Argentina - Grain Storage Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2219-AR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE ARGENTINE REPUBLIC FOR A GRAIN STORAGE PROJECT February 7, 1978 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. January 1978 Currency Unit * Argentine Pesos ($a) US$1 = $a600 $al = US$0.00167 FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY ARGENTINA - GRAIN STORAGE PROJECT LOAN AND PROJECT SUMMARY Borrower: The Argentine Republic Beneficiary: Junta Nacional de Granos (Grain Board) Amount: US$105 million Terms: Fifteen years, including three years grace, at 7.45% per annum interest rate. Relending Terms: The Government would relend US$102.3 million to the Grain Board at the same term and interest rate as the Bank loan. Project Description: The project would help increase exports of grain and obtain better export prices by constructing up-country grain storage and conditioning facilities and by improving transport facilities. The project consists of constructing 20 silos with an average capacity of 100,000 m tons, each equipped with drying, cleaning and fumigating facilities; minor improvements of rail reception facilities at major ports; and modification of 2,000 boxcars for effective grain transport. Through technical assistance, the project will improve the Grain Board's computerized inventory control system and its capabilities for inspection and supervision of primary silos. Also included are a program for training Grain Board staff to operate project silos and pilot dredging for the Port of Bahia Blanca to determine the feasibility of deepening the port access channel. There are no special risks, although inefficient silo management and lower grain production levels than forecast could cause lower volumes of grain to pass through the silos and conse- quently result in smaller than projected benefits. Estimated Cost: Local Foreign Total ----- (US$ Million) ----- Silos 107.4 64.8 172.2 Railway Improvements 9.6 5.1 14.7 Management Proce- dures and Training 0.7 0.4 1.1 Pilot Dredging 0.9 2.4 3.3 Contingencies 56.4 32.3 88.7 Total Project Cost: 175.0 105.0 280.0 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. -2- Financing Plan: Railways and Grain Government Board IBRD Total -----------(US$ Million)------------ Silos, Civil Works - 93.2 39.5 132.7 Silos, Mechanical/ Electrical Equipment - 60.0 50.3 110.3 Consultants for Engineering and Supervision Studies, Training and Pilot Dredging 0.6 7.3 6.1 14.0 Computer Equipment - - 0.5 0.5 Railway Improvements 13.2 0.3 7.3 20.8 Pilot Dredging 0.4 - 1.3 1.7 Total: 14.2 160.8 105.0 280.0 Percent of Total 5 58 37 100 ( Estimated Disbursement: Bank FY 1979 1980 1981 1982 1983 -----------(US$ Miillion)------------ Annual 3.7 19.0 40.7 32.7 8.9 Cumulative 3.7 22.7 63.4 96.1 105.0 Rate of Return: 20% Appraisal Report: Report No. 1749b-AR, dated January 26, 1978. - 3 - INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE ARGENTINE REPUBLIC FOR A GRAIN STORAGE PROJECT 1. I submit the following report and recommendation on a proposed loan to the Argentine Republic for the equivalent of US$105.0 million to help finance a Grain Storage Project. The loan would have a term of 15 years, including three years of grace, with interest at 7.45% per annum. All proceeds of the loan, except for US$2.7 million to the Secretaria de Estado de Intereses Maritimos (SEIM) for the Pilot Dredging of the outer channel at Bahia Blanca, would be relent to the Grain Board on the same term and interest rate as the proposed Bank loan. PART I - THE ECONOMY Introduction 2. A report entitled "Argentina: Reconstruction and Development" (No. 1645-AR) dated August 31, 1977 was distributed to the Executive Directors. Country data sheets are attached as Annex I. Background 3. Argentina is endowed with a favorable human and natural resource base and enjoys a relatively high GNP per capita, estimated at about US$1,550 in 1976. However, the country's income level masks deep-seated structural imbalances in the economy, manifested in its inability to attain stable growth. During most of the post-World War II period high levels of protection and domestic market limitations contributed to a generally high-cost industrial structure which did not reflect relative prices and factor scarcities within the domestic economy. Lacking adequate incentives, the agricultural sector produced and exported below its potential. Ensuing social and economic tensions made it difficult to pursue rational economic policies and resulted in a "stop-go" pattern of growth and political instability. 4. The Government which took office in March 1976 faced an economic and financial chaos unparallelled in Argentina's history. Following months of political violence and escalating terrorism, the public administration had ceased to function. Along with the explosive acceleration in the rate of inflation, the virtually complete erosion of the country's creditworthiness and a sharp decline in the level of economic activity, there had been a profound deterioration of key institutions, productive capacity, and support- ing infrastructure. The military takeover was for most part well received by the population as it meant relief from the tension and chaos of the previous months. The new Government rapidly stabilized the political situation and introduced major changes in fiscal, monetary and exchange rate policies to break inflationary expectations and to shore up the country's precarious external financial position. Recent Performance 5. The Government has made considerable progress in stabilizing the economy. A restrictive wage policy, combined with improved fiscal and mone- tary management, reduced the rate of inflation from 740% during the last year of the previous administration to about 150% in 1977. Rationalization of exchange rate and trade policies resulted in a sharp improvement in the 1976 and 1977 balance of payments as the current account balances registered a US$1.9 billion and US$2.7 billion improvement, respectively, over the 1975 level. Increased confidence in the peso and the adoption of more realistic rates of interest induced substantial repatriation of private capital. During 1976 the Government achieved a significant improvement in the external debt structure through the substitution of short-term loans due in the last quarter of 1976 by new loans with more favorable maturities. Despite large repayment of short-term debt, gross international reserves increased by almost US$1.2 billion in 1976. Strong export performance and continued capital inflow resulted in an additional increase of about US$1.9 billion in 1977. Gross and net reserves reached US$3.5 billion and US$1.6 billion, respectively, by the end of 1977. 6. Even though a considerable reduction in the rate of price increases has been achieved, inflation remains the single most difficult problem faced by the Government. Monthly rates of increase in the cost of living index in the first quarter of 1977 averaged 10.1% as compared to 7.1% during the last quarter of 1976, as the result of upward adjustment of real prices of goods and services produced by the public sector and of unusually large increases in the price of beef and some other agricultural products which weigh heavily in the consumer price index. In mid-March as it became apparent that the stabilization program was not having the desired effect, a 120 day period of price restraint was put into effect. The termination of price restraints in July, however, combined with acceleration in the growth of money supply during the second quarter of 1977 led to a new surge in inflation, which averaged 10.7% between the months of August and October but fell to an average of 8% for the last two months of 1977. 7. In order to control the continued high rate of inflation, a number of measures were introduced in mid-1977, which aimed at slowing the growth of the monetary aggregates. More restrictive limits were established on Central Bank credit to the Treasury, special Central Bank rediscounts were curtailed, and interest rates were freed and became positive in real terms. The Government totally eliminated foreign borrowings under the system of "swaps" - guarantees of short-term foreign loans at a subsidized forward exchange rate - which had been a major factor in monetary expansion during 1975 and 1976. Denational- ization of the banking system and a fractional reserve system with new regula- tions governing the operations of banks and other financial intermediaries were introduced in May 1977. These measures aimed at increasing the efficiency of the financial system by stimulating competition between private financial institutions and at strengthening the instruments of monetary policy. Controls - 5 - were established to reduce capital inflows of a speculative short-term nature and to monitor external indebtedness of the public sector, especially, of the state enterprises. Despite a rapid accumulation of foreign exchange reserves, these measures were successful in sharply reducing growth of money supply from a peak of 20% in June to 5.7% in October. The full impact of the reduced rate of growth of the money supply on the rate of inflation should be felt in the first semester of 1978. 8. During the two years prior to the change of Government in March 1976, public finances in Argentina had deteriorated to an alarming extent and had become a major factor contributing to the hyperinflation of early 1976. Declining tax collections in real terms, sharply increased expenditures due to massive wage settlements and expanded public sector employment doubled the Treasury deficit as a share of GDP. Adjustments in tariffs of public enter- prises lagged behind inflation and the consequent serious deterioration in the financial position of a number of important enterprises resulted in increased Treasury transfers to these entities. The present Government introduced a number of special emergency taxes and drastically cut current expenditures by allowing real wages of public sector employees to decline sharply. The Treasury deficit declined from about 13% of GDP in 1975 to 8% in 1976, 5.5% in the first semester of 1977 and 2.5% in the second semester. The authorities made a major effort to finance the deficit through the sale of high-yielding Treasury bills and indexed bonds. Central Bank financing of the Treasury deficit declined sharply in real terms and fell as a share of total financing requirements from 70% in 1975 to 48% in 1976, but is estimated to have risen to 80% in 1977 as a result of declining yields on government bonds relative to savings instruments offered by the private sector. 