Transcript of meeting of the Executive Directors of the IBRD and IDA, held on Tuesday, June 24, 1980 : Argentina - Oil and Gas Engineering Project

1 STRICTLY CONFIDENTIAL INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT nm INTERNATIONAL DEVELOPMENT ASSOCIATION Tuesday, June 24, 1980 Washington, D. c. The meeting of the Executive Directors was convened at 10:05 a.m. in the Board Room, 1818 H Street, N. w., Washington, D. c., Mr. Roberts. McNamara, Chairman, presiding STRICTLY CONFIDENTIAL 2 C O N T E N T S 4 Proposed Loan - Argentina (Oil and Gas Engineering Project) 3 STRICTLY CONFIDENTIAL 3 P R O C E E D I N G S We turn then to agenda item number four, a proposed loan in the amount of $27 million equivalent to the Argentine Republic for an oil and gas engineering project and I'll ask Elejalde to present it to us. Go right ahead. MR. ELEJALDE: Mr. Chairman, Members of the Board: Argentina has a substantial and varied energy resource base, including hydroelectric, hydrocarbon, coal, nuclear and  4 STRICTLY CONFIDENTIAL non-conventional resources. However, the country has not ye attained self-sufficiency in energy. Although its oil and natural gas industry ranks third in output among Latin American countries, after Venezuela and Mexico, Argentina had to spend over a billion dollars for hydrocarbon imports in the past year. At the same time, substantial amounts of domestic natural gas had to be flared because no suitable facilities for its use exist as yet. Realizing the importance of a sound energy position for the country's economic development, the Government has assigned high priority to the energy sector. It is now in the process of assembling the building blocks necessary to construct the comprehensive program to deal with the sector in its entirety. The issues facing the development and rationalizatiori I of the sector are complex, and the Government has requested increased participation by the Bank in this difficult under- taking. The Government has also decided to increase the involvement of local and foreign private enterprise in this endeavor. Bank involvement would be in areas critical for the development of the sector. It is based on the realiza- tion that the rational development of the sector can be achievJ'd only when the development of each of the main sub-sectors, pow r, I  5 STRICTLY CONFIDENTIAL hydrocarbon and coal, are coordinated so as to complement and reinforce each other. The Bank is already helping to improve organization and planning of the power sector. We are also reviewing with the Government the role to be played by domestic coal resources in Argentina's overall energy plan. The loan before you represents the first step in what may become a more substantial Bank involvement in Argentina•s hydrocarbon subsector and its principal institu- tions in this area, Yacimientos Petroliferos Fiscales, YPF, and Gas del Estado. Beyond this project, the Government and the Bank have intensified the dialogue on a number of important and interrelated topics that have critical bearing on the strengthening of the hydrocarbon sector, such as, how to redress the demand-supply imbalance of fuel oil and to reduce I- the flaring of substantial amounts of natural gas and how to promote more efficient use of natural gas. Another important topic is how to increase the participation of the local private sector which is starting to play, as the Government wishes it to, an important role in the areas of petroleum exploration and production. Given the size and complexity of Argentina's energy STRICTLY CONFIDENTIAL 6 sector, improvements will be gradual and, together with the Government, we intend to approach them step by step. However, by taking these steps, it should be possible to weave the diverse topics mentioned in a coherent whole and to make a significant contribution to a rational development of the energy sector in Argentina. Thank you. MR. McNAMARA: Thank you, sir. May I have your questions and comments? Mr. Looijen? MR. LOOIJEN: Mr. Chairman, it's a good project, and I have nothing against it, but aren't we a bit late in coming in? I mean there is a lot of retroactive financing and advanced contracting. MR. McNAMARA: Yes. i MR. LOOIJEN: And wasn't there a subsequent project~ Probably -- well, it's a large area; there is much more to I do there and couldn't we have come in a project where our input is a bit greater because this is typically an existing project where we have come at a late stage. MR. McNAMARA: Why MR. LOOIJEN: It's not usual for the Bank.  7 STRICTLY CONFIDENTIAL MR. McNAMARA: Why is there so much retroactive financing? Or put another way: Why should not the project have been recast and carried forward to further activity? MR. ELEJALDE: Mr. Chairman, this project has three points: One is the audit of reserves which is in the course of -- is prepared but it hasn't started yet. It has been prepared in the course of the whole processing ef the loan. The second one is a natural gas optimization study, which also is in the course of being prepared. We're in the finalizing terms of reference to start inviting con- sultants for quotations. And the third, which is the one where the major Bank's contracting refinancing and retroactive financing occurs is a seismic survey in the Northwest of Argentina, which is an area that has a very good hydrocarbon potential, particularly for gas. The reason why we are coming in in a way, we are not coming in at a late stage during preparation and