PUBLIC SIMULTANEOUS DISCLOSURE
DOCUMENT OF THE INTER-AMERICAN DEVELOPMENT BANK
PARAGUAY
PROGRAM FOR PAVING OF INTEGRATION CORRIDORS AND ROAD REHABILITATION AND MAINTENANCE PHASE II
(PR-L1075)
LOAN PROPOSAL
This document was prepared by the project team consisting of: Vera Lucía Vicentini (TSP/CAR), Project Team Leader; Christian Dunkerley (TSP/CPR); Luis Alfredo Uechi, Nicolás Dei Castelli, and María Romero Pons (INE/TSP); Oscar Luis Camé-Saldivar (ESG/CPR); Jonathan Renshaw, Ernesto Monter, and Rodolfo Tello-Abanto (VPS/ESG); Alberto de Egea Pérez and Teodoro Noel (FMP/CPR); and Javier Cayo (LEG/SOG).
In accordance with the Access to Information Policy, this document is being released to the public and distributed to the Bank’s Board of Executive Directors simultaneously. This document has not been approved by the Board. Should the Board approve the document with amendments, a revised version will be made available to the public, thus superseding and replacing the original version.
CONTENTS
PROJECT SUMMARY
I. DESCRIPTION AND RESULTS MONITORING ...... 1
A. Background, problem addressed, and rationale ...... 1 B. Objectives, components, and cost ...... 7 C. Results framework ...... 8
II. FINANCING STRUCTURE AND MAIN RISKS ...... 9
A. Financing instruments ...... 9 B. Environmental and social safeguard risks ...... 9 C. Fiduciary risk ...... 11 D. Other issues and risks ...... 12
III. IMPLEMENTATION AND MANAGEMENT PLAN ...... 14
A. Summary of implementation arrangements ...... 14 B. Summary of monitoring and evaluation arrangements ...... 15
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ANNEXES Annex I Development Effectiveness Matrix (DEM) – Summary Annex II Results Matrix Annex III Fiduciary Agreements and Requirements
ELECTRONIC LINKS
REQUIRED 1. Procurement plan http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37341914 2. Annual work plan (AWP|) http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37389629 3. Monitoring and evaluation plan http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37349294 4. Environmental and social management report (ESMR) http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37318545
OPTIONAL 1. Map of program project locations http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37426818 2. Performance evaluation of Phase I http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37320513 3. Itemized budget of Phase II http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37319369 4. Ex ante economic evaluation of Phase II http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37453556 5. Ex post economic evaluation of Phase I http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37487752 http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37487780 6. Designs http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37341876 http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37341831 7. Environmental impact assessment of Routes 8 and 13 http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37326622 8. Institutional Capacity Assessment System (ICAS) http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37445899
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9. Lessons learned in the sector in Paraguay http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37396770 10. Transportation Master Plan http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37319453 http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37319412 11. National Road Safety Plan 2008-2013 http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37317561 http://idbdocs.iadb.org/WSDocs/getDocument.aspx?DOCNUM=37317567
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ABBREVIATIONS
AEC Asociación Española de la Carretera [Spanish Road Association] COSIPLAN/ Consejo Sudamericano de Infraestructura y Planeamiento/Iniciativa para la IIRSA Integración de la Infraestructura Regional Sudamericana [South American Infrastructure and Planning Council/Initiative for the Integration of South American Regional Infrastructure] DAI Dirección de Auditoria Interna [Internal Audit Directorate] DCV Dirección de Caminos Vecinales [Rural Roads Directorate] DGA Dirección de Gestión Ambiental [Environmental Management Directorate] DV Dirección de Vialidad [Directorate of Roads] ESMR Environment and social management report ETAGs Especificaciones técnicas ambientales generales [general environmental technical specifications] FSO Fund for Special Operations GUS Guía para la Determinación del Nivel de Desarrollo y Uso de Sistemas de Gestión Financiera Pública [Guide for Determining the Level of Development and Use of Public Financial Management Systems] HDM-4 Highway Development and Management System ICAS Institutional Capacity Assessment System EIRR Economic internal rate of return IRI International roughness index MOPC Ministry of Public Works and Communications ENPV Net present value in efficiency prices OEL Optional electronic link PDRI Plan Director de Reasentamiento e Indemnización [Resettlement and Compensation Master Plan] PEES Plan Estratégico Económico y Social [Economic and Social Strategic Plan] PEU Program execution unit PMMR Performance-based management and maintenance of roads PMT Plan Maestro de Transporte [Transportation Master Plan] PNSV Plan Nacional de Seguridad Vial 2008-2013 [National Road Safety Plan 2008-2013] REL Required electronic link RVPN Red Vial Primaria Nacional [National Primary Road Network] SAB Sistema de Administración de Bienes y Servicios [Goods and Services Administration System] SCF Single Currency Facility SEAM Secretaría del Ambiente [Department of the Environment] SIAF Sistema Integrado de Administración Financiera [Integrated Financial Administration System] SIAMV Sistema Integral de Administración del Mantenimiento Vial [Integrated Road Maintenance Administration System] SICO Sistema Integrado de Contabilidad [Integrated Accounting System] - v -
SICP Sistema de Información de las Contrataciones Públicas [Public Contracting Information System] SIGAS Sistema de Gestión Ambiental y Social [Environmental and Social Management System] SPGV Sistema de Planificación y Gestión Vial [Road Planning and Management System] UOC Unidad Operativa de Contrataciones [Contracting Operational Unit] USAID United States Agency for International Development UTPC Unidad de Transparencia y Participación Ciudadana [Transparency and Citizen Participation Unit] WAL Weighted average life
PROJECT SUMMARY
PARAGUAY PROGRAM FOR PAVING OF INTEGRATION CORRIDORS AND ROAD REHABILITATION AND MAINTENANCE PHASE II (PR-L1075)
Financial Terms and Conditions Borrower: Republic of Paraguay FFF** Parallel financing OC OC FSO Executing agency: Ministry of Public Amortization period: 23 years 30 years 40 years Works and Communications (MOPC) Grace period: 7.5 years 6 years 40 years Original WAL: 15.25 years N/A N/A Amount US$200,800,000 Disbursement period: 7 years 5.5 years 5.5 years OC US$51,200,000 Interest rate: LIBOR SCF Fixed 0.25% Parallel OC (80%) US$56,640,000 Inspection and supervision: * * N/A financing FSO (20%) US$14,160,000 Credit fee: * * N/A Local contribution US$78,800,000 Currency: U.S. dollars U.S. dollars from the U.S. dollars from the from the OC SCF of the OC FSO Project at a Glance Project objective: To contribute to productive sector competitiveness and the economic and social integration of Paraguay through the paving and rehabilitation and maintenance of several main corridors of the National Primary Road Network in the eastern part of the country. The specific objectives are to lower overall transportation costs and improve accessibility, serviceability, and safety in the respective service areas, while preserving the country’s highway assets. Conditions precedent to the first disbursement: The borrower, acting through the executing agency, will provide evidence that: (i) legal measures have been taken to approve the program Operating Regulations (see paragraph 2.7) and implement the Environmental and Social Management System (SIGAS); (ii) an action plan has been prepared in response to the recommendations of the environmental audit; (iii) a detailed plan has been prepared for the subcomponent to support Joyvy and Bolas Kua indigenous communities that includes the maximum resources indicated in the cost table, based on the environmental and social management report (ESMR); (iv) an agreement has been reached with the Ministry of Education and Culture (MEC) on the procedure to be followed in the event of archeological finds; (v) terms of reference have been completed for the Estero Susú management plan; and (vi) fines for noncompliance with general environmental technical specifications (ETAGs) have been included in bidding documents for works (see paragraph 2.6). The borrower, acting through the executing agency, will (a) prior to the start of execution of the subcomponent to support indigenous communities: renew the cooperation agreement with the Instituto Paraguayo del Indígena [Paraguayan Indigenous Institute] (INDI); (b) during program execution: (i) implement the program in accordance with the ESMR, the Resettlement and Compensation Master Plan (PDRI), the environmental permits in force, and the subcomponent to support indigenous communities; (ii) deliver quarterly reports demonstrating that right-of-way to the construction area between the respective roadways of each works segment has been secured prior to the start of works, in accordance with the Involuntary Resettlement Execution Plan (PERI); and (iii) engage a social sector specialist for the program execution unit prior to start of the first work (see paragraph 2.6); (c) prior to tendering of the works: deliver the final designs for acceptance by the Bank, once they have been approved by the Directorate of Roads (see paragraph 2.13); (d) prior to the start of works on each segment: (i) obtain the Bank’s no objection to the PERIs for each works segment, prepared on the basis of the PDRI; (ii) provide evidence that the works segments have environmental permits in force; (iii) develop a communication plan for the PDRI and relations with indigenous communities; and (iv) prepare the terms of reference for the program to support rural communities (see paragraph 2.6); (e) six months after the first disbursement: provide the procurement units with sufficient human resources, physical space, and technology (see paragraph 2.7); (f) 18 months after the first disbursement: present the results of the Estero Susú management plan; and (g) at the midterm review of the program: provide evidence that land has been purchased in accordance with the detailed plan for the subcomponent to support indigenous communities (see paragraph 2.6). Project Summary Page 2 of 2
Exceptions to Bank policies: None. Project consistent with country strategy: Yes [X] No [ ] Project qualifies as: SEQ [ ] PTI [ ] Sector [ ] Geographic [ ] Headcount [ ] * The credit fee and inspection and supervision fee will be established periodically by the Board of Executive Directors as part of its review of the Bank’s lending charges, in accordance with the applicable policies. ** Under the Flexible Financing Facility (FFF) (document FN-655-1), the borrower has the option of requesting changes to the amortization schedule, as well as currency and interest rate conversions, subject in all cases to the final repayment date and the original weighted average life (WAL). The Bank will take market conditions and operational and risk management considerations into account when reviewing such requests.
