The World Bank Integrated Risk Management in the Rural Agroindustrial System (P162316) REPORT NO.: RES38161 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF INTEGRATED RISK MANAGEMENT IN THE RURAL AGROINDUSTRIAL SYSTEM APPROVED ON MAY 24, 2018 TO THE ARGENTINE REPUBLIC AGRICULTURE AND FOOD LATIN AMERICA AND CARIBBEAN Regional Vice President: J. Humberto Lopez (Acting) Country Director: Jordan Z. Schwartz Regional Director: Anna Wellenstein Practice Manager/Manager: Preeti S. Ahuja Task Team Leader: Tomas Ricardo Rosada Villamar The World Bank Integrated Risk Management in the Rural Agroindustrial System (P162316) ABBREVIATIONS AND ACRONYMS CSA Climate Smart Agriculture Agricultura Climáticamente Inteligente CONAE National Commission of Space Activities Comisión Nacional de Actividades Espaciales General Directorate of Sectoral and Special Dirección General de Programas y Proyectos DIPROSE Programs and Projects Sectoriales y Especiales FM Financial Management Gestión Financiera Integrated Risk Management in the Rural Gestión Integral de los Riesgos en el Sistema GIRSAR Agroindustrial System Agroindustrial Rural GSA Government Secretariat of Agroindustry Secretaría de Gobierno de Agroindustria GRM Grievance Redress Mechanism Sistema de Gestión de Reclamos INTA National Agricultural Technology Institute Instituto Nacional de Tecnología Agropecuaria IPPF Indigenous Peoples Planning Framework Marco de Planificación de Pueblos Indígenas MAGyP Ministry of Agriculture, Livestock and Fisheries Ministerio de Agricultura, Ganadería y Pesca MGAS Environmental and Social Management Framework Manual de gestión ambiental y social Políticas Operacionales/ Normas de OP/BP Operational Policies/ Bank Procedures Procedimientos del Banco Provincial Integrated Agricultural Sector Risk Plan de Gestión Integrada de Riesgos en el PARMP Management Plan Sector Agropecuario PEU Provincial Executing Units Unidades Ejecutoras Provinciales POM Project Operational Manual Manual Operativo del Proyecto PDO Project Development Objective Objetivo de Desarrollo del Proyecto RPF Resettlement Policy Framework Marco de Política de Reasentamiento SIIG Integrated Management System Sistema Integrado de Gestión Herramienta de respuesta a incidentes de SIRT Safeguards Incident Response Toolkit salvaguardas SMN National Meteorological Service Servicio Meteorológico Nacional The World Bank Integrated Risk Management in the Rural Agroindustrial System (P162316) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P162316 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 24-May-2018 31-Dec-2024 Organizations Borrower Responsible Agency Argentine Republic, Ministry of Treasury Ministry of Agriculture, Livestock and Fisheries (MAGyP) Project Development Objective (PDO) Original PDO The objective of the project is to improve the management of agricultural risks by eligible beneficiaries and selected public institutions. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-88670 24-May-2018 12-Feb-2019 08-Mar-2019 31-Dec-2024 150.00 .49 149.52 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Integrated Risk Management in the Rural Agroindustrial System (P162316) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Introduction 1. This Level Two Restructuring includes the following changes: (i) Implementing arrangement to (a) include the option for Participating Provinces to execute Subcomponents 2.1 “Institutional Strengthening for the Integrated Management of Agricultural Risk”, and 2.3 “Adoption of Climate Smart Agriculture Technologies” (b) to adjust the name of the GSA to MAGyP; and (ii) Procurement and FM arrangements to reflect the responsibility of the participating provinces under Component 2. B. Project Status 2. The Integrated Risk Management in the Rural Agroindustrial System Project (GIRSAR) was approved by the Board of Executive Directors on May 24, 2018 and became effective on March 8, 2019. The current closing date is December 31, 2024. It has a total estimated cost of about US$ 187.5 million, supported by an IBRD Loan of US$ 150 million. As of October 22, 2019, 0.32 percent of IBRD funds (US$ 490,000.00) have been disbursed. The implementing unit (DIPROSE) has already committed all the budgetary allocation of 2019 at the federal level (AR$ 26 million), and is currently processing the corresponding disbursement requests to the Bank. 3. Overall implementation and progress towards achievement of the PDO continue to be rated as Satisfactory. The Borrower is already carrying out a series of activities on each component of the Project. Among the actions that have been taken