Peru - Aguaytia - Pucallpa Highway Project

F" P '1R1JF TO R E S T R I C T E D RZ.. 1r?TS DESK WITHIN R e p o r t N o. TO-213c ONE WEEK A This report was prepared for use within the Bank. It may not be published nor may it be quoted as representing the Bank's views. The Bank accopts no responsibility for the accuracy or completeness of the contents of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT APPRAISAL OF THE RECONSTRUCTION PROJECT oF THE AGUAYTIA-PUCALLPA SECTION OF THE CENTRAL HIGHWAY PERU December 9, 1960 Department of Technical Operations  CURRENCY EQUIVALENTS 1 US dollar - 27.50 soles 1 sol a 0.0364 US dollar 1,000 US dollars * 27,500 soles 1,000 soles u 36.40 US dollars  APPRAISAL OF THE RECONSTRUCTION PROJECT OF THE AGUAYTIA-PUCALIPA SECTIONI OF THE CENTRAL HIG2LMK4 PERU Table of Contents Page Sumary I INTRODUCTION 1 II BACKGROUND 1 ... Stat,us of the Present Highway Miaintenance Project 1 B. Road Construction Program 2 III THE CENTRAL HIGHWAY 2 TV THE PROJECT 3 A, Description 3 B. Execution of the Project 4 C. Estimated Cost of the Project 5 D. Financing of the Project 5 E. Economic Justification 6 F. Conclusions 8 Annex 1 : Design Standards Map : Primary Roads of Peru  SUNNARY i. The Peruvian Government has submitted to the Bank a road project for the reconstruction of the 170 km (eastern) section between Aguaytia and Pucallpa of the Central Highway in Peru. The project also includes a pre- liminary study for reconstruction of the >22 km adjacent section Aguaytia- Huanuco-Cerro de Pasco-La Oroya-Morococha of the same highway, and the con- tinuation of the existing road maintenance program over the next two years including the purchase of spare parts and complementary maintenance equip- ment. ii. The total cost of the project is estimated at US$11,700,000 equiv- alent, of which US$6,200,000 will be in foreign currency. The Bank will cover the major portion of the foreign cost, amounting to US$5.5 million equivalent, arid the balance of US$700000 will be provided by the Peruvian Government. The U.S. Development Loan Fund has authorized a loan of US$41,500,000 equivalent tco cover the major part of the local currency. The balance of US ;l million equivalent in soles wfill be provided by the Peruvian Government. iii, The Highway Department in the HMinistry of Development is responsible for maintenance, improvement and construction of roads in Peru. It is fairly well crganized and administered. However, its staff lacks experience in directing maintenance operations and in the design and supervision of road construction. iv. In 1955 the Bank made a loan (127-PE) of US$5,000,000 for a road mniintenance program in Peru. Local funds were not adequate to make possible the execution of the program at the rate planned for at the time of the loan. However, the Government has agreed to adequate future budget appropriations and extension of the maintenance program for at least two years. An amount of $700,000 will be provided by the Peruvian Government for consultantst services, for the procurement of urgently needed spare parts and some com- p:Lementary maintenance equipment to balance the existing equipment. v,. Detailed studies and final designs for the Aguaytia-Pucallpa road have been carried out by the Highway Department on the basis of a preliminary report by a consulting engineering firm. Construction work will be carried ouit by contractors selected on the basis of international competitive bidding. Consulting engineers will be engaged to review and, if necessary, alter the plans and designs, to supervise the execution of the construction work and to assist in the preliminary study for reconstruction of the Aguaytia-Morococha section of the Central Highway. vi. The Central Highway connects the country's main center of consumption and trade, the Lima-Callao area, with the low-lying tropical region around Pacallpa, which forms part of the Amazon basin. As a result of the proposed reconstruction of the section between Pacallpa and Aguaytia, the entire Central Highway will be an all-weather road. The section between Aguaytia and Morococha will still be below standard and should later on be improved. Cheaper, safer, quicker and more reliable transportation will be possible between PucallP.: and Aguaytia and, therefore, between the Amazon region and the Lima-Callao area.  ii vi.i. The project is sound and suitable for a Bank loan of Us53,500,ooo provided firm arrangements are made to cover the local currency costs. An appropriate term would be 15 years with a four-year period of grace.  