Honduras - Petroleum Exploration Promotion Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY 4-Al J 1 - a/s Report No. P-2743-HO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF HONDURAS FOR A PETROLEUM EXPLORATION PROMOTION PROJECT May 6, 1980 This document hus a restricted disribution and may be used by reciplents only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank anthorization. |  HONDURAS PETROLEUM EXPLORATION PROMOTION PROJECT CURRENCY EQUIVALENTS Currency Unit = Lempira (L) US$1.00 = L 2.00 L 1,000,000 = US$500,000 UNITS AND MEASURES BD - Barrels daily GWh - Gigawatt-hour = 1,000,000 kilowatt-hours Ha - Hectare 2.47 acres Km - Kilometer = 0.621 miles MW - Megawatt = 1,000 kilowatt-hours ABBREVIATIONS CABEI - Central American Bank for Economic Integration CIDA - Canadian International Development Agency COHDEFOR - Corporacion Hondurena de Desarrollo Forestal (Honduran Forestry Development Corporation) CONADI - Corporacion Nacional de Inversiones (National Investment Corporation) CONSUPLANE - Consejo Superior de Planificacion Economica (Economic Planning Council) DGMH - Direccion General de Minas e Hidrocarburos (General Directorate of Mines and Hydrocarbons) ECAISA - Empresa Centroamericana S. A. IDB - Inter-American Development Bank OECD - Organization for Economic Cooperation and Development OPEC - Organization of Petroleum Exporting Countries UNDP - United Nations Development Programme USAID - US Agency for International Development FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY HONDURAS PETROLEUM EXPLORATION PROMOTION PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Honduras Amount: US$3.0 million equivalent Terms: Twenty years, including 5 years of grace, at 8.25 percent interest per annum. Project Description: The project is designed to assist the Government's efforts to find a domestic supply of petroleum by encouraging foreign companies to explore and carry out the high risk investments, strengthening the Government's capability to negotiate and supervise exploration contracts, and to improve its energy planning. The project comprises (1) technical assistance in organization and interpretation of previously acquired exploration data, preparation of evaluation reports and bidding documents on areas to be offered for exploration, evaluation of proposals by oil companies, contract negotiations, monitoring of oil companies' explora- tion activities, oil accounting and auditing, revision of the current petroleum legislation, and preparation of specialized studies as required, (2) training for staff of the General Directorate of Mines and Hydrocarbons (DGMH), (3) computer processing of data, (4) equipment and materials for DGMH, and (5) consultants' services to review the country's petroleum pricing and taxation system and the status of ongoing studies of alternate energy sources. The main risk associated with the project is that exploration data, once compiled and interpreted, may not identify sufficiently attractive prospects to attract oil companies to invest in exploration. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Estimated Cost: US$ thousands equivalent Local Foreign Total Consulting services for oil exploration promotion 420 1,590 2,010 Equipment and materials purchase 30 110 140 Computer processing - 490 490 Energy planning studies 20 120 140 Training 20 30 50 Specialized studies 30 150 180 Basic Cost Total 520 2,490 3,010 Physical contingencies 52 250 302 Price contingencies 78 260 338 Total Contingencies 130 510 640 Total Project Cost 650 3,000 3,650 Financing Plan: US$ thousands equivalent Local Foreign Total Government 650 - 650 Bank - 3,000 3,000 Total 650 3,000 3,650 Estimated Disbursements: Bank FY 1981 1982 1983 1984 Annual 1,800 500 500 200 Cumulative 1,800 2,300 2,800 3,000 Rate of Return: Not applicable Staff Appraisal Report: None. This is a combined President's and Staff Appraisal Report.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF HONDURAS FOR A PETROLEUM EXPLORATION PROMOTION PROJECT 1. I submit the following Report and Recommendation on a proposed loan to the Government of Honduras for the equivalent of US$3.0 million for the Petroleum Exploration Promotion Project. The loan would have a term of 20 years, including 5 years of grace, with interest at 8.25 percent per annum. PART I - THE ECONOMY 1/ 2. A report entitled "Memorandum on Recent Economic Development and Prospects of Honduras" (1856-HO) was distributed to the Executive Directors on January 24, 1978. Bank missions visited Honduras during January and November 1979 to review recent economic performance. The main findings of these missions are summarized below. Country data sheets are attached as Annex I. Long-term Development Trends 3. The long-term growth rate of the Honduran economy has been exceed- ingly low. Between 1950 and 1975, real per capita GNP grew by only one percent a year. Honduras' per capita GNP in 1978, US$480, is one of the lowest in the Western Hemisphere. Honduras' poverty is also evident from a variety of indicators. Malnutrition is severe: about three quarters of pre-school children are believed to suffer from protein and caloric defi- ciencies, and infant mortality is estimated at 103 per thousand live births. It is estimated that roughly 54 percent of the population has no access to safe piped water and about 76 percent lives without any form of sanitary waste disposal. Furthermore, these are country averages which conceal substantial regional disparities as living conditions in the rural areas, which account for two thirds of the population, are much worse than in the cities. 4. A major reason for Honduras' poor growth performance during 1950-75 was the continued dependence of the economy on the production and export of a few agricultural commodities, especially bananas and coffee, whose prices depend on a fluctuating world market situation and whose output may be greatly influenced by weather conditions. The latter was dramatically illustrated when extensive destruction of the banana plantations by Hurricane Fifi in 1974 reduced the volume of bananas exported in 1975 to about one half the level of 1973 and contributed to a drop in per capita income of about 3 percent. A serious lack of basic infrastructure, uneven land distribution, 1/ This section is substantially unchanged from the section on the economy in the President's Report for the Second Agricultural Credit Project (P-2757-HO) dated March 28, 1980.  - 2 - and deficient credit, technical services, and development programs kept non- banana agricultural growth far below its potential. Furthermore, the country's sizeable forest resources were subject to wasteful exploitation practices, widespread burning, and uncertain ownership. In addition, the mountainous topography of the country has made the expansion of the road network slow and costly. There has been progress, however, since 1960, including the establish- ment of a basic transportation network connecting the main population centers and a considerable expansion of electric power service. Government Development Efforts 5. Since 1972, development efforts have accelerated; several measures have laid the basis for the country's improved longer-term economic prospects. A land reform program, begun in 1972, and strengthened and expanded through comprehensive legislation in 1975, aims at greatly improving land utilization as well as increasing the income and employment of the poorer peasants through the transfer of unutilized or poorly utilized land from large landowners to landless rural families. Another major policy development was the nationaliza- tion of timber rights in 1974. A new forestry law established guidelines for private sector forestry participation