Argentina - Agricultural Services and Institutional Development Project

Document or The World Bank FOR OFFICIAL USE ONLY Report No. 9138-AR STAFF APPRAISAL REPORT ARGENTINA AGRICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT PROJECT JANUARY 29, 1991 Agricultural Operations Division IV Latin America and the Caribbean Region 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.  CURRENCY EOUIVALENTS Currency Unit - Austral (A) EXCHANGO RATF (as at January 10, 1991) US$1.00 - A 5,800 A 1.00 - US$0.0002 FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES Metric System  FOR OFFICIAL USE ONLY ADBREVIATIOMS AND ACRONWi.iU I/ AOP Annual Operating Plan ASL Agricultural Sectcr Loan (Ln. 2675-AR) DMa Bank of the Argentine Nation CAlI Argentine Chamber of Integrated Fruit Growers CCOU Central Coordination and Management Unit (Project) CIATI Rio Negro Industrial Research Center (INTI) CITECA Center for Technology and Research on Meat (INTI) CYS Maximum Sustainable Fish Catch CONKSA National Animal Health Commission COIAIs National Seed Council DICON National Directorate for Diagnostic Control and Methods (SENASA) EC European Community mum Epidemiology and Training Unit (SENASA) PAO/w3 CP Food and Agriculture Organization/World Bank Cooperative Program F3= Foot- and-Mouth Disease ODA General Directorate of Administration (SSAGyP) ICD International Competitive Bidding IDS Inter-American Development Bank IFONA National Forestry Institute IICA Inter-American Institute for Agricultural Cooperation INIDP National Fisheries Research and Development Institute INTA National institute for Agricultural Technology INTI National Insti-ute for Industrial Technology IPM Integrated Peat Management inC National Meat Board LCB Local Competitive Bidding NBC Ministry of Economy NDAP National Directorate of Agricultural PolLcy NDAS National Directorate of Agricultural Services NDF National Directorate of Maritime Fisheries NDNR National Directorate of Natural Resources PAC Project Advisory Committee PANAFTOSA Pan American Foot- and-Mouth Disease Center, Rio de Janeiro PMU Project Component Management Units PIt Plant Inspection Service PPF Project Preparation Facility PPS Plant Protection Service ISLAB National Animal Laboratory Service ISLSA Animal Disease Control Field Service S*NAWA National Animal Health Service SENASE National Seeds Service sIxAP Agriculture and Livestock Information System (SSAGyP) SIPA Livestock and Meat Sanitary Inspection Service 8NZySR National Economics and Rural Sociology Service BOB Statement of Expenditlre ISAGyP Subsecretariat of Agriculture, Livestock 2';' Fisheries sOP Statement of Policy $SiC Subsecretariat of Commerce and Industry L/ Spanish listing in Annex 14. 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.  AGRICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT PROJFCT Table of Contents Pace No. I LOANl AND PROJECT SUNJARY. . 1 II * T AGRICULTURAL SECTOR.. .. 4 Agriculture in the Economy. 4 Agricultural Institutions and Service. 5 Subsector Summaries .10 Ex1port Marketing Constraints .12 Bank Group Experience Lending for Agriculture . 12 Bank Lending Strategy in the Sector .. 13 III. TE1 PROJFT 14 Origin and Rationale for Bank Involvement 14 Project Objectives .16 Project Description .16 Organization and Implementation .. 24 Costs .25 Financing .26 Procurement .27 Disbursements and Special Accounts .28 Accounting and Audits .29 Reporting . 30 Coat Recovery .30 Project Benefits .30 Project Risks .31 Ernvirontmental Impact .31 IV. SUMMARY OF AGREEMENTS TO BE REACHED .32 This report is based on the findings of: (a) a joint World Bank/IDB appraisal mission which visited Argentina in March 1990, comprising Messrs. Mark Wilson, Jonathan Parker, Sura3it Goswami (Bank) and Mark Fairless, Fernando Rodriguez, (Consultants); and (b) a joint post-appraiwal mission in June 1990 comprising Messrs. Mark Wilson and Luis-Jose Mejia (Bank) and Mark Fairless, Fernando Rodriguez and Francisco Reifschnieder (Consultants).  ANNF D 8 ....................... Pac- No. 1. Project-Supported _ns'.itutional Development Component .. ..................... 34 2. Animal Health Services ....................... 47 3. Phytosanitary Services and Seeds ................... 56 4. Eisheries .......................................... 78 5. National Institute for Agricultural Technology ..... 87 6. Forestry .... ....................................... 92 7. National Meat Board ................. ............... 94 8. Agricultural Information System Component ......... . 98 9. Export Promotion Component ..... .................... 104 10. Key Indicator ....................................... 113 11. Cost Tables and Disbursement Table .. ............... 115 12. Organization Charts ................ ................. 157 13. List of Documents in the Technical File .... ........ 158 14. Acronyms in Spanish .................. 159 MAP IBRD No. 22436  AGRICUL5URAL SERVICES AMD INSTITUTIONAL DEVELOPMENT PROJECT . LOAN AND PROJECT SWOMRY Borrower: The Argentine Republic. Executina Aoence: Subeecretariat of Agriculture, Livestock and Fisheries (SSAGyP). seneficiarie: Public institutions providing services to the agricultural sector, farmers and agroindustrialists. Loan Amount,. US$33.5 million. Terns: Seventeen years, including five years of grace, at the standard variable interest rate. Prolect Oblectives: The project would improve Argentina's ability to compete in export markets for basic and high value-added agricultural, horticultural, livestock, forestry and fisheries products. It would: (a) establish mechanisms to improve the efficiency, productivity, impact and accountability of its technical services while achieving savings in their operation; and (b) diversify the agricultural export mix by strengthening marketing, export promotion, technical and research services for a variety of agricultural products through joint public and private sector erforts. Proiect DescriRtion: The project which would be cofinanced by the Inter- American Development Bank (IDB) and the Government of Japan, would strengthen agricultural services managed by SSAGyP, through investment in physical facilities, institutional development, training and technical assistance activities. Specifically, the project would: (a) strengthen animal disease control, primarily for foot- and-mouth disease (FMD), brucellosis, mange and tick-borne diseases, through construction of a reference laboratory, a quarantine station and promotion of intensive vaccination programs; (b) strengthen phytosanitary programs to create and maintain plant disease- and insect pest-free zones, and establish quarantine and reference laboratory facilities to certify levels of chemical residues and phytosanitary standards in agricultural produce; (c) improve wool grading and classification to provide improved market  transparency; (d) strengthen analysis and monitoring of maximum sustainable fish catches; (a) promote export of higher value-added meat products jointly with the private sector; f improve research on wool, biotechnology, post-harvest physiology of fruits and vegetables, and forest plantation management; (g) provide specialized training and technical assistance to strengthen technical and marketing skills in the Meat Board and Fisheries Institutel and (h) assist the private sector to venture into new export markets by partially financing marketing studies, technical assistance, and overseas visits and export promotions. snuefita: The main project benefits would includes (a) improved and more ccot-effective agricultural services (approximately 80% of total costs wonild be recovered from end users); (b) increased agricultural output and diversification of both commodities and high value-added export products; (c) increased effectiveness of quality control services in support of agricultural exports; and (d) increased export promotion and marketing capacity to open new markets. The following environmental concerns would be addressed: improved management of fish resources and analysis of chemical residue levels in food. Riske: In addition t. Argentina's general macroeconomic uncertainty, the nost important risks stem from the availability of counterpart funds, the level of managerial capacity and the low level of commitment by public servants due to low salaries. The budgetary risks, which affect all proposed Bank operations in Argentina, have been mitigated to an extent by the project's proposed cost-recovery mechanisms. The project's institutional strengthening programs would mitigate the lack of managerial capacity in public institutions. The issue of inadequate compensation in the public sector would be tackled by Government and the Bank through public sector reform measures to be covered under a proposed new loan. Since project design encourages financial autonomy, this should over time also support the development of a competitive salary structure for agriculture sector institutions.  -3- Estimated Costs: Local ftrein Total --------- UES million ----------- Animal Health 8.4 9.1 17.5 Phytomanitary Services 8.5 4.1 12.6 Fisheries 7.4 3.6 11.0 Meat S.0 4.4 10.4 Research 4.7 4.4 9.1 Export Promotion 5.4 2.0 7.4 Information System 0.9 0.2 1.1 Project Coordination LA 2&a JAI Total Baseline Costs 45.7 28.1 73.8 Contingencies 5.4 3.5 8.9 Total Project Costs 7 1/ Financina Plan: IBRD 17.4 15.6 33.0 V IDB 14.4 15.6 30.0 Japanese Grant Funds 0.6 0.4 1.0 Local Counterpart 1A dQ 0 18LZ Total Estimated IBRD Disbursementsr IBRD FY 199 M 199 1 993 199 199 J_996 1997 1998 Annual 3.5 2.8 3.9 5.5 6.8 6.9 2.6 1.5 Cumulative 3.5 6.3 10.2 15.7 22.5 29.4 32.0 33.5 Economic Rate of Returnt Not Applicable. i2: IBRD No. 22436. .1/ Excluding US$0.5 million to refinance PPF 119-AR used to prepare project. at Includes the initial deposit in the Special Account of US$2.0 million equivalent plus US$0.S million to refinance PPF 119-A'.  1I. THN AGRICULTURAL UNCTOR Auriculture in the Economy 2.01 laportance and Potential of th Sector. Argentina has a significant comparative advantage in agricultural and agroindustrial production. The country'a rich soils and varied agroclimatic conditions permit the production of a wide range of commodities. Thie ensures self-sufficiency in most foodstuffs, provides low-cost raw material for a developing agroindustrial complex, and allows the country to be a significant factor in world markets for a number of products, especially cereals and oilseeds. I/ 2.02 Agriculture contributes about 15% to GDP and the sector is a major contributor to export revenues. Crops represent about 65% and livestock about 35% of sector GDP. Agricultural products and manufactured goods of agricultural origin provide about 75% of total exports. For a number of historical reasons (para. 2.03), the traditional grain and livestock subsectors operate far below their potential. Additionally, the country has great potential to diversify into the production and export of fruits, vegetables, fisheries, and forestry products. However, several key constraints affect the sectors federal and provincial institutions are weak and export marketing skills are underdeveloped (except for grains). Consequently, any long-term strategy to diversify Argentina's agro-export mix and penetrate and hold markat share will require a major revamping of its support infrastructure in technical setvices, quality control, export -omotion and marketing ability, as well at investment in new technology. 2.03 Macroeconomic Policy. The single most important instrument to create a healthy incentive framework for Argentine agriculture and agroindustry is the exchange rate. Since the country is self-sufficient in most agricultuLal products, sectoral growth depends almost wholly on exports; hence maintenance of a stable, competitive exchange rate is crucial. This applies to all agricultural subsectore (traditional and non-traditional) and to agroindustry. Historically, however, domestic policy has been oriented towards using the agricultural surplue to finance industrial development. During the last decade, agriculture transferred an average of 45% of its GDP to other sectors of the economy and Government. The long-term consequence of these discriminatory policies, which have aleo included export taxation and an overvalued exchange rate, has been to decapitalize the agricultural sector. A low-cost, extensive form of agriculture has resulted, with little capital stock or debt and no incentives to improve technology. Of all the major world producers, Argentina's agriculture is by far the least protected, yet it has continued to grow. The implication is that with stronger positive signals, there is good potential for new investment and growth. In this context, recent initiatives on trade liberalization, reduction of export 3/ For a detailed review of the agriculture, livestock, forestry, fisheries, horticultural and agroindustrial subsectors, the reader is referred to Report No. 7733-AR. "Argentina: Agriculture Sector Review," dated June 30, 1989 (Green Cover).  - 5 - taxes and freeing of the exchange rate aro important stepL in the direction of creating confidence at the farm level. 2.04 Public Sector Reform. Government Is in the midst of a public sector reform initiative, the most recent version of which war promulga.ed in September 1990. This proceas aims to delegate more respovsiblity to provincial authorities, reduce federal intervention, increase the role of the private sector, reduce the size of the public sector apparatus where appropriate, and establish mechanisms to reduce coats by charging the end-user for certain services, which to date have been provided free. in addition, by Presidential Decree, the public administration apparatus has been reformed by eliminating 56 secretariats and 80 subsecretariats within the eight ministries. The institutional arrangements for agriculture resulting from these reforms are described below in greater detail. In essence, the new approach to public finance and the provision of public services has important implications for the sector and for the design of the project proposed in this report. Aoricultural Institutlions and Servicgs 2.05 The Subsecretariat of Agriculture. Livestock and risheries 13AGvyPI (Annex 1 and Chart 11. Following the reforms described above, which still have to be ratified officially, SSAGyP now comprises: (a) four National Directorates: Natural Resources (NDNR)I Agricultural Services (NDAS); Maritime Frisheries (NDF); and Agricultural Policy (NDAP). The latter was formerly the National Economics and Rural Sociology Service (SNEySR). SSAGyP is a dependency of the Ministry of Economy (MEC) which historically has meant that SSAGyP has acted more as technlcal adviser than policy maker and planner. Public expenditures on agriculture and llvestock are low, at about 0.3% of total expenditures, compared to the manufacturing sector (1.2%) and to their relative contributions to GDP (15% for agriculture, compared to 24% for manufacturing). In addition, as a public body, SSAGyP has difficulty attracting and keeping full-time staff due to low levels of compensation. SSAGyP staffing levels have declined significantly over the past decade. B^tween 1980 and June 1990, tctal staff, excluding the Agricultural Research Institute (INTA) which is financed independently (p.ra 2.17), declined by about 29% (12,940 to 9,180) and central administrativo staff by about 49% (1,280 to 6EO). Comparing June 1990 to the average of .ne 1980., the decline wac about 2)% for total staff (11,550 vs. 9,200) and about 36% for administrative staff (l,280 vs. 650). Within the public sector apparatus, therefore, SSAGyP does not reflect the importance the agricultural sector represents in the economy, especially 'or exports. An institutional analysis of SSAGyP agencies involved in providing agricultural services is detailed in Annex 1. 2.06 Animal Health services (Annex 21. Animal diseases are among the mcat important factors that affect livestock productivity in Argentina. Foot- and- Mouth Disease (FMD), which is endemic north of the Colorado River in Northern Patagonia, is the disease that receives mo'st attention because of importing country trade restrictions. The current control strategy is based on vaccination three times a year. The role of Government is to control vaccine quality, ensure that vaccination is performed, and Issue validation certificates. Despite producers spending abouat US$70-80 million annually on vaccines, the disease is  still present, highlighting the need to develop alternative control strategies and improve management of vaccination campaigns. This will require better knowledge of the epidemiology of the disease %nd use of a more off i'-ient vaccine which requir&s lec frequent vaccLnations. Such a vaccine (oil-added vaccine) has recently been developed by the Pan American Foot and Mouth Disease Center in Rio de Janeiro (PANAFTOSA). In Argentina, vaccination by veterinary personnel instead of by farmers (but at farmers' expense) ham been tried and accepted in pilot areas as the best way co ensure a higher coverage rate. Simllarly, veterinary staff can at the same time also contribute to better control of other diseases. 2.07 Other major disease control programs that require strengthening are for mange (parasitic mites in sheep and cattle), ticks (in the subtropical zone), brucellomis (entagLous abortion) and tuberculosis. Improving the control of animal diseases is one of the few ways that Argentina can increase livestock productivity and production without requiring major on-farm investments. 2.08 Veterinary services in Argentina are provided by private sector professionals, provincial veterinary services, and the National Animal Health Service (UENASaj in NDAS'a General Directorate of Health and Inspection of Animal Products (too Annex 1, Chart 1). Coordination between SENASA and provincial veterinary services is ensured by a National AnLmal Health Commission (CONASA). There are also FMD Commissions at the national, provincial and zonal levels with privete sector, professional, farmer and public sector particip'a,ion. The Zonal FHD commissions directly coordinate field campaign., and have the legal staitu of foundations. The prcductlon, distribution, and import of vaccines and veterinary pharmaceuticals are carried out by private companies; however, SENASA is responsible for quality control. 