Document of The World Bank FOR OFFICIAL USE ONLY /12/- ><3 Cco Public Disclosure Authorized Report No. 5530b-CO STAFF APPRAISAL REPORT COLOMBIA Public Disclosure Authorized PORTS REHABILITATION PROJECT October 24, 1985 Public Disclosure Authorized Pro ects Department Latin America and the caribbean Regional Office Public Disclosure Authorized LThis documnenthas a restricted distr;bution and may be used by recipients onlv in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Colombian Peso (Co0$) Col $l = 100 centavos (ctv) Col$152.06 = US$1.00 (September 1, 1985) Col$1,000 = US$6.58 (September 1, 1985) AVERAGE EXCHANGE RATES 1980 1981 1982 1983 1984 47.3 54.5 64.1 78.9 100.8 SYSTEM OF WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilogram (kg) = 2.205 pounds (lb) I ton = 2,205 pounds 'lb) ABBREVIATIONS COLPUEkTOS Empresa Puertos de Colombia S.A. 'MOPT Hinistry of Public Works and Transport FVN National Highways Fund FNCV National Rural Roads Funds DNP National Planning Department DAAC Civil Aeronautic Administrative Department FAN National Aeronautic Fund SENA National Service of Traineeship Fiscal Year January 1 to December 31 FOR OFFICIL USE ONLY STAFF APPRAISAL REPORT COLBIA PORTS REHABILITATION PROJECT TABLE OF CONTENTS Page No. I. PROJECT SUMMARY . I II. THE TRANSPORT SECTOR AND THE POR SUBSECTOR . .. 2 A. The Transport Sector . .. .. .. .. 2 (i) Characteristics . .. .. 2 (ii) Infrastructure . a . .. 3 (iii) Transport Planning, Coordination and Investment . 4 (iv) Fuel Pricing . 5 B. ThePort Subsector . 5 (i) The Port Authority and the Public Port Operations . 5 (ii) Labor Relations . 7 (iii) Port Planning . 8 C. Bank Involvement in the Transport Sector and lending Strategy 8 D. Experience with Past Lending . 10 III. THE PROJECT . 10 A. Objectives . 10 B. Description . 11 C. Equipment Situation and Port Productivity Targets . 13 D. Project Cost, Implementation and Financing . 14 E. Financial Aspects . .. .. 15 (i) Financial Information Systems . 16 (ii) Past Financial Performance . 16 (ii') Future Financial Performance . 19 F. Economic Justification and Benefits . 21 (i) Port Infrastructure Rehabilitation and Improvements . 22 (ii) Cargo Handling Equipment . ... ... 23 (iii) Tugboats . 23 (iv) Overall Project Economic Justification. 24 G. Project Risks and Sensitivity Analysis . 24 This report is based on the findings of an appraisal mission which visited Colombia during October/November 1984. The mission comprised Messrs. G. Unda (Senior Port Engineer); J. Bigosinski, and J. Hello (Consultants) and Ms. Rios (Financial Analyst). Ms. K. Sierra (Economist) assisted the mission in the economic evaluation. The report has been edited by Ms. V. Foster. This document has a retricted distnbution and may be used by recipients ondy in the performnc of their offida dues Its contents maynot otherwise be disclosed without Wodd Dak authorniati - ii - TABLE OF CONTENTS (Continued) Page No. IV. PROJECT IMPLEMENTATIONDETAILS . 25 A. Cost Estimates, Finance and Disbursements . 25 B. Execution and Procurement . ...... .. ......... .. ... 25 C. Special Account . .. .... .... 28 D. Project Monitoring, Semi-Annual Consultations and Kid-Term Review 28 V. AGREEMENTS REACHED AND RECOMMENDATION. 29 TABLES 2.1 Summary of Port Traffic in 1983 and 1984 . 32 2.2 Actual and Forecast Public Terminal Traffic, 1978-2000 . 33 3.1 Existing and Proposed Equipment . 34 3.2 Proposed List of Equipment and Procurement Schedule . 35 3.3 Existing COLPUERTOS' Tugboat Fleet . 36 3.4 Economic Evaluation and Sensitivity Analysis . 37 4.1 Detailed Cost Table - Buenaventura . .. .... 38 4.2 Detailed Cost Table - Cartagena. ....... 39 4.3 Detailed Cost Table - Barranquilla . 40 4.4 Detailed Cost Table - Santa Marta . .* 41 4.5 Detailed Cost Table - Institutional Development . 42 4.6 Detailed Cost Table - Project Supervision of Construction and Studies 43 4.7 Project Cost Sulmmary . .. .. .. a .. .. 44 4.8 Estimated Schedule of Disbursements . .. 45 ANNEXES 1. Port Traffic Analysic . ..................... 46 2. Financial Evaluation . 55 3. Labor and Equipment Situation and Productivity Targets . 79 4. Detailed Project Description . .. *6*** 93 5. Details of the Training Component . .. a 96 6. Economic Evaluation . 101 7. Project Monitoring and Reporting . 116 8. Related Documents and Data Available in the Project File . 