Facts & figures from an afternoon with Pedro Alba, World Bank Director for Argentina, Chile, Paraguay, and Uruguay

I recently attended a talk given by Pedro Alba, WB Director for Argentina and other countries in the Southern Cone. I was pleasantly surprised by Alba’s approach and perspective on economics in the region and the Bank’s more recent development endeavors. It doesn’t hurt that Argentina has, on the whole, been steadily rising out of the smoke from the 2001-2002 economic crisis. Alba’s candor on the Bank’s successes and failures in the region was both enlightening and refreshing.

Since Argentina’s devastating economic collapse in 2001-2002, the country has been on a steady path to economic recovery, averaging between 5-6% growth per year since the crisis. Informal economic activity has declined, whilst job opportunities and investment have increased.

New social programs have been adopted by the Kirchner regime (starting with Néstor and continuing with Cristina). One such example being the Successful Heads of Household (Jefas y Jefes) program, 16% of which is funded by the World Bank. El Plan Nacer, a maternal/infant health care program has been a positive factor in providing needed pre and post-natal services to mothers and infants.

The World Bank has contributed 5.3 billion dollars over the course of 2004 to 2008 via the Country Assisted Strategies (CAS) channel. Along with social programs, funds are directed towards transportation (both national and provincial road and subway projects), water & sanitation projects, agriculture in the non-Pampean regions, alternative energy in rural areas, and education (in the form of lifelong learning initiatives).

One major environmental project in the works is the Maldonado River project, a $127 million flood prevention project aimed at shoring up the river basin near that river and providing flood contingency infrastructure.

The Bank’s projects are notoriously hindered by state bureaucracy in project implementation, with delays of a year or more to break ground on a basic initiative. The Bank approaches projects with the Argentine government via Middle-Income Country (MIC) procedures. One such procedure is the so-called fast disbursing law, which filters funds straight through the Argentine Treasury to reduce red tape and facilitate timely implementation of projects.

The projects are generally repaid on a 15-year repayment plan, with 4% fixed interest rates.

New and emerging risks for projects in Argentina include:

• Questionable interest rates as reported by INDEC (el Instituto Nacional de Estadíticas y Censos), the national census bureau: whilst INDEC reports inflation at a rate of about 8%, the rate is reported by both NGOs and economists at being closer to a startling 25% at this time. Capital flight is actually at the same relative rate at which it rested pre-crisis.
• Market confidence down: seen in both investment and consumer markets.
• Dependence on high commodity prices: Argentina currently enjoys high commodity prices for its exports, particularly in meat and soy products, which grant it a favorable position in that regard; should this trend change, the country could see itself struggling in the way of net trade gains.

From 2009 to 2011, we can expect to see the World Bank approaching the country with the following objectives in mind:

• Targeted investment lending
• Direct support to provinces
• Demand-driven studies and policy notes
• Flexibility in loan design and implementation