Mexico - Lazaro Cardenas Conurbation Development Project

Document of RETURN To The World Bank REpORT T FOR OFFICIAL USE ONLY M ONE WEEKt Report No. 1904-ME FILE COpy MEXICO STAFF APPRAISAL REPORT LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT April 4, 1978 Urban Projects Department 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. MEXICO APPRAISAL OF THE LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT CURRENCY EQUIVALENT Currency Unit = Mexican Peso (Mex$) US$1 = Mex$22.5 MEX$1 = US$0.04 Mex$1 million = US$44,400 UNITS AND MEASURES mm = millimeter (0.03937 inches) cm = centimeter (0.3937 inches) m = meter (39.37 inches) km = kilometer (0.62 miles) S= square centimeter (0.1550 square inches) m = square meter (10.764 square feet) ha = hectare (2.471 acres) k= square kilometer (0.386 square miles) m = cubic meter (264 US gallons) lt = liter (0.264 US gallons) kW = kilowatt kWh kilowatt hour FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY MEXICO STAFF PROJECT REPORT LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT Table of Contents Chapter Page No. I. URBAN SECTOR AND REGIONAL BACKGROUND ................... 1 A. Urban Trends and Problems ........................ 1 B. Spatial Policy .......2......................... 2 C. The Lazaro Cardenas Region ....................... 4 D. Project Objectives .......6...................... 6 II. PROJECT COMPONENTS, COSTS, AND FINANCING ............... 8 A. Project Description ..................................... 8 (a) Urban Upgrading .................................. 12 (b) Sites and Services ............................... 13 (c) Construction Material Loans ....................... 14 (d) Training Centers ................................. 15 (e) Production Credits ............................... 17 (f) Industrial Premises .............................. 19 (g) Regional Feeder Roads ............................ 20 (h) River Control .................................... 20 (i) Technical Assistance .............................. 21 (j) Studies ............................................ 22 B. Cost Estimates ......................................... 24 C. Financing ............................................... 27 III. DESIGN STANDARDS AND PROJECT SPECIFICATIONS ............ 28 IV. BORROWING AND EXECUTING AGENCIES ..................... 31 A. Borrower - BANOBRAS ............................. 31 B. Executing Agency - the Fideicomiso Lazaro Cardenas.. 32 V. PROJECT IMPLEMENTATION ............................... . 35 A. Implementation Arrangements ..................... .. 35 B. Procurement ............................ .......... 36 C. Disbursement ..................................... 37 D. Monitoring and Evaluation ........................ 37 E. Accounts and Audits ............................. 38 This report was prepared by Messrs. M. Rothschild (Chief of Mission) and R. Chavez of the Bank and Messrs. M. Arbell, J. Espino, and E. Shluger (Consultants). 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 IFC authorization. Table of Contents (continued) Page No. VI. FINANCIAL ANALYSIS ................................. 38 A. Cost Recovery ...................................... 38 B. Affordability ................................... 40 C. Replicability ................................... 41 D. Project Cash Flows .............................. 42 VII. ECONOMIC AND SOCIAL ANALYSIS ........................... 42 A. Project Benefits ................................ 42 B. Economic Rates of Return ............................... 44 C. Risks ................................................... 46 VIII. RECOMMENDATIONS AND LOAN CONDITIONS ................. 46 ANNEXES 1. Population in Project Areas 2. Effects of Urban Upgrading Component 3. Financial Tables 4. Implementation Arrangements 5. Implementation Schedule 6. Estimated Schedule of Loan Disbursements 7. Cost Recovery Sources 8. Income Distribution in Project Areas 9. Costs and Affordability of Shelter Related Units 10. Description of Core Units 11. Selected Documents and Data Available in Project File. MAPS World Bank 12489R - Country Map World Bank 12488R - Regional Area World Bank 13454 - Project Location World Bank 13455 - Feeder Roads LIST OF ACRONYMS AND ABBREVIATIONS BANOBRAS - Banco Nacional de Obras y Servicios Publicos (National Public Works and Services Bank) CC - Comision de Conurbacion (Conurbation Commission) CFE - Comision Federal de Electricidad (Federal Electrical Commission) COPDEMICH - Comite Promotor del Desarollo Socioeconomico del Estado de Michoacan (Development Promotion Agency in Michoacan) CORETT - Comision Nacional de Regularizacion' de la Tenencia de la Tierra (National Commission for the Regularization of Land Tenure) CRB - Comision del Rio Balsas (Balsas River Commission), now integrated into SARH DGCR - Direccion General de Caminos Rurales (Rural Roads Department of SAHOP) INDECO - Instituto Nacional de Desarrollo de la Comunidad (National Community Development Institute) IMSS - Instituto Mexicano del Seguro Social (Social Security Institute) INFONAVIT - Instituto Nacional del Fondo para la Vivienda de los Trabajadores (Workers Housing Fund National Institute) NAFINSA - Nacional Financiera S. A. (National Financing Agency) SAHOP - Secretaria de Asentamientos Humanos y Obras Publicas (Ministry of Human Settlements and Public Works, formerly SOP) SARH - Secretaria de Agricultura y Recursos Hidraulicos (Ministry of Agriculture and Hydraulic Resources, formerly SRH and SAG) SEP - Secretaria de Educacion Publica (Ministry of Education) SHCP - Secretaria de Hacienda y Credito Publico (Ministry of Finance) SICARTSA - Siderurgica Lazaro Cardenas -- Las Truchas (Steel Mill) SPP - Secretaria de Programacion y Presupuesto (formerly Ministry of the Presidency) SRH - Secretaria de Recursos Hidraulicos - now expanded to be become SARH SSAP - Secretaria de Salubridad y Asistencia Publica (Secretary of Health) I. URBAN SECTOR AND REGIONAL BACKGROUND A. Urban Trends and Problems 1.01 In thirty years Mexico has changed from a rural country with only weak economic links among its diverse regions, to an urbanized and geograph- ically integrated society. Mexico's population growth has been among the most rapid in the world, and this growing population has migrated to cities at an even greater pace. The percentage of the population living in places of 2,500 or more inhabitants grew from 35% in 1940 to 59% in 1970. 1.02 In 1975 there were some 11 million people living in and around Mexico City making it the third largest metropolitan area in the world (after Tokyo and New York). Its population has been growing annually at over 5%, which means about 600,000 new people each year. U.N. projections based on recent trends show it growing to be the largest city in the world, with a population of over 30 million people, by the year 2000. Within the metropoli- tan area, in 1975 the Federal District alone had 14 percent of the nation's people, and accounted for over 30 percent of the nation's output in manufac- turing, 40 percent of the nation's sales in commerce, and over 50 percent of the nation's production of services. To stop the growth of Mexico City is probably not possible and may well not even be advisable. However, to slow it down to some extent by promoting growth in other parts of the country would be beneficial. 1.03 Mexico is now sufficiently developed for a strategy of selective decentralization to succeed. The nation has many cities that are reasonably large and growing, where additional workers can be highly productive. The second and third largest cities, Guadalajara and Monterrey, each with popula- tions of over one million, are major industrial and service centers, and have been growing even faster than Mexico City. Forty-four other Mexican cities each had over 100,000 inhabitants in 1970. Most of these cities also have the infrastructure, transport and communications links, labor pool, and other advantages that induce future growth. Measures to increase such growth and to manage it in an orderly fashion, paying due attention to the needs of low- income residents and immigrants, have a double pay-off: problems of managing the growth of the capital can be reduced (at least slightly), while efficiency from the national point of view can be increased. 1.04 Promoting faster growth in selected medium and smaller cities would be far more than a means to reduce growth in the largest cities. Indeed, the likely effects of applying growth-promotion measures to selected cities of less than one million inhabitants might be to reduce Mexico City's future growth from about 600,000 per year to perhaps 500,000 per year--a useful result, but hardly a momentous one. More important goals are to generate additional productive work in many parts of the country, and to increase the access of people living in smaller and rural towns to markets, credit, health, and other urban services. Such policies would not only improve the economic and social welfare of people in these areas, but in so doing, also help reduce the enormous social tensions that prevail in Mexico because of large differ- ences in living standards. -2- 1.05 Mexico has large regional disparities in welfare--as do other large semi-industrialized countries. Per capita income per month in 1969 ranged from Mex$628 in the Federal District to Mex$109 in Oaxaca--a range of almost six to one. Access to health care, education, potable water, and other basic needs also varies dramatically from one region to another. Although some poor regions present very difficult barriers to attempts to raise incomes, many other parts of Mexico can become more prosperous if appropriate policies are followed. Among the poorest and least-developed regions that are especially promising are: (a) parts of the coast of the Gulf of Mexico in the states of Veracruz and Tabasco, (b) the Isthmus of Tehuantepec, in the same states and also in Oaxaca and Chiapas, and (c) the Lazaro Cardenas-Zihuatanejo region of the states of Michoacan and Guerrero. 1/ 1.06 Promoting growth in promising medium-sized urban areas such as those on the Gulf Coast, the Isthmus, and the Lazaro Cardenas area is, therefore, in the national interest. Such a strategy can both (a) bring employment and urban services to less developed regions and guide growth in these places so as to be orderly and productive, and (b) shift growth, albeit slightly, to places other than the largest cities. B. Spatial Policy 1.07 Mexico, like most other nations, has not had a strong explicit spatial policy. Instruments that have affected spatial development have not been well coordinated--at least until very recently. Among the most important measures (both intentional and unintentional) have been: (i) Tax reforms established in 1972 that exempt from some levies industries located outside the three largest metropolitan areas. The objective of attracting new industries to outlying areas has had very limited success; (ii) The establishment, since 1971, of industrial parks and new urban complexes in many new places. But for a few exceptions, the exclusive reliance of these schemes on the provision of physical infrastructure has limited its impact; (iii) Financial programs to assist small- and medium-sized industries outside the three largest cities. About one third of all eligible firms have been helped by these programs; 1/ Recent World Bank studies of regional strategy options in Mexico, based on research done in early 1974, are: Economic Development of the Isthmic Region of Mexico (IBRD 1080-ME), March 30, 1976; Spatial Development in Mexico (IBRD 1081a-ME), January 31, 1977; and Urban Development in Mexico (IBRD 1449-ME), January 31, 1977. - 3 - (iv) The "maquila" programs, which created duty-free zones for manufacturing in cities along the U.S. border. Some cities have successfully taken advantage of these schemes; (v) A structure of utility charges across the nation that has not been effectively used to discourage further growth in Mexico City. 1.08 Within the last year, Mexico has moved towards establishing a stronger, coherent and explicit spatial policy. The Law of Human Settlements, adopted in June 1976, provides the legal authority for planning and imple- menting programs to achieve spatial goals. The stated objectives of the law include improved rural-urban integration, more balanced growth as among cities and regions, promotion of growth in medium-sized cities as alternatives to the largest cities, greater citizen participation in solving urban problems, land use control, better provision of urban services, and improvement of the housing location-job location-commuting situation within cities. In practice, the most important objectives that seem to be emerging are: (i) At the'national level, to reduce the growth of Mexico City, and to concentrate resources to develop a few promising alternative regions; as opposed to the past practice of generalized incentives described in para- graph 1.07 above. (ii) At the state level, to establish priorities for allocat- ing investment among cities or regions within each state. (iii) At the local levels, to plan for more orderly urban growth and implement these plans with public investments and land use control. 1.09 The new Secretariat of Human Settlements and Public Works (SAHOP), has already completed (December of 1977) a National Urban Development Plan that converts a significant part of the objectives enunciated in the Law of Human Settlements into operational goals. In order to implement Government policies in this sector, SAHOP is promoting a series of background and pre- paratory studies. SAHOP is also chairing all conurbation commissions, advising state and municipal governments on their own relevant laws and plans (at their request), and coordinating the execution of the National Plan. Perhaps the most important part of its execution role is to review investment plans of the government and public sector agencies for consistency with this Plan. 1.10 The Law of Human Settlements provides for new planning instrument for cases of contiguous urban areas cover more than one municipality, or are part of more than one state; namely, the Conurbation Commissions. These commissions can be established by the federal or state governments, depending on the extensio of the affected urban zone. these Commissions are not binding, they are a powerful guiding instrument for all federal, state and local authorities. Conurbation zones will be estab- lished mainly in cases of large metropolitan areas (Mexico City was the first), and of smaller areas where either present structure or desired future growth crosses state boundaries (Lazaro Cardenas and the other two conurbation zones of Torreon - Gomez Palacio--Lerdo, and Tampico - Ciudad Madero--Pueblo Viejo). 1.11 The Lazaro Cardenas Conurbation Development project is part of Mexico's first attempt to improve urban planning and administration in multi- state urban areas, to select and promote growth in areas where such growth will provide jobs and services for residents, and to reduce migration to the largest cities--in short, to plan and implement a coherent national spatial strategy. The World Bank can play an important role in connection with this ambitious attempt by supporting the successful implementation of this first project. The experiences gained in the process would be a valuable contribu- tion and a basis for the expansion of this first scheme into a nation-wide program. C. The Lazaro Cardenas Region 1.12 The Lazaro Cardenas region is located along the Pacific Coast in the southwestern part of the country (IBRD Map 12488R). The region is endowed with rich natural resourceI (iron ore, water, power, fertile land, and forests) and covers some 12,000 km that include portions of two of the least developed states in Mexico -- Michoacan and Guerrero. The major physical characteris- tics of the region are a sea coast of great beauty, a narrow coastal plain, and a low mountain range, broken by the winding lower Balsas River. The climate is subtropical with a heavy rainy season that averages about 600 mm. a year. The focal points of the region are Lazaro Cardenas itself, at the mouth of the Balsas River, and the developing tourist center of Zihuatanejo-Ixtapa, about one hour's drive down the coast. 1.13 Lazaro Cardenas, who was president of Mexico from 1934 to 1939, envisioned and promoted the area as a future growth pole. Subsequent admini- strations included it in their plans to develop new economic centers as alternatives to the excessive growth and concentration in the central part of the country. Beginning in the 1960's, a dam and power plant were built 15 km from the mouth of the Balsas River, including a 15,000 ha. irrigation project. During the last administration, a major deep water port was developed, and in 1972 the construction of the Siderurgica Lazaro Cardenas--Las Truchas (SICARTSA) steel plant was begun. SICARTSA's first stage came into operation in 1976. Highways under construction will soon link Lazaro Cardenas to Mexico City (about 400 km away) via Ciudad Altamirano and Toluca and with the coastal highway coming down from the north. A rail link with Mexico City through Nueva Italia, to be opened up in 1978, will complete the area's basic communi- cations structure. The Bank has supported much of the development in the region, including highways, the SICARTSA steel mill, as well as the tourist development of Zihuatanejo-Ixtapa and its international airport. The Lazaro - 5 - Cardenas region is projected to be an important development pole, based not only on economic activities around the steel mill, but also upon the develop- ment of the port, small- and medium-sized industrial enterprises, agricultural development and essential marketing services in support of all these activities. 1.14 Among shortcomings of the original development program for Lazaro Cardenas was the Government's reliance on the traditional notion that the development of the new growth pole would only require the establishment of a strong economic base. Characteristic of such an approach has been the mistaken belief that shelter and other urban services required to ensure the organic and balanced pattern of growth of the new center would either be generated without intervention, or could be taken care of by a traditional housing program. As usual, little attention was given to the needs of scores of new immigrants, mostly in the low-income bracket, that flocked to the area in search of employment and better living conditions. The pattern of life in Lazaro Cardenas, dependent almost exclusively on the operations of the steel mill, has suffered from strong fluctuations in employment and in the general level of economic activities. This has caused serious disruptions in the physical structure and social fabric of the expanding communities; for example, when the construction stage of the steel mill was completed and scores of construction workers were suddenly out of a job. Life in the Lazaro Cardenas area has continued to be extremely sensitive to the ups and downs of its enclave economy, a situation that will probably not improve until the economic base of the region has been sufficiently broadened. 