Argentina - Highway Sector Project

Doazmnt of The World Bank FOR OMCIL USE ONLY RBkprt N 12453 PROJECT COMPLETION REPORT ARGENTINA HIGHWAY SECTOR PROJECT (LOAN 2296-AR) NOVEMBER 4, 1993 MICROGRAPHICS Report No: 12453 Type: PCR Infrastructure and Energy Operation Division Country Department IV Latin America and the Caribbean Regional Office This document has a restrited distibuton and may be se by reipient only in the perfonmnce of their offici J duties Its contenut may not otherwise be disclosed without World Bank authorization.  Fiscal Year January 1 - December 31 Units of Weights and Measures: Metric 1 kilometer (kan) - 0.62 mile (mi) 1 meter (m) - 3.28 feet (ft) 1 kilogram (kg, - 2.20 pounds (lb) I ton - 2,205 pounds Abbievations B/C-Benefit Cost Ratio DNPT-National Directorate for Transport Planning and Programing DNTT-Nattonal Directorate for Land Transport DNV-National Highway Directorate DPVs-Pwvincial Highway Directorates ERR-Economic Rate of Retun FA-Argentine Railways HDM-Hihway Design and Maintenance Model NTP-National Tansport Plan SSTP-Sub Secretriat of Transport Planning Source: SAR No. 3530bAR, and DNV's repors of October 1992 and February/March 1993  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A Office of Director-General Operations Evaluation November A, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Argentina Righwav Sec.tor Proiect (Loan 2296-AR) Attached is a copy of the "Project Completion Report on Argentina - Highway Sector Project (Loan 2296-AR)", prepared by the Latin America and the Caribbean Regional Office. The report draws on an earlier draft and includes Part II, both contributed by the borrower. The project sought to develop transport sector institutions, promote road traffic safety and enhance government-Bank dialogue on sector policies. Main components designated for Bank financing were civil works, road traffic counters and technical assistance. The project was conceived as a "sector" project and at appraisal as a subset of a time slice (four years) from a long- term sector program. Total project costs were unspecified and the "sector" format was seen as less prone to disbursement delays which had afflicted earlier highway lending. Civil works (the principal component) suffered substantial implementation delays, caused by a lack-luster performance of executing agencies and unfavorable macro-economic conditions. In mid-1993, five and one-half years after the appraisal-projected completion date and three years after actual loan closing, various project-financed roads were still under implementation. Loan disbursement were delayed by two and one-half years. Most works actually completed to date had good economic rates of return. Project contribution to road safety is unclear. Institutional achievements were mixed. Government and Bank had a sector policy dialogue. On balance, the project had a satisfactory outcome, and institutional development was partial. Sustainability is likely because of an improved macro- economic situation and ongoing Bank lending. PCR quality is acceptable. No performance audit is currently planned. Attachment This document has a restricted distribution and may be used by recipients only in the perforsance of their offficat duties. Its contents may not otherwise be disclosed without World Barda authorization.  FOR OFFICIAL USE ONLY ARGENTINA HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT (Loan 2296-AR) Table of Contents PREFACE ....................................... iii EVALUATION SUMMARY ............1............... 1. Objectives .............................. I 2. Implementation and Results ................... 1 3. Sustainability ............................ 1 4. Findings and lessons learned ................... 2 PART 1. PROJECT REVIEW FROM BANK'S PERSPECI IVE.... 3 1. Project Identity .................... I ...... 3 2. Background ..... ....... ................ 3 3. Project Objectives and Description ...... ......... 4 4. Project Design and Orpnization ....... ......... 6 5. Project Inplementation ...................... 8 6. Project Results ........................... 12 7. Sustainability ........................... 14 8. Bank Performance ......................... 14 9. Borrower's Performance ........... .......... 15 10. Project Relationships . ...................... 15 11. Consulting Services ........................ 16 12. Project Documentation and Data ....... ......... 16 PART II. PROJECT REViEW FROM BORROWER'S PERSPECTTVE ................................ 17 PART m. STATISTICAL INFORMATION ................. 19 Table 1: RELATED BANK LOANS .................. 20 Table 2: PROJECT TDMETABLE ................... 21 Table 3: ESTIMATED AND ACrUAL SCHEDULE OF . 22 DISBURSEMENTS Table 4: IMPLEMENTA:ION SCHEDULE AND COSIS - (NATIONAL WORKS) ...... ................ 23 Table 5: IMPLEMENTATION SCHEDULE AND COSTS (PROVINCIAL WOVRKS) ...............26 Table 6: STATUS OF LOAN COVENANTS .... ......... 28 1tble 7: LIST OF STUDIES CONDUCTED ............. 29 Mable 8: ECONOMIC RE-EVALUATION DATA - (NATIONAL WORKS) ...................... 30 Table 9: ECONOMIC RE-EVALUATION DATA - (PROVINCIAL WORKS) ..................... 33 Table 10: USE OF BANK RESOURCES (STAFF WEEKS) ... ;. 35 Table 11: MISSiON DATA ....... ................. 36 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.  LOAN 2296-AR - ii - HIGHWAY SECTOR PROJECT PROJECT COMPLEON REPORT MAP Principal Roads of the National Highway Network .... ...... 39  LOAN 2296-AR iii - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Highway Sector Project in Argentina for which Loan 2296-AR in the amount of US$100 million was approved on May 31, 1983. The Loan was closed on May 29. 1990. two years and five months behind schedule, when US$90.36 million was disbursed and US$9.64 million was cancelled. The PCR was prepared by the Infrastructure and Energy Operations Division of the Latin America and Caribbean Country Department IV. The Borrower sent a brief PCR in October 1992, and it has been contemplated in the report. On May 27, 1993, the Borrower sent a letter with comments on Parts I and III of the final draft of this PCR. The letter is included in Part II of this report.  