Document of The World Bank FOR OFFICIAL USE ONLY Report No. 59222-AR INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT FOR THE ARGENTINE REPUBLIC FOR THE PERIOD 2010-2012 February 24, 2011 Argentina, Uruguay and Paraguay 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. The last Country Partnership Strategy for Argentina was discussed by the Executive Directors on June 9, 2009 (Report No. 48476-AR) CURRENCY AND EQUIVALENT UNITS (As of February 24, 2011) Currency Unit = Argentine Peso US$1 = 4.06 Argentine Peso WEIGHTS AND MEASURES Metric System FISCAL YEAR January 1 to December 31 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities ACUMAR Matanza-Riachuelo River Basin Authority ANSES Social Security Administration ARI Support for an Egalitarian Republic Party CAS Country Assistance Strategy CPI Consumer Price Index CPS Country Partnership Strategy CPSPR Country Partnership Strategy Progress Report CREMA Contrato de Recuperación y Mantenimiento FBS Fee Based Service GHG Greenhouse Gas GDP Gross Domestic Product IA Implementing Agency IDF Institutional Development Fund IFC International Finance Corporation IMF International Monetary Fund INDEC National Institute of Statistics and Census of Argentina IT Information Technology PAE Pan American Energy SEPA Procurement Plan Execution System SME Small and Medium Enterprise SWAp Sector Wide Approach TRP Terminales Rio de la Plata UNFCC United Nations Framework Convention on Climate Change IBRD IFC Vice President: Pamela Cox Thierry Tanoh Country Director: Penelope Brook Paolo Martelli Task Team Leaders: Tatiana Proskuryakova John Barham The CPSPR was prepared under the guidance of Penelope Brook, Country Director, LCC7C by Tatiana Proskuryakova (TTL), Alejandro Alcala, Yanina Budkin, Norbert Fiess, Andrew Follmer, Michel Kerf, Milagros Mosteirin, Rafael Rofman, Felipe Saez, Veronica Salatino, Cecilia Simkievich and John Barham. Contributions are gratefully acknowledged from Elizabeth Adu, Bruce Courtney, Barbara H. Mierau-Klein, Rakesh Nangia, Reynaldo Pastor, Alejandro Solanot and Laura Tuck who provided written comments and to Marcelo Acerbi, Cristian Aedo, Diego Ambasz, Alexandre Arrobbio, Ana Bellver, Vanina Camporeale, Rafael Cortez, Michael Crawford, Robert Davis, Ana Grofsmacht, Theresa Jones, Fernando Lavadenz, Chingboon Lee, Patricia Lopez, Catalina Marulanda, Renato Nardello, Andres Pizarro, Renan Poveda, Veronica Raffo, Daniela Romero, Marcela Salvador, Maria Marcel Silva, Alvaro Soler, Lucia Spinelli, Carlos Velez and Xiaoping Wang for th eir valuable inputs. Administrative support was provided by Mariela Alvarez, Carla Cutolo and Geraldine Garcia.The World Bank Group thanks Gabriela Costa, National Director for Projects with International Credit Institutions, Ministry of Economy and Public Finance of Argentina, and Aníbal López, Director for Projects with the World Bank, Ministry of Economy and Public Finance of Argentina, for their contributions to this CPSPR. Country Partnership Strategy Progress Report Argentina TABLE OF CONTENTS I. INTRODUCTION .............................................................................................................1 II. COUNTRY CONTEXT ..................................................................................................2 A. RECENT DEVELOPMENTS ............................................................................................................................ 2 B. OUTLOOK ......................................................................................................................................................... 3 III. PROGRESS TOWARDS CPS OUTCOMES ...................................................................5 A. PROGRAM IMPLEMENTATION AND PORTFOLIO PERFORMANCE..................................................... 5 B. RESULTS TO DATE .......................................................................................................................................... 7 C. ADJUSTMENTS TO THE CPS RESULTS FRAMEWORK .......................................................................... 12 IV. FUTURE ENGAGEMENT............................................................................................. 13 V. RISKS ............................................................................................................................... 14 ANNEXES ANNEX 1: UPDATED RESULTS FRAMEWORK ................................................................ 16 ANNEX 2: SUMMARY OF CHANGES TO CPS RESULTS FRAMEWORK ........................ 32 ANNEX 3. ARGENTINA LENDING AND GEF PROGRAM, FY09-12 ................................. 36 ANNEX 4. OPERATIONS PORTFOLIO (IBRD/IDA AND GRANTS) .................................. 38 ANNEX 5. AAA PROGRAM FY09-FY11.............................................................................. 40 ANNEX 6. SELECTED INDICATORS OF BANK PORTFOLIO PERFORMANCE AND MANAGEMENT.................................................................................................................... 41 ANNEX 7: SUMMARY OF JOINT GOVERNMENT-BANK WORKSHOP ........................... 42 ANNEX 8. ARGENTINA: SELECTED ECONOMIC AND FINANCIAL INDICATORS....... 44 ANNEX 9. ARGENTINA AT A GLANCE ............................................................................. 45 I. INTRODUCTION 1. The Board of Executive Directors discussed the 2010-2012 joint Bank-IFC Country Partnership Strategy (CPS)1 for the Argentine Republic on June 9, 2009. This Progress Report (CPSPR) assesses the implementation at midpoint of Bank's Country Partnership Strategy with Argentina. The CPS provides strategic support to the Argentine Republic in three key areas: sustainable growth with equity, social inclusion, and improved governance. The strategy is focused on the implementation of existing portfolio and delivery of new investment lending and a range of knowledge services to help achieve specific country development outcomes. 2. The development goals supported by the strategy remain valid, and there have been no significant changes in Government priorities since the adoption of the CPS. The investment partnership between Argentina and the Bank has been stable and consistent since its adoption in 2004, focusing on the long-term goals of upgrading infrastructure, consolidating social gains and poverty reduction, and improving public sector capacity. The global economic crisis, the main source of uncertainty at the start of the CPS period, did not affect Argentina as strongly as anticipated. 3. Implementation of the 2010-2012 CPS is on track and yielding tangible results. The Bank has maintained a dialogue with the authorities in areas that had been the central focus of the previous Country Assistance Strategy (CAS), while adding new initiatives, the most prominent of which is engagement in the cleanup of the Matanza Riachuelo river basin. 14 lending operations for the total amount of US$3,217 million2 have already been approved or are in advanced stages of preparation, with another 4 projects for about US$200 million indicatively planned before the end of the CPS period. Outcomes achieved to date are the result of long -term engagement as well as of new analytical work, policy reforms and investments. IFC commitments in Argentina totaled $516 million in FY09-10 and mobilized a further $325 million from participating investors. These resources were invested with 20 clients operating principally in the oil and gas, trade finance, and mining and processing sectors. 4. The Bank program for the second half of the CPS period is well defined. The main challenge for the next 18 months is to implement the large and complex portfolio of investments , building on experience and improved implementation capacity, and to implement the ongoing technical assistance program with high quality and responsiveness to Government needs. Possible changes in priorities after the upcoming elections will be addressed as part of the next CPS preparation. For its part, IFC expects no significant changes in its approach for the 1 Report No. 48476-AR 2 The total takes into account cancellation of US$88 million from the Prevention and Management of Influenza Type Illness and Strengthening of Argentina's Epidemiological System Project, Loan 7843-AR. Note also that Matanza Riachuelo project is not part of this total as it was approved under the previous CPS, although its implementation began during the current CPS period. 1 remainder of the CPS period. However, it does hope to support cross-border investments by Argentine clients, and to finance emerging IT companies. 5. Consistent with the results-based approach, this Progress Report focuses on the main achievements to date and proposes some minor course adjustments. Section II of the Report provides a summary of recent country developments. Section III describes progre ss towards CPS outcomes and proposes changes to the results framework in light of implementation experience. Section IV sets out the program for the rest of the CPS period, and Section V contains a brief summary of key risks. II. COUNTRY CONTEXT A. RECENT DEVELOPMENTS 6. The effects of the recent economic crisis have been less severe than anticipated. As Argentina recovered from the profound crisis of 2001, its real Gross Domestic Product (GDP) grew on average 8.5 percent per year between 2002 and 2008. Economic activity started to slow in 2008 with a conflict over agricultural export duties during the first semester and the impact of the global financial crisis in September. Real GDP growth declined to 6.8 percent in 2008 from 8.7 percent in 2007, according to official statistics. Economic activity declined further in 2009 due to a drop in external demand, declining commodity prices, continued deterioration in investor confidence and a severe drought that weighed on agricultural production. Fiscal performance deteriorated considerably in 2009 due to a decline in revenue stemming from lower economic activity, counter-cyclical stimulus and the sharp decline in trade and related tax revenue (the primary fiscal surplus fell from 3.1 percent of GDP in 2008 to 1.5 percent of GDP in 2009). Increased economic uncertainty prompted an increase in capital outflows that offset improvements in the current account due to reduced domestic demand. Gross international reserves declined from a record of US$50.5 billion in April 2008 to US$47.9 billion at the end of 2009. Foreign currency sales allowed the Central Bank to m aintain relative exchange rate stability. Gross public debt declined from 66.4 percent of GDP (US$153.0 billion) in 2002 to 47.1 percent of GDP (US$160.9 billion) by end-September 2010. 7. The economy rebounded strongly in 2010, fueled by fast growth in internal absorption, strong external demand (mainly Brazil and China), and commodity price improvements. A significant revitalization of industrial activity in automobiles, basic metals and textiles, and a normalization of agricultural production following the previous year's severe drought have contributed to the economy's dynamism. Internal absorption has been boosted by consumption, investment and an expansion of public spending. Real GDP is estimated to have grown by 9.1 percent in 2010. 2 8. Poverty is declining. According to official statistics, poverty has declined from 13.9 percent in June 2009 to 12.0 percent in June 2010 3. Unemployment is also falling, reaching 7.5 percent in September 2010, from a peak of 9.1 percent in September 2009. Early indications o f trends in other social indicators (i.e., infant mortality and school enrollment) are also positive. 9. Since December 2010, the Government has been actively seeking an agreement with the Paris Club to restructure the official debt that has remained in default since 2001, and an agreement with the International Monetary Fund (IMF) has also been reached to conduct a technical mission to Argentina to help design a new nationwide consumer price inflation index. In addition, the Government has been calling for a social pact between unions and employers to help anchor inflationary expectations. 10. A long-standing delegation of legislative powers to the Executive branch expired in August 2010. For decades many of the powers that in other countries are typically vested in the Legislative branch in Argentina had been within the authority of the Executive. In 1994 Constitutional reform restored these powers to the Legislative branch, including, among others, the authority to impose duties on trade and introduce changes to the public budget. The reform however did not take effect immediately and included a transitory clause granting a five-year period during which these powers would continue to be delegated to the Executive. This period was extended by Congress several times over the years until August 24, 2010, when Congress decided that such delegation to the Executive branch would no longer be authorized, thus recouping its full authority as set forth by the Constitution and restoring the balance of power between the branches of government. B. OUTLOOK 11. The political agenda for 2011 will be dominated by the upcoming presidential elections. While their outcome remains uncertain, no fundamental changes in policies are expected. Within the Peronist Party, there is an agreement that the state should maintain an active role in the economy, providing substantial investments in social programs and infrastructure. Representatives of the opposition Radical party and Support for an Egalitarian Republic (ARI) party tend to share this view, although they may differ on mechanisms for implementing such investments. 