I. DESCRIPTION AND RESULTS MONITORING
A. Background, problem addressed, and rationale 1.1 General context. Paraguay has an area of 406,752 square kilometers, a population of 6.57 million (2011), and an economic structure based primarily on agriculture and agribusiness.1 Nearly 97% of the population lives in the eastern region2 where a similar percentage of the country’s productive activity is concentrated. In 2011, the Paraguayan economy grew 4.3% in real terms, for GDP of US$23.946 billion, following record growth of 13.1% in 2010. Reported exports grew 21.8% with outstanding results in crops such as soybeans with a 44% increase. 1.2 Strategic role of highway infrastructure. The country is making efforts to promote industrialization in the agricultural sector and increase diversification by supporting productive clusters, scaling up production, integrating crop, livestock, and forestry activity, promoting improvement and processing techniques, rationalizing logistical distribution systems, and expanding domestic consumption.3 All these activities are dependent on the accessibility, coverage, and quality of the road system. Owing to its landlocked position, export freight in Paraguay must travel an average of 1,350 km to and from seaports,4 making the cost of the logistics chain, and trucking in particular, weighty factors in the country’s production and export activity.5 Thus, upgrading the national road system by paving the remaining segments and optimizing their maintenance will help to shorten distances and lower transport costs in areas with high economic and productive potential, strengthening internal communications and territorial integration, facilitating the transportation of freight and people between production and consumption areas, and enhancing the country’s competitiveness in foreign trade (see paragraph 1.21). 1.3 Condition of highway infrastructure. The inventoried road system in Paraguay (2010) is 32,060 km in length, with 9,910 km (21%) classified as belonging to the National Primary Road Network (RVPN), 6,670 km (31%) as departmental roads, and the remaining 15,480 km (48%) as rural access roads. Although the paved road network has grown on average by 212 km/year, (from 2,902 km in 1995 to 6,297 km in 2010), just 41% of national routes and 22% of departmental roads are
1 Crop and livestock production and agroindustry businesses account for more than 23% of GDP and jobs (2011), and nearly 90% of exports (Central Bank of Paraguay; www.bcp.gov.py). 2 Some 39% in rural areas (Directorate General of Statistics, Surveys, and Census; http://www.dgeec.gov.py). 3 Transportation Master Plan of Paraguay, Fourth report (2012). 4 http://www.cadep.org.py/uploads/2012/03/3_Energia-y-desarrollo_LopezFlores.pdf. 5 According to USAID (“Impacto del transporte y de la logística en el comercio internacional del Paraguay” [Impact of transportation and logistics on Paraguay’s international trade], 2006), the logistical costs of representative products in foreign trade exceed 2% of GDP. - 2 -
paved.6 In addition, limitations on maintenance activities means that 25% of the paved roads are in an advanced state of deterioration.7 Moreover, frequent rains (annual rainfall in excess of 1,600 mm) and soil conditions in the eastern region cause frequent disruption of traffic on unpaved roads (annual average of 40 to 90 days). Therefore, upgrading and adequately preserving the RVPN are crucial to overcome the shortcomings in infrastructure coverage and quality, which is a key factor in promoting the country’s development.8 1.4 Road safety. Annual traffic fatalities in Paraguay rose 38% between 2006 and 2008, from 796 to 1,096.9 In 2008, the fatality rate was 20.9 for every 100,000 population, and there were 3,240 fatalities for every 1 million vehicles, figures well above the regional averages of 16.3 and 815, respectively.10 Resources from Phase I of this program were used to develop the National Road Safety Plan 2008-2013 (PNSV), whose goal is to prevent or lessen the severity of traffic accidents. 1.5 Sector institutional structure and management. The Ministry of Public Works and Communications (MOPC) sets policy for the roads subsector and is responsible for studies and road system construction and maintenance, acting through the Directorate of Roads (DV) for national and departmental routes, and the Rural Roads Directorate (DCV) for rural access roads. In 2011 the MOPC updated the Transportation Master Plan (PMT),11 which identified a program of priority investments to be implemented thru 2021 for a total of US$2.98 billion. 1.6 Program for paving of integration corridors and road rehabilitation and maintenance. On 13 December 2006, the Board of Executive Directors approved Phase I of the program (loan 1822/OC-PR), which was designed as a multiphase operation to help improve the competitiveness of the productive sector and the economic and social integration of Paraguay through the paving and maintenance of several main corridors in the road network. The main interventions in Phase I include: (i) paving of 221 km of highway on Route 8 South (Coronel Bogado– Leandro Oviedo segment), Route 10 (San Estanislao–Puerto Rosario segment), and Route 13 South (Caaguazú–Vaquería segment); (ii) implementation of contracts for
6 In Argentina, the national and provincial road system is 228,693 km in length, with 39,619.56 km classified as belonging to the National Road Network, which is 89.69% paved. In Brazil, the total road system is 1,735,612 km in length, with 75,695 km belonging to the Federal System, which is 82% paved. In Uruguay, the total system is 77,800 km in length, with 8,696 km belonging to the National Road System, which is 88.4% paved. In Peru, the road system is 95,863 km in length, with 23,076 km belonging to the National Road System, which is 53% paved (see Sector Notes for AR (2012), BR (2011), UR (2011), and PE (2010)). 7 MOPC strategic plan 2008-2013. 8 Calderon and Servén (2010), Infrastructure in Latin America. World Bank Policy Research Working Paper Series. 9 Statistical Yearbooks, 2006 and 2008 (Directorate General of Statistics, Surveys, and Census; http://www.dgeec.gov.py). 10 AEC-BID (2009), Diagnóstico de Seguridad Vial en América Latina y el Caribe (data from 2005, 2006, 2007, and 2008). 11 The PMT was developed with funds from Phase I (1822/OC-PR) and from technical cooperation PR-T1086. - 3 -
performance-based management and maintenance of roads (PMMR contracts) over 643 km (PMMR contracts 3 and 4 on Routes 3, 5, and 6); and (iii) institutional strengthening of the MOPC. Phase I, for a total of US$150.58 million with US$134 million corresponding to Bank financing, is being executed by the MOPC through the DV and is nearing completion. 1.7 Evaluation of Phase I and verification of compliance with the minimum conditions to trigger Phase II. Loan 1822/OC-PR established that, in order to submit Phase II to the Board of Executive Directors for consideration, a performance evaluation of Phase I was to be done when at least 50% of the loan proceeds were disbursed and/or 75% committed. The evaluation was performed when that threshold was reached,12 and the results are presented in optional electronic link 2 (OEL#2). The performance evaluations recorded several important accomplishments during Phase I, notably: (i) development of an Environmental and Social Management System (SIGAS) with the environmental and social procedures to be implemented by MOPC units at each stage of the road project cycle, to ensure project sustainability; (ii) identification of the steps and procedures to simplify the process of securing rights-of-way for the highways to be paved, to lessen the risk of delays in works and associated cost overruns; (iii) introduction and documentation of PMMR activities for paved roads, to preserve road assets and maintain vehicle circulation conditions. The evaluation of Phase I outcomes also identified lessons learned, which were built into the design of this new operation. Lastly, very good progress can be seen in the program’s physical targets, as shown in Table 1.