2.C9 SENASA was established in 1963 and has a staff of about 3,300, including 1,500 professionals. 't became an aut.nomous body on October 23, 1990, under Decree No. 23899. Nlnety percent of its budget of about US$12 million equivalent is covered by earmarked taxes or fees. It comrrises three services: the Animal Disease control Field Service (SELSA), the National Directorate of Diagnostic Control and Methods (DICON), and the Livestock and Meat Sanitary Inspection Service (SIPA). DICOM consists of 22 regional inspectorates and about 300 local offices, and works on disease campaigns. SELAB manages veterinary laboratories, including one obsolete central laboratory and 14 small regional facilities. Its major activity is FMD vaccine quality contrcl. SIPA has the largest staff of the three and provides sanitary inspection services to about 70% of Argentinals slaughterhouses. (A detailed institutional analysis of SENASA hfs been carried out and is available in the technical file). 2.10 SENASA's disease control and meat inspection services are v4tal not only for the domestic but also for the export market, which imposes rigid disease control and sanitary certification requirements on meat and meat products. Since Argentina v.as endemic FJAD, in addition to the other major diseases, it is currentll excluded from the fresh (chilled or frozen) meat trade in many markets. It is essential therefore that veterinary and meat inspection services have high credibility in order to mainrain access to the remaining markets, including those for ccoked meats (which kills the FMD virus). Key issues that require urgent  attention in animal health serviceo areat (a) inadequate factlities and compensation for SENASA .mployeesj (b) unsatisfactory work programs due to 'imited interaction betwoen interested agencies an-' farmers; Ic) the neod to expand the use of oil,-added FMD vaccine to support a comprehenuive ccntroa plan; and (d) an adequate fee structure for its services. 2.11 Phytosanitarv Services {Plant Pest and Disease Control) (Annex 3)- In Argantina, plant diseases and pests, especiaUly on fresh fruits ai.d vegetableo, cause not only reductions in yield but also impede accesa to certain important internatianal markets. Key constraints are institutional, legal and phytosanitary 2pr.ac Institutionally, NDA8 handles phytosanitary issues through its General Directorate of Plant Health and Quality Control. The latteL' comprises the Plant Protection Services (PPS), the Plant Inspection Service (PIS), and a Microbiology and Chemical Laboratory. PPS coordinates the activitie of 24 provincial delegations. However, despite the creation is 1987 of a Federal Plant Health Commission to act as a forum for dialogue on these issues, linkage between the federal, provincial and private level remains weak. PIS is primarily involved with preparation of legislation rather than with its application. The PPS, alternatively, has greater operational responsibilities but has suffered from drastic reductions in its budoat in recent years and in the early 1980's Government eliminated user fees, except for laboratory analysis. 2.12 PPS has a diagnostic laboratory which, though A prerequisite for any phytosanitary service, is in practice inoperative due to a lack of staff, financtal support, and supporting infrastructure. Although Argentina has no plant quarantine stption, it has a central laboratory to test active ingredients In agrochemicals (fertilizers and pesticide) but little work is carried out on chemical residues in foodstuffs on a routine basis. Additional but limited analyses of residues are carried out by: (a) the National Institute for Industrial Technology (INTI) research center in Rio Negro (CIATI) under contract to the Argentine Chamber of Integrated Fruit Growers (CAFI); (b) Buenos Aires, Central Market; and (c) a small number of privace laboratories. Most critical, however, is the constraint on staffing. The entire phytosanitary service comprises only 265 posts, of which 76 are professionals. Vacancies are not being filled at present due to budgetary constraints, and 84 staff (35%) are due to retire over the next five years. 2.13 Key activities of Argentina's phytosanitary services include: (a) Monitoring - field detection of insect diseases and weed problems. Specifically, PPS currently focises on: (i) confining the bacterial disease, citrius canker (Xanthomonas camyestris 2.vX citri), to the northeast of Argentina where it is already present. This would allow exports to continue from the northwest, which is currently free of the disease; (ii) providing laboratory analysis on pesticide residues; and (iii) attempting to control the endemic Mediterranean Fruit Fly (Cerntitia capitata) to ensure access to key export that restrict imports from fly-infested zones. Work is also ongoing on grasshoppers, nematodes and the cotton boll weevil;  - 8 - (b) Defense - setting up quarantine barriers (check points and import control) for the above problems; (C) Inspection and certification of export products; and (d) Chemical analysis cf active ingredients in agrochemicals (registers and authorizing commercial distribution), residues of industrial crops (tobacco, cereals, oilseeds), and limited residue analysis of fresh fruit and vegetables. 2.14 The main constraints on the effectiveness of Argentina's phytosanitary services include: (a) insufficient technical staff and vehicle., fluctuating finances, and a poor information system; (b) inadequate interaction between federal, regional, and private agencies; (c) lack of a national phytosanitary strategy; (d) lack cf a quarantine station; and (e) need to update Argentina's pioneering legislation on pesticides and their residues. 2.15 Seeds (Annex 31. The National Seed Service (SENASE) in SSAGyP aims to regulate and promote the seed trade, which is well represented by multinational seed companies with agents in Argentina. Annual seed output is valued at about USS300 million, only 10% of which is currently exported but with good prospects for expansion. SENASE's regulatory functions are defined under the National Seeds Law No. 20247 promulgated in 1973 and refined in 1978 by Decree No. 1995. The law protects breeders' rights by granting proprietorship to those who develop new cultivars or varieties. It also creates norms for seed production and marketing and provides farmers with improved access to good quality seed by requiring the specification of seed purity and germination percentage. The present legai framework is considered in need of modernization although the basic principles are sound. SENASE lacks qualified staff and equipment. It has a fee structure, but funds are returned d'.rectly to the Treasury. Good communication between the public and private sector exists through representativee on the National Seed Council (CONASE). Cost recovery through fees charged for the registratior of cultivars, proprietorship of cultivars, seed certification, and seed laboratory services combined with their reinvestment in seeds activity would greatly stimulate the efficiency and impact of SENASE in the sector. 2.16 Fisheries Research and Development {Annex 4). The National Fisheries Research and Development Institute (INIDP) is required by law to report maximum sustainable fish catches (CMS) for the main commercial species at the beginning of each year as a means of controlling overexploitation. It operates laboratories, research ships, and has a staff of about 270 of whom 87 are professional, 73 technical, and 110 support level. In addition to biological studies of both saltwater and freshwater organisms and the monitoring of fish stocks, INIDP carries out research into new fish products and holds training progr&ans for crewmen and fish processors. Howevor, as with the other research institutes, its activities are severely constrained by inadequate budgetary resources, and its research vessels spend little time at sea. As a result, insufficient scientific information is gathered to manage the country's fishery resources properly.  -9- 2.17 Aoricultural Research (Annex 51a Crops. The National Institute for Agricultural Technology (INTA) was created in 1956 to perform agricultural research and provide extension services. Its current research program is carried out on 37 experimental etations by about 1,300 professional staff and a support staff of about 3,500 who service both research and extension neede. In 1988, an Economics and Rural Sociology Institute was established within INTA to improve economic and marketing aspects of its technical packages. A major institutional strengthening ie also underway (financed in part by the Inter-American Development Bank (IDB);, focussing heavily on overseas training of future research leaders. INTA has also identified areas of comparative advantage to complement private sector initiatives, including: (a) basic research into genetic engineering; (b) basic germplasm development; and (c) specific problem areas such as soil conservation, integrated pest management, fertilizer use and fertility, and crop stress response. INTA is an autonomous agency within SSAGyP, financed by a 1.5% tax on the value of exports of grains, wool, and roundlogs. 2.18 Livestock Research. INTA devotes about 40% of its resources to livestock research and extension. It operates a Veterinary Disease Center a Molecular Biology Institute, anid complements SENASA by performing advanced diagnostic services (e.g. , identifying strains of FMD virus). At its main animal production research center at Balcarce, in southeastern Buenos Aires Province, a number of improved animal production and health schemes have been developed successfully with SENASA and private veterinarians, to improve disease control and increase livestock productivity (para. 2.06). INTA also has established an effective dairy demonstration model at its Rafaela Dairying Research Center, Santa Fe Province, where the focus, inter alia, is on animal health and improvement of milk hyglene. In addition, INTA operates a wool testing laboratory at Bariloche, Rio Negro Province; however, this facility needs major upgrading to meet the requirements of: (a) farmers to strengthen their negotiating position with wool buyers; (b) an expanding wool industry; and (c) a highly competitive international wool market. 2.19 Horticultural Research. Although INTA is the main agency involved in horticultural research, its work on new varieties is insufficient to meet the needs of an expanding export sector. Dissemination of results is poor and market research is weak. An increased focus on Integrated Pest Management (IPM) and the greater use of biotechnology to reduce pesticide and herbicide usage has been recognized as essential to help reduce producer costs and to meet export market requirements. 2.20 Forestry Research (Annex 6). Forestry research is conducted in both the public and private sectors. In the public sector, the principal agencies are: INTA, the National Forestry Institute (IFONA), and the Wood Technology and Research Center. In the private sector, forestry research is conducted by larger private companies either independently or through joint support of the Forestry Research and Experience Center. Althougn forestry research covers a wide spectrum of activities, most work concerns site and species selection, forest tree improvement (pine and eucalyptus species primarily), and wood technology. A greater emphasis is needed, however, on: (a) increasing yields from plantation-grown species; (b) indigenous forest management to identify optimum management regimes; and (c) wood technology to identify uses for the lesser-known  - 10 - species of the mixed semi-tropical forests of the northwest. The latter could be done in conjunction with the National Institute for Industrial Technology (INTI) 2.21 The National Meat Board (JNC) (Annex 71, established in 1933, is an autonomous government body funded through an obligatory, outdated grading system. Its Board consists of a president, vice-president and eight directors. The president and vice-president are government-appointed, and four of the eight directors are from industry, two representing livestock producers and one each representing meat processors and livestock agents. JNC's functions are to promote the development of meat marcots, service and regulate the livestock and meat industry, and ensure an orderly and continuous flow of meat products to domestic butchers and export markets. Its major activities inter aia are to: (a) provide meat grading services at meat packing plants; (b) inspect and license terminal livestock markets and wholesale meat markets, and collect and disseminate price information on these markets; (c) administer and distribute high-value cuts/"Hilton" quotas (17,000 tons) allocated by the European Community (EC); (d) check quality control at processing and packaging plants producing for the export market; and (e) conduct market research and promotional activities in the local and international markets. 2.22 While the fortunes of JNC have fluctuated with changes in government policy, the consistent trend over recent years had been downwards along with the general decline in meat exports. With this decline, it became less effective in developing and maintaining its role in industry and was unable to act independently of government. The general quality of stdffing also suffered, and operations concentrated on its grdding activities at slaughter plants. Important functions, including economic analysis, market research and meat promotion in conjunction with the private sector, are not being performed effectively. In response to this situation, in late 1990 the structure of JNC's Board was changed to a majority representation by the private sector (7 of 10) and in November 1990, Resolution No. 160 was promulgated giving transparency to the allocation of "Hilton" quotas and ensuring access to it for a wide range of meat packers in Argentina. Subsector Summaries 2.23 Livestock and Neat (Annex 7). Beef exports from Argentina are affected by several factors: high domestic consumption (70 kg per capita); a declining cattle herd (down from 59 million head in 1977 to 45 million head in 1989); and animal health constraints (primarily FMD) that restrict entry of Argentine beef into certain markets. 2.24 The meat industry has been an important part of Argentina's development for over a century. Despite recent declines in the quantity of Argentine meat exports, potential still exists to increase the value of exports. Over the last 25 years, beef exports have changed dramatically in favor of cooked meats and prepared cuts, which now represent 91% of the total. Despite this, only about 10% of domestic beef production is exported (275,000 of 2.8 million tons) and efforts are underway to free-up beef for export through promotion of greater domestic consumption of substitutes (poultry, pork and fish). However,  - 11 - any strategy to increase the value of beef exports will also require more emphasis on higher value-added beef products. The main difficulty at present is therefore to reorient the industry towards promoting better export performance, which will require: (a) improvements in domestic and export meat marketing and export promotion within JNC; and (b) investment capital to diversify and upgrade existing meat processing facilities. 2.25 .orticulturs. Argentina has considerable scope to expand its horticulturil exports both in quantity and value-added. At present the subsector (fruits, vegetables and specialty crops) produces about US$1,000 million of product, 40% of which is exported either in fresh or processed form with over 60 processing firms in the sector. Argentina has considerable comparative advantage in horticulture with its southern hemisphere location and its controlled growing environment, which is mainly in irrigated areas. With an increasing world market for year-round fresh fruit and vegetables, it is in an excellent position to help meet the demands of northern hemisphere markets. However, technical constraints exist. INTA needs to carry out genetic engineering, basic germplasm development, and an integrated peost management program to control levels of chemicals as well as eradicate pests/diseases. Furthermore, quality control is inadequate and phytosanitary and residue analysis serviceo do not meet the needs of a demanding export market. 2.26 Fisheries. The growth and development of the fishing subsector is closely linked to the export market. In 1988, fish exports were valued at US$267 million, with about 92% by weight and 70% by value in the category of frozen products. Hake (Merluccius hubbci) is the main species exported, representing 49% by weight and 35% by value of exports. The fish processing industry comprises about 63 freezing plants with a combined capacity of about 1.0 million tons per year. The growth potential of this sector is considerable but a strong diversification into new products is required with emphasis on underexploited species. Unfortunately, key constraints remain in: (a) monitoring maximum sustainable fish catches; (b) an antiquated ocean-going fleet; and (c) on-shore plants which need re-equipping. 2.27 Forestry. Argentina's huge forestry resource (15 million ha of potentially productive forest plus 0.9 million ha of plantations) is largely unexploited. Imports of forestry products are about US$100 million per year (42% sawnwood, 40% paper and 18% pulp) and exports to neighboring countries are modest at about US$30 million per year (58% pulp, 31% paper and 11% mechanical wood products). However, test shipments of roundlogs, mostly eusalyptus, have recently been exported to Europe, which may represent a new market, along with the potential to export greater quantities of chips. Potential domestic demand for wood and wood products is estimated to increase from current levels of 15 million m3 per year to 40 million m3 per year by the year 2010. This will require a substantial expansion of the industry for which there are two basic prerequioites: (a) an accurate inventory will have to be carried out (EC financing has been offered); and (b) research into forest management and varieties will have to be intensified.  - 12 - Ex2ort Narketina Constraints 2.28 In the meat subsector, problems of disease affect access to export markets. Consequently, a two-pronged strategy is neededs (a) control/ eradication of serious diseases (FMD); and (b) increase development of cooked meats with a significant improvement in export promotion by JNC in conjunction with the major meat packers. In wool, the lack of effective international standard woc' fiber analysis severely restricts Argentina's ability to compete in overseas markets. In horticulture, producers and processors generally lack exposure to international marketing and markets, and they are not up-to-date on new varieties, new products and quality standards overseas, which would allow them to evaluate adequately risks and profitability of business alternatives. Risk aversion, limited access to information and expertise, and lack of direct contact with mainstream business realities are causing costly and unnecessary delays in preparing for the future. Finally, the bureaucracy in the public external trade system is excessive, frequently unnecessary, and time-consuming for potential exporters. This is a major hindrance for exporters of perishable products and particularly to the *ntranice of new operators. For *xample, the Subsecretariat of Industry and Trade's (SSIC) promotion fund (FOPEX), which has been suspended under recent Emerqency Legislation, requires completion of a minlmum of 24 steps for an exporter to obtain financial support. Bank Group Zxnerience Lendina for Aericulture 2.29 IBRD lending to the agricultural sector in Argentina has been limited to four projects and one sector adjustment loan (ASL). The Balcarce Livestock Development Project (Ln. 505-AR), approved in 1967, was designed to encourage adoption of new technology in pasture production and management and in animal health practices. This moderately successful project was imjlemented between 1968-80, a period of high inflation, extreme shifts in livestock policies, frequent changes in credit policies, and economic policies not conducive to sectoral investment. The Agricultural Credit Project I (Ln. 1564-AR) was approved in May 1978 to provide medium- and long-term credit for on-farm investments. This loan was cancelled in 1980, however, without disbursement because of competition from large inflows of low-cost commercial credit. A Grain Storage Project (Ln. 1521-AR), implemented between 1978 and 1988, expanded nationwide storage capacity, supported complementary rail and port transport/handling facilities and contained a credit component for private investments in storage and related facilities. In 1988, the Bank and the IDB approved the Agricultural Credit Project II (Ln. 2970-AR) which finances on-farm investments in a wide range of agricultural subsectors. Disbursement progress has been excellent despite the recent economic crises in Argentina. 2.30 In 1986 an Agricultural Sector Loan (Ln. 2675-AR) was approved to support sectoral adjustments. The policy package sought to: (a) reduce export taxes on agricultural products; (b) implement a compensatory federal land tax; and (c) rationalize import tariffs and regulations on agricultural inputs. In addition, a number of studies were funded and succecsfully completed. The Government of Argentina (GOA) did reduce, and has recently further reduced, export taxes. However, while much of the technical basis for the federal land tax was completed as proposed under the project, passage of required legislation did not take place and continues to be a politically sensitive issue.  - 13 - Quantitative restrictions on imports of tractors and agricultural chemicals were removed. 2.31 Other projects affecting agricultural development in Argentina have been funded by the Bank group. SSAGyP participates in the Public Sector Management Technical Assistance Loan (Ln. 2712-AR), which seeks to strengthen GOA'* general management of the economy. The Board has also approved several small ISC loans to support agri-buoiness. A recently-completed Second Railways Project (Ln. 1677-AR) assisted in rehabilitating the rail network and upgrading rolling stock and the locomotive fleet, thereby improving transport of agricultural goods, especially grains. The Bahia Blanca Port I Project (Ln. 2805-AR) also includes rehabilitation of existing grain storage infrastructure as a first phase in deep-water port development. Bank Lendina Strateav in the Sector 2.32 The policy conditions embodied in Ln. 2675-AR had far-reaching implications for the country's trade and tax policies, and in retrospect it appears that their achievement was limited by the narrow sectoral context in which they were set. Looking to the future, the main policy issues affecting agriculture (the exchange rate, trade and tax policy and the role of the State) will continue to be addressed through the Bank's broader support for economic stabilization and structural reform. Specifically, continued progress towards trade liberalization is the subject of conditionality under the on-going Second Trade Policy Loan (Loan 2996-AR); issues of taxation are being addressed as part of a general tax reform under a proposed Public Sector Reform Loan; and the future of the grain marketing system will be fundamentally effected by the privatization of ports, roads, railways and grain silos, a process which is being strongly supported by the Bank under the Public Enterprise Reform Adjustment Loan. 2.33 These reforms, which are aimed at creating a more open and competitive economy, will undoubtedly benefit agriculture, a sector that relies heavily on external trade. Long-term sustainable growth, however, wll not occur without major investments, even if an appropriate economic and structural framework is in place. Years of neglect in the public sector and disinvestment by the private sector have created serious bottlenecks in: (a) physical infrastructure; (b) capital for primary production, processing and marketing; and (c) agricultural services. The Bank's lending strategy for the sector over the next five years will therefore aim to stimulate growth by targeting resources to each of these three major areas. 2.34 Infrastructure. Rehabilitating the country's agricultural infrastructure involves potentially much larger sums of money than have been expended at any time in the recent past. Major flood control works are required, as are investments in irrigation rehabilitation, rural roads and drainage. An essential requirement for allocating resources in this area is a close decision- making connection between federal and provincial governments, since many potential investment proposals should originate in the provinces and would require provincial financing and administration. Given the extreme shortage of public resources, the Bank's strategy is to help build the capacity of the  - 14 - provinces to initiate and evaluate small- and medium-scale projects and to apply high standards of economic analysis in selecting them. This strategy closely conforms to that being followed in other sectors through a proposed Provincial Development Loan and would be applied specifically to agriculture through a Provincial Agricultural Development Project now in the early stages of preparation. 2.35 Private Investaent. A renewal of productive investment by the private sector in agriculture and agro-industry depends first and foremost on the creation of a stable and open economy. This alone may not be enough, however. It is unlikely that private investment will grow without a revival of financial intermediation in the banking system. This may be some years away, in spite of the far-reaching reforms now underway in the Central Bank and in the public banking system. There is therefore a gap to be filled in financing private investment, which will need to be met from external sources. Experience with the on-going Agricultural Credit Project II (Ln. 2970-AR), where subborrowers have financed on average 25% of investments, suggests that Bank resources made available through the financial system can act as a catalyet for mobilizing private savings to increase the capital assets of the sector. Therefore, as a complement to operations aimed at reviving public investment, the Bank is also considering a further line of credit to support private investment in export- oriented agriculture and agro-induz'-y. 2.36 Public Services. Finally, the capacity of the agricultural sector to exploit its comparative advantage is contingent on the strength of the institutions which serve it. The need for improvement covers a wide range. Many of the problems are familiar issues, related to poor funding and lack of direction. The total resources needed an an annual basis are not particularly large, but they are fundamental to the long-run productive and marketing potential of the sector. They therefore deserve high priority and, since agricultural technology is advancing rapidly on an international level, they are particularly suitable for external financial and technical assistance. Support for this effort is a central part of the Bank's lending strategy for agriculture, and is the subject of the project described below. III. THE PROJECT Origin and Rationale for Bank Involvement 3.01 Origin. The project developed from a series of studies financed under the ASL and carried out by the Inter-American Institute for Agricultural Cooperation (IICA) on behalf of SSAGyP. These studies formed the basis of the Bank's April 1989 Agricultural Sector Review which defined constraints and priorities for investment in the sector. Subsequently, IICA prepared a Non- Traditional Agricultural Exports Development Project for the Bank, and a Fisheries Development Project for IDB, and the FAO/WB Cooperative Program prepared an Agricultural Services Project. A total of four separate or joint Bank/IDB/FAO missions visited Argentina between October 1988 and May 1989 on  - 15 - theme three project proposals, with preparation of the Agricultural Services Project beginning in March 1989. 3.02 In September 1989, a joint Bank/IDB mission completed preparation of a proposal to finance an Agricultural Export Development Project compricing key features of the above three project proposals including an investment credit component for export-oriented agroindustries. Joint preappraisal took place in Dec-mber 1989 after which it was decided to focus on agricultural services and institutional development activities. The credit component was postponed until the economic situation in Argentina demonstrates sufficient improvement to permit a resumption of Bank operations in the financial sector. Dank appraisal took place in April/May 1990 and IDB appraisal took place in June/July 1990. At Government's roquest a joint mission was carried out in September 1990 to make appropriate modifications to ensure that the project conformed to public sector reform initiatives announced earlier in that month. 3.03 Rationale. The proposed project would be an integral part of the strategy defined in paras 2.32 to 2.36 above, and would be consistent with the findings of the 1988 Agricultural Sector Review, which has been endorsed by the Government and the Bank. In that review it was stated that the principal components of a strategy to develop agricultural services would be: (a) the setting of clear priorities for agricultural research; (b) the strengthening of animal health and plant protection services; (c) provision of market research, varietal development and export promotion for fruits and vegetables; (d) increased emphasis on the control of soil erosion and on pasture improvement; (e) development of a more autonomous meat marketing board; and (f) strengthening of forest management services and support to the fishing industry. 3.04 Through involvement in the preparation and appraisal of the project, the Bank has already had a profound impact on the structure and organization of the agencies involved, and this impact would be deepened during project implementation. In preparation for the project, each agency has had to define its strategy, role in the sector, priorities, competence and ability to develop effective cost-recovery mechanisms. This has led to a keener awareness of skill gaps, which have been critical constraints to the management of public sector institutions (Annex 1). At Bank insistence, great emphasis has been placed on sustainability through cost-recovery, and as a result, the fiscal impact of providing these services is expected to decline as the project is implemented. Furthermore, priority incremental staffing needs would be offset by reductions in SSAGyP's overall personnel quota through elimination of low priority activities. In fact, as part of ongoing public sector reform initiatives, SSAGyP was one of the first institutions to present its proposal for restructuring to MEC, following the guidelines set out during the preparation of the proposed project. As such, it is seen as a model for other institutions. Furthermore, the project focuses heavily on field-level staff, given the weakness of the federal bureaucracy and the need for service infrastructure to become more commercially oriented, with greater involvement of producers and provincial agencies.  - 16 - Proiect obiectives 3.05 The proposed project would build on the ongoing Public Sector Hanagement Technical Assistance Loan (Ln. 2712-AR) which is attempting to strengthen the planning and policy-making function in public institutions, including SSAGyP. It would extend this support to agricultural 4ervicss with a strong focus on exports. Its aim would be to improve Argentina's capability to produce, certify and maintain high quality agricultural products for export. It would: (a) strengthen the effectiveness of quality control service. while reducing the se,vice agencies' dependency on budgetary allocations by charging user fees for services renderedl and (b) diversify agricultural exports by strengthening marketing, export promotion and technical and research services through joint public and private sector efforts. This conforms to Government's public sector reform plans which can be split into two phases: the first phase (staff reductions) has already taken place (para 2.05) and the second phase (to improve the efficiency and impact of these services) would be supported by the project. Proiect Descriotion 3.06 The project would focus on investment in physical facilites, institutional development, technical assistance and training, to improve key agricultural services provided by SSAGyP. These services fall into three categories, based on the degree of institutional reform needed. The first requires moderate but specific institutional changes, and includes SENASA and JNC. The second requires substantial institutional development support, complemented by private sector inputs, and includes PPS, NDF, INIDP, and SSAGyP's Information Service (SIIAP). The third category includes INTA, which has already embarked on institutional reform but requires long-term financing to carry out priority research work. In -ddition, the project would stimulate export promotion by creating a Non-Traditional Agricultural Export Promotion Scheme. Project completion is estimated at December 31, 1997. The components are summarized in the table below:  - 17 - Table 3.1 3ummarv of Proiect Comnonents Degree of Institutional Agency Reform Objectives SENASA Moderate Improve Animal Health Services JNC Moderate Improve Meat Export Promotion PPS Substantial Improve Phytosanitary Services NDF Substantial improve Fisheries Administration INIDP Substantial Improve Fisheries Monitcring SIIAP Substantial Reform Information Services INTA Minor Carry out Priority Research Promotion Fund New Support Exporter Initiatives 3.07 Animal Health Services. This component would be implemented by SENASA and would: (a) increase '.ivectock production and productivity by reducing the impact of major diseases (FMD, bruc-llosis, mange and tick-borne diseases); (b) avoid the introduction of exotic diseases into Argentina by setting up modern quarantine facilities and an epidemiological monitoring system; (c) ensure a regular supply of high quality, state-of-the-art biologicals (including oil-added FMD vaccine) and pharmaceuticals for veterinary use; and (d) ensure the development of meat products that meet health and quality standards demanded by export markets. 3.08 The component would improve SENASA's services through an internal reorganization and better interaction with CONASA, provincial and zonal animal disease control groups, producers, and other public institutions, especially INTA and the provinces. A Directorate of Planning would be established to assist in the provision of the following common services: programming, epidemiological awareness, statistics and economics, human resource development and communications. 3.09 Specific items to be financed would include: (a) the strenothenina of SENASA's central services (USS1.5 million} through the establishment of a permanent Epidemiology and Training Unit (ETU) and a temporary Project Management Unit (PMU). The PHU would prepare annual operating plans (AOP), contract construction, procure equipment, and monitor the component. The ETU would establish strategies, propose structural changes in admini;tration, evaluate technical procedures and cost-recovery schemes, monitor field campaigns and support field staff in their training. This would require 12 new staff, the development of an epidemiological  - 18 - information system, staff training, and provision of equipment (office, computing, communications); (b) strenathenino of SELSA's field services and suuDoort to s22cific disease control camiaians IUSS7.5 millionL Field services would be strengthened through staff training (epidemiology, computing and monitoring), the provision of equipment (offico, computing, communications), and vehicle purchase. Resources for specific campaigns would be provided to expand the FHD control program using oil-added vaccine (projected to reach 45 million doses by 1995). Approximately US$1.0 million would also be included to meet requirements for stocks of vaccine. SENASA would coordinate financing of campaigns closely with the "Commission to Control FMD" and with JNC both of which have earmarked funds for this purpose; (c) construction. eauioment. trainina and technical assistance for a new central veterinary laboratory iUSS10.2 million) (11,000 mW on the grounds of INTA's Castelar station. This would include provision of additional laboratory equipment, the incorporation of staff through transfers from other laboratories (9 professionals, 26 technicians), and specialized staff training. This facility would become a National Reference Center for Argentina's network of laboratories. Half of the area would be used for bacteriology, parasitology, pathology, pharmacology, basic chemistry, and food analysis. The remaining area would be holding pens for large animals and breeding facilities for laboratory animals. This would be the main laboratory for quality control of vaccines, chemicals, and biologicals used in veterinary work in Argentina; and (d) construction and eauioment of a medium-security animal cuarantine station at Buenos Aires' Ezeiza airoort (USSO.8 million) (11600 m2). Final designs on the laboratory and quarantine station, preparation of draft tender documents on vehicles and establishment of the ETU have been completed. 