Nicaragua - Rural Sanitation Project

Document of The Worid Bank IFOR OIFIFEICIAL USIE ONLY Report No. P-2167-NI REPORT AND RECOMM NDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF NICARAGUA FOR A RURAL SANITATION PROJECT November 15, 1977 Latin America and the Caribbean Regional Office This docunnmDent hns n restricted distribuaion and mey be used by recipienas only hn tlhe perfoirmmince of thbeir ofIcihgl duties. Its contents mey noe oteirwise be disclosed without World BKank azuthorization.  CURRENCY EQUIVALENTS US$1.00 = 7 Cordobas (C$) C$1.00 = us$o.1429 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AID - Agency for International Development CABEI - Central American Bank for EconQmic Integration CARE - Cooperative for American Relief Everywhere EAM - Managua Water Company DENACAL - National Department of Water and Sewerage IDB - Inter-American Development Bank MOH - Ministry of Public Health PAHO - Pan-American Health Organization PLANSAR - National Plan of Basic Rural Environmental Sanitation  FOR OFFICIAL USE ONLY NICARAGUA RURAL SANITATION PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Nicaragua. Amount: US$3.0 million equivalent. Terms: 17 years including 4 years of grace, with interest at 7.9 percent. Project Description: The project seeks to improve basic sanitation services to rural areas by providing an integrated program of water supply, latrines, sanitary house improvements, health education and child immuni- zation. About 172,000 people (1971 Census) in about 550 dispersed villages would benefit from the project, with an estimated 250,000 to be served in these villages by 1988; the population to be reached is made up mostly of persons within the lowest income groups in Nicaragua. Most of the project benefits are unquantifiable (increased work productivity, increase in effective nutrition), and with an integrated project of this nature it is difficult to isolate the benefits of each component. It is clear, however, that the project will contri- bute substantially to improvements in health and welfare generally, as reflected in the provision of safe water, increased life expectancy and reduced mortality rates of infants and young children. Although limited experience of the executing agency and substantial dependence on community participa- tion are recognized as risks, neither is considered likely to impede the achievement of project objec- tives. This, document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Estimated Cost: ------- (US$ million)----------- Foreign Local Total Wells and Aqueducts .8 .6 1.4 Latrines .2 .5 .7 House Improvements - .5 .5 Immunization - - - * Equipment .3 - .3 Technical Assistance .1 .1 .2 Health Education - .3 .3 Engineering and Administration .2 .7 .9 Sub-Total 1.6 2.7 4.3 Contingencies - Physical .3 .2 .5 Price .4 1.1 1.5 Total 2.3 4.0 6.3 *Total component is less than US$100,000 dollars. Financing Plan: --------(US$ million)-------- Foreign Local Total Percentage IBRD loan 2.3 .7 3.0 48 Government grants - 1.9 1.9 30 Community contributions - 1.4 1.4 22 Total 2.3 4.0 6.3 100 Estimated Bank Disbursements: (US$ millions) Bank FY 1978 1979 1980 1981 1982 Annual .1 .9 .6 1.0 .4 Cumulative .1 1.0 1.6 2.6 3.0 Rate of Return: Not Quantifiable Staff Appraisal Report: 1753-NI, dated November 9, 1977.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF NICARAGUA FOR A RURAL SANITATION PROJECT 1. I submit the following report and recommendation on a proposed loan for the equivalent of US$3.0 million to the Republic of Nicaragua for a Rural Sanitation Project. The loan would have a term of 17 years, including 4 years of grace, with interest at 7.9 percent per annum. PART I - THE ECONOMY 2. A memorandum entitled "Economic Memorandum of Nicaragua" (Report No. 914-NI) was distributed to the Executive Directors in November 1975. An updating economic mission visited Nicaragua in June 1977 and a new report is now being prepared. The following discussion incorporates the main findings of the 1977 economic mission. 3. Nicaragua's major natural resource is its arable land, which is suitable for a variety of products. Although the share of agricultural production in total output has declined in recent years, agriculture con- tinues to be the main source of economic expansion, and is responsible for about 45-50 percent of employment and almost 70 percent of export earnings. The country is divided into three distinct agricultural zones: The Pacific Zone, where about 60 percent of the nation's 2 million population lives, is marked by a dual structure of farming -- a large number of small farms grow basic grains with conventional technology, and a few large farms specialize in cotton and sugarcane using modern technology; the mountainous Central District is devoted mainly to coffee and livestock; and the large Atlantic Plain holds a largely unutilized potential for forestry and live- stock production. 4. Nicaragua's economic growth prior to the 1972 earthquake was im- pressive, although it was characterized by sharp cyclical changes. Real income grew at an average annual rate of 6.4 percent (3.5 percent per capita) during the 1946-1972 period. The strong upward trend in income resulted from the expansion of production for exports, primarily of cotton, coffee, and beef, but also of simple manufactured goods. The substantial growth of the economy, however, did not mitigate the highly skewed distribution of wealth and income. Moreover, the rural sector is characterized by a dualistic structure of agricultural production and the related, highly concentrated pattern of land ownership. The poorest one-third of the rural population, for example, holds only about 3.5 percent of the country's arable land.  - 2 - 5. Progress in reducing disparities in income and consumption has been delayed by the persistently low level of public expenditures. The slow growth of current expenditures -- and a consequent shortage of important public service facilities such as education and health -- largely reflects budgetary stringency dictated by insufficient revenues. Outside the field of transport and electricity, the process of project identification and preparation has been very limited in the past. As discussed below, however, progress has been made in both fiscal performance and project preparation in the last three years. 6. The earthquake which struck Managua on December 23, 1972 took a toll of about 10,000 lives, and destroyed or rendered unusable practically all the central zone of the city, including most government offices, hospitals and schools, the financial and commercial buildings and perhaps 2,500 shops engaged in small-scale manufacturing and retail trade. About 32,000 housing units, or about 45 percent of the housing in the Managua area, were destroyed. The impact of the earthquake on productive capacity, however, was considerably lower than initially feared, and the economy has recovered at a much faster pace than originally estimated. Growth in GDP was 4.2 percent in real terms in 1973 and reached 13 percent in 1974. The impressive growth of the latter year was mainly attributable to construction activity in lManagua. Unemployment, which had increased very steeply in 1973, moved down to pre-earthquake levels of about 6 percent in 1974. However, as a result of slackening reconstruction activity, compounded by a weak external demand for some of Nicaragua's indus- trial exports, 1/ GDP grew by less than 2 percent in 1975. During 1976, improved world market conditions for Nicaraguan exports gave new impetus to economic expansion and GDP is estimated to have grown by over 6 percent during the year and by a somewhat higher rate in 1977. As far as the accomplishment of physical reconstruction is concerned, most public service facilities were back to, or exceeded, preearthquake levels by 1975, but much remains to be done to rebuild housing and commercial outlets for the poorer segments of the population. 7. The emergency taxes introduced after the earthquake reflected a major fiscal effort which resulted in the increase of the tax ratio to GDP from 8.9 percent prior to the earthquake to almost 11 percent in 1973-74. While new permanent taxes were approved in late 1974 to replace the emergency measures, the yield of the new taxes has fallen short of expectations, and the tax ratio has declined slightly. The authorities are currently studying a new program to increase fiscal revenues. These increased domestic revenues are urgently required to finance the completion of reconstruction and the projected levels of investment in the Government's development program. 8. Some progress in overall planning and project preparation has taken place in recent years. The public investment plan prepared by the Government 1/ E.g. exports of metal manufactures and chemical products, which together accounted for 38 percent of manufactured exports in 1974, declined in real terms by 13 percent and in nominal terms by almost 18 percent in 1975.  - 3 - for 1975-79 assigns priority to expanding agricultural production and improv- ing heaith, education and housing facilities for the rural poor. While a major effort is still required to improve project preparation in the fields of rural and social development, several projects have been developed recently or are in preparation in these fields; for example, in addition to the Bank's second education project (Loan 1244, signed on June 15, 1976), the IDB recently approved a loan for rural electrification. Also, the Government is proceeding with the reorganization of public sector agricultural institutions with finan- cial and technical assistance from USAID. The main focus is on the implementa- tion of an integrated rural development program -- INVIERNO -- which is supplying credit and technical assistance to low income producers in the Central Pacific and Central Interior regions and is also coordinating public activities in education, health, housing and infrastructure for the same target groups. The INVIERNO program became operational in 1976 and has so far provided credit and technical assistance to over 5,000 rural families. 9. In the years following the earthquake, cotton, coffee and beef have continued to be the leading traditional exports and constituted on the average 29 percent, 13 percent and 9 percent respectively of total merchandise exports over the period 1973-75. Relatively simple manufactured exports (e.g. tex- tiles, animal feed, chemical and wood products) have been rising rapidly and already represent over one-third of total exports. While imports averaged less than 30 percent of GDP until 1972, the post-earthquake reconstruction process, rapid credit expansion and higher import prices drove this figure up to 45 percent in 1974. The value of imports increased by almost 150 percent from 1972 to 1974, while earnings from exports increased by less than 60 percent; the resource balance changed from a surplus of US$23.0 million to a deficit of US$200.0 million. This deficit was covered by heavy borrowing during the period (much of it on commercial terms) and international reserves remained unchanged. The balance of payments situation improved substantially in 1975 when, largely as a result of slackening economic activity, imports declined by 10 percent, while export proceeds remained virtually unchanged. The resource gap declined from 14 percent of GDP in 1974 to 9 percent in 1975. 1/ A further improvement took place in 1976 and 1977 when the unusually favorable prices for exports of coffee and cotton reduced the gap to substan- tially lower levels. 10. Since the earthquake, Nicaragua's external public debt outstanding and disbursed has increased rapidly -- from about one-fourth of GDP in 1972 to over one-third in 1975. The average terms of the debt have hardened consider- ably because of heavy borrowing from private commercial sources. In the imme- diate future, because of high coffee prices, this may not result in too high a debt service ratio (the ratio for 1976 is estimated at 12.6 percent). However, as coffee and cotton prices decline from their present unusually high levels, the debt service ratio will tend to increase. However, if the country successfully undertakes a serious effort to further expand and diversify exports while keeping to a minimum additional external borrowing on commercial terms, the debt service ratio should not exceed 17 percent during the remainder of the decade. 1/ Derived from data at current prices.  -4 - 11. The overall prospects for the country's future economic expansion will thus depend heavily on movements in international prices of its major exports (cotton, beef and coffee) and imports (especially petroleum and fertilizers), as well as on the success of policies in the following fields: (a) export diversification, which is most likely to be achieved through the promotion of resource-based exports such as wood products, fruits and vegetables; (b) substitution of imports such as corn and some processed food products which could be produced efficiently in the country; (c) holding overall imports down to a reasonable level through appropriate domestic credit management; and (d) restraining external borrowing on hard terms. If these policies are implemented, the Nicaraguan economy may be expected to continue to grow at a satisfactory pace. External Finance 12. External official finance is provided principally by the IDB, USAID, the Bank, and CABEI. Recently, the Venezuelan Investment Fund (VIF) has begun providing assistance to Nicaragua through a US$16.1 million equivalent loan for electric power. USAID has made loans for agriculture, highways, industry, rural electrification, housing, education and health. In agriculture, it has played an important promotional role in developing the INVIERNO program to assist rural development in some of the more depressed areas of the country. CABEI is financing projects with regional impact, principally in transportation, industry and power. In addition, CABEI has lent for housing and in lesser amounts for education and agriculture. IDB is financing agriculture, water supply and sewerage, industry, housing, transportation and higher education. The lending of the principal external lending agencies from 1950 through 1976 is summarized below: IBRD IDA USAID IDB CABEI TOTAL -------- (In millions of US dollars) --------- Total 126.7 23.0 166.1 181.8 121.1 622.7 Cumulative Lending 1950-65 35.6 3.0 20.7 42.4 13.3 115.0 Cumulative Lending 1966-76 91.1 20.0 145.5 139.4 111.8 507.7 Transport 16.0 - 2.8 3.5 52.3 74.6 Power and Telecommunications 44.3 - 15.0 16.5 19.7 95.5 Education 15.4 - 7.3 9.3 0.7 32.7 Health, Water and Sewerage 6.9 - 11.2 37.7 - 55.8 Housing - - 3.7 6.0 6.8 16.5 Agriculture 8.5 - 31.4 48.7 0.7 89.3 Industry and Commerce - - 5.0 16.7 26.5 48.2 Reconstruction - 20.0 45.0 - - 65.0 Other - -- 24.0 1.0 5.1 30.1  - 5 - PART II - BANK GROUP OPERATIONS 13. To date, Nicaragua has received 22 Bank loans and two IDA credits, totalling US$171.9 million. As of September 30, 1977 a total of US$43.6 million remained to be disbursed on six loans for education, power, agriculture and ports, and on the 1973 Earthquake Reconstruction Credit. The most recent operation was a loan for the equivalent of US$22.0 million for the Ninth Power Project, signed April 22, 1977. In general, progress on most of these projects has been satisfactory, although cost overruns in the past three and one-half years have hampered execution of several projects, particularly ports and electric power. With respect to the Earthquake Reconstruction Project: the power and water supply components were implemented without significant prob- lems; a portion of the education component and the sites and services component were delayed initially, largely because of difficulties in acquiring sites, but are now nearing completion; and the industrial component suffered initial delays in the submission of acceptable projects by sub-borrowers, but has now been completely disbursed. Annex II contains a summary statement of Bank loans, IDA credits, and IFC investments as of September 30, 1977, as well as notes on the execution of ongoing projects. 14. In the past, Bank Group lending was heavily weighted towards assisting Nicaragua develop basic infrastructure, through loans for electric power, ports and highways. More recently, an increasing share of Bank lending has been directed towards agriculture, water supply, education and earthquake reconstruction. The Bank's current lending program is designed to respond to Nicaragua's development requirements in several different ways. Given the importance of efforts to strengthen the balance of payments, one objective is to support Government programs for export diversification through loans for agriculture and industrial credit; another is to help reduce the country's dependence on imported fuel, possibly through a project for the development of Nicaragua's geothermal energy resources. Another major objective is assisting the Government to improve productivity and living conditions in the rural sector, which would be supported by this proposed Rural Sanitation Project and by rural development projects designed to complement activities in progress under the INVIERNO program. In this connection, the Bank has agreed to send an FAO/CP mission to help identify and prepare a project for the first stage of a program for the development of the Atlantic frontier; the program will include feeder roads, land distribution, credit and technical assistance as well as necessary social infrastructure. The Bank also intends to assist the Government in improving living conditions in urban centers through a sites and services, urban upgrading and small business credit project, as well as through the proposed Managua Water Supply III Project (which would satisfy the city's water needs through 1985) being presented separately to the Executive Directors. 15. The Bank's share of total external public debt disbursed and out- standing is likely to remain at about 10 percent on the average through 1981. The Bank and IDA's share of debt service in 1974 was about 11 percent; it is  - 6 - projected to decline during the remainder of the decade because of Nicaragua's substantial increase in relatively hard-term commercial borrowing in the past few years. 