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Document of The World Bank FOR OFFICIAL USE ONLY FFILECOP Public Disclosure Authorized Report No. 1659b-PA STAFF PROJECT REPORT RURAL WATER SUPPLY PROJECT Public Disclosure Authorized PARAGUAY Public Disclosure Authorized November 22, 1977 Public Disclosure Authorized Water Supply and Sewerage Projects Division Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalents Guarani US$ 0 126.0 = US$1.00 0 1.0 = US$0.008 0 1 million = US$7,936.5 Measures 1 m 1.09 yd. 1 m2 = 10.8 ft.2 1 km .62 mile 2 1 km = .39 mile2 1 ha 2.47 acres Abbreviations and Acronyms SENASA: National Service of Environmental Sanitation WHO : World Health Organization PAHO : Pan American Health Organization UNICEF: United Nations Children's Fund AID United States Agency for International Development Fiscal Year January 1 - December 31 FOR OFFICIAL USE ONLY STAFF PROJECT REPORT RURAL WATER SUPPLY PROJECT PARAGUAY TABLE OF CONTENTS Page No. 1. GENERAL ........ .. ............ ....... ....... 1 II. THE SECTOR *....I................o .............o... A. Background ........ *.. ... .00...... S..* ...... 1 B. Sector Development ...... .. .... .. ........... 2 C. Sector Policies .... ...... ............... 4......4 Do Sector Organization . ....... ...... * ..o.... .... 5 E. Past Finances and Prospects .......... o ....... 6 III. THE PROJECT ..... o ......... o.... ... .. ........... 7 A. Project Area and Existing Facilities 7........7 B. Project Objectives ............... ............. 8 C. Project Description ........................... 8 Do Cost Estimates . ......... ................. 13 E. Financing .......... .........* ........ 13 F. Implementation ........... ...... .... 15 Go Procurement . ............. ........ 18 Ho Disbursements ...... ........... ...... 19 IV. THE EXECUTING AGENCY ... ..... ......... 20 A. General . .20 B. Organization, Management, and Staffing 20 C. Accounting System... ..... 24 D. Audit. .... *** ..... *........* 25 V. FINANCE.. .... .... .. .... 25 A. SENASA'S Past and Present Position . .25 B. Finance at Community Level . .28 C. SENASA's Financing Plan .. 33 This project was appraised in January 1977 by a mission consisting of Alfonso Sanchez (Engineer), Ms. Judy O'Connor (Economist) and Henry Vieilhezcaze (Consultant, Financial Analyst). This documenthas a rtrictd distributionand maybe used by recipientsonly in the performance of theirofficial duties. Its contentsmay not otherwisebe discloed withoutWorld Dank authorization. TABLE OF CONTENTS (Continued) Page No. VI. PROJECT JUSTIFICATION .............................. 35 A. Environment Impact and Health Benefits ........ 35 B. Risks ......................................... 36 VII. RECOMMENDATIONS ................... ................. 37 A. Management and Operations ..................... 37 B. Financial Aspects ............................. 37 C. Project Execution ............................. 38 LIST OF ANNEXES ANNEX 1 - Communities included in the Project ANNEX 2 - Technical Assistance and Consulting Program- Estimates of Costs and Manpower ANNEX 3- - Summary of Terms of Reference for Consulting Services ANNEX 4 - Water Tariffs ANNEX 5 - Monitoring Indicators ANNEX 6 - Additional Information Available in Project File. LIST OF MAPS - Area Covered by the Project PARAGUAY APPRAISAL OF RURAL WATER SUPPLY PROJECT I. GENERAL 1.01 The Paraguayan Government has requested Bank financing for a proposed rural water supply and waste disposal project. The estimated cost of the works is US$9.7 million and a Bank loan of US$6 million is proposea to finance 100% of the foreign exchange requirements, including interest during construction. The loan would be made to the Republic of Paraguay. The execution time for the project would be four years. This would be the first Bank Group financial operation in this sector in Paraguay. 1.02 The executing agency will be SENASA, a specialized department of the Ministry of Public Health, which prepared the project with the assistance of the Pan American Health Organization (WIHO/PAHO). II. THE SECTOR A. Background 2.01 Paraguay is a landlocked country situated approximately in the center of South America (see attached map), bordered by Brazil and Argentina on the east, south2and west and by Bolivia on the north. The country, with an area of 406,700 km , has vast areas of unutilized lands well suited for agriculture or livestock. 