Uruguay - Highway Project

RETURN TO RESTRICTED REPORTS DESK p"J Report No. TO-33Za WITHIN 4 J JA ONE WEEK This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF A HIGHWAY PROJECT URUGUAY October 9, 1962 Department of Technical Operations  CURRENCY EQUIVALENTS 1 US dollar = 11 Pesos 1 Peso = 0. 091 US dollar 1, 000, 000 US dollars = 11,000,000 Pesos 1,000,000 Pesos = 91, 000 US dollars Uruguayan Fiscal Year January 1 - December 31  URUGAY -2- 3. Vehicle operating costs. 71. "On the basis of rather incomplete cost data supplied by the Highway Department and some private companies, the average operating cost of a 5-6 ton truck (the representative size of trucks in Uruguay) over Route 5 in its present condition, with the exception of Pro- gresso-Florida section (75 km) is estimated to be in the order of 20 U.S. cents per km. After improvement of the highway to the pro- posed standards, the cost is estimated to be reduced by about one third. 4. Maintenance costs. 75. t',. The current levels of maintenance cost per kilometer for gravel roads and asphalt roads in good condition in Uruguay are 6,000 pesos ($550) and 4,500 pesos (4400) respectively." 5. Economic basis of justification. a) road user savings b) road maintenance savings c) reduction in accident and fatality rates (para. 76); opening up channels for an increased flow of products to marketing and export centers and a reverse flow of investment (para. 77), diversification of production (para. 78) etc.  URUGUAY APPRAISAL OF A HIGHUTAY PROJECT Table of Contents Page SUPIaERY i I. INTRODUCTION II. BACKGROUND 1-6 A. General 1 B. Transport in Uruguay 2 C. Coordination of Transport 3 D. Road Administration 14 Organization 4 Financing and Planning for Road Development and Improvement 4 Execution of Road Construction 5 Road \i4aintenance 6 III. THE PROJECT 7-12 A. Description 7 The Improvement of Route 5 7 Xaintenance Program 7 Highway Planning Survey 8 B. Status of Engineering; Role of Consultants 8 C. Cost of the Project 10 D. Financing of the Project 11 E. Execution of the Project 12 IV. ECONONIIC JUSTIFICATION 13-17 A. Introduction 13 B. Competition between Road and Rail 13 C. Road-User and HIaintenance Benefits 14 D. Development Benefits 16 V. CONCLUSIONS AND RECOlN1IENDATIONTS 18 APPENDIX Tables 1 - 10 Figure 1 HIap  URUGUAY APPRAISAL OF A HIGHIAY PROJECT SURYfARY i. The proposed loan will finance the improvement of National Route 5, a first phase of a maintenance program and other related items. The total cost of the project is estimated at about US$31.4 million equivalent of which the foreign currency requirements would amount to about USt18.5 million equiva- lent; this would be the first Bank loan to Uruguay for transportation purposes. ii. Local flooding frequently causes sections of the important Route 5 to be closed to through traffic and isolates affected areas for varying periods. Traffic volumes are sizeable, but only less than one-fifth of the road is paved and maintenance is generally inadequate. iii. Extensive improvement works are required to provide adequate facil- ities for present and future traffic. The proposed project provides for: a) the improvement of about 485 km of National Route 5, including the widening and replacemlent of some bridges; b) the preparation of a maintenance program, including the procurement of mechanical equipment spare parts, labor- atory equipment, etc., and c) a highway planning study of the country. iv. All the project works will be executed by unit-price contracts on the basis of intermational competitive bidding. The total time required for design and construction will be about four years. Road maintenance equip- ment would also be purchased after international competitive bidding. v. The responsible executive agency is the Highway Department under the hinistry of Public l'orks. The firm of consulting engineers that prepared the preliminary feasibility report for the project, will be retained to pre- pare the final designs and supervise the construction of the improvement works, and carry out the preparation of a maintenance program. The Highway Planning Survey shall be carried out separately by a team of economic and technical experts under terms of reference satisfactory to the Bank. vi. The project would provide a sound all-weather road traversing the main livestock and agricultural production areas of central Uruguay, and as a consequence, may lead to the development of these and other industries. The savings arising from reduced vehicle operating costs would yield a satis- factory return on the investment. vii. The project is considered suitable for a Bank loan of US"'18.5 million equivalent to the Government; an appropriate term would be 15 years including a four-year period of grace.  I. INTRODUCTION 1. The Uruguayan Government asked the Bank to finance the foreign ex- change costs of a highway project consisting of the construction of two roads: Route 5 from hontevideo to Rivera, and Route Inter-Balnearia (coastal route between ihontevideo and Ghuy on the Brazilian border). 2, in discussions with the Government in February, 1962, a Bank mission recommended that the project include a maintenance program. The Plission also recommended that a highway planning study be initiated. 3. The information furnished on Route Inter-Balnearia has not been sufficient to justify financing this road. 4. The project, the foreign exchange cost of which is estimated at US1ol8.5 million, therefore consists of: (a) the improvement of about 485 km of R.oute 5 (Progreso-Rivera) including the replacement and widening of some bridges; (b) the preparation of a maintenance program including the purchase of maintenance equipment, spare parts, engineering and laboratory equipment, weighing scales, etc,, and (c) an overall highway planning study related to other means of transport. 