FILE COPY! - R E S T R I C T E D
Re po r t N 0. TO (IDA) loa Public Disclosure Authorized
This report was prepared for use within the Association. It may not be pub- lished nor may it be quoted as representing the Association's views. The Association accepts no responsibility for the accuracy or completeness of the contents of the report.
INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized
APPRAISAL OF THE
ASUNCION (PARAGUARI) TO ENCARNAGION
ROAD CO.NSTRUCTION AND MAINTENANCE PROJECT
Public Disclosure Authorized PARAGUAY
October 16, 1961 Public Disclosure Authorized
Department of Technical Operations CURRENCY EQUIVALENTS
Unit Guarani (a) US$1 = ¢126 ¢1 = US$0.008 ¢1, 000 = US$7. 94 ¢1, 000, 000= US$7,936.50 PARAGUAY
APPRAISAL OF THE ASUNCION (PARAGUARI) TO ENCARNACION ROAD CONSTRUCTION AND PiAINTENANCE PROJECT
TABLE OF CONTENTS
Page
SUTMARYi
I. INTRODUCTION
II. GENERAL BACKGROUND 2
A. Transport in Paraguay 2 B. Present Condition of Highway No. 1 Asuncion-Encarnacion h C. Road Administration 4
III. THE PROJECT 6
A. Technical Description 6 B. The Improvement of the Paraguari-Encarnacion Highway 6 C. The Reorganization of the Maintenance Division 7 D. Execution of the Project 7 E. Cost of the Project 7 F. Financing of the Project 9
IV. ECONOMIC JUSTIFICATION OF TIME PROJECT 10
V. CONCLUSIONS AND RECOMMENDATIONS 13
APPENDICES
Table 1 - Design Standards Table 2 - Engineering and Construction Schedule Table 3 - Breakdown of Total Cost in Foreign and Local Currency Table 4 - List of Goods Table 5 - Breakdown of the Local Cost Over the Four-Year Construction Period Table 6 - Estimated Vehicle Ownership and Operating Costs in Paraguay Table 7 - Registered Vehicles in Paraguay
MAP I - 7ap of Primary Highway System MAP II - Detailed Road Map Southern Paraguay PARAGUAY
APPRAISAL OF ThrIE
AS UNCION (PARAGUARI) TO ENOCARI'IACION
ROAD COiNSTRlCTION AND AAINTENAiJCE PROJECT
SUIPThARY
i. The Government of Paraguay has asked for assistance to finance (a) the rehabilitation and reconstruction of the Asuncion-Encarnacion Highway Nlo. 1, and (b) equipment for road maintenance operations of the Directorate of High- ways.
ii. The cost of the project has been estimated at US97.5 million equiv- alent including the full cost of construction, engineering services and con- tingencies. The foreign exchange component is US~$5.5 million with an addi- tional US;500,000 for urgently needed maintenance equipment, and it is proposed that the International Development Association make available to Paraguay a development credit of US%6 million for this expenditure.
iii. This project appraisal is based on a report supplied by the consult- ing firm of TAvS Ingenieria, S.A., who made an investigation of the project at the beginning of tlhis year.
iv. The Asuncion-Encarnacion Highway is the maost important in Paraguay, connecting the capital of the country with its second largest town, Encarnacion. The road is today in poor condition, with sections impassable after heavy rain. A good all-weather road is essential to serve the triangular area between the Paraguay and Parana rivers. It is the most densely populated and most produc- tive area of the whole country. Improvement of the road would stimulate pro- duction and the sale of food, grains, sugar, meat, cotton, etc., and secure a constant flow of such products to the rnarkets and to the ports for export.
v. 'The railroad bet;ween Asuncion and Encarnacion will be kept in service by the Government with a minimum amount of expenditure. The Government has as- sured the Association that it would not build a highway following thle alignment of the railroad until such construction would be economically justified. It is therefore the Government's policy to retain Highway No. 1 as the principal con- nection between Asuncion and Encarnacion.
vi. The poor condition of the existing roads in Paraguay is evidence of inadequate maintenance, and there is need for improvement in both administra- tion and operation. Technical assistance is requested in this sphere and also to complete the planning and to supervise execution of reconstruction of High- way No. 1. Therefore, consulting engineers will be engaged to help the Gen- eral Directorate of Highways. Appropriate provision has been made in the cost estimates and in the amount of the proposed development credit. vii. The local currency cost of the construction would be about US$2 mil- lion equivalent (X 245 million) over a four-year period. In addition, local funds will be required for proper maintenance of all roads under the Directo- ratet s jurisdiction; the amount of such funds should be determined by the Di- rectorate, working with the Consultants, on the basis of a plan for expanded maintenance operations drawn up and agreed upon by them. The Government has undertaken to provide budgetary appropriation sufficient to cover the local costs. viii. Execution of construction work will be done under contract, to be awarded by international competitive bidding, The purchase of maintenance equipment will also be based on international competitive bidding. ix. The project is suitable for a development credit of US$6 million from the International Development Association. I. INTRODUCTION
1. The Government of Paraguay has asked for assistance to finance part of the cost of (a) the improvement of the Asuncion - Encarnacion road, and (b) equipment for the road maintenance operations of the Directorate of Highways.
