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INTATIONAL BANK POR RECONSTRUCION AND DVELOPMT INTERNATIONALDEVELOPMENT ASSOCIATION Public Disclosure Authorized

APPRAISAL OF

THE ZIHUATANEJO TOURISM PROJECT

MEXICO Public Disclosure Authorized

December 7, 1971 Public Disclosure Authorized

Tourism Projects Department CURRENCYEQUIVAIENTS

Currency UUnit = Peso US$ 1.00 = 12.5o pesos 1 peso (Mexo) - us$ o.08 1 million pesos u US$ 80,000

UNITS OF WEIGHTAND MEASURES: ?ETRIC

Metric: British/USEquivalente

m2 = 3.28ft. 1 m = 10.76 sq. ft. 1 km = 0.62mi. 1 km2 = 0.386sq. mi. 1 ha = 2.5 acres 1 m ton = 0.98 lg ton 1.1 US sh ton

PRINCIPALABBREVIATIONS AND ACR0TNY1SUBED

IDB = Inter-American Development Bank INFRATUR= Fondo de Promocion de Infraestructura Turistica SOP é Secretaria de Obras Publicas SRm - Secretaria de Recursos Hidraulicos ILO = International Labor Organisation RAMSA = Radio Aeronautica Mexicana, S.A. ASA = Aeropuertos y Servicios Auxiliares NACOA Nacional de Combustibles de Aviacion

FISCALYEAR

January 1 - December 31 APPRAISALOF THE ZIHUATANEJOTOURISM PROJECT

TABLE OF CONTENTS

Page No.

SUMARY i

1. INTRODUCTION 1

2. BACKGROUND 1 A. The Economy 1 B. The Tourism Sector 2

3. THE PROJECT 6 A. Background 6 B. Description 7 C. Fhysical Planning 9 Environmental Factors 10 D. Cost Estimates 11 Amount of the Loan 12 Diabursements 12 Procurement. 13 E. Execution 13 F. Organization for Operation 15

4. SUPPORTINGSERVICES 16 Housing 16 Training 17

5. JUSTIFIChTIOII 17 A. Market Demand 17 B. Hotel Development 19 C. Econonic Justification 20 Economic Return 20 Emiployment and Income E*fects 21 Direct Balance of Paymente Effect 22

6. FINANCIALASPECTS 22

7. RECCMENDATIONS 25

Th$s report is based on the findings of a projeot appraisal misaion consisting of Mesars. Sinmona, Vera, Duarte (Conaultant), Zetter- otrom, Thys, Willians, Menezes, Iizuka, Ru.fini (Central America and Caribbean Department) and Paraud. Desk evaluationa of certain elemente of the project were made by Mesars. Ribi, Le Moigne, Nalkaní and DeLima. -2-

Table of Contenta (Cont'd.)

STATISTICAL APPENDIX Page No.

Tables 1 - 25 28

ANNEXES Annex No.

Market Demand 1 Infratur 2 Airport Development 3 Water Supply, Sewerage and Storm Water Draínage Project 4 Economic Justification 5

CHARTS Chart No.

Sahedules of Duplementation, Expenditures and Disbursement 1

MAPS Map No. Ixtapa-Zihuatanejo Tourism Project Location and Land Use 1 Existing Zihuatanejo Airport, Topographic Obstructions 2 Coacoyul International Alrport, Master Plan 3 Coacoyul International Airport, Approach Termndal Procedures, Airport Sfrfaces and Terp's Safety Areas 4 i o*¿sv

APPRAISAL OF THE' JIHUATANEJOTOURISUI PROJECT

STMIARY i. This report appraises a project to provide the infrastructures required for a new tourist resort near Zihuatanejoon MexicoWs Pacific coast (see Map 1). The resort would in ite first atage covering a períod of 8 to 9 years provide 3,500 hotel roorns and 500 single family houses, but its ultinate capacitywjould be about 10,000 hotel rooms and 1,500 houses. The project is one of two now being developedby the Federal Governnent. The Inter-AmericanDevelopment Bank made a loan of US$ 21.5 million in August, 1971, for the second, located on the coast of Yucatan. ji. Internationaltourism has developed rapidly in Mexico in the last decade. Visitor numbers increasedthree-fold over the decade to reach 2.2 million in 1970. Foreign exchange earnings from tourism increasedby 14% annually,more than double the growth in earnings from conmodity exporte. Tourismn is now Mexico's largest single source of foreign exchange earnings. iii. The principal destinations of foreign visitors, apart from bor- der towns, have been Mexico City and Acapulco. Acapulco is already becoming congested and it, like smaller tourist centers on the Pacific coast, suffers from serious deficienciesin infrastructurewhich can be put right only after careful planning ard with heavy investmente. To meet the prospectivegrowth of demand for beach based tourism -- traffic is expected at least to double by 1980 -- the Mexican author- ities selected t'jonew resorts for early development,while the neces- sary planning for Acapulco and other establishedcenters could be pushed forward. iv. The little torm of Zihuatanejois located on the Pacific coast about 180 km north-west of Acapulco. It lies on a deep bay surrounded by green hills. Mountains rise inland and beyond the bay extensive palm-fringedbeaches of fine sand stretch to the north and south inter- apersed with rocky headlands and with a number of emall islands off- shore. The focus of the tourism developmentwill be a beach about 5 km north-west of Zihuatanejo,where there ¡a apace to develop in a setting of great natural beauty, hotels and private homes shopping centers, golf courses, a marina and ancillary facilities. )The proposed project comprises three main components. The first includes the principal infrastructures-- roads and streets, water and sewerage systems, qlec- tric power and telephones -- needed to develop the resort itself.X/The secondconsists of the principal infrastructuresin the tawn which will be developed as a service center for the main resort, but also as a - ii - secondary tourist attraction. The third main component of the project wíll be an internationalairport about 10 km south-eastof Zihuatanejo, designed to cater for non-stop flights from major U.S. cities. The project includes, in addition, provision for training of hotel personnel and for further stud- les of tourist resort areas. v. The justification for the proposed investment in infrastructure ¡a the expectation that private investora will subsequently build hotela and homes. Investnent in hotela in Mexico has yielded attractive returns in the past, and a strong interest in the new development has been expressed by potential developera though no binding cammitmenta have yet been made. There are, however, risks involved in investing in a new resort which rapidly diminish once it ¡e established. In these circumatances, the Fed- eral Government has agreed that it will, if necessary, take steps, includ- ing the provision of finance, to ensure that 750 hotel rooms will be built and operating not later than 1976. vi. The project is estimated to cost US$ 44 million aquivalent, inclucí- lng contingencies. The proposed Bank loan of US$ 22 million would cover 50% of the total project cost. The balance of the required financingwould be provided by the Federal Government. vii. Contracts for constructionand equipment to be financed by the Bank would be awarded after international competitive bídding, except for small civil works contractswhere it ia proposed that national bidding only be required. The foreign exchange componentof the total project cost would depend upon the outcome of internationalbidding. Assuming, however, that Mexican contractorswere to win the major construction contracts, as is likely, the foreign exchange ccmponent of the total project cost would be about 30% or US$ 13.3 million.

ViiI. As the project is part of a larger program of investments, includ- ing hotela, ita econmmic evaluation has been made in terma of this larger program. Net benefita would be measured by expenditures of visitors to the resort leas the cost of operating all the facilities, including the hotels, With an estimated economic life of the project of 25 years, the internal econamic return on the whole program would be 13.1%, if labor is valued at prevailíngwage ratea. Since the program would employ many unskilled workers who are now under-employedor unemployed,unskílled labor has been priced at 70% below currentwage rates. On this basis, the internal eco- nomic return would increase to 19.4%. Net foreign exchange earnings are estimated at US$ 36 million in 1980 and US$ 53 million in 1986 when all 3,500 hotel rocis are in full operation. ix. The project la suitable for a Bank loan of US$ 22 million eqt'iva- lent for a term of 25 yeara including a grace period of 5 years. The bor- rower would be Nacional Financiera, S.A. l:EXIcO

APPRAISAL OF TIE ZIHUATANEJOTOURISM PROJECT

1. IIlTRODUCTION

1.01 In 1968, the Government of Mexico indicated an interest in obtain- ing assistance from the Bank in financing the infrastructures required for meti tourism developments. Early in 1969 the Government suggested that the Bank consider three sites for developmentalong the Pacific coast -- Puerto Vallarta$S4anzanillo and Zihuatanejo. Subsequently,in the course of project identificationand preparationmissions in 1969 and 1970, agreementwas reachedthat attention should be focussed on one project at Zihuatanejo,located on the coaut about 180 km north-west of Acapulco.

1.02 The project consists of the infrastructurerequired for the devel- opment of a new resort near Zihuatanejowhich in its first atage wifllcom- prise hotels with 3,500 roons and 500 private houses. The infrastructure includea an internationrlairport, roada and streeta, water and sewerage systems, electric power, telephones and ancillary services.

1.03 Due to its complexitythe project has required about two years for its preparation,during iuhichtime it has been substantiallymodified. For the samrereason, an unusual nunber of Bank staff were involved in ita evaluation. The appraisalmission itself consisting of Messrs. Sinmons, Vera, Duarte (Consultant),Zetterstromr, Thys, Williams, Menezes, Iizuka and Ruffini completedits field work in June 1971. Mr. Paraud had earlier evaluated the road elementa of the project. Deak evaluationsof certain elements of tlieproject were made by Mesera. Ribi, Le Moigne, Malkani and DeLima.

1.04 This would be the first Bank loan for tourism in Mexico.

2. BACKGROUND

A. The EconopZ

2.01 lMexico has achieved a fast rate of economic graoth (7.1% p.a.) in the past ten years. Ita population of 50 million has been growlng rapidly, by 3.5g annually. The gross domestic product at current market prices was estimated at US$ 34 billion equivalent in 1970 and per capita income at about US$ 670.

2.02 lIexicols economny is quite diversífied with manufacturingcontri- butimngabout a quarter of GDP and services almost a half. Fast rates of growth have been achieved in various branches of industry some of which 2-

have enjoyed high tariff protection. The rapid growth of GDP in the 1960a has been accompanied by a growing demand for imports, mainly investment goods, fuels and raw materialas. Earnings from tourism have financed a growing share of the country's imports.

2.03 If past GDP growth rateo are to be maintained, imports will need to grow by about 9-10 percent annually. Because of the importance of agricultural exporte with a li:iLted growth potential, merchandise exporta are not expected in the longer run to maintain the past decadets growth trend. In this context the fast growth in tourism receipts would be particularlyimportant for the future developmentof the ecomomy.

2.04 Notwithstandingthe marked growth of the economy in the past dec- ade, widespreadunemployment and under-employmentof labor persista. Moreover, the regional imbalance in unemploymentlevels íe accompanied by longatanding dispar-tiee in levela of income between the leas and more developed regions of the country. Tourism requires lees capital investmentto create one job opportunitythan most other productivesec- tors in Mexico (Table 1), and as many areas of tourism potential are located in the poorer regionB of the country, their developmentcould contributesubstantially to alleviatingregional disparitiesin employ- ment and income.

B. The Tourism Sector

2.05 MXexico,with beautlful and dramatic scenery, a warm climate, extensive and largely undeveloped beaches on both the Caribbean and Pacific coasts, remarkable archaeological sites, particularly of the Toltec, Aztec and Mayan cultures, a wealth of Spanish colonial archi-. tecture and cultural traditions in the arta, music and dance of extraordinary variety and color, offera attractions for the touriet which can be matched bmr few other countries. These assete, together with the country'sproximity to the U.S., with which it ahares a 2,000 mile border, have attracted an increasing flow of visitora in the past and constitutean lmportantpotential for the future.

2.06 The rapid growth in tourism has been mainly a phenomenonof the past decade, although even in 1946 Mexico received more than a quarter of a million foreign visitors. Growing prosperity in the U.S. and Canada, the provision of direct air access to various destinationsin Mexico and the rapid expansion in accomodation combined to make this growth possible. Visitor numbers increased three-foldover the decade to reach 2.2 million in 1970 (Table 2). These visitors tour the inte- rior of the country and are to be distirguishedfrom the Mexican-U.S. border traffic, estimated at more than 70 million visitors in 1970. - 3 -

2.07 Mexico's gross foreign exchange earnings frcmn tourism amounted to US$ 575 million in 1970, excluding visitor transportationand bor- der traffic, second only to Spain among the developingcountries. The growth rate averaged 14$ per annum in the past decade, as compared with a growth rate of 6.5% annually in earninga from commodíty exporte. As a proportion of total receipta from ex,ports of goods and servíces, tourism receipta rose frem 11% to 18% over this períod. With the high proportionof visitors (87%) from the U.S. (Table 3), average visitor expenditures are relatively high, about US$ 21 per day, with even higher averages (US$ 31 a day) for visitors arriving by air.

2.08 litthregard to employment, recent studies estinatu tlhat for every million dollars apent by visitors to Máxico, 585 persona find employment directly and indirectly. On this basis, it is estimated that the tourism sector in Mexico currently employs approximately 340,000 persons, 2% of the economically active population.

2.09 In the past a majority of foreign visitors arrived by road, the bulk from border states, Texas, California, Arizona and New Mexico. This is gradually changing and road transportation is ylelding to avia- tion as the dominant mode of transportation of visitors as more dia- tant destínationsare opened up and the costs of air travel decline. The growth of air traffic to destinations such as Acapulco and Puerto Vallarta has been particularly rapid since international airports were opened at these cities which permitted direct flights fram the U.S. (Annex 1).

2.10 Climatic conditiona make Mlexico an all year round destination, and visitor flows to Mexico show only a minor degree of seasonality (Table 4). The small peaks in June through August and December reflect partly the vacation perioda in the U.S. and partly the differ- ences in cltrnatic conditions in the two countries. As a result, tour- ist facilities generally experiencerelatively high occupancies, much above those prevailing inmost other touriet destinatione.

2.11 The high occupancies have made investment in new capacity attractive,and Mexico la one of the few ímportant tourist-receiving countrieswhere the sector has until now received no significant incentivesor subsidies from the state. Until the end of the 19601s, the supply of accommodationgrew more elowly than demand, but in the past three year8 there have been very large additions to capacity, particularly in Mexico City and Acapulco, and occupancy rates have declined. In 1970 there was a drop in the rate of growth of visitor arrivals to Mexico, probably reflectingin part the recession in the U.S., but average room occupanices inMexico City were atill above 60% and will rise again as traffic grows, since further additions to capacity are likely to be amall in the next several yeare (para. 2.13). -4-

2.12 Apart from towns near the U.S. border, Mexico City and Acapulco have been the principal visitor destinations in Mexico. These two cit- ¡es have only a quarter of accommodation capacity in the country which totals 133,000 rooms (Table 5), but approximatelya half of all capac- ity in hígher category hotels (3M,000rooms) which are mainly used by foreign visitors. Capacity of the latter has approximatelydoubled in the past decade. Destinationsattracting much smaller nmnbers of foreign visitors include resorts on the Pacific coast, such as Puerto Vallarta and Manzanillo,and Guadalajara,Mexico'a second largest city.

2.13 Shile complete data on planred additions to capacity in all of Mexico are limited, projecte underway will add some 2,000 rooms in Aca- pulco, increasing by 25% capacity in higher category hotels there in the next year. There are líkely to be only small additionsto capacity in Mexico City during this period, but there should be sufficient capac- ity in these two centers together with minor additionselsewhere to meet the likel¡ growth of demand in the early 1970's.

2.14 In the longer term, further additionsto capacity will be required. New hotels will be needed in Mexico City as the principal destination of foreign visitors. Further expansion at Acapulco would be possible,but it would need to be on a better planned basis than heretofore. In some respecta Acapulco is already becoming congested and there are serious problems resulting from inadequate infrastruc- ture and pollution. The Méxican authorities are aware of these prob- lems and of the potential threat to one of the country's principal tourist asset9. Studies are required and the Bank has been asked for asaistance on the technical aspecta. Even though solutione wlll be found, it would be quite unrealistic to assume that in the longer-run the groilng demand for beach-based tourism could be met mainly in Aca- pulco. In these circumstances the lbxican authoritieshave rightly consideredthe need to encourage developmentat other sites on the coast. In 1969 the Federal Governmentauthorized the Bank of Mexico to create an organization-- Fondo de Promocionde Infraestructura Turistica (Infratur)-- to promote the development of infrastructures needed for the tourist industry (Annex 2).

2.15 In view of the difficulty and slowness of planning and imple-- menting major improvements in existing centers where there are estab- lished interests, Infratur has until noujconcentrated its efforta in developing two new sites, one at Zihuatanejoon the Pacific coast and the othor near the north-easterntip of the coast of Yucatan. In selectingthese areas for early development,the authoritiestook into account both the exceptionaltouristic attractionsof the sites and the fact that both are located in poorer regions of the country,where the social and economic impact of the projects would be relatively enhanced. Both projects are approximatelyequal in size, each involv- ing the provision of about 3,500 hotel rooms over the next ten years - 5 - plus a number of private residences. The Inter-American Development Bank has recently approved a loan of US$ 21.5 million for the project in Yucatan. In the future, further geographical diversification will be required to tap other segments of the market (para. 2.17) and with this in view the Bank has been asked for assistanceto study tourism zones in the Baja Californiaarea and in the State of Oaxaca on the Pacific coast.

2.16 Among other measures recently taken by the Federal Government to assist the growth of tourism have been:

(a) the gradual adoption of a positive aír transporta- tion policy, including the lowering of air fares and a more liberal policy on sir charter operations, which will have a significantimpact on the growth of tourism;

(b) the liberalization of legislationgoverning the lease of coastal land to foreignera;

(c) the channell-ngof some funda of large private finan- cial institutionsinto the export sector, including the tourism sector;

(d) the establishmentof a Commissioncharged with pre- paring short-, medium- and longer-term programs for the sector;

(e) the establishmentof a Coomrissionto study ways to ensure easier acceso of visitors to IMexico,includ- ;ng easy entry and lowering air fares.

2.17 The advantages of I.exicotstourism assets and favorablemarket location are such that with vigorous developmentpolicies, foreign exchange earnings from tourism should at least double in the next decade. IWJiththe growth of the travel market in the U.S., this should be possible even if Mexico does no more than maintain ite share of the U.S. foreign travel market. Careful considerationahould, however, be given to expanding tourism for the middle income market in the U.S. Given the distances involved this would require the further develop- ment of incentive air fares and hotel prices subatantially below U.S. levels, particularly in the off-season. In this context developments in trans-Atlanticair fares will clearly affect Mexico's competitive position in the ahorter-term, but the country'e proximity to the U.S. and low domestic cost levels will be of greater importance in the longer-term. - 6 -

3. THE PROJECT

A. Background

3.01 The little town of Zihuatanejo is situated about 180 km north- west of Acapulco on Mexicols Pacific coast. The sito of the town i8 one of great natural beauty. It lles on a deep bay surroundedby green hIlla . Mountains rise inland and beyond the bay extensive palm- fringed beaches of fine sand stretch to the north and south, inter- apersed with rocky headlands. The climate i8 comparableto that of Acapulco with day-time temperatures in the winter months averaging about 250C (Table 6). In summer (the wet season) temperatures are slightly higher (28 0 C) and the humidity greater, but the climate ís still comfortable. The coastal waters are extraordinarily clear and the water warm throughout the year. All types of water sports are possible and there is excellent fishing, both deep sea and along the coast.

3.02 At present accese to Zihuatanejo i8 difficult. Its small air- strip is capable of taking only light planes, and, being surrounded by hills, it cannot be expanded (Map 2). There is no direct road to Mexico City; the visitar must come by way of Acapulco and thence along the coastal highway. Though the coastal road is being reconstructed (with the assistanceo£ a loan from the IDB), the distance i3 too great to allow Zihuatanejoto be served from the Acapulco airport.

3.03 The town of Zihuatanejo itself, though set in beautiful surround- ings, i¡ undistinguished. Ita populationis at present about 7,000. The standard of amenities and urban services provided aro either very law or notable for their absence. There are several small hotels, built on hills overlookingthe bay, which have attracted an increasingflow of visitors in recent years.

3.04 The principal tourism zone would be located at Ixtapa about 5 km from the town of Zihuatanejo,centered on a beach of fine white sand 3 km in length with hilis and rocky promontoriesat either end (Map 1). The Master Plan for the area envisages a broad boulevard some 200 metera wide, behind and parallel to the beach, giving acceas to sites for hotels and condominiums. Pablic access to this beach would be provided at three points. Additionalsites for hotels would be developed on the small bays and promontories adjoining the main beach. The nearby hills would be developed for single family homes, many sites having extensive views of the ocean and surrounding mountains. Behind the boulevard there would be a golf course and commercialcenter, and possibly at a later stage a conventioncenter. Provisionie to be made ror a fire station, health cliníc and police station adjoiningthe comnercialcen- ter. A small marina for pleasure boats would be constructedat the -7- north end of the main beach in the second stage. To provide space for ttle boulevard, golf course and commercial center, drainage, flood control and reclamation works would be needed in a swampy area behind the main beach.

3.05 The total area required for the project by Infiatur will amount to 1,200 ha. It ís envisagedthat over a twenty year period, this area could be developedto provide approximately10,000 hotel rooms and 1,500 single family residences. The developmentwould be ataged. The first atage to be implemented over 8-9 years envisages the provision of 3,500 hotel roors and 500 residences together with ancillary facilities.

3.06 While the principal investment will be in Ixtapa and the airport, both for economic and for social reasona it is considered necessary to make provision for the development of the town of Zihuatanejo. It would be politically and socially unacceptable to develop what will be, by local atandards, a luxury resort area while making no provision for the existing domestic population. Furthermore, developmenit will also bring a great increase in that population, for which provisíal nDLst be *,ade. With 3,500 hotel romas and 500 faTily residences, the direct employment created is expected to be not leas than 4.,5co.Experience in Acapuleo suggests that with indirect employment effects and taking account of dependents of those in employment, the resulting population le lI^l:zy to be not less than 50,000. These cannot be accommodated at Ixtapa; the logical alternative is to make provision for housing the bulk of them at Zihuatanejo. It ís not intended, however, that Zihua- tanejo should serve only as a "dormitory" for workers at Ixtapa. As atated above, tourism has already developed there in a small way, and the natural beauty of Zihuatanejo bay with ite several attractive beaches offers the potential of developing the area as a secondary tourist attraction, with 8mall hotels, Mexican-style restaurante, specialty stores and other facilities catering to the visitor. This wíll require an upgrading of the town with the enforcemnent of a well- conceived, if simple, urban plan and the provision of adequate infra- structures.

B. Description

3.07 The project consists of the following elemento:

(1) the infrastructureswithin the touríst zone at Ixtapa comprisingthe boulevard and other etreeta, the land reclamation and drainage works, the elec- tric power distribution network and public light- ing, telephone connectiona, the water, sewerage and storm water drainage systems, beach works, the commercial center and golf course; - 8 -

(2) the infrastructuresat Zihuatanejocomprising the improvementand expansion of principal streets, the electric power distribution network and public lighting, and the provision of water, sewerage, and storm water drainage systems;

(3) a new internationalairport, located about 10 km to the south-eaatof Zihuatanejo,designed to cater for non-stop flights from major U.S. cities;

(4) training programa for hotel personnel;

(5) feasibility studies for 2 new tourism zones and for the possible expansion and upgrading of infra- structure facilities in Acapulco.

3.08 The airport will have a single runway of 2,500 a in length and 60 m width with a parking apron for two DC8-63 or four Boeing 727-100 aircraft. It will be equipped with night landing lights, and the nec- essary navigational alda, visual aids and communicatione equipment. Mhe terminal building which will serve domestic and international flights 18 designed to proce8s up to 330 arriving or departing paseen- gers in a peak hour. The location of the airport and the approach and departuure procedures will keep noise at Ixtapa and the town of Zihuata- r.ejoto a minimum. The airport is described more fully in Annex 3. hssurances were obtained during loan negotiations that the new airport will be declared a co-terminal for international flights with Acapulco. This would allow airlines presently serving Acapulco to fly al8o to Z'ihuatanejo without having to negotiate additional traffic rights there.

.309 The principal road connection from the airport to Zihuatanejo and Extapa l8 part of the coastal highway now being reconstructed to a standard which will with some minor imprcvements be adequate to serve the estimated tourist traffic until 1985. This section of the coastal highway i8 not included in the project. A road will be built giving acces fro= the coastal highway to the tourism zone. This road, which -uill be included in the proJect, will be supplemented later by further access roads and should then be closed to truck traffic. During nego- -,lations it was agreed that Infratur and the Bank would consult on the appropriate tining of construction of the new access roads.

3410 The source of electric power will be the national system of the Federal Power Com~ission. A new interconnection between Acapulco and generating plants on the Rio Balsas, about 80 km north-west of Zihuata- nejo, la now uxnderconstruction, and this interconnection will be tapped to supply Zihuatanejoand the tourism zone. Included in the project will be the neceasary substationsand the distributionsystems within the tourism zone and the town. -9-

3.11 The water, sewerage, and storm water drainage systems for the tourism zone at Ixtapa and for Zihutanejo will initially be separate.- Adequate water sources have been faund to supply both consumption cen- ters for the first 5 yeara. At the end of that time if the population of Zihuatanejogrows as projected a new water source will be needed for the totvm. This is likely to be the water source supplying Ixtapa and an interconnectioncrossing difficultterrain, would then be jus- tified. The topographyprecludes a linked seweragi/aystemo Under the climatic cornditionsprevailing stabilization ponds_ provide an effec- tive and cheaper solution than sewage treatment planta. These will be located at sites away from the towçn and the tourism zone. The effluent wíll not be piped into the sea in order to avoid pollution of bathing beaches and may ultimatelybe used for irrigation. At present Zihuata- nejo has no sewerage systermand some pollution of the bay has resulted. The water supply, sewerage and storm drainage ccmponent ís described more fully in Annex 4.

