World Bank Documentdocuments.worldbank.org/curated/en/440541467997031987/pdf/multi-page.pdfdocument...

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. P-5542-AR

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A PROPOSED

PUBLIC SECTOR REFORM TECHNICAL ASSISTANCE LOAN (PSRTAL)

IN AN AMOUNT EQUIVALENT TO US$23 MILLION

TO THE REPUBLIC OF ARGENTINA

MAY 31, 1991

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

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CURRENCY EQUIVALENTS

Currency Unit - Austral (AS)

Under the Law of Convertibility and Deindexation of the Economy, the austral has been declared fully convertible atAS10,000 = US$1.00.

Fiscal Year

January 1 - December 31

Principal Abbreviations and Acronyins

ALADI Asociacidn Latinoamericana para el Desarrollo Latin America Association for Devpmt. andIr.tegration

ANA Administraci6n Nacional de Aduanas Customs Department

BCRA/ Banco Central de to Replblica ArgentinalBanco Central Bank of ArgentinaCo Central

BONEX Bonos Externos External Bonds

CECRA Comitd Ejecutivo de Contralor de la Reforma Comptroller Executive Comittee forAdministrative Administrative Reform

CEMLA Centro de Estudios Monetarios Latinamericanos Latin American Center for Monetary Studies

CEMYB Centro de Estudios Monetarios y 8ancarios Center for Monetary and Banking Studies

CG Contaduria General Office of the Accountant General

CGN Contralor(a General de la Nacian Office of the Comptroller and the Auditor Generalof the Nation

CSN Red de Sistemas de Computacian Computer Systems Network

OGI Direcci6n General Impositiva General Tax Office

DNPP Direccidn Nacional de Programacidn Presupuestaria Budget Office

ECLAC Comisi6n Econ6mica para Amarica Latina y el Caribe Economic Commission for Latin America and theCaribbean

FRBNY Federal Reserve Bank of New York Banco de la Reserva Federal de Nueva York

ICB Licitacin Internacional International Competitive Bidding

LCB Licitacian Local Local Competitive Bidding

LS Compras Directas Local or International Shopping

ME Ministerio de Econom.a Ministry of Economy

PERAL Prdstamo de Ajuste para la Reforms de las Empresas Public Enterprise Reform Adjustment LoanPdbticas

PSR Reforma del Sector Pdblico Public Sector Reform

PSRL Prdstamo para la Reforma del Sector Pdblico Public Sector Reform Loan

PSRTAL Pr4stamo de Asistencia Tacnica para la Reforma del Public Sector Reform Technical AssistanceSector Pdblico Loan

SEF Superintendencia de Entidades Financieras Superintendency of financial Entities

SIGENAC Sindicatura General de la Naci6n Office of the Executive Comptroller of the Nation

SIGEP Sindicatura General de Empresas Pdblicas Office of the Comptroller of Public Enterprise

SIPRECO Sistema Integrado de Presupuesto y Contabilidad Integrated Information System for Public SectorFinancial Management, Budget and Accounting

TCN Tribunal de Cuentas de la Naci6n The National Court of Accounts

YPF Yacimientos Petrolfferos Fiscales State Petroleum Company

FOR OFFICIAL USE ONLY

ARGENTINA

PUBLIC SECTOR REFORM TECHNICAL ASSISTANCE LOAN

Loan and Proiect Summary

Borrower: The Republic of Argentina

Beneficiaries: The Ministry of Economy, the other CentralGovernment Ministries and the Presidency and theCentral Bank.

Amounts US$23 million equivalent

Terms: Seventeen years, including a five-year graceperiod, at the Bank's standard variable interestrate.

Financins Plant Government of Argentina US$ 8.5 million

IBRD US$23.0 million

TOTAL USq31.5 million

Economic Rate of Return: N. A.

Staff Appraisal Report: N. A.

Maps N. A.

This report is based on the findings of an appraisal mission that visitedArgentina in March 1991, and reflects the agreements reached duringnegotiations (May 3 through May 8, 1991). The appraisal mission wascomprised of Antonio Martin del Campo (Task Manager) LATPS; Lucien Moreau,Paul Beckerman, LA4CO; Eduardo Abbott, LEGLA; Ulrike Murray, LACPT; AngelGonzalez-Malaxechevarria, Jaime Vazquez-Caro, Caroline Mascarell, LATPS.Barbara Nunberg acted as Peer Reviewer. The responsible managers wereShahid A. Chaudhry, Division Chief, LATPS; and Pieter Bottelier, Director,LA4.

This document has a restricted distribution and may be used by recipients only In the perfcrnan"eof their official duties. Its contents may not otheiwise be disclosmd without World Bank auth.riztioj

MEMORANDUM AND RECOMMENDATION OF THE PRESIDENTOF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTTO THE EXECUTIVE DIRECTORS

ON A PROPOSEDPUBLIC SECTOR REFORM TECHNICAL ASSISTANCE LOAN (PSRTAL)

TO THE REPUBLIC OF ARGENTINA

1. The following memorandum and recommendation on a proposed loan tothe Republic of Argentina for US$23.0 million equivalent la submitted for yourapproval. The loan will be on standard IBRD terms repayable over 17 years,including 5 years of grace, at the Bank's standard variable rate. It wouldhelp finance a Public Sector Reform Technical Assistance Project.

2. Background. Argentina's fiscal deficit has been a principal causeof macroeconomic instability and its eliminatLon requires the implementationof fundamental public sector reforms. The economic program of the Governmentcomprises a set of structural reforms of the Federal Government and theCentral Bank (the PSR program) which will be supported by the Bank throughthis Loan, and a proposed Public Sector Reform Loan (PSRL). The PSRL wouldcontribute to the design and financing of measures to improve the efficiencyof current and investment expenditures, increase revenues while reducing thedistortions in revenue mobilization, and limit recourse to money creation bydisengaging the Central Bank from public finances and creating an independentmonetary authority with limited powers. Bank technical assistance has alreadybeen instrumental in the design of policy improvements and strengthening keyagencies, however, additional technical support is needed to strengthen thegovernment's capacity to implement the reform.

3. Rationale for Bank Involvement. Supporting public sector reformis a fundamental Bank objective in Argentina. The recently approved PublicEnterprise Reform Adjustment and Execution Loans (PERAL/PEREL) would providevital financial assistance and technical support to the Government reformprogram in this area. The proposed PSRTAL would strengthen the administrativeand technical capabillities of the National Administration (Central Government,Special Accounts, and Decentralized Organizations) to carry out the reformsbeing supported by the PSRL. The project would extend on activities carriedout under the Bank's 1986 Public Sector Management Technical Assistance Loan(Ln. 2712-AR), one of whose aims was to develop an analytical basis for thereform of the public sector. Specifically, the proposed project wouldgenerate required institutional strengthening of the key agencies responsiblefor implementing those reforms. Without the support proposed under PSRTAL,vital reforms--such as the implementation of comprehensive financialmanagement improvements of the public sector, a modern institutional frameworkfor control, an effective internal administration of the Central Government,an efficient administration of customs, and the reorganization andmodernization of the Central Bank and the Superintendency of FinancialEntities (SEF)--would be much less likely to proceed as planned by theGovernment given the austere fiscal environment. As part of the collaborativeeffort with the Argentine Government in preparing the PSRL, the Bank has beensignificantly involved in the design of the reform measures now underimplementation in these areas.

- 2 -

4. Proiect Obiectives. The proposed PSRTAL will support:(a) modernization and computerization of the Customs Department(Administraci6n Nacional de AMuanas-ANA); (b) administrative reform andmodernization of internal administration of the Central Government;(c) establishment of a new framework and development of systems forcomprehensive public sector financial management, integrated budgetaryprocesses and effective control for improved allocation of public resources;(d) the reorganization and modernization of the Central Bank; and (e)implementation of a program fer a complete restructuring of the SEF.

S. Proiect DescriPtLon. The proposed project would strengthen thecapacity ofs

(a) the Ministry of Economy by providing consultant services, computerequipment and software, and loglatical support to (i) manageeconomic reforms; (ii) allocate and control public resources bythe design and implementation of an integrated budget andaccounting information system for financial management, budgetprogramming, execution and control--including institutionalstrengthening of the entities that constitute the internal andexternal control network; and (iii) administer customs by theestablishment of new administrative procedures and relatedcomputerized information systems;

(b) the Central Government Ministries and the Presidencr by providingconsultant services, computer equipment and software to modernizeits internal administration by developing now uniform proceduresand information systems for personnel, financial resources, andfacilities management;

(c) the Central Bank through the provision of consultant services,computer equipment and software to improve its organizationalstructure and administrative procedures, develop key informationsystems and enhance staff capabilities, with special emphasis onthe SEF.

6. The matrix of key project activities (Attachment r) includesinformation on objectives, activities, outputs, impact, and timing targets.Evaluation criteria and performance indicators are presented in Attachment It.The table of activities, inputs, and estimated costs (Attachment 1I1) furtherdisaggregates the main activities and relates them to project inputs andcosts, and sources of financing. Attachments IV to VIII contain the basiccomputerization model that is planned for each project component. The totalproject cost is estimated at US$31.5 million equivalent of which US$23.0million equivalent would be financed by the Bank. The project will becompleted by December 31, 1994, with the closing date of the loan June 30,1995. Retroactive financing of expenditures made after May 1, 1991 would beprovided up to a maximum of US$1.5 millior equivalent. Selection ofconsultanto and procurement of equipment would follow Bank guidelines. Theaggregated cost estimates by component are shown in Schedule A. Theprocurement methods and estimated IBRD disbursements appear in Schedule B.lne timetable of key processing events and the status of Bank Group operationsare shown in Schedules C and 0, respectively. A detalled project description

is given in the Technical Annex. An Executive Summary of the proposed PSRL isalso included as Attachment IX.

7. Lessons Learned and Proiect Design. The preparation of theproject has benefitted from previous regional experiences that faced thefollowing constraints: (a) emphasis on inputs and lack of capacity to completethe expected outputs and reach the desired technical assistance impact; (b)soft budget constraints and weak management that allowed the use of resourcesfor purposes beyond the objectives of the project; (c) widespreadproliferation of individual consultancies that became difficult to control andcostly to administer; and (d) weak counterpart participation and support ofthe beneficiary institutions. The design of this project addresses theseconstraints, as follows: (a) draws on specific but adaptable action plans andannual work programs for each component that focus on outputs, defineevaluation criteria and performance indicators to judge project progress, andidentify preconditions for successful implementationt (b) establishes criteriato improve administration of the project, especially with respect toprocurement; (c) considers that consultant services in most cases will bepro.,ided by consulting firms or institutions; and (d) emphasizes thecounterpart responsibilities of the beneficiary agencies and, in particular,staffing of key positions.

S. Actions Acreed. During negotiations, agreements were reached onthe action clans for each of the five project components: (a) CustomsModernization Program; (b) Administrative Reform and Modernization of theCentral Government; (c) Public Sector Comprehensive Financial Management andPerformance Control; (d) Reorganization and Modernization of the Central Bank;and (e) Reorganization and Modernization of the SEF. Further, the Borrowerand the Bank would agree on specific annual work programs. A condition ofdisbursement for any new activities to be financed under the Loan will betheir inclusion in such annual programs. In addition, it was agreed that theannual work programs would incorporate the following aspects: (a) specificmeasures for staffing key positions in the beneficiary institutions; (b)selection procedures to ensure adequate staff participation in the trainingprograms; and (c) the actions that will be taken to guarantee sustainabilityof the outputs and impact of the Project as its execution ceases. Given thestrong linkage of this project with the PSRL, the following conditions,originally introduced in the proposed PSRL, were also established for thePSRTAL: (a) progress on the administrative reform program as delineated inPSRL, including employment reduction, ministerial reorganization, and anincrease in the salary compression ratio; (b) formulation of the program forimprovement in Customs Administration; (c) presentation to Congress of thedraft Law on Financial Management and Performance Control, the preparation ofwhich has been assisted by the Bank; (d) a Central Bank reorganization programas agreed with the Bank; and (e) completion of the restructuring process ofthe SEP. During negotiations the Government and the Bank reviewed progress onimplementation of these policy conditions and confirmed that the conditionshave been met. With respect to organization and administration of theproject, the Government will sign a Management Service Agreement Contract withUNDP-OPS, or another acceptable procurement agency, before Loan effectiveness.The Government has also stated that it will transfer the existing officefaci.ities and equipment of the Coordinating Unit of the Public SectorManagement Technical Assistance Project (Ln. 2712-AR), upon completion, to the

proposed PSRTAL. Procurement and the contracting of consultants will becarried out according to Bank guidelines as set forth in Schedule B.

9. Benefits. The PSR program is expected to make a significantcontribution in terms of overall economic efficiency gains derived fromincreased productivity and effectiveness of the public sector. The PSRTALwould contribute by strengthening key functions of the institutions in chargeof the economic reform program.

10. Risks. The loan faces two risks. Firgt, progress in achievingthe targets of the PSR program may not be fully satisfactory or proceed moreslowly than desired. In particular, the Government's Administrative ReformProgram might be delayed. This would call into question our technicalassistance activities, since without the reform the project objectives of thisand future operations would be compromised. To lower the impact of this risk,the proposed loan establishes up-front conditionality in this area. 8econd,the Government's priorities with respect to the specific TA activities to beimplemented in the various components might change. To minimize this risk,the disbursement conditions require agreement on action plans, includingspecific work programs and terms of reference for each of the project'e fivecomponents.

11. Recommendation. I am satisfied that the proposed loan wouldcomply with the Articles of Agreement of the Bank and recommend that theExecutive Directors approve the proposed loan.

Barber B. ConablePresident

Attachments

Washington, D.C.May 31, 1991

5- Schedule APage 1 of 1

"GENTN

PUBLIC SECOR REFORM TECHNICAL ASSISTANCE LOWN

SIMATED COSTS(US$ '000)

FinancingGovt. of

Bank Argentina Total

Consultant Services & TraininI. Customs Modernization Program 3,800 800 4,600II. Administrative Reform & Modernization

of the Central Government 3,600 580 4,180III. Public Sector Comprehensive Financial

Management & Performance Control 3,700 1,200 4,900IV. Reorganization & Modernization of the

Central Bank (CB) 1,580 840 2,420V. Reorganization & Modernization of SEF 920 850 1,770VI. Project Implementation Unit _ 600 400 _°LQ°

Subtotal 14,200 4,670 18,870

I. Customs Modernization Prog-m 3,000 2,000 5,000U1. Administrative Reform & Kok rnization

of the Central Government 2,000 80 2,0801II. Public Sector Comprehensive Financial

Management & Performance Control 1,400 1,500 2,900IV. Reorganization & Modernization of th,

Central Bank (CB) 1,700 . 1,700V. Reorganization & Modernization of SEF 700 - 700VI. Project Implementation Unit 2- 20 250

Subtotal 8,800 3,830 12,630

Total Project Costs 23.000 8.500 31.i

Note: Detailed information on project activities, Inputs and estimated costsis included in Attachment 1II.

