Bolivia - Vuelta Grande Gas Recycling Project

Document of The World Bank FOR OFFICLAL USE ONLY CtR /2/?-Fo Report No. P-4309-BO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO SDR 12.8 MILLION TO THE REPUBLIC OF BOLIVIA FOR THE VUELTA GRANDE GAS RECYCLING PROJECT June 3, 1986 |This document has a restricted distribution and may be used bv recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Bolivian Peso ($b) = US$0.0000005 US$1.00 = $b 2 million 1 million ($b) = US$ 0.5 GOVERNMENT FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES Megawatt (MW) = thousand kilowatts Gigawatt-hour (GWh) = million kilowatt-hours Barrel (Bbl) = 0.159 cubic meters (cu m) Cubic Foot (CF) = 0.028 cubic meters (cu m) British Thermal Unit (Btu) = 0.252 kilocalories (kc) Mile = 1.609 kilometers (km) Bbl = 0.1765 CF MMBbl = million barrels GLOSSARY AND ABBREVIATIONS BCF - billion cubic feet BD - Barrel per day CIF - Cost, Insurance, Freight ENDE - Empresa Nacional de Electricidad ENFE - Bolivian Railways FOB - Free on Board IDB - Inter-American De'elopment Bank LPG - Liquifirr petroleum gas (propane/butane) MCF - thousand cubic feet MEH - Ministry of Energy and Hydrocarbons MMCF - million cubic feet MMCFD - million cubic feet per day N4YSCRF - New York State Common Retirement Fund TCF - trillion (1,000 billion) cubic feet tpy - metric tons per year YPFB - Yacimientos Petroliferos Fiscales Bolivianos (Bolivian National Oil Company) Note: A standard cubic foot of gas is the amount of gas at sea level atmospheric pressure and 600 Fahrenheit contained in one cubic foot of space.  BOLIVIA FOR OMCUAL USE ONLY VUELTA GRANDE PROJECT DEVELOPMENT CREDIT AND PROJECT SUMMARY Borrower: The Republic of Bolivia Beneficiary: Yacimientos Petroliferos Fiscales Bolivianos (YPFB) Amount: SDR 12.8 million (US$15 million equivalent) Terms: Standard Onlending Terms: The Government would onlend the proceeds of the Credit to YPFB for a period of 12 years, including 3 years of grace at an interest rate of 9.5%. Project Des:ription: The proposed project would assist YPFB to increase its liquid hydrocarbon production by 28.2 million barrels over twenty years with gas production thereafter. At peak during gas recycling, the project would produce about 2 million barrels of condensate and L million barrels of LPG per year. The project consists of the development of the Vuelta Grande retrograde gas condensate field, and of a gas recycling plant; studies of YPFBts staff policies and organizational efficiency; and consultants services and training related to the recycling operation. It would enable Bolivia to redu^e the need to import oil, and to increase foreign exchange earnings from LPG exports. Project benefits would be broadly distributed. The project faces relatively small technical risks because of the works already accomplished, while the uncertainty of the Government's economic program could have negative effects. Estimated Cost: Local Foreign Total (US$ million) Wells 4.2 9.3 13.5 Gas Processing Plant 6.8 16.5 23.3 Gathering Systems 2.5 0 2.5 Base Cost 13.5 25.8 39.3 Physical Contingency 1.3 2.6 3.9 Price Contingency 1.3 2.4 3.7 Total Project Cost 16.1 30.8 46.9 Refund PPF Advance - 1.0 1.0 Total Financing Required 16.1 31.8 47.9 This document has a restricted distribution and may be used by refipients only in the performance of their official duties. Its contents may not otherwise be disclsed without World Bank authovrition.  - ii - Financing Plan: Local Foreign Total (US$ million) YPFB 16.1 10.8 26.9 Argentine Government 0 6.0 6.0 IDA 0 15.0 15.0 Total 16.1 31.8 47.9 Estimated Disbursements: IDA FY 1987 1988 Annual 9.2 5.8 Cumulative 9.2 15.0 Rate of Return: ERR 60.4%; FRR 43.9%. Appraisal Report: Report No. 6181-BO dated June 4, 1986. Map: IBRD 14429R4  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 12.8 MILLION TO THE REPUBLIC OF BOLIVIA FOR THE VUELTA GRANDE GAS RECYCLING PROJECT 1. I submit the following report and recommendation on a proposed credit to the Republic of Bolivia for the equivalent of SDR 12.8 million (US$15.0 million equivalent) to help finance the Vuelta Grande Gas Recycling project. PART I - THE ECONOMY 1/ 2. An Economic Report (No. 5680-BO) was distributed to the Executive Directors in August 1985. The following discussion is based on that report and the findings of several missions which visited Bolivia after the Government adopted its economic stabilization and reform program. Country data sheets are presented in Annex I. Background 3. Over the past century, Bolivia's economy has functioned as a dual system in which the modern economy extracted mainly mineral resources to finance the accumulation of assets abroad and had few linkages with the non-modern economy in which the majority of the population lived under subsistence agriculture. Political life was dominated by the mining and land-owning oligarchy. 4. Bolivia's defeat in the 1935 war with Paraguay created deep dissatisfaction and generated pressures for change. The 1952 revolution sought to put an end to the colonial structure and to weaken the oligarchy's economic base. This objective was partially achieved. Progress was made in eradicating feudal conditions, distributing the land more equitably, and mitigating obstacles to social mobility, notably through an impressive effort in primary education. However, the agrarian 1/ This and Part II are abbreviated versions of the sections on 'The Economy' and 'Bank Group Operations in Bolivia- contained in the President's Report (P-4253-BO), dated April 23, 1986 on the Reconstruction Import Credit project.  -2- reform and the nationalization of the large mines were followed by falling production and declining GDP throughout the 1950s. During the subsequent decade, output increased steadily at an average annual rate of about 5Z, and real CDP per capita recovered its 1952 level by 1970. 5. In the 1970s, a commodity boom, together with political stability, brought GDP and export growth. While public sector investment expanded and was financed by external borrowing, the private sector remained dormant and continued to transfer resources abroad. Political considerations and the expectations of rapid growth of export revenues and public income generated many uneconomic and unviable projects, and unrealistic pricing, foreign exchange and mineral taxation policies. Returns on investment remained low and the country became burdened with large repayments of short-term external debt without the capacity to service them. 6. Growth during this period was characterized by a reinforcement of the role of the state in the economy. The productive sectors grew less than the service sector, resulting in a vulnerable economic structure, with relatively little real economic development. Incentives were distorted by extensive controls over prices and the exchange rate, and by excessive mineral taxation. Furthermore, expansion of private sector activity was limited by the small domestic market, the weak transport and communications network, and the lack of management capacity and of a trained labor force. 7. As the underlying weaknesses of the 1970s growth became apparent, commercial banks became concerned about the country's export potential and debt servicing capacity and reduced their exposure in Bolivia. Falling inflows of foreign exchange coincided with declines in oil production and prices of mining exports, and an increase in debt service requirements. At the same time, Bolivia entered into a period of political instability. 8. An economic program aimed at correcting the external imbalance and re-establishing normal relations with foreign lenders was defined in 1979. Its main elements included increasing some prices and tariffs of public sector services, increases in prices of agricultural goods, reduction of mining taxes, increases in interest rates, a devaluation, and negotiations on debt rescheduling with the commercial banks. These measures were the basis for a stand-by agreement with the IMF and a Bank Structural Adjustment Loan (SAL) in 1980. After initial compliance with INF targets and with the tranching conditions of the SAL, the country's economic situation again deteriorated. The economic program was interrupted by a military coup in July 1980. Rapid growth of public sector expenditures combined with lower revenues resulted in a large fiscal deficit. Public investment fell. 9. The deterioration of the economy continued under three military governments and the 1982-85 Siles administration. This was mainly caused by inconsistent, partial policies which attempted to reactivate the economy and to improve wages through foreign exchange, price, and financial controls and nominal wage increases. Because of the failure to take into account the limitations imposed by the external sector and the disregard for financial constraints, these efforts were counter-productive. The lack of direction and inappropriate policies discouraged productive activities,  - 3 - while inflation accelerated and external debt arrears accumulated. No sustained or consistent effort was made over this period to stabilize the economy or solve structural problems. 10. Thus, when President Paz Estenssoro took office in August 1985, he inherited extraordinarily complex problems. GDP, exports and investment had been falling for four years in a row. Over 1980-84, GDP had fallen by 16% while GDP per capita had declined by 27%. Sectors most affected by this decline had been manufacturing (34%), construction (30%) and mining (22%). In August 1985, inflation was running at an annualized rate of 22,256Z. Central Administration revenues in 1984 as a share of GDP had fallen to below 3%, and the deficit was in excess of 20%. The deficit of the consolidated public sector had reached 29% of GDP. The official exchange rate stood at $b 67,000 while the parallel rate exceeded $b 1 million/US$. There was a substantial accumulation of external debt payments arrears (US$700 million on public debt, 20% of GDP) and imports were less than two-thirds of the average 1979-81 level. Unemployment stood at 15% and there was a proliferation of marginal activities (small-scale smuggling, black-market operations, etc.). Increasing distortions in the formal economy had shifted a growing share of economic activities to the underground economy, especially in the external trade area. The situation was exacerbated by the weakness of the public administration, lack of confidence in government policies, and deteriorating incomes of the urban poor caused by the price distortions. Attempts to introduce stabilization measures had failed because of the weakness of the Government and strong labor opposition. The New Economic Policy 11. The new Government adopted shortly after taking office the bold and pragmatic -New Economic Policy' program (NEP),in an effort to redress the economic and social situation. It introduced measures on August 29, 1985 designed to stabilize the economy and to launch structural reforms that would lay the foundation for the resumption of economic growth. The package, whose design is well-conceived and comprehensive, includes: (a) a sharp reduction of the fiscal deficit and elimination of Central Bank financing of the public sector. These are being achieved through elimination of Government subsidies, a drastic rise in the prices of hydrocarbons, public utility tariff increases, and a restoration of fiscal revenues. The latter is to be brought about by returning economic activities to formal channels as a consequence of the unification of the exchange rates; (b) a managed float of the exchange rate through an auction system which devalued the peso in nominal terms by 97%; (c) Lhe phasing out of Central Bank financing of the Treasury (TGN); and tightening of controls over public sector revenues and expenditures by centralizing all accounts in the TGN; (d) bringing wage expenditures in line with the financial capacity of the Central Government and public enterprises, and reducing wage inequalities among public agencies. Bonuses have been  -4- consolidated and payments in kind through subsidized foodstores are being phased out. A ceiling on public sector agencies' expenditures on wages has been set at the nominal amounts spent in July, 1985 plus an additional 25% in nominal terms (the latter much below the subsequent rate of inflation); (e) a comprehensive tax reform package: a 10% value added tax, a 10% income tax (against which the VAT can be deducted), a 1% transactions tax, and a 1-5Z property tax; (f) freeing prices in the economy (in the financial, goods and labor markets), and using economic criteria to set those prices that are inherently not market determined. External trade was liberalized and import tariffs have been reduced to a flat 10% of the CIF price plus 10% VAT; (g) reorganizing and decentralizing the state mining and oil companies, and; (h) the Central Bank and the Finance and Planning Ministries were instructed to propose further monetary and tax reforms. 