5. The appraisal of the project is based upon findings of a Bank mission to Uruguay in February 1962, information obtained from the Uruguayan Government and other sources at that time and during loan negotiations, and a preliminary feasibility study prepared by a firm of foreign consultants engaged by the Government. II. BACKGROUID INFORI'ATION A. General 6. Uruguay (IMap) is the smallest of the South American republics, covering an area of about 187,000 sq. km (almost twice the size of Cuba). The country is flat and is bordered on the north by Bragil; on the west by the navigable Rio Uruguay and Argentina; and on the south-east by the Rio de la Plata and the Atlantic Ocean, l4ore than half of its national boundary is navigable coastline. Uruguay lies in the temperate zone and has a mild climate devoid of snow or frost; yearly rainfall averages about hO", with occasional heavy rainfalls. The estimated population of 2.8 million is very unevenly distributed over the country. About 1.6 million people (almost 6050 of total) are concentrated in the most southerly part of the country (12% of total area) with 1ontevideo accounting for about 1.0 million. About hO of the population is engaged in animal husbandry and agriculture, the remainder being divided equally between manufacturing, private trade and services, and Gove rwn'ent.  -2- B. Transport in Uruguay 7. The countryjs main domestic transportation systems are rail and road (Map) which serve the countryts main domestic transportation needs, water and air transport playing a linited role. Road System 8. Uruguay's road network comprises about 8,000 km of national highways (Map) and about 68,ooo ion of departmental highways. Although few statistical data are available, the highway system is the principal facility for trans- porting passengers and freight. Highway traffic has been increasing more rapidly than railroad traffic, as may be evidenced from the increase in both gasoline consumption and estimated number of vehicles for a recent five-year period. The country's short distances and low density of population outside of Ilontevideo lends itself well to highway transport. 9. The highway system gradually developed as a series of radiations out- wards from hontevideo, the traditional center of political and economic activ- ity, major routes following in mmy cases the existing railway network. Over 90% of the national hlighways are all-weather. Occasional flooding due to heavy rains, inundates a number of sections and bridges of many highways, preventing the passage of through traffic and isolating the affected areas for periodls of a few days up to many weeks. lOo Few roads, mostly located around I.-ontevideo, have asphalt or concrete paving. The total length of paving is about 1,500 km (Table 1), representing about 18% of the national system and 2% of all highways. Other unpaved nat- ional roads have some form of a base or surfacing constructed of so-called tosca (disintegrated granite). Departmental roads are usually earth roads. High speed travel on the highways, which is common because of their gentle alignment and the countryts flat and open terrain, is destructive to unpaved roads, calling for expensive, continuous maintenance. I'oreover, although maximum axle loads are established by law, there is no proper enforcement. 11. Some sections of the major routes are well maintained, but road maintenance is generally below standard due mainly to inadequate maintenance organization and equipment. 12. Statistics on motor vehicles are poor. A 1960 national vehicle census (Table 2) indicates a total number of about 191,000 motor vehicles; many of them overage and in a bad state of repair. The bulk of the vehicle fleet is made up of passenger cars, taxis and light trucks of the "pick-up" type with a load capacity of about 3/h - 1 ton. Larger trucks probably comprise about 25do - 30/% of the total number of vehicles (excluding motor- cycles), the average types of truck being one of around 5 - 6 ton capacity. Vehicle registration in the municipality of hontevideo has more than doubled in the ten-year period from 19h8-58, representing an annual growth rate of about 7>,J and is estimated that about half of all motor vehicles are registered here (Table 2); the overall national annual growth of highway traffic is probably in the order of 5%.  -3- Rail Transport 13. The present railroad network (Map) totals about 3,000 Ica and basic- ally consists of standard gauge single track; three lines meet Brazilian railroads at the border, but differences in gauge require goods to be trans- shipped; there are no rail connections with Argentina. Short distances and concentrations of population in the area of lontevideo results in a low traf- fic density for the railway system. The development of competing highways parallel to most of the lines, the lack of transport or rate regulations, and insufficient capital investment in the system, particularly since its national- ization in 1948, have caused the gradual deterioration of the railway. Oper- ating deficits have been increasing; probably only livestock traffic revenue has begn covering its costs. ih. There is not yet a clear Government policy as to the Railway's future. A survey of the railways, partially financed by the