Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 3791b-PA STAFF APPRAISAIL REPORT SEVENTH HIGHWAY PROJECT Public Disclosure Authorized PARAGUAY April 19, 1982 Public Disclosure Authorized Projects Department Latin America and the Caribbean Regional Office Public Disclosure Authorized 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 Unit: Guarani (¢) US$1 : t 126 i1 : US$0.008 ¢ 1,000,000 : US$7,936.50 SYSTEM OF WEIGHTS AND MEASURES 1 meter (m) 3.28 feet (ft) 1 kilometer (km) : 0.62 mile (mi) 1 square kilometer (sq km): 0.386 square mile (sq mi) 1 liter (1) : 0.26 gallons ABBREVIATIONS CNCE National Council for Economic Coordination CPS President Stroessner City DGECP General Directorate for Execution and Budget Control DGT General Directorate for Transport DGV General Directorate for Highways ER Economic Return GDP Gross Domestic Product IBR Rural Welfare Institute MAG Ministry of Agriculture MOPC Ministry of Public Works and Communications OCPIT Office of Coordination and Integral Planning of Transport OED Operations Evaluation Department PCR Project Completion Report UCR Feeder Roads Unit UNDP United Nations Development Program VPD Vehicles per Day FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY STAFF APPRAISAL REPORT SEVENTH HIGHWAY PROJECT PARAGUAY TABLE OF CONTENTS Page No. I. INTRODUCTION .............................................. 1 A. Sector Background ..................................... 1 B. Bank Involvement in the Highway Subsector .... ........ 3 (i) Overview ....................................... 3 (ii) Projects Completed ............................. 3 (iii) Ongoing Projects ............................... 5 II. INSTITUTIONAL STRENGTHENING AND POLICY lMPROVEMENIS ....... A. General . 7 B. The Planning Process ................................. 7 C. The Highway Program .................................. 8 D. Highway Financing .................................... 9 E. Staffing of DGV ................ .. ....................10 F. Staffing of OCPIT .................................... 11 G. Management of Maintenance Operations . 12 (i) Maintenance and Betterment Planning .... ........ 12 (ii) Equipment Management ........................... 13 (iii) Axle Weight Control ............................ 14 H. Accounting and Auditing ............. .. ................14 I. Perspectives for the Highway Subsector ....... ......... 14 III. THE PROJECT ............................................... 16 A. Project Objectives and Components ................. ... 16 (i) Construction and Upgrading of Primary Roads .... 17 (a) The San Lorenzo-Eusebio Ayala Road ... ..... 17 (b) The Tacuara-Santa Rosa Road .... ...........18 (c) The Villarrica-Numi Road .... ..............19 (d) Supervision of Civil Works .... ............19 (ii) Strengthening of Sectoral Planning and DGV's Capacity ................................ .... 19 (a) Training of DGV's Staff in Highway Engineering ............................. 20 (b) Pavement Evaluation ....................... 20 (c) Technical Assistance to OCPIT for Transport Planning ................................ 21 (iii) Improvement of the Efficiency of Maintenance Operations ................................. 21 This report is based on the findings of a mission which visited Paraguay during September 1981. The mission comprised Messrs. A. Paz-Estenssoro (Economist), Jorge Lanas (Engineer), Raul Paraud (Engineer-Consultant), and Rene Jarquin (Financial Analyst-Consultant). Mrs. M. Pokorny assisted in the economic evaluation. The report has been edited by Miss Virginia R. Foster. This document has a restricteddistribution 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. - ii TABLE OF CONTENTS (Continued) Page no. III THE PROJECT (Continued) B. Summary of Economic Evaluation ....................... 22 C. Cost Estimates ....................................... 22 D. Financing ............................................ 24 E. Disbursement ......................................... 25 F. Implementation, Procurement and Monitoring .... ....... 26 G. Risk ................................................. 27 IV. AGREEMENTS REACHED AND RECOMMENDATION ..................... 28 TABLES 1 - Staffing Schedule .......................................... 31 2 Projected Routine Maintenance Expenditures (1982-1986) 32 3 - Projected Highway Network to be Routinely Maintained ....... 33 4 - Betterment and Rehabilitation Program (1982-1986) .... ...... 34 5 - Design Standards for Project Roads ......................... 35 6 - Tentative List of Equipment Purchases ...................... 