The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) Program Information Documents (PID) Appraisal Stage | Date Prepared/Updated: 05-Jan-2021 | Report No: PIDA232958 Dec 01, 2020 Page 1 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Program Data Country Project ID Program Name Parent Project ID (if any) Argentina P172689 BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) LATIN AMERICA AND CARIBBEAN 15-Dec-2020 25-Feb-2021 Water Financing Instrument Borrower(s) Implementing Agency Program-for-Results Financing Argentine Republic AYSA Proposed Program Development Objective(s) The Program Development Objectives are to increase access to safely managed water and sanitation services with a focus on vulnerable areas of Buenos Aires, improve AySA´s efficiency, and capacity to respond to water and sanitation emergency needs COST & FINANCING SUMMARY (USD Millions) Government program Cost 4,865.72 Total Operation Cost 576.61 Total Program Cost 575.86 Other Costs 0.75 Total Financing 576.61 Financing Gap 0.00 FINANCING (USD Millions) Total World Bank Group Financing 300.00 World Bank Lending 300.00 Dec 01, 2020 Page 2 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) Total Government Contribution 227.26 Total Non-World Bank Group and Non-Client Government Financing 49.34 Multilateral and Bilateral Financing (Concessional) 49.34 Decision The review did authorize the team to appraise and negotiate B. Introduction and Context Country Context 1. The COVID-19 outbreak has hit the Argentine economy at a moment of significant macroeconomic imbalances and a highly uncertain outlook. Following a two-year recession, high inflation and lack of access to capital markets, the strict lockdown to contain the spread of the pandemic triggered the sharpest Gross Domestic Product (GDP) decline ever recorded in March-April of 2020. While the gradual easing of confinement measures has allowed economic activity to slowly pick up pace, it has also set off a rapid rise in COVID-19 cases. The implementation of a fiscal stimulus package coupled with an abrupt decline in revenues resulted in a central government deficit of nearly 5 percent of GDP between January and July of 2020, the largest in more than 30 years. Lack of market access mandated a full monetization of the deficit, which is exacerbating macroeconomic imbalances: the gap between official and parallel foreign exchange rates has been increasing and the Central Bank is rapidly losing reserves as it attempts to maintain the official exchange rate stable, despite a significant trade surplus and tightened currency controls. 2. The economy is expected to decline by close to 12 percent in 2020 and the unprecedented economic contraction has had a severe impact on employment and poverty. Economic recovery is expected to pick up steam as containment measures are progressively lifted, building on the economy’s ample idle capacity. However, high uncertainty could limit investment growth, while the imperative to reduce the large fiscal deficit will strongly curtail demand stimulus. As a result, only a partial rebound is expected in 2021, and the economy is not projected to reach 2019 GDP levels before 2023. Labor market statistics point to a sharp 9 percent decline in employment, while unemployment “only� increased by 2.5 percent. As a result, the poverty rate increased from 35.4 to 40.9 percent in the first half of 2020, with 11.7 million people now living below the poverty line and 3 million in extreme poverty. 3. More than half of Argentina’s poor live in Greater Buenos Aires (GBA). With 15.4 million inhabitants, GBA is one of Latin America’s urban giants, accounting for one third of Argentina’s population and nearly half of its GDP. Although urbanization has contributed to economic growth and improved living standards for millions of people, it has not always been accompanied by adequate planning and investment in infrastructure and services, leading to “pockets of poverty.�. At close of second semester 2019, people living in poverty and indigence in GBA was already considerable, standing at 35.2 and 9.3 percent, respectively. The outbreak of the COVID-19 pandemic raised these figures to 41.6 percent and 11.7 percent. 4. In GBA, which is ground zero of the COVID-19 pandemic in Argentina, low-income neighborhoods are being hit the hardest by the sanitary and economic crises. There are three main factors driving the high vulnerability of GBA’s Dec 01, 2020 Page 3 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) poor: crowded living conditions; high dependence on informal economic activities, which undermines compliance with lockdown policies; and lack of access to safely managed water supply and sanitation (WSS); all of which are key to preventing virus transmission. Over 30 percent of these neighborhoods are in flood-prone areas, rendering existing informal and often unsafe WSS systems even more prone to failure. Sectoral and Institutional Context 5. Argentina faces a considerable gap in access to piped water, sewerage and wastewater treatment. An estimated 7.5 million inhabitants (17 percent of the population) lack access to safely managed piped water systems, and 21 million (48 percent) are not connected to sewerage networks. The combined economic impact of these service gaps is estimated at 1.32 percent of GDP, including harm to health and education — the essentials for building Argentina´s human capital. Furthermore, only 12 percent of total wastewater generated is treated, which poses serious environmental and health impacts, especially on populations living near polluted urban waterways. 