Argentina - Road Maintenance and Rehabilitation Sector Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 11413-AR STAFF APPRAISAL REPORT ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT MAY 10, 1993 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: Peso (A$) AS 1.00 = US$ 1.00 WEIGHTS AND MEASURES Metric System FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AA - Aerolineas Argentinas AADT - Annual Average Daily Traffic AGN - National General Audit AGP - Administracion General de Puertos B/C - Benefit Cost Ratio BOT - Build, Operate and Transfer CVF - Federal Road Council DNV - National Highway Directorate DPV - Provincial Highway Directorate DPVLP - DPV of La Pampa DPVSC - DPV of Santa Cruz EA - Environmental Assessment EBM - Expenditure Budgeting Model ERR - Internal Rate of Return FA - Ferrocarriles Argentinos FHWA - Federal Highway Administration of USA FEC - Foreign Exchange Component FSE - Federal Secretary of Environment GDP - Gross Domestic Product GRV - Directorate for Highway Reconversion HDM - Highway Design and Maintenance Standards Model IE - Index of Pavement Condition ISIT - Institute of Advanced Studies in Transport Engineering MBP - Management by Program MEOSP Ministry of Economy and Public Works and Services NTP - National Transport Plan PCU - Project Coordination Unit SOP - Sub-Secretariat of Public Works SOPyC Secretariat of Public Works and Communications SSTP - Sub-Secretariat of Transport Planning TATP - Technical Assistance and Training Programs TCN - Court of Accounts  FOR OFFICIAL USE ONLY ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Table of Contents Page No. LOAN AND PROJECT SUMMARY .............................................. iii-v I. THE TRANSPORT SECTOR ............................................ 1 A. Transport Scope and Demand ................................. 1 B. Transport and Road Reform in the 1990's ..................... 3 C. Issues in the Road Subsector ............................... 4 D. National Road Sector Expenditure Program .................... 9 E. Previous Bank Lending Experience in the Transport Sector .... 10 II. THE PROJECT ...................................................... 13 A. Project Origin .............................................. 13 B. Project Rationale and Objectives ............................ 14 C. Project Description ........................................ 14 D. Project Costs ............................................... 16 E. Financing Plan ............................................. 18 F. Economic Evaluation ........................................ 18 G. Project Risks .............................................. 20 III. PROJECT IMPLEMENTATION DETAILS ................................... 21 A. Status of Project Preparation .............................. 21 B. Project Implementation ..................................... 21 C. Procurement ................................................ 23 D. Disbursements .............................................. 26 E. Accounts and Auditing ...................................... 27 F. Environmental Impact ....................................... 28 G. Monitoring of the Project .................................. 28 IV. AGREEMENT TO BE REACHED AND RECOMMENDATIONS ...................... 31 This report is based on the findings of preappraisal and appraisal missions to Argentina on November 25 to December 11, 1991, and September 25 to October 23, 1992, respectively. The missions were composed by Mr. Raul Auzmendi, Sr. Economist (Task Manager), Mr. William Matthey, Sr. Highway Engineer, Mr. John Dixon, Senior Environmental Economist, Mr. Lucio Caceres, Highway Engineering Consultant and Mr. Manfredo Linder, Procurement Consultant. The report was prepared under the general direction of Mr. Ping-Cheung Loh, Director LA4DR and Mr. Alain Thys, former Chief, LA4IE, who was succeeded on November 1, 1992, by Mr. Alfonso Sanchez, Chief, LA4IE. Messrs. Hernan Levy, EA2TP and Luis Pinilla, LA2IE acted as Peer Reviewers. Mmes. Leo Malca and Dionisia Harris assisted in the processing of the Report. 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.  ii LIST OF TABLES: 1.1 Modal Composition of Domestic Traffic 1.2 National and Provincial Highway Network 1.3 Traffic Data on National Roads 1.4 National Roads Condition 1.5 Sections Let Out for Concessions in Early 1991 1.6 Some Recent Accords Signed between DNV and DPVs 1.7 Action Plan for Highway Reform - Pilot Province: Santa Cruz 1.8 Action Plan for Highway Reform - Pilot Province: La Pampa 1.9 DNV's Staff and Average Salaries 1.10 Actual and Projected Budgets for DNV During 1991-1997 2.1 Detailed Cost Estimates by Year 2.2 Summary of Technical Assistance and Training Programs 2.3 Economic Indices of the Program Analyzed by ISIT Using HDM Model 3.1 Estimated Schedule of Disbursements of Bank Loan CHARTS: A. Organization of DNV B. Organization of PCU LIST OF ANNEXES: 1. Policy Letter of the Government 2. General Information on DPVB 3. Regionalization and Decentralization Process 4. DNV Staff Motivation 5. DNV Capacity to Execute the Project 6. Outline of a Manual of Environmental Analysis of Road Projects 7. Funding of the Road Sub-Sector 8. Technical Assistance and Training Programs 9. Flood Emergency Works Program 10. Results of Transport Projects in Argentina 11. Project File MAPS: IBRD 24715 Road Maintenance and Rehabilitation Sector Project IBRD 24716 Region I IBRD 24717 Region II IBRD 24718 Region III IBRD 24719 Region IV IBRD 24720 Region V  iii ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT LOAN AND PROJECT SUMMARY Borrower: The Argentine Republic. Executina Agency: National Highway Directorate (DNV). Amount: USS 340.0 million equivalent. Terms: Repayment in 15 years, including a grace period of 5 years at the Bank's standard variable rate. Prolect Description: The project, within a sectoral context, would include a four-year tranche (mid-1993 to mid-1997) of DNV's routine and periodic maintenance, as well as road reconstruction needs, which represents over 90% of the program cost. It will also include flood emergency works which amount to 3.5% of project cost. The project contains a major technical assistance and training sub-component aimed at (a) strengthening the Secretariat of Public Works and Communications (SOPyC) for its important role in establishing policies and goals in the road sector, (b) strengthening DNV, and particularly its regions, for the new role it has to play with regard to supervision of concessions, technical leadership, coordination and support of the Provincial Highway Directorates (DPVs), road research, environmental impact assessment, (c) improving the capability of DPVs to plan, manage and execute roadwork properly, and (d) reinforcing DNV's capabilities in carrying out national programs for traffic safety, control of vehicle weights and dimensions, and other activities of such scope that it is not advisable to assign oversight responsibility to each province. The project would also support the preparation of a Manual on Environmental Assessment of Road Projects to be systematically used in DNV and disseminated to DPVs. The project would, in addition, provide for acquisition of related equipment, and technical assistance to study alternative options of a proposed transport link between Argentina and Uruguay. Retroactive financing in the order of US$10 million for expenditures incurred after August 31, 1992, is envisaged complying with relevant Bank rules. Benefits: Avoidance of major road reconstruction costs and cost savings to road users will be the major noticeable benefits, but, equally important, significant benefits would also derive from the institutional reform program, although not easy to quantify. In particular, significant benefits are expected from the long effects of better Environmental Assessment (EA) of road works. The former, as is normally the case with maintenance works, would amply justify the project; average economic returns are as follows: for asphaltic paved roads the average ERR is about 30%, for unpaved roads the average B/C ratio !, at an opportunity cost of capital of 12%, is 2.5 and for the repair of cement concrete roads the average ERR resulted in 46%. I/ For mathematical reasons, in the economic evaluation of some of the works on unpaved roads the ERR gave either multiple or no solutions; therefore, B/C was used as the economic indicator.  iv Risks: Since project components involve proven technology and there is enough experience in the country performing the type of work envisaged, technical risks connected with the project are minimal. The most important risks relate to the capacity of DNV to execute planned works and contracts, the sustainability of the institutional changes, including the ongoing concession program, and the availability of counterpart funds. It is estimated those risks are low and would not affect project execution (para. 2.24). Estimated Proiect Cost (in Millions of US Dollars at October, 1992 prices) Local Foreign Total Foreign cost Cost Cost Cost as % of Item Paved Roads: Reconstruction 23.4 19.1 42.5 45 Periodic Maintenance Concrete Pavement Repair 1.8 1.4 3.2 45 Asphalt overlays 45.4 37.1 82.5 45 Bituminous Surface Treatments 24.8 20.3 45.1 45 Slurry Seals 44.2 36.2 80.4 45 Sealing 37.4 30.6 68.0 45 Pavement Striping 5.6 8.4 14.0 60 Routine Maintenance 66.0 54.0 120.0 45 Unoaved Roads: Periodic Maintenance Regravelling 5.5 4.5 10.0 45 Routine Maintenance 22.0 18.0 40.0 45 Flood Z- raencv Works 11.0 9.0 20.0 45 Consultina Services: Detailed Engineering 4.4 0.5 4.9 10 Supervision 10.1 1.1 11.2 10 Technical Assistance, Studies & Training 8.6 5.0 13.6 37 IguiDont Office & Communication 0.0 0.6 0.6 95 Vehicle Weight Control 0.0 0.3 0.3 95 Traffic Counting 0.0 0.4 0.4 95 Road Condition Rating 0.1 2.2 2.3 95 Base Cost 310.3 248.7 559.0 45 Physical Contingencies 18.7 15.3 34.0 Price Contingencies ' 27.5 22.5 50.0 Taxes 113.0 0.0 113.0 Total Cost 469.5 286.5 756.0 38 2/ Based on 6% local cost increase during 1993 and 4% p.a. thereafter, and for foreign exchange 4% p.a. throughout.  v Financino Plan: (in Million US Dollars at October 1992 Prices) Local Foreign Total % of (FEC) Total Government 416.0 0.0 416.0 55 World Bank 53.5 286.5 340.0 45 Total 469.5 286.5 756.0 100 Source: SOP, DNV Estimated Disbursements (in USS million) (Bank Fiscal Years) 94 95 96 97 98 99 00 Annual 88.9 131.1 74.9 23.8 14.3 6.0 1.0 Cumulative 88.9 220.0 294.9 318.7 333.0 339.0 340.0 Economic Return: 30% average ERR for asphaltic paved roads; 2.5 average B/C for unpaved roads; and 46% average ERR for cement concrete roads.  I  I THE TRANSPORT SECTOR A. Transport Scope and Demand General 1.01 The transport sector plays a crucial role in the economy of Argentina. Estimates indicate transport costs represent on average about 8% of total gross production costs, and nearly 6% of the aggregate value of Argentine exports. During the period 1985 to 1991 the sector represented about 6% of GDP, and 12-16% of public sector investment. The Government consequently give. high priority to improving sector oporations, coordination, and efficiency as any bottlenecks could easily and severely damage the country's economy. 1.02 The transport system is shaped by the main features of the country, namely: (a) its large expanse of approximately 2.7 million sq. km; (b) a predominantly flat terrain; (c) the lack of major natural impediments; (d) a concentrated population and economic activities in a few large cities (70% of a total population of 33 million live less than 600 km from Buenos Aires, an area generating close to 85% of GDP); (e) the dispersion of the rest of the population in a large number of small, and often remote urban centers; (f) the relatively low average hauling distances for major bulk export commodities, notably grains; and (g) the scarcity of natural deep water harbors. 1.03 To meet transport demand, the country first developed a number of railroads of which 34,115 km of railway lines now remain, with some constituent parts dating from 1857. With the advent of motorized vehicles, an improved road network was developed, now consisting of about 38,000 km of national roads and almost 180,000 km of provincial roads. There are, in addition, 17,000 km of trunk pipelines, 46 ports and terminals, and 65 commercial airports. A number of railway lines are uneconomic and a significant amount of dredging is required at the ports. 1.04 Transport services are provided by a large, privately-owned fleet of trucks and buses, a publicly-owned railway (although a large number of sections are being privatized), a mix of public and private maritime and river shipping companies, two major airlines (one private and the other recently privatized), and several regional airlines. Transport operations have been adversely affected by: (a) chronic macroeconomic instability and slow growth since 1940; (b) inefficient public enterprises, especially railways and ports; and (c) major cuts in public expenditures to reduce severe fiscal deficits. The latter has caused serious maintenance problems (para. 1.08). 1.05 Transport demand has kept pace with economic development in the country. Table 1.1 shows that during the period 1985-90, the general growth trend for freight was about 1% per year but that there was an annual average decrease of about 4% per year for passengers. However, consistent with the general recovery of the economy, there was a significant increase for passengers of over 7% in 1991. Road transport, sometimes beyond economic justification, represents the dominant mode for internal transport (69% of interurban freight, 83% of interurban passengers, 100% of urban freight and 88% of urban passengers). Railways' share is a very modest 10-12% in each of the three businesses in which it participates (urban passengers and interurban passengers and freight), while fluvial and coastal shipping carry about 21% of interurban freight and air transport handles about 7% of interurban passengers. Shipping lines and airlines carry most of the international trade and passenger traffic, respectively. 1.06 Historically, planning and inter-modal coordination in the transport sector have been weak. Formerly, the considerable independence of the Government's modal transport agencies, sometimes under different ministries, obstructed the integration and consistency of transport plans and policies. Under the current Administration, this situation promises to be substantially improved because all transport agencies now report to one single ministry, the Ministry of Economy and  2 Public Works and Services (MEOSP), although the transport sector setup for policy making remains uncertain because of insufficient coordination between the Secretaries of Transport and Public Works, and between the Federal and Provincial Governments. Significant improvements in the short term, are to some extent impeded because of the transfer of major responsibilities now underway during the current transition period of privatization of public sector enterprises. The Roads Network 1.07 Table 1.2 shows that the extensive Argentine road network, in 1991, consisted of about 38,000 km of national roads, 28,600 km (75%) paved, and 178,700 km of provincial roads, 33,200 km (19%) paved. It also shows that 67% of the paved national road network is constructed of asphaltic concrete, 30% of bituminous surface treatment and 3% of portland cement concrete. With the exception of 573 km of four-lane sections, the roads are two-lanes wide. Seventy nine percent of the national network lies in flat terrain, 17% in rolling terrain and only 4% in mountainous areas. In summary, 57% of the total national network, carrying about 70% of the total national network traffic volume measured in vehicle-km, is composed of two-lane roads on flat terrain with bituminous pavement. The general traffic data on national roads and the 1991 AADT (Annual Average Daily Traffic), shown in Table 1.3, confirm that there exists a large traffic concentration in the vicinity of major nodes such as Buenos Aires, and, to a lesser extent, Rosario and Cordoba (served by freeways and multi-lane roads) and low to moderate traffic on the remaining links (two-lane roads). As a result, urban congestion is becoming a problem especially in Buenos Aires. Following the trend in the economy, traffic volumes decreased significantly in the 1980s, followed by a robust recovery in 1991 - 1992. 1.08 The combined national and provincial highway networks generally satisfy the basic demands for road transportation in the country with the exception of some localized problems such as road access to major cities, notably Buenos Aires. An inventory of the characteristics of the national network, classified also according to type and level of traffic served, is maintained and updated continuously by the National Highway Directorate (DNV). Availability of similar data for the provincial networks varies considerably among the different provinces. Erratic availability of maintenance funds in the 1980s, aggravated by bursts of severe inflation and inconsistent policies regarding the way road maintenance is performed, brought the network to a general unsatisfactory condition. Table 1.4 shows that nearly 55%-60% of the paved national network, and similar percentages of a sample of provincial networks, is in fair or bad condition. Although the information is not available for the rest of the provincial networks, visual inspections confirm the situation as possibly even worse, Clearly, the number one priority in the road subsector is to meet maintenance needs, a policy to which the Government is now fully committed. 