Guatemala - Highway Construction and Maintenance Project

R E S T R I C T E D Report No.T.O. 88-a This document was prepared for internal use in the Bank. In making it available to others, the Bank assumeC no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT APPRAISAL OF GUATEMALA HIGHWAY PROJECT GUATEMALA June 20, 1955 Department of Technical Operations  CURRENCY EQUIVALENTS US$1 1 Quetzal 1 Quetzal US$ 1 1 million Quetzals = US$ 1,000,000  TABLE OF CO1NTENTS Page Para. Summary i- ii A-L I. Introdcuction 1 1- 5 II. Background. 6 - 11 III. The Need for the Projects - Agricultural Background 2 12 - 16 - Existing Transport Situation 3 17 - 28 IV. The Project A. Physical Features 5 29 - 48 - Maintenance and Betterment Program 5 31 - 36 - Physical Description of the Atlantic Highway Project 6 37 - 39 - Physical Description of the Pacific Highway Project 6 40 - 44 - Features Common to Both Highway Projects 7 45 - 48 B. Organization and Management 7 49 - 52 C. Construction and Purchase Procedures 8 53 - 57 D. Financial Features 8 58 - 69 - Estimated Costs and Timing of the Project 8 58 - 66 - Sources of Finance 10 67 - 70 V. Economic Features of the Projects - Potential Benefitz of the Maintenance and Betterment Program 10 71 - 73 - Potential Benefitsof the Atlantic Highway 11 74 - 78 - Potential Benefits of the Pacific Highway 12 79 - 84 VI. Conclusions and. Recommendations 13 85 - 92  ii TABLE OF CONTENTS Annex A. Recommended Design Standards Primary Highways in Guatemala Annex B. Cost Estimates Maintenance and Betterment Program (Foreign Currency Only) Annex C. Approximate Yearly Highway Maintenance and Betterment Cost Annex D. Estimated Construction Costs of Atlantic Highway by Class of Work Annex E. Estimated Currency Requirements for Atlantic Highway Annex F. Estimated Construction Costs of Pacific Highway by Class of Work Annex G. Estimated Currency Requirements for Pacific Highway Schematic Map  1. Summar of Appraisal of Guatemala Highway Project A. The Government of Guatemala has been constructing, since 1951, two important highways, namely - i) the Atlantic Highway between Guatemala City and Puerto Barrios, the country's main port on the Atlantic Coast, and ii) the Pacific Highway between the Mexican and El Salvador borders (see schematic map). The Government has requested a Bank loan in the amount of $18.2 million equivalent to finance the foreign exchange costs of the completion of these highways. B. A new port has recently been built at Santo Tomas (only a few miles from Puerto Barrios) which has been designed principally to ac- commodate truck transport. However, at present a railroad constitutes the only effective connection betwveen Guatemala City and the Atlantic port region. The primary purpose of the Atlantic Highway is to provide an alternative connection with the Atlantic ports and connect Santo Tomas with Guatemala City. The road will support and supplement the single track railroad, which is nearing the point of saturation. C. Little development can be expected along the Atlantic Highway al- though in areas not too distant from it considerable potentialities of agricultural development exist. Their realization would, however, require further public and private investment. D. The Pacific Highway will replace a series of unpaved roads only good for local traffic and will provide level connection between Mexico and Central America. E. The zone north of the Pacific Highway is at present the most pro- ductive of Guatemala. The Coastal Plain south of it is potentially the most productive area and the highway is expected to contribute to its development. F. The projects have been planned to suitable standards. It should take about three years to complete both projects, including design work. All the preliminary engineering necessary to locate the route has been carried out and provisional cost-estimates based on approximate quantities have been prepared. G. In general the condition and maintenance of existing roads are un- satisfactory. At the Bank's suggestion the Government has included in the loan project a Maintenance and Betterment program for the country's road network, the foreign exchange cost of which is included in the amount of $18.2 million mentioned in paragraph A. H. The Government is prepared to undertake reorganizing and strength- ening of the Highway Department, which would be responsible for the construction of the new highways and for the execution of the Maintenance and Betterment program.  ii. I. The Government has engaged competent consulting engineers for advice and assistance in the reorganization and strengthening of the Highway Department, the execution of the Maintenance and Betterment program, and the engineering and supervision of construction for the completion of the highways. Furthermore, the Government intends to let the construction contracts on the basis of unit prices to pre- qualified contractors chosen through international competitive bidding. J. The total local cost expenditure for the loan projects amounts to approximately Q22.3 million ($22.3 million equivalent) which the Govern- ment is prepared to budget. K. The proposed highway projects and Maintenance and Betterment program appear to be suitable for Bank financing to the amount re- quested, $18.2 million equivalent. L. Based on comparable recent loans and with allowance for the required construction period the appropriate terms would be 15 years with a 3-year period of grace.  APPRAI SAL OF GUATEMALA HIGHWAY PROJECT I IITTRODUCTION 1. The Guatemala Government has asked the Bank to help to finance the completion of the Atlantic Highway and the Pacific Highway, the con- struction of which has been under way since 1951, 2. At the Bankts suggestion the Government has included a three- year Maintenance and Betterment Program in the loan request. 3. The construction of the Atlantic Highway and part of the Pacific Highway, as well as improved maintenance procedures, were recommended by a Bank General Survey Mission in 1951. 