Announcement of World Bank Lends Three Hundred Million US Dollars to Argentina to Continue Yacyreta Hydroelectric Project on September 30, 1992

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 93/20LAC Contact: Ciro Gamarra (202)473-8721 WORLD BANK LENDS S300 MILLION TO ARGENTINA TO CONTINUE YACYRETA HYDROELECTRIC PROJECT WASHINGTON, D.C., September 30, 1992 -- The World Bank has approved a $300 million loan to Argentina to help finance the construction of the Yacyreta hydropower plant, a binational project with Paraguay on the Parana River. The $1.5 billion investment project, to be carried out during the period 1992-1995, will help the completion of Yacyreta's first six units totalling 930 MW, implementation of the associated transmission system, and resettlement and environmental management programs necessary for the 78-meter reservoir. The project will help provide efficient supply of energy in the mid-90s by ensuring early operation of Yacyreta; bring about tighter environmental protection and appropriate handling of social aspects in Yacyreta; and encourage private capital participation in the Entidad Binacional Yacyreta (EBY), the Argentine- Paraguayan entity in charge of the plant. The centerpiece of the Argentine economic reform program is the restoration of fiscal discipline by reducing public sector expenditures and improving tax revenues. To this end, the government has downsized the civil service, privatized many public enterprises, and taken other measures to stem the fiscal drain. In this context, the continued heavy claim on budget resources over many years for Yacyreta has represented a serious problem. Therefore, completion of this project is now a critical part of the Government's program to restore financial soundness. Moreover, the completion of Yacyreta would be the least cost option to provide for the growing demand for electric power in Argentina. The massive project which started in the late 1970s is now well advanced with about 80 percent of civil works completed, assembly of the first four turbines progressing well and favorable prospects for commissioning the first unit in September 1994. The project will encompass appropriate handling of social impacts in Yacyreta required by the operation of the reservoir with an elevation of 78 meters, including the resettlement of about 25,000 people until 1995, of which some 9,000 people have already been resettled. Technical assistance will be provided for the implementation of the resettlement and environmental management programs required for the reservoir and preparation of the environment and resettlement measures to be taken in the future for the possible rise of the reservoir above 78 meters. NOTE: Money figures are expressed in U.S. dollar equivalents. -2- A comprehensive resettlement plan has been designed to restore farmlands and employment sources, rebuild houses and community buildings such as schools, markets and clinics, and to provide modern drinking water, electricity, drainage and sewerage systems. To offset the loss of natural ecosystems to reservoir innundation, the project provides for the establishment of a network of 7 compensatory protected areas encompassing more than 80,000 hectares, as well as wildlife rescue and relocation. A possible operation of the reservoir at an elevation of 83 meters will be jointly considered by the World Bank and the governments of Argentina and Paraguay during a review scheduled for mid-1994. The World Bank is prepared to help the Argentine Government in putting together a solid financing plan for the execution of the additional resettlement of 25,000 people and environmental management program required for such increase of the reservoir level, if this is so decided. To prevent water quality and related health problems, the project supports the design and construction of potable water and sewerage systems in the cities of Posadas, Argentina and Encarnacion, Paraguay; biomass removal and refuse dump stabilization in areas to be flooded; and technical assistance for industrial pollution control. Furthermore, the Bank plans to provide additional funding of approximately $50 million by the end of 1993 for these purposes. Public health will also be enhanced through the surveillance and treatment of water-related diseases and the monitoring and control of potential disease vectors (such as mosquitoes and aquatic snails). Important archaeological remains and historical features will be salvaged and recorded prior to reservoir filling. The project will also support enhanced management of the Parana River's native fish species. Aside from the generation of electricity, water releases from the Yacyreta dam will be managed to achieve environmental objectives such as reservoir water quality and control of floating aquatic weeds. Of the $300 million World Bank loan, $299 million will be for EBY and $1 million for the Executing Unit for the Yacyreta Transmission System (UESTY) under the Secretariat of Electric Energy (SE). In addition to the World Bank loan, the balance of the project cost investment will be financed with net internal funds ($95 million), government loans ($503 million), a proposed Inter-American Development Bank loan ($32 million) and export and supplier credits ($560 million). The World Bank has approved two previous loans for the Yacyreta project: one of $210 million in October 1979, and another of $250 million (out of a $252 million loan for the electric power sector) in October 1988. Both loans have already been disbursed. The World Bank $300 million loan to the Republic of Argentina is for 17 years, including 4 years of grace, with variable interest rate, currently 7.6 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balance. -0-