World Bank Document

RESTRICTED RETURN TO Re REPORTS DESK WH153 WITHIN Vol. 5 __1QE WEECK This report was prepared for use within the Bank and its affiliated organizations. Public Disclosure Authorized They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized ECONOMIC ]?OSITION AND PROSPECTS OF PARAGUAY (In five volumes) VOLUME V Public Disclosure Authorized Annex IV: Transportation in the Paraguayan Economy December. 27, 1965 Public Disclosure Authorized estern Hemisphere Department CURRENCY EQUIVALENTS Unit Guarani (a7') US$1 r=126 a$1 = US $0. 008 (I 1, 000 = US $7. 94 (I 1, OOt), 000 = US $7, 936.50 TRANSPORTATION IN THE PARAGUAYAN ECONOMY ANNEX IV: ECONOMIC POSITION AND PROSPECTS OF PARAGUAY TABLE OF CONTENTS Page N 0 STJiMARY AND CONCLUSIONS . ............................... i I. INTRODUCTION ........................................ 1 II. RIVER TRANSPORT ........................................ 5 A. The Navigability of Paraguay's Rivers ..... ......... 6 B. River Ports ........................................ 8 C. River Fleet ........................................ 10 D. Flota Mercante del Estado ........ .................. 11 III. HIGHWAY TRANSPORT ...................................... 15 IV. THE PARAGUAYAN STATE RAILROAD . ......................... 24 LIST OF TEXT TABLES AND 1MAPS Following Page No. Section I: Table 1 Exports of Paraguay by Product and Country of Destination, 1963 and Projection by Product to 1970 1 Map 1 Population of Paraguay 2 Map 2 Mapa de la Republica del Paraguay, II;.O.P.C. 3 Section II: Table 1 Identified Passes on the Paraguay River Between Confluencia and Asuncion 7 Map Rio Paraguay, Entre Asuncion y Confluencia 7 Table 2 Duration of Water Levels in the Paraguay River 7 Table 3 Increase in Navigability of the Paraguay River from Deepening Channel 8 Table 4 Ships of the Flota Mercante del Estado, 1964 11 Table 5 Participation of F.M.E. in Transport of Paraguay's Foreign Trade 12 Table 6 Exchange Earnings of F.M.E., 1964 12 Table 7 Financial Results of F.M.E. Vessel Operations, 1963 13 TABLE OF CONTENTS (Continued) LIST OF TEXT TABLES AND MS Continued) Followig Pe Noo, Section III: Table 1 Highway Distances in Paraguay 15 Table 2 Road Network by Type of Construction 15 Table 3 Days Miajor 'Routes Closed from Rain, 1964 19 Table 4 Revenue from Gasoline Taxes and Similar Duties, 1964 20 Section IV: Map 1 Ferrocarril Central del Paraguay 24 Table 1 Personnel of the FCAL Railroad 25 Table 2 Traffic of the PCAL Railway 26 Table 3 Annual Profit and Loss 26 Table 4 Balances of the Ferrocarril Presidente - Carlos Antonio Lopez 26 Table 5 Average Monthly Train-Kilometers, 1964 26 Table 6 Development of Railroad Costs, 1962-64 27 Table 7 Railroad Freight Traffic With Argentina and Total Commerce 30 Table 8 Tons of Railroad Freight Received and Originated 30 Table 9 Projected Railway Revenues and Expenditures 31 SUNN ARY AID CONCLUSIONS 1. Transport in recent years has absorbed the largest share of the resources available to the public sector for investment. Within transport, road construction has been given first priority. To judge the efficacy of past investments, the viability of the present transport system, and to indicate guidelines for future transport investments and policy, it is necessary to keep in mind a number of the salient characteristics of Paraguay's geography and economy: (a) Paraguay is a land-locked country linked to the Atlantic Ocean by the Parana-Paraguay River. The great bulk of the country's imports and exports overseas are transhipped at Buenos Aires. The cost of the transhipment plus freight rates between Beunos Aires and Asuncion make total transport costs for these goods high. The Paraguay River is subject to sharp seasonal and cyclical fluctuations in depth, at times requiring a second transhipment below Asuncion when the water level is low. It may well be, however, that significant improvements are possible in the navigability of the river. (b) To the west of the Paraguay River the country is nearly perfectly flat, while to the east the land is flat or rolling. Iuch of the land is poorly drained and heavy rainfall makes road maintenance difficult and costly because most roads have not been built to all- weather standards. Construction materials are scarce and no petroleum has been found. (c) Total population is only about 2 million and is poorly distributed. While the immense Chaco to the west of the Paraguay River is literally empty, population is concentrated around Asuncion and in a narrow corridor stretching southeast from Asuncion toward Encarnacion, characterized by minifundia. (d) The economy is based primarily on agricultural, livestock, and forestry production, both for domestic consumption and for the critically important exports. These sectors are also the key to the future growth of the economy, especially livestock and agricultural exports. (e) Distances among the populated centers, especially to the east of the Paraguay River, are relatively short. - ii - 2. Taking into account these characteristics, it is immediately evident that trucks and buses will provide nearly all the internal transport that Paraguay requires. W4hile river transport filled this role in the past, the distances are far too short and the traffic volumes too light for river craft to be able to compete with trucks once adequate roads exist. 