-6- Schedule BPage 1 of 1

ARGENTINA


PROCUREMENT ARRANGEMENTS(US$'000)

Procurement method TotalProject element LCBTa ICB/b Otherslc N.A. costs

1. Consultant Services& Training 14,200 14,200

(14,200)2. Equipment 500 8,200 100 /d 8,800

(500) (8,200)3. Local Inputs - -8_200_ 8,500/e a .so*

500 8,200 14,300 8,500 31,500

Total (500) (8,200) (14,300) (23,000)

Note: Figures in parentheses are the respective amounts financed by the Bank.

Ia Local competitive bidding (LCB) if estimated contract value lies betweenUS$25,000 and US$250,000.

Lb International competitive bidding (ICB) if estimated contract value is forthe equivalent of US$250,000 or more.

/c Include contracting of consultants in accordance with Bank Guidelines.Id Local/international shopping.Ie The Government's contribution of approximately US$8.5 million consists

largely of counterpart staff, administrative equipment, computers andtheir maintenance, secretarial services and supplies.

DISBURSEMENTS(USs'005)

Category Amount Percentage

1. Consultant Services & Training 14,200 10O? net of taxes2. Equiputent 8.800 10OZ foreign expenditure and 85?

ex-factory local expenditures.Total 23,000

ESTIMATED IBRD DISBURSEMENTS(US$'000)

FY92 FY93 FY94 FY95

Annual 3,000 10,000 8,000 2,000Cumulative 3,000 13,000 21,000 23,000

7-S7O-duI&APage 1 of 1

ARGENTINA


TIMETABLE OF KEY PROCESSING EVENTS

(a) Time Taken to Prepare: Six months

(b) Prepared by: Government with Bank assistance

(c) First Bank Mission: November 1990

(d) Appraisal Mission Departure March 1991

(e) Negotiations: May 1991

(f) Planned Date of Effectiveness: July 1991

(g) List of Relevant PCRs and PPARs: Not Applicable

.- B -

Schedule DPage 1 of 2

JHE STATUS OF SANK 6ROUP OPERATIONS

STATEY!T OF BANK "OANS

(As of farch 31, 1991)

Fiscal & l mount LessLanFi No. Lear o Puroose latl Undisbursed

~uimi I I1on)y

Fully disbursed loans (26) 2,310.89

2296 1983 Argentina Highway Sector 100.0 9.6

2592 1985 Yacimientos Gas Utilization 180.0 82.0Pet. Fiscales & Tech. Assist.

2641 1986 Argentina Water Supply 60.0 44.1

2712 1986 Argentina Public Sector Mgt. 18.5 2.6

2751 1987 Argentina Power Engineering 14.0 1.1

2793 1987 Argentina Small & Red. Scale Cred. 125.0 63.8

2805 1987 Argentina Port 50.0 42.9

2815 1987 Argentina Trade Policy 1/ 496.0 0.4

2854 1987 Servicios Elec. Power Dist. 276.0 218.7

2920 1988 Argentina municipal Dev. 120.0 114.0

2970 1988 Banco de la Agric. Credit 106.5 11.8Nacion

2984 1989 Argentina Social Sector 28.0 18.6

2997 1989 Argentina Housing Sector 300.0 262.3

2998 1989 Argentina Electric Power 252.0 2.0

3015 1989 Argentina Tax Admin. T.A. 6.5 5.1

32801/ 1991 Argentina Provincial Devel. 200.0 200.0

3281V/ 1991 Argentina Water Supply 100.0 100.0

3291VI 1991 Argentina Public Enterprise 300.0 300.0Reform Adjust. (PERAL)

3292/f 1991 Argentina Public Ent. Reform (PEREL) 23.0 23.0

32972/ 1991 Argentina Agric. Services 33.5 33.5

TOTAL 5,100.2of which has been repaid 1.267.3

Total now outstanding 3,832.9

Amount Sold 12.8of which has been repaid 12.8

Total now held by Bank 3,820.1

Total undisbursed 1535.S

if Not yet effective.N/ot yet signed.

-9

Schedule DPage 2 of 2

(As ot Mrob 81, 1991)

Aroentlna

terr Obiloor TYJs of Busine LOUX IEix L koni

1906 Actidac Indust.ri Arg. S.A.** Stel Products a.7 - .1906 Papele,r Rio Parana, S.A.se Pulp and Paper *.0 - 8.01981 Fades& S.A.* Auteotive, 1.5 1.5

1902 Pace* .. - 8.1985/72 Celulosa Argentina, S.A. Pulp and Paper 12.6 - 12.61909/75 Dalmine Siderea, S.A.* Steel Products 17.0 - I.01909 Editorala C.odx, S.A.* Prlnting 7.6 2.6 6.01171173 Calera Av*11anes, S.A.* Cmnt 5.5 - 6.51977/84 Alpargatas S.A.?.C. Toxti lee & Fibers 5W.6 5.0 46.61977 Soyax S.A. Soybean Proceaeng 21.0 - 21.0

1976 gassuh, S.A. Pulp and Paper 29.0 2.4 27.51978 Juan Uinetti, S.A. Cemnt 198.0 - 198.0

1970/70 Ipako-Industries Chemiclo 20.8 2.0 19.$i9o ASTRA Petrochemicals 17.4 - 87.4

1979/63/64 Alpeca cS.A.* Fletwse. 6.s 1.6 5.21984/86 Petroquisiea Cuyo S.AI.C. Petrochemical. 4$.1 4.0 42.1

0896/87 ROPASA/SADICAR Capital Market* 2.0 2.9 -l088 Atanor S.A.W. Chmicalo 6.9 1.9 7.0

1987 lidre Oil Chemicals A Petrochem. 107.0 - 197.9

1987 Garavagllo/Zorraquin Food & Food Proc. 18.0 - 18.0

1987 Terminal 6 Port, Storage 0.5 - 9.6l983 sung. y Born Food & Food Proe. 40.0 - 40.0

1983 Areor Food & Food Proe. 12.0 - 12.0

1988 8RLP D9v. Finance 80.0 - 89.91988 Chi rte Chomicale 5.2 6.2 -1988 Brides Cheical. 20.0 - 20.0

1988 Banco Genoral de Negoctoe Fi nane 20.0 - 20.1198 AIC Capital Markets 2.0 2.01989 Chihuldo. Chemicalo and 6.9 0.0 -

Petrochelmcals

1989 C. G gonoey A Car. market. .1 .1 -1989 Banco Frances Devi. Financ 15.0 - 15.01086/09 URSA Money a Capital 20.9 - 20.01090 Petroken Chemical. 20.0 - 9.1980 CIP Service .1 .1

Total Gross Commitmente 697 82.4 064.9LeA" Cancellations, Terminatlon.

Repayment. and Sales 8164 8.0 816.4Total Coemitmeant now held by IFC 87.09 29.4 840.1Total UVdlebureed (IFC only) 4.6 a l.? .

- 10 -

Technical Annex

ARGENTINA

PUBLIC SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

A. BACKGROUND

1. The proposed Technical Assiatance Loan will support a set ofstructural reforms of the Federal Government and the Central Bank beingaddressed at a policy level by the proposed Public Sector Reform Loan (PSRL).The reestablishment of macroeconomic stability in Argentina will require theimplementation of fundamental public sector reforms. The PSRL will contributeto the design and financing of those measures that would improve theefficiency of current and investment expenditures, increase revenues whilereducing distortions in revenue mobilization, and limit recourse to moneycreation by disengaging the Central Bank from public finances and creating anindependent monetary authority with limited powers.

2. In Argentina, Bank technical assistance has been instrumental inthe design of economic policies end strengthening related key agencies underthe Public Sector Management and Tax Administration Technical AssistanceLoans. The activities financed under the Public Sector Management TechnicalAssistance Project (Loan 2712-AR) developed: (a) an analytical basis forfundamental reforms that are now being undertaken by the Government with thesupport of the PSRTAL in: (i) financial management, budgetary process andcontrol; (ii) customs administration; and (iii) National Administrationrationalization; and (b) the initial stages of the computerization plans ofthe Central Bank and the Superintendency of Financial Entities (8EF). ThatProject has also supported the overall design, monitoring, and implementationof the economic reform program. The Tax Administration Technical AssistanceProject (Loan 3015-AR) is supporting management development andcomputerization of the General Tax Office (Direcci6n General Impositiva-D¢I)to improve revenue collections. The recently approved Public EnterpriseReform Execution Loan (PEREL) will support: (a) privatization plans of majorPEs in Argentina as well as improvement of the financial viability and servicequality in nonprivatized business units; (b) preparation of furtherprivatization programs; and (c) strengthening the institutional and regulatoryframework for the sectors in which PEs operate.

B. PROJECT DESCRIPTION

3. The proposed project would strengthen: (a) the Ministry of Economythrough the provision of consultant services, computer equipment and software,and logistical support, in its capabilities to (i) manage economic reforms;(ii) allocate and control public resources by the design and implementation ofan integrated budget and accounting information system for financialmanagement, budget programming, execution and control, including institutionalstrengthening of the entities that constitute the internal and externalcontrol network; (iii) administer customs by the establishment of newadministrative procedures and related computerized information systems; (b)the Central Government ministries and the Presidency through the provision of

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consultant services, computer equipment and software, to carry out amodernization of its internal administration, on the basis of new uniformprocedures and information systems for personnel, financial resources, andfacilities management; (c) the Central Bank through the provision ofconsultant services, computer equipment and software, to improve organizationand procedures, develop key information systems, and enhance staffcapabilities, with special emphasis on the SEF.

4. The Bank missions that preappraised and appraised the proposedproject visited Argentina in November 1990 and March 1991. The missionsreached agreement with the Government on the scope and main objectives of theproposed operation and on the action plans and related budgets of the projectcomponents presented below.

I. CUSTOMS MODERNIZATION PROGRAM(Estimated cost of US$6.8 million)

Maior Problems and Reform Program

5. To a great extent, the main problem of the Customs Department(ANA) is the excessive burden of its administration on business activities andits distortionary effects. In addition, given its relative importance inrevenue generation and effect on other revenues, the management of customsactivities has a critical impact on the fiscal balance.

6. Economic development is also affected by ANA interventions in itsrole as a regulatory institution for private operations linked to theproduction cycles of industry and commerce. The direct costs under ANAdiscretion play an important part in the formulation of prices in the economysupward distortions raise costs, while undervaluations reduce them. If thediscretion is applied unevenly among importers--as is true in Argentina--business will have artificially imposed operational conditions. In addition,delays in the processes involved in the entry of goods bear additional coststo importers. Finally, the tolerance of smuggling further distorts theinternational trade scenario. For the above reasons: (a) the operations ofANA should be as streamlined as possible, as well as neutral in terms of theofficial determination of value; and (b) their coverage should encompass themaximum number of transactions, i.e., contraband imports should be kept to aminimum. Currently, ANA does not satisfy these standards of efficiency andits operation has proved to be highly distortive.

7. FLscal performance is affected by ANA operations: (a) directly asa function of its coverage of taxable transactions and/or accuracy invaluations, and (b) indirectly, as a function of the effects of this coverageand/or valuations on compliance with domestic taxes, in particular VAT andincome taxes. Although no attempt has been made to measure indirect effects,they are likely to be larger than direct ones because undervaluation iscarried forward simply by being outside the formal VAT circuit.

8. Currently, the concept of customs intervention includess(a) control of international trade through the management of duties and taxesLmposed on international trade plus the prevention, control and sanctioning ofsmuggling; (b) implementing international agreementsl and (c) assistance to

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other services and departments in performing their duties, in particular thecollection of internal taxes (VAT and others). In addition, the ANA providesstatistics on international trade.

9. The main weakness of ANA stems from the way it is conceived. Thelegal framework is very complex and provides immense decision-makingdiscretion to the Customs National Administrator without accountability. Thismakes the system extremely vulnerable to corruption. The administrator ismpowered to issue resolutions classifying products in accordance with specialregimes, thus creating an environment where tax liability varies according totaxpayer but not by products. The post of Administrator traditionally hasbeen a political appointment. This helps to explain the very high turnover.Under these circumstances, the balance that is achieved is at cross-purposeswith the interests of the State and there are no internal institutional forcesto support change. Discretion without accountability creates a situation inwhich external monitoring becomes impossible and the Ministry of Economypolicies are held hostage to the Administrator and other ANA officials.

10. The problem is widely acknowledged in Argentina. Some officialsof previous governments have attempted to address it; however, the politicalnature of their posts made it impossible for them to sustain occasionalattempts to remedy the situation. For example, in 1985 the ArgentineGovernment agreed to French technical assistance, the main product of whichwould have adapted the technological and administrative setup of Frenchcustoms to Argentina. The fulfillment of this agreement was not possibleprecisely for the reasons identified above. Under the PSRL, fullrestructuring of ANA operations has been conceived from outside theinstitution as part of a comprehensive public sector reform program. Oncecompleted, the reform of customs will assure establishment of an adequateframework for ANA to perform efficiently.

I1. The proposed PSRL incorporates support for a restructuring programthat addresses the following main weaknesses in customs operationst(a) unjustified concentration of normative and operative functions granted tothe ANA Administrator; (b) frequent turnover of Administrators; (c) complexityof rules and procedures with limited enforcement; (d) lack of monitoring ofAMA performance; (e) lack of efficient and effective personnel policies; and(f) lack of a computerization program. These actions will contribute to thetransparency, equity, and efficiency of customs activities.

12. The ANA Administrator position possesses an undue concentration ofnormative and operational functions. Ideally, some of the current decision-making functions of the Administrator should be transferred to the Ministry of3conomy (NE), and its operational functions performed by operational divisionswithin the ANA. To reverse the current concentration of functions in thatauthority, a deep revision of customs regulations will be necessary. Thecurrent legal framework is antiquated and too complex. The coexistence ofnumerous rules and resolutions impedes transparency of the system, leads toinadequate interpretations of the law, and favors overlapping procedures thatImporters use to their advantage.