2. The cost of the construction project is estimated at US$7c5 million equivalent, including the full cost of equipment, engineering services and adequate contingency allowance. The foreign exchange compo- nent is US$5.5 million, and in addition US$500,ooo is required for maintenance equipment. It is proposed that the International Development Association make available a development credit of US$6 million which would cover the foreign exchange needs.
3. This appraisal report is based on information supplied by TAPiS Ingenieria, S.A., a firm of consulting engineers engaged by the Bank/ Association to assist in preparation of the rehabilitation project, and discussions with the Paraguayan representatives during September 1961. The consultants' staff was in Paraguay from January to April 1961; their report of May 1961 has been submitted to the Bank/Association and to the Government of Paraguay. II. GEYERAL BACKGROT,1TD
A. Transport in Paraguay
4. Paraguay is a landlocked country, surrounded by Argentina, Bolivia and Brazil, and has an area of about 407,000 sq,km.; it is approximately the size of California. The Paraguay River divides the country into two distinct parts; the Eastern Section is the smaller, with an area of approximately 160,000 sq.km. but it is the most developed, contains over 90% of an estimated total population of 1.6 million, and includes the two principal towns, Asuncion the canital (population 210,CCO) and Encarnacion (34,000); the W4estern Section (Chaco) is sparsely settled and is undeveloped. Annual precipitation ranges from 1,200 to 1,800 millimeters; the rainy season is liarch to Mlay.
5. Transportation is characterized by the country's inland position, and the rivers, Parana and Paraguay, give natural access to the Atlantic Ocean. The sailing distances on these rivers are great, going for hundreds of miles beyond Asuncion and Encarnacion; they are said to be the best unimproved rivers for inland navigation in the world. Practically all of Paraguayis foreign trade is carried by river. In i957, for instance, of the total trade volume of 500,000 tons only 15,000 tons were carried by rail, and only a fragment re- presented cross-border trade with Brazil.
6. The main highway network in Paraguay has developed in the Eastern Section south and east of Asuncion (see MIaps I & II). In this region the topo- graphy is mostly flat to rolling land wiith low mountain ranges of 300 to LOO m in the east, and it is well suited to highTway transportation. Road develonment has, however, been slow with the result that today Paraguay has a total netwTork of only 3,200 km of first-and second-class roads, an insignificant amount for a country of its size, and more and better roads are essential to develop the national economy.
7. Three main trunk roads branch out from Asuncion, of which the most important is Highway No. 1, from Asuncion to Encarnacion, the projoct in this renort. Another important road, Highwfay lNo. 2, leads east toward the towfn of Puerto Stroessner on the Parana River. A contract for improvement of the section Col. Oviedo to Puerto Stroessner was recently awarded, the financing based on a loan from the Development Loan Fund. A third important highway that penetrates the Chaco, northwest of Asuncion, is now under construction and is expected to be completed this year. It is being built to very lolwf standards, much as a dirt road, and would not be passable during the rainy season.
8. Most other roads are located in the triangle between Asuncion, En- carnacion and Puerto Stroessner, traversing the most densely populated areas of Paraguay, where the predominant occupations are farming and cattle raising. The condition of the roads is, in general, poor. Except on the main trunk roads, bridges and culverts are usually timber structures in various states of decay. Drainage conditions are in many cases unsatisfactory, causing erosion of embankment and ditches. Lack of proper maintenance has resulted in deterio- ration of road surfaces, and the riding qualities of the roads are rough. Due -3 -
to the poor condition of the roads, man, of' them, including those main trunk roads whi4ch have no asphalt pavement, are closed to traffic for days and some- times weeks after heavy rainfall in order to prevent "heir destruction.
9. Road traffic has doubled during the last ten years; the total numrber of registered vehicles has increased from 5,000 in 1950 to about 11,000 in 1960. Traffic is light, varying from 50 to 200 vehicles per day on the main trunk roads, down to 10 to 50 vehicles on secondary and feeder roads.
10. Paraguay possesses one of the oldest railroads in the world, the 377-km line from Asuncion to Encarnacion, which also has a 63-km branch line from San Salvador to Abai. The line was built in several stages from 185h to 1915 by a British company. Over the years the railroad has fallen into dis- repalr of both track and rolling stock. Annual losses on operations have been incurred in eight of the ten years from 1949/50 - 1958/59, that of the last year being about USg185,000 before fixed charges. Over the same period the decline in traffic was 48% for freight (18.1 million ton-kmI in 1958/59) and 49% for passenger (31.2 million passenger-km). The financial circumstances of the company became so serious that a receiver and manager was appointed in 1959 on behalf of the holders of Prior Lien Debenture Stock.