12. The structural reform effort aims at reducing Government intervention, establishing market prices, and restoring incentives for private sector activity so as to increase the efficiency of the economy. A drastic departure from past policies, the program is comprehensive and surpasses in some aspects the recommendations of several international entities which have advised the Government. 13. Initial results were encouraging. Inflation was reduced from a monthly rate of 60% in August to -2% in October and 3% in November. Money emission by the Central Bank likewise fell from a 60% expansion in August to 34Z in September, 16% in October and 0% in November. After the float of the peso, the gap between the official and parallel rates had been effectively eliminated and the exchange rate stabilized at about $bl,100,000 to the US$. Treasury revenues increased from 5.5 trillion pesos in August to 16.7 trillion in November. The consolidated public sector deficit is estimated to have been reduced from 29% of GDP in 1984 to 10% in 1985. 14. The program slipped towards the end of the year resulting in a temporary setback in these trends. The Central Bank's lack of full control over public sector agencies led to a substantial accumulation of arrears. The process of clearing these up coincided with year-end bonuses to public employees to compensate for the drastic reduction in real wages, expansion of agricultural credit and credit and military expenditures. Monetary emissions increased 50% in December. Inflation accelerated to 16% in December and 33% in January and for a short period the parallel rate of exchange exceeded $b2 million. 15. In response, President Paz reshuffled the cabinet in January 1986, appointing to the key ministries of Planning and Finance two of the main architects of the NEP. The new cabinet has brought the program back on track. Monetary emission and fiscal expenditures have been controlled  effectively, albeit to some extent through build-up of arrears. As a result, inflation was zero in February and March and the exchange rate has stabilized at slightly less than $2 million; the spread between the official and parallel rate is less than 5%. Tax reform proposals were approved last month by the Congress. 16. Based on the NEP, the Government, with IMF assistance, has prepared a short-term economic program. The objectives for 1986 are a sharp reduction of inflation (from over 8,000% in 1985 to below 85%), and a stabilization of the economy after an accumulated fall of 18% since 1981. Although initially a modest economic recovery was expected from the improved price signals and reduced labor unrest, the fall in prices for key exports and floods-cut farm output have reduced the possibilities of achieving growth this year. The key stabilization element is the reduction of the non-financial public sector deficit from an estimated 10% of GDP in 1985 to 5.8% in 1986. Fiscal adjustment is based on the increased revenues of YPFB from the large real depreciation of the Peso and the indexation of petroleum product prices to the US dollar; a very tight wage policy; and the tax reform measures. This target is consistent with an annual inflation rate of 80% (28% in the last three quarters). Central Government current expenditures are programmed to remain constant in real rerms. The current account savings of the consolidated nonfinancial public sector is expected to improve from -6.2% of GDP in 1985 to 0.4% in 1986, and investment expenditures to increase from 4.3% of GDP in 1985 to 7.0% in 1986, largely as a result of drawing on external financing for the execution of on-going projects. Other program targets include limiting expansion of money and quasi-money to no more than 40% in 1986, from 2,300% in 1985; interest rates are to remain flexible and positive in real terms; the exchange rate and trade regimes are to remain libc-ralized. The IMF has agreed with the Government on a Letter of Intent and a policy memorandum for 1986. A Stand-by Agreement is scheduled for approval this month. Success of the New Economic Policy 17. The major requirement for the success of the NEP is the Government's continued determination to carry it forward, including the consistent application of exchange rate, monetary, fiscal, and wage policies. Some of the most difficult measures have already been adopted, those requiring time are under implementation, and the program's medium term objective of a market-oriented economy with minimal intervention has been made explicit. The Government's commitment has been confirmed by its restrictive Salary Decree, firm handling of a general strike in September, Decree imposing compulsory loans for the Employment Emergency Fund, recent cabinet changes, agreement with the IMF, and the approval of comprehensive tax reforms. These stringent measures, however, are straining the country's social fabric. 18. A second critical requirement is external support. After prolonged economic decline, the population is impatient and decisive action and more resources are needed to build on the reforms now underway. In the short run, expansion of economic activity is constrained by the need to avoid the resurgence of hyperinflation, which requires maintenance of the tight monetary policy. The only way to allow for expansion of demand without triggering inflationary pressures is through a higher level of  - 6 - imports, leading to increased production that would, in turn, translate into improved real wages and increased exports. 19. The sweeping reforms undertaken would normally have induced significant improvements in the balance of payments. However, Bolivia has experienced an extraordinary collapse of world markets for tin and hydrocarbons on which export earnings depend. The need for external resources to allow the required higher imports without increasing pressures on the exchange rate market has thus been exacerbated. In Bolivia, peso depreciation and domestic inflation are closely related, therefore avoiding a rapid depreciation of the exchange rate is crucial to contain inflation. The latter is crucial to restore private sector confidence and to bring about a reduction of interest rates, which currently constrain private investment. Rapid transfer of external resources to Bolivia can thus help sustain the economic program in the short-run. 20. The third condition is the need to strengthen the Government's administrative capacity. There is a serious shortage of capable middle-level managers and technical staff to carry out the planned reforms. The few qualified managers in the public sector are occupied in mapping strategies and day-to-day defense of the economic program. Among the areas that need to be addressed are the monetary program, fiscal budget, tax reform, debt rescheduling, and the reorganization of public enterprises. The IMF, IDB, and USAID are providing technical support in these areas. Bank plans include assistance in the reorganization of CONIBOL and YPFB and public financial sector reform, plus an evaluation of the public investment program currently under preparation. 21. Finally, the fourth main condition is to achieve a positive response from the private sector, which must provide a significant part of the required increases in investment, production and exports. This depends critically on the credibility of the Government program -particularly control of inflition; maintaining a realistic exchange rate policy; and the availability o' credit at reasonable costs. 22. Over the medium term, the NEP measures already in place and those envisaged under it provide an overall framework for an efficient use of resources. Growth, however, will require substantial investment resources to develop Bolivia's potential. After several years of economic decline, both the public and private sectors have very limited capacity to generate them. The strategy to enhance this capacity (whose preparation is now underway) should include the following measures: - renegotiation of the external debt on concessionary terms; - strict screening of public sector investment projects with funds channeled to projects of high returns, short maturity periods, and which contribute to improving the balance of payments; - rationalization of YPFB and COMIBOL; - greater development of agricultural export potential; and  - 7 - - attraction of foreign investment to support effective use of natural resources, in particular hydrocarbons. Balance of Payments Outlook and External Capital Requirements 23. Background. Over the 1981-85 period, there were continuous trade surpluses as Bolivians cut imports drastically to meet external obligations, while the current account has been highly negative because of the large interest payments on the external debt. In 1986-87, as a result of the drastic elimination of the principal distortions in the economy, a partial recovery of exports is likely. This outlook, however, has been affected by the fall in the prices of mineral exports, particularly that of tin. Gas exports to Argentina are assumed to be sustained. Non- traditional exports (mainly agriculture), which fell from US$150 million in 1980 to US$31 million in 1985, may recover only gradually because international prices, with the exception of coffee, remain depressed. Demand from neighboring countries, which were important markets, is also expected to be below past levels. 24. Since 1982, registered imports have been sharply curtailed through controls and a quota system for allocation of foreign exchange. Consumption good imports fell in 1985 to 55% of the 1981 levels, while imports of inputs and capital goods fell by 40%. These sharp reductions seriously affected production, including that of the most important public enterprises because of the lack of spare parts and imported inputs. The same factors reduced manufacturing output by 31% between 1982 and 1984. Investment, affected by the limitations on the purchase of imported equipment, is estimated to have fallen to 70% of its real 1980 level. 