Document of The World Bank FOR OFFICIAL USE ONLY Report No: 20698 IMPLEMENTATION COMPLETION REPORT ARGENTINA SECOND PROVINCIAL REFORM - SALTA (LOAN 4219-AR) June 30, 2000 Poverty Reduction and Economic Management Argentina, Chile and Uruguay Country Management Unit 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 Bank authorization. Currency Equivalents Currency Unit: Peso US$1 = ARG$1 Fiscal Year January 1 to December 31 ABBREVIATIONS AND ACRONYMS ANSES - National Administration of Social Security CAS - Country Assistance Strategy CPI - Consumer Price Index EGB - Educaci6n General Basica (General Basic Education) ERR - Economic Rate of Return GDP - Gross Domestic Product GPP - Gross Provincial Product HPA Hospitales Publicos Auto-Gestionados (Autonomous Public Hospitals) IBRD - International for Reconstruction and Development ICR - Implementation Completion Report IDB - Inter-American Development Bank IFC - International Finance Corporation IMR - Infant Mortality Rate LPR - Letters of Provincial Reform MCBA - Municipality of the City of Buenos Aires MDP I - First Municipal Development Project MDP II - Second Municipal Development Project MSP - Ministry of Public Health NBI - Necesidades Bcisicas Insatisfechas (Unsatisfied Basic Needs) OSP Obra Social Provincial (Provincial Health Insurance) PAMI - Health Fund for the Elderly. PDP I - First Provincial Development Project PDP II - Second Provincial Development Project PIS - Provincial Insurance Institute PRESSAL - Provincial Health Sector Development PRISE Programa de Reformas en el Sector Educacion (Reform Program on Health Sector) PRL - Provincial Reform Loan PRLII - Second Provincial Reform Loan PRODYMES - Higher Education Reform PRODYMES I - Secondary Education Reform I PROMIN - Maternal and Child Health SAL - Structural Adjustment Loan Vice President Mr. David de Ferranti Country Director Ms. Myrna Alexander Sector Director Mr. Guillenno Perry Task Manager Mr. Mark Hagerstrom FOR OFFICL USE ONLY ARGENTINA FOR OFFICIAL USE ONLY SECOND PROVINCIAL REFORM LOAN - SALTA TABLE OF CONTENTS Preface . . 4 Part I. Project Implementation Assessment A. Statement of Objectives .5 B. Achievement of Objectives .................... , . 8 C. Public Finance .11 D. Education ..... 13 E. Health .16 F. Major Factors Affecting Project Implementation 18 G. Project Sustainability: Likely .20 H. Bank Perforance .21 I. Borrower Performance .22 J. Assessment of Outcome .23 K. Future Operation .24 L. Lessons of Experience . 24 Part' II. Statistical Annex Table 1: Summary of Assessments .26 Table 2: Related Bank Loans .28 Table 3: Project Timetable .29 Table 4: Cumulative Loan Disbursements .29 Table 5: Status of Legal Covenants .30 Table 6: Key Indicators for Project Implementation .................... 31 Table 7: Bank Resources: Staff Inputs .31 Table 8: Bank Resources: Missions .32 Table 9: Salta's Policy Matrix .34 Table 10: Changes in Own-source Revenues by Province .36 Table 11: Change in Personnel Expenditures by Province .37 Table 12: Evolution of Current Account Balance by Province . 38 Table 13: Change in Stock of Debt by Province .39 Table 14: Change in the Fiscal Performance Indicators .40 Table 15: Education: Monitoring Indicators .41 Table 16: Health: Monitoring and Impact Indicators .42 Annex A: Letter of Provincial Reform .......................................,43 Annex B: Institutional Assessment ................ 51 Annex B: Creditworthiness .......... 61 3 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. INTENSIVE LEARNING IMPLEMENTATION COMPLETION REPORT ARGENTINA SECOND PROVINCIAL REFORM LOAN TO SALTA (Ln. 4219-AR) Preface This is the Implementation Completion Report (ICR) for the Second Provincial Refonn Loan to the province of Salta, Argentina, for which Loan 4219-AR in the amount of US$75 million equivalent was approved on August 26, 1997 and declared effective on December 22, 1997. The loan was disbursed in two tranches of US$45 million and US$30 million on December 24, 1997 and September 3, 1999 respectively. The loan closed on December 31, 1999 as expected. It was disbursed in its totality, thus no balance was canceled. The ICR was prepared by Cecilia Zanetta (consultant), with Olympia Icochea (Institutional Development) under the supervision of Mark Hagerstrom, Task Manager (LCSPR), and reviewed by David Rosenblatt (LCSPR), John Underwood (LCSPR), and Geoffrey Shepherd (LCSPR). Preparation was begun in August 1999, following the new Bank guidelines for an intensive learning ICR. It is based on information in the project files and discussions with government at the national and provincial levels. Stakeholder workshops were conducted with provincial authorities and technical staff in each of the sectors to assess the scope and impact of the reforms, and the relevance of institutional facts in implementation and sustainability. Missions were fielded with specialists from outside the Region to review issues in fiscal performance and creditworthiness (David Vetter, Cons), health (Simon Blair, ECSHD), and education (Luis Pisani, Cons), with the participation of technical staff for the relevant federal ministries. In addition, the Borrower, and the province, contributed to the preparation of the ICR by actively contributing its views, providing background material, and ample support whenever needed. It was agreed with the Borrower that its formal written contribution would be made following the evaluation of the other PRL2 programs for San Juan (Loan 4220-AR) and Rio Negro (Loan 421 8-AR), which are scheduled to close at the end of FY00. 4 Part I Project Implementation Assessment A. Statement of Objectives 1. Towards the end of 1994, Argentina was already experiencing the benefits from the ambitious reform program implemented by the Menem administration after it took office in July 1989. Swift and far-reaching reforms targeted at reducing the role of the state in the economy, tackling fiscal imbalances, and achieving price stability had been implemented successfully. The success of the reform program was evidenced by the substantial improvements in the country's economic performance: inflation rates were drastically cut from a monthly rate of 200 percent in 1989 to an annual inflation rate of 3.9 percent in 1994, growth rebounded to an average of 7.7 percent over the 1991-94 period, and fiscal balance was achieved at the federal level by 1994. 2. However, the financial crisis that resulted from the Mexican devaluation in December 1994 pointed out the vulnerability of the reform program. Investors' reduced confidence in Argentina, together with higher international interest rates, contributed to net capital outflows. As a result, GDP fell 2.8 percent and unemployment soared to 18 percent during 1995. The government took prompt measures to control the crisis by cutting expenditures, raising main tax rates, and taking measures to enhance the liquidity of the banking system. Moreover, with the support of the Bank and IDB, a package of US$1.1 billion was made available in support of the Convertibility Plan. This backing helped to restore confidence in the economy and the financial sector. 3. By the end of 1995, the Argentine economy had recovered and was well out of a recession. Economic growth reached 5.5 percent in 1996, and inflation (CPI) was practically nil. The need to deepen the adjustment effort, particularly among provincial governments, had now become obvious to the federal government. Provincial reform was critical to ensuring the sustainability of the government's stabilization program, since most provincial governments continued to be a source of fiscal imbalance accounting, for a deficit of 1.2 percent of GDP in 1995.1 Improvements in fiscal performance at the provincial level had been mostly cyclical, reflecting the increase in transfers from the center rather than a sustained effort to reduce expenditures and improve resource allocation. Ensuring a sustained fiscal balance at the provincial level continued to be a major challenge for the government and for the success of the stability program. Moreover, provincial governments were ill prepared to fulfill their role as efficient service providers, thus seriously endangering the productivity and competitiveness of the country's economy. The adjustment strategy at the federal level included the decentralization of health and secondary education to provincial governments. In 1994, provincial governments accounted for 38.5 percent of all public expenditures and were "Argentina Country Assistance Strategy," Report No. 16505-AR, April 24, 1997. 5 responsible for 96.5 percent of public spending in basic education and 74 percent in health care. 4. Provincial reform was not a new item on Argentina's reform agenda. Since 1991, the national government had launched a concerted effort to promote fiscal adjustment in the provinces. Within its own direct jurisdiction, the national government's efforts were aimed at correcting distortions within the revenue-shared system, including the reduction of discretionary transfers, and at eliminating Central Bank rediscounts for provincial banks, a traditional source of provincial deficit financing. To promote reform within the jurisdiction of sub-national governments, the national government sought the Bank's assistance in developing a lending portfolio that provided both technical and financial support to sub-national governments' efforts to stabilize their public finances, reform their administrations, and increase their efficiency as providers of public goods and services. 5. The first generation of IBRD operations targeted at sub-national governments were the First Provincial Development Project (PDP-I) and Municipal Development Project (MDP-I) and subsequent follow-up operations--PDP-II and MDP-II.3 These loans were multi-sector operations covering all provinces to provide, at a minimum, support for institutional strengthening and, for those satisfying creditworthiness criteria, financing for investments linked to sector reforms and improved fiscal performance. In time, these loans were complemented by a series of sector investment operations aimed at improving the efficiency of delivering secondary education, public health, provincial roads, water supply, and agricultural services and infrastructure. In terms of reform, the multi-sector operations had been successful in strengthening the weak technical capacity of provincial and municipal governments and introducing the concept of rewarding good fiscal performance. However, they were not suitable for providing the necessary financial support to those provinces willing and able to implement major structural reforms. The Provincial Reform Loan (PRL) was designed to fill in this gap. 6. Targeted at a group of reform-minded provinces, the PRL was aimed at deepening the fiscal reforms underlying macroeconomic stability and enhancing the capacity of the provincial governments to fulfill their increasingly-important role as providers of public goods and services. To accomplish these objectives, the operation was designed as a quick-disbursing adjustment loan with conditionalities both at the federal and at the provincial levels. The loan's proceeds were used to capitalize a Transformation Fund, established by the national government in April 1993 to promote structural adjustment in the provinces. Under the framework of the Transformation Fund, the national government established individual agreements with each of the participating provinces, determining in each case the measures to be taken by the provincial governments, their needs for technical and financial support, and the terms for repayment. The national government, in turn, was responsible for maintaining an adequate macroeconomic framework. The PRL operation in concert with the complementary Provincial Bank 2 "Argentina: Provincial Finance Study," Report No. 15487-AR, July 12, 1996. 3 The Inter-American Development Bank co-financed the First Provincial Development Project and the Second Municipal Development Project. 