Document of The World Bank FLE COPY

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. 1749b-AR

STAFF APPRAISAL REPORT

ARGENTINA Public Disclosure Authorized

GRAIN STORAGE PROJECT

January 26, 1978 Public Disclosure Authorized Public Disclosure Authorized

Regional Projects Department Latin America and the Caribbean Regional Office

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. CURRENCY EQUIVALENTS (at the time of appraisal and used in this report)

US$1 = $a 360

US$1 Million = $a 360 Million

$a 1 Million = US$2,778

WEIGHTS AND MEASURES

Metric System

GLOSSARY OF ABBREVIATIONS

DIGID - Direccion General de Investigacion y Desarrollo

DNCEG - Direccion Nacional de Construccion de Elevadores de Granos

ERR - Economic Rate of Return

FA - Ferrocarriles Argentinos

JNG - The Grain Board

SEIM - Secretariat of Maritime Affairs

GOVERNMENT OF ARGENTINA

FISCAL YEAR

January 1 to December 31 FOR OFFICIAL USE ONLY

ARGENTINA

GRAIN STORAGE PROJECT

TABLE OF CONTENTS

Page No.

I. THE AGRICULTURAL SECTOR

A. Agriculture in the Economy ...... 1 B. Agricultural Policy ...... 2

II. THE GRAIN SUBSECTOR

A. Supply and Utilization ...... 3 B. Marketing ...... o...... oo...... 5

III. THE PROJECT COMPONENTS, COSTS AND FINANCING

A. Brief Description ...... 11 B. Detailed Features - ...... 12 C. Cost Estiates ...... 15 D. Financing ...... 17 E. Procurement ...... o...... 18 F. Disbursement ...... 0 ...... 19

IV. DEMAND AND MARKET ASPECTS

A. Effective Export Demand ...... 20 B. Demand for Project Storage Facilities ...... 21

V. TECHNOLOGY AND PRODUCTION SPECIFICATIONS

A. Grain Storage and Controls ...... 22 B. Grain Transportation ...... 23

VI. PROJECT IMPLEKENTATION

A. Government ...... 24 B. Grain Board Organization and Operation ...... 24 C. Project Management ...... 26 D. Construction Schedule ...... 0 ...... 28 E. Accounts, Auditing and Reporting ...... 28

This report was appraised in April/May 1977 by a mission consisting of Messrs. W.R. Ringlien, C.W. Wolffelt, P.N. Taborga (Bank), and J. Bigosinski, P. Christensen, C. Fowler, A. Lewis, and D. Treleaven (Consultants).

This document has a restricied distribution and may be used by recipients only in the performance of their oficWl duties. Its contents may not otherwise be disclosed without World Bank authorization. TABLE OF CONTENTS (Continued)

Page No.

VII. FINANCIAL ANALYSIS ...... 29

VIII. ECONOMIC ANALYSIS

A. Benefits ...... 31 B. Costs ...... 32 C. Project Risks ...... 33 D. Impact of Silos on Environment ...... 34

IX. SUMMARY OF AGREEMENTS REACHED ON LOAN CONDITIONS ...... 34

ANNEXES

1. Terms of Reference for Engineering and General Consultants 36

2. Terms of Reference for an Inspection and Supervision System at Level of Primary Elevators 42

3. Terms of Reference for Improved Grain Inventory Control System 50

4. Terms of Reference for Training of Silo Managers and Supporting Staff for Project Silos 60

5. Bahia Blanca Pilot Dredging 63

6. Construction and Implementation Schedule 66

7. Network Flow Model Determining Storage Requirements 67

8. Grain Board 83

9. Terms and Conditions for Leasing Project Silos 86

10. Financial Rate of Return 89

11. Economic Rate of Return Calculations 95

12. Selected Documents and Data Available in the Project File 110

MAP Location of Project Silos and Major Grain Ports, IBRD No. 13012R ARGENTINA

GRAIN STORAGE PROJECT

I. THE AGRICULTURAL SECTOR

A. Agriculture in the Economy

General

1.01 The agricultural sector during 1965-76 has accounted consistently for about 14% of GDP. Excluding the comparatively small contribution of forestry and fisheries, the total sectoral output is fairly equally divided between crops and livestock. There are, however, significant regional differences as the pampas region accounts for about 62% of all livestock output but only 38% of all crops. Agricultural exports made up 79% of total exports in the 1970-76 period, declining in relative importance from 83% in 1970 to 74% in 1976. Between 1970 and 1976, grains grew from 29% to 31% of total exports, meats declined from 21% to 14% and oilseeds products remained constant at 10% of total exports.

Employment

1.02 Argentina has a population of about 25 million. The agricultural sector directly employed about 20% of the labor force in 1950-54, and 17% in 1970-74. Absolute numbers have remained stable, implying migration from the farms to the cities.

Land Tenure and Farm Size

1.03 According to the 1969 census, 73% of all grain and livestock farms in Argentina were owner operated and accounted for almost 90% of all land in farms. To a large degree, they are family farms, meeting their own labor requirements. In the pampas region, which produces most of the grain, 56.3% of the farms were less than 100 ha in size, averaging about 38 ha; 33.2% were between 100 and 500 ha, averaging 225 ha; 5.5% were between 500 and 1,000 ha, averaging 700 ha; and the remaining 5% were large farms of over 1,000 ha.

Production

1.04 Agricultural production in Argentina grew at a rate of 1.8% per annum during 1953-77. The comparable figure for crops was 2.6% and for livestock 1.4%. Growth during the second half of the period was almost double that of the first half mainly as a result of an improvement in the terms of trade for agriculture, and a more widespread use of commercial inputs, especially improved seeds and intensified mechanization. Growth of crop output accounted for the bulk of the improved performance while livestock production expanded at a somewhat slower pace in the 1963-77 period than in the earlier period and in comparison with the rate of growth for crops. - 2 -

B. ARricultural Policy

1.05 The growth strategy of the Government aims at strengthening the country's external payments position through an accelerated development of sectors in which Argentina enjoys a comparative advantage. In line with this, the economic environment of agriculture is being improved through adjustments in taxation, credit, tariff, marketing, and exchange rate policies. The objectives are to bring farm product and input prices in line with interna- tional levels, and to establish a tax and credit system which will stimulate improved resource use and output expansion. Over the intermediate term, it is expected that land use will be intensified in the humid pampas (which now accounts for most of agricultural exports) and that livestock and crop produc- tion in the other areas will be expanded through land and water development. The potential is impressive, not only in crops and livestock, but also in forestry and fisheries.

1.06 The Government's agricultural policy, announced in April 1976, is being vigorously implemented. Differential exchange rates for many agricul- tural exports have been reduced or eliminated. The export retention tax for wheat was reduced from 40% to 10% in August 1976 and was eliminated in November. In December 1976, the tax rates on coarse grains were cut from 40% to 10% and will be eliminated in May 1978. By the end of the year, most domestic price controls had been removed, the state monopoly on grain trading had been lifted, the system of cattle slaughter quotas had been abolished, and the National Meat Board was no longer engaged in direct selling abroad.

1.07 From April 1976 to September 1977 in constant prices of April 1976, prices of agricultural products increased by 21%, crop prices by 22% and live- stock prices by 20%. In the case of soybeans, prices have risen as a result of liberalization of the restrictions on the export of unprocessed soybeans. In 1976, the Government permitted export of 150,000 m tons of soybeans and for 1977 it has established an export quota of 600,000 m tons. All restrictions on direct exports of soybeans will be eliminated as of March 1, 1978.

1.08 To help offset the revenue effects of the reduction in export taxes, a temporary (until December 31, 1979) sales tax of 4% on agricultural products at point of first sale was introduced on September 1, 1976. Fifty percent of the sales tax payment is deductible from income subject to income tax. The provinces are in the process of revaluing land to 70% of market value, and establishing an annual tax rate equal to 1% of that valuation. The effect of the land tax should provide landowners with greater incentives to use land more intensively and increase revenues to provincial Governments.

1.09 Substantial progress has been made in shifting from negative interest rates and administrative rationing of funds to positive rates for agricultural credit. For the crop year beginning in July 1976, the Banco de la Nacion Argentina, the main source of agricultural credit, made production loans available at an annual rate of about 94% (including 17% emergency tax). Although still negative, this rate was in real terms about double that of the previous two years. The BNA credit for silos (supported by - 3 - the Inter-American Development Bank) was made available in early 1977 and now bears a rate of 6%, with outstanding principal being adjusted in line with the general wholesale price index. Since June 1977, virtually all institutional lending rates have been positive.

1.10 As of mid-1977, the country setting for rapid agricultural growth is highly favorable. Nonetheless, farmers will require time to acquire the supplies, equipment and knowledge needed to apply higher yielding techniques, to reorganize resource use, and to become convinced that current public policy for agriculture will be maintained.

1.11 Production expansion in the immediate future is expected to result from wider use of available techniques within the limits imposed, among other factors, by infrastructure weaknesses such as lack of storage facilities and inefficient train service and port facilities. This trend would be stimulated by the higher return to inputs, which would result from the new policy, from the intensification of the cropping pattern and increased productivity of pastures, and by the fact that land prices would increase more rapidly than input prices, which typically are more supply elastic. For the longer run, land and water development is expected to reinforce the upward production trend, as is presently foreseen in the emerging agricultural development policies.

II. THE GRAIN SUBSECTOR

A. Supply and Utilization

Production

2.01 Except for rice, grain production in Argentina is heavily concentrated in the pampas area, which embraces most of the provinces of Buenos Aires, Cordoba, Entre Rios, Santa Fe and La Pampa. The pampas is a highly fertile plain of some 45 million ha, of which some 20 million ha are planted annually to grains. The balance is devoted to livestock production, utilizing both improved and unimproved pasture land. Grains in the pampas are produced, by and large, in a mixed livestock/grain farming system whose structure is highly sensitive to the beef-grain price relationship. A normal rotation includes a number of grain crops, followed by three or four years of grasses and legumes. Part of the grain production is used directly for fodder purposes, with some crops being seeded largely for pasture use (oats, rye and barley) and some of the cropped area being used for grazing before and after harvest (corn and sorghum).

2.02 Wheat (5.7 million ha) is the principal food-cereal crop in terms of area planted for the period 1968-77, with corn (4.2 million ha) and sorghum (2.6 million ha) the major feed-grain crops. Rye is seeded to a large area each year, about 2.3 million ha, but the harvested area is much smaller, with the balance used as fodder crop. Oats (1.5 million ha) and barley (0.5 million ha) complete the cereal group, with barley being grown chiefly for brewing purposes. The oilseed group (2.6 million ha) is dominated by sunflower seed, linseed, peanuts and soybeans. Of these, sunflower seed is presently the most important, both in terms of area and production, but it is rapidly being overtaken by soybeans. Soybeans were virtually unknown to Argentine agriculture in 1970, but in 1977 its production of 1.2 million m tons equalled sunflower. Corn, which, along with wheat, has been the most important crop in Argentina, has declined by one-third over the past decade, while sorghum has increased by a similar proportion in the same period. Given the total agri- cultural structure of the pampas, soybeans are popular because it can be double-cropped after wheat, and sorghum fits in well with the livestock industry because it can be grazed after harvesting. Typically, the area has two harvests a year, the harvest of winter grains--wheat, oats, rye, barley-- in December-January, and the harvest of summer grains, comprising corn, sorghum and the oilseeds, in April-May.

2.03 The largest potential for rapid production expansion lies in the land resource in the pampas. Much of this fertile area could be converted from pasture land to grain production quickly and at minimum cost and there is also considerable potential for yield increases through the use of im- proved technology. As a result of the new policy direction, a production volume of about 38 million m tons of all grains is projected for 1985, compared to the average of 23 million m tons over the past 10 years.

Domestic Utilization

2.04 Wheat is essentially consumed by the human population, though a considerable area of wheat is pastured annually depending on the wheat-to-beef price ratio for any particular season. Total domestic consumption of wheat fluctuates between 4 and 4.5 million m tons annually, including industry pro- cessing, seed, and waste. Corn and sorghum are used almost totally as animal feed except for the corn used by the food processing industry. Domestic utilization of corn is around 4 million m tons and of sorghum around 2.5 million m tons annually. While per capita consumption of wheat (100 kg) is on the decline, that of pork (9 kg) and poultry (14 kg) can be expected to increase slightly, implying some growth in overall use of corn and sorghum as animal feed. Although Argentina has no grain reserves policy, stocks at the beginning of the marketing year have averaged about 12% of production for wheat, 2% for corn and 8% for sorghum for the period 1970-76.

Exports

2.05 For the 1970-76 period, Argentina exported about 42% of its grain production and these exports accounted for about 25% of all export earnings for that period; an additional 5.5% of total export earnings accrued from sales of oilseed exports, mostly in the form of oil and meal. Argentina has been a major exporter of cereals and oilseeds since the beginning of the century, reaching a peak in the period 1920-40 with an annual average export of 9.8 million m tons of grain, equivalent, in volume, to about 20% of total world exports in physical quantities of wheat and 64% of corn. However, her relative position as a grain exporter has deteriorated considerably over the last few decades, mainly because of short and extremely variable supply, which - 5 - has adversely affected the country's reputation as a reliable supplier and because of inadequacy of the marketing system and storage facilities. For the period 1970-76, average annual grain exports were 8.7 million m tons and Argentine wheat accounted for only 2.7% of world wheat exports and 9.2% of world coarse grain exports.

B. Marketing

Organization of the Grain Trade

2.06 There are essentially three distinct operations in the grain market- ing structure: (a) the up-country marketing system, involving the movement of grain from farms to primary elevator facilities; (b) the pricing system, involving the operation of the grain exchanges in Buenos Aires, Bahia Blanca and Rosario; and (c) the export operation, involving the sales activities and vessel chartering of the grain exporters and the port elevator facilities.

2.07 Up-country Marketing Systems. This system is based on a network of primary silo facilities designed to receive grain from farms, weigh, condition (dry, clean and fumigate), store and ship it out to domestic processors and export silos. The principal agents carrying out this function are the inde- pendent grain merchants, cooperatives and the Grain Board. Grain merchants usually purchase the grain FOR (free on rail) port terms, utilizing prices established on the grain exchange of the port of destination. The producer pays all costs for: (a) transportation from farm to primary silo and primary silo to port; (b) weighing, receiving and shipping; (c) drying, cleaning and fumigating; (d) local taxes as applicable; and (e) commission to the merchant ranging from 6% to 9% based on the charges for services rendered. Cooperatives operate facilities similar to those of grain merchants, providing the same basic services, except that they do not buy grain for their own account. They give the producer sales assistance by disposing of his grain through grain exchange brokers or on a direct brokerage basis as directed by the producer, charging him similar prices for services plus a commission. Cooperatives handle about 40 to 45% of the total grain harvest. The Grain Board owns 81 primary silos, 28 port elevators and about 12 underground silo plants. In the existing marketing structure, the Grain Board is a buyer of last resort under the Government price support program, which has been limited largely to wheat. Its primary facilities are utilized mainly for storing grains for the account of grain merchants and cooperatives while little grain comes in for conditioning and storage directly from producers.

2.08 The up-country marketing system is characterized by an acute shortage of storage facilities virtually throughout the production area, which puts pressure on the producer to sell at low prices and on the primary silo operator to push through as much grain as possible to maximize his profits. This prac- tice, in turn, puts pressure on the transportation system, the port silos, and, finally, the exporter to move grain into export markets as rapidly as possible. Other major problems of the system are delayed payments to producers due to lack of financing, deterioration of grain due to lack of storage facilities and reduced income to producers due to weakness in the Grain Board's system of inspection and supervision at the primary silo level. - 6 -

2.09 Pricing System. The dominant factor in the pricing of grains is the grain exchange in Buenos Aires, with the grain exchanges in Rosario and Bahia Blanca limited largely to their specific areas of influence. There are, in effect, three pricing systems operating simultaneously in the exchange: (a) the cash market; (b) the futures market; and (c) the parallel market. The cash market is the most active and handles the bulk of the trade. It deter- mines the local price for the "spot" or nearby delivery of grain according to the classic supply-demand principle and is the mechanism used almost exclusively by primary silo operators for reselling grain taken from producers. The futures market has been greatly eroded due to the monopoly of the Grain Board in the grain trade between 1974 and 1976, high inflation, lack of storage facilities and the absence of an adequate pool of speculative investors to produce enough volume to make it viable and, therefore, is not presently an important pricing instrument. A parallel market exists unofficially but perhaps represents a greater volume of trade than is posted officially through the exchange futures market. It involves the direct selling by a country merchant to an exporter, for future delivery, but at an agreed price, not at the official futures price as determined in official exchange trading.

2.10 Export Operation. The export sales of Argentine grain and grain products are carried on by three groups, the "exporters" comprised of both national and multinational independent companies; the cooperatives operating through their central organization; and the Grain Board on a direct basis with foreign governments or government agencies. Of these, the "exporter" group is by far the most active and important in terms of volume and trade. The exporters offer grain in the international market through their overseas affiliates, either on an FOB or CIF basis. Unlike operations in the other major exporting countries, offers from Argentina tend to be seasonal and concentrated in the periods immediately following the harvest of winter or summer grains. This is a reflection of the pressure of primary marketing over a relatively short time period, and the need to get grain through the system rapidly because of limitations in storage facilities. To some degree this practice has always exerted a downward pressure on international prices of the grains being offered, in the same manner in which domestic prices tend to decline following harvest. While some export contracts are still concluded by cooperatives themselves, it appears that the bulk of the grain they handle is resold to exporters for the international market. The Grain Board still acquires grain--principally wheat in 1976/77--under price support programs. This grain is resold directly to countries with centrally controlled economies, which prefer to deal with other Government entities, or it is sold on a tender basis to exporters for subsequent resale abroad. The Grain Board also has authority to buy grain in the market to fulfill specific contracts, but it is expected that this authority would be used only in exceptional circumstances.

Infrastructure

2.11 Grain Storage Facilities. The many changes in Government grain policy over the past two or three decades and the frequent shifts in respon- sibility for grain marketing between the private and public sectors have contributed to a period of instability during which there has been little - 7 - new investment by the private sector in grain handling facilities. The major port elevators have been in operation for 50 years or more, and, while they are still capable of an impressive throughput, modernization of unloading equipment and berthing facilities is required at most of them. USA and Canada have storage capacities in excess of their total annual grain production, but Argentina's capacity amounts to less than 50% of its annual grain output. To accommodate the winter and summer harvests, the existing primary silos must have an annual turnover of about 3.0 times their capacity, which implies that large quantities of grain are merely passed through the primary silos for conditioning and must subsequently be sold and shipped for export to make room for the balance of the harvest.

2.12 Grain storage facilities are expensive in Argentina because they must include driers since about 70 to 80% of the summer crops (corn, sorghum, sunflower, soybean, and such) must be dried prior to storage. This feature has precluded investment in on-farm storage where driers are too expensive for individual farmers and has limited it largely to the predominantly winter crop (wheat, barley, linseed, rye) areas where only about 20% of the grain requires drying. Storage facilities thus consist mostly of primary silos, which receive the grain directly from producers, condition it and store it as long as possible for subsequent transport to a port elevator for export or to a flour or feed mill for internal consumption. The private sector is expanding existing facilities and building new ones at the rate of about 500,000 m tons per year, but the tendency is to concentrate on the more profitable activity of conditioning (drying) rather than on storage. However, this means that dried grain is often left in the open for a period of 30 to 60 days, which results in significant losses.

2.13 Argentina has a total grain storage capacity of about 14 million m tons distributed as follows:

- On-farm storage 2.0 million m tons - Primary storage owned by grain merchants, coops. and Grain Board 7.6 million m tons - Milling industry 1.5 million m tons - Grain Board underground storage 1.5 million m tons Sub-total: 12.6 million m tons - Grain Board port elevators 1.2 million m tons

Total: 13.8 million m tons

2.14 Transportation. Argentina has achieved an extensive and well developed land transport network and exploited the transport potential of its coastal waters and the River Plate navigation system. From the very beginning, metropolitan Buenos Aires has been the focal point of the transport network within the country and between it and the rest of the world. Grains are one of the principal freight items throughout the year, but the peak movements of wheat occur during the January-May period and those of corn and sorghum during March-July. - 8 -

2.15 Rail Transport. Argentina's rail system includes almost 40,000 km of broad, standard and meter gauge track and a wide variety of rolling stock. In 1946, the Government purchased the 12 private railway companies and com- bined these with the six owned by the Federal Government and one by the Province of Buenos Aires, creating one railway organization called Ferrocarriles Argentinos (FA). The system is overstaffed, physically run down, over- extended and inefficiently operated. However, efforts of the Government and FA during the last two years to improve the system are beginning to show re- sults. Freight carried by FA in the first six months of 1977 is up 25% (in m tons) over the same period last year, uneconomic intercity passenger services (train-km) have been reduced by about one-third, railway staff has been re- duced from 158,000 to 125,000 (about 21%) and about 5,000 km of uneconomic lines have been authorized for closure by the Government.

2.16 In 1976, 5.6 million m tons, or less than one-fourth of grain produced in Argentina, were moved by train. This represented nearly one- third of rail cargo and was the single most important component of rail freight. Grain is transported in nine different types of rail cars, in- cluding mineral hoppers pressed into service to relieve local and seasonal shortages. Broad gauge rail cars normally used for grain transport total 10,300, including over 5,000 boxcars. Of these, 60 to 70% are in service at any one time. There are also some 830 standard and meter gauge grain cars. FA has been trying to encourage the rail transport of grain by granting land on the right-of-way rent-free for the construction of silos and offering concessionary freight rates to the Grain Board.

2.17 The two most immediate grain transport problems are the congestion of rail reception facilities at the ports and periodic shortages of grain cars. Based on current data, a typical grain car is used only twice a month during the peak harvest season because, in many cases, it is shunted aside and used for temporary storage of grain due to inadequate reception facilities and inefficient organization in the ports. With the average travel distance of about 400 km and running speeds of 30 and 40 km/hr, most time is lost in non-transport activities such as waiting, handling and repairs. FA is encountering difficulty in capturing a large share of the grain transport business.

2.18 Road Transport. The road network expanded rapidly in recent decades and today totals 1 million km, including 40,000 km of paved roads. Road trans- port is particularly well developed in the grain growing areas and between these areas and the ports and urban consumption centers where virtually all roads are already paved. The trucking industry is largely unregulated and characterized by relatively free entry and effective competition. Aided by favorable terrain and local truck production, the truckers compete effec- tively with other transport modes on short, medium and some long distance hauls. Trucks accounted for over half of grain deliveries to ports in the 1976/77 season. The Grain Board has recently instituted a port delivery quota system for trucks, which has improved the productivity of truck transport by reducing the congestion and delays in the port reception areas.

2.19 River Transport. The River Plate and the navigable portion of its tributaries and Parana and Uruguay rivers form an extensive waterway system - 9 -

serving the heart of Argentina's grain growing region. However, the heavy siltation brought by the Parana and Uruguay rivers allows only small vessels upriver and requires costly dredging of the river and estuary ports, includ- ing the port of Buenos Aires. A maximum of about 300,000 m tons of grains was barged from the ports of Barranqueras serving the Chaco area and the port of Concepcion del Uruguay serving the Mesopotamia area during the 1972- 76 period. Improved transshipment facilities are under construction in Rosario.

2.20 Port Facilities. Grain is shipped from 13 river and ocean ports, the three principal ones for export being Bahia Blanca, which handled about 29% of the grain exported in 1976; Buenos Aires, 25%; and Rosario 22%. The river ports and port of Buenos Aires are also used for barge-ship trans- shipments. Because the river ports have a relatively shallow draft, it is common practice for ships to stop first at one of them for partial loading and then top off at either Buenos Aires or Bahia Blanca. As a result, about 80% of vessels loading grain at Bahia Blanca and Buenos Aires have already been to river ports. According to grain exporters, this practice is cheaper than moving the grain by surface to the ports of Buenos Aires and Bahia Blanca for loading the vessels exclusively at these ports. During the 1967-76 period, average monthly throughput at all ports ranged from a low of 427,000 m tons in November to a high of 1,024,000 m tons in April. An all-time high of 2,067,000 m tons was handled in April 1977.

2.21 Reception Facilities. The design capacity of total grain reception facilities in the ports for rail and truck transport is estimated at 27,000 m tons per hour. However, access to port facilities for grain transport vehicles is often seriously congested; there are numerous delays in the process of classification, weighing, inspecting and unloading, particularly for rail cars.

2.22 Storage Facilities. Official grain storage facilities in or near the ports total 2.7 million m tons, including 1.2 million m tons in elevated silos and 1.5 million m tons in underground silos. Additional grain storage facilities, totaling 137,000 m tons capacity, are under construction in the river ports of Rosario, Buenos Aires, San Nicolas and San Pedro, and the construction of an 80,000-m-ton port elevator in Barranqueras will be started in 1978. The utilization of grain storage facilities varies for individual ports, reflecting the seasonal nature of grain trade.

