Document of The World Bank
FOR OFFICIAL USE ONLY FILECOPY Public Disclosure Authorized Report No. 478lb-PE Public Disclosure Authorized STAFF APPRAISAL REPORT
PERU
LIMA METROPOLITAN DEVELOPMENTPROJBC T Public Disclosure Authorized
May 29, 1984
Public Disclosure Authorized FILECOPY( Projects Department Latin America and the Caribbean Regional Office
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalent
Currency Unit = Sol (SI.) March 1983 May 15, 1984
US$1 = S/1,172 US$1 = S/3,025 S/.1 = US$0.00085 S/.1 = US$0.0003 S/.1,000 = US$0.85 S/.1,000 = US$0.33
System of Weights and Measures
Metric
1 kilometer (km) = 0.62 mile (m) 1 metric ton = 2,205 pounds
Fiscal Year
January 1 - December 31
LIST OF ACRONYMS AND ABBREVIATIONS
CAF CorporacionAndina de Fomento Andean DevelopmentCorporation CM Comision Multisectorial MultisectorialCommission CMC Comision MultisectorialCoordinadora Multisectorial Coordinating Commission CMP CoordinadorMunicipal del Proyecto Municipal SubprojectsCoordinator DGR Direccion General de Rentas Revenue Office ESMLL Empresa de Servicios Municipales de Limpieza de Lima Municipal Solid Waste Corporation EMMSA Empresa de Mercados MayoristasS.A. WholesaleMarketing Corporation ENATRU Empresa Nacional de Transportes Urbanos National Urban Transport Corporation FAO Food and Agriculture Organization of the United Nations GTZ German Technical Assistance Agency INVERMET Fondo Metropolitano de Inversiones en Fideicomiso Metropolitan Investment Fund MEFC Ministerio de Economia, Finanzas y Comercio Ministry of Economy, Finance and Commerce MH Ministerio de Vivienda Ministry of Housing MLM Municipalidad de Lima Metropolitana Municipalityof MetropolitanLima MTC Ministerio de Transporte y Comunicaciones Ministry of Transport and Communications FOR OFFICIAL USE ONLY
OMC Oficina Metropolitana de Catastro Metropolitan Cadaster Office OMTU Oficina Metropolitana de Transportes Urbanos Metropolitan Urban Transport Office OPDM Oficina del Plan de Desarrollo Metropolitano Metropolitan Development Planning Office PPF Project Preparation Facility UP Unidad de Presupuesto Budget Unit of MLM
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disciosed without World Bank authorization.
STAFF APPRAISAL REPORT
PERU
LIMA METROPOLITANDEVELOPMENT PROJECT
TABLE OF CONTENTS
Page No. I. LOAN AND PROJECT SUMMARY ...... 1
II. METROPOLITAN LIMA AND THE URBAN SECTOR ...... 3
A. Urbanization and the Primacy of Lima ...... 3 B. National Urban Policy ...... 4 C. Lima Metropolitan Government ...... 5 D. Institutional Development ...... 5 E. The Issues of Metropolitan Management ...... 6 (i) Municipal Finances . 6 (ii) Planning ...... 6 (iii) Staffing ...... 6 F. Other Sectoral Issues in the Lima Metropolitan Area ...... 7 (i) Urban Transport ...... 7 (ii) Wholesale Markets ...... 9 (iii) Solid Waste Management ...... 10 G. Bank Involvement in the Urban Sector ...... 10
III. THE PROJECT ...... 11
A. Project Rationale and Objectives ...... 11 B. Main Features of the Project...... 12 (i) Urban Transport Subproject ...... 12 (ii) Wholesale Market Subproject ...... 14 (iii) Solid Waste Management Subproject ...... 15 (iv) Urban Management Subproject ... ,...... 16
IV. COST ESTIMATES AND FINANCING PLAN ...... **.o...... 18
A. Cost Estimates ... ,.18 B. Financing Plan . ... . 1 C. Flow of Funds ...... 20 D. Procurement ...... 21 E. Disbursements ... 22 Fo Accounts and Audits . ... e..... oe.. o.... o..o...... o23
This report is based on the findings of an appraisal mission and a post-appraisalmission that visited Peru during April and May 1983 and February 1984 respectively. The appraisal mission comprised Messrs. C.-H. Mumme (MissionLeader), S. Alber, LCPUR; G. Menckhoff,ASP; D. Arbour, S. Cointreau, G. Kroll, R. Paraud, and M. Thomson, Consultants. The post-appraisalmission consistedof Messrs./Mmes.C-H. Mumme (Mission Leader); J. Flora, S. Whitehead; G. Yabrudy, LCPUR, and S. Cointreau (Consultant). Miss Martha Behar assisted in the production of the report, which has been edited by Miss Virginia Foster, IDF2. Table of Contents (Continued) Page No.
V. PROJECT IMPLEMENTATION ...... 24
A. InstitutionalArrangements ...... 24 B. Status of Project Preparation ...... 26 C. Implementation Schedule ...... 26 D. Monitoring and Evaluation ...... 27
VI. FINANCIAL ANALYSIS ...... e..... 27
A. Metropolitan Finances: An Overview ...... 27 B. Action Program ...... 27 C. Fondo Metropolitano de Inversiones (INVERMET)..ET. 29 D. Empresa de Mercados Mayoristas S.A. (EMMSA)...... 29
(i) Financial Performance on Existing Operations ... 29 (ii) Proposed Market ...... 30 (iii) Financial Management ...... 30
VII. ECONOMIC AND SOCIAL ANALYSIS c... 31
A. Economic Justification ...... 31 B. Distribution of Project Benefits ...... 32 C. Environmental Impact ...... 33 D. Project Risks ...... 33
VIII. AGREEMENTS REACHEDAND RECOMMENDATION ...... 34
TEXT TABLES
4.1 Project Cost Summary ...... 18 4.2 Financing Plan ...... a..... 20
ANNEXES
1. Organization Chart of the Municipality of Lima ...... 38 2. Detailed Cost Table ....* ...... 39 3. Procurement Arrangements ...... 40 4. Disbursement Schedule ...... *41 5. Details of the Management System ...... 42 6. Implementation Schedule/Physical Indicators ...... 45 7. Key Institutional Actions ...... 46 8. Key Evaluation Indicators ...... 51 -iii-
Table of Contents (Continued) Page No.
Annexes (continued)
9. ConsolidatedStatement of Income and Expendituresfor Lima Metropolitan Area ...... 54 10. ComparativeHistorical Financial Statements- INVERMET., 55 11. ProjectedRevenue and Funds Flow - INVERMET. 57 12. Comparative Financial Statements - EMIMSA ...... 59 13. Projected Financial Statements - EMMSA ...... 62 14. Key AssumptionsUsed in Economic Analysis ...... 65 15. Results of Economic Evaluation ...... 67 16. Sensitivity Tests ...... 68 17. Distribution of Project Benefits ...... 69
18. Selected Documents and Data Available in Project File . 70
MAP
IBRD - 17613 Lima MetropolitanDevelopment Project
PERU
LIMA METROPOLITANDEVELOPMENT PROJECT
I. LOAN AND PROJECT SUMMARY
Borrower: Republic of Peru
Beneficiaries: Municipalityof MetropolitanLima (MLM) and Wholesale Marketing Corporation (EMMSA).
Amount: US$82.5 million equivalent, including a capitalized front-end fee.
Terms: Repayable in 17 years, including four years of grace, at the standard variable interest rate.
Relending Terms: For the market subproject, the Borrower would on-lend US$22.4 million equivalent for 17 years, including six years of grace, with the same interest rate as the Bank Loan. EMMSA would bear the dollar-sol exchange risk.
Project The proposed project would support (a) the progressive Description: transfer of urban administrationfrom national to local governmentand, specifically,more efficientmetropolitan management in Lima, the capital of Peru, as well as (b) improvementsin high priority infrastructureand services in the areas of urban transport, solid waste and wholesale marketing. About 53% of benefits from the infrastructureand services improvementswould accrue to low-income residents. Principal subprojectswould be: (a) traffic management improvementsthroughout the city, paving of about 100 km of streets in low-income areas and road rehabilitationand maintenance;(b) constructionof a new wholesale market; (c) provision of vehicles, equipment and transfer station capacity and development of two landfill sites to meet the needs of the city's solid waste agency and the city districts; and (d) institutionalstrengthening through studies, technical assistance and training of the agencies charged with each of the above activities as well as improvementsin city planning,municipal finance and coordinationof urban investmentsand project administration.
Special Risks: Risk of local funding difficultiesduring a period of national austerity would be addressed by relying mainly on local funding from an earmarkedsource (gasoline tax revenues). Risk of inadequate professionalstaff within the Municipalitywould be mitigated by requiring contractingof implementationadvisors initially for the largest subproject,transport, and by providing training for municipal staff. Any problems of coordination between national and municipal agencies would be eased by the MultisectoralCoordinating Commission. -2-
Estimated Costs* Local Foreign Total ------US$ million------
(a) Urban Transport 26.6 33.6 60.2 (b) Wholesale Market 15.4 9.3 24.7 (c) Solid Waste 2.0 7.4 9.4 (d) Urban Management and Project Administration 2.2 4.2 6.4 (e) Project Preparation Facility 0.0 1.0 1.0
Base Cost 46.2 55.5 101.7
Contingencies:Physical 5.1 4.7 9.8
Price 9.2 12.1 21.3
TOTAL PROJECT COST 60.5 72.3 132.8
Interest during construction of market 0.2 2.7 2.9
Front-End Fee on Bank Loan 0.0 0.2 0.2
TOTAL FINANCING REQUIRED 60.7 75.2 135.9
Financing Plan
World Bank 13.3 69.2 82.5 Government, EMMSA and INVERMET 47.4 0.0 47.4 GTZ 0.0 1.0 1.0 Suppliers Credits 0.0 5.0 5.0
TOTAL 60.7 75.2 135.9
Estimated Disbursements
Bank FY 1985 1986 1987 1988 1989 1990 1991 1992 ------US$ million ------
Annual 16.7 27.1 22.5 7.5 3.0 2.0 3.3 0.4 Cumulative 16.7 43.8 66.3 73.8 76.8 78.8 82.1 82.5
Rate of Return: The economic rate of return is estimated at around 70% for those parts of the project with directly quantifiable benefits. These represent 78% of total project costs.
* Project costs include US$9.0 million in identifiable taxes and duties. - 3 -
II. METROPOLITANLIMA AND THE URBAN SECTOR
A. Urbanization and the Primacy of Lima
2.01 The population of the Lima Metropolitan Area grew fram less than 3.2 million in 1972 to 5.1 million in 1983 and will probably reach at least 8.0 million by the end of the century. Nevertheless, its annual growth rate slowed to less than 3.8% in the 1972-1981 intercensal period compared with 6.1% between 1961 and 1972. Thus, earlier fears of a Lima of more than 12 million in the year 2000 are no longer justified, even if recent natural disasters (i.e., the floods in the north and the drought in the south) lead to increased migration to Lima in the short run.
2.02 Many secondary cities in the three major ecological regions of Peru (Coast, Mountains and Jungle) are now growing faster than Lima, so that the trend of the national urban system is toward greater balance. Nevertheless, there are fewer than a dozen cities with more than 100,000 population, and Lima is more than double the size of all of them combined, accounting for 28% of the national population and 53% of the total population in cities and towns with more than 20,000 population.
2.03 The slowing down in the rate of urbanization and the faster autoncmous growth of secondary cities justify a strategy for allocating resources both to Lima and to other selected cities. The logic of numbers dictates that Lima should be the first priority, although, in the longer run, a public investment strategy for Lima should be complemented by investments in secondary cities. Such an approach would be consistent with strengthening the economy of Lima, with the development of strong regional economies based on secondary cities, and with distributive equity (the greatest concentration of poor people being in Lima).
2.04 The urban sector has been deprived of public investment since 1968, initially because of the Government's rural bias and, more recently, because of tight budgetary constraints. The failure to invest in urban areas is now impairing their economic efficiency and adversely affecting household welfare levels, already reduced in recent years by falling real wages.
2.05 An inefficient Lima implies an inefficient Peru because the Metropolitan Area produces more than 90% of the national output of capital goods, two-thirds of national consumer goods and almost all of the country's financial and business services. As a result, the Lima Metropolitan Area accounts for almost half of Peru's GDP. It is therefore vital that the city should be well managed and maintained; this, at present, is not the case. - 4 -
2.06 The concentrationof economic activity in the capital has not been associated with improvementsin real incomes or in their distribution. About 54% of the households are absolutely poor, while about 62% are relatively poor (para. 7.11). More than three-fifthsof the population live in central city slums (tugurios) or peripheral squatter settlements (includingillegal invasions or pueblos jovenes). Moreover, despite the slowdown in Lima's growth, population continuesto grow faster than the rate at which public services are being expanded.
B. National Urban Policy
2.07 Recent governmentshave proposed various strategies to discourage the growth of Lima. During 1975-1980, the government backed a National Urban DevelopmentPlan to integrate Lima with the major towns of the Central Region, especially those in the Sierra, but left office before any attempt was made to implement the Plan. The present government has supported a "decongestioncorridor" plan to promote urban growth north of Lima (at Huacho-Barranca)and south of Lima (at Pisco-ChinchaAlta). Few actions have been taken to implement this strategy other than the partial completion of a coastal expresswayand the developmentof a new port near Pisco. The northern pole has negligible potential while industrial potential near Pisco is too small to have much prospective impact on the growth of the MetropolitanArea. To invest in either area instead of Lima would be a costly and high-risk strategy, probably resultingin underutilizedinfrastructure and minimal impact. Moreover, the spontaneous decelerationin the growth of Lima revealed by the 1981 census makes any strategy to disperse economic activity and populationwithin a much larger coastal region of dubious merit. The Bank has been discussing these issues with the country in the context of its sector dialogue.
2.08 Even in the absence of a shift in the balance of concentration between Lima and the rest of the urban system, a major issue of national urban policy is that Peru has perhaps the most centralizedsystem of urban management of any country its size or larger in the region. The fact that the local sector accounts for only 2% of consolidatedpublic expenditureis one measure of the fact that the management of cities, includingLima, is strongly concentratedin the National Government. The need to revise this system and to transfer responsibilitiesto local governmentswas recognized in the 1979 Constitution,and, while the effects of this new Constitution apply most obviously to Lima, they are also relevant to other cities. This revised framework recognizes an urgent need to improve the efficiency of urban management and, concomitantly,of most urban networks and services. The developmentof a sound urban management system and public investment strategy for Lima is therefore crucial and must be the core of any national urban policy for Peru. The proposed project is an important element in the evolution of this strategy. - 5
C. Lima MetropolitanGovernment
2.09 MetropolitanLima is the most populous of Peru's provinces and is divided into 41 districts. The provincial government,the Municipalidadde Lima Metropolitana (MLM), is headed by an elected MetropolitanCouncil which sets policy for the metropolitanarea and has a Municipal CoordinationAssembly made up of the districts' mayors. The province does not include the port of Callao, which is constitutionallyindependent, with special provincial status. The chief executive officer is the MLM Mayor, elected at three-year intervals. The Mayor of MLM is also the Mayor of Lima Cercado, the historic center of the city. Because of the continued high degree of district administrativeindependence, however, coordination within MLM remains difficult.
D. InstitutionalDevelopment
2.10 MLM controls the Fondo Metropolitano de Inversiones (INVERMET) (para. 6.05) and the Empresa de ServiciosMunicipales de Limpieza de Lima (ESMLL) (para. 6.03) as well as 12 executive departments (social communication,planning, legal administration,police, revenue, public works, private construction,population and human affairs, education, culture and sport, health and environmentalsanitation and product marketing). INVERMET is MLM's trust fund to finance municipal infrastructureworks. ESMLL is responsiblefor the transfer of solid waste and the landfillsin the MetropolitanArea. The collectionof solid waste has been a traditionalfunction of the districts,and ESMLL is responsible only for the collectionof solid waste in Lima Cercado. Maintenance of main roads, except for some intercity roads maintained by the Ministry of Transport and Communications(MTC), is primarily the responsibilityof the districts. Retail markets remain a district responsibility,but wholesale markets are managed (until now with little coordinationwith other activities in the MetropolitanArea) by a national body (Empresa de Mercados Mayoristas S.A.--EMMSA)presently under the Ministry of Agriculture. The proposed project would ensure that the wholesale market would be closely coordinatedwith other activities in the MetropolitanArea and would analyze the institutionalframework for an eventual transfer of the wholesale market to MLM. National corporationsare responsiblefor electricity,water and sewerage and telecommunications.These organizationsundertake their own project planning and implementation, largely without consultationwith the municipal authorities. The organizationchart of MLM is given in Annex 1.
2.11 As noted in paragraph 2.08, the new Constitutionof 1979 mandated the transfer of key functions, particularlyin the transport and planning fields, from the central to local governments. The initial transfer of power in Lima was handled by a Comision Multisectorial(CM), which consisted of members of MLM, MTC, and the Ministry of Housing (MH). Beginning in late 1983, the Comision MultisectorialCoordinadora (CMC), establishedby decree (DecretoSupremo), replaced CM. MLM is setting up an Oficina Metropolitanade TransEortesUrbanos (OMTU) for urban transport -6-
(para. 5.04) and has already establisheda MetropolitanDevelopment Planning Office (OPDM) to replace the,old Plan Lima Office which operated within MH. Responsibilityfor metropolitanplanning was transferredto the local level in 1981/82, and the control and regulationof public transport and the installationand maintenanceof traffic control devices were formally transferredin December 1983, although details of the transfer are still being worked out.
E. The Issues of MetropolitanManagement
2.12 The outstandingneeds for improved managementcapacity in MetropolitanLima may be summarizedin terms of three main issues: municipal finances, planning and staffing.
(i) Municipal Finances
2.13 Historically,MLM has had very few autonomousbudgetary resources,and inflation in recent years has reduced the real value of local revenues by about 30%, and of Government grants by about 50%, for 1983. The consolidatedoperating and capital budgets for all 41 districts amounted to about US$56 million equivalent (US$1i per capita) of which Lima Cercado, the central area, accounted for about 30%. This figure probably represents the lowest per capita expendituresfor any large city in Latin America. All but a small part of total resourcesfinance operatingcosts, capital outlays being on the order of US$6 million in 1983. In the absence of substantialincreases in financial resources, and of stronger financial managementat the metropolitanlevel, the transfer of new functional responsibilitiesis bound to proceed slowly.
