Argentina - Native Forests and Protected Areas Project

Document of The World Bank Report No. 15609-AR STAFF APPRAISAL REPORT ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT August 5, 1996 Natural Resources, Environment and Rural Poverty Division Country Department I Latin America and the Caribbean Region  CURRENCY EQUIVALENTS Currency Unit - Peso (Arg$) EXCHANGE RATE (August 5, 1996) US$1.00 = Arg$1.00 Arg$1.00 = US$1.00 FISCAL YEAR January I to December 31 WEIGHTS AND MEASURES The metric system has been used throughout the report.  Abbreviations and Acronyms APN National Parks Administration Bank/FAO-CP Food and Agriculture Organization Cooperative Program CFI Federal Investment Council CIEFAP Center for Forest Investigation and Extension in Andean Patagonia CNB National Forestry Commission CONADEPA National Commission for the Promotion and Development of Patagonia DBMU Database Management Unit DPF Directorate for Forestry Production (within SAPyA) DRFN Directorate for Native Forests (within SRNyAH) DTR Regional Technical Delegation DTRP Patagonia Regional Technical Delegation (within APN) ESW Economic and Sector Work GDP Gross Domestic Product GEF Global Environment Facility GEF Project Associated GEF Biodiversity Conservation Project GTZ German Technical Assistance Agency ICA Institutional Capacity Analysis ICB International Competitive Bidding ICGs Institutional Capacity Gaps ICR Implementation Completion Report IDB Inter-American Development Bank IFONA Argentine National Forestry Institute INASE National Seed Institute INTA National Institute for Agricultural Research LAC Latin America and the Caribbean LIB Limited International Bidding NCB National Competitive Bidding NGO Non-Governmental Organization OED Operations Evaluation Department OP Bank's Operational Policy PAR Project Audit Report PIU Project Implementation Unit POA Annual Work Plan SAPyA Secretariat of Agriculture, Fisheries and Food SBD Standard Bidding Documents SLOI Standard Letters of Invitation SOE Statements of Expenditure SRNyAH Secretariat of Natural Resources and Human Environment TOR Terms of Reference UAI Internal Auditing Unit   ARGENTINA STAFF APPRAISAL REPORT NATIVE FORESTS AND PROTECTED AREAS PROJECT Table of Contents' Loan and Project Summary .................................................................i 1. NATIVE FORESTS AND PROTECTED AREAS ..............................................................1 A. Background 1................................................................. B. Priorities for Government Action ................................................................. 2 C. Major Public Sector Institutions Involved .................................................................. 5 D. Previous Bank Lending .................................................................6 E. Lessons from General Bank Experience ................................................................. 6 F. Bank Group Strategy ..................................................................7 2. THE PROJECT ..................................................................8 A. Origin and Concept ..................................................................8 B. Project Objectives .................................................................8 C. Project Description ................................................................8 Project Components .................................................................8 Generation and Dissemination of Research and Information Component ......................9 Protected Areas Component ................................................................ 14 Project Im plem entation ................................................................ 16 D. Associated GEF Biodiversity Conservation Project ....................................................... 17 E. Costs and Financing ................................ ................................. 18 Project Costs ................................................................ 18 P roject F inancing ................................................................ 19 F. Procurement and Disbursements ................................................................. 20 Procurement ....... ................................................ 20 This report incorporates the findings of an Appraisal Mission which visited Argentina between March 31 and April 17, 1996. The mission consisted of Messrs. Michael McGarry (Task Manager) and Robert Kirmse (Bank). It is also based on the findings of previous Bank and Bank/FAO-CP missions consisting of Messrs. Michael McGarry, Robert Kirmse, Alain Tobelem, Luis Constantino, and Steven Schonberger (Bank); Richard Owen and Random Dubois (Bank/FAO-CP), and Jim Barborak (Consultant, Bank/FAO-CP). The Peer Reviewers are Ms. Susan Shen (EAIAE) and Mr. William Beattie (LA2NR). The Division Chief, Projects Adviser, and Department Director are Constance Bernard, Orville Grimes, and Gobind T. Nankani, respectively.  TABLE OF CONTENTS (Continued) Disbursements ............................................................ 23 G. Organization and Implementation ............................................................ 24 Project Management ............................................................ 24 Monitoring, Supervision and Evaluation ............................................................ 26 Accounts, Audit and Reporting ............................................................. 26 H. Rationale for Bank Involvement ............................................................. 27 1. Program Objective Categories ............................................................ 27 J. Benefits, Risks and Environmental Impact ............................................................ 28 Benefits ............................................................ 28 Risks ............................................................ 28 Environmental Impact ............................................................. 29 3. SUMMARY OF AGREEMENTS REACHED, AND RECOMMENDATION ................ 30 Recommendation ............................................................ 31 ANNEXES: A. Lessons Leamed from Previous Related Bank Lending .......................................................... 33 B. Generation and Dissemination of Research and Information Component . . 37 A ttachm ent ............................................................ 47 C. Protected Areas Component ............................................................ 50 D. Project Implementation Component ............................................................ 68 E. Project Costs . ............................................................ 78 F. Allocation of Loan Proceeds ............................................................ 89 G. Schedule of Loan Disbursements ............................................................ 90 H. Schedule of Monitorable Actions ............................................................ 91 1. Supervision Plan ............................................................ 94 J. Selected Documents and Data Available in the Project File .................................................... 96 MAP: IBRD No. 28062 Vice President: Shahid Javed Burki Director: Gobind T. Nankani Division Chief: Constance Bernard Task Manager: Michael McGarry/Robert Kirmse  ARGENTINA STAFF APPRAISAL REPORT NATIVE FORESTS AND PROTECTED AREAS PROJECT Loan and Project Summary Borrower: Argentine Republic Implementing Agency: Secretariat of Natural Resources and Human Environment (SRNyAH) Beneficiaries: The rural population living inside or around the native forests and protected areas to be included in the project (benefiting from improved natural resource management as well as from local economic growth), the visitors to the national parks and, indirectly, the population of Argentina that values the existence of intact natural forests Poverty: Not applicable Amount: US$19.5 million equivalent Terms: Repayable in 15 years, including five years of grace, with loan amortization based on level repayments of principal, at the Bank's standard variable interest rate Commitment Fee: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver Onlending Terms: Not applicable Financing Plan: See para. 2.42 Net Present Value: Not applicable Staff Appraisal Report: Report No. 15609-AR. Map: IBRD No. 28062 Project Identification Number: AR-PA-40808   ARGENTINA STAFF APPRAISAL REPORT NATIVE FORESTS AND PROTECTED AREAS PROJECT 1. NATIVE FORESTS AND PROTECTED AREAS A. Background 1.1 The area of land with woody vegetation in Argentina is estimated at about 64 million hectares (23 percent of the country), of which forested land is estimated at between 35 and 45 million hectares. The area of native forest with commercial potential is estimated at about 15 million hectares; it produces about 1.5 million m3 of wood per annum, equal to about 40 percent of the country's annual production. Preliminary studies of about 78 percent of the land area of Argentina show that about 10 percent is affected by water erosion and 9 percent by wind erosion. Overgrazing and the destruction of the perennial vegetative cover (including loss of native forests) are contributing factors. Desertification in parts of the Chaco is one of the more problematic results of this degradation trend. 1.2 Argentina has barely begun to address the issues raised by its potential for producing public goods and services from its native forests, except through the establishment and management of a system of protected areas. The country lacks an inventory of its native forests, an evaluation of environmental threats to them and their economic implications, and a solid research and information base on which to base analysis of policy options. Without such information and analysis, it is difficult to develop either realistic plans or political consensus on how best to manage these natural resources in the public interest. 1.3 For example, the Chaco ecoregion, with an area of about I million km2, is the second most extensive ecosystem in Latin America, and 46 percent of it is located in Argentina. Despite this, and in sharp contrast to the Amazon ecosystem, it has received relatively little attention and remains poorly researched despite the critical role this woodland ecosystem is believed to play in providing a habitat for many endangered species of plants and animals, preventing desertification over vast areas of Argentina, eastern Paraguay, and Bolivia, and protecting and regulating both the quantity and quality of an important part of the water supply to two of the Region's principal rivers: the Paraguay and the Parana. 1.4 Argentina falls just short of being ranked as one of the Latin America and the Caribbean (LAC) Region's countries with extraordinary diversity in terms of natural ecosystems. Yet it does have a diverse set of ecosystems and a wide range of plants and  - 2 - animals. It is believed that there are about 300 species of mammals, 980 species of birds, 250 species of reptiles, 140 species of amphibians, and 312 species of fresh-water fish in Argentina. Many of these species are considered to be endangered or threatened, due in part to the loss of native forests. 1.5 Many countries use national parks and other protected areas as a means of protecting flora and fauna. Argentina is no exception, and about 4.4 percent of the national territory (about 12.1 million hectares) is protected. Argentina's percentage of total protected area is about average ror a group of countries examined. Of the total area protected in Argentina, about 22 percent is in national parks and the remaining 78 percent is under provincial or other control. However, many of the provincial protected areas are truly "paper parks," with no active management or day-to-day presence of guards. 1.6 What is more important than designation of protected areas, however, is the mix of ecosystems represented and the level of management. For example, only 0.2 percent of the land area of the Pampa grasslands, 0.5 percent of the Chaco, 4.2 percent of the Interior Atlantic coastal forest, and 5.6 percent of the Yungus are represented in protected areas. In addition, a recent analysis of management effectiveness in Argentina's protected areas estimated that less than 21 percent of the area under protection is acceptably managed, 30 percent is under some form of management though insufficient, and almost 50 percent receives little or no management whatever. Most of the area falling into the latter two categories is under the jurisdiction of provincial or municipal authorities or private landholders. B. Priorities for Government Action 1.7 The challenge facing the Argentine government in the management and conservation of native forests and protected areas is to develop and to put in place, at both the federal and provincial levels, the institutional capacity, the information base, and the policy, legal, and regulatory regimes that would encourage decision makers in both the public and private sectors to strike an appropriate balance over time between the production of public and private goods and services in native forests and protected areas. Defining an appropriate role for the state is critical in the development and consideration of government options. 1.8 Native forests produce commercial products such as timber, charcoal, and nuts, but they also produce a range of non-commercial goods and services. Examples are: serving as sinks for carbon sequestration, a global externality; preventing soil erosion, buffering water flows, and protecting biodiversity and watersheds, which generate global, regional, and/or national externalities. The production of important public goods by native forests requires that they be treated in special ways by the state and society at large. 1.9 The policies that contribute most to the destruction of native forests are those that constrain growth of the Argentine economy. Macroeconomic instability in earlier decades, which led to low or negative economic growth rates, contributed to loss of native forests by: (a) lessening the alternative job opportunities for poor rural families and thereby increasing the attractiveness of subsistence agriculture in or close to native forested areas; (b) lessening the investment opportunities available to most commercial farmers and  - 3 - thereby making attractive the farming of land which in a well-managed economy would be regarded as sub-marginal for agriculture and left under native forests; (c) fostering inflation, which boosted the demand for inflation hedges, and, thus, the demand for land as a long-term but illiquid hedge, and cattle as a short-term and very liquid hedge, these demands encouraged expansion of the crop and livestock frontiers at the expense of native forests; (d) making counterpart funds scarcer and thereby depriving protected areas and other native forests of effective protection; and (e) lowering the priority attached to the preservation of native forests at the national level because of very pressing macroeconomic concerns. In view of this, the general policy framework that is good for efficient economic growth in general, is also likely to be most supportive of conserving native forests and strengthening the protected areas system, particularly over the medium- and long-term. Consequently, maintaining and deepening the reform process now underway in Argentina is a high priority for conserving native forests and strengthening the protected areas system. 1.10 In addition to putting in place policies and regulations which foster overall efficient economic growth, the government faces many additional challenges in developing and implementing a comprehensive and effective strategy for conserving native forests and strengthening the protective areas system. One challenge is to realize the efficient growth potential of commercial forestry in Argentina while avoiding the negative externalities associated with the loss of native forests to logging and conversion to other uses. This requires, inter alia, that the future source of growth in the output of commercial forestry products shifts progressively toward plantations and away from native forests. In turn, this requires a rapid increase in both the productivity and output of plantations, but this growth should be efficient and, therefore, quite different from much that occurred in the past. It should be driven by improved access to better quality information, technology and incentives which reflect the full range of costs and benefits, both private and public. The Forestry Development Project, which is being implemented by the Secretariat of Agriculture, Fisheries and Food (SAPyA), and supported by a Bank loan (Ln. 3948-AR) of US$16.0 million, helps the government to provide appropriate public sector support to forest plantations, timber processing industries, and agroforestry. 1.11 While efficient economic growth and appropriate public sector support for forest plantations are necessary conditions for the conservation of Argentine native forests and protected areas over the medium- to long-term, they alone are not sufficient. In the short- to medium-term in particular, accelerated economic growth will place increased pressure on some native forests from commercial logging. This could be the result of more profitable logging opportunities due to stronger domestic demand for the logs which come from native forests, lower transport costs, more efficient ports, and a more productive and motivated labor force. The same forces that may drive commercial loggers to cut more trees in native forests could also lead to the clearing of selected native forests for alternative land uses such as cropping and ranching. While some of these activities would undoubtedly be efficient from an economy-wide perspective, much of it would probably not be, particularly in instances where substantial negative externalities would be involved and decisions to cut the native forests are based on a consideration of private costs and benefits only. Therefore, the government cannot depend exclusively on market forces to determine the use of resources in native forests because the presence of substantial  externalities will lead the private sector, acting alone, to misallocate resources in too many instances. 1.12 A major challenge, therefore, is to find efficient and effective ways of preventing this misallocation of resources in native forests. One such way is to reform the policy, legal and regulatory framework. At a minimum, the policies and regulations that create incentives to destroy native forests in an inefficient manner should be identified and changed. In addition, an optimal policy, legal and regulatory framework would actually encourage decision makers, both public and private, to internalize in their decision making processes the full range of costs and benefits resulting from management decisions affecting native forests and protected areas. Identifying ways to prevent misallocation of resources in native forests as a result of deficiencies in the policy, legal and regulatory framework would require a substantial amount of effort. Since nearly all forests (apart from national parks) are under provincial jurisdiction and are privately owned, and since a high percentage of the policies and regulations are also at the provincial level, the federal government would have to use persuasion and incentives to bring about the desired changes. 1.13 Two kinds of policy instruments are available to effect the production of non- commercial forestry products on privately-owned land (most native forests in Argentina are privately owned): (a) market-based instruments, such as payments and taxes; and (b) "command and control" instruments, such as regulations and standards. In general, market-based instruments are to be preferred to "command and control" measures. More specifically, the guiding principle should be to pay for the production of public goods from the forest sector or, alternatively, to tax competing goods, with due regard to the net effect on the government budget and resource allocation within the rural economy. If the value of the public goods that would be generated from the proper management of privately owned native forests is substantial, there should be no objection, in principle, to the government paying to such private owners an appropriate price in the form of a conservation payment for these goods and/or services flowing to society, provided such payments are necessary to preserve the flow of such public goods and services. 1.14 Before attempting to implement any such payment schemes, however, research information is required on the magnitude and value of the non-commercial goods and services produced in different native forests, and how the production levels of such goods and services might be most efficiently increased or maintained, as appropriate. Research of this kind would, in most instances, be appropriately seen as a public good.' For example, research to identify critical watersheds and habitat, and on the merits of the various options for protecting such watersheds and habitat, produces public goods and services and justifies, in principle, public sector financing. Generating the research information necessary for reaching a political consensus on the value of such public goods and services, as well as designing effective and efficient payments schemes, is, therefore, a research priority for the managers of native forests in Argentina. I The term "public good" is used here to describe goods that produce substantial positive externalities.  - 5 - 1.15 Federal payments to provinces for conservation as part of a national system for the management of native forests are likely to be among the few mechanisms the federal government will have for influencing provincial forest policies and regulations. Conservation payments should be given to a province only when its forestry policies and regulations meet minimum federal standards. Such federal controls are necessary because payments alone will be ineffective if other parts of the incentive system are incorrect. There may also be externalities not well internalized at the provincial level, but which are internalized at the federal level. Designing appropriate and effective federal/provincial roles and relationships in the management of native forests and protected areas is a major challenge in Argentina. 1.16 Another dimension of these native forest ecosystems is their ability to generate global externalities, in the form of globally unique biodiversity as well as reduction of greenhouse gas emissions through carbon sequestration. As the costs of capturing these global externalities, however, are largely additional to the costs that would be incurred for investments contributing to Argentina's sustainable development, they pose financial burdens which the country is ill-prepared to meet. In such circumstances, it may be appropriate to solicit financing from grant sources (such as the GEF), in support of high priority, cost-effective programs with identifiable global benefits. C. Major Public Sector Institutions Involved 1.17 The role of the state in the management and conservation of native forests and protected areas mapped out above would include: (a) adapting existing policies, laws and regulations to new requirements; (b) managing in an effective way the protected areas system; (c) generating and disseminating relevant information and data and making it available to interested parties directly or through extension activities; and (d) fostering relevant training at all levels. 1.18 To perform this role adequately, substantial improvement is required in the existing institutional capacity. The Argentine National Forestry Institute (IFONA), an autonomous agency under the institutional umbrella of the SAPyA, was responsible for overall management of the forest sector until late 1991, when it was dismantled.2 IFONA's functions were divided between the newly-created Directorate for Native Forests (DRFN) within the Secretariat of Natural Resources and Human Environment (SRNyAH), which was given responsibility for all aspects of native forests, and the SAPyA's Directorate for Forestry Production (DPF), which was given responsibility for forest plantations, timber processing industries, and agroforestry. The National Parks Administration (APN), a semi-autonomous agency within SRNyAH, has responsibility for protected areas at the federal level. 1.19 The 23 Argentinean provinces have different structures of government and administration. In the forest sector, however, while the names of the administrative units differ, the general institutional design is relatively simple. The focal point is a provincial Forestry Directorate (Direccion de Bosques) with responsibility for coordinating the 2 Decree 2284 of October. 31, 199 1.  forestry-related activities of all entities, including national, for both native and planted forests. D. Previous Bank Lending 1.20 This is the Bank's second free-standing forestry project in Argentina. Earlier, as part of the Agricultural Services and Institutional Development Project the Bank supported a small sub-component for forestry research (US$1.9 million), and more recently it approved the Forestry Development Project (Ln. 3948-AR), which focuses on forest plantations, timber processing industries and agroforestry and is being implemented by SAPyA. E. Lessons from General Bank Experience 1.21 The Bank has lent over US$2 billion for forestry components and free-standing forestry projects. The Forestry Policy Paper of 1978 re-directed Bank financing from an almost exclusive focus on industrial forestry, to a new generation of social and rural development, and environmental forestry projects. Sector work was stressed as the critical link between the policy statement and the lending program. Only one Implementation Completion Report (ICR), and no Project Audit Report (PAR), exists for the forestry sector in the Latin America and the Caribbean Region, Lessons learned and other conclusions are derived from Bank studies of sectoral experience. A 1991 Operations Evaluation Department (OED) study of the Bank's forestry experience concludes that the overall performance of this new generation of projects has been satisfactory.3 However, consolidation may be a problem given the long maturation period of such projects, especially of their institutional development objectives. The OED study indicates that the nature, structure and operational effectiveness of institutions are critical determinants of the impact of environmental forestry projects, and that this is likely to intensify in the 1990s as political pressure is exerted on environmental and forestry institutions to broaden their agendas to incorporate protection, management, biodiversity and conservation. 1.22 An analysis carried out by OED concludes that the development frontier for the forest sector in the 1990s is in institutional and human resources, as well as research and information systems for forest and other natural resources. Macroeconomic policies and the incentive structure, including the legal and regulatory context, are vital, especially for enhancing private sector conservation involvement. These lessons are also generally corroborated by the 1991 Board paper on Forestry and the 1994 Board paper on forestry project implementation. 1.23 The proposed project represents an appropriate set of public sector interventions aimed at improving the productivity of native forests while being sensitive to environmental issues in native forest and other ecologically fragile areas. It heeds lessons from Bank and non-Bank projects, in LAC as well as in Asia and Africa, that native forests and other wildlands are a resource capable of being managed for multiple outputs, 3 Forestry Development: A Review of Bank Experience, OED Report No. 9524, April 22, 1991.  - 7 - including environmental services, and that the government has a key role to play in protecting critical habitat. A description of lessons learned and how the project was designed to take these lessons into account is given in Annex A. F. Bank Group Strategy 1.24 The Bank's country assistance objectives and strategy for dealing with native forests and the protected areas system have been defined through intensive mission contact since the start of 1992, leading to a Forestry Sector Review (Report No. 11833- AR, dated April 26, 1993), and continuing into the identification, preparation and appraisal of the proposed project. The solutions to the issues and problems that confront Argentine native forests and protected areas are consistent with the Bank's country assistance strategy and its forestry, environmental, and sector policies. Bank support for economy-wide policies and actions necessary, inter alia, for the realization of Argentina's commercial forestry potential is being pursued as part of the country dialogue and economic work program. 1.25 Regarding native forests and the protected areas system, it is proposed that the other policies and actions deemed appropriate be pursued under the proposed Native Forests and Protected Areas Project. The Bank can be of great assistance to the government in helping it to develop and to implement an appropriate state role in the conservation and management of native forests and the development and management of the protected areas system.  