Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7700-BO STAFF APPRAISAL REPORT BOLIVIA EXPORT CORRIDORS PROJECT APRIL 12, 1989 Infrastructure and Energy Operations Division Country Department III Latin America and the Caribbean Regional Office This document has a resticted distribution and may be used by recphele, only in the performance of their officWil duties. Its contents may not otherwise be disclosed witout World Bank authorizado. CURRENCY E_QUjIVaLNT (as of December 31, 1988) US$1.00 2.44 bolivianos ($b) US$0.41 = 1.00 boliviano US$1.00 = SDR 0.76 US$i.31 SDR 1.00 FISCAL YEAR January 1 - December 31 ACRONYMS AND ABBREVIATIONS AAD.A Autonomous Customs Warehouse Administration ("Administracion Autonoma de Almacenes Aduaneros") CAF Andean Development Corporation ("Corporacion Andina de Fomento") ENFE Bolivian National Railway ("Empresa Nacional de Ferrocarriles del Estado") ER Economic return ESF Emergency Social Fund FCALP Arica-La Paz Railway ("Ferrocarril Arica-La Paz") GDP Gross Domestic Product ICB International competitive bidding IDB Inter-American Develop?aent Bank INPEX National Institute for Export Promotion ("Instituto Nacional de Promocion de las ExportacLones") LCB Local competitive bidding MTC Ministry of Transport and Communications PPF Projection Preparation Facility RIC Reconstruction Import Credit SNC National Road Authority ("Servicio Nacional de Caminos") UN United Nations FOR OMCIL USE ONLY RR9UBLIC OF BOLIVIA BXPORT CORRIDORS PROJECT CREDIT AND PROJECT SUHKARY Borrower: Republic of Bolivia Implementing Ministry of Transport and Communications ARenciest Servicio Nacional de Caminos (SNC) Empresa Nacional de Ferrocarriles del Estado (ENFE) Emergency Social Fund (ESF) Ministry of Industry, Trade and Tourism Credit Amount: SDR 28.3 million (US$ 37.0 million equivalent) Terms: Standard, with 40 years maturity On-lending Terms: US$11.3 million on-lent to ENFE at LIBOR + 0.5, 15 years amortization, 3 years of grace Grant: US$3.7 million equivalent passed on to ESF Proiect The project corsists of major components of a program Description: which aims to promote Bolivia's exports and reduce the costs of its foreign trade by: (a) providing two well- functioning corridors by 1992-3, one to the Atlantic and one to the Pacific; (b) strengthening railway management to make it more market-oriented; (c) improving road and rail maintenance; (d) strengthening the Ministry of Transportation and Communications in planning and policy- making; and (e) facilitating the use of containers and airfreight. The items to be financed by IDA in the Pacific corridor are: (a) deferred maintenance (asphalt concrete overlay) on the La Paz-Oruro highway (228 km) and construction supervision (48% of project cost); (b) a feasibility study and detailed engineering fc. the Patacamaya-Tambo Quemado road, which would complete the Bolivian portion of the La Paz-Arica (Chile) highway (refinancing of a PPF - 1% of project cost); (c) minor track improvements on the La Paz-Arica rail line and at the La Paz rail freight terminal (3% of project cost). The Atlantic corridor improvements (20S of project cost) comprise: (d) rehabilitation of track and replacement of two bridges on the Santa Cruz-Corumba (Brazil) railway line, (e) conversion of boxcars to multiple use on ENFE's Eastern network, and (f) construction of a new freight terminal in Santa Cruz. System-wide improvements comprise: (g) maintenance works and drainage improvements on the main road and rail export routes, to be carried out by labor-intensive small contracts through This document has a restricted distribution and may be used by recipients only in the perfotmance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. the Emergency Social Fund (92); (h) pur^hase of telecommunications equipment for both Andean and Eastern rail networks (62); and (i) technical assistance and studies (11 2 of project cost) for (i) MTC in planning (including an evaluation of investment requirements in the La Paz-Cochabamba-Santa Cruz corridor), (ii) SNC in road maintenance, (iii) ENFE in management and marketing, external audit, and terminal design and management, and (iv) the National Institute for Export Promotion in facilitating the use of containers and airfreight. Finally, the project will also finance procurement services for the above (2%). The balance of the progrea consists of construction of an all-weather gravel road between Patacamaya and Tambo Quemado (188 km) and superviuion of its construction, expected to be finarnced by IDB. Prolect Benefits Direct benefits will be reductions in transport costs and Risks: and increased reliability of international freight movements. In turn, these are expected to give an important stimulus to exports. Savings in direct transport costs and the avoiding of costly reconstruction of infrastructure left unmaintained stould yield an ER of at least 402. We have no estimate of the value to users of more reliable service, which is over and above th.s, but we believe it to be large. There are two main risks: (a) delays in project implementation, due to lack of counterpart funds and of qualified staff in the implementing agencies; (b) difficulties in achieving management improvements and performance targets in the railway. To mitigate the risk of delays in project implementation, the government has agreed to earmark the necessary counterpart funds for the project in its annual public investment program. Achieving the proposed improvement in the railway will be difficult, but made more feasible by ENFE's agreement to recruit an expatriate management advisory team. Underpinning the success of the whole project is sound macroeconomic management and careful selection of future sector inveAtments. IDA will continue to advise the Government of Bol:via on macroeconomic policy and on major transport investments. Economic Rate Over 402 (IDA Project) of Return: Staff Appraisal Report No. 7700-BO Reports MLap: IBRD 21392 FIR&NCIG PLAN OF THE PMOGtM Local Foreign Total (US$ millior) - PART is IDA PROJECT IDA 7.5 29.5 37.0 Government 10.1 0 10.1 Total 17.6 29.5 47.1 PART II: IDB PROJECT IDB 3.1 34.8 37.9 Government 12.6 0 12.6 Total 15.7 34.8 50.5 Grand Total, PROGRAM 33.3 64.3 97.6 ESTIMATED IDA DISBURSEMENTS IDA Fiscal Year 90 91 92 93 94 -------(US$ million)-------- Annual 5.8 12.5 13.3 5.0 0.4 cumulative 5.8 18.3 31.6 36.6 37.0 IDA DISBURSEMENTS BY CATEGORY Category Amount (US$ million) Road civil works, SNC 17.2 80Z Road and railway civil works, ESF 3.7 90S Railway civil works, ENFE 2.9 45Z Equipment and materials, ENFE 5.2 100Q of foreign expend. Consultant services 8.0 1001 &O_L VIA~ EXPORT COIlDORS PROJECT PROJECT SUMMARY .............................. i I. BOLIVIA'S TRANSPORTATION SYSTEM S.ST.................... 1 TrAnsportation's Contribution to Economic Recovery .... 1 Government Strategy for Transportation .......... ......... . 1 The Bank and Other Donors' Roles and Lending Strategy in Bolivi's *.................... .................. 2 Previous Bank Assistance in the Transportation Sector 2 II. BOLIVIA'S EXPORT CORRIDORS ........... . . . 3 Future Exports and Imports ........ 3 Bolivia's ExportlImport Routes: the Options .......... 4 Pacific Corridor ...... ........ .. G * * * * * 4 Atlantic Corridor ...5... ....... ........... 5 Improving Railway Management ......................... 7 Encouraging the Use of Containers and Air Freight ..... 7 Strategic Conclusions ......... .. ..... .. ....... .... *... 8 III. TEE PROJECT ...............................9 Origin of the Project ... .............................. 9 Objectives ........... ... 9 Project Description ........... ...................... 10 Part I: IDA Project ...... ......... .. ............ ... 10 Access to Pacific Ports ............................... 10 Access to Atlantic Ports .... *............... . .11 System-wide Improvements ......... .. ..... . . .. . *. ......... 12 Part II: IDB Project ............**e..******........ 13 Cost Estimates ..... .... 14 Table 1: Cost Estimates ..... ...... 15 Co-Financing ..........**************************..* 16 Implementing Agencies .........***s*******e*e....... e, 17 On-lending Terms ........."......*..*... ...........*.... 17 Implementation Schedule .......... ... .. .. ............. . 17 IDA Review of ESP Subprojects ....................... 18 Continued This report was prepared by Messrs. Graham Smith (transport economist and mission leader), Jose Alonso (road engineer), Robin Carruthers (transport economist - consultant), Noor Rasheed (financial analyst), Hector Revuelta (transport planner - consultant) and Charles Reynolds (railway engineer), on the basis of visits to Bolivia between June a;.d December 1988. (ii) Procurement . . . ..... .. .... ...... .. . .. .. ....... 18 Disbursements O ...... 20 Auditing ...20 Reports ..*oooo........o.e 20 Other Conditionality ...****.*...**.o ...*... 21 Environmental Impact ...***600.*.0.0 ..*0*.... 21 IV. ECONOMIC EVALUATION ...... ..... ......... *...... 22 Deferred Maintenance of La Paz-Oruro Highway 22 Proposed Railway Investments . . . .............. 22 Labor-Intensive Road and Rail Maintenance and Drainage Improvements to . o . o ..oo*0 . 0.t0024 Overall Economic Return ... ................ .......... 24 Risks ................**..o* o 24 Vo FINANCIAL EVALUATION ... .. ................ t ... 24 ENFE's Past and Present Financial Performance 24 Costing and Pricing .. ........... . 5 Financial Objective and Forecasts for 1988-92 .9..... 26 VI. RECOMMENDATIONS **.*...... t.......oo....... **.* * 27 haNEE Annex 1 Patacamaya-Tambo Quemado Road: details to........... 29 Annex 2 "eferred Maintenance on El Alto (La Paz)-Oruro Highway .......*.....**.....o ....*................. 33 Annex 3 SNC's Road Maintenance Program ......to........... 35 Annex 4 Technical Assistance for SNC in Road Maintenance and Contract Management - Terms of Reference ..... 38 Annex 5 Road User Charges ...etoo *.......*-*.***....*.0 39 Annex 6 Railway Items to be Procured 4*..........4. Annex 7 Financial Evaluation of EtIFE 4..................7..4 Annex 8 Technical Assistance to ENFE in Railway Management and Marketing - Terms of Reference ............... 57 Annex 9 Performance Contract ("Acuerdo Programa") between MTC and ENFE - Main Features 60 Annex 10 Labor-Intensive Maintenance and Drainage Works (Tentative List of Subprojects)...oo .............* 63. Annex 11 Technical Assistance for M.T.C. in Planning and Policy Analysis (Terms of Reference)................ 64 Annex 12 Encouraging Use of Containers (Technical Assistance to INPEX) (Terms of Reference)... 65 Annex 13 Facilitating Airfreight for Bolivian Exports (Technical Assistance to INPEX) (Terms of Reference) 67 Annex 14 Environmental Impact Assessment (Rehabilitation of Santa Cruz-Corumba Rail Lne i ne.............. ..... 70 Annex 15 Project File Documents .. . ........ 71 MAP IBRD 21392 BOLIVTA EXPORT CORRIDORS PROJECT STAFF APPRAISAL REPORT I. BOLIVIA'S TRANSPORTATION SYSTE Tratsportacion's Contribution to Economic Recovers 1.01 Bolivia urgently needs to generate non-traditiona' exports as the motivq power for its recovery from ths economic crisis of the early 1980s. Yet tzansportation to potential markets is unusually costly and unreliable, due to the long distances involved, Bolivia's difficult terrain, and its lack df direct access to the sea. Its low traffic volumes, a result of the low population density, also prevent it from taking advantage of the economies of scale inherent in road and rail infrastructure, which is very capital-intensive. 1.02 The need to generate non-traditional exports is made all the more urgent by the expiry in 1992 of Bolivia's contract for selling natural gas to Argentina, now its largest single source of foreign exchange. Thereafter, revenues from gas are expected to fall sharply. However, the agreement that Bolivia signed with Brazil in August 1988 to sell natural gas, electricity, urea and polyethylene offers the possibility of a transformation of the economic prospects for the 1990s. It calls for construction of a gas pipeline from Santa Cruz to the Brazilian city of Corumba and the development of a large-scale industrial zone in eastern Bolivia. The agreement calls for the sales to start. in 1992, but it is improbable that this deadline can be met. Several factors threaten to delay the operation, not the least of which is the inadequacy of transport facilities in eastern Bolivia. Government Strategv for Transportation 1.03 The Government's macro-economic program, introduced in 1985, has succeeded in restoring order in fiscal management after the 1980-85 crisis, bringing down inflation ftom 24,0002 in the worst 12 months of 198415 to about 10 in 1987 and 20% in 1988, and reversing the prolonged decline of GDP. 'ts strategy is to look to the private sector to take the lead in productive activity. A central policy for carrying out that strategy is the promotion of non-traditional (i.e. non-mineral) exports. 1.04 In the transportation sector, the Government's investment priorities are to: (a) maintain and rehabtlitate the existing road and rail networks; -2- (b) integrate the three main populated areas of the country by rehabilitating and paving sections of the La Paz-Cochabamba- Santa Cruz highway still In poor condition; (c) up-grade two priority export corridors, one to the Atlantic and one to the Pacific; and (d) construct penetration roads in the lowlands to areas of high agricultural potential. The Bank and Other Lionors' Roles and Lending Strategvy l' Bolivia's Transportation System 1.05 The Bank strongly supports the macro-economic adjustment program. As the centerpiece of its sssistance program since 1986 it has been implementing two Reconstruction Import Credits (RIC I and RIC II --Credits 1703-BO and 1828-BO), which provide lines of credit for urgently needed imports to key public enterprises, as well as working capital for private firms, in the framew*rk of an action plan of policy measures. As regards transportation, it has endorsed the above priorities for the sector in its Transport Sector Strategy Paper (greei cover, July 10, 1987). 1.06 IDA is supporting the road and rail maintenance requirements under the two RICs. Through them, it is providing a total of $4 million to the National Roads Authority (Servicio Nacional de Caminos - SNC) and $17 million to the railway company (Empresa Nacional de Ferrocarriles del Estado - ENFE), most of it for spare parts. SNC is to receive a further $9 million and ENFE a further $9 million from Japan as co-financing for RIC II, also mostly for spare parts. IDA is further financing road maintenance through its two credits (Credits 1829-BO and 1882-BO) to the Emergency Social Fund (ESF). ESF finances labor-intensive maintenance works and drainage improvements using small-scale contractors who hire predominantly ex-miners. The Andean Development Corporation ("Corporacion Andina de Fomento* - CAF) is also financing maintenance works in five southern districts and technical assistance in maintenance management. 1.07 As to the second of the above priorities, the Inter-American Development Bank (IDB) and CAF have been financing the construction of a new highway between Cochabamba and Santa Cruz. The main part opened in December 1988, though substantial repair and upgrading is still to be undertaken on old sections at each end. IDB is also financing paving of the last unpaved section of the La Paz-Cochabamba highway (Confital- Caihuasi). Several other donors are financing rural roads giving access to areas 'eing opened up for agriculture. IDA is preparing to do so under its proposed Eastern Lowlands Regional Development (First Phase) Project. The next priority to address is the need to up-grade the export corridors. Previous Bank Assistance in the Transportation Sector 1.08 Prior to the two Reconstruction Import Credits, the Bank's previous transpor` operations in Bolivia were limited to five loans or credits signed in the period FY72-78. Three were for railways (FY72, '74 and '77), one for road maintenance (FY78), and one for civil aviation (FY77). SNC had enjoyed extensive financial and technical assistance from the US government since 1955 and from IDB in the 1970s; hence the Bank's late entry into the roads subsector. The absence of new operations between FY78 and FY86 reflects the deterioration of economic management during the early 1980s. 1.09 Because of the radical charge in economic policies since then, the experience of these earlier projects has only limited lessons to offer for the future. The technical capacity of both ENFE and SNC was generally good, but the economics were weak; over-designing was a common failing. Maintenance was (and remains) poor. Furthermore, procurement was notoriously slow, with frequent all2gations of corruption and multiple layers of bureacracy, whose ostensible purpose was to control corruption, but whose effect seems to have been the opposite. Experience with ENFE under RIC I has been satisfactory, though procurement has remained slow. Since April 1988 and with the Bank's encouragement, the Government has required all public-sector contracts over 100,000 bolivianos (about US$41,000) to be handled by international procurement agents. This procedure applies to RIC II and has been satisfactory, though still slow in the prasent start-up phase. Finally, experience with the labor-intensive road maintenance operations under the Emergency Social Fund has been excellent: rapid and effective. II. BOLIVIA'S EXPORT CORRIDORS Future Exports and Imports 2.01 The most promising products for future exports (aside from natural gas, which will move by pipeline) are soya and soya cake (produced in the eastern lowlands), wood and wood products (grown in the northern lowlands), minerals (mined in the Altiplano), meat (from cattle raised in the lowlands), and other food and agricultural products (grown in the Valleys region). If the Government's economic reactivation policies are successful, exports of these products are expected to grow at an average rate of about 12% per year through the year 2000. This may appear rapid, but it starts from a small base and in some cases entails recovering ground lost during the contraction of the economy from 1980 to 1986. 2.02 The principal markets for these exports are expected to be Europe and USA (one quarter each), Asia and Argentina (about one sixth each), and Peru, Chile and Brazil (together the remaining one sixth). 2.03 Improvements in international transport routes will serve imports as well as exports. The largest import flow at present is donated wheat (approaching 200,000 tons per year, over one third of the total import volume). Other food accounts for about one quarter and manufactured goods the remainder. It is the Government's intention to keep these from increasing faster than GDP as a whole, which is expected to grow at about 4% per year. The wheat comes from USA, Canada and Argentina; half of the food and industrial produccs come from Biazil. These patterns are expected to change little. 2.04 Other exports are possible in large quantities$ though not probable: minerals other than tin, mined mostly in the Potosi area, salt from the Uyuni salt-flats in the south-western Altiplano, and iron ore from Mutun in the eastern lowlands on the Brazilian border. These bulks are likely to prefer rail or, in the case of Mutun ore, river transport. Their transport requirements should be evaluated by their respective potential exporters, case by case, in dialogue with the railway company, counting any transport investments needed as an integral part of the costs of production and sale. Bolivia's Exportllmport Routess the Options 2.05 A detailed study carried out in 1987 established that, comparing current truck and rail freight rates, Arica (Chile) is the least-cost port for La Paz, principally an origin and destination of general cargo. Antofagasta (Chile) is the logical choice for minerals e.corted from the Potosi region. Matarani (Peru) attracts road traffic only because the road from La Paz to Arica is so bad; rail traffic to Matarani has been suspended since 1986, when Lake Titicaca flooded and damaged the line in Bolivia. From Cochabamba the Pacific and Atlantic ports are almost equally costly to reach. For Santa Cruz, effectively in the middle of the continent, Atlantic ports in Brazil, Argentina or even Uruguay are slightly less costly to reach than Arica. All, however, are over 2,000 km distant, leaving Bolivian traffic vulnerable to costs and delays in their long overland transit through the neighboring countries, beyond Bolivian control. In September 1988 a new grain terminal was inaugurated at Puerto Quijarro in eastern Bolivia, with direct access to the Paraguay River, an international waterway. This provides a potentially cheaper and less vulnerable new route using the Paraguay and Parana Rivers. It is particularly attractive for soya and soya products that could be produced profitably in large volumes in the eastern lowlands. Pacific Corridor 2.06 For high-value goods entering and leaving Bolivia, the speed and reliability of transport are particularly important. Yet r.one of the present land routes is quick or reliable. The change that would make the greatest impact in this regard would be the construction of an all-weather road from Patacamaya, on the La Paz-Oruro highway, to the Chilean border at Tambo Quemado, a distance of 188 km. From the Chilean side of the border to Arica there already exists an all-weather road, paved in the lower half of its length and gravel-surfaced in the upper half. The Chilean government plans to complete the paving of this road in 1989. The present road between Patacamaya and Tambo Quemado is an unengineered track with no bridges and few culverts. It crosses several seasonal rivers, which trucks can ford in the eight dry months of the year, but which are impassable to all but the largest trucks during the rainy season from December through March. 