Peru - Water Utility Management : Beyond the Reform

Document of The World Bank FOR OFFICIAL USE ONLY CONFIDENTIAL Report No. 14539-PE SECTOR REPORT PERU WATER UTILITY MANAGEMENT: BEYOND THE REFORM June 28, 1995 Latin America and the Carribbean Regional Office Environment and Urban Development Division Country Department MF L ACRONYMS AND ABBREVIATIONS BOT Build-Operate-lansfer, form of private sector participation CEPRI-SEDAPAL SEDAPAL's Privatization Committee CONADE Corporacion Nacional de Desarrollo, government's holding company for state-owned enterprises COOPOP Cooperacion Popular COPRI Inter-Ministerial Committee for Privatization CORDECALLAO Corporacion de Desarrollo de Callao CORDELIMA Corporacion de Desarrollo de Lima CORTAPA Former Tariff-Setting Board CTAR Consejos hansitorios de Administracion Regional ENACE Empresa Nacional de Edificaciones FONCODES Fondo Nacional de Compensacion y Desarrollo Social FONAVI Fondo Nacional de Vivienda GDP Gross Domestic Product GOP Government of Peru IDB Inter-American Development Bank INABIF Instituto Nacional de Bienestar Familiar INADE Instituto Nacional de Desarrollo INFES Instituto Nacional de Infraestructura Educativa y de Salud led liten per capita per day MCF Muncipal Compensation Fund MEF Ministry of Economics and Finance MIPRE Ministry of the Presidency OSIFTEL Regulating Agency for the Telecommunication Sector PRASBA Programa de Alcantarillado y Saneamiento Basico PRONAA Programa Nacional de Asistencia Alimentaria PRONAP Programa Nacional de Agua Potable and Alcantarillado PSP Private sector participation SEDAPAL Servicio de Agua Potable y Alcantarillado de Lima (Lima Water and Sewerage Service Company) SENAPA Superintendencia Nacional de Agua Potable y Alcantarillado SNSS Superintendencia Nacional de Servicios de Saniamiento (new regulatory agency for the water and sanitation sector) -i- PERU WATER UTILITY MANAGEMENT:1 BEYOND THE REFORM SECIOR REPORT TABLE OF CONTENTS. TABLE OF CONTENIS......................................................................................i EXECUTIVE SUMARY..................................................................................iii 1. INTRODUCTION A. Recent Reforms: Are They Enough? ......................................................... 1 B. Much Room For Improvement................................................................. 1 2. SECIOR ISSUES A. Institutions and Regulation: The Legacy of Centralization...............................7 B. Financing Investments Without A Policy Framework.....................................13 3. SECIOR STRATEGY A. Further Reform of the Institutional and Regulatory Framework........................22 B. Improving Efficiency Of Infrastructure Finance ...........................................28 C. A Medium-Term Investment Plan.............................................................31 This report is based on the findings of an appraisal mission that visited Peru in Fbruary 1995. The mission comprised of Messrs./Mmes. Abel Mcjfa, Caroline van den Berg (LA3EU), Thelma Triche (TWUWS) and Luz Maria Gonzalez (Consultant). Vnceslao Urbina, Nely Nunez, Juan Carlos Barandiaran, Ana Mendoza (PRONAP) comprised the counterpart team in Peru. Guillerno Yepes and Augusta Dianderas (TWUW5) are peer reviewers. The sector Division Chief, Projects Advisor, and Department Director are Messrs. Eugene McCarthy, Robert Crown, and Yoshiaki Abe. - ii - BIBLIOGRAPHY ............................................................................................35 ANNEXES Annex 1. Financial Viability and Company Size ...................................................37 Annex 2. Performance of Water Supply and Sanitation Companies............................41 Annex 3. Sources of Investment Resources .........................................................47 Annex 4. Assumptions for Financial Projections ..................................................57 STATISTICAL APPENDIX ...............................................................................73 MAPS IBRD 27000 Urbanization by Department, 1993 .....................................................87 IBRD 27001 Urban Water Supply Coverage by Department, 1993 ...............................88 IBRD 27002 Urban Sanitation Coverage by Department, 1993....................................89 - iii - EXECUTIVE SUMMARY The Government initiated a structural reform program in 1990, that has had its impact on the performance of the urban water and sanitation sector. The core of this reform process was the recognition of the new role of the central government as a regulator rather than a service provider. Although much progress has been made in reforming the water and sanitation sector, further adjustments are needed to increase the efficiency of the water utilities in the provision of services. This paper reviews the institutional, regulatory and financial issues that are still prevailing in the sector and hence proposes a strategy to resolve them. It argues that there is a danger of drifting back to the perverse policies of the past, if the reform process is not further deepened and accelerated. The Issues The poor financial and operational performance of the urban water utilities can be partly attributed to lack of resources, due to the rapid rate of urbanization, and the low incomes of urban households. Yet, the poor performance is mainly due to the physical constraints and perverse incentives that the urban water and sanitation sector still faces. Although a new institutional and regulatory framework has been set up, the old framework has not been accordingly dismantled with the ensuing result that outdated institutions and myriad decrees and directives accumulated in many years of government control are still burdening the sector. In the new framework the role of the central government is limited to that of regulator. A regulating agency, the Superintendencia Nacional de Servicios de Sanewmiento (SNSS) has been established, but up to date progress in implementing the regulatory functions has been very slow. 'Ib increase the efficiency of SNSS, practical regulation has to be defined. SNSS is currently struggling to define its mandate, that calls also for the broad responsibility for sector development. The double role of SNSS as a regulator and promoter of service improvements in the water and sanitation sector seems to have resulted in loss of focus from its core function as a regulator. Additionally, due to the lack of capacity for sector policy formulation in MIPRE, SNSS has assumed a lead role in policy formulation. Yet, SNSS' mandate is to regulate, and it is therefore not consistent with the agency assuming a role in policy formulation. In addition, the lack of autonomy of SNSS and the lack of experience of SNSS' staff in regulating the sector, has further added to the slow progress in implementing regulatory functions. In 1990 municipal governments assumed responsibility for the provision of services. At present district municipalities own the water companies, while provincial municipalities are responsible for the provision of services. This division of responsibilities can easily give rise to conflicts. The efficiency of water utilities is adversely affected by disregard for financial viability and economies of scale of water and sanitation operations, the absence of a management culture based on efficiency incentives and political interference from local governments in the daily management of water companies. - iv - The policy framework for financing water and sanitation investments still remains very poor. The financial performance of the water utilities is still very weak despite the introduction of commercial incentives in the sector. Political interference in the utilities' daily management decisions, poor management and inefficient operations prevent the water utilities from generating sufficient internal funds to finance their investment plans. In addition, municipalities have inadequate funds to finance the sector, because the transfer of functional sector responsibilities to the local governments has not been matched by a comparable increase in their financial resources. As a consequence, almost all sector investments are still financed through the central government. The concentration of public expenditures at the central level is aggravated by the dominating role of MIPRE, which has a virtual monopoly on financing investments in basic infrastructure. The multitude of financing mechanisms makes it difficult to avoid duplication, because many of them overlap. Hence, coordination of investment finance is a major issue. If the domestic capital market is further developed, private financing of infrastructure investment could become a more important source of future funding. The Strategy The proposed strategy is designed to deepen and accelerate the on-going reform. The strategy is centered around three elements: fostering the efficient functioning of the SNSS as the cornerstone of the regulatory regime; accelerating deregulation of sector institutions which have been burdened by outdated institutions and-directives accumulated in the years of government control; and promoting a transparent and accountable system for the use of public investment funds with clear efficiency objectives and poverty targets. The efficient functioning of SNSS would require a further clarification and strengthening of the role of the regulatory agency through establishing its financial and political autonomy; defining transparent and clear regulatory rules by finding the proper mix of competition and regulation, and implementing efficient and simple tariff regulation; ensuring the accountability of regulatory decisionmaking; and guaranteeing a secure appeal procedure. The second element of the strategy mix asks for accelerating deregulation of sector institutions by dismantling the old regulatory regime. Elimination of this regime will increase the autonomy and efficiency of the water companies. Autonomy of the water utilities has to be further improved by clearly delineating the roles of the various levels of oversight to eliminate political interference in daily management. Acceleration of deregulation should also include support for private sector participation (PSP), that so far has only been focused on SEDAPAL. The central government should initiate a concerted effort to promote PSP, including the promotion of capital market development. The third element would promote a transparent and accountable system for the use of public investment funds with clear efficiency objectives and poverty targets. This element would require the need for setting up a permanent institutional capacity for sector planning and formulation in order to ensure an efficient and equitable allocation of public investment funds. This agency should be supplemented by a unit within MEF to coordinate external finance. Transparent criteria for the use of public investment funds need to be developed. Sector investments should be financed through full cost recovery. Subsidies for the provision of water and sanitation, however, are likely to be necessary at least in the short-run. Hence, a transparent subsidy system should be established, either through direct income or sector subsidies. In case of full cost recovery, investments will be financed through loans. If subsidies are required, investments will be financed through a combination of loans and grants. Yet, the current main financing mechanisms for the sector, FONAVI (loans) and FONCODES (grants), need to be adjusted in order to ensure their long-term sustainability. 7[b further enhance transparency, water utilities should develop the capacity to conduct a proper technical, financial, economic and environmental evaluation of the projects so that least-cost investment options are selected. -1- Chapter 1: INTRODUCTION A. Recent Reforms: Are They Enough? 1. The legal and institutional environment of water utilities in Peru has changed dramatically over the past five years. In 1990 the responsibility for the provision of water and sewerage services was transferred from the center to local governments. In December 1992 the government created a new regulatory agency for the sector, the Superntendencia Nacional de Servicios de Saneamiento (SNSS). Under the 1993 Constitution, municipalities got the authority to organize, regulate, and administer local public services. In July 1994 the Ley Generl de Servicios de Saneamiento (Water and Sanitation Services Law) was enacted, and a reglamento, the accompanying regulations to the Law, are currently under preparation. A draft W%ter Resources Law is currently before Congress. 2. Although much progress has been made in the structural reform of the water and sanitation sector, further adjustments are required. This report assesses the impact of the reform process on the performance of water utilities. A strategy to consolidate the reforms is proposed, supplemented by a medium-term investment plan. Realistic investment scenarios are presented, showing what service levels could be achieved with the recommended sector strategy. 3. For the past three years the Bank has engaged in an active policy dialogue with the Peruvian authorities regarding the reform of the water and sanitation sector, including support for the ongoing process of attracting private sector participation to a long-term concession contract for Lima's water utility. This report has been prepared with strong participation of the Government of Peru and the Inter-American Development Bank (IDB). PRONAP, the project implementation unit of IDB, prepared the basic documents used for the assessment of the water utilities and the analysis of sector issues. 4. The report focuses on the institutional, regulatory, and financial issues identified as the most critical during a May 1994 seminar with representatives of the central government, municipalities, water supply companies, and major donors. The report concentrates on the urban segment of the sector; communities with populations exceeding 2,000 are considered urban. B. Much Room For Improvement 5. Socioeconomic seting. Peru's population in 1993 was 22.7 million, growing at an annual rate of 2 percent. Although about 70 percent of the population lives in urban centers with more than 2,000 inhabitants, the urban population is unevenly distributed. Nearly 6.4 million people (about 40 percent of the total urban population) lives in the Lima metropolitan area. Meanwhile, Peru's second- and third-largest cities, Arequipa and Trujillo, have populations of 620,000 and 510,000, respectively. By 2010 the country's total population is projected to grow to almost 31 million, of which 22 million will live in urban areas. -2- 6. Investment levels. Economic policies during the Garcia administration (1985-89) initially induced economic growth but eventually generated large deficits, created hyperinflation, and aggravated the misallocation of investment resources. In addition, large- scale government interventions in the economy resulted in inefficient public enterprises and inadequate infrastructure development. During the 1980s average investment in the water supply and sanitation sector was only 0.10 percent of GDP, resulting in a sharp decline of service quality. In mid-1990 the Fujimori administration introduced its macroeconomic stabilization and structural reform program. Since then inflation has been brought under control and economic growth has resumed. Public investment has increased, and the share of investment in water and sanitation rose to 0.49 percent of GDP in 1993. 7. Health implications. Living conditions have worsened dramatically since the 1980s due to rapidly declining per capita incomes and cuts in social spending. Real per capita income declined by 28 percent between 1981 and 1993. A 1994 survey found that almost half the population was classified as poor, of which 41 percent was considered extremely poor. And even these figures could underestimate the extent of poverty, since the country's poorest regions were not included in the survey.' 8. The decline in per capita income has had an adverse impact on the health status of the population. A major cause of morbidity and mortality in Peru are waterborne and water-related diseases-the country has the highest incidence of diarrhea in Latin America.2 Census data reveal that the number of episodes of diarrhea for children under 5 years old is 8.6 a year. Since 1981 cases of morbidity associated with waterborne diseases have been increasing rapidly (table 1.1). The medical costs and lost working days that result from waterborne disease are substantial. A 1991 study carried out in Lima's pueblos jovenes estimated these costs at US$ 13 per capita per year. Thble 1.1 Morbidity from diseases associated with water and sanitation as % of total morbidity Type of disease 1981 1991 1993 Diarrhea 21.9% 16.6% 16.2% Viral hepatitis 1.6% 0.2% 0.4% Other salmonella infections 0.9% 0.2% 0.2% Shigelosis 0.9% 0.3% 0.3% Amoebiasis 0.5% 0.3% 0.2% Cholera 0.0% 27.1% 9.2% Total waterborne diseases as a % of total diseases 25.7% 44.8% 26.6% Number of cases of waterborne diseases per 1,000 inhabitants 20.9 30.3 25.1 Source: Ministerio de la Presidencia/PRONAP, Estudio Sectorial - Sector de Sancamiento, Lima, March 1995 1The Living Standard Survey did not include a number of departments in the Rural Sierra (Apurimac, Ayacucho and Huancavelica) , a number of urban areas in the Costa (Ancash, Ica and Lima), and the departments in the Sciva. 2 Data based on census of households: OPS/OMS, September 1991. 3 Sheila V*bb and Associates, "WAterborne Diseases in Peru," Vrking Paper 959, Wrid Bank, %hshington D.C., 1992. -3- 9. Infant mortality in Peru averaged 58.3 per 1,000 live births in 1993. This figure does not, however, reveal large regional disparities. In Huancavelica infant mortality is 106.6 per 1,000 live births, compared with 22.9 in Callao. Vterborne and water-related disease are a major cause of the high infant mortality rate. A regression analysis between access to piped water (house connections and standpipes), access to sanitation, and infant mortality based on departmental data showed a strong negative correlation between infant mortality and access to water supply or sanitation: infant mortality rates were lower in areas with higher piped-water supply or sewerage coverage. The regression also shows that sanitation coverage can explain changes in infant mortality better than water supply coverage (Statistical Appendix). 