2.23 Outloading Facilities. The total installed capacity for outload- ing grain exports is rated at about 55,000 m tons per hour, however, only a small portion of that capacity is used at the present time. In April 1977, a new record of 2.3 million m tons of grain was outloaded through all the ports. Low ship loading rates continue to be a problem, only partly relieved by extending the port working hours to handle the peak demand. The lack of spare parts and proper maintenance, port labor featherbedding, changing ship technology, river port draft limitations and adverse weather conditions--all'contribute to the present underutilization of outloading capacity. - 10 -

2.24 The substantial grain throughput capacity in the existing ports can handle the expected growth of grain exports in the immediate future, but at high costs in terminal operations and ship waiting time outside the ports. To illustrate, the recent operational improvements in effect since January 1977 more than doubled the average monthly throughput compared with the same period in 1976, the most recent peak export year. However, as a large portion of the port facilities is old and poorly maintained, it is uncertain that this higher level of throughput can be maintained. The Government is therefore considering possibilities of upgrading existing terminal facilities at major ports on the Parana and La Plata rivers and at Bahia Blanca. It is expected, furthermore, that the port of Bahia Blanca will require major increases in grain reception, storage and outloading capacity by 1982/83. A study will therefore be undertaken during 1978, with UNDP financing, to (a) recommend operational improvements and equipment acquisitions which would increase the efficiency of grain throughput at each of the ports; and (b) provide pre- liminary engineering and economic analyses for high priority terminal expan- sion at Bahia Blanca (e.g., berth construction, grain silos, railroad yards and other shore facilities required to be in operation by 1982).

2.25 More important, the draft limitations of the river ports, including Buenos Aires, limit the grain bulk carriers calling at Argentina's ports to sizes well below the worldwide economic size of 50,000 to 60,000 dwt which serve the large markets of Northern Europe, South Asia and Japan. Smaller ships of 20,000 to 30,000 dwt will, of course, be used for Latin American ports and others with draft limitations. Lack of deep water berths is becoming an increasingly important handicap as the continued growth of Argentina's exports is predicated on its ability to compete in existing and new markets. Deepening of existing access channels at major ports on the Parana and La Plata rivers is not considered feasible because of very high siltation rates in these rivers; even at present depths, annual dredging in the order of 50 million cu m is required to maintain these channels. Therefore the only possible solutions would be to deepen the access channel at Bahia Blanca and/or to construct a new port.

2.26 Deepening of the access channel at Bahia Blanca requires study of complex hydraulic conditions in the outer bay. Test dredging of two channel sections is proposed, to determine seabed conditions and resiltation rates. This work, which is to be accomplished under the pilot dredging component (para 3.16), would complement ongoing studies of a new port at Punta Medanos, a location selected by the Secretariat of Maritime Affairs (SEIM) after extensive analysis of alternative sites. Punta Medanos is located on the open coast, near the mouth of the La Plata river, and would require very large investments in new terminal facilities, land transport connections and other supporting infrastructure. The feasibility of the new port will not be determined until the ongoing studies are completed in 1979. The deepening of the channel at Bahia Blanca may be justified, even if the deep water new port is built, because of large increases in grain exports expected to flow through Bahia Blanca from its hinterland. - 11 -

III. THE PROJECT COMPONENTS, COSTS AND FINANCING

3.01 Following identification of the project by a Bank mission in September 1974, the Grain Board, in March 1975, awarded a contract to Direccion General de Investigacion y Desarrollo (DIGID), a consulting branch of the Argentine Armed Forces, to prepare a feasibility study for additional inland grain storage and conditioning facilities. FAO/CP assisted DIGID with particular reference to a network flow model developed by the latter during three project preparation missions (December 1975, December 1976 and March 1977). A draft of the feasibility study was presented to the Bank in March 1977.

A. Brief Description

3.02 The objectives of the project are to:

(a) reduce grain losses from spoilage due to lack of conditioning and storage facilities;

(b) increase efficiency of primary silo operations through the introduction of large-scale silos;

(c) provide producer incentives to grow more grain;

(d) reduce cost of marketing and exporting grain;

(e) enable grain producers to increase their incomes through improved handling and storage and greater marketing flexibility;

(f) supply grain reliably to export markets at more stable and higher prices throughout the year; and

(g) facilitate access of intermediate-size grain carriers to Bahia Blanca.

3.03 The project would finance: (a) the construction of 20 large primary silos in grain growing regions of the greatest storage deficit which would be built at rail lines, with grain being sent to the ports by improved rail operations; (b) alterations of boxcars to handle grain efficiently; (c) improvements in the inspection and supervision system of the Grain Board at the primary silo level; (d) improvements in the existing grain inventory control system; (e) training of silo operating staff; and (f) pilot dredging and consulting services for studies related to the channel at Bahia Blanca.

3.04 The silo construction, railway improvements, and management pro- cedures and training would be administered by the Grain Board which would set up a Project Committee to take full responsibility for the execution of the project, including approval of all expenditures and making of technical - 12 -

decisions. A Project Executing Unit would be set up under a Project Director to carry out the Project Committee's decisions and to handle the day-to-day management of the project. Loan proceeds would be channeled through the Argentine Central Bank to the Grain Board. The pilot dredging component would be administered by SEIM and loan proceeds would be channeled through the Argentine Central Bank directly to SEIM.

B. Detailed Features

Silos

3.05 Twenty horizontal silos with an average storage capacity of 100,000 m tons each would be built, each consisting of receiving hoppers and out- loading equipment for trucks and railway cars, grain drying and cleaning units, and storage facilities. The actual sizes of storage units and working bins for each silo complex would vary depending on the expected composition of grain supply in each location, but a prototype design serving as an example of a possible arrangement calls for six 700-m-ton working bins, ten 2,000-m-ton storage units, eight 4,500--ton units, four 10,000-a-ton units and six 100-m-ton outloading bins. The silos would have prefabricated concrete walls and roofs of corrugated aluminum sheets supported by steel trusses. The main items of equipment to be installed would be weighbridges for trucks and rail- road cars, mechanical conveyors, driers, cleaners, dust control and aeration systems, grain temperature indicators and mechanical and electrical controls. The receiving capacity for each of the three intakes would be 200 m tons per hour. Most silos would have four driers and corresponding cleaners, each capable of handling 40 m tons per hour, but space would be allowed for later expansion of drier capacity.

3.06 Qualified engineering consultant firms would be selected to prepare detailed designs and functional specifications for the silo structure and mechanical/electrical equipment. The firms would also prepare tender and con- tract documents and assist in bid evaluation. During the construction period, they would provide on-site inspectors to ensure that civil works and equipment installation conform to contract specifications. Argentine engineering consult- ants are generally qualified to perform the above tasks, but selected firms would, most likely, form an association with foreign firms to take advantage of the experience of the latter in the size and type of silos expected to be built under the project. It is expected that engineering consultants accept- able to the Bank would be employed on terms and conditions satisfactory to the Bank about August 1978 by the Grain Board. Furthermore, general consultants satisfactory to the Bank would be hired to assist the Project Executing Unit to carry out its various functions (para 6.09), including overall supervision of the engineering consultants. Terms of reference for the engineering and general consultants are presented in Annex 1. - 13 -

Rail Improvements

3.07 Alterations to 2,000 Existing Boxcars. Alterations consist of installing four roof doors in each boxcar to permit gravity loading from silos and horizontal hinged doors at both ends of each car to permit gravity unloading to an elevating ramp. These modifications are expected to reduce present loading time of boxcars by one-half and unloading time by two-thirds. A previous study by the Grain Board and FA concluded that these alterations are the most practical among the feasible alternatives.

3.08 Alterations to Silo Access Tracks - Port of Bahia Blanca. Modifi- cations to silo access railroad tracks at the port of Bahia Blanca under the project would include construction of a small hump and installation of two weighbridges for simultaneous weighing and classifying of wagons by type and by grain immediately before unloading. These improvements would reduce unload- ing time to the extent that silo reception capacity would, most likely, be doubled, allowing a corresponding improvement in rail car turnaround time.

3.09 Alterations to Silo Access Tracks - Port of Rosario. Project works at the port of Rosario would complete railway improvements already undertaken by FA and would consist of access tracks to the port silos and a large railcar classification yard. As a result, throughput is expected to double.

3.10 Railway Interline Connections. Three interline junctions connecting the Sarmiento region with the Mitre region at Coronel Granada (Los Callejones) and at Pehuajo (El Recado and Capitan Castro) in Buenos Aires province would be constructed. Engineering estimates tentatively show that some 9 km of main line track would be required, including signaling and switching.

3.11 Silo Access Lines. The project would construct an average of 1 km of rail spurs to each of the 20 silos. Secondhand rail, weighing 50 kilos per meter, would be used as only about 600 trains per annum will move over the spurs, or slightly over 1.0 million gross m tons. Rail would be welded in 36-meter lengths and fastened by screw spikes, together with new sleepers and 30 cm of stone ballast.

3.12 Offloading Ramps. Ramps, designed to raise a rail car fitted with end unloading doors to an angle of 450 in a manner similar to that used now for truck and trailer unloading, would be constructed at the ports of Bahia Blanca (two ramps), Buenos Aires (two), and Rosario (four). With the boxcar alterations proposed, these ramps would cut unloading time and manpower requirements by two-thirds and also eliminate labor difficulties and special payments for operations under unhealthy conditions due to excess dust.

Management Procedures and Training

3.13 Inspection and Supervision. The project would include*the training of about 14 inspectors to carry out an effective supervisory operation which would cover the project silos initially and later be extended to all primary facilities as trained personnel become available. Problem areas to be super- vised would include: (a) licensing and bonding; (b) inspection of scales; - 14 -

(c) determination of moisture content of grain; (d) issuance of warehouse receipts; (e) maintenance of stock records and periodic audit; (f) fumigation requirements; and (g) primary silo tariffs. The proposed program would require a total of two man-years for course preparation and instruction by the Director and Deputy Director of the proposed Primary Silo Inspection and Supervision Branch of the Grain Board. The project would provide for: (a) salaries and traveling expenses for course instructors, Grain Board staff and local outside experts in particular disciplines related to the project; and (b) salaries and expenses of course participants during the instruction period (Annex 2).

3.14 Inventory Control. The project would also include installation in the Grain Board of an inventory control system that would ensure: (a) control of rail and truck transportation for moving grain; (b) forward programming of export shipments and use of port facilities; and (c) adequate stock records by type of grain and its exact location in the marketing system. Consultants would recommend whether computer terminals or telex equipment would be the more appropriate link between the Grain Board technical offices in the field and the head office and between the project silos and the head office of the Grain Board to transmit the pertinent inventory information. The cost of consultants' services, equipment and its installation cost would be financed under the project (Annex 3).

3.15 Training of Silo Staff. A centralized training program would be established within the Grain Board to prepare project silo managers and supporting staff--accountants, mechanics, electricians--to operate project silos. The center would be headed by a full-time director assisted by instructors from the Grain Board's own staff. The project would finance the salaries of the local staff of the training program, supplies and equipment and travel abroad (Annex 4).

Bahia Blanca Pilot Dredging

3.16 The project would also include the following operations for pilot dredging at Bahia Blanca: (a) hydrographic and oceanographic surveys of the existing access channel of 97 km (with installation of a survey tower for tide and wave measurement in the outer bay); (b) dredging of test sections in the channel (1-million cu m) and observation of resiltation rates; and (c) preliminary engineering and feasibility analysis for recommended channel improvements. The work would require 16 months for completion of the surveys, dredging, preliminary engineering and feasibility analysis, but would include a further year of channel observations to support forecasts of maintenance dredging (Annex 5). The surveys and channel design would be accomplished under a contract for consulting services between a qualified firm of coastal engineers and SEIM. The dredging of test channel sections would be done under a separate contract with a suitable dredging firm. - 15 -

C. Cost Estimates

3.17 Total project cost, including contingencies, is estimated at US$280 million, of which 37%, or US$105 million, is foreign exchange, which is net of import surcharge.

3.18 Local and foreign cost components are based on mid-1977 prices and exchange rate. Silo construction costs include 10% physical contingencies, mainly to provide for possible extra drainage and to cover other unforeseen underground problems. A physical contingency of 15% was included for the rail component to cover additional track work costs; and an 11% physical contingency was included in the pilot dredging component to allow for unknown site condi- tions. Also included in the project cost are price contingencies between mid-1977 and the end of the construction period, applied to both local and foreign exchange costs at the following annual rates: civil works, 9% in 1977-79 and 8% thereafter; and equipment, including engineering and super- vision, 7.5% in 1977-79 and 7% thereafter.

3.19 For the silo construction component, basic costs for civil works and for domestically manufactured items were obtained from Argentine contrac- tors and silo equipment suppliers; costs for imported items were obtained from importers and checked against those costs received by Direccion Nacional de Construccion de Elevadores de Granos (DNCEG) through competitive bidding. For the rail improvement component, basic costs for civil works, rail, rail car alterations and other items were obtained from FA. All costs were checked against rates obtained in recent contracts and current force account rates for civil works on railroad construction and maintenance. For the studies and technical assistance component, current salaries of Grain Board executives were used for the professionals working in the Grain Board and current costs of local and internationally recruited consultants were obtained from contracts let by DNCEG. For the pilot dredging component, costs of the consulting services contract are based on Bank's experience with internationally recruited consulting firms and costs of the dredging contract are based on unit costs of contract dredging incurred by SELM in 1977. The average man-month cost per consultant for all project components is estimated at US$5,500 (including consultant firm overhead, fees, social charges and other costs, where appli- cable). - 16 -

Foreign Local Foreign Total Exchange ---- (US$ Million)------

I. SILOS

Civil Works 61.5 27.0 88.5 30 Mechanical and Electrical Works 41.1 34.5 75.6 45 Engineering and Supervision 4.8 3.3 8.1 41

Sub-total 107.4 64.8 172.2 37

II. RAILWAY IMPROVEMENTS

Offloading Ramps 0.3 0.2 0.5 40 Track Improvements and Wagon Alterations 9.3 4.9 14.2 35

Sub-total 9.6 5.1 14.7 35

III. MANAGEMENT PROCEDURES AND TRAINING

Inspection and Supervision 0.1 -/1 0.1 14 Inventory Control 0.2 0.3 0.5 60 Training of Silo Staff 0.4 0.1 0.5 20

Sub-total 0.7 0.4 1.1 36

IV. PILOT DREDGING

Survey and Design Contract 0.5 1.3 1.8 67 Dredging Contract 0.4 1.1 1.5 75

Sub-total 0.9 2.4 3.3 71

Total Base Cost 118.6 72.7 191.3 38

Contingencies: Physical 12.6 7.0 19.6 36 Price 43.8 25.3 69.1 37

Sub-total 56.4 32.3 88.7 37

Total Project Cost: 175.0 105.0 280.0 37

/1 US$16,400. - 17 -

D. Financing

3.20 The project would be financed as follows:

FA and Category Government /I Grain Board IBRD Total ------(US$ Million)------

Silos, civil works 93.2 39.5 132.7

Silos, mechanical/electrical works - 60.0 50.3 110.3

Consultants for engineering and supervision, studies and training, and pilot dredging 0.6 7.3 6.1 14.0

Computer equipment - - 0.5 0.5

Railway improvements 13.2 0.3 7.3 20.8

Test Dredging 0.4 - 1.3 1.7

Total: 14.2 160.8 105.0 280.0

Percent of total project cost: 5 58 37 100

/l FA would finance railway improvements of US$13.2 million and the Govern- ment would finance under the pilot dredging component US$0.6 million for consultants and US$0.4 million for test dredging.

3.21 The proposed Bank Loan of US$105 million would be made to the Govern- ment of the Argentine Republic and would finance about 37% of total project costs, representing the estimated direct and indirect foreign exchange compo- nents of the project. All funds would be channeled through the Argentine Central Bank; in turn, would pass them on to the Grain Board, which would be the executing agency, except for pilot dredging to be carried out by SEIM. The Bank Loan would be for 15 years, including three years of grace at 7.45% interest. The Bank would finance US$39.5 million (30%) of the civil works of the silos and US$50.3 million (45%) of the mechanical and electrical works. The Grain Board would finance the balance of the civil works and mechanical and electrical works partly with its own funds of US$116.7 million and partly from a medium-term private bank loan of about US$36.5 million. The Bank would also finance US$6.1 million (43%) of the total cost of consultant services, with the Grain Board and Government contributing the balance. The cost of computer equipment, amounting to about US$0.5 million, would be funded 100% by the Bank, as this equipment would be imported. For railway improvements, the Bank would contribute US$7.3 million (35%) and the Grain Board would fund US$0.3 - 18 - million corresponding to the local cost of the offloading ramps at the ports. Local costs of the component, involving alteration of boxcars, part and silo access lines, interline connections and a small hump at Bahia Blanca port, amount to US$13.2 million. Assurances were obtained at negotiations that Government would ensure that FA would contribute not less than US$13.2 million equivalent to cover the local cost component of railway improvements as required in accordance with the project implementation schedule (para 3.28). Further, assurances were obtained at negotiations that Government would ensure that the Grain Board would be provided through taxation, export duties or other appropriate means, with the necessary funds to finance its share of total project costs (US$160.8 million equivalent). The Bank would finance the full foreign exchange cost of US$2.7 million for the pilot dredging component. Assurances were obtained at negotiations that SEIM would be provided with the necessary funds by Government for the local cost component (US$1 million equivalent) of pilot dredging.

E. Procurement

Grain Storage Silos

3.22 It is expected that civil works and the mechanical/electrical works associated with silo construction and equipment would be procured under one contract. For bid evaluation purposes, bidders would be instructed to present scope and price of three major equipment categories, i.e., mechanical, electrical and auxiliary power station so that 15% preference or the applicable import duties, whichever is less, can be given to domestic manufacturers. Silo works would whenever possible be grouped geographically into construction contracts of not more than five silos each, and bids for a single silo would be allowed. The total value of the contracts for the 20 silos, including contingencies, would be US$243 million. ICB according to Bank guidelines would be required for contracts likely to exceed US$1,000,000 each including both civil works and mechanical/electrical equipment and works. Contracts exceeding.US$50,000, for both civil works and mechanical/electrical works, would be subject to local com etitive bidding satisfactory to the Bank. All other works and goods costing $50,000 or less would be acquired through prudent shopping, mostly in the local market. Assurances were obtained at negotiations that the Grain Board would observe the following procurement procedure: (a) prequalification of engineering consultants for silo design; (b) competition by prequalified consultants for submitting design and preparation of bidding documents and supervision during construction; and (c) ICB in accordance with Bank Guidelines for construction of the silos based on designs and bidding documents prepared by selected consultants. Due to variety of locations and soil conditions, it is expected that more than one design would be adopted and, therefore, more negotia- than one consultant would be hired. Assurances were also obtained at tions that: (a) the selected silo designs with their corresponding draft contracts from the design competition would be referred to the Bank for approval prior to any commitment by the Grain Board with the selected firms; for (b) the bidding documents for construction would be referred to the Bank - 19 - approval prior to ICB; and (c) the evaluation of bids for construction as well as proposed contracts would be sent to the Bank for approval prior to any commitment with contractors.

3.23 Procurement of all consultant services (US$11.9 million) would be in accordance with local procedures, acceptable to the Bank; it is expected that foreign consultants will form partnerships with local consulting firms. Assurances were obtained at negotiations that the Grain Board would send the qualifications of preselected consulting firms and the proposed draft contracts for services costing over US$100,000 for Bank approval prior to any commitment. Minor services up to and including the above limit would be procured directly. A small computer and terminals (US$0.5 million) included in this project component would be bulked and procured under ICB.

Rail Improvement

3.24 The alteration of about 2,000 boxcars (US$10.5 million) would be arranged under competitive bidding advertised locally and in accordance with local procedures, acceptable to the Bank, because this is essentially a repair job. The work would most likely be distributed among several contractors and it is expected that at least 50% more quotations would be obtained than contracts expected to be awarded, to assure adequate competition in the bidding.

3.25 Silo access lines (US$4.2 million), the interline rail connections (US$2.2 million), the small hump in Bahia Blanca port (US$0.4 million) and improvements for rail marshalling yards in Rosario port (US$2.9 million) would be procured through force account by FA, with assistance of sub-contractors. Procurement and installation of weighbridges, scales, unloading ramps and other minor improvements in the ports of Bahia Blanca, Rosario and Buenos Aires (US$0.6 million) would be handled by the Project Executing Unit and procured under competitive bidding advertised locally in accordance with local procedures acceptable to the Bank.

Pilot Dredging

3.26 Consulting services and related equipment for the survey and channel design (US$2.1 million) would be selected in accordance with procedures and retained on terms and conditions acceptable to the Bank. Because of the highly specialized nature of this work and the absence of experienced Argentine firms in this field, it is likely that only foreign firms would be invited, but they would be required to associate with local consultants of their choice, to participate in the work. The dredging work (US$1.7 million) would be subject to international competitive bidding, in accordance with the Bank's Guidelines on Procurement. Assurances were obtained at negotiations that SEIM would proceed with procurement in accordance with the foregoing.

F. Disbursement

3.27 The Bank would disburse Loan funds over a period of four and one-half years, as follows: - 20 -

(a) 37% of total expenditures for civil works for the construction of silos;

(b) 37% of total expenditures for contracted mechanical/electrical works;

(c) 37% of total expenditures for consultants services for engineering and supervision and management procedures and training;

(d) 37% of total cost of rail improvements procured locally;

(e) 100% of foreign cost of computer equipment purchased under ICB from foreign suppliers; and

(f) 71% of the total cost of the pilot dredging component, for consulting services, related equipment and dredging.

Disbursements would be made against normal documentation duly certified by the Project Committee for (a) through (e) and by SEIM for part (f).

3.28 In accordance with the above and the estimated implementation schedule (Annex 6), the schedule of disbursements is estimated as follows:

Project Year Source of Financing 1978/79 1979/80 1980/81 1981/82 1982/83 Total ------(us$ Million) ------

IBRD 3.7 19.0 40.7 32.7 8.9 105.0 Grain Board 2.3 20.0 52.2 38.4 11.4 124.3 Private Banks - 5.0 15.2 15.0 1.3 36.5 FA 0.1 9.8 3.3 - - 13.2 Government 0.7 0.2 0.1 - - 1.0

Total: 6.8 54.0 111.5 86.1 21.6 280.0

IV. DEMAND AND MARKET ASPECTS

A. Effective Export Demand

4.01 Much of Argentina's trade in coarse grains has been directed toward the developed countries, particularly Western Europe and Japan, which accounted for roughly half of such exports in 1975. The balance has been distributed widely, with destinations varying from year to year, reflecting fluctuating needs in individual countries, rather than sustained and continuing markets. This is particularly true of wheat whereby less than 20% of Argentina's exports in 1975 went to the developed countries which have been traditional wheat importers. - 21 -

4.02 The inference from the current distribution of export markets is that a major market development program should be undertaken by Argentine grain interests to establish continuing outlets and to merchandise the pro- jected increase in export supplies, roughly estimated at about 6 million m tons of wheat and about 17 million m tons of corn and sorghum by 1984/85. Since so much of the Argentine grain export trade is now in the hands of multinational companies, which quite normally sell grain on optional-origin contracts (i.e., for sorghum, it could come from Argentina, United States or Australia, whichever was most profitable to the trader at a particular time), such a promotional program should be undertaken by distinctly "national" entities, independent grain companies, cooperatives and, particularly, by Government departments or agencies. The objective is to make the buyer look to Argentina as a reliable supplier of at least part of his grain needs, on the basis of price, quality and shipping performance.

4.03 Argentine markets in the developed countries can be maintained at recent levels, but may not expand materially because of the strong competi- tion from other well-established exporters. The obvious outlets for additional export supplies are in the developing countries, where import needs will be the greatest, and growing. Recent studies 1/ indicate that by 1985 the developing countries will have a food grains gap of approximately 75 million m tons, or some 40 million m tons in excess of their 1974 import requirements. This level of need allows for an increase in per capita grain consumption from approximately 176 kg to 192 kg in grain equivalent, additional demand due to population growth and some improvement in income levels.

B. Demand for Project Storage Facilities

4.04 During marketing year 1976/77, Argentina produced about 31 million m tons of grain, of which 14 million m tons corresponded to winter crops and 17 million m tons to summer crops. By 1984/85 the Secretariat of Agriculture is forecasting a total production of about 38 million m tons and exports of about 23 million m tons. This expected increase in production would require additional grain storage and conditioning facilities not only to provide incentives for producers to grow grains but also to avoid deterioration of grains and depressed prices at harvest time.

4.05 The project facilities would be primary silos directly serving the producer by receiving, conditioning, fumigating, storing and shipping grains generally at a cost slightly lower than existing rates. The use of project silos is virtually assured because: (a) Government policies are providing producers with incentives to grow more grain; (b) the silos would permit pro- ducers to avoid deterioration of grains due to late harvesting and/or inade- quate storing; (c) they would also allow owners of the grain to retain a

1/ World Bank Working Paper No. 247, November 1976. "Developing Country Food Grain Projections for 1985." - 22 - certain volume in storage during and immediately after harvest time and there- by receive a high price for the grain; (d) they would also receive special service from FA through the use of block trains at rates reflecting the im- provement in the transport of grain, which are already in use by FA and large grain merchants; and (e) they would be located in areas of large storage and conditioning deficits.