LOAN 2296-AR - I - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT EVALUATION SUMMARY 1. Objictives 1.1 The main objectives of the project were largely achieved. The project comprsed civil works in the national and provincial road system, and a technical assistance program for strengthening the government entities responsible for transprt (para 3.01). By linking significant investments in the national and provincial programs to important institutional changes for the improvement of the policy planning and operational capabilities of the National Directorate for Transport Planning and Programming (DNPT), the project laid the foundations for the implementation of a comprehensive strategy for the tansport sector. The DNPT was subsequently converted into the Sub- Secretariat of Transport Planning (SSTP). The large number of small but imporant studies conducted under the Technical Assistance Program helped begin the definition of a long term plan for the reorganizaticn of the highway sub-sector and to clarify the strategy for restructuring the railway system (para 5.06). 2. Implementation and Results 2.1 There were substantial delays in the implementation of the Civil Works. These were caused initially by the slow progress in the evaluation and start up of the various subprojects and later by problems in obtaining counterpart funds, mainly for the provincial works, some of which remained uncompleted (para 5.02). As a result of the delays, the loan closing date had to be extended twice and the loan was closed 2 1/2 years later han the date foreseen at appraisal. 2.2 The overall cost of the project was 16.5% higher than appraisal estimates, the increase being largely on account of the inflation in dollars (para 5.08). The economic re-evaluadon of the individual national road sub-projects (para. 6.04) shows ERRs greater than 12% (except in one case, which shows an ERR of 10%), ranging from 14% to over 50%. In the expost evaluation of provincial roads (para. 6.04) sixty five percent of the evaluated sub-projects have ERRs greater than 12%, ranging from 12% to 43%. In the rest, the provincial roads show ERRs in the order of 8-10%, with one exception that has an ERR of only 3%. The broad geographic distribution of the subprojects ensured that the benefits of the road improvements were dispersed and widely distributed despite the delays in the execution of the works. The fact that the loan had a Sector format (parm 4.01 and 5.02) and consequently was not tied to predetewmined projects, minimized the adverse effects of the restrictions in the road investment budget, caused by the economic difficulties in the country. 3. Sustainability 3.1 Much of the Project as originally conceived was sustaimble as the civil wors iunproved the deterioratng sections of the road network in Argentina.  LOAN 2296-AR - 2 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT Several of the institutional goals were achieved. and the project provided the start of a long term program followed up in subsequent highway/transport sector projects. 4. Fmdings and lessons learned 4.1 This was the first transportation project in the Bank with a sector format. It established the advantages of the sector concept in as much as it allowed a greater range of justifiable projects to be financed (para 5.02). The preparation and execution of this project set a pattern for future sector projects in the Transport Sector, notably the Fifth Railway Project for Mexico in 1984, and the Road Maintenance and Rehabilitation Sector Project for Argentina in 1993. 4.2 Although project implementation was delayed (para 2) the objectives of the project were largely achieved (para 1), and the economic re-evaluation shows a satisfactory rate of return on the investments (para 3). However, the rather extended appraisal process appears to indicate, albeit with the benefit of hindsight, that the project was appraised prematurely (para 2.03). Secondly, project results highlight the importance of the macroseting and show how changes in Government, and inappropriate fiscal and budgetary policies can not only delay the preparation of a project (para 2.03) but also its implementation (para 5.01 and 5.02). Thirdly, the poor perfonnance in the provincial component showed up the importance of strengthening the capability of the provinces. The weaknesses in the program for the transfer of technology and responsibility to the provinces, revealed during the implementation of the project (para 5.03) focussed attention on the problems of the provinces (para 6.02). The requirement of passing a provincial law in each province to authorize the commitment of funds was a major cause of delay (pam 5.02). Finally, it also became evident that the duplication of responsibilities among national and pro'!incial agencies for similar highway activities resulted in inefficiencies in the subsector. These issues were recognized in the Bank's Transport Sector Work (October 1988) and later embodied in the Argentine Governments's decree 616/92 (April 1992). This decree eventually resulted in the reorganization of the roles of the National Highway Directorate (DNV) and the Provincial Highway Directorates (DPVs). A program of assistance for the implementation of this change has been included in the Road Maintenance and Rehabilitation Sector Project of 1993.  LOAN 2296-AR - 3 - HIGHWAY SECTOR PROJECT PROJECT COMPLFTION REPORT PART I. PROJECT REVEW FROM BANK'S PERSPECTIVE 1. Project Identity Project Name Highway Sector Project Loan Number 2296-AR Loan Amount $100 million (reduced to $90.36 million) Project Cost on Appraisal $315.7 million Actual Project Cost $367.7 million RVP Unit Latin America & the Caribbean Region Country Argentina Sector Transport Sub-sector Highways 2. Background 2.1 Argentina has a diverse and extensive transport network to integrate its 2.7 million kmn2 of territory, and to serve the needs of its population of 33 million. The network covers 38,000 kan of national roads and 180,000 kan of provincial roads, 34,115 km of railways, 17,000 km of pipelines, 46 ports and terminals and 65 commercial airports. Following the worldwide trend, highways represent increasingly the dominant mode of internal transport, (69% of interurban freight, 83% of interurban passe1,gers, 100% of urban freight, and 88% of urban passengers). The railways share is a modest 10-12 % of each of the three businesses (interurban freight and passengers, and urban passengers) in which it participates. Pluvial and coastal shipping carry 21% of interurban freight and air tansport handles about 7% of interurban passengers. As far as international traffic is concerned, ships and airlines catry m.ost of the foreign trade and passenger traffic respectively. 