9. The 1978 budget calls for a further reduction in the Treasury deficit to 1% of GDP. This amount is to be financed entirely through the issue of Treasury bills and indexed bonds and would therefore preclude Treasury recourse to Central Bank credit. Reduction of the Treasury deficit and the monetary and balance-of-payments programs adopted by the Government are expected to result in a further reduction of inflation in 1978. In order to strenthen the finances of the state enterprises, the Government implemented a program of periodic rate adjustments which, since mid-1976, has provided tariff increases in real terms for a number of important state enterprises. Further progress in reduction of Central Government transfers to state enter- prises is assumed in the 1978 Budget, and the authorities are continuing periodic tariff adjustments this year. The Government's program is being monitored by the IMF under the current 1977-78 Standby Agreement which was approved by the Board of Directors of the Fund on September 16, 1977; the fiscal, monetary and balance-of-payments performance is well within the ceilings specified under this Agreement. 10. During 1975 and early 1976, there was an increasingly sharp contrac- tion in the level of economic activity. As the economic situation deteriorated, private investment declined precipitously. The sharpest decline in investment was registered in the first quarter of 1976 as inflation accelerated and default on the country's external debt appeared imminent. The momentum of the recession continued into the second quarter of 1976 as measures required to - 6 - slow inflation further reduced aggregate demand and growth. Stocks of indus- trial products, which had been accumulated for speculative reasons during 1975 and early 1976, were brought to market as the private sector shifted out of r-al gcods into financial assets. While this drawdown of stocks reflected a return of confidence in economic management and a response to the sharp increase in real interest rates, it also accentuated the decline in industrial production. 11. Since June 1976, the situation has improved significantly as a result of a turnaround in private investment and sharply expanded exports. Responding to improved prices, agricultural production grew by 3.5% during 1976 and 11.6% during the first semester of 1977. The 1976/77 grain crop is estimated at a record 27 million tons. The livestock sector expanded strongly. Domestic consumption of beef remained buoyant and the volume of beef exports doubled following the opening of new markets. Petroleum output increased substantially from the second quarter of 1976 on as a result of a change in the management of YPF, the state-owned oil company, and the introduction of measures to expand secondary recovery. Manufacturing activity fell by 4.5% in 1976 mainly as a result of the decline in real wages, but significant recovery took place in major branches of industry during 1977. Overall growth of GDP in the first quarter of 1977 was 1.8%. Preliminary information for the second and third quarters of 1977 indicates recovery on all fronts. Overall growth of GDP in 1977 is estimated to be around 4.5%. 12. Reflecting the decline in overall output, unemployment had risen from 2.7% to 4.9% in the last six months of the previous administration. The new Government was able to stem the tide through a combination of restrictive wage policies and arrangements with the private sector to retain employees. The new Government even succeeded in lowering the unemployment rate to 4.1% at the end of 1976, a major achievement in view of the continuing decline in overall output, and was thus able to spread the costs of the stabilization program more evenly than is usual in situations of this type. The rapid recovery in 1977 reduced unemployment even further to 2.2% in October 1977 which actually indicates some scarcity of both skilled and unskilled labor. The improving employment situation also had a positive impact on private sector wages as the more dynamic branches attracted personnel from the still stagnating industries and the public sector. Indications are that average real wages had risen by over 15% between October 1976 and July 1977, although they were still below previous levels. To avoid a continued exodus of public sector employees, the authorities decided in December 1977 to pay wage increases in line with productivity increases in the public enterprises. This should help narrow the wage gap in the near future. Development Strategy and Prospects 13. The immediate objectives of the Government's economic program were achieved with a large measure of success in 1976, and since then the Government has turned its attention more to its longer-term development objectives. In contrast to the protectionist, import-substituting industrial development strategy which prevailed during most of the post-World War II period, the present authorities are pursuing an export-oriented growth strategy. - 7 - Through a combination of trade and internal pricing policies the internal terms of trade have been shifted in favor of agriculture and the effective exchange rate for agricultural exports has improved. Import duties on indus- trial products were reduced so as to align the internal price structure with international levels, thereby encouraging greater efficiency and increased use of Argentina's export potential. A unified exchange rate of a "gliding parity" type was introduced in November 1976, whereby continuous adjustments to compensate the difference between domestic and international inflation have taken place. To attract external capital and technology, a very liberal foreign investment law was promulgated. 14. In order to strengthen domestic resource mobilization and to rationalize public sector finances, a reform of the financial and fiscal systems has been undertaken. Special emphasis has been placed on restoring the financial viability of provincial governments and state enterprises which in recent years accounted for much of the fiscal deficit. Twenty-six private enterprises acquired by previous administrations are to be returned to private ownership or to be liquidated. During 1977 ambitious cost cutting measures were implemented by the Argentine Railways which helped to reduce significantly their large deficit. Additional taxes were introduced at the national level and important improvements in tax administration were carried out. A new group was created in the Ministry of Economy to rationalize public sector investment planning and to develop a medium-term public investment program. Taken in their entirety, the measures adopted by the new Government represent a major shift in Argentine development strategy which, when fully implemented, should lay the foundation for strong self-sustained growth in the future. 15. Over the longer term, the prospects for strong growth of the Argentine economy are favorable. In the immediate future, growth rates are likely to be moderate, due to the high priority which the Government has placed on the reduction of inflation. Price and trade policies aimed at opening the economy are expected to bring about a shift in the structure of industry and agricul- ture, which is needed to increase economic efficiency and stimulate growth. The levels of international trade, which have been low for an economy of Argentina's resource endowment and size, are expected to expand signifi- cantly as the economy adjusts to a new price structure and set of investment incentives. It will, however, take a number of years and continuing large capital inflows to carry out these tasks, partly because of their inherent complexity and partly because public support needed to maintain the effort can be sustained only if social costs of the adjustment process are held within tolerable limits. The inflows of medium- and long-term capital from both private and official sources will, in addition to their support of moderniza- tion of infrastructure and productive capacity, play essential roles in this process. 16. Export prospects for the longer term appear to be excellent and assuming continued strong beef exports and substantial increases in the volume of grain exports, total export earnings should increase by an average of 7% annually in real terms through 1980. Roughly two-thirds of that increase would be generated by agriculture and about one-third by the industrial sector. Maintenance of a 5% to 6% growth rate of GDP through 1980 and beyond will - 8 - require imports to increase at 10% annually. This pattern of growth of imports and exports would permit the country to maintain a favorable trade surplus over the medium term. This surplus would be adequate to cover factor services and still yield a modest but declining current account surplus through 1980. However, given Argentina's heavy debt service payments, and the need to continue to improve the structure of its external debt and to rebuild its international reserves, considerable gross inflows of medium- and long-term capital will be required, averaging US$1.8 billion annually for the next four years. The bulk of these capital requirements should be available from bilateral arrangements, suppliers' credits, world capital markets and direct private investments. Multilateral sources, however, are expected to play an important role both by providing capital and by stimulating capital flows from other sources. Debt Service and Creditworthiness 17. In March 1976, Argentina was faced with external debt payments falling due before the end of the year estimated at US$3.7 billion, equiv- alent to two-fifths of Argentina's total outstanding external debt. Overall indebtedness included short-, medium- and long-term obligations of the public sector in the amount of US$5.3 billion, "swaps" of approximately US$1.3 billion, exchange rate guaranteed imports of roughly US$600 million and miscellaneous other private debt estimated at US$1.9 billion. Disposable foreign exchange reserves amounted to only US$23 million. The new administration moved imme- diately to arrange short-term loans with commercial banks. It obtained a standby credit from the IMF of about US$300 million of which the first credit tranche of about US$180 million was used in 1976. The Government secured a four-year loan of approximately US$970 million from commercial banks in the U.S., Canada, Europe and Japan. These medium-term credits, although needed to make payments on the previously short-term bank borrowing and rollovers, strengthened Argentina's foreign exchange position, and contributed to an improvement in the external debt structure. As a consequence of these trans- actions and of the favorable performance of the current account of the balance of payments, Argentina was able to reduce outstanding foreign exchange guarantees by US$1.5 billion and increase gross foreign exchange reserves by US$1.2 billion or by more than double the increase in total outstanding and disbursed external debt in 1976. 