RESTRUCTURING PAPER ON A. PROPOSED PROJECT RESTRUCTURING OF SECOND PROVINCIAL AGRICULTURAL DEVELOPMENT PROJECT LOAN August 25, 2008 TO THE

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank RESTRUCTURING PAPER ON A Report No: AR PROPOSED PROJECT RESTRUCTURING OF SECOND PROVINCIAL AGRICULTURAL DEVELOPMENT PROJECT LOAN August 25, 2008 TO THE ARGENTINE REPUBLIC September 14, 2012 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization

2 ABBREVIATIONS AND ACRONYMS EIA Environmental Impact Assessment ESMF Environmental and Social Management Framework EMP Environmental Management Plan GoA Government of Argentina OM Operational Manual OP Operational Policy MAGyP Ministry of Agriculture, Livestock and Fisheries (Ministerio de Agricultura, Ganaderia y Pesca) PDO Project Development Objective PIU Project Implementation UnitPROSAP II Second Provincial Agricultural Development Project (Segundo Programa de Servicios Agrícolas Provinciales) UEC Central Project Implementation Unit (Unidad Ejecutora Central) Regional Vice President: Country Director: Sector Manager / Director: Task Team Leader: Hasan A. Tuluy Penelope J. Brook Laurent Msellati/ Ede Jorge Ijjasz-Vásquez Ayat Soliman 2

3 ARGENTINA SECOND PROVINCIAL AGRICULTURAL DEVELOPMENT PROJECT P CONTENTS Page A. SUMMARY... 6 B. PROJECT STATUS... 6 C. PROPOSED CHANGES... 7 D. APPRAISAL SUMMARY

4 ARGENTINA SECOND PROVINCIAL AGRICULTURAL DEVELOPMENT PROJECT DATA SHEET 1. Basic Information Project ID & Name P106684: AR 2nd Prov Agric Dev Country Argentina Task Team Leader Ayat Soliman Sector Manager/Director Laurent Msellati Country Director Penelope J. Brook Original Board Approval Date 09/25/2008 Original Closing Date: 03/30/2015 Current Closing Date 03/30/2015 Proposed Closing Date [if applicable] EA Category B-Partial Assessment Revised EA Category EA Completion Date 03/15/2007 Revised EA Completion Date 06/15/ Revised Financing Plan (US$m) Source Original Revised BORR IBRD ZFAR Total Borrower Organization Department Location The Argentine Republic Argentina 4. Implementing Agency Organization Department Location Ministerio de Agricultura, Argentina Ganaderia y Pesca 5. Disbursement Estimates (US$m) Actual amount disbursed as of 10/16/ Fiscal Year Annual Cumulative Total

5 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured projects trigger any new safeguard policies? If yes, please select from the checklist below and update ISDS accordingly before submitting the package. Y Safeguard Policy Last Rating Proposed Environmental Assessment (OD 4.01) Natural Habitats (OP 4.04) Forestry (OP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP 4.11) Indigenous Peoples (OD 4.20) Involuntary Resettlement (OP 4.12) Safety of Dams (OP 4.37) Projects in International Waterways (OP 7.50) Projects in Disputed Areas (OP 7.60) 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes To increase the productivity and sales volume of small and medium-size producers. To achieve this, the project's strategy involves technical assistance (TA), capacity-building activities, and direct investments that contribute to long-term improvements in agricultural productivity, as well as competitiveness and market access. 7b. Revised Project Development Objectives/Outcomes [if applicable] 5

