Document of The World Bank FOR OFFICIAL USEONLY ReportNo: 34514-AR PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDLOAN INTHEAMOUNT OFUS$40MILLIONEQUIVALENT I TO THE ARGENTINE REPUBLIC FORA NATIONAL URBAN SOLID WASTEMANAGEMENT PROJECT January 25,2006 Environmentallyand Socially SustainableDevelopment Argentina, Chile, Paraguayand Uruguay Country ManagementUnit Latin America and the CaribbeanRegion CURRENCY EQUIVALENTS (Exchange Rate Effective January 26,2006) Currency Unit = Argentine Peso (AR$) 1AR$ = US$.32927 1US$ = AR$3.037 FISCAL YEAR January 1- December 31 ABBREVIATIONS AND ACRONYMS ACF Argentine Carbon Facility AFL Adaptable ProgramLoan CEAMSE Public Company for Ecological Coordination of the Metropolitan Area (CoordinacidnEcoldgica Area Metropolitana Sociedad del Estado) CEMPRE Private Sector Recycling Commitment (CompromisoEmpresarial para Reciclagem) CER Certified Emission Reductions CFB Carbon Finance Business CoM Consortium of Municipalities EL4 Environmental Impact Assessment EMF EnvironmentalManagement Framework ER Emission Reductions ERPA Emission Reductions PurchaseAgreement FM Financial Management GEF Global Environmental Facility GOA Government of the Republic of Argentina IMA Inter MunicipalAgreement MFP Municipal Focal Point MSW Municipal Solid Waste MSyA Ministry of Health and Environment MUSWU Municipal Urban Solid Waste Unit NGO Nongovernmental Organization NSWMS National Solid Waste Management Strategy NUSWU National Urban Solid Waste Unit O M Operational Manual PET Polyethylene Terephthalate PFP ProvincialFocal Point PIU Project Implementation Unit PUSWU Provincial Urban Solid Waste Unit SAyDS Secretariat of Environment and Sustainable Development SEA Sectoral EnvironmentalAssessment SEMP Sectoral Environmental Management Plan S I L Sector Investment and Maintenance Loan sw SolidWaste S W M Solid Waste Management TA Technical Assistance UNDP UnitedNationsDevelopment Program Vice President: Pamela Cox Country Director: Axel Van Trotsenburg SMUDirector: John Redwood Sector Manager Abel Mejia Sector Leader Carter Brandon Task Team Leader: Horacio Terraza FOROFFICIAL USE ONLY This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. ARGENTINA NationalUrban Solid Waste ManagementProject CONTENTS Page A.STRATEGICCONTEXT AND RATIONALE................................................... 1. Country and sector issues...................................................................... 2. Rationale for Bank involvement............................................................. 3. Higherlevel objectives to which the project contributes.................................. B.PROJECT DESCRIPTION........................................................................ 9 1. Lending instrument............................................................................. 9 2. Project development objective andkey indicators.......................................... 9 3. Project components ............................................................................. 9 4. Lessonslearned and reflectedinthe project design........................................ 17 5. Alternatives considered and reasonsfor rejection.......................................... 19 C.IMPLEMENTATION.............................................................................. 20 1. Institutionaland implementationarrangements............................................. 20 2. Monitoring and evaluation of outcomes/results............................................. 20 3. Sustainability .................................................................................... 21 4. Critical risks and possible controversial aspects............................................ 21 5. Loadcredit conditions and covenants........................................................ 23 D.APPRAISALSUMMARY ......................................................................... 23 1. Economic and financial analyses............................................................. 23 2. Technical......................................................................................... 24 3. Fiduciary......................................................................................... 25 4. Social............................................................................................. 26 5. Environmental................................................................................... 27 6. Safeguardpolicies.............................................................................. 28 7. Policy exceptions and readiness............................................................. 28 Annex 1:Country and Sector Background.......................................................... 29 Annex 2: Major RelatedProjects Financed by the Bank or Other Agencies................... 38 Annex 3: Results Framework and Monitoring...................................................... 40 Annex 4: DetailedProject Description............................................................... 44 Annex 5: Project Costs................................................................................. 58 Annex 6: ImplementationArrangements ............................................................ 59 Annex 7: Financial Management and Disbursement Arrangements.............................. 62 Annex 8: Procurement Arrangements................................................................. 68 Annex 9: Economic and FinancialAnalysis ......................................................... 1 3 Annex 10: Safeguard Policy Issues................................................................... 88 Annex 11:Project Preparation and Supervision.................................................... 94 Annex 12: Documents inthe Project File............................................................ 96 Annex 13: Statement of Loans and Credits......................................................... 99 Annex 14: Legal Frameworkfor S W M Inter-municipal Agreements........................... 103 Annex 15: Carbon Financeunder the AR-SWM Project.......................................... 107 Annex 16: Argentina at a Glance..................................................................... 110 Annex 17: Map IBRD34461- Argentina............................................................ 112 ARGENTINA AR-NATIONAL URBANSOLID WASTE MANAGEMENTPROJECT PROJECTAPPRAISAL DOCUMENT LATINAMERCIA AND CARIBBEAN LCSEN Date: November 22, 2005 Team Leader: Horacio Terraza Country Director: Axel van Trotsenburg Sectors: Solid Waste loo%, Sector ManagedDirector: Abel Mejia Themes: Pollution management and environmental health (P), Environmentalpolicies and institutions Project ID:PO89926 (P), Climate Change (S) Environmental screening category: Partial Assessment Lending Instrument: Sector Investment Loan Safeguard screening category: Limited Impact ProjectFinancingData [XILoan [ 3 Credit [ ] Grant [ ] Guarantee[ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 40.00 Proposedterms: FSL INTERNATIONAL, BANK FOR 40.00 0.00 40.00 RECONSTRUCTIONAND DEVELOPMENT L O C K SOURCES OF BORROWING 11.68 0.00 11.68 COUNTRY Total: 54.38 0.00 54.38 Borrower: The Argentine Republic ResponsibleAgency: Secretaria de Ambiente y Desarrollo Sustentable (SAyDS), Ministerio de Salud y Ambiente. SanMartin459, Buenos Aires. Director: Dr.MiguelAngel Craviotto (54 114348 8305, acraviotto@medioambiente.g;ov.ar); Coordinador: Lic. Ana Corbi (54 114348 8623, acorbi@medioambiente.gov.ar). Estimateddisbursements(BankFY/US$m) FY 06 07 08 09 10 11 12 0 0 Annual 1.20 9.50 11.70 8.10 6.10 3.40 Cumulative 1.20 10.70 22.40 30.5 36.60 40.00 A. STRATEGICCONTEXTAND RATIONALE 1. Country andsector issues 1. About 60 percent of Argentina's solid waste is disposed in open dumps without sanitary controls. The economic crisis of 2001-2002 worsened solid waste management (SWM) practices, and the lowest socio-economic groups are disproportionately affected by poor service. In particular, the economic crisis forced many families to enter the informal recycling and separation business, which peaked at about 30,000 families in 2002. Extremely high health costs and negative environmental impacts are associatedwith these poor service levels. 2. As the economic situation improves, sub-national (provincial and municipal) governments are becoming increasingly interested in addressing these issues and have requested technical and financial assistance from the Federal Government. At the same time, National Law (Ley Nacional) 25.916, which established minimumrequirements for S W M services, was enacted on September 7 2004. The Secretariat of Environment and Sustainable Development (Secretaria de Arnbiente y Desarrollo Sustentable, or SAyDS) has therefore given top priority to SWM in the National Environmental Agenda. 3. As a first step, the SAyDS requested Bank assistance with the preparation of a National Solid Waste Management Strategy (NSWMS), financed through the Bank's ongoing Pollution Management Project. The Strategy was officially launched by the SAyDS on October 21, 2005, and agreed on by the provincial authorities. The overall objective of the NSWMS i s to protect the health of the population. In addition, the Strategy recommends a wide range of policies and regulatory, institutional, and financial improvements over the next 20 years to achieve sustainable SWM services in all urban areas. The NSWMS emphasizes the following goals: (i) integrated S W M systems countrywide, (ii) strategic planning at provincial and municipal levels, (iii)introduction of regional final disposal facilities, (iv) closure of existing open dumps, (v) adoption of a sustainable cost recovery system, and (vi) establishment of realistic goals for waste minimization, recovery, recycling, and composting. 4. As a second step, the Government of Argentina (GOA) asked the World Bank to provide technical and financial support for the implementation of the NSWMS. Assistance will be provided through an investment operation designed to (i)improve final disposal practices through the constructionof environmentally safe final disposal facilities and closure of open dumps, (ii) support the adoption of policies and regulatory and institutional frameworks that ensure the environmental and economic sustainability of the system at the sub-national level, (iii)provide technical assistance (TA) and training, (iv) support social rehabilitation of informal waste pickers, and, (v) encourage the adoption of long-term recycling and waste minimization policies. The GOA intends to carry out the project in a phased approach according to its implementation capacity. It i s estimated that this project will finance safe final disposal of 20 percent of the waste currently disposed in open dumps. 5. The GOA i s also seeking carbon finance support to improve the project's financial feasibility. As a developing country (non-Annex B) Party that has ratified the Kyoto Protocol, Argentina is eligible to participate in the Clean Development Mechanism (CDM) enabled under the Protocol. Waste disposed in landfills generates gases typically composed of 50 percent methane, a potent greenhouse gas (GHG) that can be captured and flared or utilized. Those emission reductions (ERs) can be negotiated for sale with Annex 1Parties to generate economic revenue for the improvement of current S W M practices. According to the last update of the GHG National Inventory, emissions from landfills represent 7 percent of Argentina's total emissions. 1 6. Finally, the GOA is seeking the Bank's assistance to access grant resources from the Global Environment Facility (GEF) to deal with the closure and remediation of existing open dumpsites. These dumpsites are the main source of dioxins and furans emissions, according to the National Persistent Organic Pollutants (POPS)Inventory. Major Sector Issues 7. Lack of proper final disposal facilities and related health concerns. Argentina collects 90 percent of its solid waste nationwide but disposes only 40 percent of this waste in an acceptable manner. More than 300 open dumps have been identified in the metropolitan area of Buenos Aires alone, and more than 2,500 countrywide. The main reason for the disparity between collection and proper disposal of solid waste has beenthe lack of popular and political will to tackle a problem that could be hidden away (dumps are located outside city limits, not in front of peoples' houses). In addition, before 2003 final disposal was not a priority for local authorities. Changingpublic opinion and a new legal framework are radically modifying this trend. 8. Problems resulting from disposal in uncontrolled dumpsites include inadequate buffering from inhabited areas, uncontrolled access by waste pickers and children, location of dumpsites that usually do not meet environmental protection standards in areas subject to flooding, and, in some cases, commingling of healthcare waste. These practices pose serious health and safety concerns, with hazardslinkedto surface and ground water contaminqtion and breedinggrounds for disease. 9. Lack of cost-recovery policiesfor financial sustainability. S W M expensesrepresent between 5 percent and 25 percent of typical municipal budgets. Currently, the main problem related to the financial sustainability of S W M services is the lack of an effective enforcement policy to ensure that the population pays for the S W M service. In70 percent of the municipalities, only 30 percent of the population pays an S W M fee (known as ABL, or Alumbrado Barrido y Limpieza). In rare cases (less than 10percent), municipalities achieve as high as 80 percent cost recovery because they charge the ABL service together with the electricity bill. To compound the situation, fees are generally set at levels below full cost recovery, and there i s no differentiation in fees for industrial or commercial waste generators 10. Revenues generated through S W M services do not go to a segregated municipal account. Because municipalities typically have general accounts, there is no way to track revenues from SWM. As a result, it i s extremely difficult to assign and maintain a transparent and realistic budget for S W M services. 11. Lackof a regulatoryframework at local levelto deal with solid waste. National Law 25.916 approved by the GOA set the minimum requirements for S W M nationwide. The law's scope, however, is still too broad to include specific economic, technical, or environmental principles, and it needs to be complemented by a regulatory framework. . 12. Few provinces have functioning S W M regulatory frameworks. The provinces need to enact their own laws and regulations, which cannot be less restrictive than the national law. They need to establish roles and responsibilities, particularly for budgetary commitments, to ensure (i) enforcement, control, and penalties, (ii) technical construction standards, (iii) structures tariff reflecting real costs, (iv) efficient cost-recovery mechanisms, (v) implementation of recycling, and (vii) waste minimization policies. 2 13. Lack of institutional and technical capacity. Argentina lags behind other countries in the region in terms of institutional and technical solid waste management capacity. In the country's federal structure, the SAyDS i s the highest authority at national level responsible for domestic S W M policy, but the ministry lacks enforcement responsibilities. Provinces are responsible for establishing and enforcing local regulatory frameworks, but few provinces have enacted legal frameworks, and all lack the economic and technical resources to enforce them. Municipalities are responsible for waste management as well as fee collection from customers. In most medium-size cities, private companies provide satisfactory waste collection services, but in suburbs, informal settlements, and rural areas, these services needimprovement. 14. Strong NIMBY factor. The not-in-my-back-yard (NIMBY) phenomenon has complicated and highly politicized site selection for new landfill sites. In some cases, opposition goes beyond the NIMBY syndrome. In the metropolitan area of Buenos Aires, for example, there are groups opposed to sanitary landfills as a sound technical solution for final disposal. Strong opposition to technically feasible SWM solutions i s a consequence of inadequate communication campaigns, political polarization, lack of public involvement in decision making, and previous negative experience (positive local experience has never been disseminated). As a result, some urban areas face serious problems in siting new final disposal facilities, forcing the municipalities to postpone long-term solutions and maintainthe status quo. 15. Waste pickers in existing open dumps. Waste pickers are found in dumpsites in every medium-size city in Argentina, their numbers fluctuating with local economies and the spot price for recyclables. The waste pickers live and work without basic economic or social security, under conditions that are extremely hazardous to health and detrimental to family, social, and educational development. Society has marginalized these groups, and the informality of their activity makes it difficult to integrate their contribution into the S W M system. Rarely have provinces or municipalities designed social plans to include the waste pickers formally in this sector or in other economic activities. 16. There are two types of waste pickers inArgentina. The first and larger group, called cartoneros, or cardboard collectors, live in the streets of metropolitan areas and are well organized. Duringthe economic crisis of 2001, an estimated 30,000 families were involved in this kind of waste collection. The cartoneros mainly work on the streets separating cardboard and other materials, which i s picked up by intermediaries who eventually sell the separated materials for recycling. The waste pickers in the second group go through waste at open dumpsites in large metropolitan areas Participation of criminals in this second group has been identified, making it more difficult for authorities andnongovernmental organizations (NGOs) to approach them. 17. The Argentina S W M Project does not intend to solve the problem of the cartoneros, but rather will focus on the social inclusion of waste pickers working at the dumpsites to be closed or rehabilitated because of project activities. Project design took into consideration successful social inclusion experience from the region, for example, that of Brazilian Business Commitment for Recycling (Compromisso Empresarial para Reciclagem, or CEMPRE) and Argentina's El Ceibo Project and Ecological Coordination of the Metropolitan State Society (Coordinacidn Ecologica Area Metropolitana Sociedad del Estado, or CEAMSE). 3 Government Strategy 18. In order to address these issues, the GOA has included S W M as a first priority in the National Environmental Agenda. Consequently, the GOA designed an NSWMS that sets realistic long-term objectives and priorities. The main objective of the NSWMS i s to protect human health through the establishment of environmentally, socially, and economically sustainable management of urban solid waste. The document takes a long-term approach, setting 2025 as the deadline to achieve its objectives. The Strategy was revised and endorsedby a Steering Committee representing NGOs, the private sector, and academia and endorsed by the provinces through the Federal Council for the Environment (COFEMA). 19. The specific objectives of the Strategy are listedbelow. 0 Improve waste minimization to reduce waste currently sent for final disposal. Argentina needs to move up in the ladder of waste management to achieve higher levels of waste reduction, reuse, recycling, and recovery; Establish an integrated S W M systemcountrywide; Establish sanitary, safe, and environmentally sustainable final disposal facilities linked to the consequentclosure of open dumps; 0 Improve public participationand communicationinthe decision-making process; 0 Modify production processes, use, and consumption to make them compatible with the sustainableuse of natural resources; 0 Establish and improve sub-national legal frameworks associated with S W M to guarantee environmental and economic sustainability;and Improve local technical and administrative capacity for SWM. 20. These objectives were determined based on a set of basic principles that included regionalization of final disposal facilities, social inclusion of waste pickers, and mitigation of climate change through technical solutions. 21. Short-Term Goals. The NSWMS establishesa schedule and short-term (2005-2007), medium- term (2007-2015), and long-term (2015-2025) goals related to these objectives. Short-term goals include (i)implementation of sustainable integrated provincial S W M and closure of open dumps in at least two provinces, (ii)establishing goals for minimization and recycling rates in those provinces, (iii)development of provincial S W M plans in at least three additional provinces, and (iv) establishment of awareness and communication campaigns in all provinces implementingprovincial S W M plans. 22. Solid Waste Generation. The NSWMS i s the first official document prepared by the GOA to carry out a comprehensive national assessment of SW generation rates and waste composition. The total national generation rate i s approximately 12.325.000 tonslyear, or about 34,000 tonslday, with a remarkable disparity among provinces. The province of Buenos Aires i s the main generator, generating 4,268,000 tonslyear (34 percent of the total), and Tierra del Fuego i s the least significant generator, with only 26,000 tonslyear (0.003 percent of the total). Interms of generation per capita, 4 the City of Buenos Aires tops the list, with an average generation of 1.52 kg/day, and Misiones is at the bottom, with an average generation of 0.44 kg/day. The national average generation rate i s 0.91 kg/day. The most conservative calculation estimates that this average will increaseup to 1.13 kg/day by 2025. Figure 1 shows the average per capita SW generation rate in each province. An analysis of generation rates per province demonstrates, as expected, the correlation between provincial GDP and urban solid waste generation rate (figure 2). 23. Regionalization. International experience demonstrates that shared municipal disposal sites are associated with significant economies of scale infinal disposal costs, as well as increased ability to achieve desired environmental standards. As a result, the GOA i s promoting a regionalization principle for final disposal at the provincial level through the NSWMS. A study carried out by the Bank (Sanguinetti 2005) analyzed final disposal costs in several Figure 1: Average per capita SW generationrate inArgentina,by province municipalities of various sizes across the country. The results strongly support the implementation of regionalization policies and are consistent with the costs estimated by international studies for middle-incomecountries- 300kg/capitdyear in a range between US$8/ton and US$15/ton. Figure 3 shows the result of the analysis. 5 Figure 2: Provincial GDP per Capita andWaste Generationper Capita inArgentina 1.5- 1.4 - 1.3 , - 1.2 - . / t 1.1 ** ' 7 ..L p 0.9 $.** - @ ' * 0.8 2 0.7 1 0.6 - - - -** 0.5 - 0.4 0.1 1 0 1 1,000 10,000 100,000 AR$ Figure 3: Final disposalcosts per ton by size of final disposal facility / Source: Pollution ManagementProject, Argentina,World Bank 2005 6 24. Economic Incentive Program. The GOA has historically considered S W M a "public good," and the design of the NSWMS follows this principle. In part, this position reflects the fact that uncollected and illegally discharged solid waste adversely affects general public health and the environment. Moreover, the GOA recognizes that the health and environmental risks associated with current inadequate final disposal practices represents a high cost for most local governments. Because local governments need an economic incentive and technical guidance to reach final disposal targets established in the NSWMS, the GOA plans to generate a temporary (one-time) Economic Incentive Program to stimulate the construction of environmentally acceptable final disposal facilities. All the Provincial S W M Plans have identified sanitary landfills as the best option for final disposal. The Economic Incentive Program follows successful experiences carried out in the European Union, the United States, Canada, Israel, and other countries. The Economic Incentive Program will finance only initial infrastructure and complementary activities such as closure or rehabilitation of open dumps, TA, and social assistance to waste pickers. Recurrent operating costs will not be financed. The municipalities will have to cover the O&M costs and construction of future cells. 25. National, provincial, and external financing sources will initially fund the overall Economic Incentive Program. The one-time subsidies will flow from the national government to the provinces. Funding will be transparent and available to every province that meets certain technical and financial conditions. The government intends to address disparities in poverty and health indicators across the provinces by providing higherincentives to the poorest provinces, which include some of those most affected by open dumping practices. The provinces will complement the partial subsidy on a cost-sharing basis. 26. Provincial Allocation Formula. Subsidy levels will be determined by a Provincial Allocation Formulathat takes into consideration each provincial poverty index. The total subsidy will have two components. The first component is fixed and reflects the minimumamount of incentive estimated by the GOA to catalyze the transition. The second component i s variable and focuses on compensating for socio-economic differences among provinces (see Annex 4 for individual provincial allocations). This component i s based on an official comprehensive poverty'index called the HouseholdPoverty Index (Zndice the Privacidn Material de Hogares, or IPMH).This index is public and available at the National Statistics Institute (ZnstitutoNacional de Estadisticas y Censos, or ZNDEO . The temporary subsidy formula for the initial works includes the followingcomponents: i)Fixedcomponent:50percentofthecostofthesub-project'sinitialinfrastructure. ii)Variablecomponent:theremaining50percentoftheinfrastructurecost(IC) weightedby the provincial IPMHindex. The proposed equation for the subsidy allocation is shown below: S = IC*0.5 + (IC*0.5* IPMH) where: S = Subsidy for each sub-project IC =Infrastructure cost IPMH =Poverty index expressedinpercentage 7 27. The total subsidy will range from a minimum of 61 percent for the province with the lowest IPMHindex (Santa Cruz) to a maximum of 85 percent for the province with the highest IPMH index (Formosa). The remaining percentage not covered by the temporary incentive will be provided by the provinces. These percentages are only applied to the initial infrastructure costs and not to total project costs (initial infrastructure+ futurecells + recurrentcosts). If compared to the total project cost, the subsidies average 15 percent. 2. Rationalefor Bank involvement 28. The Bank i s uniquely positioned to support the SAyDS in the implementation of the national S W M program. Its recognized technical expertise and ability to act as an "arms length" broker makes the Bank an important partner in addressing the complex public-private issues and arrangements associated with a sustainable S W M service. The project i s fully compatible with the GOA'SS W M Strategy prepared under the Pollution Management Project, which acknowledges the need for a planned, integrated approach to SWM. The impact of Bank activities in this sector will be a tangible solution at low cost in a relatively short period. In addition, the Bank's partnership will bring acknowledged experience in dealing with Carbon Finance initiatives and supporting sustainable S W M practices by providing a revenue stream through the sale of ERs. The project was envisaged in the April 2004 Country Assistance Strategy (CAS), and remains fully consistent with the three pillars that form the basis of that CAS as well as the proposed CAS for Argentina, which i s scheduled to be presented to the Board in the first quarter of 2006: (i) sustained economic growth with equity, (ii) social inclusion, and (iii)improved governance. 3. Higher levelobjectives to which the project contributes 29. The project will contribute to the following higher-level objectives: (i) improvement of public health and quality of life through reducing exposure to pollutants and disease vectors from solid waste, (ii) improvement of institutional capacity at local levels through establishing cutting-edge technical and financial models for SWM, (iii)enhancement of environmental policy through improving the S W M legal and regulatory framework at provincial and municipal levels and facilitating recycling and waste reduction programs nationwide, (iv) improved local governance through enhancing cooperation among sub-national governments, and (v) poverty reduction and social inclusion through supporting social integration of informal waste pickers with training and formalization of waste separation programs. 30. The project's specific goals are to: Develop new environmentally safe and socially acceptable regional landfills as the backbone of final disposal operations and close existing open dumps; Develop legal and regulatory frameworks at the sub-national level; Improve municipal financial management and cost recovery systems to guarantee the sustainability of urban SWM; Ensure the positive social impact of the new S W M system on the waste pickers and informal sectors; Establish provincial and municipal policies relatedto minimization andrecycling; and Apply Carbon Finance mechanisms under the CDM of the Kyoto Protocol to reduce O&M costs for the municipality and encourage good operating practices. 8 B. PROJECTDESCRIPTION 1. Lendinginstrument 31. The proposed project will be financed through a Sector Investment and Maintenance Loan (SIL) operative from the end of FY2006 until FY2011. The project will be followed by two repeater projects to be implemented in FY2011-FY2015 and FY2015-FY2020, respectively, in line with the NSWMS. Repeater projects will be implemented provided a successful performance of the proposed initial project. The total amount of the SIL i s US$40million. 2. Project development objective and key indicators 32. The objective of the proposed project is to improve public health and quality of life by developing environmentally and financially sustainable systems for urban solid waste management in Argentina. Several studies (annex 12) carried out in different parts of the world have demonstrated the strong link between poor solid waste management (open dumps) and the impacts on health through i.e. ground water pollution, disease vectors and air pollution. The specific objective i s to increase the percentage of population served by sanitary landfills within the timeframe of this project. Key detailed performance indicators to measure the results of the project's intervention are listed in table 1below. Table 1: Key Performance Indicatorsfor Monitoring Progress Indicator type Outcomeindicator Proper solid waste disposal' Amount of waste sent to environmentally sustainable and sanitary final disposal facilities Number of open dumps closed r Institutional strengthening Strategic planning for SWM (development of provincial and municipal plans) Enactment of provincial regulatory frameworks Environmental Average percentage increment of formally recycled or composted waste over a 5-year period I sustainability Social sustainability I Improved well-being of waste pickers participating in the project I Financial sustainability Municipal financial management and cost recovery system inplace and agreedprogram for its gradual improvements Global environment and GHG emission reductions and Carbon Finance mechanisms applied to financial sustainability implemented sub-projects 3. Project components 33. Component 1: Policy and Institutional Strengthening (US$4.9 Million). Component 1 will finance TA for the agencies involved in the development and control of sector policies and regulations. This component will also strengthen the national institutional capacity of SAyDS to implement the project. At the local level, it will support the capacity of local authorities to make informed decisions and develop sustainable S W M services. The component will also support the government's long-term planning for S W M incorporated in the National S W M Strategy. All provinces are eligible for this component, which includes the following five sub-components: Several studies (annex 12) carried out in different parts of the world have demonstrated the strong link between poor solid waste management (open dumps) and the impacts on health through i.e. ground water pollution, disease vectors and air pollution. 