2.07 As long ago as 1975 a design for a paved road was prepared. In today's prices it would have eost about US$120 million. An engineered gravel road can be built for only about US$40 million. The cost saving is achieved by reducing the embankment width and height to bring them into line with the adjoining existing roads, eliminating large parking areas at the border, and postponing the paved surface until traffic reaches 250-350 vehicles per day, the economic threshold for paving. We estimate thiat by 1992. thi earliest year in which the improved road could be completed, traffic will be about 50-100 trucks per day. 2.08 Another investment is required in association with the upgrading of the road corridor to Arica. between El Alto (La Paz) and Oruro the paved highway is showing signs of advanced fatigue (cracking and deformations), indicating that an asphalt-concrete overlay is urgently required to p-event the pavement from breaking up. It is at present carrying 1,200 vehicles per day near La Paz and 520 vehicles on the section with the least traffic, including 502 trucks and buses. This ia more than sufficient to justify an overlay economically; it is likely to pay for itself very quickly. 2.09 At the same time, ENFE is making efforts to reach agreement with the Chilean railway (Ferrocarril Arica-La Paz - FCALP) on ways to operate the La Paz-Arica line more ef iciently and to expand its capacity. For the first time in many years there is a real prospect of co-ordinated operation of -he two parts of the line. ENFE proposes to make minor track and teruinal improvements on .he Bolivian portion of this Arica-La Paz railway line, to facilitate the operation of through freight trains from the Bolivian border to La Paz, and from Arica to La Paz once agreement is reached with FCALP. Atlantic Corridor 2.10 The completion of the grain terminal at Puerto Quijarro, the prospect of a major industrial complex nearby, and the likelihood that the Atlantic eorridors will come to handle more than half of Bolivia's international trade, all call for particular attention to the Santa Cruz- Corumba route. 2.11 The export of soya is critically dependent on low-cost transport if it is to compete with soya grown in Brazil, Paraguay and Argentina. The rail routes through Argentina, now the least costly for the users, and those through Brazil, presently the most intensively used, are expected to become considerably more costly soon, as the Areentinian and Brazilian railways take advantage of newly granted authority to charge traffic full cost, rather than the heavily subsidized rates now in effect. 2.12 The soya traffic's requirements are for feeder roads frcm the growing areas to the nearest rail-head, silos at those rail-heads, unit trains operated on short cycle to Puerto Qutjarro, and transshipment there to river barges at the private terminal on a short channel leading into the Paraguay River. Soya products will be shipped out the same way after processing in Santa Cruz, where lengthened private sidings and higher- capacity loading facilities are required. On the Paraguay River Brazilian, Paraguayan and Argentinian private barge companies operate to various ports of the River Plate basin where the soya can be transferred to ocean-going ships. Nueva Palmira (Uruguay), on the Uruguay River opposite the mouth of - 6 - the Parana River, is the most promising. This route offers to cut about $25 per ton from the transport cost by the next cheapest route, which is by rail via Corumba to Paranagua (before Brazilian rates go up). 2.13 Barges were in short supply in 1987 and 1988 because of the rapid growth of Brazilian mineral and soya exports. However, it is reasonable to expect the private sector to respond by expanding the barge fleet within a year or so, provided that the prospects for future demand remain good. 2.14 Because of the poor service currently operated by ENFE, the Santa Crus business community is arguing vociferously for the construction of a paved road to Brazil. However, even a gravel-surface road would cost US$90-100 million. While the railway continues to operate on the same route, this will not lower total transport costs (services and infra- structure) until traffic in the corridor approaches 1 million tons per year; in 1988 it was below 200,000 tons. Expansion of soya growing may raise this total to 400,000 tons by 1995, implying that the railway will remain the more economical option for the next few years at least, provided that it can provide an acceptable service. 2.15 What difference the gas-based industrial plants planned for Santa Cruz and Puerto Suarez will make to this conclusion, if they go ahead, is not clear. Some 100,000 tons of polyethylene would be moved each year between Santa Cruz and Corumba. The urea would be shipped directly into Brazil from a plant located wl.thin 15 km of the border, predominantly by rail. There would be few inputs other than gas. For reasons of cost and availability, most consumables end spare parts would be supplied from Brazil rather than from Bolivia. It is likely that during the construction phase, there would be a large demand for construction materials and labor which could be supplied at least in part from within Bolivia. It remains to be determined whether the volume would be large enough to warrant construction of the missing links of the Santa Cruz-Corumba road. On the other hand, construction of the pipeline would require construction of an access road alongside, with low standards and a minimum of structures. The incremental cost of building an all-weather road with bridges and drainage might then be in the range $40-60 million. 2.16 Some observers have questioned whether such a road would cause negative impacts comparable to the Trans-Amazonian highway in Rondonia (Brazil). Doubts have been expressed about the sustainability of agriculture in certain areas, and about the impact of new settlements on indigenous peoples. Until the road's economic justification is firmly established and its possible impact on the environment better understood, a more prudent strategy will be to undertake an all-out effort to increase the efficiency of the rail service and improve its quality, and so ease the presssure for a road. 2.17 The railway company, ENFE, has several options for reducing the cost and/or improving the quality of service for general freight on the Santa Cruz-Corumba line. One option is for ENFE to promote intermodal transport, carrying containers or road trailers on railway flat-cars - 7 - between Santa Cruz and a terminal near the Brazilian border. This requires modest investment in container-handling equipment and land preparation at the terminals. The issue was explored at a seminar for all the interested parties, public and private, held in September in Santa Cruz under Bank sponsorship, and repeated in La Paz. The concept was received enthusiastically. 2.18 The physical investments required to up-grade the Santa Cruz- Corumba rail line are limited to what is needed to protect it from flood damage that might close it temporarily: the rehabilitation of certain vulnerable sections of track, drainage improvements and the rebuilding of a few small bridges. It is not worth investing large amounts in raising travel speeds per se; many operational measptjs can be taken to reduce travel time at no capital cost, such as introducing unit trains that make no intermediate stops. Improving Railway Management 2.19 ENFE is exceptional among the world's railways in covering all its costs without subsidy. However, this is largely thanks to the lack of competition from road transport in the trade corridors that are ENFE's main market. It also disguises a large cross-subsidy from freight to passenger services, made possible only by the lack of competition for the freight services. This position will erode in the coming years. The present management structure of ENFE is inadequate for future needs, since it is excessively centralized and oriented to production rather than to the market. It also suffers from excessive government intervention in management affairs, notably pricing. 2.20 The Government has therefore agreed to clarify its relationship with the railway, with the Ministry of Transport limiting its intervention to the setting of strategic policies and objectives and profitability goals, backed up by agreed performance plans and targets for which the railway can be held accountable. Within that framework the Eastern and Andean networks will be operated as profit centers with managerial, financial and operational autonomy. To help ENFE make this transition to a market-oriented operation, the Government is seeking technical assistance from an expatriate management team for three years. 2.21 An essential part of any management improvement to the railway will be improved telecommunications. The present telephone and telegraph system is incapable of providing the reliable and fast communications necessary to maintain efficient management control of the railway. ENFE wishes to purchase a new radic-based communications system which will permit a sound management information system to be implemented and allow for an improved system of train control. Encouraging the Use of Containers and Air Freight 2.22 The safety from pilferage and damage en route that containers offer in door-to-door transport should in principle be particularly advantageous for a land-locked country like Bolivia. Yet so far Bolivia has made little use of containers. This seems to be due to a combination -8- of factors, some attributable to unfamiliarity with the techniques of container operations and inappropriate pricing, in inherently thin markets where return loads are rare and telecommunications are deficient. 2.23 There is scope for the National Institute for Export Promotion (INPEX) and the Foreign Trade Department of the Ministry of Industry, Trade and Tourism to advise and intermedi..te in the setting up of container services, to press for legislation to streamline documentary requirements for exports, to encourage private freight forwarders to expand market information on container supply and demand, and to encourage the construction of "di.y ports", or inland terminals for the consolidation of freight. To this end, the Government is seeking finance for an intermodal freight terminal in Santa Cruz and consultant assistance for INPEX. 2.24 Air freight so far plays an insignificant part in transporting Bolivia's freight exports, whereas for a landlocked country it would be expected to play a major role, particularly considering that Santa Cruz has a high-standard airport and daily flights to Miami. INPEX wishes to determine what measures would be necessary to stimulate greater use of airfreight. Strategic Conclusions 2.25 As the above shows, the transport problems of exports require not only investuaents but also more efficient and reliable operation of transport services. For the next decade at least, the railway will continue to play a vital role, both to the Atlantic and to the Pacific, and there is undoubted scope for strengthening its commercial orientation and making it more responsive to customers' needs. At the same time, the technology of containers also offers an important potential that has not yet been exploited, because of institutional and managerial obstacles and a lack of consolidation terminals. 2.26 This is not to say that no public investments are needed. On the contrary, the poor and unreliable condition of the road from La Paz to its nearest port, Arica, commands a clear priority for investment. Equally, it is barely tolerable that the Santa Cruz region should have to depend on rail lines that are vulnerable to flooding and other damage, when timely expenditures on preventive maintenance can reduce that vulnerability at modest cost. 2.27 Thirdly, Bolivia faces a basic choice between concentrating its investments and efforts on a few international trade routes, or diversifying its efforts over several routes to diminish its vulnerability, if transit via one of the preferred routes is disrupted for reasons beyond Bolivia's control. Bolivia has in practice followed the latter strategy in recent decades, and the outcome has been costly and unsatisfactory. Roads and railways are both very capital-intensive and subject to great economies of scale. Large savings can be made by concentrating traffic. Larger volumes of traffic are also more likely to make it profitable for transit countries to invest in transport improvements for Bolivia's benefit. Yet to negotiate from strength, one needs a good fall-back option. Hence the merit of concentrating on one corridor to the Pacific and one to the Atlantic. 2.28 Concern over the vulnerability of transit traffic gives road transport an inherent advantage over rail, because of its greater flexibility. A railway can be Immobilized by a washout or a strike. If the railway or customs authority of a neighboring country holds up Bolivian goods in transit, there is little Bolivia can do. International railway issues are particularly 'management-intensive', putting demands on the time of government officials which they can Ill afford. Road transport operators, in contrast, are less prone to strikes and have a strong incentive to work things out for themselves, without every technical problem turning into an international political issue. The uncertainty attached to future growth of international trade also puts a premium on flexible transport means and the avoidance of large fixed investments. Both reasons argue for relying on road transport in at least one of the priority corridors. 2.29 The desi%n of the i?roposeA project takes all the above considerations into accou-tt. III. TRE PROJECT Oriign of the Proiect 3.01 Betffeen March and June of 1988 the Bank prepared a sector study ("Export Corridors Study", green cover, June 16, 1988) to address the questions of which corridors deserve priority, which mode of transport within each corridor is to be preferred, and is it advisable at all to concentrate efforts on just one or two corridors? The study reached the conclusions summarized in Chapter 2; the purpose of this project is to Implement them. The study report was discussed with the Ministry of Transport and the Ministry of Planning during the preappraisal mission in June/July 1988. Both ministries agreed with these conclusions. 3.02 The project was appraised in late November/early December 1988. Negotiations took place February 27 - March 1, 1989. The Bolivian delegation was led by the Ministry of Transport's Subsecretary for Planning, Mr. Mario Galindo. Obiectives 3.03 The prqject consists of major components of a program which aims to promote Bolivia's exports and reduce the costs of its foreign trade by: (a) providing two well-functioning transport corridors by 1992-3, one to the Pacific and one to the Atlantic; (b) improving road and railway maintenance; (c) strengthening management of the railway to make it more market-oriented; (d) strengthening the Ministry of Transportation and Communications in planning and policy-making; and (e) encouraging the use of containers and air freight. 3.04 This project will be linked with four other Bank operations. First, the proposed Atlantic corridor improvements are a necessary condition for success of the Eastern Lowlands Regional Development (First Phase) Project, planned for FY90. It will also benefit the construction of the Puerto Quijarro power plant and the pipeline from Santa Cruz to supply it with gas, for which the Bank has tentatively programmed a loan in FY91. Thirdly, funds available so far to the Emergency Social Fund (para. 1.06) - 10 - have been insufficient to finance all the economically justified road maintenance operations that SNC has submitted to it. The labor-intensive maintenance proposed below is an extension of that program. And fourthly, the Economic Management Strengthening Operation, approved in December 1988, is to provide assistance to the Customs Directorate in improving its revenue-gathering capabilities. Consideration will be given within that project to hiring of consultants to simplify the current cumbersome documentation processes necessary for the export and import of goods. Proiect Description 3.05 The project is part --roughly one half in cost terms-- of a program co-financed with the IDB. Activities proposed under the program fall into three groups, one to improve access to the Pacific port of Arica, one to improve access to the Atlantic ports of the River Plate, and the third to improve aspects of the national transport system which will have particular benefits for export trade. rhe program consists of: Part I: IDA Proiect Access to Pacific Ports (a) Deferred maintenance (asphalt concrete overlay) on the La Paz (El Alto)-Oruro highway (228 km), including the Caracollo- Caihuasi b_.anch; and consultant services for supervision 3.06 The La Paz-Oruro highway is part of the main route between La Paz and Arica and will be used by about 70% of the Bolivian road export traffic to the Pacific (para. 2.8). The Caracollo-Caihuasi branch (17 km) links to the Oruro-Cochabamba highway. The La Paz-Oruro road was constructed in 1966 and has received little maintenance attention since that time. The present volume of traffic exceeds the original design volume by more than 501. The road's condition is precarious with an imminent danger of break- up of the pavement unless remedial action is taken quickly. The project proposes to provide a complete reconstruction of the pavement for 34 km which are already in an advanced state of deterioration, partial reconstruction for a further 11 km and a 5-cm asphalt-concrete overlay over the remaining 183 km to prevent further deterioration of the pavement. (Details are given in Annex 2.) (b) Feasibility study and detailed engineering of the Patacamava- Tambo Quemado road, which would complete the Bolivian portion of the La Paz-Arica highway This road is described in the IDB project description below. The IDA credit will refinance the Project Preparation Facility Loan of US$400,000 awarded in April 1988. - 11 - (c) Minor track and terminal improvements on the Bolivian section of the La Paz-Arica railway 3.07 Not all exports to the Pacific ports will be transported most economically by road. Minerals, which for several years will continue to be the most important in terms of both volume and value, will continue to be exported by rail. The Project provides for minor improvements to the track between La Paz and the frontier with Chile so that unit trains of 15 freight cars can be operated without the need for dividing the train on steep gradients. Minor improvements to the terminal in La Paz will allow the 24-hour operation of these unit trains. Access to Atlantic Ports (d) Rehabilitation of track and bridges on the Santa Cruz-Corumba railway line and conversion of boxcars to multi-use capability for use on ENFE's Eastern network 3.08 Much of the track infrastructure and many of the bridges on the rail line between Santa Cruz and Corumba have been replaced in the last ten years, with the assistance of Bank and Japanese financing. Before the line can be considered good enough as a principal export route to the port of Quijarro, soiae additional infrastructure works are necessary. The Project provides for the placing of rock ballast to minimum standards over 200 kms of line which currently have only earth ballast and for the replacing of two bridges which are in a precarious state. 