1.15 The situation in Lazaro Cardenas has been further aggravated by the lack of coordination among those agencies that were originally entrusted to carry out shelter and other urban development programs in the area. 1/ Given this fragmentation of efforts, even the few programs that were established have been extremely inefficient; especially in their impact on low-income groups. The least expensive housing units presently available in the region cost about Mex$ 75,000 (or about US$3,300), without including land nor all infrastructure costs. Even with the benefit of current subsidized interest rates, such units are only affordable to about 25% of the area's population; that is, households with monthly incomes above Mex$ 6,000. 1.16 Today, three urban zones make up the conurbated area of Lazaro Cardenas: the larger towns of Lazaro Cardenas and Guacamayas located on the left bank of the Balsas River; the La Mira-Playa Azul system, including four smaller communities, and located further inland on the Michoacan side; and the four small villages of the Zacatula-Petacalco system, across the river in the State of Guerrero. Of the conurbated area's total population of about 59,000 inhabitants, about 78% (46,000) are located in the first zone; namely, in Lazaro Cardenas and Guacamayas. After an explosive annual population 1/ Responsibility for the provision of housing was assigned to three dif- ferent agencies (INFONAVIT, the former CRB, and the Fideicomiso); water supply to the former SRH and later to the Fideicomiso; sewerage networks to the Fideicomiso; electrification to CFE; roads to SAHOP; health facilities to IMSS and to SSAP; education and training to four different agencies, etc. -6- growth of about 25% resulting from massive investments in the area between 1972 and 1976, and then a slump in 1976-1977 due to the postponement of the steel plant's second stage, it has been estimated that future growth in Lazaro Cardenas and Guacamayas will be about 10% a year between 1978 and 1981, and 7% in the other towns. 1/ Population estimates for the conurbated area, as well as the corresponding expected demand for future shelter units, are shown in Annex 1. 1.17 As can be seen in this Annex, most of past growth in the region has been concentrated on the two larger cities; namely, Lazaro Cardenas and Guacamayas. Also, clearly distinguishable, is the population drop in some of the other towns between 1974 and 1977; as a matter of fact, some will not grow to their 1974 levels even by 1981. 2/ Furthermore, these yearly figures convey only partially the true scope and range of population fluctuations in the project region. D. Project Objectives 1.18 The main objectives of this project are to support Government efforts to initiate a process by which shelter and urban services can be provided to low-income groups in an efficient and replicable manner; to promote the development of new regional growth centers; and to increase the distribution of social and economic benefits in the Lazaro Cardenas region. The institutional arrangements that were developed during project preparation have been defined with the objective of correcting some of the weaknesses of past urban related programs in Mexico in general, and specific- ally in the Lazaro Cardenas area. These arrangements will provide an effi- cient model for the successful implementation of additional regional develop- ment projects in other areas of the country. An important objective of this project will be the preparation of such projects though a number of appropriate studies. 1.19 A common facet of many earlier public shelter programs established in Mexico has been the lack of correspondence between the costs of the units provided and the paying capacities of the intended beneficiaries. These differences have led to substantial losses by the implementing agencies, either because they have not been able to sell the finished units, or because of the financial drain caused by the required subsidies. In many cases the units have therefore been eventually sold to higher income users, thus de- feating the original purpose of these programs. The proposed project pre- sents a scheme that would effectively solve these problems and in so doing, 1/ Although these estimates are considered to be adequate, they are probably on the conservative side, in view of recent annuncements about the establishment of a Guanomex fertilizer plant and Pemex oil storage facilities in the area. 2/ See, for example, Zacatula, Naranjito, La Mira, El Habillal and El Bordonal. - 7 - provide a solution to families with income levels that have until now been effectively excluded from shelter programs. This will be achieved by signifi- cantly reducing construction standards, plot sizes and design criteria to levels that, while still adequate, are much lower than those traditionally used in programs of this kind. 1.20 Publicly supported shelter and urban services programs in Mexico have also suffered from an additional problem that has seriously limited their expansion possibilities; namely, inefficient cost recovery. Thus, whenever implemented, such programs have resulted in a serious drain of public funds, not a very attractive solution for a seemingly endless problem. Experiences have been similar in connection with public supported credit programs for small- and medium-scale enterprises. The lack of rigorous financial guidelines has often led to failure of well-intended efforts in these sectors. 1.21 A mechanism commonly used in Mexico to implement public develop- ment programs of these kinds has been to create Fideicomisos (Trusts) which by their very structure have often been confined to supervise fund disburse- ments, and have not been responsible for recovering them. In support of new Government efforts to reduce public subsidies, a major contribution of this project has already been the restructuring of the existing trust (the Fidei- comiso Lazaro Cardenas. (See paras. 4.04 to 4.14). From its previous limited function of managing the disbursement of budgetary transfers, it will now have much wider responsibilities and become a financially self- sufficient agency. Significant efforts have thus gone into developing not only a balanced and technically sound project for the Lazaro Cardenas area itself, but also into establishing an institutional approach directed to the full recovery of costs associated with the provision of shelter and other services for the area's low-income groups. 1.23 The project will also promote the establishment of a more diversi- fied and balanced economic base for the region. To this effect, it will offer a special credit line and the construction of standard factories to support the development of complementary high-potential economic activities in the region. These activities will be particularly geared to take advantage of the existing markets and the agricultural potentials of the conurbation area. In this connection, the project will also finance the construction of re- gional feeder roads to increase the accessibility of presently isolated outlying agricultural areas to the urban centers of the region. The project will, in addition, support some river control works needed to secure sub- stantial investments already made in the region. These works are required to safeguard the operations of the SICARTSA steel plant financed under a previous Bank loan, and to prevent grave siltation problems in the Lazaro Cardenas harbor. Funds will also be provided for the completion of studies required to consolidate the development of the Lazaro Cardena region and to prepare additional urban projects in other high priority areas of the country, as well as for some technical assistance required to complement ongoing efforts by Fideicomiso. - 8 - II. PROJECT COMPONENTS, COSTS, AND FINANCING A. Project Description 2.01 Corresponding to the objectives described in the previous section, the main elements of the proposed project will include the establishment of an efficient and financially viable institutional structure; the provision of some form of shelter at affordable cost to about 47,000 low income people; the generation of about 1,200 permanent jobs plus another 16,000 man-months of temporary work during the construction period (not including work involving self-help); the construction of regional infrastructure; the preparation of additional urban projects; and the provision of technical assistance to ensure the project's success. 1/ Total cost of the project will be about Mex$ 812.2 million (US$36.1 million), of which the Bank is expected to finance about Mex$ 371.3 million (US$16.5 million). 2/ The project components can be grouped into the following programs: (i) Shelter and related elements; including Urban Upgrading, Sites and Services, Construction Material Loans, and Training Centers (total cost of these elements amounts to about US$12.5 million); (ii) Establishment of a Credit Line for Productive Activi- ties and the construction of complementary Industrial Premises (approximately US$5.9 million); (iii) Construction of Regional Feeder Roads and the first stage of a River Control scheme (about US$12.9 million); (iv) Preparation of Studies designed to support further develop- ment in the Lazaro Cardenas area, and the preparation of additional projects in other regions of the country (US$4.5 million); and (v) Provision of Technical Assistance to the implementing agencies (US$0.3 million).3/ 2.02 In analyzing the alternative strategies available to solve the problem of inadequate shelter and other urban services for low-income groups in the project areas, the mission was confronted with two major problems. One was the difficulty of producing reliable population growth projections for each project area. The other, the very large size of individual plots prevail- ing in the region; which made the design of affordable units extremely difficult. The first problem was caused by the extremely uneven population growth patterns 1/ Additional discussion of project benefits is provided in Chapter VII, section A. 2/ Further cost details are provided in Section B of this Chapter. 3/ During negotiations is was agreed to limit this program to the indicated level because substantial assistance is alreadly being provided to Fideicomido through ongoing programs. - 9 - the region has experienced in past years. This issue was resolved by designing a flexible shelter program based exclusively on upgraded and serviced plots, complemented by the provision of three alternative construction material loan packages for self-help and mutual-aid schemes. Thus, and although appropriate shelter demand estimates for each of the region's towns were computed, the exact phasing of the units to be built will be determined by the acuual demand in each area during the four-year implementation period of the project. 2.03 Solving the issue of the prevailing plot sizes required extensive discussions with the Government and the affected communities. Eventually, and realizing that the proposed plots would have to be affordable to the area settlers and that full cost-recovery of the proposed programs was essential, agreement ws reached on the need t2 reduce th traditional plot sizes from up to 600 m to an average of 125 m and 200 m (for Sites and Services and Upgrading areas, respectively). 2.04 A major objective of the planned shelter program will be to regularize the structure of land ownership and to provide legal and secure tenure to the settlers of the area. This will be accomplished through the preparation of an extensive program of regularization. At present, parts of many settlements in the project area are, in formal terms, illegally built on ejidal lands. I/ The planned regularization will involve the expropriation of the built-up areas by the Government and the transfer of ownership to the present settlers through legal sales. This would generate enough funds to recover the indemnization paid to the original "ejidatarios" and ensure replicability of such programs. 2/ 2.05 A total of about 600 ha of land will be affected through the proj- ect, of which 226 ha correspond to Sites and Services and 373 to the upgrading areas. All land required for Sites and Services, but for about 19 ha in Guacamayas, is already property of the Fideicomiso. On the other hand, most of the land on which upgrading schemes are planned will need to be expropriated. Of these 373 ha, about 156 ha correspond to areas that will 1/ State-owned lands transferred in the past by the Government to rural communities. The ejidatarios or beneficiaries were given a "parcela ejidal" in unsufruct, for agricultural production, plus a lot to build a dwelling. Demand created by immigrants led to illegal sales or squatting on parcelas ejidales contiguous to the communities. Dwellers of these lots have no legal titles and hence no security to tenure. 2/ By law, the indemnization price for ejido land is set at a figure equiva- lent to twice the agricultural value of the land, plus a value-added (plusvalia) margin. - 10 - only be regularized and not provided with any infrastructure. Summarizing, of a total of about 600 ha, only 217 ha represent areas that could delay actual loan disbursements; almost all of which (95%) are lands that corres- pond to upgrading areas. The Fideicomiso will prepare a detailed program and schedule to complete expropriation procedures. Disbursements in upgrading areas that have to be expropriated will be conditional on the actual completion of expropriation procedures in these areas. 2.06 The expropriations will be carried out by CORETT, 1/ the govern- ment agency responsible for such actions on ejido lands all over the country. Once expropriated, the land will be transferred to the Fideicomiso for regularization. The Fideicomiso will then remodel and develop the communities. Dwellers will then purchase their "own" properties, paying for both the land and the new urban infrastructure. In addition to the expropriated lands, the Balsas River commission 2/ will hand over property it owns in Guacamayas and on which it has allowed the settlement of migrants free of charge. 2.07 In order to reduce the costs of the provided services, efforts were also made to increase the densities of existing urbanized areas and thus, in- crease the number of households that will share in the cost of general infra- structure works. This will be achieved by remodeling the layouts of the existing urbanized areas, and through this remodelling, reduce the size of existing large plots, reduce and straighten out roads and footpaths, and plan housing clusters in the empty cores of large street blocks. Preliminary remodelling of these layouts has already been made and, as a result, a significant number of new plots has been identified in these areas. 2.08 In estimating the need for future shelter in the region, these theoretically recoverable plots were considered part of the potential supply of new units, and the scope of the Sites and Services component was derived accordingly. Jointly, the Upgrading and Sites and Services components of the project will provide a total of some 7,370 plots with adequate urban services. Some 5,580 of these will be located in the upgrading areas, of which 3,980 will be upgrading of existing units and 1,600 plots gained in existing block cores. The remaining 1,790 new serviced plots will be provided through the Sites and Services component on new areas selected for this purpose. 2.09 The following table summarizes the combined expected impact of the Upgrading and Sites and Services programs on the project's area. A more detailed description of each component is given in separate sections below. 1/ National Commission for the Regularization of Land Tenure. 2/ This Commission does not function as an independent agency any more and was integrated into the Ministry of Agriculture and Hydraulic Resources (SARH) in December of 1977. - 11 - Number and Location of Upgrading and Sites and Services Plots Total Estimated % of New Upgrading Sites and Total Serv- New New Demand Area Old Plots New Plots Services iced Plots Plots Demand /a Satisfied /b Lazaro Cardenas/ Guacamayas 2,924 1,248 1,792 5,964 3,040 3,906 78% Zacatula/Petacalco 419 108 - 527 108 180 60% La Mira/Playa Azul 633 250 0 883 250 495 50% Total: 3,980 1,610 1,790 7,380 3,400 4,580 74% /J From table in Annex 1. /b It is assumed that part of the difference relates to higher income groups and will be covered by other schemes. As can be seen Erom these figures, the largest number of serviced units will be provided in the principal centers of the region, namely in Lazaro Cardenas and Guacamayas. This reflects the Government's objective to strengthen the concentration of urban life in a few viable centers, and to discourage the establishment of low-density scattered and smaller towns in the region. 2.10 The upgrading programs will provide serviced plots costing Mex$15,000 (US$667) and Mex $18,500 (US$822) in the smaller towns and in Guacamayas, respectively. The cost of a fully serviced plot under the Sites and Services scheme in Lazaro Cardenas will be about Mex$24,000 (US$1,067). 1/ The differences in cost reflect variations in land cost and the level of services provided. 2/ The units provided under the up- grading and remodeling schemes (6760 units) 3/, make up about 80% of all shelter related units provided in the project. Regular Sites and Services comprise the remaining 20% of the shelter program (1790 units). In combina- tion with the construction material loans detailed below, the joint Urban Upgrading and Sites and Services programs would offer a series of alternatives to accomodate different income levels ranging from Mex$1,425 (US$63) to Mex$2,540 (US$113) per month. The least cost element of this program (a 1/ Quoted prices include costs of professional services as well as all physical and price contingencies. 2/ See Section (a) below for more details. 3/ This includes 1,180 that would only be legalized. See para. 2.13. - 12 - serviced plot in smaller towns) is affordable by about 97% of the area's residents, and the most expensive element (a dwelling core in Lazaro Cardenas) by 72% of the area's population. This corresponds to yearly household incomes of about US$670 and US$1,350 respectively. About three quarters of the pro- posed shelter units would be affordable by households between the 7th and 22nd percentile of the region's income distribution. 