9 (i)StrategicPlanningandRegionalization. Thissub-componentwillfinancethepreparation of integrated S W M plans at municipal and provincial levels. The project supports regionalization, this is, the establishment of legal multi-municipal final disposal districts in which a single landfill receives the waste generated by several municipalities. The Provincial S W M Plans should include this regionalization concept in their design. The number of sites per province should be consolidated to minimize investments and operating expenses. This regionalization concept will result in significant economies of scale for participatingmunicipalities. (ii)Training Program on S W M and Urban Finances Fundamentals. This sub-component will finance a National Training Program (NTP) on S W M fundamentals to increase the technical capacity of provincial and local governments (see Annex 4). The training will focus on national, provincial, and municipal staff involved in SWM. The sub-component will also finance a specific training programon improving urban finances for S W M through the development and adoption of effective and sustainable financial management. Moreover, this urban finance program will concentrate on cost recovery mechanisms for S W M at municipal level, including training on topics such as calculation of S W M fees, tariff structures, anduser charge collection systems. (iii) Technical Studies. This sub-component will finance the following activities: Preparation of a national recycling strategy through market analysis and incentives for recycling; Sub-projects' recycling market assessments; National and provincial waste minimization programs in line with the NSWMS objectives; and Technical studies for closure or remediation of selected dumpsites. (iv) Public Communication and Outreach Programs: This sub-component will finance TA for the development of Public Communications Programs for the SAyDS and participating provinces and municipalities. The objective of the sub-component i s to increase education and public awareness related to issues such as health and environmental problems linked to open dumping, the role and responsibilities of households in the new S W M system, final disposal technical options and related costs, recycling, and minimization. The expected outcome i s consensus and effective use of the new S W M system financed by the project, decreasing the amount of waste sent for final disposal, limiting the NIMBY effect, and promoting fee collection. Model national and provincial communication strategies adapted to the two pilot provinces will be designed before project effectiveness. (v) Project Management, Monitoring, and Evaluation. The main objective of this sub- component is to support appropriate fiduciary capacity and specialized technical consulting to ensure effective project implementation. The Waste Management Unit in the SAyDS will implement the project. This sub-component will finance relevant personnel (i.e., procurement, environmental, social, and financial management specialists) to ensure the Bank's fiduciary responsibilities (see Annexes 4 and 6 for more details). 10 34. Component 2: Constructionof new landfills and closure of opendumps (US$31.5 Million). This component will finance the construction of environmentally and economically sustainablefinal disposal facilities and closure of existing open dumps. It will also cover infrastructure and equipment for separation and recycling activities as part of the social inclusion plans (component 3). The project will finance composting activities only if a technical and economic study provided by the municipality demonstrates the sustainability of the enterprise. A set of eligibility criteria (section 37) was developed to identify provinces and municipalities that can participate in this component. While all the provinces will be eligible for TA, a limited number will receive funding for investment in final disposal sites inthis first phase. This component includes the following two sub-components: (i)ConstructionofNewRePionalSanitarvLandfillsinEligibleProvinces. Theconstruction of new sanitary landfills covers the following activities: 0 Construction of only the first cell, general civil works, access roads, auxiliary and maintenance buildings, fencing, etc. Containment cells for industrial non-hazardous waste will also be eligible. Sanitary landfills will need to have a minimum lifespan of 12 years and adopt minimum technical standards related to strict environmental pollution control measures (impermeable clay or synthetic liners, leachate drainage and treatment, gas control and flaring systems, monitoring wells, etc.). The SAyDS will be responsible for determining these minimum standards in agreement with the Bank team; and 0 Setting up of transfer stations where deemed necessary based on the results of the Provincial S W M Plans and construction and equipping of waste separation plants in all sub-projects to support recycling programs as part of the social inclusion plans described under component 3. The new separation plants may be installed either at the transfer station, if any exists, or at a location near the new landfills. Eligible sub- projects will need to demonstrate the financial sustainability of the plant based on market assessment studies or social plans to provide a sanitary, safe environment for waste pickers to continue their separationactivities. (ii) orRemediationofOpenDumpsites.Thissub-componentwillfinancetheclosure Closure (and remediation where necessary) of dumpsites in participating municipalities. To access these funds, municipalities will need an operating sanitary landfill in place, a social programfor waste pickers, and atechnical study for the dumpsite closure. 35. Component 3: Social Inclusion (US$1.5 Million). This component will finance the implementation of social inclusion plans for the waste pickers working only at the dumpsites being closed or rehabilitated by the activities under component 2 and in the cases where needed. At the same time, this component will help strengthen national and local capacity to assess and manage complex social issues around the implementation of S W M interventions. During project preparation, a number of successful initiatives were identified both in Argentina and overseas. Waste picker cooperatives have been operating for almost 20 years in Sao Paulo, Brazil, where NGOs provide technical support and private sector companies provide the necessary equipment and training. This component will finance the following specific sub-components: 11 (i) Capacity Building in Social Inclusion and Management. This sub-component will finance the incorporation of a social specialist in the NUSWU, training of provincial and municipal public officers on social issues, and the implementation of tailored social assessments and social inclusion plans at sub-project level. Specific methodologies, including social assessment guidelines for the use of the municipalities, were designed for these activities duringproject preparation. (ii)Technical Assistancefor Micro-enterprises andCooperatives. This sub-component will finance training and technical assistance to establish micro-enterprises and cooperatives of waste pickers. This task will be led by social specialists in the municipalities in collaboration with organizations that have extensive experience in informal garbage collection. (iii)Private-Public Partnerships.The project will supportthe establishment of apartnership between the SAyDS and a network of private companies for example (CEMPRE) interested in promoting more recycling in Argentina. This model was tested with great success in Brazil, where private companies, informal waste pickers cooperatives, technical NGOs, and the government came together to provide integral solutions to this issue. 36. Design and preparation of the social inclusion plans started as part of the project preparation activities. More case specific details of the social inclusion plans will be defined after the project becomes effective but long before the new final disposal systems begin operation. Also at the same time, the provincial S W M units will carry out the necessary market studies for recyclables. Actual implementation of each sub-project's social inclusion plan (recycling activities) will occur once the new final disposal system has begun operations and separation facilities have been built. Meanwhile, the wastepickers will be able to still carry out their activities in the original dumpsite duringthe time of the construction of the new landfillfacility. 37. Eligibility Criteria. All provinces will be eligible for TA (Component l), only selected but provinces will receive funding for investment in final disposal infrastructure (Component 2). Eligibility for Component 2 will be based on demonstrated local needs and priorities, readiness to work with other municipalities and assume ownership of the project, willingness to attain financial sustainability, and selection of environmentally safe and cost-effective solutions. Participating provinces and municipalities seeking financing will be able to meet the eligibility criteria gradually through different stages of project preparation. Table 2 describes these criteria indetail . Table2: EligibilityCriteriafor Component 2 Stage Description 1. Provincial S W M Plan developed with municipal participation and approved by provincial authorities and the NUSWU. The Plan must include the following: (i) Regionalization scheme based on province-specific technical economic analysis Pre-selection (ii) Plan for closure of dumpsites (iii) Introduction of appropriate sanitary landfills in conjunction with separation plants and an action plan for a SW minimization program or I2. Municipal S W M Plans for those cases involving only individual 12 municipalities. 3. Provinces have drafted a legal and regulatory framework for SWM. 4. Landfill siting process concluded, including Environmental Impact Assessment (EM) and Public Consultation Process of the alternative locations. 5. Land Titling: Municipalities will have to demonstrate legal ownership of the land, or legalusage rights satisfactory to SAyDS and the Bank 6. Participating municipalities have signed a Inter-MunicipalRegional Agreement (IRA) includingthe following2: (i) A legalentity tomanageandsuperviseasharedlandfilland transfer stations. Only in specific cases will an entity be eligible for landfill operation. IRAs should include a cost- sharing agreement based on objective criteria such as population or tonnage. (ii) Participatingmunicipalitiesagreetocompensateadequately host communities for real or perceived nuisances (if needed). (iii) Municipalities draft an ordinance or by-law requiring commercial establishments, industries, institutions and other large generators to pay a differentiated fee for hauling and Sub-project final disposal of waste at the regionallandfill. Selection: Prior to approvalfor 7. Provincial - SAyDS Subsidiary Agreement signedand through which: investment financing (i) The province commits to complement the federal subsidy on cost sharing basis for the construction of a regional landfill and transfer station construction according to SAyDS parameters. (ii) The establishment of provincial and municipal technicalteams i s required to implement the project. The team's technical characteristics and responsibilities will be described in the Operations Manual (OM). 8. The province and municipalities have incorporated social specialists into their project's teams. 9. Municipality or consortia of municipalities have developed a proposal for increasing their cost recovery efficiency through a tariff scheme that will enable them to guaranteea minimumlevel for economic sustainability of the new S W M (landfill) service. This minimumlevel should include the attention to both the fee3price and the fees' collection rate. The SAyDS and the Bank will approve this proposal. 10. Provincial-Municipal Agreement signed, ensuring the economic sustainability of the operation of the new landfill. The agreement will make clear that the municipal economic contribution for operation will be * SeeAnnex 14 Legal Framework for Inter Municipal Arrangements for further detail The fee refers to the value calculated accordingto the tariff scheme and which is neededto recover the full cost of constructing, operating and maintaining the new landfill. 13 guaranteedby the provincial co participationfunds. 11. In the cases where the municipality or consortia of municipalities have the intention to provide themselves the operation and maintenance services for the future landfill, they are required to provide proof of having the necessary equipment, technical capacity and adequate personnel needed to operate properly the facilities prior to issuing the public tender for designing and building the new landfill. The SAyDS will evaluate this operation and maintenance capacity and determine if it i s acceptable. Sub-project 12. Participating municipalities will seek carbon financing by capturing execution: and flaring and/or utilizing landfill gas, or by composting or recycling to Prior to release of reduce methane emissions in the atmosphere. In turn, the revenues will fundsfor landfill contribute to the sustainability of the S W M system through the provision construction of additional resources. The participating municipalities agree to transfer ownership rights of the landfill gas to the regional operating entity (consortium of municipalities). 13. Municipalities or consortia have agreed to apply the social development framework addressingthe needs of informal waste pickers at dumpsites, if applicable. Prior to release of 14. Social Inclusion Plans have been duly consulted with the affected fundsfor waste picker groups and their views and concerns have been taken into closure/rehabilitation account inthe design of the Plan. of open dumps. 15. Construction of the recycling facilities has been completed and the social inclusion plan i s ready to be implemented 38. Transparency and Private Sector Participations. Inorder to ensure a transparent process and provide a level ground for private sector participation during the bidding process, the GOA prepared a model of bidding documents for designing, building and operating landfills in compliance with Bank Procurement Policies. The final version of the model documents are being reviewed by the Bank and are expected to be approved before Board Approval. The municipalities participating in the project that wish to issue an International Competitive Bidding process for construction of the new landfills will have to follow this model. In addition, the Secretary of the Environment and Sustainable Development will appoint a high level civil servant to oversee the evaluation of proposals and the selection processes. 39. The task team carried out an extensive analysis of the private sector through a consulting process with the most experienced local firms in S W M sector, particularly those providing final disposal services. Most of the medium and large size municipalities have a private or sedprivate collection and transport service. In terms of final disposal, the sector i s divided into two types of firms, according to the company size, those operating in medium and small cities ( up to 200 todday of waste generation) and those operating in large urban centers (above 200 todday). It is estimated that there are at least 5 companies of the first type capable of proving this type of service at an adequate level and at least another 5 in the second group. The legal contracts, both for collection/transport and final disposal, are generally long term (between 5 and 20 years) and municipalitiesare familiar with them becauseof the existing collection and transport services. 14 40. Individual Municipalities.Only in exceptional cases (to be evaluated by the SAyDS and the Bank), will specific individual municipalities be eligible for financing. These exceptional cases include (i) municipalities that because of their distance from other municipalities cannot establish an economically viable inter-municipal agreement for final disposal and (ii) municipalities with significant environmental impacts or risks due to lack of adequate final disposal facilities in provinces that are unable to develop provincial S W M plans. Individual municipalities will also have to comply with all eligibility criteria in table 2 with the exception of sections 1and 3. 41. Coordination with Other Operations inthe Sector.The Inter-American Development Bank (IADB) has expressed interest in investing in the solid waste sector. In response, the GOA has agreed that in case it would seek additional financing from other donors for further investments in SWM, the new projects will strictly follow the eligibility criteria established under this Loan Agreement. 42. As this loan is being prepared, the GOA is starting to negotiate an additional loan with the IDB for the S W M sector. The Bank team has conducted preliminary meetings with IDB officials. The IDB project amount will be approximately US$10million, and the project is at an early stage of preparation. It was agreed that the two institutions will work on a complementary basis, with the IDB supporting small sub-projects in provinces that have already complied with the eligibility criteria. It was also agreed that the IDB operation will follow in all cases the eligibility criteria established for this project. 43. Project Component Cost and Financing. Table 3 details the resources allocated to each component according to its funding source. Table 3: ResourcesAllocatedto PrqiectComponents Percentage Bank Local Percentage Component Indicative cost (US$) of project tot& financing financing of Bank (US$) (US$) financing 1) Policy and InstitutionalStrengthening s 7,600,000 14% S 4,900,000 S 2,700,000 9% - Strategic Planningand Regionalization - Cost Recovery and SWM Training - TechnicalStudies - PublicCommunication - ProjectManagement 2) Constructionof new landfills and closure of opendumps $43,180,000 79% $31,500,000 $11,680,000 58% - BasicLandfill Infrastructure - Constructionof First Cell - MethaneCapture System - RecyclingPlant - Closure/Rehabilitationof Dumpsites - O&M (100%local financing) 3) SocialInclusion $1,500,000 3% $1,500,000 $ - 3% \ - Implementationof Social Plans - TA for Micro-enternrises IIUnallocated $2,000,000 4% I $2,000,000 I 4% FrontEndFee II $100,000 II I $100.000 II I II Totalprojectcosts I $54,380,000I 100% I$40,000,000 I $14,380,000 I 74% 15 Note: The amount indicated in the Social Inclusion Component does not include equipment financing. This will be financed throughcomponent2. 44. Provincial Readiness. Project preparation included an assessment to determine provincial readiness to implement the investment component (Component 2). Based on the results of the assessment, provinces were initially classified in three groups (although some may move up, depending on efforts made over the next few years) according to the followingcriteria: (i)GroupI: Provinces that are expected to comply with the project's eligibility criteria before or within the first months of project effectiveness and be ready to start and/or finish sub- project implementation during the first 2 years of the project. There i s a small possibility that some of these provinces may request financing on a retroactive basis. (ii) 11:Provinces that have clearly given priority to SWM in their environmental Group agendas, drafted legal regulatory frameworks in accordance with the National Law, initiated dialogue with the national government on a technical and financial solution for SWM, and agreed to the basic eligibility criteria. The project will assist these provinces to comply with eligibility criteria duringthe first year of implementation. Selected sub-regions of these provinces that comply with the eligibility criteria are expected to receive investment financing duringthe later years of the project. (iii) 111:ProvincesthatapparentlyhavenotprioritizedSWMorestablisheddialoguewith Group the national government at project design stage. The project will assist these provinces to comply with eligibility criteria duringthe first year of implementation. Selected sub-regions of these provinces that comply with the eligibility criteria may receive investment financing duringrepeater operations. 45. Table 4 lists the provinces ineach of the three groups according to their readiness. Table 4: ProvincialReadinessfor Component2 IGroup Province I Tucumin,Chubut,Mendoza,SantaCruz I I I1 Salta, La Rioja, Formosa, Santa Fe, Entre Rfos, San Juan, Cbrdoba, Jujuy 'I1 Buenos Aires, Corrientes, Santiago del Estero, Catamarca, Neuqutn, Ri6 Negro, L a PamDa, San Luis, Tierra del Fuego, Misiones. Chaco 46. Carbon Financing. Greenhouse gas ERs can be instrumental in turning an environmental liability into a resource that can generate an economic revenue stream to improve current S W M practices. Through the inclusion of a strong Carbon Financing (CF) component, the project intends not only to benefit from the economic revenues, but also to support national capacity to design and implement effective climate change mitigation policies. The economic revenue will contribute only marginally to financing O&M costs. The project will draw from the experience of Landfill Gas (LFG) projects implemented by the Bank in the southern cone, for example, the Global Environment Facility (GEF) project in Maldonado, Uruguay, and CF operations in the Olavam'a and Montevideo landfills. In addition, the project will coordinate activities with the Argentina Carbon Facility to generateunderlying finance and innovative financial operations. 16 47. The proposed project i s innovative because it i s the first fully blended Carbon Finance operation within a programmatic S W M lending operation. This design follows the main regional recommendations for best practices in CF, Le., mainstreaming CF in regular lending operations and applying programmatic approaches to scale up the size of the operations. To guarantee benefits from the CF revenues, the project includes technical and contractual conditi,ons in its eligibility criteria. First, it i s mandatory for each participatingmunicipality, or municipal consortia, to include a landfill gas capture and flaring system in the engineering design. Second, it i s mandatory for the consortia to sell its ERseither to the Bank or to some other broker or developer. 48. Between 1.2 million and 1.5 million tons of COzequivalent could be mitigated and sold until 2012 through the implementation of the pre-identifiedsub-projects. At current international carbon prices of US$6.0-US$7.0 per ton C02 equivalent, this represents approximately US$bUS$10.5 million. These additional revenues may represent a reduction in a range of 10percent to 30 percent of the O&M costs of the final disposal operation. 49. A bundlingapproach has been developed for national endorsement and Emissions Reduction Purchase Agreement (ERPA) signature. The framework agreement in Annex 15 was prepared in collaboration with the Designated National Authority (DNA) of Argentina-represented by the SAyDS-to obtain only one endorsement for all the sub-projects participating in this project. In addition, project design included preparation of a template for the Letter of Intent (LoI) and ERPA to be negotiated between participating municipalities and the Carbon FundBusiness Group (CFBG) of the World Bank. These measures would allow all the sub-projects to be bundled together to avoid the administrative requirements of individualproject processing. All the sub-projects that eventually decide to sell their ERs to the World Bank's CFBG will be eligible for up front financing of 25 percent of the negotiated ERs. 4. Lessons learned and reflected inthe project design Countrywide 50. The Bank's previous experience in Argentina's SW sector includes the AR-Pollution Management (AR-PM) Project, the Olavam'a Methane Capture Project, and the Second Municipal Development Project (MDP-IT).The objective of the AR-PM Project was to strengthen the capacity of SAyDS through innovative pollution management instruments and initiatives. The project components included support for SWM-related activities such as preparationof the NSWMS, S W M plans for two provinces (Chubut and TucumBn), and S W M plans for several municipalities across the country. The proposed project will provide part of the necessary funding to implement the NSWMS and the related Provincial S W M Plans. The Olavam'a Methane Capture Project i s a carbon-offset activity whose main objective i s to reduce greenhouse gas emissions and improve S W M practices in the Olavam'a landfill. The MDP-I1financed trucks in several municipalities, the design of the Provincial SWM Plan of the province of L a Rioja, and civil works included in Rioja's plan. The following conclusions drawn from those projects were incorporated in the design of the proposedproject: (i)Inadequatetechnical capacitv for strategic planning. Local governments lack adequate technical expertise to develop SWM strategies and plans. Inaddition, the private sector on many occasions has not delivered work to the expected technical standard. Previous experience clearly points to the needto work with more experienced and specialized firms; (ii)Publicparticipationandcommunication. Experienceclearlydemonstratesthatwithout a strong public participation and communication component to address public concerns, the project is doomed to fail; 17 (iii) cost recovery. Low costrecovery is not strictly relatedto customer affordability. Low Simple modifications in the bill collection system, for example, tying a SW surcharge to bills for utilities such as electricity, result inessentialcost recovery improvements. Low cost recovery i s also linked to a municipal culture in which people often treat environmental services as quasi-public goods. This issue i s evident in SW final disposal practices; (iv) Lack of regionalization. There has been poor collaboration among municipalities in clustering landfill operations. The trend has been to build individual city landfills when possible, ignoring the economies of scale derived from cooperative inter-municipal programs. This is a consequence of poor federal and provincial legal and regulatory frameworks as well as a lack of incentives; (v) Lack of integrated solid waste management solutions. Despite improvements in SW collection during the past 20 years in Argentina, final disposal is still poor. Most landfills built in previous Bank-supported municipal projects were not well operated. One of the main reasons for this failure was the fact that the construction of the landfill was an isolated activity instead of an integral part of a comprehensive system. In addition, no cost recovery analysis and strategy were ever linked to the construction activity; and (vi) Carbon Finance. The economic value of potential ERs from methane capture in landfills could become an essential tool in financing final disposal O&M; It has been estimated that the revenues from ERs could cover between 10 percent and 30 percent of the landfill's O&M costs. Worldwide 51. International Bank experience with municipal S W M projects was taken into account during project preparation. The Mexico SecondS W M Project, the Bosnia and Herzegovina S W M Project, the Tashkent S W M Project, and the recent solid waste sector work in China highlighted issues common to such projects and provided important lessons. Of particular interest was the Mexico project, which encountered numerous implementation difficulties because of the country's economic situation at the time. Some parallels can be drawn with the present Argentinean economy. The main conclusions of the project's Implementation Completion Report (ICR), listed below, were important indesigning this proposed project. (i)ofInvestment financing. Municipalities may determine that they can live with a primary level environmental quality and public health protection, based on their level of income. However, provincial or central governments may require them to meet a higher standard. To help municipalities reach a higher standard of environmental protection, it i s appropriate to create financial or economic incentives for municipalities that meet the targets. This i s common policy in the EU.In the Mexico Second S W M Project, the financial incentives for constructing landfills were on an on-lending basis from federal to regional governments. This scheme proved inadequatebecause there was almost no demand. The ICR concluded that an incentive type of scheme using one-time partial grants would have been more successful: (ii)SocialdeveloDmentprogramsandcommunicationstrategies.Thesestrategiesneedtobe mainstreamed into infrastructure financing programs and includedas criteria for eligibility; (iii)Technical support.Trainingandtechnicalassistanceforadministrationofinter-municipal consortia i s necessaryto avoid delays and achieve long-term improvement in S W M interms of both efficiency and environmental protection; and 18 (iv) Remlatorv framework and institutional capacity. Proper legislative and regulatory frameworks need to be in place at provincial level prior to any investment. Moreover,, provincial and municipal solid waste institutions need to be adequately staffed and independently funded in order to avoid project implementation problems and assure sustainability of the system. 5. Alternatives considered and reasons for rejection 52. The following alternatives were analyzed during project design: (i)agreed On lending vs. on manting. After discussions with the GOA and upon their request, it was that the project would support the national government's proposed program to provide incentives to provinces or group of municipalities. Under this program, the provinces would be responsible for complementing the partial subsidy on cost-sharing basis, varying according to a poverty index (IPMH). The GOA'Sjustification for this program i s that the significant implications of environmental and social externalities associated with poor S W M practices. In addition, this type of subsidized scheme has proven successful in many countries of the world. The Bank agreed to adopt this approach, in an on-granting manner more consistent with its existing health portfolio than with its existing municipal infrastructure portfolio, on the basis of the public health and environmental externalities to be gained, as well as the good practice documented from OECD countries. (ii)APL vs. SIL. As discussed at the Project Concept review stage, the project will be implemented as a Sector InvestmentLoan (SIL) followed by repeater projects rather than as an APL. The reason for this i s the large number of pre-existing Adaptable Program Loans (APLs) in Argentina's project pipeline, not the characteristics of this project per se; (iii)Incineration vs. landfills. All the proposed Provincial SWM Plans have identified the landfill as there final disposal technological option and the Bank team supports this decision. The main reasons supporting landfilling are: it is the most cost-effective technology, guaranteeing environmental protection and health safety, it i s a globally proven technology, that the country has ample land available, and local expertise and technical capacity are available for adequate construction and operation of landfills. This technological solution will be coupled with recycling and waste minimization programs. These programs are expected to grow overtime. Incineration was not considered viable because of extremely high investment and operating costs, limited technical capacity for operation, limited capacity for government enforcement, and hazardous emissions and health impacts associatedwith the risk of poor operational practices; (iv) Municipal solid waste vs. other wastes. The government strategy i s to concentrate initially on municipal SW to support the new S W M National Law and NSWMS. Municipal SW includes industrial, commercial, and institutional waste with similar characteristics as domestic waste. Hazardous wastes require special management capacity that must be built up inthe private sector by licensed operators; and (v) Regional landfills vs. smaller sanitarv landfills. Shared municipal landfills through cooperation among numerous municipalities are necessary to maximize the benefits from improved sanitary landfill standards. Economies of scale dictate that the costs of maintaining more and smaller sanitary landfills for individual municipalities conforming to 19 the same standards would result in much higher costs that would not be cost effective and cannot be sustained in the current fiscal situation. Furthermore, it i s unlikely that smaller- scale landfills can provide the same level of environmental protection (for example, LFG collection and utilization i s not as efficient at smaller scales). C. IMPLEMENTATION 1. Institutionalandimplementationarrangements 53. The National Urban Solid Waste Unit (NUSWU) within the SAyDS will execute the project and be responsible for all technical and fiduciary aspects, overall project management, and monitoring and evaluation. This new group will comprise the S W M staff already working at the SAyDS and use the existing staff of the Pollution Management (Loan 4281) executing unit. The staff roster has been submitted to the Bank for review. The NUSWUwill be appropriately staffed in terms of procurement, environmental impact assessment, financial management, SWM, strategic planning, social issues, and communications. Overall implementation will be the responsibility of the project's National Director, a SAyDS staff member. According to the new Bank policy, the project will finance fiduciary-relatedpersonnel and specialized consultants. A group of consultants from the existing Pollution Management PIU will beeome employees of the new NUSWU, and their positions will be financed ina phased-outapproachfor the first 3 years of this project. 