6. Although the main provincial WSS operators provide acceptable service levels in terms of continuity and water quality, their efficiency is low compared with regional peers. Critical indicators are the low level of micro-metering (25 percent compared to the 80 percent average of the main regional utilities) and the high level of daily per capita water production (560 liters compared to a regional average of 330 liters and an international reference value of 200 liters). Without micro-metering, real volumetric tariffs cannot be applied, making it difficult to link operating costs and tariff revenues and to control physical and commercial losses (estimated at 45 percent compared to a regional average of 36 percent in main regional utilities). The financial sustainability of Argentina’s main WSS service providers is also low. On average, tariff revenues cover 83 percent5 of operation and maintenance (O&M) costs, with the rest provided as subsidies by the provinces and, in the case of the GBA operator Agua y Saneamientos Argentinos (AySA), by the National Government. 7. AySA is the concessionaire responsible for providing WSS services to most of GBA. AySA is one of the largest WSS utilities in the world, and the largest in the country servicing a population of 14.4 million residents (96 percent of the population in GBA). It is estimated that 66 percent of the population without access to piped water in Argentina (3.7 million) and 39 percent without access to sewerage (6.8 million), live in this area. The concession area is divided into two clearly differentiated zones, the city of Buenos Aires – with high levels of drinking water and sewerage coverage - and the suburbs – made up of municipalities from the Province of Buenos Aires (PBA) with lower service coverage. AySA’s Specific Challenges 8. Average access levels in AySA´s service area have decreased considerably since it expanded coverage to new municipalities. Overall access levels in AySA’s jurisdiction are 75 percent for water and 53 percent for sewerage. There are, however, considerable differences in coverage among municipalities. For instance, while 97.2 percent of residents in the capital have access to water and 96.2 percent to sewerage, rates in the PBA municipalities are below 20 percent. Many of these unserved residents live in fragile neighborhoods1, and the incorporation of nine new municipalities since 2016 has lowered AySA’s average access rates. Whereas the original 17 municipalities post coverage rates of 80 percent for water and 49 percent for sewerage, the rates for municipalities included since 2016, average 40 and 23 percent, respectively. 9. Since 2006, AySA has focused considerable attention on expanding WSS services in the peri-urban municipalities, however connectivity rates are low among poor households. Between 2015 and 2019 alone, AySA installed 68 1 Fragile neighborhoods are defined in the context of this Program as those where most of the people live below the extreme poverty line as per national standards, and characterized by the high levels of informality, social problems and precarious living conditions Dec 01, 2020 Page 4 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) secondary drinking water and 144 secondary sewage networks throughout 18 municipalities of its concession area. However, recent surveys carried out by AySA reveal that only 83.2 percent have effectively connected to the water network of which roughly 50 percent are either incomplete or poorly installed. Survey findings further reveal that insufficient household income, time, or the existence of alternative, often unsafe water sources (such as wells) are the primary reasons for not connecting to the network. Similarly, only 77.2 percent of households have connected to the sewage network. Expanding WSS services is especially timely and impactful given the important role of these services as a first line of defense to slow the transmission of COVID-19. 10. Needs are particularly dire throughout fragile neighborhoods of AySA’s concession area. An estimated 384,810 households or 2.82 million people inhabit 982 these areas, referred to as Urbanizaciones Emergentes (UREM). These UREMs are characterized by varying degrees of land tenure, overcrowding and overriding deficiencies in access to basic public services. Roughly 57 percent of UREMs do not have access to drinking water and 80 percent lack access to a sewerage connection. In all, an estimated 1.54 million UREM inhabitants lack access to an official water supply, obligating them to seek out other coping mechanisms including receiving water from informal neighboring networks or collecting water from wells. Roughly 2.32 million do not have access to sewage networks, and instead resort to precarious, informal connections or septic tanks, which are often poorly constructed and/or managed. 