Colombia - Barranquilla Water Supply Project

Do>mu of The World Bank FOR OMCLAL USE ONLY Reprt Ne. 12326 PROJECT COMPLETION REPORT COLOMBIA BARRANQUILLA WATER SUPPLY PROJECT (LOAN 2637-CO) SEPTEMBER 20, 1993 MI CROGRAPHICS Report No: 12326 Type: PCR Infrastructure Di-Ision Department III Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their ofricial duties. Its conteots may not otherwise be disclosed without World Bank authorization.  F iLeal Year Januay I to December 31 CURRENCX EUI1VALENTS Currency Unit = Peso Colombiano (ColS) Average Cajendar 1984 US$1 = Col$ 100.8 Col$ I US$0.0099 Exchcange Rate Effective October 27. 1985 US$1 = Col$ 161.6 Col$ I - US$0.0062 Weights and Measure Metric System GLOSSARY OF ABBREVIATIONS EPM Empresas Publicas Municipales (Municipal Public Works Company) EPMB Empresas Publicas Municipales de Barranquilla (Barranquilla Municipal Public Works Company) FFDU Fondo Financiero de Desarrollo Urbano (Fund for Urban Development) INAS Instituto Nacional de Salud (National Institute of Health) INCOMEX Instituto Nacional de Comercio Exterior (National Institute for Foreign Trade) JNT Junta Nacional de Tarifas (National Tariff Board)  FOR OFFICIAL USE ONLY THE WORLU BANK WaSh1ngt0n, D.C. 20433 U.S.A Office of Director-General Operatloss Evaliation September 20, 1993 MEMORANDUMTO THE EXECUTIVE DIRECTORS AXP THE PRESIDENT SUBJECT: Project Completion Report on Colombia Barranguilla Water SuDDYl Pro1ect (Loan 2637-CO) Attached is the "Project Completion Report on Colombia - Barranquilla Water Supply Project (Loan 2637-CO)n prepared by the Latin America and the Caribbean Region. No Part II was prepared by the Borrower; comments received from the Guarantor are attached in a translated copy. The project was to restore the most deteriorated part of the water supply system of Barranquilla, Colombia's fourth largest city, located on the Atlantic coast. The US$24 million loan was also to help increase water supply coverage from 50t to 951 in five years, eliminate sewage overflows in downtown areas, re-establish door-to-door garbage collection, and improve the municipal utility's efficiency in finances, operations and maintenance. The disbursements vere suspended due to non-compliance with several Loan Agreement requirements and US$2.1 million were canceled. Several components were either not implemented (sewerage) or failed short of target (water supply coverage at only 651 in 1990). The institutional strengthening component was the most startling failure. The municipal utility's responsibilities were awarded to a private cempany only recently. The PCR gives a fair assessment of the principal impediments to successful project implementation. No reliable reassessment of economic or financial returns could be provided due to the uncertainties still affecting the "enabling environment". Overall, the project is rated as unsatisfactory, its sustainability as uncertain, and its institutional impact as negligible. This documnt has a restricted distribution and may be used by recipients rly in the performance of their official duties. Its contents may not otherwise be disclosed uithout Wortd Bank uthorization.  FOR OMCIAL uSE ONLY COLOMBIA BARRANQUILLA WATER SUPPLY PROJECT (LOAN 2637-CO) PROJECT COMPLETION REPORT PageNog Preface . .. .......... . i . .. ................... Evaluation Surunary .............................-........ ii PRO J ECT REVIEW FROM BANK'S PERSPECT_ VE .......................................1 1. Project Identification ..............................1 2. Background ..............................1 3. Project Objectives and Description ..............................4 4. Project Design and Organization ..............................S 5. Project Implementation ..............................7 6. Project Results ............................. 11 7. Projec Sustainability ............................. 12 8. Bank Performance and Lessons Learned ............................. 13 !0. Borrower Performance and Lessons Learned ............................. 14 10. Bank-Borrower Relations ............................. 15 11. Performance of Consultants and Contractors .............................I S 12. Project Documentation Data ............................. 16 11. PJKO.ECE REVIMW EOM BORROWER'S PERSPECTIVE Comments received from the Guarantor April 23, 1993 ............. 17 m. STATISTICAL INFORMATION ..................... ............................. 20 1. Related Bank Loans Prior to the Project ...........................-----. 20 2. Project Timetable .......................... . ,20 3. Loan Disbursement ....................... 20 4. Project Implementation ................. 21 5. Project Cost and Financing ................. 22 6. Project Results .................. -23 7. Status of Loan Covenants ................. 24 8. Use of Bank Resources ................... 45 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authoriation.  COLOMBIA PROJECr COMPLELION RIEPORT BARRANQURLA WATER SUPPLY PROJECr (Loan 2637-CO) Ihis is the Project Completion Report (PCR) on the Barranquilla Water Supply Project in Colombia financed under Loan 2637-CO for US$24.0 million. Loan 2637-CO was approved on November 26, 1985, and the project was carried out from 1986 to 1991. T'he original closing date was December 31, 1991. Because of prolonged non-compliance with various loan covenants, loan disbursements were suspended on June 19, 1991, the suspension was not lifted because of continued non-compliance, and the undisbursed balance of US$2.1 million was canceled on November 8, 1991. 91.2% of the loan was disbursed, with the final disbursement made on August 8, 1991. The PCR was prepared by the Infrastructure Division, Country Department Im, of the Latin America and the Caribbean Regional Office. It is based on the Staff Appraisal Report, the Loan Documents, information gleaned from the project files, materials obtained during the project completion mission, and discussions with Bank staff and with consultants who were associated with the project This report contains Parts I and HI prepared by the Bank Since the Borrower has been divestd of responsibilities for water supply, sewerage and solid waste services, with the creation of a new company with private sector participation to be responsible for these services, and there is no continuity of the Borrower's staff, Part II cannot be prepared by the client. There has been no access possible to the Borrower's records despite repeated efforts. Comments on thi report have been requested from the Guarantor, and the comments received are attached in a translated copy.  -I COLOMBIA PROJECr COMPLTInON REPORT BARRANQUILLA WATER SUPPLY PROJECr (LAn 2637-CO) EVALUATION SUMMARY A. OBECIVES. The project objectives were to: (i) restore the most deteriorated parts of the water supply system and expand service to low- income neighborhoods in the south-western part of the city so as to increase water supply coverage from 50Wo to about 95% by 1990;, (ii) eliminate sewage overflows in some key downtown areas through the expansion of collector capacity, (iii) re-establish regular door-to- door solid waste collection services to about 50% of the city's area; (iv) improve EPMB's financial performance such that the company would be able to finance by 1989 about one- third of its investment needs from internal cash generation; (v) increase EPMB's operating efficiency; (vi) establish an adequate capacity for maintenance of EPMB's equipment and facilities. L IMPLEMENTAT1ON. (i) The loan was signed on December 16, 1985 and became effective four months later, April 30, 1986. The closing date was 't for December 31, 1991. Due to the notable non-compliance with various clause4 -'ie Loan Agreement the Bank decided to suspend disbursements on June 19,1991, and subsequently canceled the loan account and the remaining undisbursed balance of US$2,097,125.85 on November 8, 1991. (ii) From the start of the project, it was beset by problems due partly to the lack of funding, given the difficult financial situation of EPMB. Despite these problems, the contracting of the civil works for the water supply system and the majority of the tenders for supply of equipment were carried out. During the whole of the project's implementation its performance depended directly on the General Manager of EPMB and the Mayor of the city, both of whom, in spite of various changes of incumbents, were subject to significant local political influence. In general, the procurement for equipment and materials was carried out, but the majority of the equipment and materials were not installed/in use by the date of loan cancellation. 91% of the loan was disbursed, but the majority of the planned works were not carried out to the stage of being fully functional as intended.  - iii - (iii) The sewerage program to have been crried out towards the end of the project and the water service improvement component.in the south-western zone were not executed. (iv) The acquisition of the solid-waste collection equipment was carried out. Shortly after receiving this equipment, EPMB contracted the solid-waste collection of the most profitable zones with private contractors on very unfavorable terms. (v) The component of institutional strengthening included the acquisition of vehicles, and the contracting of consullmnts for designing the institutional strengthening. The contract was awarded initially to a French-Colombian consortium, whose efforts were considered unsatisfactozy by the Borrower. Consequently, the contract was canceled after the diagnostic phase was finishec. In agreement with the Bank, EPMB contracted a consultant, who had participated in the supervisory missions for this component, to direct a group of professionals and continue with this consutancy for institutional strengthening. The consultants designed new accounting, management information, inventoty management and commercial systems to the point of being ready for implementation. The programs and systems developed were never implemented because there was opposition Erom the union, in particular to the accounting system. The technical assistance unit was disbanded just when the systems were ready to be implemented. (vi) The increase of wo.-Idng capital financed under the Bank loan was totally absorbed by the acquisition of spare parts and chemicals for the treatment plants, and hence served its objective of giving EPMB an initial "shot in the arm". PROJECr RESULTS. (i) The project aimed at increasing the coverage of the water supply service to 95% of the population in 1990. However, because of failure to cany out the expansion program in the souti-western zone, 35% of the city population remained in 1990 without improved access to drinldng water. (ii) The works carried out in the water distnbution system and the treatment plants allowed the city to maintain to some extent its water supply service and prevent an even more chaotic situation than the eventual result. (iii) Although the 50,000 new meters acquired to improve collection and to reduce the percentage of unaccounted for water were not installed, they should be a valuable contnrbution for the new water supply and sewerage company, which was created in 1991, with private sector participation. (iv) The elimination of overflow of the street drains in some of the principal areas of the city-center was not attained, as the sewerage component was not implemented. (v) The objective of establishing a solid-waste collection service for 50% of the population was reached, although waste disposal and its management were not improved, since the necessary studies were not carried out.  -iv- (vi) The objective of strengthening EPMB in management, administraticK and finances, was not ufil Public dissatisfaction became intense with the lack of access to water supply of important parts of the oity, poor maintenAance leading to serice interruptions and overflow of raw sewage in the city center, and disgust with the perceived high level of mis-management With the support of important private sector associations and the intervention of the national Govenment, a decision was taken to divest EPMB of responsibility for water supply, sewerage, and solid waste services, and create a new company with minority private shareholding (but u jority voice on the Board) to be responsible for these services in Barranquilla. The new structure relies considerably on sub-contracting with the private sector. Meanwhile, the national Goverment is meeting debt service obligations to the Bank. (vii) The benefits expected at the time ef appraisal were only pailly obtained, through some rehabilitation of the water supply network, water treatment plants and storage tanks, and establishment of solid waste collection services. D. SUSW.'AINABUITY. The lemoval from EPMB of water supply and sewerage servike responsibilities was the culminating reflection of the unviability of the institutional framework. The eventual increase of servce coverage, efficiency and quality of the water supply, sewerage, and solid waste management services will depend crucially on thl viability of the new institutional structure and its freedom from politization. E. LESSONS LEARNED. fi) The main lesson of this project is the fundamental importance of an "enabling environmente for institutional performance. Efforts at utility rehabilitation/reform will fail if this environment is counter-productive. The Barranquilla project is an extreme manifestation of a rather common phenomenon which explains the poor performance of numerous water supply/sanitation and other inastructure projects. EPMB seemed to have a formal autonomous identity and clearly, several managers, staf