Argentina - Agricultural Services and Institutional Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 19320 IMPLEMENTATION COMPLETION REPORT ARGENTINA AGRICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT PROJECT (Ln. 3297-AR) May 19, 1999 Environmentally and Socially Sustainable Development Sector Management Unit Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.  ABBREVIATIONS AND ACRONYMS AGN National General Auditor BCR Borrower's Completion Report FAO/CP Food and Agricultural Organization of the United Nations Cooperative Program FMD Foot and Mouth Disease GATT General Agreement on Tariffs and Trade GOA Government of Argentina IASCAV Plant Protection Services Agency ICADS Institutional Capacity Analysis and Development System IDB Inter-American Development Bank ICB International Competitive Bidding ICR Implementation Completion Report IICA Inter-American Institute for Agricultural Cooperation INASE National Seeds Certification Agency lNIDP National Fisheries Research and Development Agency INTA National Agency for Agricultural Technology IWTO International Wool Testing Organization JNC National Meat Board MERCOSUR Southern Cone Common Market PCU Project Coordination Unit POA Annual Operating Plan PROCAR Meat Export Promotion Program PROMEX Non-Traditional Agricultural Export Program PROMSA Agricultural Services and Institutional Development Project SAGPyA Secretariat of Agriculture, Livestock, Fisheries and Food SAR Staff Appraisal Report SENASA National Animal Health and Plant Protection Services Agency SIIAP Agriculture, Livestock and Fisheries Information System CURRENCY EQUIVALENTS Local Currency Unit at Appraisal': Austral Exchange rate at appraisal: US$1 = A 5,800 A 1 = US$0.0002 Exchange rate at closing: US$1 = 1 Peso I Peso = US$ 1 FISCAL YEAR January I - December 31 WEIGHTS AND MEASURES The metric system has been used throughout the report. A new cuffency, the Peso, was introduced in 1991. Vice President Shahid Javed Burki Country Director Myrna Alexander Sector Director John Redwood Task Manager Steven N. Schonberger  IMPLEMENTATION COMPLETION REPORT ARGENTINA FOR OFFICIAL USE ONLY AGRICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT (Loan No. 3297-AR) TABLE OF CONTENTS Page No PREFACE ..........................................................i EVALUATION SUMMARY ...........................................................ii PART I: PROJECT IMPLEMENTATION ASSESSMENT .................................................1 A. Statement/Evaluation of Objectives ..............................................1I B. Achievement of Project Objectives ..............................................3 C. Major Factors Affecting the Project .............................................9 D. Project Sustainability ............................................... 11 E. Bank Performance .............................................. 12 F. Borrower Performance ............................................... 13 G. Assessment of Outcome .......... ........... ......................... 14 H. Future Operation .............................................. 15 I. Key Lessons Learned .............................................. 15 PART II: STATISTICAL INFORMATION ..... .. ..... ............................................. 17 Table 1: Summary of Assessment ................................. ........................ 17 Table 2: Related Bank Loans/Credits ..................................................... .... 19 Table 3: Project Timetable ......................................................... 20 Table 4: Loan Disbursements: Cumulative Estimated and Actual ...................... 20 Table 5: Key Performance Indicators ..................................................... .... 21 Table 6: Studies Included in Project . ......................................................... 22 Table 7: Project Costs and Financing ..................................................... .... 23 Table 8: Economic Costs and Benefits ......................................................... 24 Table 9: Status of Legal Covenants ......................................................... 25 Table 10: Bank Resources: Staff Inputs ....................................... .................. 27 Table 11: Bank Resources: Missions ......................................................... 28 APPENDIX I: BORROWER COMPLETION REPORT (Summary) ............... ................. 30 MAP: IBRD No. 22436 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  i IMPLEMENTATION COMPLETION REPORT ARGENTINA AGRICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT (Loan No. 3297-AR) Preface 1. This is the Implementation Completion Report (ICR) for the Agricultural Services and Institutional Development Project, for which Loan 3297-AR in the amount of US$ 82.7 million was approved by the Board on February 2, 1991, signed on August 13, 1991 and became effective on February 5, 1992. 2. The Loan closed on September 30, 1998, after a three month extension of the Closing Date. The Bank made its last disbursement on August 17, 1998. Following the termination of the grace period for the disbursements incurred before the Loan Closing Date, there was an undisbursed balance of US$571,446.43. That balance has been canceled from the Loan. An additional US$120,083.61, representing unused funds from the Project Special Account, was refunded to the Bank and canceled from the Loan on May 21, 1999. 3. This ICR was prepared by Steven Schonberger of the Environmentally and Socially Sustainable Development Sector Management Unit (LCSES) of the Latin America and Caribbean Region (LCR) in collaboration with Selim Mohor of the Food and Agriculture Organization, Cooperative Program (FAO/CP), Nancy Hirschhorn (World Bank) and Alvaro Soler (Consultant, FAO/CP) all of whom participated in the Bank's final Project Supervision Mission. Review of forestry development activities was carried out independently by Robert Kirmse (World Bank). The ICR was reviewed by Thomas Wiens, Lead Specialist, Rural Development (LCSES) and Anna Roumani (LCSES). 4. Preparation of this ICR has been based on review of material in the project file, discussions with Bank and FAO/CP staff and consultants who worked on the project, interviews with 'government officials and project beneficiaries in the private sector, and a Borrower Completion Report (BCR), prepared by the Secretariat of Agriculture, Livestock, Fisheries and Foods (SAGPyA). The executive summary of the BCR is attached as Appendix 1, and the full report is available in the LCSES Department Project Files. The conclusions of the ICR mission were discussed with Government and comments were taken into consideration during the preparation of the final version.  ii IMPLEMENTATION COMPLETION REPORT ARGENTINA AGRICULTURtAL SERVICES AND INSTITUTIONAL DEVELOPMENT (Loan No. 3297-AR) Evaluation Summary Introduction 1. Agricultural production, and particularly exports, have been crucial in Argentina's economic development. Until 1991, domestic policy had historically been oriented to using the agricultural surplus to finance industrial development. At the time of project appraisal, the sector was heavily taxed relative to the rest of the economy through export taxes on the fo.b. value of agricultural products and through exchange rate regimes which implicitly taxed the sector. 2. . An Agricultural Sector Review (Report No. 7733-AR) completed in 1989, pointed out that Argentina's economic recovery would depend on an expansion of exports and foreign exchange earnings. However, the report indicated that despite its significant comparative advantage, Argentina's traditional agricultural exports were limited by sanitary restrictions in many important potential export markets, and non-traditional exports suffered from a poor image due to insufficient quality control, unreliability of supplies, and a passive approach to export marketing. The Agricultural Services and Institutional Development Project (Ln. 3297-AR) focused on improved agricultural competitiveness in export markets, through development of improved agricultural services to support product quality enhancement, and an export promotion scheme to foster diversification of export products and markets. Project Objectives 3. The project sought to promote private sector development through achievement of the following objectives: (a) establishment of mechanisms to improve the efficiency, productivity, impact and accountability of its technical services while achieving savings in their operation; and (b) diversification of the agricultural export mix by strengthening marketing, export promotion, technical and research services for a variety of agricultural products through joint public and private efforts. Furthermore, the project would build on the then on-going Public Sector Management Technical Assistance Loan (Ln. 2712-AR) which attempted to strengthen the planining and policy-makiing function in public institutions.  iii 4. In order to achieve its objectives, the project had eight components at appraisal': (a) Component A: Animal Health Services to strengthen animal disease control, primarily for foot and mouth disease (FMD), brucellosis, mange and tick-borne diseases through construction of a reference laboratory, a quarantine station and promotion of intensive vaccination programs ($17.5 million); (b) Component B: Plant Protection Services to create and maintain plant disease and insect pest- ftee zones through establishment of phytosanitary barriers and controls, construction and rehabilitation of quarantine and reference laboratory facilities; and Seed Certification Services (later a separate component) to improve certification and registration of seed quality through provision of technical assistance, training and equipment ($12.6 million); (c) Component C: Fisheries to strengthen analysis and monitoring of maximum sustainable fish catches ($11.0 million); (d) Component D: Meat Marketing to promote export of higher value-added meat products jointly with the private sector ($10.4 million); (e) Component E: Research Activities to improve research on wool, biotechnology, post-harvest physiology of fruits and vegetables, and forest plantation management ($9.1 million); (f) Component F: Information System: to link existing independent sources of information in order to produce consistent and regular information flows ($1. 1 million); (g) Component G: Non-Traditional Export Promotion Scheme to assist the private sector to venture into new export markets by partially financing marketing studies, technical assistance, and overseas visits and export promotions ($7.4 million); (h) Component H: Institutional Development of SAGPyA to strengthen institutional and administrative capabilities in providing agricultural services, including procurement capabilities and the project coordinating unit ($4.7 million). 5. The total project cost at appraisal was $83.2 million (including contingencies and refinancing of PPF), of which the Bank would finance $33.5 million, the Inter-American Development Bank (IDB) $30.0, a Japanese PHRD Grant $1.0 million and Government the remaining $18.7 million. Shortly after appraisal, the project costs were revised upward to $107.3 million to account for the increased cost of non-tradable goods and services and changes in the institutional structure of SAGPyA. While the Bank loan remained unchanged, IDB's loan was increased to $41.3 million, the Japanese PHRD Grant to $1.3 million, and Government counterpart to $31.2 million. Government's decision to eliminate the exemption of internationally-financed projects from payment of the value-added tax required an additional increase in counterpart funding of $14.7 million. At project closure, the project had undisbursed balances of $0.6 million of World Bank financing and $0.1 million of IDB financing, bringing total project cost to $121.3 million. The creation of a Seed Certification Agency (INASE), following project appraisal, resulted in the addition of a ninth component wthich comprised the relevant activities formerly included under the Plant Protection component.  iv Implementation Experience and Results 6. The project's outcome is assessed as satisfactory. The project contributed to creation of an improved business environment in the agricultural sector, and supported Government's restructuring of the public, sector to improve efficiency and to concentrate on services complementary to private activity. Most of the project's major objectives were achieved. Foot- and-Mouth Disease and Citrus Canker were eliminated, opening several new export markets to Argentine meat and citrus products. 150 non-traditional export promotion projects were supported through matching grants which were complemented by over 100 training seminars and courses for producers which contributed to an estimated $220 million in export contracts for 336 firms. Similar activities were carried out to promote high-value beef products which increased almost 250% over the prcject period. Sustainability is likely for most activities. Animal health, plant protection, seed cert:ification and wool testing activities all achieved at least 85% self- finan,cing of operating costs. Most project activities, by focusing on cost-recovery and participation of the private sector and local governments, were carried out in a cost-effective manner. 