document of the world bank report no: icr00003656 ......2016/02/09 · bapin bank of public...

Document of The World Bank

Report No: ICR00003656

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD 7268; IBRD 7974)

ON A

LOAN

IN THE AMOUNT OF USD 200.0 MILLION

AND ADDITIONAL FINANCING

IN THE AMOUNT OF USD 50.0 MILLION

TO

THE PROVINCE OF BUENOS AIRES

FOR A

BUENOS AIRES INFRASTRUCTURE SUSTAINABLE INVESTMENT DEVELOPMENT PROJECT PHASE I (APL1)

January 28, 2016

Water Global Practice LCC7C Country Management Unit Latin America and the Caribbean Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

(Exchange Rate Effective December 07, 2004, and May 30, 2015)

Currency Unit = AR Peso (ARS) ARS 1.00 = USD 0.337 – Board Approval

USD 1.00 = ARS 2.961 ARS 1.00 = USD 0.111 – Closing Date

USD 1.00 = ARS 8.997

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ABSA Buenos Aires Water Company (Aguas Bonaerenses Sociedad Anónima)AF Additional Financing APL Adaptable Program Loan APL1 Buenos Aires Infrastructure Sustainable Investment Development

Project Phase I APL2 Buenos Aires Infrastructure Sustainable Investment Development

Project Phase II BAPIN Bank of Public Investment Projects (Banco de Proyectos de Inversión

Pública) CPS Country Partnership Strategy CREMA Performance-Based Roads Rehabilitation and Maintenance Contracts

(Contratos de Rehabilitación y Mantenimiento) DIPAC Provincial Department of Water and Sewerage (Dirección Provincial de

Auguas y Cloacas) DIPSOH Provincial Department of Sanitation and Hydraulic Works (Dirección

Provincial de Saneamiento y Obras Hidráulicas) DVBA Department of Roads of the Province of Buenos Aires (Dirección de

Viales de la Provincia de Buenos Aires) ERR Economic Rate of Return FM Financial Management IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results IFI INDEC

International Financial Institutions National Institute for Statistics and Census (Instituto Nacional de Estadisticas y Censos)

IPMH Index of Household Material Deprivation (Indice de Privación Material de Hogares)

IRI International Roughness Index ISR Implementation Status and Results IT Information Technology MTR Mid-Term Review NPV Net Present Value OCABA Buenos Aires Agency for Water Regulation (Organismo de Control de

Aguas de Buenos Aires) O&M Operation and Maintenance PAD Project Appraisal Document PBA Buenos Aires Province (Provincia de Buenos Aires) PDO Project Development Objective SCEOCI Sub-Secretariat for Coordination of International Credit from Countries

and Organizations SIGADE System for Debt Management and Analysis (Sistema de Gestión y

Análisis de la Deuda) SPIP Provincial Public Investment System (Sistema Provincial de Inversión

Pública) TA Technical Assistance UCO Unit for Coordination with Multilateral Credit Organizations UCPO Unit for Coordination of Projects and Works (Unidad de Coordinación

de Proyectos y Obras) WSS Water Supply and Sanitation

Vice President: Jorge Familiar Country Director: Jesko S. Hentschel Practice Manager: Wambui G. Gichuri Project Team Leader: Lilian Pena P. Weiss ICR Team Leader: Lilian Pena P. Weiss

PROVINCE OF BUENOS AIRES

Buenos Aires Infrastructure Sustainable Investment Development Project Phase I – APL1 (P088032)

Table of contents

Data Sheet ............................................................................................................................ i

A. Basic Information ........................................................................................................ i B. Key Dates .................................................................................................................... i C. Ratings Summary ........................................................................................................ i D. Sector and Theme Codes ........................................................................................... ii E. Bank Staff ................................................................................................................... ii F. Results Framework Analysis ..................................................................................... iii G. Ratings of Project Performance in ISRs .................................................................. vii H. Restructuring (if any) .............................................................................................. viii

Summary and Overview of ICR Findings .......................................................................... 1 Section 1: Project Context, Development Objectives, and Design ..................................... 1 Section 2: Key Factors Affecting Implementation and Outcomes ..................................... 8 Section 3: Assessment of Outcomes ................................................................................. 13 Section 4: Assessment of Risk to Development Outcome ............................................... 21 Section 5: Assessment of Bank and Borrower Performance ............................................ 22 Section 6: Lessons Learned .............................................................................................. 24 Section 7: Comments on Issues Raised by Borrower/Implementing Agencies/Partners . 25 Annex 1. Project Costs and Financing .............................................................................. 26 Annex 2. Outputs by Component...................................................................................... 27 Annex 3: Summary of Achievements under APL1 and APL2 ......................................... 32 Annex 4. Economic and Financial Analysis ..................................................................... 37 Annex 5. Province of Buenos Aires: Provincial Fiscal Indicators .................................... 50 Annex 6. Project Preparation and Implementation Support/Supervision Processes ......... 56 Annex 7. Borrower Completion Report ............................................................................ 58 Annex 8. List of Supporting Documents .......................................................................... 66 Annex 9. MAP .................................................................................................................. 67

i

Data Sheet A. Basic Information

Country: Argentina Project Name: AR CRL1 APL1 Buenos Aires Infrastructure

Project ID: P088032 L/C/TF Number(s): IBRD-72680,IBRD-79470

ICR Date: 01/20/2016 ICR Type: Core ICR

Lending Instrument: APL Borrower: GOV OF THE PROVINCE OF BUENOS AIRES

Original Total Commitment:

USD 200.00M Disbursed Amount: USD 249.76M

Revised Amount: USD 250.00M Environmental Category: B Implementing Agencies: Ministry of Economy of the Province of Buenos Aires Cofinanciers and Other External Partners: N/A B. Key Dates

Process Date Process Original Date Revised / Actual Date(s) Concept Review: 12/02/2003 Effectiveness: 06/17/2005 06/17/2005

Appraisal: 09/20/2004 Restructuring(s): 06/11/2010 10/29/2012 05/02/2013

Approval: 12/07/2004 Mid-term Review: 09/15/2006 09/19/2006 Closing: 07/31/2009 05/30/2015 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Unsatisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Satisfactory

ii

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Moderately Unsatisfactory Government: Moderately Satisfactory

Quality of Supervision: Moderately Unsatisfactory Implementing Agency/Agencies: Satisfactory

Overall Bank Performance:

Moderately Unsatisfactory

Overall Borrower Performance: Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators

QAG Assessments (if any) Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Moderately Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Flood protection 5 3 Rural and Inter-Urban Roads and Highways 28 47 Sub-national government administration 10 1 Urban Transport 27 16 Wastewater Treatment and Disposal 30 31

Theme Code (as % of total Bank financing) Administrative and civil service reform 14 1 City-wide Infrastructure and Service Delivery 29 36 Infrastructure services for private sector development 14 23 Public expenditure, financial management and procurement

14 4

Urban services and housing for the poor 29 36 E. Bank Staff

Positions At ICR At Approval Vice President: Jorge Familiar Calderon David de Ferranti Country Director: Jesko S. Hentschel Axel van Trotsenburg

iii

Practice Manager/Manager:

Wambui G. Gichuri Jose Luis Irigoyen

Project Team Leader: Lilian Pena Pereira Weiss Ventura Bengoechea & Marcela Silva

ICR Team Leader: Lilian Pena Pereira Weiss ICR Primary Author: Elisabeth Sherwood F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The overall purpose of the program is to 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. To this end, the Province is prioritizing a set of interventions through a sector wide Infrastructure Program for the period 2005-2010 specifically aimed to: i. Develop a multi-year public expenditure program, in line with the priorities of the Province, to implement the Infrastructure Program following sound fiscal policies to ensure convergence towards a long-term sustainable fiscal framework. ii. Enhance access to water and sewerage services to low income people living in highly vulnerable areas and to mitigate urban flooding. iii. Improve high priority segments of the productive paved road network to support the reactivation of the provincial economy and strengthen regional competitiveness. Revised Project Development Objectives (as approved by original approving authority) N/A (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Fiscal framework regularly updated to reflect the evolution of agreed fiscal monitoring indicators. Value quantitative or Qualitative)

2004 fiscal projections Updated fiscal results Dropped in

AF N/A

Date 11/10/2004 7/31/2009 06/11/2010 05/30/2015 Comments (incl. % achievement)

Indicator dropped due to change in inter-governmental fiscal relations between national and provincial governments. Indicator was considered to no longer be relevant.

iv

Indicator 2 : High-traffic productive road assets preserved with acceptable average roughness (IRI) to reduce operational costs and travel time and to avoid accumulation of future liabilities in the overall network.