16. In FY 1968, IFC made a loan and equity investment totalling US$2.1 million equivalent to help establish a new cotton and synthetic fiber textile company (FABRITEX). IFC's equity has since been sold to local investors. FABRITEX was hampered in its early years by marketing problems associated with the difficulties experienced by the Central American Common Market, further aggravated by the 1972 earthquake in Managua. The company has now reorganized its operations and financial structure. In FY76, IFC made a loan of US$6.5 million to Nicaragua Sugar Estates Limited to help expand its sugar production capacity, and a loan and equity investment totalling US$900,000 equivalent to help finance construction and equipment of the Camino Real Hotel in Managua. PART III - THE SECTOR Sector Background 17. The improvement of Nicaragua's water supply system during the 1960s contributed substantially to bettering health conditions in the country, but serious problems still exist as evidenced by a high infant mortality rate (146 per thousand births), high percentage of deaths among young children caused by enteritis and other diarrheal diseases (37 percent) and low life expectancy (52 years) relative to other Latin American countries. Contami- nation in Nicaragua is not effectively regulated or controlled. By 1975, about 100 percent of Nicaragua's urban and 14 percent of its rural population had access to potable water. Of the urban population, 72 percent had house connections for water and 38 percent for sewerage; another 38 percent were served by latrines. Of the rural population, only 24 percent had access to latrines. Although the availability of water and sewerage services in urban areas ranks average in comparison to other Latin American countries, services in rural areas are among the lowest, with only five countries in the Hemisphere having inferior service levels. Sector Organization 18. Public water and sewerage services in Nicaragua are provided by Empresa Aguadora de Managua (EAMI), Departamento Nacional de Agua Potable y Alcantarillado (DENACAL) and the Ministry of Public Health (1IOH). Four municipalities and some large industrial users have their own water sources. 19. EAM has been a Government-owned utility since 1932 and is the capital city's main supplier of potable water. In 1976, it was serving 435,000 persons (90 percent of the city's population) with house connections; almost all others had access to community standpipe services. DENACAL is a  - 7 - national agency, dependent on MOH, that operates sewerage systems in all urban areas as well as all urban water systems throughout the country, except in Managua and the four municipalities which have their own systems. In 1976, it served 62,000 water and 48,000 sewer house connections, reaching 320,000 and 390,000 inhabitants respectively. 20. MOH has responsibility for rural water supply and excreta disposal. To develop these services, it created a new unit in 1976 called PLANSAR responsible for planning and constructing rural sanitation systems. PLANSAR is divided into planning and executing branches and is one of three sections in the Ministry's Rural Health Department. The other two sections are the Administration section, which is in charge of all procurement and general services for the Rural Health Program, and the Human Resources section, which trains the paramedical personnel required for rural areas. PLANSAR has initiated and is satisfactorily executing a program, financed with the assis- tance of a 1976 AID loan, to train personnel for rural health, improve rural health care and provide water and excreta disposal services for 300 rural communities. PLANSAR is also the proposed executing agency for the Bank's Rural Sanitation Project, which will extend its coverage to over 500 additional communities. The Bank and AID projects together would bring the PLANSAR program to all provinces of Nicaragua except for largely inaccessible areas in the sparsely populated eastern province of Zelaya. As part of this Bank project, PLANSAR's staff will be increased to assure its ability to execute effectively both projects. Sector Development 21. Investment for water and sewerage during the last six years (1971-76) reached US$38.2 million, or 7.8 percent of public fixed investment, with 95 per- cent of this investment being concentrated in urban areas. The Government now plans to extend, improve and integrate services and give greater emphasis to rural areas. Its target for 1981 is to serve 80 percent of the urban population by water house connections and 70 percent with sewerage connections, and in the rural areas, to serve 40 percent of the population with safe water and to provide 48 percent with latrines. In rural areas, the Government is aiming at integrated development, including education, sanitation and house improvements. These efforts are expected to increase life expectancy, reduce child malnutri- tion, increase productivity of the rural population, improve environmental and healthlconditions and help slow migration to urban areas. This program represents a key element in the Government's overall effort to improve rural living conditions and should complement other programs, like INVIERNO, being undertaken in the rural areas. 22. External assistance has financed over half (53 percent) of urban and rural water/sewerage investment over the past five years. The IDB, AID and World Bank/IDA have supplied major aid for urban areas, while CARE has been a source of assistance for small rural communities, working with DENACAL to develop water supply for several towns below 3,000 inhabitants. AID,  -8- through the loan mentioned above, is also financing rural sanitation efforts. In order for the Government to continue its program in the sector and achieve its targets for the country by 1981, it is estimated that public investment in the sector would have to grow on average at about 10 percent per annum in real terms. Certain measures are being undertaken to help ease the financial burden of investment in this sector. In urban areas, the Government is phasing out its program of giving foreign loans to DENACAL as grants for construction works, and EAM is implementing tariff increases and structural modifications. In rural areas, the Government is emphasizing the development of simple designs and the participation of the community, in cash and labor, which will bring costs for construction, operation and maintenance of the systems to levels which will enable the country to readily duplicate the program in the future in additional communities. The proposed Rural Sanitation Project conforms to this goal and will provide facilities with the capacity to serve a projected population of close to 250,000 in 1988 at about US$19 per person. Both this project and the proposed Managua Water Supply III Project would give strong impetus to the current Government policies of improving sanitary conditions and living standards of the poor. Prior Bank Projects 23. Bank Group lending for water supply in Nicaragua has included one loan, one IDA credit and a component of the 1973 Earthquake Reconstruction Project, all for the Managua area. The first operation in 1962 (First Managua Water Supply Project, Credit 26-NI) for US$3 million helped finance a US$6 million water supply project, which was successfully completed in 1966. Under this project, water supply capacity was expanded to allow an eventual increase in the number of house connections from 15,300 to 39,200 by 1972. The second operation in March 1972 (Managua Water Supply Project II, Loan 808-NI) for US$6.9 million helped finance a US$10.0 million project designed to develop and expand EAM's water sources, transmission and distribution facilities. EAM was in the early stages of this project when the earthquake struck, and the project was subsequently modified to meet the new conditions in the service area resulting from the shift of a substantial part of the population from downtown to suburban areas. The deletion of a few project elements, which were no longer of high priority due to the changed circumstances, freed an estimated US$850,000 of loan funds to be used to finance loan interest and commitment charges. Also, the closing and maturity dates were extended by one year, and the rate of return requirement waived through 1976 (Board presenta- tion R73-67, dated April 10, 1973). In addition, to provide resources needed to reconstruct water works and extend services to new areas populated after the earthquake, a US$2.5 million component was included in the Earthquake Reconstruction Project (Credit 389-NI) of June 6, 1973. This component financed US$1.0 million of civil works, equipment and supplies for repair and rehabilitation, and US$1.5 million to cover the higher prices of civil works being performed under Loan 808. Both the Second Managua Water Supply Project and the water supply component of the Earthquake Reconstruction Project have been completed.  -9- PART IV - THE PROJECT 24. A report entitled "Staff Appraisal Report of Rural Sanitation Project, Nicaragua" (No. 1753-NI dated November 9, 1977) is being distributed separately. This project has been under preparation for two years with PAHO's assistance, and was appraised in March/April 1977. Negotiations were held in Washington on October 20-21, 1977. The Government of Nicaragua was represented by Mr. Jose Maria Zuniga, Director of PLANSAR. Description of the Project 25. The proposed loan represents the first Bank involvament in a project designed to provide basic sanitation and health-related services exclusively to the lowest income rural population, living in dispersed areas (maximum population of 800 and median population of only 75). It supports an integrated program of water supply, latrines, sanitary house improvements, health educa- tion and child immunization, and will reach rural communities in 3 of the country's 8 regions (Regions I, III and VI). About 172,000 people would be reached by the project initially, and it is estimated that by 1988 the popula- tion served would have grown to about 250,000 people, or 41 percent of the rural population in these areas. The target group is among the poorest in Nicaragua, with annual per capita incomes below US$150 (i.e., below one-fourth of the national average). The project would also strengthen the managerial and operational capabilities of PLANSAR, the executing agency for the Ministry of Health. The specific project components are as follows: (a) Construction of basic water supply systems in approximately 550 villages. The investments chosen for each community will be the least-cost solutions and are estimated, subject to the technical solution chosen for each village selected, to include 135 drilled wells, 300 dug wells, 300 improved wells and 77 aqueducts of varying levels. (b) Provision of sanitary excreta disposal through improvement, rehabilitation and addition of over 26,000 latrines. (c) Improvement of sanitary conditions (trash disposal, floor leveling, mosquito prevention, crack and roof repair, inside partitions, eventual water hook-up, etc.) in about 26,000 houses in project villages (to be financed entirely by the Government). (d) Vaccines to immunize about 72,000 children, five years of age and younger, in project villages against measles, polio and other diseases (to be financed entirely by the Government). (e) Equipment to be used by PLANSAR in executing the project, mainly office and communications equipment, jeeps and trucks.  - 10 - (f) Project Technical Advisor to assist PLANSAR in bid prepara- tion, tender analysis, implementation of low-cost technical solutions, promotion of community organization, assurance of adherence to eligibility and design criteria and administra- tion of procurement and supply; consultants to make recommen- dations on project cost control, programming and construction supervision. (g) Additional PLANSAR personnel to provide health education and promote community organization. (h) Additional PLANSAR administrative and engineering personnel to plan technical solutions, direct community construction works, procure the required materials and equipment and train the community to maintain its own systems (to be financed entirely by the Government). 26. Given the large number (over 2,000) of villages in the regions to be served by the project, a set of criteria have been established for selecting the estimated 550 rural villages included in the proposed project. These criteria are: population size between 50 and 800 inhabitants in 1978; access to roads (at least part of the year); willingness to provide labor, cash or materials to cover at least 15 percent of project costs; and an estimated least-cost water supply solution of less than US$25 per capita (1977 dollars). Standpipes and hand-pumps will be used whenever possible, and mechanized systems (wind or eventually electricity) only when no other solu- tion is feasible. Agreement has been reached on these eligibility and design criteria, which are similar to those being used under the AID project (Loan Agreement, Sections 1.02(a) and 3.01(b)(iii) and Schedules 1, 2 and 5). Cost and Financing 27. The total project cost is estimated at US$6.3 million, including US$2.0 million for price and physical contingencies. Base costs have been estimated at January 1977 prices, to which yearly allowances for price increases have been added as follows: for foreign costs, 7.5 percent up to 1979 and 7 percent thereafter; for local costs, 12 percent in 1977, 9 percent in 1978 and 7.5 percent thereafter. Physical contingencies have been calculated at 30 percent for drilled wells, 5 percent for engineering and administration and 10 percent for all other items. The average cost of consultant assistance (48 man/months for the Project Technical Advisor and 10 man/months for other consultants) would be US$3,400 per man/month (January 1977 prices). This relatively low cost figure is attributable to the simplicity of the tasks to be carried out and the use of direct hiring of individual consultants. 28. The proposed loan of US$3.0 million would finance the foreign exchange cost of the project (US$2.3 million) and about US$0.7 million (18 percent) of local costs. The proposed local cost financing is justified to assure a reasonable Bank participation in a project which has a low foreign cost component, and which represents a key initiative to improve living con- ditions for families within the lowest income groups in Nicaragua. Government  - 11 - budgetary allocations would finance a total of US$1.9 million (30 percent) over the four-year period of the project. The communities would make a cash or labor contribution of US$1.4 million (22 percent). Although the minimum community participation has been fixed at 15 percent of project cost, based on experience so far with the AID project and mission estimates of the participa- tion needed for the different types of project works proposed, the average contribution is likely to be 22 percent. (Details of project costs and of the financing plan are presented in the Loan and Project Summary at the beginning of this report.) Project Execution 29. The project will be executed by PLANSAR, with work beginning in Region VI in January 1978, in Region III in January 1979 and in Region I in January 1980 (after work in Region VI is finished). The experiences and results obtained under this project and under the previously mentioned AID project will be exchanged within PLANSAR to achieve coordination of these programs. In order for PLANSAR to execute both projects, it is estimated that its one existing Regional Unit (being used for the AID project) would have to be supplemented by two new Units, one immediately and a second in 1979, with professional staff composed largely of educators and engineers. Training of additional educators, most of whom are expected to be women, for these new Units has already begun under the AID project, and it has been agreed that as a condition of effectiveness, the Nicaraguan Government will adequately staff a new Regional Unit, requiring about 44 employees, including 21 professionals. It has also been agreed that a second Unit would be staffed no later than January 1, 1979 or on such other date agreed by the Bank and the Government (Loan Agreement, Sections 6.01(b) and 3.01(b)). Although PLANSAR's management is adequate and there is a PAHO engineer providing technical advice to the AID- financed project, Nicaragua's short experience in rural sanitation makes the presence of a Project Technical Advisor critical to the proper execution of the Bank-financed project. The selection of this Advisor, with qualifications and under terms and conditions acceptable to the Bank, will therefore also be a condition of loan effectiveness (Loan Agreement, Sections 3.03 and 6.01(a)). Likewise, assurances have been obtained that technical assistance consultants acceptable to the Bank to make recommendations on PLANSAR's project cost control, programming and construction supervision will be appointed not later than March 1, 1978 (Loan Agreement, Section 3.03). 30. Implementation arrangements for the project, the majority of which are already beginning to be applied under the AID project, would be as follows. Each Regional Unit would establish operational centers in two or three villages within a Region to serve the rural population within a 50-100 kilometer radius. A PLANSAR educator would visit each village to instruct its population on basic health problems and organize a Health Committee (HC). The PLANSAR educator and HC would then evaluate health problems and develop possible solutions. The educator would also assess the community's willingness and ability to participate in the project. Upon receipt of a favorable report from the educator, PLANSAR would send an engineer to carry out a study of the least-cost solution for water supply and waste disposal. The community would  - 12 - then present to PLANSAR a written request for assistance, prepared with the help of the PLANSAR educator, and describing the work to be done, implementa- tion schedule and the community contribution. A typical project would include: water supply (usually by hand pumps), latrines, child immunization, and home improvements (appropriate waste disposal, drainage for mosquito control, roof, floor and wall improvements and water hook-up in rural towns where a water distribution system would be installed). 31. After review and approval by the Project Technical Advisor, and further approval by PLANSAR's Director, this request would form the basis of a contract, whose basic format will be approved by the Bank as a condition of effectiveness (Loan Agreement, Section 6.01(c)). This contract, to be signed between the Government (PLANSAR) and, on behalf of the community, the corre- sponding municipality or an association of members of such community (usually a cooperative), would describe the works to be performed and the respective contributions and responsibilities. The contract would provide that each community would own, operate and maintain its system, with MOH responsible for supervision and assistance in operation and maintenance. In order to assure the timely execution of these contracts, it will also be a condition of effectiveness that the Government will have confirmed, with evidence satis- factory to the Bank, that existing legislation for cooperatives and municipali- ties is adequate to allow local organizations to legally sign such contracts on behalf of the communities involved (Loan Agreement, Section 6.01(d)). The Government has agreed to take all necessary steps for the expeditious granting of legal status to each cooperative formed for this project (Loan Agreement, Section 3.02(d)). The Government has also indicated that it expects these cooperatives to be used in the future to organize communities for other programs--such as nutrition, family planning and education--which would form part of integrated rural development. 