Argentina - Mining Sector Development Technical Assistance Project

Document of The World Bank Report No: 23368 IMPLEMENTATION COMPLETION REPORT (CPL-39270; SCL-3927A; SCPD-3927S; PPFB-P2380) ONA LOAN IN THE AMOUNT OF USS30.0 MILLION TO THE REPUBLIC OF ARGENTINA FOR A MINING SECTOR DEVELOPMENT TECHNICAL ASSISTANCE PROJECT November 1, 2002 Mining Department of the World Bank Group Country Management Unit: Argentina, Chile, Paraguay and Uruguay Latin America and the Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2001) Currency Unit = Argentine Peso AR$1.00 = US$ 1.00 US$ 1.00 = ARS1.00 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS BUD Unified Mining Information System CAS Country Assistance Strategy COFEMIN Federal Mining Council DIA Environmental Impact Declaration DNM National Mining Directorate DNSG National Geological Service Directorate DPM Provincial Mining Directorate EIA Environmental Impact Assessment GPS Global Positioning Systems GIS Geological Information Systems IHA Environmental Impacts report INTEMIN Mining Technical Institute NGO Non-governmental Organizations PASMA Mining Sector Development Technical Assistance Project PCU Project Coordinating Unit PMI Public Mining Institution PSR Project Status Reports QAG Quality Assurance Group SEA Sector Environmental Assessment SEGEMAR Argentine Geological and Mining Service SINATEM National System of Mining Technology SM Secretariat of Mines SSM Under Secretariat of Mines SUIM Unified Mining Information System UGAP Provincial Environmental Management Units UGAN National Environmental Management Unit WB World Bank Vice President: David De Ferranti Country Manager/Director: Myma Alexander/Axel van Trotsenburg Sector Manager/Director: Peter van der Veen Task Team Leader/Task Manager: Gotthard Walser  ARGENTINA MINING SECTOR DEVELOPMENT TECHICAL ASSISTANCE PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 9 6. Sustainability 11 7. Bank and Borrower Performance 12 8. Lessons Learned 14 9. Partner Comments 15 10. Additional Information 15 Annex 1. Key Performance Indicators/Log Frame Matrix 16 Annex 2. Project Costs and Financing 22 Annex 3. Economic Costs and Benefits 24 Annex 4. Bank Inputs 25 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 27 Annex 6. Ratings of Bank and Borrower Performance 28 Annex 7. List of Supporting Documents 29 Annex 8. Borrower's Summary Report 30 Map IBRD 27034   Project ID: P006055 Project Name: MINING SECTOR DEVELOPMENT T.A. Team Leader: Gotthard Walser TL Unit: COCPD ICR Type: Core ICR Report Date: November 1, 2002 1. Project Data Name: MINING SECTOR DEVELOPMENT T.A. L/C/TF Number: CPL-39270; SCL-3927A; SCPD-3927S; PPFB-P2380 Country/Department: ARGENTINA Region: Latin America and Caribbean Region Sector/subsector: Central government administration (100%) KEY DATES Original Revised/Actual PCD: 03/29/1994 Effective: 12/07/1995 12/07/1995 Appraisal: 03/27/1995 MTR: Approval: 07/25/1995 Closing: 06/30/2001 06/30/2001 Borrower/lImplementing Agency: GOVERNMENT OF ARGENTINA/UNDERSECRETARIAT OF MINES Other Partners: STAFF Current At Appraisal Vice President: David De Ferranti Shahid Javed Burki Country Manager: Axel van Trotsenburg Gobind T. Nankani Sector Manager: Peter Van der Veen Alfonso Sanchez Team Leader at ICR: Gotthard Walser Aura Garcia de Truslow ICR Primary Author: Sati Achath; Gotthard Walser 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU-Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The main objective of the project was to develop and support, through an institutional development technical assistance, the government's policy, regulatory and institutional reforms which encourage the expansion of private investment in mining in an environmental sound way. The project was aimed to help build the capacity needed at the federal level and in six participating Provinces (Catamarca, La Rioja, Mendoza, Salta, San Juan and San Luis) for the efficient administration of mining rights. It was also expected to establish adequate environmental safeguards for mining operations; strengthen services that support mining growth, including the public provision of reliable geological and mineral information, and support divestiture of mining interests held by provinces. The six provinces selected to participate in the project were those actively implementing the sector reform and located within the most prospective mineral area of the country. A "PASMA" (acronym of the project name in Spanish) Agreement was signed in 1995 between the federal Government and the six Provinces to formalize the policy and implementation principles along which the project would be carried out. The choice to include only six and not all the 23 Provinces was made because of the historical complexity of the relationships between the federal and provincial States regarding the management of mineral resources. As stated in the Argentine Constitution - mineral resources belong to the Provinces. The successful implementation of the project led in 1998 to a second operation (loan 4242-AR) involving the 17 remaining Argentine provinces. The objectives of the project were clear, realistic and consistent with the Bank's Country Assistance Strategy (CAS) discussed by the Board on May 4, 1995, which stated that "Bank support