3.09 The beginning of rail services to Puerto Quijarro and the resulting reduction in demand for services to Paranagua (Brazil) will free a large number of boxcars for conversion to multi-use cars. Hatches will be built into the roofs and trap-doors into the floors to allow automated loading and unloading of bulk commodities. Although boxcars are suitable for the transport of bagged soya flour, they are not the most suitable for the transport of soya beans in bulk. The availability of multi-use cars will allow ENFE to transport soya beans and flour as export traffic and general freight as import traffic, with the maximum utilization of cars. Under the project 40 boxcars will be converted to multi-use. When added to the 30 grain hoppers already available, they will give sufficient car capacity on the Eastern network for projected demand through 1994. (e) Construction of a new rail and intermodal freight terminal in Santa Cruz 3.10 The present arrangements for freight terminals in Santa Cruz are unsatisfactory. There are two terminals, one operated by ENFE and the other by the Autonomous Customs Warehouse Administration ("Administracion Autonoma de Almacenes Aduaneras" - AADAA), a government monopoly bonded warehouse company. The ENFE terminal lacks even the most basic facilities for dealing with export freight, having no terminal building, no loading platform, no area for dealing with containers and no provision for dealing with intermodal freight from other parts of Bolivia. The AADAA terminal lacks suitable terainal buildings and has insufficient capacity for - 12 - receiving wagons at peak periods. The project will provide for the construction of a new terminal to replace both the existing terminals, the now terminal to include all the necessary facilities for the efficient handling of export and import freight. ENFE will be responsible for its design and for leasing the terminal operation to a private operator. The lease or concession will be awarded on the basis of international competitive bidding. To ensure that the operating company is appointed in time to participate in decisions on the design and construction, the first disbursement from the Credit against the construction of the terminal will be conditional on ENFE having first awarded the management contract. System-wide Improvements (f) Labor-intensive maintenance and drainage improvements on road and rail export routes 3.11 SNC, ENFE and certain regional development corporations have asked the ESF to finance maintenance and dra 1age improvements on some 35 sections of road and railway on the main routes to Bolivia's international borders, which can be undertaken by small contractors using labor-intensive methods. Most of these operations cost in the range US$150,000-250,000. Under the project, IDA will provide a line of credit of US$3.7 million to finance about 20 operations to be selected from this list (Annex 10). Since ESP plans to cease infrastructure operations at the end of 1989, most of these operations have been started early in 1989, using local funds. IDA's contribution to them under this project will therefore be retroactive. (g) Radio communications system for ENFE 3.12 ENFE suffers from not having a modern radio communications system which would allow for control of car movements and transmission of information regarding export and import commodity movements, as well as for train control. The project provides for the purchase of such a system. (h) Technicel assistance for strengthening the institutional capacity of: (i) the Ministry of Transport in transport planning and policy analysis. (ii) SNC in road maintenance mana)ement. and (iii) ENFE in management and marketing, audit and terminals 3.13 The MTC benefited from Bank assistance in developinR the National Transport Plan in 1979-83 and establishing a transport plar"Ling capability thereby, but the virtual collapse of government services in the early 1980s has left the transport planning capability very wealt. The Project will provide funding for building up a transport planuing offti.e as a permanent part of the MTC (Annex 11). Separate studies will advise on improving the organization of the ministry, set up a transport data base, update investment priorities in the sector, revise road design standards, and design an axle-load control program. Transport operations and investment requirements (all modes) in the La Paz-Cochabauba-Santa Cruz corridor will also be evaluated; and funds will be provided for small preinvestment studies as the need arises. - 13 - 3.14 SNC has so far lacked the capacity to formulate a rigorous national road maintenance program within which it can prepare its annual road maintenance budgets (Annex 3). The project till finance the development of such a program along lines proposed by the SNC and MTC. (Terms of reference are in Annex 4). The key activity will be to put into operation throughout the country a maintenance management system and an equipment management system designed by consultants in 1982-84 but not yet adequately calibrated to Bolivian performance levels and costs. Design of these two systems is currently being completed as part of the pilot road maintenance program in five southern districts, financed by CAF (para. 1.06). SNC has aSreed to put these systems into full operation throughout the country by June 30, 1991. 3.15 ENFE lacks many of the management skills necessary to successfully make the transition to a commercially oriented railway, a change it will need to make in the next few years as Bolivia develops a road system capable of sustaining road services in competition with the railway. The Project will provide for an experienced ex-patriate railway operat.ons team to work with ENFE in managing the transition and training ENFE managers in the skills necessary to assume responsibility for the future operation of the railway in its new operating environment. (Terms of reference are in Annex 8). Given the importance of this process to the project's objectives, the first disbursements against ENFE's civil works and goods purchases will be conditional on ENFE having hired these consultants. 3.16 Ths project also provides funds for hiring (a) external auditors, and (b) consultants to finalize the design of the Santa Cruz freight terminal and advise on the leasing/ concession arrangements. The latter assistance will be required at two stages: drawing up the bidding documents and evaluating the bids. (i) Technical assistance for INPEX on encouraging use of containers and airfreight for Bolivia's exports 3.17 INPEX is a mixed publiclprivate agency for promoting exports, primarily through information services. The project provides finance, through the Ministry of Industry, Trade and Tourism, for INPEX to commission studies on encouraging the use of containers (Annex 12) and air freight (Annex 13). (j) Procurement services for the above 3.18 By law, all public-sector procurement for amounts over 100,000 bolivianos (approximately US$41,000) must be handled by international procurement agents. The Government so far has general agreements with two such agencies: the UN Office of Project Services and the Crown Agents (UK). Each implementing agency may choose which to use. Fees are proportional to the amounts procured; they average about 2.52. - 14 - Part IIs IDB Project Construction of an all-weather, gravel-surface road between Patacamava and Tambo Quemado (188 ki): and construction supervision 3.19 The Export Corridors Study concluded that the most economically worthwhile investment in export corridors for Bolivia would be to construct this section of road (para. 2.06 and Annex 1). Now impassable to all but the largest of trucks in the three months of the wet season, it will form part of the principal road access between Bolivia and the Pacific ports of Chile, particularly Arica. The design will provide for a minimum-condition road in the first instance, with basic drainage and bridges and a gravel surface. A paved surface is to be added later when the traffic has Increased sufficiently to justify it. The road will be constructed in three segments more or less simultaneously, so that it can be put into use as quickly as possible. Cost Estimates 3.20 The cost of this entire program is estimated at 238 million bolivianos, equivalent to about US$98 million. Its foreign exchange cost is about US$64 million. Details are set out in Table 1. The IDA-financed project --the program minus construction and supervision of the Patacamaya- Tambo quemado road-- is expected to cost US$47.1 million equivalent (foreign cost US$29.5 million). IDA will contribute approximately 79X and the Government 21% of the cost of the IDA project. Within this, IDA will finance the foreign exchange cost of the railway goods and civil works (602), 802 of SNC-managed road works, 902 of ESF-financed works, and 100l of all consultant services. The cost of the IDB-financed project is provisionally estimated at about US$51 million (foreign component US$35 million). The local component of these estimates includes taxes where relevant, mainly value added tax of 11%. Prices are of December 1988. Price escalation is estimated on the basis of expected inflation in international prices of goods and services of 5.3X per year in 1989-90 and 4.12 per year thereafter. 3.21 The estimates for the La Paz-Oruro pavement strengthening and the ENFE civil works are based on final design. For these and the remaining IDA components, except the ESF component, a physical contingency of 102 is included. The ESF component is regarded as a line of credit; any under- or over-estimation of costs will be accommodated by adjusting the number of sub-projects committed. The estimate for the Patacamaya-Tambo Q6.eAado road is based on a prefeasibility study and is subject to some uncerteinty. For this reason the cost table allows a physical contingency of 152 on this item. 3.22 The unit costs of road and rail civil works are high relative to the rest of Latin America. This has been examined closely and found to be due to the remote location of sites, which :aises transport costs, and the thin market for large-scale works in Bolivia, which makes it difficult for contractors to spread their costs and risks over several operations. - 15 - cms mvrm Share Foreign of FN*CS PMM Coonent Loal Poriean T@tal Loca Forei Total Co"s Tota I A We6 ID t --(bol *i llon)-- -- il lion)-- ( (w US Una Uw. ____ ___ ___ -_--- - ---__._- -- ------ - - - -_ _ _ _ _ _ _ _ _ _ _ _ PART 1: IDA PR0LT Pacific Corridor Deferred maintenance & overlay of La Psa-Oruro road * brmch 11.6 30.9 42.5 4.7 11.7 1?.4 73 4S 13.9 3.S 5.jpervi5ioa of "we 1.9 0.2 2.1 0.5 0.1 e 9 10 2 0.9 Fee.ib. *tudy of PUtaceAya-Ta o u*ando Road (PPF refinanced) 0.3 0.7 1.0 0.1 0.3 0.4 70 1 0.4 Rail track iproveata, La Paz- Charans & La Pas terminal 1.6 1.1 2.7 0.6 0.3 1.1 42 3 0.5 0.8 Atlantic Corridor Track rehab.. St Cruz-P.Quijarro (rebal Ist, rp I ace 2 bridges) 4.3 6.1 10.4 1.0 2.8 4.8 So 11 2.8 1.8 Boxcar conversiona 0.1 0.2 0.3 0.0 0.1 0.1 sO 0 0.1 0.0 Construction Sta Crux terminal 4.1 p.4 7.6 1.7 1.4 3.1 48 8 1.4 1.7 System-wido i provemonts Labor-inte. road * rail ma;ntce 7.6 1.9 9.5 3.1 0.8 3.S 20 10 3.8 0.4 Telecommunications 0.2 4.6 4.9 0.1 1.9 2.0 95 5 1.9 0.1 institutional atrengotng. lTC SSPTC - trans. policy * p Ino. 0.6 0.6 1.2 0.3 0.3 0.5 80 1 0.5 SNC - mint. A project adin. 0.4 0.e 1.2 0.2 0.3 0.6 65 1 0.8 ENFE - managent A aarktg 1.8 5.9 7.3 0.6 2.4 8.0 0o a 8.0 - extrnal audit 0.0 0.1 0.1 0.0 0.0 0.1 60 0 0.1 - terminal deign/anat 0.0 0.1 0.1 0.0 0.0 0.1 so 0 0.1 Tech. Assist, to D61 Facilitating container use 0.0 0.2 0.2 0.0 0.1 0.1 so 0 0.1 Facilitatine air freight 0.0 0.2 0.2 0.0 0.1 0.1 6o 0 0.1 Procuremnt services (2.5) 0.8 1.2 2.0 0.3 OS 0.6 60 2 0.0 Subtotal, bass cost 38.2 S8.2 93.5 14.4 28.9 38.3 62 100 30.2 8.1 Physical contingencie (103) 2.8 8.8 0.4 1.1 2.3 8.4 2.7 0.0 Price escalation (1) 4.9 6.2 13.1 2.0 8.0 8.4 4.1 1.2 Tctal. WA Project 42.0 72.0 115.0 17. 20.5 47.1 6S 07.0 10.1 PART It Dl PMlOJEIT Construction of Patacamoys- Tmb*o qu"edo road a 25.0 55.7 60.6 10. 22.8 88.1 69 69 28.0 9.8 Supervioion of "we 2.4 5.7 5.1 1.0 2.3 3.5 70 9 8.3 Procurement services (2.51) 0.9 1.3 2.2 0.4 0.5 0.9 60 2 0.9 Subtotal. bas cost 29.3 02.7 91.1 11.6 2S.7 37.8 69 100 28.0 9.5 Physical continbencies (1) 4.3 9.4 18.7 1.7 5.9 5.6 4.2 1.4 Price escalation (6l1) 5.0 12.8 18.5 2.4 8.2 7.6 3.7 1.9 Total, 1D Project 38.4 84.9 12S3. 15.7 34.8 S0.8 69 37.9 12.t WA TOTAL. PROWAN S1.3 157.0 288.2 33.5 64.3 S 7.6 6s 37.0 37.9 22.6 2.44 bolivianoS * USS1100 eProliminary e*timete baed on perfeasibility study. a ine gravl srfc - 16 - 3.23 A total of about 400 man-months of consultant services will be required, as followsa Man-months US$000 i. MTC planning & policy studies 120 500 ii. Road maintenance management 50 500 iii. Railway management assistance 200 3,000 iv. Railway external audit 7 50 v. Freight terminal design 1 20 vi. Terminal leaselconcession management 2 40 vii. Containers 8 100 viii. Air freight 12 100 400 4,210 The average cost of the consultants (total cost divided by the number of man-months) is expected to be about US$10,500. This relatively high cost is determined largely by the railway management assistanc'n, which necessarily has to be provided by highly experienced expatriates. The other items are expected to combine local and expatriate consultants. 3.24 The Government agreed at negotiations to earmark the counterpart funds needed for the project in its investment plans for the next four years. The amounts are: 1989 US$ 0.8 million equivalent 1990 3.3 1991 4.1 1992 1.9 Total 10.1 Co-Financint 3.25 IDB has agreed to consider a loan to finance the Patacamaya-Tambo Quemado road in its 1989 lending program. It is tentatively progradming an appraisal mission in June 1989 and a Board presentation in December, 1989. The loan amo'ant of US$38 million shown in Table 1 is only indicative, The IDA-financed project is viable on its own --though its benefits will be enhanced by the IDB-financed project-- and is being processed before the latter is appraised because of the urgency of several of its components. The two projects are presented as a program because of the importance both banks attach to a rationalization of investments in this field and to the strengthening of road maintenance. A memorandum of understanding between the two banks, setting forth their shared interests and agreeing on procedures for coordination, is to be signed in April, 1989. Implementing Agencies 3.26 The Ministry of Transport will have overall respensibility for the project. Its Subsecretariat for Planning will be the beneficiary of the technical assistance *n transport planning and policy studies. Except for the ESF-financed subprojects, SNC will be responsible for all the road - 17 - items and ENFE for all the railway items, including the freight terminals. ENFE will carry out the various track improvements with its own labor. The consultants for the containers and air freight studies will be hired by the Foreign Trade Department of the Ministry of Industry, Trade and Tourism, which is represented on INPEX's board of directors. It will then assign the consultants to work with INPEX. 3.27 ESF will contract with private contractors for the labor-intensive maintenance subprojects, as under Credit 18S2-BO. ESF will be responsible for paying the contractors; SNC and ENFE will provide technical supervision. On-lending Terms 3.28 The Government will on-lend to ENFE US$11.3 million under a subsidiary loan agreement, at an interest rate of LIBOR and 0.52, for 15 years with 3 years grace. ENFE will bear the foreign exchange risk. These conditions are consistent with ENFE functioning as a commercial railway and not as a department of government. 3.29 The Government will pass on US$3.7 million to ESF as a grant under a sub-grant agreement. Imuplementation Schedule 3.30 Five years are allowed for implementation of the project. This includes a year-long start-up for components other than the ESF works. The country profile implementation period, based on experience between 1972 and 1986, is nine years. However, it is reasonable to expect that the slowing of inflation and the introduction of procurement agents will avoid the mtliti-year delays in contracting common in the early 1980s. An allowance of five years to complete a program of minor civil works and technical assistance, which because of the urgent needs ought to be completed in three years, should be sufficient in Bolivia's current circumstances. 3.31 On this basis, the IDA-financed project is expected to be completed by December 31, 1994, and the credit will be closed on June 30, 1995. IDA Review of ESF Subproiects 3.32 The project will finance ESF subprojects selected by ESF, in consultation with IDA, from the agreed list. The selection will be made during the course of the project. ESF has appraised and approved all subprojects in the list, applying the same criteria and procedures as under Credit 1882-BO. For each subproject that it wishes to include, ESF will submit its own appraisal documentation to IDA for approval before the relevant contract is awarded in the case of subprojects costing over US$100,000, and accompanying the first withdrawal application for all others. As an exception, IDA will review those for which ES? seeks - 18 - retroactive financing together with their firit withdrawal application, whatever their cost. Procurement 3.33 IDA-financed civil works and goods will be procured in accordance with IDA's procurement guidelines. An exception is ESF-managed subprojects expected to cost less than US$250,000, which will be procured in accordance with ESF's standard-price direct contracting procedure. This is acceptable to the Association with the safeguards provided under Credit 1882-BO summarized in the next paragraph. Civil works expected to cost over US$2 million --which inclu'e all the SNC-managed works and the freight terminal- will be procured by international competitive bidding (ICB). There is a small number of Bolivian firms with the capacity needed; Brazilian and possibly Chilean firms are also expected to compete. Contracts expected to cost less than US$2 million --such as the railway bridge replacement-- will be awarded by competitive bidding advertised locally, using procedures acceptable to the Association. ICB will also be used for purchase of equipment and materials --including rails, ballast and telecommunications equipment-- expected to exceed US$250,000, LCB for contracts expected to fall between US$50,000 and US$250,000, and local shopping for contracts of less than US$50,000 each, up to a combined total of US$200,000. The authorized procurement agents will process the bidding for all contracts over 100,000 bolivianos (equivalent to about US$41,000), except those managed by ESF, which is exempted by law. 3.34 For subprojects expected to cost less than US$250,000, ESF will negotiate directly with a contractor selected by the sponsoring agency (SNC, ENFE or regional development corporation) on the basis of a schedule of standard unit prices maintained by ESP. The subproject sponsors will be permitted, at their option, either to nominate the contractor or select one by LCB. For subprojects expected to cost between US$250,000 and ESF's legal maximum of US$750,000, ESF will require the subproject sponsor to select a contractor by LCB. If the lowest bid is significantly above ESF's estimate based on its standard prices. ESF will reserve the right to reject all bids and negotiate with the lowest bidder on the basis of its (ESF's) standard prices. To ensure fair access to ESF contracts for all qualified contractors, IDA will not normally approve the awarding of contracts to any onc contractor by the standard price procedure for more than US$500,000 in aggregate; waivers may be granted on a case-by-case basis in the light of the availability of qualified contractors and the opportunities given to other contractors to participate. 3.35 IDA will carry out prior review of procurement documentation for contracts expected to cost over US$100,000. Smaller contracts will be reviewed at the time the first disbursement request against each is received. - 19 - 3.36 All consultants will likewise be hired in accordance with IDA's guidelinest their qualifications and zhe process of their selection will have to be satisfactory and the terms and conditions of their contracts acceptable to the Association. 3.37 Table 2 shows the expected breakdown of procurement among ICB, LCB and other procedures. Table 2 Breakdown of Procurement by Procurement Method Project Element Procurement Method Total ICB LCB Other Cost ---- (USS million)---- Road civil works 21.5 4.1 25.6 (17.2) (3.7) (20.9) Railway civil works 6.5 0.6 0.5 7.6 (2.9) (2.9) Equipment and materials 5.2 0.8 0.0 6.0 (5.2) (5.2) Consultant services 8.0 8.0 (8.0) (8.0) TOTAL 33.2 1.8 12.5 47.1 (25.3) (11.7) (37.0) IDA contribution is shown in parentheses Other 1. Road civil works financed by ESF will apply ESF's standard unit- price procedure used under Credits 1829-BO and 1882-B0, unless contracts are for over US$250,000, when LCB will be applied. 2. For rail civil works EWE will use its own labor force to place rails, ballast, etc. 3. Consultants will be hired in aecordance with IDA guidelines. Disbursements 3.38 The credit proceeds will be disbursed on the following basis: - 80% of total expenditures (including taxes) on civil works carried out by SNC - 902 of total expenditures (incluudng taxes) on civil works financed by ESF - 452 of total expenditures (including taxes) on civil works carried out by ENFE - 20 - - 100% of expenditures (excluding taxes) for equipment and materials procured from outside Bolivia - 100% of expenditures (excluding taxes) for consultant services 3.39 Disbursements will be made against certified statements of expenditures for all local expenditures. The documentation for these expenditures will not be sent to the Association but will be retained by the Borrower for periodic review by the Association. All other expenditures will be fully documented. 