Documentof The WorldBank FOROFFICIALUSEONLY ReportNo: 38697-AR PROJECTPAPER ONA PROPOSEDADDITIONAL FINANCINGLOAN INTHEAMOUNTOFUS$lOOMILLION TO THE ARGENTINE REPUBLIC FORA BUENOSAIRES URBANTRANSPORT PROJECT February27,2007 Finance, PrivateSector and InfrastructureDepartment CaribbeanCountry ManagementUnit LatinAmerica andthe CaribbeanRegion This document has a restricted distribution and may be usedby recipients only inthe performance o f their official duties. Its contents mav not otherwise be disclosed without World Bank authorization. CURRENCYEQUIVALENTS (ExchangeRateEffectiveFebruary21,2007) CurrencyUnit = AR Peso AR$1.00 = US$0.32 US$1 = AR$3.1 FISCALYEAR January 1 - December31 ABBREVIATIONSAND ACRONYMS AMBA Metropolitan Area of the Great Buenos Aires AR$ Argentine Peso CAS Country Assistance Strategy CNRT National Commission for the Regulation of Transport (Comisidn Nacional de Regulacidn del Transporte) EL4 Environmental Impact Assessment ESMM Environmental and Social Management Manual GBA Great Buenos Aires GOA Government of Argentina IBRD InternationalBank for Reconstruction And Development IFPA Integrated Fiduciary Performance Assessment INDEC National Instituteof Statistics and Census (Instituto Nacional de Estadisticay Censos) IRR Internal Rate of Return MTA Metropolitan Transport Agency (AgenciaMetropolitana de Transporte) PIU Project ImplementationUnit PTUBA Buenos Aires UrbanTransport Project (Proyecto de Transporte Urbano de Buenos Aires) RAP Resettlement Action Plan RPF Resettlement Policy Framework SEPA Procurement Plans Executing System (Sistema de Ejecucidn de Planes de Adquisiciones) ST Secretariat of Transport (Secretariade Transporte) UEPEX Automated Accounting System for ExecutingUnits Vice President: PamelaCox CountryManagedDirector Axel van Trotsenburg Sector Director Laura Tuck Sector Manager Jose Luis Irigoyen Sector Leader Juan Gaviria Task Team Leader Andres Pizarro FOROFFICIAL USE ONLY ARGENTINA BUENOS AIRES URBANTRANSPORT PROJECT ADDITIONAL FINANCING CONTENTS A . INTRODUCTION ............................................................................................................................... 1 B. BACKGROUNDAND RATIONALEFORADDITIONAL FINANCING ................................... 1 1. COUNTRYCONTEXT.......................................................................................................................... 1 2. THEORIGINAL LOAN ......................................................................................................................... 1 3. PROJECTOBJECTIVE .......................................................................................................................... 2 4. COMPONENTS. SCOPE. AND DESIGNOFTHE PROJECT ........................................................................ 3 5. PROJECTPERFORMANCE .................................................................................................................... 3 6. RATIONALE AND REASONS FOR REQUESTING THE ADDITIONAL FINANCING ....................................... 4 C . PROPOSEDCHANGES ..................................................................................................................... 5 D CONSISTENCYWITH CAS ............................................................................................................. 7 E.. APPRAISALSUMMARY .................................................................................................................. 8 1. ECONOMICEVALUATION ......................................................................................... 2. TECHNICAL ........................................................................................................................................ 8 3 FIDUCIARY......................................................................................................................................... 8 4 10 5 ENVIRONMENT ................................................................................................................................. 11 6.... SOCIAL............................................................................................................................................ SAFEGUARD POLICIES ...................................................................................................................... 12 F EXPECTEDOUTCOMES ............................................................................................................... 12 G .. BENEFITS AND RISKS ................................................................................................................... 13 H I IMPLEMENTATIONARRANGEMENTS .. FINANCIAL TERMS AND CONDITIONSFORTHE ADDITIONAL FINANCING ..............14 .................................................................................... 15 ANNEX 1:DESCRIPTIONOF PROJECT COMPONENTSAND SUB-PROJECTS ........................ 16 ANNEX 2: ECONOMICEVALUATION ................................................................................................. 19 ANNEX 3: FINANCIAL MANAGEMENTARRANGEMENTS ........................................................... 23 ANNEX 4: PROCUREMENT ARRANGEMENTS ................................................................................ 25 ANNEX 5: SAFEGUARDPOLICY ISSUES ........................................................................................... 28 ANNEX 6: FINANCINGPLANAND DISBURSEMENTSCHEDULE ............................................... 33 This document has a restricted distribution and may be used by recipients only in the performance of their official duties.Its contents may not be otherwise disclosed without World Bank authorization. ARGENTINA BUENOS AIRES URBANTRANSPORT PROJECT ADDITIONAL FINANCING PROJECT PAPERDATA SHEET Does the restructured or scaled-up project require any exceptions from Bank No policies? Have these been approved by Bank management? NIA I s approval for any policy exception sought from the Board? No For Loans/Credits/Others: Total Bank financing (US$m): 100 Proposed terms: FSL Years to maturity: 15, including a grace period of 5 years. IBRD 100.00 0.00 100.00 Total: 132.80 0.00 132.80 ARGENTINA BUENOSAIRES URBANTRANSPORT PROJECT ADDITIONAL FINANCING A. INTRODUCTION 1. This Project Paper seeks the approval o fthe Executive Directors to provide an Additional Financing in an amount o f US$ 100 million to the Argentine Republic to be used for the Buenos Aires UrbanTransport Project, Project IDP039584, LoanNo. AR4163. 2. The proposed additional loan would finance the costs associated with: (i) covering a financing gap derived from the reallocation o f loan resources to respond to Argentina's social emergency in 2002, and to cover unanticipated higher costs for civil works; (ii) financing implementation o f modified project activities as part of a partial project restructuring; and (iii) financing the implementation of additional activities to scale up the project's impact and development effectiveness. B. BACKGROUNDAND RATIONALE FORADDITIONAL FINANCING 1. CountryContext 3. Argentina i s one o f the most urbanized countries in Latin America. Over 89 percent o f its total population lives in urban areas o f 2,000 or more inhabitants. Despite its high level o f urbanization, Argentina i s still experiencing significant growth in its urban population. Between 1980 and 1991 urban areas grew from 23.2 million to 28.4 million inhabitants (1.9 percent per year). Today 13 million people live, or almost 38 percent o f the country's population, are concentrated inthe Buenos Aires Metropolitan Area (AMBA).Population densities are highwith nearly 14,800 people per km2 in the city o f Buenos Aires. The city population (3 million) i s growing at a rate o f 0.7 percent a year. Yet some o f the suburban municipalities are growing at a rate ten times faster (7 percent per year). Sound urban transport management i s critical for meeting the growing transport needs o f the AMBA. 4. The effects o f increasing urban population, growing motorization, suburbanization, inadequate transport and traffic management, and worsening congestion and air pollution have been evident in many metropolitan areas and medium size cities. Bus transport i s deteriorating and, despite significant improvement in the nineties, suburban rail services in the Great Buenos Aires have become overcrowded, unreliable and subject to much criticism, in part due to lower- than-expected investment levels and the obsolescence o f roadrail crossings which generates many traffic safety and service quality issues. Traffic safety and personal security have become serious issues that impact the whole urban transport system. Because o f these factors, and the 2001 economic crisis and subsequent reduction in investment, public transport has lost around 50% o f its ridership since the early nineties, aggravating the problems o f congestion and pollution insome areas, andthose ofpoor access andmobility inothers (the povertyzones). 2. The OriginalLoan 1 5. The ongoing PTUBA project was approved in 1997 for a total amount of US$200 million. Project initiation was delayed 20 months between late 1996 and mid-1998 due to various ministerial reorganizations and the project implementation unit. Project implementation accelerated between late 1998 and the beginning of 2000. Unfortunately, in early 2000, as a result o f the prolonged recession, the Government reduced budget allocations for investment projects, forcing a slowdown of the execution of the Project's ongoing contracts. In 2001, the situation worsened and budget allocation for this Project was eliminated, and all Project components came to a standstill. Given the importance attached to the Project, the Federal Ministry of Economy tried without success to find alternative institutional arrangements whereby the City could carry-on the project. Furthermore, a fiduciary fund was created to involve the private sector operator of the subway infinding a solution albeit for the subway related contracts. However, none of these attempts succeededand when the crisis of December 2002 developed, the project had been classified as unsatisfactory for 2 years, and reached a standstill. In October 2002, the project was amended to permit the financing o f the health and nutrition components of Argentina's social emergency program, through the reallocation of US$50 million of loan proceeds for said purpose. 6. A turnaround in implementation was reached after May 2003 when the incoming administration assigned a high priority to completing the Project, positively resolving the ownership issues that had previously paralyzed its execution, and allocating counterpart funds commensurate with the Project requirements. Since then, the Project has been implementing at a strong pace and achieving its development objectives. 