10. Voter resources. Peru's water resources are very unevenly distributed. The sparsely inhabited East Andes have ample water resources, yet the coastal areas-where most of the country's population lives - receive less than 15 millimeters of annual rainfall. In 1993 the estimated average flow of surface water was 51,200 n3 per second, of which only 2 percent flows to the Pacific basins. Ibtal water demand in 1993 amounted to 824 m' per second, of which about 75 percent was diverted to the coastal areas. Most of this water is claimed by agriculture (92 percent); the rest is used for municipal water supply. The problem of scarce water resources in the coastal areas is aggravated by the strong seasonality of river flows in these areas. 11. Groundwater resources have been investigated less systematically. It is estimated that 85 m' per second of groundwater reserves can be safely extracted in the coastal areas. Yet groundwater resources in the coastal areas are particularly vulnerable to overexploitation. As a result of uncontrolled access to aquifers, these areas have suffered from increasing seawater intrusion. 12. Ib improve efficiency in the use of water resources, the government has presented Congress with new legislation modeled after the 1981 Chilean water code. Under the proposed law water users would be given property rights to water use without charge. Rights to new or unallocated surface water would be distributed through public auction. These rights may be traded at freely negotiated prices provided that the trade would not reduce water availability to others and there is enough water to maintain a minimum ecological flow to cities and towns. The law also prohibits altering water quality to the detriment of flora and fauna. But rather than proposing specific sanctions and fines, the law defers to the Environmental Code and Environmental Authority to set and enforce water quality standards. In contrast to the current law, the new rights do not have to be used for any specific purpose: there is no priority among water rights for different purposes-including municipal water supply-and water rights are separate from land rights for both surface and groundwater. Groundwater rights require ownership of the land on which a well is to be built, but the availability of the requested volume will be established by the Watershed Director. 13. Wer pollution. The major source of water pollution is uncontrolled mining activities. Although legislation has been enacted to control mining pollution, little has done to mitigate the impact of mining on water quality. Rapid urbanization and industrial development rates are another source of water pollution. The inappropriate management of wastewater and solid -4- waste by municipalities, particularly in the pueblos jovenes, also has contributed significantly to water pollution problems. 14. Inadequate sewage disposal has had an adverse impact on public health. Uncontrolled mining and industrial activities have resulted in the dumping of heavy metals such as arsenic, lead, and copper in water bodies that are subsequently used to produce drinking water. The Rimac river, the major source of water supply for the Lima metropolitan area, is heavily polluted with heavy metals from mining dumps in the upper basin. The indiscriminate discharge of raw sewage in rivers and other water bodies has resulted in a serious deterioration of water quality, resulting in higher incidences of waterbome and water-related diseases, euthrophication of surface water, and increasing salinity of groundwater. Because of the scarcity of water in the coastal areas, irrigation with wastewater has become increasingly common. A study carried out by the Agricultural University revealed that about 5 percent of Peru's cultivated area is irrigated with heavily contaminated water (more than 1,000 fecal coliforms per 100 ml). 15. Water pollution regulation and enforcement is fragmented due to the sectoral approach to environmental management. The Ministries of Health, Agriculture, Industry, Mining, and Energy all have responsibilities for policy formulation and enforcement with regard to water pollution control, but there is little coordinktion among the ministries. Environmental functions within the water and sanitation sector have not been established. The lack of a cross-sectoral approach to environmental management has contributed to the alarming deterioration of water quality. Coverage and Service Quality 16. Vbier supply. According to census data, Peru made major progress in improving access to piped water supply between 1981 and 1993. Water supply coverage increased from 49.1 percent in 1981 to 59.6 percent in 1993. About 4.8 million people gained access to piped water. This progress, however, does not reflect the quality of the service. The overall quality of service provision (measured by reliability and quality) has declined substantially over the past decade. Per capita investment during the past decade was only US$ 59, mostly for expansion of already deteriorated water distribution networks. Maintenance was grossly neglected. 17. Water supply coverage in urban areas increased from 77.1 percent in 1981 to 82.3 percent in 1993, showing that growth in urban water supply coverage was lower than that of the sector as a whole (figure 1.1). Large migration into the cities, spurred by increasing poverty and terrorism, and the decline in social spending made it increasingly difficult for the central and local governments to keep up with the high urbanization rate. -5- Fgure 1.1 Water Supply Coverage, 1993 Wabr Supply Coverage 1993 Flrcitage of Rpulation Covered 0% 20% 40% 60% 60% Ill House conn ections - Standpipes Wh Vendor Wter Rivers MN Other IRwurban 11rural Source: Ministcrio de Is Psidencia/ PRONAP, Estudio Sectorial - Sector Sanamiento, Lima, March 1995. 18. There are large regional differences in the provision of urban piped water. Thena's urban coverage rate is 93 percent, whereas in Ucayali only 44 percent of the urban population has access to piped water. Moreover, big differences exist between the level of water services to which the urban population has access. In Pasco, more than 40 percent of the urban population with access to water service rely on standpipes, compared with less than 10 percent in Lima. 19. Based on data from fourteen water companies, including SEDAPAL, the average weighted production of water was 356 Icd in 1994.* However, actual water consumption is substantially lower because of high levels of unaccounted-for water (UFW). Poor maintenance, operational inefficiencies, and the lack of a commercial orientation within the water utilities are the main causes of these losses. An IDB-funded study revealed that the average weighted UFW was 41 percent of total water production, indicating that the actual water billed is only 212 lcd. 20. Vter rationing is common in Peru. Less than 8 percent of the population served had more than twenty hours of service a day, whereas 12 percent received water less than eleven hours a day. The poor suffer the most from rationing. In Trujillo, some pueblos jovenes receive water only every other day. The unreliability of water services has resulted in involuntary self- provision as industries and households have been forced to install pumps and storage tanks at high costss. In 1994 the total rationing costs in Lima were calculated at US$ 0.38 per m M consumed. These costs have to be added to the average current water tariff of US$ 0.34 per to determine the total cost of water in the metropolitan area. 4 The fourteen water companies in this investigation are Emusap-Abancay, Seda-Chimbote, Sedahuancayo, Sedajuliaca, Sedaloreto, Sedapiura. Sedapuno, Sedaqosqo, Emaps-tacna, Emapa-tumbes, Sedalib, Sedapar, Emapal, and Sedapal. Staff Appraisal Report Peru - Lima VAter Rehabilitation and Management Project. Washington D.C., November 1994: Annex 9. -6- 21. The quality of water supply services varies widely across the country. The bacteriological quality of drinking water deteriorated in the past decade, especially in small and medium-size cities, due to lack of maintenance, lack of chemicals and laboratories to control the water treatment process, inappropriate water supply technology choices,' and the absence of a national water quality program. According to the Ministry of Health, only 45 percent of the total urban water production is in accordance with bacteriological quality standards. In small cities, only 21 percent of the bacteriological samples are conform to standards. 22. Sanitaion. Based on data from the two latest census, access to sanitation services increased from 44.1 percent in 1981 to 63.5 percent in 1993. In urban areas sanitation coverage rose to 80.2 percent in 1993, whereas in the rural areas 24.7 percent of the population had access to sanitation (figure 1.2). These figures indicate enormous progress in coverage, but they also reflect large rural-urban disparities. Yet, there are also large regional differences in the provision of urban sanitation services. In Huancavelica only 30 percent of the urban population has access to sanitation, whereas in Lima and Callao the coverage rate is close to 90 percent. 23. Only 27 percent of the wastewater collected in 1993 received some kind of treatment before final disposal. In Lima the situation is even worse--only 5 percent of the collected sewage received any treatment before final disposal; the remainder is dumped into the ocean. Moreover, sanitation coverage lagged when compared with water supply, particular in densely populated areas such as the pueblos jovenes, which aggravates the deterioration of environmental and public health conditions. Figure 1.2 Sanitation Coverage, 1993 Sanitation Coverage Percertage of population covered 0% 20% 40% 60% 80% Sewerage Lstdnes Other No serAcs Source: Ministerio de la Presidencia/ PRONAP, Estudio Sectorial - Sector Sancamniento, Lima, March 1995 6 In the study prepared by PRONAP, it is stated that a pilot study in Junin showed that 88 percent of the wAter systems with treatment plants in small size cities delivered contaminated wter (more than 10 focal coliforms per 100 ml), compared with 67 percent of the pumped systems and 34 percent of the gravity systems. -7- Chapter 2: SECTOR ISSUES A. Institutions and Regulation: The Legacy of Centralization 24. The institutional environment of the water and sanitation sector is still evolving. In 1992 the Ministry of the Presidency assumed policy oversight of the sector, and the Superintendency of Sanitary Services (SNSS) was created to regulate services and to promote the evolution of efficient and financially viable water companies. Since then, policies favoring the financial viability and autonomy of water companies have been developed. A general statement of the government's new orientation is embodied in the 1994 Water and Sanitation Services Law (Ley General de Servicios de Sanemento). This law defines institutional responsibilities for service provision and regulation; establishes transparency, financial viability, and social equity as the basic principles to govern tariff-setting; and calls for service in most urban areas to be provided by autonomous, commercially viable water companies subject to Peruvian company law. Finally, it establishes a framework for private sector participation. 25. While the new legal framework has laid a reasonable foundation for the future development of the sector, a number of challenges remain in interpreting and implementing the new laws. In a few cases the new laws may need to be complemented by further refinements in the legal framework. These challenges are explored in the following discussion of the key issues and actors in the sector, and how they interact. KMaj la les : A Road Map Iack Of tapaity or.-sctor policy fornulation tlo progress in huaplessenting regulatory Elnctions SPractical togulatory policy *Coriflicting roles: promoter of services and regulator Undlear mandate of the regulatory agency *Auitonomy of regulatory lastitutions --Culture and skills ofregulators The burden' of fQr . ..egultions uThe persistence of inefficient regulations Prverse impacts on water utilities * Ownere? o assets separated from operatioa easibility Political appointment of nagers * eluctancet rivatization of utilites -8- Lack of capacity for sector policy formulation 26. Policymaking for the water supply and sewerage sector is vested in the Vice-Ministry of Infrastructure within the Ministry of the Presidency (MIPRE). In the absence of a formally established technical staff for water supply matters in MIPRE, the Progmma Nacional de Agua Iorable y Alcanarillado (PRONAP), financed by IDB, has assumed responsibility for sector policy formulation.7 For the past two years PRONAP has provided the resources and oversight for drafting new sector laws and a number of complementary studies, and managed setting up SNSS. While PRONAP has thus made an important contribution to the reform process, it is not a permanent body, and its mandate is not to make policy for the sector. The lack of permanent staff for water supply and sewerage policy analysis in MIPRE means, that there is little institutional capacity to continue this strategy work or to coordinate central policy regarding investment finance. Slow progress in implementing regulatory functions 27. Parical regulation. Water and sanitation services are a natural monopoly, therefore regulation is needed to protect customers' interests. Regulation should focus on creating incentives to increase efficiency by setting prices, supervising performance and operational and investment expenditures, and specifying service standards. Water tariff regulation is therefore at the heart of water utility regulation, given that water tariffs reflect an assumed quality of service. Among the choices to be made in defining rate regulation are the use of cost (rate-of- return) regulation or revenue (incentive) regulation, the correct level of initial tariffs, and the informational requirements for each rate regulation approach. 28. Conlicting roles. SNSS, which was created in 1992 to regulate water services and to promote efficiency, reports to MIPRE. SNSS faces a huge challenge in its double role of regulator and promoter of service improvements. As regulator, it is responsible for enforcing technical and service standards; establishing tariff formulas and monitoring their application; establishing rules for the creation, merger, or dissolution of water companies; verifying that water service operators are established as, or transformed into, autonomous companies; and encouraging private sector participation. Given the magnitude of the changes in the institutional and legal environment, SNSS must also provide technical assistance to the water companies to enable them to adapt to the new arrangements. By law, it also plays a key role in reviewing existing standards and regulations and proposing changes or new regulations for approval by MIPRE. 29. Unclear mandate of the regulatory agency. The issues that SNSS faces will have to be addressed if the agency is to carry out its regulatory mandate. SNSS is currently struggling to define its mandate, which calls for it to promote sector development. Because of this rather ' In addition to funding this central policy work, the US $140 million IDB project provides finance for institutional strengthening and rehabilitation works for ten water companies. For example, even though the two major sources of domestic finance for the sector (FONCODES and PONAVI) are also administered by MIPRE, their investment fiance practices are inconsistent with the policy directions articulated in the new sector law. -9- vague mandate, SNSS seems to have lost its focus. In the absence of a strong capacity in MIPRE, SNSS has assumed a role in policy formulation. But SNSS's mandate is to regulate, and therefore excludes the agency from assuming a role in policy formulation. Regardless, SNSS has made little progress in implementing its regulatory functions.9 30. Autonomy of regulatory institutions. The dependent position of SNSS within MIPRE is another reason for concern. It is not clear whether SNSS will be able to perform its regulatory functions adequately if it lacks autonomy. Other regulatory agencies, such as OSIIEL (telecommunications), have been placed outside the sector so that they can regulate the sector independently of the sector institutions. 31. Cultur and skills of regulators. Another issue concerns the institutional mentality of SNSS. SNSS's current staff, most of whom were transferred from the former SENAPA, are capable and committed, but they have no experience in implementing a regulatory framework that relies on managerial autonomy and carefully constructed economic incentives. This has resulted in a lack of trust between the management of the local water companies and SNSS. The water companies perceive SNSS not as an agency that serves their needs, but as another central government agency that is taxing and controlling them. SNSS increases these tensions by continuing to treat the utilities like the subsidiaries they were under the SENAPA system. 32. FUnding the regulatory system. SNSS is currently financed through a 2 percent assessment on water company revenues, which is a significant drain on utilities' finances. This budget will increase substantially if the productivity of the sector improves. Hence, it will be necessary to review the financing structure of SNSS periodically to ensure that it remains focused on the essentials of regulation. The burden of former regulations 33. The persistence of inefficient regulation. The Corporacion Nacional de Desarrollo (CONADE) is the government's holding company for all centrally owned state enterprises. It also regulates procurement by state agencies, as well as recruitment and salaries, and in these matters its jurisdiction extends to municipal companies. Thus water companies-which are supposed to be autonomous-cannot even replace worn-out vehicles without CONADE's consent, nor can they recruit badly needed professional staff at competitive salaries. No consideration seems to have been given to the need to eliminate CONADE's role in light of the government's wide-ranging privatization and decentralization programs. CONADE's controls conflict with the new regulatory framework for water services based on the principles of managerial autonomy and, to the extent possible, the free play of market forces. 