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RETURN TO , ~\ , REPORTS DESI<' RESTRICTED VJITHIN Rep 0 r t No. TO-294a ONE \\lEEK FILE Copy TO (IDA) 14 Public Disclosure Authorized This report was prepared for use within the Bank and the Association. It may not be published nor may it be quoted as representing their views. The Bank and the Association accept no responsibility for the accuracy or .. completeness of the contents of the report. TNTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized APPRAISAL OF HIGHWAY PROJECT COSTA RICA Public Disclosure Authorized October 4, 1961 Public Disclosure Authorized Department of Technical Operations COSTA RICA ---------------APPRAISAL OF A ;UGHl;IAY PRC'JECT TABLE OF COHTEr.i'TS suai\TARY i-ii I. mTRODUCTION 1 II. BACKGROUND mFDRl'1ATION 1 Geographic and Demographic 1 Occupation and Land Ovmership 1 Public Transportation System' 2 III. THE HIGHWAY SYSTEN J Classification and Condition of Roads 3 General HighwC'.y Hanagement 4 l'finistry of PuL1ic "l'lorks 5 Execution, Supervision and Naintenance of Roadworks 5 Traffic Growth and Characteristics 6 Highway Development Plans 7 IV. THE PROJECT 8 General Description 8 Studies, Design and Documentation 8 Estimates of Co:r:struction Cost 9 Execution of Project !dorks 9 Foreign and Local Components of Construction Cost 10 Construction, I'Iaintenance and Survey Equipment 11 Technical Advisory Assistance 12 Financing: Composition of Bank and Association Loan/Credit 12 v. ECOlWNIC JUSTIFICATION 14 Areas Affected by Road Improvements 14 Direct Economic Returns from Road Improv~aents 14 Additional Benefits from Road Improvements 16 Economic Benefits from Nev-r Road Construction 17 Higmlay Haintenance Investment 18 VI. CONCLUSIONS AND RECOHj\IENDATIONS 18 ANNEXES TABlES 1. Road Lengths and Classification, December 1960. 2. Average Annual Expenditure on Roads and Bridges by Different Authorities, 1956 - 1959 3. MinistF,f of Public vJorks Expenditure" 1955 - 1960 4. Vehicle Registration and Gasoline Consurr~tion, 1950 - 1964 5. First Stage (Four-Year) Highway Development PJan 6. Sources of Local Currency for First stage Highl"ray Development Plan 7. Design Standards B. Road Works in First Three Years of Highway Plan 9. Foreign Currency Component of Highway Construction Costs 10. Foreign Currency Investment in Construction, }'Iaintenance and Survey Equipment 11. Application and Sources of Project Funds 120 Direct Economic Benefits of Highway Improvements FIGUHF.B 1. llilinistry of Public vlorks; General Organization 2. Directorate of Public 1rJorks; HigmJay Department M\.PS 1. Costa Fica; Road and Rail Systems 2. Central Zone and l'letropolitan ~'irea SUMMARY (i) The Government of Costa Rica has asked the Bank and the Association to assist in financing the first stage of a seven-year highway development program for the improvement and extension of the country's highvTay network. The foreign currency requirements of a suit.able pro~iect amount to US$ll million equivalent; this wouJd be the first transportation loan to Costa Rica by the Dank or the Association. (ii) The number of road vehicles in Costa Rica has more than tripled in the past ten yeClI's. The resulting increase in traffic volume has overloaded the capacity of a major part of the existing highway netvlOrk, and has caused damage to road surface and foundations. The situation has been aggravated by inadequate road maintenance in the past due mainly to the insufficier:.cy and poor condition of maintenance equipment and repair facilities. (iii) Extensive improvement "JOrks and some new highway construction vlOrks are urgently required to provide adequate facilities for present and expected future traffic. The proposed pro.iect provides for: a) the improvement of 640 lun (about one-third of the total) of existing nat2.0nal and regional roads, and the construc tion of 31 km of new roads; the total estimated cost of the lvorks is about US$13,,2 million equivalent of vJhich the foreign exchange component is about US$702 million equivalent; b) the purchase of mechanical equipment, spare parts and materials for high-tolay construction and maintenance to an amount of about US$3 million equivalent in foreign exchange; c) the foreign exchange cost of surveying instruments, en gineering studies, and consulting services, estimated at about US$0.5 million equivalent. (iv) The pro.iect is technically sound and cost estimates are realistic; it is adequately .iustified economically by the future savings in vehicle oper atirg costs which l~ll result from the improved road transport conditions. (v) The responsible executive agency is the 11inistry of Public l;orh:s; the organization is sound and staff are generally competent although perhaps som81·fhat inexperienced in certain aspects of major high~olay works. The Ninis try is arranging with the U.S, Bureau of Public Horks to provide technical assistance on all phases of the projecto (vi) About one-third of the pro.iect 1'11orks 1dll