Argentina - Industrial Credit Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. PROJECT COMPLETION REPORT ARGENTINA INDUSTRIAL CREDIT PROJECT (LOAN 1463-Al DECEMBER 29, 1989 Country Department IV Latin America and the Caribbean Regional Office 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. CURRENCY EQUIVALENTS Currency Unit = Before June 14, 1985 - Peso ($a) Since June 14, 1985 - Austral (A) - Sa 1,000 Mdrket Rates End of 1976 US$1 = Sa 277 1977 US$1 = Sa 599 1978 US$1 Sa 1,007 1980 US$1 $ Sa 1,996 1982 US$1 $ $a &.85 new pesos (1 new=10,000 old) a 1984 US$1 Sa 178.24 (Hay) 1985 US$1 Sa 593.85 6 (June) 1985 S A 0,80005 Australes 1986 US$1 = A 1.2570 1987 US$1 = A 3.7500 (July) 1988 US$1 A10.7400 a GLOSSARY OF ABBREVIATIONS AUSTRAL Argentina Unit of Currency since June 14. 1985 BANADE Banco Nacional de Desarrollo (National Development Bank) DFC Development Finance Company ERR Economic Rate of Return FRR Financial Rate of Returns IFC International Finance Corporation LIBOR London Interbank Offered Rate SIGEP Sindicatura General de Empresas Publicas, an entity auditing public enterprises. FOR OFFICIAL USE ONLY THE WORLD BANK Washington. DC 20433 USA Office of Onector-Genetal Opetatinns !valuatum December 29, 1989 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Argentina Indu3trial Credit Project (Loan 1463-AR) Attached, for information, is a copy of a report entitled "Project Completion Report on Argentina Industrial Credit Project (Loan 1463-AR)" prepared by the Latin America and the Caribbean Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment 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. FOR OFFICIAL USE ONLY ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1463-AR Table of Contents Page No. PREFACE ........ ...... ............. . . . .. . . . ... -i EVALUATION SUMMARY...................* ........................ .i-v PART I Main Findinas and Lessons Learned by the Bank A. Project Identity. .........#4 .....0 ......... 1 B. Background.. ......... ...... ...... *.4................ 1 C. Project Objectives and Description.. ............. 2 D. Project Design and Organization.............. ...... 3 E. Project Implementation.............................. 5 F. Project Results................ ..................... 7 G. Bank Performance....................................... 8 H. Borrower Performance......................... 10 I. Project Relationship................................... 12 J. Project Documentation and Data...... ............ 12 PART III: Basic Data 1. Related Bank Loans................................... 13 2. Project Timetable....................... ..... 14 3. Loan Disbursements..................................... 15 ANNEXES: 1. BANADE: Subproject Profile.................... .......... 16 2. BAN&DE: Outstanding Arrears Under Loan 1463-AR............. 18 3. BANADE: Subprojects Financed Under Loan 1463-AR............ 19 4. BANADE: Comparative Balance Sheet, December 31, 1979-87.... 29 5. BANADE: Income Statements, 1979-1987....................... 30 6. BANADE: Financial Ratis, 1979-1987........................ 31 7. BANADE: Personnel Employed in 1978-1988.................. 32 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. ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1463-AR PREFACE This project completion report (PCR) describes and assesses the design, implementation, and impact of a US$100 million World Bank loan (Loan 1463-AR) extended in 1977 to the National Development Bank of Argentina (BANADE) for relending to support modernization and expansion of manufacturing enterprises. BANADE, a public institution, had become a channel for subsidized funds to state-owned or supported enterprises, and was recapitalized and reorganized during project preparation with the expectation of becoming an autonomous development bank. The Bank loan, approved June 16, 1977, became effective November 28, 1977. At the outset BANADE experienced initial implementation delays and suffered from a deteriorating investment climate caused by adverse macroeconomic conditions. As a result, it took nearly five years to get the loan close to commitment, with final closing on October 25, 1985, some eight years after effectiveness. At the time BARADE was still a weak, undercapitalized institution and underwent further reorganization. After this loan, the Bank made two subsequent loans with BANADE as the financial intermediaryt the Second Industrial Credit Project (Loan 2063-AR), approved in December 1982, which had design and objectives similar to the first one; and the Small and Medium Industries Project (Loan 2793-AR), approved in April 1987, which was an Apex operation using BANADE as the second-tier bank. This PCR is thus the beginning of an in-depth evaluation of a relationship of more than a decade between the Bank and BANADE involving three consecutive loans. This PCR has been prepared 12 years after loan approval and about seven years after the loan was essentially committed. In the meantime, the Second Industrial Credit Project was committed, but because of delays in some subproject disbursements, the implementation period had to be extended. At the time the PCk normally would have been prepared, the decision was made to wait and combine it with the PCR of the Second Industrial Credit Project. This decision was not well thought through, because it postponed a thorough discussion of the first loan that would have alerted the Bank to the serious problems within BANADE. A further delay in preparing this PCR was caused by BANADE's contention that it was not possible to retrieve information on subloans granted under this operation. Only after forceful intervention by Bank management did BANADE produce the needed information. The preparation of this PCR was carried out over an extended period because time was needed to address BANADE's problems. This PCR was prepared by the Trade, Finance and Industry Division of Country Department IV of the Latin America and the Caribbean Regional Office. This PCR was overdue by three years. Since many Borrower representatives involved in this project had retired or moved to new assignments, it was difficult for the Borrower to complete Part II. Therefore, this PCR consists only of Part I and Part III. Following standard OED procedures, copies of the draft PCR were sent to the Government and the Borrower. No comments were, however. * received. - iii - ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1463-AR EVALUATION SUMMARY Objectives 1. This US$100 million loan to the National Development Bank (BANADE) had the following objectives: (i) to increase the overall efficiency of the * industrial sector by helping to finance projects with the greatest potentiel for exports and import substitution; tii) to support the implementation of reforms instituted by BANADE's new management aimed at enabliag it to fulfill its role as a major provider of term-lending to industry; (iii) to provide BANADE with technical assistance to improve the quality of its lending; and (iv) to serve as a catalyst for the mobilization of external funds through cofinancing. Implementation and Results 2. Credit Component. The two most important deviations from original expectations were: (i) the slower than expected pace of loan funds use. To complete the project, the Bank had to extend the final commitment date five times and the closing date three times. Two factors account for the slow use of loan proceeds: the decline in industrial investment in 1977-82 (para. 6); and BANADE's continued slow appraisal procedures (para. 36) that discouraged borrowers, even though alternative funds were more expensive and of shorter maturities; and (ii) the lower than expected use of funds for project as opposed to equipment financing. The loan had been designed for project financing; however, to facilitate loan processing, the Bank agreed in mid-1980 to permit finance of equipment purchases for replacement under simplified appraisal procedures (para. 21) not requiring ERR calculation for subloans of up to US$2 million and FRR for subloans below US$100 thousand or for small firms. At the end, the loan financed only 19 new subprojects amounting to 45Z of loan proceeds, while the major share was used for equipment financing. Most of the equipment was for replacement and prodrction for the domestic market; therefore, the loan did not generate much new employment nor expand exports. It is difficult to assess the subprojects' contribution to improvements in the borrowers' efficiency, because under the simplified appraisal procedures for equipment financing BANADE did not have to calculate ERRs. This loan provided an implicit subsidy to its beneficiaries after 1978. when the onlending rates under the loan lagged substantially both LIBOR and domestic interest rates. 3. Under the loan BANADE financed a total of 223 subprojects, 77 of which are still in BANADE's portfolio; the others have been fully repaid. Eight subloans, representing 15% of all subloans granted, in value, show payment problems, although all of the beneficiaries are still in business (Annex 2). BANADE has initiated legal action against one subborrower and - iv - is in the process of negotiating new repayment arrangements with the others. The collection record under the Bank loan has been better than the average of BANADE's loans financed from other sources, probably as a result of more rigorous preparation and evaluation procedures. The rest of the portfolio generally relied on Government guarantees (para. 25). 4. Institution Building. The adoption of a new Statement of Policy and a new Charter of Incorporation before the signature of the Loan Agreement constituted the cornerstone of efforts to transform BANADE into an efficient and financially sound institution. Subsequently, BANADE's management did not fully adhere to the principles established in these two legal documents. In the absence of a follow up program to assess the outcome of the organizational measures taken up-front, Bank supervision missions did not focus on continued management and organizational shortcomings (para. 22). 