25. The Medium-Term Outlook. The outlook for Bolivia's external sector in the medium term remains uncertain. Exports have declined from US$942 million in 1980 to US$621 million in 1985 as a result of the persistently overvalued exchange rate; falling export prices; economic difficulties in neighboring countries; and social unrest that affected production. While the volume of 1986 exports is expected to increase by 6%, declining prices will result in earnings of only US$562 million. Beyond 1986, however, possibilities for increased export volumes are good. 26. While the policy environment to achieve export growth has substantially improved, international markets remain weak. The collapse of the tin market has serious short-term repercussions but its impact on the trade balance could be alleviated by closing some of COMIBOL's mines which lose foreign exchange because of their high operating costs. Further ahead, there are good possibilities for other minerals, but response to NEP measures will be quite slow as exploration efforts have lagged and private miners remain cautious about investing. The main export product is natural gas, which is sold to Argentina at relatively high prices, under contracts through 1992. There are indications that a lower price may be agreed to in 1986. The Bolivian Government intends to re-open dis^c-sions with Brazil regarding substantial gas sales but these prospects remain uncertain.  -8- 27. Agricultural and agroindustrial exports could be multiplied as Bolivia has much unused fertile land, but only one-seventh of arable land is cultivated and yields are low. Improved technology, increased fertilizer use, and changing crop patterns could significantly increase the value of production. Also needed are reducing transport costs, agricultural research and extension, low cost irrigation, credit, and improved marketing. The export potential is diverse (soybeans, corn, coffee, cacao, wood and beef). Improved external policies should encourage a relatively rapid response in agriculture but sustained production increases and significant export diversification will depend on concerted action to develop the institutional capacity to provide support and infrastructure investments. 28. The upshot is that, unless an effort is made by the international financial community to put together an extraordinary financial package that will support Bolivia's economic reforms over the medium term, the likelihood of success is very low. The principal elements of such package, assuming continued strong domestic efforts, are clear. In addition to: (i) continuing IMF support for Bolivia's stabilization program, and (ii) IDA assistance to underpin key structural and sectoral reforms, it will be necessary to (iii) increase the flow of concessional aid, and (iv) undertake a major restructuring of Bolivia's debt. This multi-pronged strategy is currently being carried out, with the Association's approval on May 20, 1986 of the Reconstruction Import Credit, the projected Stand-by Arrangement and with a planned Consultative Group meeting. A restructuring of Bolivia's external debt is now being pursued. PART II - BANK GROUP OPERATIONS IN BOLIVIA 29. Bolivia did not obtain any Bank Group financing until 1964 and because of its restricted capacity to service external debt, initial Bank Group financing was almost exclusively on IDA terms. With Bolivia's promising prospects for expanded hydrocarbon exports, IDA lending ceased in 1975. In 1978, however, it became apparent that the expectations of large petroleum exports, and with it, dynamic economic development, would not materialize. Development is still seriously constrained by the dual structure of the economy; a large part of the population continues to live in extreme poverty. Limited creditworthiness and low per capita income make Bolivia eligible for IDA credits. To date, the Bank and IDA have approved 29 operations (15 crelits and 13 loans and one blend operation) for Bolivia, amounting to US$451.1 million, of which 20 have been fully disbursed. 30. Bank Group lending to Bolivia has concentrated on the development of infrastructure and social sectors. In the agricultural sector (seven operations amounting to US$48.6 million), the Bank Group has helped Bolivia develop a livestock industry, increase agricultural production, improve incomes and living conditions on the Altiplano and promote the development of the alpaca/llama industry; efforts to strengthen the Agricultural Bank of Bolivia have met with limited success. Through five operations in the power sector, amounting to US$53.4 million, the Bank Group has been instrumental in modernizing the sector, expanding electricity supply, improving the quality of service and setting up a regulatory agency and a public power company, which has been efficient and financially sound. In  - 9 - the transportation sector, Bank Group assistance to the railways (three operations of US$67.0 million) has helped to streamline organization, increase efficiency of operations and strengthen finances; an aviation development project assisted Bolivia's efforts to develop hitherto isolated areas by providing safe and efficient air freight and passenger transportation; a highway maintenance project is helping Bolivia protect its investments in highways. In the mining sector, five operations amounting to US$37.2 million have aimed at increased exploration and production and improved sectoral coordination. Additional Bank-supported projects are improving water supply and sewerage services in rural communities and the city of Santa Cruz; upgrading education and vocational training programs; and bettering living conditions for the urban poor in La Paz. The Bank's activities in the hydrocarbon sector are discussed in paras. 51 and 60. Finally, a Structural Adjustment loan was provided in 1980 to help the economy with its adjustment to a more productive basis. 31. Overall, Bank Group lending to Bolivia has supported broadly based Government efforts to expand and upgrade Bolivia's economic and social infrastructure. Prior to 1978, the Government had an excellent record in providing the required local funds, and in general, projects were adequately carried out. Since then, however, the execution of many ongoing projects has been affected adversely by the shortage of local funds, changes in Government personnel, and periodic suspension of Bank disbursements. The recent economic reforms and the appointment of highly qualified project managers by the current Government should help improve the execution of the remaining ongoing projects (however, the existing portfolio is small with only US$22.1 million undisbursed.) 32. While no new operations were approved in recent years, the Bank group has provided substantial technical assistance and undertaken much economic and sector work, focussed on critical impediments to Bolivia's development. Much work has focused on improvements in resource management and particularly investment programming but the proposals have yet to be implemented. A comprehensive study on COMIBOL was completed in 1981, including an action program for the rehabilitation of the company, a priority listing of investment projects, and feasibility studies for quick return investments. A program for the reform of the mining tax was prepared and analyses of the mining investment law and the fiscal reserves were carried out. Similarly, a blueprint was prepared for the reorganization of the Agriculture Credit Bank (BAB) and reform of the agricultural finance system. Studies were also prepared on pricing and investment issues for agriculture and broader studies on constraints and development options for the agriculture, transport, and energy sectors. A study was also undertaken as a basis for overhauling public sector auditing and procurement practices, some recommendations of which have been adopted. Finally, Bank staff provided assistance to set up an orderly debt data collection system and improve external debt management. Many of the recommendations of these studies and reports are either in place or have provided the bases for the current Government's stabilization and structural reform program. 33. The new economic policy provides a promising basis for resumption of lending to Bolivia. Since Bolivia is not expected to become creditworthy for Bank lending in the immediate future, the scale of the  - 10 - future operational program will depend in large measure on the availability of IDA financing. Assuming that concessional funds are available, we plan a major effort to support the Government's economic program and, accordingly, to rebuild our lending portfolio and pipeline, which has been seriously depleted following the hiatus in lending since 1980. Our assistance program would aim to strike a balance between policy-based and other lending, with a substantial institution-building component. It would be designed to assist the Government to achieve economic recovery and establish the foundations for future growth. With Bank staff support, the Government is currently defining a medium-term development program which will elaborate on macroeconomic and sectoral policies and present priority investment and financing plans. This will be presented to a planned meeting of the Bolivian Consultative Group tentatively scheduled for October 1986. More specifically, the objectives of Bank Group lending in the immediate future would be to: (i) assist in sustaining the implementation of the structural reform program and other adjustment policies that would restore Bolivia's economy on the path of growth; (ii) assist in the rehabilitation and reconstruction of the productive and infrastructure support sectors; (iii) stimulate mining, agriculture, agro-industrial, and hydrocarbon production to increase exports and achieve efficient import substitution; and (iv) assist in the improvement of public sector management and administration to enable the effective execution of the economic reforms. 34. Accordingly, the Bank Group's operational program will be designed to support critical medium-term adjustment measures, both through economic and sector work and individual lending operations. Following the Reconstruction Import Credit, priority will be accorded to support for the economic reform program through close monitoring and technical assistance, with a further policy based operation tentatively planned for FY88. Both sector work and lending are planned to support the restructuring of the financial sector, now in disarray, essential for recovery of the mining, manufacturing, and (to a lesser extent) agricultural sectors. Specific policy measures will include rationalization of interest rates and a major overhaul of the state-owned banking system. An institutional development operation is being prepared to help strengthen financial management and controls; support the development of more efficient systems of financial intermediation both in the public and private sectors, streamline the Government's budgetary, tax administration, cash and debt management systems, and improve public sector accountability. Preparation is underway for reconstruction and rehabilitation programs for COMIBOL and YPFB which would include institutional and policy reforms to stimulate increases in mining and hydrocarbons, respectively, and encourage joint ventures with private sector investors, supported by three recently approved PPFs. Other possible operations include a follow-up urban operation, transport and power projects to redress the deterioration in the financial and operating performance of ENFE and ENDE, and an agricultural credit cum extension project. This tentative lending program will be reviewed in light of the Government's mediumrterm recovery and structural reform program which will be elaborated over the next six months. 