7. The important exception is in the area of institutional strengthening, where, other than in those cases where the implementation unit and the agency were virtually the same (SIIAP, INASE, and to a lesser extent INTA), project financed activities were neither sustainable nor cost-effective. Project design sought to compensate for the complexity of many components and weak implementing agencies through the creation of implementation units in each agency. By focusing institutional strengthening activities on these units, the benefits of these efforts generally had little lasting impact on the implementing agencies. There are indications of excessive use of finds -mainly local counterpart- to hire consultants for short term and non- capacity building activities with limited long term impact on institutional strengthening. This was aggravated by the absence of institutional development monitoring and evaluation criteria to guide project supervision. Key Lessons Learned 8. The project provided several key lessons which can be applied to other projects in Argentina both within and outside the agricultural sector: T Ihorough sector assessment permitted identification of key bottlenecks to improved agricultural export performance which could be appropriately addressed by public sector initiatives. The project's effectiveness in supporting the positive response of Argentina's agricultural producers to the new incentive framework created by the economic stability and liberalization of secto:r policy was due, in large part, to the thorough analysis of the sector carried out by Government, the Bank and their international partners. Close collaboration with technical staff in the future implementing agencies and consultation with the private sector permitted identification of the key bottlenecks to improved export performance and diversification and an appropriate role for Government intervention. * Organization ofplant and animal health campaigns proved to be the most effective government-sponsored activities to open new export markets. Plant and animal health restrictions in the United States and in Asian countries on imports from countries with FMD  v and citrus canker are examples of export barriers which cannot be addressed by individual producers. Government's role in informing and organizing producers, as well as carrying-out required control activities, was essential to the eradication of these diseases. As a result, Argentine producers enjoyed immediate access to new markets representing billions of dollars in potential exports. While export promotion activities were also valued by producers, unless carried out as part of an industry-wide campaign to promote a product quality image, as in the case of meat, the benefits tended to be producer-specific and could have been carried out by the private sector with little or no Government assistance. Organizedproducer involvementfrom the outset in defining the goals and operational mechanisms ofproject activities permitted Government to effectively pass-on operational responsibility to the private sector. Government's role in identifying the technical requirements, organizing producers and demonstrating the value of animal health, phytosanitary, seed certification and meat export promotion services, at the very least, significantly accelerated the recognition of their importance by the private sector. In all cases, producers were initially skeptical regarding the value of, and Argentina's ability to carry out, the controls and promotional activities. However, in those cases where producers were involved in an organized fashion from the beginning in defining and monitoring the operation of the activities, the private sector eventually assumed a substantial share of the technical and financial responsibility for these services. In those cases where industry's participation was less formalized and proactive, such as with PROMEX, industry has not demonstrated a willingness to assume a substantial share of the costs of the program. This approach is particularly important in Argentina, where Government has emphasized private service provision. * Project outputs were unable to effectively support development objectives in the absence of institutional capacity in terms of appropriate legislation and budgetary and technical skills in the responsible agency. The fisheries component was successful in strengthening INIDEP's capacity to assess maximum sustainable yields of key commercial species, and in the installation of a fisheries information system to monitor registered catch. However, these tools were not effectively applied to avoid over-fishing due to the Subsecretariat of Fisheries' limited capacity to monitor and enforce restrictions on fishing effort due to inconsistent budgetary support, lack of qualified staff and weak legal framework. * institutional strengthening activities should have been carried out directly with implementing agency staff, rather than project consultants, and required specific monitoring and evaluation indicators. Institutional strengthening activities were more or less successful to the extent they were focused on staff of the implementing agencies rather than consultants in the implementation units. SIIAP and INASE are the most successful institutions as their creation was directly supported by the project and as such their implementation units were the key operational staff of the agencies. At the other extreme, in fisheries, the implementation unit undertook many of the tasks of the Subsecretariat of Fisheries which demonstrated no management improvement under the project. These problems were not easily detected during implementation as there were no indicators for monitoring and evaluating institutional performance of the participating agencies. External implementation support should have been centralized in the project coordination unit, with assistance to implementing agencies provided within the context of their line  vi operations, under their direct responsibility. Creation of implementation units for each participating agency, was very costly and tended to isolate technical staff of the agency from the project, diminishing their direct responsibility for component performance. The large number of implementation units resulted in substantial over-capacity and duplication of functions, resulting in high project administration costs. Line staff tended to view the implementation units as highly paid consultants who controlled project resources. As a result, ownership of thie project waned and project staff were left on their own to resolve delays and conflicts which should have been addressed by the direct beneficiaries of the investments. As indicated above, in those cases such as INASE and SIIAP, where project staff and line staff were the same, or INTA where the implementation unit consisted of a single consultant, implementation was relatively trouble-free.  IMPLEMENTATION COMPLETION REPORT ARGENTINA AGRICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT (Loan No. 3297-AR) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. Statement/Evaluation of Objectives 1. Macroeconomic and Sector Setting: Agricultural production, and particularly exports, have been crucial in Argentina's economic development. The natural productivity of its fertile soils contributes to some of the lowest production costs in the world, providing Argentina with a distinct comparative advantage. Until 1991, domestic policy had historically been oriented to using the agricultural surplus to finance industrial development. At the time of project appraisal, the sector was heavily taxed relative to the rest of the economy through export taxes on the f.o.b. value of agricultural products and through exchange rate regimes which implicitly taxed the sector. Export taxes more than off-set marketing-board regulated price supports. 2. Project Development: An Agricultural Sector Review (Report No. 7733-AR) completed in 1989, pointed out that Argentina's economic recovery would depend on an expansion of exports and foreign exchange earnings. However, the report indicated that despite its significant comparative advantage, Argentina's traditional agricultural exports were limited by sanitary restrictions in many important potential export markets, and non-traditional exports suffered from a poor image due to insufficient quality control, unreliability of supplies, and a passive approach to export marketing. 3. The project grew out of a series of studies carried out by the Inter-American Institute for Agricultural Cooperation (IICA) under an Agriculture Sector Loan (Ln. 2675-AR) and by missions from the World Bank, Inter-American Development Bank (IDB) and Food and Agricultural Organization of the United Nations (FAO/CP) during the latter part of 1988 and 1989. Those missions worked with the Secretariat of Agriculture, Livestock, Fisheries and Food (SAGPyA) on the preparation of three different projects focusing on: agricultural export development (export diversification and promotion), fisheries and agricultural services. By 1990 all three projects were merged into a single project, financed by the World Bank, IDB and the Government of Japan, which focused on improved agricultural competitiveness in export markets, through development of improved agricultural services to support product quality enhancement, and an export promotion scheme to foster diversification of export products and markets. 4. Project Objectives: The project sought to promote private sector development through achievement of the following objectives: (a) establishment of mechanisms to improve the efficiency, productivity, impact and accountability of its technical services while achieving savings in their operation; and (b) diversification of the agricultural export mix by strengthening marketing, export promotion, technical and research services for a variety of agricultural products through joint public and private efforts. Furthermore, the project would build on the  2 then on-going Public Sector Management Technical Assistance Loan (Ln. 2712-AR) which attempted to strengthen the planning and policy-making function in public institutions. 5. These objectives were consistent with Government priorities and the Bank's Country Assistance Strategy at the time of appraisal, and became increasingly relevant as a result of the macroeconomic, sector policy and institutional changes which occurred during the 1 990s. The Convertibility Plan required strong export performance from the private sector in order to sustain exchange rate parity with the dollar. Though the share of agricultural and agro-industrial exports declined relative to other sectors (65% at appraisal to 60% in 1998), they grew in absolute terms (from $7.9 billion to $11.9 billion), and continued to account for the bulk of Argentina's export revenues. In addition, new opportunities resulting from MERCOSUR and GATT agreements required aggressive quality control and market development. Finally, the liberalization of the sector and increased costs of non-tradable goods and services required many farms, particularly small- and medium-sized operations, to diversify into non-traditional products which provide higher returns per unit of land. 6. Project Components: In order to achieve its objectives, the project had eight components at appraisal2: (a) Component A: Animal Health Services to strengthen animal disease control, primarily for foot and mouth disease (FhDD), brucellosis, mange and tick-borne diseases through construction of a reference laboratory, a quarantine station and promotion of intensive vaccination programs ($17.5 million); (b) Component B: Plant Protection Services to create and maintain plant disease and insect pest- free zones through establishment of phytosanitary barriers and controls, construction and rehabilitation of quarantine and reference laboratory facilities; and Seed Certification Slervices (later a separate component) to improve certification and registration of seed quality through provision of technical assistance, training and equipment ($12.6 million); (c) Component C: Fisheries to strengthen analysis and monitoring of maximum sustainable fish catches ($11.0 million); (d) Component D: Meat Marketing to promote export of higher value-added meat products jointly with the private sector ($10.4 million); (e) Component E: Research Activities to improve research on wool, biotechnology, post-harvest physiology of fruits and vegetables, and forest plantation management ($9.1 million); (f) Component F: Information System: to link existing independent sources of information in order to produce consistent and regular information flows ($1.1 million); (g) Component G: Non-Traditional Export Promotion Scheme to assist the private sector to venture into new export markets by partially financing marketing studies, technical assistance, and overseas visits and export promotions ($7.4 million); 2 The creation of a Seed Certification Agency (INASE), following project appraisal, resulted in the creation of a ninth component which comprised the relevant activities formerly included under the Plant Protection component.  3 (h) Component H: Institutional Development of SAGPyA to strengthen institutional and administrative capabilities in providing agricultural services, including procurement capabilities and the project coordinating unit ($4.7 million). 7. All of the components were intended to provide outputs consistent with achievement of the project objectives; however, the large number of diverse components and the tenuous linkage of some of these components (Fisheries and Information System) to the broad project objectives reflected the amalgamation of three separate projects during the preparation stage. The resulting, complex project design put substantial demands on SAGPyA to coordinate and monitor the disparate activities. Nonetheless, the project was able to adjust to the substantial institutional changes in SAGPyA and to changes in Government's sector priorities, particularly as concerned sanitary emergencies (foot-and-mouth disease and cotton boll-weevil) and the redirection of phytosanitary control activities to support increased trade with MERCOSUR partners (border control posts with Brazil and Uruguay). B. Achievement of Project Objectives 8. The project substantially achieved its objectives as summarized by the indicators portrayed in Table 1. Table 1 - Main Project Output Indicators Indicator Target Target I At Appraisal I Achievement Degree of self-financing of operating costs Animal health 90% 87% Plant health 70% 87% Seeds 70% 95% Wool testing 90% 98% INIDEP 90% 82% Sanitary Status # of annual FMD outbreaks Less than 100 0' Citrus Canker - free status in NOA 100% 100% Fruit Fly eradicated in Patagonia 100% 0% 2 Export Markets New citrus markets 5 4 Beef exported with quality seal 100% 100% # of non-traditional exports subprojects supported 120 134 # of PROMEX sponsored seminars and courses 100 116 # of businesses participating in trade fairs 200 676 # of annual trade fairs with PROCAR participation 5 8 1 Complete eradication under vaccination achieved. 2 Although rural eradication program was carried-out, outbreaks emerged in urban areas. 9. Objective 1 - Establish Mechanisms to Improve the Efficiency, Productivity, Impact and Accountability of Technical Services while Achieving Savings in Their Operation: This objective, focused on improvement of public sector management, involved an institutional development objective which was only partially achieved and a financial objective which was fully achieved. Project design was technically consistent with achievement of this objective, but in the case of institutional development, failed to provide an effective monitoring framework or evaluation criteria.  