54. The NUSWU will be responsible for the following activities: (i)application of fiduciary responsibilities, including approval of the Sectoral Environmental Assessment and Environmental Management Framework to comply with World Bank's safeguards, (ii)approval of Provincial S W M Plans, (iii)evaluation of compliance with eligibility criteria, (iv) liaison with provincial managementand technical teams, (v) technical advice to provinces and municipalities in developing S W M strategies and plans, (vi) development and implementation of the national S W M training program for provincial and municipal authorities (an NGO will be hired to provide training), and (vii) supervision of social programs. 55. A project Operational Manual (OM) will include all rules and regulations for the operation of the NUSWU (planning, monitoring, evaluation, institutional arrangements, environmental review, reporting, communication, human resources, coordination, procurement, and financial management) and implementation of each project component. Specific annexes to the O M will include templates for the EWA and Nation-Province subsidiary agreement, samples of inter-municipal agreements, a sample provincial legal and regulatory framework, and minimum technical standards for landfill construction. The O M and any changesto it will require no objection from the Bank. 2. Monitoringandevaluationof outcomes/results 56. For proper monitoring and evaluation of key outcome results, the team has established a set of monitoring indicators (Annex 3). The NUSWU will prepare semi-annual progress reports and submit themto the Bankfor review. These reports will describe progress inthe various components and measure performance against indicators in the following areas: (i) implementation of civil works contracts, (ii) execution of works, (iii) training, (iv) development of Provincial S W M Plans, (v) social and communication programs, (vi) an environmental report indicating measures undertaken in each sub-region to ensure compliance with Bank safeguards, and (vii) activities performed by the NUSWU. 20 57. The semi-annual reports will also include information regarding disbursements and forecasts for the next period. The impacts of the project (e.g., enhanced waste disposal, closure of dumpsites, increased cost recovery, increasedrecycling, reduction of negative environmental externalities) will be assessed at mid-termreview and project completion. 3. Sustainability 58. Long-term sustainability of SWh4 programs was a central objective throughout project preparation. The followinginterventions are expectedto contribute to sustainability: (i) Strategic planning and regionalization through integrated, comprehensive, and technically robust Provincial SWM Plans that will lead to the construction of proper sanitary landfills, taking into account economic, environmental, technical, and social considerations; (ii)Successfuloperationandclearrulesofassociationforinter-municipalconsortiatoensure proper managementof the newly createdsolid waste system; (iii)Achievement of financial sufficiency by gradually increasing revenues through an adequatetariff system, improved fee collection, and consequentcost recovery; (iv) Mainstreaming the capture of LFGto generate CERs, therefore reducing operational costs and guaranteeing proper long-termoperation of the landfill; (v) Guaranteed municipal consortia contributions for landfill operation through provincial transfers (fondos de coparticipacidn provincial); (vi) Implementation of sub-projects only in provinces and sub-regions with demonstrated ownership, commitment, and demand for services; (vii) Implementation of communication campaigns and participation of stakeholders in decision-making; and (viii) Adequate technical training for municipalities and provinces. 4. Criticalrisksand possiblecontroversialaspects 59. Table 5 lists the project's potential risks and mitigation measuresto address them. Table5: ProjectRisks andMitigationMeasures Riskto Project Development Objectives (PDO) iRisk Riskmitigationmeasure lrating (i) Lack of sustainedpolitical will to committo (i) Financial,institutional, andregulatory financialsustainability of the project; cost- eligibility criteriahavebeen set to guarantee recovery issuesand difficulties in enforcing sustainabilityand preparethe provincesand collectionfee charges or tariff increases municipalitiesto access projectfunding. Financialsustainability is assured through mandatory minimumcost recovery at project entry and mandatoryincrementincollection of user chargesover time for participating municipalities.Moreover, institutional eligibility criteria will includethe signature of provincial-municipalagreementsin which the municipalitiescommit to providing necessary fundingfor final disposal operations. This committed funding will be guaranteedthrough provincialtransfers Cfondosde co-participacidn provinciales). 21 (ii)Politicaldisagreementsbetweenfederaland L i)Asaresultofthefirstconsultationseminar, provincial/municipal governments the SAyDS received strong commitment from the provinces. Meetings between provincial governors and the Ministry of Health have taken place, and strong support has been ensured. Some of the participating provinces have already earmarked the counterparting funding, and in one case the province will start the civil works by the first half of 2006. Riskto componentresults Riskmitigationmeasure Component 1 (i,DelaysduetotheNIMBYeffect: s i) Countrywide consultation started as part of Communities may not support preparation of the preparation of the NSWMS, which was Provincial SWM Plans and construction of launched in October 2005. The NSWMS sanitary landfills because of lack of received wide support from the provinces, information or participation. private sector, academia, and the best-known NGOs. There i s a strong opposition from a limited number of small NGOs that do not accept dialogue with the government. A National Steering Committee representing all the above-mentioned sectors was set up by the SAyDS to review and comment. A communication campaign is under preparation at national level, and specific provincial campaigns will follow before construction of landfills begin. (ii) oftechnicalandmanagerialcounterpart Lack L ii)Eligibilitycriteriawillincludeestablishment capacity at national and local levels, of a specialized project team in the SAyDS particularly to prepare provincial SWM plans and coordination units at provincial level. A National Training Program on SWM and CF will be implemented. A toolkit including "model" legal inter-municipal agreements, provincial legal frameworks, bidding documents, contractual agreements and a set of minimum standards for landfill construction (SAyDS decree) were developed as part of project preparation. Component2 (i) Lack of private bidders for designing (i) The GOA has prepared a model bidding building and operating the proposed new document in accordance to the World landfills. Bank's Procurement Policies that will ensure a transparent process. Inaddition the GOA has assessedthe potential interest of private companies to participat inthe biddingprocesses. Also the potential revenues from Carbon Finance and the fact that the funds will come mainly from the Federal Government are important incentives for private sector -_`. participation. -*--_*-*--*-*-*-M-- (ii) Poor performanceby the legalentities (ii) The modelInterMunicipal Agreements establishedto manage and supervisethe to be usedunder the projectestablishesthe newly constructed landfills. legal and financial guidelines for the entities, based onbestpractice. The IMA clearlydefines responsibilitiesand organization of the consortiums so to ensure properfunctioning. Inaddition, training under component 1of this project will be providedto help strengthenthe capacity of localpersonnelto perform their tasks. Component3 (i)Delaysinsolvingsocialissuesrelatedtowaste M (i)A socialassessmentwas carriedoutduring pickers projectpreparation to develop adequate social programs for waste pickers.A toolkit is beingpreparedfor the establishment of "social" companies, and El Ceibo, an experiencedand organizedgroup of waste pickers, has beenhiredas aconsultinggroup to leadthe dialogue with provincial waste pickers. L=Low; M=Medium;S=Substantial 5. Loanconditionsand covenants 60. The Loan Agreement does not contain any condition of effectiveness. D. APPRAISAL SUMMARY 1. Economic andfinancialanalyses 61. Project preparation activities included the elaboration of different economic and financial studies. The first of these was an assessment of the costs and benefits of the potential sub-projects to be implemented under component 2 (Construction of Regional Landfills). The study (Sanguinetti 2005) identifiedand quantified the private, environmental, and social costs associated with both the current SW final disposal practices (open dumping) and the possible future implementation of the sub-project (Regional Sanitary Landfills) in a group of selected municipalities and analyzed and compared the costs and benefits of both scenarios. The main conclusion was that the overall costs of implementingenvironmentally sound final SW disposal systems are lower than the current costs of open dumping once the externalities on the environment and people's health are taken into account. A summary of the study i s includedinAnnex 9. 23 62. An additional assessment was made of the financial and economical aspects of SWM in selected Argentinean provinces and municipalities. The analysis showed that most municipalities currently have severe deficiencies in the financial management of SW services. Insome case, S W M cost recovery may be as low as 19 percent (see Annex 1). Moreover, municipal governments lack precise cost accounting registries, making it difficult to plan S W M budgets and design efficient tariff systems. With this in mind, the project design included as part of component 1training in budgeting, cost accounting, and financial monitoring to improve urban finances in the participating municipalities. To strengthen S W M financially and ensure the sustainability of project interventions, the team included in the eligibility criteria for component 2 minimumrequirements for cost recovery, such as the implementation of a tariff system that would allow at least to achieve a 50 percent cost recovery. Finally, the assessment showed that the fiscal impact of the project (Annex 9) i s marginal in the budget of the Ministry of Health and Environment and moderate compared to the expenses allocated to environmental activities in the provinces and municipalities. 2. Technical 63. The project supports the promotion of integrated S W M practices in Argentina through the construction of treatment and final disposal facilities operated by multiple municipalities. The location and design of the regional sanitary landfills depend on environmental, economic, social, and operational considerations. Those parameters will be determined from the results of studies carried out to prepare the Provincial S W M Plans. The technical characteristics of the sanitary landfills will comply with environmental and safety standards set by the Federal Government and the Bank's safeguardpolicies. The project will finance the following activities: (i)PreparationofProvincialSolidWasteManagementPlans; (ii)Constructionofthelandfill'sbasicinfrastructureandthefirstwastedisposalcell(expected useful life of 4 years); (iii) Construction of a recyclingfacility where feasible; (iv) Construction of transfer stations where necessary; (v) Construction of a landfill gas capture and flaringsystem; (vi) Design of minimization plans; (vii) Communicationcampaigns; and (viii) Closure of open dumps. 64. The design of the new sanitary landfills will take into consideration the need to maximize generation and capture of methane in order to benefit as much as possible from Certified Emission Reduction potential revenues. Therefore, the landfill cells will have to comply with the following minimumdesign standards: (i)Sequencedfilling in phasesof a minimumof 3-4 years to achieve depths of more than 10 m; (ii)Bottomlinerwithaguaranteedpermeabilityoflessthan1xlo-'ds; (iii)Leachatecollectionandtreatmentsystem; (iv) Landfill gas collection system; (v) Daily cover; and (vi) Final cover with a maximum permeability of 1x d s . 24 3. Fiduciary 65. This section discloses findings and agreements from the Financial Management Assessment prior to PAD distribution to SECBO. This assessment has taken into consideration the experience and general performance of the existing PIU for the Bank-financed Pollution Management Project, Loan 4281-AR (P006052): effectiveness 04/27/1999, closing date 12/31/2005, loan amount US$6 million (original amount US$l8 million, cancelled US$12 million). The Financial Management Assessment found the PIUof the existing Pollution Management project to be appropriately staffed in terms of financial management, with support provided by SAyDS. This project will assume financial managementresponsibilities for the proposed project. 66. The aim of the Financial Management Assessment is to determine whether the implementing entity of the proposed project has acceptable financial management arrangements in place in accordance with the guidelines issued by the Financial Management Board on June 30, 2001, and revisedon October 1, 2003. The assessment will analyze to what extent the FM system ensures that (i) areusedonlyfortheintendedpurposesinanefficientandeconomicalway,(ii) funds accurate, reliable, and timely periodic financial reports are prepared, (iii) the entity's assets are safeguarded, and (iv) assets are subject to acceptable auditing arrangements. The proposed financial management arrangements meet minimum Bank requirements, and the NUSWU has sufficient capacity and resourcesto implement them. 67. While project implementation involves provincial and municipal participation at technical and institutional level, the FM responsibilities will remain at central level. The NUSWU, with a simplified flow of funds, will direct the flow of funds from the central level to the consultant or supplier bank account in participating areas. The NUSWU will be in charge of project coordination and in control of implementation. The NUSWU has already participated in the Pollution Management Project, which i s still under implementation. Taking into account the experience and performance of the existingunit,no relevant issues are expected 68. The Financial Management Assessment will result in an Action Plan comprising proposed FM improvements to be carried out by the borrower for its full implementation. The following main issuesidentified to date will be included inthe Action Plan: (i)execution Set a separate budgetary line in the Ministry's annual budget to keep track of project (prior to effectiveness); and (ii)Adjust the existing Administrative Operational Manual, which comprises the internal control system and procedures to be implemented, and submit it for Bank approval. Adjustments will include preparing the Chart of Accounts for the project, agreeing on format and contents of the annual financial statements and the FMR format for monitoring and evaluation purposes, and setting up terms of reference for the external auditing. 69. Works initially financed with counterpart funds by participating provinces and municipalities, and the O M will contain provisions about the way this counterpart funds will be provided. Funds will be transferred from Provinces and Municipalities to a dedicated account before the initiation of works on those municipalities. 25 70. Procurement activities will be carried out by a NUSWUlocated at the National Directorate of Environmental Management of SAyDS. The NUSWUwill take advantage of the existing Pollution Management (Loan 4281-AR) PIU. The Procurement Capacity Assessment revealed that the existing PIU is appropriately staffed in terms of procurement and that legal support i s provided from SAyDS. The procurement expert is a civil engineer with good experience in Bank procurement. An Independent Procurement Review to the 4281-AR carried out during project implementation, did not.reveal any issue of particular concern. Procurement risk i s rated as AVERAGE. 4. Social 71. Inthe first half of 2005, government counterparts of the SAyDS, in close coordination with the Bank's technical team, commissioned a social assessment to better understand the possible impact of the proposed project on individuals and communities who depend on their work as waste pickers at the dumpsites. Inaddition, the assessment determined ways to constructively integrate provincial and municipal authorities, community actors, and neighbors during the design and implementation of the project. 72. GOA officers commissioned the consulting firm SIGLA to cany out the study and monitored its implementation in close coordination with Bank technical staff. The study included a comprehensive methodology based on a literature review; analysis of secondary data; focus group discussions with neighbors, merchants, informal waste pickers, and civil society leaders; in-depth interviews with local and provincial authorities, service providers, informal waste pickers, recyclers, and civil society organizations; and a survey of 1,260 waste producers. Field work was conducted in two provinces (Chubut and Tucum6n) in six locations (San Miguel de TucumBn, Concepcih, La Cocha, Trelew, Comodoro Rivadavia, and Esquel). In addition, and in the framework of the Sectoral Environmental Assessment (SEA), a second consulting firm, Cooprogetti, interviewed over 100waste pickers at dumpsites. 73. The main findings of the social assessment are summarized below and presented in greater detail inAnnex 10. (i) Informalwastepickersoperateinmanyoftheappraiseddumpsites; (ii)Wastepickersmigrate,followingnewfinalwastedestinations; (iii)Inmanycases,childrenhaveaccesstodumpsitesandworknexttotheirparents; (iv) Waste separation at origin can be done with well-structured public education campaigns at extremely highcost; (v) Informal waste pickers are not homogenous groups and tend to resist formalization; (vi) Successful and sustainable solid waste management projects require the development of social activities; (vii) There is room for private sector involvement along the lines of the companies' corporate social responsibility agenda; and (viii) Low trust in government officials may require strategic partnerships with civil society organizations. 26 74. The project will address these issues through the implementation of plans to provide social inclusion for the waste pickers working only at the dumpsites being closed or rehabilitated by project activities. This social component was designed to mitigate the project's social impacts, ensuring that the waste pickers will not be affected by loss of income. Duringproject preparation, a number of successful initiatives were identified both in Argentina (El Ceibo, Pepe Sanchez, CEAMSE's Norte I11 Recycling Program) and overseas (CEMPRE in Brazil). Waste picker cooperatives have been operating for almost 20 years in Sao Paulo, Brazil, where NGOs provide technical support and private sector companies provide the necessary equipment and training. This experience and the lessons learned were taken into consideration during project design. Specific activities are described in section 36 and Annex 4. 75. Sub-projects (closure, construction of new landfills, and construction of transfer stations) that after environmental and social screening may trigger the resettlement safeguard will not be eligible for project funding. 5. Environmental 76. The project's environmental impacts are expected to be minimal and manageable. All of the new landfill sites to be chosen will meet the legally binding technical and siting criteria to avoid significant adverse impacts on (i) wetlands or waterways of any kind, (ii) aquifers, (iii) or existing proposed protected areas or other critical natural habitats, (iv) involuntary resettlement, (v) lands inhabited or claimed by indigenous communities, and (vi) sites of cultural (archaeological, historical, religious, or paleontological) interest. In fact, the project will yield important environmental benefits because it will not only strengthen the institutional capacity of the environmental authorities and assist the government in reviewing environmental policies and regulations, but also construct environmentally adequate and socially acceptable final solid waste disposal facilities in selected municipalities that currently practice open dumping. The project design lays out provisions to ensure that potential impacts from the siting of such facilities are assessed and mitigated in accordance with the Bank's safeguardpolicies. 77. Project preparation included the elaboration of a Sectoral Environmental Assessment (SEA) for solid waste that addressed structural issues in the legal and regulatory framework; proposed sectoral guidelines for the design, construction, and operation of landfills; and defined institutional environmental management responsibilities. The study also proposed enhancement measures to ensure that participating institutions have the capacity to address any environmental issues associated with the project. Moreover, the SEA will serve as guidance for the policy and institutional-level strategic planning under component 1. As part of the SEA, two important tools were developed to ensure the environmental and social integrity of any project intervention under component 2. The first tool is a detailed Environmental Management Framework (EMF) for civil works. The EMF outlines the required screening criteria for site selection, includingthose noted in the previous paragraph, as well as mitigation and management procedures. Municipalities will have to complete the site-specific Environmental Impact Assessments (EIA), including the final determination of the site, before undertakingconstruction of landfills. The second tool i s a Sectoral Environmental Management Plan (SEMP), which includes the preparation of technical standardsfor the design and construction of landfills, guidelines for the preparation of municipal S W M plans, environmental education and awareness programs, an institutional strengthening program, and strategiesto provide incentives for recycling and waste minimization. 27 78. Becausethe project will support investments in locations yet to be determined, municipalities seeking finance under component 2 will have to apply the EMF as part of their site selection and landfill design and adopt the SEMP as part of the construction process. If a pre-identified landfill project is proposed for retroactive financing, the municipalities must update and retrofit the environmental work carried out for that specific case to meet the requirements of the EMF, includingconsultation and disclosure of all EnvironmentalImpact Assessment (EIA) reports. 79. All relevant stakeholders were consulted as a part of the process of the preparation of the SEA. Additional consultations with local communities are planned during the implementation of the project, as part of the preparation of landfill project-specific EIAs and EMPs. The SEA will be available at the offices of the NUSWU and in the World Banks Infoshop before Board approval. Future landfill project-specific EIAs and EMPs will similarly be made available to the public in each province. 6. Safeguardpolicies 80. Table 6 lists the safeguardpolicies triggered by the project. Table 6: Safeguard Policies, Argentina NUSWMProject Safeguardpolicy Yes No ~ EnvironmentalAssessment (OP/BP/GP4.01) [XI [ I Natural Habitats (OP/BP 4.04) [ I [XI Pest Management (OP 4.09) [ I [XI Cultural Property (OPN 11.03, being revised as OP 4.11) [ I [XI Involuntary Resettlement (OP/BP 4.12) [ I [XI Indigenous Peoples (OD 4.20, beingrevised as OP 4.10) [ I [XI Forests(OP/BP 4.36) [ I [XI Safety of Dams (OP/BP 4.37) [ I [XI Projects inDisputedAreas (OP/BP/GP 7.60) [ I [XI Projects on InternationalWaterways (OP/BP/GP 7.50) [ I [XI Environmental Assessment Policy 81. Project interventions would trigger the Bank's Environmental Assessment Safeguard Policy OP 4.01. To comply with this policy, the borrower has prepared an EMF that includes screening criteria for site selection and a SEMP that specifies environmental guidelines for the design and construction of landfills and for the respective EIA. The team's environmental safeguard specialist reviewed the EMF and SEMP tools and found them acceptable to the Bank. The screening criteria will be used to identify the typology of each sub-project proposal, while the environmental guidelines will serve for the preparation of specific EIAs and EMPs to be considered prior to construction and operation of each landfillproject. 82. Furthermore, the SEMP includes specific provisions mandated for the design and construction of a new landfill and requires the adoption of certain standards and measures for the design, bid tendering, construction, operation, and maintenanceof the landfill and associatedworks. 7. Policy exceptions andreadiness 83. The project does not require any exceptions from Bank policies and meets the regional criteria for readiness for implementation set forth in the procurement and financial management assessments. 28 Annex 1:Country and Sector Background ARGENTINA: NationalUrbanSolidWaste ManagementProject GeneralContext 1. Argentina's 2.8 million square kilometers encompass a wide variety of climates and natural habitats, ranging from frozen tundra to deserts and from mountainous regions to coastal areas. Those varied geomorphologic conditions are also reflected in demographic and economic distribution disparities that strongly influence all aspects of solid waste management (SWM). Argentina is a highly urbanized country, with 90 percent of the population living in cities. Nearly half of the population is concentrated in the five largest urban centers: Buenos Aires Metropolitan Area, Gran Cbrdoba, Gran Rosario, Gran Mendoza, and Gran La Plata. According to the latest national census in 2001, the total population was 36.3 million, with a decreasing growth rate-from 1.7 percent in the 1970s to 1.12 percent in 2001-resulting in part from a stagnating birth rate. Since the economic crisis of 2001, Argentina has implemented various strategies in the productive sectors to reactivate national economic activities. As a result, the country has regained its status as a strong exporter of raw materials and industrial goods. Unemploymenthas decreasedgradually, from 18 percent in 2000 to less than 12percent in 2005. Overall, after difficult negotiations with creditors and multilateral banks, Argentina's GDP has grown steadily in recent years, and average income per capita also has increased. 2. The country generates 12.3 million tondyear of solid waste (SW), nearly one-third of it inthe province of Buenos Aires. About 60 percent of the waste, or 20,000 tondday, i s disposed in open dumps and the rest incontrolledor semi-controlled dumps.The main problemrelatedto solid waste management (SWM) is inadequate final disposal, which causes significant environmental and health problems such as groundwater and surface water pollution, air pollution from waste burning, negative visual impact, and disease vectors. The highconcentration of waste generation in the main metropolitan areas, combined with the lack of proper final disposal facilities or official information campaigns, has brought the S W M issue to the front page of the country's newspapers. However, in most cases the population is concerned solely with removal of garbage from their curbsides and has not interest in knowing its final destination or paying for safe final disposal. Strong environmental education and awareness-raising campaigns are needed in Argentina to sensitize public opinion to the environmental and social aspects of this issue. 3. Waste pickers work in open dumps, while cartoneros, or cardboard collectors, generally carry out recycling on an informal basis. There i s only one formal, well-operated recycling plant in Argentina, in the city of Manipur, Mendoza. A few small municipalities have attempted to produce compost, but the quality does not meet commercial standards. There i s no legislation in Argentina requiring control of landfill gas emissions, and therefore most of the disposal facilities in the country have only passive landfill gas venting. Nevertheless, as a signatory to the Kyoto Protocol, Argentina can benefit from the Clean Development Mechanism by developing projects to capture and flare methane from landfills, generating additional revenues from the sale of certified emission reductions (CER). SolidWaste ManagementLegislation 4. Argentina's Constitution establishes the autonomy of municipalities or town councils to (i) dictate regulations, (ii) authorities, (iii) elect self-administer, and (iv) self-finance. Nevertheless, the provinces have to regulate the institutional, political, administrative, economic, and financial content and scope of this municipal autonomy. Because of these institutional and legislative structures, urban S W M primarily falls under the jurisdiction of the municipalities. More precisely, 29 the municipalities must guarantee and establish frequencies and methods for collection, transportation, and final disposal of SW. The provinces are responsible for enforcing environmental regulations and controlling the impacts of final disposal. National Regulation 5. The Federal Government has the power to dictate national regulations concerning minimum environmental protection requirements (presupuestos mi'nimos). Law No. 25.9 16 on Integrated Management of Domestic Waste defines urban solid waste as "all materials, objects and substances generatedthrough consumption or development of human activities that are later disposed of. The origin may be residential, urban, commercial, sanitary, industrial, or institutional, with the exception of those regulated by specific norms." The Law lays out the followingnationalpolicy principles and guidelines for provincial and municipal regulation of urban SW: 0 General principles and objectives for waste management that have to be reflected in local policies and legislation: o Promote recycling through adequate methods and processes and provide incentives for source separation. o Minimizethe quantity of waste goingto final disposal facilities. o Prevent and minimizethe negative environmental impacts of waste handling. 0 Obligations of each localjurisdiction: o Implementintegratedsolid waste managementwithin its territory. o Minimize the negative environmental impacts of waste handling. o Dictate the necessary regulations to enforce the law, including the authority to sign agreements that facilitate implementation of regional strategies for one or more aspects of solid waste management. o Guarantee collection of domestic waste (defining methods and frequency) and transportation to authorized final disposal sites. Establish waste treatment and final disposal methods. 6. General EnvironmentalLaw No. 25.675 prescribes instruments such as EnvironmentalImpact Assessments and basic norms to avoid or mitigate environmental damage. mtblic participation and access to the information are also essentialaspects of this legislation. The environmentalregulations comprised under this Law apply to all activities that may affect the environment and therefore cover any waste management project. Environmental Protection Law No. 25.6 12/02 i s the national legislation concerning waste from industrial activities. This Law establishes general guidelines for management of industrial, requiring adequate treatment and final disposal. However, no national legislation provides technical requirements for landfill construction or operation. Norms for emissions from landfills may exist only at provincial level, as in the province of Buenos Aires. ProvincialLegislation 7. Argentina's provinces differ significantly in terms of the extent and contents of waste management legislation. Mendoza, SantaCruz, and Cbrdoba, have extensive legislation, while other provinces have very basic legislation or none at all. The main problem in most provincial legislation i s the lack of a regulatory framework. One possible way to improve solid waste management (SWM) at provincial and municipal level i s to establish inter-municipal consortia to deliver public services within the existing legal framework. This modality of cooperation may facilitate the implementation of better S W M legislation and practices and thereby promot economic and social development. 30 Solid Waste Management 8. Argentina faces serious challenges in managing solid waste, aggravated by the profound economic crisis of the past 3 years. Today an estimated 40 percent of the population still lives below the poverty line. In 2002 approximately 30,000 families were forced to earn their livelihoods from informal waste collection in urban areas and dumpsites. The cost to society of this economic marginalization i s highin terms of public health, social impacts, and environmental degradation. 