2. THE PROJECT A. Origin and Concept 2.1 Because of the commercial products produced by native forests, and the positive externalities benefiting the domestic economy which they and protective areas produce, the Government gives high priority to their improved management and conservation, as evidenced by the establishment of SRNyAH, the ratification of the Biodiversity Convention, and the elaboration of a Biodiversity Strategy. The recently completed Forestry Sector Review (Report No. 11833-AR, dated April 26, 1993), and the follow-up discussions with Government, including those related to the preparation of the proposed project, have provided useful opportunities for exploring the strategic options open to government. The emerging strategy now envisages a role for the state in native forests and protected areas which would focus on: (a) the creation of a framework of policies, laws, regulations and norms which efficiently protects and enhances the flows of goods and services from native forests and protected areas, including, in particular, the flows of public goods and services; (b) the generation of information required for the appropriate management of native forests and protected areas, giving due weight to the production of both private and public goods and services; and (c) the maintenance under direct public sector management, or under some form of public sector-sanctioned management regime, of native forest areas with the potential to produce particularly valuable flows of public goods and services in a cost-effective manner. The proposed project would help the Government implement the public sector role outlined here in partnership with other members of the civil society. B. Project Objectives 2.2 The objectives of the project are to: (a) help SRNyAH prioritize its proposed actions dealing with native forests; (b) facilitate the development of an incentive and regulatory framework which would encourage decision makers, both public and private, to more fully internalize within their decision making processes the full range of social costs and benefits associated with their decisions and actions affecting native forests; (c) develop a plan for transforming APN into a world-class park management organization; and (d) increase the environmentally sustainable level of tourism in four national parks: Lanin, Nahuel Huapi, Los Alerces, and Los Glaciares. C. Project Description Project Components 2.3 To achieve these objectives the project would: (a) prepare draft legislation for reforming the policy and regulatory framework affecting native forests at both the federal and provincial levels; (b) carry out an inventory of native forests from which it would generate and disseminate information on the geographic distribution of native forests within Argentina; (c) based on the inventory and other analysis, identify the priority areas of native forests deserving of protection; (d) based on the findings of an applied research and studies program and other information, develop options from which the government  - 9 - and the private sector might choose an appropriate response to different threats in these priority areas; (e) develop a plan for transforming APN into a world-class park management organization; (f) build additional infrastructure and improve management in four national parks (Lanin, Nahuel Huapi, Los Alerces, and Los Glaciares); and (g) establish a project implementation unit (PIU) which would assist DRFN and APN with project implementation. 2.4 The project would have three components: (a) generation and dissemination of research and information; (b) protected areas; and (c) project implementation. Generation and Dissemination of Research and Information Component (Baseline Costs US$13.4 million) 2.5 An information generation and dissemination component would support actions and investments aimed at generating information with a high public-good content concerning native forests and protected areas. It would have the following three sub- components: (a) reform of the policy, legal and regulatory framework affecting native forests; (b) a national inventory of native forests, and establishment and operation of a related database; and (c) applied research and studies to facilitate the improved management and conservation of native forests and protected areas. Further details on this component are given in the following paragraphs and in Annex B. 2.6 Policy, Legal and Regulatorv Reform (Baseline Costs US$0.9 million). SRNyAH is the agency assigned responsibility for managing the federal role in native forests. In discharging this responsibility, one of the principal instruments available to it is the policy, legal and regulatory framework which is in place at the federal level affecting the management of native forests. This framework has many weaknesses which must be addressed as the first step in any strategy to improve the management of native forests in Argentina. A detailed study would be completed of existing federal legislation and regulations affecting the use and conservation of native forests to identify the main obstacles to their better management, including obstacles to the internalization of environmental values in private and public decision-making. The study would be followed by workshops with representatives of the public and private sectors and non- governmental organizations (NGOs). The objectives of the workshops would be to obtain feedback on the results of the above study, to agree on a hierarchy of problems, and to prioritize obstacles to be removed. Draft legal documents would then be prepared, incorporating proposed changes in existing laws and regulations. 2.7 Because most laws and regulations affecting native forests are enforced by the provinces, a concurrent and similar effort would be launched at the provincial level with the objective of aligning proposed provincial legislative changes with those proposed at the federal level. During negotiations, agreement was reached that the TOR of all consultants would include the obligation that they carry out their work on the basis, inter alia, of the Bank's Operational Policy (OP) 4.36 on Forestry, and OP 4.04 on Natural Habitats, which are incorporated in the Project Implementation Manual (para. 3.1 (a)). The baseline cost of this sub-component would be US$0.9 million, and would include expenditures for consultants, technical assistance, training tours, and workshops.  - 10- 2.8 National Inventory of Native Forests and Management of a Related Database (Baseline Costs US$7.5 million). For SRNyAH to establish priority geographical areas of native forests on which to focus its attention, it would require, at a minimum, certain critical information about the total stock of native forests as a basis for analysis and decision making. However, there has never been an inventory of native forests in Argentina and reliable knowledge on their extent, ownership, distribution and condition is lacking. There is also little information on the nature and importance of the threat being posed to biodiversity in these forests, and the dynamics of change in forest cover (deforestation and degradation). Some of the critical information that SRNyAH requires for analysis and decision making would be generated by the inventory sub-component. The objectives of the sub-component would be: (a) to complete an inventory of native forests, including their biodiversity in carefully selected areas; and (b) to develop and manage a related database so that SRNyAH would have the capacity to store, retrieve, analyze and publish reliable information related to its mandate governing native forests. 2.9 The first objective of the sub-component would be pursued by completing a two- phased inventory of native forests. Phase I (baseline costs US$1.9 million) would involve: (a) the purchase of two sets of computer-compatible tapes of satellite imagery for the entire area of Argentina, one at the beginning of the project, and the second toward the end; (b) the preparation from an analysis of the first set of these tapes of a basic ecosystem map for the entire country, which would be used, inter alia, to provide information on land use, the broad distribution and extent of the principal ecosystems in the country, including native forests and protected areas; and (c) the preparation from an analysis of the second set of these tapes of a basic ecosystem map for the entire country with emphasis on native forests and protected areas, which would form the foundation for monitoring changes in native forests, other ecosystems and protected areas. 2.10 Phase 2 (baseline costs US$4.2 million) of the inventory of native forests would first require that the approach and methodology for completing the inventory be agreed between SRNyAH and other interested parties so that a standardized and technically sound approach is adopted from the outset, one that would enable all data generated to be efficiently incorporated and processed in the database. Internationally recruited consultants (the lead consultant firm for both phases) would play a central role in this undertaking, as would a workshop to elicit stakeholder participation and foster consensus before the fieldwork is begun. Once the approach and methodology is agreed under Phase 2, and because Phase I would be proceeding in parallel, field work could begin once sufficient progress has been made under Phase 1. 2.11 Phase 2 would involve systematic field sampling, or ground truthing, to verify spectral signatures of different tree species on satellite images, to obtain more detailed information on soils, slope, ownership, recent land use history, and habitat disturbance. Biodiversity inventories would be carried out in carefully selected priority areas within the five principal forest formations, namely, the Yungas, the Paranaense, the Chaco, the Espinal and Sub-Antarctic Forests. These would be used to determine biodiversity indices in these formations, assess species endemism, refine ecotype boundaries, measure species dominance, define species hierarchies, describe habitat structures, assess degree of threat, identify areas in need of protection, and monitor the dynamics of change over time.  - 11 - 2.12 In addition to generating raw data by carrying out the national inventory of native forests, it is necessary that SRNyAH put in place a database system for processing this data and transforming it into information that can be readily accessed by users (baseline costs US$1.4 million). In addition to inputting data generated by the inventory, SRNyAH would input into the database existing pertinent information available anywhere in Argentina, including that available in the different parts of SRNyAH, SAPyA, the German Technical Assistance Agency (GTZ), and the provinces. To some extent, at least, this database would have to be custom designed to meet these requirements of SRNyAH, and to help it fulfill its mandate as the lead federal agency dealing with native forests. The present small statistics unit (3 persons) in DRFN would be transformed into a Database Management Unit (DBMU) with responsibility for developing and managing this SRNyAH database. This would require a substantial effort in institutional strengthening, including training, so that this new DBMU would have the capacity to discharge its responsibilities. An internationally recruited consultant firm (the lead firm) would put in place the system and manage it while training the DBMU to take over. 2.13 The baseline cost of the sub-component would be US$7.5 million, and would include expenditures for computer compatible tapes of satellite imagery, computer hardware and software, vehicles, consultants, technical assistance, workshops and training. At the provincial level, assistance would take the form of workshops to sharpen awareness of the importance of collecting reliable data on native forests. 2.14 Applied Research and Studies to Facilitate the Improved Management and Conservation of Native Forests (Baseline Costs US$5.0 million). The overall objective of this sub-component would be to provide additional building blocks to SRNyAH in its efforts to develop a strategy for discharging the federal responsibility toward native forests. Based in particular on the information generated by the sub-component entitled national inventory of native forests and establishment and operation of a related database, SRNyAH would develop and manage an applied research and studies program to: (a) identify the geographic areas of native forests most threatened with loss and destruction; (b) select from the set of areas so identified the subset with the highest priority for protection, (c) identify the principal forces leading to loss and destruction in the subset with the highest priority for protection; and (d) develop and elaborate the options, including, where feasible, a cost-benefit analysis for actions recommended, which SRNyAH might exercise to improve the management of these priority areas, particularly when all or part are privately owned. 2.15 Developing options for responding to threats in priority areas of native forests raises difficult issues for SRNyAH because of the dearth of reliable information available on appropriate responses. A particularly important challenge confronting SRNyAH is how to effectively pursue its objectives in native forest areas where the land is privately owned. Considering that most of the native forests of Argentina are privately owned, the importance or this latter issue is apparent, and responding to it would be a focal area of this applied research and studies sub-component. The Chaco region has been selected for three principal reasons as the geographic region where SRNyAH would concentrate its efforts to develop appropriate responses for improving the management of native forests in areas where the land is privately owned: (a) the region's importance as an ecosystem;  - 12 - (b) the importance of native forests in this ecosystem; and (c) the fact that most of the native forest land there is privately owned. 2.16 The Chaco is the second largest vegetation type (after the Amazon) found in Latin America, and occupies over one million km2 in four countries (Argentina has 46 percent of the total area, Paraguay 32 percent, Bolivia 15 percent, and Brazil 7 percent). The Chaco vegetation type is by far the largest forest/vegetation type in Argentina, where it covers some 500,000 km2 ( 18 percent) of the total surface area of the country. Although the Chaco region appears flat and uniform, it contains marshlands, palm savanna, several varieties of grasslands, brushlands and thorn forests at higher elevations. The main forest type of the Chaco region is the Parque Chaqueno, which is part of the Gran Chaco that extends from Argentina to Bolivia and is characterized by low rainfall (600-1,000 mm per year) and low deciduous forests. 2.17 The Chaco region's vegetation has been severely degraded over years of mismanagement, especially overgrazing and unplanned tree harvesting. This has led to desertification, soil erosion, and decreased infiltration, leading to increasing risks of flooding, loss of wildlife habitat, and modifications in vegetation composition to the extent that the existence of some tree species is endangered. While these problems are apparent to the trained observer and are being felt by the local people who suffer economically from their effects, there is surprisingly little solid information on the magnitude of the physical and socio-economic impacts. 2.18 The primary objective of the applied research and studies program in the Chaco region would be to develop the biodiversity, silvicultural and current use information, management and payment mechanisms, and experience needed to encourage private landowners to better manage and conserve its native forests. This objective is in line with the government's priorities and objectives as it would support the initiative taken by SRNyAH in drafting Decree Number 534/92, which establishes the principle that private forest owners are entitled to compensation if they are required to take management actions that decrease profits while providing public benefits. The ultimate aim would be to establish an institutional capacity in SRNyAH which would enable it to act as an information focal point and catalyst for uniting the provinces and the private sector in an expanded effort to improve natural resource management and conservation in the Chaco region. 2.19 One of the first tasks expected to be completed under this sub-component would be a comprehensive study on the Chaco region, including socio-economic, ecological, land use, and a review of the international experience in similar areas. A workshop would then be held with all interested parties, including representatives of the provinces, in which the findings and recommendations of the study would be discussed and a research program and strategy developed. Concurrently, and with the information provided by the study and workshop, an applied research and studies program would be developed aimed primarily at: (a) generating economic, biological, ecological, and management information needed for policy formulation, priority setting and decision making, both by the public and private sectors; (b) developing technologies for improved management to protect environmental values on-farm; (c) testing systems for making available to farmers, including indigenous people, payments tied to the positive externalities produced by their improved  - 13 - management of native forests; and (d) developing monitoring and supervisory mechanisms. Apart from the comprehensive study of the Chaco region, practically all the research and studies funded in the Chaco region is expected to be on-farm applied research. This is the research area most neglected to date, partly because it is more difficult to complete successfully, but also because it is more demanding in terms of effort, and yet probably less rewarding at the present time to individuals working at the National Institute for Agricultural Research (INTA) or local universities. 2.20 The technical criteria which would guide the writing and appraisal of research and study proposals for the Chaco region would be proposed by the SRNyAH and would address the Chaco's main environmental problem: that of diminished production on-farm of environmental goods and services, as well as loss of biodiversity, due to over harvesting and grazing. Initially, such management techniques would, ideally, have been observed to work in similar areas elsewhere in the world and would include a combination of: (a) fencing to exclude or control grazing (control the intensity, time of grazing, and kind of animal grazed); (b) manipulation of the vegetation through controlled burning, control of weed species, mechanical control of species composition, and seeding or planting of (preferably) indigenous multiple-use species, and (c) planned harvesting of timber species so as to ensure sustainable residual stands of timber, livestock, and, most importantly, biodiversity. 2.21 Outside the Chaco region, the focus of the applied research and studies program would be on topics other than on-farm research. Since the amount of funding available would be small relative to the size of the task, the focus of this sub-component in areas lying outside the Chaco region would be on: (a) obtaining an improved understanding of the general underlying forces adversely affecting priority areas of native forests for protection (e.g., the subtropical humid forest of Misiones, the Selva Tucmana of the northwest, and the Andino-Patagonico, Monte Occidental and Parque Pampeano-Puntano forests); (b) elaborating the consequences for the country if such loss and destruction continues unabated; (c) developing, where feasible, a cost-benefit analysis for each action recommended, (d) collecting and analyzing information from around the world on best practices in the management and conservation of native forests that are relevant to the Argentine situation; and (e) such other topics as are agreed from time to time between the Bank and SRNyAH. 2.22 Under this sub-component, SRNvAH would take the initiative and suggest topics for study that it regarded as high priority. More generally, however, SRNyAH would rely on a competitive system for generating research and study topics and ideas in order to provide it with the opportunity to tap into the latest thinking in Argentina and elsewhere on how best to respond to the challenges inherent in its mandate of improving the management and conservation of native forests. This competitive system would provide all interested researchers and consultants with tthe opportunity to compete for funding, while leaving with SRNyAIFl the responsibility to allocate the available scarce funds wisely. During negotiations, agreement was reached that in awarding research and study contracts SRNyAH would follow the selection criteria, approval process and form of contract outlined in the Attachment of Annex B (para. 3.1 (b)). During negotiations, agreement was also reached that a model form of research and study contract would be included in  - 14 - the draft Project Implementation Manual, which would be agreed at negotiations (para. 3.1 (c)). 2.23 The baseline cost of this sub-component would be US$5.0 million, and would include expenditures for research and studies, as well as consultant services directly related to the preparation and completion of research and study activities proposed by SRNyAH. The sub-component would include: (a) US$0.5 million for a comprehensive socio-economic, land-use, technical, and international comparison study of the Chaco region; (b) US$0. 1 million for a workshop (including facilitator, meeting rooms, meals, publications, travel) to develop a research and studies plan for the Chaco region; (c) US$2.9 million for on-farm research and studies in the Chaco region; (d) US$0.05 million for workshops to develop research and study plans for priority native forests elsewhere in Argentina; and (e) US$1.45 million for carrying out research and studies in areas outside the Chaco region. Only in exceptional cases is it expected that individual research and study contracts would exceed US$250,000 over a six-year period. Protected Areas Component (Baseline Costs US$10.3 million) 2.24 The objectives of the Protected Areas Component would be: (a) to prepare a plan for modernizing APN and transforming it into a world-class park management organization; and (b) to increase the capacity of four national parks in Patagonia to accommodate a greater number of tourists without damaging their environment. The Protected Areas Component would comprise two sub-components: (a) the development of a plan for the modernization of APN; and (b) specific infrastructure development and management strengthening in four selected parks in the Patagonian region: Lanin, Nahuel Huapi, Los Alerces, and Los Glaciares, as well as strengthening the Patagonia Regional Technical Delegation (DTRP). 2.25 Under the modernization sub-component, the project would support studies and activities aimed at developing and obtaining consensus on a vision, detailed blueprint, and implementation plan for transforming APN into a world-class organization for managing the Argentine national parks system. The sub-component would not, however, include financing for implementing the plan because of the uncertainties and difficulties associated with, inter alia, costing such an endeavor before it is agreed and designed. 2.26 An internationally selected lead consultant firm (including NGOs) would follow a phased approach in completing its work under the modernization sub-component. The most critical and difficult task confronting this consultant firm would be to arrive at a consensus with the Argentine authorities and key stakeholders concerned on a vision for a reformed APN that, if successfully implemented, would place APN among the handful of best managed park systems in the world. 2.27 The lead consultant firm would present to the Argentine authorities (both in writing and orally) the best options which are available based on experience from around the world. Some of the critical questions to be addressed during this conceptual and consensus building phase would include: (a) identification and listing of the individual products/services produced by national parks in Argentina; (b) the pricing/subsidy policy  - 15 - appropriate in a reformed APN for each product/service so identified; (c) based on the above analysis, and drawing on the best experiences from around the world, what degree of self-financing should be set as the goal for a reformed APN, both for recurrent expenditures and capital items, and over what time period should the goal be achieved; (d) considering the results of the above product/service and pricing analyses, and other factors as appropriate, where on the private-public sector spectrum should a reformed APN ideally lie, and what does this suggest about the appropriate legal mandate and charter for a reformed APN; (e) what payment mechanisms should be used to compensate APN for its provision of certain public goods and services; and (f) the broad outlines of the legal mandate of a reformed APN, and the incentive system under which a reformed APN should operate. 2.28 Once the vision is agreed, the next step would be to prepare the detailed blueprint for this "vision of a reformed APN." Under this phase, the lead consultant firm would design the core systems for a reformed APN (i.e., the legal, managerial, financial, personal, contracting, including concessions, etc.). The last step included under this sub- component would be for the lead consultant firm, working closely with APN and SRNyAH and the Ministry of Economy, to prepare the plan to implement the proposed blueprint. 2.29 The baseline costs of this sub-component have been estimated at US$0.8 million: the main cost would be consulting services. 2.30 The other sub-component would finance specific infrastructure developments and management strengthening in four selected parks in the Patagonian region: Lanin, Nahuel Huapi, Los Alerces, and Los Glaciares, as well as strengthening the DTRP. The selection of the parks which would be included under this sub-component was based on two main criteria: (a) the tourism importance of these parks (mainly because of their scenic beauty and sporting opportunities) within the national parks system and their potential to increase revenues through the removal of infrastructure constraints; and (b) the presence of representative institutional problems which, if effectively addressed under the project, would provide useful input into the earlier sub-component dealing with the modernization of APN. These parks were also selected because of their ecological importance and the critical role they play in protecting the headwaters of the region's watersheds. 2.31 The four parks selected were among the earliest developed in Argentina (1934- 1937), and have substantial tourism-based infrastructure serving to increase their attraction and accessibility. Because of the natural beauty and tourism attractions, these four parks receive about 66 percent of the total number of visitors (1.2 million in 1995) to the Argentine park system, and contribute about 33 percent of the total revenue generated in the system in 1995. Notwithstanding this history, and despite the parks attractions and existing infrastructure, there is growing concern that their tourism potential has not been realized and that capture of visitor-generated revenue is highly inefficient. 2.32 The infrastructure investments in these selected parks would include access control and information offices, which would allow for increased entrance fee capture; visitor centers; mountain refuges for trekkers and for use by park guards while patrolling the parks; observation points and trails; park guard housing; restoration of historical and  - 16 - cultural centers of attraction; and repair or building of roads. In general, development sites within parks would increase tourism satisfaction and revenue capture. The sub- component would also support improved management in the DTRP and the selected parks through the funding of (a) vehicles and equipment (mainly radio communications and computers); and (b) training seminars and short courses, attendance at conferences and technical meetings, and training materials. 2.33 In line with APN regulations, an updated management plan would be prepared for the proposed investment program in each selected park. For each park and specific development site, APN would hold meetings with stakeholders and interest groups (i.e., provincial authorities, local people, concessionaires, recreational user groups, tourism organizations and NGOs) to obtain their input prior to final approval of the proposed investment program. During negotiations, agreement was reached that the consultative process to be followed prior to approval of a management plan for any park included under the Protected Areas Component would be included in the draft Project Implementation Manual, which was agreed at negotiations (para. 3.1 (c)). During negotiations, agreement was also reached that prior to the commencement of civil work investments to be financed under the Protected Areas Component in any park, APN would have an approved management plan for that park, which would be in accordance with relevant Bank guidelines on Forestry and on Natural Habitats (para. 3.1 (d)). Further details on this component are given in Annex C. 2.34 Under the mandate established in Law No 22.351 and resolution No. 16/94, the screening process for classifying proposed park investments into one of three classes of environmental impact, and the associated level of impact study required, is the responsibility of APN and is outlined in an APN regulation, which is acceptable to the Bank. The key parts of the regulation are summarized in Annex C. A satisfactory environmental study in accordance with the Borrowers legislation (Annex C) would be required for all civil works as a condition of disbursement. The costs of the studies required to satisfy the regulation are included in project costs. Project Implementation (Baseline Costs US$2.2 million) 2.35 This component would strengthen the capacity of DRFN and APN to manage and coordinate project implementation by establishing a PIU which would assist the managers of DRFN and APN in implementing the project. The PIU would comprise a Project Coordinator, two Technical Managers (one for DRFN and one for APN), an Accountant and other staff needed for the implementation of the project. 