4 10. Institutional Development: Institutional development activities consisted of development of an agricultural information system, staff training, technical assistance, improvement of management planning tools and monitoring of institutional development. 11. Agricultural Information System, SIIAP. The component provided an important contribution to the efficiency of SAGPyA as it unified the various information bases and provided easy access for all staff. The arrival of the internet facilitated access to the system by SAGPyA and provincial clelegations in the interior of the country as well as non-official users in Argentina and throughout the world. As a result, SIIAP surpassed its performance goals related to user access, and expanded its activities into primary data collection (agricultural census) and qualitative data analysis. 12. Training and Technical Assistance. Skills enhancement through exposure to external knowledge was more effectively captured by the implementing agencies through external technical assistance than through staff training. Foreign technical assistance for management advice or technical peer review was generally well utilized and internalized by the agencies. On the other hand, the majority of staff that received foreign training did not return to the sponsoring agencies. 13. ' Institutional Strengthening, SAGPyA: The management planning and monitoring framework introduced by the project had limited impact on the implementing agencies. Project preparation included an institutional capacity analysis of all implementing agencies based on the Institutional Capacity Anailysis and Development System (ICADS)3 in order to identify "capacity gaps" related to legislation, inter-institutional relationships, organization and distribution functions, personnel policy and skills. Annual operating plans (POA) based on the ICADS model were utilized by the implementation units for planning and monitoring of project activities. The POAs permitted the linkage of objectives, outcomes, activities and resource planning, and served as the basis for implementation monitoring and reporting. 14. While the ICADS model facilitated project management, its benefits for SAGPyA were limited by the failure of the majority of the project implementation units to fully integrate themselves into the pareni: agencies. In most cases, the implementation units were viewed as isolated groups of well-paid consultants whose role was simply to provide procurement and contracting services. This extended to the project coordination unit (PCU) itself which failed to evolve into a central projects unit for SAGPyA as expected at appraisal. In the extreme case of the Fisheries Component, continued institutional weaknesses in the Fisheries Subsecretariat resulted ifn the implementation unit assuming many administrative functions with the result that the Subsecretariat demonstrated little improvement in its ability to manage fisheries resources. In the more successful cases of the Seeds, SIIAP, and Meat Marketing Components, the institutional strengthening activities were much more influential as these were new agencies within SAGPyA and so the implementing units and the agencies were virtually the same. 15. In addition, institutional development was poorly monitored during project implementation due to: (i) failure of the project coordination unit to assume its central role in carrying out the reviews; and (ii) the lack of specific, verifiable institutional development 3 "Institutional Capacity Analysis and Development System (ICADS) Operational Maliual, LATPS Occasional Paper, Number 9 - July 14, 1992,.  5 indicators for each agency. The PCU focused strictly on administration of project implementation. The comprehensive institutional assessment and description of institutional development activities contained in the SAR was not complemented by a complete set of indicators which would draw attention to the broader institutional issues of the project. Even in the case of cost recovery, the PCU only carried out the monitoring required by the Project Loan Agreement following repeated requests by the Bank. 16. Financial: The autonomous agencies supported by the project surpassed the targets for the financial objective, achieving an average level of self-financing of 85%. While all agencies reduced their cost-structure through personnel reductions, each utilized different mechanisms to generate revenues consistent with the nature of the services provided. In all cases, revenues did not flow directly to these agencies, but were placed in general or sector revenue accounts. 17. The animal health service charged producers for vaccination services and, together with the plant health service charged inspection fees at control barriers. In both cases, cost-recovery was initially resisted by producers and local governments and the national government financed close to the full cost of the services. However, when the benefits associated with improved market access for exports were realized, both local government and producers took over the primary responsibility for administration and financing of the quality control systems. 18. The seed and wool certification laboratories provided services which were directly related to the prices which producers received for their exports. As a result, these services could immediately charge frll cost-recovery rates. By gaining international accreditation, both facilities became regional reference laboratories which attracted clients from other South American countries. 19. * The costs of the fisheries research service (INIDEP) were recovered indirectly from fishers through licensing and permit fees as well as administrative fines imposed on violators of access or equipment restrictions.. This indirect approach was justified by the fact that research was not used directly by the fishing industry but was intended to be utilized by Government in order to establish maximum sustainable catch levels. 20. Objective 2 - Diversify the agricultural export mix by strengthening marketing, export promotion, technical and research services for a variety of agricultural products through joint public and private efforts. The physical objective was substantially achieved. Sector statistics indicate that the agricultural export mix did diversify substantially during the project period. In addition to important increases in exports of fruits, ground nuts, cotton, forestry and fish products, Argentina established itself amongst the first five world exporters of value-added products such as fruit juice concentrates, wine and vegetable oils. 21. Achievement of this objective was directly supported by institutional development activities to strengthen export promotion, technical, and research services through joint public and private efforts4. Project design - provision of infrastructure, equipment, technical assistance and training to the key public service agencies - was generally appropriate to support the objective. With few exceptions, performance criteria in the SAR and President's Report focused 4 Sector reforms in 1991 resulted inter ail in the dissolution of the marketing agencies for meat and grain. As a result, activities associated with these institutions, with the exception of the export promotion activities, were dropped from the project.  6 on indicators of project output, rather than monitoring the impact of the outcomes on the institutions, or the quality of the services provided. 22. Export Promotion Services: Promotional services for non-traditional agricultural exports and meats were successfully developed under the project, though with differing levels of participation by the private sector. Activities supported by the project, which included technical and financial assistance for exporters and organized participation in major international trade fairs, were effective, cost-effective measures for achieving the project's objectives. 23. Non-traditional agricultural export promotion agency, PROMEX PROMEX, which was established by the project, was successful in developing an export information database, participating in trade fairs, and providing training, advisory services and financial assistance to mainly small and medium-sized producers. As a result, in part, of PROMEX assistance, 336 companies initiated export operations with export contracts worth over $220 million. The component was less successful in developing a sustainable mechanism for private sector participation and support. 24. PROMEX was careful to ensure that activities benefited producers in all regions of the country. Producers of fresh and processed horticultural products, honey, organic products, fine wines and cut flowers, were involved in 90% of the activities. The non-traditional export data- base provided market information to over 11,000 users. PROMEX also organized over 100 courses, seminars and workshops which were attended by over 10,000 participants; organized 16 trade missions to select markets, and led producer delegations and carried out promotional activities at 43 international fairs. A $1.2 million matching grant fund provided assistance to 134 companies with a median grant size of approximately $22,000. 25. There were a number of changes in the design of PROMEX following appraisal, including definition of targeted products and eligible participants. Eligible food products were expanded to include higher value-added exports, such as wine and cookies, reflecting the expansion of SAGPyA's rnandate to include processed food products. Near the end of the project, the strategy of the export promotion fund focused on grants to producer organizations, rather than individuals, with grants which exceeded the $30,000 limit for individual exporters. PROMEX effectively worked to organize and foster the participation of producers' and processors' groups in development of the training program and review of export promotion proposals; however, the component failed to build a self-sustaining institutional structure. PROMEX also had limited success in coordinating and differentiating its activities relative to the other Government-sponsored export promotion programs. 26. Meat export promotion agency, PROCAR. PROCAR was successful both in its export promotion and institutiona[l objectives. PROCAR was successful in promoting an image of high quality, "healthy beef' in Argentina's principal high-value export market, Germany, while also developing product recognition in new markets in Asia, Russia, the United States and South Africa. High-value beef products (fresh cuts) increased almost 250% over the project period. Promotional activities were carried out with the direct participation of the private sector and included seminars by animal health personnel from importing countries, marketing studies, matching export promotion grants of up to $30,000 per company, registration of a quality logo for Argentine beef, participation in overseas trade fairs, as well as point of sales promotions, mainly in restaurants and hotels. These promotional efforts coincided with Argentina's certification as a foot-and-mouth disease-free producer of beef which opened access to several  7 new markets which were monitored by a meat marketing publication produced and disseminated by PROCAR. While beef exports did not reach the appraisal goal of 500 metric tons and $1 billion by project close (467 MT and $616 million achieved), this was due in large part to a worldwide decline in beef consumption, both as part of a longer-term trend, and due to concerns related to the outbreak of BSE ("mad cow disease") in Europe. 27. PROCAR, like PROMEX, experienced a number of adjustments in its institutional arrangements. The National Meat Board was abolished shortly after project effectiveness and project activities focused exclusively on meat export promotion and marketing information. The single-industry focus of PROCAR facilitated stronger direct producer participation in the planning and management of activities.. Indeed, PROCAR considered organization of the industry to develop a single Argentine beef export image as a central objective of its efforts. At project closure, a proposed law was under consideration for the creation of a meat export marketing board to be fully funded by the private sector and managed with limited Government participation. 28. Technical Services: Technical services were generally very effective in eradicating targeted diseases and pests and providing quality certification services. Strong participation from the private sector substantially lowered the direct cost of service provision to Government. Actihities under the project directly supported achievement of foot and mouth disease free with vaccination status for beef cattle and eradication of citrus canker, which positioned Argentina to enter several important new export markets, including the U.S., Chile and East Asia. In the case of seed and wool certification, Argentina achieved international recognition for its laboratories. The development of seed-stock and egg quality control facilities for aquaculture was negligible. 29. Animal health services agency: SENASA. The component was successful in supporting (via training and provision of equipment) the consolidation of the animal health system based on activities operated by beneficiaries' foundations and commissions. The most notable contribution was to the eradication Foot and Mouth Disease (FMD), including the development of the oil based-FMD vaccine, though New Castle poultry disease was also eradicated and Argentina was certified free of BSE ("mad cow disease") and Scrapie. Target values for most indicators (input, process and impact) were achieved. Although results for the Brucellosis vaccination campaign and tick-borne diseases were slightly lower than expected (87% achievement), the aforementioned system supported by the project provided an excellent basis for their control and eradication. A level 3 bio-security laboratory was built and equipped to handle FMD and other exotic and regional viruses, while construction of the central laboratory and quarantine facility was postponed due to SENASA's decision to focus its efforts on FMD control. 30. . Rapid progress in the FMID campaign encouraged strong participation from initially hesitant producers. A foundation was established under producer's control to mobilize financial support of the program and to lobby for continued Government support. Producers were connected directly with SENASA through a computer system purchased with project support. Provincial governments, recognizing the economic benefits to producers, worked closely with SENASA and producers to ensure effective operation of control stations. 