Argentina - Highway Sector Project

Document of The World Bank F FOR OFFICIAL USE ONLY Report No. P-3567-AR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$100.0 MILLION TO THE ARGENTINE REPUBLIC FOR A HIGHWAY SECTOR PROJECT May 9, 1983 This document bas a restricted distribution and may be used by recipients only in the perfonnance of their official duties. Its contents may not otherwise be disclosed witbout World Bank authorization.  CURRENGY EQUIVALENTS (January 1983) US$ I = A$ 54,045 A$ 1 million = US$ 18.50. WEIGHTS AND MEASURES Metric System ABBREVIATIONS DNPT - National Directorate for Transport Policies and Programing DNTT - National Directorate for Land Transport DNV - National Highway Directorate MOSP - Ministry of Public Works and Services NAO - National Accounting Office NTP - National Transport Plan  FOR OFFICIAL USE ONLY ARGENTINA HIGHWAY SECTOR PROJECT Loan and Project Summary Borrower: Republic of Argentina Project Executing Agencies: National Highway Directorate (DNV) for civil works related to the national roads, procurement of equipment, and for its technical assistance component; each participating province, through a Bank-approved agreement with DNV, for carrying out the works on provincial roads within its own jurisdiction; National Directorate for Transport Policies and Programing (DNPT) for its technical assistance component. Amount: US$100 million equivalent, including the capitalized front-end fee of about US$249 thousand. Terms: Repayable in 15 years, including 3 years of grace, at the Bank's standard variable interest rate. Project Description: The project is part of the Government's and the provinces' 1983-86 Four-Year Highway Investment Program. The program components supported by the proposed loan are: construction, reconstruction and improvements of federal highways and urban bypasses and provincial roads; road marking, signing and betterment subprojects; traffic counting equipment; and consultants' services for technical assistance. Subprojects to be assisted under the loan will be submitted to the Bank for approval. The project will help (a) prevent further deterioration of aged pavements; (b) alleviate urban congestion; (c) promote traffic safety; (d) assist in the transfer of technology to the provinces; (e) promote improved sector policies; and (f) strengthen local capabilities to plan and manage sector programs. Beneficiaries: Project benefits will accrue to the economy at large in the form of savings in vehicle operating costs. While the positive effect of the project will be felt first by road users, benefits would be broadly distributed to consumers in general since, because of the competitive nature of the trucking industry, reductions in transport costs will be passed on. The organizations involved in transport planning would benefit through the technical assistance component. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Risks: A further deterioration of the economy could reduce public revenues and, hence, cause delays in project implementation. However, the risk of delays in project implementation is low since the project represents only a small percentage of the investment program and will include high priority works, and in view of the experience of the executing agency and the flexible implementation format of the project. Another uncertainty is the extent to which the change in administration, scheduled for January 1984, would affect improvements in sector policies. Estimated Costs: The total estimated cost of DNV's 1983-86 highway investment programs is about US$1.3 billion. In addition, the Project would include provincial road investments amounting to a total of US$90 million. The total estimated cost of potential national and provincial subprojects for which financing is not yet committed is some US$560 million, including approxi- mately US$250 million in foreign exchange. Four-Year Investment Program (in US$ million) Foreign Exchange DNV Subprojects 1983 1984 1985 1986 Total Component Construction 110 100 90 85 385 175 Reconstruction 100 115 120 125 460 205 Betterment, overlays, traffic safety 60 65 70 70 265 120 Buildings, consultants, other items 50 55 60 65 230 105 Sub-total 320 335 340 345 1,340 605 Provincial Subprojects 5 20 40 25 90 40 Total 325 355 380 370 1,430 645 Financing of DNV's Highway Investment % Total Investment Program and Provincial Subprojects Total Program IDB 100 7 Proposed Bank Loan 100 1/ 7 Fourth Highway Loan 40 3 Assigned User Taxes 1,190 83 1,430 100 1/ Includes front-end fee of US$249,377.  - iii - Estimated Disbursements: Year Annual Cumulative 1983 1.0 1.0 1984 21.0 22.0 1985 31.0 53.0 1986 30.0 83.0 1987 17.0 100.0 Rate of Return: Highway subprojects to be financed under the proposed loan would be appraised according to agreed technical and economic criteria and would have a minimum rate of return of 12 percent. Staff Appraisal Report: No. 3530b-AR dated May 4, 1983.   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN OF US$100.0 MILLION TO THE ARGENTINE REPUBLIC FOR A HIGHWAY SECTOR PROJECT 1. I submit the following report and recommendation on a proposed loan to the Argentine Republic for the equivalent of US$100.0 million to help finance a Highway Sector Project. The loan would have a term of 15 years, including 3 years of grace, at the Bank standard variable interest rate. I. THE ECONOMY 2. An Economic Memorandum No. 2988-AR was distributed to the Executive Directors in July 1980. A new Economic Memorandum will be distributed in May 1983. The following paragraphs draw on this report providing a summary of recent developments. A summary of the Country Basic Data is attached as Annex I. Background 3. Argentina has rich natural resources, a highly literate and mobile population, organized in an export-oriented and diversified agriculture and a large industrial sector. The economic performance of the country has suffered, however, from the policy instability and distortions of incentives introduced by frequently changing Governments. Public sector participation in the economy is high, industrial production is largely domestic market oriented and the economy does not use the resources at its disposal effi- ciently. 4. The post World War II strategy of import-substitution, with a heavily regulated price system and tightly controlled foreign trade, collapsed in 1976, when economic chaos and widespread political violence led to a military takeover. The military administration acted to reduce the public sector deficit, free prices and interest rates, and adjust the exchange rate. Following initial successes in the fight against inflation and in the balance-of-payments, the Government took further measures to stabilize expectations and to open the economy to foreign competition. It began, in December 1978, to preannounce devaluation schedules and public sector prices and to reduce customs duties according to a five-year schedule. 5. The schedules of preannounced nominal exchange rates and public enterprise tariffs called for steadily decreasing rates of adjustment, primarily in order to dampen inflationary expectations. In the event that inflationary expectations lagged, however, the real exchange rate would appreciate, and the fall in the relative prices of imported goods would increase the degree of foreign competition and eventually put a ceiling on domestic price increases. This new policy did achieve, by the second  - 2 - semester of 1979, a further reduction in the rate of inflation. However, the Government did not adequately support this approach with a restrictive fiscal policy to restrain aggregate demand. Consequently, real interest rates rose to prohibitively high levels, and the exchange rate continued to appreciate in real terms. Industrial firms, squeezed between increased production costs (in foreign currency terms), growing imports and high interest rates, remained hesitant to make the investments needed to sustain growth and, instead, cut production and shifted to financial assets. 6. The Government continued to lag exchange rate adjustments behind the rate of inflation through 1980. Altogether the peso appreciated some 45% in real terms from the end of 1977 to the end of 1980, resulting in a substantial shift in the relative domestic prices of traded and non-traded goods. A 107% increase in real imports from 1978 to 1980, alongside a 13% drop in exports and rising interest payments on the external debt, turned a US$1.8 billion current account surplus into a $4.7 billion deficit, the latter equivalent to about 8% of GDP. 7. Public confidence in the Government's economic policies was weakened during 1980 by growing signs of recession in the industrial sector and by the failure early in the year of several financial institutions. Growing expectations of a large peso devaluation, heightened by an increasing public sector deficit and the anticipated change of government scheduled for April 1981, led to a massive capital outflow. Industrial output fell, and the growing indebtedness of the productive sectors started to threaten the solvency of the financial system. 8. In April 1981, the incoming Government abandoned the exchange rate policy through a series of large-scale devaluations, suspended the tariff reduction program, and designed schemes to help industrial borrowers in order to prevent the further deterioration of the balance of payments and to dampen the growing fears of large-scale bankruptcies in the industrial and financial sectors. Yet, the Government failed to build public confidence in its policies, and they remained largely ineffective. Amid the continuing uncertainty, GDP declined 6% in 1981 with industrial production falling 16% to below the 1970 level. Fixed investment declined 15%, and inflation, propelled in part by the massive devaluations, once again surged forward. As the malaise deepened, the Government was replaced in December 1981. 9. The new Government gave top priority to dampening inflationary expectations and stabilizing the exchange market as the only way to reduce interest rates and permit the recovery of economic activity. While significant progress was made during the first quarter of 1982 to reduce inflation and to calm the exchange markets, interest rates remained high with the industrial sector still awaiting relief for its liquidity problem. In April, the outbreak of hostilities in the South Atlantic brought this latest program to a halt. Recent Developments 10. During and immediately after the South Atlantic crisis, Argentina's access to international capital markets was severely limited. Previously  normal rollovers were denied, spreads widened, and debt arrears began to accumulate. Overall investment and industrial employment continued to fall. Following the restrictions reintroduced in the foreign exchange market during the early days of the conflict, there was a speculative rise in imports, which led the Government to ban non-essential imports. 11. Termination of the South Atlantic crisis at the end of June 1982 brought a new Government into office and a refocussing on the problems of the economy. The Government acted to alleviate private industry's liquidity problem, which was presenting a serious obstacle to recovery and continuing to threaten the solvency of the financial system. Another pressing diffi- culty was to meet the service due on the external public debt, amounting to US$7.5 billion for the remainder of the year, including the arrears accumu- lated during the South Atlantic conflict. 12. The financial measures taken included extension of a rediscount line to banks which agreed to refinance their portfolios and the imposition of interest rate ceilings on short-term financial operations. Thus a sub- stantial shift of assets from depositors to borrowers followed, with signifi- cant impact also on durable consumer goods sales and stock market prices. However, the financial relief measures, the depreciation of the exchange rate, and the redemption of indexed government bonds caused a large expansion of the monetary base. In spite of the Government's move to absorb excess liquidity through the sale of short-term Treasury bonds, prices rose at a monthly average rate of 21% during the third quarter of 1982. The Government also attempted to control prices directly, first by reaching an agreement with major firms, then by introducing mandatory rules for price adjustments. 