3.10 The fee charged to farmers would cover the cost of vaccines as well as the cost of staff, transport and cold storage of vaccine at existing private facilities. The areas to be covered are the Salado River Basin, the North, Mesopotamia, the FMD barrier areas in northern Patagonia and the milk production areas of Buenos Aires Province. Other disease programs (brucellcsis, tuberculosis, mange and tick-borne diseases) would also benefit from the manpower resources allocated for the FMD scheme since these areas could be covered during off-periods of the FMD campaigns. The cost of the animal health component is estimated at about US$20.0 million. Debt service on the Bank and IDB loans would be recovered through user fees from SENASA's entire service activities, including inspection by SIPA at meat plants. SENASA currently administers a system which recovers about 70% of its costs but these funds are returned to the Treasury. A revised fee structure has been developed and the final rates will be presented to the Bank prior to first disbursement (para 3.44). An analysis of the fee structure is available in the Technical File.  - 19 - 3.11 Phytoganitary Services (Annex 31. This component would target public services which are not substitutable by the private sector and which require independent quality control and/or certification service. Improving phytosanltary residue analysis and quality control services would earn increased acceptance and access for Argentine products in export markets. The quality of agricultural produce in the local market would also be improved. PPS would carry out the phytosanitary component in coordinatica with provincial agencies, and would aim to improve programs to control the fruit fly and citrus canker, prevent introduction of exotic pests such as the cotton boll weevil, and improve analysis and monitoring of chemical residues in foodstuffs. Incremental staff needs would be met in part through internal transfers iithin SSAGyP, and in part through losses ln other lower priority SSAGyP agencies, e.g., the National Forestry Institute (IFONA). Specific items to be financed would includet (a) a central auarantine station and diaanostic laboratory in Buenos Aires (USS2,Q 0illionA. The project would finance the construction (610 m ), equipment, staffing and training (three MSc-level) of a phytosanitary control facility that would include a main building (office and laboratories) and a greenhouse complex. All staff needs would be incremental (23 total, 7 professionals); (b) supo2rt to PPS and provincial staff (USS5.5 sillion}. The project would finance the construction of small office facilities, equipment, and vehicles. A number of staff would be recruited (37 professional, 37 technical, 18 administrative, and 21 general service) and post-graduate training would be provided at the MS level (two each in pathology and entomology). Additional staff needs have been derived by assuming that relevant provincial delegations would each require a minimum of two professional, one technical, one administrative, and one service staff. Delegations with sections in Cordoba, Corrientes, Mendoza, Posadas, and Resistancia would need additional staff and two new delegations would be created at Rio Gallegos and Neuquen; (c) Desticide residue analysis (USS3.0 aillioni for both export and domestically consumed products. The project would remodel an existing laboratory building at the Central Laboratory and construct a new regional laboimtory (220 m2 building, 16 m2 oven) in the Northwest at Tucuman. The project would provide equipment, 11 additional professional and technical staff and construct, equip and staff the regional laboratory. Post-graduate training would be required for two professionals in detection and in application technology; and (d) ohvtosanitarv barriers and disease prevention can2aians 1USS.2 aillion) would comprise: (i) the citrus canker campaign, which would aim to maintain the Northwest Region free from the disease Ly setting up eight quarantine barriers (phytosanitary control points) in the region, upgrading disease monitoring, and providing communications equipment. This is especially important since the EC only conferred cancrosis-free status on the area in September 1990.  - 20 - Staff would include six professionals distributed in eight-hour shifts at each phytosanitary control point, with one vehicle per location plus communication equipment. All fruit and vegetable shipments passing through these control points would be inspected; and (ii) the fruit fly program, which would aim to eradicate the pest from the Comahue Region (Rio Negro, Neuquen, and part of La Pampa Provinces). A monitoring network with sanitary barriers and communications equipment would be set up. Close coordination would be maintained with the local fruit producers organization (ENTE FRUTICOLA), provincial authorities (especially in Mendoza) and INTA. Additional staff would include six professionals to lead the team and 40 quarantine agents. The monitoring network would require five vehicles plus insect traps and laboratory equipment to identify species. Each of the five checkpoints would need one vehicle. 3.12 PPS would work closely with INTA on research into post-harvest losses of horticultural products (para 3.20 c) and on equipping the quarantine station, diagnostic laboratory, residue analysis laboratory and improvement of itd technical services. A major constraint identified during preparation is the quality and quantity of staff available to implement the component. As a result, a major hiring and training program for PPS staff is anticipated. 3.13 The cost of the phytosanitary component (excluding seeds) is estimated at about US$13.2 million and, except for the campaigns, annual operating costs and debt serv'- on the Bank and IDB loans would be recovered through user fees as in the case of SENASA. (Preliminary estimatee of fees for the first year of the project are shown in Annex 3). Conditions of disbursement of this component would be: (a) signing of an agreement with the resp3ctive provinces on campaigne; and (b) confirmation that all funds collected for phytosanitary services would be made available to SSAGyP to cover operating costs. Final designs of laboratories and the quarantine stations have already been prepared. 3.14 Seeds IUSS1.0 millionl. The project would improve SENASE's certification and registration of seeds by financing consultant services, training and the purchase of equipment. Specifically, consultants would be contracted to: (a) improve seed quality control as required by the International Seed Testing Association; (b) improve plant breeders' rights; (c) improve seed certification (as required by OECD); (d) modernize SENASE; (e) develop a national seed plan: (f) explore the potential of the export/import market; and (g) update the legal framework for the export/import trade. Training would be concentrated on short trips to gain first-hand experience on seed certification, plant breeders' rights and seed quality control in the USA, Europe and Australi_ Local training for seed inspectors, seed analysts and staff from seed quality control laboratories would concentrate on the same three themes as above for short trips plus variety registration. Electrophoresis equipment would be purchased for the seed laboratory operated by SENASE to improve varietal identification, seed pathology identification as well as purity, germination and viability. Computers would be procured to improve processing of the national registrars of plant breeders, seed certification, and retail inspection.  - 21 - 3.15 Fisheries Ln 4g The fisheries development strategy supported by the project aims to expand the industry and exploit Argentina's southern continental shelf in a rational manner, ensuring in the process that populations of the maln economic species are sustained at productive levels. The specific mechanisms to achieve this strategy would include: (a) setting up a program in INIDP to monitor fisheries resourced aid determine maximum sustainable fish catches (CMI) for the main commercial species. This would entail making better use of INIDPl two research vessels and complementing results with data pgovided by 1S observers placed on board private fishing vessels; (b) reorganizing NDF to improve its capacity in strategic planning, control, and support to the private sector; (c) restructuring INIDP; (d) supporting legislation which should include clauses on f4shery licensing to cover the cost of fisheries research. The latter woutc1 be set up in such a manner so as not to create a selective barrier to entry into Argentine waters by foreign vessels; and (e) supporting the creation of two aquaculture centers for INIDP. The latter would focus research and development on trout farming in Patagonia (Bariloche) and on fresh water prawn (Macrobrachium ros*nbercii) and other warm water species in the northwest (Corrientes). This research would also complement the fish farming investments eligible for financing under Loan 2970-AR. 3.16 Specific items to be financed include: (a) at INIDP, fishing and scientific equipment for research vessels, scientific equipment for on-shore laboratories and incremental operating expenses to allow INIDP's two research vessels to increase the total number of days at sea from 200 up to 400 per year (US$10.2 million); (b) at NDF and INIDP, institutional support would including about 80-man months of consultant support in fishing technology, project management, administration of fisheries research, institutional development (policy, planning and economics), information systems, short-term training courses and computer equipment (US$0.8 million); (c) Aquaculturs. At the Bariloche Research Center, construction and equipping of the facility, and at the Corrientes Center, civil works, fish tanks and equipment (US$1.7 million total). Conditions of disbursement would be: (a) on aquaculture, ensure effective possession of land for the two aquaculture centers; and (b) on the INIDP research program, put into effect appropriate mechanisms to generate adequate funds through issuance of permits to finance resource monitoring on a permanent basis. The total cost of the fisheries component is estimated at about US$12.7 million. 3.17 Neat Karketina tAnnex 7). Institutional development of JNC would focus on developing its capacity to promote Argentine meat exports, vacuum- packed meats and substitute meat products (poultry, pork, fish). JNC would also upgrade standards in the domestic meat market by changing its meat classification system, and would rebuild its capacity to analyze financial aspects of the meat market. The project would include consultancies, meat promotion studies, and purchase of equipment to aid in promotional activities. 3.18 The cost of the meat marketing component is estimated at US$11.5 million. Specific items to be financed include: (a) development of a market information system; and (b) research into meat quality at INTI's Center for Technology and Research on Meat (CITECA) under an agreement with JNC. The goal would be to build CITECA into a quality certification institution especially for chemical residues in meat; (c) promotional costs associated with fairs and  - 22 - exhibits, including equipment, materials and technical assistance for international eventsl (d) technical assistance in planning, marketing studies, and market information systems; and (e) support to modify seat classification procedures since meat is still classified on a carcass basis despite the fact that the major'ty of non-cooked meat is sold as cuts. The total cost of the meat marketing component is estimated at about US$11.1 million. 3.19 Research (Annex 51. The project would support four INTA activities related to analytical procedures and generation of new technology to increase agricultural export activity. INTA's network of research facilities wo 'd be involved in the subprojects which would comprises (a) expansion of INTA's wool technology laboratory at Bariloche (Rio Negro Province) and establishment of a satellite, provincial laboratory at Rawson (Chubut Province). The objective would be to bring Argentine wool certification procedures up to International standards, to allow "more objective" measures into the production, preparation and classification of wool, and to bring more transparency to the wool market in Argentina. (b) biotechnology in four areas: (i) FHD and brucellosis; (ii) resistance to potato virus; (iii) control of insect populations; and (iv) hybrid vigor in plants; (c) post-harvest physiology in fruits and vegetables, which will require equipment and training at regional centers. In Northern Patagonia, research would cover apples, peaches and table grapes, focussing specifically on chemical residues and fungicides to reduce disease during refrigeration. In Mendoza, the same topics would be covered on stone fruits and vegetables. In the Northwest, citrus and vegetables research would focus on refrigerated storage and in other regions on residues and cold storage; and (d) development of techniques to improve forest plantation management and varieties at INTA's Concordia Station in 4esopotamia. 3.20 Specific items to be financed under the reseerch component include: (a) Wool: laboratory and compLuting equipmert, corstruction, training, and incremental operating expenses including . cremental, contracted technical staff (US$2.3 million); (b) Biotechnology: remodeling of laboratories at, .astelar; laboratory, administrative and computing equipment, furni ,.re and vehicles, and incremental operating costs including the maivtenance of a critical inventory of biological reagents for biotechnol, ;y research (US$2.7 million); (c) Post-harvest Physiology: support to five research working groups located at existing INTA research stations in the main fruit and vegetable production areas. This would require recruitment and training of staff, procurement of equipment, suppLies, vehicles, and construction of small warehouses with packing-house, cold rooms, offices, and a small laboratory (US$3.4 million); and (d) Forestry Research: constru'cs-ion of research facilities, and procurement of laboratory and office equipment, vehicles, a boat,  - 23 - and training (three staff years overseas plus short-term local seminars) (US$1.9 million). The total cost of the research component is estimated at about US$10.3 million. 3.21 Iaformatiop, System {Annex 71. The project would strengthen the integration of SSAGyP's information systems to link existing independent federal/provincial public and private sources to produce consistent and regular information flows. System integration would be pursued by: (a) assisting the technical units within SSAGyP in the collection and processing of information using informatics (hardware, software and training); (b) assisting decentralized institutions; (c) exchanging information with the Provinces; (d) cooperating and exchanging information with other federal and provincial entities in both the private and public sectors; (e) establishing a central repository for aggregated information in the NDAP, which would process the information and present it in suitable forms to decision-makers; and (f) establishing a central support unit to assist other SSAGyP units in their use of informatics. A decentralized, micro-computer-oriented approach would be used. An Informatics Committee would be created, composed of the major users of information in SSAGyP to ensure a coordinated approach to information identification and definition, homogeneous systems development, compatible hardware and software and economies of scale in training for SSAGyP. This decentralized approach would facilitate third party contracting, and therefore a minimum of four staff would be required. Equipment would include mostly micro-computers but possibly local area networks and a supermicro, the exact number and configurations of which would be determined during the detailed design and analysis of each system. The estimated cost of the component is about US$1.2 million. 3.22 Non-Traditional Zxnort Promotion Scheme {Annex 8$. This component would support the private sector in evaluating and penetrating new export markets. Specifically, it would: (a) support mechanisms to exchange specialized information on production, processing and marketing of nontraditional agricultural products through seminars, publications and overseas visits. This process would be complemented by the existing (and underutilized) network of Commercial Attaches operating in Argentine embassies; and (b) provide financial resources to individuals or groups of exporters out of a Promotion Fund to be set up under the project which would finance up to 50% (with a maximum of US$30,000 equivalent) for the following: (i) data searches; (ii) preparation of feasibility studies; (iii) technical advice on processes; (iv) pilot shipments to test markets; and (v) monitoring of pilot shipments. These activities could be carried out by the exporters themselves or by consultants. The first three proposals would be sent to the Bank and IDB for review; thereafter, review would be by sampling during supervision. The administration of the program would be streamlined, efficient, and unencumbered by long review procedures. It would comprise an Executive Directorate with representatives from SSAGyP, the Subsecretariat of Commerce and Industry (SSIC), BNA, and three individuals from the agroindustrial sector. This Executive Directorate would be supported by a Technical Secretariat. 