5. Cofinancing. BANADE did not blend the funds of the US$100 million cofinancing loan with the Bank's funds, as originally envisaged. The cofinancing loan was disbursed quickly through indexed peso rather than dollar denominated subloans. The Bank d,d not supervise cofinancing subloans because they were disbursed independently of the Bank loan. The results of the cofinancing loan cannot be assessed because there is no information on the types of investments financed with this loan. For BANADE, however, the loan became increasingly expensive as LIBOR rates soared and the Government finally adopted a policy of devaluation. When BANADE stopped servicing this loan, it added to the Government's external debt (para. 23). 6. Technical Assistance. Only US$40,000 of the US$250,000 technical assistance component, provided for staff training, was disbursed. Most of the staff training programs carried out by BANADE were financed from BANADE's own funds. The Bank, however, contributed directly to training BANADE's staff in appraisal methods. BANADE's training program, financed with its own resources, was considered acceptable by supervision missions. Lessons Learned 7. The loan had intrinsic weaknesses in its design. First, the institutional improvements were limited to the approval of BANADE's Charter of Incorporation and Statement of Policy without any follow-up program to address the efficiency of BANADE's assets, liabilities and operations management. The improved legal foundation, intended to safeguard BANADE's operational autonomy and financial soundness, neither prevented BANADE from bailing out ailing public and private enterprises nor from conducting business as usual inspite of the financial crisis starting in 1981. Second, no comprehensive set of financial performance targets were established to monitor BANADE's financial performance, including its liquidity situation, in addition to the debt/equity covenant. Third, there were no legal covenants for the use of the cofinancing loan and thus no operational link to the Bank loan. Furthermore, in hindsight and as a matter of judgement, the appraisal mission was overly optimistic - v - in its assessment of the investment demand, possibly oa the basis of the positive policy changes rather than an analysis of existing, well prepared investment projects (paras. 33 and 34). 8. Measured against. current Bank thinking on credit line lending, the loan had other important weaknessess. First, the selection of BANADE as the only intermediary for Bank funds gave BANADE a monopoly over term financing. At the time, the loan was in line, however, with accepted principles in the Bank that put less emphasis on the benefits of competition. Second, the lack of attention given to BANADE's long-term financial viability, independently from Central Bank rediscounts and external financing. Third, the adoption of a fixed interest rate mechanism on dollar subloans, which made the loan unable to adapt to the changes in international interest rates during the implementation period. The Bank loan likewise had a fixed rate, which was standard practice until 1981, when the Bank adopted a variable rate in response to the volatility of international interest rates during the late 1970's (paras. 36-39). 9. Bank supervision of the project was not adequate. Supervision missions were concerned with the status of subproject approvals and loan utilization, but paid little attention to organizational and management issues nor to the effects of the broader financial crisis on the project. When it became apparent that BANADE's slow appraisal procedures were deterring clients, the Bank accepted the use of simplified appraisals for equipment financing - without ERR and FRR calculations - to accelerate loan processing, instead of improving BANADE's appraisal procedures. Similarly, when the Bank identified a significant departure from the debt/equity covenant, the Bank decided to enforce its compliance leniently. Moreover, notwithstanding mounting problems in the economy and the institution, the Bank found BANADE creditworthy for a subsequent loan (para. 29). 10. This loan shows the difficulty of converting an essentially bankrupt public bank into an effective and sound financial intermediary. In the event, the Bank should have been convinced, before making the loan, that the Governmentt (i) had a credible program to strengthen the external environment; and (ii) would not use the DFC to bail out ailing public and private enterprises. Also, the Bank should have agreed with the management of the institution on a program to achieve certain organizational performance targets. The project should have been linked to these conditions through strong legal covenants that would allow the Bank to stop new commitments or suspend disbursements if any of these conditions were to change drastically during implementation (para. 32). 11. Finally, an important lesson is the need to complete PCRs on time. The delay in completing this PCR prevented a thorough discussion of this loan, which would have alerted the Bank to the internal problems in BANADE and helped to improve the design and monitoring of the subsequent loan (para. 35). ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1463-AR PART I. MAIN FINDINGS AND LESSONS LEARNED BY THE BANK A. Project Identity 1. Project Name Industrial Credit Project Loan Number 1463-AR Loan Amount US$100.0 million Cofinancing US$100.0 million RVP Unit Latin America and the Carik i Region Country Argentina Sector Industry B. Background 2. The military government that took power in Argentina in 1976, shortly before project appraisal, had as an immediate objective to restore macroeconomic stability and secondly to revitalize the economy. A more - stable growth and increased productivity would be realized by: (i) liberalizing trade to enable Argentine industry to become more competitive; and (ii) liberalizing the financial sector to make it more efficient and link it more effectively to the international capital markets. 3. The policy context at appraisal was one of increasing liberalization. Steps had been taken to unify the exchange rate; imports of most items covered by the 1972 and 1975 prohibited lists were freed in July 1976; advance import deposits and remaining quantitative restrictions were abandoned. Tariff reductions between 1976 and 1977 reduced effective rates of protection (ERPs) from an average of 1112 in 1969 to 39? in 1977. 4. The financial reforms announced in April 1976 included the liberalization of interest rates in the financial sector, removal of barriers to entry into the bankin; system, and a guarantee system for time deposits in local currency. There was also an attempt to return banking to a fractional-reserve system, with an initial interest-earning, required- reserve ratio of 45Z, much lower than the previous 100% requirement during 1973 to 1976. Commercial banks were also permitted to provide a wider spectrum of financial services thus ending the specialization of financial institutions. An important objective of these reforms was an overall -2- increase in term financing. In addition, Government measures to reduce the fiscal deficit and to improve the efficiency of state enterprises was expected to result in a gradual reduction of public sector competition for funds. 5. At appraisal, the Government and the Bank agreed that it would probably take some time for a term market to develop; thus, the investment requirement of industrial firms to adapt to a more competitive environment would not be fully satisfied by the financial system for some time. Reliance on foreign capital markets to fill this gap was considered feasible only for the largest firms, so the Bank loan was intended to help fill the gap in the financing of medium-sized industrial firms. 6. The opening of the economy did not generate the expected structural changes in industry so the anticipated investments did not materialize. On the contrary, between 1977 and 1982 manufactured value added plunged by about one-third, while employment declined 60Z. The preparation of this project coincided with the initial success of the liberalization program, so it was difficult to foresee the failure of the 1978-1981 macroeconomic policy, which centered on fighting inflation through an increasingly overvalued exchange rate. The initial phase of the tariff reform program, between 1976 and early 1979, had only a mild effect on -industrial producers due to significant redundancy in the tariff system. As a result, firms made only limited adjustment efforts. The second phase of trade liberalization in 1979 produced more significant adjustments. However, during late 1979 and 1980, reduced protection combined with substantial currency appreciation and sharply rising interest rates dampened firms' investment plans. As interest rates soared and external capital became available at lower rates, intermediate good producers, less affected by the recession, turned increasingly to external financing. A banking crisis erupted in early 1980 as a result of excessively rapid expansion of bank activities. In mid-1982 the financial crisis deepened as a result of the combined effect of the sharp devaluations of the previous - 15 months, high interest rates, and the virtual cutoff of new external loans. The devaluations and high interest rates affected both, domestically and externally indebted firms and their banks. The authorities reacted to the crisis by reversing the liberalizing reforms. C. Project Objectives and Description 7. The project consisted of a loan of US$100 million to the National Development Bank (BANADE) with the Government guarantee. The loan objectives were: (i) to increase the overall efficiency of the industrial sector by helping to finance projects with the greatest potential for exports and import substitution; (ii) to support the implementation of reforms instituted by BANADE's new management aimed at enabling the institution to fulfill its role as the zajor provider of medium and long- term funds to the industrial sector; (iii) to provilde BANADE with technical assistance to improve its lending to the industrial sector: and (iv) to serve as a catalyst for the mobilization of complementary external funds from the international capital markets through cofinancing. - 3- 8. The loan components weres (a) a credit line of US$99.75 million to finance the foreign exchange component of industrial projects; (b) a technical assistance component of US$250,000 to help improve BANADE's lending to the industrial sector. More specifically. the TA component included US$200,000 to cove- 65 man-months of consultancy services for staff training and sectoral studies and US$50,000 to finance fellowships to train BANADE's staff abroad. In addition, BANADE was to obtain US$100 million in cofiaancing through an internati3nal banking syndicate headed by Lloyd Bank Ltd. of London. 