4.06 The determination of proposed project silo sites (Map IBRD 13012) is based on the results of a network flow model and on the results of studies (para 6.10) carried out by the Grain Board to assess the financial viability for each silo site (Annex 7). Early indications from the model focussed attention on specific regions where storage facilities were estimated to be in greatest deficit based on a production level of 38.4 million m tons by 1984/85. The network flow model minimizes the sum of all transport, storage and grain deterioration costs including various cost penalties for port draft, export destination and various waiting times. Constraints were imposed on the maximum export of grain at each port by time period. Primary silos as well as project silos were generally limited to 2.5 turnovers per silo and a maximum of 10% of wheat production, in certain regions close to ports, was allowed to flow directly from farm to the underground storage facilities nearest that port. Finally, the area of influence (i.e., distance grain would be transported to project silos) of project silos was limited to a radius of 100 km. Results indicate that about 10 million m tons of addi- tional storage facilities in the aggregate would be economically justified by 1984/85. This deficit is expected to be covered, in part, by the project providing 2 million m tons and, in part, by the private sector providing about 5 million m tons of grain storage capacity. The project was limited to 2 million m tons as a first phase of a longer term storage program due to (a) the capacity of the grain subsector to absorb efficiently this additional storage and (b) administrative constraints within the Grain Board to operate or lease more than 2 million m tons of new storage.

V. TECHNOLOGY AND PRODUCTION SPECIFICATIONS

A. Grain Storage and Controls

Grain Storage

5.01 The project would introduce a number of new developments in tech- nology into the Argentine grain marketing system which would extend beyond the immediate benefit of providing urgently needed primary grain storage and conditioning facilities in the specific silo locations.

5.02 One innovation is the introduction of large silo units. At present, roughly 80% of the primary elevator facilities in Argentina have a capacity of 5,000 m tons or less. They have been developed essentially to serve small local communities, and particularly for conditioning grain--drying, cleaning, fumigating--rather than storage. Many of the units are made up of - 23 - a series of small metal silos, which could be readily added to as local demand required and finances permitted. Because most of the revenue from these facilities arises from conditioning grain, the trend has been to concentrate on drying equipment rather than on storage. The project silos will establish, at the primary level, storage facilities of a size which would allow for quite a substantial reduction in storage costs and, at the same time, provide a better balance between capacity to condition grain and capacity to store it.

Regulation of the Trade

5.03 The project would also help introduce a more sophisticated system of supervision and inspection of the grain trade, particularly in the primary sector by training a group of primary silo inspectors who would help control abuses in the system. At the present time, there is little supervision, and producers are in a disadvantageous position vis-a-vis country merchants, who take in grain very much "on their own terms." The merchant's receiving scales are rarely, if ever, checked. He assesses dockage (foreign material content) in samples which are taken by his own employees. He determines the moisture content, in most cases, on which volume discounts and drying charges are based. His stocks are never monitored against purchases and sales. All these practices leave great opportunity for abuses at the expense of the producer, and the proposed system of regulation and inspection would go a long way toward correcting the situation.

B. Grain Transportation

5.04 The project silos would have efficient rail loading facilities, which would allow a continuous movement in block trains. Given the projected throughput of each silo (para 7.01), one or more complete trains would be required each working day to maintain an even flow of grain and maximize efficiency. It is anticipated that the railways would allocate complete trains to the project silos for a continuous shuttle service to the ports. While the "unit" train concept cannot be utilized with existing rail track and rolling stock and the receiving facilities at port silos, the shuttle concept with block trains and uniform grain cars on a continuous run basis would greatly reduce loading, transit and unloading time.

5.05 The project would also improve the inventory control system, initially for the operation of the new silos, but later to be extended to all primary elevator facilities. The major benefits of such a system would be to provide more positive control over the movement of grain by rail and optimal use of storage capacities. - 24 -

VI. PROJECT IMPLEMENTATION

A. Government

6.01 The borrower would be The Argentine Republic; proceeds from the loan for silo construction, railway improvements, management procedures and training would be channeled to the Grain Board, which would be the execut- ing agency for those components but would make available to FA those proceeds of the loan to undertake the railway improvements; and proceeds from the loan for pilot dredging would be channeled to SEIM, which would be the executing agency for only that component.

B. Grain Board Organization and Operation

6.02 The Grain Board was chartered in the early 1930s as a result of the depression to promote production of wheat, corn and linseed by offering support prices to farmers. It underwent several changes over the years, but its current structure and functions date essentially from 1963 when it was reorganized and most laws related to grain marketing were updated. From 1974 to March 1976, the Grain Board was the sole buyer and exporter of the major grains: wheat, corn, sorghum and sunflower, with a price support function for most of the remaining grains. In March 1976 the grain trade was liberalized and the Grain Board returned to a price support function as a buyer of last resort.

6.03 The Grain Board fulfills the following basic functions:

(a) controls all transactions involving grain. It formulates and enforces policies and regulates marketing systems related to all aspects of grain marketing and is authorized to inspect regularly all facilities for receiving, condi- tioning, storing, and shipping grain;

(b) intervenes directly in the marketing of the basic grains if Government considers this advisable to support production or regulate the market; and

(c) administers the public network of port elevators, silos and other complementary facilities.

6.04 The Grain Board has five managerial divisions and 19 departments, with the Elevator Operation Division being by far the largest (Annex 8). It administers 28 port elevators and 81 field silos and employs about 4,700 persons of the total Grain Board work force of about 6,000.

6.05 A proposal on the establishment of a Grain Elevator Company, which would be, in fact, comprised of the Elevator Operations Department of the Grain Board and the DNCEG of the Secretariat of Public Works and Transport, is now under discussion both within and outside Government. The purpose of - 25 - the SAE would be to construct and operate grain elevators in the ports as well as at the primary level. It appears that there will be no early decision on its outcome due to the intensity of the debate and due to the necessity to re-evaluate all the assets of the Grain Board before the SAE can be constituted. In the event that the SAE is established and designated by Government to undertake silo construction, railway improvements, and training components of the project, the Bank would need to approve the SAE and an amendment to the Loan Agreement would be agreed prior to transfer of responsibility for project execution from the Grain Board to the SAE.

Grain Silo Construction

6.06 Major repair work on the Grain Board port installations and silos as well as construction of new facilities is carried out by DNCEG. Its organization comprises a branch of the Secretariat of Public Works and Trans- portation, although it works exclusively for the Grain Board. DNCEG's total staff is about 100 persons, including engineers, draftsmen, and technicians. The DNCEG is well organized and experienced in the design of silos and in the work of preparing specifications, bidding procedures, evaluation of bids, contracting, and supervision of construction. The DNCEG has gained consider- able experience over its 40 years of operation and, at present, has under construction two primary elevators totaling 20,000 m tons of storage capacity and four port elevators totaling 137,000 m tons capacity (80,000 in Rosario, 20,000 in San Pedro, 12,000 in San Nicolas and 25,000 in Buenos Aires). A port facility in Barranqueras for 80,000 m tons is also in the initial stage of construction. However, the technical staff of DNCEG has been depleted lately due to overall Government policy to decrease civil servants and there- fore there is need for additional professional staff as well as consulting engineers to implement the project silo program.

Sources of Financing

6.07 According to its charter, the Grain Board is funded by the proceeds from a tax on grain exports up to 2% on the FOB values and 1% on the value of the grain processed for domestic consumption. As the Grain Board derives substantial income from the fees charged for the use of its port elevators, silos and other services, it is at present only collecting tax in the amount of 1% on grain exports, which, in addition to its other income, has placed it in a comparatively healthy financial situation in spite of the inflationary pressure of the last years, as shown in the Balance Sheet and Profit and Loss Statement of the Years 1974-75-76 in Annex 8. The DNCEG is also funded by an additional tax on the FOB export value of grain amounting to 1.5%, which has enabled it to finance adequately construction of silos and major repairs for the Grain Board. - 26 -

C. Project Management

Project Committee

6.08 The Grain Board is an experienced institution, financially sound, and capable of carrying out the proposed project. The Government would set up a Project Committee within the Grain Board to take full responsibility for the execution of silo construction and railway improvements, including approval of all expenditures and making of technical decisions. Assurances were obtained at negotiations that the Project Committee would consist of four representa- tives of the Grain Board, two representatives each of the Secretariat of Agriculture and DNCEG and one representative each of FA and the Secretariat of Economic Programming and Coordination. The chairman of the Committee would be the Undersecretary of Agriculture and, in his absence, one of the representatives of the Grain Board. The establishment of the Project Committee would be a condition of Loan effectiveness.

Project Executing Unit

6.09 The Grain Board and DNCEG would continue operating under existing arrangements in carrying out the construction of project silos, which will comprise virtually the total activity of DNCEG during the second through fourth years of project implementation. A Project Executing Unit, under the authority of the Project Committee, would be established and would be responsible for carrying out the Project Committee's decisions and for handling the day-to-day management of silo construction and railway improvements. It would be staffed by three representatives of DNCEG, three of the Grain Board and one of FA and technically supported by general consultants and engineering consultants. A Project Director, who would be the chairman of this Unit, would be appointed from the staff of DNCEG. A condition of Loan effectiveness would be the establishment of the Project Executing Unit, which would have the following functions:

(a) selection of engineering consultants;

(b) preparation of detailed design of silos;

(c) preparation of bidding documents and evaluation of tenders;

(d) supervision of construction;

(e) arrangements for payment of contractors and equipment suppliers and application of cost adjustment to contracts;

(f) preparation and periodic updating of the overall budget for engineering and construction expenditures;

(g) start silo operation and trial runs to ensure that guarantee clauses are met; and

(h) preparation of quarterly progress reports. - 27 -

Selection of Silo Sites

6.10 The Grain Board has undertaken studies of the 20 proposed silo loca- tions with reference to production forecast, existing and planned expansion of primary silos and demand for more storage, in order to confirm that project silos would have sufficient grain throughput and storage to ensure the financ- ial viability of individual silos. A financial analysis has been carried out of all proposed project silo sites for this purpose (para 4.06). Assurances were obtained at negotiations that the Government would ensure that the Grain Board and FA would acquire the land as needed for the construction of project silos and rail access tracks.

Lease Contracts

6.11 It is the policy of the Grain Board to return the grain trade and handling to the private sector in the short term. In line with this policy, the Grain Board would attempt to lease project silos to qualified groups of operators, who would agree to operate them as primary facilities to receive grain for purchase or for storage; to dry, clean and fumigate grain as required; and to merchandise it privately or on consignment on the domestic market or on the world market through grain exporters. Invitations to bid for leases would be called gradually to gain experience. Assurances were obtained at negotiations that the lease contracts would be for one to three years from the start of silo operations, with an option to purchase the facility. In order to stimulate competition and to provide as wide an opportunity as possible to operate large-scale silos, the Grain Board would not lease or sell more than one silo to any lessee or purchaser. If the lessee enters into a purchase contract during the initial leasing period, the lease fees paid up to date of the purchase contract would be applied against the purchase price. In the case of project silos sold for cash, the Grain Board would either prepay the corresponding portion of the Loan or would use the proceeds from the sale to finance the construction of new, large scale primary silos subject to Bank approval. In the case where the Grain Board finances a buyer for part of a silo, the purchaser will be required to take over the proportionate part of the Bank Loan outstanding at the time of sales which is attributable to construction of the silo he is buying. He will also be required to repay this part of his debt within the time remaining in the life of the Bank Loan for the project, assuming also the foreign exchange risk. Assurances were also obtained that a project silo that was not leased immediately after its construc- tion is completed would be operated by the Grain Board, with a trained silo manager and trained supporting staff. The Grain Board would grant an annual license of the project facility for operation as a public elevator, but prior to issuance of license, the lessee would furnish security to the Grain Board, by bond, for the performance of all obligations as specified in the terms of the lease and for the payment of all sums that may become due under any contract by the licensee relating to his operation of the elevator. Assurances were obtained at negotiations that pro forma lease contracts would be submitted to the Bank for review prior to signing by lessees. Suggested terms and condi- tions for leasing project silos are in Annex 9. - 28 -

Railway Improvements

6.12 The railway component of the project would be carried out by FA except for the construction and installation of the offloading ramps for converted boxcars and trackage within the project silo area which would be carried out by the Grain Board. Assurances were obtained that the Grain Board and FA would carry out all necessary tests prior to installation of hinge doors on both ends of 2,000 railcars for unloading grain and of construction of all proposed unloading ramps. Assurances were also obtained that the Grain Board would enter into contractual arrangements with FA to ensure that FA would provide the necessary locomotives and railcars for transporting grain from project silos directly administered by the Grain Board to the various ports at rates which reflect the improvements in the transport of grain.

Management and Training

6.13 The Grain Board would be responsible for developing the inspection and supervision program and inventory control system and for training project silo managers and supporting staff.

Pilot Dredging

6.14 The pilot dredging component of the project would be carried out by SEIM, assisted by consultants. The contract for dredging would be admin- istered by the National Directorate for Construction of Ports and Waterways, an agency of SEIM.

D. Construction Schedule

6.15 Project silos would be constructed over a three-and-a-half-year period following a 12-month period for design, engineering and contractor selection, as shown in the Construction and Implementation Schedule in Annex 6. The design phase is expected to start in May 1978, while construction would start in May 1979. All project silos would be operational by November 1982. Most of the railway improvements, including boxcar alterations, would be carried out during the second year of project implementation. The improve- ments of Grain Board's inspection and supervision operations and inventory control system would be introduced during the second and third years. Train- ing of silo managers would begin during the third year and continue until the end of the implementation period. The contract for consultant services on the pilot dredging component would be awarded by mid-1978 and would be awarded by mid-1978 and would take 28 months; test dredging would begin about the first quarter of 1979.

E. Accounts, Auditing and Reporting

6.16 The Grain Board's accounting system for its service activities is satisfactory, and, under Argentine law, accounts are audited by the General - 29 -

Accounting Office of the Treasury on a quarterly basis. Assurances were obtained at negotiations that the annual audit reports would be sent to the Bank within four months of the close of the Grain Board's fiscal year.

6.17 To facilitate supervision of the silo construction, railway improve- ments, management procedures and training, assurances were obtained at nego- tiations that the Grain Board would maintain separate accounts for the project for recording funds withdrawn from the Bank loan and from other sources, and for all other transactions. For the pilot dredging component, assurances were obtained at negotiations that SEIM would maintain separate accounts for the component, for recording funds withdrawn from the Bank loan and from Government.

6.18 Assurances were obtained at negotiations that the Grain Board would prepare and submit to the Bank quarterly reports on all project components except pilot dredging, for which it would be the responsibility of SEIM to prepare and submit to the Bank bi-monthly progress reports.

VII. FINANCIAL ANALYSIS

7.01 Operation of the project silos would be a financially viable enter- prise. The financial models show costs and income of the following, under different ownership arrangements: (a) buyer of the silo; (b) lessee; (c) Grain Board as lessor; and (d) Grain Board as silo operator. Under lease contract or purchase of silo, the financial models assume that a unit would reach an annual turnover of 2.5 times its capacity of 100,000 m tons in the third year of operations. Annex 10 contains a detailed project silo model associated with a flow diagram showing the throughput of the silo and the ownership of the grain entering and leaving the silo. The turnover rate of 2.5 times is considered conservative as primary type of silos, privately owned, operate frequently at higher turnovers, given the acute shortage of storage space. With this volume, and charging tariffs for grain conditioning and storage just slightly lower than current rates, a silo would yield a financial rate of return of 18% on an investment of US$10.9 million per silo, including physical contingencies and 8% interest during construction. Provided a silo is purchased by a firm and the buyer contributes 20% of his own funds as equity, the margin on the operations is sufficient to allow amortizing his debt at 8% interest over eight years. Working capital requirements for purchase of grain by lessees would come from their own resources and the private banking system.

7.02 A silo operated by the Grain Board would be expected to reach an annual turnover of two times capacity. The silo would charge a commission of, at least, 5% on services rendered, and collect, at least, US$1 equivalent per m ton shipped by block trains (para 6.12). As the Grain Board would not take title to the grain stored in project silos, it would not benefit from price increases on grain held in storage. These benefits would go instead to producers, grain merchants, cooperatives and exporters, who would be the users of the silos. The expected financial rate of return to the Grain - 30 -

Board would thus be about 10%. Assurances were obtained at negotiations that the Grain Board would levy such leasing fees or direct charges for services as would enable it to earn an average annual financial rate of return of about 10% on the capital invested for the construction of the silos. Assuming that the Grain Board would operate half of the project silos and lease the other half, it is estimated that the Grain Board would have a satisfactory project cash flow (Annex 10).

7.03 In the case of leasing, similar operating conditions would yield a profit (before income tax) of US$860,000 annually to the lessee, after the payment of a yearly lease fee of US$1,700,000 to the Grain Board. Although the fee would be lower during the first two years of operations, income from leasing would yield the Grain Board a reasonable financial rate of return on its investment. A summary of data on estimated net income under (a) lease contract to lessee and Grain Board; (b) purchase of facility by lessee; and (c) operation by Grain Board of a 100,000-m-ton silo is given in the following table.

Under Purchase Under Under Lease Contract by Lessee Grain Board Lessee Grain Board Owner Operation ------(us$ '000) ------Investment Cost 1/ - 9,500 10,900 2/ 9,500 Annual Total Gross Income at Full Development 22,443 - 22,443 1,865

Annual Total Operating Costs 19,883 - 19,883 497

Annual Net Income at Full Development (before taxes) 860 3/ 1,700 4/ 2,560 1,368

Annual Debt Service 5/ - 920 1,500 920

Annual Net Income After Debt Service and Income Tax 602 780 6/ 560 448

Annual Net Income After Full Amortization and Income Tax 602 1,700 1,900 1,368

Financial Rate of Return (%) - 12% 18% 10% (before interest)

1/ With physical contingency, without price contingency. 2/ Includes interest during construction as buyer purchases silo during fourth year of construction. 3/ Net income to lessee after lease payment of US$1.7 million to Grain Board. 4/ Lease payment to the Grain Board. 5/ Equity contribution of Grain Board, 48%; of owner, 20%. Annual debt service used was annual average during 6th through 9th years of project implementation. 6/ Grain Board would not pay income tax. - 31 -

VIII. ECONOMIC ANALYSIS

A. Benefits

8.01 The proposed investments would result in economic benefits to the country of over US$70 million annually at full development (the eighth year after the beginning of the project). Benefits would accrue in form of (a) higher export prices for the portion of grain stored over a period of time; (b) availability of additional storage facilities which would help reduce grain losses due to lack of storage; and (c) reduced distribution costs, including vehicle waiting time; grain transport and handling costs; and interest costs on grain in transit. Due to the experimental nature of the Bahia Blanca pilot dredging, its benefits have not been quantified (para 2.26). For a detailed breakdown of these benefits, see Annex 11.

Improved Export Prices

8.02 By increasing storage facilities, the project would encourage hold- ing grain in anticipation of higher export prices during the post-harvest season. The historical differential between the harvest time price and average annual export price has been 10% for corn and sorghum and 15% for wheat and oilseeds. Allowing for the fact that even with adequate storage facilities, the farmers would continue to sell a substantial portion of their crops immediately after the harvest to pay off financial obligations, only one-half of the grain handled by project silos is expected to benefit from an improved export price differential. Higher export prices should be partially reflected in higher farmgate prices, which would provide incentives to increase produc- tion, given the relatively high supply elasticity among Argentine farmers. At full development, the annual benefits due to improved export prices are esti- mated at US$41.2 million.

Reduced Grain Losses

8.03 Grain losses due to the lack of storage are estimated to affect 70% of corn and sorghum expected to be stored in project silos and would average 7.5% of their respective FOB prices. The availability of expanded storage facilities provided by the project would eliminate these losses, amounting to US$16.6 million annually.

Distribution Cost Savings

8.04 The project would lower grain distribution costs but the amount of savings would vary from silo to silo, depending on the distance between them and the ports and on the improvement of reception facilities in different ports financed by the project: - 32 -

(a) Handling cost savings. The modern grain handling (loading and unloading) facilities at the project silos and improved unloading facilities at the ports would reduce grain handling costs. For the project silos using ports with improved unloading facilities, the estimated handling cost saving is US$1.42 per m ton, while for the grain shipped to other ports, the handling cost saving is estimated at US$1.15 per m ton. For the project as a whole, the handling cost savings would amount to US$6.9 million annually.

(b) Transport cost savings. The project envisages the use of block trains operating on a constant schedule between the project silos and the ports. The economic cost of rail transport under these conditions is expected to decline from US$6.50 per 1,000 m ton/km to US$5.08 per 1,000 m ton/km, generating US$2.0 million in annual transport cost savings.

(c) Waiting cost savings. Waiting costs are the costs of keeping rail cars waiting to load or unload grain. At present, over 80% of a typical grain car cycle time is spent in waiting. The reduction in waiting time would depend on which ports were used but would range from five to seven days per cycle time. The annual value of waiting time savings attributable to the project is estimated at US$3.5 million.

(d) Interest cost savings. Grain tied up in transit incurs interest cost. Interest costs with the project are expected to decline between 40% and 90%, depending on the availability of improved rail reception facilities at the ports. The annual saving in interest costs on grain handled by project silos is estimated at US$772,000.

B. Costs

8.05 Project costs for economic evaluation include physical contingencies and are based on mid-1977 price levels. Wherever appropriate, these costs have been adjusted for import duties and taxes. Salvage cost estimates were made for project components with a useful life exceeding 20 years. The adjusted value of project investment costs is estimated at US$167.6 million; operation and maintenance costs at US$5.7 million during first 10 years and US$7.2 million during following 10 years; and working capital requirements at US$54.5 million.

Economic Rate of Return

8.06 The economic rate of return (ERR) on the proposed grain silo project would be 20%. Should all costs of the project increase by 20% without increas- ing value of benefits, the ERR would be 17%; should costs increase by 10% and benefits decline by 10%, the ERR would be 17%; should volume throughput decline - 33 - by 20%, the ERR would decline to 16%; should total benefits slip by two years and investment costs maintain their original schedule, then ERR would be 15%. Thus, the project appears economically sound and justified for Bank financing.

C. Project Risks

8.07 The project does not have unusual risks but may encounter problems if grain production fails to reach forecast levels and management of the silos proves inefficient.

Grain Production Less Than Forecast

8.08 Grain production was about 31 million m tons in 1976/77, and it is expected to reach 38 million m tons under the project, which would seem a realistic target, under present policy incentives. However, if policies change adversely for farmers, production goals would be difficult to achieve. It is hoped that Government would maintain present export tax, credit and support price policies. Grain production, which determines storage demand, is also affected by (a) unfavorable weather, which would have a depressing effect on grain output; (b) world grain prices not maintaining the upward trend shown by Bank forecasts; and (c) beef prices, which, if strong, may cause a substitution of grain area by pasture.

Inefficient Management of Silos

8.09 While inefficient management might result from many factors, this risk could be reduced by leasing and/or selling the project silos to the private sector. If the silos are managed by the Grain Board, expected throughput of grain may be less than if the facility were under private management and, therefore, the returns to investment (net profits) could be less. However, under most circumstances, the enterprise would be financially viable.

Pilot Dredging

8.10 The pilot dredging component involves the uncertainties inherent in an exploration of coastal conditions where little data is available. The sequence of proposed operations is designed to minimize these risks. If the first phase of the survey by consultants indicates that physical conditions for channel deepening are highly unfavorable, the test dredging will not be undertaken and that portion of the loan will be cancelled. If it is decided to go forward with the test dredging, the work will be so located as to permit use of the pilot channels as part of the future navigation channel at Bahia Blanca. - 34 -

D. Impact of Silos on Environment

8.11 Silos would be equipped with dust collectors around the intake pits and around the outloading spouts, which would reduce dust pollution con- siderably. There would be no special noise from operation of units, and all measures would be taken to keep rodents out of the silos. All grain received would be fumigated with phostoxin tablets to minimize the impact of rodents and birds.

IX. SUMMARY OF AGREEMENTS REACHED ON LOAN CONDITIONS

9.01 During negotiations, assurances were obtained from the Government that:

(a) it would ensure that FA would contribute not less than US$13.2 million equivalent to cover the local cost component of railway improvements as required in accordance with the .project implementation schedule (para 3.21);

(b) Grain Board would be provided through taxation, export duties or other appropriate means with the necessary funds to finance its share of total project costs (US$160.8 million equivalent) (para 3.21);

(c) SEIM would be provided with the necessary funds for the local cost component (US$1 million equivalent) of pilot dredging (para 3.21);

(d) a Project Committee would be established and consist of four representatives from the Grain Board, two from DNCEG, one from FA, two from Secretariat of Agriculture and one from Secretariat of Economic Programming and Coordination (para 6.08);

(e) a Project Executing Unit would be established headed by a Project Director responsible for carrying out the Project Committee's decisions and for handling the day-to-day manage- ment of silo construction and railway improvements (para 6.09);

(f) it would ensure that the Grain Board and FA would acquire the land as needed for the construction of project silos and rail access tracks (para 6.10); and

(g) the Grain Board and FA would carry out all necessary tests prior to installation of hinge doors on both ends of 2,000 railcars for unloading grain and of construction of all proposed unloading ramps (para 6.12). - 35 -

9.02 During negotiations, assurances were obtained from the Grain Board that:

(a) the lease contract for the project silos would be for one to three years at the start of silo operations with an option to purchase the silo (para 6.11);

(b) a project silo that was not leased immediately after its construction is completed would be operated by the Grain Board, with a trained silo manager and trained supporting staff (para 6.11);

(c) pro forma lease contracts would be submitted to the Bank for review prior to signing by lessees (para 6.11);

(d) it would enter into contractual arrangements with FA to ensure that FA would provide the necessary locomotives and railcars for transporting grain from project silos directly administered by the Grain Board to the various ports at rates which reflect the improvements in the transport of grain (para 6.12); and

(e) it would levy such leasing fees or direct charges for services as would enable it to earn an average annual financial rate of return of, at least, 10% on the capital invested for construction of the silos (para 7.02).