12. Growth is expected to continue in the near term. Real GDP is projected to expand by 9.1 percent in 2010 and by 5.8 in 2011; growth is likely to decelerate in 2011 due to an expected moderation in external demand, continued high inflation that will take its toll on 3 Data based on official inflation figures, which are contested by market analysts. 3 consumer confidence and real incomes, and the possibility that firms will hold off investments ahead of the 2011 presidential elections. 13. Inflation is accelerating. Fiscal stimulus, bottlenecks in production, energy shortages and a more relaxed monetary policy during the second half of 2010 are fueling inflationary pressures. The gap between private and official inflation estimates remains w ide. According to INDEC, inflation in December 2010 reached 11.0 percent compared to estimates of around 25.0 percent by market analysts for year-end. Some analysts expect inflation to accelerate further in 2011 (29 percent) as an expansionary fiscal and monetary stance will likely be maintained in the run-up to October presidential elections. 14. Fiscal accounts are stable. The primary balance is expected to post a surplus of 1.7 percent of GDP and the overall balance a surplus of 0.2 percent of GDP in 2010. Fiscal revenues have increased strongly during 2010 due to economic recovery, inflation gains and greater export tax revenue. Total revenue grew by 34.7 percent in 2010 compared to 18.7 percent the previous year. Strong revenue performance has allowed the Government to maintain an expansionary stance without endangering the primary balance; although expenditures have grown by 33.9 percent, the primary fiscal result has remained positive at AR$25.1billion. Fiscal accounts are expected to deteriorate somewhat in 2011, as expenditures are likely to increase in the run-up to the October presidential elections. The primary balance is expected to remain positive at 0.8 percent of GDP whereas the overall balance is likely to post a deficit of about 1.0 percent of GDP in 2011. 15. The financing gap is manageable. Argentina's gross financing needs for 2010 (US$12.8 billion) have been covered by the primary surplus and the US$6.6 billion fund created with Central Bank reserves in March 2010. Gross financing needs for 2011 (US$14.4 billion) and 2012 (US$11.8 billion) are high, but also manageable. The successful debt exchange in June 2010 has opened the possibility for fresh financing from international capital markets 4. However, the Government will likely continue to rely on inter-public sector borrowing (from the Social Security Administration (ANSES) and Banco de la Nación Argentina) and the Central Bank (through the issuance of local currency and the renewed use of international reserves 5) to cover its financing needs. 16. External accounts are deteriorating. During 2010, the trade balance posted a surplus of US$12.1 billion, equivalent to 3.8 percent of GDP ­ a 28.9 percent decline relative to 2009. The decline in the trade surplus occurred despite record soybean exports and dynamic manufactured exports to Brazil, as imports grew even stronger due to the economic recovery: 4 In December 2010, the Government launched another attempt to swap the remainingUS$6.1bn of defaulted debt that was not tendered during the two previous debt restructurings (2005 and June 2010). According to official preliminary estimates, with the three debt restructuring initiatives 93% of defaulted debt has been restructured. 5 The decree ruling the extension of the 2010 Budget to 2011 also creates a US$7.5billion fund furnished with Central Bank reserves to service debt with p rivate investors during 2011. 4 exports grew by 23.0 percent, while imports expanded by 45.5 percent. The current account surplus is expected to narrow to 1.7 percent of GDP in 2010 (from 3.9 percent in 2009) and to decline further in 2011. 17. Monetary accounts. Strong dollar inflows from trade surpluses and a commitment to a stable nominal exchange rate have led to record reserve accumulation, reaching US$52.2 billion at the end of December 2010. Net international reserves amounted to US$41.9 billion, equivalent to 78.0 percent of private M2, or 7.8 months of imports. At the same time, the nominal exchange rate has appreciated by only 4.2 percent relative to 2009, trading at AR$3.98 per US$ at the end of December. Continued sterilization of dollar inflows and transfers f rom Central Bank's profits to the Treasury have fueled a monetary expansion well beyond the recently updated monetary target for 2010 ­ private M2 closed the year with a rate of growth of 31.5 percent, exceeding the 29.9 percent target for December 2010. In spite of high inflation, the nominal exchange rate is expected to remain relatively stable in 2011. As long as Argentina's terms of trade remain favorable and the Brazilian Real, the currency of Argentina's main trading partner, remains strong, the economy is expected to absorb the loss in competitiveness associated with a moderate real appreciation. 18. Financial sector remains stable. During 2010, the financial system has remained stable characterized by strong liquidity and capital adequacy figures. In addition, credit growth is picking up while asset quality has reversed its negative trend in response to a more benign economic environment. Financial stability is likely to be maintained in 2011. III. PROGRESS TOWARDS CPS OUTCOMES A. PROGRAM IMPLEMENTATION AND PORTFOLIO PERFORMANCE 19. New lending commitments since the start of the CPS period include 12 investment operations for US$2,617 million6, with another 6 projects for about US$800 million planned in end of FY11 and FY12 (see Annex 3). Infrastructure investments account for the largest share of new lending (36 percent), followed by health (29 percent) and social protection (27 percent). Across the board, new lending is focused on assistance to provinces: 10 projects approved so far under the CPS, accounting for 72 percent of the total lending amount, are funding expenditures at the provincial level either through direct sub-national lending, or by supporting Government transfers to the provinces. The new portfolio continues the traditional strong focus on results, with 8 out 14 new operations including results based financing. Ten recently approved projects have an explicit poverty focus, targeting disadvantaged social groups or regions. 6 This is based on current assumptions with respect to the schedule of Board presentation of pipeline operations and this Progress Report. Basic Protection Board date as of 02/23/2011 is 03/10/2011. 5 20. Portfolio performance during the first half of the CPS period has been strong. The disbursement ratio in FY09 and FY10 has significantly increased from the FY08 levels (from 12.2 percent to 29.1 and 23.4 percent respectively), particularly reflecting progress under the infrastructure portfolio. There are 4 problem projects representing 10.5 percent of projects by number, not including GEF. 21. The focus on portfolio management and intensive dialogue with the Government to address issues affecting the portfolio has continued and strengthened. Through the Improving Investment Portfolio Management: Building Up Institutions, Systems and Human Capital Project funded by an Institutional Development Fund (IDF) Grant, the Bank is contributing to Government's efforts to improve the design, preparation and approval of loans at the national and provincial levels, procurement capacity, and portfolio monitoring. As an input to the mid-point evaluation of the CPS, the Government and the Bank carried out a workshop on challenges and risks faced in the preparation and implementation of investment projects, focusing on the areas of procurement, safeguards and financial management. A joint action plan defined at the workshop is now in implementation (see Annex 7). 22. Analytical and technical assistance activities are also focused on infrastructure, environment, social protection and health, sectors where the Bank has operational presence and active dialogue (see Annex 5). There has been an increase in demand for Bank analytical services at the sub-national level, including a number of requests for Fee Based Services (FBS) for provinces in areas of public sector management and strategies for productive sectors. There are currently three such operations underway in the provinces of Corrientes, Chaco and Cordoba. 23. The International Finance Corporation (IFC) program in Argentina during the past few years has been geared toward export-oriented sectors with clients with a solid track record, in sectors such as agribusiness, oil and gas, and information technology. Most recently, the strategy has been expanded and, on a selective basis, IFC has started to invest in new clients in strategic sectors such as ports, and in new sectors such as information technology. Although the Corporation remains closely engaged with Argentina, market conditions have presented fresh challenges to investment teams in the country. A combination of relatively low investment levels by highly rated corporations and substantial liquidity in the local financial system has led to a steady reduction in IFC commitments. Still with commitments totaling $516 million in FY09- FY10 and an outstanding balance of $972.8 million for its own account and $861.6 million in investments by participants at the end of June 2010, Argentina was IFC's fourth largest ma rket worldwide in terms of outstanding balance and the second largest in the region after Brazil. 6 B. RESULTS TO DATE 24. Overall progress towards expected CPS outcomes has been strong, particularly under the Sustainable Growth and Social Inclusion pillars. Consistency over time in the strategic areas and priorities of Bank engagement means that some long-term programs are now bearing fruit and translating into country level outcomes. In three specific areas ­ transport, health, and social protection ­ it is possible to report that CPS outcomes have made a significant contribution to Argentina's development goals. Likewise, in areas such as water and sanitation, rural education, agriculture and rural electricity, important achievements can be reported at the regional and local level. The main results under the Improved Governance pillar have occurred in the area of efficiency of public institutions, with a more recent shift in client demand towards customized assistance to provinces in addressing their priority governance challenges, such as fiscal performance or social services delivery. Pillar I: Sustainable Growth with Equity 25. In line with the country's goal of improving competitiveness and addressing resource degradation, the first pillar of the CPS emphasizes upgrading infrastructure in key sectors, improving competitiveness in agriculture and addressing selected issues of resource degradation. The most significant results achieved to date are as follows. 26. Improved condition of national and selected provincial highway networks. A major focus of Bank assistance in the infrastructure sector has been ensuring that the national highway network reaches the target of over 90 percent of roads in good condition. The Bank's contribution to this outcome has been through the introduction and partial financing of outcome- based rehabilitation and maintenance contracts (Contrato de Recuperación y Mantenimiento, or CREMA contracts) that currently cover over 70 percent of the national highway system of 34,000 kilometers, and are also used as a network management tool in seven provinces. Based on the efforts since the late 1990s, in the course of 2009-2010 the national road network achieved a steady state, that is, fully removed the backlog of deferred maintenance and now boasts over 98 percent of roads in good condition, surpassing the CPS target. Seven provinces using the CREMA system also achieved the same level of road quality, confirming the effectiveness of the model, which has now been adopted by other countries of the region including Brazil and Peru. 27. Improved urban transport services. The Bank has been supporting investments and institutional strengthening reforms in the urban transport subsector through a large program of lending (PTUBA, PTUMA) and GEF (Sustainable Transport and Air Quality) operations. Bank support is focused on improving the quality and sustainability of urban transport systems in Metropolitan Areas of Argentina, through the improvement of sectoral decision making and by giving priority to public transport modes and projects that have lower carbon-footprint and lower 7 impact on climate change. While it is too early to assess overall outcomes, Bank-financed interventions include the rehabilitation of metro line A, urban transport transfer centers, and road/rail underpasses in the Buenos Aires Metropolitan Area, as well as enhanced decision making tools (surveys, transport models, strategic plans, feasibility and design studies) and setting up permanent statistical data gathering and results monitoring systems in Buenos Aires and in five medium size metropolitan areas. The Bank is also supporting the Government's efforts to improve road safety through an ongoing Road Safety Project. 