11. AySA has a strong track record of supporting “last mile connectivity� in poor and vulnerable neighborhoods. Since 2010, AySA has partnered with municipalities and municipal labor cooperatives in implementing Agua más Trabajo (Water and Jobs, A+T) and Cloaca más Trabajo (Sewerage and Jobs, C+T) programs. These programs have been successful in increasing intra-household connectivity rates, particularly in vulnerable peri-urban GBA. The A+T and C+T programs not only improve quality of life and reduce water, sanitation, and hygiene (WASH)-related health risks in fragile neighborhoods, but reduce local unemployment through participation in municipal cooperatives. 12. Untreated wastewater continues to pose significant environmental and health concerns. AySA treats 2.4 million m3/day of wastewater, which represents roughly 50 percent of the water delivered to its customers. However, only 16 percent of the wastewater receives secondary treatment. The remaining wastewater is only pretreated and predominantly released into the Rio de la Plata through different urban waterways, creating public health concerns for those living along the riverbanks. The risk to public health is compounded by floods characterized by increased frequency and intensity due to climate change. More than one million people in the metropolitan area of Buenos Aires are exposed to floods with a return period of 5 years, and more than 30 percent of fragile neighborhoods are exposed to 100-year return period floods. 13. Public health concerns can also be traced to a widescale lack of sewerage connections and the use of unsafe groundwater. Numerous peri-urban areas use groundwater rendered unsuitable to serve as a sole drinking water source due to years of unchecked pollution – primarily from households relying on suboptimal onsite sanitation solutions. As a result, piped water tapping into groundwater resources, sometimes surpass national regulatory limits on nitrate concentrations. Such is the case for the estimated 100,000 residents of Florencio Varela, most of whom are vulnerable, who are exposed to unsafe water, underscoring the urgent need for AySA to increase the quality and safety of water services in this area. Similarly, there is a pressing need for the utility to provide residents of the Escobar, Esteban Echeverría, Ezeiza, San Fernando, San Isidro, San Martin, and Tigre municipalities access to safely managed sanitation services by ensuring both adequate sewage treatment and associated discharges in compliance with regulatory standards. 14. There is considerable scope to reduce AySA’s O&M costs and increase operational efficiency. AySA posts 35 percent more network breakages due to the aged water network, 8 percent more water losses and produces 74 percent more water per person than other similar utilities in Latin America and the Caribbean (LAC), signaling the need to reduce non-revenue water (NRW), estimated at 41 percent (37 percent of which is attributable to physical losses) through Dec 01, 2020 Page 5 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) network rehabilitation and upgrading. These indicators are also associated with high levels of energy consumption given the need to pump higher than needed volumes of water. Similarly, on the sewerage front, AySA posts 361 percent more network blockages and 194 percent more breakages than regional comparators. In addition, the inclusion of the nine additional municipalities since 2016 and their corresponding utilities resulted in a 95 percent staff increase, translating into a workforce of 3.51 employees per 1,000 water users, which surpasses the regional average of 1.8, thereby decreasing labor productivity and overall efficiency. AySA plans to increase connections at an annual rate of 8.2 percent to offset the rate of staff change and further increase operational efficiency and quality of services. 15. Low micro-metering coverage and a tariff structure that does not provide appropriate incentives also undermine AySA’s commercial and operational efficiencies. Micro-metering throughout AySA’s concession area stands at approximately 17 percent, a quarter of the level of main regional utilities. Since most users do not have metered service, they are charged a fixed amount regardless of consumption levels. AySA recently changed the tariff structure applicable to metered connections by reducing the fixed charge and increasing the share that corresponds to metered consumption. This together with increased micro-metering is considered sine qua non to improving AySA’s commercial, financial and operational efficiencies. With regard to subsidies, although the scheme provides some tariff differentiation criteria based on location, area, quality and age of property, in 2015, roughly 93 percent of residential users received a tariff discount (compared to the coefficient that determines tariff increases) and about 48 percent received a discount of 50 percent or above compared to this coefficient. Water subsidies in Argentina have been shown to be progressive in relative terms, since the poorest 20 percent receives 4.7 percent of subsidies while having only 3.6 percent of income, ; this is not the case, however, in absolute terms. Therefore, additional mechanisms are necessary to ensure that subsidies are more efficiently targeted, avoiding errors of inclusion and exclusion that undermine the financial sustainability of the system and its effectiveness. 