2.36 This component would also include a provision for vehicles and equipment (telephones, photocopiers, fax machines and computers) of about US$180,000, and for incremental operating costs for the PIU of about US$160,000.  - 17- D. Associated GEF Biodiversity Conservation Project 2.37 A GEF-supported Biodiversity Conservation Project (GEF project) is expected to be associated with the project. The overall objective of the associated GEF project would be to support in Argentina the conservation of biodiversity of global significance within the protected areas system. The GEF project would have three major components: (a) Information Management for Protected Areas; (b) Protected Areas Management; and (c) Project Management, Monitoring and Evaluation. Preparation of GEF-eligible activities is currently underway with support from the GEF, the FAO/CP and the Canadian Trust Fund. A preparation grant (PDF Block B) of US$289,000, to support local preparation activities, was approved by the GEF operations committee in February 1996. In May 1996 a PID was prepared and sent to the PIC. 2.38 Information Management for Globally Significant Protected Areas. This component would aim to develop information systems as an important tool for the monitoring of globally important sites. The databases developed under this component would be linked to the database which would be established under the Bank-supported project. 2.39 ProtectedAreasManagement. This component would create several new protected areas in globally significant and unprotected ecosystems. It would include three activities: (a) Creation of new protected areas. Under this activity, the GEF-supported project would establish about five new national and/or provincial protected areas in ecosystems of recognized global importance, but which are currently poorly represented in the protected area system of Argentina and LAC. A tentative list of the candidate sites includes the following: Quebrada El Condorito, Pampa de Achala, and Mar Chiquita in C6rdoba; Reserva San Guillermo in San Juan; Horco Molle, San Javier and Anconquija in Tucuman; Talampaya in La Rioja; and Pampas grasslands in Buenos Aires Province. An extensive stakeholder participation process and consultations with federal and provincial institutions and representatives of NGOs, indigenous peoples' organizations (where appropriate), and universities has and will continue to play a central role in determining creation and protection strategies. The component would also finance demarcation and management plans and investments in infrastructure and equipment to help ensure the sustainability of the new protected areas; (b) Training. Under this activity, the GEF project would provide training to strengthen key national and provincial government organizations involved with the protection of sites of global importance. The training program would be designed in close consultation with the University of Tucuman, which already conducts training programs in protected area management under an agreement with APN; and  - 18- (c) Sustainable Use of Biodiversityfund. Under this activity, the GEF project would finance the establishment of a fund which would provide small grants, on a competitive basis, to NGOs, universities, and government agencies (other than APN) for pilot initiatives and targeted research that would contribute directly to the sustainable use of biodiversity in protected areas and their buffer zones. Only initiatives in globally important sites would be eligible and counterpart funding would be required. 2.40 GEF Project Management. Monitoring and Evaluation. This component would include support for scientifically sound monitoring of biodiversity sites and for evaluation of the GEF project results. These activities, including management support, will build upon the related activities of the Bank-financed project. E. Costs and Financing Project Costs 2.41 Project baseline costs have been estimated at US$25.9 million. Physical contingencies (US$0.9 million) and price contingencies (I 1.7 percent of baseline costs plus physical contingencies) increase total project costs to US$30.0 million, including taxes and duties which are estimated at about US$3.9 million. Project costs are shown below in Table 1, with further details given in Annex E. The associated GEF project is currently estimated to have a total incremental cost of about US$12.0 million, but this will be examined more fully during final preparation and appraisal.  - 19 - Table 1. Project Costs by Component and Financing (US$ Million) Components Bank GEF Govt. Total Generation and Dissemination of Research and Information: (a) Policy, Legal and Regulatory Reform 0.7 0.2 0.9 (b) Inventory and Database Management 4.2 3.3 7.5 (c) Applied Research and Studies 3.0 2.0 5.0 Protected Areas: (a) Modernization of APN 0.7 0.1 0.8 (b) Investments in APN Parks 6.6 2.9 9.5 Project Implementation 1.6 0.6 2.2 Baseline Costs 16.8 9.1 25.9 Contingencies (a) Physical 0.6 0.3 0.9 (b) Price 2.1 1.1 3.2 Total Project Cost 19.5 10.5 30.0 Associated GEF Project 10.0 2.0 12.0 Grand Total 19.5 10.0 12.5 42.0 Project Financing 2.42 A Bank loan of US$19.5 million equivalent would finance about 75 percent of total project costs, exclusive of taxes and duties. Bank financing would cover all the foreign exchange expenditures of US$8.6 million, and about 51 percent of local costs. Local cost financing is justified on project grounds because of the relatively high proportion of project costs in local currencies and because of the inability of a new institution to obtain more than a modest amount of project counterpart funds in the present tight fiscal conditions prevailing in Argentina. Government would finance the remaining US$10.5 million equivalent of total project costs. Details of counterpart funding requirements, including a breakdown by year and by agency, are given in Annex E (Table E. I 1). Retroactive financing of eligible expenditures made after Negotiations would be permitted for an aggregate value up to 10 percent of the Loan amount (US$1.95 million equivalent). Table I shows the project financing plan by component and sub-component. Details on the allocation of the loan proceeds are shown in Annex F. It is expected that the associated GEF project would be financed by a GEF grant of about US$10.0 million and government counterpart funds of about US$2.0 million.  - 20 - F. Procurement and Disbursements Procurement 2.43 During negotiations, agreement was reached that the procurement of goods and services financed under the project would be undertaken in accordance with Bank Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995, revised January 1996) and Bank Guidelines for the Use of Consultants (August 1981), using standard documents, satisfactory to the Bank, for procurement of goods and works under National Competitive Bidding (NCB); and Standard Letters of Invitation (SLOI) and standard forms of contract for consultant services (para. 3.1 (e)). 2.44 The review and approval of bid documents and procedures, including bid evaluations and contract award proposals, would be the responsibility of the manager of DRFN for DRFN-managed activities, and the manager of APN for APN-managed activities. Each manager would be assisted in this endeavor by the PIU. A Country Procurement Assessment Report for Argentina is scheduled for completion during 1996. Because this would be the first project for which SRNyAH would be the principal implementing agency, including having responsibility for all procurement, a procurement consultant familiar with Bank procedures would be retained on a part-time basis to ensure adherence to Bank's guidelines and procedures. Further details on procurement are presented in Table 2. 2.45 Works. The procurement of works would consist of the construction of about 30 km of feeder roads, the rehabilitation of about 1 19 km of existing roads, the construction of about 3,000 m2 of small buildings (park guard houses, visitor centers, control points, volunteer housing, mountain refuges), the construction of five trails/observation points, and the rehabilitation of two historical sites within the protected areas component. Construction and road works would be dispersed in remote locations and are difficult to package for International Competitive Bidding (ICB). Contracts for road work estimated to cost a total of US$3.7 million would be bulked into packages valued at not less than US$350,000 and awarded on the basis of National Competitive Bidding (NCB). All other construction and rehabilitation work would be small in value (i.e., less than US$350,000) and undertaken through lump-sum, fixed-price contracts, awarded on the basis of three quotations. 2.46 During negotiations, agreement was reached that all bidding documents and contracts for road works under the Protected Areas Component would incorporate an environmental manual acceptable to the Bank, said manual to include, inter alia: (i) the applicable environmental and natural resource legislation and regulations; (ii) explicit prohibitions and environmental behavior guidelines for work crews, especially for work in sensitive areas; (iii) procedures for proper selection and management of quarries, borrow pits, gravel extraction along rivers, and other sources of construction material, and eventual rehabilitation of affected areas through soil replacement and revegetation; (iv) procedures for selection of camp sites, management of camp wastes, and guidelines for camp dismantling and abandonment; (v) procedures for proper disposal of excavated earth and spoil material to avoid contaminating streams or causing other unnecessary damage;  - 21 - and (vi) procedures for proper disposal of waste from construction machinery and equipment (para. 3.1(f)). During negotiations, agreement was also reached that the environmental manual would be included in the draft Project Implementation Manual, which was agreed at negotiations (para. 3.1 (c)). 2.47 Goods. The size of the contracts involved in the procurement of goods would be such that they could not be grouped into packages large enough to justify ICB. Therefore, the following procurement procedures would be used. To the extent possible, contracts for goods would be bulked into packages valued at not less than US$ 100,000 and awarded on the basis of NCB, up to an aggregate amount of US$700,000. Contracts for equipment (e.g., computers and software, communications equipment, transmission towers, vehicles, boats, and office, audio visual, research and training equipment) valued at less than US$100,000, would be awarded on the basis of international or national shopping. All procurement using these shopping procedures would not exceed an aggregate amount of US$1.1 million. Satellite images (computer-compatible tapes), which are estimated to cost about US$1.1 million, would be procured by direct contracting because they are proprietary and obtainable only from one source once a technical choice is made between the various systems available. Contracts for the procurement of vehicles, boats, technical equipment, and computer hardware and software would be awarded to agents or vendors with appropriate after-sales services, maintenance facilities and spare-parts supplies. All vehicles and boats procured (about 20) would include a four-year service contract. 2.48 Consultinz Services. Studies, which would cost about US$500,000 in consultant fees, would include analyses of policies, laws and regulations for native forests. Technical assistance, which would cost about US$8. 1 million in consultant fees, would include: (a) development of a database on native forest; (b) implementation of a native forest inventory; and (c) development of a plan to modernize APN. Training, which would cost about US$300,000 in consultant fees, would include the provision of on-the-job training as well as local short courses and seminars in database management and park management. Project management, which would cost about US$1.7 million in consultant fees, would include the consultant services required for the PIU to assist with project implementation. Of the total costs of consulting fees, it is estimated that about US$3.6 million would be awarded to internationally recruited consultants, and the balance (about US$ 7.0 million) to locally recruited consultants. In Table 2, consultant expenses other than fees and international travel costs (e.g., domestic travel and subsistence) are included under the "Other Expenditures" heading. 2.49 Research and Studies. Research and study contracts, estimated to cost up to an aggregate amount of US$5.4 million, would be procured following the selection and approval process described in the Attachment to Annex B.  - 22 - Table 2. Summary of Proposed Procurement Arrangements (US$ Million) a/ Project Element Procurement TOTAL ICBb/ I NCBg' I Other | I..F. I.Civil Works 1.1 Buildings and Trails 4.9 4.9 (3.3) (3.3) 1.3 Roads 3.7 3.7 (2.5) (2.5) 2.Goods. 2.1 Vehicles and Boats 0.7 0.7 (0.4) (0.4) 2.2 Equipment IIe/ 1.1 (0.7) (0.7) 2.3 Remote Images I 1 1.1 (0.7) (0.7) 3.Consulting Services gl 3.1 Studies 0.5 0.5 (0.5) (0.5) 3.2 Technical Assistance 8. 1 8.1 (5.7) (5.7) 3.3 Training 0.3 0.3 (0.2) (0.2) 3.4 Project Management 1.7 1.7 (1.7) (1.7) 4.Other Expenditures 4. 1 PIU & Other Recurrent Costs 1.7 1.7 4.2 Workshops 0.4 0.4 (0.3) (0.3) 4.3 Training programs 0.4 0.4 (0.3) (0.3) 4.4 Research and studies 1! 5.4 5.4 _____________________________(3.2) ______ (3.2) Total 4.4 23.9 1.7 30.0 (2.9) (16.6) (19.5) Figures in parentheses are the amounts to be financed by the Bank. a/ Totals include taxes and contingencies. b/ ICB-lntemational Competitive Bidding c/ NCB-National Competitive Bidding; d/ Not Bank-financed. e/ Intemational or national shopping. f/ Direct contracting. g/ Consultant services include only fees and intemational travel costs. h/ Mostly lump-sum consultant services contracts, covering associated travel costs, materials and services.  - 23 - 2.50 Bank Review. During negotiations, agreement was reached that, regarding procurement, the process of Bank review outlined here would be followed (para. 3.1 (g)). All procedures, documents, Terms of Reference (TOR), bid evaluations, and contract awards would be subject to prior review by the Bank for: (a) procurement of works under NCB; (b) contracts under small works (i.e., three quotations) procedures where contracts are over US$150,000; (c) procurement of goods under NCB; (d) direct contracting of the purchase of satellite images; and (e) procurement of consulting services costing US$50,000 equivalent or more for firms and US$30,000 equivalent or more for individuals. The review thresholds proposed above provide for prior review by the Bank of approximately 52 percent of the total value of Bank-financed contracts . In addition, the first five research and study contracts, and thereafter all such contracts greater than US$100,000 equivalent, would be subject to prior review by the Bank. The Bank would review on an ex-post sample basis all other contracts awarded under shopping procedures; the sample size would aim to ensure that at least one contract in 20 would be examined. For research and study contracts costing less than US$ 100,000 equivalent, a copy of all signed contracts and related financial and technical audits and evaluations would be sent to the Bank, and at least 20 percent would be subjected to ex-post review. For consulting services costing less than US$50,000 equivalent for firms and less than US$30,000 equivalent for individuals, contracts would be signed based on a model contract and terms of reference previously agreed with the Bank. During negotiations, agreement was reached that the draft TOR for consultants, and a SLOI and standard form of contract, would be included in the draft Project Implementation Manual, which was agreed at negotiations (para. 3.1 (c)) and finalized, with draft TORs, before effectiveness (para. 3.2). Disbursements 2.51 Loan proceeds would be disbursed over eight years, in line with the standard disbursement profile for Bank-supported projects in Argentina. Therefore, the project is expected to be completed by December 31, 2004 and the Closing Date would be June 30, 2005. The allocation of the proposed loan and the disbursement percentages are presented in Annex F. A Special Account for Bank disbursements would be established in the Banco de la Naci6n Argentina with an authorized allocation of US$790,000 equivalent. The initial deposit in the Special Account would be US$370,000 equivalent; the full authorized allocation would be deposited once the amount of Bank disbursements reaches US$3.0 million equivalent. The Special Account should be used for all payments less than 20 percent of the Authorized Allocation. Applications for replenishment of the Special Account should be submitted on a monthly basis or more frequently if the amount withdrawn from the Special Account exceeds one-third of its value. Disbursements for all contracts below the prior review limit would be made on the basis of Statements of Expenditure (SOE). The relevant documentation in support of SOE would be retained by SRNyAH, and would be made available to the appropriate auditors and Bank review missions. All other expenditures would be fully documented. The Bank's approval of the relevant environmental studies for civil works under the Protected Areas Component would be a condition of disbursement for these civil works under the proposed loan (para. 3.3). The estimated schedule of Bank loan disbursements is shown in Annex G.  - 24 - G. Organization and Implementation Project Management 2.52 Overall responsibility for project implementation would rest with SRNyAH, and authority to make most decisions affecting the project would be delegated to the manager of DRFN for the Research and Information Generation and Dissemination Component, and the manager of APN for the Protected Areas Component. The two managers would make maximum use of existing SRNyAH capacity for project implementation but, in addition, would receive administrative and technical assistance from the PIU which would be established under the project. 2.53 The PIU would include as core staff (a) A Project Coordinator, who would be recruited locally for the duration of the project, would be responsible for, inter alia: (i) the coordination of implementation both in DRFN and APN; (ii) putting in place, and maintaining, a system for monitoring project implementation; (iii) coordinating the preparation of annual work programs ("POAs"), bi-annual progress reports to the Bank, and the production of audit reports; (iv) supervising the administration of the Special Account; (v) preparing, in cooperation with the Technical Managers, all documents for the Mid-Term Review and ensuring their quality; and (vi) completing, in cooperation with the Technical Managers, in particular, an evaluation of the Project at the end of its life. He/she would ultimately be the link between Bank supervision staff and DRFN and APN; (b) Two Technical Managers, who would be recruited locally for the duration of the project, would be responsible for ensuring the technical quality of all project work under their respective areas of responsibility, namely, DRFN and APN, and, in cooperation with the Project Coordinator, for preparing the required documentation for the Mid-Term Review, and for preparing the project evaluation report at the end of the project's life; and (c) An Accountant, who would be recruited locally for the duration of the project, would be responsible for financial record keeping, the Special Account, and disbursement requests; and other part-time technical and administrative consultants as needed for project implementation, such as: (d) A Procurement Specialist, who would be recruited locally for a total of about 20 months spread over six years, would be responsible for ensuring that procurement procedures follow Bank guidelines and for making recommendations on award of contracts to the managers of DRFN and APN; (e) A Statistician, who would be recruited internationally for about 20 months spread over six years, would be responsible for ensuring the statistical  - 25 - soundness of all research and study work carried out by DRFN under the project. The Statistician would be selected for his/her qualifications and experience in the design and implementation of on-farm research either in Argentina or elsewhere; and (f) An Economist, who would be recruited locally for almost the duration of the Project, would be responsible for ensuring the quality and completeness of the work under the sub-component dealing with reform of the policy, legal and regulatory framework affecting native forests, the sub-component dealing with the modernization of APN, and, more generally, for the quality of all economic work under the project, including the design of research and study proposals in the Chaco region on privately owned property. The Economist would be selected for his/her qualifications and experience in environmental and natural resource economics and their linkages to the efficient working of the overall economy. 2.54 The establishment of the PIU and the appointment of a Project Coordinator, two Technical Managers, and an Accountant, on terms and conditions acceptable to the Bank, would be a condition of effectiveness of the proposed loan (para. 3.2). 2.55 DRFN and APN would be delegated responsibility by SRNyAH for the implementation of those parts of the proposed project falling under their respective mandates. Consequently, DRNF would have responsibility for the implementation of the Research and Information Generation and Dissemination Component, while APN would have responsibility for the implementation of the Protected Areas Component. 2.56 Under the Generation and Dissemination of Research and Information Component, DRFN would implement the sub-component dealing with the reform of the policy, legal and regulatory framework affecting native forests by recruiting consulting firms and/or individual consultants to complete the task. 2.57 Under the Generation and Dissemination of Research and Information Component, DRFN would implement the sub-component dealing with the National Inventory of Native Forests and Management of a Related Database by recruiting a lead consultant firm which would complete Phase I of the inventory, design and obtain agreement to the approach and methodology for completing Phase 2, prepare an inventory manual, manage the carrying out of the inventory in the field, and exercise quality control. It is expected that DRFN would recruit local consultants to complete the actual detailed field inventory work. The country would be divided along ecosystem lines, with the inventory work in each region completed under different local consultant contracts. Regarding the management of a related database, an internationally recruited lead consultant firm would put in place the system and manage it until the DBMiU is capable of taking over. 2.58 Under the Generation and Dissemination of Research and Information Component, DRFN would implement the sub-component dealing with Applied Research and Studies to Facilitate the Improved Management and Conservation of Native Forests by using the services of researchers and consultants who may be qualified individuals, firms, universities, public or private research entities, or NGOs from Argentina or elsewhere. A  - 26 - substantial part of the applied research and studies, particularly that in the Chaco region, would be collaborative in nature and would involve landowners, NGOs, universities, INTA, the ministry of agriculture and natural resources of participating provinces, and other government agencies. 2.59 Under the Protected Areas Component, the Modernization of APN sub- component would be managed directly by the senior management of APN in Buenos Aires with assistance from the PIU, particularly the Economist. Every effort would be made to seek the views of other interested parties in the federal government, provincial governments, the private sector and NGOs. 2.60 APN would delegate authority for the management of the infrastructure investment and management strengthening program in the four selected parks, as well as the strengthening of the DTRP, to the superintendencies of each selected park and the managers of the DTRP. The DTRP would work closely with the superintendencies to achieve the objectives of the sub-component, and would receive technical and administrative assistance from the PIU, particularly from the Technical Manager assigned to APN. Monitoring, Supervision and Evaluation 2.61 During negotiations, agreement was reached on the Schedule of Monitoring Indicators (Annex H) and the Supervision Plan (Annex I), which includes a Mid-Term Review (para. 3.1 (h)). 2.62 The responsibility for project monitoring, which is a task inseparable from effective project management, would rest with the managers of DRFN and APN, who would be assisted in completing this task by the Project Coordinator. Project evaluation would also be the responsibility of these managers, who would be assisted in completing this task by both the Project Coordinator and the Technical Managers. These responsibilities would be detailed in the draft Project Implementation Manual, on which agreement was reached at negotiations (para. 3. 1 (c)). 2.63 Reporting requirements would be designed to assist with the submission to the Bank of annual and semi-annual progress reports, the Mid-Term Review, and the ex-post evaluation of the project, namely, the ICR. Project performance indicators and measures of project impact (Annex H) would guide possible mid-course adjustments. During negotiations, agreement was also reached that a Mid-Term Review would be carried out by November 2000, focusing in particular on progress being made in reaching a consensus on reforming the policy, legal, and regulatory framework affecting native forests, and in preparing the modernization plan for APN (para. 3.1 (1)). Accounts, Audit and Reporting 2.64 Under the overall direction of the managers of the DRFN and APN, the PIU would maintain separate project accounts and records for each project component and sub- component and prepare SOEs. Supporting documents provided by the various entities concerned would be maintained by the PIU and made available to visiting Bank missions  - 27 - and independent auditors, who on their judgment would make field visits to entities concerned for the purpose of the overall audit. A standard chart of accounts would be prepared for the project. 2.65 Project accounts, including the Special Account and SOEs, would be audited annually in accordance with appropriate auditing principles and practices. The audit TOR would be included in the draft Project Implementation Manual, which would be agreed during negotiations (para. 3.1 (c)), and would, inter alia, ask the auditors to: (i) certify that procurement had been carried out using bidding documents agreed with the Bank, (ii) certify that procurement documents presented to the Bank for prior review were representative; and (iii) carry out a physical audit of procurement actions taken under the project. Agreement was also reached during negotiations that the Borrower would hire independent auditors acceptable to the Bank, and that certified copies of their audits would be submitted to the Bank no later than six months after the end of each fiscal year (para. 3.1 (i)). 2.66 During negotiations, agreement was reached that SRNyAH would present to the Bank for review and comment, no later than June 30 each year, the draft POA for the project for the following calendar year (para. 3.1 (j)). During negotiations, agreement was also reached that at the end of each year SRNyAH would produce a Progress Report for the project, and in the middle of each year an Interim Progress Report, for submission to the Bank; these would be provided to the Bank not later than January 31 and July 31, respectively (para. 3.1 (k)). The Progress Reports would provide the basic information and data for supervision missions and the Mid-Term Review. H. Rationale for Bank Involvement 2.67 The proposed project is fully supportive of the Country Assistance Strategy (CAS), which was discussed by the Board of Executive Directors on May 4, 1995. The CAS highlights three broad objectives: (a) consolidating structural reform; (b) reducing poverty and strengthening social services, and (c) rebuilding infrastructure. The proposed project would be the Bank's first free-standing project aimed at improved management and conservation of native forests and protected areas in Argentina. It would provide a vehicle for the Bank to pursue CAS objective (c) above by improving environmental management and protection. It would pursue this objective by enhancing the policy, legal and regulatory framework governing native forests, by addressing information constraints to sustainable use of native forests and conservation of biodiversity, and by supporting the modernization of APN as a national parks management entity. Bank support for this project would make possible the formulation of an integrated and balanced approach to improved management and conservation of native forests in Argentina, and therefore also providing the foundation for proposed GEF-conservation activities focused on areas of global significance. I. Program Objective Categories 2.68 The program objective categories which would be affected by this project are environmentally sustainable development, and natural resource management.  - 28 - J. Benefits, Risks and Environmental Impact Benefits 2.69 The project would begin the process of addressing native forest management issues in a comprehensive and coherent manner. For example, in the applied research work on private lands in the Chaco region, the long-term aim would be to establish an institutional capacity in SRNyAH which would enable it to act as an information focal point and a catalyst for uniting the provinces and the private sector in an expanded effort to improve natural resource management and conservation in that region. As a result of the project, Argentina would be better positioned to continue the process of managing its native forests and protected areas by virtue of the increased quantity and improved quality of information that would be available, and the strengthened protected area system and improved incentives which it would be capable of putting in place. Improvement in the management of the protected areas system, development of visitor infrastructure and formulation of tourism strategies would increase opportunities for cost recovery and revenue-earning activities in local communities without threatening the stability of the ecosystem. Tourism plans would analyze the carrying capacity of fragile ecosystems to ensure that sustainability is not threatened. The rural economy would be strengthened due to the increased tourism as a result of a better-managed parks system. This boost to the rural economy gives some balance between addressing environmental values and more direct economic activities, particularly in rural areas. This project would also lay the foundation for the associated GEF project which would contribute to the conservation of biodiversity of global significance. Risks 2.70 The major risks and uncertainties include the danger that the institutions charged with executing the project would not be up to the task, and that the government commitment of funds to achieve long-term goals would not be sustainable in the face of short-term fiscal stringencies. Regarding the former, strong emphasis would be placed on strengthening the project implementation capacity of DRFN and APN as part of the project, and for the latter, the fiscal implications of the project would be clearly elaborated in the preparation documents and government commitment sought. More specifically: (a) the limited capacity of SRNyAH, including APN, to manage project implementation would be addressed by the establishment of a PIU to support the carrying out of project administration, and by contracting consultants, NGOs, and universities to avoid the need to increase staff, and (b) the possibility of inadequate counterpart funds to finance recurrent costs on the part of participating parks would be addressed over the medium-to long-term under the modernization of APN sub-component, which would emphasize the importance of individual national parks availing themselves of every opportunity to be self financing.. The incremental recurrent cost after project completion would be modest at about US$0.6 million per annum (further details are given in Annex E). 2.71 Project sustainability would be enhanced through the reform of the policy, legal and regulatory framework that affects native forests. Research-generated information would make possible more efficient programs to protect native forests, which, in turn,  - 29 - would make such activities more sustainable. Because SRNyAH has an ongoing institutional strengthening project with the Inter-American Development Bank (IDB), partially financed with a US$30 million loan, the overall capacity of this institution should be strengthened, thus improving the likelihood of the proposed project being sustainable. The sub-component to modernize APN has the potential, over the medium- to long-term, to place that institution on a financially self-sustaining basis. Environmental Impact 2.72 Under the mandate established in Law No 22.351 and resolution No. 16/94, APN is responsible for environmental review and assessment associated with relevant interventions in any protected area under its jurisdiction, including the construction and maintenance of public services and tourist infrastructure. Accordingly, prior to APN commencing the implementation of any construction, trails, or road works under this project, an environmental impact assessment (in the case of new roads), or an environmental impact report (for other works) would be prepared. Where indigenous people might be affected, the analysis, and associated participatory process, would specifically address possible impacts and identify actions to ensure that management plans are compatible with their cultural preferences. There would be no involuntary resettlement under the project. The project has an Environmental Assessment category B because infrastructure in protected areas could damage natural habitat and because of the need to ensure that reform of the policy, legal and regulatory framework affecting native forests would avoid negative consequences for the environment.  - 30 - 3. SUMMARY OF AGREEMENTS REACHED AND RECOMMENDATION 3.1 The following agreements were reached at negotiations: (a) the TOR of all consultants would include the obligation that they carry out their work on the basis, inter alia, of the Bank's Operational Policy (OP) 4.36 on Forestry, and OP 4.04 on Natural Habitats, which are incorporated in the Project Implementation Manual (para. 2.7), (b) in awarding research and study contracts SRNyAH would follow the selection criteria, approval process and form of contract outlined in the Attachment of Annex B (para. 2.22); (c) a model form of research and study contract, the consultative process to be followed prior to approval of a management plan for any park included under the Protected Areas Component, the environmental manual, the draft TOR for consultants, a standard letter of invitation and forms of contract, the allocation of responsibility for project monitoring and evaluation, and the audit TOR would be included in the draft Project Implementation Manual, which was agreed at negotiations (paras. 2.22, 2.33, 2.46, 2.50, 2.62, and 2.65); (d) prior to the commencement of civil works to be financed under the Protected Areas Component in any park, APN would have an approved management plan for that park, which would be in accordance with the Bank's guidelines on Forestry and on Natural Habitats (para. 2.33); (e) the procurement of goods and services financed under the project would be undertaken in accordance with Bank Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995, revised January 1996) and Bank Guidelines for the Use of Consultants (August 1981), using standard documents, satisfactory to the Bank, for procurement of goods and works under National Competitive Bidding (NCB); and standard letters of invitation and forms of contract for consultant services (para. 2.43); (f) all bidding documents and contracts for road works under the Protected Areas Component would incorporate an environmental manual acceptable to the Bank, said manual to include, inter alia: (i) the applicable environmental and natural resource legislation and regulations; (ii) explicit prohibitions and environmental behavior guidelines for work crews, especially for work in sensitive areas; (iii) procedures for proper selection and management of quarries, borrow pits, gravel extraction along rivers, and other sources of construction material, and eventual rehabilitation of affected areas through soil replacement and revegetation; (iv) procedures for selection of camp sites, management of camp wastes, and guidelines for camp dismantling and abandonment; (v) procedures for proper disposal of excavated earth and spoil material to avoid contaminating streams or  - 31 - causing other unnecessary damage; and (vi) procedures for proper disposal of waste from construction machinery and equipment (para. 2.46); (g) regarding procurement, the process of Bank review outlined in para. 2.50 would be followed; (h) agreement on the Schedule of Monitoring Indicators (Annex H) and the Supervision Plan (Annex I), which includes a Mid-Term Review (para. 2.61); (i) the Borrower would hire independent auditors acceptable to the Bank, and certified copies of their audits would be submitted to the Bank no later than six months after the end of each fiscal year (para. 2.65); (j) SRNyAH would present to the Bank for review and comment, no later than June 30 of each year, its draft POA for the project for the following calendar year (para. 2.66); (k) at the end of each fiscal year, SRNyAH would produce a Progress Report for the project, and in the middle of each year an Interim Progress Report, for submission to the Bank; these would be provided to the Bank no later than January 31 and July 31, respectively (para. 2.66); (I) a Mid-Term Review would be carried out by November 2000, focusing in particular on progress being made in reaching a consensus on reforming the policy, legal, and regulatory framework affecting native forests, and in preparing the modernization plan for APN (para. 2.63). 3.2 The establishment of the PIU and the appointment of a Project Coordinator, two Technical Managers, and an Accountant, on terms and conditions acceptable to the Bank, and the completion of the Project Implementation Manual, with draft TORs, would be conditions of effectiveness of the proposed loan (paras. 2.50 and 2.54). 3.3 The Bank's approval of the relevant environmental studies for civil works under the Protected Areas Component would be a condition of disbursement for these civil works under the proposed loan (para. 2.51). Recommendation 3.4 Subject to the above conditions and assurances, the proposed project would be suitable for a Bank loan of US$19.5 million equivalent, repayable in 15 years, including 5 years of grace, with loan amortization based on level repayments of principal, at the Bank's standard variable interest rate.   -33- Annex A ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT Lessons Learned from Previous Related Bank Lending 1. The management of natural resources and the strengthening of institutions are two critical, interdependent ways in which governments can ensure the sustainability of economic development. The adoption and financing of an environmentally sound resource management strategy is unlikely to succeed without the managerial, technical and operational support of efficient institutions. Lessons from Bankwide Experience 2. OED has evaluated several hundred completed Bank projects with forestry/environment and institutional objectives and has derived broad-based recommendations for future lending. OED has concluded that natural resource advice should be a central element in the design of sustainable country strategies and development programs, and the Bank should help countries incorporate environmental concerns into macroeconomic planning. The basis for this advice should be sector work which stresses sustainable development as a matter of economic efficiency, identifies a set of policy options, defines informational needs for improved planning and policymaking, and provides a strong operational foundation for Bank lending. The recent Forestry Sector Review for Argentina (Report No. 11833-AR, dated April 26, 1993) meets these requirements. It has been discussed with Government and is a key reference for the Government's evolving forestry/natural resource conservation strategy. 3. The Bank should assist governments to assess the trade-offs, if any, between growth, equity, and sustainability, an effort which requires strong technical criteria based on research, natural resource inventories, and information and database development to establish the benefits of resource conservation and to design appropriate growth-related or environmental incentives. OED cites the importance of the incentive structure in natural resource strategies; personal benefits must be evident, understandable, and fairly imminent. A LAC study on deforestation in Costa Rica (1992) showed that forest protection for example, will rarely be a competitive use of forest resources for private agents unless they are paid for potential income foregone, a principle which research will determine may well apply to a variety of habitat. The idea of compensation is also raised in OED's comprehensive Forestry Development: A Review of Bank Experience (1991). The participation of local people in designating protected areas may require compensating them, while revenue raising schemes for their benefit might increase their acceptance and decrease the enforcement burden.  - 34 - Annex A 4. OED analysis shows that institutional weaknesses have seriously undermined the more complex collaborative arrangements usually needed in environmental forestry projects due to their multi-purpose nature. However, few of the many Bank-financed institution-strengthening components have had lasting effects, a major concern given the increasing complexity of projects and the diversity of the demands being placed on institutions. OED concludes that the nature, structure and operational effectiveness of institutions are a critical determinant of the impact of environmental forestry projects, and that this is likely to intensify in the 1990s as political pressure is exerted on environmental and forestry institutions to broaden their agendas to incorporate protection, management, biodiversity and conservation. 5. Several OED analyses of Bank technical assistance for institution-building conclude that success entails: a high level of commitment and mutual interest on the part of borrower and donor; project design which capitalizes on existing opportunities and forms part of a well-defined, economic and sector work (ESW) based institutional development plan; concentrating on technical, managerial and administrative systems development; attention to legal and regulatory issues governing both the relevant natural resource subsectors and the powers, functions and responsibilities of the institutions themselves; and decentralization of planning, policy and implementation to state and local authorities, limiting central government responsibilities to normative, enforcement and administrative functions. 6. Lessons from specific projects corroborate the above. The Brazil National Environment Project (Ln. 3173-BR) is confirming the need for: a thorough institutional analysis early on; greater attention to institutional capacity building lest undue reliance has to be placed on the project coordinating unit and technical experts, thus reducing the institutional benefits of the project; more strategically oriented, simple project design, and rational sequencing of project activities. The recent restructuring of this project stresses new, decentralized approaches to environmental management, including the use of market- based incentives. Equally germane are the Rond6nia and Mato Grosso Natural Resource Management Projects (Ln. 3444-BR and 3492-BR) currently being implemented. Both projects contain institution strengthening, and decentralization of environmental policy to the municipalities. Experience points to the importance of strong environmental agencies at the state level and of timely consultation with a broad variety of entities, especially on zoning issues. Institutional development should also include analysis of the legal framework and agencies' internal managerial and organizational capacities. Lessons of Native Forest Management in LAC 7. Lessons learned from native forest management projects in LAC have prompted a shift away from forests as purely a revenue generating resource to the view that forest lands are capable of being managed for multiple outputs, including environmental services. A LAC paper, Prospects for Improved Management of Natural Forests in Latin America (1993), sets out the impediments and suggests solutions. While the technical feasibility of improved native forest management in LAC has been demonstrated, important constraints  -35- Annex A have limited its implementation, namely: weak research information and databases for decision making; contradictory policies which create perverse incentives to destroy forests; failure to involve local communities in forest management schemes; lack of profitability and political will, and land invasions, causing abandonment of otherwise viable management systems; and weak, overcentralized institutions. 8. According to this study, improved management of native forests should include: the use of existing technology including detailed inventories of natural forest and biodiversity; research and information dissemination including on the ecosystem, the supply of environmental services and biodiversity; financial incentives; providing incentives to local communities to protect forests; reform of institutions including decentralization of decision making and fiscal authority, and reform of the regulatory framework to reflect environmental values; and participatory approaches in project preparation and execution. Bank Lending Experience in Argentina 9. The current lending portfolio in Argentina comprises 19 loans, mainly in the infrastructure and finance sectors, totaling US$5.4 billion. The Bank has undertaken five operations in the agricultural sector, several of which indirectly sought natural resource conservation benefits (e.g., use of credit to buy modern farm machinery with soil conservation features) but the proposed project would be the first Bank investment in native forests and protected areas in Argentina and thus there are no lessons from previous efforts. Periodic economic and sectoral crises and profound institutional weaknesses have been a daunting context for Bank project planning and execution especially in the 1980s, affecting commitment and counterpart funding, implementation schedules, and the ability to develop a longer-term strategic perspective and sustain project benefits. However, recent macroeconomic reforms, greater awareness of environmental degradation and the potential benefits of sound resource management, and Bank sector work, have paved the way for new projects in forestry, industrial pollution control and solid waste management, flood protection, biodiversity conservation and global warming. Project Strategy 10. The proposed project complements the Forest Development Project (Ln. 3948- AR), constructing a programmatic approach to the management and conservation of Argentina's native forests. It heeds relevant lessons of Bank and non-Bank experience and studies, addressing institutional deficiencies, information needs, and prioritizing expansion and consolidation of protected areas. It would consolidate selected national parks, facilitating tourism through road construction and rehabilitation, and demarcation activities. Multiple use native forest management, e.g., tourism, logging and environmental benefits, would be tested. 11. Acknowledging the critical need for a better knowledge base for forest/environmental decision making, the project would support native forest inventories. Research within the Chaco region would attempt to devise a workable compensation  - 36 - Annex A mechanism for private owners to induce them to produce environmental goods and benefits on private land in a unique region. The objective is to be able to demonstrate technically and methodologically, the environmental response associated with financial inducements, and to quantify that response. Outside the Chaco region, research would stress efficient and effective ways of protecting the natural habitat and biodiversity. Finally, the project would strengthen the SRNyAH and the APN, in preparation for an increasingly complex role in environmental and forestry management and policy-setting, through analysis of the legal and regulatory context affecting native forest management, personnel training and monitoring and evaluation systems.  -37- Annex B ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT Generation and Dissemination of Research and Information ComDonent (Baseline Costs US$13.4 million) A. Sub-Component: Reform of the Policy, Legal and Regulatory Framework Affecting Native Forests (Baseline Costs US$0.9 million) I1. The policy, legal and regulatory framework affecting native forests has many weaknesses which must be addressed as one of the first steps in any strategy to improve their management in Argentina. Under this sub-component the following actions would be taken: (a) At the Federal Level: (i) Study of policies, laws and regulations at the federal level (US$140,000). Detailed study of existing federal legislation and regulations affecting the use and conservation of native forests, and the identification of the main obstacles to their efficient protection, including the internalization of environmental values in private and public decision making. This item would include six person/months (p/m) of an internationally recruited economist, six p/m of a national economist, 6 p/m of a national environmentalist, and four p/m of a national lawyer; (ii) Workshops for prioritizing federal obstacles (US$40.000). Workshops for consultations with the public and private sectors, and NGOs on the policy and regulatory constraints at the federal level. The objectives of the workshops would be to obtain feedback on the results of the above study, to agree on a hierarchy of problems, and to prioritize obstacles to be removed. Costs include a facilitator and travel expenses; Drafting revised federal legislation and regulations (US$50,000). Drafting legal documents and regulations, following the priorities agreed in (a) (ii). This would be done using about 10 p/m of local lawyers;  - 38 - Annex B (b) At the Provincial Level: (i) Study of policies, laws and regulations at the provincial level (US$250.00!). Detailed study of existing provincial legislation and regulations affecting the use and conservation of native forests and the management of protected areas, and the identification of the main obstacles to their efficient protection, including the internalization of environmental values in private and public decision making. This item would include 10 p/m of an international economist, 22 p/m of national economists/environmentalists/researchers, and 8 p/m of a national lawyer; (ii) Workshops for consultation with provinces (US$70.000). Workshops for consultations with the public and private sectors, and NGOs on the policy and regulatory constraints at the provincial level. The objectives of the workshops would be to obtain feedback on the results of the above study, to agree a hierarchy of problems, and to prioritize obstacles to be removed. The workshops would be held in each affected region. Costs include a facilitator and travel expenses; (iii) Drafting revised provincial legislation and regulations (US$100,000). Drafting model legal documents and regulations in close coordination with the provinces, and following the priorities agreed in (a) (vi). This would be done in about 10 Provinces. Costs include about 20 p/m of local lawyers; (iv) Domestic travel and subsistence (US$100,000). Domestic travel and subsistence outside Buenos Aires for internationally recruited consultants, and outside place of residence for locally recruited consultants, calculated at the rate of about US$1,000 per p/m of consultants; (v) Training tours to the USA, Brazil and Bolivia (US$100,000). Training tour 1 would be to the USA for forest taxation, public lands management, and private forest land policies; and training tour 2, to Bolivia and Brazil on Chaco Region-related problems, including charcoal manufacturing. In addition to carefully selected staff from DRFN, a maximum of 8 representatives of provincial governments and legislatures directly involved with native forest and protected areas would be included in each tour. Priority would be given to those provinces most advanced in putting in place adequate legislation;  - 39 - Annex B (vi) Preparation of a plan and agenda for the approval and implementation of the new policies (US$50.000). In close coordination with the federal and provincial officials, propose an agenda for the approval of the revised draft legislation and regulations. Ten p/m of local consultants would be required. Table B.1. Baseline Costs for Policy, Legal and Regulatory Reform Input Description (US$'000) Internationally recruited consultants for about 16 person- months (p/m) at US$ 10,000 per month, which includes all expenses except domestic travel and subsistence outside 160 Buenos Aires Locally recruited consultants for about 86 p/m at US$5,000 per p/m, which includes all expenses except domestic travel and subsistence outside place of residence 430 Domestic travel and subsistence outside Buenos Aires for internationally recruited consultants, and outside place of residence for locally recruited consultants, calculated at the rate 100 of about US$1,000 per p/mr Workshops 110 Study tours 100 Total costs 900 B. Sub-Component: National Inventory of Native Forests and Protected Areas and Management of a Related Database (Baseline Costs US$7.5 million) National Inventory of Native Forests and Protected Areas (Baseline Costs US$6.1 million) 2. The inventory would be carried out in two phases. Phase 1 would involve: (a) the purchase of two sets of computer-compatible tapes of satellite imagery for the entire area of Argentina, one at the beginning of the project, and the second toward the end; (b) the preparation from an analysis of the first set of these tapes of a basic ecosystem map for the entire country, which would be used, inter alia, to provide information on land use, protected areas and the broad distribution and extent of the principal ecosystems in the country, including, in particular, native forests; and (c) the preparation from an analysis of  - 40 - Annex B the second set of these tapes of a basic ecosystem map for the entire country with emphasis on native forests and protected areas, which would form the foundation for monitoring changes in ecosystems, native forests, and protected areas. 3. Phase 2 of the inventory of native forests and protected areas would first require that the approach and methodology for completing the inventory be agreed between the SNRyAH and other interested parties so that a standardized and technically sound approach is adopted from the outset, one that would enable all data generated to be efficiently incorporated and processed in the database. Internationally recruited consultants (the lead consultant firm) would play a central role in this undertaking, as would a workshop to foster consensus before the field work is begun. Once the approach and methodology is agreed under Phase 2, and because Phase I would be proceeding in parallel, field work could begin once sufficient progress has been made under Phase 1. 4. Phase 2 would involve systematic field sampling, or ground truthing, to verify spectral signatures of different tree species on satellite images, to obtain more detailed information on soils, slope, ownership, recent land use history, and habitat disturbance. Biodiversity inventories would be carried out in priority areas within the five principal forest formations, namely, the Yungas, the Paranaense, the Chaco, the Espinal and Sub- Antarctic Forests. These would be used to determine biodiversity indices in these formations, assess species endemism, refine ecotype boundaries, measure species dominance, define species hierarchies, describe habitat structures, assess the degree of threat, identify areas in need of protection, and monitor the dynamics of change over time. 5. Cost Estimates and ImDlementation of Phase 1. Phase 1 would have a baseline cost of US$1.9 million. Baseline costs include: (a) the purchase of two sets of computer compatible tapes of satellite imagery for the entire area of Argentina, one at the beginning of the project, and the second toward the end; (b) internationally recruited lead consultant firm, including 76 person-months of internationally recruited consultants for image analysis and map production; and (c) 3 5 person-months of locally recruited consultants to work with the lead consultant firm. A breakdown of costs is given in Table B.2. Table B.2. Baseline Costs for Phase 1 of the National Inventory Input Description (USs'000) Two sets of computer compatible tapes of satellite imagery 900 Internationally recruited lead consultant firm, including consultants for about 76 person months (p/m) at US$10,000 per month, which includes all expenses except domestic travel 760 and subsistence outside Buenos Aires Locally recruited consultants for 35 p/m at US$4,000 per p/m, which includes all expenses except domestic travel and  - 41 - Annex B subsistence outside place of residence 140 Domestic travel and subsistence outside Buenos Aires for internationally recruited consultants, and outside place of residence for locally recruited consultants, calculated at the rate 100 of about US$900 per p/m Total cost of Phase 1 1,900 6. Cost Estimates and Implementation of Phase 2. Phase 2 would have a baseline cost of US$4.2 million. This would include: (a) 60 p/m of internationally recruited consultants (the lead consultant firm) for designing and obtaining agreement to the approach and methodology for Phase 2 of the inventory, finalizing TORs, preparing inventory manual, managing the carrying out of the inventory, and exercising quality control; (b) workshop to obtain consensus on methodology and approach to carrying out an inventory of Biodiversity within selected native forests and protected areas; (c) 20 p/m of internationally recruited consultants for training participants in the methodology for completing Phase 2; these would be supplied by the lead consultant firm as part of its contract; (d) 1,680 p/m of locally recruited consultants mostly for field sampling; (e) 2 vehicles and equipment, including computer hardware and software. 