Document of The World Bank FOR OFFICIAL USE ONLY Report No.5494-ME STAFF APPRAISAL REPORT MEXICO CHIAPAS RURAL ROADS PROJECT March 25, 1985 Projects Department Latin America and Caribbean Regional Office 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. Currency Equivalents Currency Unit = Peso (Mex$) US$1.00 = Mex$ 25 in December 1981 = Mex$ 55 in February 1982 = Mex$ 120 in June 1983 = Mex$ 185 in June 1984 = Mex$ 205 in March 1985 The exchange rate is currently sliding at a rate of Mex$0.21 per day against the US dollar. Fiscal Year January 1 - December 31 Weights and Measures Metric: British/US Equivalent 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 kilogram (kg) 2.20 pounds (lb) 1 metric ton (m ton) = 2,205 pounds 1 liter (1) = 0.26 gallons (gal) Abbreviations AADT Average Annual Daily Traffic AU Animal Units CFE Federal Electricity Commission CONASUPO National Marketing Organization for Basic Foods COPLADE State Committee for Planning and Development COPLAMAR General Coordination for National Plan for Marginal Areas CUD/CUC Federal/State Investment Agreements DGAF Directorate General of Road Transport DGC Director General for Maintenance DGCR Directorate General for Rural Roads DGP Directorate General for Planning ERR Economic Rate of Return IVA Value Added Tax JLC Local Roads Council N de M Ferrocarriles Nacionales de Mexico, National Railways of Mexico NAFINSA Nacional Financiera, S.A. PEMEX Mexican Petroleum Monopoly PIDER Integrated Rural Development Project PLANAT Rainfed Agriculture Project SAHOP Secretariat of Human Settlements and Public Works SARH Secretariat of Agriculture and Water Resources SCT Secretariat of Communications and Transport SEDUE Secretariat of Urban Development and Ecology SHCP Secretariat of Finance and Public Credit SPP Secretariat of Programing and Budgeting TDE State Transit Authority FOR OFFICIAL USE ONLY STAFF APPRAISAL REPORT MEXICO CHIAPAS RURAL ROADS PROJECT TABLE OF CONTENTS Page No. I. PROJECT SUMMARY ....................... .... ....... ..-.6....... 1 II. THE TRANSPORT SECTOR ................................................ 3 A. Transport Develop:ent and the Economy ......................... 3 B. Institutional Framework and Planning ......................... 5 C. The National Rural Roads Program and Rural Development Strategy .............................. 5 D. Past Bank Participation and Experience ......................... 7 E. Bank Lending Strategy ................ .. .. ...........7 III. TRANSPORT AND RURAL DEVELOPMENT IN CHIAPAS ............ . . 8 A. General Social, Economic and Geographic Setting ................ 8 B. The Transport Network of Chiapas .............................. 9 C. Chiapas Road Administration ................... . ................ 11 D. Rural Road Planning, Design and Construction ........s-9........ 12 E. Rural Road Maintenance ......................................... 14 F. Rural Transport Services ....................................... 16 IV. THE PROJECT .................................................. 16 A. Project Origin and Objectives ................................ 16 B. Project Costs .................................................. 17 C. Rural Roads Construction Program ............................... 18 D. Rural Roads Rehabilitation and Improvement Program ............. 19 E. Consulting Services ............................................ 19 F. Economic Evaluation ............................................ 20 G. Project Beneficiaries .................... .. ............ .. ... 22 H. Social and Ecological Considerations ........................... 22 I. Project Risks .................................................. 23 This report is based on the findings of an appraisal mission which visited Mexico in February/March 1984. The mission comprised Messrs. J. Gutman (Economist), L. Schiffman (Engineer), S. Hertel (Consultant) and F. Cancian (Environmental Specialist) and Ms. C. Cook (Sociologist). The report has been edited by Miss V. Foster. 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. - i1 - TABLE OF CONTENTS (Continued) Page No. V. PROJECT IMPLEMENTATION .............................................. 24 A. Subproject Selection, Preparation and Evaluation ............... 24 B. Procurement .................................................... 25 C. Disbursements *.............................o ..s.. 26 D. Special Account ................................................ 27 E. Auditing ....................................................... 28 F. Project Implementation Schedule and Monitoring ................. 28 VI. RECOMENDATIONS ..................................................... 29 TABLES 2.1 Transport Investment ....-......................................... 31 2.2 Development of the Road Network ..................................... 32 2.3 SCT Highway Infrastructure Investment 1977-1984 .................... 33 2.4 National Rural Roads Construction - 1971-1983 ....................... 34 2.5 Bank Lending to the Transport Sector ................................ 35 3.1 Existing Chiapas Road Network ....................................... 36 3.2 Traffic Levels on Chiapas Main Highways ............................. 37 3.3 Division of Responsibility for Roads in Chiapas .................... 38 3.4 Rural Roads Construction in Chiapas ................................. 39 3.5 Rural Road Design Standards: Class E Road .......*................. 40 4.1 Detailed Project Costs ... ............................... 41 4.2 Initial Rural Road Construction Program ............................. 42 4.3 Initial Rural Road Rehabilitation/Improvement Program ............... 43 5.1 Project Implementation Schedule ............................. 5.2 Estimated Schedule of Disbursements ................................. 45 ANNEXES 1. Major Sectoral Issues . ............................................. 46 2. Analysis of Rural Road Maintenance Costs ............................ 48 3. Proposed Inventory Format for Rural Roads ........................... 52 4. Draft Terus of Reference for Chiapas Rural Transport Services Study .......................... 54 5. Guidelines for Preparation of Updated SCT Manuals ................... 57 6. Guidelines for Economic Evaluation ................................. 58 7. Related Documents and Data Available in Project File ................ 64 8. Project Reporting Requirements ..................................... 66 CHART 25805 - Organization of SCT ....................................... 67 MAP IBRD 18421 - Chiapas Rural Roads Project MEXICO CHIAPAS RURAL ROADS PROJECT I. PROJECT SUMMARY Borrower: Nacional Financiera, S.A. (NAFINSA) Guarantor: United Mexican States Project Secretariat of Communications and Transport (SCT) Executing Agency: Amount: US$22.0 million equivalent. Terms: Repayment in 15 years, including three years of grace at the standard variable interest rate. Project The proposed loan is being presented simultaneously with an escription: agriculture development project as part of the Bank's support for the initial phase of the Government's development program for the State of Chiapas. The Chiapas Development Plan is designed to address the main constraints to the development of the State and to implement economic as well as social investments. The areas of influence of the two proposed projects would fit well into the priority areas of the Chiapas Development Plan. The proposed project would support the initial stages of this Plan through the execution of a rural roads construction, rehabilitation, improvement and maintenance program in coordination with other simultaneous social and economic development efforts. The project provides for: (i) construction of about 1,000 km of rural roads; (ii) rehabilitation and improvement of about 2,000 km of existing rural roads; and (iii) consulting services and related technical support to carry out detailed engineering and upgrade the administrative and implementation capabilities of the executing agency. Beneficiaries: The intended beneficiaries of this project are State rural residents lacking adequate road access. The areas affected would be predominantly small farm communities for which agriculture is the main source of income. A significant proportion of the beneficiaries are expected to be from the State's large, ethnically distinct indigenous population. The initial year's program would serve about 40,000 people. The benefits would be realized through the generation of employment during the construction period and through increased agricultural production following construction. In addition, local residents would benefit through improved access to employment opportunities elsewhere in the state and better access to, and delivery of, social services. -2- Risks: The project faces the following risks: (a) the first one flows from the fact that the institutional framework for coordination of Federal and State level planning and & implementation activities under the Chiapas Program is new and largely untested in practice. This institutional risk way*' also have implications for the provision of adequate and timely counterpart funding. The Government is taking steps to improve the institutional and budgetary capabilities of the executing agencies involved; (b) there are two types of risks which could affect the realization of project benefits: (i) agricultural increases may not be realized because of delay in parallel actions such as extension services, seeds and fertilizer provision and credit; and (ii) road employment and construction targets may not be met because of a possible shift to equipment-intensive methods and/or budgetary limitations. By preparing the project in close coordination with the parallel Agricultural Development Project and applying relatively conservative assumptions to production potential, this risk expressed in (i) would be minimized. With regard to (ii), the program scope takes into consideration the local capacity for execution and historic construction levels. Also, project preparation has focused upon defining when labor-intensive methods are most appropriate. Estimated Costs: Local Foreign Total -----(US$ millions)---- I. Investment Program Rural Roads Construction 18.7 6.3 25.0 Rural Roads Rehabilitation/Improvement 5.2 1.7 6.9 Consulting Services and Technical Assist. 1.1 0.4 1.5 II. Project Base Cost 25.0 8.4 33.4 III. Price Contingencies 6.2 2.1 8.3 Total Project Cost /1 31.2 10.5 41.7 Financing Plan Government 19.7 - 19.7 IBRD 11.5 10.5 22.0 Total Project Cost 31.2 10.5 41.7 1/ Net of taxes -3- Estimated Disbursements Bank FY 1986 1987 1988 1989 1990 1991 (USS millions) Annual 2.0 3.9 5.1 4.8 3.8 2.4 Cumulative 2.0 5.9 11.0 15.8 19.6 22.0 Estimated All subprojects to be financed under the loan would be Rate of appraised according to agreed technical, economic and social Return: criteria and would, in general, have a minimum estimated rate of return of 12%. Roads in less productive areas, serving substantial populations but not meeting the minimum economic criteria applying traditional evaluation procedures, would be reviewed on a social benefits basis. For such roads, the maximum cost per person served should not exceed US$450, and the total cost should not exceed 15% of the rural roads program. Rural road rehabilitation works would not require economic evaluation, but selection of subprojects would be based on a technical review of existing conditions, and the confirmation of traffic and road utilization. II. THE TRANSPORT SECTOR A. Transport Development and the Economy 2.01 Mexico has developed an extensive transport network which comprises over 200,000 km of roads (including 67,000 km of paved and over 80,000 km of rural roads, with the rest being state and local unpaved roads); about 20,000 km of railways (all except 500 km being standard gauge); some 33 ports, of which 13 serve international traffic; about 50 airports capable of handling medium or larger size aircraft; and over 20,000 km of crude oil, refined products and gas pipelines. From 1972 to 1981, traffic on the nation's roads grew by 10% annually, with road traffic representing an estimated 48% of total traffic in ton-km and over 90% in passenger-km. Railway freight traffic, representing about 14% of total ton-km, experienced a growth of 7% annually. Even more significant growth rates were registered by coastal shipping and ptpelines, with annual rates of between 13% and 15% in ton-km because of increased oil production resulting in an estimated 15% and 21% share respectively of all ton-km in 1982. After only limited growth prior to 1977, the ports registered average annual increases of almost 17% in cargo tons handled from 1977 to 1982. In passenger transport, domestic aviation traffic increased by over 17% annually, with total passenger-km generally equal to that of the railways. 2.02 During the 1960s and early 1970s, substantial amounts were invested in transport - particularly roads, railways and aviation - with the transport sector receiving about 20% of all public investment. With the trunk network generally in place, emphasis shifted to operational improvements and pricing and using transport investment to foster the development of outlying areas, especially through the extensive rural roads construction program of the mid-1970s. This investment policy, however, proved to be untenable with the surge of economic activity in the late 1970s, which was accompanied by accelerated growth in traffic in all modes. Between 1978 and 1981, serious port and rail bottlenecks emerged, clearly affecting the operation of basic industries and the conduct of international trade. To eliminate the bottlenecks and improve capacity, the Government, in 1977, launched an important industrial ports development program and a major track improvement plan for the railways. Highway investment expenditures, however, were not significantly increased, so that highways' share of transport sector investments declined from 68% in 1972 to 44% in 1984 (Table 2.1). Although there were instances of premature investment and some works suffered from poor programing, the overall response of the Government to the situation in those years was appropriate. 2.03 With the onset of severe budgetary restrictions after the recession in 1982 and 1983, transport investment priorities had to be shifted again. Transport investment levels, excluding urban transport, were reduced in 1984, in real terms, to about US$1.2 billion (roughly equivalent to average 1979-80 levels), focusing on maintenance, reconstruction of existing infrastructure, and completion of high priority ongoing works, while deferring major new investments. The transport sector's cuts were less severe than the general cut in public investment, however, and, therefore, its share in the total rose from 9% in 1979 to almost 11% in 1984, the apparent rationale being the ability of the sector to quickly generate short-term productive employment during this critical period of economic contraction. Given the lull in transport demand caused by the recession, this strategy is satisfactory for the time being. Rail traffic declined 12% in 1982, highway traffic dropped by 10 to 15% in 1983 and several industries, which experienced transport bottlenecks in the recent past, do not anticipate difficulties in the near future. 2.04 The major issues in the sector relate to the following: the scope and timing of transport investments to effectively serve the economic recovery; fuel pricing, i.e., diesel prices below international levels; road user charges, particularly the issue of equity among types of road users; railway tariffs which are below variable costs for many commodities; inadequate port charges; and lack of rural road maintenance. These issues are being treated under a number of ongoing Bank lending operations and through the preparation of new lending operations. They are summarized in Annex 1, and more detail is provided in the Staff Appraisal Reports for the Second Highway Sector Project (April 1984) and the Lazaro Cardenas Industrial Ports Project (May 1984). -5- B. Institutional Framework and Planning 2.05 Based on the institutional reforms of the current Administration, all transport agencies are incorporated under the Secretariat for Communications and Transport (SCT) (Chart 25805). A Subsecretariat for Infrastructure in SCT handles infrastructure development for almost all transport, and a Subsecretariat for Operations has responsibility for operational, regulatory and tariff matters. A Directorate General for Planning (DGP), which reports directly to the Secretary, is in charge of overall planning and budget preparation. Planning units within the various modal directorates are responsible for identifying and proposing capital investments and provide the technical details required for the analysis of such investments. DGP, in turn, has responsibility for carrying out the economic feasibility analysis and providing a multimodal consistent analytic framework for the preparation of the medium- and long-term investment programs. With the recent institutional reorganization of the sector, SCT is upgrading its planning procedures and criteria, and the Bank is providing assistance to this effort under various ongoing transport loans (1929-ME and 1964-ME). To assure continuity, further assistance will be provided under the recently approved Second Highway Sector Project (Loan 2428-ME) and the Lazaro Cardenas Industrial Ports Project (Loan 2450-ME). 2.06 In addition to SCT, the Secretariat for Programing and Budgeting (SPP) plays an important role in ensuring consistent modal planning. The Directorate for Public Infrastructure of SPP must approve the proposed SCT investment and operating budgets and conducts a serious review of all major investments in the sector. Although small, this unit has proven effective and capable during the first years of this Administration. For rural development, including rural roads construction, overall investment levels are determined by the Subsecretariat for Regional Development of SPP in order to properly integrate various investment and service programs. Last, in an attempt to decentralize planning decisions and stimulate local participation, State Planning Committees (COPLADES) have been established in each state. Representatives of the three levels of Government constitute the committees, with the State Governor as chairman and the Regional SPP Delegate as technical secretary. These committees are to formulate and to propose annually, to the Federal and State Governments, the investment, expenditure and financing programs for the state. The initial experience and influence of these committees vary, and an effort is being made to strengthen them in order to prepare and oversee the execution of regional development plans such as the Plan Chiapas (para 4.01). C. The National Rural Roads Program and Rural Development Strategy 2.07 Prior to 1970, Mexico's road-building program was directed at developing the federal and state trunk network, while rural access was largely ignored. In 1970, of a total of 71,500 km of roads in the country (excluding rural tracks and trails), only 8,500 km, or 12%, were rural access roads (Table 2.2). As a result, some 90,000 communities 1/ lacked 1/ 82,000 communities with 500 or fewer inhabitants and 8,000 with over 500 inhabitants, representing 91% of the communities in Mexico. - 6 - all-weather access to the trunk network and the national economy. With the change in administration that year, rural development was given greater priority, and new strategies were accordingly reviewed and revised with the objectives of better integrating the many small subsistence farmers into the economy, stimulating economic growth in rural areas and providing short-term employment. A new rural electrification program was initiated, agricultural credit programs were enlarged, the role of the agricultural price support and marketing agency (CONASUPO) was expanded, and new Agrarian Reform and Water Laws were passed. In 1973, the PIDER program 2/ was initiated, and it focused upon coordinated investment strategies7for rural micro-regions. Other programs were instituted during the rest of the decade for various reasons, but all were designed to direct aid to the rural areas (e.g., COPLAMAR, CUC, and PLANAT 3/). 