13. Customs operations in Argentina depend on the effectiveness andlntegrity of the Administrator. Unfortunately, high turnover has inhibitedthe planning of a stable program to realize medium-term objectives. Customs

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officials throughout the country seldom provide information to theAdministrator; thus, he is usually unaware of the number, nature, and scope ofoperations that take place. This is particularly true in the control area atthe borders, where there is a corps of only 50 customs officers who cannotrealistically be expected to monitor all international exchanges. It iscommon practice that when ANA faces a shortage of police officers, staff fromthe prefecture or the gendarmerie are called on. In practice, this leads toconfusion over responsibility and seriously compromises the integrity ofcustoms operations. Personnel services (health and social services) also failto meet the basic needs of customs staff. In addition, the current salarystructure should be completely restructured. Current salaries at all levelsare too low to attract and retain staff. Staff are also deprived of a wellplanned career development program. Such deficiencies combined withinadequate supervision cause low morale and promote a climate of corruptionand bribery. The most common forms of corruption are underinvoicing ofimports and processing exports with documents used in previous operations.

14. The lack of an Integrated automated system for the wholeorganization greatly contributes to the ineffectiveness and inefficiency ofadministrative, operational, and control functions. The absence of amechanism for cross-checking operations has led to weak control overoperations and low detection of irregularities.

ProDosed Assistance

15. The restructuring and modernization of ANA requires; (a) arevision of the legal framework to simplify customs norms and procedures,including integration of some of the decision-making responsibilities nowconcentrated in the Office of the ANA Administrator in the Ministry ofEconomy; (b) redesign of the organic and functional structure to establishmodern administrative processes, including redefinition of the Administrator'soperational functions and the set up of linkages between the Administrator'soffice and the field offices; (c) a comprehensive computerization plan of ANAoperations, as well as of the tariff structure and the valorization functionto generate and provide reliable information and avoid fraud (the automationplan should include an effective monitoring system to verify that computerrecords match actual receipts)3 and (d) a comprehensive personnel policy thatincludes a career development framework, a training program and an incentivesystem linked to increases in receipts, that would be implemented when theorganizational restructuring and computerization are in place.

16. The preparatory activities of this component are being carried outunder PSMTAL financing. The proposed PSRTAL would provide support for: (a)preparing, monitoring and implementing an Automated Plan including a plan ofaction over the next three years for the development of a computerized customsinformation system within ANA to simplify and improve administrative,operational, and control procedures. This would include systems developmentand its implementation, acquisition and installation of computer equipment,and establishment of a communications network (US$6.0 million); (b) preparingnew guidelines and procedures including legal framework, and administrativereorganization, (US$0.3 million); (c) a training program for staff on relatednew regulations, plus introductory courses on the proposed information system(US$0.25 million); and (d) coordination of the project (US$0.25 million). The

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total cost of activities to be financed by the Bank is estimated atUS$6.8 million.

Il. ADMINISTRATIVE REFORM AND MODERNIZATIONOF THE CENTRAL GOVERNMENT

(Estimated cost of US$5.6 million)

Maior Problems and Reform Proaram

17. To reduce public expenditures and rehabilitate an oversized anddeteriorating public administratlve apparatus, the Argentine Government hasembarked on an Administrative Reform Program to streamline employment levelsand rationalize administrative structures and functions in the NationalGovernment. To consolidate the Government's Reform Program, institutionalstrengthening and modernization of administrative functions in the NationalGovernment will be needed.

18. The main objectives of the Government's reform program are thefollowing: (a) reduce significantly and permanently public expenditures; (b)strengthen key areas of the Government'. administration and create aneffective administrative apparatus; (c) develop an incentive system to improvestaff productivity and build a strong work force; (d) simplify administrativenorms, deregulate key economic activities, and modernize procedures throughcomputerized systems. The NatLonal Government's reform program was initiatedin March 1990 (Decree 435/90) and further developed in early September(Decrees 1757 and 1930/90) and late November of that year (Decree 2476/90).The immediate measures taken under Decree 435/90 include: (a) a freeze invacancies and promotions; (b) elimination of secretariats and reduction in thenumber of subsecretariats; (c) the suspension of collective agreements; (d) acap on salaries) (e) elimination of overtime; (f) early retirement for thosewithin two years of normal retirement; and (g) enforcement of bans againstmultiple employment. Under Decree 1757, two Comptroller Executive Committeeswere created, one of which, CECRA (Comit6 Ejecutivo do Contralor de la ReformaAdministrativa)o is in charge of the Administrative Reform. This Committee iscomposed of high-ranking officers of the Ministry of Economy, and of theGeneral Secretariat, the Legal and Technical Secretariat, and the Publicfunction Secretariat, within the Presidency. The main responsibility of thisCommittee is to identify the methods and procedures for implementing theemployment reductions and restructuring of the National Government and toensure implementation.

19. Decree 2476/90 establishes a specific action plan for theimplementation of the Government's Administrative Reform Program in theNational Administration (Central Government, Special Accounts, andDecentralized Organizations). The main elements of this action plan include:(a) rationalizing organizational structures by reducing the number ofdepartments (Direcciones Nacionales o Gen3rales) in each ministry and in thePresidency; consolidation of the internal administrative functions under onedepartment in each ministry and each decentralized agency, as well as theconsolidation of the legal departments under one unit in each ministry;reduction in the number of positions by at least 34% in the Central Governmentand Special Accounts and at least 40% in the Decentralized Organizations, andrationalization of administrative positions, not to exceed 33% of the total

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personnel of the National Adminictration; (b) limitations on the recourse totemporary (multiple) employment, which will. only be permitted for technicaland scientific activities; (c) restructuring, privatization, cancellation. ortransferring to the provinces of the Decentralized Organizations and of thoseassociated with Special Accounts in charge of regulating markets of regionalproducts, and other agencies specifically identified in the Decree; (d)restructuring, rationalizing, and institutional strengthening of theMinistries of Defense, Education and Justice, and of other key agen$ies suchas ANA (National Administration of Customs), the Subsecretariat ofAgriculture, the Subsecretariat of Industry and Commerce, the NationalInstitute of Public Administration, and scientific and technical agencies; (e)improvement of public services; (f) privatization of selected services (i.e.,control of personnel attendance in all agencies of the NationalAdministration, including maintenance and cleaning services of publicbuildings)l (g) technical modernization of the public administration--development and implementation of computerized data processing systems in allagencies of the National Administration; (h) improving the incentive systemfor key administrative positions in the National Administration through aProgram for Executive Managers, whereby 1,500 key positions will be createdwith a salary structure that appropriately reflects the level of thepositions; and {i) aid to displaced workers through temporary incomemaintenance, a lump-sum payment, continued payment of social benefits for upto 18 months, training programs for possible reentry into the public sector,and creating a special Commission on Private Enterprises to assist thosedisplaced workers interested in private sector employment.

20. To date, the Government has achieved the following as part of theAdministrative Reform Program: (a) a freeze in vacancies and promotions; (b) areduction in the number of secretariats and subsecretariats; (c) a cap onsalaries; and (d) elimination of overtime. In addition, the program is ontrack to effect reductions--62,000 as of February 1, 1991, and 120,000 byyear's end. The ministerial restructuring process is well underway.Particularly important is the progress reached in the restructuring of theCentral Government. The new organizational structure of five of the eightministries (Economy, Health, Labor, Foreign Affairs and Interior) has beenapproved by the National Cabinet, two (Education and Defense) are beingreviewed by CECRA, and one (Justice) is finalizing the legal process for theestablishment of its structure as a ministry. The plan for institutionalstrengthening of the General Tax Office (DGI) has been approved and thepreparation of the related Decree is in process. The Program for ExecutiveManagers has been submitted and is in the process of being implemented. Thereconversion program for excess Government workers has been developed and theDecree is in execution. The Government will implement the required measuresto achieve the agreed wage compression to attain a 7:1 ratio (currently about3.5:1) from the highest to the lowest wage by late April.

21. The administrative procedures in the eight Ministries of theCentral Government are in need of redefinition and modernization. There is acritical lack of computerized systems to facilitate diverse administrativeoperations such as personnel management (payroll, attendance, personnelprofile, contracting, etc.), financial management (budget execution andaccounting), facility management (inventory), and procurement. The lack ofcomputerized administrative functions renders these functions unmanageable andinefficient. The administrative procedures in their present form involve

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complex, cumbersome, inefficient and time-consuming administrative procedures.

Excessive bureaucratic procedures have caused increasingly unwarranted delays

in the daily operations of all ministries. There is a critical need to

establish standard guidelines to simplify and thus enhance internaladministrative procedures. The lack of coordination in the execution of

administrative functions within each ministry represents another critical

constraint. The result is duplication of work in departments, supervision of

activities, and evaluation and control; chronic delays in daily operations;and inconsistencies on the basis of which administrative functions are

routinely conducted. To remedy these serious constraints and helpconsolidate the Government's Reform Program, assistance is needed to

rationalize administrative procedures in the Ministries of the Central

Government, as well as in the Presidency. Decree 2476/90 specificallystresses the importance of strengthening the Ministries' general

administrative operations; for this purpose, a new institutional framework has

been created for internal administration in the Central Government. This

framework is composed of Central Administrative Departments (DizeccionesNacionales de Administraci6n) in each Ministry and the Presidency, and

Administrative Units or Delegations in each core area of the CentralGovernment (i.e., Subsecretariats in the Ministries and Secretariats in thePresidency). The proposed assistance would provide support to strengthen and

modernize the internal administrative functions, now under the coordination of

the newly created internal administration networks (Central Departments andDelegations) in the eight key Ministries and the Presidency, with the

objective of consolidating the Government's Administrative Reform.

22. There is a critical need to deregulate some of the functions of

the Central Government. A significant number of norms governing economic

activities such as insurance, ports, regional markets, pharmaceuticalproducts, and quality control for food export are found to be highly complex,

outdated, vague, and, in some cases, redundant. In addition, there Is a lackof computerized systems for the handling of norms and regulations. These

constraints complicate the decision-making process relating to these economic

activities, which hampers daily operations and brings about unwarranted

delays. The proposed assistance would provide support to (a) rationalize and

simplify the body of norms and regulations governing selected economic

activities, and (b) design and implement a new computerized system for the

handling of streamlined norms and regulations.

23. The Government's Reform Program includes the decentralization of

certain functions in the Central Government--transfer of public services to

the provinces. The Government is not fully equipped to undertake this effort

and would require support in: (a) analyzing the impact of the transfer of

public services to the provinces; (b) preparing the legal basis associated

with the decentralization effort; and (c) formulating guidelines for tho

actual transfer.

Proposed Assistance

24. The Government's objectives are to: (a) strengthen the internal

administrative functions of the Central Government, specifically, in the newly

created Central Administrative Departments and their Delegations in the eight

Ministries--Health, Education, Economy, Foreign Affairs, Defense, Labor,Justice and Interior--and in the Presidency; (b) rationalize and simplify

- 17 -

norms and regulations governing selected economic activities;and (c) ensureadequate transition of public services to the provinces.

25. The proposed assistance would provide support for: (a) the designof simplified standard internal administrative procedures and preparation ofguidelines for their implementation (US$0.25 million); (b) development,adaptation and establishment of computer systems for personnel management(payroll, attendance, personnel profile, contracting, etc.), financialmanagement (budget execution and accounting), and facility management(inventories); and procurement in the internal administration networks of theeight Ministries and the Presidency (US$0.75 million); (c) acquisition andinstallation of hardware (US$1.9 million); (d) training in basic managementoperations and procedures and related systems (US$0.2 million); (e) the reviewof existing norms and regulations governing selected economic activities(i.e., insurance, ports, regional markets, pharmaceutical products and qualitycontrol of food export), and formulation of recommendations forrationalization and simplification (US$1.4 million); (f) design andimplementation of a computerized system for the handling of streamlined normsand regulations (US$0.2 million); (h) the analysis of tne impact of thetransfer of public services to the provinces, preparation of the legal basisassociated with the decentralization effort, and formulatlon of guidelines forthe transfer (US$0.8 million); and (i) coordination and technical managementof the component (US$0.1 million). The total cost of activities to befinanced by the Bank is estimated at US$5.6 million.

26. The expected results of the activities proposed would be:(a) formulation and application of guidelines to simplify and thus enhanceinternal administrative procedures and to strengthen coordination in theexecution of administrative functions within each ministry; (b) installationof computer systems to facilitate diverse administrative operations (personnelmanagement, financial management, facility management and procurement); (c)trained technical personnel who would be proficient in performingadministrative functions; (d) formulation of a general normative Decree onderegulation; (e) streamlined norms and regulations governing selectedeconomic activities that will favor development ol markets and efficiencygains; (f) installation of computer systems for the handling of norms,including trained technical personnel in the usage of the normative

information system; (g) legal basis associated with the decentralization ofpublic services; and (i) guidelines for the preparation and transfer of publicservices to the provinces and municipalities. The proposed assistance wouldconsolidate the Government's Administrative Reform Program throughinstitutional strengthening and modernization of the Central Government.

III. PUBLIC SECTOR COMPREHENSIVE FINANCIAL MANAGEMENTAND PERFORMANCE CONTROL


Major Constraints in Budaetarv Capacity and Public Sector FinancialManaaement and Reform Prooram

27. The legal and institutional framework for financial management,budget programming,and control does not ensure an efficient and comprehensivemanagement of public sector resources. The weakness of budgetary capacity

- 18 -

results in an inability to allocate adequate resources and control spending.The budgetary process is plagued by several problems, including:(a) insufficient coverage of the various public sector segments; (b) absenceof budget programming and therefore of a regular programmatic review of publicexpenditures; (c) inaccurate registries and absence of timely budget data, andtherefore inadequate monitoring of budget execution due to lack of accountingnorms, institutional weakness of the public sector financial authority, andunenforceable reporting requirements; (d) ex-ante and ineffectual control;Ce) the breakdown of the public investment planning process and the absence ofa link to the budget; and (f) the lack of computerized information systems tosupport financial management, programming, execution and evaluation of thebudget, as well as control.

