Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 3530b-AR

STAFF APPRAISAL REPORT

HIGHWAY SECTOR PROJECT

ARGENTINA

May 4, 1983

Projects DepartmentLatin America and the Caribbean Regional Office

jThis document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Currency Equivalents

US$1.00 - 1,328 Argentine Pesos ($a) in June 1979- 1,850 Argentine Pesos ($a) in June 1980- 4,200 Argentine Pesos ($a) in June 1981- 39,000 Argentine Pesos ($a) in September 1982- 54,000 Argentine Pesos ($a) in January 1983

Fiscal Year

January 1 to December 31

Units of Weights and Measures: Metric

1 kilometer (km) - 0.62 mile (mi)1 meter (m) - 3.28 feet (ft)1 kilogram (kg) - 2.20 pounds (lb)1 ton - 2,205 pounds

Abbreviations

AGP - General Administration for PortsCIF - Cost, Insurance and FreightDNPT - National Directorate for Transport Policies and ProgramingDNTT - National Directorate for Land TransportDNV - National Directorate for HighwaysDWT - Dead Weight TonsFA - Argentine RailwaysFDR - Regional Development FundFONIT - National Fund for Transport InfrastructureGDP - Gross Domestic ProductHDM - Highway Design and Maintenance ModelNTP - National Transport PlanSEIM - Secretariat for Maritime AffairsUNDP - United Nations Development ProgramWPI - Wholesale Price Index

STAFF APPRAISAL REPORT FOR OFFICIAL USE ONLY

HIGHWAY SECTOR PROJECT

ARGENTINA

TABLE OF CONTENTSPage No.

I. THE TRANSPORT SECTOR ......................................... I

A. General ............ 1B. The Transport Network ................................... 1C. Sector Planning, Coordination and Investment .... ........ 2D. Major Issues in the Sector .............................. 3E. Bank Participation in the Sector ........................ 5

II. THE HIGHWAY SUBSECTOR ....................................... 7

A. The Highway Network and its Development .... ............. 7B. Traffic Growth .......................................... 7C. Road Transport Industry - Freight Services .... .......... 8D. Road Transport Industry - Passenger Services .... ........ 9E. Road User Charges ....................................... 9F. Traffic Safety .......................................... 11G. Administration of the National Network .................. 12H. Administration of the Provincial Networks .... ........... 13

III. THE DNV INVESTMENT PROGRAM .................................. 15

A. Global Investment Level ................................. 15B. DNV's Rolling Four-Year Program (1983-1986) .... ......... 15C. Maintenance Program ..................................... 16D. Economic and Technical Basis of the DNV Program ... ...... 17E. Financing and DNV's Budget .............................. 19F. Engineering, Construction and the Road Construction

Industry .............................................. 20G. Provincial Road Investment Program ...................... 21

IV. BANK PARTICIPATION .......................................... 21

A. The Project ............................................. 21B. Subproject Selection .................................... 24C. Procurement .............. 24D. Procedures for Provincial Subprojects ................... 25E. Disbursements ........................................... 26F. Special Account ......................................... 27G. Semi-Annual Consultations and Project Monitoring ... ..... 28H. Economic Viability and Assessment of Risk .... ........... 29

V. AGREEMENTS REACHED AND RECOMMENDATION ........................ 30

This report is based on the findings of an appraisal mission whichvisited Argentina in February 1981 comprising Messrs. A. van Dijck(Engineer), J. Gutman (Economist) and R. Mosse (Financial Analyst); and apost-appraisal mission in March 1983 comprising Messrs. van Dijck andGutman. The report has been edited by Miss V. R. Foster.

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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TABLE OF CONTENTS (Continued)Page No.

TABLES

1.1 Modal Composition of Traffic ............................... 321.2 Historical Level of Public Transport Investment .... ........ 332.1 National and Provincial Highway Network ................... . 342.2 Indices of Sector Growth ................................... 352.3 Appraisal Estimates of Traffic Compared with Actual Counts

per Third Highway Project (Loan 734-AR) .... .............. 362.4 Weights and Dimensions of Vehicles ................... 372.5 Composition of Fuel Prices - November 1982 ........... 38

2.6 Road-Related User Tax Revenues and Road Expenditures 1980 392.7 Contribution to Paved Highway Costs by Vehicle Type 1979 ... 402.8 Transfer of Road Sections between Provinces and DNV ........ 413.1 Highway Investment Program 1983-1986 ....................... 423.2 Estimated First-Year Benefits for Road Works to be

Tendered in 1983 ......................................... 433.3 Pipeline of Project Preparation ............................ 444.1 DNV Tender Program 1983-1986 ............................... 454.2 Bank-Financed Program ...................................... 464.3 Estimated Schedule of Disbursements ........................ 47

ANNEXES

1. Program for Transfer of Technology to the Provinces ........ 482. Annual Report on Road Maintenance Operations .............. . 493. Economic Evaluation Guidelines for the Preparation of the

Four-Year DNV Investment Program ..... .................... 514. Completion of Main Corridors for Country Integration ....... 565. DNV Procedures for Updating Four-Year Program ............ .. 576. List of Initial Candidate Projects on DNV Network .......... 597. Potential Uses of Technical Assistance Funds ............... 608. Summary Data Sheets for Candidate Subprojects .............. 619. Related Documents and Data Available in the Project Files 67

CHARTS

1. Institutional Structure for Transport (March 1983) ......... 682. Distribution of User Tax Receipts ........... .. ............. 693. Organization of the National Highway Authority ........... .. 70

MAP

IBRD 3157R - Argentina Highway Sector Project

I. THE TRANSPORT SECTOR

A. General

1.01 Over the last decade, Argentina has passed through a difficultperiod, with a series of economic and political crises, In the mid-1970s, acombination of domestic and international events undermined the country'seconomy, resulting in rising external debt, falling foreign exchange reservesand surging inflation. The Administration which came to power in 1976 movedto stabilize the economy, but, by late 1981, the Government was faced with arapidly deteriorating balance of payments, heavy capital flight, reacceler-ating inflation, deepening industrial recession and growing fears of a whole-sale collapse of private financial institutions. The political confrontationin the South Atlantic put further pressure on the economy in 1982.

1.02 The transport sector, representing 6% of the Gross Domestic Product(GDP) and 18% of public sector investment, has been significantly affected bythe economic crises. In the mid-1970s, traffic declined on much of thehighway network. After 1976, traffic regained its early 1970s level andresumed regular growth at 4% to 6% per annum until 1981-1982 when theeconomic recession again affected it. Transport budgets have similarlyfluctuated in accordance with the economy.

1.03 The Bank has been involved extensively in the transport sectorduring the past decade through the Second, Third and Fourth Highway Projects,two Railway Projects and the preparation of a Port Project. As a result, theBank has played an important role during the difficult rebuilding years.Bank projects have supported improvement in sectoral planning, policy formu-lation and related institutional measures. The proposed Highway Sector Loanrepresents the logical culmination of the Bank's four highway loans to theNational Directorate for Highways (DNV). Its format has been made possibleby the relatively high operational standards attained by DNV and the planningand policy review efforts carried out under the Fourth Highway Project. Theproject is directed at implementing policies and procedures in the highwaysubsector in remaining areas of importance and provides for timely Bankcooperation on issues relating to the transport sector as a whole.

B. The Transport Network

1.04 Argentina has developed a highly diverse and extensive transportnetwork to integrate Its 2.8 million km2 of territory and to serve the needsof its population of 28 million. The network (Map IBRD 3157R) includes100,800 km of national and provincial primary roads; 32,200 km of railways;17,000 km of pipelines for crude oil, refined petroleum products and naturalgas; over 100 ports and 90 commercial airports. Following the worldwidetrend, highways increasingly represent the dominant mode. From 1965 to 1979,road transport's share of cargo traffic increased from 47% of total inter-urban ton-km to 52%, while rail's share declined from 18% to 9%. Similarly,in terms of passenger service, roads' share rose from 76% of inter-urbanpassenger-km to 88%, while rail declined from 22% to 7%, with air transportincreasing its share from 2% to 5% (Table 1.1). For the next decade, nosignificant changes in modal distribution are expected.

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C. Sector Planning, Coordination and Investment

1.05 Within less than two years, the Government has gone through threeorganizational changes. At present, responsibility for the transport sectoris divided mainly among the Ministry of Economy, in which the Secretariat ofState of Maritime Affairs (SEIM) and its related agencies are located; andthe Ministry of Public Works and Services, in which DNV and the ArgentineRailways (FA) are located. Within the Ministries, sectoral responsibility isfurther diffused in such a way that DNV is overseen by the Secretariat ofState for Public Works; and FA and the National Directorate for LandTransport (DNTT), which regulates road transport services, are overseen bythe Subsecretariat for Transport. Air transport comes under the Air Force aswell as the Subsecretariat for Transport, and pipelines are handled by theSubsecretariat of Energy within the Ministry of Public Works and Services(Chart 1). In addition, the provinces maintain separate highway directoratesfor their extensive networks and transport directorates for the regulation ofbus and truck operations within their jurisdictions. The most significanteffect of this organizational structure is the difficulty that it presents inestablishing balanced investment and operational, pricing and regulatorypolicies for the sector.

1.06 Traditionally, the Ministry of Economy has established annualinvestment limits for each of the modes, giving the modal agencies flexibil-ity in determining priorities within those limits. Large projects requiresupporting economic evaluations to be reviewed by the Ministry of Economy.No multi-modal planning approach is applied by the Ministry. A detailedassessment of the transport sector, however, has been conducted under theNational Transport Plan (NTP), which provides the Government with a morecomprehensive and consistent development strategy for the transport sector todirect investment and policy planning. In 1977, the Government formed theNational Directorate for Transport Policies and Programing (DNPT) with twoobjectives: to prepare the NTP and to establish a capacity for conductingplanning and policy formulation for the transport sector on a continungbasis. The Bank, under the Fourth Highway Loan (Loan 1384-AR), as well asthe United Nations Development Program (UNDP), provided technical assistanceand funding for the NTP. By March 1981, Phase I was completed; it includedan analysis of the existing status of the sector and preliminary recommenda-tions on investment, operational efficiency, pricing and taxation andGovernment organization. Phase II is directed at refining the results ofPhase I, conducting further analytical work and initiating actions to imple-ment the Plan's recommendations. Bank financing under Loan 1384-AR has beenmade available for Phase II (scheduled to end by January 1984). The proposedProject is designed to maintain a dialogue between the Bank and theGovernment on the important issues addressed in the NTP and would providefinancing for internationally experienced consultants for further studies tobe carried out by DNPT during the 1983-1986 period (para 4.07).

1.07 Public sector investment, especially in transport, has fluctuatedconsiderably during the past decade following the rise and fall of thegeneral economy. The "boom and bust" cycle of investment results in themodal agencies trying to catch up on deferred works postponed because ofunder-investment in earlier years. In transport, there was a considerableincrease in investment from 1967 to 1972, which then steadily declined over

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the next three years, rose sharply in 1976 and has declined ever since(Table 1.2). The country's current economic difficulties will furtherrestrict transport investment at least through 1983. In terms of modaldistribution, while water and air transport shares have fluctuated from yearto year, probably because of the lumpiness of investments in thosesubsectors, rail's share increased from 1977 to 1983 while roads' sharedeclined. The NTP recommends an annual level of investment for the sectorover the next decade equivalent to that of 1979 with 43% for federal roads,30% for rail, 19% for air and 8% for ports. Provincial transport expendi-ture, almost totally in roads, is considerable, and, in 1979, total provin-cial road expenditures were about 40% higher than DNV expenditures. Thereare also major transport investments which are considered outside the levelsset for the modal agencies. These investments include strategic projects,such as international bridges, and projects for which private concessionairesare being sought, such as toll roads.

1.08 While DNPT serves as the only transport planning unit with asectorwide perspective, institutionally it is located within theSubsecretariat of Transport, which is formally responsible only for therailways and the regulation of road transport services. DNPT's influence onthe rest of the sector is limited and depends on the extent to which it iscalled upon for advice by other Secretariats and/or Ministries. At the veryleast, DNPT should be responsible for annually reviewing, on behalf of theMinistry of Public Works and Services, the investment plans for groundtransport, both road and rail. It was agreed during negotiations that theMinistry of Public Works and Services would establish mechanisms to ensureconsistency in the preparation of rail and road investment plans. DNPT wouldreport on this matter during the semi-annual reviews (para 4.25).

D. Major Issues in the Sector

1.09 Among the issues confronting the sector, there are four which are,or will be, of considerable concern to the Government over the next fiveyears:

(a) Changing Role of the Federal Government;(b) Rationalization of the Railways;(c) Road User Charges; and(d) Limited Port Capacity.

(i) Changing Role of the Federal Government

1.10 One response to the economic crises of the 1970s and the surge inspending by the Federal Government has been the decision to promote therationalization of Government services, the "privatization" of those serviceswhich could be handled more efficiently by the private sector and the decen-tralization of selected Government activities to the provincial level. TheFederal Government would maintain responsibility for those activities whichcannot be delegated. Although the initial targets of the Government policieshave been outside the transport sector -mainly in health, education and waterworks- there have been some important efforts in transport, and more areexpected in the future. Rationalization of transport services has beenapplied mostly to the railways and has led, since 1976, to the closing of 19%of the network and the elimination of uneconomic passenger service, thereduction of freight service on another 35% of the system, and a 37%

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reduction in FA personnel. "Privatization" is being attempted in all thesubsectors. The major effort in the sector has been the leasing of theBuenos Aires subway system, which is currently being negotiated. Otherefforts include the leasing of railway shops and port facilities, thebuilding and operation of toll roads by private firms and the contracting oiroad maintenance (para 3.08).

1.11 In addition, decentralization has already moved ahead in thehighway subsector, with the transfer, in 1980, of a substantial portion ofthe national network to the provincial system (para 2.01). Pressure ismounting to further decentralize and transfer DNV activities to the provinces(para 2.26). Other decentralization actions include the pending transfer ofthe Buenos Aires suburban passenger rail system from FA to the City andProvince of Buenos Aires and the delegation to the provinces of responsibil--ity for expanding and constructing river port facilities.

1.12 In carrying out this wide-ranging new policy in the transportsector, Government agencies will require assistance in designing plans ofaction, in strengthening provincial agencies which will receive increasedresponsibilities, and in monitoring the results of the actions taken. TheBank's Second Railway Project (Loan 1677-AR) is already providing assistanceto FA and DNPT in developing and implementing an appropriate plan of actionfor the railways (paras 1.13-1.14). The proposed Highway Sector Project isdirected at assisting DNV and provincial authorities with regard to decen-tralization (para 2.26) and privatization (para 3.09) in addition to makingfinancing available to DNPT for technical assistance on these issues for thesector as a whole (para 4.07).

(ii) Rationalization of the Railways

1.13 The Argentine railway problem stems from the combination of achange in the economic structure of the country, the extension and improve-ment of the highway network and the inefficiencies which result from decayinginfrastructure, an "over-dimensioned" network and an excessive number ofemployees. While FA is an extensive railway with over 32,000 km of raillines, the traffic density on those lines averages about 330,000 ton-km perkm of line, which is about 35% of the traffic density on the Mexican system.About 80% of the traffic is hauled on 16,000 km of the network, and 95% ofthe tonnage hauled is handled at 27% of the stations.

1.14 Since 1976, the Government has made a substantial effort toredefine the role of the railways and to rationalize the system accordingly.The Second Railway Project is designed to assist in that process throughinvestment and technical assistance. The staff of FA has been cut from156,000 to 97,000, the network has been cut by 7,600 km and uneconomicservices have been reduced. Operational efficiencies have been achieved withimproved locomotive and wagon availability and increased loads per freightcar. Traffic, which had declined from 16.1 to 9.7 billion ton-km from 1950to 1978, rose to 10.7 billion ton-km in 1979, only to decline again to aboul:9.5 billion in 1980 and 1981 and rise to 11.5 billion in 1982, mainly depend-ing on the grain harvest. The operating losses are substantial, with aworking ratio of 207, since tariff increases have been limited in realterms. Thus, substantial work and difficult decisions remain before therailways can serve the country's economy efficiently.