3.40 Since ESF is ceasing infrastructure operations in the first half of 1990, much of its allocat'on from the credit will be applied to reimburse works already in implementation, funded hitherto from the National Treasury. Retroactive financing will be permitted of up to 10% of the credit amount, effective for eligible expenditures made after June 15, 1988 ti.e. 12 months before the expected date of signing) and before Board presentation. Subprojects will be considered eligible if their economic justification and procurement are acceptable to the Association. Auditing 3.41 The submitting of audit reports to the Association under previous railway projects has been unsatisfactory. The Contraloria General, as the external auditor, is very slow in performing audits because of lack of qualified auditors. ENFE's accounts for 1986 and 1987 have not yet (in February 1989) been audited. To avoid such delays under the proposed project, the implementing agencies will be required to appoint private independent commercial auditors. The Controller General has agreed to this. ENFE is now in the process of appoisnting such auditors. The initial contract between auditors and ENFE will be for FY1987 and 1988. The auditors will clear the backlog of past work and submit future audit reports to the Association not later than four months after the end of each fiscal year. Reports 3.42 By March 31 of each year until the project is completed, the implementing agencies will send to IDA, through MTC, a report on progress during the preceding year on those project items for which they are responsible. The MTC, drawing upon inputs supplied by the other implementing agencies, will submit a project completion report by Decemtier 31, 1995 or 6 months after the credit is closed, whichever is later. Other Conditionality 3.43 In view of the need to strengthen the appraisal and programming of transportation investments and the co-ordination among external sources of finance, the Government has agreed to afford IDA the opportunity, not later than September 30 each year during project implementation, to review and - 21 - comment on the transport investments planned for the following five years. Furthermore, the Government has agreed that, before undertaking any major road or rail investment in its export corridors during project implementation, it will show to IDA's satisfaction that each such investment is economically justified and, in the case of railway investments, financially justified. For this purpose, 'major' means over US$5 million in any one fiscal year in the case of roads and over US$1 million in the case of rail investments; 'export corridors" are routes linking Bolivia's five largest cities to its international borders. 3.44 Likewise in view of the need to strengthen the programming of road maintenance, it will be a condition of effectiveness that the Government present to IDA a detailed road maintenance program for 1990 and an outline plan for 1991-93, each satisfactory to the Association. The Government has also agreed to submit to the Association by March 31 of each year starting in 1990 and until the project is completed, a report on the results of road maintenance in the previous year. Further, the Government has agreed to present to IDA by September 30 of each year starting in 1990 and until the project is completed, a road maintenance program for the following year that is satisfactory to the Association. 3.45 To allow ENFE to achieve the commercial autonomy and responsibility it needs, MTC and ENFE have agreed to negotiate a performance contract ("acuerdo programa"), setting out each party's objectives and commitments to the other (para. 2.20). The first disbursement against the ENFE civil works and goods purchases will be conditional on the Government submitting to the Association such an agreement, acceptable to the Association, addressing the topics outlined in Annex 9 and covering 1990-91. By September 30, 1991, MTC will further submit to the Association a renewal of this agreement covering 1992-94, acceptable to IDA. By March 31 of each year from 1991 to 1994 the Ministry will also submit to IDA a review of both parties' compliance with the "acuerdo programal during the previous year. Environmental Impact 3.46 The civil works under the IDA project involve the improvement of existing infrastructure and do not entail any appropriation of land or displacement of people. Improvements in drainage along the roads and railways will generally reduce soil erosion. In the Eastern Lowlands, the proposed improvements to the railway will also have a benign effect on the environment, in so far as they reduce the political pressure for the construction of a road through the essentially undeveloped region between Santa Cruz and Corumba. The rail improvements themselves will give no great incentive to development along the line other than in the soya- growing areas, since ENFE will concentrate on end-to-end services without intermediate stops. Bank-sponsored studies carried out in preparation for the Eastern Lowlands Regional Development Project (para. 3.04) will clarify the prospects for expanding production of soya, a major component of traffic expected on the line. - 22 - 3.47 As to the possible environmental impact of the actual work operations on the Santa Cruz-Corumba line, relevant safeguards will be incorporated into the bidding documents, as detailed in Annex 14. 3.48 The design study for the Patacamaya-Tambo Quemado road, in progress between January and May 1989, includes an environmental impact assessment, whose conclusions will be incorporated in the IDB appraisal. No serious issues are expected to arise, as the proposed route passes through a thinly populated region, which has few environmentally sensitive attributes. IV. ECONOMIC EVALUATION Deferred Maintenance of La Paz-Oruro Hithway 4.01 The road between La Paz and Oruro, which forms part of the road export corridor between La Paz and Arica as well as the principal internal inter-urban road between La Paz, Cochabamba and Santa Cruz, is in a perilous state of repair. There has been no preventive maintenance since the road was constructed some twenty years ago and the traffic volumes exceed the design capacities. Details of the proposed works are given in Annex 2. Savings will come from reduced vehicle operating costs on the improved surface and from the avoidance of the full reconstruction of the road that would have been necessary, had the pavement been left to break up. An evaluation of the proposed rehabilitation using the Bank's Highway Design and Maintenance Standards model showed an ER of 621. PropsedRailwa Investments 4.02 The economic justification of the rail items has been made in three partst those relating to the Pacific corridor to Arica, those relating to the Atlantic corridor to Quijarro, and those which will benefit the entire railway --the management assistance and telecommunications equipment 4.03 Arica-La Paz corridor: The investments in this corridor will permit the 24-hour through running of 15-car unit trains between the Chilean borier and La Paz. With the co-operation of the Chilean railway, these trains could be operated through from Arica with only one section where they be divided. The investments required will reduce the maximm gradient in the Bolivian section from 2.31 to 1.31 and at the same time eliminate curves which restrain the maximum operating speed of trains. Changes will also be made to the track layout in the El Alto terminal, allowing the trains to operate up to the terminal building without the need to be divided into sections. A security enclosure will allow the trains to enter the terminal at any time, rather than the during the single shift in which the rest of the terminal operates. The investment in these changes is only US$1.1 million, but the first-year benefits in train operating cost savings are expected to exceed US$250,000. The ER is estimated at 33%, - 23 - reducing to 272 if the construction cost is 252 more than envisaged, 252 if the traffic level is 252 less than projected, and 21Z in the worst- case combination of both factors. 4.04 The justification for investing in improvements to the La Paz- Arica line rests heavily on closer co-ordination being achieved between the managements of the Bolivian and Chilean companies. To promote such co- ordination, disbursements against the works on this line will be conditional on ENFE taking effective action to keep the number of freight cars awaiting traction at Arica and Charana below 100 (each) on average during the two previous months. ENFE has undertaken to maintain such efforts throughout the implementation of the project. 4.05 Santa Cruz-Corumba Line: The main benefits from investing in the track and bridges will be security of operations against deformation of the track and closure of the line through washouts. The benefits of conversion of freight cars to multi-use will be lower train operating costs through the ability to use fewer cars and to use them in unit train formations. The overall ER of this sub-project is 32%, reducing to 26% if the investment cost increases by 25%, 25% if the benefits are reduced by 251 and to 20% in the worst-case combination of the two factors. 4.06 The main benefits of the construction of a new terminal will be reduced losses through theft and damage, improved car turnaround and a resulting need for fewer cars, reduced terminal operating costs through operation by a private company and improved co-ordination between terminal and train operations by the elimination of AADAA from a major role in operation of a railway terminal. ae estimated ER for the terminal sub- project is in excess of 100%. The main contributing factor to this high value is the reduction of loss and damage to freight. Current losses are estimated to exceeded US$4 million per year. Although in theory it would be possible to reduce this value without investing in a new terminal, in practice it would be almost impossible. The reason why no successful measures have been taken so far to reduce losses is that it is in the interest of many parties involved to maintain the system as it is. Only a fundamental change in the form of operation, such as proposed in the project, will bring about the necessary improvement. 4.07 Management Assistance: To evaluate the proposed management assistance to ENFE, three levels of managerial and operational efficiency have been defined: the existing situation, a level corresponding to a well-run, commercially-oriented operation (for which the average Class 3 railroad of the United States is taken as a model), and an intermediate level between these two, which could be considered equivalent in efl.iciency to a small state-owned railway with no public-service obligations. If the assistance were to succeed in raising ENFE's operating efficiency to the highest of the three levels, the ER on the investment would be 892. If it achieves only the intermediate level, a more realistic prospect, the ER will be 53%. Sensitivity tests with certain pessimistic, yet not improbable, assumptions show that the ER is unlikely to be less than 38Z. 4.08 Telecommunications Equipment: The main benefits from introducing a radio-based telecommunications system are reduced time needed for issuing - 24 - operating instructions to trains, quicker car turnaround (because it will be possible to track their whereabouts in real time), and reduced maintenance and operating costs for the communications system itself. The ER I8 estimated at 632 in the most likely case, and not less than 46% in the worst-case scenario. Labor-Intensive Road and Rail Maintenance and Drainage Improvements 4.09 The benefits of the labor-intensive maintenance and drainage works will be of two types: savings to transport operators from the greater reliability of the roads and rail lines and to SNC and ENFE from the avoidance of greater damage; and benefits derived from the stability of the social structure and economic policy of the government, thanks to the reduction of unemployment and creation of purchasing power. Among the subprojects from which the selection will be made, all those costing over US$100,000 have been found to promise an ER of 122 or more. Overall Economic Return 4.10 Our best estimate of the ER on the IDA project is over 402 and on the total program 392. The majority of the benefits are expected to come from the two most costly projects, the road construction and reconstruction in the La Paz-Arica corridor. Risks 4.11 There are two main risks: (a) delays in implementation, due to lack of counterpart funds and of qualified staff in the implementing agencies; (b) difficulties in achieving management improvements and performance targets in the railway. To mitigate the risk of delays in implementation, the Government has agreed to earmark the necessary counterpart funds for the project in its annual public investment program. Achieving the proposed improvement in the railway will be difficult, but made more feasible by ENFE's agreement to recruit expatriate management advisory team. Underpinning the success of the whole project is sound macro-economic management and careful selection of future sector investments. IDA will continue to advise the Government on macro-economic pclicy and on major transport investments. V. FINANCIAL EVALUATION ENFE's Past and Present Financial Performance 5.01 ENFE is rare among the world's railways in covering all its costs without subsidy. Furthermore, at the beginning of 1938 the Government took over all its outstanding long-term debt, to enable it to lower its (high) prices. Its financial situation is therefore not a matter of immediate concern. For the longer term, however, it needs to relate its pricing more _ 25 - closely to its costs, requiring stronger cost accounting. ENFE ought now to rely entirely on its own revenues to service future debt; its decision- making on investments should adapt to this stronger discipline. 5.02 In the past ENFE had ups and downs in its financial condition (Annex 7). Since 1985 its financial situation has been satisfactory. The absence of competition from other modes, particularly in the Eastern network, allowed ENFE to substantially increase its tariffs during 1985 and 1986. As a result, the working ratios remained satisfactory at 82% in 1987 and 86% in 1988. Costing and Pricing 5.03 In early 1987 ENFE established a traffic costing system with the help of a Brazilian consultant. Its pricing policy, however, is inadequate. In mid-1988, to provide an incentive for exports, the MTC instructed ENFE to cut freight rates for exports by 60% and for domestic traffic by 30%. These discounted rates corresponded fairly closely to marginal costs for most such traffic flows at the times since excess capacity was available. However, this is neither constant nor true for all export traffic. The discounts have in fact distorted traffic on the Arica- La Paz line. At the same time, the large number of commodity categories, each with its own rate schedule, complicates the tariff needlessly. Later in 1988 ENFE engaged the same consu'ltAnt (financed from IDA's RIC II) to design a simpler tariff structure more closely related to costs and more flexible over time. 5.04 The results for freight, submitted in December 1988, are highly satisfactory; ENFE, MTC and IDA all agree on this. For long distances (over 500 km) the proposed rates are lower than the existing ones and for short distances slightly higher, in line with ENFE's cost structure. All rates cover at a minimum the long-run variable cost (for definition see Annex 7, para. 5). Rules are proposed giving ENFE limited freedom to negotiate discounts with customers for large volumes for periods of 3 or 6 months at a time, with authority to award such discounts appropriatety reserved to successively higher management levels for successively larger discounts. Under the new system, MTC would intervene less in setting ENFE's rates, limiting its role to approving the broad structure and periodic adjustments, and approving the largest of discounts. The consultant also recommends that, if the Government continues to require that certain strategic commodities, such as wheat, be carried at rates below variable costs, it should pay direct compensation to ENFE. More attractive rates for containers are also proposed, to encourage such traffic. 5.05 As a continuation of his assignment, the consultant prepared a new tariff for passengers in February-March 1989. The main issue there is that most fares barely cover marginal cost. Concern for low-income passengers has motivated holding certain fares low, but there is a lively secondary market among middle-income passengers for the few seat tickets available. Greater differentiation of fares among first and second class levels of service, for example, would clearly be rational. - 26 - 5.06 MTC and ENFE intend to put the new freight tariff into effect in April, 1989. However, objections can be expected from certain users, particularly as this is a pre-election period. To encourage its adoption not later than the entry of the new administration (August-Septamber 1989), the first disbursements against ENFE's civil works and goods items will be made conditional on implementation of the new freight and passenger tariff structure. Financial Obiective and Forecasts for 1988-92 5.07 The primary financial objective of ENFE should be to become self- sufficient so that its revenues cover all operating costs, debt service charges and a major contribution of future investments for replacement and new assets. It should operate as a commercial, market-oriented enterprise without subsidy. 5.08 Annex 7 sets out details of the financial forecast and major assumptions used. A seven-year forecast (1989-95) has been prepared for the Andean and Eastern networks separately and for the consolidated operations. It indicates that ENFE is likely to remain in a satisfactory financial condition. The working ratios for consolidated operation are expected to improve from 86% in 1988 to 781 in 1995. The staff costs are expected to decrease in real terms from 57% of working costs to about 52% by 1995. The financial rate of return with revalued fixed assets shows good improvement from 1% in 1987 to 3.51 in 1995 and should continue to improve thlereafter. The flow of funds statement indicates that ENFE should be able to manage its own operations without government subsidy as its revenues will cover operating costs, debt service charges and a contribution of around 40% toward future investments. The debt/equity ratio of the consolidated operation will remain at about 0.39 and the liquidity ratio between 1.2 to 1.9, which are both satisfactory. 5.09 ENFE's finances are highly sensitive to cost increases without adequate traffic increase and to major declines in traffic. To maintain the satisfactory financial condition, the Government and ENFE management have agreed that ENFE will, during implementation of the project: (i) show, to the satisfaction of IDA, that any investment of over US$1 million it intends to undertake in the export Gorridors, will be economically and financially justified; (ii) not take on debts in addition to the proposed loan unless the expected net cash revenues are 1.7 times its annual debt service obligations or unless the Association agrees otherwise; (iii) revalue its fixed assets in operation, based on current market value, in the fiscal year ending December 31, 1990 and every five years thereafter; and revalue these assets each intervening year by applying the wholesale price index of the Instituto Nacional de Estadistica; and (iv) achieve working ratios of 871 or lower for 1989-1990 and 83% or lower in 1991 and thereafter. - 27 - VI. UCCIIIMD&TIONS 6.01 As a condition for effectiveness, SNC has agreed to submit to IDA a detailed road maintenance program for 1990 and an outline program for 1991-1993, both acceptable to the Association (para. 3.44). 6.02 As conditions of first disbursement against ENFE civil works and purchases of Roods, the Government and ENPS have agreed that: (a) ENFE will hire consultants for its management assistance program (para. 3.15); (b) the MTC will submit to IDA a performance agreement entered into by MTC and ENFE covering the period 1990-1991, acceptable to the Association (para. 3.45); and (c) ENFE will introduce a revised tariff structure based on the freight rates study completed in December 1988 and the passenger fares study to be carried out in February-March 1989, to cover at least long-run variable cost on each freight commodity and passenger train service (para. 5.04-5). 6.03 As a condition for first disbursement aaainst construction of the Santa Cruz freiaht terminal, ENFE has agreed to award the management contract for operation of the terminal to a qualified operating company, in a manner satisfactory to the Association (para. 3.10). 6.04 As a condition of disbursements against the works on the La Paz- Arica rail line, ENFE has agreed to provide evidence satisfactory to IDA that the queue length of rail freight cars Awaiting traction in each of Arica (Chile) and Charana (Bolivian border) will not have exceeded an average of 100 during each of the preceding two calendar months (para. 4.04). 6.05 As a condition of disbursement against works on the La Paz-Oruro highway, MTC has agreed to provide the counterpart funds required for the carrying out of such works (para. 3.24). 