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Document of The WorldFlank -A_ Public Disclosure Authorized Report No. P-3448 CV REPORT AND RECOMMENDATION OF THE PRESIDENT OF "'HE Public Disclosure Authorized INTERNATIONAL DEVELOPMENITASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENr CREDIT IN AN AMOUNTEQUIVALENT TO U.S. DOLLARS $7.2 MILLION TO THE REPUBLIC OF CAPE VERDE Public Disclosure Authorized FOR THE PRAIA PORT PROJECT January 20, 1983 Public Disclosure Authorized This report may not be published nor may it be quoted as representingthe views of the World Bank. The World Bank does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS Currency Unit = Cape Verde Escudos (CVEsc) US$1 = CVEsc 60.0 CVEsc 1 million = US$16,666.66 .* SYSTEM OF WEIGHTS AND MEASURES: METRIC Metric US Equivalent 1 meter (m) = 3.28 feet (ft.) 1 square meter (m2 ) 10.76 square feet (ft.2 ) 1 kilometer (km) = 0.62 mile (mi.) 2 2 1 square kilometer (km ) = 0.39 square miles (mi. ) 1 hectare (ha) = 2.47 acres 1 metric ton (t) = 2,205 pounds (lb.) ABBREVIATIONS AND ACRONYMS ADB = African Development Bank BADEA Arab Bank for Economic Development in Africa EIB = European Investment Bank ENAPOR = Empresa Nacional de Administragao dos Portos JAP Junta Aut6noma dos Portos MTC = Ministry of Transport and Communications TACV Transportes Aereos de Cabo Verde FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY REPUBLIC OF CAPE VERDE PRAIA PORT PROJBJCT CREDIT AND PROJECT 3UMTARY Borrower: Republic of Cape Verde Beneficiary: Empresa de Administragao dos Portos (ENAPOR) Amount: SDR 6.7 million (US$7.2 miLlion equivalent). Terms: Standard Onlending Terms: The Government would on-lead $6.3 million equivalent of Credit proceeds to ENAPOR, for 25 years, including 7 years grace, with interest at 11.0 percent per annum. Co-financiers: Arab Bank for Economic Development in Africa (BADEA), the Republic of Portugal, the Kingdom of Norway. Project Description: The project would reconstruct and improve the port infra- structure and operations at Praia, and assist in transport planning. The major project components are: (a) civil works, including rehabilitation and reinforcement of the deep water berth at Praia Plort, construction of support facilities, and construction of a small berth for fishing and interisland vessels; (b) cargo handling and workshop equipment for Praia Port and Porto Grande; (c) equipment and technical assistance for the maritime training center at Mindelo; and (d) technical assistance to (i) improve port operations and managenent, and (ii) help the MTC define sector policies and objectives, identify investment priorities, strengthen transport institutions, and prepare high priority projects in ,he sector. Project Benefits and Risks: The major economic benefits of the proposed project would be savings in the capital and operating costs of lighterage facilities, savings in ship-waiting time, and reduced cargo losses. The project would also yield savings in cargo handling costs and reduction in cargo damage, through the replacement of obsolete cargo handling equipment at Praia and Porto Grande. Unquantified project benefits include lower freight rates between Cape Verde and overseas by allowing for larger size vessels to call at Praia, and more This document has a restricteddistribution and may be used by recipientsonly in the performanceof their official duties. Its contents may not otherwisebe disclosed withoutWorld Bank authorization. -ii- economical grain handling through provision of appropriate equipment. There are no special risks. The project civil works have been designed in accordance with standard engineering principles and do not involve significant technical risks. Estimated Project Costs (exempt of taxes): I/ Foreign Local Total -----------US$ million----------- Civil and related works 12.48 3.17 15.65 Cargo handling and workshop equipment 2.19 0.7 2 2.91 Technical Assistance 1.452/ 0.25 1.70 Maritime Training Center 3.08 1.51 4.59 19.20 5.65 24.85 Contingencies - Physical 1.44 o.28 1.72 - Price 4.06 1.07 5.13 5.50 1.35 6.85 Total Project Costs 24.70 7.00 31.70 Financing Plan Percentage Foreign Local Total of Total --------US$ million------- Project Cost IDA 6.3 0.9 7.22/ 23 Portugal 6.6 1.4 8.0 25 BADEA 8.0 2.0 10.0 31 Norway 3.2 0.8 4.0 13 Cape Verde 0.3 1.0 1.3 4 ENAPOR 0.3 0.9 1.2 4 Total 24.7 7.0 31.7 100 1/ Except for $0.6 million equivalent in customs duties for cargo- handling equipment. 