11. In May 1961 the Government signed an agreement to purchase the rail- road. The Goverment has informed the Bank that for economic and social reasons it would keep the railroad operating to provide transport communications for the communities served. The railroad has been falling to pieces for years and in spite of lugubrious statements about its imminent collapse it is still run- ning. If the Government makes available the funds needed to keep the railroad just functioning, it might remain in service for a few more years without too heavy expenditure. A large capital investment wiould be required to put the propertv into good condition, and it is very doubtful that a return could be earned.
12. The Government's policy is to keep Highway No. 1 as the principal road connection between Asuncion and Encarnacion; it does not now conter,iplate construction of a main road at any time within the near future following the alignment of the railroad which w,sould be an alternate route bet-ween Asuncion and Encarnacion.
Previous Bank Loan to Paraguay
13, On December 7, 1951, the Bank made a loan to Paraguay (Loan 55-PA), of USV\X5 million to help increase agricultural production. Loan funds totaling about US,jl million were earmarked for the purchase of road building equipment for construction, rehabilitation and maintenance of roads to connect the prin- cipal agricultural areas with the main marketing and transportation centers. The loan also included the purchase of spare parts and tools for the proper maintenance of the equipment. The equipment w^ras used to good purpose by the authorities on a program which encompassed 750 km of grading and drainage works. The equipment purchased has for the most part become obsolete and has been written off. B. Present Condition of Highway No. 1 Asuncion-Encarnac 4o
14. The existing 366 km long road from Asuncion to Encarnacion is in fair to good condition with generally satisfactory horizontal and vertical align- ments. The country through which the road passes varies from flat to gently rolling. The first 63 kn section from Asuncion to Paraguari has a bituminous pavement in fair condition which can be inproved by routine maintenance. IVo capital investment would be required for this section and it is therefore the Paraguari-Encarnacion section, 303 km long, of Highway No. 1, which has to be rehabilitated and reconstructed.
15. This part of the road is narrow in many parts and has a gravel or clay-gravel surface, except for about 67 km in the south, wJhich is ordinary earth fill. Because of lack of sufficient base and suDbase, sections of thle road often have to be closed to traffic after heavy rains in order to prevent its destruction; such sections were closed for 38 days last year, preventing through road traffic between Asuncion and Encarnacion.
16. The drainage structures along most of the existing road are in poor condition, and there has been heavy erosion and damage to the embankment. Many of the bridges are in need of repair, ranging from replacement of timber decks to reconstruction in concrete of pillars and abutments.
17. A hindrance to the free flow of traffic along Hight.ray No. 1 is the lack of a bridge over the Tebicuary River, near Villa Florida, at Km 160, which is now crossed by a ferryboat service.
18. The volume of the present traffic along the road is not large; the number of vehicles per day varies from 50 to 165. However, improvement of the road to provide all-weather travel, the fact that traffic carried by the rail- road is gradually switching to the road, and the effect of national economic growth should produce a sizable increase in traffic over Highway No. 1 during the next five to ten years.
C. Road Administration
19. The construction and maintenance of highways are organized under the Ninistry of Public Works and Communications. There are two entities in the Ministry specifically charged with highway operations. a) General Directorate of Highways
20. This directorate is responsible for the planning, construction, better- ment and maintenance of the primary road system which has a total length of 1,700 km and is classified as follows:
Km
Asphalt pavement 200 Gravel surface (with or without base) 640 Dirt roads 860 1,700 b) General Directorate of Road Commissions
21. This directorate was created by decree in 1952 for the purpose of organizing a road conscription service to work on secondary roads, mainly of the dirt-feeder type, of w.hich there are noI- about 1,550 Icn. All males between certain ages are required to contribute their services to road work for a few days or pay a tax, the proceeds of which are used to finance the directorate's activities.
22. Opera-ting through one capital, 16 regional and 134 local coimissions, construction and maintenance are carried out mostly bv hand labor. The wiork of the directorate and its commissions has been hampered by inadequate funds. Only / 13 million (about US`0O,OCO) wjas collected in 1960 and assuning that contributed labor had about the same value, the total for the year was $1 26 million.
23. The nature of this organization, its complete dependence on temporary labor and uncertain tax collections, and the increasing importance of its task, would justify investigation to determine whether reorganization or incorporation with the General Directorate of Highways should be undertaken in an endeavor to ensure adequate performance.
24. The General Directorate of Highways is headed by a Director and Vice Director who have a staff of 35 at headquarters in Asuncion and about 1,000 in field offices. There are departments for plannine and design, bridges, paving, inspection and administration. In addition, there are a highway police force and two cormissions; the conLtrissions were formed for liaison and administration of construction work on (i) the Col. Oviedo to Puerto Presidente Stroessner road and (ii) the Trans-Chaco road, referred to previously.
