world bank document · 2016. 7. 8. · document of the world bank for omcial use only report no....

Document of

The World Bank

FOR OmCIAL USE ONLY

Report No. 5783-AR

STAFF APPRAISAL REPORT

ARGENTI NA

WATER SUPPLY PROJECT

November 11, 1985

Projects DepartmentLatin America and the Caribbean Region

This doument 1e a resiid lshuo md my be 1ed by ncipients eoly in the pesfonnce ofther olda dde Its couters may not dorise be dikosed wthout Woi Bak sutboration.

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ARGENTINAWATER SUPPLY PROJECTSTAFF APPRAISAL REPORT

CURRENCY EQUIVALENTS

Currency Unit = Austral (A)

USS 1 = AO.80

A 1 = USS1.25 (September, 1985)

WEIGHTS AND MEASURES

Metric System

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

BH - Banco Hipotecario (National Mortgage Bank)DIPOS - Direccion Provincial de Obras Sanitarias de Santa Fe

(Santa Fe Water Utility)EPOS - Empresa Provincial de Obras Sanitarias de Cordoba

(Cordoba Water Utility)IDB - Inter-American Development BankMOSP - Ministerio de Obras y Servicios Publicos

(Xinistry of Puiblic Works and Services)MSAS - Ministerio de Salud Publica y Accion Social

(Ministry of Health and Social Welfare)OSN - Obras Sanitarias de la Nacion

(National Water Works)PNSB - Plan Nacional de Saneamiento Basico

(National Water and Sanitation Development Plan)SIGEP - Sindicatura de Empresas Publicas

(Comptroller of Public Enterprises)SNAP - Servicio Nacional de Agua Potable Rural

(National Rural Water Service)SRH - Secretaria de Recursos Hidricos

(Secretariat of Hydraulic Resources)UC - Unidad Coordinadora para el Financiamiento Programas

Inversion en Saneamiento Urbano(Coordinating Unit for Sector Investment)

UE - Unidad Ejecutora del Plan Nacional de Saneamiento(Executing Unit of the National Sanitation Plan)

FOR OMCIAL USE ONLY

ARGENTINAWATER SUPPLY PROJECTSTAFF APPRAISAL REPORT

Table of Contents

Page No.

LOAN AND PROJECT SUMMARY ..................................... iii

I. THE SECTOR .. ......... ...... ................. ..... ..... 1

Sector Organization ..................................... .. 1Population, Service Levels, and Quality ............ ....... 2Sector Performance, Policies, and Constraints ............. 2Sector Objectives and Strategy ........................... . 3

II. THE PROJECT .... ..... ... ................ 4

Background ................. ..... 4Project Objectives and Rationale for Bank Involvement ..... 4Project Description .... 5Project Implementation .........................4 ..... . . . . . 5Project Executing Agencies ..... 0 .......... 6Project Monitoring 1. ........................ 7Project Cost .............. .. 7Project Financing Plan .................................... 8Past and Current Financial Performance ......... 4.......... 8Future Operational Performance and Covenants .............. 9Future Financial Performance and Financial Covenants ...... 10Audit ... .................. ......... 4.. . 10Procurement .............................................4444 11Disbursements ........... ........................ 11Status of Project Preparation ............ ............ 12Project Justification and Economic Benefits .......... 12Project Sensitivitv, Risks and Safeguards ... .............. 14

III. AGREEMENTS REACHED AND RECOMMENDATIONS ................. 15

This report is based on the findings of an appraisal mission which visitedArgentina from February 23 to March 21, 1985. The mission was comprised ofMessrs. Emilio Rodriguez, Engineer; Bernardo Gomez, Financial Analyst; andEmmanuel Mbi, Economist.

hi document has a rsricted distribution and may be used by epents only in the perfornume oftheir ofriual duties. Its contents mny not otherwis be diWosed without World Bank authorization.

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Page No.

LIST OF ANNEXES

1. Institutional Arrangement in the Provinces . . ............. 172. Population and Service Level .... 183. Levels of Supply and Sewerage Services in Provinces 194. Project Description.. . .... 205. Project Implementation Schedule.... 236. Organization Charts ............. ... 247. Institutional Overview ..... 28

8. Terms of Reference for Technical Assistance.. 309. Monitoring Indicators .... 3610. Project Cost Estimates .... 37

11. Project Executing Agencies Financial Da t ... 4012. Project Cost by Procurement Method .... 4713. Loan Disbursement Schdule .... 4814. Economic and Social Analysis.. ... 4915. Selected Reference Documents and Data Available in

Project File... 57

MAp

IBRD No. 19128

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ARGENTINA


STAFF APPRAISAL REPORT

Loan and Project Summary

Borrower: The Republic of Argentina

Beneficiaries: Ministry of Public Works and Services (MOSP), National WaterWorks (OSN) and the water utilities of the Provinces ofCordoba (EPOS) and Santa Fe (DIPOS).

Amount: US$60.0 million equivalent (includes US$8.0 million forinterest during project execution).

Terms: Repayment in 15 years, including 3 years of grace, withinterest at the Rank's standard variable rate.

Relending The Borrower will make available proceeds of the Loan toTerms: OSN, EPOS and DIPOS on the same terms as those -of the loan.

Both foreign exchange and interest risk will be assumed bythe project executing agencies.

ProjectDescription: The project will assist the Government to rehabilitate old,

poorly maintained water and sewerage installations, extendwater services to new urban areas; and strengthen sectorplanning, management and finances. The project includes th-following components:

(a) national water and sanitation plan preparation;

(b) operational improvements program in Metropolitan BuenosAires and the cities of Cordoba and Rosario, consistingof the first stage of a national program including,inter-alia, consumption and production metering,rehabilitation of distribution networks, andstrengthening of the water utilities, distributionmanagement and commercial operations;

(c) rehabilitation and extension of the city of Cordoba'swater system consisting of the construction of a watertreatment plant to replace a rundown plant, upgrading ofanother plant, and water mains and secondary pipes; and

(d) technical assistance to improve the financial planning,accounting and purchasing systems of OSN and EPOS.

The project will directly benefit about 1.4 million peoplein the three project cities. This includes about 0.35million in Cordoba, 0.80 million in Buenos Aires and 0.25million in Rosario.

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Risks The multiplicity of activities to be undertaken under the projectwill require close cooperation of several entities. To someextent, the risk associated with the multiplicity will be mini-mized by the agreed upon institutional arrangements for projectimplementation which includes clearly defined responsibilitiesfor project participants, and by the services of an internationalorganization to undertake administration and contracting of thetechnical assistance program. These measures will be supple-mented by intensive supervision by Bank staff and by projectreporting and monitoring provisions which will allow the Bank tocheck frequently on project progress and to detect problemsearly. The federal and provincial governments commitment toensure the funds required by the project, and the strengtheningof the utilities' management systems and efficiency, minimizerisks of delays related to the availability of counterpart funds.

Project Costs:

Local Foreign Total-=U bS$ Million----

National Water andSanitation Plan 0.42 0.41 0.83

Technical AssistanceBuenos Aires 0.52 0.52 1.04Cordoba 0.10 0.11 0.21

Operational 'mprovementsBuenos Aires 8.30 i2.45 20.75Cordoba 2.78 4.17 6.95Rosario 3.03 4.54 7.57

Cordoba Water SystemRehabilitation and Extension

-Los Molinos Channel-, 5.59 2.50 8.09Water Production, and Distribution 25.35 12.49 37.84

Engineering and administration(7% of US$45.93 Million) 2.16 1.06 3.22

Base Cost (09/85 Prices) 48.25 38.25 86.50

Tech. Contingencies 10% 4.83 3.82 8.65

Price Contingencies 15.36 9.93 25.29

Total Project Costs 68.44 52.00 120.44

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Financing Plan:Local Foreign Total

-- US$ million

Bank - 52.00 52.00Government 11.07 - 11.07Domestic Loans 43.30 - 43.30OSN 14.07 - 14.07

TOTAL 68.44 52.00 120.44

Bank (interest during project execution) - 8.00 8.00

Estimated Disbursements:

1986 1987 1988 1989 1990 1991 1992 1993 1994Bank Fiscal Year US$ million

Annual 6.00 8.80 13.10 8.00 7.30 7.50 4.80 2.80 1.70Cumulative 6.00 14.80 27.90 35.90 43.20 50.70 55.50 58.30 60.00

Rate of Return: About 15Z.

ARGENTINA


PART I - THE SECTOR

Sector Organization

1.01 Until 1980, nation-wide responsibilities for most of the water andsewerage systems in urban areas were concentrated in the National Water WorksCompany (Obras Sanitarias de la Nacion - OSN). At that time, the Governmentinitiated a series of changes to decentralize most of these responsibilitiesto the provinces. The Government's action was part of an overall strategy toimprove quality of services by inducing efficiency and dynamism in a stag-nated, overcentralized sector (paras. 1.10 and 1.11).

1.02 The sector was decentralized by Decree 258 of 1980. Under this ap-proach, the Ministry of Public Works and Services (MOSP), through the Secreta-riat of Hydraulic Resources (SRH) was made responsible for planning, and over-all supervision of sector activities. Other responsibilities were given to:Ci) OSN for water and sewerage services in the Buenos Aires Metropolitan Area;(ii) a water utility in each of the twenty-three provinces; and (iii) theNational Rural Water Services (Servicio Nacional de Agua Potable Rural -SNAP), created in 1966, for services in rural areas and urban communities withless than 10,000 inhabitants. Other agencies active in the sector include theMinistry of Health and Social Welfare (Ministerio de Salud Publica y AccionSocial) and the National Mortgage Bank (Banco Hipotecario).

1.03 SRH, in addition to coordinating water resources management, over-sees the activities of OSN, SNAP, and a research and training institute. SRHis responsible also for making the decentralized arrangements operative. Tothis end, SRH created in 1980 the Executing Unit (UE) of the National Sanit-ation Plan for developing sector technical, financial, and managerial policiesand assisting the provincial utilities develop their capabilities; and in1985, the Coordinating Unit for Sector Investment (UC) for coordinatinginvestment projects which require Government funds and external financing.

1.04 OSN, a national government enterprise, in addition to providingwater and sewerage services to fourteen municipalities of the Buenos AiresMetropolitan Area with an aggregate population of 10 million provides tech-nical assistance to the provincial entities in coordination with UE.

1.05 The provincial entities created under the decentralization process,received from OSN, on a grant basis, the existing infrastructure and thecurrent assets, including accounts receivable. Organizationally, these enti-ties vary from provincial enterprises to departments of provincial governments(Annex 1). The responsibility for setting tariffs rests with Provincialgovernments. The provincial utilities under the proiect are: Cordoba Provin-cial Water Works (Empresa Provincial de Obras Sanitarias - EPOS) and Santa FeProvincial Water Works (Direccion Provincial de Obras Sanitarias - DIPOS).

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Population, Service Levels, and Quality

1.06 Argentina has become increasingly urbanized. During the 1970s, theurban population grew at a rate of 2.5% per annum, from 18 to 23 million,while total population grew at 1.6% per annum, from 24 to 28 million. The1980 census showed that 83% of the population lived in urban areas, 75% livedin 198 communities with populations greater than 10,000, and 35% was concen-trated in the Buenos Aires Metropolitan Area (Annex 2).

1.07 The percentage of total population connected to public water supplysystems increased from 45% in 1970 to 60Z in 1980. In urban areas, theincrease was from 56% to 69%. Population service coverage for sewerage inurban areas is lower than that for water supply: 31% in 1970 and 37% in 1980(Annex 3). In rural areas, 71% of the population living in communities bet-ween 100 to 2000 inhabitants received water services through house connec-tions. About 38% of the rural population had excreta disposal systems. Watersupply and sewerage service coverage is not in line with the per capita incomerank of Argentina in Latin America (6th). The country ranks 9th in servicelevels.

1.08 Public water supplies throughout the country are chlorinated andquality is controlled by routine testing and analyses. A large portion of thepopulation not connected to public systems, however, relies on individualwater sources which often are contaminated. In parts of the Buenos AiresMetropolitan Area and in provinces especially in the northeast and north,where services have not been extended and bad sanitary conditions are prev-alent, infant mortality rates are more than twice the national average.

1.09 Population and public service coverage in the proposed project areaare as follows: (a) Metropolitan Buenos Aires has a population of 10.0 millionin a vast urban area and water and sewerage service coverages of 64% and 40%respectively. These low coverages result from some distant municipalitieslacking connections to the public system; (b) the city of Cordoba has 1.0million inhabitants and service coverages of 78% and 25%; and (c) the city ofRosario has 1.0 million population and service coverages of 89% and 45%.