12 As of 29 January 2013, 99.8% of the loan proceeds had been disbursed. - 4 -
Table 1: Physical Targets of Phase I Target Category Progress (km) Completion (%) (km) Paving works 221 169 76%13 PMMR contracts 643 643 100%
1.8 The performance indicators presented in the performance evaluation are linked essentially to three main areas: (i) PMMR contracts; (ii) strengthening of MOPC management capabilities; and (iii) incorporation of lessons learned into the design of Phase II. 1.9 PMMR contracts. The evaluation of PMMR contracts 3 and 4 of Phase I indicates that the unit responsible for managing the PMMR contracts has been established and PMMR contracts have been successfully implemented on 643 km of the RVPN. The standard PMMR contract has also been reviewed, identifying areas for improvement and proposing modifications to the contracts to be used in Phase II. 1.10 Strengthening of MOPC management capabilities. The main findings relate to: (i) development of proposals to simplify contracting processes, enhance the integrity and transparency of management, and promote institutional modernization of the MOPC; (ii) development of standards and specifications for works maintenance, to be added to Paraguay’s Highways Manual; (iii) update of the classified inventory of the paved road network through surveys by the Road Management Department, which was created in 2011 to update the inventory and survey the condition of paved and unpaved roads operated by the DV, staffed with qualified personnel and equipped with pavement condition survey devices; (iv) engagement of consulting services to develop and implement a Road Planning and Management System (SPGV) based on review of the Integrated Road Maintenance Administration System (SIAMV); (v) implementation of the Public Contracting Information System (SICP) with a procurement portal14 that serves as an external information tool and centralizes the procurement processes of the central government, regional governments, and municipios and posts calls for bids and their outcomes; (vi) development of the PNSV, which was used to identify critical points where most accidents occur; countermeasures were proposed to reduce accidents, some of which have already been implemented via the PMMR contracts; and the enforcement capabilities of the highway patrol was strengthened; (vii) satisfactory execution of the socioenvironmental management plans of Phase I through the contracting of environmental oversight for each segment, hiring of an environmental specialist for the program execution unit (PEU), hiring of a specialist in indigenous issues for the Environmental Management Directorate (DGA), and
13 The works on 63 km of Route 13 have been delayed owing to serious noncompliance by contractors resulting in cancellation of the contracts and halting of the works. The MOPC has arranged to restart the works, financed with counterpart resources, and completion is expected in May 2014. 14 www.contratacionesparaguay.gov.py. - 5 -
equipment for the DGA; (viii) conclusion of the environmental audit with satisfactory results; (ix) development of the Environmental and Social Management System (SIGAS) for the MOPC,15 which includes the environmental and social procedures to be followed by all MOPC units at all stages of the road project cycle; (x) procurement of 2,431 hectares of land with funds of the Government of Paraguay to benefit 148 families belonging to indigenous communities in the service area of Route 13, and implementation of a comprehensive strengthening program for indigenous communities, with completion expected in May 2013; (xi) consolidation of the MOPC’s Weights and Measures Control Unit, which was strengthened with equipment, weigh stations, and human resources, and development of a basic statistical information system on axle load distributed throughout the network; (xii) startup of the Transparency and Citizen Participation Unit (UTPC); and (xiii) the necessary strengthening in logistics and management for the units involved in Phase I execution to consolidate their operating procedures. 1.11 Lessons learned. The following lessons learned have been reflected in the design of Phase II:16 (i) reformulation of the PMMR contracts in terms of time frames, specific standards, and frequency of measurement, balance of penalties and bonuses, payment methods and mechanisms, flexibility in subcontracting microenterprises, and extension of the targeted highway segments (see paragraph 2.13); (ii) proper sizing of the MOPC’s technical teams for supervision and review of designs, execution of projects, and implementation of environmental and social programs, including purchases of indigenous lands by hiring specialists and additional staff with program resources (see paragraph 1.17); (iii) engagement of inspection services prior to the start of works to review their design as well as the execution plans proposed by the contractors, to determine whether they are reasonable given the special features of each project (see paragraph 2.13); (iv) review of payment methods and penalties for nonperformance of inspection contracts (see paragraph 2.13); (v) development of the weight control system, to prevent premature deterioration of pavement leading to more expensive maintenance contracts (see paragraph 1.17); (vi) application of the standards and specifications for works maintenance added to Paraguay’s Highways Manual, to unify criteria and technical specifications (see paragraph 2.13); (vii) dissemination and early coordination by the MOPC with the agencies involved and municipios for implementation of the socioenvironmental management plans (REL#5); (viii) participation of indigenous communities in planning support programs and community leader involvement for effective implementation (REL#5); (ix) securing of right-of-way and payment of compensation prior to the start of works, so as to minimize disputes (see paragraph 2.9); and (x) review and adjustment of the
15 Awaiting signature of the ministerial resolution for mandatory implementation. 16 See the Performance Evaluation of Phase I (OEL#2) and Lessons Learned in the Sector in Paraguay (OEL#9). - 6 -
MOPC’s human resources policy to retain qualified technical staff (see paragraph 2.7). 1.12 The Bank’s country strategy. This operation (Phase II of the program) is consistent with the Bank’s country strategy with Paraguay for 2009-2013 (document GN-2541-1), inasmuch as it contributes to: (i) the construction, improvement, and preservation of road infrastructure necessary to overcome the country’s landlocked status and the low coverage and quality of basic services, which is one of the main development objectives identified in the diagnostic assessment of the country’s growth; and (ii) the expansion of productive infrastructure, which is an objective identified in the country strategy results matrix. The operation is also aligned with two of the Bank’s strategic institutional priorities set in the Report on the Ninth General Increase in the Resources of the Bank (document AB-2764): (b) infrastructure for competitiveness and social welfare; and (d) competitive regional and global international integration, through interventions to upgrade and preserve roads belonging the national primary road network, which are among the COSIPLAN/IIRSA physical integration corridors. 1.13 The Bank’s sector engagement. The Bank has played an important role in developing the transportation and logistics sector in Paraguay in recent decades, with the primary objective of making the country more competitive by lowering transportation costs and, since Paraguay is landlocked, improving access by people and freight to enable integration with the neighboring countries and other export markets. Given this approach, investment has emphasized highways owing to the low density of the country’s paved national primary road network17 and the need to support the country’s growing volume of exports, which are projected to contribute to 10.5% growth of GDP in 2013, one of the highest rates in the region, driven by growth in the primary sector.18 Over the last 20 years, the Bank has financed the paving of 799 km of major highways and supported the development of a system of maintenance based on levels of service on 1,193 km of roads.19 The Bank has also supported the development and implementation of the PNSV, a key action led by the MOPC, in addition to strengthening its planning capabilities through development of the PMT and the National Logistics Plan, which will indicate the top investment and intervention priorities supporting the country’s sustained development. 1.14 Conclusions and recommendation. Based on the foregoing, the Phase II triggers have been fulfilled, the Phase I targets will be met, and the program is consistent with the strategies of the Bank and the country. Approval of Phase II is therefore recommended, to continue the program.
17 Paraguay: 0.009969 km/km2; Argentina: 0.012286 km/km2; Brazil: 0.00706 km/km2; Uruguay: 0.10087 km/km2. 18 http://www.bcp.gov.py/attachments/article/1164/Resumen_prensa_PIB_2013. 19 Loans 933/OC-PR (1996-2007); 1230/OC-PR (1999-2010); l278/OC-PR (2000-2010); and 1822/OC-AR, Phase I. - 7 -
B. Objectives, components, and cost 1.15 Objective. Phase II of the program has the same goal as Phase I, which is to contribute to productive sector competitiveness and the economic and social integration of Paraguay through the paving and rehabilitation and maintenance of several main corridors of the National Primary Road Network in the eastern part of the country. The specific objectives are to lower overall transportation costs and improve accessibility, serviceability, and safety in the respective service areas, while preserving the country’s highway assets. Phase II of the program has the following main components. 1.16 Component 1. Civil works and inspection. This component will finance: (i) paving of segments of Route 8 North between Caazapá and Yuty (72.9 km and 12.7 km of access roads),20 and of Route 13 North between Vaquería and the junction with Route 10 (57.3 km),21 including activities to secure the right-of-way; (ii) rehabilitation and maintenance of 1,193 km of the RVPN under the PMMR arrangement, corresponding to PMMR contract 3 (Route 6, 250 km), PMMR contract 4 (Routes 3 and 5, 393 km), PMMR contract 6 (Route 10, 400 km), and PMMR contracts for the works concluded in Phase I (Route 8 South, Route 10, and Route 13 South, 150 km),22 and including road safety works to correct critical points on the respective segments; and (iii) technical and environmental inspection of the paving works on Routes 8 and 13, including the physical and socioeconomic cadastre of the rights-of-way and PMMR contracts. 1.17 Component 2: Engineering and administration. This component will finance: (i) program administration, including the contracting of specialists and additional staff for MOPC units, including the socioenvironmental management unit, for the effective execution of Phase II; (ii) external technical and financial audit and monitoring and evaluation of the Phase II outcomes; (iii) training for MOPC staff in road safety and university certification in internal auditing, among other areas; and (iv) special studies that include: (a) a five-year update of the PMT; (b) development of a bridge management system; (c) development of a weights and measures management system; (d) support for PNSV implementation; (e) update of baseline and designs for road safety works of PMMR contracts; (f) support for MOPC administrative and financial management; and (g) updates and adjustments to the program Operating Regulations for Phase II. 1.18 Component 3. Expropriations and socioenvironmental compensation. Includes funding for: (i) expropriations and support for land titling and management along Routes 8 and 13 (purchase and titling of land and compensation plan for improvements affected and resettlement); (ii) socioenvironmental compensation,
20 The works on Route 8 will be financed wholly with local counterpart resources. 21 Phase I financed the paving of segments of Route 8 South (52.2 km and 10.6 km of access roads), Route 13 South (64.2 km and 5.9 km of access roads), and Route 10 (75.4 km and 15.2 km of access roads). 22 Phase I financed PMMR contracts 3 and 4. PMMR contracts admended to reflect the lessons learned in Phase I will be used for Phase II. - 8 -
including activities to support local governments, environmental education and road safety, support for natural resource protection (management plan for Estero Susú and its wetlands, water resource monitoring), and productive support for campesino organizations; and (iii) support for indigenous communities and their organizations, purchase of land, and consolidation of settlements (basic infrastructure and support for farm production). 1.19 Beneficiaries. The main beneficiaries of the program will be the users of the road system, especially agricultural producers, including small and medium-sized entrepreneurs, and those living in the service area of the targeted road segments. 1.20 Cost. The total cost will be US$200.8 million. Of that amount, US$122 million will be financed by the Bank (US$107.8 million in Ordinary Capital resources and US$14.2 million in resources of the Fund for Special Operations), and US$78.8 million will be the local counterpart contribution. See below for a summary table of costs and financing.