25. The staffing of the General Directorate of Highways, which includes 23 highway engineers, should be sufficient to fulfill responsibility for 1,700 km of roads, if the organization were operating efficiently. There is a lack of proper operational planning and failure to delegate authority; some headquarterst officials work half-time only, and senior members are overburdened with detail work. The morale at headquarters is low and consequently the ini- tiative to solve work problems is lessened and staff performance is adversely affected. A satisfactory system of cost accounting does not exist, which hampers budgeting and expenditure controls.
26. The poor condition of the roads is evidence of lack of proper main- tenance and the need for reorganizing and strengthening the maintenance operation.
27. It is therefore considered necessary that foreign consultants should be employed, (i) to study the Directorate General of Highways and to make re- commendations for improving its performance, that in particular the maintenance function should be studied and proposals made for reorganizing and strengthening its operations, and (ii) to complete the planning and to supervise execution of the project submitted to the Association. - 6 -
III. THE PROJECT
A. Technical Description
28. The project consists of: 303 1m a) the improvement to specified standards of the of Highway No. 1 between Paraguari and Encarnacion, including construction of a 330 meter lcng bridge over the Tebicuary River; b) the study of the organization and operation of the Directorate General of Highways, including its maintenance division, and the implementation of the adopted recommendations resulting therefrom, and the procurement of maintenance equipment.
B. The Improvement of the Paraguari-Encarnacion Highway of Highway No. 1, the 29. The section, Paraguari-Encarnacion, is part Asuncion,with the most important road in Paraguay, connecting the capital, densely pop- second largest town, Encarnacion. The road connects the most the main artery for ulated areas in the country and is also important as of goods and produce to and feeder roads, thereby facilitating the movement external from markets and the two ports which handle most of the country's trade. of the road is in 30. As the present horizontal and vertical aligrnnent sharp curves and general satisfactory, it will be retained except for a few new bridge the relocation of about 3 km for the approaches to the proposed over the Tebicuary River. wide pave- 31. The design standards are shown in Table 1. A 6 meter surface treatment will be applied, consisting of a double-bituminous ment materials as over a 15 cm crushed-stone base course and subbase of selected roadway in those re(-;usred. In order to minimize the widening of the present width of the southern- sections w^he-re traffic valume is low, the minimum. to 2.0 meters). shoulders has been set at O.5 meters (varying from 0.5 of the ditches 32. Also included are the reshaping and reconstruction the replacement and the rehabilitation of a number of bridges, principally of timber decks and abutments with reinforced concrete. River bridge en- 330 The preliminary design for the 330 m Tebicuary with maximum spans visages a prestressed concrete beam and deck structure (about 1 km of 30 meters. The bridge will be located near Villa Florida soil investi- dowmstream from the ferryboat crossing) and the preliminary bottom, gations reveal that solid rock will be found 5 meters below river which would present no foundation problem. - 7 -
Co The Reorganization of the Maintenance Division
34. The reorganization and the strengthening of the Maintenance Division would be based on the recommendations of the Consultants' study, which has yet to be made. The objectives would be an efficient organ- ization, adequately equipped, to maintain the main roads, including the reconstructed No, 1.
35. An allocation has been made in the proposed development credit for maintenance equipment, which would be supplemented by equipment re- leased from construction of Highway No. 1 when completed. Determination of the physical and financial requirements will be a result of the study, which will also indicate the resources that the Government would have to make available.
D. Execution of the Project
36. The General Directorate of Highways will be responsible for the execution of the project, but as it lacks experience in design, preparation of tender documents and supervision of construction work, the assistance of competent consulting engineers is required to ensure efficient execution of the project. The same consultants should undertake the study of the Maintenance Division and assist in the execution of its work. The consultants will advise the MIaintenance Division on the numbers and types of equipment to be procured with the allocated funds of the development credit.
37. Execution of construction will be by contractor under a single unit-price contract awarded on the basis of international competitive bid- ding. Because of the high cost of moving equipment to and from Paraguay, which would normally be included in the contract's price, and because of the Government's need of maintenance equipment, the Government will make known in the invitation that it will purchase upon completion of the pro- ject that part of the contractor's equipment judged suitable for maintenance purposes. The effect of such an arrangement will benefit both parties, In the cost estimate of the project an allowance has been made for the residual value of such equipment, to cover the Government's expenditure for its purchase.
38. The design and construction of the work is scheduled over a period of about four years. About ten months would be required for final design, preparation of tender documents, award and signing of the contract. The contractor would need about two months for mobilization, leaving three full years for actual construction. It is estimated that the work would shut down 80 to 100 days each year for the rainy season. A schedule for the engineering and construction is shown in Table 2.