C. Physical Planning

3.12 For the tourism zone at Ixtapa, land use has been atudied first, in terms of the likely pattern of activity of people in the resort; and second, in terms of space requirementsand the needed physical facil- ities or improvementsto the land to acconmodatethese activities. For the town of Zihuatanejo,apecial attention was paid to the expected atructure and functioningof the town's economy and to the special dis- tribution of urban functions -- its residentialareas, its industrial, commercialand retail business districts,and the apaces set aside for public purposes and leisure-timeactivities. The land use plans for Ixtapa and Zihuatanejoare based on carefullyatudied estimates of future land requirementsfor urban renewal and expansion,showing how develcpment in both areas should proceed to ensure the best possible physical environnent,the most economic use of land, md the proper balance from a cost-benefítpoint of view.

3.13 The proposed zoning regulationafor both Ixtapa and Zihuatanejo appear suitable instruments for guiding the development of privately- owned land in these areas. As is normal in the case of such regulatíons they deal with matters such as the use of land and buildings, the den- sity of population,the coverage of lots, the bulk of structures, etc. One of the main objectivesof zoning in the Ixtapa area ja to prevent the development of the hotel districtain a haphazard and unplanned

1/ These are open basins 6 feet deep which utilize solar energy to treat sewage. - 10 - manner as has occurred in other parte of Mexico and in other countries. The proposed zoning will not preclude high density buildinga but tries to combine this high density with the best use of the land and with the preservation of the area's natural attractions. It was agreed during loan negotiations that the adoption of a land use plan and zoning regu- lations for Ixtapa, satisfactory to the Bank, would be a condition of effectivenesa of the proposed loan. In the case of Zihuatanejo one of the main objectivesis to prevent developmentof isolated residences and hotels as well as the haphazard erection of primitive shelters by the low income population likely to be attractedto the town, particu- larly on the steep hill sides where the provision of even rudimentary infrastructurewould be prohibitively expensive.

EnvironmentalFactors

3.14 The developmentof the coastal zone of Zihuatanejofor tourism activities has raised several types of environmentalproblema: 'ípublic health -- which was given major consideration in tema of maintenance of sea water quality and marine life, treatnent of wastes and a mosquito control program -- and the specific question of dealing with a large mangrove swamp in the Ixtapa area and with a mud-flat located in the cen- ter of the town of Zihuatanejo. Ecological studies of these aspects were carried out by Infraturiaconsultants. Sewage pollution problems were carefully analyzed and the solutions adopted (para. 3.11) will not harm the great diversityof marine life of the area. The study of the man- grove at Ixtapa included a detailed analysis of ite animal and vegetable ife, which is in fact relativelysmall due to the amount of tannin in the water. A dike i8 planned to divide the mangrove into sectors of fresh and salt water and to connect the latter with the ocean by a chan- nel. The mud-flat in Zihuatanejocontains polluted water because it recelves sewage frcm the town, A careful control of sedimentationand polluting effluents la necessary before opening the connectionof the mud-flat with the bay. During loan negotiations assurances were obtained that studies for the elinination of the mud-flat would be completed with- in one year of the date of the proposed loan and the Governmentand the Bank would then agree Qn what action should be taken to this end, Assur- ances were also obtained that the Governmentwould take action to prevent the pollution of the Ixtapa zone by industrialplants to be constructed in the future, and that atudies would be completedwíthin two years frcm the date of the proposed loan of possible damage to the Ixtapa zone from the silting of the Ixtapa river. These atudies would be reviewed with the Bank to determinewhat action, if any, should be taken. - 11 -

D. CostEstimates

3.15 The detailedestimated costs and foreign exchangecomponent of the variousparta of the projectare given in Tables7-11 and are sum- marizedbelow:

MexicanPesos US Dollars % of (millions) (millions) Base- Line Local Total LocalForeign Total Costs

1. IxtapaTourism Area: Land Acquisition 21.0 21.0 1.68 1.68 4.6 Civil Works 102.6 45.0 147.6 8.22 3.60 11.82 32.5 Equipment 6.9 11.3 18.2 o.56 0.90 1.46 4.0 Prof. Services 11.6 0.7 12.3 0.93 0.06 0.99 2.7 2. City of Zihuatanejo: CivilWorkca 40.4 17.7 58.1 3.23 1.42 4.65 12.8 Equipment 1.3 2.2 3.5 -0.10 0.18 0.28 0.8 Prof. Services 7.3 7.3 0.58 o.58 1.6 3. InternationalAirport: Land Acquisition 8.4 8.4 0.67 0.67 1.7 Civil Works 63.7 28.0 91.7 5.09 2.25 7.34 20.2 Equipment 5.7 9.2 14.9 0.45 0.74 1.19 3.3 Prof. Services 13.2 13.2 1.06 1.06 2.9 4. Training & Feasibil- i-tyStudies: 5.5 8.2 13.7 0.44 0.66 1,10 3.0

5. Promotional x : 6.8 11.2 18.0 0.58 0.86 1.44 4.1 6. ProjectAdmitistra. tion: 26.4 26.4 2.11 2.11 5.8 ------~~- , Base-LineCosta 320.8 133,5 454.3 25.70 10.67 36.37 100.0 7. Contingencies: Price Increase (14.0%) 31.1 15.7 46.8 2.47 1.27 3.74 10.3 PhysicalIncrease (14.5%) 32.4 16.1 48.5 2.57 1.32 3.89 10.7 TOTAL PROJECTCOST 384-3 165.3 549.6 30.74 13.26 44.00 Interestand Other Chargesduring Con- struction (a) 28.9 28.9 (a) 2.3 2.3

(a) No interestwill be chargedduring construction on fundaprovided by the FederalGovernment. - 12 -

3.16 Constructioncosta have increasedby 7% per year since1962. While priceinflation has been moderate,it seems prudentto asaume that the increasewill continueat aboutthe same rate, and appropri- ate provision has been made for such increasesin building and site- work costs during the construction period. In addition,an allowance of 14.5%of the construction and sitework costs has been nade to cover phyaicalcontingencies, This la appropriate in view of the extent of works for which preciseestimates must awaitthe final desígnatage. The detail8 of the allowances provided for price increases and contin- gencies for other ccmponents of the project are shown in Table12. The overall provi8ion for contingencies would amount to 21.0% of base- line costaor 17.3% of totalproject cost.

3.17 Moat building materials, electrical equipment and pipelines required for the project are locally produced (some royaltie8 are paid for manufacturíng foreign-patented produicts). Heavy equipment to be used in constructing roads and earthworka and the airport navigation and electronic aids would be imported. The foreignexchange component of the total project cost would depend upon the outcome of interna- tional bidding. The size of major construction contracta would be large enough to attract foreign bids. Assuming, however,that Mexican contractors were to win the bida as ia likely, the foreign exchange camponeqntof the totalproject cost would be about30% or US$ 13.3 million. Amountof the Loan

3.18 The proposed loan of US$ 22.0 nillion would cover the foreign exchange costaof the project,estimated at Us$ 13.3 mnillion equiva- lent, and would provide about US$ 8.7 m$llionequivalent for local currency financing, or approxímately 28% of local currency costa of the project.

Disbursements

3.19 The loan would be disbursed on the basis of appropriate percent- ages (up to 76%) of major civil worls cortracta, contracts for the pur- chase of equipment, and technical assistance. These percentages would be adjusted as neceasary so that withdrawals would be distributed over the project implementation period. A number of agencies will be respon- sible for implementing differentelementa of the project (c.f. paras. 3.21-3.27 below and Table13). For ease of administration it is proposed that the proceedsof the Bankl' loan should be disbursed for selected ele- ments of the totalproject, chosen with referenceto their estimated foreign exchange component and to the need to limit the number of agencies with which the Bank has to deal. On this basisit ia proposed that disbursement should be for selected works to be carried out by Infra- tur at Ixtapa, by the Secretariat for Public Works at the airport, and - 13 - by the Secretariat for Hydraulic Resources at Ixtapa and Zihuatanejo. In addition relatively small amounts would be disbursed for hotel training programs for which the Departmentof Tourism and the Secre- tariat for Educatimn would share responsibility, and for studies to be carried out by Infratur and the Secretariat for the National Pat- rimony (Tables8-11, 13). The estimated schedule of disbursements of the loan ia shown in Table 19. Applications for disbursementwould be channelledthrough the borrower, Nacional Financiera,S.A.

Procurement

3.20 Major civil works contracts and contracts for most equipment would be awarded under internationalcompetitive bidding. Items would be grouped to the extent practicableto encourage such competi- tive bidding. The proposed project is within the capacity of the Mexican constructionindustry to implement,but it i expected that foreign contractors would submit bids for the larger contracts. The water supply and sewerage elementa of the project and certain works at Ixtapa and the airport (e.g. fencing, street signo, etc.) would involve a number of contractawhich would be too small to attract foreign bids. Local contractorsare capable of executingthe work efficiently,and it ¡a thereforeproposed that for these contracts national campetitivebidding be required. The total value of such contracta is estimated at US$ 3.5 million equivalent. Contracto totalling US$ 200,000 for the electric and telecommunicatíonlines for the airportwould be awxardedthrough direct negotiationawith the companiesproviding these services. In evaluatingbids, Mexican manufacturerawould be allowed a preferentialmargin of 15% of the CIF costa of competingimporte or the level of customa duties gen- erally applicable,whichever í8 the lower.

E. Execution

3.21 Infraturwould be responsiblefor implementingall works within the t mrism zone at Ixtapa, asaisted by consultantarchitects and engi- neera, acceptableto the Bank. Technicaldesigns and apecíficationsof hydraulic worke, and of the water, aewerage and storm water drainage systems would be subject to approval by the Secretariatfor Hydraulic Resources,designa for the telephone system by the Secretariatof Com- municatimns and Transportand designs for the electric power system by the Federal Power Commission. Infratur would cori,ractwlth the Federal Power Commiaslan to construct the main transformer station and transmis- sion line to Ixtapa. During loan negotiations aseurances were obtained that adequate power supplies would be provided at Ixtapa and Zihuatanejo. A project unit has already been established within Infratur for the can- structimn of the part of the project at Ixtapa. The project unit would be - 14 - responsible,inter alia, for preparing and issuing tenders, evaluating bids and awarding contracts. A full-time director of the project unit has been nominated, who ia acceptableto the Bank. The project unit would also include engineers, an architect, a procurement officer, accountants and other staff. A field unit would be establishedat Ixtapa for the direct supervision of the work in the tourism zone and to keep in touch with the progress of implementationat Zihuatanejoand at the airport.

3.22 The execution of the project within the tourism zone will depend upon Infratur's obtainingtitle to 1,050ha. and the right to develop a further 157 ha. of 'ejido"land (see para. 3.25). Infratur has so far acquired 700 ha. The acquisitionof the remaining 350 ha. and of the right to develop the ejido land would be a condition of effectiveness of the proposed loan.

3.23 Within the urban area of Zihuatanejo,the Secretariatfor Hydrau- lic Resources (SRH) will be responsiblefor the design and construction of the water supply and sewerage systems. SRH will employ consultants to design the systems, and will supervise constructiondirectly. Its staff is qualified for this work. Final designa for the water supply and sewerage systems would be approved by the Bank.

3.24 Responsibilityfor the constructionof the electric power and street systems in Zihuatanejo,for environmentalsanitation and possi- bly the implementationof the urban plan will be assumed by the National Bank for Public Works (BNOSP). This bank is charged with financíng and executing a variety of infrastructures in urban areas using funds provided by the Federal Government. The bank has on ita staff engineers and other specialists capable of supervising the execution of the work. The designs of the electric power system would have to be approved by the Federal Power Cominisasion. The contract between the Federal Govern- ment and the National Bank for Public Works would be approved by the Bank.

3.25 The greater part of the area which uall become the township of Zihuatanejo is at present ,ejido", land, i.e., public land of which the occupiera have the use but may not sell. Only the Federal Governnent may change the use of such land. The execution of the project within Zihuatanejo requires that this ejido land be declared an urban area by the Federal Governnent and that a suitable urban plan (plan regulador) be adopted after approval by the appropriateState and Federal author- ities. A request for the declaration of saiurban area has been submit- ted by the Governor of the State of Guerrero to the Federal Government and an urban plan with draft r'egulations, acceptable to the Bank, has been submitted to the Federal authorities by Infratur. The declara- tion of the urban area and the promulgation of the urban plan would be conditionsof effectivenessof the proposed loan. -15-

3.26. Responsibilityfor the design and constructionof the new air- port would be that of the Secretariatfor Public Works (SOP) assisted by various Federal Agencies responsible for caomunications and air navigation (RAiBA), airport operations (ASA), and by the company which supplies aviation fuels (NACOA). SOP has designed and supervised the construction of a number of major airports in Mexico and is competent to execute the project. Final designs for the airport and the terminal building would be approved by the Bank.

3.27 While direct responsibility for the execution of the principal components of the project will rest with five agencies, a considerable number of other agencies at the Federal, State and local levels will also be involved. Hence there will be complex problema of coordinating the executionon schedule of all parte of the project. Infratur will be in charge of coordinationat the operating level. To help in obtain- ing the full cooperation of SOP and SRH and other agencies,the Secre- tariat of the Presidency will have ultimate responsibility for coordina- tion. During negotiations, aseurances were obtained that SOP, SRH, and BNOSPwould prepare in cooperation with Infratur a critical path plan acceptable to the Bank for carrying out all parte of the project. The preparation of this critical path plan would be a condition of effective- nese of the proposed loan. Aseurances were aleo obtained that the crít- ¡cal path plan would be reviewed by all parties concerned at least every aix months and the resulte of such reviews would be promptly communicated to the Bank.

F. Organization fLr Operation

3.28 Responsibility for operation and administrationof the facil- ities to be provided at Ixtapa, Zihuatanejo and the airport winl devolve upon various agencies.

3.29 In the tourism zmne at Ixtapa, Infratur will be responsible for maintaining the public areas, for administering the public services and for selling or leasing sites to private investors. Infratur plana ini- tially to lease shopa in the shopping center and beach facilities. These may subsequentlybe sold to private investors, as may the golf course when it beccmes a profitable operation. In the case of electric- ity and telephone services responsibilityfor operation and maintenance will be assumed by the Federal Power Cormiesion and the private national telephone company respectively. The source of supply of water to Ixtapa will be outside Infratur'earea of control. Thus tho Secretariatfor Hydraulic Resourceswill be responsiblefor the water system to the boundary of Infraturl' zone and will deliver water in bulk for retícula- tion by Infratur. - 16 -

3.30 The town of Zihuatanejois at present so small and ite reveniues so limited that ít is not able to provide public services or to under- take financial obligations in respect of services to be provided when the project la implemented. In view of this, the responsibilíty for providing and maintaining most basic services will rest with varíous Federal authorities. Gradually, however, as the tawn develops in the longer term the municipality will undertake certain responsibilities.

3.31 Within Zihuatanejo, responsibility for operating and maintaining the electric power system will be assumed by the Federal Power Commis- sion. The operation and maintenance of the water supply and sewerage systems will be the responsibility of the Secretariat for Hydraulic Resources. The maintenance of streets and public aquares in Zihuatanejo, including trash collection and mosquito control, will be the responsibil- ity of the National Bank for Public Works under an agreement to be con- cluded with the Federal Goverrnent. This will be in accordancewith established practice in iMxico.

3.32 The new airport at Zihuatanejo will be operated by the various agencies responsible for operating other airports in Mexico. These are described in Annex 3.

4. SUPPORTINGSERVICES

Housin

4.01 The project does not include housing for hotel workers in the town of Zihuatanejo. Hotels situated outside towns and enuloying more than 100 workera are required by recent legislation to provide housing for their employees. How such housing can be financed is not yet clear but varicus arrangemente are now under atudy. Hotel workers will, how- ever, be only a part of the population of Zihuatanejo. Many people will be attracted there who will not work in hotels and will be too poor to obtain housing loans under any existing schemes. Such people in other towns have built the simplest type of shelter which they try to improve as circunstances permit. Federal authorities are unwilling to finance in Zihuatanejo public housing which they are unable to provide elsewhere in Mexico, but with the provision of essentialinfra- atructure in the town and the enforcementof the urban plan, a better framework for "self-help"housing will exist there than in many other towns and cities of the country. To rely wholly on t'self-help,"how- ever, la likely to prove inadequatein securing an urban development compatible wíth the development of the tourism project, and assurances were obtained during negotiationsthat the Federal Governmentwould devise means acceptable to the Bank of providing assistance for "self- help"'housing in Zihuatanejo, - 17 -

TrainijE

4.02 Training of hotel staff is largely provided as "in house" train- ing by hotel operators. EThile in the better establishedtourism cen- ters such as Mexico City and Acapulco, the standards of skill and serv- ice are satisfactory,in newer resort areas these standards are frequently deficient. Training facilitieshave been establishedby the Government and also by the trade unions in Mexico City and other centers, and a new hotel school is being establishedin Acapulco. Without further develop- ment these facilitieswill not be adequate to meet the very large increase in numbers of skilled personnel required in the next decade, when the projecta at Zihuatanejoand Yucatan alone will need between 10,000-1,000 trained staff. tIhileprivate hoteliera will continue to provide much of the necessary training, an expansion of public training facilities will be needed. The proposed loan includes a small training component for this purpose. The ILO has expressed its willingness to cooperate in working out with the responsibleMexican authoritiesappro- priate training programs and in recruiting teachers. During negotiations assuranceswere obtained that the Mexican authoritieswill within one year after the proposed loan ia made submit a program to expand hotel training facilities on a basis acceptable to the Bank.

5. JUSTIFICATION

A. Market Demand

5.01 The main market for the new resort at Ixtapa-Zihuatanejo will be in the U.S., though it is estimated that there will aleo be considerable - nuumbersof IMexicanvisitors. Access for foreign visitora will be predomi- nantly by air, and experience at other resorts in Mexico including Aca- pulco and Puerto Vallarta, has demonstrated that to attract large numbers of foreign visitors by air requires the provision of direct flights fron major departure points in the U.S. A principal factor affecting the vol- ume of foreign vacation travel is the level of income. VarLous studies of the likely growth of family income in the U.S. have been made, and based on past trends there is every probabilityof a rapid increase in the number of households with incomes in excess of US$ 10,000 (at con- stant prices). This number was 9 million in 1960 (at 1 prices), 17 million in 1967 and is estimated at 34 million in 1980.11 The ratio

1/ Data used here is based on an appraisal of past trenda and represent low to moderate forecastsmade by the National Industrial Conference Board on data supplied by the U.S. Department of Comerce and the National Planning Association. - 18 - between Americano travelling abroad and those with family incomes exceeca- ing US$ 10,000 has been slowly rising, and on this basis the 5 million travell.ing abroad in 1967 (excludingCanada) ahould at least double by 1980. In the light of experience in the past tlree years, however, such a projection appears highly conservative. Already by 1970, almost 8 mil- lion Americano travelledabroad (Annex 1).

5.02 Infraturhas based ita market projectionfor Ixtapa on the assump- tion that the new resort will be competingwith Acapulco,Hawaii and selected Caribbeanislanda for beach holiday traffic from the U.S. Extra- polating past growth trends to these several destinations,Infratur has concludedthat the proposed developmentat Ixtapa would abaorb aoout 5p of the estimatedtraffic to all these destinationain 1981. This number -- 420,000 -- would represent about 10% of the projected total visitor flow to Mexico in that year, assuming a growth rate in the next ten years of 7.1% annually (as compared with 11.5% in the past decade). These pro- jections are based on the assumption that Mexico will continue to maintain ita ahare of the U.S. market for travel abroad. It would represent about 20% of projected air arrivals, assuming a continued gradual rise in the proportion of foreign visitors arrivíng by sir. None of these ratios appears overly optimisticfrom the side of demand. However, it la possi- ble that the build up of traffic to Ixtapa will be slower than forecast by Lifratur in view of the time required to complete the basic infrastruc- tures and build the first hotels.

5.03 While the majority of visitora to Acapulco have been foreigners in recent yeara, very large numbers of Mexicans have also visited the resort. In 1969, the latter numbered 414,000 as compared with 466,000 foreign visí- tors. Infratur in ita projectionsfor Ixtapa-Zihuatanejohas not forecaat a similar ratio between domestic and foreign visitors,but has rather con- servatively estimated that domestic visitora would number about 20% of total tourists. As the majority of domestio visitora to Acapuleo travel by road, and as acceso to Zihuatanejo from Mbxico City by road will be via Acapulco in the foreseeable future, it is likely that domestie traf- fic will continue to favor Acapulco. Hence a conservative projection of domestic visitora to Zihuatanejo seems justified.

5.04 At present foreign visitora arrivíng by air apend on average much more per day than visitora arriving by road. In 1969, the former sperit on average US$ 31 per day. With the expected rise in prices, estimated at 5% a year and ecual to the average increase in the past five years, average daily expenditures at Ixtapa by visitors are estimnated at US$ 41i5 in 1975 when the first hotels are expected to be in operation. The breakdown of this amount ia calculated to be as follows: - 19 -

Item AxAmount(US$) Percentage(%)

Accomnmodation 14.44 34.8

Food and Beverage 11.29 27.2 Entertainnent 4.44 10.7 LocalTransport 4.32 10.4 Purchases 4.98 12.0

Other 2.03 4.9 TOTAL 41.50 100.0

Source: Bank of'Mexico; figures adjusted by Bank.

Some of the tourists are likely to visit the area only, whileothers are expected to visit it as well as other destinations in IMexico. The average length of stay ¡a asaumnedto be 4 days, somewhat leas than in Acapulco, but greater than in Puerto Vallarta.

B. Hotel Development

5.O5 The justification for providing infrastructure at Ixtapa and Zihuatanejo is the prospect that private investora and hotel companies will be prepared to buíld and operate hotels as envisaged by the spon- sors of the project. Infratur projecte a gradual build up of hotel capacity and development of private houses as follows:

Ixtapa Zihuatanejo Year Hotel Rooms 0uces _Hotel Rooms

1 750 10 -

3 l,500 60 450 9 3,500 500 600-800 - 20 -

5.06 While discussions with potential hotel developers and investors have confirmed a 8trong interest in building at Ixtapa, no binding com- mitmente have been made by private investore. This could not be expected at the present stage of the project's developmentwhere specific hotel Sites cannot yet be delineated,and work on implementingthe project has not yet begun. Neverthelees, the prospects for hotel investment are con- sidered highly favorable. Investmentin hotels has yielded attractive returns in the past. Mhilemost hotels are Mlexican-owned, the large U.S. hotel companiesincluding Hilton, Sheraton,Western International, Holiday Innrsand Mariott have entered the market either primarily as operators or with sizeable lnvestments. The operating conditionsfor higher category hotels have been favorablewith prices aligned with prices in the U.S., high average occupanciesand relativelylow operat- ing costs, particularly for labor. These favorable conditionsare likely to continue,though large additionsto capacity could have adverse effects on occupancy levels in the short-term.

5.07 Besides the favorable environmentfor investment,the general concept of the project is expected to be attractíveto investors. Prospective hotel developers will find a planned area with all infra- structures provmded, with adequaté zoning and controla over neighbor- ing developments and with common amenities provided such as the golf course, shopping center and at a later etage marina and convention facilities. By comparisonwith existing resort areas, where infra- structure i9 often inadequate and zoning controls weak or lacking, these advantages, common to both the Zihuatanejo and Yucatan projects, are expected to be powerful attractions.

5.08 Nevertheless, the risks involved in starting a new resort are greater than in expanding one already established. There is an un$er- standable reluctance among hoteliers to be alone in a new resort.Y' Once several hotels are built attracting others is easier. For this reason it seems appropriateto envisage special arrangements,if such are needed to get the firat hotels established. Hence, during nego- tiations the Federal Governmentagreed that it would, if necessary, take steps, including the provision of finance, to ensure that 750 hotel rooms, costing an average approximately US$ 20,000 per room, would be built and operating not later than 1976.

C. Economic Justification

Econamic Return

5.09 The net benefits to the econemy will consist of expenditures made by visitore in the Zihuatanejo-Ixtapaarea, less the cost of

1/ There are special category hotels or holiday villages -- e.g., those of the Club Mediterranee-- where this is not so. - 21 -

operating all the facilities to be provided. The relevant investment is the capital cost of the infrastructure project itself, plus the investment costa of hotels in Ixtapa and Zihuatanejo. The additional investments that are likely to take place in local transport, enter- tainnent and shopping facilities have also been taken into account, although they are estinated to be relatively smalU. Although properly chargeable to the program of investments, revenues and costa associated with private residences and of international and domestic air travel have not been taken into account, except those directly related to the airport.

