Peru - Port of Pisco Project

CONFIDENTIAL Report No. 816 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT PERFORMANCE AUDIT REPORT ON PERU PORT OF PISCO PROJECT (LOAN 446-PE) July 25, 1975 Operations Evaluation Department  PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 446-PE) PROJECT DATA Loan Amount US$9.1 million Amount Disbursed US$8.3 million Amount Cancelled US$.8 million Date of Loan Agreement May 13, 1966 Date of Effectiveness July 15, 1966 Original Closing Date December 31, 1970 Final Closing Date March 30, 1973 First Supervision Mission September 1967 Final Supervision Mission May 1971 Exchange Rates (Soles) Through September 1967 US$1 = S/. 26.8 September 1967 to present US$1 = S/. 38.7  PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 446-PE) PREFACE This report presents an audit of achievements under the Peru Port of Pisco Project, for which Loan 446-PE of May 13, 1966, in the amount of US$9.1 million, was finally closed on March 30, 1973. This performance audit is based mainly on correspondence and reports in Bank files (Loan and Guarantee Agreements, Appraisal Report, Progress Reports, Supervision Reports, and correspondence between the Bank and the Borrower), as well as on discussions with staff members of the Peru Ministry of Transport and Communications, the Empresa Nacional Puertos del Peru (ENAPU), and the Bank. A Project Completion Report pre- pared by the Latin America and Caribbean Regional Office in December 1974 also was useful in the preparation of this report. In February 1975, a one week visit was made to the Republic of Peru in connection with this report. The valuable assistance of the Peru Ministry of Transport and Communications and ENAPU is gratefully acknowl- edged.  PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 446-PE) TABLE OF CONTENTS Page No. Summary i- ii I. Introduction 1 II. The Bank and the Loan 2 III. Project Implementation 4 Delays 4 Costs 5 IV. Institutional Achievements 5 Establishment of NPA 5 Consultants' Services 7 V. Traffic, Tariffs, and Financial Performance 8 VI. Economic Justification 9 VII. The Role of the Bank 11 VIII. Conclusions 13 Annexes 1. Detailed Project Description 2. Main Provisions of the Loan Agreement and Supplementary Letters 3. Estimated and Actual Project Costs 4. Forecast and Actual Traffic of the Port of Pisco, 1965-73 5. 'Forecast and Actual Revenues and Expenses of the Port of Pisco, 1970-73 6. Distribution of Project Benefits 7. Ocean Freight Rates from the Port of Pisco Map: Major Ports and Service Areas  PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 446-PE) SUMMARY In May 1966, the Bank made a US$9.1 million loan to the Government of Peru to help finance the foreign exchange cost of a US$14.7 million port project. The project included: (a) construction of deepwater facilities at Pisco (96% of project costs); (b) feasibility studies and design works for improvements at three river ports and one ocean port (3% of project costs); and (c) consultants' services (1% of the project costs). Special loan covenants and supplementary letters required the Government to: establish a National Port Authority (NPA), provide housing for port workers, establish modern accounting procedures for NPA, maintain charges for port services related to actual costs so that a 6% rate of return on net fixed assets would be obtained, use the proceeds from a "Special Account" only for port investments, and reimburse that Special Account for any amount transferred from it to the Treasury. The project was completed in January 1973 about two years later than expected at appraisal. The closing date was postponed twice and the loan was finally closed on March 30, 1973. The main reason for the post- ponements of the closing date was a delay in completion of the feasibility studies. Completion of the other project components was also delayed. A nine month delay occurred in completing the construction of the port due to a design change in one of the wharfs because of unexpected soil conditions encountered in its foundation. According to Peruvian officials involved with the project, this delay most likely could not have been prevented. In addition, construction of housing for port workers has not yet started, establishment of NPA was delayed for about three years, and appointment of the consultants was delayed for about two years. The construction of the houses for port workers was first delayed by financial problems and then by technical difficulties with the construc- tion site. An alternative site about 20 km from the port is now under consideration. The National Port Authority was finally established in January 1970. Internal political factors and the change in Government in October 1968 were the major reasons for the delay. Although its organization did not fully comply with the principles agreed with the Bank, it is an improvement over the previous organization of the sector. - ii - The accounting consultants did most of the expected work but their recommendations were not fully implemented because of the late inclusion of the Port of Callao under the National Port Authority. A special training program was developed by the consultants and about 30 people received training in accounting procedures. The total project cost was very close to the appraisal estimate: an 8% overrun occurred in the local component and a 9% underrun occurred in the foreign exchange component. This close relation is explained by a revision of the project in late 1968 to avoid a substantial cost overrun because of the redesign of the wharf and general price increase following a 45% devaluation of the sol in 1967. The revision resulted in deletion of some items included under port construction. The port of Pisco started operations in 1970. Traffic was slightly higher than expected in 1970-71, but it has been decreasing thereafter and in 1973 was only 28% of the expected level. The main reasons for the decrease are the lack of growth in traffic other than fish meal and the decline in fish meal traffic after 1971, when the national production of the commodity dropped. This traffic decrease is the main reason for the net deficit in port operation in 1973. For all other years, there was a surplus which was sufficient to obtain a rate of return on net fixed assets above the 6% set at appraisal. A provisional tariff system was introduced in 1970 and its general level seems adequate. However, there are inefficiencies in its structure since there have been no studies to relate that structure to the cost of services. The economic rate of return is estimated at 12% at audit against 16% at appraisal. The lower than expected rate of return is mainly explained by the sudden decrease in traffic following the crisis of the fish meal industry. Most of the benefits expected at appraisal have materialized. In regard to the distribution of benefits, a substantial part of the benefits accruing to port users in the form of elimination of losses in cargo and reduction in handling costs (59% of the project benefits) have been absorbed by the Port Authority through higher port charges for cargo, but only 4% of the benefits accruing to shipowners in the form of reduction in vessel turnaround time have been absorbed by the Port Authority. Peruvian shipowners have gained increased participation in this benefit because the share of Peruvian ships out of the total number of ships calling in the new port has steadily increased since 1970. It was not possible to determine to what extent the savings accruing from this reduction in ship turnaround time has been passed on to port users, but this issue will be considered in a future study on the distribution of benefits from port investments by the Operations Evaluation Department. - iii - The Bank played- an important