9. The interest rate of the Bank loan was fixed at 8.22 p.a. The loan was repayable over a maximum period of 15 years, following a flexible schedule based on the aggregate of the amortization schedules of BANADE's subloans. The loan proceeds were onlent in US dollars. The loan itself was to be repaid in a basket of currencies with the Government assuming th? cross-currency exchange risk. BANADE would relend the loan proceeds at : interest rate of not less than 11 p.a., plus a commitment fee based on the undisbursed balaace. Subloans would be for up to 15 years with a maximum grace period of 3 years; the maximum loan amount was fixed at US$6 million and the 'free limit, below which the Bank would not review BANADE's appraisals was set at US$2 million. All subloan requests of US$500,000 and above would require FRR and ERR calculations as woll as estimates of direct employment generation and contribution to the balance of payments. 10. Under the cofinancing agreement signed in November 1977 between the Bank and Lloyd Bank International (London), acting as agent for 36 participating banks. BANADE received a syndicated loan for 7 years, including 3 years of grace, at an interest rate of 1-5/81 p.a. over LIBOR for 6 month US dollar deposits, plus 1/2% p.a. commitment fee on the undrawn portion of the loan. The cofinancing agreement provided for an optional cross -default clause in the Loan Agreement. D. Project Design and Organization 11. The project was designed as a traditional DFC operation using BANADE (a pablic sector bank) as channel for lending to private sector enterprises. The only innovative feature of this loan was the cofinancing agreement with a syndicate of European banks. While the financial and organizational weaknesses of BANADE as an intermediary for Bank loans were recognized at the time of appraisal, BANADE was selected as the borrower because it was the only large financial institution in Argentina dealing in development finance; furthermore, the Government had pledged to put it on a sound basis. 12. After having lent at highly negative interest rates during a period of very high inflation, by 1976 BANADE's equity was almost completely eroded and its operations at a virtual standstill. Prior to 1976, BANADE's low interest loans frequently became a channel for subsidies to industry and particularly to deficit-ridden state enterprises. The new Government, wanting to restore the role of BANADE as a term-lending financial institution, recapitalized BANADE through the infusion of new capital and a capitalization of BANADE's liabilities with the Central Bank. The new board and management team appointed by the Government adopted a new organiz&tional structure for BANADE. 13. During project preparation, Bank staff worked closely with BNADE's new management to reorganize the institution and to prepare a new Institutional Charter and Statement of Policy. This was designed to provide safeguards for the maintenance of BANADE's operational autonomy, sound credit evaluation standards, and financial viability. The roles and responsibilities of BANADE were clearly defined in the New Institutional Charter, which underlined BANADE's primary role as a term-lending financial institution acting within the overall industrial promotion framework set by the Government. The new Statement of Policy set forth several operational principles and limits to protect the institution from unreasonable financial risks, including the provision that the recapitalized institution's total debt would be limited to ten times its capital and reserves. The debt/eauity ratio was considered reasonable, given BANADE's role as a mixed commercial and development bank. 14. The institution building aspects of this operation were implemented up front, with no major institution building measures to be implemented after effectiveness. The new Statement of Policy, satisfactory to the Bank, was approved by BANADE's Board of Directors on December 29, 1976 and the new Charter of Incorporation was signed on August 31, 1977, before the signature of the Loan Agreement. The Charter and the Statement of Policy were listed in the Loan Agreement and could not be changed without the Bank's agreement. The institution building aspect of the project was limited to training BANADE's staff to carry out subsector studies and to comply with the Bank's subproject appraisal procedures through a modest technical assistance component of US$250,000. 15. The scope and scale of the project seemed appropriate in light of the expectation that the liberalization program adopted by the Government would bring about a rapid revitalization of the industrial sector. However, in hindsight, and as a matter of judgement, it is possible that the appraisal mission was overly optimistic in its assessment of the investment demand, possibly on the basis of the positive climate and growth outlook created by the liberalization program, rather than an analysis of existing, well prepared investment projects. 16. The operation had several design problems: First, the limitation of institutional improvements to the approval of legal documents (the Charter of Incorporation and the Statement of Policy), without any follow- up program to address the efficiency of BANADE's assets, liabilities and operations management. Second, the absence of clear financial performance targets for BANADE in the Loan Agreement, against which the Bank coald assess BANADE's financial performance. The only financial covenant in the Loan Agreement, the debt/equity ratio, was not adequate to monitor BANADE's financial performance, including its liquidity position, which deteriorated sharply during the financial crisis of 1980-83. Third, there were no legal - 5 - covenants for the use of the cofinancing loan and, thus, no operational link to the Bank loan. Fourth, there was lack of specificity in the design of the training programs to be financed under the TA component, which explains the modest use of TA funds and the eventual cancellation of much of this component. 17. Measured against current Bank thinking on credit line lending, the loan had other important design problems: First, the selection of BANADE as the only intermediary for Bank funds, to the exclusion of other public and private banks gave BANADE a monopoly over term financing. At the time, however, the loan was in line with accepted principles in the Bank, that put less emphasis on the benefits of competition. Second, the lack of attention given to BANADE's long-term financial viability, independently from Central Bank rediscounts and external financing. Third, the adoption of a fixed interest rate mechanism on dollar subloans, which made the loan unable to adapt to changes in international interest rates during the implementation period. The Bank loan was also at a fixed rate, which was the standard practice until 1981, when the Bank adopted a variable rate in response to the volatility of international interest rates since the late 1970s. E. Proiect Implementation 18. The Credit Component. The most critical shortfalls of planned versus actual implementation of the credit component were: (i) the slower than expected pace of loan funds use; a:.d U.i) the lower than expected use of the funds for project financing as opposed to equipment financing. 19. The loan became effective on November 28, 1977, but the first subproject was submitted for Bank approval only in May 1978. By mid-June 1979, only US$19 million of the Bank funds had been committed. To expedite loan utilization, BANADE's management requested, and the Bank agreed, that- the US$6 million limit for subprojects could be exceeded in exceptional cases. Low utilization continued, however, and by April 1980, only 33! of the expected amount had been disbursed. The pace accelerated after mid- 1980, when the Bank accepted the use of simplified appraisal methods by BANADE (see para. 21). The loan was almost fully committed (98.7Z) by end- 1982, three years after the original final commitment date. It was formally clospd on October 24, 1985, three and a half years later than originally expected, partly due to delays in procurement and the postponement of investments in several large subprojects because of the recession. To complete the project, the Bank had to extend the final commitment date several times from December 31, 1979 to December 31, 1982, and the closing date three times from December 31, 1981 to December 31, 1984. Even so, US$1.3 million of the loan was not disbursed and had to be cancelled. 