6.06 The Government has agreed on the following dated covenants: (a) NTC will give the Association, by September 30 of each year during project implementation, the opportunity to review and comment on the t-ansport sector investment program proposed for the following five years (para. 3.43); (b) SNC will submit to IDA by September 30 each year starting in 1990 and until the project is completed, annual road maintenance programs consistent with the agreed 1990-1993 maintenance plan (para. 3.44); (c) SNC will submit by March 31 each year a report on the previous year's road maintenance activities (para 3.44); - 28 - (d) SNC will put into operation throughout the country its maintenance management system and equipment management system by June 30, 1991 (para. 3.14); (e) ENFE will achieve wotking ratioa of 87Z or lower for 1989-1990 and 832 or lower in 1991 and thereafter (para. 5.09); (f) ENFE will revalue its fixed assets in operation, based on current market value, in the fiscal year ending December 31, 1990 and every five years thereafter; and revalue these assets each intervening year by applying the wholesale price index of the Instituto Nacional de Estadistica; (g) By September 30, 1991, MTC will submit to the Association a renewal for the period 1992-94 of the performance agreement between it and ENFE, incorporating such changes as shall have been agreed between them on the basis of their review of each party's compliance with the initial agreement (para. 3.45); (h) By March 31 of each year from 1991 to 1994, MTC will d.so submit to IDA a report on each party's compliance with the performance agreement during the previous year (para. 3.45); and (i) By March 31 of each year until the project is completed, the implementing agencies will send to IDA, through MTC, a report on progress during the preceding year on those project items for which they are responsible. MTC will also submit a project completion report by December 31, 1995 or 6 months after the credit is closed, whichever is later (para. 3.42). 6.07 It is further agreed that, during implementation of the project: (a) the Government will earmark in its investment budget the amount of US$10.1 million equivalent in counterpart funds needed for the project (para. 3.24); (b) before entering into any major road or rail investments in export corridors, MTC will show to IDA's satisfaction that each such investment is economically justified and, in the case of railways, financially justified (para. 3.43 and para. 5.09); (c) the Government will on-lend to ENFE US$11.3 million under a subsidiary loan agreement, at an interest rate of LIBOR and 0.5%, for 15 years with 3 years grace. ENFE will bear the boliviano/dollar exchange risk (para. 3.28); (d) ENFE will not take on debts in addition to the proposed loan unless its projected operating revenues are at least 1.7 times the expected annual debt service charges on all outstanding loans and credits, except as the Association shall otherwise agree (para. 5.09); - 29 - (e) ENFE will take all actions needed to continue to keep the queue of freight cars awaiting traction at each of Arica and Chatana below 100 at all times (para. 4.04); and (f) The Government will pass on US$3.7 million to ESF as a grant under a sub-grant agreement (para 3.29). 6.08 The Government has also given an assurance that international procurement agents acceptable to the Association will process all procurement under the project for contracts expected to cost over 100,000 bolivianos, except ESF's operations (para. 3.33). 6.09 On this basis, I recommend that the Republic of Bolivia be authorized a development credit of SDR 28.3 million (equivalent to US$37.0 million), on sts:ndard 40-year terms. - 30 - ANNEX 1 Page 1 of 4 PATACM69Y&-TAUBO QUEMADO ROADs DETAILS Present Route Options 1. There are presently five transport routes between Bolivia and ports of the Pacific Ocean, three by rail and two by road. Each of them has its drawbacks, both for present traffic and as potential future routes for development. The rail line to Arica, the cheapest option at present on the basis of tariffs, suffers severe capacity shortages, requiring importers particularly to wait weeks before the wagons they need are allocated for their freight. The road between La Paz and Arica includes a section of about 200 km which is passable only by the largest trucks, if at all, during the four wet months (December through March). The road route to Matarani is 150 km longer than the road to Arica (though the average travel time is one third shorter, at 24 hours) and, because of civil unrest in southern Peru, considered unsafe. 2. The rail route to Matarani, not operating at present, is complicated by the need for transshipment at Guaqui, on the Bolivian shore of Lake Titicaca. Meter-gauge wagons are run on to a rail ferry equipped with dual-gauge track, and at Puno, at the Peruvian end of the lake, the goods have to be off-loaded and reloaded to the standard-gauge wagons used on the line from there to Matarani. In 1986-87 the level of Lake Titicaca rose about 2 meters, flooding Guaqui and the rail track giying access to it; rail service was halted. The water level fell aga'& in 1988, but the damage to the track has not yet been repaired and rail srvice has not been resumed. There is insufficient traffic demand to justify the expenditure in track reconstruction and port facilities needed to put this route back in oparation. 3. The fifth option, the rail route to Antofagasta, is 720 km longer than that from La Paz to Arica. The private Chilean railway company, on the other hand, provides a satisfactory service. 4. None of the three Pacific ports has experienced congestion in recent years. In fact, they are operating at about half their capacity. Procedures for processing goods through the ports are not cited by shippers as serious problems (though there is room for improvement). Distribution of Present Traffic 5. The volumes of Bolivia's exports and imports over the past few ,ears have been severely disrupted by the economic crisis, changing relations with its neighbor countries, and the suspension of the rail service to Guaqui. Total traffic to the Pacific in 1986 (data are not available for 1987) was 550,000 tons, down from the almost 700,000 tons of 1980. The trend was different for each of the five routes. Antofagasta - 31 - ANNEX 1 Page 2 of 4 retained two-thirds of all Bolivian traffic to or from the Pacific (which in turn was about 60% of Bolivia's total international trade by volume). In 1980/81 the remaining Pacific traffic was split almost equally between Matarani and Arica, with Matarani just ahead. By 1984, the volume of all traffic categories had declined and general cargo had fallen markedly, affecting both Arica and Matarani, though Matarani more so. But by 1986 general cargo transport by road had picked up again, taking Arica's traffic (road and rail) to 135,000 tons, above its pre-crisis peak. Matarani's traffic, in contrast, fell yet further, as the recovery in -oad traffic was insufficient to off-set the loss of rail traffic due to the Guaqui closure. 6. These conflicting trends make 1986 a poor basis for extrapolation into the future. A more reliable basis (though still far from ideal) is the average for the seven years 1980-86. This gives a total for the three ports of almost 600,000 tons, with about 370,000 through Antofagasta and 115,000 each through Arica and Matarani. Wheat imports and mineral exports were almost half the total; over 902 of this bulk traffic used Antofagasta. General cargo totaled 264,000 tons; imports heavily outweighed exports by a factor of 3:1. Road traffic into and out of Arica averaged 38,000 tons, corresponding to 20-25 loaded trucks per day. The 1986 volume substantially exceeded the '80-'86 average; the traffic reported on the La Paz-Arica road in 1987 was about 35 trucks (loaded and empty) per day. Many of the inbound trucks carry cars. Patacamaya-Tambo Quemado Road 7. As long ago as 1975 a feasibility study was carried out for a paved road from Patacamaya to Tambo Quemado. Its alignment cut 40 km from the distance. Before the Government could obtain financing for its construction, the jeonomic crisis intervened. In 1988 prices, its cost as designed, about US$120 million, is too high to be economically justified with today's traffic volumes. With lower design standards, on the other hand, the road can be Justified. Four important changes are proposed: (a) the platform width be narrowed from 12m (8m pavement and 2m shoulders) to 9m (7m pavement and lm shoulders, the same as the El Alto-Oruro highway); (b) the height of the embankments be. lowered (in places they were designed at 3m above the natural level where 1.5m is sufficient for drainage); (c) the large parking areas proposed at the border post be cut back; and (d) the asphalt-concrete surface be deferred until such time as traffic reaches 250-350 vehicles per day, the economic threshold for paving. If these design changes are made, then the initial construction cost can be brought down to about $36 million (in 1988 prices). The feature that the present traffic will value most is good drainage: bridges over the five largest water-courses and ample culverts in other stretches vulnerable to flooding. There are also a few short steep gradients climbing out from the river beds which are difficult when wet. The terrain is otherwise flat or rolling throughout. - 32 - ANNEX 1 Page 3 of 4 8. The road on the Chilean side is of similar standards. The Chilean highway department is proposing to pave the currently unpaved section of the road in 1389, and has asked SNC about its intentions for the Bolivian side so as to estimate future traffic loads. 9. At the freight rates prevailing in late 1987, rail was cheaper than road for La Paz-Arica traffic by an average of $12 per ton for general cargo exports, $29 per ton for general cargo imports, and $35 per ton for imported wheat. The rates for carrying cars were virtually equal. For Cochabamba traffic rail was $15 per ton cheaper for general exports, $26 per ton cheaper for general imports, and $47 per ton cheaper for wheat imports. Road transport was cheaper for imported cars, by $110 per car. 10. The impact on truck rates of an improved road between Patacamaya and Tambo Quemado has been estimated on the basis of synthesized operating costs. It is estimated that, if the road is built, the trucks will be able to raise their travel speed from 15 kmlh (average of dry and wet months) to 40 km/h and cut their travel time between La Paz and Arica from about 21 hours to about 5 hours. The major consequence of this 16-hour saving is that they will be able to double the number of round trips per month from about 1.5 to about 3 (taking a weighted average of trips from La Paz and from other cities). This corresponds to raising their annual mileage from its present very low level of about 23,500 km to about 47,000 km (respectable but still far from high). Fuel consumption is also expected to drop substantially, and truckers will be able to load their vehicles more fully, since they will no longer fear getting stuck in the mud. It is also expected that the improved road will encourage more truckers to trade up to tractor-semitrailer combinations, since such large-capacity trucks can achieve lower costs per ton carried than the 12-tonners only if they can be used intensively. The cost is calculated to go aown from 50-60 US cents per ton-km to about 13 cents. 11. These savings correspond to about $10 per ton per trip for exports and $25 per ton for general cargo imports, while for imported cars the saving would be $80 per car. It is reasonable to assume that these will be passed on in large part to users through lowered rates, as Bolivian trucking has been deregulated since 1985 and has become relatively competitive in pricing. 12. On the basis of rate and travel time comparisons, it is estimated that these savings will attract to the Arica road at least 802 of general cargo exports and 502 of general cargo imports ow using Matarani, together with 101 of all general cargo traffic now using Antofagasta and the Arica rail route. Specifically, the new road is expected to capture all imports of passenger cars, whether arriving at Arica or at Iquique. It is not expected that the road will capture any minerals or wheat traffic, since they are not time-sensitive, most of the mines are already served direczly by rail, and over the distances involved rail costs for large volumes will continue to be lower. - 33 - ANNEX 1 Page 4 of 4 13. Adding the above diverted traffic to that already using the Arica road, the total traffic expected in the first year of operation, 1992, is about 195,000 tons, including 10,500 imported light vehicles (against 53,000 tons in 1986). The number of trucks will show a far smaller increase, from 35 to about 50 per day, as the expected increase in load factor and shift to larger trucks will raise the average load from about 4 tons to about 9 tons. The benefits in 1992 are tentatively estimated at $4.3 million ($3.8 million to imports and $0.5 million to exports). 14. Economic losses to the Arica-La Paz rail operation due to the need to continue paying fixed costs while losing traffic, are expected to be small. If ENFE improves its service (as it has done in the second half of 1988), it may lose no bulk traffic and only some 102 of its general cargo, equivalent to only two years of normal growth. The general cargo diverted would be less than 10,000 tons, or under 5Z of the total expected to use the road. 15. Consistent with the trade growth prospects set out in Chapter 2, the growth rate of traffic on the Patacamaya-Tambo Quemado road in the 20 years beyond 1992 is projected to average 5-62 per year, the weighted average of non-traditional exports growing at 12-13% and of manufactured imports growing at 3-42. Assuming unit benefits to remain unchanged in later years, this will yield an economic return in the range 13-172. 16. This is not a compelling return on investment for a country facing such severe resource constraints as Bolivia. However, it is worth stressing that this estimate is distinctly conservative. It does not include any benefits to new traffic generated by the investment, for want of any good basis for estimating its magnitude. For high-value exports a reduction of $10 per ton in the delivered price is less Likely to affect the volumes sold than removal of obstacles such as excessive documentation requirements. The main advantage of this road may come from the greater reliability that it can offer than present routes, particularly if full advantage is now taken of the benefits offered by containers. The road investment is a necessary condition for this to develop, though not a sufficient one. No good methodology is available to place a value on this greater reliability, though users are undoubtedly willing to pay for it. The projection of diverted traffic is also conservative; it implies that this road will capture no more than 15Z of Bolivia's non-bulk exports and 332 of its non-bulk imports (i.e. excluding wheat, mineral and natural gas). 17. It is worth noting that the simulation of users' zoute choices underlying the above is only approximate, and that rail freight rates are not necessarily identical with economic resource costs. The ER of about 15% derived from these assumptions is acceptable, but the range of uncertainty on either side of it is no doubt fairly wide. The purpose of the full-fledged feasibility study now being carried out is precisely to narrow down this uncertainty (i.e. reduce the down-side risk) before a final decision to proceed with the iuvestment is made. - 34 - ANNEX 2 Page 1 of 2 DEFERRED MAINTENANCE ON EL ALTO (LA PAZ)-ORURO HIGHWAY 1. * The works proposed on the El Alto-Ocuro highway encompats pavement overlay and reconstruction of some sections of the El Alto-Oruro highway itself (211.6 km) and the Caracollo-Caihuasi branch (16.8 km) linking to the Oruro-Cochabamba highway, that is, a total length of 228.4 km of pavement rehabilitation. 2. The final design required prior roughness measurements and field surveys. For the section where the analysis showed that more information was necessary deflections, with a Benkelman beam, and if needed sample cores, were taken to know the road-bed state, the thickness of the different layers and the quality of the materials of those layers. 3. Based on this analysis, three different solutions were adopted: (a) total pavement recoastruction over 34 km, on sections with high deflections and low CBR subgrade valuesl (b) partial pavement reconstruction, affecting the base but not the lower layers, over 11 km, on sections with low CBR base values; and (c) 5-cm asphalt concrete overlay on the remaining sections of the El Alto-Oruro road and on the Caracollo-Caihuasi branch that showed acceptable CBR values for base, sub-base and sub-grade and moderate deflections. 4. For design of the pavement thickness, empiric procedures (CBR, AASHTO and DNER of Brazil) were used, jointly with the equivalent thickness theory. These procedures are decreasingly used for final design, but nevertheless they can be considered a valid option. In this case, the following results were obtained: Sections with total pavement reconstructions 5 cm - asphalt concrete 15 cm - granular base 38 or 25 cm (depending on CBR) granular sub-base Sections with partial pavement reconstruction: 5 cm - asphalt concrete 15 cm - granular base Sections with overlay only: 5 cm - asphalt cohcrete - 35 - ANNEX 2 Page 2 of 2 5. The final design also includes 4-m widening of the platfonm on each side for bus-stops, mergings and exits of side streets in urban sections and drainage and road signing works. 6. The civil works budget is US$17.2 million plus supervision and procurement services, physical contingencies and price escalation. 7. Economic iustifications The economic feasibility of the project was confirmed using the above direct cost and the Bank's HDM III model. Savings will come from reduced vehicle operating costs on the improved surface and from the avoidance of a full reconstruction of the road, if the pavement were to break up before action was taken. The resulting ER is 62X. 8. Recommended Works Schedule: The present road condition is precarious, especially in some sections, and pavement break-ups are possible. Accordingly, rapid action is advisable. With this purpose, the project should be divided Into two or three contracts to allow its conclusion in one year from the contract signature, that should take place as soon as possible. Abbreviations AASHTO - American Association of State Highway and Transportation Officials CBR - California bearing ratio DNER - Departamento Nacional de Estradas de Rodagem (Brazil Federal Highway Authority) HDM - Highway Design and Maintenance Standards Model (World Bank) - 36 - ANNEX 3 Page 1 of 3 SNC 'S ROAD MAINTENNCE PROGRAM Is SNC's road maintenance budget sufficient? The Government puts maintenance at the top of its transport priorities, but the funds allocated to it in the indicative plan for 1988-1991 are still only 12% (?] of the roads budget. Bolivia, unlike many borrowers, is still far from completing construction of the basic transport network it requires. It is hard to deny to substantial parts of the population the radical improvement in access to other areas that new roads offer, in favor of repairing roads for communities that already have them. But at the same time the future cost of allowing existing paved roads to break up is great, compared to the cost of repairing them today. 2. Paved roads make up less than 5% of Bolivia's network. In 1986, when the last assessment was made, approximately one third of the paved length was in good condition, one third was in fair condition and one third was in poor condition. Gravel roads, which make up about one fifth of the network, were in generally worse condition: good 20%, fair 35% and poor 45%. Earth roads, which make up the remaining three quarters of the network, were --and very probably still are-- yet worse: about one seventh good, 317 fair and 3/7 poor. (Statistics on the latter are too unreliabli to command much confidence --and their condition varies greatly between the wet and dry seasons. Since traffic is concentrated on the paved and gravel roads, it is appropriate to focus on them.) 3. Compared with 1984, the 1986 situation showed two conflicting developmentss more paved roads in good condition, but simultaneously more in poor condition. This probably reflected the fact that after the 1980-85 economic collapse a start was made to rehabilitate roads in a state of advanced fatigue, having received no preventive resealing or overlays in good time, that is, no periodic maintenance. However, the effort was not extensive enough to catch many sections before they cracked up. On gravel and earth roads, the 1986 assessment showed some effort to improve the condition from poor to fair. In all categories, however, the length of road treated fell far short of that needed, only 9% of paved roads and only 8% of gravel and earth. The Association has estimated that in 1986, the accumulated backlog of periodic maintenance and rehabilitation of paved roads amounted to as much as 60% of the paved network and just over 50% of gravel roads. 