32. PLANSAR engineers would direct the community works or, in the case of drilled wells and some aqueducts, request bids for the necessary civil works. The Regional Unit would order necessary materials and equipment from a Central Office, which would handle all procurement. The Central Office would fill the order from materials and equipment stored centrally and pro- cured in suitable quantities in advance on the basis of estimated requirements supplied by the regions. The Planning Department would coordinate work in different regions for both the AID and Bank projects, control project costs, produce educational aids and perform all general planning. During project execution, PLANSAR educators would train leaders to provide the continuing education and direction required to maintain the improved public health conditions and teach one or two persons in each participating village the required skills to operate and maintain the water system. After completion of project works, they will be turned over to the community free of charge. Operation and maintenance would be a community responsibility (under the supervision of MOH). The cost of this should be readily manageable, as most systems would be hand-operated and administered by the community, and cash outlays would, therefore, be very small (estimated from about US$.14 to US$.57 per capita per year, depending on the type of water system installed). To assure effective project administration and monitoring, it has been agreed  - 13 - that the accounting and procurement units of the Rural Health Department's Administration, which are adequate for current programs, will be reinforced as and when needed to support project activities (Loan Agreement, Section 3.01(b)(i)), and that quarterly reports will be submitted to the Bank on specified monitoring indicators acceptable to the Bank (such as number and percentage of villages served, percentage of community contribution, number of wells and latrines, etc.), to be established no later than March 31, 1978 (Loan Agreement, Section 3.07). Procurement and Disbursement 33. All contracts for materials or equipment with an estimated cost of US$20,000 or more, or civil works contracts with an estimated cost of US$100,000 or more, would be awarded through international competitive bidding in accordance with Bank Guidelines. Contracts for lower amounts may be awarded on the basis of competitive bidding in accordance with local pro- curement procedures acceptable to the Bank, provided however that the aggre- gate costs of these contracts for materials, equipment and civil works do not exceed US$500,000. Suppliers from the Central American Common Market, in- cluding those in Nicaragua, will be allowed a preference of either 15 percent of the CIF price, or 50 percent of the import duties applicable to suppliers from non-member countries, whichever is lower. It is expected that most civil works contracts would be won by Nicaraguan firms, and most of the equipment and material supply contracts would be won by foreign firms. A schedule of the villages to be served during each calendar year and a proposed procurement program covering the items estimated to be required for these villages will be presented by the Director of PLANSAR to the Bank before bids are invited. Disbursements would be made only for expenditures included in the approved procurement program (Loan Agreement, Section 3.06 and Schedule 1, paragraph 4(b)). 34. The loan would be disbursed over a period of four years to meet: (a) 100 percent of foreign expenditures and 80 percent of local expenditures for water supply (wells, distribution and transmission lines and reservoirs); (b) 100 percent of foreign expenditures and 80 percent of local expenditures for the latrine program; (c) 100 percent of foreign expenditures for equipment and vehicles; (d) 100 percent of foreign expenditures for the Project Technical Advisor and technical consultants; and (e) 50 percent of total expenditures for salaries of PLANSAR personnel to be hired for the project for health education and community organization. The closing date is expected to be June 30, 1982. Project Risks 35. The short experience of PLANSAR in project implementation represents a possible source of delay. However, the proposed projects for rural communi- ties are simple and repetitive, and the AID program is being executed well ahead of schedule with enthusiastic community participation, so no major problems are expected. In addition, the Bank project includes a substantial technical assistance component to PLANSAR to help assure effective project execution.  - 14 - Another potential risk is the project's heavy dependence on community partici- pation in maintenance of the systems, but the continuous supervision and support to be provided by MOH, the simplicity of the systems and the minimum maintenance needs of the works should ensure that the risks are no greater than those that could normally be expected with water supply and sewerage projects. Environmental Effects 36. No adverse environmental effects can be expected from the project. On the contrary, contamination levels would be reduced as a result of the latrinization program. Justification 37. A quantitative measure of economic benefits for this project is not possible, not only because of the scarcity of data, but also because the project is designed to provide an integrated approach to basic sanitation and health, including many dissimilar components (water supply, latrines, garbage disposal, house improvements, immunization, etc.). A considerable part of the project cost (20 percent) is dedicated to expenses for community organiza- tion and basic health education, which should not only result in better health, but also contribute to the overall economic welfare of the population. Al- though these economic benefits are difficult to measure in monetary units, it is clear that the project will contribute significantly to supporting Govern- ment efforts to improve living conditions in Nicaragua s rural population. The primary benefit of improved health and welfare will be reflected in greater access to safe water, increased effective nutrition, increased life expectancy, reduced mortality rates for infants and young children, and increased work productivity. The beneficiaries' willingness to pay for these perceived benefits will be demonstrated by their contribution of at least 15 percent of project costs and all operating and maintenance expenses. PART V - LEGAL INSTRUMENTS AND AUTHORITY 38. The draft Loan Agreement between the Republic of Nicaragua and the Bank, the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement of the Bank, and the text of the Resolution approving the proposed loan are being distributed to the Executive Directors separately. The draft Loan Agreement conforms to the normal pattern of loans for water supply and sewerage projects and its more important features have been included in Part IV and summarized in Annex III of this report. There are four special conditions of effectiveness of the Loan Agreement: (i) that the Borrower will have engaged a Project Technical Advisor acceptable to the Bank; (ii) that it will have adequately staffed a new PLANSAR Regional Unit to initiate project execution; (iii) that it will have submitted for Bank review an appropriate model form for contracts to be signed between it and the participating villages; and (iv) that it will have confirmed, with evidence  - 15 - satisfactory to the Bank, that existing legislation for cooperatives and municipalities is adequate to allow local organizations to legally sign such contracts on behalf of the community. 39. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMIENDATION 40. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President by J. Burke Knapp Attachments November 15, 1977   ANNEX I TABLE 3A Page 1 of 4 pages NICARAGUA - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2) ------------------------------------------------ ------------ hl NICARAGLA REFERENCE COUNTRIES (1970) TOTAL 130.0 MOST RECENT AGRIC 27.6 i960 1970 ESTIMATE GUATEMALA PANAMA COSTA RICA** GNP PER CAPITA (USS) 240. 0** 450.0** 750.0**/a 360.0* 830.0* 580.0* POPULATION AND VITAL STATISTICS _______________________________ POPULATION (MID-YR. MILLION) 1.4 1.9 2.3/a 5.4 1.4 1.7 POPULATION DENSITY PER SQUARE KM. 11.0 15.0 18.0/a 49.0 19.0 34.0 PER sQ. KM. AGRICULTURAL LAND 54.0 71.0 83.07-9 216.0 85.0 93.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 52.3 49.3 48.3 45.1 39.8 41.8 CRUDE DEATH RATE (/THOU,AV) 21.3 16.8 13.9 16.8 8.7 B.1 INFANT MORTALITY RATE (/THOU) .. 8. .. 