121 CHARTS World Bank 27106 - Project ImplementationSchedule World Bank 27107 - COLPUERTOS Organization Chart World Bank 27108 - Port Terminals Organization Chart MAPS IBRD 18406 - Colombia Transport System IBED 18729 - Ports Rehabilitation Project - Cartagena IBRD 18730 - Ports Rehabilitation Project - Santa Marta IBRD 18731 - Ports Rehabilitation Project - Buenaventura COLOMBIA PORTS REHABILITATIONPROJECT I.' PROJECT SUMMARY Borrower: Empresa de Puertos de Colombia, S.A. (COLPUERTOS) Guarantor: Republic of Colombia Amount: US$42.8 million Terms: Repayment in 17 years, including four years o' gratLe, with interest at the Bank's standard variable rate. Project This would be the first Bank involvement in the port sub- Description: sector. The project's objectives are to (i) strengthen COLPUERTOS' managerial, financial, administrative and operational capabilities to improve port services and reduce operational costs and (ii) upgrade port capacity by restoring port installations and increasing port productivity to enable the public port system to cope with future traffic demand and ensure adequate support to Colombia's foreign trade. The proposed project consists of (a) civil works to rehabilitate existing port installations and to upgrade port utilities; (b) provision of heavy cargo handling equipment, workshop machinery and tools, second hand tugboats, training equipment and material, and computer hardware; and (c) management, operational, engineering and training consulting services. Risks: The main risks associated with the project are the uncertainty regarding traffic levels and COLPUERTOS' failure to achieve productivity targets. The civil works components are not par- ticularly sensitive to these risks, and, in the case of the equipment components, the risks have been minimized by concentrating on replacement of obsolete items. The project is associated with institutional changes aimed at restructuring the terms of compensation to port labor and establishing a new pension system for port workers, to free COLPUERTOS from the heavy financial burden imposed by the current practices. The changes envisaged will permit COLPUER- TOS to reduce substantiallylabor costs and long-term pension obligations,while improving manpower efficiency, thereby enabling the enterprise to transfer these benefits to port users through better service and lower port charges. The Government and COLPUERTOS have already shown their commitment to these objectives by pursuing actively, through negotiations with the port labor unions, the necessary changes to legally binding labor agreements, and by initiating the legal process to establish a pension system self-sufficient in the medium term and financially separated from COLPUERTOS. -2- Estimated Project Costs Local Foreign Total (US$ million) Civil Works 12.10 11.10 23.20 Equipment - 17.20 17.20 Institutional Development 0.60 3.00 3.60 Project Supervision and Studies 0.90 3.60 4.50 TOTAL BASE COST 13.60 34.90 48.60 Physical Contingencies 1.40 2.80 4.20 Price Contingencies 2.20 5.00 7.20 TOTAL PROJECT COST 17.20 42.80 60.00 Financing Sources: Proposed IBRD Loan - 42.80 42.80 COLPUERTOS' Own Resources 17.20 - 17.20 TOTAL FINANCING 17.20 42.80 60.00 Disbursements: Bank FY 86 87 88 89 90 91 (Project Only) Annual 5.0 11.0 13.0 7.0 4.0 2.8 Cumulative 16.0 29.0 36.0 40.0 42.8 Rate of Return: 38% 1/ Rounding up to the nearest integer. II. THE TRANSPORT SECTOR AND THE PORT SUBSECTOR A. The Transport Sector (i) Characteristics 2.01 Colombia's advantage of having coast lines on both the Pacific Ocean and the Caribbean Sea is largely offset by the difficulty of movement between the coasts and the interior. The three massive ranges of the Andean Mountains running the length of two-thirds of the country present formidable obstacles to communication among its main population centers, which, until recently, developed as separate and somewhat isolated regions. The Magdalena River, until the mid-century, provided the only overland route between the Central region and the Caribbean coast and, even so, with serious naviga- tional problems during the dry season. In the 1950s, however, under a drive toward integration and modernization, the transport system began to evolve into a national network. The development of the country's railways, trunk highways and civil aviation has greatly improved inter-regional communication and national integration. 2.02 The effort to establish the basic transport infrastructureabsorbed a considerable proportion of the country's public investment. Transport rep- resented about half of the Central Government's investment in the late 1950s. More recently, with the basic infrastructure in place, transport's share has declined, and, since the late 1970s, it has been around 13%. In 1984, the transport sector accounted for some 8% of the GDP, compared to about 5% in 1950. In the same year, the country's domestic surface transport system moved 25.4 billion ton-km of freight, of which 88% by road, 5Z by inland navigation, 4% by coastal shipping and 3% by railways. Roads and aviation dominate passenger traffic, accounting