Document of The World Bank

Report No: ICR00003349

IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-22013)

ON AN

OZONE PROJECTS TRUST FUND GRANT

IN THE AMOUNT OF US$31.22 MILLION

TO THE

ARGENTINE REPUBLIC

FOR A

REDUCTION OF OZONE DEPLETING SUBSTANCES PROJECT

June 30, 2015

Environment and Natural Resources Global Practice Buenos Aires-Southern Cone Country Management Unit Latin America and the Caribbean Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective as of December 30, 2014)

Currency Unit = Argentine Peso 1.00 = US$ 0.12

US$ 1.00 = ARS 8.55

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ARS Argentine Peso CE Cost-effectiveness CFC Chloroflourocarbon CP Country Programme for Phase-out of Ozone Depleting Substances ExCom Executive Committee of the Multilateral Fund FIASA Frio Industrias Argentina S.A. GA Grant Agreement GEO Global Environment Objectives GOA Government of Argentina GWP Global Warming Potential HCFC Hydrochloroflurocarbon HFA Hydrofluoroalkane HPMP HCFC Phase-out Management Plan INTA Instituto Nacional de Tecnología Agropecuaria (National Institute

of Agricultural Technology) INTI Instituto Nacional de Tecnología Industrial (National Institute of Industrial Technology) IA Implementing Agency of the Multilateral Fund IP Implementation Progress ISR Implementation Status Report Kg Kilogram M Million MCF Methyl chloroform (1,1,1-Trichloroethane, TCA) MeBr Methyl bromide MLF Multilateral Fund for the Implementation of the Montreal Protocol MOD Memorandum and Recommendation of the Director MOI Ministry of Industry MP Montreal Protocol on Substances that Deplete the Ozone Layer MT Metric tons NCPP National CFC Phase-out Plan NOU National Ozone Unit ODS Ozone Depleting Substances ODP Ozone Depleting Potential

OORG Ozone Operations Resource Group OPROZ Oficina Programa Ozono (National Ozone Unit) OTF Ozone Projects Trust Fund PCR Project Completion Report PCU Project Coordination Unit PDO Project Development Objective PIM Project Implementation Manual PRESAO Proyecto para la Reducción de Sustancias que Agotan la Capa de Ozono/Project for the Reduction of ODS OTF Ozone Projects Trust Fund SAyDS Secretaría de Ambiente y Desarrollo Sostenible (Secretariat of Environment and Sustainable Development) SGA Subgrant Agreement SI Secretariat of Industry TA Technical Assistance TTL Task Team Leader UEPRO Unidad Ejecutora de Proyecto (Project Coordination Unit) UNDP United Nations Development Programme UNIDO United Nations Industrial Development Organisation

Vice President: Jorge Calderon

Senior Global Practice Director:

Paula Caballero

Country Director: Jesko S. Hentschel

Practice Manager: Emilia Battaglini

Project Team Leader: Tuuli Bernardini

ICR Team Leader: Tuuli Bernardini

ICR Author: Mary-Ellen Foley

ARGENTINE REPUBLIC Reduction of Ozone Depleting Substances Project

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Global Environment Objectives and Design ................................... 12. Key Factors Affecting Implementation and Outcomes .............................................. 43. Assessment of Outcomes .......................................................................................... 104. Assessment of Risk to Development Outcome ......................................................... 145. Assessment of Bank and Borrower Performance ..................................................... 146. Lessons Learned ....................................................................................................... 177. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 18Annex 1. Project Costs and Financing .......................................................................... 19Annex 2. Outputs by Component ................................................................................. 20Annex 3. Economic and Financial Analysis ................................................................. 32Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 34Annex 5. Beneficiary Survey Results ........................................................................... 36Annex 6. Stakeholder Workshop Report and Results ................................................... 37Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 38Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 44Annex 9. List of Supporting Documents ...................................................................... 45

MAP

A. Basic Information

Country: Argentina Project Name:

Reduction of Ozone Depleting Substances Project (Montreal Protocol)

Project ID: P005920 L/C/TF Number(s): TF-22013

ICR Date: 05/11/2015 ICR Type: Core ICR

Lending Instrument: SIL Recipient: REP OF ARGENTINA

Original Total Commitment:

US$ 25.00M Disbursed Amount: US$ 29.65M

Revised Amount: US$ 31.22M

Environmental Category: C Global Focal Area: O

Implementing Agencies: Ministry of Industry

Cofinanciers and Other External Partners: -- B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 06/30/1993 Effectiveness: 03/03/1997 03/03/1997

Appraisal: 01/09/1995 Restructuring(s):

10/07/1999 10/23/2001 03/04/2004 31/07/2008 19/11/2010 04/01/2014

Approval: 01/09/1997 Mid-term Review: 09/03/1998 --

Closing: 03/03/1999 12/30/2014 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory

Risk to Global Environment Outcome: Low or Negligible

Bank Performance: Moderately Unsatisfactory

Recipient Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance Bank Ratings Recipient Ratings

Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Moderately UnsatisfactoryImplementing Agency/Agencies:

Moderately Unsatisfactory

Overall Bank Performance:

Moderately UnsatisfactoryOverall Borrower Performance:

Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance

Indicators QAG Assessments

(if any) Rating

Potential Problem Project at any time (Yes/No):

Yes Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

None

GEO rating before Closing/Inactive status:

Moderately Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 4 4

General industry and trade sector 96 96

Theme Code (as % of total Bank financing)

Pollution management and environmental health 100 100 E. Bank Staff

Positions At ICR At Approval

Vice President: Jorge Calderon Shahid Javed Burki

Country Director: Jesko S. Hentschel Homi Kharas (Acting)

Practice Manager/Manager: Emilia Battaglini Constance Bernard

Project Team Leader: Tuuli Bernardini Laura Tlaiye

ICR Team Leader: Tuuli Bernardini

ICR Primary Author: Mary-Ellen Foley

F. Results Framework Analysis Global Environment Objectives (GEO) and Key Indicators (as approved) The objective of the project is to reduce or eliminate ozone depleting substances (ODS) use in the Recipient’s territory. According to the PAD equivalent, the Memorandum and Recommendation of the Director (MOD), the operation is expected to contribute to a reduction in ODS consumption in Argentina by 20 to 40 percent with respect to 1992 levels. The specific objectives are to: (i) finance subprojects on a grant basis for technology conversion in manufacturing or commercial entities leading to reduction or elimination of ODS use; and, (ii) strengthen the institutional capacity at the Secretariat of Industry for administering resources for approved subprojects and for preparation and supervision. This ICR evaluation is primarily based on the GEO contained in the GA as this is the legally binding objective. It also has been and continues to be the ultimate objective of MP projects in the Bank. Revised Global Environment Objectives (as approved by original approving authority) and Key Indicators and reasons/justifications The GEO as per the GA was not revised through an approval process.i (a) GEO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1: To reduce or eliminate Ozone Depleting Substances in Argentina (metric ton) Value quantitative or Qualitative)

--

880 – 1,760

-- 3,787

Date achieved 3-Mar-1999 30-Dec-2014

Comments (incl. % achievement)

Achieved. The original target was 20 to 40 percent of Argentina’s 1992 ODS consumption of 4,400 metric tons (MT) as captured in the Multilateral Fund (MLF)-financed “country program” strategy. The baseline was considered to be zero, in that no phase-out had occurred prior to the project. Achievement of the upper target value of 1,760 MT by more than 100 percent is due to the addition of a subproject to close down 3,020 MT of CFC production. In terms of impact on ozone layer protection measured by tons of ozone depleting potential (ODP) eliminated, the actual value achieved is 3,944 ODP tons, compared to 590 to 1,179 ODP tons to which the target values above

i The GEO was restated in project reporting and monitoring subsequent to 1998 as a variation of the MOD specific objectives to be to (a) support Argentina's program to phase out ODS consumption through the provision of technical and technological assistance; and (b) strengthen the institutional framework in Argentina to better identify, prepare, evaluate, and administrate subprojects.

equate. ODP achievement of more than three times the upper value of ODP tons is due to the CFC production sector subproject as well as a subproject eliminating halon 1301, an ODS ten times as potent as CFCs.ii

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Finance subprojects on a grant basis for technology conversion in manufacturing or commercial entities leading to reduction or elimination of ODS use.

Value quantitative or Qualitative)

-- 20 -- 23

Date achieved 3-Mar-1999 30-Dec-2014

Comments (incl. % achievement)

Achieved. 15 percent more subprojects were implemented than first targeted in the MOD, if comparing the originally targeted subprojects to the 23 actually financed and completed by 30 December 2014. The specific objective of the MOD, to “finance subprojects on a grant basis for technology conversion in manufacturing or commercial entities leading to reduction or elimination of ODS use,” corresponded to 20 subprojects originally included in the project and hence is used as an indicator for evaluation.iii Out of the 20 subprojects, 8 were cancelled between 1999 and 2003. However, 11 additional subprojects could be identified, prepared and executed with the periodic GA extensions and ceiling increases. Thus, there were a total of 23 subprojects by the end of 2008, each endorsed by GOA prior to funding approval by the MLF.

ii The original end target phase-out values were not revised through restructuring despite 1) addition and removal of subprojects associated with ODS phase-out values and 2) strategic alignment of Argentina’s official national consumption reductions with Montreal Protocol (MP)-mandated phase-out targets from 1999 to 2010, which together replaced the country program data as the basis for ODS action. In the Bank’s monitoring system, the target value varied but settled on an upper target value of 1,612 MT in 2006.

iii This specific objective of two from the MOD was changed in the Bank’s monitoring system in 1999 without formal approval to “support Argentina's program to phase out ODS consumption through the provision of technical and technological assistance.” An indicator “finance projects to replace technologies that use or produce ODS by ODS-free technologies in order to reduce consumption and production of ODS,” was introduced in the Bank system in 2006 to track progress towards meeting this modified part of the GEO. The justification was that it included reduction of ODS production in addition to consumption and was more expansive to include non-manufacturing, non-commercial entities which had been added as subproject beneficiaries.

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 2 : Strengthen the institutional capacity at Secretariat of Industry (SI) for administering resources for approved subprojects and for preparation and supervision.

Value quantitative or Qualitative)

--

Capacity to administer

resources at SI strengthened

--

MOI (formerly SI) has capacity to

administer subprojects

Date achieved 3-Mar-1999 30-Dec-2014

Comments (incl. % achievement)

Capacity for administering MP activities was established in 1997 when the project coordination unit (PCU) UEPRO, in the now Ministry of Industry (MOI), was formally established. SI/MOI’s capacity for administering resources, preparation and supervision of subprojects was developed through its approval, hosting and subsidizing (20%) of the UEPRO that functioned throughout the project with support of project funds. The MOD’s specific objective, to “strengthen the institutional capacity at SI for administering resources for approved subprojects and for preparation and supervision,” is used as the indicator for purposes of this project evaluation given its direct bearing on meeting the GA GEO and inferred intent in the MOD. iv

iv This specific objective of the MOD was revised by the Bank team in 1999 (without formal approval) to “strengthen the institutional framework in Argentina to better identify, prepare, evaluate and administer subprojects.” An intermediate indicator (Indicator 1) was introduced in the Bank portal in 2006 as “develop an institutional framework for the implementation of the Montreal Protocol in Argentina” to track progress through the project’s end in meeting this part of the MOD objective as restated. The modifications may be attributed to the GA GEO which elevates the project objective to the country level, and the fact that SI/MOI, is part of the tripartite representation within Argentina’s National Ozone Unit (NOU) in charge of MP implementation, OPROZ. OPROZ and its constituents (MOI, Foreign Affairs and Secretariat of Environment and Sustainable Development, the latter hosting the NOU) embody the broader institutional framework needed to effectively implement ODS phase-out subprojects. The Bank team reported that an operating framework for Montreal Protocol activities in Argentina was in place.

The target of an institutional framework for MP activities in Argentina was achieved by 1997 in that the national ozone unit, OPROZ and the UEPRO, were both officially established. Moreover, after 2000 Argentina further strengthened its institutional and policy frameworks in the context of transitioning to an MP compliance-based project implementation approach whereby results on the ground were directly linked to meeting time-bound national ODS phase-out targets. By 2004, Argentina had a fully functioning licensing and quota system for controlling imports and exports of ODS and raw materials and domestic ODS production. This system has not only sustained phase-out results achieved through this project and others, but formed the basis for addressing the next set of ODS subject to phase-out (HCFCs).

G. Ratings of Project Performance in ISRs

No. Date ISR Archived

GEO IP Actual

Disbursements (US$ millions)

1 12/15/1999 Satisfactory Satisfactory 10.17* 2 06/14/2000 Satisfactory Satisfactory 11.03 3 06/27/2000 Satisfactory Satisfactory 11.03 4 10/30/2000 Satisfactory Satisfactory 11.58 5 05/25/2001 Satisfactory Satisfactory 12.95 6 12/26/2001 Satisfactory Satisfactory 13.77 7 06/13/2002 Satisfactory Satisfactory 13.77 8 11/28/2002 Satisfactory Satisfactory 13.77 9 06/16/2003 Satisfactory Satisfactory 14.04

10 12/10/2003 Satisfactory Satisfactory 14.88 11 06/17/2004 Satisfactory Satisfactory 14.88 12 12/10/2004 Satisfactory Satisfactory 16.13 13 04/19/2005 Satisfactory Satisfactory 17.19 14 06/01/2006 Satisfactory Satisfactory 17.20 15 12/27/2006 Satisfactory Satisfactory 18.32 16 06/20/2007 Satisfactory Satisfactory 21.97 17 12/13/2007 Satisfactory Satisfactory 22.41 18 05/13/2008 Satisfactory Satisfactory 24.80 19 12/18/2008 Satisfactory Satisfactory 26.08 20 05/29/2009 Satisfactory Satisfactory 26.12 21 12/19/2009 Satisfactory Satisfactory 26.26 22 01/20/2010 Satisfactory Satisfactory 27.97 23 02/23/2011 Satisfactory Satisfactory 28.46 24 12/28/2011 Satisfactory Satisfactory 29.92 25 07/09/2012 Satisfactory Satisfactory 30.00 26 02/23/2013 Satisfactory Satisfactory 30.16 27 11/17/2013 Satisfactory Moderately Satisfactory 29.61 28 05/17/2014 Satisfactory Moderately Satisfactory 29.61 29 12/24/2014 Moderately Satisfactory Moderately Satisfactory 29.65**

*US$10.17 million is the cumulative disbursement 33 months into project implementation. The project was already underway when the Bank’s monitoring system through ISRs was introduced. **A lower disbursement at project completion from the highest disbursement level in February 2013 is due to a return in project funds from a subproject beneficiary, the CFC production facility

H. Restructuring (if any)

Restructuring Date(s)

Board Approved

GEO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in US$ millions

Reason for Restructuring &

Key Changes Made GEO IP

10/07/1999 N/A S S 9.79

Grant agreement (GA) extended by two years to November 30, 2001 to permit subproject completion of 10 enterprises with implementation delays due to the financial crisis and to pursue five new subprojects.

