Argentina - Special Structural Adjustment Loan : Request for Inspection

The Inspection Panel Report and Recommendation on Request for Inspection Re: Request for Inspection - ARGENTINA: Special Structural Adjustment Loan (Loan 4405-AR) 1. On July 28, 1999, the Inspection Panel (the "Panel") received a Request for Inspection (the "Request") related to the Argentina: Special Structural Adjustment Loan ("SSAL"). On August 11, 1999, the Panel received some clarifications associated with the Request for Inspection (both the Request for Inspection and subsequent clarifications hereinafter referred to as the "Request") (Annex 1). On August 12, 1999 the Panel notified the Executive Directors and Bank President of receipt of the Request (meaning "Registration" under the Panel's Operating Procedures).1 A. THE LOAN 2. The SSAL for an amount equal to US$2,525,250,000 was approved by the Board of Executive Directors on November 11, 1998. As approved by the Board, this assistance aims to help Argentina reduce its vulnerability to external financial shocks and, at the same time, increase its capacity for sustainable and equitable growth. The assistance also seeks to help the Argentine Republic (the "GOA") carry its reform agenda forward by supporting measures to improve social protection and the quality of social services as well as strengthen the financial sector, improve effectiveness of the regulatory framework, and restructure and refocus federal-provincial fiscal relations. 3. As in any adjustment loan, the loan agreement for the SSAL (the "Loan Agreement") sets out certain conditions which have to be met by the GOA prior to the release of funds. The SSAL was to be released in three tranches. The first in the amount of US$1,025,250,000, was disbursed on November 13, 1998. The second tranche could only be released after February 28, 1999 and the third tranche after June 30, 1999. In fact, Management released the second tranche only on September 9, 1999, informing the Executive Directors that it was satisfied that all required conditions had been met. In other words, when the Request was filed in July 1999, Management had not disbursed either the second or third tranches. Indeed, the third tranche is yet to be released. The closing date of the SSAL is December 31, 1999, or such later date as the Bank may establish. 4. Aside from the GOA's commitment to the execution of the program described in the Letter of Development Policy dated November 2, 1998 (see par. 16 below), the conditions for release of the second and third tranches are detailed in Section 2.02 and in the related Schedules 3 and 4 to the Loan Agreement. There are 22 1See The Inspection Panel, Operating Procedures (August 1994) at paragraph 36. 1  separate conditions for the release of the second tranche and 26 for the third tranche. They relate to a wide number of objectives, actions and policies designed to achieve reforms in the GOA's fiscal, financial, regulatory and human development sectors. 5. The Requesters are concerned with only one of these conditions, namely the budgetary allocation for social programs, which the Management Response refers to as the "Social Budget Condition". This condition pertains to both the second and third tranches. It requires that the GOA's 1999 budget for the social programs listed in the Annex to Schedule 3 to the Loan Agreement be maintained at an aggregate level equivalent to at least US$680,000,000. The 24 programs listed in the Annex are targeted at providing for the needs of the poorest segments of Argentine society and they include programs in the areas of food and nutrition, disease control, emergency employment, education and social funds as well as programs for vulnerable groups. Among the listed programs is the Pro Huerta Program. It aims to provide nutritional support to those poor who are classified statistically as having unsatisfied basic needs by assisting them to maintain small vegetable gardens to produce food for their own consumption. The Request focuses specifically on this program. B. THE REQUEST 6. The Request was submitted by a group of attorneys from the Centro de Estudios Legales y Sociales