Table 2. Budget (US$ millions) Category IDB Counterpart Total 1 Civil works and inspection 100.64 73.41 174.05 1.1 Paving and securing of right-of-way 46.67 63.57 110.24 1.2 Rehabilitation and maintenance 48.27 4.83 53.10 1.3 Inspection 5.70 5.01 10.71 2 Engineering and administration 7.96 1.75 9.71 2.1 Program administration 5.07 1.46 6.53 2.2 Audits, monitoring and evaluation 0.43 0.04 0.47 2.3 Training 0.29 0.03 0.32 2.4 Special studies and road safety 2.17 0.22 2.39 Expropriation and socioenvironmental 3 4.75 0.53 5.29 compensation 3.1 Cadastre and expropriations 0.88 0.44 1.33 3.2 Socioenvironmental compensation 0.87 0.09 0.96 3.3 Support for indigenous communities 3.00 0.00 3.00 4 Contingencies and escalation 8.65 3.11 11.75 TOTAL 122.00 78.80 200.80
C. Results framework 1.21 The main outcomes of the program will be verified by means of: (i) vehicle operating costs on the targeted road segments (constant US$/vehicle-km); (ii) average travel time (minutes/trip); (iii) number of days in the year that roads are unserviceable (closed to traffic) or with severe restrictions on circulation; (iv) accessibility index of the paved roads in the RVPN (km paved roads/1,000 km2); (v) annual average daily traffic (vehicles/day); (vi) international roughness index (IRI); and (vii) number of traffic accidents per million vehicle-km/year. The program’s impact on productive sector competitiveness and Paraguay’s economic integration will also be analyzed by means of the increase in - 9 -
the share of export crops for all districts located in the service area of the program road segments in relation to the total for the department to which they belong (REL#4). 1.22 The road upgrades and paving will lead to reductions in travel times of more than 65%, reductions in vehicle operating costs of 50%, and the elimination of restrictions on year-round travel. The works will also contribute to a minimum 10% reduction in the accident severity index.23
II. FINANCING STRUCTURE AND MAIN RISKS
A. Financing instruments 2.1 The project is an investment loan under the multiphase modality. The execution period and the disbursement period will be seven years. Table 3 shows the projected disbursements (values in US$ millions).
Table 3. Disbursements (US$ millions) Financing Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 TOTAL IDB 12.5 34.8 28.0 18.3 9.6 9.5 9.3 122.0 Local 14.5 24.6 24.0 12.5 1.1 1.1 1.0 78.8 Total 27.0 59.4 52.0 30.8 10.7 10.6 10.3 200.8 Note: Year refers to the annual period running from the effective date of the loan contract. B. Environmental and social safeguard risks 2.2 The project was classified as environmental and social impact category B under the Bank’s Environment and Safeguards Compliance Policy (Operational Policy OP-703). In addition to OP-703 (Directives B.1, B.2, B.3, B.4, B.5, B.6, B.7, B.9, and B.12), the program will also trigger the following operational policies: Involuntary Resettlement (OP-710); Indigenous Peoples (OP-765); Access to Information (OP-102); and Gender Equality in Development (OP-270). 2.3 The segments of Routes 13 and 8 to be paved will have lower impact compared to Phase I, since they are located in areas of gently rolling hills, which reduces the need for severe cuts and earth movement, crossing rural areas planted with crops or fallow land and small residual woodlands with no urban centers. One potential direct impact of Route 8 is the effect of raising the elevation of the highway, which is less than six kilometers away from Estero Susú and could affect its hydrology and wetland area. An analysis will be done as part of the program to determine whether the design of the drainage system for this segment needs to be adjusted. The other environmental impacts of construction, such as erosion, improper waste disposal, and mismanagement of stores of materials, disposal sites, camps and workshops, can be controlled by including environmental technical specifications in the works and inspection contracts.
23 Equivalent number and type of traffic accidents per 1 million vehicle-km/year. - 10 -
2.4 The most important social issue is the indigenous communities in the service area of Route 13, where funds from Phase I are being used to implement programs to support 11 communities classified as vulnerable. The programs include: (i) technical assistance for production; (ii) strengthening of community organization; (iii) health assistance and education; and (iv) strengthening of social capital. In addition, this operation includes a subcomponent to purchase land, infrastructure, basic services, and support for agricultural production for communities that do not currently possess their own land. Another important issue will be the people affected by acquisition of the right-of-way, for which the Bank reached agreement on a Resettlement and Compensation Master Plan (PDRI) with the MOPC that includes the principles and basic criteria for compensation. In addition, prior to the start of works on each of the roadways, the MOPC will prepare involuntary settlement executive plans, as established in the PDRI. The environmental impact studies done for the program as a whole (Phases I and II) indicated that paving the roads may lead to changes in their indirect service area, particularly in land use, causing the fragmentation of ecosystems, expansion of human settlements, and the advance of mechanized farming. As part of the preparation of Phase II, an evaluation was done of indirect impacts in the indirect service area of the roads already paved in Phase I, which found that the adverse indirect impacts were not significant. 2.5 The program will benefit from the continuity of the Bank’s work to manage socioenvironmental issues in Paraguay. During Phase I, the Bank supported the creation of an Environmental and Social Management System (SIGAS) for the MOPC to systematically analyze the environmental aspects of its projects beforehand. The SIGAS also allows for better coordination with the Department of the Environment (SEAM). As part of Phase II, SIGAS training and awareness activities will be conducted within the MOPC in coordination with SEAM. The general environmental technical specifications (ETAGs) for works also will be updated. Together with the MOPC, the Bank organized a workshop to simplify the process of securing rights-of-way to the benefit of those affected, and the workshop’s recommendations have been built into Phase II. Implementation of all these measures is expected to improve execution not just of this operation but of any road project in Paraguay. Details of the socioenvironmental plans are presented in the environmental and social management report (ESMR) (REL#5). 2.6 As conditions precedent to the first disbursement, the borrower, acting through the executing agency, will provide evidence that: (i) legal measures have been taken to implement the SIGAS; (ii) an action plan has been prepared in response to the recommendations of the environmental audit; (iii) a detailed plan has been prepared for the subcomponent to support Joyvy and Bolas Kua indigenous communities that includes the maximum resources indicated in the cost table (see paragraph 1.20), based on the ESMR; (iv) an agreement has been reached with the Ministry of Education and Culture (MEC) on the procedure to be followed in the event of archeological finds; (v) terms of reference have been prepared for the Estero Susú management plan; and (vi) fines for noncompliance with ETAGs have been - 11 -
included in bidding documents for works. Commitments have also been made to: (a) prior to the start of execution of the subcomponent to support indigenous communities: renew the cooperation agreement with the Instituto Paraguayo del Indígena [Paraguayan Indigenous Institute] (INDI); (b) during program execution: (i) implement the program in accordance with the ESMR, the PDRI, the environmental permits in force, and the subcomponent to support indigenous communities; (ii) deliver quarterly reports demonstrating that right-of-way to the construction area between the respective roadways of each works segment has been secured prior to the start of works, in accordance with the Involuntary Resettlement Execution Plan (PERI); and (iii) engage a social sector specialist for the PEU prior to start of the first work; (c) prior to the start of works on each segment: (i) obtain the Bank’s no objection to the PERIs for each works segment, prepared on the basis of the PDRI; (ii) provide evidence that the works segments have environmental permits in force; (iii) develop a communication plan for the PDRI and relations with indigenous communities; and (iv) prepare the terms of reference for the program to support rural communities; (d) 18 months after the first disbursement: present the results of the Estero Susú management plan; and (e) at the time of the program midterm review: provide evidence that land has been purchased in accordance with the detailed plan for the subcomponent to support indigenous communities. C. Fiduciary risk 2.7 The MOPC’s Directorate of Roads (DV) has experience in applying the Bank’s policies and procedures. However, areas for improvement have been identified, such as planning, accounting, and control capacity, although according to the most recent ICAS assessments they present satisfactory levels of development and low risk. A need was also identified to strengthen the financial management, internal audit, and internal control areas and to review procurement and cash management processes. These needs arise from successive institutional restructurings that have not yet fully taken root, and the large number of projects with multiple external lenders that outstrip the capacity of the trained human resources assigned to tasks of planning, procurement, financial management, and oversight of projects under way. This could affect the execution of Phase II, impacting execution schedules and the meeting of objectives. Accordingly, the MOPC, acting through the executing agency, will: (i) as a condition precedent to the first disbursement: provide evidence that legal measures have been taken to approve the program Operating Regulations; and (ii) six months after the first disbursement: provide the procurement units with sufficient human resources, physical space, and technological infrastructure to efficiently manage procurement processes. Also promoted will be the development of a human resources policy for the MOPC, strengthening of the Internal Audit Directorate through training, human resources, implementation of a manual for ex post certification of works, harmonization of the accounting and financial systems used for program management, and ongoing training for the program execution unit (PEU) and the Contracting Operational Unit (UOC) in Bank procurement procedures. - 12 -