2.2 Argentina's economic and political difficulties over the past few decades significantly affected the transport sector, and in the mid seventies traffic declined on much of the highway network. After 1976 traffic regained its previous level, resuming regular growth at 4-6% per year until 1981-1982 when the economic tecession again affected it. Transport budgets, by and large, have also tended to fluctuate with the economy. However despite the ups and downs caused by the economy, the basic national road network is in place, although not quite to the stdards required, and sorely in need of maintenance to keep it going.  LOAN 2296-AR -4- HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT 2.3 Prior to the pmparation of this project the Bank had been extensively involved in the transport sector through four highway projects, two railway projects and a port project. These projects played an important role in supporting sectoral planning and strategic investments. n reinforcing the ransportation network in generai, and the highway netwo. particular. The preparation of this project started in September 1980 durin4 the supervision of the Fourth Highway Project, and the First Project Brief was issued on October 28, 1980. This was followed by a Bank mission in January V)81 to specially look into the safety aspects of Road Traffic in Buenos Aires, La Pampa, Rio Negro, Neuquen and Bahia Blanca. A Project Brief update, issued on January 20, 1981, highlighted the main issues as being the imiposition of appropriate Road User Charges, the development of program plamning in the DNV (the National Highway Directorate, the role of the DNPT, (the National Directorate for Transport Planig and Programmg) and the need for decenralization of responsibility to the Provinces. In addition, there was an undercurrent of concern reprding the impending changes in the government, expected in March 1981. Appraisal of the Project took place between Febnruy 21, 1981 and March 6, 1981 and was followed by a rather large Bank mission in April 1981, to review the progress of the various studies initiated under the auspices of the National Transport Plan financed by an earlier Highway Project. This was folowed by a Pbst-Appraisal mission in May 1981. Although invitation to the Borrower to negotiate was sent in August 1981, d mission in November decided to reconsider whether the timing for the project was appropriate. Fiscal deficit and high inflation in Argentina, resulting in lack of budgetary funds, made it difficult to assure financing for the project. Negotiations were first postponed to March 1982, then to May 1982 and finally, with another few missions in between, to April 1983. Board approval was given on May 31, 1983 to a loan of $100 million for financing a Highway Sector Project to be based on the 1983- 1986 investment program. Considering the long time taken between appraisal and Board Approval (over two years) it would seem that the project was appraised prematurely. 3. Project Objectives and Description 3.1 Project Objectives. At the time this project was appraised there was as yet no single agency that controlled all transport undertakings viz; the highways, railways, airways, ports, pipelines etc., and responsibility was so diffused between the ministries of Economy and Public Works and Services that it was impossible to establish balanced investment and operational, pricing and regulatory policies for the transport sector. Studies conducted under the National Transport Plan (NTP) enabled the formulation of a comprehensive straegy for the transport sector and for ivestment and policy planng. The proessive imp ion of this strategy became the primary focus of this project, which likd investments in the DNV's and the provinces' programs, to Technical Assistavce aimed at strengthening the operational investnent and policy planing capabilities of the sector. Specifically this was planned to be  LOAN 2296-AR - 5 ' HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT (a) The establishment, clarification and strengthening of the role of the DNPT, witi: a sector wise perspective. (b) The efhctive pursuit and implementation of the recommendations of the NTP on Sector-wide issues, such as road user charges, passenger transport regulation, role of the railways etc; (c) The reorganization and strengthering of DNV's Planing Department and improvement of its operational procedures for updating the investment program; (d) The progressive decentralization of the DNV's activities through the transfer of some of its responsibilities to the provinces; (e) The definition of appropriate road maintenance systems and budgetary requirements for their implementation; and (f The improvement of DNV's traffic safet, program. 3.2 To a considerable extent therefore, the success or failure of this project should be measred against the implementation of the above-mentioned objectives. 3.3 Project Description. The Project was formulated to assist the Borrower in the financing of parts of DNV's Four-Year Investment Program, for the years 1983 dtough 1986, road investments in the Provinces during the same period, and technical assistance to DNV and DNPT. The main components of the Project were: (a) Execution of a approved civil works sub-projects in the national road system which had a high priority for the economic and social development of the Country (para 3.04); (b) Execution of approved civil works sub-projects in the provincial road system of a high priority for the economic and social development of the Partcipant Provinc and the Borrower (para 3.04); (c) A technical assistance program to improve the planning, progammina and operation of DNVs activities, including, 1irS.0Iia, road and bridge design, traffic engineering, spcial types of ma operations, mainteance costing and dministA'on, traffic satt, and investment p :;and  LOAN 2296-AR - 6 - IIIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT (d) A technical assistance program to strengthen DNV and DNPT's capabilities for a broad range of issues related to the execution of the NTP and the definition of transport sector policies. The civil works program was broad-based and comprised a variety of subprojects ranging from road marking, installation of road signs and betternent projects, to reconstruction of existing road sections and constuction of urban beltways and access roads. The national program. covered a total of 1,564 kms. of roads in 150 different sections (table 4) and the provincial program 668 kms. in 27 sections (table 5). Procurement of traffic counters was included to help DNV upgrade a comprehensive traffic count system, set up in 1971 with technical assistance from the U.S. Federal Highway Administration. Technical Assistance to DNV and the DNPT was intended for employment of high level experts for studies to be carried out as part of the program for the implementation of the recommendations of the NTP. The Project was expected to be completed by December 31, 1987. 