35. Because of the narrow scope for private investment, IFC became active in Bolivia only in 1973 through an investment of US$400,000 in a  - 11 - firm producing cables and plastic products. Two IFC 2.nvestments since then have contributed to the establishment of a local market for long-term securities; an equity participation of up to $550,000 in Banco Industrial S.A. (BISA) to assist in financing medium-sized industrial and mining enterprises, and US$337,500 in Banco Hipotecario Nacional to assist in the development of mortgage banking. Annex II contains a summary statement of the status of Bank loans, IDA credits and IFC investments in Bolivia. PART III - OIL AND GAS SECTOR 36. Bolivia has large and well-diversified energy resources. The economically exploitable hydroelectric potential is estimated at 18,000 MW of which only a small fraction has been developed. Proven natural gas reserves in 1985 were sufficient to sustain output for over 40 years. Proven reserves of liquid hydrocarbons (crude oil and condensates) are limited by comparison, equivalent to 17 years of present production. Ultimate reserves, especially for natural gas, are likely to be significantly larger. Nearly half of the national territory is potentially hydrocarbon bearing; only a small part of this area has so far been partially explored. 37. In 1984, net primary energy production reached 4.4 million tons of oil equivalent (toe) derived mainly from natural gas (48Z), crude oil and condensate (25%) and wood (21%). Energy resources and demand are not well balanced. Crude petroleum accounts for less than 1X of identified domestic resources but provided 57% of final energy consumption. Conversely, natural gas, the largest energy resource, met only 12% of final consumption. 38. There has been petroleum exploration in Bolivia since the early 1900's, carried out mostly by international companies. 336 e7ploration wells were drilled through 1984, with a discovery rate for each well of 1.3 million barrels of oil and condensate and 17.2 billion cubic feet of gas, making Bolivia a minor oil producer. The sector developed rapidly in the 1960s and after a hiatus in 1969-70, oil output continued to rise about 6.5% per annum until it peaked in 1973 at 47,400 barrels per day (BD). Thereafter, output failed to keep pace with current depletion because of reduced public investment in petroleum and lack of major new discoveries. Oil exports (which reached 32,500 BD in 1973) were reduced to Loot sales of naphtha and gasoline after 1979. In 1985, oil production totalled 25,500 BD compared to the demand of 21,000 BD. 39. Bolivia's fields are more gas than petroleum-prone; five of the 35 oil fields are marginal producers of oil, and the largest producer is in fact a gas field. Black oil resources, on the other hand, are more modest. At present, about 75% of total liquids production comes from condensate, mostly by stripping gas of its liquid content. (The dry gas is then sold to Argentina and locally). In 1982, under the Gas and Oil Engineering Project (S-25), YPFB made the first new oil discovery in many years, but this and the other finds in this period are relatively small. Production of crude and condensate is expected to rise with the development of newly discovered fields. But, even with this increase, liquid  - 12 - production will decline in the long term again unless the present aged fields are replaced. 40. Private enterprise continues to play an active role in the oil and gas subsector. The Government's policy for some time has been to rely on foreign companies, in association with YPFB, to provide the bulk of risk investment. The 1972 petroleum law postulates private sector participation in exploration, development and production of hydrocarbons under production-sharing contracts. A third of the area now contracted for oil exploration rests with the private sector, mainly the Occidental Petroleum and the Tesoro companies. Shell is exploring the Beni basin in which it recently applied to the Government for new acreage. The companies, who bear all costs and risks, are guaranteed the right to retain foreign income from their hydrocarbon sales, and YPFB is required to pay the contractors' taxes. They share production from discoverLes with YPFB receiving 50-60% of output. The Government awarded around 20 contracts from 1972 to 1982, whose results have been disappointing, i.e., only 30 million barrels of recoverable liquids have been discovered. Private companies nonetheless are producing an increasing share of crude and condensate output, i.e. 24% in 1985 compared to 112 of total production in 1979. In 1978, the Government agreed to divide with the private sector the supply of gas exports to Argentina so as to encourage the foreign firms to produce more gas, and later promised them participation In future projected gas sales to Brazil. More recently, the Goverment has paid for oil from private producers at the most commonly used benchmark in the trade (Arab Light Crude), and, for gas, the private firms are paid the same border price as YPFB (US$3.70 per MCF, equivalent to approximately US$20 per barrel of fuel oil, less transportation charges). 41. Natural gas development meanwhile has been expanding particularly since the late 1970Ws when the private operators brought on stream fields producing large volumes of gas. Gas production in 1985 reached 450 MMCFD, largely determined by the need for the associated liquids. About half of the output was exported with the remainder used locally and reinjected to maintain reservoir pressure or to be stored because of insufficient markets. Greater gas consumption will be needed to satisfy domestic energy requirements and substitute for liquids to be exported. 42. Domestic Demand. Petroleum demand growth in the mid-1970's averaged over 11Z per annum, but fell to less than 3.52 yearly in 1979-80 and has stagnated since. Demand is stable for lighter products while LPG continued to grow fast. In order to promote the substitution of gas for scarcer fuel oil, the Government is constructing a gas pipeline to connect Santa Cruz, La Paz and Oruro. Petroleum product demand is prolected in 1990 to be around 23-24,000 BD, assuming (i) relatively modest recuperation of economic growth; (ii) declining elasticity of demand for petroleum; and (iii) that natural gas will increasingly substitute for industrial fuels. Increasing domestic petroleum prices and other incentives for energy conservation should slow future domestic energy demand and illegal exports. 43. Exports. Natural gas has displaced crude oil in Bolivia's hydrocarbon exports (which provided about 60% of 1984 foreign exchange  - 13 - earnings), largely through gas sales to Argentina made possible by the Gas Pipeliae project (635-BO). These sales, based on a take-or-pay contract extending to 1992, have recently been expanded while prices increased from US$0.28/MCF in 1972 to US$3.70/MCF in 1986. The volume of gas exports exceeded original expectations; and the pipeline was completed ahead of schedule, below original cost estimates, and has been operating without disruption. Under the project arrangements, an offshore trust account was established to receive proceeds of the gas sales to Gas del Estado (Argentina). It has served, as designed, for compensation of the 1969-70 Bolivian Gulf Oil nationalization; debt service to foreign lenders; and YPFB's operational requirements. The arrangement worked well until 1982 when Argentina developed severe foreign exchange problems and Gas del Estado fell behind on sales payments (although it has maintained timely service on the Bank loan). Subsequently, the Governments of Bolivia and Argentina concluded agreements to settle arrears on 1982-84 gas deliveries, which were fully settled by early 1985. In addition, YPFB ships LPG to Brazil under a sales agreement which originated in 1979. It calls for LPG deliveries of 18,000 metric tons per year (tpy) but the Brazilian authorities have taken all the LPG that could be exported. Present sales arrangements provide for deliveries priced at US$255 per ton. New bilateral agreements provide for increasing these sales to 100,000 tpy but growing Bolivian domestic demand and delays in developing new gas fields have kept exports below that. The proposed project, however, would increase the exportable surplus. For this reason, by June 30, 1987, YPFB would submit proposals to the Association for improving LPG transport facilities in order to accommodate the increased volumes. 44. The Governments of Brazil and Bolivia have long discussed possibilities of the sale of 400 MMCFD of gas for the Sao Paulo area. With the Association's assistance, appraisal drilling has established that Bolivia has sufficient reserves for the planned exports to Brazil while still meeting domestic needs. The two countries collaborated in the prefeasibility and preliminary engineering study for a gas pipeline from Santa Cruz to Sao Paulo (for which the Bank was executing agency) but project implementation arrangements have not been developed, and the recent fall in oil prices has affected the economics of the proposed line. Development Strategy 45. Bolivia's main objective in the oil and gas subsector is to increase domestic output of liquids in order to maintain self-sufficiency in petroleum supplies. If it fails to reverse the declining production, the country could easily become a net oil importer, for which it lacks both physical infrastructure and foreign e:xchange. To avoid this, the Government invested some US$150 million in 1979-83 for development of gas condensate fields and enhanced recovery at oil-producing fields, in addition to exploring for additional oil reserves. It opened areas previously reserved for state development to foreign oil companies and assuLed them also a share in gas export markets. The Government aims to manage petroleum products demand by improving pricing policies and to encourage substituting LPG and natural gas for kerosene, diesel and fuel oil. Also, the Government recognizes that Argentina is unlikely to seek to maintain the existing level of Bolivian gas imports beyond 1992. On these accounts, the Government has set as a major objective the identification of  - 14 - new gas export markets, together with increased condensate production. These objectives are consistent with the conclusions of the Bank's energy assessment study ("BOLIVIA: Issues and Options in the Energy Sector," No. 4213-BO). 