5.10 With an estimated economic life of the project of 25 years, the internal economic return on the program of investments would be 13.1%. This calculatiun, however, does not take into consideration the real eccnomic costa of labor. Since the construction and operation of the project is expected to employ considerable numbera of relatively unskilled workers from the surrounding region who are currently under- employed or unemployed, the evaluation of the investment calla for some of the labor inputs to be priced below the current market wage-rates. Accordingly, unskilled labor was priced at 70% below current market wage-rates. On this basis the internal economic return would be 19.4% and may be considered the Ilbest estimate.11 The rate of return would be sensitive to changes in occupancy levels and delays in the opening of hotels. With varying asaumptiona about occupancy levela and open- ing dates, and with shadow pricing of unskilled labor the internal economic return would range from 15.6%to almsot 20.8%.

5.11 Improved infrastructure facilities in the town of Zihuatanejo constitute an important benefit to the local population. The above analysis has not taken into account these benefits, because of the difficulties of separating that part of the investment which will benefit local population frca investment that la needed for the devel- opment of tourism, both in Ixtapa and Zihuatanejo. It ¡a realistic to asaume, however, that ovaer half the investmenta in infrastructure in Zihuatanejo would benefit the local population rather than the tourism sector. On this basis the economic rate of return on the tourísm pro- gram as a whole would increase to more than 20%. The economic justifi- cation of the project la discussed more fully in Annex 5. Employment and Income Effecta

5.12 The proposed projectts area of influence ia expected to extend to 32 t"municipiosl l/ in the states of Michoacan and Guerrero, with a total population of about 675,000. These Umuniciplos' are amongst

1/ A small administrative district. 22 - the poorest aresa in Mexico with per capita GDP about half the national average and with high rates of unemployment and under-employment. Between 1960 and 1970, it ia estimated that while total population in thli zone increasedby 37%, the economically active population remained ataticat 160,000and in relationto total populationdecreased from 32.1%to 23,.6in 1970. When in full operationit is estimatedthat the project will provide einployment directly and indirectlyfor a mini- miumof 26,000 persona and will increase the value of output in the area of influence by about 30% as compared with 1970.

Direct Balance of Paymenta_Impact

5.13 The proposedproject i8 expectedto increasegross foreign exchangeearnings by about US$ 7 milllonin 1975 when the first hotels opon up and by TU$ 62 millionwhen the projectbecomes fully opera- tionalin 1986. This compareswith US$ 575 millionearned by tourism in Mexicoin 1970. Becaumeof the high proportionof foreigntouriíts that are expectedto visit the area and the low importcontent of oper- ating costs,the estimatednet foreignexchange earnings of the project are relativelyhigh. At present,only 10% of every touristdollar earnedgoes out of the countryto pay for importa,technical services, interest,dividenda, etc. With regard to the program of investmenta in the Ixtapa-Zihuatanejozone, the proportionis likelyto be somewhat higher, sincehalf the cost of infrastructurewould be financedfrom the proposed loan. On this basis» net foreign exchange earnings would amount to US$ 36 million in 1980 and US$ 53 million in 1986, which com- pares with the estimated foreign exchange component of the proposed project of US$ 13 million, including price contingencies, and the foreign exchange component of superstructure of about US$ 25 million.

6. FINANCIALASFECTS

6.01 The total estimatedfinanclal requirements of the projectare US$ 44 millionequivalent. It ís proposedthat the Banklsloan should coverabout half of total projectcosta. The balance would be provided by the FederalGovernment. Assurances were obtained during negotia- tiona that the Federal Government would meet any cost overruns, and would make arrangements satisfactory to the Bank to provide capital funds for the project as needed.

6.02 As the project consists of different infrastructureelements, some revenue earning and othera not, no overall financial calculation would be meaningful.Nevertheless, financial projections have been made for the operationof the tourismzone at Ixtapa,for the water and sewerageproject outside the tourismzone and for the airport. These financialprojections are shown in Tables1 and 2 of Annex 2, Table 2 of Annex3, and Table 3 of Annex 4. The chargeslevied by the Federal _ 23 -

Power Commission both at Ixtapa and at Zihuatanejo will be the standard charges for the different classes of service applied throughout Ma1oxico,

6.03 Infratur 1s a development agency; its primary purpose i8 not to make profits (Annex 2). It is expected however to recover the invest- mente made, and the Federal Governnelitexpects it to repay with inter- est monies advanced. Its operatingpolicies, e.g., on financial objec- tives, on the acquisition and sale of land, on land prices, on annual charges to hotel investors,have not yet been formalized. Understand- ings on such policies are desirable and aseurances were obtained during negotiations that a policy statementwould be prepared after consulta- tion with the Bank within one year of the signing of the proposed loan,

6.04 The financial projectiona for Ixtapa cover the investment expendi- tures on developingthe site at Ixtapa, revenues fram the sale and lease of lots, the shopping center and the golf course, revenues from the sale of services and expenses of operating and maintaining such services.

6.05 Revenues from the sale of lots and from selvice charges have been estimated on the basis of a price of US$ 20 per m for hotel sites (US$ 81,000 per acre) and US$ 6-8 per mZ for houwe sites (US$ 4,50o-6,00o per lot) in 1972 rising by about 9% annually thereafter, and of amual charges of US$ 65 equivalentper hotel room and US$ 271 per house lot. These values are substantiallybelow canparableprices in Acapulco and are designed as incentive prices for investors. The resulting revenue projections are conservative. Experience may show that higher prices can be charged once the resort area le established. Revenues will also be obtained from rents of shops and the golf course, though Infratur hopes to sell these facilities,as mentioned above (para. 3.29).

6.06 The costs of operating the services which Infratur will provide at Ixtapa -- maintenance of roads and street8, environxentalsanitation, street lighting, water and sewerage,conmuniLty services (fire protection, police, clinic) etc. -- are substantialand with the exception of water and sewerage are not closely geared to the gradual increase in hotel rooas and private houses. In ita projections Infratur expectsto incur deficits on operating account until about the seventh year of operationa. As the proposed annual charge per hotel room le very low, however, a sub- stantial increase seems feasible. A charge of US$ 200 would still represent a very emall fraction of total hotel operating expenses. On this basís a small surplus on operating account would be achieved in the fifth year of operationa, and the financial rate of return to Infratur would be 5.3% as caapared with 1.6% on the basis of the charges proposed by Infratur. The proposed charges which will be applied frcm 1975 are necessarilyvery tentative,but during negotiatior.saseurances were obtairned that the basis for fixing annual charges would be agreed with Infratur within one year of the signing of the proposed loan. -24 -

6.07 All Infraturla capítal fund8, whether obtained from the Federal Government or from the proposed Bank loan would be repayable over an extended period of 20-25 yeara. Infratur would pay 8% on funds pro- vided by the Federal Goverrment and interest on the proceeds of the proposed Bank loan plus a commission,expected to be 0.25%, charged by Nacional Financiera. Infratur expecta to sell land to developeraout- right or with deferred payments or in exchange for equity shares or to lease sites. Hence revenues from the sale or lease of land cannot be projectedwith any precision and the Federal Governmenthas agreed that Infratur ahould not be held to a fixed amortizat4on achedule. The Fed- eral Government would make itself responsible for repaying the proposed Bank loan (para. 13 and 14 of Annex 2).

6.08 Though the direct financial return on the investment in the proj- ect at Ixtapa ia modest, the Government ¡a expected to receive substan- tial tax revenues from hotela, beginning in the third year of operations. Over the period to 1991, total revenues from profits tax on hotels at Ixtapa (at a rate of 450) are estimated at US$ 44 million equivalent. In addition, the Governmentwill receive revenues from individual income taxes, import duties and sales tax which cannot be estíated with anY precision. Taking account only of the profits tax on hotels, and rnking no adjustmentein Infratur'aprojectiona of net operatingrevenues and land sales, the internal financial rate of return to Governnenton the investmentat Ixtapa would be 10.7%.

6.09 The water and sewerage undertaking which will serve Zihuatanejo, supply bulk water to the tourism zone and provide treatment for the sew- age from Ixtapa, will charge water rates which will discriminate between the two principal categories of ccmsumer8 -- visitors and residenta. As the bulk of the permanent population of Zihuatanejo will be poor, the proposed water rate for residente in the to'n would be about half the rate charged to hotels in Zihuatanejo and to hotels and villas at Ixtapa. On the basis of the rates proposed, projected revenues would, three years after the ccmpletion of the project, cover operating and mainte- nance costa and depreciation of the water supply and sewerage systems. Subsequently, they would also provide a surplus for financing a reason- able portion of future expansion of such systems. The maintenance of a rate structure adequate to achieve these objectives was agreed during loan negotiations. Agreement on the schedule of initial charges for water and sewerage services would be a condition of effectiveneas of the proposed loan. At Ixtapa, the rates currently under consideration would cover the coat of purchased water together with costs of operating and maintainingthe water and sewerage systems in the tourism zone after the fifth year of operation. The capital investnent in the water, sewerage and 8torm drainage systems at Ixtapa would be recovered in the prices of land sold to hotel developera and house owners. 6.10 Based on the projected flow of traffic through the airport over the period 1974-1990 and applying the standard landing fees and other charges levied at other airports in Mexico, revenues are expected to be sufficient to cover costa of administration, operation and maintenance frcm 1977 but will only meet capital charges from 1983. The total investmentia expected to be recovered by the early 19901s, and the internal financial rate of return would be about 9%.

6.11 Accounts and financial statements in a form acceptable to the Bank would be kept by Infratur both in respect to the tourism zone at Ixtapa and for all ita operations,by SRH in respect of the water and sewerage undertaking serving Ixtapa and Zihuatanejo and by SOP and ASA in respect of the new airport. Audited financial statements in a form acceptableto the Bank would be presented to the Bank within four months of the close of the financial year.

7. RECOMENDATIONS

7.01 During loan negotiations, ornitnents werc obtainod that

(i) the new airport at Zihuatanejo would be declared a co-terminal for international air services with the airport at Acapulco (para. 3.08);

(ii) Infratur would consult with the Bank in order to agree on the timing of construction of additional acceso roads to the tourism zone at Ixtapa, and at such time the first acceas road included in the project would be closed to truck traffic (para. 3.09);

(iii) atudies satisfactory to the Bank for the elimina- tion of the mud-flat at Zihuatanejo would be com- pleted within one year of the date of the proposed loan and agreement would then be reached between the Government and the Bank on the action to be taken to this end (para. 3.14);

(iv) the Governnent would take action to prevent the pol- lution of the Ixtapa zone by industrial planta to be constructed in the future (para. 3.14);

(v) the Government would ensure that atudies would be completed within two years of the poesible damage to the Ixtapa zone resulting from the silting of the Ixtapa river. These studies would be reviewed with the Bank to determine what action, if any, should be taken (para. 3.14¿); - 26 -

(vi) conaultingarchitects and engineers,acceptable to the Bank, would be appointed as needed to complete the design of the project (para. 3.21);

(vii) a project unit would be operated within Infratur for the execution of the project at Ixtapa under the authority of a full-time Project Director assisted by engineers, an architect,a procurementofficer, accountants and other staff, as needed (para. 3.21);

(viii) adequate power supplies would be provided at Ixtapa and Zihuatanejo (para. 3.21);

(ix) final designs for the airport and terminal building, the water supply and sewerage systems, and the shop- ping center and other common facilities at Ixtapa would be submitted for approval to the Bank (paras. 3.23 and 3.26);

(x) the contract between the Federal Government and the National Bank for Public Works for the execution and maintenance of works in Zihuatanejo would be submit- ted to the Bank for ite approval (paras. 3.24);

(xi) the Federal Government would cause SOP, SBH and BNOSP to prepare in cooperation with Infratur a critical path plan acceptable to the Bank for carrying out all parts of the project. The Governnent would coordinate the progreso of the project according to the critical path plan which would be reviewed at least every six months, and the results of such reviews would be promptly communicated to the Bank (para. 3.27);

(xií) the Federal Governnent would devise meana acceptable to the Bank for providing assistance for self-help housing in Zihuatanejo (para. 4.01);

(xiií) a program to provide hotel training facilities on a basis acceptable to the Bank to meet the likely demand for trained personnel at Ixtapa would be sub- mitted within one year of the signing of the pro- posed loan :zd ccrried out (para 4.02);

(xiv) the Federal Government would take such steps as may be needed to ensure that 750 hotel rooms will be built and operating at Ixtapa by 1976 (para. 5.08);

(xv) the Federal Government would make arrangements satia- factory to the Bank to provide funds for carrying out tlheproject, as needed (para. 6.01); - 27 -

(xvi) Infratur would prepare and adopt a statement of oper- ating policies in consultation with the Bank within one year of the signing of the proposed loan (para. 6.03);

(xvii) the basis for determining annual levies on hoteis and house sites made by Infratur would be agreed with the Bank within one year of the signing of the proposed loan (para. 6.06);

(xviií) charges levied for water at Zihuatanejo would be adjusted as necessary to caver the operating and main- tenance costa and depreciation of the water supply and sewerage systems and provide a surplus for financing a reasonable portion of the future expansion of such aya- tema (para.6.09);

7.02 Conditionaof effectiveziesa of the proposed loan would be:

(i) the adoption of the land use plan and zoning regula- tionsfor Ixtapa (para. 3.13);

(i) the appointment of a full-time director to the project unit established within Infratur for the execution of the project at Ixtapa and the coordination at the work- ing level of the other elemento of the project (para. 3.21);

(iii) the completionof acquisitionof land or rights to land by Infratur at Ixtapa (para. 3.22);

(iv) the declaration of the urban area and the adoption of the urban plan for Zihuatanejo(para. 3.25);

(v) the preparationof the criticalpath plan for the execu- tion of the project (para.3.27).

(vi) agreementon the scheduleof ínitialcharges for water and sewerage(para. 6.09).

7.03 With the indicatedassurances, the proposedproject provides a suitable basis for a Bank loan of US$ 22 millionfor a term of 25 years including a 5-year grace period. - 28 -

STATISTICAL APPENDIX

Table No.

Capital Required to Create One Job Opportunity 1 Growth of Foreign and Domestic Visitors to Mexicoo,1960-1970 2 Foreign Visitors to Mexico by Nationality, 1966-1969 3 Seasonality in Visitor Traffic to Mexico, 1960-1969 4 Distribution of Acoamnodation According to Type and Category, 1961-1970 5 Metereological Cmnditiona of Itnportant Tourist Destinations in the Pacific and the Caribbean 6 Breakdown of Total Project Costa 7 Cost of Infrastructures and Superetructures - Ixtapa Tourism Area 8 Cost of Infrastructures - City of Zihuatanejo 9 Cost of Infrastructures and Superetructures - Zihuatanejo International Airport 10 Training and Feasibility Studies 11 Contingency Allowances 12 Estimated Annual Expenditures by Agencies 13 Estimated Schedule of Expenditures of Infratur by Quarters and Years 14 Estimated Schedule of Expenditures of the Secretariat of Hydraulíc Resources (SRH) by Quartera and Years 15 Estimated Schedule of Expenditures of the Natioíal Bank of Publio Works and Servioes (BNOSP) by Quarters and Years 16 Estimated Schedule of Expenditures of the Secretariat of Public Works (SOP) by Quarters and Years 17 Estimated Schedule of Expenditures by Quartera and Years - Training and Feasibility Studies 18 Estimated Sohedule of Disbursements 19 Estimated Sehedule of Disbursements by Quartera and Yeara 20 Estimated Schedule of Disbursements by Quarters and Yeara - Ixtapa Touriam Area 21 Estimated Schedule of Disbursements by Quartera and Years - City of Zihuatanejo 22 EstimatedSchedule of Disbursementsby Quarters and Years - ZihuatanejoInternational Airport 23 Estimated Schedule of Disbursementsby Quarters and Years - Training and FeasibilityStudies 24 EstimatedAnnual Financial Requirementeof Agencíes 25 TABLE 1

MEXICO

CapitalReguired to Create One Job %pjortunity (at 1960 Prices) Pesos

Agriculture 8,668 Mining 74,650 Petroleum 237,162 Food & Beverages 59,162 Textiles 21,718 Wood Products 40, 307 Chemical Products 65,452 Non-Metal Products 50,410 Metal Products 130,538 Manufactureof Machinery 37,737 Construction 15,662 Electric Power 359,683 Commerce 48,552 Transport 120,026 Services, includingTourism 24,346

Source: Banco de Mexico, S.A., Departamentode Estudios Economicos.

October 1971 TABLE 2

MEXICO: ZIHUATANEJOTOURISM PROJECT

GROWTHOF FQREIGN ANDDCWESTIJ VISITORS TO MEXImO. 1960 - 1970 -/

Year International Index Domestio - Index Total Index Visitors (000) Visitors (000) Visitors (000)

1960 690.4 100 69.9 100 760.3 100

1961 717.3 104 84.6 121 801.9 105

1962 833.9 121 106.4 152 94o.3 124 1963 945.7 137 117.2 168 1,062.9 140

1964 1,077.6 156 135.9 194 1,213.5 160 1965 1,199.5 174 151.9 217 1,351.4 178 1966 1,328.5 192 169.7 243 1,498.2 197

1967 1,445.1 209 183.5 263 1,628.6 214

1968 1,664.5 241 215.4 308 1,879.9 -247

1969 1,817.8 263 246.8 353 2,064.7 272

1970 3/ 1,984.3 287 261.2 374 2,245.5 295

1/ Excludesborder visitor traffic 2/ Mexicans residing abroad. 2/ Preliminaryestimates

Souroe: Departmentof Tourism

Octobcr 1971 TABLE3

MEXICO: ZIHUATANEJOTOURISM PROJECT

FOREIGN VISITORS TO MEXICOBY NATIONALITY, 1964-1969 (Percentages)

Nationality 1964 1965 1966 1967 1968 1969

U. S. 87.5 87.4 86.9 86.6 86.3 87.4

Ganadian 2.5 2.9 2.8 3.2 3.2 3.2

Central American 3.4 3.2 3.1 2.8 2.8 2.8

Cuba and the Antilles 0.1 0.1 0.1 0.2 0.2 0.2

European 3.4 3.6 4.0 4.2 4.7 3.9

South American 2.4 2.0 2.4 2.5 2.0 2.0

Others 0.7 0.8 0.7 0.5 0.8 0.7

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Departaent of Tourism

October 1971 TABLE4

MEXIGO:ZIHUATANEJO TOURISM PROJECT

SEASONALITYIN VISITOR TRAFFICTO MEXIGO,1960 - 1969 (In Thousands)

Month 1960 1965 1969-/ Percent of Total

January 58.2 105.8 144.3 7.0 February 62.0 105.3 154.3 7.4

March 52.4 91.2 171.3 7.6 April 59.5 106.5 160.2 7.6

May 53.1 93.7 147.2 6.5 June 73.5 123.0 195.5 9.6 July 90.2 153.6 213.1 10.9

August 80.0 143.2 235.6 11.0 September 50.7 89.5 110.6 6.4

October 47.9 91.1 162.0 7.1

November 52.0 100.3 171.6 7.7 December 80.8 148.1 231.4 11.2

Total 760.3 1,351.3 2,097.8 100.0 1/ Preliminaryestimate Source: Departmentof Tourism

October1971 TABIE 5

MEXICO: ZIHUATANEJOTOURISM PROJECT

DISTRIBUTIONOF ACCDOMODATIONIN MEXICO ACCORDING TO TYPS AND CATEGORY,1961 - 1970 1/

- 1 9 6 1 - 1)65 6 - - 1y o -

Type of Number of Percent Number of Percent Number of Percent Number of Percent Number of Percent Number of Percent Accoinmodation Establishments of Total Rooms 1 Suites of Total Establishments of Total Roons & Suites of Total Establishments of Total hooms se Suites of Total

Apartments 177 5.3 2,185 2.4 228 6.6 2,336 2.4 340 7.1 4,178 3.2

Guest Houses 699 21.1 7,800 8.6 866 25.1 10,203 10.6 1,381 29.0 16,019 12.1 2/ Motels 195 5.9 4,240 4.7 371 10.7 8,205 8.5 510 10.7 12,127 9.1

Hotels 2,243 67.7 76,666 84.3 1,987 57.6 75,909 78.5 2,534 53.2 100,377 75.6

Total 3,314 100.0 90,891 100.0 3,452 100.0 96,653 100.0 4,765 100.0 132,701 100.0

Category

"AA" 121 3.7 6,267 6.9 233 6.8 10,994 11.4 398 8.3 21,008 15.8

"A" 35b 10.7 14,713 16.2 739 21.4 26,o47 26.9 711 14.9 23,069 17.4

Sub-Total 475 14.4 20,980 23.1 972 28.2 37,041 38.3 1,109 23.2 44,077 33.2

"tB" 419 12.6 13,278 14.6 478 13.8 14,170 14.7 714 15.0 22,3y2 16.9

Sub-Total 896 27.0 34,258 37.7 1,450 42.0 51,211 53.0 1,823 3d.2 66,469 50.1

",C"l 382 11.5 10,564 11.6 347 10.1 8,862 9.2 846 17.d 23,526 17.7

"D" 942 28.4 26,541 29.2 846 24.5 20,814 21.5 1,218 25.6 27,118 20.4

`E` 1,096 33.1 19,528 21.5 809 23.4 15,766 16.3 87d 18.6 15,588 11.8

Total 3,314 100.0 90,891 100.0 3,452 100.0 96,653 100.0 4,765 100.0 132,701 100.0

1/ Surveys ending May 31 of each year. 2/ Sometines defined as motels and sometimes as tourist camps.

Source: Departnent of Tourism September 1971 TABLE,6

MEXIGO- ZIHUATANEJOTOURISM PROJECT

METEREOLOGICALIJNDITIONS OF IHPORTANTTOURIST DESTINATIONS

IN THE PACIFIC AND THE CARIBBEAN

Average Number of Temperatures Tourist Annual Rainy Centigrades Destinations Rainfall Das maximum minimum mean (D11s118) ( )m

Zihuatanejo 1,285 61 32.7 20.6 26.7 Acapuleo 1,470 66 31.6 23.7 27.7 Honolulu 556 99 27.7 21.0 24.4 Hilo 3,470 284 27.0 18.6 22.8

San Juan 1,524 209 28.2 22.9 25.6 Bahamae 1,178 114 28.3 21.1 24.7

Sources: Direccionde Meteorologia,Secretaria de Agriculturay Ganaderia. WeatherBureau, U.S. Departmentof Commerce.