9. Per capita waste generation in Argentina has increasedconsiderably in recent decades and now lies between that one of developing countries and industrialized countries. With increasing waste generation, poor or inadequate waste management becomes a greater concern. Table 1.1 lists Argentina's waste generation pattern by province. Table 1.1. Solid Waste GenerationinArgentina, by Province Ciudad de Buenos Aires 2,72 1,750 1.52 1,493 Cdrdoba 3,177,382 1.05 1,204 Corrientes 979,223 0.87 306 Chaco 1,053,335 0.61 232 Chubut 433,739 0.95 148 Entre Rios 1,209,218 0.60 261 Formosa 518,000 0.65 122 Juiuv 650,123 0.71 166 La Pampa La Rioia 314,131 315,744 I CY$ I 1:; Mendoza ,,I .__.__- ~- 1.15 678 _l__"__" Misiones 1,033,676 0.44 163 Neuqutn 1 1,637,756t .................... 169 Rio Negro 571,013 178 Salta ....................................... 316 San Juan 655,152 226 San Luis 161 --..-I ~ ~ _I_I1~llll"lll Santa Cruz I 211,336 399'425 I 0.821*12 63 1.11 1 SantaFe ~- 1,235 l_l_- Santiago Del Estero t- 255 Tierra DelFuego .l_l 113,363..--.-.I 0.64 26 I ...- .I_- ~" 1111111111" _I_--- Tucumgn 1,405,521 0.73 369 TOTAL 37,669,169 0.91 (average) 12,325 Source: Argentina's NationalSolid Waste ManagementStrategy, 2005. 31 10. Table 1.2 shows aprojectionof the country's total solid waste generationbetween 2004 and 2025. Table 1.2. Estimationof SolidWaste GenerationinArgentina2004 and2025 II Total Population 37,669 47,463 SW generation(1,000 tondday) I1 12,325 I1 19,107 II Source: Argentina's NationalSolidWaste ManagementStrategy, 2005. 11. Inspite of the increaseincardboard andpolyethylene terephthalate (PET) consumption, municipal solid waste in Argentina i s still dominated by biodegradable organic material(Figure 1.l) Figure1.1. SolidWaste CompositioninArgentina 0 Paper&cardboard 12% 17% 0Glass Metals 0 Plastic Organic (mainlyvegetationand food) Others Source: Argentina's NationalSolidWaste ManagementStrategy, 2005. Organization and Operation 12. Authorities have limited knowledge of responsibilities and relevant national and provincial legislations for waste management. Another important aspect that affects organization and operation of S W M systems in Argentina i s the lack of formal provincial and municipal programs for periodic collection of data on general waste indicators such as generation (e.g., quantities, qualities, source distribution) or cost structures of collection, transport, and final disposal activities. Inconsequence, provincial and municipal authorities lack the necessary information for effective decision-making, organization, and planning. 13. Solid waste collection and street cleaning have been carried out properly in most municipalities, because medium-size and large municipalities rely on private contractors to provide the service. The degree of coverage (the percentage of domestic and commercial generators that receives waste hauling services) i s between 90 percent and 98 percent in urban areas but much lower in rural areas. 14. Final disposal of urban solid waste represents a significant problem for local governments. A very small percentage of waste i s finally disposed of under environmentally acceptable conditions, 32 especially outside the metropolitan area of Buenos Aires. Approximately 60 percent, or 20,000 tondday, of the total solid waste generation in the country i s disposed of in open dumps or semi- controlled dumps. This kind of disposal i s even more prevalent in small and medium-size cities, as shown intable 1.3. Total percentage of SW - disposed - 100 % 41.1 % 33.5% 25.4% Economic and FinancialAspects 15. Today in Argentina it i s very difficult to collect fees for solid waste management. On average, the percentage of generators that pay their fees regularly i s low, between 40 percent and 60 percent. In extreme cases tariff payment is 15 percent or lower. This means that most of the population enjoys the services free, regardless of their economic situation. As a result, municipal governments face a huge deficit in covering SWM costs, and the burden of proper final disposal translates into indiscriminate open dumping of urban refuse. Table 1.4 shows fee collection levels in different municipalities. Table 1.4. Examplesof MunicipalSWMTariff Payment I BuenosAires I 233,5081 40.8 I 33 Source: Sanguinetti,Juan ,Economic and Financial Analysis of the Solid Waste Management Sector in Argentina, 2005. 16. Because municipalgovernments lack a clear understanding of the costs associatedwith SWM, the value of the tariffs is completely arbitrary, with no economic or technical basis. The fee is often related to the size of the household as a percentage of the property tax or to the area of the dwelling (including the garden). In other cases, the fee i s consolidated with other public service charges such as electricity or water. These cases are not common practice, and the positive effect of fee consolidation on improving fee collection for S W M has not been adequately disseminated. Because industrial waste similar to domestic waste, does not usually have a specific fee, the Polluter's Pay Principle i s not applied. As a result, when combined with the payment factor, the range of cost recovery for the S W M system varies enormously among Argentinean municipalities, as shown in table 1.5. The analysis is based on the provinces and municipalities initially participating in this project. Table 1.5. S W M Costs and Percentage of Cost Recovery inSelected Municipalities I Capital (2002) I 3,395,507 I 10.7% I 6,411,808 ' 1 83% I 189% II GuaymallCn (2002) 2,538,624 I 10.6% 1,594,155 37% 63% GodoyCruz(2002) II 5,072,047 I 18.0%t II 2,997,689 '' 11 45% II 59% 34 I LaHeras (2002) I 5,123,427 1 28.4% 1 1,279,305 '''' 1 28% 1 25% I L6jan (2002) 4,066,549 22.3% 2,186,778 60% 54% Maip6 (2002) 3,034,164 17.4% 1,736,696 37% 57% Lavalle (2002) 722,414 14.8% 235,761 53% 33% Tupungato (2002) 755,200 16.0% 268,270 10% 36% Tunuyan (2002) 917,920 16.0% 929,320 46% 101% SanCarlos(2003) I 812,640 I 16.0% I 427,520 3 ) 30% r p 5 3 % I SanMartin(2002) I 2,375,100 21.0% I 1,717,950 3 , 46% 1 72% I Rivadavia(2002) I 1,099,575 II 13.5% I 819,510 3 , 23% I 75% I I Rawson(2003) I 645,138 I 5.0% I 840,000 I 30% I 130% I Rio Gallegos (2003) 4,748,350 9.0% 879,588 d a 19% Recovery and Recycling 17. Studies inArgentina show apotential for recycling up to 30 percent of waste materials, but this potential i s limited by current technological, technical, and economic constraints. Moreover, there i s little culture of recycling in the country. Waste pickers collect most recyclable materials, searching through garbage piles in the streets or at dumpsites and sanitary landfills. There is little experience with source separation or privately organized recycling. Nevertheless, in some cases waste pickers have successfully organized to establish recycling cooperatives, thus institutionalizing their activities and improving their social, working, and economic conditions. Table 1.6 shows a sample of recycling percentagesand selling prices indifferent areas of the country 35 Table 1.6. Examples of RecyclingPercentagesand Selling Prices inArgentina Paper and I I I I I I I cardboard 18.72 0.25 9.1 0.1 12 0.15 Plastics 20.26 0.60 10.3 0.2 10 0.10 Metals (iron) 3.13 1.oo 0.9 1.o 4 1.80 Metals (non- iron) 0.30 2.00 0.2 3.2 Glass 7.27 0.10 2.6 0.1 5 0.20 Source: Argentina'sNationalSolid Waste ManagementStrategy, 2005. 18. There i s a market for recyclable materials in Argentina, recovered either formally or informally. An illustrative case is recycling of PET, which has grown in the last years and achieved a certain degree of formality. One of the main reasons behindthis phenomenon i s that international markets pay attractive prices, so that exports of collected PET bottles provide significant profit margins. Argentina intends to build processing plants to take advantage of these revenues.Table 1.7 shows the growth pattern inPET recycling from 1997until 2004. Table 1.7. PET RecyclingData inArgentina 1I2000 I 6,600 I 150 I 130.000 I 5.00 1 2001 I 8,580 I 200 I 145.000 I 5.91 I 2002 10,250 238 115.000 8.91 2003 13,700 342 135.000 10.14 I 2004 I 22,100 I 443 I 160.600 I 13.7 I Source: Asociaci6n Civil ArgentinaPro Reciclajedel PET (ARPET), 2005. 36 Social Aspects 19. Dumpsites in every medium-sizecity in Argentina have waste pickers. Their numbers fluctuate according to local economies and the spot price for recyclables. The waste pickers live and work without basic economic or social security, under conditions that are extremely hazardous to health and detrimental to family, social, and educational development. Society has marginalized these groups, and the informality of their activity makes it difficult to integrate their contribution into the S W M system. Rarely have provinces or municipalities designed plans to include waste pickers formally in this sector or inany other economic activity. 20. There are two types of waste pickers in Argentina. The first and larger group, the cartoneros, live inthe streets of metropolitan areas and are well organized. Duringthe economic crisis of 2001 an estimated 30,000 families were involved in this kind of waste collection. The cartoneros mainly work on the streets to separate cardboard, which i s picked up by an intermediary who eventually sells the separatedmaterials for recycling. The waste pickers in the second group .go through waste at open dumpsites in large metropolitan areas. Criminals may be involved in these groups, making it difficult for authorities and nongovernmental organizations to approach them. 37 Annex 2: Major RelatedProjectsFinancedbythe Bankand/or Other Agencies ARGENTINA: NationalUrbanSolidWaste ManagementProject Latest Supervision Ratings Sector Issues Projects (Bank FinancedProjects only) (Most Active) Implementation Development Progress (IP) Objective (DO) Argentina - Olavarria LFGRecovery - To mitigate Solid Waste climate change by financing the improvement of Signed ERPA Management (SWM) municipal SWM, helping the enhancement of potable water and water heating supply in the rural village of 12/07/2004 Espigas (P088934) Argentina - Pollution Management - To strengthen General Industry and public-private partnerships for pollution management Trade and Government and provide TA for municipal environmental Administration management and municipal and regional pollution management (P006050) Climate Change and Uruguay - GEF-MSP LandfillMethane Recovery S S SWM Demonstration- To eliminate methane emissions from the Las Rosasmunicipal landfill (P058303) Tashkent - Solid Waste Management - To return the S S SWM existing SWM system to a satisfactory level of service, improving its technical, financial, and institutional basis (P049582) Bosnia-Herzegovina- Solid Waste Management - To S S improve solid waste services (collection and disposal) SWM and Government inpriority areas and increase administrative and Administration technical capacity to improve cost recovery, encourage private sector involvemen,t and reduce health hazards (P057950) Water, Sanitation, and Brasilia Environmentally Sustainable Project -To Bank Approval Flood Protection ensure quality water resources by abating water resources pollution loads (P089440) 08/25/2005 China - Shanghai Urban Environment APL Phase 2 - Sewerage To support urban environmental infrastructure, Bank Approval including wastewater and solid waste (SW) 07/05/2005 management (P075732) Water, Sanitation, and Turkey - Municipal Services - To finance activities in Bank Approval FloodProtection water, wastewater, and SW sectors (P081880) 06/23/2005 India-ThirdTamil Nadu UrbanDevelopment - To Water, Sanitation, and develop sustainable urban investments such as water Bank Approval Flood Protection supply and sanitation, wastewater collection, and SWM 07/05/2005 (P083780) China - Liuzhou Environmenalt Management - To Water, Sanitation, and construct1 SW transfer station and 42 waste collection Bank Approval Flood Protection stations with associated vehicles and provide TA to help implement the project's wastewater, SWM, and 05/24/2005 municipal sanitation (PO81346) 38 Renewable Energy and Mexico - Waste Management and Carbon Offset - To Signed ERPA SWM reduce greenhouse gas (GHG) emissions supporting the development of three LFG facilities (P088546) 03/18/2005 Health, SWM, and Peru- Vilcanota Valley Rehabilitationand S S Water and Sanitation Management - To support the development of a regional SWM system (P082625) Brazil -NovaGerar Landfill Rio de Janeiro -To Power and SWM minimize GHG emissions by upgrading the waste management disposal system through a gas collection Under Preparation system and a power generation plant (PO79182) Uruguay -Montevideo Landfill Gas Recovery - To SWM help mitigate climate changethrough the facilitation of market-based mechanisms in support of clean energy Under Preparation sources and technologies (P094495) S S Water, Sanitation, and Ghana - SecondUrban Environmental Sanitation - To finance the construction of sanitary landfills, improve Flood Protection use of refuse dumps, and scale up private SW collection (P082373) Transportation, Argentina - Second Municipal Development Project - Government To strengthen institutional capacity of municipalities Administration, and and provinces to manage their resources more Closed 06/30/2005 SWM effectively and increase the efficiency of their systems for delivery of services (P006060) Mexico - Second Solid Waste Management Project - SWMand Government To improve solid waste services, strengthen Administration BANOBRAS capacity to provide TA to municipalities Closed 12131/2000 to encourage private sector involvement, and safeguard the environment (P007612) Health and SWM Egypt - To support the Government of Egypt in privatizing SWM services to reduce health problems (hepatitis and meningitis) and environmental problems in Alexandra and Cairo Sri-Lanka - To compost SW inthe city of Colombo to generate a source of quality nutrients Agriculture andSWM I for Sri Lanka's agricultural needs. Health and SWM Vietnam - Ho Chi Minh-To boost the efficiency of SWM and improve the working conditions of informal waste collectors SWM Argentina - Integrated SWM inL aPampa -To prepare an integrated SWM Plan for the province I 1 - SWM I Ecuador - Investment Plan for SWM - To provide technical cooperation in SWM SWM Guyana - SWMProgram - To design sanitary landfill and implement a municipal SWM department 39 Annex 3: ResultsFrameworkandMonitoring ARGENTINA: NationalUrban Solid Waste Management Project ProjectDevelopmentObjective OutcomeIndicators Useof OutcomeInformation Improveoverall health, \lumber of waste pickers 4elp valuate economically the :nvironmental conditions, and io longer working in )enefits of improvement in SWM quality of life of population by :ontrolled dumps xactices developing environmentally and Financially sustainable systems for Percentageof risk 'romote the adoption of proper SWM solidwaste management :eduction of ground xactices throughout the country water pollution 'rornote the useof Carbon Finance as Percentage of risk itoolforimprovingand -eductionof explosions ;trengthening SWM practices it waste disposal sites .hroughoutthe country Reducedlandfill gas Baselinedata and argument for a missions ?ossibleimproved repeater project IntermediateOutcomes OutcomeIndicator Useof ResultsMonitoring Component1: Component1: Component1: 1.1Development and adoption of Preparation of Provincial Show levelof commitment from integrated SWM Plans at provincial SWMPlans inat least 6 SAyDS, Provincial and Municipal level provinces Governments to improve SWM 1.2 Increased training and technical Number of technical and Measure success of training programs capacity for SWM financial management andcapacity building municipal staff receiving training: at least 2 per participating municipality 1.3 Development of effective and Implementation in at Strengthen community commitment sustainable financial management least 10 municipalities of to pay SWM tariffs and fees for SW services effective tariff systems (expected minimum payment coverage of 50 percent) 1.4 Design of legal and regulatory Enactment of provincial Indication of the appropriateness of frameworks for SWM at provincial SWM regulatory the different instruments designed to and municipal levels frameworks in at least 3 bringtogether private sector, provinces provincial and municipal authorities to provide an efficient SWM service 1.5 Development of public Implementation of communicationprograms public communication programs in at least 6 provinces 1.6 Establishment of Project Tariffs basedon actual Management Unit expenditures 40 Average number of 4sses the performance of the PMU months from call for 'or implementationof the project. proposal to signing contracts Overhead costs as a 4lert in case of inefficient use of percentageof total -esourcesor project delays project costs Number of subsidiary agreements signed: at least 6 Component2: Component2: Component2: 2.1 Constructionof new sanitary Number of constructed Demonstrate the appropriatenessof landfills in eligible provinces landfills: at least 6 :he design for subsidies 2.2 Closure or remediation of open Indicators of sanitary Improve enforcement of regulations dumps landfill oerformance Disseminate the economic, social, Percentageof recycled and environmentalbenefits of inter- materials (ifapply) municipal sanitary landfills I Tons of SW disposed at Demonstrate economic and technical new facilities sustainability of the SWM system Environmental quality Show political acceptanceof sanitary indicators landfills as the best alternative for SW final disposal Volume of greenhouse gas emissions reduced Support implementation of the National SWM Strategy Number of closed or Support national waste minimization rehabilitatedopen and recycling strategies dumps: at least 3 Component3: Component3: Component3: 3.1 Capacity building for social Number of informal Create innovative mechanisms for inclusion and management groups of waste pickers marketing recycling materials reinserted in formal activities Demonstrate the capacity of socially excluded individuals to organize 3.2 Technical assistanceto conform Income generated by the themselves and improve their overall micro-enterprises or cooperatives separating micro- quality of life enterprises or cooperatives Make society more sensitive to scavengers 41 5 S 5 e, n x -0 2 e, > 8 P LI h S 0 in W m 0 9x Q 0 rd C 0 3 Annex 4: DetailedProject Description ARGENTINA: National Urban Solid Waste Management Project 1. The overall objective of the Argentina National Urban Solid Waste Management (SWM) Project i s to improve public health and quality of life by reducing the population's exposure to pollutants and disease vectors from solid waste. The project has three components: (i) Policy and Institutional Strengthening, (ii)Investment for construction of new landfills and closure of open dumps, and (iii)Social Inclusion. The components have been designed to ensure successful implementation and address essential aspects of integrated S W M such as capacity building, legal framework, and cost recovery. The largest component in terms of budget, and the core of the project, i s component 2, related to construction of S W M infrastructure. This design characteristic is based on Bank experience and demand for S W M projects at provincial and municipal levels. Two of the proposed sub-projects might be implemented on a retroactive basis. Project design included a strong set of eligibility criteria (table 4.3) to ensure project quality and readiness. Each component of the project i s described in detail below Component 1: Policy and Institutional Strengthening (US$4.9 Million) 2. The main objective of component 1 i s to finance technical assistance (TA) for the agencies involved in the development and control of sector policies and regulations. This component will strengthen the nationalinstitutional capacity of the National Urban Solid Waste Unit (NUSWU). At local level the component will support the capacity of authorities to make informed decisions and develop sustainable S W M services. The component will also support the government's long-term planning for S W M incorporated in the NSWMS. All provinces are eligible for this component, which addresses the following thematic issuesrelated to SWM: Strategic Planningand Regionalization 3. This sub-component will finance the preparation of integrated S W M plans at municipal and provincial levels. The concepts of strategic planningand regionalization support the establishment of legal multi-municipal final disposal districts, in which a single landfill receives the waste generated by several municipalities. The number of sites per province should be consolidated to minimize investment and operating expenses. This regionalization will result in significant economies of scale for participating municipalities. Both provincial and municipal S W M plans will have to include the regionalization concept in their design. Moreover, development of these plans will be one of the eligibility criteria for receipt of funds under component 2 (Investment for construction of landfills and closure of open dumps). Traininp Program on S W M Fundamentals and Cost Recoverv Mechanisms 4. To increase the technical capacity of provincial and local government, the project will finance the training of a group of professionals and decision-makers in basic concepts of urban SWM. These concepts include (i) planning and selection of alternative solutions, (ii) identification of investments, (iii) new technologies, (iv) minimization and recycling, (v) schemes for private sector participation, (vi) cost recovery and tariff structure, (vii) educational campaigns, and (viii) evaluation of environmental impacts. The short training will emphasize cost recovery and transparent budgeting and accounting, to encourage the adoption of effective and sustainable financial management mechanisms. The International Solid Waste Association (ISWA) will participate in designing the training course, based on a similar experience to be implemented in Brazil. The final design and training will be the responsibility of a local institution supervised by the Secretariat of Environment and Sustainable Development (SAyDS). 44 5. The implementation of the NTPwill include preparation of training materials anddelivery of training programs. The training programs will include the following courses: (i)Executive seminars designed primarily for the mayors of medium-size cities and their assistants, with participatingcities given priority for attendance. The main objective will be to introduce basic concepts and fundamentals of SWM, including the strategic approach to SWM, cost recovery, the not-in-my-back-year (NIMBY) phenomenon, and community participation. The duration of each course will be 6 hours; (ii)IntroductorycoursesformembersoftheSAyDSandenvironmentalstaffatprovincialand municipal levels responsible for S W M services. The courses will focus on management of SW services, technologies, environmental and health impacts, separation and recycling, cost recovery, social programs, and community participation. The total duration of each course will be 4 days; and (iiij Special workshops designedon demandfor (i) municipal and provincial administrative and technical personnel on specific topics such as hospital waste, regulatory framework, definition of tariffs and (ii)municipal personnel in charge of landfill operations and daily control where the municipalities provide the service directly. Monitoring and Evaluation 6. The courses will be given according to the schedule intable 4.1. Table 4.1. National Training Program Course Schedule Activity 1"year Ydyear 3* year 4`h year P year Total Executive seminars 1 2 1 1 0 5 Introductorycourses 1 2 1 0 4 Specialworkshops 1 2 1 1 0 5 Total 3 6 3 2 0 14 Technical Studies 7. This sub-component will finance three types of studies: (i)Preparation of a national recycling strategy through market analysis and incentives for recycling. The implementation of this activity i s one of the main outputs of the National Strategy. It will be an essential analyticalpiece for the development of the recyclingtargets at national and provincial levels and i s expected to be implemented within the first year of project implementation; (ii)Nationalandprovincialminimizationprograms.Thisisanotherofthemainoutcomesof the National Strategy, which specifies the need for a national minimization program and guidelines for the provinces. There is a significant difference in waste generation depending on whether Argentina follows a "low", "medium" or "high" growth. The actual rate will be 45 most influenced by economic development. The project will finance a comprehensive study at national level and programs for specific municipalities. The national program will be implementedduring the first year of project implementation. Only municipalities or groups of municipalities that already have a sanitary safe and environmentally sustainable operating final disposal facility will be eligible for these programs; and (iii) Technical studies for closure/remediation of selected dumpsites. Open dumps have been identified in already participating municipalities, and closure costs have been estimated. However, detailed analysis will be performed to determine the environmental impact and actual costs. Public Communication and Outreach Programs 8. This sub-component will finance technical assistance (TA) to the SAyDS, provinces, and municipalities to develop and implement public communication programs at the three levels of government. The objective will be to increase education about and public awareness of health and environmental problems linkedto open dumping, the role and responsibilities of households in the new S W M system, final disposal technical options and related costs, recycling, and minimization. The expected outcomes are a consensus on and effective use of the new S W M system financed by the project, mitigation of the NIMBY effect, promotion of fee collection, and improved coverage of the topic by the media. By raisingpublic awareness on the importance of proper waste management and promoting greater civil society ownership, this sub-component would also help isolate the project from political pressure and ensure smoother implementation. As part of preparation activities, the project designed a national and two pilot provincial S W M communicationstrategies. Proiect Management and Monitoring and Evaluation 9. The main objective of this sub-component i s to support appropriate fiduciary capacity and specialized technical consulting to ensure effective project implementation. The NUSWU will implement the project. This sub-component will specifically finance procurement, environmental, social, and financial management specialists in the NUSWU to ensure the Bank's fiduciary responsibilities. The NUSWU will also (i) act as liaison and maintain dialogue with the provincial governments and inter-municipal consortia, (ii) technically approve provincial and municipal S W M plans, (iii) approve bidding documents and procure according to Bank rules, (iv) review and approve Environmental Impact Assessments (EM) according to Bank recommendations, and (v) review and provide technical assistanceto service contracts. Inaddition, a robust mechanism will be in place to monitor and evaluate (i)project milestones and indicators, (ii)compliance with final disposal service contracts, (iii)environmental impacts and Environmental Management Plan (EMP) compliance, (iv) beneficiary perceptions of project impact, and (v) the impact of social inclusion plans. Component2: Constructionof new landfillsandclosure of opendumps(US$31.5 Million) 10. This component will finance the construction of environmentally and economically sustainable final disposal facilities and the closure of open dumps. Funds under this component will be made available on a nation-to-province partial subsidy basis. The level of funds granted to each multi- municipal investment project will be determined by a Provincial Allocation Formula following Government of Artgentina (GOA) recommendation. The temporary subsidy formula for the initial works will consist of two parts. 46 (i) A fixed component (50 percent of the cost of the sub-project's initial infrastructure) that reflects the minimum amount of incentive estimated by the GOA to encourage the construction of regional landfills; and (ii)Avariablecomponent(theremaining50percentoftheinfrastructurecostweightedbythe provincial IPMHindex) that focuses on compensating the deep socio-economic differences among provinces. Based on the official Household Material Poverty Index (Zndice the Privacidn Material de Hogares, or IPMH), this comprehensive index is public and available from the National Statistics Institute (Znstituto Nacional de Estadisticas y Censos, or INDEC). 11. Because of the variable component, the subsidy will never reach 100 percent. As shown on table 4.2, the total subsidy will range from a minimum of 61 percent for the province with the lowest IPMH index (Santa Cruz) to a maximum of 85 percent for the province with the highest IPMH index (Formosa). The remaining percentage not covered by the temporary incentive will have to be provided by the provinces on cost-sharing basis. Those percentages are only applied to the initial infrastructure costs (civil works, methane capture plant, recycling plant, and first waste disposal module) and not to the total project costs (initial infrastructure + future modules + recurrent costs). The proposed equation for the subsidy allocation is shown below. S = IC*0.5 + (IC * 0.5"IPMH) where: S = Subsidy for eachproject I C = Infrastructure Cost IPMH = Povertyindex expressedinpercentage 47 Table4.2. IPMHIndexandProvincialSubsidyAllocation IGCBA I 14% I 57% I Santa Cruz 21% 61% Tierra del Fuego 22% 61% L a Pamva I 28% I 64% I C6rdoba 31% 66% Chubut 32% 66% Neuau6n 34% 67% SantaFe 37% 68% Buenos Aires 38% 69% Rio NegJo 38% 69% San Luis Entre Rios Mendoza 71% La Rioia 44% 72% Catamarca 51% 75% San Juan 53% 76% ITucumhn I 59% I 80% I Corrientes 61% 81% Salta 62% 81% Juiuv 63% 82% Misiones 65% 82% Santiago del Estero 65% 82% Chaco 67% 83% Formosa 71% 86% *According to the ProvincialAllocation Formula 12. Project design also included the establishment of a set of eligibility criteria (table 4.3) to identify regions Or multi-municipal districts that can be selected as recipients of the subsidy. While all the provinces will be eligible for TA (component l), a limited group will receive funding only for investment in final disposal infrastructure (component 2). Eligibility will be based on readiness to work with other municipalities, adopt a strategic planning approach, assume ownership of the project, achieve financial sustainability, and select cost-effective and environmentally sound final disposal solutions. 48 Table 4.3. Eligibility Criteria for FundsUnder Component 2 Description 1. Provincial S W M Plan developed with municipal participation and approved by provincial authorities and the NUSWU. The Plan must include the following: (iv) Regionalization scheme based on province-specific technical economic analysis (v) Plan for closure of dumpsites Pre-selection (vi) Introduction of appropriate sanitary landfills in conjunction with separation plants and an action plan for a SW minimization program or 2. Municipal S W M Plans for those cases involving only individual municipalities. 3. Provinces have drafted a legal and regulatory framework for SWM. 4. Landfill siting process concluded, including Environmental Impact Assessment (EIA) and Public Consultation Process of the alternative locations. 5. Land Titling: Municipalities will have to demonstrate legal ownership of the land, or legal usage rights satisfactory to SAyDS and the Bank 6. Participating municipalities have signed a Inter-Municipal Regional Agreement (IRA) includingthe following6: (iv) A legal entity to manage and supervise a shared landfill and transfer stations. Only in specific cases will an entity be eligible for landfill operation. I R A s should include a cost- sharing agreement based on objective criteria such as Sub-project population or tonnage. Selection: (v) Participating municipalities agree to compensate adequately Prior to approvalfor host communities for real or perceived nuisances (ifneeded). investmentfinancing (vi) Municipalities draft an ordinance or by-law requiring commercial establishments, industries, institutions and other large generators to pay a differentiated fee for hauling and final disposal of waste at the regional landfill. 7. Provincial - SAyDS Subsidiary Agreement signed and through which: (i) The province commits to complement the federal subsidy on cost sharing basis for the construction of a regional landfill and transfer station construction according to SAyDS parameters. (ii) The establishment of provincial and municipal technical teams i s required to implement the project. The team's technical characteristics and responsibilities will be described in the Operations Manual (OM). See Annex 14 Legal Framework for Inter Municipal Arrangements for further detail 49 8. The province and municipalities have incorporated social specialists into their project's teams. 