20. Two factors accounted for the slow use of loan proceedes (i) the decline in industrial investment in 1977-82; and (ii) BANADE's slow appraisal procedures that discouraged borrowers, even though alternative funds were more expensive and of shorter maturity. - 6 - 21. Although by November 1980 the interest rate on the Bank loan through BANADE had increased from 11% to 12%, it remained extremely attractive when compared with LIBOR, which averaged 13.4Z p.a. in 1980 and 16.16Z p.a. in 1981; however, many potential borrowers were discouraged by the length of time it took BANADE to complete an appraisal (see para. 35). The May 1980 supervision mission reported that clients were transferring their loan applications to Banco de la Nacion and Banco de la Provincia de Buenos Aires both of which offered competing financing. To facilitate loan processing, the Bank agreed in June 1980 to permit financing subloans of up to US$2 million for equipment purchases needed to replace or complement existing machinery, under a simplified appraisal procedure not requiring EER calculation. In December 1980, the Bank agreed to a further simplification of project appraisal analysis making the calculation of FRR not necessary for small subloans below US$100,000 and loans to small firms (defined as having sales less than US$700,000, capital less than US$200,000, and employing less than 10 people). These changes permitted more rapid loan processing at the expense of strict evaluation criteria at a time when banks and enterprises were becoming increasingly overextended and many went bankrupt or required relief to remain in business. 22. The Cofinancing Component. The use of the cofinancing loan was not as envisaged. The original assumption was that given the shorter maturity and different interest rates of the cofinancing and the Bank loans, BANADE would mix the funds and adjust repayments on Bank subloans such that the aggregate principal payments would be approximately equal. However, this objective was not reflected in the legal agreement and the cofinancing loan was invested in indexed pesos subloans and quickly disbursed in 1977/78. These subloans were indistinguishable from other indexed peso loans made from local currency sources. After 1978, the cofinancing loan, based on LIBOR, became increasingly more expensive for BANADE than the Bank loan. The Bank exercised its function to oversee collections until September 1985. receiving Lloyd's notices and advising BANADE of pending and overdue notices. The Bank stopped this function when- the outstanding debt to the private banks became part of the Government's external debt, following renegntiations of private debt in 1985. The private banks did not press the Bank to invoke the cross-default clause of the Loan Agreement. 23. The Technical Assistance Component. Only US$40,241 of the US$250,000 provided for training under the TA component was utilized and the rest was cancelled. Host of the staff training programs carried out by BANADE in Argentina were financed from BANADE's own funds. In 1982, BANADE carried out nine internal training programs on technical and management aspects of development banks. TA funds were used to hire an external expert to help in the programs' preparation. Also, during 1981/82, 185 officials of BANADE participated in 69 different seminars and symposia in Argentina, financed from BANADE's own resources. The Bank, however, made a substantial direct contribution to training BANADE's staff, through a six- week special training program organized in the Bank for senior loan officers and project analysts in June/July 1979. The TA component was also used to finance the preparation of a plan for the development of human resources in BANADE, by a local consultancy firm, and two former Bank/IFC members retained by BANADE to design a program and budgeting system and to review the loan decision making process. -7- F. Project Results 24. The Credit Component. Under Loan 1463-AR, BANADE financed a total of 223 subprojects, of which 11 were over the free limit and 212 did not require Bank approval. The total use of the loan funds was US$98.6 million and the total cost of subprojects, as reported by the borrowers, exceeded US$360 million (this is a partial figure, since in most cases the overall cost of equipment financing was not reported). The Bank loan had been primarily designed for project financing, i.e., new and expanding enterprises. At the end, the loan financed only 19 new projects amounting * to about 451 of loan commitments; the rest of the subloans (204) were for equipment 2inancing. Medium and large enterprises were the main beneficiaries of the loan, although some of them used Bank loan proceeds to . finance only a fraction of their project investment costs. Commitments accelerated markedly after 1980, when the onlending rates under the loan lagged substantially behind both LIBOR and domestic interest rates. One of the results of this project was, therefore, the implicit subsidy it provided to its beneficiaries. It is difficult to assess whether the subloans contributed to an improvement of the efficiency of the borrowers, as originally intended, because only 11 subprojects reported ERR calculations. These subprojects showed an average ERR of 24.7Z, but no attempt was made to confirm the ERR expost. Similarly, it is impossible to determine if the loan contributed to expand exports, as originally intended, because no systematic calculation and recording was made of the effect of 1ie subprojects on the balance of payments, in spite of a specific provision of the Loan Agreement (Section 3.02) that required such calculation. It appears that most of the equipment financing was for production for the domestic market and, since the equipment was usually for replacement and not for expansion, these loans did not generatA new jobs. In fact, only 36 subprojects reported changes in employment amounting to 2,218 new jobs. 25. Annex 3 provides a full listing of all subprojects financed under Loan 1463-AR. Of the total of 223 subloans, 77 are still in RANADE's portfolio; the rest have been fully repaid. As indicated in Annex 3, 7 subprojects (8 subloans) are having payment problems, although all of the subborrowers are still in business. The three largest subborrowers in arrears account for 86% and 892, respectively, of the total principal and interest overdue. As part of a recent effort to increase collections, prompted by the Central Bank decision to stop new rediscounts to public banks, BANADE has initiated legal action against two of these subborrowers and is in the the process of negotiating new repayment arrangements with the other five subborrovers. While the overdue loans represent about 40Z of the 77 subloans still in BANADE's portfolio, the overdue amount represents 152 of all sublonns granted under Loan 1463-AR. This is a high level of arrears, compared to those of a commercial bank which range between 1 and 3Z of the outstanding portfolio. However, the collection record under this loan is better than that of BANADE's entire loan portfolio, probably as a result of more rigorous preparation and evaluation procedures and less political influence on Bank financed loans as compared to loans funded with Government rediscounts. The arrears situation of the whole loan portfolio would be worse had it not been for BANADE's efforts since the last quarter of 1988 to increase loan collections. - 8 - 26. The Cofinancing Component. It is not possible to assess the results of this component because there is no information on the types of investments financed, since it was used for peso loans, indistinguishable from other peso loans made by BANADE from other sources. For-BANADE, however, the loan was not successful because it became increasingly expensive, as LIBOR rates soared after 1978. When BANADE stopped servicing this loan, it added to the Government's external debt. 27. The Technical Assistance Component. This component received no serious follow up. Only a fraction of the allocated anount was actually used. BANADE carried out a staff training program in project appraisal methods which it financed from its own resources. The program was regarded as acceptable by supervision missions. G. Bank Pc-.formance 28. During preparation and appraisal, Bank staff worked on BANADE's new Charter of Incorporation and Statement of Policy. These were designed to safeguard BANADE's operational autonomy, ensure adequate evaluation standards and promote financial soundness. However, the appraisal was overly optimistic of the effect of these legal agreements and overlooked a number of BANADE's institutional weaknesses that became increasingly important as Argentina's financial situation deteriorated, such as: (i) overstaffing: at appraisal BANADE had 4,000 people and administrative expenses between 3Z and 4Z of total assets; (ii) an ill- defined organizational structure that lacked clear delinm'ation of responsibilities and coordination between various operational departments; (iii) improper accounting procedures based on accruals and inadequate standards for loan loss provisions; (iv) absence of reliable information on loans in arrears, status of resources, and maturities or breakdown of short and long-term accounts (making it impossible to calculate liquidity ratios); (v) poor loan collection procedures; and (vi) lack of independence of BANADE's board of directors, which made it susceptible to political influence in its lending decisions. Some of these weaknesses became apparent during supervisions, but were not fully addressed during project implementation, although recommendations were made to tackle some of these weaknesses during a follow up operation (Loan 2063-AR) which was under preparation. The issues of overstaffing and inadequate financial reporting were addressed by the subsequent loan. 29. Bank supervision of the project was not adequate. The major supervision weakness was the little attention paid to the outcome of all the organizational measures taken up front. While the number of supervision missions (nine) was barely sufficient, these were mostly one man/one week missions to check on the status of subproject approvals and loan utilization. The Project was fully supervised only in 1978 and 1980, because later missions in 1982/83 were already working on a subsequent loan. Supervision missions paid little attention to BANADE's project approval and supervision procedures. When it became evident that BANADE's slow appraisal procedures was deterring clients, the Bank allowed BANADE to use simplified methods instead of assessing the reasons for the delays and trying to make the system more efficient. Supervision missions failed to - 9 - review the quality of the appraisal methods applied to loans not financed with Bank funds. Although BANADE was supposed to apply the same project evaluation methods to all its loans, independently of the source of funds. During the period of the loan BANADE financed a number of large projects with Government guarantees that later became the core of BANADE's arrears problems. Also, Bank supervisions did nothing to assess the use given by BANADE to the cofinancing loan that the Bank helped to negotiate. 