Value quantitative or Qualitative)

HT IRI =2.97 AV IRI =2.98

HT IRI below 3 AV IRI below 3.3

HT IRI below 3.8

AV IRI below 3.5

HT IRI 3.36 AV IRI 3


Revised target for HT IRI achieved. Original target for HT IRI not achieved. Original and revised AV IRI targets achieved.

Indicator 3 : Reduced waterborne diseases. Value quantitative or Qualitative)

TBD -20% Dropped in AF N/A


Baseline was not set for the indicator; indicator dropped during restructuring related to Additional Financing due to lack of clarity in measurement of indicator.

Indicator 4 :

Additional poor people with access to water supply and sanitation services. - People with water connections - People with sewerage service lines - People with active sewerage connections

Value quantitative or Qualitative)

0

Total: 259,073 - Water: 85,775

- Sewerage: 272,512

- Active sewerage: 173,298

Total: 267,270 - Water: 85,775

- Sewerage: 254,057 - Active

sewerage: 181,495

Total: 314,840 - Water: 85,775

- Sewerage: 254,057

- Active sewerage: 229,065


100% of revised water target achieved. 100% of revised sewerage beneficiaries target achieved. 126% of revised active sewerage beneficiaries target achieved. 70% of original target of 450,000 total beneficiaries achieved.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Number of Km roads rehabilitated. Value (quantitative or Qualitative)

0 457 Km 649 Km 649.36

Date 11/10/2004 07/31/2009 10/29/2012 05/30/2015 Comments (incl. %

Formal wording in 2012 Restructuring: “Roads rehabilitated – non-rural (km)” 100% achievement of revised target. 142% achievement of original target.

v

achievement) Indicator 2 : Number of Km roads widened. Value (quantitative or Qualitative)

0 25 Km 28 Km 28.11 Km


Formal wording in 2012 restructuring was “Roads constructed – non-rural (km)”. 100% achievement of revised target. 112% achievement of original target.

Indicator 3 : Number of Intersections enhanced Value (quantitative or Qualitative)

0 2 Dropped in AF N/A


Intersection enhancement indicator dropped during preparation of Additional Financing; however, the counterpart did finance the improvement of the two intersections.

Indicator 4 : Increased (water) coverage in poor areas (IPMH < 40%). Value (quantitative or Qualitative)

12.5% 25% Dropped in AF N/A


Not measured. Dropped due to lack of clarity in measurement of indicator.

Indicator 5 : Number of poor people connected to water and sewerage services by this project.Value (quantitative or Qualitative)

0 people 450,000 people 267,270 people 314,840 people


118% achievement of revised target. 70% achievement of original target (450,000 people).

Indicator 6 : Number of water supply service lines built by the project in poor neighborhoods (IPMH < 40%). Value (quantitative or Qualitative)

22,403 22,403 22,403

Date 11/10/2004 7/31/2009 05/30/2015

Comments (incl. % achievement)

Formal wording established in 2012 restructuring was: New piped household water connections that are resulting from the project intervention. All water supply was constructed prior to 2010 restructuring; 100% achievement of target.

Indicator 7 : Number of sewerage service lines built by the project in poor neighborhoods (IPMH < 40%). Value (quantitative or Qualitative)

41,201 69,833 65,104 65,104

vi


Indicator established in 2010. 100% achievement of target set in 2012. 93% achievement of target set in 2010.

Indicator 8 Number of people provided with access to improved sanitation facilities under the project – urban Value (quantitative or Qualitative)

188,911 254,057 229,065 (active) 254,057 (access)

Date 10/29/2012 12/31/2013 05/30/2015 Comments (incl. % achievement)

Target set during 2012 project restructuring. 100% achievement of revised target. 120% achievement of target set in 2012.

Indicator 9 : Number of urban drainage non-structural measures implemented (land use regulations enacted, integrated development plans formulated). Value (quantitative or Qualitative)

0 measures 5 measures 4 measures 4 measures

Date 11/10/2004 7/31/2009 10/29/2012 05/30/2015

Comments (incl. % achievement)

Substantially achieved. Implemented measures were: adoption (by decree) of a “Drainage Good Practices Manual”; land-use regulations; introduction of environmental measures in urban planning; new procedures for operation/maintenance of drainage systems.

Indicator 10 : Hectares of improved drainage. Value (quantitative or Qualitative)

0 ha 3,063 ha 230 ha 230 ha


Target established during 2010 restructuring. 100% achievement of target revised in 2012. 7.5% achievement of 2010 (original) target.

Indicator 11 : Percentage of trucks with axle overload in pilot area. Value (quantitative or Qualitative)

60% 25% Dropped in AF N/A


Indicator was dropped as part of restructuring associated with AF; Indicator not tracked.

Indicator 12 : Number of projects aligned with the new productive strategy assessed in the Provincial Database within the Provincial System of Public Investment. Value (quantitative or Qualitative)

None 150 projects 5,200


Target significantly overachieved. Target had been set based on the original closing date; all provincial capital projects are now incorporated into the database.

vii

Indicator 12 : Number of people in urban areas provided with access to Improved Water Sources under the project Value (quantitative or Qualitative)

0 85,775 85,775


Target set in 2010, at which time all water connections had already been made. 100% achieved.

Indicator 13 : Number of water utilities that the project is supporting Value (quantitative or Qualitative)

0 4 4


100% achieved.

G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP Actual

Disbursements (USD millions)

1 05/09/2005 Satisfactory Satisfactory 0.00 2 02/24/2006 Satisfactory Satisfactory 1.00 3 04/06/2006 Satisfactory Satisfactory 1.00 4 07/25/2006 Satisfactory Satisfactory 8.42 5 11/09/2006 Satisfactory Satisfactory 21.41 6 06/04/2007 Satisfactory Satisfactory 35.52 7 10/26/2007 Satisfactory Satisfactory 71.54 8 06/06/2008 Satisfactory Satisfactory 103.49 9 10/29/2008 Satisfactory Satisfactory 127.98

10 05/06/2009 Satisfactory Satisfactory 161.00 11 11/14/2009 Satisfactory Satisfactory 174.02 12 05/18/2010 Satisfactory Satisfactory 194.64 13 11/29/2010 Satisfactory Satisfactory 199.94 14 06/20/2011 Satisfactory Satisfactory 200.00 15 01/03/2012 Satisfactory Satisfactory 200.00 16 07/11/2012 Satisfactory Satisfactory 200.00 17 11/21/2012 Satisfactory Satisfactory 212.00 18 02/26/2013 Satisfactory Satisfactory 214.95 19 07/21/2013 Satisfactory Satisfactory 229.87 20 02/15/2014 Satisfactory Satisfactory 249.88 21 09/15/2014 Satisfactory Satisfactory 249.88 22 01/09/2015 Satisfactory Satisfactory 249.88 23 05/29/2015 Moderately Satisfactory Satisfactory 249.88

viii

H. Restructuring (if any)

Restructuring Date(s)

Board Approved PDO

Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made DO IP

06/11/2010 N S S 197.45

Additional Financing; inclusion of Involuntary Resettlement (OP/BP 4.12) Safeguard, Indicators revisions, extension of closing date.

10/29/2012 N S S 200.00 Cost reallocation; target revisions; change in percentage of loan financing.

05/02/2013 N S S 220.20 Extension of closing date. I. Disbursement Profile

1

Summary and Overview of ICR Findings 1. The Buenos Aires Infrastructure Sustainable Infrastructure Development Project, Phase I (APL1) was prepared in the aftermath of Argentina’s 2001-2002 financial and economic crisis as the first of a two-phase, multi-sectoral infrastructure investment project with the Province of Buenos Aires (PBA). The project intended to finance major investments in provincial road rehabilitation and water and sewerage network expansion, as well as investments to mitigate urban flooding. This was proposed in the context of the PBA’s overall objective of strengthening its fiscal performance and of reinvigorating the provincial economy.