18. Argentina's medium- and long-term external public debt outstanding and disbursed was US$4.2 billion at the end of 1976. Private external debt amounted to roughly US$2.0 billion. Preliminary estimates show that the public and publicly guaranteed debt outstanding increased only moderately in 1977. External public and total debt service ratios during 1976 were 18% and 32%, respectively. Due to the rapid increase in exports these rates are expected to have declined to 16% and 25% in 1977. Despite the large gross borrowings envisaged over the next several years, and continued use of finan- cial and suppliers' credits, these debt service ratios are expected to decline to about 13% and 19%, respectively, in the early 1980's, because of the improvement in the term structure of debt and the expected increase in exports. Provided the authorities continue to effectively manage the country's external indebtedness, Argentina should have no difficulty servicing the afore-mentioned external borrowing required for economic reconstruction and sustained economic growth. - 9 - PART II - BANK GROUP OPERATIONS IN ARGENTINA Bank Operations 19. Past Bank lending to Argentina has been sporadic because of periodic macroeconomic difficulties and unsatisfactory sector policies, along with delays and problems in complying with specific project conditions. A loan for an electric transmission and distribution project, approved by the Executive Directors in September 1976, marked the resumption of lending to Argentina after a hiatus of over five years. Six loans are now being disbursed. Annex II contains a summary statement of Bank loans as of December 31, 1977, and notes on the execution of ongoing projects. 20. In its lending to Argentina, the Bank is supporting several impor- tant and related objectives. The first objective is to contribute to the Government's efforts to diversify and increase Argentina's export capacity and overall economic efficiency in line with the country's economic resources and development base. While recent policy changes have provided much of the initial stimulus, sustained growth will require an expansion of productive facilities both in the agricultural and industrial sectors. The fourth highway project approved in March 1977 will support the resumption of economic growth and the expansion of agricultural export traffic. The industrial credit project would support the modernization and expansion of efficient industry in general and potential export industries in particular. The proposed grain storage project will assist Argentina to export larger quantities of grain in a more orderly manner throughout the year by introducing large-scale silos in the grain production areas. Other loans with a direct export orientation, which we plan to submit to the Executive Directors, include those for agricul- tural credit, ports and railways. 21. The second lending objective is institutional development and policy reform to ensure that investments are made and used efficiently. Under the industrial credit project, reforms are being implemented so that BANADE can fulfill more effectively the role of major provider of medium- and long-term funds to the industrial sector. Under the highway loan, the Bank has supported efforts to improve the management, planning capabilities, and operation of the National Highways Authority. Likewise, in the power sector, the Bank has supported important reforms in the tariff structure and has assisted in the preparation of a long-overdue national power expansion program and a national power organization study. The proposed project includes training in modern silo operations and improvements in the Grain Board's inspection and supervision procedures and computerized inventory control systems. The leasing arrangements for the project silos would enable a more effective cooperation between the private and public sectors in the promotion of grain trade. 22. Thirdly, Bank lending to Argentina is helping to provide essential long-term external capital when it can be absorbed effectively within the framework of sound overall financial planning and when capital requirements exceed availabilities from other external sources. It will take Argentina some years of successful economic management to regain its position as a - 10 - substantial borrower of long-term capital in private markets. In the meantime, very large amounts of relatively short-term external loans and credits will have to be repaid. During this period, the Bank would serve as a catalyst to c-imulpte medium- and long-term lending from other sources as well as to provide a part of the needed capital inflow. In October 1977, BANADE obtained through a co-financing arrangement with the Bank-financed industrial credit project, a US$100 million Eurodollar loan from a group of 36 private banks. This was the second such loan for Argentina in 1977, following a US$50 million Eurodollar loan to SEGBA in August. 23. Finally, the Bank is maintaining a dialogue with the Government regarding possible Bank assistance in projects that would foster physical in- tegration between Argentina and its neighboring c5untries, especially Bolivia and Paraguay. Such projects should serve as a major impetus to the economic growth of these two relatively poor and landlocked countries. The Bank project for a gas pipeline between Bolivia and Argentina has been a milestone in integrating the two economies in the energy field to the benefit of both countries. Other integration projects are under preparation, notably the Yacyreta hydroelectric project, which would benefit both Argentina and Paraguay. IFC Operations 24. As of December 31, 1977, IFC had made thirteen loans to borrowers in Argentina totalling US$67.2 million and one equity investment of US$2.0 million, of which US$35.1 million has been repaid, cancelled or sold. A summary of IFC's investments up to December 31, 1977, is shown in Annex II. PART III - THE AGRICULTURAL SECTOR AND THE GRAIN SUBSECTOR The Agricultural Sector 25. The agricultural sector has maintained a share of about 14% of GDP during the past decade. Excluding the comparatively small contribution of forestry and fisheries, the total sectoral output is fairly equally divided between crops and livestock. Agricultural exports made up 79% of total exports during 1970-76, declining from 83% in 1970 to 74% in 1976. Between 1970 and 1976, the share of grains in total exports grew from 29% to 31%, meats declined from 21% to 14% and oilseeds products remained constant at 10%. 26. While the share of the agricultural sector in the labor force declined from 20% in 1950-54 to 17% in 1970-74, the number of people employed in the sector has remained stable. According to the 1969 census, 73% of the farms in Argentina were owner-operated and accounted for almost 90% of the land in farms. In the Pampas, which produces most of the grains, 56.3% of the farms were less than 100 ha in size, averaging about 38 ha; 33.2% were between 100 and 500 ha, averaging 225 ha; 5.5% was between 500 ha and 1000 ha, averaging 700 ha and the remaining 5% were large-size farms of over 1000 ha. - 11 - 27. Agricultural production in Argentina grew at a rate of 1.8% p.a. during 1953-77 (crops 2.6% p.a. and livestock 1.4% p.a.). Growth during the second half of the period was almost double that of the first half mainly as a result of an improvement in the terms of trade for agriculture, and a more widespread use of commercial inputs, especially improved seeds and intensified mechanization. In line with the Government's development strategy (paragraph 13), the economic environment of agriculture is being improved through adjust- ment in taxation, credit, tariff, marketing and exchange rate policies. The objectives are to bring farm products and input prices in line with inter- national levels, and to establish a tax and credit system which will stimulate improved resource use and output expansion. Over the intermediate term, it is expected that land use will be intensified in the humid pampas region, which now accounts for most of the agricultural exports, and that livestock and crop production in the other areas will be expanded through land and water develop- ment. The potential is impressive, not only in crops and livestock, but also in forestry and fisheries. 28. The Government has made impressive progress in implementing the new agricultural policy. By the end of 1976, most domestic price controls had been removed, the state monopoly on grain trading lifted, the system of cattle slaughter quotas abolished, and the National Meat Board was no longer engaged in direct selling abroad. Differential exchange rates which discriminated against agricultural exports were eliminated. The export retention tax for wheat has been eliminated and the export tax for coarse grains was cut from 40% to 10% and is scheduled to be eliminated in May 1978. To help offset the revenue shortfall because of the reduction in export taxes, a temporary sales tax of 4% on agricultural products at point of first sale was introduced on September 1, 1976. Fifty percent of this sales tax payment is deductible from income subject to income tax. The provinces are in the process of revising the land tax to an annual rate of 1% levied on a base of 70% of current market value. This measure is intended to increase revenues for the provincial governments while encouraging landowners to use land more inten- sively. 29. Substantial progress has been made in shifting from negative interest rates and administrative rationing of funds to positive rates of interest for the entire economy, including the rates for agricultural credit. Beginning in July 1976, the Banco de la Nacion Argentina (BNA), the main source of agri- culural credit, made production loans available at about 94% (including 17% emergency tax). Although still negative, this rate was, in real terms, about double that of the previous two years. BNA opened a credit line for silos, supported by the Inter-American Development Bank (IDB), in early 1977 which now bears a rate of 6.0%, with outstanding principal for semi-annual payments being adjusted in line with the domestic wholesale price index. Since June 1977, virtually all institutional lending rates have been positive. 