September1971 TABLE 7

MEXICO: ZIHUATANEJOTOURISM PROJECT

BREAKMM OF TOTAL PROJECT COST

Cost figumes in thousands of Mexdcan pesos (M$OO0) Rate of Exchange: M$12.49 * US$1 .00

Cost of Cost of Cost of Cost of Cost of Cost of Cost of Cost of Cost of Land Siteworks Construction Squipment Professional Physical Facilities Promotional Pro ject Techn.ical TOTAL PROJECT COST Project Items Acquisition Se-rviCes Expenses Administration Assistance M$ (000) M$ (000) M$ (000) M$ (000) M$ (000) M$ (000) US$ (000) M$ (000) M$ (000) M$ (000) M$ (000) UsS (000)

2 I. Ixtapa Tourism Area 21,000 101,249 46,361 18,200 12,308 199,118 15,942. 18,000 19,591 236,709 18,951.9

II. City of Zihuatanejo n.a. 44,404 13,652 3,536 7,292 68,884 5,515.1 n.a. 6,777 75,661 6,057.7

III. Zihuatanejo International Airport 8,350 10,137 81,549 14,918 13,202 128,156 10,260.7 n.a. n.a. 128,156 10,260.7

IV. Training and Feasibility Studies 13,739 13,739 1,100.0

Total Gost Before Contingeneies 29,350 155,790 141,562 36,654 32,802 396,158 31,718.0 18,000 26,368 13,739 454,265 36,370.3

Price Increase 21,811 19,818 5,132 46,761 3,743.9

Physical Increase 22,638 20,570 5,326 48,534 3,885.8

Total Contingencies 44,L449 40,388 10,1458 95,295 7,629.7

GRANDTOTAL 29,35° 200,239 181,950 477,112 32,802 491,1453 39,3347.7 18,000 26,368 13,739 549,560 44 ,000.0

Foreign Exohange Component

Peroentage 30.5% 30.5% 62.0% 2.1% 29.8% 29.8% 62..4% 60.0% 30.2% 30.2%

Total 61,o61 55,486 29,219 688 146,454 11,725.7 11,235 8,244 165,933 13,258.8

October 1971 TABLE8

HEXIOO ZIHUATA8JO TOtURI5NPROECT2

I. IXTAPA TOUI. k8E OST OF INFPALTR800TUR8AÁND SUPS5TRUCTURE3

Total TOTA.L COST Fóroip. Code Total Sitewor8B Oonatr-atoton Equipaent TOEhange !yar 1 Iear 2 rear 3 L:tter (m 2) (40OO (000002 M3;( . us$ (000> 2 - 268(000) m .N00O)

A. Prolíinairy Worlot 1/ n.a. 2,261 200 2,1461 197.0 858 2,461 B. Tupopray B 2ildtg/ 323 3,202 1,517 5,0142 °3. 7 1,137 5,ó42 e. Rarth 1i7ring n.a. 17,54i4 i7754, 1,404.6 5,789 7,018 10,526 B. Roa&B.elar2d n.a. 26,859 26,859 2,150.4 8,863 8,784 12,397 5,678 E. k&doaulo WookaA/ n.a. 990 19,381 20,371 1,631.0 5,781 8,380 7,418 4,573 p. Seq&e Troat.ent 2/ n.a. 8,601 1,650 1,496 11,747 940.5 3,409 2,926 8,821 0. Stoe iWater Draegae S. n.a. 5,790 5,790 463.6 1,716 8. 2,842 2,948 Wat.or Suppl.y Sy>tat 2 t 925 7,665 465 1,567 9,697 776.4. 3,120 6,525 3,172 I. wibrxnentalt -1 ~ mitation n.a. 2,782 3,781% 6,566 525.7 2,224 3,671 886 2,009 J. aeetr1cty 2z n.a. 7,911 12,093 2,400 22,IJ04 1,793.8 9,020 2,350 13,702 6,352 K. Teonami.ationas / 300 5,260 600 1 230 7,090 567.7 2,460 3,821 3,269 L. Golf Couree md Club House 1,795 8,293 2,752 4,104 15,149 1,212.9 5,680 12,315 2,834 24. Oer.cial Conter 2,786 658 3,227 30 3,915 313.4 595 1,513 N1. Co.aurnity 2,402 Servtaes 1,082 839 1,300 1,872 14,011 321.1 2,515 4,011 0. 3treets of tie Residential DUstrict n.a. 4,143 4,113 331.7 511 788 3,355 P. Beach Developmnt 400 1,330 1,691 3,021 241.9 303 596 2,425

Sub-Total 101,249 46,361 18,20J 165,610 13,275.41 53,931 37,706 76,255 51,849 contingencia.,: Prico Inazeo (7.0% ann.uaaly) 23,213 1,858.5 7,557 Fhy*st4al Inereaee (14.5%) 21.0914 1,929.1 7,844 Total ContingenIeas 17,37 3,787.6 15,101

Pro:rsaional 8eervicaa 2/. Dens.i ( 6 4.5% ) 7,107 569.0 688 Supervlaion ( 6 4.0%) 5,201 416.41. Total Profaesional Serqioes 12,308 985.4 688

Land AcquIaition / 21,000 1,681.3 ProJect Unlit, Mexaco CIty 2 14, 08 1,185.6 Projact Onit, Ixtp 1/ 11,560 925.5 PrzaDtlonal Expeneoa T/ 18,000 1,441.2 11,235

G02NO TOTAL 290,793 23,282.0 81,305

1/ Oot to bo finanead by ths L1a 2/ Onludes sone aork to be imple-ented hy other gorerent,t gencies

Deotnber 1971 TABLE 9

MSXICO: ZIHUATANEJO TOURISM PROJECT

II. CITY OF ZIHUATANEJO

COST OF INFRASTRUCTURES

Total TOTAL COST Foreign Code Area Siteworks Conatruction Equipment Exchange Year 1 Year 2 Year 3 Letter ( 2) M$ M$m (000) M$ (000) USm (000) M$ (000)OO(° M$ (000) m$ (00)

A. Sevferage System 2,874 9,304 4,366 1,745 15,415 1,234.2 3,509 4,494 10,921 B. Envirozmenta Sanitation 1/ n.a. 800 800 64.O 427 290 70 440 C. Water Supply Szstem n.a. 4,065 2,935 991 7,991 639.8 1,664 614 3,752 3,625 D. Electricity 1/ n.a. 5,781 5,781 462.9 2,023 3,470 2,311 E. Stoz, Water Drainage System 10,763 10,763 B61.7 3,552 1,182 4,604 4,977 F. Streets 1/ 35,320 20,272 570 20,842 1,668.7 7,503 873 5,338 14,631

Sub-Total 4,4014 13,652 3,536 61,592 4,931.3 18,678 2,959 21,728 36,905

Conti-ngencies: Price Inercase (7.0% anually) 8,623 690.4 2,615 Physical Inciease (14.5%) 8,950 716.5 2,714 Total Contingencies 17,573 1,406.9 5,329

Professional Services -/: Design ( ± 4.5% ) 2,772 221.9 Supervision ( + 4.0% ) 2,464 197.3 Master Plan Preparation 2,056 164.7 Total Professional Services 7,292 583.9

GRAND TOTAL 86,457 6,922.1 24,007

1/ Not to be financed by the Loan

October 1971 TABLE 1o

14EXICO: ZIHUATANEJOTOURIEX PROJECT

III. ZIHUkTANIJOINTRRNATIONA1L AIRFORT

GOSTOF INFRASTRUCTURESAND SUPERSTRUCTURES

Ceode Area Siteworks Construction Equipjent TOTA COST Xcege Year 1 Year 2 Year 3 Letter (m 2) M$ (000) m$ (°00) M$ (000) m$ (21 M$ ) M$s (OOO)

A. Manxvering Area and Access Road 469,369 7,952 62,639 5,129 75,720 6,062.5 28,833 9,689 40,917 25,114 B. Buildinga 29,491 1,684 14,425 3,530 19,639 1,572.4 6,794 11,258 8,381 0. Visual Aida and Electricity n.a. 128 1,148 2,174 3,450 276.2 1,369 1,500 1,950 D. Fuwl Storage and Supply n.a. 193 1,736 1,866 3,795 303.8 1,352 3,000 795 E. NBavAda d C~omunications n.a. 180 1,601 2,219 4,000 320.2 2,403 1,480 2,520

Sub-Total 10,137 81,549 14,918 106,604 8,535.1 40,751 9,689 58,155 38,760

Contingencies: Pries Increase (7.0% annually) 14,925 1,195.0 5,705 Phaical Increase (14.5%) 15,490 1,240.2 5,921 Total Contingencies 30,415 2,435.2 11,626

Professional Seraie Y1/t Design ( ± 5.0% ) 5,281 42Z.8 Sup.rvision ( ± 7.4% ) 7,921 634.2

Total Profeasional Services 13,202 1,057.0

Land ACquisition 1/ 8,350 668.5

ORUID TOTAL 158,571 12,695.8 52,377

1/ Not to be finmiced by the Loan

October 1971 TABLE1 1

MEXICO: ZIHUATANEJOTOURISM FROJECT

IV. TRAININOAND FEASIBILITY STUDIES

TOTAL COST Foreign Codo Exchange Year 1 Year 2 Year 3 Letter M$ (000) USlt 000) M M ( K$ (000)

A. Technical Training 6,245 500-0 3,747 3,122 3,123 B. Feasibility Studies (2) 4,996 400.0 2,998 2,498 2,498 C. Tecluinal Asaistaice 2,49B 200.0 1,499 1,249 1,249

GRANDTOTAL 13,739 1,100.0 8,244 3,747 6,869 3,123

October 1971 TABLE 1

MEXICO: ZIHUATANEJO TOURISM PROJECT

CONTINGEDCYALLWANCFS

Land Acauisition Siteworks Construction Equipment Professional Proeotional Prject Technical SeWrveesEpese Acninietrat~ion A7T¡~¡istce Local Foreign Local Poreign Local Foreign Local ~ TOTAL Foreígn Local Foreign Local Foreign Loca' Forr L oc_i

Allovances for Physical Increase n.a. 14.5% 114.5% 14.5% n.a. n.a. n.a. n.a.

Allowances for Price Increase n.a. 14.0% 114,0% 14.0% n.a. n.a. n.a. n.a.

Total Project Coet Before Contineencies 2.35 8.67 3.80 7.87 3.46 1.12 1.82 2.57 o.o6 0.5h 0.90 2.11 0.144 0.66 36.37

Allowances for Wi sical mrease n.a. 1.26 0.55 1.15 0.50 0.17 0.26 n.a. n.a. n.a. n.a. 3.89

Sub-Total 2.35 9.93 4.35 9.02 3.96 1.29 2.08 2.57 0.06 0.54 0.90 2.11 0.1o1. 0.66 40.26

Allowances for Price Increase (US$millions) n.a. 1.21 0.54 1.11 o.48 0.14 0.26 n.a. n.a. n.a. n.a. 3.74

TOTAL, Including Contingencies 2.35 11.14 4.89 10.13 4.44 1.43 2.34 2.57 o.o6 0.54 0.90 2.11 0.44 0.66 44.00

October 1971 TABLE 13

MEXICO: ZIHUATANEJOTOURISM PROJECT

ESTINATED ANNUALEXPENDITURES BY AGENGIES

YEAR I YEAR II YEAR III TOTAL

M$ (000) Us$ (000) M$ (000) us$ (000) M$ (000) us$ (000) M$ (000) us$ (o)

INFRATUR

Ixtapa Tourian Area 62,904.6 5,036.4 115,886.0 9,278.3 80,238.5 6,424.2 259,029.1 20,738.9 Feasibility Studies 2,498.0 200.0 2,493.0 200.0 4,996. 1400,0

Total 65,402.6 5,236.4 118,384.0 9,478.3 80,238.5 6,424.2 264,025.1 21,138.9

SEORETARYOF RIYDRAULICRESOURCES (SIff)

Ixtapa Touriem Area 7,160.5 573.3 3,603.4 288.5 10,763.9 861.8 City of Zihuatanejo 2,685.3 215.0 18,568.9 1,486.7 27,831.5 2,228.3 49,o85.7 3,930.0

Total 2,685.3 215.0 25,729.4 2,060.0 31,434.9 2,516.8 59,849.6 4,791.8

NATIONAL BANK FOR PUOBLIOWORYS AND SERVICES (BNOSP)

City of Zihuatanejo 1,261.5 101.0 12,345.1 988.4 23,764.7 1,902.7 37,371.3 2,992.1

Total 1,261.5 101.0 12,345.1 988.4 23,764.7 1,902.7 37,371.3 2,992.1

S3 ARY OF PUBLIO WOllRKS(SOP)

Zihuatanejo International Airport 1/ 13,654.1 1,093.2 81,948.1 6,561.1 54,618.8 4,373.0 150,221.0 12,027.3

Total 13,654.1 1,093.2 81,9J48.1 6,561.1 54,618.8 4,373.0 150,221.0 12,027.3

DE1PAMENT (F IWRSM

Technical Training 3,122.5 250.0 3,122.5 250.0 6,245.0 500.0

Total 3,122.5 250.0 3,122.5 250.0 6,245.0 500.0

SECRETAR OF NATIONAL PATRIMONY(SPN)

Technical Asasitance (Acapulco) 1,249.0 100.0 1,249.0 100.0 2,498.0 200.0

Total 1,249.0 100.0 1,249.0 100.0 2,498.0 200.0

GOANOTOTAL 84,252.5 6,745.6 242,778.1 19,437.8 193,179.4 15,466.7 520,210.0 41,650.1

1/ Excluding land acquisition

October 1971 TAsLZ 14

MEXICO: ZIHUATANEJOTOURISM PROJECT

ESTDUITEDSCHEOULE OF EYPENDITURESOF DWRATURBY QUARTBRSANDIF.AYRS (In Thousand US Dollar5)

Code Letter Quarter 1 Quarter 2 Quarter 3 Quarter 4 YEAR I Quarter 5 Quarter 6 Quarter 7 Quarter 8 YBAR II Quarter 9 Quarter 10 Quarter 11 Quarter 12 YlAR III TOTAL

I. IXTAPA TOURISMNAREA 1/

A. Preliminary Works 7.8 147.4 89.2 244-4 244.4 B. Tenporary Buildings 40.4 245.7 215.2 501.3 501.3 C. Lrth Moving 40.3 687.3 72. 409.1 318.2 181.9 181.9 1.091.1 1,818.7 D. Road-Boulevard 88.5 351.1 526.5 966.1 204.6 340.9 340.9 477.4 1.363.8 329.1 295.5 62 2,954.5 E. ñydraulio Works 97.7 329.7 494.5 921.g 326.4 244.8 163.2 81.6 8166 93.0 93.0 93.0 224.1 2,241.0 F. Sewage Treatnent 17.0 20.7 111.1 111.1 259.9 205.2 227.5 227.5 102.2 762.4 1,022.3 G. Storm Water Drainage System 29.5 71.2 99.7 114.0 314. 104.8 91.7 65.6 64.1 326.2 640.6 H. Water Supply System 31.1 73.4 102.8 117.5 324.8 44.6 39.0 27.9 48.5 160.0 484.8 J. Enviromental Saitation 10.5 395.6 406.1 24.5 24.5 24.5 24.5 1.0 59.9 52.4 37.4 72 6 22 726.4 J. Electricity 42.6 215.9 258.5 301.5 452.2 452.2 301.5 1 507.4 181 0 158.3 113.1 246.5 me 2,464.8 X. Telecommunicatlona 42.3 84.5 126.8 169.1 4227 113.3 99.2 70.8 78.4 361.7 784.4 L. Golf Course and Club House 272.5 408.7 408.7 272.5 1,362.4 102.1 43.8 167.6 1,675.9 M. C«a~ rcial Center 16.7 33.5 50.2 66.9 16T.j 89.0 77.8 55.6 43.3 267 433.0 N. Cowmunity Services 119.8 159.7 119.8 44.4 443.7 443.7 O. Streeta, Residential Distri, 31.7 47.5 9.2 73.9 118.3 103.5 41.7 337. 416.6 P. Beach Developnent 26.4 39.5 6 58.7 94.0 82.2 33.4 268.3 334.2

Project Unit, Mexico City 98.8 98.8 98.8 98.8 395.2 98.8 98.8 98.8 98.8 395.2 98.8 98.8 98.8 98.8 395.2 1,185.6 ProJect Unit, Ixtapa 34.7 48.6 55.6 92.5 27 92.5 92.6 992.5 2.5 37d 92.5 92.5 83.3 55.6 3 925.5

Promotional Expenses 14.4 7.9 180.8 180.8 383.9 189.5 188.0 131.3 131.2 640.0 123.4 123.4 123.4 47.1 417.3 1,441.2

TOTAL-'/ 475.7 548.4 1,320.4 2,691.9 5,036.4 2,056.0 2,452.0 2,442.8 2,327.5 9.278.3 1,889.1 1,864.9 1,469.5 1,200.7 6,424.2 20,738-91'

IV. TRAD¡Mf AND STUDIES

B. Feasibility Studies 30.0 40.0 60.0 70.0 200.0 70.0 60.0 40.0 30.0 2Q00 400.0

GRANDTOTAL 505.7 588.4 1,380.4 2,761.9 5.236.4 2,126.0 2,512.0 2,482.8 2,357.5 9.478.3 1,889.1 1,864.9 1,469.5 1,200.7 6.424.2 21,138.9

1/ Excludtng land acquisition

October 1971 TABLE1 5

MlEXICO: ZIHUATANEJOTOURISM PROJECT

ESTINATEDSCHEWEE OF EXPENDITURESOF TNE SECRETARIATOF NIDRAULICRESOURCES (SRI) BY QUJRTERSUND YE9S (In Thousand US Dollars)

Code Q8 YEARII Q9 Q10 Ql1 Q12 YEARIII TOTAL Letter Ql Q2 Q3 Q4 YEAR17I Q5 Q6

I. IXTAPATOURISM AREA 37.7 56.5 56.5 37.7 188.4 36.4 36.0 29.0 101.4 289.8 F. Sewage Treatmnent 52.0 46.7 31.2 57.2 187.1 572.0 H. Water Supply System 77.0 115.4 115.5 77.0 384,9

573.3 88.4 82.7 60.2 57.2 288.5 861.8 TOTAL 114.7 171.9 172.0 114.7

II. CITY OF ZIHUATANEJo 124.1 173.7 198.5 426.3 259.0 414.3 362.6 170.2 1 206.1 1,702.4 A. Sewerage System 127.0 111.2 79.4 89.8 l 898.1 System 27.6 41.4 69.0 42.2 63.3 147.5 168.7 421.7 C. Water Supply - 192.7 168.6 120.5 133.0 614.b 1329.5 E. Stonm Water Drainage 36.5 51.1 58.4 146.0 85.3 113.7 142.2 227.5

578.7 694.1 562.5 393.0 2,228.3 3,930.0 TOTAL 36.5 78.7 99.8 215.0 127.5 301.1 463.4 594.7 1,486.7

667.1 776.8 622.7 450.2 2,516.8 4,791.8 GRANDTOTAL 36.5 78.7 99.8 215.0 242.2 473.0 635.4 709.4 2,060.0

October 1971 TABLE 16

MEICO: ZIHUATANEJO TOURISMPROJECT

ESTIM&TED 8CHEDJLE OF EXPNDITURES OF THE NATIONAL BANK OF PUBLIC IDRKS AND SERVIES (BNOSP) BY QUARTERS AND YEARS

(In Thousand US Dollars)

Code Letter Ql Q2 Q3 Q4 YAR I Q5 Q6 Q7 Q8 YEAR Il Q9 Q1o Qll Q12 YEAR III TOTAL

II. CITY OF ZIHUATANEJO

B. Enviromrental Sanitation 1.5 1.8 3.3 0.2 0.2 0.2 0.2 0.8 0.7 1.4 1.5 1.3 4.9 9.0 D. Electrloity 39.0 156.0 195.0 39T 90.9 77.9 52.D 39.0 125.o 6149.8 F. Streeta 39.1 58.6 97.7 89.6 119.5 1149.14 239.1 :6 498.8 573.3 332.6 233.3 1,i5 2,333.3

GRANOTOTAL 40.6 60.4 101.0 89.8 158.7 305.6 1434.3 988.4 590.4 652.6 386.1 273.6 1,902.7 2,992.1

October 1971 TABLE1?

MEXICO: ZIHUATANSJOTOUBISN PROJECT

ESTIfATEDSCOREDLE OF EXPNDrITURESOF TSE SEORSARIrATOF PURIJO WIPXS (sJpl RY oITA14V Aun VR&gS

(In Thousand US Dollars)

Code 8 Letter Ql Q2 Q3 Q4 YEARI Q5 Q6 Q7 Q YEARII Q9 Qi1 Qíl Q12 YEA1 III TOTAL

III. ZD!UATANEJOAIRPORI T/

A. Maneuvering Areas & Boad 437.3 655.9 1.093. 692.5 923.3 1,384.9 1,615.7 4 616.4 791.6 692.7 494.8 854.3 2j83 8,543.0 B. Buildings 127.0 228.6 365.8 548.7 1_270.1 289.6 253.4 t81.0 221.6 945.6 2,215.7 C. Visual Aids & Electricity 42.3 59.2 67.7 162 72.4 63.4 45.3 38.9 220.0 389.2 D Fuel Storage & Supply 50.8 71.9 100.7 115.0 338.4 46.9 42.8 8 142a.1 E. Nav Aids & Cuunications 25.0 35.5 49.7 56.8 i3L.0 83.7 95.7 59.8 45.1 2.3 451.3

TOTAL 1/ 437.3 655.9 1,093.2 895.3 1,301.6 1,960.3 2,403.9 6,561.1 1,284.2 1,105.2 823.7 1,159.9 4,373.0 12,027.3 1/

1/ Exoluding land acquisition

October 1971 TABLE 18

MEXICO: ZIHUATAMEJOTOURISM PROJECT

TRAININO AID FEASIBILITI STUDIES

ESTIM&T1D SCHE11,LE OF DISBURSEIIENTS BY QUARTERSAID YEARS

(In Thousand US Dullars)

Codo Letter Q Q2 Q Q IEAII 9 Q10 QQl Q12 YEAR III TOTAL

DEPAR~IT CF TOURISI

IV. TRAINII AND STUDIES

A. Technical Training 25.0 56.3 78.7 90.0 250.0 90.0 78.7 56.3 25.0 250.0 500.0

SECRTA OF NATIONAL PATRDMONY(SPN)

IV. TRAIND

C. Technical Asaistance (Acapuleo Renewal) 25.0 35.0 40.0 100.0 40.0 35.0 25.0 100.0 200.0

October 1971 TABLFE19,'

MEXICO: ZIHUATANEJO TOURISM PROJECT

ESTDIATED SCHEDULE OF DISBURSEMENTS

Cumulative Disbursement IBRD Fiscal Year and Quarter at End of Quarter US$ Millions

1972-1973 March 31, 1972 June 30, 1972 - September 30, 1972 0.7 December 31, 1972 0.8

1973-1974 March 31, 1973 2.6 June 30, 1973 4.4 September 30, 1973 6.6 December 31, 1973 9.3

1974-1975 March 31, 1974 11.8 June 30, 1974 14.5 September 30, 1974 17.4 December 31, 1974 19.9

1975~1976 March 31, 1975 22.0

October 1971 TABLE20

HEXICO: ZIHUATANEJOTOURISH PROJECT

ESTIMATEDSCHEDULE OF DISBURS4E2NTSBY QUARTERSAND YE&RS 1/

(In Thousand US Dollars)

Ql Q2 q3 Q4 DEARI Q5 Q6 Q7 Q8 YEA II Q9 QiO Ql Q12 YEA. III Q13(TR 1n) TOTAL

I. IXTAPATOURISM AREA 408.8a 408.8 1,297.7 1,067.0 1,218.4 1,192.3 4,775.4 1,210.5 1,068.2 1,150.4 1,054.7 4,4B3.8 911.1 10,579.1

II. CITY OF ZIHUATANEOJ 54.3 54.3 57.6 79.1 179.7 294.3 610.7 316.7 402.1 619.1 536.7 1,874.6 292.8 2,832.4

III. INTERATI0FAL AIRORT 8.6 238.7 247.3 391.6 540.6 731.5 1,058.0 2,721.7 964.0 1,147.3 1,098.7 800.8 4,010.8 926.7 7,906.5

IV. TRAININGAND STUDIES 18.6 40.3 58.9 117.8 68.2 83.7 93.8 89.1 334.8 74.4 55.8 48.8 34.9 213.9 15.5 682.0

TOTAL 18.6 48.9 760.7 828.2 1,815.1 1,770.4 2,223.4 2,633.7 8,442.6 2,565.6 2,673.4 2,917.0 2,427.1 10,583.1 2,146.1 22,000.0

1/ Eixcludin and acqait&ion

October 1971 TABLE 21

MEXCO: ZfINUATANEJOTOURISM PROJECT

1. IXTAPATOURISM AREA

ESTIMATEDSCEULE OF DISBURSEMENTSBY QUARTERSAbD YEARS

(In Thousand US Dollars)

Code Q10) Ql Q2U YEAR TTT 013(YRIV) TOTAL Letter Q1 Q2 Q3YE;AR I 5 Q Q. Q YEARuII Q2

124.1 1,227.4 C. Farth Moving, Stuks. 539.6 253.6 197.3 112.8 1.103.3 124.1 204.4 U" 276.0 126.9 177.3 177.3 757.5 296.0 204.0 219.9 194.0 913.9 1,675.8 D. Road-Blvd., Stmks. 63 E. H3rdraulic Works, Stwks. 27.7 Lr41.6 176.7 265.0 202.4 151.8 101.2 720.1 50.6 57-7 57.7 57.7 235.1 1,355 9 Constr. 176.7 601.6 Stwks. 33.9 33.9 60.3 12. 52.4 98.7 126.5 135.9 -m F. Sevage Treatment, 115.5 Constr. 11.6 32.3 36.9 23.1 . 11.6 Equipm. 14.0 43.6 £. 28.3 t9.8 7 104.7 40.7 233.3 405.0 G. Storm W. Drain3ge, Stwks. 18.3 44.1 61.8 1.2= 70.7 65.0 56.9 536.3 H. Water Supply, Stwks. 67.0 106.1 108.5 21 80.8 26.8 32.6 25.6 .8 88. Constr. 4.9 4 9 13.0 9.8 4.9 27.7 32.6 Equipm. 11.0 21.9 32.9 26.8 23.3 15.6 11.0 76. 109.6 133.8 194.6 Envirorm. Sanitation, Stwks. 15.2 15.2 15.2 15.2 6 15.2 15.2 51.7 51.7 I. 264.7 Equipn. 21.9 17.3 116.7 13I9 108.8 Stwks. 133.9 96.5 62.1 54.5 347.0 55.3 60.4 90.7 206.4 553.4 J. Electricit;, 846.o Constr. 126.8 111.0 79.3 317.1 82.3 109.5 124.5 121.8 I T 90.8 LEquir. 26.4 44.1 66.2 136 3.34.2 170.9 34.9 58-0 580.3 L. Golf Course & C.H., Stwks. 116.0 185.7 162.5 464.2 23.2 Constr. 23.1 34.7 57.B 46.2 34.7 20.8 13.8 11.5 19.2 192.5 Equipm. 67.2 75.2 43.9 37.6 2 63.2 287.1 9.2 138 46.1 M. CQnaeercial Ctr., Stwks 10.4 13.1 8.8 32. 4.6 Constr. 28.6 42.8 71. 46.1 39.5 32.9 13.3 22.6 225.8 Equipm. 1.0 1.1 2.1 2.1 52.7 1Q 58.7 N. Coni5y Serv., Stwks. 21.1 18.4 13.2 Constr. 20.5 32.7 28.7 81.9E 91.0 Equipm. 40.8 61.3 10í6! 28 130.9 24.3 290 289.9 0. Streets of the R.D., Stwke. 19.6 19.6 60.3 72.4 60.3 48.3 -U 11.2 93.1 P. Beach Developt., Stwks. 16.4 1:3 26.2 22.9 16.4 Corntr. 33.9 38.8 24.3 97-° 21.3 118.3