4. Over the past four years the maintenance allocations under the current account have increased substantially, but they are still not sufficient: 1985 US$ 2.4 million 1986 5.7 1987 10.0 1988 18.0 - 37 - ANNEX 3 Page 2 of 3 The 1988 allocation was only about 20S of the total budgeted for roads, capital and current. Other items in the capital account present definitional problems, as they involve the reconstruction of existing roads, but fully half of the capital budget was for new roads. 5. Routine maintenance in 1988 was concentrated almost entirely on the one third of the network that is paved or gravel-surfaced. Surface type Total length Km Receiving Work Percent paved 1,700 1,405 832 gravel 12,000 11,575 96Z earth 27,300 602 22 total 41,000 13,582 332 6. Thus the average budgeted cost per km of paved and gravel road receiving attention was US$1,340. This is more than adequate for routine maintenance alone, but not enough to cover periodic maintenance needs, which should be at least as much again, if not more. 7. SNC employs about 4,000, of whom about 3,800 are involved in maintenance. This is high (3.6 km maintained per employee). The age composition is heavily weighted to men over 50. 8. SNC does not contract out any maintenance work, other than minor works being financed through the Emergency Social Fund. 9. Maintenance equipment presents a major problem. Of 2,100 items in SNC's inventory, 700 are out of service. 10. In evaluating the 1989 maintenance program, the Association examined the trade-offs being made at the margin between new construction on the one hand and maintenance and rehabilitation on the other, and estimated a minimum total expenditure and a minimum share of that total for maintenance which could be considered acceptable. This review concluded that an expenditure of at least US$ 27 million on road maintenance' the sum of current and capital account maintenance expenditures, was a minimum acceptable. The budget for roads approved by Congress in January 1989, indicates a considerable change from 1988, with 45Z of total expenditure allocated to maintenance and rehabilitation. The budget satisfies the Association's requirement, having a proposed current account maintenance exienditure of US$ 23.6 million and a US$ 25.6 million capital budget for maintenance and rehabilitation. The average proposed expenditure is therefore US$ 1,200 per km over tne whole network. 11. To ensure that this changed balance is not a one-off occurrence, resulting from Association pressure or a temporary accounting aberration, a condition of effectiveness of the proposed Credit will be that SNC prepare a three-year maintenance program, within which future maintenance budgets can be developed. A covenant will ensure that future annual maintenance budgets are acceptable to the Association. - 38 - ANNEX 3 Page 3 of 3 1989 ROAD HAINTEANANC AND RKHABILITATION BUDGET (FINAL tEQUST TO CONGRESS. JANUARY 1989) (USS 000) New Constrl MaintI Uptradina Rehab Studies Total Current budget 23,605 23,605 Capital budget Programa Naclonal Transportes IDBICAF 14,610 Chimore-Yapacani IDBICAF 12,063 Equipamionto de Mantemiento JICA 8,000 Accesos Chimare-Yapacani IDBICAF 5,915* Programa Manten. Distritos Sur CAF 5,319 Santa Cruz-Trinidad FONPLATA 5,827* Caminos Vecinales Santa Cruz IDB 3,294* Equipo Mantenimiento (San Julian) KFW 3,042 Equipo Mantenimiento (RIC II) IDA 2,855 Samaipata-Taruma II IDB 2,443 Construccion Naclonal de Puentes 2,371* Doe Puentes PL-480 1,464 Eatudlo Oruro-Pisiga IDB 750* Pavlmentaci6n La Paz-Cotapata 600* Construcci6n S.Jer6nlmo-San Luis 324* Cotagaits-San Juan de Oro 307 Santa Rosa-Riberalta 289* Caminos Vecinales Yungas La Paz UNDP 236 Proyecto Vial Agro. Norte Chuquisaca 32* SUBTOTAL, SNC capital budget 43,592 25,614 782 69,741 of which: Core (61,704) Supplementary (marked by *) (1) (8,037) Reg. Devt. Corporations 16,766 GRAD TOTAL 49,214 110,112 (1) Core request for Accesos Chimore-Yapacani 3,000 Caminos Vecin. Santa Crux 2,294 - 39 - ANNEX 4 TECHNICAL ASSISTANCE FOR S.N.C IN ROAD MAINTENANCE AND CONTRACT MANAGMENT Terms of Reference 1. SNC has so far lacked the capacity to formulate a rigorous national road maintenance program to prepare its annual. road maintenance budgets. The objective of this technical assistance will be to develop a program along lines proposed by SNC and MTC. 2. The principal tasks to be performed are the following: (a) implementation of a maintenance management system and formulation of a pilot program to carry out maintenance works by contract; (b) implementation of an equipment management system; (c) implementation of computerized analysis and application of cost accounting to road maintenance; (d) preparation of a four-year national maintenance program and its budget (1990-1993); (e) personnel training; and (f) advising on project inspection and control. 3. Under the Estudio Integral del Transporte and the maintenance pilot programs (financed by IDA), a start was made in the early 1980s in generating the technical data needed for the above tasks. Technical assistance financed by the Government and the Corporacion Andina de Fomento, begun in mid-1988 and due to run four years, is extending this process in the southern districts (Oruro, Chuquisaca, Potosi, Tarija and Tupiza). Its results will be considered by this new technical assistance as the base to implement the system nationwide. 4. It is foreseen that a total of 50 man-months will be needed over a period of 14 months. The budget for this technical assistance will be US$500,000. - 40 - ANNEX 5 Page 1 of 2 ROAD USER CHARGES 1. One impediment to a freer, less costly flow of freight traffic on the roads of Bolivia are the SNC's toll barriers out all main roads throughout the country. These often cause delays to users, and the opinion is widely held that the revenue collected (which supports SNC's operating expenses) does not justify the cost of collecting the tolls. At the same time there is clearly a need to secure for SNC a larger and more stable road maintenance budget. 2. In June 1988, the Association commissioned a consultant to study the revenue collected from the various charges Imposed on road users in Bolivia and the costs of collecting these revenues, and to recommend any improvements In the administration of these charges which might be desirable. 3. The most significant road user charges are the taxes levied on fuels and lubricants, generating incomes for the Government in excess of US$50 million per year. These taxes are not expensive to collect and the revenue cannot be evaded by non-payment by YPFB, the national oil company. (Fuel prices are set at border prices plus an adequate distribution margin; they are adjusted every few months to keep them at that level.) 4. The study 'ound that the costs of collecting the road tolls, the second most important source of road user revenue at just over US$6 million, are low as a proportion of the total revenue collected, about 8X. There is however, a significant loss of revenue through evasion and a failure to control adequately the activities of the operators of the toll booths. Although no detailed estimates have been made, the loss of potential revenue from this source is believed to be several millions of dollars each year. 5. The third most important source of road user charge revenue was found to be from the capital value tax which is levied on road vehicles, private aircraft and pleasure boats. The revenue from vehicle owners amounts to some US$3 million per year. The only other road user charge identified, the national transactions tax of 1% on vehicle sales, yielded less than US$1 million. 6. A detailed analysis of vehicle behavior at toll booths revealed a high user cost in waiting time. The value of this lost time was estimated at almost US$12 million, about double the revenue collected in tolls. 7. Given the high user cost in lost time at toll booths and the difficulties of implementing controls to reduce evasion of tolls and leakage of revenues, and considering the ease with which fuel taxes can be collected, the consultant recommended replacing road tolls with an increase in fuel tax of 2-3 centavos of a boliviano (1 US cent) per liter. The marginal collection cost of the revenue from this tax would be zero and the gross revenue would be equal to the current gross revenue from tolls. ANNEX 5 Page 2 of 2 8. The Ministry of Transport and Comamunications, the Ministry of Finance and other interest parties are now reviewing these conclusions and recomendations. Since the Government's macro-economic policies explicitly preclude earmarking of taxes to specific budget items, the Association is not pressing for any immediate decision, but intends to continue exploring the issue in its supervision missions and economic dialogue with the Government. ^ 42 - ANNEX 6 RAILWAY ITES TO Bt PROCURED Local Foreign Total Works Goods Goods Constructor _____- 0(US$ 000) - A. PACIFIC CORRIDOR La Paz - Charana Tracks easing grade 200 200 400 800 ENFE Terminalt access tracks 200 40 60 300 Contractor 1,100 B. ATLANTIC CORRIDOR Santa Cruz-Puerto Qui1arro Ballast and placement 600 500 900 2,000 Contractor (300,000 cu. meters e 0.8 cu.m./linear m.) Chemicals for vegetation control 180 200 300 680 ENFE Ditching machinery 600 600 Reconstruction of 2 bridges 200 100 700 1.000 4,280 Materials for conversion of 40 boxcars to multi-use cars 20 100 120 ENFE Santa Crus freight terminal 900 800 1,400 3,100 Contractor C. SYSTEH-WIDE Telecommunications equipment 100 1,900 2,000 SUBTOTAL, Works & goods 2,280 1,960 6,360 10,600 D. CONSULTANT SERVICES Management assistance 600 2,400 3,000 Audit 20 30 50 Terminal design 20 20 Terminal management advice 40 40 SUBTOTAL, Consultant services 620 2,490 3,110 TOTAL 4,860 8,850 13,710 - 43 - ANNEX 7 Page 1 of 5 FiRNCIAL Su&TION OF BulK I. Paost and Present Financial Performance (a) 0perating Results 1. While in the past ENFE had ups and downs in its financial condition, since 1985 its financial situation has been satisfactory. During 1985 and 1986, rates and fares were substantially increased. ENFE's total revenues therefore fully covered all operating costs (Tables 2 and 3 for Andean and Eastern networks individually and Table 1 for the consolidated figures). The working ratios of 692 in 1986 (Eastern 61S and Andean 75%) and 821 in 1987 (Eastern 79Z and Andean 85%) were better than the target of 1001 specified in the RIC I credit agreement. The annual net working revenues were 9 to 10 million pesos during 1985 to 1987. Encouraged by such improvements, ENFE and IDA agreed on a mors demanding target under RIC II of 901 from 1988 onwards. The estimated working ratio for 1988, based on actual income and expenditure in the first 10 months of the year (Table 1), is 861. This shows some deterioration from the 821 in 1987, although it is still better than the RIC II target of 901. Several reasons contributed to this deterioration. (i) The Brazilian railways raised rates for Bolivian freight; this and a strike in the two Brasilian railways caused a reduction in Bolivian export traffic. (ii) A broken railway line interrupted traffic in Northern Argentina. (iii) The price of Brazilian goods imported into Bolivia increased, thereby reducing the volume imported. 2. ENFE expects that these set-backs will be eliminated in 1989. EIE , however, needs to ensure that increases in staff costs are properly controlled to avoid any adverse effect on its finances. Wages were increased by 151 in March 1988 to match general increases in the country, followed by another 6 to 7X increase in August 1988. 3. The consolidated cash flow position of ENFE was quite satisfactory at the end of 1987, showing a closing cash balance of about Bol$ 2.8 million (Tables 4 to 6). ENFE must continue to maintain a healthy cash position in the future, which should be possible because in July 1987 the Government took over all ENFE's long-term loans outstanding at December 31, 1986, to enable it to make substantial reductions in freight tariffs. ENFE however will be responsible for paying all its future debt obligations without any government subsidy. - 44 - ANNEX 7 Page 2 of 5 (b) CostinR and Pricing Policy 4. Due to the mountainous terrain and low traffic density, ENFE's operating costs are high. Upon introduction of the New Economic Policy in 1985, ENFE substantially increased its freight rates. This caused the rates in the export corridors to rise to about US 5.5 cents per ton-km. (The ideal minimum, in easy terrain and with dense traffic, is about US 1.9 cents per ton-km, as achievred by some US railroads.) The export of tir. and other minerals was being adversely affected. The Government therefore instructed ENFE to discount rates on exports by 60X and domestic traffic by 30Z, with effect from July 1, 1987, while the rates for import traffic remained the same. At the same time passenger fares were increased b.y 501. 5. In December 1988 a consultant hired under IDA's Second Reconstruction Import Credit completed a study of ENFE freight tariffs. The study recommends a substantially reduced and simplified commodity classification and a revised tariff structure. The proposed structure is cost-oriented. Rates are about 7 to 101 less than the present tariff for distances of 500 km and up. For 300 to 500 km the new tariff has not changed, and for less than 300 km. the proposed tariff has gone up. These tariffs will cover at the minimum the long-run variable costs of railway operations. The term "long-run variable cost' may be defined as the cost which varies directly with variations in the traffic volume and will consist of all costs directly related to tha railway operation of the respective services, including administration, adequate maintenance, and provision for capital recovery consisting of depreciation of, and return on, assets that will need to be replaced in due course. If the Government continues to require ENFE to charge rates lower than long-run variable costs, then it will have to compensete ENFE the difference between the tariff actually charged and the tariff that ENFE could have charged. ENFE and MTC fully agree with the consultant's recommendation. The consultant has also introduced container tariffs for 20 feet and 40 feet containers separately. ENFE intends to introduce the new structure in March 1989. Passenger fares will be studied by the same consultant, who will propose cost-based fares by the end of March 1989. (c) Revaluation of Fixed Assets 6. ENFE has carried out a physical inventory and revaluation of all fixed assets in both regions. A full report is to be submitted to the Patrimonio Nacional for review and approval. As soon as the approval is received, ENFE will incorporate the results in the provisional balance, have them examined by external auditors and send the report to the Association for review and comment. The 1989 balance sheet should incorporate the results of the revaluation. (d) Budgets. Accounting and Auditing 7. ENFE's current practices seem adequate. It prepares the annual budget in two main parts. the Capital Expenditure budget and the Recurrent budget. The budget goes to the Government for approval. ENFE follows a commercially oriented accounting system. The classification of accounts helps the cost analysis for railway costing. ENFE is gradually mechanising its financial reporting. - 45 - ANNEX 7 Page 3 of 5 II. Future Financial Performance (a) Financial Objectives 8. The long-run financial objectives of the railway should be to become a revenue-earning public enterprise with full financial viability. It should be able to generate sufficient revenues to cover all its costs including debt service charges and a satisfactory contribution toward future investments. It should not receive any operating subsidy from the Government. If the Government wishes ENFE to provide any specific service at below-commercial tariffs, it should pay specific compensation as if it were another user. ENFE should operate under commercial principles with increased attention to pricing and marketing. (b) Financial Forecast 9. Based on the financial objectives described above, ENFE's financial forecast has been prepared for seven years, 1989-95. Major assumptions used are stated in Attachment ' to this Annex. ENFE's IncoiLe Statement, Flow of Funds Statement and Balance Sheet for 1989-95 (Tables 1 to 6) have been prepared for each network (Andean and Eastern) as well as for the consolidated operation. The consolidated revenues are expected to increase from Bol$ 95 million in 1988 to BolS 148 million in 1995 --a 55% increase. The working costs, on the other hand, are expected to increase from Bol$ 82 million to Bol$ 115 million for the same period --a 401 increase. Therefore the incremental revenues for this period will be Bol$ 52 million, whereas the incremental cost will be Bol$ 33 million. The working and operating ratios are expected to show continued improvement from 861 and 100% in 1988 to 78 and 90% respectively in 1995. It is expected that the staff costs, which are about 571 of working costs in 1986, will decrease in real terms gradually to 522 inspite of the traffic increases, but ENFE could reduce its manpower further with better planning and improved productivity. ENFE should carry out a manpower study to assess the number of staff that can be reduced, the total cost of indemnities to the laid-off or retired staff (including early retirement), and how much ENFE can afford to pay and how mich outside financial help is needed. Based on such a study a detailed plan of action could be prepared for staff reductions. This would make a major contribution to lowering ENFE's costs, the benefit of which could be passed on to the exporters of Bolivia through reduced tariffs. 10. As to the individual network performance, the Eastern network is expected to show better improvement in working ratios than the Andean network. During the forecast period the Eastern network is expected to increase its revenues by 60% higher and the Andean network by 501. The working ratio for the Eastern network in 1995 will be 771 as compared with Andean network's 79% (Tables 2 and 3). It should be noted, however, that the depreciation charges included in the forecast are based on ENFE's revaluation of fixed assets. This has to be approved by the Controller General of Bolivia and to be audited by external auditors whose appointment is expected before June 1989. - 46 - ANNEX 7 Page 4 of 5 11. The Flow of Funds Statements (Tables 4 to 6) show a gradual $mprovement in the cash balance from Bol$ 1.0 million in 1988 to Bol$ 3.8 million in 1995 for the consolidated operations. No operating subsidy from whe Government is included in the forecast. During the project Implementation ENFE's revenues are expected to cover its total operating costs, debt service charges and about 40X of Its investments. 12. The balance sheets for Eastern and Andean networks and for the consolidated operations of ENFE are shown in Tables 7 to 9. The consolidated position indicates that the financial rate of return with revalued fixed assets will gradually improve from about 12 in 1987 to about 3.52 in 1995. The atnual debt/equity ratio will remain at a satisfactory level of 0.39 up to 1993 and the liquid ratio will improve from 1.0 In 1989 to 1.9 in 1995. III. Financint Plan 13. The financing of ENFE's portion of the Export Corridors Project is the following: ENFE's total investment in constant dollars of 1988, including physical contingency US$ 15.2 million - IDA financing $ 10.5 a - ENFE'F own financing $ 4.7 a IV. Sensitivity Analysis 14. A sensitivity analysis have been carried out to assess the robustness of ENFE's financial prospects. Two risk elements have been tested as follows: (a) If traffic growth is only 50Z of the forecast; (b) If staff costs are increased by 102 annually; 15. The effects of the above changes on the working ratios would be: 1990 1992 1995 Working ratios, consolidated (7) as per forecast (base case) 83 80 78 Working ratios if: (a) traffic growth is 502 of forecast 84 85 87 (b) staff costs rise by 10X 98 110 130 - 47 - ANN= 7 Page 5 of 5 16. ENFE'e operations are sensitive to changes in both the above risk elements. A traffic decrease of 502 would create a deficiency in cash of about Bol$ 53 million dtring the forecast period. A 102 annual increase in staff costs would cause a cash deficiency dur'.ng the forecast period in the order of Bol $95 million. If costs were to rise by more than 151 and the traffic were to decline, then ENFE would be in a serious financial condition. 17. ENFE should therefore make every attempt to reduce its operating costs, particularly by improving its productivity and decreasing staff numbers. ENFE should also focus on developing pricing incentives and service improvements to increase its freight traffic. - 48 - ANNEX 7 Attachment 1 Major Assumptions and Notes for the Financial Forecast for ENFE (a) Currency Value and Exchange Rate 1. The forecast was prepared in constant Bol$ of October 1988, when the exchange rate was Bol$ 2.42 - US$1. The forecast period is 1989-95. (b) Traffic. Tariffs and Revenues 2. The forecast is based on actual results of 1986, 1987 and first 10 months of 1988. 3. The tariffs recommended by the consultant have been used for the forecast. (c) Oieratina Costs 4. Staff costs are based on the existing staff strength and level 1 salaries of October 1988. No increase in real terms is assumed during 1989-95. It is assumed that aay increases in wage levels will be offset by decreases in manpower. 