Argentina - Capital markets development technical assistance

 ICRR 10624 Report Number : ICRR10624 ICR Review Operations Evaluation Department 1. Project Data : Date Posted : 06/21/2000 PROJ ID : P006062 OEDID: OEDID : L3710 Appraisal Actual Project Name : Capital markets US$M ) Project Costs (US$M) 10.2 7.4 development technical assistance Country : Argentina Loan /Credit (US$M) Loan/ US$M ) 8.5 7.3 Sector, Major Sect .: Capital Markets US$M ) Cofinancing (US$M) Development , Finance L/C Number : L3710 FY ) Board Approval (FY) 94 Partners involved : Closing Date 09/30/1999 Prepared by : Reviewed by : Group Manager : Group : Rene I. Vandendries John H. Johnson Ruben Lamdany OEDCR 2. Project Objectives and Components a. Objectives The original objectives of the project were threefold : (i) development of the securities market; (ii) development of independent pension funds; and (iii) training of staff of financial institutions . The objectives were amended twice . Objective (iii) was dropped because of wavering interest by potential beneficiaries; it was replaced by an objective to improve insurance regulation and supervision . At the same time, a fourth objective was added to strengthen the credit reporting system. Later, a fifth objective was added to improve access to private credit by SMEs . While all objectives were consistent with the Bank's CAS, the fourth and fifth objectives eventually found insufficient borrower interest in their implementation. b. Components Objective (i) had two components: institutional strengthening of the National Securities Commission (CNV), and upgrading securities market regulations . The main component of objective (ii) was implementation of the new legislation, which involved preparatory work for a proper regulatory environment . The core components of the revised objective (iii) were to prepare draft amendments to the existing legislative and regulatory framework of the insurance industry and strengthen the institutional capacity of the National Superintendence of Insurance . The primary component for the fourth objective was improvement in the legal and regulatory framework of credit reporting . The fifth objective was to be pursued through a review of existing legislation and proposals for amendments to facilitate increased term lending for SMEs. In support of all the above, a Project Coordinating Unit was to be set up at the Ministry of Economy. c. Comments on Project Cost, Financing and Dates The project was approved in March 1994 with an original loan amount of $8.5 m, of which close to $7.3 m had been disbursed as of May 10, 2000. The project was closed on 09/30/99. 3. Achievement of Relevant Objectives : The project contributed significantly to the development of the Securities Market and the private pension funds . It also led to some strengthening of the insurance industry . However, there were frequent delays in implementation . Moreover, the original third objective and objectives number four and five were dropped because of a lack of interest by the borrower. 4. Significant Outcomes /Impacts : (i) The institutional capacity of the National Security Commission (NSC) was significantly improved through extensive staff training; (ii) advanced information systems were introduced to the NSC and SAFJP, a regulatory agency for the pension system ; (iii) new pension legislation and definition of a legal framework for the insurance industry were developed ; (iiii) a capital requirement system in the insurance industry was implemented. 5. Significant Shortcomings (including non -compliance with safeguard policies ): (i) Inflexible design of the project resulted in implementation delays and inefficient work of technical assistance and coordination units; (ii) At the project preparation stage, the Bank did not evaluate adequately potential beneficiaries' commitment towards certain project objectives; (iii) Initially, there were substantial implementation delays as well as a lack of continuity in supervision . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : During project preparation, the Bank should evaluate the borrower's institutional capacity and involve potential beneficiaries in order to set realistic objectives . 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The quality of the ICR is satisfactory, although it does not prioritize the importance of the project objectives in relation to the capital markets development objectives . This would have been helpful in evaluating project outcome . Additionally, the ICR contains an error, two different ratings for Institutional Development Impact : modest and satisfactory (pages 1 versus 26).