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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized ReportNo. 11445-VE STAFF APPRAISAL REPORT VENEZUELA Public Disclosure Authorized URBAN TRANSPORT PROJECT sEPTEMBER 30, 1993 Public Disclosure Authorized Infrastructure Operations Division Country Department I Public Disclosure Authorized 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. CURRENCYEOUIVALENTS Currency Unit = Bolivar (Bs) US$1.00 = Bs. 63 (September92) US$1.00 = Bs. 85.9 (April 93) US$1.00 = Bs. 97.1 (September93) WEIGHTS AND MEASURES Metric system FISCALYEAR January I to December31 ABBREVIATIONSAND ACRONYMS CAMETRO - Caracas Metro Company CBV - Central Bank of Venezuela CVT - VenezuelanTransport Council CVTT - National Traffic Police CORDIPLAN - Ministry of Coordinationand Planning DGSTT - Land Transport Directorate FONTUR - NationalUrban Transport Fund (FondoNacional de TransporteUrbano) FUDECO - Foundationfor the Developmentof MidwestRegion (Fundaci6npara el Desarrollo de la Regi6n Centro - Occidental) FUNDACOMUN - Foundation for Community and Municipal Development (Fundaci6n para el Desarrollode la Comunidad y Fomento Municipal) GOV - Government of Venezuela IDB - Inter-American Development Bank LCA - Local Coordination Agency LORM - MunicipalLaw (Ley Organica de RegimenMunicipal) MINDUR - Ministry of Urban Development MTC - Ministryof Transport and Communications PERL - Public Enterprise Reform Loan PMU - Project ManagementUnit PTS - Public Transport Study UNDP - United NationsDevelopment Programme UT - Urban Transport VOC - Vehicle Operating Costs FOR OMCIAL USE ONLY VENEZUELA URBANTRANSPORT PROJECT STAFFAPPRAISAL REPORT Table of Contents Page No. PROJECTSUMMARY . ................................................... iii I. BACKGROUND................................................. 1 A. Project Background............................................. 1 B. The Urban Sector ............................................. 1 C. Municipal Government in Venezuela................................... 2 D. GOV's DecentralizationStrategy ..................................... 3 II. THE URBANTRANSPORT SECTOR .. 3 A. Overview .3 B. Urban Transport Characteristics.4 C. Institutional Framework.4 D. Regulatory Framework .6 E. Cost Recovery, Pricing and Subsidies.7 F. Sectoral Issues. 9 G. Lessons Learnedfrom Past Projects .12 H. Towards a Better Managed Urban TransportSystem .13 Ill. THEPROJECT .................................................. 14 A. Origin .... .................................................. 14 B. Rationaleand Objectives .......................................... 15 Rationalefor Bank Involvement................................... 15 Objectives ................................................. 15 C. Description ................................................... 16 Part A - Institutional Developmentand Policy Programs.................. 16 Part B - Infrastructure and EquipmentInvestment ...................... 19 D. Project Costs .................................................. 23 E. Indicative Investment Needs........................................ 24 This report is based on the findings of an appraisal mission which visited Venezuela in September, 1992. Mission members included: Messrs. Jorge Rebelo, (Task Manager, Sr. Transport Planner); GerhardMenckhoff, (Sr. Urban Transport Specialist);Gerard Uautaud, (Highway Engineer);and John Cracknell,(Consultant, Traffic Engineer). Messrs. RichardScurfield and John Flora provided the Peer Review. Messrs. Asif Faiz, Orville Grimes and Rainer B. Steckhan are respectively the managing DivisionChief, ProjectsAdvisor and DepartmentDirector for the operation. Ms. Allison Tumer assisted in producingthis report. This documenthas a restricteddistribution and may beused by recipientsonly in the performance of their officialduties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. ii Table of Contents PageNo. F. Financing ..................................................... 24 G. Project EconomicEvaluation H. EnvironmentalAspects ........................................... 27 I. Project Risks................................................... 28 IV. PROJECTIMPLEMENTATION ............................................ 29 A. Institutional Responsibilities........................................ 30 B. Contractual Arrangements......................................... 30 C. ImplementationSchedule .......................................... 30 D. ImplementationArrangements ...................................... 30 E. ImplementationProgram .......................................... 32 F. Procurement .................................................. 