10,579.1 TOTAL 408.8 408.8 1,297.7 1,067.0 1,218.4 1,192.3 4,775.4 1,210.5 1,068.2 1,150.4 1,054.7 4.483- 911.1

October 1971 TABLE22

MEXICO: ZIHUATANUOTOURISM PliJECT

II. CITY OF ZIHUATANEJO

ESTIMATEDSCHEDULE OF DISBURSENENTSBY QUARTERSAND YEARS

(In Thousand US Dollara)

Ltter Ql Q2 Q3 Q4 YEARI Q5 Q6 Q7 Q8 RÁ II Q9 QiO Ql1 Q12 IIARII Q13(YRIV) TOTAL

A. Severage Systea, Stwks. 70.0 76.9 146.9 81.1 109.6 175.4 153.5 519.6 74.1 740.6 Canstr. 37.7 37.7 38.6 54.8 87.6 76.7 252.1 347.5 29.5 47.3 41.3 20. 138.9 C. Water Supply, Stlks. 21.4 23.0 23.5 38.0 105.9 42. 4 32.9 52.6 46.o 173.2 49.4 329.2 Constr. 3.2 15.7 46.5 6ç4 51.9 33.9 29.7 21.2 l36.7 35.7 237.8 Equipu. 7.0 7. 10.3 15.7 25.2 22.0 73.2 80.2 E. Stora Drainage, Stwks. 54.3 54.3 36.2 52.9 70.5 88.2 2 4 92.4 125.7 201.3 l76.0 9_ 956.2

TOTAL 54.3 54.3 57.6 79.1 179.7 294.3 610.7 316.7 402.1 619.1 536.7 1,874.6 292.8 2,832.4

October 1971 TABLE 23

MEXICO: ZIHUJATANEJOTOURISP PROJECT

III. ZIHUATANEJO INTERNATIONAL AIRPORI

ESTIM&TED SCHEDULE OF DISBURSWENTS BY QUARTERS AND YEARS

(In Thousand US Dollars)

Code Q I T_1i Letter Ql Q2 Q3 Q4 YEAR I Q5 Q6 Q7 Q8 YIARII Q9 Q10 Q11 Q12 IZARIII Q13(YRIV) TOTAL

A. Maneuv. & Road, Stwks. 8.6 16.1 24. 20.7 34.0 47.6 54.4 156.7 56.4 70.3 112.5 98.4 337. 70.8 589.8 Oonstr. 222.6 íÉ 370.9 370.9 469.2 667.3 1.378. 508.5 591.6 517.6 369.7 1 4 557.5 4,645.8 Equipo . 32.7 32.7 52.3 99.9 87.4 62.5 302.1 45.7 38J.5 B. Buildinigs, Stwcs. 18.6 26.0 29.7 30.3 5.2 15.0 5 124.8 Oonstr. 7B4.3 1040 118.9 297.2 133.2 178.8 204.4 127.8 6 128.4 1,069.8 Zqui4n. 36.5 36-5 59.8 5. 5 44.2 31.6 186.1 261.9 C. V.Aids & Electricity, Stwks. 8.2 1.3 ? 1.3 9-5 Conotr. 15.7 33.5 liE.2 11.0 8.8 5.9 2.7 10.2 85.1 Zqni. 18.771419 30.8 49.3 43.1 193 161.2 D. Fuel Storage, Stj¿ke. 9.5 2.9 12.4 2.0 ±90 14.4 Constr. 19.2 37.8 44.9 101.9 11.4 15.4 26.8 12d.7 Equ5pu1 12.0 12.0 19.1123.71 22.7 36.2 31.7 16.6 138.3 E. Nav Ai.ds & Canmn., Etulce. 4.6 6.9 11.S 1.9 1.9 13.4 Constr. 9.5 13.2 13.9 36.6 19.4 29.1 19.4 Z 14.2 113.7 Eqtip_ 14.2 1=.2 38.7 44.2 27.7 15.1 12j7 21i 164.6

TOTAL 8.6 238.7 247.3 391.6 540.6 731.5 1,058.0 2,721.7 964.0 1,147.3 1,098.7 800.8 4,010.8 926.7 7,906.5

October 1971 TABLE24

MEXIGO: ZfAI.TASEJO TOURISMP}OJECT

IV. TRAINflG AND FEABIBILITYSTUDIES ESTIMATEDSCHEDUIE OF DISBURS8X82

(In 'Thousand,JS Dollras)

Code Letter Ql Q2 Q3 Q4 R 1 Q5 Q6 Q7 Q8 YEARII Q9 Q10 Qll Q12 YEARIII Q13 (YR IV) TOTAL

8 8 A. Technical Training 15.5 34.9 4 . 99.2 55.ó 55.8 48.8 34.9 1 15.5 310.0 B. Feasibility Studies 18.6 24.8 37.2 43.44 43.4 37.2 24.8 148.8 18.6 248.0 C. Technical Assistance 15.5 21.7 37.2 24.8 24.8 21.7 15.5 m 124.0

TOTAL 18.6 40.3 58.9 117.8 68.2 83.7 93.B B9.1 334.8 74.4 55.8 48.8 34.9 213. 682.0

October 1971 40Ico 0ZIHUIT7ANEJOTOIURISM PR0J0flT

r T1D ANUlALFIIWCOIAL RHQUIHEI21S or ACiBOlS

1BM I YRAR II _ 1BAR III

TOTAL 8886K11 FISCAL PillO TOTAL 98ANKLAN FISCAL PURD3 SOTAL ~1KLOA1 1 XtO-O t'0 obs' tisoC oo os ~USVOOOISO800us UJioOO 'lNs! 000 o$¡~ 00 twni US'O SOF l''O '0 cO

80,238.5 6,4.24. 50,016.2 4.00.5 30,222.3 2.1b9.7 xtxpt Tori.nl1.. A8 1/ 62^901..6 5,036.b 21,31L.2 1,706.5 b1,590.4 3,329.9 115,886.0 9,278.3 55,159.6 4,416.3 60,726.b 4.862.0 - - 'iiiillt5 y S¡di« 2.b98.0 200.0 1.58.8 12b.0 9b9.2 76.0 2.b9h.0 200.0 1.548.8 12b.0 9849.2 76.0 60,236.5 6.b2b.2 50,016.2 4.004 5 0222.3 2. To"l 65,b02.6 5.236.4 22.h63.0 l.h30.5 42,539.6 3.b05.9 llb.3b.0 i.u78.3 56,10h.b 4.54.03 61.675.6 4,93b.0 qW,,ToRT or HIOAIULIC U30w7 u (SHR) 28h.5 2,247.0 179.9 1,356.4 108.6 lx To.lM Af. . - - - - 7,160.5 573.3 3,396.0 271.9 3,76h.5 301.b 1,603.h 964.0 7.,831.5 2.228.3 12.b58.6 97f5 15.372.7 1.230.b 00ty or 2ibhlinrijo 2.685.3 215.0 950.5 76.1 1.734.b 138.9 18.568.9 1.1466.3 6,526.5 522.7 12.040.4 11,434.9 2.516.B 1.705.8 1.177.b 16.729.1 1.339.4 ToIla 2.685.3 215.0 95M.5 76.i 1.73h.6 138.9 25,729.4. 2,060.0 9.92b.5 791.6 15,80i.9 1.265.4

N*TION$L 8ATKPOR PUb8LIOC UKS AbD S RVICBS (iSP) 1.9M2.7 10,656.5 853.2 13,10b.2 1.0&69. eity of Ziheoojo 1.261.5 101.0 417.1 35.0 814.4 61.2 12.3bS.1 9bb.4 b.335.3 317.1 8,009.0 641.3 23,761.7 ?3,76b.7 1902.7 10.6s6.5 653.2 13,108.2 1.0b9.5 T_t_l 1.261.5 121.0 1.7.1 35.b 811.1. 65.2 12,345.1 988.1. 4,335.3 347.1 6,009.8 641.3

MH6T2R6 O Pl8LIC 6ORKS(SOP) 54,618.8 4,373.0 49,629.0 3.973.5 L,S9 98 399-5 '~t.-J.Iiirlatir Airp>rt 1/ 13,65b.1 1.093.2 7,979.9 63B.9 5,674.2 454.3 ol,948.1 6.501.1 41,143.3 3.V4.1 40,804.c 3,267.0 5S,618.8 4.373.0 b9.629.0?? 3.973.5 b,Sb9.8 399.5 T)ooi o13,654.1 1.093.2 7.979.9 63B.9 5,674.2 454.3 b 1,948.1 6,%51.1 41,113.3 3,294.1 40,b.5 3.267.0

2*¶P~T O? T704R2I2 1,172.5 250.0 1,936.0 155.0 1.186.5 95.0 Twsh.lsal Tfrdning - 3,122.5 250.0 1,936.0 155.0 1,186.5 95.0 3,172.5 250.0 1.936.0 155.0 1.186.5 7 T7. - - - __- 3,122.5 250.0 1,936.0 155.0 1.186.5 95.0

M-!s-RT OF lATl0ll8ALPATRII~Y (SF1) _ _ . - TOChoIo.1 AZsUstOce (Ac80íl.0) 1.249.0 100.0 774.4 62.0 474.6 38.0 1,2bs9.D 100.0 771.4 62.0 4174.6 38.0 - 7o00. 1.249.0 100.0 774.4 62.0 474.6 36.0 1,249.0 100.0 774.4 62.0 1.74.6 38.0

15,466.7 126,943.5 10.163.6 66.235.9 5.303.1 DIUNOTOTAL 84.252.5 6,745.6 33.011.9 2.J43.3 51.237.6 4.102.3 242,77b.1 19,437.b 114.821.9 9.193.1 127.955.2 10.244.7 lS3,179.b

VI 8601odig lind oqi0.Ii-or.

(b t-obr 1971

Annex 1 Page 1

inPPRAISALOF THEIZIHUATAUJO TOURISM PROJECT

i9IRKErT1A

Introduction 1. Mexico, with its numerous attractions for tha visitorS is in an advantageous position to participate in a rapidly expanding travel market. The main market for the new resort at Ixtapa-Zihuatanajo will be the U.S., thoughit is estimatedthat there will also be a fair number of Mexican vísitors. Specifically, the proposed project ia expectedto compete particularly with Acapulco, Hawaii and selected Caribbean desti- nationa for beach holiday traffic from the U.S. and elsewhere. (a) The U.S. Travel Market

2. The U.S. ia olie of the rmost dyn c travel generating markets in the world. According to a recently released Department of Commerce cen3us, about 108 million people in 38 million houaeholds in the U.S. took at least one trip in 1967. Altogether,183 milliontrips were taken (consisting of one or more persons from the housahold) or 361 million person-trips. This compares with 275 million person-trips in 1963, a 319 increase. More important is the increase in long-distance travel. Tripa over 500 miles, for example, grew from 10 of the total in '963 to about 171 in 1967, much of the increase being by comercial air transport. Of significance for the Zihuatanejoproject is the fact that abouthalf of the total person- trips in 1967 were generatedin tha Southernand Westarnatates of the TJ.S. (statusncaúest i>,eico)anJ.tht 'alnost 158. Mil]idn pers¿n-trips ihvolvea travel on vacation. 3. Apart from the growth of family income, an important factor that ís influencing travel is the total leiswre time available.Longer paid vacations, the four-day work week, national holidays fixed on Mondays,and earlier retirement add considerably to total leisure time available. 4. án official analysis of the length of paid vacations shows a sharp rise in the length of paid vacations offered by companies between 1964 and 1967 (Table1). Companíesara aleo offeringlonger vacationa after shorterqualifying perioda (Table 1). Amnex 1 Page 2

Tabla 1: Lenwth of Paid Vacatioras in the U.S.: 1964-1969

Jistribution of U.S. Paid Vacationa Workers on Payroll of Offered bv ComPanies these Companies

No. of After Average Type Weeks No. of Years of 5 Year Vacation Servica Worker 1 Gain

2 or more 3 Office 98 99 + 1 Plant 93 97 + 4

3 or more 5 Office 6 16 +10 Plant 5 12 + 7

3 or mora 10 Office 50 71 +21 Plant 41 58 +17

3 or more 15 Office 81 87 + 3 Plant 71 78 + 7

4 or more 20 Office 47 67 +20 Plant 38 53 +15

5 or more 25 Office NA 13 NA Plant NA 12 NA

Note: Distributiorp are cumulative. Thus the proportion eligible for 2 weeks paid vacation inclules those aligible for longer periods.

Source: U. S. Bureau of Labor Statistics.

5. This trend is likely to continme. Some companies are alreaay adopting the four-lay work week. Aboreover, as the length of paid vacations increases, greaber numbers of people are taking more than one vacation a year.

(b) The Market for Foreign Travel

6. With ragar. to foreign travel, U.S. citizens travelling overseas (eaxcludingCanada) increased from 2.2 million in 1960 to over 7.9 million in 1970, growing at a rate of about 149 per year on average. U. S. visitor expanditures for travel abroad increasel from US$2.6 billion in 1960 to US$6.2 billion in 1970. Annex 1 Paye 3

7. A principal factor aEfecting the volume of foreiín travel is the level of income. Various studies of the likely growth of family income in the U.S. have been made, and based on past trenls there is every pro- bability that there will be a rapid increase in the number of households with incomes in excess of US$10,000 (at constant prices). In fact, few developmentswill have greater impact on the spending patterns of the 1970's than the almost dramatic reshuffle of family income that is expectec to take place. 1/ In the mid-sixties,leas than 30% of all families in the U.S. had earnings of $10,000 or more a year. By 1980, the proportion is projected to exceed 559 measured at constant 1966 prices. In the mid-sixties about 55- of all family income acerued to the US$10,000 and over bracket. By 1980, this proportion is projected to be 80%. The consequencesof these changes on the demanM for foreign travel will be sub- stantial.

3. Since family income ¡s a principal factor influencingU.S. travel abroad, the potential travel market may be defined to be those families earning US$10,000 or more a year. On this basis the table below correlates the growth of U.S. visitor flows to foreign countrias (excluding Canada) with the number of U.S. I?wmilies earning more than 410,000 a year at constant 1967 prices.

Table 2: U.S. Family Ixicome and Foreign Travel: 1960-67

Number of U.S. Number of U.S. citi- Nunber of U.S. citizens families earning zens going abroad, going abroad as a per- $10,000 or more (excluding Canadian centaga of number of U.S. in constant 1967 travel over land families earning 410,000 Year Dollars boraers) or more 000) (000) (>)

1960 8,977 2,235 25.0

1965 13,825 4,078 29.5 1966 15,255 4,568 29.9 1967 16,329 5,093 30.3

9. Table 2 shows a gradually increasing ratio of travellersgoing abroad to families earning $10,000 or more. This trenw may be expectad to

/ Data used here i8 based on an appraisal of past trends and represent low to moderate forecasts mado by the National Industrial Confer'encaBoard on data supplied by the U.S. Department of Commerce anilthe National Planning Association. Arnex 1 Pag eW,

continue in the future. As a minimum the proportion will remain at 30%. Consaquently, in 1980, of the total 34 mi]7iiionfamilíes thlt are foruecast to have incomes over $10,000 (at constant 1966 prices), the potential U.S. market for travel abroad In that year is likely to be at least 10 million persons.

10. Studies of the growth In "discretionary' income in the U.S. (defined as annual earnings accruing to individual familiesin excess of US$10,000)indicate that the potential market for travel abroad may be more than 10 million persons. In the closing years of the 19501s, discretíonary income as defined above totalled $50 billion, or sllghtly over 10% of total personal income. By the mid-19601s such income had more than doubled,and representedabout 17% of total personal income. In the decadeof the 1970's,discretionary income is forecastto grow to $350 billionby 1980.(at constant1968 prices),and could then represent30% of total family income. 11. The table below correlatesthe growthin discretionaryincome with the nLmberof U.S. visitorsgoing abroad, Between1960-1967 with every increasein total discretionaryincome, the numbers going abroad increasedmore than proportionately.Thus in 1960,for everymillion dollarsin discretionaryincome in the U.3. 37 personstravellel abroad. By 1967 the numbersgoing abroadhad increasedto 44 for everymillion dollars of discretionaryincome. Extrapolatingthis trend,by 1980 the numbers golng abroad for every million dollars of discretionary income would at least increase to 50 persons. On this basis the total potential U.S. market for travel abroad in 1980 would be arourd 17-18 million persons.

Table 3: U. S. JiscretionaryIncome and ForeignTravel:1960-80 Numberof U.S. citi- Numberof U.S. citizens zens going abroaAper Discretionarygoing overseas(exclud- million dollars in dis- Year _ncome___ ing Canada) cretionaryincome (billionsUS$) (000) 1960 60 2,235 37 1963 78 3,199 41 1965 100 4,078 41

1967 115 5,093 44

1980 350 17,500 50 (projected) Annex 1 Page 5

12. Coupled with these devolopment9 in inccnes, major changes are taking place in the marketing of travel in the U. S. The Civil Aerorautics Board is gradually easingrestrictions on air charter operations in the U. S. and the trend seems to be in the direction of openirig up new destina- tionsto air charter carriers. Travel agencies are also moving in this direction. Thomas Cock ia already offering tour Dackages using charter carriers and American Express for the first time is considering doing the same.

(c) Travelto Mexicoand.Zihuataneo 13. Consideringthe size of the U.S. travelmarket, the numubers visitingMexico are stillrelatively very small. Mexico and Canadaare the only two countries that U.S. visitors can drive to and yet In 1970 Mexico received only 1.8 million U.S. visitors, compared to Canada's 14 million. Nevertheless,U.S. visitorato Mexicohave more than doubledin the past decade,increasing by 11.5%a year,and in view of the projected growthin foreigntravel by U.S. citizensin the next decade,a further doublingof travelto I:exicoin that periodwauld appeara very conservative projection.

14. Mexico is a good exampleof the changingrole of variousmodes of transportation in tourism development. In the past, with increased owner- ship of automobiles in the U.S. and improvement in land communications, a f-Lrly large proportionof visitors drove into Hexicoin private cars. This is changing, and although not dramatically, road transportation is yielding to aviation as the dominant mode of trarsportation of visitors (see Ta'ole 4). Thus, between 1963 and 1969, use of air-transportation increasedat a rate of 13.6%,while that of automobile-transportation grew at a rate of less than 10%. The main factorsencouraging the use of air- transportation has been the cor.struction of new airports in tourist desti- nationa in Mexico, the establiíhmnent of direct air-links and a decline in the costs of air-travel.

15. More than 50,5of all U.S. visitors to Mexico originate from the 4 borderatates of Arizona,California, New Mexicoand Texas (seeTable 5). Most of these visitors (73`) drive into Mexico, although their expenditure and lengthof staypatterns vary enormously. The visitorfrom California, Lforexample, stays on the averageabout 18 days and apends US$360, while the Texanstays for only 3 days and spendsUS$126 per day. Thispattern is graduallychanging, however, as can be seen from the fact that increased use of air-transportation holdstrue both for border and non-border state visitora.

16. Foreign vis-tors to PIexico spent an average of 13.6 days in 1969. The averagelength of atay vanied, however, depending on the mode of trans- port used and the country or state of origin. Generally,visitors arriving by automobile stay longerthan those coming by air, except in the case of the State of Texas. If Texasis omitted,the averagelength of stay of all other visitors jumps to about 18 days. Whilethis is true for the countryas a whole, the average length of stay at arnyone destination in PIexicois lese. In Acapulco, for exaznple, it is estimatedto be about 6 days. Armex 1

Table 4: MEXICO: ZIHUATANEJOTOURISM PROJECT

MEANS OF TRANSPORTATIONUSED BY FOREIGN VISITORS TO MEXICO1963-1969 (percentages)

Means of Transportation 1963 1964 1965 1966 1967 1968 1969

Private Car 51.9 54.7 54.6 50.6 49.3 47.7 47.4

Plane 37.9 35.3 36.0 39.8 41.8 42.3 43.5

Rail 2.6 2.5 2.2 2.2 2.0 2.2 2.3

Bus 6.0 6.4 6.2 6.2 5.9 6.5 6.1

Boat 0.4 0.3 0.3 0.4 0.4 0.7 0.4

Not Specified 1.2 0.8 0.7 0.8 o.6 0.6 0.3

TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0

SOURCE: Departnent of Tourism Annex 1 Page 7

Table 5: MEXICO: ZIHUATANEJOTOURISM PROJECT

Origin of U.S. Visitorsto Mexico by Mode of_Transport 1969

Visitors Total Visitors Percentage Visitors Percentage Arriving Percentage Origin of Visitors Number of Arriving of Total Arriving of Total by Other of Total Visítors bv Air Visitors by Car Visitors Modes Visitors (000) 000%) (000) (%) (000) (%)

Arizona 108.9 12.4 11.4 84.6 77.7 11.9 10.9 California 279.2 135.1 48.4 130.3 46.7 13.8 4.9

Florida 28.4 22.1 77.8 6.2 21.8 0.1 0.4 nlhinois 120.0 74.2 61.8 38.1 31.8 7.7 6.4 Louisiana 24.3 13.9 57.2 10.4 42.7 - -

Michigan 31.7 17.9 56.5 12.2 38.5 1.6 5.0 New Jersey 20.6 18.3 88.8 2.3 11.2 - - New Mexico 38.6 2.6 6.7 26.1 67.6 9.9 25.6 New York 88.8 80.5 90.7 8.1 9.1 0.2 0.2 Ohio 23.5 14.7 62.5 8.5 36.2 0.3 1.3 Pennsylvania 18.4 14.8 80.4 3.5 19.0 0.1 0.5 Texas 530.4 107.5 20.3 352.9 66.5 70.0 13.2

Othersa/ 492.3 348.6 70.8 134.3 27.3 9.4 1.9

Total 1,805.1 862.6 47.8 817.5 45.3 125.0 6.9

e,/ "1Others" include perEonF from other states in the U.S. and the rest of the vorld. ,OURCF: Bpnco de Merico, 3.P. (Specií1 Survey) Annex 1 Page 8

17. The remarkable development of tourism to the Pacific Coast of Mexico is attributable basically to two factors: the provisíon of direct air accesa from the U.S. and the supply of first-classaccommodation. Acapulco, for example, was a tourist destinationalmost 45 years ago. However, it was not until the internationalairport was built in 1964 that the rapid rise in visitor arrivals bagan. Since then foreign visitor numbers increased on an average by more than 199 per year compared to an average growth rate of only 5, per year between 1960 and 1963. The growth in visitor arrivals was accompaniel by an increase in first-class accommo- dation which expandel by 189 per yaar between 1963 and 1970.

18. The experience of i4azatlan and Puerto Vallarta on the Pacific Coast is similar and demonstrates the important role played by infrastruc- tural and other facilities. Air accesas is of particular significanca, since it will be many years before the coastal area gets an adequate road network.

19. Zihuatanejo will offer beach holidays which will be particularly attractive for U.S. visitors during the winter months. It irlí be compet- ing with winter resort areas such as Acapulco, Hawaii and selected Carib- bean islands which can offer equally attractive climatic and scenic attractions at that time of the year. It will have the advantage over Hawaii and the Caribbean, enjoyed by Acapulco, of offering a combination of a beach holiday with visits to i.lexicoCity and other centers where the rich archeological, historical and cultural attractions of the country can be enjoyed.

20. On the assumption that Zihuatanejo will share in the beach holi- day market outlined above, Infratur has projected this market at about 8 million in 1980, of wihommore than 2 million are expected to visit Hawaii. Excluding visitors to Hawaii who count as domestic travellers in U.S. statistics, this figure would represent about the same proportion of total foreign travel in 1980 on the projection outlined in para. 11 above, as these destinations represented in 1970. The traffic flow forecast to Zihuatanejo in 1980 - 420,000 - would.represent about 51 of the projected total market for Acapulco, Hawaii and selected Caribbean destinations and about 101 of the projected total visitor flow to Aexico in that year, assuming a growth rate in the next ten years of 7.1% annually as compared with 11.5% in the past decade.

21. In tems of accommodation, the project's share of total and first- class accommodationin IMexicowould be only 1.6, and 6.2% respectivelyin 1983, assuming that total accommodationwoull grow at the same rate as in the past ani that the growth rate in the supply of first-classaccommoda- tion would be substantially reduced in view of the very large recent addition to such capacity an, in view of the need to cater for more midile-income visitors.

22. While the majority of visitors to Acapulco have been foreigners in recent years, very larga nimbers of Mexicans hava also visited the resort. In 1969, the latter numbered 414,000 as comparedwith 466,Oo Annex 1 Pagn Q foreign visitors. Infratur in its projectionsfor Ixtapa-Zihuatanejohas not forecaet a similar ratio between domestic and foreign visitora, but has rather conservatively estimated that domestic viaitors would number about 20% of total tourists. As the majority of domestic visitore to Acapulco travel by road, and aB acceso to Zihuatanejo from lMexico City by road ui1l be via Acapulco in the foreseeablefuture, it i8 likely that domestic traffic will continue to favor Acapulco. Tlencea coneervativeprojection of domestic visitora to Zihuatanejo seems justífied.