6 Privatization and the Provincial Pension Reform loans were highly successful in deepening public sector reform among participating provinces. Some of their specific accomplishments under the PRL include the reduction of 55,000 provincial agents, the privatization or concessioning of 48 provincial enterprises, the privatization of nine provincial banks, and the transfer of eight provincial pension funds to the national social security system. 7. The Second Provincial Reform Loan (PRL-2) came as the next step in the progression towards more direct interaction with selected, reform-minded provinces. Targeted directly to individual provinces that had demonstrated their willingness and ability to implement reforms, the PRL-2 was conceived as a more agile lending tool tailored to fit the reform programs of individual provinces, thus avoiding the administrative bureaucracy of programs administered at the central level and increasing borrower ownership. 8. The PRL-2's specific objective, as stated in the Report and Recommendation of the President (Report No. P-7136-AR, July 30, 1997) was to help four Argentine provinces--Rio Negro, Salta, San Juan, and Tucuman--to reform and restructure their governments so as to ensure an efficient and responsive delivery of public services, particularly in health and education, within fiscally sound policies. To accomplish these objectives, the PRL-2 was structured as four quick-disbursing adjustment loans to the individual provinces to support fiscal adjustment combined with structural reform in the social sectors. The operation was to finance the adjustment cost of the provincial programs and to provide technical assistance and analytical support to the provinces. The PRL-2 was fully consistent with the 1997 Country Assistance Strategy (CAS), which defined a strategy towards the provinces that focused on reform and sector investment operations aimed at deepening reforms in selected provinces by improving the efficiency of social expenditures.4 9. According to the eligibility criteria and the focus of the program that had been agreed between the national govermment and the Bank, the PRL-2 loans were available to provinces that: (i) had introduced significant structural reforms in terms of the size of the provincial government and the privatization of major public enterprises; (ii) had accepted the transfer of the provincial pension funds to the national system; and (iii) had demonstrated ability and political commitment to further reforms. On the basis of these criteria, four provinces were selected for piloting this approach: Rio Negro, Salta, San Juan, and Tucuman. These provinces represent a diverse pool in terms of their main demnographic and socio-economic indicators, economic base, and the political affiliation of the provincial administrations Together, they account for 6 percent of Argentina's GDP and 10 percent of the country's population.. 10. The borrower of the four adjustment loans was the Argentine Republic, which in turn was to onlend funds equivalent to the loan amounts to each province. The amount of each loan was determined as a function of the population of each province, its adjustment needs, and the depth of each program. Tranche conditionality was also tailored to match 4 "Argentina's Country Assistance Strategy," Report No. 16505-AR, April 24, 1997. 7 the depth and pace of reforms in each participating province. Disbursements for each loan were conditioned on Board approval (i.e., loan effectiveness) and subsequent positive evaluations on the compliance of the loan conditionality agreed with each province. While the formal tranche-release actions were limited to key measures, the operations supported an ambitious reform program in each of the participating provinces that were detailed in the Letters of Provincial Reform (LPR) drafted by each province. 11. Salta was one of the four participants in the PRL-2. A relatively poor province from the NW, Salta had a per capita income of about $3,800 in 1995, less than half Argentina's average.5 It accounts for 1.3 percent of Argentina's GDP and 2.8 percent of the country's population. A stellar performer under the PRL, the province had already developed an ambitious reform and modernization program under the leadership of the reform-minded Governor Romero. During 1996, Salta implemented a set of key reforms aimed at fiscal adjustment. Some of the early accomplishments of Salta's reform efforts included the reduction of more than 10,000 provincial agents and the privatization of the four provincial enterprises and the provincial bank. The PRL-2 was designed to help Salta carry its reforms a step further, providing critical support to the implementation of social sector reforms while sustaining a sound fiscal performance. 12. The loan amount for Salta (Loan 4219-AR) was US$75 million, to be disbursed in two tranches of US$45 million and US$30 million respectively. The first tranche was to be released after loan effectiveness, since the actions required for disbursement had been implemented prior to Board presentation. The second tranche was to be released within 12 to 18 months, depending on the pace of the implementation of the agreed actions. The conditions required for disbursement included actions aimed at enhancing: a) the province's fiscal performance; b) efficiency in the education sector; and c) efficiency in the health sector (see Policy Matrix, Table 9). These specific conditions supported the overall reform program set forth by the province in the Letter of Provincial Reform (Annex A). A complete set of monitoring instruments was also defined at negotiations, including: a) fiscal targets to assess progress (i.e., personnel as a ratio of net current revenues, current balance and debt stock as percentage of current revenues); b) the mechanics of a Public Expenditure Review Program; and c) a set of performance indicators. B. Achievement of Objectives 13. Salta's PRL-2 has been very successful in providing ongoing support to the province's reform program. This success is reflected in Salta's fiscal performance, which is well above the average fiscal performance of Argentina's provincial sector as a whole in terms of all the main fiscal indicators.6 The success of the reforms undertaken in Salta has resulted in the province's improved creditworthiness, with the Standard & Poor's report recognizing Salta's achievement and praising the province's "strong commitment to fiscal austerity".7 5 Argentina's average GNP per capita in 1995 was US$7,700 (Argentina's CAS, 1997). 6 For a detailed description, see para. C.30. Standard & Poor's, Rating Report: Provincial de Salta, March 2000. 8 14. The impact of PRL-2 on this performance is evidenced by the general improvements of all PRL-2-provinces as a group, as compared to no-PRL-2 provinces during the 1996-99 period (Tables 10-13). The average change in own-source revenues for PRL-2 provinces was 18 percent between 1996 and 1999, compared to 9 percent for non-PRL-2 provinces (see Table 10). Similarly, PRL-2 provinces showed an average increase in personnel expenditures of only 8 percent between 1996 and 1999, compared to 17 percent for the remaining provinces (see Table 11). The performnance of PRL-2 provinces in terms of both revenues and expenditures was also reflected in a strong improvement in current account balance, which improved from a consolidated average annual level of -$310 million for the 1995-96 period, to a only -$17 million in 1998-99. (see Table 12). Finally, the performance of PRL-2 provinces was also clearly superior with respect to the provincial debt, with PRL-2 provinces increasing their stock of provincial debt by an average of only 3.6 percent during the 1996-99 period, compared to 30 percent for the remaining provinces (see Table 13). 15. The PRL-2 has also provided a valuable road map to guide the participating provinces in its efforts to introduce reforms in the health and education sectors. Salta has been particularly effective in implementing reforms designed to improve the quality and effectiveness of social spending in both education and health. The impact of the PRL-2 goes beyond Salta, as its demonstration effect has been key to show other provinces the feasibility of implementing ambitious reform programs-even in poor provinces-and the corresponding pay-offs. 1 6. It is important to point out that the success of the PRL-2 is closely linked to that of other loans. In particular, the PRL-2 builds upon the technical and institutional capacity built by the PDP-I and II at the provincial level. It also carries one step further the efforts towards provincial reform that began under the PDP-I and II and that were later deepened under the Provincial Reform, the Provincial Bank Privatization, and the Provincial Pension Reform loans. Moreover, the PRL-2 has demonstrated the potential complementarities between adjustment and sector operations by articulating provincial sector objectives within the framework of sound fiscal performance. In this way, the PRL-2 served to reinforce and promote the objectives of sector loans in education8 and health.9 17. Macroeconomic Policies: Substantial Achievement. Clearly, as a pilot involving only four provinces representing 10 percent of Argentina's population, PRL 2 in and of itself was not expected to have a major direct impact on the country's fiscal situation, however, the PRL-2 has demonstrated that the provinces can make an important contribution to the further consolidation of Argentina's macroeconomic stability. In the 9 The specific objectives of the two education loans are as follows: a) IBD's PRISE supports reforms on the education sector; and b) IBRD's PRODYMES I promote the decentralization and improvement of secondary education. 9 The specific objectives of the four IBRD health loans are as follows: a) the Social Protection Project protects high priority federal social expenditures; b) PROMIN promotes maternal-child care programs; c) PRESSAL, a pilot project, introduces the concept of self-managed hospitals in the context of a broader sector reform; and d) the Health Insurance Reform Project addresses efficiency and equity issues related to Obras Sociales Nacionales. 9 case of Argentina, the link between fiscal balance and macroeconomic stability is a particularly important one due to the strict restrictions on currency emission established by the Convertibility Law. By putting pressure on the balance of payment, persistent fiscal deficits at the provincial level can be a source of strain on the money supply and the financial system, thus reducing the credibility of the government's long-run ability to maintain the Convertibility Plan. The PRL-2 has contributed towards improving fiscal balance in the four participating provinces by reducing large deficits in current spending, as noted above, from -$310 million on average annually during the 1995-96 period to only -$17 million for the 1998-99 period. This performance compares well to the overall consolidated accounts of the provinces, where the current balance declined for $75 million in 1995-96 to -$690 million in 1998-99. (see Table 12). 18. The challenge of reducing the public deficit in the provinces is compounded by the important role that provinces play in the provision of social services--education and health--which are critical to the country's long term economic growth and poverty reduction. Within this framework, the PRL-2 has also effectively contributed towards the stabilization of Argentina's economy and the sustainability of the overall reform program by supporting the implementation of measures conducive to reorienting provincial public spending in ways that increased productivity and efficiency in the delivery of services while strengthening fiscal positions. Tables 15 and 16 show the significant improvements in efficiency that have been achieved in education and health in the case of Salta. 