4. Project Design and Organization 4.1 Taking ituo account the Bank's long association with Argentina in general, and with DNV in particular, a sector loan format was considered appropriate for the project. In such program any sub-project within the time slice chosen (1983 to 1986) could be a potential candidate for financing, as long as the economical evaluation brought out clearly the justification for the sub- project. Whereas this placed the onus for preparing the justification on the borrower (by now considered mature enough to prepare an acceptable economic evaluation), it was expected that disbursement delays encountered in earlier projects would be reduced. 4.2 The accent during appraisal was, therefore, on analysis of the 1983-1986 program as a whole and, having determined that it was justified, on the methodology for selection of the individual sub-projects to be financed. DNV would prepare for each sub-project, a technical and economic justification in a basic data sheet which would include inbrmation on the rationale of the proposed works, the design standards, the alternatives considered, the cost and results of the economic evaluation, and the proposed tenderiDg schedule. A minimum rate of return of 12% was required unless otherwise agreed by the Bank. Acceptance of a sub-project as eligible, therefore, meant that the Bank would, in principle, finance contracts related to it. Budget funds were allotted by the Borrower, and the tender process was carried out in accordance with Bank guidelines. 4.3 An analysis of the DNV's total investnent program showed that during the years 1983 to 1986 an investment of $1,340 million would be made. Of this, roughly $500 million was uncommitted, from which $470 was taken in the Bank project, and, adding an investment of $90 million on provincial roads, a  LOAN 2296-AR - 7 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT program of $560 million was available over the 1983-1986 period. From this sub-projects were selected for financing from the Bank loan. as detailed below: Table A: BANK FINANCED (1983-1986) PROGRAM (in millions ot US$) | 1983 1984 | 198S 1986 Total DNV uncommitted tenders 40 90 Iso 190 470 Provincial Roads Program 5 20 40 25 90 TOTAL 45 110 190 215 560 Foreign Exchange Content 20 50 85 93 250 45% Bank to fmance 10 30 40 17 97 4.4 The foreign exchange component of the 1983-1986 program, representing about 45% of the total cost, was estimated at $250 million. The Bank loan of $100 million was thus proposed to pick up 40% of the F.E, cost, or 18% of the (1983-1986) program of $560 million. 4.5 The execution of the project was entrusted to the DNV, which would also serve as the intermediary in the technical preparation, evaluation and supervision of the provincial sub-projects. Each subproject would be governed by an agreement ("convenio") between DNV and the provinces. Loan repayments and interest from the provinces to DNV would be regulated under this agreement, with the provision that DNV would have the right to deduct the necessary amount from user taxes assigned to that province, if there was a default in repayments to DNV. 4.6 A Special Account in Argentina, subject to audit by the Auditoria General was made available for financing the Bank's share of the project cost. ks against a Standard Disbursement Profile of a seven and one-half year period prepared by the Bank for Argentina, a disbursement period of four years, was, optimistically, considered appropriate for this project.  LOAN 2296-AR - 8 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT S. Project Implementation 5.1 Loan Effectiveness and Project Start Up. The project was appraised in February-March 1981, negotiated in April 1983 and approved by the Board on May 31, 1983 (para 2.03). The Loan Agreement however was not signed till January 31, 1984. The delay occurred mainly because elections were scheduled in November 1983 and the goverunent was reluctant to proceed with the loan signing. After the new government came into power, a presidential decree was issued in December 1983 approving the loan documents and authorizing the Transport minister to nominate a representative to sign the loan. However, the Bank had already started sending missions to expedite matters, and actually four short missions were fielded from Board approval date in May 1983 to Loan Effectiveness in August 1984. These missions supervised the ongoing Fourth Highway Project and also reviewed the status of the Road User Charges Study, initiated as part of the recommendations of the Nauonal Transport Plan. The missions began to look at the first editions of the evaluation sheets of proposed sub-projects and to give suggestions to make the evaluations more meaningful. As a result, by April 1984, economic evaluations of 22 road sections of the national program were ready, of which 21 vwere approved in the field. In addition, eight sections for the provincial program were evaluated. 