Sector Performance, Policies, and Constraints

1.10 OSN led the development of the water supply and sewerage sector inArgentina for more than a century, building and operating systems which weremostly financed and subsidized by the Government. This institution operatedin periods of rapid growth when Argentina attained a leading position withregard to sector activities in the region. Installed water production andmain distribution capacity were often designed to meet overestimated demands.Buenos Aires was situated near an unlimited supply of fresh water. As long asthe real cost of capital was low OSN found it more effective to build largeinfrastructure rather than operate sophisticated systems which could reducedemand. The deterioration of the economic conditions in the country preventedthe Government from continuing to provide large subsidies for sector

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activities, and OSN was unable to adjust to the resulting financial con-straints. Until 1976, OSN was not generating enough revenues to cover evfnoperating expenses. In 1977, newly adopted economic policies stressed greaterfinancial self-reliance of public enterprises and required OSN to generate itsfirst operating surplus. Government subsidies were curtailed, and OSN wasdirected to borrow on the internal and external credit markets. Grant financ-ing of investment was reduced to limited funds obtained from provincial andmunicipal budgets. The combined effect was a sharp reduction in investmentand an increasing inability to satisfy demand for services and to properlymaintain existing installations.

1.11 The decentralization of the sector reflected the Government's beliefthat most of the above constraints could be more effectively removed by pro-vincial governments. The decision to decentralize was taken, however, withouttaking into consideration the limited institutional capabilities at the pro-vincial level, and it was not accompanied by the necessary assistance to pre-pare the provinces for the full assumption of responsibilities. The Govern-ment is now attempting to overcome these deficiencies by defining and imple-menting a set of policies and assistance programs which would be included in anational water and sanitation developmeat plan, to be prepared under the pro-posed project (para. 1.13).

Sector Objectives and Strategy

1.12 At the end of 1983, the Government established service goals for1990. The goals were to provide 80% of the population with water supply and70% with sewerage or alternative excreta disposal systems. The attainment ofthese goals represented serving an additional 6.1 million population throughpublic water supplies at a cost estimated by Argentinian authorities at aboutUS$1.6 billion, and 10.4 million persons with sewerage at a cost of aboutUS$2.4 billion. Annual investment required (US$700 million) is several timesthe annual investment levels of the 1970s and the 1980s (US$114 million andUS$78 million in current prices). This level of investment is highly unlikelyto be achieved since: (a) the country's public investment programs continuebeing sharply curtailed; (b) the financial intermediaries and financialresources for the sector have yet to be determined; and (cj the water entitieswould need sufficient lead time to implement operational and financial poli-cies which allow them to internally generate sufficient funds for investmentsand for serving debts. The emphasis in sector development will have, there-fore, to be placed on maximizing service coverage and quality under a severelylimited investment budget. This approach entails the rehabilitation andexpanded use of existing infrastructure, reduction of per capita investmentcosts, water conservation, and improvement of operational and commercialpractices.

1.13 The Government has now agreed to this approach which will featurethe National Water and Sanitation Plan (PNSB) to be prepared under theproject. The plan will update the demand for services and evaluate requiredinvestments. It will review the setting up of an investment financing systemand propose tariff policy and levels to reflect the economic cost of services,

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the users' capacity to pay, and the need to enhance the water utilities'self-financing capacity. Other areas to be covered are the least costanalysis of projects, which take into account rehabilitation of existinginfrastructure, and the promotion of water conservation measures consistentwith the efficient use of sector resources. The plan will be in line withgeneral economic policies for the country, inter alia, to alleviate federaland provincial governments budgetary requirements by financially strengtheninggovernment enterprises and improving public sector management.

1.14 The Bank's strategy is to act as a catalyst to speed the formulationand implementation of new sector policies and practices conducive to moreefficient operation and less capital intensive sector investments. An import-ant element of this strategy is to help the Argentinian authorities in thepreparation of the PNSB plan, while at the same time focusing Bank assistanceon the rehabilitation of existing installations, to prevent a collapse ofservices in major cities and improvement of the operational, managerial, andfinancial capabilities of.the provincial utilities. With this assistance, theprovincial utilities would be prepared to introduce improved cost recoverypolicies and to undertake the necessary expansion of the systems.

PART II - THE PROJECT

Background

2.01 In late 1983, the newly elected authorities requested the Bank todiscuss sector issues, assess progress made in sector reorganization, and toassist with project preparation. The project was appraised in February-March,1985 and negotiations were held in Washington in October, 1985. TheArgentinian delegation was led by Carlos Rivas Roche, Undersecretary ofHydraulic Resources, MOSP.

Project Objectives and Rationale for Bank Involvement

2.02 The main objectLves of the project, which is the first in thesector, are to: (i) rehabilitate deteriorating infrastructure, replace rundownfacilities and extend water services to new urban areas; (ii) prepare anational plan to provide the necessary institutional framework to permit thenewly decentralized system to function in a more efficient manner; and (iii)initiate a national operational improvements program which promotes waterconservation through physical rehabilitation of water systems, production andconsumption metering, and institutional strengthening of the water utilities.The operational improvements program covers in this first stage the BuenosAires Metropolitan Area, and the cities of Cordoba and Rosario de Santa Fethat represent 60% of the urban population of the country, and where che waterutilities are prepared to introduce new technologies which could be replicatedin other areas of Argentina.

2.03 The above objectives are corsistent with the Bank's strategy toassist the Government in the improvement of public sector management both atthe national and provincial levels; the inducement of greater efficiency inthe use of resources; and the rehabilitaLion of the nation's valuable socialinfrastructure.

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Project Description

2.04 The project includes the preparation of a national water supply andsanitation plan (US$1.1 million or 1% of the project cost), an operationalimprovements component (US$47.0 million or 392), and rehabilitation and exten-sion of the water system in the city of Cordoba (USS70.7 million or 59%). Theprojec- would be complemented by technical assistance to OSN and EPOS (US$1.6million or 1% of the project cost).

2.05 The preparation of the national water supply and sanitation planwill include: (a) formulation of Government objectives in the sector, servicetargets ard investment alternatives for the decade; (b) development of projectevaluation criteria to foster adequate technical standards for project designwith special emphasis on least cost analysis; (c) preparation of financialpolicies, including definition of financial criteria for setting investmentpriorities; (d) definition of tariff structures and levels to achieve reason-able rates of return on sector assets and enable the sector to contribute sig-nificantly to new investments; (e) evaluation of the existing organizationalframework and responsibilities at federal and provincial levels; (f) recom-mendations for the establishment of the organizational and institutionalstructures to effectively implement the sanitation plan; (g) recommendationson strategies directed at improving the efficiency of the present sectororganization; (h) definition of responsibilities in sector financing andalternative flow of funds; (i) identification of manpower resources and stafftraining needs; and (j) evaluation of existing research facilities and theirfunding, and recommendations for further development. Preparation work willbe carried out by consultants assisting SRH (paras. 2.09 and 2.10).

2.06 The operational improvements component which will be carried out inMetropolitan Buenos Aires and the cities of Cordoba and Rosario de Santa Fe,includes the following sub-components: (a) wnter consumption metering; (b)production and main distribution metering; (c) water distribution flow survey;(d) mapping of the water distribution and sewerage systems; (e) water distrib-ution network rehabilitation; (f) distribution system management; and (g) up-grading of commercial systems. The component, mostly equipment (88%), isdesigned to cut water wastage thus decreasing operating costs and delaying theneed for new investment (para. 2.34).

2.07 The rehabilitation and extension of the Cordoba water systemincludes the following: (a) construction of 'Los Molinos water treatmentplant (2 m3/s); (b) upgrading of "Suquia water treatment plant; (c) comple-tion of the multipurpose Los Molinos raw water channel; (d) four boosterpumping stations; and (e) construction of mains and distribution pipelines.

2.08 Finally, the project includes: (a) studies, technical assistance andequipment for the improvement of financial planning, accounting, and purchas-ing systems for OSN and EPOS and (b) preparation by OSN, EPOS, and DIPOS ofinvestment, operational and financial recovery plans including annual targetsin the areas of water production and sales, service levels and quality.as wellas billing, collection and tariff levels (para. 2.22).

Project Implementation

2.09 The Borrower will be the Argentine Republic. MOSP will act asterhnical agent for the project, being responsible for overall project

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supervision and coordination. To this end, MOSP through SRH, will be theliaison between the Bank, the Government and the project beneficiaries. MOSP,with assistance of consultants, will prepare the national water and sanitationplan. OSN, EPOS, and DIPOS will be responsible for the execution of works andinstitutional programs in Metropolitan Buenos Aires, Cordoba, and Rosariorespectively. Each of these agencies have appointed a coordinator for theproject. The project will be executed in the period January 1986 to December1993. Detailed implementation schedule is in Annex 5.

2.10 Project execution will require extensive use of consultants to helpintroduce improved managerial praccices in the project executing agencies(para. 2.12-2.15). The project includes 410 man-months of foreign consultantsand 300 man-months of local consultants. MOSP and OSN will enter into mastercontracts with consultants for the preparation of the National Water andSanitation Plan, and for the operational improvement program in Buenos Aires.EPOS and DIPOS will retain specialized consultants for specific projectactivities. Agreement was reached during Loan Negotiations on terms ofreference for master contracts for consulting services.

2.11 The contractual documents under the project are: (a) a Loan Agree-ment between the Bank and the Government; (b) Project Agreements between: (i)the Bank and OSN; (ii) the Bank, EPOS and the Government of Cordoba; and (ii)the Bank, DIPOS and the Government of Santa Fe; (c) three onlending agreementsbetween the Government and: (i) OSN; Cii) EPOS and the Government of Cordoba,and (iii) DIPOS and the Government of Santa Fe; and (d) Special Account Agree-ment between the Government and the Account Bank.

Project Executing Agencies

2.12 OSN, the executing agency for the Metropolitan Buenos Aires projectsubcomponent, is managed by an administrator appointed by MOSP. The adminis-trator directs the activities of the institution through three departments:operations, engineering, and finances and administration, and twelve second-level units under the department's managers. With 9,400 employees, OSN, pro-vides weter and sewerage services through 1.0 million and 0.5 million houseconnections respectively. OSN's annual budget is approved by the Congress;cizg;es for services are approved by an interministerial committee comprisingPublic Works, Economy and Labour. OSN is required to get prior approval fromthe Ministry of Economy and the Planning Secretariat for major multi-yearinvestment projects. Planning and budgeting at OSN have been weak. Account-ing reports are not issued on time and are often based on unreliable and poor-ly coordinated data. The accounting system is, however, adequate to recordproject related transactions and expenditures. OSN staff prepares mostengineering designs and supervises most works and operations. Operation ofsystems is an area which needs substantial improvements. With the exceotionof limited areas of Buenos Aires for which services were partially financed byIDB, systems lack production and consumption metering. Most of the instru-mentation in the old production and distribution systems are in disrepair. Inaddition to these physical deficiencies of the system, water distributionmanagement needs upgrading. The commercial system needs to be strengthened inthe areas of installations mapping, customer register, tariff structure, andbilling and collection (para. 2.21).

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2.13 EPOS, the executing agency for the Cordoba project subcomponent, isgoverned by a board composed of a president and four ditictors. There aredepartments for planning, engineering, operations, finances and administra-tion, and small communities administration. With 2.030 employees, EPOS, prov-ides water and sewerage services through 260,000 and 92,000 house connectionsrespectively. Its budget is approved by the provincial congress and tariffsby the provincial government. Engineering planning is quite adequate to needsand financial planning has improved noticeably during project preparation.Engineering design and project supervision are carried out in most cases byEPOS' staff. Problems in operations, commercial and accounting areas aresimilar to those of OSN (para. 2.21).

2.14 DIPOS, the executing agency for the Rosario project subcomponent, ismanaged by an administrator appointed by the provincial Governor. Activitiesare carried out by five departments: planning, operations, commercial,finances, and administration. With 1,400 employees, DIPOS provides water andsewerage services through 299,000 and 148,000 house connections respectively.Accounting is satisfactory. Engineering is mostly carried out by DIPOS'staff. Problems in operational and commercial areas are similar to those ofOSN and EPOS (para. 2.21).

2.15 SRH, the executing agency for the national sanitation plan, is atMOSP directly responsible for overseeing the activities of UC and UE. SRHstaff comprises about 30 professionals. SRH to adequately undertake itsincreasing activities under the project, would rely heavily on the consultantsassisting UE and UC (paras. 2.09-2.10). Organization charts of SRH, OSN, EPOSand DIPOS are in Annex 6. An instititional overview of the three utilities isin Annex 7. Draft terms of reference for technical assistance to OSN and EPOSare in Annex 8.

Project Monitoring

2.16 Monitoring indicators have been prepared as shown in Annex 9.Agreement was reached during negotiations on the monitoring indicators as wellas on a plan for project progress reporting. Agreement was also reachedduring Loan Negotiations that two project implementation reviews will becarried out by June 30, 1987 and December 31, 1989, respectively. Thesereviews which include discussions with the Bank of the findings and recommend-ations of the water and sanitation plan, operational improvement program, andtechnical assistance for OSN and EPOS will provide the basis for the requiredcorrective actions on project execution.

Project Cost

2.17 The total cost of the project excluding interest during constructionis estimated at US$120.4 million equivalent. The foreign exchange componentis estimated at US$52.0 million or 43% of the project cost. Costs are basedon September 1985 prices and include physical contingencies of 10Z. Pricecontingencies of US$25.3 million or 27% of 1985 project cost are based onestimated international inflation of 5% in 1985, 7.5% in 1986, and 8%, there-after. Technical assistance and consultant costs (US$5.7 million) are based

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on those of similar internationally and locally recruited experts inArgentina. Construction costs are based on unit costs developed by OSN andEPOS during implementation of ongoing projects. Costs do not include directtaxes. Detaile& project costs are in Annex 10.