36 7 - Estimated Schedule of Cumulative Disbursement .... ..........37 8 - Implementation Schedule .................................... 38 ANNEXES 1 - Ministerial Decree No. 615 ................................. 39 2 - OCPIT's Program of Activities for 1983-1984 .... ............41 3 - Terms of Reference for Technical Assistance for Highway Engineering Training ..................................... 42 4 - Terms of Reference for Technical Assistance for the Management of Equipment Fleet and Workshops .... ..........46 5 - Details of the Economic Evaluation ......................... 50 6 - Project Monitoring Indexes ................................. 59 7 - Related Documents and Data Available in the Project File ... 61 MAPS IBRD 12831R - PARAGUAY, Main Highway Network IBRD 12832R2 - PARAGUAY, Highway Network: Bank Projects I. INTRODUCTION Since this is a repeater project, the Staff Appraisal Report has been simplified; it includes only a general overview of the highway subsector, a description of the Bank's involvement in the subsector and details of the project components, cost estimates, financing, implementation and monitoring. A. Sector Background i.01 During the past five years, while GDP grew at an average rate of 8.8% p.a., the transport sector of Paraguay has accompanied economic development with a relatively steady 3.3% of GDP. During the same period, transport investment has averaged 24% of fixed public sector investment and about 2.5% of GDP. Landlocked, with a primnarily high-volume/low-product- value based economy, Paraguay relies heavily for its continued economic development on its transport system and the connecting links to major ports in neighboring countries. Domestic traffic is basically attended by road transport, while foreign trade is carried by river transport (79% of imports and 39% of exports in 1979) and road transport (18% of imports and 53% of exports in 1979). Railway traffic is of minor importance. Air transport demand is growing moderately, and, although low in absolute terms, domestic services are important, particularly in regions where they constitute the only means of rapid access for passengers. An indicator of the importance of, and the need for, efficient transport is the fact that freight costs amounted to 23% of the f.o.b. value of exports and 14% of the f.o.b. value of imports in 1979. 1.02 Paraguay has steadily pursued the task of building its primary network. Main roads have gradually been upgraded to paved standards. The paved road network now totals about 1,500 km against 470 km in 1965. About 85% of the estimated 10,300 km of highways are unpaved, generally built without adequate standards and drainage systems, and are closed to vehicular traffic an average of 100 days per year during rainy periods to prevent deterioration. The rapid growth of agricultural production and the expansion of cultivated acreage have multiplied the need for betterment of feeder roads. Several rural development and highway projects include specific feeder road components. Another important step has been the creation, under the latest Bank project, of the Feeder Roads Unit (UCR) within the Ministry of Public Works and Communications (MOPC). UCR would provide the capability needed to plan and coordinate the expansion of the network of tracks and rural roads in developing areas. A Feeder Roads Coordinating Committee, including representatives from the Rural Welfare Institute (IBR), the Ministry of Agriculture (MAC) and MOPC has also been established. - 2 - 1.03 A third element of the road policy has been the buildup of road maintenance capability. Since 1960, successive prograns have supported the growth of a modest and uncoordinated maintenance department into a country- wide organization which, although still facing significant constraints, is proving capable of maintaining reasonable levels of serviceability on the main roads. Since the mid-1970s, control of overloading has been a component of the maintenance policy. The major issues currently facing the transport sector, including the highway subsector, are the lack of a comprehensive planning and management system and the shortage of trained personnel. 1.04 Transport sector planning, including highway planning, is not carried out as a systematic and continued task. Over the last 20 years, several medium and long-term transport plans and investment programs have been prepared with UNDP or Bank financing. They have provided a framework to support the basic objectives of expanding and upgrading the primary road network and, later on, to set up the maintenance system. Paraguay's trans- port system has grown in complexity and size. Expansion of the basic