34. Perverse impacts in water utilities. Deficiencies in management and staffing have compounded the operational problems of the local water companies. Although the local companies are theoretically autonomous, they are burdened with regulations and restrictions SPant of this lack of progras could be explained by the absence of a regansento of the law that provide further details on SNSS' mandate detail and is currently being drafted. - 10- that prevent them for operating efficiently. Procurement procedures, annual budgets, personnel policies, and salary structures are tightly regulated by CONADE. The debilitating effect of CONADE's regulation is shown in the overstaffing of utilities. The water utilities are especially qualitatively overstaffed'o. Data for municipal water companies (excluding Sedapal, Sedapar, and Sedalib) show that low-skilled workers make up 89 percent of total staff, while only 8 percent of the staff are professionals. Noncompetitive wages have made it difficult for local companies to attract qualified staff. This employment structure is likely to affect the quality of the decisionmaking process, for example, with regard to investment planning. Decentralization creates its own problems 35. Ownership of assets sepamted from operational responsibility. The 1993 Constitution asserts that local governments are responsible for the provision of water and sanitation services. The W%ter and Sanitation Services Law affirmed this responsibility, but went further than previous decrees and laws in specifying that this responsibility lies with the provincial municipalities and extends to rural and urban areas. Yet the operational assets of the water companies are owned by district municipalities. As ownership and responsibility for service provision are separated among different levels of local government, conflicts arise easily. This situation is aggravated by the fact that the law does not address the question of how municipalities are to mobilize investment finance. Recent changes in the revenue-sharing agreements of the central government aggravate the situation, because most funds are directed to district municipalities. 36. Political appointment ofmanagers. The potential advantages of municipal water companies are that they provide input at the local level, so services are more likely to reflect local needs and willingness to pay. This arrangement also forces greater transparency and accountability. But the experience of the municipal companies shows that these advantages will not be fully realized unless the institutional framework protects the companies from political interference at the local level. Under arrangements that are currently in place, many water companies are autonomous in name only. Mayors, particularly provincial mayors, have in many instances usurped the responsibilities of the boards of directors in setting policy and influencing investment decisions. Directors, while they are often highly capable and respected individuals in the community, serve at the behest of the mayor. Whenever a new mayor takes office, new directors are appointed. This results in a lack of continuity on boards and a risk that important decisions may be influenced by short-term political considerations rather than by sound technical, financial, and economic judgment. The president of the board, in turn, often is involved in day-to-day management decisions that should be the responsibility of the general manager. Such arrangements make it difficult to hold managers accountable for the cost and quality of service and the financial performance of the company; they also make it unlikely that innovation and good management will be encouraged and rewarded. 1o In 1994, staff productivity was 4.4 workers per 1,000 connections compared to 3 to 4 workers per 1,000 connections for well-managed water companies in Latin-America. - 11 - 37. Disregantforfinancial viability and economies of scale. The issues that the water supply companies face center around their financial viability. The WAer and Sanitation Services Law specifies that larger operating entities should be organized as autonomous companies under Peruvian company law, and all operators are to be organized as functionally and administratively autonomous units. Organizational forms for the smaller units are to be specified in the reglamento. The law foresees the formation of companies that will serve more than one province. The reality since decentralization, however, shows an enormous fragmentation of water companies. The number of water companies and smaller operating sector units has expanded dramatically (table 2.1). By law, SNSS may require operators to interconnect their installations to ensure the technical and financial viability of services. Enforcement of the new tariff policies will undoubtedly go a long way toward encouraging small operating units to merge into more viable companies. Table 2.1 Entities Operating in the Water and Sanitation Sector EBefor orm After Reform Autonomous municipal water companies 15 36 Municipal operating units 185* More than 100 User groups Rs. 2,300 Refrs to municipalities that provided service through direct municipal operations or through cooperatives and other fmos of managemrent. 38. 'Ib be financially viable, a water and sewerage company usually must serve at least 50,000 users. A production cost function was estimated based on the data of fourteen water supply companies (using number of connections and per capita production as explaining variables). At an average revenue level of US$ 0.44 per m3 consumed, an average number of 10,000 connections (that is, average population coverage of 50,000 to 60,000) is needed to achieve full cost recovery (figure 2.1). For a more detailed account of the relationship between financial viability and system size, see annex 1. 39. Of the 188 provinces in Peru, only 46 have urban populations of greater than 50,000, yet these provinces account for about 86 percent of the urban population. These figures suggest that water companies in these provinces can become financially viable. For provinces with urban populations between 10,000 and 50,000, the formation of financially viable multi- province companies might be feasible; the feasibility of merged companies in areas with a low population density should be addressed in a later study. At present, 85 provinces have urban populations between 10,000 and 50,000; these provinces account for about 12 percent of the total urban population. Service in many rural areas and in the urban areas of sparsely populated provinces (57 provinces accounting for 2 percent of the total urban population) will probably not be financially viable for some time. During the transition, and particularly if the government intends to subsidize investments in areas where full cost recovery is not (yet) feasible, one of the big challenges facing SNSS is to devise mechanisms for encouraging - 12 - efficiency without adopting a heavy-handed approach which would undermine autonomy and ultimately be counterproductive. Figure 2.1: FInandal Viability and Company Size Cost of Water and Company Size 0.55 0.50 re 0.45 0.40 0.35 0.30 0.25 I 1,000 10.000 50,000 100,000 5 .000 1.000.000 conpany sie (no. of conriections) W Cost per WG iled * ARM U)S$ 0.30 A ARM UJS$ 0.40 Noe: * ARM is average revenues per billed m. 'Company size refir to the number of connections covered by a vWter utility, assuming five persons per connection. 40. Absence of a management culture based on efficiency incentives. The water companies have to develop a more effective management culture based on financial and managerial autonomy and accountability. Company statutes currently allow boards of directors to perform functions that should be the responsibility of the general manager and line managers. As a result, managers sometimes have little incentive to innovate or to fulfill their roles responsibly. Salaries for mid- and upper-level managers are inadequate. Changing these practices will require more than rewriting company statutes and eliminating restrictions on hiring, dismissal, and salaries. The changes are likely to evolve slowly, and only if innovative managers feel empowered by the new regulatory framework. Unfortunately, interviews with staff of water utilities, as well as within SNSS, revealed that there is a lack of trust between utilities' management and SNSS. Company managers were not involved in the early stages of the reform process. Ib its credit, SNSS initiated consultation in May 1994, when it organized a sector seminar to discuss the implications of the new law. Discussions at that forum demonstrated the need to keep communications open and to develop a firmer partnership. 41. Reluctance to private sector participation in utilities. Under the new law, a water company may contract private operators to carry out all or part of its functions. This has made it possible for COPRI, the government's privatization committee, to move forward in arranging a - 13 - long-term concession for water and sewerage services in Lima. A special committee, CEPRI- SEDAPAL, was established to formulate a strategy and to manage the competitive selection process. As of August 1994, three consortia were prequalified. Bidding documents were sent to prequalified firms in November 1994, and bids are expected by August 1995. Under the terms of the proposed concession, the private operator would be responsible for all aspects of water and sewerage services in the Lima metropolitan area (except the development of new water sources). Specific targets for improvements in service quality, water losses, rehabilitation and renewals, meter installations, and sewage treatment and disposal are specified in the draft contract. Selection of the concessionaire will be based on a two-stage process in which-once the technical proposal has been approved-the contract is awarded to the bidder who proposes the lowest tariff per cubic meter. Subsequent tariff increases will be regulated under a price- cap regime. This scheme, enthusiastically supported by COPRI and MEF, is perceived with anxiety by sector officials, the regulatory agency, and municipal authorities. 42. Among the other water companies, attitudes toward private sector participation seem driven by misinformation and misconception. With few exceptions, water companies outside Lima have not exhibited much interest in private participation, and some are openly hostile to the idea. Resistance comes from two key sources: staff who fear for their jobs and mayors who do not want to lose control over this politically important service. WYter company managers do not have adequate information on the potential benefits and risks of private participation. What little interest exists is focused on attracting private finance for new investments through Build- Operate-Transfer (BOI) arrangements, rather than on operational contracts to improve the technical and financial performance of existing assets. Nor do managers seem to appreciate the importance of a transparent and competitive selection process. In one case, management attempted to negotiate a deal with a foreign supplier, hoping to secure bilateral finance for the associated investments. After pursuing this deal for several months, management was dismayed to learn that the central government would not provide the required guarantee for the loan unless the contractor was selected through a competitive process. B. Financing Investments Without a Policy Framework 43. The policy framework for financing water and sanitation investments remains very poor. Each financing institution has its own policy agenda and criteria for allocating funds to the sector. Financial and economic evaluation of investment projects is done on an ad hoc basis. Vter companies have only started to prepare master plans in the past year. Due to their lack of qualified staff, many of these plans have been prepared by consulting firms whose services are financed by donors. Preparing master plans in this way has two major drawbacks. First, the plans are not prepared by investigating various investment alternatives. In many cases the selected investment option will therefore not be the least-cost option. Second, donors usually have a tendency to favor expansion projects. But since the financial and operational performance of the water companies is weak, this preference excludes least-cost investments aimed at improving the efficiency of the water companies. 44. Although the responsibility for the provision of water supply and sanitation services has been transferred to local governments, most investments are still financed by central - 14 - government institutions. Data from fourteen water companies showed that 85 percent of investment in 1994 was financed by the central government. 45. In the past water sector policy was mainly geared toward expanding production capacity. This orientation has resulted in poor policy choices. The precarious financial position of the water supply companies during the 1980s resulted in a serious neglect of maintenance. Hence, the sector currently faces an enormous backlog of rehabilitation needs. Moreover, sector investments have not been equitably distributed. Between 1981 and 1993, 95 percent of the total investments in the water and sanitation sector were aimed at the urban sector. na t ing. Urban t Su and Pbor financial performance of utilities 46. The financial position of the local water supply companies since decentralization of responsibilities has been weak (annex 2). The sample of fourteen water supply companies showed that three were still generating operational losses in 1994, while five registered negative net income." In addition, the companies generated insufficient cash to cover working capital and investment needs. None of the water companies investigated was able to generate sufficient cash to finance an important part of their investments. 47. In the past, (central) government interference in daily management decisions and lack of commercial incentives were cited as the major reasons for the poor financial performance of the water companies. Since the enactment of the new Water and Sanitation Services Law which made cost recovery the basic principle for tariff setting, water rates in many local companies have increased substantially. The water rate levels are therefore no longer a major issue on the sectoral policy agenda. In 1994, nine of the fourteen water companies sampled used tariffs that were sufficient or that exceeded cost recovery (table 2.2) 12. ThiS figure Could be overestimated since many water companies tend to neglect maintenance, while depreciation is based on a historical cost basis. Hence, the real cost of the production and distribution of water is probably underestimated. it Operating loss or income is defmed as the diffeece between operating revenues and operating costs (including depreciation). Net income is operating income minus financial expenses, taxes and nonoperating income. The average revenues per cubic meter water billed were equal to or higher than the total cost (operating and maintenance cost, depreciation, and financial expenses) per m3 of water billed. - 15 - 48. Now, one of the major issues on the agenda is the political interference in daily management decisions of the water companies. The establishment of new sector institutions has not always been followed by the dissolution of old agencies, and at present both municipal and central government agencies are interfering in the companies' daily management decisions. Thble 2.2 Cost Recovery in Selected Water Companies, 1994 Emuseap-Abancay 0.26 0.28 105 Seda-Chimbote 0.39 0.32 83 Seda-Huancayo 0.15 0.20 127 Seda-Juliaca 0.29 0.32 110 Seda-Lrato 0.36 0.35 98 Seda-Piura 0.43 0.44 102 Seda-Puno 0.35 0.38 110 Seda-Qosqo (Cusco) 0.40 0.59 148 Emapa-Tkna 0.42 0.52 124 Emapa-Thmbes 0.59 0.33 56 Sedapar (Arequipa) 0.56 0.57 100 Sedalib (Trujillo) 0.32 0.24 75 Emapal (Chiclayo) 0.26 0.24 91 Sedapal (Lima) 0.27 0.36 135 Sowce: PRONAP, Estimacion de Inversiones en cl Sector Saneamiento, Periodo 1994 - 2003, Lima, January 1995; LMG Consultoria, Mobilization and Allocation of Resources. Ibledo, March 1995. 49. A second major issue refers to poor management and inefficient operations that adversely affect the financial performance of the local companies. A major source of inefficiency is the large amount of unaccounted-for water that is generated by the local companies. Only 59 percent of the water produced was actually billed for in the companies sampled, compared to about 80 percent in many developing countries . In the past decade the number of illegal connections has increased while metering of consumption has declined. Only 4 percent of the customers in Lima were billed on the basis of metered consumption in 1993, compared with 35 percent in 1981. Because of the decline in metering, consumers are increasingly charged a flat rate which has effectively removed price signals to conserve water. Water losses deprive the water companies from an important source of revenues. This loss of revenue limits investment in maintenance, which affects the reliability and quality of services and consequently alters the payment discipline of consumers. " Customers are generally billed for a minimum monthly consumption of 20 m3 a month. As customers are rationed, this practice is actually resulting in a sharp reduction of unaccounted-for water (UFW). Sedalib, which rations water on a large scale, had an UPW of only 8 percent of total production in 1994. In absence of rationing, the UFW is likely to increase substantially. - 16 - Thble 2.3 Reforms affecting local water companies Indicator Bedore Reform After Refenn Degree of Centralization High degree of centralization through High degree of decentralization: SENAPA municipal water companies Degree of Autonomy political interference from central Political interference from municipal government governents Thriffs Thriff-setting affected by political Trend to full cost recovery decisionmaking process Revenues LOW Revenues have been increasing Cost control LOw LOw Operational Efficiency LOW Low Financial Efficiency Very low LOw Unfunded municipal mandate 50. Local governments have been responsible for the provision of urban services, including water supply and sanitation services, since 1990. Yet the transfer of functional responsibilities has not been matched with a comparable increase in their share of fiscal resources. The municipalities' lack of resources results in excessive control over the utilities in day-to-day financial management and limits their capacity to take investment decisions, which are mostly financed by the central government. The allocation of expenditures is still highly centralized, and there is a strong tendency for further centralization. Ibtal local government spending was about 11 percent of total public spending in 1993. 51. Since the enactment of Decree 776 in December 1993, the main sources of municipal revenues are local taxes, including property tax, tax on the transfer of property, taxes on vehicles, and some minor taxes on gambling, raffles, and games. However, the use of these instruments is restricted by central government regulations, and municipalities cannot determine tax bases and tax rates. Hence, in 1992 (more recent data were not available) slightly over 3 percent of total government revenues were generated through local taxes. Municipalities can further rely on nontax revenues, including user charges and fees for municipal services and betterment levies. But the revenue-generating capacity of local governments is constrained by their weak institutional and administrative capacity. 