28. Improved water and sanitation services to the poor have been a major focus of the Bank's partnership with the Province of Buenos Aires. A series of three operations (including one Additional Financing) for an aggregate amount of US$470 million have been approved since 2004 to support infrastructure investments in the province, including in water and sanitation with the objective of expanding access to these services to 128,000 poor residents in areas with high sanitary or environmental vulnerability. 29. Among the new water sector operations particularly notable are the Matanza Riachuelo project and two projects in the Norte Grande provinces, a region that suffers from low coverage and poor quality of services in both water and sanitation. The Matanza Riachuelo Program (US$840 million) began implementation in recent months, after initial delays reflecting the program's complexity and high profile. When completed, the project will directly benefit 2.1 million people through the expansion of sanitation services and 5.7 million people through the protection of the water intake. Although it is too early to measure results, progress achieved so far in building institutional capacity of the Matanza Riachuelo River Basin Authority (ACUMAR) and in advancing the prequalification process for the large sanitation works, as well as the high priority assigned to the program by the national and sub-national authorities suggest that this program is likely to achieve its objectives. The two Norte Grande operations are expected to provide new coverage to 32,000 low income residents. However it will take longer than the remainder of the CPS period for these recent operations to achieve intended results. 30. Addressing the challenge of resource degradation. Activities are underway in four critical areas. The Matanza Richuelo Program, mentioned above, supports the cleanup of the Matanza Richuelo urban river basin. Through the Sustainable Natural Resources Management Project as well as GEF operations supporting biodiversity conservation, steps have been taken to control illegal logging in Chaco, set up monitoring units for forest and deforestation assessments and build critical infrastructure to better protect national parks. Under the Mining Environmental Restoration Project, a containment and monitoring system for uranium mining tailings has been put in place at Malargue site. Finally, Clean Development Mechanisms (CDM) projects have enabled the elimination of a total of 2,778 tons of Ozone Depleting Substance, far above the targets originally set. 8 31. Increased production diversification and poverty alleviation in the agricultural sector. The World Bank is supporting Argentina's agricultural sector through a two-pronged approach: (i) production diversification in the non-pampean region through infrastructure investments geared towards commercial-scale agriculture, and (ii) improved productivity and sustainability of small scale production through the financing of investments and working capital. The first phase of this approach supported by the Provincial Agricultural Development Project has already produced results: cultivation in project areas increased by 55,000 ha; agricultural production grew by 210,000 tons, including a 109 percent aggregate production increase achieved by irrigation subprojects in Mendoza and Tucumán Provinces fueled, among others, by agricultural productivity increases of 80 percent in grapes, 188 percent in fruits and 198 percent in vegetable yields (kg/ha); and export volumes of fruit (apples, pears, peac hes and cherries) in Mendoza, and strawberries in Tucumán, also grew by 47 percent and 1.173 percent respectively. The small-scale producers segment of the Bank agriculture sector strategy has focused mostly on the sustainability and improved income generation capacity of the rural poor. So far 10,306 productive subprojects have been completed benefitting 73,926 people. 32. Improved access to rural electricity supply. Through the Renewable Energy in Rural Markets project7 the Bank is supporting the implementation of a major initiative to improve access to electricity in rural communities with a particular emphasis on the electrification of rural households and schools using renewable sources such as wind and solar energy. Proposed outputs such as the electrification of 25,000 households and 2,000 rural schools are on track to be met during this CPS period. 33. IFC engagements in Argentina have been strongly centered on projects that support this pillar. In the area of infrastructure, IFC has financed several clients to upgrade port installations. IFC provided a loan to Noble Argentina SA, an existing client, to support the construction and operation of a soybean crushing plant near Rosario. As well as raising export volumes, this project allowed Noble to expand and upgrade its environmental and social practices. IFC provided long term loans to Buenos Aires port operators TRP and Exolgan to increase trade volumes and cruise ship traffic. 34. Supporting job creation and small and medium-sized enterprises. An important component of IFC'S strategy in Argentina has been to support job creation and meet the needs of low-income populations. Overall, the 20 investees in Argentina that currently report employment to IFC provided about 67,000 jobs in 2009, compared with 39,000 jobs provided by 12 investees four years earlier. IFC has worked to channel financing to small companies and farms that often struggle to find reasonably priced working capital lines. Local banks tend to favor larger and less risky corporate clients. However, key partner Banco Galicia used IFC credit lines to provide direct financing to export-oriented SMEs and small farms, making over 12,000 SME loans in 7 Approved in 1999 but still ongoing with Additional Financing approved in 2008. 9 calendar year 2009 for a total $719 million. IFC also worked with Banco Galicia to increase the availability of financial services in Argentina's poorest and most underserved regions. 35. Argentina's strong human development level has enabled the emergence of a small but dynamic IT sector. In FY09, IFC provided quasi-equity financing to Grupo ASSA, a small IT company that faced difficulties funding growth plans due to the limited availability of long - term capital. 36. While Argentina is a relatively small source of GHGs, IFC has sought wherever possible to improve clients' emissions profiles. In FY10 it provided $25 million in equity financing for Aluar Aluminio Argentino to complete expansion of its plant in the province of Chubut that set a benchmark for energy efficiency and environmental best practices in the region. Aluar expects to raise annual exports by almost 25 percent to $730 million, as well as generate certified emission reduction credits under the UNFCC's Clean Development Mechanism. 37. The country's strategic oil and gas industry has relied on IFC for long term financing. The Corporation provided financing for Argentina-based oil producers Diadema and PAE for a total $205 million during the CPS period. These clients have also provided a key flow of resources for local and federal governments through the $1.4 billion in annual royalty and tax payments, as well as reducing Argentina's energy imports. Both operators adopted community development programs as well as complying with IFC Performance Standards, as have other IFC investees in this sector. Pillar II: Social Inclusion 38. In line with the country's goal of poverty reduction and consolidation of gains in health and education, the second pillar of the CPS is focused on improving the country's social safety net and consolidating progress on selected health outcomes. Key achievements to date under this pillar include the following. 39. Transformation of the social protection system. Supported by a highly productive dialogue and focused lending and analytical contributions by the Bank, a prominent outcome proposed under the CPS ­ the move from crisis-time emergency support to a long-term social protection system with expanded income coverage for vulnerable children--has been achieved. In November 2009 the Government introduced a universal child allowance, which provides about US$45 per month to 3.7 million poor children and youth under age 18 subject to school attendance and health check-ups. The implementation of the new program was facilitated by the close collaboration between ANSES and the Ministry of Health. By integrating and cross- checking the information on their databases, ANSES was able to register 230 thousand children 10 that were already enrolled in Plan Nacer, an ambitious Government program aiming to increase access to health services for uninsured women and children through a results-based approach. Plan Nacer in its turn increased coverage by 71 percent because enrollment in the Plan is a condition of receiving the child allowance. 40. Improved maternal and child health results. Reducing infant and maternal mortality represents a key development goal for Argentina. Plan Nacer is the instrument to ensure the sustainability of the gains achieved in this indicator during recent years. The Bank has been supporting this program since its inception both through analytic work and a series of investment projects. The program has already yielded important results. As of September 2010, 1.47 million previously uninsured pregnant women and children have gained access to a defined package of essential health services. The share of expectant mothers in the poorest Northern provinces who receive pre-natal consultations by week 20 has risen to 52 percent from the baseline of only 3 percent 8. National immunization rates have reached 98.6 percent (children under age 18 months receiving measles vaccine or triple viral coverage). 41. Improved access and quality of education in the rural sector. Argentina's high levels of school attendance mask high rates of dropout and repetition and large differences in educational attainment by region, gender and socioeconomic status. The Bank's dialogue in the education sector focuses mostly in the rural areas where these issues are particularly relevant. Through the Rural Education Improvement Project the Bank is supporting selected investments in rural educational establishments ranging from improved teaching materials and training to the refurbishing of basic school infrastructure. The solid progress in implementation of the project has generated improved teaching and student learning conditions as more than 95 percent of the schools in the rural areas have benefited from at least one activity included in the project. This has also translated into improved coverage, namely, a 5.6 percentage point increase (to 76.8 percent) in transition between the 7th and 8th grade and promotion rates in grades 1 to 3 has improved from 76 percent to 83.2 percent. Pillar III: Improved Governance 42. The CPS envisioned supporting country goals of expanding performance based management and improving the quality of public expenditures, enhancing service delivery outcomes and trust in institutions; and strengthening public sector capacity to spur investme nt and growth. While these goals remain relevant, the Government has chosen not to seek Bank financing in support of performance based budgeting, and instead has asked the Bank to focus its efforts on improving the efficiency of national and sub-national public institutions. The Bank's 8 This improvement includes two different effects: a clear health outcome improvement and an improvement in the health information systems and registration processes. 11 program has been adjusted to respond to this changing demand, requiring a corresponding adjustment in the CPS results framework. 43. Improved efficiency of public institutions. The Bank has supported a number of initiatives aimed at greater efficiency of public services. Assisted by the Institutional Strengthening of the National Social Security Administration Project, the percent of people who report satisfaction by ANSES services grew from 45 percent to 78 percent between 2005 and 2010. Investments and technical assistance financed by the Social and Fiscal National Identification System Project (APL 2) allowed the agency to bring the share of correctly registered and identified population to 92 percent (up from 31 percent in 2008). 16 Government agencies and programs are using consistent common processes to identify entities and assets, and this number is likely to increase to 18 by the end of the CPS period. This is expected to contribute to the improvement of the efficiency, effectiveness, and impact of social services and fiscal programs at all levels of government. 44. Improved governance at sub-national level. In response to demand from sub- national administrations, the Government and the Bank have agreed to devote a share of B ank assistance to addressing priority development challenges of several provinces, including some structural service delivery vulnerabilities. Ongoing and new projects in support of this agenda include the San Juan and La Rioja SWAps and a new operation in the Salta province currently under preparation. Results of these projects are likely to be seen in the next CPS period. 