Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

48692

PROJECT PAPER Public Disclosure Authorized

ON RESTRUCTURING THE

URUGUAY: TRANSPORT INFRASTRUCTURE MAINTENANCE AND RURAL ACCESS PROJECT

February 15,2007 Public Disclosure Authorized

Public Disclosure Authorized Sustainable Development Department Latin America and the Caribbean Region

UR - Transport Infrastructure Maintenance and Rural Access Project (Loan 7303) Project Paper

A DATA SHEET

Date: February 15,2007 Task Team Leader: Jorge Rebelol Andres Country: Oriental Republic of Uruguay Pizano Project Name: Transport Infrastructure Sector Manager: Jose Luis Irigoyen Maintenance and Rural Access Country Director: Axel van Trotsenburg

Colonia 1089, Piso 3, 11100, Montevideo, Uruguay

2

B Introduction 1. This Project Paper seeks the approval of the Vice President to introduce changes in the Uruguay - Transport Infrastructure Maintenance and Rural Access Project (the Project)- Loan 7303 - P057481, and any accompanying amendments to the Project’s legal documents (the Loan Agreement and Implementation Letter). The proposed changes reflect the inclusion of rehabilitation of new roads and reconditioning of bridges in Schedule 2 to the Loan Agreement and Annex C to the Implementation Letter, under the Corporacibn Vial del Uruguay’s (CW) execution. The works included had been part of the Forest Products Transport Project (the FPTP financed in part with Loan 4204) but were not completed due to a lack of fiscal space and consequent reduction in budgetary allocations to the Ministerio de Transporte y Obras Publicus (MTOP). As a result of the proposed changes, new rehabilitation of roads would be added and some reinforcing of bridges would be replaced. These changes would be done while maintaining all the road rehabilitation and the bridge reinforcing on key international corridors that were originally included in the design ofthe Project. Section 4 ofthis paper provides details of the roads added and bridges being replaced.

C Background and Reasons for Restructuring 2. Uruguay’s economy depends very much on its road network for the movement of goods and passengers since other modes such as rail cannot deliver the same level of service. The road network also plays a very important role in the facilitation ofUruguay’s exports and in attracting foreign direct investment in processing plants for products such as forest products. In the last 15 years, the country benefited from the Bank-financed Second Transport Project (STP) and the FPTP, which contributed to the increase in the quality of road corridors through rehabilitation and maintenance, including through private sector schemes such as Contrato de Rehabilitacion y Mantenimiento (CREMA) contracts. In 2005, Uruguay signed a new loan to finance the Project, which is the subject ofthis amendment.

3. During the last 15 years, the MTOP embarked on a major effort of modernizing the transport sector that included (i)reorienting the functions of transport agencies towards policy making, planning, regulation and control, rather than execution activities; and (ii)allowing for increased private sector participation in the sector through outsourcing and concessions. On the whole, the reforms have succeeded in improving the quality of transport infrastructure and services, as may be measured by the condition of the road network and its weathering of the crisis and by the important improvements in port productivity and costs.

4. The Republic of Uruguay’s (RoU) road management strategy is based upon the use of performance based instruments, including: (i)private sector participation mechanisms, such as road concessions, performance-based maintenance contracts, and maintenance by micro-enterprises; (ii) the concessions with CW (former

3 Megaconcession), an innovative scheme for channeling funding towards the performance-based maintenance ofkey sections ofthe network; and (iii)an output-based maintenance scheme for departmental roads.

5. The Project was approved by the Board on June 9,2005 and became effective on July 4, 2005. The Project’s Development Objective (PDO) is to upgrade the country’s transport infrastructure to a condition that facilitates the transportation of freight and passengers at a cost-efficient level of service. To achieve the PDO, the Project intends to rehabilitate key transport links, remove existing bottlenecks, arrest any further deterioration of infrastructure due to budgetary constraints and improve infrastructure management and safety. Total Project cost is US$ 100 million of which the Bank is financing US$70 million through Loan 7303.

6. The Project is performing in a satisfactory manner. Based on the latest supervision mission carried out in November 2006, the achievement of the PDO was rated marginally satisfactory, essentially due to delays in implementation. The implementation of the Project was also rated marginally satisfactory, due mainly to budgetary constraints requiring the administration to wait for the approval of the new budget in March 2006. There are no audits outstanding. Finally, the Project is still at an early stage but has already disbursed about US$ 10.87 million (14.5% of the loan). The implementation of the Project is proceeding marginally slower than planned but the preparatory work is in line with the main objective of improving cost efficiency of transport.