52. Since the municipalities lack an independent revenue base, they have to rely on government transfers, of which the Fondo de Compensacion Municipal (MCF) is the most important. Decree 776 radically changed the revenue sharing system of MCF. It reallocated the majority of funding from provinces to districts, designating 80 percent of the MCF to district municipalities and 20 percent to the provincial municipalities. It also changed the geographical distribution of the funds by eliminating the special status of the Lima metropolitan area and substituting the original distribution formula to one that targets poor rural areas. The redefinition of the MCF targeting poor rural areas raises two issues. The change resulted in a relative reduction of resources to finance urban investments without providing provincial municipalities with a substitute. Second, the shift of resources from - 17 - provincial to district municipalities fosters the fragmentation of the allocation of capital investments. Excessive centralization of Investment resources 53. Most capital investment funds in the sector are channeled through central government agencies. The concentration of public expenditure at the central level is aggravated by the dominating role of MIPRE. This ministry has a virtual monopoly on investments in basic infrastructure. It controls the most important funds, FONAVI and FONCODES. Additional funding for the sector comes from PRONAP, PRASBA, COOPOP, and INADE-which also are under MIPRE's control. Other financing resources for the water and sanitation infrastructure are provided for by the Consejos runsitorios de Adminisnurcion Regional (CTARs) and regional development corporations like CORDELIMA and CORDECALLAO. The regional governments are financed through central government transfers and have relatively little autonomy over their expenditures; they are essentially administrative branches of the central government. Hence the actual percentage of water and sanitation investments budgeted through the central government is higher than official figures suggest. 54. This multitude of financing mechanisms makes it difficult to avoid duplication of efforts because many of these mechanisms overlap. The sector lacks coordination between central and local governments because a number of these mechanisms prefer to work directly with communities and nongovernmental organizations rather than local governments, making coordination at the central level virtually impossible. Even though many of the financing mechanisms are concentrated in MIPRE, there is an overlap in the functional and geographical allocation of financial resources. FONAVI 55. FONAVI was originally set up to finance low-cost housing. After a reorganization in 1992, FONAVI was transferred from the Ministry of Housing to MIPRE. Since its reorganization, FONAVI finances urban infrastructure" investments in low-income neighborhoods, predominantly secondary water and sewerage networks and electrification projects (figure 2.2). FONAVI finances its investments through credits to local community groups or utilities (annex 3).1s Because the fund only started lending to the water and sanitation sector in 1992, it is too early to detect any structural trends in its lending pattern. About 25 percent of FONAVI's funds are currently channeled to the water and sanitation sector. While in 1992 FONAVI lent almost exclusively to water supply companies, in 1994 the fund directed 67 percent of its total resources for the water and sanitation sector to community groups. 4 By Law 25,520 of May 1992, PONAVI's mandate was confined to financing investments in water supply and sanitation and electrification, construction of housing, extension and repair of community and/or recreation centers in rural and peri-urban areas, housing renovation, pavement of roads, and maintenance of local and interdistrict roads. Is PONAVI also recently supplied so-called emergency loans to the sector. These loans ar based on government decrees to solve infrastructure problems in specific (mainly terrorist-striken) areas. - 18 - 56. The major source of income for FONAVI is a payroll levy, currently set at 9 percent. This levy is supplemented by a 3 percent levy that contractors and suppliers have to pay over the value of their FONAVI contract.16 Between 1992 and 1994 these levies contributed about 87 percent of FONAVI's total income. Other sources of income include the repayment of FONAVI loans, yields on financial transactions, and direct government contributions. 57. FONAVI is an important source of finance for the water supply and sanitation sector, but the program has weaknesses that must be addressed to increase its effectiveness and efficiency. The first issue concerns FONAVI's funding. Since FONAVI's reorganization the link between employment contributions and benefits has seriously weakened, which has fomented criticism against the current funding policies. The 9 percent payroll levy is regressive because it affects the relative price of labor in the formal sector-and thus investment decisions and employment generation in the formal sector, hence it contributes to the growth of the informal sector. 58. A second issue relates to the repayment of FONAVI loans. In the past two years FONAVI has received only 24 percent of its scheduled loan repayments. Households benefiting from FONAVI loans are composed of the poor or extremely poor. The total monthly cost of a FONAVI loan varies from almost 10 to 17 percent of monthly household income for poor households to 30 to 51 percent for extremely poor households.17 These high repayment rates are partly due to the specific nature of FONAVI operations, in which contractors can act as promoters of FONAVI investments. This procedure is not likely to result in a preference for least-cost investments. The current problems of nonperforming loans will increase over time as FONAVI only recently started lending to local communities. FONAVI is planning to take measures to reduce its accounts receivables and bad debts by increasing its collection effort, adjusting its repayment schedules,18 and transferring the responsibility of recovering loans from FONAVI to the water supply enterprises. Still, these measures will not increase the ability to pay for these services. Moreover, the problem of nonperforming loans is not limited to local communities only. Public enterprises, especially water utilities, also have serious problems repaying their FONAVI debts. 59. A third issue refers to the lack of coordination of investment projects. Although working with local communities has the advantage of guaranteeing demand-driven investments, it also results in a serious fragmentation of efforts. In some cases, local communities have constructed distribution networks but the utilities failed to construct the required transmission lines. There is also a lack of coordination between FONAVI and the municipalities. FONAVI tends to bypass local governments in investment allocation because it prefers to work with local community groups, thus undermining the municipality's authority in urban planning. 1 The payroll levy is formally a compulsory saving scheme. Yet, because there is no linkage between an employee's contribution and the benefits he receives, the levy has the attributes of a tax. 17 Between 1992 and 1994, PONAVI lent US$ 273 million to the water and sanitation sector, benefiting 211,656 households. Assuming a monthly interest rate of 1% and a repayment period of 5 to 12 years for local community groups and monthly household incomes ranging from US$ 60 to USS 180 for the (extremely) poor. Repayment is now based on annuities, but PONAVI proposes to change the repayment schedule so that households pay less in earlier years and more in later years. - 19 - FONCODES 60. FONCODES was established in 1991 to mitigate the social cost of economic adjustment. This short-term emergency fund primarily finances investments in social infrastructure (education, health, sanitation) in rural and periurban areas. It finances these investments mainly through grants to communities, although investments in economic infrastructure are financed through credits. FONCODES and FONAVI have similar mandates: they both finance demand-driven investments in basic infrastructure. 61. FONCODES is financed through government contributions. Until the beginning of 1994, FONCODES was directly financed through the Treasury. Since then, World Bank, IDB, and KfW contributed to FONCODES through a credit line of US$ 253 million for 1994-97. 62. Since its establishment, FONCODES has approved projects worth a total of US$ 418 million, of which nearly 69 percent has been proposed by local community groups and 17 percent through nongovernmental organizations. Between 1991 and 1994 about 12 percent of all resources were directed to the water supply and sanitation sector through investment in low- cost technologies such as standpipes, artesian wells, and latrines. 63. FONCODES is an effective source of social spending. Still, a number of issues must be addressed to ensure the effectiveness of this financing mechanism and to support its transition from a social spending mechanism to an effective tool for social investment. Coordination of the poverty alleviation efforts of FONCODES is a first issue that must be addressed. A wide range of government agencies is concerned with poverty alleviation, creating ample room for dUplication. FONCODES' mandate and activities overlap with agencies such as PRONAA, INFES, COOPOP, INADE, and FONAVI. Tb avoid duplication, inefficient use of resources, and inter-institutional conflict, a commission has been established to coordinate policies and activities between FONCODES and other sector ministries and government agencies. 9 The coordination of this commission appears satisfactory. Yet this commission does not include all the organizations that are operating in the sector, making it difficult to assess the commission's success in coordinating poverty alleviation efforts. FONAVI and FONCODES have decided to reduce their overlap by selecting different target groups. FONCODES now targets its interventions to rural areas and small towns, whereas FONAVI concentrates on operations in bigger cities. It is not yet apparent how successful this informal division of responsibilities has been. In addition to the coordination problems at the central level, coordination of investment allocation between FONCODES and local governments is strained. Grants to local community groups emphasize the demand-driven character of these investments, but elude municipalities. Avoiding municipal input in investment allocation is undermining local governments' authority in urban planning and development, and contradicts the government's decentralization efforts. 1 This commission consists of INPES, INADE, COOPOP and the Departmental Cooperation fDr the Development of Lima and Callao (CORDELIMA and CORDECALLAD). Staff Appraisal Report, Peru: Social Development and Compensation Fund (PONCODES) Project. VAshington D.C., November 1993. - 20- 64. A second issue relates to the sustainability of FONCODES projects. In principle, anyone-including contractors-can promote projects that are financed by FONCODES. Thus it is possible that demand is created for certain services that are not necessarily the most urgent needs in a particular area. In addition, this procedure is not likely to provide incentives for least-cost investments, and hence affects the sustainability of these investments. Lack of coordination in investment financing 65. Local sources. Many organizations are involved in financing the water and sanitation sector. PRONAP (Progmma Nacional de Agua Potable y Alcantanllado) is a special unit within MIPRE that manages an IDB project aimed at the institutional strengthening of local water companies. The mandate and activities of COOPOP (Coopemcion Popular) and the three special programs managed by INADE (nsdituto Nacional de Desarollo) are similar to those of FONCODES. 2 Development corporations and CrARs also finance water supply and sanitation projects. Although mechanisms have been established to coordinate these different organizations, duplication of efforts continues to be a major problem. 66. Enernal sources. Data on the extent of external financing in the water supply and sanitation sector are limited. Multilateral institutions such as the World Bank and IDB already have committed US$ 350 million to the sector. These institutions also have lent indirectly to the sector through government organizations such as FONCODES. Bilateral donors also are operating in the sector. In the past year, several local water companies, including those of Arequipa, Cuzco, Chiclayo, and TujiWo, have agreed on loans from bilateral donors. The water companies of these cities are expected to receive almost US$ 100 million in soft loans from Germany.(through KfW) and France. These contracts sometimes take the form of contracts with foreign suppliers that are subsequently financed by bilateral donors. A point in case is Cuzco, which is negotiating a deal with a French pipe supplier whose contract is going to be financed through a soft loan from the French government. Nongovernmental organizations also have been a source of external finance. The fourteen water companies surveyed received US$ 6 million from nongovernmental organizations between 1991 and 1994. 67. The basic issue with regard to external finance is the lack of coordination. No organization has any mechanism to coordinate external funding. Moreover, no tools are available to evaluate proposed projects once external financiers ask for government guarantees. The lack of coordination and the unavailability of tools for evaluation have major impacts on the technical, economic, and financial viability of loans, resulting in an inefficient allocation of resources and unsustainable investments. These failings also cause a lack of transparency, which can adversely affect the equitable distribution of resources. 2 INADE manges the Programa de Emergencia de Inversion Social (PIS), Pryecto &pecial Sierra Cen8ro Sur (PESCS), and Proyectos Eipeciali de Sierra y Selva. -21- Nonexistence of capital markets to finance infrastructure projects 68. The domestic capital market in Peru is small and not very deep. Nevertheless, a number of trends in the Peruvian economy support capital market development. Privatization has given a boost to local stock markets-stock market capitalization soared by 684 percent between 1990 and 1994. New investors, such as pension funds and insurance companies, have emerged. Although the bond market is still underdeveloped, in the long run revenue and municipal bonds could become new channels for financing infrastructure projects. 69. Financing of investments in the water and sanitation infrastructure remains under the domain of the central government. But given the large financing requirements needed to rehabilitate and expand the water and sanitation infrastructure and the global trend toward privatization, private financing for water and sanitation investments could account for a much larger share than in the past. PSP in financing of the water and sanitation sector can take many forms. Mobilization of private capital for investments is a major goal in concession agreements and Build-Own-Operate-Transfer (BOOT) contracts. Financing of infrastructure investments can take other forms as well, such as financing through infrastructure funds and domestic capital markets. -22 - Chapter 3: SECTOR STRATEGY 70. As described in the previous chapters, the legal status and institutional organization of the water and sanitation sector in Peru had changed dramatically. However, most of this reform is still largely on paper with limited impact on sector performance and service delivery efficiency, particularly to the poor. There is even a danger of regression to the previous sector framework if the modernization process is not advanced further. The legacy of heavy centralization and public management is still deeply rooted in the professional culture of engineers and public officials providing substance and direction to the reform. The proposed strategy is designed to attack this shortcoming by deepening and accelerating the reform. The core of the reform is the recognition of the new role of government as a regulator rather than as a service provider. The proposed strategy is centered around three elements: fostering the efficient functioning of the Superintendencia Nacional de Servicios de Saneamiento (SNSS), as the cornerstone of the new regulatory regime, accelerating deregulation of sector institutions, which have been burdened by outdated institutions and myriad decrees and directives accumulated in many years of government control; and promoting a transparent and accountable system for the use of public investment funds with clear efficiency objectives and poverty targets. Strategy Matrix Further reform of tfe lastitutlonal asnd regulatory tramework formulation * Clarify and strengthen theroleofttheSNSS S Accelerate the disautling of the old regul tegim Ensur oantonomy of the water tilities Support pilvate ectori ti:ipatior Devalop a credible ystem for dispute resoution Improve efcn of Inrastrictm nam * oodinatkon tif externallfinaneing Develop ansparent criteria fr the allocat fpublic facing based on* efficienci pinciples * Poster capital mnarket developmtent * Develop investment planning capacity A. Further Reform of the Institutional and Regulatory Framework Create a Permanent Institutional Capacity for Sector Planning and Policy Formulation 71. A technical division to deal with water supply and sanitation policy matters should be established within MIPRE's Vice-Ministry for Infrastructure. Its role would be to analyze and - 23 - recommend policies and strategies for the sector and, once approved, to ensure that all central government activities in the sector are consistent with such policies and strategies. One of the first priorities of the technical staff would be to evaluate the financial and economic implications of alternative investment finance policies and mechanisms for the sector, and on the basis of such an analysis make recommendations for a coherent investment policy. Once the government has adopted a sector investment policy, the division would coordinate any required restructuring of existing financing mechanisms to ensure their ability to carry out the new policy. Policy work is also needed in the area of private sector participation. MIPRE, in collaboration with COPRI, should take the lead in formulating a strategy and developing guidelines for private participation in the sector. Clarify and Strengthen the Role of SNSS 72. The next few months will be a crucial period for SNSS, as it establishes directions for its future development. SNSS should give first priority to fulfilling its regulatory role, and should limit its role in policymaking to advising policymakers on the impacts and enforceability of alternative policies. Likewise, its promotional and technical assistance activities should serve its regulatory functions. For example, to promote private sector participation (PSP) the SNSS should sensitize water companies to the regulatory implications of private involvement and to the importance of well-designed contracts, but it should not assume the primary role in promoting PSP or in educating water companies on the subject. 