2.08 A key element in the rural development strategy was the improvement of rural access, especially to areas with population concentrations of over 350 people. Since 1970, the construction of rural roads has been executed and financed by a variety of agencies. The principal executing agency was the former Secretariat of Human Settlements and Public Works (SAHOP), but SCT now carries out the program through the Directorate General for Rural Roads (DGCR) and rural road departments in its state offices. Rural road construction rose to over 30% of the total SAHOP road investment (Table 2.3), and SAHOP, along with the PIDER organization and the state road agencies, constructed almost 80,000 km from 1971 to 1983, with the rate of annual construction reaching as high as 15,000 km in 1973 and remaining relatively steady at about 5,000 km per year since 1975, until 1982 when the construction levels declined (Table 2.4). In addition, the Secretariat for Agriculture and Water Resources (SARH) has constructed thousands of kilometers of roads, mainly farm service roads, as part of its investment programs. 2.09 In terms of construction, the progress of this intensive effort has been remarkable, and the lessons learned in organization, community planning, design criteria, construction techniques and training have been referred to in the planning of rural roads programs throughout the world. While new construction has declined to about 12% of the road investment budget, it is apparent that the Government must turn its attention to better maintenance and rehabilitation, an area which has been ignored until recently (para 3.23). 2.10 As for economic %evelopment consequences, the results are mixed; no formal monitoring mechanism has been established. Various studies have found that specific roads had a significant positive effect 4/, but agricultural 2/ Integrated Rural Development Project. 3/ General Coordination for National Plan for Marginal Areas, Federal/State Investment Agreements, Rainfed Agricultural Project. 4/ Frank Cancian, Change and Uncertainty in a Peasant Economy, Stanford University Press, 1972; Robert Wasserstrom, Class and Society in Central Chiapas, University of California Press, 1983; and World Bank StudZ of Rural Mobility and Communications in Mexico, Draft Final Report, 1981. - 7 - production as a whole in Mexico did not surge during the period of rural road construction. Mexico's basic crops, such as maize, beans, wheat, rice, sorghum and sugarcane, registered annual rates of growth from 1.5% to 2.5% over the 1970s, well below the population growth rate. The blame has been attributed to inappropriate Government intervention in price setting and marketing in an attempt to protect consumers from increasing food prices. Export crops, however, such as coffee, fruits and vegetables, were relatively free of Government intervention and registered an annual growth rate of 12% up to 1979, when the overvaluation of the peso affected export markets. The new Administration has reoriented agricultural policies. Most important, it has allowed substantial increases in guaranteed farm prices, consistent with international prices. Also, multi-sectoral regional investment plans, such as the project in Chiapas, are expected to better optimize the mix of investments and to stimulate local participation, all crucial to generating projected road-related benefits. D. Past Bank Participation and Experience 2.11 The Bank has had an extensive involvement in the Mexican transport sector (Table 2.5). Nine highway loans have been made, focusing upon the trunk network, the first in 1960 and the ninth (a Second Highway Sector Project - Loan 2428-ME) in 1984. There have been four railway loans, with the Fourth Railway Project (Loan 1929-ME) in execution. In addition, there have been three port loans, including a port preparation loan in 1981 (Loan 1964-ME) for the industrial ports project and the recently approved Lazaro Cardenas Industrial Ports Project - Loan 2450-ME. For air transport, an airport loan (Loan 1022-ME) was made in 1974 and completed in 1982. As expressed in Project Completion Reports (e.g. for the Seventh Highway Project, issued June 22, 1982), although the quality of works executed is satisfactory, cost increases, construction delays and insufficient budget allocations have generally resulted in delayed completion of Bank projects. 2.12 Rural roads construction has received Bank financing tinder agricultural projects, but not under transport projects. Most of such roads were built by SARH and were farm service roads, not community access roads which were more typical of the main rural roads program. Bank agricultural projects have supported the PIDER program, which included community access roads. It was the reviews of the PIDER projects which identified transport issues that could best be handled under specific transport lending, particularly with regard to road selection criteria and maintenance budgets and practices. Thus, it was considered appropriate to prepare a rural roads project in parallel with an agricultural development project in order to continue the integrated development framework of earlier projects, while allowing for a more focused treatment of important transport issues. E. Bank Lending Strategy 2.13 The Bank's role in the transport sector has been expanded because of the measures taken by the Government on issues which have been of concern to the Bank during its long standing involvement in the sector, particularly with regard to sector pricing (Annex 1) and institutional reorganization (para 2.05). The sector lending strategy, in accordance with the Bank's overall objectives for lending to Mexico, is to develop relatively quick disbursing loan operations which focus upon short-term investment in maintenance, rehabilitation and modernization, and upon making prior -8- investments operational while assisting the Government, through the new Planning Directorate, in reassessing the medium- and long-term need for major new investments. Furthermore, a constructive dialogue on sector policies has been initiated between the Bank and the Government which would be supported through the Bank's lending and sector work program. 2.14 The proposed rural roads project has a more limited focus and represents, together with the proposed agriculture project for Chiapas, a pilot effort to support comprehensive regional development. As with other lending operations to the sector, this project attempts to achieve a better balance between new investment and maintenance and rehabilitation. It is expected that the lessons of this project will serve as the basis for other regional development plans being prepared, as well as for the national rural roads program in general. III. TRANSPORT AND RURAL DEVELOPMENT IN CHIAPAS A. General Social, Economic and Geographic Setting 3.01 The state of Chiapas is in the southeast of Mexico, on the border with Guatemala, and has an area of about 74,000 km2 with a population of about 2.3 million. About one-third of the population is estimated to live in urban areas (centers with more than 2,500 inhabitants), and the remaining two-thirds in rural areas, an opposite relationship to the national population distribution. It has two principal cities: Tuxtla Gutierrez, the capital, with a population of 180,000; and Tapachula, with about 150,000. The rest of the population is generally dispersed among small villages and farm clusters. Economically and socially, it is one of the least developed states in the country. Although less than 15% of the land is cultivated, agriculture accounts for 36% of the State's gross national product (GNP). Another 33% of the state's GNP pertains to industry, primarily petroleum and hydro-electricity, the benefits of which have not directly accrued to the local population. 3.02 The state can be divided into four distinct regions, demarcated according to geography, climate and communications networks: (a) The Pacific Tropical Coastal Plain is a belt averaging 30 kn in width, covered by generally poorly drained alluvial soils. It is separated from the rest of the state by the Sierra Madre mountain range, with peaks rising to over 4,000 m above sea level. Although this area has high agricultural potential, drainage problems have limited much of the land to grazing; (b) The Central Depression extends from Guatemala to Oaxaca on the inland side of the mountains. It has a semi-tropical climate and rises from 400 m to 1,000 m above sea level. It is the most agriculturally productive area, principally maize and beans; (c) The Central Highlands (Los Altos) are located to the northeast of the Central Depression. rising 1,500 m to 2,500 m. It is the most densely populated area, with about 250,000 of the State's 40,000 indigenous population, and is noted for the scarcity of cultivable land; and - 9 - (d) The Tropical Rainforest (Selva) is in the eastern section of the State. It is sparsely populated and contains some of the last remaining tropical rainforest in North America. The area is becoming more and more threatened by spontaneous migration and slash-and-burn agriculture. 3.03 The state of Chiapas is one of the poorec. in Mexico, with a per-capita income of about US4350, compared with the national average of US$2,250. Statewide, poverty is prevalent and malnourishment among children is widespread, with a child mortality rate (between the ages 1 and 4) of 85.2 deaths per thousand children as compared with 42.9 for the nation. The population has the highest illiteracy rate (34%) compared to the national average of 20%, and more than 10% of the people speak only local native dialects. Piped water covers about 45% of the households and electricity, 50%, but these facilities are concentrated in the urban centers. One of the main obstacles to improving the social, as well as the economic, environment has been the difficult terrain and climatic conditions which hinder access to the widely dispersed population. The problem is compounded by the fact that a large portion of the population, particularly in Los Altos, lives in relatively non-productive areas and would have to travel out of the villages for gainful employment. In addition, there has been a significant inflow of Guatemalan refugees, complicating the fragile social and economic situation. 3.04 Maize is the principal crop of Chiapas, with about 1.2 million tons produced per year on about 500,000 ha. The state of Chiapas is also the leading producer of coffee and bananas in Mexico, with about 125,000 tons and 300,000 tons respectively, and is also a major producer of cotton, sugarcane, soybeans and fruits. There are an estimated 4.3 million head of cattle, producing 114,000 tons of beef and 200,000 tons of milk, as well as significant numbers of sheep, pork and poultry. The state produces an estimated 23,500 tons of fish annually and has 4.0 million ha of forest (most of it virgin), producing 280,000 m3 of timber per year. The main constraints to increasing production are lack of proper drainage, limited extension and other agricultural services, lack of storage and inadequate transport access. B. The Transport Network of Chiapas 3.05 The transport network of Chiapas consists mainly of about 8,600 km of roads, including 2,840 km of paved roads (Table 3.1), one Pacific Coast port, 540 km of railway lines, and two major airports (Map IBRD 18421). The construction of the network is relatively recent, with major highway connections, such as Huixtla-Comalapa (financed under Loan 968-ME), Comitan-Altamirano and Ocosingo-Palenque roads, completed in the last five years. Most of the rural roads network of 4,000 km was constructed over the last ten years. Puerto Madero was completed in 1975, and the present Tuxtla Gutierrez and Tapachula airports were completed in 1982 (financed under Loan 1022-HE). The network is still sparse, as evidenced by the fact that an estimated 500,000 people are without all-weather access. 3.06 The Pacific Coast port, Puerto Madero, was originally constructed to support an expected increase in banana exports (130,000 tons of bananas projected for 1975). By 1980, total traffic was at 12,000 tons, mostly cement and fertilizer imports, and the port, with its 151 m berth and 1,600 m access channel with a depth of about 33 feet, is severely under-utilized. - 10 - The port also has a fishing dock with a 3GO-boat capacity, but has been unable to compete with other more developed ports, such as Salina Cruz, in terms of unloading facilities, processing plants and marketing channels. Future forecasts do not foresee significant increases in traffic for Puerto Madero. 3.07 With the construction of the Tuxtla Gutierrez and Tapachula airports, now serving B-737 aircraft, along with existing smaller airports at Comitan and Palenque and some 90 other landing strips, the air transport network is relatively complete. Weather conditions at the Tuxtla Gutierrez airport, however, often result in closures and substantial delays as well as uncertainty, as traffic is diverted to Tapachula or Villahermosa in the state of Ta!.6co. To minimize these problems, the installations of instrument landing systems and other navigational aids are being studied. Also, Comitan is being considered for further expansion in light of the expected economic development of that area. 3.08 Two railway lines serve Chiapas: the Coatzacoalcos-Merida line of the Ferrocarril del Sureste (recently incorporated into N de M) extends 210 km across the northern part of the state; the second line is the 330 km of N de M from Salina Cruz to Tapachula and Guatemala along the Pacific Coast. Tapachula and Arriaga are the two main freight centers for the line, with terminal facilities and switching yards. The Tapachula line, in 1982, handled from 212,000 to 647,000 net tons of varied products, with the highest concentration of traffic on the line from Arriaga, west. Any investment should be limited to improved maintenance and rehabilitation. 3.09 Road transport is the principal transport mode for Chiapas. The three main axes are the Pan-American Highway, running from the Oaxaca state border through Tuxtla Gutierrez to Ciudad Cuauhtemoc at the Guatemala border; the Pacific Coastal Highway, from Oaxaca through Arriaga and Tapachula to Ciudad Hidalgo at the Guatemala border; and North Highway 195, running north-south from the Tabasco state border to Ixtapa and Escopetazo on the Pan-American Highway east of Tuxtla Gutierrez (Table 3.2). While, in 1970, much of the rest of Mexico lacked only rural roads (para 2.07), Chiapas still faced the problem of a limited trunk network. Prior to the completion of the Huixtla-Comalapa road in 1981 (Loan 968-ME), traffic from the fast-growing Comalapa area had to travel via Tuxtla Gutierrez aad Arriaga to get to Tapachula, a distance of 569 km, as compared with 243 km on the new road. PEMEX and the Federal Electricity Commission (CFE) built their own roads to permit oil exploration in the north and construction of the hydroelectric facilities in the Central Depression. Rural roads money was directed at finishing the State's trunk network, resulting in many low-standard roads with significant traffic volumes. 3.10 Transport investment needs in the state are concentrated in the road subsector. The needs include completing the trunk network, particularly the Valdivia-Mapastepec road (providing a direct connection between the main production areas of the Central Depression and the Pacific Coastal highway to Tapachula) and the Ocosingo-Palenque road; the upgrading of low-standard roads with high traffic, especially in the Central Depression; the modernization of existing federal trunk roads, including widening and rehabilitation; improved rehabilitation and maintenance of existing rural roads; and the extension of the rural roads network to potentially productive areas and outlying communities. In addition, the Government has placed - 11 - strategic importance on the Fronteriza road, a road skirting the Guatemala border through the rainforest area. This road is presently being reassessed on environmental grounds to determine an alignment which will minimize the effects upon environmentally protected areas. These needs, with regard to the federal and state trunk network, are adequately treated in SCT's indicative 1984-1988 investment program, taking into account the overall national budgetary restrictions. Rural road investment needs are discussed in paragraph 4.05. To help to determine future investment requirements for all modes, the Government agreed, at negotiations, to carry out a review of the transport investment priorities in the State and complete a road master plan for Chiapas not later than December 31, 1986. C. Chiapas Road Administration 3.11 The division of technical and financial responsibilities for selecting, designing, executing and maintaining the various roads in Chiapas is complex (Table 3.3) and has developed as a result of the different road investment programs which were started by federal, state and quasi-public entities. The principal road-building agencies include: SCT, through its local state office (Centro SCT); the Local Roads Council (JLC), a state agency for state trunk, feeder (alimentadoras) and rural roads in the CUC/CUD program, a federal revenue sharing program; PIDER, with direct funding from SPP for rural roads in PIDER micro-regions; and other entities such as PEMEX, the national oil company, SARH and CFE which build roads relating to their major investment projects. Coordination is to be provided by COPLADE, and the COPLADE committee of road agencies, with SCT as technical adviser, reviews the overall program to avoid redundancy. Although the existing road network which resulted from the various programs is appropriate, the geographic patchwork of responsibility appears to be causing inefficiencies in supervision and maintenance. The most serious concern is that of the differing maintenance policies and capabilities of the entities. 