28. The Government recognizes the need for both legal andinstitutional change to regain control over Argentina's public expenditures.The National Public Sector requires a legal framework for modern financialmanagement, including budget and control of expenditures. Accordingly, theGovernment with Bank assistance has prepared a draft Law on FinancialManagement and Performance Control that would:

(a) Implement a comprehensive financial management framework for theNational Public Sector, allowing differentiated treatment of thevarious segments or components (Central Government, DecentralizedOrganizations, Special Accounts, public enterprises, and socialsecurity funds), but guaranteeing an integrated budgetary process;

(b) Define financial and budgetary authority and assign theresponsibility to the Subsecretary of Finance, Ministry ofEconomy, to carry out a comprehensive financial management and anintegrated budgetary process. In addition, would define specificresponsibilities for each key financial management function andagency (Contaduria General de la Naci6n (CG), Direccidn Nacionalde Programacion Presupuestaria (DNPP), the new office for DebtManagement and the Treasury), as well as for all National PublicSector entities and executing units (including budget programming,execution, monitoring and evaluation, as well as reportingrequirements);

(c) Establish a modern institutional structure for control by:(i) assigning full accounting responsibilities to the CG(coordination of the new financial and accounting informationsystems, accounting norms, and the preparation of the nationalfinancial accounts); (ii) creating a system for internal controlby transforming the existing SIGEP into a general comptroller ofthe Executive (Sindicatura General de la Naci6n-SIGENAC) reportingdirectly to the President, and establishing a network of internalauditing units reporting to the heads of the various governmententities and operating on the basis of auditing norms defined bySIGENAC and under its supervision; and (iii) restructuring theTribunal de Cuentas de la Nacion (TCN) into a new ContraloriaGeneral de la Nacion (CG), an agency for external control, withfull administrative and financial independence. While theinternal control function will support executive managers throughmonitoring and audits, the external control function will

- 19 -

essentially be focused on ex-post performance control exempt frompre-control and performance judgement practices, reportingdirectly to Congress, concerning (i) audits performed directly-orthrough qualified audit firms, and (ii) the information producedby the internal control structure; and

(d) Define the basic principles under which the Executive could makeuse of foreign and internal credit and would limit the changes inthe level of indebtedness to the amounts incoroorated in thebudget.

29. The Government has also undertaken an action program to modernizeits financial management and effectively reconstruct the budget process.First, it has established a task force to design and implement the new basisfor budget programming, execution, monitoring and evaluation. The advancepreparation of the 1991 budget (sent to Congress in February 1991)incorporates: (a) an efficient procedure to cope with inflation; (b) aprogrammatic review of expenditures taking into account the administrativereform program and the new policies defined for the public sector;(c) measures to strengthen public investment planning through approvedanalysis and project selection in the budget process; and (d) recommendationsto improve resource allocation in the budget through a better definition ofthe nature of expenditures and the associated budget program structure. Thereare also ongoing efforts to improve existing information systems in theAccounting Office, the Treasury, and the Budget Office. These efforts wouldbe continued to facilitate a completely new and comprehensive basis for budgetpreparation, execution, and control beginning in 1992.

30. Second, the Government, through Decree 2476/90 (November 26, 1990)on Rationalization of the National Public Administration, has established thecriteria that will guide implementation of a program to reduce the scope andcoverage of earmarked special funds. Previously, Decree 1757 had extended thepower of the Subsecretary of Finance to reassign up to 100 percent of thefunds originating in the accounts. It is expected that the Government willmake progress in the implementation of this program by reducing the coverageof earmarked funds, incorporating revenues into general revenues, and reducingfunctions and expenditures. This will be undertaken in conjunction with theadministrative reforms to eliminate unessential funds and agencies. The fullimplementation of the rationalization/elimination program will take place inabout a year and be consistent with a thorough programmatic review of thebudget relative to administrative reform targets.

31. Finally, to improve transparency and institutionalize furthertransactions with the nonfederal public sector (public enterprises andprovinces), the Government intends to limit amounts transferred to theseentities to the amounts approved in the 1991 budget. For the provinces thiswould entail supporting transfers only through the Coparticipation Law anddesignated special funds. For the public enterprises, explicit but decliningsubsidies would be given to the railways as well as a specified level oftransfers from the national oil company (YPW). These budgetary commitmentswould complement reforms already underway and supported by the PERAL.

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Proposed Assistance

32. A completely new basis for budget programming, execution andcontrol would be established to facilitate a comprehensive public sectorfinancial management framework. To achieve this, the Subsecretary of Financehas prepared a draft decree to develop an Integrated Budget and AccountingSystem for the National Administration. The objectives of the proposedIntegratad Budget and Accounting System (Sistema Integrado de Presupuesto yContabilidad - SIPRECO) are: (a) rationalization of budgetary and accountingprocedures; (b) generation of updated and complete public sector financialinformation; (c) creation through computerization of consistent and autonomousfinancial management in all the entities involved; and (d) incorporation ofmodern technologies for efficient administration of public res'urces. TheSIPRECO would include various systems specifically for the Budget Office(DNPP), the Accounting Office (CG), and the Treasury, as well as systems thatwould interrelate them with those for debt management, revenues, and payments.In addition, the SIPRECO structure would be extended to the internaladministration networks throughout the National Administration.

33. The Bank, under the Public Sector Management Technical AssistanceProject, has financed: (a) the preparation of a draft of the new FinancialManagement and Performance Control Law; (b) a study (being prepared by ECLAC)to evaluate the existing budgetary process and produce recommendations toimprove budget programming; (c) consultants to improve existing informationsystems in CG and the Treasury; and (d) the design of a new accounting system.

34. The Bank will finance the following activities of this component:(a) design of the new criteria and establishment of new methods to improvebudget programming and public sector financial management, and more widespreadimplementation to ensure efficient resource allocation. This implies thecontinuation of activities initiated by ECLAC that now emphasize theimplementation of new methods and techniques (USS0.3 million); (b) preparationof manuals on the new guidelines (including draft decrees), methods andprocedures (to be applied in budget preparation and execution, accounting, andinternal and external control), as well as related policy guidelines that willbe needed as a result of approval of the draft Law on Financial management andPerformance Control (US$0.65 million); (c) development and establishment of ar.integrated financial management information system (SIPRECO). This wouldinclude computer hardware and systems development (US$3.15 million); (d)training and professional enhancement program for officers of key financialagencies (the Accounting Office, *he Treasury, the Debt Management Office, andthe National Department for Budget Programming), the institutional structurefor control and those of the internal administration network responsible forthe newly integrated financial management and control systems and procedures(USSO.9 million); and (e) coordination and technical management of thecomponent (US$0.1 million). The total estimated cost of activities to befinanced by the Bank is US$5.1 million.

35. The main outputs/impacts of the proposed assistance will be:(a) implementation of SIPRECO and therefore availability of the requiredinformation for efficient budget execution and control; (b) a newmethodological and administrative basis for public sector financial managementand budget programming, and therefore improved resource allocation in thebudget process; and (c) strengthening of the OG, DNPP, the Debt Management

- 21 -

Office, and the Treasury, the institutions .n charge of the structure forcontrol, and the internal administration networks of the Central Government toperform adequately in the reformed financial management and controlenvironment.

IV. REORGANIZATION AND MODERNIZATION GF THE CENTRA BANK(Estimated cost of US$3.28 million)

Maior Problems and the Reorganization of the Central Bank

36. Since the present Government took office in mid-1989, it hasrecognized the need to change the Central Bank's organizational structure. Atthe request of the Government of Argentina, a Bank Financial Sector Missionwas undertaken in October-November of 1989 with the objective of makingrecommendations in this area. The mission, with the assistance of the USFederal Reserve, identified many problems in the Central Bank's organizationalstructure. It made several recommendations, the principal one being that theCentral Bank's core areas be separated into operations and analytical areas,rather than, as at present, into external and domestic areas, each of whichembrace operations and analytical activities. The spreading of functionsamong many and diverse management units has slowed decision-making andinformation processing.

37. The Central Bank's Directors approved a reorganization of theSuperintendency of Financial Entities in July 1990, and carried it out inSeptember 1990. The general Central Bank plan for reorganization has beenrecently approved by its Board of Directors, and the reorganization process isalready underway. The new structure is essentially consistent with the WorldBank's recommendations. The Central Bank has also prepared a draft decreethat would establish its financial autarchy; the proposed decree is beingreviewed by the Presidency and is expected to be approved in the next fewweeks. Finally, it is also expected that the Executive will send to Congrossa proposal for the new Central Bank's Charter that is consistent with theobjectives of the economic reform and incorporates the implications of therecently approved legislation guaranteeing full convertibility of the austral.

38. The reorganization plan would reduce the 23 departments to 18.There would be two basic areas as before, each headed by a Sub-General Manager(Subgerente General); however, they would be designated a Policy Area and anOperations Area. Central Bank divisions were organized by subject matter,e.g., the Financial System Studies and Financing Division compiled statisticsand managed the financing operations. The reorganization would permit a moreprecise delineation of operations unit activities. The Central Bank'saccounting system would be reconstituted to reflect this change. In effect,only operations units would be able to handle accounts, with each operationsunit only able to affect a defined range of accounts.

39. Under the new organization, the main functions of the Policy Areacomprise: (a) economic, monetary, and banking studies; (b) statistics; (c)monetary and exchange norms; (d) monetary policyl and (e) external sector.The Operations Area includes: (a) open-market operations; (b) creditoperations; (c) accounting; and (d) treasury. In addition, there areoperations areas to handle Liquidations of Financial Entities, the

- 22 -

Superintendency of Financial Entities, and the support areas of Administrationand Legal.

40. The reorganization is likely to encounter some practicalobstacles. The most important is that at present a very small number ofrelatively high-ranking staff cperformarry out a large number of crucialactivities. The proposed reorganization would divide these activities betweentwo or more departments. Appropriately skilled and trained staff may not nowbe available to carry out all of the functions as described in thereorganization. This is part of the problem the reorganization aims to solve.In following up the reorganization, skills would be disseminated more widelywithin the BCRA.

41. The Central Bank has a severe deficiency in its computingequipment. It has taken some steps to remedy this deficiency--some computingequipment has recently been acquired under the Public Sector ManagementTechnical Assistance Loan (PSMTAL)--but lack of resources has prevented itfrom completely solving this problem. The problem may be broadlycharacterized as follows. First, in the areas concerned with information-gathering, data-processing and analysis, there is an acute lack of computingequipment. The Central Bank's capacity to maintain and process informationfor its own use is accordingly limited. Policy-making is hamstrung by theinability of analysts to simulate even the simplest models of the economy.This major flaw contributes to the difficulties of undertaking routine dailyactivities such as monetary programming, balance of payments programming, andanalysis of financial institutions. A related problem is that access toinformation within the Central Bank has become increasingly inefficient.Second, lack of up-to-date equipment has served as an obstacle to themodernization of the Central Bank's operational capacity. Information abouttransactions is transmitted to the Central Bank's accounting system slowly andis poorly organized. As a consequence, Central Bank management is oftenuncertain about the state of the Bank's policy instruments. The procedures bywhich information is transmitted to the accounting department are extremelydeficient, and will require major changes. A particular problem is thetransfer of data between the Superintendency of Financial Entities and themain part of the Central Bank, which are located eight city blocks apart. TheCentral Bank's mainframe computer, which is almost a decade old, is bothobsolete and operating dangerously close to its capacity limit.

Proposed Assistance

42. The Government's overall objective is to restore the CentralBank's effectiveness so it can meet its primary objective of ensuring theexternal and domestic stability of the austral. To this end, the Governmentintends to provide the Central Bank functional independence by promulgating anew Charter, recapitalizing it, and providing it with the requisite technicalcapacity. Activities under the PSRTAL would help strengthen the CentralBank's technical capacity.

43. The proposed assistance would provide support fort (a) stafftraining in areas of Central Bank functions including monetary programming,macroeconomics, financial analysis, and banking (US$0.2 million); (b) externaltraining for Central Bank staff in open market operations and in internationalreserve portfolio (US$0.1 million); (c) training of Bank staff in debt

- 23 -

reporting and management (US$0.08 million); (d) strengthening the managementof data bases and information services, including large debtors, disqualifiedchecking account holdere, and bank data (US$O.1 million); (e) designing a.Procedures Manual in conjunction with the planned reorganization (US$0.2million); and (f) design and implementation of an Automation Plan includingsystems development, hardware, and training of Central Bank staff in the newsystems (US$2.5 million); and (g) coordination and technical management of thecomponent (US$0.1 million). The total cost of activities to be financed bythe Bank is US$3.28 million.

44. The Central Bank is presently preparing an Automation Plan that

includes a plan of action over the next three years for mainframeinstallation, acquisition of personal computers, development of an internalnetwork, and external linkages (including linkage to the Superintendency of

Financial r-itities). This plan would also include provisions for training incomputer systems for Central Bank staff. An internal committee has been setup within the Central Bank to plan training programs in various areas in whichCentral Bank staff require greater competence (apart from computer skills).Outside training at the IMF is being considered for Central Bank staff. TheCentral Bank will need to set up a committee to begin planning a proceduresmanual in conjunction with the reorganization now being implemented and theAutomation Plan. The Central Bank will also need to seek consultingassistance for its data base management. For training in operations, theassistance of the Federal Reserve Bank of New York (FRSNY) and the Center forLatin American Monetary Studies (CEMLA) is being considered. Finally, WorldBank assistance in debt reporting and management is presently underconsideration.

45. The expected result of the activities proposed would be: (a)establishment of computer systems and equipment; (b) successfully completedcourse work by staff indicating proficiency in use of the new systemsl(c) completed course work by staff indicating proficiency in central banking

skills; (d) a useful procedures manual; (e) effectively organized data bases;and (f) effective and skilled operations staff are to disseminate acquiredknowledge among other staff. The Central Bank would improve its operation,

which would thus permit the authorities to stabilize the macroeconomy more

effectively.

V. REORGANIZATION AND MODERNIZATION OF THE SUPERINTENDENCYOF FINANCIAL ENTITIES (SEP)


Naior Problems and Recent Reorcanization of SSF

46. The SEF's practices regarding loan classification, provisioning,and interest, are both lenient and inconsistently applied. Various norms

regarding accounting, liquidity and solvency, control systems, creditevaluation, liability regulation, and monetary regulation, have over the yearsbecome overly complicated and increasingly ineffective. The internalorganization of the SEF is inefficient, partly because responsibilities werenot clearly delimited, but also because coordination was ineffective. Inparticular, the SEF separated staff who analyzed bank reports from those who

inspected banks. Inspection procedures currently emphasize financialinstitutions' compliance with reserve requirements, but inadequately assess

- 24 -

solvency and profitability. There is also a human resources problem: manystaff lack the necessary skill to evaluate Argentina's financial institutions.The SEP's information systems have a number of deficiencies. Moreover, the8E lacks the data processing capacity to manage the large quantity ofinformation it must process to supervise adequately Argentina's financialsystem. In fact, financial institutions are required to provide far more datathan the SEF can absorb.