7. The proposed restructuring would enable the completion ofroad and bridge works that were part of the FPTP but could not be completed before loan closure in April 2006, because of severe fiscal space restrictions that constrained the MTOP’s budget. These budgetary constraints were triggered by the compliance of targets agreed between Uruguay and IMF, as part of a program to improve the fiscal situation of the country which was highly affected by the Argentine macroeconomic crisis. One direct implication is that several capital investments planned could not take place or were delayed due to uncertainty in budget allocation, as priority was given to the maintenance of existing roads which were key to the economy. Loan 4204 was amended to help the country deal with the crisis. As a result, some road and bridge works initially planned under Loan 4204 could not be undertaken before the approval ofthe new budget in March 2006.

D Proposed changes 8. The Bank received on August 30, 2006 a request from the MTOP to modify the Schedule 2 to the Loan Agreement, Annex C to the Implementation Letter and update the procurement plan referred to in the Loan Agreement, in order to substitute road and bridge works by others initially planned in the Loan 4204.

4 Description 9. The proposed changes in the Project’s design have high priority and are consistent with the original PDO. These changes consist of replacing a number of sub-projects included in Schedule 2 to the Loan Agreement and Annex C to the Implementation Letter with roads that had originally been part of Loan 4204 and were not completed because of budgetary restrictions. The works initially planned under the Loan Agreement and being replaced will be undertaken later in the period 2005-2010 by the Borrower using other sources offunding.

10. The original Project consists of 5 components, involving investment in road rehabilitation and maintenance, bridge reinforcement, transfer terminals, transport safety and institutional strengthening. The original Project’s components are described below:

Table 1: Project sescription Component Description Amount financed by Project US$ million A.l DNV (a) rehabilitation works consisting of reinforcing the 8.4 managed routes pavement structure of about 35 km of roads on national route 3 and route 18 A.2 CVU (a) rehabilitation works consisting of reinforcing the 27.6 managed routes pavement structure of 24 km of roads on national and bridges route 1, 2 and 3 and (b) carrying out of reconditioning works consisting of strengthening, widening or replacing existing structures of 20 bridges located on national Routes 1, 5, 6, 7, 8, 21, 26,28,30 and 200 A.3 Transfer Minor infrastructure rehabilitation works in several 8.6 terminal terminals rehabilitation B Road Rehabilitation and maintenance works in six road 24.85 rehabilitation and sub-networks covering an estimated 981 km of maintenance national roads through performance-based CREMA contracting - contracts. CREMA contacts C Departmental Departmental road rehabilitation and maintenance 20.6 road rehabilitation and maintenance D Transport (i)implementing low-cost measures to increase road 3.8 infrastructure safety, including roads passing through urban areas, safety program and (ii)acquisition and installation of road safety elements- - - - __ - __ __ E Transport (i)assist MTOP in the preparation of its transport 5.8

5 sector infrastructure plan for years 2005-09, (ii)training for management and capacity building and provision of new tools, (iii) institutional strengthening infrastructure management, (iv) building assisting MTOP in the preparation of an urban transport program, and (v) feasibility studies of the Montevideo ring-road and access roads projects

11. The proposed changes will update Part A.2 of the Project according to the Loan Agreement, which consists ofthe rehabilitation of CVU managed routes and bridges and will not modify any of the other components. Part A. 2 of the Project was expected to reinforce the pavement structure of about 24 km of roads and to strengthen, widen or replace the existing structure of20 bridges. The proposed changes would replace some of the works initially planned under Part A.2 of the Project by other rehabilitation of CVU managed routes and bridges and would result in the rehabilitation of 91.2 km of roads, and the reconditioning of 5 bridges for this component. The proposed changes will result in an increase of 67.2 km of roads being rehabilitated and a decrease of 12 bridges being reinforced under component A.2. The Project will finance up to US$ 27.6 million of works under component A.2 (amount which excludes the US$ 4.5 million in works already financed by Loan 4204 from the total cost of the works listed under the proposed Part A.2 of the Project). The total amount of the Loan will remain of US$ 70 million, as initially approved by the Board.

