, Ministry of Production, Provincial Road Agency (DPV-SF) and San Agustín local authorities.
Acquisitions and Resettlement
90% of the rural plots will be affected in less than 40% of the total surface, and more than 50% will be affected in less than 10%.
2,891,911
DPV-SF, through Land Management Area with the help of Social Assistance staff.
Landscape To enhance the existent forest and generate new green areas along the road and city gates in the entrance of by-passed cities.
It Is an environmental liability. A ‘boring’ road is a risk factor for accidents.
2,338,710
Will be included in the bidding documents. Contractor will implement and Environmental unit will monitor.
Road Safety Although one of the basic impacts of the road is the reduction in crash rates, design recommendations are included: curve corrections, returns, bus stops)and so on. A Community Road safety Education Program will be implemented
Presently high the accident rate along the road caused by bad road design conditions. OCCOVI identified 15 hot points.
4,710
DPV-SF and Environmental and Social Consultants are responsible to feed the engineering design. Contractors will be responsible for road works and conservation and monitoring during guarantee period (12 months)
Rural Road Network Restoration Recommends 16 crosses between Road #19 and rural road network and 16 returns On beltway zones (San Francisco, Sa Pereira and San Jerónimo de los Sauces) will be guaranteed their adequate link with urban centers and main roads.
Considering the need to have access control to keep the design speed, Road 19 will generate a “barrier effect” for movements through it., affecting connectivity of rural road network
Included in Project
costs
DPV-SF is responsible to suggest corrections to engineering design.
Restoration Santo Tomé Urban Zones Includes boulevards, bicycle paths and complementary projects by the Municipality: parkings, service centers, etc.
The road widening will make impossible the use of ROW for commercial and manufacturing activities.
Included in Project
Costs
DPV-SF is responsible to suggest corrections to engineering design. The Santo Tomé Municipality is responsible for defining the legislation for transit and parking. .
Urban Restoration in By-passed Towns: The negative impacts in San Jerónimo del Sauce and Sa Pereira will be compensated changing the former roads into boulevards and city gates with tourist information.
The beltways in San Jerónimo del Sauce, Sa Pereira and San Francisco might impact shops presently located on Road 19. The abandoned road will be an integral part of the urban area.
707,655
Municipalities and Comunas are responsible for conservation of future boulevards .
Environmental Mangement of Construction Establish environmental adequate constructive practices, following the “Handbook for Environmental Assessment and Management for road works” (MEGA) from DNV and Technical Environmental Specifications from the Environmental and Social Management
Construction impacts: nuisances on population, noise. Camp location and asphalt plants. Included
in Project Costs
Contractors will be the responsible for the Environmental Technical Specifications. The Environmental Management Plan during construction phase will be applied by contractors, Supervisors, monitoring staff and environmental agencies.
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Summary of the Environmental and Social Management Plan
Program Social and Environmental Impacts
Budget (US$) Institutional Arrangements
Plan Community Communication and Participation Their objectives are:
To reach an adequate knowledge of the Project by population and
effective interaction with the responsible of different development stages
Construction, specially in or near urban areas, will interrupt daily activities. Nuisances from construction.