1.09 Until 1991, planning, design, construction, and maintenance for the national highway network were the exclusive responsibility of DNV, under the supervisory authority of the Secretariat of Public Works and Communications (SOPyC), currently in the MEOSP. The work was carried out by 24 district offices reporting to DNV's central headquarters in Buenos Aires. Provincial Highway Directorates (DPVs) performed similar roles and work in each of the provinces. The coordination between DNV and the DPVs at the national level was carried out by the Federal Road Council (CVF), integrated by representatives of both kinds of institutions, but it was mainly limited to administrative matters related to appropriation of funds. However, informal yet often effective coordination was maintained on an ad-hoc basis between the DNV districts and the DPVs. 1.10 The manner of duplicating the responsibilities for similar highway activities among national and provincial agencies, managing separate networks, resulted in inadequate planning, sub-optimal use of resources and installed capacity, inferior production, costly administration, and lack of coordination. The Bank's transport sector work (ARGENTINA: Transport Sector Public Enterprises, October 1988) identified this problem and made recommendations along lines similar  3 to the major reform program which is now being implemented by the Government in the road subsector (para. 1.13). B. Transport and Road Reform in the 1990's 1.11 A major objective of the current administration is to increase public sector efficiency. The Government thus has launched a major reform program of the State aimed primarily at reducing overall public sector size and expenditures. The principal mechanisms used are privatization, deregulation, and decentralization. In the transport sector this includes: (i) achievements in: (a) privatizing the largest national airline Aerolineas Argentinas (AA); (b) concessioning five major freight rail branches of Ferrocarriles Argentinos (FA) of a total length of 20,700 km, or around 60% of the rail network; (c) concessioning of all rail commuter services in Buenos Aires, including the subway; (d) concessioning of an interurban passenger rail line of about 400 km; (e) involving the private sector (through concessions) in managing the maintenance and rehabilitation of about 25% of the national road network; (f) deregulating the road transport; and (g) transferring to local governments a number of ports previously managed by the federal agency Administracion General de Puertos (AGP) -- including the major port of Buenos Aires, being transferred to the Municipality, and some 50 small and medium-size ports to their respective provincial Governments. The above mentioned efforts have been particularly successful in railways (supporting a tranche release of US$75 million equivalent of Loan 3291-AR, Public Enterprise Reform Adjustment Loan), in road transport (with the likely impact of reducing transport costs, especially for agricultural exports by about 15%) and, to some extent, in roads (para. 1.12) and ports; with respect to the privatization of AA, several problems have occurred which makes the future rather uncertain. (ii) continuing efforts to: (a) reform FA through the privatization of all possible activities, and rationalization, divestiture or closure of the rest; (b) privatize the national maritime company ELMA; (c) reform the highway subsector (para. 1.13); and (d) decentralize the port subsector by creating autonomous port authorities in the remaining major ports that will report to local governments, while maintaining a greatly reduced AGP with mainly regulatory functions, as mandated by the new Port Law, approved in May 1992. The first major actions for this far-reaching reform program were taken at the beginning of 1991, and the process has gained momentum. It is premature to reach definitive conclusions, but by December 1991 the total FA staff decreased by almost 30% compared to January 1990. Preliminary results indicate that the railway concessionaire of the first freight branch is providing service with only 25% of the previous staff. As expected, in 1991 and 1992 the FA deficit remained at about the same level of the previous year (US$600 millions) due to some slowness in the concessioning program and payment of severance commitments to employees taking retirement. Following the cargo line privatizations and the concessioning of the metro rail, budgetary support is expected to decrease to a range of US$100 to 150 million per year. The approved 1993 budget includes a mere US$140 million. 1.12 At the beginning of 1991, the Government was preoccupied by the unsatisfactory conditions of the national road network and the scarce resources available. A decision was made to privatize part of the works through concessions of road maintenance of specific sections in exchange for toll revenue the private investor was authorized to collect. This represents a major change in the road subsector and aims to improve overall efficiency, ensure that maintenance  4 contractors are responsible for the execution of their work, improve road conditions, and reduce the fiscal burden on the National Tr-asury. The toll fee was initially established by the Government at about US$2.50 per 100 km, to be adjusted periodically for inflation. The concessions remain in force for 12 years, with the concessionaire responsible for maintaining the road at a certain Index of Pavement Condition (IE) specified in the legal documents. Some 9,000 km (Table 1.5 and IBRD Map 24715), or about 25% of the national network, has been concessioned on a competitive basis. A section of about 600 km of Route 22 is slated for inclusion as well. This total of around 10,000 km is considered by the Government an absolute maximum. The current reduced level of the allowed toll fee, the Government's decision to exclude subsidies on new concessions, and the lower traffic volumes in the remaining road sections make toll collection unattractive for the recovery of private investments. The system, which started in 1991, had some initial difficulties as a result of: (a) popular reaction against what was considered an excessively high toll fee compared to perceived user benefits; (b) legal arguments over the constitutionality of the system; (c) insufficient supervision of the concessions; and (d) consensus on the need to review the road user charge system in light of the extensive application of the new tolls. Consequently, the toll fee was reduced to about US$1.00 per 100 km with a subsequent major revision of the other contractual obligations of the concessionaire. In January 1992, DNV was committed to carry out the technical and financial supervision of all the concessions. A procedure was also established to let the user present claims to DNV related to concessions. Although it is premature to reach definite conclusions on the results, after these adjustments, the system now appears to run properly. Recent surveys confirm that a high percentage of road users are beginning to recognize the advantages of the system. One positive outcome is that road users, the silent majority for many years, have now an opportunity to express their views about a service they directly finance. 1.13 The Government is also starting major reforms in regards the remaining 28,000 km of the national road network for which maintenance will not be let for concession. Specified in Presidential Decree No. 616/92 of April 10, 1992, this reform has substantially changed the role of DNV. An objective of the reform program is to strengthen the five Regional Offices of DNV (IBRD Map 24715). Also, the participation of the provinces is to be greatly enhanced. This should facilitate better communication and coordination with the provinces. Presidential Decree 616/92 establishes that the role of the DNV as one of technical leadership, national road planning (including access to large cities), allocation and auditing of financial resources for national highways (including funds for the DPVs), technical and financial supervision of road concessions, road research, environmental impact analysis, standardization of road maintenance and construction (both by contracts), and training and transfer of technology to DPVs. The jurisdiction over the national network remains with DNV. However, in the non- concessioned network it will increasingly delegate the execution of road works to the DPVs. Since both levels of government perform and manage similar functions, the potential increase in cost-effectiveness through delegation of work and responsibility is high. C. Issues in the Road Subsector 1.14 The major issues identified in the road subsector comprise: (a) the implementation of the reform program in the highway subsector; (b) adequacy of funds for road maintenance in the future; (c) availability of needed local counterpart funds for project financing; (d) sustainability of the existing system of carrying out maintenance by private concessionaires; (e) adequacy of the road user charge system under the current intensive and widely dispersed application of road tolls; (f) how to improve staff motivation in DNV; and (g) lack of systematic analysis of the environmental impact of road projects. The Government issued a policy letter and a plan of action (Annex 1) that adequately address the major issues. However, there remain constraints to actual implementation of the reform program. Highlights  5 of the policy letter concerning the road sector are: (i) confirmation of the current road concessioning program; (ii) road maintenance is the highest priority in the sector; (iii) annual allocation of funds for routine road maintenance would be in the order of US$40.0 millions for the non-concessioned network; (iv) Build, Operate (Maintain) and Transfer (BOT) systems may be applied to road construction with the purpose of reinforcing the responsibility of the contractor; (v) road accesses to major cities, excluding Buenos Aires, would be transferred to the provinces for their privatization through toll collection; and (vi) by mid-1993, the Federal Government will concession road accesses to Buenos Aires to more than one firm. At appraisal. the Policv letter was discussed and agreed, and it was later confirmed at necotiations. 1.15 Constraints to Imolementation of the Reform Proaram. Although the legal framework is adequately provided by Presidential Decree 616/92 as well as legislation concerning concessioning of road works, successful implementation of the major institutional reform requires, in addition to careful planning and adequate resource allocation, fundamental changes in the roles played by the key agents: DNV, DPVs, the private sector, and the road users. The main tasks which need to be accomplished, and which are discussed further below, are to: (a) remedy the present precarious conditions of the network; (b) reorient DNV management toward controlling work assigned to private concessionaires and DPVs; (c) improve interaction between DNV and the DPVs; and (d) strengthen and encourage the DPVs to discharge their expanded responsibilities. Implementation of the plan of action will require a long period (at least 3 to 4 years) because: (a) the capabilities of the different DPVs in the country vary widely, with a handful of provinces able to undertake bigger responsibilities, but with the majority requiring technical and management strengthening to cope with the expected workload increase (Annex 2); and (b) the current condition of the national road network requires an enormous initial effort to bring the roads to adequate standards so as not to unduly increase the initial workload eventually delegated to the provinces. (a) ImDrovement of the Road Network Condition. This is now in part the responsibility of the private firms who were awarded concessions. The proposed project would support the physical reconditioning of the other road sections for which maintenance and operational responsibility may be transferred to the DPVs. (b) DNV Manacement Reorientation. The organization of DNV is in the process of being changed to evolve into an institution responsible to provide general leadership, planning and coordination in the subsector, but with limited responsibilities in the execution of road works. The program for the transfer of responsibilities from DNV to the concessionaires is progressing, and the proposed project will assist in strengthening DNV's capability in carrying out the technical and financial supervision of concessions through a technical assistance program. The new organization of DNV (Chart A) has a Directorate of Highway Reconversion (GRV) to deal specifically with the program of mutual cooperation between DNV and DPVs. This is in keeping with the Central Government's recent intensification of the signature of accords with the provinces for works of mutual interest (Table 1.6). The policy letter (Annex 1) includes a plan of action to transfer responsibilities from DNV to DPVs. (c) Interaction between DNV and DPVs. In the context of the overall road network in Argentina, DNV has been weak in providing leadership to, and coordinating with the DPVs, mainly as a result of the unbalance between its staffing and available resources and the amount of work for which it was responsible. Although with some exceptions (as in the Province of Santa Cruz, where the DPV has been for years in charge of the maintenance of most of the national road network in that Province), cooperation and technology transfer between the national and provincial road agencies have not been systematic, and the joint efforts have been generally the result of aiming to solve specific problems through personal contacts between officers of the two agencies. In the framework of the reform program, the interaction between DNV and DPVs has to be substantially improved so as to encourage  6 the former to delegate to the latter, while providing the incentives needed to have provincial authorities accept a greater degree of involvement and oversight from DNV. Although the proposed project does not include any loan financing for provincial roads, provincial road financing is contemplated in the ongoing Provincial Development Project (Loan 3280-AR), and the institutional strengthening of the DPVs, an objective of the proposed project, is one of the qualifying criteria for becoming a beneficiary of that Loan. In addition, the increasing participation of provinces in executing and managing works on national roads will permit their access to the financing under the proposed project for those kind of works, to be executed under accords with DNV, and so strengthen their capabilities. With the intention of monitoring more closely the main characteristics of the reconversion program and learn lessons to be later applied to other provinces, acreement was reached that two vrovinces. Santa Cruz (DPVSC) and La Pampa (DPVLP). would particiiate in a more focussed institutional development vilot effort. The selected provinces are in a different degree of co-participation with DNV, are representative of Argentine provinces, and specific plans of action have been developed for each province to monitor the transition process (Tables 1.7 and 1.8). For the DPVSC (Table 1.7), the main objective is for DNV to delegate by 1995 through negotiated accords, 100% of routine maintenance of the National Road Network in that Province in accordance with the new standards fixed by DNV for that kind of activity, which are higher than the present ones followed by the Province. Another objective is the delegation to DPVSC of the execution of detailed engineering and field inspection of road works; for this purpose, it was selected the section of R3, between limits with Chubut and Caleta Olivia, whose detailed engineering will be completed by DPVSC by the end of 1993 and its supervision by the end of 1994. Finally, during 1993, vehicle load control and road inventory on National Network will be delegated to DPVSC. Similar conditions apply to DPVLP (Table 1.8). Every year an evaluation of the achievements of the two Provinces will be carried out as indicated in paras. 3.30 (a) and 3.31. At neaotiations it was also confirmed that a part-time consultant will be incorporated in the PCU (para. 3.051 not later than November 30. 1993 with the sole oblective of ireparina vroaress reports on the overall reconversion oroaram for Bank review during the biannual supervision missions (para. 3.30). (d) Strenathenina DPVs and Encouraaina Cooperation. The DPVs will gradually become responsible for managing the contracted works in the sections of the national road network located within each province. Limited current capability exists in this area in most provinces (Annex 2). The proposed project aims to support the strengthening of provincial capability through a broad technical assistance and training programs, and technology transfer among highway agencies. 1.16 Fundina of Road Maintenance. Actual maintenance expenditures in Argentina are substantially lower than those required (only 35% of the requirements have been met during the last years). Argentina is not an exception to the general findings of a recent Bank report (Infrastructure Maintenance in LAC: The Cost of Neglect and Options for Improvement, LATIE, June 1992), which concludes that the condition of the LAC networks are poor (almost 2/3 of the Argentine national network is in poor condition), and consequently the estimated total cost of removing the backlog and preventing its further accumulation is high (over US$1 billion for the next four years). But the low expenditures on road maintenance in Argentina is not a result of inadequate cost recovery in the road sector (para. 1.19). For many years, part of the road user taxes in Argentina had been earmarked for road construction and maintenance; however, this practice has been entirely eliminated by this Administration in favor of central revenue management (Annex 7). The argument for an exception to the central management of funds would be the crisis nature and magnitude of the infrastructure maintenance problem, and the high cost to the economy of not solving it. The LATIE report recommends that: - a portion of road-user charges be earmarked to cover the total needs for removing the maintenance backlog and preventing its further recurrence;  7 - these funds should be paid directly into a trust fund managed by the ministry responsible for the road network; and - funding for road improvement and new construction should not be from the earmarked funds but should continue to be provided by general budgetary allocations. During appraisal and negotiations, this concept was discussed. and the matter is under consideration by the Government. In the oolicv letter (Annex 1. cara 2-5 c)i a sDecial mention is made of the high prioritv attached by the Government to road maintenance, and that adeauate funds, of the order of USS40 million 2er year Ibased on averace values in the country). will be allocated for routine maintenance for the non-consessioned network in forthcomina budgets. This should be considered as a minimum, which might need to be increased if any of the maintenance works oresentlv being carried out under concessions were to revert to the oublic sector. Also transfers of roads from/to DNV to/from DPVe could affect the total lenath of the national network. and conseauentlv said amount should be adiusted orvoortionally. At neaotiations, acreement was reached that in the future enouah funds will be allocated in the national budget for road maintenance. 