7. As part of the effort of bringingthe Project back to a normal implementation status, the project was restructured inearly 2004. Inview of the higher than expected civil works costs, and considering the combined effect with the changes inrelative prices after the 2002 devaluation, the loan cost sharing was reduced inJuly 2005 to enable Bank participation inall works planned for execution. The financing of the rehabilitation of Line A was reduced from 70% to 55%, and the financing of roadrail crossings and transfer centers from 48% to 35%. All civil work contracts were finally renegotiated by mid-2004, after almost 3.5 years of work stoppage or slowdown due to the impact of recession and then the economic crisis and devaluation. Additional civil work contracts were awarded in 2004 and 2005 for the construction o f seven roadrail crossings and one budrail transfer center, and an origin-destination survey to establish a sound basis for future transport planning in Great Buenos Aires. Most of these contracts, with very positive impacts on road safety, have now been completed, with the last remaining crossing (San Fernando/Tigre) to be completed by March 2007. The contract for the public transport origin-destination survey was signed inJanuary 2006 and the field work and data processing is to be carried out between April 2006 and June 2007. 8. The current loan was originally scheduled to close on December 31, 2003, and was granted successive extensions until June 30, 2007, based on the project's significantly improved implementationperformance, inorder to enable the authorities to hlly meet the objectives of the project. 3. ProjectObjective 9. The current project's development objectives are to: "(a) support the private-public partnership in improving the service quality and coverage of mass transit; (b) support infrastructure improvements defined in the concession agreements between the Government and the private sector; (c) assist in improving the conditions of trafJic safety and environmental 2 quality; and (d) help in developing an integrated urban transport (road and rail) system in the AMBA." 4. Components,Scope, andDesignof the Project 10. Inparticular, the PTUBA's project description inthe PADincludes "apackage of actions and investments aimed at thefollowing: (a) finance the rail equipment and infrastructure which are critical for the upgrading of public transport services; (b) promote the integration of the transport system by upgrading transfer stations among rail lines, building better transfer facilities between rail and road-based transport, and generally improving road access to rail stations; (e) improve traffic safety and environmental conditions through the construction of grade separations at high-volume crossings, the enhancement of controls at roadhail grade crossings, the development of a complementary program of road safety actions, and the introduction of systematic air pollution monitoring, and (d) strengthen the institutionalframework which would ensure the continued operation of an economically and environmentally sustainable transport system in the metropolitan area." 11. The works and technical assistance activities under the PTUBA were grouped under five components: (a) support o f the basic investment program o f the Metrovias concession (36% o f total project costs net o f project administration) (b) rehabilitation o f subway Line A (31%) (c) integration o f the transport system (including transfer centers; improvements o f rail stations to ease access to buses, pedestrians, bicycles, etc.) (9%) (d) environmental monitoring and traffic safety program, including roadrail grade separations (16%); and (e) strengthening o f the institutional framework (8%). 5. ProjectPerformance 12. Since 2003, this project has benefited from successful implementation. The outputs/outcomes and results recorded in the two most recent ISRs reveal that its impact thus far has been consistent with the expectations set out in the Project Appraisal Document. The ISR ratings over the last 12 months, including those for implementation progress (IP) and development objectives (DOs), have been consistently satisfactory. The last ISR rated the IP as highly satisfactory. There are no unresolved fiduciary, environmental, social or other safeguard problems. 13. Moreover the Borrower and the Project Implementing Unit are committed to the project as evidenced by the level o f budgetary resources allocated to the Project by the GOA, as well as the level o f commitments and disbursements in the last three years, which after the project's restructuring in early 2004 had a disbursement ratio o f 41% inFY04, 41.2% in FY05 and 37.3% in FY06. The Borrower's request for additional financing further explains the Government's commitment to the project. 3 6. Rationale and reasons for requesting the additional financing 14. According to OP/BP 13.20, the Bank may provide additional financing through additional loans in the context of ongoing, well-performing projects. The GOA requested an additional financing of US$lOO million. The initial reason behind this request was that the reallocation of US$SOmout of the original loan amount of US$200 to meet the need arising from the social emergency in October 2002, led to a scaling-down of the project. Therefore, some components and sub-projects were not finalized as originally planned. Subsequently, as has been mentioned, the project became highly successful earning recognition within Argentina and the Bank, and a high-impact component was considered a candidate for scaling-up to increase its positive impact. Finally, the ongoing policy dialogue with the country inthe sector warranted the inclusion of additional strategic studies that would improve our knowledge of the sector given recent policy developments, and allow better backgroundfor future dialogue. 15. Consequently, the additional financing request i s structured around three eligible categories contemplated inthe policy: (i) Financing Gap:approximately US$30 million to address a financing gap that resulted as a combination of (i) the authorities' decision to restore part of the original project objectives scaled down following the 2002 reallocation of US$SOm to meet the need arising from the social emergency in October 2002, and (ii) unanticipated higher costs for civil work contracts linkedto the on-going economic recovery; (ii) Project Restructuring: approximately US$5 million to finance implementation of modified project activities to be included as part of project restructuring. The modified project activities are being included to address changed circumstances that emerged during project implementation including the establishment in 2002 of an urban transport subsidy scheme financed by the GOA to alleviate the impacts of the crisis, and increased needs to address urban transport improvements in cities other than the Great Buenos Aires metropolitan area. The on-going dialogue between the Bank and the GOA regardingthe urban transport sector has recently concentrated on the national subsidy policy. This project is not the vehicle to further develop the discussion on this issue as it was not inherently part of the original project, and the nature of the Additional Financing i s that of supporting successful components in successful projects, not developing broad policy dialogue. However, within the scope of this project several studies and analyses will be carried out that will allow for the improvement of sector knowledge to frame the on-going dialogue with the Government on urban transport policy issues. These have been included under the restructuring category; and (iii) Additional Financingfor Project Scale-up: approximately US$65 million to finance the implementation of some additional activities that were part of the broader original project scope and would scale up the project's impact and development effectiveness. 16. Other instruments were considered before opting for the Additional Financing, such as a Repeater Project and a standard SIL. The fact that the project had suffered a significant financing gap during the crisis meant that a number of components, which were part of the original loan scope and which had been appraised, were dropped. These can now be completed as originally planned through the additional financing; this contrasts with the nature of a SIL and a Repeater Project, which would be fully used for newly-identified activities. Furthermore, there were significant costhime-effectiveness and procedural gains to be obtained from an Additional Financinginstrument duringpreparationas opposed to a new loan albeit Repeater. 4 C. PROPOSEDCHANGES 17. The eligible categories o f the proposed additional financing, will include a series o f subprojects that correspond to the original project component classification. Below the subprojects included are distributed inthe corresponding eligible categories: A) Category under Financing Gap: Works: (i)roadrail separated crossing inthe Buenos 1 Aires metropolitan area (AMBA); (ii)Accessibility improvements to suburban railway stations in AMBA; and (iii) Continuation o f minor rehabilitation works in subway Line A stations. Technical assistance: (i)Complete the origin-destination and household surveys initiated under the PTUBA project, and set up and calibrate a traffic forecast model for the GBA, botho f which were includedinthe original project design. B) Category under Project Restructuring: Technical assistance: (i)Studies to review the federal government's urban public transport fare and financial assistance framework; and (ii) Provide technical assistance to cities other than Buenos Aires to prioritize and design urban transport projects, especially the cities that will benefit from the GEF Regional Sustainable Transport Project (Tucuman, Rosario, Cbrdoba, Posadas). C) Category under Project Scale-up: Works: 6 additionalroadrail separated crossings inthe AMBA that are being studied through an on-going study funded under the project. Technical assistance: Support through expert advice the creation o f the Great Buenos Aires Metropolitan Transport Agency. 18. The subprojects have been organized according to the original project components as shown in Table 1. The type o f subprojects correspond to a concerted effort to improve public transport efficiency in the AMBA; the suburban railway accessibility works have as principal motivation the improvement of transport conditions for the lower-income population who are more largely dependent on suburban rail, and as corollary, to improve patronage with improved physical integration o f road based public transport and rail. The roadrail crossings have been seen to significantly contribute to the improvement o f railway operations and reduce accidents. Therefore, the project will scale up this approach and with the technical assistance and study try to develop an overall strategy for the remaining roadrail crossings inAMBA. 