appraisal of the project. We reviewed all the parameters with regards to the way the seismic survey would be carried out, and our ataff visited the sites and had extensive discussions with YPF engineers and geologists on the way this I 11 i/ I STRICTLY CONFIDENTIAL 8 this work should be carried out. What happens is that given weather conditions normally, this work is carried out between May and October to avoid the rainy season. And this year was an unusually dry year and it was possible for YPF to start the work in January. This is the reason why -- of course, starting the work in January was a very valid business decision in that in oil things have to be done quickly; there is a great opportunity cost of delays and also in November -- if this work started earlier, in November it's possible to have drilling rigs on the side and start drilling part of the project. Otherwise, the weather conditions again would have created delays. So it was advantageous to start if possible earlier and in this regard there is more unusual retroactive financing in this project. MR. McNAMARA: Thank you. Mr. Kurth? MR. KURTH: Thank you, Mr. Chairman. Well, in the first place I had the same comment and question Mr. Looijen has just asked. I was also surprised about the late stage we came in and the unusual high amount of advanced contracting, 35 million out of 50. Well, this I think is an unusual high amount.  9 STRICTLY CONFIDENTIAL My other question -- my other two questions, Mr. Chairman, are both in relation with the overall performance of our projects in Argentina. I -- looking at the annexes where we can find the amounts which have been disbursed so far on ongoing projects, I really get the impression that the performance is particularly bad there. There are two projects approved -- one in '67 and one in '71 -- which are not yet fully completed. Then there are two other projects. This is the Loan 1330 and 1384, • which are delayed by 15 months and two years respectively. Then the industrial credit project approved in June '77 is also behind schedule. So far only 30 million out of 100 million have been committed. The agricultural credit approved in May '78 has been cancelled. I have nothing seen of sort of message to the Board about this cancellation. Maybe it escaped our attention. And in addition we are now informed that the grain storage project approved '78 has also serious problems. I would appreciate, Mr. Chairman, some explanation and a brief report on the overall situation on the performance in our projects in Argentina. And one more point is -- this is related to the  10 STRICTLY CONFIDENTIAL project we have before us. As I understand in an engineering project normally the repayment period is shorter than our normal loans. And if I remember rightly in our operational manual, we talk about normally ten years. I would be interest d to know why in this case we had to go to 15 years. What are the exceptional circumstances which prompt us to deviate from the rules? Thank you. MR. McNAMARA: Thank you. First, perhaps Mr. Scherer would come to the table and respond on the first question on the overall performance of projects in the Argentine and then maybe Mr. Barletta would add to that. MR. SCHERER: Mr. Chairman, the progress of Bank projects in Argentina is not as good as we had expected at the time these loans were made. This is quite obvious. However, to judge the individual projects by I their delay, compared to the estimates at the time of appraisa 4 would not do full justice of what has been achieved and I would like to elaborate briefly on this in a moment, before addressing or giving brief reasons why the projects are delayed. The projects were made at times when Argentina faced  11 STRICTLY CONFIDENTIAL still very serious economic problems and in particularly the control of inflation proved much more intractable a problem than both the government and the Bank had expected. The government had to take compensating measures, particularly in terms of reducing the fiscal deficit and in adjusting public sector prices and tariffs, putting a ceiling on those, in order to bring inflation down, which was the overriding concern of this government now for the last two to three years. And this undoubtedly has affected the World Bank program. Lack of counterpart funds for one and then the financial situation of the enterprises the World Bank is supporting because of inadequate tariff adjustments compared to the adjustments the Bank had expected at the time of appraisal. However, major achievements have been made and the railways, as one example, which has not disbursed anything yet. There is no disbursement at all -- has improved its operating procedures. Freight tariffs have gone on -- have gone up much more than we expected. Uneconomic lines have been closed and this all as part of a program which had been designed by the government with Bank cooperation, major I I progress has been made there. ! i  12 STRICTLY CONFIDENTIAL Under the highways loan, the unit costs for constructions are considerably lower than they were before because of operational changes within the Highway Administra- tion; a similar argument holds true for the power sector, where the operating efficiency measured according to a variety of parameters we have analyzed has improved con- siderably. We have now a long-term investment program which rationalizes power development in Argentina. On all those issues significant progress has been made. Now admittedly disbursement