I. INTRODUCTION 1. The Peruvian Government has asked the Bank for a loan of US$'5,500,000 equivalent to cover the foreign exchange cost of (1) the reconstruction of the Aguaytia-Pucallpa 170-km section of the Central Highway, (2) a preliminary en- gineering study for reconstruction of the adjacent section Aguaytia-Huanuco- Cerro de Pasco-La Oroya-Morococha of the same highway. 2, The appraisal of the project is based on a preliminary study of the Aguaytia-Pucallpa section made by the consulting firm of Michael Baker, Jr., of Rochester, Pa., USA, in 1955, on further studies developed by the Hi.ghway Department of the Ministry of Development and on the findings of a Bank mission to Peru in March 1959. II. BACKGROUND A. Status of the Present Highway Maintenance Project 3. Maintenance, improvement and construction of roads in Peru are the responsibility of the Highway Department in the Miinistry of Development. For maintenance purposes, the country is divided into 25 districts, which are responsible to the Maintenance Division of the Highway Department. Improve- ment and construction activities come under the Construction Division of the same Department which also handles the planning and design of new work. 4. On August 5, 1955, the Bank made a loan (127-PE) of U'$5 million equivalent for a maintenance program, inc'luding the purchase of equipment, materials and supplies, and payment for consultarts' services. The loan became effective on September 8, 1955, but maintenance operations in the f:ield could not be started until the beginning of 1957 mainly because of delays in providing local funds. 5. The amounts of local funds appropriated in 1957 and 1958 were not adequate to make oossible the execution of the program at the rate planned for at the ti.me of the loan. Only last year was there noticeable improvement in the maintenance of the most important roads, Substantial progress has been made in the administrative field such as accounting, cost control and warehousing. IHowever, delays have occurred in the erection of repair and service facilities for equipment. At the beginning of 1959, the Highway Department embarked on a shop erection program, which is almost complete, and will make it possible to maintain and operate efficiently the equipment purchased with Loan 127-PE, and to organize maintenance operations properly.  6. The Highway Department has been assisted by consulting engineers in the execution of the maintenance program. The number of technicians on the consultants' team has been gradually reduced, but the Department is still in need of expert advice, principally for the planning of maintenance oper- ations, for equipment maintenance, cost accounting and budgeting. The De- partment also lacks some equipment and spare parts for the existing equip- ment. 7. As indicated above, the maintenance program was not completed by December 31, 1959, the closing date of Loan 127-PE. To obtain reasonable benefits of the investments already made and to help Peru to establish a reasonably well-equipped, well-organized and well-managed highway mainte- nance organization, the program should be extended for at least two years, B. Road Construction Program 8. The Peruvian Government is conscious of the need for new roads. A five-year national highway plan was approved by Law No. 12990 of March 31, 1958. The plan called for the betterment or construction of a number of roads throughout Peru (4,200 km), mainly penetration roads in the mountains and tropical plains in the eastern part of the country. It was to be carried out in the period 1958-1962 at an estimated cost of 1 billion soles to be met from the proceeds of specific taxes, mainly gasoline taxes, earmarked for this purpose. 9. Economic and financial considerations were not taken sufficiently in,to account in establishing the national highway plan and the survey and engineering of the various roads were very preliminary. In fact, little actual work under the national plan has been completed. The Government is nc'w considering whether to have a transportation survey made, presumably with the emphasis on roads in order to determine a more realistic construc- tion program. In the meantime, the Government wishes to embark on the reconstruction, with Bank's financial assistance, of the Aguaytia-Pucallpa section of the Central Highway, which the Government considers to be a high priority project. 