1/ The various possible com- binations, including respective total costs and monthly charges, are described in the following table. Figures in Mexican Pesos Serviced Plot Only Basic Unit Sanitary Unit Dwelling Core Total Monthly Total Monthly Total Monthly Total Monthly Cost Charge /a Cost Charge la Cost Charge /a Cost Charge a Upgraded plot in towns 15,000 189 21,500 285 22,700 302 29,000 393 Upgraded plot in Guacamayas 18,500 233 25,000 330 26,200 347 32,500 438 Sites and Services 24,000 302 30,400 400 31,600 417 38,000 508 /a Assuming 10% downpayment on the plots, no downpayment on the construction materials and the rest payable at 15% over 15 years. (a) Urban Upgrading 2.11 In response to the accelerated growth and the urban problems that ensued as a result of the construction of the steel plant, the Government implemented a special investment program in the Lazaro Cardenas region in 1975-1976. With it, water, sewerage, electrical and circulation networks were brought up to near standard levels in Lazaro Cardenas itself and parts of Guacamayas, La Mira, and Playa Azul. However, much of Guacamayas and eight other towns in the conurbated area were untouched by the program and have had to make do with already inadequate utility networks. The upgrading component consists of a program to complement the urban infrastructure in most of those areas that lack adequate services. 2.12 The program will provide for two levels of upgrading; namely, a fully serviced level for the upgrading of the densely populated, larger, and faster growing Guacamayas, and a reduced level in the smaller towns of the area. The difference in the proposed schemes corresponds to the paying capacities of the population in the alternative centers and thus to the level of infrastructure that can be afforded. 2/ 1/ Assuming that a family would spend 15% of its income if only buying a serviced plot. Terms are 10% downpayment and 15% interest over a period of 15 years. A detailed description of the affordability structure is provided in Annex 9. 2/ The level of upgrading in the smaller towns will include, for example, simpler sewerage disposal systems and less expensive road networks. - 13 - 2.13 It is estimated that the upgrading program will affect about 6,760 plots in Guacamayas, Playa Azul, La Mira and other towns on both sides of the Balsas River. Of these, an estimated 5,580 existing and recovered 1/ units will be upgraded and the remaining 1,180 will only be legalized. The latter group includes about 890 already serviced plots (in La Mira and Playa Azul) and about 290 units in smaller towns where the upgrading of services is not yet justified. The table in Annex 2 summarizes the range of this program. 2.14 The upgrading program will provide about 3,550 water, the same number of sewerage, and 2,570 electrical connections, as well as about 17.0 km of access roads. Off-site infrastructure is only required and will be built in five smaller towns included in the program. 2.15 In conjunction with the corresponding part of the proposed Con- struction Material Loans program (see section "c" below), this component will benefit an estimated 37,000 people in the region 2/. Total cost will be about US$7.65 million, including the costs of all infrastructure, professional services and contingencies. (b) Sites and Services 2.16 The sites and services component has been designed to complement, with additional serviced plots, the overall upgrading program. This com- ponent envisages the preparation of about 1,800 new serviced plots distributed in three sites in Guacamayas (1,200 plots) and Lazaro Cardenas (600 plots), the fastest growing settlements in the conurbated area. Each of the plots will have individual water, sewerage, and electrical connections. The settle- ments will also be provided with access roads and street lighting. 2.17 The 600 serviced plots planned for Lazaro Cardenas will be located on an 11.8 ha site contiguous to a previous Sites and Services project carried out by INDECO on the original property entrusted to the Fideicomiso. The units in Guacamayas will be broken into two areas: (a) to the north, on two sites adjoining the colonias Anibal Ponce and Lucrecia Toriz, with 242 and 271 lots, respectively, and (b) to the south, in the urban ejidal area of Guacamayas, totalling 677 units. The total area for the three sites is about 28.7 ha. 2.18 The only community facilities to be established as part of the project will be the training centers described in section (d) of this chapter. As part of its regular activities, these centers will also offer training of professional skills, adult education, promote health and nutri- tion related campaigns, and provide first aid. Regular health and education services will be provided from existing facilities considered to be adequate for the projected population in the project areas (see para. 2.29). 1/ These are units that will be gained by reducing the size of existing plots and by opening up previously locked areas in the middle of large street blocks. 2/ Average family size in the Lazaro Cardenas area is 5.5 people per household. - 14 - 2.19 The Sites and Services plots will average about 125 m2 in size and cost about Mex$24,000 (US$1,070) each; including the corresponding land costs, infrastructure, professional services and all physical and price contingen- cies. Total cost of this component is estimated at about US$2.4 million, and it will benefit approximately 10,000 people. (c) Construction Materials Loans 2.20 This program has been designed to improve and increase the housing stock in the area by providing, in combination with the Urban Upgrading and Sites and Services components, a range of construction material loans of various alternative amounts to suit the needs and financial possibilities of different low-income groups throughout the conurbated area. The possible combinations of these options with upgraded plots or serviced sites, range from about Mex$21,500 (US$956), for a basic unit in one of the smaller towns, to about Mex$38,000 (US$1,689) for a dwelling core in Lazaro Cardenas (see Annex 9). The program, described in more detail below, will provide some 5,300 material loans with technical assistance for a total of about US$2.08 million. 2.21 The component will be modelled after a successful 50-unit pilot program currently being carried out by the Fideicomiso in Lazaro Cardenas. Relying basically on self-help and mutual-aid construction techniques, the objective of the construction material loan program is two-fold: (a) to upgrade existing dwelling units, and (b) to produce new housing for low-income groups. The program will be complemented by two supporting schemes offered in the training centers; namely, training of basic construction skills and actual production of building components. 2.22 Loans will be made by the Fideicomiso to individual household heads. Material and building parts will only be provided in kind, 1/ whereas equipment will be rented and labor contracted 2/ by the Fideicomiso. These loans would include: (a) materials, such as cement, gravel, reinforcement bars, wood; (b) building components, such as concrete blocks, pipes and prefabricated beams or asbestos sheets, wooden or metal doors and windows, cement sinks and toilets; (c) equipment, ranging from shovels, picks, trowels and wheelbarrows to small concrete mixers, usually on a rental basis; and (d) specialized labor such as for plumbing and electrical installations, or semi-specialized labor such as for masonry and other less-skilled tasks. 2.23 Although the proposed loans will be for varying amounts to cover specific needs of borrowers, it is assumed that they will generally involve the construction of one or more room-units. The breakdown of these loans by 1/ This system was adopted because of serious supply problems in the area's relatively small market for construction materials. 2/ This refers to skilled labor that will gradually have to be financed by each applicant from loan proceeds, as well as unskilled labor to be con- tracted by loan applicants that are unable to carry out such work them- selves. - 15 - type was determined according to the results of a preliminary demand survey and the paying capacities of the potential beneficiaries. This breakdown is shown in the table below. Unitary Number Total Cost Unit Type Unit Area Cost (US$) of Units (US$ million) Basic Unit 12 m2 289.0 2,000 .58 Sanitary Unit 12 m2 342.0 2,000 .69 Dwelling Core 24 m- 622.0 1,300 .81 5,300 2.08 2.242 The basic unit designed for the project wi consist of a single 12 m room. The sanitary unit will also have 12 m of floor area and consist of a bathroom with shower, toil2t and sink, plus a kitchen with a kitchen- laundry type of sink. The 24 m dwelling core is a combination of the two previous elements. Design details are provided in para 3.09 of this report and in Annex 10. 2.25 The construction material loans program will be operated out of the training centers to be implemented in the project (see next section). Materials, equipment and specialized labor will be made available at four center warehouses or from smaller temporary warehouses to be set up in nine selected areas where concentrated upgrading or dwelling construction is planned to take place 1/. If required, technical assistance will also be provided from these centers (see para. 2.37). 2.26 The proposed criteria for selecting recipients of these loans is based on a point system that takes into account household income and expendi- tures, employment base, family composition, permanence of residence, land tenure situation, and an appraisal of the existing, if available, dwelling. The approval of a loan would also take into account the recommendations of the community's committee in which the potential loan recipient lives. A tentative selection system has been developed by Fideicomiso and will be presented to the Bank for review not later than December 31, 1978. (d) Training Centers 2.27 The proposed component will consist of the construction and equipment of four centers, primarily for the promotion of self-help con- struction using the proposed material loans and in support of the proposed credit line for artisans and small and medium-scale enterprises. 1/ The warehouses will be set up in model core dwellings which will function as an administrative base in the area, and will then be put up for sale upon the completion of the program. - 16 - The centers will also house a number of additional community wide programs organized under a general development program. Both the physical facilities and the training programs were requested by and coordinated with the com- munity organizations in the project areas. Despite the relatively recent establishment of these settlements, a strong and efficient community struc- ture led by articulate leaders exists in these areas (uniones de coiones). Their active participation during project identification and preparation, as well as their planned role during implementation, has been considered to be a key condition for the project's success. 2.28 The centers will provide facilities for conducting training courses, including open air and enclosed workshops. The self-help construc- tion training programs will specifically provide basic skills in masonry, carpentry, and plumbing, as well as in the production of building elements. Instruction in basic skills will be given to groups of about twenty trainees each, while training in the production of building elements has been planned as a continuing open-ended program. Among the building elements will be electrical and plumbing fixtures, wooden doors, windows, furniture, concrete blocks, tiles, lintels, and pipes. The components will either be used by the trainees in self-help construction and improvement of their own dwelling or sold. 2.29 Training courses for the promotion of productive credits will be in fields such as management, accounting, and marketing. Special training courses will also be provided to the area residents in other technical subjects to improve their professional skills and increase their productivity. This training will be in areas such as auto-mechanics, electricity, air- conditioning and cooling, etc. Complementing these, a general development program has been planned to provide basic adult education in other essential fields such as general education, home economics, health promotion, preven- tive medicine and first-aid. The preventive medicine and first-aid programs will be run by personnel of the Secretaria de Salubridad y Asistencia in a similar fashion to established arrangements in already ongoing programs of this kind. All other programs will be run by the Fideicomiso staff. Specific terms of reference, including course contents, duration and methodology are being prepared by the Fideicomiso and will be presented to the Bank for review not later than December 31, 1978. 2.30 Neither the first-aid program nor the training courses are intended to substitute the medical or educational systems in the area, but rather to complement these with services already offered in the project areas. Thus, the first-aid unit will only provide emergency attention and refer, if re- quired, patients to the larger facilities in Lazaro Cardenas. The other planned courses will offer practical training that is not usually provided by schools, and much less, for adults. 2.31 2 Each training center will consist of multi-purpose area of about 600 m of covered area plus an additional 800 m of open space. The component includes one center each in the Zacatula-Petacalco and La Mira-Playa Azul systems, and two in Guacamayas. Lazaro Cardenas has adequate facilities - 17 - already and will therefore not need any new ones at present. The location of each center was primarily selected as a function of the concentration pattern of low-income groups in the area. It is estimated that each center, when operating at full capacity, will be able to train a total of about 1,200 persons each year. The total population directly benefiting from the four centers over three years will thus be about 15,000 people. 2.32 Total cost of the proposed four training centers amounts to about US$450,000. This includes all construction costs, professional services and contingencies. Some vehicles and equipment were considered to be part of the promotional effort of these programs and as such will be charged to the project. These costs are included in the Technical Assistance component treated separately in section (i) below. The Government will be expected to cover, through regular appropriations, the costs of staffing and maintaining the centers, similarly to its regular support of schools, clinics and training institutions. Assurances to this effect were obtained during negotiations. (e) Production Credits 2.33 This component will offer credits to artisans 1/ and other small- or medium-scale enterprises in the Lazaro Cardenas region, which until now have had no access or only limited access to institutional credit. 2/ Al- though credits for small and medium sized industrial enterprises are theo- retically available through commercial banks, such programs are of national focus and not effective in the project area. The proposed program will be part of a locally coordinated comprehensive approach to the needs of the region. Besides industrial activities, it will also support badly needed service enterprises. A total of US$4.0 million equivalent will be made available to the Fideicomiso to establish and operate a revolving fund for on-lending to beneficiaries through three commercial banks. 3/ This sum will include a US$300,000 reserve guarantee fund and be complemented by another US$1.0 million in self-contributions by the beneficiaries, thus adding up to the US$5.0 million total cost of this component. In terms of actual disburse- ments, it is estimated that about 130 micro-enterprises would obtain credits averaging about US$1,500 each and totalling about US$200,000 equivalent; another 40 small-scale enterprises (SSE) would receive an average of US$50,000 each for a total of about US$2.0 million; while six medium-scale enterprises (MSE) would be granted credits averaging US$250,000 equivalent each and 1/ This group includes carpenters, shoemakers, electricians, mechanics, plumbers, and other small operators called in Mexico "micro-enterprises". 2/ Credits for artisans are occasionally available from "private lenders," but at interests that reach up to 50% annually. 3/ During project appraisal, assurances in principle were obtained for the participation in the lending program from Banco de Comercio de Mexico, Banco Nacional de Mexico, and Banco del Atlantico. These are the largest, second, and fifth largest commercial banks in Mexico. - 18 - totalling about US$1.50 million. A thorough analysis of actual and potential demand for such credits has been conducted by both the mission and local consultants, and the proposed line of credit has been defined accordingly. 2.34 Local artisans applying for credits will first be interviewed by the respective Uniones de Colonos (Settler Committees) to assess their personal integrity and repayment icapacity. The Fideicomiso will then assist serious applicants with the preparation of their credit applications for submittal to a special credit Committee that will include representatives of the con- cerned commercial banks. Applicants will be required to satisfy certain eligibility criteria to be developed jointly by the Fideicomiso and the commercial banks, and which will be submitted to the Bank for review not later than December 31, 1978. Final action on each package or individual application for credit will be the responsibility of the commercial banks. 1/ 2.35 The Fideicomiso will engage in a forceful program designed to identify and promote new subprojects and to attract private investors from other parts of Mexico. It has already contracted the services of a consulting firm which will focus on identifying and developing possible agro-industrial and agro-business enterprises to be based on identified potentials of the zone. This, and additional complementary promotion efforts, including some equipment, will be financed through a special US$39,000 contribution by the Government. 2/ 2.36 Commercial banks will make loans to end-beneficiaries in Mexican pesos at an interest rate of 15% per annum. In the case of loans to artisans and small-scale enterprises, this rate will include an annual 1% Guarantee Charge. This charge will be collected and transferred to the Fideicomiso for deposit in a US$300,000 special Credit Risk Guarantee Fund to be established and operated as part of the credit line by the Fideicomiso (see para. 6.05 for additional details). Credits for the first five small-scale and all six medium-scale enterprises will be reviewed and approved by the Bank. Assur- ances to this effect were obtained during negotiations. 2.37 The Fideicomiso is in the process of increasing its capacity to identify and evaluate industrial and service projects and to promote regional economic development. Within this program, it will train four officers in the areas of loan promotion, preparation, appraisal, business management and achievement motivation. Other experts will train and assist the sub-borrowers in this component. Technical assistance to artisans during the first three years of this program will be rendered free of charge, while the costs of such assistance to all other enterprises, if required, and to artisans after the first three years will be charged to the beneficiaries. 