7. A summary of baseline costs for Phase 2 is given in Table B.3. Table B.3. Baseline Costs for Phase 2 of Inventory Input Description (US$'000) Vehicles and equipment, including computer hardware and software 320 Internationally recruited consultants for 80 months at US$ 10,000 per month, 800 which includes all expenses except domestic travel and subsistence outside Buenos Aires Locally recruited consultants for 320 months at US$4,000 per month, which 1,280 includes all expenses except domestic travel and subsistence outside place of residence  - 42 - Annex B Locally recruited junior consultants for 1,360 months at US$ 1,000 per month, 1,360 which includes all expenses except domestic travel and subsistence outside place of residence, to carrv out detailed inventory work in the field and to input data into database Domestic travel and subsistence outside Buenos Aires for intemationally 400 recruited consultants, and outside placc of residence for locallv recruited consultants. calculated at the rate of about US$227 per consultant month Workshops 40 Total cost of Phase 2 4,200 8. As already stated, the lead consultant firm would be responsible for designing and obtaining agreement to the approach and methodology for completing Phase 2 of the inventory, finalizing TOR, preparing inventory manual, managing the carrying out of the inventory in the field, and exercising quality control. It is expected that the actual field inventory work would be carried out under local consultant contracts. The country would be divided along ecosystem lines, with the inventory work in each region completed under different local consultant contracts. Development and Management of a Related Database (Baseline Costs US$1.4 million) 9. In addition to generating raw data by carrying out the national inventory of native forests and protected areas, it is necessary that SRNyAH put in place a system for processing this data and transforming it into information that can be readily accessed by users. This requires the development of a database to handle this challenging task. To some extent, at least, this database would have to be custom-designed to meet these requirements of SRNyAH, and to help it fulfill its mandate as the lead federal agency dealing with native forests and protected areas. The present small statistics unit (three people) in DRFN would be transformed into a Database Management Unit (DBMU) with responsibility for developing and managing this SRNyAH database. This would require a major effort in institutional strengthening, including training, so that this new DBMU would have the capacity to discharge its responsibilities. An internationally recruited consultant firm (the lead firm) would put in place the system and manage it until the DBMU is capable of taking over. 10. Development and management of the database would have a baseline cost of US$1.4 million and would include: (a) 60 p/m of internationally recruited consultants (the lead consultant firm) for selecting, adapting, and installing the software for the database, and training and managing the DBMU staff until they are capable of taking responsibility for the management of the database;  -43- Annex B (b) 240 p/m of locally recruited consultants (including people to input data into the database) to work in the DBMU, (c) hardware and software for the database. 11. A summary of baseline cost for the development and management of the database is given in Table B.4. Table B.4. Baseline Costs for the Database Input Description (US$'000) Hardware and software for the database 170 Internationally recruited consultants for 60 months at US$10,000 per month, 600 which includes all expenses except domestic travel and subsistence outside Buenos Aires Locally recruited consultants for 120 months at US$4,000 per month, which 480 includes all expenses except domestic travel and subsistence outside place of residence Locally recruited junior consultants for 120 months at US$ 1,000 per month, 120 which includes all expenses except domestic travel and subsistence outside place of residence, to input data into database Domestic travel and subsistence outside Buenos Aires for internationally 30 recruited consultants, and outside place of residence for locally recruitedl consultants, calculated at the rate of about US$100 per consultant month Total cost of database development and operation 1,400 Implementation of Component 12. All work under this component would be carried out under consultant contracts. Cost estimates are for guidance only and may differ from bid submissions. The administrative procedures for issuing contracts would be spelled out in the Project Implementation Manual. C. Sub-Component: Applied Research and Studies to Facilitate the Improved Management and Conservation of Native Forests (Baseline Costs US$5.0 million). 13. Applied Research and Studies in the Chaco Region - Rationale and Objectives. The Chaco region has the second largest vegetation type (after the Amazon) found in Latin America, and occupies over one million km2 in four countries (Argentina has 46 percent  -44- Annex B of the total area, Paraguay 32 percent, Bolivia 15 percent, and Brazil 7 percent). The Chaco vegetation type is by far the largest forest/vegetation type in Argentina, where it covers some 500,000 km2 of the total surface area of the country. Although the Chaco region appears flat and uniform, it contains marshlands, palm savanna, several varieties of grasslands, brushlands and thorn forests at higher elevations. The main forest type of the Chaco region is the Parque Chaqueno, which is part of the Gran Chaco that extends from Argentina to Bolivia and is characterized by low rainfall (600-1,000 mm per year) and low deciduous forests, consisting mainly of the species Quebracho colorado, Quebracho blanco, and Lapacho negro. Stocking and annual increment are both low in the Chaco region, averaging about 100 m3 per ha and 1 m3 per ha per year, respectively. At lower elevations, the soils are silty mud with a clay hardpan that inhibits percolation. These soils are rich in minerals, calcium, phosphorous and potassium, but low in organic matter. 14. The Chaco region's vegetation has been severely degraded over years of mismanagement, especially overgrazing and unplanned tree harvesting. This has led to desertification, soil erosion, and decreased infiltration, leading to increasing risks of flooding, loss of wildlife habitat, and modifications in vegetation composition to the extent that the existence of some tree species (e.g., Schinopsis spp.) are endangered. While these problems are apparent to the trained observer and are being felt by the local people who suffer economically from their effects, there is surprisingly little solid information on the magnitude of the physical and socio-economic impacts. 15. Some observers (e.g., Redford et al, 1990) maintain that the arid environments of the tropics and semi-tropics, such as that found in the Chaco region, have the vegetation types most susceptible to alternation by man and the least understood. This is partially because the concentration of attention on the tropical rainforests has deflected attention from the more open vegetation formations of the semi-arid regions of South America. In fact, studies (Redford et. al., 1990) show that the rainforests do not hold a monopoly in terms of species richness. One study comparing the Chaco in Central Paraguay with the Manu National Park in Peru (a rainforest area) has shown that there were 30 species of large and medium size mammals in the Chaco region compared with 34 in the rainforest. Another study comparing the Gran Chaco (including Argentina, Paraguay and Bolivia) with the Venezuela lowlands east of the Andes, showed that the Chaco region has 53 species of medium and large mammals compared with the same number for the rainforest of Venezuela. The conclusion of these studies is that the Chaco region is as rich as tropical rainforests in terms of numbers of large mammalian species. One member of this study team was unable to find any area in the Argentina Chaco region that had not been modified by recent human activity and believes that the "degradation of the dry Argentina Chaco region is one of the greatest, yet least known, ecological catastrophes in South America" (Redford et. al., 1990). That article goes on to emphasize that we "do not yet know enough about the Chaco region to determine how or if sustainable development is possible", but that work there could "serve as an invaluable model for developing an understanding of ecological processes in arid regions." 16. Unlike the Patagonia region--which has the Center for Forest Investigation and Extension in Andean Patagonia (CIEFAP) and the National Commission for the  - 45 - Annex B Promotion and Development of Patagonia (CONADEPA)--there is no focal point for systematic information gathering and well planned, long-term research and mitigation efforts in the Chaco region. Some ad-hoc work has been done by the Universities of Cordoba and Santiago del Estero, as well as by some NGOs, but little has been documented in a systematic way, and there is no strategy which would lead to definitive answers. Furthermore, Argentine institutions have limited capacity to promote, support, and monitor conservation oriented technologies, and there is no experience with mechanisms for paying private parties for the production of public goods and services on their properties. 17. Details on the approval process and selection criteria to be followed by SRNyAH in awarding research and study contracts under this sub-component are given in the Attachment to this Annex.   - 47 - Annex B Attachment Implementation of the Sub-Component: ADplied Research and Studies to Facilitate Improved Mananement and Conservation of Native Forests I. Implementation of this sub-component would be planned, managed and supervised by SRNyAH with the assistance of a PIU which would be staffed on a full-time basis with, inter alia, a Coordinator, two Technical Managers, and an accountant. The process which SRNyAH would follow in selecting, approving and financing research and study proposals is outlined in this Attachment. 2. SRNyAH would have the freedom to take the initiative and to suggest topics for study that it regarded as high priority. More generally, however, SRNyAH would rely on a competitive system for generating research and study topics and ideas in order to provide it with the opportunity to tap into the latest thinking in Argentina and elsewhere on how best to respond to the challenges inherent in its mandate of improving the management and conservation of native forests. This competitive system would provide all interested researchers and consultants with the opportunity to compete for funding, while leaving with SRNyAH the responsibility to allocate the available scarce funds wisely. 3. To obtain approval, a research or study proposal would have to pass four tests; (a) a technical test to ensure its technical soundness and quality; (b) an economic/financial test which, assuming the research or study outcome is as expected, would show a likely favorable balance between expected benefits and costs (e.g., payments to farmers on privately owned land in the Chaco region, including the transactions costs involved); (c) a sustainability test which, assuming the research or study outcome is as expected, would show a reasonable expectation of sustainability (e.g., in the Chaco region, based on a declining gap between the with- and without-project net financial returns to the farmer); and (d) an environmental test, which would exclude proposals that would be harmful to the environment. 4. Initially, the applied research and studies supported in the Chaco region under this sub-component would provide for the investment and operating costs needed to close the financial gap between the net returns a farmer would expect when testing environmentally friendly management systems and the returns to the farmer without any change in management. In order to enhance the probability of researching technical packages which would prove to be sustainable, the evaluation and approval process for research and study proposals would pay particular attention to ensuring that the required amount of payment to individual owners of native forests would be on a declining scale. 5. All of the research and study proposals approved by SRNyAH would have the following characteristics: (a) if successfully completed, they would yield valuable  - 48 - Annex B information concerning a geographic area or topic about which decisions of importance to environmental values are being, or shortly will be, considered; and (b) valuable results could be produced within the life of the proposed project. 6. The approval process for research and study proposals submitted by non-SRNyAH staff for either the Chaco region or areas lying outside the Chaco region would follow the following steps: (a) interested parties, including researcher(s), consultant(s), NGOs, farmer(s), etc., would consult, when appropriate, with an SRNyAH research committee, as per (c) below, for clarification of the rules, and to obtain a positive or negative response to their preliminary research or study proposals, following advertisements which SRNyAH would place in the national and local press; (b) assuming a positive response to the preliminary research or study proposal, a detailed research or study proposal would then be submitted to SRNyAH for its consideration, including, inter alia, the research or study objectives, description of task, research or study methodology, a plan for completing the research or study, a chronogram of implementation, names of researchers, including their qualification and experience, level of payments requested, and proof of land ownership in all cases where farmer participation is involved; (c) a Research Committee--consisting of the Director of DRFN (or his designee), the Technical Manager of the PIU, a Statistician and an Economist--would complete an evaluation of each research or study proposal, paying particular attention to, inter alia, its priority within the overall research and study program established by SRNyAH for either the Chaco region or areas lying outside the Chaco region, expected outputs, technical feasibility, soundness of the research or study design, expected benefits relative to costs should research or study results be as expected, likelihood of sustainability should research or study results be as expected, proposal for quantification of results, payment schedule, and qualification, motivation and experience of researchers and sponsoring party. On the basis of the evaluation, the committee would accept or reject the proposal; (d) if the proposal is approved in step (c), which would require the written agreement of the Technical Manager, the Statistician, and the Economist, then a contract would be written and signed between the SRNyAH and the parties involved, with the research or study proposal included as part of the contract. The contract would include, inter alia, the research or study objectives, expected outputs, description of task, research or study methodology, names of researchers and consultants, chronogram of implementation, and schedule of payments by all parties, including SRNyAH,  - 49 - Annex B (e) SRNyAH would monitor carefully the progress under each research and study contract and make periodic payments as warranted; (f) researcher(s) and/or consultants would submit final written reports, listing achievements and failures and any departures from the contract; (g) SRNyAH would recruit independent financial and technical auditors to audit compliance and evaluate results under each contract in order to ensure the integrity of the process; (h) SRNyAH would make final payment under the contract, or take other appropriate action, depending on the outcome of the financial and technical audit and evaluation of the research or study results. 7. The approval process for research and study proposals submitted by SNyAH staff for either the Chaco region or areas lying outside the Chaco region, which would not exceed about 30 percent of the total research and studies funding, would follow the following steps: (a) staff, where appropriate, would consult with the Research Committee for clarification of the rules, and to obtain a positive or negative response to their preliminary research or study proposals; (b) assuming a positive response to the preliminary research or study proposal, SRNyAH would recruit individual consultants, following the procedures agreed for this project, to prepare the detailed TORs, which would then be submitted to SRNyAH for its consideration; (c) The Research Committee would complete an evaluation of the detailed TORs along the lines outlined above in paragraph 6 (c), and if approved, SRNyAH would recruit the necessary consulting services following the procedures agreed for this project; SRNyAH would follow the exact same steps outlined above in paragraph 6(e), 6(0, 6(g), and 6(h).  -50 - Annex C ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT Protected Areas Component (Baseline Costs US$10.3 million) A. Background The National Park System 1. Argentina was the first country in Latin America to create a national system of parks. The system had its origin in 1903 with the private donation of some 7,500 ha to the State for the purpose of "maintaining exceptionally beautiful places for the present and future generations". That initial holding was enlarged to 43,000 ha in 1907, and then again to 785,000 ha in 1922, before being designated the Nahuel Huapi National Park, the nation's first national park which was created together with the National Parks Commission in 1934. Other important milestones leading to the present national park system include: the establishment of the country's other major southern parks--Lanin, Los Alerces, Perito Moreno, and Los Glaciares--in 1937; the creation of the national school for park rangers in 1967; and the development of a national protected areas system in 1986. 2. The present national park and reserve system consists of 30 national protected areas, which are estimated to cover about 2.8 million ha or about one percent of the total national land area. The system has evolved over the last 60 years to include four classes of protected areas: National Parks, National Reserves, Natural Monuments, and Natural Strict Reserves. The National Parks and Natural Monuments are the protected categories with the most restrictions on their use, allowing only for scientific, educational and tourism activities. Sport hunting and fishing for exotic species, and commercial and agricultural activities are allowed, through a permit system, only in the National Reserves. 3. Park Administration. The lead agency responsible for managing the country's national protected areas is the APN, which is a semi-autonomous agency within the SRNyAH. The APN is headed by a Board of Directors composed of its president (designated by the President of the nation), a vice president and four members representing SRNyAH, the Secretariat of Tourism, the Ministry of Defense and the Ministry of Interior. For overall planning and coordination, there are three national directorates responsible for: conservation of protected areas; recreational and productive resources; and administration, all located at the APN headquarters in Buenos Aires. The National Directorate for Conservation of Protected Areas is responsible for: (a) defining  - 51 - Annex C priorities and actions to ensure the preservation, conservation and management of natural resources in national protected areas; (b) proposing mechanisms for monitoring and controlling the impact of human activities in protected areas; (c) disseminating information in national protected areas and organizing environmental education activities; and (d) coordinating park protection activities and overseeing environmental impact evaluations. The National Directorate for Recreational and Productive Resources is responsible for: (a) evaluating and proposing to the Board of Directors the approval or denial of public and private projects to exploit natural resources, build infrastructure or provide visitor concessions, including recreational facilities, in national protected areas; (b) coordinating the implementation of approved projects with the park superintendencies; and (c) establishing conditions for rights, permits, concessions, fees and other actions associated with the projects. The National Directorate for Administration is responsible for: (a) preparing the annual budget and supervising and controlling its implementation; (b) advising the Board of Directors on personnel administration; and (c) managing purchasing and contracting of goods and services. 4. At the field level, there are 13 superintendencies (i.e., headquarters) responsible for the operational management of one or more of the national protected areas, including the monitoring and control of approved concessions. Typically, the administrative structure of a superintendency consists of three functional units responsible for administration, works and infrastructure maintenance, and conservation management and control. Each superintendency reports directly to the national directorate in Buenos Aires. For technical support to the superintendencies, there are three Regional Technical Delegations (DTR), which are located in Iguazu, Salta, and San Carlos de Bariloche. 5. Personnel. Argentina's national public personnel system makes a distinction between two types of permanent APN personnel: administrative (Sistema Nacional de la Profesi6n Administrativa) and park guards (Cuerpo Nacional de Guardaparques). Park guards, responsible for the day to day management of the parks, provide the full range of management and protection functions such as nature interpretation, visitor safety, and park security, including armed anti-poaching patrols. In addition, there are a number of non-permanent categories of employees, namely: contractor, volunteers, and interns. APN staff currently totals about 680, of which about 180 are park guards. Compensation and career development opportunities are important issues for increasing the retention of park guards and creating a more professional park management staff. 6. Park Revenues. Table C. I shows APN's own-generated revenues and treasury transfers over the last six years in 1995 dollars. APN's own-generated revenue has seen a healthy growth (about 19 percent per year) over the past five years. However, since there was a precipitous drop in such revenues in 1990, the 1995 estimate is only 10 percent higher than the 1989 revenue figure. In 1994, the most recent year for which more detailed information is available, APN's own-generated revenue, excluding exceptional one-time only sources of income such as sale of assets, was estimated to be US$3.9 million. In that year, one park alone, Iguazu, accounted for approximately 45 percent of total income. The four Patagonian parks proposed for inclusion in this project accounted for an additional 44 percent of the revenue generated in that year.  - 52 - Annex C Table C.1. APN's Total Income (in 1995 US$) Year Own From Treasury Total Revenue 1989 7,874,000 49,071,000 56,945,000 1990 336,000 4,922,000 5,258,000 1991 1,906,000 6,738,000 8,644,000 1992 2,998,000 7,446,000 10,444,000 1993 5,253,000 14,430,000 19,683,000 1994 5,196,000 16,771,000 21,967,000 1995 8,671,000 15,238,000 23,909,000 7. Entrance fees, which are charged in only 11 national parks, make up about 42 percent of internally generated revenue. However, the level of these visitor fees, which was increased from US$3 to US$5 per person in 1995, is not based on any study of willingness to pay. Depending on the park, other important sources of park revenue include: rental of park properties (9 percent); permits for fishing, hunting and boating (2 percent); pasture fees; royalties associated with forest exploitation in reserves; and licensing of tourist guides and other concessionaires. 8. Concession rates are based on limited bidding processes, or assigned arbitrarily, and most of the existing concessionaires have contracts which have established a fixed-fee structure over a 30-year period, with no contractual means to adjust for inflation or variations in income. As a result, there are a number of cases in the park system where park income has diminished to insignificant amounts despite the presence of very lucrative concession operations. The APN has begun to address this issue through the replacement of the traditional contract based on a fixed fee by one which establishes a percentage of gross receipts (usually 3 percent). In general, opportunities to generate revenues have not been well explored and, therefore, an important management issue is to ascertain to what extent is it possible, or desirable, to increase revenue generation from protected areas, without compromising the long-term benefits of protection. 9. Operating Budget. APN's budget suffered cuts during the 1980s, followed by a drastic cut in 1990, which limited its ability to maintain the equipment and infrastructure needed to carry out its mandate to manage existing protected areas. The initial 1995 budget of US$27.8 million was a significant increase over the 1994 budget of US$22 million. Because of austerity measures, however, that 1995 budget was later cut to about US$24 million. Of the total 1994 budget allocation, 56 percent covered salaries of permanent staff, a relatively low proportion in comparison with other Latin America park systems. APN's 1996 budget is US$24 million and has been allocated as shown in Table C.2. It is noteworthy that the US$3.5 million allocated for land purchase is not fungible because it comes from a special fund which is earmarked exclusively for this purpose and funded by sales of assets.  -53 - Annex C Table C.2. APN's 1996 Budget Category Budget Amount (US$) Salaries 14,500,000 Works 2,000,000 Equipment 1,400,000 Land Purchase 3,500,000 Operations 2,600,000 Total 24,000,000 10. Currently, it is estimated that about 60 percent of the budget is financed by the national treasury and the remaining 40 percent comes from internally generated funds. This compares with 86 percent financing from the treasury in 1989. Current policy is that treasury funds are used exclusively to cover salaries and benefits of park staff, and that own-generated revenues are used to cover everything else, including investments (and in the case of a Bank loan, the counterpart funding). These park-generated revenues are deposited in an APN account with the Banco de la Naci6n in Buenos Aires. Park operating expenses are then managed through this account by a system of rotating funds and petty cash. 11. The treasury system, which is coordinated by the Tesoreria General de la Naci6n, is moving towards the centralization of all public sector revenues and expenses into a single account. This centralization will be completed by 1997, and is effectively eliminating all individual accounts of the agencies that now have them, such as APN. This will significantly reduce the level of autonomy of otherwise decentralized agencies like APN, as they will no longer have the freedom to manage own-generated revenues. 12. Budgeting and Accounting Systems. With the promulgation of the State Reform (Reforma del Estado Nacional) Law No. 23,696 of 1989, and the Law of Ministries (Ley Nacional de Ministerios) No. 24,190 of 1993, which moved APN from the Secretariat of Agriculture to the Secretariat of Natural Resources (SRNyAH), APN has undergone, and continues to undertake, major changes in its financial and administrative management systems. As mandated by the Public Sector Financial Administration and Systems Control Reform Law (Ley No. 24,156--Reforma de la Administraci6n Financiera y de los Sistemas de Control del Sector Publico Nacional) in 1992, APN is responsible for administering a financial system in compliance with national standards. Furthermore, the Constitutional Reform Law of 1994, mandated that all national public sector institutions adopt a double system of accounting, which is under the control of an Internal Auditing Unit (UAI) in each agency, coordinated by the Sindicatura General de la Naci6n, which is responsible to the President's Office. 