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(iii) Road User Charges

1.15 The issue of road user charges is discussed in detail in paragraphs2.10 to 2.12. Based on 1979 data, the NTP concluded that inter-urban truckoperators have not been paying a share of road infrastructure costs commen-surate with their use of the road network. Since then, the situation hasdeteriorated further. The central issue is that diesel prices 1/,includingroad user taxes, are not sufficient to cover the opportunity cost of fuelplus providing an adequate contribution for road infrastructure. Resolutionof the issue should be part of a strategy to implement a consistent pricingpolicy for all modes, and especially between rail and truck.

(iv) Limited Port Capacity

1.16 The Argentine port subsector needs substantial investment toimprove its handling of grain exports and containerized cargo. The majorproblem has been the shallow draft of the sea and river channel accesses tothe ports. At the Port of Buenos Aires, the maximum draft is 30 feet, with amaximum of 27 feet upriver to Rosario and 22 feet to Santa Fe. Grain shipsare restricted to 34,000 DWT compared to the typical ship in world graintraffic of 50-60,000 DWT. Even the smaller ships must follow the slowprocess of loading 10-18,000 tons upriver and "topping-off" at Buenos Airesor Bahia Blanca for a relatively low overall load factor. An initial solu-tion supported in the NTP would be the dredging of the approach channel to 45feet to the ocean port of Bahia Blanca, expanding its port and improvingstorage facilities and inland grain transport. This is the objective of theproposed Bank port project (para 1.17), which has been delayed because ofvarious technical and institutional difficulties. Another investment deci-sion which is being discussed is the construction of a new deepwater port atPunta Medanos, north of Mar del Plata. A review of the feasibility studysuggests that such an expensive project (costing about US$1 billion for portinfrastructure alone) would be premature and that other improvements such asBahia Blanca and expanded river ports should be implemented first.

E. Bank Participation in the Sector

1.17 As evidenced by the preceding discussion, the Bank has beeninvolved extensively in the transport sector. Highway development has beenpromoted by four loans totaling US$228.5 million (Loan 288-AR, June 1961,US$31 million after cancellation; Loan 619-AR, June 1969, US$25 million;Loan 734-AR, May 1971, US$67.5 million; and Loan 1384-AR, May 1977, US$105million). Two loans totaling US$152.5 million have been made to helpimprove the railway system (Loan 733-AR, May 1971, US$56.5 million aftercancellation; and Loan 1677-AR, March 1977, US$96 million). A port projectwas appraised in August 1979, but negotiations have been delayed. All ofthe above projects have experienced serious delays and, in many cases,substantial cost overruns, mainly due to the economic crisis of the mid-1970s. The First Railway Project was to assist the Argentine Governmentin renovation and improvement of the railway to make it viable within a

1/ In Argentina, diesel is called "gas-oil."

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modern competitive environment; by 1974, it was clear that no substantialprogress was being made. Rather than renegotiation of the targets, theGovernment and FA chose cancellation of the uncommitted balance of the loan.The Second Railway Project experienced delays in becoming effective.

1.18 The First Highway Project in 1961 required a project redefinitionand an extended closing date to December 1968. The original road sections,totaling 800 km, included for upgrading under the Second Highway Project werecompleted by mid-1973; the two sections (totaling 260 km) added in 1974 toutilize the loan balance were completed in June 1978. The final cost of theProject was 17% above the initial estimates, mainly because of the rapidinflation in the mid-1970s. The Third Highway Project, which straddled thisdifficult economic period, was not completed until 1980; it provided forupgrading 1,130 km of primary and secondary roads of the national network.Completion cost was 41% above the appraisal estimates. All road sectionsincluded in this project were ultimately completed. The ongoing FourthHighway Project experienced initial delays when the DNV budget was scaleddown and the backlog of projects already in execution had to be completed.Further delays have been caused by the financial failure of severalcontractors and subsequent contract rescissions. Although about 40 of the 48sections should be completed by end-1983, the remaining retendered sectionswill not be completed until mid-1985.

1.19 The experience with past and current transport lending operationsindicates that project implementation in Argentina can be difficult andtime-consuming and that delays are the rule rather than the exception. Muchdepends upon the continuity of government and the state of the economy, bothextremely difficult to factor into the implementation plan of a project. Thesector format of the proposed loan should help to avoid many of the delaysencountered in earlier loans.

1.20 Over the course of the four highway loans to DNV, the Bank hashelped to finance the construction and improvement of 5,500 km or 14% of thenational network. The current-Fourth Highway Project involves about 1,285 kmof public works, of which about 75% were completed by January 1983.

1.21 In addition to the public works aspects of Bank lending to DNV, thefour highway projects have contributed significantly to the institutionaldevelopment of DNV, as confirmed in the respective Project Completion Reports(PCRs) for the Second and Third Highway Projects.2 / The most notablecontributions have been in improving the planning practices of DNV throughstaff training, preparation of methodologies and financing of field surveysof the network and in improving organizational efficiency and managementprocedures of DNV through mission reviews and technical assistance. Theresultant high operational standards of DNV and the established dialoguebetween DNV and the Bank have led to the proposed Highway Sector Project asan appropriate means for Bank involvement in the remaining areas of

2/ Second Highway Project - Loan 619-AR - PCR dated November 30, 1978 andPPAR 2556 dated June 25, 1979.

Third Highway Project - Loan 734-AR - PCR dated January 30, 1981 updatedand released with Highlights under M83-179 of March 3, 1983.

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importance. The bases for Bank involvement in those areas are the studiesprepared under the Fourth Highway Project:

(a) the National Transport Plan (para 1.06);

(b) the Highway Needs Study (para 3.11); and

(c) the Study on Traffic Safety (para 2.13).

The implementation of the recommendations of these studies would beobjectives of this proposed Sector Project.

II. THE HIGHWAY SUBSECTOR

A. The Highway Network and its Development

2.01 The basic road network in Argentina is in place, although not yetat required standards. As of 1981, it consisted of 38,500 km of nationalroads with 71% paved and 62,000 km of provincial primary roads with 28% paved(Table 2.1). The network is classified according to the type and level oftraffic served; an inventory of the general characteristics of both theprovincial primary and national network is maintained by DNV and updatedcontinuously. In keeping with the Government's policy to rationalize theactivities of Federal agencies and to delegate responsibility to provincialauthorities, DNV, in late 1980, reviewed its classification of the roadnetwork, transferred 13,140 km of the national networks to the provinces andreclassified 3,230 km of provincial roads as belonging to the nationalsystem.

2.02 Substantial improvements were made on the national network between1965 and 1975 with the paving of 9,355 km of roads. The restrictive DNVbudgets of the mid-1970s left a backlog of major works to be completed, whichtook priority over strengthening and reconstruction during the rebuildingyears of 1976-1980. As a result, the condition of the generally lightpavements on older sections of the network deteriorated. The DNV HighwayNeeds Study 1980-1982 (para 3.11) found that 6,400 km, or 23% of the nationaltrunk and primary network (27,500 km), are now in need of reconstruction.Over 50% of the DNV investment program for 1983 is thus directed atrehabilitation, strengthening and reconstruction. The condition of theprovincial network is under study by DNV.

B. Traffic Growth

2.03 Traffic growth on the nation's roads followed an erratic patternfrom 1970 to 1980. Fuel consumption statistics (Table 2.2) illustrate howautomobile travel declined in 1975 in response to the general economicproblems of that period and to the 1974 OPEC price increase, but rose quicklybetween 1975 and 1980, with gasoline consumption increasing at an averageannual rate of 7%. Diesel consumption, of which trucks represent about 46%,was apparently unaffected during this decade, growing at about 4.5%annually. It is too early to perceive the effects of the substantialincreases in fuel prices in recent years and the current economic problems.

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2.04 Traffic growth not only varied greatly from year to year, but alsofrom region to region. The PCR for the Third Highway Project revealed thatthe earth and gravel roads which were improved, especially in the outlyingless developed provinces, registered substantially higher traffic thanexpected, while the high traffic density road sections in major urbanizedregions registered less than expected growth, if any (Table 2.3). Thus, thepaving of the arterial Route 14 in the provinces of Entre Rios, Corrientesand Misiones had an average annual growth rate of from 8 to 15% between 1970and 1980, while the sections which were repaved or converted to four-lanedivided highways showed average annual increases of from 0 to 5%. Thesestatistics illustrate the growing importance of inter- and intra-regionaltransport in areas outside the traditional radial traffic pattern betweenBuenos Aires and the provinces and are in accordance with population trends.

2.05 To monitor traffic development, DNV established, in 1971, acomprehensive traffic count system with technical assistance from the U.S.Federal Highway Administration and financing under the Second Highway Loan.The system included 122 permanent count stations and substantially moreseasonal count stations. The system was neglected after 1974, and, althoughdata were collected, no control over procedures and results was instituted.No statistical summaries were published until 1980, and much of theinformation was considered unreliable except for traffic counts made inconjunction with specific projects to be implemented with externalfinancing. During the preparation of the proposed Sector Project, DNVprepared and implemented a Plan of Action for Traffic Counts and hasimproved the system through the introduction of new, specially trained fieldstaff. Under the proposed Project, financing would be provided for theacquisition of 200 traffic counters to upgrade and expand the current system(para 4.05).

C. Road Transport Industry - Freight Services

2.06 Road transport has continuously increased its share of freightmovements since 1965 at the expense of rail and inland waterways(para 1.04). The trucking industry which has evolved is a dynamic one, notrestricted by entry, capacity or tariff regulations. With 65% of the fleetin the hands of owner-operators, a healthy level of competition has beenmaintained, resulting in a wide range of tariffs and types of servicesoffered. Of the remaining trucks, 20% are operated by transport companiesand the remainder are for "private" or "own-account" hauls. The fleet grewat an average annual rate of 4.4% from 1975 to 1980 (Table 2.2). Trucksrepresent a comparatively high proportion of highway traffic, averaging 43%on the road sections included in the Third Highway Project (Table 2.3).Further analysis of the trucking industry was made by the Bank and ispresented in ARGENTINA: Analysis of Road Freight Transport and IntermodalAlternatives (Cono Sur), March 1981.

2.07 Freight vehicles on the nation's highways are subject toregulations limiting the size and weight. The regulations are administeredby DNV in accordance with the Transit Law of 1970. DNV has establishedmaximum dimensions and weights per axle and per vehicle (Table 2.4).Enforcement of the regulations was originally conducted through the use ofportable scales at alternate locations. After finding such scales to beinadequate for the 24-hour coverage which is considered necessary to control

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freight vehicles on heavily trafficked routes, DNV has initiated theinstallation of 44 permanent weighing stations for a control "belt" aroundBuenos Aires and near other major cities. One of the weighing stations beinginstalled on Route 9, north of Buenos Aires, has a scale for weighingvehicles in motion. Recent legislation has attempted to standardize size andweight limits for all of the national and provincial networks as well as thefines to be imposed for non-compliance. Operation of vehicle weigh stationsoutside of the Province of Buenos Aires is expected to become theresponsibility of the provinces under the new legislation, and some provincesare already operating stations.

2.08 In 1979, DNV introduced a minimum power-to-weight ratio, which ismeasured by the vehicle braking power related to the gross weight. Theaverage ratio for trucks in Argentina is 3 HP/ton as compared with over 6.5HP/ton in Europe. Many trucks in Argentina are "under-powered," resulting inlesser speeds and lack of acceleration, especially on steep grades, causingdangerous conditions and contributing to congestion. The DNV regulationraises the minimum power-to-weight ratio gradually from 3.5 in December 1981to 5.0 by January 1986. DNPT assessed the impact of the regulation byidentifying the affected fleet and estimating the increased cost of eitherreducing cargo loads on underpowered vehicles or purchasing more appropriatetrucks. The results showed that the regulations would substantially affectthe truck-trailer combinations with rear tandem axles which represent about35% of the truck combinations on the highways. The regulation is now underreview to determine if full implementation is warranted.

D. Road Transport Industry - Passenger Services

2.09 In 1980, interurban buses accounted for 32% of all interurbanpassenger-km in the country. Over 180 companies with 2,900 vehicles areserving inter-provincial routes. This important industry, however, has beenhindered by an inefficient regulatory structure, as pointed out in the NTP.Entry, capacity, tariffs, routes and schedules are regulated by the DNT forroutes which cross provincial boundaries and by the provincial transportagencies for intra-provincial routes. Many companies are regulated at bothlevels because of the mix of routes which they serve and are subjected toconflicting or redundant reporting procedures, resulting in unnecessary addedcosts. The complexity of administrative procedures at DNTT has caused delaysof over two years in deciding on applications for additional service. TheSubsecretariat of Transport is preparing to review the situation, andtechnical assistance for this purpose would be made available under theproposed Project (para 4.07).

E. Road User Charges

2.10 The Government has traditionally followed a policy that road usersshould pay for the utilization of road infrastructure through the impositionof specific ad valorem taxes, mainly on fuel (Table 2.5), lubricants andtires (61% of gross user tax receipts) and through registration fees andtaxes on vehicle sales. The distribution of these taxes is illustrated inChart 2. According to the NTP, gross receipts from user taxes in 1980 weremore than the total expenditures for the construction and maintenance of thenational, provincial and urban highway networks as well as for the regulationof freight and passenger transport on the networks (Table 2.6). While the

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gross receipts may be adequate, an analysis of the distribution of road taxesamong types of users and the pricing of fuel, compared with its economicopportunity cost, raises the issue that certain road users, especiallycommercial heavy vehicles on the interurban highways, may not be paying anappropriate share of road costs. The general principle to be applied indetermining a minimum equitable distribution of user taxes should be thatusers pay the full costs of owning and operating the vehicle and theattributable costs of operating, maintaining and reconstructing the roadway,which vary in accordance with the number and weight of the various types ofvehicles. This would be generally equivalent to paying the medium termmarginal cost of the roadway. In the case of Argentina, such criteria arenot being fully met by diesel-powered vehicles.

2.11 One of the main questions is whether the pump price of fuel issufficient if one takes into account the opportunity cost of fuel. Althoughsubstantial fuel price increases at the pump since 1979 had improved thesituation so that, by February 1981, all fuel prices appeared to be wellabove their opportunity costs, the subsequent devaluations of the pesoresulted in lower dollar equivalent prices per gallon, as shown below:

FUEL PRICES PER GALLONSUPER REGULAR DIESEL

($A) (US$) ($A) (US$) ($A) (US$)

June 1979 1,793 1.35 1,501 1.13 1,116 0.84February 1981 5,867 2.65 4,807 2.17 3,520 1.59June 1981 7,392 1.76 6,090 1.45 4,620 1.10February 1982 15,709 1.43 13,060 1.19 10,031 0.91February 1983 66,995 1.08 60,560 0.98 36,715 0.59April 1983 77,214 1.19 69,644 1.07 42,014 0.65

These prices can be compared with an estimated international CIF price toArgentina of US$0.87 per gallon for regular and US$0.84 for diesel as ofApril 1983. The comparison reveals that the current pump price does notcover the opportunity cost of diesel and does not permit an adequatecontribution, in economic terms, to cover road costs, especially in the caseof commercial vehicles using diesel, which is discussed in the followingparagraph. Argentina, however, is expected to raise its fuel prices by 3.2%per month in real terms through March 1984 in accordance with an agreementwith the International Monetary Fund. This would mean that the diesel pumpprices should reach international prices by the end of the year.

2.12 In addition to the issue of fuel prices is the question whethereach type of road user is paying an equitable share of road costs. The NTPanalysis of road user charges (based on 1979 data)3 / revealed two forms ofcross-subsidization between road users. The first type in Argentina occursbetween urban and inter-urban traffic, where urban traffic contributes 60% of

3/ Excluding the secondary costs of pollution and congestion.

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gross tax receipts but represents only 11% of total road-related operatingand capital budgets (excluding congestion costs). This cross-subsidy is notconsidered to have caused major distortions in demand, and its resolution isnot a priority issue. More serious is the finding that, for the pavedinter-urban network, truck and bus operators were covering only 50-60% ofmedium term marginal costs attributable to their use of the road network, or25-35% of average costs, while automobiles were paying 85% of average costs(Table 2.7). Again, with the substantial fuel price change since 1979, thesituation, which apparently has deteriorated, needs to be reviewed based onan updating of the NTP analysis. At negotiations, the Government confirmedthe following:

(a) that it is the Government's policy that users of roadinfrastructure contribute, through related and specific roaduser charges, to cover at least the marginal cost of thatinfrastructure and that it recognizes that the operators ofdiesel-powered vehicles are not complying with this policy;

(b) that, by July 31,1983, DNPT would update its user taxanalysis, taking into account changes in fuel prices sincemid-1979, and would formulate explicit policy recommendationsand mechanisms for implementation; and

(c) that, based on the Government's review of the above-mentioneduser tax analysis for commercial diesel-powered vehicles andrecommended changes in the taxation level, a plan of actionwould be proposed by December 1983 and adopted by June 1984,after consultation with the Bank.

