Document of The World Bank Public Disclosure Authorized ReportNo. 15951 AR STAFFAPPRAISAL REPORT Public Disclosure Authorized ARGENTINA BUENOSAIRES URBAN TRANSPORT PROJECT April 11, 1997 Public Disclosure Authorized Infrastructureand Urban DevelopmentDivision CountryDepartment I Latin America andthe CaribbeanRegional Office Public Disclosure Authorized CURRENCY EQUIVALENTS Currency Unit = Peso US$1 = 1 Peso WEIGHTS AND MEASURES Metric System FISCAL YEAR January 1 - December 31 PRINCIPAL ABBREVIATIONS AND ACRONYMS AMBA - Buenos Aires Metropolitan Area (Area Metropolitana de Buenos Aires) ATAM - Metropolitan Area Transport Authority (Autoridad de Transporte del Area Metropolitana) CONAMBA - National Comission for the Buenos Aires Metropolitan Area (Comisi6n Nacional Area Metropolitana de Buenos Aires) CoNTA - National Commission for Motor Transport (Comisi6n Nacional de Transporte Automotor) EA - Environmental Assessment FA - Argentine Railways (Ferrocarriles Argentinos) FEMESA - Metropolitan Railways (Ferrocarriles Metropolitanos, S.A.) GFCNRT - Successor to UCPF (Gerencia Ferroviaria de la Comisi6n Nacional de Regulaci6n de Transporte) ICB - International Competitive Bidding IERR - Internal Economic Rate of Return MCBA - Municipality of the City of Buenos Aires NCB - National Competitive Bidding NGO - Non-Governmental Organization NPV - Net Present Value OCRABA - Agency responsible for urban motorway concessions PIP - Project Implementation Plan PPF - Project Preparation Facility Pre-ATAM - Technical group, conceived as precursor to Metropolitan Area Transport Authority (Apoyo a la Creaci6n de la Autoridad de Transporte del Area Metropolitana) SBASE - Buenos Aires Subway (Subterraneos de Buenos Aires, S.E.) SOPyT - Secretariat of Public Works and Transport (Secretarfa de Obras Publicas y Transporte) TBA - Suburban Railway Company (Trenes de Buenos Aires) TUAMBA - Transport Planning Unit - Successor to Pre-ATAM (Transporte Urbano del Area Metropolitana de Buenos Aires) UCP - Project Coordination Unit - (Unidad Coordinadora del Proyecto) UCPF - Coordination Unit for the Railway Restructuring Program (Unidad de Coordinaci6n del Programa de Restructuraci6n Ferroviaria) UEP - Project Implementation Unit (Unidad de Ejecuci6n del Proyecto) Vice President Shahid Javed Burki Director Gobind T. Nankani Division Chief Asif Faiz Task Manager Gerhard Menckhoff ARGENTINA BUENOS AIRES URBAN TRANSPORT PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. LOAN AND PROJECT SUMMARY ............................................. ; I. THE URBAN TRANSPORT SECTOR ............................................. I A. BACKGROUND............................................. 1 B. INSTITUTIONALFRAMEWORK ............................................. 2 C. SECTOR ISSUES............................................. 2 D. LESSONSLEARNED IN PAST BANK PROJECTS............................................. 3 E. RATIONALEFOR BANK INVOLVEMENT............................................. 3 F. SECTORSTRATEGY ............................................. 4 II. FRAMEWORK OF URBAN RAIL CONCESSIONS ............................................. 6 A. BACKGROUND............................................. 6 B. THE CONCESSIONPROCESS ............................................. 6 C. INITIALBENEFITS OF CONCESSIONINGURBAN RAIL SERVICES............................................. 9 D. REGULATORYISSUES ............................................. 10 E. THE METROVIASCONCESSION ............................................. 10 III. THE PROJECT ............................................. 12 A. PROJECTOBJECTIVES ............................................. 12 B. PROJECTDESCRIPTION ............................................. 12 C. PROJECTCOSTS AND FINANCING............................................. 15 D. PROJECTRISKS AND BENEFITS ............................................. 15 E. ECONOMICEVALUATION ............................................. 17 F. FINANCIALEVALUATION ............................................. 18 G. ENVIRONMENTALIMPACT ............................................. 19 H. PUBLICPARTICIPATION ............................................. 20 IV. PROJECT IMPLEMENTATION ............................................. 21 A. INSTITUTIONALRESPONSIBILITIES ............................................. 21 B. IMPLEMENTATIONSCHEDULE ............................................. 21 C. PROCUREMENT............................................. 22 D. DISBURSEMENTSAND SPECIALACCOUNT ........................................................ 24 E. AUDITING........................................................ 25 F. PROJECTMONITORING AND REPORTING........................................................ 26 G. PROJECT SUPERVISION........................................................ 