73. FVnd the proper mix of competition and regulation. Finding the proper mix of competition and regulation is the central issue of utility regulation. An acceptable regulatory system needs to be constructed on four principles: the independence of the regulatory agency, the transparency of regulatory rules, the accountability of regulatory decisionmaking, and a secure appeal procedure for the regulated utilities. 74. Ensure political autonomy of SNSS. At present, SNSS has been placed under MIPRE's responsibility. The independency of SNSS's position could be substantially improved if it was placed outside the sector so that they can regulate the sector independently of the sector institutions. It could be either responsible to the Consejo de Ministros like OSI'EL or to MLF. 75. Develop a transparent and accountable budget limited to financing regulatory functions. Because SNSS is funded by a 2 percent assessment on water company revenues, its budget will increase as the productivity of the sector increases. While this funding mechanism helps to ensure SNSS's independence from political interference, the level of the assessment should be reviewed periodically to prevent it from becoming an unnecessary drain on the sector, and to ensure that SNSS remains efficient and focused on the essentials of regulation. During the start-up phase, more resources will be needed to develop processes, to train staff, and to reorient inefficient companies. Once the sector is more efficient, SNSS should require fewer resources to carry out its role. The level of the assessment should thus be reviewed after about five years to determine whether it is appropriate. The 2 percent assessment (about US$ 5.9 million in 1994) could be reduced to 1.3 percent in 2000. -24 - 76. Create a proper regulatory culture. SNSS needs to break completely with the command and control approach that characterized SENAIWs interventions. It should introduce incentives for efficiency and must avoid excessively bureaucratic regulations and reporting requirements. It will earn the respect of the technical and managerial professionals in the water companies only by supporting the elimination of regulations that hamper their effectiveness and by putting in place a streamlined regulatory framework that promotes good technical performance and economic and financial viability. SNSS' staff, particularly heads of departments, must be sensitized to the need to adopt a more innovative attitude toward sector oversight. 'Ib stimulate these changes, SNSS should take advantage of the expertise emerging in other utility sectors, such as telecommunications and energy, through informal consultations and by participating in joint seminars and symposia. Exchanges with academic institutions and regulatory bodies in a variety of other countries should also be pursued. 77. Use the private concession in Lima as the cornerstone for enhancing regulatory capacity. Regulation of the private concession in Lima presents a different challenge, and will need to be very rigorous, though fair, from the beginning. While this task should be simplified by the choice of a price-cap approach, experience elsewhere has demonstrated that it remains a complex and demanding task. Given the importance of the concession and the challenge it presents, SNSS will need to dedicate adequate resources and staff to this component of its mandate. SNSS should concentrate resources on its two most essential regulatory objectives: tariffs that reflect the economic value of water resources and that ensure the financial viability of efficient and accessible services, and improvements in service quality. SNSS should not allow its vague mandate to divert its attention from these tasks. For example, SNSS should formulate procedures for financial reporting so that it can compare water utilities' performance. Enforcement of technical and service quality standards should, at least initially, be seen as a collaborative process in which SNSS and utility managers seek practical methods of improving performance. 78. Implement efficient and simple tariff regulation. One of SNSS's biggest challenges for the near term is to implement a tariff regulation process that is transparent, straightforward, and adapted to the various conditions that exist for different companies. Common sense should prevail over excessively complex and academic exercises, particularly in the regulation of the smaller provincial companies for which a cost-based, rate-of-return approach is more suitable. This rate-of-return (or cost-plus pricing) does not promote efficiency as price-cap regulation would. Alternatively, the long-run marginal cost could be used as a tariff, while this cost definition contains efficiency improvements. For example, the long-run marginal cost includes an improvement of the UFW. An intermediate step would be to calculate the tariff on the basis of the financing needs of the utility which arise from the medium-term investment plan (that should not only include investments for expansion, but also investments aimed at efficiency improvements). SNSS should avoid assuming responsibility for calculating tariffs for all the water companies. Yet, they should prepare guidelines on how to calculate the tariffs. - 25 - 79. Develop criteria to evaluate business plans of utilities. There is a direct link between business plans and tariff regulation. SNSS's role in the review and approval of investment programs will need to be specified with care, yet investment programs for water and sanitation services are often politically sensitive. SNSS must develop precise criteria for determining whether investment programs are justified and for evaluating their tariff implications, and it must enforce them impartially. Ib avoid politicization of the regulatory role, SNSS should advise policymakers on the economic and financial implications of different investment finance policies, but should not be responsible for making policy in this regard. 80. Ensure accountability of regulatory decisiomaking. Ib ensure that SNSS abides by the rules of regulation, it should be required to explain and justify its decision in public. Such accountability ensures that all interested parties can see that their views are taken into account. 81. Guamantee a secure appeal pmcedure. It is likely that there will arise conflicts between regulators, operators and new entrants. While such disputes might be resolved through negotiation, fair outcomes that balance the interests of the competing parties are unlikely to always serve the public interest. Therefore the utility that is regulated should, as a last resort, have the right to appeal against the decisions of SNSS when it thinks that regulatory rules and procedures have not been followed correctly, or when it considers the decision of SNSS to be unfair. In other countries, the right of appeal is generally conducted by a special branch of the judiciary system. Accelerate the Dismantling of the Old Regulatory Regime 82. CONADE's control over procurement, recruitment, and salaries is a legacy of the institutional and regulatory framework that dominated the sector in the 1980s. CONADE's control undermines the autonomy and efficiency of the water companies and contradicts the new institutional and regulatory framework. Hence, CONADE's control should be eliminated. Moreover, SNSS should avoid establishing similar controls. Any regulation of these areas (whether by SNSS or the municipalities) should be limited to the specification of procedures that guarantee transparency and fair competition, and that allow prices and salaries to be determined by market forces. Ensure the Autonomy of the Water Utilities 83. Wter companies need to be placed in an institutional framework that promotes managerial autonomy and accountability. The roles of the various levels of oversight need to be clearly delineated. Peruvian company law specifies that the owners of the company, the district municipalities, are represented in the junta empresarial, which in turn appoints the directorio. However, many of the details regarding the composition and roles of these bodies will be specified by the reglamento to the new sector law. These details will have an important impact on the development of the companies, and should be specified carefully. In particular, it is important to limit the roles of both the junta and directorio to eliminate political interference in day-to-day management. -26- 84. The current double layer of shareholders' meeting and junta (i.e., a representation of the shareholder's meeting) should be eliminated. The shareholders' meeting or junta should meet only once a year, and should have only the following responsibilities: approval of annual reports, approval of investment plans, revision of company statutes, and approval of capital increases. 85. lb avoid excessive politicization of the directorlo, the terms of directors should not be the same as the terms of mayors. 'b ensure continuity, directors should be appointed according to staggered terms. Since mayors serve for three years, directors could have terms of two, four, or five years. Two years is too short a term to enable directors to develop the expertise needed for effective oversight, so four- or five-year terms would be preferable. The size of the directorio should be limited, with some directors representing more than one district. The appointment of such multidistrict directors could rotate among the districts represented, or they could be elected by popular vote. The directorio, and not the junta, should appoint the general manager, who in turn should be allowed to nominate line managers for approval by the directorio. In no case should directors be allowed to assume any executive functions. The responsibilities of the directorio should be limited to the appointment of the general manager, approval of the annual budget upon proposal by the general manager, approval of the f investment program upon proposal by the general manager, monitoring of the company's performance in maintaining and operating services, and meeting technical and health standards and legal requirements. Support Private Sector Participation 86. Approach to municipal company. Efforts to promote PSP thus far have focused on SEDAPAL. Given the potential efficiency benefits of increased PSP in the water supply and sanitation sectors, the central government should initiate a concerted effort to promote PSP in the other water companies. Such an initiative is consistent with its role as policymaker and major source of investment finance for the sector. Nevertheless, the role of the central government would be somewhat different for the other companies, since they are owned by municipalities. Given the level of local responsibility in the sector, this effort should be conceived as an opportunity to help municipal authorities and company managers make good decisions, not as a campaign to force PSP on them. If the government pursues a rational investment finance policy, requiring water companies to exhibit minimum performance standards as a condition of investment finance, the municipal companies will come to see PSP as a useful tool that enables them to qualify for scarce investment resources. 87. An action plan. The government's strategy should include the following components: identification of the most promising and feasible options for PSP in the sector; educational programs to garner support for PSP, not only within water companies but also among other influential institutions and groups; specialized technical assistance programs to assist the water companies in preparing for PSP; and formulation of appropriate central government policies and regulations to ensure the benefits of PSP. MIPRE, in collaboration with COPRI, should assume the leadership in the strategy formulation and educational aspects of this effort. SNSS should contribute to regulatory aspects. -27 - 88. Options. A key element of an effective PSP strategy is the concept that PSP is a practical tool, not an ideology. No one approach is ideal; rather, a number of different options in urban water supply are potentially useful. Their suitability depends to some extent on the economic, financial, technical, and social aspects presented by the local context into which they are introduced. For example, contracting out a substantial part of support services to a number of specialized small enterprises is an effective way of reducing costs for a well-managed water company in a city that has an active private sector characterized by keen competition. It would not be effective for an administratively weak company or in a situation where contracting practices lack transparency. In such a situation a single, more comprehensive contract would be more effective. Long-term concessions allow a water company to take advantage of private finance. Concessions also ensure maximum coordination among investment decisions, demand conditions, and operational performance, but they can be introduced only in companies that have achieved a reasonable degree of financial viability. Lease contracts are more suitable where, in the short to medium term (five to ten years), large investments either are not needed or are not feasible because of poor operational and commercial performance. Such contracts represent a good interim solution to strengthen weak companies, making them capable of attracting finance for future investments. The sale of water supply assets to a private operator and the private development and ownership of new assets have not yet been attempted in Peru, but should not be excluded as a potential option, since private ownership may offer efficiency incentives that are absent from concessions. An example of this type of PSP would be a BOIT for the development of new water resources in the Lima Metropolitan Area. Already some international investors have expressed interest to finance such a project. However, such a BOT will require two specific conditions for the developers: a long-term (i.e., 10 to 15 years) contract to sell their water in bulk to a privatized SEDAPAL, and rights to the use of water sources must be secured by the water law. In short, a strategy for introducing PSP in the water companies should aim to promote a variety of options and to match them with local environments where they are likely to be effective. 89. Dvining and technical assistance. Water utilities would benefit from more information on the options for PSP in water supply and on how to structure contracts to ensure transparency, financial viability, and efficiency. The companies need to be able to judge the potential benefits as well as the dangers to be avoided. As a first step, the experience gained during the process of arranging the concession for Lima should be documented, and lessons extracted and disseminated. Seminars of a general nature describing the various options and their relative merits, as well as the issues and challenges associated with PSP, should be organized for municipal authorities, water utility managers, the press, labor unions, and other influential groups. The Economic Development Institute of the World Bank has developed materials that would be appropriate for such seminars. MIPRE should take advantage of these, as well as resources of other international agencies, in organizing such seminars. Finally, when a utility expresses interest in PSP, COPRI should mobilize specialized technical assistance for preparation. 