30. The setting for rapid growth in agricultural production is highly favorable. Production expansion in the near future is expected to result from wider use of more advanced techniques, intensification of the cropping pattern and increase in the productivity of pastures. Nonetheless, farmers will need time to carry out the planned investments and to organize resource - 12 - use. Also, to sustain a high growth rate in agricultural production, farmers have to be convinced that the present favorable Government policies will be maintained. The Grain Subsector 31. Grain Production. With the exception of rice, grain production is heavily concentrated in the Pampas, a fertile plain of some 45 million ha radiating out to the north, west and south of Buenos Aires. Less than half of the arable land of the Pampas is under crop production, with the rest being used to cultivate forage and as pasture for the large cattle population. 32. The potential for increasing grain production in the Pampas is substantial; about one-quarter of the land under forage cultivation could rapidly be converted to grain production, while the use of fertilizers, agricultural chemicals, improved seed stock and irrigation would result in significant yield increases. Large tracts of undeveloped land in the peri- meter of the Pampas could also be converted to grain production by clearing the scrub and light forest cover. These processes are already underway; grain production reached 31 million m tons in 1976/77 and is projected to reach 38 million m tons by 1985, as compared to an average of 23 million m tons per year during the past decade. 33. Grain Exports. Argentina was one of the world's leading exporters of grains in the years prior to World War II. At the peak, annual average export reached about 9.8 million m tons and accounted for about 20% of total quantity of world exports of wheat and 64% of corn. This situation has changed because of severe fluctuations in production and poor marketing which eroded the country's reputation as a reliable supplier of grain. During the 70's, annual grain exports averaged 8.7 million m tons which accounted for only 2.7% and 9.2%, respectively, of the greatly expanded world trade in wheat and coarse grains. 34. The Government is taking vigorous measures to regain Argentina's role as a major grain exporter. The removal of adverse pricing policies has already resulted in significant increase in production. Favorable factors such as the low cost of production owing to the natural fertility of the soil and the desirable quality of grain, provide Argentina with good prospects for increasing grain exports, to about 6 million m tons of wheat and 17 million m tons of corn and sorghum by 1985, to the growing world market, especially in the developing countries. 35. Organization and Problems of the Grain Trade. There are three distinct operations in the grain marketing structure: (a) the up-country marketing system, involving the movement of grain from farms to primary silos; (b) the pricing system, involving the operation of the Grain Exchanges in Buenos Aires, Rosario and Bahia Blanca; and (c) the export operation, involv- ing the sales activities and vessel chartering by the grain exporters and the operation of port elevator facilities. The efficient functioning of all of these operations is restricted by the shortage of storage facilities in the production areas. The repeated shifts in grain marketing responsibilities - 13 - from private to public sector during the past three decades have discouraged investment in storage facilities and have prevented the development of an efficient domestic and export marketing network. 36. Grain storage capacity at individual farms is limited to about 10% of annual production because of the high cost of grain conditioning facilities. Commercial storage, provided by private merchants, cooperatives and the Grain Board, bring the total storage capacity to about 45% of current annual pro- duction. This compares unfavorably with Canada and US which have grain storage capacity equivalent to annual production. The shortage of up-country silos in Argentina puts pressure on the producer to sell quickly, even at low prices, to minimize losses due to spoilage, while the primary silo operator pushes through as much grain as possible to maximize his profits. This practice in turn puts pressure on the transportation system, the port silos and finally the exporter to move grain into export markets as rapidly as possible. In short, the lack of primary storage facilities has prevented Argentina to offer high quality grain in reliable quantities to the world market and to obtain stable and, on average, higher prices. Another major problem of the system is that, because of the weakness of the Grain Board's inspection and supervision system, producers must sell grain at the terms dictated.by the primary silo operators who are at times less than fair in weighing or evaluating grain. 37. The pricing system is currently using a spot or cash market because of the shortage of storage facilities and high rates of inflation; the futures market has been eroded by a number of factors including the lack of storage facilities as well as the lack of speculative investors and the monopoly exercised by the Grain Board between 1974 and 1976. A parallel market, which operates outside of the Grain Exchange, permits the grain merchants to sell directly to exporters. Export operations are dominated by local and multi- national grain export firms, with cooperatives and the Grain Board accounting only for small shares of exports. 38. Since the liberalization of grain trade in the spring of 1976, the private sector, aided by an IDB loan, has accelerated the expansion of existing facilities and the construction of new small-scale silos averaging about 2000 m tons each. Projections are for further construction, including those under the proposed project, of up to 7 million m tons of primary silo capacity at a rate of about 700,000 m tons per year. This falls short of the total demand for additional primary storage capacity estimated to be about 10 million m tons by 1984/85. 39. Improvements are required in grain transport facilities to provide a smooth flow of grain and to handle the projected increase in grain production which will go almost totally into the export market. Insofar as grain exports are concerned, relatively limited modifications of equipment and rail reception facilities at the ports would improve matters greatly. The port elevators also require modernization of outloading equipment. Additional problems are the shortage of berths for loading intermediate size vessels of up to 40,000 tons, now common in the international grain trade, and the inadequate depth in the channel for the port of Bahia Blanca, which force fully loaded intermediate size vessels to wait for favorable tides. - 14 - PART IV - THE PROJECT 4C. Following the identification of the project by a Bank mission in September 1974, the project was prepared by the Grain Board with the assis- tance of consultants and FAO/CP. It was appraised by a Bank mission which visited Argentina in April/May 1977. Negotiations were held in Washington from January 9 to 12, 1978. The Argentine delegation was headed by Mr. Miguel Iribarne, Director, Ministry of Economy. A supplementary project data sheet is presented in Annex III. A report entitled "Staff Appraisal Report, Argentina, Grain Storage Project," Report No. 1749b-AR dated January 26, 1978 is being circulated separately to the Executive Directors. Between April/May 1977 and January 1978, the exchange rate of the Argentine peso changed from 360 to 600 pesos per US dollar. This change has not affected the cost estimates, the financing plan nor the rate of return of the project because, under the "gliding parity" policy adopted by the Argentine Government (paragraph 13), the devaluation of the Argentine peso has correctly reflected the difference in domestic and international inflation. Project Objectives 41. The objectives of the project are the following: (a) to reduce grain losses from spoilage and to increase efficiency of primary silo operations; (b) to stimulate grain production especially in the outlying areas of the pampas traditionally used for pasture; (c) to reduce the cost of marketing and exporting grain; (d) to enable grain merchants and exporters to supply grain reliably to export markets at a more stable and higher price throughout the year; and (e) to facilitate access of intermediate size grain carriers to Bahia Blanca. Project Description 42. The project consists of: (a) construction oi 20 large-scale silos with an average capacity of about 100,000 m tons, each equipped with grain conditioning facilities, to be located in the grain growing regions with the greatest storage deficit; (b) construction of railway spurs and minor interline linkages to facilitate railway transportation; (c) modification of 2,000 boxcars to handle grain efficiently; (d) training of Grain Board staff for country-wide inspection and supervision of primary silos and for operating project silos; (e) improvement of Grain Board's computerized inventory control system; and (f) pilot channel dredging, including hydrographic and oceanographic surveys and preliminary engineering and feasibility analysis, for the deepening of the outer channel at the port of Bahia Blanca. - 15 - Cost Estimates 43. The total cost of the project is estimated at US$280.0 million (including physical and price contingencies), with a foreign exchange compo- nent of US$105 million, or 37% of total cost. Local and foreign cost esti- mates are based on mid-1977 prices and exchange rate. The foreign exchange costs of the silos and railways components are based on the assumption that domestic contractors would be awarded all of the civil works contracts and two-thirds of the value of silo equipment contracts. Silo construction costs include 10% for physical contingencies mainly to provide for extra drainage and other unforeseen soil mechanics problems; railway improvements include 15% physical contingencies for additional track work; and the pilot dredging 11% to allow for unknown site conditions. Costs of local and foreign consultants for the studies and technical assistance components are based on recent experience in Argentina and is estimated at an average of US$5,500 per man- month. Price contingencies for foreign and local costs have been applied at the following annual rates: civil works, 9% in 1977-79 and 8% thereafter; and equipment, including engineering and supervision, 7.5% in 1977-79 and 7% there- after. It is expected that the devaluation of the Argentine currency would reflect the difference in the inflation rates of the domestic and foreign currencies. Financing Plan 44. The Bank loan would finance the full foreign exchange cost of the project. All but US$2.7 million of the loan funds would be relent by Govern- ment to the Grain Board at the same term and interest rate as the Bank loan (Section 3.01(b) of the draft Loan Agreement). The Grain Board in turn would onlend a part of the funds to FA, also at the same terms and interest rate as the Bank loan (Section 2.02(a) of draft Project Agreement). The Government gave assurances that the Grain Board would be provided with the necessary funds (estimated at not less than US$160.8 million equivalent) through appro- priate means, including taxation and export duties on grain, as and when necessary to cover the local costs of silo construction and technical assis- tance (Section 3.01 of the draft Loan Agreement). The Government would also enable FA to appropriate US$13.2 million equivalent to cover the local costs of the railway improvements (Section 2.02(b) of the draft Project Agreement and Section 3.01(a) of the draft Loan Agreement). The Government would also provide SEIM with the necessary funds (estimated at US$1.0 million equivalent) to cover the local cost component for pilot dredging of the Bahia Blanca port access channel (Section 3.02 of the draft Loan Agreement). 