Project Financing Plan

2.18 The Bank loan of US$60.0 million to the Government of Argentinafinances 100 percent of foreign costs estimated at US$52.0 million. Also, theloan includes US$8.0 million to finance interest during the execution period,to help reduce the financial pressures on the Government and oh t.'e projectexecuting agencies. The l_-al counterpart of US$68.4 million will be financedby OSN internal cash generatlon (US$14.0 million), a combination of provincialgrants or loans to and internal cash ge-neration from EPOS and DIPOS (US$39.5and US$3.8 million respectively), and a federal government contribution to theprovince of Cordoba for the multipurpose -Los Molinos" channel (US$11.1million). Assurances from the federal and provincial governments wereobtained during loan negotiations on the timely availability of counterpartfunds. Bank loan proceeds will be made available by the Government to OSN,EPOS and DIPOS on a loan basis, at the same interest as the Bank loan, andwith similar grace and repayment periods. Foreign exchange risk would beassumed by the project executing agencies. The signing of at least two subsi-diary loan agreements between the Government, the executing agencies and therespective provincial governments is a condition of effectiveness of the pro-posed loan.

Past and Current Financial Performance

2.19 OSN's financial situation in 1980 was highly satisfactory. In both1981 and 1982, the company experienced substantial operating surpluses (incomebefore depreciation amounted to US$154 and US$67 million respectively) whichresulted in a high liquidity position. OSN's favorable financial performancedeteriorated rapidly, however, mostly as a result of declining tariffs which,by the end of 1982 through 1984, were equivalent to 34-40% of early 1981tariffs in real terms. OSN revenues in 1983 and 1984 were used almost entire-ly to cover oreration and maintenance budgets which lacked programs of pre-ventive maintenance and of replacement and improvement of worn out facili-ties. The 1984 operating deficit was financed by delayed payments to contrac-tors and suppliers and by Government grants. OSN's investments which in 1981and 1982 amounted to US$68 million and US$85 million respectively, declined toUS$28 million and US$38 million in 1983-84. OSN's financial statements for1982-84 are shown in Annex 11. Financial performance in 1985 is expected toimprove as a result of substantial tariff increases during the first semester(22% cumulative in real terms). These increases were approved before thetemporary freeze imposed on prices and wages. The Government has indicatedits willingness to consider further tariff increases when the wage and pricefreeze is relaxed in 1986.

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2.20 EPOS and DIPOS started operations with a financial position adequateto support the -implementation of policies and practices to gradually improveservice coverage and quality in the respective provinces. They received fromOSN a large asset base and no debt. Also, tariff levels were sufficient togenerate enough revenues to cover operation and maintenance budgets and tofinance some investments. Since then the performance of both companies deter-iorated. DIPOS' revenues continued being sufficient to cover its limitedoperation and maintenance budget and to finance an average annual investmentof US$6.0 million during 1982-84. This performance was mainly the result ofthe implementation in 1983 of a policy of periodic tariff adjustments based ona formula which takes into consideration cost increases. The implementationof this policy allowed the company to rapidly recover its 1981 tariff level inreal terms after a sharp decline experienced in 1982. EPOS, which also exper-ienced a tariff deterioration delayed the recovery process until mid-1984.Tariffs during 1982-84 were equivalent to 31-39% of early 1981 tariffs, inreal terms. As a result, EPOS' revenues were barely sufficient to finance thealready unsatisfactory operations and maintenance budget. EPOS' investmentssince its creation have therefore been negligible: US$2.0 million in 1983 andUS$2.7 million in 1984 (the latter being financed by a provincial grant).This trend is however, being reversed by a recent provincial government andEPOS' management decision to implement a tariff recovery plan. In compliancewith this plan, tariffs were increased by 45Z, in real terms, between June1984 and April 1985. Further tariff increases scheduled for 1985 were indefi-nitely postponed in compliance with Government's recently imposed austerityplan. The net result of this tariff freeze would be a 1985 average tariff 8%above the 1984 tariff level. This tariff level would provide EPOS with a pos-itive income before depreciation despite excessive maintenance expendituresfor the water treatment plant to be replaced under the proposed project (aboutUSS1.6-1.8 million for this year). In addition, government and EPOS' authori-ties have agreed to continue gradually increasing tariffs during the proposedproject execution period as soon as the price freeze is lifted (para. 2.22).This policy is consistent with EPOS' charter which provides that tariff levelsshould be sufficient to generate enough revenues to cover current expendituresand debt service, and also to contribute an unspecified amount to financeinvestments in system expansion and improvement. EPOS and DIPOS financialinformation is presented in Annex 11.

Future Operational Performance and Covenants

2.21 The operational improvements project component is designed to drama-tically change the operations of the three water utilities involved by addres-sing, inter alia, major weaknesses discussed above (paras. 2.12-2.15). Therewould be a tightened control of water produced and sold. Clandestine connec-tions and leakages would be minimized. Metering the largest water consumers(the top 10-25%) which account for the bulk of water consumed (40-60%), wouldpermit the introduction of tariffs structures related to the marginal cost ofwater and would promote water conservation. Thus, as water demand decreases,large investments could be postponed. The increased efficiency in the waterutilities will be closely monitored as follows: (i) by the monitoring indi-cators agreed upon during loan negotiations (Annex 9); (ii) through invest-ment, operational, and financial recovery plans (para. 2.22); and (iii)through project implementation reviews agreed upon during negotiations (para.

- 10 -

2.16). In addition, agreement was reached with OSN, EPOS, and DIPOS duringloan negotiations on the following: (i) metered connections as percentage oftotal connections will increase in Buenos Aires, from 10Z in 1986 to 22% in1991; in Cordaba, from 6% to 24%; and in Rosario, from 5% to 8%; and (ii)revenues collected to amounts billed by OSN, EPOS and DIPOS will increase from86% in 1986 to 96% in 1991 and thereafter.

Future Financial Performance and Financial Covenants

2.22 There is an increasing awareness at federal and provincial levels inArgentina of the need to improve the self-financing capabilities of the publicenterprises, including water and sewerage companies. The provisions in theproject which involves the revision and updating of ingrained institutional,financial, and engineering policies and practices will help the project bene-ficiaries in this endeavor (para. 2.08). These revisions combined with theresults of the technical assistance, metering and other operational improve-ments to be financed under the loan, will provide the basis for financialrecovery, investment and managerial improvement programs. These programsare expected, inter alia, to set specific targets for future financialimprovements in the forms of rates of return or internal contribution toinvestment, which the Bank will review in detail in conjunction with the pre-paration of further operations in the sector. During loan negotiations: (i)agreement was reached on the terms of reference for the above financialrecovery plans for OSN, EPOS, and DIPOS, and (ii) assurances were obtainedthat these plans and schedules for their implementation will be completed byJune 30, 1987, and that the Bank will be given an opportunity to comment onthe provisions of the plans. Assurances were also obtained during negotia-tions that: (i) beginning in 1986, OSN, EPOS and DIPOS will generate suffi-cient revenues to cover operating expenses, adequate maintenance, taxes, anddebt service requirements; (ii) OSN, EPOS and DIPOS will submit to the Bank bySeptember of each fiscal year an update of the financial pLan and projectionsfor the current and the following three years, specifying the measures to betaken to meet the aforementioned financial covenant.

Audit

2.23 Audit of the project executing agencie: is carried out as follows:(i) MOSP, by the Comptroller General; (ii) OSN, by tho Comptroller of PublicEnterprises (Sindicatura General de Empresas Publicas - SIGEP);. (iii) EPOSby the Contaduria General de la Provincia; and (iv) DIPOS, by the Tribunal deCuentas de Santa Fe. SIGEP is at present an acceptable independent auditor.The Bank will assess in the next few months the institutional and technicalcapabilities of the EPOS and DIPOS auditors. During Loan Negotiations, assur-ances were obtained that: (i) OSN, EPOS, and DIPOS will have their financialstatements for zacii fiscal year starting with fiscal year 1985 and statementof expenditures, audited by independent auditors satisfactory to the Bank, andin accordance with generally accepted accounting principles; (ii) MOSP willhave the accounts of its project component and the project's special account

- 11 -

audited by independent auditors satisfactory to the Bank and in accordancewith generally accepted accounting principles; and (iii) starting in June 30,1986, but not later than April 30 of each following years, the project execut-ing agencies will submit to t.ze Bank certified copies of the audited financialstatement and reports.

Procurement

2.24 Procurement under the project will be carried out following Bankguidelines. The exemption for project-financed procurement from legislationmandating the use of domestic goods and services would be a condition of loaneffectiveness. All contracts for equipment and materials exceeding US$100,000and for civil works exceeding US$1,000,000 will be awarded on the basis ofinternational competitive bidding. Equipment and materials will be grouped toobtain packages in excess of US$100,000 with the exception of contractsamounting to less than US$130,000 under the MOSP water supply and sanitationplan component, US$1,000,000 for OSN's component, US$2,800,000 for EPOS' com-ponent, and US$370,000 for DIPOS' component. The nature of civil works underthe operational improvements components precludes the efficient packaging ofservices to be bid as works will be carried out in operating installationsspread over the project cities. These works, amounting to approximatelyUS$9.0 million or 11% of the project cost, will be carried out under proced-ures satisfactory to the Bank by: (i) local contractors: US$2,600,000 underOSN's subproject, US$900,000 under EPOS' subproject, and US$1,000,000 underDIPOS' subproject; and (ii) by force account US$2,600,000 under OSN's subpro-ject, US$900,000 under EPOS' subproject, and US$1,000,000 under DIPOS' subpro-ject. Standard bidding documents and a purchase program for 1986 were agreedupon during Loan Negotiations together with assurances of an updating of thepurchase program by October 31, of each year starting in 1986.

2.25 Technical- assistance and consultants' services, will be procured inaccordance with Bank's Guidelines for the Use of Consultants. A contract withan international organization under terms and conditions satisfactory to theBank wil]. be awarded to ease the administrative burden on MOSP for the prep-aration of the water supply and sanitation plan.

2.26 Project costs by procurement method are presented in Annex 12.Prior Bank review of feasibility studies, final designs and prequalifications,bidding documents, awards, and contra:ts procured under ICB will be required.The executing agencies will maintain all relevant documentation for local pro-curement of goods and services. Bank missions will carry out an ex-postreview by sampling.

Disbursements

2.27 The Bank will disburse as follows:

(a) 100% of foreign expenditures for direct imports;

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(b) 44% of local expenditures for imported equipment and materialsprocured locally and ex-factory costs of locally manufactured goods;

(c) 44% of total expenditures of civil works;

(d) 100% of total expenditures for consulting services and training; and

(e) against amounts due for interest and other charges on the Bank'sloan until the date of the first principal payment to the Bank up toa maximum of US$8 million.

Disbursed amounts, excluding interest under (e) above, should not exceedUS$1.0 million for MOSP, US$16.0 million for OSN, US$29.0 million for EPOS,and US$6.0 million for DIPOS. Proceeds of the Bank loan will be disbursedupon presentation of standard documentation with the exception of thoseproceeds financing goods and services procured locally which will be disbursedagainst statement of expenditures prepared by MOSP. In these cases, detaileddocumentation will be retained by the executing agencies for inspectionduring supervision missions. Disbursements, estimated in line with the 8 1/2year profile for water supply projects in the Region, would be completed byJune 30, 1994 (Annex 13). A special account for the project in the amount ofUS$5.0 million (estimated four month's peak disbursements) will be establishedin the Central or other bank.

Status of Project Preparatior

2.28 Project preparatior^ conforms to the agreed implementation schedule.The project coordinating unit in MOSP (UC) has been created and staffed. UChas prepared and submitted to the Bank model onlending contracts between MOSPand OSN, EPOS, and DIPOS. UC has also prepared draft terms of reference fora master contract for consulting serviczs under the preparation of thenational plan. -Los Molinos treatment plant design preparation is com-pleted. The land for the plant is already in the expropriation process andthe law allows EPOS to take immediate possession of it. OSN, EPOS, and DIPOShave created and staffed units for the execution of the operational improve-ments components. Terms of reference for most of the activities in the oper-ational improvement and for the technical assistance to OSN and EPOS have beenprepared. During Loan Negotiations agreements were reached between: the Bankand MOSP and the execut'ng agencies on onlending contracts; and between theBank and MOSP on terms of reference for a master contract for the preparationof a national water and sanitation plan.

Project Justification and Economic Benefits

2.29 General. The project will enable OSN and DIPOS to satisfy short-to-medium-term demand from existing faZilities and to prepare them to adequa-tely undertake system expansions which k1ill be needed in the future. The pro-ject yields satisfactory returns and has a high social impact. In Cordoba forinstance, nearly 30% of the beneficiaries are the urban poor who would be pro-vided a dependable water supply at affordable rates. Given the advanced state

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of deterioration of water production facilities in Cordoba, large levels ofunaccounted-for water in all three cities comprising the project and theexisting inefficient financial and operational practices among the entities,failure to execute the project would invite the risks that: (i) in the nearfuture EPOS (Cordoba) would become incapable of providing even a minimal levelof services to Cordoba's population; and (ii) all three entities would alsocontinue to experience ever increasing losses with the consequent need forlarger subsidies and investments. Furthermore, the project will be instru-mental for assuring major sector-wide institutional, financial and operationalpolicy adjustments.