(ii) Planning
2.14 Planning in Lima is presently limited to the control of current development. This control is exercised by zonal offices of MLM, whose task is to handle developmentapplications. These officeshave achieved some success in regulatingland use through standardizedzoning practices. However, the comprehensiveplan (Plan Lima) being used as a framework for land use regulationis obsolete (it was prepared in 1972) and is based on assumptionswhich have proved to be incorrect. The unanticipatedgrowth of pueblos jovenes has altered the patterns of proposed land use and density. The transport strategy which envisioned the developmentof a rail system has not become a reality. Neither have the developmentof a proposed road network nor a Central Area plan. The need for a compehensivestrategy to guide decisions affecting land use and transport developmentin the MetropolitanArea is urgent.
(iii) Staffing
2.15 There is a serious shortage of skilled city managementstaff, and the situation has been aggravatedby recently imposed austerity measures. The municipal departmentsare all subject to municipal terms of employment and salary levels. The disparitybetween the public and private sectors makes it difficult to attract and retain qualified senior staff. There is currentlyno systematic training within MLM, and career developmentis nonexistent. As a result, the quality of staff engaged in various aspects of metropolitanmanagement is generallyinadequate.
F. Other Sectoral Issues in the Lima MetropolitanArea
(i) Urban Transport
2.16 Rapid growth of population,of car ownershipand of the urbanized area has placed tremendous demands upon the metropolitantransport system and upon the resources - financial and organizational - to expand and improve it. Every aspect of the network is in need of expansion or improvement;there is, however, both a lack of funds and a lack of capacity to plan, implement and manage the needed projects.
2.17 All transport in Lima is by road. Traffic congestion,with resultant delays in the movement of people and goods and excessive use of fuel, is common in the central area and on major approaches to the city. Accident rates are high. These conditionsare less a result of inadequate space devoted to roadways than to their mismanagementand inefficientuse. Signing and channelizationare generally poor or non-existent,and street vendors encroach on many major streets. Traffic signals are outdated and uncoordinatedand, in some places, contributemore to the problem than they help to reduce it.
2.18 The performanceof the transport system must be evaluated in conjunctionwith the land use pattern of the city. Lima has expanded outward at rather low densities,with little high building and little coordinationof housing, employmentand shopping. Journey distancesare often long, and neither the quality of the existing road system nor the level of available bus services have kept pace with demand. A major problem has developed in supplying transport facilities to the huge numbers of lower income people on the city outskirts, particularlyin the Cono Norte and Cono Sur areas. Environmentalconditions along the main roads are generallydeplorable.
2.19 In the older, built-up areas, all main roads and most side roads are paved, but in the outlying low-incomeneighborhoods, the majority of side roads are not paved and are generally in a poor state, discouraging the entry of buses, refuse collectorsand other service vehicles.
2.20 Lack of personnel, equipmentand financial resources, and poorly defined institutionalarrangements have resulted in severely inadequate maintenanceactivities. As a consequence,the road network is deteriorating(surface and base failures), resulting in rising operating costs for the public transit fleet and for private and commercial vehicles. - 8 -
2.21 Taxis are plentiful and cheap and provide an effective service for those who can afford them, although mechanical and operational standards are generally poor. For those in lower income groups, however, buses are the only available transport. As of December 1983, 1,148 buses were registeredby 20 companies or cooperatives, and another 6,900 buses-- known as microbuses but covering a range of sizes-- were registered by individuals or associations. A further 560 colectivos (shared taxis on fixed routes) were registered. The largest organizationis ENATRU, the state-owned company, with 808 buses. Owners of micros and colectivos are formed into committees for the purpose of organizing route operations. The route structure has gradually evolved on the basis of a flat fare and is characterized by highly circuitous routes, all entering the Central Area. Fares are establishedby the Transport Tariff RegulatoryCommission within MTC; they are based on operatingcosts developed by the Commission. Route structure is also determined by a commission (ConisionTecnica Mixta) within MTC.
2.22 An outstandingproblem regarding bus service is lack of capacity. Long queues and excessivewaiting times to travel on overcrowded buses are common. Conditionsare particularlybad in the Cono Sur. The shortage of buses contributesto the reluctanceof bus owners to extend services to outlying areas, so that many people have a long walk to reach the nearest bus route.
2.23 The shortage of available buses is attributablepartly to the lack of spare parts. Furthermore,the bus fleet is too small and the average age of vehicles is excessive,reflecting the impact of import controls and import taxes. There may also have been insufficient incentives (in terms of profit and security) to invest in buses. Fares have been controlled during a period of rapid inflation, and the leading private operator is currently reportinglarge operating losses. The Government is now, however, permittingthe importation of 3,000 new buses in two contractsfor 1,300 and 1,700 units respectively. During 1983, all necessary agreements were signed for the delivery of the initial 1,300 units, and the first buses arrived at the beginning of 1984. It appears, however, that only 260 of the additional 1,700 units will be ordered by microbus operators. A bus maintenance agreement, part of the contract for the 1,300 buses, has been signed with Volvo. Moreover, the proposed route rationalization and tariff study (para. 3.14(b)) would make more efficient use of the existing bus fleet.
2.24 A 1972 study, undertakenby experts financed by the Federal Republic of Germany, recommended the construction of a metro. A more recent study (1982) called for a surface light rail system along an available right-of-waybetween Villa El Salvador in the south and Comas in the north of the city. During the preparation of the proposed project, it became obvious that available data and analysis do not permit a proper evaluationof the mass transit alternatives. Therefore,in September 1983, it was agreed that a study of mass transit alternativeswould be financed through the Bank's Public Sector ManagementLoan (Loan 2204-PE). A first phase would result in the identificationof the most feasible - 9 -
alternative(s),while a second phase would involve a detailed study of those alternative(s). Assurances were obtained during negotiationsthat the Government and MLM would (a) inform the Bank of any proposal to undertake major transport investments in the Lima Metropolitan Area in excess of US$10 million during the project implementation period; (b) provide information on the impact of such investment on the Bank project; (c) give the Bank an adequate opportunity to comment on the technical, economic, financial and institutionalaspects of the proposed investment; and (d) agree not to execute any investment that would adversely affect the urban transportsubproject of the proposed project (para 8.03(a)).
(ii) Wholesale Markets
2.25 Wholesale marketing of fruits and vegetablesin Lima is mainly carried out in two markets located in the La Victoria district, about two miles from the city center. The main market was built in the 1940s when the populationof the city was about one-fifth its present size. The congestion problem now encounteredresults partly from its design and partly from the subsequent growth of the city. Consumptionof fruits and vegetableshas increased roughly in proportion to the populationand is now about twice the efficienthandling capacity of the wholesale markets (700,000 tons). In addition to the inadequatesize of the markets, their design and facilities are obsolete and do not permit the introduction of modern handling and storage.
2.26 The present wholesale markets are grossly congested, and clients are obliged to devote long periods of time to completingtheir transactions. The city has spread around and beyond the markets, and access roads have become crowded with local traffic and pedestrians. Trucks have difficultyin approachingthe markets and must queue for long periods before entering. Total waiting times, in and out of the markets, typically exceed four hours. Wastage and pilferage and the loss of value due to damage, deteriorationand theft are high, while the unplanned growth of low-income residentialstreets around the market area has led to public health hazards and marked social deterioration.
2.27 The markets are managed by EMMSA, but the sites and facilities belong to the district La Victoria. In 1964, a study to find a suitable location for a new market was commissioned,and a site at Santa Anita in the Ate district near the Carretera Central was selected and acquired. A feasibilitystudy was undertaken in 1972 by a local consulting firm. The study was updated in 1982 by EMMSA with the assistance of the Food and AgricultureOrganization (FAO).
2.28 There is no question that the existing markets should be replaced and closed down. Modernizationwould be extremely difficultand expensive if carried out while the markets continued in operation. A major - 10 -
enlargementof capacity would require multilevel operation,which would be costly. The site could never accommodateadequate parking and is unsuitable from the point of view of access and environment.
(iii) Solid Waste Management
2.29 Improvementsin refuse managementare needed throughoutthe city. In the central districts,trucks do not have efficient routes or schedules for servicing their collectionareas. The lack of transfer station capacity means that many collectionvehicles have to deliver directly to the landfills,involving journeys of up to 40 km each way. Consequently,these vehicles usually can make only one collectionround, and collect less than a full load per shift. In the outer districts,the major reason for low service levels is the lack of equipment. While the outer districts generate almost the same amount of refuse as the central districts,they are served by only about 25% of the number of vehicles.
2.30 These problems are aggravated by inadequate maintenanceand repair service, which result in less than 60% of the fleet being available at any one time. In addition, most of the refuse of Lima is presently deposited in open dumps, which are smoking, unsanitary areas. Because of their poor access and condition, the dumps are a major cause of equipment failures.
G. Bank Involvement in the Urban Sector
2.31 In addition to the mass transit study mentioned above (para. 2.24), the Bank made an Urban DevelopmentLoan (1283-PE of October 12, 1976 for US$21.6 million) which focused on Lima and Arequipa. It included the provision of sites and services, water supply and sewerage networks as well as the expansion of electric connectionsand health facilitiesin low income areas and industrialparks. After initial delays, the pace of execution picked up, and the project was completed in early 1984. Because of much-higher-than-expectedinflation, negative real interest rates have developedwhich will inhibit the achievementof the project's cost recovery objectives;however, the project has demonstrated the feasibilityof low-cost shelter solutions. Discussionsleading to a new national housing project are being centered upon the importanceof a revised system to adjust interest rates for the sector. Complementaryto the Urban Development Loan, the Bank helped to finance water supply and sewerage systems in Lima through Loan 2139-PE (of June 4, 1982 for US$40.6 million). Inadequatewater tariffs and institutionalweaknesses have kept this project from progressingat a satisfactorypace. However, during the first semester of 1984, the Governmentraised water tariffs 30% in real terms. It has also selected a management consultant to assist it in institutionalimprovements. The Central Government,rather than the Municipalityof Lima, is responsiblefor the water agencies and sector policies through its Ministry of Housing. - 11 -
III. THE PROJECT
A. Project Rationale and Objectives
3.01 The proposed project is fundamentallyconceived as an instrument to support a shift of administrativeand financial responsibilityfor metropolitanmanagement in Lima from national to local government,in furtheranceof the 1979 constitutionalreform described in paragraph 2.08.
3.02 This constitutionalamendment was designed to promote local autonomy but it will take considerabletime, perhaps 10 to 15 years, and great determination,to replace a traditionof centralizedmanagement of urban areas with effective local governmentsince the skills required for metropolitanplanning and coordinationmust be acquired, and this cannot be achieved quickly. The proposed project, through providing institutional support for administrativedecentralization as well as tangible improve- ments in three of the basic urban systems, should thus be regarded as the first stage of a gradual process and the first step in a program of continuousmetropolitan development.
3.03 The proposed project has been developedin the context of the financial and institutionalconstraints which affect Lima and in the absence of a long-termstrategy for metropolitandevelopment, but in the setting of a firm political commitment to devolutionand more efficient urban planning and management. In designing the proposed systems improvements,the emphasis has been placed on short and medium-term schemes and on the effectiveutilization, maintenance and rehabilitationof existing capacity rather than on new investmentsexcept where, as in the case of the proposed market, there is no alternative.
3.04 The proposed project has been appraisedand would be implemented while long term policy decisionsarticulating a program of devolution on urban managementand administration,staffing, funding, local resource mobilizationand revenue-sharingwith the Central Government are being made. An important opportunityexists for the Bank to participatein the shaping of these decisionsand to help guide the process along sound lines.
3.05 The primary objectivesof the proposed project are to:
(a) support the progressivetransfer of urban administrationto MLM as mandated in the 1979 constitutionalamendment;
(b) develop land use, transport and investment planning capability within MLM and to assist it in developing greater autonomy in tax administrationand in increasing its revenue base to gradually assume new responsibilities;
(c) strengthen the institutionalcapacity of MLM in the urban transport,wholesale markets and solid waste sectors and in metropolitanmanagement; and - 12 -
(d) implement selected high priority improvementsin infrastructure and services in the urban transport,wholesale markets and solid waste sectors, which would have a major impact upon the functional efficiency of the metropolitanarea and would directly improve the living conditions of the urban population and, particularly,of the low income population.
B. Main Features of the Project
3.06 The project would include four subprojects:urban transport, wholesale market, solid waste management and metropolitanmanagement (Map IBRD 17613).
(i) Urban Transport Subproject
3.07 Cono Norte. This componentinvolves detailed design, supervision,and constructionof traffic management schemes along the major roads in this corridor, linking the predominantlylow-income areas in the north to the Central Area. Elements include the constructionof segregated busways and improvementsto access control and intersectiongeometrics. Safety features include median barriers, pedestrian signals, sidewalks, crosswalks and signing, and marking.
3.08 Cono Sur. Traffic management improvementssimilar to those in the Cono Norte would be made to the major roadways in the southern corridor connecting the low income suburbs to the Central Area. Bus lanes would be introduced rather than segregatedbusways.
3.09 Central Area. To improve traffic circulation,the operational efficiency of buses and pedestrian safety, four major elements are included in the Central Area component:
(a) Central Area Study. This study would develop a traffic circulationplan and provide detailed feasibilityanalysis and functional designs for (i) an area traffic signal control system (approximately500 intersectionscovering the central and outlying areas), (ii) traffic management measures, and (iii) reconstructionof Avenida Alfonso Ugarte.
(b) Traffic Control System. Based on the analysis and functional design developed in the Central Area study, this element would include final design, supervision,and implementationof the first stage of a coordinatedtraffic signal control system; would cover approximately100 intersectionsin the Central Area.
(c) Avenida Alfonso Ugarte. Based on recommendationsincluded in the Central Area study, this peripheral road would be reconstructed within existing rights-of-wayto provide segregated busways and an underpass at Plaza Dos de Mayo. Detailed design, supervision and constructionwould be included. - 13 -
(d) Traffic Management Measures. Following the proposals developed in the Central Area study, a program of low-cost traffic management actions would be implementedto support the traffic improvementsystem. Final design, supervisionand construction of this program would be included.
3.10 Paving in Low Income Areas. This component involves the design, supervisionand implementationof a program to pave about 100 km of unimproved streets in low-income areas. The program is designed to integrate with the corridor improvements.
3.11 Road Rehabilitationand Maintenance
(a) Deferred Maintenance. Limited resourceshave caused many routine maintenance activities to be postponed. This componentwould represent a "catching-up"activity to bring many major roadways back to a conditionwhere routine maintenance can be performed. It involves patching and repairs to the surface (but not complete resurfacing)of approximately24 km of roadway.
(b) Road Rehabilitation. As a result of inadequatemaintenance, many sections of roadway have deterioratedto the point where routine maintenance and periodic maintenance are no longer feasible. This component provides for the patching, resurfacing,and repair to the base of approximately26 km of roadwaywhere major failure has occurred.
(c) Road Maintenance Program. The previous two components are necessary to correct physical problems resultingfran the lack of a coordinatedand effective maintenanceprogram. To correct this organizationalinadequacy, the proposed project would fund a study to develop recommendationsfor a road maintenanceprogram including its institutionalframework, organizationaland manpower needs, standards and procedures,required equipment, programing and financing. Agreement was reached during negotiationsthat MLM would present the results of this study, covering the institutionalframework, budget requirementsand proposed financing, to the Bank for review and comment by December 1985 (para. 8.03(b)).
(d) Equipment. Based on recommendationsof the maintenance study, equipmentwould be purchased to assist in the implementationof the recommended program.
(e) TechnicalAssistance. To improve maintenance practices during the period prior to the outcome of the maintenance study and to assist in implementingthe recommendationsof the study, technical assistancewould be provided to the districts.
3.12 Enforcement Program. Technical assistance and training as well as motorcycles,radios and other equipmentwould be provided to the traffic - 14 -
control unit of the Guardia Civil (police) to improve mobility and effectivenessin traffic control, traffic law enforcementand accident investigationand prevention.
3.13 Equipment. Equipment essential for project implementationwould be purchased for OMTU and INVERMET using loan proceeds. Such equipment would include vehicles, office equipment,drafting and measuring equipment, traffic counting equipment,calculators and microcomputers.
3.14 Technical Assistance,Training and Studies. A major objective of the proposed project is to address existing weaknesses in INVERMET and OMTU, the offices which would be most directly involved in implementingthe transport subproject and which would have long term responsibilityfor Lima's transport system. This institutionalstrengthening would occur principally through technicalassistance and training activities for both INVERMET and OMTU during project implementation. Elements of the technical assistance, training and studies, in addition to those already discussed for the road maintenanceand enforcementprograms, would include:
(a) INVERMET. Consultantswould be hired to work with INVERMET counterpartstaff in project implementation. There would be two specialistsin procurement,a highway design engineer, and a street maintenancespecialist. Short courses in the development of specifications,contracts, and procurement,as well as in project inspectionand control, would be provided.
(b) OMTU. Consultantswould be hired to work with OMTU counterpart staff in traffic engineering,transport planning and public transport. Training in the form of work-study grants and short courses (to be taught in Lima) would be provided. Several studies would be carried out, including the developmentof a strategic land use transport plan (executedin conjunctionwith OPDM as a part of the developmentplan), a Central Area Study, and a Route Rationalizationand Tariff Study.
(ii) Wholesale Market Subproject
3.15 Wholesale Market. A new wholesale market (called "Santa Anita") would be constructedon an 83 ha site owned by EMMSA some 7 km east of the city center (para. 2.27). This market would replace the two small (7 ha total) markets which currently serve Lima (para. 2.25). The master plan for the site indicates that about 30 ha would be devoted to wholesaling activities at the expected time of opening at the end of 1986. An additional7 ha would be for administrativeand service activities,while another 2.5 ha would be for on-site access roads and control stations. The remaining land would be reserved for possible market expansion beyond 1986. A capacity throughputof 1.7 million metric tons would be achieved with constructionof the first phase. This capacity would be fully utilized within three years of market opening, and additional construction would be required at that time. The final detailed design, construction, supervisionand operation of the Santa Anita market would be carried out by EMMSA. - 15 -
3.16 Technical Assistance,Training and Studies.
(a) Assistance to EMMSA. Although EMMSA is considered to be a fairly strong agency, with responsibilityfor managing wholesale markets throughoutPeru, the proposed project includes additional technical assistance to ensure that the complexitiesof designing, constructing,and operating a large, modern market with high throughputcan be achieved. Experts would be hired to assist EMMSA in the following areas: design, construction supervision,market management,market operation,and financial and accounting procedures. Additionally,a consultantwould be hired to advise on an appropriatestrategy to relocate some 1,200 existing wholesalers to the new market.
(b) Training. Prior to opening the new facility,the project director for EMMSA would be sent abroad to review operationsof similar markets. The project includes funds for this training activity.