46. This strategy is reflected in YPFB's tentative investment program of US$511 million for 1985-88 which was prepared prior to the drop in oil prices. The program is larger than has been achieved lately, although it represents a considerable reduction over YPFB's initial plans in 1985. It would have to be further reduced because of the Government's financial difficulties; reduced oil prices and the high risk of exploration. Exploration and development activities dominate the program but a large part would be allocated to pipeline construction and other infrastructure. It includes completing development of the important retrograde gas field at Vuelta Grande, which the proposed project would help support and similar low risk, high return gas projects. The Association, as well as YPFB's management consultants, are now reviewing the content and priorities of the program, as well as its funding. A major focus would be on reducing YPFB's exploration in stratographic traps and associating itself instead with the private sector in riskier technological ventures. Agreement was reached during negotiations that, not later than 60 days before the start of each fiscal year, YPFB will present its investment program for the subsequent year to IDA for review and comment, and its proposed financing plan. This review would be linked to the Bank Group's comprehensive assistance on the mediumrterm development strategy (ref. para. 33). Also, any borrowing for an investment project outside the financing plan of more than US$10 million equivalent would require IDA approval. 47. The Government plans to rely more on the private sector in the future for expanded exploration and development of hydrocarbon resources. There has already been some consideration of a possible new commitment by Tesoro, which is discussing with the IFC the exploitation of several oil/gas fields recently discovered in the Chaco. Private sector confidence is recovering as the Government has moved to redress the previous uncertain policy towards foreign oil firms and slow payments to the contractors, and is permitting the latter to export their petroleum output. With Bank assistance, the Government is reviewing its legislation regarding private sector activities and considering opening joint ventures. As a followup, assurances were obtained during negotiations that the Government would consult annually with the Association on measures designed to expand exploration and development including enhanced private companies' activity. 48. In order to help the Government realize these goals, the Association in March 1986 approved a US$500,000 PPF advance for preparation of a proposed Hydrocarbon Development Project, which would finance studies for: ti) new investments to increase domestic production (development of the Escondido, San Roque, and Cascabel fields); (ii) elaboration of a more comprehensive sector strategy; and (iii) examination of improved incentives for private investment promotion and joint venture schemes. 49. Petroleum Pricing. In the past, there had been a need for major policy changes in Bolivia to correct the inappropriate pricing of energy resources. The Governments throughout most of the 1970's and early 1980's kept internal petroleum prices low. As a result, exploration drilling declined and few new fields were discovered. Energy demand increased faster than GDP during the 1970's without the required incentives for  - 15 - conservation and fuel substitution. The distortion also encouraged unofficial petroleum exports, undermined YPFB's financial position, and led to costly consumer subsidies of petroleum products. By the end of 1983, petroleum prices for the composite barrel were about US$17.60 at the official rate and about US$4.40 at the parallel rate (or about 14% of international prices). 50. To correct these distortions, recent administrations have moved to realign domestic petroleum prices more closely with international and regional levels. Throughout 1984-85, there were substantial increases, following discussions with the Association on the advisability of raising the composite barrel's price, in connection with advancing the proposed project. The current authorities did so in October 1985, increasing the composite barrel's price above international levels and pegged it to the US$. This price was increased from US$17.71 equivalent in April 1985 to US$36.60 equivalent in March 1986 when international prices were US$20.50. This large differential has considerably reduced unauthorized exports and domestic market demand. The Government plans further adjustments and has expressed its intention to maintain suitable petroleum prices. In this connection, assurances were obtained during negotiations that the Government would maintain average petroleum prices at least at international levels in US$ terms, and discuss annually with the Association the relationship between international and domestic prices. 51. Role of the Bank Group. The Bank Group's involvement in the sector has been oriented towards supporting Government efforts to obtain more appropriate product pricing and ensure a more balanced public vis a vis private sector development of hydrocarbon resources. Past activities have concentrated on improving the data on Bolivia's reserves, and defining a better strategy for utilization of these resources in the Bank's energy assessment study. In addition, the Bank has also helped to focus the Government's attention on maintaining YPFB's competence and favorable climate for private companies in the petroleum field, as it did initially by facilitating the compensation agreement covering the nationalization of Gulf's fields. The Bank has also been working with both Bolivia and Brazil on the proposed gas pipeline project as well as the extension of their bilateral LPG sales contract. 52. The proposed project is a priority investment identified by the energy assessment study to meet domestic fuel demand and expand gas exports. Moreover, the proposed credit is designed to support efforts by YPFB to promote a better balance between liquids and gas production in the development of the sector, and establishes the basis for annual reviews of the sector investment program with the Government. It also would contribute to strengthening YPFB's scarce technical staff and auditing, which should help to increase the company's efficiency and effectiveness. Further, the proposed project would serve as a basis for continuing the policy dialogue with the authorities, particularly concerning sector planning; petroleum product pricing; gas utilization, including regional cooperation in gas projects; and encouragement of private sector contributions to oil and gas development. It would complement the Bank Group's present technical assistance on YPFB's organization (ref. para. 54) and Bolivia's private sector framework (ref. para. 47).  - 16 - Institutional Setting 53. The Minister of Energy and Hydrocarbons (HEH) is responsible for energy planning and policies and regulates the exploration, exploitation, industrialization and use of energy resources. MEH supervises the operations of YPFB and the private oil companies active in Bolivia. Petroleum product pricing is decided by MEH. In the past, the absence of an overall energy development plan and frequent changes in the administration have impaired MEH's functions and deterred the development of policies and programs to meet energy sector requirements. The new Government is committed, however, to develop a national energy plan by end 1986. 54. YPFB. The state-owned Yacimientos Petroliferos Fiscales Bolivianos, as the sole petroleum concession holder, is responsible for hydrocarbon exploration, production, transportation, pipeline construction and operation, refining and distribution as well as imports and exports. It contracts operations with foreign oil companies. YPFB is well experienced in all phases of the oil industry, and produces the bulk of Bolivia's oil and gas output. The present Government has decided to re-iiew YPFB's operations, investment program and scope of activities so as to improve its efficiency, which the Bank is assisting as executing agency of a UNDP project. Consultants examined reorganization alternatives in November 1985; a more comprehensive study is now underway. The Bank is also advising the company on gas strategy, and has assisted YPFB on the company's insurance coverage. Assurances were obtained during negotiations that the Government will carry out a study on the operations and efficiency of YPFB by June 30, 1987, and present this to the Association for review and comment by September 30, 1987 together with a plan and timetable for achieving efficiency improvements. 55. YPFB has generally been a well managed company and adequately staffed with highly trained and experienced professionals. In recent years, though, YPFB's management deteriorated and it lost many of its best engineers and geologists. Several department heads have been removed in the last several years for political reasons, while the erosion of salaries led others to shift to private companies. The company will need to redress their loss. Accordingly, YPFB has agreed to carry out a study of its staff compensation policies by December 31, 1986; to present IDA by March 31, 1987 an action plan which would be initiated by June 30, 1987. In addition, lack of foreign exchange has impaired YPFB's ability to finance essential imports and has required the use of makeshift substitutes with some loss of efficiency. This will be lessened by the provision of US$11 million under the Reconstruction Import Credit for the spare parts, equipment and materials needed to increase production and ensure continued operation and maintenance of producing wells, processing plants, refineries and pipelines. 56. YPFB's budgeting and accounting system is adequate and complies with standard industry practices. Its computerized system effectively monitors income and expenditures in the main profit and cost centers; the accounts and material coding systems are good and are well usee. YPFB's internal audit unit audits all departments and cost/profit centers except the Materials Department which has its own internal auditor. Overall,  - 17 - YPFB's external and internal auditing practices are satisfactory, but the latter would be improved by incorporating the regular auditing of the Materials Department. YPFB has agreed to do so. Financial Aspects 57. YPFB's net income was modest in the late 1970's, because of low domestic prices but it has since improved largely as a result of gas exports to Argentina. These enabled the company to finance about a third of its US$440 million investment program in 1979-83 from internal cash generation. Its net income compared to sales increased from 4% in 1979 to over 25% in 1983, but then fell to 19% of sales in 1984. 