role in the strengthening of the port sector through this project. The need for a National Port Authority, the employment of consultants and feasibility studies to establish priorities in a future port investment program were important Bank initiatives. Despite the delays, the Bank can be credited with the eventual achievement of these institutional objectives. It is unlikely that the Bank could have done much to increase the impact of the consultants' recommendations, but closer attention to the effect of improvements in the efficiency of port operations on the compositionof the project and to the need for complementary investments might have improved the impact of the project. The still unresolved issue of housing for port workers is interesting. The audit suggests that in deciding the issue the Government should compare in detail the costs and benefits of providing the housing close to the port because preliminary calculations indicate that transport of the workers from PJsco might be the most economical solution. - iii - The Bank played- an important role in the strengthening of the port sector through this project. The need for a National Port Authority, the employment of consultants and feasibility studies to establish priorities in a future port investment program were important Bank initiatives. Despite the delays, the Bank can be credited with the eventual achievement of these institutional objectives. It is unlikely that the Bank could have done much to increase the impact of the consultants' recommendations, but closer attention to the effect of improvements in the efficiency of port operations on the compositionof the project and to the need for complementary investments might have improved the impact of the project. The still unresolved issue of housing for port workers is interesting. The audit suggests that in deciding the issue the Government should compare in detail the costs and benefits of providing the housing close to the port because preliminary calculations indicate that transport of the workers from PJsco might be the most economical solution. PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 446-PE) I. INTRODUCTION 1.01 The loan for the Port of Pisco (446-PE) was the fourth Bank involvement in the Peruvian port sector. The first loan, in 1952 (57-PE), and the second, in 1958 (208-PE), totalling US$9.1 million, were tohelp expand and modernize Callao, the port for Lima and the largest port in Peru. The third loan in 1964 (373-PE), for US$3.1 million, was to construct new port facilities at Paita in northern Peru. 1.02 Port investments had been of high priority to accommodate the growing Peruvian trade. But the provision of deepwater facilities had been difficult because the Peruvian coast is rocky, with stretches of shallow water and only a few natural harbors where berths could be constructed with- out breakwaters. Therefore, in the early 1960s only a few ports had berths for deepwater vessels, and the growing trade was leading to a large number of small lighterage ports along the 2,000 km coast. 1.03 The expensive operation of transferring cargo by lighters between shallow jetties and oceangoing ships at anchor in deep water led the Government to focus its Port Investment Plan on improvement of selected ports where modern deepwater facilities could be provided. One important item of that Plan during the 1965-69 period was Pisco, a long-established lighterage port about 275 km south of Callao (See Map). 1.04 Pisco and the other Peruvian ports, except Callao and Salaverry, were operated and managed by the Directorate of Port Administration (DPA), a department of the Ministry of Finance and Commerce. This administrative arrangement had serious drawbacks as it caused DPA to lack financial and administrative autonomy. Port charges were treated as income and operating costs as expenses in the Government's budget. This situation had an adverse effect on financing of port expansion. Although new port works were supposed to be financed through a special port charge, the "Special Account," the Government's budgetary laws caused the unspent balance in that account at the end of each year to be transferred to the Treasury with no reimbursement to DPA. 1.05 Another drawback of the administrative arrangement was the serious shortage of competent qualified staff in DPA. The main reason for the shortage was tight Government budgetary control. That control not only prevented DPA from expanding its management staff to keep pace with growing traffic, but also made it difficult for DPA to attract qualified staff because salary scales allowed by the Government were unattractive. -2- 1.06 Given that unsatisfactory situation, the Bank was very concerned in its relation with the Government leading to Loan 446-PE for the port of Pisco that a National Port Authority (NPA) should be created and established. The Bank felt that this NPA should be financially and administratively autonomous as well as responsible for management of all Peruvian ports except Callao, which should continue to be operated by its own port authority. II. THE BANK AND THE LOAN 2.01 The Government of Peru first approached the Bank in late 1964 regarding a project for construction of new port facilities at Pisco. In May 1966, about one and a half years later, Loan 446-PE was signed to help finance the project. 2.02 The major issues discussed by the Bank and Government during that period related to: (a) forecasts of port traffic; (b) establishment of NPA (c) provision of housing near Pisco for port workers and (d) reimbursement of proceeds from the Special Account until the creation of NPA. 2.03 Port traffic in 1965 was growing much faster than expected in the latest available forecast, made for the appraisal of the port of Paita in 1963. The main reason was the explosive growth of the fish meal industry after 1961, the latest year for which information was available. This substantial traffic growth had important implications in relation to the timing of construction and the design of the port of Pisco.1/ 2.04 Construction was originally scheduled to begin in 1968. But, in view of the rapid traffic growth, the Government decided to advance construc- tion, and submitted an application to the Bank to help finance a project which provided for three berths. However, the Bank's appraisal mission in July 1965 found that, according to the new traffic forecast, the capacity of three berths would be exceeded in 1970 and that of four berths in 1975. The Bank, therefore, recommended that a fourth berth should be included in the project, and this recommendation was accepted by the Government. 2.05 Given the inadequate existing administrative arrangement for ports, creation and establishment of NPA through this project was a major goal of the Bank. The Government and Bank discussed the general principles of the legislation to create NPA, and agreed on the main provisions of the legislation and on a target date for establishment of the Authority. As the lack of adequately trained personnel might have hampered the effective- ness of NPA, the Bank proposed that consultants' services should be financed under the project. These services were to: (a) advise NPA on accounting 1/ The 1963 traffic forecast assumed traffic of 346,000 tons in 1970 and 395,000 tons in 1975. New data available in 1965 suggested that the port should be prepared to handle dry cargo of about 500,000 tons in 1970 and 700,000 tons in 1975. - 3 - procedures; (b) prepare tariff charges at Pisco and Paita based on the cost of different services; (c) assist in implementation of those tariffs; and (d) advise on operating procedures and recommend improvements in efficiency for all NPA ports. In addition, the Bank suggested that feasibility studies to determine priorities for the Port Investment Plan should be included in this project. 