E. Cost of the Project
39. A comprehensive cost estimate for the improvement of the 303 km section Paraguari-Encarnacion has been made, based on computed quantities and using unit prices established after analyzing the actual construction - 8 -
costs of roads built under similar conditions. The figures arrived at, also for the bridge over the Tebicuary River, may therefore be accepted as reason- ably accurate. Hovever, a 152o contingency item has been included in the cost estimate to protect against price increases and to meet any unforeseen conditions.
40. Details of the total cost estimate and the division of local and foreign currencies are given in Table 3. A summary appears below:
Estimated Total Cost US.$ MILLIONS
1. Highway construction 4.34
Tebicuary bridge .54
Other bridges .17
Survey and test equipment, vehicles and provisions for camps' removal .15 5.20
Contingencies .80
Cost of Construction 6.00
2. Residual value of contractor's equip- ment to be purchased by Government for maintenance .60
3. Ilaintenance equipment .50
4. Engineering services .90 8.0o
Division of Currencies
US$ MILLIONS Foreign Local Total
Construction, including engineering services and contingencies 4h9(70%) 2.00(30%) 6.90(100%)
Residual value of construction equipment .60 .60
Maintenance equipment .50 .50 6.oo 2.00 8.00 - 9 -
41. Construction cost, excluding bridges, of U3$4,335,ooo equivalent, or US$14,400 per km, is regarded as reasonable considering that the work is reconstruction to modern standards of an existing highway. The cost also reflects the fact that base and subbase material is found in several places along the road, and therefore at reasonable hauling distance for the material. As to chips for the bituminous pavement, there are reported to be a number of places from which such material can be quarried, but further investigation and testing will be needed during the survey to finalize the places from which material can be obtained within economical hauling distance.
F. Financing of the Project
42D It is proposed that the Association finance the total foreign ex- change cost of the project, estimated at US$6 million equivalent, as show-n in the List of Goods, Table 4. It contains the estimated foreign exchange cost of construction, including such items as spare parts, fuels and lubri- cants, imported materials, contractor's overhead and profit, engineering fees, etc., an allocation for contractor's equipment to be purchased by the Government, as previously explained, as well as the cost of supplementary maintenance equipment.
43. The estimated local cost of the project, amounting to US$1,961,000 or A 245 million, will be provided by the Government over a four-year period. A breakdown by years of the requirement of local funds for the construction project is shown in Table 5, which briefly is:
a Millions
1961/62 17 1962/63 87 1963/64 76 1964/65 65
Total a 245 million
44. The Government will provide the funds needed for the expanded main- tenance activity, inter alia, to assure operation of the equipment to be purchased with the credit and later the equipment to be used for maintenance after completion of the construction project. It will be the Consultants' task, in co-operation with the General Directorate, to establish the amount of funds required for proper maintenance of all roads under the Directorate 's jurisdiction, after the plans for expanded maintenance operations have been finalized and agreed upon.
45. The local currency cost will be met by budgetary appropriaticns. The Government will set aside, starting January 1, 1962, the proceeds from the 5% surcharge on imports, which have so far been used for the constructioni of the Trans Chaco road. The 5% surcharge was expected to produce about G.108.7 million during fiscal 1961. It is expected to produce similar or greater amounts in the future. If these revenues should prove insufficient to cover the local currency cost, the Government will make provision by additional funds from non-inflationary sources of financing. - 10 -
IV. ECONOMIC JUSTIFICATION OF THE PROJECT
46. National Route No. 1 from Asuncion to Encarnacion traverses the tri- angular area lying between the Parana and Paraguay Rivers which is the most densely populated region of the country and the most productive as well (see Maps). The planned improvement of the section between Paraguari and Encarna- cion would benefit a wide strip of crop and pasture land in Paraguari, Nisiones, Itapua, and Neembucu departments which have about 25% of Paraguay's population, produce 30% of the crops and raise 265; of the cattle.
47. From 20 to 55% of the total output of major cash crops for export and hcme market use are produced in the service area of the s ection of Route 1 proposed for improvement; for example:
Cotton 55% Corn 38% Rice 62% Tobacco 31% Sugar Cane 19% Beef 26%
The region also produces subsistence crops such as alfalfa, sweet potatoes, onions, mandioca, peanuts, potatoes, and beans.
48. The planned road improvements would stimulate production and sale of food grains, sugar, meat, cotton, tobacco, etc., mainly in the southern region, and induce a flow of imports and domestic consumer goods as well. The stimulus would come from transport cost savings, year-round access to markets, faster delivery of produce and livestock, and a widening of the Asuncion supply area.