4. The projects have been investigated in the field by Bank's staff and the engineering consulting firm, Tippetts-Abbett-McCarthy-Stratton. 5. The mission found the proposed highwqays to be feasible if the survey, design and specifications and the supervision of their construction were guided by experienced consulting engineers. The mission was satisfied about their economic justification which was in accordance with the views expressed in the General Survey Mission report. II BACKGROUID 6. The Atlantic Highway and a part of the Pacific Highway have long figured as an important part of the Guatemala Governmentts highway program. Construction was started in 1951 and 1952 respectively, on the basis of provisional plans prepared by the Highway Department. The execution has been mainly done by direct administration. 7. Up until the present, about Quetzal 18 million (= $18 million equivalent) have been spent on the Atlantic Highway including $8 million for equipment bought in 1953-1954; part of this equipment, however, has also been used for the construction of other roads. As of mid-1955, Q6.5 million will have been spent or budgeted by the Government on the Pacific Highway. In February 1955 a $4.5 million contract for part of this highway was let, of which $3 million will be financed by P.O.A. funds. 8. In particular for the Atlantic Highway, the results have fallen far short of what could have been achieved with the amounts spent because of unsound layout, design and specifications and inefficient execution. Earthmoving works on easier stretches were started before the sulrvey of the more difficult stretches through the rugged mountainous areas had been completed, and some relocations of already completed parts will be necessary. 9. The Government, aware that the Highway Department with its present staff would not be able to finish the works efficiently and economically,  2. has engaged the consulting firm, Tippetts-Abbett-McCarthy-Stratton, to prepare a preliminary report on the two highways and a Maintenance and Betterment Program. This report was submitted during May, 1955. 10. If a loan is made, TAMS will also act as consulting engineers for the planning, design, and supervision of the execution of the two highways. Although final cost estimates and specifications, etc., will not be available before November, 1955, the conclusions of its preliminary report are adequate to assess the merits of the loan projects. 11. The Bank has advised the Guatemalan Government to reorganize and strengthen its Highway Department and to establish a suitable Maintenance and Betterment program for the countryts road network, with the advice and assistance of the consultants. The Government has agreed to this suggestion, provided that the foreign currency costs of the consultants' fee and the Maintenance and Betterment program are included in an eventual Bank loan, and has recently engaged TAMS for this purpose. III. THE IHEED FOR THE PROJECT Agricultural Background 12. Agriculture is the principal source of national income in Guatemala and gives employment to over 75% of the working population. Climatic and soil conditions are favorable for agricultural development. 13. The total area of the country is 10.9 million hectares. Only one third is occupied by farms and only 7% of the total land area is under culti- vated or plantation crops. 14. The population of 3.2 million is mainly rural and is unevenly spread over the country. Figures for population density vary from less than one per square kilometer in El Peten in the north, to over 200 per square kilometer in the department of Guatemala in the highlands. The bulk of the population is concentrated in the central highlands and the slopes of the Pacific Piedmont. It is mostly in the latter areas that a varied agriculture has develoDed as a result of the fertility of the volcanic soils and favorable climatic conditions. 15. The leading crops for domestic use are corn and beans, but appreciable quantities of sugar cane, rice, tobacco, fruits, vegetables, and recently cotton ara grown. Export crops are predominantly coffee and bananas. Livestock production is deficient but still represents 10% of the gross national product. 16. Ouing to gaps in the road system and the bad state of many of the roads, transportation is difficult and costly, and is one of the factors that depresses prices at the farm. Improving the road system in  3. the populated and the ajoining areas should have priority over costly projects of road building into practically uninhabited areas like El Peten. Existing Transport Situation 17. Guatemala's main connection with the outside world to which it sells its exports, mainly agricultural products, and from which it imports nearly all the manufactured goods it needs, is by way of the sea. There are three ports at present, Puerto Barrios at the Atlantic Coast and San Jose and Champerico at the Pacific Coast. The two latter are less impor- tant lighterage ports, and Puerto Barrios is by far the most important, handling about two-thirds of the maritime exports and imports of the country, and in addition, part of El Salvador's external trade. 18. Near Puerto Barrios, at Santo Tomas a new port constructed at the cost of t5 million, is virtually completed. Although it was not recommended by the General Survey Mission, the Government decided in 1951 to construct this port to relieve the situation of Puerto Barrios, owned and operated by the International Railways of Central America, where delays occur frequently. 