12. The roads and bridges under Part A.2 as initially described in the Implementation Letter are:

1 I Arroyo~rroyo Sauce I Bridge reconditioning 0.710.7 I 1 I ArrovoMinuanoArrovo Minuano I NewbridgeNew bridgeY 0.4 1 Arroyo Riachuelo New bridge 8 Arroyo Sarandi New bridge rn 9) 5 Rio Yi Bicycle bridge I 3 I 0.3 I 5 A. Villasboas Reinforcement 5 A. Molles Reinforcement 5 Cda. La zorra Reinforcement 0.1 6 A. Canelon Grande New bridge 0.2

6 6 A. Tala Widening and reinforcement 7 A. Fraile Muerto New bridge 21 A. Las Viboras New bridge 26 Cda. Sin nombre Widening and reinforcement

Total Roads and Bridges (US$ million) $27.6

13. Route 1 is maintained as in the original Project, with the same sections being rehabilitated under two different contracts. The bridge works initially planned on Route 1 (Arroyo Sauce, Arroyo Minuano, and Arroyo Riachuelo) and described in Table 2 were added to the road rehabilitation contracts on Route 1, described in Table 3. As a result, the total number of bridges being reinforced by the Project is 8 (5 in the CVU-managed bridges section and 3 within the CW-managed roads section for Route 1).

14. The road rehabilitation works on Routes 1, and 3, originally planned under Part A.2 ofthe Project have not been modified, but additional road sections to be rehabilitated on Routes 8 and 11 were added. As a result of the addition of new road sections to be rehabilitated, some ofthe original bridge rehabilitation and construction were eliminated. The proposed changes would result in the following works under Part A.2 of the Project, to the extent they have not already been financed under Loan 4204:

Table 3: Corn onent A.2 Ai :er Restructurin Financed Total

Forest Route I CVU-Managed Roads (including bridge works on Route 1) I Ruta54 (138km000)-Ruta 1 22 Additional lane 10.2 $ 8.2 0% $ 8.2 1 .7 Ruta 2-Ruta 54 1 (13 8kmOOO) Additional lane 10.8 $ 6.3 0% $ 6.3 Planta urbana de 3 Young Reinforcement 3 $ 0.5 0% $ 0.5 Rio Cebollati-Ao. 8 Piraraja Rehabilitation 15.3 $4.1 0% $4.1 Ao. Piraraja- 8 235kmOOO Rehabilitation 12.6 $3.5 0% $3.5 , Ecilda Paullier- , 11 Juan Soler Rehabilitation 25.6 $ 3.3 94% $ 0.2 San Jose-Villa

Total Roads and Bridges (US$ million) $32.0 $4.4 $27.6

15. The main impact of the proposed changes will result in some bridge works not being undertaken and a larger number ofkilometers of international corridor roads being rehabilitated. The additional number of kilometers of roads rehabilitated is 67.2km and the number ofbridges reduced is 12. No other components are affected.

Table

8 Pasaje Sup. Con Santin acc CRossi Overpass 2 Pasaje Superior (a determinar) Overpass 2

16. The proposed changes will result in an update of the Project’s physical outputs for Part A ofthe Project, and the outputs for the other components remain unchanged.

Tab

intained to standards under CREMA-

Component D km ofroads that have pavement markings improved to Mercosur standards 450 km 450 km Additional number ofkm with signals I according to Mercosur standards 800 km 800 km

9 number ofkm illuminated under the project 13.3 km 13.3 km

Implementing Agencies 17. The proposed modifications will not change the agencies responsible for implementation. The CVU remains the implementing agency for the works initially financed by Loan 4204 and included in the Loan Agreement. The CVU was responsible for the implementation of the works initially planned under Part A.2 of the Project, which is the only component impacted by the proposed changes.

Financing mechanism 18. The financing mechanism will not be changed following the proposed modifications. The Project is financed through a Specific Investment Loan (SIL) of US$ 70 million, under FSL terms. The financing plan remains the same, as the works initially planned under component 1 (b) and being replaced were expected to be initiated in 2006 and 2007, which is the same timeframe as the works being incorporated from Loan 4204.

FY 2007 2008 2009 2010 201 1 Annual 24.60 21.30 8.50 3.40 1.60

Project’s Outcome and Ouqput 19. The proposed changes will not modi@ the PDO and associated outcome target and outcome indicators. The PDO’s associated outcome target is that “basic transport infrastructure is maintained in a condition that facilitates the movement of freight and passengers at a cost-efficient level of service by arresting any further deterioration due to fiscal restrictions, and ensuring the preservation of existing infrastructure assets in the long term”. The PDO’s associated outcome target and indicators are maintained as described in the Implementation Letter (see section 6 for details).