13. The Government split the exchange rate for "commercial" and "financial" transactions, and a multiple exchange rate system, including export taxes on agriculture and subsidies for industrial exports, was maintained in an effort to complement the domestic stabilization and recovery objectives. Notwithstanding the undervalued "financial" peso, the "parallel" market continued to flourish, reflecting the future uncertainties of the exchange rate and monetary policies. The multiple exchange rate policy thus remained ineffective in limiting the rise in the prices of major agricultural export commodities, which began to be exported as contraband. At the end of October, following negotiations with the IMF, the Government again unified the foreign exchange markets. 14. An IMF stand-by agreement and compensatory financing facility, providing US$2.2 billion for 15 months, became effective on January 1, 1983. The Government's economic reactivation program aims to keep the fiscal deficit at a level equivalent to 2.1% of the GDP, to achieve balance of pay- ments equilibrium in 1983 through a major rescheduling and adherence to a realistic exchange rate policy, to limit the expansion of the net domestic assets of the Central Bank to the growth of its currency issue, constrained to the inflation target. Thus the Government expects to reduce the rate of inflation to an annualized 110% in the last quarter of 1983 and to bring about a 5% GDP growth in 1983. The public investment program is planned to increase from 7.6% of GDP in 1982 to 9.7% in 1983 with transport and energy  - 4 - absorbing a large part of the incremental expenditure. Under the agreement with the IMF the Government will raise, in order to provide real resourcces for investment, fuel prices by 3.2 percent per month in real terms and other public prices by 2.8 percent through March 1984. The Government will limit the increases in real wages to the rate of GDP growth during 1983, and it will periodically adjust the foreign exchange rate to compensate for the differential between Argentine and trading partner rates of inflation. Short- and Medium-Term Prospects 15. The agricultural sector has already responded to the correction of the exchange rate with record harvests. Since the depressed state of the economy continues to keep the demand for capital goods imports low and net oil exports high, the trade surplus is expected to exceed US$3 billion in 1983. Overall recovery, however, is likely to be limited to increases in capacity use, rather than led by a substantial revival of private investment. The latter will probably be delayed at least until 1984, when the uncertainties about the direction of the economic policies are expected to diminish. 16. A civilian Government is scheduled to take office at the beginning of 1984, after elections in October of 1983. Indications from the major parties are that some of the policies adopted by the present Government will be continued: a realistic exchange rate policy and additional incentives for the promotion of exports, a restrictive fiscal policy to gradually reduce inflation, and incentives to stimulate investments in fixed capital and to promote the repatriation of Argentine capital abroad. 17. Medium-term prospects for export growth are promising. Assuming continued strong demand for grain exports and further diversification of markets for beef exports, export earnings are projected to increase by an average of 6% annually in real terms. Price prospects for Argentina's major export crops are favorable. Agriculture and agro-based industries will continue to provide the bulk of exports, but manufactured exports are expected to grow more rapidly (8%) over the course of the next five years. With expected average GDP growth over the next half-decade of 3% per annum, the economy should be able to generate a growing trade surplus to service its external debt. Debt Service and Creditworthiness 18. At the end of 1982, the total external debt of Argentina, according to the Central Bank, was US$36 billion. From US$12.5 billion at the end of 1978, it had grown almost three-fold. The term structure of the debt, especially that of the private sector, also had changed radically during the 1978-1980 period. At the end of 1978, the short-term debt constituted 21% of the total (25% of the private debt), but this ratio rose to 38% (50% of the private debt) by the end of 1980, and 45% (62% of the private debt) by the end of 1982. 19. Service requirements of the medium- and long-term public debt were 28% of exports in 1982, and the trade surplus was large enough to meet this part of the debt service. However, total interest and amortization payments were beyond the servicing capacity of the country. Thus, the disruption of the rollovers resulted in arrears of US$2.1 billion by the end of 1982. In  its efforts to normalize payments, the Government has negotiated with Argentina's commercial creditors a US$1.1 billion "bridge-loan and a US$1.5 billion medium-term loan. Also, an agreement has been reached on the transformation of the US$4.7 billion short-term private debt into medium-term public or publicly-guaranteed debt. Following the IMF's review of the economic performance of the first quarter of 1983, first tranches of the stand-by and the US$1.5 billion medium-term loan are expected to be released in early June. Argentina's medium-term debt service profile will depend on the outcome of the debt renegotiation that is currently taking place. Provided that the heavy short-term requirements can be successfully transformed into medium- and long-term obligations, Argentina's trade account should be able to generate the surpluses required to service its external debt. PART II - BANK GROUP OPERATIONS IN ARGENTINA Bank Operations 20. Past Bank lending to Argentina has been sporadic because of periodic macroeconomic and sectoral difficulties. After a hiatus of five years, lending was resumed in September 1976. In the period 1976-1981, the Bank has made loans for thirteen projects amounting to US$1,286.0 million. A US$60 million loan for an agricultural credit project was cancelled in 1979. Since December 1981, however, no new operations have been presented because of the drastic deterioration in Argentina's economic situation and frequent changes in economic management. 21. To assist Argentina with its stabilization effort and to help in the needed reconstruction of the public sector's institutions, many of which had been allowed to deteriorate to a dangerous degree, Bank lending has focused on major infrastructure projects and the provision of credit and training to productive sectors. A grain storage project was designed to enable Argentina to export agricultural products in a more orderly manner; a vocational training project helps improve vocational and skill training; two industrial credit projects helped support modernization and expansion of export oriented industries, and the projects for power, highways and railways provided part of the infrastructure necessary to facilitate agricultural and industrial expansion. Recently, the Bank began lending to Argentina's hydro- carbon sector through a series of loans. An oil and gas engineering loan was the first step in helping Argentina improve its knowledge of hydrocarbon reserves through expanded auditing and seismic surveys; the coal exploration loan will improve the basis for a rational exploitation of Argentina's coal resources; the oil and gas credit project will stimulate private sector participation in developing these resources; and the refinery conversion project will strengthen Argentina's principal sector company. 22. Disbursements have been slower than expected. Persistently high rates of inflation, the need for fiscal austerity and inertia of the private sector did not provide a conducive environment for progress on Bank financed  projects. However, disbursements have increased from US$57 million in FY 80 to US$ 115 million in FY 82. Annex II contains a summary statement of Bank loans and notes on the execution of ongoing projects. 23. Future Bank lending is oriented to assisting Argentina in strengthening its balance of payments position. Bank assistance would concentrate on promoting increased productivity and competitiveness in the industrial sector as well as further rationalization of public sector enterprises. 24. The Bank is now reviewing Government proposals for helping in the exploration and development of new hydrocarbon resources, together with programs for improvements in investment planning and financial management in the state-owned national oil company. Bank participation in energy conserva- tion, mining development and regional water development are additional possi- bilities that are under study. IFC Operations 25. As of December 31, 1982, IFC had made 14 loans to borrowers in Argentina totalling US$174.4 million and two equity investments of US$2.9 million, of which US$105.7 million have beer repaid, cancelled or sold. A summary of IFC's investments is shown in Annex II. PART III - TlE TRANSPORT SECTOR General 26. Argentina has developed a highly diverse and extensive transport network to integrate its 2.8 million km2 territory and to serve its 28 million inhabitants. The network includes 100,800 km of national and provincial primary roads, 32,200 km of railways, 17,000 km of pipelines for crude oil, refined petroleum products and natural gas, over 100 ports and 90 commercial airports. Highways increasingly represent the dominant mode. From 1965 to 1979, road transport's share of cargo traffic increased from 47% of total inter-urban ton-kms to 52% while railway's share declined from 18% to 9%. In terms of passenger service, roads' share rose from 76% of inter-urban passenger-kms to 88% while railways' participation declined from 22% to 7%, with air transport increasing from 2% to 5%. 27. The transport sector, representing 6% of GDP and 18% of public sector investment, has been affected negatively by Argentina's economic difficulties. In the mid-1970s traffic declined on most highways, and public expenditures for all modes were drastically reduced. In 1977, overall traffic regained its early 70's level and resumed regular growth at 4-6% per annum. In 1981 and 1982, however, the economic recession resulted in an overall decline in traffic levels and transport investment budgets.  - 7- Planning, Coordination and Investment 28. Planning and coordination in the transport sector historically have been weak. The considerable independence of the Government modal transport agencies has obstructed integrated and consistent transport plans and policies. Currently, responsibility for the Transport sector is divided between the Ministry of Public Works and Services (MOSP) which generally oversees land transport and the Ministry of Economy which oversees water transport. The Air Force continues to be responsible for air transport policy. The division of responsibilities is further complicated by the struc- ture of Secretariats and Subsecretariats within each Ministry. In 1977, the Sectoral Transport Planning Office was strengthened and became the National Directorate for Transport Policies and Programing (DNPT), responsible for preparing the National Transport Plan (NTP). The Bank under the Fourth High- way Project (Loan 1384-AR) as well as the UNDP have provided technical assistance and funding for the NTP. By March 1981, the first phase of the NTP was completed. It included an analysis of the status of the sector and preliminary recommendations on investment, operational efficiency, pricing and taxation and Government organization. The Government's steering committee (representatives of the modal agencies) authorized a second phase, directed at refining the initial results, conducting further analytical work and helping the agencies involved to implement the NTP's recommendations. DNPT, within the MOSP, continues to be responsible for this task. The proposed Project provides financing for further studies to be carried out by the DNPT during the 1983-86 period. During negotiations assurances were obtained that the Government would exchange views with the Bank on the carrying out of the recommendations of the NTP (section 3.06 of the draft Loan Agreement). 