2. The project was successful in several ways; the original loan was fully disbursed with little lag from original projections; project outputs for one of the components (road rehabilitation) exceeded the original targets by a wide margin; Additional Financing in an amount of USD 50 million enabled the implementation of a significant part of the original water and sewerage investments; the economic returns to investments have been positive; and implementing agencies noticeably increased their planning, implementation, and safeguards management capacity. In addition, Phase II of the project (APL2) contributed as well to road rehabilitation, sewerage network expansion, and urban drainage improvements, assisting the PBA toward meeting investment targets that it could not have met without financing from the Bank. Despite these achievements, however, the overall success of the project has to be judged based on the formal objectives and targets established and formally revised in project documentation. As project objectives were broadly worded, included objectives that were unlikely to be met through project activities, and were only restructured after much of the project had been implemented, this Implementation Completion and Results (ICR) report has evaluated the project’s outcome as Moderately Unsatisfactory.

Section 1: Project Context, Development Objectives, and Design 1.1 Context at Appraisal 3. Country Background. The project was prepared in the aftermath of Argentina’s 2001-2002 financial and economic crisis. While the economy had largely stabilized at the time of project preparation and appraisal, poverty rates in the country had more than doubled during the crisis – from 25 to 54 percent1 – and both federal and provincial investment in infrastructure had, due to lack of funds, fallen significantly.

4. The Province of Buenos Aires (PBA) was (and remains) the largest province in Argentina, with a population of 14.4 million – just under 40 percent of the country’s population – and produced approximately 29 percent of the national gross domestic product. As a result of the economic crisis, 64 percent of the provincial population was living under the poverty line in 2002, compared to less than 20 percent in 1994.

5. In terms of economic and financial management, the province had experienced significant deterioration in the years leading up to the crisis. During the 1990s, the province had balanced fiscal accounts and was the largest revenue contributor to the federal revenue-sharing system. However, beginning in the late 1990s, changes at the national level in education, health, and social security policy, which shifted responsibility for spending in these areas to the provinces, as well as general

1 The 2003 poverty rate reported in the World Bank’s Country-at-a-Glance Annex was 55 percent. The 2005 poverty rate was reported to have fallen to 31 percent, as reported in the Country-at-a-Glance Annex for the 2007 PAD for the Phase II APL. Poverty rate here refers to the percentage of the population below the national poverty line.

2

public-sector wage increases, resulted in increased current expenditures by the PBA and net revenue losses. On top of this, significant problems in the provincial bank (Banco de la Provincia de Buenos Aires) resulted in extraordinary transfers from the PBA to the bank. In 2001, the provincial deficit was 50 percent of revenues, financed with locally-issued quasi-money – effectively adding to the province’s debt stock. In 2002, the PBA defaulted on its international bonds.

6. To address the above, the federal government entered into bilateral agreements with the PBA in 2002, 2003, and 2004 that allowed the province to access federal resources to meet its financing needs and to service much of its public debt. As part of those agreements, the PBA committed to certain fiscal targets. These agreements were followed by the passage of the Fiscal Responsibility Law in 2004, which formalized fiscal norms for the participating provinces. Participation in the law limited provincial borrowing to international financial institutions (IFIs) and to loan agreements that would improve the debt profile. In return, the province would be eligible for continued financial support from the national government, although this would be subject to annual negotiations.

7. Sector Context. One of the consequences of the 2001-2002 crisis was a drastic decrease in infrastructure investment and rehabilitation by the PBA. In 2002, investment was less than one percent of total provincial spending, a level far below that needed to rehabilitate existing infrastructure – in particular, the provincial road network – and to make needed new investments, including in areas unserved by water and sanitation infrastructure and areas subject to repeated flooding.

8. Rationale for Bank Assistance. In this context, and consistent with the agreements made with the national government, the Province’s Ministry of Economy prepared a comprehensive infrastructure investment program within a framework of long-term fiscal balance and approached the World Bank for support. The subject project was prepared to assist in the financing of the infrastructure proposed in the PBA’s investment program, the strengthening of public-sector capacity, and improvement in the environment for provincial economic growth. An Adaptable Program Loan (APL) was chosen, as opposed to a single Investment Loan, in order to provide a framework for additional funding for the program upon successful implementation of the initial investments. Phase II of the Project (APL2), in an amount of USD 270 million, was approved by the Bank’s Board of Directors in 2007. APL2 was fully disbursed and closed in December, 2013.2

1.2 Original PDO and Key Indicators 9. The Project Development Objective (PDO), as defined in the Loan Agreement between the World Bank and the Province of Buenos Aires (dated March 8, 2005; page 24), was to:

i. enhance the provision of water and sewerage services for the benefit of low-income people, in particular for those living in highly vulnerable areas;

ii. to improve high-priority road segments of the Borrower’s road network;

iii. to mitigate urban flooding; and

iv. to support the reactivation of the Borrower’s economy and strengthen its regional competitiveness.

2 Project Appraisal Document for the Buenos Aires Infrastructure Sustainable Investment Development Project – Phase II (Report No. 39558-AR), dated May 29, 2007; and Implementation Completion and Results Report for APL2 (Report No. ICR0000742), dated June 30, 2014.

3

10. The project components and activities follow closely from the above project objectives, with the exception of the last objective. That said, the main text of the Project Appraisal Document (PAD) does not explicitly mention the PDOs as defined in the Loan Agreement; it emphasizes instead the objectives of the PBA’s fiscal reform and investment program, which was presented as follows: “to 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”. As a means to that end, the PAD specifies that the Province’s program prioritized investments and activities aimed to:

i. Develop a multi-year public expenditure program, in line with the priorities of the Province, to implement the infrastructure Program following sound fiscal policies to ensure convergence towards a long-term sustainable fiscal framework.

ii. Improve and maintain high-priority segments of the paved road network to support the reactivation of the provincial economy and strengthen regional competiveness.

iii. Enhance water and sewerage services to low-income people living in highly vulnerable areas and to mitigate urban flooding.

11. This ICR evaluates the performance of the APL1 against the objectives as stated in the Loan Agreement. The project is not being evaluated based on the outcomes of the PBA’s overall program, nor are the combined outcomes of APL1 and APL23 being jointly evaluated. However, aspects of the PBA’s program that were particularly highlighted in the PAD will be commented on, and Annex 3 provides summary information on the infrastructure goals of the government’s investment program (which APL1 and APL2 supported) and the associated contributions from both APL1 and APL2.

12. PDO indicators were presented in the main text of the PAD and in the Results Framework annex consistent with the statement of goals as described in paragraph 7, above, although with differences between the main text and the annex. In the main text of the PAD (pg. 11), key indicators established to measure progress towards the achievement of the PDO were expressed as follows:

i. Implementation of the Fiscal Framework, including the maintenance of monitoring indicators at levels consistent with medium-term fiscal sustainability;

ii. Number of kilometers (of road) rehabilitated under the program and overall average roughness of the network;

iii. Population benefitting from the water and sewerage component (population connected to piped water and/or sewerage system); and

iv. Number of municipalities adopting urban and land-use regulations that minimize the hydrological impact of urban development in flood-prone areas.

13. In comparison, the Results Framework (PAD Annex 3, pgs. 43-45) provides the following PDO outcome indicators:

i. Fiscal framework regularly updated to reflect the evolution of agreed fiscal monitoring indicators;

3 For information on the APL 2 results, please refer to the ICR for APL2 (Report No. ICR0000742), dated June 30, 2014.

4

ii. High-traffic productive road assets preserved with an acceptable average roughness (IRI) to reduce operational and travel time costs, and avoided accumulation of future liabilities in the overall network; and

iii. Reduced waterborne diseases.

14. The Results Framework also specified component-specific indicators; these were largely consistent with the PDO indicators mentioned in the main text of the PAD. Component-specific indicators included: kilometers of key productive roads rehabilitated; increased water supply and sewerage coverage in poor areas and number of poor people connected to water and sewerage services; number and type of non-structural measures implemented (with respect to flood prevention); and, with respect to a component focusing on institutional capacity, the percentage decrease of (axle) overload in the pilot road and the number of infrastructure projects aligned with the new productive strategy assessed in the provincial Projects’ database.

15. As the first phase of a two-phase APL, the PAD specified several triggers and related indicators that would need to be met in order to move forward with Phase 2 of the APL4. These are provided in the following table.

Trigger Indicator

Evidence of satisfactory implementation of the Fiscal Framework that would enable accommodating the second loan without jeopardizing convergence towards a sustainable fiscal situation.