19. The railroads are the principal freight carrier in the Republic at present. The main lines of the I.R.C.A. extend from Puerto Barrios, via Guatemala City, to Ayutla on the Hlexican border. An important branch extends from Zacapa to Anginatu on the Salvadorian border and thence into El Salvador; other branches serve the Pacific ports,San Jose and Champerico. Other rail- ways are private systems of the United Fruit Company. The capacity of the I.R.C.A. railway is limited by the fact that it is a single track line with steep ruling g;ades. With the economic development of Guatemala,the volume of traffic, inland and through the ports, is bound to increase. According to the General Survey Mission's report the railway capacity was nearing satura- tion, and raising it would require large investments for new equipment and lengthening of sidings or for doubling of the track. 20. While a good road system providing cheap transport from village to town or station is a basic condition for the agricultural development of a country, the roads in Guatemala are, generally speaking, poor. The rugged topography of the mountainous areas makes highway construction difficult and expensive and this has hampered the development of a good road system. 21. The total length of the Guatemalan roads is about 5,700 km. The Hi-hway Department is responsible for 2,800 km., of which no more than 435 km. are paved. The remainder, all dirt roads, are Departmental and Municipal roads; however, the Government has also assumed responsibility for maintenance of 375 km. of these local roads. 22. Although a system of highways exists (see schematic map) most of these are hi4b'_niays in name only as, in general, -both the layout ani  - 4 - maintenance are poor. Most of the highways appear to have been gradually developed from farm roads or pack trails. 23. The three main East-West arteries of the network are: a. The Inter-American Highway, running from La Democracia near the Mexican border to San Cristobal near the El Salvador border. b. The Pacific Highway, running from beyond El Carmen near the Mexican border to Pijije near the El Salvador border, half way between and roughly parallel to the Inter- American Highway and the Pacific Coast. c. The Atlantic Highway between Guatemala City and the countryts main ports, Puerto Barrios, with a branch to the newly constructed nearby port of Santo Tomas. 24. None of these main arteries are real highways at present. Parts of the Inter-American Highway are under construction with finnncial and technical assistance of the U.S. Government, but only one-fourth of its total length of 509 km has been completed. However, in accordance with stated U.S. policy, it can be expected that the construction of this Highway also will be continued and perhaps accelerated. 25. As of 1954, about 12,000 automobiles and jeeps, 1,500 buses and 6,000 trucks were operating, which is approximately 305 more than in 1951. Motor vehicle traffic is most dense on the paved highway from San Jose to Guatemala where maximum densities of about 150 vehicles per hour are reached, with a high proportion of commercial traffic. 26. Road maintenance is mainly carried out by hand and little road maintenance eouipment is available. For purposes of road maintenance the country is divided at present into six zones, each with a workshop which in fact is not more than a storehouse, lacking suitable facilities for repair and maintenance of road equipment. 27. Construction of new roads is mainly carried out by the Adminis- trationts own forces. There are no local contractors with sufficient experience and equipment to carry out big construction works, but a few large foreign contracting firms have branch offices in Guatemala. Although in 1953 road construction equipment in the amount of 48 million was pur- chansed, no adequate maintenance and repair shops were estab'lished. This has resulted in a quick deterioration of the new equipment, much of which is out of use at present. 28. From 1949 through 1954, the Highway Department expended about Q45 million for various road purposes (the Guatemalan share for the Inter- American Highway not included); 25 million thereof was spent from 1951 through 1954 for the Atlantic and Pacific Highways. Of the remaining Q20 million, only q2.3 million was spent for construction and the balance of Q17.7 million for administration and maintenance. This amounts to about Ql,000 per km per year, which is high considering the poor results.  - 5 - IV THE PROJECT A. Physical Features 29. The immediate project consists of three main items, lnamely: a. A Maintenance and Betterment program. b. Completing the construction of the Atlantic Highway. c. Completing the Pacific Highway. 30. Besides these the project will also include the reorganization and strengthening of the Highway Department. The consultantst tasks will include provision of engineering, financial, and administrative assistance, and advice on all aspects of the Departmentts work. Maintenance and Betterment Program 31. The consultants have submitted a preliminary report on a Proposed Program for Maintenance and Betterment of the National Highway system. This three-year program includes establishment of a proper organization, building of workshops and storehouses, with adequate facilities for maintenance and repair of road equipment, and purchasing appropriate road construction and maintenance equipment. 32. It is assumed that the 3,175 km of roads and highways, the main- tenance of which are the responsibility of the State Highway Department at present, will gradually be increased to about 5,000 km by the construction of new roads and by incorporating improved local roads in the network of National Highways. 33. It is proposed to decentralize the maintenance ard betterment of existing highways by replacing the present six zones by eight districts, each under a District Engineer with two Assistant District Engineers, Arsa Sunerintendents and Section Foremen. All district engineers will report to a INational Assistant Engineer for Maintenance, working directly under the Director General of the Highway Department. 34. Each district will have its own equipment, suitable for road maintenance and smaller betterment works; it will be provided with a well equipped maintenance shop and distribution center of spare parts. 