58. YPFB's financial condition as measured by the quick ratio (current assets excluding inventories divided by current liabilities) has improved considerably, rising from 0.7 in 1979 to 1.4 more recently. YPFB's long-term debt/equity ratio also has been improving (48/52 in 1979, 20/82 in 1982, 14/86 in 1984). The situation however is not entirely satisfactory since the Government's foreign exchange shortage has limited YPFB's ongoing operations, and the company has had difficulties collecting its gas export receivables from Argentina. Also, YPFB's statements are somewhat misleading since there has not been suitable monetary correction; in addition, local costs and revenues were distorted by the overvalued exchangr rate. 59. For the period 1986-1990, the projections show that YPFB should remain in good financial condition, mainly as a result of the Government's petroleum pricing policy. This should increase its income from domestic sales from about US$146 million in 1983 (28% of total income) to about US$326 million by 1990 (52%), and permit YPFB to pay substantial dividends to the Government. Cash generation is expected to exceed US$100 million per year through 1991 although YPFB's funds are presently tight because, in order to sustain the stabilization program, the company has prepaid taxes equal to 73% of domestic and 70% of export sales this year, and the Government is now also restricting YPFB's access to its cash balances. The financial ratios also are projected to remain strong with debt service coverage exceeding 2 for every year, the current ratio remaining above 2 and the quick ratio above 1.1. The debt/equity ratio is expected to increase slightly but not to exceed 35/65. Moreover, although YPFB's investment plans call for a large increase, about 45% of its proposed outlays relate to IDB-assisted operations and the proposed IDA-financed Vuelta Grande project. To ensure sound financing of the investment program, assurances were obtained during negotiations that the Government would enable YPFB to maintain debt service coverage of 2.0, a long-term debt/equity ratio of 40:60 and a quick ratio of 1.1. 60. Experience with Past Lending. The Bank Group's past support to the sector totalling US$39.3 million, began with the 1971 loan (635-BO) for construction of the gas pipeline to Argentina. As noted above, the project was successful and its benefits far exceeded the original expectations (ref. Project Performance Audit Report No. 593, dated December 13, 1974). In February 1980, IDA approved a US$16 million Credit to finance a Gas and Oil Engineering Project which led to the confirmation of 1.6 TCF of recoverable gas reserves, initiation of secondary oil recovery in the Monteagudo field and delineation of the Vuelta Grande reservoir, the field with Bolivia's largest reserve of liquid hydrocarbons.  - 18 - PART IV - THE PROJECT 61. The proposed project emerged from the identification of the aforementioned prospects of developing the Vuelta Grande gas reservoir economically. In order to help realize these prospects, the Bank's Project Preparation Facility advanced US$1.0 million in March 1981 for a gas recycling simulation study, basic and detailed design studies, and the preparation of bidding documents for a gas processing plant. The proposed Vuelta Grande project was appraised in December 1980 and the first round of negotiations took place in Washington from April 28 to May 1, 1981. Further project processing was then delayed, however, by the deterinration of economic conditions in Bolivia. The project was reappraised in March 1985 and was re-negotiated on May 14-19, 1986. The Staff Appraisal Report 'Bolivia - Vuelta Grande Gas Recycling Project," No. 3385-BO dated June 4, 1986 is being circulated separately to the Executive Directors. A supplementary project data sheet is presented in Annex III. Project Objectives and Description 62. The proposed project would help exploit an important gas condensate field and thus enable YPFB to produce considerable additional liquid fuels and LPG. At its peak, annual product_..on would provide about 2 million barrels of condensate (about one quarter of Bolivia's annual petroleum product needs) and 1 million barrels of LPG, together worth about US$35 million in depressed April 1986 prices. The condensate would be used locally to help avert domestic shortages of petroleum while the LPG output would enable Bolivia in 1987 to almost triple the volume of export sales to Brazil last year. The experience of carrying out these works would advance Bolivia's technology in gas recycling and secondary oil recovery. The Government's agreement to maintain adequate petroleum product pricing would expand production so as to enable the private sector to export more output, and encourage their further investment. In addition, the proposed Credit would help advance a project which would have a major impact on Bolivia's balance of payments. The Association's participation therefore would help improve the Government's capacity to service its external accounts and thus facilitate Bolivia's renewed access to normal commercial credit. 63. The project would complete the development of the Vuelta Grande retrograde gas condensate field through the drilling of 6 wells (2 production and 4 injection), the installation of a gas processing plant, and the laying of gathering lines and injection lines. In Vuelta Grande, all liquid hydrocarbons exist in gas form in the reservoir and appropriate reservoir pressure must be maintained in order to permit condensate production by recycling dry gas into the reservoir. Field conditions are suitable to recycle gas over a twenty year period, allowing recovery of more than 23 million barrels of condensates and nearly 1 million tons of LPG (11 million barrels equivalent). After the recoverable liquids have been extracted during the recycling period, the reservoir would enter a 10 year "blow down" period, i.e. gas would b' -roduced at the rate of 120 MMCFD (without re-inJection) and shipped f --norts or domestic demand. The gas processing plant would have a desib ity of recycling 90 MMCFD which a review of the reservoir model indicate - field could sustain. Ultimate recoverable gas reserves are estimated aL 8 TCF of gas. Should  - 19 - a sizeable gas demand develop (possibly by implementation of the gas pipeline to Brazil), it would also be possible to stop recycling of gas after, for example, 10 years and instead to begin exporting 120 MMCFD of gas. This alternative would increase project benefits but for purposes of project appraisal, the more conservative 20 year recycling alternative has been taken. 64. Implementation. Project preparation of Vuelta Grande is well advanced. The 15 wells already drilled have established the gas water contact, confirmed the fault lines and defined the extension of the field. Intercomp (USA) prepared a preliminary reservoir engineering study based on the results of the first wells and later a more detailed reservoir simlation study. Basic and detailed engineering of the gas recycling and LPG plants were prepared in 1983 by Trentham Corporation (USA), financed under the aforementioned PPF. In June 1983, YPFB inaugurated a pilot plant at Vuelta Grande which is now producing 24 MMCFD of gas and producing 1,200 BD of condensate. Additional wells are to be brought on stream, increasing the output to 2,000 BD. The operating data to date increase the confidence in the project. The project is expected to be completed by December 1988. To help meet this target, YPFB has agreed to establish a project account that should ensure the continuing availability of domestic funds for project expenses, in conjunction with a US$2.0 million Special Account to be financed by the Credit. 65. YPFB would carry out the project with the further assistance of Trentham Corporation consultants. A Project Unit has been created to coordinate execution and start-up of the project; it is headed by a project coordinator who reports to YPFB's Production Manager. Assurances were obtained during negotiations that the qualifications and experience of the Project Coordinator and the Unit's geologists, engineers and accountants shall remain satisfpctory to the Association. In addition, YPFB would consult with the Association before removing any member of the unit during project execution. Cost Estimates and Financing Plan 66. The total estimated cost of the remaining works to be completed is US$47.8 million (exclusive of taxes and duties from which the project is exempt) with a foreign exchange component of US$31.8 million. This estimate excludes the US$47 million of investments YPFB has already incurred for exploration, field development and the gas plant. The project cost calculations, based on December 1985 prices, include physical contingencies of 10%. Price escalation has been calculated on the basis of 7.2% for 1986, 6.8% in 1987 and 1988 and 7.0% in 1989 for imported components. The proposed IDA Credit of US$15.0 million would cover 47% of the remaining foreign exchange component and less than a third of total estimated financing requirements. This financing share is considered justified by the Government's lack of access to alternative foreign exchange sources, and YPFB's previous project expenditures. YPFB would meet the US$16.8 million balance of the foreign exchange costs from a combination of US$6.0 million of counter-trade arrangement proceeds from the Government of Argentina, mainly for equipment for the gas plant system and well drilling, and the rest from the revenues of gas sales. It would also cover all local currency expenditures.  - 20 - 67. US$1 million of the Credit would reimburse the Association for the PPF advance (see para. 61) provided for the preparation of the project. YPFB would receive the proceeds of the proposed Credit for repayment in 12 years (including 3 years of grace) at an interest rate of 9.5%, and would carry the foreign exchange risk on the Credit. A condition of effectiveness of the proposed Credit would be the signature of a subsidiary agreement between the Government and YPFB, satisfactory to the Association. Procurement and Disbursement 68. The proposed Credit would finance (a) services for drilling 2 of the remaining 6 wells to be completed; (b) equipment, spare parts and materials for the gas processing plant; and (c) engineering services to prepare equipment specifications, tender documents, and supervise reservoir engineering and the assembly and construction of the plant. About 61% of the goods and services provided by the Credit would be procured under international competitive bidding procedures, in accordance with Bank guidelines. Of the balance, about US$5.5 million worth of goods and services would be procured through limited international tendering. Only a small number of companies offer the services needed for the Vuelta Grande wells, such as electrical logging, cementing, and well testing, estimated to cost US$2.4 million. The modification of three existing compressors which would be used in the gas plant is estimated to cost US$2.0 million. Procurement of materials that are highly specialized and in limited international cupply is estimated to cost US$1.1 million; individual bid packages for these goods are estimated to cost less than US$250,000. Bidding documents for items costing more than US$250,000 would be approved by the Association before issuance. Advance contracting of US$2.2 million is proposed to cover the foreign cost of the ongoing consulting services for the gas plant (which was started under the PPF), and long lead items for the gas plant. It is recommended that retroactive financing be permitted for the engineering services, subject to an aggregate maximum of US$500,000. In order to help lessen the delays which have obstructed the execution of previous Bank Group operations, assurances were obtained during negotiations that all items to be procured for completion of the proposed project would be procured by YPFB under procedures acceptable to the Association, and purchases would be reviewed solely by the Ministries