19. Financial Objectives: Substantial Achievement. In the case of Salta, significant savings have resulted from increased efficiency in the functioning of the public sector in general, and of the social sectors--i.e., health and education--in particular. Some of these savings are described below for each of the individual components. They include savings in the payroll of the provincial administration corresponding to a reduction of more than 4,500 public sector positions, improved monitoring of teachers' absenteeism and licenses with annual savings of approximately US$11 million, and the implementation of payroll system for education with estimated annual savings of US$19 million. 20. Public Sector Reform: Substantial Achievement. This is the area in which the operation has made- its central contribution. It has successfully accomplished its original objectives by effectively supporting reforms aimed at improving the quality of health and education services in the participating provinces within a framework of sound fiscal responsibility. As a result, Salta has consolidated its fiscal situation and is at the forefront of public sector reform in the health and education sectors. Now in its second term, the Romero administration is pushing forward with its reform program with the continuing support of the legislature, focusing on those areas in which reforms that lagged behind, such as the reform and modernization of the Provincial Insurance Institute (PIS), and incorporating important new elements into the program, such as municipal reform. 21. A detailed analysis of the factors affecting the implementation of each component and the achievement of their specific objectives follows below. 10 C. Public Finance 22. Achievement of Objectives: Satisfactory. Salta's fiscal situation had experienced rapid deterioration during the first part of this decade. Weak public administration had led to rapid growth in current expenditures and serious fiscal imbalances, marked by excessive public employment and borrowing. In 1995, the provincial deficit reached 4 percent of current revenues (excluding discretionary transfers), the wage bill absorbed 73.4 percent of the provincial current revenues, and the debt stock/ current revenue ratio was almost 73 percent (see Table 14). Due to lack of resources, capital expenditures were financed by the earmarked transfers from the central government and by commercial debt guaranteed with shared revenues. Payment arrears represented 35 percent of total debt at the end of 1995 (see LPR, Annex A). 23. When the Romero administration first took office in December 1995, it embarked in a far-reaching and ambitious reform program aimed at reestablishing provincial fiscal balance, increasing tax collection, reducing current government expenditures, and reducing provincial debt (see LPR, Annex A). In the framework of the PRL, Salta successfully took the critical steps towards fiscal adjustment, privatizing the provincial bank and four provincial enterprises, and setting in motion an administrative reform program. Under the PRL-2, the province pledged to implement structural reforms in the social sectors-health and education-within a framework of fiscal soundness. 24. The specific fiscal objective adopted by Salta for 1997-99 in the framework of the PRL-2 was to achieve a sustained fiscal balance through *improvements in tax administration and better spending. In particular, Salta expected to reach: (a) a decline in their wage bill to a sustainable 65 percent of net revenues by the end of the program; (b) a positive current balance beginning in 1997; (c) increased current savings to enable the province to finance a higher share of public investment; and (d) a reduced debt stock both in absolute terms and as a share of revenues. The province was highly successful in attaining its objectives, as demonstrated by its ability to meet the agreed performance benchmarks and its fiscal performance compared to other Argentinean provinces. In particular: 25. Civil Service Reform: Personnel expenditures in Salta represented 86 percent of net current revenues in 1995.10 In its initial steps towards reform, the province took several measures leading to a reduction of 8.5 percent of the wage bill in 1996. During 1997-99, the government continued to implement a program for rationalizing public sector employment by means of a privatization program, early retirement, outsourcing of peripheral services, natural attrition, etc. This program has been successfully implemented, achieving a net decrease of permanent staff of 4,553 by mid-1999 from that budgeted in 1997. This achievement surpasses the initial target of 2,900 positions. 10 For the purpose of the fiscal targets, "Current Revenues" are calculated as (i) revenues from taxes; (ii) non-tax revenues from the sale of goods and services and from property rentals; and (iii) revenues from federal revenue-sharing transfers (fondos de coparticipaci6n; excluding those from Fondo Nacional de la Vivienda, from Fondo Especial de Desarrollo Electrico del Interior and for the financing of public works expenditures. "Net Current Revenues" excludes revenues that are transferred by the Province to its municipalities. 11 26. These efforts have enabled the province to lower its personnel salary and benefits expenditures to 61 percent, thus surpassing the loan conditionality for the disbursement of the second trance requiring a level of provincial public sector personnel salary and benefits expenditures equal to no more than 65 percent of provincial public sector net current revenues. Moreover, adjustments in the structure of expenditures have been important in allowing the province to respond to an unanticipated decline in revenues during 1999 and to still be able to achieve a surplus in current spending. 27. Fiscal Balance: In agreement with the conditionality for the release of the second tranche, a current account surplus of US$15 million was achieved during the six continuous months of December through May 1999. Subsequently, however, with the downturn in the economy and increased election year spending the fiscal situation deteriorated and the overall balance for the year was -$24 million, or about 3 percent of current revenues. Additional tightening measures were adopted in late 1999 and during the first quarter of the year 2000 a balance in current spending has been regained. 28. Debt Stock: As of July 1999, the principal outstanding of public provincial debt has been reduced to 70 percent of current revenues collected during the first twelve of the preceding thirteen months, as required by the loan conditionality. Despite this achievement, Salta is still saddled with a large, poorly-structured debt in which the coparticipacion guarantee has not been used effectively. So far, market conditions have not allowed a more effective restructuring of the debt stock. Salta is currently taking steps to refinance US$100 million of short-term debt with a 10- year bond to reduce the impact of future debt service. (See Annex C: Creditworthiness.) 29. To ensure the sustainability of transparent and responsible fiscal practices, PRL-2 conditionality also required that the province pass in the Legislature a Financial Discipline Law based on five principles: (i) all annual provincial public sector budgets to be balanced; ii) debt not be used to finance provincial public sector current expenditures; iii) provincial public sector revenue and expenditure records and accounts to be audited and made publicly available; iv) personnel salary and benefits expenditures not to exceed 65 percent of net current revenues; and iv) principal outstanding of provincial debt not to exceed 70 percent of current revenues. The province has successfully met this condition. The new provincial constitution, promulgated in April 1998 under Article 70 and regulated in May 1999 requires the provincial public sector to meet all these conditions, which it has been doing during 1999. The sanctioning of this law provides an important element to help the province sustain its prudent fiscal course. 30. The overall success of the actions taken by Salta is also evident when comparing Salta's fiscal performance relative to that of the other provinces. Tables 10 through 13 show that Salta's performance during 1996-99 was substantially better than the median for all provinces in terms of the changes in own-source revenues, personnel expenditures, and stock of debt. Specifically, the increase in own-source revenues between 1996 and 1999 was 28 percent, compared to a median of 11 percent for non-PRL-2 provinces (Table 10). This increase is particularly impressive given the fact that Salta has decentralized both the vehicle and property taxes to the municipalities and the province is taking additional steps to gradually eliminate another two distortionary taxes -- the 12 payroll and stamp taxes -- while reducing the rate of the turnover tax. In terms of the change in personnel expenditures, Salta's performance is highly impressive relative to olher provinces, with an increase of 1.6 percent between 1996 and 1999, compared to a median increase of 14 percent for non-PRL-2 provinces (Table 11). Finally, an equally impressive performance can be observed with respect to the debt stock. While Salta reduced its stock of debt by 3.8 percent between 1996 and 1999, the median for non- PRL-2 provinces was an increase of 20 percent. (Table 13. Due to this outstanding fiscal performance, international banks now consider Salta to be creditworthy. Although its debt is still high and poorly structured, Salta's other financial ratios are generally favorable. Having privatized its bank and public enterprises, and having transferred its pension fund to the national government, Salta has few contingent liabilities (see Annex C: Creditworthiness). D. Education 31. Achievement of Objectives: Highly Satisfactory. The challenges that Salta faced in education are similar to those of other provinces. Personnel expenditures dominate the education budget, leaving little room to finance non-personnel inputs and investment. The quality of education is poor, while average costs per student are high due to low student/teacher ratios and disproportionate use of temporary and substitute educational personnel. Teachers often abuse the leave system and their pay is unrelated to teaching quality or effective classroom hours. These problems are compounded by the fact that a significant increase in educational demand is expected due to demographic growth and extension in compulsory education from six to nine years, as mandated by the National Education Law. 32. With the support of the PRL-2, Salta has developed a reform program for the education sector aimed at ensuring the extension of mandatory education and improving access to the poor within current budget constraints. The specific actions implemented between 1997 and 1999 fall into four areas: (i) improving the management of human resources; (ii) improving efficiency in primary and secondary schools; (iii) reforming the system of private sector incentives; and (iv) restructuring the teacher training institutes. 