47. Although a large percentage of bank loan portfolios are weak, witha concomitant problem of improper asset classification, the negativeconsequences to the banks under present circumstances are limited sinceArgentine banks generally have a high ratio of capital to assets. Even underpresent circumstances, however, an effective SEP would be helpful for tworeasons; (a) it would help verify the low (in many cases uegative) profitflows banks are now earning, and (b) it would help the authorities to overseebetter the process of consolidation that will be essential for Argentinebanking institutions to become effective and efficient. In any case, once theArgentine financial system returns to active lending, the SEF will have to beprepared to carry out ar. adequate supervisory role. This is the objective ofthe reforms to be supported by the PSRL and the PSRTAL with respect to theSEP.

48. In September 1990, the Central Bank undertook a fundamentalreorganization of the SEF. The new organizational structure, by itself, doesnot make the SEP more effective; however, it should provide a framework withinwhich progress can more easily take place. The most important effect of thereorganization is to end the separation between the analysis and inspectionfunctions. In addition, the reorganization creates a more streamlined andadaptable structure. One reporting level has been eliminated at the core ofSEP's control (compilation, monitoring, and analysis of data) and inspectionfunctions. More importantly, the basic inspection units would be reorganizedto permit flexibility: the management of the SEF can thus constitute itssupervision teams as necessary to accommodate the evolving state of thefinancial system. Finally, several units previously outside the SEF but moreappropriately part of the superintendency functions were integrated within it--in particular the "norms" unit and the units that evaluate financialentities, which includes the system that monitors "large debtors."

49. The new SEF is structured as follows. The institution is headed(as before) by a Superintendent, one of the highest ranking staff in theCentral Bank, Sub-General Manager (the position of General Manager iscurrently vacant and may be eliminated by the new Charter). There are threedivisions (gerencias), each headed by a manager and comprising severaldepartments: Supervision, Financial Entities, and Technical. In addition,there are two separate Departments dealing with administration of the SEF andcontrol of foreign exchange operations that report directly to theSuperintendent. Under the previous structure, there were four divisions:Control; Inspections; Authorizations for New Entities; Branches and Agencies;and Maintenance of Norms. The control and inspection functions have beenseparately maintained, wit.n virtually no interaction between analysts andinspectors.

SO. The authorities Intend to bring the SEF "up to speed" to supportthe process of financial revitalization they hope to bring about in the medium

- 25 -

torm. In the short term, the SEF will deal with the deteriorating situationin many banks owned by provincial governments. The basic strategy is toimprove the computer capacity of SEP centers by not only training staff forcomputerization but simultaneously improving staff skills in SEP procedures.As a result of reorganizing and computerization, the authorities hope the SEPwills better process information it receives from financial institutions, andprovide the results of its analysis more effectively and rapidly to decision-makers. At the same time, the SEP should take advantage of the computertraining it will have to provide, to focus on more up-to-date analyais andinspection techniques.

51. The Bank would provide financial and technical support for thecomputerization of SEF and subsequent training under the proposed PSRTAL.Funds from the existing PSMTAL already are being applied in an initial phaseof the computerization program. These funds should enable the SEF to obtainpersonal computers for use in implementing pilot procedures that will serve asthe planning basis for future computer operations.

Pronosed Assistance

52. The PSRTAL would provide support for: (a) staff training in theareas of Superintendency functions such as inspection procedures, financialanalysis, banking practices, and economic analysis (US$0.2 million); (b)revising and updating the various existing norms (US$0.1 million); and (C)design and implementation of an Automation Plan, including systemsdevelopment, computer equipment, and training SEF staff in the new systems(USS1.24 million); and (d) coordination and technical management of thecomponent (US$0.08 million). The total cost of activities to be financed bythe Bank is US$1.62 million.

53. The SEP is preparing an Automation Plan, including a plan ofaction over the next three years for installation of its central computer,acquisition of personal computers, the internal network, and externallinkages, including linkage to the Central Bank main host. The plan wouldspecify the program for training in computer systems necessary for SEP staff.The SEF would also establish a training program in areas in which SEF staffrequire greater competence other than computers. The SEP also would establisha program for review of the existing norms. Lastly, it would determineconsultancy needs for database management.

54. The expected results of the activities proposed would be: (a)systems in place and installation of main computing equipment and network; (b)completed course work by staff indicating proficiency in the use of theequipment; (c) completed course work by staff indicating proficiency insupervision skills; (d) revised norms, along with procedures in place forongoing review of norms; (e) effectively organized databases; (f) properlyinspected provincial banks; and (g) effective and well-skilled staff withskills well disseminated among its members. The expected outcome/impact isthat the SEF would operate more efficiently, which would permit theauthorities more easily to detect problems in banks and enable them to actmore quickly to cortrol these problems.

- 26 -

VI. IMPLEMENTATION UNIT FOR THE PSRTAL(Estimated cost US$0.6 million)

55. The Project Implementation Unit (PIU) will support the Ministry ofEconomy in the management of the Project, as well as in the coordination andfollow-up of activities under the five project components to ensure successfulimplementation of the Public Sector Reform Technical Assistance Project.

56. The PIU will include a Project Coordinator, who will act as DeputyNational Director, and two executive-level professionals (one Computer Expertand one Management Assistant) --all of whom will report to the NationalDirector of the Project. To facilitate the administration and relatedprocurement needed by the Project, the Government will sign a ManagementService Agreement with UNDP-OPS or other suitable management arrangementacceptable to the Government and the Bank.

C. PROJECT ADMINISTRATION AND IMPLEMENTATION

organization and Implementation

57. The Borrower will be the Republic of Argentina. The Ministry ofEconomy (ME) will be the Executing Agency. The National Director who will beappointed by the Minister at least at the level of Subsecretary will head thePIU and be responsible for overall project implementation. A full-time DeputyDirector will be assigned to the Subsecretary with powers to hire consultantsand request disbursements from the Bank. The functions of the PIU would beto: (a) manage Bank financing with the support of UNDP-OPS; (b) keep closecontact with the Counterpart Institutions and the Coordinators of the fivecomponents and provide technical support as required; and (c) monitorcompliance with the Bank's legal agreement. In carrying out the proposedproject, the National Director would facilitate the implementation of specificproject components with: (a) the Customs Department for its modernizationprogram} (b) the Administrative Departments of the Ministries and thePresidency for the development of new integrated administrative systems andprocedures; (c) the Subsecretary of Finance for development of the new basisfor comprehensive financial management and control; and (d) the Central Bankand the Superintendency of Financial Entities for the needed support in theirreorganization and modernization efforts.

Procurement

58. The goods and services to be financed under the project,summarized in Schedule A, would be procured in accordance with Bank Guidelinesfor procurement. Contracts for the procurement of equipment, supplies, andmaintenance items equivalent to US$250,000 or more would be awarded throughICB; items between US$25,000 and US$250,000 with an aggregate amount not toexceed US$500,000 would be made through LCB. No contract for the procurementof equipment is expected below US$25,000; if this case occurs, contractsvalued below US$25,000 up to an aggregate amount of US$100,000 would beawarded through local or international shopping by requesting quotations fromat least three eligible suppliers. Local manufacturers will be granted apreference margin according to Bank Guidelines in all contracts for goodsawarded under rCs procedures. The Government's LCB procedures have beenreviewed by the Bank and found acceptable. Consultants for technical

- 27 -

assistance and training services under the project would be selected inaccordance with Bank Guidelines and under terms of reference and employmentconditions satisfactory to the Bank. It is expected that most contracts willbe awarded to consulting firms for more effective project management.

59. All ICB contracts and the first two LCB contracts for goods willbe subject to prior review by the Bank. All other contracts would be subjectto ex-pogt review by the Bank. In addition, whenever possible, procurementwill be made on the basis of packages of US$250,000 or more.

60. To facilitate the procurement of equipment and the hiring ofindividual consultants, the Borrower has proposed to the Bank to employ UNDP-OP8. Previous experiences with UNDP-OPS in supporting the management ofBank's projects in Argentina are good; they have an office in Buenos Aireswith broad experience in handlLng this type of project. In addition, giventhat the PSRTAL would finance to a large extent a relatively limited number ofmain contracts for goods and consultant services, it is expected that theiradministrative commission will be significantly lower than the one applied toformer Bank projects in Argentina. Finally, the respective Management ServiceAgreement would specify that UNDP-OPS would follow Bank guidelines forprocurement of goods and contracting of consultant services.

Disbursements and Financing

61. Disbursements would be made on the basis of Statements ofExpenditures (SOEs) for contracts valued below US$250,000. For every contracte-ual to or above this amount, disbursements would be fully documented. Fordisbursements made through SOEs, detailed documentation providing evidence ofexpenditures would be retained by the PIU at ME and/or UNDP-OPS Office inBuenos Aires, and made available for the required audit and also forsupervision by the Bank. A special account will not be established in thiscase because of the service agreement being considered with UNDP-OPS.

62. The Government's contribution of approximately US$8.5 millionequivalent would essentially consist of counterpart staff, administrative andcomputer equipment, office space, supplies, secretarial services, and vehicleoperation to be provided in the different project components.

Accounts and Audits

63. Separate accounts would be kept for all expenditures made underthe project. The PIU at ME and/or the UNDP-OPS Office in Buenos Aires wouldmaintain records and accounts for all project activities. The accounts andSOBs would be audited each year by auditors acceptable to the Bank inaccordance with the Bank's Auditing Guidelines. The audit reports would besubmitted to the Bank not later than six months after the close of eachproject fiscal year.

Attachment IPage 1 of 11I

ARGENINA

PUSLIC SETOR TEfG tECMIIICAL ASSISTAIME W

IUTRIX OF MY POECT ACTIVITIES

FAIN 6 0VEMEUT PROJECT IIENT INSTITUTIONAL ARRANGEl MS EXPECTED TIMING TARGSOSJECTIVES ACTIVITIES AND RESPONSISILITIES UTPUTIIMPACT (STARTINGfNPLETION OATES)*.................... , ,... ............................... .............................. ..................... _. __........ .................1. CSTUM MUERNIZATION

PROO........... .................... .. .

1. Institutional strengthening Ia. Internationdl consultants to 1a. lational Administration of Is. WUTPUTS: Design aNd laple- la. Systems Developent andard rationalitation of the provide assistance In the propi - Customs Undersecretariat of mantation of an Automated Plan Adaptation of the coqeuter-Custem Department (Aduinistra- ration, mnitoring and toplem- Pubtic Finsnce inistry for the developqent of the lied syste.cion Nacional de Adunas -ANA) entaticn of an Auteantion Plan of Economy. coqputerized system. Starting date: July 1991.indicating a ptln of action INPACT: A more effective and CompLetion date: March 1994.over the next three years for efffeient Argentine Customsthe develepment of the corputer- that enuld: (i) detect irre8u- installatIon of Nardwarelied Customs project. larities in International and Establishment of theThia would include: (i) systems exchanges; (ii) provide infor- Network:develtpment and adaptation mtion on the nature of goods Starting date: July 1992. 00(including trriffs, petitions, and materials exchanged; Corpletfon date: July 1993.export/fiport operations (fif) red4ce risk and fraut;statistics, declaration, (iv) provide faster releasef scalization); and (i) atqui- of goods and minimum require-sition mid installation of ments for documentation; ondhareSmre and establishment of (v)facilitate the creation of aa comumication network. ceqplete data base on InportEstimated cost: US$6.0 mnllion information.

lb. Assistance in the revision lb. National Administration of lb. OUTPUT: Customs operational lb. Starting date: Juty 1991of current custon norms and Customs, Undersecretariat of Manual incorporating revised Comptetion date: March 1993procedures to be incorporated Pubtlc Finance, ministry customs norms and proceduresinto a single Operational Manual of. Economy. and related functionaland In the preparation of a reorganization of services.strategy paper for reorgani- IMPACT: Effective customszation of the services derived norms and procedures.from simptIfication ofprocedures.Estimated cost: US#0.3 million

1c. Training progrmm for staff 1c. National Administration of lc. OUTPUTS: Training of ANA 1c. Starting date: Jan. 1992and all those Involved in Customs, Undersecretariat of staff. CompLetion date: June 1994Internationat trade in customs PubiLc Finance, inistry tMPACT: Staff proficiency Insystems and related new customs of Economy. computerlted customs systemsregulations and an Introductlon and new customs regulstionscourse on the custom's computer and well Informed internationalproject. traders on the customs computerEstimated eost: USSO.2S million project.

Attachment IPage 2 of 11

MAIN GO9ERN T PROJECT COPONENT INSTITUTIONAL ARRANGEMENTS EXPECTED TMINlG TARGETS8JECTIVES ACTIVITIES AND RESPONSIILITIES OUTPUT/IMPACT (STARTING/COMPLETION DATES)................................ ,...... ...................... ........... ........... ..................... .......................2. Coordinate and support the 2. International consultant to Id. National Adcinistration of Id. Outputlzapact: A well Id. Starting date: July 1991lpplemmntatfon of -the cocponent. provide support with the Customs, Undersecretoriat of managed and properly ifptemen- Caopletfon date: Jium 1994.

coodination and technical Pthtic Finane, Ministry ted cocponent.manaement of the copponent. of Economy.Estimated cost: USSO.25 mitlion.......... ..................... ................................ .............................. ................................ ............................


NAIN _'VE ex NT PRCJECT C _ INSTITUTIONAL ARRANGEMENTS EXPECTED TINING TARGETSOBJECTIVES ACTIVITIES AND RESPONSIBILITIES OUTPUT/IMPACT (STARTING/COMPLETION DATES)

t. ADMtRISTRAtTIVE REFORM ANDMODERNIZATION OF THE CENTRALGOVERNMENT

1. Strengthen the internal 1. Assistance in the design 1. Eight ministries, the 1. OUTPUTS: Guidelines for 1. Design of The Plan andadministrative functions in of guidetines for standard Public Function Secretariat, standard internal administ- New Procedures:the newly restruetured internal adfinistrative proced- the Subsecretariat for rative procedures, install- Starting date: Sept. 1991.ministries of the Central ures, and implementation of Administrative and Technical ation of computerized systems Completion date: Dec. 1991.Government, and more speci- related computerized systems for Coordination of the Ministry and trained technicalfically in the newly created personnel, financial and of Economy and the Comptroller personnel in each of the Systems Development:internal administration networks facility management, and Executive Committee for the Central Government Ministries Starting date: Dec. '1991.(Central Departments and procurement for the eight Administrative Reform and the and the Presidency. Completion date: Dec. 1992.Delegations) in the eight ministries. This woutd include Commission for Administrative IMPACT: Consolidation ofministries: (Health, Education, computer hardware, systems Reform in every Ministry. the Governmen;tts Administrative Adaptation and Estabtish-Economy,Foreign Affairs, Defense development, software packages, Reform through institutional ment of The Systems in allLabor, Justice and Interior) and and training. strengthening and moderniza- iinistries and in thein the Presidency. Estimated cost: USS 3.1 million tion of internal administra- Presidency:

tive functions in the Centrat Starting date: Jan. 1993.Government. Completion date: July 1993.