49. The transport cost savings for a 6-ton truck might total US$32 a round trip, or US$h.27 a ton for goods as follows:
6-ton truck assumed to carry full load 303 km to Asuncion and 25% load 303 kaa on return haul:
Reduced costs of fuel, lubricants, wear and tear, wages, turn-around time, and finance charges (based on 4.6¢ reduction in cost per vehicle-kilometer see Table 6) For round trip US$27A08
Savings from avoidance of (i) idle time due to road closing in rainy season; and (ii) spoilage and losses from non-delivery of goods For round trip 2.CO
Savings from use of Tebicuary River bridge instead of present car ferry 2020
Savings for 606 km round trip US$32.00
Savings per ton of goods carried (7.5t) 4.27 - 11 -
50. Buses and passenger cars would also run over the improved road sections at lower costs of operation, ownership and finance. The economies for a 606 km round trip might readily reach US$24 for an average bus and light truck and US$10 for an average passenger car. Road maintenance and repair which now costs about US$690 per km a year, might decline to US$500 a year as of 1965. This would save about US$57,000 a year for the Maintenance Department.
51. Economic benefits of the highway improvement will not be limited to the road-user and maintenance benefits; more significant gains will be material- ized through its anticipated role of stimulating productive activities in the region. A fact poassibly favoring t1rse developmerital benefits is the large proportion of commercial vohiclcs in the composition of the traffic in Para- guay. Traffic counts made on several points of Route No. 1 have shown the traffic to be composed of 70% comriercial vehicles (buses and trucks) and only 30% passenger cars. The record of vehicle registration in the country moreover shows that the percentage of commercial vehicles in the total number of vehicles in the country has been increasing in recent years, This trend is shown in Table 7, the percentage of trucks and buses has risen from 42% in 1955 to 53yS in 1960. In the light of the Government's import policy for automobiles, there is a likelihood that the percentage of commercial vehicles would still increase in the future.
52. The developmental benefits cannot be definitely assessed for lack of data. There is no doubt that the regional real income will tend to grow in response to a 65 to 75% reduction of transport costs as trucks come to replace other means. The improved roads would make it possible to haul agricultural produce and livestock by truck at about 3 cents a ton/km, where it now costs 9 cents a ton/kIn (counting loss of weight) to walk cattle to market, and 8 to 10 cents a ton/km to carry produce by ox-cart over dirt trails. However, the consultants' estimate that regional income might increase 3% annually would not be realized unless, as explained below, the Government takes other devel- opmental action as well as highway improvement.
53. The road-user benefits plus the road maintenance savings would equal or exceed the financial charges of the project almost from the start of opera- tions. Assuming that 6% interest ought to be earned and that the works have a 30 year economic life, the benefit/cost ratio would start at 0.9 (equivalent to a 5 % return after amortization) as of 1965 and increase to 1.5 (equivalent to 1021% yield) by 1971.
Traffic volume if roads wiere not improved Average number of vehicles daily (a)
1965 1971
Present volume 70 70
Increase (excluding induced traffic) 30 105
Total 100 175 - 12 -
Road-user benefits, non-induced traffic 1965 1971 X COO annually)
Reduced costs of vehicle operation, ownership and finance 332 582 Savings from all-weather traversibility 37 64 Savings from use of bridge to replace ferry 40 70 Sub-total 409 716 Additional road maintenance savings 57 57 Total benefits 466 773 Annual capital cost of project (b) 5C0 500 Benefit/cost ratio 0.9 1.5 Equivalent investment yield (return after amortization) 512% l0z% (a) Weighted by distance run; (b) 6% interest, 30 year amortization of project cost ($6.9 million).
54. In addition to the road user benefits and road maintenance savings, land values would increase as a result of the project, traffic accidents would diminish, there would be more comfort and convenience for drivers and passengers, and the Government would collect more revenue from vehicle and road-user taxes. These benefits are important but indeterminate. 55. Highway improvements, transport cost savings, and expectations of traffic growth cannot by themselves guarantee economic development. It would require concurrent public and private investment to expand productive capacity and governmental measures to provide a suitable climate for expansion. Although it seems unlikely that the Paraguayan Government will formulate a well inte- grated development program for some time, it has already put into effect a number of measures which, if consistently followed and reinforced by other measures to the same end, might ensure effective use of the highway investment as a catalytic agent of development. Not long ago, the Government adopted a new financial policy aimed to arrest the galloping inflation which has dis- rupted the economy since the War. Concurrently, it is taking action which would ease some stifling controls of cattle marketing that have long deprived the livestock industry of incentive to increase production. 56. Several recent measures aim to stimulate agricultural growth in particular - first, the enactment of a law to facilitate agrarian reform; second, the enactment of a law to clarify the title of land now occupied and worked by "'squatters", and third, the establishment of a new National Develop- ment Bank which has, as a primary objective, the provision of long-term agri- cultural credit.