45. Governance and fiduciary issues are a cross-cutting theme in Bank program. Preparation and implementation support to all projects includes a strong governance focus. Fiduciary considerations have been an important aspect of Bank's program in Argentina since the 2006 CAS introduced a Fiduciary Action Plan as an essential complement to the implementation of a full investment partnership in the context of relative fiduciary fragility. Over the years, a number of instruments developed to reinforce fiduciary monitoring and evaluation ­ including the Procurement Plan Execution System (SEPA), audit compliance monitoring, and concurrent audits--have shown their effectiveness in ensuring the fiduciary integrity of the Argentina investment portfolio. In addition, a Governance and Accountability Action Plan has been agreed for projects in the health sector, and its implementation is jointly reviewed by the Government and the Bank once a year. The Government and the Bank are collaborating on a series of capacity building initiatives in the governance area, including workshops on procurement, safeguards and fiduciary aspects of project implementation for agencies in all sectors. C. ADJUSTMENTS TO THE CPS RESULTS FRAMEWORK 46. The main elements of the 2010-2012 CPS results framework remain relevant, and the achievement of most intended results is on track. The following adjustments are proposed in light of changes in priorities and implementation experience discussed above (see Annex 2). 12 47. First, some originally envisaged areas of Bank assistance have been replaced with new areas that emerged as higher priority during implementation. For example, operations in power transmission, environmental management of extractive industries and public expenditure management did not materialize, and instead Bank resources were shifted to improving road safety and customized assistance to provinces, including the new focus on transport and water infrastructure in the Norte Grande region. Under the Governance Pillar, the Government decided not to seek Bank assistance for performance based budgeting, and instead asked to focus the efforts on improving the quality of public instit utions, including at the provincial level. 48. Second, the results framework has been adjusted to improve clarity and ensure better alignment between Bank activities and expected outcomes. For example, result indicators for the education sector have been clarified to focus on rural education, which reflects the scope of Bank involvement in the sector. Indicators for public transport, natural forest management and solid waste management sectors, as well as for most of the Governance pillar, have been reformulated in line with the actual scale of Bank's contribution. Similarly, indicators of portfolio performance have been clarified (e.g., by defining disbursement targets), and new expected outcomes have been introduced to reflect the results of joint Government/ Bank implementation workshop (see Annex 7), such as improvement of fiduciary and safeguards capacity of Government agencies implementing investment projects, improvement of dialogue between the Government and the Bank on safeguards and fiduciary issues, and strengthening the coordination role of the Government. IV. FUTURE ENGAGEMENT 49. The main focus of Bank's engagement with Argentina for the remainder of the CPS period is implementation support for the large and complex portfolio of investments (see Annex 4). The Bank will work closely with the client to ensure that projects currently under implementation are executed in a smooth and efficient manner and produce the intended development results. 50. The indicative Bank lending program for the remainder of the CPS period is well defined and project preparation has been advanced, taking into account expected difficulties in progressing new operations in the run-up to October 2011 elections. Four new lending operations are envisaged in the last year of the CPS (FY12). Additional Financing to Cordoba Roads (US$30 million) would allow for the expansion of this successful ongoing project. Social Inclusion Project (US$53 million) is focused on rural poverty alleviation. Sustainable Industrial Development Project (US$40 million) would support small and medium enterprises in Argentina with inadequate access to credit to improve their compliance with environmental regulations, while simultaneously boosting their industrial competitiveness. Finally, a SWAp to the Province 13 of Salta (US$60 million) would continue building on the experience of other sub-national SWAps to address the key development challenges of the province. 51. Country dialogue and non-lending work in the final part of the CPS period will focus on implementing the ongoing program as well as on laying the foundations for the new CPS. The Bank will continue analyzing emerging issues and policy priorities that could serve as a basis for the new Country Partnership Strategy. 52. IFC's strategy during the remainder of this CPS period is expected to remain substantially unchanged. Its focus will remain on export-oriented industries with a record of strong management and sound financial performance. It will continue to focus on job creation and on low-income groups. IFC remains committed to seeking more investments in Frontier regions in the north of Argentina. However, wherever appropriate, IFC could also engage with corporate clients making cross-border investments in the region or in emerging countries beyond Latin America. IFC also hopes to maintain its selective support for Argentina's emerging IT industry. V. RISKS 53. Notwithstanding upcoming presidential elections, political risk for the Bank's lending program in the near future is assessed as low. As discussed in paragraph 11, the major political parties share broadly common core policy goals, with which the Bank's current investment program is broadly consistent. Two further factors provide substantial mitigation of the political risk. First, the bulk of the program will be in the implementation phase at the time of the upcoming political transition, and thus is unlikely to be affected in the absence of substantial changes in direction. Second, and more important, projects supported under the current CPS are focused on the areas of broad consensus and long term engagement. 54. Macroeconomic risks are moderate. In the medium term, accelerating inflation, due to continued expansionary macroeconomic policies, higher wage demands and global inflationary pressures is likely to fuel uncertainty and threaten competitiveness. Fiscal expenditures will need to be adjusted and other measures may need to be adopted to rein in inflation and to ensure medium-term macro sustainability. 55. Implementation risks for the portfolio are substantial. The Bank's portfolio includes many complex, large and high profile operations, particularly in the area of infrastructure, which are subject to a range of implementation risks. In particular, portfolio includes several Category A projects triggering a range of Bank safeguard policies. At the sub-national level, projects are subject to additional risks due to lower implementation capacity in some provinces, and to changing political relations with the national level. Furthermore, upcoming elections may lead to additional implementation challenges due to possible staff turnover. These risks are mitigated at 14 the level of specific projects through close supervision/ implementation support of the portfolio as well as at the country level through capacity building efforts in safeguards and procurement. 56. Fiduciary risks are moderate. Public Financial Management (PFM) system in Argentina is well designed, has adequate legal basis and human resources have the required technical skills and qualifications. However, the PFM system has been operating below expectations. Major factors that have affected PFM are: (i) the incomplete budget coverage; and (ii) the control environment (sub-optimal level of rule enforcement and attitude towards internal/external audit recommendations). Incompatibilities between procurement requirements under the World Bank guidelines and national procurement regulations may also have impacted implementation of some projects. The Bank team is committed to working closely with the client to build better understanding of the Bank's policies and guidelines. Capacity to implement procurement processes and implement public financial management is weaker at the provincial level, although there is variation across provinces. This may present additional challenges for projects implemented by provinces. The Bank is addressing these risks both through attention to fiduciary concerns in project design and supervision, and through a program of capacity building activities that was designed and is implemented in close collaboration with the client. 57. The risk of external or domestic shocks is also moderate. Like other countries, Argentina is vulnerable to natural disasters, changes in the external economic environment and domestic political tensions. The Bank portfolio includes several elements that seek to mitigate some of such risks, including a series of flood protection projects and operations in the area of environment, as well as socially targeted programs such as Plan Nacer and Basic Social Protection that could be used quickly to respond to an adverse event. 15 Annex 1: Updated Results Framework PILLAR 1-SUSTAINABLE GROWTH WITH EQUITY Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 1. Infrastructure Development Upgrade Argentina's Rate of infrastructure Transport Network Improved 16,700 km of the national 98% of roads in good or fair National Highway Asset infrastructure to address investment has been highly achieving a steady state as network managed though condition as a share of total Management APL I and II constraints on variable, declining from 3% of indicated by at least 90% of CREMA. classified roads (13,416 km (approved FY04 and FY07, competitiveness, and GDP in the 1980s to 1.7% in national and provincial18 managed through CREMA as respectively) (LEN) underpin medium-term the 1990s to less than 0.5% in paved non-concessioned roads 2,104 km of the provincial of November 2010) Provincial Road II (approved growth and poverty 1995-2003. in good condition and no network managed through FY05) (LEN) alleviation. deferred maintenance factors CREMA. Córdoba Road Infrastructure affecting the network. + AF (approved FY07 and LEN, respectively) Infrastructure Project for the Province of Buenos Aires Infrastructure (APL1, II and AF) (approved FY05, FY07 and FY11) (LEN) Norte Grande Transport (approved FY11) (LEN) Increase capacity in key 136 km of dual carriage ways Construction of dual carriage Santa Fe Road Infrastructure segments of the network. constructed. roads underway with an Project estimate 6 months delay from (approved FY07) (LEN) the original 5 years construction contract. Cost overruns may lead to increased budgetary contribution from the provincial government. 16 PILLAR 1-SUSTAINABLE GROWTH WITH EQUITY Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 1. Infrastructure Development Help build institutional Establishment of a National National Driver License Road Safety (approved FY10) Upgrade Argentina's Argentina has a high index of capacity of the National Road Driver License Registry. established and operational in 1 (LEN) infrastructure to address road fatalities due to Safety agency on the first Establishment of National province and 7 municipalities. constraints on accelerated motorization in the phase in a longer term national Traffic Records and Infractions National traffic records in competitiveness, and absence of substantial public objectives of reducing the Registry System testing phase. underpin medium-term policy intervention. severity and number of road National Road Safety growth and poverty accidents in Argentina. Observatory in operation. alleviation. Improvements in infrastructure Contribute to increased Transport infrastructure Investments are at design stage. Argentina Metropolitan and services has not kept up investments in public transport investments in medium size Areas Urban with increase in public together with a rationalization metropolitan areas (Tucuman, Transport Project (PTUMA) transport demand. Operational of the current subsidy scheme. Mendoza and Posadas) lead to (approved FY10) (LEN) subsidies absorb an increasing significant service share of public resources and improvements. Buenos Aires Urban lower incentives to operational Transport Project efficiencies. Strengthening of institutional Establishment and initial (PTUBA) and Additional planning capacities in the operation of a Public Transport Financing Buenos Aires Metropolitan Agency in the Buenos Aires (approved FY97 and FY07) Region and selected medium metropolitan area. (LEN) size cities. 4 medium sized metropolitan GEF Transport and Air areas have updated their origin- Quality (FY09) destination household survey 4% of population (mainly Increase rural access to 25,600 households electrified 7,777 households have been PERMER + Additional rural) lack access to electricity. electricity supply and promote with sustainable electricity electrified with the expectation Financing There is always room for energy efficiency while services by 2012 that the full target will be (approved FY99 and FY09) improving energy efficiency on contributing to address climate achieved. the demand side. change issues. 