3.23 Specific items to be financed include: computer hardware and software, office and communications equipment, incremental operating expenses,  - 24 - and start-up resources for the promotion fund. The cost of the component is estimated at about US$8.3 million. As a condition of effectiveness, SSAGyP would: (a) sign the agreement with BNA-SSIC; (b) sign the contract with BNA's non-profit Foundation to administer the funds; and (c) hire the Executive Director and Technical Director. Organization and luRlementation (Annex 1l 3.24 NDAP would establish a Central Coordination and Management Unit (CCMU) to coordinate overall project activities. Although the head of each agency would be responsible for implementing its component, each would also appoint a specific project coordinator for the respective component to serve as a liaison between the agency and the CCMU. In addition, a Project Advisory Committee (PAC) would be created, headed by the Subsecretary of SSAGyP or his designate, with the Director of CCMU acting as Technical Secretary. This Committee would meet at least three times a year and would comprise representatives from SSAGyP's four National Directorates and one representative each from SENASA, PPS, JNC, INTA, SIIAP, and the Export Promotion Program. The main objective of the PAC meetings would be to resolve problems of an inter- institutional nature and ensure effective liaison with the provinces and the private sector. The first PAC meeting would occur within 90 days after effectiveness. The already-nominated Project Coordinator attended negotiations. Establishment and full staffing of CCMU would be a condition of effectiveness and of component management units (PMU) would be a condition of disbursement of the respective components. 3.25 Each participating agency would prepare an Annual operating Plan (AOP) that would be submitted to CCMU before October 30 of each preceding year. The AOPs would outline program objectives for the year, quantify available resources, describe how staff work programs would be implemented by task, establish implementation schedules, identify sources of financing, and summarize progress to date for the prevailing fiscal year. Ongoing AOP'B would be reviewed in June of each fiscal year to allow for adjustments during the second semester of that year. The CCMU would: (a) analyze and approve AOPB to ensure compliance with project objectives; (b) consolidate all AOPs and prepare a project budget; and (c) confirm the availability of counterpart funding and monitor key indicators. The 1991 AOPs for each agency have been prepared, and all subsequent AOPs would be reviewed with the Bank prior to finalization of each new year's plan. 3.26 The legal mechanism to implement the project would be outlined in Subsidiary Agreements between SSAGyP and the participating autonomous institutions (INTA, SENASA and INDP), which would be responsible for their respective shares of the debt service on the Bank and IDB loans. In the case of other service agencies that are integral parts of SSAGyP, project implementation and transfer of funds would be regulated by internal SSAGyP resolution through the General Directorate of Administration (GDA). The cost of institutional strengthening and project coordination activities is estimated at about US$1.6 million for computing and facsimile equipment, technical and incremental operating expenses, and studies. CCMU staff needs would be small: a coordinator, one financial analyst, one monitoring officer, an accountant, and  - 25 - three administrators. As a condition of effectiveness, subsidiary agreements and related SOP* would be signed and JNC would adopt a SOP satisfactory to the Bank. 3.27 A detailed analysis of key tasks necessary for successful project implementation has been carried out during appraisal by management consultants financed and supervised by the Bank. These tasks and the schedule for their completion have been compared with the existing staffing and skills mix of each agency to determine any capacity gaps. Each agency has prepared a training and staffing program to fill these capacity gaps. The institutional development activities included in the project are designed to support these initiatives and thereby improve the efficiency, impact and productivity of these agencies. All 1991 training programs have been prepared. 3.28 To ensure compatibility with general institutional reform initiatives being promoted in the public sector with Bank support, a draft agreement was reached between project implementing agencies, SSAGyP, the Subsecretariat of Hacienda and MINEC covering cost recovery and staffing aspects of the project. This agreement commits agencies to reducing the net fiscal cost of providing services and allows individual agencies such as PPS to increase staffing provided there is no net increase in the overall complement of public employees in SSAGyP. 3.29 statements of Policy (SOPI. To improve their management of public resources, agencies would provide Statements of Policy (SOP) that would define in detail: (a) financial and technical objectives with monitorable indicators; (b) a strategy to obtain the objectives that define the agency's relationship with the private sector and the Provinces, and the degree to which its revenues will cover its costs; (c) specific programs to implement the strategy; (d) the contribution of the project to implementing these programs; and (e) the resulting change in the size and structure of the agency. Each agency's SOP was reviewed in draft at necotiations. These would form part of subsidiary agreements to be signed as a condition of effectiveness. Assurances would be included in the loan documents that these SOPs will be followed during the project. 3.30 At present, SSAGyP's General Directorate of Administration (GDA) and the participating agencies do not have cost accounting systems that provide them with the management information they need to control their costs or price their services in a rational manner. GDA uses the standard government chart of accounts, which does not provide this information. GDA and the independent agencies, with the help of consultants, would Cevelop parallel cost accounting systems to help them achieve the business objectives of their SOPs. The cost of consulting advice, computer equipment, training and software to establish these systems would be eligible for financing under the project. A condition of disbursement for individual comoonents would be the prior implementation of Bank- approved cost accounting systems. Costs 3.31 Project costs (net of taxes) are estimated at about US$82.7 million in June 1990 prices, of which about 38% would be foreign exchange costs. Price contingencies (about 9% of baseline costs), have been included at a rate of 3.6% p.a. between 1991-95. Physical contingencies, (3% of baseline costs), have been  - 26 - applied at a rate of 10% for civil works and equipment and 5% for vehicle- and other goods. Project cost and financing data are given in Annex 11. 3.32 Incremental recurrent costs are estimated at about 30% of base coats. The SENASA, PPS, INIDP, and INTA Wool Laboratory components would constitute the bulk of poat-project incremental operating expense.. Cost estimates for these components have taken into account the ability of these services to generate sufficient income (through user-fees and licenses) to cover all operating costs as well as debt servicing on the Bank and IDB loans. Consultant costs have been calculated at a level of US$12,000 pe man-month for international consultants and US$3,000 per man-month for local consultants. Financing 3.33 The proposed Bank loan of US$33.5 million equivalent (including US$0.5 million to refinance PPF 119-AR) would finance about 40% of total project costs including local currency expenditures. IDB would parallel finance US$30.0 million equivalent (36%) of total project costs. Counterpart funding needs amounting to US$18.7 million equivalent (23% of total) would largely be financed or rofinanced by JNC, INTA, SENASA, PPS, INIDP, INTA wool revenues collected from end-users through various mechanisms. The Japanese Grant Fund would provide US$0.95 million or (1% of total project costs), and would finance technical assistance, training and studies in the forestry research (INTA) and fisheries (NDP and INIDP) components. The Bank loan would be made to the Government at the standard variable interest rate for a term of 17 years, including five years of grace. To enable project executing agencies to prepare for an early start on project implementation, project expenditures incurred after May 1, 1990 but prior to loan signing would be eligible for retroactive financing up to US$1.5 million equivalent. 3.34 F. x.i financing would cover: (a) 100% of eligible civil works and laboratory equipment expend.tures in all components except animal health (SENASA), which would be covered by IDB; (b) 100% of eligible vehicle procurement in all components; (c) 100% of technical assistance for the following: (i) local consultants and studies in CCMU and SIIAP components, and private auditors costs for all components, and (ii) international consultants including all needs of INTA wool component, and relevant third party procurement services (para. 3.?5 (b)); (d) 100% of training for the following: (i) overseas training includil.g all needs of the INTA wool component, and (ii) local training for SIIAP and for CCMU in support of studies; (e) approximately 50% of eligible incremental operating expenditures for all components on a declining basis of 100%, 80% 60% 40% of equal increments of US$2.0 million and 20% of the balance; and (f) in the export promotion fund, in addition to eligible activities covered above, 100% of eligible promotional costs, which represents 50% of total prormotional costs (para 3.22). Loan documentation would ensure that there would be no financing under the Bank loan of expenditures financed by any international finance institution or agency other than the Bank.  - 27 - Procur- ent 3.35 Given the existing constraints to efficient contracting for good a*nd services by public agencies in Argentina, SSAGyP and it. autonomous agencies could elect to hire specialized international agencies to carry out this procurement function. This would also facilitate the packaging of procurement for such goods and services as vehicles, equipment, and consultant services. These services would be procured in accordance with Bank guidelines (see below) and would take the form of an annual contract. This option would only be an interim measure that would be terminated when the overall public sector reform program becomes operational. Thereafter, individual agencies would be able to carry out these functions independently. Procurement for all eligible Bank- financed items would follow Bank guidelines as follows: (a) CivLl Works. Civil works costing between US$50,000 and US$2.0 million equivalent, representing an estimated 37% of civil works, would be procured under local competitive bidding procedures (LCB) satisfactory to the Bank and through which: (i) foreign contractors would be allowed to bid on all contracts; (ii) a minimum of 30 days would be allowed between the date of publication of the last advertisement and the bid opening date; (iii) each bidding would be advertised in a national newspaper for at least three days; and (iv) bidders would be allowed to submit their bids by mail. Civil works contracts above US$2.0 million equivalent (SENASA's Central Laboratory totalling about US$6.0 million) would be financed by IDB and would be procured under international competitive bidding (ICB) procedures. To minimize adverse impact on the environment during construction, specifications in the bidding documents for the major works (laboratories and quarantine stations) would include clauses under which contractors would be required to prevent, minimize or mitigate environmental damage. (b) g22js. Vehicles required for the project, estimated to cost about US$4.9 million equivalent over five years, would be procured under ICB procedures in accordance with Bank guidelines. All vehicles provided (about 400) would include a four-year service contract. Laboratory equipment (US$7.5 million) and computing and telecommunications equipment (US$1.5 million) would be bulked as necessary and procurement would include four-year service contracts. Procurement of lots in excess of US$250,000 equivalent would be procured under ICB procedures in accordance with Bank guidelines; lots under US$25,000 by local or international shopping; and lots between US$25,000 and US$250,000 by local competitive bidding procedures acceptable to the Bank. To the extent possible, the acquisition of goods and vehicles should be packaged into contracts estimated to cost US$300,000 or more. (c) Consultant Servicep. Consultants (US$1.8 million) would be selected and retained in accordance with Bank guidelines.  - 28 - 3.36 Contract Review. All ICB procurement and all civil works contracts, as well as the first two contracts of each kind (LCB and shopping) for goods below the ICB limits would be subject to the Bank's prior review of procurement documentation before invitation. to bid were issued and contracts awarded. This review would result in a coverage of about 100% of the total estimated value of works contracts and about 70% of goods contracts eligible for Bank financing. The balance of contracts would be subject to expost-review by tha Bank after contract award A unified system of procurement with standard bidding documents would be followed for all goods and, similarly, for all civil works, depending on the bidding option (LCB or ICB). As a condition of disbursemnt for each individual component tender documents for year 1 procurement contracts would be presented to the Bank for review. Procuremnnt Arranogments 1, (USS million) ICB LCB Other Japanese Total Grant Civil Works 7.7 4.6 - 12.3 0 ) (4.6) ( 4.6) Equipment/Vehicles/Machinery 11.0 8.0 2.2 - 21.2 (6.0) (2.8) (1.0) ( 9.8) Training/TA/Consultant2/ - 23.1 1.0 24.1 4.0) ( 4.0) other J/ 25.1 - 25.1 (14.6) (14.6) Total 18.7 12.6 50.4 1.0 82.7 (6.0) ( 7.4) (19.6) (33.0) 1/ Values in parentheses show amounts to be financed by the Bank. 2/ Procurement in accordance with Bank guidelines. 3/ Includes recurrent expenditures and export promotion costs. Disbursemnts and Special Accounts 3.37 Loan proceeds would be disbursed over eight years, consistent with the standard profile for agricultural projects in the LAC Region. Bank disbursement would be made against all components as noted in para 3.34. Japanese Grant Funds would be used to finance technical assistance, training and studies in the forestry research and fisheries components.  - 29 - 3.38 To expedite implementatlon, SSAGyP would establish two special accounts for the project in the Central Bank: one each for Bank and IDB disbursements. Up to US$2.0 million would be deposited by the Bank into the relevant account, equivalent to an estimated four months of average disbursements. The CCMU would manage this account and make withdrawals. Disbursements would be made on the basis of Statements of Expenditure (SOE) for civil works contracts valued at less than US$1.0 million equivalent and for goods and equipment contracts valued at lses than US$150,000 equivalent. The documentation for these expenditures would not be sent to the Dank but would be retained by S8AOyP and made available to Bank staff during supervision missions. All other expenditures would be fully documented. 3.39 In accordance with relevant subsidiary agreements, each agency would be responsible for debt service on its respective part of the loan. In addition, each agency would create with its own resources a small revolving fund to cover project-related expenditures for three months. After expenditures are made by the participating agency it would forward a disbursement application to CCMU which, in turn, would process reimbursement from the Bank loan. The CCMU would request the Central Bank to: (a) disburse the funds directly to each agency from the Special Accounts for the Bank and IDB loans; and (b) request the Bank and IDB to replenish the respective Special Accounts. The project closing date is expected to be June 30, 1998. Accountina and Audits 3.40 SSAGyP and service institutlons involved in the project would keep separate accounts to record their expenditures. SSAGyP would have overall responsibility for project implementation. All participating agencies would submit their requests for reimbursement of project expenditures to CCMU which would maintain separate project accounts and records for each project component, consolidate them into the project accounts, and prepare SOEs. Supporting documentation would be maintained by CCMU and made available to visiting Bank missions and independent auditors, who at their discretion would make field visits to implementing agencies for the purpose of the overall audit. 3.41 Project accounts, including the special account and SOEs, would be audited annually in accordance with appropriate auditing principles consistently applied by external independent auditors acceptable to the Bank, with terms of reference approved by the Bank. At present, SSAGyP is audited by the National Court of Audits (Tribunal de Cuentas). Certified copies of audits would be submitted to the Bank no later than six months after the close of each fiscal year. Conditions for the audit work were agreed at negotiatiois. 