and created the state-owned Honduran Forestry Development Corporation (COHDEFOR). In the same year, the Government established the National Investment Corporation (CONADI), to promote and finance industrial projects. Furthermore, improvements in Government planning and executing capacity resulted in a substantial increase in public fixed investment from an average 4.9 percent of GDP in 1968-72 to 6.6 percent in 1974, and 10.1 percent in 1978. The Government has also made an effort to increase investment in the social and productive sectors and strengthen public finances through tax reforms and better tax administration. A 1975 tax reform made the tax on coffee exports ad valorem, with marginal rates ranging from 10 percent to 20 percent depending on coffee prices; substituted a 3 percent value added tax for the sales tax; and raised the tax rates on beer, cigarettes and liquor. Partly as a result, current Central Government receipts increased from 13.2 percent of GDP in 1970 to 15.3 percent in 1978. Recent Developments 6. During 1974-75, the Honduran economy was adversely affected by one of the worst hurricanes in its history, by the oil price rise of 1974, and later on by the OECD recession. GDP remained almost stagnant, severe balance of payments difficulties arose, and the country's savings capacity was seriously reduced. Honduras, however, recovered during 1976-78. A much higher level of public investment, the gradual recovery of banana production, the extraordinary increase of coffee prices (which doubled in 1976 and again in 1977), and dynamic private fixed investment (7.4 percent real increase yearly) were the major factors responsible. Real GDP grew at about 7.4 percent a year, or almost double the long-term growth rate recorded during 1950-75. The rate of inflation reached 6.4 percent a year, mostly fueled by imported inflation and domestic difficulties with basic grain crops. 7. Although merchandise exports grew 27 percent a year in dollar terms during 1976-78 as a result of higher coffee prices and the partial  - 3 - recovery of banana production, imports grew at a 20 percent rate and the balance of payments continued to show large current account deficits. Expansionary policies which led to the more rapid economic and investment growth had an immediate effect on imports into the small economy. Net foreign exchange reserves, however, increased as a result of greater disbursements of foreign loans, and by the end of 1978 were US$135 million, equivalent to about two months of imports of goods and non-factor services. 8. Central Government finances during 1976-78 reflected the economic performance. Current revenues increased rapidly (21 percent yearly) but current expenditures grew almost equally fast and current savings showed only a modest improvement. As a result, the large increment in capital expendi- tures was largely financed by foreign credits. The increase in Central Government current revenues between 1975 and 1978 resulted from higher income and property tax collections; almost a tripling of export and import tax revenues (including an increase of coffee taxes from US$4 million in 1975 to US$32 million in 1978); and a rapid increase in receipts from domestic taxes. Current expenditures for wages, goods and services, and transfers showed large percentage increases. Higher wage expenditures resulted from expanded employ- ment (7 percent annually) and higher nominal wages (about 9 percent annually). About 57 percent of the new posts created were teaching positions. The Government expanded significantly operating expenditures for education, health, and defense. Budgeted expenditures for education increased by 81 percent from 1975 to 1978; health expenditures doubled; and defense expenditures increased by 80 percent. 9. In 1979, the Honduran economy continued its much improved growth performance. Real GDP growth is estimated at about 6.5 percent owing mainly to larger export volumes than in 1978 and increased public expenditures. GDY, however, increased little because the terms of trade deteriorated by about 13 percent. In spite of larger export volumes of coffee (15 percent) and bananas (26 percent), lower coffee prices slowed export earnings growth and, coupled with rapidly rising import prices, resulted in a sharp decline in the terms of trade. The annual average rate of inflation accelerated to about 8.8 percent, mostly because of imported inflation and higher domestic prices for housing and food products, partly related to the influx of Nicaraguan refugees. Towards the end of the year, however, inflation accelerated to an annual rate of 19 percent. The current account deficit of the balance of payments increased from US$154 million in 1978 to about US$183 million in 1979 as exports of goods grew 20 percent and imports (CIF) 18 percent, fueled by higher import prices and the expansion of economic activity. While Central Government current revenues grew rapidly, they were neverthe- less outpaced by current expenditures; as a result, current savings declined from 1.1 percent of GDP in 1978 to 0.5 percent of GDP in 1979. Public fixed investment is estimated at about 9.9 percent of GDP, a slight decrease with respect to 1978. Future Prospects and Development Programs 10. Real GDP growth, while expected to remain well above historic levels, is likely to be less than in 1977-79, and to average about 5.6 percent a year during 1980-83. The main reason for the deceleration is the expected lower export growth. Exports (in constant prices) may increase by about 7.0 percent  a year, compared to 17.2 percent in 1978-79, since banana production has already recovered significantly and coffee production is completing a cyclical peak in the 1979/80 harvest. Further output expansion will be slower than in the recent past. Export growth would depend mainly on lumber exports (made possible by the expansion of sawmill capacity now underway) together with increased beef and sugar production, expansion of fruit and vegetable produc- tion for export, and promotion of tourism. However, the prospects for export expansion within Central America have been affected by the political unrest in the region. A slower growth of the quantum of total exports coupled with higher levels of imports, partly fueled by rising public investment, will likely result in continued moderately high deficits in the current account of the balance of payments during 1980-83. Private investment is expected to show less dynamism, as CONADI's support for large private projects may have peaked since most of its existing projects are being completed and few signif- icant new projects have been identified. Within certain parameters dictated by the public sector's revenue and indebtedness capability, public expenditures, both current and capital, may be a positive factor for GDP growth. Real current expenditures are expected to increase at rates slightly above those of GDP, although some restraint is needed to insure adequate public savings. Real public investment is expected to average about 10-11 percent of GDP during 1980-83. 11. The public investment program for 1980-83 calls for large invest- ments to alleviate the most significant bottlenecks to the country's develop- ment process and expand productive activities. The program includes investments for infrastructure, particularly for power and transport; for export diversifi- cation, mainly through forestry development; for agricultural development to advance the agrarian reform program and increase rural productivity; and for health, particularly potable water. Full implementation of this program is not likely because of limitations in administrative capacity to prepare and implement projects, particularly in the rural and social sectors. Neverthe- less, the public sector's administrative capacity to prepare and execute projects has shown a marked improvement in the past few years. This is reflected in the doubling of the share of public investment in GDP since the early 1970's and has made it reasonable to expect that the major components of the program, some of which have been under preparation for a number of years, will be implemented in a relatively timely manner. 