9.03 During negotiations, assurances were obtained from SEIM that:

(a) consultants and equipment required for consulting services would be selected in accordance with procedures and retained on terms and conditions acceptable to the Bank (para 3.26);

(b) the dredging work would be contracted in accordance with Bank Guidelines for international competitive bidding (para 3.26);

(c) it would maintain separate accounts for the pilot dredging component for recording all funds withdrawn from the Bank loan and from Government (para 6.17); and

(d) it would send to the Bank bi-monthly progress reports (para 6.18).

9.04 It would be a condition of Loan effectiveness that the Borrower would have established the Project Committee and the Project Executing Unit (paras 6.08 and 6.09).

9.05 With the foregoing assurances, the proposed project is suitable for a Bank Loan of US$105 million to Argentina for a period of 15 years, including three years of grace.

January 26, 1978 - 36 -

ANNEX 1

ARGENTINA

GRAIN STORAGE PROJECT

Terms of Reference for Engineering and General Consultants

1. The Grain Board will invite proposals for services from qualified consulting firms for preparation of tender documents, including detailed design and technical specifications, for bidding on the construction of 20 inland silos. The firms would be expected to provide full supervision of silo con- struction.

A. Preparation of Tender Documents

2. The engineering consultants would be responsible for preparing all documents required for tendering of the construction contracts, including:

(a) bidding advertisement and tender invitations;

(b) general conditions;

(c) special conditions;

(d) technical specifications;

(e) all design drawings required for construction, including:

- all structural engineering designs; - all civil engineering layouts, including site drawings; and - machinery layout and specifications;

(f) instruction on the submission of tenders;

(g) form of contractor's tenders (bid form);

(h) form of construction contract; and

(i) questionnaires and qualification form as needed for qualification of contractors.

3. The above documents shall show clearly all requirements necessary to carry out the construction contracts and shall conform to accepted engineering practice for similar documents used for the grain storage construction industry. The engineering consultants shall submit all documents to the Grain Board and the Bank for consultation, review, and approval before printing such documents - 37 -

ANNEX 1

in final form and advertising them. The consulting engineer would have the major responsibility for providing clarification of the tender documents to inquiring contractors and notification of such to the other contractors.

B. Tender Documentation and Evaluation Phase

4. The engineering consultants would:

(a) obtain field information on topography of the site, including sub-soil conditions and availability and location of utilities and communication facilities, and determine their feasibility for each silo;

(b) prepare site plans showing location and orientation of the silos in relation to their surroundings, indicating location of conveyors for unloading, the head house, the processing equipment, the storage silos, the weighbridges, offices and staff accommodations, electrical substations and control rooms, approach roads and railway line connections;

(c) prepare a grain flow diagram and describe functional require- ments for civil, mechanical, electrical and other works;

(d) prepare functional specifications for civil, mechanical and electrical materials, equipment and works;

(e) prepare general specifications for civil, mechanical and electrical materials, equipment and work;

(f) prepare plan, elevation and sectional drawings and details of structural design, mechanical/electrical equipment and sewage systems;

(g) prepare technical specifications for all civil, mechanical, electrical and sanitary works for the units;

(h) prepare list of workshop machinery, laboratory equipment, spare parts, to be supplied under the contract, and their general specifications;

(i) prepare tender documents, including forms for tender, bid bond, performance bond and other guarantees;

(j) prepare contractors' qualifications questionnaire; - 38 -

ANNEX I

(k) prepare all of the above documents in draft form and submit them to the Grain Board and the Bank for review, and, on approval, print sufficient copies for issues to the intending bidders;

(1) advertise the invitation to international tender, in accordance with Bank guidelines;

(m) advise and assist the Grain Board in all legal and technical issues in connection with the tenders; and

(n) on receipt of the tenders, analyze, evaluate and make recommendation to the Grain Board for award in accordance with Bank guidelines.

C. Construction Supervision Phase

5. The construction supervision of the consulting engineers would include:

(a) inspecting machinery and materials in plants during manufacture, if it is, after consultation with the Grain Board, deemed prudent to do so;

(b) maintaining staff of on-site supervising engineers to supervise the work and performance of all civil, mechanical/electrical, and other contractors and quality control of material and equipment;

(c) reviewing and following through contractors' and suppliers' schedules;

(d) maintaining construction accounts;

(e) checking computations, preparing change orders, and examining applications for payment from contractor and equipment and machinery/electrical suppliers;

(f) advising and assisting the Grain Board, at its request, in dealing with disputes between the Grain Board and contractors in the negotiations of prices and supplies;

(g) assisting in selection of and directing auxiliary specialized services (soil mechanics, etc.);

(h) assisting in selection of and consulting with outside specialists when appropriate; - 39 - ANNEX 1

(i) upon completion of the works, furnishing of record drawings of the project "as built," and assembling catalogues, operation manuals and written guarantees required of contractors and equipment and machinery/electrical suppliers for each project;

(j) supervising the running-in and adjustment of machinery/electrical equipment and preparing "punch lists";

(k) final inspection and submitting acceptance documents; and

(1) furnishing several on-site personnel for 12 months after acceptance (warranty period).

D. Staffing

6. The engineering consultants would provide a staff in Argentina composed of Argentine and, if necessary, expatriate personnel. Argentine consultant firms would provide expatriate personnel through an association with an expatriate firm for those positions for which no qualified Argentine personnel are available. All technical personnel would have had previous experience in silo construction, and the expatriate staff members would have done previous overseas work. The nomination of key personnel of the consultants, including head of design and contract specialists, chief civil engineer, at least one silo civil engineer, and mechanical and electrical engineers, would be subject to the approval by the Grain Board. The estimated staffing require- ments are as follows:

(a) Design and Documents

- Silo Facilities Design Personnel and Contract Specialists. To perform the necessary design work and to prepare documents (estimated time required: one year).

(b) Field Staff

- Chief Civil Engineer. An engineer with previous overseas experience, particularly in contract administration; to be stationed for duration of the project (estimated time required: four years).

- Silo Civil Engineers. One engineer for each contractor; to start work from the time civil contractor is awarded contract until acceptance (estimated time required: two years).

- Site Inspectors. Chief inspector with two general assistant inspectors; one or two site inspectors per construction site; to start work from the time the civil works contractor begins mobilization until acceptance (estimated time required: two years). - 40 - ANNEX 1

- One Mechanical Engineer. To work during installation and testing of machinery (estimated time required: one year).

- One Electrical Engineer. To work during installation and testing of electrical equipment (estimated time required: one year).

- One Accountant. To maintain project accounts (estimated time required: four years).

- Short-term Experts. One for roads (estimated time required: six months); and one for rail (estimated time required: six months).

- Auxiliary Personnel. Three secretaries (one for four years, two for two years); four drivers (one for four years, three for two years); and three messengers (one for four years, two for two years).

The consultant would provide his own offices, housing, and vehicles.

E. General Consultants

7. In addition to engineering consultants, the Project Executing Unit would be technically supported by three or four general consultants hired from time to time as necessary to assist in carrying out the following tasks:

(a) prepare technical guidelines for silo designs, bidding and contracting procedures, and construction supervision;

(b) assist in the selection and contracting of firms for engineering consulting services for individual silo projects or groups of projects;

(c) review, evaluate and comment on the designs, bid documents and contracting procedures prepared (proposed) by the engineering consultants;

(d) coordinate the work of the engineering consultants and supervise their performance during all phases of their work;

(e) assist in the resolution of any technical problems or conflicts arising in the course of execution of engineering and contracting work;

(f) review and periodically report on the progress of the work; and

(g) prepare and periodically update the overall budget for engineering and construction expenditures under the project. - 41 - ANNEX 1

F. Engineering and General Consulting Cost Estimate

8. The cost of engineering and general consulting services is based on an estimate of about 5% of the total silo work. About 40%, or US$3.3 million, is estimated to be the foreign exchange component of the services, while 60%, or US$4.8 million, is estimated to be the local currency component without price contingencies.

January 19, 1978 - 42 - ANNEX 2

ARGENTINA

GRAIN STORAGE PROJECT

Terms of Reference for an Inspection and Supervision System at Level of Primary Elevators

A. Introduction

1. The primary (country) grain elevator system in Argentina is a heterogeneous mixture of type, storage capacity, efficiency and ownership of facilities. The system has developed over the years without any apparent pattern or overall plan but seems to reflect changes in the profitability of grain handling and storage on the one hand and of frequent Government policy changes on the other. The system is composed of three separate and distinct groups of facilities:

(a) those owned and operated by local cooperative associations;

(b) those owned and operated by local independent merchants; and

(c) those owned and operated by the Grain Board.

2. Grain Board facilities receive grain from producers under price support or from cooperatives and merchants for storage and there is a certain degree of uniformity in tariffs, operations and services offered. However, those facilities owned and operated by cooperatives or grain merchants operate quite independently on the basis of their own managerial decisions. There is no standardization of design, storage capacity, equipment, quality of service provided, schedule of charges applied for receiving, conditioning and storage of grain, or conditions under which grain will be accepted from producers. There is a need to establish an effective central regulatory system to standardize operating procedures in all primary facilities to protect the interest of producers who must utilize such facilities and reduce overall marketing margins.

B. Problem Areas

3. The Grain Board has wide powers under the grain law to control and regulate the trade in grain, both for internal and export operations. At present this authority is not being used effectively in regard to primary marketing operations, chiefly because the Grain Board has been the sole pur- chaser of grains during various periods, the most recent being 1974-76. It is difficult to establish a supervisory and regulatory system over facilities already in existence and operating, and for that reason it is recommended that the procedures outlined in the following paragraphs be implemented immediately with the commencement of operations of the project silos and be extended to all facilities as rapidly as trained and experienced personnel become available. - 43 - ANNEX 2

Licensing and Bonding

4. Country merchants are starting purchasing operations in areas of expanding production with inadequate facilities--i.e., where land is being converted from livestock to grain production. In some instances grain is simply put through a portable drier and then stored on the ground. Producers are rarely, if ever, paid for the grain at time of delivery. Normally they must wait until the merchant has received reimbursement from the exporter or domestic processer to whom he resells. For the protection of producers, the Grain Board should enforce and supervise a system of licensing each facility before operations commence and require the operator to be bonded in an amount sufficient to provide financial liability for all grain which may from time to time be in his care and which is not the property of the operator. The terms of the license should require minimum conditioning and storage facilities and strict adherence to regulations prescribed by the Grain Board for the operation of the facility and trade in grains.

Inspection of Scales

5. All primary facilities operate their own weigh scales on which total volume of receipts from producers is based. Such scales are subject to ins- pection (for accuracy) by the Grain Board, but there is little evidence that this form of supervision is being carried out. On the contrary, reports of short-weighing of receipts from producers were common in discussions the appraisal mission had with individuals in the production area. The Grain Board therefore should establish, as quickly as possible, an inspection team to carry out routine checks for scale accuracy in all licensed grain handling facilities.

Moisture Determination

6. Much of the grain harvest in Argentina is taken off in a high moisture condition. This is particularly true for sorghum, corn and some oilseeds, and particularly in areas of conversion from livestock to grain where harvest equipment is hired from custom operators who will not wait for crops to dry completely in the field. As a result a very large percentage of the grain must be dried immediately to avoid deterioration and all local grain merchants and cooperatives have drying equipment. Indeed, in many cases, drying is the most profitable segment of their operation. The Grain Board's technical offices will provide moisture determinations on samples submitted to them, but this requires immediate analysis when the sample is taken, which is not always feasible, so moisture content is usually deter- mined by the merchant, especially in the case of corn.

7. There is no standardization of procedures, and there is opportunity for widespread abuse by establishing moisture levels too high. The producer loses in two ways:

(a) he is charged a fee for drying based on the number of percentage points that moisture content has to be reduced; and - 44 - ANNEX 2

(b) the total volume (weight) of grain is reduced by a percentage equal to the stated reduction in moisture content. There is no check on actual reduction in moisture content.

To ensure that the producer is adequately protected in moisture determination procedures, the Grain Board should require, as a condition of license, that each operator install an approved moisture meter to take accurate readings at time of delivery. The meters should be checked and calibrated periodically by the Grain Board inspectors. Checks should also be run on moisture content as determined at time of delivery against the samples submitted to the Grain Board's technical offices for analysis.

Certificates of Deposit (Warehouse Receipts)

8. It appears to be normal procedure in Argentina for producers and country merchants, including cooperatives, to enter into a purchase and sale agreement at harvest time, and for deliveries to be made to the merchant's facilities under this agreement from time to time as harvest proceeds. Pay- ment is not made until after deliveries are completed, and the merchant has resold the grain and been paid for it. Advances are sometimes given, but at relatively high rates of interest. It is not clear who bears the risk of deterioration or loss during this period from delivery to final payments, and there is a need for specific documentation in this respect. The following procedure is suggested.

9. The Grain Board issues "Certificates of Deposit" covering grain taken into its facilities for storage, and these documents are a legal under- taking to return, on demand, a comparable volume of grain of the same grade and quality. A similar form of documentation should be introduced in the private sector with the operation of the project silos. Two basic certificates are required:

(a) a "Certificate of Deposit" covering each parcel of grain taken into the facility for storage purposes, and which is not the property of the operator; and

(b) a "Purchase Certificate" or "Cash Ticket" covering each parcel of grain taken into the facility for purchase by the operator, which would be a legal liability to pay to the producer an amount of money shown on the Certificate in settlement of the volume of grain purchased.

In both instances the grade of grain, total volume (weight) and moisture content would be shown in the Certificate. Ultimately, this same form of documentation should be a requirement in all facilities in the private sector. - 45 - ANNEX 2

Maintenance of Stock Records and Periodic Audit

10. The terms of the operating license of the project silos should require that the operator maintain complete records of all receipts of grain (copies of Certificates of Deposit and Purchase Certificates) and all out- ward shipment by railway car or truck. These records should be available for inspection from time to time by Grain Board inspectors to compare total receipts against total shipments and stocks-in-store. At least once a year there should be a physical weigh-over of stocks in store as part of the audit, to determine overages or shortages in stocks.

11. The Grain Board should establish a "tolerance" for weight losses in private sector facilities to cover normal "shrinkage" and loss in handling, and this tolerance should be taken into account in determining physical over- ages or shortages. At the present time the Grain Board allows a tolerance of 0.3% of total volume received in its own port silos.

12. Where the physical weigh-over audit indicates overages (surpluses) of grain relative to total purchases vs. shipments and stocks, taking into account the established "tolerance," such surpluses would be turned over to the Grain Board for disposal and sale (or the equivalent in funds at its commercial value) and the revenue accruing therefrom would be utilized by the Grain Board to offset field inspection costs.

13. Where a shortage in stocks is indicated by the physical audit, the loss would be incurred by the silo operator, or, if the shortage concerned stocks held for storage for the account of an exporter or producer, the operator would be required to pay to the owner of the grain an equivalent market value or the market price at time of receiving the grain, whichever is higher.

Fumigation Requirements

14. All grain received at primary facilities is subject to charges for fumigation where the operator finds evidence of infestation. Similarly, grain arriving at port silos is inspected for infestation, and segregated if necessary for specific fumigation. In addition, all grain received at port silos is fumigated with malathion on the receiving belts as a preventive sanitation measure. Because similar sanitation is not carried out at primary facilities, Grain Board inspectors should check bins on a routine basis on each visit to determine if infestation is present, and if so, to require corrective action before significant losses occur or before the problem is transferred to port facilities. Where infestation is found, Grain Board inspectors should have authority to order fumigation of a prescribed type to correct the situation, and, in severe cases, to close the facilities for both receiving and shipping grain until the condition has been cleared up to the inspector's satisfaction. Costs involved in such sanitary procedures should be for the account of the operator.

Primary Elevator Tariffs

15. The Grain Board has a schedule of tariffs applicable to its own primary facilities, and covering such costs as receiving, weighing and ele- vation, storage, fumigation, drying, and shipping out. To some degree this - 46 - ANNEX 2 schedule is followed by local merchants and cooperatives, particularly within the immediate area of Grain Board silo locations. There does appear to be a very large degree of discretion, however, on the part of most operators of primary facilities, in fixing the specific charges they demand for receiving and conditioning grain. Additionally, some operators establish limitations under which they will accept grain into their facilities--i.e., for immediate sale only, not for storage and conditioning--and these limita- tions can severely restrict a producer's marketing flexibility where the shortage of storage facilities is most acute.

16. The Grain Board should undertake a study to determine the desirability of establishing maximum tariff charges for all elevator services in the primary sector, and the level of such charges to produce viable operations for efficient units, without undue costs to the users of the facilities. They should also study the desirability of establishing and supervising the terms and conditions under which grain is taken into "public" elevator facilities--i.e., the right of the public to use such facilities for the storage of grain or for its conditioning and subsequent sale to the operator or other buyer.

C. Requirements to Set Up Inspection and Supervision System

17. All of the above problem areas suggest the need for much expanded supervision and inspection activities on the part of the Grain Board as the regulatory body under a free market economy for grain. The problem is primarily one of personnel--the employment and training of an adequate number of inspectors to carry out an effective supervisory operation. The require- ment can be broken down into two phases:

(a) selection and training of a Director and Deputy Director of Country Silo operations; and

(b) selection and training of a field staff of inspectors of about 10 to 12 individuals to be assigned specific areas of operations, with headquarters at designated technical offices. Of the field staff, two would be chosen as supervisory personnel after course completion, with their territories divided roughly on the basis of northern and southern halves of the production area.

18. The objectives of the proposed training program would be:

(a) for the Director and Deputy Director:

(i) to select two individuals, preferrably from the Grain Board's staff in existing delegations or from senior head-office employees, with several years' experience in the grain trade in Argentina, its structure and organization; with a good knowledge of Argentine grain grading and quality control and with a basic knowledge of the construction and operation of grain handling facilities; - 47 - ANNEX 2

(ii) to have these individuals perform a detailed study of regulation, supervision and inspection of primary grain handling facilities in major exporting countries-- principally the United States, Canada and Australia-- and to thoroughly familiarize themselves with Govern- ment control and regulation of primary facilities in these countries (approximately three to four months);

(iii) to report to the Grain Board their recommendations for primary elevator regulation, supervision and inspection which would best standardize the Argentine grain trade to give effective and economic service to the producer and the industry as a whole;

(iv) to draw up regulations to implement Grain Board policy arising out of the above recommendations which would be instituted 4n project silos;

(v) to draw up and supervise a course of study for inspectors which would give detailed instruction in the following fields:

(1) grading and quality control for Argentine grains;

(2) basic silo construction and operation;

(3) problems of grain infestation, detection and most effective means of control;

(4) grain weighing: construction, maintenance and calibration of scales;

(5) operation, use and calibration of moisture meters;

(6) basic audit procedures for grain documentation, checking of receiving and shipping documents, stock statements, and silo operator's application of approved charges for conditioning grain;

(7) crop forecasting and reporting;

(8) familiarization with Grain Board authority, objectives and operations, and the use of all reporting forms and procedures affecting primary elevators; and

(9) orientation lectures in grain marketing: opera- tion of the grain exchanges (Bolsas) in the major port areas; pricing of grain for country purchases; futures market operation; export pricing; ocean vessel chartering; costs involved in moving grain from "track" to FOB vessel; - 48 - ANNEX 2

(vi) to draft appropriate forms for inspection and reporting by the field staff and by primary elevator operators as may be required from time to time by the Grain Board; and

(vii) to establish territories of responsibility for the members of the staff and to direct their operations once field work has commenced.

(b) for Field Inspectors:

(i) To select a group of individuals, probably with an agri- cultural background and a minimum educational equivalent of senior matriculation, to undertake a course of study of approximately three months' duration dealing with the various subjects outlined in subparagraph (v) above.

(ii) To train these individuals to assume supervisory and inspection duties with respect to the regulation of primary elevator facilities in a specific area of operation as required by the Grain Board after the completion of their course of instruction.

D. Manpower, Facilities and Cost Estimates

19. The proposed training program would require 24 man-months of study, course preparation and instruction for the Director and Deputy Director of the Country Silo Inspection and Supervision Branch. It is proposed that the salary and travelling expenses of these two individuals be included in the cost of the proposed training program during the estimated one-year period before the Branch becomes fully operative. It is assumed that most of the instructional personnel for the training course would come from the Grain Board's own staff, and that all course costs would be local currency expendi- tures. Allowance is made for travel expenses of course instructors and Grain Board staff and for local outside experts in particular disciplines related to the project. Finally, allowance is made for salary and expenses of course participants during the instructional period until they are assigned terri- tories and are taken "on-strength" as a Grain Board employee. See Table 1 for details.

January 19, 1978 ARGENTINA

GRAIN STORAGE PROJECT

Country Silo Supervision and Inspection Officers - Training Course

Item Unit Unit Cost Foreign Exchange Local Cost Total ------(US$) ------

Director and Deputy Director: Salaries 24 man-months 1,000 - 24,000 24,000 Expenses 2 x 4 months overseas 1,800 14,400 - 14,400 Air Fare 4 round trips 2,000 2,000 6,000 8,000

Outside Instructors: Fees lump sum 5,000 - 5,000 5,000 Travel Expenses lump sum 3,000 - 3,000 3,000

Staff Instructors: Travel Expenses lump sum 3,000 - 3,000 3,000

Participants: Salaries 12 x 4 man-months 500 - 24,000 24,000 Expenses 12 x 4 months 900 - 43,200 43,200 Miscellaneous Travel lump sum 6,000 - 6,000 6,000

Supporting Staff: Two Secretaries 16 man-months 300 - 4,800 4,800

Total Base Cost: 16,400 119,000 135,400

S2X July 29, 1977 - 50 -

ANNEX 3

ARGENTINA

GRAIN STORAGE PROJECT

Terms of Reference for Improved Grain Inventory Control System

A. Introduction

1. For the crop years 1973/74 through 1975/76, the Grain Board had been the sole buyer of grain from producers under various guaranteed price programs. The grain so acquired was then merchandized in the domestic and export markets either directly by the Grain Board, or through the established export trade. In any event, the Grain Board, being the initial purchaser in the country, had inventory records of their stocks, by grain and by location, and could call these forward as required to meet sales commitments.

2. With the change in Government in March 1976, some basic changes in policy took place, which had a marked impact on the structure of the grain industry in Argentina. The grain trade was liberalized, with the Grain Board becoming simply a buyer of last resort under price support programs. Country purchases became the responsibility of local merchants who bought for their own account and resold to exporters and processors, or of cooperatives who took in grain from their members for conditioning and storage until it could be sold domestically or into export markets. The Grain Board, however, re- tained control of the operation of all port silos and in this capacity had to assume some responsibility to assure that adequate stocks were available to load vessels as they came in to pick up export cargoes.

3. One of the effect of these changes was a lack of knowledge of existing stocks, by position, to service export contracts and disruption of port and transportation facilities due to the efforts of exporters individually to concentrate their country purchases in port silos so they would be avail- able as required.

B. Problem Areas

4. Under the liberalization of the trade, there was suddenly a group of exporters actively engaged in marketing Argentine grains, and each, indi- vidually, was competing for the use of limited transportation and port storage facilities without any coordination of activities. This gave rise to a number of severe problems for the industry, the main difficulties being in the general areas of (a) rail and truck transportation; (b) forward programming of export shipments--port utilization; and (c) stock records by grain and position. - 51 -

ANNEX 3

5. These problems are related essentially to inventory control and require correlation by a central authority. The Grain Board has assumed this responsibility to some degree because of its role in port operation. As a result, some of the problems have been considerably relieved, but others still require solution. A description and recommendations follow.

Grain Transportation - Truck Movement

6. Exporters who had bought grain in the country from merchants and cooperatives to apply against overseas sales were anxious to move that grain to port position in ample time to have it available in-store to load vessels as required. The country merchants were equally anxious to move the grain out of their facilities, particularly at harvest time, so that additional volumes of grain could be taken in for conditioning and storage or sale. Also, in the early months of trade liberalization, country merchants were paid only for the grain sold to exporters after it had been received at the ports. They therefore shipped it out as rapidly as possible. Accordingly, each merchant ordered either rail or truck transport, or both, to move grain forward. The result was congestion of transport facilities, with long lines of waiting trucks and railway cars at port silos, in excess of a silo's ability to receive grain. The grain which was taken in was not necessarily the kind and grade required to meet the needs of the ships at the grain ports, however, and this, in turn, resulted in protracted delays in out- ward loading. Also, the combination of immobilized transport facilities and delayed vessel loading was costly to the economy as a whole.