33. Management of Human Resources: The province has implemented a major re- engineering of its administration system within the education sector. The three basic pillars have been: a) the consolidation of parallel administrative regimens and the redesign of administrative procedures; b) the implementation of a new payroll system; and c) the outsourcing of the control system of sick leave and absenteeism. As a result of this re-engineering, all teachers teaching in public schools are now under the same administrative regime, including those who used to depend on the national government prior to the decentralization of education. The time savings (and consequently, the savings in personnel) resulting from the redesign of administrative procedures have been outstanding. For instance, the time required to officially appoint a teacher has been reduced from one year to just ten days. Similarly, the time required to obtain an employment certification has been reduced from six months to just ten minutes! The implementation of the new payroll system, which is now running parallel to the provincial system for its final testing, has also been very successful. Annual savings 13 from the elimination of irregular payments such as duplications, non-existent positions, etc. are estimated at approximately 10 percent of personnel costs in the education sector (or approximately US$19 million).'" Finally, as a result of the implementation of a privately-run control system, absenteeism and sick leaves have been reduced from 17 percent and 15 percent in 1996 to 5 percent and 6 percent respectively in 1999. The estimated annual savings resulting from these reductions are of US$11 million.'2 34. Education Efficiency. The province has also made significant progress towards improving the efficiency in primary and secondary schools through the consolidation and elimination of small classes, with the consequent increase in student/teacher ratios and decline in unit costs. As a result of these actions, the province has met the loan conditionality requiring a student to teacher ratio of 19:1 at the primary level including the ninth grade. 35. Private Sector Incentives: As agreed under the framework of the PRL-2, Salta has adopted an improved formula to allocate public subsidies to private schools. The new formula, developed in conjunction with a committee representing different stakeholders within private education, was designed to promote equity, quality and efficiency, based on the number of students, share of the teaching staff with university titles, costs per student, equipment, and level of fees. This fornula is currently applicable for schools representing 65 percent of private school students, but not for schools that had previously not received subsidies nor for secondary private schools decentralized by federal law, which are guaranteed certain levels of transfers by the terms of that transfer. The province, within its budgetary possibilities, will seek to include schools not receiving subsidies in order to provide incentives for their improvement. The change in the subsidy formula has allowed the province, within its original budget allocations, to make better use of these subsidies by extending them to more schools, promoting more efficient levels of enrollment, and targeting subsidies to schools serving poor students. Poor schools have benefited most, as their subsidies have increased. 36. Restructuring Public Teacher Training: It was estimated that the number of teacher training institutions in Salta was more than double the number needed, as their graduates could not be absorbed by the educational system.13 Accordingly, the province has closed ten of the thirty public teacher-training institutes and seven technical institutes. Prior to this initiative, the training institutes were graduating annually eight students for each opening, thereby wasting fiscal resources and training people for non-existent jobs. The curriculum in the remaining institutes is being updated to respond to the newly- created needs of the federal education reform. "1 This estimate is based on a total budget for education of US$230 million for 1998 and 1999, with personnel accounting for 83 percent of the total budget, and savings of approximately 10 percent of personnel expenditures. 12 This estimate is based on US$19 million in salaries for substitute teachers during 1996 and a reduction in teacher leaves from 14.77 percent in 1996 to 6.05 percent in 1999. Personnel costs are based on data from "Argentina: Improving Health and Education in Salta," Sept. 24, 1997. 13 "Argentina: Improving Health and Education in Salta," Sept. 24, 1997. 14 37. Levels of Expenditure in the Education Sector: The actions implemented under the PRL-2 have enabled the province to reduce the level of salary and benefits expenditures for the period from June 1998 to May 1999 to 83 percent of total sector spending, bettering the initial target of 85 percent. As agreed under the PRL-2, Salta has niade available for public education US$230 million in 1998, and US$231 million in 1999, both substantially higher than the US$180 million budgeted for 1996. Moreover, the province has allowed savings from personnel expenditures to be used to cover non- personnel costs within the sector and actual expenditures have not been shifted from investment to current expenditures. 38. Efficiency in Education: Table 15 summarizes some of the improvements in the education sector that resulted from the educational reforms implemented under the PRL- 2. These improvements are: a) a reduction in absenteeism from 17.4 percent in 1996 to 5.3 percent in 1999; b) a reduction in the percentage of substitute teachers from 14.8 percent in 1996 to 6 percent in 1999; c) an increase of 118 percent in system capacity, from 70,000 students in 1996 to 150,000 in 1999; and d) a reduction in the per capita annual cost of secondary education per student from US$828 in 1995 to US$732 in 1999. T hese improvements represent outstanding gains in efficiency, as the system capacity was doubled with a less than 30 percent increase in spending.'4 However, increased efficiency reflects just a portion of the far-reaching reforms implemented by Salta in the sector. Aimed at significantly improving the quality of its education system, the province has embarked on a major redesign of the entire curricula to meet the requirements of the National Education Law. At the same time, the province is promoting the administrative (lecentralization of schools and a system of incentives that promote innovation and self- improvement among teachers while offering them opportunities for training and continuing education. The reforns implemented under the PRL-2 have supported Salta's ambitious education reform by generating additional resources to finance non-personnel inputs, to better motivate teachers, and to focus on poverty areas where additional attention was needed. 39. Lessons from the education reforms: Salta's success in the implementation of education reforms underscores the importance of several factors, including: a) the need to have a champion with a vision of the sector; b) the central importance of the training and institutional strengthening component; c) the importance of having some previous hands- on experience for decentralization efforts to succeed; and d) the importance of using participatory mechanisms, such as in the design of the new subsidy formula for private schools. The individual actors in education, such as the Ministry of Education and the PRL-2 Executive Director, were key to the success of the reforms in this sector. These actors or "champions" had a vision for the sector and were successful in conciliating the requirements of the national education reform with the province's own needs. The emphasis on teacher training and curricula support was also critical to the success of the reforms, helping in the trickling down of the overall vision and developing support among the teachers for the reform program. The experience in education also 14 Increased spending is estimated at approximately US$80 million (US$50 million from increased education budget between 1996 and 1999; US$19 million from saving from new payroll system; and US$ 11 million from reduced teacher absenteeism). 15 underscores the importance of having previous "hands-on" experience. Some school principals had already developed some hands-on experience in administering resources that were being transferred directly to them by the national government under the "Plan Social," which proved a valuable element to support the province's decentralization efforts. Finally, the participation of the main stakeholders in the design of the new formula allocating subsidies to private schools permitted the early resolution of potential conflicts related to its implementation and the acceptance of the new allocation criteria as legitimate. E. Health 40. Achievement of Objectives: Satisfactory. There is a large scope for improving the health status in Salta and the other Northwest provinces. Infant and maternal mortality rates are higher than the national mean. Mortality causes include long-standing public health diseases associated with underdevelopment and poverty. Malnutrition and diarrhea remain among the principal causes of death of children 1-4 years old. 41. Poor health statistics are, to a large extent, the result of structural deficiencies in the province's health delivery capacity. The health system is predominantly hospital- based, with hospitals being managed primarily by the provincial government. Most hospitals are obsolete and lack basic maintenance, both in terms of equipment and physical facilities. Internal inefficiencies are magnified by the lack of accountability of hospital directors. As decision-making is highly centralized at the level of the Provincial Ministry of Health, hospitals have limited authority to achieve improvements in efficiency. Public hospitals are also inefficient, with low occupancy rates averaging only 57 percent, low personnel productivity and low quality of care. Hospital care dominates the budget of the sector. Personnel costs absorbed 82 percent of the health budget in 1996, leaving little room for essential complementary inputs. The size and salary of personnel are not under the control of the hospital authorities, and there is no motivation to budget and use resources efficiently. In addition, there was no targeting of the poor and no cost recovery. 42. Under the framework of the PRL-2, Salta developed a reform strategy aimed at promoting the progressive separation of the provision of health services and public financing. This basic objective translates into actions in three areas, as follows, by: (a) the establishment of self-managed hospitals; (b) the strengthening of the Provincial Insurance Institute (Instituto Provincial del Seguro-IPS); and (c) the extension of health insurance coverage for the poor using money now allocated to public hospitals. 43. Self-Managed Hospitals: The transformation of public hospitals into self- managed (or autonomous) hospitals is a central pillar in the program towards increasing efficiency in the sector. The concept of self-management implies that public hospitals are to be financed by the sale of services to private and public insurance providers rather than by direct budget lines from the Ministry of Health. As the resources generated by these self-managed hospitals are to remain in the hospitals, self-management is expected to be conducive to cost recovery and improved efficiency. 16 44. On December 1, 1998, the regulatory decree for Law 6841 was enacted for eleven hospitals, thereby converting them legally into self-administered hospitals, which are to collect revenue exclusively on the basis of per capita demand through a new payment system, retain the majority of their collected revenues, and apply to their employees a remuneration system including merit-based bonuses. These hospitals account for 72 percent of public hospital beds and 74 percent of public hospital discharges. Further, the province is in the process of deepening the reform beyond that originally contemplated by the program by granting autonomy to the two largest hospitals and three smaller ones, which would give them full control over their property, personnel and goods. This initiative has empowered hospital directors to put in place systems aimed at improving quality and efficiency in the provision of services. 