and the speed with which the projects are being executed has not been as fast as we had hoped, but to the extent that the government has now brought inflation under control, after all within a six months period, five months period, inflation, as measured by the general wholesale price index has decreased by over 100 percentage points. It was about 150; now it's about 47, 48, plus a very thorough control of the public investment budget, which means allocations for Bank projects ahead of time over the years should turn this situation around. And we are quite confident that the projects which are still in the pipeline would now move considerably faster than would be indicated by the figures we have in front of ,, II  13 STRICTLY CONFIDENTIAL us. MR. McNAMARA: Thank you. Mr. Barletta, do you wish to add to that? I MR. BARLETTA: Just to complement, Mr. Chairman, that}. we have been very concerned about this ourselves and with I I Mr. Scherer and our team we have been in close contact with I the Argentineans very intensely over the last year. I made this the central purpose of my discussions with the authoritie a couple of months ago. I think we can also complement by saying that in the feeder roads projects things are moving much more rapidly now and much more satisfactorily. The commitments are being made very quickly. In the industrial credit project the commitments are being made very quickly to the point that maybe by the end of the year, it will be fully committed. In the agricultural loan, it was best to cancel it frankly, given the fact that it was not working out the way it was originally designed and a notice of this had been distributed to the Board on time. Besides this also, the government itself has taken measures to create a better coordination internally within the Ministry of Economy and the other areas of project  14 STRICTLY CONFIDENTIAL execution so that the small administrative details could be ironed out more quickly. So we feel that we're on a better track now and given the avenues of these two or three projects, are moving better and we hope to continue that way. MR. McNAMARA: Mr. Elejalde, why 1S years instead of 10 years for an engineering project? MR. ELJALDE: Mr. Chairman, the allocation of 15 years are country terms to the proposed project. It is not an exception but it is due to the specific nature of the project. The project has three components, as mentioned before. Each of these, audit of reserves, seismic survey and gas optimization study, would lead to different types of projects -- could lead to a variety of projects, if any, and that would be, of course, -- the ensuing loan would result from these studies. At the moment, it's difficult to pinpoint which projects, if any, would be refinanced from this first effort, know exactly who would be the borrower. That would make the -- a refinancing arrangement subsequently somewhat cumbersome. And the way we have handled cases of this nature I' II I STRICTLY CONFIDENTIAL 15 before is to provide country terms to this type of project. MR. McNAMARA: Thank you. Mr. Smith? MR. SMITH: Thank you, Mr. Chairman. I was struck, Mr. Chairman, as were Mr. Looijen and Mr. Kurth, by two aspects of this project and I would like just to explore them a little bit further. I ought to say at the outset that we, of course, fully endorse the effort by the Bank in the energy sector for reasons of which we are all aware. But I was slightly surprised that the Bank had become involved with the seismic surveys element of this project, given that YPF had already started on it and given that the Bank generally I think acts as a lender of last resort in this sort of situation. I could have understood it a bit more perhaps if this had been a very small or very poor country which had difficulty in raising the funds for continuing the program that had already been started. And I wondered whether in fact YPF could have gone ahead without Bank financing or whether it wasn't crucial that the Bank should come in. My second question relates to the r~Jroactiv~. financing. ,,.,., •. ,,..,_,.,..v-···_-·~-". My understanding is that the general guidelines . . - I .! !I 11 Ii Ii  16 STRICTLY CONFIDENTIAL limit retroactive financing to what has been incurred after the appraisal of the project and generally not more than 10 percent of the cost. Now, as the report recognizes, we're up to some- thing like 19 percent here and to relate it to my first question, I wondered whether it was really essential that the Bank should pick this up? Thank you, Mr. Chairman. MR. McNAMARA: Surely. Mr. Elejalde, the real question is: Why should the Bank participate at all in this seismic operation? What have we contributed to it and why wasn't it possible for the Argentine to carry it on without us? MR. ELEJALDE: Mr. Chairman, this is a small loan to a very big institution. So clearly in terms of funds this project could have been completed by YPF without our participation. However, in terms of our involvement, we have reviewed this project, discussed a number of its parameters with YPF staff. So we have made a contribution in that regard. And the other important point is that this is \ an engineering loan whose purpose is to -- one of its main I purpose, apart from solving particular problems at the moment, 1,i 1! STRICTLY CONFIDENTIAL 17 is to prepare and have subsequent projects of a larger magnitude. The area where the seismic survey is being carried ) out, the Northwest of Argentina, has