13. The current financial administration system of national public sector institutions, which have now been adopted by APN (at least at the central administrative level), is comprised of a standardized budgetary system, accounting system, auditing system, public credit system, and treasury system. The Secretary of Finance of the Ministry of Economy is responsible for the control of these systems and has prepared procedural  -54- Annex C manuals and computer programs to standardize the operations across institutions. The budgeting system that is being adopted is an improvement over the old system. The new system, controlled by the National Budget Office (ONP) of the Secretariat of Finance, and as detailed in a series of standardized operational manuals, now requires the preparation of Annual Operation Plans (POAs), which draws on POAs from the field offices. While this budgeting system is now in place in the central office of APN, the superintendencies are still in the process of obtaining the software, manuals and training to conform to the standard systems. In the interim, the current manual system is apparently working satisfactorily. 14. The standardized national double accounting system--Sistema Integrado de Informaci6n Financiera (SIDIF)' --was issued by the Ministry of Economy in 1995 and is being adopted by APN. While this standard system is now operational at the APN headquarters, it still needs to be installed in the field offices, where the required equipment, software, modems and operational manuals are yet to be acquired. As required by law, in 1993 APN set up a UAI for internal auditing of all accounts as well as for technical and legal operations. The UAI, which is composed of three lawyers, three accountants and an engineer, operates on the basis of an Operational Manual, which was issued by the Sindicatura General de la Naci6n, to which the UAI must send periodic reports. The Constitutional Reform Law of 1994 also established an external auditing authority under the Auditoria General de la Naci6n, which depends on the National Congress. 15. The UAI's 1995 audit has already pointed to the following problems that need to be resolved: lack of an inventory of concession obligations, lack of information on the payments and other obligations of concessionaires (and, hence, the failure to collect all fees), lack of interaction across APN on methods of concession contracting, lack of clarity regarding responsibility for concession and permit management, and a general lack of planning. 16. Priorities and Constraints. The APN budget documents have identified three priority program areas, namely: (a) management of protected areas; (b) training and institutional strengthening; and (c) strengthening the national system of protected areas. Priorities under the protected areas management program are: (i) management of protected areas through an increased allocation of resources required to maintain and improve existing infrastructure, with particular emphasis given to park headquarters, park guard entrance stations, and the maintenance and repair of utility vehicles; (ii) purchase of equipment and in particular utility vehicles needed to support park control functions; (iii) interpretation and environmental education activities, under which interpretation centers and visual aid equipment were identified as priorities; and (iv) park boundary delimitation. Under the training and institution strengthening program, the main priority identified was the need to continue to develop and provide training courses and workshops for professional and technical personnel and park guards. Under the third program area-- I This system was developed under the World Bank Loan (3362-AR)--Public Sector Reform TA Loan.  -55 - Annex C support for the national system of protected areas (NSPA)-- one of the more important identified needs is to improve the management capability of participating institutions (i.e., provincial agencies, NGOs), which would help to facilitate coordination and cooperation between the national and provincial governments and promote a more integrated approach to the management of the park system. 17. The main constraint identified in the budgetary policy document was a general shortage of funding, which can be attributed to poor economic management in earlier decades and recent efforts to address long-standing and deep fiscal problems at the national level. Limited financial resources have generally resulted in under-investment in park infrastructure and, because of inadequate maintenance, a significant loss of equipment needed to adequately carry out APN's legal mandate. Investment in park infrastructure has decreased to such an extent that much of the existing infrastructure is in various states of decay and new facilities have not kept pace with the actual and potential visitation levels. Visitation rates are believed to be stagnant or even in decline in some parks, partially because of the perception that there are no new attractions to be seen and the quality and safety (some roads and trails have become very unsafe to travel) of the experience is reduced from times past. Critical equipment needs include utility vehicles, radio telecommunications, fire fighting equipment and uniforms. Other major constraints include: (i) the overly-centralized structure of APN, which constrains rapid and efficient decision-making; (ii) the lack of planned-based annual operating budgets; (iii) the lack of incentives to increase revenues at the park level due to the fact that park-generated revenues are deposited in a general APN account with the Banco de la Naci6n in Buenos Aires; and (iv) shortage of qualified personnel, particularly in the medium and higher professional levels. B. The Protected Areas Component Objectives and Strategy 18. The objectives of the Protected Areas Component are: (a) to begin the process of modernizing APN and transforming it into a world-class parks administration; and (b) to increase the capacity of four national parks in Patagonia to accommodate a greater number of tourists without damaging their environment. The Protected Areas Component would comprise two sub-components: (i) the development of a plan for the modernization of APN; and (ii) specific infrastructure developments and management strengthening in four selected parks in the Patagonian region: Lanin, Nahuel Huapi, Los Alerces, and Los Glaciares. Modernization of APN 19. This component is described in some detail in the main text. The baseline costs have been estimated at US$0.8 million; the overwhelming share of this cost would be for consulting services. Costs have been estimated as follows:  -56 - Annex C (a) Phase 1: agreeing on a vision of a reformed APN: the lead consultant firm would supply about 19 p/m of internationally recruited consultants, and about 4 p/m of Argentine consultants, to develop and reach consensus with Argentine authorities on a vision for a reformed APN. This work would include the preparation of an issues-oriented report on the design and workings of the three best park systems in the world (to include probably New Zealand, the United States and Australia), and the synthesis from this, and discussions in Argentina, of a vision for a reformed APN. The cost of this phase has been estimated at about US$300,000, including provisions for workshops to assist in the process of reaching consensus between the principal stakeholders involved; (b) Phase 2: developing a detailed blueprint to implement the agreed vision: the lead consultant firm would supply about 30 p/m of internationally recruited consultants, and 15 p/m of Argentine consultants, to design the core systems for the reformed APN. These would include legal, managerial, financial, personnel, contracting, including of concessions, and incentives. The cost of this phase has been estimated at about US$400,000; (c) Phase 3: developing an implementation plan for the agreed blueprint: the lead consultant firm would supply about 5 p/m of internationally recruited consultants and about 9 p/m of Argentine consultants, to prepare an implementation plan for the above agreed blueprint of the reformed APN. The cost of this phase has been estimated at about US$100,000. Infrastructure Development in the Four Project Parks 20. Under this sub-component, infrastructure investments in selected parks would be financed, including information and access-control offices that would result in increased entrance fee capture, visitor centers, mountain refuges for trekkers and for use by park guards while patrolling the parks, observation points and trails, park guard housing, restoration of historical and cultural centers of attraction, and repair or building of roads. In general, development sites within parks would increase tourism satisfaction and revenue capture. The project would also support improved management in the selected parks through the funding of: (a) equipment (mainly radio communications and computers) and vehicles; and (b) training seminars and short courses, attendance at conferences and technical meetings, and training materials. The selected parks, and the proposed investment program in each, are briefly described below. 21. Nahuel Huapi. Created in 1934 as one of the country's first two national parks, Nahuel Huapi is today considered Argentina's "flagship" national park. The park and reserve together are estimated to cover some 710,000 ha, of which about 470,000 ha is zoned as national park. Characteristic environments are the high Andean forest, the steppe and aquatic environments (lakes and rivers). Major tourism uses of the park include world  -57- Annex C class fishing, trekking, white-water rafting, camping, skiing and sightseeing. High visitation areas in the park include Isla Victoria, the black glacier at Cerro Tronador, the Los Alerces waterfall, Peninsula Quetrihue, Lake Steffen, and Puerto Blest. Current tourism is estimated at about 300,000 visitors (of which 236,000 paid entrance fees). In 1995, entry fees alone accounted for US$773,000 of park revenue, which represents about 73 percent of the total revenue collected in Nahuel Huapi that year. The park's 1995 budget was US$3.9 million. 22. The costs of this sub-component in Nahuel Huapi have been estimated as follows: (a) construction of 3 new information and access control posts, 3 new visitor centers and conversion of 2 existing structures to visitor centers, and 3 new volunteer houses; and the improvement or repair of 5 mountain refuges (1,000 m2), 5 observation stations/trails, and one historical structure; for a total construction cost of about US$1,533,000; (b) road works, including the repair of 74 km and some 30 km of new roads, costing about US$2,377,661; (c) vehicles (4) and boats (2), costing US$150,000; (d) equipment (field, computer, and communication), costing US$80,700. 23. Lanin. The Lanin National Park was created in 1937 to protect a representative portion of the Andean-Patagonian forests, which contains a number of endemic species. The park and reserve cover about 379,000 ha, of which some 195,000 ha is classified as national park. The park represents an impressive mixture of volcanoes, mountains, thermal waters, and 24 lakes. Major tourism attractions include rafting, trout fishing, horseback riding, beach activities, winter skiing, sailing and mountain climbing. One of the biggest tourist attractions is the Lanin volcano (3,744 meters above sea level). Tourism visits in 1995 were estimated at about 55,000, of which about 30,000 paid an entrance fee. These fees totaled some US$84,400, which was 38 percent of total park revenue collected in Lanin for that year. The park's 1995 budget was US$2.0 million. Situated in the southeast portion of Neuquen Province, the park protects a series of catchments including the Lacar and Huechulafquen watersheds. These are critical headwaters to several major downstream hydroelectric projects, the more important of which are El Choc6n, Piedra del Aguila, and Alicura. 24. The costs of this sub-component in Lanin have been estimated as follows: (a) construction of 3 new information and access control offices, 3 visitor centers, 3 new volunteer houses (total estimated area of 900 m2) and the repair of one historical structure, for a total construction cost of US$1,072,400; (b) road works including the repair of 12 km of the Quila Quina road, costing US$174,756;  - 58 - Annex C (c) vehicles (3), costing US$75,000, (d) equipment (field, computer, and communication), costing US$81,700. 25. Los Glaciares. The Los Glaciares National Park was created in 1937 primarily for preserving the area's ice fields and glaciers, which comprise the third largest ice mass in the world. Situated in the southwest portion of Santa Cruz Province, the park and reserve cover an estimated 600,000 ha, of which the glacial system covers 143,000 ha and an additional 154,000 ha is classified as national reserve. The glacier field is located along a 350-km band of the Andean cordillera and is composed of some 47 major glaciers that vary in length from 40 to 70 km. In 1981, the park was declared a UNESCO World Heritage Site, mainly because of its glaciological and geomorphological importance, but also because of the presence of sub-arctic forests and Patagonian steppe and the associated fauna (including several rare and endangered species). In addition to ice fields and glaciers, the protected area comprises the extreme western portions of the Viedma and Argentino lakes, which are part of the headwaters of a series of rivers that drain the Patagonian steppe. Located in one of the least populated provinces in the country, the park is contiguous with two Chilean Patagonian national parks: Bernardo O'Higgins and Torres del Paine. High tourist demand is concentrated in the Peninsula de Magallanes area, mainly because of the Moreno Glacier, relict forests, and visitation infrastructure. Other tourist attractions include petrified forests, hiking trips on the glaciers, prehistoric caves, boating in fjords, mountain hiking and trekking. Over the last five years, tourism has been increasing by about 10 percent a year. Paid tourist visits in 1995 numbered 72,000. About 50 percent of those tourists came from Europe, and another 30 percent from North America. Total tourism revenue in Los Glacares was estimated at US$355,000 in 1995, of which US$160,000 was from entrance fees. The park's 1995 budget was US$355,000. 26. The costs of this sub-component in Los Glaciares have been estimated as follows: (a) construction of 2 new information and access control offices, 2 new visitor centers, 2 new volunteer houses, 2 new park guard houses, and the completion of one guard house, for a total of 790 m2 of construction, costing about US$950,000; (b) road works, including the repair of the 33 km road leading to P. Moreno Glacier, costing about US$435,000; (c) vehicles (2), costing US$50,000; (d) equipment (field, computer, and communication), costing US$46,000. 27. Los Alerces. This park was created in 1937, primarily for the protection of the alerce (Fitzroya cupressoides) forests. This forest represents the largest remaining stand of these trees, many of which are over 3,000 years old. Situated in Chubut Province, the park covers some 263,000 ha and is dominated by three mountain ranges and an inter-  59 - Annex C connecting system of lakes. Other major ecotypes protected by the park include the Patagonian Steppe and the Valdivian Rainforests. Tourism activities include hiking, boating, and fishing. Total entry fee revenue in 1995 was estimated at US$52,000, or approximately 34 percent of total park revenue. The total number of visitors in 1995 was estimated at 70,000, of which only about 19,000 paid entrance fees due to a shortage of control points. The park's 1995 budget was US$1.4 million and its own-generated revenue in 1995 were estimated at US$205,000. The park plays an important role in protecting the headwaters of the Futaleufui dam. 28. The costs of this sub-component in Los Alerces have been estimated as follows: (a) construction of 2 new information and access control offices, I new visitor center, I new volunteer house (total estimated area of 399 m2) and I observation station/trail, for a total construction cost of about US$457,000; (b) vehicles (2) and boat (1), costing US$75,000; (c) equipment (field, computer, and communication), costing US$61,600. 29. Strengthening the Management of the DTRP and the Four Project Parks. In addition to the infrastructure investments in the selected parks, this sub-component would include funding for strengthening the DTRP, which serves Patagonia, and the management of the four selected parks. Investments would include: (a) two vehicles for DTRP, costing US$50,000; (b) equipment for DTRP (computer and related technical equipment), costing US$124,000; (c) 2 training seminars, 2 short courses, attendance at conferences and technical meetings, and miscellaneous training and promotional materials, costing US$200,000; (d) internationally recruited consultants: 14 p/m contracted for technical assistance and/or for conducting training programs, costing US$152,600; and (e) locally contracted consultants: 507 p/m to support engineering studies, management plan preparation, environmental assessment/analysis and other activities associated with sub-component implementation, costing about US$1.35 million. 30. The baseline costs of protected areas component are summarized in the following Table C.3.  - 60 - Annex C Table C.3. Baseline Costs for the Protected Areas Component Input Description (US$'000) Construction (3,089 m2 construction @ $1,136/m2), restoration of historical 3,975 structure (2 units @ US$50,000) and observation station/trail construction (6 units @ US$61,000 per unit) Road works (119 km repair @ US$14,563/km and 30 km new road @ 3,033 US$43,333/km) Vehicles (13 @ US$25,000) and boats (3 @ US$25,000) 400 Equipment 394 Lead consultant firm: 54 p/m of intemationally recruited consultants at 652 US$ 10,000 per consultant month, and 28 p/m of locally recruited consultants at US$4,000 per consultant month to implement the APN modemization program 14 p/m of intemationally recruited consultants at US$10,000 per consultant 140 month to conduct training programs and or provide technical assistance to APN staff in the Patagonian region 507 p/m of locally recruited consultants at US$2,000 per consultant month to 1,014 assist with the preparation of management plans and environmental assessments in the four selected parks Domestic travel and subsistence outside Buenos Aires for intemationally 422 recruited consultants (68), and outside place of residence for locally recruited consultants (401), calculated at a rate of about US$900 per p/m. Training program 200 Two consensus-building workshops at US$35,000 each 70 Total Costs 10,300 Financial Analysis 31. Tables C.4 - C. 7 show the financial analysis for the proposed investments in the four parks. The results of this analysis demonstrates that the investments are financially viable: the internal financial rates of returns (IRRs) were 13 percent, 16 percent, 11  - 61 - Annex C percent and 36 percent respectively, for Nahuel Huapi, Lanin, Los Glacares and Los Alerces. 32. In calculating these financial rates of return, the following assumptions were used. The investment costs were taken from the project cost tables. The training and TA costs of the Delegation Technica (DTRP) were assigned in direct proportion to each park's relative contribution to the component's total investment cost. For assigning the vehicle and equipment costs of the DTRP, it was assumed that some 80 percent of these costs would be attributed to the four project parks ( while the remaining 20 percent would be used for the other four Patagonian parks). The 80 percent assigned to project parks was then assigned between the four project parks according to each park's contribution to the total investment costs. Incremental operating costs were provided by APN. It was also assumed that vehicles would be replaced every five years, and that the major rehabilitation of roads under the project would result in maintenance savings over the following four years for those roads. 33. The projected incremental revenues for each park, with- and without-project, were derived from a study conducted by the University of Camague (Otero, 1996). The revenue and incremental cost streams were run over a twenty-year period following the completion of the investment phase. To estimate the revenue stream from year 2003 onward, the historic tourist visitation growth rate of 4.5 percent for Patagonian parks was applied to both the with- and without-project scenarios for Lanin, Los Glacares, and Los Alerces. Because Nahuel Huapi is centrally located, more easily accessible by air (of the four parks it is the only one with a major airport) and road, and encloses the town of Bariloche with its excellent hotels, and because of the type of investment being made in this park, it is expected that, given appropriate advertisement, the with-project visitation growth rate would exceed the historic growth rate by 1.5 percent (i.e., 6 percent versus 4.5 percent). It was also assumed that incremental revenues would be positive in the first year of the park investment program because of an APN decision to focus initially on the construction of control points, which would immediately start yielding revenues.  Investment Costs, Incremental Operating Costs and Revenues: Nahuel Huapi NP Base Unit Total Phy I IN Cost Units Cont (US$'000) Investment Costs Construction (m2) 1.1 1000 0.1 312.4 624.8 312.4 0 0 0 0 Historical Rehab 50.0 1 0.1 13.8 27.5 13.8 0 0 0 0 Trails 61.0 5 0.1 83.9 167.8 83.9 0 0 0 0 Road Rehab 14.6 74 0.1 296.4 592.7 296.4 0 0 0 0 Roads New 43.3 30 0.1 357.5 715.0 357.5 0 0 0 0 Vehicles 25.0 4 0.1 27.5 55.0 27.5 0 0 0 0 Boats 25.0 2 0.1 13.8 27.5 13.8 0 0 0 0 Equipment 80.7 1 0.1 22.2 44.4 22.2 0 0 0 0 Technical Delegation 74.8 1 0.1 20.6 41.1 20.6 0 0 0 0 Training 26.9 53.7 26.9 0 0 0 0 TA 201.5 403.1 201.5 0 0 0 0 Sub-total Investments 1376.3 2752.6 1376.3 0 0 0 0 Incremental Operating Costs Costyr Units _1 21Ta _o2O Control Posts 8.4 3 0.0 6.3 12.6 25.1 25.1 25.1 25.1 Visitor Centers 10.9 5 0.0 13.6 27.3 54.5 54.5 54.5 54.5 Volunteer Housing 2.3 3 0.0 1.8 3.5 7.0 7.0 7.0 7.0 Mountain Refuges 1.8 5 0.0 2.3 4.6 9.1 9.1 9.1 9.1 Guard Houses 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Historical Structures 10.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Trails 0.6 5 0.0 0.0 0.0 0.0 3.1 3.1 3.1 km of new road 0.6 30 0.0 0.0 0.0 0.0 19.5 19.5 19.5 Vehicles & Boats 3.5 6 0.0 5.3 10.5 21.0 21.0 21.0 21.0 Rd Maintenance Savings -0.6 74 -48.1 -48.1 -48.1 -48.1 Sub-Total Operating Costs 0.0 29.2 58.4 68.7 91.2 91.2 91.2 Total Costs 1376.3 2781.8 1434.7 68.7 91.2 91.2 91.2 (a) Revenues without project 1480.0 1507.0 1526.0 1594.7 1666.4 1741.4 1819.8 (b) Revenues with Project 1595.0 1692.0 1884.0 1997.0 2116.9 2243.9 2378.5 Incremental Project Revenues (b)-(a) 115.0 185.0 358.0 402.4 450.4 502.5 5 58d.71 Net Returns (Loses) due to project -1261.3 -2596.8 -1076.7 333.7 359.2 411.2 467.5 IRR @  Investment Costs, Incremental Operating Costs and Revenues: Lanin NP Base Unit Total Phy = _ _ p = _q_= Cost Units cont (US$'000) Investment Costs Construction (m2) 1.1 900 0.1 0.0 281.2 562.3 281.2 0.0 0.0 Historical Rehab 50.0 1 0.1 0.0 13.8 27.5 13.8 0.0 0.0 Trails 61.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Road Rehab 14.6 12 0.1 0.0 48.1 96.1 48.1 0.0 0.0 Roads New 43.3 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Vehicles 25.0 3 0.1 0.0 20.6 41.3 20.6 0.0 0.0 Boats 25.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Equipment 81.7 1 0.1 0.0 22.5 44.9 22.5 0.0 0.0 Technical Delegation 25.6 1 0.0 7.0 14.1 7.0 0.0 0.0 Training 0.0 9.2 18.4 9.2 0.0 0.0 TA 0.0 69.0 138.0 69.0 0.0 0.0 Sub-total Investments 0.0 471.3 942.6 471.3 0.0 0.0 Incremental Operating Cos Costyr Units _;.. g.. .2..N ..... Control Posts 8.4 3 0.0 0.0 6.3 12.6 25.1 25.1 25.1 Visitor Centers 10.9 3 0.0 0.0 8.2 16.4 32.8 32.8 32.8 Volunteer Housing 2.3 3 0.0 0.0 1.8 3.5 7.0 7.0 7.0 Mountain Refuges 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Guard Houses 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Historical Structures 10.9 1 0.0 0.0 2.7 5.5 10.9 10.9 10.9 Trails 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 km of new road 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Vehicles & Boats 3.5 3 0.0 0.0 2.6 5.3 10.5 10.5 10.5 Rd Maintenance Savings -0.6 12 -7.8 -7.8 -7.8 Sub-Total Operating Costs 0.0 0.0 21.6 43.2 78.5 78.5 78.5 Total Costs 0.0 471.3 964.2 514.5 78.5 78.5 78.5 (a) Revenues without Project 338.0 351.0 378.0 406.0 424.3 443.4 463.3 (b) Revenues with Project 338.0 351.0 575.0 681.0 711.6 743.7 777.1 Incremental Revenues due to Project (b)Ha) 0.0 0.0 197.0 275.0 287.4 300.3 313.8 Net Returns (Loses) due to project 0.0 -471.3 -767.2 -239.5 208.8 221.8 235.3 IRR l CD  Investment Costs, Incremental Operating Costs and Revenues: Los Glacares NP Base Unit Total Phy _ _ _ 2_ _ _ Tq. l Cost Units cont (US$'000) Investment Costs Construction (m2) 1.1 790 0.1 0.0 246.8 493.6 246.8 0.0 0.0 Historical Rehab 50.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Trails 61.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Road Rehab 14.6 33 0.1 0.0 132.2 264.3 132.2 0.0 0.0 Roads New 43.3 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Vehicles 25.0 2 0.1 0.0 13.8 27.5 13.8 0.0 0.0 Boats 25.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Equipment 46.0 1 0.1 0.0 12.7 25.3 12.7 0.0 0.0 Technical Delegation 26.9 1 0.0 7.4 14.8 7.4 0.0 0.0 Training 0.0 9.7 19.3 9.7 0.0 0.0 TA 0.0 72.5 144.9 72.5 0.0 0.0 Sub-total Investments 0.0 494.9 989.8 494.9 0.0 0.0 Incremental 0perating Costs Costlyr Units . .................~ To202 Control Posts 8.4 2 0.0 0.0 4.2 8.4 16.8 16.8 16.8 VisitorCenters 10.9 2 0.0 0.0 5.5 10.9 21.8 21.8 21.8 Volunteer Housing 2.3 2 0.0 0.0 1.2 2.3 4.7 4.7 4.7 Mountain Refuges 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Guard Houses 2.5 3 0.0 0.0 1.9 3.7 7.4 7.4 7.4 Historical Structures 10.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Trails 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 km of new road 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Vehicles & Boats 3.5 2 0.0 0.0 1.8 3.5 7.0 7.0 7.0 Rd Maintenance Savings -0.6 33 -21.4 -21.4 -21.4 Sub-Total Operating Costs 0.0 0.0 14.4 28.9 36.3 36.3 36.3 Total Costs 0.0 494.9 1004.2 523.7 36.3 36.3 36.3 (a) Revenues without Project 526.0 545.0 563.0 581.0 599.0 610.0 637.5 (b) Revenues with Project 526.0 606.0 665.0 720.0 778.0 825.0 862.1 Incremental Project Revenues (b)-(a) 0.0 61.0 102.0 139.0 179.0 215.0 224.7 Net Returns (Loses) due to project -433.9 -902.2 -384.7 142.7 178.7 188.4 IRR R x-  Investment Costs, Incremental Operating Costs and Revenues: Los Alerces NP Base Unit Total Phy __ Cost Units cont (US$-000) Investment Costs Construction (m2) 1.1 399 0.1 0.0 0.0 124.6 249.3 124.6 0.0 Historical Rehab 50.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Trails 61.0 1 0.1 0.0 0.0 16.8 33.6 16.8 0.0 Road Rehab 14.6 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Roads New 43.3 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Vehicles 25.0 2 0.1 0.0 0.0 13.8 27.5 13.8 0.0 Boats 25.0 1 0.1 0.0 0.0 6.9 13.8 6.9 0.0 Equipment 61.6 1 0.1 0.0 0.0 16.9 33.9 16.9 0.0 Technical Delegation 11.9 1 0.0 0.0 3.3 6.5 3.3 0.0 Training 0.0 0.0 4.3 8.5 4.3 0.0 TA 0.0 0.0 32.0 64.0 32.0 0.0 Sub-total Investments 0.0 0.0 218.5 437.0 218.5 0.0 Incremental Operating Costs CostVyr Units _ _ _ _ _ _ Control Posts 8.4 2 0.0 0.0 0.0 4.2 8.4 16.8 16.8 Visitor Centers 10.9 1 0.0 0.0 0.0 2.7 5.5 10.9 10.9 Volunteer Housing 2.3 1 0.0 0.0 0.0 0.6 1.2 2.3 2.3 Mountain Refuges 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Guard Houses 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Historical Structures 10.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Trails 0.6 1 0.0 0.0 0.0 0.2 0.3 0.6 0.6 km of new road 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Vehicles & Boats 3.5 3 0.0 0.0 0.0 2.6 5.3 10.5 10.5 Sub-Total Oeratin Costs 0.0 0.0 0.0 10.3 20.6 41.1 41.1 Total Costs 0.0 0.0 218.5 447.3 239.1 41.1 4.1 (a) Revenues without Project 333.0 348.0 364.0 380.4 397.5 (b) Revenues with Project 425.0 505.0 602.0 629.1 657.4 Incremental Revenues with Project 92.0 158.0 238.0 248.7 259.9 Net Returns (Loses) due to project -126.5 -289.3 -1.1 207.6 218.8 ~ IRR " _  - 66 - Annex C Environmental Reviews 34. Under the mandate established in Law No 22.351 and resolution No. 16/94, APN requires that an environmental assessment be carried out for every investment in protected areas under its jurisdiction, including the construction and maintenance of public services and tourist infrastructure. The requirements and administrative procedures are outlined in APN's Reglamento para la Evaluacion Impacto Ambiental en Areas de la Administracion de Parques Nacionales, a copy of which is available in the Project Files. 35. Each investment is screened and a decision is made on whether it requires: (i) a full Estudio de Impacto Ambiental (EIA), required for investments that are approximately equivalent to what the Bank would classify as an "A" category investment; (ii) a less detailed Informe de Impacto Ambiential (IIA), approximately equivalent to what the Bank would classify as a "B" category project with relatively significant impacts; and (iii) an Informe Medioambiental (IMA) for all investments with very minor environmental impacts. The Reglamento outlines the required content for each of these reports; that content is consistent with World Bank requirements as outlined in the Operational Directive 4.01 on Environmental Assessment. 36. Under the project, most of the investments in National Parks are small and would require an IIA or an IMA, the only investments that would require an EIA are the two new roads proposed for Nahuel Huapi National Park. Under current administrative arrangements, the EIA, IIA or IMA will be prepared by APN staff or by consultants. The cost for the analyses will be borne by APN and is included in the total project costs. 