45. Considerable improvements can already be observed in terms of management systems, quality control, etc. Similarly, the required information system to identify patients' health coverage is up and running in the hospitals. However, it is important to point out that there has been no significant financial impact, with cost recovery being less than 1 percent in the self-managed hospitals. The main reasons for this disappointing performance are the chronic arrears of the IPS. Unless the IPS regularizes its payments and the hospitals start seeing some monetary rewards for their increased performance, the sustainability of these hospitals can be jeopardized. The existence of legal restrictions on income generation options, such as renting space for private sector operations (see institutional evaluation), and the lack of training in hospital administration skills of hospital management staff have also contributed to their poor performance in terms of their ability to increase revenues. Moreover, developing mechanisms for automatic payments in coordination with ANESS and the major insurance providers can be better done at the provincial and national levels. It would also be important to disseminate the results and lessons learned in those self-managed hospitals that had a very successful experience, such as the Padilla Hospital in Tucuman. 46. Provincial Insurance Institute (IPS): Under the PRL-2, the province has installed amd is implementing an improved information system to keep records on accounts of beneficiaries of the IPS. The required information system is running and is being applied to both the traditional beneficiaries (provincial public employees) as well as the newly insured indigent population. However, as mentioned above, the IPS has been a bottleneck in the reform process within the health sector, jeopardizing the process of implementing self-managed hospitals as a result of its large payment arrears. There are still significant actions that need to be taken in relation to the IPS, including its structural reorganization. The recent liquidation of the commercial insurance component of the IPS (with the corresponding funding of its financial liabilities) demonstrates the intention of the Romero administration to tackle this challenge 47. Provincial Health Insurance: One of the objectives of the PRL-2 was the establishment of a Provincial Health Insurance integrating the resources of the IPS and the budget funds of the Ministry of Health, which in turn would enable the coverage of non-insured poor people. The province has established and is administering a provincial health insurance system to provide coverage for a basic health care package to all indigent residents of the province who are unable to pay for health care through any other 17 means. Through the provincial "obra social" the resident indigent population is being provided with health insurance covering a basic health care package. Under the system, the poor are treated on a par with the general population, are provided with documentation of their rights, and a complaints desk and hotline have been set up to help insure proper implementation of the system. The province is now implementing a census of the indigent population. The census has been completed for the capital area. However, its completion in rural areas is still pending. 48. Levels of Expenditure in the Health Sector: As required under the PRL-2, the province has preserved the level of expenditures in the sector. Annual budgets for public health have been US$135 million in 1998 and US$123 million in 1999, substantially higher than the 1996 budget of US$116 million. Similarly, the annual budgets for the Provincial Obra Social have been US$89 million and US$100 million for 1998 and 1999 respectively, higher than the 1996 budget of US$55 million. Moreover, the savings have been retained by the sector to cover investment costs, bonuses, and supplies, have been available when needed, and have not been transferred. 49. Efficiency in the Delivery Public Health: The actions taken in the health sector have resulted in the improvements in quality and efficiency in the delivery of services. As shown on Table 16, average waiting times have decreased consistently, the occupation rate has increased, the same as personnel output. Similarly, the sector personnel salary and benefits have been reduced from 82 percent to 73 percent of provincial public health sector expenditures between 1996 and 1999, bettering the PRL-2 initial target. 50. Lessons from the health reforms: In the case of health, the actions supported under the PRL-2 were at the forefront of the reform strategy being formulated at the national level. Thus, some important lessons were learned that are now being incorporated in related sector operations, such as the "Health Insurance for the Uninsured Project." Some of these lessons are: a) the proper functioning of the Obra Social Provincial is a pre-requisite for the successful implementation of self-managed hospitals; b) the regulatory and legal environment of the hospitals should be compatible with the reform's objectives; c) there must be flexibility in human resource management; d) there is a strong need for training in business administration for hospital managers; and e) it is necessary to educate the public about the meaning and the scope of the reforms being implemented. For instance, the reform program and its objectives were purposely distorted during the 1999 election campaign. In the case of the Provincial Health Insurance, the opposition publicized it as a way to exclude poor people from provincial hospitals, quite the opposite of the true intent of the reform. F. Major Factors Affecting Project Implementation 51. The loan was implemented roughly at the pace at which it was anticipated, with the second tranche being released approximately 20 months after loan effectiveness. All fiscal targets were satisfactorily met despite the downturn in the economy during 1999. Some of the factors that affected the implementation of the reforms sought under the PRL-2 are detailed below: 18 52. Outstanding political support: In the case of Salta, strong political support at different levels of the provincial government was one of the key factors contributing to the success of the PRL-2. The reform program counted with the full support of the governor as well as the legislature. The reforms in each of the sectors also received the full support of the Finance, Health, and Education Ministers. The experience in the education sector was particularly successful in terms of overcoming the resistance of the lower layers of a highly complex institutional structure (see Annex B: Institutional Assessment). 53. Importance of preparatory sector work: The policy actions outlined under the PRL-2 benefited from the in-depth ESW on social sectors prepared at the same time as theses loans for the same provinces. The Provincial Finance Report (Report No. 15487), prepared July 1996, provided the basis for the initial dialogue on provincial fiscal reform and for the discussion on major issues in the design of fiscal federalism in Argentina. The report was shared with all governors and discussed in the Senate. The policy reforms that have been prepared by the provinces were amply discussed in that report, which provided a very useful introduction to the current work with the provinces. 54. Sector reforms: Provincial reforms in health and education benefited from and complemented national initiatives, particularly in health, and was able to call on support from an array of Bank (and IDB) sector investment operations available to assist in imnplementation. In education, the PRL-2 has complemented the IDB-financed PRISE and the IBRD-financed PRODYMES I, which provide technical support to the provinces to improve the management of the education sector. In health, the PRL-2 has successfully complemented other ongoing Bank loans to the health sector, namely PRESSAL, PROMIN and Health Insurance Reform Projects. The PRL-2 has also promoted the concept of self-managed hospitals in the four participating provinces, a key objective of the PRESSAL and, more importantly, has tied its implementation to a broader health finance reform agenda. Finally, while the Health Insurance Reform Project is addressing efficiency and equity issues pertaining to "Obras Sociales Nacionales," the PRL-2 has confronted similar issues in relation to the "Obras Sociales Provinciales" and has helped provincial governments develop a public health insurance fund to finance coverage of the currently uninsured, mostly the poor. The relatively fragile institutional capacity of the provinces and the depth and complexity of the reform program called for -sustained technical assistance as a prerequisite for sustainability and success. The assistance to the education reform program was provided by the IDB- financed PRISE and by the Bank-financed PRODYMES. In health, the Bank-financed PRESSAL continued the assistance provided during preparation of the program. 55. National framework for fiscal reform. Along with specific sector-level reforms promoted by the federal government, the Salta effort benefited from a consistent system of fiscal incentives at the national level that combined a hard budget constraint and federal resistance to providing bailouts, with proactive programs to support state reform. In Argentina, a set of critical actions was implemented during the 1992-1996 period, including the signing of the Fiscal Pacts, the elimination of quasi-deficit financing through Central Bank rediscounts and provincial banks, and support for transferring 19 provincial pension funds to the national government, and privatizing provincial banks and public enterprises, and institutional strengthening for financial and tax administration 56. Fiscal targets and economic downturns: Despite the sharp decrease in provincial revenues resulting from the economic downturn during 1999, Salta was able to successfully meet all its fiscal targets. However, the conditionality to maintain sector budgets (i.e., education and health) at the same absolute levels of 1996 or higher put additional strains on the provincial finances. 57. Institutional assessment: The PRL-2 took into consideration institutional arrangements for service delivery that encompass voice, competition, and hierarchy. In education, for example, the re-design of the criteria to allocate subsidies to private schools introduces incentives for increased competition and improved quality among private schools. Likewise, the school management decentralization promoted a greater participation from parents and the community. In the case of health, the establishment of a provincial health insurance for the poor, combined with the establishment of autonomous hospitals, provided mechanisms for competition among public institutions and citizen participation. The province implemented accountability mechanisms and institutional arrangements during the implementation of the reforms. In the case of Salta, there was an excellent fit between the PRL-2's institutional arrangements and the characteristics of the province, mainly in terms of its well-aligned power structure and state institutions. The solid political support, in conjunction with the institutional arrangements discussed above, has been key to the success of the program. (See Annex B: Institutional Assessment.) G. Project Sustainability: Likely 58. Sustainability: Likely. The operation's objectives have been met and important reforms have been successfully implemented. In the case of Salta, the sustainability of these reforms is likely, as they have continuing political support from the governor and the legislature, which were re-elected last December. Also, Salta's fiscal position is sustainable in the medium and long run, with a level of provincial debt that can endure short-time fluctuations of financial markets. It is important to guarantee the continuing implementation of basic management tools, such as cadastre, financial management, and tax administration, to help consolidate the improvements in the fiscal situation. Also, it is important to foster accountability and participatory mechanisms for the population to voice their position about the reforms' benefits. In this regard, the province has taken an important step by setting in motion a mechanism for routine citizen input regarding the quality of the services provided by any provincial unit (Decree 3062; July 6, 1999). 