1/ Terms and conditions of these credits are discussed in Chapter VI, Section A. 2/ This amount has also been added to the Technical Assistance component of the project. - 19 - 2.38 The proposed credit line is expected to broaden the economic base of the region and provide new employment to families in the project areas. It is estimated that these credits will generate about 1,200 new jobs at an average cost per job of about US$600, US$8,000 and US$14,000, respectively, for micro-enterprises, SSE and MSE. 1/ The consolidated average for the compo- nent will be about US$4,200, which is about a third of the US$13,000 Bank's Urban Poverty Benchmark for Mexico. 2.39 Total estimated cost of this component is about US$5.0 million. The project will directly benefit about 7,000 people, 2/ and is expected to have additional indirect benefits through multiplying effects and the promotion of tertiary activities. (f) Industrial Premises 2.40 In support of the credit line for productive activities, and in order to facilitate the establishment of new enterprises in the zone, the project will also build standard workshop halls and industrial buildings to be rented to artisans and larger enterprises, respectively. The buildings would allow many firms to avoid the need to tie up large resources in unneces- sary expenditures, and instead, utilize these funds for more productive uses and at a lesser risk. The proposed facilities will encourage the development of productive ventures at their early stages of growth and provide a service not presently available in the zone at adequate standards. The smaller work- shops will be located between the industrial zone and the residential and commercial areas of Lazaro Cardenas, while the industrial buildings for larger enterprises will be located in an existing industrial park itself. These well located sites will offer significant benefits of agglomeration and complementarity of production and services. 2.41 The proposed component2will consist of three workshop halls with individual units ol 100 to 200 m each, and two larger industrial structures of 800 to 1,000 m each. The facilities will be built in stages over a three year period, as a function of actual demand. 3/ The buildings will be simpl2 but adequate in their construction standards and cost about Mex$2,500 per m , including engineering and all contingencies. The facilities will be provided with complete services that will be expanded according to parti- cular needs, and will be managed by a special unit of the Fideicomiso within the department in charge of handling the proposed production credits. 4/ 1/ These jobs and cost estimates are based on detailed demand estimates prepared by Fideicomiso and Bank consultants, and a thorough review by the mission with the support of IDF staff. 2/ This figure corresponds to the households of the above mentioned 1,200 new jobs. 3/ An analysis of the potential demand for this type of facility conducted by the mission indicates that the size and number of proposed premises are adequate. 4/ A similar, but larger and national program for building standard factories is included in a proposed Small and Medium Scale Industry Development project to be financed by the Bank. Design and construction standards presently being prepared under this program would be made available to the Fideicomiso. - 20 - 2.42 Total cost of this progran will be about US$9.90 million. The estimated annual rent of about Mex$550 (US$24.4) per m is lower than the rents presently charged in the region for facilities of much lower quality and service standards. 1/ (g) Regional Feeder Roads 2.43 This component will consist of constructing and upgrading eight roads--with a total length of about 198 km--that will link 40 villages in the project's macro-region to the Lazaro Cardenas-Guacamayas network. The existing uneven dirt roads, which in some cases are scarcely more than paths, become unusuable in the rainy season isolating the villages and hamper- ing the trade of their products. The projected roads are expected to have a dual impact; namely, to improve access by the villagers to urban services and facilities, and to offer better marketing possibilities to the region's agricultural output. 2.44 Only in one section; namely, between Guacanayas and Lazaro Cardenas, a road already exists. Because of the relatively heavy traffic it carries, this section will be upgraded and fully paved. This road shortens travel distance for vehicles from Guerrero to Guacamayas and to Central Mexico by 12 km and decongests traffic along the busy La Mira-Lazaro Cardenas highway. Preliminary engineering for all roads and detailed engineering for some of the projects have been completed by the Direccion General de Caminos Rurales of SAHOP. The execution, operation and maintenance of the roads will also be carried out by this agency. 2.45 Total cost of this component will be about US$7.2 million. The roads will benefit about 25,000 people in one of the country's most backward regions. A total of some 62,000 ha of cultivated land will be connected to the growing Lazaro Cardenas market by the new roads, of which about half will be new areas presently without any road link at all. Another approximately 44,000 ha in new areas for livestock production will also be opened to potential development by the proposed network. (h) River Control 2.46 In the 15 km stretch between the dam of La Villita and the mouth of the river, the Balsas River passes by four towns and the city of Lazaro Cardenas. The river is the most important single natural factor in the region. One way or another it affects every aspect of viable development in the entire area: it provides water for drinking, irrigation, and industrial uses; indirectly, it supplies all power for industry and lighting for homes and commercial establishments; and finally, the deep waters of its estuary allow Lazaro Cardenas to maintain a seaport of growing importance. 1/ These rents correspond to about 15% of total investment costs per m2 See para 6.06 for further details. - 21 - 2.47 Since the construction of La Villita dam in 1965, the river regime has been undergoing significant changes brought about by erosion, siltation and seasonal floodings. These changes have had increasingly detrimental effects as the urban areas along the river have grown denser. Thus, for instance, over the last two or three years more than 200 ha of prime land have been lost to, and some urban areas endangered by erosion; the siltation problem has begun to endanger the movement of large ships in the port and reduced the hydroelectric output of the dam; and the operations of SICARTSA, the steel plant, have been adversely affected. SICARTSA draws all its water supply from the river and has suffered substantial damages due to sudden drops and increases in the water flows of the river. Following consultations between a number of affected agencies, the Secretariat of Agriculture and Hydraulic Resources has decided to implement a long-term water management program to control the effects of the river. The proposed component will be the first stage of this program. 2.48 The component will consist of a set of works designed to increase and regulate the flow of water along the right branch of the Balsas river (see Map 13454). This will involve the construction of a large culvert that will act as a drain or spillway for small discharges by the dam, while restricting the flow caused by large discharges and floods. The proposed works will also involve partial dredging of the river on both sides of the culvert. 2.49 In regulating the flow of water along the right branch of the river, the planned works will address some of the most urgent problems in the Delta and specifically: (a) provide an adequate supply of water for the use of SICARTSA (and other industries); (b) avoid the effects of large discharges from the dam that presently result in substantial siltation of the channel and the inner harbor of the port; (c) partially reduce the continuing erosion along the left branch of the river (by decreasing the flow along it through increasing flows down the right branch); and (d) provide an adequate flow of water to safely dispose of sewage plant effluents along this branch of the river. 2.50 Additional improvements and corrections planned in the comprehensive river control program will be implemented through future stages of this program and following the gradual development of the Delta area. These planned works include the construction of spur dikes and levies along the left branch of the river, as well as dredging operations below the La Villita dam. (i) Technical Assistance 2.51 Competent and efficient institutional arrangements are necessary to ensure the successful implementation of this first Bank supported urban - 22 - project in Mexico, and to establish procedures that can serve as a model for an extended program of additional urban projects across the nation. In addition, support must also be provided to project beneficiaries to enable them to take full advantage of the planned programs. 2.52 In response to these requirements, the Fideicomiso is presently in the process of adjusting its operational structure and management practices. These actions are being taken in accordance with recent decisions by its board, which has directed the Fideicomiso to complete a comprehensive program of improvements. 1/ 2.53 These improvements are in the fields of budgeting and planning, financial management, billing and collecting, project design, management of the construction material loans, management of the training centers, and promotion of production credits. The Fideicomiso is also in the process of setting up a monitoring and evaluating unit. 2.54 All the costs associated with these efforts are considered to be promotional support by the Government to the development of the Lazaro Cardenas region, and as such will be covered by it though regular appropria- tions. Future costs of this kind will be covered through appropriate sur- charges to the beneficiaries of the various schemes. Assurances on all these matters were obtained during negotiations. (j) Studies 2.55 Complementing the implementation of this first urban project, the Government has requested Bank support for a package of studies required for the preparation of additional urban projects in Mexico and of integrated zonal plans in the Lazaro Cardenas Conurbation area. The total cost of this com- ponent will be about US$4.5 million, of which about US$3.1 million will be for preparatory studies and US$1.4 million for studies in the Lazaro Cardenas area. 2.56 Although the Government has already identified a number of addi- tional high-priority urban areas it wishes to support and develop 2/, sub- stantial preparatory work is still required before actual projects in these areas can be considered for financing. A first such effort is already under- way for the Coatzacoalcos region, one of the sites proposed for a second Bank supported urban project in Mexico. The areas selected by the Government as targets for preparatory studies are: Coatzacoalcos-Villahermosa-Itsmo, Quertaro-Irapuato-Leon-Lagos de Moreno, Tampico-Ciudad Madero-Valles, Guaymas-Ciudad Obregon-Guasave, and Manzanillo-Barra de Navidad. I/ Assurances that the Fideicomiso is carrying out and will complete this program were obtained during negotiations. 2/ In its National Urban Development Plan. - 23 - 2.57 These areas were selected because of their potentials for sustained economic growth, their strong linkages with corresponding areas of influence, and the critical urban problems presently afflicting them and requiring immediate attention. The proposed studies will result in integrated urban development plans for each of these regions and spell out detailed develop- ment programs for the 1979-1982 and 1983-1988 periods. 2.58 Preliminary terms of reference for these studies have been prepared by SAHOP, reviewed by the mission, and found to be adequate. The specific subjects that will be covered include the identification of: (a) population projections by economic activity and income groups; (b) present and future needs for housing, urban services and public facilities; (c) present and future transportation (public and private) and communication needs; (d) urban projects to be implemented in each project; (e) present and future land-use distribution and ownership structure; (f) financing and credit needs for each program; and (g) the institutional framework required to administer and supervise each program; The studies will be consolidated and analyzed together with local authori- ties to determine a list of possible projects by order of priority. 2.59 The studies to be implemented in the Lazaro Cardenas region are required to complete the Development Plan (Plan de Ordenacion) to be pre- pared by the Conurbation Commission for the region. 1/ Such an integrated plan is long overdue considering the uncoordinated manner in which substantial investments have already been made in the region, the adverse impact of unpredicted migratory movements generated by these investments, and the disorganized manner in which urban growth has developed in the area. 2.60 The main objective of the studies planned for this area will be to anticipate the future impact of planned activities, integrate these with present deficiencies and imbalances, and develop a comprehensive and adequate development framework for this region. 2 1/ This zonI has a total extension of about 12,000 km , of which only 2,000 km have been surveyed and analyzed. - 24 - 2.61 The Conurbation Commission, which is in charge of completing the Development Plan for the area, is not equipped to carry out the necessary studies by itself. Therefore, most of this work will have to be done by consultants and will only be coordinated by the Commission. Preliminary terms of reference for each of these studies have been prepared by the Com- mission, reviewed by the mission, and found to be adequate. The proposed studies will include the following areas of investigation: (a) population projections and development of an integrated settlement policy; (b) regional resources and economic growth plans; (c) detailed hydraulic conditions and development possibilities in the Balsas River estuary; (d) seismic zoning of the estuary areas; 1/ and (e) pollution control. 2/ 2.62 Final terms of reference for each of the studies proposed in this component will be presented to the Bank for approval. The Bank will also coordinate supervision of these studies during implementation, for which outside consultants will be used. About 12 man months of such supervision will be required during the three year implementation period, and the associated expenses (about US$75,000) have been included in the component's cost. Contracts for the elaboration of studies will be awarded according to procedures acceptable to the Bank. Assurances were obtained during negotiations on all these conditions. B. Cost Estimates 2.63 Total project costs, including all professional services and con- tingencies, have been estimated to be about US$36.1 million. The direct and indirect foreign exchange component amounts to about US$16.5 million. 2.64 These cost estimates are based on preliminary engineering and price quotations actualized to December of 1977. They include 3% for design costs, 7% for supervision, 15% for physical contingencies, as well as price contin- gencies of 9% in 1978 and 1979, and 8% thereafter, for both local and foreign 1/ This study is in response to recent preoccupation with the subject and the need to map out secure zones for future industrial and urban areas. 2/ To establish norms and standards to control the increasing effect of local industry on the fishery potential and human environment of the region. - 25 - costs. 1/ Price contingencies are based on Bank forecasts for international inflation, and it has been assumed that the rate of exchange will fluctuate to compensate for any differences between the Mexican and the international rate of inflation. The estimated contingencies are consistent with other bank supported projects in Mexico and considered realistic and appropriate for a project of this nature. A summary of total project costs is shown in the following table. 1/ No contingencies were included for Construction Material Loans, Produc- tion Credits, Studies, and Technical Assistance because costs estimates for these components are considered flexible enough to absorb possible cost variations. - 26 - SUMMARY PROJECT COSTS /a % % of Total Foreign Foreign Local Foreign Total Exchange Component - ----- In US$ million ---- A. Urban Upgrading 3.79 1.57 5.36 29 10 B. Sites and Services 1.08 0.38 1.46 26 2 C. Construction Material Loans 1.54 0.54 2.08 26 3 D. Training Centers (Community) 0.19 0.09 0.28 32 1 E. Production Credits 2.80 2.20 5.00 44 13 F. Industrial Premises 0.50 0.11 0.61 18 1 G. River Control 1.66 2.03 3.69 55 12 H. Regional Feeder Roads 2.56 1.73 4.29 40 10 I. Studies - 4.50 4.50 100 28 J. Technical Assistance - 0.30 0.30 100 2 Subtotal 1-2 13.7 27.57 (82) Professional Services A 1.84 0.01 1.85 1 - Contingencies L1 (i) Physical 1.40 1.33 2.73 - - (ii) Price Escalation 2.30 1.71 4.01 45 18 Subtotal 3.70 3.04 6.74 45 18 Total Cost of the Project including land cost /d 19.60 16.50 36.10 46 100 a These costs do not include interest during construction. /b These costs include: 3% design, 7% supervision on base cost plus physical contingencies. L Assuming annual price increases of 9% in 1978 and 1979, and 8% thereafter, for both the local and foreign costs. d Land acquisition costs for components A, B, F and H above amount to Mex$53.68 million and are included in respective local costs. - 27 - C. Financing 2.65 The proposed loan to BANOBRAS will be in the amount of US$16.5 million, which corresponds to the foreign exchange component of the project, net of duties and taxes. The Government will finance, by means of a grant to BANOBRAS, as trustee of the Fideicomiso, another US$18.0 million, while end-beneficiaries will finance the remaining US$1.6 million of the project costs. The following table summarizes the financing sources by project component. Financing (in US$ millions) Total Cost IBRD GOM Beneficiaries A. Urban Upgrading 7.65 2.29 4.91 0.45 B. Sites and Services 2.36 0.53 1.64 0.19 C. Construction Material Loans 2.08 0.90 1.18 - D. Training Centers 0.45 0.12 0.33 - E. Production Credits 5.00 2.20 1.80 1.00 F. Industrial Premises 0.90 0.44 0.46 - G. River Control 5.68 2.73 2.95 - H. Regional Feeder Roads 7.22 2.49 4.73 - 1. Studies 4.50 4.50 - - J. Technical Assistance 0.30 0.30 - - Total 36.14 16.50 18.00 1.64 2.66 The loan will be made to BANOBRAS (Banco Nacional de Obras Publicas), who will repay the loan plus interest and charges to the Bank. 2.67 The financing of the project will follow a standard procedure often used in Mexico; namely, through a Fideicomiso, or Trust Fund. To this purpose, the structure of the existing Fideicomiso Lazaro Cardenas is being modified and expanded to meet the needs of the project. 1/ The Fideicomiso's trustee will continue to be BANOBRAS. The Government will instruct BANOBRAS, as trustee of the Fideicomiso, to establish an appropriate project account and will replenish this account as disbursements are made by the Fideicomiso and as required for the implementation of the project. 