2.06 Housing for port workers became an issue because .the proposed port location was about 35 km from the nearest town, Pisco, and therefore, about 154 families would have to be housed closer to the port. After discussion within the Bank, this item was deleted from the project because the Bank's lending policy at the time did not permit financing of this type of invest- ment. The Bank consequently asked the Government to take the necessary steps to provide adequate housing for port workers by project completion time. The Government was planning to build a new town close to the port, and the housing for port workers would be part of it. 2.07 Finally, the Bank's purpose in raising the issue of proceeds from the Special Account was to ensure that until NPA was created,the unspent balance in this account transferred to the Treasury at the end of each year would be reimbursed to DPA. In the 1964 loan agreement for the port of Paita, the Government had agreed that proceeds of the Special Account would be used only for port investment. Despite that provision, substantial unspent balances were transferred to the Treasury at the end of 1964 and 1965. To ensure that the proceeds would be used exclusively for port investment, the Bank again requested the Government to ensure that it would reimburse the Special Account promptly for any year-end balance transferred to the Treasury. The Government agreed to this request. 2.08 Negotiations were held in March 1966, and a US$9.1 million loan was signed in May 1966. The total cost of the project was estimated to be US$14.7 million, and the loan was to cover the entire foreign exchange cost. The main components of the project were: (a) construction of deepwater facilities at Pisco; (b) feasibility studies and design works for improve- ments at the river ports of Iquitos, Yurimaguas, Pucallpa and Maldonado and the ocean port of Chimbote; and (c) consultants' services. Details are described in Annex 1. 2.09 Special loan covenants and supplementary letters required the Government to: (a) establish a National Port Authority; (b) provide housing for port workers; (c) establish modern accounting procedures for NPA; (d) maintain charges for port services related to actual costs so that a 6% rate of return on net fixed assets would be obtained; (e) use the proceeds from the Special Account only for port investments; and (f) reimburse that Special Account for-any amount transferred from it to the Treasury. Details about the covenants and supplementary letters are given in Annex 2. III. PROJECT IMPLEMENTATION 3.01 The project was completed in January 1973, about two years later than expected at appraisal and after a revision in late 1968 in which some of the items included under port construction were deleted. The closing date was postponed twice, and the loan was finally closed on March 30, 1973 (the original closing date was December 31, 1970). An 8% overrun occurred in the local component, while a 9% underrun occurred in the foreign exchange component (US$8.247 million as against US$9.092 million) (Annex 3).1/ Delays 3.02 The main reason for postponement of the closing date was a delay in completion of feasibility studies for the river ports (2% of the actual total project cost). These studies were not completed until January 1973. This was largely due to the Government's decision to postpone finalization of the preliminary version, submitted in late 1968, because of the lower than expected traffic growth in these ports. In early 1970, as traffic growth had resumed, the Government decided to update the exisuing studies and complete the remaining parts. But its slowness in engaging consultants led to further delays. These feasibility studies were subsequently used in the preparation of the proposed Lima-Amazon Transport Corridor Project,which is currently under consideration for financing by the Bank. 3.03 A nine-month delay occurred in completing construction of the port (97% of the actual project cost) due to a design change in the wharf because of unexpected soil conditions encountered in its foundation. Some research on the soil conditions was done during design of the project, but according to Peruvian officials involved with the project this delay most likely could not have been prevented. 3.04 A substantial delay arose in relation to construction of housing for port workers. The Government had agreed to provide these facilities before December 31, 1968. However, the Government has still not been able to start construction. The initial factor contributing to the delay was the longer than expected preparation of plans for the town, which were not ready until late 1967. Then, the method chosen by the Government for financing the town construction was not viable under Peruvian law. 2/ 1/ The local and foreign costsof the project are presented separately because of the 45% devaluation of the sol in 1967. 2/ Construction of the houses was proposed to be financed through the sale of land owned by the Government. But according to Peruvian law, those proceeds could not be used for a specific purpose and, therefore, had to be transferred to the Treasury. - 5 - The proposed revision in the legislation was still in the Congress when a military takeover occurred in October 1968. The new Government revised the plans, and found technical difficulties with the construction site. An alternative site about 20 km from the port is now under consideration. Construction at that location will not remove the need for daily transport of port workers, estimated to cost about S. 1 million/year (about US$25,000 or 4% of port operating expenses in 1973). Costs 3.05 The close relation between the estimated and actual costs of the project (Annex 3) is explained by the revision of the project in late 1968. A substantial cost overrun was expected at that time due to redesign of the wharf (mentioned under "Delays") and the general increase of domestic prices following the devaluation of the sol. These factors, together with the difficult financial situation of the Government which already was incurring important delays in payments to contractors, led to revision of the construction works to maintain the cost of the project within the appraisal estimate. Some of the buildings and internal roads were to be constructed to lower standards than originally planned and other items, such as construction of two of the five transit sheds and a pumphouse, were to be deleted. The Bank approved this revision after being assured by the consultants that port efficiency would not be seriously affected. In retrospect, these deletions appear reasonable in light of the budgetary constraints at the time. 3.06 The lower final cost of technical studies is explained by the fact that the feasibility study of the port of Chimbote, originally included for financing in this loan, was financed from other sources. The preliminary study was done by Corporacion del Santa, the owner of the steel plant which is the main user of the port, and the final study was financed with funds provided by the UK for repair of earthquake damage in Chimbote. 3.07 Finally, the higher than expected expenditure for consultants' services is due to financing of a port operations consultant who was working with DPA at the time of project appraisal, and of training of some DPA staff in US ports. 