23. The bulk of visitors to Zihuatanejo will arrive by air. At present, foreign visitors arriving by air spend on average much more per day than visitors arriving by roal. In 1969, the former spent on average US$31 per day. With the expected rise in prices, estimated at 5% a year and equal to the average increase in the past five years, average daily expenditures at Ixtapa by foreign visitors are estiíated at Us$41.50 in 1975 when the first hotels are expected to be in operation. The breakdown qf this amount ¡8 calculated to be as follows:

Item .u4ount (US$) Percentage (%)

Accoammodation 14.44 34.8

Food and Beverage 11.29 27.2

Fntertainment 4.44 10.7

Local Transport 4.32 10.4

Purchases 4.98 12.0

Other 2.0 4.9

TOTUL 41.50 100.0

Source: Dank of Mexico3 figures adjusted by Misíion.

Some of the tourists are likely to visit the area only, while others are expectel to visit it as well as other destinationa In Mexico. The average length of stay ¡a assumed to be 4 days, somewhat leas than in Acapulco but greater than in Puerto Vallarta.

ANEX 2 Page 1

MEXICO

APPRAISAL OF TI£ ZIHUATAiEJOTOURISM PROJECT

FONDODE PROMOCIONDE INFRAESTRUCTURATURISTICA

1. The Fondo de Promocion de Infraestructura Turistica (ILfratur) was established as a trust ftnd by agreement between the Federal Govern- ment and the Bank of Mexico in June 1969. Ita purposes as set out in the Trust Agreement are:

"(i) The promotion and carrying out of infrastructure projects in the tourist sector, supplementedby other Federal Governmentinvestmenta, whose desírablity may have been decided upon in tech- nical atudies entrusted to the Banco de Mexico, S.A., the conclusionaof which have been approved by the Departmentof the Treasury and Public Credit.

"(ií) The encouragementof private investmentto supple- ment the above-mentionedínfrastructure invest- menta.

"(iii) The purchase,urban developnent,subdivision, sale and rental of real property,subject to conditiona or general requirementsapproved by the Technical Coimnitteeof this Trust.

"(iv) Collaborationwith Departmentaof the Federal Admin- istrationand with the Governmenteof States and Municipalitíes, for the purpose of developingthe tourist industry as.a whole.e

2. The aum of Mex$ 30 million was provided initially by the Federal Governrnentas Infratur'acapital and by September 1971, the Federal Gov- erment had provided an additionalMex$ 22 million. This amount had been apent mainly on the purchase of land for the projects at Zihuatanejoon the Pacific coast and at Cancun on the Caribbean coast, on construction work at Cancun and for the preparatory atudies of the two projects.

3. While the legal powers of Infratur in ite day to day operations -- such as the power to make contracta,to acquire property,to engage staff -- are exercised by the Bank of Mexico as Trustee, the overall supervision of the operationsof Infratur is the responsibilityof a ANNEX2 Page 2

Technical Comnittee of three members, one appointed by the Department of the Treasury and Public Credit, one by the Bank of Mexico and one by Nacional Financiera. The powers of this Cominttee are:

"(i) To approve the Trustta programa of general and regional activities, and lay down guidelines for such activities.

"(ii) To lay down the general basis on which agreements and contractaare to be made for the execution of infrastructureprojecte in the tourist sector, and for the provision of relatedservices.

"(iii) To lay down the conditionsor general requirementa governing the purchase,urbanization, subdivision, lease or sale by the Trusteo of real property, and fix the renWial,price of sale and any other require- mente that it may deem expedientwith respect to such operations.

11(iv) To approve the annual budget of expenditure.

"9v) To settle any questionathat may be submittedto it by the Trustee, and exercise any other powers that may subsequentlybe conferredupmn it by the Trustor in the form of a written communicationfrom the Departmentof the Treasury and PutblicCredit to the Trustee."

4.0 No written statementsof policy in aerms of these powers have yet been issued by the TechnicalConmittee, but policies have evolved as progrese has been made in the preparationof the projecta at Zihua- tanejo and Cancun. During loan negotiationa, agreement should be reached that a policy statement should be prepared within one year of the signing of the loan aLter consultationwith the Bank. Subjecta to be covered in such a statement should include the financialobjec- tives of Infratur,policies on the acquisition,sale and lease of land, policies in financing operatingcosta, and other matters referred to in para. 3 above.

5. In developingnew tourism infrastructures, Infratur has to work with existing governnentalinstitutiona at the Federal, State and local level as wjellas with private investora,and it has autonomy only within those areas of land which it can acquire by purchase. While Infratur could advise on development in existing resorts, it la not clear that it could implement any programa In such areas without acquiringaizeable property there. Its role is comparablein some aspects to that of a private land developer,but it is likely to be ANIF, Pag,

able to mobilize larger resources and to operate on a larger scale than most private developers in Mlexicoand to achieve closer coordination with those state agencies which have responsibilityfor providing infra- structures external the resort area, such as airporta,main access roads, electricityand water.

6. Infratur,financed by the Federal Government and using other funds availableto it as authorizedby the DepartLlentof the Treasury and Public Credit will be responsiblefor developing all the infrastruc- tures within its own land, though it will have to observe technical standards as laid down by the responsiblegoverrinental agencies. Infra- tur i9 seen as having a developmentalrole; its primary purpose is not to make profits. In the conduct of ita operationshowever it ls expected to recover its investments,and the Federal Governnent expects it to repay monies advanced plus interest.

7. In endeavoringto establish new resort areas, Infratur expects to have to offer substantialincentives to attract the fírst investors. Among the incentiveswill be the assured provisicn of all needed infra- atructuresand the advantageof investing in an area with adequate zon- íng and controls over neighboringdevelopments 0 The principalincen- tive is, however, likely to be in the price of land. Infratur expects to offer sites for the first hotels at Ixtapa at prices which will be low by comparison with establisned resort areas auch2 as Acapulco. The ínitial prices are expected to be about US$ 20 per m for hotel sites and from USI 6-8 per m for house sites, rising by 9-10% annually thereafter on the most concervativeprojection. It is recognizedthat `he alinualincrease could be substantially higher once the resort is established and closer to the historical rise in Acapulco where from 1965 to 1970 prices of house sites rose on average by about 20% annually. Recent land prices for hotel sites in Acapuleo have been as high as US$ 280 per m2.

8. lJhilethe initial price of land is low ln relation to present prices in Acapulco, it is doubtful whether higher pric s could be charged in a completelynew area and even US$ 20 per mi may be high viewed as an incentiveprice. The price estimnatedby Infratur in the 9th year ¡s US$ 100 per m2 which would be high given the assumptions on average room rates and investment costa of hotels made in the report. Such a price could probably be realized only if there ís a continuing inflationin average room rates which would justify higher investnent costa.

9. The financialprojection made by Infratur for revenues from land sales contains the implicit asaumptionthat sales will be "cash" sales, i.e., the land will not be leased or sold on deferred payment terms. On this basis, sales of hotel and house sites which will be ANNEX2 Page 4 developedin the firat atage of the project (i.e., for 3,500 hotel rooma and 500houses) will yield US$ 8.7 million. Wlth very little further investment, additional sltes could be so.ld for an estimated US$ 12.4 mil- lion in 1981, and Infratur proposes to retain for sale in the 18th-20th years an area along the main beach at Ixtapa wliich will be developed in the first atage. This would allow Infratur to obtain the benefit of the long-term rise in land prices, and these later sales are estimated to yield a further US$ 12.0 million. Thus over a twenty year period, Infra- tur expects to recover the US$ 23 million investaent in the first atage development at Ixtapa.

10. Infratur will also incur expenses in operating and maintaining common services and facilities at Ixtapa. It proposes to levey charges on hotela and house to cover part of the costa of these services, The projection of operating revenues and costa made by Infratur 1B shown in Table 1. Annual charges for water and aewerage will be sufficient to cover the operating and maintenance costa of these services. The annual charges to be levied on hotela and house lote of US$ 65 per hotel rocm and U5$ 271 per house lot are intended to be incentive prices. On this basis, substantial operating deficita are projected by Infratur during the first seven yeara of operations.

11. While the need to offer incentive prices to attract investora in the early years la clear, the annual charges particularly on hotels pro- posed by Infratur appear low. The proposed per room charge would be a very amall fraction of total annual operating costa of the hotela and increasing the charge to US$ 200 a year might be feasible. On this basis a amall surplus on operating account would be achieved in the 5th year of operationa and substantial surpluses thereafter (Table 2). D(aleg negóttznttons agreementwas reached that the basis for the annual harzges fcr hotels cnd house altos uould be a~eed withln one year o£ thb aigning of the proposed loan.

12. On the basis of the chargesproposed by Infratur,the internal financialrate of return Qn the (lst stage) project at Ixtapa would be 1.6%. If the annual charge per hotel room were to be US$ 200, the financíal rate of return would be 5.3%.

13. Infratur will pay 8% on funds provided by the Federal Government and interest on the proposed Bank loan plus the service charge, expected to be ó.25%, levied by Nacional Financier¿l. The Federal Goverrment will be responsible for repaying the Bank's lomn. Although Infratur la expected to repay all capital funda, no fixed repayment schedule has been established in view of the uncertainties of projecting revenues frcm the sale or lease of land. In Table 3, 25-year loans with 5 years grace have been assumed. Qn this basis with an annual charge of US$ 200 per hotel room., revenues fran operations and from the sale of land in the first stage of the project would not be adequate to meet debt serv- ice charges in full. ANNEX Page 1

14. Infratur presentlyexpects to develop the second and third stages of the project at Ixtapa in 1982/83 and 1986/87 respectively. The invest- mente in infrastructure at the second and third stages will be lower per hotel room than in the first stage. As a result the financialprofit- ability of the second and third stages will be greater, and Infratur expects in the long run to cover deficita on the first stage from the surpluses earned on the second and third stages. To cover the earlier deficits shown in Table 3, adjustmentsmight be made in the debt repay- ment schedule, or in the timing of land sales. These adjustments would £robably be adequate, but in the last five years of the maturity of the oans a cumulative deficit of US$ 7.0 million í8 incurred. Thi8 could only be covered by surpluses earned on atages 2 and 3.

Staffing

15. Infratur's professional ataff now numbers 27 excluding the Direc- tor and his two principal assistanta. The breakdown of the total ia as follows:

Engineers 12 Economist8 5 Lawyera 3 Accountants 6 Airport adviser 1

16. A large inerease in staff will be needed to supervise the execu- tion of the projects at Ixtapa and Cancun. A project unit has been estab- lished within Infratur to execute the project at Ixtapa. A director of the project unit has been nominated who is acceptable to the Bank.

Financial Position

17. Frorathe interest earned on ite initial capital, Infratur was able to cover its operating expenses during 1969 and 1970. In 1971, however, it has invested heavily in land at Cancun and Ixtapa, it has undertaken substantial on-site works at Cancun and the expenses of preparlng the two projecta have risen sharply. These resulta are reflected in the summary Balance Sheet attached (Table 4).

18. The Balance Sheet as at September30, 1971, shows a large excess of current liabilities over current assets, pending the transfer to Infratur of additional fiscal funde. It i8 necessary that Infratur ahould have adequate liquid resources to meet current obligatione in order, ínter alia, to secure more favorable príces from contractora, and assurances were obtained during negotiationa that the Federal Government would provide Infratur with capital funds for the project as needed.

Annex2

MEXICO ZIRUATAAEJO TOURlSM PROJECT 1/ I;.rlATUR: PROJ2ECTED07UTEINM INhC0 AI;D EXPN'SES AT IXTAPA - (in Eax.$ 000)

Isar 1975 1976 1977 1978 1979 1980 1981 1982 1983-1991 Operatíng Year 1 39-17 ---

Revenues: Annual Charges: Hotels 611 814 1,221 1,628 2,035 2,239 2,242 2,6146 2,o14Y Annual Charges: besidences 34 102 203 339 509 729 1,000 1,322 1,695 Annual Charges: Other 102 136 204 272 340 374 408 441 476 Water Charges 415 629 893 1,200 1,562 1,987 2,486 3,053 3,883 Commercial Center Renta 70 140 245 327 467 653 840 887 - Golf Course Rent *437 664 927 1,259 1,637 2,079 _ _ _

Total 1,669 2,485 3.Q22 5,025 6,550 8,061 7,176 8,349 8,903

Expenses: Road Mtaíntenance 655 682 655 1,123 599 626 599 1,122 599 Hydrauilic Works Maintenance 142 142 142 142 142 142 142 142 142 Water and Sewage 567 744 1,005 1,263 1,601 1,946 2,354 2,813 3,480 Sanitation 1,376 1,171 1,171 901 901 632 740 740 740 Public Lighting 164 164 164 164 164 164 164 164 164 Golf Course 1,510 1,510 1,510 1,510 1,510 1,510 - - - Coa.mercialCenter 83 83 83 83 83 83 83 83 - Fuel Service 558 558 558 558 625 563 563 563 563 Residential Street Maintenance 168 168 168 257 149 149 149 257 _149 Beach Development 344 344 344 344 344 344 344 344 344 Promotioan 2,500 2,500 2,500 2,500 2,500 2,500 2,500 - - Adninistration 500 500 500 500 500 500 50o 505 500

Sub-Total 8,565 8,800 9,345 9,118 9,159 8,138 6" 2S 6,681

Contingeacy (15%) _t,285 1a¿65 1,320 1,402 1,368 1,374 1,221 1,009 1,002

Total 9,852 9,851 10,120 0,7147 10,486 10,533 9,359 7,737 7,683

Surplus (or Deficit) before Capital Charges (8.183) (7,366) (6,427) (5,722) (3,936) (2,472) (2,183) 612 1,220

1/ Excluding income fran sale of land erd c -1 charge of IHex.$2,500 (or > per roor.- Hotels: annual 2 Residential lot, annu21 charz- nf R:o.3,'90 (or UZi271) Prr an aver're lot ( n60m ). Water, charges, Vex.$2.40 (or TUS$0.19) per m3, to cover cost of purchased wat,r and operating costs for water distribution and sewage system in the tourist zone. 2/ Reavy maintenance expendituresare made in every fourth year. Sourcet Infratur Annex 2 Table 2

MEXICO ZIHUATANEJO TOURISM PROJECT

INFRATUR: PROJECTED OPERATING INCOME AND EXPENSES AT IXTAPA - (In Mex.$ 000)

Year 1 1976 1977 1978 1979 1980 1981 1982 1983-1991 Operating Year 3Y35B Revenues: Annual Charges: Hotels 1,875 2,500 3,750 5,000 6,250 6,815 7,500 8,125 8,750 Annual Charges: Residences 34 102 203 339 509 729 1,000 1,322 1,695 Annual Charges: Other 102 136 204 272 340 374 408 Water Charges 441 476 415 629 893 1,200 1,562 1,987 2,486 3,053 3,883 Commercial Center Rente 70 140 245 327 467 653 840 887 - Golf Course Rent 437 664 927 1,259 1,637 2.079 - - _ Total 2,933 4,171 6,222 8,397 10,765 12,697 12.234 13,828 1L.8o Expenses: Road Maintenance 655 682 655 1,123 599 626 599 1,122 Hydraulic Works Maintenance 599 142 142 142 142 142 142 142 142 Water and Sewage 142 567 744 1,005 1,263 1,601 1,946 2,354 2,813 3,480 Sanitation 1,376 1,171 1,171 901 901 632 740 740 740 Public Lighting 164 164 164 164 164 164 164 164 164 Golf Course 1,510 1,510 1,510 1,510 1,510 1,510 - - Comuercial Center - 83 83 83 83 83 83 83 83 Fuel Service - 558 558 558 558 625 563 563 563 563 Residential Street Maintenance 168 168 168 257 149 149 149 257 149 Beach Development 344 344 344 344 344 344 344 344 344 Promotion 2,500 2,500 2,500 2,500 2,500 2,500 2,500 - - Administration 500 500 500 500 500 500 5°0 500 Sub-Total 8,67 8,566 8,800 9-345 9,118 9,159 8,138 6,728 6,681 Contingency (15%) 1,285 1,285 1,320 1,402 1,368 1,374 1,221 1,009 1,002 Total 9,852 9,851 10,120 10,747 10,486 10,533 9,359 7,737 7,683 Surplus (or Deficit) before Capital Charges (6,919) (5,680) (3,898)9 (2,350) 279 2,164 2,875 6,091 7,121

1/ Excluding ¡neome frca sale of land and capital charges. Hoteis: annual charge of Mex. $2,500 (or US$200) per room. 2 Residential lot, annual charge of Mex.$3,390 (or US$271) per an average lot (760 m ). Water, charges, Mex.$2.40 (or US$0.19) per m3 , to cover cost of purchased water and operating costs for water distribution and sewage system in the tourist zone.

Source: Infratur with revenue projectiona adjusted by Bank mission. October 1971 HEXIGO. ZIHATANEJOT0URISM PROJEOT T.bil 3 I8JFRATUROPERATION AT IXTAPA ILLUSTRATIVECASH FLOW

(in M...$ million)

Year 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 199. 1995 1996

F8N1 PROVIDEDBY:

fflwal.2Funde 62.6 60.7 30.2 ------IBiLL1oeno 21.3 55.1 50.0 ------Total 83.9 115.8 80.2 ------

Net Operating innome - - - ~~~~~~(6.9)(5.7) (3.9) (2.4) 0.3 2.2 2.8 6.1 7.1 7.1 7.1 7.1 7.1 7.1 7.' 7.1 7.1 7.1 7.1 7.1 7.1 7.1

Land Sales 11.3 4.7 lo. 12.1 14.0 10 12.5 15.3 18.5 131.5 - 8.6 - - - -- 38.1 42.5 68.8 - Total 11.3 4.7 10.4 5.2 8.3 6. 10.o1 15.6 20.7 134.3 6.1 15.7 7.1 7.1 7.1 7.1 y.1 45.2 49.6 75.9 7.1 7.1 7.1 7. 7.1

Tot-al Funds 95.2 120.5 90.6 5.2 8.3 6.2 10.1 15.6 20.7 134.3 6.1 15.7 7.1 7.1 7.1 7.1 7.1 45.2 49.6 75.9 7.1 7.1 7.1 7.1 7.1

APPLICATIONS:

Investaente ñrojet xpenses 0. 98.3 66.0o ------Lend kquislt4on 21.0 ------pro3ectUlt (Hexio0) 4.9 4.9 4.9 ------Pr3ect lnít (Ixt.apa) 2.9 6.6 4.0 ------Pr~tion 4.8 -- 8.0 5 .2..... Total 83.9 115.8 80.1 ------7 - -

Debt Service Fis-cal ui - - 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 i5.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 IBED Ioens 12.3 12. 1.3 1223A 12.3 12.3 12.3 12. 23 1 23.3 3.j. jL 12.3 12.3 12.3 12 .3 12.3 12.3 12.3

Total - - - - - 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8

Total Aorplicationa 83.9 115.8 80.1 - - 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27. 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8

BY ler 11~3 .7 lo 5 5 * 3 (J<16< <1¿) (12.21 (7~j1 fi5 (21 7 (12.1) (20~L (2) (n 7) ()2 207( (20.7 1734 21.8 48.1 (2.)(Qf 2,) (2o0) (20.7

Aooaolated 11.3 16.o 16.5 31.7 40.0 18.4 0.7 (11.5) (18.6) 87.9 66.2 54.1 33.4 12.7 (8.0) (28.7) (h9.4)(32.0) (10.2) 37.9 17.2 (3.5)'(24.2) (44.9) (65.6) Annex 2 Table 4

MEXICO: ZIHUATANEJOTOURISM PROJECT

INFRATUR STATEMENTOF FINANCIALPOSITION, 1969-1971

(in Mex. $.000) December 31 Sept. 30 1969 1970 1971 Current Assets

Cash - Banco de Mexico 24,813 12,798 4,986 Cash - Banco Comercial Peninsular,S. A. 2,250 164 47 Accounts Receivable - 22 146

Total Current Assets 27,063 12i984 5,179

(Less) CurrentLiability

AccountPayable -_43 20,044 / Net WorkingCapital 27,063 12,941 (14, 8 65)

Fixed and Other Assets:

LIand - 19,487 25,982 Buildings - 345 Other construction 31,849 Furniture and Equipment - - 210 Deferred Expenses 4,112 19,890 12,862

Equity 31,175 52,318 56,383

Represented by:

Capital from Federal Govern- ment 30,000 52,175 60,068 Retained Earnings (or Deficit) 1,175 143( 3,685) 31,17S 52,318 56,383

2/ Short-termadvances from the Bank of Mexico.

Source: Infratur Annex Page 1

NJVCICO

APPRAISAL OF THE ZIYUATAMEJOTOURIS PROJECT

AIRPORT D-EVLOPMENT

1. The existing ailport at Zihuatanejo (see Map 2) is unacceptable for any but light aircraft and the site is incapable of a practical develop- ment to international standards. A substitute site just south of Coacoyul has been identified and found to meet all pertinent internatíonally accepted criteria for airport development. The total investnent in this part of the overall project will amount to 154 million pesos (US$12 .3 million) and will be disbursed over the firat two and one half years of the project.

1. Descrjjtion of the Airport Project

2. The airport project consista of the provision of a runway and taxiwayo with lighting, heavy and light aircraft parking apronrs, terminal building,control tower and technical block, fire station, fuel atorage area and apron hydrant system, parking lot and acceso roads, navaids, visual aids and comiimication equipment. The various elements oa the project are further described below and shown on the Airport Master Plan (see Map 3).

a. Airport Delopent

3. First stage development of the runway will be 250Om long on an alignment of 08/26 magnetic to provide 95% wind coverage and to allow opera- tion of DC-8-63 aircraft non-stop to New York. Future growth to 35OOm ¡8 wíthin the site capability. Pavement width will be 60m and thicknesswill be .82m consisting of .30m selected subgrade, .25m sub-base, .20m base and .07m asphaltic concrete surface. There will be tu-rning bulbs at each end of the runway. Standard high intensity edge lighting will be provided.

4. Taxiways stubs will be constructed of Portland Cement concrete, 23m wide and .27m thick over a .20m sub-base and .3Om selected subgrade. Medium intensity edge lighting will be provided.

5. The heavy aircraft apron will consist of the same pavement as the stub taxiways. The light aircralt apron and ite connecting taxiway will be the same as the heavy apron except the surface will be .O4m asphaltic concrete instead of .27m Portland Cement concrete. Thi8 will allow future use as a heavy apron after only inereasingthe thickness of the surface course. Medium intensity edge lighting will be provided.

6. Storm drainage will be collected in open ditches along the edges of the flight strip, taxiways and aprona. Culverts will be provided where these ditches pass under paved areas. Annex 3 Page 2

7. The runway aligrnent will pase over a lagoon formed by storm sur- face drainage which cannot pase over the sand dune along the edge of the sea. This partícular lagoon overflowa into an adjacent lagoon when the water level ia sufficiently high. The second lagoon does have an opening to the sea. A chamnel between these two lagoong will be dredged to assure easy paesage of water from the airport area through the lagoons to the sea. Since part of the first lagoon will be on the land sade of the runway after it i8 constructed, large culverta must be provided under the runway to allow passage of water back and forth to relieve any damming action the runway might create.

8. Visual approach alope indicator lights (VASI) will be installed at the threshold of Runway 26.

9. A fuel atorage area will be constructed just outside of the terminal area and will be connected to jet fuel hydrants on the heavy apron. Gasoline fuel will be dispensedby tanker trucks.

10. A VOR/DMEnavigational aid will be installed on the airport for use as an enroute aid as well as a terminal approach aid.

b. TerminalBuilding

11. An internationalterminal building will be constructedutilizing as much as possible the general aesthetictheme accepted for the rest of the project buiíldings. Flows within the building will be designed to keep the various conflicting categories of passengers separated,i.e. arriving and departing domestic and international. The design i8 based on the forecast of 250 arriving or departinginternational paesengers and 80 arriving or departingdemestic pasaengersper peak design hour in 1978, but will allow incrementalexpansion of ticketingareas, airline offices, wçaitingand baggage areas, and inspectionareas to accommodatedemands through at least 1990.

c. Other Buildinga

12. A control tower will be constructed with a one story technical block adjacent to it. All necessarycommunication equipment will be provided.

13. A fire atation of four equipment bays will be constructed. It will include space for dormitory,dining, food preparation,training, storage and offices. The fire fighting equipmentwill be provided under the normal equip- ment replenishment budget of the national airport operator (ASA).

d. Access Roads

1h. A 6.lom wide acceso road consistingof .04m asphalticconcrete surface, .20m base and .30m sub-basewill be constructedfrom the main Zihuatanejo-Acapulcohighway to the terminalbuilding complex. Other connectingroads of the same constructionbut of narrower widths in accordance with intended use will be provided within the airport complex. Alnex 3 'P-e 3

e. Utilities

15. The electrical services will be brought from the main distribution substation in Zihuatanejo to the airport substation as part of the airport project. Distribution within the airport will be under various contracts depending upon the ultimate use.

16. Potable water will be provided through the use of bore holes and underground storage tanks. Presaure for the domestie system will be provided by pneumatic tanks. High pressure pumps will be provided for the fire hydralt ring system.

17. Sewage disposal will be accomplished by meana of septic tanks anid leaching fields. Aircraft sewage wastes will be passed through a triturator and industrial treatment plant to neutralize the antiseptic solutions prior to introduction into the airport sanitary system.

