Conaprole Project The proposed project includes: (1) an investment program to rationalize and modernize Conaprole''s industrial, logistic, and distribution operations; (2) labor restructuring; and (3) restructuring of up to US$40 million of short-term debt. The Investment program comprises two phases of which phase one, completed in August 2001, involves the construction of a new milk powder plant. Phase two consists of the creation of a new industrial complex in the outskirts of Montevideo.    The project is a key component of a long-range modernization program initiated by the cooperative in 1999 to transform itself into a modern, low cost and world competitive dairy company, in order to survive in the midst of heightened competition and position itself as one of the leading regional dairy players in the medium-term. Significant progress have been achieved over the last three years to that end, through consolidation of manufacturing activities; upgrade of manufacturing processes; adoption of best practices; innovative IT solutions, and improvement of governance practices to become more efficient and proactive with the market.     The next major step in this program, the project, will allow the cooperative to achieve significant efficiency gains and realize large cost savings by relocating the production of value added products from two old plants in Montevideo to a new state of the art facility located in the outskirts of the city and two other existing sites where synergies can be achieved. These operations are currently inefficient due to the plants'' antiquated layout, limited automation and low productivity, logistic bottlenecks, and duplication of specialized lines and distribution centers across several sites.     IFC will help the cooperative undertake this critical project, by providing it with long-term financing with a tenor that would not otherwise be available from commercial banks. Given the regional economic situation, IFC''s involvement will also provide comfort to the company''s local and international short-term lenders for participating in the restructuring of the company''s short-term debt into long-term debt, thereby reducing refinancing risks. Furthermore, IFC will support the cooperative''s initiatives to improve its corporate governance practices and provide its newly created environment division assistance for institutionalizing environmental best practice standards.    The project is expected to have a strong developmental impact given the cooperative''s central role in Uruguay''s dairy sector. It will strengthen the competitiveness of the cooperative in a sector where Uruguay has a strong comparative advantage.  By placing the cooperative on sounder operational and financial footings to meet the challenges of an increasingly competitive international market, it will directly benefit the 2,650 farmers supplying milk to the company by increasing the overall efficiency and viability of the dairy sector and enhancing their revenues in the long-term. It will also have a very positive environmental impact including improved effluent quality and reduced environmental nuisances for the inhabitants of Montevideo. Finally, it will enhance the corporate governance of the flagship of the cooperative sector in Uruguay.