Installation of Hardware:Starting date: July 1992.Completion date: June 1993.

Training:Starting date: July 1992.Completion date: June 1994.

2. Rationalization and simplifi- 2a. Provide assistance in the 2a. The Subsecretariat for 2a. OUTPUTS: A general Decree an 2a. Decree on Oeregulation,cation of norms and regulations review of existing norms and Administrative and Technical Normative Deregulation, Recomvndations for thegoverning selected economic regulations, and in the formula- Coordination of the Ministry recommendations for the ration- Rationalization and Simpli-activities (i.e. insurance, tion of recommendations for of Economy, the Comptroller alization and simplification of fication of Worms and Regu-ports. regional markets, rationalization and simplifi- Executive Committee for the norms and regulations governing lations governing selectedpharmaceutical products, ane cation of selected economic Administrative Reform, and the selt-ted economic activities. economic activities.quality control for food activities. Commission for Administrative IMPACT: Consolidation of the Starting date: Oct. 1991.export.) Estimated Cost: uS$1.4 million Reform in every Ministry. Government's Adninistrative Completion date: Sept. 1993.

Reform through streamlirnednorms and regulations governingcritical economic activities.

2b. Assistance in the design 2b. The Subsecretariat for 2b. OtTPUTS: Installation of Starting date: July 1991.and implementation of a compu- Administrative and Technical computerized systems to handle Conpletion date: Dec. 1992.terized system for the handling Coordination of the Ministry the streamlined norms andof streamtlined norms and of Economy, the Comptroller regulations, and trainedregulations. This would include Executive Comnittee for the technical personnel in the newlycomputer hardware and training. Administrative Reform, and the restructured Goverrnent bodies.Estimated Cost: US$0.2 million Co'mission for Administrative IMPACT: Consolidation of

Reform in every Ministry. Government's AdministrativeReform through modernizationof normative functions in thenewly restructured Governmententities.


MAtE GOVERNMENT PROUECT CWPONEMT INSTITUTIONAL ARRANGEMENTS EXPECTED TINING TARGETSOBJECTIVES ACTIVITIES AND RESPONSIBILITIES OUTPUTfIIPACT (STARTING/COMPLETION DATES)

3. Transfer of public services 3. Provide assistance in 3. The Subsecretariat for 3. OUTPUTS: Recomendations for Starting date: Oct. 1991.to the provinces through a well analyzing the impact of the Adeinistrative and Technical the preparation of the legal Completion date: March 1993.designed decentralization transfer of public services Coordination of the Ministry basis associated with theplan. to the provinces, preparing of Economy, the Cocptroller decentralization of public

the legal basis associated with Executive Committee for the services: guidelines for thethe decentralization effort, awd Administrative Reform, ard the preparation and eventualformulating guidelines for the Comrissien for Administrative transfer of public services.actual transfer. Reform in every Ministry. IMPACT: Consolidation of theEstimated Cost: USS 0.8 mitlion Goverreent's Administrative

Reform through a well designeddecentralization plan and asmooth transition of publicservices to the provinces.

4. Coordinate and support the 4. hational consultant to 4. Eight ministries, the 4. Output/Impact: A well managed 4. Starting date: July 1991.implecntatton of the component. provide support with the Public Function Secretariat, and properly implemented Completion date: June 1994.

coordination and technical the Subsecretariat for component.management of the component. Administrative and TechnicalEstimated cost: US$0.1 million. Coordination of the Ministry

of Economy and the ConptrollerExecutive Committee for theAdministrative Reform and theComnission for AdministrativeReform in every Ministry.

._ _ _ . . _. ..........,,,,,,.........------------------ ------------- ------------------------------ -------------------------------- ,. , ,,.,,,,,,,,,,,,,,,,-,,,,,.,,,,,,-------,.,.,,,.-

Attacl_st IPag 5 of 11

1R POJECT cO _oNT ITITUTI0L ARRAGEITS EXPECTED TINIII TARGETSOBJECTIVES ACTIVITIES AD RESPoCSI5ILITIES OUTPUTIIMPACT (STATItW/MIMETI DATES)................................ ................................ .............................. ............................ ............................111. PUILIC SECtOB CTOMlNlENSIW

PIUNACIAL _MAEENT AD

................................1. Strengthe finaniel_mru mp t budgetary process Ia. Dosinf of new criteri and 1a. Undersecretariat of la. OUTPUTS: Develqpet of an la. Starting date: Juty 1991wd control of the pubic establishment of new methods Ffnance. Ninistry of Econoamy. integrated fraework for Completion dote: July 1993.ector. to iqepove budget pregrandng psbtlc sector financial manaew -

sn resource allocation through- Mont and budget programaing,out the budgetary process. This execution, evaluaticn sndfoplies the continuation of control.activitfes initiated uith ECUtC IMPACT: Reproved allocationunder PSUTAL financing. and controt of public resources.Estimated Cost: US$0.3 million

lb. Provision of assistance in lb. Undersecretariat of lb. OUTPUT: Ilplementatfon lb. Startfnr date: July 1991the preparation of the emysts Finance Ministry of Economy, of new accounting norm, methods Completion date: Narch 1992.on norms methods, procedures and the institutional procedures, and guidetines forand suidetines needed as a structure for control. financial maement andresult of approval of tho draft performance control.Lam on Financial Mnagemt and IMPACT: Effective and updatedPerformanee Control and the execution, monitoring andassistance that would encompas control of pbtlic sectorthe development of the eonpre- financial maaement.hensi information system forpubtic sector ffnencial manage-ment and performance control.Estimated cost: USS0.65 mltlion

Ic. Assistance in the develop- ic. Undersecretariat of lc. OUTPUT: Design and lnptemnr- lc. Starting date: July 199tmoent and establishment of an Finance, Ninstry of Economy. tation of the computerized Coapletion date: March 1994.Integrated financalt management system SIPRECO.Information system (SIPRECO). IMPACT: Effective and updatedThis would include computer execution, monitoring andhardware and systems development control of pibtic sectorEstimated cost: US$3.15 milion. financial magement.

Id. Training and professional Id. Undersecratariat of Id. OUTPUT: Persomet trained Id. Starting date: Oct. 1991enhancement program for Ffnance, inistry of EconomY, to manage and operate the new Coapletion date: June 1994.officers of key financial the institutfonal structure financial management and controlagencies (Accounting office, the for control, and the National systems and procedures.Treasury, the Debt Management Departments for Adninistration IMPACT: Effective keyOffice, and the NationaL Dept. of each Ministry and the agencies for financial manage-for Budget Progreaming), the Presidency. ment and control.institutional structure forcontrol and thome of theinternal adainistration network,responsible for the newlyintegrated ffnencfal managementand control oysteam ad

stimat ed c s US$0.9 million

Atteebmut IPose 6 of 11

RUIU USIn PMUJECt SPPIEUT INUITUTIOUAL ARRANGEMENTS EXPECTED TINII TARGETSCEWECTVES ACTIVITIES AND RESPONSIBILITIES CUTPUT/ANPACT (STARTUGICOMPIETION OATES)................ ................. . ............................ ............... .............................. .............................. ................. .............................. .. ....................._,2. Coordinate and support the 2. National crnsultant to 2. Undwwsecratariat of 2. Outputllqact: A well nunaoed 2. Starting date: Juty 1991.lpiemntat1on of the compqnent. provide sLvpurt with the Finane* Ninistry of Economy. ard property iupteumnted Coapletfon date: June t994.coordinatfon and technfeal Component.oarageent of the cowpknant.

Estimated cast: US$D.1 million................................. ................................ .............................. ................................ ............................


MAIN GOVERIIENT PROJECT COMPONENT tNSTITUTIONAL ARRANGEMENTS EXPECTED TIMING TARGETSOBJECTIVES ACTIVITIES AND RESPONSIBILITIES OUTPUT/IMPACT (STARTING/COMPLETION DATES)_ _ ___ ___ _ _ , ... ... ..------ ------ ----- ------ ----- ----.- ----- ------ ------ --- - ------ ----- ------ ------ --- - - .... ..... ...... .....WV. REERGAUIZATION AYD NODERNI-ZATIO0 OF TNE CENTRAL DANK

1. Improve the Central Bankas la. Train staff In areas la. An internal committee la. OUTPUT: Training of Central la. St'-ting date: Sept.1991analytical capacity, operation- relevant to Central 8ank for reorganization and moder- Bank staff. Completion date: Dec. 1993.at skilts and organizational functions (monetary programing, nization of the Central Bank IMPACT: Improved proficiencystructure. macroeconomics, financial will be responsible for of staff in central bankinganalysis, banking). plaming training programs for operations would enhanceEstimated cost: USS0.2 million Central Sank staff. effectiveness.

lb. Outside training for lb. Central Bank. lb. OUTPUT: Effective operations lb. Starting date: Sept.1991Bank staff in open-market staff with skills transferred to Completion date: Sept. 1993.operations and in international other staff.reserve portfolio. IMPACT: Same as above.Estimated cost: US$0.1 million

lc. Training for Bank staff Ic. Central Bank. 1c. OUTPUT: More effective 1c. Starting date: Sept.1991in external debt reporting and monitoring of Argentina's Cotmletion date: June 1993.management. external debt.Estimated cost: USSO.08 million IMPACT: Same as above.

Id. Technical consultants as Id. Central Bank staff with Id. OUTPUT: Effectively Id. Starting date: Sept.1991necessary to provide assistance specific responsibilities organized data bases with Caopletion date: sept. 1992.in strengthening management of for data bases. appropriately trained staff.data bases and information IMPACT: Same as above.services.Estimated cost: USSO.1 million

le. Provision of assistance le. Designation of staff le. OUTPUT: A Procedures Manual ls. Starting date: July 1991in design of a Procedures within the Central Bank to for the Central Bank. Completion date: June 1992.Manual in conjunction with coordinas.a preparation of IMPACT: A clear descriptionthe reorganization now being the Procedures Manual, of Central Bank operationalplarned. procedures.Estimated cost: USS0.2 million

2. Development of the 2. Assistance to the Central 2. The Central Bank's 2. OUTPUT: Presentation and 2. Preparation of TheCentral Bank's information Bank's manager of Systems and Manager of Systems and implementation of the Automated Automation Plan:systems network. Information in preparing an Information. Plan, installation of computer Starting date: July 1991.Automation Plan, indicating equipment, conpleted course Completion date: Dec. 1991.a plan of action over the next work by operational staff.three years for mainframe IMPACT: Increased prodctivity Systems Development forinstaltation, acquisition of in Central Bank operations Main Operational Functions:personal computers, an and analysis. Starting date: Oct. 1991.internal network, and external Completion date: Dec. 1993.linkages (including linkageto the Superintendency of Installation of PersonalFinancial Entities). This Computers and the Firstactivifty would include systems Phase of the Locat anddevelopment, hardware and External Network:training for Centrat Bank staff Starting date: Oct. 1991.in the new systems. Completion date: Sept. 1992.Estimated cost: US$2.5 million


MAIN GOVERNMENT PROJECT COMPONENT INSTtTUTIONAL ARRANGEMENTS EXPECTED TIMING TARGETSOBJECTIVES ACTIVITIES ANE RESPOSSIBILITIES OUTPUT/IMPACT (STARTII/COMPLETION DATES)

Computer Training Program:Starting date: June 1992Completion date: Dec. 1994.

3. Coordinate and support the 3. National consultant to 3. An internal comittee 3. Output/impact: A wetlt manased 3. Starting date: July 1991.implementation of the component. provide support with the for reorganization and moder- and properly implemented Cocpletion date: June 1994.

coordination and technical ni2ation of the Central Bank component.management of the component.Estimated cost: USSO.1 million.

.......................... ,.... ........ -----------------------.-- ---------------------.----- --------------------------------.----------------------------

t0

Attachmet IPage 9 of it

RAIt T PROJECT CSIPoNENT tNsTtTUTtONAL ARRANGJ MENTS EXPECTED TIRING TARGETSO0JECTIVES ACTIVITIES AND RESPONSIBtLITIES OUTPUT/IMPACT (StARTINI/CONPLETtON DATES)............... ................. ....... ......................... ............. ,.............. ................... ..................................V. tEORGAIZATION AND NODERI-I UTION OF TIE SUPIRINTEUDENCTOF FINANCtAL ENTITIES (SEF)................................1. Improve the Superintendency 1. Train staff In areas Is. The Superinterdency of la. OUTPUT: Completion of basic la. Starting date: Sept.1991of Financial Entities' (SEF) relevant to Superi( -dency Financial Entities (SEF). course work by SEF staff. Completion date: Oecembranalytical copecity, operation- functions (inspect prose- IMPACT: The proficiency of 1992.l skills, and organizational dures, financial at isis, SEF staff in supervisionstructure. banking practices, and economic activities would contribute

analysis). to the effectiveness ofEstimated cost: SUS0.2 million SEF operations, enabling it to

monitor properly and inspectfinancial entities.

lb. Support for the revision lb. The Super4ntendency of lb. OUTPUT: Revised norms lb. Liquidity and Solvencyand updating of the various Financial Entities (SEF). along with a solid procedwre Starting date: Juty 1991.existing norms: in place for on-going review Completion date: Dec. 19t.- Liquidity and solvency; of norms.- Credit evaluation; IMPACT: tmprove the effect- Credit Evaluation, Brk- Bank liabilities; iveress of the SEF's operations. Liabilities, and Monotary- tonetary regulation rowphi- Regulation Coaptlence:once; Stsrting date: July 1991.- Inspection procedwres and Comptetion date: July 1992.- Accounting.Estimated cost: USO.1 million inspection Procedores

mid Accounting:Starting dote: Juty 1991.Coopletfon date: July 1993.,,................... .................... . ....... ........ .......... ......... . *.............................. ...................................... ..................... ................... .............. .._..2. Development of the Superin- 2. Assistance to the SEf in 2. the Superintendency of 2. OUTPUT: Presentation and Design of the Automutfontwndency of financial Entities* preparing an Automation Plan, Financial Entities (SEF). implementation of an Autometion Ptan:(SEF) information systems indicating a plan of action Plan, installation of cocputer Starting date: July 1991.network. over the next three years (ard equipment, compteted course Completion date: Dec. 1991.more loosely, two additional work by operational staff.

years) for installation of a IMPACT: Increased effective- System Development andcentral computer, acquisition of ress in SEf's inspection and Adaptations (operationalpersonal computers, the inter- supervision activities. functions):nal network, and external Starting date: Sept. 199.linkages (including linkage to Comptetion date: Sept. 1993.the Central Bank's maincomputer center). This activity Installation of Hardbarewould include systems develop- and Establishment of Networkmnnt, computer equipment, and tinkages:training for the SEP staff Starting date: Jan. 1992.in the new systems. Completion date: Sept. 1992.Estimated cost: USS1.24 million

Computer Training Program:Starting date: Jan. 1992.CoAmetim dust Ote. 195.