45. Representatives of the Grain Board held discussions with a large New York based commercial bank regarding the possibility of a loan of about US$30 million at medium term to supplement the proposed Bank loan. Such financing would be in substitution for the borrowings which the Grain Board would otherwise undertake within Argentina. We have informed the prospective lender as well as the Grain Board that we would be prepared to recommend to the Executive Directors to associate the proposed Bank loan with the commercial bank's loan if this were to result in better terms for the Grain Board than it - 16 - could otherwise obtain in international markets. Since the loan funds would finance local costs during the latter part of the project, the arrangements for the private cofinancing are not expected to be concluded for some time. If and when such a cofinancing operation materializes we would return to tb- Executive Directors with full details regarding the proposed private loan and appropriate recommendations for amendments to the Bank's Loan Agreement. Grain Board Organization and Operation 46. The Grain Board was chartered in the early 1930s to promote produc- tion of wheat, corn and linseed by offering support prices to farmers. It underwent several changes over the years, but its current structure and functions date essentially from 1963 when it was reorganized and most laws related to grain marketing were updated. From 1974 to March 1976, the Grain Board was the sole buyer and exporter of the major grains: wheat, corn, sorghum and sunflower, and had a price support function for most of the remaining grains. In March 1976 the grain trade was liberalized and the Grain Board returned to a price support function as a buyer of last resort. The main functions of the Grain Board now are to control market transactions of grain, including direct purchases of grain as necessary to support production or regulate the market, and to administer the public network of port elevators, silos and other complementary facilities. 47. The Grain Board has five managerial divisions and 19 departments, with the Elevator Operations Division being by far the largest. The latter administers 28 port elevators and 81 primary silos, and employs about 4,700 persons of the total Grain Board work force of about 6,000. The Grain Board's financial condition is sound. In accordance with its charter, the Grain Board is funded by the proceeds from a tax on grain exports of up to 2% on the FOB values and 1% on the value of the grain processed for domestic consumption. As a substantial income is currently derived from the fees it charges for its port elevators, silos and other services, the Grain Board collects tax in the amount of only 1% on grain exports. This, in addition to its other income, has placed th Grain Board in a comparatively healthy financial situation in spite of the inflationary pressure of the recent years. Another important factor is that the National Department of Grain Elavator Con- struction (DNCEG) of the Secretariat of Public Works and Transport is funded by a 1.5% tax on the FOB export value of grain which has enabled it to finance adequately the construction and repairs of silos owned by the Grain Board. 48. The Grain Board's accounting system is satisfactory. In accordance with Argentine law, accounts are audited by the General Accounting Office of the Treasury every quarter. The annual audit reports would be sent to the Bank within four months of the close of the Grain Board's fiscal year. The Grain Board would maintain separate accounts for the proposed project. 49. A proposal to establish a Grain Elevator Company (SAE), which would consist of the Elevator Operations Division of the Grain Board and the DNCEG, is being considered by the Government but it is unlikely that an early decision would be taken. The purpose of the SAE would be to construct and - 17 - operate grain elevators in the ports as well as in the production areas. If such a decision were ever taken, SAE would be responsible for the proposed project; we would then present full details regarding its operating procedures, statutes and staffing to the Executive Directors together with appropriate recommendations for amendments to the Loan and Project Agreements. Project Execution 50. Silo Location. The proposed sites for the project silos have been selected based on the results of a network flow model and of a financial viability study. The sites are scattered throughout the grain growing regions with special emphasis on western Buenos Aires Province (Map attached). The exact location of a number of silo sites has only recently been determined and is subject to change if the results of the detailed soil studies prove to be negative. Government would ensure that the Grain Board and FA would acquire the land needed for proposed silo sites and the railway right-of-way for access spurs (Section 3.07 of the draft Loan Agreement). 51. Project Organization. The Government would establish, within the Grain Board, a Project Committee consisting of representatives from the Grain Board, DNCEG, FA, Secretariat of Agriculture and the Secretariat of Economic Programming and Coordination (Sections 3.04(a) of the draft Loan Agreement); the chairman would be the Undersecretary of Agriculture. The Project Committee would be responsible for the execution of silo construction and railway improve- ments including approval of all expenditures and technical matters. The Government would establish, under the authority of the Project Committee, a Project Executing Unit consisting of the staff of DNCEG, the Grain Board and FA to assist the Project Committee in the day-to-day execution of the project (Section 3.04(b) of the draft Loan Agreement); the chairman of the Project Executing Unit would be one of the representatives of DNCEG. Both the estab- lishment of the Project Committee and the Project Executing Unit would be conditions of effectiveness of the Bank loan (Sectio 6.01 of the draft Loan Agreement). When the project silos become operational, the Grain Board and FA would enter into contractual arrangements whereby FA would provide the neces- sary railway equipment to transport the grain from the project silos, directly administered by the Grain Board, to the various ports at rates which would taken into account the transport improvements resulting from the Project (Section 2.07 of the draft Project Agreement). With the assistance of consul- tants, the Grain Board would improve its training program for silo managers and supporting staff, improve its computerized inventory control system and strengthen its capability for the inspection and supervision of primary silo operations. SEIM, with the assistance of consultants satisfactory to the Bank, would undertake the Pilot Dredging component (Section 3.03 of the draft Loan Agreement). 52. Construction Schedule. Project silos would be constructed over three and one half years following a 12-month period (starting from May 1978) for design, engineering and contractor selection. All project silos would be operational by November 1982. Most of the railway improvements, including boxcar alterations, would be carried out during the second year of the project - 18 - implementation. The improvements in the Grain Board's inspection and super- vision procedures and its computerized inventory control system would be introduced during the second and third years. Training of silo managers would begin during the third year and continue until the end of the implementation period. The Pilot Dredging component is scheduled to start in the second half of 1978 and would require 16 months for completion of the surveys, dredging, preliminary engineering and feasibility analysis. A further 12 months would be spent in observing the test channel to support forecasts for maintenance dredging requirements. Lease and Sales Contracts 53. In accordance with the Government's policy to encourage private enterprise, the Grain Board would attempt to lease, with option to purchase, or sell project silos to groups qualified to operate silos. Commercial oper- ators, who have greater experience in operating primary silos, are expected to be more efficient than the Grain Board in operating the project silos. In order to let as wide a cross section of the commercial operators as possible to operate large scale silos, the Grain Board would not lease or sell more than one project silo to any one lessee or purchaser. Invitations to bid for the leases would start prior to the completion of the project silos. Lease contracts, satisfactory to the Bank, would be for one to three years with an option to purchase the facility (Section 4.03(a) of the draft Project Agreement). In the case of cash sales, the Grain Board would either prepay the Bank loan component or apply the funds for construction of additional large scale-silos (Section 4.03(d) of the draft Project Agreement). The project silos not leased or sold immediately after construction would be operated by the Grain Board (Section 4.03(b) of the draft Project Agreement). Procurement 54. The civil works and the mechanical/electrical equipment for the project silos would be procured under single