tremendous potential I for oil and for gas and it is linked with the idea of J I incentive as in private investment which is one of the policieJ I that the government is now strongly following out, and it also is linked with our own World Bank activities in neighbor- ing countries where regional type of trades of oil and gas could be eventually made from important discoveries of gas in this area. Therefore, we think that our participation in this project, in this part of the project is important and that we have made a contribution and it if projects result from this as we expect, we will it is important to have been at the beginning influencing the way the project would be carried out. MR. McNAMARA: Mr. Stern, do you want to add to that? MR. STERN: Well, I think the concerns expressed by Mr. Looijen and Mr. Kurth and Mr. Smith are ones that we struggled with quite extensively before we decided to finally go ahead with this project. And the reasons which  18 STRICTLY CONFIDENTIAL persuaded us to do so are the ones that Mr. Elejalde has referred to but essentially we believe that in Argentina there are very large-scale opportunities for hydrocarbon development. Argentina already has a substantial production; it the sources of -- the uses of this production need to be realigned. There is now considerable waste in the system. Additional production is possible. Argentina does have a substantial institution, but it is an institution that needs further assistance. And we see this project as an introduction into a substantial involvement in this sector in which we believe we can con- tribute both to the mobilization of resources, external resource of which we would play a part, and to substantial institution-building. And perhaps within institution- building we would certainly include the evolution of a satis- factory sectoral program to deal with all of the energy resources which Argentina has. Because of that expectation, we did exceed our standard guidelines of 10 percent retroactive financing and the basic justification or the basic reason is the shift in timing which turned out to permit earlier start of the work. But even so, under other circumstances, we might  19 STRICTLY CONFIDENTIAL not have thought that a satisfactory basis. And it is also for that reason that we thought that even though work -- seism c work had been started and was in progress and we are only financing extension of work that already is in progress, that our early involvement in the formulation of the seismic survey and their interpretation was very important as a basis for future involvement. And it is on those grounds that we finally decided that this was that we ought to respond to the government's interest in our participation in this sector, that this was a first step, and that it did warrant an exception to the guidelines of the degree of retroactive financing because we think there lie ahead substantial investments in which we can participate, one of which, for instance, is in the refinery sector where -- as we will explain in some greater detail in our energy paper which is coming forward shortly the reorientation of refineries in developing countries is a major area of investment to balance their production against domestic demand to reduce imports. And in Argentina, for instance, there is a substan- tial scope for this kind of activity as well. This is merely one example where we think in the future we can make a large contribution and this is a first step in that direction.  20 STRICTLY CONFIDENTIAL MR. McNAMARA: Mr. Barletta? MR. BARLETTA: Just to complement what has been said. I think it would enhance our understanding of this situation to underline the fact that Argentina has a tremendour· energy potential which has been partially developed over the last 20 years, but which the present government -- and we fully agree with its assessment -- has found totally unsatisfactory because it doesn't go on on the basis of a comprehensive policy that includes all the different aspects of energy development. We have already worked with them in the hydro- electric area and they have developed fairly adequate policies and a plan for comprehensive hydroelectric development. This 1 project, as well as other potential ones that Mr. Stern has referred to, will allow us to help them in the institutiont building aspects and sector aspects of the gas and oil development. I I There may be the possibility of a carbon development[ one. And by these building blocks, like Mr. Elejalde referred to in his initial statement, we hope to be able to help them put together a very comprehensive and rational short and medium-term policy and plan for all the different sources of energy within the country. And it's really -- this is  21 STRICTLY CONFIDENTIAL the main justification for our presence in the energy sector in Argentina which they have asked for and which we have thought we can make a contribution for the institution- building and comprehensive aspect of the policy. MR. McNAMARA: Mr. Smith? MR. SMITH: Thank you, Mr. Chairman. I think, you know, it's possibly arguable that we ought to have gone in at the stage of the next major development, but I recognize it's a matter of very fine judgment about when to get into the sector. And I think I'm encouraged by the fact that the Bank hopes through their intervention in this to help Argentina not only to go in for institution building but also to mobilize considerable external resources which clearly are going