200,871
Prior/during to construction phase DPV-SF should define a person or a leading group from the Environmental Unit, for the monitoring program
Institutional Strengthening The objective is to guarantee the effective execution of the ESMP
Compliance with ESMP will need to be ensured. 257,000
DPV-SF
TOTAL COST ESMP
6,400,856
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Annex 12: Project Preparation and Supervision
ARGENTINA: AR Santa Fe Road Infrastructure Planned Actual PCN review 02/22/2006 02/22/2006 Initial PID to PIC 03/08/2006 03/08/2006 Initial ISDS to PIC 03/08/2006 03/08/2006 Appraisal 09/04/2006 12/18/2006 Negotiations 09/25/2006 12/19/2006 Board/RVP approval 02/13/2007 Planned date of effectiveness 04/01/2007 Planned date of mid-term review 03/31/2010 Planned closing date 06/30/2012 Key institutions responsible for preparation of the project: Santa Fe’s project implementation unit (Unidad de Gestión), the Province’s of Santa Fe Ministry of Finance and Ministry of Public Works, and the Province’s Road Agency (Dirección Provincial de Vialidad, DPV). Bank staff and consultants who worked on the project included: Name Title Unit Tomás Serebrisky Infrastructure Economist LCSFT José-María Alonso Biarge Lead Highway Engineer LCSFT Juan Manuel Campana Highway Consultant Andres Mac Gaul Senior Procurement Specialist LCOPR Ana Maria Grofsmacht Procurement Specialist LCOPR Enrique Pinilla Procurement Consultant Alejandro Solanot Financial Management Specialist LCOAA Reynaldo Pastor Sr. Counsel LEGLA Fernando Brunstein Environmental Consultant Lucia Spinelli Infrastructure Economist Consultant Juan David Quintero Senior Environmental Specialist LCSEN Elena Correa Senior Social Scientist LCSEO Xiomara Morel Sr. Finance Officer LOAG1 Jose Luis Irigoyen Sector Manager LCSFT Juan Gaviria Sector Leader LCSFP Juan Sanguinetti Fiscal Consultant Cesar Queiroz Lead Highway Engineer (Peer Reviewer) ECSIE Aurelio Menendez Lead Transport Economist (Peer Reviewer) EASTR Zeinab Partow Senior Country Economist (Peer Reviewer) LCSPE
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Bank funds expended to date on project preparation: 1. Bank resources: US$127,000 2. Trust funds: 0 3. Total: US$127,000
• Análisis Estadísticos de los Siniestros Viales en la Provincia de Santa Fe. Período 1999-
2005. Ministerio de la Producción. Subsecretaría de Transporte. 2006 • Región Centro, Tierra de Oportunidades. August 2004.
• Girardoti, Luis Miguel. Estudios de Tránsito. Ruta Nacional N19. Tramo Ruta Nacional
11-Ruta Nacional 158. Marzo de 2006. • IIRSA. Eje MERCOSUR-Chile. 2004.
• Transformación Ruta Nacional N19 en Autovia. Provincia de Santa Fe. October 2005. • Plan Estratégico de Transporte Multimodal de Cargas y Pasajeros de la Provincia de
Santa Fe. Provincia de Santa Fe. December 2005.
• Plan Estratégico Territorial. Componente Provincia de Santa Fe. Ministerio de Planificación Federal, Inversión Pública y Servicios. 2006.
• Project Concept Note: Santa Fe Road Infrastructure Project. March 2006. • Aide Memories October 2005, June 2006, July 2006, November 2006.
• Minutes of meetings held during the November mission with Requesters that have
presented Requests for Inspection before the World Bank Inspection Panel.
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Annex 14: Statement of Loans and Credits
ARGENTINA: AR Santa Fe Road Infrastructure
Project ID Fiscal Year Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm Rev'd
P090993 2007 AR-Essential Public Health Functions 220.0 0.0 0.0 0.0 0.0 220.0
P095515 2007 AR (APL2) Prov Maternal-Child Health 300.0 0.0 0.0 0.0 0.0 300.0 0.0
Total portfolio: 561.97 124.73 143.37 675.17 449.75 57.28 128.37 672.17
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic.
