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Uruguay Road Infrastructure Program (Ur-L1001)

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Uruguay Road Infrastructure Program (Ur-L1001) DOCUMENT OF THE INTER-AMERICAN DEVELOPMENT BANK URUGUAY ROAD INFRASTRUCTURE PROGRAM (UR-L1001) LOAN PROPOSAL This document was prepared by the project team consisting of: Gregorio Arévalo (RE1/FI1), Project Team Leader; Esteban Diez Roux (RE1/FI1); Rafael Acevedo (RE1/FI1); Mario Durán (RE1/FI1); Emilio Sawada (RE1/FI1); Sergio Deambrosi (COF/CUR); Rosina de Souza (LEG), Juan Martín Cala (consultant); and Margarita Orozco (RE1/FI1), who helped produce the document. CONTENTS EXECUTIVE SUMMARY I. FRAME OF REFERENCE......................................................................................................... 1 A. Macroeconomic context.............................................................................................. 1 B. The transportation sector in Uruguay......................................................................... 1 C. The country’s sector strategy: DNV Five-Year Plan 2000-2004 ............................. 4 D. The Bank’s experience and lessons learned .............................................................. 6 E. Involvement and coordination with other multilateral agencies............................... 6 F. The Bank’s country strategy with Uruguay and value added by Bank participation................................................................................................................. 7 G. Program strategy and support for the IIRSA ............................................................. 7 II. THE PROGRAM ..................................................................................................................... 9 A. Objectives and description.......................................................................................... 9 B. Description ..................................................................................................................9 C. Cost and financing .................................................................................................... 13 III. PROGRAM EXECUTION....................................................................................................... 15 A. Borrower, guarantor, and executing agency ............................................................ 15 B. Project execution and management.......................................................................... 15 C. Execution period and disbursement timetable......................................................... 19 D. Procurement .............................................................................................................. 19 E. Maintenance of program works................................................................................ 20 F. Monitoring and evaluation........................................................................................ 20 G. Ex post evaluation..................................................................................................... 21 IV. VIABILITY AND RISKS........................................................................................................ 22 A. Institutional viability ................................................................................................. 22 B. Socioeconomic viability ........................................................................................... 23 C. Financial viability...................................................................................................... 24 D. Technical viability..................................................................................................... 25 E. Environmental and social viability........................................................................... 26 F. Environmental and social impact and proposed measures...................................... 26 G. Benefits and beneficiaries......................................................................................... 28 H. Risks .......................................................................................................................... 28 - ii - Eectronic Links and References Abbreviations http://opsws3.reg.iadb.org/idbdocswebservices/getDocument.aspx?DOCNUM=374269 Basic socioeconomic data http://www.iadb.org/res/index.cfm?fuseaction=externallinks.countrydata Status of loans in execution and loans approved http://opsws3.reg.iadb.org/idbdocswebservices/getDocument.aspx?DOCNUM=350885 Tentative lending program http://opsws3.reg.iadb.org/idbdocswebservices/getDocument.aspx?DOCNUM=374275 Information available in the RE1/FI1 technical files http://opsws3.reg.iadb.org/idbdocswebservices/getDocument.aspx?DOCNUM=374278 Annex I. Logical framework http://opsws3.reg.iadb.org/idbdocswebservices/getDocument.aspx?DOCNUM=374283 Annex II. Procurement plan http://opsws3.reg.iadb.org/idbdocswebservices/getDocument.aspx?DOCNUM=374285 Map http://opsws3.reg.iadb.org/idbdocswebservices/getDocument.aspx?DOCNUM=368261 PROJECT SUMMARY URUGUAY ROAD INFRASTRUCTURE PROGRAM (UR-L1001) Financial Terms and Conditions1 Borrower: Eastern Republic of Uruguay Amortization period: 20 years Executing Agency: Ministry of Transportation and Grace period: 48 months Public Works (MTOP), National Disbursement period: 48 months2 Highways Department (DNV) Commencement of works 36 months Source Total % Interest rate: Adjustable IDB (OC) US$ 77,000,000 70% Inspection and supervision: 0% Local US$ 33,000,000 30% Credit fee: 0.25% Total US$110,000,000 100% Currency: SCF (dollars) Project at a Glance Project objective: The program’s general objective is to improve overland transportation of freight and passengers along the key corridors of Uruguay’s road system, in order to enhance competitiveness and regional integration. The purpose of the program is to lower transportation costs and travel times, preserve Uruguay’s road assets, and increase road safety by improving and resurfacing integration corridors with Argentina and Brazil and key national roads and highways linking Uruguayan production centers with domestic and external markets. It also supports road system sustainability by making road management more effective. Special contractual clauses: Conditions precedent to the first disbursement of the loan: (i) Hiring an environmental specialist to work closely with DNV professional staff as a member of the environmental unit, to strengthen it in the areas of contractor training and the environmental monitoring and supervision of works (see paragraph 3.13). (ii) Bank approval of standard procurement and bidding documents (see paragraph 3.24). 1 The interest rate, credit fee, and inspection and supervision fee mentioned in this document are established pursuant to document FN-568-3 Rev. and may be changed by the Board of Executive Directors, taking into account the available background information, as well as the respective Finance Department recommendations. In no case will the credit fee exceed 0.75%, or the inspection and supervision fee exceed 1% of the loan amount. With regard to the inspection and supervision fee, in no case will the charge exceed, in a given six-month period, the amount that would result from applying 1% to the loan amount, divided by the number of six-month periods included in the original disbursement period 2 With the exception of up to US$1.5 million for the outsourced traffic count contract included in item 3 (institutional strengthening). This contract will be valid for five years and commence in the third year of the program, and the corresponding disbursement period will consequently be 7 years. - ii - Exceptions to Bank policies: None. Project consistent with Country Strategy: Yes [x] No [ ] Project qualifies as: SEQ [ ] PTI [ ] Sector [ ] Geographic [ ] % Beneficiaries [ ] Verified by CESI on: 30 July 2004 Environmental/social review: See paragraphs 4.17 to 4.25. Procurement: See paragraphs 3.20 to 3.24. I. FRAME OF REFERENCE A. Macroeconomic context 1.1 In the 1990s, following the structural reforms implemented during the previous decade, the Uruguayan economy experienced average annual growth of 3.2%, while considerably reducing the inflation rate that fell from over 100% in 1991 to approximately 5% at the outset of the current decade. Despite these successes, the external shocks originated in the second half of the decade by the Asian and Russian crises, the devaluation of the Brazilian real, the drop in Uruguayan commodity export prices, and the recession and subsequent financial crisis in Argentina all had a serious impact on Uruguay’s economy, culminating in the economic and financial crisis of 2002, during which economic activity fell by over 10%. 1.2 However, the decisive fiscal stabilization, monetary, and exchange measures introduced in response to this situation with firm financial backing from the principal multilateral lenders, including the Bank, helped to limit the effects of this crisis on the financial sector, methodically and voluntarily restructure Uruguay’s international obligations, and reembark on the path of economic growth and the gradual recovery of employment levels from the second half of 2003 onward. Consequently, the Uruguayan economy has managed to achieve high growth rates in recent quarters and, following expansion of more than 14% in the first quarter of this year, GDP is currently projected to grow by 7% to 9% for 2004 as a whole. In the current context of economic recovery and rapid growth, one of the main issues facing Uruguay relates to the structural challenges currently hampering the competitiveness of domestic industry, specifically the lack of public investment in
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