1.17 Availability of Countervart Funds. Recent Bank projects have experienced difficulties in the Government providing timely and adequate counterpart funds to complement bank financing. The proposed project would require a major financial effort on the part of the Government of US$416 million during an implementation period of 4 to 6 years. Based on a program of project activities agreed at negotiations, counterpart funds would be in the order of US$52 million for 1993 and would peak at about US$129 million in 1994 and 1995, decreasing gradually afterwards. In the Budget for 1993, recently approved by Congress, all proposed project components for 1993 are included. They represent over 60% of the total works to be started in the Plan. For works, the total approved amount is US$280 million, which includes US$140 million for ongoing contracts, US$40 million for routine maintenance, and US$100 million for works to begin in 1993, a good part of which would be the components of the first year of the proposed project. This last amount compares favorably with the above mentioned counterpart requirement of US$52 millions for 1993. At negotiations, assurances were aiven that the Government will Provide the reauired local funds on schedule. durina the oroiect life. 1.18 Sustainabilitv of Road Maintenance by Concessions. As indicated in para. 1.12, about 25% of the national road network, at present, is being maintained by a system of concession agreements which are supposed to last 12 years. In this system --unlike the traditional way of paying the contractor for works performed in accordance with previously-agreed technical specifications-- the concessionaire has the responsibility of maintaining the road at a condition (IE) specified in the concession agreement; however, the concessionaire will determine the road works most suitable to achieve that condition, within a general framework of a road work program originally agreed as part of the concession terms. Given the special nature of this setup, the technical and financial oversight function by the Government becomes critical. This was only weakly performed during the first year of the system, due to the then responsible ministry failing to complement DNV's technical oversight with planned financial oversight. At the beginning of 1992, the function was reinforced by the appointment of DNV as the sole agency in charge of supervising the concessionaires, which permits it to contract directly for any needed assistance. At avyraisal. details of the supervisory arrancements of road concessions by DNV were discussed and it was aareed that the oroanization would be totally in place by mid-1993. This was confirmed at negotiations. Terms of reference for related technical assistance to reinforce imilementation of this function were also discussed and agreed. 1.19 Adeauacv of Road User Charges. The Government has traditionally followed a policy that road users should pay for the use of road infrastructure through the imposition of specific ad valorem taxes, mainly on fuel, lubricants, tires, vehicle registration fees, and vehicles sales. According to a study prepared  8 for the Government of Argentina (Estudio de Cargas al Usuario Vial, 1990), gross receipts from interurban user taxes during the period 1984-88 have been (except in 1985), higher than the total expenditures (by am much as 17% in 1988) for the construction and maintenance of the national, provincial and urban highway networks. Recently, the wide variation in application of toll charges has added another dimension. Total charges should exceed related expenditures; however, distribution analysis of road user charges among different types suggests that some users may not be paying an appropriate share of road costs. The general principle should be that users pay the full costs of owning and operating their vehicle plus costs of operating, maintaining, and reconstructing the roadway, which will vary according to the number and weight of the various types of vehicles. The proposed project includes an updating of previous studies (Annex 8) with special consideration of toll charges. At ne-otiations. it was confirmed that this study will be comoleted by July 31. 1994 and a plan of action for implementina its recommendations will be sent to the Bank for comments by March 31, 1995. 1.20 Improvement of DNV Staff Motivation and Adeauacv of its Current Capacity. During the past decade, the morale and relative quality of DNV staff has deteriorated. Major declines in DNV efficiency occurred due to attrition accompanied by cost-cutting restrictions on hiring of replacement staff because of the economic problems in the country during the 1980s, low and declining purchasing power of salaries, worsening career prospects, unavailability of resources needed to operate, uncertainty about the future of the institution, and lack of job incentives. The problem has been compounded even further as DNV'a management and planning capabilities became outdated. The Government has taken the following actions to address this situation: (a) Presidential Decree 616/92 established precisely a future role of DNV in the sub-sector; (b) the streamlining of DNV staff in accordance with its new function (staff has been reduced by around 1,300 employees, or 25% of the previous staff) has been followed with (c) a significant DNV salary increase approved in August 1992 ranging from 42% to 89% in USS (Table 1.9); (d) the appointment of a capable and experienced general manager selected from DNV's staff; (e) significant increases in proposed budgetary allocations for DNV; (f) the Government's decision to proceed with the preparation of the proposed project; and (g) the recent advertisement in the national press for bidding for over 100 small maintenance projects (half of which will be partly financed by the proposed project). These actions, which would facilitate the availability of resources and bring opportunities for technical enhancement of DNV's staff, constitute strong incentives to improve staff motivation. The proposed project provides technical assistance and training to DNV to strengthen its capacity for the kind of functions it will perform in the new highway sector setup. During appraisal, a detailed assessment of the "still-reorganizing" DNV staff motivation (Annex 4) and an in-depth analysis concerning the capacity of DNV and other entities involved in road activities (Annex 5), both in general and with respect to the proposed project, were carried out. As a result, it was found that: (i) staff motivation has significantly improved, although there are still areas to be reinforced. The following key actions were taken before negotiations as being of primary importance: (a) definition of the DNV structure and complete staffing down to the level of divisions: (b) hirina an individual consultant to evaluate and recommend the future DNV staffina needs and the transition from the Dresent situation to the future one, toaether with the vrelaration of TORs for a consulting firm to greDare the oersonnel oolicv of DNV: and (cI avvointment of DNV counterparts for the Technical Assistance Program (Annex 81 included in the oro2osed iroiect. It was also confirmed at negotiations, that the consultina firm mentioned at the end of (b) above will be hired by December 31. 1993. The implementation of its recommendations will be started by December 31. 1994. (ii) adequate capacity exists in the country to handle the workload for the next five years, with an adequate and balanced mix of DNV, DPVs, construction and consulting firms. It was further concluded that DNV  9 has enough capacity to handle all aspects concerning contracting routine maintenance works, preparation of detailed engineering, supervision of the simpler works (surface treatments, sealings, slurry seals and regravelling) as well as the capacity to manage consulting contracts and accords with DPVs who would be entrusted with the remaining works. 1.21 Environmental Impact Assessment of Road Proiects. The Argentine highway agencies do not carry out on a systematic basis, analyses of the impact road works might have on the environment or an affected community. DNV and DPVs should develop and use specific, substantive environmental standards and guidelines for road projects in cases like rerouting roads around highly environmentally sensitive areas, opening a new area as a result of the construction/improvement of a road, or choosing environmentally appropriate road construction materials. Road maintenance works do not represent, in general, major environmental problems. To identify potential environmental problems, and take appropriate mitigative measures, the proposed project includes the preparation of an Environmental Assessment Manual, the creation of an Environmental Unit in DNV, and training in environmental assessment procedures for selected DNV staff. Technical assistance to some of the DPVs in this matter will also be included. The Environmental Unit will depend on the Directorate of Planning, Research and Control (Chart A), and will have an oversight and/or clearance functions with respect to projects that pose sensitive environmental problems. The Manual, which should be endorsed by the Federal Secretariat of Environment (FSE) under the Presidency, will clearly specify the rules (standards, guidelines and procedures) to be followed by the Unit, the rest of DNV, and contractors. The Unit is at present adequately staffed by a chief and two young professionals. At negotiations, the Government presented the terms of reference of the Unit and its staff, which was found satisfacto_y to the Bank. An outline of the Manual (Annex 6) had been agreed during appraisal. At neaotiations. the Government oresented a draft of the Manual which was found adecuate: it was agreed that the completion of the Manual is a condition of Loan effectiveness. D. National Road Sector Exnenditure Program 1.22 Table 1.10 shows the actual DNV budgets for 1991 and 1992, the committed for 1993 and that projected for the period 1994-97. The total amount (including operation, maintenance and investment) for 1991 was low (US$232 million), followed by a sizeable increase of 70% in 1992 (US$397.2 million), and a further increase of, on average, over 50% of the committed value for 1992 for each year of the period 1993-97. Based on a work program prepared by DNV, the same table shows that the proposed project would represent about 20% of the total budget for 1993 (which includes a significant number of ongoing projects), and 41% for 1994. The share would gradually taper down to 33%, 16% and 7% in the following years. The following table summarizes the source of financing for DNV's investment program for 1993-97. FINANCING OF DNV'S INVESTMENT PROGRAMS (in millions of US Dollars) Year IBRD IDB National Treasury TOTAL 1993 54.5 0.0 281.0 (51.6) l/ 336.0 1994 135.0 12.6 289.7(128.5) 437.3 1995 110.8 31.0 311.3(128.6) 453.1 1996 31.6 40.5 328.9 (69.4) 401.0 1997 6.7 40.4 338.8 (39.3) 385.9 -==ss==s = ==== =.==so ====, 338.6 124.5 1,550.2 2,013.3 j/ Figures in parenthesis represent the required local counterpart funds for the proposed project.  10 1.23 The financing by the National Treasury of all investments--including ongoing contracts, works partially financed by the Bank and IDB (an IDB highway loan is under preparation and scheduled to be approved in early 1994, covering upgradings of major corridors in the country, which does not pose any conflict with the kind of works included in the proposed project), and new works without foreign financing -- would amount to US$280 million in 1993 (as approved in the Budget); for the next four years the increases in budgetary allocations over 1993 would be kept below 20% which seems to be reasonable. The values in parenthesis after each year's expected allocation by the National Treasury to DNV represent the required local counterpart funds for the project for that year; in 1994, the percentage share of the project in the National Treasury allocation is the highest reaching 44%, which does not seem to pose any major problem, provided the expected allocations are approved. Eighty percent of the projects to be started in 1993 are for road rehabilitation and maintenance, and the percentage remains high for the following years. All major elements of the programs are subject to economic evaluation using in most cases the HDM-III modely. At neaotiations. the Government agreed to: (al review with the Bank, by not later than July 31 in each year startina in 1993. any new investments to be included in the Annual Road Investment Plan; (b) furnish to the Bank. by not later than December 31 in each Year startina in 1993. a covy of the Annual Road Investment Plan to be implemented in the followina year: and (c} inform the Bank of any chances introduced in any of those Plans. Also. during negotiations, the 1993 Plan was discussed and aareed. E. Previous Bank Lendina ExDerience in the Transport Sector 1.24 The Bank has been involved extensively in the transport sector in Argentina (see Annex 10). Highway development has been supported by five loans totalling US5319.5 million (Loan 228-AR, June 1961, US$31 million after cancellation; Loan 619-AR, June 1969, US$25 million; Loan 734-AR, May 1971, US$67.5 million; Loan 1384-AR, May 1977, US$105 million; and Loan 2296-AR, January 1984, US$91 million after cancellation). Two loans totalling US$122.9 million have been made to help improve the railway system (Loan 733-AR, May 1971, US$56.5 million after cancellation; and Loan 1677-AR, March 1977, US$66.4 million after cancellation). A single loan for port improvement (Loan 2805-AR, May 1987) was canceled after only US$8 million had been disbursed as a result of the privatization of the Bahia Blanca grain terminal (representing about 65% of the total project cost) and the new port law, which decentralized the port system. Together, these caused enough changes to make impractical the continuation of the project. 1.25 The results of the highway projects have in general been good. Targets have been achieved or exceeding for highway civil works, albeit with considerable delays and in some cases substantial cost overruns. The delays, cost problems, and accompanying shortages of counterpart funds were generally caused or aggravated by bursts of high inflation and rapid devaluation. This affected DNV's ability to pay contractors on time, causing lags in applying for disbursements from the Bank which, under the Bank's former policy of disbursing at the exchange rate of day-of- disbursement, in turn reduced the Bank's contribution to civil works in real terms. It also led to financial failures for some contractors and subsequent contract rescinding. The protracted execution periods also resulted in the projects spanning several changes in Governments and consequent discontinuities in DNV management with attendant changes in policies. 1.26 The highway loans were also largely successful in improving DNV's planning capabilities; introducing technologies of field surveys to provide traffic, 3/ The Highway Design and Maintenance Model was developed by the Bank with participation by a number of borrowers. It is a tool for optimizing different road maintenance strategies by minimizing the summation of capital, maintenance and vehicle operating costs.  11 road inventory, condition, and sufficiency data; improving organizational efficiency and management procedures (particularly the earlier loans); and later in having a National Transport Plan (NTP), a Highway Needs Study, and a Study on Traffic Safety carried out. The first two loans also provided equipment for road maintenance but with the institutional progress DNV was believed to have achieved, the last three loans concentrated more on technical fine-tuning than additional institutional involvement. This, in hindsight, may have been unfortunate, since in the early 1980s the Bank was not well positioned to advise or support efforts in contracting road maintenance, decreasing the size of the force-account field organization, or transferring 15,000 km of the national network to the provinces, and reclassified 10,000 km of provincial roads as part of the national system. This important change was not accompanied by adequate increase in funds to the provinces for their maintenance, and contracting of routine maintenance on national roads did not last due to internal resistance within DNV and lack of preparation of district staff for their new role. Nor did Bank projects begin to address the problems of the extensive provincial road networks and the DNV/DPV responsibilities and relationships until the Fifth Highway Project. Technically proficient, DNV was quite successful in implementing the use of new systems and technology related to infrastructure planning, construction, and management; however, neither DNV nor its parent ministry assumed responsibility for accountability to the road users. In this context, implementation of traffic safety recommendations and axle-load control faltered. Preparation of the multimodal NTP provided a major training experience not only for the highway sector but for the transport sector as a whole. Although continued use of planning models and criteria developed during the study did not materialize as intended, NTP made a positive impact on the sector. It served to train a cadre of transport planners and economists, who can provide leadership in sector planning and it introduced improved planning techniques suitable for local transport institutions and/or businesses. In 1980, an attempt was made to rationalize the activities of Federal agencies and to delegate responsibility to provincial authorities. As a result, DNV reviewed its classifications of the road network and subsequently transferred. 