29. In addition to the NTP, the DNPT has compiled a consistent and reliable data base and has established modal cost structures to assess the effects of alternative transport investments and sector policies. While the DNPT serves as the only transport planning unit with a sectorwide perspec- tive, institutionally it is located within the Subsecretariat of Transport which is formally responsible only for the railways and the regulation of road transport services. As a result, the road and rail investment plans have not been prepared in a coordinated manner. At negotiations the Govern- ment confirmed that it shall establish planning and coordinating mechanisms within MOSP to ensure that the railways and highways investment plans are complementary to each other, and are analyzed in accordance with consistent criteria (Section 3.05 of the draft Loan Agreement). Rationalization of the Transport Sector 30. One response to the economic difficulties of the 1970's has been the decision to promote the rationalization of Government services through "privatization" of those services which could be handled more efficiently by the private sector, the decentralization of selected Government activities to the provincial level and the elimination of services which are not viable economically. The major "privatization" efforts in the sector include the leasing of railway shops and port facilities, the building and operation of  - 8 - toll roads by private firms and the contracting of road maintenance. The leasing of the Buenos Aires subway system is currently being negotiated. In addition, a substantial portion of the national highway network was transferred in 1980 to the provincial network, and further decentralization of federal highway activities (i.e. maintenance) to the provinces is being considered. There are plans for the transfer of the Buenos Aires suburban passenger rail system to the City and Province of Buenos Aires, and for the delegation to the provinces of responsibility for expanding and constructing river port facilities. Railways 31. Argentina's railways suffered until the mid-1970's from the combination of a change in the economic structure of the country, the extension and improvement of the highway network and its overall operating inefficiencies. The latter were largely related to a decaying infrastructure, an over dimensioned network and an excessive number of employees. Since 1976, the Government has cut the railway staff from 156,000 to 97,000 (ahead of the target set under the Bank's Second Railway Project, Loan 1677-AR); has reduced the network by over 7,600 km; and has curbed other uneconomic services. Locomotive and wagon availability has improved, as has the average load of freight cars. In spite of this progress, the railways continue to incur heavy financial losses with a working ratio above 2 and an operating ratio above 3. After a long period of lower than expected traffic, a significant increase was registered in 1982. However, inadequate tariff increases prevented a meaningful improvement in the operating ratios. Recently the Government has authorized the railways to implement increases in freight tariffs in real terms which, if continued, should improve the financial situation in 1983. 32. The NTP's recommendations indicate that the railway must direct its attention to the principal corridors with high traffic densities and to the products which comprise 70% of the total tonnage hauled. They state that further cost reductions should come from additional line and station closures, increased operational efficiencies and more appropriate investment with increased stress on "block" train service instead of mixed rail car operations. With the assistance of the Second Railway Project, the Government is currently studying these issues with the intention of developing appropriate plans of action. Ports 33. Argentine ports need substantial investment to improve handling of grain exports and containerized cargo, principally by overcoming the shallow draft of the sea and river channel accesses. The Bank has been involved in the ports subsector through the preparation of a project for improving the ocean port of Bahia Blanca, including its storage facilities and related inland grain transport. Highways 34. The basic road network in Argentina is in place although not yet at required standards. It consists of 38,500 km of national roads with 71% paved and 62,000 km of provincial primary roads with 28% paved. Substantial  improvements were made on the national network between 1965 and 1975 with the paving of 9,355 km of roads. The restrictive budgets of the mid-1970s left a backlog of major works to be completed, which took priority over strengthen- ing and reconstruction during the 1976-1980 period. As a result, the condi- tion of the generally light pavements on older sections of the network has deteriorated. A study of highway needs made in 1980-1982 and financed through the Fourth Highway Project found that 23% of the national trunk and primary network (6,400 km) needed reconstruction. Over 50% of the Federal road investment program for 1983-1986 is thus directed at rehabilitation, strengthening and reconstruction with the rest destined for paving unpaved roads and freeway and bypass construction. The condition of the provincial network is now under study. 35. Traffic growth on the nation's roads was erratic during the 1970's. Automobile travel declined in 1975 in response to the general economic problems of that period, but then rose quickly until 1980 with gasoline consumption increasing at an average annual rate of 7%. Diesel consumption (almost half for trucks) grew during this period at about 4.5% annually, which probably reflected the growth of economic activity in Argentina's outlying provinces. Other statistics also illustrate the growing importance of transport outside the traditional radial traffic pattern between Buenos Aires and the provinces. 36. Road transport has increased continuously its share of freight movements since 1965 at the expense of rail and inland waterways. The truck- ing industry is a dynamic one and is not restricted by entry, capacity or tariff regulations; a healthy level of competition has been maintained, resulting in a wide range of tariffs and types of services offered. On the other hand, road passenger services are heavily regulated in terms of entry, capacity, tariffs, routes and schedules, by both the provinces and the National Directorate for Land Transport (DNTT). The Subsecretariat of Trans- port is preparing to review this situation and technical assistance for this purpose would be made available under the proposed project. Road User Charges 37. Government policy traditionally provided for road users to pay for the use of road infrastructure through taxes on vehicle sales, fuel,lubri- cants, tires, and through registration fees. Because of lagging adjustments following drastic devaluations in real terms, domestic fuel prices, which had been substantially above international levels, declined to US$1.07 per gallon for regular gasoline and US$0.65 for diesel in April 1983, compared with an estimated international CIF price to Argentina of US$0.87 per gallon for regular gasoline and US$0.84 for diesel. Pump prices for diesel are thus below the estimated opportunity cost of fuel. Argentina is committed to raise fuel prices by 3.2% per month in real terms through March 1984 (para. 14). This means that the gap between pump prices and international prices for diesel would be eliminated by the end of the year. 38. While aggregate road user charges would, by year-end, be more than sufficient to cover the economic costs of using the road system, certain classes of road users will not be paying an equitable share of road costs. The NTP analysis of road user charges (based on 1979 data) revealed two forms  - 10 - of cross-subsidization between road users. The first type of cross-subsidi- zation is between urban and inter-urban traffic; urban traffic contributes 60% of gross tax receipts but represents only 11% of total road-related operating and capital budgets. This cross-subsidy is not considered to have caused major distortions in demand, and its resolution is not a priority issue. More serious is the finding that, for the paved inter-urban network, truck and bus operators were covering only 50-60% of medium term marginal costs attributable to their use of the road network. With the substantial fuel price change since 1979, the situation needs to be reviewed based on an updating of the NTP analysis. At negotiations, the Government confirmed that: a) the Government's policy is that users of road infrastructure should contribute, through related and specific road user charges, to cover at least the marginal cost of that infrastructure attributable to their use, and the Government intends to resolve deficiencies in the existing user charges structure, particularly with regard to diesel-powered heavy vehicles; b) by July 31, 1983, DNPT would update its user tax analysis, taking into account changes in fuel prices since mid-1979, and formulate explicit policy recommendations and mechanisms for implementation; and c) based on the Government's review of the above-mentioned user tax analysis for commercial diesel-powered vehicles and recommended chd-ges in the taxation level, a plan of action would be adopted by June 1, 1984, after consultation with the Bank (Section 3.06 of the draft Loan Agreement). Traffic Safety 39. Traffic safety has been of increasing concern in Argentina. The number of deaths related to traffic accidents on the national road network in 1975 was more than three times higher relative to total population than in the U.S. and Canada. Under the Fourth Highway Project, there was a compre- hensive study of the problem which made recommendations on improved road design standards; road marking and signing; identification of, and improve- ments to, dangerous road sections; and vehicle standards and inspection. A newly created Traffic Safety Division within the DNV has initiated an ambitious program to implement the traffic safety study's recommendations. The proposed project would contribute to this program by financing the road marking and signing component and the improvement of dangerous road sections; by providing technical assistance; and by monitoring the safety program's implementation. Administration of the National and Provincial Networks 40. Planning, programing, design, construction and maintenance for the national highway network is the responsibility of the DNV, a semi-autonomous organization under the authority of the MOSP. DNV's headquarters plans and controls the budget and coordinates development of the national highway net- work. Its 24 district offices supervise road construction, betterment and maintenance. DNV is a mature, well-developed organization with a staff of  - 11 - 9,000 including about 500 professionals and 2,200 technicians. Salaries, especially for the higher functions, are sufficient to attract qualified staff. 41. DNV annually prepares a four year program which lists the highway projects to be carried out within the budgetary limits set by the Ministry of Economy. The yearly changes have been handled pragmatically with new entries decided mainly on the basis of engineering judgement, economic analysis, and regional balance. Although the existing system has not resulted in any apparent serious investment errors, and high priority projects are normally included in the program, increasing political pressures, high inflation and limited budgets have raised the need to institute more systematic and tech- nically consistent procedures for the preparation of DNV's program. These would allow the DNV to better weigh the costs and benefits of project proposals in order to properly estimate and justify its budgetary require- ments, as well as the selection and design of projects. Revised procedures have been developed for this purpose by DNV staff in consultation with the Bank. Their main features are the formal incorporation of the results of the highway needs study in the updating of the investment program and application of a consistent economic methodology in the evaluation of all projects being considered for investment. Assurances were obtained during negotiations that DNV would institute the agreed upon procedures and that DNV would provide adequate resources for such purposes (Section 3.08 of the draft Loan Agree- ment). 