10/23/2001 N/A S S 13.77

GA extended by three years to November 30, 2004 to complete ongoing subprojects and to start three new subprojects.

3/04/2004 N/A S S 14.88

GA extended by six years to November 30, 2010 to accommodate the annual CFC production reduction schedule in the CFC Production Sector Phase-out Plan subproject that was MLF approved in 2002.

6/09/2008 N/A S S 24.80

GA ceiling increased to US$ 28.91 M from US$ 25 Mto permit receipt and transfer of additional funds to accelerate CFC production phase-out under the CFC production subproject ($2.3 M), for partial compensation for a new subproject to convert CFC-based metered-dose inhalers (MDIs) at $1.5 M, and to top up UEPRO’s fees by 3% of these two amounts.

11/19/2010 N/A S S 28.46

GA extended by four years to December 30, 2014 and ceiling increased to US $31.22 M to include the balance of the final MDI subproject and to give it sufficient time to complete.

Safeguard category changed from a B to C.

4/01/2014 N/A S MS 29.61

Reallocation of US$ 0.29 M from Category 1 (subgrants) to Category 2 (goods and consultancies under Part B on administration and technical assistance, TA).

I. Disbursement Profile

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1. Project Context, Global Environment Objectives and Design

1.1 Context at Appraisal 1. Country and Sector Background. In September 1990, Argentina ratified the Montreal Protocol on Substances that Deplete the Ozone Layer (MP) 5 , a multilateral environmental agreement that was adopted in 1987 based on international recognition of the need for concerted action to mend and protect the ozone layer 6 , albeit through common but differentiated responsibilities. With consumption7 of ozone depleting substances (ODS) under 0.3 kilogram (kg) per capita at time of ratification, Argentina was categorized as an “Article 5” country and qualified not only for a grace period for instituting ODS controls but also for grant assistance under the MP’s financial mechanism, the Multilateral Fund (MLF). 2. As a basis for MLF assistance to meet the incremental costs of ODS phase-out, the Government of Argentina (GOA) developed a country program (CP) defining its 1992 level of consumption by substance, outlining its commitment to gradually phase out the first major groups of ODS, primarily chlorofluorocarbons (CFCs), and proposing the required institutional and policy framework to achieve this phase-out by 2006. This was in advance of the MP’s 2010 mandate for Article 5 countries of the complete phase-out of CFCs and other substances listed in Annexes A and B of the Protocol 8 . The requirement was significant for Argentina, because its 1992 consumption was high at 4,440 metric tons (MT), making it one of the largest ODS consumers in Latin America. It was also a producer of ODS, one of four in the region to supply domestic and regional markets.

3. Argentina became a committed proponent of the MP early in its negotiation and approval, even though the first MP obligations for Article 5 countries would not kick-in until 1999 with a freeze on average 1995-1997 consumption levels. The fact that Argentina was the first to see the highest ozone depletion of any inhabited area of the world as a country with land close to the Antarctic (site of the “ozone hole”), no doubt contributed to this early engagement. It began developing framework legislation soon after signing onto the MP in 1988, and in 1991 introduced national controls on Annex A substances. It has been a recurring member of the MLF Executive Committee (ExCom) and active participant in all MP meetings. 4. For Argentina, the ODS to be targeted under the MP’s phased compliance period was primarily CFCs used widely in refrigeration, air-conditioning, aerosol, metered dose inhalers (MDIs), solvents and foam applications, as well as methyl chloroform (MCF) used as a solvent. Halon, a fire extinguishing agent, was consumed in smaller quantities but due to its high ozone depleting potential (ODP9) was important. Out of the various industrial sectors using ODS in

5 The Montreal Protocol entered into force on January 1, 1989. It was adjusted in 2007 to accelerate the phase-out of hydrochlorofluorocarbons (HCFCs). 6 About 90 percent of all ozone is found in the stratosphere and is known as the “ozone layer.” The ozone layer protects plant genetic material, ecosystems, and animal and human health from ultraviolet (UV) radiation. 7 Consumption is defined by the MP as imports + production – exports. 8 Substances first subject to complete elimination were Annex A substances grouped into the most common CFCs and halon, and Annex B substances, including methyl chloroform. 9 CFC-11 and CFC-12 have an ODP of 1. Halon-1211 and Halon-1301 have an ODP of 3 and 10 respectively.

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Argentina, durable goods manufacturing with CFC (as a refrigerant and foam blowing agent) was considered the most economically and socially significant.

5. Given that MP implementation was deeply intertwined with Argentina’s economic development and trade, it began establishing an institutional and policy framework able to manage the demands of eliminating a key input in industrial production in line with international environmental treaty obligations while promoting new technologies that did not unduly harm industrial competitiveness. 6. Rationale for Bank Assistance. The argument at project inception for the Bank’s involvement was that the proposed operation to channel resources to implement a national response to a global environmental problem was consistent with the Bank’s strategy to support Argentina in addressing environmental issues. The Bank became one of the Implementing Agencies (IAs) of the MLF in 1991 and as such had already begun dialogue with several countries on future cooperation in ODS phase-out, including with Argentina.

7. In 1993, the Bank adopted operational policy, OP/BP 10.21 to adapt to the MLF’s financing approach and project cycle characterized by frequent and small grant approvals on an enterprise level. The policy introduced “umbrella projects,” flexible instruments to absorb these new subprojects in line with time-bound country and MP priorities and made it possible for countries to work with the Bank using MLF grants. The GOA asked for Bank assistance in developing and then implementing the 1994 CP, specifically in sectors with the highest ODS consumption: refrigeration, air-conditioning and foam manufacturing. 1.2 Original Global Environment Objectives (GEO) and Key Indicators (as approved) 8. According to the Grant Agreement (GA), the objective of the project is to reduce or eliminate ODS use in the Recipient’s territory. 9. According to the Memorandum and Recommendation of the Director (MOD), the PAD-equivalent at the time of project approval, the operation is to contribute to a reduction in ODS consumption in Argentina by 20 to 40 percent with respect to 1992 levels. The specific objectives are to: (i) finance subprojects on a grant basis for technology conversion in manufacturing or commercial entities leading to reduction or elimination of ODS use; and (ii) strengthen the institutional capacity at the Secretariat of Industry (SI) for administering resources for approved subprojects and for preparation and supervision. 10. The key indicator as derived from the above MOD project objective was the amount of ODS reduced by subproject in metric tons and on aggregate terms. The GA objective is used as the primary basis for ICR evaluation, and consequently ODS quantities phased out as the indicator. Given that ODP is the official and key measure of impact under the MP (and consequently of a country’s state of compliance), achievement of the GEO is also assessed through this metric.

1.3 Revised GEO and Key Indicators, and reasons/justification 11. The GEO as worded did not specifically anticipate that reduction of ODS would go beyond that used by enterprises in manufacturing (i.e. consumed) to also that (CFC) produced by

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enterprises. The GEO was however not revised through a formal restructuring. In 1999, the project team adapted each of the MOD’s two-pronged, specific objectives to better contextualize the project work in Argentina’s broader MP program and institutional framework for reducing and eliminating ODS. GEO wording in Bank internal monitoring reports consequently became to: (a) support Argentina's program to phase out ODS consumption through the provision of technical and technological assistance; and (b) strengthen the institutional framework in Argentina to better identify, prepare, evaluate, and administrate subprojects. In 2006, two intermediate indicators were introduced in the Bank’s monitoring system only to measure this adaptation of the GEO and to more explicitly link production to the GEO: (a) development of an institutional framework for MP implementation in Argentina; and (b) number of projects financed to replace technologies that use or produce ODS by ODS-free technologies. 12. Neither the key GEO indicator of ODS reduction in Argentina, nor the original target were changed. For the purpose of the ICR, the original GEO as stated in the GA will be used to evaluate the project. “ODS use” from the GA GEO is understood to be ODS consumed. In that regard, the MP legal definition that consumption is equal to imports plus ODS produced, minus that exported is applied in evaluating GEO achievement. Progress towards the achievement of objectives adapted from the MOD will be used as additional evidence to support the original objective.

1.4 Main Beneficiaries 13. The main project beneficiaries were the Argentine industry and public entities that received funds for the introduction of appropriate knowledge, technology, and equipment to eliminate consumption of CFCs and halon. The then-SI, as the executing agency, was to benefit primarily from capacity-building and institutional strengthening related to administering resources for subproject preparation and implementation, whereas the national ozone focal point in the Secretariat of Environment and Sustainable Development (SAyDS) and the overall OPROZ (Oficina Programa Ozono, i.e. national ozone unit) would benefit from the reduction in ODS demand to assist it to enforce MP implementation. The global environment would be a primary beneficiary due to the reduction of negative effects on the ozone layer.

1.5 Original Components 14. Component A: Provision of Subgrants, or the investment component, entailed an original pipeline of 20 subprojects for ODS phase-out, subject to review and individual approval by the MLF. Seven of these had been approved by the MLF by October 1995; another 13 were at various stages of preparation at project appraisal. 15. Component B: Administration and Technical Assistance (TA) included provision of TA for establishing and supporting a project administration unit within the executing agency (SI) to prepare and supervise the execution of subprojects with the technical support of the National Institute of Industrial Technology (INTI). 1.6 Revised Components 16. The components were not revised but developed over time in a manner consistent with the umbrella project modality. The cancellation of eight of the initial ODS phase-out subprojects under

4

Component A, but addition of 11 new subprojects up through 2008 to compensate for the foregone phase-out targeted, brought the total of implemented subprojects to 23 by project’s end. This included subprojects in sectors aside from those first targeted. The scope and scale of Component A was thus increased leading to a larger grant, longer duration, and, ODS phase-out targeted and actually phased out. 17. Component B mirrored changes in Component A due to the need to administer delayed subprojects and manage new subprojects over an extended period. Due to budget constraints for administration and TA, it was agreed in 2001 to streamline technical support initially provided by INTI into the core function of the project coordination unit (PCU, or “UEPRO” in Spanish).

1.7 Other significant changes 18. To accommodate the net grant increase from new MLF-approved subprojects and the corresponding time for implementation, the GA was amended/restructured six times. The overall ceiling of the GA of $25 million consequently increased to $31.2 million.

Date Restructured

Component Cost (US$ M)

No. of MLF Subprojects Approved*

ODS to be Phased Out

(MT)* Key Changes

A B

Oct. 1999 24 0.9 24 (-2) 748 GA extension for delayed subprojects; 4 new subprojects added to first 20.

Oct. 2001 24 0.9 24 (-3) 656 GA extension for ongoing subprojects; 2 subprojects added.

Mar. 2004 24 0.9 25 (-3) 3,685 CFC production subproject added with 3020 MT of CFC to eliminate by 2010; 3 other new subprojects added.

Jun. 2008 27 1.8 23 3,787 Ceiling raised to absorb full grant funding of CFC production subproject ($10.6 M total). More funding provided for Comp. B; 1 new subproject added.

Nov. 2010 29.4 1.8 23 3,787 Ceiling increase and extension (until Dec. 2014) for the final, MDI subproject; safeguard category changed to C.

Apr. 2014 29.2 2 23 3,787 Funding reallocation in favor of Component B. *Total of 31 subprojects approved up to Nov. 2008 but 8 gradually cancelled by Dec. 2003. This led to a net decrease in ODS to be phased out in the project during the 2nd restructuring period until new subprojects added.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry 19. Soundness of the background analysis. The project had its underpinnings in the country’s first strategy and action plan for MP implementation, the 1994 CP. As such, the project design was based on knowledge at the time of the sectors known to consume ODS and have alternative technologies available. The CP was approved with only three years of experience under the MLF in enterprise conversions and information on cost, duration, and markets was limited. Hence, MP country programs, including Argentina’s, tended to be ambitious and did not fully anticipate time and funds needed nor the impact that the 1999-2010 MP compliance period would have on future MLF approvals and phase-out prioritization. 20. Assessment of project design. The project design was simple and clear-cut with only two components, conversion of industrial enterprises to technologies and substances less harmful to

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the ozone layer, and administrative and technical support for effective implementation. It was closely modeled after the first round of ongoing ODS projects in five Bank Regions using the umbrella project modality where the GA indicated a notional amount of grant funding expected to be released for subprojects rather than a defined value. There was consequently implicit intention from the start to treat the project more like a program and develop and gradually add new subprojects to support the country’s phase-out goals.

21. Detailed policies, procedures and guidelines of the MLF ExCom on MP sectors, costs, enterprise eligibility, safety, monitoring and completion, among others, lent structure and direction to the design of Component A and the subprojects. A US$13.5 million pipeline of subprojects identified in the CP was submitted to and approved by the MLF in parallel to project preparation. This not only informed the project scope and operational framework (e.g. for determining UEPRO’s responsibilities and the most appropriate procurement methods), but accelerated project start, along with GA provision for retroactive financing of expenditures incurred by subprojects between negotiations and effectiveness (more than a year apart).

22. Attention was equally paid to the enabling environment with the requirement that the institutional arrangements be formally in place at implementation start. Conditions of grant effectiveness thus included the formal establishment (by decree) of OPROZ and establishment of UEPRO. Component B was dedicated to funding UEPRO’s work with compensation pegged at three percent of the value of signed subgrant agreements (the average level levied by country executing agencies in other Bank ODS projects). Another 1.5 percent was provided on cancelled subprojects. 23. Government commitment. As the project objectives were linked to international treaty obligations made by Argentina on ozone protection, there was strong Government commitment at the start. GOA recognized that to best engage industry, which is the primary stakeholder in the project, and for eventually meeting MP compliance targets, it needed to rely on an inter-ministerial approach that at minimum included the entity responsible for industrial development. Not only was SI represented in OPROZ, but it was agreed that it would house the UEPRO, and finance 20 percent of its costs. 24. Risk assessment. At preparation, three risks were identified. One was the possibility of delays from the MLF and Bank’s external subproject review process. This would be addressed by streamlining Bank review. The second risk was efficiency in subproject execution given the many actors involved (beneficiary enterprises, SI and INTI). The project implementation manual (PIM), detailing administrative procedures and milestones, was to mitigate this risk. The third risk was that enterprises would not want to participate if they perceived that the administrative burden related to procurement outweighed the grant benefits. Procurement arrangements would therefore include commercial practice and project staff would receive training to expedite project execution.