57. It is, therefore, concluded that, on the basis of the expe^ted direct benefits and its developmental effects (the present production of the region is only a fraction of its potential), the proposed improvement of the Paraguari- Encarnacion section of Highway No. 1 has sufficient economic merits as to justify the Association4s assistance. - 13 -
V. CONCLUTSIONS AND RECOHMENDATIONS
58. The planned improvement of Highway No. 1, would stimulate the agricultural production of the area, which is densely populated and the most productive in Paraguay, and provide an all-weather road connection between Paraguay's two most important cities. The need for an improvement of the maintenance operation and the importance of maintaining properly the road included in the project and the remainder of the country's main road network are self-evident.
59. Satisfactory assurances have been obtained from the Government that:
a) the local funds needed to carry out the improvement of the Paraguari-Encarnacion highway will be available as required;
b) reorganization of the maintenance operation will take place, and that the local funds required will be made available from budgetary sources;
c) a consulting firm will be engaged for the planning and control of the work on the Paraguari-Encarnacion high- way, and that the same consultants will be retained to assist and guide the Ministry in the maintenance reor- ganization.
60. The project is sound and provides a suitable basis for a devel- opment credit of US$6 million equivalent from the International Development Associationo Table No. 1
PARAGGUAY ROAD PROJECT
DESIGN STANDARDS
For the Asuncion (Paraguari) to Encarnacion EHihy
Design Speed ...... 80 km. per hour Double Stopping Sight Distance .225 meters
Passing Sight Distance .520 meters Desirable Minimum Radius of Curvature .210 meters
Minimum Distance Between Curves in Opposite Direction .120 meters
Maximum Grade. 6 Maximum Distance for Maximum Grade ...... 300 meters Minimum Grade in Cuts .0.5%
Width of Pavement .6.0 meters
Km. 63-141 Km. 141-366 Width Of Base ...... 7.5m 7.Om min., 7.5m max. Width of Shoulder ...... 1.5m min 0.5m min.
Total Width of Road ...... Om mmin. 7. m min. Pavement Crown ...... 2% Slope of Cut Banks .1:1
Slope of Fills
Under 2 meters .3 hor.: 1 vert. Over 2 meters. 1 hor.: 1 vert.
Superelevation .10% max.
Clear Roadway Width on Srrucrures .7.0 meters Design Load. Bridges .H20-S16
Design Axle Load, for Pavement Design .12 metric tons Table No. 2
PARAGUAY ROAD PROJECT
E NO I ELPRT' I iJ'D CO:LST.RUCTTON SC}TEDULE
For the Asuncion (Parauari) to EncarrAcion Highway
FIRST SECOND THIRD FOURTH ITEM YEAR YEAR YEAR YEAR
~Surveys for Design JJ LI]iIIiJ__[
Kiaterials Investigations t
Foundations Investigations (as required)
Prepare Preliminary Design ______- and Bid Plans n__
Advert ise
Analyze Bids t_r
Sign Construction Contract _ _ f
Hiighway Construction and Rehabilitation of Bridges…jI triii _ -
Final Highway Desilgn Drawings -
Final Bridge Drawings
Construct Tebicuary River Bridge - | | - | | _ - - -
Supervision of Construction -L I -I I I -. I 1L1 E 1 ] ] | rrrrTT~~tI i I TI1 I I I Table No. 3
PARAGUAY ROAD PROJECT
Breakdown of Total Cost in Foreign and Local Currency for the Asuncion (Paraguari) to Encarnacion Highway
A. Foreign Currency Costs
Depreciation of construction equipment $ 949,000 Equipment parts and repair facilities 570,000 Fuels and lubricants 630,000 Contractor's foreign labor costs 285,000 Constructiion materials 760,000 Overhead and profit 665,000 Contingencies 600,000 Consulting engineers 425,000 Survey and test equipment and vehicles 50,000
Total foreign currency costs $ 4,934,000
B. Remaining Value of Construction Equipment Chargeable against future projects $ 560,000
C. Local Currency Costs
Dollar Guaranies Equivalent
Local skilled and unskilled labor a 82,625,000 $ 661,000 Construction materials 49,375,000 395,000 Overhead 28,750,000 230,000 Contingencies 25,000,000 200,000 Engineering 59,375,000 475,000