30. Supervision missions also paid little attention to BANADE's financial situation. The only financial aspect that wa3 reviewed during supervision was the compliance with the debt/equity covenant. No analysis was made of the quality of the portfolio, the cashflow situation, or the need to reduce operating costs. When the financial crisis erupted in 1980, the Bank failed to step up supervision and ask for a special audit of BANADE's accounts. When the 1982 supervision mission identified the erosion of BANADE's equity, the Government provided an equity infusion that was, however, not enough to lower the debt/equity ratio to the covenant leiel. The Bank decided to enforce its compliance leniently. Later on, wh.n BANADE's debt/equity ratio was more than twice the maximum established in the covenant, the Bank continued not pressing for compliance. The Bank also failed to press for adequate reporting: periodic progress reports from BANADE were requested only in August 1980, and the only external audit received by the Bank was for 1981. This should have produced suspension of disbursements. Notwithstanding mounting problems, not only in the institution but in the entire financial sector, the appraisal mission for Loan 2063-AR, found BANADE creditworthy for becoming a borrower in a subsequent Bank loan in February/March 1981. 31. There a:e important lessons to derive from this project that are relevant for other Bank financed investment projects in terms of the design of investment projects, when the financial intermediary for Bank funds is a public bank, and in terms of proper supervision during a financial crisis. 32. This loan shows how difficult it is to convert a an essentially bankrupt public bank into an effective financial intermediary with proper financial discipline and independence from political influence. The Bank tried to safeguard BANADE's operational autonomy through the new Charter of Incorporation. However, the Charter did not shield BANADE's board from political influences. Even if these political influences did not play a role in Bank-financed loans, they contributed to the deterioration of BANADE's portfolio. The Bank should have been convinced, before making the loan, that the Government would not use the DFC to bail out ailing public and private enterprises. Also, the Bank should have agreed with BANADE's management on a program to achieve certain organizational performance targets. 33. The Bank tried to instill financial discipline into BANADE through the Statement of Policies, that established limits in terms of debt/equity and exposure to individual clients. But, in a country where prudential regulations and supervision by the Central Bank are weak, as was the case in Argentina during this project, these safeguards are not enough. In such circumstances, the Bank should have established clear financial performance targets against which to monitor the DFC's financial health, - 10 - including its liquidity position. In many projects of this type the only financial covenant is th3 debt/equity ratio. This ratio is inadequate to monitor a DFC ca-hflow that can deteriorate rapidly during a financial crisis. Under . .=se conditions, the Bank would have had to undertake considerable supervision efforts to monitor compliance with accounting standards and achievement of the financial targets. 34. During this loan, the policy framework justifying this loan was reversed and Argentina went through a very serious eccnomic crisis that called into question the viability of the projects being financed and the solvency of the intermediary bank. The Bank, however, did not take any precautionary measures: it did not step up supervision nor requested an special audit of BANADE financial situation. Before making the loan, the Bank should have been convinced that the Government had a credible program to strengthen the external environment and linked the project to the performance of this program through strong legal covenants that would allow the Bank to stop new commitments or disbursements (to apply the Bank remedies) if the policy environment or the economic conditions were to change drastically during implementation. 35. Another important and obvious lesson is the need to complete PCRs on time. The delay in completing this PCR prevented a thorough discussion of this loan which would have alerted the Bank to the internal problems in BANADE and helped to improve the design and monitoring of the subsequent loan. H. Borrower Performance 36. Quality of Project Appraisal, Supervision and Loan Recovery. Over the implementation period, BANADE developed acceptable appraisal procedures for traditional credit operations, although the excessive processing time (six months for medium/large projects and three to four months for small projects) became a deterrent for prospective clients. The main weaknesses of the system had to do with management of loans after they had been appraised. BANADE's supervision of the subprojects was limited to physical inspection, with the purpose of verifying expenditures; there was almost no supervision during the operating life of the subprojects. BANADE's major weakness was, however, in loan collection or recovery, as a result of inadequate portfolio management and control systems. The underlying cause of BANADE's poor collection record was, in the opinion of a high ranking official in BANADE, that Ountil 1986-87, loan collection or recovery had not been historically part of the corporate culture, and the staff viewed the institution more as a disbursement window than as a bank." On the whole, however, the quality of the portfolio of Bank financed loans was better than the rest of BANADE's portfolio. 37. Organization and Staffing. BANADE undertook only minor organizational changes between 1978 and 1984. In 1981/82, an attempt was made to define departmental responsibilities and in 1983 a Department of - 11 - Human Resources was created, which undertook a systematic training program and developed a personnel policy. Despite these improvements, the organizational structure of BANADE did not change sufficiently. The lack of coordination among the various operational departments continued and the number of staff was only marginally reduced. Many of BANADE's professionals continued the practice of maintaining outside jobs. This system of part-time employment, which contributed greatly to the excessive processing time of loan appraisal, was tolerated by management due to the relative low salaries paid by BANADE relative to private sector banks. In 1984, a new Government once again tried a partial rehabilitation of BANADE by appointing a new board and management team. 38. BANADE's Financial Situation. Neither the new Charter of Incorporation and Statement of Policy nor the initial acceptable results achieved by BANADE during 1976-1980, were enough to prevent the deterioration of its financial situation between 1981 and 1984. When the financial crisis started in 1981, the Government, once again, used BANADE to rescue a number of large privately and publicly owned firms. As a consequence, by the time the loan closed in 1984, BANADE faced a severe financial crisis. 39. Comparative balance sheets and income statements of BANADE in US dollars equivalent for years 1979-1984 are presented in Anne.-)s 4 and 5. The balance sheets show a 78% deterioration in net equity from US$718 million in 1979 down to US$162 million in 1984. This was after substantial Government capitalization of BANADE through grants and the liquidation of its debt to the Central Bank between 1981 and 1983, representing an increase of more than 150% of BANADE's capital. The reasons for the drastic decapitalization of BANADE were twofold: (1) increased arrears of the current portfolio--resulting from the financial and economic crisis of 1980-83, aggravated by BANADE's poor collection efforts--forced BANADE to substantially increase reserves to cover bad debts, thus reduced its profitability (1979-83 provisions represented 3.5 times the actual - capital); and (ii) t.he need to finance assets (loans) with BANADE's own funds at very negative interest rates since mid-1982 and the introduction of regulated interest rates in early 1983. As a result, BANADE's income account for 1981-83, while showing a modest profit in current US dollars (Annex 4), resulted in substantial losses in constant pesos after adjustments for inflation. In constant 1983 equivalent US dollars the adjustment losses would amount to US$125 million. This deterioration of BANADE's financial position is clearly reflected in its debt/equity ratio, which reached 12.3:1 in 1981 and 26.4:1 in 1984, greatly exceeding the limit of 10:1 established in the Loan Agreement. 