2.68 All project funds will be channeled through the Fideicomiso Lazaro Cardenas, who in turn will transfer as required funds to the Ministry of Agriculture and Hydraulic Resources (SARH) for the implementation of the River Control scheme, to SAHOP for the implementation of the Regional Feeder Roads and the studies for other areas of the country, and to the Conurbation comission (CC) for the implementation of studies in the Lazaro (Ardena) region.2/ 1/ See Chapter IV for a discussion of BANOBRAS and the Fideicomiso, and Annex 4 for a list of implementing agencies. 2/ Implementation arrangements are described in more detail in Chapter V, Section A, and in Annex 4. - 28 - 2.69 All funds recovered by the Fideicomiso from the Sites and Services, Urban Upgrading and Construction Material Loans will be retained in a Revolv- ing Fund from which the Fideicomiso will continue to finance expansions of these schemes in the area. Similarly, all funds recovered through repayments of Production Credits and rents for Industrial Premises will also be retained by the Fideicomiso in a separate Revolving Fund to continue this particular program. 1/ Confirmation was obtained during negotiations that the Government agrees to these arrangements and that the Fideicomiso will use these funds exclusively for promoting programs similar to those implemented under the present project. III. DESIGN STANDARDS AND PROJECT SPECIFICATIONS 3.01 All detailed engineering for the project components is being prepared by the Fideicomiso, except that concerning regional feeder roads and the river control components which are being prepared by SAHOP's rural roads department and SARH, respectively. The following paragraphs provide some basic data on the design standards for each of the project components. More detailed background material was reviewed by the mission and found to be adequate. Urban Upgrading 3.02 All lots covered in this component will be provided with indi- vidual water and sewerage dwelling connections. In Guacamayas, La Mira, and Playa Azul, only expansions of the distribution and collection networks, but no new off-site installations will be required. On the other hand, complete self-contained water and sewage treatment plants will be built in the five smaller communities. Although initial consumptions are estimated to be lower, the design criteria was based on a daily per capita water con- sumption of 200 lts to 250 lts 2/ and 75% of that as discharge. 3.03 The off-site infrastructure and trunk networks have been designed for population increases up to 1990, although the distribution network that will be implemented at the present stage will only cover expected demands through 1980. The sewage treatment systems planned for the five smaller communities will, due to their relatively small populations, just be primary treatment systems, based on sedimentation ponds. The ponds will discharge into selected gulleys at safe distances from the villages, or into the left branch of the river on the Guerrero side which carries a more than sufficient flow of water for this purpose. 1/ See Table 3 in Annex 3. 2/ These figures apply to the smaller towns and Guacamayas, respectively. They are considered adequate in view of the tropical/industrial en- vironment of the area. The national standards established by SARH are considered adequate and have been used throughout the project. - 29 - 3.04 The electrical elements in the component consist of expanding the existing network to provide street lighting and individual dwelling connec- tions, including individual meters to an additional 2,570 dwelling connections. The design criteria for the electrical network was based on an estimated demand of 3,150 watts per capita with an 0.6 factor, or about 2,000 watts per capita. It is estimated that for the type and size of the locality, this figure will adequately cover street lighting and all other non-residential consumption. The proposed low-cost 'rural' type street lighting system is based on concrete posts and mercury lamps. 3.05 The upgrading of the circulation network will consist of two steps; namely, the remodelling of urban layouts (as described in para. 2.07), followed by the paving (two types) of a selected part of the system to provide year round access to all parts of the town. Network designs and proposed standards were reviewed by the mission and found to be adequate. Sites and Services 3.06 The relatively hilly topographic conditions of all sites, except the urban ejidal area of Guacamayas, makes the development of efficient layout designs in the area very difficult. Nevertheless, the proposed designs achieve relatively favorable land use ratios between public and private areas, making good use of the available terrain. A maximum inclination limit of 20 degrees for slopes was set in order to keep down infrastructure construction costs. A preliminary analysis, which is summarized below, reveals that these layouts compare reasonably well with optimum solutions 1/. Guacamayas Urbano North Lazaro Optimum Ejidal Area Cardenas Model Lot proportion 1/32 1/3 2 1/3 2 1/3 2 Lot size 137 m 116.6 m 113.2 m 119 m Private land 50% 59% 57.6% 54% Public land 25% 27% 27.2% 29% Semi-Public land 25% 14% 15% 16% No. of lots/ha. 36.5 50.6 50.9 46 3.07 All sites and services lots will be served with individual water and sewerage dwelling connections. None of the selected sites and services areas require any off-site infrastructure. The proposed expansions will simply be hooked to existing networks that are near the sites 2/. Design standards for the water and sewerage as well as for the electrical networks of this component are the same as those applied in the upgrading program. 1/ The "Optimum Model" is derived from the guidelines for the evaluation of design efficiency for low-income settlements in the Urbanization Primer (Internal Document, Urban Projects Department). 2 Existing networks were designed with expansion capacities for population growth projections up to 1990. - 30 - 3.08 The circulation network in all three sites is only intended to provide access to the settlement and not total coverage. All streets are designed to be eventually upgraded. In designing the access network, pre- dominance was given to pedestrian paths rather than to vehicular streets. Construction Material Loans 3.09 The basic unit designed for the project will consist of a single room while the sanitary unit will consist of a bathroom with shower, toilet and sink plus a kitchen with a kitchen/laundry type of sink. The so-called dwelling core is a combination of the two previous units. All three options will be built with stone foundations, concrete structure, brick walls, polished cement floors and asbestos sheet roof. The units are modularly designed in order to allow for their progressive development. The designs also respond closely to the climatological requirements for the region by allowing cross ventilation and affording adequate protection against monsoon rains and heavy winds (see Annex 10). Training Centers 3.10 The physical facilities of the training centers will be adapted from structure and components provided by the National School Building Program (CAPTCE). The proposed buildings will be simple and inexpensive in their construction and maintenance, and be similar to those currently being used in the area. The proposed combination of a metal structure, masonry, and asbestos sheet roof units appears to be adequate for both the proposed functions and the existing environmental conditions. Regional feeder Roads 3.11 Only one of the projected roads; namely, the Guacamayas-Los Coyotes section, will be fully paved. All other roads will receive less expensive gravel surfacing that can eventually be upgraded to full service levels. The former's travelled way will be 7 m wide and the estimated cost for this type of road will be about Mex$2.0 million per km. The unpaved roads will have 4 m carriageways and cost approximately Mex$0.6 million per km. 3.12 Given the topographical conditions of the area, ranging from flat lands through hills to mountaineous terrain, a road type "E" has been chosen for the unpaved roads 1/. Construction of this type of road involves labor- intensive methods and will be built using available labor organized and technically assisted by SAHOP 2/. 1/ Road types and technical specifications were established by SAHOP and are considered adequate. 2/ Meetings to inform and organize the local populations to this effect have already been initiated and "pro-camino" committees to resolve the expro- priation issue have been formed. - 31 - River Control 3.13 In 1976 the Institute of Engineering of the National University carried out a first integral study of the Balsas River Delta for the Balsas River Commission (now SARH). The study proposed a water management policy and the works required to implement it. An ad-hoc committee formed by the new Ministry of Programming and Budgeting, SICARTSA, the Federal Electrical Commission, and the Balsas River Commission, then suggested in 1977 that the proposed works be broken up into a staged program and that more economical alternatives be analyzed in view of the Government's restricted investment policies. The current proposal is the result of a new and integral study of the Delta completed by the Balsas River Commission and the Institute of Engineering. 3.14 The integral study of the Delta includes a mathematical model which was used to determine the water surface elevations based upon various flood probabilities and with different channel control features such as levees, spurs and deepening of channels by dredging. Based on historical flooding levels and storage volumes in the river and over bank, the model is able to project the level of flooding throughout the Delta for various theoretical levels of discharges imposed on the Delta by flows from La Villita dam. This model has been reviewed by Bank consultants and found to be adequate. 3.15 Preliminary engineering studies for the proposed culvert envisage two alternative solutions with varying number and different diameter of pipes. Those studies, prepared by SARH, have been reviewed by the mission and found to be adequate. Detailed engineering for the project is expected to be completed by August of 1978. IV. BORROWING AND EXECUTING AGENCIES A. BANOBRAS--Banco Nacional de Obras y Servicios Publicos 4.01 The proposed borrower of the loan will be Banobras (Banco Nacional de Obras y Servicios Publicos, S.A.) 1/ In addition to its role as borrower, BANOBRAS will continue to be the Government-assigned Trustee of the Fideicomiso Lazaro Cardenas, which is the Trust that has been selected as implementing agency of the project. As Trustee, BANOBRAS will receive from the Government all the funds required for project execution and be responsible for general supervision of the Fideicomiso's financial and administrative performance. BANOBRAS will also be responsible for processing all forms and communications with the Bank relating to loan withdrawals, and prepare the Project Completion 1/ BANOBRAS has been selected by the Government to be the financial agent for urban projects in the country. - 32 - Report. It will also repay to the Bank the loan's amortizations. Assurances on all these points were obtained during negotiations 1/. 4.02 BANOBRAS is a national development bank whose corporate objectives are to finance public works and services; to advice public entities in the planning, financing and implementation of same; to act as technical advisor in like matters to the Federal Government and state and local Governments, at their request; and to carry out and finance low cost housing projects and public works of municipalities. It is a well-organized institution with strong management and technical capabilities. Its technical department has about 120 engineers and technicians. BANOBRAS as investments of over US$65 million and holds in reserve about 25 million m of urban land on which about 86,000 new housing units will be built in the coming years. In the Lazaro Cardenas urban area, BANOBRAS already administers the existing trust fund which manages about 695 ha for residential, commercial, and industrial uses. To date, BANOBRAS has participated in the development of more than 30,000 serviced lots and in the construction of about 75,000 housing units. It has developed imaginative programs for home ownership, upgrading, slum redevelop- ment and for applying techniques of cross-subsidization as well as capturing "incremental value" (plusvalia) to benefit lower-income families. 4.03 BANOBRAS has had extensive experience in managing fideicomisos or trust funds. It utilizes the mechanism of trust management in different urban development works, as for example, in the development of housing proj- ects integrated with commercial and industrial development. As of December 31, 1976, the assets of all trusts under BANOBRAS were approximately US$900 million. B. THE EXECUTING AGENCY 4.04 In the process of selecting an appropriate implementation mechanism, careful attention was given to an institution already operating in the project area; that is, the Fideicomiso Ciudad Lazaro Cardenas. The financial record and past management procedures of this agency were so deficient though, that an alternative possibility had to be considered; namely, the establishment of completely new implementation arrangements. Assuming that it would be more beneficial in terms of overall development objectives to improve the operations of an existing institution than to create a new one, agreement 1/ Several Bank missions have extensively analyzed BANOBRAS and most recently in connection with the Medium Cities Water Supply and Sewerage Project, Loan Number 1186-ME. - 33 - was eventually reached that the existing Fiedeicomiso will be the implement- ing agency for this project. 1/. This decision required that a number of actions be taken by the present management of the Fideicomiso and by the Government to correct past deficiencies (see para. 4.07 below). 4.05 The Fideicomiso Lazaro Cardenas was established as a trust in January 1973, originally under NAFINSA, the national Financing Agency, as trustee. In 1975 the trust was transferred to BANOBRAS, the National Bank of Public Works and Services. The operations of the Fideicomiso are super- vised by a technical committee (Comite Tecnico) whose president is the minister of Human Settlements (SAHOP) and whose members are representatives of the Ministry of Finance and Public Credit, the National Workers Housing Fund (INFONANIT), the National Institute of Community Development (INDECO), the state governments of Michoacan and Guerrero, and the municipality of Lazaro Cardenas. 4.06 Actual operations and administration of the Fideicomiso are handled by a general manager and his deputy. The Fideicomiso had, by mid-1977, a staff of about 490 people organized under three main departments; namely, Administration, Finance, and Legal. Of its staff, about 75% are located in the Lazaro Cardenas area and the rest in the Mexico City office. About half of the staff are workers engaged in the construction activities of the Fideicomiso and the rest is made up about equally by professionals, technicians and administrative staff. A new general manager and a number of key officials were appointed to the Fideicomiso at the end of 1977. 4.07 The financial situation of the Fideicomiso had, under its previous management, steadily deteriorated over the past years (see tables in Annex 3). One of the main reasons for this situation has been the continuous discrepancy between the cost of and the conditions under which the Fideicomiso has been receiving funds and the conditions it put on funds made available to its bor- rowers; that is, to the buyers of the houses it builds. Specifically, the Fideicomiso has been borrowing at relatively high market rates of interest, including floating rates, while offering much lower and fixed rates to its borrowers. Another serious problem has been the large amount of receivables in its accounts. Its largest debtor; namely, the SICARTSA steel mill for which most of the housing units have been built in the past, was by the end of 1977 in serious arrears to the tune of about Mex$100.0 million, which constitutes most of the Fideicomiso's outstanding receivables from benefi- ciaries. 4.08 All these and many other deficiencies were clearly the result of inadequate management practices. The lack of proper mechanisms to plan, review and manage financial operations are a common characteristic of many 1/ The Fideicomiso would implement most of the project components, but for the river control works, the regional feeder roads and the proposed studies which would be implemented by other agencies as described in more detail in Chapter V, Section A. - 34 - trusts of this sort. Fideicomisos are often conceived as temporary financial channels for development projects, while their responsibilities and existence are often limited to the implementation period of such projects. One parti- cularly important matter often treated only very lightly in their charters is their responsibility for financial self-sufficiency. Implicit is often that all necessary funds will somehow be made available by the Government; little is said about cost-recovery. 4.09 Confronted with this situation, agreement was reached on a number of operational and administrative changes to improve and strengthen the capacity of the Fideicomiso to implement the proposed project. First, the Fideicomiso's new management agreed to reorganize the trust's administrative and operational structure in line with its new orientation and objectives; namely, to change from being merely a disbursement agent for the Government in the urban sector to that of becoming a self-financed, corporation-minded promoter of such programs. Of primary importance in this context was the recognition that the Fideicomiso will from now on be responsible not only for proper implementation of works and disbursements of associated funds, but also for the recovery of all costs related to the provision of shelter solutions and other urban services to individual beneficiaries.l/ 4.10 Prior to the preparation of the now proposed project, the Fideicomiso had been mainly concerned with the development of a 695 ha site to provide housing for SICARTSA and government employees. No coordination had been prop- erly established for the overall development of the area, while complementary urban services were left to the responsibility of individual agencies. Under its new role as executing arm for the Lazaro Cardenas Conurbation Commission 2/, the Fideicomiso's new orientation and administrative structure will for the first time ensure an integrated effort to the development of the region. 