1. Satisfactory implementation of the Fiscal Framework and its dynamic use to review and update projections to reflect the evolution of revenues, expenditures, and fiscal targets, with semi-annual reviews of the Program conducted by the provincial Ministry of Economy and the Bank.

2. Attainment of a primary surplus consistent with medium-term fiscal sustainability, as set forth in the Fiscal Framework.

Evidence of satisfactory implementation of the APL1 and readiness to implement further subprojects.

3. At least 70 percent of all APL1 loan proceeds committed and 50 percent disbursed.

4. At least 50 percent of subprojects to be financed under APL2 are ready to be tendered.

Evidence that institutional, policy, and provincial regulatory frameworks have been strengthened and enforced so as to ensure long-term sustainability of programmed interventions.

5. Based on the institutional diagnosis of DPV to be carried out during the APL1, the Borrower furnishes a satisfactory action plan for optimizing road sector management and maintenance, including the design of performance-based contracts.

6. Satisfactory implementation of the Framework Agreements between the PBA and the water and sewerage operators, and satisfactory enactment of the regulations of the provincial Regulatory Framework.

7. Borrower enacts adequate policies for investments in urban drainage in accordance with a Manual of Best Practice acceptable to the Bank.

1.3 Revised PDO and Key Indicators 16. An Additional Financing (AF) loan in an amount of USD50 million was approved in mid-2010, at which time a Level 1 restructuring was undertaken.5 The AF was intended to fill the

4 The compliance with the triggers was analyzed during the preparation of APL 2; while the triggers related to the fiscal framework were considered not to have been met and were waived, overall progress was considered sufficient to move forward with APL2. 5 Project Paper for the Buenos Aires Infrastructure Sustainable Investment Development Project (APL-1), Report No. 54946-AR, June 11, 2010.

5

financing gap caused by unforeseen cost increases that affected the scope of the works. There was no change in the PDO as specified in the Loan Agreement.6 However, the Results Framework of the Project Paper specified that the PDO (as stated in the PAD) was changed to remove its first part (“Develop a multi-year public expenditure program, in line with the priorities of the Province, to implement the Infrastructure Program following sound fiscal policies to ensure convergence towards a long-term sustainable fiscal framework”) and the associated outcome indicator was removed. Since there was no change in the PDO as specified in the Loan Agreement, for the purposes of the evaluation of the outcomes of the project, there were no changes in the areas to be evaluated.

17. In addition to the removal of the indicator related to monitoring fiscal performance, the revision in the Results Framework at the time of the Additional Financing changed the outcome indicator related to water and sewerage from “reduction in water-borne diseases” to “additional poor people with access to (i) water supply and (ii) sanitation services.”7 Component-specific Intermediate Outcome Indicators had minor adjustments, but remained largely consistent with the original intermediate indicators. The project restructuring also included an extension of the closing date to December 31, 2013 and the triggering of the Involuntary Resettlement safeguard policy (OP/BP 4.12).

18. In 2012 a level II restructuring was carried out in order to revise the scope of the civil works to reflect construction cost increases and to adjust the target values of project indicators accordingly, among other minor changes. In addition, the 2012 restructuring enabled financing of 100 percent of project costs through the AF loan. In 2013, another level II restructuring extended the deadline of the AF loan from December 31, 2013 to May 30, 2015.

1.4 Main Beneficiaries 19. While the main text of the PAD did not mention specific beneficiaries, particularly with respect to the rehabilitation and improvement of roads, the PAD Results Framework specified that water and sewerage investments would benefit a total of 450,000 persons. Water and sewerage investments were required to take place in areas with higher levels of low-income residents,8 and therefore most beneficiaries were likely to be poor. In addition, the project’s drainage investments and policy measures were most likely to benefit households subject to regular flooding, and therefore more likely to be low-income.

20. Specific beneficiary targets for water supply and sewerage were originally established and revised as follows:

6 Loan Agreement for the Additional Financing for the Buenos Aires Infrastructure Sustainable Investment Development Project-Phase I, dated February 6, 2012. 7 The Results Framework for the Additional Financing incorrectly states that there was no change in the outcome indicator for water and, sewerage. The authors may have been following the results framework established for APL2. 8 Requirement that target areas for water and sewerage extensions have an IPMH (Indice de Privación Material de Hogares, which is a Provincial indicator that proxies poverty) greater than 40. See footnote 10 for more details.

6

Original PAD 2010 Additional Financing

and Restructuring* 2012 Level 2

Restructuring Additional poor people with access to water supply and sanitation services (combined)

450,000 259,073 267,270

People with water connections n/a 85,775 85,775 People with sewerage service lines n/a 272,512 254,057 People with active sewerage connections** n/a 173,722 181,495

* Targets specified in the 2010 Additional Financing are the total number of beneficiaries for the combined original loan and AF (not only for the investments to be financed under the AF). ** The calculation of active sewerage connections (i.e., households that have connected to the sewerage network) is a function of an assumed connection rate and time. It is therefore possible to have a reduction in the total number of people with access to a sewerage service line (a decrease from 272,512 to 254,057) and an increase in the number of people with an active sewerage connection (an increase from 173,722 to 181,495). Note that the number of people with active sewerage connections is an estimate based on the connection rate of one of the water supply and sanitation (WSS) operators who tracks the figure. Most operators do not track the figure, as all customers with access to a sewerage line pay a sewerage charge regardless of whether they are connected. 21. In addition to the above direct beneficiaries, the project design benefitted the agencies of the PBA implementing the project – the Unit for Coordination with Multilateral Credit Organizations (UCO) within the Ministry of Economy and its predecessors, the Roads Directorate (DVBA), the Water and Sewerage Directorate (DIPAC), and the Hydraulic Works Directorate (DIPSOH). 9 This was through both project-supported interventions (capacity building and technical assistance, strategy development, planning) and through on-the-job project implementation, which had a significant impact on the agencies’ capacities to design, plan, and manage infrastructure investments. These benefits are discussed further in section 3.5 (Overarching Themes, Other Outcomes and Impacts).

1.5 Original Components 22. The original APL financed four components as follows:

23. Component 1: Provincial Roads (Estimated Cost: USD 136.2 million; IBRD financing: USD 101.2 million). The roads component proposed to rehabilitate high-priority segments of the road network, remove critical bottlenecks, and implement a maintenance program for the Provincial road network.

24. Component 2: Water and Sewerage (Estimated Cost: USD 66.1 million; IBRD financing: USD 52.3 million). The water and sewerage component proposed to finance the extension of treated water and sewerage networks to unserved, low-income areas. Targeted areas, in addition to being technically feasible, had to meet identified poverty criteria (areas had to have an Index of Household Material Deprivation (Indice de Privación Material de Hogares (IPMH)10) higher than 40 percent. In addition, beneficiary operators had to have signed a binding Framework Agreement, which established the legal and operating requirements for the investments, with the PBA.

9 Dirección de Viales de la Provincia de Buenos Aires (DVBA); Dirección Provincial de Auguas y Cloacas (DIPAC); and Dirección Provincial de Saneamiento y Obras Hidráulicas (DIPSOH). 10 The IPMH was developed by Argentina’s National Institute of Statistics and is based on an index of hereditary deprivation and current resource deprivation. For a complete description and calculation references, please see PAD (report 29432-AR) pages 142 and 143.

7

25. Component 3: Drainage (Estimated Cost: USD 14.3 million; IBRD financing: USD 11.3 million). The drainage component planned to finance storm sewers in five urban and peri-urban areas of greater Buenos Aires in order to reduce urban flooding.

26. Component 4: Technical Assistance (Estimated Cost: USD 14.8 million; IBRD financing: USD 11.7 million). The technical assistance (TA) component intended to finance (i) institutional strengthening of the various project implementing agencies, provincial regulators, and other infrastructure and economic-planning and finance functions within the PBA and (ii) activities to support economic competitiveness and job creation, e.g., identification of bottlenecks to economic growth, the development of appropriate policies, etc.. In addition, the component was to finance some costs related to project implementation.

1.6 Revised Components 27. Project components were not revised during project implementation. Additional Financing was approved by the Bank’s Board of Directors in July, 2010 (signed in February, 2012).11 The Additional Financing provided additional funds for the infrastructure components listed above – Provincial Roads (USD 14.9 million); Water Supply and Sewerage (USD 20.3 million); and Drainage (USD 21.3 million), as well as additional funds for contingencies. The Additional Financing was arranged primarily in order to meet the financing needs of the Water and Sewerage and Drainage components, whose funds under the original loan had been transferred to meet cost increases under the Roads component.