20. The results indicators for each component of the Project will remain the same. The only results indicators whose value could be impacted by the proposed amendment are those for Part A.2 of the Project: (i)average roughness (IRI) and road condition (IES) of targeted International Corridors (IC), (ii)transit of trucks loaded up to Mercosur standards is permitted along Route 8, and (iii)km of national roads compliant with Mercosur standards. However, since the restructuring includes additional roads to be rehabilitated, therefore the outcome indicator values can be expected to be higher than originally envisaged. The bridges that have been eliminated from the original project do not negatively impact the route 8 outcome, as the bridge originally included in the Project on Route 8 has been maintained.

10 21. However, the Project’s physical outputs related to the first component will change as the number ofkm ofroads rehabilitated under Part A of the Project will increase from 143.6 km to 210.8 km and the number ofbridges being reinforced will decrease from 20 to 8.

22. Overall the impact of the restructuring should facilitate and improve the attainment of Project objectives and outcome targets. The impact ofthe proposed changes on the achievement of the PDO, outcome indicators, and output is detailed in section 6 of this Project Paper. The list of outcome target and indicators is described in Annex 1 and 3.

Project cost and financing plan 23. The Project will not finance the portions of the works already financed under Loan 4204 and will not change the cost of Part A.2 of the Project. As shown in Table 3, some works (2 road rehabilitations on Route 11 and the widening and reinforcement of a bridge on Route 5) were already financed partly with US$4.4 million of Loan 4204. The total cost of the proposed works listed under Part A.2 (including works already financed with Loan 4204 under the FPTP) is US$ 32 million, resulting in US$ 27.6 million being financed under the Project. Out of this amount, Loan 7303 will finance US$ 17 million, as described in Table 7, and the Borrower will provide the remaining US$ 10.6 million.

24. The Project total cost and financing plan will not be modified by the proposed changes. The changes will only modify Part A.2 of the Project and will not modify its cost. In addition, the size of CREMA contracts, consisting of rehabilitation and maintenance ofroads, can be adjusted if needed to meet the budget ofthe component. As a result, the costs of the Project, individual components and subcomponents remain the same as approved by the Board in April 2005. The amount in each category of the disbursement table in Schedule 1 to the Loan Agreement does not change and remains the following:

Category Amount of Loan Allocated US$

I (4) Front-end fee I 350.000 I (5) Premia for Interest Rate Caps and 0 Interest Rate Collars

11 (6) Unallocated 7,880,000

Total 70,000,000

Disbursement and Financial Management Arrangements: 25. The current disbursement and financial management arrangements will not be modified following the proposed changes. The implementation agency for the works initially considered under Loan 4204 (CVU) is the same as the agencies responsible for implementation of Part A.2 of the Project. The amendment would be effective as of January 1, 2006, so that the expenditures linked to the proposed changes may be recognized as of Jan 1, 2006. The disbursement and financial management arrangements will remain as those described in the Loan Agreement, and the new works under Part A.2 in the amended Loan Agreement will only be carried out as part of the Project to the extent they were not already financed under Loan 4204.

Procurement: 26. There will be no changes in Schedule 4 to the Loan Agreement and an updated procurement plan including the proposed activities was submitted to the Bank by the Borrower. The updated procurement plan was reviewed by a procurement accredited staff and cleared by the Sector Manager. The procurement risk was rated as low in the Project Appraisal Document (PAD) of the Project, following the assessment of procurement capacity ofthe implementing agency. The procurement ofthe works to be included in the Project will be done in accordance with May 2004 World Bank’s procurement guidelines and as provided in Schedule 4 to the Loan Agreement.

Closing Date 27. The closing date of the project will remain at July 31, 201 1, after which an ICR will be prepared.

E Analysis 28. The proposed changes do not modify the original economic and financial aspects of the Project as appraised. The roads being included in the Loan Agreement were filly appraised (including economic and social) for the Loan 4204. The economic evaluation of the impact of the new roads using the Highway Design and Maintenance Model (HDM) gave the same results as during appraisal. A new HDM was run for the network after restructuring and the economic rate ofreturn is the same.

29. The proposed changes will not result in outcome being counted twice. The fiscal restrictions that affected the Loan 4204 did not prevent the Project from reaching its PDO. The roads that would be included in the Loan Agreement were not completed and not included in the ex-post evaluation ofthe outcomes ofthe Loan 4204. The inclusion of the works from the Loan 4204 does not affect the economic impact ofthe Project.

30. The new works under Part A.2 ofthe Project will only be carried out as part ofthe Project to the extent they were not already financed under Loan 4204.