31. Plant protection services agency, SENASA (formerly IASCA V). The component supported implementation of the successful phytosanitary campaign (establishment of fumigation and control points and monitoring) to eliminate citrus canker from the Northwest Region. Attempts to eradicate the fruit fly from the Patagonia Region were less successful due  8 to difficulties in controlling its presence in urban areas. The project also financed renovation of SENASA's central phytosanitary laboratory and construction of a quarantine facility to control the import of vegetable matter through the country's main international airport. The planned construction of a regional pesticide residue analysis laboratory was suspended in order to redirect funds to higher priority activities such as control of the cotton boll-weevil incursion from Paraguay, and improvements to border control points to handle the higher volume of trade of fruits and vegetables with neighboring MERCOSUR countries. 32. As in the case of animal health, plant protection activities were oriented toward developing capacity amongst producers to support the phytosanitary campaigns. Initial resistance to participation on the part of producers disappeared as the individual benefits of successful controls became apparent. Regional foundations were organized with producers, and, in the case of the Northwest Region, with provincial governments, to monitor, finance and manage the barriers and fumigation points. The decision to suspend construction of the pesticide residue laboratory in the PFrovince of Tucuman reflected the view of producer organizations that the limited demand for these services could be met by existing, private laboratories with SENASA certification. 33. Seeds certification agency, INASE. This small component supported INASE's development into an internationally recognized reference laboratory for the certification and registration of seeds, allovwing Argentina to adhere to international conventions governing property rights and product quality, and thus supporting growth in seeds production and exports. The project supported remiodeling, equipping and staff training for INASE's central seeds, seed pathology, molecular marlcers laboratories. 34. The creation of INASE as a semi-autonomous agency at the outset of the project, facilitated its focus on cost recovery and provision of services which were complementary to existing private and provincial service providers. With producer support, INASE has signed agreements with 15 provinces to decentralize its services. 35. Wool quality control laboratory, INTA. This component supported the improvement of the quality of wool exports by building capacity for quality analysis which was used for commercial certification and as part of genetic improvement programs. The project provided equipment, technical assistance and training for the expansion of INTA's wool technology laboratory in Bariloche and the establishment of a satellite laboratory in Rawson. In recognition of the high quality of their analysis, the laboratories received certification from the International Wool Testing Organization (IWTO), and within IWTO, as a reference laboratory of the group of six Independent Laboratories Round Trials. However, these certifications were suspended at the end of the project period, pending compliance with ISO 25 quality standards. 36. The laboratories focused on provision of services required by the private sector, both in Argentina and in neighboring countries, for wool marketing, such as core sample analysis and traction and compression tests. Substantial drops in the international price of wool over the project period limited the demand for testing services. 37. Aquaculture reference laboratories, Subsecretariat of Fisheries. This component supported construction and equipping of a center to promote warm water aquaculture through provision of seed stock and training, and construction of a salmon production center which would screen eggs and breeding stock which enter Argentina. Construction of both centers was  9 substantially delayed due to conflicts with the provincial and local governments regarding cessation of land. In addition, as these activities were carried out independently of the private sector and local government, the basis for the continued operation of these facilities was unclear. 38. Research: Research was generally effective in supporting the export-oriented technical services. By their nature, these activities did not involve close collaboration with the private sector, though they did respond directly to exporters' needs. Project-supported activities, by building on existing research capacity, generated substantial benefits relative to the cost of the incremental infrastructure and equipment provided. 39. Applied biotechnology, INTA. The project provided equipment and training to researchers who developed, inter ail, sterile fruit flies and improved diagnosis and vaccines for FMIJ and Bruccelosis. These activities directly supported the associated plant protection and animal health services of SENASA which were responsible for transferring the benefits of the research to producers. 40. Post-harvest loss reduction, INTA. The project financed training of staff, construction of pilot plants and laboratories, and vehicles for INTA experiment stations, which were able to develop improved post-harvest handling practices, including cold storage, fumigation and packaging. These results were transferred to the private sector through training courses, publications and INTA's extension service. 41. Forestry development, INTA. The project financed construction and rehabilitation of offices and laboratories, as well as equipment, for the INTA experiment stations focused on plantation forestry, primarily in the Northeast Region and the Rio de la Plata Delta. The research on species selection, phytosanitary requirements and harvesting practices permitted the integration of agro-forestry activities in INTA's extension programs. 42. Diversification of production, INTA. A Japanese PHRD Grant financed studies of alternative agricultural products, including their production, domestic and export marketing. A series of publications, oriented to private sector users, were produced and disseminated through workshops and INTA's extension service. 43. Marine fisheries resources evaluation, INIDEP. The project financed the equipment and operational and maintenance costs for INIDEP's two, principal research vessels, permitting them to substantially exceed the 200 days at sea operational goal. The project also financed observers on commercial fishing vessels in order to collect data for analysis of commercial fish stocks, and studies of fishing practices and by-catch. The estimates of the stocks and the impact of commercial fishing activities were intended to support the Subsecretariat of Fisheries in the management of fishing effort. While the information was not effectively used for resource management, the quality of the stock assessments was verified by an international panel of experts. C. Major Factors Affecting the Project 44. Factors not subject to government control: Factors not subject to Government control had a negligible effect on achievement of project objectives. Given the project's support of a wide variety of export products, fluctuations in world prices were generally short-lived and uncorrelated, resulting in limited impact on producers over the project period. An important  10 exception was beef, whose export demand and prices were substantially depressed by declines in consumption in the wealthier export markets targeted by the project as a result of health concerns and the outbreak of "mad cow disease" in Great Britain. With the exception of the Ezeiza Phytosanitary Quarantine Station, where bankruptcy of the primary contractor delayed completion, contractor and consultant performance was generally satisfactory. 45. Factors generally subject to government control: Factors subject to government control had a substantial and generally positive impact on achievement of objectives. In 1991, important macroeconomic and sector policy reforms were implemented which significantly improved the incentive framework for agriculture. The Convertibility Plan5 resulted in the reduction of the annual inflation rate from over 1340 percent in 1990, to negative one percent in 1998. Maintenance of the plan required strong export performance, further enhancing government's commitment to the project's objectives and activities. However, the sharp increase in the costs of non-tradable goods andi services, particularly labor, resulted in strong increases in the cost of consultant and construction services under the project. 46. In terms of sector policy, export taxes were virtually eliminated, and a number of public agencies which intervened in the provision of inputs and services and marketing of agricultural outpbts were disbanded (National Grain Board and National Meat Board), as were their regulatory functions and the special taxes and tariffs earmarked to finance them. In 1990, the net transfer for seven principle commodities6 to the rest of the economy amounted to over US$1.9 billion. By 1993, the seven commodities as a group received an estimated net transfer of $252 million from the economy. 47. Public sector reform throughout the decade had a significant impact on the project. The significant institutional changes associated with the initial round of reforms delayed compliance with effectiveness conditions until 15 months after project signing. The reforms resulted in significant reduction of the size and role of SAGPyA and the gradual devolution of responsibilities to provincial governments and the private sector. Government generally appointed well-qualified staff to head the project units which, in some cases, compensated for weaknesses in the implementing agencies. In addition, project implementation benefited from stability of personnel in both the project units and implementing agencies throughout the life of the project. 48. The total project cost at appraisal was $83.2 million (including contingencies and refinancing of PPF), of which the Bank would finance $33.5 million, the Inter-American Development Bank (IDB) $30.0, a Japanese PHRD Grant $1.0 million and Government the remaining $18.7 million. Shortly after appraisal, the project costs were revised upward to $107.3 million to account for the increased cost of non-tradable goods and services and changes in the institutional structure of SAGPyA. While the Bank loan remained unchanged, IDB's loan was increased to $41.3 million, the Japanese PHRD Grant to $1.3 million, and Government counterpart to $31.2 million. Government's decision to eliminate the exemption of internationally-financed projects from payment of the value-added tax required an additional increase in counterpart funding of $14.7 million. At project closure, the project had undisbursed balances of $0.6 million of World Bank financing and $0.1 million of IDB financing, bringing 5 The Convertibility Plan created a currency board which tied the monetary supply closely to the Central Bank's holdings of foreign exchange, which essentially pegged the value of the new Argentine currency, the peso, to the U.S. dollar. 6Beef, cotton, maize, sorghum, soybean, sunflower, wheat.  11 total project cost to $121.3 million. Counterpart funds were not a problem, except during the aftermath of the Mexican financial crisis in 1994 when budgetary outlays were restricted under a fiscal adjustment program. 49. Cessation of land by local governments, particularly for the aquaculture facilities in Corrientes and San Martin de los Andes was much more contentious than expected. Suspension of the provincial legislature in Corrientes and disputes regarding the cessation to the federal government delayed construction by three years. Efforts by the Province of Neuquen to have the salmonculture facility added to the provincial research center and legal challenges by the municipality of San Martin de los Andes interrupted construction for over two years. 50. Factors generally subject to implementing agency control: Although cost increases were largely outside the control of the PCU and implementation units, there was limited effort to anticipate the impact of these cost increases on overall project implementation or to rationalize project activities accordingly. This passive approach was facilitated by the availability of funds from IDB due to the cancellation of construction of the animal health lab. The Bank-financed portion of the project was extended by three months, until September 30, 1998, to permit completion of the Ezeiza Quarantine Station, Significant delays were also encountered in construction of the aquaculture facilities which, in part, justified the 30 month extension of the IDB loan to March 22, 1999. 51. The project sought to overcome limited institutional capacity by financing technical assistance to improve project management. This strategy was only partially successful and proved to be very costly. The simultaneous process of reduction of permanent staff within SAGPyA, that was carried out without a revision of overall requirements and functions, led to a situation where essential regular tasks within SAGPyA were performed by PCU and implementation unit staff as well as other short term consultants. The SAR projected project coordination and institutional strengthening costs of US$4.7 million, or 5.6% of total project costs. Final figures show expenditures of US$ 24.9 million, equivalent to 20.5 % of total project costs. Expenditures for the PCU and implementation units totaled $6.8 million while the additional funds were utilized for institutional strengthening of SAGPyA and preparation studies for new projects. While the dollar value of salaries for highly-qualified Argentine consultants increased as much as 400% as a result of macroeconomic stability, there are indications of excessive use of funds -mainly local counterpart- to hire consultants for short term and non- capacity building activities with limited long term impact on institutional strengthening. D. Project Sustainability 52. Given the continued importance of export performance in agriculture, general long term sustainability of most project supported activities is likely without having to resort to substantive changes in the institutional and operational strategies followed by each component. Animal and plant health and seed and wool quality services respond directly to the recognized needs of producers who, as a result of their close involvement in implementation, represent both a lobby and source of funding for these activities. 