12. Power investments will be the largest of the proposed program, averaging about 40 percent of public fixed investment, mostly because of the large, lumpy investment required for the El Cajon hydroelectric project. This high share is justified in view of the need to provide adequate power supply to industry and other expanding sectors of an economy expected to grow at a higher long term rate than in the past. It should be noted that per capita generation of electricity in Honduras is currently very low (the second lowest in Central America). Moreover, development of the country's hydroelectric resources could make an important contribution to reducing the economy's dependence on imported oil. Expenditures on imported oil and lubricants were US$76.3 million (10.7 percent of the merchandise import bill) in 1978 and increased dramatically to US$113 million (13.4 percent of merchandise imports) in 1979 compared to only US$14.7 million (6.6 percent of merchandise imports) in 1970. During 1970-79, Honduras' fuel needs for electricity generation grew from about US$1 million to about US$5.8 million. Rising prices and the  - 5 - expanded domestic demand would bring about a much larger bill for imported oil in the future. Clearly Honduras has to pursue a policy to minimize the negative balance of payments impact of its dependence on foreign energy sources. The El Cajon project will contribute significantly toward this goal in the 1980s. Honduras, however, has to continue looking for other sources of energy. Petroleum exploration, if successful, could represent an important additional step toward energy independence and a significant strengthening of the country's balance of payments. 13. Transport investments will also be large, and include the roads for the Olancho sawmills, further rural roads, the expansion of the trunk highway system, and a new port for wood product exports. Forestry investments planned by COHDEFOR and the Industrial Forestry Corporation of Olancho (CORFINO) include five relatively large sawmills. Agricultural investments will be focused on rural development projects for three major valleys: Aguan, Guayape, and Comayagua. Health investments will be concentrated on water supply and medical facilities for Tegucigalpa, San Pedro Sula and provincial towns. These fixed investments will be supplemented by growing credit programs for agriculture and industry. 14. The Government has declared its intention to mobilize additional domestic resources needed to support prudently its ambitious development program. For this purpose, it has already implemented a tax package which will increase revenues of the Central Government by about 1.6 percent of GDP in 1980. Other measures are expected to include a reduction of annual current expenditure growth from 22 percent in 1976-78 to 17 percent in 1979 and 14.5 percent thereafter; higher tariffs for public enterprises, particularly electricity and port tariffs; and, if necessary, further reforms of the tax system. In addition, the Government has established ceilings for total public fixed investment (about 11 percent of GDP). To avoid excessive pressures on the balance of payments and the domestic price level, the Government is also expected to increase credit only slightly faster than nominal GDP. Interest rates were raised to keep them in line with external market conditions and to stimulate savings deposits. Based on its development program, the Government earlier this year negotiated with the IMF a loan package totalling about US$75 million (of which US$57 million is from the Extended Fund Facility). The three-year EFF arrangement provides Fund resources in support of sound overall economic and financial policies during the implementation of the public investment program; the latter should strengthen substantially the balance of payments in the mid-1980s by reducing significantly the fuel import requirement of the economy and by generating increased exports, particularly lumber and wood products. However, given the present and foreseeable poverty of the country, even with the above measures, Honduras needs external assistance in excess of the foreign exchange component of development projects suitable for international finance to enable the Government to implement its public investment program. The large size of this program, the political uncertainty now prevailing in the Central American region, and past volatility in Honduras' export receipts have led the authorities to agree with the Bank on annual reviews of the investment program and its financing prospects. We plan to continue monitoring closely Honduras' progress.  -6- External Financing 15. As the import needs of the economy expand, in particular the imports related to the public investment program, the current account deficit is expected to increase to about US$329 million by 1983 (about 9.7 percent of GDP) and, as a result, large capital inflows will be required. The bulk of the external financing requirements is expected to be met through public borrowing. Honduras will require an estimated gross capital inflow of US$1.1 billion during 1980-83, of which over US$360 million will be disbursed from commitments made through the end of 1979. 16. Honduras' public external debt repayable in foreign currency amounted to US$591.1 million at the end of 1978, US$917.9 million if undisbursed commit- ments are included. In the past, Honduras has managed to keep its external debt service ratio fairly low, because foreign loans were almost all on concessionary terms. The debt service ratio at the end of 1978 was 8.6 per- cent. It is important that the country continue to borrow on reasonably soft average terms in view of the country's poverty, the fact that it will continue to depend on exports of a few commodities with volatile price prospects, and because, historically, natural disasters have sharply reduced the volume of exports every few years. Even if Honduras is successful in obtaining about two-thirds of the financing it needs for its investment program on terms similar to those offered by the international lending agencies, the debt service ratio is likely to rise to about 13 percent in 1986 and 15 percent in 1992. Continued maintenance of Honduras' creditworthiness will depend on the efficiency with which it chooses and implements its major public investment projects; on careful, continued demand management, including cautious use of non-concessionary borrowing; and on export promotion policies. 17. The Bank Group holds 25.3 percent of the disbursed public debt outstanding and repayable in foreign currency; excluding IDA, the Bank's share is about 18 percent. About half of the IDB's total loans disbursed and outstanding are repayable in local currency, so that IDB's share of the disbursed public debt repayable in foreign currency is only 10.5 percent. CABEI accounts for 15.0 percent of the total, the US Government for 14.2 percent, Venezuela for 13.2 percent, privately held debt for about 18.9 percent and other debt for 2.9 percent. 