contracts for better coordination and to avoid delays. For the purpose of bid evaluation, however, local manu- facturers would obtain the 15% margin of preference, or the applicable import duties, whichever is less, for each of the three equipment categories, i.e., mechanical equipment, electrical equipment and auxiliary power station. The silo contracts would be grouped geographically into contracts of up to five silos each, in order to permit medium as well as large contractors to bid. The total value of the contracts for the 20 silos, including contingencies, would be US$243 million. International Competitive Bidding according to Bank's Guidelines would be followed for contracts exceeding US$1.0 million each. Contracts exceeding US$50,000 but less than US$1.0 million, except for the computer and related equipment which would be purchased under ICB, would be subject to local competitive bidding procedures satisfactory to the Bank. All other works and goods costing US$50,000 or less would be acquired through prudent shopping mostly in the domestic market (Schedule lB of the draft Project Agreement). All consultant services costing over US$100,000 would be subject to prior approval by the Bank (Section 2.03 of the draft Project Agreement). - 19 - 55. The modification of 2,000 boxcars for more efficient loading and unloading procedures of grain would be procured by the railways under local competitive bidding. FA would carry out all other rail improvements by force account, with assistance from subcontractors (Schedule ID of the draft Project Agreement). Disbursement 56. The Bank would disburse loan funds over a period of about four and one-half years, as follows: (a) 37% of total expenditures for civil works for the construction of silos and mechanical/electrical equipment; (b) 37% of total expenditures for consultants' services for engineering, procurement and supervision, inventory control and staff training; (c) 37% of total expenditures for rail improvements; (d) 100% of foreign expenditures for the purchase of computer and terminals; and (e) 71% of total expenditures for consultants' services and civil works for pilot dredging of Bahia Blanca port access channel. Disbursements would be made against normal documentation duly certified by the Grain Board for (a) through (d) and by SEIM for (e) above. Financial Analysis and Economic Justification 57. The financial analysis for the operation of the project silos is based on the assumption that a unit would reach an annual turnover of 2.5 times its capacity of 100,000 m tons in the third year of operations if leased to the private sector and 2 times if operated by the Grain Board. A buyer of a silo, contributing 20% of his own funds as equity and paying 8% interest on the debt over eight years, would obtain an 18% rate of return on his investment. In comparison, the Grain Board as operator would obtain a return of only 10% be- cause of the lower turnover and also because it does not take title to the stored grain, and consequently would not benefit from the price increases of the grain. In the case of leasing, the lessee is expected to earn about US$860,000 (before taxes) per year, after the payment of a lease fee of US$1.7 million to the Grain Board. In view of the expected low turnover of grain during the first two years of operations of a new project silo, the lease fee would be set at about US$500,000 and US$1.3 million for the first and second years, respectively. The Grain Board as lessor is expected to obtain a return of 12%. The Grain Board would levy such leasing fees or user charges on project silos which would result in an annual financial rate of return of not less than 10% on the capital investment for the project silos (Section 4.03(c) of the draft Project Agreement). - 20 - 58. The economic benefits from the project would consist of (a) reduced grain losses; (b) reduced transportation costs,'including vehicle waiting time, grain transport and handling costs and interest costs on grain in transit; and (c) higher average export prices for Argentina if grain is stored over a period. Overall, the project is expected to strengthen Argentina's balance- of-payments position through increased grain production and exports and thus help mitigate one of the major factors of the country's erratic growth pattern in the past. Also, the project would enable Argentina to export its grain in a more orderly fashion and thus help smoothen the price fluctuations in the world market. The average economic rate of return of the Grain Storage Project is estimated at 20%. Sensitivity analysis on 20% increase in costs, project slippage of two years, 20% reduced volume of grain going through silos, and 20% lower prices of grain, taken separately, would drop the rate of return to a range between 15% and 17%. 59. The project has no special risks, although inefficient silo manage- ment and lower grain production levels than forecast could cause lower volumes of grain to pass through the silos and consequently result in smaller than projected benefits. The project would not have any adverse impact on the environment. PART V - LEGAL INSTRUMENTS AND AUTHORITY 60. The draft Loan Agreement between the Argentine Republic and the Bank; the draft Project Agreement between the Bank and the Grain Board; and the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement are being distributed to the Executive Directors separately. 61. Special conditions of the project are listed in Section III of Annex III. An additional condition of effectiveness would be the establish- ment by the Government of the Project Committee and the Project Executing Unit (Section 6.01 of the draft Loan Agreement). 62. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 63. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments February 7, 1978 ANNEX I Page 1 of 4 ARGENTINA - SOCIAL INDICATORS DATA SHEET LAND AREA kTHOU KM2) --------------------------------"---------------- ARGENTINA * REFERENCE COUNTRIES (1970) TOTAL - 776.9 MOST RECENT AGRIC. 1782.2 1960 1970 ESTIMATE VENEZUELA SPAIN AUSTRALIA GNP PER CAPITA (USS) 560.0* 990.0* 1550.0*/a 1540.0* 1580.0* 3710.0* POPULATION AND VITAL STATISTICS POPULATION (MID-YR, MILLION) 20.6 23.7 25.7/a 10.3 33.6 12.5 POPULATION DENSITY PER SQUARE KM. 7.0 8.0 9* 11.0 67.02 PER SO. KM. AGRICULTURAL LAND 42.0 13.0 14.0/ 49.0 1os.o 2.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 24.9 22.5 21.8 42.1 21.0 20.9 CRUDE DEATH RATE (/THOU,AV) 9.0 8.6 8.8 8.7 8.8 8.8 INFANT MORTALITY RATE (/THOU) 59.4 59.0 .. 48.0 27.9 17.9 LIFE EXPECTANCY AT BIRTH (YRS) 66.0 67.4 68.3 63.8 70.5 72.0 GROSS REPRODUCTION RATE 1.5 1.5 1.5 2.9 1.4 1.4 POPULATION GROWTH RATE (%) TOTAL 1.5 1.4 1.3 3.4 1.1 2.n/S URBAN 2.6 2.4 2.3 4.7 2.0 2.9 URBAN POPULATION (% OF TOTAL) 71.2 77.4 80.0 75.7 59.1 88.5 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 30.7 29.3 29.0 .. 27.8 28.8 15 TO 64 YEARS 63.7 63.7 63.0 .. 62.5 62.8 65 YEARS AND OVER 5.6 7.0 8.0 .. 9.7 8.3 AGE DEPENDENCY RATIO 0.6 0.6 0.6 .. 0.6 0 6 ECONOMIC DEPENDENCY RATIO 1.0 1.0 *. .. 1.1 0. FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) .. .* * 67.0 USERS (% OF MARRIED WOMEN) *. EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 7500.0 8 9000.0 .. 3100.0 11900.0 4900.0/z c LABOR FORCE IN AGRICULTURE (%) 18.0m 15.0 22.0 25.0 9.0 UNEMPLOYED (% OF LABOR FORCE) 9.0 5.0 .2 /b 6.0 1.1/a 1.0 INCOME DISTRIBUTION % OF PRIVATE INCOME REC'D BY- HIGHEST 5% OF HOUSEHOLDS 27.5 21. -. .. . . 14 /d HIGHEST 20% OF HOUSEHOLDS 50.9 47.0O ** .. 38.972 LOWEST 20% OF HOUSEHOLDS 6.9 5.6 .. .. 7.17 LOWEST 40% OF HOUSEHOLDS 16.6 16.2 .. ** . 20.09 DISTRIBUTION OF LAND OWNERSHIP % DWNED NY TOP 10% OF OWNERS .. .. .. ,% OWNED BY SMALLEST 10% OWNERS .. .. ** ,* * HEALTH AND NUTRITION POPULATION PER PHYSICIAN 650.0 12 5000 460.0 1080.0 7400. a4. /b POPULATION-PER NURSING PERSON .. 980.0 520.0 .. 150.0f POPULATION PER HOSPITAL BED 160.0 C 170.0 1700/c .310.0 220.0 80.0x PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) .115.0 129.0 129.0 100.0 107.0 115.0 PROTEIN (GRAMS PER DAY) 98.0 99.0 107.1 62.0 81.0 101.0 -OF WHICH ANIMAL AND PULSE 54.0 64.0 68.5 32.0. 40.0 71.0 DEATH RATE (/THOU) AGES 1-4 4.4 3.2 ** 5.4 0.9 0.9 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 98.0 106.0 109.0 100.0 131.0 106.0 SECONDARY SCHOOL 32.0 37.0 53.0 41.0 57.0 83.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 12,0 12.0 12.0 it.0 11.0 13.0 VOCATIONAL ENROLLMENT (% OF SECONDARY) 50.0 59.0 63.0 .. 20.0 16.0 ADULT LITERACY RATE (%) 91.0 93.0 ** 77.0 94.0 99.0 HOUSING PERSONS PER ROOM (URBAN) 1.3 1.4 . .. .. c.7/b.c OCCUPIED DWELLINGS WITHOUT PIPED WATER (%) 53.0 .. .. ACCESS TO ELECTRICITY (% 0k ALL DWELLINGS) 89.0 76.0/d 79.0 **- ** 98. /bc RURAL DWELLINGS CONNECTED TO ELECTRICITY (%) 19.0 .. .. ** .. 93.0 /be CONSUMPTION RADIO RECEIVERS (PER THOU POP) 176.0 370.0 838.0 Ll 164.0 211.0 PASSENGER CARS (PER THOU POP) 24.0 61.0 * 55.0 71.0 312.0 ELECTRICITY (KWH/YR PER CAP) 524.0 936.0 lif.lU 1229.0 1634.0 4496.0 NEWSPRINT (KG/YR PER CAP) 0.6 11*4 7.4 8.2 5.8 35.9 SEE NOTES AND DEFINITIONS ON REVERSE ANNEX I Page 2 of 4 NOTES Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 and 1970, and for Most Recent Estimate between 1973 and 1975. a GNP per capita data are based on World Bank Atlas methodology (1974-76 basis). ** Selection of Australia as an objective country is based on coparable resource endowments and economic structure. ARGENTINA 1960 /a Persons 14 years of age and over; / Persons 15 years of age and over; /c 1962; d Registered, not all practicing in the country. 1970 /a Income recipients, Buenos Aires - urban; / Hospital personnel only; /c Households, total, urban and rural; /d Percentage of population. MOST RECENT ESTIMATE: a 1976; /b October 1977; Ic 1971; /d Percentage of population. SPAIN 1970 /a Employment office estimate; /b Registered, not all practicing in the country. AUSTRALIA 1970 /a Due to inanigration, population growth rate is higher than rate of natural increase; lb 1966; /c Excluding full-blooded Aborigines; /d 1967-68. R6, January 24, 1978 DEFINITIONS OF SOCIAL INDICATORS Land Area (thou km2) Population per nursinR person - Population divided by number of practicing Total - Total surface area comprising land area and inland waters. male and female graduate nurses, "trained" or "certified" nurses, and Agic.