of Finance and Energy. These provisions are to be incorporated in a procurement manual, satisfactory to the Association, whose ratification would be a condition of effectiveness of the proposed Credit. Project Benefits and Risks 69. Since project implementation is advanced (the field has been operating with a pilot plant for several years), the benefits of incremental investments are high while the risks are smaller than they would normally be. The price of oil and the capital cost are the key variables In the analysis of benefits which does not consider the incremental natural gas production for export that would begin in the 21st year. The calculation assumed a constant well head price for condensate of US$12 per barrel in real terms (equivalent to US$10/barrel of oil), one third of the present retail price for petroleum products. The analysis  - 21 - also assumed a US$20 per barrel CIF cost for projected import substitution, with the difference reflecting Bolivia's limited import infrastructure. On the basis of these factors, with YPF's past investments considered as sunk costs, the wbase case" analysis shows the project yielding an economic rate of return of 60% and financial benefits of 44%. A sensitivity analysis indicates that, even under adverse conditions, the rates of return would remain satisfactory. Moreover, even if the cost of imported oil fell to as low as US$6 per barrel, the project would still have a satisfactory ROR (ERR 28.1%, FRR 11.9%) under the sunk cost assumption. Further, the project would generate substantial foreign exchange benefits from increased LPG export returns and averting the cost of crude imports, amounting to the equivalent of about 6% of current exports. The project would also provide important unquantifiable technical and institutional benefits. 70. Project Risks. The drilling done to date at Vuelta Grande establishes a high degree of confidence in the recoverable reserve estimates although technical risks are inherent and reservoir behavior can never be fully predicted. Another risk is that YPFB may find itself unable to halt and reverse the loss of qualified technical personnel; this issue is addressed through the elaboration of a program to strengthen the stability of the technical staff. Further, YPFB should have no major difficulties in meeting its project financing requirements and the proposed grace period would require debt repayment to begin well after the project is expected to enter into full production (mid-1988). 71. Execution of the project might be impaired if the Government could not sustain the implementation of the economic program or pursued policies which would hinder the attainment of its objectives. There is only a meager availability of foreign exchange and the serious lack of qualified middle-level managers and technicians to implement the reforms. Bolivia has shown, however, marked determination and commitment to pursue the NEP, and the INF program and possible increased aid commitments from other sources should alleviate the external financing constraint. PART VI - RECOMMENDATION 72. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. A. W. Clausen President Attachments June , 1986  -22-AN. P8ag 1 of 6 201*1. 1096.5~~~M 1096.5 1096.4 01RAKS NM3T *1UC OL. U') AGR1WLURAL. 301.0 291. 303.4 ormcurii (o) ... 10.0 6873.9 214.4.3 (xuLooRAn oF OIL UIVALW) 123.0 113.0 22.0 9. 119.8 POPOllamm ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ x Ax TIliilgn Pw. am l ms P0N1ATI06,U5-UhL (U5311m3) 3421.0 4325.0 034*.0 SURM P(UILATMOIL OP 1U AL) 34.0 404. 43.1 67.7 471 . POAulOW P33M10 POPUI.A2 IN 23I*3 2000 (WILL) 9.0 Az lmy POPUfLATO CXILW 22.0 POPUIrZ XU3II3 ..9 POLATo DEWITT FlS sQ. M. 3.1 3.9 1.3 40.0 o4.7 PII I. IN. AoL?. LAND 11.4 15.3 19.3 91.1 145.9 ProUTA An 32C13 (X) 0-14 Yu 41.9 43.7 53.4 36.3 31.2 u5-4 nI 54.5 52.9 3.3 57.1 51.5 3 me Alan 33 3.3 3.2 4.2 7.2 POILATZUM 0IN11 RATS2 (2) TOTAL 2.1 2.3 2A. 2.4 1.5 33313 1.1 4.1 3.3 32. 34 C1l33 1993 am CPU Ts300) 4.4 '.5 3 43.4 30.9 234 ca n 332 3t3 PER TOWN) 22.2 19.3 14.0 o. *.9 *-OS SIMOCTUIII 3*23 34 3.2 3.0 2.0 1. FAMILY PLANING 4MP0h. 4334. (..0..).. . _ CZ r,0 o E .. .. 2.0 453. rman - ona 10 or NM0 ru. MU CAPIA ( 149-71.100) 93.0 101.0 70.0 109.A 109.1 PU CAIPXtA uUrn. OVP CALCles (C o0 3331323) 75.0 53.0 90.0 113.2 131.5 -illS (Cm PUX DAZ) 49.0 50.0 57.0 9.4 92.A 0r MIl ANIM1AL AND PU 15.0 14.0 13.0 IX 3O.2 34. 011 (AM -) OLAl 3M 41. 32.A 1.0 4.6 4.? NULU LIE mP=t. AT SIlST (231) 42.7 43.9 31.0 64a 57.2 1176T MM. RA*2 (rU 23s) 167.0 134.3 123.0 39.7 33.3 ACCtSS T0 541 MAYU (%p0W) TOMAL *- 33.0 37.0 /a 43.3 70.2 33IUU1 .. 92.0 69.0 75.5 39A 33311. .. 2.0 10.0 44.2 57.0 ACC TO SEC DIUSOSAL (t 0o POPUATIU) TOTAL .. 12.0 1.OA 3M.3 59.6 g3as" .. 25.0 37.0 73.5 55.9 AL .. 4.0 4.e0 7? 25.3 47.5 POPULAlON *PtI P1(SI9XA* 3630.0 2020.0 .. 1909.7 1070 POP. P1U USIG 30 510.0o Ln0.0 .. 0.2 70.5 POp. PU UOSPIAL 333 TOTAL 570.0 430.0 .3. 32.0 36.3 UUSD 270.0 230.0 -2.. 2.0 201. 123AL 9160.0 2030.0 .. 71.7. 4519.7 * A3SSSIS Pwn HOMOSPI TAL .. .. .. 27.5 20.0 AV3ACI SIZE OP OIIWILD TOTAL .. .. 4.4 /* SUDN . ...7; lUlAL .. .. * J 7 .*. AWU= N0. or P3soNiUOO. TOTAL .. .. 533*3.. .. .. .. .. RL .. ... P1E1311AC OF OIELi-u 513 ELECT. TOaAL 22.0/I .. 33.o / Ein 76A 7t .. L* SA07f ......  23 - A I Page 2 of 6 J2IJVUi - IOMAL INZIMqA cuIKNU AvDAI) t ICITIDDI INCOM M DD. l c i,.oLk i97Af =ThaL LAT. AWIuArc 6a EUAOP ADJUSTE IIIMAMLN MATXOS 106.7 101.9 IPIDUIAI TOTAL 64.0 76.0 56.0 0.162 HAZE ~~~71.0 91.0 93.010.102 VuIIL 30.0 62.0 76.0 104.6 97.5 SIJWMAXf. TOTAL 12.0 24.0 34.0 44.2 57.5 MALI ~~~~~13.0 28.0 3'.0 42.7 64.9 FImuz 9.0 20.0 31.0 "4. 30.0 vocATIONA (I0 aIICSolIDAI 13.7 11.3 ..13.3 21.0 PUPIL-TIASIER RATIO rI mA! 27.0 27.0 23.0 29.9 23.1 SICODA!? 713.0 14.0 16.7 19.1 ppAUUUU Sf S11OUSA P 2.0 4. 3. 46.0 54.2 MMIL VITWSA POP0 28. : 0 *a. U. RADIO Uc111333/U0U3AIS POP 72.7 92.9 575 321.3 170.7 TV C ,1h3fA1D Po1 59.6 112.4 149.3 iutIazsTn CIRCULATION 7. ru Tc_US_ P'IULATI 26.1 46.3 1.1 .0 CNMA MWAL At DU 70rWCAP 3.7 IL 2.4 2.7 TOAL LANKO0 CTHUU) 1193.0 1413.0 1916.0 IiiwU Cl'1) 18.6 19.8 22.7 23.6 36.3 *AOIICL7.1J (C1nT) 61.0 55.4 49.7 7i 31.4 40.8 IEUSTR (EUTM 16.1 21.1 24.2 24.3 23.3 pAarxCIPATI am CUcuIT) TOTAL 34.9 32.7 31.5 33.3 43.1 57.3 5331 50.1 1 3 35.1 iRNi 12.8 12: 141 1539 31.4 IcOiUKC oU UC! R10 I.3 1.4 1.5 1.3 0.9 Pma9 or PR1VATE Du IcuV2D w R1 - 35 01 o IsIOIIS . 36.0 J .. K-TIM 24S OF NEUSIS . 3 59.0 LOsU 2I Z O0 o ISU .. *.o. 4.0 LOOIS *t 0? UShO W 13.0 .. MrMA SOIXT PWRS EsTIAMAD RWATIV POUNIST I30 LEML CSS MA CAIA) a .. .. .. 519.J SRfAL .. .. .. 359.7 ZSTIIWD POM. BMW ABIOLUTI PovrTY IOmX LIIL (C) UUAM .. .. . .. DAL .. .. ', .. N OTIS Ia Yb. ra awae for *eeh Inteaor *rm pepalal.o.- ce l5bteI ttutc _-e C.vermo couree sg the tadlcater. deoedsen avallaUIty of data _a s eoe umfor /b Unles otbazrs noted Dta fer 1iO refor to *~ er betwee 1939 nd191; Dta for 1970" betwee 1969 ad 1971; md dat; for "Im laea lalae" bat_s 1981 a_d 1b63.*- jc 1977; Id 1960; /- 1976; /f 1963;L 99;j 1979;p h om, JUNl. 1953  -24- ANNEX I Page 3 of 6 DEFINITmONS OF SOCIAL INDICATORS Noim: AsJs. die data madradmwn frm usom genely judge the mat autho nutve and elible. at should aso be noted that they my not be mntermuon lly comparable becaue af the lackt of standdize dednaltona and concepts uaed bv dilferent countrm in collecing the data. The datis are. nonethe uehfd to *descnbe order of magnitude indidote trends. and churattenze certan major diferences between countries. The feference gnrouparellA the san country groupof the iubiect country and III Aacuryi group with somewhit higherAverge income than theco_uny groupoet hesubjectcounstrytexc.ptor frHih Income oil Exponers" roupvhere -MiddleIncomeNorth Afnc and MiddleEast"aschosen becaeusofstronger cia.culturnt .ifimuMsL In Lhe reterence group data the aerAges are population weighted anthmetic means iar ecath .nidicator And ,hown only when majority afthe coumnes in a group has data for thit indicator Sinie the cover.age oicouatris among the indicatonr dependsondtheialadbility ofdata and is not uniform. caution mug be esercstl in relaung averags ulonc indicatwr w anothcr. These averages am only useful t cumparing the value ofonc indiawr at a time anang the country and reference groups AREA (thousand sq.kin.) Crude Iirth RaIe yper thuscaudj-N umber of live births in the year Total-Total surface area comprising land Area And inland waters: per thousand of' mid-year population: 1960. 1970. and 1983 data. 1960. 1970 and 1983 data. Crude Deatr Rate (per troiemdJ-Number of deaths in the year Agflcuhural-'Estimate of agricultural area used temporarily or per thousand of mid-year population: 1960. 1970. and 1983 data. permanently for crops. pastures. market and kitchen gardens or to Gross Reproduction Rate-Average number of daughters a woman lie fallow. 1960. 1970 and 1982 data. will bear in her normal reproductive perioc if she experiences present age-specific fertility rates: usually fiv--year averges ending GNP PER CAPITA (UISS)-GNP per capita estimates at current in 1960. 1970. and 1983. market pnces. calculated by same conversion method as Vorild Famiy lani-,4cepturs. Annua (shosud. -Annual num- Baaic .4rlas 11981-83 basis); 1983 data. ber of acceptors of birth-control devices under auspices of national ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program. consumption of commercial primary energy icoal and lignite. Family Plarnuing-Usen r(percnt of mried iawoe e)-The percen- petroleum. natural gas and hydro-. nuclear and aeothermal clec- tage of mamed women of child-bearing age who are practicing or tncty; in kilograms of oil equivalent per capita; 1960. 1970. and whose husbands are practcing any form of contraception. Women 1982 data of child-beanng agte are generallv women aged 15-49. although for some countnes contraceptive usage is measured for other age POPULATION AND VITAL STATISTlCS groups. otalA Population. Alid-Year (thousamitu-As of July 1: 1960. 1970. FOOD AND NUTRRMON and 1983 data. PoplaJRatio o' urban to tota IndexofFood Pdution Per Capita t1969-7l-a 100)-Inde of per (ia-baa Population (pa-ernast of reta" J-Rauo o uroan capita annual production of a11 rood commodities. Production population: ditferent defintions of urban areas may atTect compar- excludes animal reed and seed for agriculture. Food commodities abIlity of data among countries. 1960. 1970. and 1953t data. include primary commodities le.g. sugarcane instead of sugar) Population P,.j,a., which are edible and contain nutrients (e.g. coffee and tea are Population in vear 2000-The projction of populauon for 2000. excluded): they comprise cereals root crops. pulses. otl seeds. made for cach economy separately. Starting with information on vegetables, fruits, nuts. suarcane and sugar bects. livestock, and total population bv age and sex. rertilitv rates. mortalitv rates. and livestock products. Aggregate production of each country is based intemational migration in che base year 1980. these parameters on national avenge producer price weights; 1961465. 