(c) Studies. Three studies would be carried out as part of this subproject:a long-termplan covering the location and size of future wholesale market(s); development of institutional alternativesfor an eventual transfer of responsibilityfor the wholesale market to MLM; and developmentof a new packaging scheme to reduce waste and facilitatehandling.
(iii) Solid Waste Management Subproject
3.17 Equipment. A central facility for ESMLL with administrative officesand workshop space has recently been completed. Under this subproject,office and maintenanceequipment, mobile repair vehicles, tow trucks, and vehicles for field supervisionwould be provided.
3.18 Collection Vehicles. Provision of solid waste collection vehicles, overhaul of compaction vehicles owned by MLM, and provision of spare parts for remaining vehicles not requiringcomplete overhauls are included.
3.19 Transfer Facilities. A new transfer station would be provided, and the capacity of an existing transfer station would be expanded. Development of the new transfer station would involve civil works such as access road building, constructionof a small administration/sanitary facilities building and the installationof hoppers and weigh bridges. Transfer vehicles would also be procured. The land for the new transfer station has been acquired by MH, and assuranceswere obtained during negotiationsthat MLM would obtain the ownership of the land for the new transfer station by December 1984 '(para.8.03(c)).
3.20 Landfills. Two strategicallylocated sanitary landfillswould be developed as key operationalnodes of the solid waste system. The city already owns both sites, which, together,have the capacity to receive all of Lima's solid waste over the next 20 years. The developmentof access roads and preparationof sites would be undertaken,including the installationof weigh bridges. Bulldozers for spreading and grading solid - 16 -
waste and soil cover, and payloaders for excavatingand hauling soil cover would be included.
3.21 Technical Assistance and Training. Technical assistance and training are included, and part of their cost is co-financedby the German Technical Assistance Agency (GTZ) (para. 4.09(b)). GTZ has already begun pre-project technical assistance in order to strengthen the local staff who would deal with project implementation. The technical assistance and training would be provided to ESMLL, together with training for district staff engaged in the collection of solid waste and in public awareness education. The proposed program includes funds for pilot projects which the technicalassistance team would help to design and implement. The pilot projects would be conceived to develop safe, effective systems for recyclingand cost-effectivetechniques for refuse collection.
(iv) Urban Management Subproject
3.22 Planning.
(a) A planning study of the Lima Metropolitanarea would be undertaken building on the comprehensivedevelopment plan, (Plan Lima) produced in 1972. The general objective of this study is to recommend strategiesand policies to guide urban development in Lima in the long term (through2005) and medium term (through 1996). Specific goals are to:
(i) develop a DirectionalPlan for the long term developmentof Lima which would establish the land-use and transport strategies and policies to be followed;and
(ii) develop a Design Plan which would establishan investment program for transport developmentover the medium term within the context of the DirectionalPlan.
(b) Technical assistance and training are included in this subproject to strengthen OPDM. This support would enable OPDM to assume a stronger and more positive role in the developmentand execution of current and long-range planning for the Lima Metropolitan Area.
3.23 Municipal Finances.
(a) Cadaster. Under a US$5.4 million equivalent turnkey contract and French export financing, a group of French firms would provide the equipment and technical assistance to begin the process of establishingurban developmentcadastral data throughout the MetropolitanArea. Initially, the turnkey contract would cover an area of about 20 km2 where new developmenthas been concentratedin recent years. In addition, an assessment would be made of the organizationaland staffing requirementsof MLM to extend the area covered and to update the data periodically. Training would also be provided under the contract. To complement the work of this contract effectivelyand to ensure - 17 -
continued functioningonce it has been completed, the project would include funds for experts with specializedskills in computer processingand data management.
(b) Betterment and Local Taxation. A broad review of local taxation as it relates to the nationwide taxation system has recently been completedunder the Public Sector Management Loan (Loan 2204-PE). The study emphasizes implementationof the recently enacted betterment tax; operationalguidelines and regulationsare expected to be completedby July 1984. A more explicit review is required,however, of metropolitanfinances in Lima, particularly in view of changes in functional responsibilitiesfor metropolitanmanagement and, consequently,the need for a significantly larger capital investent program. Under the proposed project, US$450,000 would thus be allocated to fund: (i) implementationof the betterment tax following the completion of operationalguidelines and regulations;and (ii) review and implementationof additionalfiscal measures.
(c) MetropolitanFinancial Planning and Management. Financial programing is presently based on yearly budgets which consolidate the revenues and expenditures of the metropolitan administration, including each of the district and municipal offices. The coordinationof investment planning with other public sector agencies operating in metropolitanLima is, however, not well established. Introductionof service costing and pricing systems and multi-year program budgeting in MLM has become urgent as a means of establishingand monitoring operationaland financial policies, especially since metropolitanoperations and investmentsare expected to expand significantlyas devolution proceeds. Under the proposed project, a detailed review would be undertaken to identify and implement improvementsin accounting systems, and in financial and investmentplanning (para 4.19). Agreement was reached during negotiationsthat MLM would present the results of this review, including recommendationsfor followup actions, to the Bank for its review by December 1986 (para. 8.03(p)).
(d) Equipment. Office equipment, including reproductionequipment, microcomputers,calculators, and drafting equipment would be provided for MLM and CMC under this subproject. The necessary vehicles to conduct the programs would also be purchased.
3.24 Coordination. The Municipal Project Coordinator (CMP) of MLM would be responsiblefor carrying out all coordinationactivities of the municipal subprojects (para. 5.03); funds to finance the hiring of the CMP would be provided under the loan.
3.25 Project Management. Funds would be included for a declining share of salaries of incrementalsenior personnel and support staff within MLM and CMC. These would supplement counterpartfunds on a transitional basis to finance the additional staff needed for project implementation. - 18 -
IV. COST ESTIMATESAND FINANCINGPLAN
A. Cost Estimates
4.01 The total estimated cost of the project, including land, is US$132.8 million, of which US$72.3 million (54%) is foreign exchange. The base cost estimates are in June 1984 prices. The project cost includes identifiable local taxes and duties which amount to US$9.0 million, or 6.8% of the total project cost. Summary cost estimates are presented in Table 4.1 below. Estimated total financing required, including interest during construction and the capitalized front-end fee, amounts to US$135.9 million (para. 4.07). Detailed cost estimates are presented in Annex 2.
Table 4.1 Project Cost Summary In US$ million
Foreign as of Subprojects Local Foreign Total % of Total
1. Urban Transport 26.6 33.6 60.2 56 2. Solid Waste 2.0 7.4 9.4 79 3. Urban Management 2.2 4.2 6.4 66 4. Market 15.4 9.3 24.7 38 5. Project Preparation Facility 0 1.0 1.0 100
Base Costs 46.2 55.5 101.7 55
6. Physical Contingencies 5.1 4.7 9.8 48 7. Price Contingencies 9.2 12.1 21.3 57
Total Project Cost 60.5 72.3 132.8 54
8. Interest - Construction 0.2 2.7 2.9 93 9. Front-End Fee 0 0.2 0.2 100
Total Financing Required 60.7 75.2 135.9 55
4.02 Cost estimates for civil works are based on preliminary engineering designs prepared by OMTU, EMMSAand ESMLL and their consultants. Unit base costs were developed from recent contract rates for similar works and from information provided by contractors. Equipment costs are based on current prices in Peru.
4,03 Design and supervision costs (combined) range from 6% to 11% depending on the complexity of the works. These costs are based on current estimates of such costs in Lima.
4.04 The costs of technical assistance, training and studies are based on recent worldwide experience for similar services. The project includes 1,391 person-months of technical assistance, training and studies. Details are available in the Project File. - 19 -
4.05 Physical contingencieshave been estimatedat 15% for civil works. Total costs for physical contingenciesare US$9.8 million.
4.06 Peru continues to use a system of regular adjustment in its exchange rates relative to hard currencieswhich approximatelycovers the differencebetween domestic and internationalinflation. Therefore, price contingenciesin project costs are calculated on US dollar base values and are estimated at 3.5% for 1984, 8.0% for 1985, 9.0% for 1986 through 1988, 7.5% for 1989, and 6.0% for 1990 and 1991, amounting to a total of US$21.3 million.
B. FinancingPlan
4.07 The proposed Bank loan of US$82.5 million would finance 65% of the estimated total financingrequired (net of taxes and duties), including US$69.2 million in foreign costs and US$13.3 million in local costs. Bank financing of local costs is justifiedby the importance of the project in improving the efficiency of urban management,urban infrastructureand urban services and by the urgent need to improve social conditions in Lima (see Chapter VII, B). The loan would include US$1 million to refinance the PPF advance, the capitalizedfront-end fee of US$0.2 million, and US$2.7 million for interest and other charges during constructionon the market subproject.
4.08 Proceeds of the Bank loan related to the market would be onlent by the Central Government to EMMSA as a US$ denominated loan at the variable IBRD interest rate, repayable in 17 years with six years of grace. The cross currency risk would be borne by the Government. Proceeds of the Bank loan related to the transport,solid waste and urban management subprojects,which are occasionallyreferred to in this report as "municipalsubprojects," would be passed on to MLM as a grant. These arrangementswere confirmed during negotiations(para. 8.03(d)).
4.09 Counterpartfinancing for the market subproject would be provided by an investment of US$2.0 million equivalent by EMMSA (from the sale or lease of surplus land or other sources) and by a loan from the Central Government of US$1.9 million equivalent,on terms satisfactoryto the Bank, currentlyprojected at 12% interest for eight years with three years of grace. In addition,government-owned land, valued at US$12.1 million, has already been transferredto EMMSA, of which US$5.8 million represents the pro-rata value of land being used in the Bank-financed subproject. Counterpart financing for transport, solid waste and urban management subprojects would be provided as follows:
(a) MLM would contribute, from INVERMETfunds, during 1984 through 1990, up to US$4 million equivalentper year up to a total of US$20.2 million to help finance the municipal subprojects;
(b) GTZ would grant US$1 million to help finance the technical assistance and training component of the solid waste subproject;
(c) Suppliers credits of US$5 million would be provided for traffic signals and road maintenanceequipment; and - 20 -
(d) The Government would provide a budgetarycontribution of US$17.5 million equivalent,in the period 1986-1991,to help finance the municipal subprojects.
These arrangementswere agreed during negotiations (para. 8.03(e)).
4.10 If the suppliers credits for traffic signals and road maintenance equipmentare not forthcomingand if EMMSA is unable to provide the required counterpartfinancing, government would also provide financing in the amounts required. These arrangementswere agreed during negotiations (para. 8.03(e)). The details are shown in Table 4.2.
Table 4.2 Financing Plan In US$ million
Total Fi- Bank Loan Central GTZ Sup- Subprojects nancing Re- Passed on as INVERMETGovern- Grant pliers EMMSA quired a/ Grant Loan ment Credit
1. Urban Trans- port b/ 86.0 43.3 20.2 17.5 5.0 2. Solid Waste Management 10.3 9.3 - - 1.0 - 3. Urban Manage- ment 7.5 7.5 - - - - 4. Market 32.1 - 22.4 - 7.7 c/ - - 2.0
TOTAL 135.9 60.1 22.4 20.2 25.2 1.0 5.0 2.0 a/ Includes Front-EndFee b/ Includes Project PreparationFacility c/ Includes land valued at US$5.8 million equivalent
C. Flow of Funds
4.11 MLM, through INVERMET,would be responsiblefor the financial administrationof the municipalsubprojects (transport,solid waste and urban management),and EMMSA for the market subproject. Two working accounts would be establishedin the Banco de la Nacion by the Central Government to cover estimated expendituresfor the municipal and the market subprojectsrespectively. Simultaneously,in order to also accelerate disbursement, the Central Government would establish two corresponding Special Accounts at the Banco de la Nacion into which the Bank would make initial deposits estimated to cover the Bank's share of three months of expenditures(US$8.0 million). During negotiations,agreement was reached that the Special Accounts, together with the working accounts,would be establishedand that the Bank's initial deposits in these special accounts would not be made until MLM's and EMMSA's advances into the working accounts were made (para. 8.03(f)). Reimbursementof the Bank's share of expendituresfrom the Special Accounts would be claimed upon presentation of withdrawal applicationsby INVERMET or EMMSA to Banco de la Nacion, - 21 -
which applications,in turn, would be forwardedto the Bank fully documented for replenishmentof the Special Accounts. The Bank would require a monthly statement of the Special Accounts which would reflect transactionsduring the previous month.
D. Procurement
4.12 Procurementarrangements are summarized below and further details are provided in Annex 3.
(a) Civil Works. Approximately70 contracts are expected to be let, ranging in value from approximatelyUS$15.5 million (market subproject)to less than US$500,000 (for the paving subproject component). Local competitivebidding (LCB) procedures, acceptable to the Bank and documented in the project file, would be used for approximatelyUS$35.7 million comprising about 50 contracts. These contractswould primarily involve road maintenanceand rehabilitationand paving in low-income areas. Because of the nature of the work, the contracts are not likely to attract foreign bidders, and, in an effort to provide opportunitiesto a large segment of local industry, individual contracts would not exceed US$1.0 million. Other civil works would be divided into suitable lot sizes in an effort to allow wide participationby local firms while still attracting foreign contractors. These contractswould total approximatelyUS$49.5 million and would be subject to internationalcompetitive bidding (ICB). Contractorswould be allowed to bid for more than one lot dependingupon capacity. These arrangementswere confirmed during negotiations(para. 8.03(g).
(b) Equipment. Following the Bank's guidelines for procurement (July 1980), ICB would be used for all equipment with the exception of approximatelyUS$2.6 million for small equipment contracts, for which local competitivebidding procedures (LCB) would be applied. Any single contract using LCB would not exceed US$50,000. Contracts for goods estimated for US$10,000 or less may be awarded for the lowest price out of a minimum of three quotations from local supppliers,provided that the aggregate cost of goods would not exceed US$500,000. These arrangements were confirmed during negotiations(para. 8.03(g)).
(c) ConsultantsAll consultantsfinanced under the loan would have qualificationsacceptable to the Bank, and would be hired in accordancewith Bank guidelinesunder terms and conditions acceptable to the Bank. This arrangementwas confirmed during negotiations (para. 8.03(g).
4.13 Prior Bank review and approval of bidding documents, bid evaluationsand recommendationsfor contract awards would be required for all contractssubject to ICB under the four subprojects (transport,solid waste, market and urban management).The Bank, through its supervision missions,would review, ex-post and on a sample basis, all other contracts not subject to ICB. - 22 -
4.14 Bank review and approval would be required for the final design of the followingsubproject components: (a) Cono Norte; (b) Cono Sur; (c) Central Area (all components);(d) about 5 km of each of the low income area paving and rehabilitationand deferred maintenancecomponents; (e) transfer stations and landfills;and (f) market. These arrangements were confirmed during negotiations(para. 8403(h)).
4.15 Up to US$1.1 million, to cover final design, technical assistance and some equipment expenses incurred during 1984, would be financed retroactively. This arrangementwas confirmed during negotiations (para. 8.03(i)).
E. Disbursements
4.16 Disbursementcategories of the loan would be as follows:
(a) 100% of total expendituresfor consultant services and training for the municipal subprojects (US$16.9 million equivalent);
(b) 100% of total expendituresfor consultant services and training for the market subproject (US$1.5 million equivalent);
(c) 100% of foreign and 85% of local expendituresfor equipment and supplies for the municipal subprojects (US$7.0 million equivalent);
(d) 100% of foreign and 85% of local expendituresfor equipmentfor the market subproject (US$0.9 million equivalent);
(e) 60% of total expendituresfor civil works of the municipal subprojectsup to a disbursementof US$16.0 million equivalent and 31% of remaining expendituresup to a maximum accumulated aggregate disbursementof US$23.0 million equivalent;
(f) Project management costs (incrementalsalaries) of the municipal subprojects:(i) 100% up to a maximum accumulatedaggregate of US$0.9 million equivalent; (ii) 60% up to a maximum accumulated aggregate of US$ 1.0 million equivalent;and (iii) 20% up to a maximum accumulatedaggregate of US$1.1 million equivalent;
(g) 84% of total expendituresfor civil works under the market subproject (US$11.5 million equivalent);
(h) Front-end fee of US$0.2 million equivalent;
(i) PPF of US$1 million equivalent;
(j) Initial deposit into the Special Account for the municipal subprojects (US$4.5 million equivalent);
(k) Initial deposit into the Special Account for the market subproject (US$3.5 million equivalent); - 23 -
(1) Interest and other charges during constructionof the market subproject (up to US$2.7 million equivalentaccrued through March 1987);
(m) Unallocated for municipal subprojects (US$6.5 million equivalent);and
(n) Unallocatedfor market subproject (US$2.2 million equivalent).
4.17 Disbursementswould be made against standard documentationexcept for contracts of local purchases of materials and equipment for which disbursementswould be made against statements of expenditure. Documentationfor these expenditureswould not be submitted to the Bank, but would be retained by MLM and EMM4SAfor periodic review by Bank staff. The estimated schedule of disbursements,shown in Annex 4, is based on the anticipatedinvestment schedule,allowing a six-month lag for the processing of withdrawal applications. The period of disbursementswould be 7-1/2 years. The loan closing date would be December 31, 1991.
4.18 The proposed 7-1/2-year disbursementperiod is slightly shorter than the average historical profiles for projects in Peru (9 years) and urban projects in the region (8 years). The 7-1/2-year period is, however, considered realistic for the following reasons:
(a) The Bank has been involved in the proposed project since 1981 through its two PPF tranches which have helped to prepare the proposed project and to initiate project implementation;
(b) the proposed project is concentratedin one metropolitanarea, and the great majority of the subproject components (design and construction)are of a nature which have long been carried out successfullyby Peruvian agencies and design professionals. New, untried physical actions are not contemplated;
(c) most of the subproject componentswould be executed under contractingarrangements;
(d) a significant amount of technical assistance and training would be provided to ensure that experts in each technical and financial area were available to assist in project execution;and
(e) the proposed special accounts and working accounts would avoid delays in the disbursementof both foreign and local funds.
F. Accounts and Audits
4.19 INVERMET would be responsiblefor maintainingproject accounts for all components except the market. Accounts for the market would be prepared by EMMSA. The accounting systems in both INVERMET and EMMSA have served reasonablywell for the relatively modest level of operations undertaken to date by these entities, and both have consistentlyreceived unqualified audit reports. Since the operations of INVERMET and EMMSA would increase both in scale and in complexity,their accounting systems would be reviewed under the project (paras.3.23(c) and 3.16(a)). Audit of - 24 -
project accounts in MLM and EMMSA would be undertaken by independent auditors acceptable to the Bank, and would be submitted to the Bank no later than six months following the end of each fiscal year. The annual audit of EMMSA would include a review of the adequacy of the tariff structure in maintaining the proposed market on a financiallyviable basis including operations,maintenance and debt servicing. In addition,MLM would forward annual accounts on its overall operationsto enable the Bank to review the impact of revenue measures to be implementedduring the project period. The special and working accounts funded by the Bank and by the Governmentrespectively, as well as the statements of expenditure, would also be audited by independentauditors acceptable to the Bank. These arrangementswere confirmedat negotiations (para. 8.03(j)).