Bank, was made by consultants in 1958. The consultants made reconrnendations regarding transport policy and the future composition of the railway system. However, so far only part of the consultants' recommendations have been carried out. C. Coordination of Transport 15. Coordination of transport is practically non-existent. In 1959 a "Junta Nacional de Coordinacion de Transportes" was established within the Ministry of Public '.'orks for the purpose of regulating rail and truck fares, as well as setting up tax rates for the trucling industry. However, so far very little, if anything, has been done by this committee and the situation as to transport coordination continues to be very unsatisfactory. Only bus rates are regulated, and it is not uncommon that bus rates are lower for sections paralleling the railways than on sections where no railway com- petition exists. Road freight transport is completely unregulated and any- one who wishes to operate a truck is free to do so without any control of routes or rates. 16. This policy results in a very unsatisfactory, and possibly unfair, competition between the various means of transport. It is impossible for the railways, which the Goirernment considers to be indispensable for certain goods and lines, to pay their cost because of the unrestricted competition, whereas also the unlimited competition between truckers prevents the development of a sound and business-like trucking industry. Wasteful competition prevails between an excessive number of small truckers. The current freight charges do not cover reasonable depreciation of vehicles, and there is a continuous flow of newcomers into the trucking business, many of whom go bankrupt after a few years. 17. The Government should endeavour to formulate a policy that would ensure satisfactory coordination of investment in, and utilization of, transport facilities (see Highway Planning Survey, paragraphs h2 and h3).  D. Administration of Roads Organization 18. The authority over national highways is vested in the National Government through the hinistry of Public Works and that over departmental roads in the respective departments, Traffic and transport responsibilities lie with the hjinistries of Public riorks and the Interior. The i.inistry of Public Works acts through its Highway Department wlhich is charged with the administration, design, construction and maintenance of the national highway network, the formulation of rules and instructions for vehicular traffic and axle loads. The Iiinistry of Interior acts through the Highway Police, rhich is charged with enforeement of traffic rules and regulations. 19. A comprehensive Civil Service Code governs the employment of Government personnel in the linistry of Public dforks; operational continuity is maintained independently of changes of Government with only the post of Ihinister of Public works being subject to change. 20. The Highway Department is composed of a main office and three zonal offices all located in iontevideo; the zone offices are divided into 10 regional offices located in the field; regional offices are divided into two to five districts. The main office includes, under a director, five divisions: construction and maintenance; studies of highways and bridges; administration; equipment and supplies; and technical investigations (Figure 1). Respon- sibility for the preparation and execution of construction and betterment works is divided between the main office and the field offices. In addition, the zon3s and regions are charged with maintenance under the construction division in the main office. 21. The technical ability of; the Highway Department's staff is generally good but much needs to be done to increase knowledge of the modern techniques of carrying out large road development projects; the number of staff in both main and field offices is possibly not sufficient for the current level and types of works. Design and supervision of road construction works are ade- quate but have been limited so far to small projects as a result of the modest construction programs of the past. Design and execution of bridge works are -good. Technical assistance from qualified consultants will be required if greater volumes and sizes of highway work are undertaken. Financinp and Planning for Road Development and Improvement 22. Road expenditures are primarily financed out of the "Public Works Tund". The Fund was established by law in 1953 and its annual receipt in 1961 wias estimated to have aeceeded Pesos 150 million (Table3 ). In 1961 a new law was passed by the Legislature by which the resources made available to the Fund have been increased and the annual receipt from 1962 on is ex- pected to be arounr- Pesos 200 million. The taxes turned into the Fund are used to execute public works programs approved by the Congress, the main part of it being spent for highway works (see Tables 415 ). The Public Works Plan as submitted annually to the Legislature is usally larger than the resources available and they are executed on a "pay-as-you-got' basis, that is. works are done to the extent funds are available, the remainder being carried over to the following year's program.  - 5 - 23e No well-founded, overall plan exists for the priority development and improveraent of highways in bruguay. While there is no doubt of the need and justification for improving R.oute 5 (the subject of the proposed Bank loan), as is discussed in paragraphs 70 to 8J. there is no clear picture which sections of the existing highway system have higher priorities than others. A few individual road projects and a number of development studies in the fields of railroads, ports, agriculture, power and airports have been, are being, or will be carried out, but none of these studies have been coordinated. A long-range highway development program is considered necessary for the orderly development of Uruguay's highway system and the preparation of such a program, for which competent assistance is required, should be included in a first highway project. Execution of Road Construction 24. With the exception of the major improvement of the coastal Route 10 (from Montevideo to Punta del Este), little major new construction has been executed in recent years. ]"st work has been confined to maintenance activi- ties, replacement of bridges, minor realignment and improvements of sections of the more important roads. 25. In the past, most road work was mainly carried out by force ac- count with the Highway Department's own forces; however, contract work has increased substantially in recent years. 26. Designs and specifications are adequate but there is consider- able room for improvement and modernization, particularly if large works are to be contracted. 27. Contract work is by contractor on a unit-price basis after public bidding. Foreign contractors are not excluded from putting in tenders, but have shown no interest in the past because of the small value of construc- tion projects normally prepared, usually less than US'?500000. A small number of competent domestic contractors have been operating in Uruguay for a number of years, but with the exception of bridge work, few of them are equipped to undertake considerably larger higIhway works tilan h. s been customary in the past. Therefore, if major works are to be undertaken, it is likely thAt foreign contractors will be needed and would be inter- ested, provided contracts are of substantial size. 28. The quality of work done by contractors and the Highway Department's oi,n forces is good. Considerable attention is paid to compac$ion, drainage and selection of materials, but testing is done primarily in the main laboratory located in ihlontevideo which is inadequately equipped and understaffed to handle the undertaking of larger works; field laboratories and expansion of the main laborator-y would be necessary to enable quality control to keep pace wlith construction. 29, In general, soil conditions and terrain- are favorable for road building. Roadway sub-base and base materials are abundant; stone chips for roadriay wearing surfaces can be obtained from numerous quarry sites. Little time is lost during construction because of weather conditions.  -6- Road Maintenance 30. The maintenance of the national highway system is carried out through Zone, Region and District offices (Figure 1). The chief engineer in each of the zones or regional offices is responsible for maintenance and new works carried out in his zone. Such an arrangement should provide for efficient execution of work in areas remote from the main depots, but unfortunately efficiency is hampered by the shortage of maintenance equip- ment and repair facilities in the field. 31. 1iaintenance equipment is short in numbers and a serious need exists for replacing overage equipment, the bulk of which was acquired before 1951. Additional equipment is also needed because of the expan- sion of the highway network and the increase in road transport. 32. In recent years maintenance has taken a relatively large share of road expenditure(Table 6), indicating that a high priority has been assigned to this function. Nevertheless the annual budget allocated for maintenance still falls short of actual requirements which results in deferred maintenance for a number of roads. Those road sections that are maintained show a high quality of work. 33. Equipment repairs are generally carried out in the main shop located in Kontevideo; workmanship is good. The main shop is well organized but understaffed and needs improvement and some refitting; it does not adequately meet the current maintenance needs nor can it meet the requirements of an improved highway system. The regional shops lack tools and equipment to take care of even minor repairs and buildings are in a poor state of re- pair. Yfuch time is lost by shipping equipment to the main shop for repair. A number of well equipped subsidiary shops should be established. 3h. Procurement of new maintenance equipment is clearly required to step up maintenance operations. As the present organization is not sufficiently experienced to handle this equipment without reforms, con- sultants are considered necessary to assist the Highway Department also in this matter.  - 7 - III. TMST PPOJECT A, Description 35 The proposed project covers the following items: i) the improvement of about 485 im of Route 5 from Progresso to Rivera, including widening and re- placement of some bridges; ii) a maintenance program, including the procurement of maintenance equipment, engineering and laboratory equipment, weighing scales, etc.; and iii) a highway planning study of Uruguay. 36. The total estimated cost of the project is about US$314 million equivalent, of which the foreign exchange cost would be about US"'18.5 million equivalent. Improvement of Route 5 37. The improvement of about 485 km of Route 5 comprises widening, paving, raising the grades of certain sections frequently inundated, re- placement of inadequate drainage structures, and replacement and widen- ing of a number of bridges, in order to provide an all-weather road from