28. This review notes that, while the original project was heavily framed in the context of the PBA’s program, which emphasized the development and maintenance of a sustainable fiscal framework, the fiscal framework was not one of the formal project development objectives. The project included funding for some technical assistance as well as IT hardware and software related to budgeting and fiscal management. The original project’s M&E framework included a monitoring indicator related to the fiscal framework, and one of the triggers for APL2 was related to the fiscal framework. As the fiscal arrangements between the Province and the national government had significantly shifted since the original PAD such that the fiscal targets related to the PBA’s primary balance could no longer be met, the Additional Financing and related restructuring removed the associated PDO indicator (see para 71 and 72 for additional information).

1.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations): 29. There were no significant changes to the project components, which were largely implemented as originally designed. That said, more funds than originally intended were allocated to the Roads component, while fewer funds were allocated to the Drainage component and the Technical Assistance component. The outputs and outcomes of these components are discussed in Section 3.2 (Achievement of the Project Development Objectives).

30. Implementation Period: The original project was intended to be implemented over a five-year timeframe (2005 – 2009). The original funds were 100 percent committed at the time of the original closing date and were effectively entirely disbursed by June, 2010. The USD 50 million Additional Financing, approved in June, 2010, was expected to be completed by December 31, 2013, however, it was not signed until February, 2012 due to an extended process between the PBA and the National Government to exchange relevant fiscal information in order for the National Government to guarantee the loan. The closing date was later extended to May 30, 2015, to allow

11 The Project Paper for the Additional Financing states (page 2, paragraph 5) that there were six components in the Original Project. The authors may have been referring to the project design for APL2, which had six components.

8

the completion of activities. In all, the implementation period of the project was approximately ten years. Additional information about the implementation of the project is provided in paragraphs 38 through 41.

31. Cofinancing: Under the original loan and AF, the PBA was expected to co-finance 25 percent of total project costs. That co-financing arrangement remained throughout the disbursement of the original loan; a restructuring in October, 2012 eliminated the co-financing requirement due to financial constraints within the PBA (and Argentina in general) due to a slowdown in the economy and constraints in accessing foreign currency, enabling 100 percent IBRD financing of AF activities. That said, the PBA contributed its own funds to the completion of the last project activities once all AF funds were disbursed, and PBA funding ultimately contributed 25 percent of total project costs.

Section 2: Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design, and Quality at Entry 32. Project preparation was extremely thorough, with significant background analysis and component preparation in all aspects of the project. The project was tightly aligned with the PBA’s investment program, which was focused on core public-service infrastructure needs. The project made funds available at a crucial time given the financial crisis and PBA’s inability to undertake necessary rehabilitation in the preceding years and lack of access to other sources of financing.

33. Project implementation arrangements appear at first glance to be overly complex due to several layers of responsibility and authority. Implementation had to be coordinated through the provincial Ministry of Economy’s Unit for Coordination with Multilateral Credit Organization (UCO; later the Sub-Secretariat for Coordination of International Credit from Countries and Organizations (SCEOCI)), with direct implementation by three separate directorates (water/sewerage, drainage and roads) under the Ministry of Infrastructure. The Ministry of Infrastructure established a unit – the UCPO (Unidad de Coordinación de Proyectos y Obras) – to coordinate the three directorates and to maintain communications with the UCO/SCEOCI. The implementation arrangements worked well, with clear lines of decision-making and reporting, and internal communication that enabled the sharing of lessons learned and problem-solving.

34. Readiness for implementation: the various components evidenced mixed readiness for implementation. Roads rehabilitation sub-projects were reasonably well identified, but water and sewerage sub-projects were to be identified and assessed during project implementation. In addition, the water sector was undergoing significant uncertainty and restructuring due to the collapse of contracts with international private operators during and following the currency devaluation, and therefore it was not yet clear which operators would be able to apply for project-funded network extensions. Despite this, the project included eligibility criteria for water supply and sewerage proposals and operators, a poverty-focused selection criteria, and a social and environmental safeguards framework.

35. Drainage subprojects were postponed after a supervision review of the initial designs of the subprojects, which revealed technical weaknesses that would likely have resulted in a failure of the works to meet performance expectations. Instead, the project adopted a more updated design methodology, which was then adopted across the Province for all drainage works. After this updated design approach (see para. 68) the works were able to be designed and implemented. By that time, however, funds had largely been allocated to other components. In addition to the drainage works financed under the Additional Financing, APL2 financed the drainage works for the city of Finochietto, originally intended under APL1, at a total cost of USD 48 million.

9

36. Complexity of Technical Assistance: Most of the technical assistance originally specified was not undertaken. Based on a review of the original TA plans, the component was somewhat overdesigned, with a comprehensive, long-term program of activities that should probably not have been identified without earlier phases being completed. There seems to have been a prescriptive nature at the component planning stage, rather than an investigative nature. Delays in initial implementation, combined with complex terms of reference, uncertainty with respect to intended outcomes, and lack of experience within the implementation agencies with respect to technical assistance, resulted in overly slow implementation for the component as a whole. There were, however, notable successes within the TA component. Additional information is provided in the Project Outcomes section.

37. Consistency of Project Documentation: Internal documentation with respect to the PDO as described in the PAD, the initial project results framework, and the PDO as defined in the Loan Agreement was inconsistent. Only one PDO indicator – related to road roughness – was well tied to the PDO and to project activities. An outcome indicator related to the province’s fiscal framework was not tied to the PDO (it was later removed), while the original outcome indicator related to improvements in water supply and sewerage was not able to be measured or monitored, and had to be revised.

2.2 Project Implementation 38. Project implementation was consistent with infrastructure-focused operations. Issues that arose during implementation were not unusual in infrastructure investment projects and are discussed below. 39. Unexpected price increases for works: Both roads and water and sewerage investments were faced with unanticipated price increases during project implementation, which resulted in procurement delays, funding reallocations, and reduced overall investments. As roads sub-projects were at more advanced stages of preparation than the water/sewerage and drainage sub-projects, funding under the original loan was reallocated from the other components to the roads component during the first several years of implementation, and particular attention was paid to price increases in that sector. A comprehensive review of price increases in the roads sector was undertaken in 2009/2010.12 Price increases in road works in Argentina between 2004 and 2008 were estimated to be nearly 75 percent; this increase was consistent with other infrastructure sectors, and mirrored increases in construction costs globally in that period. As works under APL1 were bid out and contracted in that period, the project faced a combination of higher costs and, where funding was not increased, lower outputs.

40. Effectiveness Delays for the Additional Financing: There were significant delays in the signing of the Additional Financing for the project, which was approved by the Bank’s Board of Directors in mid-2010 but was not signed until February, 2012.13 This was reportedly due to the national government’s unwillingness to guarantee the sub-sovereign loan to the PBA. The PBA continued to proceed with the major procurement processes during the delay and was able to sign key contracts shortly after the AF effectiveness.

41. Adaptability due to Parallel Project Implementation: Project implementation was considered to be significantly more adaptable due to the parallel implementation of APL2, which was approved in June, 2007 and became effective in August, 2008. APL2 had similar goals,

12 Information provided in the Project Paper for the Additional Financing for the Project, June, 2010. 13 The effectiveness of the AF loan was declared shortly after its signing, on February 17, 2012.

10

indicators and components and was implemented by the same agencies and under the same conditions, and therefore sub-projects that had originally been planned to be financed under APL1 were able to be undertaken under APL2 when cost increases reduced the amount of funding available. In addition, following the approval of the AF, sub-projects originally planned to be financed under APL2 were able to be financed by the AF. Total funding under the two phases (USD 520 million, consisting of USD 200 million under APL 1, USD 50 million under APL1 AF, and USD 270 million under APL 2) enabled the development of a critical mass of investments and activities that not only noticeably improved the road, water and sanitation and drainage infrastructure within the PBA but also significantly strengthened the planning and implementation capacity of all the agencies involved.