90. Ensue competition. Regulation of PSP arrangements must address the selection process as well as the viability and quality of service once an arrangement is in place. The government -28- will have to make some important policy and regulatory decisions in the near future to ensure maximum competition and transparency in the selection of private operators. For example, to promote competition, as well as local private sector development, the government may want to encourage the emergence of local companies with operational expertise. Existing procurement and contractor selection rules should be reviewed to determine their appropriateness for PSP arrangements. SNSS, in collaboration with COPRI, should then develop guidelines aimed at ensuring transparency and competition. If a concession is successfully arranged for SEDAPAL, there will be many opportunities to learn lessons as regards the regulation of a private operator. If other arrangements also materialize, the challenges will be multiplied-as will the opportunities for learning. SNSS needs to approach its regulatory task with a firm commitment to a few basic principles, but with flexibility and an open mind regarding procedural matters and the finer details. Frequent informal assessments of the effectiveness of its regulatory approaches will allow for immediate feedback of lessons learned. B. Improve Efficiency of Infrastructure Finance Coordination of External Financing 91. Recommendation to the Pubhc Investment Unit in the Ministry of Economy and Rnances. Coordination of external financing is a major problem. In all the cities that were visited during the appraisal mission, problems existed with the financing of loans that had to be guaranteed by the central government. Coordination problems are aggravated by the lack of sufficient capacity to evaluate investment projects. The result is an inefficient and inequitable allocation of external investment resources. It is therefore proposed to strengthen the small Public Investment Unit (PIU) in MEF to coordinate these external funds; IDB is preparing a loan to support the strengthening of this unit. The PIU would act as administrator of grant and loan facilities. It has to be informed in case of grant finance. Yet when loans are concerned and hence a guarantee of the central government is required, the PIU has to approve them. The approval of loans has to be based on transparent and explicit investment criteria. MEF will define these investment criteria, which would include proper financial and economic evaluation of investment projects. The coordination unit will subsequently monitor the application of these investment criteria. For this unit to work effectively it must be granted autonomy; otherwise, it will be subject to a high degree of political interference. Yet, effective coordination of public investment funds will also depend on the existence of a sectoral policy framework. Develop Transparent Criteria for the Allocation of Public Financing Based on Efficiency Principles 92. Enforce fidl cost recovery. The new sector law defines full cost recovery as the main principle for tariff-setting. Under the principle of full cost recovery, investment finance to the sector should be made available under market conditions. But while most customers may be willing to pay for the full cost of reliable water supply and sewerage services, they may not be as willing to pay for wastewater treatment because the link between costs and benefits is less obvious than in the case of water supply. Hence, subsidies are likely to be necessary, especially in the short run. - 29 - 93. Create a transparent subsidy system. Investment subsidies for specific social or environmental objectives will also be needed because of the weak financial performance of local water companies. Where subsidies are justified, they need to be transparent so that they will not result in distortions. In designing a subsidy policy for the sector, strategic decisions should be made on the nature of these subsidies: direct income and/or sector subsidies. Sector subsidies include cross-subsidies in which the rich (i.e., large consumers) are subsidizing the poor (i.e., small consumers). However, in a society with a large poor population, the efficiency of cross-subsidies as a tool to reach the poor is limited. In addition, subsidies for water services should be included in an overall subsidy policy for the poor. Chile offers an example of direct income subsidies. There the social agency pays part of the water bill of poor customers. Moreover, this type of subsidy system also offers the possibility to synchronize the subsidy policies of all sectors providing basic services. Yet, whatever the subsidy policy, it should agree with the principles laid down in the sector law. 94. Loans and grants. Two separate financing channels should be created for the sector. The first would be a loan facility that finances investments under full cost recovery principles. This facility could operate along the lines of the FONAVI facility. If FONAVI takes up this role, it will first need to implement some major reforms. The second financing channel would be a grant facility, similar to FONCODES, based on partial cost recovery. In order to act as the grant facility, the current FONCODES facility also would have to be modified. 95. Both the loan and grant facility would mobilize local and external resources and on-lend them based on the marginal cost of funding plus (possibly) a small administration fee. The existence of two financing channels does not necessarily mean that only two financing mechanisms will operate in the sector. But relying on just two financing mechanisms, instead of the multitude of organizations that are currently financing the sector, will improve simplicity, introduce transparency, and facilitate coordination. Loan financing 96. Investment projects that are financed through loans will have to be evaluated using appropriate technical, financial, economic, and environmental criteria. This evaluation is the responsibility of the water supply companies, but the loan agency should approve this evaluation before financing investment. The willingness and ability to pay for water supply and sewerage services, particularly in the pueblos jovenes, has to be assessed by the local water companies in order to ensure the demand-driven character of their investments. 97. Companies that are not financially viable because of poor performance will not be eligible for any funding. A large number of local water companies are still not financially viable. During this transition period some utility investments could be financed, with the provision that these investments are geared exclusively toward improving the operational and 22 DB is preparing a loan for the water and sanitation sector, which includes a study to design a subsidy policy for the sector. -30- financial efficiency of the company. But if the lack of financial viability of the water utilities is caused by a lack of economies of scale, they will have to depend on a combination of loan and grant financing. In addition, expansion of the secondary network in the pueblos jovenes also will have to be supplemented by grant financing. The limited ability to pay for investments in low-income neighborhoods already has resulted in a sharp decline of the quality of FONAVI's loan portfolio. 98. Recommendation for FONAVI. If FONAVI becomes the channel through which loans for the water and sanitation sector are financed, the performance of its loan portfolio has to be restored and loan repayments will have to be secured. The restoration of the performance of the loan portfolio could be enhanced by making water utilities responsible for financing secondary distribution networks instead of local communities. Investment costs should be included in the company's water rates, which will be based on the long-run marginal cost in order to guarantee full cost recovery. In the short run, however, if water utilities are not able to repay their loans, a carefully designed transition period should combine loan financing supplemented by grant financing. The policy of lending only to financially viable companies and projects will restore the performance of FONAVI's loan portfolio. Once its performance has been restored, the fund will replenish itself through the repayment of loans. The regressive payroll tax can then gradually be eliminated. Grant Financing 99. Grants should be made available in the form of direct and transparent subsidies toward qualifying investments. The allocation of subsidies should be made on the basis of estimates of the economic, social, environmental, or other benefits. The proposed investments should have a high priority for the community and society. Least-cost and demand-driven investment can be secured by minimizing per capita investment subsidy ceilings2 and by maximizing the financial contribution of communities and local governments. The grant facility should develop different technology options to provide poor communities with water supply and sanitation so that the community can choose which technology is most appropriate for them. Investment subsidy ceilings can hence rectify distortions in the allocation of scarce public subsidies to the water and sanitation sector. The participation of the beneficiaries is a sine qua non in financing these investments in order to ensure their sustainability. Communities should be involved in decisions with regard to the planning and implementation of the investments as well as operation and maintenance, and ownership. 100. Recommendation for FONCODES. FONCODES can continue to operate as the grant financier of the sector. In operating the grant facility for the sector, however, the fund will have to make some adjustments in its current operations. It should place more emphasis on the economic and financial viability of the projects it finances, while also increasingly using local governments as agents to support the decentralization process. 23 The size of the subsidy cap will depend on willingness and ability to pay for water supply and sAcrage services, engineer estimates on the costs of different technologies, based upon an analysis of water supply and sanitation projects in the different parts of Peru. - 31 - Foster Capital Market Development 101. Financing infrastructure investments through private capital will require further development of the domestic capital market. This process of capital market development requires a program of structural reform that has three major steps. First, it requires a reform of the institutional and regulatory framework of the water and sanitation sector, making it conducive to PSP. This includes transparent legislation, efficient tariff policies, and an independent regulatory agency. Second, the government's technical capacity to plan, identify, structure, tender, evaluate, negotiate, and monitor PSP has to increase. Third, government has to become a facilitator of PSP by developing an institutional investor base (private pension funds, mutual funds, insurance companies), establishing securities market regulatory agencies, and setting up government-sponsored agencies that provide government guarantees. Develop Investment Planning Capacity 102. Beyond traditional master plan exercises. The importance of a proper technical, economic, financial, and environmental evaluation of investment projects should be emphasized. Planning capacity at the national and local level is currently underdeveloped. Even though MEF is responsible for authorizing loan guarantees and counterpart funding at the national level, the ministry lacks the proper tools to evaluate investment projects. At the local level, governments have started to prepare master plans. But the lack of capacity in a large number of municipalities and water enterprises has had an adverse impact on the quality of these plans. Master planning currently refers only to investment planning. In the longer run, local water companies have to develop business plans that link investment planning and financial planning, and that present investment plans in an operational context. 103. Daining. Institutional capacity-building is needed to enable the water companies to strengthen their capacity to identify, plan, prepare, and evaluate projects. A proper technical, financial, economic, and environmental evaluation of the projects will have to take place in order to ensure that least-cost solutions are selected. lb support the local water companies in the formulation of their business plans, SNSS should develop guidelines for these plans by defining the parameters that will determine the tariff-setting process. C. Medium-'brm Investment Plan Priorities 104. Rehabilitation. The proposed investment plan assigns top priority to the rehabilitation of existing infrastructure. Rehabilitation investments should be aimed at reducing UFW. Reducing the water losses will reduce the need for rationing, and hence will increase the supply of water that can be used to improve or expand service coverage. Moreover, rehabilitation investments could postpone the need for investments aimed at increasing production capacity. Although the master plans of the fourteen water companies that have been investigated assign funds to rehabilitation, the view prevails that expansion of production capacity is the preferred solution to problems in the water supply system. This view is not only - 32 - strong in municipalities and water companies-external donors also favor expansion projects. The lack of capacity to evaluate projects properly according to financial, economic, and environmental criteria reinforces this preference for expansion projects. 105. Epansion. Allocation of expansion investments also is a priority. The current practice of prioritizing projects based on poverty and geographical criteria should be replaced with a prioritization scheme based on project viability. In this arrangement poorer communities will have access to investment subsidies. These subsidies should be minimized, however, since the financial contributions of communities and local governments are likely to enhance the sustainability of investments. Moreover, this approach also will provide incentives for the selection of least-cost investment options. Investment Requirements 106. In 1993 only about 60 percent of the population had access to the public piped water supply, and 63 percent of the population was served by either a sewerage system or had access to septic tanks. Assuming an annual population growth of 2 percent, Peru's population is growing by 0.5 million people a year. Expanding service coverage will thus require an enormous effort. The calculations of investment requirements are based on the master plans of the fourteen water companies that have been investigated. These data have been extrapolated to adjust for population size and technical criteria with regard to the type, size, age, and maintenance of the production system. All underlying assumptions for the calculations are summarized in annex 4. 107. Rehabilitation investments should have top priority in investment planning. The total rehabilitation investments for the urban sector for 1995-2003 (based on the existing master plans) are estimated at US$ 667 million, of which US$ 436 million is for water supply and US$ 231 million is for sanitation. These programs include the rehabilitation of water supply and sewerage systems (including distribution networks) and institutional strengthening programs, including water loss programs. Rehabilitation investment will make up 25 percent of the total base-case investment program. When SEDAPAI's investment program is excluded, however, only 16 percent of the investment program is devoted to rehabilitation projects. 108. Expansion investments will depend largely on the objectives set in the sector. The requirements have been summarized in table 3.1. Three scenarios are presented in this table. The first scenario includes the investment requirements for maintaining current coverage levels. The second, base-case scenario contains the investment requirements needed to realize the objectives set out by the water companies. This scenario involves an increase in water supply coverage from 60 to 74 percent of the population, while sewerage coverage increases only marginally, from 63 to 66 percent. The third scenario projects an increase in water supply and sewerage coverage to 90 percent of the population. Investment requirements for these scenarios ranges between US$ 1.7 and US$ 5.2 billion for the 1995-2003 period. Annual requirements thus vary between US$ 190 million and US$ 580 million. These annual requirements correspond to 0.29 and 0.91 percent of GDP (in constant 1995 prices), compared with the 0.49 percent of GDP invested in 1993. - 33 - Table 3.1 Thtal Investment Requirements 1995 - 2003 (US$ million) lw Bas Cas HGh Coverage 60% 74% 90% Rehabilitation Investment 436 436 436 Expansion Investment 433 1,048 1,779 Tbtal Investment in VAtter Supply 869 1,484 2,216 Sewerage Coverage 63% 66% 90% Rehabilitation Investment 231 231 231 Expansion Investment 604 971 2.796 Total Investment in Sewerage 835 1,201 3:026 Total Investment 1,704 2,686 5 Note: Includes sector investments in rural areas. Vkter and sanitation investment in rural areas is very small-total investment in districts with fewer than 2,000 inhabitants amount to only USS 43 million. However, the larger districts also contain rural populations. The actual rural investments are therefore likely to surpass US$ 43 million. FInancing Alternatives 109. Base case scenario. A possible base case scenario has been depicted here to give an indication of the medium-term financing needs of the sector. Three major sources of finance can be identified for the financing of the investment requirements: internal cash generation, international financing and government financing. In this scenario, private financing is excluded. 110. Internal cash generation. Since the implementation of the new sector law, internal generation of funds has become an increasingly important source of finance. In the fourteen water supply companies sampled, 62 percent already had tariffs that incorporate cost recovery. These fourteen companies will be able to generate internally 44 percent of their base-case investment between 1995 and 2003 (annex 4). The capacity to generate funds internally by smaller water supply entities (covering areas with fewer than 30,000 inhabitants) is smaller due to economies of scale. It is assumed that these companies will be able to generate 33 percent of their investments. 