3.12 As the trunk network nears completion and investments focus more upon upgrading and rehabilitation, the network is being consolidated under SCT and JLC. Consolidation of the rural or tertiary roads program (para 3.16) is also occurring, with SCT concentrating upon community access rural roads (connections between the trunk network and population centers); SARH concentrating upon farm service roads to the fields; and JLC concentrating mainly upon urban roads. Road planning and identification of waorks are generally initiated at the local level by Centro SCT and JLC. For federal trunk roads, the priorities identified by Centro SCT are reviewed in Mexico City, and final budget allocations for specific works are determined by the Directorates General for Planning and for Federal Road Construction. Major federal projects, the Fronteriza in Chiapas, for example (para 3.13), are often initiated at the federal level in Mexico City. Rural road priorities are generally established at the state level, while budget allocations among states are set in Mexico City (para 3.15). 3.13 Federal trunk road investment in Chiapas was reviewed under the Second Highway Sector Project (Loan 2428-ME) and found to be appropriate. The Fronteriza, however, is being built as a strategic road to facilitate monitoring the Guatemalan border and could not be justified solely on economic grounds. Its total cost represents about 2.5Z of the overall Mexican road investment 1984-1988. In 1984, SCT spent about Mex$ 775 million (US$4.4 million) equivalent, excluding the Fronteriza, on trunk roads in - "2 - Chiapas, or 2% of its national construction and modernization budget. The state spent Mex$ 119 million (US$1.0 million equivalent) in 1983, mostly on upgrading works to pave high traffic gravel roads, and these works are expected to be continued in 1984. 3.14 Centro SCT in Chiapas and JLC are effective, adequately staffed, road organizations with substantial experience in road design, supervision, construction and maintenance. The organization of Centro SCT mirrors that of the Subsecretariat of Infrastructure in Mexico City with separate offices for federal road construction, rural roads construction, maintenance, airports, and programing. D. Rural Road Planning, Design and Construction 3.15 Under the various construction programs, about 1,800 km of rural roads were built between 1977 and 1983, excluding SARR roads (Table 3.4). The average annual rate of construction is about 250 km per year, of which about 200 km pertain to SCT and PIDER. The method of selection of road projects has been largely ad hoc, and, although each federal program on paper has specific objectives for selecting roads, in practice, the roads proposed by the local communities are distributed among the agencies, depending mainly upon available budgets and, in the case of PIDER, whether they are located in a PIDER micro-region. Judgment is used to eliminate proposed roads which serve very small farm clusters (e.g., less than 350 affected inhabitants) and/or which are very costly. Except for SARR roads, Centro SCT must give its approval to each agency's program, and is usually concerned that acceptable design standards will be applied, because SCT will later have maintenance responsibilities (para 3.22). The final decision for all agencies rests with COPLADE, the State's planning and budgetary review committee, on which the Governor serves as chairman. Although SCT and COPLAMAR, in Mexico City, review the rural roads list for the COPLAMAR projects, the review appears to be cursory. 3.16 While the Federal Government has taken action to consolidate the various rural roads programs, so that SCT will have primary responsibility for construction and COPLADE for identification, the problem remains that there is no consistent methodology or set of criteria for selecting roads and establishing priorities. Initially, the road needs of Chiapas were so great that the most important sections were relatively obvious and the Bank's review of many of the roads which were built showed that, in general, the selections were logical and the design standards appropriate. As the road needs turn to lower volume access roads to the more dispersed villages and farm clusters, the local road requests still exceed the budget levels, and the feasibility and priority rankings are not as obvious. If decentraliza- tion is to be pursued, the need for reasonable selection criteria will be even more crucial in order to countermand the local political pressures which will be brought upon the Governor, COPLADE and the road agencies. What is needed is to standardize, formalize and monitor the collection of social and economic information, to establish procedures for the processing of that information and to set minimum social and economic criteria for the final selection of projects (paras 4.10-4.14). 3.17 Centro SCT has had long experience in planning, design and construction of rural roads of the type and extent included in this project, in administering associated construction contracts and in carrying out such - 13 - works through force account methods. SCT has maintained a sufficient number of qualified staff who, together with local consultants, produce satisfactory results of high professional standard. Rural roads constructed by SCT are designed to Class E standards with a 4 m wide platform (Table 3.5). These design standards are reasonable, and they are not strictly adhered to if they would lead to excessive costs in difficult terrain. Average construction cost per km in 1985 prices is about US$25,000 equivalent, which is appropriate considering the difficult terrain, soil and climatic conditions. There is, however, a lack of consistency between SCT and SARH rural road design standards. In the interests of economy and efficiency, it is important that rural roads constructed by SCT and SARH be designed, constructed and maintained to the same standards. In order to promote this objective, the Government confirmed at negotiations, that it will, by December 31, 1987, carry out a review of the construction and maintenance practices regarding rural roads in the state under the jurisdiction of SCT and SARH, with a view to further rationalizing rural roads designs, specifications, construction methods and maintenance practices, and assignment of maintenance responsibilities between agencies. 3.18 As with the national rural roads program, the rural roads program in Chiapas, in the early 1970s, was executed mainly by force account using labor-intensive methods 5/. The emphasis of the program gradually changed, and, by the late 1970s, most roads were built by contractors using light equipment. Part of the reason behind this shift was the quickly increasing cost of labor as the economy surged, compared with the slower increase in equipment and fuel costs. With the economic recession and the maxi- devaluations in 1982, the trend was reversed again, and the Government focused upon job creation, particularly for rural areas. In 1983, SCT began to distinguish between those roads which could be carried out by labor- intensive methods because of terrain as well as local labor availability, and those roads which required equipment or a mixed technology. In Chiapas, about one-third of the works in 1983 were built using labor-based methods. 3.19 It is estimated that wages for unskilled labor comprise 40-50% of total costs using labor-based methods versus less than 15% using equipment- based methods. SCT has considered the possibility of using contractors to carry out labor-based construction, but the approach does not appear feasible because of the large amount of under-utilized equipment available and the time constraints of the private contractor. Government-supervised force account works can be flexible in terms of work schedules and manpower, allowing workers to serve in shifts, or only during certain months of the year, to avoid conflicts with planting and harvest schedules. Although, in 1983, labor-based works averaged 80% of the cost per km of equipment based construction, if the value added tax is excluded and the terrain conditions are taken into account, the average financial costs for equipment-based construction may, in fact, be lower. In addition, in most cases, labor-based construction methods, as practiced in Chiapas, result in a product of lower quality than does equipment-based construction. Thus, labor-based methods are preferred only in selective cases. SCT needs to 5/ The original program was called Caminos de Mano de Obra or "Labor-Based Roads." - 14 - provide more guidance to field engineers, through updated manuals, in determining the comparative costs of labor versus equipment-based construction and in selecting the appropriate technology for specific works, considering possible tradeoffs between financial costs and social and economic gains (para 4.08). 3.20 For equipment-based, or so-called "mixed" construction, SCT awards contracts based on local competitive bidding (LCB). The contractors are usually locally based firms, or national firms with branch offices in Chiapas. All works are based upon unit price contracts, whose terms include provision for price escalation and are generally satisfactory. Contractor capacity has been ample, and bids have been reasonable. 3.21 Compaction equipment (rollers) is almost never used in the construction of rural roads. The only compaction is done by the passing of the contractors' equipment and vehicles. With labor-based construction methods, the normal practice is to employ compaction with manual rammers and similar equipment only where critically needed (fills around culverts, parts of steep slopes, etc.). Current practice should be modified to use compaction equipment wherever it may be of importance for the durability of the road, since its use would significantly reduce washouts and subsequent maintenance needs. The increase in construction costs from using compaction equipment on the subgrade and the surface gravel layer would increase the construction cost by no more than about 5-7%. SCT would provide guidance to field engineers, through updated manuals, in the use of compaction equipment in this connection, and Centro SCT would carry out some pilot project exercises in Chiapas under the project, to improve, inter alia, compaction techniques (para 4.08). E. Rural Road Maintenance 3.22 Presently, Centro SCT Chiapas is responsible for maintaining about 4,200 km of rural roads, including the CUD and PIDER roads, and 1,600 km of federal roads. JLC maintains a total of 1,700 km of state and feeder roads, of which 700 km are paved, 800 km are gravel roads and the remainder are earth roads. Centro SCT administers the maintenance of roads through its Directorate for Maintenance (DGC), with five district offices (residencias) for federal roads and four district offices for rural roads, each further divided into three subdistricts. JLC carries out its maintenance activities through 12 district offices. A number of roads built by other agencies are receiving sporadic maintenance. SARH has also proposed the transfer of 500 km of its roads to SCT for maintenance. Under the project, the Government will review construction and maintenance practices regarding rural roads in Chiapas and develop a plan to allocate responsibilities in order to ensure effective maintenance (para 3.17). 3.23 Rural road maintenance is lacking in Chiapas as well as nationwide. Since 1971, the Government's attention has been directed toward the construction of rural roads with minimum design standards. With over 80,000 km built in a decade, the requirements for maintenance, particularly periodic maintenance, spot improvements and rehabilitation have accumulated rapidly. Field inspections of the Chiapas network confirmed the declining condition of the roads. In certain cases, new construction works cannot be initiated until existing sections, which provide access to the new works, are rehabilitated. The basic deficiency is inadequate budgets. The SCT maintenance budget for Chiapas, in 1983, was equivalent to US$300 per km, an increase of 88% over the 1982 budget, and was still not sufficient to meet - 15 - 501 of the maintenance needs. It is estimated that, in Chiapas, the average annual cost of appropriate routine and periodic maintenance is about US$875 equivalent per km, of which about 50% represents periodic and emergency maintenance (Annex 2). Taking into account deferred needs, it is expected that average budgetary levels per km should be even higher. The Government recognizes the problem and, for 1984, budgeted Mex$ 285 million (US$400 per km equivalent) for SCT in Chiapas. On a national level, SCT has projected substantial real increases in its 1985-1988 investment program for rural road maintenance and rehabilitation, reaching about US$750 equivalent per kn by 1988. During that period, the Government is also expected to permit more flexibility in the use of the rural roads construction budget in order to meet deferred rehabilitation requirements. At negotiations, the Government confirmed that it will provide adequate resources to meet rural road maintenance requirements in Chiapas, including annual routine maintenance of all rural roads within the SCT network. In addition, sufficient funds will be provided to carry out an average of 350 km per year of rehabilitation and spot improvements in 1985-1987, gradually increasing to 500 km per year by 1988. This provision would cepresent an annual budget of US$700 per km equivalent by 1988. 3.24 As maintenance budgets are increased, it will also be necessary to improve road inventory and project identification procedures. A new rural road inventory format has been agreed to with SCT's Directorate for Maintenance and is being applied in selected states (Annex 3). In Chiapas, the initial coverage for the road inventory has now been completed. At negotiations, the Government agreed to update the inventory on an annual basis. 3.25 Each SCT district office has four pick-ups and three dump trucks at its disposal . In addition, two districts have one front-end loader and a small grader, and one district has a small bulldozer. The SCT equipment (with an average age of 6-7 years for vehicles, about 10-12 years for other equipment) is old, about half being beyond what is considered a normal economic life. SCT is trying to keep the equipment working much longer through an extensive equipment reconstruction program. The present availability rate of the equipment is only about 602, and Centro SCT's main workshop in Tuxtla Gutierrez is only able to carry out preventive maintenance, with major repairs being performed in private sector workshops. Subject to the availability of necessary budgetary allocations, sufficient equipment rehabilitation work will be carried out over the next two years to bring the availability rate to about 80%. Nevertheless, SCT, to a large extent, will continue to rent equipment from the private sector at fixed rates. No difficulty or inconvenience is apparent from this system, and no major increase in the fleet is recommended while equipment is available for renting at reasonable prices. 3.26 Routine maintenance is, whenever feasible, carried out in collaboration with the municipality/community benefiting from the road. In that case, an agreement (convenio) is entered into between the two parties. This agreement specifies that the particular road (section) will be included under the SCT maintenance program and that the community will participate with unskilled labor either without pay or, as is generally the case, at a rate corresponding to 50% of the minimum salary. In an increasing number of cases, it is not possible to reach an agreement, either because the community may not perceive that it is a main beneficiary of the road or because there - 16 - are more profitable job opportunities in the neighborhood (e.g., near Tuxtla). In such cases, SCT would normally still accept the maintenance responsibility. Budgetary allocations would need to reflect such situations. F. Rural Transport Services 3.27 Transport services in Chiapas are provided largely by the private sector. The registered vehicle fleet in the state is estimated at about 60,000, or one vehicle for every 35 inhabitants. This motorization rate is one of the lowest in Mexico. Public transport services are provided by more than 3,000 vehicles, about evenly divided between automobiles (taxis), buses, and trucks (including the popular "combi" or light mixed passenger/freight vehicle). Input distribution and collect'on of crops are done largely by federal agencies. However, their trucks generally operate only on the improved road network. Seasonal goods transport on the unimproved network is accomplished by small private operators whose vehicles are registered for own-account transport. Non-motorized transport (carts and pack animals) is still important in many areas. 3.28 Providers of public transport on the federal network are registered with SCT's Directorate General for Road Transport (DGAF), the federal regulatory agency. There are over 60 such enterprises registered in Chiapas. Most are large companies owning substantial numbers of trucks or buses. Private transport of freight over federal highways also requires a permit from DGAF. Transport on state and rural roads is regulated by the State Transit Authority (TDE). Authorized freight tariffs and passenger fares on rural roads take into account variations in road surface type, so that the benefits of rural roads improvements involving a change in surface type are at least partly passed on to consumers. Rurol taxi services are essentially unregulated. Many own-account truckers also informally provide freight and passenger transport services. 3.29 Institutionally, the transport services sector appears strong and adequately organized. Regulatory solutions to problLms on the state and federal highway network are sought through a participatory planning process in which the various interest groups involved are represented. However, little is known about the transport services provided on unimproved or recently improved rural roads, and how these services may affect the way in which the benefits of road improvements are passed on to rural residents. To fill this gap, it was agreed at negotiations that the Government will carry out a study of rural transport services to be completed by December 31, 1986. Draft terms of reference are provided in Annex 4. IV. THE PROJECT A. Project Origin and Objectives 4.01 To help define a comprehensive development strategy for Chiapas, a multisectoral Bank mission was sent to Mexico in late 1981, at the request of the Government, and reviewed the social and economic potential and problems of the state. The recommendations of the joint Bank/Government working group formed the basis for the Chiapas Development Program (Plan Chiapas) officially adopted by the Government in May 1983. Two priority elements were - 17 - selected which are crucial to the initial stages of the Program and which provided an appropriate instrument for Bank financing: agricultural development and rural roads. Two projects, the Chiapas Agricultural Development Project and the Chiapas Rural Roads Project, have thus been prepared in parallel. 