5.2 Project Eecution. In as far as the road betterment program is concerned, a chronological account of the important steps in the execution of the civil works is given in Table 4 for the national program, and Table S for the provincial program. It is noted from these tables that in some cases there were substantial delays in the execution of the civil works. Initial delays occurred due to the borrower's untfimliarity with the process of preparing evaluations for the investments, and because DNV took some time to understand the difference between a project loan and the sector fornat which required a different approach and preparation. Once the advantages of the Sector format, which permitted financing of all economically justifiable projects falling partly or entirely within the 4-year time slice, were appreciated, it proved very effective. It allowed DNV to qualify for financing from the loan, during the period in question, a larger portion of works than the loan could accommodate if the entire value of these contracts were to be financed by the loan. Thus the National Road component was disbursed larely on schedule, even though some contracts were delayed. A major cause of delay in the provincial works was the requirement (not foreseen at appraisal) of passing a provincial law in each province to authorize the commitment of funds. Later, delays were caused due the lack of availability of couwerpart funds for the National Works, and in case of the provincial progrm, for paucity of funds as well as for delays in the transfer of klowhow from the DNV to the provincial authorites. For the national works,  LOAN 2296-AR 9 HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT out of a total of 44 works 36 were completed by the time the PCR was written, whereas the remainng 8 were in various stages of completion, rated at above 70%. Fourteen works out of 36 completed were finished approximately within the time forecast, whereas 10 were completed within an additional period of 10%. 6 between 50% and 100% additional time, and 6 in 100% or more additional time. 5.3 For the provincial works only 2 out of 27 works were completed in time (one ahead of time) whereas the rest were finished with considerable delays ranging from 50% to 300%. Out of a total of 27 subprojects in the 13 provinces, which decided to participate in the project, 20 were completed up to the time of writing of the PCR, 3 were completed 70% or above, and of the remaining 4, one was reinitiated in 1992 (outside the scope of this project) whereas 3 were cancelled. Most of the funds not utilized pertain exclusively to provincial works. The poor performance in regard to provincial works was due to: (a) Inadequate capacity of some of the provinces to underake the project civil works in time; (b) Lack of familiarity in the provinces with regard to implementation of Bank projects; (c) Delays in the preparation of economic evaluations data for the candidate projects; (d) Delays in the authorization of provincial loans to implement projects; (e) Marked deterioration in the economies of the provinces, particularly during the later stages; (f) Dastic reductions in budgetary allocations as a consequence of the deterioration of the national economy; and (g) Impact of hyper-inflation and uncertanties in the rate of exchange. 5.4 The Bank supervision missions noticed the delays in project implementaion due to insufficient unde g of the sector concept and iadequate tansfr of nical knowhow to the provinces. To improve the tansfer of technology to the provinces, a seminar suggestd by the Bank was arranged in which staff and officials of the provinces were insucted in project evaluauion and implementation as appl3ed to sector projects. This improved matters somewhat but performance and implemenaion of Part B of the project pertaining to provincial works remained poor due to the deteriorating conditon nf tbhe eDnnmv of the countrv in aeneral- and the provinces in particular.  LOAN 2296-AR -10 HIGHWAY SECTOR PROJECT PROJECr COMPLETION REPORT 5.5 The Program for the procurement of equipment. although a relatively minor component of the project ($1.0 million) was not implemented. Initially, difficulties surfaced in regard to the preparation of specifications for the procurement of traffic counters and related equipment such as dynamic scales. as the Bank was in favor of specifying molern "state of the art" equipment whereas the Argentine authorities wanted to procure locally manufactured equipment. When specifications were finally agreed upon and bids invited, only two offers were received and the tender was cancelled. Later, this program became a victim of the deteriorating economy of the country, and procurement action was shelved, due to shortage of funds. 5.6 The technical assistance part of the project had two components: (i) the strengthening of the DNV; and (ii) assistance to the DNPT, subsequently reorganized and renamed the (SSTP). The program for the DNV started slowly but three important studies were conducted dealing with the improvement of bridges, maintenance systems for highways, and a study dealing with monitoring of maintenance concessions. The seminar to improve the transfer of technology from the DNV to the provinces (para 5.04) was also financed from the Bank loan. The Technical Assistance Program for the DNPT/SSTP aimed at implementation and follow-up of several of the recommendations of the NTP, was more an adequately implemented and included, inter alia a group of studies related to the transport of grains, the port of Bahia Blanca, several studies related to urban transport in major cities, and a study concerning financing of the transport sector. The technical assistance program was effective in as much as the studies (Table 7) highlighted actions to be taken in regard to several of the principal issues in the transport sector, helped define a long term plan for the highways and clarified the strategy for restructuring the railway sysrem. 5.7 Project Costs. In a sector project of this type in which a part of a time slice of the country's highway program is financed, the project cost varies as it depends upon the number and costs of projects eventually selected for financing. Therefore, the real test of whether the project was well executed, is to check whether the individual t.omponents had adequate rates of reurn, and to see how the final costs compared with the original estimates as foreseen on the date of evaluation, given the state of the economy, the inflation rates, etc. The estimated and final costs for the national and provincial vorks are given in Tables 4 and 5. Thiese tables also give some indication of the work done, and the estimated time versus the actual time taken. A summary of project costs indicating the actual costs vis-a-vis the appraisal estimates (in this case the sum of the costs of the evaluated sub-projects) is given below:  LOAN 2296-AR - 11 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT Table B: SUMMARY OF PROJECT COSTS (in US S million) I ITEM I EVALUATION | ACTUAL COSTS ESTIMATE ____ 1. Civil Works Domestic IBRD Total Domestic IBRD Total Nationr 163.24 50.75 213.99 