18. Industrial wastes will be passed through the industrial treatment plant to remove oil and other non-water soluble material from the wastes prior to introduction into the sanitary system.

19. Solid wastes from the aircraft and airport will be incinerated in a gas fired furnace having at least two chambers to burn all material com- pletely so that no smoke will be discharced. The practice enployed at other Mexican airports of dumping or burying these wastes will not be continued at Coacoyul International Airport.

f. AeronauticalCon iderations

20. Procedures have been approved by Civil Aeronautics (DCGA) based on the VOR/DMEfor both approach and departure from the airway and the airport (see Map 4). The transfer of the existing NDB from Zihuatanejo to Coacoyul will provide a means for aircraft not equipped with VOR/IME to navigate and land at the new alrport.

21. In the future, either end of the runway could be fitted with ari instrument landing system (ILS). Such installation should be seriously considered as soon as heavy aircraft begin to use the airport in any quantity7 The reason for this í8 that vertical and lateral guidance during landing approaches 18 highly desirable for large jet aircraft.

22. The existing bi-lateral air agreements between Mexico/Canada and Mexico/UnitedStates do not list Zihuatanejoas one of the points to be served. Since these two countriesare the major sources for the tourist supply for this project, the Goverrnenthas taken steps to add Zihuatanejoto the agree- menteas a co-terminalwith Acapulco. Thia will allow either non-stop or multiple-stopflights from Canadian and United States cities to Coacoyul InternationalAirport. Annex 3 Page 4 g. Engineeripg Services

23. Alh engineering work aseociated with the airport project will be accomplished by Secretariat of Public Works (SOP) with technical aseistance provided by Secretariat of Communication9 and Transport (SCT) Airports and Auxiliary Services (ASA), Aeronautical Radio of Mexico (RAMSA5,and National Company of Aviation Combustibles (NACOA). SOP has designed and supervised the construction of many airports in the past and ¡a fully competent to exe- cute this project. h. EnvironmentalConsiderationa

24. The topographyaround the airportsite reducesthe probability of noiseproblema for the villageof Zihuatanejoand the tourismdevelopment area in two ways. First, because of the relatívelyhigh terrain to the north and east of the airport,approach procedures will carryaircraft over the oea for safe descents. Takeoffsto the west will followthis same path while takeoffsto the east will be away from the projectareas. Second, the high terrain betweenthe airportsite and the villagewill tend to deflect ground noise away from the populated areas. Noise over the beach areas to the south of the airport site should not be a problem because these beaches are not particularly attracti.efrom the development point of view because of their steepness,narrowness, and short, very strong breakers.

25. The leachingfields asacciated with the sewagedisposal system will introducea pure effluentdirectly into the groundwater with no harmful effecta, Aircraftand induetrialwastes will be treatedprior to their introductioninto the sanitarysystem to remove all harmful elements. 26. Solid wasteswill be incineratedin a furnacedesigned to release no unburned material into the air. Ashes will be buried in a landfilU area on the airport.

27. The provision of a channelconnecting the shorelinelagoons lowers the depth of the lagoonat the airportand reducesthe possibilityfor insectand diseaseproducing stagnant w^ater to collect. 2a. The developmentof the airportat this site will requirethe des- truction of up to 5,000coconut-producing palm trees and the relocation of up to a maximumof ten families (squatters). B. Cost Estimate

29. The cost estimates and their breakdown are shown belowin sumnmarized form per contract. Detailed cost estimates for the airport project are shown in attached table. Annex 3 Paíe5

Table 1

Pesos (000) US$ (000) Local Foreign Total Local Foreien Total

Land Acquisition 8,350 - 8,350 668.5 - 668.5

A. Maneuvering Areas & Access Road 46,887 28,833 75,720 3,754.0 2,308.5 6,062.5

B. Terminal, Other Buildings & Utilities 12,845 6,794 19,639 1,028.4 544.0 1,572.4

C. Visual Aida & Elec- trical Supply 2,081 1,369 3,h5o 166.6 109.6 276.2

D. Fuel Storage & Supply 2,443 1,352 3,795 195.6 108.2 303.8

E. NavigationalAids & Coammunications 1,597 2,403 4,000 127.9 192.3 320.2

Contingencies Physical (9.8%) 9,569 5,921 15,490 766.1 4 74.1 1,240.2 price (9.4%) 9,220 5,705 14,925 738.2 456.8 1,195.0

Engineering (3.3%) 5,281 - 5,281 422.8 - 422.8

Supervision (5.0%) 7.921 - 7,921 634.2 _ - 634.2

Total Airport Project Costs 106,194 52,377 158,571 8,502.3 4,193.5 12,695.8

30. The cost estimateswere developedby SOP and are based on quantities obtained from field survey data and architecturalpreliminary drawings. The unit costa used are comparableto costa of similarwork designed and con- structed under the supervisionof SOP, and are consideredreasonable. Con- atructionis expected to take two years.

31. An item for contingencies,amounting to approximately17% of the total airport project, has been included to allow for variations in the scope of work and price increases. Considering the construction costaalone, 10% was added to allow for physical increases in the worle and 7% per year was added to allow for equipment price risaes and increases in labor costa. Anmex 3 Page 6

C. Procurement

32. A high percentage of the material required for the project ¡a pro- duced locally. While contractors for building conetruction are fairly numar- ous in Mexico, contractors for large earth moving are not. The fuel system installation will be done by foreign contractora as well as the manufacture and installation of the commmnicationa equipment. All of these contracts will be awarded through international competitive biddlng in accordance with the Bank's "Guidelines for ProcurementIl aftera prequalification acreen- lng of interested contractora.

33. A portion of the Navaid equipment will be obtained from Wilcox Electric Conpany, Division of American Standard, Kansas City, Milsouri. The co0t of this procurement willbe about US$ 160,000 and will consi8t of the manufacture and installation of a Wilcox VOR/DME. There ía ample justi- fication for purchasing this equipment from this sole manufacturer. All VOR's in Mexico (41) are Wilcox, supply support ls based on this ene type of equipment, the electronic maintenance technicians are trained for this equipment, test equipment for this specific VORla available in quantity in the country, the only DME't in Mexico (11) are Wilcox and the Wilcox DMEla specífically designed to mate with the Wilcox VOR. D. Disbursement

34. Disbursement of the proposed loan would be made on the basis of 76% of the expenditures of contracts. Disbursementa are expected to take place over a 2-1/2 year periodfrom tne third quarter of 1972 to the first quarter of 1975 (seo Table 23). Since this la a combined project, any sur- plus loan amounts for this portion should be applied against possible under.. estimates in the other portiona of the total project. E. Aviation Administration

35. The responsibility for the administration and operation of avia- tion in Mexico falls under four organizationa. The design and supervision of construction of airports and their buildings ia the responsibility of two divisions within SOP. After construction, the maintenance of the air- fieldworks ís the responsibility of SOP except for fíeldlighting. The responsibllity for the operation and maintenance of the terminal buildings, maintenance of the fieldlighting and collection of landing and rental charges i that of ASA. RAMBA la responsible for the operation and main- tenance of the navaida, communication gear and their operation areas (con- trol tower,etc.) and i in completecontrol of enrouteand terminalair traffic. DirectorateGeneral of CivilAeronautics la in chargeof estab- lishingair routes and procedures, licensing, negotiating bilateral air agreements and other policy type matters. DGCAis a Governmental agency 5age 7 and reports to SCT. RA2LSAalso reports to SCT but i3 a private corpora- tion which is partially owmed by the Governmer. and the airlines serving Mexico. ASA, the airport operator, Js a Goverrmentenal agency but reports to neither SOP nor SCT. It reports directly to the Secretariat oL the Presidencia.

36. A fifth organization operates tne fuel services. NACOAis a partially Governnentowned private corporationwhich operates under very exacting standards. The fuel being processed is continuallyunder test to assure the airlíres that the fuel meets their specifications. Since the fuel being processed actually belongs to the airlnes involved, the only income NACOA realizes is derived from a through-put charge. This charge is establishedby SCT, not by NACOAL

37. The various other charges are alio estabáiihedby SCT, although some are upon the recommendationof the operating services. For example, enrioutecomnunication chiarges and navigationalalá user charges are estab- lished by SCT upon the recomniendationsel' DrGC ard RAZBA; landing charges for each category of airport (4) and terminal building rental charges are established by SCT upon reconm.endations of ASA. The responsibility for collecting these charges rests with RAMSAand ASA respectively. As a result, a pilot is required to obtain departure clearances from both organizations prior to take off.

38. Fragmentation of authority for aeronautical affairs such as exists in H-Iexico creates many difficult problems. H-ioever, correction of this situation is not vital to the successful conclusion of this project.

E. Financial Projections

Income from Operations

39. Revenue would be earned from.

(a) Landing fees for conmercial aircraft. (b) Landing fees for general aviation aircraft. (c) Fees for use of flight aprons and remaining overnight. (d) Participation in the sale of aviation fuel. (e) Rertal fees aná concessions. (f) Sundry services.

40. In order to calculaze rzkeincome resultirigfrcm conmercial air- plane landing fees, the yearly .aovement of passen-ers by flight sectors, and the use factor of trhe differe.nt types of aircraft were taken into consideration. Based upor.the acove as we1` as the historical experience of the Acapulco and Mexico CÍty airports, dlferent ccmbinatiorisof air- craft wera corisideredfcr tilanati.nal arn =ternationalflight sectors, with the percentageof t ¿ir Ie flees .-pa'ic4£patiorAprogressively chang- ing in each one of tn-e years irn the forecaet. Page8

4W1,. Landing fee tar~ffs 'or the period beginning in 1972 have been set by a deoree of the 24th July, 1969. The tariffs are determined accordirig to the following schedule:

Class of Aireraft

I Up to 2,)C00 kg II Frcm 2,401 to ,sOOOkg III Ercm L,001 to 10,000 kg IV Fom 10001 to 20,000 kg V From 20,001 to 40,000 kg VI Fro' 4O,0,C1to 60,000 kg VII Frcmi 60,001 to 100,000 kg VIII Fron 100,001 to 125,000 kg IX Fron 125,001 to 150,000 kg X F~rom 150,001.

Landing Pees by Type of Airplane (Pesos)

Type of Airplane TWeight In Kg. 1972

DC-9-30 48,924 1,650 B-727-100, B-727-200 78,000 2,615 B-737 48,471 1,650 DC-8-50 143,000 5,975 DC-8-63 158,550 6,515 DC-10 233,295 11,015 L-1011 185,277 8,135 B-747 308,000 15,455 B-707-320-C 151,120 6,095 Twin Otter 5,223 190 Hawker Siddeley 748 20,200 1,035

In considering the types of airoraft currently in use and the plans of airline companies, airoraft were grouped according to weight and number of seata. The traffic projections were translated into the probable use of different types of aircraft and their probable flight schedules, assuming certain load factors.

42. An average landing fee for general aviation was projected for small plane landings correspomding to domestic and internationalflights. It was assumed that the percentage of domestio and internationalflights of general aviation would each be 50C at the opening of the airport, but that the proportion of international flights would gradually increase. Annex 3 Pare 9

43. Income from the u oparking2 aprons, barre in fuel sales, leases and various services was ca1ceLated on the basís o£ íncome earned fron eu¿h services during 1970 at Puerto Vallarta and Acapulco, with an appropriate adjustnent for the conditions likely to be met at Zi1uatanejo.

Operation and MIainten2nce Gosts

44. In calculating annual operating and mainterance costs, operating and maintenance cost data for the airports of Acapulco and Puerto Va"larta during the year 1970 were used. The maintbenance cost of the mareuvering area (runways, taxiways and platforms), v7a calculated at 3.25% per annum of the invesctment in these facilities taRIng into consideration also tMture enlargements. The recormended figure of 2.% per arnumwas increased in order to cover such elemente as the hot climate and the early introduction of large capacity aircraft. The cost of upkeep and cleaning of the terminal area, incIudLng buildings, services, parking lots, etc. was calculated on the basis of data from Acapulco and Puerto Vallarta. Sim'ilarly wages and fringe benefits and the costsof equipment and supplies were calculated on the basis of data from Acapulco and Puerto Vallarta, after making allowance for the increases planned by LSA. Year'y indirect costs were calculated on the basis o£ the share of general expenditures of ASA allocated to each airport.

Annex 3 Table 2

2MICO ZIHUATANEJOINTERNATIONAL AIRPORT

PROJECTIEDOPEIG DICOMEAUn EXPENSES (in Mex. * °o°)

1984 1985 1986 1987 1988 1989 1990 1991 rear 1975 1976 1977 1978 1979 1980 1981 1982 1983 10 11 12 13 14 15 16 17 Operating Year 1 2 3 4 5 6 7 8 9 u Rweven 32,916 35,856 40,091 43,963 48,616 53,836 comercialaircraft 2,271 4,163 6,340 8,802 11,825 14,426 17,564 20,558 24,288 26,713 29,646 giigfeo for 722 787 859 937 1,021 1,114 1,215 fee general aixtraft 301 329 359 392 428 467 510 556 607 662 Landing for 161 170 181 192 204 217 232 247 Feefor use of platfozm 65 73 82 92 100 108 122 136 152 466 539 618 703 799 896 1,005 1,123 Sale of fuel 25 36 45 53 60 70 171 280 399 avation 1,127 1,245 1,372 1,511 1,660 1,828 1,999 2,189 2,396 fe. concession 240 300 365 430 480 549 726 918 Rental and 276 311 349 391 436 487 538 596 658 Sundxy service 41 56 62 70 81 101 155 213

29,558 32,798 36,404 39,706 44,346 48,634 53,752 59,475 Total Revenue 2,943 4,957 7,253 9,839 12,974 15,721 19,248 22,661 26,849

Exe= S Direct cost 3,274 3,369 3,463 2,525 2,550 2,575 2,600 2,688 2,775 2,878 2,930 2,990 3,050 3,119 3,196 Maitenae of operational area 2,485 2,505 1,867 1,954 2,048 2,152 934 992 1,049 1,110 1,167 1,184 1,313 1,410 1,514 1,574 1,638 1,707 1,782 Upkeep& oleaning of tenainal 1,577 1,662 1,748 1,840 1,942 744 801 857 917 973 1,029 1,117 1,212 1,315 1,373 1,436 1,505 Wagesand benefit 712 752 793 837 886 340 369 396 422 W49 491 537 586 614 644 677 Equipaent and suppliesa 313 202 218 235 253 272 Miacellaneous 42 52 63 79 86 97 113 132 152 163 175 188

6,445 6,654 6,883 7,127 7,392 7,695 8,004 8,347 8,715 Sub-Total 4,51B 4,690 4,863 5,052 5,223 5,359 5,722 6,o66

cout Indirect 830 883 941 1,004 1,072 1,148 1,226 1,312 1,406 Adinistration expense for A.S.1. 306 358 409 469 516 568 648 735 7,275 7,537 7,824 8,131 8,464 8,843 9,230 9,659 10,121 Total Expense 4,824 5,048 5,272 5,521 5,739 5,927 6,370 6,801

Operating Profit (or LOas) before 19,574 22,021 24,974 28,273 31,242 35,503 39,404 44,093 49,354 Capital Cnargee (1,881) (91) 1,981 4,318 7,235 9,794 12,878 15,860

3eptenber 1971

Page 1

M3tICO

APPRAISAL CF THE ZIHUATANEJOTOURISM PROJECT

THE WATERSUPPLY. SEWJERAGEAJD STORWWATER DRAINAGE FPROJECT

A. Scope of Proiect

1. The development of the Ixtapa tourist resort by Iifratur, where 3,500 rooms and 500 private residences are to be built will trigger a rapid development of the nearby town of Zihuatanejo. The population of the Zihuatanejoarea is expected to increase in ten years to about 50,000 inhabitarts. This represents more than a ten-fold increase over the present population.

2. The pro ject will provide wjater supply, sdwerage and storm drainage for the first phase of this growth, and the facilities are thus designed to supply 20,000 irliabitants of Zihuatanejo as well as the Ixtapa tourism zone.

3. Tnio entities will be responsible for the construction and operatior of' the various elements of the project. Secretaria de Recursos Hydraulicos (SHR), a federal agency, will undertake all water supply, sewerage and storm drainage works for Zihuatanejoas well as the Ixtapa water supply works and sewerage treatmentfacilities. Inside the Ixtapa tourist zone, Infratur will construct the water distributionsystem, together with the sewage collectionnetwork (includingpumping equipment) and storm drainage works.

B. Description of Project

WTaterSuiPly - Ixtapa

4. The project vTill provide the :xtapa tourism zone with water from the Ixtapa Valley aquifer situated some 6 ka to the north of the tourist zone. The facilities incluce:

(i) t,hreewells auqipped. it:1 ;p=pz and electrical motors ard chlor-r.atior.ecq-,en-

(U) 1.8 ki of l01 1,-.pel-úzes connecting the wells with the transm:,isjionm.a-~n;

(iiíi a taan5.:__r. raizr of as_to. cercz-it 18" and 20"1 in diameter a.-d ',7.ow -L ern4g-. .;

(iv) a 'coa,ter p-r&,n-" 3tat-co. to e_-ver 127 1/aec through a '.7 i. ~. r.a-it o a~10Cçx m> S'9at tank sítuated the lwxa',a zc,-c Arnex>4 Page 2

(V) the d',tributl ,+em lr.s,le .leIxtapa zone, includínga sm' - tank, small booster

station te surn'y +*ic ` .1 gronds around the golf course, anou,t 10?.0 e>s -^fstr-ibution lines, house c,onnec.-mrs ad-ve - "tior equipment.

5. The transmissionmaíns -apacít+.-s designed so that, when the local sources of Zihuatanejo are f':lly deveionec, another 100 l/sec could be supplied from the Ixtapa valley sources by ex.ending the transmission main to Zihuatanejo. i.it+,4rgth§s adc ional .nacity now is cheaper in present value costs than building a nara Ie'ire in 1979 at discount rates up to 25%.

6. Elernents (i) to (ÑV) are to be built by SRH, while the distribution system will be constructed by Infratur.

Seweraie - Ixtali

7. Sewage collectedfrom the hotels, the residences and the comercial distriet will flow to a pumping stationrand be punped to stabilizationponds built by SRH outeide the Infra-Irnroperty. The pond effluentwould be used for irrigation.

8. The length of sewers to be installedis about 16,500 m. Sewer lines will be made of concretepipes in diameters varying from 8" to 24" and in reinforced concrete for diametersof 30" to 60".

Storm WJater Drainace - IxtalDa

9. Storm water drainage in Ixtapa will protect the residentialsectioil.. drain the hotel boulevard,and dischargestorm waters into the lagoon. Some 7,500m of lateral drairis,3,500 mnof in',erceptorsand 200 m of outfalls will be constructed.

Water Supnlv - Zihuataneio

10. Water from the Zihuatanejoaquifer which has a potential capacity of 75 l/sec will be developedby constructionof 3 new welle.. The distri- bution systen will be desigred to serve a population of about 20,000 in- habitants,the total new area to be suppliedamounting to about 110 ha. Distributionworks include the constructionof a 1,500 m3 reservoir, 37.5 kn of 2½9"diameter pvc pipe and 17.5 hm of asbestos cementmaíns ranging from U" to 12" in diameter,two booster pumping stations,chiorination equipment and the supply and installationof 2,000 connectionswn.th domestic water meters. Annex 4 ±'ag,e

Sewerage - Zihutaneojo

11. The sewerage system of Zihuatanejo will serve the area supplied with water (110 ha) including the separate section of the town in the Las Brisas beach developnient. Sewage fram Las Brisas will be pumped over the mountain separating this area from Zihuatanejo. It will then flow by gravity to Zihuatanejo's putnpíng station. Sewage from Zihuatanejo and Las Brisas will then be pumped to stabilization ponds situated 1 ln outside the town's limits. Sewerage and sewage disposal works include: 38 km of lateral sewers of 8" diameter, 7 km of collectors rangíng in diameter from 10" to 24", two pumping stations, two force mains of 4.8 kn and 1.9 km with respective diameters of 18" and 12", the stabilizationponds, and the hause connections(15 km of 6" pipe).

Storm Drainage - Zihuatanajo

12. Storm water drainage consists basically of a main interceptor arnd four secondary lines discharging into the bay. The diameters of the concrete storm water drains vary between 24" and 60" and their length totals about 9.7 kn.

C. Cost Estimates of Project Elements

13. The estimated cost of the water supply, sewerage, sewage disposal and storn drainage componentof the Zihuatanejo-Ixtapatourism project is sumnarized in the following tables. The first table is for works undertaker by SRH, the seccnd for works undertaken by Infratur. Cost estimates by geo- graphical area are given in Tables 8 and 9 of the Main Report. Cost esti- mates were prepared by SRH and Estudios y Proyectos (consultants to Infra- tur). Urit costs are based on the Mexican cost of gocds and civil works and appear reasonable. A price contingenciesallowance of 7% per year and technical cor.tingenciesof 15% per year have been assumed, and these provi- sions should be adequate. Design costS are estimated at 4% of construction costs.

D. Procurement

14. All contracta for the supply of equipmentwould be subject to international competitive bidding. In view of the fact that numerous small civil works contracts will be required for construction of the works and that only local contractora are likely to submit bids, it is proposed that for civil work contracts only national competitivebidding be required,

E. Administrationof Project

15. Both Infratur and SRH will employ consultantsfor the design of their respectiveparts of the project. Supervision of constructionwill be done by SRH's own engineers and technicians,and by Infratur'snew divi- sion of works in the tourist zone. Annex h

F. Financial Aspects

16. Financial projectiona were made for tne water supply and sewerage components of the project in the form of Income Statementforecasts for SRH and Infraturrespectively Sor the years 1972-84. The projectionsfor Infratur are included in the consolidated statement of operatingrevenue and expen- diture shownin Table 1 o£ =nnex2. The projectiona -efr SM.I ,re shown in Table 3 of this Annex. The two statementsare not on an identical basis. For the SRH operation (bulk water supply to the tourist zone and retail supply and sewerage in Zihuatanejo)the table takes into account operating expenses,depreciation, and a return on capital; for Infratur (water distributionand sewage collectionin the tourist zone), depreciation and return on capital are not included, since these are assumed to be recouped in the sale price of land in the tourist zone.

17. These differencesin presentationare suggestedby the differing nature of the two developments;for the tourist zone, capital outlays represent a once-for-allexpenditure to be sold to developera as a package, with operation and maintenancecovered by inclusive consumer charges, wqhereas in Zihuatanejothere ¡a an establishedcommunity, and costs would have to be recovered throughwater rates.

18. For the SRH operation, rates of Mex $1.60 per m3 for bulk supply to the tourist zone, and of Mex $1.20 and 2.40 for retail distributionin ZihuataneJo (the lower rate for residences and the higher for hotels) would, three years after completion of the project, cover costs including depreciation and provide a return on net fixed assets rising to about 9% in 1984. This surplus arises predlominantly from the bulk supply to the tourist zone. For sales in Zihuatanejo the forecast covers only the population which can be served by the first stage works - i.e., using Zihuatanejo own wells.

19. Within the tourist zone, an average resale price of Mex $2.40 per mi3 for the water purchased in bullkfrom SRMHwould cover Infratur's distri- bution costs over the period, together with sewer operatingcosts, but (as indicated above) not depreciationor any return on capital.

20. For these projections,water sales in thletourist zone were based on forecasts of tourist inflows (at an average of 4 days each) and rooas available, indicating occupation rates of betwieen approximately 60% and 90 of hotel capacity. Per capita demand was assuned to be 600 lcd, less 15% water losses in distribution. To the results were added estimates of residential consumption in the zone.

21. For Zihuatanejo, sales were based on population forecasts, less a deduction for those not connected (50%, falling gradually to 27% at the point where Zihuatanejo's resources are fully used). Those connected were asaumed to require 360 m3 per year per connection, at 7 persons per connection, plus an allowancefor losses in transmission. As stated, calculationswere Annex4 Page5 made only to the point in population growt,h which can be supplied from Zihuatanejo's own resources (reached in 1979). Further demand could be supplied from Ixtapa bulk supply, and the supply system is designed for this (see paragraph 5 above); but extensive distribution and sewerage works in the town would also be requlred and these are not allowed for in the projections at this stage.

22. Other as8umptions included the following:

(a) Operational personnel costs were based on detailed estimates supplied by the Mexican authorities. Administrative costa for Zihuatanejo distribution were assumed to rise in proportion to the nunber of connections.

(b) Maintenance expenses were assumed to rise gradually to a level of roughly 1% per annum of fixed assets (0.3% for sewers).