2.30 Least-Cost Solution. The project finances only items of high prior-ity and immediate impact which are consistent with long-term objectives. Pro-ject components represent the least-cost solution for achieving the project'sobjectives (para. 2.02) and do not involve the use of unusual or unproventechnologies. The most significant physical component (the construction ofwater production, transmission and distribution facilities to replace rundownfacilities in Cordoba) was selected on the basis of the analyses of eightalternatives and it is consistent with the future reorientation of Cordoba'swater system (study of alternatives available in project file).

2.31 Economic Analysis. Internal rates of return (IRRs) have been calc-ulated for the two key components of the Cordoba subproject (65Z of total pro-ject cost). The estimated IRR for the plant construction and expansion compo-nent is 10Z, and for the operational improvement component 44%, yielding aweighted IRR of 15%. The Buenos Aires and Rasario operational improvementcomponents (24% and 9% of total project cost) possess similar characteristicsto this component in Cordoba and c.uld be expected to yield similar highresults. A detailed description of the benefits of these components is inproject files. An IRR was not computed for the institutional development com-ponent because its benefits cannot be quantified reliably. Assumptions anddetails of the analyses are described in Annex 14.

2.32 The IRRs were calculated using revenues from consumer charges as theminimum measure for economic benefits of the project. As in all twater supplyand sewerage projects, the full economic impact of the proposed project cannotbe captured solely in a rate of return measure since many benefits such asimprovement of public health and hygiene, enhanced property values, employmentgeneration, greater well being of tie population, cannot be quantified reli-ably and therefore, are excluded from the calculations. The consumer surplusis excluded from the calculations also. As a result, the IRRs are under-stated. Revenues were calculated using projected 1987 tariffs in Cordoba heldconstant in September 1985 prices. The calculated IRRs indicate that theproject is fully justified in economic terms.

2.33 Long-run marginal costs for the Cordoba subproject were calculatedusing the Average Incremental Cost (AIC) method with a 12% discount rate. Allcosts are expressed in September 1985 prices. The AIC for the subproject isUS$0.17/r3 which is higher than present (1985) tariff expressed in September

- 14 -

1985 prices of about US$0.14/m3. Tariffs projected for Cordoba in 1989slightly exceed the AIC. While the AIC for the subproject as a whole isUS$0.17/m3, the AIC for the components of the subproject were estimated asfollows: for the plant construction and expansion compoaent, US$0.25/m3, andfor the operational improvement component at US$0.06/m3. This clearlydemonstrates the need to execute the operational improvements under whichwater can be provided at least-cost.

2.34 Beneficiaries, Urban Poverty Impact and Affordability. Benefits ofthe Cordoba subproject would accrue to virtually the entire population servedby EPOS in the city of Cordoba as a result of the replacement of rundown pro-duction facilities which breakdown with increasing frequency and that couldbecome inoperative at any moment. Direct beneficiaries of the Cordoba con-struction and expansion component include about 0.4 million people who wouldhave either lost or had the volume of their water supply curtailed if the newfacilities were not constructed. The operational improvement componentdirectly benefits 0.35 million new users through more reliable services. Thisproject component also benefits the entire population presently served by EPOSthrough more reliable and fair billings and safer and less expensive supply.The immediate savings of water through the operational improvement componentin Buenos Aires will make it possible to supply 0.80 million additional peopleby 1990 at a per capita cost of about US$30. This is appreciably more econo-mic than supplying water to this population through construction of new facil-ities which would require investments of about US$80 to US$100 per capita.The Rosario component benefits about 0.25 million people whose services willbe upgraded in quality and quantity. In addition, the entire populationserved by DIPOS would benefit through more accurate and timely billings.Totally, the operational improvements in the three cities will benefit 1.40million people.

2.35 The direct impact of the project on the poverty group, defined asfamilies with a monthly monetary income of less than US$160.00 in September1985 prices (on an annual basis, this corresponds to approximately one fourthof the national per capita income) was estimated for the Cordoba subproject bycalculating the proportion of urban poor in the projected 1993 incrementalpopulation served by each project component. About 22% of the directbeneficiaries of the construction and expansion component and 37% of thedirect beneficiaries of the operational improvements component will be theurban poor. An estimated 23% of the subproject investments will directlybenefit the poor. An evaluation of the affordability of services was madebased on 1985 tariffs. In 1985, a family with a monthly income at the povertythreshold would pay an acceptable 2.6% of its income for a "lifeline" watersupply of 12m3.

Project Sensitivity, Risks and Safeguards

2.36 There is a high degree of certainty that the project will providedesired benefits. The effect of variations in costs, benefits and implement-ation delays on the project's rates of returns has been analyzed (Annex 14).The analyses demonstrate that the IRRs are not highly sensitive to changes incosts and benefits. There is little risk regarding the construction compon-ents of the project as the works are of conventional design and- well within

- 15 -

the capabilitY of local civil works contractors and consultants to constructand implement. The multiplicity of activities to be undertaken under the pro-ject which includes the introduction of new technologies in Argentina requiresthe close cooperation of the whole utilities' organization. To some extent,the risk associated with the multiplicity would be minimized by the agreedupon institutional arrangements for project implementation which includesclearly defined responsibilities for project participants and the retaining ofan experienced organization to undertake the administration and contractingfor the technical assistance and studies. These measures will be supplementedby intensive supervision by Bank staff and by reporting and monitoring provi-sions, which will allow the Bank to regularly check on project progress and todetect problems early.

2.37 The federal and provincial Governments have committed themselves toensure the funds required by the project. Moreover, by strengthening theutilities' management systems and improving the quality and efficiency of itsservices, the project would enhance the utilities' finances, their acceptancein the communities and thus their ability to implement tariff increases whennecessary. These project features minimize risks of delays related to theavailability of local counterpart funds.

III. AGREEMENTS REACHED AND RECOMMENDATIONS

-3.01 During negotiations of the Loan, agreement was reached on 'thefollowing:

(a) with MOSP, on terms of reference for a master contract for the pre-paration of a national water and sanitation plan (para. 2.10);

(b) with MOSP, on progress reporting and monitoring indicators (para.2.16);

(c) with the executing agencies that two project implementation reviewswill be carried out by June 30, 1987 and December 31, 1989 respect-ively (para. 2.16);

(d) with the Government of Argentina, the provinces of Cordoba and SantaFe, EPOS, DIPOS and OSN, on the timely availability uf counterpartfunds (para. 2.18);

(e) with OSN, EPOS and DIPOS, on the terms of reference for the prepara-tion of investment, operational and financial recovery plans (para.2.22);

(f) with OSN, EPOS and DIPOS on the targets for improved bill collectionand for increased metered connections (para. 2.21);

(g) with OSN, EPOS and DIPOS that plans mentioned in (e) above will becompleted by June 30, 1987, and that the Bank will be given oppor-tunity to comment (para. 2.22);

- 16 -

(h) with OSN, EPOS and DIPOS, on the submission to the Bank by Septemberin each year of updated financial plans and projections for thecurrent and following three years (para. 2.22);

(i) with OSN, EPOS and DIPOS, on the annual submission of a plan ofaction to meet the financial break-even covenant (para. 2.22);

(j) with the executing agencies on audit arrangements (para. 2.23);

(k) with the executing agencies on standard bidding documents and anannual purchase program for 1986, and its annual updating (para.2.24);

(l) with the executing agencies on model onlending contracts (para.2.28).

3.02 As a condition of Loan Effectiveness, the Government shouldenter into subsidiary loan agreements with at least two beneficiaries and therespective province or provinces and enact a resolution declaring that Bankprocurement guidelines have precedence over local legislation (para. 2.24).

3.03 With the above assurances, agreements and conditions, the projectis suitable for a Bank loan of US$60.0 million to be repaid over a period of15 years, including three years of grace.

- 17 -

ARGEJTINA - WATER SUPPLY PROJECTinstitutional Arrangement in the Provinces_

Rural Decentral-Provinces Planning Urban Operations Operations ization3uenos Aires National Warer Works (OSt) OS0 Provincial Serv. Ye

Carazarca General Adainia- GAWV GAW Yentiation of gaterYorks (CAW)

Cordoba Cordoba Provincial EPOS EPOS TesWarer Works (EPOS)

Corrientes General AdAniis- GAWV N.A. yentration Waterworks (u W)

Chaco State 'dater Company (SVC) suc N.A. ye

Chubut Direction of Water Corporation and DWG goand Gas (DWG) municipalities

Entre Rion Provincial Direction PDG or Nunici- PDWC Noof 'ater and Gas (PDWG) palities

Formosa Direction of Water DVS or Nunici- DVS laand Sewerage (DWS) palltiee

JuJuy Administrazion of AS AS YeeSanitation (AS)

La Parpa Service of Water Nunicipalities SWSS soSupply andSanitation (Svss)

La Rioja Direction of DS N.A. soSanitation (DS)

lendoza Water Company (OSXSE) OsXSB OSNEE ere

Nisiones Administration of AW or Nunici- AW Yes'Waer Works (AYW) palitiee

Neuquen Provincial Services PSV or Nunici- N/A Noof Water (PSW) paLitiem

Rio Negro CGneraL Directiob Provincial Admi- N/A goof Water (GDV) istration of Water

Salta Direction of Water WE DWS YesSupply (DWS)

San Juan State Water SWC SVC YesCompany (SVC)

San Luis ?rovincial Direction of Wunicipelities PDVS yesWater and Sewerage (PDWS)

Santa Cruz Company of Public CPS H/A YeaServices (CPS)

Santa Fe Provincial Water'Works (DIPOS) DIPOS DIPOS Yen

Tucumean /A N/A N/A N/A

Santiago del Estero N/A S/A N/A N/A

Tierra del Fuego N/A /A N/A N/A

- 18 -

ANNEX 2

ARGENTINA - WATER SUPPLY PROJECT

Population and Service Levels

Popul- No. of cities Total pop- Z Service Levelsation with 10000 ulation Water Supply Seweragesize People (1980)

(thousands) - (thousands)

Greater than1000 3 10.716 65 42

500 to1000 3 2.132 79 42

L00 to500 13 3.040 77 37

50 to100 24 2.514 60 13

10 to50 153 3.161 69 34

2 to10 - 2.100 n/a n/a

less than 2 - 4.200 18 n/a

TOTAL .196 27.863 58 36

VILKNZ

tu w afv Na 41 titu t

Samm MU 900 %111 OS INNI1111 sle .Ou ms of n ."51, Imblims votard, il sIt via WA knifed6431 643 -uN IMIITNIO9 ________________ n

h.is n t.m _. S.01 in W.M k . t t w NO" t* - O. | .m 1.4.-_4. 1 m ka uIm -

t_ 1. b1l1 I*I agIa bt l'sssIaIl* b d l * baed L.- Waist I rq.t.sim b-Ull tEl w _ me _. 1 Clb 1 Pq.IaIIa b G l - -iI q 1 0 fh Sl I 9otaki.O bead ta li head

:Fp1%%1 ti .1" _ _ _ _ _ 1" . I .ftpk i. ."- t_ _ _ . _w I _W I "}wMZ t>}9lcities hp' - - - 411(44 . I 9 I III m. * I bw. - a n.... -. S

,~~~~~~~~ .m _ __- '^ ^| 'a@'"1 - -- - -- -- - 1- --. z84l-all l

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H a1.0m04*41 * 11.49 14) 1416. I 1H.31 1 6H4111t.61pi1M61 3 1 .1 6 s 142)46 U)JMI 16 9 661I6 t I m t

844t 49 909.326 1906.44 be 18.a1 a 1^W4.1 21e.t^ 14 83.614 10 I110.-44 - -0.31 66- _.46 1by . 1m ii as64ple441.1 AU it 346.13 as

. eN.*i a 914.13) 949.065 09 * 1.9 1 A 1 3I .110 890.,6) 64 44.061 )- . . . .. . . 413l0 MU31 74 MAN 0I

'14 0 -t9 6.090 6 - .4 43*5 _419 II 1lll6 - - 14. 1m16 M 1| 3l8i1 41

44*..t _ 10.161 38.114 64 4.11 I 941,1 1-.141 14 '1.4,41 - .. I 4 54 14344' 18 -8. 61

sr. Alss 44 a91.044 96.91,93 I9 1143 3 4 1444.41 46.441 U 38.711 I1 115.316 994.415 764 41.614 10.11 143116 40 14 941.49 30

i.^ f _ le.l# _ _ s~~~~~~.ot0 _~ s1.*4: l.aw *9 11,1 to 61 .. a .Is | || | |"'wl 4 X|tR CIII 4 909.941 116.6121 II 48.18.9 164.461 4'9.614 it 46.70) 40.9 314.4m 11ME 63 411A7 31