35. There will be in Guatemala City a principal maintenance shop to carry out heavy repairs and overhauls for all districts. In this shop there will also be an equipment pool to provide supplementary equipment to the districts for larger betterment works. 36. The preliminary proposais of the consultants for the three-year Maintenance and Betterment Program are well calculated to improve the country's road system gradually to an adequate level and to insure that this level can be maintained, provided that sufficient funds will be made available both during and after the program. It can be expected that the Government is prepared to do so because the yearly amounts required for the  - 6 - new program are hardly higher than the amounts spent on road maintenance during the last six years. Physical Description of the Atlantic Highway Pro.iect 37. The Atlantic Highway will be an all-weather, paved highway, 298 km long between Guatemala City and Puerto Barrios, with a 5 km long branen to the newly constructed Government owned port of Santo Tomas near Puerto Barrios. 38. Beginning at Guatemala City on a 5,000 ft. high plain, the Atlantic Highway runs for 85 km through very difficult, mountainous terrain to El Rancho where the Motagua river valley is reached. It then follows the wide valley where many mountain spurs require numerous cuts and fills, and a great number of bridges and culverts will have to be constructed for the tribu- taries of the Motagua. The last stretch to Puerto Barrios runs through swampy jungle. A bridge across the Motagua River in the side road to Zacapa is included in the Atlantic Highway project to provide this important center with a good connection with the new highway. 39. By the end of March 1955, about 55% of the earthmoving work was done, and of the 100 bridges and culverts, about one-fourth were completed and one-fourth under construction. Physical Description of the Pacific Highway Project 4o. The Pacific Highway will be a 348 km long, all-weather, paved highway, running from the Mexican border to the Salvadorean border roughly parallel to the Pacific Coast, at a distance of 20-50 km. 41. One strztch of 99 km between Taxisco and Popoya has been com- pleted and paved, and one stretch of 114 km between Popoya and Coatepeque is under construction by an American contracting firm. The latter stretch is expected to be completed by the end of 1955. Neither of these two stretches is included irn the loan project. 42. The project covers the two ends of the highway, one of 59 km in the East between Taxisco and the Salvador border and the other of 76 km in the West between Coatepeque and the Mexican border. 43. The Eastern stretch follows for 11 km from Taxisco, an existing road where some grading and all paving has still to be completed. The remaining 48 km will be entirely new road construction. The line runs along the lower slopes of the foothills to avoid the numerous lakes, and. swamps between the hills and the ocean. Thirteen new bridges and 20 culverts have to be constructed; six small existing bridges need widening. 44. The Western stretch follows for the greater part, existing gravel roads, which facilitates construction. Eight new bridges have to be con- structed and nine bridges need improvement. A shortcut of 17 km, saving 12 km, would require entirely new road construction through a mountainous area and another four new bridges. This is not considered economically justified at the present.  - 7 - Features Common to Both Highway Projects 45. The proposed highways as they are planned by the consultants, are well located and adequately designed for their basic purpose-promoting road transport between the countryts most developed areas and from these areas to the main ports. 46. The preliminary engineering has been completed including provi- sionalestimates of quantities and materials. The entire routes have been approximately located, including relocating of a 35 km stretch of the Atlantic Highway which will replace a 50 km stretch on a previous location on which 15 km of earthmoving work had already been completed. Final designs may involve some further relocations. 47. Design standards have been chosen (Annex A) which generally don- form as regards grades and curves with the specifications for secondary roads set forth by the American Association of Highway officials, and which slightly exceed the specifications to which most sections of the Pan American Highway have been built. 48. The standards chosen are well suited to the terrain, the expected traffic density and the type of vehicles likely to be used. B. Organization and Management 49. Responsibility for the maintenance, improvement and construction of the national road system is centralized in a Highway Department which is part of the Ministry of Public 'Works. This Department is headed by a Director-General. The theoretical organization scheme is fairly good but in practice there are not enough qualified staff to carry out all functions efficiently. 50. The layout, design, and specifications of roads and structures under construction are not always sound, and the execution is inefficient. This is mainly due to lack of experience of the Highway Departmentts staff and also to lack of cooperation between design office and field engineers. 51. The Highway's staff must be strengthened and improved; in parti- cular the mechanical division of the Department needs to be strengthened to provide better maintenance and repair of the road construction and maintenance equipment. 52. The contract between the Government and the consultants provides for the possibility that key positions in the Highway Department may tempo- rarily be held by members of the consultants' staff. Their tasks can gradually be taken over by local personnel after sufficient training. The consultantst staff will work in close cooperation with the local staff both in the office and in the field, and can thus provide the necessary training.  - 8 - C. Construction and Purchase Procedures 53. Consulting engineers satisfactory to the Bank have been employed to plan, supervise, and inspect the work on the Atlantic and Pacific High- ways; to advise on reorganization and strengthening of the Highway Department, and to provide, temporarily, key personnel for the Department; to advise on the setup of a maintenance program; to prepare a list of proper workshop machinery and road construction and maintenance equipment with spare parts, to advise on its purchase and to inspect the delivered equipment. For the two highways, the consultants will conduct surveys; prepare detailed plans, design and specifications, in suitable form. for the submission of unit price bids; advise on the qualifications of contractors and on the award of contracts; and supervise actual construction with the aid of Highway Department personnel. 54. Until the detailed engineering work has been completed and contracts for construction are let, the execution of the Atlantic Highway will continue to be carried out departmentally with the assistance of experienced field engineers of the consultants to ensure a more efficient execution. 55. After this period, prequalified contractors, satisfactory to the Bank., and chosen through international competitive bidding, will be employed to construct both Bank-financed highways. In approved cases the primary contractors will be free to subcontract individual portions of the work to properly qualified subcontractors. It might be practical for the Adminis- trations' own forces to complete the smaller, scattered parts of the work. 56. Materials and equipment for the Maintenance and Betterment program will be purchased as the result of competitive bidding. In placing orders not only the lowest prices will be taken into account, but also the suitability of machinery and equipment, possibilities of servicing by the manufacturers, limit- ing of makes and types to standardize stocks of spare parts. No new equipment is needed for the construction of the Pacific Highway. The new construction equipment for the Atlantic Xighway will be fully paid for by the Government and will stay in the country after completion of this highway. A procedure for the purchase of this equipment, either directly by the Government or via the con- tractors, will be worked out. 57. The above procedures appear to be suitable for the efficient execu- tion of the project. D. Financial Features Estimated Costs and TiminR of Expenditures 58. The three-year Maintenance and Betterment program requires $4.7 mil- lion equivalent in foreign exchange costs for road construction and maintenance equipment, with spare parts, imported machinery for workshops, and consultant fees. The local currency costs will be Q7.9 million (Annexes B and C). 59. According to the engineers' preliminary estimates (Annexes D and E) the completion of the Atlantic H.ghway requires about Q21.3 million, including Q10.7 million in local currency and $10.6 million equivalent in foreign cur- rency including consultants' fees. Although the Guatemalan Government has  - 9 already purchased much equipment only part of it is available for the Atlantic Highway; a significant part is being used on the Pacific Highway and a smaller part on other road construction work. Of the $3.2 million for additional equip- ment still needed for the Atlantic Highway, about half has been included in the cost estimates for this highway. The residual value of the equipaent allows for future road construction or betterment work. Appendix "E" shows the break.- down of the $10.6 million equivalent which will be expended from the loan. 60. The construction of the two remaining stretches of the Pacific Highway will cost Q6.6 million according to the engineer's preliminary esti- mates (Annexes F and G). Of this $2.9 million equivalent is required in foreign currency, including cost of consultants, and Q3.7 million in local currency. Available equipment will be used to construct this highway but a small amount for spare parts is included in the foreign currency costs. 61. What foreign currencies will be needed cannot be determined until construction contracts are awarded and orders for materials and equipment have been placed. Most of the requirement is expected to be in dollars. 62. The cost estiaates are provisional in the absence of actual bids. They, nevertheless, seem realistic because they (a) are the result of actual field surveys by experts; (u) reflect clear-cut specifications giving rise to definite quantities of materials; (c) give appropriate weight to the various factors involved in formulating unit-price bids; and (d) include adequate al- lowances for freight, spare parts and contingencies. 63. The estimate of the foreign exchange component appears to be con- servative as it is based on the assumption that all the work will be let to foreign contractors, requiring foreign exchange to pay for overhead, profit margins and supervisory personnel. Subletting of parts of the work to local contractors may result in some reduction of the foreign exchange requirements. Furthermore, the fact that there will be a considerable residual value of the construction equipment means that there is also a margin in the foreign currency requirements for this equipment in case the quantity of construction work should be underestimated. 64. The construction of the Atlantic Highway is scheduled to be completed by mid-1957, and of the Pacific Highway by mid-1958. 