12 31. The compliance of the additional works with Bank’s social safeguards was reviewed and cleared by SAT. An updated resettlement framework and a resettlement plan for the proposed Part A.2 (a) (vii) of the Project was submitted by the Borrower to the Bank. The Resettlement Plan (RP) and the Resettlement Framework (RF) will replace Annex G to the Implementation Letter if this amendment is approved. The works to be included do not involve resettlement but some land acquisitions already took place for Route 5 and Route 11. SAT reviewed the RF and RP for road segments on Routes 5 and 11 and confirmed that “The Resettlement Policy Framework as well as the specific Resettlement Plans for expropriation of agricultural lands required for road rehabilitation works on Routes 5 and 11 demonstrate compliance with the Bank’s OP 4.12 (Involuntary Resettlement) Policy. The Amendment to the Loan Agreement includes appropriate references to OP 4.12, the Resettlement Policy Framework and the requirement of Resettlement Action Plan”.

32. The compliance of the additional works with Bank‘s environmental safeguards was reviewed and cleared by SAT. The following documents were provided to and reviewed by SAT: (i)procedures and criteria for the environmental screening of subprojects, such as those to be financed through the restructured Project, (ii)measures to ensure mitigation of all potential impacts identified through environmental screening, including specific Environmental Assessments for subprojects with significant impacts, (iii)application of environmental guidelines for construction and operation, which are referenced in bidding and contract documents, (iv) arrangements for environmental supervision of contractors, and (v) environmental supervision of the project by the PIU. In addition, institutional strengthening has been provided to the implementing agency to strengthen its environmental management. SAT agreed that “the strategy to manage impacts related to road rehabilitation and bridge reconditioning was appropriate from a safeguards perspective”.

F Expected Outcomes 33. The proposed changes will not affect the PDO, its outcome target and outcome indicators, as the activities added are hlly in line with the original Project.

34. The proposed changes will not modi@ the expected Project’s development outcome as the associated outcome targets (in reference to those initially set out in the Implementation Letter) will still be met. The outcome indicators that would measure the achievement of the PDO are: (i)the percentage of the road network below the optimal level of service, (ii)the percentage of the road network in bad condition as determined per the Road Condition Index, and (iii)the value of the road assets maintained equal or above the average level. The proposed changes will result in an increase in the number of km ofroads being rehabilitated by the Project, thus contributing even more to the quality of the road network. The works under Part A.2 of the Project consisted originally of the rehabilitation of 24 km of roads. With the proposed changes, a total of 91.2 km of roads will be rehabilitated under Part A.2. The outcome indicators for the achievement of the

13 PDO are all road-related, which means that they won’t be impacted by the reduction in the number ofbridges works being financed by the Project.

35. The proposed changes will not modify the achievement of the Project’s results indicators for individual components, as the rehabilitation of roads that was initially included in the Project is maintained, as well as the bridge works on key international corridors. The changes will impact only Part A.2 of the Project, which outcome target is that “targeted national roads and bridges on international corridors (managed by DNV and CVU) have adequate levels of service and are upgraded to Mercosur standards”. The first associated result indicator - the average roughness (IRI) and road condition of targeted International Corridors - will not be negatively impacted, as (i)the proposed road rehabilitation (on routes 1, 8 and 11) is on international corridors, (ii)the number of km being rehabilitated on these corridors increases as a result of the proposed changes, and (iii)the reinforcing ofthe bridges on routes 1 and 8 (international corridors) are kept. The second result indicator - transit of trucks loaded up to Mercosur standards is permitted along Route 8 - will be met as the proposed road rehabilitation on route 8 is of Mercosur standards and the construction of the new bridge on route 8 is maintained. Finally, the third result indicator - additional km of national roads are compliant with Mercosur standards - will be met as the proposed road rehabilitation on routes 1,8 and 1 1 will be compliant to Mercosur standards.

36. The proposed changes will not result in an increased risk of a reduction of the RoU’s investment program in roads and will not result in modification of the outcome targets. The proposed changes will allow the completion of the road rehabilitation on Routes 8 and 11 that could not be completed in the FPTP. The rehabilitation works on Route 1 and 3, which were included in the original Part A.2 of the Project, will be maintained in the updated Part A.2 following the proposed changes. As a result, the proposed amendment won’t impact the RoU investment program on Routes 1, 3, 8 and 11.

G Benefits and Risks 37. The proposed changes will enable the Borrower to complete works expected to be financed by the loan Loan 4204 but that could not be completed before closing date due to fiscal space limitation. By completing the works, the Borrower will support exports of forest products and other goods, as a result of a rehabilitated road network.