A eel I 90.110 - - 90 $ 9.4 8 1.381 41 4.811 644.8 69.411 an 34 51114 ?a-

11a 4.010 6.661 45 - 8 0.414 11.814 la a g J0ib aa 8m 343 is 3*30 04

It 10 .49t 61.61' 1 4 11.111 3 3a O.41 10.411 k4ao 11.49t 3 . § . . } - .t6 to.exm i se |5 a I mJ1 68.n w i4s| .'tl a"i

9am. '0 69.10 91.1 0 4_ A.411 .949 40.31 43 __-_ a _1611 4 lU_IUl

. 3 _ 4.099 33.910 _61 ._ _ 8 10.09 ,1.100 i 1 .998 43. _ _ _- 4 804 Ai 4& luo1 1

to "ts., II 101.11 00.6611 7r wssioXl .-I_- - IIAO 11 %M41 Al-uaol^ttels,. 112.31) 16.001 it 1i 41 99. 19.03 .1 o 8lla69101.630 941 is 104t U

W~~~~~~~~~2.10 VI E1.a I I e 6 a zo a . -e4* i s.161* .a tO . .. *-41 is IOL is | |* aii is?4*|

.0 &I.... . . . 9a4,45 940.19 6^4"E 40#o.4s 1 99..... 1 i 41533. 1.8944 1i 91 48 is

460 CMlu a 61 5410 98.980 99 99,890 98 .. ....... 610 38 14 90.1181 19

SAUl 76 4t 1_ .94% 11.469 40 74.04 _ 4 . 41.001 39 0.680 a9 4 61.840 _1-1 al9 80 1L .186 4t1 4.000 14.166 _* - .11. | .t4 |.464U M4 4)68 4

9.6.4 _I 41039,11 63.180 01 90.116 .4 10 1'.414, 1. L ' 83 - 8'

1 814."9 99.411 89 11.43 99 . _. .4 e 144 8440 1 .4. . . ..1 81. 814.1t 41t. .i .!1 jI

del 74e4 _ 8t 14.14 440 __ 99.89 I ..... .t o 1--4 la .M 14 446 41

70 9*A 1)3 66J9 911.100 69 &4 3484 118m. Itl 64 3.11061if is W $41*47 of 49)66164 R ~ ~ 1t9L e9 . * U I1 U~

., *._ at

fro tolt _ N a llll_1

cI fr. Imss Altos IhWwo4 Capitol eaud049 t*eba

I . _ _ _ _ _ _ _ _ _

- 20 -

ANNEX 4Page 1 of 3

ARGENTINA

WATER SUPPLY AND SEWERAGE ENGINEERING PROJECT

PROJECT DESCRIPTION

1. The Project includes the following components: (a) national waterand sanitation plan preparation; (b) operational improvements program inMetropolitan Buenos Aires, and the cities of Cordoba and Rosario consisting ofthe first stage of a national program including inter alia consumption andproduction metering, rehabilitation of distribution networks, and streng-thening of distribution management and commercial areas of the water utili-ties;- Cc) rehabilitation and extension of the city of Cordoba's water system;and (d) technical assistance to OSN and EPOS.

2. The following presents a list of main project components:

Part A: Preparation of a National Water Supplv-and Sanitation Plan (PNSB).

A.I. Purchase of office equipment; and

A.2. Technical assistance including consulting services, in-servicetraining of MOSP's staff, and fellowships for: (a) Investment plan preparation- Mi) at the Province level, diagnosis of sector services, formulation ofsector service targets and development of investment alternatives for thedecade; and (ii) formulation of government objectives in the sector andconsolidation of the provincial plans in a national plan; (b) Engineering -development of project evaluation criteria to foster adequate technicalstandards for project design with special emphasis on least cost analysis; (c)Finances - Ci) preparation of financial policies for investment and oPerationand maintenance of systems; (ii) definition of financial criteria for settinginvestment priorities; and (iii) definition of tariff structures whichmaintain equity while encouraging efficiency; and (d) Institutionalresponsibilities - (e) evaluation of the existing organizational framework andresponsibilities at federal and provincial levels; (i) recommendations for theestablishment of organizational and institutional structures to effectivelyimplement the sanitation plan; (ii) preparation of amendments of existinglegislation; (iii) definition of inter-institutional coordination; (iv)recommendations on strategies directed at improving the efficiency of thepresent organization; (v) definition of responsibilities in sector financingand alternative flow of funds; (vi) identification of staff training needs;and (vii) evaluation of existing research facilities and its funding, andrecommendation for further development.

Part B: Operational Improvement Program in the Metropolitan Area of BuenosAires and in the Cities of Cordoba and Rosario de Santa Fe.

B.1. Consumption Metering. Purchase and installation of about 200,000water meters for Buenos Aires, 60,000 for Cordoba, and 4,000 (industrial andcommercial meters) for Rosario de Santa Fe;

- 21 -

ANNEX 4Page 2 of 3

B.2. Production and main distribution metering. Purchase andinstallation of water meters in water treatment plants, water storage tanksand water mains;

B.3 Pitometer survey. Purchase of pitometers and accessory equipmentand setting up of a system for routine surveys;

B.4. Mapping of water distribution and sewerage systems. Purchase ofequipment, setting up of a day-to-day mapping updating, and collection ofdata;

B.5. Water distribution network rehabilitation. Replacement and/orconstruction of about 700 kms of pipelines in Buenos Aires, 275 kms inCordoba, and 300 kms in Rosario de Santa Fe;

B.6. Distribution system management. Purchase of vehicles, equipment,and tools for maintaining water distribution pipes, sewers, and houseconnections. Setting up of systems for preventive and corrective maintenancefor water distribution networks and sewerages;

B.7. Commercial system manaz"ment. Purchase of data processingequipment, updating of consumer files, tariff studies, and upgrading ofbilling and collection systems; and

B.8. Consulting services, in-service training of OSN, EPOS, and DIPO'sstaff, seminars, and fellowships to complement activities under B.1 to B.7.

C. Rehabilitation and Extension of the Cordoba Water System.

C.1. Completion of Los Molinos- multipurpose raw water channel (waterfor the Cordoba city's water supply system and for agricultural uses);

C.2. Construction of "Los Molinos'/two cubic meter per second waterintake and water treatment Dlant;

C.3. Upgrading of -Suquia" water treatment plant, including an expansionof about three hundred liters per second of its production capacity;

C.4. Four booster pumping stations in Arguelle, Suquia, Alto Alberdi andNueva;

C.5. Connection of the water distribution network to the newinstallations; and

C.6. Construction of mains and water distribution pipelines.

- 22 -

ANNEX 4Page 3 of 3

D. Technical Assistance to OSN and EPOS.

Includes consulting services, equipment and in-service training forthe improvement of the financial planning, accounting, and purchasing systemsof OSN and EPOS (draft terms of reference, Annex 8).

- 23 -

WAIER SUPPLY PROJECT,.ps mn 0in mi___ Sch____

i,^-_-~~~~~~~ tu 'W

1--- 123 '' 11331 1 111 I 311

1__ III LI7 1 7

w-- I I i i I I I I I I

.Arw hul-

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S.-.,'. II III ~ ~ ~ ~ ~ ~ _ 7s

s : 3~~~~~~~~~

SL 1l: z~~~~~~~

5~~~~~~!

- 25 -

ANNME 6Page 2 of 4

ARGENTINAWATER SUPPLY PROJECT

OBRAS SANITARIAS DE LA NACION (OSN) Oganlbafn Chat

= ~~~^u

ACMt~~~~~~~~~WMOACQOMAc

_ _

PRC CON.M _ 9 j-

WRGJnIl e4Gw4mwllr. l lMOCK

WA1 NIVXMV a1CMO MECK*C I Iw M-h~~~~~~~~wm ACC1 I MNI

- 26 -

ANNEX 6Page 3 of 4


EMPRESA DE OWS SANITARIAS DE COROORA (EPOS) Organizton Chat

a CON.,. -

¶'u CXm.Y3ESr'' E3URW' d'O I

- 27 -

ANNEX 6Page 4 of 4


DIRECCION PROVINCEAL 0E OSR SANITARIAS DE S. FE (DIPOS) Organizao Chat

GEIE1AL

AMAICK

SW--

Ht q I~~XWA"

-3-onE.ex 7

Paqe I a

ARCEVLMIA

*JATKR SUPPLY PRtOJECT

[n.E1rcZcofla OYfYIE

UseEr ns111o7

iN A _ _ _ _ _ _ _ _ _ _ , _ _ _ _ . Y :n w_

e_ p-. s u ac 1_1. OII mL u aL_w

_um ba* to dmca bc ro pEa~a d u_ m bc toc@MTEN- pclmtin1a I Cz .&A A katlin. GWME MM S hazm. QPAa m'nul MfSa m _ by a _ _ c p me m

atmiml Aodciw _ ootd by m tch pto&m fw Amstc aold r a does m 0. a 5t- d c m b I8 Ad s C io

SOT URI. mla mo=v Ss m1uxm byr DMW~MM .

AM CA A L das z ad 13 1C'- 9:. I q SDw a dv.LLCMof Mum. Alm. fa16 ,g_ m. In 2 orm R

a _c sorml.axom mo 60.000 299.00

-- N -t :m m 92.mD 14ow

RMAC

san !M_ =. Ta aay 19. am A f ' ' . to D-S an a tcrw pmj0I 1h_ on

_mm a 10 ,_ pLi di 9 £ ftw_p lnm ia pL-. CC de = a w a * 11g pL- for t cF d C b IU E. 1.

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pmm yomls In de df ofan LfI - fat am

SMON-7 baI*E Is cm by Tdm to MLs1afmcq. Ur on idSug CM=woulbJLY -. gm _ at t.s umj Di zIn

- omwo . Iwo cp mu m mathe boc0u pw .at I- C aI.n c el h~

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mobuls -. 1 1smbLJ _ u of

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opwa1im ad lumdotgpm w a w Seanpaum ui Mnm ML The a m atoxwv mdmox. ~Di sai cmm pliw. ti p3 cIudm uimla-ptfblim i a..ld by CiA atamd q of tome r m. laUmIm

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t [ va%2 2jj ii II2

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t121¢1''fli, 1 1 ,' '1 l' U41Il iWilf^lg.

- 30 -

ANNEX 8Page 1 of 6

ARGENTINA


Terms of Reference for Technical Assistance

A. Draft Terms of Reference for Improving OSN and EPOS' Financial Management

}. Objective

1. The objective of the technical assistance is the setting-up of afinancial system which facilitates managerial activities leading to theformulation and to the achievement of the company's long, medium, and short-term goals, as well as to the efficient utilization of resources.

II. Financial System

2. The financial system would be one of the key elements of thecompany's internal control and it should include instruments and proceduresfor: 1) monitoring and enforcing compliance with policies and programs; 2)evaluating performance (results and costs) of the company as a whole as wellas of different responsibility centers; 3) securing the celevancy, timeliness,reliability and accuracy of financial and operational data; and 4) safeguard-ing assets. The system should integrate the functions of financial planningand budgeting with the accounting and reporting activities of the company. Itshould include, but not be limited to, the following instruments:

(a) long, medium, and short-term budgets which include investments andoperations and maintenance activities;

Cb) long, medium, and short-term financial projections which consolidatethe above budgets and the proposed financing policies;

(c) management reports on the company's financial situation and onbudget execution, including comparisons between budgeted and actualresults for the company as a whole and for the responsibilitycenters; and

(d) financial statetients to meet the needs of external parties, includ-ing government, creditors, and regulatory agencies.

3. The system should not only accomodate large volumes of data anddifferent types of data, but also must be capable of meeting changing informa-tion needs, including reporting information along revised organizationallines, when necessary.

- 31 -

ANNEX 8Page 2 of 6

III. Scope of Consulting Services

4. The consultants will conduct the work here described and whateverwork is needed to attain the technical assistance objectives. As part oftheir work the consultants should evaluate, modify, design and implement allthe required elements for the effective and efficient operation of theproposed financial system. The consultant's assistance should cover, but notbe limited to, the development and implementation of improvements in thefollowing areas:

Planning, Budgeting, Reporting - including:

(a) standard procedures, input documents and timetables to ensure thatall data required for the long, medium and short-term budgets arecaptured, that is, investment and operations and maintenance activi-ties, identifying financial and operational targets;

(b) financial planning and cash management models integrated wich theaccounting and budgeting system. These models should permit OSN'sstaff, inter-alia, to assess the viability of investment plans,determine tariff requirements, evaluate the impact of changes incosts, in financing plans and in exchange and inflation rates, andplan the use of cash. The consultants should also proposeprocedures, equipment and software which would allow the company'sstaff to use microcomputers.

(c) reporting system which includes the four instruments mentioned inparagraph 2; and

(d) procedures for processing data and providing relevant informationtaking into consideration changes in price levels.

Accounting - including:

(a) chor. of accounts and instructions to operate the financial, budget-ary .nd cost accounting systems;

(b) forms ard procedures for posting financial, budgetary and costaccounzing data;

(c) flows of documents and timetable for their processing;

(d) controls of quality and timeliness of inputs to the accountingsystem; and

- 32 -

ANNEX 8Page 3 of 6

(e) interface between the accounting system and the single-purposesystems that capture or generate financial and operational data.For example: customer billing and collection, materials andsupplies, payroll personnel, accounts payable, fixed assets, andwork in progress. The consultants should assist the company in theimprovement of the single-purpose systems so as to facilitate theorderly and timely flow of data and information to the accountingsystem.