97.1 41.0 62.0 LIFE EXPECTANCY AT BIRTH (YRS) 45.5 50.4 52.9 51.1 64.9 66.8 GROSS REPRODUCTION RATE 2.3 3.3 3.3 3.1 2.8 2.8 POPULATION GROWTH RATE (X) TOTAL 2.9 3.0 3.3 3.2/a 3.1 3.4 URBAN 4.2 4.2 4.7 3. IN 4.3 5.2 /a URBAN POPULATION (% OF TOTAL) 40.0 45.0 48.0 33.8 47.6 36.5 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 47.8 48.6 4 45.4 43.7 47.4 15 TO 64 YEARS 4y.7 49.U 49.1 51,7 52.3 49.3 65 TEARS ANhD OVER 2.5 2.4 2.4 2.9 3.5 3.3 AGE DEPENDENCY RATIO 1.0 1.0 1.0 0.9 0.9 1.0 ECONOMIC DEPENDENCY RATIO 1.6/a 1.8/a 1.7/b 1.6 /c 1.5 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) . 41.3 40.2 USERS (% OF MARRIED WOMEN) .. .. .. .. . EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 430.0/b 550.0/b 660.0/c 1600.0 500.0 /a LABOR FORCE IN AGRICULTURE (%) 50.Ott 53.0P 48.0jv 61.0 38.0 UNEMPLOYED (% OF LABOR FORCE) .. .. .. .. 7.0 INCOME DISTRIBUTION X OF PRIVATE INCOME RECOD BY- HIGHEST 5% OF HOUSEHOLDS .. 42.4 /c 22.2 /b HIGHEST 20% OF HOUSEHOLDS .. 65.4 E .. 22.2 b HIGHEST 4 7C ~~~~~~~~~~~~49.3 7W LOWEST 20% OF HOUSEHOLDS . 3.1 7 C . .. 4.1 7 LOWEST 40X OF HOUSEHOLOS .. 8.7 7 .. .. 13.6 8 DISTRIBUTION OF LAND OWNERSHIP ______________________________ X OWNED BY TOP 10% OF OWNERS . . .. 45.0 X OWNED BY SMALLEST iO% OWNERS .. .. .. . 1.0 HEALTH AND NUTRITION POPULATION PER PHYSICIAN 2700.0 2060.0 2080.0 .. 1550.0 1E30.O POPULATION PER NUBSING PERSON 5080.0 4860.0 4120.0 5142.0 1690 0 POPULAtION PER HOSPITAL BED 440.0 410.0 400.0 470.0 360.0 /c 250.0 PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 93.0 106.0 109.o/d 97.0 109.0 110.0 PROTEIN (GRAMS PER DAY) 68.0 70.0 71.07w 59.0 61.0 63.0 -OF WHICH ANIMAL AND PULSE 38.0 33.0 .. 19.0 31.9 35.0 DEATH RATE (/THOU) AGES 1-4 .. .. .. 24.4 7.5 4.6 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 62.0 62.0 65.0 58.0 103.n 110.0 SECONDARY SCHOOL 7.0 18.0 24.0 11.0 40.0 28.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 12.0 12.0 12.0 12.0 12.0 11.0 tCATION%'. ENROLLMENT (X OF SECONDARY) 24.0 9.0 9.0 15.0 /d 32.0 10.0 ADULT LITERACY RATE (X) 38.0 53.0 57.0 8. 2.0 /d HOUSING PERSONS PER ROOM (LlBAN) 2.2 /c *- 1.8 OCCUPIED DWELLINGS WITHOUT PIPED WATER (X) 87.0 /c,d ,, 62.0 74.0 /e ACCESS TO ELECTRICITY (X OF ALL DWELLINGS) 33.0 /c .. 41.0 .. 52.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (X, 4.0 /c .. 7.0 .. 16.0 CONSUMPTION RADIO RECEIVERS (PER THOU POP) 53.0 55.0 62.0 111.0 157.0 72.0 PASSENGER CARS (PER THOU POP) 5.0 17.0 16.0 8.0 32.0 23.0 ELECTRICITY (KWH/YR PER CAP) 125.0 343.0 432.0 146.0 585.0 594.o NEWSPRINT (KG/YR PER CAP) 0.9 1.9 1.9 1.5 4.0 6.4 SEE NOTES AND DEFINITIONS ON REVERSE  ANNEX I Page 2 of 4 pages MOTES Unless otherwis noted, data for 1960 refer to any year between 1959 and 1961, for 1970 bet.ceco 1968 and 1970, sod for Moat Recan.t Estimate between 1973 sod 1975 aCNP per capita data are base.d on the World Rank Atlas nethodology (1974-76 basis). 5Data ar diff-ret from thoas ,,od for oeainlguidelineslbscause iOf recent rvsosin the basic data. 05Coota Rica bao been aelsoted as an objective countrygsince, athough it baa -seurc base very similar to that of Nicaragua, it has managed to grow at the ocboton tiullv bhi r ra,te while obtaining a ouch mOre squit distribution of jcose and social services. NICO]RACUA 1960 Ia Ratin of population under IS and 65 sod over tO total economically active population, lb Economically active population; /c 1963; Id Inside only 1970 1a Ratio of Population under 1) and 65 and over to total econoically active population, /b Economically active population, Ic Rural population only. MORT RFCENiT ISTIMATE /. 1976; /b Ratio of Population under 15 and 65 and over to total economically active Population, Ic Econom~ica lly active Population; /d 1969-71 average. GUATEMaLA 1970 'a populatioc growth rtst is lower than ths rate of natural increase; lb 1964-70, Ic Ratio of populatios umder 15 and 65 and over to total labor forc; Id Iocluding evening schools. LANAMA 1970 ~ a Iooluding residents working in Canal Zone; lb Ioncase recipients _/0 Governmsent hospital establi.alanta only; Id 10 vo..rs and over; Is inside only. COSTA RICA 1970 /a 1963-70 86, November 8. 1977 DEPDSTIO?SS OP SOCIAL INDICATORS Land Area (thou ke Pooulstion oar --ring perso - Ppoplation divided by smber of pr-rtiog TotlI Total -ufuce anon coprioisg land ores and island waters. male sad femal graduate nurses, "trained or "certified" nurses, . ad Agtic. M-Mo -c-rcn as .tit of agricultural area used tmporarily or pea- a,siliary personnel with traising or asperisncs. nsstly for cropa, pasturs, n-ket 4 bitches gardens or to lie failma. Paoplation per hospital had - Population divided by somber of hospital beds available in Public asd private ge..sral sand apecialised hospital and CNP Per caPita (US0) - CNp~ per -apit. asci-csre at current merkt pnices, rehabilitation centers, seldssrsing homes sod satsblisalasnts for us.lcutacd by -am connersioc -wnthd as World Rank Atlas (1973-75 basis), custodial and preventive care. 1960; 1970 and 1975 dana. Pen osoIto supplY of calories ft of renuiremets) - Compotad from energy oquina1leon ofn ot fond suPplies avsilable in cumtypar caPit. per day, Puoulation aud vicul statistic ansi~~~~~~~~11 alai s upplies comprisa domestic production imports lass esp-ta , and Pelotion (old-vet.i. io Au of july first. if non avilabla, -ovrage changes in stock, sea suppliso aculuds soimaI fsad, seeds, quanJtiisa need of two end-yea- oioto 1-160, 1900 and 1975 data. in food processing sand lasses in distribution; r-quir-ets ware estimated by FAO base.d on physiological masds for no.-I activity end bealtb cons id- Population dens ity-pesuaeb - Hid-year population Per square kilometer sting eovirononetal temperature, body weights, age sod sex distributions of 11001 hecre) .ttlurappulation, sod ai1lmelag 1% foe wases at haushbuid level. Ponuitiondecaty-nn sqare e ofnorm land - Compotod as shove for Petcait. supely of Proti far soea day) - Protein content of par .apit. agricultural loud only. sat supply of food per day; net supply of food is defined as above; esquire- meats f or all csomtriea established by 0108 EconMic gesearch Sarvices Vital snutistcis provide for a imisiom allowance of 60 grows of total Protein Per day, And trude birth rare per thou-sod. overage - Anonual live bincha per thousand of 20 grom of animal sand poles Proteio, of whish 10 greas should be animal aid-year population; ten-year arithmetic aver ages ending in 1960 sand 1970, pr-teis, thea standards are lowr than tbose of 75 gr-w of total protain and fImo-year averge ending in 1975 for ems reenact astimers, sand 23 gre,o of animal prensin aso anverage for the weld, proposed by_ FAO Crude death rtet per tho..sand, avrage - uAn..I deaths par thouaand of mid-year in the Tbird World Food Survey. population, is-year arithomtic averages ending in 1960 and 1970 and five- Per capita protein supply from asisoal amd pulse - Protein supply of food year overage enIng in 1975 for most recant estimate, derived from animals and poises in grows par day. Ifant mortait rot 1/ho)-Annacul deuths o infanta under one year of age Death rate (/thou) agtes I--Ausidah petosndoaggrp14 per thousand Iun births.yas,t children in this ago grop; auggeated as an indicator of Life eo_c tancv ut birth lyre) Av-uvrge ouobar of years of life rasaining on mantrtbon birth, usually five-ysar averages ending in 1960, 1970 and 1975 for develop- Euai Gross renrodunnionrune - Average comber of line daughters a woman will bear Adjusted enrollment ratio - rmac shool - Enrollmet of all ages as per- is her norma repr-duotit paniod if she spenie...ne Present age-specific cetage uf primary sho-g ppuaion; includes children aged 6-11 years fertility rates ually tins-year avraeseding in 1960, 1970 and 1971 but adjustod fun different lengths of primary education, for countries with for denipogcctne.universal education, enrollment may emnead 100. since an Pupils er bel1w macoton rotl ran 7.)- otL.1 - Compound -uua growib rates of mid-year or babve th. official school age. popula tion for 1 950-60, 1560-70 and 1970-75. Adjusted enrollment ratio - secondary school - Computed as above; secondary Pplto rmoth rate 7_ - uban- ComputedI -egr,h rats of total education requires at leas t four years of approvad primary iat-uctitn, population, diffrent definition- f obacaesmy affect comparability of provides g-enera, voustioa1 or ta...bhr tra ining intruction forcpupils data amon untis.of 12 to 17i ye rsof~ age; norspnenacoors ar gnealy ecudd Urban aupulatio(7Q o-f cu)-RatIo of urban to total Population; different Tears oftscholn prgdd fra sd secndleel) Tta year of definitions of urban areas may affent comparability of data -mng countries, schooling; at secondary level, noc.. ional instruction may he Partially or com,pletely aecladed, bee 'Puou e .pe.cet) -Childre (0-14 y-ars), working-age (15-64 years), Vctiona ssrall_eat (% of secondary) Vocational institutions include and et-red (65 yasnd over so percontage of aid-year population. teohoti-1, industrial on tber prgsro,a which operate indapendeonlyora Age dependency rto-Raio of population under 15 sod 65 sud over to those deparoments of secondary institutiana. of ages 15 through h64 Adult lteracy rate it) - ILierate adults (able to read and wits) as Per-- maunv denndon ratio - Ratio of population under 11 and AS and over to cetcage of tatal odui pop-ulation aged 15 years and over. the lbor force in ag rupf1-6 ers. Fomily placnisi -uc.ceptu1rs )ctanllti5e