19. The studies and technical assistances are all geared to improving strategic approaches to project development in AMBA, in particular to the development o f transport planning capabilities. Equally, this approach i s extended to some provincial cities who have sought support and who are involved in significant urban transport improvement schemes. Project Component Bank(US$) Argentina Total EstimatedCost (US$) (US$) Component A: Transport 23.5 9.4 32.9 Integration A1: Improvement works to 21.9 9.4 31.3 suburbanrailway stations in the AMBA: 80 A2: Supervisionof 1.6 1.6 5 improvement works ComponentB: Traffic 36.8 14.7 51.5 Safety B1: Seven roadrail separated 34.3 14.7 49.0 crossinginthe BuenosAires metropolitan area (AMBA) B2: Supervisionof works 2.5 2.5 ComponentC: Subway 0.7 0.3 1.o LineA C1: Line A rehabilitation 0.5 0.3 0.8 works C2: Line A supervision o f 0.2 0.2 TOTAL ESTIMATED PROJECT COST: approx. US$132.8 million 20. The activities proposed are fully consistent with the PDOs, and compliant with Bank policy for additional financing. The existing monitoring indicators and arrangements are adequate for the proposed operation. The proposed component o f technical assistance to other cities would imply a geographical expansion beyond the scope of the original loan; however, the significance o f this component in monetary terms i s limited while the development impact o f the design o f sustainable urban transport programs inthese cities would be crucial, and would help secure GEF funding and prepare the Urban Transport Project for Metropolitan Areas inArgentina. The new, complete fifth PDO outcome for the project would be: "help in developing integrated urban transport strategies inArgentina's largest Metropolitan Areas." 21. The proposed operation can be accommodated in the context o f the ongoing project, relying on the PTUBA PIU which has proven its ability to handle such contracts with good results. The proposed additional activities are expected to be completed within a maximum o f three years o f the current closing date o f the loan, which i s consistent with the Bank's policy on additional financing. 6 D. CONSISTENCYWITH CAS 22. The proposed additional activities under this operation are fully consistent with the Country Assistance Strategy (CAS') discussedby the Board on June 6, 2006. The three pillars of the 2004 CAS2-sustained growth with equity, social inclusion and improved governance-have beenretained as central to support the country's efforts to shift from a focus on crisis responseto medium-term growth. Improvement of infrastructure assets is a fundamental element of the CAS'Spillar of sustained economic growth, particularly with respect to establishing growth that i s more equitable and pro-poor. More than one-third of lending operations proposed in the indicative lendingprogram inthe CAS are ininfrastructure, with the bulkof these inthe transport sector. 23. The proposed operation seeks to improve the inclusion of the poor into the urban transport service network in GBA and finds its rationale in the ever-increasing importance of cities, both as carriers of economic growth and magnets for low-income people seeking better opportunities, and in the recognition of urban transport as a sphere of confluence o f three essential aspects o f development today: (i) Economicgrowth:Qualitytransportservicesandinfrastructureenhancetheproductivity and competitiveness of cities through numerous avenues. At the macroeconomic level, they generate growth by facilitating trade and by increasing access to the gamut of amenities and services crucial to the development of human capital, including health and education. At the microeconomic level, transport improvements lower the price of labor, capital and technology inputs,thereby contributingto productivity gains; they also increase access to markets and hence the diversification of outputs. The quality o f transportation infrastructure and public transport services affects the location decisions made by firms and individuals and the efficiency o f the labor market. (ii) Poverty alleviation: The rapid expansion of urban areas in Argentina has placed increased pressure on its transport infrastructure and services, and raising associated accessibility problems. For many urban dwellers, thejourney to work has become excessively long, unsafe and uncomfortable, especially so for some of the very poor. The proposed project i s a partial response to some of the more intractable problems associated with urban poverty, not only in terms of access to economic opportunity, but also in terms of the broader dimensions of social exclusion associatedwith a lack of access to schools, health facilities, and wider social interaction. (iii) Environmentalquality:Theincreaseincarownershipandtheinefficientmanagement o f an aging public transport fleet, combined with the proliferation of old and polluting micro- buses and deficiencies in bus inspection and maintenance have led to increased congestion and high levels of traffic-generated air pollution. The proposed project will improve traffic flows through the removal of traffic bottlenecks such as roadrail at-level crossings. 24. In addition, through its institutional component, especially through supporting the creation of the Metropolitan Transport Agency for the Great Buenos Aires, the project will 'Country Assistance Strategy for the Period 2006-2008, May 4,2006. Report No. 34015-AR Report No. 27340-AR 7 address transport-related governance issues and improve the coordination o f public sector activities in land use, transport planning, air quality, infrastructure investment, traffic management, and public transport franchising. E. APPRAISAL SUMMARY 25. For the sake o f clarity and given the structure o f the project components the appraisal was carried out on all the activities included without differentiating among activities that corresponded to financing gap, scale up or project restructuring. 1. Economic evaluation 26. The cost o f subprojects o f component A, improvements to around eighty suburban railway stations, are low (less than $500,000 on the average) and are expected to yield substantial economic benefits. Only projects with IRR above 12% will be selected and prioritized from a batch o f projects based on their NPV. The economic evaluation methodology will be acceptable to the Bank and will be further developed as the sub-project designs are further defined. 27. The component B subprojects, the roadrail crossings, considered for the scaled-up project have been subject to an economic evaluation, usingthe same criteria as the one used for the appraisal o f the original project. The economic analysis procedure calculates time and cost savings for road and rail operators and passengers, as well as accident cost savings. The calculations also take account o f the effects on road and rail system users during the period o f construction, including those o f reduced speed o f rail operations and diversion o f road traffic to other crossings in the interim period. As a result o f the economic studies carried out for 22 candidate projects so far, eight crossings have been identified with IRRs between 12 and 29 percent. Those with the highest rankings are now undergoing final design, and one i s being tendered. Details o f this evaluation are shown inAnnex 2. 2. Technical 28. The design and construction criteria of the roadrail crossings are the same as for the original project, and their implementation will benefit from the lessons learned during the last three years when six similar crossings were completed. The engineering departments o f AMBA municipalities have been responsible for identifying and designing the access improvements to outlying railway stations; these include the rehabilitation o f roads, sidewalks and street lighting, the design o f traffic engineering schemes, and o f facilities improving access conditions for buses, pedestrians and bicycles. Metrovias (the Buenos Aires subway concessionaire) and the supervision consultants contracted under the loan have already designed the rehabilitation works that need to be completed in Subway Line A stations and are included inthe on-going contracts that are inexecutionunder the original loan. 3. Fiduciary 29. Financial Management. The Financial Management (FM) arrangements for the additional financing to the Buenos Aires UrbanTransport Project meet Bank requirements. Those 8 FM arrangements and mitigating measures, which are summarized inthe present paragraph, are based upon the FM risk assessment and the lessons learnt from the implementation o f the initial project. 0 Implementing entity and capacity, The implementing unit o f the Secretariat of Transport (PTUBA Implementing Unit) will be responsible for project accounting, FM reporting, internal control, disbursements and interaction with the Bank and the external auditors on FM issues. FM staff from PTUBA implementing unit is qualified; has gained experience from the implementation o f the initial project; and has the capacity to manage additional financing project funds. 0 Flow of funds & Disbursement. The project will operate a designated account in U S dollars located at the Banco de la NacidnArgentina and inwhich funds receivedfrom the Bank for payments o f project eligible expenditure will be deposited. Payments will be made from an Operational Account in AR Pesos also managed by the PTUBA Implementing Unit and located at the Banco de la Nacidn Argentina. The recommended maximum authorized allocation for this operation i s US$ 8 million. Replenishment o f the Designated Account will be made inaccordance with standard Bank procedures. 0 Accounting and Internal Control. The accounting and internal control policies and procedures comply with Bank standards. Financial statements will be preparedusingcash basis. All project funds will be processed in the Government-wide project execution system UEPEX, commonly used for externally h d e d projects in Argentina and acceptable to the Bank, and will be supported by documentary evidence for related works, goods and services procured inline with Bank guidelines for the proposed project. The Operational Manual o f the project will include (i) the internal control system and procedures to be implemented; (ii) Chart o f Accounts for the project; (iii)format and contents o f the annual financial statements and annual financial management reports; and (iv) terms o f reference for the external auditing. The Operational Manual has also been updatedwith regards to relevant Bank policies currently applicable. 0 External Audit. Project Designated Account, Statement of Expenditures and Financial Statements and accounts will be subject to annual audit carried out byAuditoria General de la Nacidn. Audit report shall be presented to the Bank no later than six months after the close o f the fiscal year. 0 Bank Supervision. The project will be subject to annual Integrated Fiduciary Performance Assessment (IFPA) supervision missions as requested by the Argentina Fiduciary Action Plan. Inaddition, the Bank will carry out annual supervision missions focused on implementing audit recommendations and completing Action Plans addressing potential audit issues. 30. Fiduciary Risk. The Fiduciary Risk (combined FM and Procurement) o f the project is rated as Modest. FM risk i s rated as modest due to the overall adequate FM arrangements. The FMriskassessment is detailed inthe Financial Management Annex (RiskAssessment & External Audit).Procurement riskis assessedas average. 