be executed by force ac count and tHo-thirds by contracts to bo awarded through international compe titive bidding. Although planned for three years, execution of the works "Jill probably take about three and a half years allowing for customary delays and extensions of contract periods. - ii (vii) Financing arrangements appear satisfactory and as the project forms part of a -vn.der highVl'ay development plan to be financed from assigned sources of local currency revenue and special budget appropriations, assurances have been obtained from the Government that the project liwrks "Jill receive priority in the application of funds from these sources • • (viii) The proposed project provides a suitable b,asis for a Bank loan of US~~5.5 million equivalent and an Association credit of US$5.5 million equiva lente A suitable term for the loan liould be 15 years including a three and a half year period of grace~ COSTA RICA. APPRAISAL OF A HIGHWAY PROJECT I <» INTRODUCTION 16 The Government of Costa Rica has requested the Bank and the Associ ation to assist in financing a highway improvement, construction, and mainte nance project which constitutes the first three-year program of a broader seven-year development plano The project provides for improving about 640 km of existing roads; the construction of 31 km of new roads; the equipping of highway const~lction and maintenance divisions; and for associated engineering stUdies and advisory services~ Participation by the Bank and Association w0uld cover the total foreign exchange costs for the project works, equipment and services amounting to US$11 million, and would be the first loan or credit to Costa Rica for transportation purposes~ 2. This appraisal of the project is based upon findings of Bank mis sions to Costa Rica in Decem1~!' 1959, ,Tanuary and December 1960, and upon fi nancial and technical informat~on subsequently submitted by the costa Rican Government in March and May of 1961., IIo BACKGRO:JND INFORMATION Geographic and Demographic 3. Costa Rica (Hap 1) has an area of approximately 51,000 sq. km .. (sli ghtly larger than Switzerland) and may be divided into three main topographical regions--the Caribbean coastal plains and hinterland with a tropical climate and heavy rainfall; the central plateau with a mild temperate climate; and the Pacific coastal plains and hinterland, again tropical but with much less rain than the Caribbean region. Most regions except the Caribbean enjoy a relative ly dry 4-month period from December to Aprilo 40 The population of Costa Rica is approximate~ 102 million and is in creasing at an annual rate of more than 4%, one of the highest net increments in the worlde About one-third of the total population is urban and two-thirds rural0 The central plateau is the most intensively developed and most densely populated area of the countrJr, accommodating over 60% of the total population with proportions of urban to rural population being about equal~ San Jose, the capital, is located in the central plateau at an elevation of about 1200mf the population of the metropolitan area is almost 250,000. Occupation and Land Ownership 5. About half the active population is engaged in agriculture and approx imately 40% of national income is derived from agricultural produots, princi pally coffee, bananas, cacao, and beef cattle. The facilities for producing one of the principal exports, coffee, are owned and operated almost exclusively by Costa Ricans; production of the second most important export crop, bananas, is mainly in the hands of foreigners. - 2 6. Land ownership is widespread among a large number of small holdings; 70% of farms in Costa Rica are less than 20 hectares in area. Most of the small farms are located in the central plateau, while large plantations are more common in the less-densely populated Caribbean and Pacific coastal areas. Public Transportation System " 7. The road and rail systems (Map 1) meet the country1s main domestic transportation requirements. The basic road netl-lork has developed gradually as a series of radiations outwards from San Jose, the traditional center of polit ical and commercial activities. A relatively recent road development has been the extension of the basic network to the north and south (Routes 1 and 2) to form part of the Inter-American high1f.Tay; sections of this highway are still under construction in the south. The present public road system comprises about 3,300 km of all-weather roads and about 10,700 km of local earth roads and tracks. 8. THO independent public railroads link San Jose with the country fS main seaports - Puntarenas on the west coast, and Limon on the east coast. A third independent system, co~prising isolated lengths of railroad, serves large privately mmed banana estates located along the Caribbean and Pacific coastal plains. 9. The present total length of railroad is about 1,390 km, operated by the following three companies: RAILROAD SYSTEM Company Length operated (km) 1.