2.2 Implementation 25. A total of 23 subprojects involving 26 private sector companies and two public institutions was completed under the project. Project implementation can be considered to have taken place in three phases as denoted by the period between effectiveness and the first extension in October 1999, the period between the second and third extensions, i.e. 2001 until 2010, and the final phase

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taking the project to closure in December 2014 (described further in Annex 2). The 17-year overall project length is not unusual for these early Bank MP umbrella projects (with an average 13-year duration) given that continuity in program support to countries in meeting phased ODS reduction targets in line with MP requirements starting in 1999 was paramount. Specific factors in implementation affected outputs and duration of each of the three phases as described below. 26. The 1998-2002 financial crisis severely disrupted implementation of the first-phase subprojects that had been approved by the MLF between 1994 and 1999. Subprojects targeted elimination of CFCs, the largest ODS group consumed in Argentina at the time, in GOA priority sectors, primarily domestic refrigeration and mobile air-conditioning. An unfortunate convergence of the crisis with rising global competitiveness of the refrigerator appliance market, left the Argentinian industry vulnerable. The impact on the project was a delay of five to seven years in subprojects as enterprises sought financing, restructured or eventually went bankrupt.

27. These subprojects required close monitoring and reporting to the MLF ExCom which initiated a cancellation procedure on several subprojects. UEPRO interacted closely with enterprises with implementation challenges to modify action plans and identify ways to remove obstacles. In parallel, the Bank team used in-house technical expertise to help develop replacement subprojects in MP sectors that had not been as affected by the financial crisis. The 1999 two-year GA extension was thus sought to give additional time to the delayed enterprises and to implement subprojects in new sectors (solvents and halon).

28. The 1999-2010 compliance period prompted changes in the MLF to more strategic delivery of limited resources through sector and national plans, enabling countries to take better ownership of ODS phase-out for compliance with MP time-bound reduction targets in return for performance-based funding. The Bank, at the forefront of the move to sector-based phase-out through its ODS production closure work in China, began to prepare with GOA in 1999, Argentina’s first ODS sector phase-out plan. Following a two-year GOA delay in endorsement, the US$8.3 million CFC Production Phase-out Plan was approved in 2002 by the ExCom to gradually close CFC production before 2010 at Argentina’s sole producer, FIASA against tranched payments.

29. The production sector plan effectively linked national policy with investment to better balance domestic CFC supply with demand over a more realistic timeframe (than Argentina’s early pledge of total phase-out by 2006). This had been lacking and contributed to Argentina’s sole incidence of non-compliance with the MP in 1999 whereby CFC production exceeded the baseline level. Reliable and timely results provided impetus for approval of an additional US$2.3 million to accelerate CFC production closure to 1 January 2008.

30. Home-grown alternative technology to CFCs in an MP sector with critical socio-economic importance – MDIs, i.e. inhalers, used to treat pulmonary-respiratory disease – required a special window of time for research and development, testing and approval from the public health authority. One manufacturer under the final sector-based subproject decided to follow its own technology path based on isobutane, instead of the common, high global warming potential (GWP) alternative propellant. This decision delayed MLF approval to November 2008 and was eventually why the GOA sought a four-year extension in 2010, noting the time needed to fully foster and

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adopt this innovative technology. As the goal was sustainable CFC phase-out, extension was granted.

31. Although not used to justify extension, the 118 MT of CFCs addressed by the MDI subproject allowed the GEO target of consumption phase-out to be neared given that in 2010 it was only at 73 percent of the lower-end target of 880 MT if excluding production. This third and final phase also presented ample opportunity for UEPRO to complete remaining work.

32. Institutional and personnel changes as well as gaps in capacity were collectively a factor affecting all project phases. Changes in Government most critically impacted the speed of adopting ODS regulations needed to tie-in industry interventions to national-level phase-out obligations. UEPRO was at times in search of a home within the Ministry of Industry as a result of changes, and OPROZ, responsible for endorsing new subprojects among others, was revamped in 2001. At least six people served as UEPRO coordinator during the project. On the Bank side, Task Team Leaders changed seven times which likewise contributed to some interruptions in implementation. 33. Lack of technical capacity to deal with highly specific subprojects in different sectors contributed to inefficiencies and a slow-down in momentum in the second, and notably third project phase. A complex subproject approved in 2005 to replace chillers in return for a 20 percent grant subsidy was cancelled by the ExCom in 2013 for lack of progress. Two subprojects with public sector beneficiaries, recovering and reusing Halon 1301, and testing MeBr alternatives in crop fumigation, took several years to begin and once completed, the former with very positive results, were kept open as proponents explored ways to use grant savings. Development of a communication strategy in the context of the MDI subproject and directly dependent on the UEPRO, was by project’s end never fully pursued. It appears that UEPRO did not supervise subprojects close enough to notice any breach of ExCom rules, for example on technology changes. 34. The project was rated satisfactory for implementation progress (IP) and achieving the GEO throughout project implementation with GEO downgrade to moderately satisfactory first in December 2014 on the basis that cumulative delays impacted the degree of institutional capacity strengthening. The consistent satisfactory rating for IP and GEO until 2013 and 2014 respectively is not fully supported considering implementation events. Periods of no or little disbursement (reason for a 2006 flag) also evidence that IP was overrated at times. There was no mid-term review as stipulated in the GA. The six project restructurings offered periodic opportunity to review progress and make course corrections but more vigorous assessment was not undertaken and the results framework not formally adapted, despite the notable shift of the MLF to multi-year, compliance-based sector plans, inclusion of ODS production phase-out, and need for use of better metrics of ODS phased out to assess impact.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 35. M&E design. Variations between the GEO in the GA and that of the project document as well as discrepancies in the nomenclature used to set the ODS phase-out target laid the bedrock for future inconsistencies in reporting and evaluation of outputs and results. In spite of this, the overall progress towards meeting the main objective could be maintained because of the clear, measurable GEO indicator on ODS phase-out. Other performance indicators, including time taken

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to prepare and sign subgrant agreements (SGAs); disbursement; and timeliness of reporting were listed in the MOD and were, per the 1998 PIM, to be included in reports of the UEPRO on a semi-annual basis to the Bank as well as to OPROZ. A defined results framework was not required in the Bank at the time of preparation and hence was not part of project design. 36. M&E implementation. Implementation of the project’s M&E framework was largely driven by MLF requirements which the Bank as an IA was obligated to meet on behalf of the Recipient. Most of the project indicators of progress coincided with those of the MLF. The Bank collected from UEPRO detailed progress and disbursement information annually on subprojects for reporting to the MLF ExCom; however the semi-annual progress reports were not collected regularly. Monitoring through actual site visits decreased in the last implementation phase. 37. The CFC production subproject had additional reporting requirements based on the performance-based, multi-year agreement with the ExCom. Before each release of annual tranche funding, an independent verification of the production of CFCs in the previous year was required along with an annual plan. This accountability framework gave Argentina and donors assurance of compliance with the obligations.

38. A final source of data on subprojects were project completion reports (PCRs), to be finalized upon subproject completion by the beneficiaries and UEPRO and submitted to the ExCom by the Bank. Details on project sustainability, alternative technology employed, and actual costs and lessons learnt were included. The PIM and SGAs noted the beneficiary’s responsibility to report upon completion. PCR delivery in practice lagged, with many only completed by UEPRO and the Bank during the last two years of the project. 39. M&E utilization. In early supervision missions, the Bank advised the country that reports on progress of current projects would be used by the MLF to consider approving additional resources. This drove implementation progress by the UEPRO while creating an appreciation of the relevance of M&E. UEPRO reports from 2007 onwards that are with the Bank show that the original set of indicators was not systematically applied to inform overall project management needs and future work plans particularly where chronically delayed subprojects were concerned. Cumulative data, gathered with some difficulty in the last project phase, was just sufficient to meet minimum MLF reporting requirements and inform preparation of follow-on work on a new operation (see Section 2.5).

2.4 Safeguard and Fiduciary Compliance 40. Safeguards. The project was classified as an environmental category B in August 1994 following a project environmental assessment in accordance with OP 4.01. Bank safeguards supervision response in the project’s early years was appropriate and reflected a good understanding of the technologies and possible risks. All subprojects were reviewed for safety and environmental issues by the Bank’s Ozone Operations Resource Group while the ExCom provided funds to mitigate any identified risks. No social risks were foreseen. 41. When the methyl bromide (MeBr) subproject involving the testing of alternative pesticides was approved by the MLF in 1999 for inclusion in the project, a safeguards review was warranted. No such assessment was undertaken although the subproject was active until 2011, into the final

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period of project extension. A potential social issue was the loss of jobs from CFC production closure. The concern was addressed at the onset with compensation provided to FIASA by the MLF for affected workers. 42. The safeguards category was changed from B to C during the 2010 restructuring and final grant extension, on the basis that the MDI subproject was not expected to pose risks nor have adverse environmental or social impacts. Little evidence supported a change though considering that the replacement substance was highly flammable hydrocarbon and that the MLF itself had considered the risks substantial enough to provide additional grant funding for safety measures. No adverse impacts as a result of changing the safeguards category or of overlooking a possible triggering of OP 4.09 (pesticides) were observed by the ICR mission, which met with the MDI and MeBr subproject beneficiaries. 43. Fiduciary compliance. The project had satisfactory financial management (FM) arrangements in general, in compliance with Bank requirements. However, moderate FM shortcomings were identified during supervision such as: (i) discrepancies in the accounting records related to the 2002 devaluation of the ARS; ii) significant delay in the submission of the 2003 audit report to the Bank; (iii) qualified auditors opinion on the 2012 project Financial Statements and on the Statement of Expenditures because of minor non-eligible payments; and (iv) an amount of US$549,912 reimbursed by FIASA incorrectly deposited in the Special Account in 2013. Due to these findings, FM performance was downgraded to Moderately Satisfactory and returned to Satisfactory once UEPRO effectively implemented the agreed action plan. 44. Equipment procurement related to subprojects (Component A) with the private sector was done by the beneficiary enterprises using commercial practice. Procurement was deemed satisfactory following post review of a sample of subgrants. Procurement procedures were also specified for goods and works carried out by public beneficiaries (INTI for the halon bank and INTA for MeBr subproject).

2.5 Post-completion Operation/Next Phase 45. The institutional framework created by the GOA for MP implementation during the preparation of the CP and the ODS reduction project has evolved into a well-established, mature system with OPROZ firmly at the helm. With the 1991 National Chemical Compounds Law that restricts the production and use of certain ODS as a basis, OPROZ is the mover of regulatory change for MP compliance and is leading the country in tackling HCFCs, the next major group of substances (Annex C) targeted for phase-out. 46. The MLF ExCom approved Argentina’s Stage I HCFC Phase-out Management Plan (HPMP) in April 2012, which covers industry conversions in air-conditioning and foam while controlling HCFC consumption and production at the national level through quotas. The bulk of the Argentina Stage I HPMP is under OPROZ’s direction with support from UNIDO (as the Lead IA). The GOA requested some Bank support in the foam sector and in the area of its comparative advantage, the production sector.

47. Because of the overlap between the time of preparing for the first HCFC obligation, the 2013 freeze on consumption, and of the extended winding down of the ODS reduction project and

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UEPRO, transition to new work followed similar implementation arrangements. MOI agreed to maintain UEPRO as the PCU for subprojects in the foam sector and to monitor FIASA’s HCFC-22 production in a follow-on Bank project. It will also carry forward the chiller replacement work that had been cancelled with other OTF funds in the new operation, the US$1.9 million HCFC Phase-out Project (P129397), effective on January 30, 2015.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation – Rating: High 48. The objectives of the project, as well as its results continue to be highly relevant to Argentina’s international commitment to comply with and implement the Montreal Protocol. Institutional and technical capacity is required to effectively address MP obligations on the last major group of ODS to eliminate, HCFCs. ODS phase-out through interventions in industry, that was key to project design, will again play a major role in meeting HCFC phase-out reductions in the next decade. Because Argentina continues to be a consumer and producer of ODS with the production of HCFC-22 at FIASA, sustained institutional capacity to bridge industrial development and environmental protection goals in the next phase of MP implementation is necessary, as is inter-ministerial cooperation. 49. World Bank country assistance and country program strategies that have arisen since the project’s inception all included calls for sustainable growth which for example mainstream brown issues of air pollution and integrate climate considerations into sector planning. The FY15 Country Program Strategy (CPS) points to the project to have helped reduce environmental risks and sees future elimination of ODS as a means to continue to do so while safeguarding natural resources. A link can also be made to the CPS’ aim for more competiveness of firms given that conversions led to the use of advanced, more competitive technologies. In addition to the ozone benefits, significant climate benefits were accrued (see Section 3.5), an outcome not planned in project design but that is relevant to the Bank’s CPS and corporate climate protection goals. Relevance of objectives and design is rated high.

3.2 Achievement of Global Environmental Objectives – Rating: Substantial 50. The project substantially achieved the GEO objective of reducing and eliminating ODS consumption in Argentina although not as originally planned given 1) individual delays of most subprojects; and 2) that the bulk of the phase-out was achieved through closure of CFC production (a subset of consumption). Main ODS phase-out results are compared below.

Phase-out Value

Original Target 20-40% of 1992 Consumption*

MLF Approved Phase-out

Consumption**

Actual Phase-out Consumption*

(a)

CFC Production Eliminated

(b)

Total Phase-out (a) + (b)

MT 880 to 1,760 987 767 3,020 3,787

ODP MT 590 to 1,179 929 924 3,020 3,944

*Original targets were set in metric tonnes (MT) only. Targets are converted to ODP MT here for comparative purposes. **Net of cancelled subprojects that would have addressed 259 MT of CFCs and MCF.