18. During 1970-79, the principal external lending agencies active in Honduras have committed some US$1,005 million at FY79 prices, of which the IDB provided 38.3 percent, the Bank Group 30.4 percent, CABEI 22.3 percent and USAID, 9.0 percent. IDB has concentrated on agriculture, manufacturing, water and sewerage, transport, power, education and housing; CABEI on transport, power and manufacturing, and USAID on agriculture and education (see Annex I, page 6). It is expected that USAID and CABEI will continue lending primarily in the same sectors in the future, while IDB would concentrate on agriculture, forestry, transport, industry and power.  - 7 - PART II - BANK GROUP OPERATIONS IN HONDURAS 19. Beginning with a loan of US$4.2 million for roads in 1955, Honduras has to date received 22 Bank loans totalling US$377.7 million and 12 IDA credits totalling US$85.1 million, both net of cancellations. The most recent operation, a US$20.0 million loan and US$5.0 million credit for the Second Agricultural Credit Project, was approved on April 17, 1980. Bank Group lending to Honduras has been unusually large recently, both because of the Government's stepped-up investment program and because of the major, lumpy investment in the El Cajon Power Project, for which a US$105.0 million loan and US$20.0 million credit were approved on March 11, 1980. While we hope to continue to support actively Honduras' development efforts, the annual Bank Bank Group lending level will be considerably lower now that the El Cajon operation has been approved. An important factor which will be taken into account in determining the pace and size of future lending will be the Govern- ment's capacity to implement its large ongoing program and to absorb further operations (see paragraph 11 above). As of March 31, 1980 a total of US$218.5 million remained to be disbursed on 13 operations for electricity, roads, education, agricultural credit, ports, regional development, industrial credit and tourism. Execution of projects financed by the Bank Group has, on the whole, been satisfactory. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of March 31, 1980, as well as notes on the execution of on-going projects. 20. In the past, Bank Group lending was heavily concentrated in trans- port and power, where inadequate facilities hampered the development of the country. The First Livestock Development Credit approved in 1970, how- ever, marked a first step towards the diversification of our lending. Since then, while lending for power and transport has continued, diversification of our lending has increased through operations for a Second Livestock Project; a First Education Project, which included as major components primary and secondary teacher training schools, and support for vocational training centers and the national agricultural secondary school; a First Agricultural Credit Project to finance livestock and crop development with emphasis on assisting agrarian reform settlements through investment credits and a substan- tial technical assistance program; a Second Education Project to help finance rural primary schools and agricultural vocational education; a Regional Development Project to assist small farmers and agrarian reform settlements in the Guayape Valley; an Industrial Credit Project to provide funds primarily to small and medium manufacturing firms and firms proposing priority projects in the wood industry; a Tourism Development Project to contribute to the diversif- ication of the sources of Honduras' foreign exchange earnings; and the Second Agricultural Credit Project to continue financing livestock and crop develop- ment, with increasing attention to small-scale and agrarian reform farmers, and to initiate a pilot reforestation program. 21. In future lending to Honduras, we plan to support the priorities of the Government's investment program by continuing emphasis on investment in agricultural and rural development to support the agrarian reform efforts. A number of rural development projects covering many of the major valleys with good agricultural potential are now being studied. We also expect to extend  - 8 - further assistance to the expansion of educational opportunities particularly for the rural population. We would also help finance activities to strengthen the balance of payments and diversify exports, while continuing to lend for physical infrastructure where there are still deficiencies to be overcome. In transport, we plan to place emphasis on maintenance of existing roads and on assisting the construction of a network of feeder roads to support the Govern- ment's agricultural program. 22. It is expected that the Bank Group share of total external public debt disbursed and outstanding will remain at about one quarter during the 1980s. The IBRD share of public external debt service has dropped substan- tially since the early 1970s because of increasing lending by other external agencies and a slight increase in commercial borrowing. The IBRD share is now about 20 percent and is projected to remain at this level through the 1980s. 23. IFC's activities in Honduras include a 1964 loan and equity invest- ment, of US$295,000 and US$55,000 respectively, in a tannery, Empresa de Curtidos Centroamericana, S.A. In 1966 an additional equity investment of US$27,500 was made in this company. In 1969 and 1970 equity investments totalling US$75,000 were made in a pilot company, Compania Pino Celulosa de Centro America, S.A., which was established to develop an industrial project based on timber from the Olancho Forest Reserve. Although this company is no longer involved in this project, IFC has assisted the Government of Honduras in creating an organizational structure and selecting a technical partner for the project. In 1978 IFC approved a loan of US$9.0 million and an equity investment of US$1.0 million in Textiles Rio Lindo, S.A. de C.V., a locally owned textile company, to help finance an expansion and diversification project. IFC continues working with CONADI and local private investors in developing other investment opportunities in the country. PART III - THE ENERGY SECTOR Energy Resources, Supply and Demand 24. Honduras has the second lowest per capita energy consumption in Central America, although total use of energy in the country has been increasing by an average 7 percent annually since 1970. Commercially marketed energy represents about 60 percent of total energy consumption. Imported petroleum meets about 80 percent of commercial energy requirements and hydropower the remaining 20 percent. Honduras' hydroelectric potential is large (about 35,000 GWh annually) but only 656 GWh, or about 2 percent of the total, has been tapped. With installation of the 292 MW El Cajon Power Project (Loan 1805 of March 27, 1980 and Credit 989 of April 10, 1980) expected by 1986, Honduras' hydroelectric production capacity will increase more than threefold, to over 2,000 GWh per year. 25. Apart from hydropower, the country's known domestic energy resources are limited to wood, charcoal, bagasse and coal. Wood and charcoal account for about 35 percent of total energy consumed in the country and for over 80 percent of the fuels used in rural households. As a result of continued exploitation of forests for fuel, however, serious deforestation and consequent fuel shortages have developed in a number of areas. Bagasse, which represents about 5 percent of Honduras' fuel requirements, is used by sugar mills and farmers largely in the regions where it is a by-product of sugar cane processing.  - 9 - 26. There are a number of coal deposits in Honduras. Although they have not yet been fully investigated, a study by the Canadian International Development Agency (CIDA) estimates possible reserves at about 10 million tons. While geological conditions do not indicate that the country has major prospects, further exploration seems justified. Commercially exploitable discoveries of coal would help relieve the pressures on forests for fuel wood and might be sufficiently plentiful for use by local industries or for small thermal power generating units. 