6 A. SUMMARY SECOND PROVINCIAL AGRICULTURAL DEVELOPMENT RESTRUCTURING PAPER 1. The proposed project restructuring is for triggering the following two safeguards policies, Safety of Dams (OP/BP 4.37) and Natural Habitats (OP/BP 4.04), in order to reflect the adoption of appropriate mechanisms to manage and reduce any potential adverse environmental and social impacts related to dam safety and natural habitat issues that could arise from subproject financing during implementation. 2. No other changes to the financing, institutional or fiduciary arrangements are proposed. The Project will remain as Category B and the proposed restructuring does not imply a change in the Project Development Objective (PDO) or its outcome indicators. B. PROJECT STATUS 3. The IBRD Loan in the amount of US$300 million was approved by the Board on August 25th, 2008, and became effective on May 11th, The current closing date of the project is March 31, This first restructuring is in response to the review of specific sub-project cases submitted by the Ministry of Agriculture, Livestock and Fiserhies (MAGyP) for financing under the project, which require compliance with the above mentioned safeguard policies. 4. The Project is implemented by the Ministry of Agriculture, Livestock and Fisheries (MAGyP) of the Government of Argentina and consists of the following components in the poorer less productive agricultural areas of Argentina: (i) support to pre-investment activities, including institutional strengthening at the national and provincial levels; (ii) investment subprojects for enhanced agricultural competitiveness, including public subprojects and small-scale grants to individual farmers; and (iii) support to project management, monitoring and evaluation. The implementation of provincial subprojects under Component II is undertaken through Subsidiary Loan Agreements with Provinces. Subprojects are subject to a comprehensive technical, economic, financial and safeguard policy screening and review prior to their approval for Project financing. 5. Progress towards the PDO as well as Implementation Progress are deemed satisfactory, based on the allocation by December 2011 of US$ million (US$ million of the IBRD loan proceeds) to 21 provincial subprojects, of which 7 are under implementation, in addition to 2 national subprojects directed to transfer of innovation and regional development. To date the Project has disbursed over US$ 77 million, or 26% of the loan amount. There are no financial management or outstanding audit issues. Procurement arrangements and management are also proceeding well. Currently, the overall operation is being implemented across nine Provinces (Catamarca, Córdoba, Entre Rios, Jujuy, La Rioja, Mendoza, Neuquén, Salta and San Juan) as well as at the national level, financing subprojects in the areas of irrigation and drainage, rural roads, 6

7 land administration, institutional strengthening, energy and productive agricultural support services. 6. The oversight of safeguards issues under PROSAP II has been rated moderately satisfactory. Key action areas undertaken by MAGyP during the past period to improve the management of safeguard aspects include: (i) the Environmental and Social Unit was strengthened by the appointment of an environmental specialist dedicated to field environmental supervision of subprojects; (ii) a review and update of the Environmental and Social Management Framework (ESMF) was completed to ensure compliance with the newly triggered safeguards; and (iii) the Environmental and Social Unit is providing periodic detailed environmental implementation reports. Enhanced technical capacity in field supervision and improved reporting were registered during the last supervision mission of April 2012, while the updated ESMF has been approved by the Bank and disclosed by MAGyP on June 15, 2012 and in the Bank s Infoshop on July 11, The Bank has recently recruited a full time experienced consultant, based in Buenos Aires, to further support Project supervision. C. PROPOSED CHANGES 7. The Project design is based on a framework approach, because subprojects were not known at appraisal and were to be reviewed individually per the guidelines established under the Project Operational Manual and the Environmental and Social Management Framework. The following safeguard policies were triggered at appraisal: Environmental Assessment (OP 4.01), Pest Management (OP 4.09), Involuntary Resettlement (OP 4.12), Indigenous People (OP 4.10) and Forests (OP4.36). Large scale water infrastructure, such as construction of new large dams, was considered ineligible for World Bank financing, thus OP 4.37 was not triggered. Similarly, subprojects that would impinge upon natural and critical habitats (protected areas) were considered ineligible and OP 4.04 was not triggered. 8. During implementation, MAGyP proposed two subprojects that would involve irrigation systems linked to existing dams. These are worthy of financing based on their clear positive impacts on water availability and agricultural productivity in the target areas. Furthermore, four subprojects have been proposed in and around natural and critical habitats. Three of these are located around and upstream of a critical habitat, Lagunas de Huancache, Desaguadero and Bebedero, which is a Wetlands of International Importance (Ramsar Convention) site in the San Juan, Mendoza and San Luis Provinces. Individual Environmental Management Plans have addressed the potential negative impacts of the subprojects on the ecosystem, but it is also necessary to address broader, cumulative environmental impacts at the site in a coordinated manner at the provincial level. The details of these cases, including measures already taken by MAGP, are outlined below. OP/BP 4.37 Safety of dams 9. The proposed restructuring will trigger the Safety of Dams safeguard policy (OP 4.37) to ensure appropriate management of potential impacts related to dam safety under the PROSAPII program. Two subprojects have been proposed supporting irrigation 7