9. Municipality or consortia of municipalities have developed a proposal for increasing their cost recovery efficiency through a tariff scheme that will enable them to guaranteea minimumlevel for economic sustainability of the new S W M (landfill) service. This minimumlevel should include the attention to both the fee7price and the fees' collection rate. The SAyDS and the Bank will approve this proposal 10. Provincial-Municipal Agreement signed, ensuring the economic sustainability of the operation of the new landfill. The agreement will make clear that the municipal economic contribution for operation will be guaranteedby the provincial co participation funds. 11. In the cases where the municipality or consortia of municipalities have the intention to provide themselves the operation and maintenance services for the future landfill, they are required to provide proof of having the necessary equipment, technical capacity and adequate personnel needed to operate properly the facilities prior to issuing the public tender for designing and building the new landfill. The SAyDS will evaluate this operation and maintenance capacity and determine if it i s acceptable. Sub-project 12. Participating municipalities will seek carbon financing by capturing execution: and flaring andor utilizing landfill gas, or by composting or recycling to Prior to release of reduce methane emissions in the atmosphere. In turn, the revenues will fundsfor landfill contribute to the sustainability of the S W M system through the provision construction of additional resources. The participating municipalities agree to transfer ownership rights of the landfill gas to the regional operating entity (consortium of municipalities). 13. Municipalities or consortia have agreed to apply the social development framework addressingthe needs of informal waste pickers at dumpsites, if applicable. Prior to release of 14. Social Inclusion Plans have been duly consulted with the affected fundsfor waste picker groups and their views and concerns have been taken into closurehehabilitation account inthe design of the Plan. of open dumps. 15. Construction of the recycling facilities has been completed and the social inclusion plan i s ready to be implemented 13. Provinces and their corresponding regions may become eligible for component 2 at different stages of the project. In a preliminary screening, the project team identified at least 6 potentially eligible regions to be ready within the first 2 years of the project effectiveness date. Other provinces and their regions may become eligible in subsequentyears of project implementation. 'Thefee refers to the value calculated according to the tariff scheme and which is needed to recover the full cost of constructing, operating and maintaining the new landfill. 50 Construction of New Sanitary Landfills inEligible Provinces 14. The selectedprovinces will be able to request funds for the following: (i)Civil works suchasconstructionofonly thefirst wastedisposalcell(with aminimum operational life of 4 years), access roads, auxiliary and maintenance buildings, and fences. Containment cells for industrial non-hazardous waste will also be eligible. Sanitary landfills will require a minimumlifespan of 12 years and adoption of minimumtechnical standards related to strict environmental pollution control (e.g., impermeabilization, leachatedraining and treatment, gas control systems, monitoring wells). The SAyDS will be responsible for determining these minimumstandards, with the approval of the Bank project team; (ii)Settingupoftransferstationswheredeemednecessary;and (iii)Constructionandequipment of waste separationplants supporting recycling programs. Eligible sub-projects will need to demonstrate the financial sustainability of the plants based on market assessment studies or social plans aimed at providing a sanitary and safe environment for waste pickers to continue their separation activities in transfer stations or facilities close to the landfill. Closure or Remediation of Open Dummites 15. This sub-component will finance the closure (and remediation where needed) of dumpsites only in participating municipalities. To access these funds, municipalities will require an operating sanitary landfill, a social programfor waste pickers, and a technical study for the dumpsite closure. Sub-project Information and Results of Regionalization Analysis 16. Project preparation identified six regions in four provinces (Chubut, Mendoza, SantaCruz and Tucuman) that were eligible for component 2. These provinces have already taken important steps toward adopting an integrated S W M systembased on the premises promoted by this project. So far Provincial S W M Plans have been approved by the competent authorities, multi-municipal consortia have been established, provincial regulatory frameworks and procurement documents have been drafted, and actions have been taken to ensure an adequate cost-recovery level to make the S W M system economically sustainable. Construction works are expected to be carried out within the first 3 years of project implementation. Table 4.4 provides detailed information on provincial readiness. Table 4.4. Provincialreadinessto implement integrated SWM MetropolitanTucumh X X X X X X MetropolitanMendoza X MendozaCenter X X X X X X Rio Gallegos X N/A X TrelewNadrydRawson X Comodoro Rivadavia X N/A 51 * Cost-sharingagreement ** underpreparation Samplesof biddingdocuments sent to Municipalities.Documents under preparation ***Under preparation v 17. As part of the project preparation, two technical studies were carried out: (i) model for a calculating maximum economically viable radius for transportation of SW and (ii) a review of the technical and economic data from the Provincial S W M Plans. The model, developed by a team of Argentinian consultants and applied for the decision making of the regionalization scheme, accounted for local conditions and prices. The review verified the costs and preliminary engineering design included in the Provincial S W M Plans and was used for cost estimations. A description of key data for each of the candidate regions and the main results of the regionalization analysis are found below. Chubut Province: Regions of Comodoro RivadaviaandPuerto Madwn/Rawson/Trelew 18. The province of Chubut has two main economic, political, and social geographical centers, which together account for approximately 80 percent of the population. Based on the results of the Provincial S W M Plan, provincial authorities suggested two SWM districts: the Northeastern Region, includingthe municipalities of Puerto Madryn, Rawson, and Trelew, and the Southeastern Region, including the municipality of Comodoro Rivadavia. The economic studies proved the impossibility of further regionalization because of extremely long distances, even if an alternate location were considered for a regional landfill between regions. Table 4.5 shows the results of the analysis, takinginto account the maximum economic distance. Table 4.5. Resultsof Regionalization Economic Analysis Chubut Province PtO. Indicator MadrynlRawson Comodoro SW generation (tondday) 170 150 distance to proposedregionalLandfill (km) 30 370 Economicallyviable waste transportation radius (km) 95 95 Total cost of disposingat alocal facility (US$/ton) $ 14.60 $ 16.81 Total cost of disposingat the regional facility (US$/ton) $ 14.60 $ 59.18 ~ 19,. Table 4.6 summarizeskey information on the sub-regions 52 Table 4.6. DataonProposedSWM Region ChubutProvince' Population I 144,75 1I 115,000 Pomlation served 139.5 80I 113.333 % of counterpart funding* 34% 34% % of projectfunding 66% 66% Expectedamount grantedunder Comp. 2 $ 1,912,247 $ 2,001,088 Province of Mendoza: Metropolitan and Central Regions 20. The Mendoza Provincial SWM Plan identified three sub-regions eligible for component 2. Metropolitan Region comprises the capital city of Mendoza and all surrounding districts of Godoy Cruz, Guaymallen, Las Heras, Lavalle, Maipti, and Lujhde Cuyo. This project will not include the cities of Maipu and Lujan de Cuyo becausethere is already a treatment and final disposal facility in Maipu. The Eastern Region comprises the municipalities of San Martin, Rivadavia, Junin, Santa Rosa, and La Paz. A secondary analysis of the information provided in the Provincial S W M Plan demonstrated the possibility of bundling these two sub-regions through the construction of a transfer station in Eastern Region and the disposal of its additional 180 tondday of SW into the Metropolitan regional landfill. This proposal is based on (i) distance of only 65 kmbetween the the Metropolitan and Eastern regions, less than the maximum economically viable distance of 112 km, and (ii) relatively good road infrastructure, which makes it technically and economically viable the to link the two sub-regions. The third proposed sub-region i s Central Region, which i s formed by the municipalities of San Carlos, Tupungato, and TunuyBn. The road network i s less developed there than in Eastern Region, and the area i s sparsely populated. The sub-region lies approximately 130 km from the Metropolitan regional landfill. The economic study showed that the cost of transporting waste from Central Regionto the Metropolitan landfill would be higher than the cost of disposing of waste inCentral Region's own regional landfill. The risks of vehicle failure or accident also prompted the provincial authorities to decide to keep Central Region as a separate sub-region. Table 4.7 shows the results of the analysis, taking into account the maximumeconomic distance. Foreign materialsfor constructionof landfills are expectedto representaround 20% of the total costs 53 Table 4.7. Resultsof Regionalization Economic Analysis P W generation (tondday) I 684)I 1801I 74 istance to proposedregionalLandfill (km) 30 65 130 Economicallyviable waste transportation radius (km) 72 73 71 Total cost of disposingat alocal facility (US$/ton) $ 11.21 $ 15.12 $ 17.39 Total cost of disposingat the regional fwilitv (1JSS/tnn\ $ 11.21 $ 13.88 $ 26.86 21. Table 4.8 summarizes key information about the sub-regions. Table 4.8. Data on ProposedS W M Region Mendoza Province' - Ifthe proposalto transfer SW fromEasternRegionis accepted, landfill designwill consideran additional180tons/day, thus approaching900 todday. C xAs calculatedwith the Provincial Allocation Formula. Province of Santa Cruz: Rio Gallegos Region 22. This proposed regional landfill will serve the city of Santa Cruz and nearby rural communities. Studies carried out under the Provincial S W M Plan suggested that it was not feasible to cluster in more municipalities for several reasons. First, Rio Gallegos i s geographically isolated, with the nearest municipality 500 kmaway (the maximum economically viable distance is 112km). Second, most of the trucks that could be used to transfer the waste from other municipalities are old, increasing the risk of accidents and mechanical failure. None of the other provincial cities generates the minimum waste required to establish a mechanized landfill operation. The Provincial S W M Plan recommended the construction of manual landfills as the best alternative for communities or regions generating less than 30 tons/day and semi-mechanical landfills as the best alternative for communities or regions generating less than 50 tons/day. Table 4.9 shows the results of the analysis, taking into account the maximum economic distance. Foreignmaterials for constructionof landfills are expectedto representaround20% of the total costs 54 Table 4.9. Resultsof Regionalization EconomicAnalysis Santa Cruz Province . I pic0 herto Las Indicator Trunmdo Deseado Heres SW generation(todday) ~ 71 29 12 8 7 uIBLaIIL.G I.upIvpuJcuregionallandfill (W 30 750 750 850 900 IotaicostUI uispusingataiucairaciiity (US$/ton) $ 17.31 $ 22.61 $ 25.16 $ 28.16 $ 28.61 Total cost of disposingat the regional facility (US$/ton) $ 17.31 $ 135.68 $ 164.95 $ 188.96 $ 226.6 23. Table 4.10 presents key information about the sub-regions. Table 4.10. Data on Proposed SWM Region Santa Cruz Province" Closureof dumpsites $ 1,868,220 EstimatedO&M costs in4 years $ 681,204 Costs eligible for finance $ 3,318,396 % of counterpart funding" 39% % of projectfunding 61% Expectedamount granted under component 2 $ 2,024,221 Province of Tucumhn: Metropolitan Area 24. The Provincial S W M Plan for Tucumiin divided the province into six S W M regions, but the economic studies carried out under the plan resulted in recommendations to cluster some of those regions. Gran Tucumh Region (Region l), which includes the municipalities of Alderetes, Banda del Rio Sali, San Miguel de Tucumiin, Tafi Viejo, Las Talitas, and Yerba Buena, was the only region identified during project preparation as eligible for component 2. Technical and economic analysis demonstrated that it was not feasible to join an additional region or municipality to Gran Tucumh Region. Nevertheless, the studies resulted inthe recommendation to cluster Regions 2 and 3, with a regionallandfill situated inthe municipality of Monteros (Region 2). The Provincial S W M Plan recommended the construction of manual landfills as the best alternative for Regions 4 and 5. loForeignmaterialsfor constructionof landfills are expected to representaround 20% of the total costs 55 Table 4.11 shows the results of the economic analysis carried out for Region 1, while table 4.12 includes results for Regions 2 and 3. Table 4.11. Results of RegionalizationEconomic Analysis, Region 1 TucumhnProvince Table 4.12. Results of Regionalization Economic Analysis, Regions 2 and 3 Tucumhn Province" - r Indicator SW generation (tons/day) ~ 123 160 distance to proposed regional Landfill (km) 30 50 Economically viable waste transportation radius (km) 101 105 Total cost of disposing at a local facility (US$/ton) $ 15.86 $ 15.17 Total cost of disposing at the regional facilitv (US$/ton) $ 15.86 $ 1.22 25. Key information about the sub-regions i s shown intable 4.13. Table 4.13. Data on proposed SWM region Tucumhn Province - Population 1,000,000 Population served 9 10,000 LTC of DoDulation served 91% 3,450,750 Estimated O&M costs in4 ears Costs eli ible for finance % of counter art fundin * % of ro'ect fundin *Ex calculatedwith theProvincial Allocation Formula ected amount anted under com onent 2 8,090,341 As "Foreignmaterialsforconstructionoflandfillsareexpectedtorepresentaround20%ofthetotalcosts 56 Component 3: Social Inclusion(US$1.5 Million) 26. This component will finance the implementation of plans to provide social inclusion of the waste pickers working only at the dumpsites being closed or rehabilitated by the activities under component 2 (investment in Final Disposal Infrastructure). This component also will help strengthen national and local capacity to assess and manage complex social issues around S W M interventions. Only provinces and municipalities eligible for component 2 will be eligible for component 3. As reflected in the social assessment, this project operates in a complex social situation. A large number of informal waste pickers operate in some of the existing controlled dumps. During project preparation, a number of successful initiatives for social inclusion were identified both in Argentina and overseas. The experience of Brazil's Business Commitment for Recycling (Compromisso Empresarial para Reciclagem, or CEMPRE) and Argentina's El Ceibo were considered in the design of the social inclusion component of the project. Waste picker cooperatives have been operating for almost 20 years in Sao Paulo, Brazil, where NGOs provide technical support and private sector companies provide the necessary equipment and training. Component 3 will finance the following specific activities: (i)participation Capacity buildingin social inclusion and management.This sub-component will finance the of Social Inclusionexperts as part of the NUSWU,training on social issues for provincial and municipal public officers, and tailored social assessments and social inclusion plans at sub-project level. Specific methodologies were designed to this end during project preparation, including social assessment guidelines to be applied by the municipalities; (ii)Technical assistance for micro-enternrises and cooperatives. This sub-component will finance training and technical assistance for the establishment of micro-enterprises and cooperatives for waste pickers. The municipalities' social specialists will lead the implementation of this task in collaboration with civil society and organizations with extensive experience indealing with informal garbage collectors; (iii)Private-public partnershies. The project will support the establishment of a partnership between the SAyDS and a network of private companies interested in promoting recycling in Argentina. This model was tested with great success in Brazil, where private companies, informal waste picker cooperatives, technical NGOs, and the government came together to find integral solutions to recycling. CEMPRE Argentina will participate in financing training activities and preparing market studies to develop regional recycling strategies. 57 Annex 5: Project Costs ARGENTINA: NationalUrbanSolidWasteManagementProject Component CostSummary (US$`000) 1.PolicyandInstitutionalStrengthening 2,700.0 4,900.0 7,600.0 1.1Strategic planningand regionalization 0.0 2,400.0 2,400.0 1.2Cost recovery and S W M training 0.0 250.0 250.0 1.3 Technical studies 0.0 250.0 250.0 1.4Public communication 0.0 1,000.0 1,000.0 1.5 Project Management 2,700.0 1,000.0 3,700.0 2. Constructionof newlandfillsandclosure of open 11,680.0 31,500.0 43,180.0 dumps 2.1 Landfill Infrastructure / closure of dumps 5,268.0 12,200.0 17,468.0 2.2 Construction of lst disposal cell waste 3,543.0 11,500.0 15,043.0 2.3 Methane Capture Systems 2,44 1.O 6,600.0 9,041.O 2.4 RecyclingPlants 428.0 1,200.0 1,628.0 3. SocialInclusion 0.0 1,500.0 1,500.0 3.1 Implementationof Social Plans 0.0 1,000.0 1,000.0 3.2 TA for Micro-enterprises 0.0 500.0 500.0 Unallocated 0.0 2,000.0 2,000.0 FrontendFee 0.0 100.0 100.0 Total 14,380.0 40,000. - Note: Infrastructure costs had been estimated by local SWM specialists and updated on December 2006 during appraisal. 58 Annex 6: ImplementationArrangements ARGENTINA: NationalUrbanSolid Waste ManagementProject 1. The Secretariat of Environment and Sustainable Development (SAyDS) will be the executing agency, with responsibility for overall management, supervision, coordination, technical and fiduciary control. The SAyDS has designated the newly created National Urban Solid Waste Unit (NUSWU) as responsible for direct implementation of the project. This new unit will comprise the solid waste management (SWM) staff already working at the SAyDS and build on the existing staff of the Pollution Management (Loan 4281) Project ImplementationUnit (PIU). The staff roster has been already submitted to the Bank for review. The NUSWU will be appropriately staffed in terms of procurement, environmental impact assessment, financial management, SWM, strategic planning, social issues, and communications. For the Carbon Finance activities, the NUSWU will require support from the Argentinean Carbon Facility (ACF). Overall implementationresponsibility will be under the project's National Director, a SAyDS staff member. According to the new Bank policy, the project will finance fiduciary-related personnel and specialized consultants. A small group of consultants from the existing Pollution Management PIU will become employees of the new NUSWU, and the project will finance their positions in a phased-out approach (only the first 3 years). 2. The NUSWU will be responsible for the following activities: (i)application of fiduciary responsibilities, including approval of the Sectoral Environmental Assessment and Environmental Management Framework to comply with World Bank safeguards, (ii) approval of Provincial S W M Plans, (iii)evaluation of compliance with eligibility criteria, (iv) liaison with provincial management and technical teams, (v) technical advice to provinces and municipalities for developing S W M strategies and plans, (vi) development and implementation of the national S W M training programfor provincial and municipal authorities, and (vii) supervision of social programs. A nongovernmental organization (NGO) will be hiredto providetraining. 3. In addition, each province where project activities will be implemented, will require its own Provincial Urban Solid Waste Unit (PUSWU), to be financed entirely by the provincial government. These sub-national solid waste units will be responsible for (i) liaison with the SAyDS, (ii)preparation of biddingdocuments, (iii) supervision and approval of the construction works, (iv) supervision and enforcement of environmental standards and requirements included in the landfill operating contract, (v) assistance in preparing and implementing the social program, and (vi) implementation of the communication campaign. The PUSWU will have to include at a minimum specialistsin SWM, social programs, and communications. 4. The institutional framework for the project will be legally defined by the following agreements to be signed between the interested parties (i.e., the national government, participating provinces, and municipalities): (i)Inter-MunicipalRegionalAgreement (IRA).Thisagreementwillbasicallyestablishalegal entity to manage and supervise a shared landfill and transfer stations. Only in specific cases will an entity be eligible for landfill operation. I R A s should include a cost-sharing agreement based on objective criteria such as population or tonnage; (ii)Subsidiarv Agreement I(Province - SAyDS). This agreement will mainly commit provincial governments to complement federal grants for regional landfill and transfer station construction according to SAyDS parameters. A draft of the document will be ready for project appraisal, and a revised version will be included inthe negotiationpackage; and 59 (iii)SubsidiarvAgreement I1(Province - Municioalities - SAyDS). This agreement will ensure the economic sustainability of the operation of the new landfill. Cost recovery levels and mechanisms should be detailed and satisfactory to the SAyDS and Bank team. The agreement will make clear that provincial co-participation funds will guarantee the municipal economic contribution for operation. The project institutionalarrangementi s illustratedinFigure 6.1. Figure 6.1. InstitutionalArrangements, Argentina National Urban SWM Project 1 SAyDS ACF support support Eligible Eligible Eligible province 1 province2 province 3 province4 *PUSWUs will be entirely financed by provincialfunds 5. Table 6.1 shows the responsibilities of the project's executing agencies duringimplementation. 60 Table 6.1. Responsibilities of Executing Agencies H Providetechnicalsupport = A =Preparebiddingdocuments =PrepareTOR for consultancy and/or technicalspecifications for works iE= Participateinproposalevaluationcommittee *== 0 Reviewand approveproducts Carry out biddingtender 4 = Signcontract 61 Annex 7: FinancialManagementandDisbursementArrangements ARGENTINA: NationalUrbanSolidWasteManagementProject ImplementingEntity 1. The SAyDS will execute the project and be responsible for all technical and fiduciary aspects, overall project management, and monitoring and evaluation. The SAyDS has created the National Urban Solid Waste Unit (NUSWU) within the institution for direct implementation of the project. This new unit will comprise the S W M staff already working at the SAyDS and will build on the existing staff of the Pollution Management (Loan 4281) executing unit. The NUSWU will be responsible for project accounting, project reporting including preparation of Financial Monitoring Reports (FMRs), internal control, disbursements and external audit. During the last Financial Management (FM)supervision mission to the referred Pollution Management Project canied out on April 2005, the PIU's FMstaff was assessed and considered adequatewith robust experience and a solid background. Accountingpolicies 2. Public Sector accounting standards in Argentina will be followed. The public sector accounting rules are comprehensive and consistent with public international standards. The Accountant General Office, Contaduria General de la Nacidn (CGN), sets the public accounting standards in Federal Government. Uses of Funds: 3. All the project uses will be processed in the NUSWU's dedicated accounting system while supported by documentary evidence for the related works, goods and services procured in line with the Bank guidelines for the project. FinancialManagement InformationSystem 4. The NUSWU will keep the project accounts in its own accounting system with the chart of accounts reflectingthe project categories, components and sources of funding. ReportingandMonitoring,Flow of FundsandDisbursementArrangements 5. Financial statements will be prepared on the accrual basis of accounting and shall be in line with the Bank requirements. Format of the interim and annual financial statements will be part of the adjusted operational manual. In addition, the NUSWU shall also prepare semiannual FMRs comprising at least: i)Afinancial sectionstatingfor theperiodandcumulatively (project life) .cashreceiptsby sources and applications by main expenditures classification as well as beginning and ending cash balances of the project and a statement of accumulated investments by project component with a comparison between actual and plannedexpenditures; ii)An output monitoring section that: (a) sets forth physical progress in project's implementation, and (b) explains variances between the actual and previously forecast implementation target; and 62 iii)Aprocurementsectiondescribingthestatusofprocurementundertheproject,asoftheend of the period covered by the report. 6. FMRs' formats will be agreedwith the NUSWU and included in the Operational Manual. The Operational Manual prepared by the NUSWU and acceptable to the Bank is part of the Action Plan to be accomplished prior to negotiations. The NUSWUwill be responsible for the project financial management, comprising accounting, timely submission of the FMRs, annual audits and disbursements and will record all transactions in its own system. FMRs will be submitted semiannually to the Bank. The physical progress indicators and the timing of the FMRs will be consulted with the TTL to ensurethe usefulnessof the FMRs inthe overall project supervision. Flow of Funds 7. The project will operate a Special Account in U S dollars for processing disbursements for payments of project eligible expenditures. As in prior projects, the Special Account (SA) will be opened by the borrower inBanco de la Nacidn Argentina and will be under control of the NUSWU, responsible for coordinatingthe project. Figure 7.1. Scheme for the Flow of Funds Transferences in US[)$ Certification of uorks and services 8. Funds deposited into the SA as advances would follow the Bank's disbursement operating policies and procedures established as described in the Legal Agreement and in the Disbursement Letter as the case may be. 9. Flow of funds from the NUSWU to the participating municipalities and provinces will be simplifiedto gain efficiency and reduce transaction costs. Loan proceeds will be transferred directly from the SA to the supplier bank account for eligible services rendered or works or goods provided 63 and certified by the participatingprovinces. Withdrawals from the SA will be made for payments of project eligible expenditures. 10. Loan proceeds will be disbursedagainst the expenditure categories: I , Part B: Construction of new landfills and closure of open dumps Works 31,500,000 Tntal Part B - - - ..-.- 1I 31.500.000 _ _ II 86" 7 -- - 7 -- - _. Part C:Social Inclusion Consultant Services & Training 1,200,000 Goods 300,000 Total Part C 1,500,000 100 Unallocated 2,000,000 Front EndFee 100,000 Total Pro~iectCosts 40,000,000 11. New Policy Framework on Eligibility of Expenditures inWorld Bank Lendingapplies for this project as the country's financing parametersfor Argentina have been approved by the Bank. 12. Once the loan Agreement i s signed, the Loan Department will senda letter - the Disbursement Letter - outlining the disbursement procedures to be followed by the loan. Traditional method for disbursements will be used. An Authorized Allocation (AA) for advances into the Special Account will be established. This AA will be set to cover a maximumamount of six months of expenditures and the project could request such advance as needed once the loan i s declared effective. All Withdrawal Applications (WAS)will be fully supported by proper supporting documentation for all expenditures made under contracts requiring prior review by the Bank, and contracts whose value will be raised above the prior review limits because of amendments to the Loan Agreement. All consolidated Statements of Expenses (SOEs) documentation should be maintainedby the NUSWU for post-review by the Bank supervision and audit purposes for up to one year after the final withdrawal from the loan. 13. Requests for replenishments to the Special Account should be sent to the Bank on a monthly basis or whenever the account needs to be replenished by a1least 50 percent. Replenishments, up to the Authorized Allocation will be made based on Applications for Withdrawals (Form 1903) accompanied by the supporting and other documentation detailed in the Disbursement Handbook. The NUSWU will access Bank's Client Connection web page to get the 1903 Form from the web and to perform on a periodic basis the reconciliation between its bank account and resources received from the different sources. The recommended Special Account is 3 million dollars. 64 ExternalAudit Arrangements 14. Project financial statements will be subject to an annual financial audit under Terms of Reference and by auditor acceptable to the Bank within six months of each fiscal year. It was proposed that the Argentina Supreme Audit Institution, Auditoriu General de la Nucidn (AGN) carry out this task. Annual audit will cover all funding and expenditures reported in the project financial statements. For audit purposes, the fiscal year will be the calendar year. Interim semiannual reports on internal control issues and follow up on implementationof recommendations will be included. InternalAudit 15. NUSWUas part of SAyDS and Federal Government is subject to internal audit of the General Syndicate of the Nation (SIGEN) which i s the Federal Government's internal audit agency under the jurisdiction of the executive branch. SIGEN supervises and coordinates the actions of Internal Audit Units (MUS)in all agencies, approves their audit plans, conducts research and independent audits, systematizes the information from its own reports and those produced by the NUS. Country Issues,RiskAnalysis and SupervisionPlan 16. The Country Financial Accountability Assessment (CFAA) prepared by the Bank in 2003- 2004 states that at the central level, the Government of Argentina has a fully integrated budget, accounting, treasury, and public debt financial management system. These systems control the funds received by the central government from any source and provide sufficient information to determine if the funds were utilized as planned. 17. This CFAA covered the Federal Government central system and did not comprise the assessment of public financial systems at sub-national level, Provincias. A CFAA update of the Federal system in Argentina i s planned for FY 2006 while the evaluation of Provincial systems i s planned to be performed inFY 2007. 18. A FM issue raised in the Country Assistance Strategy (CAS), document issued in January 2004, was the chronic problem on the timely submission of audit reports to the Bank. However, since 2003 there has been some improvement on country audit report compliance. The audit compliance issue i s being addressed by the Bank at portfolio level and through an IDF grant to strengthen the institutional capacity of the Auditoria General de la Nacion (AGN), the Borrower's Auditor General Office. The 2006-2008 CAS for Argentina that i s currently under preparation develops a fiduciary action plan which aims at improving the timeliness and effectiveness of the external audit function inthe country. 