27. In the face of increasing domestic demand for energy and higher import prices for liquid fuels, the Honduran Government is attempting to diversify and increase the supply of domestically produced energy resources. In this connection, greater emphasis is being placed on hydrocarbons and the Government hopes, through the proposed project, to accelerate petroleum exploration. Also, with the help of bilateral and multilateral loans and grants, it is examining areas which appear to have potential for geothermal development. The Honduran Forestry Development Corporation (COHDEFOR) has proposed the use of waste wood (produced by the country's sawmills) for fuel, and a recent study by its consultants suggests that modern methods of pelletizing woodwaste would make steam power plants economically feasible. These plants would be mainly in rural areas and would help provide earlier access to electricity in such areas than would otherwise be feasible. Finally, the Government is also investigating gasohol possibilities and, to a smaller extent, wind power and biogas prospects. Sectoral Policies and Institutions 28. In line with the increased attention being given to energy issues, the Government has undertaken, with UNDP assistance (partly OPEC funded), preparation of an energy balance with forecasts of supply and demand, by sector, to the year 2000. At the same time, it is seeking, through training programs--also with UNDP assistance--to increase the analytical capacity of Government technicians and economists concerned with energy matters. 29. To make these activities more effective, however, several sectoral issues need to be addressed. Among the most important of these is sector organization. A number of Government institutions participate in energy policy-making in Honduras. The Economic Planning Council (CONSUPLANE) defines broad national energy policy objectives, undertakes studies and coordinates training. Other agencies with responsibilities in the sector are the Ministry of Natural Resources (petroleum exploration and production), the Ministry of Economy (petroleum products distribution and pricing), the National Electrical Energy Company (electricity generation and distribution), the Ministry of Communications, Public Works and Transport (transport companies), and COEDEFOR (wood and charcoal production). Also, the Ministry of Finance plays a role in the area of fuel taxation policy and in decisions on the public investment program. 30. In view of the large number of agencies involved, coordination of energy planning and development in Honduras needs to be addressed. Recognizing this, the Government agreed, in connection with the Nispero Power Project (Loan 1629-HO of December 15, 1978), to contract a consulting firm to undertake  - 10 - a sector organization review and study. With a view to integrating energy policy-making and ensuring better coordination, one of the principal tasks of the consultants was to be the examination of the possible establishment of a National Energy Commission. 31. However, the Government subsequently decided to handle the organiza- tion matter internally without engaging a consulting firm, and, in March 1979, established an Advisory Group to review whether and how the entire sector should be reorganized to improve policy-making, management and planning for the energy sector. In December 1979, the Advisory Group presented to the Government alternatives for reorganizing the sector, together with draft legislation designed to establish the entities required. Essentially, the proposed alternatives involve two approaches: establishment of a Ministry of Energy, or formation of a National Energy Commission, which would be made up of key Cabinet members and structured to provide integrated leadership in energy matters. The Advisory Group's report and recommendations have been under review by the Government. While a final decision has not yet been made, current indications are that the Government will opt for a National Energy Commission, rather than establishment of a new ministry. 32. Thus, the initial steps are now being taken towards improved manage- ment of the energy sector. In addition, it was agreed during negotiations that the Government would, no later than October 1, 1980, begin to carry out its program to improve the organization of the sector (draft Loan Agreement, Section 4.03). It is clear, however, that reorganization by itself will not cause effective energy policy-making and planning; therefore, as soon as it reaches a decision on the organizational approach, the Government intends to analyze what specific additional studies and training assistance may be needed to implement the new organization. In this latter connection, we plan to respond favorably to a Government request to reallocate the funds (US$75,000), originally assigned under the Nispero Power Loan for the sector organization study, to provide assistance for the implementation phase of the reorganization. 33. A second sectoral issue to be addressed is that of domestic petroleum pricing and taxation policies. In this connection, the prices of some products do not reflect costs while other products are priced higher to offset this implicit subsidy. This tends to bias the energy demand pattern in Honduras and, in some cases, promotes consumption and imports. It is important to eliminate these distortions and assure the most economic use of fuel, while at the same time controlling increases in oil imports. Taxes on petroleum products have remained set since the early 1970s at a fixed, low amount per gallon: US$0.20 for premium gasoline (out of a total cost of US$1.79 per gallon), US$0.025 for diesel, US$0.007 for kerosene, and US$0.003 for bunker oil. Aimed at keeping prices to consumers as low as possible, the petroleum taxation policy not only deprives the Government of additional fiscal revenues (in 1979 revenues from petroleum amounted to less than 4 percent of total tax revenues) but also limits the effectiveness of other measures which have been adopted to contain the use of petroleum products (see paragraph 36 below). To help resolve these issues, the Government has requested a petroleum pricing and taxation study as a component of the proposed project. The primary aim of the study would be to provide the Government with a comparative evaluation  - 11 - of the economic, fiscal and social effects of its existing petroleum pricing and taxation policy and of several alternative strategies to be used as a basis for achieving an adequate petroleum products pricing system. 34. A third sectoral issue is the need to coordinate the various studies of energy alternatives being carried out in Honduras (see paragraph 27 above), and to assess their comparative costs and benefits. The proposed project would provide consulting assistance for this purpose. The Petroleum Sector 35. Honduras has no domestic petroleum production. All of the crude oil for refining and various petroleum products are imported, mainly from Aruba, where a mixture of crudes with a base of Venezuelan oil is prepared to fit the requirements of the 16,000 barrels per day (BD) Texaco-owned refinery in Honduras. Until 1975, this refinery, where the imported mixed crude is processed, exported about 30 percent of its output of fuel oil annually, primarily to Panama. These exports have all but stopped due to the establish- ment of other refineries in the Caribbean area, and a consequent refining overcapacity; the refinery is now operating at 70 percent of capacity, compared to 80 percent in the early 1970s. Future alternatives for the refinery are currently being studied by a United States consulting firm. Petroleum products are distributed in Honduras by major companies such as Esso, Shell, Texaco and Chevron, and by two smaller Honduran companies. 