40. The ratios of profits to assets and return on equity were both positive for 1979/80, but became negative for 1981-83, after monetary adjustments. These ratios are, however, misleading due to BANADE's accounting practices based on accruals. If international loan accounting standards would have been applied, it is likely that interest accrued and loan portfolio value would have been significantly lower than those registered in the income statements, and that BANADE would have shown substantial losses. -12- 41. A major source of BANADE's financial weakness was its gradually deteriorating loan portfolio: portfolio arrears (over 10 days). which at the end of 1980 represented 6.4Z of BANADE's overall loan portfolio, reached 12.22 in 1984 and 21.12 in 1985. In 1982, as loan collection deteriorated and voluntary external financing ceased. BANADE had to resort to expensive short term borrowing to solve its liquidity problems. As a result, BANADE had to temporarily suspend its operations in local currency in late 1982. I. Project Relationship 42. The project period covered seven years and both the Bank's Project Officers and BANADE's management changed several times. Some lack of continuity in project supervision was due to these changes. J. Project Documentation and Data 43. BANADE did not fully comply with the reporting requirement of this loan. According to the Loan Agreement (Sec. 4.02), BANADE's financial statements had to be audited by the Central Bank which, as agreed during loan negotiations, would act as an independent auditor. Annual audit reports were to be reviewed by the Bank each year at the end of April. No reports were received. In April 1980, the Central Bank proposed to limit the audit report to the Bank loan and hire an external auditor for this task. The Bank insisted that the annual external audit should cover the entire institution. BANADE was opposed to the use of an external auditing firm on the basis of confidentiality of public recores and the high cost of private audits for an institution of BANADE's size. A compromise solution, accepted by the Bank in August 1980, was an audit by BANADE's trustee (Isindicol), who was appointed and responsible to the Minister of Economy but could hire private auditors. Between loan inception and 1984 the Bank received only one internal report for 1978 and an external audit statement for 1981. In 1984 the Bank agreed with the Government to accept audit reports from the newly established Sindicatura General d? Empresas Publicas (SIGEP). 44. A chief reason for the delay in completing the PCR was BANADE's contention that it was not possible to retrieve information on subloarf granted under this operation. Data on these subloans had not been entered in BANADE's computerized data base; moreover, according to BANADE officials, a number of folders had been misplaced. Only after forceful intervention by Bank management was a team created to retrieve the data. The first information available to BANADE's management on the results of this loan came from the data collected for the preparation of this PCR. - 13 - ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT (LOAN 1463-AR) PART III BASIC DATA 1. Related Bank Loans Years of Loan Title Purpose Approval Status Comments Second Industrial To finance industrial 1981 Closed Disbursement period Credit projects through a was extended for 6 Loan 2063-AR US$100 million credit months after closing line. date in Dec. 1988. US$9 million was cancelled. Small and Medium To finance SMIs 1987 In About US$30 million Industries Project projects through an progress committed up to now. APEX operation The financial situation (US$125 million) of BANADE and other using BANADE as second- participating banks is tier bank and under review to assess commercial banks and the impact of current BANADE as first-tier financial crisis. lenders. - 14 - ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECTs LOAN 1463-AR 2. Project Timetable Staff Dates of Activity MonthfYear No.of Weeks No.of Pers. Weeks Report Identification 2/73 4 6 24 6/5/73 Preparation 4/74 1 2 2 4/18/74 Preparation 9/76 3 4 12 10128/76 Appraisal 11/76 3 3 9 5125/77 Post Appraisal 3/77 1 1 1 5/25/77 Subtotal 48 Supervision 2/78 1 1 1 3/17/78 Supervision 10/78 1 2 2 3/14/79 Supervision 12/78 1 2 2 3/14/79 SupervLsion 4/79 1 1 1 11 Supervision 3/80 1 1 1 5/8/80 Supervision 7/80 1 2 2 8/18/80 Supervision 11/80 2/ 1 4 4 21 12/5/80 Supervision 8/82 i1 1 1 1 i1 9129/82 Supervision 3/83 3/ 1 1 1 31 6/22/83 Subtotal 15 Completion 10/88 2 1 2 TOTAL 65 1/ No formal report. The operations officer left the Bank in June 1979. 2/ Combined with preparation of the Second Industrial Credit Project; supervision counted as 10Z of the mission's time. 3/ Combined with Supervision of Loan 2063-AR; 10? time allocated. - 15 - ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT (LOAN 1463-AR) 3. Loan Disbursements CUMULATIVE ESTIMATED AND ACTUAL EXPENDITURES AND DISBURSEMENTS (US$ Million) FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY85 Appraisal Estimate 28.0 50.0 78.0 95.0 100.0 Actual -- 2.0 26.0 55.0 83.0 87.0 93.0 99.0 Actual as Z of 0.0 4.0 33.3 57.9 83.0 87.0 93.0 99.0 Date of First Disbursement 10/06/78 Initial Loan Closing Date 12/31/81 First Extension Loan Closing Date 12/31/82 Second Extension Loan Closing Date 12131/83 Third Extension Loan Closing Date 12/31/84 Fourth Extens"rn Loan Closing Date 10/24/85 Date of Last Disbursement 10/24/85 - 16 - ANNEX 1 Page 1 of 2 ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1463-AR BANADE - SUBPROJECT PROZILE No. z Amount Z (US$'000) By Size of Subloan Up to US$100,000 49 22.0 3.382 3.4 US$100,001-US$250,000 88 39.5 14,027 14.3 US$250,001-US$500,000 62 27.8 23,644 24.0 US$500,001-US$1,000,000 11 4.9 7,438 7.5 US$1,000,001-US$5,000,000 9 4.0 20,544 20.9 More than US$5,000,000 4 1.8 29,395 29.9 Total 223 100.0 98,A30 La 120.0 BI Size of Subprojects (Total Cost of Investments, Up to US$250,000 119 53.4 15,608 4.3 US$250,001-US$1,000,000 79 35.4 34,365 9.5 US$1,000,001-US$5,000,000 13 5.8 29,809 8.3 More than US$5,000,000 12 5.4 280,747 77.9 Total 223 100.0 360,539 100.0 By Size of Enterprise Small 79 35.4 14,125 14.3 Medium 108 48.4 30,283 30.8 Large 36 16.2 54,023 54.9 Total 223 100.0 98.431 / 100.0 By Maturity Less than 3 years 0 0 0 0 3 to 5 years 73 32.7 11,386 11.6 More than 5 years 150 67.3 87,045 88.4 Total 223 100.0 98,431 /a 100.0 /a Amount differs from Bank records (US$98,652) due to fluctuations in cross-currency exchange rates. Sources BANADE - 17- ANNEX 1 Page 2 of 2 ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1463-AR NATIONAL DEVELOPMENT BANK - DISTRIBUTION OF SUBPROJECTS No. 2 Amount 2 (US$9000) Dy ftena Capital Federal 67 30.04 17,743 18.02 Gran Buenos Aires 80 35.87 25,640 26.04 Provincia de Buenos Aires 18 8.07 18,954 19.25 Provincia de Catamarca 2 0.89 9,642 9.79 Provincia de Cordoba 8 3.58 2,669 2.71 Provincia de Corrientes 1 0.44 273 0.27 Provincia de Chubut 7 3.13 1,627 1.65 Provincia de Entre Rios 2 0.89 1,443 1.46 Jujuy 1 0.44 62 0.06 La Rioja 2 0.89 924 0.93 Mendoza 12 5.38 8.519 8.65 Misiones 2 0.89 4.026 4.09 Neuquen 2 0.89 2,135 2.16 Rio Negro 2 0.89 671 0.68 Santa Fe 11 4.93 2,296 2.33 Santiago del Estero 1 0.44 631 0.64 Tucuman 4 1.79 1,018 1.03 Tierra del Fuego, Antartida 1 0.F5 150 0.24 Total 223 100.00 98,423 fa 100.00 By Sector Fishing 1 0.4 178 0.2 Vdgetable oil 1 0.4 53 0.1 Mining 6 2.7 11,713 11.9 Foodstuff 19 8.5 5,387 5.5 Textiles 38 17.0 21,278 21.6 Shoes and clothing 12 5.4 6,004 6.1 Wood and wood products 6 2.7 7,649 7.8 Furniture 2 0.9 282 0.3 Paper and paper products 6 2.7 1,733 1.7 Printing 15 6.7 2,993 .0 Leather and leather products 1 0.4 55 0.1 Rubber products 4 1.8 600 0.6 Chemical products 9 4.0 7.245 7.4 Mineral products (non-metallic) 3 5.8 4,181 4.2 Metal industries (basic) 12 5.4 4.053 4.1 Metal products 20 9.0 3,363 3.4 Machinery (except electric) 5 2.3 838 0.8 Electric machinery 8 3.6 4.302 4.4 Transport 9 4.0 7,388 7.5 Various manufacturing 28 12.6 6,790 6.9 Construction 4 1.8 903 0.9 Public utilities 4 1.9 1,433 1.5 Total 223 100.0 98.421 La 100.0 By Financing Purpose New projects 19 8.5 32,128 32.C Modernization 204 91.5 66,303 67.4 Total 223 100.0 98,431 La 100.0 /a Amount differs from Bank records (US$98,652) due to fluctuations in cross-currency exchange rates. - 18 - ANNEX 2 ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1468-AR BANADE - OUTSTANDING ARREARS UNDER LOAN 1488-AR AS OF 12/81/87 Overdue Amounts (USS069) No. of Subloans Total Principal Interest Less then one year 1 8,199 More then one year 7 11,692 Total Arrears /b 14,881 8.3 _S.228 Is Total subloans granted 228 98,482 Subloans still outstanding 77 87,488 Arrears as N of: Total subloans granted 8.41 16.11 Outstanding portfolio under the loan 10.85 89.95 SUBPROJECTS IN ARREARS UNDER LOAN 1483-AR (All Sources of Financing as of 12/81/87 In US$8e) Asunt Overdue Overdue Total Total Company Outstanding Principal (X) Interest (5) Overdue (X) Exposure () (1) (2) (8) (4)u(2+3) (5).(1.4) 1. Tejidos Argentinos Norteste 8,188 8,456 89.9 8,282 52.7 6,737 45.8 12,9066 54.1 2. Talleres Absdor 1,217 1,883 21.2 2,251 86.1 4,989 27.5 5,808 22.2 3. Caffeti 1,083 2,150 24.9 - - 2,159 14.4 8,758 16.7 Subtotal 9.988 7.448 8.0 5.533 89.8 12,976 87.2 211,959 92.6 4. Uzal SMIC - 581 6.1 412 6.6 948 8.8 943 4.0 5. Grafic Velton - 492 5.7 194 8.1 680 4.8 686 2.9 6. Frigorifico MinguillIon Lb - 89 6.1 o 1.0 99 0.7 99 6.4 7. Reas - 148 1.7 29 0.5 177 1.2 177 6.7 Tots ILb 8 .983 8.668 100. 6.2 106.0 14.881 28.864 166.6 /b One firm has 2 subloans, both in arrears. Source: BANADE: mission calculations. ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT SUBPROJECTS FINANCED UNDER LOAN 1483-AR Subprej. Company Sector Invest. Employ- FRR ERR Total EBRD Status No. Purposes ment (2) (X) Cost Financing (USI0) (USSOOS) A-1 Nalelc SA Chemical Products no 64 21 21 13,458 5,022 oper/current A-10 Tejides Ar- Textiles nee 410 18 2 54,018 9,016 arrears/refin.plan gontinos Norest A-11 Ceramica Za- Mineral Products ne 88 26 3 8,082 2,096 oper./rofinanced A-2 Talleres Equipment A Ac- moderniz. - 33 20 10,973 8,002 arrears/logal action Adabor cessories A-8 TELMEC Equipment (except moderniz. - - - 94 94 fully repaid electrIcal) A-4 Establecl- Trunsport Material nodernia. - * * 136 136 fully repaid mientes Motal A-9 Caffet Wood & Products modernia. - - - 3,872 8,872 arrears in restruet. A-8 Astilleros Transport Material modernia. 26S 18 13 53,789 5,484 fully repaid Allenza A-7 Copetro SA Mining new 46 18 46 88,671 9,919 oper./curren A-8 Ceramics Mineral Products now 99 17 16 28,837 8,90 oper./current mmven A-9 CVyo Places Wood A Products modernia. 