31. There are no fiduciary issues under the project as evidenced by the Audit Reports and procurement and financial management supervision missions and ex-post reviews. The Additional Financing will be implemented according to provisions defined in the Loan Agreement, which includes the Bank Procurement and Consultant Guidelines dated M a y 2004, and provisions related to the Fiduciary Action Plan agreed upon between the Government o f Argentina and the Bank. The Loan Agreement will include Special Procurement Conditions aimed at increasing transparency, competition, and social monitoring consistent with the above- 9 mentioned Fiduciary Action Plan (e.g. publication on the web of procurement documents and feeding the Bank publicly accessible Procurement Plans Execution System, known as SEPA3), and at addressing the aspects of domestic legislations that are not consistent with Bank procurement policy. Prior review thresholds will be those currently inplace. Consistent with the Fiduciary Action Plan, Procurement post review work will be carried out jointly with Financial Management supervision work at least annually. 32. Procurement. PTUBA has a well established implementation unit that i s fully familiar with the procurement rules of the Bank; no changes are expected in the unit during the implementation of the additional financing (except the hiring of four to six additional experts, including a Procurement Specialist). A Procurement Plan for the additional financing is being preparedand will be posted inthe SEPA soon. The thresholds for the procurement methods will remain as per the 2004 restructuring amendment; the specific packages, procurement methods, and prior review threshold by the Bank will be reviewed and approved in the procurement plan prepared according to the guidelines of May 2004. 33. Retroactivefinancing. The Bank will reimburse payments made up to one year before the date of signature of the Loan Agreement, and on or after January 1,2007. These expenditures would be paid in advance by the GOA, and should not exceed 20 percent of the additional financing loan amount. 4. Social 34. The Project is expected to have positive impacts on living standards of the population as it i s aimed at improving physical access and quality of public transport, improving sidewalks, paving roads, adding lighting and urban furniture. Additionally, the project will improve traffic safety through the construction of underpassesinexisting at-grade roadrail crossings. 35. Nevertheless, the inhabitants of the neighborhoods where the works will bebuilt will face some negative impacts during the construction phase, such as noise, dust and traffic disruption. Given that these social impacts are related to the environmental management of the construction of the works, they will be addressedthrough the Environmental and Social Management Manual (ESMM)as it will be explained inthe next section. 36. Ingeneral, the civil works under the project will follow the alignments of existing roads and right-of-ways which will prevent any involuntary displacements. However, given that final designs of most of the works under the Traffic Safety Enhancement component are not yet completed, a Resettlement Policy Framework was prepared and i s part of the ESMM.Duringthe screening process conducted in project preparation only one house was identified for potential resettlement and a few street vendors will have to be relocated. 37. The ESMM also includes guidelines for public consultation of the sub-projects and discussions regarding the social and environmental measures. One consultation was carried out during the preparation of the project for one of the roadrail crossings sub-projects (Av. San Martin-Ruta 53 inFlorencio Varela). Sistema de Ejecucidn de Planes de Adquisiciones. 10 5. Environment 38. The project i s expected to have positive environmental impacts in the long-run, since it aims at improving access and quality o f public transport and reducing conflicts between rail and motorized traffic, which will reduce congestion and emissions, and improve traffic safety. The detailed screening - using standard forms - o f the different sub-project sites has confirmed that none are close to natural habitats or environmentally sensitive areas, nor do they require major works that will result in irreversible long-term impact or displacement o f people. However, a number o f short-term and long-term induced impacts trigger OP 4.01. The civil works in the Great Buenos Ares Metropolitan Region include building grade-separated roadrail crossings in the Buenos Aires metropolitan area (AMBA) are being selected from an existing short list o f 25 crossings, based on an economic and social and environmental assessment. The project also includes small scale accessibility improvements to suburban railway stations in the AMBA. The project will incorporate strategies to increase safety and incentives to reduce air pollution. The main direct impacts are expected to occur during construction and cause localized negative environmental impacts. Such impacts are expected to consist essentially o f noise, vibration, dust, and traffic disruption. Additional negative impacts during construction will occur due to haulage and final disposal o f materials. Most o f these impacts can be mitigated by proper designs and environmental and social manuals that have to be followed. 39. Given the interrelation between the social end environmental aspects inthis project, both dimensions were integrated in one comprehensive approach. The preparation o f the social and environmental aspects included the following activities: (i) an assessment o f the environmental and social management o f the ongoing PTUBA project in order to identify lessons learned and improve these practices; (ii) an environmental and social ranking o f the works included in the Components A and B o f the project inorder to determine the magnitude and nature o f the impacts and define those that need social and environmental assessment; (iii)evaluation o f the environmental management capacity o f the PTUBA P I U and municipalities where the project will have an intervention; (iv) screening o f priority subprojects in component B and a sample o f those in component A; (v) five workshops were organized with participation o f municipalities from AMBA involved to agree on the screening methodology and define an action plan; and (vi) an EIA for the roadrail crossing at Av. San Martin in Florencio Varela. Based on these activities the Environmental and Social Management Manual was prepared. 40. Mitigation or compensation measures can be clearly identified in order to guarantee social and environmental sustainability and can be easily identified and implemented with an adequate environmental management system in place during the various phases o f the Project cycle. The main impacts identified occur during construction phase like: air quality and noise increase, traffic and pedestrian disruptions, access to commerce and businesses. Some works might also require the relocation o f few street vendors and impact public space, including trees and local vegetation. Finally, there might be some potential impacts on cultural property at Subway stations along Line A. 41. The Environmental and Social Management Manual (ESMM) provides adequate and detailed prevention, mitigation and compensation measures to address the potential impacts identified during sub-project preparation, implementation and operation. In the case o f Subway Line A, special measures have been prepared to address the potential impact on stations that have been declared historical heritage. The Manual specifies procedures and responsibilities o f contractors and the environmental units in the municipalities involved and the PTUBA PIU to minimize the environmental and social impacts during preparation, construction and delivery o f 11 works. Contractors are required to submit environmental management plans and monitor works against this plan. The Environmental Unit of the PTUBA PIU will supervise the work o f contractors for compliance and post-work operation. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes No EnvironmentalAssessment (OP/BP/GP 4.01) 1x1 11 Natural Habitats (OP/BP 4.04) [ I [XI Forests (OP/BP 4.36) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, beingrevisedas OP 4.11) [XI [ I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [ I [XI Involuntary Resettlement (OP/BP 4.12) [XI [ I Safety of Dams (OP/BP 4.37) [ I [XI Projects on International Waterways (OP/BP/GP 7.50) [ I [XI Projects inDisputedAreas (OP/BP/GP 7.60)* [ I [XI 42. Based on the evaluation of the ongoing PTUBA project and screening of the proposed works on the additional financing, the Project has been qualified as "Category B", following the Operational Bank Policy OP 4.01. F. EXPECTEDOUTCOMES 43. The expected outcomes of the project remain those established for the original PTUBA project and are described in the Staff Appraisal Report No. 15951 AR for Buenos Aires Urban Transport Project of April 11, 1997, in annex D,Table D2.However, the distribution of financing in the proposed additional financing does not mirror exactly the original project therefore we expect that the impacts will be greater on some of the originally expected outcomes than others. 44. For the impacts relative to the original project objectives we expect this additional project will contribute more significantly to: (i) decrease in suburban railway crossing related number of fatalities; (ii)conversion of the Steering Committee into a permanent body responsible for the metropolitan transport policy; (iii)Increased professional capacity in the planning and management agency; (iv) Definition of results indicators for transport policy and planning, such as modal share targets. 45. Regarding the new additional objective this additional financing i s seeking to attain, i.e. "help in developing integrated urban transport strategies in Argentina's largest Metrouolitan Areas. 'I,we expect the outcomes to be: (i) adoption of consistent and coherent urban transport strategies insuch cities as Rosario, Cordoba, Posadas, Tucuman and Mendoza. * By supporting the proposed project, the Bank does not intend to prejudice thefinal determination of the parties' claims on the disputed areas. 12 G. BENEFITS AND RISKS 46. Benefits. Quantifiable and non-quantifiable benefits are expected from the proposed project, including cost savings, time savings, and fewer accidents and fatalities as described inthe economic appraisal o f the project. 47. Improvement of the quality of suburban rail services: After major improvements in the go's, suburban rail services have been deteriorating since the 2001 crisis, and these worsening conditions are taking a heavy toll on train users, mainly lower income population from the GBA (train services serve mainly lower-income neighborhoods). Fares are kept at very low levels but users complain heavily about a lack o f reliability, delays, poor accessibility to train stations, rundown trains and stations, long headways between trains, cancelled services, poor personal security, etc. A pro-poor urban transport strategy needs to contemplate this issue, acting simultaneously on bus-train physical integration4, accessibility to stations, rolling stock improvements, roadrail crossings (roadrail crossings in some places and upgrading the at-grade barrier system elsewhere will allow shorter headways). A combination o f all these actions will greatly improve the quality (reliability, waiting times, commercial speed, headways) o f suburban train services inthe GBA. There are already some on-going works of this type on some rail lines, part o f it being financed by the PTUBA', which will be complemented by the works envisaged under this operation (see ANNEX 1 for a list and description o f the works to be funded). Special emphasis will be put on rail road crossing that have been and currently are a major source o f serious car accidents for the following reasons: (i) vehicles get stuck on the tracks due to the poor quality o f the crossing, (ii) in areas with high crime rates, car drivers tend to force their way through the barriers to avoid being assaulted while stopped waiting for the barriers to be lifted, (iii) closingtimesaresolong(duetoinefficient,outdatedandmis-designedsystem)that barrier drivers and pedestrians just pass through, bypassing the barriers. The proposed component would fund grade-separated crossings and optimize the functioning of at-grade crossings. It is worth mentioning that the PTUBA, for its roadhail crossing component, was awarded the traffic safety prize o f the Asociacidn Argentina de Carreteras in2004.6 . 