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51. The original target was established using the quantity of ODS to be phased out rather than the level of impact (MT versus ODP MT). If looking purely at consumption as captured in the original GEO (i.e. separating CFC production phase-out), the project falls short of reaching the original lower-end target of 880 MT by 13 percent. This is primarily due to the forfeit of 259 MT of ODS from cancelled subprojects in the first project phase. However, in ODP terms consumption phase-out is well within the range of the plan – actual ODP impact of the ODS eliminated is within range due to the addition of the subproject in 1998 to eliminate 20 MT of halon 1301, an ODS ten times as potent as CFC. Adding the production phase-out achieved, the project’s total phase-out is more than twice the upper target value of ODS phase-out and three times the ODP. 52. Also relevant for assessing GEO achievement is that more rapid subproject approval and implementation would have avoided consumption of additional ODS before phase-out in a few cases and might have avoided an instance of GOA non-compliance with the MP in 1999. Excluding the multi-year, performance-based CFC production subproject, most subprojects were delayed an average four years and had a longer duration than comparable subprojects in the Bank’s ODS umbrella project portfolio. Any extra consumption however after 1999 at these enterprises was contained within Argentina’ national level ODS import and production controls and did not lead to non-compliance. Moreover, the MLF’s method of accounting does not deduct ODS consumed due to delays from the phase-out achieved, hence phase-out is shown in the table above as achieved. Achievements by Component 53. The level of achievement of specific objectives of the GEO as stated in the MOD of: i) financing subprojects for technology conversion to reduce or eliminate ODS use, and ii) to strengthen institutional capacity for preparation and administration of subprojects are as follows: 54. Component A: Subgrants. US$27.8 million in grant financing was disbursed for ODS elimination through 22 of 23 subprojects (the MeBr subproject demonstrated technology and therefore did not directly contribute to phase-out). Eight subprojects were cancelled (worth US$6.2 million in grant funding) but subproject enterprises that survived the crisis or were added with the help of GA extensions eventually converted from CFCs or MCF, benefitting at the same time from technology transfer and augmentation of technical capacity. In addition, the grant financing leveraged an estimated US$18 million in private sector co-financing given that full costs were not always covered by the MLF.

55. Establishment of one of the world’s only functioning halon banks for tracking and exchanging recycled halon 1301 for use in fire protection by INTI under the halon subproject has eliminated demand for virgin halon, thereby ensuring compliance with GOA’s halon ban. The CFC production subproject alone eliminated a total of 3,020 MT of CFCs and essentially closed the loop between consumption (imports) and domestic CFC supply (production). By gradual elimination of national CFC supply by 2008, users under this project as well as those that were unfunded, or under other projects could more sustainably and quickly reduce and eliminate ODS consumption in Argentina. See Annex 2 for detailed subproject outputs. 56. Component B: Administration and TA. Capacity was created within MOI through UEPRO to prepare, administer and monitor subprojects, and to more or less maintain some

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capacity over a significant time continuum encompassing periods of political uncertainty, economic crisis and stagnation in subproject progress. This is seen by the 23 subprojects that went from preparation to SGA signing to eventual completion (by ExCom decision in one case) under UEPRO’s watch, as well as UEPRO’s role in preparing and executing the follow-on HCFC project (which coincided with the ODS Reduction Project). Several factors in implementation such as changes in MOI and UEPRO or the inability to source technical capacity to effectively implement certain subprojects suggest that the capacity however is somewhat tenuous and dependent on prevailing circumstances such as external and internal leadership, interpersonal relationships, types of activities and beneficiaries, and financing. 57. More broadly, the project can claim to have helped build institutional capacity in Argentina insofar that MOI is one of three members in the country’s MP executing body, OPROZ. Project advisory and technical support provided to OPROZ in its nascent stages (1994-1998) helped it take root and grow, later through other support. During the strategic planning exercise for the compliance period (1999-2002), the project was essential in strengthening coordination between regulators in environment (SAyDS) and MOI so that Argentina could effectively manage CFC production within its national quota system. The project cannot claim credit for strengthening the institutional framework in Argentina alone (the objective that the Bank had monitored in practice) as MOI through UEPRO is a small part of the larger framework involved in MP implementation.

3.3 Efficiency – Rating: Modest 58. Efficiency of the operation is assessed by analyzing the two project components separately, given their association with each specific objective of the GEO. Overall efficiency rating rests with the component of greatest weight, Component A due to its value (in US$), impact (towards meeting the GEO) and cost-effectiveness (CE). 59. Component A – Subgrants. Subprojects were provided grants for technology conversion from ODS use. In the case of MLF-funded subprojects, efficiency is determined by cost-effectiveness of the planned ODP phase-out at approval. The CE of the majority of the subprojects in the MP sectors addressed was the same or better than that approved. The actual CE values all came under the MLF established CE norm with the exception of one for the refrigeration sector. The average CE of the entire portfolio of subprojects was US$7.45/kg of ODP eliminated in comparison to US$8.64/kg approved overall (see Annex 3).

60. The CFC production subproject contributed significantly to overall CE of Component A at a cost of only US$3.40/kg of CFC phased out. In general, production sector projects are the most cost-effective under the MLF. Comparative analysis of Argentina’s production sector plan at approval and after implementation with CFC production closure in China and India indicates that it was even more cost-effective MLF-wide (10 percent more). Given the higher grant effectiveness of the phase-out achieved than planned, the efficiency for this component is deemed Substantial. 61. Component B – Administration and TA. In line with the standard fee levied by executing agencies of ODS projects and as approved by the ExCom, UEPRO received three percent of subproject funding disbursed to enterprises for preparing, administering, and supervising subprojects. US$500,000, or five percent of the funding for the production sector subproject, was approved in TA and project management and allocated to Component B. An

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additional $290,000 was reallocated to Component B in 2014 because funding had been overdrawn. In total, the actual cost of administration and TA as a percentage of funds disbursed is seven. A major factor contributing to UEPRO’s higher cost are the long delays in individual subproject implementation. In addition to the group of subprojects that suffered from external economic factors, the two subprojects with public entities (INTI for halon and INTA for MeBr) were delayed by more than a decade each. The majority of funds utilized under Component B after 2010 went to sustain UEPRO at nearly full capacity up to the closing date despite the size and activity of the remaining subproject portfolio. Efficiency is rated as Modest.

3.4 Justification of Overall Outcome Rating – Rating: Moderately Satisfactory 62. Justification for the overall outcome rating that combines relevance, achievement of the GEO, and efficiency is based on the above analysis and takes into account the following:

The high relevance of the project. The GEO’s main objective of ODS phase-out was substantially achieved due to the

adaptive approach taken to deal with external factors and resulting delays, thereby replacing cancelled subprojects with new types of subprojects in new sectors.

Specific objectives as per the MOD were largely achieved although institutional capacity for preparing and administering subprojects created by the project can only be partly claimed for the UEPRO in MOI. Wider capacity is attributed to the combined impact of this and other MP projects in Argentina over time.

The costs and time taken to achieve results for individual subprojects (with the exception of the production sector).

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 63. The project was entirely centered on environmental outcomes in following with applicable requirements of the Montreal Protocol, the MLF, and OP/BP 10.21. (b) Institutional Change/Strengthening 64. Argentina’s overall national framework for meeting international environmental treaty obligations has coalesced, evolved and continues to be responsive to the MP. This is evident as GOA has achieved three years of compliance with the new HCFC phase-out obligations, relying on the same inter-agency and inter-ministerial structure for policy promulgation, implementation, monitoring and enforcement. The combined effect of all MP support provided to GOA, including that provided through the project can be attributed to said achievement. In addition, a cooperative relationship was cultivated and continues with the private sector in almost all MP sectors over the project’s life. This collaboration is needed in the current phase of MP implementation and perhaps beyond, considering that high-GWP alternatives such as HFCs may someday be eliminated through MP support.

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(c) Other Unintended Outcomes and Impacts (positive or negative, if any) 65. The development of homegrown and innovative technology for propellant in MDIs was not foreseen as ODS conversions usually involve commercially available alternative technologies. As isobutane costs less and is more climate friendly, this new technology for MDIs may have greater climate benefits once established and more widely adopted. Another significant and similar additional benefit of the project was to reduce GHG emissions as a result of eliminating more than 3,700 MT of CFC consumption and production. CFC-12 and -11 have GWPs of 10,900 and 4,750 respectively, much higher than substitutes (in some cases HCFCs) introduced by the project. Thus, more than a net 37 million tons of CO2 eq. emissions were avoided annually through the project.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 66. No survey or stakeholder workshops took place. However, the final Implementation Support Mission included eight meetings with a sample of representatives of subproject beneficiaries and several site visits. Beneficiaries were on the most part satisfied with their subprojects and the financial assistance received.

4. Assessment of Risk to Development Outcome – Rating: Negligible to Low 67. GOA has continued to comply with the MP requirements of complete phase-out of Annex A and B substances five years after the January 1, 2010 obligation. This is partly due to the country’s now well-established regulatory and institutional framework through which the consumption of these substances is illegal, the technological transformation of the sectors where these substances were used, and the elimination of the global supply of CFCs, virgin halon and MCF. GOA enforces its ODS rules and there has been no evidence of illegal importation. The likelihood that industry will revert to the use of these substances is therefore extremely low.

5. Assessment of Bank and Recipient Performance

5.1 Bank (a) Bank Performance in Ensuring Quality at Entry – Rating: Moderately Satisfactory 68. The performance of the Bank in identifying, preparing and appraising the project is assessed as satisfactory for having effectively incorporated required pieces needed to develop a responsive intervention to support Argentina’s ODS phase-out goals while meeting Bank operational requirements. The scope of the work was firmly founded on sector analysis of the CP, the country’s specific requests for areas of Bank support, and the OP/BP on MP Operations. The Bank was proactive in developing an MLF subproject pipeline in priority sectors and adequately mobilized required technical expertise. The Bank anticipated the need for a functional institutional framework not only for executing the project but to ensure that enabling regulations and policy outside of the project would be put into place to foster sustainable outcomes. It also rightly identified the possible risk to project efficiency from the many actors in subproject implementation.

69. A caveat to the Bank’s otherwise satisfactory performance is the lax handling of the project objective across documents and the key data upon which targets were based. The project document’s objective statement embedded indicators and targets and was once removed from the

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GA’s more global angle. Metric tons of ODS (volume) and ODP (impact) were referred to interchangeably and not all possible types of ODS that would be included in the project were specified. These inconsistencies contributed to the future challenges in the M&E framework, such as agreement on what target values to monitor. (b) Quality of Supervision – Rating: Moderately Unsatisfactory 70. The rating of Bank performance in supervision combines distinct phases of the project. The team in place in 1997-2006 demonstrated good technical knowledge and understanding of MLF rules through advice to the country on eligibility criteria, incremental cost reasoning, baseline equipment disposal, and financial viability, among others. A strong drive to develop new subprojects in close cooperation with UEPRO and OPROZ was consistently present and proved essential to achieving the GEO after the large group of initial subprojects were cancelled. The Bank MP Coordination team mirrored this drive by submitting and negotiating subprojects on behalf of Argentina at ExCom meetings. In addition, the Bank provided policy support to GOA, for example on implementing regulations for Law 24.040 on Controlling Halon and on controlling CFC production to meet national consumption targets. But comprehensive supervision and technical support came at a cost – annual Bank costs are nearly four times higher annually between FY98-FY06 than most of the remaining years. 71. By facilitating the last GA extension in 2010, the Bank ensured that the final subproject, the conversion of MDIs had ample time to be completed given the innovation involved, the critical role of the product, and regulatory approval requirements in Argentina. However the Bank’s support to the project had already slipped. This is evidenced by the quality and dearth of supervision and monitoring reports, no site visits, failure to formally realign project objectives, targets or the results framework with evolving project needs (stemming from the inclusion of production as part of consumption phase-out, and the MLF shift to compliance-based phase-out), and to more effectively capture project impact with the proper metric), and the carryover of unrealistic assessments of project status that had already begun in the project’s first phase. This decrease in technical and policy support permitted inefficiencies in UEPRO to grow. The Bank did not fully tap into its internal resources in terms of budget and cross-support (for MP technical issues) as it had in previous years. Subprojects first identified as having delays in early 2000, lingered into the final two years of the project. Safeguards treatment was “casual” at best, and there was no mid-term review that could have brokered the needed restructuring of the GEO and indicators, despite the opportunity before the last two project phases.

72. Bank engagement with UEPRO as well as OPROZ began to increase again in 2011 in light of the impending HCFC phase-out requirements and the need to ensure adequate transition arrangements were in place. This entailed preparation in 2012 of a new ODS operation to support Argentina’s Stage I HPMP. (c) Justification of Rating for Overall Bank Performance – Rating: Moderately Unsatisfactory 73. The rating is based on the above-assessed Bank performance for Quality at Entry and of Supervision, noting that the lower-quality support in supervision was not constantly evident but dominates given the project’s trajectory in its last phases and persistent M&E issues.

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5.2 Recipient (a) Government Performance – Rating: Moderately Satisfactory 74. GOA generally showed commitment to the overall objectives of the project during implementation, despite periodic changes across the Government and gaps in coordination under the tripartite arrangement, particularly with MOI as represented by UEPRO. That MOI covered 20% of salary costs during the entire 17-year life of UEPRO was an important sign of this commitment. Nonetheless, there were delays at times in receiving clearances or endorsement of subprojects due to frequent changes in Government or officials not familiar with the MP. For example, two years were required until the CFC Production Sector Plan was endorsed for submission to the MLF. Without the plan in place, a critical disconnect occurred between MOI, which took responsibility for the production sector, and SAyDS, which focused on reporting of overall consumption, leading to Argentina’s non-compliance with its first MP obligation in 1999. 75. In the project’s last years, MOI’s interest for the project appeared to decline leaving UEPRO as the sole interlocutor with the Bank on project policy and strategic matters. In addition, UEPRO as MOI’s ozone representative was somewhat isolated from MP governance and the country’s strategy for MP implementation as seen in the interactions with OPROZ/SAyDS, which were limited primarily to reporting on the status of the project, when solicited. 76. In spite, and possibly as a result of the early coordination challenges encountered in the tripartite arrangement, GOA has a legal framework that is responsive to emerging regulatory and policy needs of the MP and is complemented by inter-agency arrangements and enforcement particularly between OPROZ, Ministry of Foreign Affairs and Customs. (b) Implementing Agency or Agencies Performance – Rating: Moderately Unsatisfactory 77. UEPRO, the project coordination unit created under the project and hosted by the MOI, took lead responsibility for the project implementation. It was originally a two-person unit in addition to INTI technical support to manage a subproject portfolio of up to US$24 million. It entered into SGAs with beneficiaries and managed all elements of the subproject cycle. UEPRO provided appropriate and timely support and led on related initiatives. For example it pursued a tax exemption on imported equipment with the Ministry of Economy in line with the recommendation of the MP Parties and ExCom. Another example is a study it undertook on how the financial crisis was impacting project delivery and how early CFC production closure would impact the local CFC market.