199.49 62.52 262.01 Provincial 62.71 36.00 98.71 76.58 26.50 103.08 Sub Total 225.95 86.75 312.70 276.07 89.02 365.09 2. Equipment - 1.00 1.00 - - - 3. Technical Assistance DNV 0.50 0.50 1.0 .08 .08 .16 DNPT 0.50 0.50 1.0 1.26 1.26 2.52 Sub-total 1.00 1.00 2.0 1.34 1.34 2.68 TOTAL 226.95 88.75 315.70 277.41 90.36 367.78  LOAN 2296-AR i 12 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT 5.8 Analysis of costs in Argentine is a difftcult task not only because of high inflation rates but also because the parity between the US Dollar and the Peso or Austral was unevenly maintained, with marked fluctuations in certain years. As a result, due to the hyper-inflation in Argentina during the project period and the distortions introduced while converting Argentine Pesos/Australs into US Dollars, the actual costs given in the above table can only be treated as indicative. Nevetheless, it is seen from the above that considering the overall position of the project, the actual costs were 16.5% higher than appraisal estimates, the increase being largely on account of the inflation in dollars. For the civil works alone, costs were 16.7% higher, being 22.5% higher for the natonal worls, and 4.4% higher for the provincial works. Considering that these cost increases were largely on account of the inflation in dollars, these can hardly be considered to be cost-over-rns. Bank participation at $90.36 million was 24.7% instead of 28.9% when the projects were evaluated. 5.9 Disbursement. Table 3 gives the Estimated and Actual Schedule of Disbursements. Disbursements actually started in the first half of FY85, ending December 31, 1984, against the appraisal estimated start nearly one year earlier. By the initial Closing Date of December 31, 1987 only about $ 69.8 million out of $100 million had been disbursed. Tw extnsions of the Loan Closing date were made, first to December 31, 1988 and then to December 31, 1989. Delays in disbursements were largely due to an overoptimistic implementation scheduled in the SAR, budget constraints and the special factors that delayed the implementation of the provincial program (para 5.03). The final disbursement was made on May 29, 1990. Of the loan of $100 million, $90.36 million was disbursed,. and $ 9.64 million cancelled. 6. Project Results 6.1 Project Objectives. The main objectives of this project were largely achieved in as much as the progressive implementation of a comprehensive strategy for the tansport sector was started by linking investments in the DNV's and provinces' road investment programs to technical assistance aimed at strengtening the operational and policy planning capabilities of the DNV and DNPTISSTP. The major part of the imvestments in the national highways were well ex cuted, albeit with delays. These delays were caused largely by the economic problems faced by the country and the frequent changes in the government which made it difficult for the project to be pursued in a susained and consistent manner. 6.2 The provincial component of the project, however, although inadequately implemented for reasons detailed in para 5.03, focussed attention on the problems of the provices. These were taken up in the Provincial Development Project (Loan 3280-AR) appraised in November 1990, and in the follow up highway project. From the institutional viewpoint, it was learnt during the  LOAN 2296-AR - 13 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT project that the prevailing duplication of responsibilities for similar highway activities between the National and Provincial agencies, managing separate networks. was inefficient, and led to improper planning, and non-optimal use of resources and installed capacity. These issues were recognized in the Bank's Transport Sector work published in October 1988, and the Government embodied most of the recommendations of the Bank in its current sector policies as reflected in Decree 616/92 issued on April 10, 1992. This decree basically established that the role of the DNV would henceforth be one of technical leadership, planning, allocation of financial resources, supervision of concessions, research and standardization, training, etc. The actual execution of the national road works and related activities would be delegated to the DPVs. A program for the implementation of this change was included in the Road Maintenance and Rehabilitation Sector Loan appraised in 1992. It is important to note that although the provincial component of the project was not executed well, its lack-lustre implementation, in itself, led to serious reorganization of the institutional set-up, and a gradual improvement of the highway operations through decentalization and delegation of more work and responsibility to the provinces. 6.3 Economic Re-evaluation. As the project had a sectorial nature (para. 4.01), during project implementation, DNV prepared for each national as well as provincial subproject, a technical and economic evaluation, summarized in a basic data sheet agreed at negotiations. This data sheet included information on the rationale of the proposed works, the design standards, the alternatives considered, the cost, and the results of the economic evaluation. During the course of the project, the Bank reviewed these evaluations and if found acceptable (an estimated ERR of 12% was rquired as a minimum), the subproject was declared eligible. The ex-post evaluation was carried out using the same data sheet and original methodology (Tables 8 and 9) but, as there was no economic evaluation at the time of apprisal of the individual road sections eventually included in the program, the ex-post results of each subproject were compared with the evaluation carried out at the time that subproject was declared eligible. 6.4 In the ex-post evaluation of national roads, all sections, except one (ERR = 10%) if time's savings are included and two (ERRS = 6% and 9%) otherwise, show ERR's greater than 12%, ranging from 14% to 50%. Three- quarters of the national subprojects which were evaluated, rsulted in higher economic indices of the ex-post evaluation as compared with the original one. In the ex-post evaluation of provwincial roads, sixty-five percent of the subprojects evaluated have ERRs greater than 12%, ranging from 12% to 43%. In the rest, the prvincial roads show ERRs in the order of 8 - 10% with one exception that has ERR of only 3 %. Fifty percent of the prvincial subprojects which were evaluated showed ex-post economic results better than the original evlation. Atble 8 presents the geal results of the economic re-evaluation for the National Works and Tlble 9 for the Provincial Works. These results are grouped into two general categores: orginal evaluation, at the time the  LOAN 2296-AR - 14 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT subprojecEs were selected, and ex-post evaluation, and in each category benefit/cost ratios and economic rates of return. both with and without road user's time savings, are included. 