65. Based on the engineers' preliminary estimates, the timing of ex- penditures might be e-pected to approximate the following pattern: Foreian Exchange in $000 Maintenance and Budget Atlantic Pacific Betterment Year Highway Hi zhwaa Program Total 1955-56 8,773 890 3,745 13,408 1956-57 1,847 1,330 500 3,677 1957-58 610 450 1 060 10,620 2,830 4,695 18,145  - 10 - - Local Currency in Q 000 - Budget Atlantic Pacific Maintenance & Year Highway Highway Betterment Total Program 1955-56 7,105 930 2,670 10,705 1956-57 3,568 1,866 2,635 8,069 1957-58 - 30 2.615 3.545 10,673 3,726 7,920 22,319 66. The completion of the three main highways will undoubtedly give a big impetus to road transnort and will lead to an expansion of the fleet of motor vehicles, requiring investments in foreign currency. On the other hand, there will be savings in foreign currency as a result of reduced wear and tear on the vehicle fleet. As a considerable quantity of freight will still be hauled by railroad, the amount of the investment for expansion of the vehicle fleet cannot be estimated. Sources of Finance 67. The Government wishes to borrow the foreign exchange costs - about $18.2 million equivalent - from the Bank and proposes to cover the local currency costs - about Q,22.3 million - out of budgetary resources, including both ordinary revenues and special receipts to be obtained in the form of the local currency countermart of United States economic aid to Guatemala. 68. The foreign aid bill which is now reaching its final stages in the United States Congress provides the amount of $14 million as economic aid to Guatemala during the fiscal year 1955-56, over and above appropriations for technical assistance. Wihile some reductions may be made by the Congress in the over-all sums requested by the Administration for foreign economic aid in the coming fiscal year, no particular criticism has been directed toward the allocation for Guatemala and there is every reason to believe that some- thing like this amaunt will become available. Through informal discussions with the United States and Guatemalan authorities, an understanding has been reached that first priority in the allocation of Guatemalan aid funds during the coming fiscal year will be accorded to the local currency expenditures on the Atlantic and Pacific Highways, presently estimated at about Q8 million (see table above). 69. There appears to be a good possibility that additional funds will be available from the United States to support local currency budgetary exnenditures in Guatemala in the period following June 1956. In any case, the amounts required in 1956-57 and 1957-58 are not large in relation to Guatemala's budgetary resources, and the Government should be able if necessary to finance them without external aid. 70. The Government is prepardlto appropriate in fut-re years sufficient funds to ensure a proper use of the investments made in the Maintenance and Betterment program, and to provide adequate maintenance of the Atlantic High- way and the Pacific Highway.  - 11 - V ECONCMIC FEATU.P.S OF THE PROJECTS Potential Benefits of the Maintenance and Betterment Program 71. Improved roads, resulting from a proner Maintenance and Better- ment program will provide farmers with better access to widened markets at lower transport costs. 72. There are scattered deposits of lead, zinc, chromium, copper, silver, petroleum and other minerals in Guatemala. The output of mining was about $800,000 in 1953 and is still increasing, but there has been no extensive exploitation of the country's mineral resources so far. A better road system is one of the factors essential for developing these resources. 73. The Maintenance and Betterment program will provide much better maintenance and also road improvement for hardly higher yearly cost than is spent at present. It is expected that eventually an annual budget of Q3 million will provide efficient maintenance for about one and a half times the present length of roads, reducing the cost per km by about 30c 4 Potential Benefits of the Atlantic Highway 74. There is at present no road to Puerto Barrios, the only good port of Guatemala. All traffic through it depends on a single track private rail- road which also controls and operates the Port. The priority the railroad gives to banana transport and the latter's favored treatment put all other traffic at a disadvantage, both with regard to rates and speed of movement. The railroad runs through difficult country where the track is exposed to damage. Any stoppage of traffic as a result of recurring landslides cuts the country's most important lifeline. The Atlantic Highway would help to relieve the difficulties of this situation by providing greater security in connecting the country with Puerto Barrios and the nearby port of Santo Tomas and by taking care of part of the increased traffic that can be ex- pected with the economic development of the country. 75. The route of the Atlantic Highway runs through an area where natural conditions are, on the whole, unfavorable for agriculture. Some areas are unsuitable as a result of the topography, others are too arid; the soils of the high rainfall area are badly leached and acid. It is unlikely that improved transportation would lead to a substantial increase in production in this region. 76. There are, however, areas not too distant from the road, which are now inaccessible and where about 260,000 hectares could be put to agricul- tural use. Food crops, mainly rice, could be growr. in one region, rubber, cacao and coffee in the others. The realization of this development would req.uire private and further public investment for drainage and the con- struction of feeder roads. Once developed, the production of these unused lands could surpass several times the value of production of the now cultivated area along the road.  - 12 - 77. The economic importance of the Atlantic Highway does not merely rest on the provision of an alternative link with the Atlantic ports and the agricultura'l development it may bring about in the immediate area. As a logical consequence of its construction, the highway could be ex- tended into the upper part of the valley of the Rio Motagua and linked with the existing north-south highways of Central Guatemala; thus the fertile and hardly developed areas of the north would have direct access to the Atlantic. The opening up and exploitation of these areas is part of the Government program. 