78. Upon a series of changes in UEPRO leadership, removal of INTI’s technical contribution to UEPRO and low periods of activity on the beneficiary side, UEPRO’s role and responsibilities decreased. The CFC Production Phase-out Plan that required intensive reporting and monitoring to ensure timely release of funding tranches to FIASA under the performance-based approach was an exception. At that point, UEPRO was augmented to five full-time professional staff. However, it continued with this configuration three years after the CFC production subproject closed in 2010. With only the MDI subproject remaining and four more or less dormant subprojects, this period was manifested by low disbursement rates, inability to supply or source technical know-how needed to move forward remaining subprojects, and an overall decrease in initiative by UEPRO.

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79. Throughout the up and downswings of the project, the PIM was not revisited and the appropriate size and cost of the PCU in relation to the active subproject portfolio not observed as it had been in the earlier phases of the project. Adherence to ExCom policies, which is also a shared responsibility with the Bank, was not consistent in terms of reporting, changes in technology and disbursement rules, as witnessed by the ICR mission. (c) Justification of Rating for Overall Recipient Performance - Rating: Moderately Satisfactory 80. The combined assessment of performance of the Government and Executing Agency (UEPRO) is MS, based on Government performance in the satisfactory range and a modestly satisfactory outcome.

6. Lessons Learned 81. An adaptive approach was key to successful ODS phase-out outcomes. The umbrella project modality, established through World Bank policy on Montreal Protocol operations facilitated the substantial achievement of ODS phase-out when unforeseen events arose such as the financial crisis and during the extended MP-mandated phase-down steps. As a result of the flexibility and simple design, the project could respond to phase-out needs by incorporating new subprojects to replace those cancelled. 82. Donor requirements can play an instrumental role advancing implementation. The decisions, policies and procedures of the MP and the MLF shaped the project and had a positive influence on outcomes in terms of phase-out targets and prioritization, environmental and safety requirements on alternative technologies, monitoring and reporting requirements, pressures for cancellation of inactive projects, and sustainability measures. These guiding parameters drove subproject implementation progress including in periods when supervision, MP technical capacity, and monitoring and reporting by the Bank and UEPRO were lacking. 83. Promoting synergies with global environmental goals is important to reinforce Government buy-in. MOI, as the executing agency had a distinct role to play in obtaining industry’s cooperation for the implementation of project requirements by balancing its primary mandate of promoting industry with that of national environmental objectives. A notable example is MOI’s advocacy for the development of alternative MDI technology with the potential to give Argentine industry a competitive edge in the regional market due to low input cost and climate impact, addition to achieving CFC phase-out. 84. Grant financing is more effective when delivered through a sector plan approach. Effecting industrial change towards ODS-alternative technologies was facilitated by grant financing and the availability of alternative technologies in the market. However, a performance-based sector-level approach that makes funding dependent on reaching national-level ODS phase-out targets, is better able to create commitment to, and efficiencies in implementation. The CFC Production Phase-out Plan subproject that combined policy with grants stood out among other subprojects for its unique approach, impressive results and timely execution. It effectively brought together stakeholders (regulator, executing agency and private sector) to reach shared objectives through combined incentives and disincentives.

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85. Linking ODS supply and demand leads to sustained phase-out results. A universal lesson observed, but particularly so in Argentina, is the need to control ODS consumption and production while simultaneously converting industry (the users) from the beginning of the project. Knowledge that CFCs would be in short supply and costs would rise could have accelerated subproject implementation among slow-movers. Moreover, the temporary lapse in coordinating national consumption with production targets that caused Argentina to exceed MP limits in 1999, may have been avoided if addressed sooner. This lesson was reflected in the design of the follow-on HCFC Phase-out Project (P129397). 86. Positive outcomes may be put at risk when duration exceeds the point when the GEO has been substantially reached. The majority of project disbursement and phase-out was achieved by the 2010 MP phase-out target. The final restructuring made a good case for GA extension, but the period of extension was not used to its full potential to close out remaining subproject balances and to focus technical and administrative capacity on the MDI strategy and chiller replacement subprojects. The final period of little outputs overshadowed the positive results achieved prior to 2010.

7. Comments on Issues Raised by Recipient/Implementing Agencies/Partners (a) Recipient/implementing agencies 87. The responsible GoA representatives were provided with the draft ICR and substantive and editorial comments were received from UEPRO, the Ministry of Economy and the Chief of Cabinet of Ministers. The Bank’s detailed responses to the comments were provided to the GoA separately while the edits and some of the comments have been reflected in the final ICR. A summary of the Recipient’s comments and the ICR (in Spanish) is found in Annex 7. (b) Cofinanciers and other partners and stakeholders 88. Not applicable.

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in US$ Million equivalent)

Components Appraisal Estimate

(US$ millions)

Actual/Latest Estimate

(US$ millions)

Percentage of Appraisal

Component A: Provision of Subgrants

24.00 27.66 115%

Component B: Administration and TA

0.90 1.99 221%

Unallocated 0.10 0.00 Total Baseline Cost

Physical Contingencies Price Contingencies

Total Project Costs 25.00* 29.65 119% Project Preparation Facility (PPF) Front-end fee IBRD

Total Financing Required 25.00* 29.65 119%

* Original umbrella amount is shown given that MLF approvals were received primarily during the life of the project. Counterpart funding provided by the enterprises was not envisioned and therefore not formally included in the project.

(b) Financing

Source of Funds Type of

Cofinancing

Appraisal Estimate

(US$ millions)

Actual/Latest Estimate

(US$ millions)

Percentage of Appraisal

Recipient N/A 0.00 0.00 0.00 MONTREAL PROTOCOL Grant 25.00 29.65 119%

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Annex 2. Outputs by Component Component A – Subgrants 1. Refrigeration and Foam. Ten subprojects were completed in the sector responsible for the manufacturer of commercial (1) and domestic refrigeration (9). The majority of enterprises first identified to take part in the conversion program were domestic, i.e. household refrigerator producers. Sixteen subprojects were originally prepared by UEPRO, OPROZ and the Bank, submitted, and approved by the MLF between 1994 and 2000 – worth a total US$16.8 million in grant funding.

However, the financial crisis experienced by Argentina between 1998 and 2002 had severe consequences on the refrigeration subproject portfolio and was exacerbated by international market trends as CFC controls began in 1999. These subprojects were delayed an average five to seven years as enterprises with financial difficulties attempted to adjust to the market. One subproject was delayed more than a decade and nearly cancelled several times as it struggled to complete its two-part conversion through bankruptcy and ownership changes. Seven subprojects with domestic refrigeration companies were cancelled. The result was not only the grant financing of US$6.2 million foregone by the GoA to cease CFC use (a total of 195 ODP MT), but the administrative costs to the project. The approved fees to the Bank and UEPRO (ten and three percent respectively on the funding approved) of US$380,000 had to be returned in their entirety by the Bank to the MLF (although UEPRO had the right to retain 1.5 percent on cancelled subprojects per the original project document and PIM).

Two companies were interviewed during the ICR mission to gauge their experiences and determine the sustainability of the previous interventions in foam and refrigeration manufacturing. One enterprise received grant financing to cease use of CFC-11 in the production of rigid polyurethane foam in panels for thermal insulation. More than 12 years later, the enterprise is still using the project funded equipment in its discontinuous panel production for commercial refrigeration (display cases, cold-storage, etc.). In 2013, it installed a nearly fully automatic continuous panel production line based on isobutane technology. The equipment purchased by the project was a significant process improvement while allowing for CFC elimination because three stand-alone machines were replaced with a foam injection system allowing for multiple injections. The enterprise was able to select the supplier/equipment manufacturer that best fit into its overall production process. Enterprise representatives expressed satisfaction with the project.

Another enterprise visited, originally called Frimetal, used CFC-11 and -12 to manufacture domestic refrigerators and received nearly US$2 million to convert to ozone and climate-friendly alternatives (hydrocarbons). The company is, since 2011, a part of a multi-national group but was able to confirm its experience with the subproject (executed between 1998 and 2004). It had benefitted from technical support from INTI through UEPRO. What stood out most for the company was the new technology and the bidding process, which led to a highly successful outcome and was later replicated by its branch in Chile.

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The enterprise was highly satisfied with the project, which it considers to have been a door opener to more sophisticated and quality manufacturing. It was the first step towards its corporate greening approach. The greening programs of the global company has allowed it to continue improving safety measures, e.g. the installation of sprinklers. During the plant tour, it was confirmed that the enterprise had never started production nor currently produced with isobutane (HC) in refrigeration and is instead using HFC-134a. The enterprise justified its decision not to adopt the technology as planned for safety concerns, particularly in aftersales service. This technology change in the subproject, however, should have been reported according to rules of the ExCom given that the enterprise received funds to go to HC. 2. Mobile Air-conditioning. Four subprojects were implemented at four companies in Argentina responsible for mobile air-conditioning (MAC). As the enterprises were part of the value chain and did not actually charge MAC systems in vehicles with the refrigerant, CFC-12, ODS phase-out achieved is considered indirect.

The market was divided into two groups of MAC manufactures. The first was integrated by three companies. In this group, two produced the evaporators and condensers, and the third, assembled the units. The group accounted for 75 percent of the national MAC market, about 180 indirect ODP tons and received subproject approvals in December 1994 in the group of the first MLF approvals for Component A. The other group was made up by one large company, which produced and assembled its own MAC systems. Its subproject was approved in 1995.

A total of US$7.1 million was approved for the subprojects however due to ownership

changes (increase in developed country ownership), funding was adjusted downwards and US$4.9 million was disbursed; the balance was returned to the MLF. Including counterpart funding, the total estimated cost of converting to non-CFC MACs for vehicles was US$12.4 million.

Implementation duration was several years longer than planned primarily because the automobile market continued to demand CFC-12 based MACs until 1997. When the industry was ready as a whole to adopt the alternative systems (based on HFC-134a), conversion quickly completed. A secondary cause of delay was the change in ownership. More than 240 ODP tons of CFC-12 were eliminated from downstream use.

3. National Halon Management Program helped eliminate the use of Halon-1301 in new applications and manage recovered Halon-1301 in old applications. The subproject was conceptualized at the inception of the project in order to support GOA’s then-recent Halon Law from 1990. It was approved in November 1998 and included two modules, setting up of a halon management program (including training and education to the fire protection industry) and transfer of alternative fire protection technology and technical assistance for users and the establishment of a national halon-1301 reclamation and recycling system, through a network of recovery stations, three reclamation and storage facilities and a national clearing-house center. From the beginning, the implementation process for the establishment of the Halon Bank encountered difficulties due to lack of experience at the national level, including which would be the most appropriate laboratory equipment to procure and expedient mechanism to achieve the

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sought after results. The assistance provided by an international expert hired by the Bank (October 2000) helped to better define the components and build consensus in the sector. In January 2004, the Halon Bank started to work through an operator recognized by INTI. INTI played the role of the Halon Bank administrator agent and also managed and assessed its performance. Given that the market turned out to be smaller than initially expected, three firms out of the five initially identified as interested eventually registered as Halon Bank operators. The Halon Bank was implemented at a lower cost than budgeted as it was determined that it was not necessary to purchase all the planned laboratory equipment (i.e. analysis instruments) or furnish as many facilities with technical equipment (i.e. deposit tanks). The Halon Bank works in Argentina as a virtual bank, controlled by INTI, which is informed of each operation made in the market by the operators and/or user. INTI provided a comprehensive overview of the subproject to the ICR mission and the amounts of halon reclaimed. It was highly satisfied with the project while recognizing its duty to perform this service given Argentina’s obligation to the MP and other multilateral environment agreements. The Halon Bank, as implemented in Argentina, continues to be in use and operate, one of the few among Article 5 recipients of halon bank funding. 4. Testing Methyl Bromide Alternatives in Post-harvest Disinfestation for Cotton and Citrus. The subproject was approved in 1999 as a demonstration activity with no associated phase-out of the ODS involved, i.e. methyl bromide (MeBr), an “Annex E” substance with an ODP of 0.6. The subproject aimed to demonstrate the technical and economic feasibility of several alternatives for extending post-harvest life of cotton and citrus: phosphine for citrus and cotton, carbon bisulphide for cotton, cold treatment for citrus and integrated pest management systems as alternative technologies to the use of MeBr.

The subproject was to be executed by SENASA (National Phytosanitary Service) and

finding a contractor needed for research and test services would be done through a competitive selection process. After a five-year period of institutional and administrative delays from changes in GOA to trying to set up the subproject legal and administrative framework at SENASA, including selecting a general coordinator, it was agreed between GoA and the Bank to transfer the subproject to a new agency, INTA (National Institute of Agricultural Technology). INTA, a research and extension institute capable of performing tests and implementing the demonstration in house entered into agreement with UEPRO to be the executing agency.

Further delays were encountered in implementation (testing) attributable to the growing

cycles of crops as well as the pests and climatic factors during the harvest season and a dengue epidimic that occurred in the work zones. Trials were postponed several times until the subsequent year's harvest season. Modifications in the technologies tested were considered late in the project after results were found to be lacking, e.g. the use of heat with the cold treatment. However, UEPRO decided to discontinue testing to prevent additional delays in 2011. Subproject closing was done two years later as time was taken to determine how project savings could be utilized.

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As per the final report completed by INTA, the conclusion from the tests done were 1) for citrus that cold treatment works the best to kill pests but is commercially difficult, requiring cold throughout distribution (i.e. also cold transport) as there is only a small window to market the produce; 2) for cotton fiber, phosphine is effective but neither reasonable at a commercial level due to high cost combined with the fact that the main growers are small farmers. Further, carbon bisulphide only had a ten percent efficacy. In summary, cold treatment (requiring a cold chamber) and phosphine are viable only for large companies that can afford the technology.

In terms of subroject execution, INTA found that the administrative requirements

sometimes clashed with the “biological” time required to conduct experiments and tests (seasonal aspects, pest life cycle, unintended developments in experiments, etc.). INTA would have also preferred to have had the opportunity through the project to interact more with international experts. In sum however, the project was a good opportunity to have exchanges with industry, seeing that UEPRO sits in the MOI and INTA belongs to the Ministry of Agriculture, and to receive inputs from a different sector to help solve challenges as they arose.

Despite challenges with finding the right executing agency with testing capacity, as well

as other delays, the project eventually served its original intent to demonstrate the feasibility of alternative treatments for citrus and cotton than MeBr. Subsequent to the approval of the demonstration, Argentina continued with investment activities to phase out MeBr with other MLF Implementing Agencies. MeBr consumption as per the MP definition has been phased out in Article 5 countries since January 1, 2015. The demonstration subproject contributed to the cumulative agronomic knowledge needed to shift from a highly effective and efficient treatment to other alternatives. 5. Technical Aerosols. Component A included two subprojects in the sector, specifically aerosols used to propel cleaning, lubricating, and other similar agents, primarily in the automotive industry. Servex S.R.L. received a grant to finance the incremental operating costs associated with the replacement of two CFCs used as propellants and solvents by a mixture of HFC-134a and HCFC-141b. In addition, 0.2 ODP MT of MCF were also phased out.