thou) - C-olative combero atccept-rs Housing of birth-an-rt deis-nersspns fntoa femily plauning progroc Pernos ea room (urban) - Average nomber of persona par room in occupied sneincepin ovtiionale ud ..tc f tdwelling iu urban areos, dwellings eaclode o-emaa Femily PIl..nngo users (t of married womn) - Percentages of married woma of structures od unoccpiedprs child-bearing age (15-44 yers) who use bitth-control devices to all married Oc-unied dwellinswihu ai water Cl) -Ocpe ootonldweligs wmnin som age group incrban and rural sreesa without inside or outside Piped water facilities as .percen.tage of all occupied dwellings. uneloymect A~~~~~~~~~~~~~~~ccesto electricity ft of all dwsIlimae) - Conventional dwellings with Toa rau force (thousa1d) -,Economlually active.person, intlu,Iding armd eIe1nriciry in living qus~erer as percent of total dwelliga in urban and farce.soad unemployedbht eacIisg housewves,tecdena sin.; deinitin rural area.. in various countries are noat comparable. Rural dwellinas connected to electricity Mt - Computed as above for rural Labor1 forte i.fagricultur (7) Agritultora1 lbor force (in farming, forestry, delings only. huningad fihing) aspercetag ofnalbor forc.. Vueplayed f% oflao force) - ueployed ar usually defined as persons h. Consumption are abole sod williog to take a Job, out of a Job on a given day. rsinad out Radio receIvers footpthou Pup)1 - All types of rece.ivers for radio broadcasts ofajob, and seeking wok for a spunified minimu period not e...seding one tu gene.ral public pr thousand of Ppaplation; secludes onlcemad receivers week, may not be comparable hetwas ca...trieas due to different definitions in countries and in years when registration of radio sets ace in effect; of.uneployed and source of data, e g , omploysent office statiatics, eeple dots for recent years may nor be comparable since most countries abolished survYs, compulsory uneployment insurance licensing. Passen ger cars Coon thou pop - Passeneger tar oompnis mator nan seati,g In_n-distribution - Percenrage of Private incoa,a (bath is rah and bind) les tbsp uih prsona,I secludes ombulanc, hearses ad military received by richest 5t, rieheen 20%., poorest 20%, and poorest 40% of house- vhcl:,es. h p holds. Electricity (kwh/yr_per cap) - Annual consuaption of industrial*1 nanil public sand private electricity In kilowatt hours per capita, generally Distribution of laud ownrship - Perce-naga of land mond by wealIthiest 10% based on prduntIon data, without alwnefor leases in grids hut allo-- an:d poorest 10% of land owners. ing far imports sand esports of electricity. Newasprint ibkg/yr per cap) - Per capit.a snnual coansmptiom lea kilagr-m lesth and Nutrition eatimated from domesatic production plus met imports of meweprist. Pnpularion, peqruplyaiin- Ppoplation divided by ouser of prantining physcian qu Lifed from a medical school at university level.  NICARAOUA ANH I Page 3 of4 ICOgIC D6VBLQ3UN DATA (In million of US dollars) Actual eatimted Projeotion Av Wp Anl Orouth Rate As pre tW of ODY 1970 175 i Y7 1S05 977 1977-19y55 1970 17 Y NATIONAL ACCOUNS Amounts in 1967-9 prioes & exeh nga rate Gross doseatic prod1et 812.7 1,052.3 1,191.2 1,827.0 5.6 5.5 99.4 96.o 98.7 Oains frr term of trade 5.0 -56.1 49.6 24.6 - - 0.6 4.0 1.3 Gross doematic income 817.7 996.2 1,240.8 1,851.6 6.1 5.1 100.0 100.0 100.0 Imports 212.3 278.8 362.2 536.8 7.9 5.0 26.0 29.2 29.0 Exporta (import capacity) 197.3 210.5 337.6 504.1 8.0 5.1 24.2 27.2 27.2 Resouree gap 15.0 68.3 24.6 32.7 - - 1.8 2.0 1.8 Consumption 688.4 898.8 1,00i.6 1,482.5 5.5 5.0 84.2 80.7 80.1 Investment 144.3 165.7 263.8 401.8 9.0 5.4 17.6 21.3 21.7 Domestic savings 129.3 97.4 239.2 369.1 9.2 5.6 15.8 19.3 19.9 National savings 108.4 10.8 207.6 314.6 9.7 5.3 13.3 16.7 17.0 MERCHANDISE TRAIE Annual data at current prices As percent of total Imaports /1 Capitsl goods 60.6 147.3 228.8 580.0 20.9 12.3 30.5 32.6 33.0 Petroleum, oil, lubricants 11.4 73.0 86.o 240.3 33.5 13.7 5.7 12.3 13.7 Other internediate8 68.9 174.7 200.2 530.0 16.5 12.9 34.7 28.5 30.2 Consumption goods 57.8 121.9 186.8 406.6 18.2 10.2 29.1 26.6 23.1 Total merchandise importe (c.i.f) 198.7 516.9 701.8 1,756.9 19.8 12.2 100.0 100.0 100.0 Exports Primary products 129.0 260.6 505.9 1,036.2 21.6 9.4 72.6 74.5 63.4 Manufactured goods 48.8 114.3 172.9 597.8 19.8 16.8 27.4 25.5 36.6 Total merchanise exports (f.o.b.) 177.8 374.9 678.8 1,634.0 21.1 11.6 100.0 100.0 100.0 Merchandise trade indices 1967-69 100 Export price index 112.4 l71.5 205.0 4114.5 13.0 5.8 - - - Import price index 109.0 216.4 226.2 394.3 11.0 7.2 Terms of trade index 103.1 79.4 117.2 105.1 - - Export volmne index 101.7 141.1 153.4 255.0 6.o 6.6 VALUE AIDED BY SECTOR Annual data at 1967-69 prices Agriculture 195.8 255.4 280.1 368.9 5.2 3.5 24.1 23.5 20.2 Industry 177.1 246.0 278.7 515.9 6.7 8.0 21.8 23.4 28.2 Service 439.7 550.9 632.4 942.2 5.3 5.1 54.1 53.1 51.6 Total 812.6 1,052.3 1,191.2 1,827.0 5.6 5.5 100.0 100.0 100.0 PUBLIC FINANCE Annul data at 1967-69 prices As percent of GODP (Central Gover=ent) Current receipts 83.7 124.2 132.2 228.4 6.7 7.1 10.3 11.1 12.5 Current expenditure 72.3 103.1 107.2 171.7 5.8 6.1 8.9 9.0 9.4 Budgetary savings 11.4 21.1 25.0 56.7 11.9 10.8 1.4 2.1 3.1 Other public sector savings 12.2 13.7 22.6 36.5 9.2 6.2 1.5 1.9 2.0 Public sector fiud investment 41.4 77.9 91.7 118.8 12.0 3.3 5.1 7.7 6.5 PUBLIC YIflD INVIESTENT BY SECTCR 1967-69 prices_ LABOR FORCE AND Total labor force Value addeper worbr 1 or Total OUrPUT PER WOIRK 1975 Millions i Total S . average Social sectors 2i F 6.7 (1967-69 prices) Agriculture 23.6 4.9 Agriculture 0.314 47.9 813 50.6 Power 132.2 27.5 Industry 0.096 14.7 2,563 159.5 Transport and telecunounications 158.6 33.0 Services 0.2O4 37.4 2,249 139.9 Other 38.0 7.9 Total 0.655 100.0 1,607 100.0 Total fixed investment 480.8 100.0 /1 Include construction materials.  NICARAOUA AP 1 I1 3AKM OF PAIDITS, XM ML ASSISTA AND MT In millon of S doll- at nrremt pricee) Actual stimated Pro1cto 1970 1975 1Y7 17i0 195 SWO4ARY BAIANCE OF PAMMS Ekporte (including NF7) 215.2 456.1 764.8 972.6 1,987.5 Importa (includirw NF) 231.4 603. 819.8 1.140.1 2.16. Resource balance (1-K) AISr -R li7U --57 5 NAw.4 Intereet (net) -6.3 -29.3 -48.8 -78.2 -172.2 Direct investment income -21.8 -23.8 -31.3 -41.7 -67.1 Cnrrent tr frea (not) 6.2 6 8.0 12.2 24 Blnoo on eumrreont*e-coa m 3 = i - ik -I 2 7 -3 Private direct investment 15.1 11.0 15.0 30.0 55.O Public medium-and long-term loans Diabursmsnts 43.7 174.1 192.3 343.4 540.4 Repaymente -16.1 -18.2 -44.7 -89.2 -231.4 Loans repayable in local curreney 3 3.7 4.0 Net disbursements 31.1 TI 5 T 39 Capital transactions n.e.i. (inl. errore and omisdione) 7.8 20.0 -6.9 Changp in reserves (-increase) -15.9 -6.6 -32.6 -9.0 -20.0 Actual Estimated LOAN COOQTMIETS A 1970 1975 1976 DEBT AND DEBT SERVICE 1970 1T717 Medium and long-term loazns Public debt outs. & diab. 145.7 600.3 639.8 IBRD - 5.0 11.0 (end of year) IDA - - - Interest on public debt 6.8 34.o 42.6 im - 22.5 25.7 Repayment on public debt 16.1 15.2 36.1 CABEI 4.4 20.9 11.0 Total public debt service 22.9 52.2 78.7 Governments 3.4 43.3 26.6 Suppliers o.6 12.2 0.1 Burden on export (%) Private banks 12.3 62.5 90.6 Bonds - - - Public debt service 10.6 l.124 12.6 Loan n.e.i 0.1 8.5 10.0 DS + investment inceome 21.3 16.2 17.1 Total medium and long-term loans 171 Average terms on: Int. an s prior year DO & D 5.7 7.6 7.1 EXTEDtLA PUBLIC DEBT Estimated debt outstanding as of Dec.31,1976 Amort. as S prior year DD & D 13.7 L.l 6.0 Disbursed only Percent I3RD 63.8 10.0 IERD debt outs. & disbursed 26.6 52.3 63.8 IDA 19.2 3.0 IMD as % of public debt outs. 18.3 8.7 10.0 IDB 28.8 46.5 IBRD as % of public debt serv. 13.1 10.3 7.9 CAR I 4jl.8 6.5 Governments 159.4 24.9 IDA debt outs. & disbursed 3.0 13.4 19.2 Suppliers 3.6 o.6 IDA as % of public debt outs. 2.1 2.2 3.0 Private banks 215.3 33.6 IDA as % of public debt serv. 0.1 0.2 0.2 Bonds 10.0 1.6 Others d7e9 15.3 Total publi o debt 639 M 100 c a lxcludes loans fepayable in domeBtIc currencv.  ANNEX II Page 1 of 4 STATUS OF BANK GROUP OPERATIONS IN NICARAGUA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of September 30, 1977) US$ Million Loan or Amount (less cancellations) Credit # Year Borrower Purpose Total IDA 1/ Undisb. Seventeen Loans and Credits fully disbursed 73.8 3.6 - 532 1968 Government Education 4.0 - 0.1 840 1972 Emp. Nacional Power 24.0 - 2.8 de Luz y Fuerza 943 1973 Banco Central Agriculture 8.5 - 3.1 389 1973 Government Earthquake - 20.0 1.3 Reconstruction 879* 1975 Autoridad Port. Ports 5.0 - 3.3 de Corinto 1244 1976 Government Education 11.0 - 11.0 1402 1977 Emp. Nacional Power 22.0 22.0 de Luz y Fuerza Total 148.3 23.6 of which has been repaid 34.6 0.2 Total now outstanding 113.7 23.4 Amounts sold 5.6 of which has been repaid 4.1 1.5 - Total held by Bank and IDA 112.2 23.4 Total undisbursed 43.6 * Supplemental Loan. 1/ Includes exchange adjustments.  