1.27 The results of the two railway projects were much less positive. The First Railway Project which was to assist the Government make the railway viable within a modern competitive environment, was canceled in 1974 when it became clear that no substantial progress had occurred. Only about a third of the intended investments were actually made. The Second Railway Project was only slightly more successful, rehabilitating some main-line track and improving freight car turnaround time but was plagued by frequent changes in top management, uncertain political conditions and deteriorating economic conditions which FA, lacking the organizational strength of DNV, was unable to overcome. 1.28 Experience with previous highway lending operations (mainly the first four) indicates that project implementation in Argentina can be time-consuming with delays the rule rather than the exception. Much depends on the continuity of the government and the condition of the economy. Although this has proved difficult to factor into the implementation plan of a project, the Fifth Highway Project, by adopting a sector format, was successful, at least in regards national road project subcomponents, in completing and disbursing the national road allocation on schedule. The delay in starting the provincial roads subcomponent led a number of subprojects to extend into the period of hyperinflation, which virtually closed down all road construction in Argentina. 1.29 The proposed project has been prepared in a sector format to provide greater flexibility in responding to changing conditions. The problem of using exchange rates of day-of-disbursement has been addressed by the use of special accounts. The proposed project encompasses all aspects of road maintenance and is expected to result in substantially higher use of maintenance by contract by DNV and eventually by many of the DPVs. As it provides support for such maintenance over a four year period, it allows time for adjustments to be made on the basis of experience within the country, as contrasted to the earlier attempt, which barely lasted a year before being discarded. The lack of success was also due to strong  12 internal resistance to moving away from force-account operations (and the equipment ownership it implied) and a disinclination to have anyone but DNV involved with national roads. The proposed project is the first sizable public-sector operation on roadworku in several years. As such, it is viewed within DNV and its management as an opportunity to rebuild along new lines, to the type of technical excellence DNV formerly enjoyed.  13 II. THE PROJECT A. Project Origin 2.01 The implementation of the last Bank-assisted highway project (Fifth Highway Sector Project, Loan 2296-AR) was marred in the late stages by excessive bursts of inflation. In addition, macroeconomic conditions led to reduced highway budgets and DNV was prevented from recruiting staff to fill vacancies. In the competition for scarce resources, the quantity of maintenance work under execution diminished and the road network condition deteriorated. The present Government now has decided to give high priority to maintenance of existing road and bridge infrastructure. This is consistent with the conclusions of a recent Bank report (para. 1.16). The proposed 4-year program of maintenance, rehabilitation and reconstruction works is intended to restore the condition of the Argentine national highway network within a time frame compatible with revenues the Government can provide, linked to Bank guidance on how to optimize the program. 2.02 The identification and subsequent evolution of the institutional aspects of the proposed project originated separately from the physical road maintenance works the project would finance. The 1988 Bank study of the transport public enterprises Sector (para. 1.10) foresaw an eventual need for institutional change, particularly in the DNV/DPV relationships. Recommendations of this study addressed the need to upgrade the capabilities of the weaker DPVs as a precondition to DNV delegating work on national roads to capable DPVs, but received only a lukewarm reception from many DNV managers. The rationale was to reduce duplication, streamline DNV's organization, and improve its focus on introducing technology updates, research management, and the like. 2.03 Under the present Government, the policy of decentralization was given additional impetus and the need to prepare the DPVs additional urgency. The concept of Bank lending for provincial roadwork as well as for national roads was initiated under the previous Fifth Highway Sector Project. A proposed follow-up project would have built on this concept as well as support and test the Bank's proposals for improvements in highway administration in Argentina. However, in parallel with national policy to contain national government spending through privatization and public sector reform, the provinces were required to set their financial affairs in order as a precondition to receiving any supplementary financial credits from external sources. Bank assistance for this policy has been provided through the PDP, which inter alia restricts financing to the provinces under that Loan or other loans that have the same eligibility (eg., Water Supply II, AR-3281). Thus, lending to the provinces for highways could have only been done in an operation with this same conditionality. However, this did not preclude DNV providing technical assistance to the DPVs to help them prepare sound programs that later could serve as the basis for applying for financial credits. The proposed project supports the strengthening of the DPVs. 2.04 During appraisal of the proposed project, the Government requested that repairs and replacement of damage to national roads and bridges attributable to the heavy flooding that occurred between April and July 1992, also be included as a part of the project. In June 1992, the Government had requested Bank assistance in preparation of a flood rehabilitation project to inter alia foster the speedy recovery of damaged infrastructure in seven provinces. A special Bank mission was dispatched to work with the provincial officials of the affected provinces. The resulting emergency Loan 3521-AR, which was approved by the Board September 4, 1992, provides for onlending to the provinces for financing repairs of provincial infrastructure but not for those needed on the national roads. The Bank agreed to the Government's request to include financing for these works (Annex 9). 2.05 The proposed project is considered appropriate and timely, given the current conditions of the road networks and the prevailing environment of reforming  14 the subsector. In fact, project preparation accompanied the pace of institutional reforms in the highway subsector. B. Proiect Rationale and Obiectives 2.06 The proposed project is an integral part of the Bank's macroeconomic and sectoral assistance strategy for Argentina. This strategy concentrates on the use of analytical work and lending operations in support of Government efforts to stabilize the economy, reduce fiscal deficits, increase efficiency in the delivery of public services, and achieve overall economic growth. Three lending operations are ongoing to provide the foundation for achieving these macroeconomic objectives: (a) the Public Enterprise Reform Adjustment and Execution Loans (Loans 3291-AR and 3292-AR); (b) the Public Sector Reform Loans (Loans 3362-AR and 3394-AR); and (c) the Provincial Development Loan (Loan 3280-AR). The proposed project addresses major sectoral aspects with significant macroeconomic implicationo, such as: optimization of road expenditures in infrastructure maintenance and rehabilitation under budgetary restrictions, increasing efficiency in the management of all types of roads, and the imposition of road planning as the primary tool for budget definition and strategic management of the entire Argentine road network. The expected results include: (a) reduction in vehicle operating costs, which will help reduce consumption of scarce resources and enhance the international competitiveness of export products; and (b) preservation of an important national asset like the road network, which is in jeopardy of being seriously damaged unless urgent actions are taken for its maintenance and rehabilitation. The Bank's presence in the sector would bring a beneficial catalytic effect in precipitating policy decisions, without which Bank assistance might be difficult to implement. 2.07 The main objectives of the proposed project are to: (a) ensure adequate maintenance and/or rehabilitation of the present National Road network for those sections not concessioned; (b) assist with the quality and financial supervision of the maintenance to be executed by the concessionaires; (c) support the incremental implementation of the institutional reform of DNV, DPVs, SOP and CVF to respond to the Government's decentralization policy as well as to changes in national/ provincial government roles regarding sharing road transport subsector management responsibilities, through (i) the physical reconditioning of the road sections for which maintenance and operational responsibility may be delegated to the provinces (thus reducing the initial workload of the provinces), (ii) the strengthening of the generally inadequate provincial capability to manage road activities through a broad Technical Assistance program and reinforced transfer of technology among highway agencies, and (iii) the evolution of an appropriate road planning and financing mechanism; (d) assist in achieving the optimal combination of provincialization, privatization, and nationally-supported operations of those road sections that are of national interest; and (e) support the creation in DNV of an environment unit with trained staff to prepare systematically and monitor EA when the works warrant, and to provide future guidance to the DPVs. C. Proiect Description 2.08 A sector loan format is proposed for this project taking into account the satisfactory performance of DNV in the previous sector loan (Loan 2296-AR, para. 1.28), the adequacy of the road investment program (para. 1.22), and the suitability of the economic criteria to select project components (para. 2.23). This flexible format permits a better adaptation of the project to meet the needs of the national road network. This is needed because updated road condition and traffic data may alter investment priorities. It will also facilitate accommodation of progress in institutional reform during project execution and allow disbursements to be made more rapidly than through traditional project lending. For the purpose of transferring to DNV the proceeds of the loan, as a condition of effectiveness the  15 Government shall enter into a subsidiary agreement with DNV. setting up mutual responsibilities and riahts. 2.09 The project comprises: (a) a four-year tranche (mid-1993 to mid-1997) of the DNV's road maintenance and reconstruction program for the portion of the national road network which is not concessioned (regional Maps 24716 through 24720); (b) flood emergency works (Map 24715); (c) technical assistance for DNV reorganization and its reconversion program; (d) management training and technical assistance; and (e) implementation of specific Action Plans in pilot provinces to transfer know-how and strengthen their implementation capacity (Tables 1.7 and 1.8). The project would also include the equipment required for implementation of the various Technical Assistance components. (a) Road Maintenance and Reconstruction (90.5% of project cost). 2.10 The optimization analysis for the rehabilitation and maintenance of the asphalt-paved, national road network, using the HDM-III and EBM models, considered seven periodic maintenance or rehabilitation activities, in addition to regular routine pavement and roadside maintenance, namely: - bituminous sealing - single bituminous surface treatment - slurry seals - double bituminous surface treatment - asphaltic concrete maintenance overlay - structural (strengthening) asphaltic concrete overlay - pavement reconstruction Table 2.1 presents a summary of the annual costs of the works planned for: (a) the nearly 18,000 km of paved national roads, which excludes those roads being maintained under the program of concessions to contractors (para. 1.12); and (b) the 9,000 km of unpaved roads that fall under DNV jurisdiction. Included in the routine and periodic maintenance costs are the costs of maintenance performed through pilot operations from which DNV would seek to determine: (a) the types and styles of contracts or work delegation arrangements for maintenance related operations that best suit existing capacity and/or social organization of the population; and (b) the maintenance related technology and developments best suited for Argentine roads and conditions. (b) Flood Emergency Works (3.5% of project cost). 2.11 The repair and replacement of damage to road sections and bridges of the national road network in the provinces affected by the heavy flooding in 1992 are detailed in Annex 9. (c) Consulting Services, Technical Assistance and Equipment (6.0A). 2.12 These can be grouped as follows: (i) consulting firms, individually contracted engineers or contractual agreements (Accords) with DPVs to assist DNV in preparing detailed engineering and DNV's Regions in supervising the works and maintenance contracts; (ii) a program of technical assistance and training to help DNIV monitor the project as a whole, introduce modern management and information systems, provide technical assistance to the DPVs, and conduct specific technical studies; and  16 (iii) office, communication, and special-purpose field equipment for traffic counting, vehicle weight control, and road condition rating to enable DNV to implement results of the technical assistance programs. 2.13 The Technical Assistance (TA) and Training Programs comprise a number of activities that would: (a) carry out specific studies; (b) develop management tools; (c) support institutional development; and (d) facilitate project monitoring all required to fulfill project objectives and to address the issues raised in Chapter I, Section C. These programs are considered essential to support the major institutional reforms in the sector, and especially to strengthen each organization involved (DNV, DPVs and SOP) in the new roles they are now required to play. The TA programs will help DNV in the following areas: implementation of the reform program (para. 1.15); sustainability of road maintenance by concessions (para. 1.18); updating of road user charges (para. 1.19); improvement of DNV staff motivation and adequacy of its current capacity (para. 1.20); and preparation of environmental impact assessment (para. 1.21). TA would also serve to define: ways to strengthen the system of vehicle axle load control; ways to improve road traffic safety; and the management/quality control organizations, systems, and procedures (hence training requirements and delivery systems) needed for each of the above and to supervise the work performed by concessionaires. The technical assistance program will also include financing of background studies related to a major project to establish a link between Buenos Aires and Colonia, Uruguay, which already has a partial financing, in a similar amount as proposed, out of an ongoing Loan 3021-UR to Uruguay; the approximate distance of the link would be about 45 km, and the Governments are interested in investigating the possibilities of getting international involvement through a BOT scheme. Table 2.2 summarizes those programs, including their cost, and Annex 8 provides detailed information about each program. D. Proiect Costs 2.14 The total project cost, including some US$113.0 million (about 15%) for identifiable taxes, and some US$50.0 million in price contingencies, amounts to US$756 million, with a total foreign exchange component (FEC) of US$286.5 million (38%). Price contingencies have been determined on the basis of estimated price increases of 5% for 1993, and 4% for 1994 through 1997. The project cost summary is shown on page 17 and in Table 2.1. and was confirmed with the Government durinQ neaotiations. 2.15 The cost estimates for road maintenance and rehabilitation of civil works are based on quantity estimates for representative conditions in different parts of Argentina and on current unit prices. These are considered reasonable and have been confirmed by detailed engineering studies for 1993 projects. The costs of horizontal pavement striping, which are not included in contract costs, are shown separately, as this work is performed by a specialized group of contractors, under an ongoing, "self-financed", contract not eligible for financing under the loan. The costs of the flood emergency works are based in part on some completed detailed engineering, and for the remainder on substantially complete preliminary engineering. The latter costs were analyzed at appraisal and were confirmed during negotiations. together with the related plan of action included in Table 2 of Annex 9. The cost for detailed engineering and supervision services is the result of a detailed estimate of consulting service requirements to supplement DNV capacity (Annex 5), at prices based on DNV experience in contracting for engineering and supervision services in similar programs. The cost of the technical assistance and training components, including related equipment requirements, was estimated by detailed costing of all elements (Table 2.2). 