2.02 Estimated population in 1976 was 2.6 million, of which 37% (some 960,000) was urban and 63% (approximately 1,640,000) was rural. The census defines urban population as the population of all municipal districts (cabece- ras municipales) with 100 inhabitants or more; the remaining population is 2 considered rural. The average population density is 5.8 inhabitants per km one of the lowest on the continent. This density is even lower in the western region, El Chaco, where there are only 0.3 inhabitants per square kilometer. The average annual rate of population growth is 2.6%, with 3% in Asuncion and 2.4% elsewhere. 2.03 The country, divided administratively into 19 Departments, has 161 towns or medium size cities, excluding Asuncion, with more than 100 inhabitants. Distribution of urban population on the basis of 1972 census is as follows: - 2 - Table 1 Distribution of Urban Population Total % of Population Range No. of Towns Inhabitants Urban Population 100 - 4,000 134 191,700 21.8 4,000 - 100,000 27 296,100 33.6 100,000 - 500,000 1 392,800 44.6 Totals 162 880,600 100.0 2.04 Recognizing its enormous hydroelectric potential, largely on the Parana river which forms its eastern and southern borders, Paraguay has reached agreements with its neighboring countries for joint international development of these resources by undertaking several large hydroelectric projects. Construction operations to exploit its water resources together with the recent rapid expansion of land under cultivation have resulted in increased economic activity, expanded investment in infrastructure and new patterns of population migration and settlement in the country. 2.05 The effect of increased economic activity is reflected in the recent growth of per capita income from 1.2% p.a. for the 30-year period before 1972, to an annual 5.8% during 1972-76. Per capita GNP for 1975 at market prices is estimated at US$570, which is still one of the lowest in South America. 2.06 The implementation of major land reform and colonization programs by the Government and the construction of new hydroplants have placed heavy burdens on the relatively poor existing infrastructure (transport, education, health, etc.). The Paraguayan Government has already identified this problem and intends to improve and extend basic facilities in order to guarantee continued economic development and productive investment by new settlers. B. Sector Development 2.07 Sector development has been slow. The first water supply system came into operation in 1959 to serve part of the city of Asuncion. Until 1963 it was the only one in existence. Since then, this system has been expanded, and a program financed by the IDB to serve nine additional medium-size towns is under execution. In the rural sub-sector, activities have been limited to case-by-case solutions without a general or sector approach. Only 10 out of 161 towns in the country (excluding Asuncion) had partially developed water - 3 - supply systems in 1976. Recently, however, the Government has tried to establish a systematic, planned program for the sector, as evidenced by in the National Plan of Health 1976-1980 (see para. 2.10). 2.08 Service levels in the water supply and sewerage sector are among the lowest in South America and are low in comparison to other sectors of Paraguay's infrastructure. In 1973, the Ministry of Public Health estimated that only 17.3% of the total population had access to any organized water supply system (about 8% through house connections). In the urban sector, 36.2% of the population was served, and only 6.1% of the rural population had water supply service. The remaining population relies mainly on contaminated surface sources, water holes, and some inadequately protected dug wells. Only Asuncion has water treatment; water supply in other cities is based on raw water of dubious quality, without even chlorination. Service levels for water supply have not changed substantially during the past three years since no major waterworks have been recently completed. 2.09 In 1973, 16% of the urban population, mainly in Asuncion, was served by some sanitary sewerage system; individual solutions for excreta disposal, mainly latrines, prevail, serving some 70% of the total population. Some improvement in the sanitary sewer figures is expected for Asuncion, where the sewerage system has recently been extended. A summary of levels of service is shown in Table 2. Although the figure for population served with individual excreta disposal solutions shows as high as 85%, many of the solutions are completely inadequate against generally accepted standards. SENASA's recent local surveys point to a lower percentage. -4 - Table 2 Water Supply and Excreta Disposal Service Levels - 1973 Total Population Urban Pop. /1 Rural Pop. No. % No. % No. % Total Country Population 2,430,000 100.0 904,000 100.0 1,526,000 100.0 Served with Water Population connected 194,000 8.0 192,000 21.2 2,000 0.1 Population with access 226,000