2/ Includes refinancing of PPF advances totalling US$200,000. - iii- Estimated Disbursements from FY84 FY85 FY86 FY87 FY88 the IDA Credit: Annual 1.81 1.94 1.71 0.94 0.80 Cumulative 1.81 3.75 5.46 6.40 7.20 Rate of Return: 189 Staff Appraisal Report: Report No. 4070-CAP dated January 10, 1983 Maps: IBRD 16104, 16105 INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF 'HE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF CAPE VERDE FOR THE PRAIA PORT PROJECT I submit the following report and recommendation on a proposed Devel- opment Credit to the Republic of Cape Verde for SDR 6.7 million (US$7.2 mil- lion equivalent) to help finance the Praia Port Project. The Credit would be on standard IDA terms. Of the Credit proceeds, SDR 5.9 million (US$6.3 million equivalent) would be onlent to the Empresa de Administragao dos Portos (ENAPOR) for 25 years, including 7 years of grace, at 11.0 percent per year. Additional financing for the project would be provided by a loan from the Arab Bank for Economic Development in Africa (BADIHA)in the amount of US$10.0 mil- lion equivalent, a grant from the Republic of Portugal in the amount of US$8.0 million equivalent, and a grant from the Kingdom of Norway in the amount of US$4.0 million equivalent. PART I - THE ECCINOMY 2. The latest economic report on Cape Verde (2730-CV), dated May 15, 1980, was circulated to the Executive Directcrs on July 16, 1980. Its conclu- sions, as well as the findings of subsequent missions, are reflected in the following assessment of the state of the economy and its prospects. Country data appear in Annex I. Background 3. The Republic of Cape Verde consists of ten islands and five islets within an area of 4,000 square kilometers located in the Atlantic Ocean about 450 kilometers from the coast of Senegal. Of the estimated 300,000 inhabit- ants, 50% are on Santiago Island, mainly in Praia, the political and adminis- trative capital (55,300), and another 14% on Sao Vicente Island, site of the economic capital, Mindelo (33,200). 4. The main problems of development facing Cape Verde are: - high external transport costs due to its remote location; - lack of scale economies in infrastructure because of the wide dispersion of the population; - a weak agriculture base resulting from low and unreliable rainfall and rugged topography; - a limited natural resource base; - a small, low income population with inadequate training and education. -2- 5. The country has historicallybeen plagued by periodic droughts and famine which explain the exceptionalrate of out-migration. The current drought, which began in 1967, contributedto the pressures to migrate, parti- cularly to the U.S. where over 300,000 Cape Verdeans now live. 6. Known mineral resources are mainly salt and pozzolana (a volcanic rock used as an additive in the manufacture of hydraulic cement). Fish is the only relatively abundant natural resource. With a fragile productive base, internationalshipping and transit trade remains of paramount importance to the economy. Real growth in GDP averaged 4% between 1977 and 1981 due to growth in shipping, as a result of policies to increase agricultureoutput, and because of expanded constructionactivities. Cape Verde remains one of the poorest countries with a per capita GDP of $200 in 1981. Large emigrant remittancesraise GNP per capita to $300. Some 40% of the population is below the poverty line. Offsetting the constraintsto developmenthas been the country's success in mobilizing large amounts of foreign, mainly grant, aid. Between 1978 and 1981 foreign aid amounted to 45% of GDP and financed most of the public investmentprogram. This, together with emigrant remittances, enabled the country to deploy resources twice as large as the GDP. DevelopmentStrategy 7. The success of the Government in attracting such an impressive flow of foreign resourcesmay be ascribed in part to the political stabilitywhich has prevailed since independencein 1975, and to the commitment and pragmatism it has demonstratedto try to cope with its most urgent problems and to lay the foundation for future growth. In the years immediately following Indepen- dence, the Government'soverriding concern was to alleviate hunger and unem- ployment, which it did with considerablesuccess through two Emergency Pro- grams, 1976/77 and 1977/78. These programs were financed through the sale of food aid, the proceeds of which were used as wages for labor-intensivepro- jects, predominantlyin soil and water conservation. After this first phase the Government'sinvestment policies were directed towards more productive activities in high priority sectors: agriculture,fisheries, transport and social services. For example, the Government embarked upon programs to in- crease the level of fisheries technologyand the range of operations,modern- ize the existing fleet, and improve marketing and transport facilities. A lobster farm on Sal began operations in 1980 with assistance from the Netherlands,and exports (mainly to Spain and Portugal) are progressing satisfactorily. Structure of the Economy 8. With limited mineral resources, Cape Verde's economy has tradition- ally been based on agriculture.The sector currently employs 38% of the perma- nent labor force, but its share of GD? is only 20-25%, depending on the annual rainfall.