4.02 The proposed Rural Roads Project would support the development of Chiapas through the implementation of a rural roads construction, rehabilitation, improvement and maintenance program coordinated with simultaneous agricultural and other social and economic development efforts. The project would provide for: (a) the construction of about 1,000 km of rural roads; (b) the rehabilitation and improvement of approximately 2,000 km of existing rural roads; and (c) related consulting services for detailed engineering and technical assistance. The selected roads would provide improved access to rural areas to reduce costs and increase production and/or to population centers which require improved access for the efficient provision of social services and for better access to employment opportunities. Where appropriate, the project would promote the use of labor-based construction techniques to offer increased employment opportunities for unemployed and underemployed local residents. 4.03 To ensure the full realization of expected benefits, the Rural Roads Project would also focus upon Government efforts to: (a) strengthen state planning and decision-making capabilities in Chiapas; (b) improve planning, programing, construction, rehabilitation, improvement and maintenance programs for rural roads in Chiapas; (c) assess rural transport services for freight and passengers in Chiapas; and (d) extend lessons learned in Chiapas to other states. B. Project Costs 4.04 The total cost of the project is estimated at US$41.7 million equivalent, net of taxes and including price contingencies of about US$8.3 million equivalent and foreign exchange costs of about US$10.5 million as shown in the following tabulation and detailed in Table 4.1. Physical contingencies are not estimated separately because the costs are calculated on an average per kilometer basis. The proposed loan of US$22.0 million would be made to NAFINSA, with SCT as the executing agency. SCT would act in coordination with COPLADE to carry out some technical components (para 4.09). The remaining funds required are expected to come from annual federal budgetary allocations. The project would require about five years to execute, with a completion date of June 30, 1990. The cost of new rural road construction is estimated to average about US$25,000 equivalent per km in 1985 prices, derived as a weighted average of labor- versus equipment-based construction for Class E roads (Table 3.5). Rehabilitation and improvement costs are estimated to average US$3,400 equivalent per km, with the initial roads costing more because of the lack of prior maintenance. Consulting services and technical assistance costs are estimated (excluding price contingencies) at about US$1.5 million equivalent including approximately US$75,000 equivalent for tools, equipment and other associated expenses. - 18 - Project Cost Summary (US$1.00 - Mex$ 205) Foreign Loan 1/ Exchange Amount Item Local Foreign Total (%) (US$ million) Rural Road Construction 3,845 1,282 5,127 25 12.5 (Mex$ million) Rural Road Rehabilitation/ Improvement 1,058 352 1,410 25 3.4 (Mex$ million) Consulting Services and Technical Assistance 216 92 308 30 1.5 (Mex$ million) Total Base Costs (Mex$ million) 5,119 1,726 6,845 25 - Total Base Costs (USS million) 25.0 8.4 33.4 25 17.4 Price Contingencies 2/ (US$ million) 6.2 2.1 8.3 25 4.6 Total Project Cost (US$ million) 31.2 10.5 41.7 25 22.0 C. Rural Roads Construction Program 4.05 COPLADE, together with SCT, compiled a listing of about 2,500 km of rural roads based upon requests made by local communities. It was decided that the average annual construction program should consist of about 200 to 250 km per year, with a total of 1,000 km for the project period, based on the historical average of about 250 km per year for Chiapas, and an appropriate overall mix of road investments in Chiapas by SCT and other agencies. Priority subprojects were then selected, based upon population density, construction costs and transport needs. An initial 269 km (Map 18421) were confirmed for inclusion under the project through economic or social evaluations. Subprojects for subsequent years would be selected on the basis of agreed upon procedures (paras 4.10-4.15). The first year's construction program, however, would comprise only 120 km because of difficulties in arranging for the timely completion of detailed engineering. 4.06 The initial 269 km comprise 31 subprojects ranging in cost from US$12,000 equivalent to US$51,000 equivalent per km, or an average of US$25,000 per km (in 1985 prices), and they serve population centers of from 100 to 6,100 people (Table 4.2). The lengths of the initial subprojects 1/ Using 50% disbursement rate for civil works and 100% for consulting services and technical assistance. 2/ Assumes Inflation rates of 5% in 1985, 7.5% in 1986, 8% in 1987-1990 and 5% thereafter. - 19 - range from less than 1.0 km to 18 km, with an average of 8.7 km. Detailed engineering is being prepared by SCT, for the first 120 km of works, comprising the first year's construction program. A number of identified subprojects (52 km) have been postponed, pending an environmental review, because they are located in the ecologically sensitive area of Montebello Park (para 4.20). D. Rural Roads Rehabilitation and Improvement Program 4.07 Centro SCT in Chiapas initiated an inventory of the rural roads network under its jurisdiction, focusing on the road segments in poorer condition which district engineers consider as priority candidates for rehabilitation, spot improvements and/or periodic maintenance works. A field review showed that the works to be included in the program would vary in cost from approximately US$3,000 equivalent per km to about US$4,900 equivalent per km. As the higher cost, seriously deferred, works are completed, subsequent subprojects should cost about US$3,000 equivalent per km. The initial program identified totals about 300 km (Table 4.3). At the time of negotiations, the Government confirmed that the inventory is completed. The first year's construction program for rehabilitation and improvement works will comprise about 250 km. The annual workload should increase gradually to about 500 km per year by 1988, with a total of 2,000 kms during the project period. E. Consulting Services 4.08 The project includes consulting services for detailed engineering of rural roads to be constructed. Supervision of construction, however, will be carried out by Centro SCT, utilizing their own staff. The project also provides consulting services for technical assistance to SCT, including 50 man-months of domestic and foreign consulting services, to th. extent needed, to support the following: * (a) review of transport investment priorities in the State, including the preparation of a road master plan for Chiapas (12 man-months) (para 3.10); (b) study tours within Mexico and abroad and provision of seminars at SCT headquarters in Mexico City on rural road planning, construction and maintenance (8 man-months); (c) carrying out of appropriate pilot projects in Chiapas using non-standard technology and equipment in order to improve rural road construction and maintenance techniques (20 man-months); and (d) preparation of revised manuals of rural road construction and maintenance practices, as well as new manuals and guidelines, where justified (10 man-months) (Annex 5). 4.09 '...e work described in paragraph 4.08 preceding would be the primary responsibility of SCT, in coordination with COPLADE, mainly utilizing their own staff. However, since sufficient capability and the appropriate expertise are not available in these agencies in Chiapas to the extent needed to properly carry out all the studies and other work planned, domestic and/or foreign consultants would be used, when needed, to complement and amplify - 20 - in-house capabilities and would be the elements financed through the proposed loan. During negotiations, agreement was reached on terms of reference for studies included in the project. F. Economic Evaluation 4.10 The problem of poor access to a large proportion of the state's rural population has been well documented, as have been the benefits generated by previous rural road construction works in Chiapas (para 2.10). The Plan Chiapas provides for integration of the proposed rural roads construction program with a series of simultaneous social and economic development programs, including the proposed Chiapas Agricultural Development Project. Because of its comprehensive geographic coverage, the types of benefits to be generated by the Rural Roads Project would vary in accordance with the specific needs of the communities to be served. For most of the subprojects, the benefits from lower transport costs, more reliability, and better access to services, technical assistance and farm inputs would be realized in the form of improved use of existing cultivated lands, through reduced losses and higher yields, as measured by the incremental net value of additional production. Similarly, it is expected that, in many cases, the area of cultivated land would be expanded. In addition, other benefits, more difficult to quantify, should be realized as outlying small communities, particularly indigenous communities with limited production potential, become better integrated with the main road network and receive better access to social services (e.g., education and health services) as well as to job opportunities in other areas with greater economic potential. 4.11 With a few exceptions, the road subprojects proposed for construction in the first year lie outside the primary zone of influence of the Chiapas Agricultural Development Project. The road network for the areas affected by that project are either largely in place (needing rehabilitation in some instances) or would be provided as a project component or as a byproduct of the drainage structures to be built. The zones of influence under the Rural Roads Project represent the next geographic areas for development, where access must be provided before agricultural development benefits can be realized. 4.12 For the economic evaluation of new road construction, a staged screening methodology has been applied to the initial subprojects (Annex 6). For subprojects which do not pass the first stage screening (estimated rates of return of less than 12% using minimal benefit assumptions), a more detailed analysis is conducted. Of the initial proposed subprojects of 442 km, 269 km have been confirmed as eligible for financing, with about 118 km passing the first stage screening and 132 km passing the second stage screening, which, together with about 19 km of socially justified roads (paras 4.13-4.14), comprise the initially identified eligible subprojects. Estimated economic rates of return were generally about 20%, and the analyses were based on the following: (a) the analysis period was 20 years; (b) road construction, maintenance and rehabilitation costs were estimated for the 20-year period; - 21 - (c) unskilled labor costs for labor-based and mixed technology construction works were adjusted by 50% to reflect the opportunity cost of such labor in the seasons of slack agricultural activity; (d) population, existing production and potential cultivable area were estimated for each subproject's zone of influence by the related Government agencies; (e) projected yields, costs, parallel investments and prices were derived from farm models relating to the Agricultural Development Project, with more conservative assumptions applied to the road subproject's areas in terms of timing and ultimate target yields; (f) the three principal affected commodities are corn, coffee and cattle-related products with corn benefits reflected in higher yields and increased cultivated land, coffee benefits reflected in rehabilitetion of existing areas, and cattle benefits reflected in improved beef output per hectare as well as increased milk production; and (g) other commodities such as lumber, fruit and fish would be incorporated in future subprojects where they represent substantial benefits. 4.13 Although the principal criterion for accepting a road for financing under the project is the effect upon production increases, it has been apparent, through the preparation of the project, that there are areas of Chiapas with high population concentration but with limited agricultural or other natural resource potential. Particularly, in certain areas of the state, such as Los Altos, roads are planned as part of an effort to integrate remote and/or indigenous communities with the rest of the state and the country. The roads are one element in a coordinated program to improve the standard of living of these comunities without seriously undermining the local culture. Many of the benefits of these roads are difficult to calculate, such as access to health and educational services and to employment opportunities outside the immediate zone of influence. The beneficial impact of such roads has been documented in prior research conducted in Chiapas (para 2.10). 4.14 For the reasons stated in paragraph 4.13, a further review of proposed subprojects with estimated rates of return below 12% is to be carried out to determine whether substantial populations in areas with little production potential would benefit in terms of access to social services and employment. Such roads would be considered as "social" roads. The number of roads with a predominantly social justification to be financed under this project should not exceed 15% of the construction program, and each such road should not exceed a construction cost of US$450 per person served. This indicator is based on assumptions regarding potential increases in community earnings through outside employment, some increases in the value of local production, and the potential magnitude of other social benefits compared with the average cost of rural road construction (Annex 6, paras 9-11). For an average 8 km road, the minimum population required would be 440 people with higher populations required for higher cost or longer road sections. For the initial program, two subprojects totaling 19 km are included, based on a social justification. - 22 - 4.15 For rural road rehabilitation, no economic evaluation would be required because of the low cost of the works. But a technical evaluation of existing conditions would be undertaken and the utilization of the existing road would be confirmed by providing estimated daily traffte counts as part of the road inventory procedures (para 5.03). G. Project Beneficiaries 4.16 The intended beneficiaries of this project are rural residents in the state of Chiapas who do not already have adequate road access or whose road access has deteriorated. The areas affected are expected to be predominantly small farms or ejidos. Typically, households in such areas of Chiapas, for which agriculture is the main source of income, earned about US$135 per capita in 1980. A significant proportion of the beneficiaries are expected to be from the large, ethnically distinct indigenous population. With regard to the initial 31 subprojects (269 km), the total affected population would be about 40,000 people. While 23 subproject - -eas have primary education facilities, only seven have secondary school facilities. Only three of the areas have health care facilities, four areas have electricity and five areas have piped water. H. Social and Ecological Considerations 4.17 Chiapas is a uniquely sensitive state, from a social, ecological and political point of view, because it contains a high prop:rtion of indigenous inhabitants and ecological reserves of world significance, and it has a permeable border with Guatemala. Chiapas also contains many micro-regions, with varying potential for economic development, which could help to serve national objectives for agricultural production. 4.18 The impact of rural road improvement on indigenous inhabitants would be generally positive, as has been shown by earlier rural road construction in the state. Besides the direct benefits to those employed in construction, benefits have included greater access to health services and education, greater commercialization of agricultural and craft products, access to new agricultural lands, ar.d greater mobility of unskilled labor. The rapid expansion of transport services following rural roads improvements has allowed indigenous entrepreneurs, with state support, to enter the transport sector. Furthermore, for many generations, the indigenous inhabitants of Chiapas have provided seasonal farm labor for the producers of commercial crops, as well as maintaining their own small subsistence plots. This pattern has involved many men in temporary or seasonal long-distance migration from their homes in the highlands to the cattle ranches of the Central Depression and the coffee plantations of the Soconusco regions. Small farmers and landless households depend upon wage labor which requires daily or weekly travel, often to several different sites. The labor market in Chiapas is characterized by a high degree of mobility in response to the changing structure of opportunities for unskilled labor. Rural roads construction will enhance the effective use of local labor by expanding the radius of travel from home to work, as well as by generating new employment opportunities both directly (about 3.5 million man-days in road construction) and indirectly (through induced agricultural production). - 23 - 4.19 Chiapas contains a number of unique ecological reserves which are important in terms of wildlife and plants, as well as for watershed management, soil conservation, water quality, fisheries and potential tourism. The two federally protected areas are: the Lacandon Forest Biosphere Reserve, the last humid tropical forest of significant size in Mexico, located in eastern Chiapas; and the Lagunas de Montebello National Park, which contains 80 lakes among pine and oak forest with subterranean rivers and caves, also located in eastern Chiapas. The impact of rural road improvements upon the physical environment is minimized by the design standards and construction methods, which are based upon the principle of providing nccess to existing rural communities at minimum cost, while avoiding d43turbances to the natural terrain and excessive future road maintenance costs. Alignments generally follow existing trails, and cuts and fills are kept to a minimum. Labor-based methods are used wherever feasible, supplemented by light equipment when necessary. Natural vegetation is removed only if needed to assure adequate sight distances and drainage. Protective measures are taken against erosion, including the use of retaining walls and slope planting. 