48. Risks. The proposed changes do not increasethe level o frisk o fthe project. There are no additional risks that could jeopardize the achievement o f the restructured project development objectives or outcome targets. Overall, the main risks are institutional and financial. The experience o f the PTUBA project shows that time overruns are an important risk o f urban transport projects. Also, the higher-level staff o f the municipalities tends to be rotated often with the resulting need for new members to go through a learning process o f Bank procedures. More specific risks that may arise and possible mitigating measures are summarized in the following table: And in the medium-term, fare integration as soon as the Agencia exists or its institutionalization is sufficiently advancedto facilitatethe implementationof an integratedfare system over the GBA. 'For example, on the Sarmiento line of the TBA network, the Bank has financed a bus-rail transfer center in Moreno and roadrail crossings at Ituzaing6 and Tres de Febrero, while the Government, through TBA, is funding train fleet improvements (double-deck trains that will increasecapacity by 40% and station refurbishing). Such a combinationof WB and federal fundingwill bereplicated,pooling resourcesto maximizeimpacts. See: htto://www.transoorte.gOv.ar/otuba/Menciones/Mencion I/Mencion1.htm) 13 Table 2 Possible Risks and Mitigation Measures Risk Risk Risk MitigationMeasure Rating Untimely release o f counterpart funds L First year works have already been included in the Secretary o f Transport budget for 2007. The PIU is not staffed adequately and does M The PIU needs to be strengthened to reinforce its capacity in a few areas such not perform well. as procurement, traffic engineering, civil engineering, etc. To address these specific technical weaknesses, the PIU will be staffed with some o f the experts that have participated in the PTUBA project, and thus have valuable experience for an adequate implementation o f this project, and some additional professionals to meet the needs in the above-mentioned technical areas. Lack o f cooperation from private operators L Inall cases, it is expected that the works to be financed under the PTUBA will during project implementation. positively impact the operating costs of private operators. In the specific case o f suburban train operators, this additional financing project will replicate the scheme used in the ongoing PTUBA, whereby roadrail crossing works will not be initiated until the official signing o f an agreement between the concessionaire, the Municipalities and the GOA to define the responsibilities o f each party. OverallRiskRating I M I 49. Project Age: The proposed three year extension will lead to a cumulative project lifetime that is longer than normal. The proposed lifetime o f 13 years would be an outlier among all lending operations. However, OP 13.20 places no specific limit on cumulative project lifetime, and there are objective reasons why the project has had a long lifetime, as explained inparagraph 5 and 6 above; (i)the project initiation was delayed almost two years due to institutional rearrangements, (ii) the project stood at a standstill before and duringthe Argentinean crisis, and did not really disburse for three years between 2000 and 2002. Thus one may contend that the projects real lifetime has been at best 7 years if one only considers the crisis delays, and five if one accepts the GOA'Sinitial implementation shortcomings. It i s believed, however, that the project's extended lifetime will have no negative consequence on the development objectives and may in fact have a positive effect, since it would provide continuity o f Bank support inthe sector with a new project for UrbanTransport proposed inthe CAS. H. FINANCIAL TERMS AND CONDITIONSFORTHE ADDITIONAL FINANCING 50. US$lOO.O million would be provided as a credit, through a fixed-term loan with a 15-year maturity, including a 5-year grace period. 51. The project will be executed inthree years counting from the closing date o f the existing project, inother words from June 30* 2007. As a result, the project execution speed i s paramount ifthe financing is to be successfully disbursed duringthe execution period. The team has verified the UEP disbursement history and believes that if implementation practices are not modified, the disbursements can be accomplished. Thus, existing implementation practices will be followed where possible and procurement has already been initiated to ensure meeting the implementation timetable. 14 I. IMPLEMENTATIONARRANGEMENTS 52. The Borrower i s the Argentine Republic and the Executing Agency the Secretariat o f Transport within the Ministry o f Federal Planning and Infrastructure. The management o f day-to- day matters related to all stages o f project execution has been the responsibility o f a Project Implementation Unit set up when the project was initiated. The main tasks o f which are described inthe Staff Appraisal Report 15951AR, dated April 11, 1997, onpage 38, Annex B.This PIU is a well established unit, which has performed satisfactorily during the last years o f project implementation and which i s hlly familiar with Bank's rules. 53. Although the execution o f projects through a PIU i s not the most preferable solution, there are currently both institutional and legal constraints that limit the ability o f the GOA to execute externally financed projects from line ministries, especially since staff recruitments are frozen and the Secretariat o f Transport in-house skills required to execute this project are very scarce or already assigned to other tasks within the Ministry. In addition, there i s a satisfactory multi-year experience o f project execution with the PIU. Therefore, it seems reasonable to extend the implementation arrangements as the project financing i s extended. Nonetheless, as originally envisaged by the project, part o f the staff currently working for the PIU would be gradually integrated into the urban transport planning agency for the Buenos Aires metropolitan area that i s expected to be created in the coming years, with support from this project. Thus, the sectoral institutions will capitalize on the experience gained by some o f the PIU staff. 54. Inrecent years, the PIU size has diminished by 30% from its original size. However, given the challenges presentedby this proposed operation it was recommended that between three to six additional specialists (including a sociallenvironmental specialist, procurement specialist, traffic engineer and civil works engineer) be added to its staff. 55. The PIU will prepare progress reports every six months, replicating the current arrangements. The PIU i s headed by a General Coordinator, assisted by various sub-coordinators in the Works, Accounting, Technical Assistance and Administrative areas. The composition o f the P I U i s submitted to the Bank's approval. 15 ANNEX 1:Description of Project Components and Sub-projects The subprojects that compose the different components o f this project are described inthis annex. Component A: Transport Integration (US$32.9M without contingencies). This component i s comprised o f small engineering, urban and signaling projects around suburban railway stations. The objective o f the subprojects i s to improve the physical access to and around stations for pedestrians, cyclists and public transport users. The types o f works will include improving sidewalks, paving roads, bikeways and sidewalks, adding lightingand urban furniture. The municipal governments o f the AMBA have identified their needs and defined the types o f subprojects they require. The PTUBA P I U has processed the requests on the basis o f objective criteria which include: the number o f people with unmet basic needs (NBIor necesidades bbsicas insatisfechas) in the area o f influence o f the station, the number o f passengers using the station, and the estimated costs o f the works. On this basis, the P I U has ranked the subprojects and will execute the works according to this list and practical packaging of the works. The idea is to execute the works inpackages o f 8 to 10 stations which are geographically close. Component B: Traffic Safety (US$ 51.5M without contingencies): This component i s comprised o f about seven roadrail crossings. The objective o f the subprojects i s to facilitate the crossing o f traffic over at-grade railway lines, improving the reliability and operation o f the railway and reducing congestion o f traffic and reducing accidents at crossings. The types o f works are underpasses replacing existing at-grade crossings. The municipal governments o f the AMBA have identified the locations that according to their knowledge o f local issues will benefit from a new roadrail crossing. The municipal governments havepresented their requests with differing level o f detail to the PTUBA PIU. The PIU, through a consulting company, carried out an economic evaluation o f the candidate subprojects (see Annex 2) and retained the eight candidate sub-projects deemed the most feasible according to the economic evaluation. From these, seven will be financed and the final choice i s on-going. The list i s given below: Table A2-1 :List of R o a m a i l Crossings (Preliminary) Name of the R o a m a i l Crossing Municipality Railway Line Av. SanMartin(Ruta 53) Florencio Varela Roca 1Ruta Nacional N"3 1LaMatanza I Belgrano Sur I Lisandro de la Torre Tres de Febrero SanMartin RutaNacional No202 Malvinas Argentinas Belgrano Norte Italia-Eva Per6n Berazategui Roca 1Av. Julio A Roca (Ruta 201) IHurlingham I Urquiza I Rodriguez A. Esteban Echeverria Roca Dorrego Constanzo. Esteban Echeverria Roca 16 Component C: Subway Line A (US$ 1.OM without contingencies): This component is comprised o f minor works in Buenos Aires Subway Line A stations. The component completes the ongoing works contracts to rehabilitate stations and improve communication systems inthose stations, which have been delayed due to unforeseen circumstances, including the acquisition and utilization o f the equipment required. Component D: Institutional Strengthening (US% 13.2M without contingencies). This component comprises o f five subcomponents containing study, technical assistance and capacity buildingactivities. D1: Subcomponent: Transport Planning Studies and Technical