42. Provincial authorities maintain, reconstruct and construct the provincial highway networks. The capabilities of the provinces in highway operations vary widely, however, and the transfer of over 13,000 km of the national roads to the provinces represents a substantial new burden. While they received some assistance to help absorb the initial impact, further pressure to decentralize DNV field activities underscores the need to improve the provincial authorities' capabilities. This led to an agreement between the DNV and provincial highway authorities in March 1981 to conduct a transfer of technology program, consisting of DNV's training provincial staff and helping them to develop investment planning. Subsequent to that agree- ment each of the provinces signed letters of intent with DNV requesting that funds from the proposed loan be applied to economically justified high priority provincial road works. This would help ensure the carrying out of needed provincial subprojects and would enhance the transfer of technology program through the preparation of specific subprojects and an overall investment plan. Assurances were obtained during negotiations that the Borrower shall carry out a program to improve planning and operational capabilities of the provincial highway authorities according to a timetable satisfactory to the Bank (Section 4.06 of the draft Loan Agreement). Assurances were also obtained during negotiations that each of the provinces participating in the Project will prepare, by December 31, 1984, and annually update thereafter, a detailed Four-year Investment Program (Section 3.04 (a) (v) of the draft Loan Agreement).  - 12 - Road Maintenance 43. Although DNV's funding for maintenance was erratic during the 1970s, the national highway network is in an adequate state of repair. Much of the reconstruction work required is to provide heavier pavements for increased traffic volumes, a task which could not have been avoided by better maintenance practices. While periodic maintenance (including overlays and surface treatments) is done under contract, DNV carried out routine mainte- nance directly under force account until 1979. Since then, in line with Government policies to foster private enterprise, DNV has experimented with various forms of contract operations for its routine maintenance tasks, seeking to improve efficiency, minimize costs and reduce its equipment fleet which was due to be renewed. Expenditure for routine maintenance by the DNV for 1983 is set at about US$70 million or US$1850/Km which is adequate considering the condition of the road network. During negotiations, the Government confirmed that it would continue to maintain the national highway network adequately and that it intends to allocate the required funds, which would be at least at the 1983 level in real terms unless otherwise agreed to with the Bank (Section 4.04 of the draft Loan Agreement). A formula was agreed to during negotiations to adjust the amounts allocated in future years in line with increased input prices. The Highway Sector Project would support the maintenance operations and development toward contract mainte- nance by financial assistance to help solve management problems that may arise in DNV and to help assess the cost effectiveness of the approach. To help monitor the progress of this effort, the Government confirmed during negotiations that it will provide, by March 1 of each year, starting in 1984, an annual report on maintenance operations (Section 3.07 of the draft Loan Agreement). Investment Program 44. DNPT has estimated that, based on highway needs for the period 1981-1990, DNV should carry out an annual investment plan of about US$350 million and complete a major program for the national network whose main components are: (a) the paving of 5,100 km of present earth and gravel roads (45% of the unpaved national roads); (b) the reconstruction and/or strengthening of about 19,500 km of the paved roads and (c) the construction of 1,200 km of freeways and urban bypasses. The physical condition of the network would gradually improve under this program but service levels may not change significantly because of traffic increases. The DNV has developed a four-year (1983-86) investment program in accordance with these objectives, but with a higher share of reconstruction vis-a-vis construction projects. The Bank considers the program as a whole balanced; the individual sub- projects already identified are well justified. The program would provide the necessary emphasis to prevent rapid deterioration of aged light pavements; and would support traffic safety-oriented projects and an adequate road maintenance program. Moreover, the program would assist in completing corridors which are needed to integrate outlying regions into the economy. Financing 45. DNV's funds are derived mainly from the earmarked portion of user taxes on the sale of fuels, lubricants, tires and motor vehicles. DNV's financial structure is sound with low debt leverage and its borrowings have  - 13 - been carried out on a commercial basis. For the 1983-86 period it is estimated that DNV's debt service payments would not exceed 28% of forecast tax revenues. In the context of the system of federal co-participation, DNV transfers 35% of its receipts of user taxes on fuel, lubricants and tires to the provinces for the contruction and maintenance of provincial principal roads which are complementary to the national system. In addition, the provinces received about an equal amount directly from the fuel taxes and additional funds from registration fees of vehicles. In 1979 the provinces spent about 40% more on their 62,000 km primary network than DNV did on its 38,000 km network. Past Bank Operations in the Highway Sector 46. Since 1961, the Bank has made four highway loans to Argentina for a total of US$228.5 million. With these, the Bank has helped to finance the construction or improvement of 5,500 km or 14% of the national network. In the course of this association, DNV has achieved considerable progress in its insitutional development, as confirmed in the Project Completion Reports for the Second and Third Highway Projects 1/. The most notable contributions have been in improving DNV's planning practices, in the preparation of methodologies and field surveys of the network, and in improving DNV's organizational efficiency and management procedures. These were supplemented by the studies prepared under the Fourth Highway project, i.e., the National Transport Plan, the highway needs study and the study on traffic safety. All these projects have been completed except the latest one (Fourth Highway Project: loan 1384-AR of May 1977) involving about 1,285 km of road works, of which about 75% were completed by January 1983. 47. The format of past projects was focused on a specified group of subprojects to be completed over a four-to-five-year period. The Bank's experience in previous highway operations shows that this format has not always provided sufficient flexibility, resulting in some substantial delays in periods of high inflation or fiscal restraint. Thus, the Project Completion Report for the Third Highway Project concluded that, by being tied to specified projects, the Bank was unable to meet the immediate needs of DNV as fluctuations in the economy altered investment priorities and the initiation of Bank subprojects was postponed. The proposed highway sector project addresses this issue. PART IV - THE PROJECT 48. The project was prepared by DNV during 1980 and appraised in February 1981. Thereafter, the Government requested that project processing be postponed because of restrictive investment budgets. The project was reappraised in December 1982 and March 1983. Negotiations were held in Washington from April 13 to April 20, 1983. The Government delegation was 1/ Second Highway Project, Project Completion Report dated November 30, 1978 and Project Performance Audit Report 2556 (see M79-476) of June 25, 1979; Third Highway Project, Project Completion Report dated January 30, 1981, updated and released with Highlights under M83-179 of March 3, 1983.  - 14 - headed by Ing. Julio Cesar Caballero, General Administrator of the DNV. A Staff Appraisal Report entitled "ARGENTINA - Highway Sector Project (No. 3530b-AR dated May 4, 1983) is being distributed separately to the Executive Directors. Special conditions of the Project are listed in Section III of Annex III. Objectives and Approach 49. The proposed project is directed at assisting in the implementaion of DNV's and the provinces' 1983-1986 Investment Programs. It would pursue the following sector objectives: (a) reorganization and strengthening of DNV's Planning Department and improvement of its operational procedures for updating the invest- ment program; (b) strengthening of provincial planning capabilities through the transfer of technology from DNV to the provincial authorities; (c) definition of appropriate road maintenance management system and budgetary requirements; (d) support to DNV's program for traffic safety; (e) maintenance of the dialogue between the Government and the Bank on sectorwide issues arising from the conclusions of the NTP, especially with regard to user charges and passenger transport regulation; and (f) establishment of the role of the DNPT and strengthening of that agency; 50. The appraisal of the proposed project confirmed that Argentina's highway sector is directed by an experienced and well-staffed institution. It also found that the Government's highway investment policies and program properly address the priority development needs of the subsector. Moreover, during long association with DNV, a relationship has developed in which the Bank's counsel on many aspects of DNV operations and highway issues is sought and accepted. Taking these factors into account, the proposed operation has been designed as a sector loan, addressing the upcoming part of DNV's Four- Year Road Investment Program. The specific works within the program to be financed by the Bank would be selected during the course of project implemen- tation in accordance with criteria and procedures agreed with the Bank. The sector format would be more effective than the traditional format whereby all project components are agreed in advance. It would provide DNV and the provinces the necessary flexibility in using the loan resources. The large number of subprojects and the advanced state of preparation of those making up the first year portfolio would provide a basis for timely disbursement. The proposed project would directly support further improvements in DNV's planning and evaluation capabilities, and would allow DNV, the provinces and the Bank to focus attention on the highway program as a whole.  - 15 - 51. The project components would include: (a) Civil Works: A variety of subprojects to be carried out by DNV and the participating provinces ranging from reconstruction of existing road sections, new construction of roads, construction of urban beltways and access roads to road marking and signing and betterment subprojects. The proposed sector project would help finance the new construction, reconstruction and the road improvement program for 1983-86. The initial candidate works include 19 road sections, variously scheduled for reconstruction, paving, upgrading or expansion, ranging from 10 km to 86 km and dispersed among 17 of Argentina's 21 provinces. Some are continuations of present or previous Bank projects; others were considered premature for earlier loans and are now more appropriate. (b) Traffic counters and related equipment: Equipment designed to assist in planning road investment and maintenance requirements; (c) Technical Assistance: Contracting individual experts with international experience for limited periods to: (i) improve DNPT's planning and executing capability; and (ii) supplement DNV's capacity to address such specialized or technical problems as road and bridge design; maintenance of bridges and mountainous roads; traffic safety; and investment programing. 52. The road works to be financed under the proposed loan would be chosen on the basis of DNV's revised procedures for updating the Four-Year Investment Program, which were developed in consultation with the Bank. As noted in para. 41, they focus on a more systematic identification, selection and evaluation of new investment items. In practice, DNV's Economic Studies Division and its consultants would prepare technical and economic feasibility studies. Moreover, agreed methods would be used in defining and estimating current and future traffic; user costs and benefits; feasibility indices; vehicle speeds with congestion; the social costs of urban bypass projects with substantial population displacement; and the required adjustment of fuel prices to reflect international price levels. 