4.20 Mexico has established an environmental review process applicable to all construction works, with the Secretariat for Urban Development and Ecology (SEDUE) acting as the responsible agency. At negotiations the Government confirmed that a subproject would not be considered eligible for financing under the project until its SEDUE clearance has been issued. Data on the initial candidate subprojects under this project have been submitted to SEDUE, and all but seven of the proposed roads have received clearance. The seven roads which require further study are located in the Lagos de Montebello National Park area, near the Guatemalan border. This area contains several population centers to which the Government wishes to provide access, both to serve the needs of rural residents and to organize and direct the flow-of refugees across the Guatemalan border. The Government is preparing land use plans for this and other ecologically sensitive areas in Chiapas. I. Project Risks 4.21 The economic evaluation assumes an incremental change in farm production patterns as a result of road improvements. While this increment has been estimated conservatively, there is a risk that the expected yield increases and/or increases in area cultivated wouln not occur if technical assistance, seeds and fertilizer, and credit fail to reach the majority of farmers. This risk would be miilmized by the actions proposed under the extension component of the proposed Chiapas Agricultural Development Project. This component is statewide in concept and is not limited to the agricultural subproject areas. Agricultural extension agents assigned to the areas to be served by improved rural roads have participated in the collection of data for the economic evaluation, including the identification of complementary investments needed in agriculture. COPLADE has the responsibility of making sure that these investments are included in the budgets of the respective agencies and, through its monitoring and evaluation activities, determining that needed services are delivered in a timely fashion in the road-impact areas. - 24 - 4.22 Additional benefits are derived from direct employment on the project. There might be a risk that the project would fail to construct the planned roads, or that the choice of technology might shift toward more equipment-based methods during implementation, thus lessening employment benefits. The first risk would be minimized by the extensive preparatory work done by SCT and COPLADE staff and the scope of the project, which takes into consideration local capacity for execution and historic construction levels. The second risk would be minimized by the development of manuals for determining appropriate construction technology, i.e., equipment-based versus labor-based methods (para 4.08, Annex 5). 4.23 Finally, benefits would accrue to the rural population, and especially to the indigenous population which occupies unproductive land, through improved access to employment opportunities generated under the Chiapas State Development Plan. The risks here are that new employment opportunities may not arise, or that they may be taken by other people, particularly neighboring Guatemala. To minimize the first risk, this project has been prepared in close coordination with the Bank-financed Chiapas Agricultural Development Project, which is expected to generate the equivalent of 15,000 full-time jobs and to enhance agricultural production throughout the state. No mitigating measures for the second risk have been proposed at this time. V. PROJECT IMPLEMENTATION A. Subproject Selection, Preparation and Evaluation 5.01 Candidate rural road construction subprojects are generated through written petitions (solicitudes) submitted to SCT or state officials by community representatives. SCT follows up on these petitions by sending a promotor to the community to discuss the road, to help form a local committee responsible for organizing community participation and to identify local social, economic and physical resources and constraints. SCT will, on an annual basis during the project, prepare preliminary cost estimates for candidate subprojects and then pass the subproject information to COPLADE. COPLADE and SCT, with the assistance of SARR, will carry out the economic and social evaluation in accordance with the agreed upon procedures (Annex 6). Road subprojects with a minimum estimated economic rate of return of 12% will be considered eligible, and summary data sheets will be submitted to the Bank for review and comment. If accepted, SCT will then prepare final engineering in accordance with agreed upon design standards. 5.02 Road construction subprojects in less productive areas with substantial population, but which do not meet the minimum economic criteria, will be reviewed on the basis of social benefits. The maximum construction cost per person served should not exceed US$450 and the total cost of such roads should not exceed 15% of the rural roads program. These limits were agreed with the Government at negotiations. Summary data sheets on these subprojects will be submitted to the Bank for review and comment. If accepted, SCT will prepare final engineering in accordance with the agreed upon design standards. - 25 - 5.03 For rural road rehabilitation subprojects, it was agreed at negotiations that SCT would carry out a road inventory on an annual basis in accordance witt agreed upon procedures and would select priority rehabilitation and improvement works from that survey and from discussions with field engineers. The utility of these roads will be confirmed through estimated traffic counts and the costs estimated. A summary program will be presented to the Bank annually (by November 30 of each year) for review and comment and, after approval, financing will be provided for a portion of that program's budget. B. Procurement 5.04 All civil works included in the project would be executed by SCT. All procurement would be carried out in accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (August 1984). In the case of rural roads included in the project, the works are of two general types, construction and rehabilitation. The packages of construction works that would be carried out by contractors are relatively small in value, would employ light or minor quantities of equipment and are scattered geographically throughout the state. Foreign contractors, therefore, are unlikely to be interested in this type of work. Special efforts would probably be necessary to interest domestic contractors from states some distance from Chiapas. The rehabilitation works would be carried out, with rare exceptions, by SCT through force account or mano de obra methods. In some cases, small local contractors would be used to execute minor works, to provide equipment or to act as labor contractors. For these reasons, civil works that would be contracted would be tendered using LCB. 5.05 Procurement procedures used in Mexico were reviewed in detail and were found to be generally satisfactory. A working paper on LCB procedures in Mexico is in the project file (Annex 7). Procurement in Mexico is carried out in accordance with the new Public Works Law which became effective on January 1, 1984. During negotiations, agreement was reached with the Government that certain procedures now followed would be modified in order to agree more closely with the Bank's procurement policies. In particular, the time for prequalification of contractors and for bid advertisement and preparation will be increased in order to increase bidding opportunities and permit more careful bid preparation. The Government also agreed that contract awards should generally be made to the lowest evaluated bidder and that information concerning bid opportunities should be widely disseminated. 5.06 Civil works for road construction would be grouped into contract packages ranging in size from US$75,000 to US$700,000 equivalent in order to realize economies of scale while, at the same time, providing a range of small to large sized contracts that could be executed by local contracting firms. Contractors would be prequalified using SCT's standard procedures which are acceptable to the Bank (Annex 7). Contractors would be free to choose their own construction methods, subject to their work complying with the technical specifications. While use of labor-based methods to the maximum extent possible would be encouraged, contractors would be allowed to use the most economical mix of mechanical equipment and labor. 5.07 The Government would acquire all necessary rights-of-way and rights-of-access and would take the necessary action to complete rights-of-way acquisition prior to awarding contracts in the affe,ted areas. - 26 - During negotiations, assurances were obtained from the Government that all necessary rights-of-way for the first year's construction program have been obtained. 5.08 The rehabilitation works included in the project would be carried out by SCT using force account methods, a minimum of equipment and a high percentage of local labor. These works usually consist of spot repairs or improvements and deferred periodic maintenance, and their average cost is about US$3,400 per km. 5.09 Consulting services for detailed engineering of rural roads to be constructed and for technical assistance to SCT would be obtained in accordance with the Bank's Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency (August 1981). About US$1.1 million equivalent, of consulting services would be provided for detailed engineering for the rural roads to be constructed (excluding price contingencies). About US$400,000 equivalent (excluding price contingencies) would be needed, to provide technical assistance to SCT and COPLADE together with necessary equipment and supplies for carrying out the pilot projects for improvements in rural road construction and maintenance. Mostly, individual domestic consultants would be engaged to assist Centro SCT in carrying out the work, with foreign consultants engaged only to provide expertise not available in Mexico. 5.10 For contracts which are estimated to be less than US$500,000 in value, and in view of Centro SCT's capabilities in planning, design and construction of rural roads (para 3.17), Centro SCT would, after agreement with the Bank on standard bid documents and tender procedures, prepare bid documents and final cost estimates, advertise for bids, open and evaluate tenders, and award and sign contracts without prior review of these actions by the Bank. After the signature of each contract, SCT would send the Bank two conformed copies of the contract, together with the bid evaluation report indicating the award decision and the reasons therefor. The Bank would review this information and indicate acceptance if it were found to be satisfactory. The Bank could, if acceptable procurement procedures were not followed, reject the contract and cancel the related loan amount. In case higher than anticipated bid amounts are received which would cause the project's economic rate of return to be unacceptably low, consultations between the Bank and the Government would take place with a view toward modifying the design or reducing the standards used in order to bring the costs to an acceptable level. For other contracts, the procedures set forth in Appendix 1 of the Bank's Guidelines for Procurement Under IBRD Loans and IDA Credits (August 1984) will be followed. C. Disbursements 5.11 Expenditures for civil works included in the approved program and carried out under the project and for consulting services may be reimbursed from the Special Account on the basis of Statements of Expenditures (para 5.16). Disbursements would be on the basis of 50% of total expenditures (excluding value added taxes, IVA) for civil works (rural road construction, rehabilitation and improvement) and 100% of total expenditures (excluding IVA) for consulting services for detailed engineering and for technical assistance, including necessary tools, equipment and supplies. - 27 - 5.12 The foreign exchange component for civil works is estimated to be about 25% of total costs (excluding IVA). For consulting services, foreign exchange costs are estimated to be about 30% of total costs (excluding IVA). Following Bank policy for Mexico, disbursements for civil works would be made at a rate of 50% of total net costs, thereby financing up to 33% of local currency costs. For consulting services, disbursements would be on the basis of 100% of total costs (excluding IVA), for both foreign and local currency expenditures. 5.13 Standard disbursement profiles, based on the usual type of project lending, prepared for Mexico and the Latin American region, show that, on the average, a seven-to-eight year period is required to fully complete and disburse transport projects. Because of the time-slice nature of this project, the fact that it is made up of many small road sections being built to a relatively low standard that do not require extensive pre-construction preparation, and the fact that the first year's program will be completely prepared prior to Board presentation to permit an early start, a disbursement period of six years is considered adequate. On the basis of the project implementation schedule (Table 5.1), a schedule of estimated disbursements (Table 5.2) has been prepared. Based on this schedule, the closing date for the loan would be June 30, 1991. 5.14 For civil works carried out by SCT using force account methods, disbursements from the Loan Account would be made (replenishing the Special Account, para 5.16) on the basis of statements of expenditures which are based, in turn, on certified statements of works carried out and monies expended, using SCT's normal methods of accounting for such expenditures, which have been reviewed and found to be satisfactory. Records of work performed and expenditures made would be kept on file by SCT, audited annually (para 5.17) and made available for periodic review by Bank staff. 5.15 SCT is proceeding with the preparation and execution of the first year's construction program, first implementing those subprojects that would be executed on a force account basis. Between July 1, 1984 and the anticipated date of loan signature, approximately 80 km of new construction and 150 km of rural road rehabilitation and improvement works are expected to be completed. On this basis, the loan would include retroactive financing of up to US$2.2 million for expenditures included in the approved program that are incurred after July 1, 1984 but before the date of loan signature. D. Special Account 5.16 In order to reduce the interval during which SCT would finance the Bank's share of project costs with its own resources, the Government may request the Bank to make advance payments from the loan account into a Special Account, to be opened in US$ by NAFINSA and which would be available for reimbursing SCT, through NAFINSA, for the Bank's share of the project cost. The total amount in the Special Account would be that required for project execution, but would not exceed US$2.0 million. NAFINSA would be entitled to make withdrawals from the Special Account in pesos at the exchange rate applicable on the day upon which payments were incurred on Bank-approved contracts and rural roads investments and on Bank-approved consultant contracts and equipment purchases for technical assistance purposes, if such payments took place within 90 days before the withdrawal request. Otherwise, withdrawals will be made at the exchange rate prevailing - 28 - on the day of the withdrawal from the Special Account. The withdrawal applications would be on the basis of statements of expenditures covering the payments made for these specific contracts and works executed in these specific programs respectively. Supporting documentation would not be submitted to the Bank, but would be retained by SCT; it would be made available for inspection during audits (para 5.17) and project supervision missions. The Bank would replenish the Special Account, at the request of NAFINSA, upon the basis of the withdrawals made. At negotiations, agreement was reached on the terms and conditions of the Special Account. E. Auditing 5.17 Under the project, the Bank would require two types of audits: an annual audit of the Special Account and an annual audit of the accounts of SCT upon which the statements of expenditures are based. Procedures have been agreed to between the Government, NAFINSA and the Bank which would govern the auditing of all Special Accounts established for loans with NAFINSA. The external auditor for NAFINSA would carry out the required audit each year. These procedures were confirmed at negotiations. With regard to the auditing of SCT accounts, SPP will carry out the control and verification of accounts and will report on such verification annually. There is also a General Directorate of Control in SCT, independent from the operational departments, carrying out physical as well as financial audits of SCT expenditures. The auditing procedures are satisfactory. At negotiations, the auditing procedures to be applied to the related SCT accounts were confirmed and agreed upon. F. Project Implementation Schedule and Monitoring 5.18 Contracts for rural road construction works included in the first year's construction program (120 km), consisting of about 9 contracts, have been or will be bid upon and awarded during 1984 and 1985. The balance, of about 6 road sections, are being carried out directly by SCT through force account methods and were initiated during the latter half of 1984. Also, 250 km of rural road rehabilitation are expected to be carried out during 1984/85. In subsequent years, the program would reach a rate of about 220 km of rural road construction annually, and up to 500 km of rehabilitation/improvement. The project implementation schedule (Table 5.1), drawn up on the basis of Chiapas' overall rural road construction program, was reviewed and agreed with the Government during negotiations. 