2001 ITBA 0.01 0.00 0.00 0.00
2001 Gasnor 0.02 0.00 0.00 0.02
2004 Banco Rio TFF 0.02 0.00 0.00 0.05
2005 Vicentin Exp. 0.00 0.00 0.00 0.05
Total pending commitment: 0.05 0.00 0.00 0.12
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Annex 15: World Bank’s Road Sector Strategy in Argentina
ARGENTINA: AR Santa Fe Road Infrastructure
Introduction Given the nature of the productive activity in Argentina, with agriculture and industry generating more than 47 percent of total Gross Domestic Product (GDP), the role of the transport sector in the country’s economy is of paramount relevance, enabling regional integration and facilitating access to international markets. The involvement of the Bank in the infrastructure sector in general and in the road sector in particular stems from the acknowledgement that the improvement of infrastructure assets is key to sustain economic growth and to mitigate the severity of poverty, both of which are overarching objectives of the CAS. The economic relevance of the road sector in Argentina historically has never been so high, triggered mainly by an important expansion of freight transportation by road. This upsurge responded to the growing significance of the market of goods vis a vis the service market and to the general economic reactivation experienced in the country after the 2001 economic crisis. The devaluation of the peso introduced substantial competitive advantages to Argentine export products. However, to facilitate the sustainability of the growth of exports and economic recovery in general, a reduction in the country’s structurally high logistics costs is required to avoid neutralizing the competitive gains brought about by the devaluation. Logistic costs in Argentina represent an estimated 27 cents of every dollar exported, compared to 7 cents in the OECD60. With a growth rate between 8-9 percent of GDP in 2004 and 2005 respectively, a considerable pressure is being placed on the responsiveness of the road transportation system in terms of its adequacy to accommodate an increased demand along key corridors61, its capacity to enable regional integration and the quality in the provision of associated services. This document describes the Bank’s development strategy for the road sector in Argentina and how said strategy is being rolled out as new lending opportunities come around. The document focuses only on infrastructure related issues since aspects related to the provision of services has already been discussed in a separate sector work. Argentina’s Road Sector Main Characteristics: Road transport is the dominant mode in Argentina concentrating nearly 81 percent of total freight volume movements. Only 6 percent is transported by rail, 7 percent by pipelines, 5.5 percent by waterways and 0.5 percent by air. The country’s road infrastructure includes an extensive network of nearly 630,000 kilometers (out of which only 11 percent are paved). This network includes roads that are the responsibility of three different administrative levels, i.e., national, provincial and municipal, as follows: (i)
60 Logistics costs are becoming increasingly relevant to international trade given the significant reduction in trade tariffs worldwide over the last decade. 61 Recent studies estimate that for every percentage point increase in GDP, the demand for roads grows between two and three percentage points.
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38,000 km of national roads managed by the National Road Agency (DNV); (ii) 192,000 km of provincial roads under the jurisdiction of 24 Provincial Road Directorates (DPV); and (iii) an estimated 400,000 km of rural and local roads under the responsibility of municipal governments. More than 70 percent of total traffic volumes are concentrated in the paved national and provincial road networks. The national road network system, built in its great majority more than 30 years ago, represents assets that are valued at about US$7 billion equivalent. About 80 percent of the paved network consists of flexible structures with granular base, and the remainder consists mainly of soil-cement and a small fraction is bituminous macadam. Traffic volumes cover a wide range, from less than 500 vehicles per day up to 10,000 to 20,000 vehicles per day on the most heavily trafficked interurban corridors and access to the main cities of the country. The construction of the provincial network was initiated in the early 60s at an average rate of about 50 km per year and per Province and it is estimated that nearly 50 percent of the paved network is more than 30 years old. Of the 192,000 km belonging to the provincial road network (including primary and secondary road networks), 39,000 km are paved (20 percent), 41,000 km are gravel roads (22 percent) and 112,000 km are earth roads with very basic and sometimes poor geometrical and engineering standards (58 percent). The total replacement value of the provincial road network alone is estimated to be in the order of US$18 billion. The information available on the tertiary network under municipal jurisdiction is less certain. No inventories are known to have been carried out and no consolidated data in terms of traffic, network conditions or investments can be easily found. Generally speaking this network consists of urban roads, unpaved roads, access to farms and feeder roads with ill-defined engineering characteristics and very low-traffic volumes. These are assets that deteriorate very quickly and require constant renovation with participation of agricultural producers.
Table A15-1 Argentina’s Road Network
Federal Provincial Municipal Total Length (km) 38.000 192.000 400.000 % Paved 81% 20% - % of paved roads in poor condition (IRI>5)
6% 10% NA
Average Traffic Volumes (Veh/day) 2,000 800 NA Investment/km-year (93-01) in US$ 7.945 2,358 NA Investment/km-year (02-03) in US$ 2,615 834 NA
Despite its important role in the country’s economic activity, investments in the road sector have decreased significantly over the last years, in three stages: (i) significant decrease in the overall public investment after the fiscal crisis of the late 80’s until 1993 - public resources dried up62 and only a fraction was replaced with private resources, (ii) low level of total investments 62 Earmarked revenue assignments to the road agencies from taxes on fuels, tires, and lubricants were eliminated as part of the economic policy reform initiated in the late 80’s, leaving the sector subject to the availability of budgetary allocations from the Treasury.