53. The export promotion activities demonstrate the importance of developing activities in alliance with the private sector from the outset so as to permit transfer of operational and financial responsibility. In order to ensure the sustainability of meat export promotion activities, a new law creating a meat export promotion fund is being prepared for presentation to the Congress. The fund would be managed by industry with Government participation, and funded  12 by a levy on beef producers In contrast, the non-traditional export promotion fund, which has operated relatively independently of industry, is faced with uncertain funding though it may receive assistance under new loans being prepared by the IDB. 54. Research funding is likely to come from more diverse mechanisms. The continuity of agricultural research activities in INTA will depend on the demonstrated ability of scientists in this well-established agency to access funds from their own budgets, donors and partnerships with the private sector. lI4TA is also preparing a research project for IDB financing. Forestry research is supported by the Bank-financed Forestry Development Project (3948-AR). On-going fisheries research and information development should be financed through the fisheries fund established by the new fisheries law. The law requires that the revenues from licensing and fines be used to support fisheries management and research. Little interest has been demonstrated by either Government or the private sector in funding the aquaculture research activities. 55. The importance of a well-functioning agricultural information system has led SAGPyA to support SIIAP as a regular budget item and to seek funding for continued system development under the Bank-financed Provincial Agricultural Development Project (4150-AR). The information unit is also investigating revenue generation through development of a customized subscription service. A plan to sell advertising space on their web-site was dropped as it conflicted with Government regulations. E. Bank Performance 56. Bank performance was highly satisfactory throughout project Identification, Preparation and Appraisal. Sector ES'W complemented the studies undertaken by IICA and provided an excellent technical basis for project design. The Bank also worked effectively with IDB and FAO/CP to ensure a comprehensive approach to strengthening of services which was consistent with Government's on-goiing civil service reform efforts and which responded to farmers' needs. By working closely with the implementing agencies in preparation, project activities generally responded well to their technical needs as well, ensuring ownership of project outputs. Assessment of SAGPyA and the individual implementing agencies' capacity was thorough and correctly identified the need for substantial implementation support. 57. The primary weakness in the Bank's performance during this phase of the project was the design of mechanisms to address the institutional weaknesses in the implementing agencies. It was clear that the project's broad scope would make coordination and supervision very difficult. The formation of implementation units in each implementing agency permitted government to avoid addressing the long-term strengthening needs of these agencies and resulted in high consultant costs. In addition, improved management skills were generally transferred to consultants in these units, rather than to agency staff. Lack of a project organizational plan for the PCU and implementation units, as well as the absence of specific monitoring indicators for institutional strengthening of the agencies, resulted in weak controls on the use of consultants in these units. 58. Bank performance during implementation was satisfactory. Implementation was adequately reported and included identification of key problems, though implementation ratings may have under-estimated the difficulties faced by some of the subcomponent activities such as aquaculture. Initially, supervision focused on procurement and disbursement issues, as well as amendments to the Loan Agreement required by SAGPyA's reorganization. Following the mid- term review process, there was greater focus on development objectives as reflected by the  13 incorporation of FAO/CP technical staff in the supervision missions. These was also agreement on the preparation of a project organizational chart which included terms of reference for all PCU and implementation unit staff, which were used to rationalize the hiring of Bank-funded consultants. 59. In response to budgetary limitations and client request, Bank supervision efforts evolved from two dedicated supervision missions per year, to a more continuous supervision effort carried out by the task team in conjunction with missions for other activities in Argentina7. As a result, though formal supervision missions became less frequent, there was increased field presence which permitted more rapid response to client concerns and a better understanding by the Bank of the project's evolving needs. This was also more consistent with the client's experience with IDB which supervised the project from Argentina. 60. Loan covenants were enforced by the Bank, but the Bank showed flexibility in modifying the activities financed by the project in order to address more urgent or newly emerging sector requirements such as phytosanitary and animal health emergencies. A major amendment to the Loan Agreement was signed in August 1997 to reflect SAGPyA's new institutional structure and to reassign funds consistent with actual priorities and operational needs. 61. The primary weaknesses in the Bank's performance during supervision were: (i) insufficient coordination with IDB; and (ii) insufficient focus on institutional strengthening issues. The presence of the IDB task manager in Argentina resulted in an on-going, rather than mission-oriented approach to supervision. As a result, despite regular meetings with IDB, supervision efforts were carried out independently by the two institutions, in some cases resulting in distinct reporting and procurement requirements which complicated the work of the implementing agencies. On the other hand, the Bank and IDB worked well in supporting reassignment of project funds to address newly emerging priority activities consistent with project objectives. 62. The Bank also failed to focus sufficiently on institutional development of the implementing agencies. This was, in part, a consequence of the lack of specific monitoring and evaluation indicators, but also due to the tendency of supervision missions to interact mainly with consultants in the implementation units rather than the line agency staff. This improved somewhat through increased participation of technical staff from FAO/CP in supervision missions. F. Borrower Performance 63. Government's performance was highly satisfactory during project preparation. Staff of the concerned agencies worked closely with preparation unit consultants to define project activities and support technical, institutional and financial assessments. Government's close participation is reflected in the project's anticipation of the evolving role of SAGPyA and the implementing agencies in the sector. 7Budgetary limitations in FYI 995 resulted in the cancellation of two formal supervision missions, including a four-month postponement of the mid-term review mission. This was partially compensated for by an FAO-CP mission which canied out a technical review of the project in December 1995 in conjunction with mid-term review preparation.  14 64. Government's implementation performance, particularly that of the PCU, was generally satisfactory. The initial pace of project implementation was slow, reflecting difficulties in complying with legal covenants following the public sector reforms of 1991. Institutional changes resulted in lags of 60% and more in disbursements throughout the first two years after project approval (1991 through 1992). Thereafter, the primary difficulty in complying with legal covenants regarded the cessation of land from provincial authorities for construction of the aquaculture centers. Altlhough Government was able to obtain rights to construct the facilities, disputes with local authorities continued up to the project closing date. 65. Procurement problems, associated with International Competitive Bidding (ICB) procedures, hampered implementation at the outset of the project but was resolved. Until amendment of the loan agreement in August 1997, procurement thresholds for the Bank and IDB were different, with several delays due to the insistence of the implementation units to apply IDB thresholds to Bank-financed procurement. 66. Planning, monitoring and evaluation, and reporting were very good throughout the project. POAs and project progress reports were prepared according to the agreed format and were provided to the Bank in a timely manner. On-going monitoring and evaluation, while input and output, rather than outcome, oriented was carried out according to agreed indicators. The mid-term review was contracted out to a firm which provided a thorough review of the project, including interviews with project stakeholders in the public and private sector. Following initial delays, a thorough Borrower Completion Report was prepared according to terms of reference agreed with the Bank. 67. Project financial management under the PCU was generally excellent, but audit timeliness and quality declined with the assignment of auditing responsibilities to the National General Auditor (AGN). Audits were contracted to a Bank-approved, private firm until audit year 1997. During this time, audits were prepared on-time, and the auditor's recommendations were rapidly addressed by the PCU to improve financial management. Beginning in 1997, the Bank agreed with Government to have projects audited by AGN, a public auditing service. AGN, which suffered shortages of qualified auditors, was unable to complete the audits within the legal deadline. In addition, the auditor's comments were not always discussed with the project staff prior to issuance, resulting in disagreements with the PCU. 68. While the PCU did a good job coordinating activities with the financiers and also responding well to the needs of the implementation units, there was little effort to integrate the separate components of the project and very little teamwork in project implementation. The implementation units, despite having their own procurement and financial management staff, required substantial individualized assistance from the PCU, an indicator of staff quality weaknesses below the level of the implementation unit coordinators. G. Assessment of Outcome 69. * The project's outcome is assessed as satisfactory in supporting its private sector development objectives. This assessment is based on: (i) most of the project's major objectives were achieved; (ii) sustainabilty is likely for most activities; and (iii) most project activities, by focusing on cost-recovery and participation of the private sector and local governments, were carried out in a cost-effective manner. The project contributed to creation of an improved business environment in the agricultural sector, and supported Government's restructuring of the public sector to improve efficiency and to concentrate on services complementary to private  15 activity. The important exception is in the area of institutional strengthening, where, other than in those cases where the implementation unit and the agency were virtually the same (SIIAP, INASE, and to a lesser extent INTA), project financed activities were neither sustainable nor cost-effective. H. Future Operation 70. An operation plan was prepared by the PCU in conjunction with the implementation units prior to project closing. In all cases, except PROCAR, PROMEX and the aquaculture centers, maintenance of the facilities, equipment and staff are included in the regular budgets of the implementing agencies. Incremental investment costs are included under PROSAP. As mentioned above, a law is under review to create a meat marketing and promotional organization based on a $1 per slaughtered head charge on processors. PROMEX is being considered for support under a future IDB loan. Aquaculture activities are being reviewed in the context of an overall institutional assessment of the Subsecretariat of Fisheries. L Key Lessons Learned 71. The project provided several key lessons which can be applied to other projects in Argentina both within and outside the agricultural sector: * Thorough sector assessment permitted identification of key bottlenecks to improved agricultural export performance which could be appropriately addressed by public sector initiatives. The project's effectiveness in supporting the positive response of Argentina's agricultural producers to the new incentive framework created by the economic stability and liberalization of sector policy was due, in large part, to the thorough analysis of the sector carried out by Government, the Bank and their international partners. Close collaboration with technical staff in the future implementing agencies and consultation with the private sector permitted identification of the key bottlenecks to improved export performance and diversification and an appropriate role for Government intervention. * Organization of plant and animal health campaigns proved to be the most effective government-sponsored activities to open new export markets. Plant and animal health restrictions in the United States and in Asian countries on imports from countries with FM and citrus canker are examples of export barriers which cannot be addressed by individual producers. Government's role in informing and organizing producers, as well as carrying-out required control activities, was essential to the eradication of these diseases. As a result, Argentine producers enjoyed immediate access to new markets representing billions of dollars in potential exports. While export promotion activities were also valued by producers, unless carried out as part of an industry-wide campaign to promote a product quality image, as in the case of meat, the benefits tended to be producer-specific and could have been carried out by the private sector with little or no Government assistance. * Organizedproducer involvementfrom the outset in defining the goals and operational mechanisms of project activities permitted Government to effectively pass-on operational responsibility to the private