5.19 During negotiations, the Government confirmed that it will prepare periodic reports on a quarterly basis for Bank review, covering, inter alia, the items listed in Annex 8 and that it will prepare a project completion report within one year of the project's closing date. 5.20 In addition, the Government will provide annual data and information, for project monitoring purposes, on the following key project indicators: (a) the level of completion, during the previous year, of rural road works in the approved program; - 29 - (b) the level of accomplishment reached during the previous year through the technical assistance component of the project, including the effort and resources expended and the lessons learned through the pilot projects program; (c) the status of rural road maintenance within Chiapas, budgets allocated, funds expended, physical accomplishments and future trends; (d) the projected level of rural road construction, rehabilitation and improvement, as well as technical assistance, for the coming year; and (e) the status of the ongoing rural roads inventory program. VI. RECOMMENDATIONS 6.01 During negotiations, agreement was reached with the Government on the following: (a) a review of the transport investment priorities in the state, and a road master plan for Chiapas to be completed by December 31, 1986 (para 3.10); (b) a review of the construction and maintenance practices regarding rural roads in the state under the jurisdiction of SCT and SARH to be carried out by December 31, 1987 with a view to further rationalizing rural roads designs, specifications, construction methods and maintenance practices, and assignment of maintenance responsibilities between agencies (para 3.17); (c) the provision of adequate resources to meet rural road maintenance requirements (para. 3.23); (d) the annual update of the rural roads inventory (para. 3.24); (e) a study of rural transport services to be completed by December 31, 1986 (para. 3.29); (f) technical assistance requirements and terms of reference for related studies (para. 4.09); (g) the need for SEDUE clearance of subprojects prior to declaring eligibility for Bank financing (para. 4.20); (h) proceduies for the annual technical and economic preparation and evaluation of the rural roads construction and rehabilitation program (paras 5.01-5.03); (i) procurement procedures for civil works and consultant services (paras 5.04, 5.05, 5.09 and 5.10); - 30 - (j) retroactive financing (para 5.15); (k) terms and conditions of the Special Account (para 5.16); (1) auditing procedures for the Special Account and for the SCT project accounts (para. 5.17); (m) implementation schedule for the project (para. 5.18); and (n) project reporting requirements (paras. 5.19-5.20). 6.02 Subject to the above, the proposed project is suitable for a Bank loan of US$22.0 million, with a term of 15 years, including a grace period of three years. March 25, 1985 ME)IOD DIIAPAS RURAL 14VS PRIJECI Transport Investment (in udllions of 1984 Mex$) 1/ Subsector 1977 1978 1979 1980 1981 1982 1983 1984 1q5 (Pr ted) Highways 90,600 95,200 104,200 116,300 176,600 126,700 114,700 90,800 113,400 Railways 43,200 37,800 61,300 83,700 103,000 88,800 77,192 80,650 88,024 Ports 2/ 5,400 5,100 10,700 24,500 53,100 46,700 19,000 20,600 20,100 Aviation 3/ 6,700 7,030 7,500 7,900 13,100 4,000 53,100 3/ 14,800 31,700 TOTAL 145,900 145,100 183,700 232,400 345,800 266,200 263,992 206,850 253,224 1/ US$1.00 = Mx$ 175. 2/ Excludes dredging except in 1983-1985 and P94E port investments. 3/ The sudden increase in aviation expenditures in 1983 and 1985 reflect the acquihition of airplanes. Source: SPP, SCT and Bank estimates March 1985 - 32 - TABLE 2.2 MEXICO CHIAPAS RURAL ROADS PROJECT Development of the Road Network (Km) 1952 1960 1970 1975 1980 Federal Roads 13,033 23r828 29,358 3Br292 42,521 Earth 479 974 620 901 757 Gravel 1,517 2,623 1,310 1,590 2,063 Paved - 2 lanes 11,037 20,231 27,299 35,427 39,153 Paved - 4+ lanes - - 129 374 548 Toll Roads 113 290 868 1,028 932 Paved - 2 lanes 52 229 496 552 480 Paved - 4+ lanes 61 61 472 476 452 State Roads 10,830 15,137 29,984 37,102 49,302 Earth 1,560 1,756 2,986 2,967 7,831 Gravel 4,388 7,325 15,091 15,437 17,176 Paved 4,882 6,056 11,907 18,698 24,295 Local Roads 3,356 2,787 7,530 13,489 3,194 Earth 591 1,130 2,544 3,175 787 Gravel 2,619 1,255 3,353 6,378 1,050 Paved 146 402 1,633 3,936 1,357 Rural Roads -2160 64,777 83,268 Earth - 429 15,443 15,360 Gravel - 1,708 49,310 67,273 Paved - 23 24 635 Earth Tracks NA 2,850 1,520 22,486 33,409 TOTAL 27,332 44,892 71,520 186,218 212,626 Tracks NA 2,850 1,520 31,530 33,409 Earth 2,630 3,860 6,579 22,486 24,735 Gravel 8,524 11,203 21,462 72,715 87,562 Paved - 2 lanes 16,117 26,918 41,358 5B,637 65,920 Paved - 4+ lanes 61 61 601 850 1,000 Source: SCT July 1984 MEXICO CHIAPAS RURAL ROADS PROJECT SCT Highway Infrastructure Investment 1977-19R4 (in millions of 1984 Mex$) I/ Type of Investment 1977 1978 1979 1980 1981 1982 1qR3 1984 (Estimated) Construction 16,000 15,500 16,300 17,300 21,000 17,300 25,800 17,200 Reconstruction/ Modernization 2/ 4,200 7,500 10,600 15,400 31,000 23,200 34,200 24,200 Rural Roads Construction 12,300 13,400 18,000 36,800 54,900 36,000 12,000 10,700 Trunk Road Maintenance 3/ 22,400 22,400 20,500 20,500 23,300 17,900 29,0qo 25,600 Rural Road Maintenance NA NA NA NA NA NA 4,900 6,600 Other 4/ 35,700 36,400 38,800 26,300 46,400 32,300 7,900 6,500 Total 90,600 95,200 104,200 116,300 176,600 126,700 114,700 90AP00 I/ US$1.00 * Mex$ 175.00 2/ Toll road investments included. 3/ Includes rural road maintenance in 1977-1982. 4/ Transfer of budget for bipartite roads out of SCT budget occurred after 1982. Source: SCT and SPP March 1985 * - 34 - TABLE 2.4 MEXICO CHIAPAS RURAL ROADS PROJECT National Rural Roads Construction - 1971-1983 (km) Program Year Normal Program CUD PIDER COPLAMAR Total 1971 2,740 - - - 2,740 1972 10,540 - - - 10,540 1973 13,480 - 1,520 - 15,000 1974 4,070 - 1,780 - 5,850 1975 3,565 - 2,970 - 6,535 1976 2,945 - 2,055 - 5,000 1977 - 2,734 2,604 - 5,338 1978 - 2,601 2,614 - 5,215 1979 - 2,325 2,546 - 4,871 1980 - 537 2,199 2,969 5,705 1981 - 591 1,010 4,661 6,262 1982 - NA NA NA 3,800 1983 - 1,002 400 929 2,331 Total 79,187 Source: SCT/DGCR July 1984 - 35- TABLE 2.5 MEXICO CHIAPAS RURAL ROADS PROJECT Bank Lending to the Transport Sector Loan No. Title Amount Date Status (USS (FY) (FY) miLLion) 103-ME First Railway Project to Ferrocarrit del Pacifico 61.0 1954 CompLeted 1959 268-ME First Highway Project 25.0 1961 Completed 1968 317-ME First ToLL Road Project 30.5 1962 Completed 1967 354-ME Second Highway Project 40.0 1964 Completed 1972 401-ME Second ToLL Road Project 32.0 1965 CompLeted 1970 528-ME Third Highway Project 27.5 1968 Completed 1973 695-ME Fourth Highway Project 21.8 1970 Completed 1977 820-ME First Port Project 20.0 1972 CompLeted 1977 825-ME Second RaiLway Project (N de M) 75.0 1972 Completed 1977 968-ME Seventh Highway Project 90.0 1974 Completed 1982 1022-ME Airport Development Project 25.0 1974 Completed 1982 1232-ME Third RaiLway Project (N de M) 100.0 1976 Completed 1983 1671-ME First Highway Sector Project 120.0 1979 Completed 1984 1929-ME Fourth Railway Project (N de M) 150.0 1981 Est. Completion 1985 1964-ME Port Development Preparation Project 14.0 1981 Est. Completion 1985 2428-ME Second Highway Sector Project 200.0 1984 Est. Completion 1988 2450-ME Lazaro Cardenas Industrial Port Project 76.3 1984 Est. Completion 1990 Source: Bank staff March 1985 - 36 - TABLE 3.1 MEXICO CHIAPAS RURAL ROAPS PROJECT Existing Chiapas Road Network (ka) Type_of Road or Road Surface Responsible Agency Earth Gravel Paved Total Federal Trunk Roads - - 1601 1601 State Trunk and Feeder Roads 154 840 693 1687 Rural Roads (Federal) 48 3955 - 4003 CFE 66 141 153 360 PEMEZ - - 216 216 SAMB! - 174 - 174 Others 87 278 177 542 TOTAL 355 5388 2840 8583 Source: Centro SCT, Chiapas July 1984 - 37 - TABLE 3.2 MEXICO CHIAPAS RURAL ROADS PROJECT Traffic Levels on Chiapas Main Highways Average Annual Z Heavy Road Section Daily Traffic (1981) Vehicles Pan-American Highway Tuxtla Gutierrez - Comitan 2,000 - 3,700 16 - 22 Cintalapa - Tuxtla Gutierrez 3,000 - 5,600 31 - 34 Coastal Highway Arriaa - Tapachul-a 2,000 - 4,000 30 - 36 North Highway - Route 195 Achucalco - ascopetazo 60 - 3,200 44 - 50 Source: SCT July 1984 MEXICO CHIAPAS RURAL ROADS PROJECT Division of ResponsibiLity for Roads in Chiapas (as of 1983) FinanciaL Responsibility Construction Maintenance Road Program Selection 11 Construction Maintenance FederaL State LocaT FederaL State Local Federal Trunk Roads SCT SCT SCT 100% - - 100% - - COPLANAR Rural Roads 2/ SCT SCT SCT 1001 - - 100% - PIDER RuraL Roads 2/ PIDER PIDER SCT 1001 - - 100 - - . CUD3/ State Trunk Roads CUD JLC 4/ JLC 50 50% - 50% 50% - Feeder Roads CUD JLC JLC 33% 33X 33% 50% 50 - Rural Roads CUD JLC SCT 80% 20% - 100% - - SARH Service Roads SARH SARH SARH 100% - - not defined 1/ SCT must comment on aLL road programs except for SARH. 7/ The rural road programs of PIDER and COPLANAR were incorporated into the SCT Rural Roads Program in 1984. 1/ CUD is basicaLLy a state-run program. T/ Junta Local de Caminos Source: Centro SCT, Chiapas JuLy 1984 - 39 - TABLE 3.4 MEXICO CHIAPAS RURAL ROADS PROJECT Rural Roads Construction in Chiapas (Km) SCT/ Year COPLAMAR CUD PIDER Other Total 1977 208 70 - 278 1978 76 124 - 200 1979 - 49 65 - 114 1980 103 139 85 - 327 1981 217 117 100 - 434 1982 116 37 100 - 253 1983 89 15 50 60 214 Total 525 641 594 60 1,820 Source: SCT, DGCR and Centro SCT, Chiapas July 1984 - 40 TABLE 3.5 MEXICO CHIAPAS RURAL ROADS PROJECT Rural Road Design Standards Class E Road ITEM UNITS STANDARDS 1. Average Annual Daily Traffic Vehicles/day (100 2. Type of Terrain: Mountainous Rolling - Flat 3. Design Speed km/hr 30 40 50 60 70 4. Stopping Sight Distance n 30 40 55 75 95 5. Passing Sight Distance m - - - - - 6. Maximum Degree of Curvature degrees 60 30 17 11 7.5 7. Vertical Curves ,, Crest m/Z 4 7 12 23 36 Sag m/z 4 7 10 15 20 'inimum Length a 20 30 30 40 40 8. Desirable Grade % 9 9 7 - - 9. Maximum Grade % 13 13 10 7 7 10. Formation Width m 4.0 11. Riding Surface Width m 4.0 12. Crown (Transverse Grade) ' 3 13. Superelevation % 10 Source: SCT July 1984 MEXICO CHIAPAS RURAL ROADS PROJECT Detailed Project Costs (millions of March 1985 Mex $; US$1.00-Mex $205.00) Investment Item 1984 1985 1986 1987 1988 1989 Total Rural Road Construction Cost 129 464 1242 1242 1025 1025 5127 (km) (40) (80) (240) (240) (200) (200) (1000) Rural Road Rehabilitation/ Improvement Cost 42 168 242 305 305 348 1410 (km) (50) (200) (350) (450) (450) (500) (2000) Consulting Services and Technical Assistance 42 103 82 41 40 - 308 Total Base Costs Mex $ million 213 735 1566 1588 1370 1373 6845 US$ million 1.0 3.6 7.6 7.7 6.7 6.7 33.4 Price Contingencies (US$ millions) 1/ - 0.2 1.0 1.9 2.2 3.0 8.3 Total (US$ million) 1.0 3.8 8.6 9.6 8.9 9.7 41.7 1/ Assumes inflation rates of 5% in 1985, 7.5% in 1986, 8% in 1987-1990 and 5% thereafter. Source: Bank staff and SCT March 1985 _ ах _ М�[ifb ТАвLЕ а.х C8IMA5 q11W, 11оАМ РloJlСТ 1в![!в1 виеаl Rовд [пvав[rnc РтаЕги рсlисед Сисв (мwаП)1I _ ►оN1всlи '[ур л[ 4ob Флt M1твао 1Yrrkв Иад 5еесlи ъв .Lrvвd Сапвсгиесlи Фес Фвк/Ув двгwд Nиввв lедгрводисlл - Ф1оп1а CriJвl+a -L.C. ФиlврвllгавЕоувs (11) 21 17.П 2,СО3 lвъог 7Е.10П х.2м 17.6 Under Соrtгьп[ап7/ nии - 1.1.р. (12) 1s.o 1.ws и1д.д п.то :.16а х7.п е.с. и Рглдо/Ои1л[а]1[о - GC.E. Zap.c.-c.1ow (1а) П.7 7ц 1.ъог 2,е90 а.Iю 7.е совlпигlо� Фql9сМэ1 1а Ргlrпга - Е.с. о.ъ/0]о е. Aaw (1у) 7.о 10S )въог [о,аоо 7,UO 99.о Е1 SYlanro-Loдo дв Ф1t1vo {[Ь) 5.ь z.s7a 1.ъог (3.у9о 1.еч0 б.х Ery1lao.rlnE саврИслдэJ 5ле lвсдго-5вs lогвnи-Е.С. гw..о ил.ое/ии (ze) 11.о s11 гдоlр.мс ьь,аю a.t2o 9о.в Епеlее.тlвс са9рl.с..1э/ икеlсв-с1 Ым (х9) т.s +ОО Е9лlрилс 7ь,9ао а.9ю а[.1 Lв9liвллгlдll СавРlосадэ/ sn ллп е.1 va11o - с.с. .1 hгаривгго (7и а.о х17 1.ваг )в.170 а,Пм 7ь.5 iлplwrlnr [e�L•с.д7/ Pai9 Фгде - С.С. 1. C.R.n■гС1 и.т (n) 1е.о sa �: иелг то,ебо а.1бо 1но.о епдег �autruetlan?/ . сгl.спЬв1 Ф1оо - ..птл Е1.и (7а) э.П 1еа 1.вог zп,т9о в,9ю 1п.п Etllиrb Поslприп 5ав ]ли 1х[орлс (э9j 12.П 2,абП Fдиlрдвл[ 3S,iб0 а.б211 22.6 LnC1и9rloR Ппд9[wy7/ A1raro оъгвдап - Е.с. S1м]ow1/Пипо бтл (it) 3.П 1.2a3 07и1риа[ t7,]7П 3,f70 (7.а иггlо Sоигв-СТве]а1е ГS3) 16.П 2,716 1qrlprat 79,1L0 а.9а0 29.2 Тnв Leeunoe-L1вoo largo t�■ lbвал (17) 1s.o asn иlид ц,9аП s,sю 1м.1 Ln111eиrWlt Фврlвbдl/ Р1вп dw Аувlл- Ф1иl. v.coccua (2а} б.о б.1х0 мlид э].ою +.1ю sл 5ал Mcи1o-ewfcs GC. 1а Рlедвд (2)) 1.0 а1б Lвбог 7,Ь70 ).а70 Е.] ►�ЕlпитtпЕ С9врl9свдэl 5rn Ал[мсо-9111а[lоnв- 1дв Сиегев�llа dr АRи- Е1 lдве (ю) 1х.П 1,1SП G1иlрио[ 50,0а0 f,2a0 аа.э 7ацlпввтlлЕ Фвр1л[W7/ � RиеWгlа-5впсв 10иа- Ф1. ltчеоцо ►lдагтов (32) а.П х.73ь 1л0ог 31.190 3,2П0 1l.] Gy1м9t1W Сову19се07/ Ге11рв Мр1вв Fгвееlко ]. Мд1д (]б) Ь.О 597 M1sd хП.790 3.i70 ]а.9 ФЕ1пикl.у Udorroy7/ 5сл .1овв в1 Mryaco � 5ао 51воп-Lв У1е[огlв (77) 12.0 а71 М(яд 53.[а0 а,620 [16.е [nEleooclо� ФврlпW71 ни+в РаlевсlпrLиlв ' ЕвРlоиа <]Е) 7.3 1.e97 LвЬаг б1.ц11 и.18о 72.7 бчllплвгln� Саврlосвд�l 4е[оп 1в Пhlдлд Е.С. А САт1врlса (Ч) Ь.О 1,2а5 Гдиlрrв[ 27,ЬС0 7,930 19.0 Егцlевлт(еR СоврИевд�/ Sми еlви Gc. Гаггпвгс Гдл[вга (iy) 12.0 е50 ►qпlриаС а1,уЕ0 З,а70 аеА ьl11ai1oroв-Ia бвраsа Е.с. Lсивlрв/Zвгаlрлда (аб) 7.0 697 Walprot а0,ц0 5,796 3е.3 влqwгол-Мпlоиъвl иио Crsndo-O]о д• Асив-АRив беелпдlда - с.С. 1б.lд[ 1в/Moюstпt 1в: hm О�о дв Ы[и - GC. 1У1пlв/Мосиlпсlа (ie] {а.П 1,777 Гqлlрввд[ R7,620 5.970 а7.0 Rlлсав G1 loquo- 1а ►ог:лп. (а9) s.0 п2 Гqotpre[ гь,17n 3.2ю z2.a 4Ъ1оп Р!]1]Lрвы Echвlµery (5)3 Iэ.П 2.юь М1двд 51.4е0 а,00е 22.6 Ia Свпдеlвгlа - Е.С. 5вл Сг1а[оЬв1lТ+ов�арв (Sx) 2.5 765 иlхвд 27,770 9,)7П 67.9 Е1 '1riooEo-CL Мвпl{иlсо (ц) 7.0 1,279 Гдиlрввоt 7г�,ь1о 5,2ю 29.5 бцtполгtеС Содуlвсвд]/ ивпсоео-0[осврвс (S5) 10.0 7аЕ иlавд 5П.820 S.ОВП [а6.0 и1`vo1 A1so- Е1 Porwnlr Ргя.I. Мвдгтл (36) 7.0 б7] М1твд 2i.2б0 7,а70 Я.7 тоТбс zбе.ь Iч.923 1.1ае.о9о a.r0 3/ г9.о 3! 11 1ss).По:и.ц )еа • I/ 5С! впиггвсlи 7! IncloGd 1п Р1гвс Тиг•л Соевсгиесlое Гго1[си L1 PoPUL[1on лвгvед lоиид а[ тда о[ гаад ввпlи апд oot 1псlадвд !л [lивл овtlигr 5/ Ф1си1а[ед влгаR• 5оигсв: 3С1 г Мвгсъ 19е3 MEXICO CHIAPAS RURAL ROADS PROJECT Initial RehabilitationjImprovement Program (Mex$000).I/ Segments Maintenance Network Road Proposed for Avg. Total District Responsibility Length Reconstruction cost/Km Cost (km) (km) (km) Tuxtla-District 7-A 769.2 227.0 77.5 700 54,250 Palenque-District 7-B 911.8 388.3 78.2 600 46,920 San Cristobal-District 7-C 1,046.6 476.2 55.4 1,000 55,400 Tapachula-District 7-D 11304.3 374.8 80.0 - 750 60,000 TOTAL 49031.9 19466.3 291.13/ 744 216,570 ...Z" I/ US$1.00 - Mex$ 205 (March 1985). 9xcludes 324 km in process of being transferred to SCT. Of this total, about 250 km would be included in the first year's construction program. Source: SCT and COPLADE March 1985 MEXICO CHIAPAS RURAL ROADS PROJECT Project Impleentation Schedule Year/Ramester 1 9 8 5 9 9 8 6 I 9 8 7 I 9 RA I 9 A 9 I 9 9 0 1 9 9 1 Item/Activity let let 2nd let 2nd let 2nd let 2nd let 2nd let 2nd (1) Determine Annual Construction Program 85 86_87 BR 9I (2) Determine Rehabilitation 6 Improvement Program 185 1 6 I87 _ 88 __II 40 91 , (3) Engineering 6 Contract Documents (a) For (1) 8 T687 OR__ A9 (b) For (2) I5_1 8I 1 A7 189 190 (4) Prequalification of Contractors for (1) 81 6 187 S8 A9 (5) Execution of (2) by 8n Force Account 85 86 87 88 89 90 a1 (6) Bid & Avard of Contracts for (1) 85 1 86 7IAL wl I89 (7) Construction of (1) 1.85 86 87 88 89 (8) Technical Assistance & Studies (a) Transport Master Plan (b) Rural Transport Services Study (c) Study Tours and Seminars (d) Pilot Projects (e) Preparation of Updated | Manuals and Guidelines 87 Program for year indicated Execution of Activity u' Source: SCT and Bank Staff March 1985 -45 - MEXICO TABLE 5.2 CHIAPAS RURAL ROADS PROJECT Estimated Schedule of Disbursements (millions of US$) Cumulative IBRD Fiscal Year Disbursements Disbursements at Cumulative and Semester for the Semester End of Semester Percentage 1986 December 31, 1985 0.7 0.7 3 June 30, 1986 1.3 2.0 9 1987 December 31, 1986 1.7 3.7 17 June 30, 1987 2.2 5.9 27 1988 December 31, 1987 2.5 8.4 38 June 30, 1988 2.6 11.0 50 1989 December 31, 1988 2.6 13.6 62 June 30, 1989 2.2 15.8 72 1990 December 31, 1989 2.0 17.8 81 June 30, 1990 1.8 19.6 89 1991 December 31, 1990 1.1 20.7 94 June 30, 1991 1/ 1.3 22.0 100 1/ Closing Date June 30, 1991 Source: Mission estimates March 1985 - 46 - ANNEX 1 MEXICO CHIAPAS RURAL ROADS PROJECT Major Sectoral Issues 1. The main issue in the transport sector is the appropriate scope and timing of transport investments. The 1985 budget basically represents a holding strategy with no major new investments. The Government, in establishing its six-year plan, must still face major decisions concerning the deferred large transport investments. The rail infrastructure investment program has received a full economic and technical review in preparation for the proposed Railway Sector Project, particularly to determine the appropriate timing for projects such as the new line between Guadalajara and Monterrey, the coastal line between Tampico and Veracruz and various major rail yards. The Mexico City-Queretaro electrification, because of prior commitments, cannot be delayed further and will require substantial budgetary allocations between 1984 and 1987. For the ports, the major decision will be to determine what further investments are justified at Lazaro Cardenas and Altamira (with assistance to be provided under proposed Bank-financed port projects) and to establish the timing of the remainder of the industrial ports program and industrial decentralization. In the roads subsector, Mexico faces a significant backlog of modernization (widening) works on the trunk network, particularly on the toll roads. In addition, alleviating capacity limitations at Mexico City Airport will require substantial investments. Most of these decisions will depend upon the expected timing and structure of the economic recovery, the projected level of import substitution and its impact upon grain imports and related transport facilities, the transport requirements of non-traditional exports, and the progress of industrial decentralization and urban deconcentration efforts. 2. Besides the overriding issue of transport investment, other major sectoral issues relate to transport pricing, regulation and maintenance: (a) Fuel Price: Diesel prices are still below international levels, but the Government is making a serious effort to raise all fuel prices to international levels as part of its program to reduce public subsidies. 