2.16 To estimate the FEC of civil works, DNV calculated the FEC for each construction or maintenance item for typical operations or programs. The FEC for consulting services was estimated assuming that contracts would normally be awarded to local firms, with a limited participation of foreign consultants. For goods to  17 be procured under the program the FEC has been estimated at 95%, net of the 18% value added tax, based on the CIF prices at port of entry into Argentina and payment SUMMARY OF PROJECT COSTS (in Millions of US Dollars at October 1992 prices) Local Foreign Total Foreign cost Cost as % of Item Paved Roads: Reconstruction 23.4 19.1 42.5 45 Periodic Maintenance Concrete Pavement Repair 1.8 1.4 3.2 45 Asphalt Overlays 45.4 37.1 82.5 45 Bituminous Surface Treatments 24.8 20.3 45.1 45 Slurry Seals 44.2 36.2 80.4 45 Sealing 37.4 30.6 68.0 45 Pavement Striping 5.6 8.4 14.0 60 Routine Maintenance 66.0 54.0 120.0 45 UnDaved Roads: Periodic Maintenance Regravelling 5.5 4.5 10.0 45 Routine Maintenance 22.0 18.0 40.0 45 Flood Emoruencv Works 11.0 9.0 20.0 45 Consulting Services: Detailed Engineering 4.4 0.5 4.9 10 Supervision 10.1 1.1 11.2 10 Technical Assistance, Studies & Training 8.6 5.0 13.6 37 Ecuipment Office & Communication 0.0 0.6 0.6 95 Vehicle Weight Control 0.0 0.3 0.3 95 Traffic Counting 0.0 0.4 0.4 95 Road Condition Rating 0.1 2.2 2.3 95 Base Cost 310.3 248.7 559.0 45 Physical Contingencies 18.7 15.3 34.0 Price Contingencies ' 27.5 22.5 50.0 Taxes 113.0 0.0 113.0 Total Cost 469.5 286.5 756.0 38 4/ Based on 6% local cost increase during 1993 and 4% p.a. thereafter, and for foreign exchange 4% p.a. throughout.  18 by DNV of 5% customs clearance and port costs. Ten percent physical contingencies on the costs of periodic maintenance and flood emergency works have been provided, but none for routine maintenance activities. E. Financing Plan 2.17 The project will be financed by the Government and the Bank. The Bank would finance 52.9% net-of-taxes project cost (45% of total project cost) including US$53.5 million of local costs, and the Government of Argentina the remainder (see summary below). FINANCING PLAN (in Millions of US Dollars at October 1992 Prices) Local Foreign Total % of (FEC) Total Government 416.0 0.0 416.0 55 World Bank 53.5 286.5 340.0 45 Total 469.5 286.5 756.0 100 Source: SOP, DNV. F. Economic Evaluation 2.18 The proposed project would finance part of the 1993-97 DNV's Investment Program (para. 1.22) and facilitate major policy and structural reforms as well as institutional strengthening. The project's benefits would therefore go well beyond the economic returns on specific individual investments. In particular, the major institutional reforms in the road sector are expected to improve the management, administration, and operation of the road system, generating benefits, which although expected to be significant, will be difficult to quantify. All project components, with the exception of the Emergency Works and the Technical Assistance and Training Programs (representing about 9% of total project cost) were subject to full economic evaluation. 2.19 The original objective of the economic evaluation was to define an optimum package of maintenance and rehabilitation projects for the whole network of national roads, excluding the sections already under concession, and within the budgetary limitations that undoubtedly will continue to exist in the foreseeable future. As noted, the current poor condition of the network requires large volumes of resources to bring it to adequate service levels, resources that are and will continue to be scarce. The economic decision was to include either technically ambitious projects with a long project life of say 8 to 10 years, or rather more modest but technically sound projects with shorter lives, which would demand less resources, thus permitting a much wider coverage of the network. Consequently, a system analysis was required for the whole network, because the budgetary limitation made all projects interdependent. The Bank's HDM-III and EBM models were used since they are suitable for that kind of exercise, and will permit the definition of the most convenient overall strategy for maintenance of national roads, within budgetary limitations. The models were primarily used for paved roads, although they were still considered as a reference for unpaved roads based on experience gathered in similar cases in other countries.  19 2.20 The HDM model was successfully calibrated to Argentine conditions by the Institute of Advanced Studies in Transport Engineering (ISIT) at the University of Cordoba, and by mid-1990 the first investment program was produced applying the models. Paved road sections in the country were first bunched into about 50 groups, following a criteria of including sections in each group that had homogeneous characteristics for traffic volumes, terrain conditions, geometric characteristics, kind of pavement, current maintenance conditions, etc. The application of the models resulted in the definition of a maintenance or reconstruction improvement for each group of sections out of the seven alternatives mentioned in para. 2.10. In a second step of the analysis, each individual section of a universe of more than 500 was evaluated taking as input the maintenance or reconstruction improvement recommended in the first run for the group to which this section belonged, but including in this second step the actual traffic volumes and projections, costs, and road conditions of this section, as opposed to average values used for the first run. The result of this step was the definition of specific improvement work or adequate routine maintenance for each section. Next, DNV did extensive field work to verify on site the results obtained in the second step through the application of the models; in cases of disagreement alternative solutions were proposed. The result of this verification gave a very high degree of consistency between the recommendations of the theoretical and practical approaches. In only 15% of the cases the results differed; in most of these cases the original information input in the model contained errors. In summary, the general approach followed for the economic analysis of the system was sound and helped disseminate the use of the models and provided an opportunity to test the HDM results against practical experience. For unpaved roads, the methodology was similar but simpler, given the relatively lesser significance of these types of roads in Argentina (they count for 9% of total project cost), and the limitations of the HDM for unpaved roads. 2.21 The "without-project" alternative selected for the economic evaluation was the execution of at least routine maintenance in each section analyzed, as the baseline case. This was a conservative assumption, because in that way, the benefits had to be calculated taking a "strong" without-project case as the benchmark. If, on the contrary, an actual "do-nothing" case had been assumed, pavement conditions would have deteriorated rapidly, and the benefits would thus be overstated. However, to prove the economic feasibility of routine maintenance in itself, an analysis of sections selected at random was carried out against the do- nothing alternative, the only logic alternative for this case. As expected, the results were very high, with economic rates of return (ERR) greater than 50%. 2.22 Table 2.3 gives the ERR or Benefit/Cost ratio (B/C) at an opportunity cost of 12%, for the different project items. For paved roads the average values are high, ranging from 21% for slurry sealing to 35% for pavement reconstruction. This results in an overall ERR of 30%, which largely exceeds the opportunity cost of capital in Argentina. For unpaved roads, the average B/C ratios at 12% are also high ranging between 2.5 for gravel roads to 2.7 for earth roadsB'. Finally, the average ERR for the repair of portland cement concrete roads resulted in a high 46%. A complete listing of all improvement works for each road section is included in the Project File, (Annex 11) and comprises the basis for the proposed project investment program. 2.23 The analysis described above was carried out with cost estimates based on preliminary engineering. Before calling for bids, detailed engineering will be prepared for each project. As a final verification, economic analyses in each case will be done using as an input to the HDM the cost based on detailed engineering and updated traffic data. Any subproject for which no periodic maintenance (or reconstruction) alternative yielded an ERR of 12% or more would not be eligible for financing under the proposed loan, but would revert to the length of roads on which only routine maintenance would be financed. Also, in the updating of the economic analyses consideration would be given through appropriate sensitivity analyses to 5/ For mathematical reasons, in the economic evaluation of some of the works on unpaved roads the ERR gave either multiple solutions or no solution; therefore, B/C was used as the economic indicator.  20 the possible effects of project risks am they become evident during project implementation. At negotiations. detailed enqineerina and final economic evaluation for all subcomRonents of the 1993 proiect proaram were ready or substantially completed. No major differences in cost exist between preliminary and detailed engineering since the projects are, generally, straightforward and enough experience exist in Argentina to support an adequate cost estimate. Traffic volumes in each section will take into account traffic diverted to or from the railway lines as currently reorganized. The proposed project is a sector loan. As such, some variation in the road sections that would be finally included in the project are expected during its implementation. At negotiations. it was confirmed that the HDM will be used to Prove the economic feasibility of any new sections. G. Proiect Risks 2.24 Since project components involve proven technology and there is enough experience in the country performing the type of work envisaged, technical risks connected with the project are minimal. The most important risks relate to the capacity of DNV to execute planned works and contracts, the sustainability of the institutional changes, including the ongoing concession program, and the availability of counterpart funds. DNV staff capacity for implementation will be monitored closely, complemented by provincial (in those cases where provinces have adequate capacity) and/or consulting firms as necessary. This should, in any case, be the future trend in DNV; however, it may take some time to materialize. The institutional changes have already been decided and supported by the political authorities and the process seems irreversible. Therefore, the risks in this respect are low. For counterpart funding, the Government, as a matter of policy, attaches high priority to the implementation of this project because it tackles a major need in the country and will help alleviate the existing high level of unemployment. In fact, the Government has already included project funds in its current plans and has officially agreed to provide the resources needed for planned expenditures, which was confirmed at negotiations. Another kind of risk, beyond DNV's jurisdiction, might be caused by inactions or delays in areas requiring joint efforts by Federal and Provincial Governments, or by the Secretariat of Public Works and Transport. The Bank should be ready through and intensive supervision effort to identify specific problems of this nature and to react accordingly. From an environmental viewpoint, there is little risk since the program is mainly for maintenance of existing roads.  21 III. PROJECT IMPLEMENTATION DETAILS A. Status of Prolect Preparation 3.01 Although the results of the verification between the computer modelling and inspection approaches show a high degree of consistency (para. 2.20), actual overlay thicknesses and reconstruction works will require further detailed engineering, based on field testing of pavement on a section-by-section basis before awarding contracts. The engineering required for the other, essentially periodic maintenance work and for routine maintenance contracts would be simpler. It will comprise an inventory of: (a) pavement patching requirements; (b) shoulder repair and restoration requirements; (c) roadside and drainage maintenance and repair requirements (routine maintenance activities); and (d) corresponding quantity and cost estimates. This work would be executed jointly with the periodic maintenance. 3.02 About 95% of the road length for which periodic maintenance works have been scheduled for contracting during the first project year are of the latter type, for which engineering, together with up-dated cost estimates, were prepared by DNV staff. About 80% of the total work program for 1993 had been prepared for review during appraisal. Revisions reflecting comments discussed and aareed with DNV headguarters staff, and the remaining 20% of cost estimates were completed by negotiations. In addition, at negotiations, DNV's staff Presented standard routine maintenance contracts and bid documents, which would be used throughout the project. This would ensure the maintenance of those portions of the road network for which no periodic maintenance is scheduled during the project period. 3.03 The summarized terms of reference for the technical assistance Programs (Annex 8), including studies, related traininc reauirements. related eguinment reguirements, and corresponding cost estimates were reviewed during appraisal, and confirmed during negotiations. B. Project Implementation (a) Civil Works 3.04 Primary responsibility for project implementation of the road works would rest with DNV. Only work performed by contract or by delegation to the DPVs would be financed from the proceeds of the loan. The delegated works in some cases would be performed by provincial force account (particularly for unpaved roads) and in most cases by contracts managed by a DPV. Detailed engineering for the simpler periodic maintenance of asphalt pavements (para. 3.01) as well as normal repairs to portland cement concrete pavements would generally be performed by DNV regional staff or delegated to DPV technical staff under DNV regional supervision. Supervision of these works also would normally be performed by DNV regional staff. DNV staff competence for this kind of work is satisfactory. If DNV Regions do not have sufficient staff with the required capabilities, they would engage consulting firms or individual consultants, financed as a part of the project. For the asphalt overlays, reconstruction and more complex concrete pavement repairs, consulting firms would be contracted under project-specific terms of reference for both detailed engineering and construc~tion supervision. The engineering in these cases would require more detailed study of the existing pavement structure and in-situ soils and would also consider, on a case-by-case basis, the desirability of inviting alternative bids for portland cement concrete and asphalt options. These consultant services would be contracted by DNV headquarters. 3.05 With the purpose of reinforcing DNV's capacity to manage the project (para. 1.20) and, in view of the large number of contracts that would need to be bid and then supervised each year and the scope of the technical assistance foreseen, DNV has formed a strong Project Coordination Unit (PCU) to manage the entire program. The PCU (Chart B) is comprised of five main sections headed by coordinators for: (a) procurement control and administration; (b) execution control; (c) programming and reprogramming; (d) accounting; and (e) technical assistance supervision. These have been assigned exclusively to the project, on a full-time basis, and report to the PCU Chief and his deputy, who are directly responsible to  22 the General Administrator of DNV. In addition, a high-level coordinator has already been appointed in the SOPyC to facilitate the interaction between the Secretariat in charge of establishing transport sector policy and the executing agency, DNV. The PCU will also include a transport economist, two assistant engineers, and short- term consultants to help with specific tasks as needed. For instance, one of these consultants will be in charge of preparing semiannual reports on the progress in highway reconversion for Bank review (para. 1.15 (c)). Three of the PCU's senior staff have already been contracted from outside DNV through long-term contracts. Other staff needed to inspect activities by the DNV Regions and by consultants are being provided by DNV's line departments. The salaries of the PCU contracted staff as well as other overhead expenses for materials and services have been calculated as a part of the cost of monitoring the program. This is included as a part of the technical assistance being financed under the loan. The cost of contracted staff working with the DNV Regions on the project is included in the costs of engineering and supervision of works. At acoraisal. functions resoonsibilities. and staffing of the PCU were aoreed. and later confirmed at necotiation.. 