F. Traffic Safety

2.13 Traffic safety has been of increasing concern in Argentina. Thenumber of deaths related to traffic accidents expressed in vehicle-kilometerstraveled on the national road network was more than three times higher in1975 than that in the U.S. and Canada. Under the Fourth Highway Project, DNVundertook a comprehensive study, executed by Argentine consultants, coveringall aspects of traffic safety in Argentina. The study assessed, and maderecommendations on, road design standards; road marking and signing;identification of, and recommendations for, improving dangerous roadsections; traffic accident statistics; vehicle standards and inspection;driver licensing; insurance; police enforcement and education. The NationalCommission for Traffic and Highway Safety was established in 1980, headed bythe Secretary of Transport and Public Works, with the participation of thevarious Government agencies and private organizations. The DNV study hasserved as a basic working document for the Commission, and initial effortshave been directed at a comprehensive educational program.

2.14 DNV has created a Division for Traffic Safety within its PlanningDirectorate. This Division is responsible for updating and implementing atraffic safety program including improved standards for geometric design,safety measures during execution of works and maintenance, and road markingand signing. The Division is developing a traffic accident register designedto identify the "black spots," dangerous road sections; it is also proposing

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education programs, preparing draft legislation on traffic safety andmaintaining relations with federal and provincial police departments.

2.15 DNV has initiated an ambitious program to implement therecommendations of the traffic safety study. The proposed sector loan would:

(a) monitor the implementation of the Safety Studyrecommendations;

(b) provide financing for the road marking and signing program andfor the improvement of dangerous road sections; and

(c) provide technical assistance when and where required(para 4.06).

G. Administration of the National Network

(i) DNV's Organization and Staffing

2.16 Planning, programing, design, construction and maintenance for thenational highway network are the responsibilities of DNV, a semi-autonomousorganization under the supervisory authority of the Secretariat of PublicWorks 4in the Ministry of Public Works and Services. DNV's headquarters inBuenos Aires plans, controls the budget and coordinates development of thenational highway network, while the supervision of construction, bettermentand maintenance is carried out by DNV's 24 district offices, which report toheadquarters through five regional offices. DNV is directed by anAdministrator General, and the organizational structure is shown in Chart 3.

2.17 DNV's staff has been reduced from a level of about 17,000 in 1977to 9,000, mainly because of the contracting of maintenance operations and theelimination of related laborers in the district offices. There are about 500professionals, 2,200 technicians, 900 administrative personnel, 800 servicepersonnel and 4,600 laborers. Salaries, especially for the higher functions,are low under the present economic conditions but apparently are sufficientto attract qualified staff from the private sector and from other Governmentagencies.

2.18 Within the General Directorate of Planning, a Department of Traffichas been created which includes a Division for Traffic Safety (para 2.14),a Division of Vehicle Weights and Dimensions (weight control, power-weightratio, exemptions for special transports, tariffs for truck permits, etc) anda Division for Traffic Statistics. Also of great importance are the expandedtasks of the Directorate General of Control, which will have primary respon-sibility for auditing requirements, including the control and evaluation ofthe technical, administrative and financial management of DNV (para 2.20).Together, these changes will provide DNV with more centralized planningcapability.

(ii) Accounting and Auditing

2.19 DNV's accounting and financial functions are the responsibility ofDNV's Administration Department and are carried out by competentprofessionals who enter the institution following a competitive selection

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process. The budgeting practices of DNV are sound. It is recognized thatimproved coordination between the Administration and Planning Departments isrequired for updating budget requirements so that financial needs arereliably projected well in advance. Revised procedures for updating theInvestment Program (para 3.15 and Annex 5) should facilitate such coordin-ation and enable DNV's Administration Department to plan its liquidityrequirements.

2.20 The Control Department for DNV has an internal audit function inthe technical, administrative and financial management of DNV. TheDepartment is responsible to the Administrator General, but also respondsdirectly to requests from the national Management Control Department in theoffice of the President. An improved reporting system is being implementedin which physical progress of DNV works is related to accumulated budgetaryexpenditures and, also, better estimates are made of what funds, includingcost escalation, are required to complete the works. The increased respon-sibility of the Control Department will resolve this issue.

2.21 On the project level, control of expenditures is carried out inmany stages. For instance, the monthly certificate of a contractor isapproved for physical and technical progress and budgetary, contractual andfinancial appropriateness by the consultant responsible for supervision andby DNV's Resident Engineer. Thereafter, the payment certificate has to beapproved by DNV district and region, by the construction and accountingdepartments in DNV Headquarters and, finally, by the Administrator General orhis representative. The payment certificate is then sent for payment to theAccounting Department of the Ministry of Economy.

2.22 The Ley Nacional de Contabilidad (National Accounting Law) isapplicable to DNV. In the first quarter of each year, the balance sheet ofDNV and a complete and detailed account of its financial transactions of theprevious year are submitted through the Executive Office to the ContaduriaGeneral de la Nacion (National Accounting Office) for its examination andapproval. The Contaduria General acts as the outside auditor required by theLey de Contabilidad and is entitled to examine all documents which itconsiders necessary. It was agreed during negotiations that the Governmentwould, commencing with the fiscal year ending December 31, 1983: (a) havethe Special Account (para 4.23) and DNV's accounts and financing statementsfor each fiscal year audited, as well as accounts and financial statementsrelated to the subprojects included in the Highway Sector Project, inaccordance with sound auditing principles consistently applied by theContaduria General de la Nacion; and (b) furnish to the Bank, as soon asavailable, but in any case not later than six months after the end of eachsuch year, the report of such audits and such other information concerningits accounts and financial statements and the audit thereof as the Bank shallreasonably request from time to time.

H. Administration of the Provincial Networks

2.23 Provincial Highway Authorities are in charge of the maintenance,reconstruction and construction of the provincial highway networks. In thecontext of the system of federal co-participation, DNV transfers 35% of itsreceipts of user taxes on fuel, lubricants and tires to the provinces for theconstruction and maintenance of provincial principal roads which are

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complementary to the national system. In addition, the provinces receiveabout an equal amount directly from the fuel taxes to be spent at theirdiscretion. A major additional source of financing for provincial roads isthe registration fee of vehicles (Chart 2).

2.24 Information provided by the NTP indicates that, in 1979, theprovinces spent about 40% more on their 62,000-km primary network than DNVspent on its 38,000-km network. About 87% was directed at construction andthe remainder at maintenance activities. The earmarked taxes mentioned abovecover about 70% of the expenditures; the rest are financed from generalrevenues.

2.25 The capabilities of the provinces in highway matters vary widely,from the provinces of Buenos Aires, Cordoba, Santa Fe and others with highwayorganizations equivalent to DNV, to several provinces in the outlying regionswith limited capacity. The ability of these latter provinces to administerthe network adequately is of immediate concern because of the effect on theseprovinces of the recent transfer of sections of the national network. In thecase of Salta, Catamarca and San Juan, the transferred sections representfrom 63 to 79% of their primary network, placing a substantial new burden onthese provinces (Table 2.8). While some funding of improvement, transferof equipment and personnel adjoined the transfer in many instances, there isa need to monitor the condition of these roads in the near future. DNVshould seek agreement with the provincial authorities to carry out suchmonitoring.

2.26 During the next five years, pressure will increase on DNV todecentralize its activites and transfer more responsibilities (and funds) toprovincial authorities. The main voice for the provinces has been theFederal Highway Council (CVF) which includes representatives from each of theprovinces as well as representatives of DNV. DNV, for its part, has taken amajor step in this direction through the transfer of road sections. Also,DNV delegates bidding and supervision responsibilities to the provinces on anad hoc basis for federally funded projects. The contract maintenance programis designed to facilitate the possible transfer of maintenance responsibil-ities to the provinces without substantial changes in provincial organiza-tions which could interrupt maintenance operations during transition. Therealization that more must be done to help the provinces care for their ownnetworks and prepare them for the transfer of responsibilities led to thesigning of an agreement between DNV and CVF in March 1981 to conduct atransfer of technology program (outlined in Annex 1). Subsequent to thatagreement, each of the provinces signed letters of intent with DNV, request-ing that funds from the Highway Sector Loan be applied to economicallyjustified high priority provincial road works. This would help to ensure thecarrying out of needed provincial subprojects during this period of budgetaryrestrictions and would enhance the transfer-of-technology program through thepreparation of the specific subprojects and an overall investment program(para 3.24).

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III. THE DNV INVESTMENT PROGRAM

A. Global Investment Level

3.01 The Ministry of Economy establishes investment levels for thenational road network (para 1.06) which DNV is not allowed to exceed. Theinvestment targets include all expenditures, with the exception of theadministration of DNV, routine maintenance, transfers to provincial agencies,and debt service. Since 1977, this level has continually dropped in real

terms, from US$580 million in 1977 to US$354 million in 1979 to aboutUS$228 million in 1982. For 1983, the Government increased the level toUS$320 million supported by increasing user tax revenues.

3.02 The National Transport Plan reviewed road transport needs andestimates that the appropriate average annual level of investment for DNVover the next ten years should be about US$350 million, equivalent to thelevel attained in 1979 and to the average projected levels in DNV's 1983 to1986 financial forecast. Applying generalized technical and economiccriteria to the road network and identifying the major feasible projects forthe 1981 to 1990 period, the Plan concluded that, with appropriate investmentlevels sufficient to cover estimated highway needs, DNV could carry out thepaving of 5,100 km of presently earth and gravel roads (45% of the unpavednational roads); the reconstruction and/or strengthening of about 19,500 kmof pa^ved roads; and the construction of 1,200 km of freeways and urbanbypasses. Although the physical condition of the network would graduallyimprove under this work program, the overall level of service might notchange significantly because of traffic increases.

B. DNV's Rolling Four-Year Program (1983-1986)

3.03 DNV annually prepares a Four-Year Program which lists the highwayprojects to be carried out within the budgetary limits set by the Ministry ofEconomy. Distinction is made between two main categories of civil works:(a) works: new construction, reconstruction and works related to agreements(Convenios) with provinces and the Regional Development Fund (FDR)(para 3.14); these projects are carried out by the Construction Departmentand usually have a construction period of more than one year; and (b) im-provements and other items: betterment and road safety items carried out bythe Maintenance Department, and consultant contracts and various miscel-laneous works. These are usually one-year contracts.

3.04 Assuming that DNV will receive about US$320 million per yearthrough 1986, the following observations can be made concerning the probablerevised Four-Year Program (Table 3.1):

- New construction projects will decrease and expenditures forreconstruction projects will increase markedly. This trendreflects the increased priority being placed on reconstruction andimprovements;

- Commitments in works in execution will be relatively heavy in 1983and 1984, which leaves, after allowing for Inter-AmericanDevelopment Bank (IDB) projects still to be tendered, limiteduncommitted funds for new construction and reconstruction works inthese years; and

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The amounts set aside for various improvement works will besatisfactory, allowing sufficient road betterment and traffic-safety-related works to be carried out.

3.05 The Program as a whole is balanced and the individual subprojectsalready identified are well justified (paras 3.11-3.13). The investmentprogram, together with the operational budget, provides for: (a) the neces-sary emphasis toward betterment and reconstruction of existing roads in orderto prevent rapid deterioration of aged light pavements; (b) suppo rt fortraffic-safety-oriented projects, such as road marking and signing and theillumination of a limited number of road sections; and (c) sufficient fundsfor road maintenance. While DNV's program includes substantial new construc-tion works in low density corridors, which are directed at better integratingoutlying regions into the economy, the construction of freeways and beltwaysnecessary to alleviate heavy congestion near and around urban centers hasbeen deferred. Thus, although there is a need to improve programingpractices for future updates (para 3.15), the current Program provides asatisfactory basis for initiating the Highway Sector Project.

C. Maintenance Program

3.06 The Maintenance Directorate of DNV is responsible for routine andperiodic maintenance of the national highway system. Although funding formaintenance was erratic during the 1970s, it is evident that the network isin an adequate state of repair. Much of the reconstruction which has beenidentified is to provide heavier pavements for increased traffic volumes, atask which could not have been avoided by better maintenance practices. DNVdistricts are divided into zones, the basic management unit for maintenance;zones cover 150 to 1,000 km of roads, with a 350-km average.

3.07 Periodic maintenance, including overlays and surface treatments, iscarried out by contract. Limited funds were available in the 1977-1979period, when attention was focused on the completion of the large number ofconstruction projects dating back to the previous administration. Since1980, the level of expenditures has been raised to a satisfactory US$150million level, in 1982 values.

3.08 Until 1979, routine maintenance had been carried out directly bythe DNV zones under force account. Late in 1979, in line with Governmentpolicies to foster private enterprise, DNV introduced contract maintenancefor its routine maintenance operations, seeking to improve efficiency,minimize costs and reduce its equipment fleet, which was due to be renewed.Some 70% of the network was contracted, but 30% remained under force accountto enable DNV to gauge contract prices, to retain a nucleus of maintenanceactivities, and to have DNV staff and equipment available for emergencies.The system proved not flexible enough in the face of uncertain future budgetallocations, as well as too complex to supervise and manage. DNV's presentapproach is to contract specific maintenance tasks, when required, compatiblewith the financial constraints. This approach implies a more extensive forceaccount operation, estimated at about 50%, rather than the 30% originallyintended, and will require more staff and the procurement of maintenanceequipment and tools, provided for in the draft investment budgets for1983-1985.

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3.09 Expenditures for routine maintenance are presently at the US$70million level and are scheduled to increase gradually in the future; with38,000 km in the national network, this figure represents an averageexpenditure of US$1,850/km, which, under the present restricted financialsituation and given the adequate condition of the network, should beconsidered satisfactory. During negotiations, the Government confirmed thatit would continue to maintain the national network adequately, and it wasagreed that the Government would allocate the required funds, which would beat least at the 1983 level in real terms, unless otherwise agreed duringconsultations with the Bank. A formula was agreed during negotiations toadjust the amounts allocated in future years in line with increased inputprices. The Highway Sector Project would support the maintenance operationsand development toward contract maintenance by financing technical assistanceto help solve management problems that may arise in DNV and to help assessthe cost effectiveness of the approach (para 4.06 and Annex 7). To helpmonitor the progress of this effort, the Government agreed at negotiationsthat it would provide, by the end of March of each year, starting in 1984, anannual report on maintenance operations. The contents of that report aredelineated in Annex 2.

D. Economic and Technical Basis of the DNV Program

3.10 The updating of the rolling Program has been conducted in the pastin a pragmatic manner, and new entries have been made on the basis ofeconomic analysis, engineering judgment, political pressures and regionalbalance. Feasibility studies are made either by the Economic StudiesDivision of the Planning Directorate or by consultant firms in more complexcases. The evaluation methods are those which have been used and improvedthrough the preparation and final evaluation of previous Bank loans to DNV.The economic justification for the investment program has been confirmedthrough three sources:

(a) DNV Highway Needs Study for reconstruction projects;

(b) National Transport Plan for new construction projects; and

(c) Bank confirmation of feasibility of initial projects to betendered.

3.11 The reconstruction projects in the Program generally coincide withthe segments identified by the Highway Needs and Pavement Strengthening Studybeing carried out by DNV, with support under the Fourth Highway Project. TheNeeds Study is to be a continuous effort designed to identify, in amethodical manner, deficient road sections on the national network and toevaluate project alternatives in terms of design and timing. About 10,000 kmof roads are being reviewed annually with regard to their general structuraland geometric characteristics. Through the use of standard sufficiencyratings, the more deficient sections are selected for detailed study, includ-ing roughness measurements, deflection and test borings. Improvement alter-natives are then assessed through the use of the Bank's Highway Design andMaintenance Model (HDM) with modifications appropriate for Argentina. In1982, of the 27,000 km of the national principal network which weresurveyed, 6,400 km were identified for reconstruction. The estimatedinternal rates of return (IRR) for the projects identified, almost all ofwhich have been included in the Four-Year Program, either as reconstructionor betterment, ranged from 10% to over 100%, with 85% of the projects havingIRRs of over 25%.