ANNEX II Page 2 of 4 B. STATEMENT OF IFC INVESTMENTS (As of September 30, 1977) $ Million Amount Year Type of Business Loan Equity Total 1968 Textiles Fabricato de Cotton and Nicaragua, S.A. polyester fabrics 1.00 1.07 2.07 (FABRITEX) 1976 Posada del Sol, S.A. Tourism 0.70 0.20 0.90 (Camino Real Hotel) 1976 Nicaragua Sugar Estates Limited Sugar 6.50 - 6.50 Total Gross Commitment 8.20 1.27 9.47 Less: repayments, sales and cancellations 0.80 1.07 1.87 Net Investments held by IFC 7.40 0.20 7.60 Undisbursed 2.50 2.50 C. PROJECTS IN EXECUTION Ln. 532 Education Project; US$4.0 million of April 10, 1968; Effective Date: June 25, 1968; Closing Date: December 31, 1977. This project is supporting government efforts to improve and expand secondary education in major cities and upgrade primary teacher training. Despite delays in implementation, related primarily to the 1972 earthquake in Managua and some administrative problems, 19 of the 20 project schools are now in operation and the remaining one will be completed by the end of 1977. Ln. 840 Eighth Power Project; US$24.0 million of June 28, 1972; Effective Date: March 30, 1973; Closing Date: December 30, 1977. The two main works of the project -- the steam power plant with associated transmission lines, and the interconnection with Honduras--were delayed about 14 months on average for several reasons: the need to make repairs and install emergency facilities for power after the earthquake, late deliveries of equipment by suppliers, and late loan effectiveness because of delay in signing the interconnection contract with Honduras. The interconnec- tion was placed in service in October 1976, and the project originally appraised to cost US$34.7 million equivalent is now expected to be completed in 1978, with a substantial cost overrun amounting to US$24.3 milion. ENALUF raised tariffs 30 percent on average in February, 1975, in addition to a fuel surcharge of about 50 percent which went into effect in late 1974. The  ANNEX II Page 3 of 4 Venezuelan Investment Fund has approved a US$16.1 million loan to assist ENALUF in covering the financing requirements arising from the cost overrun. An extension of the closing date by about one year will be required. Ln. 943 Agricultural Credit Project; US$8.5 million of November 16, 1973; Effective Date: April 10, 1975; Closing Date: December 31, 1978. After an initial delay in loan effectiveness caused by (1) addi- tional time required for the Borrower to sign a subsidiary loan agreement with the first participating bank, and (2) difficulties in hiring a project director, the rate of sub-loan approvals by the Project Unit and the participating banks is satisfactory. However, considerable cost increases are expected to reduce the number of sub-loans to be made under the project to below appraisal estimates. Cr. 389, Earthquake Reconstruction Project; US$20.0 million of June 6, 1973; Effective Date: August 7, 1973; Closing Date: December 31, 1977. With the help of the US$5.0 million power component, the National Power Company (ENALUF) has completed repairs to its damaged equipment and is providing service to people displaced by the earthquake. The Water Supply Company of Managua (EAM), assisted by the US$2.5 million water supply com- ponent, has repaired all its storage reservoirs and all its main distri- bution system. Production and distribution of water is back to normal. No serious delays in project execution or cost overruns were experienced for the power and water supply components. As for the US$2.0 million education component, the four prefabricated schools built under Part I of this component are in full operation. The multilateral secondary school and the technical institute to be built under Part II are under construction. Because of difficulties in acquiring sites, the construction of these two institutions is expected to be completed by December 1977, one year behind schedule. Project execution on the US$8.0 million sites and services component is proceeding satisfactorily. The Managua I and II, the Masaya, Granada, Leon, and Jinotepe projects have been completed. The remaining project is Managua III where dwelling and sanitary cores are expected to be completed by December 1977. Design standards have been reduced for many of the sites in an effort to offset the cost escalation which has taken place during the last two years; however, the total number of serviced lots still has had to be reduced from the originally planned 5,500, to a total of 4,453 units at present. After some initial delays in the submission of acceptable sub-projects by the implementing agency, the industrial financing component is fully disbursed. An extension of the closing date may be required for complete disbursement of project funds.  ANNEX II Page 4 of 4 Ln. 879 Second Port of Corinto Project; US$11.0 million of February 2, 1973 and US$5.0 million Supplementary Loan of August 1, 1975; Effective Date: March 23, 1973; Closing Date: June 30, 1979. The project initially encountered substantial cost overruns pri- marily due to world and domestic inflation and earthquake-related delays in project execution. In order to help finance these overruns the Government obtained supplementary financing from the Central American Bank for Economic Integration and the World Bank. Progress on the project is now good. Of the project components still in execution, the containers' wharf is nearly com- pleted and should shortly become operational for general cargo shipments, and the administration building will be ready by the end of the year. No action has been taken, however, by the Government to improve the access road to the port, and the Bank has expressed its concern about this delay. The Government has already paid C$11 million of its overdue contribution to the equity of the Port Authority, and has agreed to pay a total of C$35 million by the end of the year. Ln. 1244 Second Education Project; US$11.0 million of June 15, 1976; Effective Date: August 17, 1976; Closing Date: June 30, 1981. Project implementation is progressing satisfactorily. Architec- tural designs, selection of construction firms, in-service teacher training courses and selection of an agency to manage the technical assistance compo- nent of the project are proceeding in accordance with the appraisal schedule. Ln. 1402 Ninth Power Project; US$22.0 million of April 22, 1977; Effective Date: October 27, 1977; Closing Date: March 31, 1981. This project has just become effective.  ANNEX III Page 1 of 2 NICARAGUA RURAL SANITATION PROJECT Supplementary Project Data Sheet Section I: Timetable and Key Events (a) Project Preparation (i) Feasibility Study prepared by PLANSAR, with PAHO assistance November 1976 (b) Preparation - Pre-Appraisal (i) First Request for Project Financing November 1976 (ii) First Bank Mission to consider project December 1976 (c) Appraisal Mission Departure March 1977 (d) Negotiations Completed October 21, 1977 (e) Loan Effectiveness Planned February 27, 1978 Section II: Special Bank Implementation Actions None Section III: Special Conditions Assurances have been obtained from the Borrower that: (i) The personnel of the accounting and procurement sections of the Rural Health Department's Administration will be rein- forced as and when needed to support project activities (paragraph 32). (ii) Eligibility and design criteria agreed by the Bank and the Borrower will be used for all villages in the project (paragraph 26).  ANNEX III Page 2 of 2 (iii) The PLANSAR Director will submit to the Bank for approval a schedule of the villages programmed to be served during each calendar year and a proposed procurement schedule before bids are invited for those villages (paragraph 33). (iv) A system of Monitoring Indicators acceptable to the Bank will be established no later than March 31, 1978, and quarterly reports would be submitted to the Bank on the targeted and actual values achieved for these indicators (paragraph 32). (v) PLANSAR will employ consultants, whose selection, contracts and terms of reference are to be acceptable to the Bank, no later than March 1, 1978 to make recommendations on project cost control, programming and construction supervision (paragraph 29). (vi) As a condition of effectiveness, it will engage a Project Technical Advisor, who would assist PLANSAR in bid prepara- tion, tender analysis, implementation of low-cost technical solutions, promotion of community organization, assurance of adherence to eligibility and design criteria and administra- tion of procurement and supply, and whose selection, contract and terms of reference are acceptable to the Bank (paragraph 29). (vii) As a condition of effectiveness, a new PLANSAR Regional Unit will be staffed, with about 44 employees, including 21 professionals, to initiate project execution (paragraph 29). (viii) A second Regional Unit will be established no later than January 1, 1979 or on such other date to be agreed between the Bank and the Government (paragraph 29). (ix) As a condition of effectiveness, an appropriate form for contracts, to be signed between the Government of Nicaragua and the villages participating in the project, detailing project works to be done, the amount of community partici- pation and arrangements for future operation and maintenance of the works, will be approved by the Bank. Also, the Government will have confirmed, with evidence satisfactory to the Bank, that existing legislation for cooperatives and municipalities is adequate to allow local organizations to legally sign such contracts on behalf of the community. (paragraph 31). (x) It will take all necessary steps for the expeditious granting of legal status to each cooperative formed for purposes of this project (paragraph 31).  IBRD-13083 i7 i4' a ,* AUGUST 1977 -15- 5 . ~~~~~~~~~~~~H O N D U R AS i NICARAGUA o RURAL. SANITATION PROJECT ' REGIONS FOR PLANSAR PROJECT t C=Vt