53. The reconstruction projects in the program generally coincide with the segments identified by the highway needs and pavement strengthening study carried out by DNV. This study is intended to identify deficient road sections of the national network and to evaluate project alternatives. About 10,000 km of roads are being reviewed annually with the more deficient sections selected for detailed study. Improvement alternatives are then assessed through the use of the Bank's Highway Design and Maintenance Model as modified for Argentina. In 1982, 6,400 km of the roads surveyed were identified for reconstruction. The economic rates of return (ERR) for the projects identified in 1982, either as reconstruction or betterment, most of which have been included in the Four-Year Program, ranged from 10% to over 100% with 85% of the projects having ERRs of over 25%. The NTP has confirmed the economic feasibility of the major upgrading and freeway projects included in the DNV program. Their ERRs ranged from 11% to 45%.  - 16 - 54. When presenting each subproject to the Bank for approval DNV would submit a technical and economic evaluation, including the rationale of the proposed works, the design standards, the alternatives considered, and the proposed tendering schedule (Section 3.03 (a) and Schedule 5 to the draft Loan Agreement). The results of the economic evaluation of a subproject would include an estimate of the first year's cost/benefit ratio, net present value and the economic rate of return. To test the sensitivity of the evaluation, critical variables would be adjusted in line with possible developments and new indices calculated. All subprojects selected for financing under the proposed loan, unless otherwise agreed to by the Bank, would have a minimum estimated economic rate of return of 12 percent (Section 3.03 (b) of the draft Loan Agreement). Once approved, the scope of a subproject would not be changed (Section 3.03 (c) of the draft Loan Agreement). In order to limit the supervision and documentation requirements and to concentrate subproject reviews on important items of DNV's and the provinces' program, subprojects submitted to the Bank would have an estimated cost of at least US$1 million equivalent. (Section 3.03 (d) of the draft Loan Agreement). During negotiations, DNV confirmed the status of project preparation and the tender and award schedule and agreement was reached on DNV's 1983 administrative and maintenance budget as well as on the updated 1983-86 DNV's investment program. In order to monitor the project, assurances were obtained during negotiations that the Government would hold semi-annual meetings with the Bank to review the status of the Four-Year Program, DNV's investment and operating budgets, its financial status and progress on the Bank-supported subprojects (Section 3.09 of the draft Loan Agreement). During these meetings, DNV would also report on the updating of its investment plans and on the progress of the transfer of technology program, traffic count and safety programs, while DNPT reports on the status of road user charges and fuel prices, investment update for each transport subsector, and the Government's actions on decentralization. Costs and Financing 55. In carrying out its long-term program, DNV is expected to maintain an annual investment level of over US$300 million. The sector project would help finance the 1983-1986 portion of the uncommitted new construction, reconstruction and improvements subprojects in the investment program of DNV and the provinces. The total cost to completion of these subprojects is US$690 million of which US$560 million (including US$56 million in value added taxes) would be executed from 1983 through 1986. Of this amount, about US$90 million represents provincial subprojects. The estimated foreign exchange component of this investment during the 1983-1986 period represents about 45% of total cost and is equivalent to US$250 million. The proposed loan includes about US$97 million towards the civil works cost or about 17% of the cost of the potential subprojects for the period; it would contribute about 7% of the total DNV investment program and the provincial subprojects to be financed during the same period. It is estimated that some 90 man months of consultant services (at an average fee of US$4,000 per month for local consultants and US$9,000 for foreign experts plus a per diem of US$3,000 per man-month and travel averaging US$2,500 per visit) will be required to carry out the studies to be financed by the Bank under the tech- nical assistance component. About one-third of total man-months is estimated to be provided by local consultants. The project would also finance the procurement of traffic counters (US$1 million) to replace outmoded equip- ment. An amount of US$1 million has been left unallocated.  - 17 - 56. Over the 1983-1986 period the DNV will need to contribute about US$1.1 billion towards the US$1.3 billion investment program. The remainder will be provided under the ongoing IBRD Fourth Highway Project (about US$40 million), the ongoing IDB Project (about US$100 million) and the proposed project. The local contribution will be obtained directly through the exist- ing system of assigned user taxes, mainly on fuels, lubricants, vehicles and tires. In 1983 DNV's revenues from directly assigned user taxes are estim- ated at US$422 million. These revenues cover most of DNV's expenditures for investments and periodic maintenance (US$328 million) operating budget including routine maintenance (US$93 million) and interest on debt and debt repayment (US$77 million). Loan Administration 57. Except for the studies which DNPT will administer, the project will be administered by DNV which will prepare and submit to the Bank for its review and approval all subprojects it proposes to be financed under the loan including those to be carried out by the provinces. Bank financing would be restricted to disbursements on civil works contracts pertaining to eligible subprojects awarded before January 1, 1986, and which would have an initial completion date prior to July 1, 1988. In order to allow Bank financing of subprojects already tendered following international competitive bidding procedures, retroactive financing for up to US$2 million for expend- itures made after January 1, 1983 is included in the Project (paragraph 4 of Schedule 1 to the draft Loan Agreement). The proposed loan would conse- quently be linked to financing a "time-slice" of expenditures on contracts of eligible subprojects approved by the Bank; thus, not all contracts would be completed when loan funds will be depleted. Assurances were obtained during negotiations that DNV and the provinces would complete the works for each approved subproject (Section 3.01(a) and (b) of the draft Loan Agreement). 58. For purposes of carrying out the improvements to the provincial roads, the Borrower, through DNV, would enter into an agreement with each participating province. Such agreement would provide: arrangements for the selection of the subprojects and the execution and supervision of the works; the financial arrangement for the execution of each subproject; and the prep- aration of a Four-year Road Investment Program. (Section 3.04 (a) of the draft Loan Agreement). 59. Declaring a subproject eligible would signify the Bank's agreement to help finance contracts related to the subproject, provided Government budget funds are allocated and that the tender process and detailed engineer- ing have been carried out in accordance with the agreed standards. Once a subproject has been declared eligible, DNV would complete its detailed engineering and proceed with procurement except for civil works contracts with an estimated cost over US$10 million, for which prior Bank approval of the contract documents would be required (para. Cl of Schedule 4 to the draft Loan Agreement).  - 18 - Procurement, Disbursements and Audit 60. Civil works eligible for financing under the proposed loan would be procured through international competitive bidding in accordance with Bank guidelines except for civil works estimated to cost US$3 million or less which would be procured on the basis of contracts in accordance with local competitive bidding procedures, while giving foreign contractors the opportunity to bid. The total contracts awarded under this procedure is estimated at 40% but would not exceed US$50 million. In view of the advanced development of the local contracting industry, foreign contractors are not likely to be competitive for civil works. These works typically consist of road improvements of limited lengths spread over the entire country and do not lend themselves to being combined in larger packages. Disbursements will be made only for approved subprojects and after the Bank has reviewed the related civil works contract. In the case of provincial subprojects, an agreement between the DNV and the province which defines the subproject and regulates loan repayments from the province to DNV would be required. The Bank would disburse at the rate of 45% of total expenditures for civil works which is the estimated foreign exchange component. The proposed loan would finance 100% of foreign expenditures for equipment and 100% of technical assistance costs. In order to avoid the delays encountered with other Bank loans, assurances were obtained during negotiations that the Government shall take all necessary actions, including exemptions under the current legislation, to enable DNPT and DNV to contract in a timely manner foreign consultant services as required for the purposes of the project (Section 3.02(b) of the draft Loan Agreement). The project timetable assumes tendering of about US$50 million for Bank-financed subprojects by end-1983. On the basis of the schedule for additional tendering and the procedures established for the proposed project, the loan would be disbursed in a 4-year period, i.e. by end-1987. 61. In order to reduce the interval during which DNV would finance the Bank's share of project costs with their own resources, Government may request the Bank to make advance payments from the loan account into a Special Account, to be opened in US$ in the Central Bank, and which will be available for financing the Bank's share of the project cost only. The amount deposited in the Special Account could be increased by the Bank as required for project execution, but would not exceed US$10 million. DNV would be entitled to make withdrawals from the Special Account in Pesos at the exchange rate applicable on the day DNV's payments were made on Bank approved contracts. The withdrawal applications for civil works would be on the basis of statements of expenditures covering the payments made by DNV for these specific contracts. Supporting documentation would not be submitted to the Central Bank and the Bank, but would be retained by DNV and made available for inspection during project supervision missions and would be subject to annual auditing. The Bank would replenish the Special Account upon request of the Central Bank on the basis of the withdrawals made. 62. DNV's accounting and financial functions are the responsibility of DNV's Administration Department, and are carried out by competent professionals. The external audit is the responsibility of the National Accounting Office (NAO). This Office is fully qualified for its task. During negotiations, the Government confirmed that, commencing with fiscal year 1983, it would have the Special Account and DNV's accounts and financial statement, as well as accounts and financial statements related to the subprojects, audited by the NAO.  -19 - Project Benefits and Risks 63. The experience gained under past Bank-financed highway projects and the selection and evaluation procedures to be employed assure that the subprojects to be selected would be economically sound. Specifically, no subproject would be approved unless it is expected to yield at least a 127. estimated economic return (para. 54). Furthermore, the project itself is designed to promote DLNV's more systematic selection and evaluation of projects by improving planning procedures. This, together with the additional institutional improvements in DNV and the provincial road agencies and the extension of DNPT's role, should produce substantial efficiency gains in the sector. Also, the planned broad geographic dispersion of subprojects should ensure widespread benefits, as would the competition in the trucking industry. 