16. AySA has expanded a targeted social tariff scheme to support low-income populations in its concession area. This benefit is provided to households that request the tariff discount and meet the eligibility criteria. In 2018, approximately 60,000 vulnerable users benefitted from the social tariff, up from roughly 23,500 in 2015. AySA’s program also supports debt cancellation for low-income households unable to pay outstanding water bills and provides subsidies for low-income households to connect to the water and sewerage networks, including a 50 percent discount in new connection costs to incentivize their connection to the network and additional subsidies of up to 100 percent of the tariff and free network connections to households in extreme poverty. 17. The COVID-19 crisis has imposed significant cash flow constraints, further straining AySA’s financial challenges. AySA’s financial challenges have worsened amid the COVID-19 crisis. Widescale job loss has sharply curtailed consumer ability to pay water and sewerage bills, thereby reducing revenues. During the first two months of the pandemic alone, AySA reported a 30 to 40 percent decrease in revenues, while emergency mandates require it to continue providing services. Concurrently, increased emergency response expenses associated with, inter alia, delivering drinking water in trucks and boats, investments in safety gear and measures for frontline operators and staff at risk of contagion, remote work and other adaptation measures, have further increased AySA’s already high O&M costs. The combination of these factors has resulted in cash liquidity issues. As a consequence, the cost recovery rate is expected to drop to 47 percent in 2020 after the effect of the frozen tariffs due to the COVID-19 outbreak. Although AySA has introduced measures to tackle these challenges, for instance by promoting online payment options, and is receiving extra support from the government, more robust actions are needed to reduce the cashflow gap. 18. To capitalize on experience gained through its COVID-19 response, AySA needs to systematically draw lessons from this crisis and incorporate innovative digital solutions to further improve emergency preparedness and resilience. Despite relying on an established Prevention and Emergency Plan (PPE or Plan de Prevención y Emergencias), and responding swiftly to the COVID-19 crisis with a package of measures, including wastewater-based epidemiology Dec 01, 2020 Page 6 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) (WBE),it has yet to consolidate and incorporate this knowledge into its PPE to strengthen preparedness to future epidemiological disruptive events. In addition, AySA has yet to tap into the full potential of digital solutions for post- COVID-19 recovery and seek opportunities to enhance its ability to apply data science and augmented intelligence techniques to its business, commercial and technical challenges. 19. AySA presents low levels of digitalization of commercial processes compared to regional peers and is one of the few large utilities in the region that lacks the ability to interact with its customers through a digital platform. For example, 90 percent of claims are currently received by telephone, 54 percent of payments are made through physical, in-person interactions, and most management and procedures are conducted using traditional paper files. These approaches are associated with higher bureaucracy, slow processing times, and reduced agility in responding to crises. Bridging the significant digital divide is not only considered a necessity but an opportunity for AySA to review its outdated but strongly rooted internal processes and to promote organizational changes. 20. AySA also lags behind in terms of female participation in executive positions, which is widely recognized as a key contributor to improved financial performance and is particularly crucial in times of crisis. Currently, 22 percent of managers at AySA are women, which is well below the regional average of 44 percent. Contributing to this gap is the fact that women are promoted at lower levels – only 18 percent of promotions to managerial positions were granted to female staff in the past year. A 2013 study of 345 companies in six LAC countries revealed that companies with women on their executive committees reported over 40 percent higher average return on equity and EBIT margins than those without female participation. It also bears highlighting that during crises, female representation in leadership positions is critical to better respond to the differential impacts on women and men. AySA has already adopted a variety of measures during the pandemic to prevent broadening of existing gender gaps and is committed to promoting female career advancement opportunities to improve its operational and financial performance and crisis response capacities. PforR Program Scope 21. The government program is AySA’s PMOEM, which is closely aligned with Argentina’s first National Plan for Drinking Water and Sanitation (Plan Nacional de Agua Potable y Saneamiento, PNAPyS) and the SDG agenda, setting out ambitious targets to secure 100 percent access to water and 75 percent access to sewerage service throughout Argentina’s urban areas by 2030. The PMOEM serves as AySA’s default masterplan and includes interventions to expand and improve WSS services and increase AySA’s efficiency and quality of operations throughout the 27 districts it serves. 