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maintained between 1993 and 2001, and (iii) further significant reductions of the total investments after the devaluation in 2002. Transport expenditures of the Consolidated Public Sector fell about 40 percent in 2002 compared to historical average values since 199363 (from around 1 percent of GDP in 1993 to 0.67 percent of GDP in 2002)64. Although recovery was observed in 2003 and 2004, the levels of transport expenditures remain well below those necessary to sustain rates of economic growth above 3 percent per year. Capital expenditures on the road network measured on a per km basis in US dollars fell 67 percent at the federal level and 65 percent at the provincial level during the 2002-2003 period as compared to 1993-2001, with Provinces spending on average 30 percent of what is spent at the national level on the road network. Recent Evolution and Performance. With the reforms supported by Government in the 90s the road sector has been subject to a series of transformations that have enabled important achievements in terms of sector development – including the decentralization of expenditure and financing responsibilities to provincial and local governments and the introduction of private sector participation. Reforms were motivated by the deep economic crises of the end of the 80s and had as one of their main objectives the reduction of the burden that the transport sector had on the budget. In the transformation process Argentina has been aiming at gradually transforming its operations within the road sector, transferring the execution of works to private contractors, and focusing the capacity of the participating Road Agencies towards more efficient planning. However, the pace of reforms and the degree at which the reforms have been internalized at the federal, provincial and municipal levels are quite different and even vary significantly among Provinces. At the federal level, the Government has decided to concentrate DNV strategic role towards efficient planning and supervision of the primary road network, leaving the execution of works to the private sector. High traffic highways were concessioned to the private sector creating a new entity (OCCOVI- Órgano de Control de las Concesiones Viales or Highways Concession Adminstration) to handle road concession contracts.65 On the other hand, for the non-concessioned portion of the network, a long-term maintenance strategy is being implemented based on the gradual expansion of performance-based (CREMA)66 contracts.
63 Consolidated Public Expenditure Accounts-Transport Account. Ministry of Economy and Production. 64 Private sector participation in toll road concessions compensated for the reduction of public investment between 1991 and 2000. However, since 2000 onwards, total investment has declined. 65 Initially, contracts included the execution of rehabilitation and upgrading works as well as operation and maintenance, but once these contracts expired in 2003, new operation and maintenance concession contracts were awarded for a 5-year period assigning the responsibility for the expansion and rehabilitation investments to the Government. 66 This type of contracts requires the contractor to rehabilitate and then maintain a network of roads over a period of five years for a lump sum amount. They further specify required road service outputs, and use performance-based payments to ensure the quality of the works. Throughout the contract period, rehabilitation works must meet or exceed the minimum thickness of overlay and must comply with the maximum level of roughness, rut depth, cracking, or raveling. Regular monthly visual inspections of maintenance activities focus on a few essential items (about 10) in ensuring compliance with the specifications: no potholes or unsealed cracks, no excessive rutting, good condition maintained on shoulders, culverts and drains, guardrails, vertical and horizontal signs, as well as on the road side environment.
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At the provincial level a clear strategy is still not generalized nor visualized in the same manner by all Provinces. Some provincial road agencies are behind in the reform process, with several DPV’s still relying heavily on force account for the execution of works and lacking modern planning tools. Nevertheless, about a third of all Provinces have embarked in varying degrees in a reform and modernization process with an aim to move away from traditional public-sector oriented organizations in which the focus is placed on administering inputs rather managing performance and results. A few Provinces have introduced concession contracts in their primary paved network and some are preparing to introduce the use of CREMA-type contracts, but overall traditional ad-measurement type contracts are the most commonly used. The evolution of the sector has been notorious. However, several issues still need to be addressed and others need to be revisited in order to continue modernizing the sector, the ultimate goal being the establishment of a sound governance system. One of the main issues deals with ensuring stable and predictable sources of funding for maintenance and capacity expansion of the road network. In 2001, the Government approved a surcharge on gas oil in an attempt to provide a stable source of funds for the road sector. However, frequent changes in the allocation rules of the targeted funds and the incorporation of new beneficiaries (including subsidies to bus operators and urban transport services) has evidenced the lack of commitment and