2,000 rural schools electrified 1,870 are expected to be with reliable, renewable electrified by 2012 (currently: electricity supply by 2012 1,377) Contracts to equip another 400 households with wind power systems, 36 schools with solar power, 314 public buildings 17 PILLAR 1-SUSTAINABLE GROWTH WITH EQUITY Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 1. Infrastructure Development and 59 solar water heating systems have been signed. Upgrade Argentina's Another 7 mini-grids which infrastructure to address would serve a total of over constraints on 1200 users are also being built. competitiveness, and underpin medium-term 24.5 million CFL have been GEF Energy Efficiency growth and poverty purchased using counterpart (Approved FY08) alleviation. financing. Matanza Riachuelo River Basin Integrated clean up of the Establishment and operation of ACUMAR is fully operational Matanza-Riachuelo Basin is the most contaminated river Matanza Riachuelo River Basin a multijurisdictional River and in charge of the CMR Sustainable basin in Argentina and consisting of sanitation, Basin Authority. program. Development Project (APL-1) represents a case of critical industrial pollution abatement, (approved FY09) (LEN) social and environmental rehabilitation of low income Initiate construction of trunk Prequalification process for the degradation. neighborhoods and flood risk collection, transmission, construction of the left bank reduction. treatment and disposal infrastructure is underway. infrastructure for Matanza Bidding expected to start in Riachuelo River Basin. first quarter of Calendar 2011. Limited access by poor Expand water and sewage Initiate pilot plans for the Initial implementation of pilot Buenos Aires Province population to water and coverage for poor residents in rehabilitation of low income plans in at least 2 Infrastructure (APL-I, II and sanitation services. selected areas of BA Province. neighborhoods. neighborhoods. AF) (approved FY05, FY07 and Expand water and sewage 107,622 people with water and FY11) (LEN) coverage for 128,000 poor sewage coverage, from which residents in areas of BA 85,219 have access to Province with high sanitary improved water resources and or environmental vulnerability. 22,403 have new piped household water connections. 18 PILLAR 1-SUSTAINABLE GROWTH WITH EQUITY Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 1. Infrastructure Development Upgrade Argentina's Poor urban and productive Reduced flooding vulnerability Initiate a program for Project at initial stage. Norte Grande Water infrastructure to address rural areas affected by in selected urban and rural strengthening water service Infrastructure (approved constraints on significant flood risk. areas. providers in the Northern FY11) and Second Norte competitiveness, and region of Argentina with the Grande Water Infrastructure underpin medium-term expectation of increasing water (pipeline FY11) (LEN) growth and poverty coverage for about 32,000 alleviation. additional beneficiaries in the medium term. City of BA: Reduce flood risk City of BA: Short drainage Urban Flood Prevention and from biannual events to once tunnel completed. 18 months Drainage (APL1) every 10 years events for a extension approved to allow (approved FY05) (LEN) population of about 100,000 full contract implementation. people living in the most critically flooded areas in the Maldonado Basin. Reduce flood risk for a PIDU: Slow implementation Urban Flood Prevention and population in selected pace with only US$35 million Drainage (PIDU) (APL2) provinces (Chaco, Corrientes in contracts signed and delays (approved FY06) (LEN) and Santa Fe) of about 150,000 in contract implementation. and covering an area of about Two year extension in process. 8,500 ha. 19 PILLAR 1-SUSTAINABLE GROWTH WITH EQUITY Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 2. Towards More Sustainable Rural Development and Environmental Management Improve competitiveness, Building an even more Contribute to increasing Provincial Agricultural Devt Completed PROSAP I and II quality, and exports of competitive, diversified and beneficiaries household strategies designed and under (approved FY07 and FY09) agriculture and livestock inclusive agricultural sector incomes through improvements implementation in at least 12 (LEN) production will require strengthened in farm productivity, expanded provinces. national and provincial output and diversification to institutions. crops with higher added value. 55,000 ha of increased land Completed area under cultivation in project irrigation areas, achieved through six subprojects (66% increase from baseline) in CH, ER, MZ and TM. 210,000 tons of additional Completed aggregate production achieved through four subprojects (109% increase from baseline) in MZ and TM Increased agricultural Completed productivity in project areas: 80% (grapes) to 198% (vegetables) yield (kg/ha), increases achieved by irrigation subprojects in Mendoza. Low priority assigned to rural Support a strategy for poor Increased agrifood exports Completed (agrifood exports PROINDER and AF poverty despite representing rural communities that may value and its participation in value grew 38% from 2006 to (approved FY98 and FY08) 28% of Argentina's poor and lead to improved infrastructure, national exports 2010, representing 56% of (LEN) 2.5times the poverty rate increased production of national exports) prevailing in urban areas. agricultural products for family consumption and increase value Satisfactory outcomes for Completed added and diversification of 72,000 beneficiaries production. Satisfactory subprojects completions for a target of 12,000 subprojects. No specific outcomes were defined for subprojects. 20 PILLAR 1-SUSTAINABLE GROWTH WITH EQUITY Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 2. Towards More Sustainable Rural Development and Environmental Management Address a growing Increased contamination and Increase investments in 11 provincial and municipal 9 plans completed (4 Provincial Solid Waste Management problem of resource resource degradation derived integrated urban solid waste solid waste management plans and 5 Municipal). 2 provincial Project degradation. from disposal and poor management. completed by 2012. under preparation. (approved FY06)(LEN) management of solid waste. At least 3 sanitary landfills 2 large landfills contracts in built. process and 2 underway. At least 40 dumpsites closed by Closing about 51 micro- 2012. dumpsites in Cordoba. At least 3 solid waste recovery Transfer station already built in and transfer plants. Rosario.4 more plants planned to be built by 2012. Policy and incentive framework Improving the policy and Policy and incentive framework Development of a system to to engage landowners in planning frameworks for the for sustainable forestry control illegal logging in the sustainable forestry management of forest management in place, including Chaco is underway, and 4 management (SFM) is not yet resources. funds available to small regional monitoring units for in place and the control producers for conservation, tree forest and deforestation IBRD Sustainable Natural framework is weak. planting and SFM. assessments are being installed. Resources A plan for reform of the Management Project. Direccion de Bosques has been (approved FY08) (LEN) completed and under review by SAyDS. Work with Plantation GEF Biodiversity Forests is gaining momentum Conservation in Productive but still behind schedule. Forestry Landscapes (approved FY07) (LEN) National Parks facing Upgrading park management Increased financial and Major Infrastructure for Las infrastructure and sustainable GEF Rural Corridors and infrastructure and human institutional capacity of the Quijadas National Park is 95% development opportunities in Biodiversity resources deficits to maintain National Parks authority in complete. A contract for and around parks. Conservation adequate protection levels in ensuring the protection of parks infrastructure works has been (approved FY10) (LEN) light of heightened tourism in a context of growing tourism made for Talampaya Park, and activity. activities. procurement has advanced for infrastructure in Bosques Petrificados and Los Alisos Parks, Sustainable development projects are underway around Talampaya park. 21 PILLAR 1-SUSTAINABLE GROWTH WITH EQUITY Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 2. Towards More Sustainable Rural Development and Environmental Management Address a growing Low priority assigned to Environmental plans for Mining sector environmental 80% of planned site Mining Environmental problem of resource environmental risk containment uranium mining risk management policies of remediation works completed Restoration Project degradation. management in mining sector. tailings, developed CNEA, and of the Secretaries in accordance with best (approved FY09) (LEN) of Mining and Environment international practices. Only strengthened. Containment one (Malargue) system for uranium mining CNEA site has environmental tailings completed and management plans applied in monitoring in place at accordance with best Malargue site; environmental international practices. management plans (remediation, monitoring and consultation) prepared for 7 other CNEA sites (closed uranium mines and/or processing plants) Increase access to Argentine Carbon Facility in Petrobras Gas Transport international carbon markets SAyDS strengthened and in System Project capacity to advise and process (approved FY10), Salta CDM Project Landfill Gas Capture Project (approved FY08), Olavarría CDM projects contribution to Methane Capture Project CO2 reductions of about (approved FY05) 300,000 tons per annum. Forest Carbon Partnership Facility (approved FY09) Eliminate an additional 109 The original PDO target has tons of Ozone Depleting been achieved, with a total of Montreal Protocol Ozone Substances (ODS). 2,778 tons of ODS eliminated. Depleting Substances With the additional subproject, a total of 2,887 will be GEF Third National eliminated Communication to UNFCCC Project (pipeline FY10) and Kyoto Protocol Adaptation Fund 22 PILLAR 2-SOCIAL INCLUSION Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 1.Supporting Progress Towards Permanent Safety Nets and Fostering Employment Reduction in poverty by Limited coverage of social Supporting the government's Establishment of a universal UAVC:3.8 million Basic Protection Project supporting the government in protection system, including efforts in developing and allowance for vulnerable beneficiaries (approved) (LEN) a long term strategy for key vulnerable groups, benefits implementing a Universal children (UAVC) under 18 Basic Protection AF (pipeline Social Protection in some programs inadequate to Social Protection Strategy for years old conditioned on FY11) (LEN) meet intended objectives, and the most vulnerable groups. compliance with education and Argentina Social Protection issues of fiscal sustainability. health requirements. AAA Coverage under the UAVC Coverage under the UAVC Social Programs towards the benefits at least 90% of eligible benefits about 70% of eligible Bicentennial population. population. AAA (FY09) Limited educational and Integrating marginalized Award of 100,000 secondary 14,481 received certification. Heads of Household employment service initiatives groups into the productive and primary education Transition Project for the integration of the marketplace certificates of adult education. (approved FY06) unemployed into the productive market place. Participation of 250,000 155,000 workers have Life Long Learning Project workers in competency based benefited from competency (approved FY07) training courses. based courses. Certification of 70,000 workers 31,506 workers certified Employment Inequality AAA based on competency based (FY10 occupational standards. 2. Improving Selected Health and Education Outcomes Consolidate improvements in Population without health Provision of provincial health Beneficiaries by end of Beneficiaries by end of Provincial Maternal-Child health indicators and coverage is 35-39% insurance coverage for December 2011: 1.7 million, September 2010: 1.47 million Health APL1&2 improve quality. maternal child health corresponding to about 80% of covering about 70% of the (approved FY 04 and FY07) beneficiaries (mothers up to 45 the eligible population. eligible population. In Centro, days after delivery and children Patagonia and Cuyo Regions up to 6). coverage was 66% on average with more than 916,000 active beneficiaries, while in the Northern Region was 83% with more than 559,000 enrollees. 23 PILLAR 2-SOCIAL INCLUSION Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence Provision of selective insurance Pending project approval. Provincial Health Insurance Consolidate improvements in Population without health coverage for vulnerable groups (pipeline FY11) (LEN) health indicators and coverage is 35-39% (children up to 19 years, improve quality. women up to 65 years) Disparity in the provision of Improve effectiveness of Autochthonous measles cases 3 cases (all imported) Essential Public Health priority health programs rates Federal Public Health system in are maintained at zero. Functions Project (approved across regions. delivering results under seven Congenital rubella cases 1 case (imported) FY07) priority health programs decrease to zero at the end of including breast and cervix the project. 2nd Essential Public Health cancer, diabetes, vaccine Prevalence of smoking has Functions Project (LEN) preventable diseases, decreased by 6% (Pipeline FY11) HIV/AIDS and tuberculosis. Argentina has certified in 90% 5 provinces certified of its Provinces with Chagas disease (17 out of 19 Provinces), the interruption of vectorial transmission. 