6.5 For the economic analyses, reliable traffic data was used for national roads. as DNV carries out proper traffic counts all over the national network. Out of 44 national subprojects, seventy percent (31 subprojects) showed in 1988 positive traffic growths averaging 1.5% to 3% per year, while the rest had significant declines. During project implementation, it became evident that trafflc data for provincial roads had, in general, various deficiencies, and the technical assistance program of the Road Maintenance and Rehabilitaiior Sector Project (para. 9.02) aims to appropriately strengthen this important area for provincial road planning. 7. Sustainability 7.1 Although the period of implementation of this project was marked by severe economic problems and political instability which led to delays in the execution of the project, the macroeconomic and political conditions have tended to improve and stabilize during the last few years. The major institutional reforms which have been introduced during this period (para. 6.02) also augur well for the realization of the full potential benefits of the project. Thus, as long as timely financing for road maintenance is available, and good road maintenance management continues, the level of net benefits through the economic life of the project would remain acceptable. With the $756.0 million Road Maintenance and Rehabilitation Project appraised in 1992, covering the four year tranche, from 1993 to 1997, of extensive periodic road maintenance and works, as well as providing for contractual routine maintenance and significant amount of technical assistance for institutional improvement, the perspective is positive. A significant amount of technical assistance for institutional imnprovement of the DPVs is expected to improve their maintenance capabilities which would tend to also preserve the investments made on provincial roads. 8. Bank Performance 8.1 With 153 staffdays spent in the field on the preparation and appraisal of the project, and 300 staffdays on the supervision (Table 11), this was a carefully prepared and vigorously supervised project. Review of supervision reports indicates particularly intense supervision missions from 1986 onwards, and greater attention to the lagging subprojects in the provinces and the technical assistance component. In general, throughout project implemenation the Bank's operational staff in the field, supported by divisional and departmental management, performed well, suppordng the Borrower's executing agencies who expenenced considerable difficulties due to economic and politcal problems. The provincial program remained inadequate in implementation, but was fruitful in regard to the lessons drawn from it in respect of the insdtutional  LOAN 21296-AR - 15 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT and organizational set-up of the highway administration at the centre and the provinces (para 6.02). 9. Borrower's Performance 9.1 Borrower performnance was mixed. This was the first sector project in the highway sector in Argentine and therefore, its preparation and implementation was substantially different to the conventional transport projects. Secondly, the project had a national component and in addition a significant provincial component in which the provincial and regional offices were required to play an important role. Thirdly, in the aftermath of the NTP, significant policy and institutional changes had to be introduced in regard to invesUnent planning, road user charges, and the organizational set up of the DNV, and DNPT/SSTP in the centre and the DPVs in the provinces. Finally the macro economic conditions of Argentina affected implementation adversely. 9.2 During implementation, the Borrower was initially slow to react to the sector format of the project, in as much as there were delays in the preparation of sub-project evaluations and the execution of civil works (para 5.02). Although these problems were overcome for national projects, delays and hold ups continued for the provincial projects in which a substantial part of the loan remained undisbursed (para 5.07). These latter delays were due not only to economic difficulties leading to delays and cuts in budget allocations, but also due to inadequate transfer of technology and knowhow to the provinces from the centre. The political and economic problems began to resolve after the Menem Government took charge in July 1989 and introduced its reform programs in 1991, with the aid of the IMF and the World Bank. The policy and institutional reforms started during this project weie continued in a series of projects, notably the Bank's Transport Sector Public Enterprises Project (October 1988), the Provincial Development Project (November 1990), and the Road Maintenance and Rehabilitation Sector Project (presented to the Board in June 3, 1993). 10. Project Relationships 10.1 This project was implemented during a period of eight years during which both the Bank's project officers and the borrower's officials, notably the General Administrator of the DNV and the responsible under secretary in the Govermnent changed several times. Some delays in processing documents and unexplained interruptions are noticed in the project files. However these were relatvely minor, and, by and large, the dialogue between the Bank and the Borrower was maintained. The relationship between the Bank on one side and the DNV, SSTP and the DPVs was generally good and was strengthened by the regular bank missions which generally sought to resolve difficulties and hold Ups.  