predictability of financing sources available to the sector.67 In the future, more transparent and better rules governing the allocation of funds and mechanisms to ensure accountability are required. It is important to establish a clear link between sources and uses of funds on the basis of technical parameters relating the cost of providing certain level of service to a particular network. Predictable and dependable sources of funds should be redirected towards the maintenance of the core network while further capacity expansions and the upgrading of key integration corridors are prioritized based on cost-efficiency criteria away from political pressures. Furthermore, as the 5-year operation and maintenance concession contracts are coming to an end in 2008, the Government needs to begin the preparation of the future concession strategy revising the role that the public and private sector will play in the financing of the expansion and upgrading works taking into consideration that under the current scheme public interventions have not been implemented as expected. The desire to have a leading role in infrastructure finance coupled with the decision to subsidize certain transport modes is a difficult challenge in a context of finite fiscal resources. From the institutional viewpoint, revamping the institutional capacity and revitalizing the key role of road agencies in the sector is crucial. Road sector institutions are faced with a series of deficiencies that undermine their performance mainly as a result of the (lack of updated statistics, modern planning tools, systematic studies of the problems of the sector, etc). Besides, with some 67 Transport subsidies are financed from direct treasury contributions and funds from a fiduciary fund (fed by a 20.2 percent tax on gas oil). The SISVIAL was created in 2001 to finance road (80 percent) and railroad infrastructure (20 percent) with proceedings from a tax on diesel. The government, in order to finance subsidies to operators, imposed changes in the allocation rules wiping out the purpose and philosophy of the SISVIAL. After some rounds of changes the current allocation (August 2005) indicates that the SISVIAL receives 50 percent of the pool of available funds while the SISTAU (fund to subsidize urban bus transport operators) receives 30 percent and the SIFER (fund to subsidize metropolitan railroad operators) gets 17.5 percent.
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exceptions, there is a remarkable deficit of qualified technical personnel in these agencies. Road Agencies needs to be invigorated to regain its muscle to become strategic planners and consolidate its transformation into client-oriented organization. As identified in other sector works, there is an imperative need to enhance the capacity of the road agencies and institutions to ensure that resources are used efficiently, in particular in an era where significant public sector investments are taking place. In this sense, it is essential to strengthen the capacity to conduct technical assessments and carry out cost-benefit analysis to prioritize projects with the highest social rates of return, but at the same time, is of paramount relevance to strengthen the procurement capacity of public institutions and ensure high competition during the procurement process to bring about the anticipated cost-efficiency benefits associated with said projects. Finally it is worth mentioning the need of improving coordination mechanisms between the federal, provincial and municipal levels to achieve the integration of the road networks under all jurisdictions. The institutional set up in the road sector lacks adequate coordination and planning. Due to an unclear allocation of responsibilities, there is no agency elaborating policies with an integral vision of the road network (not surprisingly for instance, even though Argentina faces a serious problem with poor road safety records, revealing a road crash fatality rate -deaths per population- three times greater than the current rate of best practice countries -Sweden, United Kingdom and the Netherlands- there has not been any serious attempt to design a national strategy to overcome this problem). The reforms implemented during the last decade altered the relationships between the national, provincial and municipal governments and created tensions linked to the allocation of funds among jurisdictions under the federal co-participation agreements. With the decentralization of low traffic roads, Provinces and municipalities have important attributions over a significant part of the road network that connects productive areas with consumption centers, ports and other export gateways through the national system of inter-provincial highways. However, technical capacities and funds are still pretty much under the realm of the federal government limiting the development possibilities at the provincial and municipal levels. Bank’s Overall Road Sector Strategy for Argentina Through several projects both at the federal and provincial levels, the Bank has played a key role in the transformation process of the road sector in the country. Bank engagement in Argentina’s road agenda has contributed to reduce the infrastructure backlog and to strengthen technical, managerial and environmental capacities of the participating Road Agencies (DNV and six DPVs68). The Bank’s overall strategy focuses on the development of a more comprehensive and efficient road management strategy in the country that ensures the convergence of the road assets towards a steady state-condition, relying on five building blocks:
68 Buenos Aires, Córdoba, Santa Fe, Corrientes, Neuquén y Entre Ríos.
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(i) Supporting adequate road financing strategies within a sound fiscal framework that enables to achieve the sustainability of the core network but at the same time, breaks up the vicious cycle of postponing interventions in the poorer less developed parts of the country. So far, the focus has been placed on arresting deterioration of the core road network that requires important periodic maintenance and rehabilitation interventions to upgrade its overall condition and overcome the backlog of deferred maintenance. This implies higher financial requirements than those under a steady-state scenario (where the network deterioration reaches a relatively constant level year after year and future interventions can be anticipated and reasonably taken care of with a given level of resources) thus postponing interventions in less developed areas or limiting the possibilities to address other needs. Therefore, it is important to design and implement a sound system for the financing of the road network in which: (a) efficient work programs that are aligned with existing budgets are elaborated, creating space to address other needs; (b) resource allocation is based on cost-effective policies according to agreed and coherent priorities; (c) sound financial planning mechanisms are adequately linked to investment plans to avoid disruptive “stop-and-go” implementation resulting from volatility in budget allocations.
(ii) Building-up planning capacity and improving mechanisms to establish investment priorities under network-wide approaches. The Bank strategy is based on the development and implementation of strategic road programs that take care of the entire road network, according to traffic and physical conditions of the different segments, prioritizing interventions based on sound economic criteria. This implies designing and implementing investment plans in line with budget constraints, ensuring an efficient allocation of resources between competing needs (capacity expansion, regional integration, rehabilitation and maintenance) and strengthening the technical capacities in support of the use of appropriate design and maintenance standards. The main goal is to build-up the required institutional capacity driven by basic principles such as efficiency, accountability, and transparency to best address user’s needs. Road agencies in the country need to evolve as the sector evolves, in order to manage road assets under a results oriented environment focused on client satisfaction
(iii) Implementing cost-efficient asset management policies to make the most of the available resources. In an aim to ensure the sustainability of the interventions, the Bank’s strategy aims to promote the implementation of more efficient managerial schemes based on target or results oriented programs. In such effort, road agencies need to rely more systematically on the private sector even for the execution of the routine maintenance activities. Private sector participation through toll road concessions in high traffic corridors where the capacity exists is a first step in the evolution and transformation of the sector. The introduction of performance based contracts elsewhere, enhances the overall management of existing road assets in many respects: (i) linking budget allocations with multi-year expenditure requirements established under the contacts; (ii) increasing cost-efficiency as compared to ad-measurement type contracts; (iii) minimizing delays in project implementation; (iv) eliminating cost overruns; (v) reducing the risk of unsatisfactory quality in the rehabilitation and subsequent maintenance works improving the condition of the network; and (vii) fostering innovation in the programming and execution of works.
(iv) Improving governance, driving policy and decision making with a focus on the degree of institutional rationality, increased transparency and social accountability. The main
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purpose is to develop a system that clearly establishes what is being achieved, at what cost, and how that cost compares to internationally accepted benchmarks in order to actually achieve and transfer to the society the benefits from cost-efficient decision making and asset management. The Bank has engaged in a dialogue with the country to develop alternative options and additional measures to improve governance and build-up the capacities of the agencies involved in procurement processes, the ultimate goal being the implementation of a framework to track key indicators that will allow to identify factors that could jeopardize the achievement of cost-efficiency in the sector. Several actions have been discussed and agreed upon to increase transparency, encourage competition in the sector and enhance monitoring, including among others: (i) closely monitor the evolution of prices in the sector; (ii) carry out thorough reviews of the technical designs (carry out site measurements on the condition of the roads, revise the required interventions, etc) to prepare budget estimates that reflect updated market prices before launching any new bid; (ii) monitor and assess the capacity of the construction industry to identify possible issues that may limit competition, and to have a clear view of the characteristics of the market towards which bids are to be aimed; (iii) design bidding strategies and reformulate the procurement plans to take into consideration the results of the analysis of the capacity of the construction industry; and (iv) modify aspects of the bidding documents that will increase the entry of new firms to the market and improve competition; (v) increase information available to the public with regards to projects procurement and implementation.
(v) Addressing externalities by mainstreaming road safety initiatives and environmental management and into government’s policy agendas. Due to the ever-growing number of casualties and fatalities occurring on the road network, road safety has become a common and prominent issue at all levels of government in Argentina. Road fatalities in Argentina are the first cause of death among the younger generation of less than 35 years old, and the third cause of death in general. The Bank strategy increasingly and aggressively is addressing the issue through the design of an integrated, multi-disciplinary and results-focused approach for road safety. Similarly the Bank’s strategy foresees the introduction of the environmental and social dimensions in road management in the country.