to be essential if they are going to realize their full potential in this sector. Thank you, Mr. Chairman. MR. McNAMARA: Thank you, sir. Mr. Mentre? MR. MENTRE: Mr. Chairman, I strongly support this project which intervenes at a time when Argentina is trying to develop a comprehensive energy policy and had modified its past practices in dealing with private oil companies. And Ii fi 11 i  II 22 STRICTLY CONFIDENTIAL I think as a part of an overall strategy, it's a welcome project. At first sight I had the same reservations as Mr. Looijen, Mr. Kurth and Mr. Smith on retroactive financing but I think I was convinced by the arguments put forward by Mr. Stern, noticeably the institutional-building aspect and gradual involvement of the Bank in energy sector in Argentina. And in addition it might help alleviate Mr. Kurth's fears on effective implementation of the project. (Laughter.) But I have three questions. First there was reference to the role of the private sector in developing oil resources, and I was interested by the reference which is made in paragraph 39 to the role the Bank might play in strengthening the capacities of the private sector in Argentina to be involved in oil and gas financing. And I would appreciate if the staff might elaborate a little on it with the possible reference to the role of IFC in that context. Seconjl, I was a little disappointed by what is ....... ,._...-~~",r said on the policy on pricing. I think that the u. s. i experience is showing how rapid might be the effect noticeably/ I STRICTLY CONFIDENTIAL 23 on the production side of rapid decontrol of oil prices and here, in spite of 15 percent increase in real prices, I think that in one year Argentina prices of oil will be at roughly two-thirds of international levels. And I think it might well be a too gradual approach and here·too I would appreciate additional comments. And finally, in the presentation of the report and in the oral statement, the staff was quite cautious on the possible development of natural gas. And I read some weeks ago in the newspapers reference to a summit meeting another one -- between the Brazilian and Argentine heads of state with a specific reference to a massive development of natural gas in direction of Brazil. And I would here too appreciate some additional information. Thank you, Mr. Chairman. MR. McNAMARA: Yes. Mr. Elejalde, first, how might the Bank and IFC assist in expanding the role of the private sector in oil and gas development? MR. ELEJALDE: Mr. Chairman, the role of the private sector in Argentina by policy of the government is becoming increasingly important not only in terms of foreign private companies but also in terms of local private companies, which have been involved in drilling services and mostly in services  24 STRICTLY CONFIDENTIAL in the past but for a number of years have already started working on exploration and production. We believe that this role of local private sector is important in that they have expertise: they mobilize resources they can mobilize resources into areas of the economy which have high rates of return and also in that these companies many times associate themselves with other foreign companies. So they bring new technology into the country and, knowing local conditions, they can attract smaller companies to be their partners. So they sort of mobilize more technology and expertise and in a way also stabilize the political problems that sometimes take place in the oil sector. I The way we have already discussed with the governmen~ possible ways of financing -- or helping supporting these companies which have -- many of which have expertise. There are this thing that are well qualified and experienced in oil exploration and production. And another point I would make is that they are I winning a number of bids. The way the system works in Argenti a, 1 exploration and production areas are prepared by YPF and put f out for bids. And private companies bid on these areas I on basis, let's say, of whoever is willing to sell me the i  \I 25 STRICTLY CONFIDENTIAL crude that you find at a certain price will get this area. And they put a formula which relates to the international price and companies bid. And a number of bids -- in some cases for development they bid on programs of exploration or programs of development. A number of bids have been won by these local companies. Now in terms of the assistance we can give them, IFC could consider financing directly a number of these companies. There are private companies. Some of them are clients of IFC and some of their conglomerates, many of them, and they might be clients of IFC in some other projects. In the case of the Bank, we think that the continued role that if we can elaborate -- help develop the banking system in a way that they can support this effort, we will not only help particular projects being considered now, but establish a long-term ongoing situation and, therefore, what I think we can try to do is to help strengthen a number of banks with -- give them technical assistance and maybe finance so that in a project a la IDF, although we would have to have a number of different features in terms of our control of investments, which would be larger, we could provide the technical assistance and the finance to the private sector. II  26 STRICTLY CONFIDENTIAL MR. McNAMARA: Thank you. With respect to the pricing situation in the Argentine, is it not a penalty reducing the stimulus to conservation and reducing