22. The current iteration of the PMOEM (2019-2023) builds on the goals of the first two PMOEMs (2010 and 2015), and comprises three subprograms and operational expenses totaling an estimated US$4.87 billion as follows: (i) Sub- program 1: Improvements and Expansion, including the analysis and scheduling of works needed to satisfy current and future demand, with a focus on the newly incorporated municipalities; (ii) Sub-program 2: Improvements and Maintenance, focusing on water network efficiency through network rehabilitation, demand management through installation of consumption meters and sectorization, and energy efficiency through infrastructure rehabilitation and replacement; and (iii) Sub-program 3: Operations, seeking to improve the quality of operations through increased efficiency of internal processes through systems integration and improvements in communication by providing the general public and stakeholders better access to information. The next phase of the PMOEM will entail the period from 2024-2028 and will give continuity to the activities planned in the current version. 23. The proposed Buenos Aires Water Supply and Sanitation with a Focus on Vulnerable Areas Program (the Program) will support the implementation of AySA’s 2019-2023 PMOEM and its continuation in the period 2024- 2028, plus operational expenditures corresponding to newly built infrastructure under the Program . The Program is firmly aligned with the PMOEM and structured around three key Results Areas: (i) Expansion of WSS services, with a focus on vulnerable areas; (ii) Improvements in AySA’s efficiency; and (iii) Increasing AySA’s capacity to respond to water Dec 01, 2020 Page 7 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) supply and sanitation emergency needs. The Program will be implemented over the period 2021-2026, for an estimated cost of US$576.6 million, including US$227.3 million in counterpart funding, US$300 million in World Bank financing, and US$49.3 million in other multilateral support. The operational expenditures linked to the new infrastructure to be built under the Program are accounted outside the PMOEM by AySA, but will be included in this Program. 24. The Program has a focus on vulnerable areas of Greater Buenos Aires. These areas belong to peri-urban municipalities within AySA’s jurisdiction where households lack access to safely managed WSS services. The inhabitants of these areas are defined as living below the poverty line. Within these vulnerable areas, there are also socially fragile neighborhoods, where most of the people live below the extreme poverty line. These neighborhoods are adequately registered by AySA in national databases that are periodically updated. 25. The scope of each Results Area is described as follows: Results Area I - Expansion of WSS services, with focus on vulnerable areas 26. The Program will contribute to PMOEM’s Sub-program 1 and improve access to safely managed water and sewerage as follows: (i) Under Results Area 1.1, the Program will expand safely managed water supply services to 140,000 people in selected municipalities of peri-urban Buenos Aires, including 100,000 in the municipality of Florencio Varela, where there are water quality problems in the network due to the presence of nitrates in groundwater, and 40,000 in fragile neighborhoods to benefit from the installation of intra-household water connections, where primary and secondary networks already exist. The latter will be implemented through AySA’s A+T model; and (ii) Under Results Area 1.2, the Program will expand safely managed sanitation services to 305,000 people in selected municipalities of peri-urban Buenos Aires, including 225,000 to benefit from the expansion of sewerage networks and of the Norte and Jaguel wastewater treatment plants (WWTPs), and 80,000 in fragile neighborhoods to benefit from the installation of intra-household sewerage connections, through AySA’s C+T model. The Program will also acknowledge the operational expenditures associated with these two WWTPs. Results Area II – Improve AySA’s efficiency 27. The Program will contribute to PMOEM’s Sub-programs 2 and 3 by improving AySA’s efficiency through support to the design and implementation of an Efficiency Improvement Action Plan (EIAP) which will: (i) Under Results Area 2.1, promote operational efficiency through the reduction of leakages via the rehabilitation and replacement of critical water networks, as well as through improvements in energy efficiency. These interventions are expected to generate water savings of 125,000 m3/day, as well as energy savings of 34 GWh/year; and (ii) Under Results Area 2.2, promote commercial management efficiency by expanding the menu of digital payment options available to AySA’s customers. The move towards electronic billing and payment will allow AySA to reach digitalization levels comparable to other large regional providers, and increase the number of users who pay through digital channels by 30 percent, and saving costs by freeing up staff in commercial offices from highly transactional “manual� tasks to more productive duties. Results Area III – Increase AySA´s capacity to respond to water supply and sanitation emergency needs. 