(vi) Expanding support to Provinces through tailor made operations that address specific issues in key strategic Provinces in the country. The strategy aims at rolling out Bank’s support to develop a more direct and in-depth policy dialogue with key strategic Provinces in the country. The approach includes: (i) initial “template” operations executed through the Federal Government further extended to provincial governments willing to participate in a sector program; moving towards (ii) stand-alone operations directly with Provinces which allows fostering the generation of a strong strategic partnership between the Bank and key strategic Provinces to deal with more Province-specific issues.
Bank interventions at the federal and provincial levels have been a mechanism to roll out the Bank’s strategy and support the evolution of the sector under the above-mentioned building blocks, developing road programs under network-wide approaches and encouraging the gradual transformation of the road agencies into evermore results-oriented organizations. Since 1995 multilateral organizations have financed about 36 percent of total investments in roads under the jurisdiction of DNV (the Bank’s share of this amount being approximately 50 percent) whereas at the provincial level, for the six Provinces participating in the Provincial
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Roads Project, Bank financing so far has represented on average almost 26 percent of total investment (without taking into consideration the new proposed infrastructure operations under preparation for Córdoba and Santa Fé Provinces). Over the last decade, seven Bank operations have been developed (including three currently under preparation) for the sector. Table 2 summarizes the areas of interventions of said operations as described below. At the federal level, the National Highway Rehabilitation and Maintenance and the National Highways Asset Management project (Loans 4295-AR and 7242-AR) have focused on the gradual consolidation of an efficient road network management strategy, preserving the condition of vital road assets through the expansion of performance-based contracts for the rehabilitation and maintenance of the non-concessioned primary paved network and supporting the institutional strengthening of DNV:
• The Bank completed the implementation of Loan 4295-AR in December 2005 with a total of 9,000 km incorporated into CREMA type management contracts.
• Loan 7242-AR supports the expansion of the CREMA system to reach 16,700 km out of 22,000 km of paved non-concessioned national roads. The project also provides support for the implementation of an institutional renewal action plan for DNV, the implementation of a road safety initiative and the introduction of a systematic approach to bridge rehabilitation and maintenance. This is a major program that complements Government and Bank resources to finance a very ambitious program of life cycle road asset management within a budget constraint.
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Table A15-2 Summary of Bank Projects in roads in Argentina
4295-AR Yes CREMA contracts Environmental management No
Federal 7242-AR
Study to consolidate a long term financing strategy for the sector
Institutional Renewal Action Plan Contribution to the strategic plan for territorial development
CREMA contracts
Design mechanisms to disseminate DNV’s performance, monitor performance and control results, and construct performance and user satisfaction indicators
Road Safety Environmental management
No
4093-AR Yes
Rehabilitation, Paving and Maintenance ad-measurement type contracts
Environmental management No
7301-AR Yes CREMA contracts, Rehabilitation, Paving and Maintenance
Design mechanisms to monitor/assess achievement of cost-efficiency in procurement and implementation processes Established mechanisms to disseminate DPV’s performance
Road Safety Component Environmental management
No
7268-AR
Implementation of infrastructure program within a sound fiscal framework
Institutional Diagnostic and Action plan
Rehabilitation and Maintenance
Mechanisms to monitor the construction industry’s response to bidding processes
Environmental management Yes
Santa Fe Yes Capacity Expansion
Road Safety Component Environmental management
Yes
Provincial
Cordoba Yes CREMA contracts Paving admeasurements type contracts
Road Safety Component/ Environmental management
Yes
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At the provincial level, the Provincial Road Project (Loan 4093-AR), which is an on-lending operation to six participating Provinces through the Federal Government, was the Bank’s first entry point to encourage the evolution in the administration of provincial road assets. This Bank operation supported the design and execution of more efficient road programs based on appropriate design and maintenance standards, the reorganization and strengthening of provincial road agencies, improved the efficiency of investments, and financed works to upgrade and rehabilitate selected segments of the core network under traditional ad-measurement type contracts. Most importantly, this project created opportunities to develop a more direct and in-depth policy dialogue with provincial authorities enabling the identification of different approaches and lending opportunities at this level. Building on the achievements of this project, Bank operations at the provincial level have been diversified and now include:
• A Provincial Roads Infrastructure Project (Loan 7301-AR) which aims at: (i) introducing the use of CREMA contracts in participating Provinces to cover nearly 2,200 km of provincial roads (about 25 percent of the total paved network in the participating Provinces) and rehabilitating/upgrading some further 260 km through ad-measurement contracts; (ii) bringing about the required technical capabilities in the participating provincial road agencies to confront the introduction of new performance-based management strategies; and (iii) balancing the performance among different Provinces to integrate network strategies, develop coordinated road safety initiatives and enhance technical, environmental, planning and monitoring capabilities reaching other Provinces in the country.