85% of Provinces are 6 out of 10 Programs accredited for public health accredited in Tucuman functions and programs developed with a minimum standards and norms for all 10 prioritized programs. Strengthen leadership of MoH Establishment of a National Observatory at pre design GPF Strengthening and health sector governance. Health Policy Observatory stage. Governance in Argentina's aimed at improving the quality GAAP agreed and under Health Sector and access to information implementation. Reviewed related to the performance and jointly by the Bank and Hospital Performance results attained by the health Government once a year. Assessment ( AAA) (FY11) system in Argentina. Governance and Accountability Action Plan (GAPP) agreed and under implementation by the Ministry of Health. 24 PILLAR 2-SOCIAL INCLUSION Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence Reduce disparity in Argentina's high levels of Improve completion rates for Increased school enrollment for On track to meet project target. educational attainment school attendance rates in rural students in lower secondary children age 5 between the urban and the areas masks high rates of drop- rural education (grades7-9). rural sector. outs and repetition in addition Improve promotion rate in rural Target accomplished. Rural Education to quality issues. areas from EGB1 (grades1-3) Promotion rate in EGB1 in Improvement Project to EGB2 (grades 4-6) from rural areas of 86 percent in (approved FY06) 76% to 85% by April 2011. November 2010. Effective usage of Laptops in Increase the access of students The country presents advances a school setting AAA completing the 7th grade to the in this indicator and the target 8th grade of schooling in rural is within reach. As of areas from 73% to 85% by November 2010 the value of April 2011 the indicator was 81 percent. Realign (better alignment of) Threat to the country's Existence of critical mass of At least one school-based Policy dialogue to be initiated Lending and Policy Dialogue educational policy and traditional regional leadership policy and school-based innovation fully assessed and in FY11/12. (FY12/13). practices with emerging role in education attainment innovations. mainstreamed by 2015. challenges. and quality. Limited effectiveness of Increase understanding of Dissemination event to discuss In preparation to be delivered Tertiary Education AAA tertiary study programs in linkages between tertiary with key stakeholders the main in FY11. enabling access to labor education and labor markets findings of the study. markets. 25 PILLAR 3-IMPROVED GOVERNANCE Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 1. Strengthening Public Institutions Expand performance Key challenges include: management and improve the quality of public At National Level: At National Level expenditure, enhance More transparent government service delivery outcomes Improving service delivery decision-making processes, and build trust in institutions. outcomes and build trust in increased access to Government. government-related information and improved service delivery, by Making the public sector strengthening the efficiency, more accountable and effectiveness and responsive to the needs of transparency of the following citizens and the private sector. institutions: ANSES Consolidate and expand Customer satisfaction grew Institutional Strengthening of organizational reform of ANSES from 45% to 78% between 2005 the National Social Security aimed at improving customer and 2010. Administration Project satisfaction in service delivery, Reduction of average time in (approved FY06)(ANSES II) including increased the provision of new benefits. decentralization, timely (Baseline:140, Current:88, determination of benefits and Target: 90) reduced claims against ANSES Level of quantitative error in benefit determination. pension reports: (Current: 4.7, Target: 7) Project Extended up to September 2012). The percentage of physical 92%already achieved. SINTyS APL 2 SYNTyS (approved FY09) persons that can be identified univocally by SINTyS has increased to 92%. The number of government The number of government agencies and programs using agencies and programs using consistent common processes to consistent common processes to identify entities and assets has identify entities and assets has increased. increased from 16 in 2008 to 22 in 2010. 26 PILLAR 3-IMPROVED GOVERNANCE Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 1. Strengthening Public Institutions Chief of Cabinet Office SINFO covers 90 percent of SINFO covers 56% percent of State Modernization II civilian national executive civilian national executive Project (LEN) Expand performance branch employees. Personnel branch employees. LUPI still in (approved FY07) management and improve data that appears in both the development process. the quality of public SINFO and LUPI systems are expenditure, enhance consistent. service delivery outcomes and build trust in institutions. Electronic directory of Electronic directory of Government procedures includes Government procedures 20 % of procedures that have includes over 900 procedures been simplified and can be and has over 2 million visitors electronically processed. per year. Two transactional Progress is made towards services have been implemented offering transactional services. and two more are in process. User surveys showing improved User surveys show over 20% service delivery in the agencies increase in service delivery that have implemented the satisfaction in the agencies Citizens Charter implementing the Citizens Charter. The methodology is currently being revised. At Sub-National level: At Sub-National level: Strengthening Public Sector Provide customized support In at least one province the time Project Restructured: extended Subnational Governments Capacity, which is facing and capacity building to sub- for key services and up to March 2012; change in Public Sector Modernization significant limitations due to national governments on administrative processes has PDO indicators. Contracting Project (LEN) (approved low provincial revenues and public expenditure been reduced from 15 to 10 days. period up to March 2011. FY06) capacity in public sector management, tax Implementation at initial stage. management. administration and public In at least one province , % of service delivery. public employees included in the Strengthening the efficiency, integrated personnel information effectiveness and transparency and pay systems has increased of public expenditure from 0 to 30% management. Project launched. Project not yet effective. San Juan SWAp (LEN) 27 PILLAR 3-IMPROVED GOVERNANCE Country Strategic Goals Issues and Obstacles Outcomes the Bank Milestones Status Bank Program and Indicators Program Expects to Instruments Influence 1. Strengthening Public Institutions At Sub-National level: At Sub-National level: Province of La Rioja: (i) Project not yet effective. La Rioja SWAp (LEN) Expand performance Increased local tax revenue; (ii) management and improve Strengthening Public Sector Provide customized support Increased share of budgeted the quality of public Capacity, which is facing and capacity building to sub- primary expenditures executed; expenditure, enhance significant limitations due to national governments on (iii) Higher share of budgeted service delivery outcomes low provincial revenues and public expenditure Projects which are drawn from and build trust in institutions. capacity in public sector management, tax the provincial development plan; management. administration and public (iv) Increased proportion of service delivery. competitive bidding; (v) Strengthening the efficiency, Increased efficiency in the effectiveness and transparency management of irrigation water of public expenditure supply systems. management. Province of La Rioja: To be delivered in FY11 Q4. La Rioja Governance Diagnostic in Tax Assessment & Public Administration, PFM, Public Financial Management Expenditure Management and Assessment (PFMA) (ESW) Procurement. Province of La Rioja: Draft To be delivered in FY11 Q4. La Rioja Procurement Public Procurement Law Reform TA (NLTA) prepared. Provinces of Buenos Aires, To be delivered in FY11 Q3. Sub-national Public Cordoba, San Juan, Santa Fe: Financial Management Diagnostic in PFM. Assessment (PFMA): Buenos Aires, Cordoba, San Juan, Santa Fe (ESW) Province of Corrientes ­ Strategic Plan (FFS) 28 PORTFOLIO PERFORMANCE Country Strategic Goals Outcomes the Bank Milestones Status Bank Program and Indicators Issues and Obstacles Program Expects to Instruments Influence Time of approval of loans by Average time between Bank IDF: Improving Investment Delays in approval of projects Improved approval procedures the Government is reduced approval and effectiveness of Portfolio Management ­ Strengthen the capacity of the at the national level. of projects at the national level. loans has been reduced from 12 Government to prepare, to a maximum period of 4 Building Up Institutions, months, aligning it with the months (FY07-FY09) to 6 Systems and Human Capital. approve and implement Improved design, preparation months (FY10-FY11). investment projects in line approval of the loan by the (approved 2008) and approval procedures of Bank. with the requirements of a medium-term investment projects at the subnational level. Time for approval of loans at partnership. the subnational level is reduced to a maximum of 6 months, aligning it with approval by the Bank and at the national level. 80% PPRs rated S; 33% PPRs reflect an S rating Strengthening and enhanced and 55.5% reflect an MS coordination of fiduciary rating in FY10. team based in Buenos Aires. 80% PPRs confirming 58% of reviewed projects qualified procurement staff have procurement staff Training Program for Improved procurement capacity implementing agencies and of agencies implementing have been appointed; issues (appointment, lack of central coordination agencies investment projects. capacity, etc). supported by the Bank. 60% of procurement 68%* of procurement processes contracted as processes contracted as planned. planned by end of CY 2009. Delays in processing large procurement contracts. 50% of projects provide Pilot including 32% of reliable information on projects implementing contracts and financial interface between SEPA and transactions, and this UEPEX systems, which Improved monitoring capacity information is available in a implies real time information of central coordinating agencies consolidated system to be on contracts and payments. (Ministry of Economy and used by implementing Public Finance). agencies, and the Government and the IFIs for monitoring purposes. 29 PORTFOLIO PERFORMANCE Country Strategic Goals Outcomes the Bank Milestones Status Bank Program and Indicators Issues and Obstacles Program Expects to Instruments Influence Strengthen the capacity of the Fiduciary risk. Improved fiduciary risk Adjustment of existing risk Price Monitoring Mechanism Government to prepare, monitoring systems. assessment tools to ensure in place. Applied by PIUs in approve and implement strategic focus on project their Procurement Plans and investment projects in line fiduciary risks and results. by the Bank in PPRs and with the requirements of a bidding evaluation forms medium-term investment gradually since 2007. partnership. Governance and Accountability Action Plan designed for health projects and ready to be applied to other projects if required. Being applied for new projects. Action Plans for reduction in the use of individual consultants in Framework Agreement for place in certain operations Phasing out PIUs (i.e. State Modernization Project) Difficulties in compliance with Improved safeguards capacity High level government Series of training events Training Program for safeguards and sustainability of agencies implementing officials, project launched in March 2011. implementing agencies and policies investment projects. coordinators and safeguard central coordination agencies specialists in implementing supported by the Bank. Improved dialogue between agencies trained. central agencies and the Bank on safeguards, and Gap analysis between Gap analysis underway, Gap Analysis between strengthening of coordination country systems and Bank jointly with Government. environmental and social role by central agencies. policies carried out. country systems and safeguards and sustainability Model documents for Model documents under policies of the Bank. environmental and social preparation. safeguard compliance adopted. 30 PORTFOLIO PERFORMANCE Country Strategic Goals Outcomes the Bank Milestones Status Bank Program and Indicators Issues and Obstacles Program Expects to Instruments Influence Strengthen the capacity of the Portfolio riskiness Reduce portfolio riskiness Reduce APPs to 5% in number APPs** : 12% in number and Government to prepare, and 14% in amount. 17% in amount (Basic approve and implement Municipal Services, investment projects in line Subnational Government with the requirements of a Public Sector medium-term investment Modernization, Matanza partnership. Riachuelo, Natural Resources) PPPs **: 10% in number and 9% in amount (Mining Restoration, National Highway Asset Management, Natural Resources) Risk flags: 29% projects have slow disbursement flags and 26% projects have procurement flags. Slow disbursements Maintain adequate levels of Achieve disbursement targets FY10: project execution (i.e. 30% ratio of around $ 800 million and o Disbursements of $869 of disbursements over signed 25% disbursement ratio Disbursement ratio of contracts for infrastructure average during CPS period 23.4% portfolio) and zero net transfers. Do not exceed -50 million o Net transfers of -$45 net transfers in CPS FYs. FY11 (projected): o Disbursements of $900 o Disbursement ratio of 26% o Net transfers of $140. FY12 (projected) Disbursements of $850 Disbursement ratio of 23% Net Transfers of $20. *Target is based on Procurement Plans presented by projects taking exclusively those processes planned to be contracted during the corresponding calendar year. This figure includes 20 projects from which we were able to collect appropriate data. **APPs (Actual Problem Projects): Projects graded MU or U in Development Objectives or Implementation. PPPs (Potential Problem Projects): Projects with at least three risk flags. 