3.08 In early 1973, the Loan Account contained an undisbursed balance of about US$845,000, which was cancelled. IV. INSTITUTIONAL ACHIEVEMENTS Establishment of NPA 4.01 NPA was finally established in January 1970, about three years later than the date agreed at appraisal, and with an organization that did not fully comply with the principles agreed with the Bank. Internal political factors and the change in Government in October 1968 were the major reasons for the delay. - 6 - 4.02 Legislation to c7reate NPA was sent to Congress in late 1965. Following extensive discussions with the Bank in 1966, the Government amended the legislation to comply with the general principles set forth in the loan agreement and supplementary letters. Consideration of the legislation by Congress was continuously delayed because of the increasing deterioration of relations between the Executive Branch and Congress. At the same time, strong pressure was exerted by some sectors of the Govern- ment to create regional port authorities instead of NPA. These factors led to several postponements in the deadline for creating NPA. Finally, in May 1968, the Bank became aware that there was no likelihood that the Executive Branch would be able to convince Congress to pass the necessary legislation. 4.03 This factor, together with some problems in other areas of the project, 1/ led the Bank to consider seriously the possibility of suspend- ing disbursements under this loan, but a final decision was postponed until the end of 1968. In the meantime, because of the country's difficult economic situation, the Executive Branch was given special legislative powers for a 60-day period. This circumstance was used by the Executive Branch to create NPA by a special decree in August 1968. However, NPA was never established because the decree was suspended after the change in Government. 4.04 In 1969, the new Government undertook a substantial reorganiza- tion of public administration. The Bank insisted on the need for a law creating NPA, and was given the opportunity to comment on the legislation. A law was finally passed in January 1970 creating a national port authority under the name of Empresa Nacional de Puertos del Peru (ENAPU). 4.05 ENAPU is a decentralized government agency under the general supervision of the Minister of Transport and Communications through the General Directorate of Water Transport (GDWT). It has the full juridical status as well as financial and adminstrative autonomy that was lacking in NPA. ENAPU has its own separate budget, and can: retain surplus, carry on an investment program on the existing ports, set its own salary structure to attract and retain qualified staff, and set port charges and ship dues with the approval of the Ministry of Transport. ENAPU's manage- ment (formerly the top management of the Callao Port Authority) is competent and, according to Bank supervision missions, port administration is more efficient than before. 4.06 Although ENAPU is an improvement over the port administration which existed before 1970, there are at least two areas in which further improvements seem possible. First, the division of responsibilities between ENAPU and GDWT does not seem to be efficient. ENAPU is responsible for operation of the existing ports, while GDWT is responsible for overall 1/ Delays in the appointment of consultants and in the construction of houses for port workers. - 7 - planning and execution of hew ports. When the works in the new ports are completed, they are transferred to ENAPU. As a result of the division, the possibility exists of inadequate coordination between agencies and inadequate participation of ENAPU in port development plans. Second, private users of the ports are not represented on the Board of ENAPU, to which the Government appoints all members. Inclusion of representatives of private users might contribute to the independence of ENAPU's decisions and to better port operations and planning. Consultants' Services 4.07 This section deals with consultants in accounting and administra- tive matters. The work on operational aspects was limited to the services of a port expert who was already advising DPA at appraisal time. Substantial delays occurred in the appointment of consultants, and although most of the expected work was carried out, it had only a limited impact. The main bene- fit from the consultants' work was the training of local staff. 4.08 The consultants were appointed in May 1968, about two years later than expected. The substantial delay was due to the lengthy process required under Peruvian law. The Bank played an important role in expediting the process, and it can be credited to a large extent with obtaining the final appointment of the consultants because of its position about suspending disbursements in early 1968. 4.09 The consultants completed the main aspects of their draft report in early 1969. At that time, they produced general and specific accounting manuals. The former set out the general principles for establishing a modern decentralized accounting system, while the latter explained the accounting procedures applicable to .a particular decentralized port. The consultants also made available a statistical manual on the system for collection of information in each port. They also produced manuals on internal auditing procedures and a methodology for the revision of port charges. 4.10 Because implementation of these accounting procedures would be delayed by lack of staff with adequate technical skills, a special training program was developed by the consultants. Three courses were given during 1969 -- two at the port of Matarani in May 1969 and August 1969 and one at the port of Salaverry in September 1969. Each course lasted about two months, and about 30 people participated from different public ports. 4.11 Staff training can be regarded as the most important contribution of the consultants because the accounting and other administrative procedures they developed were not fully used by ENAPU. In the case of the accounting procedures, the main reason was the late inclusion of the port of Callao in ENAPU. The accounting staff of Callao, who became the nucleus for the Accounting Department of ENAPU, was not very sympathetic toward the work of the consultants. This factor, together with the fact that the work by the consultants was developed for a NPA -t:hat did not include Callao, led ENAPU - 8- to develop its own accounting system. In the case of the statistical manual, ENAPU developed a system for the collection of information that they claim permits a more complete coverage than the system suggested by the consultants. The methodology for the revision of port tariffs was not used either. 4.12 It is difficult to assess to what extent these accounting and administrative procedures developed by ENAPU were influenced by the work of the consultants. In our opinion, even though the consultants' suggestions were not fully implemented, the general principles were probably useful to ENAPU in the development of its own procedures. V. TRAFFIC, TARIFFS, AND FINANCIAL PERFORMANCE 5.01 The port of Pisco started operations in early 1970. Traffic was higher than expected in 1970-71, but it has been decreasing thereafter. A new provisional tariff system was introduced by ENAPU in early 1970, and an operating surplus was achieved in all years except 1973. 5.02 The uneven development of traffic during the 1970-71 and 1972-73 periods is explained by the lack of growth in traffic other than fish meal and by a decrease in exports of fish meal after 1972 (Annex 4), as can be observed in the following table: Actual Traffic as a Percentage of Expected Traffic Total Traffic Fish Meal Other Traffic 1970 111 155 41 1971 103 159 36 1972 79 110 37 1973 28 25 31 5.03 Traffic other than fish meal has been 60%-70% lower than expected at appraisal. The Bank expected this traffic to increase from less than 100,000 tons to about 200,000 tons by 1970, but it has remained at a fairly constant level. The main reason is the lack of diversion of exports of mineral ore from the port of Callao. The production area is closer to Pisco than to Callao, but the lack of adequate road access to Pisco has prevented any major diversion of traffic. The Ayacucho-Pisco route (financed by the Government) was intended to provide that access; however, its construction was substantially delayed, and is not expected to be completed until 1976. 