1C). In the latter part of 1958, the Government had a special committee prepare a comprehensive plan of public investments. Under the heading "High- weys" several of the roads included in the Highway Plan were listed and the road Aguaytia-Pucallpa was assigned top priority. III. THE C3NTRAL HIGHWAY 11. The Central Highway stretches over a total of 840 km between the Lima-Callao area on the Pacific coast and Pucallpa, located on the navi- gable Ucayali river, a tributary of the Amazon river. From Lima, the high- way climbs the western slopes of the Andes mountains and reaches its high- est point of 4,843 meters above sea level shortly before La Oroya (Km 188),  - 3 -- an important mining center. Between La Oroya and Cerro de Pasco (Km 313), the road follows the Altiplano at an altitude of about 3,800 meters. From Cerro de Pasco, the road descends through a narrow valley to Huanuco (Km 427), at an elevation of 2,000 meters. After Huanuco, the road climos the Carpish Pass (Km 475) at 3,000 meters to descend into the tropical plains w-hich are reached approximately 50 km east of Aguaytia (Km 673) from where the road follows the almost horizontal terrain to Pucallpa (Km 840). 12. The section between Aguaytia and Pucallpa was built about 16 y-ears ago as an earth road with a relatively straight alignment and flat grades, except for the portion near Aguaytia where the road has insuffi- cient width and narrow curves in a number of places. 13. Due to lack of surfacing and proper drainage, the Aguaytia-Pu- callpa section is impassable and closed for all traffic during the rainy season, which lasts for ab^lt six months (Novenoer-YIay) each year, and during the occasional rainstorms outside the rainy season. Maintenance is the responsibility of a military detachment, which enforces the rule prohibiting traffic when the road is closed. ]4. The Highway Department has for years been working on the improve- ment of the first 150 km of the Central Highway from Lima over the pass to Horococha, which should be completed in a year from now. The re- constructed road is being built to standard specifications and paved. 115. The condition of the remaining section of the Highway between i'Horococha and Aguaytia leaves much to be desired. Although all-weather, the road is winding and narrow and has a rough surface in many places. In the section between Cerro de Pasco and Huanuco only one-way traffic is allowed on alternate days. 16. The project financed by Loan 127-PE included preliminary study of the reconstruction of the road between Aguaytia and Pucallpa. The study was undertaken by the firm of consulting engineers employed for the maintenance program, whorecommendedconstruction of a high-standard road wiith asphalt pavement. The Highway Department undertook the revision and detailed design of this section, which was completed in 1959. IV. THE PROJECT A. Description L7. The project consists of: a) The construction and reconstruction of about 170 km of the existing road between Aguaytia and Pucallpa, the easternmost section of the Central Highway. b) The planning and preliminary engineering for the improvement and reconstruction of the 522-km long section Aguaytia-Huanuco-  - 4 - Cerro de Pasco-La Oroya-Morococha of the Central Highway, in- cluding cost estimates so that at a later stage detailed plans and tender documents can be prepared. c) The continuation of the maintenance program provided for in Loan 127-PE for a further period of two years. 18. The road between Aguaytia and Pucallpa will be reconstructed to have a six-meter wide, light asphalt pavement and shoulders of one meter on each side. The center line of the reconstructed road will generally follow the center line of the existing road, except in the mountainous area near Aguaytia where curves will be widened to have at least a 43-meter ra- dius. The general design standards are shown in Annex 1. These design standards are acceptable. 159. The preliminary engineering study and design for the reconstruction of the Morococha-Aguaytia section will be undertaken to obtain reliable data on the scope and cost of the work to be done on the various sectors. These data will serve as a basis to determine the priority of reconstruction of the different sectors. It is most likely that the reconstruction can follow in general the alignment of the existing road; however, the preliminary study will examine a possible relocation of about 80 km to avoid the high eleva- tion of the Carpish Pass between Huanuco and Tingo Maria. 