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3.12 The NTP has confirmed the economic feasibility of the majorupgrading and freeway projects included in the DNV Program. The IRRs rangedfrom 11% to 45%, with 25 of the 34 projects having IRRs of 15% or more. Timesavings, which comprise a substantial proportion of the benefits for freewayprojects, were appropriately based on an analysis of income levels and aredifferentiated by trip purpose. The projects with the lower economic returnswere for paving unpaved roads, for which diverted and generated traffic maynot have been fully accounted, leading to a potential underestimation ofbenefits and returns.

3.13 In addition to the preceding, the Bank, with DNV's assistance,tested the general feasibility, through the estimation of First YearBenefits, of new construction and reconstruction projects included in the1983 tender program. Assuming a weighted average savings per vehicle invehicle operating costs, time and accidents, when applicable, by type ofconstruction project, and using only the first-year traffic on the projectroad section, project benefits in the first year were approximated. Withvery few exceptions, the benefits were equivalent to over 10% of theinvestment cost, which indicates IRRs greater than the accepted opportunitycost of capital for Argentina, estimated at 10% (Table 3.2). More detailedfeasibility calculations are being conducted for initial candidate projectsfor Bank financing, following the methods prescribed in Annex 3.Furthermore, future updates of DNV's Program should ensure optimum projectselection and design as the recommended programing procedures and methods arefully incorporated into DNV's operations (para 3.15).

3.14 Also included in the investment program are road projects for whichthe primary justification is the integration of outlying regions with thenational network. The major corridors which are the focus of this effort aredescribed in Annex 4. Some of these projects are selected under a programcalled the Regional Development Fund (FDR), which is administered by theMinistry of Interior and executed by DNV with the combined financing of theMinistry of Interior, DNV and the affected province. In some instances,these projects have lower rates of return than the rest of the program, buthave been given priority by the province and/or the Government because of thesocial or strategic considerations of the project. In such cases, a tech-nically adequate minimum cost solution should be pursued. An importantcorridor is Route 40 along the foothills of the Andes, many sections of whichare still earth roads. At negotiations, it was agreed that DNV, by June1985, would carry out a technical and economic feasibility study for theimprovement of Route 40 and/or its alternatives from Catamarca to Santa Cruzand take into account the results in future updates of its investmentprogram.

3.15 Although the existing system has not resulted in any apparentserious investment errors and the high priority projects are normallyincluded in the Program, increasing political pressures, high inflation andlimited budgets have raised the need to institute more systematic and tech-nically consistent procedures for the preparation of the Program. Suchprocedures would allow DNV to weigh the costs and benefits of alternative

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projects in order to properly estimate and justify its budgetary requirementsand to select and design projects taking overall budgetary restrictions intoconsideration. Under the Highway Sector Project, DNV would implement a planfor revising its procedures for updating the Four-Year Investment Program.The revised procedures have been developed by DNV staff in consultation withthe Bank and are summarized in Annex 5. The main features of the revisedprocedures are the formal incorporation of the results of the Highway NeedsStudy into the updating of the investment program and the application of aconsistent economic methodology in the evaluation of all projects beingconsidered for investment. At negotiations, it was agreed that DNV, startingin 1984, would institute the proposed procedures for the updating of theFour-Year Investment Program.

3.16 DNV is reviewing its staff requirements for the PlanningDirectorate and agreed at negotiations to provide sufficient resources toupdate the Four-Year Investment Program annually.

E. Financing and DNV's Budget

3.17 The main sources of funds for DNV's investment and operatingbudgets are the earmarked portions of user taxes on the sale of fuels (5-7%of pump price), lubricants and tires, representing 73% of DNV's projectedcapital and operating expenditures in 1983 and on the sale of new and usedmotor vehicles, representing 28% of these expenditures. Other fundingincludes Federal Government contributions from the Transport InfrastructureFund (FONIT), which is also based on fuel taxes and is distributed betweenthe railways and DNV at the discretion of the Government (originally 50%each, but lately a much lower percentage is allocated to DNV and virtually nosuch funds will be assigned in 1983); the collection of tolls; and internallygenerated funds from the sale of used DNV equipment. The distribution ofuser tax receipts is shown on Chart 2. Existing loans from the World Bank(Fourth Highway Loan) and IDB (road reconstruction) represent about 12% ofthe 1983 to 1986 investment program.

3.18 A summary of DNV's budget for 1978, 1983 and projected 1986 isshown on the next page. Capital expenditures show a substantial decrease intime because of the gradual elimination of the large backlog of uncompletedworks inherited from the previous administration and the lower levels ofinvestment imposed by the Ministry of Economy since 1979. The higher levelsof investment through 1978 required large direct Government allocations,especially in 1976 and 1977, a sizable contribution from FONIT in 1978, andlarge foreign and domestic borrowing in 1977 and 1978. However, because ofthe steady net increase of the earmarked taxes available to DNV (especiallythe large increase of the Motor Vehicle Expressway Fund derived from theincreased sale of cars in 1979 and 1980), DNV has been able, with itsinvestment level fixed, to reduce its debt notably, especially in 1980,notwithstanding the large reduction of allocations from the FONIT fund.Personnel costs have increased despite substantial staff reductions becauseof an increase, in real terms, in DNV's salaries and wages and because of theshift in DNV's personnel structure with the hiring of more professionalstaff.

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DNV's Budget Summary(in millions of Constant September 1982 US$)

1978 1983 1986

Capital Expenditures 484 80% 328 78% 353 78%Operating Expenditures 124 20% 93 22% 97 22%Total Expenditures 608 100% 421 100% 450 100%

Net Taxes on Fuel, Lubs., Tires 240 40% 306 69% 324 68%Taxes on Sale of Vehicles 111 18% 116 26% 128 27%Other Sources 25 4% 24 5% 25 5%FONIT Allocation 77 13% 1 - - -Direct Government Allocation 24 4% - - - -

Total Revenues 477 79% 447 106% 4 106%

Surplus/Deficit -131 -21% 26 6% 27 6%Interest on Debt & Debt Repayment - 98 -77 -88

Financing Required 229 51 61to be covered by additionaltaxes, direct Governmentallocations and loans fromthe Bank and IDB

3.19 DNV's financial structure is sound, with moderate debt leverage.DNV repaid almost all of its expensive domestic long term debt for thereasons mentioned, and by obtaining favorable foreign loans. The borrowingpractices of DNV have been carried out strictly on a commercial basis. Forthe 1983-1986 period, it is estimated that DNV's debt service payments, inrelation to tax revenues, would not exceed 28%, reflecting a rational finan-cial policy followed by DNV's management. In the semi-annual consultations,the financial status of DNV would be monitored (para 4.25).

F. Engineering, Construction and the Road Construction Industry

3.20 The Design Department of DNV is responsible for the detailedengineering of road investment projects and prepares tender documentation andcost estimates up to the tender stage. The Department is well staffed andable to carry out design work in-house as well as to control and monitordesign work executed by Argentine consultants. The professional standards ofDNV and its consultants are at international levels. Table 3.3 indicates theprogress made in project preparation. As of January 1, 1983, designs werecompleted for over 30 projects covering 950 km of roads and totaling US$230million, and an additional 139 projects covering 4,000 km and totaling aboutUS$400 million were in various stages of design preparation.

3.21 The Argentine road construction industry is well developed and canexecute all types of works satisfactorily, including intricate expresswaysand major bridges. Highway construction is carried out under unit pricecontracts with adequate price adjustment formulas. No foreign contractorsshowed interest in the works tendered for the Fourth Highway Project. Thereis a possibility, however, that, because of scarcity of works in surrounding

countries, notably Brazil, foreign interest may increase, although thecompetitive position of the local contractors will remain strong. Typical

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construction and reconstruction projects are in the US$2-5 million range, butthere are regularly contracts of over US$10 million for expressways andbeltways. Because of keen competition and a proficient contracting industry,road construction prices have traditionally been low in Argentina.

3.22 Contractor performance is generally good; work progress was, in thepast, very much linked to DNV's ability to pay the monthly certificates on atimely basis. In the difficult years during the mid-1970s, works virtuallycame to a standstill, and many contracts had to be renegotiated when the newadministration took office in 1976; these works have now all been completed.At present, DNV pays within the two-month period specified in its standardcontract. Present performance of contractors is linked to their financialsituation. Past experience illustrates how extreme fluctuations in thenation's economy can affect works in execution.

3.23 DNV's Construction Department is responsible for the tender processand the execution of construction and reconstruction works, presently at anannual level of over US$200 million. In accordance with Government policiesto foster private enterprise and to diminish civil service staff, the inspec-tion of construction work is often carried out by consulting firms, whereasDNV monitors this inspection in the field. The quality of the consultingservices is good.

G. Provincial Road Investment Program

3.24 Few statistics are available in aggregate form for the provincialroad investments. Through the financing of provincial road works, theHighway Sector Project would focus on developing rational planning practicesand capabilities at the provincial level. At negotiations, it was agreedthat all participating provinces would prepare, by December 31, 1984, andupdate annually thereafter, detailed four-year investment programs incoordination with DNV. To ensure that appropriate procedures are applied inthe selection, evaluation, preparation and execution of works to be financedby the Bank, DNV would have significant responsibility, as outlined in para-graph 4.17.

IV. BANK PARTICIPATION

A. The Project

4.01 The proposed Highway Sector Project is directed at maintaining theBank's presence in the subsector in order to promote and assist the effectiveimplementation of a series of programs and plans of actions developed underthe ongoing Fourth Highway Project. Through the financing of investmentitems in DNV's and the Provinces' Four-Year Program, 1983-1986, and theprovision of technical assistance, the Sector Project would accomplish thefollowing:

(a) reorganization and strengthening of DNV's Planning Department andimprovement of its operational procedures for updating theinvestment program (paras 3.15-3.16);

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(b) strengthening of provincial planning capabilities through thetransfer of technology from DNV to the provincial authorities(para 2.26);

(c) definition of appropriate road maintenance management system andbudgetary requirements (para 3.09);

(d) support to DNV's program for traffic safety (para 2.15);

(e) maintenance of the dialogue between the Government and the Bank onsectorwide issues arising from the conclusions of the NTP,especially with regard to user charges and passenger transportregulation (paras 1.06, 2.09, and 2.12); and

(f) establishment of the role of DNPT and strengthening of that agency(para 1.08).

4.02 Taking into account the Bank's long association with DNV and DNV'sadministrative capabilities, a sector loan format is proposed for thisproject. This flexible format, by which virtually any subproject within theinvestment program during the project period is a potential candidate forfinancing, should overcome the disbursement delays encountered in earlierprojects (para 1.18). The Project Completion Report for the Third HighwayProject concluded that, by being tied to specified projects, the Bank wasunable to meet the immediate needs of DNV as fluctuations in the economyaltered investment priorities and the initiation of Bank subprojects waspostponed. Rather than being tied to specific projects at appraisal, theSector Project would be directed at financing a "time slice" (1983 to 1986)of the investment program.

4.03 If investment levels are not reduced from the estimates provided inTable 3.1, DNV is expected to maintain a tender program for new construction,reconstruction and various road improvements, excluding subprojects includedin the IDB loan, of about US$180 million in 1983 and reaching US$240 millionby 1986 (in January 1983 prices) (Table 4.1). In addition, about US$90 mil--lion is assumed as the total cost of provincial subprojects which could beproposed for financing. The Sector Project would help to finance the 1983-1986 time slice of a large part of these uncommitted subprojects in theinvestment program, including new construction, reconstruction and improve-ments, as well as the provincial roads (Table 4.2). The total cost of thesesubprojects during this period is US$560 million including about US$56 mil-lion in value added taxes. The foreign exchange component of this investmentduring the 1983-1986 period represents about 45% of total cost (para 4.20)and is equivalent to US$250 million. The proposed US$100 million loan, ofwhich US$1 million is for technical assistance, US$1 million for theprocurement of traffic counters and US$1 million unallocated, would thusrepresent almost 17% of the cost of the potential subprojects for the 1983-1986 period and would contribute about 8% to the total DNV investment programfor the same period.

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4.04 The distribution of the loan would be as follows:

Civil Works- National Roads US$56.75 million- Provincial Roads US$40.00 million

Procurement Traffic Counters US$ 1.00 million

Technical Assistance- DNV US$ 0.50 million- DNPT US$ 0.50 million

Front-end Fee US$ 0.25 million

Unallocated US$ 1.00 million

Total US$100.00 million

4.05 Among the civil works for the national highway system, the Bankwould finance a variety of subprojects ranging from road marking and signingand betterment subprojects to reconstruction of existing road sections, newconstruction of roads and construction of urban beltways and access roads.The initial candidate projects are shown in Annex 6. The civil works for theprovincial networks would include betterment and reconstruction subprojects,as well as selected construction works. At negotiations, DNV confirmed thestatus of project preparation and the tender and award schedules. Also,agreement was reached on the DNV updated four-year rolling program for theperiod 1983 to 1986 and on the administrative and maintenance budget for1983. During semi-annual meetings, the Bank and DNV would discuss the annualupdating of the program and the proposed subprojects (para 4.26). Theproject would also finance the procurement of traffic counters to replaceoutmoded existing equipment (para 2.05)

4.06 Technical assistance to DNV under the Project would be establishedas a global amount which would finance the contracting of individual expertswith international experience for limited periods of time to provide highlevel assistance during the course of the project. As the need for specificconsulting services arises, terms of reference and consultant selection wouldbe prepared subject to Bank approval. Potential uses for this fund arelisted in Annex 7. An amount of US$0.5 million has been provided. Loanfunds would cover the full costs of the foreign experts estimated at anaverage fee of about US$9,000 per month plus a per diem of about US$3,000 perman-month and air travel averaging US$2,500 per visit. Local consultantswith international experience would also be eligible for financing under thiscomponent at an average monthly fee of about US$4,000 and would representabout one-third of total man-months. The fund, then, represents about45 man-months of assistance for DNV. It was agreed at negotiations that theGovernment would take all actions necessary to facilitate the contracting offoreign experts, including exemptions under current legislation.

4.07 In order to promote the implementation of the recommendations ofthe NTP (para 1.06), the proposed loan would provide financing for foreigntechnical assistance for studies to be carried out by DNPT during the1983-1986 period. An amount of US$0.5 million has been reserved for theseactivities. The potential use of these funds has been listed in Annex 7; thecost per man-month is estimated to be the same as that given in paragraph4.06. This part of the loan would be administered by the Subsecretariat ofTransport through DNPT.

-24-

B. Subproject Selection

4.08 Two important concepts to be considered are the individual sub-projects and the contract(s) associated with each subproject. The subprojectis the unit considered for purposes of selection, preparation and evaluation,while contracts for the implementation of specific subprojects are the basisfor disbursements.

4.09 Bank financing would be restricted to disbursements ¢!. ,'ivil workscontracts pertaining to eligible subprojects awarded before January 1986 andwhich would have an initial completion date prior to July 1988. The proposedloan would consequently be linked to financing a time-slice of expenditureson contracts of eligible subprojects approved by the Bank; thus, not allcontracts would be completed when loan funds would be depleted. Fulldisbursement is expected by mid-1987 but would depend upon the number andprogress of the contracts financed by the Bank. DNV and the provinces wouldcomplete the works on contracts then still under construction in accordancewith a schedule defined for each subproject. At negotiations, it was agreedthat the Government would complete all subprojects assisted under the SectorLoan. The financing of a time-slice under the proposed Sector Loan wouldalso allow the inclusion of two subprojects already tendered and subprojectsto be tendered early in 1983 following international competitive bidding inaccordance with Bank gttidelines. These subprojects would be eligible forretroactive financing for up to US$2 million for expenditures afterJanuary 31, 1983.

4.10 DNV would prepare, for each subproject, a technical and economicevaluation summarized in a basic data sheet (Annex 8), which would includeinformation on the rationale of the proposed works, the design standards, thealternatives considered, the cost, the results of the economic evaluation andthe proposed tendering schedule. The Bank would study this evaluation,request additional information as required, and confirm eligibility. Anestimated rate of return of 12% or more would be required unless otherwiseagreed to by the Bank. Three sample projects, proposed for financing, arepresented in Annex 8. Rejected subprojects may be resubmitted for futureconsideration if the project scope is amended, or if changed conditionsimprove the relevance and the justification of the proposed subproject.