D. Other issues and risks 2.8 Delay or postponement of legislative approval. Delays may occur in obtaining legislative approval for the loan, related to the legislative cycles and changeovers of authorities. Accordingly, a strategy will be launched to publicize the program, targeted to the local authorities and parliamentarians in the service areas of the segments to be upgraded, which will allow information to reach Congress about the scope of program Phase II and the expected benefits. 2.9 Purchase of right-of-way. Another risk is possible delays in the paving works particularly owing to difficulties in purchasing properties for the right-of-way. This risk is mitigated by financing the purchases with loan proceeds and including a declaration of public convenience and social interest of the properties for right-of- way together with the bill to approve the loan. Until approval is obtained, work will move forward on cadastral identification and determination of the legal status of each property, thereby advancing the process of securing the right-of-way, which will be optimized based on the experience of Phase I. All this will be accompanied by strengthening of the executing agency with the addition of qualified staff to perform the tasks involved in these processes. 2.10 Economic viability. For the economic evaluation of the present operation, a cost- benefit analysis was performed of the paving of the two route segments and two PMMR circuits included in Phase II (OEL#4). The evaluation was based on a comparison of costs and benefits at efficiency prices for the conditions with and without the road works. The benefits for each individual project were estimated using an analysis method widely employed in road projects (consumer surplus), quantifying the savings in general transportation costs for normal travel, derived and generated, as well as the reduction in the cost of road maintenance. The HDM-4 model was used, which calculates the return on each project, considering the investment costs including the cost of mitigating direct socioenvironmental impacts, vehicle operating costs including time, and annual maintenance costs, determined for the conditions with and without the project. 2.11 The analysis yielded economic internal rates of return (EIRRs) in the range of 19.2% y 22.6% for each paving project, and in the range of 35.2% and 35.7% for each project for maintenance by levels of service (PMMR circuit). The sensitivity analyses considered an increase in investment costs of 20%, a reduction in benefits of 20%, and a combination of a 10% increase in investment costs and a simultaneous 10% reduction in benefits. In the sensitivity analyses, each project maintains an EIRR above the discount rate of 12%, which confirms the robustness of the projects in more unfavorable scenarios. The following table summarizes the results of the cost-benefit and sensitivity analyses. - 13 -
Table 4. Economic Cost-Benefit Analysis EIRR (%) Length Cost ENPV Sensitivity analysis Segments (km) (US$000) (US$000) Base Cost Benefit Cost +10% +20% -20% Benefit -10% Route 13: Segment Vaquería-Junction R10 57.3 48,540 37,170 22.6 19.4 15.3 17.4 Route 8: Segment Caazapá-Yuty 85.6 58,865 27,474 19.2 16.1 15.5 15.8 PMMR contract 3 (R6: Encarnación- 250.2 10,400 17,059 35.7 31.7 31.7 33.6 Junction R7) PMMR contract 4 (R8: Junction R3-Yby Yau; R5: Pedro Juan Caballero- 392.8 16,348 24,950 35.2 30.8 30.8 33.1 Concepción)
2.12 There are additional benefits that were not quantified, arising from the strategic nature for the development and socioeconomic integration of the area of influence of each project (such as the impact on local production and increases in the value-added of farm produce, development of the tourism sector, and the savings in health costs from the reduction in traffic accidents, etc.), as well as from the improvement in year-round serviceability, which allows for better access to social services (schools, health care facilities, markets, etc.). 2.13 Additional costs. To reduce the risk of possible additional costs for the program works, the engineering designs for the segments to be paved were reviewed, and it was found that only minor adjustments would be required that will not have a substantial impact on costs. It was also decided to engage inspection services prior to the start of works, to review their design. As a condition precedent to tendering of the works, the executing agency will deliver the final designs for acceptance by the Bank, once they have been approved by the DV. The same will apply to the PMMR contracts, whose designs are financed with program resources (see paragraph 1.17) and must incorporate the recommendations of the performance evaluation. All the designs will follow the standards established in Paraguay’s Highways Manual, unifying criteria and technical specifications. All this will reduce the likelihood that: (i) the bids received exceed the estimated budget owing to a lack of detail in the design; (ii) substantial changes are made in the designs and/or quantities of works during construction; and (iii) longer times will be needed for the works owing to design revisions/and or increased quantities, resulting in higher costs from extending the works and supervision contracts or from claims by contractors. 2.14 Sustainability of investments. The executing agency undertakes to properly maintain the segments paved under the program, incorporating them into the existing road maintenance system, which will follow acceptable technical standards. Furthermore, upon completion of the paving of each segment in Phase II, the executing agency will deliver the multiyear maintenance plan covering those segments to the Bank each year. - 14 -
III. IMPLEMENTATION AND MANAGEMENT PLAN
A. Summary of implementation arrangements 3.1 Borrower and executing agency. The borrower of this operation will be the Republic of Paraguay, which will be responsible for the counterpart contributions to the program. The executing agency will be the Ministry of Public Works and Communications (MOPC). 3.2 Implementation arrangement. At the MOPC, the Directorate of Roads (DV) will be responsible for implementing Phase II, acting through the program execution unit (PEU), whose main function will be technical coordination of the MOPC units involved. Implementation activities, including procurement, works supervision, and social and environmental actions, will be the responsibility of the MOPC’s line units. The Office of the Vice Minister of Administration and Finance (VMAF) will be responsible for administrative and financial coordination, just as during Phase I. 3.3 Approval of the detailed designs will be the responsibility of the DV. The program works, including paving and the contracts for performance-based management and maintenance of roads (PMMR contracts), will be carried out by construction firms, and the DV will be responsible for supervision, which it may perform directly using its own personnel or with the support of individual consultants. Works inspection, studies, and specialized technical assistance services will be performed mainly by consulting firms or independent consultants engaged by the executing agency. The construction firms and works inspection firms must have an environmental specialist on their team to verify compliance with the general environmental technical specifications (ETAGs) established in the bidding documents and applicable manuals. 3.4 Procurement. Project procurement and contracting will be conducted in accordance with the Policies for the Procurement of Goods and Works Financed by the IDB (document GN-2349-9) and the Policies for the Selection and Contracting of Consultants Financed by the IDB (document GN-2350-9), both of March 2011. All procurement and/or contracting processes will be subject to ex ante review by the Bank. 3.5 Disbursements. The loan will be disbursed under the advance of funds modality, with the frequency determined by the program’s financial programming, to be updated regularly by the PEU. The Bank may make a new advance of funds when justification has been provided for at least 80% of the total funds disbursed under the previous advance. The financial review of disbursement requests will be performed on an ex post basis by the external auditors. 3.6 Recognition of expenditures. Expenditures and advance procurement are envisaged principally in relation to engineering, administration, expropriation, socioenvironmental compensation, and works execution activities that form part of the program components. Up to US$39.4 million in expenditures will be recognized as part of the local counterpart, only if incurred subsequent to Bank approval of the - 15 -
project profile (4 January 2013), and in any event no more than 18 months prior to loan approval by the Bank’s Board of Executive Directors, in accordance with Operational Policy OP-504. B. Summary of monitoring and evaluation arrangements 3.7 The monitoring and evaluation plan will support implementation of the operation in accordance with the targets and progress indicators established in the Results Matrix. The following instruments will be used to that end: (i) the project implementation plan, annual work plan, procurement plan, the annual external audits; (ii) quarterly monitoring reports on the PERI (see paragraph 2.6); (iii) six-monthly status reports, including indicators to monitor impact, outcomes, component execution, and compliance with socioeconomic programs and requirements, particularly the plan to support indigenous communities, the PDRI, PERIs, and the environmental management plan; (iv) the midterm evaluation report, presenting evidence that land has been purchased as established in the detailed action plan for the subcomponent to support indigenous communities (see paragraph 2.6); (v) the project completion report, including the ex post economic evaluation of the projects financed by Phase II; and (vi) the audited financial statements. A breakdown of these activities is given in REL#4, “Monitoring and evaluation plan.”
Annex I - PR-L1075 Page 1 of 1
Development Effectiveness Matrix Summary I. Strategic Alignment 1. IDB Strategic Development Objectives Aligned Lending to: i) small and vulnerable countries, and ii) support regional cooperation and Lending Program integration. Regional Development Goals Paved road coverage (Km/Km2). Bank Output Contribution (as defined in Results Framework of IDB-9) Km of inter-urban roads built, maintained or upgraded. 2. Country Strategy Development Objectives Aligned i) Increase the number of kilometers of paved roads, and ii) Country Strategy Results Matrix GN-2541-1 Increase the number of kilometers of improved roads in the primary network. The intervention is included in the 2013 Country Program Country Program Results Matrix GN-2696 Document. Relevance of this project to country development challenges (If not aligned to country strategy or country program) II. Development Outcomes - Evaluability Highly Evaluable Weight Maximum Score 8.8 10 3. Evidence-based Assessment & Solution 9.0 33.33% 10 4. Ex ante Economic Analysis 10.0 33.33% 10 5. Monitoring and Evaluation 7.5 33.33% 10 III. Risks & Mitigation Monitoring Matrix Overall risks rate = magnitude of risks*likelihood Medium Identified risks have been rated for magnitude and likelihood Yes Mitigation measures have been identified for major risks Yes Mitigation measures have indicators for tracking their implementation Yes Environmental & social risk classification B IV. IDB´s Role - Additionality
Financial Management: Budget, Treasury and External control. The project relies on the use of country systems (VPC/PDP criteria) Yes Procurement: Information system. The project uses another country system different from the ones above for implementing the program The IDB’s involvement promotes improvements of the intended beneficiaries and/or public sector entity in the following dimensions: Gender Equality Labor Environment Additional (to project preparation) technical assistance was provided to the public sector entity prior to approval to increase the likelihood of success of the project The ex-post impact evaluation of the project will produce evidence to close knowledge gaps in the sector that were identified in the project document and/or in the evaluation plan
The POD presents the problems to be addressed through the project as well as their magnitudes. It also identifies the project’s beneficiaries. The factors that have contributed to the problems are not presented. The proposed interventions are linked to the problems identified in the diagnosis. The results matrix has vertical logic. All the indicators are clearly specified, they have baselines, targets and sources of information. With the exception of one output indicator all indicators are SMART. With regards to the data for the PMR, all outputs have annual targets, however, the outputs presented in the POA are not identical to those presented in the results matrix.