3.42 During appraisal, it was determined that GDA does not have the capacity to account properly for project expe.aditures in a timely manner. Consequently, the GDA would hire consultants acceptable to the Bank to undertake a diagnootic study in two parts. The first part would be to recommend changes in procedures and personnel to improve GDA's project accounting capabilities and the second part would cover GDA's general administrative requirements. These studies would be eligible for retroactive financing under the loan. GDA has prepared a standard chart of accounts for the project. Conditions of disbursmant for each component would be that: (a) a cost accounting system  - 30 - based on the National Court of Audits diagnostic recommendations concerning ODA would be implemented; and (b) each agency has adopted the standard chart of accounts. Reggrtina 3.43 Monitoring of progress on implementation would be carried out by the respective implementing agency; however, mid-term and eX-221t evaluation of the impact of the project would be carried out by consultants contracted by CCXU. A preliminary, agency-led evaluation would be carried out at the end of year 1 to identify areas in need of immediate adjustment. During negotiations, Government provided assurances that: (a) semiannual progress reports will be sent to the Bank not later than two months after the end of each reporting period; and (b) satisfactory terms of reference would be presented to the Bank prior to the mid-term and ex-post evaluations, with reports sent to the Bank not later than June 30, 1993 and June 30, 1997, respectively. The June 30, 1993 report would, inter alia, contain an analysis of the impact of the JNC Resolution No. 160 (para. 2.22) on improving transparency in allocating meat quotas. Cost Recovery 3.44 During project preparation and appraisal, SENASA, PPS and NDF (with assistance from the Bank and IDB) developed illustrative models on cost recovery. The latter confirmed that financial self-sufficiency is an achievable goal, not only to cover operation and maintenance costs but also to meet debt service needs on the Bank and IDB loans. Mechanisms to cover relevant project-related costs would be adopted, including tariffs to be charged, ds a condition of disbursement of the respective components (SENASA, INIDP, PPS, and INTA wool laboratories). Thereafter relevant implementing agencies would be required to discuss annual charges with visiting Bank supervision missions to ensure adherence to the project's financial objectives on cost recovery namely to ensure a system of generating revenues sufficient at least to cover debt service on the Bank and IDB loan. To meet these financial needs, GOA will have to enable these agencies legally to meet their cost recovery obligations under the project. An agreement between MEC and SSAGyP implementing agencies covering, inter alia, cost recovery has been reached (para. 3.28). In addition, SOPs would confirm that the long- term objective would be to cover all operating costs and not only debt service needs as required under the Bank Loan Agreement. It is estimated that approximately 80% of total project costs would be recovered from end users of these various services. Proiect Benefits 3.45 Project benefits would be derived from: (a) an improvement of services provided by participating institutions; (b) increase in the quality, quantity and diversity of products available for export by the private sector; and (c) greater export diversification. The overall strengthening of key SSAGyP services would contribute to maintaining Argentina's comparative advantage as an agricultural producer. A stronger SSAGyP would also be in a better position to contribute to the formulation of sound public policies.  - 31 - 3.46 An economic rate of return has not been calculated since precise quantitative estimates of bene'its are difficult to make in an institutional development project. However, animal disease control campaigns would bring direct benefits in terms of reduction of losses, improved productivity and increased access to export markets. The impact of phytosanitary control is more difficult to estimate, since statistics on potential losses due to crop pests and/or rejected products (pesticide contamination) are not available in Argentina. The magnitude of the potential problem can, however, be estimated on the basis of experiences elsowhere. For example: (a) the introduction of fruit fly to the Rio Negro valley (70,000 ha of apples and pears) could cause about US$30 million per year in direct losses; and (b) the introduction of cotton weevil into the northeastern Argentina would increase pesticide costs by raising the number of applications from three up to about eight per growing cycle. In addition, yields could decline by about 30%, as demonstrated when the weevil appeared in previously uninfested areas of Brazil. 3.48 Without the project, Argentina would incur serious losses in agricultural export markets. Failure to comply with the increasingly strict requirements of most importing countries on pesticides and other residues would have an strong negative impact on exports. In addition, phytosanitary standards in the EC will become even stricter after 1992 when Spanish regulations banning fresh fruit imports from regions with fruit fly or citrus canker become the standard for the entire EC. The opening-up of markets in Eastern Europe could also be threatened if EC standards are adopted throughout Europe. With regard to meat exports, though full control of FMD will not be possible during the project implementation period, it is clear that the EC will increase pressure on exporting countries to meet FMD-free status requirements. As regards wool, the International Wool Secretariat establishes the industry certification standard, unless Argentina can meet this standard, its wool will continue to fetch lower prices in world markets. Proiect Risks 3.49 In addition to Argentina's general macroeconomic uncertainty, the most important risks stem from the availability of counterpart funds, the level of managerial capacity and the low level of commitment by public servants due to low salaries. The local funding risks, which affect all proposed Bank operations in Argentina, would be mitigated to a large extent by the project's proposed cost recovery mechanisms. The lack of managerial capacity in public institutions would be mitigated by the project's institutional strengthening programs. The issue of inadequate compensation in the public sector is being tackled by Government through public sector reform measures which are also being assisted by the Bank in proposed new loans. Since project design encourages financial autonomy, this should also provide means to support competitive staff salaries over time. 3nviromnental Impact 3.50 The project would have a positive environmental impact. The animal health and phytooanitary components would provide mechanisms to control disease, pesto and levels of chemical residues in all foodstuffs, not only those for  - 32 - export. The fisheries *ubcomponent would prevent over-exploitation of maritime resources. IV *SUWARY Or AGREZNDNSS TO Al REACHED 4.01 The following were agreed at necotiations: (a) draft agreement on Export Promotion Component and contract with BNA Foundation (para 3.23): (b) draft Statements of Policy; (para 3.29); (C) conditions for audit work; (para 3.41); and (d reporting procedures including key indicators (para 3.43). 4.02 Th- following would be conditions for effectiveness of the loan: (a) Zxport Promotion Component documents signed between BNA, FBNA, SSAGyP and SSIC; Export Promotion Fund established; and ED and TD hired (para 3.23); and (b) CCMU established and staffed (para 3.24); (C) SSAGyP signed agreements including SOPs with autonomous agencies, and that JNC has adopted an SOP satisfactory to the Bank (para 3.26). (d) IDB has approved its loan (para. 3.33); and (a) Action taken to permit procurement according to Bank Guidelines (para 3.35). 4.03 The following would be conditions of disbursement of the resoective oroiect components: (a) Sign agreements with provinces on PPS campaigns and Government make available to SSAGyP funds collected by PPS from its phytosanitary services (para 3.13); (b) Effective possession of lands for aquaculture centers at Bariloche and in Corrientes (para 3.16); (C) Put into effect mechanisms to ensure INIDP, through a system of fishing permits, is able to recover the costs of fishery resource monitoring activities (para 3.16); (d) PHUs in place for each component and respective coordinators nominated (para 3.24);  - 33 - (a) Bank-approved cost accounting systems in place and mechanisms to recover costs for indlvidual agencies including tariffs to be cnarged (paras 3.30 and 3.44); (f) Tender documents prepared for all first year contracts (by component) (para 3.36 and Annex 11, Tables)l and (g) Each agency has adopted standard chart of accounts; and National Court of Audits' recommendations implemented by GDA (para 3.42). 4.04 With the above assurances, the proposed project would be suitable for a Bank loan of US$33.5 million on standard terms for Argentina. January 29, 1991  - 34 - AnMnx_1 AROCN$IN AORICUL$URALi SERVICES AND INSTI$VTIONAL DEVELOPHMD PROJECT ProIect-Supoorted Institutional Develo2gent Comoonent A. Dackaround and Obiectives. 1. The project supports an ambitious policy that aims to increase and diversify agriculture exports for valuo-added, crop, horticulture, livestock, forestry and fishery products into markets that have increasingly strict regulations. This objective has complex implications for SSAGyP and other implementing agencies collectively responsible for providing quality agriculture services such as animal health, plant protection, fishery resource management, forestry resources information and management, meat export promotion and other more general, services such as information systems and market surveys. An institutional capacity analysis was carried out during project preparation using the institutional capacity analysis system (ICAS), to help assess actual and potential capacity gaps that could hamper implementation of this Project. As a result, a consolidated list of institutional capacity gaps (ICGs) has been established against project tasks as a basis for the design of this project-supported institutional development component (PSIDC). This annex summarizes the identified ICGs and presents the strategy designed to increase institutional capacity that would, in turn, ensure successful implementation in the most cost-effective manner. Detailed information is available in Spanish in the PSIDC working paper in the Project File; illustrative examples from Component 1, Animal Health, are provided in Tables 1-7 of this Annex. B. Institutional Capacitv Analysis System (ICASI. 2. Institutional capacity assessment was carried out for all agencies with a role in implementing the project. The eight main project components' objectives (Form A: Table 1) have been disaggregated into their respective activities/resources (Form B: Table 2), which, in turn, have been translated into detailed tasks describing who would do what to ensure adequate implementation and achievement of component objectives using available resources (Form C: Table 3). An interinstitutional relationships map has been designed for every component. The capacity assessment was carried out, task by task, from the following five viewpoints: legislation; interinstitutional relationships; organization and distribution of functions; personnel policy and reward system; and management, professional, technical staff and beneficiaries' skills (Forms D (i) to D (v): Table 4). The resulting identified ICGs were consolidated into capacity gaps by category with PSIDC designed to include inputs that would systematically address them (Table 5). In addition, ICAS led to the preparation of a useful management tool that will be used to organize the distribution of the implementation work and for project monitoring and evaluation. C. Identified Institutional Capacitv Gaeos (ICor 3. .islation. In general, ICGe on legislation commonly include a lack of legal capacity within implementing agencies to act independently of SSAGyP,  - 35 - Annx 1 despite deconcentration or decentralization. For example, Anima Health Services (SENASA) cannot directly undertake construction or rehabilitation works because Public Works Law 13064 (of 1947) stipulates that any constructioti work using public funds must go through the Public Works Secretariat. In addition, SENASA cannot legally mobilize resources it has generated to perform Its functions and work programs. Phytosanitarv Services (Sanidad Vegetal) faces similar legal hurdles aggravated by its total lack of autonomy. Furthermore, the legislation related to the use of pesticides (Law 3489/58, and related Decrees) are out of date. In the Fishery Resources Subsector, INIDP has little legal capacity to enforce established, albeit unclear, rules of the game to preserve fishery resources at a satisfactory level of economic production. There is also no permit system to monitor the fleet and ensure adherence to maximum sustainable fish catches. 4. Interinstitutional Relationebigs. Interinstitutional relationships between implementing agencies, their administrative units and also with provincial administrations are not well defined. Other deficits include cumbersome t-reacratic procedures and unclear procurement procedures. In phytosanitary campaigns the respective roloo of the provincial authorities and the National Directorates are unclear and cause considerable delays. 5. Oreanisation and Distribution of Functions. Internal organization with implementing agencies is weak. Key capacity gaps include: (a) un-clear distribution of functions e.g., in SENASA the role of central offices versus SELAB (laboratory); and (b) general lack of clearly defined norms that would describe procedures to be adopted throughout relevant sub- sectors, particularly in animal health and plant protection, but also in the other subsectors. This often makes it difficult for higher-level of technicians to understand what their work programs and their contribution in crneral, should be, as in the case of SENASA's inspectors, veterinarians and technicians who carry out vaccination campaigns. Other organization problems include lack of sufficient personnel in the Provinces, lack of resources to carry out field work, and even lack of adequate support infrastructure. In the Fishery subsector, the problem is particularly difficult, and in the Forestry subsector, there is no formally approved organizational structure. 6. Personnel Policy. Under this category of institutional capacity deficits, the problem is pervasive: very low salaries compared to the private sector, absence of a career path, and a resulting high level of staff turnover and low staff commitment. If this is not solved during the life of the project, the risk also exists that i. )lementing administrations would not be able to retain the necessary qualified personnel as in the case of INTA, the research institute where highly qualified specialists are particularly in demand. However, this problem will be tackled in the case of the nontraditional agricultural export promotion component where a legal charter would enable it to work as a private sector company, offering independent salary scales with firing and hiring as needed. 7. Skills. There is a general lack of updated skille in management procedures, organization, administration, financial management and computing activities. Most serious gaps are found in: (i) animal health--sanitary management, virology, epidemiologic analysis, diagnosis, modern laboratory organization and management, quarantine techniques; (ii) plant protection--peost  - 36 - Annz_L1 diagnosis, pesticide legislation, vegetable products sampling; and (iii) fishery--technical work organization; norms; related- legislation; cost-benefit assessment; permit management; fishing activities control and administration. D. The Proiect-Supoorted Institutional Develooment Comooneut (PSUDC) S. Three categories of measures have been designed to address the above-mentioned capacity deficits: (i) administrative or legal decisons made or to be made, by GOA, measures that do not imply any particular financed input; (ii) specialist assistance to carry out studies, design specific institutional development strategies, or provide management procedures; and (iii) skill-upgrading activities at all levels of staff and beneficiaries. Theme are briefly described in the following paregraphs. A more detailed presentation is shown in the PSIDC working paper available in Spanish in the project file. 9. OOA Decisions. In general, these include the reorganization of existing administrative frameworks to be more in line with project needs (see para. 9 below) ane correcting identified rigidities. Flexibility and exceptions are granted tc the current budget contention rule. Most specific measures include: (i; animal health: SENASA would now be able to undertake construction activities (its laboratory and quarantine station in particular) without going through the Ministry of Public Works; harmonization of relevant federal and provincial legislation in key areas such as entry of animals; and norms allowing bENASA personnel to travel overseas to study sanitary requirements set by countries importing Argentine animal products; formal agreements with provincial authorities to set up sharing of responsibilites; simplification of fund transfers and control by the central financial authorities; and improvement of internal organization by adding missing functions such as an epidemiology unit; (ii) plant protection: norms for the quarantine station; same arrangement as in SENASA for the corresponding administration to undertake its own construction program; ruling about use of pesticides and control of residues that would apply to the whole country; agreements with Provinces so as to ensure harmony and compatibility of procedures and work programs; donation: of sites by Port Administration for the construction of the quarantine station and by Mendoza Province for the construction of the Cuyo Regional Laboratory; (iii) fisheries: INIDP staff would have a mandate and authority to carry out inspections aboard fishing boats; a national fishery law or Presidential Decree would be approved to formalize the new policy and ways and conditions for its enforcement; specific agreements would be signed with provincial authorities, as well as with Prefectura Nacional Marotima for the establishment and conditions of granting fishing permits; Fishery Operating Units would be created in the Port Administration; national and international agreements would be signed to facilitate and promote the circulation of relevant information; reorganization of the Fishery Administrative Unit within SSAGyP, incluiding more flexibility and autonomy to make it possible to achieve the modernization policy supported by this project; (iv) meat export: establishment of promotion office in Europe to represent Argertine meat industry; and  - 37- &BSLL1 (v) researcht special legislation would be approved for patenting new genetic devicesl specific agreements would be signed with professional organisations to protect research results financed under the project. 