5.04 Exports of fish meal through Pisco amounted to only 97,000 tons in 1973 as against an average of about 500,000 tons in 1970-71. This tremendous decrease in traffic followed the national trend in production of fish meal. In 1970, after a decade of explosive expansion all along - 9 - the Peruvian coast, production of fish meal started to decline. A record 2,000,000 tons was exported in 1970 as against 500,000 tons in the early 1960s. But after 1970, production started to decrease and by 1973 only 327,000 tons were exported. This substantial drop is explained to some degree by over-fishing and by a sudden biological change in the sea brought about by changes in ocean streams along the Peruvian coast. Over- fishing was stimulated by rising international prices and the target catch for 1975 (about 2,000,000 tons) was reached five years earlier. 5.05 This decrease in traffic is the major reason for the net operating deficit in the operation of the port in 1973 (Annex 5). In all other years, there was a surplus which was enough to attain a rate of return on net fixed assets above the 6% set at appraisal. 5.06 The general level of tariffs seems to be adequate, but there are inefficiencies in its structure since there had been a lack of studies to relate tariffs to costs of services. The tariff system now in use was introduced by ENAPU in 1970 on a provisional basis until a more elaborate tariff system based on costs of services could be implemented. Under this provisional system, ship dues are the same for all ports while cargo dues vary from port to port. Cargo dues are in the form of fixed rates per ton and are divided in two parts: a fixed charge due in soles and a complementary charge due in US dollars. This new system is much simpler than the one used before 1970, in which cargo dues were a combina- tion of ad valorem and per ton charges contained in a number of different laws. 5.07 Therefore administration of the new tariff system is much easier than that of the previous one, but the achievements in this area still are below the Bank's expectations. There is no relation between cargo and ship dues and costs of providing services. Ship dues have not changed since 1968, and account for only about 5% of the operating revenue of Pisco. Studies to relate tariffs to costs of services have been seriously delayed, and only recently ENAPU has undertaken a study on this subject with the assistance of UNDP. 5.08 Finally, the Government did not comply with the provision of the loan agreement regarding reimbursement of funds from the Special Account. During 1965-66, a total of about S/. 69 million of undisbursed balances in the Special Account was transferred to the Treasury without reimburlsement. In late 1967, following a change in budgetary laws, the Special Account was eliminated and funds for port investment were provided from the' Government's budget. VI. ECONOMIC JUSTIFICATION 6.01 The rate of return is estimated as 12% at audit against 16% at appraisal. The lower than expected rate of return is mainly explained by the sudden decrease in traffic following the crisis of the fish meal - 10 - industry. As the audit rate of return has been derived under conservative assumptions regarding recuperation of the fish meal industry, the actual rate of return probably is higher than 12%. 1/ 6.02 Most of the benefits expected at appraisal materialized. Sub- stantial reductions occurred in handling costs, vessel turnaround time, and losses in handling cargo of fish meal. However, the benefits regarding the diversion of traffic from Callao (about 20% of expected benefits) did not materialize. 6.03 Benefits relating to the reduction in handling costs are estimated at S/. 35.6/ton in the case of fish meal and minerals (about 90% of total traffic) as against S/. 34/ton at appraisal. 2/ Savings in handling costs at audit are estimated on the basis of savings in operating costs of lighters (S/. 16.8/ton) and savings in loading of cargo on lighters and unloading of cargo from lighters to ships as against the costs of loading ships directly from the docks (S/. 18.6/ton). A comparison of this methodology with the one used at appraisal is not possible since the latter is not available. 6.04 Another important source of benefits has been the reduction in vessel turnaround time. There are no figures to permit direct comparison of vessel turnaround time before and after the project, but estimates by GDWT indicate a reduction of about three days/ship. 3/ This reduction would have led to a savings of about 860 ship days for transporting the 515,000 tons of dry cargo expected in 1970 at appraisal. For that year, the appraisal estimated a saving of about 775 ship days, which is remarkably close to the 860 ship days that would have been saved on the basis of GDWT's estimates. 1/ Traffic is assumed to remain constant at the low level of 1973 (175,000 tons as against 600,000 tons in 1970-71) for five years. Beginning in 1978, traffic is assumed to recuperate to the 1972 level (about 500,000 tons) and to remain constant thereafter. 2/ The audit estimates are based on 1970 prices, while the appraisal estimates were on 1966 prices. But as there have not been major changes in the rates for transport on the lighters or in stevedore charges, the comparison is valid. 3/ This estimate is quoted in: OAS, CIES, "Antecedentes para el estudio sobre mejoras portuarias y su incidencia en los fletes" (CIES/CECON/12, 11-71). According to this publication, the average stay of a ship in the old port was about four days while it is one day in the new port. By using this estimate, the project benefits probably have been underestimated because of the likely increase in vessel turnaround time in the old port as traffic has grown; this could, in addition, have led to freight rate surcharges. - 11 - 6.05 Finally, another source of benefits has been the elimination of losses of fish meal as it is loaded on ships alongside the dock instead of through lighters. The appraisal estimated that these losses would be reduced by 2% of the total fish meal exports through Pisco. A precise check of this figure has not been possible, but indications are that losses of fish meal have been substantially reduced. This source of benefits has become much more important than expected at appraisal because of the substantial increase in the price of fish meal over time. In 1970, it was 75% higher than in 1966 and has remained fairly stable thereafter. 