Assistance (US$ 5.OM without contingencies); This sub-component contains activities related to the improvement o f transport planning capabilities for the Metropolitan Area o f Buenos Aires. They include: (i) ENMODO: A household transport survey for the Metropolitan Area o f Buenos Aires (AMBA); (ii) RECOBA: A study and inventory o f the bus transport system o f the AMBA. This activity contains the acquisition o f counting and inventorying equipment, its installation, exploitation and analysis. (iii) CONTRAPI: A study and inventory o f private and individual transport in AMBA. This study includes the acquisition o f passenger counting equipment, traffic counting campaigns and data analysis. (iv) ENTRAPI:This is a survey o f private transport inAMBA. It will consist in the design, execution and analysis o f the counts. (v) Transport Model: This activity consists o f the hiring o f a number o f individual consultants over a three-year period to develop a transport demand forecasting model in-house for the AMBA on the basis o f the data and the results o f the studies mentioned in (i) through (iv) herein. (vi) Capacity Building: This activity will include several training sessions for ST staff on urban transport planning, and on the use and operation o f transport modeling software and transport planning techniques. D2: Subcomponent: Project Development Studies (US$ 2.6M without contingencies): This sub-component will include carrying out engineering designs o f (i)about six o f the roadrail crossing sub-projects; and (ii) the access improvements to suburban railway stations. It will also include provision o f technical assistance regarding (iii) technical, financial, environmental and social aspects o f transport, including strategic studies on the Borrower's financial assistance framework in the urban transport sector at the federal level, and (iv) to carry out project monitoring and ex-post project evaluation analyses. D3: Subcomponent: Support to the development of the Metropolitan Transport Agency (US$2.1M without contingencies): This subcomponent will consist o f technical assistance and capacity buildingactivities inthe areas o f transport planning, operations, and on any other related area which would contribute to improving the urban transport and environmental knowledge and practices o f the future Metropolitan Transport Agency. These activities would strengthen the PCT (Programa de Coordinacidn del Transporte,Transport CoordinationProgram) as a prior stage to the creation o f the MTA and whose activities began in 2006. This program was initiated through an invitation by the Transport Secretariat inFebruary 2006, in coordination with the Jefatura de Gabinete de Ministros, to the Buenos Aires Province, the Autonomous City o f Buenos Aires, the Comisidn Nacional de Regulacidn del Transporte (CNRT) and the participation o f the ArgentineanFederation o f Municipalities (FAM). D4: Subcomponent: ProvincialCities Studies and Technical Assistance (US$ 3.5M without contingencies): This component will include studies and technical assistance to provincial cities such as Rosario, Cordoba, Mendoza, Tucuman, and Posadas. The objective o f the studies i s to help the cities move towards coherent and consistent transport planning strategies and projects, by 17 providing assistance in the development o f an integrated urban transport strategy for each city, and carrying out urban transport pre-investment and investment studies. In addition, this sub- component will carry out specific studies on the Borrower's financial assistance framework inthe urban transport sector at the provincial level. Component E: Project Administration (US$ 3.OM without contingencies).: This component includes resources for direct PIU staffing costs and functioning. It will simply be a continuation o f the existing equivalent component o f the original PTUBAproject. 18 ANNEX 2: Economic Evaluation This annex presents details ofthe economic evaluation of the project. Component A: Transport Integration: The works to improve access to suburban railway stations do not individually surpass US$500,000 per station and are expected to yield substantial economic benefits. A methodology will be developed in line with the methodology for component B, when more detailed preliminary designs are prepared and only sub-projects with I R R s well above 12percent will be accepted. Component B: Traffic Safety: Consultants contracted under the ongoing project carried out an economic benefit-cost analysis o f 22 proposed roadrail crossings. The economic rates of return vary between 0.89 and 29 percent, with eight crossings having an IRR o f over 12 percent, as shown inTable A2-1.7 Economic Evaluation Methodology. The road traffic base for the calculations was obtained from a 24-hour automatic count, supplemented by a one-hour classified count during a working day. Where these counts were undertaken by the consultants, they were done in conformity with a guide on counting methods. The rail traffic base for the study was obtained from the concessionaires. This consists of the timetable of the trains, together with a calculation of numbers of passengers derived from manipulation of an origin-destination matrix of passengers obtained from the concessionaire. From the same sources, estimates were made of the times during which the barriers are closed to allow the passage of trains and these were complemented with observations. Information on accidents at level crossings was obtained from statistics provided by the rail concessionairesand the Transport Secretariat. Costs and benefits were estimated separately for effects during the period of construction of the grade-separated crossings, directly associated with the construction process, and for the subsequentperiod of operation of the crossings. Effects during the Period of Construction. The major costs duringthe period of construction are the economic costs (excluding taxes) of construction itself. Where the location of the new crossing is the same as that of the existing crossing, that crossing would have to be closed during the period o f construction. The calculation included the costs associatedwith extra travel distance incurred when the existing crossing i s closed during construction. For this calculation, in the absence of a comprehensive traffic model, a simple reassignment formula was used to assign traffic to alternative crossings. On the basis of this reassignment, the increase in time and operating costs associatedwith the works was calculated. Inthese cases there is also an associated benefit in that the costs of guarding the crossing can be avoided immediately. Costs were also Estudio de Prioridadespara la Ejecucidn de Pasos a Distinto Nivel en el Area Metropolitana de Buenos Aires, Evaluacidn Preliminar de Pasos, preparedbyIATASAfor the PTUBAPIU, December2006. 19 calculated for the reduction in train speeds in the vicinity o f the works during the period o f construction. Effects during the Period of Operation. The benefits to road users include both vehicle operating costs and time costs o f passengers. The operating costs o f private cars and trucks were calculated on the basis o f the publication "Costos de Operacidn de Vehiculos", issued in 2005 by the National Directorate o f Roads. For buses, they are based on the costing model o f the National; Transport Regulatory Commission (CNRT). Estimates o f the value o f time savings were derived from INDEC's Permanent Household Surveys, carried out inthe second semester o f 2005, and usingvaluation criteria elaborated by the World Bank.* Accident rates were calculated on the basis o f the number o f expected accidents without the improvements increasing at the rate o f increase o f vehicles o f 3 percent per annum for vehicular accidents and at the rate o f population growth of 1.4 percent in the case o f pedestrian accidents. These are conservative assumptions, as they make no allowance for the increase inthe number o f potential conflicts which is also a hnction of the increasing number o f trains, and the risk associated with a potential conflict which i s likely to be a b c t i o n o f train speed. Each accident causes an interruption o f the rail service. This interruption was estimated, on the basis o f historical data, to be 58 minutes in the case o f a vehicle-related accident and 30 minutes inthe case o f a pedestrian-related accident. The number o f trains affected was calculated on the basis of the train frequency and the accident type. Passenger time delays were then evaluated on the basis o f the average load factors and time values discussed earlier. Delays to vehicles at barriers were estimated using standard formulae reflecting average arrival rates at the barrier, closure time o f the barrier, cycle time, and capacity o f the level crossing. Estimates were also made o f the increased operating costs o f vehicles, particularly fuel consumed, on account o f the low speed o f movement into and across the grade crossing. Annual savings on the maintenance o f barriers replaced were estimated as US$9,600 per manual barrier and US$4,800 per automatic barrier. For the purpose o f the economic evaluation, a residual value o f 50 percent o f the original cost o f the works was assumed at the end o f the period o f appraisal (20 years). Sensitivity analyses were undertaken halving the value o f personal time savings. Sensitivity Analysis For the purpose o f the economic evaluation several sensitivity tests were carried out. Inparticular, the analyses were sensitive to the present performance o f the at-grade crossing and the length o f time the barrier stays closed. Secondly, it was found that the way in which the construction was carried out and the temporary arrangements to deviate traffic had a cost that could have a significant effect on the final evaluation. Therefore, additional analyses were carried out to determine the impact o f the abovementioned elements. * KennethGwilliam,The Value ofTime inEconomicEvaluationof Transuort Projects,World Bank. 1997. 