- Most recent estimate of agricultural area used temporarily or perms- auxiliary personnel with training or experience. nently for crops, pastures, market A kitchen gardens or to lie fallow. Population per hospital bed - Population divided by number Of hospital beds available in public and private general and specialized hospital and GNP per capita (US$) - GNP per capita estimates at current market prices, rehabilitation centers; excludes nursing homes and establishments for calculated by same conversion method as world Bank Atlas (1973-75 basis); custodial and preventive care. 1960; 1970 and 1975 data. Per capita supply of calories (% of requirements) - Computed from energy equivalent of net food supplies available in country per capita per day; Population and vital statistict available supplies comprise domestic production, imports less exports, and Population (mid-year million) As of July first: if not available, average changes in stock; net supplies exclude animal feed, seeds, quantities used of two end-year estimates; 1460, 1970 and 1975 data, in food processing and losses in distribution; requirements were estimated by PAO based on physiological needs for nomaal activity and health consid- Population density - per aque km - Mid-yer population per square kilometer ering environmental temperature, body weights, age and sex distributions of (100 hectares) of total area. population, and allowing 10% for waste at household level. Population density - per suare km of agric. land - Computed as above for Per capita supply of protein (eras per day) - Protein content of per capita agricultural land only. net supply of food per day; net supply of food is defined as above; require- ments for all countries established by USDA Economic Research Services Vital statistics provide for a minimum allowance of 60 gramas of total protein per day, and Crude birth rate per thousand, average - Annual live births per thousand of 20 grams of animal and pulse protein, of which 10 grams should be animal mid-year population; ten-year arithntic averages ending in 1960 and 1970, protein; these standards are lower than those of 75 grams of total protein and five-year average ending in 1975 for mast recent estimate. and 23 gram of animal protein as an average for the world, proposed by FAO Crude death rate per thousand, averaie - Annual deaths per thousand of mid-year in the Third World Food Survey. population; ten-year arithmetic averages ending in 1960 and 1970 and five- Per capita protein supply from animal and pulse - Protein supply of food year average ending in 1975 for most recent estimate. derived from animals and pulses in grams per day. Infant mortality rate (/thou) - Annual deaths of infants under one year of age Death rate (/thou) ages 1-4 - Annual deaths per thousand in age group 1-4 per thousand live births. years, to children in this age group; suggested as an indicator of Life expectancy at birth (yr) - Average number of years of life remaining at malnutrition. birth; usually five-year averages ending in 1960, 1970 and 1975 for develop- ing countries. Education Gross reproduction rate - Average number of live daughters a woman will bear Adjusted enrollment ratio - primary school - Enrollment of all ages as per- in her normal reproductive period if she experiences present age-specific centage of primary school-age population; includes children aged 6-11 years fertility rates; usually five-year averages ending in 1960, 1970 and 1975 but adjusted for different lengths of primary education; for countries with for developing countries. universal education, enrollment may exceed 100% a ace some p pils are below Population growth rate (%) - total - Compound annual growth rates of mid-year or above the official school age. population for 1950-60, 1960-70 and 1970-75. Adjusted enrollment ratio - secondary school - Computed as above; secondary Population growth rate (%) - urban - Computed like growth rate of total education requires at least four years of approved primary instruction; population; different definitions of urban areas may affect comparability of provides general, vocational or teacher training instructions for pupils data among coustries. of 12 to 17 years of age; correspondence courses are generally excluded. Urban population (% of total) - Ratio of urban to total population; different Years of schooling Provided (first and econd levels) - Ttal years of definitions of urban areas may affect comparability of data among countries. schooling; at secondary level, vocational instruction may be partially or completely excluded. Age structure (percent) - Children (0-14 years), working-age (15-64 years), Vocational enrolment (% of secondary; - Vocational institutions include and retired (65 years and over) as percentages of mid-year population. technical, industrial or other program which operate independently or s Age dependency ratio - Ratio of population under 15 and 65 and over to those departments of secondary instit o.m of ages 15 through 64. Adult literacy rate (%) - Literatetadults (able to read and write) as per- Economic dependency ratio - Ratio of Population under 15 and 65 and over to centage of total adult Populatin aged 15 years and or. the labor force in age group of 15-64 years. Family Elanning -accecors (cumulative, thou) - Cumulative number of acceptors Housing of hirth-control devices under auspices of national family planning program Persons per room (urban) - Average number of persons per room in occupied since inception. conventional dwellings in urban areas; dwellings esclude non-permnent Family planning - users (% of married women) - Percentages of married womaen of structures and unuccopied parts. child-bearing age (15-44 years) who use birth-control devices to all married Occupied dwellings without piped water (%) - Occupied conventional dwellings women Ic cone age group. in urban and rural areas without inside or outside piped water facilities as percentage of all occupied dwellings. Total labor force (thousand) Ac t lectricity (% of all dwellings) - Conventional dwellings with Totl lbo foce thusad)- Economically active persons, including armed electricity in living quarters as percent of total dwellings in urban sod forces and unemployed but excluding housewives, students, etc.; definitions rural areas. in various countcries are not comparable. Rural dwellingsL connected to electricity ()-Computed as above for rurul Labor force is agriculture ) - Agricultural labor force (in farming, forestry, dwellings Only. hunting and fishing) as percentage of total labor force. Unemployed (% of labor force) - Unemployed are usually defined as persons who Consumption are able and willing to take a job, out of a job on a given day, remained out Radio receivers (per thou 1op) - All types of receivers for radio broadcasts of a job, and seeking work for a specified minimum period not exceeding one to general public per thousand of population; excludes unlicensed rec,ejy- week; may not be comparable between countries due to different definitions in countries and in years when registration of radio sets woe in eftec; of unemployed and source of data, e.g., employment office statistics, sample data for recent years may not he comparable since moot c u tries abolised surveys, compulsory unemployment insurance. licensing. Psegr cars ler thou pop) -Psege.racars comprise mater cars seating Income distribution - Percentage of private income (both in cash and kind) lssnhar carht persons; eclu d ambul cars, hearses and military received by-richest 5%, richest 207, poorest 20%, and poorest 40% of house- vehicles. holds. Electricity (kwh/yr per cap) - Annual consumption of industrial, comuercial, public and private electricity in kilowatt hours per capita, generally Distribution of land rerip - Percentages Of lend mined by wealthiest 10o based on production data, without allowance for losses in grids but allow- sod poorest 10% of land owners. log for imports and exports of electricity. Health and Nutrition Newsprint (kg/yr per cap) - Per capita annual consumption in kilograme Population per pheician - Population divided by mber of practicing estimated from domestic production plus net imports of newsprint. physicians qualified from a medical school at university level. ECONOMIC DEVELOPMENT DATA AgE 1 P'age 3 of 4 pages Actual Projected 1970- 1976- 1970 1976 1977e 1979 1982 1985 1976 1985 1970 1976 1985 TIONALMillion of US at 1975 Prices and Exchanae Rates Annual Growth Bates As Percent of GDX Gross Domestic Product 33o519 39,210 40,935 45,995 55,040 5,87 2.6 6.0 100.7 100.9 100.1 Gaios frmTem of Trade = 237 -353 -269 -137 w 82 - 33 -- -- . .9 .1......i i ___ me_ rms__ f_Trade__(+) -8 2.6 6.1 100.0 100.0 100.0 Gross Domestic income 33.2a2 38,857 40,666 45,858 54,958 65,8432.61100 100 100 Import (incl. NS) 3,427 2,814 3,304 3,876 5,159 6,761 -3.2 10.3 10.3 7.2 10.3 Exports ( c(imort capacity) -3,644 -3.664 -4,980 -4.285 -5.424 -6,887 .1 7.4 -10.9 A -10.5 Resource Gap - 217 - 850 -1,676 - 409 - 265 - 126 -- -- - 0.6 -2.2 - .2 Consumption Expenditures 25.393 30.173 30.459 34,869 42,032 50,566 -2.9 6.0 76.3 77.7 76.8 Investment " (i :l. stocks) 7,672 7,834 8,531 10,579 12,658 15,151 .3 7.7 23.1 20.2 22.0 Domestic Savings 7,889 8,684 10,207 10,989 12,924 15,277 1.6 6.6 23.7 22.3 23.2 National Savings 7,441 8,387 9,852 10,691 12,646 15,054 1.1 6.9 22.4 21.4 22.9 MERCHANDISE TRADE Annual Data at Current Prices As Percent of Total Imports Capital Goods 365 550 874 1,327 2,423 4,004 -- -- 28.5 6.0 28.3 Intermediate Goods 1,168 1,870 2,402 3,310 5,477 9,010 -- --9 61.3 63.8 Fuels and related materials 79 560 584 635 721 818 4.7 18.4 5.8 Consumption goods 82 70 98 124 185 298 4.9 2.3 2.1 Total March. Imports (cif) 1,694 3,050 3,958 5,396 8806 14,130 100.0 100.0 100.0 Exports 8. 46 7. Primary products 1.485 2.807 3.842 4.457 6.876 10.421 --83.7 74.6 72.5 Manufactured goods -..2AQ ..f. 1"495 13 2,267 39 16.3 10.0 27.5 Total March. Exports (fob) 1,774 3.763 5,337 5,835 90143 14,375 100.0 100.0 100,0 Merchandise Trade Indices Average 1975 - 100 Export Price Index 45 95 105 125 156 193 Import Price Index 49 104 121 129 158 194 Terms of Trade Index 93 91 95 97 98 100 Export Volume Index 132 136 178 157 198 251 VALUE ADDED BY SECTOR Annual Data at 1975 Prices and Exchange Rates Agriculture 4,478 4,664 5,094 5,690 6,849 7,807 1.5 5.4 14.6 13.0 13.6 Industry and Mining 12,452 15,248 15,432 17,237 20,749 23,652 2.9 6.9 40.6 42.5 41.2 Services 13.740 15.965 16.930 18.911 22.764 25,948 2.8 54 44.8 44.5 45.2 Total 30,670 35,877 37,456 41,838 50,362 57,407 2.7 6.0 100.0 100.0 100.0 PUBLIC FINANCE As Percent of GDP (Central Government-Treapury) Current Receipts 5,027 5,960 2.9 -- 15,0 15.2 -- Current Expenditures 38 5.1 -- 11.6 13.4 Budgetary Saving, 1,139 760 -- -- 3,3 1. - Other Public Sector Transfers 670 2,509 24.6 -- 2.0 6.4 -- Public Sector Investment 737 1,686 14.8 -- 2.2 4.3 -- SELECTED INDICATORS 1965- 1970- 1975- 1980- (Calculated from 3-year averaged data) 1970 1975 1980 1985 Average ICOR 4.4 6.9 6.8 3.7 Import Elasticity 1.1 0.9 1.4 1.7 Marginal Domestic Savings Rate (7.) 