7. To alleviate this particular group of problems, the Grain Board in- tervened as a "coordinator" and took the following actions:

(a) To rationalize use of port silos, it instituted measures whereby only grain that was required to meet nearby vessel loading was taken into the facility. This was achieved by imposing a system of punitive storage changes under which storage rates increased dramatically the longer the grain remained in port silo storage and became prohibitive after 60 days. 1/

1/ Port silo storage charges as of May 1977 for wheat, corn, sorghum:

First 20 days 230 pesos/m ton For 30 days 403 pesos/m ton For 40 days 691 pesos/m ton For 50 days 1,031 pesos/m ton For 60 days 1,440 pesos/m ton Over 60 days 430 pesos/m ton/day

Storage charges for oats and barley, 20% more than above. - 52 -

ANNEX 3

(b) Exporters were required, by Grain Board Resolution No. 1550/ 76, to submit to the Board weekly declarations of their country purchases, by grain, by volume, by port area to which it was to be delivered, and the delivery period required to meet vessel arrival. At the same time, by Grain Board Resolution No. 1551/76, exporters were required to make a declaration, under oath, of their export sales, showing among other things, type of grain, tonnage, and shipping period. Additionally, exporters were required to advise the Grain Board approximately 10 days before the beginning of each month and 10 days prior to the middle of each month, of the ocean vessels which would be arriving at each port to pick up grain during the succeeding two-week period, i.e., 1st to 15th of the month, or 16th to 30th of the month.

(c) Having this information of country purchases, export sales and vessel arrivals, the Grain Board was then in a position to coordinate country movement with port need. This coor- dination is not yet being exercised with respect to rail movement, although it is being achieved with respect to truck movement in the following manner: after having deter- mined a "probable" volume of rail movement of each grain to each port area for the two-week period under review, the Grain Board calculates the remaining balances required to be moved to port silos by truck to fulfill the projected shipping programs on the basis of known vessel arrivals. This volume of grain is then apportioned between the various exporters, by type of grain and port area, on the basis of a formula which takes into consideration:

(i) their respective volumes of country purchases;

(ii) their respective volumes of vessel nominations for the period under review; and

(iii) an adjustment for stocks which an individual exporter may have in store in the port silo, or to replace an exporter's stock which may have been utilized by the Grain Board in Loading an earlier vessel.

(d) Exporters are given "quotas" according to the formula allocation to move specific volumes of designated grains by truck during the period in question. The quotas are turned over to the country merchant from whom the exporter has made purchases and he, in turn, contracts' for the trucks and transports the grain. The daily move- ment is limited to the receiving capacity of the silos, and only the kind of grain required, in the volume required, is forwarded during the two-week period. - 53 -

ANNEX 3

Grain Transportation - Rail Movement

8. As previously noted the Grain Board transport office determines a "probable" volume of grain to be moved by rail for each successive two-week planning period. This figure can only be approximate in terms of volume and cannot be specific in terms of type of grain because country merchants are free to order railway cars for shipment to port silos as long as they have a sales contract with an exporter. No quotas are required and there is no limitation on the number of cars which may be ordered as long as an equivalent volume of sales contracts exists. Nevertheless, this estimate of rail move- ment is used to determine the volume of truck movement which will be required every two weeks and upon which truck shipment quotas are allocated to exporters. The system appears too loose to permit efficient inventory control or to maximize the use of the most efficient means of transportation from country positions to port.

9. The system has sometimes resulted in rail shipments to port silos beyond the capacity of the silos to receive rail cars, and loaded cars have been immobilized in port yards awaiting unloading for 20 to 30 days, thereby providing "free" storage to country merchants and exporters alike. It appears also that the railways supply cars as quickly as possible to fill country orders, but in no particular pattern. Also they are not necessarily supplied in the order in which requests have been received. Priority is given to those facilities which order complete trains and which are capable of loading them in 10 to 12 hours. Other priorities are established from time to time by the Grain Board to reflect immediate need for a particular type of grain, so only facilities having that grain available for shipment are serviced. Grain needed for import positions may be "lost in the stream," or unneeded grain may congest the system.

10. A "Means Committee," composed of Grain Board and Railway officials, meets every fortnight to consider total tonnages of grain needed at each port during the ensuing two-week period to meet vessel requirements. The Committee seems to be largely a liaison group, without decision-making autho- rity, but it does try to estimate the total tonnage of grain which will be moved by the railroads over the period under review. To make the operation more responsive to need and to increase the efficiency of utilization of existing railroad rolling stock, it is recommended that the Grain Board consider the following actions:

(a) The "Means Committee" should be formalized to the extent that firm car supply commitments can be given by the railways for specific periods of time. Since the Grain Board knows,*with some degree of precision, the requirements for each type of grain, by port, over each successive two-week period (with a 10-day lead time), a high-level liaison with the railway officials should be worked out to allow their representatives to give a specific car allocation by port, for the corresponding - 54 -

ANNEX 3

period. Quotas for rail movement, by grain, by port could then be worked out on the same basis as is now done for truck movement and supplied to the exporters who would be responsible for ordering their supplies through the country merchants with whom they have contracts. Orders for railway cars would be placed only under such established quotas.

(b) Car supply orders should designate the specific grain to be shipped under a quota. Priorities in terms of type of grain could be established by the Grain Board from time to time to compensate for any variation in programmed vessel arrivals, and the railways would supply cars first to those merchants with orders for the grain in top priority.

(c) As an interim step to improve silo unload performance, rail- ways, through the "Means Committee," should be encouraged to make up trains consisting of one type of grain car only-- hoppers, regular boxcars, or combinations--to facilitate unloading. To the extent it is feasible to do so, only cars containing the same type of grain should be supplied to each unloading track at each "spout" to maximize the use of conveyer equipment from the receiving hoppers to storage bins.

(d) Railways should maintain loaded cars to the equivalent of approximately three days' silo unloading capacity on silo trackage (yard) at all times. In the event this volume builds up due to elevator inability to accept grain in accordance with the agreed program movements, the railway would reduce its commitment accordingly in succeeding weeks until unload performance met targeted levels.

11. The essence of these suggestions is that both rail and truck move- ment of grain would be coordinated by the Grain Board for each succeeding two- week period to make maximum use of the most economic (cheapest) method and to maintain all orders for movement from the country on a current basis to avoid accumulation of unwanted grain creating bottlenecks in silo operation or the use of scarce railway rolling stock for "free" storage purposes.

Port Utilization

12. One of the major problems of inventory control faced by the Grain Board in its efforts to have stocks of grain where they are needed when they are needed arises from the fact that several exporters are competing for the use of the same facilities during the same time span without any correlation of their activities or without reciprocal knowledge of the extent to which facilities are committed. All exporters are entering into sales contracts and chartering vessels involving the use of a specific port for a specific time period, and there is a real danger that the facilities of the port may - 55 -

ANNEX 3 be overcommitted for particular periods, especially immediately following harvest. Overcommitment of this type leads to costly delays in loading ocean vessels, higher general ocean freight rates for the country, and charter-party terms which are restrictive and expensive. It seems desirable to limit this potential as much as possible and the mechanics for doing so already exist.

13. Since the Grain Board operates all port silos, it is fully informed on the practical operating capacities of each elevator under optimum and under "normal" conditions of grain movement. Statistics are available on the maxi- mum monthly throughput of each elevator on which a judgment of maximum target performance might be based. Exporters are already required, under Grain Board Resolution No. 1551/76, as stated earlier, to report, within one working day, all export sales, detailing, inter alia, loading port, tonnage and contract loading period. It is suggested that the Grain Board consider establishing monthly maximum throughput targets for each port and accepting sales declara- tions only up to that level to preclude unnecessary over-booking of port facilities. Adequate notification of port bookings would have to be given exporters to avoid contractual commitments which could not be registered and therefore could not be carried out.

14. The benefits from such a program, compared to the existing practice, are numerous:

(a) It would significantly reduce demurrage charges, which are presently implicit in many offers of grain from Argentina.

(b) It should permit a more realistic loading rate to be included in a vessel charter-party (low rates are now being used, at least in part, to extend the loading period) and thereby have a favorable impact on freight rates from the area.

(c) It would result in earlier registration of export sales contracts to avoid the danger of having a declaration of sale rejected, thereby giving the Grain Board a clearer picture of total sales commitment.

(d) It would facilitate a more orderly movement of grain to port areas, using a least-cost mode of transportation.

(e) It would tend to have the effect of spreading out Argentine export operations, a desirable development to provide con- tinuity of service to overseas customers.

Maintenance of Stock Records

15. At present, there is no comprehensive statistical information on the grain trade in Argentina which can give an overall picture of the state - 56 -

ANNEX 3 of the industry at a particular point in time. Such data, however, are essen- tial for proper planning of transportation needs, for the maintenance of ade- quate supplies for domestic consumption, and for making judgments and decisions on national policy problems related to an industry which is one of the major foreign exchange earners for the country. A statistical and inventory system has been established by the Grain Board which meets the need insofar as the Board's direct involvement in the operation of port silos is concerned, but general statistics with regard to overall stocks, grain movement, and domestic utilization are inadequate, making inventory control extremely difficult.

16. The need for improvement may be broken down into four separate categories: (a) total country supplies--acreage, yield, production and quality of new crop; (b) total marketings to primary facilities, stocks and outward shipments; (c) port movement--receipts, shipments, stocks; and (d) domestic processors' receipts, utilization, and stocks. These categories are further explained in the following paragraphs.

17. Total Supply. The Grain Board technical offices submit periodic crop reports and estimates of production covering the area which they serve. These reports are integrated with similar surveys received by the Department of Agriculture and Livestock and updated periodically. There seems to be an opportunity to make this service more timely and perhaps more accurate by including crop reporting and production estimation as specific duties of the proposed team of primary elevator inspectors (see Annex 2).

18. Primary Grain Movement. At the present time there is no reporting of grain movement through primary facilities in the private sector. Operators submit a stock statement to the Grain Board once a month, but it has historical interest only since collection, consolidation and tabulation result in a pub- lication delay of approximately six weeks. It is suggested that all primary facilities be required to report weekly:

(a) total receipts during the preceding week, by grain and grade;

(b) total shipments during the weeks by rail and truck and by destination (named port or domestic processor); and

(c) total stocks in store by grain and grade at the end of the reporting period.

These reports should be delivered to the area technical office (along with the grain samples regularly being submitted for analysis) for consolidation and telex transfer to the head office of the Grain Board. It is suggested that this reporting can be instituted in the near future, and not later than the commencement of field operations of the primary silo inspection staff. - 57 -

ANNEX 3

19. Port Grain Movement. The Grain Board has already established a daily reporting system, by telex, covering the complete silo operations of each port district, including subsidiary Grain Board installations. The information includes daily receipts by type of grain, by rail or truck; outward shipments by grain; stocks in store; vessels loading; vessels waiting; and rail cars and trucks presenting for unloading and not completed. This information is tabulated and displayed visually for operational use on a port-by-port basis. The only additional statistic which would be helpful in inventory control would be a daily tabulation of rail cars "on track" awaiting unloading in each port area (yard) and similar statistics on trucks waiting. Prompt action could then be taken to modify shipping programs by rail or truck to ensure full utilization of the elevator facilities. The railway district offices should also be encouraged to supply a daily tabulation of cars loaded in the country during the past 24 hours, tabulated if possible by type of grain and port destination. The progress of current shipping targets could then be watched on a day-to-day basis and corrective actions taken as necessary to meet port requirements.

20. Domestic Processors. These merchants should be required to submit details of grain receipts, volume processed, and stocks in store on the same basis as returns from country merchants. Such reports could be submitted directly to the Grain Board head office or to district offices for transmis- sion, whichever is most time efficient.

21. All of the above statistical data should be compiled for publication in the "Grain Board - Weekly Statistical Bulletin" now being published by the Grain Board and made available to as wide a cross-section of the industry as possible, including producers. The above measures to improve grain inventory control are all within the authority and competence of the Grain Board, in liaison with the railways. Some of the measures can be implemented in the immediate future, while others will be delayed by constraints of personnel and organization. It is hoped, however, that all reporting procedures will be established and operational from the outset in project silos and extended to other segments as rapidly as possible.

C. Manpower Equipment and Cost Estimates

22. A study would be undertaken to determine which one of two alterna- tive systems is best suited to the achievement of a necessary minimum level of inventory information and control in the presently deficient areas. The two candidate systems are:

(a) remote data entry terminals at each port, technical office and project silo for both transmitting the required data to the proposed Grain Board's central computer and assessing all data, using the computer for calculations at each facility; and - 58 -

ANNEX 3

(b) a telex link between all Grain Board technical offices and head office and between all project silos and Grain Board head office to transmit the inventory information outlined previously in this annex. The study should determine the feasibility of tying such telex reports directly into the proposed computer equipment in the Grain Board to facilitate compilation, with a view to utilizing this procedure in developing sophisticated and direct shipping order alloca- tions for rail and truck shipments.

23. The study should also investigate the practicability and desirabil- ity of eventually extending such a network beyond the suggested facilities to major primary elevators throughout the production area and determining whether additional information on individual sales and prices could be use- fully and reliably incorporated into the information flow. In any case, it is assumed that a new computer would be required in the Grain Board head office, using either system to cope with the increased data flow and for statistical calculations resulting therefrom.

24. Total base cost of the study requiring one man-year of consultants plus the computer and terminals/telex would amount to US$517,000. It is estimated that the foreign exchange component would be 67% of the total cost, with 33% the local currency component (Table 1).

November 3, 1977 ARGENTINA

GRAIN STORAGE PROJECT

Inventory Control Costs

Foreign Local Item Unit Unit Cost Exchange Component Total ------(US$) ------

Consultants 1 foreign - 6 months 5,000 30,000 - 30,000 1 domestic - 6 months 2,500 - 15,000 15,000

Expenses 2 air fare - 2 2,000 4,000 - 4,000 living expenses - 6 months 2,000 12,000 - 12,000 - 6 months 1,000 - 6,000 6,000

Equipment computer 150,000 150,000 - 150,000 terminals - 50 3,000 150,000 - 150,000 systems software - - 150,000 150,000

Total Base Cost: 346,000 171,000 517,000

July 29, 1977 - 60 -

ANNEX 4

ARGENTINA

GRAIN STORAGE PROJECT

Terms of Reference for Training of Silo Managers and Supporting Staff for Project Silos

A. Introduction

1. In order to successfully manage and operate project silos, each person employed should possess experience and knowledge qualifying him to take over his new job. However, it is expected that not all of the managers and operational staff who will be appointed to each of the 20 silos will be fully acquainted with silo operation. In order to provide the necessary require- ments of training for personnel, a program, including theoretical as well as practical training, should be organized. It is recommended that participation of the appointed project silo staff in the training program be made mandatory unless equivalent training and/or experience can be proven. Although the Grain Board is going to lease out gradually the management and operation of the silos, it is recommended that the training be organized within the Grain Board. A training program would be headed by a full-time director assisted by instructors specialized in selected subject matters and supplemented by Grain Board staff in appropriate subjects.

2. The training program should become operative at least one year prior to the completion of the first silos. It is visualized that the training of operative personnel and also of the Grain Board's own staff will be a conti- nuing need and for this reason it is recommended that the training program be established and considered as a permanent part of the Grain Board so that continuous training of new personnel and retraining for existing staff can be provided.

B. Implementation of Training Program

3. The recommended training for the appointed personnel at project silos should be divided into theoretical training at the Grain Board and practical training at existing silos. The Grain Board should be responsible for the following tasks: - 61 -

ANNEX 4

(a) establishing the program, including developing the specialized courses for each category of trainee, providing instructors for both theoretical and on-the-job training, and arranging and approving all schedules and courses for the trainees;

(b) assisting and advising the trainees in the writing of reports and operating manuals required for each trainee after the completion of the training at each on-the-job training location and arranging for training at the various silos and at other firms and agencies selected for practical train- ing and providing frequent periodic consultation and checks on the progress of the trainees; and

(c) providing the Grain Board with reports of each trainee's progress and a final written evaluation of each trainee's performance, which will accompany the trainee's theoretical and on-the-job training records. Evaluation reports and trainee records for each trainee should be submitted to the Grain Board at the end of the training program.

C. Manpower and Cost Estimates

4. The estimated budget for implementing the personnel training program amounts to US$550,000 of which about 24% would be foreign exchange costs (Table 1). The job description, the duties, and the description of the training program for the trainee classification are given in detail in Working Paper No. 4.

January 19, 1978 ARGENTINA

GRAIN STORAGE PROJECT

Estimated Budget for Implementing the Training (Two-Year Period)

Local Foreign Total ------(Us$) ------

Salaries for Local Staff: 1 Director of Training Center 24 man-months of 4,000 76,000 20,000 96,000 1 Management Specialist 24 man-months of 2,500 50,000 10,000 60,000 1 Grain Grading Specialist 24 man-months of 2,500 50,000 10,000 60,000 1 Grain Accounting Specialist 24 man-months of 2,500 50,000 10,000 60,000 1 Mechanical Engineer 24 man-months of 2,500 50,000 10,000 60,000 1 Electrical Engineer 24 man-months of 2,500 50,000 10,000 60,000

Supporting Staff:

Technical Staff 24 man-months of 1,000 24,000 - 24,000 Secretarial Staff 24 man-months of 500 12,000 - 12,000

Supplies and Equipment 25,000 25,000 50,000

Traveling 25,000 25,000 50,000

Subsistence Allowances Abroad 6 months (180 days of US$100) 8,000 10,000 18,000

Total Base Cost: 420,000 130,000 550,000

July 29, 1977 - 63 -

ANNEX 5

ARGENTINA

GRAIN STORAGE PROJECT

Bahia Blanca Pilot Dredging

1. The proposed pilot dredging component at Bahia Blanca would be coordinated with the National Transport Study being carried out by Government as a part of the Fourth Highway Project. The objectives and scope of the proposed component have been agreed in principle during a Bank mission to Argentina in August 1977. Terms of reference for the required consulting services have been prepared and cover the following:

Objectives

2. The purpose of this assignment is to assist the Government in deter- mining the technical and economic feasibility of deepening the Bahia Blanca Channel to provide access for larger vessels in Argentina's international bulk commodity trade. To this end, the consultants shall provide:

(a) an analysis of hydrographic and oceanographic conditions in the port, access channel and bay of Bahia Blanca;

(b) an evaluation of alternative channel alignments and cross- sections, taking into account (i) navigational requirements and costs of prospective patterns of grain and other bulk carrier traffic to and from Bahia Blanca; (ii) the capital cost of channel improvements; and (iii) channel maintenance costs;

(c) recommendations on the most effective and economical channel design, with preliminary engineering and cost estimates for navigational aids and channel construction;

(d) recommendations on the structure and level of user charges that could be applied to the Bahia Blanca Channel; and

(e) recommendations for a continuing program of data collection and analysis on hydraulic conditions in the bay of Bahia Blanca.

Scope and Phasing of the Work

3. The work shall be conducted in three consecutive phases (without interruptions), covering the following scope:

Phase I - Initial Surveys: this shall comprise the design and installation of a survey tower with equipment; complete hydrographic mapping of existing conditions - 64 -

ANNEX 5

in the study area; analyses of prospective naviga- tional requirements, oceanographic measurements and sea bottom testing to define alternative channel configurations; design of the pilot channels to be dredged; preparation of contract documents and assis- tance in contract award for pilot dredging; and preparation of an Interim Report.

Phase II - Pilot Dredging, Analysis and Design: this shall comprise supervision of pilot dredging operations; observation of dredged sections for a period of at least six months; further oceanographic surveys and study of alternatives for channel improvements; preliminary engineering, economic and financial analyses for the recommended navigation channel; and preparation of a Draft Final Report.

Phase III - Monitoring and Final Recommendations: this shall comprise observation of pilot channel sections for an additional period of one year and related oceanographic surveys; refinement of siltation forecasts and of economic and financial analyses; revision (if appropriate) of the navigation channel design; recommendations for future data collection and analysis on channel conditions; and preparation of a Final Report. - 65 -

ANNEX 5

4. The estimated costs of the pilot dredging component are summarized below.

Bahia Blanca Pilot Dredging

Cost Estimate Summary (US$ '000)

Local Foreign Total Currency Exchange Cost Survey and Design Contract

Professional Services 238 440 678 Equipment and Structures 310 850 1,160

Sub-total 548 1,290 1,838

Dredging Contract

Dredging Costs 375 1,125 1,500

Total Base Cost: 923 2,415 3,338

Contingencies

Physical 77 145 222 Price 60 170 230

Sub-total 137 315 452

Component Total: 11060 2730 3,790

January 25, 1978 ARGENTINA Grain Storaga Project Construction and Implementation Schedule

äay 1978lo1717 Mey.19 19791991 MDy.1980 m97 1212 12 iMa2

Dugn and spefication.

Selection td epproval of ontractora Avend of contrect Final dellgn

Mobilization

Cii work:.e e Mechanical an. i l int l Elhctrcal i tllment Pha l

RunnIn9-n and commissioning Ps p

Civil wiorks.nDji ee nDlm to V,h`nw Iinsttelment Elatricel itig llm nt Runnin ond conni.ioning f

Civil woIk te18 en 11111en el men9en el ene l coial instlment

Running4n and commissioning Phs V

Civil Work. e enm rOIna §ngi lag11111111 et manlnglie dmN:o ~.hni*el inhtallmant hIcra instelment Electricel inallment fPh.Ph-~o IVI RunniWgrin and l 7inE

Civil wiofki line§ II meleii'm inegei emil 1 IImlneiii. Mäschefnicel iniftellment Eicriu unjolw ning Ph.we V Run..ng-in avd ~o.ioovn

T,iiing PIogrem** * M*M **m

Supervision * * * * * * * * * * M *M

World B-nk-1 7658 - 67 -

ANNEX 7

ARGENTINA

GRAIN STORAGE PROJECT

Network Flow Model Determining Storage Requirements

Background

1. The Grain Board contracted with the Defense Ministry (Direccion General de Investigacion y Desarrollo--DIGID) to develop a mathematical model determining the number, type and location of additional grain storage facilities that would be desirable from an economic point of view. DIGID consultants, with some assistance from the FAO/CP preparation missions (December 1975, December 1976, March 1977), accomplished the task by a network flow formulation, but due to the difficulty of obtaining one of the standard software packages for network analysis, they were obliged to develop and program their own network model. While this model lacks the sophistication--and thus efficiency in computer time--normally found in software packages offered by the major suppliers in the US, which proves to be somewhat of a handicap in terms of the size of network and level of detail that can be encompassed, it is sufficiently efficient to be a valu- able tool in determining general locations and capacities required for storage. The model input data were then introduced to the standard network model available on the Bank's Burroughs Computer System, and this provided a more detailed evaluation of the project and additional sensitivity analyses.

Model Description

2. The simplified objective of the network flow model is to minimize the sum of all transport, storage, and deterioration costs, including various cost penalties for port draft, export destination, and various waiting time. This is equivalent to maximizing the net economic return for a given level of grain production, demand and price.

3. The network flow model is a special form of linear programming (most widely used optimizing method with mathematical formulation). The special structure of the network flow model allows the use of efficient algorithms to obtain the optimal solution, thus, permitting large networks to be analyzed at small cost and time.

4. A network flow model consists of a number of points or "nodes," each potentially connected directly to each of the other nodes by a single path or "arc." Unit cost is assigned to each arc as well as the limit on the quantity going through each arc. The problem is formulated to find how much flow would be allowed at each arc in order to minimize the total cost to bring the commodity from sink to source. In the grain storage - 68 -

ANNEX 7

application of this formulation, the source represents 35 grain producing regions and the sink represents the markets (mostly ports for export). Each node represents not only the potential site of storage but also the time of the year; thus, each arc can represent the storage of grain over a period as well as the movement of grain within a time period.

Specific Adaptation of the Model to the Project

5. Parameters. Those used in evaluating alternative project design include:

- Production (as a function of time).

- Internal consumption (as a function of time).

- Exports.

- Losses (qualitative and quantitative).

- Fixed and variable treatment costs.

- Fixed and variable storage costs (at all types of facilities).

- Amortized construction costs (of both project and non-project facilities).

- Transport costs (for each mode of transport).

- Fixed and variable loading costs (at farms, storage facilities and ports).

- Fixed and variable unloading costs.

6. Since it would not be feasible to consider each farm, mill, and silo as a node in the model, the country was segregated into 35 regions. Each region comprises a number of partidos with similar harvest times and crops, and 44 specific potential locations were initially selected for project facilities. Later, this was reduced to 27 to reduce the scope of the problem. The 17 sites selected to be dropped were those that had not been chosen as a plan for new facilities in any of the analysis so far completed. Eleven ports, four of which were treated as being at the same location, were included as nodes. Nine time periods were initially included but were later reduced to five periods for computational purposes. The entire harvest period was divided into four two-month periods and the non-harvest period was considered as one four-month period. - 69 -

ANNEX 7

7. For each geographical region, the Department of Agriculture projected production levels (by crop and time period), consumption, existing primary storage capacity, industrial storage capacity and drying capacity for 1984/85. Distances and the respective projected costs of transport over all feasible arcs (and all applicable transport modes) were also determined. Tables 1 and 2 show input costs per m ton of grain used in the model for the following parameters:

- Cost of loading (at the arc origin).