10. Pieat Coordination and Nanaaesent. SSAGyP would issue a formal resolution by which a Central Coordination and Management Unit (CCMU) would be created in the National Directorato of Agriculture Policy. Its permanence would be ensured beyond project life because It would assume the role of preparing and implementing projects in general. This would include the publication by the Ministry of Economy of a policy in which SSAGyP's self-finane-d activities would be maintained separate from budgetary itemc. In addition, procedures for tariff determination such as for animal vaccination or issuing permits, etc., collection frequency, modalitioe of these income-generating activities would be defined am well as the use by SSAGyP of the corresponding funds. Furthermore, a specific decree would grant exceptions for the implementing administrative units to become able to attract, hire, fire and better manage personnel, import key equipment, increase operating budgets, as necessary, facilitating project-related trips within and outside of the country including fellowships and provision of all arrangements to facilitate and expedite construction programs. Finally, a clear dLstrLbution of functions would be established in an updated interinstitutional relationships map (Chart 1). 11. The COWl would have the responsibility of coordinating project activities, including: (a) supervising technically, economically, financially, legally and administratively, project implementation by the implementation subunits; (b) more direct responsibility of implementing PSIDC; (c) monitoring implementation and collect related information; (d) ensuring smooth functioning of established interinctitutional relationships networks; () systematically consolidating and forwarding timely progress reports to the Bank; (f) ensuring adequate, sufficient and timely flow of funds to the sectoral implementation sub-units; (g) being responsible for carrying out (contracting) evaluation services at mid-term and at the end of project implementation; (h) reviewing specific S8AGyP projects that could be transferred to the private sector; and (i) supporting SBAGyP's Directorate of Administration to enhance its institutional capacity.  - 38 - AauX 1 12. Sectoral implementation sub-units would be established in every subsector includ-d in the Project, namely in BZNASA, Phytomanitary Services, Heat Board, INTA, and in Fishery Directorate. A precise met of norms would be prepared with the help of an organization specialist included in the technical assistance program so am to inter-relate these sub-units with the central implementation unit, facilitate coordination functions such as programing, budgeting, fiown of funds, monitoring and evaluation. More specifically, these sectoral sub-units would: (a) prepare and submit annual work programs (AOP) to CCMU after obtaining agreement by their respective sectoral nanagement; (b) implement approved POAs including bidding processes, supervision of works and services delivery, and other related tasks; (C) prepare sectoral periodical reports in accordance with norms and formats established in agreement with CCUU; and (d) contribute to CCMU's periodic review of institutional capacity available among implementing agencies and the institutional environment in which they operate so as to update the consolidated list of ICG and PSIDC inputs accordingly. 13. Technical Assistance. PSIDC includes 142 staff/months of specialist assistance in organization and management and in sectoral-related fields, for a subtotal of US$1.7 million. PSIDC also includes 653 staff/months of locally hired consultants to strengthen CCMU, SENASA, Phytosanitary Services, INIDP, and SIIAP for a subtotal of US$1.96 million. Both international and local consultants would have the exclusive objective of helping to eliminate and/or mitigate identified capacity gaps, adding those that would appear as the project is implemented. Detailed terms of reference for all the technical assistance specialists would be submitted to the Bank for information during project negotiations. (Table 6 includes a detailed description of specialists included in PSIDC). 14. Trainina Activities. PSIDC includes training activities abroad an well as others in Argentina. All activities have been designed in accordance with identified skill gaps among the management, staff, and the beneficiaries. A detailed training plan is shown in Table 7. Total cost of this component amounts to US$1.83 million for foreign training and US$1.07 million for local training.  Table 1 ARGENTINA AGRICULTURE SERVICES AND INSTITUTIONAL DEVELOPHEN? PROJECT PROJECT-SUPPORTED INSTITUTIONAL DEVELOPHENT COMPONENT institutional Capacity Analysis : Illustrated Model Form A: Component Obiectives Component Objective Description Quantitative Indicators Expected Impact Beneficiaries Name&Code Description Location 01 Animal Efficient animal health Raise from 602-10OZ number Reducing by 802 disease Livestock farmers Areas not yet Health system. Control FMD and of cattl. protected; incidence. under strict other animal diseases. Adequate sanitary inspection Private sector: control; Control 1002 animal of every animal entering Reduction of 5 to 602 of vets, labs, priv. entries. Hake services the country; other diseases; industry; accessible to all Increasing demand for servi- Increased areas under Importers and ex- National farmers. ces from farmers L priv.ind. control. porters; farmers. 02 Phyto- Respect phytosanitary Increase samples from 4.52 Substantially increased Exporters in gene- National sanita codes of potential mar- of exports to 252 by 1995 control capacity by 1995 ral. ry Ser kets; ensure quality for cereals and from 0.52 and, as a result. increa- vices products for exports; to 202 for fruits and vege- se exports revenues. prevent new pests enter- tables; analyze 5000 samples ing the country, improve (national) and 2000 (regio- pe cide use & effects. nal) for pesticide residues. 03 Fishe- Resource assessment; Reassigning fishing rights Annual surveys describing Private industry; National ry De- technology development; completely by 1995; 1002 resource availability L Policy makers; velop. and resource develop- licensing by 1995. acceptable devel. plans; INIDP Control & Res. ment. Reorganize permit systems agencies L staff. Protec Enhance sectoral control. t ion 04 etc.. 0 x  -40- Annex 1 Table 2 ARGENTINA AGRICULTURE SERVICES AND INSTITUTIONAL DEVELOPMENT PROJECT PROJECT-SUPPORTED INSTITUTIONAL DEVELOPMENT COMPONENT Institutional CaDacity Analysis: Illustrative Model Fonm B: Activities/Resources Activity/ Description of Resources Expected Outputs Implementing Res. Code Activity in US$ Agency 01 01 Central Labora- New Lab ready to SENASA Project tory construc. be equipped by 1993 Unit 01 02 Quarantine Sta- Modern station rea- SENASA Project tion construct. dy by 1995 Unit 01 03 Oil-Added Increased vacc. SELSA Vaccine Fund campaigns 01 04 Lab uipment Lab ready to opera- SELAB acqui.,ition te by 1993 01 05 Quarantine Sta. Station in opera- DP&C equip. acquisit tion by 1995 01 06 Sanitary Camp. Field staff adequa- SELSA equip. acquis. tely equipped DADM 01 07 Cor,puter Ensure communicat. SELSA acquisition with field staff DADM 01 08 Furniture,etc. Enable local offic. for local offic to carry tasks(95) 01 09 Vehicle All field staff Project Unit Purchase. with cars by 1955 DADM/SELSA 01 10 Central Lab. Operation organized SELAB Operation and carried out 01 11 Quarantine St Sanitary protection SELSA Operation for incoming livst. 01 1? Sanitary Camp. FMD under control. SELSA Local commit. 01 13 Project Unit Adequate Project Project Units Functioning coordin. & mangt.  - 41 - Annex 1 Table 3 ARGENTINA AGRICULTURE SERVICES AND INSTITUTIONAL DEVELOPMENT PROJECT PROJECT-SUPPORTED INSTITUTIONAL DEVELOPMENT COMPONENT Institutional Capacity Analysis: Illustrative Model Furm C: Tasks Task Code Task Description Task Output Date Resp.Staff 01 01 001 Reach agreement with MOP Function decentra-- 11/ AARQ to allow SENASA to under- lized so as 'n im- 90 take and manage its plement fastL., and construction program more efficiently 01 01 002 Prepare needs assessment Requirements list 10/ AARQ and plan: first elements of ready for bidding 90 SELAB bidding documents 01 01 003 Prepare preliminary designs Prel. designs ready 12/ AARQ for approval and approved 90 SELAB 01 01 004 Put together all bidding Bidding documents 01/ AARQ package ready 91 SELAB 01 01 005 Organize and implement the Bidding underway 01/ AARQ/DADM whole bidding process 91 MRREE SENASA 01 01 006 Awarding to winning firm Award completed 03/ DADM 91 01 01 007 Supervise construction Norms and specifi- 10/ AARQ works cations respected 91 SELAB 01 01 008 Receive and approve comple- Lab available 09/ SELAB ted works 92 01 02 001 Prepare preliminary designs Preliminary designs 07/ AARQ for the construction of the available 90 SELSA quarantine station SENASA 01 02 002 Technical approval of pre- Preliminary designs 09/ AARQ liminary designs approved 90 SENASA 01 02 003 etc... I _-_______________ _________________________________________________  ARGENTINA AGRICULTURE AND INSTITUTIONAL DEVELOPMENT PROJECT PROJECT-SUPPORTED INSTITUTIONAL DEVELOPMENT COMPONENT Institutional Development Analysis Forms *D-: Institutional Capacity Saps Illustrative Examples from Component 01 I n s t i t u t i o n a 1 C a p a c i t y G a p s ( ICGs) Tasks Codes ICGs:Laws, Decrees. and Interinstitutional Organization and Distri- Personnel Policy and Management. Professio- other Rules of the Game Relationships bution of Functions Reward System nal.Beneficlary skills 01 01 001 Agency in charge and Agencies/administrati- AARQ does not have Compensation system Project design and to its administrative ve units in charge clearly assigned respon- and current levels bidding-related skills 01 01 008 units not legally able (HOP, SSAGyP. AARQ) sibilitiesifunctions to make it difficult for are obsolete or to undertake construc- do not have a common undertake its newly implementing agencies missing in AARQ tion works understanding about assigned proiect-related to attract, retain and DADM their respective roles tasks. motivate competent SENASA Incompatible national, in building new labs. Also, M RQ personnel professional staff provincial and muni- attached to Admin. cipal legislation Directorate without professionally hiera- chical linkage 01 02 001 No normsor specific No clear relationship New functions only idem No staff experience to legislation for the between Implementing vaguely defined with desing of 01 02 006 admittance of animals administrative within implementing modern quarantine through Ezeiza Inter- units (AARQ, SELSA, administrative unit stations national Airport where SENASA). the Quarantine Station will be built 01 03 001 etc..  - 43 - Annex 1 Table 5 ARGENTINA AGRICULTURE AND INSTITUTIONAL DEVELOPMENT PROJECT PROJECT-SUPPORTED INSTITUTIONAL DEVELOPMENT COMPONENT Institutional Capacity Analysis Component Inputs to Eliminate Identified Capacity Gals Illustrative Examples frce Component 01 Identified ICGs Decisions Made by Specialist Assistance Training Activi- & affected tsks Government of Arg. (Consultants) ties Legislation- Give SENASA by related weak- decree right to nesses undertake own (0101001toOO8) construction program Incompatible Consultant to review national & related legislation provincial and recommend alter- legislation native solutions (0101002) (See attached consultant program Obsolete techni for Component 01) Related training cal and adminis programs trative skills (see attached training progr. for ComponentOl) etc.  - 44 - Annex 1 Table 6 ARGENTINA AGRICULTURE SERVICES AND INSTITUTIONAL DEVELOPMENT PROJECT PROJECT-SUPPORTED INSTITUTIONAL DEVELOPMENT COMPONENT Technical Assistance Component Sector-Related Specialists Internation. Local Total Code man/m US$000 man/m US$000 US$000 01 Animal Health 12 144 97 291 435 02 Phytosanitary Services 30.5 366 83 249 615 03 Fisheries - - 80 240 240 05 Meat Industry 27.5 330 30 90 420 06A Post-Harvest (Research) 2 24 - - 24 06B Textile Fibers (Research) 2 24 - - 24 06C Forestry (Research) 4 48 - - 48 07 Export Promotion 44 528 - - 528 08 Information Systems - - 140 420 420 09 Coordination Unit and Institutional Development 20 240 223 669 909 Totals: 142 1,704 653 1,959 3,663  - 45 - Annex I Table 7 ARGENTINA AGRICULTURE SERVICES AND INSTITUTIONAL DEVELOPMENT PROJECT PROJECT-SUPPORTED INSTITUTIONAL DEVELOPMENT COMPONENT Training Activities (US$ '000) Component Sector-Related Training International Local Total Code Training Training 01 Animal Health 237 332 569 02 Phytosanitary Services 694 303 997 03 Fisheries _ 192 192 05 Meat Industry _ 40 40 06A Biotechnology (Research) 396 _ 396 06B Post-Harvest (Research) 252 252 06C Textile Fibers (Research) 74 _ 74 06D Forestry (Research) 177 177 07 Export Promotion _ 158 158 08 Information Systems _ 40 40 09 Coordination Unit and Institutional Development - _ _ Totals: 1,830 1,065 2,895  - 46 - Anne x I Chart AGRXCULTURAL URVICZUS AND XNBT!TUTSONAL DEVELOPMNT PROJZCS Overview of iSAivP Service Institutions in Proleat Present Subsector Activity Agency Adi". status Funding (Future) 1/ 1. Livertock a. Animal Health SZNASA Autonomous Fees/Budget (fees) b. Research INTA Autonomous Zxport Tax c. Meat Marketing JNC Autonomous Fees 2. Crops a. Phytouanitary C.D. Plant Dependency Budget (fees) Control Health and Quality Control b. Research INTA Autonomous Export Tax c. Seeds SENASE Semi. Auto. Budget/Foee (fees) 3. Fisheries a. Administration NDF Dependency Budget b. Res./Monitoring 1NDP Dependency Budget (fees) 4. Forestry a. Research INTA Autonomous Export Tax I/ Values in parentheso- indicate revised status with project.  - 47 - Annex 2 MAREINA AORICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT PROJECT nimial Health Services The Livestock Resource and Animal Disease 1. Livestock provides about one-third of the agricultural sector's GDP. Cattle are by far the most important species numbering about 45 million head, down from 59 million in 1977. Beef consumption is the highest in the world and has rarely fallen below 70 kg/capital as a consequence meat for the domestic market represents about 14% of the domestic cost-of-living index. Only about 10% of production is exported. Sheep production mainly for wool has also traditionally been important however cattle and crops have displaced sheep from the Pampas to Patagonia, today Argentina's flock numbers only 24 million head, down from a peak of 80 million in the late 1800s. Poultry and pigs are of secondary importance in Argentina. 2. Argentina's cattle production is based on pasture. The main cattle- raising area is located to the north of the Negro and Colorado rivers in northern Patagonia. For the purpose of animal health control, tne country has been divided into five regions with distinct epidemiological features: endemic, low- risk endemic, epiendemic, paraendemic and FMD free (see Chart). Their existence implies considerable volume of animal movements between the breeding and fattening areas for stock; this in itself means a high risk of spreading infections and parasitic diseases. 3. Animal diseases prevent livestock from realizing their full productive potential, represent a hazard to public health and also affect the value of livestock products that are exported. The main cattle diseases in Argentina are: rabies, brucellosis, tuberculosis, mange, tick-borne diseases and foot-and-mouth disease (FMD); for sheep: mange; for pigs: trichinosis, brucellosis and Aujesky's disease; for horses: infectious anaemia, influenza and encephalomyelitis. The actual losses due to animal disease are very difficult to estimate accurately mainly because morbidity not mortality is the outcome with major reduction in production efficiency. The National Animal Health Service (SENASA) undertook a study to estimate the value of the losses in 1984, and concluded that about US$400 million to US$500 million could be saved if the main diseases for cattle, sheep and horses could be eradicated. Almost 30% of the value of these losses was attributed to FMD, which causes lesions on the feet and in the mouth reducing movement and the ability to forage, with a resulting loss of production. 4. The presence of FMD virus (which affects cattle, sheep, pigs and goats) is also used as a non-tariff barrier to trade by importing countries. Today, Argentina's high quality beef cannot be sold to the USA, Japan, and some other high income countries (unless it is deboned, cooked and canned). The premium for FMD-free meat on exports of chilled beef is about 30%.  -48 - ADnLx 2 5. Argentina's off icLal FMD-control campaign began in 1963 and was based on compulsory vaccination of the entire cattle population three times a year in selected areas. As a result the number of outbreaks fell from about 10,000 to about 1,700 (in 1988), 60% of which occur in the Pampas region. The quality of the vaccine is controlled by SENASA's Central Veterinary Laboratory, (SELAB). Recently a new oil-based vaccine has been successfully tested in pilot areas. The new vaccine has the following advantage: (i) it reduces outbreaks caused by mutant viral strains; (ii) and the longer period of immunity it confers reduces the number of vaccinations p.r year from three to two and eventually one. This reduces the costs of rounding up cattle, which is A major constraint to effective FMD control at present. Pilot campalgns using the new vacclne have been well accepted by the farming communlty and the degre, of protection has improved. Animal Health lervices 6. Vaccine production and veterinary pharmacuuticals are produced by about 60 private companies and sold by private retailers. Veterinary services are available from private professionals and by both provincial authorities and by SENASA. There are some 10,000 private veterinarians in Argentina and eight universities with veterinary science facilities add some 700 veterinarians per year to the nation's pool. There are, however, no post-graduate degrees in veterinary science in Argentina. 