20. As indicated above, the over-all maintenance program was not com- pleted by December 31, 1959, the closing date of Loan 127-PE. New consult- arnts are being engaged for two years in order to get maintenance operations in the field well under way. The continuation of the maintenance program will also require the purchase of urgently needed spare parts and comple- mentary pieces of equipment in order to balance the present maintenance equipment. This part of the project is not financed out of the proceeds of the proposed loan, but will be financed by the Government. B. Execution of the Project 21. The Highway Department will be responsible for the execution of the project. This Department lacks experience in design, preparation of tender documents and supervision of large road construction works, and the assist- ance of competent consulting engineers is therefore required to insure ef- ficient execution of the project. The same consultants will review the detailed design of the Aguaytia-Pucallpa road, and the preliminary design of the Aguaytia-Morococha road prepared by the Highway Department. 22. The construction work will be carried out by contractors under unit- price contracts to be awarded on the basis of international competitive bid- ding. 23. During the rainy season, from about November to May, almost all work on the hguaytia-Pucallpa road will cease, and it is therefore estimated that the construction cannot be completed before the end of 1964.  - 5- C. Estimated Cost of the Project 24. The total cost of the project is estimated as follows: (rate of exchange S/27.50 to US$1.00) Total Cost Foreign In U,S$ In Exchange Local Million Soles Cost in US$ Cost in Equivalent Million Equivalent Soles 1. Construction Aguaytia-Pucallpa including cost of maintenance one year after completion 8.6 236.0 4.3 118.0 2. Engineering and supervision of same 0.6 16.5 0.2 11.0 3. Preliminary study and engineering of Morococha-Aguaytia 0.4 11.0 0.2 5.5 4. Continuation of the maintenance program, engineering, spare parts for a further two years 0.72/ 19.0 0.7 - 5. Contingencies 14_ 38,5 0.8 16.5 Total 11.7 321.0 6.2 151.0 S/' US$ 700,000 will be financed in foreign exchange from the Peruvian Government's own funds. 2r. The final plans and designs so far prepared by the Highway Department have permitted detailed estimates of quantities and closely calculated unit prices to be made. The estimate for the Aguaytia-Pucallpa section includes the cost of one year's maintenance by the contractor after completion of the work, a condition imposed on the Highway Department by the DLF, to which the Bank has no objection. The local currency estimate for the Aguaytia-Pucallpa section irncludes an amount of S/25 million as a hedge against possible local price increases during construction. The estimate of total cost is considered adequate. 26. As shown in the above table, a general contingency (about 13%) on the Bank-financed part of the project has been added for unforeseen expend- itures. 27. The foreign exchange component has been estimated at 50% of the total cost for construction and 33% for the engineering work of the Aguaytia- PLucallpa road. These percentages represent for the eonstruction cost an allowance for depreciation, import of materials and other foreign expendi- tuxes. and for the engineering work, the salaries and expenses of foreign pesonnel- De, Financing of the Project 28. The Bank, the DLF and the Government will provide the financing of the project, the cost of which is estimated at US$11.7 million equivalent. The Bank will finance the entirety of the foreign currency costs, not only  - 6 - o the construction of the kguavtia-Pucallpa nortion O<" the Central Highwuay, but also of the rrelirin-ary, studies of the Eorococha-A.gua-tia. Thae amount invJolved is USv,,5.5 million equivalent. 29. The DLF has authorized a 15-year loan to the Government of Peru of the equivalent in soles of up to US$4.5 million to assist in financing p.rt of the local currency costs of the reconstruction of the Aguaytia-Pucallpa portion of the Central Highway. 30. The present law under which the Peruvian Government is authorized to borrow funds for the reconstruction of the Aguaytia-Pucallpa road, does not permit borrowing for maintenance purposes. Therefore, the Government will provide the remaining US700,000 in foreign exchange to cover the cost of en- gineering fees for consultants' services over a period of two years for the continuation of the maintenance program, as well as for the purchase of spare parts and complementary maintenance equipment. The Government will also pro- v:ide the balance of the local currency cost in soles, estimated at US 1 mil- lion equivalent. 