sector. Government's role in identifying the technical requirements, organizing producers and demonstrating the value of animal health, phytosanitary, seed certification and meat export promotion services, at the very least, significantly accelerated the recognition of their importance by the private sector. In all  16 cases, producers were initially skeptical regarding the value of, and Argentina's ability to carry out, the controls and promotional activities. However, in those cases where producers were involved in an organized fashion from the beginning in defining and monitoring the operation of the activities, the private sector eventually assumed a substantial share of the technical and financial responsibility for these services. In those cases where industry's participation was less f^ormalized and proactive, such as with PROMEX, industry has not demonstrated a willingness to assume a substantial share of the costs of the program. This approach is particularly important in Argentina, where Government has emphasized private service provision. Project outputs were unable to effectively support development objectives in the absence of institutional capacity in terms of appropriate legislation and budgetary and technical skills in the responsible agency. The fisheries component was successful in strengthening INIDEP's capacity to assess maximum sustainable yields of key commercial species, and in the installation of a fisheries information system to monitor registered catch. However, these tools were not effectively applied to avoid over-fishing due to the Subsecretariat of Fisheries' limited capacity to monitor and enforce restrictions on fishing effort due to inconsistent budgetary support, lackc of qualified staff and weak legal framework. Institutional strengthening activities should have been carried out directly with implementing agency staff, rather than project consultants, and required specific monitoring and evaluation indicators. Institutional strengthening activities were more or less successful to the extent they were focused on staff of the implementing agencies rather than consultants in the implementation units. SIIAP and INASE are the most successful institutions as their creation was directly supported by the project and as such their implementation units were the key operational staff of the agencies. At the other extreme, in fisheries, the implementation unit undertook many of the tasks of the Subsecretariat of Fisheries which demonstrated no management improvement under the project. These problems were not easily detected during implementation as there were no indicators for monitoring and evaluating institutional performance of the participating agencies. * External implementation support should have been centralized in the project coordination unit, with assistance to implementing agencies provided within the context of their line operations, under their direct responsibility. Creation of implementation units for each participating agency, was very costly and tended to isolate technical staff of the agency from the project, diminishing their direct responsibility for component performance. The large number of implementation units resulted in substantial over-capacity and duplication of functions, resulting in high project administration costs. Line staff tended to view the implementation units as highly paid consultants who controlled project resources. As a result, ownership of the project waned and project staff were left on their own to resolve delays and conflicts which should have been addressed by the direct beneficiaries of the investments. As indicated above, in those cases such as INASE and SIIAP, where project staff and line staff were the same, or INTA where the implementation unit consisted of a single consultant, implementation was relatively trouble-free.  17 IMPLEMENTATION COMPLETION REPORT ARGENTINA AGRICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT (Loan No. 3297-AR) PART II: STATISTICAL INFORMATION Table 1. Summary of Assessments A. Achievement of Obiectives Substantial Partial Negligible Not applicable Macro Policies E E E [A Sector Policies El D El Financial Objectives [ E E E Institutional Development [ [A j E Physical Objectives [A El 0 0 Poverty Reduction ] E E [A Gender Issues E E E [A Other Social Objectives E E E [ Environmental Objectives E E E [A Public Sector Management E [ E E Private Sector Development A E El E Other (specify) E E E [A  18 (Continued) B. Project Sustainabilitv Likely Unlikely Uncertain Highly C. Bank Performance Satisfactorv Satisfactorv Deficient (/) (/) (/) Identification I] f] Preparation Assistance j] [J Appraisal E] El Supervision [E [] Highly D. Borrower Performance satisfactorv Satisfactorv Deficient Preparation [] [] Implementation [ E] Covenant Compliance [ E] .Operation (if applicable) [] Highlv Highly E. Assessment of Outcome Satisfactorv Satisfactorv Unsatisfagty unsatisfactorv CI E3 [:1 0  19 Table 2. Related Bank Loans/Credits Loan/credit title Purpose Year of approval Status Preceding operations 1. Balcarce Livestock Encourage adoption of 1967 Implemented between Development Project (Ln. new technology in pasture 1968 and 1980 505-AR) production and management, and in animal health practices 2. Agricultural Credit Provide medium and long 1978 Canceled in 1980 Project I (Ln. 1564-AR) term credit for on farm investments 3. Grain Storage Project Expand nationwide grain 1978 Implemented between (Ln. 1521-AR) storage capacity, 1978 and 1987 supported complementary rail and port transport/handling facilities, and provided credit for private investments in storage related facilities 4. Agriculture Sector Loan Support sector 1986 Implemented between (Ln. 2675-AR) adjustments: reduce 1986 and 1989 export taxes on ag. Products; implement compensatory federal land tax; rationalize import tariffs and regulations on ag. Imports 5. Public Sector Strengthen GOA's general 1986 Implemented between Management Project (Ln. management of the 1986 and 1991 2714-AR-) economy 6. Agricultural Credit Provide credit for on farm 1988 Implemented between Project n (Ln. 2970-AR) investments in a wide 1988 and 1996 range of agricultural subsectors Follow-up Operations 1. Forestry Development Improve framework for 1995 Ongoing Project (Ln. 3948-AR) development of plantation forestry 2. Provincial Agricultual Finance infrastructure and 1997 Ongoing Development Project (Ln. agricultual services at the 4150-AR) provincial and national levels.  20 Table 3. Project Timetable Steps in Project Cycle Date Planned Date Actual/ Latest Estimate Identification (Executive Project Summary) October 1988 Preparation August 1989 Appraisal November 1989 March 1990 Negotiations December 1990 Board Presentation February 28, 1991 Loan Signing August 13, 1991 Loan Effectiveness February 5, 1992 Midterm review May 1996 Project Completion June 30, 1998 September 30, 1998 Loau Closing October 31, 1998 January 31, 1999 Table 4. Loan Disbursements: Cumulative Estimated and Actual (US$ million) Fiscal Year Appraisal Estimate Actual Actual as % of Estimate 1991 3.50 0.00 0% 1992 6.30 2.62 42% 1993 10.20 9.48 93% 1994 15.70 14.08 90% 1995 22.50 20.81 93% 1996 29.40 26.21 90% 1997 32.00 29.24 91% 1998 33.50 31.97 95% 1999 33.50 32.81 98% Final Disbursement: August 17, 1998 ' Loan balance of US$0.69 million canceled.  21 Table 5. Key Indicators for Project Implementation I. Key Implementation Indicators in SARI President's Report8 Estimated Goal Achieved (% of Goal) Output . 1. Build Central Laboratory (phytosanitary) Complete & equip Completed & equipped (100%) 2. Build Quarantine Station (phytosanitary) Complete & equip Completed but not equipped __________ __ (90 %) 3. Build and equip wool testing laboratory in Bariloche Complete & equip Completed & equipped (100%) 4. Remodel and equip wool testing laboratory in Rawson Complete & equip Completed & equipped (100%) 5. Build biotechnology laboratory Complete & equip Completed & equipped (100%) 6. Build aquaculture center in Corrientes Complete & equip Completed & equipped (100%) 7. Build aquaculture center in San Martin de los Andes Complete & equip Completed but not equipped (90%) 8. Install sanitary barriers in Patagonia and NOA (citrus canker 20 operational 20 operational (100%) and fruit fly) 9. Determine maximum sustainable catch levels of 5 main fish 5 species 5 species (100%) species 10. Percentage of beef exports with quality seal 100% 100% 11. Number of seminars and courses carried out by PROMEX 100 116 (116%) 12. Number of projects approved by PRONEX 120 134 (112%) Impact 13. FMD cases Less than 100 0(100%) 14. Eradication of Fruit Fly in Patagonia FF free area Rural only (0%/-) 15. NOA declared region free of citrus canker International International recognition recognition achieved (100%) 16. Number of agreements signed with provinces to ensure 12 15 (125%) observance of the Seeds Law 17. Number of units within SAGPyA linked to SIAP 240 240 (100%) 18. Number of provinces linked to SIIAP 23 23 (100%) 19. New citrus exports markets as a result of being recognized 5 4 (80%) as free of Citrus Canker 20. Percentage of commercial seed with quality guarantee 100% 100% 21. Number of participants in trade fairs and missions 200 676 (339%) organized by PROMEX 22. Number of businesses that carried out exports with direct 655 PROMEX assistance 23. Value of exports carried out with PROMEX assistance US$ 220 M 8 Original indicators were modified after beginning of implementation.  22 Table 6. Key Studies Included in Project Study Purpose as Defined at Status Impact of Study Appraisal 1. Situation of Evolution of production of Completed To be utilized in extension Salmonculture in trucha arco iris over past program for Salmonculture Argentina 10 years and analysis of Center in San Martin de firms dedicated to its los Andes which was not production. completed at project close. 2. Sityation of Warm Identification of principal Completed To be utilized in extension Water Aquaculture in warm water aquaculture program for Warm Water Northeast Argentina. species and practices in Aquaculture Center in Northeast Argentina. Corrientes which was not operational at project close. Evaluation of the market Irmports and exports of Completed Utilized by Subsecretariat for fish in MERCOSUR MERCOSUR countries of Fisheries in identifying and destination of exports. regional market Analysis of import opportunities. substitution opportunities. Evaluation of yield levels Analysis of captures of 10 Completed Utilized by Subsecretariat of the principle species between 1990 and of Fisheries in evaluation commercial marine species 1994 including location of requests for fishing in Argentina. and volumes of catch. licenses. Requirements for wood Review of types of Completed Utilized for preparation of processing and marketing products, technical Forestry Strategy and strategies for value-added processing requirements Forestry Development products. and opportunities within Project. Argentina and the MlERCOSUR market. Demand profile for Demand, quality Completed. Used to identify potential eucalyptus and pine specifications and prices, regulatory impediments products in Europe and an,1 required modifications and incentives to orient North America. in Argentine products to production to these meet demand. markets. Production and marketing Growing conditions, Completed. Published by INTA and requirements for non- cultural practices, and distributed to producers traditional crops. harvest and marketing primarily through Cambio requirements for Rural Program. alternative, high value crops such as asparagus, kiwi fruit, star fruit, etc.  23 Table 7A. Project Costs Appraisal Estimate (US$M) Actual/Latest Estimate(US$M) Local Foreign Total Local Foreign Total Item Costs Costs Costs Costs 1. Animal Health 8.4 9.1 17.5 17.1 1.5 18.6 2. Phytosanitary 8.5 4.1 12.6 21.0 3.2 24.2 Services and Seed Certification 3.Fisheries 7.4 3.6 11.0 17.6 1.5 19.1 4. Meat Promotion 6.0 4.4 10.4 10.5 0.3 10.8 5. Research 4.7 4.4 9.1 8.0 3.1 11.1 6. Export Promotion 5.4 2.0 7.4 9.1 0.2 9.3 7. Information 0.9 0.2 1.1 2.5 0.2 2.7 System 8. Institutional 4.4 0.3 4.7 24.1 0.8 24.9 Development and Project Coordination 9. PPF 0.5 0.0 0.0 0.6 0.0 0.6 Total Baseline Costs 46.2 28.1 74.3 110.5 10.8 121.3 Contingencies 5.4 3.5 8.9 0.0 0.0 0.0 TOTAL 1 51.6 31.6 83.2 110.5 10.8 121.3 Table 7B. Project Financing Appraisal Estimate (US$M) Actual/Latest Estimate(US$M) Local Foreign Total Local Foreign Total Source Costs Costs Costs Costs IBRI) 17.9 15.6 33.5 29.0 3.9 32.9 IDB 14.4 15.6 30.0 34.5 6.7 41.2 Japanese Grant 0.6 0.4 1.0 1.1 0.2 1.3 Funds Local Counterpart 18.7 0.0 18.7 45.9 0.0 45.9 TOTAL 51.6 31.6 83.2 110.5 10.8 121.3  24 Table 8. Economic Costs and Benefits An analysis of economic costs and benefits was not carried out at appraisal, and given the difficulty in evaluating the direct contribution of the project supported activities to private sector profitability, no ex-post ralte of return was calculated for the project. The project's success in garnering technical and financial support from the private sector, as well as mid-term evaluation and completion mission interviews with private sector beneficiaries, suggests that most activities were highly cost effective.  25 ARGENTINA AGRICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT (Loan No. 3297-AR) Table 9. Status of Legal Covenants Agreement Section Covenant Present Original Revised Description of Comments type Status fulfillment fulfillment Covenant date date Loan 3.01 (b) 10 C 05/31/91 Borrower to sign subsidiary agreements with SAPyA, INTA, IASCAV, INASE, SENASE (Implementing Agreement) 3.01 (d) 10 C Actions taken to enable INTA, IASCAV, INASE, External review delayed. Expected to be completed by SENASA to comply with obligations of loan including March 30, 1998. repayment of their part of the loan. 3.03 10 C SENASA to maintain planning and epidemiology and training units. 3.07 (i) 05 C Each agency to prepare POAs before October 30 each year. 3.07 (ii) 09 C Each Agency to review POA with Bank by 11/30 and 6/30 each year. 3.08 09 CD Progress reports to beprovidedto the Bank 8/31 and 2/28 Supervision mission reviewed requirements of Borrower of each year. Midtenn review 6/30/93 and final review Final Report. First draft to be provided to World Bank by 6/30/97. March 30, 1998 and final report by April 30, 1998. 3.09 10 C Establish Export Promotion Fund Allocation of unclaimed funds from second round of grant awards to be finished by December 31, 1997 according to criteria agreed with March 1997 supervision mission. 