7. SENASA is an autonomous body within SSAGyP as of October 1990. It is responsible for the control of animal health, the quality of animal products and by-products as well as the quality of pharmaceutical and biological products used in animal production. SENASA's 3,200 staff positions are divided among its tAtree national directorates and the units that cover oparations, administratior, and legal procedures. The National Directorate for Animal Disease Campaigns (SELSA) provides nationwide coverage of disease control campaigns mainly for: FMD, mange, ticks, brucellosis, tuberculosis and rabies as well as pig, poultry and horse diseases. SELSA has 20 professional staff and 40 administrative staff at headquarters. For field campaigns the country has been divided into 22 regions, each headed by an Inspector General. Some 190 vets, 670 technicians and 310 adminiutrative staff complete SELSA's staff. About 70% of the work centers around FMD control. For quarantine control and health inspections at cattle markets such as Liniers, SELSA has an additional 20 vets, 60 technicians and 15 administrative staff. The main handicaps facing the Directorate today are a lack of trained epidemiologists and statisticians and the lack of an efficient information system. The National Directorate for Diagnosis, Control and Laboratory Methodology (SELAB) manages a Central Laboratory in Buenos Aires and 14 small regional laboratories. This Directorate has 50 veterinarians, 60 technicians and 90 administrative staff. A new laboratory is required since the present one is ill-equipped and small. 8. SENASA's third directorate is the National Directorate for the Inspection of Animal Products (SIPA). It is the largest service, and its task is to provide veterinary inspection. SIPA has about 1,700 staff of which about 10% are veterinarians, 70% are technicians and the remainder are administrative staff. SENASA is well funded, since about 80% of its operating budget (US$19  - 49 - Agn6.L.2 million) originates from levies co'.lected by its services for meat inspection as well as field and laboratory services. In addition, with the project, SENASA would begin to charge for all its services on a cost plus overhead basis. Immediately it would introduce new service charges for fish inspection, cattle- truck inspection and vaccination certification. These three fees should add about 22% to present income and will help finance the debt arising from thio project. 9. The main conduit for relations between SENASA and other private and public institutions is the National Commission for Animal Health (CONASA). This commission was created in 1984 by agreement between SENASA and Provincial Governments and coirprises, in addition to the latter two entities, representatives from farmers' associations, professional associations (veterinarians, agronomists) and other state institutions such as the National Instit'zte for Agricultural Technology (INTA). SELAB, itself, also maintains close links with the Veterinary Faculty of the University of Buenos Aires as well as the Center for Research on Zoonosis (CEPANZO). 10. INTA itself has the Center of Veterinary Scierce Research (CICV) that carries out research programs in bacteriology, virology, molecular biology, pathology, parasitology and meat technology. CICV also supplements some of SENASA's advance diagnosis activities such as the identification of FMD virus strains. INTA also has ten regional research units for animal health throughout the country and its Molecular Biology Institute carries out research into new types of bioengineered FMD vaccine. Animal Health Policy 11. Due to the high quality of Argentine beef and its "organic" ("grass- fed") production method, there is considerab'e marketing potential for beef products in environmentally-concerned countrie Although past initiatives have made an impact on FMD incidence, it still ru.nains the main export marketing constraint for Argentine beef. Further progress to control and ultimately eradicate FMD will require advances in the organization of the official veterinary service to increase its technical efficiency. To achieve this will require investments in training, information systems and to a limited degree in infrastructure. 12. Beginning in 1984, SENASA carried out a series of successful campaigns with oil-added vaccines in: the Province of Rio Negro between the rivers Colorado and Negro; the municipality of Federacion in Entre Rios (part of Mesopotamia); the municipality of Ayacucho in the Province of Buenos Aires (the Salado river watershed); and 100 kilometers north of the present FMD sanitary barrier of the rivers Barrancas and Colorado, covering various departments in the Provinces of Buenos Aires, La Pampa and Mendoza. The use of oil-added vaccine has reduced the number of necessary vaccinations for mature cattle to once a year between March-May; animals less than two years old revaccinated between October and December. Private laboratories have already been approved for the production of oil-added vaccines.  - 50 - annex 13. Gradually, the country intends to expand succe-sful pilot programs (on southern Buenos Aires province) to control not only FMD but also mange, tick, brucellosis and tuberculosis (para 12). SENASA intends to expand the use of reliable epidemiological information for planning, monitoring and evaluation as well as campaign management and disease survo'llance. It also intends to more effectively integrate farmers into the implerv. station of the campaigns that have been successfully tested in pilot areas. Proposed Pro1ect 14. ThA objectives of the animal health component would be to promote the institutional strengthening of SENASA and to provide the service with the necessary equipment and infrastructure to allow it to reduce the impact of animal disease on production. Specifically, the project would center on three subcomponents: (a) new strategies for disease campaigns; (b) strengthening field services; and (c) strengthening SENASA headquarters. Proiect Activities 15. The proposed strategy for animal disease campaigns would be based upon seeking to more effectively integrate the diverse efforts of farmers, industry, provincial agencies, INTA, private veterinarians, faculties of veterinary science and SENASA. The new strategy would seek to institutionalize each group's participation and to assure their continuity in planning and executing the necessary steps designed in each campaign. In essence, campaigns would be based on: (i) programming and control by SENASA with participation of other agencies; (ii) vaccinations given and financed by farmers; and (iii) in the case of FHD campaigns, expanding the use of oil-added vaccines. In addition, the regions that incorporate vaccination with oil-added vaccines (namely, Mesopostamia, the Salado river basin in the Province of Buenos Airas, and the Northeast Region) would also gradually undertake disease campaigns for mange, ticks, brucellosis and tuberculosis using the systems set up for FMD control. 16. Gradually, the country intends to expand successful pilot projects (i.e. , in southern Buenos Aires Province) to control not only FMD but also mange, tick, brucellosis and tuberculosis (para 15). SENASA intends to expand the use of reliable epidemiological information for planning, monitoring, and evaluation as well as campaign management and disease surveillance. It also intends to more effectively integrate farmers into the implementation of the campdigns that have been successfully tested in pilot areas. 17. The specific regional vaccination strategy will depend on the epidemiological zoning within the country (see Chart). Emphasis would be placed on primary endemic areas (where the FMD virus exists) and on paraendemic areas (where the FMD virus is occasionally introduced by cattle coming from endemic  - 51 - Annex 2 areas). Specifically, campaigns will target on: 100% of the cattle that move from one epidemiologic region to another; 100% of disease outbreaks identified by farmers; and all strategic vaccination campaign areas. The aim is to vaccinate 100% of cattle with oil-added vaccine, raising the number of doses required from 4.4 million to 45 million by project completion, thereby beginning the process of having zones declared free of FMD beginning approximately the year 2002. 18. The campaigns for other important disease. (mange, tick, brucellosis and tuberculosis) would center around FMD vaccination campaigns so as to make efficient use of the same personnel. The target would be to reduce mange by 60% on infected farms. The strategy to be used in the case of mange would be to: (i) identify affected farms; (ii) study the cause of outbreaks; (iii) provide technical assistance to farmer groups; (iv) design a management plan for the farm or area and recommend the sanitary measures to be taken; (v) monitor the implementation of control measures and inspect the cattle herd and sheep flock during the FMD vaccination campaigns; (vi) apply measures to keep "clean" farms free of mange and (vii) constantly evaluate the disease in specific areas and declare the area mange-free after one year of no outbreaks. 19. The objective in the tick control program is to reduce infection from 50% to 10% in the area to be controlled for FMD. The strategy used would be to control infection of "clean" areas by monitoring cattle movements and by drafting health plans that taks into account the reproductive cycle of the tick. Work would consist of explaining to farmers technical matters such as plans for the construction of dips, the use of drugs for ticks, use of dipping and the parameters used in studying the epidemiological situation of the farms. 20. The target for the control of brucellosis would be: (i) 90% vaccination of female calves to the north of the rivers Barrancas and Colorado; (ii) reduction of the herd prevalence from 8% testing positive to 5% and (ii) separating animals that test positive and eliminating them. The vaccine, known as "strain 19" ("Cep_ 19") exits in sufficient quantity within the country. Initially, vaccination certification and tattooing would be undertaken by SENASA; however, at a later stage t. -ae tasks would be delegated on to producer organizations. 21. Tuberculosis is prevalent in Argentina, especially in the dairy areas. Initially, the campaign would concentrate on establishing an epidemiological survey system with information coming from farms and meat packers. To certify cattle as being free of tuberculosis it would be necessary to have two tests separated by a 60-day interval, both wouLd have to show that the cattle wcre free of tuberculosis for them to be declared free. Certification would be based on voluntary system.  - 52 - A_p- Strengthenina of SENASA's Field 8ervices 22. Strengthening of SENASA's field services would concentrate on three functions: information, field mobility, and customer service. A computerized information system would be set up linking headquarters with the 22 regional Inspector Generals' offices to improve epidemiological surveillance. To improve staff mobility in the field, 350 vehicles would be provided for staff under a payback system. To improve customer services SENASA's local offices which would continue to be rented, would be upgraded and office equipment and furniture would be purchased. Strenathenina of SENASA at Headauarters 23. The strengthening of SENASA at headquarters would involve the following: (i) strengthening of organization, administration and operational capability; (ii) construction and equipping of a quarantine station: (iii) construction and equipping of a Central Laboratory; and (iv) staff training. 24. Strengthening of SENASA's Oraaniuation. This would focus on establishing a permanent Epidemiology and Training Unit (ETU), a temporary Project Management Office (PMO) for the duration of the project, and reinforming the National Council for Animal Health to improve SENASA's relationship with other agencies. The latter comprises representatives from SSAGyP, INTA, university veterinary faculties, private vets, industry, farmers and provincial authorities. It aleo would assist SENASA through its executive secretariat (CONASA) in planning and controlling animal health programs. The ETU would have five subunits: programming, epidemiology and statistics, economics for veterinarians, information systems and human resources and social sciences. It would establish institutional policy, analyze SENASA's present structure and propose modifications if necessary, develop procedural manuals, plan the gradual introduction of a fees system for services rendered, monitor the use of funds, develop information systems on animal health, analyze the impact of the health programs and prepare the institution's training program. The unit would consist of a director plus five unit chiefs each in charge of a subunit plus four professionals. 25. A PMU would be created as a temporary unit of SENASA's General Administration and would be the main contact between SENASA and the Project Central Coordination Management Unit (CCMU). PMU's main tasks would be to prepare annual operating programs, contract construction of the Central Laboratory and the quarantine station, procure equipment and vehicles, monitor the fulfillment of the contracts and in coordination with the ETU monitor the implementation of the disease control campaigns. The PMU would consist of nine new staff to cover: project management, construction, finance, epidemiology, computer systems and administrative support. To improve the effectiveness of SENASA it would concentrate efforts to rally support for animal health programs by involving other institutions.  - 53 - _wku-_ 26. SENASA's administration would not be reorganized but would be supported by technical assistance in control procedures, finance, personnel management and information systems. SENASA's operational capability would improve through better definition of it. legal framework, improved vaccine control and monitoring of cattle movements and better data collection and analysis, especially epidewiological data. The development of the epidemiological information system would assist in decision-making on disease prevention and control of outbreaks. 27. Qarantine Station. Most animals that are introduced into Argentina at present arrive by air. Therefore, SENASA would construct a medium security quarantine station at Izeiza's International Airport. The facilities are to be constructed on SENASA's own land at the end of one of the main runways. The facilities would cover 1,600 m2 and would consist of two separate buildings; one for large animals (cattle and horses), and another for small or exotic animals. The building for large animals would have capacity for 24 horses and 32 head of cattle in individual boxes. In addition, there would be two rooms for sick animals, two storage rooms, a workshop and a truck cleaning facility. The building for small animals would have a large aviary and two small ones; two rooms for small animals and three storage rooms. A third area of the quarantine station would have office space, a small laboratory, (which could also be used for semen storage) an animal holding area to receive animals, a morgue and an area for storing organic material. The auarantine station could be upgraded to maximum security level if health measures required it. No additional personnel are required to staff the facility. 28. Control Laboratorv. A new central laboratory for SENASA would be constructed and equipped at INTA's Castelar Research Center outside Buenos Aires, where CICV is located. The laboratory (11,000 m2) would become the National Reference Center for the network of veterinary laboratories. It would be used as a reference center by regional private, public and provincial laboratories. In addition to control functions, the laboratory would also undertake other activities such as diagnosis, laboratory training and advisory functions as well as the provision of standardized reagents and antigens to be used by regional laboratories. About 50% of the laboratory area would comprise areas for virology, bacteriology, parasitology, pathology, pharmacology, basic chemistry and food analysis. The remaining area would be used for breeding guinea-pigs and for holding pens for large animals under testing. 29. Trainina. Most veter1nary faculties in Argentine universities concentrate on clinical medicine with little emphasis on preventive medicine. Interdisciplinary interchange with other subject matter and field veterinarians is infrequent, and training is needed in epidemiology, veterinary economics and the management of information. At the central level there is little experience in planning and evaluating disease campaigns while laboratory veterinarians require training in more advanced diagnosis and laboratory routines. The main objectives of the training program for field veterinarians would be basic and applied epidemiology of the most important animal diseases in Argentina. In addition, same veterinarians would be trained in computerized information systems to improve epidemiological analysis, disease campaign planning and  -54- Aso aL implementation, and extension methodology. For SENASA's headquarter' * staff, the main objective would be to improve planning capability and to train trainoru. SELA8's staff would be trained in more sophisticated laboratory techniques. 30. An integrated training exercise would be planned to ensure that the individual's training meets SENASA's requirments. Training would consist of different forms using both audiovisuals and published materials. A total of 20 trainers, 210 voterinarians, 720 technicians, and 100 computer operators would be trained during project implemntation.  ANNEX 2 - 55 - Chart 1 CHILEOL - III q 15II S c H, L E 7 NA I S SANTIACO I - .1LA. ItlOJA % h B #%%5 - se. ruu^ "o , Z ,- y 'SW FE _____ , | A;50 I OR GELNUT NA \ ( !_ La tlOJa'AGRICLTURAL ERVICESPROJEC 2 \ tS, " ) *>~^*.,, URUGUJAY 1R~ ~~~~M EPIDEMIOLOGLISCAL!lA,EAS 3s(ee, '