31. Law 12990 referred to in paragraph 8 provides that proceeds of certain taxes, mainly gasoline taxes, are earmarked to cover construction and financing costs of the national highway plan, which includes the sections Huianuco-Aguaytia-Pucallpa of the Central Highway. The proceeds from the taxes amount yearly to about S/400 million, of which, for the coming years, about S/100 million are committed, mainly for payment of debts not related to the project. Assuming that a further amount of S/150 million would be obligated for additional debt service and maintenance allocation, an amount of S/150 million per annum would still be available for construction out of which S/10 to S/12 million represent the Government's annual share of local con- struction expenditure on the Aguaytia-Pucallpa portion of the Central Highway. E. Economic Justification 32. The function of the improved road from Aguaytia to Pucallpa, as part of the Central Highway, will be to provide a cheaper, safer and quicker connection between the Amazon plain and Lima, the capital city of Peru. Sit- uated at the head of the navigable section of the Ucayali river, Pucallpa serves as a river port for a vast area stretching towards Iquitos in the north. Its population has increased from a few hundreds when the earth road was built in 1944 to almost 20,000 at present. There are also numerous settlements north and south along the Ucayali river and its tributaries. The present population of the area which would be served by the road is about 65,000. 33. The lands along the first 60 km of the road east of Aguaytia offer relatively little prospect for agricultural development because the soils are leached by an annual precipitation of 5,000 mm (200 inches) and are infertile. Eastward towards Pucallpa conditions improve, precipitation is less and the soils are better. The area includes the 400,000 ha. Tournavista concession, developed by R. G. Le Tourneau Inc., Texas, and the San Jorge experimental  -7-. cattle farms operated by SCIPA (a Peruvian entity receiving support from the U&A), and it has possibilities for beef-cattle raising and the production of tropical crops such as citrus, bananas, rubber, etc. 34. Pucallpa has already developed into an important lumbering center in spite of the present poor transport facilities. The main timbers are cedar, which competes with imported oregon pine in construction work, and mahogany, partly for export. Lumber production in the Pucallpa area itself increased from 7 million board feet in 1951 to about 20 million board feet in 1959, making it now the largest sawmill center in Peru. Moreover, much lumber produced in Iquitos and elsewhere along the river is shipped to PuLcallpa and trucked from there to Lima. Prior to the earth-road connection, lumber moved down the Amazon and through the Panama Canal to Lima. Present road-freight costs are about one-third of the sale price in Lima. 35. Peru's current lumber consumption is estimated at 78 million board feet, of which 45;' is imported at a cost of about S/70 million annually. Consumption has increased by 20 million board feet during the last six years and may reach 100 million board feet by 1968. Peru's commercial lumber pro- duLction increased from 32 million board feet in 1952 and is now about 43 million board feet of which about half equivalent to 42,000 tons are shipped ouLt of the Pucallpa area. If the Pucallpa road is improved, production could grow at a more rapid rate in the future and it might - in view of the enormous stands of trees and the potential market - reach 65 million board feet by 1968. It is likely that at least half of this equivalent to about 60,000 tons, would be transported via the Pucallpa road. 36. Although the present production of livestock (cattle and hogs) is re)latively low, there are reasonable prospects for expansion. Some meat has recently been moved out by air and improved road transport should materially stimulate output. The recent agricultural survey mission has recommended that a slaughterhouse be established at Pucallpa with meat transport by re- frigerated trucks to Lima, Movement on the hoof is also likely. Meat and cattle traffic could amount to about 7,000 tons annually by 1968. 