5. The fuel and lubricant cost is taken as a function of gross ton-km for each network. 6. The duty and tax (VAT) is taken at 112 less c.redits from government for each transaction. Insurance costs are based on the self-insurance system now used. Future estimates have been adequately increased to cover risks. 7. Depreciation is estimated by using an overall depreciation rate for fixed assets on partially revalued old assets plus new investments included in the project. (d) Borrowing conditions 8. The IDA funds will be on-lent to ENFE on the following terms: Interest rate s LIBOR + 0.5X Amortization s 15 years Grace period s 3 years E N F E WPORT CORRIDORS PROJECT Income Statements- Actual 1986-67, Estimate 1988, Forensat 1969-96 t In Constnt Oct. 1998 Solivianos In Thousand 1,996.0 1,986.0 1,967.0 1,988.0 1,9980 1,990.0 1,991.0 ,92.0 1,993.0 1,994.0 1,995.0 Operating Revenues Passengers . 11,014 9,977 14,692 12,958 13,385 18,724 14,125 14,E39 14,968 15,409 16,66 Freight & Parcels 74,860 62,401 99,970 78,46t 100,696 104,654 109,623 113,219 117,329 121,704 12t,400 Other 3,404 2,228 2,012 a,694 4,402 4,661 4,727 4,900 5,058 t,226 5,408 Total A 89,266 64,604 11,674 96,232 118,432 122,939 127,675 132,658 137,355 142,839 147,661 Operating Costs : Staff Costs 47,488 25,489 46,965 48,619 67,283 67,682 57,964 68,351 58,?26 59,130.0 59,571 Fuel A Lubricant 5,60 6,OB9 10,286 10,004 9,911 10,296 10,704 13,186 11,637 11,969.0 12,493 Moatrials 8,070 6,067 19,872 11,083 11,985 12,866 18,789 24,692 15,594 18,496.0 1?,896 Contoactore 685 789 3,554 2,777 8,111 8,158 8,204 3,265 3,311 3,871.0 8,486 Interchange 4,928 2,888 8,886 0 2,8U6 2,4S4 2,581 2,718 2,686 8,026.0 8,201 Taxes etc. (IVA) 0 1,388 7,d37 6,843 10,217 10,672 10.960 11,852 11,726 12,126.0 12,561 Insurance 0 1,221 1,805 616 1,340 1,614 1,708 1,624 2,166 2,868.0 2,607 Other 8,068 868 8,223 2,721 3,101 3,173 3,247 3,823 3,399 3,477.0 8,66 4I Total Working Costs B 69,960 44,624 95,142 81,968 99,284 101,633 104,187 106,760 10S,828 112,968 114,766 D.preciation 176 9,480 17,006 18,723 14,432 16,162 18,169 19,068 19,270 19,061.0 18,214 Total Operating Costs C 70,166 54,064 112,160 96,666 113,666 117,815 122,306 126,603 128,698 131,024 132,979 Not Working Rev. DA-B 19,288 19,960 20,632 13,269 19,198 21,306 23,638 25,908 26,082 80,376 82,904 Not Oper. Rev./(Loss) EmA-C 19,112 10,550 8,624 (454) 4,766 5,124 5,869 6,8S5 8,762 11,315 14,690 Net Non-Operat. Rev. F 1,689 1,641 1,986 1,676 1,690 1,590 1,590 1,690 1,690 1,690.0 1,590 Net Rev. Before Interest 0 20,801 12,191 5,487 1,122 6,8S6 6,714 6,969 8,44S 10,362 12,90S 16,260 Interest Charges F 14,076 10,008 3,171 0 2,743 4,680 6,600 7,428 7,179 6,S20.0 5,803 Net Surplus/(Deficit) I=G-F 8,728 2,183 2,816 1,122 3,618 1,834 459 1,022 3,173 0,385 10,477 Significant Ratios: Working I (A/B) 78 69 82 86 84 88 82 80 80 79 78 Operating Ratio X (A/C) 79 64 97 100 9S g6 96 9S 94 92 90 Source: E N F E January 1989 0 0. E N F E 13PORT CORRIDORS PROJECT Income Statcoents- Actual 1985-87, Estimto e1998,Forcast 1989-96 In Constnt Oct. Im8 Solivisnos In Thoeund6 1,96.0 I,988.0 1,987.0 ,901,98.0 1,990.0 1,991.0 1,992.0 1,993.0 1,9S4.0 1,965.0 Operating Revenues Passengers S,806 4,065 7,02S 6,031 e,099 8,843 8,6s0 8,6se 7,135 7,420 7,71? Froight a Parcels 2?,440 23,346 4s,017 35,667 43,780 46,956 48,284 60,782 63,489 68,38s 69,507 Other 2,004 9S0 see 1,690 1,432 1,601 1,7S 1,et 1,739 1,831 1,029 Total A as,260 28,840 53,606 43,178 61,311 53,799 68,4S6 69,296 62,343 SS,620 69,1U8 Operating Costs. Staff Csts 19,768 9,321 18,909 17,946 20,198 20,41S 20,852 20,908 21,188 21,496 21,M33 Fuel & Lubricant 743 2,328 4,226 4,893 4,178 4,92 4,627 4,880 6,164 6,451 5,n7a Matorilss 1,269 2,495 10,424 6,18S 6,968 7,762 6,6g6 9,318 10,101 10,88s 11,669 Contractors 68s 620 2,4U4 2,607 2,829 2,858 2,891 2,927 2,968 3,009 3,05G Interchangc 1,940 1,166 1,960 0 1,682 1,783 1,839 2,003 2,128 2,264 2,414 Taxes etc. (IVA) 1,134 4,117 2,526 4,098 4,262 4,443 4,842 4,361 6,103 6,370 Insurance 9 355 364 700 766 888 900 967 967 967 Other 1,768 312 2,038 1,889 1,496 1,568 1,i83 1,876 1,738 1,804 1,B73 '1 Total Working Costs B 26,212 17,874 42,618 86,26e 42,143 43,781 45,483 47,2S3 49,103 50,979 52,956 0 Depreciation 49 8,734 9,401 8,848 7,08 ?,788 8,823 9,360 9,686 9,618 9,209 Total Operating Costa C 25,261 24,106 51,914 42,108 49,198 61,610 64,806 68,613 68,619 60,406 K 2,164 Wet Working Rev. DsA-4 10,038 10,966 10,995 7,920 9,168 10,01 10,972 12,043 13,240 14,641 16,298 Net Oper. Rev./(Loss) E=A-C 9,989 4,232 1,594 1,072 2,116 2,280 2,249 2,883 8,724 5,125 6,9c9 Net Non-Operat. Rev. F 320 488 77s 726 730 730 780 730 730 780 730 Met Rev. 0efore Interest a 10,309 4,700 2,389 1,797 2,946 3,010 2,079 8,413 4;464 5,866 7,719 Interest Charges F 6,192 3,891 1,486 0 671 1,385 1,972 2,276 2,223 1,997 1,771 Wet Surplus/(D(ficit) IzG-F 4,117 1,300 684 1,797 2,274 1,625 907 1,138 2,281 3,868 6,943 Significant Ratio: Working I (A/0) 61 7n 82 82 el 61 so 79 76 ?7 Operating Ratio S (A/C) 86 9? 98 96 96 go 9S 94 92 90 Source: E N F E January 1989 'ft E N f E WXORT CORRIDORS PROJECT Income Statements- Actual 1986-87, Estimate 1988,Forecost 1989-96 In Constant Oct. 198 Bolivian** In Thousands 1985 198 i987 18m 1989 1990 1991 1992 1993 1994 1996 Operating Revenues Passongers 5,208 6,912 7,667 6,022 7,236 7,361 7,529 7,679 7,633 7,989 8,149 Freight & Parcels 47,410 29,066 53,863 42,928 66,915 58,699 60,639 62,437 63,860 66,335 ee,883 Other 1,400 1,296 1,146 2,304 2,970 3,060 8,162 3,246 3,319 3,396 3,474 Total A 64,018 36,264 62,166 52,064 67,121 69,140 71,220 73,362 75,012 76,719 78,616 Operating Costs Statf Costs 28,696 16,118 29,042 30,674 87,086 37,16? 37,302 87,442 37,538 37,636 37,740 Fuel & Lubricent 4,863 4,342 6,089 6,610 6,787 5,905 6,077 6,256 6,383 6,Sle 6,660 materials 1,782 3,661 8,948 4,398 6,017 6,185 5,254 5,373 6,492 5,611 6,729 Centractors 160 169 1,070 270 288 298 812 328 345 862 330 Interchange 2,983 1,228 1,876 0 650 671 692 716 738 762 787 Taxes etc. (IVA) 49 8,620 8,918 6,119 6,810 6,506 6,709 6,863 7,028 7,191 Insuronce 1,212 1,460 152 689 748 876 1,024 1,198 1,401 1,640 Other 6,295 671 1,186 1,882 1,606 1,620 1,684 1,649 1,660 1,672 1,664 Total Working Costs 9 44,768 27,260 62,629 46,704 67,066 67,054 68,662 59,49K 60,217 60,984 61,811 Depreciation 127 2,696 7,608 6,875 7,789 8,444 9,346 9,690 9,764 9,646 9,00E lotal Operating Costs C 44,896 29,946 60,287 63,679 64,826 66,298 67,998 69,188 69,971 70,629 70,816 Not Working Rev. D=A-B 9,250 9,014 9,587 5,850 10,086 11,286 12,668 13,867 14,796 16,736 16,706 Het Opr. Rev./(Loss) ExA-C 9,128 6,318 1,929 (1,626) 2,296 2,842 3,222 4,174 6,041 6,190 7,700 Het Non-Operat. Rev. F 1,869 1,174 1,188 851 860 8o6 8S0 660 860 860 nO Net Rev. Befor, Interest G 10,492 7,492 8,117 (674) 8,1je 8,702 4,062 6,034 5,901 7,050 8,560 Interest Chargs F 7,886 6,617 1,685 0 2,172 3,496 4,527 5,148 4,966 4,624 4,033 Net Surplus/(Deficit) I G-F 2,606 875 1,432 (674) 984 207 (446) (1)4) 940 2,S26 4,527 Significant Ratior Working I (A/B) 83 76 85 90 85 64 62 61 80 79 79 Operating Ratio % (A/C) 83 83 97 103 97 96 96 94 93 92 90 Source: E N F E January 1989 " a ft s - 52 - MOX 7 eN F e Table; EXCT8T CllRRIOOR! PROJET Consolidated Fund Flow Statemet, Actual 1965- 19i7, EstImate 1988, Forecest 1981-1995 In Constant Oct. 1988 Boliviano. In 7lhuaands Applicat;on Of Fund, 1,905.0 1981 1987 19t8 1989 1990 1991 1992 1.993 1,994 1,99S)0 Investment: E.port Corridor Projest 9.200.0 17.99.0 9,200.0 Other: t1FE' Own InveCt. t TCN 3.126 10.242 5.995 12,576 9,258 s,500 8.000 10.000 12,500 12.800 12.500 Other(RIC.KfW.Arg.etc) 0 1.558 28.290 6.7-3 3S,bW5 29.579 10.976 Sub Totl 3,126 16.00 34.292 19.334 43,515 47.279 35.375 19.200 12.500 12,50 12,500 0Obt Service Charges Interests 10.369 10.008 S,170 2.643 5.065 6,798 8.052 7,869 7.125 6.348 Lown Repayment 11,40S 5.068 1.176 2,158 2.158 2,312 7.015 8.727 9.523 Sut Total 2.7M 15.078 ',346 2.,43 7.223 8MM56 10,364 14,854 15.852 15.871 Iner. Workg. Cap. Excl. Cash 2.123 26.182 83.201 1,761 2,430 2.272 782 1,923 636 921 2.301 Other 1,820 2,693 2,460 2,460 2.480 2.476 2,476 2.476 2,476 Soci-l Benefits 227 730 560 2,361 2.915 3,000 3,100 3.750 3.900 *,400 4.90) Sub Total 8.670 26.912 3S.761 5,815 7,813 7.732 6,342 8,149 7.012 7.797 9,737 Total Application 28,660 58.788 75.400 26.149 S4,014 62,234 51,673 37.713 34,366 36.149 30.100 Sources Or Funds Net Woriking Revenue 19,288 19,900 20.,52 18,270 19,203 21.304 23.540 25,910 28,035 30,316 32,903 14it Non-Operating Revenu.s 1.699 1,642 1,983 1,576 1.590 1,590 1,590 1.s90 1,500 1,50 1,590 Sub Total 20,987 21.622 22.495 14.846 20,793 22.894 25.130 27.500 29,625 31,9S6 34,493 Longterm Loans Evport Corridor Project 7,165 14.329 7.165 On-going Projects 1,150 12.885 34.779 6.7s8 34.299 29.579 10,976 Oovt. TON 10.929 5,147 1.849 Sub Total 12,079 18.032 3,628 6.7t58 34.299 36,744 25.305 7,165 Soc. Senefita a other 5.7S9 15.337 11,188 1,400 2.006 2,006 2,006 2.006 2.006 2.006 2,004 TotAl Soure.S o8.825 58,829 t4,702 24,397 58,101 62.647 53.444 37.694 32.654 34,99S 37.5-2 Cash At lh. 8oegnging Of The Yes. 2.788 1,031 5,118 5.531 7,302 7,283 5.571 4,417 At the End Of The Year 1.031 5,110 t.5U1 7,302 7.283 5,571 4,417 3.831 Incr. Or ( Decr.) During Tho Year 10.257 41 (610) (1.752) 4,087 413 1.771 (19) (1.712) (1,154) (586) Souree e N F E January. 1989 - 53 - E i F E EXPORT CiRRWOR PROJECT NEX 7 Fund Flow Sttement, Actul 1985- 17, Estiate 1988, Forecet 1989-1993 Table 5 In Constant Oct. 1988 Bolli inca In Thou.nds Ematern Networlk Aplcatlon Of Funds 1,985.0 1986 1967 198i 1989 1990 1491 1992 1,993 1,094 1,995 Investeuitei Export Corridor Project 7r501 14,001 7501 Other: EWE,& Own Inv..asmt A TON 1,491 3,522 4,954 4*756 4,737 4,500 4,000 5,0O 7,500 8.0000 8.000 Oth*r(RIC,KfVAre.) 6.558 11.649 6,7e8 9,052 8.678 Sub Total 1.491 10.080 16. 603 11,51S 1.789 20.879 16,001 13,001 7.500 8.000 6.000 Debt Service Charges Interest. 3.287 1.'891 1.485 500 1.541 2,270 2,904 2.884 2.601 2.315 Loan R"qyments 3.128 1 689 S34 S78 378 767 3,082 3.082 3.082 Sub Total 6.415 ,080 2,019 0 5OO 1,919 2,648 3,671 5,96 5,683 5.397 Incr. Worlg. Cop. ExcI. Cnsb e.218 9.247 15,534 2,117 1,520 1.511 112 SO 1" 771 1,549 Otl*r 1.320 2,693 609 609 609 62S 825 82S 825 Socirl en*f It 86 780 560 307 015 900 1.000 1,6S0 1,800 2,300 2,80" Sub Total 4,639 0,977 16.094 5.117 8.144 3,220 1.921 2.978 2,769 3.898 5,174 Total Application 12,S95 25.137 34,716 16,633 17.43S 26,018 22.570 19. 650 16.235 17.579 18,571 Sources Of Fund- Nnt Working Revenues 10.038 10.966 10,95S 7.920 9,168 10.018 10.972 12.043 13,240 14,641 16,198 Not Nlon-Operating Re.nue 320 468 775 725 780 730 730 730 730 730 730 Sub Total 10,58 11,434 11.770 8.645 9,898 10,748 11,702 12.773 13.970 15,371 16,928 Longterm Loon. Export Corridor Project IDA 5,600 11,6O0 Sp800 On-going Projects 0,192 15,888 6.758 9.052 8.678 Goat. TON 4.070 879 1,849 Sub Total 4.070 9,071 17.735 6,758 9.052 14.678 11.600 5.600 0 0 0 Soc.lSensfits A Other 3.308 3.8W8 4,471 1,893 1.003 1,003 1.003 1.023 1,023 1,023 1,023 Total Sources 17,786 24,343 83,976 16.798 19,953 26,429 24,305 19,596 14,993 16,394 17,9S1 At The 8eginning Of The Year 28 191 2,711 3,122 4.857 4,e03 3.561 2,376 At the End Of The Year 191 2,711 3,122 4,857 4,003 3,561 2.376 1,756 lncr. Or ( Decr.) During The Year 5,141 (794) (740) 163 2,520 411 1,735 (54) (1,242) (1.185) (620) Soure ! E N F E January 1969 - 54 - ANEX 7 ENF E Table 6 ExPoRT CORRIDORS PROJECT Western NHetwrlk Fund Flow Stete.nt, Actual 1985 - 1987, E;tilat 1988, Foreca.t 1989-1995 In Constant Oct. 1988 8.6iviefk. In Thousands Application Of Funds 1,985.0 1966 1987 1988 1989 1990 1991 1992 1,003 1,994 1,995.0 Inveat_ents Esport Core*dor Pro). 1.699 3.398 1,699 Othoer 8E's Owan Invest. & TOR 1.635 6,720 1,041 7.816 4,521 4.000 4.000 4,500 5,000 4,500 4,5Y Other (RIC,Kf.Arg.etc.) 16,649 25,246 20,701 10,976 Sub Tott 1.635 6,720 17.690 7,016 29.769 26,400 18.374 f,199 5,000 4,500 4,500 Debt Servlce Charges Interests 7,062 6,617 1.68S 2.143 3.524 4.528 5,148 4,955 4,524 4,033 Loan Repayents 8,27S 3.379 642 1,780 1.760 1.545 3.933 S.645 6,441 Sub Total 15.357 9.996 2.327 2,143 5.304 6.300 6,69.3 8,688 10,169 10,474 Incr. Worhg. Cao. Enl. Cash (1.160) 16.935 20.667 (856) 918 761 670 1,42Q 492 5SO 812 Ott-r 1.651 1.651 1.651 1.651 1,651 1,651 J,Cn' Social Oenotita 141 2,054 2.100 2.100 2,10" 2,109 2,100 2.100 2 ly' Sub Total (1.019) 16,938 20,667 1,698 4,669 4,512 4,421 5,171 4,243 3.901 4,563 Total Appliestlon 15,973 33,651 40,684 9.516 36,s51 36,216 29,103 19.06S 16,131 18.570 19,311 ource- Of Funds Not Working Revenuoe, 9,250 9.014 9.537 5.350 10.035 11,286 12.56e 13,867 14.795 15,735 16,705 hit Non-fOerating Revonue. 1.379 1.174 1,188 851 860 3S0 eR 860 86n 860 R5l Sub Total 10.629 10,188 10.725 6,201 108'S 12.146 13.428 14,727 15.655 16.595 17,5fi Lontarm Loans EXport Corredor IDA 1.365 2,729 1.365 On-going Project(RIC,kfW.Arq.etc) 1.150 4,e93 16.693 25.247 20,701 10.978 t - TO; 6,859 4.269 Sub Total 86009 6.961 16.689 25.247 22,066 13.705 1.365 Soc. 8enefIts A Othbrs 2,451 15,337 11,168 1.400 2,006 2,006 2,006 2.006 2,006 2,006 2,rfm) Tutsl Sources 21.089 34,486 40,806 7,601 36,148 36,218 29,139 18.098 17,661 16,601 19.571 #:Gob At The b'ginning Of Thl Year 2,75S 840 2,407 2,4") 2.445 2.4eu 2,010 2,t41 At the End Of Th. Your 840 2,407 2,409 2.445 2.480 2,010 2,041 2.0nS Incr. Or t Oecr.) During The Year 5.116 835 122 (1,915) 1.667 2 !A 35 (470) 31 14 rource9 :FE January 1989 EN F E EXPORT CORRIDOR PROJECT Balance Sheets, Actual 1985-87, Esti mate 1988, Forecast 1989-96 In Constant Oct. 1988 Bolivianos In Thousands 1986 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ASSETS Crocs Fixed Assots 1,689,334 424,495 806,848 637,403 580,655 607,056 626,430 637,670 863,029 674,117 s83,082 .ess Accum. Deprec. 2,072 101,628 169,495 153,120 167,562 183,734 201,903 220,956 232,498 243,812 254,287 Not Fixed Assets 1,860,406 526,123 765,343 890,623 748,207 790,789 827,833 8s8,626 895,517 917,929 937,349 Current Assets Cash & Bank 7,250 1,798 1,722 1,807 4,262 4,354 4,480 4,671 4,887 4,804 4,927 Aects. Receivable 18,999 11,522 23,888 6,8,9 28,646 30,199 31,238 32,977 35,006 37,820 40,172 Inventory 6,172 18,138 38,696 46,078 60,868 62,046 58,361 64,319 54,668 SS,106 66,597 Sub-Total 37,097 33,114 72,949 58,979 84,236 90,428 93,026 95,366 98,364 102,214 106,744 Othor Assets 6,678 14,051 49,431 46,902 48,779 83,167 74,188 79,869 80,189 81,582 86,637 Differred Assots 862,573 164,677 251,976 222,964 179,618 157,010 146,138 141,38S 120,766 113,249 110,022 Totel Assets 2,353,610 534,709 820,709 712,148 725,787 733,928 736,867 733,114 729,819 727,350 732,178 1 Liabilities Current Liabilities 109,825 24,903 32,641 21,837 33,980 32,060 30,820 29,583 28,117 26,908 25,717 Provisions 84,279 20,909 44,804 39,296 41,868 39,602 88,880 36,108 34,669 31,395 31,091 Long Term Debts 663,777 162,406 280,414 265,837 247,100 257,551 281,874 262,168 267,562 253,182 249,028 Other Debts 288 9,847 11,019 202 202 202 202 202 202 202 202 Capital 1,613,491 826,644 461,831 399,178 402,789 404,621 405,081 406,105 409,279 415,663 426,140 Total Liabilities 2,362,610 634,709 820,709 712,148 725,737 733,926 736,867 733,114 729,819 727,360 732,178 Liquid Ratio 0.3 0.6 1.0 0.6 1.0 1.2 1.3 1.4 1.8 1.8 1.9 Debt Equity Ratio 32/68 38/62 39/61 38/82 39/81 39/61 39/61 39/61 38/62 37/63 Source E N F E January 1989 Ia 1Q Pt E N F E EXPORT CORRIDOR PROJECT Balance Sheets, Actual 1985-87, Estimate 1988, Forecast 1989-96 In Constant Oct. 1988 Bolivlanos In Thousands 1985 1988 1987 1988 19 1990 1991 1992 1993 1994 1995 ASSETS Gross Fixed Assets 773,574 197,620 278,791 244,779 261,162 266,162 289,182 279,703 286,703 293,291 297,736 Less Accum. Deprec. 738 33,683 56,841 56,362 63,405 71,143 79,966 89,326 98,842 108,358 117,667 Net Fixed Assets 772,836 163,937 222,150 188,427 197,757 194,019 189,196 190,378 187,8e1 184,93a 180,169 Current Assets Cash k Bank 6,744 1,292 1,216 1,301 3,748 3,848 3,964 4,066 4,181 4,298 4,421 Acets. Receivable 8,088 2,268 2,130 8,192 3,340 3,203 2,826 2,011 1,842 2,102 2,181 Inventory 4,037 6,702 24,093 19,980 22,689 23,948 26,264 26,222 26,469 27,009 2e,600 Sub-Total 13,847 10,262 27,489 24,478 29,655 30,999 81,533 82,298 32,482 33,40e 35,052 Other Assets 2,660 10,301 26,867 32,090 89,123 68,601 64,602 70,003 70,603 71,916 76,971 Differred Assets 214,409 62,194 s8,ao3 78,909 67,200 54,808 62,686 46,984 48,892 42,669 41,798 Total Assets 1,003,742 236,894 884,759 823,899 323,786 383,127 837,888 338,643 384,738 a82,826 833,990 Liabilities Current Liabilities 43,778 8,3865 18,16 8,699 9,916 9,s46 9,982 10,114 10,038 10,076 10,047 Provisions 19,416 6,420 18,810 17,162 18,240 16,827 16,019 14,213 12,782 11,33s 10,734 Long Term Debts 180,239 62,901 107,779 100,9S6 98,219 10e,670 110,993 111,287 106,881 102,301 96,147 Other Debts 94 1,986 Capital 780,216 167,073 228,854 197,092 199,380 200,984 201,892 208,029 206,27 209,114 216,062 Total Liabilities 1,003,742 238,694 364,769 823,699 323,786 883,127 837,888 838,843 334,788 332,828 333,990 Liquid Ratio 0.2 0.4 0.2 0.5 0.7 0.7 0.6 0.8 0.6 0.8 0.7 Debt Equity Ratio 24/f76 32/88 24/76 32/68 84/86 36/86 36/86 34/68 38/67 31/69 Source E N F E January 1989 rt A 0ll _~~~~~~~~~~~~~~~I E N F E EXPORT CORRIDOR PROJECT Balance Sheets, Actual 1985-87, Estimate 1988, Forecast 1989-96 In Constant Oct. 1988 Bolivianos In Thousands 1986 1988 1987 1988 1989 1990 1991 19 1993 1994 199S ASSETS Gross Fixed Assets 885,780 226,975 327,067 292,624 319,493 841,893 36B,288 857,967 378,326 880,826 385,326 Less Accum. Deprec. 834 67,945 102,854 96,788 104,147 112,591 121,987 131,831 133,646 135,464 136,720 Net Fixed Assets 886,426 158,980 224,203 1956,16 216,348 229,302 234,331 228,338 242,680 246,372 248,606 Current Assets Cash & Bank 5,182 2,162 9,200 4,802 1,278 4,838 4,483 4,006 4,611 5,190 5,554 Accts. Receivable 16,933 9,264 21,708 3,806 25,206 28,998 28,913 30,98 383,184 35,519 38,041 Inventory 2,136 11,438 14,602 28,098 28,097 28,097 28,097 28,097 28,097 26,097 28,097 Sub-Total 23,250 22,et2 45,510 34,506 54,681 59,429 61,493 83,069 86,872 88,806 71,892 Other Assets 3,028 3,750 22,564 13,812 9,856 9,8e8 9,86 9,6s6 9,888 9,888 9,888 Differred Assets 438,184 112,483 183,673 144,076 122,419 102,402 93,601 96,401 76,883 70,880 88,224 Total Assets 1,349,988 298,015 465,950 388,249 402,002 400,799 898,99 394,471 895,0S8 894,s24 398,198 LiabilitiosI Current Liabilities 88,047 18,538 15,825 12,938 24,084 22,404 20,858 19,419 18,079 16,832 15,670 Provisions 44,8s8 14,489 11,494 22,144 23,428 28,876 23,881 20,893 21,897 20,080 20,367 Long Term Debts 388,538 99,506 172,836 150,881 150,881 150,881 150,881 150,881 150,988 150,881 150,881 Other Debts 144 7,912 11,019 202 202 202 202 202 202 202 202 Capital 853,276 159,571 224,977 202,0e4 208,429 208,637 203,189 203,070 204,022 206,549 211,078 Total Liabilities 1,347,688 299,015 455,950 388,249 402,002 400,799 398,991 394,471 395,091 394,524 398,188 Liquid Ratio 0.3 0.7 1.9 0.8 1.1 1.3 1.6 1.8 2.0 2.4 2.8 Debt Equity Ratio 81/69 38/62 43/57 43/67 43/67 43/67 48/57 48/67 42/68 42/58 41/59 Source E N F E January 1989 %O %J - 58 - ANNEX 8 Page 1 of 3 TECHNICAL ASSISTANCE TO ENFE IN RAILWAY MNMOEMENT AND MARKETING iserms of Reference 1. It is proposed to provide assistance in three phases. The first phsse, beginning in February 1989 and financed under IDA's Second Reconstruction Import Credit, will provide a detailed diagnosis of the current management problem of the railway, together with proposals for remedying them. In the second phase, a team of railway operators and managers, with experience relevant to the task cf converting a production- based railway into a market-oriented one, will provide direct managerial assistance to the railway for a transitional period of about three years. During this period, members of the ex-patriate team will be assigned to assist specific senior managers in the performance of their tasks. By the end of the period, the local management would have gradually resumed full operational and managerial responsibility. 2. The specific objectives of the assistance to be provided under the project is to help ENFE: (i) to Implement the recommendations of the Diagnostic Study, as mended or revised by MTC; and (ii) to achieve its corporate objectives as defined in the corporate plan and performance agreement (lacuerdo programa") to be established between ENFE and MTC. 3. The consultant will provide technical assistance to ENFE in all aspects of its operations, including the following: (a) operations and management; (b) maintenance of equipment; (c) maintenance of track and structures; (d) marketing; (e) cost accounting and pricing; (f) purchasing and stores; (g) economic and financial planning and budgeting; (h) operating rules (radio procedures); (i) management information system (operational, statistical and financial); and (j) office supervisor. 