20 Traffic deviation during construction: The economic evaluation o f the roadrail crossings was carried out changing the construction scheme; a provisional road crossing structure was installed next to the construction. In this manner, the economic evaluation did no longer take into account time savings and cost savings o f vehicles being deviated but simply the installation cost o f a temporary barrier. The cost o f the temporary crossing used was US$400,000 except for the crossing at Dorrego-Constanzo where US$300,000 was used because the temporary crossing would be very near the existing road. Existing Barrier Closing Time: The economic evaluation o f the roadrail crossings was carried out changing the time the existing barrier stayed closed. Inthe initial evaluation, the time the barrier stays closed comes from observations. Inthis new analysis, the measures taken for 306 existing roadrail crossings were taken and averages were used for all crossings according to the type of barrier: - Automatic barrier more than 200m from the station: 01 min50 secs closing time - Automatic barrier less than 200m from the station: 02mins 09 secs closing time - Manualbarrier: 01 mins 38 secs closing time Both tests were carried out and I R R s calculated; table A2-1 reports IRRl, IRR2,IRR3 and IRR4. The first one, IRR1, corresponds to the basic original analysis; IRR2 corresponds to the analysis with a temporary crossing structure during construction; IRR3 corresponds to the analysis with more uniform barrier closing times; and IRR4 corresponds to the combination o f IRR2and IRR3. As can be observed from the table, eight candidate subprojects are feasible inall analyses, and a ninthwould be feasible according to the two proposed tests. As, the project will finance seven roadrail crossings the choice amongst the best eight subprojects seems adequate. Table A2 -1Rankingof Grade Separations by IRR1, IRR2, IRR3 and IRR4 No Location Municipality Railway IRRl IRR2 IRR3 IRR4 (Ruta53)Ma*in Florencio Varela Roca 13.60 22.41 16.90 27.17 2 Ruta Nacional No3 La Matanza Belgrano Sur 14.84 26.98 14.10 25.85 Lisandro de la Tres de Febrero SanMartin 12.74 14.86 20.89 23.48 . Torre 4 Ruta Nacional No Malvinas Belgrano 202 Argentinas Norte 29.23 29.23 23.00 23.00 5 Italia - Eva Per6n Berazategui Roca 5.97 10.53 14.70 20.79 6 Av. Julio A Roca (Ruta No201) Hurlingham Urquiza 10.51 13-23 14.64 15.50 7 Rodriguez A. Esteban Echeveria Roca 13.36 17.47 11.43 15.15 8 Dorrego Constanzo. Esteban Echeverria Roca 12.24 12.24 14.26 14.26 9 Av. HenryFord Tigre Mitre 13.24 13.24 14.18 14.18 10 Espora Quilmes Roca 8.25 9.88 4.38 11 Melo - Guemes Vicente L6pez Mitre 9.61 10.36 6.99 12 Montevideo San - Juan Almirante Brown Roca 7.67 7.67 9.22 13 Hudson Florencio Varela Roca 7.18 8.04 8.48 21 14 Perdriel SanMartin Mitre 6.94 7.40 5.31 15 Las Flores Avellaneda Roca 6.74 7.48 3.18 16 Bahia Blanca Avellaneda Roca 6.40 6.71 3.63 17 Sarratea Boulogne Belgrano Norte 4.46 7.30 9.62 18 Florencio Varela Quilmes - Berazategui Roca 4.41 7.85 5.04 19 Fader Esteban Echeverria Roca 2.91 2.91 2.49 20 Asamblea - Triunvirato Tres de Febrero Urquiza 2.63 2.63 3.27 21 La Guarda Quilmes Roca 1.39 3.41 1.81 22 Avellaneda (Sgto. Cabrall San Martin Mitre 0.89 0.89 2.94 22 ANNEX 3: FinancialManagementArrangements RiskAnalysis Risk RiskRating Comments I MitigationMeasure Inherent Risk Modest Country Specific Modest - Project implemented at FederalLevel (Modest Risk according -toImplementation o f the Bank Fiduciary Action Plan Country FMAssessments) -- Satisfactory Experience in implementing Bank FundedOperations Fiduciaryperformance inprevious operation - Existing adequate segregation of duties among FM/Administrative staff Measure: Staffjob description to be included inthe -OperationalManualf Adequate Flow o Funds mechanisms and related controls are inplace Modest ---- Operational Qualified and experienced staff Accounting on cash basis &Internal Control Adequate internal control systems Manual to be updated Internal Audit Modest The InternalAudit Unito fthe MinistryofPlanning has the authority to audit Bank hnded projects and define-its own annual audit plan. External Audit Modest Project Financial Statements were unqualified for Designated Account opinions and qualified for the financial statements. The audit qualifications didnot indicate substantial FMissues. Measure: Annual supervision missions focused on audit follow-uo. Reporting and Modest - Adequate Reporting & Monitoring System Monitoring Measure: Annual Financial Management Reports - Executionthrough UEPEX system complying with Bank reauirements External Audit Acceptable audit reports o f the ongoing project were submitted to the Bank from the Ministry o f Economy and Production. The audits were carried out by Argentina's Supreme Audit Institution, Auditoria General de la Nacidn (AGN) and project audit reports were reviewed by the Regional FM Team. 2003 to 2005 audit opinions for financial statements showed qualifications, whose nature do not indicate substantial FM issues essentially related to accounting errors. Designated Account opinions for the same period were unqualified. The project i s currently implementing satisfactorily a follow up action planfor the audit of 2005 fiscal year. 23 Table A3-1: Audit Arrangements Year Auditor Project FinancialStatements Specialopinions (DesignatedAccount) PTUBA -8zLoan SOE 4163-AR 2005 AGN Qualified Unqualified 2004 AGN Qualified Unqualified 2003 AGN Qualified Unqualified 24 ANNEX 4: ProcurementArrangements Summary Procurement Planfor FirstYear Activities 1. Works (a) A list o f works contracts for the first year. -1 2 3 6 7 8 9 Ref. Contract Estimated Procure P-Q Domestic Review Expected Comments No. (Description) cost ment Preference by Bank Bid- Method (yeslno) (Prior I Post) Opening Date 1 0413012007 Post review exceptionally I - 2 0611412008 Argentinas 3 Suburban I 3,900,000 Prior (b) 09/13/2007 Railway Stations + Accessibility - -T-- - Package 1 4 Suburban I 3,900,000 Prior (b) 1010212007 Railway Stations Accessibility - 5 1011712007 Railway Stations -t Accessibility - - Package 3 6 Suburban I 3,900,000 1111612007 Railway Stations Accessibility - - Packa e 4 7 Minor rehab 800,000 Prior 1110312007 Extension o f an works inLine A existing - contract (b) ICB contracts estimated to cost above US$8,000,000 for works and above US$500,000 for goods per contract, the first two contracts for works, goods and non-consultant services procured under NCB and shopping ,regardless o f their cost, and all direct contracting will be subject to prior review by the Bank. (c) Contracts for works estimated to cost below US$8,000,000 and contracts for goods estimated to cost below US$500,000 may be awarded through NCB procedures. (d) Contracts for works estimated to cost US$350,000 or less and contracts for goods estimated to cost US$lOO,OOO or less may be procured through shopping. 25 2. Goods 1 2 3 4 5 6 7 8 9 Ref. Contract Estimated Procure P-Q Domestic Review Expected Comments No. (Description) cost ment Preference by Bank Bid- Method (yedno) (Prior / Post) Opening Date 1 RECOBA 1,000,000 ICB N o Prior 10/30/2007 2 RETRAPI- 650,000 ICB No Prior 12/03/2007 CONTRAPI A 3. ConsultingServices (a) List o f consulting assignments for the first year. 1 2 3 4 5 6 7 Ref. No. Description of Estimated Selection Review Expected Comments Assignment cost Method by Bank Proposals (Prior I Submission Post) Date 1 Supervision o f 362,903 QCBS roadrail crossing through Florencio Varela Existing PTUBA long- list, 2 Supervision o f 350,000 QCBS roadrail crossing at through RN202 Malvinas Expressions o f Argentinas IInterest 3 Supervision o f 200,000 Prior I 11/03/2007 I Extensionof rehabilitation works an existing inLineA 4 Detailed Design for 266,667 QCBS roadrail crossjng through RN202-Malvinas Expressions o f Argentinas Interest I 07/10/2007 1I 5 Detailed Design for 266,667 QCBS Prior Short list roadrail crossing through No. 3 Expressions o f Interest 6 Detailed Design for 266,667 QCBS Prior 07/30/2007 Short list roadrail crossing though No. 4 Expressions o f I 08/19/2007 1IInterest 7 Detailed Design for 266,667 QCBS Prior Shortlist roadrail crossing No. 5 IInterest 8 Detailed Design for 266,667 QCBS Prior I 09/08/2007 I Short list roadrail crossing Ithrough 26 Expressionsof Interest 9 QCBS Prior 09/28/2007 I1IShort list roadrail crossing Interest 10 QCBS Prior 08/15/2007 I1 Short lists Transport Study Interest 11 CordobaUrban 680,000 QCBS Prior 08/15/2007 1I Short lists Transport Study Interest 12 Posadas Urban 420,000 QCBS Prior 09/15/2007 II Short lists Transport Study I Intkrest 13 Mendoza Urban 800,000 QCBS Prior 0911512007 II Short lists Transport Study Interest 14 Rosario Urban 800,000 QCBS Prior 07/29/2007 II Short lists Transport Study through Expressionsof 15 ENMODO A 750,000 FB Prior through Expressionsof Interest 16 ENMODOB 750,000 FB Prior 10/24/2007 II Short lists through Expressionsof 17 RETRAPI- 650,000 FB Prior CONTRAPI B through I Expressionsof Interest 18 RETRAPI- 600,000 Prior 12/23/2007 II Short lists ENTRAP1 I I Interest 19 Modelo A 130,000 10/24/2007 Short list ~ through Expressionsof (b) Consultancy services estimated to cost $200,000 or more per contract and single source selection of consultants (firms) for assignments estimated to cost above $50,000 will be subject to prior review by the Bank. 27 ANNEX 5: Safeguard PolicyIssues Introduction This annex summarizes the key issues related to the Bank's environmental and social safeguard policies triggered by the project and explains how these issues have been or are proposed to be addressed inthe additional financing o f this project. Environmental and Social Assessment of Additional Financing Given the interrelation between the social and environmental aspects in this project, both dimensions were integrated inone comprehensive approach. The preparationof the social and environmental aspects included the following activities: (i) Evaluationand lessons learned from the ongoing PTUBA; (ii) Assessment o f a sample o fthe proposed works under the additional financing; and (iii) Environmental and Social training activities for municipalities. In summary the assessment and screening duringproject preparation was used to prepare a more comprehensive Environmental and Social Management Manual (ESMM) and assisted the team to: (i) Identify the actual environmental and social impacts (positive and negative) o f the project and the measures that were implementedto mitigate the negative impacts and their results. (ii) Improve the methodology o f the community consultation and participatory process and provide concrete inputs to the study o f alternatives and to the ESSM. (iii) Assign clear roles and responsibilities to each actor in social and environmental management process and identify capacity needs. Evaluation and lessonslearned from the ongoing PTUBA An independent consultant was hired to review the roadrail crossings financed under the first phase o f PTUBA and assess the positive and negative environmental and social impacts o f the works, the effectiveness o f the methodology applied to identify and evaluate these impacts, the adequacy o f the measures applied to mitigate and prevent these impacts, the institutional capacity to monitor environmental and social impacts, and the concrete results o f public consultation process. The consultant visited project sites, interviewed employees o f affected municipalities, representatives o f the project implementation unit, NGOs, local community organizations and inhabitants. Seven roadrail crossing were constructed during the first phase o f the PTUBA, o f which a sample o f three projects underwent a detailed assessment that, beyond the activities described above, included the review o f bidding documents and environmental and social management manual o f the contractor. The project was reviewed using a standard assessment form and secondary information available. It i s important to mention that the Bank's Safeguards Advisory Team (SAT) recently reviewed urban transport projects in the region and this project was included. Main findings and recommendations by SAT were also reviewed by the consultant. The main findings o f this evaluationare presentedinthe followingparagraphs. 