Attecimmt IPage 10 of 11

MAIN GOVERUIENT PRSJECT CpoNE INSTITUTioAL ARRANSENTS EXPECTED TINING TARGETSOBJECTIVES ACTIVITIES AND RESPONSIBILITIES OUTPUT/1NPA; T (STARTING/COMPLETION DATES)

.. *............................ ................................ ............... ............... ......... ..................... .......................

S. Coordinste ard support the 3. National consultant to 3. The Superintendency of 3. Output/VIpact: A well mcnaged Starting date: Juty 1991.1If ementation of the component. provide support with the financial Entities (SEF). and properly ispleonted Coapetion date: Dee. 1993.

coordination and technical coponent.mnagr_nt of the coponent.Etlimt e.t USO.S oftmilion.

.......... ,, ,...... , ....... ,..,,...................................... ................... I...............

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


NAIN GOVERNMENT PROJECT COPMENT INSTTUTIOUAL ARRANGEMENTS EXPECTED TINING TARGETSOBJECTIVES ACTIVITIES AND RESPOMSIBILITIES OUPUTIIMPACT (STARMIINO PMPETION DATES)_. _................... ........ .......... ..... ........ ........ .......... ... .... ............. ...... . .... .... .... .... ^........ ......... . .. .........VI. IMPLEMENTATION UNIT FORPSRTAL

-- I........................

1. Coordinate and support the 1. Estabtishment of a Project 1. Subsecretariat for 1. OUTPUT/1NPACt: A well managed 1. Starting date: July 1991.implementation of the PSRTAL. Coordinating Unit. Administrative and Technicat and properly Tepltaented PSRTAL. Completion date: Dec. 1994.Estimated cost: US$0.6 million Coordination of the Ministryof Economy.

........ ............. ... .... .... .......... ...................... ...... *.... .... .... ............. .......................... ...... ........ ... . ____.... ...... .. ..

OD

- 39 -

Attachment IIPage 1 of 2

ARGENTINA


Evaluation Criteria and Performance Indicatorsfor each Project Component

1. Customs Modernization Program

1. Improvement in Customs operations- Average time required for custom's clearance(Reduction of at least 202 by end 1992 and of 502 by end ofthe program]

- Number of officers intervening in an export/import operation(Reduction of at least 20? by end of the program]

- Number of administrative procedures in an export/importoperation(Reduction of at least 30? by end of the program]

2. Effective monitoring of receipts- Proportion of transactions for which computer records matchactual receipts(Increase of at least 252 by end 1992 and of at least 702by end of the program]

II. Administrative Reform and Modernization of Central Government

1. Rationalization of the support functions- Ratio of support to substantive staff[The target of the Administrative Reform Program is toradically change this ratio from the current 1:1 level to1:3 by December 1992]

2. Simplification of normative instruments and improvement ofdecision-making- Number and proportion of decisions actually deconcentrated[Deconcentration of at least 202 by end of the program]

3. Deregulation and improvement of the incentive framework forselected activities- Number and proportion of the regulations and norms that arerepealed or streamlined[Elimination or streamlining of at least 402 by end ofthe program]

4. Decentralization of Central Government- Number and proportion of the public service activities thatare actually decentralized[Decentralization of at least 202 of public services]

- 40 -

Attachment ISPage 2 of 2

SII. Public Sector Comprehensive Financial Management and PerformanceControl

1. Improved allocation of public resources- Proportion of public expenditure (current and investment)reallocated to priority programs[Reallocation of at least 252 by end 1992 and of at least401 by the end of the program]

2. Improvement of the budget process- Time required to prepare and present the budget to Congress

(At least will imply compliance with legal dates)- Waiting time to generate financial information needed for

monitoring purposes and to produce the accounts of theconsolidated public sector(Reduction of at least 252 by end 1992 and 501 by end of theprogram)

IV. Reorganization and Modernization of the Central Bank

1. Increasing Central Bank's operational efficiency- Waiting time to generate the required information fordecision-making and audit processes

- Waiting time for the presentation of the report on thecausal factors that determine expansion/contraction of themonetary base(These indicators will be reduced at least 251 at theend L: 1992 and 40? at the end of the program]

V. Reorganization and Modernization of the Superintendency of FinancialEntities

1. Increasing SEF's operational efficiency- Time elapsed between the moment in which a financial entitypresents its information and the moment in which it isavailable to be used in SEF's analysis[Reduction of at least 30S at the end of the program]

- Average time required to prepare an evaluation of thefinancial and equity position of an entity[Reduction of at least 201 by end of 1992 and of at least402 at the end of the program]

- Time required to prepare the information of the consolidatedfinancial system and the principal debtors[Reduction of at least 25? at the end of 1992)

- Waiting time for information on disqualified currentaccounts(Reduction of at least 20? at the end of 1992]

- Average annual frequency of inspection of each entity(Increase of at least 401 at the end of the program)

- 41. - ALa=_oa1Pago 1 of S

-i- _ - - --- _- _=

'.''~ ~~ {l§_

git _ g _ . . . 5 db 0

Ei - - --

Project frpnt-

ProjectConsultants Counterpart cost eff irteingProject components (MenO1nths) inputs (USS'000)-

Con-Got_ sutting Equip- ofcentract oent (198v Arge-

Project activities Local Intern. items itess months) other Bank tina Total

(b) System development (persmel, financial and facilities management) _ 3 _ 140 _ 750 300 1,050and adaptation and establishment of the systems in all ministries andthe Presidency

(c) Installation of hardware -_ Equip. _ Equip. 1,900 80 1.980

(d) Training (nine courses one In each core area of central government) I s o 200 I80 380

2. Deregulation of selected economic activities

(a) Review of existing norms and regulations and foreulation of 48 5-6 - 1,400 1,400implementation studies and programs

lb) Implementation of a computerized system for handling of streamlined - 1 Equip. - 100 200norms and regulations 100

3. Preperation of legal basis and specific adeinistration guidelines for 48 1 6-? 8CO 800 800transfer of public services to provinces and/or municipelities

4. Coordination and technical management of the conponent 36 _ = _ = 100 100

Subtotat 5,600 660 6,260

III. PUtlic Sectwr Cerd,Amive Finuicia -aNgment and Performnuce Cntrol

1. Design of new criteria and establishment of new methods to improve budget . 3 125 . 300 250 550progromming and resource allocation in all the budgetary process (thisimplies the continuation of activities initiated with ECLAC urder PSPtAL ,Dfinancing)

2. Preparatfon of the nEruts on now norms, methods, procecures and guidelines _ _ 3-4 250__ 6S0 Soo 1 150 o that will be needed as a result of approval of the draft Law on FinancialNangemnt and Performanc Control and assistance to encopmps theodevelopment and establishment of SIPRECO It

Project inputs

ProjectConsultants Counterpart costslfinancing

Project ccrponents (CmVmonths) loputs (USS4000)

Con- Govt.sutting Equip- ofcontract ment tMan/ Argen-

Project actfvfltIes Local Intern. items items months) Gther Bank tina Total

3. Training for institutional developent of key budgetary agencies (DNPP, CGN 12 100 Equip. 900 450 1,350and Treasury), the Institutional structure for control. and those of theinternal administration network that are responsible for the newlyintegrated financial, budgetary and acco3unting informatfon systems andprocedures

4. Development of ithe compter systems co_r_s_ in SIPRECD -_ _ - 1,750 - 1,750

S. Installatfon of hardware required by StPRECO = = Equip. = Equip. 1,400 1500 2,900

6. Coordination and technical _magement of the cooponent 36 lO 1 - 10t0o

Subtotal 5,100 2,700 7,800

IV. Reorganization ard Nodemization of the Central Bank (CB)

1. Training

(a) Training areas relevant to CB functions 32 16 s 0O 200 t00 300

tb) Outside training In open market operations and In international reserve t00 100portfolio I

tc) Training in external debt reporting and managemnt 12 12 25 80_ 50 130

2. Strengthening _magemnt of data bases and information services

(a) Establisluant of a system to adinister CB detabases I . 1 - 10 - 8 20 100 o

(b) In-house trainfng to the pers4mel in charge of data bases management _I - 51 - 2 10 30 uand information systems 0

3. Design of the new procederes me tual 1 251 . 200 s 250 u

,* , : . , . .:7: ..... _

con- GltsuItfng Equip- ofcontract mint CNan/ Argen-

ProJect~ activIties Local Intefn items Items eonths) Other Sank. tfn Totat

4. Design ond ifqpe.entaticn of the CS Automation Plan

(a) Preparation of the Automeatin Plan I 30 - 20 60_ so

(b) System dbvelopent for main operational functlons Inctuding training 4 275 550 1,330

(e) Acfquisition and installation of hardhmre and establits_nt of network = = - Equip. - = t.700 3.S. Coordination and technIeal management of the cepornat 36 _ _ = = 100 100

Subtotal 3.280 840 4,120

W. Recrganization ad NodernizatIon of SEF

1. TraIning In areas relevant to SEF operational functions (inspection 32 16 . 5 SO 200 400 600prooedres f fInancial analyaf. banking practices and economic analysis)

2. Revision and uqdating of existing codes of norms (lfquidity and sotvency; _I o 100 200 300credit evaluation; bank tliabilities; monetary regulation; irnpectionprice Awes and acoomtin3)

3. Automatfon Plan

(a) Design .I I 1S . 20 30 50

(b) Systess dvelopnent and adaptatfons (operational functions) including . . 4 . 125 . 520 220 740trafning _

(c) instatlatfon of hardware and establishment of network linkages E _ = pqudp. = _ 700 = 70 *

4. Coordination and technical mngement of the coaponent 30 = = _ = _ 80 _0 O

Subotal 1,620 850 2471 un

: .. . .: . ltiWtX | : t slN~~~~~~~~~~~~~~~~~~~~PrJect,, : C.. , , ', _'000)

.cn~ _ - Iutt;rs ee _ o"t. _SuItISfI EquiiP- Of. . ~~~~~~~~~~~~~~~~~ ~ ~ ~ ~~~~contract Mont (Ibn ArotProJect cetivitIs :ee cl Itrn Item t I Otlr nk tin ate%

pr. Poject lr I n Unit 126 - = _ - fquip. 600 5o0 I,2Totstl I 00 8,031.5

FItUNCING PLANcuw000)

LOWa I Forergn, Total

B. 6,500 16,500 23,000 U'

Government of Argentifn 8.500 = 8,500

Total 15,000 16,500 31,500

11E

- 46 - Attachment IV

Page 1 of 2

GENERAL DESCRIPTION OF THE COMPUTER SYSTEMSFOR MODERNIZATION OF CUSTOMS

1. The System would provide a comprehensive computerization ofall customs operatLons. It would result in simplified and moreexpeditious procedures at a time when overall effectiveness andefficiency of this key agency is being increased.

2. The specific computer systems would be the basis for acomplete automation of customs management--involving detailed data baseson tariff structure and other foreign trade policies; the registrationof manifests on the basis of which foreign trade operations take place;the registration of data on actual exports and imports; and theassociated data for fiscal inspection and statistical purposes. Thenucleus of the system would be developed under a standardized softwareenvironment (UNIX).

3. Currently, there are 54 customs offices in Argentina. TheSystem would be implemented in three stages involving: (a) the threemajor customs offices (Ezeiza first as a model office, the Buenos AiresPort and Aeroparque, together representing 80% of the customsoperations); (b) a group of six or seven offices that cover 95% of thecustoms operations; and (c) the rest of the customs offices.

4. The establishment of the System would require differenttypes of computer equipment, based on the importance of the customsoffice: (a) the largest offices would require superminis/mainframeswith their own set of workstations; (b) local networks with serverswould mainly be used for customs offices supplied in the second stage,with size capacity varying, according to the vclume of transactionsmanaged by each office; and (c) personal computers for the rest of theoffices.

5. In addition, computer equipment facilities in the variousoffices would be linked to the main computer center at the NationalCustoms Administration. These linkages would be established through acommunications network using existing infrastructure; for locations thathave no access to an existing communications network, direct lines orregular telephone lines would be used.

6. In order to work in a distributed envir6nment, it would benecessary to define a distributed management of functions. Currently,some of the import and export functions are supported in a centralizedimplementation. The installation of two compu;ere, with capacity for200 workstations in a radius of 20 km (Ezeiza, the Buenos Aires Port andAeroparque), would cover the estimated needs.

7. Both sets of equipment would back up each other and couldact as main nodeg of-the network. Data base duplication at both siteswould contribute to the security of the entire system.

Attachment IV- 47 - Page 2 of 2

8. In the intermediate offices, the orimary nodes, procedures anddata would be distributed and daily communication would be established to sendcontrol parameters and software updates.

9. The amount and type of operations dealt with in the rest of theoffices, secondary nodes, would determine the scope of distribution. Inprinciple, these customs would capture and validate data and would process itin the primary node that corresponds to its area of influence.

Estimated Costs

(US$)

Items Cost

1. Superminis/mainframes 1,000,00Oa2. Servers & local network components 8S50,0003. Personal computers (150 ws) 450,0004. Communications network components (modems & other) 700,0005. Systems developmentt 3,000,000

- Tariff structure- Manifests- Export/import- Statistics- Fiscalization

Total 6,000,000

I /a Counterpart will contribute an additional US$1.5 million.

