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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY | Lt COPY ,! - - -,-j(-f - (C // Public Disclosure Authorized A/'( / - ,L] ReportNe. 5549b-CH Public Disclosure Authorized STAFF APPRAISAL REPORT CHILE ROAD SECTOR PROJECT Public Disclosure Authorized Mav 23, 1985 Public Disclosure Authorized Projects Department Latin America and the Caribbear. Regional Office This document has a restricted distribution and mav be used by recipients only in the perforrauce of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equtivalents Since 1983, the Government has followed a crawling exchange rate adjusting the currency to reflect the difference between domestic and international inflation. Currency Unit = Peso (Ch$) US$1 =ChS 120 (November 1984 = Appraisal Time) USSi = Ch$ 141 (March 31, 1985) USS1 =Ch$ 149 (April 30, 1985) Fiscal Year January I - December 31 Units and Measures I meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 square kilometer (km2) = 0.386 square mile (sq mi) 1 metric ton (m ton) = 1.1 US short ton (sh ton) Abbreviations ADT Annual Average Daily Traffic CIF Cost Insurance Freight CNP Corporacion Nacional Portuaria, the National Ports Corporation ECLA United Nations Economic Commission for Latin America EMPORCHI Empresa Portuaria de Chile, the Chilean State-Owned Ports Authority EMPREMAR Empresa Maritima del Estado, the State Shipping Company ENAP Eipresa Nacional de Petroleo, the N3ational Petroleum Company FEC Foreign Exchange Component FFCCE Ferrocarriles del Estado, the State Railways HD"Wodel Highway Design and Maintenance Standards Model IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IDB Inter-American Development Bank INACAP Instituto Nacional de Capacitacion, National Training Institute IRR Internal Rate of Return ITAO Instituto Tecnico de Adiestramiento de Operarios, a Technical Institute for Training of Equipment Operators LANCHILE Linea Aerea Nacional de Chile, the Stare-Owned Airline LTD Limited Liability Company MOP Ministry of Public Works ArT Hinistry of Transport and Telecommunicatinns NPV tNet Present Value ODEPLAN Oficina de Planificacion Nacional, the Planning Office of the Presidency SONACOL Sociedad Nacional de Oleoductos, the National Pipeline Company TOR Terms of Reference Vialidad The Roads Directorate of MOP STAFF APPRAISAL REPORT FOR OFCIAL USE ONLY CHILE RMADSECrOR PROJECT TABLE OF CONTENTS Page No. I. PROJECT SUMKARY.1.............................................. Il. THE TRANSPORT SECTOR .......................................... 3 A. The Transport System and the Subsectors ................... 3 (i) Railvays ............................................. 3 (Hi) Seaports and Airports ............................ , 3 (iii) State-Owned Maritime, Air Transport and Pipeline Companies .............. 4 (iv) The Road Subsector ........ *............... 5 B. Institutional Framework ........... 6 C. Main Sectoral Issues .......................... 6 Ci) The Balance between Maintenance and New Construction . 7 (ii) Road Xaintenance Personnel Training .................. 7 Ciii) Road User Charges and Diesel Taxation .... ............8 D. Bank Lending Strategy in the Sector ....................... 8 E. Experience with Past Bank Lending ............ o..... ..... 9 III. THE ROADS DIRECTORATE'S INVESTMENTAND MAINTENANCE PROGRAM AND THE PROJECT .............................................. 10 A. Project Orlgin and Objectives ....... ......................10 B. The Government's Roads Program 1985-1991 ..................it C. The Project Cost and Financing............................. 12 D. Project Components *-.........-......-........-. 14 (i) Investment............................................ 14 (ii) Maintenance ........................................... 14 E. Economic Evaluation .......................................16 F. Risk Assessment . ...........................................17 IV. PROJECT IMPLEMENTATION .......................................17 A. The Investment and Maintenance Programs .. .................17 B. Project Execution and Procurement ............ i 8............. This report is based on the findings of an appraisal mission which visited Chile in November 1984. The mission comprised Messrs. A. Byl (Economist) and S. Miquel (Engineer). Mr. L. Pisani (Vocational Training Specialist) participated in part of the mission and prepared the training annex of this report. The report has been edited by Miss V. Foster. This document has a resuricted distnbution and may beused by recipients only in theperformance of their official duties. Its contents may not otherwise bedisckosed without World Bank authorization. -ii- TABLE OF CONTENTS (Continued) Fage No. C. Tender Process and Bank Review of Contracts ............... 