the stimulus to additional productio, of energy in various forms? And why haven't they moved I faster to move the price structure to the international level? MR. ELEJALDE: Mr. Chairman, the situation of prices, as in many other countries in Argentina with its but in addition with its very high inflation is a difficult one. However, although we believe that prices in Argentina should be increased, in terms of subsidy to the consumer the problem -- there is a problem. The problem is not acute. For example, the average consumer price of all the products together is about 31, $32 per barrel. Gasoline sells at $1.70 per gallon in Argentina. The problem was there are two problems. One is that of that taxes form an important part, which means that the companies, like YPF, are not getting enough revenue out of this price. And the other one is that during the course of last year in 1979, prices declined in real terms and had an important effect -- because of the high inflation,  27 STRICTLY CONFIDENTIAL of course, and had an important effect on the financial situation of YPF. But we are -- the way -- we have discussed this matter with the government at length and the government has expressed to us clearly its policy which is to reach international prices in the foreseeable future and has also expressed to us clearly its intention to gradually increase prices. The graduality of it, which was one of the questions in the case of Argentina is justified because it's pretty close to self-sufficiency. So the cost of -- and not having a subsidy at the consumer level, the cost of going -- reaching international levels over a period, rather than doing it immediately is not that great. So -- but the government has made this commitment to gradually increase prices and to record their seriousness about it. The history since January of 1980, after a period of decline in real terms in 1979, is that they have increased prices by about 1.5 to 2 percent per month in real terms, which results in an increasing price of 7 percent in real te+~s from January to April. our expectation on the basis of the statements and the government's clear understanding,with the government that I I 11  28 STRICTLY CONFIDENTIAL prices will increase gradually and will reach international levels in the foreseeable future. We think that this pace is reasonable and satisfactory, taking into account in particularly that this engineering loan will have an opportunity through subsequent projects to monitor performance and to make our decisions on subsequent activity, taking into account this important factor. MR. McNAMARA: This is a problem, Mr. Mentre, not only in the Argentine, as you well know, but in two other countries we will be dealing with today, Ecuador and Nigeria. And in all of these it is a subject of intense discussion between the Bank and the country involved. Now thirdly, why does it appear that they're so cautious in the development of natural gas, particularly with the potential market of Brazil nearby? I MR. ELEJALDE: Mr. Chairman, actually we are not cautious -- no, we are cautious, but we are not cautious in terms of the development of natural gas. We -- the project, the seismic survey that we are financing is particularly in an area which would link with the possible gas export project in Argentina. And this seismic survey that we are financing is to define areas for subsequent exploration drilling and then hopefully discover  29 STRICTLY CONFIDENTIAL some further development. And another interesting feature of this seismic survey is that there is nearby some private companies are exploring. They have won bids. And the fact that YPF is also involved we think will induce further private investment. So in terms of -- in addition, our project includes a natural gas optimization study to determine what's the best way to develop the ample gas resources which is carried throughout the country so as to serve local markets and also see what would be the best opportunity for export; how to save the gas through gas recycling investments because they are now -- they are flaring so much and where to save it with the idea of future export projects. So we think that this possibility of exporting Argentine gas from Argentina to Brazil is a solid one, and we find it particularly attractive, not only from the point of view of Argentina, but also from the point of view of Bolivia. You may recall that in Bolivia we're financing a gas operation, a drilling project, to prove gas reserves for export to Brazil. We have -- this is the same geology, the Northwest of Argentina and the Bolivia area where our project occurs. i I I  30 STRICTLY CONFIDENTIAL If enough gas is found, it will make the Bolivia, Brazil and Argentina possible for Argentina and Brazil gas export project much more attractive because there will be different sources of supply and in addition a much greater incentive to convert to gas a number of the facilities in the Sao Paulo or Brazil area by having enough supply of gas to justify. So this whole -- so the answer to the question is that we are very interested in this question of natural gas, and it's becoming increasingly economic and having the Brazil market nearby, it's an area where we think we should support these projects, this link in a way to that. MR. McNAMARA: Thank you, sir. Are there other questions or comments? Mr. King? MR. c. KING: Mr. Chairman, I'd like to be recorded as having abstained on this project. MR. McNAMARA: Thank you, sir.