36. The Government has taken a number of energy conservation measures, directed mainly at gasoline consumption, such as limiting importation of cars to 6-cylinder vehicles or less, reducing hours for gasoline sales to the public, imposition of an 80 km (50 miles) per hour speed limit, limitation on the use of Government vehicles, and sponsorship of energy saving campaigns. Despite these conservation efforts, domestic consumption of petroleum in Honduras is growing at a rate of about 8 percent per year. Diesel and fuel oil consumption, primarily for trucks and power generation, account for almost 65 percent of petroleum product consumption. Gasoline, while declining as a percentage of consumption as a result of conservation measures and rising prices, represents about 17 percent of the total. Jet and residential fuel (kerosene and butane) account for the remainder. 37. Petroleum imports (crude and products) represent a growing burden on Honduras' balance of payments. Petroleum imports account for about 13 percent of total imports. The country's total oil import bill rose from about US$26 million in 1973, to about US$112.6 million in 1979, or about 15 percent of total merchandise exports. While consumption of gasoline is projected to grow at a relatively slow rate, use of diesel and fuel oil, however, would increase relatively rapidly to meet electric power needs. With expected increases in international petroleum prices in the years ahead, Honduras' petroleum imports in 1985 would approach US$428 million, and represent 24 percent of projected foreign exchange earnings. However, with installation of the El Cajon project in 1986, imports would drop to about US$360 million, or 18 percent of projected foreign exchange earnings.  - 12 - Petroleum Geology 38. Onland. Honduras' land area is about 112,090 km2, of which some 36,000 km2 are sedimentary. Perhaps some 20,000 km2 have petroleum prospects, mainly the Caribbean coastal areas and the Comayagua Valley, where some oil and gas seeps have been reported. These areas need to be surveyed in detail with field geology and geophysical methods, coupled with photogeologic inter- pretation, to accurately document these seeps. Though foreign companies have generally neglected these inland possibilities, particularly because of the poor quality and small size of the prospects, the area appears to have some merit. Detailed surveys may upgrade the land prospects to the point that oil companies will be seriously interested in searching for oil that could be easy to produce. 39. Offshore. Most of Honduras' prospective petroleum areas lie offshore, including some 53,000 km2 of continental shelf and 97,000 km2 of deep water (200 meters and deeper). In the northeast, the shelf consists of a wide platform capped by coral reefs and small sand keys which extends more than 200 km. The stratigraphic section consists of thick marine limestones, shales, sands and siltstones, the thickness of which can reach several thousand meters. Under proper conditions, the deeper shales may have generated petroleum while the overlying sands may have acted as reservoirs. 40. The Caribbean Sea offshore prospects appear interesting. Several sizeable structures were discovered by seismic surveys run by previous operators. The attractiveness of the region is, moreover, confirmed by a significant live oil show from a limestone bed encountered in Union Oil Main Cape-l, a well drilled in early 1973. During a test at around 8,900 feet in February 1973, about 15 barrels of oil were recovered, but the operator was not motivated to pursue this finding at a time when oil was worth less than US$2 per barrel. The Pacific offshore--a small portion of the Gulf of Fonseca belongs to Honduras--appears less promising because of its proximity to the volcanic belt which may mean great thicknesses of basalt, which would render seismic interpretation impossible at the present state of the art. Status of Oil Exploration 41. Past History. Although oil concessions have been granted to Honduran and foreign individuals since 1916, exploration started in earnest only in 1961, when major international oil companies (Pure Oil, Union Oil, Chevron (Socal), Signal, Shell, Pecten, Mobil, Phillips) became active. In addition to geological surveys, the operators ran air and surface magnetic, gravity and seismic surveys. The total amount of seismic lines which have been surveyed and for which profiles have been located to date for the compa- nies who hold, or have held, exploration permits in offshore Honduran waters is about 27,500 km. A complete tally would probably exceed 30,000 km. In 1980 prices, these data have a replacement cost of about US$20 million. Although this represents a considerable source of data which could help attract future investors, it has never been systematically gathered, stored or interpreted. The proposed project will provide assistance in this area.  - 13 - 42. Some 15 wildcat wells with an aggregate of more than 130,000 feet have been drilled since 1961 (one well per 4,800 km2 of prospective area). These wells have a 1980 replacement cost of about US$70 million. All were dry with minor or no shows with the exception of the Union Oil Main Cape-I (see paragraph 40 above). 43. Present Situation. One domestic and four foreign companies presently hold exploration rights over nine offshore blocks and two land blocks, as detailed in Map IBRD-14843 and as shown below: No. of Area in Year Permit Holder Blocks ha Acquired/Expiring Empresa Centroamericana S.A. (ECAISA)-Honduras 1 /a 34,301 1973 1979 Anschutz 1 Ia 388,760 1975 1981 Anschutz 2 /b 201,366 1977 1983 Esso 6 lb 640,728 1977 1983 Texaco/Amerada-Hess 1 /b 179,455 1977 1983 Total 11 1,444,610 /a Land block. /b Offshore block. The offshore area currently held represents about 3.7 percent of the total such area with petroleum prospects. The Government is currently reviewing the status of the ECAISA permit which was due to expire in 1979 and on which no work has been carried out. The Anschutz permits reportedly require little work obligation and no drilling commitment. Esso, having complied with its work obligations (a seismic survey and drilling two wells, which were dry), can keep its blocks for another three years. Texaco/Amerada-Hess is presently drilling a second offshore well; the first one (Castilla-1) was a dry hole completed in early January 1980 at a total depth of 12,143 feet. Current Plans 44. Little exploration is expected to take place in the next few months, but the Government plans to offer soon further offshore exploration areas for bidding by oil companies. If these plans are realized, some five to ten offshore wells could be drilled within the next four to six years, thus making it possible to accelerate exploration of Honduras' petroleum potential (see paragraph 40 above). Institutional and Legal Framework 45. Responsibility for petroleum exploration and production rests with the General Directorate of Mines and Hydrocarbons (DGMH), which is part of the Ministry of Natural Resources. DGMH, which is also responsible for the mining sector, is inadequately equipped to discharge its responsibilities with respect  - 14 - to petroleum. Its director, a civil engineer with extensive experience as a private construction contractor, has little expertise in the petroleum field. Its 25-man professional staff, while dedicated, lacks training in almost all petroleum techniques and operations. 