64. A furthier deterioration of the economy could reduce public revenues and, hence, cause delays in project implementation. However, since the project represents only a small percentage of the investment program and includes high priority works, and in view of the experience of the executing agency and the flexible implementation format of the project, the risk of delays in project implementation is low. 65. Another uncertainty concerns the extent to which the change in administration, scheduled for January 1984, might affect planned improvements in sector policies (i.e. road user charges). It is expected that the DNPT, established with the support of the Bank, will continue to be instrumental in shaping transport policy under the new administration. The proposed project is designed to maintain a close dialogue with the Government through periodic consultation and financing of technical assistance to the DNPT and the Subsecretariat of Transport. PART V - LEGAL INSTRUMENTS AND AUTHORITY 66. The draft Loan Agreement between the Argentine Republic and the Bank and the report of the Committee provided by in Article III, Section 4(iii) of the Bank's Articles of Agreement are being distributed to the Executive Directors separately. Special conditions of the loan are listed in section III of Annex III. 67. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 68. I recommend that the Executive Directors approve the proposed loan. A. W. Clausen President Attachments 1May 9, 1983 Washington, D.C.  ANNEX I Page 1 of 5 TABLE 3A ARGSNTTIr"DOCIAL INDICATORS DATA SHEET ARGENTINA REFERENCE GROUPS (WEIGHTED AVE"GES AREA (THOUSAND sq. KM.) - MOST RECENT ESTIMATE)- TOTAL 2766.9 MOST RECENT MIDDLE INCOME MIDDLE INCOME AGRICULTURAL 1785.2 1960 /b 1970 /b ESTIMATE /b LATIN AMERICA & CARIBSEAN EUROPE GNP PER CAPITA (USS) 650.0 1130.0 2390.0 1902.0 2323.9 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 1057.4 1611.4 1964.6 1259.9 2107.4 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 20611.0 23748.0 27740.0 URBAN POPULATION (PERCENT OF rOTAL) 73.6 78.4 82.4 65.7 47.9 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 34.3 STATIONARY POPULATION (MILLIONS) 42.7 YEAR STATIONARY POPULATION IS REACHED 2075 POPULATION DENSITY PER SQ. 101. 7.4 8.6 9.9 35.2 83.3 PER SQ. KM. AGRICULTURAL LAND 12.0 13.4 15.3 92.5 155.4 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 30.8 29.1 28.2 39.7 31.1 15-64 YRS. 63.7 63.7 63.3 56.1 61.2 65 YRS. AND ABOVE 5.5 7.2 8.5 4.2 7.7 POPULATION GROWTH RATE (PERCENT) TOTAL 1.8 1.4 1.6 2.4 1.6 URBAN 3.0 2.0 2.1 3.8 3.5 CRUDE BIRTH RATE (PER THOUSAND) 23.7 21.8 20.7 31.4 23.6 CRUDE DEATH RATE (PER THOUSAND) 8.6 8.6 8.4 8.4 9.2 GROSS REPRODUCTION RATE 1.5 1.5 1.4 2.1 1.6 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. USERS (PERCENT OF MARRIED WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 96.0 101.0 118.0 110.0 116.0 PER CAPITA SUPPLY OP CALORIES (PERCENT OF REQUIREMENTS) 125.9 130.1 124.21c 108.4 125.1 PROTEINS (GRAMS PER DAY) 107.1 108.7 107.87T 66.0 92.7 OF WHICH ANIMAL AND PULSE 66.4 68.9 70.07E 34.0 35.9 CHILD (AGES 1-4) MORTALITY RATE 4.4 3.4 2.4 5.6 9.2 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 65.4 67.9 70.4 64.2 67.6 INFANT MORTALITY RATE (PER THOUSAND) 60.6 53.9 45.2 64.2 65.1 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL 47.3 56.0 66.0/d 65.6 URBAN 58.9 69.0 76.07- 78.9 RURAL 9.6 12.0 26.0o7 43.9 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 85.0 97.0/d 59.3 URBAN .. 87.0 lo0.0oT 75.3 RURAL .. 79.0 83.0o7 30.0 POPULATION PER PHYSICIAN 740.2 490.5 527.1/d 1617.3 1105.4 POPULATION PER NURSING PERSON 754.9/e 636.8 .. 1063.5 634.4 POPULATION PER HOSPITAL BED TOTAL 157.4 175.0 .. 477.4 286.8 URBAN 188.7/e 199.0 .. 679.8 192.0 RURAL 4477.2T. 998.4 .. 1903.4 ADMISSIONS PER HOSPITAL BED .. .. ,. 27.3 20.0 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 3.7 3.8 URBAN 3.5 .. .. . RURbL 4.3 .. AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 1.4 1.4 URBAN 1.3 .. RURAL 1.7 . ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 69.2 76.0 URBAN 84.7 .. RURAL 18.6 ..  - 21 - ANNEX I Page 2 of 5 TABLE 3A ARGENTINA - SOCIAL INDICATORS DATA SHEET ARGENTINA REFERENCE GROUPS (WEIGHTED AVE%AGES - DOST RECENT ESTIMATE)- MOST RECENT MIDDLE INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b IATIN AMERICA & CARIBBEAN EUROPE EDUCATION ADJUSTED ENROLLMENT RATIOS PRDIARY: TOTAL 98.0 106.0 110.0/c 104.3 102.4 MALE 98.0 106.0 110.07T 106.4 107.1 FEMALE 99.0 107.0 iii.07 103.3 99.0 SECONDARY: TOTAL 23.0 45.0 56.0/c 41.3 60.2 MALE 23.0 42.0 52.077 40.4 66.4 FEMALE 24.0 48.0 61.07; 41.8 54.0 VOCATIONAL ENROL. (1 OF SECONDARY) 50.3 58.4 65.8 33.7 31.6 PUPIL-TEACHER RATIO PRIMARY 22.0 19.2 18.5/c 29.9 25.8 SECONDARY 7.4 7.3 7.5 16.7 22.2 ADULT LITERACY RATE (PERCENT) 91.0 92.6 93.0 79.1 75.9 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 23.0 60.6 81.0/f 42.8 51.0 RADIO RECEIVERS PER THOUSAND POPULATION 169.8 379.0 379.3 270.5 157.2 TV RECEIVERS PER THOUSAND POPULATION 21.8 147.4 172.6 107.7 123.7 NEWSPAPER (-DAILY GENERAL INTEREST-) CIRCULATION PER THOUSAND POPULATION 154.6 178.8 95.1 63.7 112.3 CINEMA ANNUAL ATTENDANCE PER CAPITA 7.0 4.2 2.5 2.7 4.0 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 8134.0 9215.8 10637.1 FEHALE (PERCENT) 21.4 24.7 26.3 24.4 36.6 AGRICULTURE (PERCENT) 20.0 16.4 13.1 31.3 38.7 INDUSTRY (PERCENT) 35.9 32.1 28.0 23.9 25.9 PARTICIPATION RATE (PERCENT) TOTAL 39.5 38.8 38.3 33.6 44.5 MALE 61.0 58.1 56.4 50.4 56.3 FEKALE 17.2 19.3 20.2 16.8 32.8 ECONOMIC DEPENDENCY RATIO 0.9 0.9 1.0 1.3 0.9 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 27.5 HIGHEST 20 PERCENT OF HOUSEHOLDS 50.9 50.3 LOWEST 20 PERCENT OF HOUSEHOLDS 6.9 4.4 LOWEST 40 PERCENT OF HOUSEHOLDS 16.6 14.1 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. RURAL .. .. .. 184.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 653.0/d 518.0 RURAL .. .. 577.07i 371.1 406.6 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. RURAL .. .. Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1978 and 1980. /c 1977; /d 1975; /e 1962; /f 1976. May, 1982  ANNEX I DEFINITIONS OF SOCIAL INOICATORS Page 3 of 5 etes: Although the data are drawn free sources generally judged the mast ath-oritatite and reliable, it should else be noted that they -y sot be ieter- a=tionally coparable because of the tack of stsodordieed defieitions and coucepts used by different co.netris to collecting tbe dats. Tlb dtears, eose- theless. usefol to destribe orders of aglanitds. indicatetreods, and charactrtee certaie majur differences betness cou.r. io.s The referente groaps aro (1) the same couctry group of ith suhbject cotcry and (2) a country group iuh soeshat higher average incom than the country group of the subject country (accept for "High Incom Oil Euporterl" group share 'Middle Incoe NMrth Africa and Middle fast" in chesen because of et-os-r socto-colcoral aifinities). In the -foirence grop data thl averages are popolation eightod arithetic eans for each indicator and shown only when majority of the countries tn a grouP has data for that indicatr. Sinte the coverage of countries among the indicators depends sn the availability of dars end is not uifore, caotiou est be e rcisaed iS relating averages of one indicator to aooher These averages are ooly usefol is co paring th. value of seindicator at a rise asog thelcountry ad referenc groups. AREA (tho.ssnd sq.km.) Populatian per Hospital bed - calra, urbao, and roeal - Populetion (total. Total - Total surface area comprising land area and inland cetera; 1979 dat. urban, and rural) divided by their respe tive noeber of hopital bode Aericulcoral - Estietse of agricelural a rea used tespoonrily or permanently evailable in ptblic and prIvate general and spociolised hospital and e- far crops, pasrurss., mrket and kitchen gardena -r to lie falle; 1979 dat. babilitatt cente r sci. istaln ar:staItbmeh-ts permanently staffed by at leas.t one pbys iciso. sE-blisbhnret p-Vidisg principally cease.- GNP PER CAPITA (US$) - SNP per capita esti-tee or current market prices. cal- dial oars are no lncluded. Rural hospitals, however, inlIude hb etb enlated by sa conversion methed an World bask Atlac (19738-0 basin); 1960, and mdical censers cot pereorsitly staffed by a physician (hat by a 1970, and logo dta. edical assisact, nuese., idwife, etc ) vhich offer tn-patIn -t acceme- ENERGY CONSUMPTION PER CAPITA - Annual ...... Pti. of cot rci energy, Icoaldotiton and provid e liIpited range of sedicel facilities. Per t tis- and lignite, petroleum, atulral oat end hydro-, nuclear and gBothermal elec- and rural hospitais, lcanl or raral hospitals and mdical sad naternity tricty) in hilograss ot coal equivalent pen cepita; 1960, 1970, and 1979 centers. Speca.liged hospitals are included only under total. data. Admieian e Haspito1 Bad - Total sasber of adeisetic to or dienharges frem hospitals divided by the smbe of beds. POPUIATION AND VITAL STATISTICS Total Popuiation, Mid-YTar (thousands) - As of July 1; 1960, 1970, and 1900 HOUSING dea. Average Sine of E oi I obhld (persons per bousehold) - total urban, ad coral- Urban Population (percent of total) - Batio of urban to total population; A household consists of a group of individualn who shar living qoartare different definlitions ot obn amen may offact cosperability of data and their main als. A boarder or lodger my or may net bh included in emeng noastrien; 1960. 1970. and 1980 data. the household for staietical purposes. Populaton Projections Aversan number of persons par coon- total, urban, and rural - average pu_ Poeulation in year ZOSS - Current population projections are based on 1900 her of persons per room to al urba, and renal occupied conve-tiosal total population by age and sex and their marcallty end fertility rates. danllings, respectiely. Dwellings -oclode nos-pormaseet structurns and Projectlon yarmeater_ for mertality rnet cooprine of tbres levels aI . ue- noOCoapied parts. leg life enpocceecy at birchincreaing etch couotry' per acpita income knees to fecreiciy (percent o.fldveliogai) - coral, o-ban, aed --ra - level, and fols life ropeccncy etabilieing at 77.5 y-er. Theipace- Coovantiona danling with electri ivg qe . lertr as Fr - meters foe f-rtility rate Isle h-vo three leva1s aesusuig decline in of total, acbhn, and rural denllings respectively. fertility acoordiog to icome levnl and past fosily planning perfortance. Bach country in then ossiegnd 0n0 of these nine co-binatioee of mortolity EDUCATION and fortility trends for projection y .rpone.. AdJted ESrollnnt fatios Sttionary yo aio-In .astationary popIliaio Ihere it no groth since Primar chboo - total, male and female - free total, male and feml the birth rate is nqaal to the death eats, and aoo th ig Dtgr aohsine enoro 1:eet of all agne at thl primary lv1 an pe - - ag- of espg mains conetant h Tis is achieved only after beotility rates decltne to primary school-_ag populatians; normally includes children eged 6-11 the replacement level of unit not reproduction rare abet each generati_n years hut adju-ted for differeot lengths of poicmay edneetion; fer of womlen replaces itself eoactly The stationery papolation size was countrios with universel ecatios enrollmnt ay ensed 100 portent e.timted .o the bania of t%tprjed cf the populatcon itne some pupila afe belov or nibve tha offieial ohool age. in the year 2000, and ths rate of declinr of fertility rate so replace- Secondary schoal - total, ale and female - Computed as .bov .seeondary ent level. oducatio requires at least foer years of appnoved primary istrueltin; Tear otelio.ary population in reached - The yoar when stationary population yooVide gn l voctinaIl, or teacher training inst-tctions for popila ai_ sill he rehachd. _snal of 12 to 17 yav- of age; ,vrropotd..e.e . ooner are generally Puralatino Den.ity excluded Pen eq. h - Oid-year popclation per aquare kilometer (100 hectares) of Vocational onrollment (percent of seoondary) - focational institotions tlatl area; 1960, 1970 and 1979 data include tethoicel, industrial, or other progrn wh hich operate itdepsod- er sq. k. agricult_ral land - Ccnpud atahoon f.o gricultural led ently or en departmnts of secondary institations. only; 1960, 1970 and 1979 data. Pupil-teach-r ratio - primary and secondary - Total stodents enrolled in population Age Structure (percent) - Childre. (0-14 yeala), working-age (15- primary and nce-ndary levels divided by nvohern of teachrer in the 64 y-ao), and retired (65 ynars and over) no percoo-gen of mid-yssr popo- ccornspoodig~ borI letion; 1960. 