4. Although the distribution of the consultant's effort is a matter for the consultant, the following allocation of the proposed 200 man-months - 59 - ANNEX 8 Page 2 of 3 is provided as a guide as to what is considered necessary. The results of the Diagnostic Study will be available to sssist consultants in preparing their proposals. The work program proposed presupposes that each specialist will spend two periods in Bolivia, the first to define and start the implementation of the changes to be mede and the second to monitor progress and implement any further measures necessary to achievo the railway's corporate objectives. (a) Operation and Management - 30 man-months This will be the senior member of the team, who will co-ordinate the activities of the others. He will advise on management structural changes and work with senior management to effect the changes proposed. He will also advise on train main line and yard operations, train formations, service levels, crew size, station staffing, dispatching strategies, empty car management and locomotive control. (b) Maintenance of Equipment - 24 man-months The major emphasis will be on maintenance of locomotives -- scheduling, standards, quality, parts supply, facilities, work methods, staffing and training-- but will also include similar aspects of freight and passenger rolling stock. (c) Maintenance of Track and Structures - 24 man-months The expert will advise on the maintenance standards of track and other infrastructure works, maintenance staffing levels and practices, strategies for cost reduction and more effective work methods. He will also review and advise on signalling and communication equipment standards and maintenance. (d) Marketing - 18 man-months The marketing consultant will review and advise on techniques to improve strategies to increase revenue generation. In conjunction with the Operations Specialist, he will review services offered and institute changes in service levels, equipment assigned and advise on the use of containers. (e) Accounting. Costing and Pricing - 18 man-months The consultant will improve the accounting practices to ensure accuracy and ability to do costing of services performed and to allow reliable decisions in the application of rates and fares. He will also review the computer practices and ensure that modern procedures are being used and that optimum use of computer facilities is practised. - 60 - ANNEX 8 Page 3 of 3 (f) Purchasing and Stores - 18 man-months The consultant will install a stores management system which will allow accurate forecasts of inventory with correct lead times for purchases, and provide sufficient training to ensure a working system. (g) Economic and Financial Planning and Budgeting - 18 man-months The consultant will train the incumbents in modern practices, so that sufficient analysis is carried out to fully inform management to prioritize its decisions. (h) Operating Rules (Radio Procedures) - 6 man-months The consultant will institute training in all departments connected with train operation to apply modern and safe radio procedures, to minimize possibilities of comaunications errors. (i) Management Information System - 18 man-months The consultant will design a system which will economically inform management of operating and financial statistics, to allow decisions to be taken in a timely manne.:. (j) Office Supervisor - 30 man-months It is recommended that the consultant supply an office coordinator. - 61 - ANNEX 9 Page 1 of 2 PERFORMANCE AGREEMENT (ACUERDO MROGRAMA-) BENEEN HTC AND EME MAIN FUATURES ENFE Responsibilities 1. Basic Obiective: ENFE to become more efficient and competitive with other transport modes and financially self-sufficient. ENFE should produce a corporate plan, to be agreed with MTC, which will $orm the basis of the agreement. 2. Management: ENFE to propose changes to its management structure which will increase its ability to operate as a commercial railway. These proposals will be compatible with the recommendations of the Diagnostic Study and any other consultant studies to be undertaken in 1989. 3. Corporate Plan: ENFE to produce a corporate plan, indicating: (i) traffic and revenue projections; (ii) operating plans, including principal operating parameters and statistics and detailed operating costs; (iii) investment proposals; and (iv) full financial projections. 4. Financial Obiectives: ENFE to ensure that it achieves the rate of return on fixed investment, working and operating ratios indicated in the agreed corporate plan. ENFE should revalue its assets on an annual basis using accepted price indexes and at periodic intervals using current value methods. 5. Revenues: ENFE to ensure that its revenues from freight and passenger services and other sources will be sufficient to cover total operating costs, including amortization and interest charges and a substantial contribution to investments. Other sources of revenue may include contracts with the Government for the provision of non-commercial services which the Government requires to be operated, and for the operation of other services at rates or fares lower than ENFE would require. 6. Manpower: ENFE to determine its labor requirements on the basis of operational requirements. If the Government requires that more staff be employed, the costs of these additional staff should be the responsibility of the Government. ENFE to control wage increases in line with government policy for private industry. 7. Services: ENFE to promote the provision of services to clients on a contractual basis. An important contract will be that with the Government for the provision of non-commercial services. - 62 - ANNEX 9 Page 2 of 2 8. Investments: ENFE only to undertake investments which will improve the financial position of the railway. The corporate plan will include financial appraisals of all investment proposals having a total cost of more than US$10,000. 9. Debt Limitations ENFE to refrain from undertaking additional loans to those already committed unless the projected net working revenue is at least 1.7 times the total debt obligation in the year. 10. Penalties: Should ENFE fail to achieve the financial projections for 1990 included in the agreed corporate plan, the plan will be revised for 1991. The revisions will include such reductions in railway operations and investmento as &re necessary to produce a projected compliance with the agreed financial objectives. 11. Reports: ENFE should prepare periodic reports for the MTC so that compliance with the financial and operational targets can be monitored and necessary remedial action agreed should it appear that the targets are not being met. Government Responsibilities 12. The Government will eliminate all operational and investment subsidies to the railway and not interfere in the day-to-day operations of the railway. The Government will allow ENFE autonomy to achieve the financial and operational objectives indicated in the corporate plan. 13. The Government will supervise the implementation of agreed changes In the management structure of EWE. 14. The agreed corporate plan will include proposed freight tariffs and passenger fares. Proposed changes to these agreed rates will be submitted to MTC for approval. Approval will only be denied should there be evidence of monopoly pricing. Approval will be automatic after 30 days without comment from MTC. 15. The Government will enter into contracts with ENFE for the provision of any services which ENFE would not operate on a commercial basis. Contracts will also be agreed for the transport of freight or passengers at rates below those which would allow a full cost-recovery by WNE. 16. The Government will accept financial responsibility for any requirement of ENFE to employ more staff than is necessary to operate the railway. 17. The Government will monitor ENFE's compliance with financial and oporational objectives and instruct ENFE to take such remedial action as is necessary, should it appear that the objectives are not being met. - 63 - LABOR-IITEISIVE MAINTE M-CE AND DRUMAGE ORKS TENTATIVE LIST OW SUBPROJECTS Estlmated SPonsorinQ Cost Subproiect Name Anency (US$000) Improvement Concepcion-P. Quijarro road Iclhilo Munic. 210 Improvement Tupiza-Villazon road SNC 135 Maintenance Cochuingenio-Vitichi SNC 209 Maintenance East Sec. Sta Cruz-P.Quijarro line ENFE 127 Maintenance South Sec. Sta Cruz-Yacuiba line ENFE 58 Improvement Parquipugio-Catacora road SNC 106 Improvement Capiri-Central Chama road SNC 95 Improvement Berenguela-iio Maure SIC 145 Improvement Rio Maure-Charana road SNC 141 Improvement Central Chama-S.D. Machaca road SNC 155 Improvement Toledo-Turco road CORDEOR 76 Improvement Tarija-Berulejo road SNC 279* Improvement Tarija-Camargo road SNC 293* Maintenance Sta Cruz-P.Quijarro line (Km 6-56) EIFE 179 Maintenance Sta Cruz-Yacuiba line (Km 447-497) ENFE 247 Improvement Catacora-Hito 4 road SNC 130 Improvement Chaguaya-Escomsa road SNC 66 Improvement Potosi-Puente Mendes road SNC '89 Improvement Machacamarca-Tolapalea road SNC 140 Improvement Oruro-ConfUtal road SNC 48 Improvement Quillacollo-Confital road SNC 125 Improvement Humacha-Cho3napata road SNC 142 Improvement Cochabamba-Comarapa road SNC 196 Improvement Bermejo-Trementinal road SvC 212 Improvement San Andres M.-Santiago M. road SNC 100 Improvement Santiago M.-Berenguela road SNC 100 Total, 26 subprojects 3,904 * Eligible for LCB (over US$250,000) - 64 - ANNEX 11 TECHNICAL ASSISTANCE FOR N.T.C. IN PLANNING AND POLICY ANALYSIS Terms of Reference (A full text in Spanish has been furnished by MTC.) The proposed assistance to the Ministry of Transport's Subsecretariat for Planning will take the form of seven studies: Man-months Local Intern. Total 1. Organization of the MTC, including management information systems 9 3 12 2. Establishing priorities and funding sources for identified transport investments 15 3 18 3. Setting up a transport data base and issuing a yearbook of transport statistics 11 - 11 4. Operating and investment requirements of the La Pasz-Cochabamba-Santa Cruz transport corridor (all modes) 21 15 36 5. Preinvestment studies for transport investments to be identified 20 5 25 6. Revision of road design standards 6 2 8 (in close collaboration with SNC) 7. Setting up an axle-load control system 8 2 10 Total 90 30 120 Cost Estimates Local consultants 90 m/m @ US$2,700 a US$243,000 International consultants 30 9,000 270.000 Total US$513,000 - 65 - ANNEX 12 Page 1 of 2 ICOU.ARGING USE OF CONTAINERS (TECHNICAL ASSISTANCE TO INPCX) Terms of Reference 1. Objectives: The purpose of the assistance is to identify obstacles discouraging greater use of containers in Bolivia, and to formulate a strategy for promoting their use. 2. Responsibilities: The work plan for the study should begin with a diagnostic phase, covering (but not limited to): - traffic flows, containerized and containerisable - present container movements (stressing delays in returning and their costs to users) - in-land warehouses and consolidation/deconsolidation depots - legislation and institutional aspects - costs and forms of pricing - telecommunications - documentation - insurance - banking 3. As a second phase, the expert should develop a strategy for promoting container use, covering (but not limited to): - possible container users - refrigerated containers - consolidation and deconsolidation services - "dry ports' (in-land container terminals), their characteristics, design, ownership and rental options - ancillary services (customs clearance, insurance, banking, etc.) - costs of each service - management of each service - information requirements (computerized systems) - telecommunications - standardized documentation - marketing ant publicity campaigns - possibility of constructing containers in Bolivia: technological requirements - technical assistance needed - training needed 4. The consultants should also identify and evaluate concrete business contacts, both inside and outside Bolivia, for possible joint- venture investments in this area. - 66 - ANNEX 12 Page 2 of 2 5. Expected Results: Draft final report after three months on the diagnosis and recommended strategy, including prospects for public and private investments in this areag final report one month after receipt of the Government's comments on the draft. 6. Duration of Assianment: One international expert for 2 months with expertise in freight consolidation iperations and international joint ventures; one national expert in container marketing for 2 months; one national expert in relevant legislation; and one national expert in intermodal transport for 2 months. 7. Qualifications and Ex2erience Requireds Expertise in intermodal transportation, with at least three years of practical experience in the movement of containers and the operation of in-land multi-user freight terminals, stuffing and unstuffing of containers, and related services. Understanding of legislation and institutional aspects. 8. Counterpart Aftenciess The experts will be attached to the National Institute for Export Promotion (Instituto Nacional de Promocion de Exportaciones - INPEX) and work closely with AADAA (Administracion Autonoma de Almacenes Aduaneras) and operators of intermodal transport services. - 67 - ANNEX 13 Page 1 of 3 FACILITATING AIRTREIGET FOR BOLIVIAN EXPORTS (TECHNICAL ASSISTANCE TO INPFE) Terms of Reference Obiectives 1. The Government of Bolivia attaches great importance to the promotion of exports, both traditional and non-traditional. In view of the difficulties inherent in surface transportation to and from Bolivia, it wishes to develop to the maximum the use of airfreight, taking advantage of the high-standard international airport at Santa Cruz as well as those of La Paz and Cochabamba (for which a new, safer runway is now under construction). Bolivia is, however, currently bandicapped by the fact that none of the airlines presently serving Bolivia use wide-body aircraft. The purpose of this study is to identify impediments to expansion of airfreight and advise the Government on measures it can take to encourage and assist private exporters and transport operators to penetrate promising markets, develop consolidation facilities at or near the airports as well as suitable packing arrangements, and negotiate transport contracts with Bolivian and international airlines, including such exchanges of operating rights as would facilitate use of wide-body planes. Simplification of documentation procedures may also be among the recommendations. Responsibilities 2. The consultant is required to: (a) analyse the markets in North America, Europe, Brazil and elsewhere for Bolivian products that, by virtue of unique characteristics or high value-to-weight ratios, could be exported profitably by air, and idettify promising opportunities; (b) analyse freight rates currently being charged by airlines serving Bolivia for the above products (the largest aircraft normally being the Boeing 727), and rates being charged elsewhere in South America using wide-body aircraft, with attention to the impact of aircraft size, shipment size, frequency of shipping and routing on airfreight charge per kilo; (c) analyse the current costs and quality of production, surface transport, handling, packing and storage for these goods within Bolivia; (d) identify the main factors deterring international airlines from operating wide-body planes into Bolivia; ANNEX 13 Page 2 of 3 (e) on the basis of the above analysis, make preliminary forecasts of aggregate sales volumes that could be reached by 1990 and 1995 for those few products which appear to promise the greatest profit potential; (f) make recommendations to potential exporters, the city governments and regional development corporations, among others, as to consolidation, packing and storage facilities required at or near the Bolivian airports; (g) make recommendations to the Ministry of Finance and the Customs Department, among others, on ways to simplify export documentation and procedures; (h) make recommendations to Lloyd Aereo Boliviano, among others, on modifications they could make to thqwir existing aircraft and loading equipment to make better use of available carrying capacity; Mi) make recommendations to the Civil Aviation Ministry on matters relating to exchanges of operating rights with trading partner nations, with a view to encouraging use of wide-body planes; and Cj) make recommendations to Bolivian consulates on ways to aid Bolivian exporters in the countries of destination. Expected Results 3. The consultant will submit a draft final report after three months, and a final report within a month of receiving the Government's comments on the draft. Duration of Assianment 4. One international expert for 4 months and two national experts, one senior and the other junior, each for 4 months. Qualifications and Experience Required 5. The international expert should have at least three years practical experience in fields related to air freight. The national experts should have at least two years experience in relevant fields and academic qualifications in commercial engineering or transport economics. Counterpart ARencies 6. The agency financing the study will be the Ministry of Trade, Industry and Tourism. Management and supervision will be delegated to the National Institute for Export Promotion ("lnstituto Nacional de Promocion - 69 - ANNEX 13 Page 3 of 3 de lee Exportaciones" - INPEX), which will provide premises and support services. The experts will work in close collaboration with Lloyd Aereo Boliviano and the Subsecretariat for Civil Aviation. - 70 - ANNEX 14 RIWOKTACT ASRSSMENT Rehabilitation of Santa Cruz-Corumba Rail Line 1. The works proposed for the Santa Cruz-Corumba rail line are: (a) placing ballast on parts of the track that now lack it; (b) applying weed-killer within the ballasted width of the track; (c) replacing two small bridges with stronger structures; and (d) Improving drainage by excavating side drains and cross drains. Possible issues and our approach to each are as follows. 2. Herbicides: None of the herbicides banned by the Bank will be used. 3. Quarries for ballast: Two existing quarries adjoining the line will be used. The Bank will review the bidding documents covering the supply of ballast to ensure that the contractor takes all relevant safeguards, such as to minimize erosion and intrusion on local communities (cf. World Bank Guidelines on Environmental Issues in Transport Projects). 4. Work camps: The bidding documents will incorporate appropriate safeguards regarding work camps (e.g. use existing facilities and infrastructure as far as possible so as to minimize intrusion, particularly in areas populated by indigenous peoples, clear sites on completion, etc.). Qualified agencies in Santa Cruz may be consulted as to the possibility of their assisting in planning and monitoring these activities. 5. Drainages The proposed works will have a benign effect, insofar as they aim to end the localized ponding effect that the line and other earthworks have had in s.me stretches near Km 600. This will eliminate existing seasonal ponds which serve as breeding grounds for mosquitoes. 6. Alianment: No change in the alignment is contemplated. Attention is warranted as to whether it is advisable to encourage opening up of the Tucavaca Valley to settlement and agriculture. In Santa Cruz there i8 considerable interest in doing so. The rail line passes across the lower end of this valley (at about Km 500). Local rail traffic is minimal, even though the service has operated for the past 30 years. It is intended that ond-to-end traffic on the line should grow, while local stopping services are trimmed back. By far the greater impulse to settlement would come from construction of an all-weather road through the valley. This questLon should be studied in connection with the natural gas pipeline that is now under negotiation with Brazil, since an access road would have to be built alongside the pipeline throughout its length. - 71 - ANNEX 15 PROJECT PILE - DOCMET ENFEt Estado de Ingresos y Gastos, Red Oriental, 1987 (12188) SNC: Documentos de Invitacion para los Estudios Patacamay.- Tambo Quemado, (718187) World Bank: Evaluation of Alternative Transport Systems in the Santa Cruz- Puerto Quijarro Corridor, Robin Carruthera (Consultant), (5/30/88) United Nations: Sistema Integrado de Transito para Mercaderias Bolivianas transbordadas a traves de Puerto de Aricas Evaluacion a los 12 anos de Funcionamiento, (7/12187) INPEXt Report on a Mission on Institutional Aspects of Trade Promotion, DIvision of Trade Services, International Trade Centre UNCTADIGATT, Camilo Jaramillo (10/88) INPEXs Informe sobre Seminario - Taller sobre Terminales de Transporte Multimodal, (9/16/88) World Bank: Estudio patz la simplificacion de recaudaciones por concepto de peaje y otros gravamenes a vehiculos, Hector Revuelta (Consultant), (11/88) INPEX: Informe sobre servicios actuales de Carga Aerea,Jorge Iturri (12/7/88) Presencia: Article relating to the choice of development of the Patacamaya-Tambo Quemado and Oruro-Pisiga roads, (12122/88) Bolivia Export Corridors Study: Report 7298-BO, World Bank, (6116/88) B R A Z I L BC ~~~who * R~~~~~~~A S - 'A' _ 'Wl_-R RAILROADM ROAD
Группа Всемирного банка · Staff Appraisal Report
Bolivia - Export Corridors Project
Открыть оригинал документа
Полный текст размещён на сайте публикующей организации. lawenc.com индексирует метаданные и ведёт на официальный источник.
Полный текст
Основные сведения
Организация
Группа Всемирного банка
Тип документа
Staff Appraisal Report
Страна
Боливия
Источник
Всемирный банк