by the General Directorate of Sectoral and Special Programs and Projects (DIPROSE), the Borrower’s Directorate in charge of project implementation, are the following: (i) Component 1 “Strengthening Agroclimatic Information Systems”: signing a specific cooperation agreement with the National Meteorological Service (SMN) to purchase two agrometeorological software licenses (OBSMET and CLYSIS); conducting institutional needs assessments of National Agricultural Technology Institute (INTA) and National Commission of Space Activities (CONAE) with the objective of signing a cooperation agreement between those institutions and the Ministry of Agriculture, Livestock and Fisheries (MAGyP); (ii) Component 2 “Agricultural Risk Mitigation Investments”: assisting in the preparation of 11 Provincial Integrated Agricultural Sector Risk Management Plans (PARMP) for provinces that have expressed interest in participating in the Project, preparing subsidiary agreements for the transfer of funds to Participating Provinces; (iii) Component 3 “Agricultural Emergency Response Financing and Transfer of Agroclimatic Risks”: drafting terms of reference to develop an agriculture risk financing strategy, organizing discussions with agriculture risk modeling firms that could assist the MAGyP in the design of a risk transfer mechanism to provide coverage to the project target beneficiaries; and (iv) Component 4 “Project Coordination, Monitoring, and Evaluation”: developing a targeting strategy and a registry of beneficiaries as well as designing the Integrated Management System (SIIG) of the Project. 4. However, due to the country macro fiscal constraints, budget allocation for project implementation in 2019 is limited. Disbursement projections for the second semester of 2019 are US$ 2.4 million. For the year 2019, the Project has a budget credit (Source 22) of AR$ 244.6 million for Components 1 and 2 only. No funds were allocated for Component 3 of the Project in 2019 which implies that the Project is already running the risk of not reporting progress in its results framework. The World Bank Integrated Risk Management in the Rural Agroindustrial System (P162316) C. Background and Rationale for Restructuring 5. The Project restructuring aims to anticipate generalized fiscal constraints which threaten overall performance and achievement of the PDO. The proposed restructuring would allow the Project to disburse loan proceeds more smoothly, significantly increase the delivery of risk mitigation subprojects as well as the promotion of Climate Smart Agriculture (CSA) technologies, thus maximizing the development impact at the grassroot level. There is no change to the original PDO. II. DESCRIPTION OF PROPOSED CHANGES 6. On August 1, 2019 the Executive Branch of the Government of Argentina issued Decree No. 532/2019 which amends the Law of Ministries to, inter alia, transform the Government Secretariat of Agroindustry (GSA) into the Ministry of Agriculture, Livestock and Fisheries (MAGyP). Changes in implementation arrangements 7. In the context of limited fiscal space, the Borrower is requesting the possibility for Subcomponents 2.1 “Institutional Strengthening for the Integrated Management of Agricultural Risk” and 2.3 “Adoption of Climate Smart Agriculture (CSA) Technologies” to also be executed at the provincial level. This alternative is not possible under the current scheme, since these activities were determined to only be carried out at the federal level. Originally, only Subcomponent 2.2 “Public Investments” would be carried out at the provincial level. 8. On-lending poses risks. Given current fiscal circumstances an on-lending mechanism is the only alternative acceptable to the Borrower to move forward with project execution. It is important to recognize that this scheme poses the risk of causing delays mainly due to internal processes of approving subnational debt that requires parliamentary ratification at provincial level. Conscious of this risk and given that most resources allocated to Component 2 were to be executed by provinces, the Borrower has assumed a proactive approach to collaborating and negotiating with participating provinces Framework Subsidiary Agreements which would now cover all of Component 2, rather than just “Public Investments” subprojects. The Bank team is also having regular coordination meetings with the DIPROSE to monitor progress on each participating Province. Subsidiary Agreements under the Framework Subsidiary Agreements would now be signed with Participating Provinces once specific activities under Component 2 have been identified. The template Framework Subsidiary Agreements and Subsidiary Agreements are being updated. 