19. The International Monetary Fund issued an experimental Report on the Observance of Standards and Codes (ROSC) for Argentina in April 1999, which includes a section on Fiscal Transparency which commented that based upon the description of practices provided by the authorities and summarized in the report, Argentina has achieved a high degree of fiscal transparency. This i s a reflection of the significant progress that has been made since the implementation of landmark legislationon financial administration and control in 1992. Strengthsand Weaknesses 20. Strengths: NUSWU has experience in implementing multilateral financed projects as well as highly skilledFMstaff who has been working for the unit. 65 21. Weaknesses: FM assessment and internal control issues project level reported by the auditors of the on-going project point toward some weaknesses. Especially some delay in implementing FM recommendations. The timely provision of counterpart funds will also impose another risk to the project. These risks will be mitigated through the following measures: i)preliminary reports on internal control including a section on the follow-up of recommendations made in prior audit; ii) specific provisions to ensure adequate control and provision of counterpart funds in the OM and in the flow of funds. RiskAnalysis 22. The process to determine associated risks comprised the review of Financial Management Questionnaire, the CFAA, previous supervision missions and interviews with key NUSWUstaff as well as a review of the internal control framework. The assessment of Procurement arrangements carried out for this project and its mitigation measures and risk assigned were taken into consideration for this risk assessment. tisk RiskMitigation Measures Country Specific Modest Entity Specific -Federal Level Low -NUSWU owns qualified and highly experienced accounting staff that has already participated in Bank-financed operations. Previous projects acceptable audit reports submitted to the Bank Project Specific Modest - Set a separate budgetary line inthe Ministry annual budget to keep truck of Institutional and organizational project execution. aspects will remain the same as the - Expand the scope for the external audit: ongoing project. AGN will produce preliminary reports on internal control to ensure that adequate FMarrangements continue inplace. isk Financial Management System New Government's FMsystem UEPEX for multilateral project execution (mandatory for project execution) will be New dedicated system (UEPEX) to implemented in NUSWUthrough replace the existing one will be project implementation. developed and implemented; usual system implementation risks exist Operation of the new dedicated system will be reviewed with semi annual sk rating 23. Sources of information on inherent risk in the NUSWU include the performance in Financial Management of previous Bank-financed projects where acceptable audits were produced and the NUSWU met Bank requirements. Acceptable audit reports were submitted to the Bank in previous projects implemented by the NUSWU and Bank requirements were generally complied with. The auditors' qualifications on previous Project financial statements did not indicate substantial 66 I accountability issues that could affect project implementation and the NUSWU has taken appropriate actions to address auditors' comments through the past years. SupervisionPlan 24. Previous experience in implementing Bank-financed projects has been considered to define the FM supervision plan. Table below shows the F M supervision objectives, tasks and timing planned for this project. Mechanism Objective Integratingproject team Review S. Account reconciliation; supervision missions. uses of funds; follow up on External Audit recommendations/ raised issues. Review staffing. FM). FMR Semiannually Over the FMR submitted to the Review FMR information Review Bank. consistency. Internal Semiannually Over the preliminary report to Ensure adequate financial Control be submitted by AGN management arrangements continue Report inplace at SUPCEs' level. Review I IAudit Annually Over the Audit Report Review Audit Report. Review II submittedto the Bank ActionPlan& AdditionalCovenants 25. The recommendation is to use in the legal agreement "Standard" wording for project audits and FMRs and a specific provision to prepare interim reports on internal control issues semiannually. 26. The current activities have to be implemented by the SAyDS prior to project Board presentation. I by Operational Manual revised and approved 1 I I the Bank. 2. Chart of accounts approved by the NUSWU Prior to Board presentation Bank (to be included inOM). 3. Financial Sts. & FMR format approved NUSWU Prior to Boardpresentation by the Bank. (to be includedin OM). 4. Terms of Reference for External Audit NUSWU Prior to Boardpresentation (to be includedin OM). 67 Annex 8: ProcurementArrangements ARGENTINA: NationalUrbanSolidWasteManagementProject A. General 1. Procurement for the proposedproject would be carried out inaccordance with the WorldBank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loadcredit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and timeframe are agreedbetween the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 2. Procurement of Works: Works procured under this project would include: (a) new regional sanitary landfills in six (6) to eight (8) eligible provinces, which may comprise landfill cells, transfer stations and waste separation plants (including equipment), and (b) closure / remediation of open dumpsites. Though the operation of the sanitary landfills will not be financed by the Bank, a Design-Build-Operate (DBO) approach will be followed and a single responsibility contract used. The procurement will follow ICB and NCB procedures using the Bank's Sample Bidding Document for Design-Build-Operate of Solid Waste Facility with some adaptations to local conditions and practices (mainly that prequalification will not be used). For the closure / remediation of open dumpsites, Standard Bidding Documents for NCB based upon the Bank Standard Bidding Document for Smaller Contracts will be used. Some of the processes might follow advance-contracting. 3. Procurement of Goods: the project will finance the procurement of ICT equipment, tools and machinery to help implement social plans, which procurement will be done usingNCB documents and Requestsfor Quotations acceptable to the Bank. 4. Selection of Consultants: The project will finance: (a) the formulation of regional strategic plans, other technical studies and training on solid waste management; (b) the design, management and implementation of a communication and outreach program; (c) technical assistance, capacity building and training aimed at increasing social-inclusion for waste-pickers and (d) project management, monitoring and evaluation. Requests for Proposals for contracts including non- consulting services, as it is the case of the implementation of the communication and outreach program, will include provisional sums representing the costs of these activities, to be subcontracted. The above-mentioned provisional sums will not be taken into account during the process of selecting consultant firms and the subcontractors will be subcontracted by those consultingfirms following public biddingor shoppingprocedures to be described inthe Operational Manual. Short lists of consultants for services estimated to cost less than $500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 5. OperatingCosts: will not be financed by the project 6. Others:The project will finance social plans for waste pickers working at dumpsites where new sanitary landfills will be constructed. Social Plans will aim at the social inclusion of waste pickers through formalized work for waste separation at transfer stations or recycling facilities nearby the 68 new final disposal sites. Social Plans will follow procedures to be spelled out in the Project Operational Manual, 7. The procurement procedures and SBDsto be usedfor each procurement method, as well as modelcontracts for works and goods procured, will presentedwithin ninety days of Loan Agreement signature in the project's web page: www.medioambiente.gov.ar. B. Assessment of the agency'scapacityto implementprocurement 8. Procurement activities will be carried out by the NUSWU of the SAyDS on behalf of the benefiting Municipalities following Bank rules and federal procurement laws and regulations. The NUSWU will take advantage of the existing Pollution Management (Loan 4281-AR) executing unit. The existing Pollution Management PIU is appropriately staffed in terms of general coordination, procurement, environmental and financial management, and will need to be re- enforced from the technical point of view. Adequate legal support i s provided from SAyDS. The procurement expert is a civil engineer with good experience in Bank procurement. An Independent Procurement Review to the 4281-AR did not reveal any issue of particular concern. A new feature present in this project is that the initial drafting of bidding documents will be done by Project CoordinationUnitsat the Provincial/ Municipal level. 9. An assessment of the capacity of the ImplementingAgency to carry out procurement actions for the project has been completed by AndrCs Mac Gaul, Senior Procurement Specialist, on November 9, 2005. The assessment reviewed the organizational structure for implementing the project and the interaction between the project's staff responsible for procurement and the Ministry's relevant central unitfor administration andfinance. 10. The key issues and risks Concerning procurement for implementation of the project have been identified and include the following: (i) The NUSWUdoes not have a Procurement Information System; and (ii) The previous project's Operational Manual i s not updated. 11. The corrective measures which have been agreedare the following: (i) The NUSWU will implement an Excel-based Procurement Information System acceptable to the Bank within ninety days of Loan Agreement signature. Such a system will be implementedunder Terms of Reference to be agreed with the Bank prior to Negotiations; and (ii) An Operational Manual acceptable to the Bank will be adopted prior to Board presentation. 12. In addition to the above listed project-related issues and risks concerning procurement the following country issues and risks were identified: (i) During the recent implementation of infrastructure projects in Argentina, it was found that sometimes pre-bid cost estimates were not precise and updated enough; (ii) Duringrecent post review work in Argentina it was found that the list of contracts from where the sample to be reviewed would be selected that the implementing agency provided to the Bank was not accurate enough; and (iii) Local procurement law, regulations and practices are not fully consistent with Bank rules. 69 13. The corrective measures corresponding to the country and sector issues which have been agreed are the following: (i) The Operational Manual will include procedures for preparing, reviewing and updatingpre-bid cost estimates; (ii) The NUSWU will prepare semi-annual procurement reports under TORS to be agreed at Negotiations; such reports to include lists of contracts signed and procurement processes initiated under the project and such lists to be certified by the project financial management auditor; and (iii) The Loan Agreement will include the Special Procurement Conditions listed in Section E. The overall project risk for procurement is AVERAGE C. Procurement Plan 14. The Borrower, at appraisal, developed a procurement plan for project implementation that provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on December 16, 2005 and i s available at www.medioambiente.eov.ar. It will also be available inthe project's database and inthe Bank's external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementationneeds and improvements in institutional capacity. D. FrequencyofProcurement Supervision 15. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the ImplementingAgency has recommended annual supervision missions to visit the field to carry out post review of procurement actions. E. SpecialProcurementProvisions 16. The following shall apply to procurement underthe project: General 0 Foreign and local contractors, service providers, consultants and suppliers shall not be required: (a) to register; (b) or establish residence in Argentina; (c) or enter into association with other national or internationalbidders as a condition for submittingbids or proposals. 0 The invitations to bid, biddingdocuments, minutes of bid opening, requests for expressions of interest and notifications of award of all goods, works and services (including consultants' services), as the case may be, shall be published in the web page of Oficina Nacional de Contrataciones in a manner acceptableto the Bank. Goods and Works 0 A two-envelop system of procurement will not be used for the procurement of goods, services (other than consultants services) or works. 0 After the public opening of bids, information relating to the examination, clarification and evaluation of bids and recommendations concerning awards shall not be disclosed to bidders or other persons not officially concerned with the bidding process until the award i s published. Bidders shall not be allowed to review or make copies or others bidders' bids. 70 0 Contracts of goods, services -other than consulting services- and works shall not be awarded to the "most convenient" bidbut to the one that has beendeterminedto be substantially responsive and the lowest evaluated bid, provided that further the bidder is determined to be qualified to performthe contract satisfactorily. 0 The lowest evaluated bidder shall not be required to reduce its bid as a condition of contract award. 0 Price Adjustment for Civil Works Contracts shall follow the Price Adjustment Methodology agreedbetween the Government of Argentina and the Bank, which methodology is described in the document to be attachedto the Minutes of Negotiations. Consultant Services 0 Bank models of contracts will beusedandthe use of "Convenios" will not bepermitted. F. DetailsoftheProcurementArrangementsInvolvingInternationalCompetition 1. Goods, Works, and Non Consulting Services (a) L i s t of contract packagesto be procured following ICB and direct contracting: Final Disposal Center 2 Gran Mendoza $12,100,000 ICB NO NO PRIOR March2008 RegionalFinal 7 RegionalFinal $20,000,000 ICB NO NO PRIOR February2008 DisposalCenter3 8 RegionalFinal $10,000,000 ICB NO NO PRIOR February2009 DisposalCenter4 (b) Civil Works contracts estimated to cost above $3,000,000 per contract, the first two (2) civil works and goods contracts under eachprocurement methodregardless of amount and all direct contracting will be subject to prior review by the Bank. 71 2. Consulting Services (a) List of consulting assignmentswith short-list of internationalfirms. 1 2 3 4 5 6 7 Ref. No. Descriptionof Estimated Selection Review Expected Comments Assignment cost Method by Bank Proposals (Prior / Submission Post) Date I 1 IISWMPlansfor 1$525,000 I QCBS 1 PRIOR ISeptember2006 I I Region 1 (b) Consultancy services to be provided by firms estimated to cost above $200,000 per contract, the first two (2) contracts with firms under each selection method regardless of the amount, consultant services to be provided by individuals amounting $50,000 or more throughout the live of the project and single source selection of consultants (firms and individuals) will be subject to prior review by the Bank. (c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$500,000 equivalent per contract, may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 72 Annex 9: Economic and Financial Analysis ARGENTINA. National UrbanSolid Waste Management Project 1. The economic and financial analysis of this project comprises three parts. The first part is an analysis of the cost-effectiveness of implementing an adequate system for final disposal of solid waste in sanitary landfills, taking into account the reduction in environmental damage and direct impacts on people's health compared with the open dumping prevalent in the vast majority of Argentinean municipalities. The analysis computes the environmental and social costs of solid waste disposal as an integral part of the operation. The second part of this annex covers local development of cost-recovery systems in solid waste management (SWM). The third part analyzes the fiscal implications and sustainability of the project. Private, Environmental, and Social costs of Solid Waste (SW) Disposal: Proper vs. Improper Disposal Systems 2. The project is targeted at financing environmentally safe and socially acceptable final SW disposal systems to minimize the environmental impacts of this service and its effects on the population as a whole. These systems will also include recycling activities and in some cases, the construction of transfer stations and the transportation of waste to the final disposal facility. 3. The private costs and benefits of proper final SW disposal systems include (i) investment costs for purchase of land, civil works, construction of modules or cells, system for methane capture, collection and treatment of leachate, and, in some cases, construction of a transfer station and a recyclingplant and (ii) operation and maintenance costs. Because the operation of the disposal sites will be in private hands, the operator's profits andthe depreciation of works and equipment are also included in the calculation. Some of the private benefits of the project are the potential income generatedby the sale of COPcertified emission reductions and recycling and composting activities. 4. SW management in general, and final disposal in particular, even when carried out in sanitary and controlled conditions, has environmental impacts and imposes additional costs (externalities) on society as a whole. These external costs (other than private-financial costs) may derive from different factors. The most important of these factors are soil and groundwater pollution due to percolation of leachate, emission of greenhouse and trace gases into the atmosphere, and noise and strong odors generated by the operation of final disposal sites. At a different level, the poor management of SW may significantly damage the health of residents as well formal and informal workers in direct contact with waste. To make a fair assessment of the costs of a S W M system, these impacts must be measuredand included in the cost-effectiveness analysis. Scenario without "Proper Final Disposal Svstems" 5. Presently most Argentinean municipalities dispose of their SW in individual open or semi- controlled dumps. Few use operating and control mechanisms similar to those of a sanitary landfill beingusually provincial capitals or large urban areas. Information on final SW disposal practices is available in the provinces targeted by the project. According to provincial reports, the procedures for waste treatment and disposal in those locations do not show substantial differences from practices currently in the rest of the country. Inthese provinces official disposal facilities operate as open dumpsites in which waste i s disposed of indiscriminately and without any treatment (in a few cases, however, the waste i s covered every day). 73 6. Generally, sites do not have perimeter fencing or systems to control material access and discharge, which means that informal workers (scavengers) and animals can move around the sites without restriction. Sometimes the dumps are close to urban areas or major roads with significant value for tourism development, as in the case of Puerto Madryn and Comodoro Rivadavia in the province of Chubut. Becausethere is no daily cover at the dumpsites, there is significant dispersion of light material, strong odors, and indiscriminate incineration. On occasions disposal sites have fires that jeopardize the population and pose a serious hazard to local farming and cattle raising. Moreover, in most dumps grazing animals endanger the population's health and significantly affect cattle raising because of the infections that proliferate in these sites. Scavengers are present in most disposal facilities. None of the sites have systems for leachate collection and treatment nor gas capture and flaring systems. This results in serious damage to the environment, causing soil and aquifer pollution as well as health impacts. Scenario with "Proper Final Disposal Systems" 7. The Argentina S W M Project seeks to develop sanitary disposal facilities that minimize the impacts on the environment and on people's health. These landfills are also expected to be financially sustainable. Therefore, the project promotes the construction of regional sanitary landfills to take advantage of the efficiency gains deriving from the economies of scale involved in this type of infrastructure project. At this stage, the project has identified seven possible landfill construction activities in the four identified provinces (Chubut, Mendoza, Santa Cruz, and Tucumiin) that would benefit 2.6 million residents. Four of the seven ventures would provide a regional solution to the final SW disposal problem. 8. Implementation of proper final disposal systems involves, among other things, acquiring a plot of land, installing perimeter fencing, setting up systems to control access and material discharge, building access roads, building the necessary facilities for the project personnel, establishing hygiene and security measure, carrying out daily operations, setting up systems for collection of leachate and for landfill gas capture and flaring, controlling disease vectors, and, in many cases, installing recycling plants. Every activity i s expected to generate income from recycling materials and sales of COPcertified emission reductions. In some cases, the project team also analyed the possibility of building transfer stations. The capacity of the proposed sanitary landfills was calculated based on projections for the population covered by the SW collection service and the average volumes of SW generation per capita in each location. The figures in table 9.1 indicate the population covered by each potential project, the estimated volume of waste generation, and the characteristics of the solutions proposed for eachcase. Data and Assumptions Considered inthe Analysis 9. Preliminary feasibility studies carried out by the provinces for each activity provided information on financial costs.I2 These actual costs calculated at market value comprise investment, operation, and maintenance costs. Inthis analysis, the useful life of the project was estimated at 20 years. The disposal volumes and the capacities of the proposed solutions are consistent with the projections for population with SW collection services and the waste generation rates identified at each location. Data were obtained from provincial research studies. On the other hand, it was assumed that the waste generation rate would increase 1percent each year where no new landfills l2 Deloitte and ERM. 2003. "Proyecto de Gesti6n Integral de Residuos Sdlidos Municipales para Chascomh (Provincia de Buenos Aires) y Comodoro Rivadavia (Provincia de Chubut)," October, 2003; Universidad Tecnol6gica Nacional, Regional Mendoza. 2004. "Diseiio de un Sistema de Gesti6n Integral para 10s Residuos S6lidos Urbanos del k e a Metropolitana Mendoza," March 2005. 74 are implementedand 0.7 percent per year where new final disposal systems are implemented, due to the waste minimization factor. An annual discount rate of 6 percent was applied for all components. Table 9.2 shows the criteria adopted to identify and value the externalities associatedwith each of the scenarios. The table presentsthe impacts taken into account at this stage of the study. 10. With respectto health issues, the main risk is the incidence of gastrointestinal infection among the population with direct exposureto SW, Le., informal workers and scavengers.After consultation with secondary sources, the project team established the incidence of this type of infection at 80 percent for people who work in dumps and 40 percent for people who would work in the proposed sanitary landfill~.'~ The cost of this impact was estimated based on the medical care expenses corresponding to each occurrence (3 days of hospitalization, adding up to US$120/da~'~).The costs resulting from acute and mild respiratory infections were not estimated at this stage. The estimations for the open dumping scenario included health impacts for people who live near the disposal sites and are exposedto the effects of SW. The risk of intestinal infection was also taken into account. Based on research in other countries, the incidence of this type of diseases was assumedto double the figures that apply to the populationingeneral.15 11. With regard to environmental impacts, this analysis includes three categories interms of costs: the so-called "greenhouse effect" caused by emissions of biogas into the atmosphere, pollution of soil and water resources from percolation of solid elements and leachate, and land appreciation or depreciation caused by the closure of waste dumps and the construction of new sanitary disposal sites. Impacts were assessedfor the whole life of the project (20 years), although many of them will last longer. 12. The cost resulting from the greenhouse effect was estimated based on research studies developed for the European Economic Cornmunity.I6 The values adopted were US$12/ton of SW for open dumps and US$6/ton of SW for sanitary landfills, which, as noted, are provided with systems for gas capture and venting.I7 The cost resultingfrom leachate pollution was estimated at US$2/ton. This impact was not taken into account for the proposed activities in the identified provinces because sanitary landfills include systems for leachate collection and treatment. Finally, it was pointedout that the proposed ventures would bringabout an additionalbenefit representedby the appreciation of the land affected by or exposed to the dumpsites to be closed, adding up to a 20 percent-25 percent average increase in price per hectare over a radial area of 3.5 kilometers. Damage to real property and crops because of the operation of the final disposal sites was not includedinthe study, nor was the negative impact of these sites on the regional landscape. Results of the Analysis 13. This section compares the results of the economic analysis of the activities proposed under component 2 of the Argentina S W M Project in the identified provinces with the economic analysis of open dumping. The study consisted in identifying, measuring, and assessing the costs and benefits (private, environmental, and social) of waste disposal with a technological system capable of minimizing the impacts of this service on people's health and environment (construction and operation of regional sanitary landfills) and disposal of waste in non-controlled open waste dumps, the current practice inthe identifiedprovinces. l 3This implies manualseparationandrecycling in sanitary landfills. l4 Accordingto costs reportedby Public Hospitalswith DecentralizedManagement,ResolutionMS 372/2001 OPS. 2002. "AnBlisis Sectorial de Residuos S6lidos.Ecuador." OrganizacidnPanamericanade la Salud. Organizaci6n Mundial de la Salud. Divisidn de Saludy Ambiente.May. l6 EuropeanCommission. 2000. "A Study of the Economic Valuationof EnvironmentalExternalitiesfrom Landfill Disposaland Incinerationof Waste." DGEnvironmental.October. l7 Assuming that sanitary landfill methane emissionsare 50 percent lower than open waste dumps 75 14. Figure 9.1 summarizes the results of the project economic assessment. As noted, the total cost (private, environmental, and social) of improper SW disposal is higher than that of proper SW disposal. For example, in the metropolitan region of the province of Mendoza, the overall net cost for the next 20 years without a proper system of SW disposal would be approximately US$% million, while the cost of disposal in an environmentally sound sanitary landfill would be US$40 million. Strictly speaking, the current system of SW disposal used in the metropolitan region of . Mendoza, which is deficient from the point of view of health and environment, generates an approximate cost of US$17 per disposed ton, while a system with the proper environmental considerations would cost about US$13 per ton. Figure 9.1. Overall Net Cost of SW Disposal with/without Proper SW Disposal System r With proper disposalsystem - - - - - - i Madlyn. Trelew and Comodoro (Chubui) Greater San Mlguel East Region(Mendoza) Center Region MetropolitanRegion Rio Gallegos(sanla Rawson(Chubui) (Tucuman) (Mendoza) (Mendoza) Cruz) 15. Table 9.1 presents the costs withlwithout a proper SW disposal system according to the different categories analyzed inthis researchstudy. 76 rA B Overall Conclusions 16. The study presented an assessment of the costs and benefits of urban solid waste management alternatives, in this case represented by two scenarios-sanitary land filling and open dumping. As part of the analysis, environmental economic valuation techniques were used to integrate costs accruing from environmental and social externalities into the equation. Commonly, authorities in developing countries such as Argentina do not account for these externalities intheir decision makingprocess. Ass a result, in the case of SWM, open dumping is seen as the cheapest alternative to deal with the problemuntil severe consequencesarise and society's attention is focused on the problem. In a typical private cost evaluation, the cost of sanitary landfills would be noticeably greater than that of open dumping. 17. Final disposal of solid waste will always represent a cost to society and governments. Therefore, the intention of this assessment was to provide an insight into the real costs (including environmental and social externalities) associated with the current practice of open dumping compared with those associated with the construction of sanitary landfills. The results of the study provide the necessary reference for decision-makers to select the most economically efficient solution for final disposal of SW. Inother words, theresultshelpauthorities selectthealternative with the leastcostto society as awhole. Inaddition, this economic analysis provided important informationto the GOA about the savings that would accrue from constructing sanitary landfills to justify the implementationof this project. 78 h cd z N 0 g S 0 .e 3 G 3 L. J u"S EconomicandFinancialManagement SWM Cost Recovery - 18. In countries with a significant economic development, the waste generators (i.e., households, retail stores and industries) and governments fund the costs of collection, transportation and final disposal of SW. Financing for investment is commonly obtained by a number of ways such as municipal bonds and borrowings. However, over the past decades when governments and society wanted to improve final disposal, increase recycling, implement recovery facilities, and develop landfill gas to energy projects, a set of new economic incentives have been adopted. These governmental incentives include i.e. earmarked grants (as in the case of the EU's grants to accession countries for sanitary landfills or the US Superfund for mitigation of toxic dumpsites) as well as tax credits. Despite the wide implementation of these financing mechanisms, local governments still must simultaneously develop economic systems to recover efficiently the full cost associated with these services. An adequate cost recovery system i s vital to achieve sustainability as well as to promote the incorporation of the private sector concerning the provision of these services. 19. Inan ideal situation, an effective cost recovery mechanism first requires the development of a tariff system. A detailed statement of the operating and maintenance costs, as well as the investments neededfor the urban solid waste service, is necessary for designing the tariff system. If possible, the unit cost of the service for the various user groups (households, commercial establishments, industries) must be determined to establish differentiated service fees. The application of service charges for waste generating agents or ad hoc fees for solid waste collection and disposal is the most economical and efficient way to recover a significant portion of the costs involved in urban waste management. Service fees, when correctly applied, are capable of generating a considerable flow of resources while providing proper incentives to reduce waste generation 20. The analysis of municipal accounts in a large number of developing countries shows that the percentage of cost recovery i s still low, with many chances for improvement. There are many options to generate efficient cost recovery systems. The instruments selected depend on several factors, such as political and institutional factors, the level of local development, the federal organization, and some tax considerations. Some of the most popular instruments are the implementation of fees for SWM services, the wide implementation of rates for urban services, and the implementation of taxes relatingto ecological issues. Description of Local Solid Waste Management 21. In Argentina, municipal governments are mainly responsible for urban hygiene, waste collection, and disposal services. As in most countries, S W M costs represent an increasingly larger portion of municipal budgets. Unfortunately, there are no recent statistics about the incidence of SWM costs on the total expenses of the municipal public sector in Argentina. Therefore, local governments do not usually assign the budget classification of expenses in terms of purpose and function. The Argentine Ministry of Economy publishedin 1997 the most recent estimates for the municipalities as a whole. These studies show that, on average, Argentine municipalities allocate 10.9 percent of their budgets to street sweeping and collection, treatment, and disposal of SW. Table 9.4 shows the relative weight of such services on municipal budgets for the four identified provinces (Chubut, Mendoza, TucumBn, and Santa Cruz) under this project. 