26.7 10.6 43.7 24.5 Marginal National Savings Rate (7,) 23.2 16.2 44.5 24.9 LABOR FORCE AND Total Remunerated Labor Force Value Added Per Worker (1975 Prices & Eac. Rates) OUTPUT PER WORKER In Millions % of Total Annual Growth ats In U.S.Dollars Percent of Average 1970 1973 1970 1973 1970 1973 1970 1973 1970-73 Agriculture 1.181 1.264 18 17 2.3 4,854 4,636 85.9 78.9 1.5 Industry 2.488 2.666 37 36 2.3 6,392 7,162 113.2 121.9 3.9 Services 3.082 3.434 45 47 2 3.730 100.9 99.2 .7 Total Average 6.751 7.364 100 100 2.9 5,649 5,876 100.0 100.0 1.03 ANNEX 1 Page 4 of 4 pages BALANCE OF PAYMENTS, EXTERNAL ASSISTANCE AND DEBT (amounts in millions of U.S. dollars at current prices) Actual Etti ted Projected 1972 1973 1974 1975 197b 7 1980 1985 SUMMARY BALANCE OF PAYMENTS Exports (incl. NFS) 2,389 3,799 4, 761 3,669 4,668 6,461 7,989 16,509 Imports (incl. NFS) 2.222 2.633 4.218 4J57 3.584 4,561 7,317 16.208 Resource Balance 167 1,166 543 -848 1,084 17-3 -677 301 Net Factor Service Income -386 -455 -416 -440 -490 -487 -491 -517 Net Interest Payments (-323) (-382) (-388) (-425) (-464) (-457) (-427) (-377) Direct Investment Income (-60) (-77) (-35) (-16) (.28) (-30) (-65) (-140) Other Factor Service Income (-3) ( 4) ( 7) ( 1) ( 2) - Current Transfers (net) -4 10 - 5 18 7 -10 Balance on Current Account -223 721 127 -1,283 611 1,2 -22& Private Direct Investment 10 10 10 - - - 40 120 Official Capital Grants 26 17 9 8 6 1 10 Public M&LT Loans Disbursement 522 832 776 448 1,908 1,144 1,236 1,190 -Amortization -317 -468 -548 -516 -590 --734 -1.087 -1,114 Net Disbursements 2705 364 228 -68 1,319 410 149 76 Other ML&T Loans Disbursement 101 71 244 405 268 650 550 625 -Amortieatnt -Amortizatioent -so -100 -216 -408 -427 -39 392 408 NtDsusmns51 -29 28 -3 -159 _71169 1 Short-Term Capital and Transactions n.e.i. 82 -444 -339 275 -1,814 -203 Change in Net Reserves ( - increase) -135 -648 -71 1,070 35 -1,884 Change in Gross Reserves ( - = increase) -195 -865 44 854 -1,157 -1,884 -534 -187 GRANT AND LOAN COMMITMENTS official Grants & Grant-Like - . - Public M&LT Loans IBRD - - - - 115 Other Multilateral 92 57 1 177 165 Governments 82 42 519 42 146 Suppliers 118 116 535 307 196 Financial institutions 390 156 488 126 970 Bonds 120 65 290 200 207 Public Loans n.e.i.oans- 1 Total Public M&LT Loans 80O2 736 -,833 8752 1,0 Actual Est, DEBT AND DEBT SERVICE 1972 1973 1974 1975 M Public Debt OuTrstanding - - - - & Disbursed 2,368 2,792 3,046 2,901 4,251 4,613 Interest on Public Debt 156 199 233 250 258 289 Repayments on Public Debt 317 468 548 516 589 734 Actual Debt Outstanding on Dec. 31, 1976 Total Public Debt Service 473 667 781 766 847 1,023 EXTERNAL DEBT (Disbursed only) Disbursed Only Percent Other Debt Service 174 244 408 626 659 IBRD 342 8.1 Total Debt Service 647 911 1.189 1,392 1,506 Other Multilateral 294 6.9 BURDEN ON EXPORT EARNINGS () Governments 567 13.3 Suppliers 686 16.1 Public Debt Service 19.8 17.6 16.4 20.9 18.1 15.8 Financial Institutiuns 1,566 36.8 Bonds 743 17.5 Total Debt Service 27.1 24.0 25.0 37.9 32.3 Public Debts .e.i. 53 1.3 TDS + Dir. Inv. Serums 29.6 26.0 25.7 38,4 32.9 Tocal Public MOLT Debt 4,251 100.0 AVERAGE TERMS OF PUBLIC DEBT Int. as % Prior Year DO&D 8.3 8.4 8.3 8.2 8.9 Amort. as 1 Prior Year DO&D 16.9 19.8 19.6 16.9 20.3 IBRD Debt Out. & Disbursed 256 302 340 341 342 IBRD as % of Pub. Debt o&D 10.8 10.8 11.2 11.8 8.0 IBRD Debt Serv. as % of Pub. Debt Serv. 5.1 4.6 4.5 5.6 5.1 Annex II Page 1 of 4 THE STATUS OF BANK GROUP OPERATIONS IN ARGENTINA A. STATEMENT OF BANK LOANS (As of December 31, 1977) Amount less Undis- Loan # Year Borrower Purpose Cancellations bursed (US$ million) Fully disbursed loans 342.3 505 1968 Argentina Livestock 15.3 2.7 733 1971 Ferrocarriles Railways 56.5 3.8 Argentinos S.A. 734 1971 Argentina Highways 67.5 15.1 1330 1977 SEGBA, S.A. Power 115.0 113.3 1384 1977 Argentina Highways 105.0 105.0 1463 1978 Banco Nacional Industrial de Desarrollo Credit 100.0 100.0 Total 801.6 Of which has been repaid 118.9 682.7 Amount sold 11.3 Of which has been repaid 7.0 4.2 Total now held by Bank 678.5 Total undisbursed 339.9 No IDA credits have been made to Argentina. Annex II Page 2 of 4 B. STATEMENT OF IFC INVESTMENT (As of December 31, 1977) Fiscal Amount in US$ million Year Obligor Type of Business Loans Equity Total (US$ million) 1960 Acindar Industria Steel Products 3.7 - 3.7 Argentina de Aceros, S.A. 1960 Papelera Rio Parana, S.A. Pulp and Paper 3.0 - 3.0 1961 Fabrica Argentina de Automotive 1.5 - 1.5 Engranajes, S.A.I.C. Transmission 1962 PASA, Petroquimica Petrochemicals 3.0 - 3.0 Argentina, S.A.I.C. 1965/1972 Celulosa Argentina, S.A. Pulp and Paper 12.5 - 12.5 1969/1975 Dalmine Siderca, S.A. Steel Products 17.0 - 17.0 1969 Editorial Codex, S.A. Printing and 5.0 2.0 7.0 Publishing 1971/1973 Calera Avellaneda, S.A. Cement 5.5 - 5.5 1977 Alpargastas S.A.I.C. Textiles & Fibers 7.0 - 7.0 1977 Soyex S.A. Soybean Processing 9.0 - 9.0 Plant Total Gross Commitments 67.2 2.0 69.2 Less Cancellations, Terminations Repayments and Sales 33.1 2.0 35.1 Total Commitments Now Held by IFC 34.1 - 34.1 Total Undisbursed 9.0 - 9.0 ANNEX II Page 3 of 4 C. PROJECTS IN EXECUTION (As of December 31, 1977) Loan 505-AR - Balcarce Livestock Project, US$15.3 million loan of July 31, 1967; Effective Date: August 31, 1967; Closing Date: July 31, 1979. Lending to ranchers progressed very slowly from loan effectiveness until 1970, then accelerated as cattle prices increased and technical services improved. From 1970 to 1973, project performance was satisfactory and a sub- stantial amount of the loan was disbursed. However, the closing of the European Economic Community (EEC) to Argentine beef imports in 1974 limited external demand for beef and slowed down ranchers' demand for investment credits. Current prospects for beef cattle development in Argentina are improving significantly since producers' prices are increasing in real terms under new Government pricing policies and since beef exports are expanding rapidly due in part to the reopening of the EEC market. The loan is now 82% disbursed. Loan 733-AR - Railway Project, US$84.0 million loan of April 28, 1971; Effective Date: July.30, 1971; Closing Date: September 30, 1978. Due to the socio-economic situation of the country, it became clear in 1973-1974 that the original Project could not be implemented. On July 2, 1974, US$27.5 million was cancelled. The remaining US$56.5 million was to finance procurement committed by the original Closing Date, April 30, 1974. After having come to a standstill in 1975, procurement has regained momentum. The last of 59 contracts for Bank-financed goods was finally signed in May 1976. Goods have been delivered for 40 contracts, and the revised loan is now 87% disbursed. Loan 734-AR - Third Highway Project, US$67.5 million loan of May 5, 1971; Effective Date: July 30. 1971; Closing Date: December 31, 1979. The overall quality of construction and supervision for the 28 road sections included in the project is satisfactory. Fifteen of the road sections have now been completed, but construction of the remaining thirteen sections ran into severe problems caused by the difficult economic situation prevailing in 1975 and early 1976. Since March 1976, the Government has taken measures to improve the situation and work has now resumed at a normal pace. The bulk of the remaining work is expected to be carried out during 1978, with the completion of several other contracts extending into the first half of 1979. Loan 1330-AR - Electric Transmission and Distribution Program, US$115.0 million loan of November 1, 1976; Effective Date: January 10, 1977; Closing Date: December 31, 1981. Although there was an initial delay of 3 to 6 months with the procurement procedures mainly because of changes in SEGBA's management staff, the project is now proceeding well. ANNEX II Page 4 of 4 Loan 1384-AR - Fourth Highway Project; US$105.0 million loan of May 16, 1977; Effective Date: December 13, 1977; Closing Date: June 30, 1981. The project is proceeding on schedule. Loan 1463-AR - Industrial Credit Project; US$100.0 million loan of September 23, 1977; Effective Date: November 28, 1977; Closing Date: December 31, 1981. The project is proceeding on schedule. ANNEX III Page 1 of 2 ARGENTINA GRAIN STORAGE PROJECT Supplementary Project Data Sheet Section I - Timetable of Key Events (a) Time taken to prepare project: Twelve months (b) Agencies which prepared project: Grain Board and FAO/CP (c) First presentation to Bank: November 1975 (d) First Bank Mission to review project: May 1976 (e) Departure of appraisal mission: April 1977 (f) Completion of Negotiations: January 12, 1978 (g) Planned Date of Effectiveness: June 30, 1978 Section II - Special Bank Implementation Actions None. Section III - Special Conditions 1. The Bank has obtained assurances that: (a) Government would establish, within the Grain Board, a Project Committee consisting of representatives from the Grain Board, DNCEG, FA, Secretariat of Agriculture and the Secretariat of Economic Programming and Coordination with the Undersecretary of Agriculture as chairman (paragraph 51). (b) Government would establish, under the authority of the Project Committee, a Project Executing Unit consisting of the staff of the . National Department for Grain Elevator Construction (DNCEG), the Grain Board and FA, to assist the Project Committee in the day-to- day execution of the project with one of the representatives of DNCEG as chairman (paragraph 51). (c) Grain Board would lease project silos to groups qualified to operate silos under lease and sales contracts satisfactory to the Bank (paragraph 53). ANNEX III Page 2 of 2 (d) Grain Board would operate those project silos not leased or sold immediately after completion (paragraph 53). (e) Grain Board would not lease or sell more than one project silo to any one lessee or purchaser (paragraph 53). (f) Grain Board would levy such leasing fees or user charges on project silos which would result in an annual financial rate of return of not less than 10% on the capital investment for the project silos (paragraph 57). 2. Condition of Effectiveness: Government has established the Project Committee and the Project Executing Unit. 3. Condition of Disbursement: None. T o - ARGENTINA RAIN STORAGE PROJECT 1 Cnel e JCostelb 26' P losiGunos 7 Gr.l P ndG -o>donraC VAlla A P o -0. .- 28"- MF Mant,lla StencreRenotad La R P oodo V+r To Tjc, no -I1 -Ri - - N_† -\1. i l I . 1. -, - =-1'..-- . - -1 - - - -- 1 I . .- - -i