Servex was visited by the ICR mission (nearly ten years after its conversion). The enterprise reported that the project went well. The grant enabled sufficient testing of new formulations to replace CFC-based formulations in a range of automotive and cleaning products. Servex described how it established a working group to test formulations. It encountered difficulties with the replacement substance, HCFC-22 due to a different pressure and had to work hard on a technology that would provide sufficient pressure. Servex understood since the subproject design stage through the Bank and the executing agency that HCFC is also an ODS and only a transitional technology, that would also have to be phased out eventually.

Electroquimica Delta was the second enterprise to receive a grant based on similar conditions as that of Servex, namely to cover new operating costs from phasing out various CFCs and MCF and phasing in HCFC-22, HFC-134a and others. In the early 1990s the company converted, with its own resources, 40 percent of its production line to HAPs but continued producing technical aerosols (non-flammable dusters and non-flammable contact cleaners) using CFCs as propellants and solvents. The company received incremental operating costs associated

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with the replacement of CFC propellant by a mixture of HCF-134a (60 percent) and HCFC-22 (40 percent), and CFC-113 as a solvent by a mixture of HCFCs, HC and others. The subproject phased out 60 ODP tons of ODS without major inconveniences to the enterprise.

6. Elimination of CFCs in Sterilization. The subproject objective was elimination of 20.69 MT of CFC-12 at Asisthos a company that provides sterilization services to laboratories, pharmaceutical companies, hospitals, etc., by converting operations to a 100 percent ethylene oxide process.

Given that ethylene oxide is highly toxic and flammable, safety devices, ventilation and air-conditioning were included in the subproject as well as TA, in part to certify the new facility with the alternative process. After initial delays in the process of approval by the ExCom, the subproject was executed successfully with full phase-out. No major problems were experienced throughout implementation except that portable sensors with accurate sensitivity were difficult to obtain in the market. The baseline (CFC-based) sterilization chamber was perforated and cut in vital parts to permanently disable the equipment. The process was verified by OPROZ, INTI, UEPRO, and the enterprise.

According to the company, incremental operating savings of US$105,416 that were deducted from the original approval were over-estimated, and operating costs were expected to be higher in the future due to changes in prices of raw materials and possible consumption constraints of the sterilization market in Argentina. In addition to the cut in incremental capital costs (from the MLF), the company had to finance other costs with an extra US$241,365 to complete the project.

7. Solvents. Initially two subprojects were approved by the MLF in 1999 to phase-out ODS used as cleaning agents in industrial production. The first was at a company that was not able to prove its liquidity in the midst of the financial and economic crisis. The subproject was cancelled.

The second solvents subproject was designed as an umbrella project to cover nine small enterprises with limited consumption of MCF (ODP of 0.11). For each enterprise, similar interventions were planned: replacement of existing cleaning equipment with an aqueous cleaning unit, adaptation of wastewater treatment where necessary, training, and commissioning. In one case, a retrofit of the baseline equipment was intended. The aqueous cleaning equipment was to be supplied by one local manufacturer.

Due to reported financial difficulties of the majority of the enterprises rooted in the

country’s overall economic and financial situation, seven dropped out of the project. This was coupled with the fact that grant funding was not sufficient to cover all expenditures and significant counterpart funding was required. The process of appraising and waiting for the SGA signing delayed the subproject by more than three years. Two enterprises, Buffalo and Orbis, went forward with their conversions, albeit at a slower pace than planned because of the difficulty of getting needed components due to the same reason, national economic challenges. The subproject phased out 1.4 ODP MT of MCF at Orbis and 0.9 ODP MT at Buffalo. Both Orbis and Buffalo were using aqueous solution in their production processes after conversion.

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At completion, the conversions were deemed to be sustainable with little risk of returning to old technology due to the benefits of the new technology and its implementation at the plants – in particular, environmental and safety risks have been eliminated with the new production process. Both companies had reported to have increased productivity.

8. CFC Production Closure. The Argentina CFC Production Phase-out Plan was approved at the 38th Meeting of the ExCom with in principle US$8.3 million in funding for the phased reduction and closure of the entire CFC production capacity in Argentina. The subproject involved a sole production facility at Frio Industrias Argentinas S.A. (FIASA) and permanent closure and dismantling of all capacity for the production of Group I, Annex A and Group I, Annex B CFCs. The project was Argentina’s first performance-based agreement under the MLF whereby it entered into agreement to end CFC production in accordance with agreed overall and annual targets to 2010, as verified by an independent auditor, in exchange for the release of tranche funding. In addition, the agreement included a penalty of US$1,000 per ODP tonnes of reductions not achieved in any agreement year.

In November 2007, the production sector agreement was amended in order to accelerate

the closure of production by two years. UEPRO led related inter-institutional negotiations and participated in a related market study. Another US$2.3 million was approved for FIASA on the condition that independent verifications of the plant were conducted by the Bank in 2008 and 2009 to confirm that production closure was sustained. The results of the subproject in comparison to the agreed production phase-out timetable follow:

Table A-2.1

Year Agreement Target Accelerated Phase-

out Actual Production

Funding as Adjusted (US$ m)

2002 3,020 3,020 3,015 0.5

2003 3,020 3,020 3,018 3.5

2004 3,020 3,020 3,016 -

2005 1,647 1,647 1,645 0.3

2006 1,647 1,647 1,645 2.0

2007 686 686 443 2.3

2008 686 - - 1.0

2009 686 - - 1.0

2010 0 0 0 -

TOTAL Production Eliminated/Funding Released 3020 10.6

The production sector subproject met its primary objective of CFC elimination in the agreed timeframe, including early phase-out. At the time of approval, the company decided it would produce HCFC-22, the main alternative substance to CFC-12, using the same plant, and therefore was designated as a “swing plant.” Hence in mid-2007 the plant retrofitted some equipment (such as storage tanks to hold raw materials needed) but no components were destroyed.

FIASA explained to the ICR mission that it was generally satisfied with the project, acknowledging that closing down CFC production was a straightforward objective. It felt that UEPRO was present for it throughout the subproject. In terms of drawbacks, the enterprise reported that despite being initially informed that its grant was tax exempt, FIASA needed to pay 35 percent in taxes on the grant to the GOA.

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In regards to final subproject expenditures, there were savings for labor compensation

given that part of the labor was retained for HCFC production. FIASA retained US$9,550,000 instead of the US$10,100,000 planned.

Table A-2.2 Production Sector Plan Approved Actual Savings

TA 500,000 704,976 (204,976)

FIASA 7,000,000 7,000,000

FIASA Labor Compensation 800,000 250,000 550,000

Subtotal 8,300,000 7,954,976 345,024

Accelerated Phaseout 2,300,000 2,300,000 -

Total 10,600,000 10,254,976 345,024

Note: TA was administered under Component B. Savings will be returned to the MLF ExCom.

In late 2013, UEPRO requested that US$290,000 of the US$550,000 in savings be kept and transferred to Component B for continued monitoring of FIASA and for project management, to which the Bank agreed. This was because more than a year of the project implementation period was still ahead and the new HCFC project that involves monitoring of FIASA had not become effective.

The subproject met its ultimate objectives but costs were not as planned and reporting to the MLF ExCom on expenditures was not accurate, as reports by the Bank on behalf of GOA indicated full disbursement by the end of 2010. In the end TA and project management cost was US$704,976. 9. Building Chiller Replacement. The subproject was approved by the MLF ExCom in November 2005 at its 47th Meeting as one component of Argentina’s previously approved (2004) National CFC Phase-out Plan (NCPP). With the assistance of the Lead Agency, UNIDO, the NCPP aimed to address all remaining, unfunded CFC consumption – with the exception of that for metered dose inhalers (see below) up to the 2010 CFC phase-out date. During implementation, the GOA requested that a portion of the NCPP funds be allocated to a pilot replacement of CFC-based centrifugal chillers. US$500,000 was agreed for said purpose and the Bank became part of the NCPP agreement between GOA and the ExCom.

The context for this request was a study led by the Bank on the barriers to replacing chillers with more modern technology namely energy efficient, non-CFC chillers. Grant funding for chillers was difficult because 1) chillers were imported as a product to most countries (hence technically not ‘consumption’) and were topped up with CFCs as part of servicing, and 2) CFC-based chillers were so energy inefficient, that there would be an incremental cost savings (estimated return on investment of four years) hence no need for a grant. At the same ExCom meeting, the Bank received funding for a Global Chiller Replacement Project, which included a study on Argentina’s chiller sector and another allocation in principle of US$1 million.

The NCPP-chiller replacement activity was postponed by the Bank team and UEPRO in anticipation of additional funding that would make the intervention more meaningful. Based on the Bank study on barriers to chiller replacement, it was estimated that 20-30 percent of the cost

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of a new chiller would permit barriers to adoption of more energy efficient technology to be removed. The grant also provided for the use of the funds for project management and TA for developing tools or approaches to communicate the large energy savings potential from replacing old (10-15 years) chillers.

UEPRO hence reached out to prospective building chiller owners that had been initially

surveyed. The response rate was extremely low despite several attempts in writing. No progress was made thus in 2009, UEPRO asked that the information on chiller owners be updated through a survey. Data was hence updated and in 2009 UEPRO received a “short list” of interested enterprises numbering about 15. Demand remained low as did outreach to explain and demonstrate the merits of chiller replacement. In the end only five chillers could be replaced for three building owners. In 2013, the ExCom took a unilateral decision to close some projects on CFC and other ODS that had been technically phased out by 2010. Argentina’s chiller project under the NCPP was included and the balance of the funds was returned in 2014. The additional $1 million allocated under the Bank’s Global Chiller Replacement Project was carried over, untouched to the new Argentina HCFC Phase-out Project (P129397).

One of the three building owner beneficiaries, a five-star hotel, was visited by the ICR mission in October 2014. It had one of its three chillers replaced with the 20 percent grant subsidy provided by the subproject. The chiller was replaced with an HFC-134a chiller that has contributed to energy savings that surpassed expectations of the hotel (20 percent energy savings and a 30 percent savings in the energy bill). Only one month after installation, energy consumption dropped. The hotel belongs to a larger group that has seen the replacement of a total of 4 chillers through the grant subsidy. The General Manager was highly satisfied with the project although he would have liked a larger subsidy. 10. Metered Dose Inhalers (MDIs). The last subproject that was approved and implemented under the project was the Phase-out of CFC Consumption in the Manufacture of Aerosol MDIs. The objective of the subproject was to eliminate CFCs used as a propellant in inhalers for medical uses, specifically for treating asthma. At US$2.8 million it was designed as a sector-level project, encompassing a group of laboratories to develop HFA-based formulations for their MDIs, conversion of a major pharmaceutical company, Laboratorio Pablo Cassara, to the use of pharma-grade isobutane and the conversion of another enterprise to HFA technology. It comprised a TA component with flexibility in the use of funds to develop a strategy to assist the public and healthcare providers to transition to CFC-free MDIs used to deliver salbutamol and budesonide.

The TA component of the subproject, including the MDI transition strategy, and public awareness was to be implemented under Component B through UEPRO. However, UEPRO delegated the work to beneficiaries and in the end the work was not be completed as planned.

The ICR mission visited Cassara which stated that the support of the project was important and the development of a technology not used commercially anywhere else would not have happened without it. The enterprise said the most difficult part of implementation was coming up with the formulations with isobutane as an alternative to HFA. Another challenge was finding explosion proof equipment. It had to work with a supplier of normal filling equipment to develop a special explosion proof machine. Cassara also needed to develop a special testing area for the pilots and had to find another location for MDI production, once the formulation/MDI receives

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approval and is registered (the dossier was sent to authorities in January 2014). Cassara explained that it is and has been using the new equipment to manufacturer HFA-based MDIs. It also uses the old, CFC-based line for HFA production, as the original subproject proposal did not mandate its destruction.

In terms of subproject proponents, Cassara stated that it was very comfortable with the support of MOI and UEPRO that Cassara felt, had strong buy-in in its objective. When Cassara required something, it felt there was a good link to the WB through UEPRO. On costs, Cassara stated that it covered 100 percent of salaries for R&D and 80 percent of the testing equipment and trials and estimates its contribution to be about US$2-3 million. In retrospect, the company would have liked the WB to use its convening power to help it build a network of universities/researchers on this type of product. Cassara had felt a bit isolated (partly for the need for confidentiality) but would have liked to share knowledge.

Cassara has applied for a patent but does not expect to be able to market the isobutane MDI

before 2016 (two years for approval, another two to twelve months for controlled marketing approvals). It is none the less confident and even went beyond subproject expectations by developing more than ten additional formulations for drugs other than salbutamol.

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Table A-2.3 summarizes key subproject data under Part A of the Project (Category 1) including phase-out achieved.

* “Date Completed (Actual)” is the date of physical completion, i.e. when no more ODS were in use, start-up of the use of alternatives and baseline equipment destroyed (as applicable). **The CFC Production Phase-out Plan was funded through the release of six annual tranches in exchange for not exceeding CFC production caps as independently verified each year. A final tranche was also approved to advance total production closure to 2008. The grant disbursed above includes the TA and project management amounts that are considered by the MLF ExCom as part of the entire subproject.