6.06 Distribution of the economic benefits of this project will be analyzed in detail in a future study by the Operations Evaluation Department. However,.a rough analysis of the likely participation of shipowners, port users, and the Port Authority (Annex 6) suggests that: a) Shipowners have benefitted from a substantial reduction in vessel turnaround time, which accounts for 41% of the total project benefits.!' Only about 4% of these benefits from reduced turnaround time have been absorbed by the Port Authority. With regard to the remaining 96, it is not possible to determine how much was passed on to port users.17 Freight rates have not been reduced (Annex 7), but this may be the consequence of factors other than the port improvements, like the oil crisis. Some proportion of these savings may, however, have been passed on to port users because of the increasing use of charter ships to transport fish meal. b) The Port Authority has absorbed, through charges to the cargo, about 20%-40% of the benefits accruing to port users because of the reduction in handling costs and elimination of losses to the cargo (about 59% of the total benefits of the project). Only the balance, 80%-60% of these benefits, has been received by the port users. VII. THE ROLE OF THE BANK 7.01 The Bank played an important role in the strengthening of the port sector through this project. As early as 1965, the Bank pointed out the need for a NPA, the employment of consultants to advise on operational and administrative matters, and feasibility studies to establish priorities in a future port investment program. Those Bank initiatives were made part of the project and, although important delays occurred, the Bank's firm position in early 1968 and flexible position in 1970 were major factors contributing to strengthening of the sector. In early 1968, the 1/ The number of Peruvian ships calling at Pisco has increased from about 29% of the total ships calling in 1970 to 54% in 1973. This development indicates that Peruvian shipowners are getting an increasing share of the benefits from reduced vessel turnaround time. 2/ This issue will.be analysed in detail in the forthcoming study about the distribution of the benefits from port investments. - 12 - Bank's firmness, as evidenced by consideration of the possibility of suspending disbursements, led to the appointment of consultants and to the creation of NPA. In 1970, the Bank's flexibility, as evidenced by two postponements of the loan closing date, permitted successful comple- tion of the feasibility studies. 7.02 It is difficult to assess whether the limited impact of the consultants' work in accounting and administrative procedures could have been prevented by the Bank. A change in their terms of reference in early 1969, when the Government's intention to include Callao in the NPA became clear, might have prevented the continuation of a work that was intended for a different NPA. But it seems that the constiliants' work was almost completed by early 1969; moreover, it was not clear whether they would have been able to accomplish their work under new terms of reference because of the lack of cooperation of the Port of Callao's management. Therefore, the terms of reference were not changed and the Bank's expectation was that at least the general principles set forth by the consultants and their training of local staff would eventually be useful to ENAPU. These developments point again to the difficul- ties of using consultants when the local institution, in this case the Port of Callao, is not convinced that it needs them. 7.03 In the area of training of local staff, the Bank relied completely on "on-the-job" training to be provided by the consultants. Even though in principle this is a correct approach, and the delays in the appointment of consultants could not have been foreseen at appraisal, the experience of this project suggests that additional training, to be provided inde- pendently of the consultants, could have contributed to the success of the project. As it turned out, it was not until mid-1969 that some training was provided by the consultants. 7.04 Turning now to the construction of the port of Pisco, the Bank's suggestion of adding a fourth berth to the Government's original proposal was consistent with the level of efficiency in port operations that was assumed in the feasibility study and with the new traffic forecast that was available at appraisal time. However, the actual speed of loading appears to be higher than the one assumed in the feasibility study and, in retro- 1/ spect, it raises the issue of whether the fourth berth was really necessary. 1/ The estimated average speed of loading in the feasibility study was 45 tons/hr/ship. The information available for 1973 indicates an average total stay per ship of 37 hours and an average cargo/ship of about 1950 tons. Unfortunately, the data does not indicate the percentage of the total ship stay in which loading and unloading was actually carried out. Even assuming that all of the 37 hours were working hours, we end up with an average speed of loading of about 52 tons/hour, while if there were 10 non-working hours included, the average speed would be about 70 ton/hours. In the case of bulk loading of fish meal, the GDWT has estimated an average speed of about 160 ton/hour. - 13 - The increase in the speed of operations seems to be related to some partial mechanization in the loading of fish meal 1/ and to the increasing impor- tance of the export of this product in bulk. It is difficult to assess whether these developments could have been expected at appraisal time, but it nevertheless suggests the need of a more careful assessment of the in- fluence of probable improvements in the efficiency of port operations in the design of the project. 7.05 Finally, the lack of development of traffic other than fish meal because of lack of complementary investments suggests that the Bank should have made the provision of those investments by the Government a condition of the loan. In this particular case, the shortfall in this additional traffic was compensated by the substantial growth in fish meal exports, but a higher traffic level would have resulted in a better return for the port and the complementary investments. VIII. CONCLUSIONS 8.01 The Port of Pisco Project was completed satisfactorily although with some delay. Due to budgetary constraints some items included under Port construction were deleted, although this change is not expected to affect the overall efficiency of the project. 8.02 The audit rate of return at 12% is lower than the appraisal ex- pectation of a 16% return, mainly due to the lack of development of traffic other than fish meal and to the unexpected decrease in fish meal exports after 1972. 8.03 Not all of the institutional objectives were achieved, but the present organization of the sector can be regarded as an improvement over the one existing at appraisal time. The National Port Authority was finally created about three years later than the date agreed at appraisal. There was also a delay of two years in the appointment of the consultants in administrative and accounting procedures, and tariffs have not yet been revised to relate them to the cost of the services. 8.04 This lack of revision of the tariffs has had important impli- cations for the distribution of benefits from the port investments. In the case of this project, there has been a redistribution of benefits from port users to the Port Authority, but only a minor proportion of the benefits accruing to shipowners,which account for about 41% of the bene- fits of the project, has been received by the Port Authority in the form of increased port charges. 1/ There are two conveyor belts which are used for the loading of fish meal. These conveyor belts belong to the Consorcio Pesquero Peruano. - 14 - 8.05 The still unresolved issue of housing for port workers is an interesting one. It has not been possible to assess whether provision of housing close to the port was the best alternative given the information available at appraisal. However, the audit suggests that, in deciding the issue, the Government should analyse in detail the possibility of construc- tion of the houses with the alternative of the daily transport of the workers from the town of Pisco, by comparing the investment required in the houses with the daily transport cost. The cost of housing essential for the operation of the port was assumed at appraisal to be about US$1,900,000, while the yearly transport costs of the workers, including time costs, is about US$50,000. A comparison of these magnitudes indicates a low rate of return for the investment in the houses (about 1%-2%, assuming a useful life of 50 years). This is of course a partial analysis because other benefits associated with the provision of housing close to the port, such as the need for around the clock availability of certain port personnel and a more efficient operation of the port, are not included. But it nevertheless gives an idea about the relative magnitude that those omitted benefits from the provision of the housing close to the port would have to have for the investment to yield a satisfactory rate of return. 