• The Buenos Aires Sustainable Infrastructure Development Program (Loan 7268-AR), which was the first direct operation to a Province, enabled concentrating on the overall infrastructure sector issues within the fiscal framework of the Province rather than on specific subprojects within a sector to be managed at a country level. In the road sector this Project supports: (i) a road rehabilitation program for approximately 457 km of the provincial primary paved network including access roads to some ports and localities; and (ii) the removal of selected bottlenecks, widening some 30 km of primary roads and enhancing intersections in high-traffic roads and (iii) an institutional strengthening action plan.
• A Province of Córdoba Road Infrastructure Project supports investments to increase coverage of the CREMA system on about 440 km and paving 185 km of the primary network to facilitate goods and passenger transport along productive corridors and tourist areas.
• The proposed Province of Santa Fe Road Infrastructure Project. Operation, which is the project under consideration aims at facilitating access to major regional consumption and export markets, create new business opportunities, reduce logistic costs and foster the effective economic integration of the Province, adding capacity to the existing National Road 19 (a key component of a major bi-oceanic corridor that links the Province of Santa Fe and the Center Region with Chile and Brazil) through the construction of a second lane over 130 km. Also, the project will: (i) improve road safety; (ii) reinforce the Province’s planning capacity; and (iii) set up a system to measure logistics costs in the
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Province of Santa Fe and design benchmarks to identify infrastructure and trade facilitation constraints.
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Annex 16: Country at a Glance
ARGENTINA: AR Santa Fe Road Infrastructure Latin Upper-
POVERTY and SOCIAL America middle-Argentina & Carib. income
Population (%) 1.0 1.4 0.7Labor force (%) 2.5 2.4 1.2
Most recent estimate (latest year available, 1995-2006)
Poverty (% of population below national poverty line) 31 .. ..Urban population (% of total population) 90 77 72Life expectancy at birth (years) 74 72 69Infant mortality (per 1,000 live births) 16 27 23Child malnutrition (% of children under 5) 5 7 7Access to safe water (% of population) 96 91 94Illiteracy (% of population age 15+) 97 90 93Gross primary enrollment (% of school-age population) 112 119 107 Male 113 121 108 Female 112 117 106
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1986 1996 2004 2005
GDP (US$ billions) 110.9 272.1 151.5 183.3Gross domestic investment/GDP 17.4 18.1 17.7 21.5Exports of goods and services/GDP 8.2 10.4 23.4 24.6Gross domestic savings/GDP 19.3 17.4 22.5 27.0Gross national savings/GDP .. 15.6 17.9 24.0
Current account balance/GDP -2.6 -2.5 2.1 2.9Interest payments/GDP .. 2.7 6.4 3.6Total debt/GDP 47.2 42.0 109.5 79.6Total debt service/exports 82.8 45.6 27.1 12.0Present value of debt/GDP .. .. .. ..Present value of debt/exports .. .. .. ..
1985-95 1995-05 2004 2005 2005-08 (e)(avg annual growth)GDP 2.2 2.0 9.0 9.2 6.8GDP per capita 0.8 0.9 8.0 8.2 5.6Exports of goods and services 7.5 8.0 8.1 13.8 9.7
Private consumption .. 1.4 8.7 6.9General government consumption .. 1.4 2.7 6.2Gross domestic investment 4.1 3.9 34.4 22.7Imports of goods and services 14.5 5.9 40.1 20.3
* The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.