111. Internationalfinancing. It is difficult to anticipate the size of external donor funds. Therefore only donor funding that has already been committed has been included in the calculations. The commitments amount to US$ 449 million, of which US$ 274 million was committed through multilateral donors and the remaining US$ 175 million through bilateral donors (France, Germany, and Japan). It is likely that this assumption underestimates the availability of funds, since many donors are interested in financing investments in Peru. 112. Government financing. The remaining financing gap is equal to 43 percent of the base- case investment requirements. This translates into an annual deficit of US$ 130 million that must be financed by the government through institutions such as FONAVI and FONCODES. A more ambitious investment program obviously will result in a larger financing gap (table 3.2). -34- Thble 3. FInancing 'Ibtal Investment Requirements, 1995 - 2003 (US$ million) LOWv Base Case Hith Investment inW ater Supply and Sewerge 1,704 29686 5,242 Internal Generation of Funds 157 1,022 1,995 Conuitted Govemmient Finnc 49 49 96 External Donor Finance: - amilafteral donors 274 274 274 - bilateral donors 175 175 175 Tbtal Funds Already Available 655 1,519 2,539 anucing Gap 1,049 1,167 2,703 - 35 - BIBLIOGRAPHY Alvarado, O. and V. Gouarne, FINDETER: Financing Muncipal Investment in Colombia. Infrastructure Note FM-7. Washington D.C., October 1994. Brandiaran, Juan Carlos and Ana Mendoza de Lanatta, Estimacion de Inversiones en el Sector Saneamiento: Periodo 1994 - 2003. Lima, January 1995. Casas, Carlos et al. Marco Normativa e Institucional de los Servicios Publicos Locales: Analisis y Propuestas para la rehabilitacion y Gestion Urbana. Centro de Investigaciones de la Universidad del Pacifico (mimeo). Lima, April 1995. FONCODES, Guia de Orientacion. Lima, February 1994. FONCODES, Nota Mensual. (various months). Gonzalez, Luz Maria, Requerimiento de Inversion y Fuentes de Financiacion: Periodo 1995 - 2003. Ibledo, January 1995. Gonzalez, Luz Maria, La Situacion Financiera del Sector de Saneamiento. Informe Preliminar. Tbledo, December 1994. Gonzalez, Luz Maria, Mobilization and Allocation of Resources. Tbledo, March 1994. Infrastructure Finance, Growing Pains in Asia's Capital Markets. April/May 1995. Ley de Bases de la Regionalizacion, Ley no. 24650 and 24792. Decreto Supremo No. 071-88-PCM. Ley General de Sociedades, Decreto Supremo, no. 003-85-JUS Actualizado y Comentado. MIPRE 1 PRONAP, Estudio Sectorial: Sector Saneamiento. Lima, March 1995. MIPRE 1 PRONAP, Estudio Sectorial: Base Estadistica. Lima, March 1995. MIPRE 1 PRONAP, Proyecto de Ley General de Servicios de Saneamiento: Exposicion de Motivos. Lima, October 1993. Nueva Ley Organica de Municipalidades, Ley no. 23853 and Ley no. 23854. OSI7TEL, Contratas de Concesion CPT y ENTEL PERU: Marco Legal de las Telecomunicaciones. Lima, November 1994. OSIPTEL, Documento Informativo - Banco Mundial. Regimen arifario de los Servicios Publicos de Telecomunicaciones. Lima, February 1995. -36- Rischard, Jean-Francois, LAC - Financing of Infrastructure. Washington D.C., April 1993. Seminario, Bruno et al., Financiamiento de Inversiones de Capital. Centro de Investigaciones de la Universidad del Pacifico (mimeo). Lima, April 1995. SNSS, Legislacion en Materia de Prestacion de Servicios de Saneamiento. Lima Swaroop, Vinaya, The Public Finance of Infrastructure; Issues and Options. Policy Research Working Paper. Washington D.C., April 1994. Velasquez Jara, Arturo, Programa de Mejoramiento del Sector Saneamiento Basico: Estudio de la Demanda de Agua Potable. Informe Final - Volumen I. Lima, March 1994. World Bank, Peru: At the Crossroads Building a Modern State. Report No. 11943-PE. Washington D.C., March 1994. World Bank, Peru: Issues in Urban Management. Washington D.C., July 1994. World Bank, Peru: Lima Water Rehabilitation and Management Project. Report No. 13206-PE. Washington D.C., November 1994. World Bank, Peru: Povery Assessment and Social Policies and Programs for the Poor. Report No. 11191-PE. Washington D.C., May 1993. World Bank, Peru: Public Expenditure Review. Report No. 13190-PE. Washington D.C., October 1994. World Bank, Peru: Sector Reform and Investment Review. Washington D.C., November 1990. World Bank, Peru: Social Development and Compensation Fund (FONCODES) Project. Report No. 12245-PE. Washington D.C., November 1993. World Bank, Peru: A User-Based Approach to Water Management and Irrigation Development. Washington D.C., April 1995. World Bank, World Development Report 1994. Washington D.C., June 1994. - 37 - PERU WATER UTILITY MANAGEMENT: BEYOND THE REFORM Annex 1 Justification of Company Size 1. Since the decentralization of the provision of water supply and sanitation services, the number of operating entities has increased dramatically, which has resulted in an enormous fragmentation of the water sector. Yet, investments in water supply are generally considered to be lumpy and hence, economies of scale are of major importance. The Water and Sanitation Services Law therefore specifies that the larger operating entities should be organized as autonomous companies under Peruvian company law, and all operators are to be organized as functionally and administratively autonomous units. The law foresees the formation of companies that will serve more than one province. However, merging water companies raises questions about the ideal size of these companies. It is often said, that a water and sewerage company usually must serve a market of at least 50,000 users to be financially viable. In this Annex, this hypothesis will be tested. 2. The sample size of 14 water supply companies provided information about the total cost, total revenues, total production and consumption of water and the number of connections. With these data', a logarithmical regression analysis was made to correlate the total cost of water with the number connections and the daily production per capita as explaining variables. As can be seen in table 1, the results of these analysis are rather robust. Thble 1 Regression Results Itr"sion Output Constant - 2.966630 Standard Error of Y Estimate 0.069265 R Squared 0.988370 No. of Observations 14 Degrees of Freedom 11 Connections Production (lcd) X Coefficient 0.923661 1.00941 Standard Error of Coefficient 0.045999 0.17723 T-value 20.07993 . 5.69549 The data at contained two major outliers. The first was Sedapal (Lima) that because of its size overpowers the other companies. The other consisted of the data from edsmhuancayo, which has extremely low production cost, which could be due to the quality of the datasct. - 38 - 3. Based on these results, the actual regression function can be defined as log(COST) = 0.923661*log(CONNECTIONS) + 1.00941*log(PRODUCTION/LCD) - 2.96663 lb determine the direct relationship between company size and total cost per m3 of water billed, the following assumptions have been used: * production per capita per day is estimated at about 356 led, which is the average value of the sample of the 14 water companies; * unaccounted-for water is estimated at 41 percent of total water production, which is the average value for the sample of 14 water companies. 4. Based on these assumptions, the cost per m3 of water billed has been set against different tariff lines, as can be seen in figure 1. It is shown that when the average revenues per m3 of water billed are equal to US$ 0.44, the company will achieve cost recovery with 10,000 connections (i.e., population coverage of 50 to 60,000). In case the average revenues per m3 of water billed is only US$ 0.30, about 1,000,000 connections are needed to realize cost recovery. It should be noted here that the logarithmical function could result in major outliers in the extreme values. The original data set only contains systems ranging from 5,000 to less than 1,000,000 connections. 5. The results seem to suggest that companies with a population coverage of about 50,000 can become financially viable. The required water rate of US$ 0.44 lies within the range that customers of the 14 water companies are currently paying for water. Average tariffs in 1994 ranged between US$ 0.15 and US$ 0.55 for the 14 water companies that were investigated. However, the calculated rate could be underestimated as most water companies tend to neglect maintenance and calculate depreciation cost on historical cost basis, thus underestimating the real production cost. - 39 - Figm 1 Cost per m3 billed and Company size Cost of Water and Company Size 0.55 0.50 G 0.45 0.40 I I 0.35 0.30- 0.25 I 1,000 10.000 100.000 500,000 1,000.000 miber of coemctions aARM US$0.30 *ARM US$0.4D *Cost perm3sed Note: ARM is defmed as the average revenues per m3 of wAer billed. 6. One of the major problems in many water supply companies is the high level of unaccounted-for water. Unaccounted-for water varies from 8 to 49 percent of total production in the sample of 14 water supply companies. Yet, the water supply enterprises which show the lowest unaccounted-for water, Sedajuliaca (20 percent) and Sedalib (8 percent), also face the largest rationing problems. Because of the peculiarities of the tariff system in many enterprises, rationing results in a very low unaccounted-for water as customers are billed a minimum consumption level that - in the case of Sedalib - is 20 m3 per month - equivalent to about 132 Icd. 7. Figure 2 shows the impact of a change in the unaccounted-for water on the number of connections needed to realize cost recovery. An increase in the unaccounted-for water will require a substantial increase in the average revenues per m3 billed to achieve cost recovery if the number of connections remains constant. In the base case scenario, 10,000 connections required an average revenues level of US$ 0.44. Yet, when the unaccounted-for water increases to 50 percent of total production, an average revenues level of US$ 0.52 is needed to achieve cost recovery. However, when the efficiency of the water utilities would increase and the unaccounted-for water would drop to 30 percent, the average cost per m3 water billed would drop to US$ 0.37. -40- FIgure 2: Cost of Water and Company Size by Varying Level of Unaccounted-for Water Cost of Water and Company Size by level of uraccouted-for walter 0.70 0.60 - 0.50 - 0.40 020 p 1.000 10,000 100,000 500,000 1.000,000 Mswar of comections alufw 41% +ufw 30% *ufw 50% e ARM USS 0.30 *ARM USS 0.40 Note: ARM is defmed as the average wyenu per m3 of water billed. 8. It is obvious that due to the lack of a wide database, further study on the relationship between financial viability and company size is needed. SNSS as a regulatory agency is likely to set up an information system to carry out its tariff regulatory functions. This information system can be used to make a more comprehensive study on this subject. -41 - PERU WATER UTILITY MANAGEMENT: BEYOND THE REFORM Annex 2 Performance of Water Companies 1. Data Base 1. The performance of the water companies has been analyzed using data from 14 water companies (including SEDAPAL). This sample covers a total population of about 10 million people, which is about 51 percent of Peru's total population and about 82 percent of the population living in towns with a population of more than 30,000 inhabitants. The 14 water supply companies that were investigated comprise 10 companies that are part of an institutional and operational strengthening project financed by IDB (Emusap-Abancay, Seda-Chimbote, Sedamhuancayo, Sedajuliaca, Sedaloreto, Sedapiura, Sedapuno, Sedaqosqo (Cuzco), Emapatacna, and Emapatumbes. The other companies that have been investigated are Sedapal (Lima), Sedapar (Arequipa), Emapal (Lambayeque?) and Sedalib (La Libertad). 2. Operational Performance 2. The operational performance of the company has been assessed using a number of operating indicators for 1994. These indicators do not show any structural trends as can be seen in table 1. Water supply coverage varies from 59 percent in Sedajuliaca to 94 percent in Sedalib. Although many factors play a role to determine the differences, hydrogeological factors are of utmost importance. In La Libertad, especially in Trujillo, there are hardly any alternatives for piped water supply. In Juliaca, however, wells are an alternative to piped water supply. Sewerage coverage also shows a wide variation from only 33 percent in Sedaloreto to 93 percent in Emapatacna. 3. All water supply companies have serious problems with containing unaccounted- for water losses. The average unaccounted-for water losses make up 41 percent of total water production in the 14 investigated water utilities. Although in some cases, e.g. Sedalib, unaccounted-for water is very low. The reason for this low unaccounted-for water is widespread rationing. Sedalib uses a rate schedule in which households are charged a minimum consumption level of 20 m3 per month. However, as the company is rationing water, this type of rate schedule results in overcharging customers. The problem of rationing is not confined to Sedalib only, the PRONAP study' found that rationing is a rather common feature amongst utilities. 4. The staff productivity index of the water supply companies fluctuates substantially between the different companies. In Emusap-Abancay there are 11.1 employees for PRONAP, Program de Mcjoramiento del Sector Sancamicato Basico. Lima, 1994. -42- each 1,000 water connections, while Emapatumbes has only 2.6 employees per 1,000 connections. However, most water supply companies have a staff productivity which is far above that of more efficient water supply companies in Latin America (i.e., 3 to 4 employees per 1,000 connections) as can be seen in table 1. 3. Financial Performance 5. One of the major principals in the new W%ter and Sanitation Sector Law is full cost recovery. In table 2, the level of cost recovery has been determined. It is shown that the majority of the water supply companies has embraced the principle of cost recovery. However, the definition of the cost per m3 water billed has been based on actual cost data. In general depreciation takes place on a historical cost basis and maintenance is often a neglected issue in many water companies, therefore the actual level of cost recovery could be overstated. 6. In 1994 collection efficiency was very high. However, the high collection efficiencies understate the problem of delayed payments. Firstly, collection efficiencies are very volatile. Collection efficiencies in the period 1991 and 1994 show very large variations in collection efficiencies for the different companies. The water supply companies that were visited during the appraisal mission were faced with very high accounts receivable. The delay in payments is a significant drain on the cash flow position of the utility, and can partly explain the low capacity to generate internal funds for investments. As there are no effective write-off policies for incollectible debts, this problem could result in major problems in the longer run. 7. The levels of the working and the operating ratio2 are rather high, suggesting that in a number of water companies there is little room for incurring additional debt service obligations. In 1994, Seda-Chimbote, Sedalib, Emapal and Emapatumbes had working and operating ratios exceeding 100%. The main cause of their operational losses is the lack of full cost recovery in these companies as can be seen in table 2. Al these companies have cost recovery levels that are below 100%, indicating that average cost per m3 water billed are higher than the average revenues per m3 water billed. However, also the lack of cost control could help in explaining these operating losses. Cost control is seriously hindered by the rigid CONADE regulations, that interfere amongst others with the employment and salary policies and procurement practices of the water supply companies. 4. Conclusions 8. The basic principle of the new Water and Sanitation Services Law is full cost recovery. The new principle has been adopted by a majority of water supply companies 2The wrking ratio is defined as the operating cost (excluding depreciation) divided by operating revenues. The operating ratio is calculated by dividing operating cost (including depreciation) and operating revenues. -43 - as is shown in table 2. In the period between 1991 and 1994, all the water companies that were investigated increased their water rates. When comparing the operational revenues per m 3water billed and the cost per m3 water billed, 9 of the 14 companies have achieved full cost recovery, while 2 more companies generate revenues that cover operational costs. However, due to the tendencies of water companies to calculate depreciation on the basis of historical cost and to neglect preventive maintenance, this method of calculating levels of cost recovery could result in an underestimation of the total production costs. 9. The financial performance of the local companies is adversely affected by poor management and inefficient operations. A major source of inefficiency are the high unaccounted-for water that are generated. For the 14 water utilities being investigated, only 41 percent of total water production was actually billed. This figure could be underestimated due to the widespread prevalence of water rationing, while customers are billed a high minimum consumption level. Expansion of the production capacity in these companies could result in a sharp increase of the unaccounted-for water. Another source of inefficiency is the high staff productivity index that hovered around 4.4 in 1994. These inefficiencies are reflected in the working and operating ratios. The level of these ratios show that there is still room for further improving the financial and operational efficiency of water supply companies. 10. The financial performance of the water utilities shows that there is no direct link between profitability and company size. The 5 water companies that generate a negative net income are small-size (Emapa-Tumbes), medium-size (Seda-Chimbote and Sedaloreto) and large-size (Sedalib and Emapal) companies. What all these companies have in common though, is that their tariffs (or average revenues per m3 water billed, which is slightly higher due to the impact of other revenues, such as connection fees and meter rents) do not reflect full cost recovery. ТвЫв 1 OpвnUonal РвRогтапсе 1пд1саlогs of 5атрlв of 11 Wа1вг Supply Companlet 1п 1991 Ann�r = lпдкаtоп ' ЕМ • BEDA- iEDM :. 8ЕDАг_:._ . :' ' , бЕ0 МО. s... .' 3Е. • �1- А• EMAPAL bE0 AL АУ н11tВОТЕ' UANCAYO' UW1CA :. ORETO ' PlURA � АСИА s. � Тда1 tqn 19,100 316,100 &1,000 170,600 1,1 6В,300 1,500 280.900 1,б00 1,690 129.1 706,400 . 1.16 ater Supply Соvетаре 60% 85% 86% 58% 85% В1% 76% в9% 91% В1% 92% 79% 711G ВО% Sewaгape Coverope 5В% ВО% 7ВХ 17% 33% 57% 5В% 61% 8SX в1% 927i 41х п д 15% atei Ргодисед 155 227 196 156 235 27В 13Э 119 156 209 1В1 22З 177 107 ater &Uad 96 118 132 126 150 118 В1 7В 116 10В 118 120 133 225 unao�ted-1or Water 37Х 19% 33% 20% 3В% 17% 37% 31% в% 18% Эб% 1В% 25% 15% � � етг,rепсу 1оо% 9о% lоох 9sx 9sx lоох 92х 91х юх 7о% 9вх 11о% 1о3% п д � sгan мде,г 11.1 92 пд 17 s2 в5 7.о 7.5 э1 э9 1в 2в па 3в ТаЫв 2 Flnanclal �егfогтепсе lndketots of Sемрlе of 11 WвМ suppy ComOanles 1п 1991 Ммлг 2 lndkeWts 5АР• 5 EEDA• . bEDA-. ' S EEDl4 SЕОАМlИО 3EWl- '� i iE , А• W1r � ABAkCAr н1У8отё миАИСАУо uLU1C11. орЕТо Р1йМ АсИА s verape Орегаt' екгикс т З Ч 7 0 4 0 �ега0е тааl саи а wооиарп и а.17 о 2о о 1о о 21 о 22 о 2Э о г2 о 2в о 29 о 2s о 27 о Э2 о 2о о 1s vегаре operolrp Сои а wыег eined иsiйп о 21 о 36 о 12 о г5 о 33 о з7 о эо о.27 о 2е о 1е о 31 0+s о,д2 о 2о ve�ape Тда1 Cal д Wдег BiNed USi1m 0 26 0.39 015 0.29 0 38 01Э 0 35 010 0 Э2 0 5В 012 0 59 0 26 0 27 ечвl д Тде1 Coet Reoowy 105% ю% 127% 110Х 98% 102% 110% 116% 75% 100х 1211� 56% 91% 135% akrp Ra4io 77% 110% ю% 75% ю% 86% 807L 18% 115х в5% бб% 137Х 91Х 57% Rap 92% 116% 69% В7% 97% 92% В1% 51% 128% 97% 69% 156% 110% 65% �у 10% 21% 8% 22% 20% 23% 1% 5% 2% 18% 1Э% 81% З% 20% Tлtallntieqnкnt 0 1В2 0 269 0 3,9В) 11В 3,910 1.418 12.9ю 1.159 5.975 0 73,600 1п1еггоl Cash Generotion 0 182 0 269 0 1,66Э 11В 1,610 1,119 1.712 15В 36S . 