4.11 Declaring a subproject eligible would mean agreement by the Bank,in principle, to help finance contracts related to the subproject, providedbudget funds are allocated, the tender process has been executed according toagreed procedures and the detailed engineering has been carried out inaccordance with the agreed design standards. The Bank would not acceptsubprojects estimated to cost less than US$1 million equivalent. Once asubproject has been declared eligible, DNV would complete its detailed engin-eering and proceed with the procurement process. However, subprojectsestimated to cost more than US$10 million would require ex-ante approval ofthe tender documents by the Bank. Agreement on the above procedures forsubproject identification and evaluation was reached at negotiations.

C. Procurement

4.12 Civil works eligible for financing under the proposed sector loanwould be procured through international competitive bidding in accordancewith Bank guidelines for procurement, except for civil works estimated to

-25-

cost US$3 million or less, which would be procured on the basis of contractsin accordance with local competitive bidding procedures, while giving foreigncontractors the opportunity to bid. It is estimated that about 40% of thecontracts would fall into this category. These works typically consist ofroad improvements of limited lengths spread over the entire country and donot lend themselves to being combined in larger packages.

(i) Prequalification

4.13 Prequalification of Argentine contractors is based on DNV'spermanent register which is periodically updated; this system was appliedsatisfactorily in previous Bank highway loans and would be continued. Forforeign contractors, notices on the program as a whole would be published inThe Development Forum and sent to embassies. In addition, notices forspecific tenders would be advertised locally and, for civil works estimatedto cost over US$3 million, sent to the embassies. Interested foreigncontractors should ask to be put on the mailing list for notices of theavailability for specific tenders. Foreign contractors would be subject topost-qualification.

(ii) Tender Process

4.14 Once a subproject has been declared eligible, DNV would, withoutthe Bank being involved in this stage, prepare tender documents and finalcost estimates, advertise tenders, open and evaluate bids, and award and signcontracts. However, if the data supplied in the original basic data sheetwould essentially change during the detailed engineering stage of thesubproject, causing the cost to increase by more than 20% or the estimatedrate of return to decrease below the 12% threshold of capital, DNV would senda revised form to the Bank for its confirmation prior to inviting tenders.The time allowed for preparation of bids would be 60 days for tenders with anestimated contract amount of more than US$3 million equivalent and 45 daysfor tenders of a lesser amount.

(iii) Bank Acceptance of Contracts

4.15 After the signature of each contract, DNV would send to the Banktwo conformed copies of the contract together with the resolution of theAdministrator General awarding the contract. The Bank would review thisinformation and, if satisfied, indicate no objection, thereby declaring thespecific contract accepted, or request further information. The Bank wouldhave the right to reject the contract when agreed tender procedures were notfollowed, and to cancel the related loan amount. In case a higher-than-expected tender amount would make the project economically unfeasible, DNVand the Bank would review the possibility of lowering the design standards ofthe subproject. Also, if the design of a subproject is materially modifiedafter initiation of construction, Bank concurrence would be required.

D. Procedures for Provincial Subprojects

4.16 DNV would serve as the intermediary in the technical preparation,economic evaluation and supervision of provincial subprojects. Eachsubproject would be subject to an agreement ("Convenio") between DNV and the

provinces. Loan repayments and interest from the province to DNV would beregulated under the agreement with the provision that DNV would have the

-26-

right to deduct the necessary amount from assigned user taxes to thatprovince if there were a default in payments to the contractors or repaymentsto DNV.

4.17 The modus operandi of financing the provincial roads would be asfollows:

(a) Selection of Subprojects:The Province proposes the subprojects but DNV is responsible forthe technical and economic evaluation. DNV selects the subprojectsfor Bank consideration.

(b) Eligibility of Subprojects:The Bank would declare a subproject eligible upon documentationprepared by DNV, similar to that for DNV subprojects (para 4.14).

(c) Detailed Engineering and Tender Documents:To be prepared by the Province, and to be approved by DNV.

(d) Tender and Award:By the Province, to be approved by DNV. Tenders would be open toall registered Argentine contractors and to foreign contractors whowish to participate, under local competitive bidding rules with 45days between advertisement and bid opening.

(e) Contracting:By the Province with conformed copies to DNV and the Bank.

(f) Supervision:By the Province with inspection of DNV.

(g) Payments to Contractors:Certification by the Province, payments to contractors to be madeby the Province. DNV would, upon receipt of full documentation,reimburse the Bank's participation (45%) to the Provinces and wouldsubsequently withdraw the amount from the Special Account at theexchange rate prevailing at the date of DNV's payments (para.4.24).

(h) Loan Repayments, Interest and other Bank Charges:The Province would repay DNV; DNV would be responsible forrepayment to the Bank.

(i) The Bank would receive two conformed copies of the Convenio betweenDNV and the Province; all other documentation, once a subproject isdeclared eligible, would remain in DNV headquarters.

The procedures for financing the provincial roads were agreed to duringnegotiations.

E. Disbursements

4.18 For civil works, after acceptance of the contract(s) of asubproject, funds can be withdrawn by DNV from the Special Account on thebasis of statements of expenditures (para 4.24). Disbursements for technicalassistance and for equipment items would be made upon full documentationbeing provided to the Bank.

-27-

4.19 Disbursements would be made on the following basis:

(a) 45% of total expenditures for civil works;

(b) 100% of the costs for technical assistance; and

(c) 100% of foreign exchange costs for equipment.

4.20 The foreign exchange component for civil works is difficult toevaluate because it represents mostly indirect costs included in the localproduction of vehicles and equipment, cement, asphalt, fuel and steel. Inthe 1977 appraisal report for the Fourth Highway Project, the foreignexchange component was estimated to be 35%; after the recent devaluations,this percentage is estimated at 45%.

4.21 Standard disbursement profiles, prepared by the Bank for highwayprojects worldwide, indicate, in the LAC Region and in Argentina, that aseven and one-half year period is required to obtain full disbursements.However, this pattern is not expected to be repeated under the proposedSector Project because the Bank would help to finance a time-slice of aprogram of eligible subprojects which would require US$250 million to coverforeign exchange costs, which is almost three times the available US$97million for civil works in the proposed loan. A disbursement period of fouryears would therefore be appropriate. Full disbursement is expected by theend of 1987. Estimates of disbursements are given below and in Table 4.3:

Disbursement Schedule for Sector Loan

--------(million US$)--------1984 1985 1986 1987 Total

Civil Works 20 30 30 17 97Traffic Counters 1 - - - 1Technical Assistance 1 - - - 1Unallocated - 1 - - 1

Total Disbursements 22 31 30 17 100

4.22 The above progression of disbursements assumes tendering forBank-financed subprojects of about US$50 million by end-1983 and about US$150million by end-1984. The schedule for additional tendering and the progressof the works, together with the rate of disbursements, was reviewed duringnegotiations and would be reviewed during the semi-annual consultations (para4.25).

F. Special Account

4.23 In order to reduce the interval during which DNV would finance theBank's share of project costs with their own resources, the Government mayrequest the Bank to make advance payments from the loan account into aSpecial Account, to be opened in US$ in the Central Bank, and which would beavailable for financing the Bank's share of the project cost only. Theamount deposited in the Special Account could be increased by the Bank asrequired for project execution, but would not exceed US$10 million. DNVwould be entitled to make withdrawals from the Special Account in Pesos atthe exchange rate applicable on the day upon which DNV's payments were madeon Bank-approved contracts. The withdrawal applications would be on the

-28-

basis of statements of expenditures covering the payments made by DNV forthese specific contracts. Supporting documentation would not be submitted tothe Central Bank and the Bank, but would be retained by DNV; it would be madeavailable for inspection during project supervision missions and would besubject to annual auditing. Also, the Special Account would be subject toauditing by the Auditoria General. The Bank would replenish the SpecialAccount upon request of the Central Bank on the basis of the withdrawalsmade.

G. Semi-Annual Consultations and Project Monitoring

4.24 With regard to project monitoring, the Government confirmed atnegotiations that it would prepare quarterly reports for the Bank providing:the listing of eligible subprojects; the listing of contracts relating toeligible subprojects; the progress of execution of Bank-financed subprojects;the status of disbursement requests; and the schedule of estimatedwithdrawals of the proceeds of the Loan.

4.25 Furthermore, in order to monitor progress on the objectives of theproposed Sector Project, it was agreed at negotiations that the Governmentwould hold semi-annual meetings in March and September of each year of theProject. The Government would prepare reports on the following in accordancewith the indicated schedule and any other reports as the Bank may reasonablyrequest from time to time:

(a) By March 15 of each year, DNV would report on:

- level of completion during previous year of subprojects in theinvestment program;

- breakdown of recurrent budget expenditures for previous year;- summary of financial status of DNV at end of previous year;- report on maintenance operations during previous year

(Annex 2);- status of selection and execution of Bank-financed

subprojects;- implementation of improved program planning procedures and

strengthening of related DNV departments;- use of technical assistance funds during previous year by DNV;- assessment of construction supervision costs for previous

year; and- enforcement of vehicle weight regulations.

(b) By September 15 of each year, DNV would report on:

- proposed update of four-year investment program;- proposed recurrent budget for upcoming year;- financial forecast for DNV for upcoming year;- progress of Traffic Safety Program;- progress of Transfer of Technology Program;- progress of improved Traffic Count Program;- status of selection and execution of Bank-financed

subprojects; and- estimated application of funds for technical assistance for

coming year.

-29-

(c) By March 15 of each year, DNPT would report on:

- status of road user charges and fuel prices;- status of bus regulatory review;- update of investment objectives and projected limits for each

of the transport subsectors;- status of rail and road competition; and- use of technical assistance funds during previous year.

(d) By September 15 of each year, DNPT would report on:

- the estimated application of funds for technical assistancefor the coming year; and

- the actions taken to ensure consistency of the road and railinvestment plans for the following year.

H. Economic Viability and Assessment of Risk

4.26 The general economic feasibility of the investment program wasconfirmed (paras 3.11-3.13). Furthermore, the project has been designed topromote a more systematic selection of subprojects in future updates of theprogram by improving DNV's planning procedures and has assisted in developinga consistent methodology for project evaluation. The broad geographicdistribution of subprojects ensures that the benefits of road improvementswould be widely distributed; and competition in the transport industry,especially in the trucking industry (para.2.06), should facilitate thedistribution of benefits among vehicle operators, passengers and shippers inthe form of deferred tariff increases.

4.27 One risk to the Sector Project is that renewed national economicdifficulties could lead to restrictions in the road investment budget andcause the failure of contracting firms, which would delay the implementationof many projects in the investment budget; and/or that inflation would surgebeyond expectations, raising the cost of ongoing projects and restrictingDNV's ability to finance new projects without increased budget allocations.The flexibility of the Sector Loan format minimizes such risks by not tyingthe loan to predetermined projects. In addition, the amount of the loan hasbeen prudently set below the full potential for eligible projects, and thedisbursement estimates include a delay factor in subproject execution.Nevertheless, a substantial reduction in investment levels might causedisbursement delays of one or two years and would delay the completion of theoverall investment program.

4.28 Another uncertainty is the extent to which the Bank would be ableto influence sector policies and the effect of the change in Administration,scheduled for January 1984, on planned policy improvements. The Bank'sstrategy has been to help develop, through the financing of the NTP, aGovernment institution, DNPT, with the in-house capability and sectorwideperspective needed to direct transport policy. It is expected that DNPTwould continue to be instrumental in formulating transport policy under thenew Administration. The Sector Project is designed to maintain the Bank'sinvolvement through consultation, financing of technical assistance andemphasizing the need to resolve some of the more important issues such asuser charges.

-30-

V. AGREEMENTS REACHED AND RECOMMENDATION

5.01 During negotiations, agreement was reached with the Government onthe following:

(a) that the Ministry of Public Works and Services would establishmechanisms to ensure consistency in the preparation of rail androad investment plans and that DNPT would report on this matterduring the semi-annual reviews (para 1.08);

(b) that the Government confirms its policy that users of road infra-structure should contribute, through related and specific road usercharges, to cover at least the marginal cost of that infrastructureand that it recognizes the inadequate charges imposed on operatorsof diesel-powered vehicles (para 2.12);

(c) that DNPT would update, by July 31, 1983, its road user taxanalysis, taking into account changes in fuel prices sincemid-1979, and would formulate explicit policy recommendations andmechanisms for implementation; and that, based on the Government'sreview, a plan of action would be drafted by the Government byDecember 31, 1983 and adopted by June 1, 1984, after consultationwith the Bank (para 2.12).

(d) that the Government would, commencing with the fiscal year endingDecember 31, 1983, have the Special Account and DNV's accounts andfinancial statements for each fiscal year audited, in accordancewith sound auditing principles consistently applied by theContaduria General de la Nacion, and would furnish to the Bank, notlater than six months after the end of the fiscal year in question,the agreed upon documentation (para 2.22);

(e) that the Government would allocate funds for road maintenance atleast at the level of 1983 in real terms, and that DNV wouldprovide an annual report on road maintenance operations(para 3.09);

(f) that DNV would, by June 1985, carry out a technical and economicfeasibility study for the improvement of Route 40 and/or its alter-natives from Catamarca to Santa Cruz and take into account theresults in future updates of its investment program (para. 3.14);

(g) that DNV, starting in 1984, would institute the agreed uponprocedures for the updating of the Four-Year Investment Program(para 3.15);

(h) that DNV would review the staffing requirements of the PlanningDirectorate (para 3.16);

(i) that the participating provinces would prepare and annually updatefour-year investment programs by December 31, 1984 (para 3.24);

(j) that the Government would take all actions necessary to facilitatethe contracting of all high level experts financed under the

technical assistance component of the loan (para 4.06);

-31-

(k) that the Government would complete all subprojects assisted underthe Sector Loan (para 4.09); and

(1) that the Government would prepare appropriate reports and holdsemi-annual meetings with the Bank to review progress on theselection and execution of Bank-supported subprojects as well asreview overall transport policies and plans, DNV's investment andoperating budgets, the financial status of DNV and other objectivesof the project (paras 4.24-4.25).

5.02 During negotiations, confirmation of agreement on the followingwas obtained:

(a) the status of preparation and of the tender and award schedules ofsubprojects for which Bank financing has been or would be requested(para 4.05);

(b) the draft investment program for 1983 to 1986 and theadministrative and maintenance budget for 1983 (para 4.05);

(c) the process of identification of subprojects and the technical andeconomic evaluation methodology to be applied (para 4.08-4.11);

(d) the procedures for international competitive bidding, forprequalification, tendering and contracting; and disbursementprocedures for loan funds (paras 4.12-4.23); and

(e) the procedures for financing the provincial roads (para 4.17).

5.03 Subject to the above, the project provides a suitable basis fora Bank loan of US$100 million. The terms would be 15 years, includinga three-year grace period.

May 4, 1983

- 32- TABLE 1.1

ARGENTINA

HIGHWAY SECTOR PROJECT

Modal Composition of Traffic

Passenger Traffic(million pass-km) 1965 % 1970 % 1975 % 1979 %

Air 588 2 988 3 2402 4 2985 5

Road 22657 76 30182 84 45256 83 52531 88

Rail 6373 22 4737 13 6891 13 4179 7

Total 29618 100 35907 100 54549 100 59695 100

Freight Traffic(million ton-km)

Water 24008 32 29858 31 18543 21 23403 20

Road 35953 47 46296 49 49915 56 60849 52

Pipelines (Petroleum) 1951 3 5209 6 9289 11 22233 19

Rail 14186 18 13640 14 10659 12 10532 9

Total 76098 100 95003 100 88406 100 117017 100

Source: DNPT

March 1983

-33- TABLE 1.2

ARGENTINA

HIGH1iWAY SECTOR PROJECT

Historical Level of Public Transport Investment

Year Investment Level Modal Distribution(millions of Highways Railways Water Air Other-' Total1970 pesos)

1965 664.6

1966 653.0

1967 898.1

1968 1206.4

1969 1253.2

1970 1279.1

1971 1331.9

1972 1646.7

1973 1617.5

1974 1382.8

1975 1225.5

1976 2085.3

1977 1836.4 59 12 19 7 3 100

1978 1663.1 49 17 14 16 4 100

1979 1450.8 42 25 16 14 3 100

1980 1474.2 43 23 27 7 - 100

1/ Statistics prior to 1977 are unavailable in comparable form.2/ Excludes pipeline investment.