78. The Atlantic Highway could also carry in the future international traffic. The Zacapa-Chiquimula - Esquipulas road could in due course be connected with Honduras and would provide Western Honduras with access to the Atlantic. The same road could also be connected to the road system of El Salvador and through it El Salvador as well, would. have direct road access to the Atlantic through the port of Santo Tomas. Potential Benefits of the Pacific Highway 79. The Pacific Highway serves the Pacific Coastal Plain and the Pacific Piedmont. The Pacific Coastal Plain is a .arge contiguous area of flat or slightly undulating lands which slope gently towards the Ocean. The region is thinly populated and it is now used extensively, although potentially it is the most productive area of Guatemala. The Piedmont is a progressively steep, broken-up, mountainous country, just north of the belt of the Plain, and. is, at present, the most productive region of Guatemala. Most of the coffee produced comes from there; in the lower parts sugar cane, corn, oil grasses, recently cotton, and other crops are grown. In 1955 the estimated value of the princi-oal crops produced in the Coastal Plain was - without bananas of the United Fruit Company - about q12 million, that in the Piedmont Ql14 million. The value of cattle pro- duction was Q6 and Q4 million respectively. 80. The agricultural potentialities of the Coastal Plain have so far barely been touched. On an area of 700,000 hectares, of which 600,000 hectares are considered first c'ass agricultural land, crops were grown on some 100,000 hectares. The acreage under crops could be greatly expanded, and pastures could be more efficiently used. The value of crops produced could reach q20 million. A modest improvement in livestock could bring the value of output in the Plain to about Qc9 million and in the Piedmont to about Q,5 million. 81. The Pacific Higghway is the backbone of the road system of the Coastal Plain supporting and supplementing the railway line. Two existing paved roads connect it with the Pacific ports, San Jose and Chamnerico, and with Guatemala City and the Atlantic ports. In addition several dry- macadam, gravel and dirt roads run from the Pacific Highway dowrn to the ocean and up to the Pan American Highway in the Central Plateau.  - 13 - 82. In order to obtain the full benefits of the highway the system of feeder roads would have to be improved and extended both down to the Coast and into the Piedmont, and appropriate measures taken both by the Govern- ment and by the private landowners in the area to ensure the full develop- ment of the land. 83. The highway will connect in the West with the Mexican road system and in the East with the Littoral Highway in El Salvador, at present under construction with financial assistance of the Bank. 84. Except for the stretch to be newly constructed from Ohiquimulilla to the Salvador border, the Pacific Highway had existed as a single lane, dry macadam road, of which the standards were possibly good enough for local traffic, but inadequate to serve rapid through-traffic with the neighbor- ing countries and between a potentially very productive region and the ot1ler parts of the country. VI CONCLUSICNS AND REC=O2101EDATIOXS 85. Both the Atlantic Highway and the Pacific Highway are sound pro- jects. 86. The projects are expected to reduce transport costs for the country's internal and external trade. In addition the Atlantic Highway may lead to a modest increase in agricultural production along the roads and may make possible development on a considerable scale in some more distant areas. The Pacific Highway is expected to contribute to the development of the richest agricultural region of Guatemala. 87. The preliminary engineering is adequate and proper provision for detailed engineering has been made. The proposed arrangements for employing competent engineers and contractors are satisfactory. The cost estimates and construction schedules are reasonable. 88k The Highway Department needs to be strengthened and reorganized, and a-propriate arrangements for this have been made in the contract with the consultants. 89. In spite of heavy expenditures in the past, the standard of high- way maintenance has been low. Part of the project will be a Maintenance and Betterment Drogram to ensure proper maintenance of the newly con- structed highways and to provide improvement of other roads. go. If a loan is made, the Government shouLL have sufficient means to finance the local currency costs without delaying other essential public works or curtailing other essential activities of the Highway Department. 91. After completion of the three year Maintenance and Betterment program, it will be necessary that the Government continue to budget sufficient funds for road maintenance. As these funds need onl- be slightly higher than the average expenditures on maintenance during the last six years, the Government can be expected to do so.  - 14 - 92. For the reasons stated above, the Atlantic I-Eighway, the Pacific Highway, and the road Maintenance and Betterment program could form the basis of a Bank loan of $18.2 million equivalent. It would be consistent with the Bank1s practice in highway loans to make the term 15 years. The construction schedule would indicate a three-year period of grace.  