21 D. Disbursements and Special Account .. 21 E. Auditing .................................................. 23 F. Monitoring of the Project .. 23 V. AGREEMIENTS REACHED AND RECOMMENDATION .24 TABLES 2.1 Road Network, Administrative and Surface Classification, December 31, 1984 .......................... ,. ........ 26 2.2 Longitudinal Road by Region and Surface Type, October 1984.27 2.3 Annual Average Daily Traffic and Composition by Vehicle Type at Major Toll Stations in Selected Years 1972-1984 .......... 28 2.4 Evolution of the Registered Road Motor Vehicle Fleet, 1968-1983 .................................. ,,,,..... 29 2.5 Road User Charges and Road Expenditures, 1970-1984 .30 2.6 Actual Road Expenditures and their Financing, 1980-1984 ...... 31 2.7 Actual (1984) and Planned (1985-1991) Road Expenditures and their Financing ..................... ,,. 32 2.8 Fuel Consumption by Road Vehicles, 1970-1984 .................. 33 2.9 Structure of Retail Prices of Automotive Fuels in Santiago, December 1984 ............................................... 34 3.1 Consulting Services Required and their Cost, 1986-1988 ........ 35 3.2 Equipment to be Procured under Project, 1987-1988 ............. 36 3.3 Schedule of Equipment Procurement, 1987-1988 ................... 37 4.1 General Procurement Methods ................................. 38 4.2 Summary of Routine, Periodic and Deferred Maintenance Components by Works Execution Method and Financing .......... 39 4.3 Estimated Schedule of Disbursements, FY 1986-1989 ............. 40 ANNEXES 1. Training Component .41 2. Economic Analysis .................. ,.,. 56 3. Organization and Execution of the Road Maintenance Program .73 4. Information Necessary for Project Monitoring .79 5. Selected Documents and Data Available in the Project File 81 CHARTS Chart 1- Organizational Chart of the Directorate of Roads (Vialidad) Chart II- Organizational Chart of Regional Offices for Roads MAPS MAP IBRD 18892 - The Basic Network MAP IBRD 18893 - The Basic and Local Networks in the Northern Central Region CHILE ROAD SECTOR PROJECT I. PROJECT SUIMNARY Borrower: The Republic of Chile Amount: US$140 million equivalent Terms: Repayment in 15 years, including three years of grace, at the standard variable interest rate. Project Executing Agency: Ministry of Public Works (Roads Directorate) Description: The proposed project consists of the Government's 1986-1988 Roads Investment and Maintenance Program. This program includes construction; reconstruction;upgrading; routine, periodic, and deferred maintenance; consulting and training services and procurement of road maintenance equipment. Beneficiaries: Project benefits will accrue to the economy at large in the form of vehicle operating cost savings. Risks: There are no major risks affecting the proposed project. The Roads Directorate's performance under the previous two projects has been very good, and the Government has already included the funds required for project implementation in its current three-year plan. Project Cost and Financial Plan: The total cost of the Government's Roads Investment and Maintenance Program for the 1986-1988 project period is estimated at about US$656 million equivalent with a foreign exchange component of about USS347 million equivalent. The proposed Bank loan represents 21% of the total program and 40% of the foreign exchange component. The balance of the foreign exchange requirementswill be financed by ongoing IDB loans, an ongoing Bank loan, and a supplier credit to be arranged in conjunction with this loan. The Government, will also finance all local costs. Bank loan disbursements are targeted only for expenditures under the maintenance program because of the high rate of return of maintenance and in order to ensure its timely execution. Ministry of Public Works Road Investment and Maintenance Program (1986-88) (in millions of current IISdollars) Components Total Costs 1/ Local Foreign Investment 253 114 139 Maintenance 312 152 161 Contingencies 91 43 48 Total 656 309 347 Financing Sources Government 2/ 401 309 92 IDB 44 - 44 IBRD Loan (2297-CH) 57 - 57 Supplier Credit 14 - 14 Proposed Loan 140 - 140 Total Financing 656 309 347 Estimated Disbursements: (Bank FY in millions of U.S. Dollars) 1986 1987 1988 1989 Annual 28 38 46 28 Cumulative 28 66 112 140 Rate of Return: The economic rates of return in the investment program range from 15% to 38% and those of the maintenance program are 49% for paved roads and over 1001 for gravel and earth roads. 1/ Project cost includes about 20i identifiable taxes and duties. 2/ Possible *-B Loan cofinancing may be considered. II. THE TRANSPORT SECTOR A. The Transport System and the Subsectors 2.01 The backbone of
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