28. The Program will contribute to PMOEM’s Sub-program 3 by scaling up and expanding AySA’s efforts to mitigate the impacts of COVID-19 on its operations and by strengthening its systems to render them more resilient. This will include: (i) Recognizing AySA’s efforts and initiatives to confront the COVID-19 outbreak, as demonstrated by the delivery of water to underserved areas, and the use of WBE to complement the epidemiological surveillance system and support the development of an early warning signal for future outbreaks; (ii) Strengthening AySA’s PPE by capturing the lessons of dealing with the ongoing crisis into a contingency plan to respond to epidemiological risks; (iii) Modernization through the use of digital solutions, such as the consolidation of human resources systems, solutions to enable the remote work modality on a continuous basis, predictive maintenance of main assets, incorporating advanced predictive analytics, Dec 01, 2020 Page 8 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) artificial intelligence, digital twins and dynamic 3D visualization and the digitalization of commercial processes in AySA’s commercial offices. These solutions will contribute to increasing AySA’s resilience to climate and non-climate shocks, by better preparing it to its changing environment; (iv) Strengthening AySA’s capacity to engage citizens through the phased implementation of a digital strategy that facilitates two-way engagement between user/citizen and the utility; and (v) Promoting gender diversity at AySA, in support of AySA’s Inclusion, Gender, Equal Opportunities and Treatment and Workplace Violence (IGEOTWV) strategy . 29. Role of development partners. The Interamerican Development Bank (IDB) is supporting Results Area 1 by financing the expansion of sewerage networks, to deliver wastewater to the Planta Norte WWTP to be upgraded with AySA´s and World Bank funds. It should be noted that multilateral funding for these investments is largely secured as all envisaged contracts are either under implementation or in the bidding process. 30. Beneficiaries. By Program close, an estimated 445,000 people are expected to have directly benefitted from access to safely managed WSS services (Results Area 1), 98 percent of which are considered vulnerable (living below the poverty line) and 165,000 live in fragile neighborhoods. Indirectly, 312,000 people will also benefit from the reduction in water losses. The entire population served by AySA (10.7 million people) is expected to indirectly benefit from more efficient, sustainable, and resilient services derived from the results achieved under Results Areas 2 and 3. The Program is also expected to generate around 6000 jobs (direct and indirect). 31. Program Boundaries. The criteria for defining the Program boundaries differs according to the three Results Areas or PMOEM´s Sub-programs: (i) For Results Area 1, the Program will finance investments in 18 municipalities, out of the 26 municipalities of PMOEM’s Sub-program 1. These municipalities were selected due to their low levels of water supply and sewerage coverage, and high socio-economic vulnerability; and (ii) For Results Areas 2 and 3, the eligibility criteria for Program activities are thematic rather than geographic and are linked to the scope of the results areas previously described. C. Proposed Program Development Objective(s) 32. The Program Development Objectives are to increase access to safely managed water and sanitation services with a focus on vulnerable areas of Buenos Aires, and improve AySA´s efficiency and capacity to respond to water and sanitation emergency needs. 33. The PDO-Level Results Indicators are the following: (i) Number of households gaining access to safely managed drinking water services (Access) (ii) Number of households gaining access to safely managed sanitation services (Access) (iii) Annual savings from operational and commercial efficiency measures (Efficiency) (iv) Number of AySA’s emergency response mechanisms strengthened2. (Capacity to respond). D. Environmental and Social Effects 34. An Environmental and Social Systems Assessment (ESSA) was carried out, which examined the scope, risks, benefits and potential impacts of the Program from an environmental and social perspective. The ESSA concluded that the legal and institutional frameworks pertinent to the Program, as well as AySA corporate systems and processes, are 2 These mechanisms are: (i) the strengthening of AySA´s Prevention and Emergency Plan with the COVID contingency action plan; and (ii) the implementation of AySA´s digitalization strategy including the citizen engagement digital platform, as per the standards defined in the corresponding DLIs and verification protocol included in the Operations Manual. Dec 01, 2020 Page 9 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) materially consistent with the PforR Policy and its core principles related to the adequacy of environmental and social regulatory and institutional systems, impacts on cultural and natural resources, community and workers health and safety, land management under the Program, cultural appropriateness and risks of potential conflict. 