81 Table 9.4. MunicipalProvincialPublic SectorExpense Totalexpense Waste collection,street sweepingand 2003' cleaning . Chubut 155.0 25.8 16.6% Mendoza 270.0 30.6 11.3% Santa Cruz 106.5 29.0 27.2% Tucumhn 310.6 34.7 11.2% Total municipalities- countrywide 8,830.7 963.3 10.9% 22. The relative weight of S W M on municipal budgets depends on the technology applied and the mode chosen to render the service. Most often, operating costs and are much more significant when waste management i s in the hands of a contractor who, besides taking care of street cleaning and daily collection of waste, operates a disposal site with sanitary controls. When compared to an S W M system that disposes of the waste collected in an open dumpsite without any control whatsoever, the impact on the budget i s much less. 23. Table 9.5 describes S W M in a series of selected municipalities in the provinces of Mendoza, Chubut, TucumBn, and Santa Cruz. The table shows data corresponding to population and volume of waste generated, type of service, mode chosen to render the service, and disposal technology applied. As shown in the table, the operating modes include sub-contracts to private operators, especially in the most important municipalities, direct operation by municipal administrations with their own staff and equipment, and the combined operation (public/private). Under the latest system, the private sector usually takes care of the collection and cleaning services in central urban areas, while the municipalities cover peripheral areas and sectors with smaller populations. In most municipalities outside Buenos Aires Province, waste is disposed of in open dumpsites that are barely controlled by the authorities or not controlled at all. Out of the sample of 21 municipalities in table 9.5, only the Municipality of Maip6 in the province of Mendoza uses a landfill with sanitary controls, which also has a system for waste separation and treatment. Three municipalities have partially controlled landfills, and the rest use open dumps. Current Systems for Cost Recovery 24. The deficiencies in S W M become even more serious because the mechanisms for cost recovery are poor or completely inexistent. The absence of integrated systems for financial administration, the lack of budgeting for programs, and the absence of specific units to gather information about the costs of municipal services limit the development of strategies for cost recovery, for this service as well as for other municipal services. On the other hand, the absence of baseline studies onf urban public services hinders the accurate evaluation of the current urban service rates and their economic results. Therefore, most often the fees paid by users cannot cover all the expenses incurred in the provision of the main urban services. Estimates based on the information provided by budget implementation units at the municipal level and specific wate management studies carried out by the provinces point out that, on average, cost recovery from urban service fees amounts to slightly more than 60 percent of the current expenses for SWM. However, such an average percentage of recovery must be carefully analyzed, as urban service 82 rates not only cover the expenses resulting exclusively from S W M but also provide funds for other basic municipal services. Table 9.5. Description of UrbanHygiene, Waste Collection andUrbanSolid Waste Disposal Services in Selected Municipalities Population sw Type of ' Mode of Disposal type (Census generation service service 2001) tonsfday provided operation OD I Tp 1 SL I PCL Notes: WC,SC: Waste collection and street cleaning; WC: Waste collection; WC,SC andSS: Waste collection, street cleaning and special services; A: by Administration; C: sub-contract; Comb.: Combined;OD: Opendumpsites;TP: Treatmentplant; SL: Sanitary landfill; PCL: Partiallycontrolledlandfill. (1) Since 2005, USW i s temporarily disposedin PacarhPintadoTreatment Plant. Source: Sanguinetti, Juan, Economic and FinancialAnalysis of the Solid Waste ManagementSector inArgentina, 2005, and basedon studies carriedout by the PollutionManagementProject,Secretariatof Environmentand Sustainable Development. 25. Moreover, waste management expenses do not always take into account the depreciation suffered by the infrastructure and the equipment used to offer these services. It i s worth noting that data on municipal expenses for S W M shown in table 9.6 corresponds to 2002 and do not reflect the increase in the cost of municipal services after the economic crisis and the subsequent devaluation the following year. Such costs may have increased significantly over the current year. Generally, Argentine municipalities charge general fees for services in order to obtain funds for urban hygiene 83 and waste collection, transportation, and disposal services. In most cases, the fees are associated with real estate taxes, such as the Tasa de Alumbrado, Barrido y Limpieza, or ABL, applied in many provinces, the Tasa or Contribucidn poi- Servicios a la Propiedad, or the Tasa Propiedad Raiz applied in the province of Mendoza. Tax regulations rarely establish a specific charge or fee for waste collection, street cleaning, or waste disposal. 26. Table 9.6 shows that, except for some cases in the province of Chubut, such as Trelew and Puerto Madryn, the municipalities do not specify waste management service fees. In relation to the fee assessment criteria, municipalities commonly use one of three calculation methods: estimation based on the linear meters covered by the property faqade, estimation based on a particular characteristic of the property (e.g., area or fiscal valuation), or the use of a flat rate on each property. Using the property value directly to determine the service fee has important drawbacks because house values are obtained from the provincial registries of real estate, which are usually obsolete. Moreover, those parameters are usually supplemented by a fee system based on service zones and coverage levels. On the other hand, fee systems adjusted by user or service type are poorly developed. Even though there is not much information from the group of identified cases, in medium-size and small municipalities it i s uncommon to charge special fees to commercial or industrial waste generators. 27. Interms of revenue, the possibility of collecting such fees effectively in Argentina i s uncertain. According to a survey carried out during the preliminary stages of this project, the cost recovery potential (fee value times collection rate) of urban service charges corresponding to a sample group of municipalities is about 50 percent. Table 9.6 shows the recovery percentage for the identified municipalities. The table also shows that recover ratios in small municipalities are substantially lower than the average values, in some cases as low as 10percent. Finally, another negative factor that affects the adoption of a sustainable S W M system i s the lack of awareness of the population. People forget about waste as soon as they get rid of their garbage. They do not care about the final destination or the volume, type, or final disposal method. This is partly because, dumpsites are often out of sight, and impacts do not affect the urban population directly. In addition, in most cases S W M appears together with other services in the municipal tax systems. Therefore, taxpayers do not really acknowledge how much S W M costs and believe that final disposal i s free. 28. In this context, the proposed project has established eligibility criteria for receiving financing under component 2 that will help raise the scheduled disbursements needed to implement financially sustainable SWM. These criteria and conditions were devised to ensure adequate cost recovery for the landfills financed by this project. Specifically, the criteria will require municipalities to achieve a minimum cost recovery for the final disposal system of 50 percent. paying attention to both the value of the SWM tariff and the fee collection rate. The conditions will also require that municipalities draft an ordinance or by-law establishing differentiated S W M service fees for households, commercial establishments, and industries. Finally, municipalities will be asked to contribute to the financing of the regional site for waste disposal by means of their revenue share as municipalentities, in order to offer certainty to the sanitary landfill operators. 84 FiscalImpacts of the Project 29. Table 9.7 shows the fiscal impacts of the project and details the expenses incurred by the national Ministry of Health and Environment, as well as the provincial and municipal expenses for environmentalactivities in the four provinces identified at this stage of project preparation. The data correspond to the period 2002-2005 andinclude a projection for the project implementationperiod. The overall cost of the project, includinga projection for the operating and maintenance expensesof the possible regional interventions for waste disposal to be financed, is estimated at US$83 million. Through this operation the Federal Government will finance approximately 48 percent of such cost; the provinces will cover 34 percent with their own resources, and the municipalities will be responsible for the remaining 18 percent. 30. After analyzing the table, we may conclude that the project's impact on the Ministry of Health and Environment's budget i s not significant. Over the whole period covered by the project, the national government contribution represents 1.7 percent of its expenses. In the provinces, the project impact i s relatively more significant, but it does not represent a concern in relation to the fiscal situation of such jurisdictions. he average increase in the provincial expenses in environmental activities due to the implementation of the project amounts to 19.4 percent. Finally, table 9.7 shows the incremental cost associated with the operation and maintenance of the possible new landfills to be financed, which on average represent 4.2 percent of the expenses corresponding to environmentalactivities inthe municipalities. 86 Annex 10: Safeguard Policy Issues ARGENTINA: National Urban Solid Waste Management Project Environment 1. Project interventions would trigger the Bank's Environmental Assessment Safeguard Policy OP 4.01. To comply with this policy, the borrower has prepared an Environmental Management Framework (EMF) that includes screeningcriteria for site selection and a Sectoral Environmental Management Plan (SEMP) that specifies environmental guidelines for the design and construction of landfills and for the respective Environmental Impact Assessment (EM). The project team's environmental safeguard specialist reviewed the EMF and SEMP tools and found them acceptable to the Bank. The screening criteria will be used for identifying the typology of each sub-project proposal, while the environmental guidelines will be used for the preparation of specific EIAs and environmental management plans to be considered prior to construction and operation of each landfill project. 2. Furthermore, the SEMP includes specific provisions mandated for the design and construction of a new landfill and requires the adoption of certain standards and measures for the design, bid tendering, construction, operation, and maintenance of the landfill and associated works. Environmental Category: B (Partial Assessment) 3. Project preparation activities included the elaboration of a Sectoral Environmental Assessment (SEA) for solid waste that addressed structural issues in the legal and regulatory framework as well as defining institutional environmental management responsibilities. The study also proposed enhancement measures to ensure that participating institutions have the capacity to address any environmental impact associated with the project. Moreover, the SEA will serve as guidance for the policy and institutional-level strategic planning under component 1. 4. As part of the SEA work, two important tools were developed to ensure the environmental and social integrity of any project intervention under component 2. The first tool i s a detailed EMFfor civil works, andthe secondtool is a SEMP. Whatare the mainfeatures of the EMF and the SEMP, and are they adequate? 5. The EMF outlines the required screening criteria for site selection (including those noted in the previous paragraph), as well as mitigation and management procedures. Municipalities will have to complete the site-specific EN, including the final determination of the site, prior to undertakingconstruction of landfills. 6. The SEMP includes technical standards for the design and construction of landfills; guidelines for the preparation of municipal solid waste management (SWM) plans, environmental education and awareness programs, and an institutional strengthening program; and strategies to provide incentives for recycling and waste minimization. 88 7. Because the project will support investments in locations yet to be determined, municipalities seeking finance under component 2 will have to apply the EMFas part of their site selection and landfill design and adopt the SEMP as part of their construction processes.. Inthe event that a pre-identified landfill project receives financing retroactively, the municipalities must have updated, concluded, consulted, and disclosed their EIAs and EMPs according to the requirements o f this project's EnvironmentalSafeguards and the Bank Disclosure Policy OP 4.01. How have stakeholders been consulted at the stage of (a) environmental screening and (b)dra8 EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted. 8. The main stakeholders were consulted as a part of the preparation of the SEA. First, the project team took advantage of existing consultation processes set up by the government during the development of the National SWM Strategy. The Secretariat of Environment and Sustainable Development (SAyDS) put together a multidisciplinary Consultative Group of over 15 environmental civil society organizations with whom a number of elements of the project were discussed. Inaddition, TucumAn Province established a consultation group of NGOs with whom project team members met on a number of occasions during project preparation. Second, the project team held a number of consultations with environmental NGOs, community associations, private sector representatives, academicians, the media, and national, provincial and local authorities. Third, on several occasions project team members interviewed informal waste pickers working in existing dumpsites in a number of localities. Finally, an extensive social assessment (SA) was conducted in two of the participating provinces, Chubut and TucumBn.. The SA covered 6 localities and1 included a survey with over 1,000 observations, 23 focus groups, and over 50 in-depth interviews with relevant stakeholders. Specific social guidelines were developed as part of the SA to be used during project implementation. Additional consultations with local communities are planned before additional localities are added through the lifetime of the project and duringthe preparation of the EMPs. 9. The SEA will be available at the offices of the National Urban Solid Waste Unit (NUSWU) in the SAyDS and in the World Bank Infoshop before Board approval. Future landfill project- specific EIAsand EMPs will similarly be made available to the public. What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? 10. The technical standards for the design and construction of landfills developed under the SEMP will be integrated into the contracts with private sector providers that will be responsible for building, operating, and maintaining the solid waste final disposal systems. Mitigation measures will be included in the contractors' bidding documents as well. The appropriate procedures by which the NUSWU will monitor environmental indicators will be described in the Operational Manual. Social Main Messagesfrom the Social Assessment 11. During the first half of 2005, the SAyDS commissioned a social assessment to better understand the impacts that the project may have on individuals and communities currently carrying out waste picking at selected dumpsites and determine how to constructively integrate community actors and neighbors during the design and implementation of the project. The specific objectives of the social assessment are listed below: 89 (i)Identifyingrelevantstakeholdersanddeterminetheirattitudetosolidwastemanagement intheir communities in order to incorporate their concernsduringthe designphase; (ii) Promote ownership of the project by a wide range of stakeholdersearly inthe process; (iii)Determinethe potential social impact of the proposed operation; (iv) Explore citizens' preferences regarding a variety of instruments and intervention modalities; and (v) Identify potentialresistanceto the proposed interventions. 12. To achieve these objectives, the study carried out a stakeholder analysis covering the following dimensions: (i)characteristics of the population involved, (ii) experience of citizens with waste management systems, (iii) expectations regardingthe potential benefits of the project, (iv) levels of social capital and potential for participation, and (v) levels of trust in public and private institutions. Methodology 13. Government of Argentina (GOA) officers contracted the study to the consultiung firm SIGLA and monitored its implementation in close coordination with Bank technical staff. The study's comprehensive methodology included a literature review; analysis of secondary data; focus groups with neighbors, merchants, informal waste-pickers and civil society leaders; in- depth interviews with local and provincial authorities, service providers, informal waste-pickers, recyclers, and civil society organizations; and a survey of 1,260 waste producers. Field work was conducted in Chubut and TucumAn provinces in the following locations: San Miguel de Tucumiin, Concepcih, La Cocha, Trelew, Comodoro Rivadavia, and Esquel. A second consultingfirm, Cooprogetti, conducted a separate survey, interviewing over 100waste pickers in dumpsites. Main Findings 14. The stakeholder analysis included in the study recognizes a variety of actors that need to be taken into consideration during project preparation and implementation. These actors include local, provincial, and national authorities; media agencies at both local and provincial levels; a number of civil society organizations; waste pickers operating in existing dumpsites, and area residents in general. 15. The social analysis concluded that although a few producers separate waste at origin, there is room for improvement. Survey respondents indicated that there i s a lack of information about how to separate the waste and finally dispose of the separated waste. The study concluded that well-conceived public information campaigns could have a positive effect on behavioralchange. 16. A well-articulated solid waste management project in Argentina needs to include a social dimension. There are a number of reasons for this. First, a significant number of families make their living from waste picking and may perceive the project as threatening. Second, it is important to anticipate potential NIMBY effects and put constituency buildingmeasures in place. Finally, waste separation at origin requires a change in behaviors that should be supported by public communications campaigns. 90 17. Informal waste pickers are not a homogenous group, and they resist formalization. The social assessment identified different groups of waste pickers with differential distribution of power and subsequent access to the recyclable materials. In the "waste circuit" some groups working in urban areas (cirujas) have "assigned" zones and get the "cream" of the waste. Others (carreros/cartoneros) have their own mobility, usually a carriage and a horse and access to recycling warehouses in addition to picking waste in urban areas. In many cases, municipal employees in charge of waste collection, also "select" waste in their way to the dumpsite. 18. Finally, a vast group of waste pickers (quemeros). work in the dumpsites picking whatever valuable waste they can find inthis last part of the circuit. These workers - informal by definition - resist formalization and mechanismssuch as the establishment of work schedules or prohibition of their children entering the dumpsites. Many waste pickers who were interviewed indicated their resistance to enter cooperatives, which they perceive as a potential loss of autonomy. This culture of informality poses important challenges for this project. 19. Waste-pickers migrate following the establishment of new dumpsites. This is an important factor because the project expects to open new sites in areas in which there are no waste pickers today and to close others where waste pickers are currently working. It i s expected that those affected by the closing of existing sites will migrate to the new sites, reproducing the same type of work. This i s a complex situation intwo ways. First, opening new sites will not solve the social problems per se. Second, social tensions may be created in the new sites between waste pickers and longer-term residents. Finally, the social assessment identified high levels of mistrust on government authorities and a perception that the relocation of dumpsites will affect their sources of income. 20. In many cases children take an active role in waste picking. The social assessment identified a number of families living near the dumpsites in precarious housing. Many waste pickers work in the dumpsters with their children, who would otherwise be left alone in their homes. The project may need to consider alternatives such as nearby childcare centers to make sure that children do not enter the dumpsites while their parents work. 21. There seems to be a strong potential for involving private sector companies in project activities. Private participation in waste management has proven to be effective in other countries (e.g., Brazil), and a number of companies have shown interest in participating in the project a socially responsible manner. Following the successful experience of CEMPRE, an umbrella organization of private companies concerned about the environment, in Brazil, the Argentine branch i s now willing to engage with government authorities and community-based organizations in a constructive way. This Corporate Social Responsibility (CSR) agenda also showed some results in TucumBn, where private companies and public schools partnered for the recycling of materials and generatedalmost US$7,000 (about AR$20,000) in profits for the schools. 22. Inmany locations, the social assessment found low levels of trust on public officials. This is especially important since the project will relay on local authorities for its implementation, pointing out to the need of partnering with civil society organizations and community groups on which citizens have higher levels of trust. ,Recommendations 23. Becausedealing with complex social realities is key to the success of the project and because the SAyDS has limited capacity to deal with these issues, it i s important to strengthen the capacity of the SAyDS. To this end, the participation of a Social Inclusion Specialist in the 91 National Urban Solid Waste Unit to help provinces and municipalities deal with issues related to waste pickers and their organization at local level will be invaluable. 24. Taking into account the fact that this operation envisages the incorporation of additional municipalities over a 4-year period, it i s important that local governments have the capacity to assess social dimensions as they incorporate into the program. The social assessment provided a set of guidelines for local self-assessments, which will need to be accompanied by concrete training. 25. Working with excluded populations is always difficult, and especially challenging when entire families may perceive the project as a threat to their subsistence. Working with intermediary organizations that are often closer to these populations has proven highly effective. In Argentina there are a number of cooperatives with concrete experience in community organizing and formalization of waste pickers, and these may be of great help to the project. 26. Engaging the media in a constructive manner is key for the success of the project. Since the programhas many benefits to show, it would be important to proactively engage the media during its first implementationand later. This set of actors -who have taken already an important role - will be strategic allies when seeking public support for the implementation of the program, as well as, to overcome a potential resistance from groups opposed to the project. 27. Tailored communicationcampaigns are essential to help the project achieve its objectives. In particular, they will be key in reaching out to the various provincial institutions, public and private, to ensure that the necessary level of ownership. In addition to traditional mass media campaigns focused on the public, other targeted initiatives will have to be designed to reach each of the relevant audiences. These initiatives can range from specific presentations for key decision makers to informational workshops for cartoneros or visits to landfills by journalists covering environmental issues. The project will help the SAyDS and its provincial counterparts to formulate a communication strategy that encompasses all those aspects and i s viable to implement with limitedresources. 28. Participation activities should start before project effectiveness to build a constituency for reform among the different stakeholders, avoid NIMBY effects at the local level, and support informal waste pickers in organization and formalization to take better advantage of the benefits of the project. 29. Incentives are important for the formation and sustainability of inter-municipal consortia. The social assessment found enthusiasm and an apparent political will to engage in this type of partnership. However, it is important to think beyond current administrations and develop the necessary institutional tools to ensure the sustainability of these new bodies. It i s also important to think of mechanismsto dissolve consortia that prove not to be working as expected. 30. The project should support informal waste pickers in organization and formalization. As witnessed in Argentina and other parts of the world, waste pickers benefit substantially from organization and formalization. They can avoid intermediaries and transaction costs, improve their working conditions, and strengthen their self-esteem and empowerment. Organization will also help reduce the chance of social conflict, which in turn may hamper the effectiveness of the project. 31. Technical environmental actions should be accompanied by institutionalcapacity building at the local level. Strengthening the capacity of provincial and municipal authorities, civil society 92 organizations (including neighborhood associations many times co-opted by local political leaders), and waste picker associations can yield high dividends during project implementation. This will also help moderatethe expectation of all actors. A numberof actors believe that "waste i s a great business" Unreasonable expectations can lead to high levels of frustration and resistance to the project. 32. The project should take advantage of other public interventions to strengthen its effectiveness. For example, coordinating activities with the formal education system and with health services may be good vehicles for public education. 93 Annex 11:Project Preparationand Supervision ARGENTINA: National Urban Solid Waste Management Project Planned Actual PCNreview September 1,2004 PLDto PIC December 2,2005 December 2,2005 ISDS to PIC December 2,2005 December 2,2005 Appraisal December 6,2005 December 5,2005 Negotiations December 16,2005 December 16,2005 BoardRVP approval February 28,2006 Planned date of effectiveness July, 2006 Planned date of mid-termreview December, 2008 Planned closing date July, 2011 Key institutions responsible for preparation of the project: 0 World Bank 0 SAyDS 0 Direcci6n Provincial de Medio Ambiente de TucumBn 0 Subsecretariade Medio Ambiente de la Provinciade Mendoza 0 Subsecretarfade RecursosNaturales y Medio Ambiente de la Provinciade Chubut 0 Subsecretariade Medio Ambiente de laProvincia de Santa Cmz Bank staff andconsultants who worked onthe project includedthe following: Name Title Unit Horacio Terraza Task Manager LCSEN Abel Mejia Sector Manager LCSEN Carter J. Brandon Sector Leader LCSES Francisco Grajales JPA LCSEN Roberto Aiello Technical Specialist ENVCF Roberto A. Senderowitsch Sr. Social Scientist LCSPS AndrCs Mac Gaul Sr. Procurement Specialist LCOPR Antonio L.Blasco Financial Management Spec. LCOAA Sandra Cointreau Solid Waste Mgmt Advisor TUDUR Dan Hoornweg Sr. Environmental Engineer LCSFW Juan D.Quintero Sr. Environmental Spec. LCSEN Santiago Sandoval Program Assistant LCSES Eduardo Dopazo Sr. Operations Officer ENVCF Alex Kossoy Sr. Financial Specialist ENVCF Carl Bartone Solid Waste Mgmt.Expert External Juan Sanguinetti Financial-Economic Consultant External AF consulting SWM consultants External FARN Legal consultants External ElCeibo Social consultants External 94 Bank funds expendedto date on project preparation: 1. Bank resources: USD$252,023.33 2. Total: USD$252,023.33 Estimatedapproval and supervision costs: 1. Remainingcoststo approval: USD$30,000 2. Estimatedannual supervision cost: USD$95,000 95 Annex 12: Documentsinthe ProjectFile ARGENTINA: NationalUrbanSolidWaste ManagementProject 1. ProjectDocuments Project Concept Note Project Information Data Sheet Integrated SafeguardsData Sheet Minutes of the PCNReview Meeting Minutesof the QER Meeting Project Appraisal Document 2. ProjectsReportsand Studies - AF Consulting(Sweden); Fundacih Ambiente y Recursos Naturales (FARN, Argentina). 2005, Design of a Solid Waste Management Regulatory Framework Model and other Related Documentsfor Argentina. - COOPROGETTI, 2005. Evaluacidn Ambiental Sectorial (Residuos Sdlidos Urbanos en Argentina). - COOPROGETTI, 2005. Planes Provinciales para la Gestidn de Residuos Sdlidos Urbanos en Tucumdny Chubut. - Rosso, M.2005. Costosde Rellenos Sanitarios para distintas Tasasde Generacidn de Residuos. - Rosso, M. 2005. Modelo para el Cdlculo del Radio M h i m o entre un Centro Urbano y un Relleno Sanitario Regional. - Sanguinetti, J. 2005. Andisis Econdmico de 10s Proyectos de Disposicidn Final de Residuos Sdlidos Urbanos. - Sanguinetti, J; Tomasi F. 2005. Relevamiento de informacidn de recaudacibn y aplicacidn de fondos para la recoleccidn, tratamiento y disposicidn jinal de residuos sdlidos urbanos en municipios de Argentina. - SIGLA, 2005. Evaluacidn Social y Comunicacional del Sector de Residuos Sdlidos Urbanos. - World Bank, 2005. SampleBidding Document Design-Build-Operate Solid WasteFacility. 3. References - Bartone, C; Bernstein J; Wright, F. 1990. Investments in Solid Waste Management: Opportunitiesfor Environmental Improvement. The World Bank. - Bartone, C. 1997. Financing Urban Sanitation, Sewerage and Wastewater Management. UNEPNSSCCNHO by E&FNSpon, London. - Cointreau, S. Economic Instrumentsfor Solid WasteManagement: Global Review - Cointreau, S. 1982. Environmental Management of Urban Solid Wastes in Developing Countries. The World Bank. - Cointreau S. 1994. Private Sector Participation in Municipal Solid Waste Services in Developing Countries. UNDP/UNCHSNorldBank. 96 - Conestoga-Rovers & Associates. 2004. Handbookfor the Preparation of Landfill Gas to Energy Projects in Latin America and the Caribbean. World Bank - ESMAP Landfill Gas-to-Energy Initiative. - DEFRA (U.K.)2004. Valuation of the external costs and benefits to health and environment of waste management options. - DEFRA (U.K.), 2002. Waste not, Want not. A strategy for tackling the waste problem in England. - Department of the Environment (Northern Ireland), 2005. Northern Ireland's Waste Management Strategy. - Environmental Assessment Sourcebook Update Nr. 2, 1993. Environmental Screening. The World Bank. - Environmental Assessment Sourcebook Update Nr. 4, 1993. Sectoral Environmental Assessment. The World Bank. - Environmental Assessment Sourcebook, 1991. The Environmental Review Process. The World Bank. - European Commission, DG Environment. 2000. A Study on the Economic Valuation of Environmental Externalities from Landfill Disposal and Incineration of Waste. - Foster, V. 2004. Toward a Social Policy for Argentina's Infrastructure Sectors: Evaluating the Past and Exploring the Future. The World Bank. - G6mez-Lobo, A; Foster, V; Halpern, J. 2000. Designing Direct Subsidies for the Poor-A Water and Sanitation Case Study. Public Policy for the Private Sector. Note No. 211. - Hogg, D. 2000. Costs for Municipal Waste Management in the EU. Eunomia Research & Consulting. - Inter American Development Bank (IADB), 2003. Economic Instruments for Solid Waste Management: Global Review and Applicationsfor Latin America and the Caribbean. - Kobus, D.2003. Practical Guidebook on Strategic Planning in Municipal WasteManagement. The World Bank and Bertelsmann Stiftung. - Nissim, I. From Dumping to Sanitary Landfills -SWM in Israel. 2004. - Office of the Deputy Prime Minister(U.K.),2004. Planningfor WasteManagement Facilities. - Organizacih Panamericana de la Salud. 1995. Ana'lisis Sectorial de Residuos Sdlidos en Guatemala. - Organizacih Panamericana de la Salud. 2002. Ana'lisis Sectorial de Residuos Sdlidos en Ecuador. - Rep6blica de Argentina. 