V. PROJECT IMPLEMENTATION
A. InstitutionalArrangements
5.01 The borrower would be the Government of Peru. The executing agencies would be MLM for all municipal subprojectsand EMMSA for the wholesale market subproject. Two draft subsidiary agreementsbetween the borrower and MLM, and the borrower and EMMSA, were presented during negotiations. Signing of final versions of these agreements would be a condition for loan effectiveness(para. 8.01(a)). The overall responsibilityfor project coordinationand control would lie with the Central Government through CMC, a special commission for this project, chaired by a representativeof the Ministry of Economy, Finance and Commerce (MEFC) and including representativesfrom MLM, the Public Credit Department of MEFC, MTC and the Ministry of Agriculture. During negotiations, agreement was reached that the Central Government would maintain CMC for these functions during the period of project execution (para. 8.03(k)). Under the coordinatingumbrella provided by C0C, responsibilityfor execution of the subprojectswould be divided between MLM with respect to the municipal subprojectsand EMMSA with respect to the wholesale market subproject. The details of responsibilitiesare shown in Annex 5.
5.02 Responsibilityfor execution of the four subprojectswould be divided as follows between (a) MLM acting through INVERMET and OMTUfor transport, through ESMLL for solid waste, and through its Oficina Metropolitana de Catastro (OMC), Direccion General de Rentas (DGR), Oficina del Plan de Desarrollo Metropolitano (OPDM), and Unidad de Presupuesto (UP) for urban management; and (b) EMMSA for the wholesale market. Subproject directors satisfactoryto the Bank have been appointed for the transport and the market subprojects. The appointment of a subproject director for the solid waste subproject would be a conditionfor effectiveness(para. 8.01(b)). Directors would also be named in OMTU and OPDM.
5.03 The office of CMP would have overall responsibilityfor coordinating the municipal subprojects, and its head would report to the Mayor of Lima through the Director Municipal. The most important activities of CMP would include: (a) determination of necessary corrective actions and ensuring that such actions were taken; (b) assembly of - 25 -
documentationinto regular coherent progress reports to CMC; and (c) identificationof supervisionand monitoring problems arising during implementation,and their possible solution. A Municipal Subprojects Coordinator,satisfactory to the Bank, has been appointed. All procurement activities for the municipal subprojectswould be the responsibilityof MLM acting through INVERMET.
5.04 For the urban transport subproject,responsibilities would be divided as follows: MLM through INVERMET would be responsiblefor the design, execution, supervisionand monitoringand ex-post evaluation of the civil works, road maintenanceequipment, and technical assistanceand training related to INVERMET. Implementationadvisors would be contracted by MLM through INVERMET. The advisors would be assigned to both INVERMET (two procurementspecialists, a road maintenancespecialist and a highway engineer)and OMTU (for traffic engineering,transport planning and public transport). Appointmentsof the implementationadvisors for INVERMET would constitutea condition for disbursementof the municipal subprojects (para. 8.02). MLM, through OMTU, would be responsiblefor the execution of studies, technicalassistance and training directed at OMTU, and for equipmentacquisition (excludingroad maintenance equipment). The Guardia Civil would appoint a project manager to coordinate,with OMTU, the use of police equipment and the carrying out of the traffic enforcement program. Also, an agreement would be reached by December 1984 between MLM and the Guardia Civil which would stipulate that the ownership of police equipment acquired in this project would remain with MLM and that such equipment would be used only for traffic control and safety activities in Lima. These arrangements with the Guardia Civil were confirmed during negotiations (para. 8.03(1)). A condition for loan effectiveness would be the establishementof OMTU by MLM, and the finalization of its general operatingguidelines (para. 8.01(c)).
5.05 The approach to road maintenance would be in two stages. First, for approximately the first two years of the project, maintenance would continue to be performed, as at present, by the districtsand by NTC. INVERMET would, therefore, develop a "short-term"plan for improving maintenance activities and skills by using consultant experts prior to and in the early months of the project. This approach would allow INVERMETto begin to resolve the urgent problems of road maintenance both by implementation of remedial measures and by advising MTC and the districts on procedures. Second, and in parallel, a maintenance study is proposed which, when completed, would contain recommended actions for the organiza- tion of maintenance activities in the metropolitan area (para. 3.11(c)).
5.06 For the solid waste subproject, ESMLLwould have responsibility for planning, design, execution, supervision, and monitoring and ex-post evaluation.
5.07 For the urban management subproject, four municipal offices - OMC, DGR, OPDM, and UP - would be responsible for planning, execution, supervision, and monitoring and ex-post evaluation. OPDMwould support, and work closely with, OMTUin the planning study of the Lima Metropolitan - 26 -
Area. The policy framework for the study would be set through a Steering Committee made up of representativesfrom: MLM; the Ministries of Trans- port, Economy, Finance and Commerce, Interior and Agriculture;the Province of Callao; ENATRU (the state-owned bus company) and private bus operators; thus it would be ensured that all related interests are properly representedand guidance would be provided to MLM for the preparationof the Lima developmentplan. The Steering Committeewould be considered as a "working committee" of CMC and would be ultimately responsibleto CMC for the successful completion of the study. The establishmentof this committee by the Central Government,by December 1984, was agreed during loan negotiations(para. 8.03(m)).
5.08 MLM is aware of the need to bring communityand neighborhood groups into the process of project implementationso that the entire project would receive widespread support. MJM, through CMC, would report regularly to the Bank on progress with community participationthroughout the period of project execution. Existing mechanisms (especiallythe Municipal CoordinationAssembly) would be used to disseminateproject informationand to receive community input. This reportingarrangement was confirmed during negotiations(para. 8.03(n)).
5.09 For the wholesale market subproject,EMMSA would be responsible for design, execution, supervision, and for monitoring and ex-post evaluation.
B. Status of Project Preparation
5.10 For civil works in the transportsubproject, preliminary engineering designs have been prepared. MLM, through INVERMET, has also completed the final engineeringdesign for the paving and the road rehabilitationand deferred maintenanceprograms for the first year of project implementation. For the market subproject,preliminary engineering designs for the whole subproject and final designs covering the first year of project implementationhave been prepared. EMMSA is presently in the process of consultant selection for the remainingfinal design works. Design criteria have been set for landfills and transfer stations in the solid waste subproject, and MLM has begun the process of consultant selection for the final design of these facilities. For all technical assistance,training and studies, outline terms of referencehave been prepared and, for about half of the total, detailed terms of referencehave been developed.
C. ImplementationSchedule
5.11 Project implementationis estimated to take seven years beginning in mid-1984. The schedule for implementation(physical indicators) of each subproject componentis shown in Annex 6. This schedule has been prepared consistentwith the most efficientuse of resourcesand in accordance with the necessary coordinationof activities. - 27 -
D. Monitoring and Evaluation
5.12 MLM and EMNSA, through the relevant executingoffices under the guidance of CMC, would undertake monitoring and evaluation programs for the project. The monitoring programs would identify the physical, institutionaland financial status of the subproject components. The aim is to identify implementationproblems and the extent of deviationfrom proposed targets and, thus, to provide the basis for MLM and EMMSA, in consultationwith the Bank, to reduce implementationproblems and to update project costs and schedules. The monitoring would be achieved through the preparationof quarterly reports, which would detail disbursementprogress and, by comparison with plans, demonstratephysical (Annex 6) and institutional(Annex 7) progress. Ongoing and ex-post evaluationprograms would be developed to assess the effectivenessof the subprojectsin achieving the type and scale of anticipatedbenefits and to assess the need for modifications(Annex 8).
VI. FINANCIAL ANALYSIS
A. MetropolitanFinances: An Overview
6.01 In recent years, growth in operating revenues has failed to keep pace with population growth and inflation, and total real per capita expendituresby MLM have fallen about 30% since 1981. To reverse this trend and to prepare MLM for future responsibilities,a policy of strengtheninglocal fiscal authority in order to further reduce MLM's reliance upon central financial support is vital. MLM and the Government need to agree on the principles and steps required to implementsuch a policy, but, for the near term, it was agreed that it would be necessary for municipal revenues to increase such that: (a) no financing would be required from the Central Government for the Municipality'srecurrent expendituresin excess of 1984 transfers, in real terms; and (b) INVERMET's funds would be sufficient,without any allocationsin the Central Government'sbudget, to cover any increase in the Municipality'sinvestment program and the debt service requirements.
B. Action Program
6.02 To meet these objectives,MLM has proposed an extensive review of revenue administration;consultant advisory services are being contracted to establish a fiscal cadaster and help to implementbetterment taxation. The property tax currently generatesabout US$1.50 per capita per year and finances about 20% of the total annual operatingbudget of MLM. This is significantlyless than for most cities which administer a property tax. The existing cadaster is incompleteand reflects only a small portion of the considerabledevelopment which has taken place in the MetropolitanArea over the last decade. Moreover, because of the present system of self-assessmentand ineffectivefollowup, the existing cadaster is seriouslyundervalued, and evasion is pervasive. Significantadditional revenues should thereforeaccrue from an expanded cadaster and from administrativeimprovements in billing and enforcement. At existing budgetary levels, the potential for importantfinancial savings is limited. Personnel costs now represent about 55% of recurrent expenditures as compared to 80% in 1981. However, staff productivityis low. Technical - 28 -
assistance included in the project would help MLM to identify measures to strengthen financial planning and budgetary control in order to ensure that additional revenues could be earmarked for expansion and upgrading of services. The consolidated metropolitan budget is summarized in Annex 9.
6.03 Solid waste management is administered by ESMLLand by individual districts (para. 2.10). Because basic corporate systems, including accounting and financial reporting, are not yet established, and because of the modest size of the solid waste subproject, a full institutional financial analysis has not been undertaken. Service charges for solid waste management are based on property values, but, in a number of districts,are collectedas a surcharge on electricity tariffs. Some improvementhas taken place in recovery of service costs in recent years. In 1981, service charges for solid waste management represented 15% of total revenues and financed about 27% of estimated service costs. For 1983, solid waste revenues representedabout 31% of total revenues for the MetropolitanArea. However, service standards and efficienciesvary widely among districts,as do operatingdeficits. Following the review of service financing included in the proposed project, further improvementsare anticipatedto bring charges more directly in line with service costs. These would be determined on the basis of improved service costing systems to be installed in ESMLL and the districts through the project. Assurances were received at negotiationsthat a review of the financial performanceof ESMLL and of solid waste activities of all districts would be completed and presented to the Bank by December 1984, that recommendations and a timetable for strengthening the operational efficiency and self-financing capacity of ESMLL would be presented to the Bank for review by December 1985, and that they would be carried out (para. 8.03(o)). The review of service financingwould cover operatingcost structures,investment requirementsand capacity to service debt; the extent of cost recovery and proposed tariff structures,taking account of cross subsidies and affordabilities;budgetary support; financial planning, budgeting,internal control and auditing. MLM confirmedat negotiationsthat, in the interim, service charges in 17 districts,which are levied with electricitytariffs, have recently been increased by 25%. Also, collectioncharges by MLM to the separate city districtsfor use of the existing solid waste transfer station would be enforced more strongly. In order to demonstrate that ESMLL and the districtshave adequate funds for project implementation pending completion of this review, agreementwas reached at negotiations that MLM would submit to the Bank for review, by March 30 of each year, draft solid waste budgets for ESMLL and for each district for that year which demonstratethat service charges are increasinglycapable of recoveringat least recurrent service costs (para. 8.03(o)). In addition, assurances were received at negotiationsthat no additional investment in excess of US$200,000 equivalent in any one fiscal year would be undertaken during the project implementationperiod by ESMLL without prior consultationwith the Bank (para. 8.03(o)).
6.04 Finally, MLM would prepare, jointly with the Government,an assessment of measures to improve municipal financial autonomy, and would present it to the Bank for review and comment by December 1984. A plan of action and a consolidatedtimetable for achieving financial autonomy would be formulated,endorsed by the Government,and presented to the Bank by December 1985, and MLM would carry out this plan of action. These arrangementswere confirmed at negotiations(para. 8.03(p)). Several - 29 -
actions are already under way and oriented toward maximizing management of resources currently available to MLM, primarily through administrative improvements in billing and collection procedures of principal local taxes. In addition, efforts to collect delinquent taxes are also expected to result in increases in property tax receipts. Significant increases are also planned in the rental fees for retail markets and in parking charges and street vendors fees. It is also proposed to eliminate some exemptions from the tax on unoccupied land.
C. Fondo Metropolitano de Inversiones (INVERMET)
6.05 Established in 1979 as a trust fund of MLMto finance urban infrastructure improvements, INVERMEThas, to date, been financed primarily by transfers of national gasoline tax revenues. Comparative financial statements for 1981 and 1982 (Annex 10) illustrate that INVERMET's finances have been characterized by a high degree of liquidity and substantial investments in short-term financial assets. As its contracting capacity increased, its financial assets were reduced, as a proportion of total investments, from over 80% in 1980 to about 23% in 1982. INVERMET's receipts of gasoline taxes reached about US$7.0 million p.a. in 1982. The assumption of modest increases in gasoline consumption, and of stable international gasoline prices, provides the basis for the projected revenue flows for INVERMETillustrated in Annex 11. These establish INVERMET's capacity to provide the counterpart funding required under the project and to support a modest program of additional capital investments.
D. Empresa de Mercados Mayoristas S.A. (EMMSA)
(i) Financial Performance on Existing Operations
6.06 Established in 1979 under the Ministry of Agriculture to foster the development of wholesale markets throughout Peru, EMMSA's activities as a market operator have been concentrated in Lima although it has not owned facilities. Comparative income statements and balance sheets for the financial years 1981 and 1982 are shown in Annex 12. Although operating revenues increased rapidly during the first three years of operations, increasing operating costs resulted in narrow operating margins of 2.4% in 1981 and 0.5% in 1982.
6.07 No significant change is foreseen in EMMSA's financial performance prior to the opening of the new market at the end of 1986. EMMSA would not be able to raise concession charges to market users before the new market opens because they are bound by current contracts. These charges were quadrupled in recent years; however, increases in other charges are not anticipated in view of the poor condition of the facilities. Monitoring would therefore concentrate on ensuring that EMMSA would continue at least to break even, so that, when existing operations close down, all liabilities can be fully discharged. EMMSAwould therefore be unable, except for the possible sale or lease of the surplus land (para. 4.09), to provide counterpart cash flows to meet project capital outlays or interest during construction (Annex 13), which must therefore be financed from other sources (paras. 4.07 and 4.09). Ownership of new facilities would be vested with EMMSA. - 30 -
(ii) Proposed Market
6.08 The projected revenue statements, cash flows and balance sheets (Annex 13) refer to EMMSA's operations as a whole and demonstrate its financial viability. Since the new market would dominate EMMSA's operations through the late 1980s, financial forecasts for the new market alone would not be significantly different, and have therefore not been prepared. 6.09 The pricing policy under which tariffs would be increased by up to 115% in real terms by 1989 has been designed to ensure that there are adequate resources to service the very large loan financing on this subproject. Agreement was therefore reached at negotiations that EMMSA would not incur any debt unless a reasonable forecast of estimated net revenue would be at least 1.1 times the estimated debt service requirements for the current fiscal year. In addition, and in order to ensure economic efficiency in the operation of the market, agreement was also reached at negotiations that EIMMSAwould earn an annual return of not less than 8% on average current net value of EMMSA'sfixed assets in operation by 1989 and, for each subsequent fiscal year, a return of not less than 12%. To this end, EMMSAwould charge tariffs which would provide a 6% return from opening of the market for the first two years of market operations. Agreement was reached during negotiations that MLM,in coordination with EIMSA, would close the existing markets for wholesale market activities by December 1986 and that MLMwould present to the Bank, for review and comments, its plans for the use of the existing markets by October 1985 (para. 8.03(q)).
6.10 Although periodic rehabilitation of on-site roads and parking areas of the new market would not be required until the mid-1990s, adequate financial provision should be made well before then. Agreement was reached at negotiations that, by December 1987, EMMSAwould determine the required expenditures on major periodic maintenance for the new market up to the year 2000 and, commencing in January 1988, establish a reserve fund financed by annual contributions, which, together with interest accumulating at current domestic interest rates, would be adequate to finance projected expenditures on the basis of annual reassessments (para. 8.03(q)). Projections indicate that a further additional tariff increase of 20% would be required in 1990, when repayment of principal on the Bank loan falls due, in order to sustain these requirements. 6.11 Because of the sensitivity of EMM(;A'sprojected financial performance to debt-servicing obligations, agreement was obtained at negotiations that EMMSAwould not undertake additional capital investments in excess of US$1 million without prior consultation with the Bank during the period of project execution (para. 8.03(q)). (iii) Financial Management 6.12 In view of the considerable increase in EMMSA'spresent operating budget represented by the market and the need to maintain sound financial performance, it will be particularly important to maintain effective management accounting systems. To enable EMMSAto deal fully with the increased complexity of financial decisions during project implementation - 31 -
and to give prominence to financialpolicies during operation, a suitably qualified financial executivewould be appointed by March 1985. This appointmentwas confirmed during negotiations(para. 8.03(q)).
6.13 Cost Recovery. All investment costs, including land at its current value, would be recovered through service charges.
6.14 Affordability. An analysis of the present cost structure of wholesalers and retailers indicates that considerablylower operating costs would result at the new market, primarily from reduced security expenses, porterage, and significantlyreduced wastage and losses. The out-of-pocket savings of truckers resulting from reduced waiting times are expected to cover about 75% of increased toll charges. However, the difference could easily be absorbed by the wholesalers/retailersif passed on to them.
VII. ECONOMIC AND SOCIAL ANALYSIS
A. Economic Justification
7.01 Considerableeffort has been made to keep the size of the project to a minimum. During preappraisal,the Government and Bank staff agreed to reduce the level of project costs by more than US$100 million through (a) rigorous economic analysis of alternatives; (b) reductionin design standards to minimum necessary levels; and (c) leaving, to the extent possible, investmentsin commercial facilitieswithin the market to the private sector and the financing of buses to suppliers.