35. The Program will likely have positive environmental and social impacts on vulnerable communities. The Program will support an increase of the offer and quality of drinking water and the expansion of sanitation services in targeted areas, with no significant adverse environmental impacts expected due to the proposed interventions. The main positive environmental effects are related to the adequate collection, treatment and final disposal of a greater volume of sewage, with the associated improvements in terms of soil and groundwater contamination and health conditions, and to the reduction of water losses and energy consumption. The Program will likely have overall positive social impacts on the lives and livelihoods of large vulnerable communities through the expansion of safe water and sanitation services, which will also reduce WASH-related health risks in targeted neighborhoods and generate income opportunities and promote social inclusion through the participation of cooperatives. 36. The ESSA informed that main risks and adverse environmental and social impacts are sufficiently covered by the regulations and institutional capacities of AySA and the Regulatory Framework, although areas with an opportunity for improvement have been also identified. Argentina has well-established systems to address these environmental, health and safety risks, including several strong central, provincial and municipal level legislations and institutions, as well as an effective regulatory sectoral framework, that govern environmental, occupational and community health & safety issues. These are complemented by AySA’s corporate environmental, social and health & safety systems and practices, for example the inclusion of Environmental and Social Technical Specifications (ETAS) in bidding documents, and a social tariff, debt cancellation and subsidies to support low-income households in its concession area. Overall environmental risks and potential impacts of the Program are considered to be Substantial and are mainly in connection with interventions in existing WWTPs. However, these proposed works are of a limited scale, will increase the level of effluent treatment and will take place within AySA’s premises, with no new discharge pipelines or points. Overall social risks and potential impacts of the Program are considered to be Moderate and are largely related to the incorporation of new low-income users who may not be able to pay for water and sanitation services. In addition, although there are some urban indigenous communities present in the GBA, interventions will not generate negative impacts on these communities nor will they involve any exploitation of their natural resources or knowledge. 37. Exclusion of high-risk activities. The ESSA recommended that the following activities be excluded from the Program in view of the associated high environmental and social risks: (i) the construction of new water or wastewater treatment plants, or works related to new effluent discharge pipelines or points; and (ii) works that may require the acquisition and/or taking of land that would result in the displacement or loss of housing, the loss of assets or access to assets, or the loss of income or sources of income, whether those affected have to move elsewhere or not. 38. Opportunities for improvement have also been identified and may be addressed as part of the Program Action Plan. These include the identification of high conservation value areas and areas with archaeological and paleontological sensitivity within AySA’s concession area, updating EIA procedures and ETAS on these aspects, as well as on the management of materials and waste with asbestos content, the implementation of a code of conduct for cooperatives and other contractors working with AySA, and the development of a program for the management of temporary impact of works on informal economic activities. 39. Communities and individuals who believe that they are adversely affected as a result of a Bank supported PforR operation, as defined by the applicable policy and procedures, may submit complaints to the existing program grievance redress mechanism or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address pertinent concerns. Affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a Dec 01, 2020 Page 10 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. E. Financing Program Financing Sources Amount % of Total (USD Million) Counterpart Funding 227.3 39.4 Borrower/Recipient 227.3 39.4 International Bank for Reconstruction and Development 300.00 52.0 (IBRD) Cofinancing - Other Sources (IFIs, Bilaterals, Foundations) 49.3 8.6 Inter-American Development Bank 49.3 8.6 Total Program Financing 576.6 . CONTACT POINT World Bank Name : Victor Vazquez Alvarez Senior Water Supply and Sanitation Designation : Role : Team Leader(ADM Responsible) Specialist Telephone No : 5260+3708 / Email : vvazquez@worldbank.org Name : Jean-Martin Brault Senior Water Supply and Sanitation Designation : Role : Team Leader Specialist Telephone No : 1-202-458-43 Email : jbrault@worldbank.org Borrower/Client/Recipient Borrower : Argentine Republic Contact : Title : Telephone No : Email : Dec 01, 2020 Page 11 of 12 The World Bank BUENOS AIRES WATER SUPPLY AND SANITATION WITH A FOCUS ON VULNERABLE AREAS PROGRAM (Program-for-Results) (P172689) Implementing Agencies Implementing AYSA Agency : Contact : Normando Birolo Title : Director Telephone No : 63195865 Email : nbirolo@aysa.com.ar FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects Dec 01, 2020 Page 12 of 12