15 - - 3,590 8,142 oper./current B-1 Majis SA Textiles modernia. - - - 898 898 fully repaid -10 Mits Argon- Foods modernia. - - - 02 82 fully repaid tino 8-16 Industries Metal Products modernia. - - - 73 67 fully repaid a Sics B-101 Seleve Pa6a- Metal Products moderniz. - - - 391 381 fully repaid gonica 8-192 Canters Mala- Mining moderniz. - - - 369 359 fully repaid gue A S.A.I.C. 8-103 Tecniflon Various Manufact. moderniz. 8 - - 63 61 fully repaid Subproj. Company Sector Invest. Employ- FDR ERR Tott I IBRD Statue No. Purposes ment Cost Financing (U'Stee) (US8SO0) 6-104 Precom Various Manufact. moderniz. - - - 312 312 fully repaid 8-105 Frigopap Services moderniz. 12 - - 1,112 443 oper./current 8-108 Ruben A Za- Furniture moderniz. - - - 122 122 fully repaid pato 5-107 Tex San An- Textiles moderniz. - . - 497 456 fully repaid dres SA 8-198 A Real Equipment & moderniz. - - - 130 81 fully repaid Hijoe Accessories 8-109 Metalurgica Various Manufact. moderniz. - - - 498 491 oper./current Del luchi 6-11 Vitolen SRL Various Manufact. moderniz. - - - 53 63 fully repaid 8-110 .I*e" Ci rocco Metal Products moderniz. - - - 187 134 oper./current 6-111 Clagraf Printing moderniz. - - - 134 134 oper./refinanced B-112 Autopocess Various Manufact. moderniz. 6 - - 158 116 fully repaid B-11 Feben Various Manufact. moderniz. - - - 394 394 fully repaid 8-114 Ramon Chozas Paper & Products modernia. 4 - - 695 496 oper./current SA 0 8-115 Quayule Rubber moderniz. - - - 120 85 fully repaid 8-116 Fortboeton Chemical Prod. moderniz. - - - 117 81 Co. Labora 8-117 Met Port Metal Products moderniz. - - - 46 46 fully repaid 8-118 Corte y Shoes & Clothing modernia. - * - 66 61 fully repaid Estilo 8-119 Ricardo Food new - - - 192 162 fully repaid Mario Brave 8-12 Claveplast Various Manufact. modernia. - - - 338 339 fully repaid SRL 0-120 Plaeolux Various Manufact. modernia. - - - 146 186 fully repaid SAIC B-121 Textil Le- Textiles modernia. - - - 140 146 fully repaid Mang 8-122 Cattorial Shoes & Clothing moderniz. - - - 264 its fully r4pald M 8-123 Ernesto Various Manufact. moderniz. - - - 183 148 fully repaid t Reinaldo JEN o B-124 Achinelli Textiles moderniz. - - 187 187 fully repaid 8-125 Surlon Textiles moderniz. - - - 198 170 oper./current a 8-126 Micrunda Paper A Products moderniz. - - - 86 66 fully repaid 9-127 Cabsha Food moderniz. - - - 167 167 fully repaid Subproj. Company Sector Invest. Employ- FDR ERR Tot I IORD Status NO. Purposes mont Covt Financing (Usu000) (USSON) -1298 Voltscord Transport Materials moderniz. - - - 292 292 fully repaid 8-129 Complejo Ar- Tentilc modernia. - - - 180 18 fully repaid gentino F1- bras 8-13 Artless SA Metal Products modernia. - - - 220 216 fully reptd 8-188 Agreat Shoes a Clothing Modernia. - - - 260 145 fully repaid 8-181 IND Plasti- Shoes A Clothing modernia. 45 - - 731 368 fully repaid cea ENTRE 8-182 Foderael Textiles moderniz. 4 - - 587 385 fully repaid SACIF 8-188 Cites Centro Textiles moderniz. - - - 176 176 fully repaid IND Textiles 8-184 Witcel Paper A Products modernia. - - - 336 172 fully repaid 8-186 Molino Ar- Foods moderniz. - * - 79 79 fully repaid gentino 8-187 Jose Carta- Construction moderniz. So - - 478 478 fully repaid Ilone Cont CIV 8-188 Del Turista Foods ne 14 - - 800 256 fully repaid 8-189 San Antonio Metal Products moderniz. - - - 82 82 oper./current Checanov 8-14 EST Textil Textiles moderniz. - - - 1,815 1,915 oper./current DESTE SA 8-140 Enrique Sans Printing moderniz. 12 - - 417 417 oper./current 8-141 Kenna Transport Materials modernlz. - - - 65 34 fully repaid 8-148 C.I.V.E. SAIC Mineral Products moderniz. - - - 349 349 fully repaid 8-144 Silvia Lia- Foods moderniz. - - - 861 420 oper./current oea 8-145 Impresora Pa- Printing moderniz. - - - 116,988 116,800 oper./current tagonica 8-146 Conzalo y Printing moderniz. - - - 130,900 84 oper./current ra 0. Tornan 3 8-147 Mociel Hnos. Printing moderniz. - - - 138 138 fully repaid w 9-148 Artie SA Motal Products moderniz. - - - 18 108 refinanced/ 0 fully repaid 8-15 Tableros Wood & Products moderniz. - - - 19,998 183 fully repaid a Cuillerminse Subproj. Company Sector Invest. Employ- FOR ERR Total IBRD Status No. Purposes Cent Cost Financing (USSeO) (USI90) 8-169 EST Moeal Equipment (ex. modernix. 2 2 - 107 167 fully repaid Universal electric) SAIC 8-151 IID Sicas Mineral Products modernix. - - - 78 24 arrears/refinanced 9-162 Uxal SAIC Textiles moderniz. - - - 686 427 fully repaid 8-16 Fargo Foods modernia. - - - 197 186 fully repaid 0-264 Lela Casale Textiles mod-nix. - - - 1,117 36S fully repaid 9-165 Tejodurie Textiles moderniz. - - - 96 96 fully repaid Directorlo -1568 Valenclana Textiles moderniz. - - - Sw 836 fully repaid Arg Jose 9-167 Editorial Printing moderni. - - - 23 238 oper./current Luio Feldman 9-16S Cotoca Textiles new 62 - 14 4,760 823 oper./current 9-159 La Cartujana Mineral Products moderali. - - - 119 119 oper./current SRL 8-16 Leon Romagnoll Basic Metals moderniz. - - - 405 495 oper./current 9-100 Sancor Coop Foods modernia. - 21 - 1,671 638 fully repaid B-161 Heroas Basic Metals modernia. - - - 79 79 fully repaid B-162 Texti Loens Textil es modernia. - - - 77 77 ref inanced/ fully repaid 9-163 Jose Cirocco Metal Products moderniz. - * - 238 149 oper./current 8-164 Micropack Paper & Products modernia. - * - 166 129 fully repaid 9-186 Bololux Various Manuf. moderniz. - - - 388 389 oper./current 8-188 Metalurgca Various Manuf. moderniz. - - - 8983 494 oper./current 9-167 into Textiles modernia. - - - 475 410 fully repaid B-169 RoaIwe Metal Products %odernia. - - - 106 74 eper./current 9-17 Tocalce Vegetable Oils modernix. 11 - - 63 68 fully repaid LIDAD B-179 IND Arpon Equipment & modernix. - - - 69 69 fully repaid Accessories d4r B-172 FCO Mo- Mineral Products modernIX. 2 - - 412 412 oper./current saicoe 0-173 Fargo Foods moderniz. - - - 71 71 fully repaid 0 9-174 Taro Equipment a modernix. - - - 131 11 fully repaid Accessories Subproj. Company Sector Invest. Employ- FDR ERR Total IBRD Status NO. Purposes msent Cost Financing (Ussee) (USSee) 3-175 Lacar Food modernix. - - - 19 199 fully repaid 8-170 Lotejyan Teatiles moderniz. - - - 268 201 fully repaid 8-177 Copiecol Various Manuf. noderniz. - - - 96 98 fully repaid 8-179 Ricerdo Shoes 4 Clothing moderal. - - * 417 26 oper./current Almsr SA B-19 Calera Mineral Products moderniz. - - - 267 264 fully repaid Avel laneds 8-189 Industrial Equipment A modernI. - - - 832 332 oper./current Real Accessories 8-181 Febrisur Textites moderniz. - - - 3se 150 fully repaid 8-192 Volante Rubber modernlz. - - - 189 18 fully repaid 5-198 Rio Cincel Mining moderniz. - - - 89 62 refinanced/ fully repaid 8-185 Texas Equipment (non- moderniz. - - - 230 230 oper./current electric) 8-187 Fundiciones Basic Metals moderniz. 15 - - 892 149 fully repaid Morts B-18 Tintoral Textiles moderniz. - - - 199 189 fully rapeld 6-189 Manual Shoes A Clothing modernia. - - - 74 6 fully repaid Areinian B-19 Prodo Equipment (non- modernia. - - - 139 116 refinanced/ Electric) fully repaid B-190 Texa Testil Textiles moderniz. - - - 634 266 fully repaid Americana SA B-191 Kureaal Mining modernia. - - - 446 420 oper./reflnanced 8-192 Cromerac Ustalic Products modernia. - - - 830 820 fully repaid 8-193 Grafice Printing modernia. - - - 492 499 arrears/under review Veotoo 8-194 Velsur Chemical Products now - - - 234 09 fully repaid 8-195 Laboratorlo Various Manuf. moderni. - - - 889 188 oper./refinanced Alex 9-197 Imprecolor Printing moderni. - - - 280 230 oper./current 8-198 Microonda Paper & Products moderfls. - - - 7906 407 oper./current 8-199 Ramon Chozas Paper & Products moderni. - - - 762 468 oper./current % 8-2 Henter ICSA Wood & Products moderniz. - - - 164 154 fully repaid 0 8-20 Motorar G Equipment & moderniz. - - - 196 106 fully repaid Accessories o Sobpro). Company Sector Invest. Employ- FDR ERR Tota I IBR Statues NO. Purposes ment Cost Financing (USS0) (USSOMe) B-taU Aacerers Feeds moderni. - - - 405 222 fully repaid Concepcion B-201 Rayen Cure SA Mineral Products modernit. as - - 816 266 fully repaid 0-218 Buffalo Transport Material moderniz. - * - 117 116 fully repaid B-204 PIe-Ref Basic Motls moder"ia. - 89 - 88S 198 fully repaid B-2u Cordells y Textles moderniz. - - - 833 207 oper./current CIA 6-206 Editorial Printing modernis. - * - 414 414 oper./current Rio Negro B-207 Pireague Equipment & moderniz. - * - 778 397 oper.2current Accessories B-28 Agrocom Foods moderniz. - 48 - 1,619 988 oper./current 0-21 Fornamstal Metalic Products moderniz. - - - 196 131 fully repnid 9-210 Plants Foods moderniz. - - - 6,89 6831 oper./current Lactese 3-211 Artym Metalic Products modernia. - 24 - 98 98 oper./refinnced p B-212 Frigopap Services modernia. 6 - 116 485 394 oper./current * B-213 Petroplast Various Manuf. nee 16 20 33 138 136 oper./current 9-214 Mrplatens Fishing modernia. - - - 179 178 oper./current t-215 Boldt Impre- Printing moderni. - - - 279 169 fully repaid sores B-216 Formametal Metalic Products modernia. - - - 294 193 fully repaid SA B-217 Ricardo Shoes & Clothing moderniz. - - - 186 136 oper./current Almar B-21 Tesloacti- Chemical Products new 106 16 21 28,183 1,075 oper./current voe del Litoral B-219 Teati1 Le Textiles moderniz. - - - 338 338 oper./current Ma ss1 B-22 Aerosol Sin- Chemical Products moderniz. - - - 84 84 fully repaid OQ teals 6-220 Editorial Editorial Perfil moderniz. 15 - - 699 189 oper./current PerfiI 8-221 Implex V4rlous Manuf. moderniz. - - - 182 182 oper./current Subproj. Company Sector Invest. Employ- FDR ERR Total IBRD Status Ne. Purposes Imnt Cost Financing (USSe0e) (USSM) S-222 Las 4 Barren TextlIes moderals. - - - 110 110 oper./refinaned 8-na Cloneplest Various Manuf. modernia. - - - 2860 266 oper./current 8-224 Ritex SA Textiles moderniz. 103 41 - 1,979 914 oper./current B-228 Site SA Textiles moderniz. - - - 829 29 oper./rfinanced 9-28 Laboratories Chemical Products moderniz. - - - 235 210 fully repaid Vieng D-24 Psolini SAIC Various Manuf. moderniz. - - - 888 866 fully repaid y Jorge Raul Shoes a Clothing 8-25 Aslien Metal Products modernts. - - - 420 411 fully repaid B-2 Cede Textles moderni. 