1915, and 1990 data. Adult literacy rate (percent) - Litertee adlts (able to read sod write) population Gvtb,h Bate (percent) - total - Anneal growth rater of total rid- asapercentage of total adult population aged 15 years and over year popolation far 1950-60, 1960-7, and 1970-b0. Population Iroth Bats (yercent( - orho - Annual groeth ratee of urban ypcp- CSONSUMPTION lation. for 1950-hI. 1960-70, and 1970-0. Pasengerg Cart (per thousand population) - Pa.e.nger cers cogp.rlie meter Crude girth Bate (por thousond) - Anun1 live births per thousond of mid-yero cars seatiog teas than eight persons; -ocladen ambuleoces hearses and population; 1960, 1970, end 1980 data, ilt try vehIcles Croda loath Raco (Per rho....d) - Annual deaths per thou...od of mtd-yoar Radio Eacielver (per thoesand poyolatlon) - All types of rofemfor radio population; 1960, 1970, and 1900 date. bRoadi eIta to gnv puhlic pe lthoo-aed of population et cl de i an- roes Roproductios Bate -Average number of dacghtlrr a sumacvill bear in licensed receilers ino year hen registrarion of radio hor norsal reproducctiv peciod if she noperience- proon. t a0ge-sp icfic ir- sete eat in effect; data for recent yoaru ay not be ooParable ince tility rates; usually ftvn-y..r averages. sdditg in 1960, 1970, and 1990. scat contries abolished licensing. Peety Plnoo-Accccor., AnnoI (,houde- Au..uaI nashr of eccptor TV Eneer (co thousan d -opultio)-T sevrafrbodatt of birth-control doctrs under .uspice. of national family ylonning yrofram general pubiic per thousand population; oxcludes unlicensed TV receivers Paeily Planonang-l _ern (percut. of mairind omen) - Percctcage of married in coontris and in yearn shea registration of TI sets see in effect. wo es of child-bearing age (15-44 yearn) who use birth-coutrol devices to Ntewpayer Cireulation (per thouatnd pcopltion) - ihans the average rir- all married some to same ego group. colatin of "daily general interest e.sp.per", defined asa peri dic.l publication devotod primarily to recording genora1 nes.It in =osideed FOOD AND NUTRITION to be "daily" if it appFari at laeanI.t fn times Ia wek. Indm of Po;od Producto per Capita (1969-1=100) - Indec of per c-piteo.-..I Cinem Aecul Attendance per Coic. perYe -oar-Beend an the -b-re of prodIetFoo ci all foo d comdicios -Prdaccen excludnn eed and fond and tiokot old during thet year. inclldiog distiote to dome-in J.seme is on calendar year beas. Come ditioec covr primary goods (e.g. nogorc.ne and mebile nitt. instead of sugar) which are edible and contain nuttinotn (e.g. coffee and tea are ecoluded). Aggregate production of snoh country is bhasd on LABOR FORCE nationel average producer price anighto; 1961-6, 1970, and 1900 data. Totl1 labor Force (thou.ands) - Et.onoic-lly notive persone, including Per capito snpc1p of calories (percent of requirve.nt) - CD-pnrnd tree armd forces and unemployed bhe enclading hoa..eiv-e, students. etc., energy equivalent of net food -upplien available i= country per capita coveri`g populatio of all ages. Definitions in variaos coantnies ore per dy. Available nupplito -oprins doesptic rdctiot, inpon loss not co .aeabin; 1960. 1970 and 1900 dat. exports, end changen in stock. N-t spplirn -cclode animal feed, sendn, FPml (percent) - Femal. labor fotcean percontage of total labor forc. qvantiticauted in food pcucnssilg, and louses in di-trtbutionb Reqire- Agriculcure (procant) - Lahor forca in farming foretry, hooting and ments 0000 natieItd by FAO hated on physiological needs for normal atti- fishing as peccentage of total labor forc,; 1960, 1970 and 1980 data vity and health co.nideling .nviro...tal tmperlture, body oights, ago Industry (percent) - Labor force in mining, conatrrution, man9fantorieg and non diutribhtien of population, and allowing 10 percent for .anto at and electricity, veter and gee an percentage of total labor forte; -esbodlvr; 16-65. 1970 end 1971 data. 190.190 ynd1900 deta. Per capito sopply of protein (g-ana per day) - Prootic content of per capita Participation face (portent) - total, mae, nd female - Participetian or set supply of food pot dy. Net supply of food is defined a above. Re- activity rates are computed as tot mle and female labor foresee qairemence for all 60 ofIentotai - linbed by USDA prucide for =inima= percenige of tol, mle and fetmle populatiOn f all agee ep-etivly; aloaceof 60 gree uf total protnia pEr dey end 70 frame ot ntma and 196f. 1970, and 1900 date. The. sear base.d on ILO's partioipetiae rates pulse procein, of ohich 10 grashs hould bi animal protin. These ntad- roflecting age-ann .lrtotuce of the population, and long tim tred. A ards arc lower than thins of 75 grass of total proltei and 23 grass of fee nstins ure from natioal s..r.en animlA poo Srvei no 6nerge ton its world, proposed by FAO in the Third tonceic Drepodenr y Ratio - Ratio of population ander 15 and 65 and ever Wnrld Pood Surory; 1961-65, 1970 and 1977daa to the totaIllbor force. P"r capita proceti supply frot eeie-l and pulae - Protein supply of food do- rived from esimels end pulses to green pet day; 1961-56, 1970 and 1977 data. INCOME DISTRIBUTION Child (ages 1-4) Leath Rate (per thVnaend) - Annual deathi per thoua.nd in Percentage of Private Income (both in oaeh and kind) - R-aeived by rieheet age gratp I .tern, c ch1idtr in th is age groep; for me t dev-loping coos- 5 polrcnt, richeet 2o peroot., poorest 20 percent, and poorest 40 percent trios data derived item lifo tables; 1960. 1970 end 1980 data. sf housholds. HEALTH POVEb-TY TARGET GROUPS Lif,e 3lpoo tency at Hieth (years) - Average ousb,r cf years of life remaining The following stimaten ars very approxSante esauree of poverty levels. at birth; 1960. 1970 and 190 data. and shoald be interpreted mith .oniderable caution. Infant HBrtality bate (per thonond) - Annul deaths of infanto undr one year Estimated Absolute Poverty Incom Level (U50 per capita) - urban end rural - of age per thousand live births; 1960, 1970 and 1990 data. Absolute poverty income level is Nb; isnom level below whith a minim A.cese so Safe Seine (rereont of pop.lacito) - total, ocbhe, and rural - Nm- nutritionally adnq-ate diet plus essential see-food reqoiremsts is sot boo of people (total, urban, and rural) with resonableaeeetosafe affordable. water sapply (ineludn treated surf ace wetirs or untreated bat oncontaminted Estimated Relative Poverty Incom Level (L3S pee c.pita) - urban and coral - water snob as that from protected broholes. springe, and sanitary wlls) as REnAl rlative pevarny income lrvel in one-third of average per -epite Porcaniges of theit -papetive populations. Is en urban area apblic pereoal, locoe of rho enancry Irhn level is derived tree the rura fecItagi or theprt ta.card sotn mre thou 200 eters frol a houre may be Level with adjuetmet for higher c.at of livig in uriba apsem. easidered as being within reasonable access of that house Istat areas EBatSated Population Below Absolate Poverty lncome Lvel fone.to) - urban ransanable access would imply that the hoees.ife so mebers of the household and rural - Percent of pepulatian (onban nad coral) who areabsote do not have to spend a diyroportponlt te pact of the day in fetching the per". faily'a water sand. Aceese to E-treta Dia.osal (percent of ropulation) - tonal, urban, .Ad carol - NBerbs of people (total., urba and rural) served by secrets disposal as perneetagem of ehair respantive populations. Bcreta dispessl ay include the nellntion and diapossl. wIth or wliteos tr-tm of ht sennta end est-t-er by eatsc-honoe myst or the ass of pit privies ed simi- let iktclitisos. fp.M pn PhyicLa - Papaletios divided by ember at pretisieg physi- F-aI. and Benia1 Dana Birisia cBi iii PiifLf1 a s -dcinl scheal t aniverisy i evel. ran Aslyia sd P-jeatties Dopstme Po0aiseti e p erates Per1an - Populatios diVidad by b-r of pr-ttiaiDg May 1982 maime*d fo1m agredoate esrsee, assist mast sers pr_itioal ms gse ad esemig ilccries.  - 23 - ANNEX I Page 4 of 3 ARGENTINA ECONOMIC DEVELOPMENT DATA ACTUAL ESTIMATED PROJECTED Avg. Ann. Growth Rates As Percent of GDY NATIONAL ACCOUNTS 1980 1981 1982 1983 1984 1970- 1976- 1982- 1980 1982 1984 75 81 84 (Millions of US$ at 1978 Prices and Exchange Rates) (Percentages) - Gross Domestic Product 72,681 67,942 64,137 66,061 69,396 2.8 0.8 3.9 99.1 99.7 99.6 Gains from Terms of Trade 647 189 170 190 250 0.9 0.3 0.4 Gross Domestic Income 73,328 68,131 4,307 66,251 69,646 2.9 0.7 4.0 100.0 100.0 100.0 Imports (inc. NFS) 10,503 9,342 5,115 5,294 5,506 2.8 16.3 3.7 14.3 8.0 7.9 Exports (inc. NFS) Import Capacity 7,999 9,222 7,325 8,321 8,903 -0.1 5.6 9.8 10.9 11.4 12.8 Resource Gap 2,504 120 -2 ,210 -3,027 -3,397 3.4 -3.4 -4.9 Consumption 55,439 52,039 49,127 50,600 52,691 3.5 2.3 3.5 75.6 76.4 75.7 Investment 20,393 16,212 12,970 12,624 13,558 1.9 -0.1 2.2 27.8 20.2 19.5 Domestic Savings 17,889 16,092 15,180 15,651 16,955 0.2 -5.6 5.5 24.4 23.6 24.3 National Savings 17,178 14,498 10,615 12,938 14,050 0.5 -9.3 14.0 23.4 16.5 20.2 MERChANDISE TRADE (Current US Dollars) (As % of Total) Imports (c.i.f.) 10,541 9,380 5,350 5,545 6,113 100.0 100.0 100.0 Capital Goods 2,392 1,900 1,000 950 1,100 22.7 18.7 18.0 Intermediate Goods 5,517 4,938 3,200 3,695 4,013 52.3 59.8 65.6 PeLroleum Products 1,075 1,022 800 700 750 10.2 15.0 12.3 Consumption Goods 1,857 1,520 350 200 250 17.6 6.5 4.1 Exports (f.o.b.) 8,021 9,143 7,600 9,163 9.607 100.0 100.0 100.0 Primary Products 5,882 6,658 5,244 6,950 6,677 73.3 69.0 69.5 Manufactured Goods 2,139 2,485 2,356 2,213 2,930 26.7 31.0 30.5 Merchandise Trade Indices (Average 1978 - 100) Export Price Index 145 132 130 140 154 Import Price Index 121 115 115 123 134 Terms of Trade Index 120 115 113 113 115 VALUE ADDED BY SECTOR (Millions of US $ at 1978 Prices & Exchanges) (As % of GDP) Agriculture 9,085 9,444 9,877 10,511 10,350 2.6 0.1 2.3 12.5 15.4 14.9 Industry 27,764 24,323 22,834 24,090 26,258 3.2 -0.8 7.0 38.2 35.6 37.7 Services 35,832 34,175 31,426 31,650 33 038 2.6 2.0 2.5 49.3 49.0 47.4 Total 72,681 67,942 64,137 6,251 6 6 PUBLIC FINANCE (General Government) (Billions of Pesos) Current Receipts 74,216 128,724 337,800 1,143,449 26.3 21.5 Current Expenditures 63,675 127,923 300,670 855,261 22.6 19,1 Savings 10,541 802 37,130 288,188 3.7 2.4 Transfers (net) -2,597 -4,852 -8,690 -45,311 -0.9 -0.6 Investment 17,355 34,419 78,550 357,384 6.2 5.0 Surplus/Deficit* -9,152 -38,007 -48,450 -20,521 -3.2 -3.1 LABOR FORCE AND PRODUCTIVITY (1981) (1,000 Persons) (X) Value Added Per Worker (US $) Agriculture 1,450 13.1 6,513 Industry 3,099 28.0 7,849 Services 6,520 58.9 5,242 Total/Average 11,069 100.0 6,138 MONEY, CREDIT AND PRICES (Million $a Outstanding End Period) Money and Quasi Money 91,208 188,058 312,620 Credit to Public Sector 15,929 98,339 171,942 Credit to Private Sector 111,914 318,511 526,224 Money and Quasi Money as Z of GDP 32 34 Wholesale Price Index (1970-100) 2,091 4,382 15,610 Annual percentage changes in: Wholesale Price Index 75 110 256 Bank Credit to Public Sector 250 517 75 Bank Credit to Private Sector 137 185 65 *Does not include capital receipts, financing by previous budgetary funds and interest as amortization.  24 - ANNEX I Page 5 of 5 1976 1977 1978 1979 1980 1981 1982 BALANCE OF PAYMENTS Exports (incl. NFS) 4,752 6,769 7,714 9,601 10,763 11,563 9,431 Imports (incl. NFS) -3,597 -4,892 -5,248 -9,253 -13,980 -12,542 7,179 Resource Balance 1,155 1,877 2,466 348 -3,217 -979 2,252 Net Factor Service Income -508 -618 -681 -920 -1,502 -3,700 -4,705 Net Current Transfers 18 31 48 35 30 -23 31 Balance on Current Account 650 1,290 1,833 -537 -4,689 -4,702 -2,422 Direct Investment - 136 274 265 739 927 295 NeL Public MLT Borrowing 1,351 356 1,048 1,035 2,629 3,971 175* Net Private MLT Borrowing -121 519 1,132 1,777 1,068 4,682 1,060* Use of IMF Resources 235 -115 - - - - - Short Term Capital Transactions -923 31 -1,215 1,610 -1,466 -5,113 -2,405 Capital Transactions n.e.i. -1,227 -3 174 292 -1,018 -3,572 557 Change in Reserves (- = increase) 35 -2,214 -3,246 -4,442 2,737 3,807 2,740 GRANT AND LOAN COMMITMENTS Public M&LT Loans 1,909 1,718 2,768 3,505 3,049 3,773 IBRD 115 205 165 306 27 368 TO0 Other Multilateral 175 148 231 328 44 321 170 Bilateral 159 127 91 52 115 9 Suppliers 214 394 376 553 265 1,637 Financial InsLitutions 1,246 844 1,905 2,267 2,598 1,438 DEBT AND DEBT SERVICE Medium and Long-Term Total Debt 5,880 7,003 9,850 13,996 16,780 21 367 19,819 Public Debt Outstanding and Disbursed 4,429 5,033 6,748 8,557 10,187 13,901 14,210 Interest on Public Debt 264 318 503 568 841 1,058 1,378 Repayments on Public DebL 604 722 1,615 895 1,146 1,092 1,234 Total Public Debt Service 869 1,040 2,117 1,463 1,987 2,150 2,612 Private Debt Outstanding and Disbursed 1,451 1,970 3,102 5,439 6,593 7,466** 5,609 Interest on Private Debt 92 104 197 261 535 685 739 Repayments on Private Debt 476 540 494 415 1,125 1,526 2,722 Total Private Debt Service 568 644 691 676 1,660 2,211 3,461 Total Debt Service 1,437 1,684 2,808 2,139 3,647 4,361 6,073 BURDEN ON EXPORT EARNINGS (%) Total Debt Service 30.3 24.9 36.4 22.2 33.9 37.7 64.4 Public Debt Service 18.3 15.4 27.4 15.2 18.5 18.6 27.7 Private Debt Service 12.0 9.5 9.0 7.0 15.4 19.1 36.7 AVERAGE TERMS OF PUBLIC DEBT Interest as Z Prior Year DO&D 5.6 7.2 10.0 8.4 9.8 10.4 9.9 