Announcement of Argentina to Improve Municipal Services on March 24, 1988

FOR IMMEDIATE RELEASE -NorldBank 1818 H Street, N.W .. Washington, O.C. 20433, U.S.A. BANK NEWS RELEASE NO. 88/56 Contact: Ciro Gamarra (202) 676-1217 ARGENTINA TO IMPROVE MUNICIPAL SERVICES WASHINGTON, March 24, 1988 -- A $120 million World Bank loan will help finance municipal capital improvement programs in five provinces in Argentina. This is the Bank's first effort to assist municipal development and more effective intergovernmental financial management in Argentina. The $240 million project will provide external resources to complement locally mobilized resources to finance municipal development programs in the provinces of Buenos Aires, Cordoba, La Pampa, Neuquen and Santa Fe. It will finance physical investments, including construction and rehabilitation of public infrastructure and community facilities, and the purchase of vehicles and equipment. The Bank loan will be used as a line of credit, administered by the provinces, with eligible municipalities as the final institutional beneficiaries. Additional resources mobilized through the project will be used in a non-deficit and non-inflationary way. Proceeds of the loan will be re-lent by the central government to the five provinces: Buenos Aires ($55 million), Cordoba ($21 million), La Pampa ($3.5 million), Neuqu~n ($9.5 million) and Santa Fe ($31 million). The government will assume the cross-currency exchange risk and pass on, within stated limits, the U.S. dollar exchange risk to the provinces. Municipalities that participate in the project will be financially strengthened, and thus able to provide better services. The long-term financing to be available to municipalities through the Bank loan will make basic infrastructure more affordable to the poor. Municipal works are estimated to create employment equivalent to approximately 58,000 man-years over the project's implementation period of about seven-and-a-half years. The balance of project costs will be covered by the provinces ($32 million) and the municipalities ($88 million). To receive credit to finance physical investments, municipalities must be creditworthy, which means having a balanced current account and debt within acceptable limits. The World Bank loan is for 15 years, including three years of grace, with a var~able interest rate, currently 7.72 percent, linked to the cost of the Bank's borrowings. They also carry an annual commitment charge of 0.75 percent on the undisbursed balances. NOTE: Money figures are expressed in U.S. dollar equivalents.