Computerization - Accounting and report generation under the financial svstemwould be computerized. The consultants should, therefore, recommend thepriorities for computerizing the different elements of the financial system,including those that capture or generate the basic data. Based on thosepriorities, the consultants should:

(a) develop standards for data processing and a master plan for systemdevelopment through 1990; and

(b) determine the company's computer equipment requirements and assistit in the selection and acquisition of this equipment.

Manpower Planning - The consultants should formulate recommendations to thecompany on staff requirements for the financial system operation, maintenanceand development.

Training - The consultants should make every effort to transfer their skillsto the company's staff. Most of this transfer would take place throughon-the-job training while the consultants and the company's staff carry outthe design and implementation of the system. In addition, the consultantsshould prepare and execute a plan of seminars to the company's staff in orderto provide information on:

(a) the obJectives and scope of the technical assistance work, progressmade, and work plan until full achievement of objectives; and

(b) the operation, maintenance, development, and use of the financialsystem.

IV. Phasing of the Consultants's Work

5. The consultancy should be carried out in two separate phases:First Phase - Diagnosis - During this phase the consultants should review andassess the company's existing financial system. It should end with an incep-tion report summarizing the main findings of the evaluation, including:

- 33 -

ANNEX 8Page 4 of 6

(a) identification of deficiencies;

(b) proposals for changes in systems and procedures including an eval-uation of alternative solutions in terms of costs, benefits, pract-icality and adaptability at the company;

(c) comprehensive description of proposed system and procedures;

(d) statement of hardware and software needs for implementing thesystem;

(e) statement of staff needs and, if necessary, a program for in-houseand outside training; and

(f) detailed work program including level of effort needed by theconsultant and a timetable identifying actions to be taken by theconsultant and the company.

Second Phase - Design and Implementation - After the company and the consult-ants agree on the diagnosis report, the proposed improvements would be implem-ented as a cooperative effort of the company staff and the consultants.Training of the company's staff and purchase of equipment as required wouldtake place in this phase.

V. Reporting Requirements

6. The consultants should present the company's management the follow-ing reports:

(a) diagnosis report and recommendations at the end of the first phase,including comprehensive proposals for improvement ojeasures and planof action for the design and implementation phase;

(b) draft documentation of the designed systems and implementationplans, during the early states of the design implementation phase;

(c) definite documentation of the systems designed and implemented, atthe end of the implementation phase;

(d) quarterly progress reports summarizing work accomplished, changes inplans, and identification of any major obstacles being encountered;and

(e) final report summarizing (i) all work done, (ii) the assessment ofthe problems encountered during the consultancy, and (iii) therecommendations to management for making the best use of the systemimplemented.

- 34 -

ANNEX 8Page 5 of 6

VI. Time Schedule

7. The diagnosis phase should last about 4 months, and the design/implementation phase about 12 months.

VII. Facilities and Services to be Provided by the Company to theConsultants

8. The company will facilitate the work of the consultants by:

(a) appointing a high level official to act as project coordinator;

(b) appointing counterpart personnel to work full time with the consult-ants. The number of personnel and their qualifications would beagreed upon during the negotiation of the technical assistancecontract;

(c) appointing counterpart personnel as required to carry out the workin particular areas;

td) providing suitable office space in the company's premises; and

Ce) providing secretarial assistance and office supplies as required bythe work the consultants carry out in the company's premises.

B. Draft Terms of Reference for Improving OSN's Goods and MaterialsManagement System.

I. Objectives

1. The setting-up of efficient and controlled system and procedures forthe purchase, storage, utilization and accounting for goods and materialsrequired in the company's day-to-day operations.

II. Purchasing and Inventory System

2. The goods and materials management system should provide the meansfor keeping the investment in materials and supply inventory at economiclevels while improving the level of service consistent with managementdirectives. In addition, the system should maintain at satisfactory levelsthe storage and administrative costs of inventories. Thus, the system shouldmaintain capital and operations costs at satisfactory levels and help toincrease the productivity of construction and operating personnel. The systemshould include instruments and procedures for: (a) purchasing and storinggoods; (b) inventory forecast and control; (c) delivery of goods to the users;and (d) accounting for goods and supplies.

- 35 -

ANNEX 8Page 6 of 6

III. Scope of Consulting Services

3. The consultants will conduct the work here described and whateverwork is needed co attain the technical assistance objectives. As part oftheir work the consultants should evaluate, modify, design and implement allthe required elements for the effective and efficient operation of theproposed system. The consultant's assistance should cover, but not be limitedto, the development and implementation of improvements in the following areas:

(a) material standarization;

(b) purchase programming;

(c) suppliers roster;

(d) warehouse and storage organization and procedures;

Ce) preparation of inventories, including procedures for the identific-ation and disposal of obsolete items;

(f) computerization;

Cg) manpower planning; and

(h) personnel training

IV. Phasing of the Consultants' Work

(Similar to the one described in the terms of reference for thefinancial system).

V. Reporting Requirements

(same as above)

VI. Time schedule

(same as above)

VII. Facilities and Services to be Provided by the Company to theConsultants

(same as above)

- 36 -

ANNEX 9

ARGENTINA


MONITORING INDICATORS

Preparation of a National and Sanitation Plan

1. Activities under this component would be monitored through a critical path study.

Operational Improvenents and Technical Assistance Programs

Year1986 1987 1988 1989 1990 1991

1. Number of Employees Buenos Aires 9. y 9.5 9.0 8.5 8.0 7.5per 1000/water connections Cordoba 7.5 7.1 6.8 6.4 6.1 5.8

Rosarlo 4.7 4.5 4.5 4.5 4.5 4.5

2. Number of water meters Buenos Aires - 30,000 60,000 60,000 50,000 -installed Cordoba 10,000 13,000 17,000 20,000 - -

Rosario 200 1,000 1,000 1,000 800 -

3. Kilometers of distrib- Buenos Aires - 400 400 600 600 -utlon network builtl Cordoba - 200 350 - - -replaced/rehabilirated Rosario - 100 100 200 - -

4. Revenues collected to Buenos Aires 90 92 93 94 95 96Amounts Billed (Z) Cordoba 86 90 93 94 95 96

Rosario 86 90 93 94 95 96

5. Metered connections Buenos Aires 10 13 15 19 22 22to total connections (2) Cordoba 6 13 19 21 23 24

Rosario 5 6 7 8 8 8

- 37 -

ANtEX 10Page I of 3

ARGENA

WAlR SUPPLY PR3JECr

PRWEFC COST ESrPS

CUSS 1'Ulicxi)

Project Component TDL 1986 1987 1988 1989 1990 1991 1992 1993

Iistitution Building 2.08 0.41 0.52 0.57 0.42 0.16 - - -Natiiasl 0.83 0.21 0.21 0.20 0.21 - - - -

Benos Aires 1.04 0.15 0.21 0.31 21 0.16 - - -Cordoba 0.21 0.05 0.10 0.06 - - - - -

Operational Impronments 35.27 5.25 10.45 8.76 5.63 3.11 2.07 -

Buenos Aires 20.75 1.87 5.71 4.88 3.11 3.11 2.07 - -CordoIa 6.95 1.56 2.59 2.08 0.72 - - - -

Rosario 7.57 L82 2.15 1.80 1.80 - - - -

{ORDMBA 45.93 4.13 8.69 9.19 9.84 5.60 3.77 2.64 2.07Wanter produetion, mains

& pumoing 37.84 4.13 8.69 7.53 7.76 4.15 2.32 1.19 2.07Ios Mblinos Channel 8.09 - - 1.66 2.08 1.45 1.45 1.45 -

EbwHemriw andadmdn.r 7% 3.22 0.30 0.61 0.65 0.66 0.41 0.25 0.19 0.15

Base Cost 86.50 10.09 20.27 19.17 16.55 9.28 6.09 2.83 2.22

Tecbirid1 Contaiiypcies 10% 8.65 1.01 2.Q3 1.92 1.65 0.93 0.61 0.28 0.22

Total ConstantPrices-Olec. 84 95.15 11.10 22.30 21.09 1820 10.21 6.70 3.11 2.44

Price Conting2ncies 25.29 0.56 2.91 4.67 5.83 4.33 3.49 1.85 1.65

Total Project Cost 120.44 11.66 25.21 25.76 24.03 14.54 10.19 4.96 4.09

* 38 -

ANNEX 10Pae 2 of 3

ARG(UD

WCER SUPPLY PROJECr

HRWECD aOSr ESTMME - AJR1BA REEWILrATICN AND EXSNSINtuIs$ Mliairs)

SUEFF= C41r TOM 1986 1987 1988 1989 1990 1991 1992 1993

LOSSWater!ntake 0.09 0.09 - - - - - -

Los Molii" Chmel 8.09 - - 1.66 2.08 1.45 1.45 1.45E"Tos 1DbIXx0s Water

Treatnant Plant 11.09 1.56 2.07 1.56 1.53 1.23 0.24 0.83 2.07"Sxjta" Water Treat. Plant 3.31 1.10 1.10 0.65 0.46 - - - -

Rupii"Argule1l 0.32 - - - 0.06 0.13 0.13 - -

P%wg m iva- 0.54 - - - 0.23 0.23 0.08 - -Bzplr'g"SAta7 0.72 0.31 0.41 - - - - - -P%Wdg -Alto AlUrdi 3.29 - - 0.&6 1.31 0.65 0.32 0.36 -an - Section 1 10.04 - 3.26 2.52 2.11 0.95 1.20 - -

Man - Sectic 2 2.95 - - 1.13 1.13 0.52 0.17 - -

n ectionSuia - Alberdi 1.13 0.40 0.73 - - - -

Dstributiosm Mlinos - sr 1.28 - - 0.52 0.58 - 0.18 - -

Dlstribitm Network 3.08 0.67 1.12 0.50 0.35 0.44 - - -

EgLneewl md Achtn. 7% 3.22 0.30 0.61 0.65 0.66 0.41 0.25 0.19 0.15

Base Cost 49.15 4.43 9.30 9.84 10.50 6.01 4.02 2.83 2.22

-39 -

ANMX 10Pwag 3 of 3

AREA

TA= SUPPLY PIJECr

RJECr Csr ES.E OPEATI0NL R aO

9jIHID cPio Total 1986 1987 19R8 1989 1990 1991

Clnuptin reterii 11.93 1.58 2.53 2.76 2.99 1.04 1.03

Produc nmetering 1.71 0.29 0.65 0.61 0.16 - -

Pito,nter suxey 0.31 0.13 0.09 0.06 0.03 - -

Mapping 1.25 0.40 0.47 0.33 0.05 - -

Wbter distribut1xerebabilzati.g 13.64 1.41 3.54 3.93 1.65 2.07 1.04

Di.stribitim systmI_Iageamt 5.29 1.19 2.66 0.77 0.67 - -

Cmmurcial system

mmgment i.14 0.25 0.51 0.30 0.08 - -

Base Cost 35.27 5.25 10.45 8.76 5.63 3.00 2.07

- 40 -

ANNEX 11Page 1 of 7

ARGENTINA


PROJECT EXECUTING AGENCIES FINANCIAL DATA

A. Notes to OSN's Financial Data

1. OSN's financial statements of 1982 and 1983 are audited. Those of1984 are not. OSN's external auditors, Sindicatura General de EmpresasPublicas - SIGEP -, expressed no opinion on the financial statements becauseof the inadequacy of the Company's accounting records, particularly of fixedassets, inventories and accounts receivable. Accounting principles andmethods applied in 1984 differ from those applied in previous years.

2, Financial statements were converted into current dollars at thefollowing exchange rates:

Exchange Rate */Year Year End Average

($A-US$1)

1982 4.86 2.171983 23.27 10.541984 160.84 67.79

*/ Argentinian Pesos to the US Dollar.