4 - 146 122 fully repaid B-27 Spivak y Textiles modernia. - - - 446 407 fully repaid Oryacwaig 8-28 Plastics La- Various Manuf moderniz. - - - 64 62 fully repaid vall* 8-29 Artless Metal Products modernia. - - - 210 210 oper./refinanced 6-8 Syntaryc Chemical Products moderniz. - - - 829 829 fully repaid S-83 Tintoreria Textiles modernia. - - - see see oper./refinanced a Industrial Mod S-81 Aceros Caste- Basic Metals moderniz. 406 17 - 10,286 936 oper./current Ilone SA 9-82 Materia ne. Chemical Products modernIa. 29 93 - 379 847 fully repaid 8-33 Metelurgice Metal Products new - 14 - 18,962 675 oper./current Carte 3-84 Fadete Textiles moderniz. - - - 109 19 fully repaid 8-85 Macel Printing moderals. - - - so w fully repaid B-88 Frigorifico Foods moderniz. - - - 170 166 arreare/legal Mingeillon actie 8-87 Mocaotecnice Rubber modernia. - - - 106 105 fully repaid 3-88 Floreacl A Textiles moderniz. - - - 897 887 fully repaid France 8-89 Le Industrial Mineral Products modernia. - - - 78 78 fully repaid 3-4 Fargo Feeds modernia. 120 * * 1,175 456 fully repaid 1-40 Frigorifico Foods modernis. - - - 216 177 fully repaid 8-41 Blenvenide Metal Products nodernia. 2 - - 176 170 fully repaid Q aubprej. C1ang Seebetr Ivet. EmpIoy- FDR ERR Total mBRD Statue Nt. Purpesos fe6 Cost FinnaIng (USSU) (U~SSa) 8.48 TOuse dø Sorvlces fodbrala. - -g- 9 S fully repøld 4 adetøx~ 18 MINeral Prod~cts ~mirnla. - - - løs 86 fully repid *leg 8-44 C~lojeA* . Tettwo msdeaa. - - - 2N8 247 fatly rpId g@M» d& PIbre. 8-48 Lut.jyeysa6 teo endelao. - 18 186 fot y rpd 8-46 Suee stiel Preduete modernia. - - - 29s Ifs folly repod 8.41 leense Cessteeta* eo ldera. - - - as os twill repld 8.48 Ueta Seel Truespoe6 Ueteele mederwla. - - - 119 193 feIt repid p WP -49 Ueseuless Shoet & C~oag mediea. - - - E1 52 fulily repald 8.8 prog 1 ,1el Presta edeala. - - - 114 114 at p r~epid Jet~ toIeeag Shoem & Clethlag 8-88 bi4s Pelg TemII lee adlema. - - - 26 177 fatly rqld 8-81 bieee tenbruetlon moderata. - - - 4"1 4" tel Il ropid #84 Ueeg allt Velems Uas. de*a. - - - srf - ft y eid Jeat 88 blt 3L Weeleus Usiut. MLd~ema. 1 - - s w oper./eunu~t 8-S bt&f~ VWges øseles nt. Mhdeila. - - - 1e8 174 ftly# rpald 1att.. Råh keese madela. - - - 25 2M fat ly repald 8.SS #e.e.st # Ulmeg 1hdala. - - - f2 tly rlpld alee p Ued & Pft*~cts sta. £ - - la 22 #otti ropaid 8-SS ubipoepoe Tesi6 lee mnderla. - - - 14s 14s tal fy ropold 8-Se Tenn1e Tesil ., uswedraa. - - - asaosta ly .u,,e,a 3 4-4 lote 48atag .dera. - - - 74r 70 tuip rupsid 84-8 t b & Peedoæte sdsG la. - - - 19e Ie Is pe.wumaa SubproJ. Company Sector Invest. Employ- FDR ERR Total 18RD Status No. Purposes msent Cost Financing (USSOe) (USIeg) 9681 Establ. Textiles modernia. - - - 1,620 1,690 In oper./current Textiles San Andre B-42 Industries Motal IProducts modernia. - - - 496 467 In oper./current Gorma SAIC B-4 P CalIlberti Equipment (non- moderniz. - - - 230 239 fully repaid electric) 8-64 Ind. Gaigo Various Manuf. modernia. - - - 94 84 fully repaid Arg. B-85 Mecca Cast. Basic Metals modernia. - - - 134 127 In oper./current LAR SA B-6 Industries Mineral Products modernis. - - - 117 117 fully repaid Tonic SA 8-7 Vacle Ind. Metal Products moderniz. - - - 198 18 fully repaid Arg. B-88 Anoss Basic Metale modernia. - - - 319 319 fully repaid N SACIF IA 3-89 Aristides Printing mderniz. 2 - - 85 68 fully repaid Pascual Pietach B-7 Reuse Basic Metals modernia. - - - 196 190 In legal action/ operating B-70 Sign SA Basic Metals modernia. - * - 279 219 fully repaid B-71 Aido Oscar Printing moderniz. * - - 161 161 fully repaid Martie 8-72 Vanderf I Textiles moderniz. - - - 809 697 fully repaid SAIA 8-74 SuItex Textiles moderniz. - - - 215 215 fully repaid 1-75 Meprlco Food modernia. - - - 54 54 fully repaid 8-76 Oteluares Various Manuf. moderniz. - 25 - 95 9 fally repaid 3-77 Maderaros Furniture moderniz. - - - 169 159 futly repaid a Brisio Hnos R B-78 Ceramica Mineral Products moderniz. - - - 273 273 fully repaid %0 Romero 0 6-79 Agrest SA Shoes A Clothing moderniz. - - - 496 418 fully repaid B-8 Walko Textil Shoes A Clothing modernia. - - - 8,800 8,800 fully repaid $ SubproJ. Company Sector Invest. Employ- FDR ERR Total IBRD Stotuo MO. Purposes nont Cost Financing (USSM09) (USSM98) 8-89 PI ragme SA Equipment A Acces- moderniz. - - - 1l0 160 sories B-81 Peolial Various Manu?. moderni. - - 134 127 fully repaid B-02 Buffalo Transport Materials modernia. - - - 426 426 fully repaid -844 Ennlo FCO Printing moderniz. - - - 134 129 fully repaid Ayoss B-85 S1:vio Food moderni. - - - 4860 4609 eurrent/in Llanoze e operation B-98 Curt Las Leather A Products modernia. - - - 74 SS fully repaid Roose 8-87 Plastica In- Various Manuf. moderniz. 2 - - 317 817 current/in plast operation B-88 Leon Romag- Basic Metals moderniz. - - - 438 438 current/In noll operaton B-9 Frigorifico Food modernia. - - - 183 168 in legal Minguiton action 8 Pam SRL FAB Transport Materials moderniz. - - - 466 461 current/in Arg. operation B-60 Buffalo SACI Transport Materials moderniz. - - - 466 388 fully repaid B-91 Laminfer SA Basic Metals moderali. - - - 413 412 fully repaid B-92 Maselli Va- Services moderni. - - - 88 s fully repaid ilejos FIllu SR 8-98 Petroplast Various Manuf. new 166 20 83 8,778 1,456 current/in operastion B-94 Aerosol Sin- Chemical Products moderniz. - - - 84 64 fully repaid tesis B-95 Valley Di Motel Products moderniz. 2 - - 128 s fully repaid Benedetto 8-98 Linotal Construction moderniz. - - - s 85 fully repaid 8-97 Induret Various Manuf. modernia. - - - 6 85 fiIly repaid ? 8-98 Blacor SA Various Manuf. modernia. - - - 84 84 fully repaid Roseor Giglio B-99 Laurenano y Various Manuf. moderniz. - - - 88 66 fully repaid 0 ' CIA___........._o Total 223 Subprojecto 2,218 36,6580 162,196 C> I.~. - 29 - ANNEX 4 ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1463-AR BANADE - COMPARATIVE BALANCE SHEETS, DECEMBER St. 1979-87 (in US$ million) 1979 1960 1981 1982 1983 1984 196 1986 1987 ASSETS Cash and due from Banks 80.4 189.1 235.8 219.1 114.1 168.7 81.4 99.6 89.6 Government Securities - - 62.1 960.1 71.0 46.4 37.1 28.4 12.4 Loans and other Asstes in Foreign Currency 779.4 1892.1 Loans 719.4 1111.1 2965.4 2833.8 2918.8 3626.7 8187.2 2846.8 3140.0 Other Receivables for Financial Intermediation - - 311.8 820.8 1570.8 167.3 1568.6 1942.7 1557.9 Equity in other Companies 288.4 49.9 24.2 27.2 32.6 49.9 48.0 25.6 14.6 Sundry Receivables - - 14.5 4.6 8.5 5.5 7.7 9.8 8.5 Property, Plan and Equipment 14.4 17.9 13.4 13.3 13.4 19.8 24.9 24.9 23.7 Miscollaneous Assets 4.4 5.7 0.7 1.2 1.8 1.7 8.5 7.4 6.8 Unappropriated Items - - 66.4 24.7 64.9 44.6 59.8 *.7 47.7 Other Accounts 920.7 1473.9 - - - - - - - Total Assets 2752.8 4589.9 8672.7 4034.5 4715.8 4884.7 4981.5 6021.4 4881.8 LIABILITIES AND :QUITY CAPITAL Deposits 788.6 1511.6 762.8 337.9 241.8 248.4 174.8 227.9 261.8 Othor Obligations (for financial Intermediation) 925.9 1596.7 2626.4 8486.4 4281.6 4836.0 4514.2 4457.5 .A300.8 Sundry Liabilities 823.1 631.8 15.0 7.8 18.5 9.4 16.5 16.6 17.7 Reserves and Allowances 11.8 88.6 14.8 10.2 9.6 7.4 8.7 18.1 7.5 Items Pending Allocation 6.0 16.4 8 87 87.6 46.1 61.0 64.2 44.8 Total Liabilities 2033.4 3889.8 8464.2 3879.9 4564.8 4642.4 4766.9 4773.9 4832.1 Capital Stock 208.4 860.6 61.8 15.0 19.8 12.8 28.9 98.4 54.5 Non-capitalized Contributions Monetary Adjustments - - 23.6 17.9 17.6 128.5 121.8 77.8 135.1 Aggregate Capitsl Adjustment Profit Reserve 126.3 292.1 63.4 20.2 9.9 11.3 12.9 28.1 46.3 Retained Earnings 896.1 107.8 40.0 161.8 86.6 14.4 60.7 44.0 14.6 Adjustments of Accrued Earnings Total Equity 718.9 70.5 188.4 154.5 180.9 162.8 214.5 248.8 249.7 Total Liabilities and Not Worth 2752.8 4539.9 3872.7 4034.6 4715.8 4804.7 4981.5 5021.4 4881.8 Contingent Liabilities 8878.6 2699.8 2325.1 2151.8 1978.2 1677.9 2022.6 2164.8 2148.7 Note: Minor discrepancies in decimals due to rounding. - 30 - ANNEX S ARCENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1468-AR BANADE - INCOME STATEMENTS: 1979-1987 1979 1989 1981 1982 1988 1984 1985 1988 1987 Financial Revenues 209.4 828.8 722,2 687.0 710.2 1698.5 1810.8 767.7 1495.6 Financial Expenditures (125.2) (707.8) (583.9) (494.7) (462.7%1020.7) (877.7) (484.0) (998.4) Charge for Bad Debts (129.7 (207.2) (183.9) (95.6) (28.9) (887.4) (237.4) (160.6) (827.8) Subtotal (246.5) (688.2) 4.4 47.2 48.5 195.8 195.2 127.0 169.2 Revenues from Service - - 15.4 18.9 20.2 85.0 82.0 19.1 22.5 Expenditures free Services (14.8) (28.5) (1.8) (0.9) (1.7) (2.7) (8.8) (1.2) (2.6) Monetary Result From Financial Intermediatien - - ** - (201.9) (145.0) (75.5) (134.6) Adlnistratlon Expenses (A3.8) (72.9) (89.8) (17.2) (23.3) (49.4) (88.4) (49.4) (58.6) Other Income 09.6 685.7 62.2 68.1 2.5 24. 88. 95.0 118.8 Other Losses/Expenses (884.8) (115.t) (15.0) (17.2) (9.0) (14.7) (82.2) (59.5) (79.7) Monetary Result for Other Operations - - - - - 16.2 9.2 (12.0) (34.8) Net Result for Period 89.8 85. 28.4 93.8 84.5 9.8 49.0 48.8 14.0 Note: Discrepancies in decimals due to rounding. - 31 - ANNEX 6 ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1408-AR BANADE - FINANCIAL RATIOS 1979 198 1981 1982 1983 1984 1985 1088 1987 1. Debt/Equity Ratio (Including Contingencies) Actual Total Overall 8.8:1 5.4:1 12.8:1 18.4-1 26.2:1 - - - - Total Long Term - - - - - 26.4:1 18.6:1 28.8:1 21.4:1 Estimated (1981) 2.8t1 5.5s1 7.0:1 6.8:1 6.1s 5.9:1 9.4:1 2. Current Ratios 1.19 1.17 1.8 1.84 1.94 1.95 1.66 1.98 1.10 8. Profit as 3 of Total Assets 1.4 2.0 0.7 2.8 0.7 0.2 1.9 0.9 0.2 4. Return on Equity (S) 5.5 12.1 18.4 60.7& 26.8 0.0 22.8 17.4 5.6 S. Administrative Costs as 5 of Total Assets 1.7 2.0 1.1 9.4 0.5 9.9 9.8 1.0 1.1 6. Gross Spread (Not Financial Revenue as X of Loan Portfolio) (*)7.7 (-)18.6 6.8 5.0 8.4 19.2 18.6 10.8 15.6 Sources BANADE, Contadorls, 1988. &g Return is high due to a small charge for bad debte in that year. - 32 - ARGENTINA PROJECT COMPLETION REPORT INDUSTRIAL CREDIT PROJECT - LOAN 1463-AR BaADE - PERSONNEL EMPLOYED 1978-88 Year Number 12/31/78 4,033 12/31179 3,972 1213180 3,841 12131/81 3,761 12/31/82 3,666 12/31/83 3,686 12131/84 3,647 12/31/85 3,539 12/31/86 3,422 12/31/87 3,274 08/31/88 3.175 09129/88 2,979 Sources EARADE, Human Resources.