WASHINGTON, December 7, 2004 - The World Bank today approved a US$200 million loan for Argentina to improve the provision of infrastructure services in the Province of Buenos Aires.
The provision of better infrastructure services supports the Government of Buenos Aires strategy to reactivate the provinces economy and strengthen its regional competitiveness, while alleviating poverty and increasing social equity, said Axel van Trotsenburg, World Bank Country Director for Argentina, Chile, Paraguay and Uruguay. This Project is the Banks first direct loan for infrastructure investments to a province in Argentina and represents a strategically important milestone in our dialogue with sub-national authorities in the country.
The Buenos Aires Infrastructure Sustainable Investment Development Project supports key investments in the road sector to enhance the Provinces productivity, high social priority projects in the water, sewerage and drainage sectors targeted towards areas of low income and high vulnerability.
The project to be executed over the period 2005-2008, will improve the provision of infrastructure services in the province within a framework of fiscal responsibility as a means of supporting the return to a sustainable path of economic growth, to alleviate poverty and increase social equity.
The project will support roads and water, sewerage and drainage works and help strengthen the productive potential of the economy and affect the living conditions of vulnerable and poor people.
The project will specifically:
· Rehabilitate high priority segments of the provincial road network, removing critical bottlenecks, and implementing a sustained and cost-efficient maintenance program to reduce transport costs and improve the Provinces overall competitiveness. The program includes (i) rehabilitation works in high priority provincial roads along the interurban primary paved network, (ii) widening provincial roads that connect industrial zones with production and consumption centers, (iii) rehabilitation of access roads to some ports and localities and enhance intersections in high-traffic roads, and (iv) implementation of a maintenance program for provincial roads.
· Expand the provision of water and sewerage services to approximately one half million low income people living within the Greater Metropolitan Area of Buenos Aires, in areas of high sanitary and/or environmental vulnerability. Financing under this component in respect of a given operator will become available once said operator has met the relevant eligibility criteria which include a renegotiation agreement that helps ensure the sustainability in the provision of water and sewerage services.
· Finance a series of drainage projects in urban and periurban areas to mitigate the effects of flooding, which cause significant losses to poor households, industries and commercial activities by interrupting transport and other services.
· Build a strategic framework for provincial development andstrengthen the institutional capacity in the public entities involved in project execution. Specifically it aims at building up a strategic framework to facilitate economic development, competitiveness, and foster employment.
With 50% of the people lacking access to potable water and only 25% being connected to proper sewerage system, it is key to implement this loan to improve the provision of basic services and enhance living conditions in the province, said Maria Marcela Silva, World Bank co-task manager for the project. The project also tackles inadequate urban and drainage planning lead that generates recurring flooding problems in urban areas with high social and economic costs.
Executive Directors discussed the general situation in Argentina and recognized the strong economic growth and progress in reducing poverty and creating employment. They emphasized the role of the overall economic policy environment, and stressed the importance of an adequate macroeconomic framework and, in this context, Argentinas program with the IMF. They also noted that while disbursements under investment operations can proceed normally, conditions for new disbursements under approved Bank adjustment operations have not been met yet.
Numerous Executive Directors expressed concerns about the lack of progress in the renegotiation process of public services contracts. They stressed that a framework for public services (i) be fair, transparent, and viable, (ii) support private sector investment and development of productive capacity by taking into consideration the cost of capital and rates of return on investment and enabling the private sector to retain decision-making over investment, (iii) support competition in each sector; and (iv) set clear and predictable rules on how tariff setting is to be determined.
Several Executive Directors also noted the need for re-engagement with creditors on mutually acceptable terms and emphasized that fair and transparent restructuring of the debt is essential to private sector development and improvements in the investment climate.
The US$200 million single-currency, fixed spread loan has a repayment period of 12 years, including four years of grace.
Yanina Budkin (5411) 4316-9700
Alejandra Viveros (202) 473-4306
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