8 systems connected to existing dams and these would benefit from the triggering of OP 4.37 and the strengthening of associated dam safety management instruments. These are located in the Province of Neuquén (El Chañar Dam) and in the Province of Catamarca (Sumampa Dam). 10. El Chañar Dam is part of a larger dam complex named Cerros Colorados the main function of which is to regulate the flow of the upstream dams. Based on the technical assessment of the Argentinean Safety of Dams National Authority (Organismo Regulador de Seguridad de Represas, ORSEP) which is the independent governmental agency responsible for dam safety in Argentina, and the review by the Bank, the Chañar Dam has adequate safety, maintenance and emergency plans, consistent with the requirements of the OP 4.37 safeguard policy. These safety and emergency plans have been included in the updated EIA and EMP of the subproject. El Chañar Dam Geographic location of dam 38 35'53.06"S, 68 23'26.78"W Political location Añelo Department Type of dam Earth and rock fill Built 1978 Height (m) 14 Length (m) crest 6285 Volume in dam (m 3 ) Volume of reservoir (m 3 ) Area of reservoir (m 2 ) Communities downstream San Patricio del Chañar Rivers feeding the reservoir Rio Neuquén 11. Sumampa Dam holds an important reservoir which is a central part of the irrigation system that is proposed to be rehabilitated by the Subproject Reconstruction and Improvement of Irrigation System of Los Altos, Province of Catamarca. With Bank support, ORSEP and PROSAP signed an agreement of cooperation to ensure dam safety connected with irrigation projects and full compliance with OP safeguard requirements of subprojects under the portfolio of PROSAP II. By signing this agreement, ORSEP has agreed to extend its jurisdiction to the Catamarca Province and to other provinces as needed under the PROSAP project. 12. ORSEP performed dam safety supervision in October 2011 of the Sumampa dam and identified important measures to improve dam safety procedures, maintenance and environmental prevention. These have been included in the updated EIA and EMP of the subproject. MAGyP established a timeframe and action plan to ensure implementation of the ORSEP recommendations before the start of such subproject. An agreement between the Province of Catamarca and ORSEP for regular supervision of dam safety has been signed, and the EIA and EMP have been updated to reflect the dam safety measures and agreed compliance with the safeguards policies. Sumampa Dam 8

9 Geographic location of dam Political location 28 4'4.00"S, 65 34'28.10"W Between the departments of Paclín and Santa Rosa. Type of dam Earth and rock fill Built 1969 Height (m) 44 Length (m) crest 378 Volume in dam (m 3 ) Volume of reservoir (m 3 ) Area of the reservoir (m 2 ) Communities downstream Los Altos de Catamarca (about 6km downstream) Rivers feeding the reservoir Río La Viña, Arroyo el Pintado, Arroyo el Durazno, Arroyo el Duraznillo y Río Sauce Mayo OP/BP 4.04 Natural Habitats 13. The proposed Project restructuring will also trigger the Natural Habitats Policy (OP 4.04) to ensure that natural and critical habitats will not be significantly degraded from Bank investments. One subproject, Livestock and Commercial Development (Province of Neuquén), would affect highland wetlands, mallines, which are the main source of pasture for cattle ranching. The subproject has included specific measures to ensure mitigation of impacts, including the use of only native species, water resources management, and fencing to manage the grazing load. These have been included in the updated EIA and EMP of the subproject. 14. In addition, three subprojects have been identified in and around a critical habitat, Lagunas de Huanacache, Desaguadero and Bebedero, which is a Ramsar site located in the southern part of the San Juan Province. This Ramsar site includes an area of 900,000 hectares and its administration and protection are the responsibility of three provincial governments (San Juan, San Luis and Mendoza). The subprojects around and within the area of the Ramsar site are: (i) Development of Irrigation Area of the San Juan-Canal Céspedes- Sarmiento Subproject (Province of San Juan) under implementation upstream of the wetland area; (ii) Rural Roads for Agricultural Development in San Juan (Province of San Juan) relevant technical and safeguard requirements have been completed, and (iii) Rural Electrification for Livestock Development in Departamento 25 de Mayo Subproject (Province of San Juan) relevant technical and safeguard requirements have been completed. 15. For this group of subprojects, in addition to the individual subproject environmental management plans elaborated by PROSAP and approved by the Bank, and in view of the potential cumulative impacts, MAGyP and Province of San Juan have developed an Action Plan to increase environmental conservation of the ecosystem surrounding the wetland which is currently affected because of the agriculture infrastructure and land use upstream of the lagoon. The Action Plan s main objective is to contribute to the improvement of environmental and water conditions in the wetland 9