Source: DNPT, Plan de Corto Plazo, 1965-1977; 1980 and Ministry of Economy, PublicInvestment Budget 1980-1989

March 1983

-34- TABLE 2.1

ARGENTINA

HIGHWAY SECTOR PROJECT1/

National and Provincial Highway Network(Knm)

National Network

Gravel orYear Paved Stabilized Base Earth Total

1962 12093 8137 26175 46405

1965 14714 8772 22382 45868

1970 19277 7748 18690 45715

1975 24069 7521 15873 47463

1981 27261 8482 2651 38394

Provincial Network

1972 13687 21081 29047 63815

1975 15020 22600 31200 68820

1981 17517 17817 26710 62044

1/ Varying classifications in different years make historicalcomparisons difficult.

Source: DNV and DNPT, March 1981

March 1983

-35- TABLE 2.2

ARGENTINA

HIGHWAY SECTOR PROJECT

Indices of Sector Growth(1971 = 100)

1/ 1/ 2/ 2/Year Gasoline Gasoline Diesel Diesel Light Vehicles Trucks

Consumption Prices Consumption Prices and Buses

1971 100 100 100 100 100 100

1972 106 107 98 194 110 108

1973 116 82 103 144 121 115

1974 122 251 111 244 127 123

1975 91 (NA) 121 (NA) 134 128

1976 92 133 126 194 141 133

1977 101 167 142 138 151 140

1978 107 144 139 275 157 144

1979 117 118 149 206 16b 150.

1980 129 104 150 163 178 159

1981 (NA) 136 (NA) 231 (NA) (NA)

Average AnnualGrowth Rate 1971-75

-2.3% +4.9% +7.6% +6.4%

Average AnnualGrowth Rate 1975-80

3/ 3/+7.2% +4.4% +5.8% +4.4%

1/ The index represents the real increase in fuel prices.2/ Data for individual years appear to be estimates but overall period growth rates seem

reasonable.3/ 1975-1980

Source: DNV and DNPT

March 1983

ARGENTINA

HIGHWAY SECTOR PROJECT

Appraisal Estimates of Traffic Compared with Actual Countsfor Third Highway Project (Loan 734-AR)

Route No. Estimated ActualAppraisal % Heavy Annual Actual % Heavy Annual

ADT 1970 1980 Vehicles Growth % ADT 1980 Vehicles Crowth%

Paving of Unpaved Roads

178 Pergamino-Santa Teresa Buenos Aires 960 1,240 36 3 2,140 51 8

193 Solis-Empalme R.9 Buenos Aires 630 970 36 4 970 36 4

226 Bolivar-Pehuajo Buenos Aires 550 820 32 4 1,060 21 7

P331 Aguileres-Sarmientos Tucuman 380 435 28 1 710 51 6

P305 Las Moritas-El Sunchal Tucuman 260 290 36 1 390 38 4

12 Wanda-Cataratas Misiones 450 660 24 4 1,180 31 10

157 Empalme R.60-Recreo Catamarca 640 830 63 3 360 76 - 6

157 De la Paz-Frias Catamarca 710 830 63 2 740 68 0

151 Cordero-Teresita Rio Negro 720 1,050 38 4 600 24 - 2

Average Subtotal 590 790 40% 3 910 44% 4%

14 Gualeguaych-Concordia (Entre Rios, 800 1,450 50 6 1,770 49 8

(Corrientes and

14 Concordia-Paso de los Libres (Misiones 300 570 33 8 1,190 42 15

Average Subtotal 550 1,010 41% 6 1,480 46% 10%

Improvement and Repaving of Paved Roads

3 Las Flores-Azul Buenos Aires 2,630 3,570 52 3 2,800 63 1

9 Gomez-Tortugas Santa Fe 2.610 4,000 50 4 3,640 39 3

Average Subtotal 2,620 3,790 51% 4 3,220 51% 2%

Construction of Divided Highways

9 Campana-Rio Tala Buenos Aires 5,970 9,350 39 5 7,680 40 3

20 Cordoba-Carlos Paz Cordoba 7,375 10,260 18 3 7,580 15 0

9 San Nicolas-Rosario Santa Fe 5R500 14,100 32 10 5,600 53 0 H

7 La Purisima-San Martin Mendoza 4,800 7,850 23 5 6,250 50 3 @

40 Mendoza-Empalme R.P.4-Lujan Mendoza 7,200 12,200 23 5 12,150 19 5

40 Lujan-Agrelo Mendoza 3,430 5,085 23 4 4,810 41 3

Average Subtotal 5,710 9,800 26% 6 7,350 30% 3%

Averate Total 2,420 3.980 37% 5 3,240 43% 3%

Source: Project Completion Report (Loan 734-AR)

March 1983

-37- . TABLE 2.4

ARGENTINA

HIGHWAY SECTOR PROJECT

1/Weights and Dimensions of Vehicles

Dimensions(in meters)

Width 2.5

Height 4.1

Length:

(1) Rigid truck 11.0(2) Semi-trailer 16.5(3) Truck and trailer 18.5(4) Semi-trailer and trailer 20.5

Loads per Axle(in Kg)

Single axle 10.600

Double axle 18.000

Triple axle 25.000

Maximum Payload(in Kg)

on five axles 42.000

on six axles 45.000

1/ Transit Law 13893 as modified July 1, 1970

Source: DNV

March 1983

-38-

TABLE 2.5

ARGENTINA

HIGHWAY SECTOR PROJECT

Composition of Fuel Prices - November 1982

(%)

Component Gasoline Diesel

Total 100 100

Retained by Petroleum Co. 37 57

Energy Fund 7 6

General Taxes 40 23

National Roads 6 6

Provincial Roads 6 5

General Transport (FONIT) 4 3

Source: DNV

Aarch 1983

-39- TABLE 2.6

ARGENTINA

HIGHWAY SECTOR PROJECT

Road-Related User Tax Revenues and Road Expenditures - 1980(billions of pesos)

User Tax Without Opportunity Cost With Opportunity Costof Fuel Adjustment of Fuel Adjustment

A. Purchase and Transfer of Vehicles 1388 1388

B. Licenses and Registration 1036 1036

C. Insurance Fee 565 565

D. Fuel Tax 3847 1262

E. Tire Tax 239 239

F. Lubricants Tax 143 143

Total A$ 7218 A$ 4633

Government Agency Road Expenditure

A. DNV 1703

B. Provincial Highway Directorates 2524

C. Subsecretary for Transport (M.O.Y.S.P.) 45

D. City of Buenos Aires 233

E. Other Municipalities 355

F. Provincial Transport Directorates 15

Total A$ 4875

Source: DNPT

March 1983

-40- TABLE 2.7

ARGENTINA

HIGHWAY SECTOR PROJECT

Contribution to Paved Highway Costsby Vehicle Type (1979)

With WithoutVehicle Type Opportunity Cost of Opportunity Cost of

Fuel Adjustment Fuel Adjustment

% Average Cost % Marginal Cost 1/ % Average Cost % Marginal Cost

Car 84 - 124 -

Bus 29 52 44 128

Truck-2 CII 28 54 50 379

12 29 51 48 157

111 30 52 49 157

112 36 61 57 171

113 38 61 58 139

11-11 32 51 48 104

11-12 35 53 51 102

Average 48 91 72 259

_/ Marginal costs are defined as the additional structural costs of the road, beyond a"minimum," which are related to vehicle weight. These costs are assigned to trucks andbuses. Other "common" costs are distributed by vehicle units and are included in averagecosts. Average costs for cars represent these assigned "common" costs, while for trucksthe average costs would include the 7common" costs plus the marginal costs.

2/ Truck tyDe with a number for each axle; numbers of 2 or 3 represent tandem axles, andhyphens delineate truck and full trailer.

Source: NTP

March 1983

-41- TABLE 2.8

ARGENTINA

HIGHWAY SECTOR PROJECT

Transfer of Road Sections between Provinces and DNV

(Km)

Province Net Transfer Total Provincial Net Transfer asto Province Primary Network"/ % of Total

Buenos Aires 732 11261 7

Catamarca 1323 1711 77

Cordoba 693 4486 15

Corrientes 500 2116 24

Chubut 306 5204 6

Chaco 268 2421 11

Jujuy 63 1578 4

Entre Rios 691 3361 21

Formosa 208 1247 17

La Pampa 352 1756 20

La Rioja 118 1855 6

Mendoza 340 3303 10

Misiones (-20) 1003 -

Neuquen 557 1896 29

Rio Negro 769 1897 41

Salta 794 1260 63

San Juan 443 563 79

San Luis 285 1411 20

Santiago del Estero 937 3448 27

Santa Fe 469 5198 9

Santa Cruz 49 3747 1

Tucuman 33 1320 3

Tierra del Fuego - - -

Total 9910 62042 16

1/ After transfer is instituted.

Source: DNV

March 1983

ARGENTINA

HIGHWAY SECTOR PROJECT

DNV Investment Program 1983-1986(million of US$)

1983 1984 1985 1986 Total Foreign Local

Total Investments 320 335 340 345 1,340 600 740-International Bridges 30 40 25 15 110 50 60

Investments DNV 290 295 315 330 1,230 550 680-Work in execution 140 20 10 - 170-Other items 1/ 80 85 85 90 340

Works to Start 70 190 220 240 720 320 400-IDB Projects 20 80 60 20 180-Bank Fourth Project 10 20 10 - 40

Not yet Committed 2/ 40 90 150 220 500 225 275

1/ Buildings, Consultants, special works, right-of-way, and other items.

2/ Uncommitted funds potentially available for participation under the Project.

Source: DNV and Bank Staff

April 1983 S

m

ARGENTINA

HIGHWAY SECTOR PROJECT

Estimated First Year Benefits for Road Works to be Tenderedin 1983 1/

Province Route Section Length Type of Work Cost Traffic First Year(km) (in millions of AADT in Benefits/Cost 4/

mid-1983 US$) 2/ First year

Catamarca 38 La Merced/Rumi Punco 13 Paving 8.7 600 26%Cordoba 9 Emp.60/ Las Penas 27 Reconstruction 2.5 1,400 3/ 25%Corrientes 12 San Roque/Saladas 37 Paving 3.1 700 31%

123 Rio Corrientes/Emp.119 50 Reconstruction 4.0 489 3/ 10%Chubut 40 Laleque/Esquel 43 Paving 6.2 200 2% 5/Entre Rios 12 Galarza/Nogoya 53 New Construction 5.7 1,000 3/ 22%Formosa 86 Laguna Blanca/Tacaagle 64 Paving/Reconstruction 8.0 310 19%

11 Acceso Sur Formosa 13 Reconstruction 1.0 2,424 3/ 52%11 Acceso Norte Formosa 18 Reconstruction 1.5 2,067 3/ 41%

Jujuy 34 Rio Las Pavas/Gral. San Martin 70 Reconstruction 2.8 2,403 51-58%La Pampa 143 Lte.Mendoza/Emp.R151 35 Paving 2.7 492 20%La Rioja 40 Nonogasta/Chilecito 15 Strengthening 1.2 1,017 19% 7/Neuquen 22 Cipoletti/Aerop. Neuquen 16 Bridge 12.4 16,000 3/ NA 6/

231 Emp.R 237/Lago Espejo 73 Paving 11.6 568 10%237 La Teresa/Paso Miranda 87 Reconstruction 2.0 671 3/ 14%

Rio Negro 151 Cipoletti/Lte. La Pampa 162 Reconstruction 13.0 872-3323 3/ 31%258 Tacuifi/Los Repollos 36 Gravel 12.5 90 3/ NA 6/

Total 812 98.9

1/ Excluding IDB financed reconstruction subprojects and general improvement subprojects.2/ At A$80,700: US$1.0.3/ Based on Traffic counts during 1980-1982.4/ In many cases, these are rough estimates based on general cost savings per vehicle kilometer by type of work.5/ DNV reconsidering this subproject for regraveling.6/ NA - not available at negotiations.

Source: DNV and Bank estimates

April 1983

-44-

Table 3.3

ARGENTINA

HIGHWAY SECTOR PROJECT

Pipeline of Project Preparation

Number Km Costs

Million US$

Per January 1, 1983

Designs in Preparation 139 4000 400

Designs Completed 30 950 230

Construction and Reconstruction 70 2200 300Contracts in Execution

Maintenance and Betterment Contracts 37 1400 60in Execution

Source: DNV and Bank Staff

March 1983

-45- TABLE 4.1

ARGENTINA

HIGHWAY SECTOR PROJECT

DNV Tender Program 1983-1986(Millions of US$)

l/1983 1984 1985 1986 Post-1986 1983-86 Total

Available for TendersConstruction andReconstruction fromTable 3.1

40 90 150 220 - 500 -

Tenders 1983 40 60 60 20 - 180 180

Tenders 1984 - 30 60 80 30 170 200

Tenders 1985 - - 30 90 100 120 220

Tenders 1986 - - - 30 210 30 240

Total Tenders 40 90 150 220 340 500 840

1/ Requirements for completion

Source: DNV and Bank staff

April 1983

-46 - TABLE 4.2

ARGENTINA

HIGHWAY SECTOR PROJECT

Bank-Financed Program

(Million of US$)

.. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~1

Post- Time-Slice1983 1984 1985 1986 1986 1983-1986

1. All DNV Uncommitted Tendersin 1983, 1984 and 1985(Table 4.1) 40 90 150 190 130 470

2. Provincial Road Program 5 20 40 25 - 90

3. Time-Slice 1983-1986 withpotential for BankInvolvement 45 110 190 215 - 560

- Foreign ExchangeComponent (45%) 20 50 85 95 - 250

4. Estimated Actual BankParticipation takingaccount of Proposed LoanAmount 10 30 40 17 - 937

5. Estimated DisbursementsCivil Works - 20 30 30 17 97

1/ Requirements for completion

Source: Bank Staff and DNV

April 1983

-47- TABLE 4.3

ARGENTINA

HIGHWAY SECTOR PROJECT

Estimated Schedule of Disbursements

(Million US$)

Cumulative DisbursementsIBRD Fiscal year at end of Semester

1984

December 31, 1983 1June 30, 1984 10

1985

December 31, 1984 22June 30, 1985 36

1986

December 31, 1985 53June 30, 1986 70

1987

December 31, 1986 83June 30, 1987 95

1988

December 31, 1987 100

Source: Mission Estimates

March 1983

-4b- ANNEX 1

ARGENTINA

HIGHWAY SECTOR PROJECT

Program for Transfer of Technology to the Provinces

A. Introduction

1. The growing investment requirements for roads under the responsi-bility of provincial highway authorities have resulted in a need for moreeffective network planning at the provincial level. In an effort to developthe necessary planning skills within the provincial government agencies, theDireccion Nacional de Vialidad (DNV) has entered into an agreement with theConsejo Vial Federal (CVF) to provide assistance in a transfer of technologyto the provinces.

2. After a review of the results of Phase I of the Highway Needs Studyon the national road network, CVF and DNV, with possible financial assistancefrom the World Bank, have proposed extending the Highway Needs Study methodo-logy, in modified form, to the provincial primary network of interestedprovinces. The program, which, in its initial stages, is expected to takeapproximately two years, will be carried out through the combined efforts ofCVF, DNV and the provincial authorities and will require consultant assistance.It will be directed at training provincial staff in highway investment planningand at helping to develop a feasible investment program for the participatingprovinces.

B. Objectives of the Program

3. The main objectives of the program are as follows:

(a) to develop appropriate road investment planning methods and totrain provincial personnel in their application;

(b) to help develop an inventory of the physical characteristics andtraffic for the provincial primary road network;

(c) to help identify improvements on the provincial primary networkand assess the feasibility of those improvements;

(d) to help prepare a draft investment program based on (b) and(c) taking into consideration physical and financial resourcelimitations;

(e) to help assess road maintenance requirements; and

(f) to help assess the resource needs of (d) and (e).

March 1983

-49-ANNEX 2Page 1

ARGENTINA

HIGHWAY SECTOR PROJECT

Annual Report on Road Maintenance Operations

In order to assist the DNV Administration to focus its managementand monitoring of highway maintenance performance, the Directorate Generalof Maintenance will prepare, by March of each year, a report containingdetailed information on the maintenance activities performed in the previousyear and on the activities to be carried out in the year in progress. Thereport should include information on:

A. Routine Maintenance

(a) network per district: total kilometers, divided by heavy pave-ment, light pavement, gravel and earth; and divided by form ofexecution, contract maintenance or DNV;

(b) average cost/km in constant A$/year for the various pavementcategories, by contract maintenance versus by DNV;

(c) main activities performed, and unit prices for those items executedby contract versus by DNV;

(d) outputs in man-hours for the principal work items under contractversus under DNV administration.