42. Impact of Inflation and Exchange Rate Fluctuations: Despite local inflation and fluctuations in the ARS/USD exchange rate during project implementation, the impact on project implementation seems to have been relatively minor. According to official figures published by INDEC, inflation was 139 percent from 2004 to 201414, while depreciation of the peso against the USD was 64 percent. Inflation and changes in the exchange rate affected the project in different ways. Depreciation of the Argentinean Peso relative to the US Dollar helped the project, as every dollar disbursed from the Loan effectively purchased more Pesos. However, inflation in Argentina resulted in higher costs in local currency, offsetting the improved purchasing power of the US dollar. For investments financed under the original loan, it is estimated that local prices were 21 percent higher (in nominal terms) than 2004 prices. For investments financed under the AF, local prices are estimated to have been eight percent higher than expected during the preparation of the AF. However, these price increases appear to have been largely offset – although with a slight lag – by the weakening of the Peso relative to the US Dollar. Additional detail on local inflation and exchange rate patterns is provided in Annex 4.

2.3 Monitoring and Evaluation Design, Implementation, and Utilization 43. M&E Design: The original project design included a monitoring and evaluation framework for the project. It was well designed for monitoring project outputs (e.g., kilometers of roads rehabilitated, number of household water and sewerage connections created), however, at the level of outcomes, in some cases it was not consistently tied to project activities, and in some areas was not measurable. For example, a PDO indicator related to the development of a multi-year public expenditure program was agreed, however, there was no related PDO. With respect to infrastructure investments, while water and sewerage activities could have been tied to the initially established outcome indicator of reduced waterborne diseases, due to disperse data and the difficulty in showing causal links between diseases and sanitation investments (which would require a comprehensive impact assessment), no benchmark was established, and no means of tracking the indicator was put in place. That indicator was removed in the restructuring associated with the Additional Financing, and replaced with an estimate of the number of beneficiaries. An outcome indicator for roads investments – monitoring the level of roughness of roads (IRI) – was established and tracked over the life of the project.

44. The monitoring framework was amended as part of the 2010 Additional Financing. Of the original PDO indicators, the indicator related to the fiscal framework was removed. In terms of output (intermediate outcome) indicators, the key changes were that indicators related to water and sewerage coverage were amended to directly reflect the number of water and sewerage lines constructed (thus aligning with the APL2 indicators). The drainage-related output indicator was also amended in order to reflect AF-funded drainage works, however, in retrospect, it is clear that

14 Other sources say that inflation may have been significantly higher.

11

the target was highly unrealistic. Both output and outcome targets were reduced, reflecting lower expected outputs due to cost increases.

45. Monitoring and Evaluation Implementation: The indicators discussed above were tracked consistently on a semi-annual basis by the executing agencies. The indicators were closely tied to the outputs of the project, and therefore provided information to the PBA and to the Bank on project implementation and were the basis for project restructurings. In addition, the tracking of road surface quality became embedded in the work of the DVBA and was regularly reported. The quality of the information was consistent and sound. In addition to specific project output and outcome monitoring, the PBA, through the project financing, implemented various systems for public expenditure and overall investment monitoring, including the Provincial System for Public Investments (SPIP), the Bank of Public Investment Program (BAPIN), and the Sistema de Gestión y Análisis de la Deuda (SIGADE – System for Debt Analysis and Management). The PBA consistently tracked and reported relevant fiscal indicators even after the indicator was removed from the reporting framework.

46. Monitoring and Evaluation Utilization: The focus during project implementation was on ensuring that project outputs were made in a timely manner. Indicators were a key tool of implementation monitoring. Beyond implementation tracking, the monitoring and reporting of road surface roughness feeds back into the DVBA’s broader road maintenance and investment planning through the project-financed HDM4 program. In addition, although this was removed from the project monitoring framework, the Province closely monitors operational and investment spending, debt levels and debt service obligations, and investment programs, all a vital part of provincial fiscal management.

Safeguards and Fiduciary Compliance Environmental and Social Safeguards:

47. The project was a Category B Project, as works were not expected to cause significant environmental impacts and measures were identified to mitigate any short-term environmental or social impacts. No resettlement was anticipated under the project. As part of project preparation, the PBA developed a safeguards framework to guide the environmental management of subprojects during the project cycle, revised socio-environmental management instruments in each of the implementing agencies and ensured that contracting documents included standards for environmental and social impact monitoring. In addition, the project included financing for safeguards-related capacity building in the DVBA, DIPAC, and DIPSOH.

48. In 2010, as part of the APL2 Mid-Term Review (MTR), a case of involuntary resettlement under that project’s roads component was identified. Although the review indicated that policies consistent with World Bank requirements had been followed by the implementing agency, it was noted that the Involuntary Resettlement safeguard had not been triggered in either of the APLs. To ensure that a framework for possible involuntary resettlement cases was incorporated into project implementation, the Additional Financing for APL1 triggered OP/BP 4.12, Involuntary Resettlement. 15 In addition, the APL2 MTR highlighted that borrower capacity for environmental and social safeguards monitoring could be strengthened. As a result, the PBA prepared an action plan to strengthen its environmental and social oversight of works. Subsequent supervision reports indicated significant borrower commitment to safeguards capacity and supervision; post-project interviews indicated impressive follow-through on the part of the borrower, including incorporation of World Bank-compliant policies into projects financed internally and through other international

15 At the end, no resettlement took place under the project.

12

financiers. In addition, the project implementing agency introduced oversight of occupational health and safety issues, applying such to a range of infrastructure investments. Prior to this, there had been no regular oversight of such issues, and its introduction in a systemic manner was a significant innovation in the region.

49. No social or environmental safeguards issues were identified under APL1 or its Additional Financing, thus safeguards compliance is considered satisfactory.

Procurement:

50. Procurement is assessed as Satisfactory. While there were no specific procurement issues highlighted during implementation, procurement in general took longer than originally anticipated. This was largely due to (i) lengthy internal (PBA) procurement processes; (ii) higher bids than expected, particularly for roads sub-projects in the initial project stages, due to higher international input prices; and (iii) low capacity to carry out the selection process for technical assistance assignments. In addition, capital and exchange controls may have discouraged international firms from bidding on works and, in particular, technical assistance, reducing competition in the procurement process. While several ISRs for APL1 noted issues with respect to procurement, including a case of misprocurement, these were mostly references to issues in APL2, and did not apply to APL1 investments.

Financial Management:

51. Financial Management (FM) is assessed as Satisfactory. Throughout the implementation period, the Project indicated adequate FM arrangements that in general complied with Bank requirements, and no accountability issues were identified. The project implementing unit provided timely financial information throughout the project, with accounting undertaken within the framework of the larger PBA accounting systems. The project reached a level of disbursement of 99.5 percent; the remaining balance was refunded to the Bank. Financial and concurrent audits, performed by the Honorable Tribunal de Cuentas de la Provincia de Buenos Aires, PBA’s Supreme Audit Institution, were received in a timely manner by the Bank. Financial statements all received unqualified opinions, and no ineligible expenditures were identified.

Post-Completion Operations/Next Phase 52. The PBA considers the project to have been a major success, with targeted and impactful investments and significant capacity-building within the implementing agencies (DVBA, DIPAC, and DIPSOH) through both project activities and the on-the-job training through implementation of over USD 520 million of investments and activities. PBA budget and financial management – augmented by targeted technical assistance and IT software and hardware – now provides a foundation for maintenance and investment planning in overall provincial infrastructure. Although both phases of the APL are now complete, the implementing agencies’ work with respect to infrastructure planning and implementation continues, with internal and external funding.

53. DVBA maintains its primary role in all aspects of provincial road maintenance and investment. It has incorporated the project-funded HDM4 software into its maintenance and rehabilitation planning, thereby prioritizing activities based on road quality and traffic volumes. In addition, it is actively monitoring load limits on provincial roads by using project-funded equipment. That said, DVBA’s overall budget is entirely dependent on transfers from the PBA, and its allocation for road maintenance are considered to be significantly underfunded. Additional information is provided in Annex 4 (Economic Analysis).

54. With respect to the APL water and sewerage investments, maintenance now falls to the relevant operators; at the project outset, PBA signed framework agreements with operators

13

receiving investments from the project specifying operating and maintenance requirements; all operators are under the regulatory oversight of OCABA (Organismo de Control de Aguas de Buenos Aires). It is recognized that tariffs do not currently cover the operators’ operating and maintenance costs (they similarly do not allow for new investment or major rehabilitation). This is a situation accepted by the provincial government, which has chosen to maintain below-cost tariffs to consumers and to separately provide subsidies to operators.16 To date, this arrangement has functioned successfully.