9. As a result of the institutional changes indicated in paragraph 6 above, references to GSA in the Loan Agreement are being replaced with references to MAGyP, and the corresponding definitions are being updated. 10. Procurement arrangements. When activities under Component 2 “Agricultural Risk Mitigation Investments” are carried out by Participating Provinces, Procurement would be executed in a decentralized manner through the Provincial Executing Units (PEUs), which will be responsible for the integral execution of the different activities. In most cases, work will be carried out with the PEUs pre-existing the GIRSAR operation. In the cases where they do not exist, and it is necessary to institute them, they will be units within the Organisms of the Provincial Executive Power. The incorporation of PEUs will include an evaluation and strengthening of the institutional capacity that will be conducted by DIPROSE following the procedure agreed with the Bank. Based on this evaluation, a document will be made by DIPROSE with the proposed actions, which will serve as a basis to strengthen the weaknesses identified. The document will need a satisfactory response from the Bank. The Borrower has updated the Procurement Strategy accordingly. The World Bank Integrated Risk Management in the Rural Agroindustrial System (P162316) 11. Financial Management (FM) arrangements. The possibility for Subcomponents 2.1 “Institutional strengthening for the integrated management of agricultural risk” and 2.3 “Adoption of Climate Smart Agriculture (CSA) Technologies” to also be executed at the provincial level, does not change the flow of funds or disbursement arrangements. The FM responsibility for these activities with fall under the existing PEUs, already implementing Subcomponent 2.2 “Public Investments” of the Project. For new PEUs, DIPROSE should carry out capacity assessments, which will serve as basis to strengthen any identified weaknesses. 12. No funds are to be transferred to any PEU, for which an FM assessment has not been completed and conducted by DIPROSE, and subsequently reviewed by the Bank. DIPROSE has submitted to the Bank completed FM assessments for the PEUs in the following Provinces: Salta, Chaco, Catamarca, Corrientes, Neuquén, Tucuman, Jujuy, Misiones and La Rioja, which were found acceptable (submitted under P106685 – Socio-Economic Inclusion in Rural Areas Project, as the same PEUs are executing both projects). The assessments for the PEUs of Rio Negro, Santa Fe and Córdoba have been received, and will be reviewed and completed duly. 13. The revised FM arrangements, which have been included in the Project Operational Manual (POM) provide: (i) accurate and timely financial information; and (ii) reasonable assurance that Project funds are being used for the purposes intended. 14. Safeguards instruments do not require any further adjustments. The current Environmental and Social Management Framework (MGAS) was updated in July 2019 and already incorporates the latest changes requested by the Bank, i.e. inclusion of the Safeguards Incident Response Toolkit (SIRT), World Bank guidance regarding flow of workers in environmental management plans of Subcomponent 2.2 “Public Investments”, and updates to the Grievance Redress Mechanism. Although participating provinces will now receive the funds for all activities under Component 2 “Agricultural Risk Mitigation Investments”, environmental and social management responsibilities regarding Subcomponent 2.3 “Adoption of Climate Smart Agriculture (CSA) Technologies” remain with DIPROSE’s environmental and social unit, as established in the MGAS. Regarding Subcomponent 2.1 “Institutional strengthening for the integrated management of agricultural risk”, DIPROSE will continue to provide technical assistance to the provincial teams while preparation of the plans is still responsibility of the provincial teams. Therefore, the dispositions included in the MGAS are still valid for the management of environmental and social aspects, even considering the institutional arrangements proposed under this restructuring paper. Likewise, given the nature and the implications of the above- mentioned modifications in Subcomponents 2.1 and 2.2, the dispositions included in the Indigenous Peoples Planning Framework (IPPF) and the Resettlement Policy Framework (RPF) are still valid for the management of social impacts associated with involuntary resettlement (OP 4.12) and indigenous peoples (OP 4.10). 