1970. and were projected at five-year intervals on the basis of generalized 1982 dat. assumptons until the population became stationary. Per Caj*a Supply of Calies (percent ofrefiremenr-Comput- Stationary populurion-ls one an which age- and sex-specific mor- ed from calorie equivalent of net food supplies available in country tality raes have not changed over a long period. while age-specific per capita per day. Availabie supplies comprise domestic produc- fertility rates have simultaneously remained at replacemnent level tion. imports less exports. and changes in stock. Net supplies I net reproduction rte - I 1. In such a population. the birth rate is exclude animal feed. seeds for use in agnculture. quantities used in constant and equal to the death ratc, the agc structure is also food processing. and losses in distribution. Requirements were constanL and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity size was estimated on the basis of the projected characteristics of and health considering environmental temperature. body weights. the population in the year 2000. and the rate of decline of fertility age and sex distnbution of population. and allowing 10 percent for rate to replacemt level. waste at household lev'1: 1961. 1970 and 1982 dat. PIpidazon .Uomenrurm-ls the tendencv for population growth to Per Capita Supply of Arorei (gra per dy)-Protein content of continue bevond the time that replacementlevel fertility has been per capita net supply of food per day. Net supplv of food is defined achieved: that Is. even after the net reproduction rate has reached as above. Requirements for all countrnes establshed by USDA unity. The momentum of a populaton in the vear r is measured as provide for minimum allowances of 60 grams of total protein per a rauo of the ultimate stationary populaton to the populauon in day and 20 grams of animal and pulse protein. of which 10 grams the year r. givenr the assumption that fertility remains at replace should be animral protein. These standards are lower than those of ment level from year t onward. 1985 data. 75 grms of total protean and 23 grams of anim31 promin as an Populaion Density average for the world. proposed by FAO in the Third World Food Per sq.km.-Mid-year populauon per square kilometer t 100 hec- Supply: 1961. 1970 and 1982 data. tares) of total area 1960. 1970. and 1983 data. Per Capita Prwein Supply Fron Anima and Pu-Proten supply Per sqJtm. agriculzrural and-Computed as above for agricultural of food derived from animals and pulses n grams per day: 1961-65. land only. 1960. 1970. and 1982 data. 1970 and 1977 data. Popaion Age Stnaer (perceat--Children 10-14 yearsl. work- 0did (ages 1I-4 Dearh Rate (per rhoarsad)-Number ofdeaths of ingagetl5-64vears).andretired 65vearsandoveriaspercentage children aged 1-4 years per thousand children in the same age of mid-vear population: 1960. 1970. and 1983 dtam. eroup in a given vear. For most developing countries data derived from life tables: 1960. 1970 and 1983 data PoPulto Growt Rae (pmernjoalAnnual growth rates o1 total rmd-year population for 1950-60. 1960-0. and 1970-83. HEALTH Populto Growth Rare (percennt-rbian-Annual growth races Life Ezperaay at Birth (years-Number of years a newborn of urban population for 1950-60. 1960-70. and I97083 data. infant would live if prevailing patterns of mortaiity for all people  - 25 - ANNEX E Page 4 of 6 at the tme of of igs birth wee to say te same throughout its life. Pup-reache Ratio - prnav. and mcodarv-Total students ca. 1960. 1970 and 19113 data, rolled an pnmary and secondary lvels divided by numbers of oeMt mwfra w Ren per thmoad)-Nurnber of infants who die teaces in the corresponding levels. before reaching one year of age per thousand live births in a given yar 1960. 1970 and 1983 data. CONSUMPTION 4cew, ro SWfe War (percst of peprulaom)--t.al. urn . and Passener Car (per thousand peprlesriou,-Passenger cm com- r* ul-Number of people ItoaL urban. Atd natal) with rcasonable pnse motor cars seating less than eight person;: excludes a.mbul- access to safe water supply lindludes treated surface waters or ances. hearses and military vehicles. untreated but uncontammnated water such as that from protected Radio Rwiweir (per thousand pepaldarin-AII tvpes of receivers borehols. srnngs and sanitay welisl as percentages of their Lpec- for radio broadcasts to general public per thousand of population: tive populations. In an urban area a public rountain or standpost excludes un-licensed receivers in countnes and in vears when located iot more than 200 mcters from a house may be considered registmuon of radio ss was m ect data tor ce.t years nay 1s being within reasonable access of that house. In mrau areas n re ompradio sets was cnes ata ishec yas may sonable accs would imply that the housewi or members of not be comparable sice mast countries abolshed licensng. housilhold do not have wo spend a disproportionate part of the d TVRecewr (per rhusadpepuparii-Tv xrcevers for broadcast in fetching the family's water needs to general public per thousand populanoni excludes unlicensed TV .recevers in countnes and in years when registration of TV ses was Access re Ezcrter Divposal percejar of p.paneeto-eu,raL r. in effect. and rau-Number of people (total. urban. and rural) served by eacreta disposal as perentages of ther respective populations. 'p' CircraOJn (per rthusand pepuitdon-Shows the aver- Excrea disposal may include the collection and disposal, with or age circulation of daaly general interest newspaper.- defined as a without treatment of human excreta and waste-water by water- penodical publication devoted pnmanly to recording general news borne sstmems or the use of pit privies and similar installauons. It is considered to be 'dailyv if it a pears at [lst four tunes a week. Pbopie. per P*isian-Populauon divided bv number of prac- Ciem Anua .4trendace per Capita per Year-Based on the using physicians qualified from a medical school at umversity level. number of tickets sold durine the year. including admissions to Popalelb per Niming Person-Flpulation divided by number ot drve-an cnemas and iobale unts. practicing male and female graduate nurses. assistant nurses, LABOR FORCE pracical nurses and nursing auxiliaries.lORFOC Spmacai purm and nursingl auxruor. Total Latb Force Ithousanduj-Economicallv active persons. in- (totaL urban. and nual) divided by oa enn respecuve nurnb. of cludinz armed farces and unemployed but excluding housewives. hospital bedsav. abd rla publicvand priyth general anduspecnaied students. etc. covering population of all ages. Definitions in hospitals and rehabilitaion centers. Hospitals are establishments anous counsnes are not compambic 1960. 1970 and 1983 data permanently statEed by at last one physician. Establishments proar- female percrrJ-Female labor force as percentage ol total labor iding principall' custodial care are not inclided. Rural hospitals. force. howeve. induc health.and medical cters not permanentl staffed .4gricawe (percenti-LAbor force in farnung. fomstry. hunung by a physician but by a medical assistnt nurse. amdwife, etc.; and fishing as percentage of total labor force: 1960. 1970 and 1980 which ofer in-patient accommodation and providc a linuted range data. of medical faclitines. Intvy (percenat -Labor forcc an mining, construction. manu- 4d-isuions per Hospital Red-Total number of admissions to or tactunne and electricity. water and gas as pernutage of total labor dischargs from hospitals divided by the number of beds. force. 1960. 1970 and 1980 data. Patcxro Rare epercent)r-raa mak. andfenm&-4articipation HOUSlNG ur acuvity rates arm computed as totaL male. and female labor force .AVOWe r Of HofiAUe (peons per hoHold)--fal. Whan, as percentages of totaL male and tfmale populatio of all agcs and rurae-A household consis ofa group of individuals who share rspectvely 1960. 1970. and 1983 daa. These ar based on LOas living quarers and their maun meals. A boarder or lodger may or participation rates rdeccing age-sex structure ofthe populanc. and mav not be included in the household for statistical purpose long time trend. A few estimates are from national sources Average NVau,er of Person per Rwm_toral urban, and rnua- Eoank Dependency Ratio-Ratio of population under IS. and Averge number of persons per room in all urban. and rural 65 and over. to the working age population Ithose aged 15-64). occupied conventional dwellings. respectively. Dwellings exclude non-permanent structures and unoccupied parts. INCOME DISTRIBUTION PercAraqe of DwelEnq wish Eketricity-rooaL urban and rura- Pernae of Total Disposable brme (barh in cash md kind)- Conventional dwllings with electricity in living quaers as percen- Accrnag to percentile groups of households ranked by total house- tae of totaL urban. and rural dwellings respectively. hold income. EDUCATION POVERTY TARGET GROUPS A4kmd E _a.w Ratios The following estesmaes are verv approximate mcasures of poverty Plnav school - roraL, male and femal-Gross totaL male and levels, and should be interpreted with considerable caurton. female enroalment of all ages at the prmary level as percentags of Es&im d Absolue Poverty tnom Lod I LESS pr capita p--rban respeive primary school-age ponulatons. While manv countries mid rural-Absolute poverty ncome level is that income level consider primury school age to be 611 vears. othrs dto not. The below which a mimnmal nutntionall. adequate diet plus essential differences in country practes in the age and duration of school non-food requirements Is not affordable. are reflected in the atios gevn For some countries with universal Esimated Relaive Poverty lncomw Leel t USS per capitn)--urbn education grass enolment may exceed 100 percent since some nd ru Rural relauve poverty income level as one-third of pupils ar bdow or above the countrys .standard primary-school average per capita personal income of the country. Urban level is agc. denved fmm the rurai level wtth adjustment for higher cost of Secanalr solol - rorcl male and fem Cornputed as above: living in urban areas. secondary educaton require at least four vears of apprved pr, Esimted Populn Bedow .4bsolaae Poverry Incom Lewd (per- mary instruction: provides general. vocatonaL or teacher traimnin cent j-wran and rurail- Percnt of populaton a urban and rural instructions for pupils usually of 12 to 17 vears of age: correspond- who are absolute poor.- eice courses are genmly excluded. Vocaiona Enollm ui percent of secondway-Vocatuonal institu- Comparatve Analvsis and Data Division lions indude technicaL industrial or oder programs which operate Economic Analtsis and Projecuons Department indepedendy or as departments of secondary institutions. lune 1985  -26 - lYp s of 6 ECiad.1L3 111111. 19363 mUj- IIEmIml Amok _mc bUo lAtU IT) lit Prjitl., I.4icar 1"1~~'Nili M At Cwrut Ptcagl t :c34 196 131 12 193 I3I l t 19 4 19M 3 1917 1go NUttOlhK ACMETS Srm atic Pr?dsct 327 -4.4 4.3 -. -7.3 -3.1 -Ll ricultwo 11 "I 1.! 4.9 4.4 -3.9 17.7 3.2 .. IdAstrY It 9 0. -3.9 -9.7 -L2 -3.9 -4.3 Samcn 1 37 -2.2 1.t -L.11 -1.! - -.3 -LI bEmspti 2an 41.2 0.7 -3 -7.0 -1.2 -1. . arm lvututu 33 -32. 1LL -39.3 -7.4 -15.7 43.2 Iqirts of ki d J 513 -21.3 17.0 -352 -3.4 -9.2 4.4 Elwts of ki_ me 12 -ids LI -6 -7.0 -7.3 -17.4 km itic rnap a6 -1.9 -4.5 -0.3 -L -30.2 -4.3 PIIICEI 1196100 FEurt Pgsi l1m 103.1 10l.3 97.3 94.9 * 04.0 9*A 3.2 104.1 taut Pnco hIm 109.9 0L47 10L12 161.9 10.L 97.3 IW.7 139.3 rin of Trade iii 93.3 93.41 967 93.1 104.0 93a 73.3 7..9 VW& of u at mot Pm. 3-D brag ha- i 1ms ID 197 9 1935 399 1- 19164 19- kmus Dmt c PrOijct 300. 104. 1. 10.0 3.1 -4.6 3.0 Aqrlcultw 21 .La IL3 2.4 2L9 13.1 -2.J3 Iadstry 2/ 29.7 34.4 30.4 23.3 13.9 -7.2 . Swcn V 5S. 44.4 40.0 39.4 19.1 -2.3 Cr