3.06 DNV and its Regions would update the programs of works to be performed annually as a part of the training program for the DNV regional offices. They would help develop maintenance management and planning, basically through the use of HDM- III and EBM, so as to permit quantifications of the costs of alternative funding decisions and select the best maintenance strategy given the funding constraints, which are almost inevitable in the short- to medium-term. As part of the project, DNV headquarters and its regional staff, assisted by consultants, would improve on the use of the HDM for planning unpaved road maintenance and would try to develop and introduce a suitable model for concrete pavement maintenance planning, possibly drawing on work already underway in Chile. (b) Technical Assistance and Training Proarams 3.07 The new organizational structure of DNV (Chart A) includes a Directorate for Highway Reconversion (GRV). The GRV is responsible for promoting and overseeing the delegation to the DPVs once they are capable of assuming the responsibilities of actions and operations on the national roads. This includes assisting the DNV Regions with planning resources needed to implement delegation and/or transfer of responsibilities to the provinces and to supervise how these are carried out. Most of all, GRV would be responsible for planning and overseeing the training of staff. As the DNV Regions and their Districts are also expected to assume greater responsibility for routine planning, engineering and supervision activities, including management of some consulting services, additional training for these purposes will also be needed. The Technical Assistance and Training Programs (TATP, Annex 8) will provide consultant assistance to GRV for managing the organization of the training programs and assisting the Regions with DNV contract consultants to fill organizational positions and provide on-the-job training to younger staff, when DNV lacks the resources internally. Also, the TATP includes, as requested by DNV, funds to encourage contacts with road organizations of other countries (particularly USA, Spain, France), which have similar systems of cooperation between the federal government and delegated organisms. The objective is for DNV to learn from the experience of other countries, and thus to facilitate the transfer to DNV and its personnel of the scope and intricacies of the newly assigned function. 3.08 Apart from the assistance to GRV in preparing and overseeing training, the actual training and related services would be provided by a mix of training seminars or programs that could be entrusted to local universities, specialized institutions, consultants, or previously trained DNV staff. For maintenance planning, a technical institute (ISIT) at the University of Cordoba would be contracted. This institute has worked extensively in calibration of the HDM model and in its later applications. Trained DNV staff, with ISIT assistance, would install the programs at a minimum in DNV's regional centers, which would further adapt them to regional needs. 3.09 DNV maintenance planning centers would provide assistance to DPVs who wish to learn how to use the HDM model, with the assistance of universities and  23 consultants. Consulting assistance would also be provided under the project to the DPVs for the purposes indicated in Annex 8. As the length of paved provincial roads in many of the provinces is relatively short, some of the DPVs may decide to have their programs run for a group of them. The same would apply to the use of specialized equipment for measuring road roughness and deflections. 3.10 The program of maintenance by concessions includes the control of vehicle weights and axle loads on the country's more heavily travelled interurban highways. The project includes a study of how to extend this control to the rest of the road network (provincial as well as national), including recommendations on how to staff additional weigh stations. Assistance from the US Federal Highway Administration (FHWA) would be solicited in preparing terms of reference for the study and in organizing a program of visits to the US and other countries in this connection. The toll-collecting maintenance concessions also provide excellent traffic data about the main highways. In contrast, much DNV traffic-counting equipment is obsolete and the data produced is cumbersome to process. The project includes a study of replacement requirements of this equipment that would serve both provincial and national road needs. 3.11 The project would finance consulting services to DNV, specifically to help prepare an inventory and condition survey of all road bridges in the country as well as a program for storing and regularly updating this information. Training in conducting inspections and overseas visits to see how such programs are organized and managed in other countries would be a part of the project. 3.12 Acquisition of equipment for pavement condition assessment, traffic counting, vehicle weight control, and bridge inspection eligible for financing under the project would be subject to prior agreement by the Bank once the necessary respective studies (briefly described in Annex 8, items 2 (d), 2 (f), 2 (h), and 3 (c), respectively) have been satisfactorily completed. The project would also finance the acquisition of computers and fax machines for the regional and district offices as well as DNV headquarters. 3.13 The results and recommendations of the TA activities will be implemented during the project as specified for each component in the tentative chronograms included in Annex 8, Table 1. In general, all studies included in the TA program for contracting will be carried out by consulting firms, with the possibility of inviting universities to conduct studies involving the development of specific methodologies. For short-term studies or those of a specialized nature, there may be some advantage to hiring individual experts. The training would be addressed to high-level professional staff responsible for road activities in the various agencies involved in the project. In addition, the training component would include the participation of professional staff in international conferences and seminars. 3.14 As a part of the technical assistance to DNV, a study would be conducted, lasting about a year and a half, to review the current classification of highways as "provincial" or "national". This study would require cooperation among all the DPVs as well as the DNV planning division. The project would finance consulting services to assist DNV in this review and in consultation with the provinces. At appraisal, terms of reference for this study were reviewed. At negotiations. the final version incorooratina Bank comments was discussed and agreed, and it was also acreed that by not later than July 31, 1995, the Government will start the imDlementation of the recommendations of the study. C. Procurement 3.15 Argentine bidding regulations, although in general compatible with most Bank requirements, have sometimes contained provisions, such as local preference in the purchase of goods manufactured in the country, which required exceptions when Bank financing was involved. In the past, such exceptions were obtained on a project by project basis by invoking the precedence of Loan Agreements over national laws. The Government is currently proposing new legislation which would eliminate those problems, and would become fully compatible with procurement guidelines commonly used in internationally-financed projects. It is expected that the proposed law would be approved during 1993.  24 3.16 DNV is considered to be capable of handling all procurement matters in the project. The Bank has a long experience with its tender procedures which have generally been relatively efficient and well managed. However, some procurement problems existed in the past, but they were solved over time, on a case by case basis, through a process of incorporating provisions to reflect compatibility with related Bank guidelines. A complete new set of ICB and LCB bidding documents for works have been discussed and agreed during neaotiations. Any provisions required by Argentinean law or regulations, not acceptable to the Bank, have been identified so that specific exceptions will be made in the loan documents,if necessary. In particular, one current problem stems from a national law prohibiting any indexing of prices. This complicates providing for cost escalation in longer-term contracts. At negotiations, the Government presented a letter, signed by the Secretary of Public Works and Services, indicating that it has decided to establish a system to allow periodic price adjustments in project contracts with an initial duration longer than one year, and that it will use such system in the applicable bidding documents. Bidding documents for the purchase of equipment have been reviewed and found satisfactory, and all procurement of consultant services would be done in accordance with Bank guidelines and procedures. Standard model letters of invitation and contracts. both for consulting firms and individual consultants, have been discussed and aareed at negotiations. Past Bank experience with some of the DPVs indicate that a good number of them may need help in improving their procurement capabilities, and the technical assistance to provinces included in the TATP addresses this matter. 3.17 Civil Works. Where practical, from both geographical and technical viewpoints, works would be packaged to the extent possible, so as to minimize the number of contracts to be bid, supervised and managed. International Competitive Bidding (ICB) would be used for all works individual contracts, as well as packages of contracts, of more than US$3.5 million equivalent totalling over 50 projects, and amounting to about US$306 million or approximately 64% of all periodic maintenance and reconstruction civil works. Local Competitive Bidding (LCB), up to an aggregate value of not more than $336 million (almost 200 contracts), would be used for all routine maintenance contracts (about USS 176 million) and for other periodic maintenance and reconstruction works contracts (about US$160 million), valued US$3.5 million or less. LCB would also be used for emergency flood works contracts (about US$28.5 million) generally below US$3.5 million, given the urgency in repairing the flood damages. In addition, consonant with the concept of increased delegation of execution functions to capable DPVs, a pilot program would be tested to have maintenance executed by the DPVs (about US$31 million) through negotiated accords under DNV supervision. These accords would be valued about US$1.2 million and will be eligible for financing under the project. ICB for reconstruction, overlays and large sealing contract packages would be generally centrally managed by DNV, whereas LCB would be managed by DNV's regional offices. 3.18 Consultinq Services (about US$36.0 million). Due to the geographical dispersion of the works, up to 3 or 4 consulting firms might be required in some regions to assist DNV and its regional staff with preparation of detailed engineering and construction supervision, generally for larger or more complex works. For less complex works, including supervision of routine maintenance, some regions might need to contract individual consultants to occasionally reinforce the required capability due to the large number of contracts (in excess of 250) which would need to be managed. Training activities executed by contract with outside training agencies, universities or consultant specialists would be eligible for financing from the proceeds of the loan. Training provided by DNV training specialists would not be eligible for such financing, but equipment required to provide such training would be. Qualifications, experience, selection and terms and conditions of employment of consultants would be in accordance with Bank guidelines. 3.19 Equipment. ICB would also be used for equipment purchases costing US$250,000 equivalent or more, for which there are sufficient established manufacturers or suppliers (estimated to total about US$2.4 million). When the number of suppliers is believed to be limited, DNV would first advertise  25 internationally for potential suppliers to express interest, and based on the response either utilize Limited International Bidding (LIB) or, in the case of a single supplier, direct negotiations (which might total about US$1.6 million). Below US$250,000 equivalent, equipment would be purchased by Local Competitive Bidding (LCB), satisfactory to the Bank (estimated to amount to US$0.5 million). All equipment acquisition would be centrally managed. 3.20 Prior Review. During project supervision, Bank-financed works contracts above a threshold of US$3.5 million (about US$306 million) and the first three civil works contracts, regardless of value, to be tendered through LCB procedures by each region (estimated at about US$30 million), would be subject to the Bank's prior review procedures. The prior review process would cover almost 50 percent of the total works contract value procured by ICB and LCB (100 percent, ICB; 10 percent, LCB). Ex-post review would also be conducted on a sample basis (one for each ten contracts). The percentage of contracts requiring prior review is considered satisfactory since (a) DNV gained much experience in previous projects, (b) the project includes almost 200 contracts (about 80% of the total number) which are simple, small and repetitive, and (c) this is a sector project and consequently, if the Borrower decides to award any contract not following the Bank guidelines, it would not be financed from the loan, but it may be replaced by another project, taking advantage of the inherent flexibility of a sector project. Goods procurement for amounts above US$250,000 equivalent would also be subject to prior review, covering about 55 percent of the total value of Bank-financed goods. Finally, prior review would also be carried out for all consulting firms contracts valued above US$100,000 equivalent and for all similar contracts for individual consultants; the aggregate amount of contracts for consulting firms below US$100,000 is expected to amount about US$600,000. 3.21 All eligible subproject and consultant's contracts not subject to prior review by the Bank would be tendered and awarded by DNV,and subject to an ex-post review by the Bank as described in para. 3.20. Procurement of consultants would be done on the basis of standard terms of reference and contract conditions previously reviewed and accepted by the Bank. The time allowed for preparation of bids would be not less than 45 days in the case of ICB and 30 days in the case of LCB bidding. All the above vrocurement arrangements. the results of which are summarized in the followina table, were confirmed during loan negotiations.  26 PROCUREMENT 1/ (in Millions of Current US Dollars) International Local Competitive Bidding (ICB) (LCB) Other NBF 2/ Total Civil Works Reconstruction 157.0 26.0 -- -- 183.0 Repairs & Overlays (73.8) (12.2) -- -- (86.0) Maintenance: Periodic 149.1 133.9 -- 14.0 3/ 297.0 (70.0) (63.0) -- (0.0) (133.0) Routine -- 176.0 31.0 4/ -- 207.0 -- (62.0) (11.0) -- (73.0) Flood Emergency Works-- 28.5 -- -- 28.5 -- (13.2) __ __ (13.2) Consultina Services -- -- 36.0 -- 36.0 _ _-- (31.0) -- (31.0) Eauipment 2.4 0.5 1.6 5/ -- 4.5 (2.0) (0.4) (1.4) -- (3.8) TOTAL 308.5 364.9 68.6 14.0 756.0 (145.8) (150.8) (43.4) (0.0) (340.0) 1/ Amounts in parentheses show allocations from loan proceeds. 2/ Not Bank Financed. 3/ Paid by an ongoing pavement striping contract (para. 2.15). 4/ Based on the estimate that about 10% of paved road, and 30% of unpaved road routine maintenance would be executed by the provinces or municipalities through negotiated accords. 5/ LIB or direct negotiations (see para. 3.19). D. Disbursements 3.22 The execution of the extensive road maintenance program would require disbursements against a large number of small contracts. The total volume of individual disbursement operations would seriously strain DNV and Bank capabilities to handle them in the traditional way. DNV's contracting and payment procedures have proven adequate, as has its capacity for managing swift and effective project execution; thus, simple and quick disbursement procedures will be employed. Consolidated estimated monthly expenditure statements for the execution of regionally managed subcomponents of the maintenance program would be the basis of withdrawal applications from the Special Account (para. 3.25). The monthly statements would comprise the DNV Region's estimate of expected expenditures (contract payments) for eligible contracts, determined by multiplying the recorded or measured physical production by the unit cost for each work operation, updated on a daily basis by the works supervisors. The preparation of the monthly expenditure statements by the civil works supervisors would be monitored by the DNV Regions, with appropriate consultant assistance financed under the Loan. Contractor's invoices would be checked and paid during the month and any differences  27 between estimated expenditures and actual payments on each contract would be reflected in an adjustment on the next monthly consolidated statement. Before final payment of any completed contract, full supporting documentation would be submitted to the PCU for approval, which would be retained and made available for review during project supervision missions and audits. Contract payments for centrally managed works (bid by ICB and supervised by consultants) would be handled directly by the PCU on behalf of DNV in the traditional manner. These arrangements were confirmed at neaotiations. 3.23 Disbursement of the Bank loan would be made against: (a) 47% of total expenditures for civil works except routine maintenance contracts; (b) the following schedule for total expenditures for routine maintenance contracts: - 60% until US$45 million has been disbursed; then - 40% until a cumulative US$63 million has been disbursed; and - 20% until a cumulative US$73 million has been disbursed. - 0% thereafter. (c) 100% of foreign expenditures for imported goods; 85% of the ex-factory cost of locally manufactured goods and of local expenditures for imported goods, locally procured; and (d) 100% of total expenditures, excluding taxes, for professional services and training. The expected completion date of the Project is December 31, 1999 and the closing date for project expenditures will be June 30, 2000. 