4.11 In practical terms, the Fideicomiso is in the process of reassign- ing its present managerial staff and of recruiting new personnel. Among these, the Fideicomiso has already recruited two new key officials; namely, a full-time project manager, and a new financial manager. A productive invest- ment specialist will be recruited shortly. Additional staff will be contracted according to needs as the new structure is established. These expansions will be carried out simultaneously with a reduction in the number of existing staff; particularly if redundant according to the new orientation of the agency. In this context, and as a first consequence of its reorganization effort, the Fideicomiso has already been able to reduce its staff by about 100 people (or 20% of total personnel). 4.12 Complementing these internal improvements, the Government for its part, has assumed the responsibility for helping to resolve all outstanding 1/ Most of the proposed changes have been formalized in the report by the Fideicomiso's board dated January 19, 1977 (Reunion del Comite' Tecnico). 2/ Established recently by Presidential Decree. - 35 - financial issues between the Fideicomiso and Government-owned or controlled bodies, and specifically the debts of SICARTSA. Following Government instruc- tions to this effect, SICARTSA has already agreed to settle its outstanding debts to the Fideicomiso and a tentative schedule of repayments has been established. 1/ The government will take all necessary action to ensure payment of all outstanding debts of SICARTSA to Fideicomiso as a condition of loan effectiveness. 4.13 The Government has also agreed to the Bank's request that the Fideicomiso be allowed to retain all recovered payments from end-beneficiaries of shelter related schemes and of productive credits as a contribution to its equity. The recovered payments will be managed through two revolving funds from which expansions of these programs will be financed by the Fideicomiso. The Fideicomiso will prepare a four-year investment plan detailing the pro- posed use of its funds in the coming years, and particularly those managed through the proposed revolving funds. Repayments of the Bank loan will be made through separate Government transfers chanelled directly by BANOBRAS. Assurances on all these matters were obtained during negotiations. 4.14 Implementation of the measures agreed upon by the Government and the Fideicomiso will have a significant impact on the financial situation of the Fideicomiso as can be seen in table 1 of Annex 3. Additional financial information is provided in the other tables provided in this Annex. V. PROJECT IMPLEMENTATION A. Implementation Arrangements 5.01 Overall responsibility for the implementation of the project will rest with the Fideicomiso Lazaro Cardenas. Certain components will, however, be implemented by other government agencies. To this effect, the Fideicomiso will enter into contractual arrangements with SARH, SAHOP, and CC for the implementation of their respective components. Annex 4 gives a summary of the agencies responsible for the implementation and subsequent operation and maintenance of each of the project components. 5.02 The Department of Rural Roads in SAHOP (DGCR) will be responsible for the implementation, operation, maintenance and eventual upgrading of the regional feeder roads component. The Department of Territorial Planning for Human Settlements, under SAHOP's Subsecretariat of Human Settlements, will carry out all the studies not directly related to Lazaro Cardenas. SAHOP's operational budget for 1977 was over Mex$168.0 billion and this agency 1/ This Schedule has been incorporated in the financial projections of the Fideicomiso (see table 1 in Annex 3). - 36 - is well capacitated to implement the two above mentioned project components whose costs have been estimated to total about Mex$232.5 million over three years. 5.03 The river control component will be implemented by the Ministry of Agriculture and Hydraulic Resources (SARH). In this it will be assisted by the now absorbed Balsas River Commission (CRB). The CRB was, until its incorporation into SARH, a semi-autonomous agency (under SARH) with a total yearly budget of almost Mex$890.0 million. The Commission has implemented in the past similar and much larger works than the Mex$128.0 million component to be financed in the project, and its staff (now at SARH) is technically well suited to implement the proposed component. SARH will also be responsible for operation and maintenance of the proposed works. 5.04 The Conurbation Commission (CC) will assist Fideicomiso in carry- ing out the studies pertaining to the Lazaro Cardenas Region 1/. 5.05 Operation and maintenance of the various elements in the upgraded areas and sites and services projects, once completed, will be the res- ponsibility of the corresponding local agencies. Thus, the operation and maintenance of electric networks will be by the CFE 2/, and of water networks by the local Juntas de Agua Potable 3/. The Lazaro Cardenas municipality will be responsible for maintenance of the sewerage networks and local roads. All these responsibility assignments were confirmed during negotiations. 5.06 It is estimated that overall project implementation would take about four years, that is, until the end of 1981. The chart in Annex 5 shows the anticipated implementation schedule for the project by component. B. Procurement 5.07 BANOBRAS, through the Fideicomiso, will act as the primary pro- curement agent. It will prepare tendering documents, invite for bids, eval- uate these and award contracts. Contracts for the River Control component will be awarded on the basis of international competitive bidding, except for those under US$250,000 which will be awarded under regular procedures used by the Government and acceptable to the Bank. 4/ Since most of the other civil works envisaged in the project are either self-help intensive or relatively small and at scattered locations, foreign contractors are not expected to participate. Therefore, all these other contracts for civil works will be 1/ The CC has a technical unit of about 15 professionals, including economists, planners, engineers and sociologists. 2/ CFE is the Federal Electrical Commission which operates all electrical systems in the area. 3/ These local water boards are, by law, set up by SARH to operate and maintain water systems independently of the Municipality. 4/ Up to a total of US$1.25 million. - 37 - awarded on the basis of local competitive bidding procedures or other pro- cedures acceptable to the Bank. As!urances to this effect were obtained during negotiations. Local procurement procedures have been reviewed by the Bank and found to be adequate. C. Disbursement 5.08 The Bank will disburse against: (a) 45% of all civil works costs 1/ (including costs of engineering and supervision); (b) 40% of construction material loans, and production credits; (c) 100% of foreign expenditures for imports, or 50% of local expenditures for locally procured equipment and vehicles; and (d) 100% of amounts disbursed for studies, for promotion activities by Fideicomiso, and for technical assistance by consultants. 5.09 The mission recommends that a total of up to US$350,000 be made available for retroactive financing of expenditures made for the project after August 1, 1977. These funds would cover costs for engineering studies as well as other studies done by SAHOP in preparation of additional projects 2/. 5.10 Disbursements will be fully documented. The Fideicomiso will process all documentation under the supervision of BANOBRAS which will set up a project account and will monitor withdrawal applications received. Loan disbursements are expected to be in accordance with the schedule shown in Annex 6. D. Monitoring and Evaluation 5.11 Because of deficiencies in past urban program in the region and the importance of this project as a model for a national program of similar schemes across the nation, particular attention has been given to the develop- ment of an effective monitoring and evaluating process. It is proposed to carry out this function at two levels; namely, at the Fideicomiso itself and at BANOBRAS. The Fideicomiso's role will mainly be to analyze the field experiences and assess the impact of project implementation. It will monitor and evaluate the execution of the work process itself, as well as the changes in the level of urban services,social conditions, and economic situation of 1/ These correspond to the estimated average foreign exchange costs. 2/ See Chapter II, Section (j) for a description of these studies. - 38 - of project beneficiaries. A special unit would be established by the Fide- icomiso for this purpose which will be supported by the Directorate of Program- ming and Budgeting of SAHOP. 5.12 A complementary monitoring and evaluating role will be assumed by BANOBRAS which will deal primarily with management and financial matters. As trustee of the Fideicomiso, BANOBRAS will supervise the former's operations and, in addition, develop from the experiences gained in this project an institutional model that\could be used for the promotion and implementation of all future urban projects of this kind in Mexico. The establishment of proper arrangements satisfactory to the Bank by each of the mentioned agencies was confirmed during negotiations. E. Accounts and Audits 5.13 Separate project accounts will be maintained by BANOBRAS, the Fideicomiso, SARH and SAHOP. As project components are implemented and disbursements made, the Fideicomiso will submit to BANOBRAS quarterly financial reports by project components. During negotiations, agreement was reached that annual (external) audited accounts of the Fideicomiso would be made available to the Bank no later than five months following the close of the Government's fiscal year. VI. FINANCIAL ANALYSIS A. Cost Recovery 6.01 Considerable progress has been made in this project toward ensuring that appropriate pricing policies will be followed and that full recovery of costs will be attempted in order to ensure project replicability. In design- ing a strategy for full cost recovery, special attention was given to the establishment of a proper balance between project costs and the income levels of beneficiaries. Almost as important, was the establishment of proper cost recovery mechanisms for each of the project components where such recovery was applicable. 6.02 The benefits of about half of the project components can be traced directly to individual beneficiaries, and the associated costs will therefore be directly recovered from them. On the other hand, the benefits accruing from the river control, regional roads, training centers, technical assis- tance, and studies would be difficult to assign to individual beneficiaries; the associated costs will thus be borne by the Government. The Fideicomiso will, specifically, recover most of the costs associated with the Urban Upgrading, Sites and Services, Construction Material Loans, Production Credits, and Industrial Premises components through individual loan and - 39 - credit contracts or rental charges to beneficiaries. Costs of shelter related programs will be recovered directly by Fideicomiso through its own collect- ing system, which is assisted by experienced social workers. The awarding of land tenure titles to individual participants in these programs will be conditional on their record of repayments. Production credits will be recovered from beneficiaries by commercial banks. The table in Annex 7 provides a summary of the extent of cost recovery by components. 6.03 Although the Fideicomiso itself will not repay any of the funds provided in this project by either the Government or IBRD, and thus, will receive these funds as a grant, the terms and conditions of the sub-loans and credits to the beneficiaries will for the first time in the project area cover the real cost of such programs. Compared to prevailing practices, the proposed interest rates will in the case of shelter schemes, be more than double those presently charged in some programs (15%, instead of 6% to 8%). Over time, the proposed terms will correspond to real rates of interest and cover the expected rates of inflation 1/. Financial conditions for production credits and industrial premises will be compatible with conditions proposed in the Bank-supported Small and Medium Scale Industry Development project. 6.04 In the case of the Site and Services and Upgrading programs, the cost of land, land preparation, and on-site infrastructure (except access roads), including professional services and contingencies, will all be re- covered directly from beneficiaries through regularization charges or sale of lots. Differential pricing of lots in the project areas will be applied on the basis of locational advantages. The sale of upgraded and sites and services plots, as well as that of regularized lots will be on the basis of a 10% downpayment and monthly payments for the remainder of the unit costs at annual interest of 15% over a 15-year period. The construction material loans will be recovered 100% through monthly charges reflecting an annual interest rate of 15% over a 15-year period (no downpayment). 6.05 Production credits will also be recovered 100% from credit benefi- ciaries. The commercial banks will offer the credits at 15% annual interest and be entitled to finance up to 80% and 75% of each subproject's cost (for artisans, and for small- and medium-scale enterprises, respectively). 2/ The beneficiaries will put up the rest in matching funds. The Fideicomiso will rediscount 100% of the commercial bank's credits and allow the banks a spread of 2.5% on credits to small- and medium-scale enterprises, and of 3.5% on credits to artisans to cover higher administrative costs. The amortization period of the credits will range from seven to 12 years for construction, four to seven for machinery and equipment, and one to two years for working capital. These terms will also include grace periods of nine to 12 months for credits assigned to industrial constructions, and of six to nine months 1/ Inflation is expected to drop below 10% by 1981, compared to 15% interest charged in the project. The Fideicomiso is also planning to use stepped rates of interest; for example, starting with a flat 12% and adding another 6% every year. This would lessen the initial burden of beneficiaries and strengthen the Fideicomiso. 2/ Interest rates for new credits will be reviewed and changed over time to reflect market conditions. - 40 - for purchases of equipment. The Fideicomiso's risk in connection with credits to artisans and small scale enterprises will be covered through a special US$300,000 Guarantee Fund that will initially be set up by the Fideicomiso and replenished from an annual fee of 1% included in the 15% charges by the commercial banks. 6.06 The costs of industrial premises will be recovered 100% by the Fideicomiso from rents and leases to interested entrepreneurs. Annual rents for space in workshops and s andard factories will amount to about 15% of total investment costs per m of covered area. These rents will cover amortization of the facilities (7%), maintenance (1%), and insurance (0.2%), as well as financial charges equivalent to market interest rates. In addition, rents will be inflated in order to cover possible revenue gaps due to an assumed occupancy factor of only 80%. Confirmation on these arrangements was obtained during negotiations. -B. Affordability 6.07 In designing the shelter related components of this project, special attention was given to the needs and financial capacities of the beneficiary groups the project wants to reach. The basis for this analyis was the prep- aration of a detailed socioeconomic survey of the population in the project area. In it, both the priorities of low-income groups in the urban sector as well as their paying capacity were clearly identified. 1/ One of the main parameters used in the analysis was the region's income distribution which is summarized in Annex 8. 6.08 Considering that a specific goal of the project will be to reach income groups below the 40th percentile of the region's income structure, the figure of Mex$3,125 2/ became a significant factor in establishing the highest level of services to be offered by the project. The various solutions that are proposed in the project have been designed against this limitation and assuming that between 15% and 20% of a household income will be available to pay for the offered services 3/. As detailed in Annex 9, the least expensive serviced plot available in the project will cost about Mex$15,000; will require monthly payments of about Mex$189 4/; and be accessible to monthly 1/ This survey was carried out during project preparation by a special unit of the Fideicomiso. 2/ This monthly income corresponds to the 40th percentile. 3/ It has been assumed that 15% of household incomes would be available for serviced plots, while up to 20% if combined with dwelling con- structions. 4/ At 15% interest over 15 years and 10% downpayment. - 41 - incomes of about Mex$1,250. Only about 3% of the area's population will, in theory, be excluded from this lowest-cost option (see table in Annex 8). On the ither hand, the most expensive option offered by the program; namely, a 24 m dwelling core on a fully-serviced plot in Lazaro Cardenas, will cost about Mex$38,000; require monthly payments of Mex$508 and be available to monthly incomes of about Mex$2,540. These units will be accessible to about 72% of the population. 6.09 By comparison, the least expensive units presently available in the Lazaro Cardenas area cost about Mex$75,000 or about US$3,300. 1/ Although these units are offered at subsidized rates of intercGt, in cffect, they are only affordable to monthly incomes above Mex$6,000. Less than 25% of the region's population can benefit from the lowest priced units presently offered. A detailed cost description and affordability for each shelter solution is shown in Annex 9. C. Replicability 6.10 Simultaneously with the efforts made to ensure that the options offered by the project are within the area residents' paying capacity, attention was also given to the need for community acceptance of the proposed schemes. Intensive discussions were continuously held during project prepara- tion with the settlers' organizations, and they participated actively in the preparation of these programs. Although some objections were initially voiced with respect to issues such as the proposed reduction in plot sizes (as compared to previous standards), agreement and full cooperation with these groups was eventually reached once the need for full cost recovery and re- plicability of the project were recognized. 6.11 In addition to these actions, appropriate institutional arrangements were established to ensure the recovery of funds. Recognition by the Fidei- comiso of this issue's importance, and the new administrative measures it is taking to back up its recovery mechanism, will ensure the favourable financial situation that has been projected for the Fideicomiso (See tables in Annex 3 of this report). 6.12 The funds recovered from the beneficiaries of both the shelter- related and the productive credits components will be available to expand and replicate these schemes in the Lazaro Cardenas region. The present shelter program will provide, upon its completion, about 74% of the expected new demand during this period. 