for private sector development would also be provided through the strengthening of institutions providing assistance in mining development". The project aimed to facilitate increased foreign and local investment in mining to develop Argentina's hitherto underdeveloped mineral potential. It was also aimed at technologically updating the quality and enhancing the usefulness of government services supporting mining and growth, and develop a better legal framework, including a revised mining code, improved and unified concession procedures and secure tenure provisions through the Unified Mining Cadastre. In addition, the project would also help develop technical services to enhance the productivity of small and medium-scale mining. Finally, the project would help develop mechanisms throughout the sector to ensure adequate capabilities and technological skills for the application of environmental safeguards in mining and related activities. Overall, by strengthening the geological infrastructure and mining rights tenure security, the project expected to strengthen the enabling environment for overall sustained growth in mine development activities, which once established, were likely to continue. 3.2 Revised Objective: There was no formal revision of the original project objective, as it is stated in the MOP and the Loan Agreement However, as in several contemporaneous mining projects in other countries (see for example the Ecuador ICR, dated December 2001), socio-economic issues related to mining development were increasingly integrated into the project at about mid-term of its implementation (mid 1998). This trend followed the growing worldwide awareness at the end of the last decade by communities and companies alike regarding the need of deeper community involvement to optimize the potential contribution of mining to local and regional socio-economic development - 2-  3 3 Original Components: The project consisted of the following four components: * Policy Development Component (US$1.4 million or 4 percent of the base cost) to ensure the consistency of mining sector policy with the country's overall economic liberalization efforts, to continue the modernization of the legal framework; and to develop tools for its implementation, including procedures for the provincial administration of mining rights and appropriate environmental norms and standards. * Policy Implementation Component (US$16.6 million or 47 percent of the base cost) to help develop the management capacity of the federal Secretariat of Mines (SM) and sector agencies in the selected provinces, including their cadastral and registry systems and advisory services, as well as the mechanisms to monitor and enforce environmental management. It was also to finance relevant skills transfer, training and divestiture efforts. * Support Services Component (US$16.1 million or 45 percent of the base cost), to build up the geological infrastructure in support of private investment decisions: geological and thematic mapping; a sector data bank and public information network; mineral and market statistics and promotion facilities; and a geological repository facility. Provisions for a selective support of laboratory; and, * Project Coordinating Unit (PCU) to oversee the project implementation (US$1.4 million or 4 percent of the base cost). The project financed consulting services and contract works, computer equipment and software, field and office equipment and vehicles, training, incremental operating costs (for establishing and strengthening functions), and the necessary upgrading of facilities. The components were closely related to achieving the objectives. Their design was well-prepared and based on relevant lessons learned in other T.A. projects experience, in the country and in the mining sector, in Argentina as well as in other Latin American countries. The Bank's experience in the mining sector reform also facilitated in preparing a realistic project design (see for example WB Technical Papers No 345 "A Mining Strategy for Latin America and the Carribean" and No. 405 "WB Group Assistance for Minerals Sector Development and reform in Member Countries"). 3.4 Revised Components: The main components have not been revised. However, two activities under the Support Services component were partially or totally cancelled. (i) Upon delivery of the National Geological Repository design study, a decision was made not to go ahead with the actual building of this facility due to its foreseen high operating and maintenance costs. In addition, the location of a suitable site proved to be a difficult task. And (ii), as a result of the study carried out under the Policy component on how best provide support to the important sector of Small and Medium-scale mining Enterprises (SMmEs), the decision was made not to implement the Research & Development subcomponent as designed during preparation, which included mainly the modemization of state laboratory and investigation equipment and facilities.This option had been considered in the MOP. The study showed that management capacity building, networking and access to information were more imortant factors to support the developpment of SMmEs, and a new work plan was designed and implemented along these recommendations. In