7.02 The project would have a substantialinfluence upon the efficiency of Lima's economy in two ways: first, an improvementin urban infrastructureand in public services; and second, an impact on the metropolitanand, hence, on the national economy through improved metropolitanplanning and coordination.
7.03 Where feasible, cost-benefitanalysis was used to evaluate the subproject components,and 78% of project costs were thus covered. Key assumptionsused in the economic analysis are provided in Annex 14.
7.04 All transport subproject components gave benefits in terms of higher travel speeds, which yielded savings in vehicle operating costs and passenger time. In the Cono Norte scheme, accident savings were also considered. Since nearly all the quantifiablebenefits of the transport schemes depended on higher travel speeds, detailed measurementswere made of existing traffic speeds and of derived speed-flow curves on the basis of field surveys. The influence of road surface conditions on the speed-flow characteristicsof different classes of roads was particularlyemphasized.
7.05 The solid waste transfer stations and vehicles would reduce transport costs by transferringloads from small collection trucks to large trucks at strategicpoints so that long hauls to landfills or dumps could be made as cheaply as possible. Since the transfer stations would meet only part of the city's need for more transfer capacity, they would be used only by those collection vehicles which offered the greatest savings. - 32 -
7.06 The evaluationof the market project required, first, considerationof alternativesolutions to the proposed market at Santa Anita and, second, an evaluationof the Santa Anita proposal against the "without project" alternative.
7.07 The analysis showed that the location of Santa Anita for the new market was justified. In the long term, however, there could be a case for developinga second, and possibly a third, market, rather than expanding Santa Anita, in order to save transport costs and to reduce market- generated traffic.
7.08 The benefits of the market at Santa Anita arise from the release of the valuable site at La Victoria, lower handling costs and reduced wastage and from savings in waiting time by suppliers and retailers.
7.09 As shown in Annex 15, all subprojectcomponents which can be quantified are strongly justified. The overall rate of return is about 70%, which demonstratesthe highly cost-effectivenature of the proposed project investments. Furthermore,the nature of some of the benefits, i.e., reduced fuel usage and reduced operating costs, should have a direct and favorable effect on Peru's balance of payments.
7.10 Four sensitivitytests were made, the results of which are shown in Annex 16. In one test, shadow pricing was introduced. Three other tests were made to reflect investmentrisks. First, the possible constructionof a mass transit line along the Cono Norte-Cono Sur Corridor was roughly simulated. Second, all subprojectcomponents were subjected to a delay of one year during construction. Third, a delay of three years during constructionand an associatedincrease of 25% in capital costs were postulated. In no case did the IRR fall below 23%. It was therefore concluded that all the subprojectcomponents were robust in their economic justification.
B. Distributionof Project Benefits
7.11 About 54% of the populationof the Lima MetropolitanRegion is absolutelypoor (earning less than US$167 per month in 1981 prices) and 62% is relativelypoor (with US$225 per month). The levels of poverty have been calculatedby zone in order to assess the impact of the project.
7.12 The heaviest concentrationsof the poor are in the Cono Norte and Cono Sur; many others live near the city center or work there. The proposed transport subprojectwhich would be confined to bus routes would be largely located in these areas. The road paving program would be confined to low income areas. The road rehabilitationand maintenance programs would help buses on many routes but would obviouslybe of benefit to other traffic also. The area traffic control system covers the inner and central area, which is the focus of the bus network and the main source of employment for the poor. - 33 -
7.13 Through the provision of maintenanceequipment, transfer and landfill systems, as well as improved management procedures,in the solid waste subproject,the efficiencyand effectivenessof vehicle and labor resources are expected to be markedly improved, thereby allowing services to be extended, especially in the poor districtswhere present standards are very low. The market subproject should eliminate a severe environmentaland social problem in the poor central district of La Victoria and should lead to cheaper and better food for the whole population.
7.14 The poverty indices, representingthe percentagesof project costs and benefits attributableto the poor, are shown in Annex 17. About 56% of project costs (excludingthose items that could not be evaluated) and 53% of the benefits are attributed to the relatively poor. The market would benefit some two-thirds of the low-incomepopulation of the MetropolitanArea.
C. EnvironmentalImpact
7.15 Although environmentalimprovement is not its prime objective, this project would have an important impact on the environment. Lima is currentlyan unusually dirty city because of very inadequate street cleaning and refuse collection. The solid waste subprojectwould produce an important improvementin the environment,and the market subproject would eliminate one of the worst environmentalproblems in the city by removing all wholesale market facilitiesand associated traffic from a densely populated residentialarea.
7.16 The paving of roads in pueblos jovenes would immediatelychange their appearanceand improve their cleanliness. All of the subproject com- ponents should have beneficial effects upon health. The other transport components- dealing with Cono Norte, Cono Sur and Alfonso Ugarte - should bring better order and less congestion to these parts of the city, and the road rehabilitationprogram should make it easier to keep the streets clean.
D. Project Risks
7.17 There are four potential risks associatedwith the project: difficultyin generating local counterpartfunds; difficulty in recruiting and maintainingadequate professionalstaff; problems associated with the bilateral nature (CentralGovernment and MLM) of the project; and possible implementationdelays. The project content and institutionalarrangements have been designed to reduce these risks to the lowest possible level. Local funding is based heavily on an earmarked source (gas tax revenues from INVERMET) and depends on general revenues from the Central Government only to a very limited extent (US$19.4 million over 7-1/2 years). Bank loan disbursementshave been front-loadedto minimize possible financing required from Central Government during the initial years of implementation when counterpartresource constraintswould continue to be severe. The risk related to adequate staff has been mitigated by assigning loan proceeds to finance a substantialamount of technicalassistance and training. For the largest subproject,transport, the contractingof expert advisors would ensure adequate technical support, even if local staff were not to develop as rapidly as expected. - 34 -
7.18 The bilateral nature of project responsibilityis advantageousin meeting the key institutionalobjective of strengtheningthe Municipal Government. Risks have been minimized by the establishmentof CMC as the overall coordinatingbody. Finally, by minimizing these risks, and by concentratingon physical projects of a relativelysimple nature, the proposed implementationschedule of seven years should be readily achievable.
VIII. AGREEEMENTSREACHED AND RECOMMENDATION1/
8.01 The followingwould be conditionsfor loan effectiveness:
(a) Signing of two subsidiaryagreements between the borrower and MLM and the borrower and EMMSA (SAR para. 5.01 and Section 6.01(a) and (b) of LA);
(b) Appointment of a subproject director for the solid waste subproject (SAR para. 5.02 and Section 6.01(d) of LA); and
(c) Establishment of OMTU, and the finalizationof its general operating guidelines (SAR para. 5.04 and Section 6.01(c) of LA).
8.02 The followingwould be a condition for disbursementof the municipal subprojects:
Appointment of INVERMET implementationadvisors (SAR para. 5.04 and Schedule 1, para. 4(b) of LA).
8.03 The following assuranceswere obtained and agreements reached during negotiations:
(a) The Governmentand MLM to inform the Bank of any proposal to undertake transport investmentsin the Lima Metropolitanarea in excess of US$10 million during the project implementationperiod; provide informationon the impact of such investment on the Bank project; and give the Bank an adequate opportunityto comment on the proposed investment;and the Government to agree not to execute any transportinvestment that would adverselyaffect the urban transport subproject (SAR para. 2.24 and Sections 4.02 and 5.01(g) of LA);
(b) Proposed road maintenanceprogram, covering its institutional framework, budget requirementsand proposed financing, to be presented by MLM for review and comment by December 1985 (SAR para. 3.11(c) and Section 2.08(a) of MLM PA);
1/ References are to the relevant sections of the Staff Appraisal Report (SAR), the Draft Loan Agreement (LA), the MLI Draft Project Agreement (MLM PA), and the EMMSA Draft Project Agreement (EMMSA PA). - 35 -
(c) MYLM to obtain the ownership of the land for new transfer station by December 1984 (SAR para. 3.19 and Section 2.10 of M1M PA);
(d) Proceeds of the Bank loan related to municipal subprojects to be passed on to MLM as a grant and proceeds of the Bank loan related to the market to be onlent by the Central Government to EMMSA at the Bank's interest rate repayable in 17 years with six years grace (SAR para. 4.08 and Section 3.01(b) and (c) of LA);
(e) MLM to contrLoute, from INVER21ET funds, duri±igthe years 1984 to 1990, toward the municipal subprojects, up to US$4.0 million equivalent per year to a total of US$20.2 million, and the Central Government to finance the remainder. In addition, if the suppliers credits are not forthcoming and if EMMSA is unable to provide counterpart financing, the Central Government would also provide financing in the amounts required (SAR paras. 4.09 and 4.10 and Sections 3.01(a) and (b) of LA, Section 2.01(a) of MLM PA and Section 2.01(a) of EMMSA PA);
(f) Two Special Accounts, one for the municipal and one for the market subprojects, together with the working accounts, to be established and the Bank initial deposits in these special accounts not to be made until MLM's and EMMSA's advances in the working accounts were made (SAR para. 4.11 and Section 2.02(d) and (e) and Schedule 5 of LA, Section 2.01(b) of MLM PA and Section 2.01(c) of EMMSA PA);
(g) Up to US$35.7 million in small civil works contracts and up to US$2.6 million in small equipment contracts to be procured through local competitive bidding and up to US$500,000 through local purchase. All consultants to be financed under the loan to be hired in accordance with Bank guidelines under terms and conditions acceptable to the Bank. (SAR paras. 4.12, Schedule 4, C of LA and Sections 2.02 of MLM and EMMSA PA);
(h) Bank review and approval to be required for the final design of specified subproject components (SAR para. 4.14, Section 2.08(b) MLM PA and Section 2.09 of EMMSA PA);
(i) Up to US$1.1 million, to cover final design, technical assistance and some equipment expenses incurred during 1984, to be financed retroactively (SAR para. 4.15 and Schedule 1, 4(a) of LA);
(j) M1M, INVERMET and EMMSA to maintain appropriate accounting systems and submit yearly external audits to the Bank no later than six months following the end of each fiscal year. The special and working accounts and statements of expenditure would also be audited. All auditors would have to be acceptable to the Bank (SAR para. 4.19, Section 4.03 of LA, Sections 2.05, 4.01 and 4.02 of MLM PA and Sections 2.05, 4.01 and 4.02 of EMMSA PA);
(k) The Central Government to maintain CMC for overall project coordination and control during the period of project execution (SAR para. 5.01 and Section 3.01(e) of LA); - 36 -
(1) Guardia Civil to appoint a project manager, and the equipment to remain in the ownership of MLMand be used only for control of traffic and safety activities in Lima (SAR para. 5.04 and Section 2.11 of MLM PA);
(m) Formation of a Steering Committee by December 1984 including representationfrom the Province of Callao to provide guidance to MLM for the preparation of the Lima developmentplan (SAR para. 5.07 and Section 3.02 of LA);
(n) MLM, through CMC, to report to the Bank on a regular basis concerning community involvementin project implementation (SAR para. 5.08 and Section 2.05(b) of MLM PA);
(o) MLM to prepare (i) review of financial performance of ESMLL and solid waste activities of municipal districts and present to the Bank by December 1984; and (ii) recommendationsand timetablefor strengtheningESMLL's operationalefficiency and self-financing capacity by December 1985 and that they would be carried out; MLM to present to the Bank, for review, the investment program including solid waste budgets for ESMLL and for each district by March 30 of each year which demonstratethat service charges are increasinglycapable of recoveringat least recurrent service costs; and ESMLL not to undertake additional investments during project implementationperiod in excess of US$200,000 in anyone fiscal year without prior consultationwith the Bank (SAR para. 6.03 and Sections 2.08(d) and (e) and 2.09 and Section 4.03(a) of MLN PA);
(p) MLI to prepare an assessment of measures proposed to improve municipal financial autonomy and furnish it to the Bank by December 1984 as well as a plan of action and timetable to achieve financial autonomy, endorsed by the Govenment, furnished to the Bank by December 1985 and MLM to carry out this plan of action (SAR para. 6.04 and Sections 2.08(f) and 2.09 of MLM PA) and MLM to undertake a review of the existing financial planning and management system and furnish the results to the Bank by December 1986 (SAR para. 3.23(c) and Section 2.08(g) of MLM PA);
(q) (i) EMMSA not to incur any debt unless a resonable forecast of estimated net revenues would be at least 1.1 times the estimated debt service requirementsfor the current fiscal year and to earn an annual return of not less than 8% on average current net value of EMMSA's fixed assets in operation by 1989 and for each subsequent fiscal year a return of not less than 12% (SAR para. 6.09 and Sections 4.03(a) and 4.06 of EMMSA PA); (ii) MLM, in coordinationwith EMMSA, to close the existing markets for wholesale market activitiez by December 1986 (SAR para. 6.09, Section 2.12 of MLM PA and 2.10 of EMMSA PA); (iii) MLM to present to the Bank for review and comment, by October 1985, its plans for the use of the existing markets (SAR para. 6.09 and Sections 2.08(c) of MLM PA); (iv) EMMSA to present to the Bank, - 37 -
for review and comment, the estimates of required major periodic maintenanceexpenditures, particularly for on-site roads and parking at the new market, up to the year 2000, by December 1987 and, commencing in January 1988, to establish a reserve fund (SAR para. 6.10 and Section 4.04 of EMMSA PA); (v) EMMSA not to undertake additionalcapital investmentsin excess of US$1 million equivalentwithout prior consultationwith the Bank (SAR para. 6.11 and Section 4.05 of EMMSA PA); and (vi) EMMSA to hire, by March 1985, a suitably qualifiedfinancial executive (SAR para. 6.12 and Section 2.01(b) (ii) of EMMSA PA).
8.04 Siubjectto the above, the project would be suitable for a Bank loan of US$82.5 million.
May 29, 1984
_ 38 - AN1Ex I
Organization Chart of the Municipality of Metropolitan Limo
~ - C~-~ C~C3 _ _ CCC CC'-1C'f
| ; | < t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~WC .CfC,.-CC,I|
r#-I--_7C f S 7=7
- 39 - A X2
PERU LIMA METROPOLITANDEVELOPMENT PROJECT Detailed Cost Table (Us$'0OO)
1984 1985 1986 1987 1988 1989 1990 !Q1Q SEMI SEM2 SEMi SEM2 SEf1 SE SEHMi I SE 2 sEnM I SEM2 SEM1 SEMI SEM1 SEMI SEM1 TOTAL.OR FHR SUBPROJECTCOMPONENT' URBANTRANSPORT DESIGN 241 42? 139 360 196 0 0 0 6 80 107 0 0 0 0 1556 77B 5n SUPERVISION 0 59 110 111 284 508 469 341 17-7 107 78 96 166 118 0 2634 1317 50 SCIVIL ORKS 0 13P3 2075 1074 4239 7155 6566 6136 3498 -70 1329 1568 2800 3011 578 43208 20840 48 PHYSICALCONTINGENCIES 0 2?1 349 382 ?08 1149 1055 972 552 159 227 250 445 469 97 7074 3412 42 TECH.ASSISTANCE 243 780 118B 1210 501 328 328 306 306 306 98 90 98 170 168 6120 4590 75 EQUIPMENT 0 123 946 1328 0 2508 450 450 400 510 0 0 I 9 0 6715 £044 90 PRICECONTINGENCIES 0 45 255 516 873 2237 2084 2347 1679 817 848 1032 1967 2284 545 17528 9815 56 TOTAL 484 3023 5061 5981 6801 13885 10952 10551 6618 2848 2687 3035 5476 6052 1378 84834 46796 55 P.P+F. 1ooo 1000 1000 100 TOTAL-U.T. 484 4023 5061 5981 6801 13885 10952 10551 6618 2848 2687 3035 5476 6052 1378 85834 A7796 MARKET DESIGN 266 508 774 387 5;0 :.u"REi5Psl 178 176 294 206 854 427 50 CML WORKS 3051 6279 4664 1544 15538 7155 46 WORKINGCAPITAL 172 172 0 0 PHYSICALCONTINGENCIES 0 76 484 968 726 245 0 0 0 0 0 0 0 0 0 2500 1157 46 SUB-TOTAL 266 584 3713 7423 5856 1995 0 0 0 0 0 0 0 0 0 19838 9126 46 STUDIES 133 266 133 532 399 75 EQUIP,I MATERIALS 345 690 1035 932 90 PRICECONTINGENCIES 0 14 189 680 831 328 0 0 0 0 0 0 0 0 0 2042 1123 55 LAND 5800 5800 0 0 TOTAL 6066 732 4168 8581 ?377 2323 0 0 0 0 0 0 0 0 0 29247 11579 SOLIDWASTE DESIGN 0 0 60 0 0 0 0 0 0 0 0 0 0 3 0 60 30 50 SUPERVISION 28 32 60 30 50 CIVILWORKS 640 644 1284 642 50 PHYSICALCONTINGENCIES 0 0 9 IO0 101 0 0 0 0 0 0 0 0 0 0 211 105 50 SUB-TOTAL 0 0 69 768 777 0 0 0 O 0 0 0 0 0 0 1615 807 50 EQUIPMENT 2562 2562 5124 4612 90 TECHNICALASSISTANCE 361 352 352 352 352 352 352 352 2825 2119 75 PRICECONTINGENCIES 0 44 158 106 166 68 83 101 0 0 0 0 0 0 0 725 522 72 TOTAL 361 2958 3141 1226 12?6 420 435 453 0 0 0 0 0 0 0 10289 0060 URBANMANAGEMENT TECHNICALASSISTANCE 276 1140 1140 1063 932 186 150 114 75 36 5112 3578 70 PRICECONTINGENCIES 0 4 60 108 157 179 44 43 39 30 17 0 0 0 0 680 476 70 TOTAL 0 280 1200 1248 1220 1111 230 193 153 05 53 0 0 0 0 5792 405t PROJECTMANAGEMENT INCREMENTALSTAFF 62 120 120 120 120 120 120 120 120 120 84 74 1300 650 50 PRICECONTINGENCIES 0 1 6 11 18 23 28 34 41 48 55 43 41 0 0 351 175 50 TOTAL 0 63 126 131 138 143 148 154 161 168 175 127 115 0 0 1651 825
TOTALPROJECT COSTS 6911 8056 1369817167 16831 17882 11765 11351 6932 3122 2915 3163 5591 6052 1378 132812 72315 54
INTERESTONCONSTRUCTION -BANK 74 400 430 800 951 2655 2655 100 -OTHER 25 46 82 82 235 0 0 FRONTEND FEE 206 206 206 100 TOTALFINANCING REGD. 6911 8336 14123 17643 17713 18915 11765 11351 6932 3122 2915 3163 5591 6052 1378 135908 ?5176 55
MEMORANDUMH: BASECOSTS 6911 7601 12187 14296 13251 13653 8471 7855 4621 2060 1768 1838 3138 3299 746 101703 55529 55 PHYSICALCONTING 0 347 842 1450 1535 1394 1055 972 552 159 227 250 445 469 87 9784 4674 48 PRICECONTING, 0 108 669 1421 2045 2835 2239 2524 1759 895 920 1075 2008 2284 545 2132612112 57 - 40 -
ANNEX 3
PERU LIMA METROPOLITAN DEVELOPMENT PROJECT Procurement Arrangements (US$ millions)
Procurement Method Project Element ICB LCB Other N.A. Total Cost
Civil Works 49.5 35.7 85.2 (27.2) (17.4) (44.6)
Equipment 11.8 2.6 14.4 ( 6.8) ( 2.2) ( 9.0)
Consultant Services 15.6 6.3 2.6 24.5 . (15.6) ( 6.3) (1.4) (23.3)
Other: 11.8 Project Management ( 5.6) 1.7 (1.7) Interest During Construction, 4.1 P.P.F and Front-end-fee ( 3.9) Land 5.8 ( 0.0) Working Capital 0.2 ( 0.0)
Totals 76.9 44.6 2.6 11.8 135.9 (49.6) (25.9) (1.4) ( 5.6) (82.5)
NOTE: Figures in parentheses are the respective amounts financed by the Bank loan. - 41 -
ANNEX 4
PERU LIMA METROPOLITANDEVELOPMENT PROJECT DisbursementSchedule (US$ millions)
INCREMENT CUMULATIVE CUMULATIVE SEMESTER ENDING VALUE VALUE %
Dec. 31, 1984 10.3* 10.3 12 June 30, 1985 6.4 16.7 20 Dec. 31, 1985 12.3 29.0 35 June 30, 1986 14.8 43.8 53 Dec. 31, 1986 13.6 57.4 70 June 30, 1987 8.9** 66.3 80 Dec. 31, 1987 4.2** 70.5 85 June 30, 1988 3.3** 73.8 89 Dec. 31, 1988 2.0** 75.8 92 June 30, 1989 1.0** 76.8 93 Dec. 31, 1989 1.0** 77.8 94 June 30, 1990 1.0** 78.8 96 Dec. 31, 1990 1.6** 80.4 97 June 30, 1991 1.7** 82.1 99 Dec. 31, 1991 0.4** 82.5 100
* This represents establishmentof special account to cover highest quarter of expendituresplus first semester transfersand retroactive financing.