31 Annex 2: Summary of Changes to CPS Results Framework Pillar 1: Sustainable Growth with Equity Deleted Added Reduced/Reformulated Issues and obstacles ·Reference to power and ·Road Safety issues. transmission of electricity. ·Public Transport issue. ·Reference to improved ·Specific issue for environmental PROINDER (Low priority management capacity in assigned to rural poverty) which extractive industries. used to be merged with ·Reference to food quality PROSAP although being & safety as there is a different, marginal contribution ·Specific issue for Matanza, most contaminated river from the Bank. basin in Argentina. In all these cases no Bank intervention is envisaged. Outcomes the Bank ·Road safety outcomes. ·Public transport outcomes expects to influence ·Flood protection outcomes. reduced in line with project ·Specific outcomes for outputs. Deleted reference PROINDER, which were to increases in public missing in previous transport ridership. framework (Support a ·Modified outcomes for production oriented investment natural forest management strategy for poor rural in line with project communities). outcomes. ·Specific detailed outcomes ·Solid Waste Management for Matanza which were targets reduced. missing and are achievable ·Modified PROSAP during CPS period. outcomes to align with project's objectives. Milestones ·Road Safety milestones. ·Modified milestones to ·Flood protection milestones reflect actual project for the two APLs which were indicators for solid waste missing. management, natural forest ·Specific milestones for management, national PROINDER,which were parks management, flood missing before (number of protection and public satisfactory beneficiaries, transport which were very etc). ambitious or did not reflect the actual contribution of these projects. Bank Program ·Road Safety Loan Instruments ·Norte Grande Transport ·Norte Grande Water ·GEF Decentralized Medium Size Grants Program. ·GEF Third National Communications to UNFCCC Project and Kyoto Protocol Adaptation Fund. 32 Pillar 2: Social Inclusion Deleted Added Reformulated/Reduced Country ·Safety nets goal strategic goals reformulated for simplicity and indicators and to be more aligned with bank program outcomes. Issues and ·Reformulated to show the obstacles issue of limited coverage of social protection system. Outcomes the ·Reference to Universal Bank expects to allowance for vulnerable influence children (UAVC) as an accomplishment . ·Specific outcome for Lifelong Learning. ·Specific outcomes for child health insurance coverage, and other groups' insurance coverage. ·FESP specific outcomes. Milestones ·Reference to decreases in ·Specific target for ·Changed milestones for mortality rates due to UAVC. Lifelong Learning in line attribution issues. ·FESP specific milestones with project indicators. in more detail. ·Reformulated milestones ·Reference to new purchasing ·Reference to National on health insurance procedures.. Health Policy coverage to reflect ·Hospital access milestones. Observatory. contribution of Bank ·Reference to Governance programs. Because there wasn't a clear and Accountability Action ·Limited milestones of bank involvement in these Plan. education to rural areas. education. ·Limited contribution in higher education to the dissemination of AAA. Bank Program ·Health sector governance ·GPF Strengthening Instruments Project Governance in ·Health sector Support Project Argentina's Health Sector. 33 Pillar 3: Improved Governance Deleted Added Country strategic goals and indicators Issues and obstacles ·Eliminated issue related to public expenditure management because the previously planned budgeting activity was not done. Outcomes the Bank ·Issues related to ·Focus on strengthening expects to influence performance informed efficiency and transparency budgeting and compliance of National Agencies. with the Fiscal ·Provision of customized Responsibility Law. assistance to provinces. In both cases there was no Bank intervention. Milestones ·All previous milestones ·Focus on specific (some related to activities undertaken at the performance budgeting). national and subnational level (SWAPs). ·Milestones for National Agencies reformulated in line with outcomes. Bank Program ·Foundations for ·San Juan SWAP Instruments Performance Informed ·La Rioja SWAP Budgeting Project ·Salta SWAP 34 Portfolio Performance Pillar Deleted Added Reformulated Issues and ·Fiduciary risk. ·Overall portfolio obstacles ·Difficulties in compliance with performance was replaced safeguards and sustainability by portfolio riskiness policies. which is more accurate. Outcomes the ·Improved monitoring capacity of Bank expects to central coordinating agencies influence (Ministry of Economy and Public Finance) ·Improved safeguards capacity of agencies implementing investment projects. ·Improved dialogue between central agencies and the Bank on safeguards, and strengthening of coordination role by central agencies. ·Maintain adequate levels of project execution (i.e. 30% of ratio of disbursements over signed contracts for infrastructure portfolio) and zero net transfers. Milestones ·Fiduciary Action Plan ·High level government officials, since it was done under project coordinators and previous CPS. safeguard specialists in ·Semi-Annual portfolio implementing agencies trained. reviews because it ·Gap analysis between country wasn't strongly linked systems and Bank policies carried to any outcome. out. ·Model documents for environmental and social safeguard compliance adopted. ·Reduce APPs to 5% in number and 14% in amount. ·Achieve disbursement targets of around $ 800 million and 25% disbursement ratio average during CPS period. ·Do not exceed -50 million net transfers in CPS FYs. Bank Program ·Training Program for ·Strengthening and Instruments implementing agencies and enhanced coordination of central coordination agencies fiduciary team based in supported by the Bank. Buenos Aires. Miscellaneous ·Complete column on current status of milestones. 35 Annex 3. Argentina Lending and GEF Program, FY09-12 APPROVED Fiscal Amount Quarter Project Year (US$ million) 2009 Q4 Basic Protection Project 450 Q2 Metropolitan Areas Urban Transport 150 Provincial Road infrastructure Project -AF 175 2010 Q3 San Juan SWAp 50 Prevention and Management of Influenza 229 Q4 Road Safety 30 Q1 Buenos Aires infrastructure - Additional Financing for APL1 50 Norte Grande Transport 400 Q2 Norte Grande Water 200 2011 Second Essential Public Health Functions (FESP II) 461 Partial Cancellation of H1N1 loan -88 Q3 La Rioja SWAp 30 Basic Protection - Additional Financing* 480 TOTAL APPROVED 2617 TO BE APPROVED Fiscal Amount Quarter Project Year (US$ million) Norte Grande Water 2 200 2011 Q4 Provincial Health Insurance 400 Cordoba Roads Additional Financing 30 Q1 Rural Poverty 52 2012 Sustainable Industrial Development 40 TBD Salta SWAp 60 TOTAL TO BE APPROVED 782 TOTAL PROGRAM FY2009-2012 3399 *As of 02/23/2011, board date for this project is 03/10/2011. 36 GEF Program in Argentina FY10-FY12 Fiscal Amount Quarter Project Year (US$ million) APPROVED Energy Efficiency Project Q2 15.15 2010 Sustainable Transport and Air Quality Q4 3.99 Third National Communication UNFCCC 2.4 2011 Q3 TOTAL APPROVED 21.54 TO BE APPROVED Rural Corridors and Biodiversity 2011 Q4 6.3 TOTAL GEFs APPROVED AND TO BE APROVED FY10-FY12 27.84 37 Annex 4. Operations Portfolio (IBRD/IDA and Grants) As Of Date 2/23/2011 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Project Development Implementation Fiscal Frm Project Name IBRD IDA GRANT Cancel. Undisb. Orig. ID Objectives Progress Year Rev'd P105288 AR APL2 Buenos Aires Infrastructure S S 2007 270 5.9 112.15569 66.0556901 P088220 AR (APL1)Urban Flood Preven&Drainage S S 2005 130 47.4059367 44.8171277 P095515 AR (APL2) Prov Maternal-Child Health MS MS 2007 300 135.952591 135.952591 P093491 AR (APL2)Urban Flood Prev.&Drainage MS MS 2006 70 52.2036311 52.2036311 P106684 AR 2nd Prov Agric Dev S S 2009 300 269.25 70.35 P101170 AR 2nd State Modernization S S 2007 20 10.3481614 9.21482807 P116974 AR 3rd Natl Communication UNFCCC # # 2011 2.43921 P095569 AR APL2 National Highway Asset Mgt S MS 2007 400 224.113769 219.780436 P039584 AR B.A.URB.TSP S MS 1997 300 0.043537 12.6831208 -87.273342 1.3953244 P060484 AR Basic Municipal Services Project MU MU 2006 110 91.1591151 82.5657817 P115183 AR Basic Protection Project S S 2009 450 3.0815 1.0815 P090119 AR Energy Efficiency Project S S 2008 15.155 14.655 9.5675 P110599 AR Essential Public Health Functions II S S 2011 461 461 88.6111111 P094425 AR GEF Biod.Conserv in Prod. Forestry MU MU 2007 7 6.65 P092836 AR Inst. Strengthening - ANSES II TA S S 2006 25 16.3493286 16.3493286 P095514 AR Lifelong Learning Project S MS 2007 200 111.187272 6.18727178 P095485 AR Metropolitan Areas Urban Transport S S 2010 150 149.625 P110462 AR Mining Environmental Restoration Proj MS MS 2009 30 27.0307274 17.7507274 P120198 AR Norte Grande Road Infrastructure S S 2011 400 400 0.000002 P120211 AR Norte Grande Water Infrastructure # # 2011 200 200 P117377 AR Prevention & Management of Influenza S S 2010 229 98.6200058 79.0200058 38 P006043 AR RENEW.ENERGY R.MKTS S MS 1999 80 38.7469602 -11.25304 25.049077 - P070963 AR Rural Education Improvement Project MS MS 2006 150 70.4276114 70.4276114 79.422389 P006041 AR SMALL FARMER DV. MS S 1998 120 14.6040564 -30.395944 9.6040564 P101171 AR SOC&FISC NTL ID SYS II S S 2009 20 12.0265068 1.45984011 P113896 AR San Juan SWAP S S 2010 50 50 P089926 AR Solid Waste Management Project MS MS 2006 40 30.8963942 25.2963942 - P070448 AR Subnational Gov Public Sec Modernizat U MU 2006 40 30.5475443 30.5475443 0.4949305 P100806 AR Sustainable Natural Res Mgt MU MU 2008 60 54.5995397 25.5995397 P106752 AR Unleashing Productive Innovation MS MS 2009 150 133.714302 16.0476356 P105680 AR(APL1) Matanza-Riachuelo Development MU MU 2009 840 835.9 79.2333333 P088032 AR(CRL1)Buenos Aires Infrastr SIDP(1APL) S S 2005 250 50.0648824 0.06488237 0.0648824 P099051 AR- SANTA FE ROAD Infrastructure S S 2007 126.7 26.9526454 26.9526454 P099585 AR-Cordoba-Road Infrastructure S S 2007 75 5.31254712 3.97921378 P090993 AR-Essential Public Health Functions MS MS 2007 220 0.121267 53.610573 53.73184 P114008 AR-GEF Sustain. Transp. and Air Quality MS MS 2009 3.987 3.987 2.33333334 0.6666667 P070628 AR-Provincial Road InfrastructureProject S MS 2005 325 209.499415 30.2594146 P116989 AR-Road Safety S S 2010 30 25.35858 -4.6414167 - P005920 MP/AR-REDUCTION OF OZONE D S S 1997 25 0.45020056 -3.4637994 3.4637994 - Overall Result 6621.7 53.58121 6.064804 4090.16961 1127.68822 46.601112 39 Annex 5. AAA Program FY09-FY11 Approval FY Project Name Theme Output Type Delivered to Client Corrientes FFS: Technical Assistance for the Public Sector Non Lending - Technical design of an Strategic Plan Governance Assistance FY09 Institutional Development Plan Integrated Financial System of Province of Public Sector (Non Lending - Technical Buenos Aires Governance Assistance) Provincial Economic Memorandum Buenos Public Sector Report - Public Sector study Aires Logistics II: A Deep Study of Selected Logistics Infrastructure Report - Infrastructure Study Issues in Argentina FY10 Institutional Development Plan Public Sector Provincial Performance Informed Budgeting (Non Lending - Technical Governance Assistance) Social Non Lending - Technical Gender Equity in the Private Sector Development Assistance Currently Underway** Higher Education Education Report - Education Sector Review AR Country Financial Accountability Financial Report Assessment (CFAA) Provincial Level Management Cordoba Introduction of Performance Informed Public Sector Non Lending - Technical FY11 Budget Governance Assistance (FBS*) Financial and Access to Long Term Credit Private Sector Financial Sector Workshops Development Country Environmental Analysis AR Country Environmental Assessment Environment (CEA) - Report *FBS: Fee based services ** The AAA program for FY12 is being designed as part of the Business Planning process. 40 Annex 6. Selected Indicators* of Bank Portfolio Performance and Management As Of Date 2/24/2011 Indicator 2008 2009 2010 2011** Portfolio Assessment a Number of Projects Under Implementation 28 34 36 38 Average Implementation Period (years) b 4.2 4.2 4.2 4.3 a, c Percent of Problem Projects by Number 25.0 2.9 13.9 10.5 Percent of Problem Projects by Amount a, c 31.3 0.5 17.9 15.8 a, d Percent of Projects at Risk by Number 57.1 20.6 25.0 21.1 Percent of Projects at Risk by Amount a, d 60.0 25.8 29.3 25.9 e Disbursement Ratio (%) 12.4 29.1 23.4 21.6 a.As shown in the Annual Report on Portfolio Performance (except for current FY). b.Average age of projects in the Bank's country portfolio. c.Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d.As defined under the Portfolio Improvement Program. e.Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. **Disbursement Ratio for FY11 has been annualized in base of disbursements as of 02/24/2011. 