37i* The volume of agricultural products transported from the area has increased by about 18,000 tons to 38,000 tons during the last eight years. Bananas and other tropical fruits are the principal products and smoother and cheaper transportation should materially increase marketing opportunities for these perishable goods. Rubber and cacao are also produced. There is ample suitable land for a wide range of tropical crops and the volume of agricultural products transported annually could increase to around 60,000 tons by 1968. 38. The inward traffic, which at present amounts to 56,000 tons of goods, is expected to reach 90,000 tons by 1968. 39. The estimates of transport possibilities are, in summary:  - 8 - (in '000 tons) Outward traffic: 1959 1968 Lumber 42 60 Cattle meat - 7 Agricultural products 38 60 Other 5 12 Inward traffic 56 90 Total 141 229 40. There is a further possibility of petroleum development which has nolt been included in the estimates. There is a small oil field and refinery in operation south of Pucallpa which amply supplies local requirements, and geological conditions are said to be favorable for further production if the market develops. 41. The traffic volume over the existing dirt road, which is open to traffic only six to eight months a year, has increased rapidly since its conastruction and in 1959 reached an average of 120 vehicles a day, practi- caLly all trucks. 42. Freight costs (including fuel, tire, oil, maintenance and depre- ciation) on this road are at present about S/3 per ton/km. They are expected to be reduced by one-third after the project is completed. Some additional re,ductions in drivers' wage costs, insurance, etc. have been excluded from the estimate. 43. On this basis, the annual saving in freight cost would amount to about S/24 million for moving the present volume of 85,o00 tons outgoing freight plus 56,000 tons incoming freight, i.e. 140,000 tons over 170 km (length of the section Aguaytia-Pucallpa). Deducting from this amount the yearly cost of maintenance, the saving represents about 9% of the estimated cost of the project. As indicated above, it is estimated that in 1968, 230,000 tons of freight will pass over the road, which would give savings twice as large as on present traffic. F. Conclusions 44. The improvement of the Aguaytia-Pucallpa road will be a major con- tribution towards the development of the central part of the Amazon area of Peru. This area has sufficient potentiality to justify the building of a good road connection with the center of consumption and trade, the Lima- Callao region. The preliminary studies of the M4orococha-Aguaytia section are prerequisite for reconstruction of this section which will further the development of the area. 45. The Peruvian Government has agreed to extend the present over-all road maintenance program for at least two years, and, in this connection,  - 9 - the services of consultants have been retained and provision made for purchase of' spare parts and complementary maintenance equipment. 46. The Government has engaged consultants to assist in the execution of the project, the construction part of which will be carried out by con- tractors selected on the basis of internetional competitive bidding. 47. The U.S. Development Loan Fund has authorized a loan wihich would in effect cover the greater part of the local currency cost of the project. The balance of the local currency cost would be made available by the Govern- ment to execute the project. The Government would also provide the necessary funds for the continuation of the maintenance program. 48. The project is sound and suitable for a Bank loan of U$5.5 million equivalent. A term of 15 years, including a four-year period of grace, would be appropriate.  Annex 1 DESIGN STAARDS Type of Terrain Flat Rolling Mountainous Design speed 70 km.p.h. 50 km.p.h. 40 km.p.h. Width of surfacing 6.o m. 6.0 m. 6.0 m. Width of shoulders 1.20 m. 1.20 m. 1.20 m. "'inimum radius of curves 150.0 m. 70.0 m. 43.0 n. Crown general 5% 5% 5% Crown of riding surface 3% 3% 3% Cuper elevation 8% 8% 8% Length of super elevation 60.0 m. 40.0 m. 30.0 m. Mlaximum grade 5% 5% 5 Length of maximum grade 800 m. 800 m. 800 m. Transition of curves 1.00 m. 1.00 m. 1.50 m. 3raking sight distance 90 m. 60 m. 45 m. Passing sight distance 400 m. 200 m. 150 m.  ECUADOR COLOMBIA ...TUM BES 1.7 Paitthu Chuucnos r 3 ~~~~~~~~~~Yurimoguosf MO ~M.YOBAMBA (C CHACHAPOYASO. X I ) .. ........ o iA A A A A A Z I L Aguayt,gano Azul Cs,:,::::Chimb Cs~~~~s HUANUCOCCH - .......... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ J I Oc . * *. .. , c c ""-~~~~~A AM^ERICN KIOETRSWIPA/Y | | -~REC ONS*TRUCTI|o N ' *PRLIMIAR STR**U DYX (PR oJECT 1 FEBRUARY 1960 IBRD 637R