Transcript of meeting of the Executive Directors of the IBRD and IDA, held on Tuesday, December 10, 1985 : Argentina - Water Supply Project

STRICTLY CONFIDENTIAL NM:nm INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Tuesday, December 10, 1985 Washington, D.C. The meeting of the Executive Directors was convened at 10:08 a.m. in the Board Room, 1818 H Street, N.W., Washington, D.C., Mr. Ernest Stern, Chairman, presiding. MILLER REPORTING CO .. INC, 507 C Street, N.E. Washington, D.C. 20002 /'}0")\ '\dh_ hhhh  STRICTLY CONFIDENTIAL 2 C O N T E N T S ITEM PAGE ;_J MILLER REPORTING CO .. INC, 507 C Street, N.E. Washington, D.C. 20002 l?n7\ 141\.1\1\1\1\  STRICTLY CONFIDENTIAL 3 NM:nm P R O C E E D I N G S MR. STERN: If not, we will turn to the second item, which is a proposed loan to Argentina for a Water Supply Project, and Mr. Artaza-Rouxel will introduce it to us. I should hasten to add, as you can see, this is not the $2 billion loan that has been talked about in the press. That is going to come next week. MR. ARTAZA-ROUXEL: Mr. Chairman, Members of the Board: Six months ago we reported to you on the comprehensive stabilization program which the Government of Argentina had just initiated, and which has been successfully implemented to date. Simultaneously, the Argentine authorities have set about to effect major institutional changes, which they consider essential to support the objectives of permanently arresting the past destructive inflation and adjusting the external sector. One of these major efforts is the government's attempt to put its own house in order through measures to MILLER REPORTING CO .. INC. 507 C Street, N.E . Washington. D.C. 20002 (202) 546-6666  STRICTLY CONFIDENTIAL 4 increase the efficiency of public sector enterprises. These ~] measures have included staff reductions, examination of the possibilities of divestiture of certain public enterprises to the private sector, and the restructuring of others. The proposed operation in the water sector follows from this approach. It is also consistent with the government's development strategy of establishing adequate conditions for restoring economic growth. The elements of this strategy stem from the following criteria which are central to the proposed project: First, the need to improve the efficiency of state enterprises, insofar as possible, orienting their operations along commercial lines; second, the need to use existing resources more efficiently; and third, the urgency to rehabilitate and strengthen the nation's social infrastructure. This project takes into consideration the fiscal constraints of the government by focusing on investments which would require limited budget support while still yielding high returns. Thus, the proposed loan is designed to give priority to the e.xtension and improvement of service by utilizing at its fullest the existing capacity, rehabili- tating and upgrading existing installations and promoting water conservation and upgrading water distribution management MILLER REPORTING CO .. INC. 507 C Street, N .E. Washington, D.C . 20002 (202} 546-6666  STRICTLY CONFIDENTIAL 5 We expect that the National Water and Sanitation Plan, to be undertaken under the proposed project, would provide the necessary framework for the required improvements in the sector's institutions and of the policies generated by them. The operation before you could, and we hope it will, be easily replicable in other areas of the Republic, beyond Buenos Aires, Cordoba and Rosario, thus providing with modest invest~ents water services to a large number of Argentinians. Thank you. MR. STERN: Thank you. Are there any questions or comments? Mr. Boehmer. MR. BOEHMER: Thank you, Mr. Chairman. We]l, I would just like to express my special support for this project. I think it is addressing the right issues, namely the two aspects -- the one of rehabilitation instead of expansion, and of financial and economic viability of the utiliti es involved. And I particularly support the intention of the Bank to play an active role in the definition of an adequate sector policy as described in the document, particularly in paragraph 37 of the President's Report. MILLER REPORTING CO .. INC. 507 C Srrcer, N.E. Washington, D.C. 20002 (202) 546-6666  STRICTLY CONFIDENTIAL 6 Under our bilateral programs, we have gathered quite a bit of experience in this field and, drawing on that experience, I would like to encourage the Bank to continue the dialogue with the respective authorities about questions like sector policy, including adequate water supply standards, least cost solutions, economic viability of the utilities, adequate tariffs and so on. And speaking of tariffs, the cost of sewerage systems are always a very important, if not the larger part of any water supply and sewerage program. And we have found that it is advisable and even necessary to take an integrated approach to both aspects and to make sure that, if you bring water to people, that the water tariffs adequately cover the cost of sewerage right from the beginning. Thank you. MR. STERN: Thank you, Mr. Boehmer. We certainly agree with that last point. And that is our philosophy as well. If there are no other comments or questions, we will note your approval of this operation. MILLER REPORTING CO .. INC. 507 C Street , N .E. W ashington , D .C. 2000 2 (202) 546- 6666