LOAN 2296-AR - 16 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT 11. Consulting Services 11.1 Technical assistance was slow in starting but the various studies (Table 7) were completed with the full participation of the Bank in providing comments and reviews of wGrk done by consultants. These studies, each limited in its scope, helped define policy and priorities in regard to the improvement of transport activities in Argentina, to work out long term plans for the highways, and to clarify the strategy for restructuring of the railway system. 12. Project Documentation and Data 12.1 The Staff Appraisal Report was the basis for framing the legal documents and provided the take-off point for the detailed terms of reference for the consulting services and for the supervision of the civil works. Given the eventual duration of the project, the changes in Bank supervision teams, changes in the Government and the Borrower's management, the SAR also provided, in a sense, the frame of reference concerning the project origins, and for additionslalterations to the project content which ensured that the basic scope and format of the project were maintained. 12.2 Periodic reports from the Borrower were received regularly although often with delays. These have been useful for observing the progress of the project. As most of the Borrower's officials and staff who worked on the project have since retired or left, it has been difficult to obtain some of the data required. However, the notes and tables concerning the project provided by the Borrower in October 1992 and later in February and March 1993 give some of the importan infbrmation pertaining to the project, which together with the supervision reports and the corresondence in the project files, enabled the preparation of a composite picture of the project for this report.  LOAN 296-AR - 17- HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT PA: II. PROJECT REVW FROM BORROWER'S PERSPECTIVE 1. The Borrower's comments and Data relating to the Project, given in a brief PCR sent by the Borrower in October 1992, supplemented by some explanatory comments and data sent in February and March, 1993, have been included in Pans I and III of this report. 2. In a letter to the Bank dated May 27, 1993, copy of which is included below, the borrower sent his comments on Parts I and m of the final draft of the PCR. "AfMin of Economy and Public 'b,ks Nationai Highway Direcworate Buenos Aires, May 27, 1993 Mr. Alfonso SAnchez Chief Infrastructure and Energy Division Department IV Regional Office for Latin America and the Caribbean World Bank 1818 H Street, N.W. Washington. D.c. 20433, USA Subject: ARGENTINA - Loan 2296-AR Fifth Sectuoal Project Completion Report Dear M. Sanchez: I am pleased to tansmit to you my comments on Sections I and m of the Fifth Sectoral Project, sent on Apdl 23, 1993. There is a general coincidence regrdig the performance of each stage. Particularly, I want to emphasize the coinience regarding: (a) the degree of performance achived in each stage, despite the econonmc and polidcal difficulties the country went dough during the Loan period;  LOAN 2296-AR - 18 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT (b) the reasons for the delays at the beginning of the works; (c) the results obtained. among which deserve mentioning the guidelines for the Argentine road sector reorganization, outlined in Decree 823/89 for road Reconversion, and Decree 616/92 redefining the organization, missions and functions of the National Highway Directorate; (d) the prospects of political and economic improvement, through the reform started by the National Government at the end of 1989. I also interpret that one can infer from the document that the tasks performed under this Fifth Loan have left a highly positive balance for all parties concerned: the World Bank and, especially, the Provincial Highway Ditorates and the National Highway Directorate since all of them have received valuable lessons for their organization and functioning. On the part of this Agency, the experience will permit facing with greater optimism and drive the responsibilities of the Sixth Loan whose negotiation is soon to be finalized. Finally, I wish to express my satisfaction for the high evaluation made of the results obtained in this Fifth Loan and, particularly, for having come ftom such highly qualified professionals. Sincerely, (sgd.)Lic. Miguel Angel Salvia General Administrator of National Highway Directorate cc: Dr. Ricardo Gutferrez Finance Secretary Ministry of Economy and Public Works and Services  LOAN 2296-AR - 19 - I{IGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT PAfr m. STATISTICAL INFORMATION  LOAN 2296-AR - 20 - HIIGHWAY SECTOR PROJECT PROJECT COMPLET!Oti REPORT Table 1: RELATED BANK LOANS TITLE LOAN NO. YEAR OF ORIGINAL DISBURSED COMMENTS APPROVAL AMOUNT Roads 0288 1961 48.50 30.95 Closed 1968 Project . __ Second 0619 1969 25.00 25.00 Closed 1978 Highway Project __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ First 0733 1971 84.00 56.27 Closed 1979 Railway Project Third 0734 1971 67.50 67.50 Closed 1979 Highway Project Fourth 1384 1977 105.00 104.70 Closed 1985 Highway Project , .,_ Second 1677 1979 96.00 66.35 Closed 1985 Ruilway Project ._._.__ Source: IBRD Statement of Loans  LOAN 2'96-AR - 21 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT Table 2: PROJECT TIMETABLE Title j Date Planned Actual Date Identification October 28. 1980 Preparation January 22, 1981 Appraisal February 23, 1981 February 21 to March 6, 1981 Negotiation March 16, 1982 April 13 to April 15. 1983 Board Approval June 1, 1983 Loan Signature January 25, 1984 Loan Effectiveness August 17, 1984 Loan Closing December 31, 1987 May 29, 1990 Project Completion December 31, 1987 May 29, 1990 Source: IBRD Project Files  LOAN 2:96-AR - 22 - HIGHWAY SECTOR PROJECT PROJECT COMPLETION REPORT Table 3: ESTIMATED AND ACTUAL SCHEDULE OF DISBURSEMENTS (in US S million) Cumulative Disbursements IBRD Appraisal Actual Percentage F_scal Year Estimate Disbursements Disbursements 1984 Dec. 31, 1983 1.0 June 30, 1984 10.0 -- 1985 Dec. 31,1984 22.0 9.9 45% June30, 1985 36.0 13.8 38% 1986 Dec. 31, 1985 53.0 17.8 34% June 30. 1986 70.0 25.8 37% 1987 Dec. 31,1986 83.0 42.8 52% June 30, 1987 95.0 56.4 59% 1988 Dec. 31. 1987 100.0 69.8 70% June 30, 1988 79.2 79% 1989 Dec. 31, 1988 82.7 83% June 30, 1989 87.9 88% 1990 Dec. 30, 1989 89.1 89% June 30. 1990 90.4 X% Source: IBRD Project Files and Supervision Reports  LOAN 2296-AR - 23 - HIH1WAY SECTOR PROJECT PROJECT COMPLETION REPORT Table 4: IMPLEMENTATION SCHEDULE AND COSMS - (NATIONAL WORKS) NA;IONAL ROUT. |LENG