Total local currency costs ~245,125,000 $ 1,961,000 Recapitulation
Foreign currency $4,934,000 Residual value of new equipment (foreign) 560,000 Local currency 0245,125,000 Table No. 4
PARAGUAY ROAD PROJECT
ASUNCION (PARAGUARI) TO ENCARNACION HIGHWAY
LIST OF GOODS
US dollars
1) Reconstruction and rehabilitation of Highway No. 1 3,875,000
2) Residual value of contractors' equipment to be purchased by Government for road maintenance 600,000
3) Supplementary equipment for maintenance 500,000
4) Consulting engineers' fees 425,000
5) Contingencies 600,000
Total us$ 6,ooo,ooo Table No. 5
PARAGUAY ROAD PROJECT
Breakdown of the Local Currency Cost over the Four-Year Construction Period
(in guaranis)
Local Currency Fiscal Year Engineering Construction Total
1961-1962 17,000,000 - 17,000,000
1962-1963 16,000,000 71,000,000 87,000,000
1963-1964 14,875,000 60,900,000 75,775,000
1964-1965 11,500,000 53,850,000 65,350,000 59,375,000 185,750,000 245,125,000 Tab le No. 6
PARAGUAY ROAD PROJECT
ESTIMATED VEHICLE OWNERSHIP AND OPERATING COSTS IN PARAGUAY
6-TON TRUCK, 150 H.P. GASOLINE ENGINE
DEPRECIATION AND AVERAGE VALUE List price C.I.F. Asuncion ...... 0960,000 Deduct cost of tires ...... 125.000 Total Cost, less tires 0835.000 Estimated salvage value after 5 years ...... 300.000 Total Depreciation, less tires 0535,000 Average value over 5-year period ...... ,630,000
ANNUAL COSTS Depreciation 535.,000...... 0107,000 Repairs. 75% of 0107.000 ...... 80.000 Interest, Insurance, Licenses and Storage. 15% of 0630,000 ...... 95,000 Total Annual Fixed Costs 0282,000
COST PER KILOMETER ON EXISTING UNSURFACED ROAD Fixed cost 0282,000.32,000 km. per year ...... 0 8.81 per km. Fuel for running speed of 50 km. per hr.. at 2/3 max. h.p. at 013.5 per liter 3.96 Lubrication and miscellaneous services. 40% of 03.96 ...... 1.58 Tire wear 0125,000-.35.000 km...... 3.57 Tire repairs. 15% of 03.57 ...... 0.54 Drivers and helpers salary V6,000 + 4,000 per month, 010.000T2. 667 ...... 3.75 Social benefits, 23% of 3.75 ...... 0.86 Total Cost Per Kilometer 023.07
COST PER KILOMETER ON PAVEMENT IN GOOD CONDITION Fixed cost 0282,000.48,000 km. per year ...... 05.88 per km. Fuel for running speed of 65 km. perhr. at 2/3 max. h.p. at 013.5 per liter ..... 3.96 Luhrication and miscellaneous services. 40% of 03.96 ...... 1.58 Tire wear, 0125,000,55.000 km...... 2.28 Tire repairs, 15% of 03.57...... 0.54 Drivers and helpers salary 06,000 + 4.000per month, ¢10, 000-4.000 km. per mo. 2.50 Social benefits, 23% of 02,50 ...... 0.58 Total Cost Per Kilometer 017.32 per km.
NET BENEFIT Cost on unsurfaced roads ...... 023.07 Cost on Pavement in good condition ...... 17.32 Net Benefit 0 5.75 per km. or $ 0.046per km. Table No. 7
PARAGUAY ROAD PRN^JECT lgistered Vehicles in Paraguay
Year Passenger Cars Trucks Buses Total Car/Truck-Bus Ratio
1950 * * * 4,700** *
1952 * * * 5,000** *
1955 3,783 2,429 299 6,511 58:42
1958 4,188 3,377 685 8,250 51:49
1960 5,100 4,972 784 10,856 47:53
SOURCE: Municipality of Asuncion
* Figures not available
** Estimates MAP I
B 0 L I V I A PARAGUAY _.___jPRIMARY HIGHWAY SYSTEM
ROADS I -. / 0 - \/ Asphalt Gravel Route I
\ ~~~~~~~~~Unimproved construction / 1^m __ ~~~~~~~~~~~~~~~~~~~~~~~~~~Under /-O' ____~~~~~ or proposed ( 97Sm . RAILROADS
0o p 50 100 150 200 K.
' ''> ~~~~~~~Mrarscol4
(N PedroJ.0n Coballe rv /\\ ; St t
4 ~~~~~~~~~~ ~~~~~~~~~~Concepcon
I~~~~~~~s5O ,/l 4¢-
-N ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0
I B . ,'-.e JUNE 1961IBRDAG A6
AR OPA
______~~ ~~R ~~G ~~E ~~AN T I N A JJNE 1961 IBRD-866 TRINIDAD ALTOS TBATI CARAGUJATAY
ASUNCION AA C UYBERNARDI0 A PUCU
t t '---_ e A iACALLu O ASUN4 ZtNDNDENCIA A L' S.ANTONIO IZ G \^CAl AY S ELEN A- DNAU AO~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~OE M,S P ,z P A- I U RCAAGUAZU Asphalt Pavement ~~~nA>R Km Z4~~~~~~~~~~~C LEO DTIEROAD MAP E PEDRO PARANA -I ProposedM O.F LI vNote: 80 Roads along railroads are Km/h X SOUTHERN PARAGUAY N po o lo zo 30 40 KM feasible speed as follow~s: 10 ' D JUNE 1961 IBRD-865