1999. Revisidn de la Primera Comunicacidn del Gobierno de la Repu'blica Argentina Segu'n la Convencidn Marc0 de las Naciones Unidas sobre el Cambio Clima'tico. - Rushbrook, P; PughM. 1999.Solid WasteLandfills in Middle- and Lower- Income Countries: A Technical Guide to Planning, Design, and Operation. The World Bank.. - Secretaria de Ambiente y Desarrollo Sostenible (Argentina), 2005. Estrategia Nacional para la Gestidn Integral de Residuos Sdlidos Urbanos. 97 - Silva, P; Pagiola, S. 2003. A Review of the Valuation of Environmental Costs and Benefits in WorldBank Projects. The World Bank. - The World Bank. 1996.Handbook on Economic Analysis of Investment Operations. - Velfisquez, G;O'Ryan, R. 2003. Bases para una Tarifcacidn Econdmicamente Eficiente de 10s Residuos Sdlidos Domiciliarios. Organizacih Panamericanade la Salud. - Fernhndez D. 2002. Guia para la Regulaci6n de 10s Sewicios de Limpieza Urbana con - Metodologias para la Determinacidn de Tarifas. Centro Panamericano de Ingenieria Sanitaria y Ciencias del Ambiente, Organizacih Panamericanade la Salud. - Cicowiez, M. 2003. Caracterizacih Econdmico-Social de las Provincias Argentinas. Universidad Nacional de La Plata. - Taylor, T; Arnold S. 2002. Financial and External Costs of WasteManagement Options in the European Union -An Overview of the Literature. University of Bath. 98 Annex 13: Statement of Loansand Credits ARGENTINA: NationalUrbanSolidWaste ManagementProject Differencebetween expectedand actual Original Amount in US$ Millions disbursements Project FY Purpose IBRD IDA SF GEF Cancelled Undisbursed Orig. Frm. ID Rev'd PO92836 2006 AR Inst.Strengthening- 25.00 0.00 0.00 0.00 0.00 25.00 0.00 0.00 ANSES I1TA PO88220 2005 AR (APLl) UrbanFlood 130.00 0.00 0.00 0.00 0.00 118.50 3.24 0.00 Preventionand Drainage PO70628 2005 AR-Provincial Road 150.00 0.00 0.00 0.00 0.00 150.00 0.00 0.00 InfrastructureProject PO88032 2005 AR(CRL1)BuenosAires 200.00 0.00 0.00 0.00 0.00 199.00 11.00 0.00 Infrastr SIDP(IAPL) PO71025 2004 AR-Provincial Maternal- 135.80 0.00 0.00 0.00 0.00 121.68 -1.60 0.00 Child Health Inv Ln PO72637 2004 AR-Prov. Maternal-Child 750.00 0.00 0.00 0.00 0.00 150.00 150.00 0.00 HlthAdj PMCHSAL PO78143 2004 GEFAR EnablingAct. 0.00 0.00 0.00 1.14 0.00 0.7 1 0.50 0.00 Conventionon Climate Change PO83982 2004 AR Economic Recovery 500.00 0.00 0.00 0.00 0.00 500.00 500.00 0.00 Support SAL PO88153 2004 AR NationalHighway 200.00 0.00 0.00 0.00 0.00 175.87 85.88 0.00 Asset Management PO70374 2002 AR PROFAM LIL 5.00 0.00 0.00 0.00 0.00 2.20 2.20 2.20 PO69913 2002 AR Santa Fe Provincial 330.00 0.00 0.00 0.00 0.00 126.70 126.70 0.00 Reform PO68344 2001 AR CordobaPRL5 303.00 0.00 0.00 0.00 0.00 75.00 75.00 0.00 PO64614 2001 AR- Second Secondary 56.99 0.00 0.00 0.00 0.00 13.57 13.57 0.00 EducationProject PO57473 2001 AR Indigenous 5.00 0.00 0.00 0.00 0.00 2.72 2.72 0.92 CommunityDevelopment LIL PO44447 2001 AR CatamarcaProvincial 70.70 0.00 0.00 0.00 0.00 24.30 25.00 0.00 Reform PO49012 2001 GEF AR- 0.00 0.00 0.00 8.35 0.00 7.42 4.68 4.27 Marn.Pol1ution.Prevention PO55482 2000 AR-Public Health 52.50 0.00 0.00 0.00 0.00 6.28 6.28 -0.46 Surveillance and Disease Control. PO45048 999 GEF AR-Renewable 0.00 0.00 0.00 10.00 0.00 9.38 8.87 0.08 Energy in RuralMarkets PO57449 999 AR State Modernization 30.30 0.00 0.00 0.00 0.00 18.17 18.17 -9.93 99 PO06043 1999 AR RenewableEnergy in 30.00 0.00 0.00 0.00 0.00 25.22 25.22 2.29 Rural Markets PO06046 1999 AR Water Sector Reform 30.00 0.00 0.00 0.00 0.00 17.76 17.76 17.76 PO06058 1999 AR-Social Protection4 90.80 0.00 0.00 0.00 0.00 5.10 5.10 5.10 PO39787 1998 GEF AR-Biodiversity 0.00 0.00 0.00 10.10 0.00 6.31 5.62 3.41 Conservation PO06041 1998 AR Small Farmer 75.00 0.00 0.00 0.00 0.00 17.83 17.83 5.50 Development. PO52590 1998 AR National Highway 450.00 0.00 0.00 0.00 0.00 30.22 30.22 30.22 Rehabilitation and Maintenance PO06010 1997 AR Provincial 125.00 0.00 0.00 0.00 0.00 43.61 43.61 14.28 Agricultural Development I PO06052 1997 AR FloodProtection 200.00 0.00 0.00 0.00 0.00 17.48 17.48 -19.28 PO06059 1997 AR-Maternal-Child 100.00 0.00 0.00 0.00 0.00 1.99 1.99 -1.08 Health andNutrition 2 PO05980 1997 AR Provincial Roads 300.00 0.00 0.00 0.00 0.00 27.19 27.19 27.19 PO40808 1997 AR N.ForestProtection 19.50 0.00 0.00 0.00 0.00 8.42 8.42 1.06 PO39584 1997 AR B.A.URB.TSP 200.00 0.00 0.00 0.00 0.00 36.45 36.45 36.45 PO06040 1996 AR FORESTRYDV 16.00 0.00 0.00 0.00 0.00 2.93 2.93 2.93 PO37049 1996 AR Public Investment 16.00 0.00 0.00 0.00 5.70 0.48 6.18 0.68 Strengthening - - Total: 4,596.59 0.00 0.00 29.59 5.70 1,967.49 1,278.21 123.59 ARGENTINA STATEMENT OF FCs Heldand DisbursedPortfolio InMillions of US Dollars Committed Disbursed IFC IFC FY Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. Approval 2000 ASF 4.00 0.00 0.00 4.10 4.00 0.00 0.00 4.10 1998 AUTCL 3.64 0.00 0.00 0.00 3.64 0.00 0.00 0.00 2004 Aceitera General 50.00 0.00 20.00 30.00 50.00 0.00 20.00 30.00 1995197199 Acindar 9.60 0.00 0.00 0.00 9.60 0.00 0.00 0.00 1994195 Aguas 18.82 0.00 0.00 44.63 18.82 0.00 0.00 44.63 1999 American Plast 0.00 0.00 1.00 0.00 0.00 0.00 1.oo 0.00 2000104 BACS 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1999104105 Banco Galicia 40.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Bco Hipotecario 1.00 0.00 14.54 26.10 1.00 0.00 14.54 26.10 1997 Bunge-Ceval 0.00 0.00 5.00 0.00 0.00 0.00 5.00 0.00 100 1996 CAPSA 2.08 0.00 1.91 4.63 2.08 0.00 1.91 4.63 1995 CEPA 3.00 0.00 0.00 1.20 3.00 0.00 0.00 1.20 1994 EDENOR 3.75 0.00 15.00 0.00 3.75 0.00 15.00 0.00 1998 F.V. S.A. 3.75 0.00 4.00 0.00 3.75 0.00 4.00 0.00 1996 Grunbaum 2.50 0.00 0.00 3.33 2.50 0.00 0.00 3.33 Grupo Galicia 0.00 3.06 0.00 0.00 0.00 3.06 0.00 0.00 1998 Hospital Privado 8.21 0.00 0.00 0.00 8.21 0.00 0.00 0.00 1992 Huantraico 0.00 27.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 Jumbo Argentina 0.00 40.00 0.00 0.00 0.00 40.00 0.00 0.00 LDManufacturing 8.45 0.00 5.00 0.00 8.45 0.00 5.00 0.00 1992 Malteria Pampa 0.00 0.00 2.00 0.00 0.00 0.00 2.00 0.00 1997 Milkaut 0.00 1.61 0.00 0.00 0.00 0.38 0.00 0.00 1993194103 Molinos 30.00 0.00 0.00 30.00 20.00 0.00 0.00 20.00 1995 Nahuelsat 2.05 0.00 0.00 0.00 2.05 0.00 0.00 0.00 1996199 Neuquen Basin 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 1993 Nuevo Central 0.00 3.00 0.00 0.00 0.00 3.00 0.00 0.00 PCR 5.48 0.00 0.00 0.00 5.48 0.00 0.00 0.00 1998 Patagonia 1.76 0.00 1.00 0.00 1.76 0.00 1.oo 0.00 1998 Patagonia Fund 0.00 9.37 0.00 0.00 0.00 2.40 0.00 0.00 1999105 S.A. San Miguel 20.00 0.00 0.00 10.00 0.00 0.00 0.00 0.00 1995 SanCor 9.10 0.00 20.79 0.00 9.10 0.00 20.79 0.00 1995 Socma 0.94 0.00 0.00 15.00 0.94 0.00 0.00 15.OO 1998 Suquia 0.00 0.00 10.50 0.00 0.00 0.00 10.50 0.00 1997 T61 4.44 0.00 5.00 7.50 4.44 0.00 5.00 7.50 1997 Terminal 6 4.44 0.00 0.00 3.25 4.44 0.00 0.00 3.25 1995 Terminales Port. 1.50 0.00 0.00 0.00 1.50 0.00 0.00 0.00 1995100 Tower Fund 0.00 1.68 0.00 0.00 0.00 0.83 0.00 0.00 1995 Tower FundMgr 0.00 0.05 0.00 0.00 0.00 0.05 0.00 0.00 1996 Transconor 20.29 0.00 17.87 157.58 20.29 0.00 17.87 157.58 2001 USAL 9.27 0.00 0.00 0.00 7.27 0.00 0.00 0.00 1997103105 Vicentin 20.00 0.00 15.00 0.00 0.00 0.00 0.00 0.00 1993 Yacylec 0.00 2.52 0.00 0.00 0.00 2.52 0.00 0.00 Total portfolio: 93.29 52.24 313.07 138.61 337.32 196.07 123.61 317.32 101 Approvals PendingCommitment FY Company Loan Equity Quasi Partic. Approval 2004 BancoRioTFF 0.02 0.00 0.00 0.05 2001 Gasnor 0.02 0.00 0.00 0.02 2001 ITBA 0.01 0.00 0.00 0.00 2005 Vicentin Exp. 0.00 0.00 0.00 0.05 Total pending 0.05 0.00 0.00 0.12 commitment: 102 Annex 14: LegalFrameworkfor SWMInter-municipalAgreements ARGENTINA: NationalUrbanSolid Waste ManagementProject Argentinean municipalities have been facing similar problems in terms of providing final solid waste (SW) disposal services but have not been successful in finding common solutions. Main municipal problems are related to lack of political agreement, institutional capacity, technical competence, adequate cost recovery systems, and financial resources. One of the main objectives of the proposed project i s to support regional solutions for SW final disposal services through the establishment of inter-municipal regions. The technical studies carried out for the design of Provincial S W M Plans have provided sound economic and technical arguments favoring a stronger collaboration between municipalities. Inter-municipal cooperation offers municipalities the opportunity to provide or pay for services collectively, for example, for construction of new infrastructure for SW final disposal, purchase of hauling and separation equipment, contracting collection and transport services, and institutional development for organization in charge of SW management. Some of the most important benefits accruing from inter-municipal cooperation in providing final disposal services are listed below. (i)Economiesofscaleintheconstructionandoperationofsolidwastemanagement(SWM) infrastructure; (ii)Creation of an independent institution responsible for and with better institutional capacity for planning, managing, and supervising S W M systems; (iii)Improvedcostrecoverythroughtheimplementationofseparateaccountingandspecific tariff and invoicing systems; and (iv) Increased negotiation capacity to attract more competent contractors The project's eligibility criteria include (i) establishment of the inter-municipal institution the responsible for providing or financing the final disposal services and (ii) the definition of the objectives, scope, and responsibilities of the municipalities participating in an inter-municipal legal agreement. The legal characteristics of these entities will depend on the legal framework of each participating municipality. Therefore, provincial governments will have a catalyzing role in initiating and providing support for successfulinter-municipal cooperation. LegalFrameworkfor Inter-municipalCooperation At the country level, Article 125 of the National Constitutionrecognizes the right of provinces to create regions to pursue common social and economic development. Therefore, a region i s the result of a cooperation agreement between provinces. It i s important to note that while regions do not constitute a higher level of political government than the participatingprovinces, they provide the opportunity to attain objectives that may go beyond the province's individual capacity. Inline with this national-provincial legislative framework, provinces have developed local legislation to replicate the model at provincial-municipal level. Inter-municipal cooperation i s already in place in many provinces, enabling their municipalities to reach specific cooperation agreements. As part of this project's preparation activities, an assessment of the legal conditions for inter- municipal cooperation was carried out in the pre-identified provinces of Chubut, Mendoza, and TucumBn. The Santa Cruz sub-project will not involve inter-municipal agreements. The main results are outlined inthe following table. 103 Table 14.1. LegalFramework for Inter-Municipal Cooperation inSelected ArgentineanProvinces Provincial Municipalities have the right to create sub-regions for economic and Constitution jocial development and to create organisms wihtin which to achieve Article 237 their goals. Municipalities are entitled to sign inter-municipal agreementsfor the common provision of services, execution of public works, technical and financial cooperation, and activities of interest. Provincial Establishes, by approval of the deliberating council (consejo Law No. 3098 deliberante) different forms of inter-municipal associations. for Municipal Article 44: The council has to authorize with a two-thirds vote of its Corporations members all consortiums, cooperatives or agreements. Article 45: Inter-municipal consortia can include the province, the nation, or neighboring municipalities. Municipal representation in consortia should be at least 51percent, and the share of revenues accruing from the consortium will have to be invested in improving the provision of services. Municipalities can participate in the establishment of companies or societies of any type to achieve the public good. Article 46: The municipal services cooperatives should be established with capital from the municipalities and from users' contributions. Article 51: The council has to allow the provision of public services for street cleaning, irrigation, public lightning, water distribution, sewage, sanitary inspections, transport, and any other aspectrelevant to collective welfare. Mendoza Provincial Authorization to municipalities for forming consortia for the provision Law No. 6957 and management of inter-municipal public services Article 2: Consortia formed under this law shall establish in their act the objectives, functions, and responsibilities, attributions, financial resources, administrative and managerial organization, and conflict resolution mechanisms. Moreover, consortia should be in accordance with all norms regulating their activities. Article 3: Consortia formed for solid waste management services will have to abide by Laws No. 5961 for environmental protection and NO. 5970 for closure of dumpsites and treatment of municipal solid waste. Article 4: The Direccidn de Personas Juridicus will approve the consortia's acts and authorize them to begin their functions provided that they comply with all legal requirements. Tucumitn Provincial Defines the municipalities as autarchic, with full recognition of their Law No. 5529 rights asjuridical entities in the sense that they can enter into contractual agreements and indebt themselves Article 24: The role of the municipal deliberating council (consejo deliberante) i s to (among others) to regulate the provision of public services that will satisfy local necessities and that are not under the jurisdiction of provincial or national authorities; authorize participation in inter-municipal agreements for the provisionof public services, construction of public works, and design of common development plans; issue concessions for public services; and provide for public hygiene and urban cleaning. 104 As noted, there are several differences among provincial legislation in regard to the legal framework governing inter-municipal cooperation agreements. While provinces such as Mendoza and Chubut have detailed legislation for consortiums, including specifics for SWM, others such as TucumAn have more general frameworks. However, all provinces allow the creation of inter-municipal organisms for the provision of public services in one way or another. It is expected that there would be no legal impediment hinderingthe implementationof regionally managed landfills as promotedby this project. Inter-municipal Agreements for SWM To facilitate and support collaboration among municipalities, project preparation included the development of models for inter-municipal agreements based on existing legal conditions in Argentinean provinces. The project task team delivered three suggested models to the pre-identified provinces and group of municipalities as references. The proposed options for inter-municipal agreements are summarized below. (i)The first model presents a general framework agreement wherein the municipalities express their intention to cooperate around common S W M issues such as the construction and operation of a regional landfill. National and provincial S W M legislation principles are set out. This type of agreement will work as a starting point for municipalities to develop different joint projects. The agreement also provides an opportunity to enhance implementation of important S W M principles such as monitoring, fee systems, and cost recovery mechanisms in all the participating municipalities; (ii)Thesecondmodelofagreementisbasedoncooperationintheformofanassociationbetween municipalities led by a steering committee. This would be a suitable model when the activities in common are not very extensive technically and economically, such as S W M awareness campaigns or contractingonly operation and maintenance services; and (iii)Thethirdmodelisanagreementintheformofaconsortium.Thistypeoforganismisconsidered suitable for the construction and operation of regional landfills because the activities involved represent and require long-term commitments, extensive management, and large economic flows from the partner municipalities. There is experience with this kind of agreement in Argentina, but for purposesother than SWM. Although the aims and forms of an inter-municipal agreement may vary, experience has shown some generalcontent recommendations, as describedbelow. A. Purpose. Visions, aims, and objectives of the cooperation should be clearly stated. Different municipalities may have different reasons for and interests in collaboration, but the common core activities will have to strive in a determined direction to ensure successful results. B. Territorial scope. The agreement should determine specifically the area covered and boundaries of the signingmunicipalities. C. Definition of waste. The types of waste included under the agreement, and therefore the object of inter-municipal management, must be defined. Distinctions and restrictions of wastes have to be clearly stated. D. Duties and powers. Clear distribution of power and responsibilities is vital in a multi-municipal organization. In simple forms of cooperation, the principle of "one municipality, one share" i s an alternative, while in other cases it may be more suitable to distribute shares or positions of assemblies (boards) in relation to the number of inhabitants. The latter i s relevant for multi- municipal organizations based on closer cooperation and deeper economic dependence around landfills, as population figures also could be considered an approximation of the generation of municipal solid waste. 105 E. Financial resources. An essential element of the agreement is to determine the distribution of economic burdensand possible benefits of the common organization. This is especially important in activities with higheconomic risks. Initially, thejoining partners might bringexisting property or staff into the multi-municipal organization, for which the value should be assessed and compensated (as could be the case for the host municipality). The costs of operation will also have to be distributed among the partners. These costs could be determined as a fixed yearly contribution based, for example, on the population, and revised regularly to correct for differences in demographic growth. Costs could also be combined with a more flexible fee, reflecting the use of the common landfill, provided that there are ways to measure the incoming waste quantities by weight or by volume. A combination of fixed and flexible fees could provide incentives for waste minimizationmeasures at the same time as stable income to cover the capital costs. F. Net worth. A definition of all properties, real estate, andchattels that will become the patrimony of the multi-municipal organism has to be included inthe agreement. The net worth shall be made up of properties, real estate, and chattels that (i)provinces or municipalities may transfer to the multi-municipal organism for their use, (ii) organism purchasesto achieve its purposes, or (iii) the public or private entities have donated. G. Council of Administration. It is important to specify in the agreement how the participating organizations will have access to information and decision making.. In inter-municipal cooperation, as well as in solid waste management in general, openness to public participation and information is extremely important. A Council of Administration could be assisted and advised by a Council on Solid Waste as a consultative and non-binding body. The Council on Solid Waste, shall consist of a representative from each member's Town Council, a technical representative from each municipal environmental department, a representative from the provincial environmentalholid waste authority, representatives of nongovernmental organizations, and representativesof the business community (e.g., chambers of commerce). H. Conflict resolution.A conflict resolutionmechanismhasto beestablished inorder to solve disputes among the parties prior to any legal action. I.Windingupandliquidation.Theagreementshouldalsospecifytheconditionsforthe timeframe, extension, and termination of the agreement, as well as the requirements for partners tojoin and leave the multi-municipal organism. 106 Annex 15: CarbonFinanceunder This Project ARGENTINA: NationalUrbanSolidWaste ManagementProject The CarbonFinanceOperationsat the WorldBank The role of the World Bank's Carbon Finance Operations (CFO) i s to catalyze a global carbon market that reduces transaction costs, supports sustainable development, and reaches and benefits the poorer communities of the developing world. The carbon finance initiatives are an integral part of the Bank's mission to reduce poverty through environmental and energy strategies. The threat climate change poses to long-term development and the ability of the poor to escape from poverty is of particular concern to the Bank. The impacts of climate change threaten to unravel many of the development gains of the past several decades. The World Bank CFO manages a pool of funds contributed by governments and companies in OECD countries to purchase project-based greenhouse gas emission reductions in developing countries and countries with economies in transition. The emission reductions are purchased through one of the CFO's carbon funds on behalf of the participant, within the framework of the Kyoto Protocol's Clean Development Mechanism(CDM) and Joint Implementation(JI). Unlike other World Bank development products, the CFO does not lend or grant resourcesto projects, but rather contracts to purchaseemission reductions in the form of a commercial transaction, paying for them annually once they have been verified by a third party auditor. Carbon finance provides a means of leveraging new private and public investment into projects that reduce greenhouse gas emissions, thereby mitigating climate change while linking it to sustainabledevelopment. The Banks carbon finance operations have demonstrated numerous opportunities for collaborating across sectors and have served as a catalyst in bringing climate issues to bear in projects relating to several sectors, including solid waste management. The Bank i s therefore making every effort to ensure that developing countries such as Argentina can benefit from international efforts to address climate change. A vital element of these efforts is ensuring that developing countries are key players in the emerging carbon market for greenhouse gas emission reductions. CFOactivitiesinArgentina: The Argentine CarbonFacility(ACF) Inline with the CFO activitiesinArgentina, the Secretariat of Environment and Sustainable Development (SAyDS) has announced the launch of the Argentine Carbon Facility (ACF). The objectives of this program are to (i)promote new investments in climate-friendly technologies in Argentina from both domestic and foreign sources, (ii) enhance the country's capacity to realize the full potential of its carbon market, and (iii)promote a partnership between the private and public sectors to deliver high quality emission reductions that address the global effort to mitigate the effects of climate change and promote national sustainable development. The initiative i s also intended to overcome several of the barriers identified by the SAyDS as contributing to a relatively small quantity of CDM projects either concluded or under development in the country. These barriers include (i)relatively little access to external financial markets to contribute to the underlying finance of CDM projects, (ii) reliance on the domestic financial market, which i s recovering from the crisis of 2001-2002 and has many other competing priorities, (iii) uneven awareness among investors of the opportunity for carbon finance and its contribution to lowering investment risks, and (iv) uneven awareness about successful projects in various sectors and lack of capacity to replicate them, particularly inthe private sector. 107 Carbon Finance and the Argentina SWM Project The Argentina National SWM Project was designed to incorporate the possibility of developing CDM projects as a result of the construction of facilities, related to SW processing, generating GHGs and with potential for emissions reduction (ER). Consequently, it is expected that the municipalities or groups of municipalities would benefit from Carbon Finance through a stream of revenues generated by the potential sale of emission reductions (ERs). These additional revenues are expected to partially finance the operations and management (O&M) costs of the final disposal operation. In some cases they may cover up to 30 percent of these costs. To guarantee benefits from the CF revenues, the project includes technical and contractual conditions in its eligibility criteria. First, it i s mandatory for each participating municipality, or municipal consortia, to include a landfill gas capture and flaring systemin the engineering design. Second, it i s mandatory for the consortia to sell its emission reductions (ERs) either to the Bank or some other broker or developer. Between 1.2 million and 1.5 million tons C02equivalent could be mitigated and sold until 2012 through the implementation of the pre-identified sub-projects. At current international carbon prices of between US$6.0and US$7.0 per ton COn equivalent, this representssome US$6-US$10.5 million. Table 15.1 lists the sites inwhich financial studies have been completed. Table 15.1. Resultsof Financial StudiesinSites Proposed for /CDM Projects Rio Gallegos, Santa Cruz 1 $ 701,353.00 1 21% I 30,709.00 1 75,050.00 ~ Mendoza Este $ 1,778,079.00 18% 77,855.00 190,267.00 Mendoza Centro $ 592,693.00 28% 25,952.00 63,422.00 Mendoza Metropolitana $ 7,307,172.00 30% 383,940.00 845,910.00 Pto. Madryn, Rawson, Trelew $ 1,679,296.00 23% 58,823.00 164,991.00 Comodoro Rivadavia $ 1,412,585.00 21% 49,481.OO 138,787.00 San Miguelde TucumAn 1 $ 6,820,027.00 1 30% I 358,344.00 1 789,516.00 108 The World Bank takes note of the basic conditions and proceduresset forth by the SAyDS of Argentina to be followed by interested sponsors for the submission and approval of CF projects originating from the S W M project. The main points are listed below: (i) Project auuroval. All projects would be submitted by the sponsors to the SAyDS as the Designated 'National Authority (DNA) for approval, in compliance with Resolution SAyDS No 825/2004; (ii)Emission Reductions (ERs). 100%of the ERsresultingfromthe SWM project would be channeled through the ACF; (iii)Revenue. Revenue resulting from the sale of ERs of any activity resultingfrom the S W M project would be distributed between the SAyDS, the province and municipalities in accordance with the respective proportion of investment incurred during construction, operation and maintenance from each alludedentity duringthe entire lifetime of the facility; (iv) Reserve fund. Municipalities or Consortia would constitute a reserve fund with the total amount of the revenue stream resulting from the sale of ERs limited to their municipal proportion. These funds will have to be dedicated to ensure the construction of the second cell of the landfill and to finance O&M cost. Payments would be disbursed to a special account to be opened by the municipality or Consortia to warranty the total or partial financing of the future subsequent cells of the landfill and its O&M costs; and (v) Transaction costs. The SAyDS would charge a 2 percent transaction fee of the total ERs of projects derived from the S W M project, to cover its operational costs. This fee would be automatically discounted from the disbursementsto the sponsors. 109 Annex 16: Country at a Glance ARGENTINA: NationalUrban Solid Waste Management Project Latin Upper- POVERTY and SOCIAL America middle- Argentina &Carib. income 2004 382 541 576 GNIpercapita (Atlasmethod, US$) 3,720 3,600 4,770 Lifeexpectancy 1 GNI(Atlas method, US$ billions) 1422 1,948 2,746 Average annual growth, 1998-04 lation(??) 10 force (%) 19 M o s t recent estimate (latest year available, 1998-04) 90 77 72 Lifeexpectancyatbirth (years) 74 71 69 Infant mortality (per 1WOlivebirths) l7 28 24 Childmainutntion (%ofchildrenunder5) Access to improvedwatersource Access to an improvedwatersource (%ofpopulation) 69 93 Literacy(%of populationage 97 89 91 Gross pnmaryenrollment (??ofschool-agepopulation) 19 P3 106 -Argentina Male P O P E 108 -Upper-middle-Incomegroup Female 19 8 2 106 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 GDP (US$ billions) 791 2574 Grass caprtalfonnatiorVGDP 20.0 B9 w o r t s of goods andservices/GDP 7.6 7.5 Trade Gross domestic savingslGDP 228 169 Gross nationalsavings/GDP 156 Currentaccount balance/GDP -32 -4.3 Interestpayments/GDP 4 1 12 616 29.1 63.4 252 Present value of debt/GDP Presentvalue of debtlexports Indebtedness 1984-94 1994-04 2003 (averageannualgrowih) GDP 2 4 0 3 8 6 GDP oercanta 0 9 -07 7 8 STRUCTURE of the ECONOMY I lgS4lgg4 2003 *Oo4 IGrowth of capital and GDP z (%of GDP) ( O h ) Agriculture 8.3 5.5 11.0 112 50 Industry 39.7 29.0 34.7 34.8 Manufacturing 29.7 8.3 23.9 23.9 0 Sewices 51.9 65.5 54.3 54.1 Household final consumption expenditure 70.0 62.7 69.7 Generalgov't finalconsumption expenditure .... 0.2 11.4 7.8 imports of goods and sewices 4.8 W.6 14.2 18.7 1984-94 lgg4-04 2003 2004 (averageannualgrowih) Growth of exports and imports (%) Agriculture 1.9 2.1 6.9 7.0 'O0 Industry 1.6 -0.6 16.5 7'0 50 Manufacturing 1.3 -10 16.0 7.0 Services 2 2 0.8 7.4 5.0 Household final consumption expenditure .. -0.3 6.8 6 2 -50 - Generalgov't finalconsumption expenditure 11 15 9.5 - -100 Gross capitaiformation 3.3 -3.3 38.2 32.9 imports of goods and Sewices 0.8 -2.3 37.6 45.4 ----Exports -+-Imports 110 Argentina PRICES andGOVERNMENT FINANCE 1984 1994 2003 2004 Domestic prices (?4change) Consumer prices 626.7 implicit GDP deflator 606.7 2.8 M.5 9.2 Government finance (%of GDP,includescurrentgrants) Current revenue 0.0 18.4 20.5 22.4 Currentbudgetbalance 0.o 0.7 1.3 3.3 Overallsurplus/deficit 0.0 0.0 0.5 2.4 -GDPUeflator -CPI TRADE 1984 1994 2003 2004 (US5 millions) Export and import levels (US$ mill.) Total exqorts (fob) 15,866 29,376 31,746 j4o,000, Food 1,333 2,597 2,807 I Meat 918 1,043 It27 30.000 Manufactures 4,489 8,752 9,458 Total imports (cif) 21,524 t3,8Q 21,323 20 wo Food Fuelandenergy 674 395 610 10,000 i Capitalgoods D,806 6,445 9,949 0 Exportprice index(200O=WO) 96 107 1M 98 99 00 01 02 Import priceindex (ZOOO=WO) n 5 M1 99 Exports imports Terms of trade (200O=DO) 91 M6 111 BALANCE of PAYMENTS 1984 1994 2003 2004 I (US$ millions) :urrent account balance t o GDP ( O h )I Exports of goods andsewices 9,607 8,387 33,231 35,504 imports of goods andsewices 5,961 27,305 18,485 27,154 l51 Resource balance 3,646 -7,918 14,746 6,350 Net income -6,143 -3,680 -7,425 -7,592 Net currenttransfers Current account balance -2,497 -1IMO 7,941 1,421 Financingitems (net) 2,469 1lDO -7,941 -1,421 Changesin net reselves 28 M emo: Reselves includinggold (US5 millions) 1,243 14,327 14,153 Conversion rate (DEC,local/US$) 1.00E-5 10 2.9 3.0 EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 (US5 millions) 'Composition of 2004 debt (US0 mill.) Total debt outstanding and disbursed 48,857 74,846 166,086 165,963 I iBRD 503 4,109 7,508 7,447 IDA 0 0 0 0 Total debt selvice 6281 5,750 14,007 t?,ll9 iBRD a 2 709 3,350 1,065 IDA 0 0 0 0 Composition of net resourceflows Official grants 5 16 37 Officialcreditors -22 731 -733 -2P Private creditors 14 6,477 85 -2,254 Foreigndirect investment (net inflows) 268 3,635 1,020 Portfolioequity(net inflows) 0 3,116 65 World Bank program x)4,106 Commitments MO 509 1,850 336 Disbursements 96 548 1,963 771 A. IBRD E- Bilateral 6-IDA D-Othermultilateral F-Private Principal repayments 76 425 2,966 832 C.iMF G Short-ter - 111 Annex 17: Map ARGENTINA: NationalUrbanSolid Waste ManagementProject 112 MAP SECTION IBRD 34461 70°W BOLIVIA 60°W 50°W CHILE PARAGUAY ARGENTINA B R A Z I L 30°S 30°S PACIFIC OCEAN URUGUAY ATLANTIC OCEAN ARGENTINA REPUBLICA ARGENTINA 40°S NATIONAL URBAN SOLID WASTE MANAGEMENT PROJECT ESTRATEGIA NACIONAL PARA LA GESTIÓN 40°S INTEGRAL DE LOS RESIDUOS SÓLIDOS URBANOS DISTRIBUCIÓN DE LA POBLACIÓN SEGÚN RANGOS POBLACIONALES DE LOCALIDIADES REFERENCIAS: < 19999 HABITANTES 20000 - 49999 CHILE 50000 - 99999 100000 - 199999 200000 - 999999 > 1000000 DE HABITANTES PROVINCE BOUNDARIES 50°S INTERNATIONAL BOUNDARIES SOURCE: Prepared by the Secretariat of Environment and 50°S FALKLAND ISLANDS (ISLAS MALVINAS) Sustainable Development based on a comprehensive national A DISPUTE CONCERNING SOVEREIGNTY OVER THE assessment and basic cartography from the Military Geographic ISLANDS EXISTS BETWEEN ARGENTINA WHICH CLAIMS Institute (SIG250, IGM). THIS SOVEREIGNTY AND THE U.K. WHICH ADMINISTERS THE ISLANDS. 0 100 200 300 400 500 Este mapa fue preparado por la Unidad de Diseño de Mapas Del Banco Mundial. Las fronteras, los colores, los nombres y toda otra información contenida en este mapa no denotan, por parte Del KILOMETERS Groupo Del Banco Mundial, juicio alguno sobre la condición jurídica de ninguno de los territorios, ni aprobación o aceptación 80°W 70°W 60°W 50°W de ninguna de tales fronteras JANUARY 2006