28 Ingeneral terms, the environmental and social assessment and managementprocedures inplace have demonstrated to be effective in identifying, mitigating andor preventing negative impacts. However, it i s recommended to further integrate the public consultation process with the environmental and social assessment and management process. It might be advisable in some cases to involve an independent organization to mediate discussions between municipality and affected population and compile the results and include mechanisms to incorporate the environmental and social evaluations in the decision making, as well as design and technical evaluation process. Furthermore, the ESMM has to include measures to ensure access and minimize impacts on local populationdirectly affected by the works. Regarding the public consultation process, most consultations took place several years prior to execution of the project (mainly due to the standstill that the project had to face between 2000 and 2003). This greatly reduced the effectiveness of the consultationprocess and resulted in new complaints and conflicts. Therefore, it i s important to establish validation period for public consultation, after which a new consultation must be carried out or the existing one must be updated following clear procedures. The review also recommended that the PTUBA EnvironmentalUnit strengthens its capacity and include staff to supervise the environmental and social aspects o f the project. An alternative is to integrate staff from other national secretaries inthe process. The review also suggests that the municipalities should be more closely involved in environmental and social aspects of project preparation and supervision, and implement informationprograms and provide grievance procedures. The contractor manual will include guidelines to planthe constructionactivities inorder to reduce disruptions to the community and specific recommendation regarding emergencies and contingencies. A detailed report (in Spanish) is available with a more detailed analysis and review of the roadrail crossings and recommendations for future improvements in addressing social and environmentalimpacts of this project. Assessmentof a sample the proposedworks Inorder to characterize the social and environmental impacts of the additional financing project, two independent consultants assessed a sample o f the proposed works of Components A, B and C. Based on the list of works, two criteria were defined to rank the projects according to the potential environmental and social impacts: (i)nature of the works (such as painting, urban furniture, elevators, fences, sidewalks, roadrail crossings, etc.), and (ii)socioeconomic characteristics of the areas where the works will take place (such as'number of transport customers, populationdensity and percentageof poor population). Component A: Transport Integration: Improvement of accessibility to suburban railway stations A detailed analysis of the accessibility improvements to train stations proposed under Component A, showed that the specific works canbecharacterized as follow: 29 (i) Minimalornoimpacts:painting,parking,signalization,illumination,urbanfurniture, bus stops, ramps for disabled people, fences, bike parking facilities, and (ii) Minor impacts: sidewalks, pathways, drainage improvements; bike paths, road crossings near stations; and, (iii) Medium:pedestriantunnelsorbridges,paving. The following table shows the results o f a preliminary classificationo f the proposed according to the potential impacts. Table A5-1 Environmental Classification of Proposed Sub-projects Potential Number of works impact Minimal 88 Minor 30 Medium 16 Total 134 Based on the ranking above 10 sub-projects were selected for screening. The screening was conducted by respective municipalities under supervision o f the consultants. The final review o f the screening process confirmed that these works will have no significant impacts that cannot be addressed through the measures o f the E S M M and, more specifically, through the Environmental and Social Contract Clauses, and will not cause involuntary displacement. ComponentB: Traffic Safety: RoaaYrail crossings This component is comprised o f seven roadrail crossings. The detailed designs are yet to be prepared. To date, only one project has a full detail design. Two independent consultants did the screening o f the two priority projects that will be implementedinthe first year: (i) Ruta Nacional No202 inthe Municipality o f Malvinas Argentinas (ii) Av. San Martin (Ruta 53) inthe Municipality o fFlorencio Varela Inaddition, two other roadrailcrossingswere selected for screening: (i) Av. 14 de Julio - Avellaneda inthe Municipality o fLomas de Zamora (ii) Av. Lisandro de la Torre inthe Municipality o fTres de Febrero The assessment included consultations with local population and confirmed that the proposed roadrail crossings will not have any irreversible impacts that cannot be mitigated through an improved environmental and social management plan and improved public consultation process. The consultants visited project sites, interviewed employees o f the involved municipalities, representatives o f the project implementation unit, NGOs and local community organizations. The methodology and results were discussed inworkshops involving municipal staff. In addition, the Municipality o f Florencio Varela prepared a full Environmental Impact Assessment (EM) for the tunnel at the Ruta Nacional No53 that was reviewed by the consultants and recommendations were compiled with the outcomes o f the screening form. The EIA also provides specific mitigation and monitoring measures for both construction and operation phases and a communication plan. 30 Component C:Subway Line A This component consists o f minor works in Buenos Aires Subway Line A stations, to complete the ongoing works contracts to rehabilitate stations and improve communication systems inthose stations, which were initiated under the original project. These improvements are likely to have no or minor environmental and social impacts. However, due to the historic character o f the Subway Line A, specific measures will be implemented to ensure that the cultural property i s not adversely affected by the works under this component. Environmental and Social training activities for municipalities. During project preparation, the consultants also carried out five workshops to train staff from municipalities o f AMBA. Overall 30 people attended the different workshops. The main objective was to involve the municipalities inthe process and enhance their understanding and skills on the environmental and social aspects of the project. The Bank's Safeguard policies were presented and discussed. The screening instrument was analyzed and applied and the methodology for public consultation agreedupon. Environmental and Social Management Manual Based on the environmental and social assessment during project preparation, the E S M M was prepared. The E S M M contains: (i)institutional and regulatory framework o f AMBA and the Bank's safeguard policies; (ii) explanation o f the screening process duringproject preparation and main impacts identified; (iii) responsibilities o f involved actors; (iv) manual with measures and procedures to mitigate, prevent and manage environmental and social impacts associated with proposed works financed by the project; (v) a public consultation guide; (vi) grievance procedures; and, (vii) a resettlement framework. The E S M M includes specific measures o f environmental management for activities directly and indirectly related to said phase such as: design guidelines to minimize impacts, removal o f vegetation and required arborization, management o f traffic, selection o f camping sites, material lending, asphalt plants, machinery, qualification o f personnel, the required inputs to carry out proposed work, soil movement, crossings o f water channels, civil works in general, fuel storage, pesticides, paintings and grease removers, handling and disposition o f solid and liquid waste, etc., and abandonment phase. The E S M M also includes measures required for handling activities directly and indirectly related to maintenance and operation, including: road zone cleaning, pothole and shoulder repairing, sealing o f pavement fissures and asphalt shoulders, repairing potholes in pavements and shoulders o f superficial treatment, maintenance o f horizontal signaling, etc. As part o f the ESMM, a Public Consultation Guide has been prepared to ensure close involvement o f relevant stakeholders during all project phases (design, construction and operation). It i s expected that the guide will allow a more accurate identification o f possible, negative and positive, effects of the sub-projects, related to the population and their activities. It 31 will also allow for improvements in the ESMM for prevention, mitigation and compensation of negative impacts and promote community participation and ownership. Giventhat final designs of most of the works are not completed at appraisal stage, a Resettlement Policy Framework was prepared and i s part of the ESMM. CapacityBuilding Specific activities to strengthen the capacity of PTUBA and municipalities regarding environmental and social management and supervision are included in Component D - Institutional Strengthening. InstitutionalArrangements andBudget TableA5-2 InstitutionalArrangements Task Responsibility Screening o f the sub-projectslworks Municipality Review of the screening PTUBA PIU Inclusionof the Manual inthe Contract Clauses PTUBA PIU Application o f the Manual inthe Contract Clauses Contractors Supervision o f the sub-projectslworks PTUBA PIU Public Consultation and Communication Municipalities & PTUBA PIU The implementation costs of the environmental and social measures will be part of the overall contract costs. PTUBA PIU will assign staffhpecialists to ensure implementation of the environmentaland social measu-esand activities, coordinate activities with the municipalities and other stakeholders and supervise compliance by the contractors. 32 ANNEX 6: FinancingPlanandDisbursementSchedule Table A6-1- DisbursementSchedule Additional Financingof the BuenosAires Urban Transport Project figures in US$million) Source Calendar Year 2007 2008 2009 2010 Total Borrower 1.o 12.0 16.8 3.0 32.8 IBRD 7.0 33.0 45.0 15.0 100.0 Totalfinancing 8.0 45.0 61.8 18.0 132.8 Table A6-2 -FinancingPlanfor the Proposed Additional Financingof the BuenosAires Urban Transport Project figures in US$million) Amount of the Yo of ExpenditureCategory LoanAllocated Expenditures (US$) to be financed ComponentA: Transport Integration (a) Civil Works 21.9 70% (b) Goods (c) Consultants' Services, Non-Consultants' Services 1.6 100% (d) Training (e) Incremental Recurrent Costs (a) Civil Works 34.3 70% \ I (b) Goods (c) Consultants' Services, Non-Consultants' Services 2.5 100% (d) Training (e) Incremental Recurrent Costs (a) Civil Works 0.5 70% (b) Goods (c) Consultants' Services, Non-Consultants' Services and Training 0.2 100% (d) Training (e) Incremental Recurrent Costs /ComponentD: InstitutionalStrengthening 33 (a) Civil Works (b) Goods 1.65 100% (c) Consultants' Services, Non-Consultants' Services and Training 11.35 100% (d) Training 0.20 100% (e) Incremental Recurrent Costs ComponentE: Project Administration (a) Civil Works (b) Goods (c) Consultants' Services, Non-Consultants' Services and Training (d) Training (e) Incremental Recurrent Costs 3.0 100% 34