Announcement of World Bank Loans Totaling Three Hundred Million US Dollars will Help Argentina Improve Provincial Governments and Water Supply and Sanitation Services on December 20, 1990

FOR IMMIIDIA11 RM [ASI pWorld Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. * Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 91/33 Contact: Ciro Gamarra (202) 473-8721 WORLD BANK LOANS TOTALING $300 MILLION WILL HELP ARGENTINA IMPROVE PROVINCIAL GOVERNMENTS AND WATER SUPPLY AND SANITATION SERVICES WASHINGTON, December 20, 1990 -- The World Bank has approved two loans totaling $300 million to help Argentina finance projects that will increase efficiency in provincial governments and expand and improve water-supply and sewerage services. The first loan, of $200 million, will support a project that will enable provincial governments to finance investments in infrastructure and services and to strengthen their capacity to plan, finance and execute public investment programs. The $575-million provincial-development project will provide financial support and incentives for Argentina's 23 provinces to undertake their own adjustment programs consistent with the national adjustment program. The project includes financial-management reforms that will help provincial governments stop generating deficits and begin generating current savings that can be used to finance infrastructure and services necessary to promote economic development. It will also strengthen provincial governments' capacity to plan, program, finance, execute and monitor public-investments that are economically efficient, financially sustainable, institutionally manageable, and environmentally sound. About $167 million of the loan will be used to finance the construction of roads, bridges, drainage systems and facilities such as schools, health posts and bus terminals. Maintenance programs will be launched, infrastructure and facilities will be rehabilitated or completed, and new investments will be made. About $6 million of the loan will be used for acquisition of equipment needed to maintain facilities and infrastructure and about $27 million will be used for technical assistance, training and equipment. NOTE: Money figures are expressed in U.S. dollar equivalents. 2 Proceeds from the Bank loan will be allocated according to each province's quota in the government's secondary distribution of revenue sharing. However, the amount of financing to be provided to provinces will depend on their financial-management performance. The project builds on experience gained through the current implementation of a municipal development project assisted by a World Bank loan of $120 million in March 1988, and by studies carried out by the Bank and completed in 1989. The project is estimated to take six years to implement, and the World Bank loan will be disbursed over the same period. The project is expected to generate the equivalent of 110,000 one-year jobs for unskilled workers while the governments undergo reform. The second loan of $100 million, will support the governments' efforts to improve, rehabilitate and expand water-supply and sewerage services in urban areas with at least 15,000 inhabitants. The $250-million project will promote greater efficiency and financial viability in the sector, expand coverage and equality of services, protect the environment, and encourage private-sector participation in the provision of water and sanitation services. The executing agency will be the Consejo Federal de Agua Potable y Saneamiento (COFAPYS) which will re-lend the proceeds of the loan to water- supply and sewerage entities in urban areas across the country. The loan will finance consulting services, works and goods for the improvement of the operations of the water utilities and the rehabilitation and expansion of the services. It will also finance technical assistance to improve COFAPYS operations. The project will benefit low-income groups and create employment in project-related activities. Also, under the project's commercialization program, tariffs that are now based on unmetered consumption will be replaced by tariffs based on consumption levels, making it possible to cross-subsidize low-income users, which generally are low consumers. The project will be implemented over seven years and the Bank loan will be disbursed over the same period. Both World Bank loans to the Argentine Republic are for 17 years, including five years of grace, with a variable interest rate, currently at 7.72 percent, linked to the cost of the bank's borrowings. They also carry an annual commitment charge of 0.25 percent on the undisbursed balances. 4