1/ The Bank, through its macro-economic 1/ Since December 1981, the Government has followed a policy of gradually raising domestic fuel prices toward international levels. From December 1981 to January 1985, gasoline prices have risen from US$1.06/gallon to US$1.38/gallon for extra and US$0.42/gallon to US$1.08/gallon for regular. Diesel prices have been raised even more significantly from US$0.18/gallon to US$0.61/gallon. Gasoline prices are above international levels (based on November 1984 Caribbean market prices FOB) of US$0.79/gallon for regular, while diesel prices are still below international levels (US$0.79/gallon). - 47 - ANNEX I discussions with the Government and its economic and sector work, will continue to monitor progress on the fuel pricing issue and to help the Government to assess the implications of its pricing policies; (b) Road User Charges: It is evident that certain road users, particularly heavy trucks, are not paying a sufficient amount relative to the costs they impose upon the road network. SCT is undertaking a study, with Bank assistance under the Second Highway Sector Project, and will exchange views with the Bank on the implementation of the study's recommendations; (c) Railway Tariffs: Despite substantial increases in railway tariffs since late 1982 and improvements in the railway's operating and working ratios, certain basic commodities are still carried at tariffs which do not fully cover variable costs. This situation is being discussed under Loan 1929-ME and through the preparation of the proposed followup Railway Sector Project; (d) Port Chares: Under the recently approved Lazaro Cardenas Industria orts Project, the Government has agreed to carry out a nationwide study to determine the tariff levels required to remedy the present inadequate recovery of port infrastructure investment costs. It will then provide a plan of action for implementing the study's recommendations; and (e) Rural Road Maintenance: After having constructed over 80,000 km of rural roads in a period of about 14 years, it is apparent that related maintenance and rehabilitation efforts must be greatly expanded and improved. Specific improvements with regard to Chiapas are called for under the proposed project (paras 3.23- 3.24 of report) and the Chiapas Agricultural Development Project, as well as for the rest of the country under the Second Highway Sector Project. March 1985 - 48 - ANNEX 2 MEXICO CHIAPAS RURAL ROADS PROJECT --aalysis of Rural Road Maintenance Costs 1. In order to provide an approximate estimate of the costs of maintaining typical rural roads in Chiapas, the analysis shown below has been carried out by the Bank and SCT. The basic assumptions used in determining quantities and costs are as follows: (a) A typical rural road section, 10 km long, in average condition at the present time, is taken as the model. Climatic, geographical and topigraphic conditions usually found in rolling to mountainous countryb1de in Chiapas are assumed, as are equipment, labor and methods normally used for this type of work in Chiapas; (b) Local communities in the past have helped in carrying out rural road maintenance in Chiapas by donating some or all of the required labor. Recently, the prevalence of this practice has been declining. Nevertheless, it is assumed that 50% of the labor needed to carry out routine maintenance is provided by local communities without charge; (c) The work week is assumed as six eight-hour days, with minimum wage at Mex$ 600 per day, for that portion of labor cost paid by SCT; (d) The cost of renting 6 cu m capacity dump trucks is taken as Mex$ 16,000 per day each. Trucks are assumed to be hand-loaded when used for routine maintenance (i.e., spot regraveling); and (e) Prices used in calculations are based on costs of labor, materials and equipment as of the end of 1984 and are expressed in constant prices of that datel/ 1/ At US$1.00 - MexS175.00 -49 - ANNEX 2 Routine Maintenance 2. Estimated costs in constant end 1984 Mexican pesos are: Estimated Cost Man-Days (MexS) (a) Cleaning ditches and drainage structures; filling small potholes; grass cutting and removal of vegetation; and removal of large stones and other obstructions, etc. - Prior to Rainy Season 10 men x 15 days 150 90,000 - After Rainy Season 15 men x 45 days 675 405,000 (b) Average normal drainage and bridge structure repair work. Assume 30% of road length in flat, 20% in rolling, and 50% in mountainous terrain. 75 45,000 (c) Slide removal, repair of erosion damage, etc. 50 30,000 (d) Spot regraveling at 3% of road length 10 km x 0.03 - 300 m; 300 mx 4 m x 0.15 m - 180 cu m(loose measure) 180 x 1/6 - 30 - 6 cu m truck loads; (truck rental) 96,000 6 truck days plus 10 men x 7 days 70 42,000 (e) Cost of administration, direct (road foreman) and indirect supervision over two months - 75,000 TOTAL 1,020 783,000 Locally Contributed Labor at 50% 510 306,000 TOTAL 510 MexS 477,000 - 50 - ANNEX 2 Average Annual Cost of Routine Maintenance 1/ Mex$ 477,000 x 1/10 - Mex$ 47,700 per km Mex$ 47,700 x 1/175 - US$273 per km Periodic Maintenance 2/ 3. Estimated costs in constant end 1984 Mexican pesos are: Estimated Cost (Mex S) (a) Leveling of existing road surface and re-establishment of ditches: 10 km x 4 a x Mex$ 7.50 - Mex$ 300,000 300,000 (b) Excavation of gravel from borrow pit: 10 km x 0.15 m x 4 m - 6000 cu m; 6000 cu m (loose) x 1/1.2 - 5000 cu m (compacted); 5000 cu a x Mex$ 350 - 1,750,000 1,750,000 (c) Transport of gravel (average haul - 12 km): 6000 cu a x Mex$ 35. x 12 km - 2,520,000 2,520,000 (d) Spreading, leveling and compacting gravel layer on road surface: 6000 cu a x Mex$ 120 - 720,000 720,000 (e) Major repairs to drainage structures and bridges. 700,000 TOTAL Mex$ 5,990,000 1/ At 50% contributed labor. If all labor costs are paid by SCT, the cost would be Mex$ 783,000 per annum for the typical 10-km road section. 2/ Primarily consists of regraveling, carried out at approximately eight-year intervals. - 51 - ANNEX 2 Average Annual Cost of Periodic Maintenance: Mex$ 5,990,000 x 1/8 x 1/10 = Mex$ 74,875 per km per year Mex$ 74,875 x 1/175 - US$428 per km per year Average Cost of Periodic Maintenance (8-year intervals) Mex$ 5,990,000 x 1/10 - Mex$599,000 per km Mex$599,000 x 1/175 = US$3,423 per km Summary Annual Maintenance Costs 1/ Routine Maintenance Periodic Maintenance Total Mex$/km US$/km MexS/km US/1ba Mex$/km USS/km With 50% locally contributed labor 47,700 273 74,875 428 122,575 700 All labor costs paid by SCT 78,300 447 74,875 428 153,175 875 1/ For rural roads in Chiapas as of the end of 1984. March 1985 ANNEX 3 - 52 - MEXICO CHIAPAS RURAL ROADS PROJECT Proposed Inventory Format for Rural Roads A. General Information Road:_ Type: Length: Population Served: Year of Construction: Method of Construction: Estimated Traffic (vehicles/week): Cars: Light Trucks (less than 6 tons): Heavy Trucks/Buses: Maintenance Carried Out (current pesos): 1981 1982 1983 Routine Periodic Total Status at last inventory (year/points): Existing level of access: (1) year-round access for all vehicles: (2) year-round access except for heavy trucks during and after rains: (3) Poor access: ANNEX 3 -53 - B. Details of Condition KK 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Tyw/Condition: Riding Surface Lateral Ditches Right Left Culverts Fords Bridges Steep Slopes Intervention Required: Scarification Material Replaceaent Reopen Ditches Right Left Reconstruct or Construct Culverts Reconstruct or Construct Fords Reconstruct Bridges Comments and Critical Areas August 1984 - 54 - ANNEK 4 MEXICO CHIAPAS RURAL ROADS PROJECT Draft Terms of Reference for Chiapas Rural Transport Services Study General 1. Poor transport conditions, especially on rural roads, coupled with a total lack of road access for many small and poor communities, have been identified in Plan Chiapas as one of the major constraints on socio-economic development within the State. It is believed that access improvements will stimulate increased commercial production, provide farmers with access to needed credit, extension services, and agricultural inputs, and facilitate the delivery of health and education services to the rural poor. These benefits will be achieved through coordination of development actions to be taken by different agencies as part of Plan Chiapas, under the guidance of the state's decentralized regional development committee, COPLADE. In order for COPLADE to carry out its coordinating role effectively, it will need to have a better understanding of the role played by rural transport services in the state's socio-economic development process. Since Chiapas is one of the first states in Mexico to undertake road improvements in the context of decentralized planning, this study can also provide an example for a better understanding of the role of rural transport services in the country as a whole. Objectives 2. The general objective of the proposed study is to develop a better understanding of the intersectoral consequences of changes in the transport sector. Specificially, the study will document the existing patterns of transport service provision in rural areas, considering both freight and passenger services, making the maximum use of existing data. Special attention will be paid to changes that have taken place on rural roads that have been improved in the recent past. Legal, regulatory, financial and cultural constraints on the growth of transport services in the state will be identified. Field work will then be undertaken in a sample of rural communities served by roads to be constructed under the Chiapas Rural Roads Project, with the aim of finding out how rural people actually secure goods and services for themselves and how their excess production enters commercial channels. Analysis will focus on the extent to which the benefits of rural roads improvements in Chiapas may be expected to be passed on to rural residents, thereby inducing increased economic productivity and higher levels of social participation among the rural poor. Finally, the study will recommend measures to be taken by COPLADE or by the participating agencies, in cooperation with the private sector, to ensure that rural road investments have the desired deveiopmental effects and to promote the broadest possible participation in the benefits from such investments. -55 - ANNEX 4 Scope of Work 3. The study will be undertaken in three phases: a. Preliminary data collection and field research design. In this phase, the study team will assemble the available data regarding public transport services and private vehicle ownership in the municipalities served by the Bank-funded rural roads program. SCT's planning data and promotores should be consulted to describe, as well as possible without doing additional field work, the current patterns of public and private transport on the roads to be improved under the project. On this basis, a representative sample of road links will be selected for field study; this sample should include some links that have already been improved, some scheduled for improvements, and some unimproved tracks that will not be improved under the project. Sampling procedures and interview schedules will be developed a.-id field-tested for use with various types of local informants. During this phase, the study team will also collect data from the various Federal and State agencies involved in transport and marketing regarding transport costs and charges by vehicle type and commodity type and official prices for products at different points in the collection/distribution chain. b. Field Work. The study team will carry out field research on the sample road links, including interviews in the nearest municipality center and in the settlements served by the road. It is expected that the work program would include interviews with a sample of farm households, as well as with transporters, traders, agricultural extension agents, storage facility staff, service providers, mule drivers, etc. The purpose of the interview would be to determine the true patterns of vehicle ownership and use (including animal transport, motorcycles and bicycles), prices actually paid for selected commodities at different points in the collection/distribution chain, actual charges for freight and passenger transport, actual costs incurred by different types of vehicles on various types of roads, formal or informal restrictions on the growth of the transport sector, and transportation constraints on the delivery of services. The interviews should also include data that could be used to identify patterns of land tenure, land use, employment and income that may affect the ability of the rural poor to make effective use of transport services. Naturally much of the desired data may not be readily obtained through direct interviews. It is expected that the field research would complement such interviews with observation and indirect enquiry. For this reason, the participation of a local social scientist on the study team is strongly indicated at the design stage. c. Analysis. The data collected during the field work should permit at least the following types of analyses to be carried out: (i) Analysis of the relationship between real costs, real charges, and official rates for the transport of various types of goods on different types of roads; (ii) Analysis of the relationship between real costs, real charges, and official rates for passenger travel on different types of roads; (iii) Analysis of the role of own-account transport in rural areas, for goods and for personal travel, and how these patterns may change with road improvements; - 56 - ANNEX 4 (iv) Analysis of the impact of cost savings due to transport improvements on (a) the prices paid to farmers for their crops and (b) the prices paid by rural households for inputs and consumer goods; (v) Analysis of the threshold level of transport services needed to induce service providers (agricultural agents, credit officials, teachers, health workers) to establish new service centers or to visit rural areas regularly; (vi) Analysis of the role of transport services in facilitating or limiting the free flow of labor, both local and long-distance, in response to changing employment opportunities; and (vii) Analysis of the relationship of land tenure, cropping patterns, income and employment, age and sex to the utilization of transport services and consequent effects on the distribution of benefits from road improvements. Other concerns of interest to the Government may also be addressed by the study. d. Reporting. Analysis of the data is expected to lead to a number of recommendations for action to be taken by the various participating agencies in order to increase the flow of benefits from rural road improvements to the rural poor in Chiapas. These recommendations will be reviewed and discussed by an advisory committee before the study report is prepared in final form. August 1984 - 57 - ANNEX 5 MEXICO CHIAPAS RURAL ROADS PROJECT Guidelines for Preparation of Updated SCT Manuals 1. On the basis of the experience gained and the lessons learned during the implementation of this project, SCT will, with the assistance of domestic and/or international consultants where required, update and revise the present SCT Manuals, Guidelines, Standards and Specifications for the construction and maintenance of rural roads. Where appropriate, new manuals will be prepared. The guidelines and manuals will reflect current SCT policy affecting rural roads and will contain procedures, standards and specifications derived from SCT's. overall experience, updated to reflect current practice and the results of the pilot exercises carried out as part of this project. 2. More specifically, they will contain, among other things, the following: (a) Guidelines for the selection of appropriate construction technology for rural roads, based on, inter alia, consideration of the type of terrain and soils, volume of earthworks, availability of labor, financial and economic costs of alternative construction methods, and social considerations. The effects of choices made on required subsequent maintenance technology efforts will also be treated in depth; (b) Guidelines for the design and execution of improvements to the existing sub-standard non-SCT roads in order for them to qualify for acceptance and subsequent maintenance by SCT; (c) Analysis and description of alternative methods, costs and advantages of carrying out compaction on earthworks and gravel surface layers. Guidelines for the selection and use of equipment for compaction on rural roads, both for equipment-intensive and for labor-based construction methods; (d) Guidelines for conducting rural road inventories and for establishing reconstruction and rehabilitation programs, including consideration of physical needs, costs and budgetary constraints; and te) Guidelines for choosing appropriate technology for rural road reconstruction, rehabilitation and maintenance, and for deciding when to execute works by force account with or without rented equipment, by force account using unit rate contracts for certain tasks or, in certain cases, completely by contract. 3. The new guidelines and manuals will be prepared by SCT, assisted by appropriate consultants, and is expected to be ready for dissemination to other states in Mexico by the end of 1990. March 1985 - 58- ANNEX 6 MEXICO CHIAPAS RURAL ROADS PROJECT Guidelines for Economic Evaluation A. General 1. This annex describes the methodology used in evaluating roads proposed under the rural roads "new" construction program and for submitting subprojects for Bank review. It also describes the key information used in determining the economic feasibility of the first year's construction program. A more detailed discussion has been prepared and is included in the Project File (Annex 7). 2. The Centro SCT in Chiapas, in coordination with the state COPLADE, compiled a listing of 2,500 km of potential rural road subprojects'based on the requests of local communities and a preliminary screening by Government staff. Detailed information was collected for about 442 km, and the evaluation procedures outlined in this annex have been applied. About 269 km are considered eligible, having met minimum economic or social criteria, and they represent the initial construction program. The remaining 173 km are awaiting further information to complete the evaluation or are awaiting environmental approval by SEDUE, and they are expected to enter the program in subsequent years along with another 558 km, making a total of 1,000 km of new construction. B. Project Identification and Selection 3. Potential road subprojects are initially proposed by petitions (solicitudes) of the local communities presented to SCT or State officials. SCT then sends a specially trained representative (promotor) to the community to discuss the road and the community's transport needs, to help form a local committee responsible for organizing community participation and to identify local social, economic and physical resources and constraints. Based on the promotor's findings, SCT screens the community's requests, focusing upon transport needs (availability of alternative access), population served (generally no less than 350 people) and estimated cost per kilometer (varies with terrain). The resultant list of potential subprojects is presented to COPLADE along with initial cost estimates and physical description. COPLADE and SCT are then responsible for carrying out the detailed economic and social evaluation in collaboration with SARH, and other relevant Governmental agencies. C. Economic Evaluation Procedures 4. Except for a limited number of roads, the subprojects proposed for construction lie outside the primary zone of influence of the Chiapas Agricultural Development Project. It is assumed that the road network for the areas affected by that project are either largely in place, needing rehabilitation in some instances, or will be provided as a byproduct of the drainage structures to be built. Thus, the Agricultural Project focuses upon areas where benefits can be realized relatively quickly. Road subprojects in those areas will be evaluated - 59 - ANNEX 6 within the overall context of the Agricultural Project. The zones of influence for most of the road works under the Rural Roads Project represent the next geographic areas for development, where access must first be provided before agricultural development benefits can be realized. 