B. Details of Routine Maintenance by Contract

(a) results of tenders, relative to cost estimates; number of bidders;range of bids (lowest/highest);

(b) participation of local, regional and national firms; averagesize of these companies (in approximate annual turnover), theirexperience and contractual performance;

(c) contract documents; discuss what changes are necessary in thestandard documents;

(d) contract periods; discuss convenience of current policy (twoyears plus optional third year);

(e) adequacy of DNV staff to:

(i) supervise and guide the contractors;

(ii) approve annual and monthly work programs;

(iii) control quantity, quality and timing of work performed;

-50-

ANNEX 2Page 2

(f) requirement for technical assistance to:

(i) support the contractors; and

(ii) support the DNV staff;

(g) special techniques developed by the contractors and equipmentused; and

(h) assessment of validity of contract maintenance: quality, suf-ficiency and timing; financial savings achieved; other benefits;and improvements required.

C. Periodic Maintenance

Annual data (km, cost/km) for:

(a) pavement overlays;

(b) surface treatments;

(c) seal costs;

(d) re-shaping of gravel roads; and

(e) replacement of aggregates on gravel roads.

D. Traffic Safety Related Works

Annual data (km, cost/km) for:

(a) horizontal signalization;

(b) vertical signalization;

(c) illumination;

(d) improvement of dangerous road sections; and

(e) other traffic safety related works.

March 1983

-51- ANNEX 3

Page 1

ARGENTINA

HIGHWAY SECTOR PROJECT

Economic Evaluation Guidelines for the Preparation of theFour-Year DNV Investment Program

A. Screening Process

1. The identification of potential projects for inclusion in the DNVinvestment program is based on three principal sources: (a) the continuousroad inventory of the national network carried out under the direction of theHighway Needs Study, which provides sufficiency ratings for the structuraland geometric characteristics of road sections; (b) the district offices ofDNV, which observe road deficiencies during field operations; and (c) theprovincial and local authorities which also observe deficiencies and/oridentify road requirements related to the development of the provincial net-work. Under the revised procedures for the preparation of the investmentprogram (Annex 5), the Planning Directorate will screen the identifiedprojects, select those which are most likely to be included in the programand apply the following economic evaluation procedures to confirm projectfeasibility, optimize project design and determine budgetary priorities.

B. Types of Projects Subject to Economic Evaluation

2. Under the revised procedures, an economic evaluation is to be con-ducted at varying levels of detail depending upon project scope and degreeof certainty of project feasibility for the following types of projects:

(a) Upgrading of unpaved roads;

(b) Reconstruction and pavement overlays;

(c) Freeway construction;

(d) Urban bypasses;

(e) Bridge repair and widening; and

(f) Improvement of dangerous road sections.

C. Analytical Approach of Economic Evaluation

3. Upgrading of Unpaved Roads. The benefits of upgrading unpaved roadson the DNV network reflect reduced vehicle operating costs and time savings fornormal, generated and diverted traffic. Net maintenance costs are accountedfor depending on the level of traffic and the type of surface. There are roadsections for which upgrading could serve a social and/or strategic purpose interms of national integration but for which vehicle operating cost savings are

-52- ANNEX 3Page 2

low. Most of these roads would be financed under the Regional DevelopruentFund (FDR) Program. Where upgrading projects yield rates of return of lessthan the opportunity cost of capital, a further assessment of the socialand/or strategic importance is to be included in the evaluation documents.

4. Reconstruction and Pavement Overlays. Savings in vehicle operatingcosts are the major benefits from reconstruction and pavement overlay projects(also referred to as strengthening). A major element in defining -he optimaltiming for either type of improvement is an assessment of road deteriorationand related vehicle operating costs associated with alternative reconstructionand strengthening strategies. Initially identified reconstruction projectsare subjected to extensive tests for roughness' deflection and CBR. DNVand its consultants then apply the Bank's Highway Design and MaintenanceModel (HDM) to select the best project alternative. DNV is now in the processof adapting HDM parameters to reflect Argentine conditions. Until this operation iscompleted, HDM relationships are being applied. DNV is also attempting toformulate generalized feasibility indices from the HDM to avoid extensiveevaluations for road sections with similar characteristics and to developgeneral overlay strategies for road sections where reconstruction is not beingconsidered. Time savings are not considered unless substantial deteriorationof the road has significantly affected speeds. Also,generated traffic is notestimated for such projects.

5. Freeway Construction. Congestion is the critical factor in justify-ing the doubling of a two-lane paved road to four lanes (divided or undivided).The benefits are mainly time savings from increased speeds and reduced vehicleoperating costs. Present vehicle operating cost formulations for Argentina donot take into account the increased costs caused by stopping and starting inheavy traffic and lead to an underestimate of such benefits. DNV is nowworking on incorporating such effects. In addition, DNV applies a factorof +10% to project benefits to represent accident savings. Through theimplementation of the Traffic Safety Program, DNV will obtain data to assist inbetter estimating such benefits. A further element in the analysis of freewayprojects is the differential in benefits per vehicle-km during the peak andoff-peak hours due to varying congestion levels. A weighted average savingsis taken instead of a simple daily average.

6. Urban Bypasses. With increasing "through" traffic, the need forurban bypasses has grown. Since the benefits involve reduced congestion, theevaluation is similar to that for freeway projects. The benefits accrue tointra-city traffic on the streets from which through-traffic was diverted aswell as the traffic on the bypass. Substantial indirect benefits, mainlyenvironmental, are not taken into account in the quantitative evaluation.An assessment of the "social" costs of such projects is to be included, whichconsiders the disruptive impact of the project due to the taking of propertyand the displacement of residents in the right-of-way. The assessment is topresent the volume and income distribution of the displaced population, theprocedures to be applied for relocation and the probable relocation opportun-ities in terms of comparative life-style and employment opportunities.

-53-

ANNEX 3Page 3

7. Bridge Repair and Widening. Substantial bridge repair is requiredin Argentina. Benefits include time savings, vehicle operating cost savingsrelating to speed and maximum vehicle loads. In the case where lack ofrepairs would mean not using the bridge, alternative routing costs are to betaken into account. It is expected that DNV will develop standard feasibilityindices to facilitate the assessment of similar types of bridge projects.

8. Improvement of Dangerous Sections. Where a substantial investment(over US$1 million) is required to reduce traffic accidents along an abnormallydangerous road section, DNV will assess the economic feasibility of suchinvestment. The assessment is to be based on average cost of typical accidentson the road section and on other time and/or vehicle operating cost savingswhich may indirectly result, such as when straightening a dangerous curve.DNV should obtain sufficient information to identify dangerous sections andto select the most cost effective solutions.

D). Major Analytical Parameters

9. Vehicle Operating Costs. The estimation of vehicle operating costsis based on a combination of the work conducted in Kenya and earlierBank studies in Argentina and elsewhere. Argentine prices and utilizationfactors are applied to the general cost functions. A summary of the costs isprovided in Table 1 of this annex. Although DNV is currently applying theHDM relationships for varying costs by surface condition, further efforts arebeing directed at revising those relationships to obtain more realisticresults in the Argentine context.

10. Traffic. DNV has an extensive permanent and seasonal trafficcount system which is scheduled to be improved under the Highway SectorProject. This system,along with supporting counts for sections not covered,provides the base traffic data. More extensive origin and destination surveysare called for when the project could cause substantial shifts in historicaltraffic patterns or when a new alignment requires information on trafficpatterns to determine what portion of the vehicles will remain on the formeralignment because of trip origins and destinations along the former alignment.Generated traffic, calculated in the opening year and then increased at thenormal growth rate, is derived by multiplying transport cost savings by anelasticity factor which is higher for cars than for buses or trucks. Thisrepresents the percentage increase in traffic in the opening year because ofthe improvement. Forecasting the normal traffic growth rate beyond theopening year of the project is based on reviewing historical traffic patternsand relating traffic to other related parameters such as population, vehicleownership, GDP, etc., taking into account differentials for the province, or,in readily identifiable cases, the immediate zone of influence. Except in thecase of urban bypasses, no additional sophistication in traffic estimating isrequired. Emphasis is placed on obtaining reliable traffic estimates for theopening year in order to calculate the First Year Benefits ratio with somedegree of certainty.

-54 - ANNEX 3Page 4

11. Speeds. Vehicle speeds are derived from the U.S. Highway Capacity

Manual, with appropriate adjustments for Argentine vehicle equivalents and

geometric characteristics of the roads. A minimum speed is maintained even as

congestion develops beyond a reasonable limit. At this point, it is assumedthat some traffic would divert to alternative routes and the costs are

estimated using this minimum speed on the project road section.

12. Time Values. DNV has developed time values for various typesof road users with different trip purposes. A summary of the values isrepresented in Table 1 of this annex and is based on a 75%/25% trip purpose

breakdown between work and leisure and an occupancy factor of 2.4 persons perauto and 20 persons per bus. Further refinements, especially with regard to

provincial differentials and trip purpose breakdown, are being made by DNPT

and are to be made available to DNV.

13. Shadow Prices. The Ministry of Economy traditionally provides theminimum opportunity cost of capital to be applied in feasibility studies,currently estimated at 10%. DNPT provides shadow prices for fuel based onthe opportunity cost of exporting refined products. Annual updates are to beprovided and then applied to DNV evaluations.

14. Feasibility Indices, Sensitivity and Risk Analysis. For each subproject,DNV prepares an estimate of the First Year Benefit/Cost Ratio, Net Present Valueand the Internal Rate of Return. To test the sensitivity of the evaluation,critical variables are to be adjusted in accordance with possible alternativescenarios. In standard cases, the sensitivity analysis will be limited to the

calculation of switching values.

E. Program Optimization

15. With assistance under the Highway Sector Project, DNV will developan appropriate methodology for estimating project priorities and for revisingproject designs, taking budgetary constraints into account. This approach willlead to the maximization of Program benefits rather than the existing practiceof focusing mainly on individual project feasibility.

March 1983

-55-

ANNEX 3ARGENTINA Table 1

HIGHWAY SECTOR PROJECT

Economic Vehicle Operating Costs-/(pesos/vehicle/kan)

Surface Speed (Kph) Vehicle Type

Type Auto Bus Truck Auto Bus Lt. Truck Hvy. Truck

Voc Time Voc Time Voc Voc

Paved 50 45 45 3091 2776 12570 18599 9625 17724

70 65 65 2916 1983 11683 12877 9330 18191

90 80 80 2974 1542 12000 10462 9868 19543

Gravel 50 45 45 4053 2776 17221 18599 12105 23142

70 65 65 3815 1983 16399 12877 12031 23815

90 80 80 3872 1542 16961 10462 12970 26298

Earth 50 45 45 4709 2776 22023 18599 14741 27925

70 65 65 4501 1983 20887 12877 14651 28518

90 80 80 4679 1542 21128 10462 15590 30825

1, In pesos of September 1982 with US$=A$ 39000

Source: National Highway Directorate

March 1983

-56-

ANNEX 4

ARGENTINA

HIGHWAY SECTOR PROJECT

Completion of Main Corridors for Country Integration

Government policy and DNV programing are directed toward completionof corridors which will integrate outlying regions with each other and withthe central area of Argentina. The most important projects considered are:

A. Route No. 34, connecting Rosario with the provinces of Santiago,Salta and Jujuy. Sections of this important corridor are alreadyfinanced through the Fourth Highway Project, and other sections wouldbe financed with assistance from the proposed sector loan;

B. Route No. 40, traversing the country along the foothills of theAndes from North to South over a length of more than 1,100 km.Certain high traffic sections of this road near Mendoza and San Juanhave already been financed through the Third and Fourth HighwayProjects, but most of the remainder of this important corridorconsists of not more than low class earth roads, where trafficcannot develop because of road conditions. A feasibility studyshould be carried out to define the standards of an adequate minimumcost solution for the remaining sections;

C. Routes Nos. 12 and 14; the construction and paving of these mainroads in Mesopotamia, the region between the Uruguay and ParanaRivers and consisting of the Provinces of Entre Rios, Corrientes andMisiones, is far advanced with support of IDB and the Third andFourth Highway Projects. The remainder would be completed in thecoming years, in part supported by the proposed sector loan;

D. Route No. 3, connecting the Buenos Aires area through the pampaswith Patagonia and Tierra del Fuego. Sections of this road weresupported by the First and Second Highway Projects. This PatagoniaCorridor will be completed within the decade;

E. The Cordoba-Cuyo Corridor, providing a direct link through difficultterrain between Cordoba and Mendoza, through the provinces of SanJuan and San Luis. Several sections of this corridor are includedin the Fourth Highway Project; however, the difficult mountainoussections still have to be constructed. After optimization of designhas been achieved, subsections could be included in the proposedsector project.

March 1983

-57-

ANNEX 5Page 1

ARGENTINA

HIGHWAY SECTOR PROJECT

DNV Procedures for Updating Four-Year Program

1. A system has been developed to better integrate the planning,programing and control functions in DNV. The focus is on two fronts:(a) timely assessment of the expenditures still required to complete roadworks in execution; and (b) systematic approach to identify, select andevaluate candidate road works for inclusion in DNV's Four-Year Program.

2. DNV will assess monthly, with the assistance of the Computer Centerand asimulation model, the financial requirements to complete works alreadyin execution. The Directorate General of Construction will comment on theseprojections and communicate them to the Directorate General of HighwayPlanning by November of each year. The Programing Department of thisDirectorate will then determine the uncommitted funds available to initiateroad works, taking account of the investment levels formulated for DNV by theMinistry of Economy, and the financial resources as estimated by the DNVDirectorate General of Administration.

3. All candidate road works for inclusion in the updated Four-year DNVProgram will be evaluated by the Investigations Department in the DirectorateGeneral of Highway Planning. Candidate road works can enter the process invarious ways:

(a) through the priorities established in the Highway Needs Study;

(b) through reports of DNV's Regions or the Maintenance Directorate;or

(c) on direct request by other Federal agencies or provincialauthorities.

Project identification occurs throughout the year but must be made beforeSeptember 30 of each year for possible inclusion in that year's updating of theFour-year Program. The Investigations Department, in close cooperation withthe Programing and Highway Engineering Departments, will prepare technicaland economic feasibility studies or engage consulting engineers for suchstudies, applying the methods agreed upon for the Highway Sector Loan. Afterthe screening process, a tentative work program is prepared and submitted tothe Administrator General for approval in principle by October of each year.

- 58 -

ANNEX 5Page 2

4. Thereafter, the Highway Engineering Department prepares the detailedengineering and cost estimates of the provisionally selected projects. Withthis information, the Programing Department updates the Four-year Program whiletaking into account the costs of the works in execution according to paragraph 2preceding. Subsequently, the Administrator General approves the final program.

5. A continuous flow of information is necessary throughout the yearamong the various departments in order to incorporate changes due to limitedor expanded budgetary resources or due to findings which could alter theoriginal technical and economic evaluation.