- Cost of waiting for loading.

- Cost of actual transportation.

- Cost of unloading (at the terminating node).

- Cost of waiting to unload.

- Losses in grain incurred during loading, transport and unloading.

- Fixed storage costs at terminating node when node is a new storage facility.

For storage arcs, the cost is simply the variable cost (per m ton per time period) of storage. For deterioration arcs, the cost is the average cost per m ton of grain that is expected to result from improper storage in a parti- cular time period (thus particular grain type). Arcs representing export have costs reflecting the differing desirabilities due to limited drafts of the river at the various ports for grain export and the general export destinations.

8. Network Adaptation. The 35 regions contain the following nodes: farms, existing primary storage and (potentially) new primary storage facili- ties, 27 project silos, six major existing underground silos, and 11 ports. All of these nodes are repeated over the five time periods and account for essentially all of the network nodes. Each feasible arc between these nodes is then assigned a cost based on the functional type of arc (e.g., specific distances and transport system availability for transport arcs). Table 3 provides an overview of the model structure as it applies to this particular problem and defines the nodes and arcs used to represent locations, times and flows. Since the model is an adaptation of a standardized model, there are no variable names that need to be defined; only the data serve to define this project.

9. Constraints. Constraints are imposed on the maximum export value at each port (Table 4) by time period. Existing storage facilities have only variable costs assigned to them but are constrained in each region by the amount of current storage in good condition (Table 5). Up to 5 million m tons of additional private sector primary storage is allowed to be built through - 70 -

ANNEX 7

1984/85, considered as full project development. When such storage is uti- lized, fixed costs of storage are imposed. These costs represent a weighted average of new storage and expansion of existing storage facilities. The new "project facilities" are treated in much the same fashion except that the lower unit costs reflect a different design concept. Also, for the project silos, the area of influence (i.e., distance grain would be transported to project silos) is limited to a radius of 100 km. Individual arcs were also constrained so as not to exceed a turnover of 2.5 for any silo from any single given source. No mechanism exists for constraining the net inflow from arcs treated collectively and, consequently, adjustments were made to all individual arcs to reflect the throughput. A maximum of 10% of the wheat production, in certain regions which are close to ports, was allowed to flow directly from the farm to the underground storage facility nearest that port.

10. In addition to the actual constraints, penalties were imposed at the various ports based on the available ship draft and export destination. Also, penalty costs were imposed at all ports during the periods of peak harvest to account for the port congestion that has historically occurred. The normal "mass balance" type constraints incorporated in all such network models also were, of course, included. That is, for all facilities, the total flow into the arc must equal the flow from the arc. Thus, it is assured that production equals consumption plus export plus deterioration in all cases.

Model Output

11. About 25 computer runs were made by the DIGID consultants and have been briefly described in the FAO/CP mission notes of March 1977 (Annex 11), and another 15 runs were made while the appraisal mission was in Argentina. Considerable improvement was made on the network flow model at the Bank and about 30 additional successful runs were made.

12. The two baseline runs of interest are the situation represented without project and with project at full development. The model output does not, of course, represent a projection of true future behavior but rather reflects the "optimum" economic situtation that can be achieved with the available resources. The "without project" evaluation is thus an analysis of the usage patterns of existing storage facilities, new facilities and trans- port systems that would maximize the net economic benefit to the nation. No attempt is made at this point to find a way to ensure that an individual segment of the system will have the incentive to behave in a manner that would maximize the net benefit to the country as a whole (the financial cost analyses are directed to this issue).

13. Without the project, the expansion of primary silo facilities was limited to 5 million m tons by 1984/85. Grains subject to deterioration due to lack of drying and storage are estimated at 896,000 m tons. With the project, the Grain Board would construct 2 million m tons of storage and drying capacity; under this case, it would be economically justified to expand primary silo facilities by 4.7 million m tons, such facilities to receive all - 71 -

ANNEX 7

grain without deterioration (Table 6). A breakdown of existing and new primary facilities as well as their grain throughputs are shown for the without project case in Table 7 and for the with project case in Table 8.

14. The 20 silo locations were selected on the basis of earlier model runs and adjusted by the Grain Board to reflect their experience. Table 9 shows the locations, the expected grain throughput and the composition according to winter (wheat) and summer (corn, sorghum) grains. Project silos of highest turnover would be located in General Pico, Pehuajo, Rivadavia and Catrilo, clustered mostly around the western part of Buenos Aires province and the eastern part of La Pampa province, while project silos of lowest turnover would be located in Laboulaye (Cordoba), Firmat (Santa Fe) and Avia Terai (Chaco) and these silos would hold grain for longer periods due to smaller harvests, and port congestion and would, thus, not be expected to have high turnover rates.

15. Bahia Blanca port is the only port used to capacity throughout the year, which reflects the deeper draft and larger ocean ships hauling grain. Almost all the river ports reach their throughput ceilings at different times of the year. In the without project case, about 23.2 million m tons are exported in the peak period, February-March, and, in the with project case, about 24.1 million m tons are exported over the same peak period (Table 10).

Sensitivity Analysis

16. Under conditions of a 20% decrease in the production level, grain throughput of the combined 20 project silos would decline about 20%, from 4.8 to 3.8 million m tons. If the outloading capacity of all ports were increased by 25%, there would only be a minor decrease of 5% in grain throughput of project silos. If the project silos had no cost advantage in rail transport to port facilities over the existing and new primary silos, then grain throughput of project silos would decline by about 8%, to 4.4 million m tons.

November 3, 1977 - 72 -

ANNEX 7 Table 1 ARGENTINA

GRAIN STORAGE PROJECT

Data for Baseline Project Analysis

via Network Model - Transport Associated Costs

Existing New kroJecL To: Primary Primary Subterranean Silo by TruLk by .ainr (Costs are in units of August 1976 pesos!' per ton) From:

FarM : Loading 0 0 0 0 - - Transport 2.64/km 2.64/km 2.64/km 2.64/km - - Delays 0 0 86 14 - - Unloading 95 291 166 241 - - Losses 72 72 72 72 - - Existing Primary: Loading 80 - 80 80 80 80 Transport 2.64/km - 2.64/km 2.64/km 2.64/km 1.57/km Delays 43 - 129 57 386 126 Unloading 95 - 166 241 260 260 Losses 72 - 72 72 72 72 New Primary: Loading - - 286 286 286 286 Transport - - 2.64/km 2.64/km 2.64/km 1.57/km Delays - - 129 57 386 126 Unloading - - 166 241 260 260 Losses - - 72 72 72 72 Subterranean: Loading - - - - 268 268 Transport ------Delays - - - - 120 120 Unloading - - - - 260 260 Losses - - - - 72 72 Project Silo: Loading - - - - - 194 Transport - - - - - 1.23/km Delays - - - - - 0 Unloading - - - - - 64 Losses - - - - - 72

1/ Exchange rate of $a 240 = US$1. 2/ For summer grain, an additional $a 641/ton for drying is included.

September 8, 1977 - 73 -

ANNEX 7 Table 2

ARGENTINA

GRAIN STORAGE PROJECT

Data for Baseline Project Analysis

via Network Model - Storage Costs

Annual Amortized Fixed Costs Variable Fixed Cost!! of Assumed per m ton Costs of Storage Storage Component Throughput Throughput (per m ton per Facility of Grain of Grain per month) (million of pesos)A/('000 m ton)------(pesos)2

On-farm 0 - 0 2

Existing Primary 0 - 0 40

New Primary 13.5 15 900 40

Subterranean 0 - 0 100

Project Silo 120 25 500 20

1/ Fixed cost includes debt costs, depreciation and fixed operating costs related to storage function only. For existing facilities such costs are considered sunk costs. 2/ Assumed silo of 6,000-r-ton capacity as average (60% add-ons, 40% new sites). 3/ In August 1976 prices, at an exchange rate of US$1.00 = $a 240.

November 3, 1977 ARGENTINA

GRAIN STORAGE PROJECT

A Brief Description of the Network Adaptation Utilized in this Study

Showing Number of Regions and Potential Project Facilities and Cor- responding Number of Nodes and Arcs in System.

Arcs to No. of Regions No. of Storage Exist. New Subter- To or Facilities Nodes Arcs Prim. Prim. ranean Project Ports Exports

Farm 35 105 35 122 122 15 86 - -

Existing Primary 35 175 175 100 - 70 750 470 -

New Primary 351/ 175 175 - - - 750 470 -

Subterranean 6 30 30 - - - - 35 - Project 27-1/ 135 135 - - - - 595 -

Port 8 40 40 - - - - - 40

Export 8 40 ------

1/ Number of possible locations for these facilities as seen by network flow model.

November 3, 1977 M > - 75 -

ANNEX 7 Table 4

ARGENTINA

GRAIN STORAGE PROJECT

Network Flow Model Assumption for Maximum Grain Throughput Limits for Major Grain Ports

Periodl/ Annual Port Location 1 2 3 4 5 Total ------'000 m tons ------

Bahia Blanca 1,000 1,000 1,000 1,000 2,000 6,000

Quequen 428 428 428 428 856 2,568

Mar del Plata 130 130 130 130 260 780

Buenos Aires 1,558 1,558 1,558 1,558 3,116 9,348

S. Pedro, Ramallo, S. Nicolas, V. Constitucion 1,102 1,102 1,102 1,102 2,204 6,612

Rosario 2,155 2,155 2,155 2,155 4,310 12,930

Santa Fe 555 555 555 555 1,110 3,330

Diamante 134 134 134 134 268 804

Total of All Ports: 7,062 7,062 7,062 7L062 14,124 42,372

1/ Periods corresponding to harvest times are (1) October-November; (2) December-January; (3) February-March; (4) April-May; and period (5) corresponds to the non-harvest time, June-September.

November 3, 1977 - 76 -

ANNEX 7 Table 5

ARGENTINA

GRAIN STORAGE PROJECT

Network Flow Model Assumptions for Summer and Winter Grain Production, Existing Primary Storage Facilities and Domestic Consumption in 1984/85

Existing Primary Production Domestic Storage Facilities! Region Summer Grain Winter Grain Consumption Summer Grain Winter Grain

Villarino-Patagones 45 651 66 241 106 Bahia Blanca 401 2,301 443 1,340 619 Tres Arroyos 13 726 235 884 281 Quequen 73 437 68 438 162 Mar del Plata 164 344 150 150 98 Tandil 92 91 86 140 86 Olavarria 108 300 200 183 155 Salliquelo 400 530 185 195 132 La Pampa Sur 300 487 183 198 151 La Pampa Norte 1,596 500 495 306 146 Trenque Lauquen 1,417 413 375 178 134 Bolivar 1,900 500 530 505 450 Saladillo 760 93 354 88 42 Cuenca del.Salaro 432 64 241 64 50 Gran Buenos Aires 197 3 1,754 233 415 San Antonio de Areco 630 152 409 323 200 Chacabuco 1,181 226 546 503 528 Junin 686 205 193 285 264 Gral Villegas 866 186 196 211 166 Rio Cuarto 2,241 330 623 463 395 Union-Marcos Juarez 1,600 749 1,387 727 639 Gral. Lopez 1,050 400 735 482 400 Pergamino 1,010 140 170 554 492 Ramallo-San Nicolas 457 128 57 127 119 Rosario 858 234 251 265 231 Canada de Gomez 1,961 738 918 879 821 Rio Segundo 973 119 1,007 332 340 Santa Fe-San Francisco 864 150 678 252 242 San Justo-Reconquista 404 156 314 98 76 San Cristobal-Tostado 620 50 97 50 31 Chaco Oeste 510 88 95 48 47 Chaco Este 260 45 40 21 32 Formosa 294 12 36 15 5 Tucuman, Salta-Jujuy 60 25 98 40- 15 Mesopotamia 1,786 608 123 420 294

Total: 261207 12,197 11,220 8,364

1/ The storage facilities for summer and winter grains are not mutually exclusive.

August 15, 1977 - 77 -

ANNEX 7 Table 6

ARGENTINA

GRAIN STORAGE PROJECT

With Project and Without Project Storage Capacity

and Grain Throughput

Silo Capacity Silo Throughput ------'000 m tons ------

With Project:

Project Silos 2,000 4,841

Existing Primary Silos 9,916 24,270

New Primary Silos 4,750 9,054

Total: 16,666 38,165

Without Project:l/

Existing Silos 9,916 24,764

New Primary Silos 4,994 12,503

Total: 14,910 37,267

1/ Grains subject to deterioration due to lack of drying and storage estimated at 896,000 m tons in without project case.

August 15, 1977 - 78 - ANNEX 7 Table 7

ARGENTINA

GRAIN STORAGE PROJECT

Without Project Results: Storage and Throughput in Existing Primary Facilities and New Primary Facilities and Deterioration of Grain due to Lack of Storage

Storage in Throughput Storage Throughput Existing of Existing in New of New Primary Primary Primary Primary Region Facilities Facilities Facilities Facilities Deterioration ------000 m tons ------

Villarino-Patagones 141 363 101 268 Bahia Blanca 952 2,216 104 258 Tres Arroyos 281 739 - - Quequen 225 510 - - - Mar del Plata 150 411 11 28 35 Tandil 140 183 - - - Olavarria 183 408 - - - Salliquelo 195 490 51 127 250 La Pampa Sur 198 515 91 233 - La Pampa Norte 306 873 489 1,223 - Trenque Lauquen 178 495 399 997 239 Bolivar 505 1,371 401 1,024 - Saladillo 88 220 253 633 Cuenca del Salaro 64 160 134 336 Gran Buenos Aires 233 582 - - San Antonio de Areco 323 782 - - Chacabuco 503 1,262 58 145 - Junin 285 775 - - 116 Gral Villegas 211 570 178 444 38 Rio Cuarto 463 1,158 565 1,413 - Union-Marcos Juarez 729 2,004 90 225 120 Gral. Lopez 482 1,205 92 230 - Pergamino 554 1,150 - - Ramallo-San Nicolas 127 318 107 267 - Rosario 265 684 161 402 6 Canada de Gomez 879 2,196 201 503 - Rio Segundo 332 830 105 262 - Santa Fe-San Francisco 252 630 129 322 62 San Justo-Reconquista 98 245 136 315 - San Cristobal-Tostado 50 125 194 486 Chaco Oeste 48 120 191 478 - Chaco Este 21 53 89 222 30 Formosa 15 38 107 268 - Tucuman, Salta-Jujuy 40 85 - - Mesopotamia 400 1,000 557 1,394 -

Total: 9,916 24,764 4,994 12,503 896

August 15, 1977 - 79 - ANNEX 7 Table 8 ARGENTINA

GRAIN STORAGE PROJECT

With Project Results: Storage and Throughput in Existing Primary Facilities and New Primary Facilities

Storage in Throughput Storage Throughput Existing of Existing in New of New Primary Primary Primary Primary Region Name Facilities Facilities Facilities Facilities ------000 m tons ------

Villarino-Patagones 141 363 707 268 Bahia Blanca 952 2,214 103 258 Tres Arroyos 281 739 - - Quequen 225 510 - - Mar del Plata 150 411 25 63 Tandil 140 183 - - Olavarria 183 408 - - Salliquelo 195 490 39 98 La Pampa Sur 198 495 101 253 La Pampa Norte 306 765 377 941 Trenque Lauquen 178 445 182 442 Bolivar 505 1,263 253 524 Saladillo 88 220 443 633 Cuenca del Salaro 64 160 223 337 Gran Buenos Aires 233 582 - - San Antonio de Areco 323 782 - - Chacabuco 503 1,232 - - Junin 285 775 - - Gral Villegas 211 528 32 80 Rio Cuarto 463 1,256 630 1,065 Union-Marcos Juarez 729 1,823 210 526 Gral. Lopez 482 1,250 - - Pergamino 554 1,150 - - Ramallo-San Nicolas 127 317 112 268 Rosario 265 663 62 114 Canada de Gomez 879 2,196 135 300 Rio Segundo 332 759 150 333 Santa Fe-San Francisco 252 630 149 173 San Justo-Reconquista 98 245 130 315 San Cristobal-Tostado 50 125 17 45 Chaco Oeste 48 120 320 478 Chaco Este 21 53 89 123 Formosa 15 38 211 268 Tucuman, Salta-Jujuy 40 80 5 5 Mesopotamia 400 1,000 645 1,144

Total: 9_916 24,270 4,750 9,054

August 15, 1977 - 80 - ANNEX7 Table 9

ARGENTINA

GRAIN STORAGE PROJECT

With Project Results: Storage Utilized and Throughput of 20 Proposed Project Silos, the Amount of Summer and Winter Grains Handled and the Port Destination Source of Grains Storage From Farms Utilized by Throughput of Winter Summer Port Project Silo Location Project Silos Project Silos Grains Grains! Destination ------000 m tons ------

Catrilo 100 342 - 342 Bahia Blanca Gral. Pico 100 390 140 250 Bahia Blanca, Quequen, San. Pedro, Romallo, San Nicolas, Villa Constitucion Rivadavia 100 346 193 153 Bahia Blanca, Buenos Aires Pehuajo 100 347 242 105 Bahia Blanca, Buenos Aires French 100 243 - 243 Buenos Aires Bolivar 100 243 - 243 Buenos Aires Realico 100 243 - 243 Bahia Blanca Gral Villegas 100 250 - 250 San Pedro, Romallo, San Nicolas, Villa Constitucion El Porvenir 100 194 - 194 Buenos Aires, Rosario Pergamino 100 250 - 250 San Pedro, Romallo, San Nicolas, Villa Constitucion Leones 100 250 - 250 Rosario Laboulaye 100 100 - 100 Rosario Firmat 100 100 - 100 Rosario La Carlota 100 250 - 250 Rosario Las Rosas 100 203 - 203 Bahia Blanca, San Pedro, Romallo, San Nicolas, Villa Constitucion San Francisco loci 211 - 211 Rosario La Rubia 100 250 - 250 Rosario Tostado 100 250 - 250 Rosario Gral Pinedo 10c 129 - 129 Santa Fe Nogoya 100 250 - 250 Diamante

Total: 2,000 5754,26

1/ Summer grains require drying.

January 19, 1978 - 81 - ANNEX 7 Table 10

ARGENTINA

GRAIN STORAGE PROJECT

Forecast Utilization of Major Grain Ports With and Without Project

WITH PROJECT Period- Port Location 1 2 3 4 5 Total ------'000 m tons ------

Bahia Blanca 1,000 1,000 1,000 1,000 2,000 6,000 Quequen - 428 - - 314 742 Mar del Plata - 130 - - 89 219 Buenos Aires 124 1,540 849 1,558 2,346 6,417 S. Pedro, Ramallo, S. Nicolas, V. Constitucion 647 140 1,101 866 924 3,678 Rosario 706 224 2,155 46 3,075 6,206 Santa Fe - - - - 130 130 Diamante 134 134 134 - 268 670

Total of All Ports: 21611 3,596 5,239 3,470 9,146 24,062

WITHOUT PROJECT Period-1 Port Location 1 2 3 4 5 Total ------00 m tons ------Bahia Blanca 1,000 1,000 1,000 1,000 2,000 6,000 Quequen - 428 - - 127 555 Mar del Plata - 130 - - 39 169 Buenos Aires 124 1,558 843 1,558 2,007 6,090 S. Pedro, Ramallo, S. Nicolas, V. Constitucion 538 136 1,101 1,101 603 3,479 Rosario 553 253 2,075 435 2,658 5,975 Santa Fe - - 80 34 .30 144 Diamante 134 134 134 84 268 754

Total of All Ports: 2,349 3,639 5,234 4,21 Z,732 23,16

1/ See Table 4, Footnote 1. August 15, 1977 - 82 -

ANNEX 7 Table 11 ARGENTINA

GRAIN STORAGE PROJECT

Sensitivity Analysis of Project Silos

25% Increase in Outload- Without Baseline 20% Decrease ing Capacity Improved Project Silo Location Case in Production of All Ports Rail Transport ------('000 m tons) ------

Catrild 342 236 250 250 Gral. Pico 390 290 250 250 Rivadavia 346 305 250 250 Pehuajd 347 305 250 250 French 243 150 250 240 Bolivar 243 150 250 240 Realico 243 243 250 250 Gral. Villegas 250 157 250 250 El Porvenir 194 157 250 194 Pergamino 250 250 250 250 Leones 250 250 250 250 Laboulaye 100 100 145 145 Firmat 100 100 100 100 La Carlota 250 182 250 250 Las Rosas 203 100 203 203 San Francisco 211 100 211 211 La Rubia 250 197 250 250 Tostado 250 198 250 250 Gral Pinedo 129 114 196 129 Nogoyd 250 250 250 250

Total: 4.841 32834 4,605 42462

January 19, 1978 9PORT DE,LEGATIONS5 28AORT ACLSTAN1LES TEPRIAYELEVATORs

CETEPTION EINERING~TRANSPORT DELIVERY

CONSERVATION OF

,2 N STCNICAL "lTRICTS CERTIFICATION OF QUALITY

PNUSTRAIAL

MARKET ANALYSIS

PURCHASING

O 0 o O z a g N

mm

-- O -4 0 G COMER>A COTO Z -

mc zm

CONTROL OF FACILITIES c -4 AND MERCHANOISE :D0

PR.CUREMENT

GENERAL>m ACCOUNTINGm

z

GENERIAL m SERVICESM

LEGAL MATTES

SECRETARY'S OFFH-CE

PERSONNEL

EHBTNSAND PUBLICATIONS

ORGANIZATION AND METHOOS ARGENTINA

GRAIN STORAGE PROJECT

Grain Board - Financial Statements!'

Balance Sheet (US$ Million)2!

ASSETS 1974 1975 1976 LIABILITIES 1974 1975 1976

Cash_/ 24.7 3.7 3.0 Debts4/ 7.5 17.8 16.5 Receivables- 10.2 11.4 19.4 Reserves for Future Payments- 4.2 2.5 2.3 Inventories 2.2 1.4 2.2 Amortizations 0.8 0.3 0.2 Plant and Equipment6/ 32.4 22.7 17.71 Capital and Other Reserves! 32.1 12.7 5.1 Third Parties' Accounti 66.4 85.7 84.8 Year's Profit 24.9 5.9 18.2 Third Parties' Account 66.4 85.7 84.8

Total Assets: 135.9 124.9 127.1 Total Liabilities: 135.9 124.9 127.1

1/ Grain Board's commercial operations are not included as the corresponding balance sheets for 1974-75-76 have not been approved as yet. 2/ Rates of exchange: 1974, $a 16=US$1; 1975, $a 72=US$1; 1976, $a 258-US$l. These are average yearly rates. Organization: Techint, Bs. As. Bulletin information, in general agreement with Banco Nacional data. 3/ Drop to cash and increase to receivables is due to internal transfers between the Grain Board's Commercial and Operating Divisions. During this period the Grain Board was a heavy buyer of grain and the Operating Division rendered services to the Commercial Division for handling, storing and exporting grain which were not charged as they were incurred. 4/ Increase in 1975/76 due to revaluation in Argentine pesos of the Grain Board's debt to IDB. 5/ Sundry end of year payments. 6/ Fixed assets are not indexed for inflation, investments are accumulated at actual costs, less yearly depreciation. The Grain Board is considering rendering its fixed assets. / Capital expressed in Argentine pesos that devalue constantly shows a substantial drop when expressed in US dollars. e> 8/ Mainly grain, during this period owned mostly by the Commercial Division of the Grain Board. co

November 3, 1977 ARGENTINA

GRAIN STORAGE PROJECT

Grain Board - Financial Statementsl!

Profit and Loss Statements (US$ Million)l/

EXPENSES 1974 1975 1976 INCOME 1974 1975 1976

Personnel 22.4 15.4 16.6 Handling and Storage of Grain Handlingand Storage of Grain 5.2 3.9 6.5 without Loss of Identity 18.4 11.7 21.0 Loss Administration 2.2 1.9 2.3 Storage of Grain with of Identity 20.2 11.4 18.7 Interests, etc. 0.3 0.1 0.2 Other Operating Income 2.3 0.1 0.4 Amortizations 0.2 0.1 0.1 Duties 16.9 6.5 6.8 Maintenance 0.8 0.8 1.9 Sundry 3.6 0.5 1.8 Sundry 5.4 2.1 2.9

Sub-total: 36.5 24.3 30.5 Year's Profit 24.9 5.9 18.2

Total Expenses: 61.4 30.2 48.7 Total Income: 61.4 30.2 48.7

1/ Grain Board's commercial operations are not included. 2/ Rates of exchange: 1974, $a 16=US$1; 1975, $a 72=US$1; 1976 $a 258-US$1. These are average yearly rates. Organization: Techint, Bs. As. Bulletin Information, in general agreement with Banco Nacion data.