3.24 Funds from the Bank loan are expected to be disbursed over a period of six years, slightly less than the standard profile for transport projects in the region (seven years). DNV's portion of the Fifth Highway Sector Project in Argen- tina (Loan 2296-AR) was fully disbursed within six months after the original Closing Date. Retroactive financing in an aggregate amount of up to US$10 million with respect to payments made for expenditures incurred on or after August 31, 1992 approximately one year before loan signature, would be made for urgently needed works and services to facilitate project start-up. These would include inter alia flood emergency works, engineering services, technical assistance services, and contracted PCU staffing. Durina aDyraisal, all disbursement-related matters and retroactive financing were discussed and agreed in principle with the Government. which was later confirmed at negotiations. An estimated schedule of disbursements is given in Table 3.1. E. Accounts and Auditina 3.25 The general accounting system of DNV is adequate to support its operations. In 1992, its budgeting system was improved in the framework of the Public Sector Reform Program, by implementing a Management by Program (MBP) budgeting system that permits a closer oversight by MEOSP. Training in this area is provided in the proposed project (Annex 8, activity 4.a). With respect to the project, and to maintain an adequate flow of funds to finance eligible project expenditures with a minimum administrative delay, the Government would establish a Special Account in a commercial bank under terms and conditions satisfactory to the Bank, with appropriate protection agains set-off, seizure and attachment. The Bank would, at the Government's request, deposit an aggregate amount equivalent to a maximum of US$25 million from the loan account into the Special Account. Records of Special Account proceeds and outlays would be available for review by Bank supervision missions and subject to annual audit. Disbursements would be made on the basis of Statements of Expenditures for civil works whose contractual value is less than the equivalent of US$1,000,000, for goods and for consulting services whose value is less than US$100,000. The corresponding supporting documentation would be verified on a routine basis during the supervision process.  28 3.26 The Bank would require that an independent auditor: (a) audit all loan accounts and expenditure categories for exactness and for efficiency; (b) consistently apply procedures and methods satisfactory to the Bank that conform to generally accepted auditing standards; (c) carry out its auditing work in a timely manner (annual reports would be presented no later than six months after the end of each calendar year); and (d) render an impartial judgment in its auditing role. The new National General Audit (AGN) office (Law No. 24,156 of September 30, 1992) is still awaiting evaluation of its capability by the Bank. The Bank has recommended that the current International Project Audit Group at the former Court of Accounts (TCN) be transferred in full to the AGN. It is expected that this recommendation be accepted before the loan is presented to the Bank's Board. During negotiations, the Bank indicated that it would consider the AGN as independent auditors as long as it: (a) consistently applies procedures and methods that conform to internationally accepted auditing principles and standards; (b) carries out its auditing work in a timely manner; and (c) maintains in its auditing operation the independent character required. At appraisal. terms. conditions and auditing Procedures for the project, including the Special Account, were discussed and they were confirmed at negotiations. F. Environmental Impact 3.27 The nature of the proposed civil works projects--mostly rehabilitation and maintenance of roads on existing alignments, and in already developed corridors- - is such that environmental impact is not a major issue. Where already existing problems (such as slope erosion) are identified, they would be corrected or mitigated as part of the rehabilitation/maintenance works. DNV's technical specifications were reviewed during appraisal to provide adequate protection from dust and air pollution during construction activities. 3.28 As a part of the Technical Assistance Program, a Manual (Annex 6) is under preparation to provide guidance to highway engineers on incorporating environmental considerations in the planning of roads and execution of road works. DNV would also take the lead through the CVF in organizing seminars and training for DPV engineers when applying the Manual Guidelines in regard to specific conditions in the respective provinces. An Environmental Unit has been established in DNV with oversight and/or clearance functions (para. 1.21). G. Monitoring of the Project 3.29 For project monitoring, DNV would prepare quarterly reports for the Bank and provide information on road expenditures, especially pertaining to maintenance and investment budgets, including a breakdown by expenditure category. Road lengths maintained and assessed maintenance levels should be documented along with compliance with agreed project implementation targets (para. 3.31), status of evaluation of alternatives for maintenance subprojects, and general evaluation of road network condition. The disbursement schedule would be reviewed and recommendations for eventual program modifications would also be made in quarterly reports. The quarterly reports would also include updated versions of pertinent major tables included in the appraisal report. At appraisal, scope of reporting reguirements were discussed and agreed, and it was later confirmed at negotiations. 3.30 To monitor progress toward meeting project objectives, at negotiations agreements were reached that the Government will at a minimum meet with representatives of the Bank biannually to review and discuss the following: (a) During the first semester of each year, review the results of the previous year's program including:  29 - summary of financial implementation of the road maintenance and rehabilitation programs, with special consideration on availability of counterpart fundo; - status of road work completions in the program; - state of completion of the maintenance program and compliance with Project Performance Targets; - state of progress on road reconversion, and specifically compliance with the plans of action of the two pilot provinces, which would serve as a monitoring criteria for evaluating performance of these provinces; - summary of the status of the road concession program; - implementation of the training component; - use of consulting services; - economic evaluation of subprojects; - audit reports and consolidation of disbursements against actual expenditures; - comparison of projected and actual loan disbursements; and - lessons learned during implementation. (b) During the second semester of each year, review execution of the program for the current year and the program for the next year on the basis of lessons learned, including: - road expenditures and execution of works during the current year; - compliance with physical targets; - updated medium-term program and objectives; - proposed rehabilitation and maintenance budget; - budgets for consulting services and training; - road condition inventories and review of the maintenance program; and - review of the proposed disbursement schedule. 3.31 To assess and quantify progress in project implementation, during appraisal agreement was reached to establish the following set of Project Performance Targets, against which to measure compliance with project objectives: (a) a country-wide average of the IE=7 for the whole paved national road network (excluding the concessioned network) to be achieved at the end of 1997, to indicate improvement in pavement conditions. At negotiations, DNV produced adequate documentation, based on field measurements, that the current IE for the non- concessioned national networks in 5.54; (b) by comparing the IE=7 with the current IE value the annual growth rate for IE during 1993-97 should be 6.0% p.a., which percentage will also be taken as an annual target for the increase in IE in the network the maintenance of which will be delegated to the DPVs, (especially to the pilot provinces referred to in para 1.15 (c)), as well as in the concessioned network; and (c) annual project-related targets in terms of amount of disbursements, number of km by type of work, number of bid calls, contracts under execution, completed contracts, and expenditures for the Technical Assistance and Training Programs. At negotiations. DNV presented a complete implementation program for the prolect. which is taken as the basis to determine the Performance Targets of (c).  30 3. 32 The project would require more frequent supervision missions, in the order of one every four months, during the first two years of implementation, with the constant participation of a transport economist and a highway engineer, and ocassional involvement of an institutional expert, a systems analyst, an environmental specialist and a financial analyst. During the expected remaining four years of project implementation, supervision missions would be carried out every six months with similar skill requirements. Under these assumptions, the total staff-weeks would be about 75 broken down as follows: Expected Skill FY94 FY95 FY96 FY97 FY98 FY99 Reauirements Transport Economist 6 5 3 3 2 2 Highway Engineer 6 5 4 4 3 3 Institutional Exp. 3 2 1 1 1 - Systems Analyst 4 3 - - - - Environm. Spec. 4 2 1 - 1 - Financial Analyst 2 2 1 1 = - TOTAL: 25 19 10 9 7 5 3.33 Given the special nature of the project it will require a Midterm review to assess progress in project implementation, achievement of Project objectives, and compliance with dated covenants and agreed plan of actions. At neaotiations. it was agreed that this ioint review by the Government and the Bank should be done before December 31. 1995, and be based on terms of reference prepared by the Government before October 31. 1995. These terms of reference should be satisfactory to the Bank. 3.34 At negotiations, it was agreed that within six months of project completion, the Government would prepare a Project Completion Report (PCR) to assess the success of the project, including the achivement of institutional, physical, administrative, operational and financial objectives and goals, and general evaluation of the lessons learned from project experience.  31 IV. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS 4.01 As agreed at appraisal, the following actions were taken by the Government before negotiations in a manner satisfactory to the Bank: (a) supervisory arrangements and organization for supervision of road concessions in advanced status of implementation (para 1.18); (b) definition of the DNV structure and complete staffing down to the divisional level (para. 1.20); (c) hiring an individual consultant to evaluate and recommend the future DNV staffing needs and to prepare a TOR for a consulting firm to define DNV personnel policy (para. 1.20); (d) appointment of DNV counterparts for the Technical Assistance Program (para. 1.20); (e) preparation of a draft Environmental Assessment Manual and terms of reference of the staff of the Environmental Unit (para. 1.21); (f) completion of detailed engineering and economic evaluation of the components of the first-year program (paras. 2.23 and 3.02); (g) elaboration of standard routine maintenance contracts and bid documents (para. 3.02); (h) elaboration of standard ICB/LCB bidding documents for works and standard model letters of invitation and contracts for consultants (para. 3.16); (i) determination of current IE=5.54 of non-concessioned national paved road network (para. 3.31); and (j) finalization of a complete implementation program of the project (para. 3.31). 4.02 At necotiations, the Government agreed to undertake the following actions during the implementation of the proposed project: (k) carry out a plan of action, reflecting a Government policy letter, for implementing the reform program in the highway sector (para. 1.14 and Annex 1); (1) adequate funds, (estimated to be as a minimum on the order of US$40 million per year), would be allocated for routine maintenance for the non-concessioned network in coming budgets (para. 1.16); (m) assurances that the Government will provide on time the required local counterpart funds for project execution (para. 1.17); (n) the consulting firm referred to in (c) above would be hired by December 31, 1993 and its recommendations would start to be implemented by December 31, 1994 (para. 1.20); (0) discuss and review periodically with the Bank DNV's annual road investment program before it is authorized, and inform the Bank of any changes introduced later in those plans, if any (para. 1.23); (p) project cost, including flood emergency work costs (para. 2.14 and 2.15), disbursement percentages, modalities of disbursement applications, and retroactive financing (para. 3.22, 3.23 and 3.24);  32 (q) the HDM model will be used to verify the economic feasibility of each road section to be financed by the project, and any periodic maintenance sub-project not yielding an ERR of 12% or more would not be eligible for financing under the project (para. 2.23); (r) functions, responsibilities, and staffing of the PCU satisfactory to the Bank (paras. 1.15 and 3.05); (s) goods and works would be procured in accordance with Bank guidelines for ICB and LCB procedures, and consulting services according to Bank guidelines (para. 3.21); (t) terms, conditions and auditing procedures for the project, including the Special Account (para. 3.26); (u) determine scope of reporting requirements (para. 3.29); (v) develop and apply a set of Project Performance Targets Indicators and commensurate Actions (para. 3.31); (x) an action Plan (TATP) including target dates for implementation of various key activities (paras. 3.03, 3.14 and Annex 8); and (y) conduct a Midterm review with the Bank before December 31, 1995 (para. 3.33). 4.03 The following will be conditions of loan effectiveness: (i) completion of an Environmental Assessment Manual satisfactory to the Bank (para. 1.21); and (ii) signing of a Subsidiary Agreement with DNV satisfactory to the Bank (para. 2.08). 4.04 Subject to the above, the project provides a suitable basis for a Bank loan of US$340 million. The terms would be 15 years with a grace period of 5 years.  ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Modal Composttion of Domestic TraffIc Intenrrban Passenger Traffic (bllion pass-km) 1976 % 1980 % 1986 % 1988 % 1987 % 1988 % 1989 % 1990 S 1991 % Air 2.4 4 3.7 6 3.7 6 4.1 6 4.3 8 4.0 7 3.6 6 3.2 6 4.0 7 Road 46.3 83 53.6 87 54.7 86 45.6 88 46.3 83 48.4 86 48.8 86 43.3 85 47.8 87 Rail 6.9 13 4.2 7 5.0 8 5.4 6 5.3 9 4.1 7 4.9 9 4.6 9 3.2 6 Total 54.6 100 81.5 100 63.4 100 55 . 100 65.9 100 66.5 100 57.3 100 51.1 100 65.0 100 Fnright Traffic (billion ton-km- Water 18.5 21 20.6 20 17.4 18 19.3 19.6 20.0 18 20.1 le 19.0 19 20.6 - Road 49.9 56 60.3 58 56.3 68 63.6 64.6 67.6 62 68.1 60 60.4 60 86.7 Pipelines 9.3 11 13.6 13 13.8 14 n.e. n.e 13.6 12 188 115 14.5 14 n.l1 Rail 10.7 12 9.6 9 9.5 10 8.7 8.0 9.0| 8a 8.3 7 7.6 7 6.0 Total 88.4 100 104.0 100 97.0 100 110.0 100 113.1 | 100 101.5 100 Note: n.e. = not available Source: DNV tI-  34 TABLE 1. 2 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT National and Provincial Hiahwav Network A/ (km) National Network Gravel or Year Paved b/ Stabilized Base Earth Total 1975 24,694 7,773 15,152 47,619 1980 25,005 5,071 7,739 37,815 1985 28,163 6,722 2,392 37,277 1990 28,451 6,242 3,238 37,931 1991 28,625 6,150 3,053 37,828 Provincial Network 1975 15,982 58,697 84,734 159,413 1980 27,398 30,843 118,282 176,523 1985 29,684 31,993 112,386 174,063 1990 30,700 n.a n.a 174,800 1991 33,191 30,771 114,779 178,741 .a Varying classifications in different years make historical comparisons difficult. b/ In 1991, the composition of the 28,625 km. of paved roads is as follows: 19,125 km. (67%) of asphaltic concrete, 8,500 km. (30%) of bituminous surface treatment and 1,000 km. (3%) of portland cement concrete. Source: DNV and CVF  35 TABLE 1. 3 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Traffic Data on National Roads (a) Averaae Volume at Permanent Stations Average Year AADT Rana- 1980 2,056 45/7,428 1981 2,054 50/7,664 1982 1,930 50/6,514 1983 1,960 63/7,262 1984 1,946 43/7,170 1985 1,808 51/6,707 1986 1,916 49/7,052 1987 1,971 47/7,260 1988 1,917 61/6,732 1989 1,868 58/6,710 1990 1,900 66/6,790 1991 1,910 69/6,850 (b) Vehicle Share (Jat Permanent Stations Care and Trucks Year ~ si JepP.Ickf-URpps BueA w/o Traile w/rir 1983 36.1 23.9 4.0 15.4 20.6 1984 36.8 23.4 4.7 15.8 19.2 1985 35.8 21.7 4.9 15.3 22.3 1986 35.3 21.4 5.2 15.1 23.1 1987 34.9 22.0 5.3 14.2 23.6 1988 35.8 20.9 5.2 13.3 24.8 1989 35.0 21.0 5.2 13.0 25.8 1990 34.3 22.0 5.5 13.0 25.2 1991 34.0 21.6 5.7 12.9 25.8 (c) 1991 AADT by Kind of Road Road Length (km} Average AADT Freeway 573 19,100 Two-lane 37,038 1,100 Multi-lane 75 5,500 Source: DNV  36 TABLE 1.4 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT National Roads Condition A. Condition of the Paved National Road Network (in %). YEAR GOOD FAIR 1980 n.a n.a n.a 1982 31 25 44 1984 35 22 43 1986 42 23 35 1988 46 20 34 1990 46 25 29 1991 46 25 29 1992 44 21 35 B. Condition in 1990 of the Paved National Network in Major Provinces. PROVINCE ROAD LENGTH (KM) PAVED CONDITION 1%) Good Fair Bad Buenos Aires 5,084.68 100 31 38 31 C6rdoba 2,466.19 95 60 13 27 Santa F6 2,483.23 91 42 35 23 La Pampa 1,576.17 80 34 24 42 Others 26,582.02 68 49 2 29 TOTAL 38,192.29 76 46 25 29 NOTE: n.a.: Not available. Source: DNV  Table 1. 5 Page 1 of 3 37 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Sections Let Out for Concessions in Early 1991 toNE - C R . L _ 4T 3 Empalme Ruta Provincial No.4 (km. 18.90)- Length: 660.45 Empalme Ruta Nacional No. 252 (km. 677.42) km. 1 ~~~~~~~~~~~~~~AADT IV 21,000/1,330 252 Empalme Ruta Nacional No.3 Grumbein (km. Length: 6.80 0.00)- Puerto Ing. White (km. 6.80) km. AADT ____________________________________________ _ . 