2/ The remainder corresponds to higher income groups that would be satisfied through other schemes. It is expected that demand for new low-cost plots after 1981 will for some years be around 800 units per annum, a demand that can be covered by the Fideicomiso with the help of the planned Revolving Fund (see Tables 2 through 4 of Annex 3). 1/ Actually, the indicated figure does not include land nor cover all infrastructure costs. So called low-cost housing in Mexico has in recent years been priced above Mex$128,000, or US$5,700. 2/ See table in para. 2.09. -42 - 6.13 Similarly, the credit conditions and cost recovery measures intro- duced in the production credits component have been specifically designed to ensure the replicability of this program. 1/ These conditions and measures, plus the technical capacity of the Fideicomiso and of the commercial banks that will be involved in this scheme, as well as expected funds that will be recovered from initial beneficiaries, will be a good basis for substantial expansions of this program. 6.14 Almost more important than the net effects of this project on the Lazaro Cardenas area itself, is the expected impact the project will have on future operations of this kind elsewhere in the country. The demonstra- tion that shelter and credit programs accessible to lower income groups can be self-financing and thus replicable, will be a powerful inducement to extend such programs on a much wider scale to other urban centers. D. Project Cash Flows 6.15 The financial analysis of the project has been directed to those components whose costs will be directly recovered through payments by beneficiaries. The analyzed components include the Urban Upgrading, Sites and Services, Construction Material Loans, Production Credits and Industrial Premises. 2/ The consolidated cash flow prepared for the project thus includes only these components (see Table 2 in Annex 3). Because of its particular importance, a second and separate cash flow was prepared for the Production Credits and Industrial Premises (see Table 3 in Annex 3). This partial cash flow is shown to illustrate the financial viability of these two schemes. VII. ECONOMIC AND SOCIAL ANALYSIS A. Project Benefits 7.01 The benefits that will be derived from the proposed project are of two different kinds; namely, tangible benefits related to the actual works and services that will be provided through the project, and complementary to these, benefits derived from the planned institutional innovations that will be introduced as an integral part of the project. 7.02 The planned institutional innovations are expected to have an im- portant demonstration effect and impact on the design and implementation of similar future projects in other urban centers of the country. In particular, 1/ See paras. 6.05 and 6.06 above. 2/ The cost of the other components; namely, training centers, regional roads, river works, technical assistance and studies would be absorbed by the Government. - 43 - these changes will, for the first time in Mexico, establish a coordinated mechanism for the promotion and implementation of replicable shelter and job creating programs directed at the urban poor. 7.03 Approximately 47,000 people could benefit through the shelter related programs, namely, Urban Upgrading, Sites and Services and Construc- tion Material Loans. 1/ At least the same households, but probably many more, will benefit from the complementary programs that will be carried out in the proposed Training Centers. An estimated 16,000 man months in temporary jobs will be generated during the construction period of the various physical components of the project. 7.04 Of particular importance for the region as a whole will be the * benefits derived from the planned establishment of new enterprises. These have been envisaged as a means to diversify the range of economic activities in the area and thus, will help to consolidate the presently unstable economic base of the region. About 1,200 direct jobs will be generated through the proposed production credits component, benefiting about 7,000 people. 2/ In turn, these new jobs are expected to generate additional economic activity through multiplying effects. 7.05 The proposed industrial premises will facilitate the establishment of new productive operations without having to tie up large capital amounts in fixed assets. This will reduce the risk to each of this program's par- ticipants and enable more flexible use of investments. 7.06 The planned regional feeder roads will significantly help to integrate the agricultural hinterland of Lazaro Cardenas to the main urban centers of the region. As a consequence, the rural communities of the area will have better access to urban services, and the system as a whole will be able to exploit more fully the agricultural resources of the region. The projected roads will link-up a total of about 62,000 ha of cultivated land and another 120,000 ha of grazing areas. Of these, about 30,000 ha and 44,000 ha will be completely newly opened land for cultivation and grazing, respectively. About 25,000 people in the outlying agricultural areas are expected to benefit from these roads (see footnote 1 below). 7.07 The river control scheme will practically eliminate the need by SICARTSA, the steel plant, to build an expensive new water intake that was planned to prevent the costly shut-downs and other damages the plant has experienced in the past. In addition, proposed works will also significantly reduce the siltation problem in the Lazaro Cardenas harbor, reduce erosion along the river, and solve the sewerage disposal problem created by some communities along the river. 1/ Not everybody will benefit equally from the various project components. The actual number of persons reached by each scheme, as well as the level of benefits to each family, will eventually be determined by individual needs, financial possibilities, and family size of each household. 2/ An average of 5.5 persons per household is estimated for the region. - 44 - 7.08 The proposed technical assistance will improve the abilities of the project participants to benefit from the shelter related and productive credit components, and increase the capacity of the Fideicomiso to implement effec- tively this project. The planned training programs will also increase the skills and potentials of low income people to engage in productive activities not necesarily linked to the construction sector. 7.09 The proposed studies will have a direct bearing on the development effort of the Government in other urban centers of the country, and on the possibilities of future Bank support in this sector. Additional studies will fill an important gap in the planning and coordinated development of the Lazaro Cardenas region. B. Economic Rates of Return General 7.10 An economic rate of return was only computed for those elements of the project that include significant amounts of civil construction; namely, the shelter related components, the feeder roads, and the river control works. Separate rates of return were computed for each of these components and for all the components together. The consolidated rate of return for the package as a whole is an estimated 24%. Increases and decreases of 15% in the benefit and cost streams resulted in fluctuations of this rate between 19% and 29%. Urban Upgrading 7.11 The rate of return of this component was computed taking into account all capital and labor cost of infrastructure construction. The benefits represent the difference in rental values of upgraded plots with and without the proposed improvements. The computed rate of return is about 22%, and the corresponding sensitivity analysis with respect to increases and decreases of 15% in the cost and benefit streams showed variations between 18% and 26%. Sites and Services, Construction Material Loans, and Training Centers 7.12 In order to simplify the analysis of these components, it was decided to combine them and obtain a single rate of return. This seemed appropriate because most serviced sites applicants are expected to apply for the Material Loans and would benefit from the Training Centers. Therefore, the costs associated with the construction, operation and maintenance of these centers were also added to the cost streams. The cost streams thus include: contractor cost of infrastructure, the cost of construction materials, the opportunity cost of undeveloped land, inputed costs of mutual- and self-help labor, and the training centers' total cost. The benefit stream is composed of the estimated rental values of the completed dwelling units built on Sites and Services. The residual value of land was also added as a benefit at the - 45 - end of the program's life. The computed rate of return, under the above considerations is 28%. Sensitivity analysis by increasing and decreasing benefit and cost streams by 15% led to fluctuations in this rate between 23% and 34%. Regional Feeder Roads 7.13 At present most of the agricultural products consumed in the urban area are imported from outside the region. Most of these products are grown on a subsistence basis on the relatively underexploited land surrounding the Lazaro Cardenas area. The proposed regional feeder roads will significantly reduce transport costs in the region and increase the accessibility of the regions agricultural hinterland to the rapidly expanding Lazaro Carderas market. 7.14 The calculation of the economic rates of return on this component are based on the increased value added of agricultural output that is likely to result from the lowering of transportation costs in the zone of influence of the feeder roads. This increse in value added was estimated on the basis of expected changes in land prices in the area of influence of the proposed roads. The expected increases in land prices were estimated on the basis of observed shifts in land prices in similar areas under similar circumstances when transportation costs had been lowered. The computed rate of return is approximately 22 percent. Fifteen percent changes in the cost and benefit streams resulted in variations of this rate between 19% and 25%. River Control 7.15 The proposed works will contribute substantially to the stabiliza- tion of water flows in the Balsas River. As a consequence, the SICARTSA steel mill will be ensured a regular supply of water for its operations, the port area will be protected from excessive siltation requiring substantial dredging efforts, erosion damages along the river will be significantly reduced, and better environmental conditions will be obtained for the area residents. 7.16 Because of serious past disruptions in the supply of water to the SICARTSA steel mill, the plant has been planning to build another intake three times the size of the present one at a cost of approximately Mex$207.0 million (at 1977 prices) to prevent future stops in the plant's production. These production stops have usually lasted for about four hours at a time and sometimes even 18 hours during weekends. Their frequency in recent years has been an average of eight days per annum resulting in average yearly losses of approximately Mex$40.0 million. 7.17 The cost streams included in the analysis correspond to construc- tion and installation of the proposed culvert, one-time dredging operations necessary in any event as part of the proposed component, and all contingen- cies. The maintenance costs include an annual amount of additional dredging necessary to maintain normal water flows. The only benefits included in the analysis correspond to the savings by SICARTSA which will otherwise have to - 46 - build a new water intake at a cost of about Mex$207.0 million. 1/ Half of the original cost of the works (Mex$62.5 million) was added to the benefit stream at the end of the analysis period. The computed internal rate of return of the proposed project is 28% and the variations caused by 15% changes in the benefit and cost streams range between 16% and 41%. C. Risks 7.18 No unusual risks are anticipated in connection with the implementa- tion of this project. The only issues that might become a problem relate to the management effectiveness of the restructured Fideicomiso, the time needed for land expropriation, the timing of fund transfers by the Government to the Fideicomiso, and the true future demand for production credits and indus- trial premises. 7.19 Regarding the first issue, close supervision will be given during the initial period of project implementation to ensure that appropriate management procedures are implemented. Although the expropriation process of lands required for the project has already been initiated, disbursements against areas affected by this matter will be conditional on the completion of expropriation procedures. Finally, a proper balance between the supply and demand for production credit is expected because of the thorough review and analysis that was made by the mission of these two factors. VIII. RECOMMENDATIONS AND LOAN CONDITIONS 8.01 To ensure the success of this first project, assurances were obtained during negotiations on the following matters: (a) The Government will be responsible for the solution of all outstanding financial issues between the Fideicomiso and Government-owned or controlled institutions. Confirmation that these issues have been resolved will be a condition of loan effectiveness (para. 4.12). (b) As a Government contribution to its equity for the expansion of similar programs in the region, the Fideicomiso will be allowed to retain in two separate Revolving Funds all re- payments from beneficiaries of shelter related and from pro- ductive credits plus rents for industrial premises. Banobras will repay the total IBRD loan, including all interests, by means of separate transfers. (paras. 2.69 and 4.13). 1/ Not included were all the other benefits mentioned in para 7.15 above. - 47 - (c) The Government will provide the counterpart funds necessary to carry out the project (para. 2.67). (d) The Government will assume the operating and maintenance costs of the Training Centers (paras. 2.32 and 2.54). (e) The Government will ensure that proper operation and maintenance of all works included in the project are carried out by each of the respective agencies respon- sible for these actions (paras. 5.01 to 5.05). (f) As trustee of the Fideicomiso Lazaro Cardenas, BANOBRAS will be responsible for supervising the trust's financial and administrative performance, and preparing a Project Completion Report (para. 4.01). (g) Fideicomiso will be responsible for proper execution of the tendering and procurement process (para. 5.07). (h) BANOBRAS and the Fideicomiso will monitor and evaluate the project's impact and implementation experiences (paras. 5.11 and 5.12). (i) BANOBRAS will keep separate project accounts. The Fide- icomiso will submit to the Bank annually (external) audited statements no later than five months following the close of each Government's fiscal year (para. 5.13). (j) The Fideicomiso will prepare a four-year investment plan. This plan will be forwarded to the Bank for comments no later than December 31, 1978 (para. 4.13). (k) The Fideicomiso will implement the administrative changes agreed upon with the mission and employ new staff acording to its ongoing improvements plan (para. 4.11). (1) The Fideicomiso will prepare a detailed execution program and a schedule for the regulation of land expropriations and land transfers envisaged in the project. Actual dis- bursements of upgrading programs will be conditional on completion of expropriation procedures (para. 2.05). (m) The Fideicomiso will complete detailed criteria for selecting recipients of Construction Material Loans not later than December 31, 1978 (para. 2.26). (n) In connection with the implementation of the proposed Training Centers, the Fideicomiso will prepare detailed terms of reference of the programs to be carried out in these centers. These terms of reference will be presented to the Bank for review not later than December 31, 1978 (para. 2.29). - 48 - (o) The Fideicomiso will ensure that Production Credits to ar- tisans, small- and medium-scale enterprises will be granted under conditions set out in paras. 2.36 and 6.05. (p) Production Credits for the first five small-scale and for the six medium-scale enterprises will be reviewed and approved by the Bank as a condition of disburse- ments for these enterprises (para. 2.36). (q) The Fideicomiso would rent Industrial Premises on conditions agreed upon with the Bank and set out in para. 6.06. (r) All final terms of reference for the proposed studies by SAHOP and the Conurbation Commission Lazaro Cardenas, as well as the corresponding procedure for contracting and supervising these studies, would be approved by the Bank as a condition of disbursements for this component (para. 2.62). (s) Up to US$350,000 will be made available to the project for retroactive financing of expenditures made after August 1, 1977 (para. 5.09). 8.02 Subject to the conditions mentioned in para. 8.01, above the proposed project is suitable for a Bank loan of US$16.5 million equivalent to BANOBRAS for a term of 17 years, including a grace period of four years. ANNEX 1 MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT a/ Population in Project Areas Expected Population Additional Increase Shelter 1971 1974 1977 1981 1977-1981 Demand b Lazaro Cardenas 6,005 12,845 29,056 42,553 13,497 2,454 Guacamayas 5,109 9,561 17,215 25,201 7,986 1,452 Subtotal 11,114 22,406 46,271 67,754 21,483 3,906 Zacatula 1,263 1,838 1,039 1,364 325 59 Petalco 565 884 1,265 1,655 390 71 Naranjito 712 1,084 825 1,078 253 46 San Francisco 199 383 374 489 115 20 Subtotal 2,739 4,189 3,503 4,586 1,083 196 La Mira 2,163 3,623 2,574 3,036 797 145 Playa Azul 1,740 3,550 2,645 3,371 726 132 Buenos Aires 543 742 1,452 1,903 451 82 El Habillal 1,228 1,679 1,276 1,672 396 72 Acalpican 495 677 753 984 231 42 El Bordonal 596 815 390 511 121 22 Subtotal 6,765 11,086 9,090 11,812 2,722 495 Total 20,618 37,681 58,864 84,152 25,288 4,597 a/ Includes only population in the immediate zone of Lazaro Cardenas, and not that in the agricultural areas of the region. b/ Obtained by dividing the population increase by 5.5, the average house- hold size estimated for the region. Source: Fideicomiso Lazaro Cardenas ANNEX 2 MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT Effects of Urban Upgrading Component Existing Recovereda_/ Total Total Plots to be Plots to be Plots to be Plots to be Upgraded Upgraded Upgraded Legalized ./ Lazaro Cardenas- Lazaro Cardenas - Guacamayas System Guacamayas 2,924 1,248 4,172 4,172 Petacalco- Petacalco 230 60 290 290 Zacatula System San Francisco b/ - - - 68 Naranjito b/ - - - 150 Zacatula 189 48 237 237 La Mira-Playa Azul Buenos Aires 264 43 307 307 System Acalpican 137 24 161 161 El Habillal 232 36 268 268 El Bordonal b/ - - - 71 La Mirac/ - 93 93 561 Playa Azul c/ - 54 54 475 Total 3,976 1,606 5,582 6,760 a/ All upgraded plots would also be legalized. b/ No upgrading in these communities beyond the regularization of tenure. c/ Existing plots that have adequate infrastructure and would only be regularized and legalized. MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT Table 1: Fideicomiso Cash Position with SICARTSA Repayments a/ 1974 1975 1976 1977/ 197& 1979 1980 1981 1982 Sales 3.5 29.1 61.4 1.1 43.0 49.4 55.8 62.2 68.6 Other Revenues 1.2 6.8 23.7 9.0 20.3 24.3 28.3 32.4 36.4 Less Sale Costs (4.0) (15.8) (36.0) (10.0) (26.0) (29.8) (33.6) (37.4) (41.2) Net Revenues 0.7 20.1 44.1 13.1 37.3 43.9 50.5 57.2 63.8 Operations Expenses 17.4 29.2 44.2 21.7 35.1 37.9 40.7 43.5 46.3 Net Revenue from Operations (16.7) ( 9.1) 4.9 ( 8.6) 2.2 6.0 9.8 13.7 17.5 Interest 7.7 16.2 21.3 15.2 21.9 23.5 26.9 28.7 28.0 (Deficit) (24.4) (25.3) (16.4) (23.8) (19.7) (17.5) (17.1) (15.0) (10.5) Government Transfers for Operations 24.4 25.3 16.4 23.8 - - - - - Payments by SICARTSA - - - - 20.0 20.0 20.0 20.0 20.0 Net Surplus - - - - 0.3 2.5 2.9 5.0 9.5 a/ Does not include effect of IBRD project b/ Estimated December 31, 1977 on the basis of information available as of September 30, 1977; and 1977 budget figures. Source: Fideicomiso Lazaro Cardenas 01QZ M Table 2: Project Cash Flow a/ (in million Mexican pesos) 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 19e8 1989 1990 SOURCES: Government Contribution 37.6 133.5 79.9 44.0 - - - - - - - - - IBRD Loan 12.8 49.2 31.9 18.7 - - - - - - - - - Downpayments b/ - 1.0 11.5 2.0 Subtotal 50.14 183.7 123.3 64.7 Revenues from Beneficiaries Rl' Sites and Services - 0.3 3.0 1.1 6.0 6.o 6.0 6.o 6.0 6.o 6.0 6.0 6.0 *Urban Upgrading - - 7.8 9.6 9 6 9.6 9.6 9.6 9.6 9.6 9.6 9.6 9.6 Construction Materials Loans - 1.2 4.2 5.2 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 7.7 Production Credits b/ - 2.6 10.3 20.9 32.1 29.5 25.4 25.4 18.5 9.0 - - - Industrial Premises - 0.2 0.8 1.6 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 Subtotal - 4.3 26.1 38.4 57.6 55.0 50.9 W.