The project was analyzed using a cost-benefit analysis. The economic benefits were adequately quantified and the costs reflect real resource costs to the economy. The assumptions used were presented and a sensitivity analysis was performed.
The project has a monitoring and evaluation plan. The evaluation plan follows the DEM guidelines. The operation will be evaluated using a reflexive methodology and an ex-post cost-benefit analysis. Annex II Page 1 of 6
RESULTS MATRIX PROGRAM FOR PAVING OF INTEGRATION CORRIDORS AND ROAD REHABILITATION AND MAINTENANCE PHASE II
To contribute to productive sector competitiveness and the economic and social integration of Expected impact of the program Paraguay through the paving and rehabilitation and maintenance of several main corridors of the National Primary Road Network in the eastern part of the country.
Impact indicator1 Baseline (2012) Target (2020)
2 76% 79%
Share of export crops from the set of districts in the service area of the segments to be upgraded Average growing season 2007-2008 measured in 2012 Average growing season 2017-2018 measured and paved by the program, as a proportion of total (Source: Agricultural Census 2008, Ministry of in 2020 (Source: Agricultural Census 2018, crops in the departments to which they belong. Agriculture) Ministry of Agriculture) http://www.mag.gov.py/Censo/Book%20Vol3.pdf
Expected outcomes of the To lower overall transportation costs and improve accessibility, serviceability, and safety for the users of the corridors program benefiting from the program, while preserving the country’s highway assets.
Outcome indicators Baseline (2012) Target (2020) Means of verification/Comments Paved km: Paved Road Network Accessibility index of Inventory of the Road Planning paved roads in Directorate, MOPC (baseline: June Paraguay’s National 2011inventory) Primary Road 11.95 km/1,000 km2 12.30 km/1,000 km2
Network (km of Area: Directorate General of paved roads per 1,000 Statistics, Surveys, and Census km2 of area) http://www.dgeec.gov.py
1 This indicator is included as a way of measuring the impact of the investments in upgrading and paving and in rehabilitation and maintenance of the road segments planned for the program. It is not an indicator directly linked to the program objectives, but makes it possible to infer the contribution of those investments to higher-order objectives established in the country’s development strategy. 2 The share of soybean exports by the various districts located in the service area of the segment of Route 13 to be upgraded and paved under the program, as a proportion of total departmental output, seeks to reflect the impact on competitiveness and regional/international integration of local productive areas as a result of the improvement in accessibility, efficiency, and safety conditions in the road system, facilitating access to major international trade logistics hubs (domestic and international ports).
Annex II Page 2 of 6
Responsibility: PEU/Road Planning Directorate, MOPC
VOC VOC (US$/veh-km) (US$/veh/km) Vehicle type Vehicle type Traffic study Vehicle operating Route Route Route Route Specialized equipment (roughometer) cost (VOC) on the 8 13 8 13 Highway Development and segments upgraded Light 0.386 0.380 Light 0.227 0.224 Management (HDM-4) and paved by the Buses 1.777 1.745 Buses 0.885 0.849 program3 (constant Medium 1.281 1.256 Medium 0.632 0.612 Responsibility: Directorate of Roads US$/vehicle-km). Trucks Semi-heavy 1.890 1.857 Trucks Semi-heavy 0.963 0.937 (DV), MOPC Heavy 2.960 2.910 Heavy 1.418 1.379 AVERAGE 1.659 1.630 AVERAGE 0.825 0.800
VOC VOC Vehicle operating Vehicle type (US$/veh/km) Vehicle type (US$/veh/km) Traffic study cost (VOC) on the PMMR 3 PMMR 4 PMMR 3 PMMR 4 Specialized equipment (roughometer) segments maintained Light 0.236 0.236 Light 0.237 0.237 Highway Development and by the program under Buses 1.031 1.030 Buses 1.032 1.032 Management (HDM-4) PMMR contracts Medium 0.750 0.749 Medium 0.751 0.751 (constant Responsibility: PMMR Unit/DV, Trucks Semi-heavy 1.087 1.087 Trucks Semi-heavy 1.088 1.088 US$/vehicle-km). MOPC, based on inspection reports. Heavy 1.563 1.561 Heavy 1.565 1.565 AVERAGE 0.933 0.933 AVERAGE 0.935 0.935
Minutes/trip Minutes/trip Travel times on the Vehicle type Route Route Vehicle type Route Route Traffic study highway segments 8 13 8 13 Specialized equipment (roughometer) upgraded and paved Light 169.70 126.55 Light 53.26 35.57 Highway Development and by the program Buses 193.43 144.83 Buses 58.85 39.39 Management (HDM-4) (minutes per average Medium 185.78 138.88 Medium 56.95 38.05 trip). Trucks Semi-heavy 204.07 153.05 Trucks Semi-heavy 60.12 40.24 Responsibility: DV/Road Planning Heavy 216.12 162.53 Heavy 63.64 42.60 Directorate, MOPC AVERAGE 193.82 145.17 AVERAGE 58.56 39.17
3 Defined as dirt or gravel road segments that are paved. Annex II Page 3 of 6
Veh/day Veh/day Vehicle type Route Route Vehicle type Route Route Annual average daily 8 13 8 13 traffic on the Light 187 193 Light 569 697 Traffic study segments upgraded Buses 11 10 Buses 19 20 and paved by the Responsibility: Road Planning Medium 38 9 Medium 64 17 program (veh/day). Directorate, MOPC Trucks Semi-heavy 18 5 Trucks Semi-heavy 29 11
Heavy 7 13 Heavy 32 186 TOTAL 261 230 TOTAL 713 931
International Route 8: 16.33 (m/km) Route 8: 3.58 (m/km) Roughness Index Specialized equipment (roughometer) Route 13: 15.78 (m/km) Route 13: 2.79 (m/km) (IRI) on the road PMMR contract 3: 2.63 (m/km) PMMR contract 3: 2.70 (m/km) Responsibility: Department of Road segments targeted by PMMR contract 4: 2.87 (m/km) PMMR contract 4: 2.77 (m/km) Management/DV, MOPC the program (m/km).
Number of days roads Rainfall measurement data on in the are not serviceable service area of the routes (baseline: (closed to traffic) or used 50% of days when the works have severe traffic 70 days 0 days were halted owing to rainfall in excess restrictions, on the of 20mm/day in the service area of segments to be (Average for water year 2009-2011) Route 8 in the period 2009-2011). upgraded and paved Responsibility: DV, MOPC, based on by the program. the monthly inspection reports. Accident concentration: Data from the Annual average Highway Police (SI calculated severity index (SI) SI PMMR contract 3: 1.71 Reduction in SI of between 10% and 15%. according to the Guide for (equivalent number SI PMMR contract 6: 2.12 Identification of Traffic Accident and type of traffic (Average for the period 2014-2018, based Concentration Points and Segments). accidents per (Average for the period 2005-2009 based on on traffic accident concentration data of the 1,000,000 veh- traffic accident concentration data of the Responsibility: Road Safety Highway Police). km/year). Highway Police). Department/Road Planning Directorate, MOPC
Annex II Page 4 of 6
Expected outputs Component 1: Civil works Base Year Year Year Year Year Year Year Cumulative Means of Output indicators line 1 2 3 4 5 6 7 target verification/Comments Subcomponent 1.1: Km of highways Inspection reports upgraded and paved by the program. Acceptance certificates of works
Responsibility: DV, MOPC Route 8 North 0 0 0 0 85.6 0 0 0 85.6 Route 13 North 0 0 0 0 0 57.3 0 0 57.3
Subcomponent 1.2: Km of highways Inspection reports
maintained under contracts for Acceptance certificates of works performance-based management and
maintenance of roads (PMMR (For PMMR contracts 3 and 4,
contracts), including implementation of the baseline and year 2013
road safety countermeasures at critical correspond to Phase I contracts 250 250 250 250 250 250 250 250 250 points. that will continue until that 393 393 393 393 393 393 393 393 393 year.) PMMR contract 3 0 0 400 400 400 400 400 400 400 PMMR contract 4 0 0 150 150 150 150 150 150 150 Responsibility: PMMR Contract PMMR contract 6 Unit/DV, MOPC PMMR Phase 1 works Subcomponent 1.3: Number of Contracts signed contracts for technical and Technical and environmental environmental inspection of works 0 0 6 6 6 6 4 4 6 inspection reports on the works (upgrading and paving and maintenance by levels of service) in Responsibility: PEU/PMMR execution. Contract Unit/DV, MOPC Expected outputs Component 2: Engineering and administration Base Year Year Year Year Year Year Year Cumulative Means of Output indicators line 1 2 3 4 5 6 7 target verification/Comments
Subcomponent 2.1: Program Service contracts signed with administration: additional staff 0 33 33 33 33 33 24 24 33 Number of additional staff to support Responsibility: PEU/DV, MOPC strengthening the MOPC units involved Annex II Page 5 of 6
in program execution/administration.
Subcomponent 2.2: Program audits, monitoring, and evaluation: Final report of each study
Number of program annual monitoring delivered and approved by the 0 0 1 1 1 1 1 1 6 reports. Bank.