- 41 -

ANNEX i1Page 2 of 7

NATIONAL WATER WORKS - OSNIncome Statement

(Current USS million)

1982 1983 1984(Audited) (Audited) (Non-Audited)

Revenues

Water and Sewerage 108.63 87.30 95.44Other 20.63 12.72 6.97

Total Revenues 129.26 100.02 102.41

Operating Costs

Personnel 39.54 64.99 68.38Chemical, Power, 0. and M. 10.66 21.27 39.74Administrative and Comn. 12.29 6.33

Total Operating Costs 62.49 92.59 108.12

Income Before Depreciation 66.77 7.43 (5.71)

Depreciation 49.39 52.16 54.76

Operating Income 17.38 (44.73) (60.47)

Interest Expenses and Other 1.13 1.53 87.55

Interest Earned on Investments 48.53 39.07. -

Other Non-operating Income (Expenses) 0.79 1.42 0.74

Income (Expenses) Previous Years 3.45 (66.76) 63.80

Yet Income 69.02 (73.56) -

Effect of Price Level Increases (200.88) (443.86) -

Ner Gain (Loss) (131.86) (517.42) (84.22)

- 42 -

ANNEX 11Page 3 of 7

NATIONAL WATER WORKS - OSNBalance Sheet

(Current US$ million)

1982 1983 1984(Audited) (Audited) (Non-Audited)

Assets

Fixed Assets 1888.01 2039.28 2096.62Accumulated Depreciation 534.06 739.98 668.35

Net Fixed Assets 1353.95 1299.30 1428.27

Work in Progress 32.20 34.16 360.22

Cash and Short-term Deposits 4 47.93 10.45 4.82

Acccunts Receivable Serv. (revalued) 167.79 177.79 188.03

Inventory 127.54 236.16 81.41

Other 8.47 20.90 19.21

Total Current Assets 351.73 479.46 293.47

Other Assets 7.86 2.48 3.10

Total Assets 1745.74 1781.24 2085.06

Liabilities and Equity

Accounts Payable 9.17 57.34 40.95

Long-Term Debt (Current Portion) - - 1.00

Other 0.07 0.66 -

Total Current Liabilities 9.24 58.00 41.95

Long-term Debt 14.41 16.80 21.81

Equity 1722.09 1706.44 2021.30

Total Liabilities and Equity 1745.74 1781.24 2085.06__ m_

- 43 -

ANNEX 11Page 4 of 7

B. EPOS' Financial Statements

Empresa Provincial de Obras Sanitarias - EPOS *

Income Statement(Current USSMillion)

1983 1984-Non-Audited-

Revenues

Water and Sewerage 9.60 13.29Other - 0.21

Total Revenues 9.60 13.50

Operating Costs

Personnel 5.59 7177Chemical, Power, 0. and M.Administrative and Commerical

Total Operating Costs 5.86 10.53

Income Before Deprec'ation 3.74 2.97Depreciation 4.40 2.95operating Income (0.66) 0.02Interest Expenses and Other - -Other Non-operating Income (Expanses) 4.95 -Income (Expenses) Previous Years - 1.32

Net Income 4.29 1.34

- 44 -

ANNEX 1 1Page 5 of 7

Empresa Provincial de Obras Sanitarias - EPOS

Balance Sheet(Current USSMillion)

1983 1984-Non-Audited-

Assets

Fixed Assets 189.05 195.00Accumulated Depreciation 28.23 32.28

Net Fixed Assets 160.82 162.72

Work in ProgressCash and Short-term Deposits 1.85 1.11Accounts Receivables Services 4.20 3.93Inventory 0.97 1.15Other 0.16 0.73

Total Current Assets 7.18 6.92

Other AssetsTotal Assets 168.00 169.64


Accounts Payable 0.74 0.63Long-term Debt (Current Portion)Other 0.19 0.50

Total Current Liabilities 0.93 1.13Long-term DebtEquity 167.07 168.51

Total Liabilities and Equity 168.00 169.64

* Some data had to be estimated because of inadequacies in the account-ing records, particularly in the areas of fixed assets and accountsreceivable.

- 45 -

ANNEX 11Page 6 of 7

C. -DIPOS' Financial Statements

Direccion Provincial de Obras Sanitarias - DIPOS

Income Statement(Current US$ million)

1982 1983 1984Non-Audited

Revenues

Water and Sewerage 18.85 16.92 29.64Othe.r 0.78 0.22 1.55Total Revenues 19.63 17.14 31.19

Operating Costs

Personnel 8.91 10.54 5.67Chemical, Power, 0. and M. 3 9.85Administrative and Commercial 3.41 1.03 6.02Total Operating Costs 12.32 11.57 21.54

Income Before Depreciation 7.31 5.57 9.65

Depreciation ** 0.14 0.03 0.06

Operating Income 7.17 5.54 9.59

Interest Expenses 0.21 0.20 0.31

Other Non-operating Income (Expenses) 0.56 0.75 0.82

Net Income 7.52 6.09 10.10

* On non-revalued fixed assets. DIPOS is currently carrying out aninventory and valuation of its fixed assets.

- 46 -

ANNEX 11Page 7 of 7

Direccion Provincial de Obras Sanitarias - DIPOS

Balance Sheet(Current USS million)

1982 1983 1984Non-Audited- -

AssetsFixed AssetsAccumulated Depreciation

Net Fixed Assets 2.56 2.17 2.53

Work in Progress - -

Cash and Short-term Deposits 1.06 1.26 1.99

Accounts Receivable Services * 2.67 2.20 12.07

Inventory 0.02 0.05 0.31

Other 0.83 0.45 0.48Total Current Assets 4.58 3.96 14.85

other Assets

Total Assets 7.14 6.13 17.38


Accounts Payable 1.21 1.36 0.54

Long-term Debt (Current Portion) - - -

Other 2.33 0.25 0.53

Total Current Liabilities 3.54 1.61 1.07

Long-term Debt - - 1.67

Equity 3.60 4.52 14.64

Total Liabilities and Equity 7.14 6.13 17.38

* Only the 1984 figure inclues required adjustments for inflation.

- 47 -

ANNEX 12


Project Cost by Procurement Method

Item Procurement Method a/ TotalICB LCB Other Cost

Equipment andMaterials 33.5 4.2 - 37.7

(18.2) (2.8)Civil Works 68.0 9.0 b/ - 77.0

22.2 (3.1)-Consultants - - (5.7) 5.7

Total 101.5 13.2 5.7 120.4(40.4) (5.9) (5.7) (52.0)

a Figures in parenthesis are the respective amounts financed by the Bank.

b/ Part of these works could be carried out by force account underconditions satisfactory to the Bank.

- 48 - ANNEX 13


Loan Disbursement Schedule

Bank Fiscal Year Quarterly Cumulative Disbursementand Quarter Ending Disbursement

(U%J million) (US$ million) (Z of total)FY 1986March 31, 1986 5.00 * 5.00 8.3June 30, 1986 1.00 6.00 10.0

Ff 1987September 30, 1986 1.50 7.50 12.5December 31, 1986 1.80 9.30 15.5March 3L, 1987 2.50 11.80 19.7June 30, 1987 3.00 14.80 24.7

Fn 1988September 30, 1987 3.10 17.90 29.8December 31, 1987 3.20 21.10 35.2March 31, 1988 3.30 24.10 40.2June 30, 1988 3.50 27.90 46.5

FY 1989September 30. 1988 2.00 29.90 49.8December 31, 1988 2.10 32.00 53.3March 31, 1989 1.80 33.80 56.3June 30, 1989 2.10 35.90 59.8

FY 1990September 30, 1989 1.50 37.40 62.3December 31, 1989 2.10 39.50 65.8March 31, 1990 1.50 41.00 68.3June 30, 1990 .20 43.20 72.0

FT 1991September 30, 1990 1.50 44.70 74.5December 31, 1990 2.20 46.90 78.2March 31, 1991 1.30 48.20 80.3June 30, 1991 2.50 50.70 84.5

FY 1992September 30, 1991 1.20 51.90 86.5December 31, 1991 1.20 53.10 88.5March 31, 1992 1.20 54.30 90.5June 30, 1992 1.20 55.50 92.5



* Disbursement for special account recovery assumed starting in FY91.

- 49 -

ANNEX 14Page 1 of 3

ARGENTINA


Economic and Social Analysis

Internal R.te of Return (IRR) and Marginal Cost Calculations

1. Internal rates of return (IRRs) have been calculated for the Cordobasubproject component (a) (plant construction and expansion; 55% of totalproject cost), component (b) (operational improvements; 10% of totalproject cost) and for both subproject components combined (65% of totalproject cost). Revenues expected to be generated from 1987 tariffs ex-pressed in September 1985 prices have been used as a minimum measure foreconomic benefits in the analyses. The analyses exclude costs and benefitsof tech-aical assistance and institutional development for Cordoba (EPOS).The cost of these items is, however, small (0.2% of total project cost).

2. Marginal costs were calculated for the Cordoba subproject using thelong-run Average Incremental Cost (AIC) method at an 12% discount rate.All costs are expressed in September 1985 prices and include engineering,administration and physical contingencies, and are exclusive of taxes andduties. IRR and AIC calculations are included in Attachments 1 through 3.A summary of asusmptions for the calculations is included in Attachment 4.Detailed data and other information are available in the project file.

3. The results of the analyses are summarized below:

(a) Cordoba Water Supply Expansion Component (Component A; Attach-ment 1)

Cost as a percent of total project - 552Internal rate of return - 9.54%PV of incremental investments - US$30.27 millionPV of incremental operating expenses - US$19.94 millionPV of water billed 199.49 million m3Marginal cost - US$0.25/m3

- 50 -

ANNEX 14Page 2 of 3

(b) Cordoba Operational Improvement Component (Component B;Attachment 2)

Cost as a percent of total project - 102Economic rate of return - 43.86%PV of incremental investments - US$6.23 millionPV of incremental 0 & M expenses - US$2.31 millionPV of water billed - 161.10 million .3Marginal cost - US$0.05/m3

(c) Cordoba Subproject (Water Supply Expansion and OperationalImprovement Components Combined; Attachment 3)

Cost as a percent of total project - 65%Internal rate of return - 15.23%PV of incremental investments - US$37.40 millionPV of incremental 0 &-M expenses - US$24.82 millionPV of water billed - 386.34 million m3Marginal cost - US$0.16/m3

(d) Sensitivity Test on IRR (Cordoba Water Supply Expansion;Component (A))

Change in BenefitsChange 2 Year 1 Year Basein Costs Delay Delay -20% -10% Case +10% +20%

-ERR (Z)Base Cost 7.02 8.10 5.36 7.59 9.54 11.29 12.88+10% 5.69 6.58 3.45 5.79 7.78 9.54 11.13+20% 4.45 5.17 1.59 4.08 6.14 7.93 9.54+50% 1.09 1.30 -4.61 -0.96 1.59 3.62 5.36-10% 8.48 9.76 7.36 9.54 11.47 13.22 14.84-20% 10.10 11.62 9.54 11.70 13.64 15.41 17.06

(e) Sensitivity Test of IRR (Cordoba Operational Improvement;Component (B))

Change in BenefitsChange 2 Year 1 Year Basein Costs Delay Delay -20X -10% Case +10% +20%

-EERR (%)-Base Cost 26.07 31.94 33.91 38.75 43.86 49.37 55.37+10% 24.25 29.40 30.53 34.78 39.20 43.86 48.85+20% 22.67 27.24 27.77 31.58 35.50 39.58 43.86+50% 18.91 22.28 21.74 24.75 27.77 30.81 33.91-10% 28.19 33.01 38.20 43.86 50.00 56.79 64.43-20% 30.72 38.78 43.86 50.82 58.61 67.57 78.16

- 51 -

ANNEX 14Page 3 of 3

(f) Sensitivity Test on Weighted IRR (Total Cordoba Subproject)

Change in BenefitsChange 2 Year 1 Year Basein Costs Delay Delay -20% -10% Case +10% +20X

- - - -- --- -RR (%)- --Base Cost 11.06 12.81 10.80 13.10 15.23 17.22 19.11+10 9.69 11.22 8.96 11.23 13.30 15.23 17.04+20% 8.45 9.78 7.28 9.55 11.59 13.47 15.23+50% 5.26 6.12 2.77 5.20 7.28 9.12 10.80-10% 12.58 14.60 12.86 15.23 17.43 19.51 21.50-20% 14.32 16.66 15.23 17.70 20.02 22.23 24.35

Beneficiaries and Urban Poverty Impact

4. The project partly consists of investments designed to reduce what isbelieved to be high levels of unaccounted-for water (e.g. 73% in B. Aires)through an integrated set of actions that combines macro and micrometering,new census of users, rehabilitation of networks, leak detection andimprovements in billings and collections. These actions are expected toresult in a reduction of water wastage, and make available water to facili-tate new connections. As a result, the project not only will make wateravailable to new consumers, but will also improve services to existingusers as well as provide appreciable financial benefits to the utilities.

5. The Cordoba subproject's plant construction and expansion componentwould benefit 0.4 million people by 1993. The opertional improvement com-ponent would benefit 0.35 million people. In Buenos Aires, it is estimatedthat nearly 8 million m3/month of water would be recuperated through theoperational improvements. Thus, it is estimated that allowing for losses,0.8 million people would be connected to the system. In Rosario, therehabilitation is designed to upgrade the services of 0.25 millionpersons.

6. The Cordoba subproject would have an appreciable impact on the poor,defined as families earning a monthly monetary income of less thanUS$160.00 in September 1985 prices. Several variables are used to classifythe poor in Argentina. These include levels of satisfaction of basic needssuch as housing, health, education, etc. These variables are then used toarrive at socio-economic and income stratification of the population.Nearly 80% of the population above the urban poverty threshold in Cordobawas already connected to public water systems in 1984 (regardless ofservice quality). Many areas into which new water connections will beextended are heavily populated by families below the poverty threshold.Even in new areas of settlement to which water would be extended, a sub-stantial proportion will be poor families that have recently migrated tothe city.