59. Reforms in the education sector are well advanced and are already trickling down to individual schools. Providing training and technical support to teachers has been an important component of the reform strategy, which in turn has contributed to build support for the reforms among teachers. The decentralization efforts promoted under Salta's broader education reforms have successfully built over the foundations of the "Plan Social" which, by transferring resources from the national government directly to the schools, has given school principals hands-on administrative and management 20 experience. Also, in the case of transfers to private schools, the criteria were defined collaboratively with representatives of private schools interests, which make them more likely to be sustained over the medium and longer term. 60. In the case of the health sector, the reforms are still to be further consolidated. A stumbling block has been the reform and modernization of the "Obra Social Provincial." Although the specific disbursement condition has been met, a broader reform of this entity is still pending. Moreover, the larger arrears it has with self-managed hospitals have seriously undercut these hospitals' potential for economic incentives. Other actions that can contribute to increase the sustainability of the reforms in the health sector included: a) training in business administration for the management staff of self-managed hospitals; b) coordination of efforts at the provincial and national levels to develop automatic payment mechanisms with ANSES and large health care insurance providers; and c) development of a public education campaign educating health care providers and the public at large on the objectives and benefits of the reform efforts. H. Bank Performance 61. Project Identification: Highly Satisfactory. The Bank correctly identified the need to focus resources on selected provinces with demonstrated willingness and ability to implement reforms. It also identified the window of opportunity provided by reform- minded administrations both at the national and provincial levels. Finally, the Bank also identified correctly the need to promote reforms in the social sectors-education and health-in a framework of fiscal soundness. These two sectors are central to the medium and long-term success of any provincial reform strategy, as they represent between 40 and 45 percent of the provincial budgets. Moreover, the services in these two sectors are key in determining the level of human capital development of the province in the medium and long term. 62. Project Preparation: Highly Satisfactory. The Bank's performance was highly satisfactory with respect to the sectoral and technical aspects of the operation, identifying an ambitious but feasible Policy Matrix that operationalized the major aspects of the government's reform strategy towards the provinces. The Bank worked in close collaboration with individuals in the national and provincial governments and maintained a high degree of coordination between the PRL-2 and other Bank operations, both provincial and sector loans. During loan preparation, the Bank visited the four provinces that met the eligibility criteria and had the support of the federal government. 63. Project Appraisal: Highly Satisfactory. Out of the four PRL-2 provinces, Salta had without any doubt the best conditions to succeed. It had already demonstrated a strong performance in the PRL, had strong political support from both the executive and legislative powers and a fiscal situation that, although in need of improvement, was not structurally flawed. 64. Project Supervision: Satisfactory. SAL operations pose a challenge in terms of supervision, as they require both precision and agility. The Bank worked closely with the Borrower, assessing the overall evolution of the provincial finances, as well as 21 monitoring the progress towards reform in health and education. The supervision team forged a close relationship with provincial authorities through periodic visits and a fluid communication. The geographical proximity of the supervision team-located in Buenos Aires as opposed to D.C.-has contributed to such fluid communication. Once the tranche conditionalities were met, the Bank moved quickly to accelerate the corresponding disbursement. The Bank also sought informal agreements with the provincial government to ensure consistency with other operations, such as the compromise to the revitalize the implementation of the provincial cadastre and the financial management system. I. Borrower Performance 65. Project Preparation: Highly Satisfactory. The Bank's work had the full collaboration of both the province and the federal government. Staff from the Ministries of Interior, Economy, Education, and Health participated in the preparatory work, ensuring not only that the proposed policies were consistent with the national policies but also that the provinces could count on the support of the federal government during the implementation of the reforms. 66. Salta had a strong ownership of the reform program, illustrating the ideal case in which a Bank operation fully supports provincial objectives. The highly transparent and participatory approach used by Salta in proposing and seeking approval of their reform programs have contributed to the ownership and support of the program. Most of the reforms have been subjected to the scrutiny of the legislature. Public input has been actively sought using television as well as public hearings for the discussion of specific reforms (e.g., privatizations and concessions). 67. Project Implementation: Highly Satisfactory. The supervision of the program was entrusted to an Executing Unit located in the province's Ministry of Finance, reporting directly to the governor. In addition, the Ministry of Finance and the Ministries of Education and Public Health were also active participants. At the national level, the Ministry of Economy contributed to the implementation of the program by undertaking the supervision of the fiscal and debt components. The performance of the Executing Unit was highly satisfactory, serving as an effective interface between the different actors, including the Governor, the provincial ministries, the Bank, and the executing units of other related projects. The supervision team was kept well informed of all relevant developments-both progress and occasional difficulties-that took place during the implementation of the program. Adequate documentation was made available to support the request for each tranche. 68. The province demonstrated a strong internal cohesiveness during the implementation of the PRL-2, articulating political support from the top with a strong ability to implement at the lower levels. This fluidity was particularly noteworthy in the education sector, which despite its complexity, was amalgamated in its reforms efforts by a uniting vision. 22 69. Compliance with Covenants: Satisfactory. Compliance with legal covenants was satisfactory. Over the life of the project, compliance with the stipulated covenants ancd agreements was met. J. Assessment of Outcome 70. Overall rating: Satisfactory. The project objective has been met, as the PRL-2 has provided effective financial and technical assistance to Salta in its efforts towards continuing reform and restructuring. The PRL-2 has been highly successful in promoting the strengthening of Salta's fiscal situation. Moreover, the operation has promoted the implementation of important reforms in the health and education sectors aimed at ensuring an efficient and responsive delivery of public services within fiscally-sound policies. To this effect, the PRL-2 has articulated successfully the various Bank- supported education and health loans to modernize Salta's social sectors, improve their efficiency, and protect the poor. 71. Some of the specific achievements of the PRL-2 include: a) Salta's superior fiscal performance over the 1997-99 period relative to other provincial governments in terms of own-source revenues, personnel expenditures, and stock of debt;'5 b) the reduction of more than 4,500 provincial agents; c) the enactment of a Financial Discipline Law; d) savings of approximately US$30 million accrued from the implementation of a human resource management system and a privately-run absentee control system in education; e) significant improvements in efficiency within the education and health sectors;'6 f) an improved allocation of subsidies for private education; g) restructuring of public teacher training institutions; i) the implementation-including the enactment of the necessary changes in the legislation-of self-managed hospitals; and j) the establishment of a Provincial Health Insurance System for the poor. 72. Salta is a clear success story. The ambitious set of reforms supported under the PRL-2 succeeded as a result of a unique combination of strong political support from both the Governor and the provincial legislature, as well as a solid leadership in each of the individual sectors, particularly in provincial finances and education. The PRL-2 effectively capitalized on this window of opportunity by providing intense technical assistance and helping the province to develop a sound roadmap in terms of the reform strategies to be adopted in the different sectors. As a result, Salta is now well positioned to access private financial markets, to attend the needs of the more poor segments of its population, and to compete more effectively in the world's economy (see Annex C: Creditworthiness). The impact of the PRL-2 goes beyond Salta, as its demonstration effect has been key to show other provinces the feasibility of implementing ambitious reform programs-even in poor provinces-and the corresponding pay-offs. 15 For a detailed description, see "Achievement of Objectives," paragraph B. 13. 16 For a detailed description, see "Efficiency in Education," paragraph. D.38 and Table 15; and "Efficiency in Public Health," paragraph. E.49 and Table 16. 23 K. Future Operation 73. Numerous discussions and field visits have been carried out following disbursement of the final tranche and the closing of the loan, with the participation of staff from the national ministries of Economy, Education and Health. The provincial administration, which was reelected last year remains fully committed to the reform program. 17 74. Public Finance. As noted above, has moved to tighten its fiscal performance during late 1999. However, to enhance its fiscal situation and to improve competitiveness over the medium terms, the province still needs to restructure its debt and to reorient local taxation from pro-cyclical distortionary taxes such as the turnover tax and the stamp tax to more stable and less regressive taxes such as the property tax. It also needs to complete the modernization of its financial management system. 75. Education. The province continues to move forward on all fronts. The one major problem in delays in improving the financial and human management system because of problems with the supplier is being resolved. 76. Health. The new system of self-managed hospitals appears well entrenched, although more staff training is required. More worrisome is the continued poor performance of the Provincial Obra Social. Payment delays to the hospitals have not allowed them to move more rapidly from historic-based budgets reducing incentives for efficiency. This weak performance also threatens the health insurance for the poor program system being channeled through the Obra. L. Lessons of Experience 77. Quick-disbursing loans supporting a well-defined set of reforms can be effective tools in promoting structural adjustment at the sub-national level. The specific advantages of direct provincial lending using SALs are twofold: i) they can address the needs of individual provinces more specifically; and ii) they can introduce a critical mass of economic incentives that can effectively accelerate the pace of the reform process within individual provinces. 