3.11 02 CP Establish, maintain and review annually revenue collection Cost recovery study to be completed by March 30, 1998 systems for each implementing agency to allow agencies to will verify level of self-financing of implementing agencies. cover its financial needs to service the loan. Schedule 02 C Phytosanitary services agreement entered mto with I, 3 (bXi) participating provinces and funds collected to remain with SAPyA to cover costs of providing these services. Schedule 10 CP DNPyA to acquire effective possession of lands necessary While land was formally provided by the Province of 1, 3 (bXii) for construction of aquaculture facilities in San Martin de Neuquen for construction of the aquaculture facility in San los Andes and Corrientes. Martin de los Andes, consequent delays resulted from a dispute with the Province regarding the location of the center and the municipalitys request for an environmental assessment. Though resolved, the mayor of San Martin de los Andes now considers that the time frame allowed for construction in the original cessation of land has passed and has stopped construction. The case is currently before the Supreme Court of Argentina.  26 Agreement Section Covenant Present Original Revised Description of Comments type Status fulfillment fulfillment Covenant date date Schedule 02 C Mechanisms effected to ensure recovery of costs related to Existing maritime permit system generates revenues 1, 3 fishery resource monitoring activities. sufficient to cover costs of Government activities. (bxiii) However, concerns regarding managemuent of stocks is likely to result in establishment of a quota system and it is unclear how this would provide sustainable financing for management activities. Covenant types: I. Accounts/audits 8. Indigenous people 2. = Financial performance/revenue generation from 9. Monitoring, review, and reporting beneficiaries 10. Project implementation not covered by categories 1-9 3. = Flow and utilization of project funds 11. Sector or cross-sector budgetary or other resource 4. = Counterpart funding allocation 5. = Management aspects of the project or executing 12. Sector or cross-sector policy/ regulatory/institutional agency action 6. = Environmental covenants 13. Other 7. = Involuntary resettlement 8. Present Status: C = covenant complied with CD = complied with after delay CP = complied with partially NC = not complied with  27 Table 10. Bank Resources: Staff Inputs STAGE OF PROJECT CYCLE FISCAL Negotiations TOTAL YEAR through Board Preparation Appraisal Approval Supervision Completion STAFF WEEKS 1989 17.5 17.5 1990 61.5 21.1 82.6 1991 14.1 4.2 5.0 23.3 1992 29.9 29.9 1993 19.8 19.8 1994 24.8 24.8 1995 12.9 12.9 1996 15.8 15.8 1997 6.4 6.4 1998 10.1 10.1 1999 0.5 4.5 5.0 Total 79.0 35.2 4.2 125.2 4.5 248.1 USs'000 1987 1988 1989 35.6 35.6 1990 141.7 45.1 186.8 1991 39.9 12.5 14.7 67.1 1992 86.1 86.1 1993 53.5 53.5 1994 80.3 80.3 1995 42.6 42.6 1996 38.4 38.4 1997 18.9 18.9 1998 33.4 33.4 1999 1.5 13.5 15.0 Total 177.3 85.0 12.5 369.4 13.5 657.7 Source: Cost Accounting System  28 Table 11. Bank Resources: Missions Performance Rating Number Specialized Implementat Development Stage of Month Of Days in Staff Skills ion Objectives Types of Project Cycle Year Persons Field Represented Status Problems Through Appraisal _ December 1988 7 20 Agronomist Ag. Economist Institutional Marketing Agriculturalist Financial April 1989 4 20 Agriculturalist Ag. Economist Institutional Marketing November 1989s 4 12 Agriculturalist Ag. Economist Institutional Marketing March 19910 6 12 Agriculturalist Appraisal Ag. Economist Institutional Marketing Financial Procurement Appraisal through Board Approval September 19913 1 5 Agriculturalist Public sector restructuring Supervision June 1991 2 5 Financial NR NR Pre-effectiveness Agriculturist October 1991 1 1 Financial 2 2 December 1991 3 11 Ag. Economist 2 2 Delays in preparing ICB documents Institutional Procurement  29 May 1992 2 11 Ag. Economist 2 2 Agriculturist December 1992 2 11 Ag. Economist 2 2 Agriculturist May 1993 2 8 Ag. Economist 2 2 Delays in cessation of land for Agriculturist aquaculture centers March 1994 2 5 Ag. Economist 2 2 Amend loan agreement to reflect Economist actual institutional structure December 1994 3 7 Economist S S Animal health component delaying Agriculturist construction ofjoint Ingtitutionl .facility with plant Institutional health Midte;m Review June 1996 5 10 Economist S Ss Lack of organizational plan Fisheries to rationalize use of Institutional consultants. Marketing Agriculturist March 1997 3 10 Economist S S Continued delays in construction Fisheries resulting from land Marketing disputes for November 1997 3 7 Economist S S Continued construction delays Marketing at Salmonculture Fisheries Center due to dispute with municipality. Concems regarding funding for operation of aquaculture centers. May 1998 2 6 Economist S S Remaining construction of Marketing Salmonculture Center to be financed by IDB. Bankruptcy of contractor delayed constrtuction of Ezeiza Quarantine Station. July 1998 1 3 Economist S S Extension of project requested to complete Ezeiza Quarantine Station. Completion July 1998 4 7 Economist Mission Agriculturist Institutional _._______.___ _ , , ____=- Marketing  30 APPENDIX I IMPLEMENTATION COMPLETION REPORT ARGENTINA AGRICULTURAL SERVICES AND INSTITUTIONAL DEVELOPMENT (Loan No. 3297-AR) BORROWER COMPLETION REPORT (SUMMARY) Introduction The Agricultural Services Modernization Program - PROMSA - stemmed from the administrative reform and decentralization process which the National Government began to implement in the second half of the 1980s, seeking, among other things, greater participation by the provinces in the provision of public services and their rationalization at federal level. Among the financial assistance programs it provides to the Argentine Government, in 1988 IDB presented a report on the agricultural sector which defined limitations and priorities in terms of investments in the sector and prepared a non-traditional agricultural export development project and another dealing with fishery development. A similar contribution was carried out in 1989 by IBRD which requested the FAO/World Bank Cooperative Program to prepare an investment project aimed at improving agricultural services in order to increase exports in that sector. In September 1989, a joint 1DB/World Bank mission finalized the preparation of a financial proposal for the agricultural export development project which included the important features of the three projects mentioned above, together with a credit component for agro-industrial export investment. However, a subsequent evaluation carried out in 1990 determined that the project should focus on agricultural services and on institutional strengthening activities. At the request of Argentine authorities, a new joint mission by both banks was carried out in September 1990 to adjust PROMSA to new institutional reforms in the public sector which began that year. PROMSA's objectives PROMSA's main objective has been to improve the country's capacity to produce, certify and ensure the high quality of agricultural and fishery products, for the purpose of increasing and facilitating export diversification. The Program was focused on the institutional strengthening of SAGPyA to improve the efficiency and productivity of technical support services for production. Nine components were therefore defined: (i) Animal Health (construction of a National Laboratory dealing with Animal Health; fight against foot-and-mouth disease, control of ticks, brucellosis, tuberculosis, scab in cows and sheep; disease monitoring, and strengthening of SENASA's technical-administrative capacity); (ii) Plant Health and Quality (support to national plant health programs to control citrus canker in NOA, fruit flies in the northern Patagonia region, preventing the introduction of  31 boll weevils in NEA, and institutional strengthening of the plant health service); (iii) Certification and National Registry of Seeds; (iv) Technological Development (development of biotechnology, reduction in post-harvest losses, modern wool classification, and management of forest plantations); (v) Fishery Development (support to fishery research, development of aquaculture and institutional strengthening of SAGPyA's fishery area); (vi) Promotion of External Market for Meats; (vii) Promotion of Non-Traditional Agricultural Product Exports; (viii) an Integrated Agricultural and Fishery Information System; and (ix) a General Coordination Unit under the responsibility of the Secretariat of Agriculture, Livestock and Fisheries. The Program was co-financed by the World Bank, the Inter-American Development Bank - IDB, and the Government of Japan. The Program's initial cost rose to US$107.300 million, of which US$33.5 million constituted IBRD financing, US$41.260 million was from IDB, US$1.378 million was from the Government of Japan, and US$3 1.162 million corresponded to national counterpart funds. Execution and Results of the Program Program execution took seven years instead of the five originally planned, due to a combination of factors that affected disbursements, including: (i) institutional changes in SAGPyA, (ii) difficulties in obtaining firm land rights for the location of civil works, (iii) increase in costs of non-tradable goods and services, and (iv) delays in the preparation of contracts and bids. Despite this, there were no important changes in objectives and most targets and scheduled products were reached. The results achieved are notable: record harvests in principal export crops and fish landings, eradication of bovine foot-and-mouth disease and other diseases, control of major pests (i.e., boll weevil), protection of NOA region against "citrus canker," important progress in controlling the Mediterranean fly, etc. The value of exports rose from US$8.000 million in 1990 to US$14.600 million in 1997, with a significant participation by the fruit and vegetable sector, fishing, forest production and non-traditional agricultural products, which grew at a greater rate than that of the sector's exports as a whole. While this growth is the result of a set of actions by the Government and the private sector, the reduction in gaps in the sector's institutional capacity and the improvements PROMSA was able to introduce in those services which are of importance to foreign commerce, doubtlessly constituted a significant support to the increase noted in exports, facilitated by favorable changes in the macroeconomic and institutional environment which occurred during the execution period. The strengthening of animal and plant health services was extremely important in the economic deregulation process by improving health controls which allowed the level of external competitiveness to increase and enabled the opening of new markets for beef, poultry and fruits. In the case of fishing, the strengthening of INDEP allowed a fishery information network to be incorporated nationwide and made it possible, for the first time, to evaluate Argentina's maritime fishing resources, defining limits for catches of different species of fish for conservation purposes. Adaptive research in the field of post-harvest physiology made it possible to obtain technologies aimed at improving the quality of the principal fruits which the country exports, especially in perishability treatment and in prolonging post-harvest life. Wool classification improved through the construction and operation of two internationally acknowledged classification laboratories. Types of work in forestry research were consolidated, resulting in the  32 dissemination and marketing of improved seeds, the incorporation of germ plasma from alternative species and the evaluation and dissemination of new forestry and forest management and protection practices. The development of biotechnology allowed significant research progress in the fields of animal health (improvement of vaccines against foot-and-mouth disease and brucellosis, production of diagnostic kits against foot-and-mouth disease, brucellosis and tuberculosis), plant health (obtaining sterile genotypes for the Mediterranean Fruit Fly potato plants resistant to virus), and development of genetically-improved crops (soybean, potato, sunflower). A national seed institute was created, which has agreements with 15 provinces through which it carries out its role as a leading agency dealing with certifications and registration of reproduction material. The external promotion program for beef generated a significant change in export supply by incorporating cuts of better quality and price, which allowed it to reach new markets and substantially increase export volume and value. The Non-Traditional Export Product Promotion Program was most useful in increasing and diversifying food exports,, and in establishing a unique international image of Argentine foods as being synonymous with quality and origin and offering technical assistance and training to those small- and medium-scale food companies entering international commerce for the first time. Finally, the Integrated Agricultural and Fishery Information Service supported by the program has become the principal source of information on the agricultural sector and currently collaborates with the National Statistical System in data collection and qualitative analysis. Determining factors in F'ROMSA execution Institutional changes Due to a series of unexpected factors stemming from institutional changes in the Argentine public sector structure, compliance with prerequisites for the first disbursement only became effective 15 months after the loan was signed. These include the enactment of the Economic Deregulation Decree in October 1991, which eliminates certain agencies, including the National Meat Board and the National Grain Board, making it necessary to reformulate ownership and activities of the Animal Health, Plant Health, and the National Seed Service components. SENASA therefore underwent an institutional reorganization and SAGPyA's National Bureau of Agricultural Marketing and Inspection was eliminated; in its place, new semi-autonomous agencies were created: the Argentine Institute of Plant Health and Quality - IASCAV and the National Seed Institute - INASE. Likewise, the execution of the meat product export promotion component came under the responsibility of SAGPyA's National Market Bureau. The decision by Argentine authorities to postpone construction of a Central Laboratory for Animal Health and an Animal Quarantine Station, and to allocate those funds to the fight against foot-and-mouth