15. The POM has been updated and the Bank provided a No Objection on October 1, 2019. III. SUMMARY OF CHANGES Changed Not Changed Disbursements Arrangements ✔ Legal Covenants ✔ The World Bank Integrated Risk Management in the Rural Agroindustrial System (P162316) Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ APA Reliance ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action The World Bank Integrated Risk Management in the Rural Agroindustrial System (P162316) Loan Agreement: Institutional Arrangements (Schedule 2, Section I.A.1). Description: The Borrower shall, through MAI’s DGPPSE, maintain for purpose of the implementation, monitoring and supervision of the Project a structure, functions and responsibilities, and IBRD-88670 staffing acceptable to the Bank, including fiduciary, Complied with No Change administrative and technical personnel, and social and environmental specialists, all with qualifications, experience and terms of employment acceptable to the Bank, as set forth in the Operational Manual. Loan Agreement: Institutional Arrangements (Schedule 2, Section I. A.2 (a)). The Borrower shall, through MAI’s DGPPSE, not later than three months after the IBRD-88670 Signature Date start design of a digital registry, Complied with No Change operated and with a structure and mechanisms set forth in the Operational Manual, of beneficiaries of Part B of the Project. Loan Agreement: Institutional Arrangements (Schedule 2, Section I. A.2 (b)). The Borrower shall, through MAI’s DGPPSE, as soon as technically and operationally IBRD-88670 Not yet due No Change possible but not later than nine months after the Signature Date, start implementation of the digital registry of the beneficiaries of all Parts of the Project. Loan Agreement: Operational Manual (Schedule 2, Section I.B). Description: The Borrower shall, through IBRD-88670 MAI’s DGPPSE, carry out the Project in accordance with Complied with No Change a manual (the Operational Manual), acceptable to the Bank. IBRD-88670 Loan Agreement: Cooperation Agreements (Schedule 2, Partially complied No Change Section I.D). Description: The Borrower shall, through with MAI’s DGPPSE, not later than four months after the Signature Date with respect to INTA, CONAE, and SMN, and prior to initiating any activities for the strengthening of the agroclimatic and price information systems operating in the Borrower’s territory and involving the cooperation of other Selected Public Institutions, enter into a cooperation agreement with The World Bank Integrated Risk Management in the Rural Agroindustrial System (P162316) INTA, CONAE SMN and the respective Selected Public Institution, in terms substantially similar to those in the Model Form of Cooperation Agreement and acceptable to the Bank, setting forth their respective responsibilities in the implementation of such activities. Loan Agreement: Subsidiary Loan Agreement and Risk Mitigation Subprojects (Schedule 2, Section I.C (a)). Description: The borrower, through MAI’s DGPPSE, shall prior to the implementation of any activity under Part B.2 of the Project for the benefit of a Participating Province, enter into an agreement with the IBRD-88670 Not yet due Revised Participating Province, under terms substantially similar to those in the Model Form of Framework Subsidiary Loan Agreement and under terms and conditions acceptable to the Bank, setting forth the framework for the implementation of Risk Mitigation Subprojects in their jurisdiction. Loan Agreement: Component 2 (Schedule 2, Section I.C (a)). The Borrower shall, prior to the implementation of any activity under Part B of the Project, enter into an Proposed agreement with the Participating Province, under terms NYD substantially similar to those in the model form of Framework Subsidiary Loan Agreement and under terms and conditions acceptable to the Bank. Loan Agreement: Subsidiary Loan Agreement and Risk Mitigation Subprojects (Component 2) (Schedule 2, Section I.C (b)). Description: The borrower, through MAI’s DGPPSE, shall prior to the implementation of any IBRD-88670 Not yet due Revised Risk Mitigation Subproject and not later than 24 months from the Signature Date, enter into a subsidiary loan agreement with the Participating Province under terms and conditions satisfactory to the Bank. Loan Agreement: Component 2 (Schedule 2, Section I.C (b)). The Borrower shall, prior to the implementation of any specific activity under Part B of the Project for the Proposed benefit of a Participating Province, enter into a NYD Subsidiary Loan Agreement with the Participating Province under terms and conditions satisfactory to the . Bank.