78. For the reforms to be sustainable, a consistent system of incentives has to be in place at the national and provincial levels. A clear strategy towards the provinces on the part of the national government, such as the determination to avoid bailouts of fiscally-irresponsible provincial governments, is a prerequisite for broader state reform among sub-national governments, particularly fiscal adjustment. 79. Capitalize on potential windows of opportunities. Having a reform-minded administration at both the federal and provincial governments opens a significant window 17 An exit letter was provided to the province analyzing these efforts with recommendations for improving implementation, and is found in the project file. 24 of opportunity for reform. To capitalize on such opportunities, the Bank's technical assistance and sector work are critical at early stages, during the design of the reform program. 80. The success of SAL loans depends on a combination of factors, among the most important of which is strong political support. In the case of Salta, the ambitious set of reforms supported under the PRL-2 succeeded as a result of a unique combination of strong political support from both the Governor and the provincial legislature, as well as a solid leadership in each of the individual sectors, particularly in provincial finances and education. 81. Provincial SAL operations require strong coordination across sectors to ensure that policy conditionality reinforce the strategies adopted in each sector. At the country level, it is necessary to ensure the cooperation of the different national Ministries, such as Health and Education. Within the Bank, it is necessary to develop both formal and informal mechanisms of consultations across divisions. This coordination is key not only during the design stage but also during implementation to ensure that the related sector operations can provide adequate technical and financial support for specific actions. Such an approach is facilitated under federal systems if there are national programs from which the sub-national governments can receive needed technical assistance. It is important to enhance public participation and to educate the general public on the goals and objectives of the reforms to ensure their success and sustainability. A better job at documenting and ensuring the benefits of those reforms with a strong social impact, such as the Provincial Health Insurance and self-managed hospitals, needs to be undertaken to ensure a wider support for the reforms, which would in turn increase the chances for their success and sustainability. 82. Provincial reform efforts benefit from an overall framework of incentives for improving fiscal performance and the presence of national-level reform initiatives in relevant sectors. 83. Quick-disbursing loans directed to sub-national governments can be effective complements of sector reforms and operations. If properly coordinated with sector strategies, provincial SALs can promote sector objectives by boosting political will to take key sector actions in the sector. This is particularly important in the case of Argentina, where the provinces play an overwhelming role in providing public services in education and health. Operational, then a standing TA operation may not be the most convenient. 84. The combination of effective sector leadership for reforms and participatory mechanisms in the design and implementation of reforms can be a powerful tool for pursing institutional change and overcoming bureaucratic resistance. 25 Table 1 Summary of Assessments A. Achievement of Objectives Achievement of Objectives Substantial Partial Negligible Not Applicable Macro Policies / Sector Policies Financial Objectives V Institutional Development _ Physical Objectives I Poverty Reduction _ _ Gender Issues .1 Other Social Objectives / Environmental Objectives / Public Sector Management l Private Sector Development / Other B. Project Sustainability Project Sustainability Likely Unlikely Uncertain C. Bank Performance Bank Performance Highly Satisfactory Deficient Satisfactory Identification a ._l Preparation Assistance v Appraisal V Supervision / 26 D. Borrower Performance Borrower Performance Highly Satisfactory Deficient Satisfactory l Preparation / Implementation / Covenant Compliance I Operation (if applicable) . l E. Assessment of Outcome Assessment of Outcome Highly Satisfactory Unsatisfactory Highly Satisfactory Unsatisfactory 27 Table 2 Related Bank Loans Loan Purpose Year of Approval Status Preceding operations 3877-AR Provincial Provincial PS and 1995 Ongoing Development Loan II Reforms 3860-AR Municipal Municipal Reform 1995 Ongoing Development II 3826-AR Provincial Provincial Reform 1995 Closed Reform Loan 4218-AR Provincial Provincial Reform 1997 Ongoing Reform (Rio Negro) 4220-AR Provincial Provincial Reform 1997 Ongoing Reform (San Juan) 4221-AR Provincial Provincial Reform 1997 Closed Reform (Tucuman) Following operations Provincial Reform Provincial Reform FY00 Proposed (Catamarca) Provincial Reformn Provincial Reform FY01 Proposed (Cordoba) Provincial Reform Provincial Reforrn FY01 Proposed (Buenos Aires) 28 Table 3 Project Timetable Steps in Project Cycle Date Planned Date Actual Identification April 8, 1997 IM (Project Concept Document) l Preparation l Appraisal April 11, 1997 Negotiations June 9-10, 1997 Letter of Provincial Reform July 10, 1997 Board Presentation August 26, 1997 Signing November 21, 1997 Effectiveness December 22, 1997 First Tranche Release December 24, 1997 Midterm Review n.a. Second Tranche Release September 3, 1999 Third Tranche Release n.a. Project Completion September 3, 1999 Loan Closing December 31, 1999 December 31, 1999 Table 4 Cumulative Loan Disbursements: Estimated and Actual (US$ million) Cumulative FY97 FY98 Y99 Disbursements Appraisal Estimate 45.0 75.0 -- Actual 45.0 45.0 75.0 Actual as % of Estimate 100% 60% 100% Date of final disbursement: September 3, 1999. 29 Table 5 Status of Legal Covenants Agreement Section Covenant Present Description of Comments Type Status Covenant Provincial actions described in Schedule C of the Loan LA 2.02 (d) 13 C Agreement (all of which have been agreed to by the Province Complied with (ii) and are consistent with the Borrower's policy framework regarding provincial reforms) have been taken in form and substance satisfactory to the Bank. If, after said exchange of views, the Bank shall have given notice to the Borrower that the applicable conditions referred to in this paragraph have not been fulfilled and, within 90 days after such notice, such conditions continue to be unfulfilled, then the Bank may, by notice to the Borrower, cancel the unwithdrawn amount of the Loan or any part thereof LA 3.01 (a) 13 C The Borrower and the Bank shall from time to time, at the Complied with. request of either party or of the Province, exchange views on the progress achieved in carrying out the Program and the actions specified in Schedule 3 of the Loan Agreement. The Borrower shall, as allowed by the terms of the Subloan Agreement, cause the Province to participate in such exchanges in views with the Borrower and the Bank. LA 3.01 (b) 13 CD Prior to each such exchange of views, as well as every three Complied with months from the Effective date to the Second Tranche Release delay date, the Borrower shall, as allowed by the terms of the Subloan Agreement, cause the Province to furnish to the Bank for the Bank's review and comment a report on the progress achieved in carrying out the Program, in such details as the Bank shall reasonable request. LA 3.01 (c) 13 C The Borrower shall exchange views with the Bank on any Complied with. proposed action to be taken after the disbursement of the Loan which would have the effect of materially reversing the objectives of the Program, or any action taken under the Program, including any action specified in Schedule 3 of the Loan Agreement. LA 3.01 (d) 13 C The Borrower shall, as allowed by the termns of the Subloan Complied with Agreement, cause the Province to assist in, and provide all information required for, the preparation of the report referred to in Section 9.07 (c) of the General Conditions, as said Section 9.07 (c) is amended pursuant to Section 1.01 (e) of the Loan Agreement. Covenant Types: I = Accounts/Audits 8 = Indigenous people 2 = Financial performance/generate revenue from 9 = Monitoring, review and reporting beneficiaries 10 = Project implementation not 3 = Flow and utilization of Project funds covered by categories 1-9 4 = Counterpart funding 11 = Sectoral or cross sectoral 5 = Management aspects of the project budgetary or other resource or executing agency allocation 6 = Environmental covenants 12 = Sectoral or cross-sectorrl policy/ 7 = Involuntary resettlement regulatory/institutional action 13 = Other Present Status: C = covenant complied CD = complied with after delay CP = complied with partially NC = Not complied with 30 Table 6 Key Indicators for Project Implementation 1. Key Implementation Indicators in President's Estimated Actual Report See tables 9, 15, and 16. =~~~~~~~~ ___ _ Table 7 Bank Resources: Staff Inputs Planned Revised Actual Stage of Project Cycle Weeks US$'000 Weeks US$'000 Weeks US$'000 Preparation to Appraisal n.a. n.a. n.a. n.a. 20.3 $73,531 Appraisal-Board n.a. n.a. n.a. n.a. 6 $24,145 Negotiations through Board Approval n.a. n.a. n.a. n.a. 2 $5,337 Supervision n.a. n.a. n.a. n.a. 18.1 $49,900 Completion (WPA costs) NA $70,000 X $33,0292" T'OTAL Direct Costs $103,012 TOTAL WPA Costs $33,0292 Includes Bank-financed and trust fund consultants. Dollars are direct costs only. 31 Table 8 Bank Resources: Missions Performance Rating Number Specialized Impleimentati Develop-met Stage of Month/ of Days in Staff Skills on Objectives Types of Project Year Persons Field Represented " Status Problems/Status Cycle Identification December 7 12 PS, SS, ED, PS n.a n.a n.a 2-14, 1996 P,S,E,P Appraisal April 1997 7 14 TM, EcF, C,C n.a. n.a. n.a. __________ ________ ~ED, PS, C, C_ _ _ _ _ _ Appraisal through n.a n.a n.a Board Approval Supervision I December 8 3 TM, EcF, SS, S Effective 12/22/97; 10-12, ED, SS, PS, C, C 1997 First Tranche disbursed on 12/214/97. February 1 2 TM HS HS The province is 1998 implementing its program as initially agreed and no deviations from the initial schedule are foreseen. Ill Jun.1 8 '98 5 TM, HDSL, EcF, No PSR No PSR SD, PS IV Nov. 12 - 1 7 C No PSR No PSR 18, 1998 V December 6 2 TM, SS, PS, EcF, s S Second Tranche 17-18, ED, C release pending 1998 implementation of sector refonns in education and health. VI March'99 5 TM, PS, EcF, . , _______ ______ ____ __ ______ ______ _ ____ ______ H It, C VIl March '99 3 TM, HDSL, C s 32 Table 8 Bank Resources: Missions (cont.) Performance Rating Number Specialized Implementati Develop-met Stage of Month/ of Days in Staff Skills on Objectives Types of Project Year Persons Field Represented " Status Problems/Status Cycle Vni August 2 TM, HDSL s S Second Tranche 1999 slightly delayed due to institutional development required for implementing the far-reaching social sector reforms, particularly in health. Conditionality for Second Tranche met in September 1999. Completion October 3 2 TM, C, PSM s 1999 I Completion May 2000 3 1 J PSM, EcF, Hlt ] s s Completion June 2000 2 lED 1/ Mission leader. 