37. The products of each of the analyses are submitted to the APN central directorate prior to investments being made. In the case of an EIA, the Directorate appoints an evaluation commission composed of recognized experts to assist with the review. Following this external review, public consultation is solicited through notices in national and local newspapers prior to final authorization. Consultative Process 38. Although less formally structured than the Environmental Assessment process, APN also requires stakeholder consultation on the design of park management plans and proposed interventions prior to approval. This is generally done through a series of local workshops to which provincial authorities, local people, concessionaires, recreational user groups, tourism organizations and NGOs are invited. As part of its commitments under the project, the APN would build on existing institutional mechanisms, which can be divided into a three phased approach. The first phase would consist of the re- establishment of Consultative Commissions for each of the component parks. These Consultative Commissions would serve as a link to communities associated and affected by park activities and facilitate consultation and participation in decisions regarding the protection and management of the respective parks. These Commissions would be structured to provide the flexibility to recruit additional representatives, depending on the  - 67 - Annex C issue to be discussed. In the case of Nahuel Huapi, a tentative list of institutions has already been compiled for appointment to the Commission. 39. The second phase would consist of public consultation to discuss major works under the project (e.g., new roads). Provision would be made for local consultation through a priori notification of the proposed activities, and solicitation of comments and suggestions supported through a public awareness campaign. A summary of comments and suggestions would be compiled by the APN and submitted to the Consultative Commission for evaluation. Where local circumstances warrant, a public workshop would be supported for further discussions and to reach consensus. When public consensus is reached on the proposed activities, the APN's existing environmental regulations require public consultation for all activities that require an Environmental Impact Assessment prior to and following the completion of the Assessment. Only after the final approval of the Environment Impact Assessment can the proposed work be approved and funded and the construction begin.  - 68 - Annex D ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT Proiect Implementation Comoonent (Baseline Costs US$2.2 million) A. Introduction 1. Argentina has started to define the role of the State in the forest sector in comprehensive legislation embodied in Law 13273 of 1948. Under this law, the National Forestry Administration of SAGyA, later to become the Argentine National Forestry Institute (IFONA --Law 20531 of 1973), was created. Law 13273 of 1948, encompassed only areas under Federal responsibility ("Territorios Nacionales"). At that time, the government adopted forestry management methods commonly used in European countries. It was in fact an Italian firm, later to become Argentinean, that started a pulp industry in the 1 920s. Europe further developed its influence in this sector after World War II, when refugees from many European countries, but most particularly foresters from Croatia, helped Argentine policy makers and its private sector to become aware of the sector's potential and the need for improving production and processing technologies. This coincided with the government's decision to expand its agriculture frontier and become increasingly self sufficient. A Forestry Directorate ("Direcci6n de Bosques") was created in most provinces by provincial governments. Under the influence of European immigrants, the forestry sector started to develop the necessary technology and to boost logging as well as commercial activities. 2. Despite such a promising start, the Provincial Forestry Directorates never had the human resources or the institutional capacity to really enforce Law 13273 of 1948. Provinces did not have skilled professionals to enforce federal or provincial legislation, even when it was effectively created. Instead, private entrepreneurs were left to continue their increasingly predatory use of the forests, and the prudence spelled out in the law was largely ignored. In other words, the provincial capacity to manage the forest sector was limited by their weak administrative ability to enforce existing laws, to formulate policies, or follow a structured course of action. These constraints contributed to the limited economic development of the forest sector over the years. This was further aggravated by the intense competition from crops and livestock, which have always enjoyed greater support in Argentina. 3. The creation of IFONA in 1973 reflected a renewed government interest in the forest sector for both natural resource protection and commercial development. However, as the above-listed constraints were largely ignored, or not addressed effectively, forest  - 69 - Annex D resources continued to be depleted. The increasing awareness of this situation over the years explains why the current government wants to reconsider its sectoral policy and give this sector a higher priority. Based on the Government's forest sector development policy and, more specifically, on the proposed project objectives, component by component, an institutional capacity analysis (ICA) was carried out during project preparation, and capacity gaps identified systematically. They are described below. Finally, the project- supported institutional strengthening component (ISC) that follows, includes inputs aimed at addressing all such identified capacity gaps, helping to strengthen the Government's institutional strengthening plan and ability to implement its strategy for this sector. B. The Role of the State and Development Policy 4. Both because of growing awareness of environmental threats and of business opportunities, the Government has recently moved from a de facto to a more conscious national forest policy. Important decisions made over the last several years illustrate the perceived need for change in the sector. However, the measures taken in this direction need to be considerably strengthened to yield the expected results in policy reform. Measures already taken include especially: (a) the creation (in 1992) of SRNyAH, directly reporting to the President of the Republic, and (b) the decision to create within SRNyAH the DRFN with responsibility for all aspects of native forests; and (c) the decision to create the Directorate for Forestry Production (DPF) within SAPyA, itself belonging to the Ministry of Economy. For native forests, DRFN has assumed the functions of the now extinct IFONA, an autonomous entity that had been accused of inefficiency since its creation in 1973. 5. The emerging policy points towards a role for the private sector that would focus on production and marketing, and a stronger, but still lean, role for the State limited virtually to: (a) norm-making and enforcement, especially to protect natural resources; (b) managing directly a protected areas system; and (c) stimulating expansion and productivity growth in the private sector. Private sector stimulation would aim at increasing the area under plantations and enhancing considerably the level of technology and productivity in forest production. 6. Derived from the above, the implicit role of the State in the forestry sector would include: (a) adapting existing legislation and regulations to new requirements, (b) getting organized to ensure harmony and an adequate network of institutional relationships, both at the national and provincial levels; (c) disseminating relevant information and data; (d) generating relevant technology and making it available to the private sector directly or through extension activities; (e) directly intervening in areas in which there is insufficient interest or capacity in the private sector, but which generate substantial positive externalities; (f) managing directly national parks; and (g) promoting forestry-related training at all levels, including universities.  -70 - Annex D C. Sectoral Institutions 7. Institutional Network Mapping. To achieve such objectives and to support the above-defined role of the State, substantially enhanced institutional capacity is required. Prior to addressing specific institutional capacity gaps (ICGs), a review of the sectoral institutional universe is given below as well as a description of the identified ICGs that became the basis for the design of the institutional development strategy and action plan included in the proposed project. The forest sector's institutional network is complex and unstable. This network is described below in some detail. 8. Federal Institutions. Six ministries are involved in the forestry sector in Argentina. After the dismantling of IFONA in 1991, its functions were redeployed and assigned to SAPyA for plantations and related commercial and processing activities, and the rest to a newly created SRNyAH within the Presidency of the Republic. DRFN within SRNyAH has responsibility for managing all aspects of native forests, while the National Parks Administration (APN), a semi-autonomous entity within SRNyAH, has the responsibility for the administration of national parks. SAPyA is also responsible for INTA, a semi- autonomous research and extension entity that includes a forestry research unit. 9. Other Ministries have minor but significant roles. The Ministry of Education and Culture is responsible for universities which have forestry training at the undergraduate and graduate levels. The Secretariat of Science and Technology, among others, has some responsibility for forestry research. Finally, the Secretariat of Industry and Commerce includes: (a) a National Directorate of Industries which has jurisdiction over forestry processing industries; and (b) a National Industrial Technology Institute, offering extension services to timber industries. 10. Other Forestry Entities at the National Level. In addition to the universities that carry forestry programs at the undergraduate and graduate levels, quite a few other entities have been created at the national level to address specific needs. Still others may have a substantial influence on decisions taken at the regional level, although they do not necessarily have an identity strictly related to the forestry sector. In addition to INTA's involvement with research and technology dissemination, there is: (a) INTI, which is involved in the modernization of industrial processes and reports to the Ministry of Economy; (b) CITEMA, a technical arm of INTI, which has responsibility for testing industrial processes and supporting private industry; (C) CICELPA, also a technical arm of INTI, which does work similar to CITEMA but only for the pulp industry; (d) CONICET, which reports to the Ministry of Education and Culture, and which is in charge of coordinating all research activities and financing those which are important for development in Argentina; (e) CONAQUE, which has responsibility for fostering the development and protection of the Quebracho tree; and (f) CNA, which has the same functions for the poplar tree. Institutions dealing with overall or regional coordination are: (a) CONADEPA, which reports to the President of the Republic on coordination of activities in the Patagonia region, where forestry resources are an important asset; and (b) Federal Investment Council (CFI), which coordinates actions of the provincial ministers of finance, including the municipal authorities of Buenos Aires, to ensure harmony and  - 71 - Annex D coherence in development decisions affecting one or more provinces. In addition, the legislative effort dealing with forestry is coordinated by two ad hoc Forestry Commissions in the House of Representatives and the Senate, respectively. 11. Provincial Institutions. The 23 Argentinean provinces have different organizational arrangements for provincial government and administration. In the forestry sector, however, while the name of the administrative unit may change, the general institutional design is relatively simple. This reflects the organizational setting in all provinces. The focal point is a provincial Forestry Directorate, which is generally located at the third management layer of government, with responsibility for both native and planted forests. Each provincial Forestry Directorate is responsible for coordinating forestry-related activities of all other entities, including national, within its province. 12. The Private Sector. Since an Italian company began the pulp industry in Argentina in the 1 920s, the private sector has organized itself into powerful associations and guilds of all sorts. While the private sector has undoubtedly contributed to the development of the forestry sector, it has also been a major obstacle to the full implementation of Law 13273, because of its perception that this law was an impediment to quick and substantial profits. The most important private sector entities are: (a) AFOA, a grouping of all forestry producers; (b) AFCP, which includes the most powerful and wealthy part of the forestry-related private sector; (c) FAIMA, which includes about 2,000 timber companies; and (d) CIEF, a private research entity which conducts research on behalf of its associated members that supplements that carried out by the public sector. Finally, there are many NGOs dealing directly or indirectly with the forest sector and dedicated mostly to raising awareness about the need for protecting natural resources. 13. Overall Sectoral Coordination. To ensure a minimum of harmony and coherence in the forestry-related decision-making process at the national level, a National Forestry Commission (CNB) was created with representatives from the national and provincial governments, and from the private sector institutions listed above. The main role of CNB is to advise the authorities on policy and/or investment decisions, while at the same time ensuring that the private sector receives clear signals. D. Institutional Capacity Analysis (ICA) 14. To ensure the design of an institutional development strategy and action plan that would address most pressing priorities, an ICA was carried out at the national and provincial levels, and specific ICGs were identified from the five viewpoints reviewed, namely, rules of the game; interinstitutional relationships; internal organization and management at the entity level; personnel policies and reward systems; and skills of individuals in both the public and private sectors. The analysis has been carried out in an attempt to analyze to what extent the forest sector in Argentina will be able to efficiently achieve the proposed project objectives. A description of the identified ICGs follows.  -72- Annex D Rules of the Game 15. Within this broad category of institutional capacity, four elements have been identified as limiting the sector's ability to develop, namely, governance, legislation, regulations, and culture. They are analyzed below. 16. Governance. The first element of governance is a clearly articulated and recognizable sectoral role of the State. Unfortunately, no such role is written anywhere, and can only be deduced from Government's decisions and/or informal declarations. Another important element of governance is the transparency and amount of participation allowed in the decision-making process; there is much room for improvement. 17. Poor policies have been the main constraint to the efficient growth of the forest sector in Argentina and to the protection of "green" environmental values. Most of the constraints stemmed from the lack of a clear policy environment outside the sector, including macroeconomic, financial, trade, transportation and labor policies. In recent years, as part of the macroeconomic liberalization and privatization programs of the Government, much has been achieved in eliminating policy distortions affecting the forestry sector. These measures will go a long way toward fostering efficient and sustainable growth in the sector and in removing incentives for depleting the "green" environment. 18. When private sector representatives are interviewed about changes they would like to see in the role of the State, they generally have precise ideas: (a) increased awareness on the pait of the Government of the sector's potential; (b) more public sector stimuli (direct promotion and fiscal incentives) to expand production; (c) more openness to the private sector to ensure its participation in the decision-making process, in particular on matters relating to international markets; and (d) research and extension programs more in line with private sector priorities and dictated by market conditions. 19. Legislation. Policy constraints to forestry growth and environmental protection still exist, however, mainly contained in sector-specific legislation. National forest policy in Argentina, as stated in Law 13273 of 1948, was very advanced for its time in that it struck a balance between conservation and commercial objectives. The law was less successful in its choice of policy instruments, because it favored "command and control" mechanisms rather than market-based mechanisms, which would have been more appropriate given the dominance of private forests in most of Argentina. Important policy constraints to forest development and environmental protection also remain at the provincial level. Provinces play a critical role in forest policy, but in most cases they have failed to implement the farsighted approach contained in law 13273 of 1948. Furthermore, provincial legislation tends to exacerbate the weaknesses of law 13273 by relying too much on "command and control" mechanisms that, for the most part, are misdirected and fail to achieve the underlying objectives. For example, some of these measures attenuate property rights by reducing private option values. This creates incentives against forests and in favor of competing uses, and introduces disincentives for conservation and forest development. Also, because provincial sectoral legislation varies  - 73 - Annex D widely between regions, it creates inefficiencies in the location of the industry and fosters a provincial bureaucracy that, in many cases, does little more than collect special taxes to finance itself 20. Non-forest provincial policies also play an important role in distorting sector activities. Some provinces adopted special taxation schemes to promote value-added processing within provincial borders. Other provinces impose a tax on shipments of timber raw materials to outside the province, a practice that may even be unconstitutional. Transportation is still highly regulated at the provincial level, leading to the appearance of trucking associations that behave like oligopolies and increase the transportation costs of timber products. Finally, provincial legislation is particularly poor in the area of "green" environmental protection. Although most environmental values are national or global in scope, and it would not make sense for a province to take most initiatives in the absence of transfer payments from the federal government or the global community, there are still important local values, particularly for quality water supply and soil conservation, that are poorly protected. 21. Regulations. Furthermore, the related regulations are inadequate. For instance, in case of fire, there is no special mechanism to mobilize the population as provided for in the law. Also, there are no professionals to fight forest fires. This may result in the situation being worsened when only volunteer fire fighters, without training or guidance, are available. Regulations are also missing to help minimize risks. The existing fine system is obsolete and does not stimulate prudence. In the field of regulations related to commerce and industry, there is also a need for updating or creating new rules of the game, in particular to foster productivity increases and exports. Finally, the regulations related to watershed management are particularly weak. 22. Culture. Finally, it is readily acknowledged in Argentina that there is little or no "forestry culture" as compared with neighboring countries such as Chile. Awareness of both the sectoral development potential and the possibility of expanding the forestry capital stock, instead of just destroying it, is far from being sufficient. The development of such an awareness is seen by the private sector as an important role of the public sector. Another example of weak institutional capacity because of prevailing cultural patterns is given by native populations (Mapuches in particular) who used to invade forests of araucaria and araucana to eat their nutritious fruits, thus depleting wide areas of valuable trees. Interinstitutional Relationships 23. The network of interinstitutional relationships within the forestry sector is complex and unstable. In addition, most of the relationships are de facto or informal rather than thought through on the basis of the need for many entities to cooperate and interrelate to efficiently implement their work programs. Even when specific mechanisms exist such as the National Forestry Commission (CNB), it has no power whatsoever except to give advice. Experience has shown that this advice is rarely taken. At least this is the sentiment in the private sector when CNB is mentioned.  - 74 - Annex D Internal Organization and Management at the Entity Level 24. Organization at the entity level within the forestry sector is at least as weak as it is at the interinstitutional level. In SRNyAH, weaknesses derive from its recent creation and the lack of overall experience as to how to get organized to respond to the specific needs of the country in protecting the environment and preserving natural resources. In the case of SRNyAH's DRFN, it is evidently located at too low a level hierarchically to have much influence or prestige. 25. This picture is further aggravated by gaps related to other elements of capacity also included in the broad category of "organization." These gaps are less specific to the forestry sector and more common to many public entities in Argentina. Management procedures and styles often seem antiquated. They do not include participatory mechanisms, except on very rare occasions. The entity-level interpretation of prevailing civil service rules is narrow and many entities' staff "work to rule", slowing down all processes and certainly activating only part of their skills. Only rarely are there adequate and updated manuals at the administrative and technical levels. Finally, as in many other sectors, entities are given responsibilities and work programs without the corresponding physical and financial resources (operating budgets) commensurate with the scope of their work. Facilities are not well maintained and run. Office equipment and technology generally do not cover the needs and tend to be obsolete as well. This situation has often been denounced by the private sector when explaining the low credibility level of the public sector. As a result, this element of capacity is far from adequate. On the contrary, any sector modernization effort aimed at achieving higher levels of performance and competitiveness in international markets, while simultaneously renewing the forestry sector's capital stock, both quantitatively and qualitatively, is going to be severely hampered by the above-described situation. Personnel Policies and Reward Systems 26. On this subject there is not much to say that would be specific to the forestry sector. However, this does not make the identified ICGs less severe when trying to achieve sectoral development objectives. It is well-documented that the civil service in Argentina needs to be reorganized in line with other government efforts to modernize the entire administrative machinery. Salary levels in the forestry sector are not at all competitive with the private sector. As a result, the private sector retains the best specialists, which is not necessarily a bad thing in itself However, as the role of the State in the sector becomes leaner, the need for a competent core of specialists within sector institutions is critical. Current personnel policies do not give any premium for the number of years specialists have spent in the same job and/or specialty. The system is seen as broadly unfair. Many of the existing higher- and mid-level specialists have a second job working in private activities that have nothing to do with the forestry sector. This is particularly serious in a sector in which a high level of competency is necessary to implement reforms such as the ones under the proposed project, including policy-making, definition of strategies to stimulate efficiently the private sector, and to enforce natural  - 75 - Annex D resource legislation and regulations. There is an acute need to hire and retain higher-level professionals, but these cannot be attracted by the present levels of compensation. Skills of Individuals in Both the Public and Private Sectors 27. Finally, from the viewpoint of the last institutional capacity category that has been reviewed while preparing the proposed project, namely, skills of people at all levels involved in interinstitutional relationships, wide capacity gaps exist, largely, but not exclusively, explained by the previously-described capacity gaps. Information obtained through informal interviews of both public sector officials and private sector entrepreneurs show that skills are missing at all levels, including in the private sector, to achieve the development tasks implied in the Government priority objectives. The majority of decision-makers are new to the sector. About 70 percent of the professionals and technicians, including those in the private sector which is supposed to get the best professionals as a result of better compensation packages, would need, at least, to update their skills. In the private sector, managers do not have the management or technical skills at the level required by an industry that wants to aggressively penetrate highly competitive international markets. Workers in the industry are generally unskilled, contributing to a well-known wastage of primary products. Finally, the population in general, including the groups visiting national parks or other protected areas, have neither a conservation culture nor awareness of what is expected from them as a contribution to natural resource protection. In other words, the global skill capital of the people, including within the sectoral institutional universe, is deficient. This probably will be a severe impediment to implementing the proposed sectoral development strategy if it is not addressed speedily and adequately. Conclusion 28. The Argentine Forest Sector has a weak institutional capacity because: (a) the sectoral role of the State and related development policy is only vaguely defined and is not sufficiently explicit or transparent; (b) the institutional environment is which the sector is developing is not conducive to the achievement of the highest development potential in terms of preserving natural resources and, at the same time, realizing the sector's full productive potential; and (c) the capacity of sectoral institutions is weak. Based on a comparison between existing institutional capacity thus described for the sector, and the one that is implied by the proposed project's development objectives, an institutional strengthening strategy is recommended that would help: (a) define a clearer role of the state and develop policy in effective consultation with the civil society; and (b) implement the proposed action program described below and included in the proposed project so as to eliminate, or at least mitigate, identified institutional capacity gaps for key capacity elements such as policy-making, legislation/regulations, interinstitutional and internal organization, personnel management, and skills.  - 76 - Annex D E. Project Implementation Unit Component 29. Because SNyAH has an ongoing institutional strengthening project with the Inter- American Development Bank (IDB), partially financed with an US$30.0 million loan, the government has requested that general institutional strengthening activities within SRNyAH, including DRFN, be financed from the IDB loan. The government has agreed, however, that a PIU would be included in the project. Project Implementation Unit (US$2.2 million) 30. This component would strengthen the capacity of DRFN and APN to manage and coordinate project implementation. A PIU would be established to assist the managers of DRFN and APN in implementing the project. The PIU would consist of a Project Coordinator, two Technical Managers (one for DRFN and one for APN), an Accountant and other technical and administrative consultants as necessary for project implementation. 