** Only 76% of qualified expendituresare being reimbursed during last ten semesters to facilitate recovery of special account deposits. - 42 -
ANNEX5 Page 1
PERU LIMA METROPOLITANDEVELOPMENT PROJECT Details of the Management System
1. For each subproject,a series of steps must be taken to bring each of its components from functionaland final design (or final terms of reference for technical assistance,training, studies) through monitoring and evaluation. The steps, and their associated responsibilities, are identifiedbelow.
Overall
Preparation of Progress Reports
2. CMP and EMMSA would prepare comprehensiveand concise quarterly progress reports. CMC would review and approve the reports and would submit them to the Bank.
Market Subproject
3. EMMSA would be responsiblefor all activities. These include:
Step I - Procurement of works, equipment,technical assistance (including consultant services for design and supervision),training and studies.
Step 2 - Execution and Supervision.
Step 3 - Monitoring and Ongoing Evaluation.
Step 4 - Ex-Post Evaluation.
4. Step 1 includes elaboration of terms of reference (TOR) and requests for proposals and bid documents,advertisement, receipt of proposals or bids, evaluation of the proposals or bids, contract award, progress payments, and final approval of work.
5. Step 2 includes the design of works, the executionand supervision of works, equipmentacquisition, technical assistance, training, and studies. This work includes verifying that TOR and specificationsare being complied with, preparing quarterly progress reports, and ensuring that all contractedactivities are being performed within budget and are on schedule. - 43 -
ANNEX 5 Page 2
6. Step 3 includes monitoringthe physical, institutionaland financial progress of the subprojectwith the aim of identifying implementationproblems and updating costs, schedulesand targets as necessary. This would be achieved by comparingactual against planned performanceas demonstratedby key indicators. The indicators to be employed are:
Key indicators to demonstratephysical progress;
Key indicators to demonstrateinstitutional development.
This step also includes ongoing evaluation to provide data to identify any design or operationsamendments which may be necessary.
7. Step 4, Ex-Post Evaluation,would draw on the data collected by the ongoing evaluation to confirm the level of benefits achieved. The indicators to be used to meet these requirementsare:
Key Evaluation Indicators.
Solid Waste Subproject
8. ESMLL would be the executing office and INVERMET would handle procurement.
9. In Step 1 above (para. 3), ESMLL would be responsiblefor elaboration of TORs. INVERMETwould be responsible for resquests for proposals, elaboration of bid documents, advertisement, receipt of proposals or bids, evaluation of the bids, contract award, progress payments, and final approval of the work (with participationof ESMLL and CMC).
10. For Steps 2, 3 and 4 above (para. 3), ESNLL would be responsible.
Urban Management Subproject
11. OMC, DGR, OPDMand UP would be the executing offices and INVERMET would handle procurement.
12. In Step 1 above (para. 3), OMC, DGR, OPDM and UP would be responsible for elaboration of TORs. INVERMETwould be responsible for request for porposals, elaborationof bid documents, advertisement,receipt of proposals or bids, evaluation of the bids, contract award, progress payments, and final approval of the work (with participationof OMC, DGR, OPDM, UP and CMC).
13. For steps 2, 3, and 4 above (para. 3), CMP would be responsible. - 44 -
ANNEX 5 Page 3
Transport Subproject
14. INVERMET and OMTU would each be the executing offices with OMTU responsible for all studies (except for the road maintenancestudy), training, equipment acquisition (except for road maintenance equipment) and technical assistance for OMTU. INVERMET would be responsiblefor technical assistance to INVERMET, civil works, and for the road maintenance study and acquisition of road maintenance equipment. INVERMET would handle all procurement.
15. In Step 1 above (para. 3), OMTU would be responsiblefor elaboration of TORs for all studies (except for the road maintenance study), training, equipment acquisition (except for road maintenance equipment)and technicalassistance for OMTU, while INVERMET would be responsiblefor technical assistance to INVERMET, civil works, and for the road maintenancestudy and acquisition of road maintenanceequipment. INVERMET would also be responsiblefor request for proposals, elaboration of all bid documents, advertisement,receipt of proposals or bids, evaluation of the bids, contract award, progress payments and final approval of the work (with participationof OMTU in the four above-mentionedareas, and of CMC in all eight areas).
16. For Steps 2 and 3 above (para. 3), OMTU would be responsiblefor studies, training, equipmentacquisition, (except for road maintenance)and technical assistance for OMTU. INVERMET would be responsiblefor technical assistance to INVERMET, for works and for the street maintenancestudy and acquisitionof road maintenanceequipment.
17. For Step 4 above (para. 3), OMTU would be responsible,except that INVERMETwould be responsible for Ex-Post Evaluation of civil works and the road maintenance equipment.
18. The procurement arrangements as summarized in Section D of Chapter IV would be followed by EM[SA and INVERMET. - 45
PMR tAN= 6 LIM M TAT3N SlMEPR PBYfSICiLINODICA3tBS
Qaanti- 1984 1985 1986 1987 19B8 1989 1990 1991 ty 1 II I II I II I II I II I II I II I
ConwNorte Av. Tupac Anrtu/Caqueta 7.0 km Begin Caiplete Bidding Begin 50% 75% 100% Deeign Dasigp Ccratruct. Caoplete Corplete Corplete Av. Panamericana Norte 7.5 km Begin Complete Bidding 25% 75% 100% Dign Deaign Complete Complete Complete
Av. T. Msano 5.3 km Begin Ceplete Bidding Begin 50X 75% 100% Design Design Ccnstruct. Caeplete Cacplete Complete Av. Pachacutec 3.3 km Begin Design Bidding Begin 60% 100% Design Complete Construct. Ccrplete Corplete Central Area Av. A.Ugarte/Dof de Mayo 2.5 km Begin Creplete Begin 50% 75% 100% 103 in- Dign Design Bidoing Cornstruct. Conplete Complete Coaplete Area Traffic Con,trol tersecti8. Bidding Begin Begin 60% 100X 20% 50% 75% 100% System Final Dea. Coostruct. Civil WonkCivil Wonk Sigpals Signals Signals Signals Acceptance Traffic Management Begin Biddinrg 100% Design Begin Cons. Crplete lIncame Area Pasvig 100.0 km Begin Bidding/ 20 km 40 km 60 km 80 km 100km Design Begin Cns. Road Behahilitation and 50.0 km Deaign Bidding/ | 3 km 5 km 9 km 12hm 15 km 20 km 25km 30 km 35 km 40 km 43 km 47km 50 km Maintenance Cawilete Begin Can. Techniral Assistarc Gflj and INEYMM 408 m.m 17 n.m 34 n 34 64 34 4 n.m 34 m.m 34 m.m 34 n.m 34 m.m 34 m.m 34 n.m 34 m.n 17 m.m 17 m.m 17 m.m GuardisCivil 24 m.n Final TCR 2 m.m 10n.n .n 6 m.m Training To be on key es establi6bedhedile whe s is inalized
Studies Maintenance 60 m.m 50% 100% Caqplete Craplete Central Area 103 m.m InDestigs- Fist Draft 100% tion Comp.Ccaplete Caoplete fouipment Police, MunicipalAgenc. Bidding 50% 100% Maintenance Bidding 100% Manket WonsN/Eqsipent Site Dea. Begin Site Wonks46% Wonks81% Wonka100% Croplte Work Bldg. Corplete Complete Complete Tednical Assistant 12 m. 2 m.m 5 m.m 5 m.m
SDjdies: Lag Term Planning 24 m.m Begin Cocplete IS,titutional 5 n.m Begin Cmeplete Padraging Begin C,mplete
Solid Waste Civil Wods Design Bidding/ 100% Camplete Begin Cons. Coaplete Equipment Bidding/ Acquisitia 100% Tednical Assistance 396 n.m 56 n.m 56 m.m 56 m.m 56 n.m 56 .e 56 n.M 30 n.m 30 n.m Urtbn Mansent D31 24 n.m 15% 40% d0% 100% Plan Director 132 mnm Ireatigat Develcp Lang Range Short Tem CoWplete Policy Dev. Plan Strategy |(( 60 m.m 10% 20% 30% 40% 59% 787 90% 1003 |MtM 114 m.m 10% 20% 30% 40% 50% 60% 70% 80% 90% 103Z UP 32 m.m 40% 100X FProlect Manwpcent 4% 12% 20% 29% 38% 47% 56% 66% 75% 86% 93% 100%
Note,
1. A street msintenance specialist, part of the implementation technical assistance padcage, will begin .tmk in the third quarte of 1984. 2. TIo prorment advisors wiUl begin swor with IN¶9REMTdarirg the third quarter of 1984. 3. The Central Area Study (TORreceived and approved by the Bark) will begin daring secmd semester of 1984. - 46 -
ANNEX7 Page 1 PERU LDEAMETRDPO1XLfN DEVELORI PRWECr Key Institutional Actions
84 85 86 87 88 89 90 91 cxc 1. Formation and Funding of CMC 1.1 Representatives appointed 1.2 Funding established for annual operations *
2. Staffing CMC
2.1 Executive secretary named * 2.2 Five professionals appointed * 2.3 Support staff appointed *
3. Performance
3.1 Develcp and refine monitoring and evaluation progran * 3.2 Leadloan negotiations * 3.3 Advise NEFC, MLM, and EMMA on two subsidiary agreenents * 3.4 Coordinate establishnent of Special and Working Accounts * 3.5 Supervision and control .. . - Subnit quarterly progress reports to Bank - Coordinate funding and budgetactivities - Review and submit to Bank TOR for technical assistance, training, studies
1. Formation and Funding of GMTU 1.1 Municipality enacts legislation to confirm foimation of OMTU and to define functions * 1.2 MIC transfers staff and budgetof bus studies and regulation unit to CFIU. 1.3 MTCtransfers staff and budgetof traffic signal unit to OMCTU 1.4 All agencies directed by GovernmentAumici- pality (as apprcpriate) to suhnit schenes and prcposals with transport implications to CMIU for approvall 1.5 Municipalityallocates annaal operatiornal budget .r toamT -47- ANNEX7 Page 2 PERU LDMAMETRDPOLITAN DEVELOPRMEN PROJECT Key Institutional Actions
84 85 86 87 88 89 90 91
2. Staffing/Training GMT1 2.1 CM1UExecutive Director appointed 2.2 @ITUappoints Project Director 2.3 aMfUand INYERMETsign agreenent with implementing advisers 2.4 Prcposed new professional staff (other than units transferred fron 1TC) 2 3 2.5 Training Courses - staff who have attended courses 4 4 4 4
3. Perfomnance 3.1 Monitor Lima Metrcplitan Develpmnt Plan eMPD) and provide inputs to quarterly reports to demonstrate project progress 4 per year 3.2 Supervision and control for technical assistance, (for OMIU)training, studies (except street maintenance), equipment (except road maintenance)
3.3 Ex-post evaluation for all transport subproject elements (except civilworks)
4. Technical Ftuctions 4.1 Establish standards for traffic engireering design, traffic control devices, equipment. 4.2 Prepare a traffic planning/operational manial for surveys, procedures, analyses * 4.3 Ccnmence and continue monitoring program of traffic conditions, and problem identification in areas other than included in Lima MDP. 4.4 Evaluate results of Plan Director Transport plan and 1. Finalize transport strategy included in Plan Director and obtain Municipality approval * 2. Finalize Design Plan including review on evidence of traffic monitoring and ongoing evaluation * 3. Establish immediate action traffic improvement progran based on Design Plan fran Plan Director * 4. Cammenoenecessary design studies, implementation processes for iTmndiate action and commenceimplementation. 5. Coamence functional design studies for remainder Design Plan recomendations 4.5 Initiate recomnendations fran Bus Route Rationalization and Traffic Study. * -48- ANNEX7 Page 3 1PRU LIMAMETRDPOLITAN DEVELOPMNR PROJECT Key Institutional Actions
84 85 86 87 88 89 90 91
1. Staffing INVERMET 1.1 Subproject director named * 1.2 INVE1METand CIfU sign agreement with implenent- ing advisors *
2. Perfonnance 2.1 Contract for final designs for paving in low incone areas and for road rehabilitation and maintenance * 2.2 Contract for final designs for transfer station and landfill * 2.3 Canplete final designs for paving and road rehabilitation for first year of implenentation * 2.4 Supervision and control for civil works, road maintenance study, acquisition of road maintenance equipment, and technical assistance (INVERMET) .. . *** ***. *** **** 2.5 Procure all itens in transport, solid waste, and municipal subprojects (per project schedule) k -A -A-A***d 2.6 Ex-post evaluation for civil works and road maintenance equipment 2.7 Monitor LIma MDPand provide inputs to quarterly reports to demonstrate project progress 4 per year 2.8 Prepare and submiit disbursenent request for I I I all municipal subprojects Approximately monthly
EMMSA
1. Staffing/Training EM4SA 1.1 Financial Manager appointed * 1.2 Project Director appointed * 1.3 Director's training trip 1.4 Staffing plan implenented
2. Performance 2.1 Contract for market final design * 2.2 Supervision and control for all market sub- project activities ** ** f** **e ****d* * 2.3 Procure all itens for market subproject **...... **** 2.4 Ex-postevaluation 2.5 Monitor Lima MDPand provideinputs to quarterly reports to denonstrate project p l progress per year -49- ANNEX7 Page 4
PERU LIMJAETROPLITAN *E VEOME PROJECr Key Institutional Actions
84 85 86 87 88 89 90 91
2.6 Prepare and submit disbursenent request for market subproject poximate y bi-rnontbly
3. Technical Functions 3.1 Commenceimplenentation of an efficient charge collection and control systen * 3.2 Implement an operations guidebock with detailed policies and procedures * 3.3 Implement accounting system and user's manual * 3.4 Conduct a pronotion canpaign of the new market 3.5 Adopt relocation strategy to transfer the wholesalers and truckers to the newmarket * 3.6 Camnence implenentation of recomendations of study of long-term planning of the agri- cultural and fruit wholeselling systen 3.7 Caomence implenentation of recomnendations of the study on long-teim institutional proposal for the management of the new market 3.8 Canence implementation of recammendations of consignment padkaging system study *
ESMLL
1. Staffing/Training ES4LL 1.1 Advisors (GIZ)appointed *
2. Perfounance 2.1 Prepare TOR for design of transfer stations and landfill * 2.2 Prepare TOR for equipmentacquisition * 2.3 Submit to Bank a diagncstic review of operational and financial perfonnance 2.4 Subnit to Bark an action plan and timetable i to strengthen operational efficiency 2.5 Prepare operating budget and review budget 11 1 for all districts 2.6 Supervision and control . Civil works • Equipment acquisition l l il li 2.7 Ex-Post Evaluation 2.8 Monitor LimaMetrcpolitan Develcpnent Project and provide ilnputs to quarterly reports to demonstrate project progress I 1 4 per year I - 50 -
ANNEX7 Page 5
PERU LIMAMETROPOLITAN DEVELOPMENT PROJECT Key Institutional Actions
84 85 86 87 88 89 90 91
NIM_