2,900/1,770 2 205 Acceso Aeropuerto Ezeiza (km. 25.41) - Empalme Length: 297.60 Ruta Provincial No. 65 (km. 322.01) km. AADT 6,360/850 VI 15 2 Empalme Ruta Provincial No.36 (km. 40.21)- Transferred to Empalme Ruta Nacional No.226 (km. 403.70) Buenos Aires Province VIII 19 22 Empalme Ruta Nacional No.3 (km. 719.20)- It was not Empalme Ruta Nacional No.237.00) (I) (km. concessioned 1269.64) X 16 226 Empalme Ruta Nacional No.2 (km. 0.00) Mar del Length: 404.38 Plata - Empalme Ruta Provincial No. 65 (km. km. 404.32) Bolivar AADT 3,770/1,110 . ............ : 3 7 Laboulaye (km. 489.99)- Acceso San Martin (I) Length: 507.14 (km. 997.40) km. AADT 6,920/1,737 8 Pilar (km. 57.10)- Villa Mercedes (km. Length: 664.61 4 722.95)- San Luis km. AADT -____ _________________________________________________ 6,730/1, 030 Z-:- 193 Empalme Ruta Nacional No.9 (km. 3.67)- Empalme Length: 30.66 Ruta Nacional No.8 (km. 34.33k km. AADT 1,047/750 5 7 Puente sobre Rio Lujan (km. 69.09) - Laboulaye Length: 420.77 (km. 489.99) km. III AADT 9,410/1,210 6 188 San Nicolas (km. 0.00) - Realic6 (km. 479.25) Length: 479.58 km. AADT 4,000/800 IX 17 5 Lujan (km. 66.76) - Empalme Ruta Nacional Length: 538.23 No.35 (km. 606.42) Santa Rosa - La Pampa km. AADT 5,142/820 Totai. Length tona 24 2,641 1cm. TOXAL EGKZ<6UESS 12t 4,010 )aa.  38 Tablo 1,5 Page 2 of 3 ARGENTINA ROAD MAINTENANCZ AND RFHABILITATION SLCTOR PROJZCT Sections L.t Out for Concessions in Earlv 1991 _ _ _ _ _ _ _ _ _ _ _ w w m 10 9 Rut- Nacional A-012 (km. 327.06)- Length: 332.51 km. Entrada a Pilar (km. 659.45) C6rdoba AADT S,199/3,320 VII 11 34 Empalme 2da. Avda. Circunvalaci6n de Length: 713.72 km. Rosario (km. 13.95)- La Banda (km. AADT 728.12) Santiago del Eztero 3,960/1,100 9 Empalme Rut& Nacional No.64 (km. Length: 293.17 km. 12 1,139.68) Santiago del Estero - AADT Rosario de la Frontera (km. 1,423.08) 2,500/1,580 Salta 34 Rosario de la Frontera (km. 998.51) Length: 198.99 km. Salta - Acceso a San Pedro de Jujuy AADT (km. 1,196.51) 2,500/1,410 38 Villa Carlos Paz (Salida) (km. 12.32)- Length: 109.73 km. Cruz del Eje (km. 122.05) AADT 4,250/2, 170 20 XI 36 Empalme Ruta Nacional No.8 Rio Cuarto Length: 187.81 km. (km. 595.73)- Acceso camino a Alta AADT Gracia (km. 783.50) 2,590/1,200 A-005 Empalme Ruta Nacional No.8 (km. 0.00)- Length: 11.42 km. Lmpalme Ruts Nacional No.36 (km. AADT 11.42) 4,690/4,160 14 19 Empalme Ruts Nacional No.11 Santo Tom& Length: 280.77 km. (km. 0.00)- Rio Primero AADT (km. 280.20) 4,070/2,270 t ' :F .... .... _________________=_______________ 2.128 ~ ?O'A LSGv R.NI .-,I ,,,.,,** * 0-,83 6.' 4$1 3 8 )ca k  39 Table 1 5 Page 3 of 3 ARGENTIN ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Sections Let Out for Concessions in Early 1991 zosz ~ ~ ~ __________________________ ,.,,,o," " ....... $m " 9 Salida Puerto de Campana (km. 72.90)- Zmpalm. Length: 204.66 Ruta Nacional A-012 km (km. 278.29) AADT 7 16,400/6,732 A-012 Alto Nivel s/Ruta Nacional No.9 (km. 0.01)- Length: 41.98 Ruta Nacional No.9 Rocario a Roldin (I) (km. km. 41.82) AADT 3,610/2,050 11 Impalma Segunda Circunvalaci6n de Rosario (km. Length: 683.91 8 326.34)- Zmpalm Ruta Nacional No.16 (km. km. 1007.79) AADT 4 ___________________________________________ 16,200/1,205 A-009 Puerto Reconquista (km. 0.00)- Empalme Ruta Length: 12.03 Nacional No.11 (km. 12.03) km. AADT 480 9 33 Empalme Ruta Nacional No.7 (km. 534.62)- Length: 232.23 Empalme Ruta Nacional A-012 (km. 832.69) km. AADT 5,370/1,541 12 Nmpalm. Ruta Nacional No.193 (km.84.40)- A.N. Length: 76.19 Ruta Nacional No.14 a Gual*guaychO (km. km 160.59) AADT 5,806/1,200 193 ampalm. Ruta Nacional No.12 (km. 0.00)- Length: 3.67 Empalme Ruta Nacional No.9 (km. 3.67) km. V 18 AADT :3,420 14 Bajo Nivel Ruta Nacional No.12 (km. 0.00) Length: 496.35 C-ibas - Empalme Ruta Nacional No.117 (km. km. 496.35) AADT 3,930/1,180 135 Empalme Rut& Nacional No.14 (Km 0.00)- Pu-nta Length: 14.48 Internacional General Artigas (km. 14.48) km. AADT 1,600/940 A-015 Empalm. Ruta Nacional No.14 (km. 0.00) - Length: 15.00 Acc-zo a la Represa Salto Grande (km. 15.00) km. AADT :1,310/470 117 Empalme Ruta Nacional No.14 (km. 0.00)- Length: 12.48 Comienzo Puente Internacional Paso de los km. Libres (km. 12.48) AADT 2,800/1,645 12 Zmpalm- Ruta Nacional No. 123 (Km 871.35)- Length: 769.51 Accozo Puente Internacional Tancredo Neves km. XII 13 (km. 1,640.86) - Nisiones AADT :8,840/580 16 Accezo Viaducto lado Corrientes, inclu!do el Length: 177.21 Pu-nte General Belgrano km. (km. 0.00)- Nmpalm R.N. No.95 (km. 176.27) AADT I_ jProvincia del Chaco 8,560/1,170 W17 t8 t 1".  40 TABLE 1. 6 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Some Recent Accords Signed between DNV and DPVs Date DPVs Subject 8-12-92 Mendoza DNV transfers administration and maintenance of RN 7, Section San Martin (km (997.40) - El Condor (km 1,041.91) and RN 40, Section El Condor (km 0.0) - Pareditas (km 118.6) 8-12-92 Mendoza DNV awards and administers a concession on RN 7 and RP 82, Section Mendoza - Limit with Chil-. | 7-15-92 Misiones DNV transfera administration and maintenance of RN 105, Section Between RN 12 and RN 14 (length 34.8 km). 7-15-92 Kisiones DNV transfers administration and maintenance of RN 14, Section Doe Hermanas - RN 17 (length 10.79 Km) 6-25-92 San Juan DPV will execute the control of vehicle axle loads and dimensions, with DNV equipment 9-15-92 Tierra del DPV and DNV will jointly operate the scale Fuego located at RN 3, Km29. 6- 4-92 Santa Cruz DPV will execute the control of vehicle axle loads and dimensions in national roads. n/a Misiones DPV will execute the control of vehicle axle loads and dimensions in national roads. 10-10-91 Neuquen DNV transfers administration and maintenance of RN 234, Section San Martin de los Andes - Lago hermoso. 6-22-90 Corrientas DNV transfers administration and maintenance of RN 12, Section Rio Corrientes - Batel. 4-22-91 La Rioja DNV transfers administration and maintenance of RN 40, Section Pituil - Schaqui.  ARGENTINA ROAD HAINTENANCE AND REAIBILITATION SECTOR PROJECT Pilot Province: Santa Crur Action Plan for Highway Reform ACTIVITY OBJECTIVE 1993 1994 1995 Delegate routine Delegate executive DNV-DPV accord for DNV-DPV accord for routine DNV-DPV accord for maintenance action on the National routin maintenance mintenance US$2.900.000 routine maintenance Road Network 1001 for US$1.800.OOO (401 of rood (601 of road network) US$4.900.000 (1005 of 1995. network) January 1994 road network) January 1993 January 1995 Evaluate DPV performnce Evaluate delegation Survey road condition. Cont. Cont. Evaluate DPW' force account capacity to lcroase delegation. I _ ________________________ September 1993 Equipmnt To have satiefactory Satisfy capacity --- --- purchasing/renting or capacity for requirmente to increase maintenance contracting. delegatlon. delegation. September 1993 _ _ Delegation of detalled Delegate technical DEV-DPV accord. ---- - - engineering tasks. Final deesign R3 limits w/Chubut-Caleta Olivia. July 1993 _ Delegation of field Delegate technical ---- Field inspection R3 limits Cont. inepection taake. w/Chubut Caleta Olivia by DPV. January 1994 Delegation of vehicle load Delegate institutional DNV-DPV accord for Cont. Cont. control on National Network tasks vehicle load control in National Network. J_ anuary 1993 Delegation of road Delegate Inastitutional DKV-DPV accord for road Cont. Cont. inventory updating teask inventory. delegation. January 1993 Performnce evaluation. Evaluate DPV capacity ---- Evaluate delegation of Evaluate delegation of institutional tasks and institutional tasks and detailed engineering field inspection. January 1994 January 1994  ARGENTINK ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Pilot Provincet La Pampa Action Plan for Highway Reform ACTIVITY OBJECTIVE 1993 1994 1995 Delegate routine Delegate action on the DNV-DPY accord for 416.66 DNV-DIV accord for 600 km DNV-DPV accord for 780 km maintenaDce on National National Road Network. km routine maintenance routine mintenance, routine maintenance. Road Network 1002 for 6 yeare January 1993 January 1994 January 1995 Selection of sections to be Increase delegation Select additional 18O km Select additional 180 km to Select 180 km to include added to the accord. to include in DNV-DVP include in DNV-DPV accord. in DNV-DPV accord 1986. accord. September 1994 September 1995 September 1993 Evaluate DPV perfonmance Evaluate delegation Survey road condition to Cont. Cont. justify increased September 1994 September 1995 delegation. September 1993 Delegation of Detailed Delegate technical ... DNV-DPV accord for R151- El --- Engineering tasks. Col6n - R143 Delegation of field Delegate technical ---- Field inspection by DPV Field inspection by DPV inspection tasks. R35 - Ataliva Roca Santa R151 - El Col6n - R143. Rosa Delegation of vehicle load Delegate institutional DNV-DIV Accord for Cont. Cont. control on National task* vehicle load control. Network. January 1993 Delegation of road Delegate institutional ---- DNV-DI" accord for road Coant. inventory updating tasks inventory updating January 1994 Highvay info. netvork system to be installed in DPW January 1994, DNV Traffic counting Delegate institutional --- DIV-DIV accord for traffic Cont. tasks. counting January 1994 _ -  43 TABL 1. 9 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT DNV's Staff and Averaoe Salaries (in US Dollars) Position As of 7/31/92 As of 8/31/92 Increase (%) Salary Number Salary Number Salary Number -Managers 1,095 3 2,068 7 89 +133 -Sub-managers and 1,091 17 1,816 16 66 - 6 chief of Regions -Chiefs Headquarters, 926 56 1,570 55 70 - 2 Districts and Reqional Divisions -Chiefs Headquarters 760 142 1,282 133 69 - 6 Sections and District Divisions -Work and Workshop 556 535 900 550 62 + 3 Supervisors -Foremen and 446 612 682 606 53 - 1 Laboratory Chiefs -Operators of Heavy 415 923 633 913 53 - 1 Equipment -Workmen 365 1,759 519 1,749 42 - 1 Source: DNV  44 TABLE 1.10 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Actual and Proiected Budgets for DNV During 1991-1997 (in thousand of US Dollar.) ITEM 1991 1992 1993 1994 1995 1996 1997 Actual Actual Committed Estimated Estimated Estimated Estimated Personnel 54,836 65,000 54,950 53,851 52,774 50,663 48,636 Goods 10,172 16,657 10,242 10,549 10,549 10,444 10,235 Services 20,384 9,144 13,661 15,027 16,530 17,522 17,872 Capital Expenditures 86,890 123,313 281,000 422,053 508,343 422,577 420,000 1. Previous works 6,395 7,000 500 2. Works 80,495 116,313 279,500 422,053 508,343 422,577 420,000 Transfers 36,861 87,925 84,000 85,200 86,460 87,783 89,172 1. To Central Government 73 136 2. To Private Sector 29,512 42,000 60,000 60,000 60,000 60,000 60,000 3. To Provinces 7,000 45,513 24,000 25,200 26,460 27,783 29,172 4. To Overseas 276 276 Assets 23,122 11,078 Debt Service 6 84,103 75,929 59,345 57,674 49,428 47,600 Foreign Debt Service 6 84,103 75,929 59,345 57,674 49,428 47,600 TOTAL 232,271 397,220 519,782 646,025 732,330 638,416 633,516 Proposed Project: 106.1 263.5 239.4 101.0 46.0 1% of total budget) 120%) (41%) (33%) (16%) (7%) Source of Funds: Taxes 29,024 Non-taxes 1,457 5,000 2,000 2,000 2,000 2,000 2,000 Own Capital 8 3,000 0 0 0 0 0 Transfers of Treasury 138,910 376,220 482,000 492,764 579,145 543,222 560,593 External Financing 2,903 13,000 35,782 151,261 151,185 93,194 70,923 IBRD 35,782 136,141 100,369 27,448 0 IDB 10,120 50,816 65,746 70,923 Others 2,903 5,000 TOTAL RESOURCES 172,302 397,220 519,782 646,025 732,330 638,416 633,516 Source: DNV  45 TABLE 2.1 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Detailed Cost Estimates by Year (in million of USS Dollars at October 1992 prices) 1993 1994 1995 1996 1997 TOTAL Paved Roads: Reconstruction: 3.4 18.7 18.7 1.7 _ 42.5 Periodic Maintenance Concrete Pavement Repair - 1.6 1.6 - - 3.2 Asphalt Overlays 5.8 34.9 38.8 3.0 - 82.5 Bituminous Surface Treat. 10.0 25.5 9.0 0.6 - 45.1 Slurry Seals 19.0 34.0 27.4 - - 80.4 Sealing 14.0 24.5 25.5 4.0 - 68.0 Pavement Striping 2.1 3.2 8.1 0.4 0.2 14.0 Routine Maintenance 12.0 26.0 29.8 32.7 19.5 120.0 Unpaved Roads: Periodic Maintenance 2.1 3.3 2.5 2.1 - 10.0 Regravelling Routine Maintenance 2.4 11.0 11.0 11.0 4.6 40.0 Flood Emergency Works 9.1 10.9 - - - 20.0 Consulting Services: Detailed Engineering 3.4 1.5 _ _ - 4.9 Supervision 0.4 5.2 4.4 0.8 0.4 11.2 Technical Assistance, _ Studies & Training 3.3 6.0 2.7 1.6 - 13.6 Eguijment Office & Communication 0.2 0.4 _ _ - 0.6 Vehicle Weight Control _ _ 0.3 _ - 0.3 Traffic Counting - - 0.2 0.2 - 0.4 Road Condition Rating 0.1 1.5 0.7 - - 2.3 Base Cost 87.3 208.2 180.7 58.1 24.7 559.0 Physical Contingencies 0.0 2.0 5.0 17.0 10.0 34.0 Price Contingencies 2.9 13.7 18.5 10.6 4.3 50.0 Taxes 15.9 39.6 35.2 15.3 7.0 113.0 TOTAL COST 106. 1 263.5 239.4 101.0 46.0 756.0  46 Table 2.2 Page 1 of 2 ARGENTIA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Summary of Technical Assistance and Training Proaram (in thousands of US Dollars) Item | Consultant |QtAL 1. Assistance to DNV's General Administrator's Office l.a Reformulation of 1,458 0 1,458 the National Road Network l.b Monitoring of Toll 567 _ 567 Road Concessions l.c Evalution of Toll 58 30 88 Road Concessions 1.d Project Monitoring 1,827 30 1,857 1.e Other Transport 1,200 - 1,200 Sector Studies 2. Assistance to the Directorate of Planning, Research and Control 2.a Methodology for 122 10 132 Environmental Impact 2.b Updating of Road 186 _ 186 User Charge 'Studies 2.c Highway 1,041 490 1,531 Information System 2.d Highway Condition 209 2,255 2,464 Survey 2.e Highway Planning 238 238 System 2.f Traffic 265 400 665 Information System _ 2.g Monitoring and Updating 150 _ 150 Maintenance and Rehabilitation Planning 2.h Vehicle Weight 387 300 687 Control and Road Safety 3. Assistance to the Directorate of Highway Works and Services _ 3.a Preparation of 60 60 Biddina Documents 3.b Equipment Policies 160 _ 160 3.c Bridge Management 434 25 459 System 3.d Methods and Criteria for 212 30 242 Selecting Pavement Alternatives  47 Table 2.2 Page 2 of 2 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Summary of Technical Assistance and Trainina Proaram (in thousands of US Dollars) I |tonsultant iment OTAL 4. Assistance to the Directorate of Administration 4.a Budgetary 400 - 400 Administration System 4.b Staff motivation 220 - 220 _and organization _ - 4.c Management 200 - 200 _Training 5. Assistance to the Directorate of Highway Reconversion 5.a Technical 1,372 - 1,372 Assistance to DPVs 5.b Worldwide Experience on 214 - 214 Decentralization of Road _________ Administrations I 5.c Training 800 _ 800 6. Assistance to the Argentinean-Uruguayan Bi-National Comission 6.a Complete Background Studies 1,800 - 1,800 of Rio de la Plata Crossing TOTAL 13,580 3,570 17,150  48 TABLE 2.3 Page 1 of 2 ARGENTIN ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Economic Indices of the Prorazm Analyzed by ISIT Usint HDM Model Pzoject Item 1' Length Expenditures ERR (1) Percontage Percentage of Average (km) (million USS) or B/C of length expenditures M or A. Paved Roads 1. Sealing 4,572 86.5 12<ERR<24 28 30 24<ERRc36 34 34 I _____________________ 36<ERR<48 15 15 32 ERR>48 21 20 No solution 2 2 2. Slurry 859 36.5 12cKRR<24 83 84 r _____________________ _____________ _______________ 24< =RR<36 13 12 36<9RR'48 . - 21 _____ _____ ____ ____ _____ ____ ____ _____ _ _ ERI>4 8 4 4 _ _ _ _ _ 3. Surface Troatent 1,667 84.6 12<ERRs24 46 46 24<ERR<36 25 25 36<ERRU48 16 15 29 ERR>48 13 14 4. Overlay 1,462 112.6 12<ERR<24 35 35 _ 24<MRIs36 17 17 _ _ __ __ _ 36KERR'48 10 9 27 ______________________ _____________ _______________ XE RR>48 13 14 __ __ _ __ __ _ __ __ __ __ _ __ _ _ __ __ _ __ _ No solutions 25 25 S. Reconstruction 342 | 61.2 12<ERR<24 33 34 f | 1 24<ERR<36 } 12 12 I _____________________ I____________ T______________ 36<ERR<48 10 10 35 ERR>48_4 K5 44*4  49 TABLE 2.3 Page 2 of 2 Project Item Length | Expenditures EBR (2) Percentage Percentage of Average (kn) (million US$) or B/C of length expenditures ERR or B. Unpaved Road. 6. Gravel 6,430 69.5 |< 1B/C<2 SI 61 2<B/C<6 16 35 2.5 _ | l ~~~~~~ ~ ~ ~~~~6<B/C 3 4 7. Earthj 1,550 J 11.2 1<B/C<2 J 73 J 53 I ____ __ I _ ______ 2<B/C<6 27 47 2.7 C. Cment Concrete Road 8. Concrete 65 4.9 12<ERR<24 -- -- 24<ERR<36 -- -- a___________________ _ l36< M <48 52 30 46 D11B 48 70 Note: ER - *econmic rate of return (Z) 1/C - benefit - cost ratio Source ISIT, DIV and Miesion'e eetiate (March 1992).  ARGENTINA ROAD MAINTENANCE AND REHABIUTATION SECTOR PROJECT Organrzation of DNV Mistsy of Economy and Pubic Wodis nd 8_rvc Secwstadt of Public Works and ConununlUotns Naional Highwa Dbucatoste Gaaa AdmG Ist or Genw5 Sub-Adnllstor SENIORAmnsrto How and cnriF N wi" StKIHliT | W tms ] | f*soRla | t } gXl l W04 1 1 1 bm 5 UANAMMENTT 10WS b&dwz/52819  51 CHART B ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Orcanization of the Project Coordination Unit D.N.v. ADMINISTRATION SHORT-TERM CONSULTANTS UNIT CHIEF ---------- S.O.P. r C. COORDINATOR PROCUREMENT EXCTO PRGRMI ACOII TECHNICA CONTROL CONTROL AND SUPERVISION ASSISTANCE REPROGRAIKDGl SUPERVISION 1 TRANSPORT ECONOMIST 2 ENGINEERS.  52 TABLE 3.1 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Estimated Schedule of Disburuements of Bank Loan (in US Million Dollars) By the end of Fiscal Year Annual Cumulative Percentage 1994 88.9 88.9 26 1995 131.1 220.0 65 1996 74.9 294.9 87 1997 23.8 318.7 94 1998 14.3 333.0 98 1999 6.0 339.0 99 2000 1.0 340.0 100 Assumptions: Loan Signings July 1993 Loan Effectiveness: September 1993 Project Completion: June 1999 Loan Closing Date: June 2000  53 ANNEX 1 Page 1 of 13 ARGENTINA ROAD MAINTENANCE AND REHABILITATION SECTOR PROJECT Policy Letter of the Government 1. Attached is a copy of a document sent to the Bank by the Secretary of Public Works and Communications of Argentina, Mr. Wylian Otrera on October 22, 1992, and an attachment signed by Administrator General of DNV, Lic. Miguel A. Salvia, explaining the Government policy concerning the road sector in the country.  54 NOTA SOPYC No 308/93 ANNEX I Page 2 of 13 ~ ?fl4 Nogamea REF: NOTA 106/92 CKa4,N Qo