Annex 4 Table 1 MEXICO: ZIHUATANEJOTOURISM PROJECT

GOSTOF W1RKSTO BE UNDERTAKENBY SRH

Local Foreign Total Local Foreign Total Item Thousand Mex $ Thousand US$

1. Ixtapa Bulk Water Supply Construiction 3,307 1,998 5,305 265 160 425 Design and Contingencies 1,147 692 1,839 92 55 147

Sub-Total 4,454 2,690 7,144 35'7 215 572 2. Ixtapa Sevage Treatment Construction 2,166 428 2,594 173 35 208 Design and Contingencies 856 169 1,025 69 13 82 Sub-Total 3,022 597 3,619 242 48 290

3. Zihuatanejo Water ,pply 7 Construction 6,327 1,664 7,991 507 133 640 Design and Contingencies 2,380 542 2,922 191 43 234

Sub-Total 8,707 2,206 10,913 698 176 874

4. Zihuatanejo Severage Construction 11,906 3,509 15,415 953 282 1,235 Design and Contingencies 4,664 1,374 6,038 373 110 483 Sub-Total 16,570 4,883 21,453 1,326 392 1,718

5. Zihuatanejo Storm Drainage Construction 3,986 1,963 5,949 319 157 476 Design and Contingencies 1,387 683 2,070 111 55 166

Sub-Total 5.373 2,646 8,019 430 212 642

TOTALSRH 38,126 13,022 51,148 3,053 1,043 4,o96

October 1971 Annex4 Table 2 MEXICO: ZIHUATANEJOTOURISM PROJECT

COSTOF WORKSTO BE UNDERTAKENBY INFRATUR

Local Foreign Total Local Foreign Total Item Thousand Mex $ Thousand US$ 1. Ixtapa Water Distribution Construction 2,404 1,988 4,392 193 159 352 Design and Contingencies 910 753 1,663 73 60 133 Sub-Total 3,314 2,741 6,o55 266 219 485

2. Ixtapa Sewerage Construction 6,172 2,981 9,153 494 239 733 Design and Contingencies 2,438 1,178 3,616 195 94 289 Sub-Total 8,610 4,159 12,769 689 333 1,022 3. IxtapaSto=n Drainage Construction 4,074 1,716 5,790 326 138 464 Designand Contingencies 1,661 575 2,236 133 46 179 Sub-Total 5,735 2,291 8,026 459 184 643

TOTAL INFRATUR 17,659 9,191 26,850 1,414 736 2,150

October1971 Annex 4 Table 3

MEXICO: ZIHUATANEJOTOURISM PROJECT

SECRETARIADE RECURSOSHIDRAULICOS - WATERSUPPLY AND SEWEBAE

PROJECTEDINCOME STATEMENT (1972-84)

Fiscal Year Ending December 31 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

------Thousandm ….------Water Output

Frnm Ixtapa Sources: Bulk Supply to Tourist Zone - - - 202 308 437 589 764 974 1219 1490 1809 2089

From Zihuatanejo Sources: Supply to Zihuatanejo 153 176 235 460 650 860 1260 1530 1530 1530 1530 1530 1530

Less Unaccounted for Water 23 26 35 70 97 132 191 230 230 230 230 230

Retail Sales in Zihuatanejo 130 150 200 390 553 728 1069 1300 1300 1300 1300 1300 1300

------Thousand Mex$ -- _-_ _ _ _ Revenues

Water Sales: 3 Tourist Zone (Bulk) Mex $1.60/m - - - 323 493 699 942 1222 1558 1950 2384 2894 3342 Zihuatanejo (Retail) @ Mex $1.38/m3 -/ 179 207 276 538 763 1005 1475 1794 1794 1794 1794 1794 1794

179 207 276 861 1256 1704 2417 3016 3352 3744 4178 4688 5136

Expenses

Ixtapa Production Personnel - - - 170 180 190 195 205 220 230 240 250 265 Zihuatanejo Personnel & Admin. 50 55 60 165 250 330 440 500 500 500 500 500 500 Maintenance - Water 14 15 15 50 100 150 200 200 200 200 200 200 200 Maintenance - Sewerage - - - 33 43 53 63 63 63 63 63 63 63 Chernicsls 1 2 3 8 11 16 22 28 30 33 36 40 43 Power 3 5 7 60 90 120 170 210 220 232 245 260 275 Depreciation - Water 37 37 38 263 489 489 489 489 489 489 489 489 489 Depreciation - Sewerage - - - 215 430 430 430 430 430 430 430 430 430

105 114 123 964 1,593 1,778 2,009 2,125 2,152 2,177 2,203 2,232 2,265

Net Operating Income 74 93 153 (103) (337) (74) 408 891 1,200 1,567 1,975 2,456 2,871

Average Net Fixed Assets - Water 1,143 1,107 1,069 9,947 15,600 18,110 17,622 17,132 16,644 16,154 15,665 15,176 14,688 Average Net Fixed Assets - Sewerage _ - - 10,512 21,017 20,587 20,157 19,727 19,297 18,86 18,437 18,007 17,577

Total Average Net Fixed Assets 1,143 1,107 1,069 20,459 39,617 38,697 37,779 36,859 35,997 35,021 34,102 33,183 32,265

Net Operating Income as % Return 6.5 8.4 14.3 - - - 1.1 2.4 3.3 4.5 5.8 7.4 8.9

1/ Average rate, assuming approximately 85% sold at domestia rate (Mex $1.20) and the remainder at hotel rate (Mex $2.40).

October 1971

Anne Page 1

MEXICO

APPRAISAL OF THE ZI~CALAZ¿0 TOURIa PROJECT

ECONOMICJUSTIFICATION

Introduction

1. The net benefits to the economy will consist primarily of expendi- tures of visitors in the Zihuatanejo-Ixtapa area, 'ess the cost of operatirg all the facilities to be provilded. The relevant investment is the capital cost of the infrastructureproject itself, plus the investment costs of supplying hotel accommodation in Ixtapa and Zihuatanejo. The additional investment that is likely to take place in local transport, entertainment and shopping facilities have also been taken into account, although they are esthmated to be relatively small. Although properly chargeableto the project, revenues and costs associatedwith private villas, and with inter- national and domestic travel have not been taken into account, except those directly related to the airport. The revenue and cost assumptionsare explainedbelow.

Revenue and Cost Assxlnptions

2. As the nroject is part of a larger whole, including the hotels, its economic evaluation has been made in terms of this larger whole. Sone of the facilities to be provided wrouldserve and be paid for directly by the tourist, while others would be compensatedfor only indirectly. Accordingly, the costs and the benefits have been carefully analyzed so as to avoid arny double counting.

3. A l.argeportion of the benefits from the program of investinents would consist of expenditures by visitors to the area on food, lodging, entertainment, local transport, purchases and other minor items. In addition, the airport would earn revenue which is directly related to investment in the project. There would aleo be expenditures within the project area by persons living in private villas and in condominiumsa, but these have not been taken into account because of the difficulty of estimating them.

4. It is assured zhat visitor expenditures in Ixtapa would not be very different from currenrt daily average expenditures of air-visitors to Itiexico, which were estialated to be US$31 in 1969. Given past trenda in tourism prices, however, these average expernditures have been inflated by 5% p.a. until 1975. Accordingly, ufhien the firet hotel opens in 1975, average expenditures are forecast tv be about US$38 a day. They would be a little higher in thXe Icta-3pa area (Z3$h,I . O and considerably lower in the Zihuatanejo zone (US$20.75) where cheaper acconmodation would be available. Consistent with current expen

5. In projectingproject revenues it was assumed that the average length of stay of visitors to Zihuatanejo-Ixtapawould be 4 days and that the projected increase in additicnal hotel acconmodationwould achieve a Ievel of room occupancyof 75% in four years, with a first year occupancy of 40%. Occupancyof 1.8 persons per room is assumed to remain the sane throughout the economic life of the project. These asaunptionsare con- sistent with the projectedpotential size of the market for the project and would be more than adequateto financiallycompensate private hotel investors. 6. Economic costs are derivedfrcm the project's financialaccounts and are based on the actual experienceof maintainingand operatingsimi- lar facilities elsewherein Mexico. Some of the operating costs have been indirectly estinated. Thus, for example, the operatingcosts of providing electricityand telephoneservices have been taken from hotel accounts,and are thereforenotdirectly reflected in the operatingcost's of these itema of infrastructure(see Tab'es 1 to 3).

7. Investmentcosts include the capital costs of constructinginfra- structurefacilities in ixtapa and Zihuatanejo,and also the costs of constructingthe airport. In addition,costs of constructinghotels and other superstructurefacilíties have been taken into account. Hotel investment costs are assumed to average US$ 20,000 a room in Ixtapa and US$ 10,000 in Zihuatanejo. Investmentcosta of infrastructurereflect the price increases expected over the next four years while the invest- ment costs of hotels are calculated at 1975 prices. To the extent that investnents in infrastructure if calculated at 1975 prices would be greater, this would be compensatedby the tendency of prices in the tour- ism sector to rise faster than the general price level. Investmentin private villas which eventuallycould be substantial,has been omitted from the calculations. The costs and revenues of the project are sum- marized below: AnnexJ- .Page3

(US$Ivállion)

Investment Costs Investment Other Total Infra- Costs Investme2t Investment Operati Year structure Hotels CostsL Costo Costa- Revenues

1 - - 3.73 3.73 -

2 5.37 - - 5.37 - 3 16.59 6.6o _ 23.19 4 13.45 11.90 - 25.35 - 5 3.83 7.60 1.00 12.43 8.38 9.24 6 - 10.90 1.00 11.90 12.48 15.52 7 - 10.60 1.00 11.60 19.29 25.32 8 . 8.90 1.00 9.90 26.74 36.99 9 - 5.60 1.00 6.60 34,08 47.00 10 - 5.90 - 5.9o 39.24 55.25

11 _ 5.60 - 5.60 44.23 63.04

12 - 3.90 - 3.90 48.34 69.60 13 _- - 52.57 76.o9 14 to 24 - - - - 56.00 82.00

1/ Includes investnentin land and an assumed figure for vehicles,boats, buses, etc.

2/ Operatingcosta and revenues for year 14 to 24 have been averaged for simplicity of presentation. Revenues and operating costs after that year have gradually been reduced, asauming that the first hotels opened close down after 20 years of operation. Annex 5 Page 4

8. The net benefits reaulting from the main categories of average visitor ezpenditures are shown below:

Average Gross Daily Net EpeBnditure Item VisitorExenditure Benefits -- s$) -(US- ) Accommodation,food, beverage and other expendituresin hotels 27.76 9.72 Sportsand recreationalactivities 4.44 0.89

Local transport 4.32 0.86 Purchases -4.98 0.50

41.50 11.97

9. The project facilities and equipment have varying economic lives, but as a whole it ¡a estimated that the project would have an economic life of about 25 years. The need to make modest provision for sorne replacement expenditures during this period la considered to be offset by the life of the main assets beyond 25 years. Ratesof Return

10. Based on the aboyeestimates, the internaleconomic return on the programof investmentswould be 13.1%. This calculation,however, does not take into consideration the real economiccosts of labor. Sincethe- constructionand operationof the project¡8 expectedto employconsider- able numbers of relatively unskilled workers from the surrounding region who a.re currently under-employed or unemployed,the evaluation of the investnentcalls for some of the laborinputs to be priced below the cur- rent marketwage-rates. Accordingly,unakilled labor was priced at 70% below currentmarket wage-rates. On this basisthe internaleconomic returnwould be 19.4%and may be considered the Ilbestestimate."|

11. Improvedinfrastructure facilities in the town of Zihuatanejocon- atitutean importantbenefit to the localpopulation. The aboveanalysis has not taken into accountthese benefita because of the difficultiesof separatingthat part of the investnentwhich will benefit the local popula- tion frcm investmentthat ia neededfor the developmentof tourismr,both In Ixtapaand Zihuatanejo.It i9 realisticto assure,however, that over half of the investnents in infrastructure in Zihuatanejo would benefit the local population rather than the tourism sector. On this basis the Annex 5 Page 5

economic rate of return on the tourism program as a whole would Inerease to more than 20%.

Sensitivity Analysis

12. The rate of return would be sensitive to changes in occupancy levels and delays in the opening of hotels. With varying as8umptiona about occupancy lev-eleand openingdates., and with shadow pricing of unakilled labor the internal economic return would range frcm 15.6% to almost 20.8%. Results of this sensitivity testing are ahown in the fol- lowing table:

Resulting Rate of Return.

(i) Opening dates (2 year clelay) 15.6

(i) Decrease in occupancy level and revenues by 10% 18*0

(iii) Increase in occupancy levels and revenues by 0l%' 20.8

(iv) No shadow-pricing 13.1

(v) Best estinate 19.4

It is clear that the rate of return is most sensitive to a change in the value of labor and, to a lesser extent,to delays in opening dates of hotels. Employment and Income Effects

13. The proposed programi's area o£ influerce is expected to extend to 32 "municipiosí"l/ in the states of lúchoacan and Guerrero, with a total population of about 675,0CO. These "1sunicipiosi are anongst the poorest areasin Mexico with per capitaG0? aDlout half -"e nat4r 4 al average and with high rates of urempLoyaier.t and under-emp1oymeerit.

14. Between 196C and 19'70, it ís estiiated that whiie total population in this zonae ncreasad by 37%, tne economicaly active population remained

1/ A ama-1 administrative oistriet. Annex .7 Page o. etatic at 160,000 and in relation to total population decreased from 32.1% to 23.6% In 1970. Of the economically active population, only about 30% are engaged in industry and services (8.5% and 22.3% respec- tively), while the remainder are engaged ín agriculture and other prlmary activtieas (69.2%).

15. Investment in the proposed project la expected to increase income and employmentin the area. When in full operationit la esti- mated that the project will provido direct and indirect employment for a lnimnumof 26,000 persona and will Increase the value of output in the area of influence by about 30% as coirnared with 1970. Direct employnent ia estimated to be provided fJr more than 4,500persona.

Direct Balance of Payments Impact

16. The proposed project ia expected to increase gross foreign exchange earnings by about US$ 7 million in 1975 when the firsthotels open up and by UB$ 62 million when the project becomes fully operational in 1986. This compares with US$ 575 million earned by tourism in Mexico in 1970. Because of the high proportion of foreign tourista that are expected to visitthe area and the low import content of operating costs, the esti- mated net foreignexchange earnings of the projectare relativelyhigh. At present,only 10% of every touriatdollar earned goes out of the countryto pay for imports,technical services, interest, dividends, etc. With regardto the programof investmentsin the Ixtapa-Zihuatanejo zone,the proportion¡a likelyto be scmewhathigher, since half the cost of infrastructureswould be financed from the proposed loan. On this basis,net foreignexchange earnings would amountto US$ 36 millionin 1980 and US$ 53 mil-Uonín 1986,wqhich compares wíth the estimated foreign exchange component of the proposed project of US$ 13 million, includingprice contingenciesand foreignexchange component of super- atructureof aboutUS$ 25 ndllion. MEXICO

Summary of Operating Costs - Ixtapa, Town of Zihuatanejo and the Airport

(US$ Millions)

Year Operating Costs Operating Costs Operating Costs Total Operating Ixtapa only / Town of Zihuatanejo Airport / Costs only /

1 7.20 0.79 0.39 8.38 2 11.09 0.99 O.4o 12.48 3 17.16 1.71 o.42 19.29 4 24.24 2.06 0.44 26.74 5 30.83 2.79 o.46 34.08 6 35.66 3.11 0.47 39.24 7 39.90 3.83 0.50 44.23 8 143.65 14.15 0.54 148.314 9 47.12 4.87 0.58 52.57 10 48.59 5.18 0.60 54.37 11 49.37 5.32 0.63 55.32 12-20 50.07 5.46 0.774 56.27

1/ See Table 2 of this Annex g See Table 3 of this Annex L3/ Operating Costs averaged after Year 12 - sínce it assumes that the project will be in full operation at that level after that.

H3: MEXICO

Summary of Operating Costs - Ixtapa & Zihuatanejo 1/

(US$ Millions)

Cost of Providing Cost of Providing Cost of Providing4/ Cost of Providing Other Operating Total Accommodation, Food Recreational and Local Transport 4 Shopping Gooda Costs O'Operating Costs and other Services Sport Activities 3_ and Services _ Year 1xtapa Zihuatanejo Ixtapa Zihuatanejo Ixtapa Zihuatanejo Ixtapa Zihuataneio Ixtapa Zihuatanejo

1 4.19 o.42 0.70 0.07 o.68 o.o6 0.88 0.09 0.74 0.15 7.20 0.79 2 6.50 0.53 1.20 0.10 1.17 0.09 1.49 0.12 0.73 0.15 11.09 0.99 3 10.20 0.97 1.92 0.18 1.88 0.18 2.43 0.23 0.73 0.15 17.16 1.71 4 14.42 1.17 2.80 0.23 2.73 0.22 3.53 0.29 0.76 0.15 24.24 2.06 5 18.42 1.62 3.62 0.32 3.52 0.31 4.57 o.40 0.71 0.15 30.83 2.79 6 21.24 1.79 4.26 0.36 4.16 0.35 5.38 0.46 0.69 0.15 35.66 3.11 7 23.76 2.23 4.82 0.4s 4.69 0.44 6.08 o.57 0.56 0.15 39.90 3.83 8 26.o8 2.41 5.31 o.49 5.17 0.48 6.71 0.62 0.39 0.15 43.65 4.15 9 28.19 2.84 5.75 0.58 5.59 0.57 7.25 0.73 0.35 0.15 47.12 4.87 10 28.90 3.01 5.95 0.63 5.79 o.61 7.51 0.79 0.44 0.15 48.59 5.18 11 29.31 3.10 6.07 o.64 5-90 0.63 7.66 0.81 0.44 0.15 49.37 5.32 12-20 29.51 3.18 6.13 0.66 5.96 o.64 7.73 0.83 0.74 0.15 50.07 5.46

1/ Revenaes and operating costa have been gradually reduced after Year 20, on the assumption that the first hotels opened close down after 20 years of operaticn, except in the case of "other operating costs", which remain at approximately the sa~e level.

2/ See Table 4 of this Annex. < '/ Gross operating cost assamed to be 80% of revenues from this item. i/ Gross operating cost asusmed to be 80% of revenues from this iten. Gross operating cost assamed to be 90% of revenues from this item. -/ Operating cost of providing street lighting, road maintenance, etc. (See Table 1 of Annex 3).

Note: Assumptions made with regard to average gross operating margins have been based on a financial survey of existing hotels in Mexico City, Acapulco and Puerto Vallarta and on information provided by Infratur. The assumptiona are considered conservative. Aanex 5 Table 3

OPERATINO HOTEL FROJECTIoN F0R IXTAPROTOURISO DEVEDPMET (in U,S. $ .000)

Operating Year 1 2 3 4 5 6 7 s 9 10 11 12

1. Roomo/DOcupancy (40%) 750 Ros 250 Rms 500 Rm s 500R 500 Rms 250 Rms 250 Rrs 250 Rms 250 Rmss- Occupancy (65%) - 750 Rms 250 Rms 500 Rms oRms 500 Rms 250 Rms 250 Rms 250 Rms 250 Rms! 2750 3,000 Rs 3250 Rs 3,500 Ros Occupancy (75%) _ - 750 Rms L 1,500 Ros 2,000 Ros 2,500 Rms

Total Rooms 750 Rms 1,000 Rros 1,500 Rms 2,000 Rms 2,500 Rms 2,750 Rms 3,000 Rms 3,250 Rms 3,500 Ros 3,500 Rms 3,500 Rms 3,500 Rms

2. Number of Occupied Roos 2,550 Ros 2,600 Ros 2,625 Ros per day 300 Ros 513 Ros 825 Ros 1200 Ros 1,550 Roo 1,825 Ros 2,063 Ros 22,275Roms 2,1463Ros per year 109,500 Ros 187,245 Rms 301,125 Rmo 438,OO Rm s565,750 Ros 666,125 Rm 752,995 R.s 830,375 Ro 898,Q95 Ros 930,750 Ros 949,000 Ros 958,125 R.s

3. Average Room Occupancy 40.0% 51.3% 55.0% 60.o% 62.0% 66.4% 68,6% 70.0% 70.4% 72.9% 74.3% 75.0%

Revenue 24,675 2L4,913 2,847 4,864 7,829 11,387 14,710 17,320 19,574 21,591 23,370 24,201 P'oodi l0,625 11,002 U1,218 1-1,326 Boverage1,296 2,211 3,559 5,177 6,687 7,8714 8,899 9,8i6 Telephone 933 1,592 2,563 3,729 4,8114 5,669 6,1407 7,068 7,651 7,922 8.078 8,155 210 218 222 2214 Other 28 144 71 103 133 156 176 1914 78 134 214 312 401_ 472 534 589 638 660 673 679

Total Revenue 5,278 (10.0) 8,845 W.o) 14,236 (OMo) 20,708 (lO.0) 26,745 (tOO.O 31,491 W0.0) 35,590 (X-0) 39,258 p0.) 42,0494 .O0) 44,003 ho) 44,866 00.0) 45,297 40)

OPerotin0L Cost and Expenses

Direct Cost Beverage 453 775 1,248 1,812 2,340 2,755 3,114 3,435 3,718 3,85o 3,925 3,962 2,037 6140 933 1,203 1,1417 1,601 1,766 1,912 1,979 2,018 Telephone 234 399 171 177 180 182 Qthesao 21 37 57 83 107 126 1143 158 382 395 1402 1406 W&ter & Eaect. 148 82 128 186 2140 283 320 353 207 354 569 8310 1,0470° 1,260 1,424 35311,7021 1,761 1,796 1.813

Sub Total 963 (16.6) i,647 (18.6) 2.642 (18.6) 33,844 (18.6) 4,960 (18.5 5,841 (18.5) 6,602 (18.6) 7,283 (18.6) 7,884 (18.6) 8,162 (18.6) 8,321 (18.5) 8,400 (1B.5)

Othar Expenses (27.3) 11,859 (27.0) 12,013 (26.8) 12,089 (26.7) P~yr t1atCot 1,785 (314.5) 2,725 (30.8) 14,260(29.9) 5,988 (28.9) 7,636 (28.6) 8,769 (27.8) 9,786 (27.5) 10.727 (27.3) 11,591 Pstratio n 390 520 779 1,038 1,295 1,425 1,555 1,685 1,815 1,814 1,814 1,813 roat, Light, Power 156 208 312 416 520 572 6214 676 728 72B 728 728 ha,Pia & MariitePowce 87 116 174 232 290 319 348 377 406 406 406 406 Repair &itnc234 312 467 622 775 853 931 1,309 1,387 1,087 1,086 1,085 Other 570 973 1,568 2,279 2,943 3,465 3,916 4,32r, 4,676 _ 4,842 _ 4,937 4,984 Sub Total 3.222 (62.2) 4,854 (54.9) 7,560 (53.1) 10,575 (51.1) 1-3,45 (5C.3) 15,403 (48.9) 17,160 (48.2) 18,794 (47,9) 20,303 (47.8) 20,735 (47.1) 20,984 (46.8) 21,105 (46.6) 29,305 (65.3) 29,505 (65.1) 18,419 (68.9) 21,2244 (67.5) 23,762 (66.8) 26,077 (66.4) 28,187 (66.3) 28,897 (65.7) Total Cost & Ricpenses 4,185 (80.8) 6.501 (73.5) 10,202 (71.7) 14.419 (69.6)

993 (19.2) 2,344 (26.5) 4,o034 (28.3) 6.289 (30.4) 8,326 (31.1) 10,247 (32.5) 11,828 (33.2) 13,181 (33.6) 14,307 (33.7) 15,106 (34.3) 15,561 (34.7) 15,792 (34.8)

MEXICO TOURISM PROJECT SCHEDULESOF IMPLEMENTATION,EXPENDITURES, AND DISBURSEMENTS

YEARS 1 11 llV

QUARTERS Ql Q2 03 Q4 Qs QÓ Q7 as 09 Qio Qll Q12 Q13 Q14 015 Q16

IXTAPA AREA LIAIILITY PERIOD SITEWORKS _ _lIllIllIl ItIIlIII

CONSTRUCTION _ _llIllIll l 1nnuumumu lilI¡Ili

EQUIPMENT _ -_ _ - - - - - lIlIllIll IllIllIlhl

TOWN OF ZIHUATANEJO

SllEWORKS ______Ulilililill L;ABILLAIPERIOD

CONSTRUCTION _i_liIIIiii UlihllM lIihllil

EQUIPMENT - _ - -_ _ tIIIll Riililil litilialill

INTERNATIONAL AIRPORT -IABI-T -

SITEWORKS ______l ER OiDNii

CONSTRUCTION _ _ _ lIlhl lIl l IIIIMII

EQUIPMENT ______Uumuuuum

TECH-N_CAL _ _ _ __ ASSI STANCECL N __ CLOSINGDATE _ ~ ~ ______

LOAN AGREEMENT _ SIGNING DATE

EXPENDITURES (IN U.S. DOLLARS) 6,745,600 1 ',437,800 1 ,466,700 RATE 16.2% 46.7% 37.1%

DISBURSEMENTS (IN U.S. DOLLARS) 828,200 8,442,600 10,583,100 2,146,1 00 9_8% RATE - 3.7% 38.4% 48.1%

IBRD-6111(t)

MAP 1

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MAP 2

EXISTING ZIHUATANEJO AIRPORT TOPOGRAPHIC OBSTRUCTIONS

ZIHUATANEJO

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MAP 4 COACOYUL INTERNATIONALAIRPORT APPROACH TERMINAL PROCEDURESAIRPORT SURFACES (ICAO) AND TERPS'SAFETY AREAS

DEPARTURE AR

t ~~~~~~~~~~AP~RACHRA -

APROACHPROCEDURE (VOR) RUNWAEOR

NOTE: CONTOUIS AT 50 METER INTERVALS 5996(R)