8.06 The Bank played a useful role in defining the scope of the project and in the strengthening of the port sector. It demonstrated firmness when the appointment of consultants was unduly delayed, and flexibility in extending the closing date of the loan to allow for project completion. It is unlikely that the Bank could have done much more to increase the impact of the consultants' work, but a closer attention to the need for complementary investments might have improved the quality of the project. A11EX 1 Page 1 PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 4h6-PE) Detailed Project Description A. Port Construction The new port was to be located on the west side of the "Bahia de Paracas," well sheltered from winds and waves by Punta Pejerrey, and about 35 km from the existing town and port of Pisco. The main components of the port construction were: Dredging About 1,000,000 m3 of silt, sand and clay were to be dredged and disposed of outside the harbor to reach a depth of 11 m alongside the wharf. About 2,000 m3 of boulders and rock were to be removed from the Dort site. As swells and currents are insignificant in the harbor area, no substantial siltation was expected. However, the Directorate of Port Administration (DPA) was to make suitable arrangements to ensure maintenance dredging, as required. The Wharf A 700 m long wharf was to be built and equipped to berth four ships simultaneously. It was to be a tabular steel pile cathodically protected structure with a reinforced concrete deck. The depth alongside the new berths was to be 11 m. There-were to be one open berth for handling minerals and fertilizer, one berth for fish meal export, and two general cargo berths. In addition, a small-boat jetty with an alongside depth of five meters was to be built for accommodation of harbor craft, tugs and lighters. Port Area Levelling of the port's 12 ha transit area was to require excavation and transport of about 700,000 mi3 of fill, partly rock. The port was to be equipped with the necessary stacking areas, roads, fire and fresh water mains, sewers, electrical distribution cable, weigh bridge, fencing, and two SO m high light towers. Fresh Water Supply About 2,500 m3 of water were estimated to be needed daily for the port and a town of 5,000 inhabitants. The water was to be supplied from the Rio Seco area where several wells are located yielding from 20 to 30 1/s. No treatment other than normal chlorination was to be required. Three wells with pumping station and necessary storage were to be con- structed and water mains of about 15 km were to carry water to the port. ANNEX 1 Page 2 A reservoir with a capacity of 6,000 m3 was to be built on the high ground behind the new port facilities. Approach Road Land access from Pisco and the Pan American Highway to the new port facilities at Punta Pejerrey required construction of a new two-lane road of 18 km. The road was to be lh m wide, with a paved carriage-way 6.6 m wide and compacted shoulders 2.2 m wide. The road was to enter the port area in the southwest corner and bypass the town. Construction was to be carried out and paid for by the Government. Sheds and Other Buildings The fish meal berth and general cargo berths were to have transit sheds with a combined floor space of 9,000 m2. The two general cargo berths also were to have warehouses, each with floor space of 3 000 m2. A two-story administration building with a floor area of ab?ut 850 mn and customs and labor offices with floor areas of 430 and 185 m ,respectively, also were to be constructed, together with the following minor buildings: (i) police station; (ii) fire station; (iii) dangerous goods store; (iv) storage yard office; (v) mechanical workshops; (vi) generator house; and (vii) various auxiliary buildings. Tugboat and Port Equipment During the winter months, Paracas Bay is quite windy, and an 800 HP 72 ft diesel tugbot was to be needed for berthing ships. It was to be equipped for fire fighting. The electrical generator equipment and water pumps required for fire fighting in the port area and for the fresh water supply from the Rio Seco area also were to be included in the project. In addition, cargo-handling equipment and workshop equipment were to be procured. B. Technical Studies for Improvement of Port of Chimbote and River Ports Traffic through the port of Chimbote, which in 1964 was about 780,000 tons, was handled by two deep water berths and a lighterage pier. Exports amounted to 639,000 tons, including 556,000 tons of fish meal, 45,000 tons of fish oil, and 29,000 tons of coal and ores. Imports totalled 67,000 tons, mostly scrap iron, coke, and machinery for the steel plant. Coastal traffic equalled 79,000 tons, of which 64,000 tons was iron ore for the steel plant, 9,000 tons was guano, and 6,000 tons was various items. The continued growth of exports and imports, estimated to reach an annual volume of about 2.1 million tons by 1975, made expansion of the deepwater facilities imperative. The owner and operator of Chimbote Steel Mill, Sociedad Siderurgica de Chimbote, S.A. (SOGESA), was preparing plans for construction of a two-berth mineral pier designed to handled all steel-mill cargo, expected to reach 900,000 tons by 1975, but additional ANNEX 1 Page 3 facilities were to be needed to handle the remaining 1,200,000 tons of cargo expected by 1975. The technical studies were to include: preparation of traffic forecasts based on an economic study of the port's service area; assess- ment of the economic benefits from the project and its financial viability; and preliminary engineering including soil investigation to the extent necessary to arrive at a firm cost estimate. Inland ports of Iquitos, Yurimaguas, Pucallpa, and Maldonado on the Amazon River system were to be improved. Development of Peru's eastern region, the "Selva," was under way; and traffic through the river ports was growing steadily. Only Iquitos had modern facilities, consisting of an anchored pontoon wharf, 105 m long and 6-10 m wide, with sheds and warehouses covering an area of about h,000 m2. The floating pier provided berthing space for only one ocean-going ship. When two vessels were in port at the same time, it was necessary for one to anchor in the river using lighterage for handling the cargo. The traffic, in 1964 was about 85,000 tons, and was expected to reach 130,000 tons in 1975, The floating wharf was far from sufficient to handle such volume of traffic. DAP planned to expand the pier to alleviate the present congestion and to accommodate future traffic. Pucallpa, located on the Ucayali River in an area where con- siderable erosion of the river bank takes place, had no port facilities of any kind. A yearly cargo volume of about 25,000 tons was handled manually over slipperty river banks. Traffic was estimated to reach 62,000 tons in 1975, and DPA planned to provide a floating wharf and certain upland facilities to eliminate the present difficulty. Yurimaguas, located on the Ucayali River, was the only shipping outlet for a prosperous agricultural area in the department of San Martin. Traffic was about 10,000 tons in 1964, and was expected to reach 17,000 tons in 1975. No port facilities of any kind existed in Yurimaguas, and DAP planned to build a floating wharf which would allow future relocation, if required, by changing river-bank conditions. The Port of Maldonado handled some 4,000 tons of cargo