Public Disclosure Authorized CDa 4.o OQ Public Disclosure Authorized Ca ~ ~ A0 , cc o 0~~ Public Disclosure Authorized Public Disclosure Authorized CountryDept. I Latin America and the Caribbean Region Economic Notes A Reform Agenda for the Uruguayan Transport Sector Jorge Rebelo August 1996 The World Bank This series presents the findings of work in progress.They are preparedor sponsored by LAI staff to address immediate policy concerns identifiedthrough dialogue with governments,and they reflect the views of the LA1 Department.This note was preparedby Jorge Rebelo (LA11U)with the assistanceof Maria Lucy Giraido (LAIIU) and consultantsJorge Kohon (Railways), David Hughes (Forest Products Logistics),Eduardo Alvarez (Ports) . Questionsand concernscan be answeredby Mr. Rebelo at 202-473- 9323 or via email at jrebeloeworldbank.org. CURRENCYEQUIVALENTS CurrencyUnit = UruguayanPeso (P$) US$1 = P$6.91 WEIGHTS AND MEASURES Metric System FISCAL YEAR January 1 - December 31 PRINCIPAL ABBREVIATIONSAND ACRONYMS AFE State RailwayAdministration ANCAP State Oil Company ANP NationalPort Administration ANSE NationalAdministration for StevedoreServices CATIDU UruguayanChamber for InternationalRoad Transport CGN GeneralAccounting Office CIF Cost, Insuranceand Freight CUTA UruguayanRoad TransportationUnion DNH NationalDirectorate for Hydrography DNV NationalDirectorate for Roads DNT NationalDirectorate for Transport GNP Gross NationalProduct IDB Inter AmericanDevelopment Bank INAPE NationalFishing Institute MTOP Ministryof Transportand Public Works OPP Officefor Planningand Budget PLUNA UruguayanNational Airline PNN NationalNaval Prefectship UNDP UnitedNations Development Program TC Officeof the ComptrollerGeneral UPT TransportPlanning Unit REPUBLIC OF URUGUAY TRANSPORT SECTOR ECONOMIC NOTE Introduction This note identifiesand discussesthe main issues Officeof Budgeting and Planning (OPP, which is de which must be addressed in the several transport facto the Ministry of Planning), the Office of the subsectorsof the Republic of Uruguay,and proposes Comptroller General (TC), the Uruguayan Road an agenda for refomn. It is the result of a mission Transport Union (CUTA),the Uruguayan Chamber undertaken from December 4-8, 1995 to Uruguay, for International Transport (CATIDU), and the during which Bank staff and consultants had the National Administration for Stevedore Services opportunityto meet with officialsof the Ministry of (ANSE). Transport and Public Works (MTOP) and of the several agencies subordinatedto that Ministry. The This report is organizedas follows: mission also held meetings with officials from the Office of Planning and Budgeting (OPP) and the (a) Key Issues, Conclusions and Department of Forestryof the Ministry of Livestock, Recommendations. This is a snapshot of the Agriculture and Fisheries (MGAP). Finally, the sector with a description of the key issues, a mission held meetings with several transport vision for the sector and a matrix of actions to operators,shippers and producers. addressthose issues. Objectives. The note has three main specific (b) Annex 1: Road Subsector. This is a detailed objectives: description of the subsector both from the physical, institutional,operational, financial and * it describes the current state of the economicstandpoints. transportsector in Uruguay,focusing on the activities of MTOP and of the main (c) Annex 2: Railway subsector. This is a detailed state enterprisesin the sector, as well as description of the subsector both from the the viewpoints of the producers, physical, institutional,operational, financial and shippers, users and operators of economicstandpoints transportinfrastructure and services; * it evaluateseach of the subsectorsusing (d) Annex 3: Ports and Shipping subsector. This is three basic criteria (seebelow); a detailed description of the subsectorboth from * it identifies key issues and proposes the physical, institutional, operational,financial reform options for the sector taking into and economicstandpoints. account the present and expected passengerand freight demand. (e) Annex 4: Intermodal Transport and the Logistics of Forest Products. A discussion of Evaluation Criteria. The note attempts to truck/rail combined movementswith a detailed evaluate the above subsectors with a consistent discussionon of the forestproducts situation and framework which focused mainly on the following its logisticrequirements. criteria: * Cost-Efficiencyof the subsector (f) Annex 5: Mercosur Integration Projects. A * Financial sustainabilityof the sector in summary description of proposed integration the long-term projects in the context of the Mercosur and their * Fiscal Implications impact on Uruguay. Key Players. The key players in the transport Most of the numerical data