disease through a new program, also meant a reduction in the program's general rate of execution. Subsequently, budget restrictions in the concurrent National Contribution,  33 imposed by the Ministry of Economy at the end of 1994 (motivated by the Mexican financial crisis which affected the international system), eliminated the possibilities of maintaining the rate foreseen in the construction category and in the purchase of equipment, which are financed in large part by IDB. Based on this, in August 1995 the Argentine Government requested a 24- month extension for IDB disbursements, which was agreed to by said Bank. Rescheduling of activities Another change made in the initial scheduling was the elimination of the Toxic Waste Laboratory in TucumAn in the NOA region, which was contemplated under the Plant Health component. IASCAV did not consider the construction of this laboratory a priority, since the plant health demands of markets to which this region's fruits and vegetables are sent do not require this type of analysis. Thus, these activities were transferred to a private laboratory network, under IASCAV supervision, which could operate once demand arises. The funds earmarked were used in the construction of a new IASCAV Bureau in the city of Paso de los Libres, on the border with Brazil, to handle the intense commercial exchange of plant products with that country. Legal problems in the construction of infrastructure The program also met with legal problems in the area of investments for construction, scheduled in several components (laboratories, research and fishery development centers, quarantine centers), which took away some of the dynamics of execution. The common denominator among these problems was the obtaining of firm rights on lands ceded by national and provincial institutions and local governments to PROMSA as a disbursement condition for the start-up of construction, since in various cases the ownership of these institutions was not very evident. It should be noted that the existence of these problems had been duly visualized in the institutional analysis of agencies carried out during the preparation stage. Thus, for example, in the case of the Fishery Development component, the delay noted in building the National Warm Water Aquaculture Center in Corrientes (this work was only received in February 1998) was due the delay in ceding lands by the Provincial Legislature; in the case of the construction of the National Salmon Certification Center of San Martin de los Andes in Rio Negro, construction was paralyzed by the arbitrary decision of the Municipality of San Martin, which obliged the program to recur to the federal justice system. As a consequence of the latter, the Argentine Government once again had to ask IDB for a six-month extension of the execution period, and September 22, 1998 was agreed as the program's closing date. In the case of the Plant Health component, a significant delay was noted in the construction of the Plant Quarantine Station due to problems in the ownership of adjudicated land, and the primary contractor's declaration of bankruptcy. Macroeconomic context One of the main factors that contributed to proper execution of the program and that helped to carry out its main objectives, can be found in the major changes that took place in the Argentine economic structure, in its macroeconomic, sectoral and institutional areas, at the start and during the execution of PROMSA.  34 Beginning in 1989, the Argentine Republic began the construction of a new economic model, based on a strategy of integration with the world economy as a source of economic growth, to replace an import substitution industrialization model that had been in place for several decades. This integration required increased participation of exports and imports in economic activities, which occurred through the implementation of policies aimed at opening foreign trade and policies in order to increaese competitiveness. In this group of policies, the main ones were the progressive reduction of import tariffs and the policy of integration with M:ERCOSUR, aimed at forming the Common Market and thereby expanding the internal market to the regional market. The maximum tariff levels, which until 1988 had reached 50% plus 15% of the additional surcharge, decreased to 20% plus 10% of the statistical rate in 1992, while the average tariffs went from 39% to 10%. In terms of foreign trade: (a) quantitative restrictions, permits, authorizations and prior processing for the export of goods and services were revoked; (b) quantitative restrictions on imports were eliminated, with the exception of the automotive industry scheme, the "buy national" scheme in public hiring and limitations on origin or source; (c) customs procedures for settlement of taxes were simplified, and the principle of direct dispatch for imported merchandise was adopted; (d) various taxes and fees were eliminated, including contributions to the Merchant Marine Fund and to INTA, among others. Competitiveness policies included those dealing with measures aimed at increasing the efficiency of production and reducing marketing costs to reach and maintain foreign markets. To increase efficiency, greater internal competitiveness was sought, based on a reduction in State intervention in markets to recover the market's role as a mechanism for allocating economic resources. These measures included: (a) dissolution of agencies that regulated agricultural activities (National Meat B3oard, National Grain Board, Fishery Concentration Market, National Cattle Market, Argentine Meat Producers Corporation, Regulatory Commission for the Production and Marketing of Yerba Mate, National Consignment Market for Yerba Mate, and National Sugar Bureau); (lb) release of quotas for planting, harvesting, processing and marketing of sugar cane, yerba mate, and vineyards, grapes and wine; (c) elimination of taxes and contributions that financecl the activities of dissolved agencies and that directly or indirectly fell upon producers of the respective goods. Another policy within the framework of increasing the productivity and availability of productive factors was the realignment of the country's financial relations with provinces, aimed at creating clear and stable foundations for the development of productive activities and the strengthening of the federal system. This 'set of policies was carried out within a framework of monetary stability, achieved by approval of the convertibility law (Law No. 23.928 of March 1991) by which BCR is obliged to sell the foreign currency that the market requires for a peso rate equal to one dollar, and by the organic reform of the Central Bank which reaffirms its autonomy and establishes its independence from the Naitional Executive Branch. Sustainability of Actions and Future Plans From the set of components and actions contained in each of them, it may be stated that, in a high percentage, their sustainability appears to be ensured through the mobilization of income from the sale of services, while there may be others that should be assisted by their own decentralized agencies or SAGPyA's own resources.  35 In the area of Animal Health, the financing of a project aimed at strengthening the current Disease Monitoring System is currently being negotiated with PROSAP, to achieve international recognition of Argentina as being free of foot-and-mouth disease without vaccination, and at the same time to avoid introducing exotic diseases into the country and control emerging ones. In Plant Health, the sustainability of Mediterranean fly control programs in the Northern Patagonia region and of protection against citrus canker in NOA, are ensured in terms of their operating costs by the income received by private foundations in charge of the quarantine system based on plant health barriers. In the case of the Central Laboratory for Plant Health, its operation is guaranteed by the regular budget of the National Agricultural and Food Health and Quality Service. Finally, in the case of boll weevil control, financing of control and eradication campaigns is ensured through a national budget which established the payment of US$2.00 per ton of cotton fiber. Despite the important progress achieved by the current SENASA, there is still a long way to go and there are needs to be met in these aspects in the agricultural and forestry subsectors, where the presence of plant pests and diseases (apple and pear worms, fruit flies in NOA and NEA, citrus canker in NEA constitute non-tariff barriers that impede export expansion. In INASE, the proper level of cost recovery and the full self-financing achieved by this Institute after its modernization, added to the prospects of greater income due to the growth in demand for certifications and the excellence if its services, allow its financial sustainability over time to be ensured. In the case of the Technological Development component, with the exception of the Wool subcomponent, where there is a cost recovery mechanism (it currently only covers operating costs due to a specific economic situation that it is currently experiencing caused by a drop in international wool prices), the sustainability of this set of subcomponents will be guaranteed with funds from INTA's ordinary budget. In the case of the Forestry Research subcomponent, a large part of its activities will be continued with SAGPyA' s National Forestry Development Project financed by IBRD. Under the framework of PROCAR, there is currently a National Meat Committee, with the participation of the Argentine Chamber of Beef Producers and export meat packing plants, whose mission is to define the meat promotion strategy, analyze competitiveness and contribute toward promoting more information on the markets reached. Attempts are being made to create, through a Congressional law, the Argentine Beef Promotion Institute as a non-state public agency whose objective is to position Argentine meat on the international market in order to place the country on equal standing in promotion and marketing with the principal meat producing countries which are Argentina's competitors. This Institute would be financed by charging a self-assessment of US$1 .0.0 per slaughtered head, which would signify receipts of US$12 million per year. In the case of PROMEX, this program is included in SAGPyA through a small structure comprised of six technicians, two technical assistants and four assistants. The immediate financial sustainability of its activities would occur through the 18-month financing of a bridge project presented to PROSAP for US$1.4 million, while a new credit request is prepared for a new project called Non-Traditional Agricultural and Food Export Promotion Program - PROMXA to be presented to IDB.  36 In the case of SIIAP, its financial sustainability will be ensured by funds from SAGPyA's operating budget. Increase in Program Costs The program's total cost, estimated at US$107,000, increased by US$14,779 million at the start of execution, totaling US$122,079 million, with the objective of covering tax credits initially granted to the program, which were eliminated in August 1991. This increase was absorbed by local counterpart funds. Banks' Participation The Banks' participation in the preparation stage was satisfactory. The program was broadly justified due to its solid technical nature, both of its prior diagnostics on the sector's performance, such as framework of objectives, which were broadly discussed and adjusted programmatically with authorities of the new government that took office at that time (economic openness, promotion of MERCOSUR, State reform, etc.), since this program has important effects on the macroeconomic environment. The project execution process was also generally satisfactory. In the case of IDB, the local office in Buenos Aires carried out program monitoring, dealing quickly with the various requests made by ongoing contact with the Program Coordinating Unit. In the case of IBRD, project monitoring took place through supervision missions. These missions were a positive help for executors, by allowing adjustments and modifications to be incorporated in work programs that improved execution. Despite fluid dialogue, some executors agreed to indicate the existence of various difficulties to comply in time and form with certain procedures requested by the Banks due to different regulations in both Banks, especially with regard to the preparation of bids and contracts, causing some delays in the procurement of goods and services for the program. IBRD recently corrected this situation by raising the amounts that can be released locally and defining new levels of amounts required by bidding processes with levels regulated by IDB. Supervision by both Banks could have been more complete if more flexible mechanisms had been incorporated to cover project needs, such as ex ante approvals based on annual operating plans. This flexibility only became effective by IDB in the final stage of project execution, based on a streamlining of disbursements to complete the use of financing granted, by facilitating the presentation of eligible projects generated by each component, taking into account only the overall availability of loan financing. Finally, in relation to moniitoring indicators proposed during formulation, these were not the most appropriate to be able to evaluate program performance in greater detail. A review of these was carried out in the mid-term review of the program. Borrower's Role The role played by the Borrower in program preparation and execution was satisfactory. During execution, the Coordinating Unit coordinated 8 Executing Units, of which 4 operated in  37 Decentralized Components, such as Animal Health (SENASA), Plant Health (IASCAV), Technological Development (INTA) and Seeds (INASE), and the other 4 in Centralized Components, i.e., Fishery Development (DNPyA), External Meat Promotion (DNMA), Non- Traditional Export Promotion (DNMA) and Integrated Agricultural and Fishery Information System (DNPyDA). A ninth component, that of Institutional Strengthening, was operated by the Coordinating Unit. Its strengths included: * Its proper placement within SAGPyA which gave ongoing support to this Coordinating Unit in order to carry out the various adjustments in the program's activities stemming from macroeconomic and institutional changes which took place, without altering the program's objectives. * Economic resources assured for budget execution within deadlines and with minimum disbursement difficulties. * Flexibility in purchasing and contracting.