26 V. AGREEMENTS REACHED AND RECOMMENDATION ............ ................................. 27 This reportis basedon the findingsof an appraisalmission which visited Argentina during October 1996. The missioncomprised Messrs. GerhardMenckhoff (Task Managerand UrbanTransport Specialist, LA3EI), Moazzam Mekan (Financial Analyst, LA1IU), Juan Quintero (EnvironmentalSpecialst, LATEN),Llvo Pino (FinancialManagement Specialist, ACTCO); BernardMontava (consultant), and Frank Raltek(consultant). Ms. SabineCornelius (Economist, AFTUI), andMessrs. Ken Gwilliam (Economist, TWUTD), Jorge Rebelo (Transport SpeciaUst,LA1 IU), LouThompson (Railways Adviser, TWUTD), and Surhid Gautam (consultant) also particpated In the preparationof the project.Messrs. Jitendra Bajpai (EAI IN) andJohn Flora(TWUTD) are the PeerReviewers. Mr. CraigLeisher edited the report.Ms. Sandra Albortaand Mm.. MargaritaLannon assisted in the productionof the report.Messrs. Asif Faiz, OrvilleGrimes and Gobind T. Nankaniare respectivelythe managingDivision Chief, Projects Adviser, and Department Director. ANNEXES: Page No. A. Transportin MetropolitanBuenos Aires-Issues and Outlook ..................................... 29 B. ProjectImplementation Plan, as Defined by the Borrower ........................................ 37 C. Detailed ProjectCosts ......................................................... 45 D. ImplementationSchedule, Monitoring Indicators, and Project Supervision. .......................................47 E. Disbursementand ProcurementSchedules ................................................... 53 F. Summaryof Urban TransportStudy Terms of Reference........................................................ 55 G. EconomicEvaluation ........................................................ 59 H. FinancialEvaluation ........................................................ 70 1. EnvironmentalAspects .................................. 75 J. Air Pollutionin BuenosAires .................................. 79 K. Selected DocumentsSent to the ProjectFile .................................. 83 MAPS: SuburbanRailways Operated by PrivateConcessionaires - IBRD No. 28384 BuenosAires SubwaySystem - IBRD No. 28385 -i- ARGENTINA BUENOSAIRES URBANTRANSPORT PROJECT LOAN AND PROJECTSUMMARY Borrower: ArgentineRepublic Implementing Agency: Public Works and TransportSecretariat (SOPyT) of the Ministry of Economy and Public Works and Services Beneficiaries: Residents of the Buenos Aires MetropolitanArea, particularly those who use public transport. Poverty: Not applicable. Amount: US$200million (includingup to US$20million in retroactivefinancing). Terms: Repaymentin 15 years, including five years of grace, at the Bank's standard interestrate for variable LIBOR-basedUS Dollar single-currencyloans. Commitment Fee: 0.75 percenton undisbursedloan balances,beginning 60 days after signing, less any waiver. Onlending Terms: Not applicable. Financing Plan: See para. 3.13. Net PresentValue: At 12 percent: US$239million for the Metrovias concession;US$338 million for subway Line A; and between US$0.68 million and US$24.82 million for the road/rail gradeseparations. Staff Appraisal Report: No. 15951-AR,dated April 3, 1997. Maps: IBRD No. 28384 and IBRD No. 28385 Project ID: AR-PA-39584 1.THE URBAN TRANSPORTSECTOR A. Background 1.1 Argentina is one of the most urbanizedcountries in Latin America. Over 87 percent of the total population lives in urban areas of 2,000 or more inhabitants. Despite its high level of urbanization,Argentina is still experiencingsignificant growthin its urban population.Between 1980 and 1991 urban areas grew from 23.2 million to 28.4 million inhabitants(1.9 percent per year). Today 12.4 million persons,or almost 38 percent of the country's population,are concentratedin the BuenosAires MetropolitanArea (AMBA).1Population densities are high with nearly 14,800persons per km2in the city of BuenosAires (roughly the same as Paris). The city population(3 million) is growing at a rate of 0.7 percent per year. Yet some of the suburban municipalitiesare growing at a rate ten times faster (17 percentper year). Sound urbantransport managementis criticalfor meetingthe growingtransport needs of the AMBA. 1.2 There are nearly 6.5 million motor vehicles in Argentina.On the average week day, 2.5 million cars circulate in the AMBA alone. Private car ownershiphas been on the rise, with about 150,000 vehicles being addedto the fleet in the AMBA every year. Largely becauseof the rapidly increasingcar ownership,the share of public transportationin the AMBAhas fallen from 75 percent of motorizedtrips in 1970to 61 percent in 1994. On the other hand, trips by car have increasedfrom 2.7 million trips per day in 1970to 4.5 million per day in 1991,a 60 percent