November 3, 1977 - 86 - ANNEX 9

ARGENTINA

GRAIN STORAGE PROJECT

Terms and Conditions for Leasing Project Silos

1. The Grain Board, as the responsible authority, should issue invita- tions to bid for the leasing of project silos, to operate them as country elevator facilities to receive grain for purchase or for storage, to dry, clean and fumigate grain as required, and to merchandise it privately or on consignment in the domestic market or through grain exporters. Bids should be invited as soon as possible after construction contracts have been awarded, and not later than one year before scheduled completion of construction. Leases should be tentatively approved within 30 days of submission of bids to allow an adequate training period for management and operational personnel, and formalized upon completion of construction, installation and testing of all equipment.

2. Bids should be entertained only from legally incorporated entities subject to all rights and obligations under Argentine corporation or cooperative law. They should provide evidence, satisfactory to the Grain Board, of finan- cial viability and creditworthiness, backed by a recognized financial institution.

3. The proposed lessees would form a partnership in whose name the silo would be leased. The partnership would be comprised of cooperative, grain merchants, agricultural producers and private businessmen. None of the members of this partnership could be partners in some other enterprise; they would each have separate individual financial interests. If any two members form a new corporation while they are members of the silo lessee partnership, one of them must sell his share to an existing member(s) or a new member.

4. To attract lessees, the lease for the initial year should be minimal and payable at the end of the first year. Although contracts would run for three years.

5. Bids should be submitted on the basis of a three-year lease, with option to renew for successive three-year periods as long as the leasing terms and conditions are adhered to; however, lessees would have the option to rescind the contract with six months' notice assuming all financial objectives are met. The lessee would also have the option to purchase the facility at any time after the third year of operation on the following terms:

(a) The purchase price would be the total cost of the facility, in terms of United States dollars at the time of the formali- zation of the lease; i.e., when construction and testing of all equipment has been completed, including financing costs during the construction stage. - 87 - ANNEX 9

(b) If the lessee enters into a purchase contract within the initial three-year leasing period, the lease fees paid up to date of the purchase contract would be applied against the purchase price.

6. The lessee must undertake to maintain the facility in good working condition at all times; to repair or replace all mechanical or electrical equipment which becomes unserviceable and which is no longer covered by manufacturers' guarantee; and to permit periodic engineering inspection by authorized representatives of the Grain Board.

7. The lessee must, at all times, keep the elevator and all grain in the elevator fully insured against loss or damage by fire through a com- pany approved by the Grain Board.

8. The terms of the lease should require annual licensing of the facility by the Grain Board for operation as a public elevator and subject to the following conditions:

(a) The license is not transferrable.

(b) The lessee must comply with all regulations issued by the Grain Board with respect to the operation of a licensed country elevator.

(c) All grain received for storage must be kept within the confines of the building(s) described in the license.

(d) The lessee must maintain records, in a form satis- factory to the Grain Board, of

(i) all grain, by grade, received into, stored, or shipped out of the elevator; and

(ii) the moisture content and dockage assessed on all grain received for storage or purchased by the lessee.

(e) The lessee must submit to the Board, as required by the Board, periodic summary reports of all grain received into the elevator; whether such receipts are for purchase or storage; all grain shipped out of the elevator since the last report, and stocks of each grain remaining in storage.

(f) The lessee must submit, by a specified date each year, a return to the Grain Board showing net receipts, ship- ments and balance remaining in storage, for each grade of grain handled, covering the previous operational year; the quantities of each grain dried during the year; the quantities of each grain cleaned; and of the screenings removed. - 88 - ANNEX 9

9. Before any contract is signed, the lessee shall furnish to the Grain Board security, by bond, for the due performance of all obligations as specified 1- the terms of the lease, and for the payment of all sums that may become due under any contract by the lessee relating to his operation of the elevator.

January 19, 1978 ARGENTINA GRAIN STORAGE PROJECT 100000 M TON CAPACITY SILO MODEL PROJECTED YEARLY TURNOVER SCHEDULE

LOADED 100000 M TONS LOADED: ADDITIONAL 75000 M TONS

LOADED: ADDITIONAL 75000 M TONS 100000 MAX CAPACITY

20000 M TONS 26000 1 TC Nj 4 ,.o - 0 26 RATE OF LOADING x (1 + 3) me~-~ OGA

- OF UNLOADING 25000 P.1 TCriS

T T I

TONS 201 M TONS x4 en =O.SC M10000 ONSx4Ome-4D 10000 M TONS x 4 o=0.4D

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

COARSE GRAIN HARVEST FINE GRAIN HARVS

CORN WHEAT 75000 M TONS SORGHUM 175000 M TONS KEY. OTHER O P. PRODUCER

SUMMARY STORAGE ACCOUNT Mo. L. LESSEE P LM E SUMMARY STORAGE ACCOUNT Mo 0.5A =25000 M TONS 3 1 -- - M: MERCHANT P LM E 0.2 = 25000 M TONS x -- .4--. 0.5A 25000 M TONS 03 1 0.68 =75000 M TONS x I. -- -- O F. EXPORTER 0.2B = 25000 M TONS x 1 O.5C =2500G M TONS x -- 4-- 0.5C =25000 M TONS x 4 0.6D =150O M TONS x 1 -- 4 0.4D = 10000 M TONS x 4 -- 4 175000 M TONS

NOTES. TOTAL GRAIN THROUGHPUT: 100000 + 75000 + 75000 = 250000 M TONS/YEAR TURNOVER: 250000 M TONS : 100000 M TONS = 2.5

A: GRAIN STORED 3 mo FOR PRODUCER'S ACCOUNT AND THEN 1 mo FOR LESSEE'S ACCOUNT B. GRAIN STORED FOR LESSEE'S ACCOUNT, 60%-1 mo AND 40%-4 mo C. GRAIN STORED FOR MERCHANT'S ACCOUNT. 4 mo D: GRAIN STORED 60%-i mo AND 40%-4 mo FOR LESSEE'S ACCOUNT AND SUBSEQUENTLY 4 mo FOR EXPORTER'S ACCOUNT

World Bank - 17823 rt X H O 0

- 90 -

ANNEX 10 Table 1

GRAIN STORAGE PROJECT

100,000 m ton Capacity Silo Model 1/

Income and operating Cost Projections (to Buyer or Lessee as Operators of Silo)

Yield or Number of Cost or Units at Full Price ------

1976/77 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 Volume Data (Argentina) Development P

Total grain production 2/,million m ton -- 31.3 33.9 34.8 33.7 36.6 3. 38.4 Existing primary grain storage 2/pillion m ton -- -- 12.6 14.1 14.6 1.1 13.5 16.1 16.6 Project grain storage, million m ton -- -- 2.1 2. yearly turnover - 2.5 2.4 2.4 3.4 2.1 2.1 2.1 Estimated ------Model Year ------6-20 Voiume Data (Modei) %. of total -1-3 4 5 Silo ut ------tons -5----ut- 3 A. Grain conditioned and stored for ( 100% stored 3 mo. 20% -- -- 20,000 40,000 50,000 producer's account ( ) B. Grain purchased, conditioned, stored,) 60% stored 1 mo.) 50 -- 50,000 100,000 125,000 and sold by lessee ( 40% stored 4 mo.) C. Grain stored overflowed from existing silos owned by merchants ( 100% stored 4 mo.) 20% -- 20,000 40,000 50,000 cod coo.ps..- 000 2080 2. D. nrain stared for exporter's account ( 100% stored 4 mo.) 100% - Sub-total -.- 100,000 200,000 250,000 Yearly turnover2

Income (to buyer or lessee of silo) US$------US$ 0 ------Volume 136 170 Freight to silo (all truck) A+B+D Avg. 30 KM 0.85/n ton -- 68 Conditioning of grain:/ -- 12 Loading and unloading A+R+D 100 1.40/m ton) prices -- 112 24 280 Drying 1st stage) A+B+D 65 4.00/m ton) include -- 208 416 520 37 Drying 2nd stage)2/ A+B+D 22 0.85/m ton) up to -- 15 30 112 Cleaning A+B+D 80 0.70/n tan) 1 no. -- 45 90 Fumigating A+B+D 100 1.70/n ton) storage -- 136 272 340 Freight to port A+B+D Avg. 300 EM 4.85/m ton -- 388 776 970 Storing of grain -- -- Period Loading and unloading C 100 3 1.40/n ton 2 56 70 1 10 . 66 132 163 Storage fee (C+D 100 4m.) 1.10/m ton/mo. -- 132 264 330 Commission collected 7% on all foregoing intone -- -- 84 168 209 Conditioned grain sold: Vol. Wheat ( ) Average 20% 107/n ton ) enpected 5% -- 1,712 3,424 4,280 Cor( A + 0.6 (B+0) : 1 no. )aboot 25% 85/ ten ) price increase -- 1,700 3,400 4,250 Sorghum 0.4 (B+D) : 4 m. ) 2 months 40% 66/m ton )2 mo. aft7r -- 2,112 4,224 5,280 Other ( ) 15% 181/m ton ) harvest 2,7 --2.172 5,43 Total Income -- 8,978 17,956 22,443

Operating Costs (To buyer or lessee of silo)

Direct Costs Grain purchased: Wheat 20% 102/m ten ) -- 1,632 3,264 4,080 Corn 25% 01/n ton 8/ -- 1,620 3,240 4,050 sorghum 40% 63/n ton ) -- 2,816 4,032 5,040 Other 15% 172/m ton ) -- 0,160 Sub-total (short tern loan) -- 7,332 14,664 18,330 Direct labor: Skilled 25 persons a 12 mo. 250.-/mo. -- 60 70 75 Unskilled 10 persons x 8 mo. 200.-/mo. -- 12 14 16 Fuel (light grade) 3 kg/m ton dried 200/n ton -- 42 84 104 8 16 20 Purchased power (1 KWH/ on conditioned) 0.10 /KWH (0.3 RWH/n ton/ma. storage) -- 3 6 8 (all truck) Avg. 30 0.70/m ton -- 68 136 170 Freight: to silo KM 3 to port Avg.300 0M .88/m ton -- 310 621 776 Miscellaneous materials -- 5,000.-/mo. -- 30 50 60 Broker commission 1% -- -- 12 24 30

Sub-total -- 7,877 13,685 19,383

Indirect Costs 10/ Maintenarce, incl. materials 6 persons x 12 mo. 250-/mo. -- 30 60 92 Administration expenses -- incl. insurance 10,000.-/no. -- 100 110 120 Technical, administrative and supervisory personnel 6 persons x 12 mo. 600.-/mo. -- 36 43 43 Management 3 persons x 12 mo. 13,000.-/yr. -- 39 39 39 Sub-total -- 205 252 294

Total Operating Cost ------8,082 15,937 19,883

Net Operating Surplus (to buyer as ------896 2,019 2,560 operator of silo) Lease Payment to Grain Board ------500 1,300 1,700

Net Operating Surplus (to leasos as ------396 719 860 operator of silo)

1/ All figures correspond to one silo of 100,000-a-ton capacity, 20 silos of similar capacity would be financed under the project. Each silq would take three years to build. 2/ Source DIGID and Grain Board, excludes port silos. 1/ Yearly turnover assumed 2.5 as silo would be located in area of acute shortage of storage space. are borne by the producer. 4/ Yield losses from 7conditioning 5/ Vol. dried corn, 0%, sorghum, 907.; wheat, 20%; other, 50%. 6/ See Working Paper 11. This benefit not only includes a price effect due to storage but also includes a monetary benefit due to upgrading of grain through mixing of lower quality grains with higher quality grains, 7/ Grain purchases financed with short-term loan, see Annex 10, Table 3. 8/ Producer prices for period 1981/82, see Working Paper 12. 9/ Mainly income tax, shown in Annex 10, Table 3. 10/ Prom Working Paper 3.

November 8, 1977

- 91 -

Table 2

ARGENlNA

GRAIN STORAM PROJECT

100.000-a-ton Capacity Silo Model-

Inc~ esa OpOerating Cat Projectioas (to Grain Board as Operator of S1l21

ytld or Nomber of Unit8 at Full Cot or Price ------Yars------Vol~. Data (Argentina) Develont par Unot 1976177 1979/B0 1980/81 1981/82 1982/83 1983/84 1984/85 38.4 Total Grain Production31, willign s ten - -- 31.3 33.9 34.8 35.7 36.6 37.5 Exiting Primary Grain Storagl , sallion a toea - - 12.6 14.1 14.6 15.1 15.6 16.1 16.6 Project Graf Storae, sillion I tons - - - - 1.5 2.0 2.0 Esti-ate Y.orly Turnear - 2.5 2.4 2.4 2.4 2.1 2.1 2.1 ------model ye ar------% of Total 1-3 4 5 6-20 tons ------Voluee Data (Mdel) Silo Throughpot ------

A. Grain Conditioned and Stored for Producer's Account 100% stored 3 se. 20% - 20,000 30,000 40,000 B. Grain Conditioed aad Stored for Merchants and 60% storad 1 se. ) 5 - 50,000 75,000 100,000 Coop's Account 40% atored 4 se. ) C. Condittoned Grain Stored for merchnts tnd coop' 100% atored 4 se. 20% - 20,000 30,000 40,000

D. Grain Stored for Exporter's Account 100% stored 4 se. 10% - 10.000 15,000 20,000 Sub-total: - 100,000 150,000 200,000

Yeartly Turover: - 1 1.5 2.0

Inoes- Volue _% US$ 1-3 4 5 6-20 ------US$ '000 ------

Conditioning of Graix4/: Loading .nd Unloadi.g A+B+0 100 1.40/a too - 112 168 224 Drying lst Stage5 A+B+D 65 4.00/ too - 208 312 416 »rying 2ad Stag5/ A+lrD 22 0.85/m to - 15 23 30 Cleaning A+o+D 80 0.70/m ton - 45 68 90 F~nigating A+B+ 100 1.70/s ton - 136 204 272

Storing ef Grain: Period LoadIng and Unlading C 100 - 1.40/s ros - 28 42 56 Storage Fao A 100 3 se. - 66 99 132 C+D 100 4 se. 1.10/m to/s. - 132 198 264

C=mssinn Collected 5% mn all foregoing incos - - 37 56 74

Beneftt fron Upgraded Quality Reaulting from Mixin Grades 1% (A+B+D) 91.70/ ~6n - 73 110 147

Conission mn qh.ttle Train Service to Fort 80% (A+B+C+D) 1.00/ too - 80 120 160

Total Inca: - 932 1,400 1 865 oaetinge costa

Direct Coets: Direct Leber: Skilled 25 persons x 12 me. 250/o. - 60 68 75 U-skilled 10 perso x 8 se. 200/se. - 12 14 16 Feel (itht grade) 3 kg/ te dried 200/s ton - 42 63 84 Purchsed Po~er 1 kwh/m ton conditioned ) 8 12 16 0.5 khl/m too/s. storage 0.10/kah 3 5 6 Tiscelleous Mateiala - 5,000/se. - 30 40 50 Teaaes, Oss.- --- Sub-total: - 155 202 247

Indirect Costa: Maitentnc, including Material 6 persons 12 se. 250/se. - 30 60 92 Administration Eenses, inluding Insurase - 8,000~/. - 76 86 96 Tehnioal, Administrative and Superviory Personel 5 person: o 12 se. 600/se. - 29 29 36 Manageset 2 parsone x 12 se. 13,000/yr. - 26 26 26 Sub-total: - 161 201 250

Total Operation Cost: - 316 403 497

Nes Operating S~urplu - 616 997 1,368

1/ All figures correspond se oee ailo of 100,030-s-too cpacity, 20 silo, of sitilar capacity sud be financed under the project. Each silo roud take three years ta butld. 2/ In contrast to the buyer or the le.aee f the silo, she Grate Board wouId nt previde transportionservices; It .ould not engage In the purchse and sarketing of grain and due to lack of finaecial Locentives, it ha been suted that t would only attain a tarage turoavr of to tie a year in year 6 and o-ards. 3/ Souros DIGID nd Grate Board, gexclde port atlas. 4/ Yield lossen fron conditiming ars boee by the producer. 5/ Vol. dried: orn. 70%; sorghua, 90%; hat, 20%; othr, 50%. 6/ Average copslte saarket price for period 1981/82, aee Annex 10 and Working Paper 12. 7/ Fro Worktng Paper 3.

Septembr 29, 1977 ARGENTINA

GRAIN STORAGE PROJECT

100,000 m ton Capacity Silo Model 1/ Cash Flow Projections (Buyer of Silo) (us$ Millions)

------Years ------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Income 2/ Borrower's equit- 2.2 ------Long term loan 3- 8.7 ------. .. -- Short term loan -- - 7.3 14.7 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 Total operating income 9.0 18.0 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 Last year's cash balance ------0.5 0.3 0.3 0.3 0.2 0.1 0.1 0.1 0.1 0.1 0.A 0 1 0.1 01 0.1 O.1 Total Cash Inflow 27.3 33.2 41.0 41.0 41.0 40.9 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8 Expenditures 5/ Investments: Fixed assets 5/ 10.9 ------Working capital! grain 7.3 14.7 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 Operating costs5/ 0.8 1.2 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 Debt service Long term loan principal ------0.8 0.9 0.9 1.0 1.1 1.2 1.3 1.5 ------Long term loan interest (8%) -- 0.7 0.6 0.6 0.5 0.4 0.3 0.2 0.1 ------Short term loan principal 7.3 14.8 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 18.3 Short term loan interest (8%) 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Income Tax 6- 0.2 0.2 0.3 0.4 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 Dividends distributed 02 0.3 0.5 0.4 0.4 0.4 0.3 0.2 0.1 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 Total Cash outflow 26.8 32.9 40.7 40.7 40.8 40.8 40.7 40.7 40.7 40.7 40.7 40.7 40.7 40.7 40.7 40.7 40.7 Cash Balance at Year's End ------0.5 0.3 0.3 0.3 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

1/ J.N.G would build the silo during years 1-3 for a total cost of US$ 9.5 million plus US$ 0.1 interest during construction payable in year 2, US$ 0.5 in year 3 and US$ 0.8 in year 4, making a total investment for the buyer of US$ 10.9 million. 2/ 20% of total investment, it is assumed that the borrower would purchase the silo in year 4 and commence operations the same 3! year. 80% of total investment, amortized in eight years at 8% interest; with one year of grace. For 4/ financing purchase of grain stored an average two months, see Annex 10, Table 1. 5/ From Working Paper 3. 6/ 30% after interest charges and US$0.3 million depreciation charge, see Annex 10, Table L. oZ

September 13, 1977, ARGENTINA

GRAIN STORAGE PROJECT

100,000 m ton Capacity Silo Model

Financial Rate of Return (US$ Millions)

17 18 19 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Benefits For Buyer of Silo 22.4 22.4 22.4 22.4 22.4 Total Income ------9.0 18.0 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4

Costs ------Investments 10.9 ------19.9 19.9 19.9 19.9 19.9 19.9 Operating Costs 8.1 15.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9 0.6 0.6 0.6 0.6 0.6 0.6 Income Tax 0.2 0.2 0.3 0.4 0.5 0.5 0.5 0.6 0.6 0.6 0.6 20.5 20.5 20.5 20.5 20.5 20.5 Total Cost 19.2 16.1 20.2 20.3 20.4 20.4 20.4 20.5 20.5 20.5 20.5

Financial Rate of Return 18.2% (Before interest)

Sensitivity Analysis RO.R.

Investment + 10% 16.0% operating Cost + 10% 15.9% Income - 10% 13.3%

For Grain Board as Lessor of Silo

Benefits 1.7 1.7 1.7 1.7 1.7 1.7 Total Lease Income ------0.5 1.3 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7

Costs ------Investments 1.0 5.6 2.9 ------

Financial Rate of Return 12.5% (Before interest)

Sensitivity Analysis .

Investnent + 10% 11.0% Lease - 10% 11.0%

For Grain Board as Operator of Silo

Benefits 1.9 1.9 1.9 1.9 Total incme ------0.9 1.4 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9

Costs ------Investments 1.0 5.5 3.0 ------0.5 Operating Costs ------0.3 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Total Cost 1.0 5.5 3.0 0.3 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Financial Rate of Return: 9.9%(Before interest)

Sensitivity Analysis R.OvR.

Investment + 10% 8.7% Operating Cost + 10% 9.4% Income - 10% 8.0%

September 28, 1977 AКGENTINA

GRAIN S ¢ОеА¡Е pROJECT

GÂа1» Ве а³´

Caah F1ow Р³о l еÁеl о¿²1/

------'-'---------'--------'---------------- £еа³а -""--'-"---- ------"-- ------"--------- ------...--- ------ 1978 1979 19 В0 1981 1982 19 ВЗ 1984 1985 1986 1987 19 В8 1989 2990 1991 1992 1993 1994-97

Р³оl еÁ[ а´ Á³аl ¿ Е½оо¿ Ï (  1Æ 1 Ë , ³о¿²) 1s.0 v.o 18. о 18.0 18. а 18. о 1 е. о 18.0 1 ². о 18, о 1¸ . о IB.o 1е,0 1 ², о 1²- о 18.0 1 ¸,0

¢о¡¿1 £²1¸е ef ЕÅроºt ² (U5S 611ion) 1.42 1,81 2,07 2,07 2.07 2,07 2,07 2,07 2.0] 2,07 2.07 2-07 2-07 2,07 2.07 2,0] 2,07

-----°------°°------°°°------^--°°------Os5 ¼1111 о¿ ----°- °.°-° °----.--° °---°----_°-^-°°-----°----°°------°---°------Income

ÂаÅ о¿ Á³аl ¿ Е½роÂÁ² 1z (cnannelea chrougb ÁÂаl ¿ 8 о².´) 14.2 1B.L 20.7 20.7 20.7 20.7 20.7 20,7 20.7 20.7 20.7 20.7 20.7 20.7 20.7 20.7 20.7 ¢аÅ о¿ Gre1n 8xporte 1.5% ( Áh ²¿¿еl е´ through DNCBC) 21.1 27.1 31.0 11.0 31,0 31.0 31.0 31.0 31.0 31.0 ­1.0 31.0 31.0 31,0 31,0 31,0 31.0 ÁÂаl ¿ Bonrd Servlcee: crain handling 44.6 51.6 54. ­ 54.3 54. ­ 54,3 54.3 54.3 54. ­ 54. ­ 54.3 54. ­ ¡Âа1 ¿ a[orege 54.3 54.3 54.3 54,3 54.3 Other Ineome?/ 3.0 3.0 3.0 3-0 3.0 3,0 З. О 3.0 3.0 З. О 3.0 З, О 3.0 3.0 ­, О 3,0 З . О Funde Еоº ¡³²1¿ Stozagc ²ÂоÃеÁ[?/: Long-[ еºÂ Loan - IBBD 1.3 13.9 30,5 22.5 5. ­ ------Loca1 ª²¿k ² - 4.1 12.0 В.9 2.1 ------9 Âg е¿«1 ¿е ? _ 0.1 9.2 1.7 - - - ' - - ' - - - - - ' - Income from ÁÂа ¿ Ваа³´ Оре³аее´ о² l 5i1 (а²²¸Âе´ _ 10 ²11 о²) - - - 1,9 8.4 14,0 17.7 18.7 18.7 18.7 18.7 1В,7 18,7 18.7 18.7 1В,7 _ 18.7 Irtcome [ Âо ªеаае´ 511 о² ( аа²¸Âе´ 10 ²11 а²) - - 0.5 3.3 9-4 15.0 17,0 17.0 17.0 17,0 17.0 17.0 17,0 17,0 17.0 17.0 РÂеvl о¸² £еа³' а Áа²¬ ²аlа¿Áе 3о <ь.41 i.1 4.9 1s. ь 1_4,,_ ь ³ _о 12L· 1 _а 9,_s 1·.9 1е,_² 19,_i 1 _9 11.2 е.о 11,4 Tota1 ¡а²h I ¿flow: е].3 120.6 154. ­ 137-9 143.8 147.0 151.7 L57_0 157.5 154.9 15 В. ± 163,5 163,8 159- ¬ 155.9 152-7 156-1