10 and support monitoring efforts of the Province to restore these ecosystems. The Province has agreed to implement this plan, financing its implementation with support of the technical assistance components under the three subprojects. The final version of the Action Plan has been incorporated into the relevant EIAs and EMPs of the three above mentioned subprojects. 16. Four priority strategic areas have been identified for the Action Plan: (i) improve management of water resources including monitoring of water quantity and quality; (ii) strengthen conservation of biodiversity, inventories, and biological monitoring; (iii) improve infrastructure and site management; and (iv) promote social development of populations linked to wetland (e.g. lagoon communities, etc). D. Summary 17. The proposed changes will not affect the Project s development objectives, overall design scope or outcomes. Specifically the proposed changes will strengthen the capacity to manage future potential dam safety related impacts within the GoA and participating provinces as well as addressing infrastructure investments in and around critical habitats. MAGyP and the Bank have agreed on a capacity building program to increase management capacity in the PIU in relation to the new safeguards policies triggered. This includes dedicated training to provincial staff as part of the ongoing provincial institutional strengthening program managed by the UEC, as well as the inclusion of additional capacity building on environmental compliance within the technical assistance components of individual relevant subprojects. 18. The restructuring involves no other changes in terms of financing mechanisms or amounts, outputs, project costs, financial management, disbursement arrangements, procurement, closing date, or implementation schedule. In terms of institutional arrangements, the PROSAP has enhanced its technical supervision of subprojects in the field through one senior expert that participates in field supervision, in addition to enhanced reporting activities by the Environmental and Social Unit within the UEC. 19. The Environmental and Social Management Framework (ESMF) has been updated to include the policy requirements of dam safety and natural habitats. The revised ESMF includes additional procedures to evaluate subprojects involving: (i) areas containing natural and critical habitats; and (ii) irrigation systems connected to dams to ensure dam safety and due diligence according to the Safety of Dams Policy. It also includes a revised negative list and checklist to ensure a better screening of subprojects that involve critical or natural habitats or are Category A subprojects which are ineligible for Project finance. Finally, it requires cumulative environmental impact studies when two or more subprojects with similar impacts are located within the same geographical or hydrological area. The Operational Manual (OM), including the revised ESMF, has been updated by MAGyP, approved by the Bank, and disclosed by MAGyP on June 15, No amendment to the Loan Agreement is required, since the Loan Agreement dated March 27, 2009 already states the obligation of the Borrower to carry out the Project or cause the Project to be carried out according to the Operational Manual which contains the ESMF, updated to reflect the application of OP 4.04 and O.P to the 10

11 Project. Also, the Loan Agreement provides that prior to the commencement of any works or activities under any subproject, the Borrower shall carry out, or cause to be carried out, an environmental/social screening and/or an environmental/social assessment (as the case may be) of the pertinent works/activities, and if determined by the Bank, approve an environmental/social management plan or similar environmental/social instrument, acceptable to the Bank, for each said works/activities, all in accordance with the provisions of the Environmental and Social Management Framework; and immediately after said approval, implement and/or cause to be implemented (as the case may be) the corresponding environmental/social management plan (or similar environmental/social instrument) in accordance with its terms. E. Appraisal Summary 21. No changes in impact from the original appraisal of the project are expected from this restructuring. The PDO is still achievable. Therefore, an updated appraisal is not required. 11