The 'Customs Modernization" component incorporates additional assistance forthe revision of current customs norms and procedures, the preparation of acustoms Operational Manual, and training in the new regulations and systems,for a total of US$800,000.

- 48 -

Page 1 of 2

GENERAL DESCRIPTION OF THE COMPUTER SYSTEM4S FOR THE MODERNIZATION oFiNTERNAL ADiINISTRATION -o THE CENTRA GOCVERNMENT

1. The planned new systems for modernization of internal administration of theCentral Government would provide adequate tools for effective and efficientmanagement of personnel, financial resources, facilities and procurement. Theplan covers all the institutions comprising the Central Governmetit (eightMinistries and the Presidency), for which it is possible and desirable toestablish standard administrative procedures and management information systems.

2. The systems to be developed would be based on the new administrativeprocedures and guidelines that would be developed within the scope of thisproject. These systems would provide integrated solutions for the management ofpersonnel, financial resources, facilities and procurement. In these threecases, software design and implementation should be common to all agencies, eventhough some minor differences may be introduced given the special needs of someof the Ministries and the Presidency. The systems development would benefit fromsimilar existing systems that have been developed for the same purposes in othercountries.

3. In terms of hardware, the establishment of the systems recognize threedifferent levels: (a) powerful minicomputers or supermicros for the NationalDepartments of Administration of the eight Ministries and the Presidencyl (b)local networks for the twenty main administrative delegations; and (c) personalcomputers with printers for the smaller administrative units. Anotherminicomputer would be required for the Normative System. Its 4 or 5 work.2ationswould ,e installed in the Direction of Parliamentary Information. Standardinformation for its consolidation would be provided by the computers of each maincomponent of the Central Government (i.e. by the Secretariat of Public Function).

4. The computer. equipment configuration and the software design should beundertaken consistently with the automation plan of the SIPREOO project. Thesystems to be installed in the Budget Office (DNPP), in the Accounting Office(CG) and in the Treasury would have as inputs the outputs of the System of theAdministrative Directions and Services.

5. In spite actual network linkages are not indispensable because consolidatedinformation would not generally be used on-line, some communication among theNational Departments of Administration of each Ministry and its dependantservices should be recommended for mailing and data transmission. Direct linkswith the mainframes to be installed in the DNPP, CG and the Treasury should beplanned according to the patterns and protocols to be defined by the SIPRECOAutomation Plan.

- 49 -

httachment .vPage 2 of 2

Egtimated Cogta

Items Cost (usS)

1. Supermlcros(9 NDA) 1,100,000

2. Local networks(20 AD) 550,000

3. Microcomputers andprinters (110 we) 350.000

5. Systems development- Personnel- Financial Resources- Facilities 750,000

Total 2.750.000

The $Administrative Reform and Modernization of the Central Governmentw componentincorporates additional assistance for the detailed design of new administrativeprocedures, the study of deregulation and formulation of decrees and the analysisand definition of decentralization of the Central Administration functionsincluding transference to provinces and municipalities. The additionalassistance also includes the related automation plan, as well as the training onthe new procedures and systems for an amount of USS 2,850,000.

- 50 -Attachment VIPage 1 of 1

GENERAL DESCRrPTION OF THE COMPUTER SYSTEMS FOR PUBLICSECTOR FINANCIAL MANAGEMENT. BUDGET AND ACCOUNTING

1. The Integrated Information System for Public Sector FinancialManagement, Budget and Accounting (SIPRECO) would provide the fundamentaltools for a comprehensive financial management of the public sector and wouldincrease the efficiency of budgetary and accounting procedures. SIPRECOcomprlses the computerized systems for budget programming (revenues andexpenditures) and execution, accounting and treasury functions.

2. Computer equipment would be required for the Budget Office (DNPP),the Accounting Office (CG), the Treasury and linkages to the administrativeservices of the National Pub,lic Administration. Mainframes linked to internalnetworks would be required in DNPP, CG, and the Treasury. The systems to beoperated in the administrative offices will be harmonized with those of DNPP,CG, and the Treasury. Accordingly, their local networks should have thecapacity to interact with the mainframe systems through direct linkages orindirect transfers of information.

3. The detailed automation plan is now being prepared; however, theestimated maximum total cost of the central nucleus of SIPRECO would beUS$4.65 million, US$1.75 million for software and US$2.9 million for hardware.

Estimated Costs

(US$)

Item Cost

1. Supermini/mainframe 1,400,000/L2. Systems development:

- Integrated financial managementinformation system (SIPRECO) 1.750.000

Total 3,150,000

Lj Counterpart institution will contribute an additionalUS$1.5 million for computer equipment.

The Public Sector Financial Management and Performance Control componentincorporates additional assistance for the detailed design of new methods ofbudget programming, the preparation of guidelines, manuals, and procedures andfor training for a total of US$1.95 million. The computer hardware of theadministrative units acquired by the Administrative Reform and Modernizationof the Central Government component will be shared with this project.

- 51 -

Page I of 2

GENERM. tflSCR!PTION O? THE COMZUTE §YSTES aTm=

FM, TRE CEN= BB&

1. The planned computer systems network (csN) would provide daily support tothe main functions of the Central Banks interoperability with theSuperintendendency of Financial Entities (SEP) and the telecommunication with thefinancial entities. The main functions involves (i) credit and monetaryoperations; (il.) Soreign exchange operationsI and (iii) foreign debt operations.In addition, it will support the activities of the Policy Studies Area thatinvolves (i) economic and financial analysis; (ii) statistics; (iii) policyformulation; and (iv) international relations.

2. The design of the computer systems, to be developed and implemented, shouldtherefore answer to the requirements of operational and analytical functions andthose decisions taken at political and managerial levels. The systems that wouldsupport management of credit an(. monetary, foreign exchange and foreign debtoperations should be highly user oriented (for the staff in charge of thoseoperations) and provide on-line access. The development of applications shouldbe based on a data base management system and fourth generation tools in orderto let the operations distribution, statistical analysis, simulations andprojections, as well as the access to information from different work positions.The DBMS has the mechanisms required to ensure security and reliability of BCRAdata. This methodology would allow the areas with analysis functionsresponsibility to select data and process it locally. The administrative areaswould be able to process transaction in the local network and update the DataBase with summary information.

3. Data base management systems would bc required for various levels: themainframe, local networks and personal computers (PCs). In addition, specificsoftware systems for monetary and banking analysis, monetary programming, publicsector accounts, and balance of payments and foreign exchange forecasting wouldbe established.

4. In terms of hardware, the new systems demand the configuration of amainframe that would act as a back up of the BCRA host and local networks linkedto it. In this computer equipment, administrative systems would run-i ncludingpersonnel, financial and facilities management. External connections would beestablished to allow access to the most important data banks on financial andforeign trade information worldwide (involving Geneva, New York, Paris andBrussels), as well as transfers of information to and from the financialentities. The mainframe would be connected to the SEF server.

5. Two local networks are required for operational divisions and three for thetechnical and administrative areas. It is estimated that an average of 10workstations will be needed in each local network. The minimum desiredconfiguration of workstation is that of a regular AT.

- 52 -

Page 2 of 2

Estimated Cost8

Item Cost (us$)

1. Mainframe 1,100.000

2. Local network(10 ws ea) 150.000

3. Personal computers(150 w printers) 450,000

4. Systems development- Data base management system- 4th Generation Toole- Monetary operations- Exchange operations- Debt operations- Analysis software 800,000

Total 2.500.000

The "Reorganization and Modernization of the Central Bank' component will provideadditional assistance on training, database and communication consultancy and newadministrative procedures for an amount of US$780,000.

- 53 -

Page 1 of 2

GENERAL DESCRZPTION OF THE COMPUTER SYSTEMS NETWORKER THE SUPERINTENDENCY 0E. FIANCIAL ENTITXES

1. The planned Computer Systems Network (CSN) for the Superintendency ofFinancial Entities (SEF) would provide permanent support for the basic functionsof: (i) inspection and supervision of banks; and (1i) financial and economicanalysis of banks and banking practices.

2. SEP is in charge of the follow-up, inspection, and supervision of thebanking sector both private and public. Each of these banks provides periodic,detailed reports on the status of their operations, which must be evaluated bySEF. The banking sector generates a large amount of information that has to beaccurately classified and processed.

3. Similar to the proposed computerization plan for the Central Bank, theSuperintendency requires the configuration of a main computer linked to the BCRAand to local networks installed in the areas of inspection and supervision, aswell as in its technical area in charge of analysis. Local networks could beconfigured not only by functions but also by groups of banks. Total localnetworks required involve two for the three main divisions (Supervision.Financial Entities, and Technical) and one more for administrative systems andcontrol of foreign exchange operations (departments that report directly to theSuperintendent) and legal operations. A total of 100 workstations distributedamong the 10 positions of each local network and 70 personal computers attachedto the network would satisfy the needs of the SEF.

4. Given the availability of software for financial and economic analysis ofbanks, the workstations in the network would combine this software with IBN-compatible technology. The systems to be developed would use data basemanageent systems and 4th generation tools in a portable environment and wouldbe faced accordingly with the BCRA developments.

5. The mainframe would support the internal network and main storage databases as well as facilitate overall consolidated analysis of the banking sector.The mainframe would be connected to the Central Bank host.

- 54 -

Page 2 of 2

Estimated Coste

Item cost (ss)

1. Mainframe 400.000

2. Local networks(3 with 10 ws ea) 90.000

3. Personal computers withprinters (70 AT) 210.000

4. Software developmentand packages- database management systems- 4th generation tools- supervision- financial entities- technical- administration 520.000

Total 1_220.000

The "Reorganization and Modernization of SEFT component incorporates additionalassistance for training, preparation of procedural manuals, and support for thesupervision of banks, for an amount of USS400,000.

- 55 -

Attachment IXPage 1 of 2

ARGENTINA

PUBLIC SECTOR REFORM LOAN (PSRL): EXECUTIVS SUMMARY

1. Macroeconomic Context. After two decades of economicdeterioration, culminating in hyperinflation at the end of 1989 and in early1990, the Government has steadily enacted structural reforms to reduce theunderlying cause of macroeconomic instability--the fiscal deficit. A firstphase of reforms centered on the public enterprises and provincial finances,but also included the beginnings of improvements in the tax system and theelimination of the quasi-fiscal deficit. During this phase, macroeconomicmanagement has sought to control expenditures and raise revenues throughtemporary measures that by their nature could not be enduring. The currentprogram is based on tight fiscal and monetary policies and a fixed, fullybacked exchange rate; inflation has fallen from more than 30 percent monthlyto less than 4 percent in mid-1991. However, public finances remain weak, andbecause of the history of hyperinflation and small monetary base, the economicsituation is fragile. While the temporary measures to control the deficitremain in place, the Government has moved to a second phase of structuralreforms to make the fiscal balance sustainable and revenue and expenditureactivity efficient. These measures hold the key to reversing the economiccontraction that has plagued the country for three years as well as thesecular decline of three decades.

2. Bank Lending Strateav. Because the public sector deficit is aprincipal cause of macroeconomic instability, low investment and economicstagnation, the objective of the Bank's program is to help the Governmentrecast the foundations of public finance to eliminate the structural deficit.The proposed Public Sector Reform Loan (PSRL) would support changes in theFederal Government and Central Bank. It would thereby complement a broaderBank lending program focusing on public enterprises, provincial finances, andsocial security reform. Taken together, these reforms are mutuallyreenforcing, and imply a comprehensive modernization of the public sector, andpermanent reduction in the deficit. Achieving these objectives would helpreduce inflation permanently and provide a basis for new investment andsustainable economic growth.

3. Focus of the Loan. The program for the Federal Government andMonetary Authority is to reduce distortions in revenue mobilization, makefiscal expenditures more efficient, and insulate the Central Bank from thedemands4 of the nonfinancial public sector for inflationary finance. Federalexpenditures comprise about half of the expenditures of the nonfinancialpublic sector at the national level. The PSRL will contribute to the designand financing of structural measures that would improve the efficiency ofcurrent anu IrWvestment expenditures, increase revenues while reducing thedistortions in revenue mobilization, and rationalize public sector financingby limiting recourse to money creation and by disentangling the Central Bank

- 56 -Attachment IXPage 2 of 2

from public finances. The PSRL is also designed to provide a vehicle toconduct a dialogue with authorities on macreconomic policy.

4. Objectives of the Loan. The proposed quick-disbursing loanfocusing on the federal administration and monetary authority wouldspecifically support major changes in (i) revenue mobilization through (a) taxpolicy and administration to increase VAT revenues as well as impro ecollection efficiency (including a program to improve tax administration andcustoms administration); and through (b) closing tax loopholes by reducing taxsubsidies for industrial promotion. The loan would also support (ii)expenditure rationalization through (a) an administrative reform to reducefederal employment by about 20 percent by end-1991, eliminate functions andfocus on core activities through ministerial reorganization, and provideadequate incentives for civil service performance by reversing wagecompression from 2:1 to over 10:1 and strengthen administrative capacities;and (b) improvements in the budget process through a new public finance law(that will provide for consistent accounting, comprehensive budgeting, andproper expenditure registration, control and auditing), a new law to reformprocurement procedures to lower implicit purchasing subsidies to statesuppliers, and stricter definitions of transfers to nonfederal components ofGovernment. Finally, the loan would help disentangle the financing of thenon-financial public sector through (iii) reform of the Central Bank and itsrelation to the Treasury via (a) a new charter that would limit the powers ofthe Central Bank to the Government; (b) removal from the Central Bankfunctions inappropriate to a monetary authority, such as trade financing, bankliquidations, and financing the social security payment system; and (c)support its reorganization to focus on its primary mandate.

S. Rationale for the Loan. Without Bank technical assistance and

financing, the Government would have a far lower probability of being able toimplement a reform of this magnitude. Bank financial assistance will allowthe Government to maintain imports at levels consistent with objectives forlow inflation and necessary reserve accumulation; the Government intends touse the resources to help finance lay-offs from the public sector. Banktechnical support has already been instrumental in the design of policyimprovements to date and contemplated reforms.

6. Cooperation with Other Financial Institutions. The Bank isworking closely with the IMF and IDB in the formulation of the program. IMFstaff have consulted with the Bank on numerous occasions about specificpolicies, and have adopted the Bank's recommendations in their ownnegotiations with the Government. The IDB intends to co-finance the PSRL andhas sent parallel missions with the Bank.

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