AmorLization as % Prior Year DO&D 13.4 16.3 32.1 13.3 13.4 10.7 8.9 (Estimate) EXTERNAL DEBT BY CREDITOR (Disbursed Only December 31, 1981 December 31, 1982 Total M & Lt Public Debt 13,901 14,210 IBRD 406 431 Other MultilaLeral 804 668 Bilateral 384 298 Suppliers 1,093 992 Financial Markets 11,214 11,821 IBRD EXPOSURE 1976 1977 1978 1979 1980 1981 1982 IBRD Debt O&D 343 343 352 367 404 406 431 IBRD DebL as % of Public DO&D 7.7 6.8 5.2 4.3 4.0 2.9 3.0 IBRD DebL Service 44 46 50 59 71 85 87 IBRD Debt Service as % of Debt Service 5.1 4.4 2.4 4.0 3.6 4.0 3.3 * Includes Arrears ** EstimaLe; does not include short-term debt rolled over for 18 months under an exchange rate guarantee scheme. May 2, 1983  - 25 - ANNEX II Page 1 of 5 THE STATUS OF BANK GROUP OPERATIONS IN ARGENTINA A. STATEMENT OF BANK LOANS (As of December 31, 1982) Amount less Undis- Loan No. Year Borrower Purpose Cancellations bursed (US$ million) Fully disbursed loans 481.0 1330 1977 SEGBA, S.A. Power 115.0 14.8 1384 1977 Argentina Highways 104.7 50.0 1463 1978 Banco Nacional Industrial de Desarrollo Credit 100.0 15.8 1521 1978 Argentina Grain Storage 105.0 101.6 1677 1979 Ferrocarriles Railways Argentinos S.A. 96.0 64.5 1761 1979 Argentina Yacyreta Power 210.0 200.9 1880 1980 Yacimientos Petroliferos Oil and Gas Fiscales Engineering 27.0 3.9 1905 1980 Argentina Vocational Training 58.0 58.0 S-020 1980 Argentina Coal Exploration 10.0 9.5 2031 1981 Banco Nacional Oil and Gas de Desarrollo Credit 100.0 100.0 2032 1981 Yacimientos Refinery Petroliferos Conversion Fiscales 200.0 200.0 2063 1981 Banco Nacional Industrial de Desarrollo Credit II 100.0 100.0 Total 1,706.7 Of which has been repaid 297.1 1,409.6 Amount sold 12.8 Of which has been repaid 12.8 0.0 Total now held by Bank 1,409.6 Total undisbursed 906.0  - 26 - ANNEX II Page 2 of 5 B. STATEMENT OF IFC INVESTMENTS (As of December 31, 1982) Fiscal Amount in US$ million Year Obligor Type of Business Loans Equity Total 1960 Acindar Industria Steel Products 3.7 - 3.7 Argentina de Aceros, S.A. 1960 Papelera Rio Parana, S.A. Pulp and Paper 3.0 - 3.0 Engranajes, S.A.I.C. 1961 Fabrica Argentina de Automotive 1.5 - 1.5 1962 PASA, Petroquimica Petrochemicals 3.0 - 3.0 Argentina, S.A.I.C. 1965/ 1972 Celulosa Argentina, S.A. Pulp and Paper 12.5 - 12.5 1969/ 1975 Dalmine Siderca, S.A. Steel Products 17.0 - 17.0 1969 Editorial Codex, S.A. Printing and Publishing 5.0 2.0 7.0 1971/ 1973 Galera Avellaneda, S.A. Cement 5.5 - 5.5 1977 Alpargatas S.A.I.C. Textiles & Fibres 7.0 - 7.0 1977 Soyex S.A. Soybean Processing Plant 9.0 - 9.0 1978 Massuh, S.A. Pulp and Paper 8.0 - 8.0 1978/ Juan Minetti, S.A. Cement and 81/82 Construction materials 74.0 - 74.0 1978/ Ipako-Industrias Chemicals and 79/82 Petroquimicas Petrochemicals Argentinas S.A 20.0 - 20.0 1979/ Alpesca S.A. Fisheries 5.2 0.9 6.1 1983 Total Gross Commitments 174.4 2.9 177.3 Less Cancellations, Terminations Repayments and Sales 103.7 2.0 105.7 Total Commitments Now Held by IFC 70.7 0.9 71.6 Total Undisbursed 24.7 0.4 25.1  - 27 - ANNEX II Page 3 of 5 C. PROJECTS IN EXECUTION (As of December 31, 1982) Loan No. 1330-AR Electric Transmission and Distribution Program: US$115.0 million loan of November 1, 1976; Effective Date: Janury 10, 1977: Closing Date: December 31, 1983. The execution of the project initially was delayed but has been proceeding more satisfactorily according to a revised schedule prepared in March 1980. Some 90% of the project works are now in operation. There remain to be completed primarily the acquisition and installation of 132KV substations. 1384-AR Fourth Highway Project: US$105.0 million loan of May 16, 1977; Effective Date: December 13, 1977; Closing Date: June 30, 1983. After a delay of about two years because of the Government's efforts in 1978 and 1979 to reduce public expenditures, the civil works component is in full execution. Forty civil works contracts are in execution and are expected to be completed by end 1983. The remaining eight contracts are to be retendered in 1983. Other project components are being implemented satisfactorily. An extension of the Closing Date will be required. 1463-AR Industrial Credit Project: US$100.0 million loan of September 23, 1977: Effective Date: November 28, 1977; Closing Date; December 31, 1983. The US$99.5 million of loan funds available for onlending has been almost completely committed by BANADE. 1521-AR Grain Storage Project: US$105.0 million loan of June 29, 1978, Effective Date: November 28, 1978; Closing Date: June 30, 1983. The Government recently proposed redesigning the Grain Storage Project. It has proposed a line of credit to the private sector for construction of new large grain storage facilities; smaller silos in lesser developed northern regions to be built by the Grain Board; expanded railroad improvements supporting grain movements; and engineering design of proposed port improvements. These are now being reviewed by the Bank and, if approved, an extension of the Closing Date would be required.  - 28 - ANNEX II Page 4 of 5 1677-AR Second Railway Project: US$96.0 million loan of November 8, 1979; Effective Date: May 6, 1980; Closing Date: June 30, 1983. The project is about one year behind schedule; it is now being implemented in accordance with the revised investment plan agreed by the Bank and the Government. Orders for US$80 million of Bank financed equipment have been placed. Progress in line closures, rationalization of services, staff reductions and operating improvements are in line with or above appraisal targets. Financial targets have not been met, mainly because of lower than expected traffic and inadequate tariff increases. An extension of the Closing Date will be required. 1761-AR Yacyreta Hydroelectric Project: US$210.0 million loan of November 6, 1979; Effective Date: July 7, 1981; Closing Date: June 30, 1987. Project execution has not begun because of protracted delays in the award of the main construct-in contract. The Governments of Argentina and Paraguay are now reviewing an offer from the two lowest bidders, who have formed a joint venture. 1880-AR Oil and Gas Engineering Project: US$27.0 million loan of October 3, 1980; Effective Date: December 2, 1980; Closing Date: June 30, 1983. Project implementation is now proceeding satisfactory with initial work having commenced on all the major components. Contracts have been awarded for auditing of reserves, conducting seismic surveys and for carrying out the gas optimization study. A limited extension of the Closing Date will be necessary to complete the last mentioned study. S-020-AR Coal Exploration Project: US$10.0 million loan of May 13, 1981; Effective Date: April 7, 1982; Closing Date: December 31, 1985. Procurement of all equipment is completed and the project-financed consultants are now in Argentina. The responsibilities for drilling services remain to be resolved. 1905-AR Vocational Training and Technical Education Project: US$58.0 million loan of October 2, 1981; Effective Date: February 22, 1982; Closing Date: June 30, 1985. The procurement problems and lack of adequate counterpart financing which originally caused delays no longer impede project execution. Construction of seven of the scheduled thirty new centers is about to start, and eight more should be tendered this calendar year. Furniture and equipment procurement, as well as the recruitment of technical assistance, are proceeding satisfactorily.  - 29 - ANNEX II Page 5 of 5 2031-AR Oil and Gas Credit Project: US$100.0 million loan of October 2, 1981: Effective Date: October 1, 1982; Closing Date: December 31, 1985. BANADE has selected consultants to review petroleum subprojects and to train the energy department staff of the National Development Bank (BANADE). The latter has several proposed subloan applications which await the Government's negotiations of the terms of exploration and development contracts with the private sector. 2032-AR Refinery Conversion Project: US$200.0 million loan of October 2, 1981; Effective Date: February 5, 1982; Closing Date: December 31, 1985. Satisfactory progress has been made in initiating procurement arrangements for the refinery conversion activity; a contractor has been employed. YPF has moved more slowly on the operations improvements, financial management and training programs. 2063-AR Second Industrial Credit Project: US$ 100.0 million loan of December 1, 1981; Effective Date: February 16, 1983; Closing Date: December 31, 1986. BANADE has established the policies and procedures needed for project execution. The terms of reference for and method of conducting the domestic effective protection study are approved. Although the industrial recession has dampened credit demand, the latter is expected to pick up with the Government's help in reducing liquidity problems, control of interest rates and export promotion measures.  - 30 - ANNEX III Page 1 of 2 ARGENTINA HIGHWAY SECTOR PROJECT SUPPLEMENTARY DATA SHEET Section I: Timetable of Key Events (a) Time taken by country to prepare the project: 9 months 1/ (b) Agency which prepared project: DNV (c) First presentation to Bank: June 1980 (d) First mission to review project: September 1980 (e) Departure of appraisal missions: February 1981; December 1982 and March 1983. (f) Completion of negotiations: April 1983 (g) Planned date of effectiveness- August 31, 1983 Section II: Special Bank Implementation Actionis None. Section III: Special Conditions 1. Assurances were obtained during negotiations that: (a) the Government would exchange views with the bank on the implementation of the recommendations of the NTP (para. 28); (b) the Government shall establish planning and coordinating mechanisms within MOSP to ensure that the railways and highways investment plans are complementary to each other and are analyzed in accordance with consistent criteria (para. 29); (c) DNPT would, by July 31, 1983, update its user tax analysis and that based on this study, and after consultations with the Bank, the Government would adopt an action plan by June 1, 1984 (para. 38); (d) DNV would institute the agreed upon procedures for the updating of the Four-Year Investment Program and would provide adequate resources for such purposes (para. 41); 1/ Up to first appraisal mission in February 1981.  - 31 - ANNEX III Page 2 of 2 (e) the Government would implement a program to improve planning and operational capability of the provincial highway authorities according to a timetable satisfactory to the Bank (para. 42); (f) each of the provinces participating in the project would prepare, by December 31, 1984, a detailed Four-Year Investment Program (para. 42); (g) the Government would continue to maintain the national highway network adequately and that the maintenance budget would be at least at the 1983 level in real terms, unless otherwise agreed with the Bank (para. 43); (h) DNV would provide, by March 1 of each year, starting in 1984, an annual report on maintenance operations (para. 43); (i) DNV would submit to the Bank, for approval, a technical and economic data sheet for each subproject; each subproject would cost at least US$1 million and have a minimum estimated economic return of 12 percent; once approved, the scope of the subproject would not be changed (para. 54); (j) the Government would hold semi-annual meetings with the Bank to review progress on the selection and execution of Bank-supported subprojects as well as review overall transport policies and plans, DNV's investment and operating (administrative and maintenance) budgets and the Financial status of DNV (para. 54); (k) the Government would complete all subprojects assisted under the Sector Loan (para 57); (1) For the purposes of carrying out the provincial road improvements the Borrower, through DNV, would enter into an agreement with each participating province that would cover the selection criteria, and arrangements for execution and supervision, including financial arrangements (para. 58); (m) Prior Bank approval would be required for civil works contracts costing over US$10 million (para. 59); and (n) the Government shall take all the necessary actions, including exemptions under the current legislation, to enable DNPT and DNV to contract in a timely manner foreign consultant services as required for the purposes of the project (para. 60). 2. Retroactive financing for up to US$2 million for expenditures made after January 1, 1983 is included in the Project (para. 57).   IBRD 3157R F 0 o L | VT 4 ^ , JUNE S98 | \ tArOSIACAO ! n X ! 2 J t ,<Xk Kj\, ~ ~~~~4 N. ) ,SAN ~~SALVADOR @ 2. * 4@ S ~ N_ I STr DELI .. ,-,~ URELA/ CAMPO ;(/f 2AJ2 o