No Subroject TitleO DS

Phased O ut

New Alternative

Consumption O DP to be

Phased O ut per Plan

Consumption O DP Phased

O ut

Production O DP to be

Phased O ut per Plan

Production O DP Phased

O ut

Date of MLF ExCom

Approval

Date Completed (Actual)*

MLF ExCom Approved Funding

(US$)

Adjustment (US$)

Grant Disbursed

(US$)

Grant Effectiveness

(US$/kg)

Counterpart Funding

1 Conversion to non-CFC technology in heat exchangers for mobile air condit ioning at Interclima, S.A. CFC HFC-134a 0 0 0 0 Dec-94 Jun-99 1,983,430 (314,039) 1,669,391 n/a 2,400,000 2 Conversion to non-CFC technology in condensers for mobile air conditioning at Simon Cachan, S.A. CFC HFC-134a 0 0 0 0 Dec-94 Jan-01 2,738,217 (459,396) 2,278,821 n/a 670,542 3 Conversion to non-CFC technology in complete mobile air conditioning systems at Mirgor, S.A. CFC HFC-134a 0 0 0 0 Dec-94 Jun-99 35,632 (4,082) 31,550 n/a - 4 Elimination of CFC in manufacturing domestic refrigerators at Helametal S.A., and Helametal Catamarca S.A. CFC HFC-134a, c-pentane 62 62 0 0 Dec-94 Oct-03 2,959,085 (59,591) 2,899,494 46.77 373,493 5 Elimination of CFC in the domestic refrigerator manufacturing plant of McLean CFC Isobutane, c-pentane 74 74 0 0 Dec-94 Jan-01 2,440,570 (1,567,990) 872,580 11.79 1,713,066 6 Elimination of CFCs in domestic refrigerator production plant in Autosal, S.A. CFC Isobutane, c-pentane 22 22 0 0 Nov-95 Jun-03 797,390 - 797,390 36.25 234,200 7 Elimination of CFCs in the manufacturing plant of domestic refrigerators of Briket, S.A. CFC Isobutane, c-pentane 30 30 0 0 Nov-95 Oct-01 726,400 - 726,400 24.21 290,875 8 Elimination of CFC in the manufacturing plant of domestic refrigerators of Neba, S.A. CFC Isobutane, c-pentane 29 29 0 0 Nov-95 Aug-12 686,370 - 686,370 23.67 9 Conversion to non-CFC technology in the production of mobile air conditioning systems at Sistemaire, S.A. CFC HFC-134a 0 0 0 0 Nov-95 Sep-00 2,370,550 (1,400,728) 969,822 n/a 4,417,868

10 Elimination of CFCs in the manufacturing plants of domestic refrigerators of Frimetal, Rosario CFC Isobutane, c-pentane 89.7 89.7 0 0 May-96 Sep-04 1,855,000 - 1,855,000 20.68 493,200 11 Elimination of CFCs in 1 manufacturing plant of domestic refrigerators of Whirlpool Argentina S.A. CFC HFC-134a, HC 90.55 90.55 0 0 Nov-97 Dec-99 863,879 (99,292) 764,587 8.44 3,503,686 12 Substituting CFCs in manufacturing of domestic and commercial refrigerators at El Dorado, S.A. CFC HFC-134a, HCFC-141b 12.8 12.8 0 0 Jul-98 Sep-00 176,000 - 176,000 13.75 30,050 13 National halon management program to help eliminate halon-1301 HAL n/a 200 200 0 0 Nov-98 Dec-10 290,620 (112,795) 177,825 n/a - 14 Elimination of CFCs in sterilizat ion via ETO at Asisthos SRL CFC Ethylene oxide 20.69 20.69 0 0 Mar-99 Sep-00 395,095 - 395,095 19.10 241,365 15 Phaseout of CFC-11 in the manufacture of rigid PU foam in panels for thermal insulation at Arneg Raffo CFC HCFC-141b 67 67 0 0 Mar-99 Jul-02 177,960 - 177,960 2.66 415,240 16 Conversion from MCF used as solvent to aqua based cleaning at 9 enterprises TCA H2O, Isopropyl alcohol 7.1 2.3 0 0 Jul-99 Mar-04 272,157 (183,607) 88,550 38.50 15,900 17 Demonstrat ion project for test ing methyl bromide alternatives in post-harvest disinfestation for cotton and citrus MB Phosphine, Cold Store 0 0 0 0 Nov-99 Jun-13 375,000 (62,672) 312,328 n/a18 Replacement of CFC-11 in the manufacture of rigid PU foam for domestic refrigerators at MTH S.R.L. CFC HCFC-141b 8 8 0 0 Dec-00 Oct-02 82,695 - 82,695 10.34 3,327 19 Conversion from CFC-11, CFC-12, CFC-113 and MCF into HCFC for technical aerosols at Electroquimica Delta CFC HFC-134a, HCFC-22 60 60 0 0 Mar-02 Dec-04 264,000 - 264,000 4.40 - 20 Conversion from CFC-11, CFC-12, CFC-113 and MCF into HCFC for technical aerosols at Servex S.R.L. CFC HFC-134a, HCFC-141b 36.4 36.4 0 0 Nov-02 Feb-05 160,160 - 160,160 4.40 - 21 CFC production closure plan** CFC closure 0 0 3020 3020 Nov-02 Dec-09 10,600,000 - 10,254,976 3.40 - 22 National CFC phase-out plan: 2006 work programme - Chiller Replacement CFC HFC-134a 1.5 1.5 0 0 Nov-05 Dec-13 500,000 (368,020) 131,980 n/a 1,141,187 23 Phase-out of CFC consumption in the manufacture of aerosol MDIs CFC HFC-134a, HC 118.4 118.4 0 0 Nov-08 Dec-14 2,806,874 - 2,736,874 23.12 2,000,000

TO TAL 929.14 924.34 3020 3020 33,557,084 (4,632,212) 28,509,849 7.45 17,943,999

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Component B – Administration and TA 1. Administration (UEPRO). Main results attributable to UEPRO was the continual financial and administrative services provided to the project, entering into SGAs, facilitating disbursement, monitoring implementation progress and reporting to the Bank and OPROZ. 2. Technical Assistance. In the first phase of project implementation technical advisory services were provided by INTI to domestic refrigeration companies. TA continued in the second phase of the project solely through UEPRO and primarily for organizing stakeholder workshops and consultations and monitoring surrounding implementation of the CFC Production Phase-out Plan.

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Annex 3. Economic and Financial Analysis

The project design did not include an economic or financial analysis at baseline. However, the MLF ExCom has a methodology for evaluating the efficiency of investment subprojects through the calculation of cost-effectiveness (CE) ratios. CE is the amount of the MLF grant per unit of ODS phased-out in ODP kg. CE threshold values across MP subsectors have been used by the ExCom to vet projects and decide on funding levels since their approval in 1995.

Actual approved MLF funding for the Argentina subprojects was negotiated on a

case-by-case basis against the CE thresholds. For chiller replacement, methyl bromide, and halon banking activities, CE was not used as a criterion. The production sector is assessed for cost-effectiveness, however, because funding is based on foregone profit, no CE threshold has been established.

Table A3-1. CE Values Achieved Compared to MLF CE Threshold Values by Sector

Sector and Subsectors

APPROVED / ACTUAL MLF CE

Thresholds by Sector

No. of Subprojects*

Total Phase-Out

(ODP MT)

MLF Approved Average CE

(US$/ODP kg)

Actual Average CE

(US$/ODP kg)

Refrigeration Domestic refrigeration 9 418 24.35 21.20 13.76Mobile air-conditioning** 4 0 n/a n/a n/aFoam Rigid Polyurethane 1 67 2.66 2.66 7.83Aerosols Technical aerosols 2 96.4 4.40 4.40 4.40MDIs 1 118.4 23.71 23.12 n/aSolvents/Sterilants TCA -Solvents 1 2.3 38.33 38.50 38.53CFC Sterilants 1 20.69 19.10 19.10 19.73Production CFC Production Sector 1 3,020 3.51 3.40 n/aOverall CE*** 20 3,743 8.64 7.45 n/a*Excludes halon, chiller and methyl bromide subprojects. ** Mobile air-conditioning subprojects have indirect ODS phase-out and hence no values here. *** Overall cost, or grant effectiveness is calculated on total funds disbursed for 20 subprojects divided by ODP phase-out under these subprojects in kg. The CE of the majority of the subprojects in the MP sectors addressed was the same or better than that approved. The actual CE values all came under the MLF established CE norm. The exception is the CE of the domestic refrigeration sector subprojects which appear 65 percent less cost-effective than the norm. This is mainly due to one project that was approved prior to the establishment of the CE thresholds in 1995, at 3.5 times more than the CE value. The average CE of the entire portfolio of subprojects was US$7.45/kg of ODP eliminated as compared to US$8.64/kg approved.

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The cost-effectiveness shown above is based on grant funding only as they are compared to the established grant funding thresholds of the ExCom. If adding the counterpart funding provided by the enterprises, including the amounts equivalent to foreign ownership that was not funded, the CE values are much higher (cost-effectiveness is lower). This is particularly the case for the refrigeration projects. Total counterpart funding on top of the disbursed grant funding is estimated by the beneficiaries and UEPRO to be US$17.9 M (See Table A2-3.) The cost-effectiveness of the CFC production sector plan in Argentina can be assessed by comparative analysis of costs of other CFC production sector plans implemented with World Bank support.

Table A3-2. Comparison of Sector CE Values Achieved Compared to MLF CE Threshold Values

Country Total

Approval (US$ M)

Capacity (MT)

US$ / kg Actual

Production (MT)

US$ / kg

Argentina 10.6 8,658 1.22 3,020 3.51

China 185 123,500 1.50 51,293 3.61

India 82 50,617 1.62 22,588 3.63

The table above indicates that closing CFC production capacity at production facilities as well as actual CFC production at baseline was cheaper in Argentina to the MLF than was the case in China and India.10 With the savings that were incurred under the Argentina Production Sector Plan, the cost-effectiveness improves from the US$3.51/kg approved to US$3.40/kg. As of writing this report, no savings were reported under the China and India CFC production sector plans.

10 China and India were approved CFC Production Sector Plans for the periods 1999-2010 and 1999-2011, respectively with MLF financial assistance and support of the World Bank in its capacity as an MLF Implementing Agency.

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Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty Lending Laura Tlaiye Environmental Specialist LA1ER TTL Fernando Batista Consultant Preparation

Supervision/ICR Laura Tlaiye Advisor CMD TTL Juan Lopez-Silva Environmental Specialist LCSEN TTL Yewande Aramide Awe Senior Environmental Engineer GENDR TTL Horacio Terraza E T Consultant LCSEN TTL Carter Brandon Lead Environmental Economist GENDR TTL Renan Poveda Senior Environmental Specialist GENDR TTL Tuuli Bernardini Environmental Specialist GENDR TTL Natalia Cecilia Bavio Finance Analyst CTRLN Disbursement Luz Maria Meyer Financial Management Analyst GGODR Financial Mgmt Antonio Leonardo Blasco Sr Financial Management Specialist GGODR Financial Mgmt

Jose Ramon Gomez Guerrero E T Consultant LCSEN -

HIS Operations

Hernan M. Gonzalez Figueroa

E T Consultant LCSEN -

HIS Operations

Ana Maria Grofsmacht Senior Procurement Specialist GGODR Procurement Andres Mac Gaul Senior Procurement Specialist GGODR Procurement

Federico A. Scodelaro Junior Professional Associate LCSEN -

HIS Operations

Andrea Semaan Consultant OPSOR Operations Juan Pedro Cano Junior Professional Associate Operations Thanavat Junchaya Senior Environmental Engineer GCCIA Technical Dominique Kayser Operations Specialist GCCIA Operations Mary-Ellen Foley Senior Environmental Specialist GCCIA ICR Author Maria Emilia Sparks Program Assistant LCC7C Administration (b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks* US$ Thousands (including travel and consultant costs)

Lending FY93-FY97 548.62

Total: 548.62 Supervision/ICR

FY97-98 253.45 FY99 108.70

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FY00 19 136.59 FY01 15 199.68 FY02 15 137.05 FY03 11 125.64 FY04 17 115.33 FY05 32 171.09 FY06 25 161.26 FY07 20 108.8 FY08 14 92.37 FY09 7 35.00 FY10 14 35.12 FY11 13 40.42 FY12 5 40.19 FY13 2 27.25 FY14 6 18.85 FY15 9 42.06

Total: 1848.78 *Staff weeks corresponding to costs prior to 2000 are no longer available in the World Bank’s accounting systems.

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Annex 5. Beneficiary Survey Results Selected site visits were undertaken during the ICR mission. A short synopsis of the visit findings is included in Annex 2 in the sections addressing the refrigeration, halon, methyl bromide, technical aerosols, production, chiller, and MDI sectors.

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Annex 6. Stakeholder Workshop Report and Results

Not applicable.

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Annex 7. Summary of Recipient's ICR and/or Comments on Draft ICR UEPRO in the Ministry of Economy and the Chief of Cabinet of Ministers both provided substantial and editorial comments directly inserted in the draft ICR. The edits and clarifying comments e.g. regarding the project’s FM ratings and Government performance were reflected in the final ICR. The number of changes of the TTL by the Bank was included in the main text as a factor that impacted project implementation. Beyond comments on the few changes that occurred in the project’s FM ratings during implementation, there were no comments on the actual ICR ratings.

It is to be noted that compared with the Bank ICR, the summary below of the UEPRO ICR that the Bank team helped draw together has overall a more positive tone in regards to the project as a whole and on UEPRO and Bank performance and collaboration. The full version of the UEPRO ICR summary is available through the Bank’s website for project P005920.

The Bank team wants to acknowledge UEPRO’s valuable support for organizing the ICR mission that included visits to enterprises whose subprojects had closed even more than a decade ago and its availability to contribute to the ICR preparation, as well as the careful GOA review of the draft ICR.

+++++

REPÚBLICA ARGENTINA, OTF 22013 Proyecto de Reducción de las Sustancias que Agotan la Capa de Ozono (PRESAO) Resumen del Informe Final

ARREGLOS DEL MARCO REGULATORIO E INSTITUCIONAL

La República Argentina ratificó el Protocolo de Montreal (PM) relativo a las Sustancias que Agotan la Capa de Ozono (SAO´s) el 18 de septiembre de 1990. En 1994 la Argentina elaboró el Programa País (PP) en el cual establece su compromiso y propone un marco institucional para el mismo. El PP es trianual y deja asentadas las políticas del país a futuro en cada sector y enumera las acciones que implementará para dar cumplimiento a los compromisos que contraerá. El PP es presentado al PM y, una vez aprobado, es para el país un compromiso al cual se obliga.

En el año 1996, a los fines de facilitar la coordinación y efectividad del Plan de Acción del Gobierno para el cumplimiento del PP, se creó mediante el Decreto 265/96 la Oficina Programa Ozono (OPROZ), integrada por la Secretaria de Ambiente y Desarrollo Sustentable (SAyDS), el Ministerio de Relaciones Exteriores y Culto (la Cancillería) y la Secretaria de Industria, con sede/Punto Focal en la SAyDS. La OPROZ/SAyDS financia su actividad con los recursos para el Fortalecimiento Institucional que provengan del Fondo Multilateral para la implementación del PM (MLF, por sus siglas en inglés).