38. Because the works to be included are not related to the Port of Fray Bentos, the reputational risk to the Bank is considered minimal. The initial request included the completion of the pier extension that could not be finished under the FPTP. A Quality Enhancement Review on February 1, 2007 concluded that including such works would unnecessarily raise this risk, given that the Borrower could finance this investment of US$ 7.1 million with its own funds. The Borrower agreed to drop its request to include Fray Bentos in the amendment.

14 39. The proposed changes do not increase the level ofrisk ofthe Project. There are no additional risks than those identified at appraisal that could jeopardize the achievement of the PDO and outcome targets. Risks such as institutional capacity and insufficient/untimely release of counterpart funding have been already identified in the PAD of the Project and mitigated through (i)performance indicators to monitor progress and (ii)the fact that expected works are included in the newly approved budget.

40. Although the level ofrisk does not increase as a result of the proposed changes, it was agreed that additional measures would be taken to monitor the financing of the road network, to ensure that sufficient funds will be made available by the RoU from budget and other sources. As a result, yearly review of the availability and use of funds for the road network will be conducted by the Bank during supervision.

15 Annex 1 Impact on output indicators related to specific components

2 3 Project end ComDonent 1 km ofnational roads rehabilitated 40.6 119.3 210.8 under the Proiect km km km 210.8 km Number ofbridges reinforces and widened, or replaced under the 2 5 8 Project bridges bridges bridges 8 bridges Component 2 km ofroads rehabilitated under CREMA-type 13 15 contracts km km 15 km 15 km km ofroads rehabillit at ed and/or maintained to standards under CREMA-type 512 98 1 98 1 contracts km km km 981 km Component 3 km of departmental roads maintained to satisfactory standards under the 0 9,000 9,000 9,000 km (2 Projects km km km years) ComDonent 4 km ofroads that have pavement markings improved to Mercosur 0 450 standards km Okm km 450 km Additional number ofkm with signals according to 0 8 00 Mercosur standards km Okm km 800 km number ofkm illuminated under 0 11,7 the project km km Oh 13.3 km

16 Annex 2 Impact of propc ed changes on PDO and outcome idicators PDO Outcome Indicators Impact of Proposed Changes Basic transport Percentage ofthe road network The proposed changes will ifnrastructure is maintained below the optimal level of service result in an increase in the total in a condition that Percentage ofthe road network in number ofkm being facilitates the movement of bad condition as determined per rehabilitated in component 1B, freight and passengers at a the Road Condition Index which will result in the same cost-efficient level of Value ofroad assets is maintained or a better condition ofthe service by arresting any equal or above the average level road network. The further deterioration due to rehabilitation ofroads fiscal restrictions, and originally planned by the ensuring the preservation Project have been maintained ofexisting infrastructure assets in the long term Intermediate Results for Component 1 Results Indicators Impact of Proposed Changes Average roughness (IRI) and road Roads 1, 8 and 11 are all condition (IES) oftargeted international corridors, and the International Corridors number of kms being rehabilitated on these roads increases as a result of the proposed changes. The Targeted national roads and reinforcing bridges on routes 1, bridges on international and 8 (international corridors) (managed by DNV and are kept CVU) have adequate levels Transit of trucks loaded up to Road rehabilitation on route 8 of service and are upgraded Mercosur standards is permitted is of Mercosur standards and to Mercosur standards along Route 8 new bridge is maintained from Drevious design Additional km ofnational roads The proposed changes will are compliant to Mercosur result in the rehabilitation of standards sections on route 1, 8 and 11, which are all of Mercosur Standards

17 Annex 3 Project's PDO Outcome Indicators

Outcome Indicators Baseline Targ 35

YR YR YR YR YR YR 1 -2 3 4 -5 6 Cost Efficiency 9% for Percentage of the 11% for the Percentage of the road national roads flexible flexible network below the optimal below optimal level pavement pavement level of service of service is 16% network network for the flexible pavement network 15% for the and 20% for the 13% for entire total network the entire network network - - Arresting further deterioration

Percentage of the road network in bad condition as determined per the Road Condition Index 29.5% 25.0% 25.0% (Indice de Estado de Conservacion Vial-IES)

road assets

Value of 4ctual value:US$ Value of road The value of National road 2004: US$2148 assets is at Road assets is assets million (0.65% least 1% maintained equal or reaches 3elow median above the above the median of the median Jalue) median level theoretical maximum and level minimum admissible values as defined per ECLAC's methodology

18 Annex 4 Road Corridors in Uruguay

Clasificacion Red Vial

19