addition, activities related to the contribution of mining to social development were initiated during the second half of project implementation. They included participatory diagnostics studies on socio-economic impacts of an existing mining operation - Bajo de la Alumbrera in Catamarca - and development of - 3-  procedures to be applied in future projects - Veladero-Pascua Lama in San Juan - allowing all stakeholders to understand and manage such impacts; and to optimize benefits at the community, provincial and national levels. These activities were planned and implemented in parallel with - and mainly funded under the second mining TA loan ("PASMA II"). (Note that both projects represent private investments and did not benefit from any direct support from the "PASMA" project. However, MIGA was mvolved in the Bajo de la Alumbrera mine). 3.5 Quality at Entry: The Quality Assurance Group (QAG) did not do an official assessment of the project's quality at entry. Nevertheless, the ICR finds the quality at entry, on balance, to be satisfactory. As mentioned in the earlier section, the project objectives were consistent with the country assistance strategy and the Government priorities and met the critical needs of the mining sector. Since SM had the technical capacity, the quality of project design was generally adequate to meet the project's overriding objective. The definition of objectives and project design had benefited of a fruitful cooperation between the Government of Argentina (GOA) and the Bank, initiated in 1992 with the preparation of a mining sector review (WB report 11704-AR, 1993), following the government decision to liberalize, modernize and open to private investment the mining sector, as part of the overall market economy policy reform initiated in 1990. Along the lines of actions recommended by the Bank's report, the govenmment initiated an ambitious and comprehensive reform program, including the release of all mineral resources controlled by the federal authorities. The program yielded quickly positive results in attracting investments (see charts in Section 4.1 below). Following the approval of a Bank PPF in 1994, the federal Secretariat of Mines (SM) continued its work on reforms in parallel with project preparation. The government formulated in 1995 a Sector Policy and Strategy document, reconfirming its role as a facilitator of private-led mining activities. During preparation, findings and recommendations from the sector review as well as from the project comprehensive Sectoral Environmental Assessment (1995), were considered and incorporated into the project design. The project preparation also used a participatory approach by consulting and coordinating closely with the six provincial administrations as well as with industry branch organizations, trade associations, miners unions and non-governmental organizations (NGOs). All institutional aspects were also safeguarded. The development and implementation indicators, i.a. the expected mining investments level by project end, were selected prudently and proved to be achievable without change (see annex 1). The project was complex by virtue of its interface between the federal govermment and the provinces, a risk which was minimnized through the decision to involve only selected Provinces commited to the reform. In addition, the project took into account what was deemed to be the main risk factor to successful implementation. The main risk was that of sustaining the provincial stance for reform. While participating provinces had already expressed their readiness, and had been closely involved in project preparation, (i) the political commitment could have changed; and (ii) the establishment of reliable provincial administrative capacity during implementation could have been more difficult than planned. To address (-) above, an Agreement was signed by the federal government with six participating provinces whereby all parties were committed to implementing the project, including the Unified Mining Cadastre. Regarding (ii) above, there was some flexibility in the project's strong institutional component to respond to changing needs, with a technical advisory capacity at the federal level, that could help guide and support the development of managerial and administrative capacities at the provincial level (and that could help expand such activities to other provinces later), and training (on-job and formal) addressing such specific needs. From an implementation point of view, the assessed targeted times for achievements of outputs were ambitious and did not take enough into account factors such as "resistance to changes" regarding institutional re-organization; or terrain/climatic constraints for the setting-up of the cadastral reference - 4-  system in the High Andes. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The project succeeded in achieving its project objectives. It is considered as one of the most successful mining sector reform projects that the Bank has financed in recent years. It has put Argentina on the global mining map as an attractive destination for private investment and diversified the economy. The project assisted the government to implement its policy, regulatory and institutional reforms with the goal of encouraging the expansion of private investment in mining in an environmental sound way. The project also helped build the capacity needed at the federal level and in selected provinces for the efficient administration of mining rights. Major outcome and achievements of the project are: (i) Legalframework. The project succeeded in modernizing the mining sector's legal and regulatory framework, which now even includes a number of best practice examples such as the Environmental Law for Mining, the Mining Investment Law, the Mining Treaty with Chile regulating the many across border activities, and the Unified Provincial Regulatory Procedures. (ii) Institutional Framework. To improve services to the mining industry as well as the capacity to monitor its performance and compliance with regulations and norms, a high priority has been given to the modernization of the public mining authorities, particularly in the provinces. With great success throughout the country, mining agencies were restructured, work processes and methodologies streamlined to improve efficiency and quality, infrastructure modernized, and modem technologies and equipment introduced. Special attention has been paid to the training and motivation of personnel, emphasizing the need to implement a cultural change, from closed and control-heavy mentalities to a more open and client-oriented behavior. Argentina - Mining cadastre and management of property rights The establishment of a mining cadastre, which integrates the regulatory, institutional, and technological aspects of mineral rights administration, is the comerstone of a mineral resource management aimed at optimizing the contribution of mining to regional development. The granting of mining titles, founded on transparent procedures and on unequivocal location and limits of mineral properties, guarantees the security of tenure for investors. The World Bank-supported technical assistance program to set up a modem cadastral systems in Argentina has been particularly successful and led to many improvements. Computerized granting and monitoring procedures, strictly mirroring existing regulations, speed up processing times and limit the opportunities for "arbitrary" interventions. Set-up of mining rights data- bases, linked to the procedures management system, allow the accurate and precise location (using GPS and GIS technologies) of mining properties in real time, a key factor for security of tenure and avoiding legal conflicts. In addition, displaying the information on the Intemet allows the government, as well as communities and investors, to foresee and mitigate potential conflicts between mineral resources exploitation and other land-uses, including conservation of protected areas Text Box 1 (iii) Mining Cadastre. A particularly positive achievement of the project is the successful set-up of a modem mining cadastral management system (see also Text Box 1). The project addressed the different - 5 -  aspects - legal, institutional and technical - in an integrated manner. Unified Procedures were prepared under the umbrella of the Federal Mining Council, and have been approved by all provinces. A reliable and updated mining cadastre has been established, which includes the setting up of a complementary geodetic reference network in remote areas, the precise location of all existing mining rights using modem GPS technology, eliminating legal problems such as superposition or inaccurate positioning of rights. At the provincial public mining offices, computerized management systems, mirroring the existing procedures, are operative. In provinces where the new technology is fully implemented, a mining title application can be processed in less than 15 minutes. (iv) Environmental Management. With the support of the project, mining environmental units have been established in all provinces to monitor and control enforcement of the regulations and train personnel. Since February 1997, when the law became effective, 3640 environmental impact assessments (ELAs) have been prepared by mining companies and processed by the UGAPs until December 2001, at an estimated cost of US$7 million, an amount greater than the total mining investments in 1992. To provide an adequate reference framework to evaluate possible future impacts, baseline studies have been carried out in mining regions all over the country. (v) Geological and Mining Information Infrastructure. Today, about 75 percent of the country is covered by 1:200,000 geological maps, which represents enormous progress. Metallogenic maps and other valuable thematic information (including large parts of the country covered by airbome geophysics and regional geochemistry) that are valuable for investment have been prepared. A modem computer based information network has also been established to share geological, environmental, statistical, legal and other data between federal and provincial agencies. Most of the information is also available worldwide through the intemet. Argentina - Mineral Exploration Argentina - Mineral Production Values Investments c 1500- 115i120q,111299 ~~ 150 iiol~11030 140 .2 _ 100 80 .100 80 100 1000417434481492513543 50-4 7 15 23mEEImE. 0 500- ....mEIIIII 0 I6EEEE - c' n t e (D s X 01 0 _ _ _ o O) O 01 0a