in196L, and was expected to handle 8,000 tons in 1975. DPA planned to provide some facilities there to aid in the manual handling of cargo. No final design had been prepared. All four river ports mentioned above needed improved or new facilities. However, studies similar to those described above in the case of Chimbote were required before an appraisal of the projects could be made. The cost of these studies for the four ports was estimated at US$200,000, of which US$160,000 was to be foreign exchange. ANNEX 1 Pige L C. Consultants Services These services were required to: 1. advise on port operating procedures in all public ports and recommend measures to improve efficiency; 2. (a) devise uniform, commercial accounting procedures, designed to facilitate cost finding, at the Ports of Paita and Pisco; and install such accounting procedures for use simultaneously with the new port facilities coming into partial or full use; (b) design uniform costing procedures, establish a costing office at each of said ports, and assist in initially estimating individual post service costs; (c) prepare initial tariffs of rates and charges at said ports, related to the initially-estimated costs, for use simultaneously with the new port facilities coming into full operation; (d) assist and supervise, for a period of at least two years after commencement of operations at the new facilities of these ports,in: (i) implementation of accounting procedures; (ii) periodic detei-mination of costs of individual services, based on actual-experience; and (iii) establishment of rates in relation to said actual costs; and 3. advise on the detailed organization and procedures, in- cluding accounting procedures, of the National Port Authority which was to be set up. PROJECT PEROiR:ANCE AUDIT REPOkt PERU POAT OP PISCO PROJECT (LOAN 46-E) Main Provisions of the Loan Agreement and Supplementary Letters The Government agreed to: (a) establish, not later than December 31, 1966, a National Port Administration (NPA) which will function under laws and regulations satisfactory to the Bank; (b) provide 15L housing units for port workers ard other per- sonnel needed for operation of the port, together with all the neces.- sary services in the town of Punta Pejerrey, no later than December :31, 1968, and construct the 18 km access road to connect the new port with the Pan American Highway, (c) establish modern accounting procedures, based on the consultants report, not later than October 1, 1968 for the port of Fisco, as well as establish and maintain charges for port services at the port of Pisco reasonably related to the actual cost of providing such services. They should produce revenue sufficient to ensure, no later than in the second year of full operation, a rate of return of 6% on the average value of all assets of the ports after covering all operating expenses; and (d) segregate the proceeds from the special port charge under a separate head "Special Account, Port Works in Salaverry and Other Ports," and use them solely for financing of works and equipment at the public ports. This special account will be promptly reimbursed for any amounts transferred from it to the Treasury. PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LoAx h46-PE) Estimated and Actual Project Costs Appraisal Estimate Actual Costs Actual Costs Project Component Local Foreign Total ZE Local Foreign TotalL-1 as a percentage S/. Thous. US$ Thous. US$ Thous. S7. Thous. US Thous. US$ Thous. of Estimated Costs Port Construction Works 142,780 7,245 12,592 155,776 6,610 10,635 85 Port Operating Equipment and Tugboats 0 850 850 0 724 724 85 Consultants' Services and Personnel Training Engineering Consultants 5,723 552 766 4,903 550 676 88 Operations Consultants 536 80 100 814 150 171 171 Technical Studies 2,144 320 _ag 1 000 213 252 63 Subtotal 8,L03 952 1,266 6,717 913 1,099 Contingencies/Cancellations()- - - - (845) (845) Total 150,000 9j054 162,493 4Z247 -j8 85 Using an exchange rate of US$1 = S/. 38.7 for actual costs and US$1 = SI. 26.7 for the appraisal. 2 Contingencies were distributed among the different items of estimated costs using the percentages indicated at appraisal. PROJECT PERFORMANCE. AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 446-PE) Forecast and Actual Traffic of the Port of Pisco, 1965-73 (thousand tons) Type of Traffic 1965 1966 1967 1968 1969 1970 1971 197Z 1973 --------------- Actual--------------- Forecast Actual Forecast Actual Forecast Actual Forecast Actual Dry Cargo Exports Fish mea 145 194. 265 471 340 325 503 340 520 355 3,90 365 92 Ore concentrates 22 11 18 27 28- 90 21 115 31 130 4-7 133 28 Others 40 37' 26 31 41 33 34 40 21 40 22 40; 17 Subtotal 207 42, 309 529 409 448 558 495 572 525 459- 538 137 Imports, Fertilizers 22 8 14 18 17 22 13 30 22 30 18 30 23 Others- 1 Z 7 4 1 45 6 55 8 55 6 56 7 Subtotal 23 10; 2.1 22 18 67 19 85 30 85. 24 86 30 Coastal Trade 7 7/ 20 16 13 8 6 8 6 8 6 81 1 Total Dry Cargo, 237 259 352 568 440 523 583 588 608 619 489 634 175 Liquid Cargo Petroleum 208 19.7' 215 284 219 287 256 308 255 331 253. 356 248 Fish. oil - - - - - 33 29' 34 51 35 57 37 - Total Liquid Cargo. 208 197 215 284 211 320 284 342. 306 366 310 393 248 Grand Total Dry and! Lquid Cargo 445 456 567 852 659 843 867 930 915 985 799 1 23 PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 446-PE) Forecast and Actual Revenues and Expenses of the Port of Pisco, 1970-73 (S1. thousand) 1970 1971 1972 1973 Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Operating Revenues Ships' Dues ( 1,789 ( 2,342 ( 2,381 1,328 Cargo'Dues (35,150 49,829 (42,933 66,860 42,692 58,143 (42,716 22,816 Other 1,046 349 1,176 1.27 1,238 987 1,268 889 Total Operating Revenues 36,196 51,987 44,109 70,478 43,930 61,511 43,984 25,033 Operating Expenses Personnel (8,840 11,642 (9,740 15,405 (10,320 14,784 ( 10,760 14,939 Other Expenses ( 5,948 (78,247 ( 37,862 ( 9,938 Depreciation 12,682 9,653 12,682 13,023 12,682 13,141 12,682 13,594 T.)I otal Operating Expenses T,=H 27,243 22,422 36,675 23,002 35,787 23,442 3T,271 Operating Surplus (deficit) 14,674 24,744 21,687 33,803 20,928 25,724 20,542 (13,438) Fixed Assets 381,400 354,893 381,400 356,931 381,400 358,771 381,400 367,802 Less-Accumulative Depreciation 12,700 9,601 25,400 22,570 38,000 35,705 50,700 49298 Net Fixed Assets 368,700 345,292 356,000 61 343,400 323066 330,700 318,503 Return on Net Fixed Assets (%) 3.9 7.1 6.0 10.1 6.0 7.9 6.1 negative PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 446-PE) Distribution of Project Benefits Primary Secondary Final Distribution Distribution Distribution Recipient of Benefits of Benefits of Benefits of Benefits Reduction Elimination of Reduction Elimination of in Ship Losses in Cargo in Ship Losses in Cargo Turnaround and Reduction Turnaround and Reduction Time in Handing Costs Time in Handling Costs (41% of (59% of (41% of (59% of Benefits) Benefits) Benefits) Benefits) Shipowners 100 0 96 0 40 Port Users 0 100 0 60 - 80 35 - 6 Port Authority 0 0 4 40 - 20 25 - 14 OM ANNEX 7 PROJECT PERFORMANCE AUDIT REPORT PERU PORT OF PISCO PROJECT (LOAN 446-PE) Ocean Freight Rates from the Port of Pisco (US$/ton) Fish Meal Minerals 1965 24 15 1966 24 15 1967 24 17 1968 24 17 1969 26 17 1970 26 18 1971 26 .18 1974 50 33 Note: The ocean rates concerned are to the main destination points -- Hamburg, Federal Republic of Germany, for fish- meal, and Japan, for minerals. E C U A D 0 R C O LO MB A TT, Lob,losilg Tumos Ouiroy -47 EPER P mentel - hCl Eteni, Pacosm-yo, JOB R A Z L SEVERRY AR - C'C I rrr~ jo'/m,jrio/ Cerro o 50 00 5 30 h 0 MA LOR PRTS AND PcIL SERVCEAR PubbePperts Lake Privale ~ ~ ~ / rito,., . l//cc SSERVICE AREAS MLj. p'- o 1rt ,S PaRVG AR.A -Ari ic n iav. ---- - Gravelro hMollendo,.(D 0 50 00 1SO 200 250 300 KILOMETERS CHILE - APRIL i9u6 IBýRJ 1134R2