2/ Key to specialization: A. Sr. Public Enterprise Specialist B. Legal Counsel C. Sr. Country Economist D. Principal Financial Management Specialist E. Consultant F. Sr. Country Officer G Tax Administration Specialist H. Task Manager 33 Table 9 Salta's Policy Matrix Activity Accomplished Second Tranche General Condition Legal opinion confirming the constitutionality of the reforms included in the program and conditions of tranche disbursement PUBLIC FINANCE Fiscal Balance Agreement on targets for the program Six-month Current Account Surplus at least at US$15 million equivalent Agreement on values and control mechanisms Reduction in Personnel Cost Identification of components of civil Personnel Cost is equal to no more than service reform 65% of net current revenues Conversion of Public Implementation of planned reduction in Second phase of restructuring/ Employment public sector positions (1,000 positions) downsizing Debt Stock Agreement on overall decline of debt Debt stock is equal to less than 70% of current revenues Enactment of Law of Financial Discipline as mentioned in the LPR Public Expenditure Program Agreement on the composition of External auditing of the Provincial until 1999 program and structure of social sector Public Accounts; public disclosure of expenditures consistent with the audit reports. objectives of the program, as explained in the Letter of Provincial Reform EDUCATION POLICY CHANGE Improve Administration of Prepare new leave system and approved Human Resources legal instrument; froze automatic wage increases Obtained legislative authorization and invited for bids for the new sick leave control of public school teachers Draft new teaching system Law (Ley 6830) Sector Budget For each fiscal year, make available an education budget at the real 1996 level or at least $210 million equivalent, whichever is higher. Allow savings in personnel cost to be used to cover non- personnel items. Safeguards in place to maintain education budget. Increase Educational First consolidation completion Consolidation in primary schools leads Efficiency Approved new organization (POF); to a student/teacher ratio = 19:1 for allowed savings in personnel to stay in public primary schools levels up to and the sector including the 9"' grade Management of Sector and Agreement on the budget for the sector Personnel cost to be lowered to 85% of Promotion of Decentralized and on 3-year PEP the provincial education budget Education Private Sector Participation Launched study of alternatives for private New system of subsidies for private school subsidies taking into account schools in effect equity and efficiency objectives Conversion of Teacher Interrupted admissions program to Closure of 10 Teachers Training Training transform schools Institutes and implement six "Tecnicaturas" 34 Table 9 (cont.) Activity Accomplished Second Tranche HEALTH REFORM COMPONENT Autonomous Hospitals Enacted Law 6841 (defining the Ten public hospitals are made autonomous hospitals) and defined autonomous calendar for HPA implementation. New payment system is implemented in Identification of public hospitals to be the HPA decentralized and the auxiliary services to be outsourced HPA retain the majority of revenues and can use a system of bonus by Change employment laws and allow performance. HPA employees to be under private sector contract Apply to their employees the regime referred to in Article 24 of Provincial Law 6841, which may include the provision of merit-based performance bonuses Provincial Health Insurance, Plan to create a Provincial Insurance New Provincial Health System into Extending Health Coverage Institute or similar agency to ensure effect insurance for poor people Identification of a substantial number of beneficiaries of the new insurance system Obra Social Provincial (OSP) Plan to improve structure of OSP System to control beneficiaries in effect Separation (via privatization) of commercial insurance and life insurance of OPS Sector Budget Agreement on Budget Envelope Make available an annual health budget equal to at least 1996 level or $108 million, whichever is higher. Budget for OSP should be made available at 1996 level or $30 million equivalent, whichever is higher Reduction in personnel cost to no more than 82% of health sector expenditures Savings in personnel costs retained in the sector to finance investment and other inputs. Safeguards in place to ______________________ _________________________________ maintain health budget. 35 Table 10 Change in Own-Source Revenues by Province 1996-1999 (US$'000) 1996 1997 1998 1999 Growth _____ _____ _____ ____ _____ ____ _____ ____ _____ ____ 96-99 Santiago del Estero 65,268.9 82,945.3 93,122.7 89,521.5 37.2% Talta 115,031.6 130,543.0 133,560.1 i146,925.9 27.7%' Chubut 56,520.3 62,132.3 58,8806 71,286.9 26.1% Jujuy 47,018.9 54,386.4 57,336.9 58,547.6 24.5% Neuquen 132,708.2 140,177.0 169,465.2 160,948.3 21.3% Mendoza 323,570.0 375,560.0 397,346.6 386,386.6 19.4% Tucw'nAn 1-5-0,007.7 1_6_6,957.0 1__7931.J 179,1b679 1_9_,4%/ G.C 6.A. 2,313,880.4 2,455,772.9 2,770,523.8 2,759,651. 19 .3% San Luis 74,630.0 80,534.5 85,262.7 88,251.9 18.3% Santa Fe 729,067.1 875,844.2 925,895.8 854,374.4 17.2% SanJuan 79313.6 9100,1682 9432.4 Tradeluego 39,586. 41,521.9 44,401.0 44,699.0 Catamarca 35,843.6 38,690.7 40,438.3 40,123.1 11.9% Formosa 22,573.4 27,911.9 30,800.6 25,152.7 11.4% Buenos Aires 3,867,915.3 4,510,173.6 4,716,413.4 4,263,831.2 10.2% Rio Negro 124,120.0 129,720.8 47,5026 135,428.2 7i.1 La Pampa 90,357.1 93,004.0 104,933.9 97,447.4 7.8% Corrientes 67,331.6 72,563.6 75,756.1 67,860.0 0.8% C6rdoba 863,597.5 ' 849,752.0 911,557.6 843,971.8 -2.3% Entre Rios 286,124.7 298,434.0 302,739.3 275,826.6 -3.6% Santa Cruz 63,108.9 63,404.6 64,701.2 59,343.1 -6.0% Chaco 110,166.2 111,982.3 104,471.8 99,814.9 -9.4% Misiones 117,050.1 120,185.0 113,727.5 100,662.7 -14.0% La Rioja 27,142.6 23,634.2 22,119.0 22,354.0 -17.6% Total ... 11.8% 9,801,934.1 10,897,220.0 11,650,443.3 10,961,949.5 11.8% Median 12.4% 100,261.7 102,493.2 104,702.9 98,631.2 Mean 10.7% P408,413.9 454,050.8 485,435.1 456,747.9 P5RL-2 Provinces __ _ _ _ ,__ _ _ ,__ _ _ ,__ __ _ Sub-Total 17.8% 468,472.9 518,609.8 560,549.3 551,894.4 Median ,,,,* 16.7% 119,675.8 130,131.9 140,531.4 141,177.1 Mean 117,118.2 129,652.5 140,137.3 137,973.6 17.6% NON PRL-2-Provinces Sub-Total 9,333,461.2 10,378,610.2 11,089,894.0 10,410,055.0 11.5% Median 100,261.7 102,493.2 104,702.9 98,631.2 10.8% Mean 466,673.1 518,930.51 554,494.7 520,502.8 9.3% Source: National Office of Coordination with the Provinces; Undersecretariat of Economic Relations with the Provinces. 36 Table 11 Change in Personnel Expenditures by Province 1996-1999 (US$'000) 1996 1997 1998 1999 % Growth ___________________ _ __________ __________ __________ __________ 1996-1999 Rio Negro 391,865.3 383,550 386,949.7 377,392.7 -3 ,7 Salta 467,3659 458,324.3 -4672,830.6 7,787__16 San Luis ,2 9 197,060.8 190,119.6 210,770.1 3.7% G.C.B.A. 1,651,547.0 1,723,283.9 1,656,577.5 1,773,834.4 7.4% Formosa 347,055.5 355,518.4 371,674.0 374,157.7 7.8% Catamarca 266,694.9 275,998.5 273,247.5 288,622.1 8.2% La Pampa 209,927.1 218,574.6 223,913.7 229,874.8 9.5% Chubut 283,924.0 290,411.2 306,942.0 311,120.8 9.6% La Rioja 288,136.1 287,490.9 295,882.2 316,330.3 9.8% Tucumn _507,8Z5.0 3 8,785.0 522,370.0 - 5737 9.9% Santiago del Estero 3617 ~46 372,161.0 389,984.8 4 3. Jujuy 330,783.6 327,063.8 368,708.9 367,393.2 11.1% Mendoza 638,084.0 645,900.0 672,985.9 721,261.1 13.0% Santa Cruz 265,534.4 281,665.9 290,760.8 307,157.6 15.7% Entre Rios 551,511.6 568,595.7 597,095.8 641,568.3 16.3% Chaco 505,987.0 526,144.0 557,466.4 593,271.7 17.3% C6rdoba 1,052,753.7 1,180,495.2 1,213,418.0 1,239,332.6 17.7% Santa Fe 1,185,451.1 1,213,386.1 1,291,094.5 1,409,732.2 18.9% Misiones 360,666.1 405,300.0 415,800.0 447,383.3 24.0% San Juan 317,479.8 347f1257 386,195.0 400,344,7 Tierra del Fuego 171,090.8 189,423.0 211,024.0 217,022.6 26C8% Neuquen 418,022.8 430,313.5 481,871.2 542,518.3 29.8% Corrientes 364,833.0 439,106.4 475,024.6 481,445.0 32.0% Buenos Aires 3,610,484.0 3,991,144.3 4,793,804.3 5,333,295.8 47.7% Aggregate 22.1% 14,752,157.4 15,646,808.1 16,835,740.8 18,018,224.4 Median 12.1% 363,338.8 394,428.0 402,892.4 424,561.4 Mean 15.5% 614,673.2 651,950.3 701,489.2 750,759.4 PRL-2-Provinces , , Sub-Total 7.5% 1,684,536.0 1,727,771.0 1,758,345.3 1,810,393.1 Median 5.7% 429,615.6 420,940.2 424,890.2 437,531.7 Mean 8.5% 421,134.0 431,942.8 439,586.3 452,598.3 NON-PRL2-Provinces Sub-Total 24.0% 13,067,621.3 13,919,037.1 15,077,395.5 16,207,831.3 Median 14.4% 361,255.4 388,730.5 402,892.4 424,561.4 Mean 16.9% Mean 1 653,381.1 695,951.9 753,869.8 810,391.6 _ - Source: National Office of Coordination with the Provinces; Undersecretariat of Economic Relations with the Provinces. 37 Table 12 Evolution of Current Account Balance by Province, 1994-99 (USS'000) Jurisdiction 1994 1995 1996 1997 1998 1999 TOTAL 957,238 -157,484 308,771 1,610,061 422,740 -1,800,328 G.C.B.A. 312,996 225,888 -62,722 83,271 493,538 220,446 Buenos Aires 784,238 781,486 -18,009 574,227 -356,105 -1,298,018 Catamarca -84,496 -42,640 -9,108 11,058 22,388 15,513 C6rdoba -99,769 -58,214 222,081 236,811 168,722 82,768 Corrientes -10,751 -19,961 52,508 26,708 -19,044 -67,851 Chaco 15,156 -66,331 16,601 32,489 -5,508 -87,303 Chubut -23,216 -29,377 -1,749 19,243 -55,277 -47,454 Entre Rios 12,495 -42,386 64,810 130,021 101,324 24,870 Formosa -21,958 -42,262 -3,129 17,702 17,549 -43,651 Jujuy -50,551 -115,025 -32,276 -57,193 -111,916 -108,380 La Pampa 32,924 25,532 30,932 54,492 43,251 23,141 La Rioja -135,347 -207,596 -171,687 -117,509 -145,407 -197,263 Mendoza 189,415 -85,733 -80,511 -39,765 -36,180 -48,861 Misiones 3,674 -14,210 -63,567 -4,985 -18,414 -89,508 Neuquen 35,423 -49,458 99,027 144,410 -19,698 -107,924 Rio Negro -61,713 -166,650 -117,693 -72,982 -54,701 -55,121 Salta 7,478 -31,059 37,149 50,489 16,524 -24,045 San Juan -187,602 -157,237 36,873 45,470 30,200 -23,303 San Luis 80,473 112,248 152,666 185,213 209,456 161,846 Santa Cruz 35,041 -3,928 89,118 18,422 -67,643 -87,966 Santa Fe 192,965 -35,581 89,093 226,926 142,390 -64,349 Santiago del Estero -33,924 35,635 76,553 127,044 84,825 76,460 Tucuman 5,510 -85,097 -62,587 -25,067 67,558 7,791 Tierra del Fuego -41,225 -85,528 -35,603 -56,436 -85,092 -62,167 38 Table 13 Change in Stock of Debt by Province, 1996-98 (US$'000) Province To December To December To June Growth % Growth 1996 1998 1999 96-99 96-99 ALL PROVINCES 17,255,725 18,780,014 19,936,462 2,680,740.53 15.5% Santiago del Estero 389,613 333,014 278,678 (110,935.20) -28.5% G.C.B.A. (includes debt to 2,554,100 2,435,400 2,323,400 (230,700.00) -9.0% cornpensate (1) La Rioja 506,033 462,890 471,565 (34,467.72) -6.8% SJ s 424,893 - 405,093 399,602 (25,291.00) -6.0% La Pampa 83,810 81,76 8 . 78,972 (4,838.49) .-5.8% Salta 667,695 517,882 546,138 (21,559.32) -a8% Mendoza 1,069,352 1,013,905 1,058,424 (10,928.43) -1.0% Entre Rios 608,083 600,921 637,518 .29,434.53 4.8% C6rdoba 1,155,347 1,205,692 1,221,742 66,395.31 5.7% Buenos Aires 3,275,412 3,142,100 3,544,400 268,988.00) 8.2% TucumAn - 931-,255 982,041 1,033,436 102,180.92 11.0% f ormosa 723,769 768,222 812,548 88,779.03 12.3% Chubut 344,445 474,552 412,487 68,042.47 19.8% Jujuy 594,605 676,222 717,751 123,146.12 20.7% Rio Negom 738,83 4,6 207,778.14 2.&1% Catamarca 323,322 402,359 434,980 111,658.24 34.5% Misiones 538,973 720,513 782,161 243,187.91 45.1% Corrientes 717,836 948,491 1,044,478 326,642.05 45.5% San Luis 59,981 88,449 88,355 28,373.52 47.3% Tierra del Fuego 133,119 161,296 225,934 92,814.68 69.7% Chaco 667,125 1,020,112 1,187,535 520,409.79 78.0% Neuquen 268,736 400,914 508,446 239,709.68 89.2% Santa Fe 496,632 931,542 1,004,754 508,121.95 102.3% Santa Cruz 82,750 137,046 176,548 93,798.36 113.4% Stock of Debt 17,255,721 18,780,014 19,936,462 2,680,741 15.5
Groupe de la Banque mondiale · Implementation Completion and Results Report
Argentina - Second Provincial Reform Project : Salta
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Groupe de la Banque mondiale
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Implementation Completion and Results Report
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Banque mondiale