5. For the economic evaluation of new road construction, a staged screening methodology is to be applied to candidate subprojects. For subprojects which do not pass the first stage screening (estimated rates of return of less than 12% using minimal benefit assumptions), a more detailed analysis is conducted. Because of its comprehensive geographic coverage, the types of benefits to be generated by the Rural Roads Project will vary, depending upon the specific needs of the communities to be served. For most of the subprojects, the benefits from lower transport costs, more reliability, and better access to services, technical assistance and farm inputs will be realized through the following: (a) Losses avoided in present production of cash crops which cannot be commercialized because of transport constraints; (b) An increase in yields and/or area planted in present crops; (c) Shifts, where appropriate, in production patterns toward more perishable crops, notably fruits and vegetables; (d) Increased commercial exploitation of livestock resources, notably dairy products; (e) Increased commercial exploitation of fishing resources; (f) Increased commercial exploitation of timber resources; and (g) Transport cost savings to non-freight and "through" traffic. 6. The first stage screening methodology (Paso A) assumes that rural road subprojects in Chiapas will generate benefits at least equivalent to 10% of the net value of production in the zone of influence through reduced production losses, increased new production and other types of benefits listed in paragraph 5. These benefits are calculated for the first year and held constant for the evaluation period of 20 years. If the estimated rate of return, using the economic construction, maintenance and rehabilitation costs for the period, is over 12%, the estimated opportunity cost of capital, the subproject is considered eligible, and no further economic evaluation is made. The roads which pass on this most simplified methodology are generally in areas with substantial existing production and/or have relatively low construction costs. It is reasonable to assume that agricultural output will expand in these areas when the present transportation constraint is removed. Adequate supplies of fertilizer are available, and the input distribution and marketing system for foodgrains is prepared to respond rapidly to road improvements. There is a heavy demand for credit and technical assistance in these areas, and there appears to be no major cultural constraint on delivery of such services to farmers. 7. The second-stage screening methodology (Paso B) requires more detail on the specific potential benefits in terms of increased yields and cultivated hectares for current types of crops as well as improved livestock output. - 60 - ANNEX 6 Estimates are made for each subproject's zone of influence, and the incremental net value of production is calculated for year 10, when the potential is expected to be reached. The investment costs include road costs, as well as agricultural development costs. If the estimated economic rate of return 1/ is greater than 12%, no further evaluation is made, and the subproject is conldered eligible. 8. Additional benefits which can also be considered in Paso B relate to other affected products or economic potential, such as tourism, fisheries and timber development, for which the net value added is calculated. Also, transport cost savings for non-freight traffic and "through" traffic are calculated. Furthermore, possible beneficial impacts on the secondary zone of influence are analyzed. D. Social Evaluation Procedures 9. Although the principal criterion for accepting a road for financing under the project is its effect upon production increases, it has been apparent, through the preparation of the project, that there are areas of Chiapas with high population concentrations but with limited agricultural or other natural resource potential. Particularly, in certain areas of the state, such as Los Altos, roads are planned as part of an effort to integrate remote and/or indigenous conmunities with the rest of the state and the country. The roads are one element in a coordinated program to improve the standard of living of these communities without seriously undermining the local culture. Many of the benefits of these roads are hard to calculate but have been confirmed through a number of studies in Chiapas and elsewhere in Mexico.2/ The main benefit is providing improved access to help members of the local population to find employment outside the immediate zone of influence during underemployed periods of the year. Other benefits include access to health and education facilities, as well as the increased value of the limited production in the zone of influence. 10. For the reasons stated above, a further review of proposed subprojects with estimated rates of return below 12% is to be carried out to determine whether substantial populations in areas with little production potential would benefit in terms of access to social services and employment. For each candidate subproject, in addition to the production analysis carried out for all subprojects, closer review is made of the transport needs of the community for other purposes such as gaining outside employment and facilitating access to social services. Although it would be impractical to attempt to calculate such benefits for each candidate subproject, a general calculation was made of the potential magnitude of the benefits in order to establish a maximum road investment cost per person served and to avoid excessive road investment. It is estimated that at least 35% of the heads of household are underemployed on-farm to the extent of 60% of annual normal 1/ Calculated by applying "Method III" from Economic Appraisal of Rural Roads: Simplified Operational Procedures for Screening and Appraisal. Beenhakker and Lago, SWP 610, October 1983. 2/ Frank Cancian, Change and Uncertainty in a Peasant Economy, Stanford University Press, 1972; Robert Wasserstrom, Class and Society in Central Chiapas, University of California Press, 1983; and World Bank Study of Rural Mobility and Communications in Mexico, Draft Final Report, T981. - 61 - ANNEX 6 labor time.3/ During this underemployed period, some already seek employment for about one-tNird of that time in the coffee plantations but, because of unreliable transport, are unable to participate in other types of employment during the rest of that period.4/ With the new road, it is assumed that the community will be able to obtain Wther types of employment (in urban areas, agricultural development projects or nearby oil-related employment). For a typical community of 440 people (88 heads of household), this would mean an additional annual income of about US$16,120 (US$37 per person, or US$520 per head of household seeking outside jobs) for the community assuming the minimum daily wage. This estimate excludes the potential for increases in the average wage in future years, as well as an increase in the economically active population. 11. In addition to outside employment, the communities would benefit from the increased value of local production as transport costs and reliability are improved. In some areas of Chiapas, rural road development has made vegetable and flower production and marketing viable. Furthermore, poor access has limited the delivery of educational and health services to outlying communities. The Government of Mexico allocates about US$74 per person in the country for education5/, which reflects the perceived benefit to the recipients. Chiapas rural com-unities have shown a high demand for education to the extent that they have helped to provide physical facilities. Proposed roads would help to realize these benefits in outlying areas by getting teachers into these communities and facilitating student participation in higher grades at schools outside the area. Simply adding a portion of these benefits and some increments to the value of local production to the potential employment benefits will result in an estimated rate of return of over 12% for the average 8 km road section. From this analysis, it was concluded that the maximum road investment cost per person served should not exceed US$450, such that the average 8 km road section would require a minimum of 440 people to be included in the program. Higher cost or longer road sections would, thus, require higher populations. In addition, the nimber of roads justified on this basis for financing under the project should not exceen 15% of the Chiapas rural roads construction program. E. Data Base 12. Estimates of population served, cultivated areas, production and potential additional productive areas are compiled for each candidate subproject based on census data, SARH field representatives and reports of the SCT promotores. In addition, for each subproject zone of influence, SARH has indicated the parallel measures and investments required for meeting projected potential. 3/ Details on the Altos region are provided in Frank Cancian, "Development in the Altos Region", Consultant Report, March 1984. Cancian finds that of the economically active population in agriculture, only 12% have enough land to maintain themselves. 4/ A survey in the 1970s found that half of Chamula family-heads migrated to coffee plantations for work (Cancian, op-cit., pg 6). 5/ International Monetary Fund, Government Financial Statistics Yearbook, Vol. VII, 1983, pg. 273. - 62 - ANNEX 6 13. Estimates of potential yields, production costs and faragate prices for different regions of Chiapas have been derived from the farm models prepared in conjunction with the Chiapas Agricultural Development Project. For the rural road subprojects, however, targeted yields and production with the project are scaled down to reflect that such areas have somewhat less potential than the areas in the first stage Agricultural Project, and the time required to meet those targets has been extended to ten years, representing the fact that these areas would be affected only secondarily by the first Chiapas Agricultural Project and would be more directly treated in followup agricultural projects. The project's assumptions are thus conservative as compared with those applied in the Agricultural Project. The analysis also does not assume a change in cropping patterns on existing cultivated lands, introducing another conservative element into the evaluation. 14. Three principal types of production are targeted in the Paso B analysis (para 7). The main commodity is corn (maize), which is the primary target of Government agricultural development efforts in Chiapas in order to significantly reduce the country's dependence upon imported foodgrains. For the road subprojects, it is assumed that yields in the coastal area would increase from an average 1.5 tons per hectare to 2.4 tons over a period of ten years as farmers move from traditional methods to more mechanized methods and introduce fertilizers. This compares with a target of 3.0 tons per hectare in six years under the Agriculture Project. In the Central Depression, yields are expected to rise from 2.1 tons per hectare to 3.0 tons over a ten-year period, compared with 4.0 tons in six years in the Agriculture Project's zone of influence. The second type of production is cattle for beef and dairy products. More intensive use of existing cattle grazing land is projected, reaching targets set in the Agriculture Project in ten years rather than seven. Last, a number of candidate subprojects will serve extensive coffee-growing areas. Many of these areas are being affected by coffee -rust" and require intensive efforts to prevent the spread of the problem and to replant more resistant and higher yield varieties. The roads will facilitate the planned rehabilitation of the most important coffee- producing areas in Mexico. 15. Benefits were calculated principally on the basis of improving the output on existing cultivated land. The extension of cultivated land due to the project was included where indicated by SARH, following the general cropping patterns of the existing cultivated area. An upper limit, however, was applied such that, over a ten-year period, the cultivated area could not grow more than 35%, roughly equivalent to population growth in rural Chiapas. 16. Prices used in the evaluation of agricultural inputs and outputs reflect projected world market prices adjusted for transport and handling in order to derive farmgate economic costs and revenues. Local market prices have been used for commodities which are not tradeable overseas. Net value added estimates were obtained by deducting the value of incremental inputs, including fertilizer, pesticides, labor and equipment, from the calculated economic farmgate price of incremental production. -63 - ANNEX 6 17. Capital costs include the cost of road construction, detailed engineering and supervision, and are expressed net of taxes. Incremental annual maintenance costs of about 'TS$125 equivalent per km are included, and rehabilitation costs of about US$3,400 equivalent per km every eight years are also included. Capital costs for agricultural development, mainly land clearance, materials and equipment, have been derived from the Agricultural Project's farm models. Unskilled labor costs for new road construction are adjusted by 50% in the case of labor-based and mixed-technology construction to reflect the opportunity cost of rural labor in Chiapas. It is assumed that unskilled workers on such types of construction will be hired during the slack agricultural season when underemployment is severe. This matter will have to be reviewed annually to determine if the underemployment persists and the assumption is valid. For such works, unadjusted unskilled labor costs represent from 18 to 45% of total construction costs (including IVA, engineering and supervision). F. Initial Program Results 18. About 269 km of the initially proposed 442 km (para 2) are considered eligible for financing under the project, with about 118 km passing the first stage screening. 6/ About 132 km passed the second stage screening, with 13 of 15 subproject7 having estimated rates of return in excess of 18%. About 19 km passed based on social criteria. The remaining 173 km require further data Lo pass the Paso B evaluation. March 1985 6/ No "absolute" rates of return are calculated for these works since it is important only that they pass the 12% minimum, applying minimum benefit assumptions. - 64 - ANNEX 7 MEXICO CHIAPAS RURAL ROADS PROJECT Related Documents and Data Available in the Project File A. General Reports and Studies on the Sector or Subsector 1. Mexico. Rural Roads Sector Report. Chiapas Case Study. March 1984 (Green Cover). 2. Mexico. Roads and Labor. SAHOP. 1976. 3. Mexico. Chiapas - A Case Study of Growth Potential and Improvement of the Social Environment. August 1982 (White Cover). 4. Mexico. Plan Chiapas. Federal Government of Mexico and State Government of Chiapas. 1983. 5. Mexico. Case Study of a Rural Roads Program and Its Interface with the Local Communities. Carnemark. October 1978 (Draft). 6. Mexico. Rural Development Program - PIDER III, Rural Roads. Kimes. 1981 (Draft Sector Paper). 7. Mexico. Study of Rural Mobility and Communications in Mexico. Pilot Phase. Rahkonen et. al. August 1981 (Draft Final Report). 8. Mexico. Chiapas. Plan y Programas de Gobierno 1982-1988. Gobierno del Estado de Chiapas. December 1982. 9. Mexico. Almanaque de Chiapas 1982. 10. Mexico. Estudio de Desarrollo Regional de Puerto Madero, Chiapas. CIFSA. No Date. (Vol. I-III). 11. Mexico. Staff Appraisal Report. Second Highway Sector Project April 1984 (Buff Cover). 12. Mexico. Human Ecology and Malaria Resurgence in Chiapas. Wasserstrom. 1982. -65 - ANNEX 7 B. General Reports and Studies Relating to the Project 13. Mexico. Programa Credito Banco Mundial. Componente Caminos. COPLADE. March 1984 (Main Volume and six Annexes). 14. Mexico. Resumen de Metas y Avances del Programa de Caminos Rurales 1977-1982. SAHOP. September 1982. 15. Mexico. Propuesta de Caminos Rurales 1984-1988/Programa de Reconstruccion de Caminos Rurales 1984-1988. Centro SCT Chiapas. Julio 1983. 16. Mexico. Junta Local de Caminos del Estado de Chiapas. 1983. 17. Mexico. Carreteras Troncales. Propuesta 1984-1988. Centro SCT Chiapas. 1983. 18. Mexico. Chiapas Development Program. General Background and Issues Paper with Final Project Briefs Attached. April 1984. 19. Mexico. Chiapas Decision Memorandum. May 1984. 20. Mexico. Memoranda and Reports Concerning Social, Environmental and Transport Service Issues. 21. Mexico. Basic Data for Economic Evaluation. COPLADE. 1984 (4 volumes). C. Selected Working Papers 22. Mexico. Working Paper on Local Competitive Bidding Procedures. August 1984. 23. Mexico. Worksheets for Economic Evaluation of First Year Program. July 1984. August 1984 - 66 - ANNEX 8 MEXICO CHIAPAS RURAL ROADS PROJECT Project Reporting Requirements 1. With respect to project monitoring and reporting, the Government will provide, inter alia, the following information on a quarterly basis: (a) the list of eligible subprojects being proposed for inclusion in the project, together with the list of contracts relating to them; (b) the status and progress of implementation of each contract being financed by the Bank, including basic contract data and a nerrative description of progress accomplished, problems encountered or foreseen and solutions used or proposed; (c) the state of preparation of subprojects to be proposed for inclusion in future years' programs; (d) the status and progress of the technical assistance program, its costs and accomplishments; and (e) the status of project expenditures, of withdrawals from the Special Account, of applications for withdrawals from the Loan Account and disbursements made, and a schedule of estimated future disbursements based on current implementation forecasts. 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To�achula им ммs ww и.лг�.мq ы er мwм w о. тл. иы" ` _ с.w.г. с�до..гw. rм wn°+w°a.s w.а.по м oaen ` 1и KcMr:e - �.М. м гм овп ы гпв wмic Нмь вю Or л�МпвГюrW Fл - лп лв мрв� цв°п ы впr г�в°лw а мr wдrж.rv s вс° _"- Роегю _' "�ю �O�°`�`у�-• __ С.иФдм.дпlq° �'1� 9а° 93° �! 92° I N--- j 1 CAMPECHE 9 l 01 IBRIDI 18421 TABASCO MEXICO CHIAPAS RURAL ROADS PROJECT T-" d. P,~ 5-. PROJECT: Rural Roads - Initial Year's Prograrn SCT Identification No. for Rural Roods EXISTING: Pcived Rocids GravelRoads Earth Roads Sea Port Raiiroads 17 Rivers A i rports Mountoinous Areas Stare Boundaries International Boundari, 16 GUATEMALA 90` UNITED STATES OF AMERICA . . ......... . KiLOMETERS 4.0 es u 80 100 MILES 40 60 MEXICO OW mil M-3.1c0 c.tIg r ---ýBELIZE ('GUATEMALA 911 SEPTEMBER 1984
Группа Всемирного банка · Staff Appraisal Report
Mexico - Chiapas Rural Roads Project
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