33 G. Disbursements ................................................. 35 H. Auditing ..................................................... 36 I. Monitoring, Reportingand Supervision................................. 36 V. AGREEMENTSTO BE REACHEDAND RECOMMENDATIONS.................... 37 ANNEXES: 1. Lessons LearnedFrom Past Projects..................................... 40 2. The Executing Agency: FONTUR...................................... 48 3. Municipal Financesin Venezuela.53 4. Subproject Eligibility Criteria .62 5. CompletedSubproject Appraisals.65 6. FONTURInstitutional Strengthening Program.72 7. National Training Program.77 8. Institutional DevleopmentPolicy Component Studies .82 9. Traffic Police Component.92 10. Road Maintenance Component ................................. 95 11. EconomicEvaluation ................................. 103 12. Detailed Project Costs ................................. 112 13. Project Implementationand Monitoring................................. 118 14. Urban Transport Characteristics ................................. 131 15. Documentsin the Project File ................................. 145 TABLES: Table 1.1 Populationof PrincipalCities .2 Table 3.1 Bank and IDB Projects .21 Table 3.2 Summaryof Project Costs .24 Table 3.3 Project FinancingPlan .25 Table 3.4 Summary of Quantified Subproject Benefits.27 Table 4.1 ProcurementArrangements .34 Table 4.2 DisbursementProfile by Category .35 MAPS: MAP: IBRDN° 22154 iii VENEZUELA URBANTRANSPORT PROJECT LOAN AND PROJECTSUMMARY Borrower: Republic of Venezuela. Executina Aaencies: National Urban Transport Fund IFONTUR)and the Ministry of Transport and Communications(MTC). Amount: USS 100 million equivalent. Terms: Repaymentin 15 years, including five years of grace, at the Bank's standard variable rate. Project Obiectives: The proposed Urban Transport Project aims at improving the quality and efficiency of urban transport in Venezuelancities. To assist in achieving this goal, the primary objectiveof the project is to improveand strengthen national and local institutions engagedin the planning,financing, design, and operation of urban transport systems. In addition, the project will help to increase the efficiency of traffic and transport operations, to preservethe urban transport infrastructure through better maintenance and consequently to assist in reducing user costs and deferring new transport investments. The project is also expected to contribute to poverty alleviation by facilitating access to public transport by the poor. Project Description: The project consists of two parts: Part A - an institutional development and policy program and Part B - an infrastructure and equipment investment program at the municipallevel. Part A accountsfor some 17% of the project cost (US$ 34.8million) and consists of the following components: i) an institutional strengthening program for FONTUR, ii) an institutional strengthening program at the municipal level, iii) a national urban transport sector training program, iv) a traffic police program, v) policy studies and v) preparationof city subprojects. Part B, which representssome 83% of project cost (USS 165.2million), would provide resourcesto individual municipalities for urban transport subprojects. Municipal subprojects will comprise investments in traffic and transport infrastructure and equipment, and associatedmaintenance programs. Project Benefits: The main benefits of Part A (Institutional) will stem from enhancedcapabilities of FONTURto influenceurban transport developmentthrough the allocation of resourcesto well-conceivedprograms and project schemesat the local level, and from increasedmunicipal capabilities. The national training program will strengthen technical capabilities of the municipalities and the technical assistance program for traffic police will begin to bring about better use of existing infrastructure through more effective traffic law enforcement. Part B of the project will ensure that municipalities can effectively discharge their responsibilities arising from the Government's decentralization policy. The iv investment programsfor infrastructureimprovements and maintenanceshould improve the efficiency and quality of urban transport operations. The quantified benefits are in terms of reduced vehicle operating costs and travel time-savingsthrough reducedtraffic congestion. Reductionsin congestionwill make a significant contribution to the environment and hence to the quality of urban life. The poor should benefit from the improved public transport performance because of shorter travel times to and from places of employment. Project Risks: New policies and directions in urbantransport are being