31. The Project Coordinator would be recruited locally for the coordination of implementation for the duration of the Project and would be responsible for, inter alia: (i) putting in place, and maintaining, a system for monitoring project implementation; (ii) coordinating the preparation of POAs, bi-annual progress reports to the Bank, and the production of audit reports; (iii) supervising the administration of the Special Account; (iv) preparing, in cooperation with the Technical Managers, all documents for the Mid- Term Review and ensuring their quality; and (v) completing, in cooperation with the Technical Managers, Statistician, and Economist, in particular, an evaluation of the Project at the end of its life. He/she would ultimately be the link between Bank supervision staff and DRFN and APN. 32. Each of the two Technical Managers would be recruited locally for almost the duration of the project and would be responsible for ensuring the technical quality of all project work under their respective areas of responsibility, namely, DRFN and APN, and, in cooperation with the Project Coordinator, for preparing the required documentation for the Mid-Term Review, and for preparing the project evaluation report at the end of the project's life. 33. The Accountant would be recruited locally for the duration of the Project and would be responsible for financial record keeping, the Special Account, and disbursement requests. All of these experts would work under the overall direction of the managers in DRFN and APN. 34. A Procurement Specialist would be recruited locally for a total of about 20 months and would work part-time and be responsible for ensuring that procurement procedures follow Bank guidelines, and for making recommendations on award of contracts to the managers of DRFN and APN. 35. A Statistician would be recruited internationally for about 20 months and would work part-time and be responsible for ensuring statistical soundness of all research work  - 77 - Annex D under the project. The Statistician would be selected for his/her qualifications and experience in the design and implementation of on-farm research either in Argentina or elsewhere. 36. An Economist would be recruited locally for almost the duration of the Project and would be responsible for supervising the implementation of the studies on policies, laws and regulations, and for the quality of all economic work under the project, particularly the design of research proposals in the Chaco region sub-component. The Economist would be selected for his/her qualifications and experience in environmental and natural resource economics and their linkages to the efficient working of the overall economy. 37. This component would also include provision for vehicles and equipment (telephones, photocopiers, fax machines and computers) as required, for about US$180,000, and include incremental operating costs for the PIU of US$160,000. Table D.l. Baseline Costs for the PIU Input Description (US$'OOO) Internationally recruited consultants for 20 months at US$10,000 200 per month, which includes all expenses except domestic travel and subsistence outside Buenos Aires Locally recruited long-term consultants for 360 months at about an average of US$3,670 per month, which includes all expenses except domestic travel and subsistence outside 1,320 place of residence Domestic travel and subsistence outside place of residence for Internationally and locally recruited consultants, calculated at the rate of about US$900 per consultant month 340 Vehicles and equipment 180 Incremental operating costs for the PIU 160 Total costs 2,200  - 78 - Annex E ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT Proiect Costs Table E.l. Project Components by Year (US$ '000) Project Components Project Year Total 1998 1999 2000 2001 2002 2003 Research & Information 1206 1742 2546 2680 2814 2412 13400 Protected Areas 927 1339 1957 2060 2163 1854 10300 Project Implementation 247 308 429 429 424 364 2201 Subtotal Baseline Costs 2380 3389 4932 5169 5401 4630 25901 (March 31, 1996) Physical Contingencies 89 124 179 186 193 158 930 Price Contingencies 110 244 486 647 820 820 3126 Total Project Cost 2579 3757 5597 6002 6414 5608 29957  -79- Annex E Table E.2. Research & Information Component - Total Costs by Year (US$ '000) Component Element Project Year Total 1998 1999 2000 2001 2002 2003 Goods Vehicles 7.2 10.4 15.2 16.0 16.8 14.4 80.0 Equipment 36.9 53.3 77.9 82.0 86.1 73.8 410.0 Satellite Images 81.0 117.0 171.0 180.0 189.0 162.0 900.0 Consultancies Studies Foreign 14.4 20.8 30.4 32.0 33.6 28.8 160.0 Local 20.7 29.9 43.7 46.0 48.3 41.4 230.0 Technical Asst. Foreign 176.4 254.8 372.4 392.0 411.6 352.8 1960.0 Local (Senior) 189.0 273.0 399.0 420.0 441.0 378.0 2100.0 Local (Junior) 133.2 192.4 281.2 296.0 310.8 266.4 1480.0 Training Foreign 18.0 26.0 38.0 40.0 42.0 36.0 200.0 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other Operations--Travel 56.8 82.1 120.0 126.3 132.6 113.7 631.4 Operations--Misc 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Workshops 27.0 39.0 57.0 60.0 63.0 54.0 300.0 Training Programs 9.0 13.0 19.0 20.0 21.0 18.0 100.0 Research Fund 436.5 630.5 921.5 970.0 1018.5 873.0 4850.0 Subtotal Baseline Costs 1206.1 1742.2 2546.3 2680.3 2814.3 2412.3 13401.4 Physical Contingencies 12.5 18.1 26.4 27.8 29.2 17.4 131.4 Price Contingencies 54.3 122.4 244.9 327.4 416.8 416.1 1581.8 TotalComponentCost 1272.9 1882.6 2817.6 3035.5 3260.2 2845.7 15114.6  - 80 - Annex E Table E.3. Research & Information Component - Local Costs by Year (US$ '000) Component Element Project Year Total % 1998 1999 2000 2001 2002 2003 Local Goods Vehicles 3.6 5.2 7.6 8.0 8.4 7.2 40.0 0.50 Equipment 18.5 26.7 39.0 41.0 43.1 36.9 205.0 0.50 Satellite Images 16.2 23.4 34.2 36.0 37.8 32.4 180.0 0.20 Consultancies Studies Foreign 5.0 7.3 10.6 11.2 11.8 10.1 56.0 0.35 Local 17.6 25.4 37.1 39.1 41.1 35.2 195.5 0.85 Technical Asst. Foreign 61.7 89.2 130.3 137.2 144.1 123.5 686.0 0.35 Local (Senior) 160.7 232.1 339.2 357.0 374.9 321.3 1785.0 0.85 Local (Junior) 113.2 163.5 239.0 251.6 264.2 226.4 1258.0 0.85 Training Foreign 6.3 9.1 13.3 14.0 14.7 12.6 70.0 0.35 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.85 Other Operations--Travel 45.5 65.7 96.0 101.0 106.1 90.9 505.1 0.80 Operations--Misc. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.80 Workshops 21.6 31.2 45.6 48.0 50.4 43.2 240.0 0.80 Training programs 2.7 3.9 5.7 6.0 6.3 5.4 30.0 0.30 Research fund 349.2 504.4 737.2 776.0 814.8 698.4 3880.0 0.80 Subtotal Baseline Costs, 821.8 1187.0 1734.8 1826.1 1917.4 1643.5 9130.6 Local Physical Contingencies 3.8 5.5 8.1 8.5 8.9 0.0 34.9 Subtotal Base + Physical 825.6 1192.5 1742.9 1834.6 1926.4 1643.5 9165.5 Price Contingencies 35.5 81.1 163.8 220.2 281.2 281.0 1062.9 Total Local Costs 861.1 1273.6 1906.7 2054.8 2207.6 1924.6 10228.4  - 81 - Annex E Table E.4. Research & Information Component - Foreign Exchange Costs by Year (US$ '000) Component Element Project Year Total % 1998 1999 2000 2001 2002 2003 Foreign Goods Vehicles 3.6 5.2 7.6 8.0 8.4 7.2 40.0 0.50 Equipment 18.5 26.7 39.0 41.0 43.1 36.9 205.0 0.50 Satellite Images 64.8 93.6 136.8 144.0 151.2 129.6 720.0 0.80 Consultancies Studies Foreign 9.4 13.5 19.8 20.8 21.8 18.7 104.0 0.65 Local 3.1 4.5 6.6 6.9 7.2 6.2 34.5 0.15 Technical Asst. Foreign 114.7 165.6 242.1 254.8 267.5 229.3 1274.0 0.65 Local (Senior) 28.4 41.0 59.9 63.0 66.2 56.7 315.0 0.15 Local (Junior) 20.0 28.9 42.2 44.4 46.6 40.0 222.0 0.15 Training Foreign 11.7 16.9 24.7 26.0 27.3 23.4 130.0 0.65 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.15 Other Operations--Travel 11.4 16.4 24.0 25.3 26.5 22.7 126.3 0.20 Operations --Misc. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.20 Workshops 5.4 7.8 11.4 12.0 12.6 10.8 60.0 0.20 Training programs 6.3 9.1 13.3 14.0 14.7 12.6 70.0 0.70 Research fund 87.3 126.1 184.3 194.0 203.7 174.6 970.0 0.20 Subtotal Baseline Costs, 384.4 555.2 811.4 854.2 896.9 768.7 4270.8 Foreign Exchange Physical Contingencies 8.7 12.5 18.3 19.3 20.3 17.4 96.5 Subtotal Base + Physical 393.1 567.7 829.8 873.5 917.1 786.1 4367.3 Price Contingencies 18.8 41.3 81.1 107.2 135.5 135.0 518.9 TotalForeignExchange 411.8 609.1 910.9 980.7 1052.6 921.1 4886.2 Costs  - 82 - Annex E Table E.5. Protected Areas Component - Total Costs by Year (US$ '000) Component Element Project Year Total 1998 1999 2000 2001 2002 2003 Works Construction 315.8 456.2 666.7 701.8 736.9 631.6 3509.1 Historical Rehab 9.0 13.0 19.0 20.0 21.0 18.0 100.0 Trails 32.9 47.6 69.5 73.2 76.9 65.9 366.0 Roads Rehab 156.0 225.3 329.3 346.6 363.9 311.9 1733.0 Roads, New 117.0 169.0 247.0 260.0 273.0 234.0 1300.0 Goods Vehicles 29.3 42.3 61.8 65.0 68.3 58.5 325.0 Boats 6.8 9.8 14.3 15.0 15.8 13.5 75.0 Equipment 35.5 51.2 74.9 78.8 82.7 70.9 394.0 Consultancies Studies Foreign 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Tech Asst. Foreign 54.9 79.3 115.9 122.0 128.1 109.8 610.0 Local 101.3 146.4 213.9 225.2 236.5 202.7 1126.0 Training Foreign 6.3 9.1 13.3 14.0 14.7 12.6 70.0 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other Operations-Travel 38.0 54.9 80.2 84.4 88.6 76.0 422.1 Workshops 6.3 9.1 13.3 14.0 14.7 12.6 70.0 Training programs 18.0 26.0 38.0 40.0 42.0 36.0 200.0 Subtotal Baseline Costs 927.0 1339.0 1957.0 2060.0 2163.0 1854.0 10300.2 Physical Contingencies 70.2 101.4 148.2 156.0 163.8 140.4 780.2 Price Contingencies 44.1 99.7 199.9 267.5 340.7 341.4 1293.3 Total Component Cost 1041.3 1540.1 2305.2 2483.5 2667.6 2335.9 12373.7  - 83 - Annex E Table E.6. Protected Areas Component - Local Costs by Year (US$ '000) Component Element Project Year Total % 1998 1999 2000 2001 2002 2003 Local Works Construction 252.7 364.9 533.4 561.5 589.5 505.3 2807.3 0.8 Historical Rehab 7.2 10.4 15.2 16.0 16.8 14.4 80.0 0.8 Trails 26.4 38.1 55.6 58.6 61.5 52.7 292.8 0.8 Roads Rehab 124.8 180.2 263.4 277.3 291.1 249.6 1 0.8 Roads, New 93.6 135.2 197.6 208.0 218.4 187.2 1040.0 0.8 Goods Vehicles 14.6 21.1 30.9 32.5 34.1 29.3 162.5 0.5 Boats 3.4 4.9 7.1 7.5 7.9 6.8 37.5 0.5 Equipment 17.7 25.6 37.4 39.4 41.4 35.5 197.0 0.5 Consultancies Studies Foreign 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 Tech Asst. Foreign 19.2 27.8 40.6 42.7 44.8 38.4 213.5 0.4 Local 86.1 124.4 181.8 191.4 201.0 172.3 957.1 0.9 Training Foreign 2.2 3.2 4.7 4.9 5.1 4.4 24.5 0.4 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 Other Operations 30.4 43.9 64.2 67.5 70.9 60.8 337.7 0.8 Workshops 5.0 7.3 10.6 11.2 11.8 10.1 56.0 0.8 Training prograins 9.0 13.0 19.0 20.0 21.0 18.0 100.0 0.5 Subtotal Baseline Costs, 692.3 1000.0 1461.5 1538.5 1615.4 1384.6 7692.3 Local Physical Contingencies 54.0 78.0 114.1 120.1 126.1 108.1 600.3 Subtotal Base + Physical 746.3 1078.0 1575.6 1658.5 1741.4 1492.7 8292.6 Price Contingencies 32.1 73.3 148.1 199.0 254.3 255.2 962.0 Total Local Costs 778.4 1151.3 1723.7 1857.5 1995.7 1747.9 9254.6  - 84 - Annex E Table E.7. Protected Area Component-Foreign Exchange Costs by Year (US$ '000) Component Element Project Year Total % 1998 1999 2000 2001 2002 2003 Foreign Works Construction 63.2 91.2 133.3 140.4 147.4 126.3 701.8 0.2 Historical Rehab 1.8 2.6 3.8 4.0 4.2 3.6 20.0 0.2 Trails 6.6 9.5 13.9 14.6 15.4 13.2 73.2 0.2 Roads Rehab 31.2 45.1 65.9 69.3 72.8 62.4 346.6 0.2 Roads, New 23.4 33.8 49.4 52.0 54.6 46.8 260.0 0.2 Goods Vehicles 14.6 21.1 30.9 32.5 34.1 29.3 162.5 0.5 Boats 3.4 4.9 7.1 7.5 7.9 6.8 37.5 0.5 Equipment 17.7 25.6 37.4 39.4 41.4 35.5 197.0 0.5 Consultancies Studies Foreign 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 Tech Asst. Foreign 35.7 51.5 75.3 79.3 83.3 71.4 396.5 0.7 Local 15.2 22.0 32.1 33.8 35.5 30.4 168.9 0.2 Training Foreign 4.1 5.9 8.6 9.1 9.6 8.2 45.5 0.7 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 Other Operations 7.6 11.0 16.0 16.9 17.7 15.2 84.4 0.2 Workshops 1.3 1.8 2.7 2.8 2.9 2.5 14.0 0.2 Training programs 9.0 13.0 19.0 20.0 21.0 18.0 100.0 0.5 -------------------------------------------------------. Subtotal Baseline Costs, 234.7 339.0 495.5 521.6 547.7 469.4 2607.9 Foreign Exchange Physical Contingencies 16.2 23.4 34.2 36.0 37.8 32.4 179.9 Subtotal Base + Physical 250.9 362.4 529.7 557.6 585.4 501.8 2787.8 Price Contingencies 12.0 26.4 51.8 68.4 86.5 86.2 331.2 Total Foreign Exchange 262.9 388.9 581.5 626.0 671.9 588.0 3119.0 Costs  - 85 - Annex E Table E.8: Project Implementation Component - Total Costs by Year (US$ '000) Component Element Project Year Total 1998 1999 2000 2001 2002 2003 Goods Vehicles 40.0 20.0 20.0 0.0 0.0 0.0 80.0 Equipment 25.0 25.0 25.0 25.0 0.0 0.0 100.0 Consultancies Studies Foreign 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Local 0.0 0.0 Training Foreign 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Local 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Project Management Foreign 18.0 26.0 38.0 40.0 42.0 36.0 200.0 Local 118.8 171.6 250.8 264.0 277.2 237.6 1320.1 Other PIU & other Operations 45.0 65.0 95.0 100.0 105.0 90.0 500.1 Workshops 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Training programs 0.0 0.0 0.0 0.0 0.0 0.0 0 0 Subtotal Baseline Costs 246.8 307.6 428.8 429.0 424.2 363.6 2200 2 Physical Contingencies 6.5 4.5 4.5 2.5 0.0 0.0 18.0 PriceContingencies 11.2 21.6 41.1 52.1 62.1 61.2 250.4 Total Component Cost 264.6 333.7 474.5 483.6 486.3 425.9 2468.6  - 86 - Annex E Table E.9. Project Implementation Component - Local Costs by Year (US$ '000) Component Element Project Year Total % 1998 1999 2000 2001 2002 2003 Local Goods Vehicles 20.0 10.0 10.0 0.0 0.0 0.0 40.0 0.5 Equipment 12.5 12.5 12.5 12.5 0.0 0.0 50.0 0.5 Consultancies Studies International 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 National 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 Training International 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 National 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 Project Management Foreign 6.3 9.1 13.3 14.0 14.7 12.6 70.0 0.4 National 110.0 145.9 213.2 224.4 235.6 202.0 1122.1 0.9 Other PIU & other Operations 36.0 52.0 76.0 80.0 84.0 72.0 400.1 0.8 Workshops 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 Training programs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 Subtotal Baseline Costs, 175.8 229.5 325.0 330.9 334.4 286.6 1682.2 Local Physical Contingencies 3.3 2.3 2.3 1.3 0.0 0.0 9.0 Subtotal Base + Physical 179.0 231.7 327.3 332.2 334.4 286.6 1691.2 Price Contingencies 7.7 15.8 30.8 39.9 48.8 49.0 191.9 Total Local Costs 186.7 247.5 358.0 372.0 383.2 335.6 1883.1  - 87 - Annex E Table E.10. Project Implementation Component - Foreign Exchange by Year (US$ '000) Component Element Project Year Total % 1998 1999 2000 2001 2002 2003 Foreign Goods Vehicles 20.0 10.0 10.0 0.0 0.0 0.0 40.0 0.5 Equipment 12.5 12.5 12.5 12.5 0.0 0.0 50.0 0.5 Consultancies Studies International 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 National 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 Training International 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 National 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 Project Management Foreign 11.7 16.9 24.7 26.0 27.3 23.4 130.0 0.7 National 17.8 25.7 37.6 39.6 41.6 35.6 198.0 0.2 Other PIU & other Operations 9.0 13.0 19.0 20.0 21.0 18.0 100.0 0.2 Workshops 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 Training programs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 SubtotalBaselineCosts, 71.0 78.1 103.8 98.1 89.9 77.0 518.0 Foreign Exchange Physical Contingencies 3.3 2.3 2.3 1.3 0.0 0.0 9.0 Subtotal Base + Physical 74.3 80.4 106.1 99.4 89.9 77.0 527.0 Price Contingencies 3.5 5.8 10.4 12.2 13.3 13.2 58.5 Total Foreign Exchange Costs 77.8 86.2 116.4 111.6 103.2 90.3 585.5  - 88 - Annex E Table E. 11. Costs Borne Directly by SRNyAH (Current US$ '000) Counterpart Funding Incremental Annual 1998 1999 2000 2001 2002 2003 Recurrent DRFN Laws & Regulations 39 56 81 86 90 77 0 Inventory & Database 304 439 642 676 710 608 100 Research 176 255 372 392 412 353 200 Project Implementation 67 97 141 149 156 134 Sub-total DRFN 586 847 1,236 1,303 1,368 1,172 0 APN Modernization 26 38 55 58 61 52 10 Park Investments 285 412 602 633 665 570 300 Project Implementation 44 64 93 98 103 88 Sub-total APN 355 512 750 789 829 710 0 Total Counterpart Funding 941 1359 1987 2091 2196 1882 Incremental Recurrent Costs 610  - 89 - Annex F ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT Allocation of Loan Proceeds Allocation Percent of (Expressed Expenditures Category in US$ to be Equivalent) Financed (I) Reform of the Legal and Regulatory Framework Affecting Native Forests (a) Consultant services " 590,000 100% (b) Workshops and training tours 126,000 60% (2) Inventory and Database (a) Consultant services-" 3,324,000 60% (b) Vehicles, remote images, equipment, software, workshops 941,000 100% of foreign expenditures; 100% of local expenditures ex-factory; and 60% of local expenditures (3) Applied Research and Studies (a) Research and studies 2,910,000 60% (b) Workshops 90,000 60% (4) APN Institutional Development (a) Consultant services"W 652,000 100% (b) Workshops 70,000 100% (5) National Parks (a) Consultant services wand Training 1,354,000 100% (b) Vehicles, boats, and equipment 524,000 100% of foreign expenditures; 100% of local expenditures ex-factory; and 60% of local expenditures (c) Civil works 5,165,000 67% (6) Project Implementation Unit (a) Consultant services-p 1,520,000 100% (b) Vehicles and equipment 119,000 100% of foreign expenditures; 100% of local expenditures ex-factory; and 60% of local expenditures (7) Unallocated 2,115,000 Total 19,500,000 a/ Consultant services include fees and international travel costs only; they do not include domestic travel and subsistence costs, which would be financed by the government.  -90 - Annex G ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT Schedule of Loan Disbursements"' (US$ million) FY Disbursement Cumulative Disbursements 1998 0.4 0.4 1999 0.8 1.2 2000 3.1 4.3 2001 3.2 7.5 2002 5.4 12.9 2003 4.7 17.6 2004 1.1 18.7 2005 0.8 19.5 1/ Following the standard disbursement profile for projects in Argentina. 2/ Deposit into the Special Account.  - 91 - Annex H ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT Schedule of Monitorable Actions Table H.1. Performance Indicators COMPONENT YEAR ACTIVITY I 1 2 |3 | 4 5 6 PERFORMANCE INDICATOR (Percent or Num er Completed) 1. Generation and Dissemination of Research and Information Component 1. 1 Policies, Laws and Regulations for Plantations 1.1.1 Studies of federal policics, laws. & regulations 25 60 1(0 completed; obstacles prioritized; and revised federal legislation and regulations drafted (%) 1.1.2 Federal level workshops to obtain feedback on studies 1 I and prioritize approach (No.) 1.1.3 Studies of provincial policies, laws and regulations 25 60 100 completed; workshops for consultation with provinces initiated; and revised provincial legislation and regulations drafted (%) 1.1.4 Provincial level workshops to obtain feedback on 1 3 studies and prioritize approach (No.) 1.1.5 Study tour participants (No.) 20 1.1.6 Plan and agenda for approval and implementation of 25 50 100 new policies prepared (%) 1.2 Inventorv and Database 1.2.1 Purchase of Satellite Images (No.) 160 160 1.2.2 Contract Phase I lead firm and ecosystem map 25 100 produced (%) 1.2.3 Contract Phase II Lead Firm (%) 100 1.2.4 Workshop on Inventory methodology complete and I methodology agreed (No.) 1.2.6 ground truthing completed (%) 10 25 50 100 1.2.7 Initial inventor-y completed (%) 50 100 1.2.8 Map and report produced for follow-up monitoring I (No.) 1.2.9 Procurement of vehicles and equipment (%) 30 1(( 1.2.10 Database Management Unit formed (No.) I 1.2.11 Database and lead firm contracted and database 25 50 1()0 management system designated/installed (%) 1.2.12 DMU staff trained in system (No.) 3  - 92 - Annex H COMPONENT YEAR ACTIVITY I 1 2 | 3 | 4 5 | 6 PERFORMANCE INDICATOR (Percent or Number Completed) 1.3 Research 1.3. 1 Chaco Study Completed (%) 100 1.3.2 Chaco Workshop(%) 1 1.3.3 Finalize Tech & Eligibility criteria for research 50 100 proposals, and complete guidelines for use and management of finds (%) 1.3.4 Research under implementation and monitored (%.) 25 50 60 75 100 2. Component Protected Area 2.1 Modernization of APN 2.1.1 Issues report on park models and consensus workshops 25 100 completed (%) 2.1.2 Blueprint for implementing a reformed APN completed 10 100 (%) 2.1.3 Implementation plan for reforming APN completed (%) 10 100 2.2 Infrastructure Developments in Parks 2.2.1 Updated Management Plan completed and approved 1 2 I (No.) 2.2.2 Control Posts built (No.) 2 4 2 1 1 2.2.3 Visitor Centers built (No.) 2 3 2 2 2 2.2.4 Volunteer housing built (No.) 1 1 2 2 2 I 2.2.5 Mountain refuges built (No.) 1 1 I I 1 2.2.6 Observation/trails built/rebuilt (No.) 1 1 2 1 1 2.2.7 Historical structures restored (No.) I 1 2.2.8 Guard Houses built (No.) 1 2 2.2.9 Road rehab in NH (No Km) 20 22 25 25 25 2.2.10 Road, new (No. Km) 10 20 2.2.11 Training programs completed (%) 10 25 50 75 100 2.2.12 Vehicles and equipment purchased (%) 25 50 70 80 100 3. Support for Project Management 3.1 PIU organized and staffed (%) 100 3.2 PIU staff contracted (No. p/m) 60 65 65 65 65 60 3.3 PIU vehicles purchased (No.) 1 1 3.4 PIU equipment procured (%) 50 75 100 3.5 Mid-Term Review (No.) I 3.6 Implementation Completion Report (No.) _ I_  -93- Annex H Table H.2. Impact Indicators Target Date for Impact COMPONENT OBJECTIVE Initiation IMPACT INDICATOR Generation and Dissemination of Research and Information Component To reform the policy, legal and 12/31/00 1. Management of SRNvAH aware of, and committed to, regulatory framework affecting native draft legal proposals for reform at the federal level; a forests similar stage has been reached regarding reform at the provincial level in a selected group of provinces. To generate and disseminate information 12/31/02 2. The management of SRNyAH , other policvmakers on the native forests of Argentina in concerned, and the private sector, including NGOs, order to enable all actors, both public and have a greatly improved level of knowledge private, to contribute to their improved concerning: (i) the location and extent of native management and conservation forests and the opportunities for expanding production; (ii) the location and extent of areas under threat; (iii) within the threatened areas, the subset with the highest priority for protection; (iv) the principal forces leading to destruction in the subset with the highest priority for protection, and (v) the range of options available for improved management and conservation. Protected Areas Component To begin the process of modernizing 12/31/99 1. Consensus reached on the "vision for APN and transforming it into a world- a reformed APN". class parks administration 12/31/00 2. Detailed blueprint prepared for implementing the "vision for a reformed APN". 12/31/01 3. Plan prepared and agreed to implement the detailed blueprint on the "vision for a reformed APN". To increase the capacity of four national 12/31/03 4. Improved management plans prepared and approved, parks in Patagonia (Lanin, Nahuel and infrastructure investments completed. In addition, Huapi, Los Alerces, and Los Glaciaras) training to improve the overall management of the four to accommodate a greater number of parks completed, and improved policies on concessions tourists without damaging their being implemented. environment. 12/31/03 5. Increased APN revenues, from more local and international tourists, to more than justify the project investments in the four parks. Project Implementation Component 06/30/97 1. A PIU in place and capable of assisting SRNyAH to handle procurement, accounting and other aspects of project implementation in an efficient manner, acceptable to the Bank.  -94- Annex I ARGENTINA NATIVE FORESTS AND PROTECTED AREAS PROJECT Supervision Plan Approx. Activity Skill Requirements Staff Dates Input (SW) 8/1997 Project Launch - Task Manager 5 Review Annual Work Plan (POA) PIU establishmcnt Review Implementation Manual - Economist Initiate policy/legal studies 11/1997 Review Procurement procedurcs - Task Manager 5 Review SOEs. especially for - Economist consultant travel costs Forestrv/lnventory Review Studies/Proposals Specialist - Policies/laws -LawyNer - Research Criteria - Invcntory/MIS - APN modernization Discuss Progress Report l 4/1998 Technical assessment of research - Task Manager 5 Tcchnical Asst of Park Dev. - Park Specialist Field visits Review Modernization Program Review Inventory Program Rcview Aniual Work Plan (POAs) Procurement review Review POA 10/1998 Discuss Progress Report - Task Manager 3 Rev icw draft laws and proposals - Economist Review Database System - Lawyer Procurement Review 4/1999 Review Annual Work Plan (POA) - Task Manager 3 Review inventory & MIS work - Inventory Specialist Procurement review/record keeping 10/1999 Review TOR for Mid-Term - Task Manager 3 Review - Economist Review APN Mod. Programn Review inventory manual Review Environmental Asst. Review Procuremcnt Discuss Progress Report  -95- Annex I Approx. Activity Skill Requirements Staff Dates Input (SW) 4/2000 Discuss Mid-Term Review and - Task Manager 6 agree on adjustments in Project - Parks Specialist Review: research programs - Economist - APN Modernization -Lawyer - Park Developments - Inventory/database Field Visits Review inventorn map Review Procurement Review Annual Work Plan (POA) 10/2000 Review Park Developments - Task Manager 3 Review Research Programs - Economist Attend Workshop on Chaco Discuss Progress Report 4/2001 Review Park Infrastructure work - Task Manager 5 Review field research - Park Specialist Review Inventory program Procurement Review Review Annual Work Plan (POA) Discuss Annual Review' 10/2001 Review Inventory Monitoring 3 Review APN Modernization -Task Manager Review Park training - Economist 4/2002 Review Park Infrastructure -Task Manager 3 Review Mapping work -Economist Review field Research Review Annual Work Plans (POA) 10/2002 Discuss project evaluation/lCR - Task Manager 3 Review Procurement - Forestry Specialist TOTAL SW 47 Supenrision Requirements by IBRD FY (SWs) IBRD FY 1998 1999 2000 2001 2002 2003 Total Field 10 8 6 9 8 6 47 Bank 4 4 4 3 4 4 23 | Total SW 14 12 10 12 12 10 7L__0  - 96 - Annex J ARGENTINA NATIVE FORESTS AND PROTECTED AREAS Selected Documents and Data Available in the Proiect File Produced by SRNyAH, Buenos Aires 1. Manual de Implementaci6n del Proyecto. June 1996. 2. Subsidio a Proprietarios Privados para la Conservaci6n. April 1993. 37 p. 3. El Sistema Nacional de Areas Naturales Protegidas de la Argentina; Diagn6stico de su Patrimonio Natural y su Desarrollo Institucional. Administarci6n de Parques Nacionales. Buenos Aires, Argentina, January 1994. 129 p. 4. Proyecto de Decreto Reglamentario. Ley 13,.273 sobre Masas Forestales Protectoras. 5. Relatorio sobre: Investigaci6n e Informaci6n. Preparado por el Coordinador Nacional de la Secretaria de Recursos Naturales y Ambiente Humano. Buenos Aires, April 1993. 6. Relatorio sobre: Inventario Forestal Nacional. Preparado por el Coordinador Nacional de la Secretaria de Recursos Naturales y Ambiente Humano. Buenos Aires, April 1993. 7. Relatorio sobre: Leyes y reglamentos. Preparado por el Coordinador Nacional de la Secretaria de Recursos Naturales y Ambiente Humano. Buenos Aires, April 1993. 8. Reglamento para la Evaluaci6n Impacto Ambiental en Areas de la Administraci6n de Parques Nacionales, APN, 1994. 10 p. 9. Otero, Adriena, 1996. Tourism Demand for National Park Services. Study for APN. 10. Preprojecto de Consolidacion y Desarrollo de Area Naturales Protegidas en La Argentina. Por Roberto Ronchieto, Consulto, y Pablo Canivari, Humadales para Las Americas, January 14, 1995.  -97- Annex J Produced by NGOs 11. Situaci6n Ambiental de la Argentina, Recomendaciones y Prioridades de Accion. Boletin Tecnico No 14, ISSN 0327-6937. Buenos Aires, May 1993. Fundaci6n Vida Silvestre Argentina. 69 p. 12. Perfil Ambiental de la Argentina. Simposio Argentina, January 23, 1994. Union Mundial para la Naturaleza. Buenos Aires, 1994. 50 p. Produced by FAO/CP Rome. 13. Inventario Nacional de los Recursos Forestales y La Biodiversidad. Annex 6. Report No: 133/94 CP--ARG17, November 1994. FAO Investment Centre. 14. ARGENTINA: Native Forests and Protected Areas Project. Back to Office and Full Report. R. DuBois. January 2, 1996. 15. Inventario de la Biodiversidad de las Selvas Bosques Autocotonos. Javier Castroviejo. September, 1994. 27 p. 16. Informaci6n y Estadisticas Forestales--Bosques Nativos (Anexo 8). Report No. 133/94 CP-ARG.17, November 1994. 16. Argentina: Native Forests and Protected Areas Project; Protected Areas Component. Working Paper. Report No: 96/041 CP-ARG, April 24, 1996. Food and Agricultural Organization of the United Nations. Investment Center Division (FAO/CP), Rome. Produced by the World Bank 17. ARGENTINA: Forestry Sector Review. Report No. 11833-AR, April 26, 1993. Agriculture Operations Division, Country Department IV. 18. ARGENTINA: Biodiversity Conservation Project. Proposal for Project Development Funds (PDF), Block B Grant. Global Environment Facility. GEF-PPA No. 28464. 19. ARGENTINA: Biodiversity Conservation Project. Global Environment Facility-- Project Information Document. Project ID Number: AR-GE-39787. May 28, 1996. Journal Articles 20. Redford, K.H., A. Taber, and J. A. Simonetti, 1990. There is More to Biodiversity Than the Tropical Rain Forests, Conservation Biology: Vol.4 (3). Pages 328-330.   IBRD 28062 70 BOLIVIA 0 , I PA RAGUAY BRAZIL SALTA CA-*,A -JUCUMAN / t ffU CHACO M Jr^AISIONES / t t; SANTIAGO S fi g X ~ETE R O 3 0 S H'{ SX c a, fN { - jtL : tU R U GUAY AlRES ' allENOSTIN 1 Xt, 1:i- \ AIRES uJ X i X 5 . 9 -< ~~~A R G E N T I N A FORESTS U t t a g-1 1 ; 4 9t[J AND OTHER ECOSYSTEMS 40 Puna y Altoandino --T -;J , -. IYungas \ -c- auix T~ 2 IBosques Subant6rticos 7-=-2 IEI Selva Paranoense = / IChaco 7 VJ Espinal y Parque Mesopot6mico EJf;1 Pampa }J =I!Monte Estepa Patag6nica -- /' ;Litoral Marino ('SANT rA j CL LZ ZNotioncl Capitol Province Boundaries s5 i Internotional Boundaries -50