1. Staffing/Training MLM 1,1 MLM Project Coordinator appointed (OMP) * 1.2 Assistant Coordinator and staff appointed 1.3 Five professionals hired for (MC and UP 1.4 OPDMProject Director hired 1.5 Four OPIMstaff hired
2. Performance 2.1 Coanence French contract for cadaster * 2.2 Betterment and local taxaction * 2.3 Present to Bark a plan of action to inprove municipal finances 2.4 Present to Bark a timetable for implementa- tion of actions 2.5 Present to Bark the results of a metropolitan financial planning and management review 2.6 Supervision, control, and Ex-Post Evaluation of urban managenent su1project 2.7 Monitor Lima Metrqpolitan Develcpment Project and provide inputs to quarterly reports to r denonstrate project progress per year I I I - 51 -
FM~RU AWNEX8 LIMAME1PO1OLITN DEVELOPME1NT PROJECI Page I Key Evaluation Indicatoras Iransport -uuproiect
Prcposed aspect and/or sanple Data Reauired _ 4 8 8 8 _ Indicator of subproject coaponent for evalua- Evaluation Criteria 84 85 86 87 88 89 90 91 tion Period Direction Re- Target lated to Lima Corridor Vo1ume7 1. Tupac Anaru Route Based Volxie/ A.M. Into Car 1.02 1.10 1.17 1.22 0.80 0.83 0.88 0.91 Capacity Section 2 Capacity Ratios Bus - - - - 0.40 0.44 0.47 0.50 Ratio . I P.M. Out of Car 1.00 1.06 1.12 1.18 0.76 0.80 0.84 0.88 Bus - - - - 0.40 0.44 0.47 0.50
2. Tupac Aaaru Rotute Based Volume/ A.M. Into Car 1.13 1.20 1.28 1.36 1.10 1.16 1.22 1.28 Section 3 Capacity Ratios Bus - - - 0.59 0.62 0.65 0.68
P.M. Out of Car 0.83 0.92 1.00 1.08 0.81 0.86 0. 91 0.96 Bus - - - - 0.48 0.50 0.52 0.55
3. Panamericana Route Based Volume/ A.M. Into All 1.15 1.22 1.29 1.37 1.42 1.50 1.58 1.30 Zurunmilla Capacity Ratios P.M. Out of All 0.91 0.97 1.02 1.09 1.14 1.30 1.37 1.10
4. Pachacutec Raote Based Vohmie/ A.M. Into All 1.01 1.08 1.14 1.21 1.28 1.33 1.40 0.87 Capacity Ratios P.M. Out of All 1.06 1.12 1.20 1.26 1.33 1.40 1.47 0.92
5. Avenida T. Marsano Route Based Vohune/ A.M. Into All 0.98 1.04 1.10 1.16 0.98 1.01 1.08 1.15 Capacity Ratios P.M. Out Of All 1.10 1.17 1.24 1.31 1.10 1.17 1.22 1.27
Travel 1. Tupac Asaru Average Travel Speed A.M. Into Car 41 34 27 20 42 39 36 33 Speed Section 2 over Section (k/h) Bus 25 22 19 16 38 38 36 36
P.M. Out of Car 42 37 32 27 44 42 41 40 Bus 26 23 20 17 38 38 36 36
2. Tupac Amaru Average Travel Speed A.M Into Car 10 10 10 10 18 14 10 10 Section 3 over Section (k/h) Bus 10 10 10 10 34 33 33 33
P.M. Out Of Car 37 30 25 20 40 37 34 31
Bus 23 20 18 15 37 37 32 31
3. Pananericana Average Travel Speed A.M. Into Car 110 10 10 10 10 10 10 10 Zurumilla over Section /h) Bus 10 10 10 10 10 10 10 10
P.M. Out of Car 134 29 25 21 17 13 10 17 Bus 21 19 17 14 12 10 10 14
4. Pachaautec Average Travel Speed A.M. Into Car 24 19 12 10 10 10 10 23 over Section Otfh) Bus 23 19 12 10 10 10 10 23
P.M. Out Of Car 23 19 12 10 10 10 10 19 Bus 22 20 13 10 10 10 10 19
5. Avenae T. Marsano Average Travel Speed A.M. Into Car 45 40 34 27 32 28 25 23 Over Section (kAi) Bus 26 24 20 18 25 22 20 18 P.M. Out Of Car 36 32 27 23 21 16 13 10 Bus 25 23 20 17 18 15 13 10
Accidents 1. Tupac Anaru Fatalities - Total Year N/A All Road 50 53 56 59 31 32 34 36 Users
2. Panaericana Fatalities - Total Year N/A All Road 48 50 54 56 58 62 64 34 Users
3. Pachacutec Fatalities - Total Year N/A All Road 23 26 27 28 29 30 31 16 3. Pachacutec Users
4. Avenis T. Msrsano Fatalities - Total Year N/A All Road 8 8 P.M OutoCf Users 6 6 6 7 7 7 8 - 52 -
PERU ANNEX8 LIMA MEIBPxOLITANWIEmVEO PIaIJEC Page 2 Key Evaluelon Indiesators Tra-port Subproject
Frqposed aspect and/or sasple Data Required Indicator of subprolect conponent for evalua- Evaluation Criteria 84 85 86 87 88 89 90 91 tion Period Direction Re- Target lated to Lima
Central Area Travel 1. Avenre Alfiaso Ugarte Average Travel Speed A.M. North Car 14 13 13 12 17 15 13 11 Speed over Section (kWh) Bus 14 13 13 12 17 15 13 12
South Car 10 10 10 10 22 21 20 19 Bus 10 10 10 10 17 17 17 16
P.M. North Car 14 13 13 12 17 15 13 _ Bus 14 13 13 12 18 18 18 17
South Car 10 10 10 10 22 21 20 19 Bus 10 10 10 10 17 17 17 16
Accidents 1. Avenue Alfonso Ugarte Fatalities Year N/A All Road Users 14 15 15 16 8 9 10 11
Inter- At Critical Intersections Average delay per A.M. 1. All Bus To be providedat functional section 1. Av. uilca vehicle peak approches Other design stage Delay 2. Av. Unugnay P.M. to inter- vehicles 3. Av. Bolivia peak secties 4. Av. Espana 5. Plaza Castilla
Inter- Major Schene Average delay per A.M. 1. All ap- Bus To be provided at functional section 1. DoS de Mayo vehicle peak prodces Other design stage DelayF P.M. to Plaza vehicles peak
Inter- At critical intersections Volme/capacity ratio A.M. 1. Complete 1. Traffic To be provided at functional section 1. Av. Qiuica peak irter- flcw design stage Capacity 2. Av. Uruguay P.M section 3. Av. Bolivia peak 4. Av. Espana 5. Dos de Mayo
Central Area: Traffic Sigial Systen and Traffic Management Meisures
The traffic signal systen and traffic mansgiiment measures wculd be isplEmented in paral1el; thus the evaluation wculd be carried cut jointly, although individual T.M. measures may be evaluated in isolation, dependirg on final details of the lnpleentation progran.
Travel Netwook wide, appro-dtely 5 Average trawel speed, T. A.M N/A Buses To be provided at functional Speed representative rtutes thrmoju qualified by control peak Other design stage Central Area network. traffic volnes 2. P.M Vehicles peak
Travel Sdinen (3M) level; Typical hus lacei Average trawl speed 1. A.M. Daerxirg Buses To be provided at functional Speed and traffic manaennt schanes in schade area peak on schele Other design stage qualified by control 2. P.M. details vehicles traffic volumes. peak
Inter- Apprex. 25% (25 out of 100) inr Average delay per 1. A.M. 1. All Buses To be provided at functional section tersectics prqposed for inclusion vehicle peak approach. Other design stge Delay in signal sptes 2 P.M. to inter- vehicles peak section 3. Repre- sentation Off peak
Accidents Central area wide assessnisot Deaths rellated to By year N/A Pedestrian To be provided at functional vehicle voel (total Other road design stag number enterirg central users area
IPavn in Iar-Incane Areas Trawl ApprM _ 20 Ims cut of prtpsed Aveae travel speed 1. Not 1. Not Bus Initial data provided 1y aIU Speed progran of 100 + kns included in (not related to traffic critical critical at desigin tage | | program 1 flow, as vols. law)
BUS Sanple of progran (20 Iss) 1. Bus service freqtunq 1. Day 2. All Bus users To be provided at functional Service expanded to coanplece progran on roads paved under Bus oper- design stage Level of progran ators Service 2. Additioal bus lnss per bus on road paved in program
Road ehabLlitatimn and Maintenance l d t p rTravel | Sasple of typical roads (approx. Average trawl speed in 1. Repre- 1. Not Buses Initial data to be provided by Speed 10 las) paved under progran i.e. relation to traffic sentative critical Other C bflUby negotiatios - dual 3 lane road voliue tikes vehicles - dual 2 lane road (varying
- subdivided carriageway traffic - 53 -
PE1R ANNEC8 LIM&MEROPOLJTAN IEVE2CiTI EROJECT Page 3 Key Evaluation Indicators Wholesale Market
Proposed aspect and/or sasple Data Required Indicator of subproject ceomont for Evaluation Criteria 84 85 86 87 88 89 90 91 evaluation Period Target Group
Thrrugb Operating Effectiveess 1. Total Agrinulcural Year Users and put/ (tons/year) Operators 983 1010 1040 1076 1076 1076 Volume 2. Total Fruit (tons/year) 577 595 610 630 630 630
Rented Firanial Viability 1. Total area rented Year Operators Area (m2/year) 29150 31155 33193 35200 35200 35200 2. Area rented in perzanentes (W2/year) 28100 29055 30043 3100D 31000 31000 3. Area rented in mnr- pe-uacentas (e2/year) 1050 2100 3150 4200 4200 4200
Numberof Operating Effectiveness 1. Total penanentes Year Users and Whole- (pers./year) Operators 562 580 600 620 620 620 salers 2. Total wno-permaonetes (pers./year) 210 420 630 840 840 840
Trunking Operating Effectiveneos 1. Supply vehicles (less han 5 toss (v/day) 202 210 219 228 228 228 Activities 2. Supply vehicles (5 to 15 tone (v/day) 372 387 403 420 420 420 3. Supply vehicles (6re than 15 tons (v/day) 4 4 5 5 5 5 4. Retail vehicles (cars (v/day) Trucers 3161 3294 3432 3577 3577 3577 5. Retail vehicles (asell trucks (v/ay) 733 764 796 830 830 830 6. Retail vehicles (trudcs sure than 3 tons (v/day) 170 177 184 192 192 192
Wholesale Ecoxstc Impact 1. Av. W.P. all products Month Consaars Price 2. Av. W.P. agric.prod. Month 3. Av. W.P. fruit prod. Month
Solid Waste 1/
Proposed aspect and/or sample Data Required Indicator of subproject conponent for Evaluation Criteria evaluation Period Target Group
Service No. of districts served Level by ESML - Collection Year - Transfer Year - Disposal Year
Service No. of districts in Year Effic- which routes have been iency rationalized
Operat- Tonnages per workday ional handled by ESMEL Efficiency - Collection |Day - Transfer Day - Disposal Day
1/ MIMis in the procews of finalizirg a new strategy for the solid uste subsector and wld present indicators durirg the project launch workshop to be held in Lima diring July/August 1984. - 54 -
ANNEX 9
PERU LIMA METROPOLITAN DEVELOPMENT PROJECT Consolidated Statement of Income and Expenditures for Lima Metropolitan Area
S/ .billion Actual Budget 1981 1982 1983 %
INCOME
Tax Revenues Property Taxes 3.81 7.36 14.84 19 Entertainment Tax 1.55 2.61 4.01 5 Licenses, etc. 1.46 2.84 4.84 6
Fees and Service Charges Solid Wastes Fees 4.79 10.68 25.02 31 Other Fees 1.72 4.18 8.39 11 Rents 0.25 0.60 1.02 1 Fines 0.85 1.15 1.72 2
Government Transfers 7.31 8.72 11.53 15
Other Income 11.15 4.35 7.72 10
Total Receipts 32.89 42.49 79.09 100
EXPENDITURES
Personnel 24.35 27.51 40.95 52 Supplies and Services 2.97 7.05 20.97 27 Debt Service (principal & interest) 0.38 0.77 0.10 - Infrastructure Investment 1.78 7.37 5.83 7 Others 1.34 3.45 11.24 14
TOTAL EXPENDITURES 30.82 46.02 79.09 100
SURPLUS/(DEFICIT) 2.07 (3.53) - - 55 -
ANNEX 10 Page 1
PERU LIMA METROPOLITAN DEVELOPMENT PROJECT Comparative Historical Financial Statements- INVERMET Comparative Statement of Income
December 31 1981 1982 (°OO/S.)
REVENUESa/
Investment income 749,594 1,736,057 Gains on foreign exchange 861,664 1,513,237 income 22,453 97,445
Subtotal 1,633,711 3,346,739
EXPENDITURES
Acquisition costs short-tenm investments 27,582 93,703 Personnel expenses 18,189 34,196 General expenses 21,118 77,856 Other expenses 1,286 4,022
Subtotal 68,175 209,777
EXCESS REVENUE OVER EXPENDITURES 1,565,536 3,136,962
Equivalent US$b/
3,178,279
SOURCE: INVERMET
a! Gasoline tax revenue treated as a capital receipt
b/ Conversion rate: US$1 = 987 soles. - 56 - ANNEX 10 Page 2
PERU LIMA METROPOLITAN=DVELOPMENTPROJECT ComparativeHistorical Financial Statements- INVERMET ComparativeFunds Flow Statement
1981 1982 (000/S.) SOURCES OF FUNDS
Net profit from operations 1,565,536 3,136,962 Add (i) Depreciation 951 1,447 (ii) Provisionfor local benefits 336 2,575 (iii) Recovery from projects 1,350 5,800
Subtotal 1,568,173 3,146,784
CAPITAL INFLOW
(i) Governmentgrant 450,000 (ii) Gasoline taxes 2,252,737 4,562,798
TOTAL SOURCES OF FUNDS 4,270,910 7,709,582
APPLICATION OF FUNDS
Investmentin projects 1,788,421 7,377,107 Acquisitionof fixed assets 5,626 4,221 Other 29 10
TOTAL APPLICATIONOF FUNDS 1,794,076 7,381,338
NET INCREASE IN WORKING CAPITAL 2,476,834 328,244 - 57 - ANNEX 11 Page 1
PERU LIMA METROPOLITANDEVELOPMENT PROJECT Projected Revenue and Funds Flow - INVERMET Basis for Projected Gasoline Tax Revenue
1l?4 1985 1986 1987 1988 1989 1990 1991 1992 ____ ------
1)GASOLINESALES 462.32 476.19 490.48 505.19 520,35 535.96 552.03 568.60 585.65 (MILLIONS-GALLONS) ' CHANGE 3.77 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
2)AVERAGEGAS. PRICE 1.10 1.10 1.10 1.10 1,10 1.10 1.10 1.10 1.10 (USS/GALLON)
3)EX-PLANTAPRICE 42.30 42.30 42.30 42.30 42.30 42.30 42.30 42.30 42.30 (ASZ OF2.
4)EX-PLANTAPRICE 0.47 0.47 0.47 0.47 0.47 0.47 0.47 0.47 0.47 (USS/GALLON1
5)PETROPERU-EXPLANTAREV. 223.81 230.53 237.44 244.56 251.90 259.45 267.24275.26 275?26 (USSHILL)
6)IMPUESTO-ROEIAJE 17.38 17.90 18.44 19.00 19,56 20.15 20.76 21.38 23.02 (8%OF 5)
:)TRANSFERTOINVERMET 5.60 5,77 5.95 6.13 6.31 6.50 6.69 6.89 7.42 (USSMILL) _--- -_ --__ --_ -- - -______- -_--__ -- -- _-…_---- - _ ___ -_ - __-___-____ - __-__- _-_ SOURCECENTRAL BANK: t TRANSFERBASED ON 52% OF IMPUESTORODAJE NET OF FIXEDASSIGNMENT TAXES PROJECTEDAT 6.60 6.80 7.01 7.22 7.43 7.66 7.89 8.12 8.75 - 58 -
ANNEX 11 Page 2
PERU LIMA METROPOLITAN DEVELOPMENT PROJECT Projected Revenue and Funds Flow - INVERMET Projected Funds Flow Statement (US$ millions)
t984 1985 1986 1987 198B 1989 1990 1991 TOTAL
SSIiRCESOF FUNDS
A. OPERATIONS
T) GASOLINETAXES 1/ 5.60 5.77 5.95 6.13 6.31 6.50 6.69 6.89 49.83 II) INVESTMENTINCOME 2/ 0.40 0.20 0.10 0.10 0.10 0.10 0.10 0.10 1.20
6,00 5.97 6.05 6,23 6.41 6.60 A.79 6.99 51,03
OPERATINGEXPENSES 31 0.30 0.30 0.40 0.50 0.50 0.60 0.70 0.80 4.10
GROSSFUNDS INFLOW 5.70 5.67 5.65 5.73 5.91 6.00 6,09 6,19 46.93
INCREASEIN WORKINO CAPITAL 2,77
INVERMET-COMMITMENT IBRDPROJECT 0,67 2,49 4,00 4.00 4.00 3.42 1.62 0,00 20.20
NETFUNDS INFLOW 2.26 3,18 1.65 1.73 1.91 2.58 4.47 6.19 23.96
P. FINANCING-IBRDPROJECT
r) INVERMETCOMMITMENT 0.67 2,49 4.00 4.00 4.00 3.42 1.62 0.00 20.20 II) G,T.Z.GRANT 0.10 0.20 0.20 0.20 0.20 0.10 0.00 0.00 1.00 III) SUPPLIERSCREDITS 2.61 1.14 1.25 5.00 IV) IBRDLOAN 7.55 15.43 15.64 10.01 3.93 2.56 4.36 0.62 60.10 V) GOVERNMENTBUDGET 0.00 0,00 2.56 ?.77 0.74 0.00 5.67 0.76 17.50 -_ _ ------_-_ -- _-_ - _ -_ TOTALFINANCING 8.32 18.12 25.01 23.12 10.12 6.08 11.65 1.38 103.80
TOTALSOURCES 10.58 21,30 26.66 24.85 12.03 8.66 16.12 7.57 127.76
APPLICATIONSOFFUNDS
A. CAPITALINVESTMENTS
I) IBRDPROJECT 8.32 18.12 25.01 23.12 10.12 6.08 11.65 1.38 103.80 II)OTHER PROJECTS 2.26 3.18 1.65 1.73 1.91 2.58 4,47 6.19 23.96
TOTALAPPLICATIONS 10.58 21,30 26.66 24.85 12.03 8.66 16.12 7.57 127.76
MEMORANDUM
SHORT-TERMFINANCIAL INVESTMENTS
OPENINGBALANCE-INVEST. 1.73 4.50 4.50 4.50 4.50 4.50 4.50 4.50 INCREASE(DECREASE) 2,77 0.00 0.00 0.00 0.00 0.00 0.00 0,00 CLOSINGBALANCE INVEST, 4/ 4,50 4.50 4.50 4.50 4.50 4.50 4.50 4.50
SOURCE:MISSION PROJECTIONS,
1/GASOLINETAX REVENUES BASED ON PROJECTIONS ILLUSTRATED IN ANNEX 14 PAGE1 2/INCOMEFROM US$ DENOMINATED CERTIFICATES OFDEPOSIT YIELDING 9x, 3/ASSUMESNODEBT FUNDING. 4/REPRESENTSABOUT 3 MONTHSWORKING CAPITAL REQUIREMENTS - 59 -
Annex 12 Page 1
PERU LIMA METROPOLITAN DEVELOPMENT PROJECT Comparative Financial Statements - EMMSA Comparative Statement of Income
December 31 1981 1982 (OOO/S.)