March 1983

ARGENTINA

HIGHWAY SECTOR PROJECT

List of Initial Candidate Projects on DNV Network

Call for First YearProvince Route Section Length Type of Work Cost Tender Completion Benefits/Cost

(million of %Mid-'82US$)

Buenos Aires 9 Rio Tala/Emp. R. 188 71 Freeway 17.5 3/84 2/87 35 - 36

Catamarca 38 La Merced/Rumi Punco 13 Paving 8.7 6/83 12/85 26

Cordoba 8 Rio IV/Lte. San Luis 86 Strengthening 12.4 3/84 4/86 1-/ - 20

9 Emp. 60/Las Penas 27 Reconstruction 2.5 11/83 3/85 25

Corrientes 12 San Roque/Saladas 37 Paving 3.1 6/83 9/85 31

Chaco 16 Pte. Chaco/Emp. 11 17 Strengtbening 1.5 3/84 8/85 25

Chubut 25 Trelew/Rawson 3 Bridge 0.9 3/84 8/86 NA

Entre Rios 12 Galarza/Nogoya 53 New Construction 5.7 7/83 8/85 22

Formosa 86 Laguna Blanca/Tacaagle 64 Paving/Reconstruction 8.0 11/83 5/84 19 u

Jujuy 34 Rio de las Pavas/Gral. 70 Reconstruction 2.8 11/83 5/84 51 - 58 fSan Martin

La Pampa 143 Lte. Mendoza /Emp.R. 151 35 Paving 2.7 12/83 6/84 20

La Rioja 40 Nonogasta/Chilecito 15 Strengthening 1.2 12/83 11/85 19

Mendoza 40 Mendoza/ite. San Juan 24 Strengthening 3.7 2/84 3/85 22

Misiones 14 San Jose/Leandro Alem 58 Paving 6.2 1/84 3/86 26

Neuquen 22 Cipoletti/Aerop. Neuquen 16 Bridge 12.4 12/83 11/86 NA

231 Emp.R. 237/Lago Espejo 73 Paving 11.6 5/83 4/86 10

Salta 9 Emp.R. 34/Pte. Rio 10 Reconstruction 1.5 3/84 2/86 14Naranjo

San Luis 8 Lte. Cordoba/Villa 32 Strengthening 2.0 3/84 4/86 30Mercedes

Santiago del Estero 34 La Banda/Pozo Hondo 74 Paving 8.2 3/84 4/86 NA

TOTAL 778 112.6

Source: DNV and Bank estimates

April 1983

-60- ANNEX 7

ARGENTINA

HIGHWAY SECTOR PROJECT

Potential Uses of Technical Assistance Funds

A. Technical Assistance for DNV

1. Courses in Traffic Engineering2. Preventive Maintenance of Bridges3. Maintenance of Roads in Mountainous Terrain4. Estimation of Maintenance Costs and Maintenance Contract Preparation5. Safety Measures: Signaling for High Traffic Intersection and

Use of Roadside Safety Barriers6. Prioritization of Road Investments Under Budget Constraints7. Calibration of Road Diagnostic Equipment8. Utilization of HDM Model9. Analysis of Toll Road Planning and Financing Procedures10. Extension of Highway Design Standards Study11. Development of Traffic Safety Data Bank

B. Technical Assistance for DNPT

1. Analysis and Revision of Intercity Bus Regulation2. Formulation of Provincial Transport Plans3. Assessment of General Cargo Movements4. Rationalization of Rail Trunk Lines in Northern Corridor5. Impact Assessment of Vehicle Size and Weight Limitations and

Power/Weight Ratio Regulations6. International Land Transport Agreements and Procedures7. Cost Structures for Water Transport8. Expanded Commodity Studies Especially for Grain9. Data Bank Development10. Development of Local Freight Forwarding Industry11. Port Development Scenarios with Alternative Dredging Schemes

for Rio de la Plata12. User Charges for Operators on the Rivers

March 1983

-61- ANNEX 8

page 1

ARGENTINA

HIGHWAY SECTOR PROJECT

Summary Data Sheets for Candidate Subprojects

1. Basic Data Road: RN 9Section: Rio Tala - Empalme RN188 in Province

of Buenos AiresLength: 72 kn.Cross-Section Present: 7.30m riding surface/3.0m

shouldersCross-Section Proposed: 2 separated two lane

sections each with 7.30mriding surface/3.0m shoulders

Pavement Proposed: Asphaltic ConcreteDesign Class: Limited access 4-lane divided d

Type I

2. Traffic AADT Car Bus Lt.Truck Hvy. Truck Total

Base Year: 4344 310 1086 2017 7757Year of Completion 5082 363 1246 2315 9006Growth/year 4% 4% 3.5% 3.5%

3. Bridges and Special Works Special T-orks: 4 interchanges and 10 inter-sections

Bridges: 4 bridges over rivers1/

4. Cost Estimate $a 548,000 million (US$14.1m)2/

5. Vehicle Operating Costs/km($a)

Car Bus Lt.Truck Hvy.Truck

Old Road: 5861 31169 9625 17724New Road: 4482 22110 9447 18577

6. Economic Data First Year Benefits/Cost: 36%Internal Rate of Return: 40%

7. Tender Tentative Tender Date: March 1984Completion Time: 30 monthsTentative Budget Allocation: 1984 = 100,000 million $a

1985 = 220,000 million $a1986 = 288,000 million $a

1/ $a39000 = US$1 as of October, 19822/ Includes passenger time values

ANNEX 8-62- page 2

8. Technical Description

Construction of a new two-lane road parallel to the well aligned existingroad (which will be repaved); construction of four interchanges at inter-sections of major roads; full access control will be postponed until later.

9. Economic Description

This section is the only remaining two-lane section of RN9 along the busiestindustrial corridor of Argentina between Rosario and Buenos Aires, connectingthe two principal ports of the country. Earlier Bank projects have assistedin the financing of other sections of this freeway, and the traffic hasincreased to justify the improvement of this final section.

-63- ANNEX 8

page 3ARGENTINA

HIGHWAY SECTOR PROJECT

Summary Data Sheets for Candidate Subprojects

1. Basic Data Road: RN 14Section: San Jose - L.N. Alem in Province of

MisionesLength: 51 kmCross-section present: 14 km at 8.50m., rest at

6.50m. with earth surfaceCross-section proposed: 7.30m riding surface/

3.00m. shouldersPavement Proposed: Asphaltic ConcreteDesign Class: Type III (rolling terrain)

2. Traffic AADT Car Bus Lt.Truck Hvy.Truck Total

Base Year: 213 5 42 42 302Year of Completion: 348 7 61 63 479Growth/yr.:1980-1989 8.0% 4.5% 7.0% 7.0%

1989-2003 4.0% 4.0% 4.0% 4.0%

3. Bridges and Special Works Bridges: three bridges over rivers totaling 178-.2m

4. Cost Estimate $a 241,800 million (US$ 6.2 million)-1/2/ 3/

5. Vehicle Operating Costs/km Car Bus Lt. Truck Hvy.Truck

Old Road 1152 5899 2910 7320Improved Road 689 3709 1738 3616

3/6. Economic Data First Year Benefits/Cost: 18%

Internal Rate of Return: 23%

7. Tender Tentative Tender Date: February 1984Completion Time: 20 monthsTentative Budget Allocation:

1984 24,180 million $a1985 120,900 million $a1986 96,720 million $a

1/ $a 39000 = US$1 as of October 19822/ Includes passenger time values3/ Ana1Wsis based on vehicle operating costs, traffic and construction costs of-October 1980.

-64- ANNEX 8

page 4

8. Technical Description

Construction of a Class III paved road, generally along the existingalignment, with improvement of the vertical and horizontal designfeatures.

9. Economic Description

This road is another section in the corridor which connects the fast-growingdevelopment area of the Mesopotamia with the urbanized areas of Argentinaand with Uruguay and Brazil. Construction of previous sections has beenassisted under earlier Bank projects, and the generated traffic has surpassedexpectations, even during the difficult period of the 1970s.

-65- ANNEX 8page 5

ARGENTINA

HIGHWAY SECTOR PROJECT

Summary Data Sheets for Candidate Subprojects

1. Basic Data Road: RN "F", Route 231Section: Empalme RN237 - Lago Espejo, Province

of NeuquenLength: 72 kmCross Section Present: Except for 5 km of

double surface treatment, rest is6.00 to 9.50 meter with gravel surface.

Cross Section Proposed: 6.70m riding surface/2.00 shoulders

Pavement Proposed: Asphaltic ConcreteDesign Class: III (mountainous)

2. Traffic AADT Car Bus Lt.Truck Hvy.Truck Total

Base Year 287 14 53 21 375Year of Completion 455 20 66 27 568Growth/Yr.: 1980-1989 8.0% 5.5% 4.0% 4.0%

1989-2003 4.0% 4.0% 4.0% 4.0%

3. Bridges and Special Works Bridge: 1 of 136 m.

4. Cost Estimate $a 387,000 million (US$9.9 million)-2/ 3/

5. Vehicle Operating Costs/km Car Bus Lt.Truck Hvy.Truck

Old Road 1033 5428 2348 5186Improved Road 689 4014 1752 3567

6. Economic Data -/ First Year Benefits/Cost: 10%Internal Rate of Return: 14%

7. Tender Tender Date: May 1983Completion time: 30 monthsTentative Budget Allocation:

1984 135,450 million $a1985 154,800 million $a1986 96,750 million $a

1/ $a 39000 = US$1 as of October 19822/ Includes passenger time values.3/ Analysis based on vehicle operating costs, traffic and construction costs

as of October 1980.

-66- ANNEX 8

page 6

8. Technical Description

Construction of a Class III paved mountainous road suitable for lumbertraffic, generally on the old alignment, with frost-resistant base andsubbase construction.

9. Economic Description

This section is an important connection for the outlying province ofNeuquen along the Chilean border running through difficult mountainousterrain. It serves not only a substantial number of heavy trucks fromChile (which were apparently not moving during the period of the trafficcounts) but also tourist traffic.

March 1983

-67- ANNEX 9

ARGENTINA

HIGHWAY SECTOR PROJECT

Related Documents and Data Available

in the Project File

A. General Reports and Studies on the Sector or Subsector

1. Argentina, Transport Sector Memorandum. June 1982.

2. Plan Nacional de Transporte, Informe de la Fase I, (Resumen Final). SETOP.October 1981.

3. Evaluacion Tecnico-Economica de la Red Nacional de Calzadas Pavimentadas.Consulbaires. June 1982 (3 volumes).

4. Estudio de Necesidades Viales y Refuerzo de Pavimentos en la Red Nacionalde Caminos, 1979-1982.

5. Estudio de Necesidades Viales y Refuerzo de Pavimentos. Ingeneco/Icasa.1982 (5 volumes).

6. Guia para Estudios de Factibilidad de Obras Viales. DNV. No date.

7. Decree for the transfer of national and provincial road sections.Poder Ejecutivo Nacional. July 1979.

8. Regulations with regard to vehicle sizes and weights. 1982.

B. General Reports and Studies Relating to the Project

9. National Highway Investment Plan 1983-1986. April 1983.

10. Proposed Provincial Investments. April 1983.

11. Notebook of Documents brought to Negotiations. April 1983.

12. Notebook on Data provided to Mission in March 1983.

13. Auditing of DNV. 1981.

14. Solicitudes de Financiamiento Efectuadas por las Provincias. March 1983.

15. Highway Maintenance by Contract. Henriod December 1980.

16. Sistema Planificacion Vial. DNV. March 1983.

17. Letter from DNV with Planning Procedures, Transfer of Technology andTraffic Safety Plans of Action. July 1981.

18. Vehicle Operating Costs. DNV. 1979-1983.

April 1983

ARl'lB

HIGHWAY SECTOR PROJECT

Institutional Structure for Transport (March 1983)

Ministries Ministry of Public inistry of Econmy

| WrksandSerices

Secretary for

Secretariats Secretary for Secretary for Maritme Affaits

PubUc Services FubUc Woiks (SEIM)

SubecnetarSub-Secretariats fer

|Nationa Directorate lational Directorate National N atl Nat'l Nat.Port C or.

General/National for Trarsport for Gronud Transport National Directorate Maritime Maritime ref ec- Naval Naval Const.& Deepwater

Directorates PlannirE (DNPT) (DN) for Highisys (DNV) Policy Planning ure Act. Ind. Waterways Port

Direc o Directorate Dir. Dir. Dir. Proram

l | | l | |Argentine |Aigeritine mien General Port

State |AXReetne Rflhly AcBentine Arlirnes River Fleet Merdhast Fleet Adidnistration

Enterprises (FA)(AP)

Source: DNPT

March 1983

ARGENTINAHIGHWAY SECTOR PROJECT

Disttibutian of Uer Tax FRtlipu

I fUELTAX LUTAX ON 'F| TAX ON TAX ONLUOHICANTS TIRES VEHICLES

4M 1s1lw a7s g __ t2s lo6

E O N I T 8 f L;NO ~F EDEfRAL

PSOERALLAW 20,221

FfEWAY

| PROVINCIA______|__4_---__-__ | COPLEME rAhi l fUNOS IIGHWAY PUN NATIONAL HICHWAY

V~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~lhA

IIG IEAL HETN NATOA PROVINCIAL NATIONALTE DALAIRE.O SIIWAY HiGi.WAV

Of ENRG IRECTORATES DIRtECTORATE

Il ('~~.I~.I.uspj ID w~lM| OIVM|,AM

A,_t 10

ARGENTINA

HIGHWAY SECTOR PROJECT

Organization of the National Ilighway Authority

DIRECTOR GENERAL

SUB-ADMINISTRATOR

ADMINISTRATION CONTROL MAINTENANCE CONSTRUCTION ENGINEERING

C) rn 0~~~~ 0

f ' bl i- <H At 0 0

'0 C.,'CIA0 A

~~~cn ~~~E

0 a~~~~~~~~~~~~~~~0tH H~~~~~~~~~~~~zE

~13

24 DISTRICT OFFICES J

Source: DNV

March 1983

IBRD 3157RJUNE IBBI

3 O LO V E A

LA OUIALSo-,-

A~~~13 ?tIml)\s 2 K 2 A

E M I N G AJ E DL drU

\ jV\ | 7 3 , p '5 S;E SAAf~ O DLET

fl SAN Ml SU E de rAIt. ! 0xS,'° \s i SAN CLSALA0UARrRIA

/1,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

VALF.AROSANNTAM DES --

L~~~~~BO ESRE ~ ~ ~ ~ ~ ~ ~ NO tRE

Sot, CARLOS do VSRILG ~ ~ ~ G.L u `LAP~TA_,IA t CORDE______ DEG PDATA O E

- Z A P A L A --- PROVINCIA BOUNARY

E~ I ALSPES HIHWY SECTORff PR OJE NCTE

i ( jK / , g seOY/ + ~~~~~~~ ~ ~ ~~~~~~~1. jujrY 12. CORDOBASAN CARLOS de 'EARION -v - o 2. SALTA 1S. RID NEGRO

t \ t 1+ / l oO 5?RROY 3 .. CAC I4. C4HU8TPRINCIPAL, e4, SGO. DEL ESTERO AS . SONTA CRLZ

THE N _.-- * 5.SATIONL-A HE W 6. bETUUEO

RIO GRANSE~~~~~~~~~~ "N A

C)~ ~ ~~~~~~~~~~~~~~~~S C 504 00 200 600 400RE 170 SALNMEUEN

TS,s sop i.0 heel TTRELEW I I YA A GECATAMARCAI > \ t => bR~~~~~~ ~~~~~AWSON 5. 5'UEEOS b:RES 19. FRM'SA

S OP .1 I \EA EEL FES9. mE DOZA 20. NISNES

LJO P *Ot whit. Io iep04 0 IG. 1, R1tJ'2T AItl % < j4 XdtU~~~~~~~~~~LZCuOUM H . SAN L"lS 22. CNTRE RIDE

9 .2__y Ss'-s~~~DC s5C EDRRAI - HIGHWAYS IMPROVED UNDER 3'-d PROJECT

T ts 72 ~~~~ -\(Etv>Dv^ ~~~HIGHWAYS IMPROVFD UNDER 1§.' & 2n2d PROJECT

ir j J \\ H~~~~~~~~~~~IlGHWAYS BEING IMPROVED UNDER 4Tt PROJECT

2 p I 1\-W * ~~~~~~~PAVED@ ' Z 2 ~~~~~~~~~GRAVEL OR CONSOILIDATED

,e the e Stt 9 - - - -_ EARTH ROADS h SOME TRAILS)

< 8 zt | / --- ~~~~~PROVINCIAL BOUNDARY

_ T } } i) / ~~~~~INTERNATIONAL BOUNDARYeflhteh,thSh,'Cttl hSAt JULIAN

5ehh.ptahhehttoh eARGENTINA

> ',1m 1iHIGHWAY SECTOR PROJECT\ f/ ~>t R10 6LLEG05

\\ffi9-----'-1 kPRINCIPAL ROADS OFX .2 ~~~THE NATIONAL HIGHWAY NETWORK

f+t < XRfO~1 GRIANDE

; -x ._F 50 0 50~~~~~~~~~~ ~ 100 200I 300 490 500 KILOMETERS

T-l -Sp h.s b-Epop-prd by Ih, -~T R IO Y OIFWofifszkssrfzc/usiwirft , rlERRADEL FUEGO

,Idohmrc fth tit' ff