46. In view of the new emphasis being placed on petroleum exploration, the Government has assigned high priority to the reinforcement of DGMH. Accordingly, through the proposed project, it is planning to arrange training of its personnel by operating oil companies and through attendance at specialized institutes, such as the Mexican Petroleum Institute. By itself, however, this training would not be sufficient to allow DGMH to manage oil exploration effectively. Therefore, the proposed project would also provide considerable consultant assistance to DGMH. 47. The petroleum law and its regulations governing petroleum explorati n and production providl for exploration permits to cover no more than 4,000 km on land and 10,000 km offshore, and to have a duration of six years extend- able to ten years provided at leas5 two wells are drilled. The financial2 commitment amounts to US$25 per km in year 2, increasing to US$75 per km in years 9 and 10. According to the law, all relinquished blocks become part of the National Reserves and can be awarded anew only after international bidding. One such bidding took place in 1977 following a Texaco request for exploration blocks previously released. The bidding was prepared by DGMH with CIDA assis- tance, and three companies were awarded seven offshore blocks. 48. The current law is weak in certain of its important provisions, which are not in accordance with those normally used in industry practice, and do not give the Government adequate compensation or control over rights- holders. For example, the law does not properly define work obligations, nor does it allow Government representatives to witness production tests. The Government is aware that there are deficiencies in the law and has requested assistance under the proposed project to revise it. Government Program and Bank Role 49. The Government attaches high priority to the discovery of domestic petroleum resources. Its most promising area, the northeast offshore, has been only lightly explored, and the results of past and ongoing exploration efforts (one well per 4,000 km of offshore shelf) are inadequate to establish the petroleum potential of Honduras. Moreover, a discovery of as little as 10,000-15,000 BD would go far towards satisfying Honduras' petroleum require- ments. At the same time the Government wishes to avoid risking scarce domestic financial resources in oil exploration. The Government's plans, therefore, are to pursue a policy of attracting international oil companies to carry out further exploration. Private capital would probably be available for a new round of exploration provided that, on the basis of previously acquired data, sufficiently attractive prospects are presented persuasively to potential bidders. The Government recognizes the need for such an approach and has therefore requested Bank assistance in these efforts through helping DGMH in  - 15 - compiling and interpreting existing geological and geophysical information, preparing and administering the bidding, negotiating with the foreign companies and monitoring their work. It has also requested assistance in establishing the basis for effective energy planning. PART IV - THE PROJECT 50. The proposed project was identified during the visit of a Bank mission to Honduras in August 1979 and was appraised in January 1980. Supplementary data are contained in Annex III. Negotiations were held in Washington on April 23-24, 1980. The Government delegation was headed by the Deputy Director of DGMH. Project Objectives and Description 51. The proposed project would support the Government's efforts (1) to discover petroleum by encouraging foreign oil companies to explore the most promising offshore areas of Honduras, and (2) to improve energy sector planning. The immediate objectives of the project are to: (a) strengthen the capacity of DGMH in the areas of geology, geophysics and other aspects of petroleum exploration, production processing and transportation; (b) assist DGMH in preparing itself for offering exploration areas to foreign companies; (c) pro- vide DGMH with trained staff and technical capability to monitor operating companies; and (d) assist the Government in priority aspects of energy sector planning through a petroleumm pricing and taxation study and a review of studies on alternative energy sources. It would include the following compo- nents: 52. Technical Assistance to DGMH. The project would provide a total of 108 man-months of consultants to DGMH. Geophysical consultants would assist in the organization of geophysical data and related activities so as to facilitate information access and analysis by the Government and interested oil companies. The petroleum exploration consultants would organize and interpret surface and subsurface information, undertake special studies where required, assist with preparation of evaluation reports and bidding documents on areas to be offered for exploration and evaluation of proposals by oil companies, assist with contract negotiations and monitoring of company work commitments, train competent staff in the foregoing activities, and provide guidance on exploration strategy. Other consultants would provide technical assistance in oil accounting and auditing procedures and perform specialized studies which might be required as a result of the findings produced by the geological and other consultants. Finally, the consultants and an international legal firm would review the current petroleum law and provide assistance in making necessary revisions to better protect the interests of the country, while at the same time providing adequate incentives to attract foreign oil companies. 53. Training. The project would provide training for key management personnel of DGMH and its professional staff in petroleum exploration techniques, laboratory procedures and related activities through seminars, on-the-job train- ing, and intensive courses abroad.  - 16 - 54. Computer Processing. This component would provide for processing of (a) previously acquired seismic profiles in order to improve offshore geologic interpretations and (b) Landsat remote sensing imagery and for putting seismic lines data on magnetic tapes. 55. Equipment. The project would provide office and laboratory equipment and materials, including storage files for geological data, technical books, magnetic tapes, special copying machines for logs and profiles and a telex machine. 56. Sector Studies. About 12 man-months of consultant assistance would be provided for two energy planning studies. The first would review the current petroleum pricing and taxation situation, with a view toward advising the Govern- ment on policies in this area. The second would review the status of ongoing Government studies on alternate energy sources, with a view to evaluating them based on comparative cost effectiveness. Cost Estimates 57. The total cost of the project (it is exempt from duties and taxes) is estimated at US$3.65 million equivalent, including contingencies of US$640,000 equivalent, or about 21 percent of the baseline cost estimate. Price contin- gencies were calculated assuming international price increases of 10.5 percent for 1980, 9 percent for 1981 and 8 percent for 1982. Physical contingencies were calculated at 10 percent for all project components, because of uncertainties regarding the precise quantities of work required. The average gross cost of the 120 man-months of internationally-recruited consultants has been estimated at US$14,000 per man-month, including travel, subsistence and overhead. This amount is reasonable, taking into account the high level of expertise required and salaries prevailing in the petroleum industry. A breakdown of the various component costs is shown in the Loan and Project Summary at the beginning of this report. 