included refers to sector are: The Ministry of Transport and Public 1994, because the Annual Transport Statistics book Works (MTOP),the UruguayanRailways (AFE), the for 1995, published by MTOP had not been released UruguayanNational Ports Administration(ANP), the at the time of the mission. RoadsDirectorate (DNV, a directorateof MTOP), the I REPUBLIC OF URUGUAY A REFORM AGENDAFOR THE TRANSPORTSECTOR L Key Sector Issues million tons of freight traffic or about 50 percent of the present freight traffic in the next five years. The wood All transport subsectorsexamined were analyzed products will come from the large number of tree from an efficiencystandpoint to assess whetherthey are plantation (mainly eucalyptus) that are entering able to respond to the existing and potentialdemand at production.If this wood is transported by 12-45 ton a reasonable cost; from a financial sustainability trucks through the feeder, interdepartmental and perspectiveto determinewhether or not they dependon national road network, the number of trucks expected government's subsidiesto maintain and expand their in the main routes will probablytriple and the damage infrastructure and operations to respond to potential to pavementswill accelerate.To illustrate the amount demand; and from a fiscal standpointto determinetheir of this damage, in countries confronted with the impact on government's finances and the need to evacuationof logs, total weights on 4 to 5 axle trucks revampthe existing user chargesystem. sometimesreach up to 75-80 tons and such monsters are devastating for the network. An 80 tons log- There are a number of key issues which must be carrying truck is 25 times more aggressive to the addressed to improve the performance of the pavement than a regular 40-ton load vehicle and does Uruguayan transport sector and to guarantee its as much damage to a road as 10 million cars! The developmentand sustainabilityin the long term. They RoadsDepartment (DNV) estimates that if all the wood are: (a) potential freight traffic demand and is to be transportedto the ports by road, investmentsof infrastructurecapacity constraints; (b) road, rail, and about US$600million would be needed to strengthen port infrastructureinvestment and maintenanceissues; the national, interdepartmental and feeder road (c) institutional framework related issues; (d) network.If, alternatively,30 percentof the woodwould regulatory issues; (e) cost recovery and financial be transported to rail heads by truck then to the ports, mianagementissues; (1) funding issues; (g) transport DNV and the Officeof Budgeting and Planning (OPP) planning issues; (h) private sector participation in estimate that investmentsof US$150 million will be investments and operations; and (i) Mercosur required in the road networkand about US$40 million integration issues. We examine each of these issues in the rail network.Capital dredginginvestments in the next. accessesto smaller ports such as Fray Bentos will also be required to accommodatefull ships in both options. PotentialFreight Traffic Demand and Capacity So, there is a short/mediumterm infrastructure Constraints.For the approximately5 million tons/year capacitybottleneck which is not only physical but also of freight traffic which, at present, are transported in has social impacts since there is a growing reaction to Uruguay's land transport network, there appears to be the circulationof trucks in the approachesto the cities no major infrastructurecapacity bottleneck.However, and ports. Finally, the need to store the wood which due to budgetary restrictions and poor pavement will be awaiting ships has generateda demand for land managementsystems, the primary and secondaryroad in areas not too far away (generally the old meat network lack maintenance, the tertiary network can packingplants which have been discontinued)or in the hardly cope with 1245 ton trucks used by most cattle ports themselves.This land is scarce and it is rather producers and wood products transporters, several expensive to store a product of low value such as bridges are narrow and require strengthening. The unfinished wood in the ports. Therefore,the issue of railway track is in poor condition but even so it could infrastructure capacity and land for storage must be handle much more than the 900,000 tons it handles studiedfrom a logistics standpoint,otherwise there now. So, at present there is no critical capacity will be continuoustruck congestion and road wear constraint in the land transport network of the and tear due to overloadingin feeder roads and in country, although the lack of maintenancein the rail the accesses to the ports. On the other hand, and road infrastructurecontribute to increasetrip times although a combination of rail plus road and operatingcosts