Number of evaluation reports (midterm 0 0 0 0 1 0 0 1 2 Contractual clause fulfilled. and ex post for projects). Responsibility: PEU/DV, MOPC Number of external auditors’ reports with the Bank’s no objection. 0 1 1 1 1 1 1 1 7
Formal record of participants and Subcomponent 2.3: final report on each event Number of technical/professional 0 0 0 0 0 0 0 3 3 delivered and approved by the training events held for personnel Bank. involved in the program. Responsibility: PEU, MOPC
Subcomponent 2.4: Final report of each study Number of studies approved to support delivered and approved by the road planning, design of PMMR Bank. contract works, and road safety countermeasures at critical points, 0 1 5 5 1 0 0 2 14 Responsibility: PEU/PMMR MOPC administrative and financial Contract Unit/Road Planning management, and support for the road Directorate/DV, MOPC safety strategy.
Annex II Page 6 of 6
Expected outputs Component 3: Associated costs Base Year Year Year Year Year Year Year Cumulative Means of Output indicators line 1 2 3 4 5 6 7 target verification/Comments
Subcomponent 3.1: Cadastre and Percentage progress in clearing expropriation of the right-of-way for the titles and payments to fronting roads. 4 property holders, as well as progress in implementing the Support for land management and titling: environmental management Route 8 (% progress) 0 0% 10% 20% 45% 15% 10% 0% 100% plans, based on six-monthly Route 13 (% progress) 0 0% 10% 20% 45% 15% 10% 0% 100% reports delivered by the PEU
5 and verified by the via desk Payment to fronting property holders: review and in the field. Route 8 (% payments) 0 0% 10% 20% 45% 15% 10% 0% 100% Route 13 (% payments) 0 0% 10% 20% 45% 15% 10% 0% 100% Responsibility: PEU/UBI/DAO/DAJ/DGA, Subcomponent 3.2: Environmental MOPC compensation and resettlements.6 Number of mitigation programs implemented: Route 8 0 0 0 1 4 0 0 0 5 Route 13 0 0 0 1 2 0 0 0 3
Subcomponent 3.3: Support for Ownership titles obtained and indigenous organizations. transferred to the indigenous communities. Number of parcels of land purchased for indigenous communities: Responsibility: Route 10 0 0 0 0 0 0 0 1 1 PEU/UBI/DAO/DAJ/DGA, Route 13 0 0 0 0 0 0 0 1 1 MOPC
4 Includes surveys and appraisal of affected properties and measures to compensate the population affected. 5 Includes payment for improvements, payment for properties, and required resettlements. 6 Includes measures to compensate for environmental impacts, such as reforestation of communal fields, urban forestation, support for highly vulnerable farmers, and other environmental mitigation measures. Annex III Page 1 of 9
FIDUCIARY AGREEMENTS AND REQUIREMENTS
Country: Paraguay Project name: Program for paving of integration corridors and road rehabilitation and maintenance, Phase II Project number: PR-L1075 Executing agency: Ministry of Public Works and Communications (MOPC) Prepared by: Alberto de Egea and Mariano Perales, Fiduciary Specialists
EXECUTIVE SUMMARY
The institutional assessment for the project’s fiduciary management was based on: (i) the fiduciary context of the country; (ii) the results of the fiduciary risk assessment and the project risk management workshop; (iii) the Institutional Capacity Assessment System (ICAS) update analysis of the Ministry of Public Works and Communications (MOPC); (iv) the results of the diagnostic assessment of the MOPC’s budget, accounting, cash management, and internal audit systems, prepared by the financial management fiduciary area based on the Guide for Determining the Level of Development and Use of Public Financial Management Systems (GUS); (v) meetings with staff of different areas in the MOPC; and (vi) the report on procurement procedures to streamline project execution in countries of the Fund for Special Operations (FSO) by consultant Marco Antonio Matos Saraiva. The fiduciary agreements for procurement and financial management to be applied for project execution were prepared as a result of this assessment.
I. FIDUCIARY CONTEXT OF THE COUNTRY
In general, the country financial management systems have a medium level of development. They need to be supplemented for execution of Bank-financed projects in the areas of specific financial reports, which are produced through auxiliary accounting systems. The tools for financial control, such as SIAF, SICO, and other subsystems, allow the executing agencies to arrange for transfers of payments to suppliers of goods and services through the Central Bank under acceptable conditions. Their integration will enable the SIAF to produce the audited financial statements for programs or projects in the near future. In the meantime, parallel systems are being used. External control is currently performed through private audit firms. However, we are working on a pilot project with the Office of the Comptroller General of Paraguay so that, in the short term, it will be in a position to take over the auditing of Bank-financed projects. Annex III Page 2 of 9
II. FIDUCIARY CONTEXT OF THE EXECUTING AGENCY
The MOPC is a Paraguayan central government agency responsible for the transportation and communications sector, reporting to the Ministry of Finance. The Directorate of Roads (DV), which is already familiar with Bank policies and procedures, will be the unit representing the executing agency in program administration. The GUS evaluation identified the need to strengthen the financial management, internal audit, and internal control areas and to review processes ranging from procurement to cash management. The risk areas reflect the consequences of successive institutional restructurings that have not yet fully taken root, and the large number of projects with multiple external lenders that outstrip the capacity of the trained human resources assigned to the tasks of planning, procurement, financial/administrative management, and oversight of projects under way.
III. FIDUCIARY RISK EVALUATION AND MITIGATION MEASURES
The ICAS and GUS evaluations suggest that the opportunities for improvements at the MOPC for this and future projects should focus on: (i) Strengthening the areas of planning, accounting, and internal audit; and (ii) Review and update of processes ranging from procurement to cash management. Procurement management: (i) The ICAS yielded a score of 85.29% for the Goods and Services Administration System (SAB), which is equivalent to satisfactory development with a low level of risk.2 However, the Project Risk Matrix rates the risk of “procurement delays” as medium, which reflects the DV’s experience in executing PR-L1007, when certain probability factors occurred, such as: (i) excessive red tape in contracting processes; (ii) procurements centralized in the Contracting Operational Unit (UOC), which is subject to a work overload with each new operation; and (iii) delays in the Evaluation Committee. If these factors occur once again, the risk of procurement delays will be realized, with the consequent impact on cost overruns and delays in project execution. To minimize the occurrence of these factors, the activities described in section IV need to be carried out, as a necessary condition for effective project execution. In addition, the Procurement Plan Execution System (SEPA) analysis of the procurement plan for the “contract signature” milestone indicated that 45% of the processes took longer than the three months originally planned. We also note that the executive summary of the “Consolidated General Report for FSO Countries” of August 2012, which included a study of procurements in three sectors, including transportation, stated the following findings and recommendations (point VII). Findings: (i) insufficient institutional Annex III Page 3 of 9
capacity; (ii) difficulties caused by external factors, not the application of IDB procedures; (iii) limited knowledge of procurement personnel; and (iv) high staff turnover and loss of staff already trained. Recommendations: (i) all UOCs should have a subunit autonomous from the institution, to improve management; and (ii) an institutional strengthening component should be included in projects. (ii) The three activities identified in the risk evaluation for the SAB system are: (i) ongoing training on Bank procurement procedures should be provided for the program execution unit (PEU) and the UOC; (ii) the Operating Regulations should specify the minimum number of staff required for program execution, with their respective job descriptions; and (iii) the time required by the bid evaluation committee should be monitored by a designated PEU staff member, with support from the Internal Audit Directorate (DAI). (iii) Additionally, it is essential for all executing agency units involved in procurement to be strengthened minimally in all respects within the first six months of execution, which means that in addition to sufficient human resources to operate, they must have adequate physical space, furniture, and fittings to perform their functions, and sufficient technological infrastructure to efficiently manage procurement processes.
IV. CONSIDERATIONS FOR THE SPECIAL PROVISIONS OF THE CONTRACT
To streamline negotiation of the contract by the project team and, principally, the Legal Department (LEG), the agreements and requirements to be included in the Special Provisions are given below. Program execution will require the following as conditions precedent to the disbursement of the loan proceeds: (i) Within the first six months of execution, all executing agency units involved in procurement will have, in addition to sufficient human resources to operate, adequate physical space, furniture, and furnishings to perform their functions, and sufficient technology to efficiently manage procurement processes.
V. FIDUCIARY AGREEMENTS AND REQUIREMENTS FOR PROCUREMENT EXECUTION
The procurement policies to be applied for this loan are documents GN-2349-9 and GN-2350-9. Annex III Page 4 of 9
1. Procurement execution (i) Procurement of works, goods, and nonconsulting services: Contracts for works, goods, and nonconsulting services1 subject to international competitive bidding (ICB) will be procured using the Bank’s standard bidding documents (SBDs). Bidding processes subject to national competitive bidding (NCB) will be conducted using national bidding documents agreed upon with the Bank. The project sector specialist will responsible for reviewing the technical specifications for procurements during the preparation of selection processes. Initially, no selection processes are planned that involve direct contracting.2 Procurement of information technology (IT) systems: The Bank’s IT specialist may advise on the design of arrangements for procurements of this kind. No contracts will be required that follow procurement methods other than the Bank’s. (ii) Selection and contracting of consultants: Consulting services contracts under the project will be procured using the standard request for proposals (RFP) issued by, or agreed upon with, the Bank. The project sector specialist will be responsible for reviewing the terms of reference for the contracting of consulting services. Initially, no selection processes are planned that involve single-source selection.3 Selection of individual consultants: The contracts with individual consultants working on Phase I of this project (loan 1822/OC-PR) are expected to be renewed directly.4 Training: Four training processes are envisaged as nonconsulting services. (iii) Advance procurement/recognition of expenditures: Advance procurement and expenditures are planned for this operation. (iv) Domestic preference: Not planned for this operation.