ВÅ¿е¿´l[ ¸Âее

l ¿v ее³Âе¿[s: ÁаÂрl е³i о¿ ¿Е О¸ÁЕG а¿Воl ¿g ²11 о : а¿´ alavator рÂо] еÁ[ ²/ 37.0 16.3 9. ¬ ------М 1¿¿³ vnrke о¿ еºl аГl ¿g Gra1n Во²³´ fac111t1ee 11.0 12.0 13.2 ------G³а1 ¿ 5 Áо²8е PÂoJeci31 3.5 ¹3.2 В­. ¹ ±о, е 14.5 ------' - - - - - Р¸¿´² ava11a6e Ео³ ¿еv ONCEG ²11 о а¿´ elevetor р³о] еÁt ²?/ - - - - 50.0 60.0 60.0 65.0 70.0 70.0 70.0 70.0 ¸0.0 80,0 ВО . О 80.0 85.0 Ope ³ating Coete: Gra1n ео²³´ ЕаÁ111[1 е² а¿´ Ïе³vl Áе² 26.5 30.5 31.5 31.5 31.5 31.5 31.5 ­ 1.5 ­1.5 31.5 31.5 ­1,5 31,5 31.5 31.5 31,5 31.5 ¡Âа1¿ 8 оа³´ е¿´ ПИ¡ЕG ²аl а³l е² 15.0 15.5 16.1 16,1 16.1 16,1 16.1 16.1 16.1 16.1 16.1 16,1 16.1 16.1 16.1 16,1 16.1 Gra1n ¸оа´ оре³а[ е´ р³о] еÁ[ ²11 о² ( а²²¸Âе´ 10 ²11 ое) - - - 0.6 3.9 9.4 12.9 13.7 13.7 13.7 13.7 13.7 13.7 13.7 13,7 13.7 13.7 Oe6t 5ervlce: Long-term Loan Р³l ¿³l раl: IBRD6/ - - - 6,1 6.1 6,1 6.1 6.1 ¬ ,1 6.1 6.1 ¬.1 6.1 6.1 6,1 - - Ме´l ¸Â- Áе³Â Laen Р³l ¿³l раl: Loca1 ±enke / 6,9 ¬.8 6.8 ¸.7 - - - - Long-term Loan I ¿t е³е²[: 1B8D (87.) 0.1 1.2 ­.7 5.0 4.9 4,9 4.4 3.9 ­.4 2.9 2.4 2.0 1.5 1.0 0,5 - - Long-[erm Loan ¡о . CM1erge: IBRD (3/4%) 0.6 0.5 0.4 0.2 ------М е´l ¸Â- ¡е³Â Loan I ¿[ е³еа¡: Loca1 banke ( ¸7.) _ 0, ­ 1. ­ 2,0 2.2 Р1_2 1.6 1.1 0.5 ______- ¢¿Áа1 Ceeh О¸³£1 оË : 93.7 119.5 159.2 122,3 129.2 13],0 119.4 144.2 148, П 140- З 139-8 144,4 148.9 148.4 147,9 141.3 1 ¹6.3

¢оt ²1 еаl ²¿Áе ²[ £еа ' ² End87: (6.4) 1.1 (4.9) 15.6 14.6 10.0 12. ­ 12.8 9.5 13.9 1В , е 19.1 14.9 11,2 8,0 « .4 9.8

1/ ¢h1 ² caeh £1о§ е cep[1ng р³о] еÁ¡- ³еl а¡е´ flgure ² hea ¬ее¿ ¬а²е´ о¿ G³е1¿ В¸а´ valumea, lncomes а¿´ еºре¿ьеs, praJected оÇе³ che реÂ3о´ 1978-80 and remalning Áо¿·[ аn[ thereo-Eter. А11 Flgure ² еÅр³е²ае´ 1¿ conaCant  1´-19]], US:dollere, 2/ Includee lncome fram ²аl е² оЕ а²²е[ ² euch а² рÂl ²ry ²11 о² , trucke, о¬²оl еÁе equlparen[, ееÁ , 3( Excluding рÂl Áе Áо»Áing е¿Ál е². Æ/ rne Âа]о³³[à ot Áªа²а l¸¿а² а еа³Âа³ºаа ео³ Âªе fo11o ¸1ng ²¸ о²: 8oaarlo, ео,000  Áо¿²; ²а³а¿Ã¸²³а², ео,ооо  ³о¿а; ²¸²¿о² АÆ а², 2о,оо0  [о¿²; s²¿ ееаÂо, ³0, ооо  ³о¿²; san ¸lÁоlа², 12, ооо  Áо¿²; р ² ³¸о р³lÂ.³Ã ²l ¸ а totaling 20,000  [ о¿Ï ¡²раÁl[ Ã, 5/ А ² 1t 1 ² ¿о ро²² [ l « е Áо ea[imate ½ l Áh Áе Áаl ¿[ à Ëh ²[ type of lnveetments Ëо¸l ´ ¬е Âаае, а coneervattve po ²itlon has ¬ее¿ а´ор е´ lnvee[rtrenband, therefore, ¿о change ² 1¿ apera[1ng Áо²[ ¿о income have ¬ее¿ s¬о³³¿. [ aaeumi ¿g ³h а[ l ¿Á³еааеь 1¿ operating coees would ¬е Áа¿Áеll е´ о¸Â ¬Ã i ¿ÁÂеа²е² ¿ l ¿ÁоÂе reaulcin8 Е³о [M1 е²е ±/ 15 Ãеа³² 1¿cluaing chree oF еÂаÁ² ²Á е% i ¿Áе³еаÁ, ¿ Å 7/ В Ãее³е 1nc1udingfour о£ grece а[ 8% i ¿Áе е²[. 8/ The caspa[a[1ve1y evu11 ´е£1 Á1[ ² Áо¸l ´ ªе met vlth ahoiC-Cerm ±orrowing. °

ОÁ³оªе³ 21, 1977 - 95 -

ANNEX 11

ARGENTINA

GRAIN STORAGE PROJECT

Economic Rate of Return Calculations

Improved Export Price

1. By increasing storage facilities, the project would encourage holding grain in anticipation of higher export prices during the post-harvest season. The historical differential between the harvest time and average annual export price has been 10% for corn and sorghum and 15% for wheat and oilseeds. Detailed explanation of these estimates is presented in Working Paper No. 11. Allowing for the fact that even with adequate storage facili- ties, farmers would continue to sell a substantial portion of their crops immediately after the harvest to pay off financial obligations, only one- half of the grain handled by project silos is expected to benefit from the improved export price differentials (Table 1).

Grain Loss Savings

2. It is assumed that only corn and sorghum are subject to deteriora- tion due to lack of storage. Wheat was excluded because it needs storage only marginally and because it would not be a major user of project silos. Other crops (oilseeds) were excluded because their high unit value gives them storage priority. The mission found that the grain loss due to lack of stor- age averages 7.5% of the annual value of corn and sorghum crops now stored by the farmers under precarious conditions. Detailed computations of the incidence of grain losses are available in the project file. This loss would be eliminated for 70% of corn and sorghum using a project silo (Table 2).

3. The reason that grain loss savings apply to only 70% of corn and sorghum using a project silo derives from the mission's estimate that appro- ximately 10% of corn and sorghum would not be purchased directly from the farmers but from the wholesalers (i.e., after it has been dried) and that another 20% would be harvested under conditions where drying would not be required and deterioration would not be a problem.

Distribution Cost Savings

4. The project would lower grain distribution costs including handling, transport, waiting and interest costs. These savings are not uniform for all project silos but vary depending on the distance between them and the ports and on the improvements of reception facilities in different ports financed by the project. Rail distances between project silos and the nearest grain ports are shown in Table 3. They vary between 50 and 638 km and, for the ports of Santa Fe and Diamante, refer to the meter and standard gauge rail - 96 -

ANNEX 11 track, respectively. Proposed grain distribution improvements do not apply equally to all grain ports serving the project silos. Grain classification facilities would be provided at Bahia Blanca and Rosario, and weighbridges and elevating dumps for modified grain cars are planned for the ports of Villa Constitucion, Rosario, San Nicolas, Buenos Aires and Bahia Blanca. No improvements are envisaged for other grain ports, including Santa Fe and Diamante, serving the project silos.

5. Transport Cost Savings. The uniform and complete grain trains operating on a constant schedule between the project silos and grain ports would reduce grain transport costs. According to the recent FA studies reviewed and updated by the mission, the variable cost savings in changing from a mixed conventional train to a block train operation envisaged for the project would amount to US$1.40 per 1,000 m ton per km.

6. Transport savings are not uniform for all project silos but reflect the rail distance between them and the grain ports. The actual savings to the project have been obtained by multiplying the per m ton per km savings by the actual rail distance between the project silo and the nearest grain port. Table 4 gives estimated transport cost savings for individual project silo-port pairs and for the entire project silo system.

7. Interest Cost Savings. Grain tied up in transit incurs interest cost. The proposed silo and rail sector improvements would reduce the transit time by eliminating or lowering rail transport delays. The resulting interest cost savings would vary for different ports of shipment depending on the type of improvements included in the project.

8. Actual time saving estimates for grain transported from different project silos to the nearest grain ports are shown in Table 5. The interest rate used to estimate interest cost savings is 12% per annum and the weighted average FOB price of grain is US$131.11 per m ton. The resulting per m ton interest cost savings are presented below while annual silo system savings at full development are shown in Table 6.

Interest cost savings for silo--port pairs, including ports with all improve- ments:

12% x US$131.11 x 102 hrs 24 hrs x 365 days

Interest cost savings for silo-port pairs, including ports with some improve- ments:

12% x US$131.11 x 78 hrs US$0.14 per m ton 24 hrs x 365 days

Interest cost savings for silo-port pairs, including ports with no improvements:

12% x US$131.11 x 51 hrs US$0.092 per m ton 24 hrs x 365 days - 97-

ANNEX 11

9. Handlin& Cost Savings. The project includes improvements in the rail reception areas in some grain ports, efficient grain loading and un- loading facilities in the project silos and rail car modifications to facilitate the loading and unloading of grain. These improvements would substantially reduce the cost of handling grain using the project silos.

10. The savings would materialize for grain being unloaded at the project silos from the trucks loaded at the project silos on the rail cars and unloaded at the grain ports. Unloading savings at ports would occur only at those included in the project.

11. Individual components of grain handling costs with and without the project are shown in Table 7. It is estimated that the savings for grain shipped via ports with proposed improvements would be about US$1.42 per m ton, while the savings for the ports without such improvements would be US$1.15 per m ton.

12. Loading at the farm is considered a part of the production cost and is not affected by the project. "Without project" costs are based on the updated estimates for existing inland silos prepared by the consult- ants and reviewed by the Bank/FAO mission. "With project" costs are also based on the consultant estimates but have been revised and updated by the Bank mission to reflect the recommended silo size and design.

13. Handling cost savings for different project silo-port pairs are summarized in Table 8. They are expected to total US$6.9 million at full development.

14. Waiting Time Savings. Waiting costs are those incurred when rail cars must wait to load or unload grain. At present, over 80% of a typical grain car cycle time represents waiting. The project would provide for all-grain train loads operating on a constant schedule and benefitting, in some ports, from faster grain unloading facilities. The reduction in waiting time would vary for different project silos, depending on which ports are used and would range from five to seven days per cycle time, as shown in Table 9. The table shows waiting and grain handling time only. The actual travel time would vary depending on distance and average running speeds. For a typical 400-km run, the travel time averages 12 hours, indi- cating a total grain cycle time of approximately eight days.

15. Estimates of existing grain car utilization were obtained by the Bank mission directly from the rail lines engaged in grain transport. The effects of the project on individual segments of grain car cycle time are based on the availability and design of the proposed improvements and on the assumed use of uniform grain trains operating on a constant schedule. Detailed estimates of waiting time savings for the individual project silo-port pairs and for the entire project silo system are shown in Table 10. The aggregate annual system waiting cost savings at full devel- opment are estimated at US$3.5 million. - 98 -

ANNEX 11

16. According to the FA, the cost of an imported grain car, with a useful life of 25 years, is US$45,000. Based on the actual grain cars unloaded at the ports in 1977, the average carload is 46.75 m tons. Hence, the time cost of a grain car is estimated at US$0.0044 per m ton-hour.

US$45, 0U00 ton-hour. 25 yrs x 365 days x 24 hrs x 46.75 m tons

Project Costs

17. Investment Costs. Project investment costs adjusted for financial transfers (taxes and duties) total US$167.6 million, would be distributed over the 1978-82 period as follows:

Amount Year (US$ million)

1978 2.85 1979 27.16 1980 71.58 1981 53.47 1982 12.57

Total 167.63

18. All direct imports would be on behalf of the Government and, therefore, exempt from duties, but duties averaging 20% would have to be paid on indirect imports. In addition, construction cost estimates of project silos include a value added tax (VAT), which is collected at each stage of the business cycle from importer or manufacturer of a product to the final user. The present VAT rate is 16%. No VAT adjust- ments were made for the railroad-financed improvements and project-related services. The economic cost adjustment for the physical contingencies has been computed using the ratio of adjusted financial cost to silo and rail costs.

19. Project maintenance and operation costs are estimated at US$5.7 million annually during the first 10 years, rising to US$7.2 million annually for the second half of the project's useful life.

20. It is assumed that all grain from the project silos would be exported and that grain which is held in storage would receive a higher FOB value than that grain sold at harvest time. The amount of working capital required for the purchase of that grain held in storage is estimated to be about US$54.5 million based on the FOB value at harvest time. This working capital require- ment is charged to the project as a cost during the initial years of silo operation and is recovered at the end of the project life. - 99 -

ANNEX 11

Economic Rate of Return Calculations

21. The economic rate of return on the proposed grain silo project will be 20%. Implementation of the proposed grain silo system would at full develop- ment, generate an annual benefit flow to the country of US$71.0 million, consisting of the following benefit streams:

US$ Million

Improved export prices 41.2 Grain loss savings 16.6 Distribution cost savings: 13.2 Handling - 6.90 Transport - 2.03 Waiting - 3.49 Interest - 0.77

Total: 71.0

22. Project Life. The project construction period is scheduled for 1978-1982 and the economic life of the completed project is assumed to be 20 years starting in 1983. Full utilization of the project's facilities is expected to be reached in the third year of operation. Salvage cost estimates were made for project evaluation of the project.

23. Sensitivity Analysis. The economic rate of return has been sub- jected to four specific sensitivity tests, including project cost overruns, reduced capacity utilization, lower grain prices and project schedule slippage. The effect of the first three events on the rate of return, assuming changes of 10 and 20%, are shown below.

Percent change from original estimate

10% 20%

Project cost overruns 19 17 Reduced capacity utilization 18 16 Lower grain prices 19 17

24. The effect of a two-year slippage in project schedule would reduce the economic rate of return from 20% to 15%.

October 31, 1977 - 100 -

ANNEX 11 Table 1

ARGENTINA

GRAIN STORAGE PROJECT

Higher Export Price Benefits (Computations)

Project Silo Grain Stored to Benefit from Higher Export Prices

Tons Stored per Tons Stored Total Tons per Annum for Later per Annum for Later Silo per Annum Sale per Silo Sales per Silo Project

Wheat 50,000 25,000 500,000 Sorghum 100,000 50,000 1,000,000 Corn 62,500 31,250 625,000 Oilseeds 37,500 18,750 375,000

Total: 250,000 125,000 2,500,000

Estimates of Higher Export Price Benefits

Tons Stored per Average Annual FOB FOB Export Price Export Annum for Later Price River Ports Differential Price Sale per Project in 1980-85 US$/Ton % (US$/Ton) Benefits Wheat 500,000 149.1 15 22.36 11,180,000 Sorghum 1,000,000 88.1 10 8.81 8,810,000 Corn 625,000 112.4 10 11.24 7,025,000 Oilseeds 375,000 252.7 15 37.90 14,211,500

Total: 41,226,500

July 29, 1977 - 101 -

ANNEX 11 Table 2

ARGENTINA

GRAIN STORAGE PROJECT

Grain Loss Computations

Grain Lost Without Project Annual Throughput (Tons) Tons Subjact Tons Lost Without Silo Project to Loss (70%) Project (7.5%)

Corn 62,500 1,250,000 875,000 65,625

Sorghum 100,000 2,000,000 1,400,000 105,000

Total: 162,500 3,250,000 2 L275, 0 0 0 170,625

Value of Grain Loss Savings Tons Lost Average Annual per Grain Loss Without Project Ton FOB Price 1980-85 Savings ------(Us$) ------

Corn 65,625 112.43 7,378,219

Sorghum 105,000 88.13 9,253,650

Total: 170,625 16,631,869

July 29, 1977 - 102 -

ANNEX 11 Table 3

ARGENTINA

GRAIN STORAGE PROJECT

Rail Distances Between Project Silos and

Nearest Grain Ports

Silo Location Region Port Rail Distance (km)

Tostado 30 Santa Fe 338 La Rubia 30 Rosario 364 San Francisco 28 Rosario 209 Las Rosas 26 Rosario 116 Firmat 22 Rosario 112 La Carlota 20 V. Constitucion 300 Leones 25 V. Constitucion 50 Pergamino 23 Buenos Aires 228 Laboulaye 21 V. Constitucion 229 Gral. Villegas 19 Rosario 360 El Porvenir 19 Rosario 280 Gral. Pico 10 Bahia Blanca 401 Rivadavia 11 Bahia Blanca 475 Catrilo 11 Bahia Blanca 326 Pehuajo 11 Bahia Blanca 442 Bolivar 12 Buenos Aires 336 Realico 12 Buenos Aires 213 French 12 Buenos Aires 265 Nogoya 35 Diamante 110 Gral. Pinedo 31 Santa Fe 638

January 19, 1978 - 103 -

ANNEX 1:1 Table 4

ARGENTINA

GRAIN STORAGE PROJECT

Transport Cost Savings Estimates for Project Silo System

Grain Project Handled by Distance Transport Total Port Silos in Project to Nearest Savings Transport of Region Region Silos Grain Port per Ton Cost Savings Shipment ('000 tons) (Km) (US$ '000)

30 1 250 338 0.47 117.5 Santa Fe 30 1 250 364 0.51 127.5 Rosario 28 1 250 209 0.29 72.5 Rosario 26 1 250 116 0.16 40.0 Rosario 22 1 250 112 0.16 40.0 Rosario 20 1 250 300 0.42 105.0 V. Constitucion 25 1 250 50 0.07 17.5 V. Constitucion 23 1 250 228 0.32 80.0 Buenos Aires 21 1 250 229 0.32 80.0 V. Constitucion 19 2 500 320 0.45 225.0 Rosario 10 1 250 401 0.56 140.0 Bahia Blanca 11 3 750 414 0.58 435.0 Bahia Blanca 12 3 750 271 0.38 285.0 Buenos Aires 35 1 250 110 0.16 40.0 Diamante 31 1 250 638 0.89 222.5 Santa Fe

Total: 20 5,000 2,027.5

July 12, 1977 - 104 -

ANNEX 11 Table 5

ARGENTINA

GRAIN STORAGE PROJECT

Time Savings for Interest Cost Savings Estimates

Project Silo-Port Pair Time Saved Between Silos and Ports With: Silos in Grain All Some No Region Port Improvements Improvements Improvements ------(Hours) ------

30 Santa Fe - - 51 30 Rosario 102 - - 28 Rosario 102 - - 26 Rosario 102 - - 22 Rosario 102 - - 20 V. Constitucion - 78 - 25 V. Constitucion - 78 - 23 Buenos Aires - 78 - 21 V. Constitucion - 78 - 19 Rosario 102 - - 10 Bahia Blanca 102 11 Bahia Blanca 102 - 12 Buenos Aires - 78 - 35 Diamante - 51 31 Santa Fe 51

July 29, 1977 - 105 -

ANNEX 11 Table 6

ARGENTINA

GRAIN STORAGE PROJECT

Interest Cost Savings Estimates for Project Silo System

Grain Project Silos Handled by Interest Cost Interest Cost Region in Region Project Silos Savings Savings ('000 Tons) ($/Ton) (US$ '000)

30 1 250 0.092 23.0

30 1 250 0.183 45.8

28 1 250 0.183 45.8

26 1 250 0.183 45.8

22 1 250 0.183 45.8

20 1 250 0.140 35.0

25 1 250 0.140 35.0

23 1 250 0.140 35.0

21 1 250 0.140 35.0

19 2 500 0.183 91.5

10 1 250 0.183 45.8

11 3 750 0.183 137.2

12 3 750 0.140 105.0

35 1 250 0.092 23.0

31 1 250 0.092 23.0

Total: 20 5,000 771.7

July 29, 1977 - 106 -

ANNEX 11 Table 7

ARGENTNIA

GRAIN STORAGE PROJECT

Grain Handling Costs and Cost Savings (US$/Ton)

Without With Handling Cost Project Project Savings

Load at Farm - - -

Unload at Silo 1.212 0.692 0.520

Load at Silo 1.192 0.558 0.634

Unload at Port 1.083 0.813 0.270

Total for Ports with Improvements 3.487 2.063 1.424

Total for Ports without Improvements 3.487 2.333 1.154

Source: Mission Estimates.

July 29, 1977 - 107 -

ANNEX 11 Table 8

ARGENTINA

GRAIN STORAGE PROJECT

Handling Cost Savings Estimates for Project Silo System

Grain Project Silos Handled by Handling Handling Port of Region in Region Project Silos Cost Savings Cost Savings Shipment ('000 Tons) (US$/Ton) (US$ '000)

30 1 250 1.15 287.5 Santa Fe 30 1 250 1.42 355.0 Rosario 28 1 250 1.42 355.0 Rosario 26 1 250 1.42 355.0 Rosario 22 1 250 1.42 355.0 Rosario 20 1 250 1.42 355.0 V. Constitucion 25 1 250 1.42 355.0 V. Constitucion 23 1 250 1.42 355.0 Buenos Aires 21 1 250 1.42 355.0 V. Constitucion 19 2 500 1.42 710.0 Rosario 10 1 250 1.42 355.0 Bahia Blanca 11 3 750 1.42 1,065.0 Bahia Blanca 12 3 750 1.42 1,065.0 Buenos Aires 35 1 250 1.15 287.5 Diamante 31 1 250 1.15 287.5 Santa Fe

Total: 20 5,000 6,897.5

July 29, 1977 - 108 -

ANNEX 11 Table 9

ARGENTINA

GRAIN STORAGE PROJECT

Grain Car Cycle Time in Hours

Between Project Silos and Ports Without With All With Some With No Activity Project Improvements Improvements Improvements ------(Hours) ------

Waiting to Load at Inland Silo 23 - - -

Loading at Inland Silo Including Maneuvering 1 0.2 0.2 0.2

Travel Time Silo - Port Varies Varies Varies Varies

Time to Pick Up Cars at Inland Silos on Way to Port 24 - - -

Waiting to Unload at Port Including Classification, Maneuvering, etc. 72 3 24 48

Unloading at Port 6 0.5 0.5 3

Return to Yard and Wait for Reassignment 48 - - -

Travel Time Yard - Silo varies varies varies varies

Total Wait Hours: 167 3 24 48

Total Wait Days: 7 0 1 2

July 29, 1977 ARGENTINA

GRAIN STORAGE PROJECT

Waiting Cost Savings Estimates for Project Silo System

Project Grain Waiting Time Waiting Value of Silos in Handled by Without With Time Waiting Time Savings Region Region Project Silos Project Project Savings Per Ton Per Region Port of Shipment ('000 tons) ----- (hrs) ----- (hrs) (US$) (US$ '000)

30 1 250 174 48 126 0.55 137.5 Santa Fe 30 1 250 174 0 174 0.77 192.5 Rosario 28 1 250 174 0 174 0.77 192.5 Rosario 26 1 250 174 0 174 0.77 192.5 Rosario 22 1 250 174 0 174 0.77 192.5 Rosario 20 1 250 174 24 150 0.66 165.0 V. Constitution 25 1 250 174 24 150 0.66 165.0 V. Constitucion 23 1 250 174 24 150 0.66 165.0 Buenos Aires 21 1 250 174 24 150 0.66 165.0 V. Constitucion 19 2 500 174 0 174 0.77 385.0 Rosario 10 1 250 174 0 174 0.77 192.5 Bahia Blanca 11 3 750 174 0 174 0.77 577.5 Bahia Blanca 12 3 750 174 24 150 0.66 495.0 Buenos Aires 35 1 250 174 48 126 0.55 137.5 Diamante 31 1 250 174 48 126 0.55 137.5 Santa Fe

Total: 20 5L000 3,492.5

July 12, 1977 - 110 - ANNEX 12

ARGENTINA

GRAIN STORAGE PROJECT

Selected Documents and Data Available in the Project File

A. Selected Reports and Studies Relating to the Project

Al. FAO/World Bank Cooperative Program: (a) Identification Report No. 3/76 AR6.6 of January 19, 1976; (b) Preparation Report No. 3/77 AR6.7 of February 1, 1977; and (c) Preparation Working Notes of April 19, 1977.

A2. Estudio de Factibilidad Para un Plan Nacional de Almacenamiento y Conservacion de Granos, 3 vols, prepared for the Grain Board by Direccion General de Investigacion y Desarrollo (DIGID) of the Ministerio de Defensa, 1977.

A3. Grain Board. Documents Stating Objectives, Functions, Organization and Duties of Personnel, 1977.

A4. Proyecto de Almacenamiento de Granos, Junta Nacional de Granos, 1977.

B. Selected Working Papers Prepared by Bank Mission

Bl. Production, Exports and Consumption

B2. Grain Marketing System

B3. Detailed Description and Costs of Project Storage Requirements

B4. Training Program for Project Silo Managers and Supporting Staff

B5. World Demand for Grain

B6. Direccion Nacional de Construccion de Elevadores de Granos

B7. Construction Scheduling and Monitoring of Project Silos

B8. Detailed Description and Costs of Railway Components of Project

B9. Grain Port Facilities in Argentina

B10. Rational for Estimate on Open Storage Losses

B11. Calculation of Potential Additional Income to Producers as a Result of the Project Silos

B12. Grain Prices and Tariffs

B13. Banco de la Nacion Argentina: Installed Capacity of Grain Storage Facilities Financed, 1965-77

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