41 Annex 7: Summary of Joint Government-Bank Workshop on Risks and Challenges in Implementation of Investment Projects In order to strengthen the implementation of Bank-financed investment portfolio in Argentina, the Ministry of Economy and Public Finance and the World Bank invited a group of implementing agencies representing a wide range of sectors to participate in a workshop held in Buenos Aires on November 9-10, 2010. Forty-two participants included project coordinators and procurement, financial management and safeguard specialists from selected implementing agencies, as well as Bank teams providing implementation support to the same operations (Task Team Leaders and procurement, financial management and safeguard specialist s). The methodology used during the workshop was the Analytical Hierarchy Process (AHP) supported by Expert Choice, an effective and proven methodology and software for decision - making. The methodology allowed eliciting the opinions from participants of the Government, the Implementing Agencies and the World Bank through a facilitation process and anonymous voting. The workshop aimed to: i) identify critical issues, risks and challenges affecting portfolio execution, including compliance with policy regimes (i.e. financial management, fiduciary policies and environmental and social safeguards) and monitoring systems, ii) carry out a collaborative and participatory decision-making process in the creation of a working agenda to enhance project portfolio execution, and iii) foster a trusting and collaborati ve environment, strengthen the dialogue between the parties and generate creative and effective solutions. The workshop provided a platform for frank discussion and allowed participants to work as one team, committed to the joint goal of implementing the investment portfolio smoothly and efficiently, with the focus on development results. Procurement and safeguards related questions received the highest prominence in the discussion. In particular, participants agreed that capacity constraints in the implementing agencies need to be addressed through improved training and recruitment procedures, and that the Bank would support these efforts by providing customized capacity building program in procurement and safeguards. A detailed analysis on procurement post reviews of Bank portfolio in Argentina has been completed and used as a guide to inform the ongoing preparation of procurement training for the implementing agencies. In parallel, the Bank recruited additional procurement staff in Buenos Aires office, and both Government and the Bank are working on expanding the SEPA platform to include a secure information space for exchange of experience on procurement issues. On the safeguards side, following the workshop the Government and the Bank launched a detailed analysis of overlaps and gaps between Argentina's legal framework and the Bank's safeguards policies, which would serve as a basis for developing clear guidance and sample standard documents facilitating the compliance with Bank safeguards in Argentina portfolio, as well as inform capacity building efforts. 42 With respect to financial management, workshop participants agreed that this area represents the fewest concerns for the portfolio. The main challenges are to improve internal controls in operations implemented at sub-national levels, and to create an automatic link between SEPA, procurement information system and UEPEX, the Government's FM system for external funding, which would allow the Government and the Bank have real time information on financ ial execution of projects. The Government and the Bank will evaluate progress in implementing the Action Plan developed at the workshop (see below) twice a year, at the time of each country portfolio review. Workshop on Risks and Challenges in Implementation of Investment Projects: Action Plan Primary Action Responsibility Component 1: Improvement of procurement performance Create space for exchange of knowledge and experience among implementing agencies (IA), Bank and between them and the Bank Develop a procurement training program offered by an academic institution, to build capacity Government in implementing agencies Review contracting procedures for consultants by IA to improve the conditions to attract and Government retain qualified procurement staff Ensure active participation of Bank procurement team in project preparation from early stages Bank of design Strengthen the procurement team in the Bank to ensure timely and effective response to the Bank client and support project objectives Component 2: Improvement of capacity to effectively address safeguards and sustainability aspects of operations Establish and communicate to the client clear structure of the Bank's local safeguards team to Bank ensure that the client has an easy point of contact and receives consistent messages on safeguards issues Strengthen DNPOIC's lead coordination role in safeguards and sustainability issues of Government operations Establish clear criteria and models for application of Bank safeguards policies to projects in Bank Argentina Component 3: Improvement of internal control in financial management Government Review IA structure to adapt financial management teams to the new challenges Government Improve capacity of units at the national level to supervise units at the provincial level Strengthen the Government's team currently managing UEPEX, the Government's FM system Government for external funding Improve General Audit Office capacity to perform technical audits given the increase of Government results based components in operations 43 Annex 8. Argentina: Selected Economic and Financial Indicators 2010* 2011* 2005 2006 2007 2008 2009 estimate forecast Real GDP and aggregate demand 1/ GDP (annual %) 9.2 8.5 8.7 6.8 0.9 9.1 ² 5.8 ² Exports (annual %) 13.5 7.3 9.1 1.2 -6.4 - - Imports (annual %) 20.1 15.4 20.5 14.1 -19.0 - - Public Sector 4/ National Government Primary Balance (% of GDP) 3.7 3.5 3.2 3.1 1.5 1.7 0.8 National Government Overall Balance (% of GDP) 1.8 1.8 1.1 1.4 -0.6 0.2 - Total Gross Public Debt (% of GDP) 85.3 76.6 67.2 56.4 58.9 - - External Sector Trade balance (current US$ billions) 13.1 14.0 13.5 15.4 17.0 12.1 10.2 Merchandise exports (current US$ billions) 40.4 46.5 56.0 70.0 55.7 68.5 77.6 Merchandise imports (current US$ billions) 27.3 32.6 42.5 54.6 38.7 56.4 67.4 Current account balance (current US$ billions) 5.4 7.9 7.5 7.0 11.5 4.7 3.2 Current account balance (% of GDP) 3.0 3.7 2.9 2.2 3.9 - - Gross international reserves (US$ billions, end of period) 28.1 32.0 46.2 46.4 47.9 52.2 52.5 Prices, money and exchange rate CPI (annual %, end of period) 12.3 9.8 8.5 7.2 7.7 10.9 14.4 GDP deflator (annual %) 8.8 13.4 14.3 19.1 10.0 17.1 19.8 M2 (annual %, monthly average) 23.8 22.6 21.1 17.3 11.5 22.1 27.9 Nominal Exchange Rate (AR$ per US$, end of period) 3.03 3.07 3.15 3.45 3.79 3.98 4.29 Population, Employment and Poverty Population, total (millions) 38.7 39.1 39.5 39.9 40.3 - - Unemployment rate (%) 10.1 8.7 7.5 7.3 8.4 7.7 7.4 Urban poverty headcount ratio at national poverty line (% of population) 36.4 29.2 22.0 16.6 13.6 - - * Unless otherwise indicated, 2010 estimates and 2011 forecasts correspond to REM (Relevamiento de Expectativas de Mercado) survey published by the Central Bank of Argentina. 1/ 1993 AR$. 2/ The 2011 draft Budget Law assumes annual growth of 8.9% in 2010 and of 4.3% in 2011. 3/ Including inventory and statistical discrepancy. 4/ Accounts on a cash basis. 5/ Own calculations based on actual fiscal data from Ministry of Finance and nominal GDP projections from REM survey. 44 Annex 9. Argentina at a glance Argentina at a glance 2/23/11 Latin Upper Key Development Indicators America middle Argentina & Carib. income (2009) Population, mid-year (millions) 40.3 566 993 75-79 Surface area (thousand sq. km) 2,780 20,422 48,659 60-64 Population growth (%) 1.0 1.1 0.9 Urban population (% of total population) 92 79 75 45-49 30-34 GNI (Atlas method, US$ billions) 304.1 3,865 7,352 15-19 GNI per capita (Atlas method, US$) 7,550 6,826 7,405 GNI per capita (PPP, international $) 14,120 10,496 12,763 0-4 6 4 2 0 2 4 6 GDP growth (%) 0.9 4.3 4.1 percent of total population GDP per capita growth (%) -0.1 3.1 3.2 (most recent estimate, 2003­2009) Poverty headcount ratio at $1.25 a day (PPP, %) 3 8 .. Poverty headcount ratio at $2.00 a day (PPP, %) 7 17 .. Life expectancy at birth (years) 75 73 71 60 Infant mortality (per 1,000 live births) 15 20 20 Child malnutrition (% of children under 5) 2 4 .. 50 40 Adult literacy, male (% of ages 15 and older) 98 92 95 30 Adult literacy, female (% of ages 15 and older) 98 90 92 Gross primary enrollment, male (% of age group) 116 118 111 20 Gross primary enrollment, female (% of age group) 114 114 110 10 0 Access to an improved water source (% of population) 96 93 95 Access to improved sanitation facilities (% of population) 91 79 84 1990 1995 2000 2007 Argentina Latin America & the Caribbean Net Aid Flows 1980 1990 2000 2009 a (US$ millions) Net ODA and official aid 19 169 52 131 Top 3 donors (in 2008): Spain 0 12 -6 30 15 Germany 18 41 7 22 10 European Commission 0 2 10 17 5 Aid (% of GNI) 0.0 0.1 0.0 0.0 0 Aid per capita (US$) 1 5 1 3 -5 -10 Long-Term Economic Trends -15 95 05 Consumer prices (annual % change) 100.8 2314.0 -0.7 7.7 GDP implicit deflator (annual % change) 90.8 2,076.8 1.0 10.0 GDP GDP per capita Exchange rate (annual average, local per US$) 0.0 0.5 1.0 3.7 Terms of trade index (2000 = 100) .. 85 100 133 1980­90 1990­2000 2000­09 (average annual growth %) Population, mid-year (millions) 28.2 32.5 36.9 40.3 1.4 1.3 1.0 GDP (US$ millions) 76,962 141,352 284,204 307,155 -0.7 4.3 5.4 (% of GDP) Agriculture 6.4 8.1 5.0 7.5 0.7 3.5 2.5 Industry 41.2 36.0 27.6 31.8 -1.3 3.8 6.1 Manufacturing 29.5 26.8 17.5 21.2 -0.8 2.7 5.8 Services 52.4 55.9 67.4 60.7 0.0 4.5 4.8 Household final consumption expenditure 63.0 77.1 70.7 58.3 .. 2.8 4.7 General gov't final consumption expenditure 11.0 3.1 13.8 15.2 .. 2.2 3.6 Gross capital formation 25.3 14.0 16.2 20.9 -5.2 7.4 11.1 Exports of goods and services 5.1 10.4 10.9 21.4 3.8 8.7 6.3 Imports of goods and services 6.5 4.6 11.5 16.0 -5.8 15.6 9.2 Gross savings 22.8 13.4 13.0 24.4 Note: Figures in italics are for years other than those specified. 2009 data are preliminary. .. indicates data are not available. a. Aid data are for 2008. Development Economics, Development Data Group (DECDG). 45 Argentina Balance of Payments and Trade 2000 2009 (US$ millions) Total merchandise exports (fob) 26,341 55,669 Total merchandise imports (cif) 25,281 38,771 Voice and accountability Net trade in goods and services -1,832 17,825 Political stability Current account balance -8,981 11,515 Regulatory quality as a % of GDP -3.2 3.7 Rule of law Workers' remittances and compensation of employees (receipts) 86 660 Control of corruption Reserves, including gold 25,147 47,967 0 25 50 75 100 Country's percentile rank (0-100) Central Government Finance 2009 2000 higher values imply better ratings (% of GDP) Current revenue (including grants) 19.4 22.7 Tax revenue 14.1 20.0 Current expenditure 20.9 20.2 Technology and Infrastructure 2000 2008 Overall surplus/deficit -2.4 -0.6 Paved roads (% of total) 29.4 30.0 Highest marginal tax rate (%) Fixed line and mobile phone Individual .. 35 subscribers (per 100 people) 39 141 Corporate 35 35 High technology exports (% of manufactured exports) 9.1 9.0 External Debt and Resource Flows Environment (US$ millions) Total debt outstanding and disbursed 140,914 120,184 Agricultural land (% of land area) 47 49 Total debt service 26,843 12,127 Forest area (% of land area) 12.3 12.0 Debt relief (HIPC, MDRI) ­ ­ Terrestrial protected areas (% of surface area) .. 6.5 Total debt (% of GDP) 49.6 39.1 Freshwater resources per capita (cu. meters) 7,326 6,920 Total debt service (% of exports) 69.4 17.3 Freshwater withdrawal (billion cubic meters) 29.2 .. Foreign direct investment (net inflows) 10,418 4,009 CO2 emissions per capita (mt) 3.8 4.6 Portfolio equity (net inflows) -3,227 -212 GDP per unit of energy use (2005 PPP $ per kg of oil equivalent) 6.2 6.8 Energy use per capita (kg of oil equivalent) 1,650 1,850 IDA, 00 IMF, Other multi- Short-term, IBRD, 5,069 lateral, 9,711 19,977 Bilateral, 5,794 World Bank Group portfolio 2000 2009 (US$ millions) IBRD Total debt outstanding and disbursed 8,789 5,305 Disbursements 1,019 1,028 Private, 78,350 Principal repayments 538 793 Interest payments 701 169 IDA Total debt outstanding and disbursed ­ ­ Disbursements ­ ­ Private Sector Development 2000 2009 Total debt service ­ ­ Time required to start a business (days) ­ 27 IFC (fiscal year) Cost to start a business (% of GNI per capita) ­ 11.0 Total disbursed and outstanding portfolio 2,305 1,738 Time required to register property (days) ­ 52 of which IFC own account 1,196 850 Disbursements for IFC own account 252 153 Ranked as a major constraint to business 2000 2009 Portfolio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 74 80 Economic and regulatory policy uncertainty .. 16.5 Access to/cost of financing .. 15.7 MIGA Gross exposure 491 35 Stock market capitalization (% of GDP) 58.4 15.9 New guarantees 127 0 Bank capital to asset ratio (%) .. 12.9 Note: Figures in italics are for years other than those specified. 2009 data are preliminary. 2/23/11 .. indicates data are not available. ­ indicates observation is not applicable. Development Economics, Development Data Group (DECDG). 46