1 Policies for the procurement of goods and works financed by the Bank (document GN-2349-9), paragraph 1.1: Nonconsulting services are treated as goods. 2 Policies for the procurement of goods and works financed by the Bank (document GN-2349-9), paragraph 3.6: Direct contracting must be duly justified. 3 Policies for the selection and contracting of consultants financed by the Bank (document GN-2350-9), paragraph 3.9 et seq.: Single-source selection must be duly justified. 4 Policies for the selection and contracting of consultants financed by the Bank (document GN-2350-9), paragraph 3.9 et seq.: Single-source selection must be duly justified. Annex III Page 5 of 9
2. Table of threshold amounts (US$000s) Works Goods5 Consulting services International National International National International Short list competitive competitive Shopping competitive competitive Shopping publicity 100% bidding* bidding** bidding* bidding** Consulting national
> 3,000 250 to 3,000 < 250 > 250 50 to 250 < 50 > 200 < 200
* Shopping is the recommended method for simple works and off-the-shelf goods whose value is below the threshold for ICB. ** The shopping method may be used for the procurement of complex works or unusual goods whose value is below the range for NCB.
3. Major procurement processes Type of Estimated Estimated amount Activity bidding date (US$000s) process Works Upgrade and paving of Route 13, North Segment ICB Feb/2013 48,600 Performance-based maintenance of Route 6 – PMMR 3 ICB Feb/2013 11,840 Performance-based maintenance of Routes 3 and 5 – PMMR 4 ICB Feb/2013 18,570 Performance-based maintenance of Route 10 and Superhighway – PMMR 6 ICB Feb/2013 18,990 Performance-based maintenance of Routes 8 and 10 South Segment – ICB Feb/2013 3,700 New PMMR Consulting services Inspection of works, Route 13 North QCBS Dec/2012 3,550 Inspection of PMMRs 3, 4, 6 QCBS Feb/2013 2,530 Inspection of New PMMR CQS Feb/2013 190
Program monitoring and evaluation LCS Dec/2013 250
Annual external audit of the program LCS Dec/2013 220
Demand studies and projections, update of Road Investment Plan (2018-2022) QCBS Dec/2013 220
Bridge Management System QCBS Dec/2013 275
Weights and measures control management system QCBS Dec/2013 251 Final engineering design of PMMR works and road safety countermeasures at QBS Jan/2013 550 critical points identified by MOPC Road Safety Observatory of Paraguay CQS Dec/2013 150 Design of road safety measures to be implemented on main highways CQS Dec/2013 100 Specific road safety plans for Asunción, Ciudad del Este, Encarnación, Coronel Oviedo, municipios in the service area of Routes 8 and 13. QCBS Dec/2013 450 Training plans for local governments Support for regularization of land tenure for titling and transfer along Routes 8 QBS Dec/2013 400 and 13 Sustainable development plan for the municipios of Maciel, Moisés Bertoni, CQS Dec/2013 180 Yegros, Yuty, and Caazapá Management plan for the Isla Susú natural monument CQS Dec/2013 100
Programs to support campesino communities along Routes 8 and 13 QBS Dec/2013 490
5 Includes nonconsulting services. Annex III Page 6 of 9
Nonconsulting services
Training for local professional staff in auditing and road safety NCB Dec/2013 200
Training for local professional staff in internal auditing and in required technical NCB Dec/2013 120 areas Annual road safety week and specific operations to support the National Road NCB Dec/2013 200 Safety Plan (PNSV)
4. Procurement supervision Ex ante or ex post review must be determined for each selection process.6 However, the main project procurements are “international procurement processes for works and consulting services,” which involve ex ante review in Paraguay. All processes in the table on main procurement processes will be subject to ex ante review. Small procurements, if any, will be subject to ex post review, but in response to the repeated request of the borrower, the Ministry of Finance, to use solely ex ante reviews during the negotiation with the borrower, and in function of the risk perceived by the Bank, the advisability of ex post reviews of procurement processes may be explored. Thus, given the fact that the fiduciary risk was identified as “medium,” ex post review may be used for contracts with amounts less than 40% of the ICB thresholds established in Table II above. The ex post reviews will be performed every six months, in accordance with the project supervision plan.7
Ex post review threshold
Works Goods Consulting services
1,200,000 100,000 80,000
Note: The ex post review thresholds are based on the executing agency’s fiduciary capacity for execution and may be modified by the Bank insofar as such capacity changes. 5. Special provisions It is essential for all MOPC units involved in procurement to be strengthened minimally in all respects within the first six months of execution, which means that in addition to sufficient human resources to operate, they must have adequate physical space, furniture, and fittings to perform their functions, and sufficient technological infrastructure to efficiently manage procurement processes, all of which must be established in the fiduciary appendices to the Operating Regulations.
6 Responsibilities, support for reviews, and the methodology are described in the “Pautas para realizar la revisión ex post de procesos de adquisiciones” [Guidelines for ex post review of procurement processes]. 7 Responsibilities, support for reviews, and the methodology are described in the “Pautas para realizar la revisión ex post de procesos de adquisiciones” [Guidelines for ex post review of procurement processes]. Annex III Page 7 of 9
6. Records and files Project reports will be prepared and filed using the agreed formats or procedures described in the project Operating Regulations.
VI. FIDUCIARY AGREEMENTS AND REQUIREMENTS FOR FINANCIAL EXECUTION
FINANCIAL MANAGEMENT a. Programming and budget The MOPC will centralize the coordination of execution through the DV, which will serve as PEU. The PEU will receive logistical support from the MOPC’s other directorates and units. Budget programming, administration, and execution are performed by the Directorate of Administration and Finance under the zero-based budgeting system. It was agreed that this area will be strengthened with additional staff to be hired by the program to work full time on planning and monitoring. This support will allow detailed disbursement plans to be prepared on the basis of actual timing, cross-referenced with technical activities and fiduciary processes, describing the degree of progress in such activities; as well as disbursement requests under the financial planning system with more assertive advances and renewals, which must also be aligned with the annual work plan, procurement plan, budget, and other tools. b. Accounting and information systems Accounting. Accrual accounting will be used; however, accountability processes for projects partially financed by the IDB will operate on a cash basis. The SIAF is the principal manager for budgetary and accounting transactions, connected to the SICO accounting subsystem, which with other subsystems enables information to be downloaded and reports prepared that can be accessed by the Bank and other sources of financing, through the integrated invoicing, disbursement, and accounting system. As an immediate task, it was agreed that the MOPC/IDB/Ministry of Finance will hold working meetings to prepare a plan to implement the accounting system interface with SICO. Until then, accounts will be kept through periodic reconciliations between SICO and the program’s accounting system. c. Information systems The executing agency has several internal and external information systems. The fact that they are not integrated means that longer times are required to prepare and issue reports, although the MOPC has been meeting its responsibilities. Support is needed to integrate its reporting systems, so that it can integrate project planning and execution tools. d. Disbursements and cash flow Program funds will be disbursed in the form of advances, which are to be corroborated through submittal of an itemized monthly financial plan for a period of Annex III Page 8 of 9
six months, and a longer term plan, to determine the program’s actual demand based on the project execution plan, annual work plan, and procurement plan. The second and subsequent disbursements will be contingent on justification of 80% of the previous advance. The financial plan will coordinated in advance with the technical unit, in order to coincide with the actual timing of procurement processes and disbursements to the ministry. e. Internal control and internal audit In the area of internal control, it was agreed that progress on implementation of the Standardized Internal Control Mechanism of Paraguay (MECIP) at the MOPC will be reported periodically to the Bank. Additionally, an auditor will be engaged with program resources to strengthen the internal audit plan and better enable the internal audit area to monitor project supervision. Lastly, it was agreed to use program resources to align the Unified Government Audit Manual with the Tesareko,8 so that internal audit work will supplement and follow up on the audits conducted by the Office of the Comptroller General of Paraguay. f. External control and reports The executing agency, acting through the DCP, will deliver annual audited statements of the program, to be produced by the Office of the Comptroller General or another independent audit entity acceptable to the Bank, in accordance with terms of reference previously approved by the Bank. g. Financial supervision plan Financial supervision will be three-pronged: (i) first, control of disbursement reports and review visits; (ii) second, onsite supervision visits planned by the Bank; and (iii) third, financial information taken from the financial statements and the production of execution reports. h. Execution mechanism The PEU will be responsible for: (i) coordination of all activities related to the project; (ii) preparation of physical and financial progress reports; (iii) submittal of requests for no objection and loan disbursements requests, as well as keeping accounting records which will be the main source for the preparation of such requests and any financial reports; (iv) implementation and maintenance of a control system to ensure proper use of resources and their safeguarding, as well as safekeeping of documentation on transactions; and (v) preparation and update of the initial project report, annual work plans, six-monthly status reports, evaluation reports, and the project completion report prior to their delivery to the IDB. The PEU will be responsible for timely performance of the contractual clauses and agreements and project-related activities. Operating Regulations. (i) The program Operating Regulations (OR) will be consistent with MOPC and Bank policies and procedures and with the country’s
8 Government audit manual. Annex III Page 9 of 9
laws and financial practices; (ii) approval and implementation of the program OR by the PEU to the Bank’s satisfaction will be a condition precedent to the first disbursement; and (iii) any changes to the program OR will require the Bank’s no objection. Other financial management agreements and requirements N/A.