58. The proposed loan would finance the foreign exchange component of the project, or 82 percent of the total cost. Local costs totalling US$650,000 equivalent would be financed by the Government. Project Implementation 59. DGMH would be the principal executing agency, while the energy planning studies would be supervised by the Ministry of Economy (price/taxation) and CONSUPLANE (alternative energy sources). It has been agreed that DGMH would be adequately staffed to execute the project and provide necessary counterpart personnel to the foreign experts (draft Loan Agreement, Section 3.02(b)). In addition, it has been agreed that the Government would present to the Bank for comment, no later than December 31, 1980, its proposals, based on the consul- tants' recommendations, for necessary revisions to the petroleum law and DGMH's accounting and auditing procedures, and would thereafter undertake such revisions which are required to promote petroleum exploration in Honduras (draft Loan Agreement, Section 3.06). It has also been agreed that the two energy planning studies would be completed no later than March 31, 1981 and promptly thereafter presented, along with a statement of the Government's proposed actions thereon,  - 17 - to the Bank for comment (draft Loan Agreement, Section 3.05). Finally, DGMH is expected to sell copies of an index tape giving the data of all seismic recording stations and of a report prepared by the consultants during project implementation to interested oil companies. It has been agreed that the proceeds of these sales would be placed in a special account and, until December 31, 1985, used exclusively for surveys and studies in the energy sector (draft Loan Agreement, Section 3.03(b)(ii)). Advance Contracting and Retroactive Financing 60. Since the Honduran Government plans to accelerate exploration of its promising offshore areas by granting permits through international bidding by the end of 1980 or early 1981, DGMH has already begun to contract the various consultants and purchase part of the office equipment provided under the project. For this reason advance contracting for about US$1.1 million and retroactive financing in the order of US$350,000 are recommended to cover DGMH's expenditures after March 1, 1980 and before loan signature (draft Loan Agreement, Schedule 1, paragraph 4). Procurement 61. The selection of the consultants would be in accordance with regular Bank procedures, with terms of reference, consultants' qualifications and contracts to be satisfactory to the Bank. Because of the small amounts involved, office and laboratory equipment would be procured by local shopping based on three proposals, in accordance with normal Government competitive practice, which is satisfactory to the Bank. Disbursements 62. Disbursements would be made over a period of about three years to cover 100 percent of foreign expenditures, and 80 percent of local expenditures (representing the estimated foreign exchange component), for office and laboratory equipment, and 100 percent of foreign expenditures for all other items. Accounting, Auditing and Reporting 63. DGMH would keep separate project accounts to be audited by auditors acceptable to the Bank, and would submit audit reports to the Bank no later than four months after the close of each fiscal year, starting with 1980. DGMH would submit quarterly and annual reports on project implementation in a format acceptable to the Bank. It would also prepare and furnish to the Bank, no later than six months after the Closing Date, a Project Completion Report.  - 18 - Project Benefits and Risks 64. The primary benefit from the project, which represents a first step in Bank assistance in the development of Honduras' petroleum sector, would be private capital investment in high risk petroleum exploration on terms favor- able to the country. The main risk associated with the project is that the data, which is already available but has never been systematically gathered or interpreted, may not be of good quality, or if it is, the prospects identified may turn out to be inadequate to attract oil companies. PART V - LEGAL INSTRUMENTS AND AUTHORITY 65. The draft Loan Agreement between the Republic of Honduras and the Bank and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement of the Bank are being distributed to the Executive Directors separately. The draft agreement conforms to the normal pattern of loans for petroleum technical assistance projects and its more important features have been included in Part IV and summarized in Section III of Annex III of this report. 66. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 67. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President by Ernest Stern Attachments May 6, 1980  -19- ANNE I Page 1 TLE3A NONDG3AS - SOCIAL INDICATORS DATA SRHET Et0NDRAS cREFERENCE GCOUPS (ADJUSTED A!IRAGES LAND AREA (THOUSAND S0. ?36.) - MOST RECENT ESTIMATE) - TOTAL 112.1 SAME SAME IEXT HIGHER 4GUOCUULTL 28.9 MOST RECENT CEOAPRIC INCCOE tNCOME 1960 lb 1970 /b ESTIMATE lb 2EGION /c C10P id GCOUP /I CMP PCR CAPtTA (US;) 180.0 260.0 480.0 1124.4 467.5 1097.7 ENERGY CONSUMPTION PER CAPITA (KILOGLAMA 0F CAL EQUIVALZNT) 155.0 247.0 264.0 943.1 262.1 730.7 POPULATION AND VITAL STATISTICS POPULATION, MID-TA (MILLIONS) 1.9 2.6 3.3 URIAN POPULATION (PERCENT 0F TOTAL) 22.7 28.7 32.0. 59.3 24.6 49.0 POPULATION PROJECTIONS POPVLATION N1 YIXA 2000 (MILLIONS) 7.0 STATIONARY POPULATION (MILLIONS) 15.0 ER STATIONUT YPOPULATION IS REACHED 2090 PoPULATION DENSITY PER SQ. KM. 17.0 23.0 29.0 23.5 45.3 44.6 PER SQ. KM. AGRICULTURAL LAND 67.0 91.0 114.0 80.5 149.0 140.7 POPULATION AGI STRUCTUIZ (PERCENT) 0-14 YnS. 65.5 46.1 47.0 40.9 45.2 41.3 15-64 sIs. 52.0 51.2 50.0 54.6 51.9 55.3 65 n1s. AND ABOVE 2.5 2.7 3.0 3.9 2.8 3.5 POPULATION GROWTH RATE (PERCaNT) TOTAL 3.3 3.1 3.3 2.4 2.7 2.4 U0tAN 5.3 5.4 5.3 3.7 4.3 4.5 CRUDE 1RTH RATE (PER THOUSAND) 51.0 49.0 47.0 32.8 39.4 31.1 CRUDE DEATd RATE (PER THOUSAND) 19.0 15.0 12.0 8.5 11.7 9.2 GROSS REPRODUCTION RATE .. 3.4 3.4 2.4 2.7 2.2 F7aLY PLANNING ACCEPTORS. ANNUAL (TEOUSANDS) .. 12.7 23.0 USECS (PERCENT OF MARRIED WOMEN) .. .. 9.0 17.7 13.2 34.7 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 79.4 96.0 86.0 99.4 99.6 104.4 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) S4.0 99.0 90.0 107.0 94.7 105.0 PROTEINS (GUMS PER DAT) 53.0 58.0 56.0 60.4 54.3 64.4 OF WHICH ANIMAL AND PULSE 21.0 25.0 20.0 28.3 17.4 23.5 CHILD (ArES 1-4) MORTALM LATE 30.0 20.0 14.0 6.7 11.4 8.6 HEALTH LIFE EXPECTANCY AT 31RTH (YTARS) 46.0 53.0 57.0 63.6 54.7 60.2 l4NANT MORTALITY RATE (PER THOUSAND) 130.0 117.0 103.0 76.1 68.1 46.7 ACCESS TO SAFE WAT1R (PERCET OP POPULATION) TOTAL .. 34.0 46.0 63.4 34.4 60.8 URBAN .. .. 82.0 79.5 57.9 75.7 RURAL .. .. 27.0 38.6 21.2 40.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 24.0 *. 58.8 40.8 46.0 URBAN .. 64.0 .. 77.8 71.3 46.0 RS11AL .. 9.0 .. 24.5 27.7 22.5 POPULATION PER PHYSICIAN .. 3710.0/f 3300.0 1841.9 6799.4 2262.4 POPULATION PER NURSING PERSON .. .. 1420.0 933.7 1522.1 1195.4 POPULATION PER HOSPITAL 3ED TOTAL 590.0 570.0 660.0 563.4 726.5 453.4 URBAN . 150.0 .. 279.4 272.7 253.1 RURAL .. 11810.0 .. 1140.9 1404.4 2732.4 ADMISSIONS PER 8OSPITAL BED .. .. 24.0 25.7 27.5 22.1 COUS4INc AVERAGE SIZE OF HOUSEHOLD DOTAL 5.7 .. .. 5.0 5.4 5.3 URBAN 5.5 .. .. 4.8 5.1 5.2 RURAL 5.7 .. .. 5.3 5.5 5.4 AVERACE 'L'SER OF PERSONS PER ROOM TOTAL 2.4 .. .. 1.3 .. 1.9 '.R.AN 1.8 .. .. 1.3 .. 1.6 RIRAL 2.7 .. .. 1.5 .. 2.5 iC'-ESS TO LICTEICI-Y (PERtCEN OF DWELLUNCS) -TOAL 15.0 25.0 54.3 28.1 S0.0 URBAN 56.7 .. 67.1 60.1 45.1 71.7 RURAL 2.0 .. 5.5 1-.2 9.9 17.3  - 20 - MNEX I Page 2 TABLE 3A HoNDURAS - SOCIAL TXDrCATORS OATA SHEET MONDURAS Rll:i