- 52 -

ANNEX 14Attachment I

ARGENTINA


ECONOMIC RATE OF RETURN AND MARGINAL COST (INCREMENTAL VALUES)

CORDOBA WATER SUPPLY EXPANSION COMPONENT (COMPONENT A)

(US$ Million in September 1985 Prices)

IM "117 1911 1909 190 1WI 1992 1"3 1994 1"5-2015

fECES

PWLATIN SEW 0D 00M) - - - 50.60 51.2 53.21 363.74 31.65 417.04 43 i.41VOULE PILLS (N3) - - - 5.94 5.91 6.14 41.'7 44.96 41.12 49.44

CONNECTIONS (0003 - - - 13.00 13.13 13.64 913.27 9.91 106.93 109.17

IENUEIE P OPEA*TZONS

raMIFF Ejus - - - 1.Y2 1.30 1.35 '.23 .69 10.19 10.U03 EV91 - - - 0.3B 0.59 0.61 4.20 4.50 4.91 4.94

10. A TWA. LOS lLeS 0.10 0.O 0.60 0.30 - - - - -

me I mSu. oneS o.so o.uo - - - - - - - -

LOS NLONS PLIT 1.90 2.90 2.40 1. 40 .40 1.20 - -

OmE RAMTs - 1.1O 1.10 0.70 0.50PSIIUNMON 0.30 0.50 5.70 P.30 4.50 3.10am1 IN o.Ko 1.30 0.50 0.40 -

LOS ALIES CUL E0.60 0.40 0.50 - - - - - - -

TUTtL IMNEhINfS 4.10 7.0 10.90 11.10 6.40 4.30

TOTAL COSTS 4.20 .3O 10.90 11.-6 .9 4.41l 4.20 4.50 4.31 1.94

WEI PEEITS -4.10 -7.60 -10.90 -10P. -5.6' -3-;6 5.0! 5.39 5.75 5.V4

un 12. 145 lU?43Inteml ReIb ot Return at Nt SLruat

NTI 9.54?

Net Present Value at OCC 12 - -6.3

Sumry Marginal Cost Analysis

a) Discount rate (Z) - 12b) Project life (year.) - 30c) PV of inveutmntr (USS million) - 30.27d) PV of O & M expenses ( ) - 19.94a) Pv of volume bIlUed tMn =

3) - 199.49

f) Marginal coat (c c d a) (USS/m3 ) - 0.25g) Present (1985) tariffs in Sept. 85 price. (USS/, 3 ) - 0.14h) Projected average 1989 tariffs in 1985 prtces (USS,m3) - 0* 181) 1985 cariff/larginal cost (2) - 56J) Protected average tariff/martinal cosa (Z) - 72

- 53 -

ANNEX 14Attachment 2

ARGENTINA



CORDOBA OPERATIONAL IMPROVEMENT COMPONENT (COMPONENT B)

(US$ Million in September 1985 Prices)

11 1937 im Im 1999 19 l!"2 1"913 14 l795 S01.

PWVdTERS

UItRATION SERVED 40001 70e.9 109.20 149.4 12.38 JU14 240.40 2.64 354.12 405.44 43.4'mmE tILLED 'IWIJI 4.55 '.00 .-6 11-.0 12.06 15.41 19.31 22.70 2z5.c 21.40CUI- iTiONS (0) 18.20 23.0l 38.32 44.0 41.20 61.04 73.24 90.0 103.e 117.60

REVSWIS AIn PMlETI 3S

rm. REVEJE 0.77 1.19 1.63 1.36 2.05 2.62 3.1! 3.hi 4.4Z 5.60Dam OAPS 01 - - - - 0.15 0.20 0.26 0.34 !.4- 0.53

NicRUTMII 0.60 0.50 0.60 0.70 - - - - - -

TnIOII 0.05 0.05 0.04 9.00 - - - - - -

PlTSEstEn 3.02 0.03 0.01NIPE u CA3Ml 0.13 0.13 - - - - - - - -

iE1111 1933 a RoEo 0.19 0.53 1.64 - - - - - - -

I RVin WU1 I 4INT. 0.59 1.65 - -

CWJCIML IIUPEIOTS 0.13 0.04 0.34 0.04 - - - - -

MroL r.Lwc Sr 1.76 2.98 2.33 0.79 -

rTrAL COSTS 1.776 '.9n .373 0.79 9.1;.:9 0.0 0.216 0.34 0.43 0.53

rET EFITS -0.9 -1.79 -0.71 1.69 I.0 .42 11.35 3.5 3."9 4.47

Ja 12, tM5 13:43

Inheil Not" ot Return of Not Stis

UIr2 43.861Net Present Valu- at OCC 12Z - 16.5

Sum_rv Marginal Cosc Analysit

a) Discount race (:) - 12b) Proj-et lif- (years) - 30c) PV of investments (USS million) - 6.11d) ES of 0 & m expgnss ( ) 2.04a) Pn of volua billed (Mn n3) -145.13f) Marginal coot (c + d a) (US$/13) - 0.06g) Present (1985) tariffs in Sept. 85 prices (USSl/3) - 0.14h) Projected average 1989 tariffs in 1985 prices CUSS/u3) - 0.18t) 1985 tariffEmarginal cost (Z) - 233J) Projected average tariff/marginal cost (S) - 30W

- 54 -

ANNEX 14Attachment 3

ARGENTINA



CORDOBA SUBPROJECT (WATER SUPPLY EXPANSION & OPERATIONALIMPROVEMENT COMBINED)

(USS Million in September 1985 Prices)

IM 1197 19 1939 19 I I9t 9 1993 194 iY5-:IS

PPunATIU 0eeo 70.s9 109.20 149.45 222." 3.31 293.61 649.38 743.n7 2.49 117.12WIll DILUL thil3) 4.33 7.00 9.56 1.69 17.97 22.35 60.2;1 67.66 74.1l 79.8CUMETIUS (00P 112.0 23.00 33.32 57.20 61.33 75.21 166.51 190.71 210.1 227.47

RAWilE AN3 WEP*TIUh

TMPFT IE!WI 0.77 1.19 1.63 3.17 3.35 3.97 12.34 13.75 15.01 15.89ou ESES - - - 0.51 0.74 0.81 4.46 4.84 5.24 5.47

llOAT IIWBETIIS 5.86 10.56 13.13 11.39 6.40 4.30 - - - -

TOI.L MS 5.16 10.56 13.13 12.47 7.14 5.11 4.41 4.14 5.24 3.47

El IJUlm -5.09 -9.39 -11.50 -9.30 -3.79 -1.14 7.0 0.91 9.77 10.41

hum 12. I5 18:44

Inenwl RItats rs Rcbm of Nlt Strum

IST3 154Z3

Not Present Value at OCC 122 - 10.2

Sumary Marrinal Cost Analysis

a) Discount race ( - 12b) Project life (years) - 10c) PY of investmnts (USS milion) - 36.38d) PV of O& ' He neas( - 21.98e) PY of volum billed (tn 3) - 34.62f) Marglnal cost (c + d *) (uSsS/3) - 0.17g) Pra.nt l1985) tariffs in Sept. 85 prices (U551/3) - 0.14h) Projected average 1989 tariffs in 1985 prices CUSS/,3 ) - 0.18i) 1985 tariff/marginal cost (:) - 82j) Projected average cariff/marginal cost (2) - 106

- 55 -

ANNEX 14Attachment 4Page 1

ARGENTINAWATER SUPPLY. PROJECT

Assumptions for IRR and AIC Calculations

Plant Construction and Expansion Component

1. Incremental population served includes all additional people connectedto the system beginning in 1989, when production from new plants begins toccme on stream, extending through the year 1995. Incremental populationexcludes population already connected whose service would be improved.

2. Incremental number of connections and consumption are obtained fromincremental population assuming an average of 3.9 persons per account and aconsumption (volume billed) of about 37.5 m3/connection/month.

3. Revenues stem from tariffs. Connection and reconnection charges havebeen excluded from the calculations. Tariff levels are based on tariffforecasts. 1987 tariffs expressed in September 1985 prices have F n usedto project revenues.

4. Investment costs include all water related expenditures for produc-tion and transmission, treatment plants, storage, distribution and one-sixth of the cost of the Los Molinos Canal. The canal is expected to yieldbenefits to other sectors (agriculture and energy). Of the 12 m3/secestimated, 2 m3/sec are attributed to water supply needs. Costs are basedon estimates by EPOS and quotations by contractors on recent works. Allinvestment costs include engineering and physical contingencies and makeallowance for replacement equipment.

5. Operating costs include direct and indirect costs for operatingpersonnel, chemicals, energy, materials and spare parts. Administrationcosts are included in personnel costs and. are assumed to be roughly 30Z oftotal personnel costs. It is also estimated that 15% of total 0 & M costsare fixed costs which will not increase due to the project and 70% of theremainder is due to water supply operation and 30% for sewerage. Detailedbreakdown of 0 & M costs by plant and activity is in the project files(Document No. B.6).

- 56 -

ANNEX 14Attachment 4Page 2

6. Shadow Prices. Efficiency prices have not been applied to costs.This is because in foreign exchange, Government's policy is aimed atreaching a real exchange equilibrium level in relation to the US dollar.For labor, reliable figures on unemployment levels in Cordoba areunavailable, making the estimation of the efficiency wage rate (EWR)unreliable. It is nevertheless believed that the EWR is below the officialwage rates due to high unemployment and depression in the civil worksindustry. In this event, under those assumptions, the project's rate ofreturn would be slightly higher.

Operational Improvement Component

7. Incremental population served includes additional persons connected tothe water supply system beginning in the second half of 1986 as a result ofadditional water available through a loss reduction program andintroduction of efficiency measures. Incremental population extendsthrough 1995. Excludes population already connected whose service would beimproved.

8. Incremental connections are obtained from incremental population asshown in para. 2.

9. Incremental consumption is assumed to be 21 m3/connection/month asoperational improvement program is designed to meet short-term demand untilconstruction of new plants which would augment volume of water delivered toindividual connections.

10. Revenues stem from tariffs and were calculated along the lines ofpara. 3.

11. Investment costs include all expenditures for micro and macrometering, pitrometery, network cadastre, network rehabiltation and renewal,repair and maintenance and commercial improvements.

12. Operating costs include costs for operating personnel, administrationand additional materials over what is presently needed.

13. Shadow prices. See para. 6 above.

- 57 -

ANNEX 15Page 1 of 2

ARGENTINA


Selected Reference Documents and Data Available in Project File

A. Selected Reports and Studies Related to the Sector

1. Republica Argentina: Decenio Internacional del Abastecimiento delAgua Potale y del Saneamiento, Noviembre 1978.

2. La Pobreza en Argentina, Anexo No. 4 (no date).

3. Diagnostico del Sector de Saneamiento

4. Informacion Basica del Saneamiento en la Provincia de Cordoba (nodate).

B. Selected Reports and Studies Related to the Project

1. Plan de Obras: Proyecto de Presupuesto Ano 1985, EPOS.

2. Analisis de la Demanda y Alternativas, EPOS, 1985.

3. Copias de Planillas de Costos para Sustituir en la Alternativa No.8, EPOS, 1985.

4. Demanda del Proyecto, EPOS, 1984

5. Aspectos Basico para Execucao do Programa de Melhoras Operacionais(Buenos Aires), P. Carraro, Feb. 1985

6. Analisis Economico, Cordoba, EPOS, Feb. 1985

7. EPOS: Area del Proyecto, Existencia de Servicios, Demanda y Plan deExpansion, EPOS, no date.

8. Economic Analysis: Data Package, Mission Estimates, June 1985.

9. Draft Terms of Reference for Institutional Improvement Program (OSN,EPOS, DIPOS).

10. EPOS: Proyecto de Ingenieria: Costo Marginal de Largo Plazo y TasaInterna de Retorno, Nov. 1984, EPOS.

- 58 -ANNEX 15Page 2 of 2

C. Project Entities Organizational and Financial Information

1. OSN 1982-83 Financial Statements2. OSN 1985 Budget3. OSN 1985-94 Investment and Operational Plan4. OSN Tariff System and Structure5. OSN Project Execution Unit (Resolution 073956, May 13/856. OSN 1985-93 Draft Financial Projections7. EPOS Special Program for Collection of-. ccounts Receivables in

Arrears (Provincial Decree 3413, July 26/84.8. EPOS Tariff System and Structure9. EPOS 1985 Budget10. EPOS 1983 Financial Statements11. EPOS 1985-91 Investment Plan (Summary)12. EPOS Charter (Law 7253, January 10/85)13. EPOS Organization Chart (Decree 1654, April 29/83)14. . DIPOS Charter (Law 8711, December 3/80)15. DIPOS 1984 Annual Report16. DIPOS 1982-84 Financial Statements17. DIPOS 1985 Budget18. DIPOS 1985-87 Investment Plan19. DIPOS 1985-93 Draft Financial Projections20. DIPOS Tariff System and Structure21. DIPOS Tariff Adjustment Regulations (Decree 3407, August 23/83;.22. DIPOS Special Program for Collection of Accounts Receivable in

Arrears (Resolution 1812, October 10/84).23. DIPOS Roster of Econsulting Firms (Resolution 2255, December 27/84)24. MOSP Coordinating Unit (Resolution 117/85, February 22, 1985)25. MOSP Executing Unit (Resolution 848/80 SETOP, November 14, 1980)

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