55. Ongoing maintenance of the storm drains and sewers financed under the project is the responsibility of the receiving town (in this case, Arroyo Soto drainage works, in the municipality of Ituzaingó). The municipality of Ituzaingó already maintains existing sewers and drains without issue, and problems are not expected. Several policies and guidelines were adopted with respect to urban planning and flooding mitigation through the project, including land-use guidelines, environmental protection guidelines as part of urban planning, the adoption of operations and maintenance (O&M) guidelines for urban drainage, and the preparation and distribution of the drainage manual, which introduced the integrated hydrology of the watershed as the primary factor in drainage design.

Section 3: Assessment of Outcomes 3.1 Relevance of Objectives, Design, and Implementation 56. Relevance of Objectives: Substantial. The objective of the project was consistent with the development priorities and circumstances at the time of project preparation. The 2004 Country Assistance Strategy (CAS) had three focus areas – (i) sustained economic growth with equity, (ii) social inclusion, and (iii) governance – and specified, respectively, the need to maintain and improve infrastructure in order to promote equitable growth, the restoration of basic social services, including access to sanitation in the Greater Buenos Aires area, and to improve the effectiveness of provincial governments.17 The objectives of the project – (i) to enhance the provision of water and sewerage services for the benefit of low-income people; (ii) to improve high-priority road segments of the Borrower’s road network; (iii) to mitigate urban flooding; and (iv) to support the reactivation of the Borrower’s economy and strengthen its regional competitiveness – were therefore consistent with the 2004 CAS focus areas, and they remain largely relevant at this time. The World Bank’s current Country Partnership Strategy with Argentina (CPS, FY 2015-2018) is structured around three major themes – “employment creation in firms and farms”, “availability of assets for people and households” and “reducing environmental risks and safeguarding natural resources” – the latter two highly relevant to the project’s investments and activities (water, sanitation, and drainage investments). In addition to the need for continued broad-based economic growth, the CPS notes that access to services – e.g., water and sewerage, particularly in areas of rapid and unplanned growth in the greater Buenos Aires area – and their quality remain uneven in Argentina, and that investments in flood mitigation measures remain necessary in order to reduce vulnerability to flooding events in urban areas. It should be noted, though, that the current CPS de-emphasizes World Bank support for roads and roads maintenance programs, stating that this is an area that is well established within the Government’s own programs. This is in part a reflection of the successful work of this and other World Bank-supported projects.

16 This situation is not specific to the PBA. Other provinces and major utilities in Argentina, including AySA, the largest utility in Argentina, follow the same policy approach. 17 Country Assistance Strategy for the Argentine Republic, January 29, 2004, Report No. 27340-AR.

14

57. Relevance of Design and Implementation: Modest. The design of the project was well targeted to three of the four stated objectives – i.e., road improvements, water and sewerage investments, and flood mitigation. Project activities and implementation were directly linked to the PDO. The exception was the fourth project objective – “to support the reactivation of the Borrower’s economy and strengthen its regional competitiveness”. While there are activities that were likely to have eased some constraints on economic efficiency – for example, reducing key road bottlenecks, and improving policies, procedures, strategies and infrastructure related to ports – outcomes were not established, and the link to such would have been difficult to make.

58. The quality and relevance of project design was hindered by confusion between Government program objectives, PDOs, and indicators in the main text of the PAD, the Results Framework, and the Loan Agreement. Please refer to paragraphs 9 through 13 for additional detail.

59. Although not a formal PDO, fiscal monitoring and performance was linked to the project through the inclusion of a monitoring indicator and Phase 2 triggers. The large provincial investment program was intended to be undertaken within a framework of improved fiscal performance. While some project-supported activities contributed to the PBA’s monitoring of the fiscal situation (e.g., the procurement of IT equipment for budget and financial management), the PBA’s objective – a stable and improving fiscal surplus – was necessarily more reliant on the province’s fiscal relationship with the national government, on which the project could have little to no influence.

3.2 Achievement of the Project Development Objectives 60. Efficacy Ratings: Although the project’s PDO remained unchanged over the life of the project, some PDO and output indicators were amended during the 2010 restructuring. For that reason, the project’s efficacy is judged related to both the pre- and post-restructuring PDO indicators.18 In addition, as there were four parts to the PDO, efficacy is rated separately for each part, pre- and post-restructuring. Finally, note that although project resources were heavily focused on roads and water supply and sanitation, evaluation guidelines are that all parts of the PDO should be weighted equally.

Summary of PDO Efficacy Ratings

Pre-2010 Restructuring Post-2010

Restructuring 1. Improve high-priority road segments of the Borrower’s road network Substantial Substantial

2. To enhance the provision of water and sewerage services Modest Substantial

3. To mitigate urban flooding Modest Modest 4. To support the reactivation of the Borrower’s economy Negligible Negligible

Average Rating Modest Substantial

18 Another restructuring took place in October, 2012, at which point some targets were revised slightly in order to align the targets more closely with likely outcomes. As the revisions were minor, they are not considered for the purpose of rating the efficacy of the project.

15

Roads: Efficacy pre-restructuring: Substantial. Efficacy post-restructuring: Substantial

61. The project largely achieved its outcomes and outputs with respect to the roads component under both the original and revised expectations; the efficacy for the component is judged to be Substantial. The original project design anticipated the rehabilitation and/or widening of 457 kilometers of provincial roads; over the course of the project, reflecting implementation successes and implementation readiness of additional sub-projects, the component was expanded; by project closing, 649 kilometers had been rehabilitated or widened. Project investments – in road surface rehabilitation, in the development of a strategy for road maintenance and investment at the DVBA, and in the control of truck loads on provincial roads – kept road roughness indicators very close to the original targets set in 2004 (actual IRI levels were less than 3.3, vs. an original target of 3.0) and succeeded in meeting the 2010 revised targets. Individual project-financed roads had an IRI higher than 4 in 2004 (i.e., in bad condition). After the works, the IRIs of those roads have improved substantially, to no more than 2 (with just few cases slightly over 2). However, project’s interventions only accounts for 10% of the total provincial network. By analyzing the whole network (as per outcome indicators), it is important to note that, on paper, IRI figures have remained roughly the same as the 2004 baseline, and in some cases appear to have worsened. However, the overall condition of provincial roads is significantly better than if the rehabilitation had not taken place. In terms of traffic, in a sample of 72.5% of the project-rehabilitated roads network, the average traffic has increased by 16.5% over a period of 10 years. In addition, by all reports, the project activities and their implementation had a very positive effect on capacity building within DVBA, with the department now able to measure the condition of roads and prepare and implement ongoing maintenance programs based on road condition and traffic volume. Finally, the project financed cost overruns of a performance-based roads rehabilitation and maintenance contract (CREMA – Contracto de Rehabilitación y Mantenimiento) with a private-sector firm under the Additional Financing that was primarily financed under APL2. Although the DVBA and the PBA have decided not to continue roads rehabilitation and maintenance under the CREMA framework, the experience proved useful in terms of capacity building in performance-based contracting and contract supervision. This review considers the achievements under this component to be substantial.

62. The following table summarizes the achievements of the main PDO and output indicators established at Appraisal and during the project restructuring. Annexes 2 and 7 present details on the location of the beneficiary roads.

Table: Roads Component Achievements

Objective Original Indicator

and Target (as per PAD)

Revised Target (revised June

2010)

Revised Target (revised October

2012)

Achievement of Revised Target

To improve high-priority road segments of the Borrower’s road network

High-traffic productive road assets preserved with an acceptable average roughness (HT IRI < 3)

HT IRI < 3.3 HT IRI < 3.8 3.36

Overall network roughness (AVG IRI < 3.3)

AVG IRI < 3.3 AVG IRI < 3.5 3.0

Kilometers of key productive roads rehabilitated (457 km)

633 km 649 km 649 km

Kilometers of urban roads widened (25 km) 28 km 28 km 28 km

16

Water Supply and Sanitation: Efficacy pre-restructuring: Modest. Efficacy post-restructuring: Substantial

63. The efficacy of the project with respect to the original expectations for WSS is judged to be Modest, while the efficacy with respect to the revised expectations is rated Substantial. The original PDO indicator related to WSS was to reduce waterborne diseases, and the initial beneficiary target was that the project would benefit 450,000 persons who would receive new piped water connections or access to piped sewerage connections. Because it was not possible to measure the original PDO indicator, and as the estimated beneficiaries as of the end of the project were notably lower than originally planned, the efficacy of the project with respect to the original WSS targets is rated as Modest. This rating is largely due to the inclusion of a PDO indicator that was not monitored, as well as to lower component outputs due to increased costs.