Annex A. Recommended. Design Standards Primary Highways in Cruatemala Item of Design Flat or Gently Mountainous Terrain Rolling Terrain Design Speed 100 Km/hr (60 mph) 45 Km/hr (30 mDh) Non-passing Sight Distance 145 meters (475 ft) 60 meters (200 ft) passing Sight Distance 610 meters (2000 ft) 240 meters (800 ft) Absolute Maximum Degree of 100 metric (R115 m 200 metric (R.57.3 met. Curve _ 380 ft) - 190 ft) Desirable Maximum Degree of 30-301 metric (R-327 m 150 metric (R =76.3 m Curve =1075 ft) z-250 ft) Minimum Distance Between Curves in the Same Direction 150 meters (490 ft) 100 meters (330 ft) Minimum Distance Between Curves in the Opposite Direction 60 meters (200 ft) 30 meters (100 ft) Maximum Grade 6% 7% Maximum Distance for Maximum Grade 2000 meters (6560 ft) 1000 meters (3280 ft) Grade Reduction per Degree of Curve 0.1% 0.07% Minimum Grade in Cuts 0.3% 0.3% Width of Pavement 7.2 meters (23.6 ft) 7.2 meters (23.6 ft) Width of Base 7.7 meters (25.3 ft) 7.7 meters (25.3 ft) Total Width of Road 12.0 meters (39.4 ft) 12.0 meters (39.4 ft) Minimum Desirable Right-of-Way Width 40 meters (131 ft) 40 meters (131 ft) Design Load - Bridges H-15, S-12 H-15, S-12 Width of Bridges less than 12 meters in length 8.50 meters (28 ft) 8.50 meters (28 ft) Width of Bridges more than 12 meters in length 7.90 meters (26 ft) 7.9 meters (26 ft)  Annex B. Cost Estimates Maintenance and. Betterment Program (Foreign Currency Only) PROPOSBD MAINTENANCE EQUIPMENT Cost CIF Item Units Barrios 1/2 ton Pick-up Trucks 24 $ 48,000 2-1/2 ton Dump Trucks 160 64o,000 10 ton Flat Bed Trucks 8 40,000 D-7 Dozers 8 152,000 D-4 Dozers 8 72,000 Payloaders 8 72,000 Motor Graders 16 256,000 3/4 cu.yd. Shovels with Attachments 8 280,000 Portable Crushers - 20 tons/hour 8 370,000 3 WXheel Rollers 8 80,000 1500 gallon Asphalt Distributors 2 40,000 Concrete Mixers 16 36,000 Water Trucks - 3000 gallons 16 80,000 Air Compressors 8 120,000 Pumps 16 16,000 Communication Equipment 16 32,000 Truck Tractors 8 40,000 Trailers - 30 tons 8 64,000 Station Wagons (2-way Radio) 8 32,000 Miscellaneous Tools and Equipment L.S. 50,000 $2,520,000 Spare Parts - 15a1o 378,000 TOTAI - 2,898,000 PROPOSED MAINTENANCE SHOPS Cost CIP Units Pto Barrios District Maintenance Shops: Motor Shops, Machine Shops, Welding, Electric, Paint and Sign Shops; Spare Parts Distribution 8 $ 320,000 Central Maintenance Shop 1 150,000 $ 470,000 Deduct for Available Equipment-Guatemala Shop 1001, 000 Deduct for Equipment from New Atlantic Highway Shops 130,000 Deduct for Equipment-Pacific Highway Shop 40,000 Direct Cost New District and Central Shops $ 200,000 Spare Parts 10, of $470,000 47,000 Total Shops $ 247,000 Total Equipment $2,898,000 Total Shops 247,000 Total Cost Equipment and. Shops $3,145,000  Annex C. Approximate Yearly Hiighway Maintenance and Betterment Cost 1st Year 2nd Year 3rd Year Supervisory and Skilled Administrative Staff - 64o ; k22000 Q1,280,000 Q1,280,000 Q1,280,000 Common Labor - 2000 W 0360 720,000 720,000 720,000 Equipment Depreciation 600,000 600,000 600,000 Fuel, Tires and Miscellaneous for Equipment 300,000 300,000 300,000 Asphalt 100,000 100,000 100,000 Consulting Engineers 200,000 100,000 50,000 Subsistence 70,000 35,000 15,0CO Total - Q3,2702000 Q3,135,000 Q3,065,000 Yearly Foreign Currency Requirements M-aintenance and Betterment Program (Initial Investment for Equipment and Shops Excluded) 1st Year 2nd Year 3rd Year Fuel, Tires and Miscellaneous for Equipment 6 300,000 $ 300,000 300,000 Asphalt 100,000 100,000 100,000 Consulting Engineers 200,000 100,000 50,000 Total - $ 600,000 $ 500,000 $ 450,000  Annex D. Estimated Construction Costs of atlantic Highway by Class of Wkork Class Q. 000 Excavation: Earth 2,307 Rock 2,612 Drainage 573 Structures 4,255 Pavement (incl. Base) 6,417 Miscellaneous 400 Sub-Total 16,564 Contingencies 10% 1,656 18,220 Consulting Engineers 716 Local Engineering Costs plus Administration 5% 911 Right-of-Way 109 Total Cost Atlantic Highway 19,)56 Extra: Motaqua-Zacapa bridge 350 20,306  Annex E. Estimated Currency Requirements for Atlantic Highway Foreign Local Total Exchange Currency Q 000 Class $ 000 Q 000 iquiv. Construction Equipment to be Imported: Total Cost 3,114 Remaining value after completion Atlantic Highway 1,554 To be Charged Against Atlantic Highway 1,437 Available Construction Equipment 613 2,050 Construction Materials 3,372 2,500 5,872 Fuel and Lubricants 528 528 Labor Construction Work 1,111 6,103 7,214 Consulting Engineers 716 716 Subsistence, Office Costs, etc. 900 900 Local Administration 911 911 Right-of-Way 109 1C9 Contingencies 1,656 1,656 Total Costs Atlantic Highway 8,820 11,136 19,956 Extra: Motagua-Zacapa bridge 200 150 350 9,020 11,286 20,306 Add: remaining value of construction equipment to be charged against future works 1,554 1,554 21,860 Deduct: value available equipment 613 613 Total Out-of-Pocket Costs 10,574 1;,673 21,247  Annex F. Estimated Construction Costs of Pacific Highway by Class of lTork Class Q c00 Excavation: Earth 660 Rock 445 Drainage 252 Structures 2,166 Pavement 2,624 Miscellaneous 140 Sub-Total 6, 287 Contingencies 13% 629 6,916 Consulting Engineers 380 Local Engineering costs plus AdministratIon, 5% 346 Right-of-Way 20 Total Cost Pacific Highway 7,662  Annex G. Estimated Currency Requirements for Pacific Highway Foreign Local Total Exchange Currency Q 000 Class $ 00. Q. 000 Equiv Available Construction Equipment 1,106 1,106 Spare Parts for Available Equipment 158 158 Construction Materials 1,185 800 1,985 Fuel and Lubricants 200 200 Labor Construction Work 278 2,260 2,538 Consulting Engineers 380 380 Subsistence, Office Costs, etc. 300 300 Local Administration 346 346 Right-of-Way 20 20 Contingencies 629 629 T1otal Cost Pacific Highway 2,830 4,832 7,662 Deduct: Value Available Equipment - 1,106 1,106 Total Out-of-Pocket Costs 2,830 3,726 6,556  UNPAVED ROADS / ( ASPHALT ROADS INTERAMERICAN HIGHWAY '-.--....... ATLANTIC HIGHWAY - PACIFIC HIGHWAY RAILROADS INTERNATIONAL BOUNDARIES DEPARTMENT BOUNDARIES j E L PE T EN 0 20 40 60 80 100 KM \ \ = | ._r~~~~~~~~~~7~'l FOREA ! j /BRITSH \N LA LIBERTAD HONDURAS M E X I C O 0/ POPTUN t ~~r--__ ~I i N )0 / < SAN MATEO SXTATAN ADEN LA f DEMOCRACtA SANTO TOMAS / *. -X \o ~~~~~~COB:/ LAKE IZABE E'_9UUM U HONDURASUL I~~~~~~ N Is moCI GMAT EMAL PACJFIC OMAZAEAN MA/ HAMPERIC LIAI-JUNE,195 .~ ~ ~ ~ ~ ~ ~ ~~~I:LA) .. GUATEMALA