Gross Revenues 461,264 100.0 773,892 100.0 Operating and Administration Costs 450,013 97.6 778,101 (100.5)
Gross Margin (loss) 11,251 2.4 (4,209) (0.5)
Net Earnings 17,83 0a/ 3.9 94 6a/
(Equivalent US$)
Gross Revenues 1,077,72 0c/ 1,240,212b/ Operating and Administration Costs 1,051,432 1,246,957
Gross Margin (loss) 26,288 (6,745)
Net Earnings 41,659 1,516
SOURCE: EMMSA
a/ Due to nonoperating income b/ Conversion rate US$1 = 624 soles c/ Conversion rate US$1 = 428 soles - 60 -
ANNEX 12 Page 2
PERU LIMA METROPOLITAN DEVELOPMENT PROJECT Comparative Financial Statements - EMMSA Comparative Statement of Financial Condition
December 31 1981 1982 (000/S.)
ASSETS
Current Assets Cash in banks 10,635 13,680 Accounts receivable 17,749 49,748
Subtotal 28,385 63,428
Investments 9 16
Fixed Assets Assets 59,523 72,796 Accumulated depreciation (1,825) (5,241)
Subtotal 57,698 67.555
Other Assets Intangible assets 31,451 45,545 Other 1,843 13,014
Subtotal 33,294 58,559
TOTAL ASSETS 119,386 189,558
TOTAL ASSETS (equivalent US$) 192,000 a/
SOURCE: EMMSA a/ Conversion rate US$1 = 987 soles - 61 -
ANNEX 12 Page 3
PERU LIMA METROPOLITAN DEVELOPMENT PROJECT Comparative Financial Statements- EMMSA Comparative Statement of Financial Condition
December 31 1981 1982 (000/S.)
LIABILITIES
Current Liabilities Taxes payable - 44,389 Accounts payable 11,517 55,067 Other payables 34,587 16,535
Long-Term Liabilities Provision for local benefits net 37,400 46,571 Other liabilities __-__ 2,138
Subtotal 37,400 48,709
TOTAL LIABILITIES 83,504 167,700
EQUITY
Equity Paid in capital 2,025 3,914 Additional capital 6,687 6,687 Legal reserves 405 783 Retained earnings 8,935 12,528 Current years earnings 17,830 946
TOTAL EQUITY 35,882 24,858
TOTAL LIABILITIES AND EQUITY 119,386 189,558
TOTAL LIABILITIES AND EQUITY (equivalent US$) 192,000 a/
SOURCE: EMMSA a/ Conversion rate US$1 = 987 soles - 62 -
ANNEX13 Page 1 PERU LIMA METROPOLITAN DEVELOPMENTPROJECT Projected Financial Statements - EMMSA Projected Profit and Loss Statement ('000 Current Dollars)
1987 1988 1989 1990 19?1 1?92
REVENUES4! 5351 5916 6871 8809 9026 9643
OPERATINGCOSTS 5! 2063 2236 2406 2588 2880 3232
GfRBSSSARGIN 3288 3680 4465 6221 6146 6411
FINANCINGCOST
A,)INTEfiEST IBRD2 LOAN 2467 2467 2467 2467 2243 2018 B) INTEREST-LOCALCOUNTERPARTPQ LOAN 236 236 159 142 94 47 2703 2703 2656 260B 2337 2066
DEPRECIATION1! 1311 1311 1311 1311 1311 1311
SINKINGFUND PROVISION (MAJOR MAINTENANCE) 2! - 500 750 750 750 7'Q
NETPROFIT(LOSS) BEFORE INCOME TAXES -726 -834 -252 1551 1748 2284 ------
INCOMETAXES (40 %) 3/ = 5-95 914 ______- _ _------_ - -__ ------___ NET PROFIT(LOSS)AFTER INCOME TAXES -726 -534 4-52 1551 1153 1371
WGUFCE,MISSION PROJECTIONS
1fSTfRAIGHTLINE METHOD AT 5% P.A, - EXCLUDESLAND. 2/ACCUMULATINGAT 11Z P.A, TOPROVIDE USU7 .ILLIONiAPPROX.) FOR F:EHABILITATIONOF SITE ROADSAND PARKINGLOT IN 1995. 3/CALCULATEDAT 40% WITH PROVISION OF A 5-YEARLARRY-OVER OF LOSSES. 4/INCLUDESWHOLESALE LEASES! TOLLS FROM DELIVERY TRUCKS AND R.ETAILER VEHICLES ETCi (A DIETAILEDBREAKDOWN AVAILABLE IN PROJECT FILE-REPORT BY F-RST WASHINGTON ASSOCIATESII. 5/IRCLUDESSTAFFING & ADMINRRECURRENT MAINTENANCEi UTILITIES I PROPERTYTAXES ETE. !ADETAILED BREAKDOWN AVAILABLE IN PROJECTFILE-REPORT BY FIRST WASHINGTON ASSOCIATES)k - 63 -
ANNEX 13 Page 2
PERU LI14A METROPOLITANDEVELOPMENT PROJECT Projected Financial Statements - MS-SA Projected Funds F1w Statment ('000 Current Dollers)
1984 1985 1986 1987 1989 1989 199O 1991 1992
SOURCESOFFUNDS
!.NETPROFIT(LOSS) AFTER INCOME TAXES - - - -726 -834 -252 1551 1153 1371 4DDBACK: I. FINANCINGCOSTS - - - 2703 2703 2656 2609 2337 2066 11. DEPRECIATION - - - 3 1311 1311 1311 1311 1311 Ill1 SINKINGFUND PAYMENT - - - - 500 750 750 750 750 IV. INTERESTONSINKING FUND - - - - 55 144 242 351 472
- - - 3288 3735 4609 6463 5902 5969
2.WORLDBANK LOAN I.LOANPROCEEDS 998 10850 7868 ------I.CAPITALIZATIONOFINTEREST CONMITM,FEEI FRONT-END 130 830 1751 ------
1128 11690 9619 ------
3.LOCALCOLNTERPART LOWN I.LOANPROCEEDS 0 899 832 II.CAPITALIZATIONOFINTEREST COMMITN.FEEUFRONT-END 0 71 164
0 970 996
4.SALEOF SURPLUS LAND 1000 1000
TOTALSOURCES OFFUNDS 1129 13650 11615 3288 3735 4609 6463 5902 5969
APPLICATIONSOFFUNDS
I.PROJECTEXECUTION 998 12749 9528 ------
2.WuRKINMCAPITAL - - 172 ------
3.DERTSERVICE WORLDBANK LOAN
I.FRONT-ENDFEE(0.25%) 56 ------II.COMMITHENTFEE(0.75%) 74 90 15 - - - - III.INTEREST(11%) 0 740 1736 2467 2467 2467 2467 2243 2018 IV.PRINCIPAL ------2039 2039 2039
130 030 1751 2467 2467 2467 4506 4281 4057
LOCALCOUNTERPART LOAN
I.FRONT-ENDFEE(0.253) 4 III.COMITMENTFEE (0.751) 0 13 6 ------TI.INTEREST(122) 0 54 150 236 236 189 142 94 47 IV.PRINCIPAL - - - - 393 393 393 393 393
0 71 164 236 629 582 535 488 440
TOTALDEBT SERVILE 130 901 1915 2703 3096 3049 5041 4769 4498
4. SINKINGFUND INCREASE - - - - 555 994 992 1101 1222
TOTALAPPLICATION OFFUNDS 1128 13650 11615 2703 3651 3943 6033 5870 5720
SURPLUS(DEFICIT): YEAR - - - 585 84 666 430 32 250
CUNULATIVE - - - 585 669 1335 1766 1797 2047
SOURCE:MISSION PROJECTIONS,
DEBTSERVICE RATIO 1.22 1.21 1.51 1.28 1.24 1.33
INSTALLMENTMETHOD OFREPAYMENT WITHEQUL REPAYMENT OFPRINCIPAL AND INTEREST ONREDUCING BALANCE. - 64 - ANNEX 13 Page 3
PERU LIMA METROPOLITANDEVELOPMENT PROJECT Projected Financial Statements - EMMSA Projected Statement of Financial Condition ('000 Current Dollars)
1986 1987 1988 1989 1990 1991 19P2
ASSETS
CURRENTASSETS
I) CASHGENERATED FROM OPERATIONS 0 585 669 1335 1766 1797 2047 11)PROJECTED PERMANENT WORKING CAPITAL 172 172 172 172 172 172 172
TOTALCURRENT ASSETS 172 757 841 1507 1938 1969 2219
FIXEDASSETS
LAND 5800 5800 5800 500 5800 5800 5800
5RANMERCADO MAYORISTO PROJECT 26221 26221 26221 26221 26221 26221 26221 LESS ALLOWANCEFORDEPRECIATION 0 1311 2622 3933 5244 6555 7B66
26221 24910 23599 22288 20977 19666 18355
TOTALFIXED ASSETS 32021 30710 29399 28088 26777 25466 24155
SINKINGFUND - - 555 1449 2441 3542 4764
TOTALASSETS 32193 31467 30795 31044 31155 30977 31138
DEBTAND EQUITY
LONG-TERMLIABILITIES
I,LOAN FROM WORLD BANK 22427 22427 22427 22427 20388 18349 16310 711 LOANFROM LOCAL COUNTERPART 1966 1966 1573 1180 787 393 0
24393 24393 2A000 23606 21174 18742 16310
EQUITY
I,LAND 5800 5800 5800 5800 5800 5800 s800 II.SALE OF SURPLUS LAND 2000 2000 2000 2000 2000 2000 2000 III. RETAINEDEARNINGS 0 -726 -1560 -1812 -260 893 2263 IV.PROVISION FOR MAJOR MAINTENANCE 555 1449 2441 3542 4764
7800 7074 -795 7437 9981 12235 14827
TOTALDEBT AND EQUITY 32193 31467 30795 31044 31155 30977 31138
SOURCE:MISSION PROJECTIONS.
RATIOS:
DEBTEQUITY 3.1:1 3,4:1 3,5:1 3,1:1 2,1:1 1.5:1 1.1:1 RETURNON AVERAGE CURRENT NET FIXED ASSETS IN OPERATION- I - 6 6 8 15 13 14 - 65 - ANNEX 14 Page 1
PERU LIMA METROPOLITANDEVELOPMENT PROJECT Key AssumptionsUsed in Economic Analysis
1. The main benefits fron all the transportsubprojects components were expected to be higher travel speeds, producing savings in passenger time and vehicle operating costs. The traffic management and engineering schemes were expected to reduce accidents, of which an estimate was made for the Cono Norte scheme, where the present incidence of accidents is particularlyhigh.
2 Highe-1 travel speeds would result from capacity improvementsin the schemes for Cono Norte, Cono Sur and Alfonso Ugarte, and from surface improvementsin all schemes but especially the road paving, rehabilitation and maintenance schemes. Experimentalsurveys were carried out in various parts of Lima to produce curves relat'ng traffic speed to flow on roads of various dimensionsunder various surface conditions. The estimates of speeds, with and without project, are crucial, since all the quantifiable benefits depend upon them., For this reason, in the traffic engineering schemes, traffic volumes and speeds were estimated separately in both directions, in the morning peak, evening peak and off-peak, for cars, buses and trucks.
3. Curves were produced showing the variable vehicle operatingcosts per km. of cars, buses and trucks at different average speeds. The costs that vary with speed are fuel, oil, tyres, maintenanceand repair, time-depreciation(taken as 50% of total depreciation),drivers' wages and interest (on commercial vehicles). The curves are defined in the following table.
Variable Vehicle Operating Costs by Type of Vehicle, at Different Speeds (US cents/Kn) October 1983
Speed Cars Trucks Buses Micros
70 10.4 39.3 29.2 20J 65 10.3 39.6 29.4 20.5 60 10.4 39.9 29.7 20.7 55 10.7 40.3 30.0 21.0 50 11.0 41.1 31.0 21.5 45 11.5 42.0 31.6 22.0 40 12.2 43.0 32.5 22,7 35 13.1 44.2 33.8 23.7 30 14.1 45.8 35.2 24.9 25 15.3 48.7 37.6 26.8 20 17.2 52.8 41.7 30.0 15 19,9 60.3 48.5 35.4 10 24.5 73.9 61.1 45.3 5 33.6 109.1 93.6 71.4 - 66 -
ANNEX 14 Page 2
5. A single value of passenger time was used, equal to one-third of average hourly earnings.
6. Speeds with and without project were obtained fron the relevant speed-flow curves,and benefits computed from the speed-cost curves. For the traffic engineeringschemes, it was assumed that annual benefitswould stop rising after 5 years; this conservativeassumption reflected the expectationthat after this time the roads would be operating close to capacity again. For road paving schemes, benefits(busesonly) were assumed to grow at 5% p.a. for the 10-year life. For road rehabilitationand maintenance,annual benefits were assumed to decline linearly to zero after 10 years and 5 years, respe,ctively.
Solid Waste Transfer Scheme
7. The only part of the solid waste subprojectthat could be evaluatedquantitatively was the transfer scheme. The evaluationwas made over 20 years. Vehicles were replaced after 10 years and their cost deducted from the benefits.
Wholesale Market
8. The largest benefits come from the expected reduction in "wastage and losses" fran 5% to 2 1/2% of the value of the market throughput,i.e., from the present high level to the normal level found in other markets. Other large benefits arise fran reductions in waiting time for vehicles and their occupants. In addition, the design of the new market will dispense with much of the need for porters but one-fifthof them are expected to remain in employment. Finally, a major benefit is the release of the valuable site at La Victoria. Evaluation was made over 20 years, with 3% p.a. growth in annual benefits until 1989 when the market will reach full capacity. Although markets can operate above capacity, it is assumed that there are no additionalnet benefits in so doing. - 67 -
ANNEX 15
PERU LIMA METROPOLITANDEVELOPMENT PROJECT Results of Economic Evaluation Economic Indicators
Subproject NPV BCR IRR Components $mn %
Tupac Amaru A 6.2 2.5 39 Tupac Amaru B 9.8 5.2 69 PanamericanaNorte A 2.9 5.4 98 PanamericanaNorte B 4.1 16.7 262 PanamericanaNorte C 1.5 2.9 55 Tomas Marsano 21.8 15.5 139 Pachacutec 17.9 23.2 313 Alfonso Ugarte A 6.1 3.4 53 Alfonso Ugarte B 16.2 11.2 128 Area Traffic Control 6.4 2.9 37 Road Paving 17.1 3.3. 65 Deferred Road Main- tenance 1.4 1.7 48 Road Rehabilitation 2.3 1.6 55 Transfer Stations 53.8 22.7 156 Wholesale Market 86.6 4.8 59
TOTAL 254.1 5.5 72
NPV = Net Present Value BCR = Benefit Cost Ratio IRR = InternalRate of Return - 68 -
ANNEX 16
PERU LIMA METROPOLITAN DEVELOPMENT PROJECT Sensitivity Tests Internal Rate of Return %
Subproject Components 1 2 3 4 5
Tupac Amaru A 39 38 30 35 23 Tupac Amaru B 69 62 54 62 39 PanamericanaNorte A 98 94 n/a 71 42 PanamericanaNorte B 262 276 n/a 155 79 PanamericanaNorte C 55 54 n/a 44 27 Tomas Marsano 139 140 117 108 69 Pachacutec 313 293 248 169 86 Alfonso Ugarte A 53 52 n/a 43 27 Alfonso Ugarte B 128 125 n/a 92 57 Road Paving 65 63 n/a 72 53 Deferred Road Main- tenance 48 46 n/a 51 35 Road Rehabilitation 55 53 n/a 49 29 Area Traffic Control 37 36 n/a 33 22 Transfer Stations 156 153 n/a 113 67 Market 59 60 n/a 48 33
Tests: 1. Standard Results 2. With shadow prices for wage rates, (-50%) and foreign exchange (+12%) 3. With mass transit - loss of 50% bus passengers on Tupac Amaru, Tomas Marsano and Pachacutec 4. One-year delay during construction 5. Three-years delay during construction and 25% increase in capital cost n/a = not applicable - 69 -
ANNEX '17
PERU LIMA METROPOLITAN DEVELOPMENT PROJECT Distribution of Project Benefits (Absolute and Relative Poor*)
Number of Attributed to Poor Project Beneficiaries Cost Benefit
Tupac Amaru A 203,000/day 58 46 (63) (50) Panamericana Norte A 206,000/day 46 32 (51) (36) Tomas Marsano 140,000/day 29 22 (34) (26) Pachacutec 123,000/day 76 62 (79) (65) Alfonso Ugarte/ Dos de Mayo 220,000/day 34 28 (40) (33) Area Traffic Control 1 million/day 29 19 (34) (23) Road Paving 240,000/day 52 47 (59) (54) Road Maintenance All Road Users 32 26 (41) (33) Road Rehabilitation All Road Users 32 26 (41) (33) Solid Waste 2,030,000 Resid- 64 54 dents (73) (62)
Market All Residents 58 58 (66) (66) TOTAL 49 46 (56) (53)
* Relative poor shown in parentheses - 70 -
ANNEX 18
PERU LIMA METROPOLITANDEVELOPMENT PROJECT Selected Documents and Data Available in the Project File
CMC Draft Final Report, Lima MetropolitanDevelopment Project, December 1982.
EMMSA Proyecto: Gran Mercado Mayorista de Lima, Resumen, Mayo 1983. (SummaryReport on the WholesaleMarket, May 1983).
GTZ Estudio de Factibilidadpara la Eliminacionde Basuras en Lima, Enero 1983. (FeasibilityStudy of the Solid Waste Management in Lima, January 1983). First Washington Associates FinancialAnalysis of the WholesaleMarket, June 1983.
Outline Terms of Reference for Technical Assistance,Training and Studies.
Detailed Features of the Urban Transport Subproject.
Detailed Features of the Wholesale Market Subproject.
Detailed Features of the Solid Waste Subproject.
FinancialAnalysis (AffordabilityAnalysis of Market Tariffs).
Detailed Economic and Social Analysis. IBRD 17613 770 NOVEMBER 1983
PERU LIMA METROPOLITANDEVELOPMENT PROJECT
Proposed Existing /\ TransferStations Landfills [JE ;- ~ ~Markets Major Roads Roads to be improved as part of Project
Central Area Traffic Management Schemes (DWand\ g Traffic Signal System --- c\ ____Transport Corridors which include Low Income - -C Area Poving Programs
\0 5 10 15 PA C/l /C KILOMETERS ,_. _,,____
N
12~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1'
oc v o Wo aO ,Wt , 0;~TW \ oW -W
PA CIfIZC OCEA AA'rl
~~~~~ ' 77 -' 0\
7,7 t