-O 3T.5 25.5 25.5 25.5 25.5 TOTAL SOURCES 50.4 188.0 149.4 103.1 57.6 55.0 50.9 44.0 34.5 25.5 25.5 25.5 25.5 APPLICATIONS: Sites and Services 7.2 16.3 13.9 14.5 - - - - - Urban Upgrading 50.9 107.8 9.5 - - - - - - - Construction Materials Credit - 18.4 18.4 10.0 - - - Production Credits b/ 4.8 18.0 26.0 41.2 - - - Industrial Premises 2.0 4.8 6.2 5.0 - - - - Subtotal 6T.9 165.3 74.0 70.7 Expenses 2.1 5.0 5.0 5.0 2.0 2.3 2.6 3.0 3.4 3.8 4.4 5.0 5.7 TOTAL APPLICATIONS 67.0 170.3 79.0 75.7 72. 2.3 2.6 3.0 3.4 3.8 1.1 5.0 5.7 Increase (Decrease) In Cash (16.6) 17.7 70.4 27.4 55.6 52.7 48.3 41.0 31.1 21.7 21.1 20.5 19.8 Cumulative of the period c/ (16.6) 1.1 71.5 98.9 1514.5 207.2 255.5 296.5 327.6 349.3 370.4 390.9 410.7 a/ Includes only components for which there will be repayments from beneficiaries, that is, Sites and Services, Urban Upgrading, Construction Material Loans, Production Credits and Industrial Premises. b/ Does not include downpayments by beneficiaries of Production Credits. c/ The indicated surpluses in the years after 1980 would go into two revolving funds for the expansion of the project components. These surpluses are only possible because of Government agreement to allow the FIDEICOMISO to retain repayments. Disbursements from these revolving funds after 1981 have not been included in the analysis. Additional funds, if required, would have to be secured by FIDEICOMISO from other sources. Source: Fideicomiso Lazaro Cardenas Table 3: Production Credits and Industrial Premises Revolving Fund Sources and Applications of Funds (in million Mexican pesos) 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 I. Funds Provided by 1. Government 6.8 22.8 32.2 38.2 - - - - - - - - - 2. Repayments from Beneficiaries Production Credits - 2.6 10.3 20.9 32.1 29.5 25.4 18.5 9.0 - - - - Industrial Premises - 0.2 0.8 1.6 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 Subtotal - 2.8 11.1 22.5 34.3 31.7 27.6 20.7 11.2 2.2 2.2 2.2 2.2 Total Funds Provided 6.8 25.6 43.3 60.7 34.3 31.7 27.6 20.7 11.2 2.2 2.2 2.2 2.2 II. Funds Applied for:b/ Total Production Credits 6.4 23.0 33.0 50.1 - - - - - - - - - Less: Beneficiaries downpayments 1.6 5.0 7.0 8.9 - - - - - - - - - Subtotal T. 18.0 26.0 41.2 - - - - - - - - - Industrial Premises 2.0 4.8 6.2 5.0 - - - - - - - - - Subtotal 2.0 -7.8 6.2 5.0 - - - - - - - - - Total Funds Applied 6.8 22.8 32.2 46.2 - - - - - - - - - Net Annual Yield - 2.8 11.1 14.5 34.3 31.7 27.6 20.7 11.2 2.2 2.2 2.2 2.2 Balance in Revolving Fund Available for New Credits - 2.8 13.9 28.4 62.7 94.4 122.0 142.0 153.2 155.4 157.6 159.8 162.0 a! This table shows the Source/Application and Repayment of the project's funds allocated to the Production Credits and Industrial Premises b/ The surpluses indicated in the years after 1980 would go into a revolving fund for the expansion of the two programs. These surpluses are only possible because of the government agreement to allow Fideicomiso to retain repayments. Disbursements from this revolving fund after 1981 have not been included in the analysis. Additional funds, if required, would have to be secured by the Fideicomiso from other sources. Source: Fideicomiso Lazaro Cardenas Table 4: Fideicomiso Fund Flows (in million Mexican pesos) 1974 1975 1976 1977 1978 1979 1980 1981 1982 Source of Funds Net Revenue from Traditional Operations (16.7) ( 9.1) ( 4.9) ( 8.6) 2.2 6.0 9.8 13.7 17.5 Funds Available from IBRD project - - (16.6) 17.7 70.4 27.4 55.6 Subtotal (16.7) ( 9.1) ( 7.9) (-8.6) (4 .) 23.7 80.2 41.1 73.1 Less: Funds Required by Operations Working ca-ital requirements ( 8.1) 207o4 (96.6) 38.3 26.0 10.6 ( 9.6) 16.0 (15.0) Increase (Decrease) in Receivables 1.5 2.2 97.9 58.4 ( 5.1) ( 5.0) ( 2.1) 1.6 5.9 Increase in Fixed Assets 2.2 5.2 0.7 0.1 2.9 1.9 2.0 2.0 3.0 Increase in Deferred and Other Assets 16.8 ( 0.6) (11.4) 0.3 1.0 2.0 2.0 2.0 - Subtotal 12 2142 (97) 97.1 9.5 ( ) ) Net Operating Surplus (Deficit) (29.1) (223.3) 4,5 (105.7) (29.2) 14.2 87.9 19.5 79.2 Less: Debt Service Existing Debt--Principal - - 2.0 28.3 31.0 36.3 36.3 36.3 43.3 Interest 7.7 16.2 21.3 15.2 21.9 23.5 26.9 28.7 28.0 Usable Funds from Operation (36.8) (239.5) (18.8) (149.2) (92.1) (45.6) 24.7 (45.5) 7.8 Plus:Government Contribution a/ 24.5 166.0 45.6 109.4 157.4 50.0 a/ 40.0 40.0 50.0 Long-Term Debt 79.8 82.7 91.1 46.0 - 50.0 b/ 30.0 20.0 - Downpayments 0.8 11.9 7.7 7.6 5.0 - - - - Total Usable Funds 68.3 21.1 125.6 13.8 70.3 54.4 94.7 14.5 57.8 Application of Funds Projects (others than IBRD) 68.3 21.1 125.6 13.8 70.3 54.4 94.7 14.5 57.8 Total Application 68.3 21.1 125.6 13.8 70.3 54.4 94.7 14.5 57.8 a/ Because of internally generated funds, Government contributions would decrease substantially after 1978. These contributions are necessary to cover costs of Government programs that are not directly recoverable. b/ It is assumed the Fideicomiso will borrow additional funds after 1978 to finance its ongoing programs. Source: Fideicomiso Lazaro Cardenas ANNEX 4 MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT Implementation Arrangements Implementation Operation and Component Responsibilities Maintenance Urban Upgrading Fideicomiso Municipality, CFE and Junta de Agua Potable Sites and Services Fideicomiso Municipality, CFE and Junta de Agua Potable Material Loans Fideicomiso Beneficiaries Training Centers Fideicomiso Fideicomiso Production Credits Fideicomiso Beneficiaries Industrial Premises Fideicomiso Fideicomiso Feeder Roads SAHOP SAHOP River Control CRB/SARH CRB/SARH Technical Assistance Each Agency Studies SAHOP/Fideicomiso ANNEX 5 MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT IMPLEMENTATION SCHEDULE 1978 1979 1980 1981 URBAN UPGRADING A Survey and Engineering B A Lind Expropriation Land Regularization Tendering Construction SITES AND SERVICES Survey and Engineering Tendering Construction Lazaro Cardenas Lucrecia Toriz Tendering Anibal Ponce Construction Anibal Ponce Expropriation and Land Regularization Tendering Zona Ejidal Construction Zona Ejidal CONSTRUCTION MATERIAL LOANS TRAINING CENTERS Survey and Engineering Construction Acquisition of Equipment Operation PRODUCTION CREDITS INDUSTRIAL PREMISES BALSAS RIVER CONTROL Survey and Engineering Tendering Construction REGIONAL FEEDER ROADS Survey and Engineering Land Expropriation Tendering Construction STUDIES TECHNICAL ASSISTANCE A-Upgrading in Towns B-Upgrading in Guacamayas World Bank - 18595 ANNEX 6 MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT Estimated Schedule of Loan Disbursements In millions of Mexican Pesos In millions US$ Semestral Cumulative Semestral Cumulative Disbursements Disbursements Disbursements Disbursements IBRD Fiscal Year and Semester Ending 1978-1979 December 31, 1978 27.7 a/ 27.7 1.23 1.23 June 30, 1979 4h.6 72.3 1.98 3.21 1979-1980 December 31, 1979 65.3 137.6 2.90 6.11 June 30, 1980 63.8 201.4 2.84 8.95 1980-1981 December 31, 1980 53.7 255.1 2.39 11.34 June 30, 1981 41.0 296.1 1.82 13.16 1981-1982 December 31, 1981 38.7 334.8 1.72 14.88 June 30, 1982 36.5 371.3 1.62 16.50 a/ This includes an estimated Mex$7.9 million in retroactive financing. ANNEX 7 MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT Cost Recovery Sources a/ (in US$ million) Project Beneficiaries' Costs Charges % Government _ Urban Upgrading Land and earthworks 1.50 1.50 c/ (100) - ( - On-site infrastructure b/ 3.33 3.33 (100) - ( - Off-site infrastructure 1.15 - ( - ) 1.15 d/ (100) Subtotal 3.9F .T3 (81) 1.1519) Sites and Services Land and earthworks 0.62 0.62 c/ (100) - ( - ) On-site infrastructure b/ 1.19 1.19 (100) - ( - Off-site infrastructure 0.03 - - 0.03 d/ (100) Subtotal 1775 1.81 (98) 0.03 (2) Construction Materials Loans Subtotal 2.08 2.08 (100) - (-) Production Credits Subtotal 5.00 5.00 (100) - ( - Industrial Premises Land 0.04 0.04 (100) - ( - On-site infrastructure 0.86 0.86 (100) - (_-_) Subtotal 0.90 0.90 (100) - ( - Total 15.80 14.62 ( 93) 1.18 ( 7) a! Only for those components where individual end beneficiaries are reached. b/ Does not include costs of access roads for the Upgrading, and Sites and Services components (US$1.67 and US$0.52 million, respectively). These costs are commonly recovered in Mexico from property taxes. c/ This figure represents only the expropriation costs of land plus development costs. In fact, beneficiaries pay for land at market prices, i.e. substantially more than indicated here. d/ These costs would eventually be recovered from beneficiaries through consumption charges. MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT Inftme Distribution in Project Areas (Monthly incomes in Mex$) Lazaro Cardenas Guacamas Villages Consolidated HH % Cum.% H %CUM.% HH C % HiTHH % Cum.% 0- 1250 3 1.3 1.3 68 2.2 2.2 131 8.4 5.4 202 3.5 3.5 1251- 2500 31 13.0 14.3 689 22.0 24.2 689 28.2 33.6 1409 24.3 27.8 2501- 3750 52 21.8 36.1 686 21.9 46.1 680 27.8 61.4 1418 24.4 52.2 3751- 5000 48 20.2 56.3 782 25.0 71.1 532 21.8 83.2 1362 23.4 75.6 5001- 7500 67 28.1 84.4 82 2.6 73.7 225 9.2 92.4 374 6.4 82.0 7501-10500 24 10.1 94.5 205 6.6 80.3 138 5.6 98.0 367 6.3 88.3 10501& more 13 5.5 100.0 618 19.7 100.0 50 3.0 100.0 681 11.7 100.0 238 3130 2445 5813 Source: Fideicomiso Lazaro Cardenas 00 ANNEX 9 MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT Costs and Affordability vf Shelter Related Units Alternative Serviced Plots (Figures in Mex. Pesos) Monthly % of Households Monthly Income with Access to Total Cost Charges a/ Required b/ Alternative d/ In smaller towns 15,000 189 1,260 97% In Guacamayas 18,500 233 1,553 91% In Lazaro Cardenas 24,000 302 2,014 82% Alternative Units Built on Upgraded Plots in Towns (Figures in Mex. Pesos) Monthly % of Households Monthly Income with Access to Total Cost Charges a/ Required c/ Alternative d/ Basic Unit 21,500 285 1,425 93% Sanitary Unit 22,700 302 1,510 91% Dwelling Core 29,000 393 1,965 82% Alternative Units Built on Upgraded Plots in Guacamayas (Figures in Mex. Pesos) Monthly % of Households Monthly Income with Access to Total Cost Charges a/ Required c/ Alternative d/ Basic Unit 25,000 330 1,650 89% Sanitary Unit 26,200 347 1,735 87% Dwelling Core 32,500 438 2,190 78% Alternative Units Built on Sites and Services (Figures in Mex. Pesos) Monthly % of Households Monthly Income with Access to Total Cost Charges a/ Required c/ Alternative d/ Basic Unit 30,400 400 2,000 82% Sanitary Unit 31,600 417 2,085 80% Dwelling Core 38,000 508 2,540 72% a/ Assumes a 10% downpayment on the cost of the serviced plots and no down- payment on the complementing construction materials (where applicable). b/ Assumes that 15% of income is available for payment. c/ Assumes that 20% of income is available to cover total cost. d/ See Income Distribution Table in Annex 8. MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT DESCRIPTION OF CORE UNITS COMPLETED UNIT DWELLING CORE BASIC UNIT SANITARY UNIT WrBnk 18592 ANNEX 10 Page 2 MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT DESCRIPTION OF CORE UNITS 400 C C A 2.00 Key A Sanitary Unit B Basic Unit A+B= Owelling Core C Additional Rooms built by self-help A 6.00 8 C .oc 0- -3.oo Completed Self-Help Dwelling indicating the Sanitary Unit, the Basic Unit and the Dwelling Core. The additional rooms are subsequent expansions. World Bank - 18593 ANNEX 11 MEXICO LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT SELECTED DOCUMENTS AND DATA AVAILABLE IN THE PROJECT FILE A. Selected Reports and Studies on the Sector Al - Creation of the National Urban Development Commission, Basic legal documents, CNDU, September 1977. A2 - Human Settlements Law, National Executive Committee, June 1976. A3 - National Urban Development Plan, four volumes, 1977-78. A4 - Federal Budget, Accounting and Public Expenditure Law, Diario Oficial, December 31, 1976. A5 - Urbanization Tendencies in the Mexican Republic, Institute of Engineering, UNAM, 1976. A6 - Organizational Manual, BANUBRAS, two volumes. AT - Bibliographic Catalog on Housing, Urbanism, Construction and Socioeconomic Aspects (Mexico City Libraries, two volumes, CIDIU/INDECO, 1976. A8 - Territorial Ordering Plan: Central Conurbated Zone, two volumes, 1977. A9 - Regional Development and Interregional Equity: A Mexican Case Study, D. Barkin. B. Selected Reports and Studies Relating to Project. Bl - Integral Urban Development Project; Balsas River Delta Conurbated Zone, Fideicomiso Lazaro Cardenas, 32 volumes, 1977. B2 - A Developing Community, Ciudad Cardenas, 1975. B3 - Feasibility Studies for Basic Infrastructure in Guacamayas and Other Towns of Balsas River Conurbated Zone, six volumes, Aerofotogrametria, S.A. for Balsas River Commission, 1977. B4 - Master Plan for Lazaro Cardenas/La Uni6n, 20 volumes, INDECO, 1976. ANNEX 11 Page 2 B5 - First Stage of the Study of the Balsas River Delta from Hidrodynamic and Environmental Points of View, Institute of Engineering (UNAM) for CRB, November 1976. B6 - Economic Feasibility of the Balsas Port on the Pacific Ocean; The Balsas Port's Hinterland and its Economic Activity, three volumes, Secretary of Marine, October 1971. B7 - Balsas River Commission Report on Actiities 1070-1974. CRB/SRU, 1971h B8 - Lazaro Cardenas, Basic Elements for Programming, Secretariat of the Presidency, October 1976. B9 - Terms of Reference for Integral Urban Development Studies, one volume, SAHOP, 1977. B10 - Twentythird Meeting, Technical Committee Fideicomiso Lazaro Cardenas, three volumes, January 19, 1977. Bll - Auditor's Report, Fideicomiso Lazaro Cardenas, 1976-1977. B12 - 1976 Annual Report, BANOBRAS. C. Selected Working Papers Cl - General Urbanization Specifications, Fideicomiso Ciudad Lazaro Cardenas, November 1975. C2 - Unit Prices Catalog, Fideicomiso Ciudad Lazaro Cardenas, August 30, 1976. C3 - Estimate of Industrial Settlement in the Lazaro Cardenas Area, 1978-1982. C4 - Popular Technology Center Project, Popular Technology Schools, September 1976. C5 - Planning of Education, Professional Formation and Jobs in the Lazaro Cardenas Area; CENAPRO, 1977. C6 - Income Distribution, Monthly Payments and Family Income Levels for the Lazaro Cardenas Region. CT - Financial Statements of the Balsas River Commission and Audit Report, 1975 and 1976. C8 - Detailed Project Cost Table Drafts. C9 - The Organization and Capability of BANOBRAS, B. Doebele, July 15, 1976. ANNEX 11 Page 3 C10 - Control of Land Use and Recapture of Increments in Value (Plusval'a) B. Doebele, July 15, 1976. Cl - Implementation of Law of Human Settlements, B. Doebele, September 14, 1976. C12 - Report on the Hinterland Study of Michoacan-Guerrero, with paraticular reference to Lazaro Cardenas, R. Ng, November 8, 1976. 013 - Aspects of Rural-Urban Linkage in Michoacan-Guerrero, R. Ng, November 23, 1976. C14 - Small Enterprises Feasibility Studies, PIBSA. 015 - Legal Basis, Organization and Operation of Fideicomisos or Trusts, A. Tapia, 1977. Cl6 - Report on the General Law of Human Settlements and Guidelines for a National Spatial Policy, H. W. Richardson, 1977. C17 - Report on the Balsas River Control Componnet, M. A. Albertson, 1977. C18 - Road Projects, Preliminary Engineering, Balsas River Commission. 019 - Terms of Reference for a Coastal Study, Francois Bourgois, FAO  ______________________________________________________________________________________________¡BRD-13454 345 ... -U S. A -. 1 11 ME xe/O L AAR CRDNASCOURATONDEVl.PMNTPRJ C PRJC RA- . soo ¡3  B R D 13455 To Uruapan MARCH 1978 102-30' - 1 00' 101030' M I C H Q 18030 VALLECITO PALO - - L * Og -ASCALOTE PINTADO - PAJAL VALLE ESPINOZA ESPINAL TOLUGUILLA LAS JUNTAS ARTEAGA COAHUAYUTLA ANTON SIMON BARRIO GU N ARRIO NUEVO ELINFIERNILLO BAR DELOZAND PEGUAJES G U E R R E R 0 8 EL INFIERNIL1.O'EUAE DAM NARANJOS COLMENER NUEVA CUADRILL LAS VIBORAS PASO LIMON CHUTLA OSCOYOTE VALLECITOS ....-.E_ L " L LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT FEEDER ROADS PROPOSEDFEEDEP RO-"DE EVI.TIrN rAIN R A4DE -----MAili 8'kl, UND'E F CONSTRUCT1'EIJ01 - - - -- SECiNDAR / ROAD -j DAMP.S --3- STATE BGUN0aRIE.- - - R-- R 'EPS _ _ _1 - . KIL-IME TEPS NTE¶ ~ Cr L -L....- 102°30' 102'00' .I''P  l ¯' .. -a . To Zacatecas i To Zacateas To San LusTliddiT San1020 PotosisVictoria Tampico - - Luis Potos( Leon Gunjao'li,uxpan --, 2r20 uadalajara 1rapuato uerOtar unca Ple, Vållll rput Po ,,Rc - '-\ 2 Aplc Celaya San Juan del Rio Pachuca Zamnora Teziutl,r Zacapu- Los RiØyes ore ia\ Zitacuaro, EXIC TI xcala J ardel ,.Colima o uea eara Barra -E riavitad - Manzan-- 4 *r Tepalca C6rrø JF. Ort,dj-- zucear de u ~~Matamoros Thaa DA iAE rn r .-. Las Peñas Ciudad Aleman L r- Huauapan Laýzaro Cir1ends. [130¯25] MA OR IT I SPapant.3 -- SiCA.FTS4 ýTEEL MILL DXc ,_R-MUjANTASCENJUR -01ARIT DE,VOELNTPENOT -EGABANK FINANGED R. MAIN r04DS r'Tehuantepec - . Salina Cruz IL.:Pt.. TIFPt - - - -.R DS -Ni R CN*TRuCCT4o LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT REGIONAL AREA--  To Uruapan, Morella To Corndio 104° 104 & Gada[iora & Apatzingon M I C H O A C A N GU E R R E R O WE 1 T n0ejo Bordonal la Orilla D - - a El Noranjito LA ZARO - C APP1E N4 5 M RC 0 / LAZARO CARDENAS CONURBATION DEVELOPMENT PROJECT iZ Upgriad.ng -r 5.tes and Sår,cesl Industr.I Airea - 1 Mar Pav6d Rods >fL MäL. - - - Man Paved Road Unde, C.rstruct,Gn f D.ri R,ads PaJrood Ij,jr n r.) N ,_ ..aaro Corder.as F.de.com.,o 4ea a - -- ...rate 3,,ndar,,es - er.:i- r.IETjy- 1~