64. During preparation of the Additional Financing the original PDO indicator was removed, and the target for beneficiaries was revised to 259,073, reflecting the higher cost of WSS works. The project more than met the revised target, with an estimated total number of beneficiaries of 314,840. Of these, 85,775 benefited from piped water connections, while 254,057 gained access to piped sewerage connections. While actual connections to piped sewerage always lag relative to the initial installation, it is estimated that approximately 58,700 households have connected to the piped sewerage network, for an active beneficiary population of over 229,000. The efficacy of the project with respect to the revised WSS targets is rated as Substantial.

Objective Original Indicator and

Target (as per PAD)

Revised Target

(revised June 2010)

Revised Target (revised

October 2012) Achievement

1. To enhance the provision of water and sewerage services for the benefit of low-income people

Reduced waterborne diseases (no target specified) n/a n/a n/a

Number of poor people connected to water and sewerage services by the project (450,000)

259,073 267,270 314,840

Of which, people connected to water connections (not specified)

85,775 85,775 85,775

Of which, people with access to sewerage service lines (not specified)

272,512 254,057 254,057

Of which, people with active sewerage connections (not specified)

173,298 181,495 229,065

65. In addition to the absolute beneficiary figures, water and sewerage coverage rates increased significantly in the areas targeted by the project. The following coverage ratios were provided by the WSS operators for the areas financed by the project; the results are directly attributed to the project investments:

17

Location Type of Investment Pre-Project

Coverage Ratio Post-Project

Coverage Ratio Alejandro Korn (San Vicente) Water 62% 95% San Vicente (San Vicente) Water 62% 85% Lujan Water 45% 71% Florencia Varela Water 55% 65% Berazategui Sewerage 68% 75% Berisso Sewerage 45% 71% San Nicolas Sewerage 43% 53% General Villegas Sewerage 85% 95% Florencia Varela Sewerage 26% 54% Moreno, Pt. 1 Sewerage 0% 35% Moreno, Pt. 2 Sewerage 0% 40%

66. Similar to the roads component, the water and sewerage component resulted in significant capacity building within DIPAC, the department responsible for capital investments and network expansion in the water and sewerage sector. At the outset of the project, the unit that evolved into DIPAC had a staff of eight; over the course of the project, and with the experience and capacity building of APL1 and APL2, the unit became a 40-person department, completing 64 sub-projects with a total value of ARS 1.3 billion. DIPAC currently has 15 subprojects valued at a total of ARS 355 million under execution. Funds from several international financiers (the Inter-American Development Bank, in particular), as well as from the national and provincial governments, are now managed by DIPAC.

Flood Mitigation: Efficacy pre-restructuring: Modest. Efficacy post-restructuring: Modest.

67. Only limited funds were originally allocated to drainage investments – total investment costs were estimated at USD 14.3 million. In addition, investments and activities related to the objective were lower than initially planned, although all planned investments were ultimately undertaken under APL2. No PDO indicator was established in either the original project design or in the revised design. The original output indicator related to the component was “the Number and Type of Non-Structural Measures Implemented”; this was revised to “Hectares of Improved Drainage”, with an end-of-project target of 3,063 hectares. In the first years of implementation, the project supported several policies and guidelines aimed at reducing the impact of flooding on the built environment. In addition, at closing, the project had financed improvements to the Arroyo Soto drainage system, affecting 230 hectares in the municipality of Ituzaingó, at a total cost of USD 7.9 million.

68. The original results framework intended five non-structural (i.e., policies and procedures) measures related to flooding to be undertaken through the project. Included among these were the preparation of land-use guidelines and environmental protection guidelines as part of urban planning as well as the adoption of O&M guidelines for urban drainage. The most successful project-supported policy related to urban flooding was the development and adoption of an updated drainage design approach (consolidated into a drainage manual for municipal planners that was distributed to provincial localities). Earlier design standards did not take into account the larger watershed (i.e., outside of city boundaries). The revised approach considers the whole watershed and its hydrologic dynamic in a more holistic and integrated way as primary factors in drainage design. The borrower reports that the new design guidelines have resulted in a complete rethinking of the way planners approach drainage infrastructure and in significantly better outcomes in events that used to cause damaging floods.

18

69. Recent heavy rains in the area of the investment in Ituzaingó – which previously flooded streets, homes, and businesses on a regular basis – resulted in no flooding or damage, and surveys of residents showed very high levels of satisfaction. These results are consistent with the results of the drainage investments under APL2, where flooding in the targeted urban areas has been significantly reduced and even eliminated. Despite the fact that the physical outputs of the project were noticeably lower than expected, the objective’s efficacy is rated as modest due to the very positive impact in the affected areas and the contributions that the non-structural measures have made on drainage design and implementation.

Objective Original Indicator and

Target (as per PAD)

Revised Target (revised June 2010)

Revised Target (revised October

2012) Achievement

To mitigate urban flooding

Number and type of non-structural measures implemented (5)

4 4 4

Hectares of improved drainage (not in original) 3,063 230 230

Reinvigoration of the Province’s Economy: Efficacy pre-restructuring: Negligible. Efficacy post-restructuring: Negligible.

70. It is unfortunately not possible to assess the impact of the project on the objective to support the reactivation of the Borrower’s economy and strengthen its regional competitiveness. No indicators or framework were established to track this goal, however, even if indicators had been specified, it would have been exceedingly difficult to assess causality. The Borrower’s economy strengthened and recovered in the years following the approval of this project, however, this is consistent with the recovery experienced by Argentina as a whole. Public works financed under the project contributed to a sense that the Province was active and engaged in necessary investments (which it has built on using its own and other funds since then), contributing to confidence in local capacity. By default, however, the efficacy of the project in this respect is considered Negligible.

Other

71. Although it was not a specific project objective, the PBA’s overarching program included an objective of strengthening the Province’s fiscal sustainability. In addition, the original results framework intended to track the Province’s fiscal monitoring and performance, and the PBA’s fiscal results were one of the triggers for APL2. The project provided support to strengthen capacity in this regard, including: (i) support for the design and implementation of SIGADE (Sistema de Gestión y Análisis de la Deuda), the public debt management system; (ii) IT equipment allowing the integration of budget management and financing systems; and (iii) capacity building of the statistics office. PBA managers and staff are particularly appreciative of the debt management tools and their integration into overall budget management.

72. While the PBA provided information regarding its fiscal results on an annual basis to the World Bank, its performance deviated noticeably from the targets from the beginning; the APL2 trigger was waived, and fiscal monitoring and performance was dropped from the Results Framework as part of project restructuring during the preparation of the Additional Financing. The deterioration in fiscal results was reported to be mainly due to national-level changes in provincial responsibilities and revenue sharing. Annex 5 of this ICR provides additional information regarding the PBA’s fiscal performance, as well as comparisons between targeted and actual performance between 2004 and 2014.

19

3.3 Efficiency Project Efficiency Rating: Substantial

73. The efficiency of the project is rated Substantial, reflecting the achievement of significant results for the majority of the project with reasonable costs.

74. Economic Efficiency: The ex-post economic analysis undertaken as part of the ICR shows positive results supporting the Substantial efficiency rating. Ex-post economic analyses were undertaken for the three infrastructure components, taking into consideration actual costs and estimated benefits. A summary of the ex-post ERRs and NPVs are provided in the following table, as well as the weighted rate of return. The roads components achieved an estimated ERR of 48 percent; water supply investments achieved an estimated ERR of 30 percent, while sewerage investments reached an estimated ERR of 13 percent. The combined water supply and sewerage ERR is calculated to be 16 percent. Drainage investments achieved an estimated 13 percent ERR. The weighted ERR for the project is estimated to be 36.8 percent, largely due to the strength of the returns on the roads investments. Additional information regarding the economic analyses is provided in Annex 4.

Project Economic Returns, Ex-Ante and Ex-Post Net Present Value (NPV) is in USD million, discount rate of 12 percent

At Appraisal Ex-Post ERR NPV ERR NPV Roads* 82% 357.0 48% 106.6 Water Supply and Sanitation** 23% n/a 16% 44.5 Drainage 35% n/a 13% 0.5 Weighted Average / Total 60.8% 36.8% 151.6

* The e