3. The roads which have been selected in recent years for construction and improvement are intended to open up new lands for. coloni- zation and to provide land routes for exports and imports to reduce dependence on river transport through Argentina. The choice of routes has in general been good. It is recommended, however, that efforts be made to consolidate the advances already made and to obtain as much benefit as possible from the roads which have been constructed. This implies: (a) An adequat;e maintenance program to protect present roads and a rigid enforcement of vehicle axle-weights. (b) Dedication of most resources to the construction and improvement of feeder roads to important main trunk roads rather than concentrating on costly new long penetration routes. 4. Because of the presently low traffic volumes on most of the country's roads, road improvement, leading eventually to paving, should 'be coordinated closely with traffic increases. Stage construction is especially appropriate in Paraguay, but for this to be successful it is essential that all work be concentrated on what will eventually be the definitive routes. 5. The selection of future roads to be constructed and the timing of progressive road improvement are no longer intuitively obvious. For this reason an adequate planning mechanism is required which at present does not exist. Paraguay must continue to spend large sums on roads for the itdOfitite future and planning'is essential if a high economic return on these investments is to be obtained. 6. Although there is a railroad line between Asuncion and Encarnacion, it is desirable that this mode of transport be phased out over the next three to five years and that railroad traffic be absorbed by trucks and buses. Despite the intelligent management of the railroad since it was bought from the British, it is clear that the railway is uneconomical and that attempts to keep it in service would become increasingly burdensome for the government. 7. The basic mode of transport for Paraguay's exports and imports will continue to be river transport for some time to come. Steps should be taken, however, to increase the efficiency of this mode so as to permit regular service at a lower total cost. The most important areas in this regard are the following: - iii - (a) A study will shortly start to determine if improvements in the navigability of the Paraguay River are technically and economically feasible. Should the results of this study be positive, a program shculLd immediateLy be prepared to make maximum use of the potential of the river. UJntil the study is completed, care should be taken to assure that any investments made are compatible with the possibility of an unfavorable result. (b) The capacity of the port of Azuncion should be increased. (c) The causes of the high cost of transhipment at Buenos Aires should be investigated and appropriate measures adopted. An alternative transhipment port in Uruguay should be developed. (d) Measures are necessary to reduce the presently onerous requirements for the use of the Parana-Paraguay River. (e) Future acquisitions of vessels for use on the rivers should take carefully into account the economic trade-off between the advantages of using ships of large capacity and the cost of transhipment up-river during low water. All ship purchases for the Paraguay River should be postponed until the study on the possibility of navigational improvement is finished. 8. While most of the country's exports and imports will be trans- ported on the rivers, the highway from Asuncion through Puerto Presidente Stroessner which terminates in the Brazilian port of Paranagua, on the Atlantic Ocean, offers a promising alternate for a few products, especially perishable items, provided the road is improved on the Brazilian side. I. I'TRODUCTION 1. There is surprising unanimity among the many economists who have studied Paraguayis economic development and have recommended poli- cies to hasten it as to the strategy which is appropriate at this time to break the prolonged period of near stagnation. The strategy which is recommended concentrates primarily on the expansion of agricultural exports as being that sector of the economy capable of exercising a significant impact on growth throughout the entire nation. This unanimity of opinion is a considerable help to the transport planner because it provides him with a good base on which to evaluate the adequacy of the present transport system as well as the areas where the return on new transport investments would be high.

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