La OPROZ tiene la facultad de contar con la asistencia de un cuerpo asesor, llamado “Grupo Consultivo” (GRUCO), conformado por representantes de organismos públicos y privados, empresas vinculadas a la temática a tratar, ONGs interesadas, especialistas, etc., que se invitan a opinar sobre temas específicos vinculados con la temática del ozono.

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GRUCO funciona ad-honorem y no tiene carácter permanente; se reúne con la frecuencia que la temática exigiera y se disuelve una vez agotado el tema.

El 9 de Enero de 1997 se suscribió el Convenio de Donación de los fondos provenientes del MLF, OTF Nº 22.013, entre la República Argentina y el Banco Internacional de Reconstrucción y Fomento (BIRF; Banco), actuando este último como agente fiduciario para financiar el costo del Proyecto de Reducción de las Sustancias que Agotan la Capa de Ozono (PRESAO). El objetivo del PRESAO fue la reconversión industrial para la sustitución y/o progresiva eliminación del uso de las SAO´s, en el marco de los compromisos adquiridos por el Gobierno al suscribir el PM y para alcanzar los objetivos del PP, presentado ante el PM por el Punto Focal/OPROZ. Dicho Convenio se ejecutaba a través de la Secretaria de Industria (SI), dado que se trataba de sub-proyectos vinculados a la problemática y reconversión industrial. El Coordinador del PRESAO es el representante del SI en los temas operativos de la OPROZ.

En 1997, para ejecutar el PRESAO fue creada la Unidad Ejecutora de Proyectos (UEPRO) por Resolución N° 75/97 de la entonces Secretaría de Industria, Comercio y Minería del Ministerio de Economía, Obras y Servicios Públicos con dependencia directa de la Unidad de Proyectos Especiales (UPE). Posteriormente, por Resolución N° 596/99 la administración del PRESAO fue encomendada al Director Nacional de Industria. Después, la UEPRO estuvo posicionada en la organización de la SI en varias dependencias.

MANUAL OPERATIVO (MO): El MO define el reglamento, las metodologías y los procedimientos para ingresar y ejecutar los sub-proyectos, sobre la base de criterios unificados para todas las empresas participantes que deseen obtener el financiamiento disponible a través del MLF, para cubrir los costos elegibles en el marco del PRESAO. El MO fue redactado y puesto en vigencia coincidiendo temporalmente con el inicio de la actividad de la UEPRO, estableciendo las normas técnicas y los procedimientos administrativos a ser seguidos por la UEPRO y por las empresas participantes. A medida que los sub-proyectos comenzaron a ejecutarse, las diferentes situaciones generadas por una variedad de sub-proyectos y empresas en muy diferentes sectores industriales y con una dispersión de tecnologías nuevas que se incorporarían, se dieron circunstancias no contempladas en el MO. En algunos casos se trataba de cuestiones administrativas, en otros casos contables, técnicas o bien de establecer criterios prácticos para situaciones nuevas. Cada una de las diferentes situaciones que se iban presentando fue oportunamente planteada y conversada con el Gerente del PRESAO por el Banco, normalmente durante las Misiones de Supervisión, e instrucciones adicionales o modificaciones específicas a la pauta a ser aplicada por la UEPRO quedaban generalmente plasmadas en las Ayudas Memoria (AM).

ASISTENCIA Y MISIONES DEL BANCO MUNDIAL: La asistencia del Banco se canalizó principalmente por las misiones que el Banco realizaba entre una y dos veces al año. Los resultados de cada misión se reflejaban en una AM, dejando constancia de los hechos más importantes ocurridos en los sub-proyectos y los acuerdos logrados y pasos principales a seguir entre las partes. El intercambio de opiniones sobre diferentes enfoques de cada parte respecto a un asunto dado permitió enriquecer el desarrollo de las tareas de la UEPRO y al Banco conocer las razones que llevaron a ejecutar determinadas acciones. Durante el desarrollo de las misiones, el Asistente Técnico del Banco y el Asesor Técnico

40

de la UEPRO concurrían a empresas con sub-proyectos en ejecución para tener una visión directa de su desarrollo. Esta modalidad de trabajo permitió en muchas oportunidades que el Banco respondiera solicitudes de cambios de orientación especialmente en la reasignación de fondos, con un conocimiento directo de la causa que originara la solicitud. Representantes del Banco tuvieron asimismo participación en la destrucción de equipos en algunas empresas y una activa participación en el caso del Banco de Halones 1301. Se puede destacar que a medida que el programa de reconversión de empresas tomaba impulso y se fue haciendo evidente la necesidad de implementar modalidades de trabajo no previstas en el MO, el Banco pudo ir autorizando actualizaciones dejando constancia en el correspondiente AM. Durante el desarrollo del PRESAO, la UEPRO tuvo como principio solicitar del Banco su no-objeción previa a la implementación de modalidades de trabajo. Ello nunca fue una causa de demora en la implementación.

AUDITORÍAS DE SEGUIMIENTO Y CONTROL: El PRESAO recibió anualmente una auditoria externa de los Estados Financieros y múltiples auditorias de la Unidad de Auditoria Interna del Ministerio, como así también la auditoría financiera interna del Banco. Los resultados de las auditorias anuales externas fueron enviados al Banco y presentados a las autoridades del Ministerio de Economía y Finanzas Públicas.

EJECUCIÓN DE PROYECTOS El PRESAO fue ejecutado mediante la firma de 29 Convenios de Sub-donación en los más diversos sectores, de empresas usuarias de diversas sustancias controladas y la única productora del país, distribuidas por todo el país, y por montos de obra variables en un amplio espectro. Cada Sub-donación se vinculó específicamente con una firma en particular, aun cuando hubo casos en el que varios sub-proyectos estuvieron vinculados por sub-proyectos paraguas preparados y aprobados para un determinado sector. De esta manera, se facilitaba el seguimiento y control del desarrollo de cada inversión. Consecuentemente, la UEPRO:

1) Controló la reconversión de muy diversos sectores de industrias: o fabricación de heladeras y freezers domiciliarios, o fabricación de componentes de aire acondicionado para automotores, o cambio de formulados en aerosoles de uso técnico, o esterilización de instrumental médico y quirúrgico, o cambio de formulados en inhaladores de uso medicinal, o cambio de formulados en la etapa de desengrasado de piezas en la

fabricación de autopartes, y o recambio de chillers;

2) También controló el desarrollo de tareas no convencionales tales como:

o el desarrollo experimental de reemplazo del Bromuro de Metilo (BrMe) en el tratamiento pos cosecha de cítricos y algodón,

o la organización y control del funcionamiento de un Banco de Halones, y o el cese gradual de producción de CFCs y el monitoreo y control de

producción del HCFC-22;

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3) Por lo tanto estuvo directamente involucrada en el proceso de suplantar el uso de varias SAO´s, a saber Metilcloroformo (MCF); Halones 1301; CFC-11 y CFC-12; y BrMe; y

4) Estuvo involucrada en gestiones vinculadas directamente o indirectamente, con varios sectores en proceso de reconversión o en condiciones de analizar su posibilidad de hacerlo; tales fueron los casos de:

o Relevamiento del mercado de usuarios de solventes (más de 150 empresas relevadas directamente por la UEPRO);

o Relevamiento a través de una Consultora, de usuarios de chillers predispuestos al recambio;

o Relevamiento a través de una Consultora, de existencias de halones 1301 en el mercado;

o Relevamiento del sector de inhaladores de uso medicinal (MDIs) en Argentina (relevadas directamente por la UEPRO); y

o Auditorías a procesos de fabricación y seguimiento de inventarios (directamente por la UEPRO).

La larga implementación del PRESAO representó varios desafíos que, al haberlos superado, se convierten en experiencias aprendidas. P.ej. no existían antecedentes en el país de reconversiones globales por sectores, y tampoco se contaba con la seguridad de cómo reaccionaría el sector empresario frente a las obligaciones asumidas por el país. Para hacer posible cada sub-proyecto, fue necesario hacer una etapa de presentación ante las empresas del sector respecto al desafío por delante, y de las ventajas que el PM brindaba para ejecutar ese camino de reconversiones.

Un caso singular lo constituyó la ejecución del proyecto Banco de Halones (BH) 1301, proyecto en el que el Instituto Nacional de Tecnología Industrial (INTI) debía organizar una estructura que luego debía controlar y administrar sin contar con antecedentes que le sirvieran de referencia para hacerlo en las circunstancias nacionales. La situación fue superada cuando el Banco contrató un experto canadiense que concurrió al país para guiar al INTI la manera de encararlo. El funcionamiento del BH sin inconvenientes desde su puesta en marcha el año 2004 es un índice de haber interpretado bien tanto los objetivos como los medios.

Otro desafío singular se presentó en el caso del cese gradual de producción de CFCs en Frio Industrias Argentina (FIASA), dado que la primera auditoria de control realizada a la planta puso de manifiesto la escasa organización de la planta en cuanto a documentación registrada. Como resultado, la UEPRO diseñó para FIASA, y le impuso la obligatoriedad de instrumentarlo, un sistema de registro diario de información de soporte que debía ser puesta a disposición de las sucesivas auditorías. El sistema fue elogiado por las siguientes auditorías y sigue vigente.

El recambio de chillers fue otra tarea compleja en razón de la falta de líneas de base suficientes para establecer condiciones de trabajo. Como punto de partida sólo contó con un relevamiento del mercado argentino de chillers que el Banco le encargó a una consultora; de ahí la UEPRO debía fijar el camino a seguir. Para definirlo nuevamente, la UEPRO analizó los antecedentes aplicados en otros mercados, encontrando que ninguno

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de los casos era directamente aplicable al mercado argentino. El bajo costo de la energía y el buen estado de los equipos por el bajo uso que imponen las condiciones climáticas poco extrema fueron las principales razones. Tuvo por lo tanto que diseñarse un sistema diferente ajustado a las condiciones particulares del mercado nacional. Aprobada la propuesta por el Banco, se difundieron dichas condiciones mediante presentaciones a 47 empresas sin lograr una sola respuesta positiva, dadas las circunstancias coincidentes temporalmente con un período de crisis en el mercado. Mediante un incremento en el esfuerzo de difusión de la oferta, finalmente se logró el recambio de cinco equipos.

Otro campo diferente pero no por ello menos complejo lo constituyó el manejo de los temas administrativos, contables y legales asociados a cada sub-proyecto, dado que cada uno llevaba aparejado un estudio previo de las condiciones particulares de la empresa postulante (estatutos, conformación societaria, situación impositiva, etc.), análisis de factores que llevan a conformar una mecánica adecuada particularmente a cada circunstancia. Esta etapa, si bien se desarrollaba de manera paralela con los estudios técnicos, servía de soporte previo y sustentaba a la conformación del sub-proyecto. También imponían un seguimiento y control de medidas administrativas (adquisición, solicitud de desembolsos, desembolsos, comprobantes, etc.).

Dado que el PM sólo aprueba proyectos por sectores y acuerda condiciones con las autoridades nacionales, la UEPRO ha debido capacitarse en cuestiones asociadas al desarrollo de sub-proyectos sectoriales, p.ej. los estudios de mercados (MDI´s) o de sectores (espumas), evaluación de predisposición de las empresas a ciertos cambios tecnológicos (chillers), auditorías de control de producción y monitoreo de stocks (producción de HCFCs).

En el resumen completo del informe final de la UEPRO, disponible en el archivo del proyecto (P005920) en la página web del Banco, se presentan los sectores de la industria y los servicios atendidos por los 29 Sub-donaciones, incluyendo la fecha de firma del (primer) Sub-convenio y del último desembolso que coincidía con la finalización de la reconversión y la destrucción de equipos verificada, unas observaciones de caso y las principales enseñanzas identificadas.

PLAN DE TRANSICIÓN: EXPERIENCIAS APRENDIDAS DEL PRESAO Y SU APLICACIÓN AL PROYECTO DE ELIMINACIÓN DEL USO DE LOS HCFCs El accionar de la UEPRO a lo largo de los 17 años de la implementación del PRESAO permite asegurar la existencia del expertise tanto en el orden legal como administrativo y técnico, necesario y suficiente como para ejecutar proyectos similares. La SI considera un logro muy importante el haber podido superar las barreras de los recambios de las tecnológicas existentes en los diversos sectores por otras más actualizadas. Dichos recambios incorporaron para el país y para las empresas un salto tecnológico muy significativo que las empresas tuvieron que ejecutar haciendo trabajos importantes en líneas de producción sin interferirlas y sin interrupciones de producción y, con el agregado adicional, de la necesaria capacitación del personal, en todos los niveles, en las nuevas tecnologías que la mayoría de los sectores requirieron.

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El cambio tecnológico del sector de aire acondicionado de automotores fue el desafío más complejo pero no el único ni tampoco el más simple; un desafío similar fue, como se ha señalado anteriormente, el organizar un Banco de Halones; también lo fueron las reconversiones de las fábricas de heladeras, dado que no hubo dos casos similares en complejidad, en dimensiones de instalaciones y en las soluciones tecnológicas seleccionadas por cada empresa; asimismo el recambio de chillers impuso una mecánica de trabajo especial por una diversidad de factores.

En la próxima etapa de remplazo de usos de HCFC´s, la UEPRO deberá asumir la ejecución de cuatro sub-proyectos: 1) Reconversión de uso de HCFC en Mabe S.A.; 2) Reconversión de uso de CFC en chillers; 3) Monitoreo de reducción gradual de producción de HCFC-22; 4) y Reducción gradual de uso de HCFCs en el Sector Espumas. Solamente el último presenta un tema nuevo, dada la diversidad de empresas implicadas, pero la UEPRO ya conoce los antecedentes del sector e hizo el mismo trabajo para el MCF y los MDIs.

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

Not applicable.

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Annex 9. List of Supporting Documents

(i) Ozone Projects Trust Fund Grant Agreement, January 9, 1997 (OTF Grant Number 22013)

(ii) Memorandum and Recommendation of the Director on a Proposed Ozone Projects Trust Fund Grant to the Argentine Republic, December 22, 1995

(iii) World Bank Operational Policy 10.21, Investment Operations Financed by the Multilateral Fund for the Implementation of the Montreal Protocol

(iv) Aide Memoires, Implementation Status Reports

(v) Recipient semi-annual progress reports

(vi) Multilateral Fund Project Documents and progress reports to the ExCom

(vii) Multilateral Fund Project Completion Reports (PCRs)

(viii) Argentine Republic Country Programme

(ix) Argentina - CFC Production Closure Plan and Annual Implementation Plans

(x) Report of the Thirteenth Meeting of the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer, UNEP/OzL.Pro.13/10, October 26, 2001.

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MAP