0 54В00 1пкWгюгt и% lntetr�l Gвneгelian п д 100% п д 100% п д 12% 100% 11% 79х 36% 6% 6% п д 71% Тдв1 Awle U 1,9И В,10В В,3Вб 7,252 6,070 3В.228 Э,71З п д 119.728 56,561 1�.687 12,000 10,711 190.000 икипкгх as х дл�еег. ох s% ох 1х ох 1ох Эх п д 1х 2эх ах sox ох 1s% Nde: Аиегере ОрегвдагW Rвьегихв Рег т3 д ивtег D1Nd b eGpAty hqh fhan ои аигаре tar1R рег т3 д иаtе► bwed дие b гw�егим eouroes auch as mefa rent, апд aorwdlan bes. -45- PERU WATER UTELJTY MANAGENMIM BEYOND THE REFORM Annex 3 Sources of Sector Investment Fbmmee 1. In the main text the emphasis was put on the sources of investment finance and the issues confronting these financing mechanisms. In this Annex, the operation of these financing mechanisms is discussed in more detail. The emphasis in this Annex is put on the two most important funds for financing investments in the water and sadtation sector: FONAVI and FONCODES. Other funds will only be discussed marginally. In table 1, the different funds for investment finance for local infrastructure have been depicted. This table shows that about 48 percent of all investments is directly financed through these two funds. These funds indirectly also finances other funds, such as PRONAMACH, INADE, and PRASBA. lkble I Budgetted Investment in I"al Infmstructure (in US$ miMon) Financing Mechanians M 1994 1995 L,ocal Gommment: Munidpalkies 120.2 174.3 267.8 invermat 21.9 37.2 n.a. fteional GUMMM=: CTARr 167.8 190.0 224.3 Cordelitna 4.5 4.5 5.9 CordecaUao 39.1 20.9 25.4 Central Qoymmment: FONCODES 159.6 194.4 156.6 FONAV7 - FONAVI 171.1 301.9 395.5 -ENACE 29.4 83.6 90.4 - Banco do Materiales 16.4 92.0 76.6 - PRONAMACH 24.1 57.3 60.7 - PRODEIS 0.0 34.2 n.a. -PRASEA 0.0 0.0 0.5 PRONAP 1.2 43.3 14.4 COOPOP 7.6 9.1 19.9 PRONAA 23.3 22.8 15.9 INFES 49.4 41.4 119.2 INADE 88.1 94.5 17.7 Samuniento Dwico Ruml (MINSA) 1.3 1.9 2.4 Loc. do Salud (MINSA) 19.3 0.0 0.0 TOTAL 934.4 12M.3 1,483.1 Notes: " FONAVI as defined in this table finances invesunents in loal infiastructure through direct credits, mortgages and loans to Sedapal and other Sodes. Loans to ENACE, Banco de Materiales and other public entities are nwntioned seperately. " AD fiumb depicted in halic finance invesunents in the water and sanitshon sector. Source: Universidad del Pacifico, Centro de Investigacion, Finambuniento do Inversiones de Capital. Lina, February 1995. -46- Financing Merhanism5 of the Central Government FONAVI 2. FONAVI was established in 1979 in the Banco de la Vivienda del Peru with the objective to provide housing finance for low-income groups. In May 1992, FONAVI received a new and broadened mandate, which aimed at the development of all types of infrastructure that are needed to improve the living conditions of the low-income groups. The law of 1992 extended the mandate of FONAVI to finance local infrastructure. According to the new mandate, FONAVI not only finances low-cost housing, but also finances the construction of water and sanitation infrastructure, electrification, the construction of community and recreation centres in rural and peri-urban areas, housing renovation programs, and the construction and maintenance of local and inter-district roads. Law No. 25520 of 1992 also prioritized the financing of local infrastructure as most critical. 3. The same decree that changed the mandate of FONAVI, also transferred the responsibility of the fund from the Ministry of Housing to the Ministry of the Presidency (MIPRE). MIPRE is the administrator of FONAVI. Its task is to formulate and approve the annual investment plan. It is also (amongst others) authorized to be in charge of the collection and supervision of FONAVI's contributions, the designation of resources, and project control. However, FONAVI's Unidad Tecnica Especializada (UTE) has a certain degree of autonomy in managing FONAVI's financial resources. 4. Since its creation in 1979, FONAVI's income has basically remained unchanged. The major source of income are contributions of employees and employers. Currently, FONAVI is financed through a 9 percent payroll levy, of which 3 percent is paid by the employees and 6 percent by the employers. These contributions are supplemented by a 3 percent levy that contractors and suppliers have to pay over the value of their FONAVI contract. In addition, FONAVI receives income from the repayment of its loans, the sale and rental of houses that have been built by FONAVI, yields on financial transactions and direct government contributions. Thble 2 FONAVI's Sources of Income (in US$ mi11on) Source of Income 1992 1993 1994 Contributions 206.8 260.1 374.0 Support of BANVIP* 2.7 0.0 0.0 Loan Repayments 0.0 3.5 34.4 Yield on Financial Transactions 13.2 38.5 9.5 Others 2.2 11.9 10.2 TOTAL 224.0 314.0 428.1 Note: The Banco de la Vivienda del Peru was liquidated in 1992. Source: LMG Consultories, La Situscion Financiers del Sector de Saneaniento. Inforne Preliminar, Deciembre 1994. -47 - 5. FONAVI finances investments in local infrastructure through three channels: direct credits (mainly through local community groups), credits to public sector institutions, and emergency loans. 6. Direct cedits are mainly geared at the inhabitants of the pueblos jovenes. These credits provide for the construction of water supply distribution networks. The community which wants to apply for a FONAVI loan has to organize itself. The community has to establish a committee that hires a contractor to identify the project and make a project proposal. This project proposal has to be approved by the water supply company, which has to carry out a technical evaluation of the proposal before it can be send to FONAVI. After the water utility has approved the proposal, the organized community (representing at least 80 percent of the population in the community) presents the proposal to FONAVI that evaluates the socio- economic and technical aspects of the project proposal. Subsequently, FONAVI signs a contract with the community about the repayment of the loan. FONAVI's Board will then decided whether the project will get the required funds. The Board does approve the proposal on a first come, first served basis, while also geographical considerations are taking into account. Afterwards, FONAVI signs a contract with each individual household. 7. FONAVI disburses the loan directly to the contractors after a revision of the material cost. The contractor that had been chosen by the community committee to help in the identification of the project, will be involved in the supervision during project implementation. FONAVI then supervises the supervisor of the community committee. After project implementation, the water and sanitation infrastructure is being transferred to the water supply enterprise which will be responsible for the future operation and maintenance of the infrastructure. The repayment of the FONAVI loan originally took place through payments of individual households through commercial banks. However, the high default rate has prompted FONAVI to change its procedures. Since January 1995, FONAVI wants to collect its loan repayments through the water supply companies. As this change in the collection of loan repayments has only recently been introduced, it is too early to evaluate the success of this measure. 8. Direct credits usually have an average repayment period of 10 to 12 years, with an average interest rate of about 1 percent per month. These interest rates are in line with commercial rates. The system of amortization used to be based on annuities, but has been changed in favor of a system of loan repayments that increase over time. 9. From August 1992 to September 1994, FONAVI approved 267 water and sanitation projects. The total number of households that benefited from these FONAVI project interventions was 211,656 (i.e., 1,058,280 people). Since the reorganization, the emphasis in FONAVI's loan portfolio has changed significantly. In 1992, most credits were aimed at public entities, whereas in 1994 direct credits (to local communities) were the most important target group of the fund. In addition, the loan portfolio shifted from Lima to the other provinces as can be seen in table 3. -48 - Table 3 Investment in Water and Sanitation by Type of Credit and by Geographical Location (In US$ million) Invesuent in Waer and Sanitation 1992 1993 1994 Credits to lcal Comunities 5.8 51.7 67.6 - Lima 3.3 15.3 20.0 - Other provinces 2.6 36.3 47.5 Credits to Public Sector Entities 22.2 37.3 33.3 - Lim 9.7 11.3 8.7 - Other provinces 12.5 26.0 24.6 Source: LMG Consuloriss, La Situacion Financicra del Sector de Sancamiento. InfDrm Preliminar, Deciembre 1994. 10. Credits to Public Sector Entities for the water and sanitation sector can be channeled through the water supply companies, or through different public institutions, such as ENACE, PRASBA and PRONAMACH. ENACE finances urban projects (including water and sanitation infrastructure) in invaded areas, PRASBA has been recently established to finance pre- investment cost, while PRONAMACH finances small-scale sanitation and housing projects in rural areas. 11. In case of direct financing to water supply companies, the loan process starts with the presentation of a technical proposal that the water supply company submits to FONAVI. Then, FONAVI evaluates the technical and financial aspects of the project proposal. The Board subsequently approves the project. Bidding of the contract associated with the investment is done publicly. The contractor which is selected is directly financed by FONAVI. Supervision of the project is done by the water supply company itself. 12. The repayment periods for credits to public sector entitities is between 3 to 5 years, with an average interest rate of about 1 percent per month. These interest rates are in line with commercial rates. 13. Emergency loans were used in the past to finance investments in infrastrcuture in areas that were prioritized by the government. In the past three years, the target group of these loans are emergency areas, such as areas with terrroristic activities. As can be seen in table 3, emergency loans make up only a small percentage of the total FONAVI loan portfolio. -49 - Table 4 Application of FONAVI's funds (in US$ million) Lam_1992 1993 1994 Direct Credits 22.1 10&9 141.2 - WHter Supply and Sanitation 5.8 51.7 67.6 - Electrification 16.2 57.3 73.6 Housing construction 0.0 0.0 113.5 Credit to Public Sector Entities: 7&0 79.2 102.3 - SEDAS 12.5 26.0 24.6 - SEDAPAL 9.7 11.3 8.7 - ENACE, Banco Materiales, etc. 55.8 41.9 68.9 Emergency loans 4.2 27.1 21.2 Other 1.2 9.8 15.3 TIAL 105.4 225.1 393.4 Source: LMG Consuhorias, La Situacion Financiea del Scor de Sanesmicnto. Informe Preliminar, Deciembre 1994. FONCODES 14. FONCODES was established in August 1991 as a so-called decentralized public agency which depends directly under the President of the Republic. The fund has technical, administrative and financial autonomy. Functionally, FONCODES is the responsibility of the Ministry of the Presidency in the Vice-Ministry of Social Development. The Minister of the Presidency is the chairman of FONCODES' Board of Directors. The Board defines general policies and regulates and supervises the overall operation of FONCODES. 15. FONCODES was established in order to mitigate the social cost of economic adjustment. The fund has only a temporary mandate. Its objective is to finance projects that aim at poverty alleviaton, with a strong focus on employment generation, health and nutrition services and education programs. Its main target groups are the poorest communities in rural and peri-urban areas. 16. FONCODES was originally financed through transfers from the Treasury. Yet, in December 1993 the Peruvian Government obtained two loans, from the IDB and the Mrld Bank to finance FONCODES. The IDB loan disburses about US$ 160 million in two years, while the World Bank loan finances US$ 300 million over three years. According to a recent study of the Universidad del Pacifico, these external funds represent about 70 percent of the total annual FONCODES funds, with another 30 percent still provided by the Treasury. 17. FONCODES finances four categories of projects: social assistance, social infrastrcuture, economic infrastructure and general support for productive activities. FONCODES finances these investments mainly through grants to the communities, although productive investments are financed through credits. For a project to become eligible for FONCODES financing: o the beneficiaries of the project should correspond with the target groups of FONCODES. In the case of water and sanitation projects, FONCODES has defined rural and indigeneous people as their main target group; - 50- * the project should be demand driven, i.e., there should be a real demand for the project at the community level; * the community has to contribute to the project through financing the operation and maintenance of the project to ensure its sustainability; * the project should not produce any major environmental impacts; * the project cost should not exceed US$ 250,000. 18. The loan process is rather similar to that of FONAVI. The community has to organizae itself. Hence, it has to decide on the project and the executing agency. In many cases, this executing agency is a community committee. The executing agency (representing the community) and the promotor cooperate in the identification of the project and the preparation of a project proposal. The project proposal is sent to FONCODES. The approval of FONCODES depends on a number of criteria, such as the level of poverty in the community, lack of earlier project interventions, type of projects and the age of the project proposal. Once the project is approved and the project value is less than US$ 60,000, the contract is directly awarded to a contractor, otherwise a public bidding process is set up. The grant funds are disbursed to the communities. Hence, the contractor implements the project, while the community supervises the work. Supervision of FONCODES is limited and only takes place at the final completion of the project. After project implemetation, assets are transferred to the Superintendencia Nacional de Bienes Nacionales. 19. Until 1994, the project approval was centralized in Lima. However, the loan conventions with the World Bank and IDB included a ceiling of 20 percent of available funds to be disbursed through Lima. The loan convention also included an agreement to decentralize the project approval process in regional offices. In August 1994, the Direction of FONCODES approved a pilot project for the decentralization of project approvals. This pilot project, called PREDES, is taken place in regional offices in Trujillo, Cuzco and Pucallpa. These offices can approve projects with a total value that does not exceed US$ 22,800. 20. Since its inception in August 1991 until August 1994, FONCODES has approved projects of a total value of about US$ 418 million. Thble 5 Approved Prqjects by FONCODES between August 1991 and August 1994 (in US$ million) Level of Pverty NGOs Municipa- Public Community TOTAL lities insitutions groups Extremelypoor 17 18 9 70 114 Poor 10 6 7 66 88 Average 10 6 2 34 55 Acceptable 15 2 3 49 69 Multi-region 19 0 9 63 92 TOTAL 71 32 29 285 418 Source: Universidad del Pacifico, Centro de Investigacion. Financiarniento de Inversiones de Capital. Lima, February 1995. -51- Other centrl government finance mechanisms 21. PRONAP (Prgma Nacional de Agua Potable and Alcantmarillado) is placed under the responsibility of MIPRES. PRONAP is a project implementation unit that manages an 1DB project that is aimed at improving the financial viability of water utilities. It, moreover, has to prepare a list of projects for the expansion of water supply and sanitation services in a second phase of the project. 22. COOPOP (Cooperacion Popular) was established during the Belaunda Government. Its basic objective is poverty alleviation. The fund is very similar to FONCODES. After receiving a project proposal of a community, the provincial COOPOP office evaluates the project proposal (although the project evaluation is rather sketchy). The project implementation is characterized by cooperation between the local community and COOPOP. The local community contributes local, unskilled labor, while COOPOP provides materials, equipment, technical assistance and skilled labor. In 1992, this fund was brought under MIPRE' responsibility. This - in combination with a sharp reduction of COOPOP, and the establishment of FONCODES - seemed to suggest that this fund was going to be abolished. Yet, since 1993 COOPOP's resources have increased substantially as can be seen in table 1. 23. INADE (Instituo Nacional de Desarrollo) manages three funds, that finance investments in the water and sanitation sector. The first fund is the Pmgrma de Energencia de Inversion Social (PEIS) . This fund was established in July 1991 with a grant of USAID. The basis objectives of this program are employment generation, and the construction of social and economic infrastructure, while the target group of this program are the extremely poor. This program is very similar to that of FONCODES. The second program is Proyectos Especiales de Sierra y Selva aims at rural integrated development in the Sierra and Selva zones of the country. Most of the funds for this program are provided by the central government, either through the Teasury or FONCODES. The third program is the Pmyecto Especial Sierra Centm Sur. This program was set up in 1982 as an emergency fund to finance social and economic infrastructure in the departments of Ayacucho, Apurimac, Cuzco and Huancavelica. Fnancing Mechanisms of the Regional Government 24. As can be seen in table 1, the Consejos Tasitorios de Administacion Regional (CTAR) are also a major source of finance for local infrastructure. In 1994, the investment budget of the CIARs (including the CORDELIMA and CORDECALLAO1) was US$ 206 million, of which US$ 20 million was assigned to sanitation and natural resources. The proces of regionalization took place under the Garcia-administration in 1988. The now regional governments replaced the development corporations that wer earlier created by the military government. All CORDES were transfrred into regional governments, with the eception of CORDELIMA and CORDECALLAD. Theme two CORDES continued to operate. -52- 25. The CTARs administratively depend on MIPRE, yet it is financially dependent on the Ministry of Economics and Finance (MEF). Almost all regional expenditure are financed through central government transfers. In the 1994 budget, 92 percent of the regional budget was provided by MEF through central government transfers. Most of the remainder was financed through a levy. Yet, the imposition of this levy has to be approved by MEF, because regional governments - unlike municipalities and central governments- do not have a constitutional assignment of own revenue resources. Moreover, the regional governments have little autonomy in expenditure allocation. Because of this lack of financial autonomy, regions can be considered as administrative branches of the central government. Financing Mechanisms of the local Government 26. Since 1990, provincial munipalities have become responsible for the provision of urban services, including the provision of water supply and sanitation. However, the corresponding change in financial resources to provide these services has lagged far behind. The financial structure of the government is still highly centralized as is shown in table 1. In 1994, less than 13 percent of the total investment in local infrastrcuture was financed by municipalities. The 1995 budget suggests an increase to 18 percent of total local infrastructure investment. However, this share overestimates the revenue-generating capacity of the local governments as a large part of its revenues are central government transfer, in particular transfers through the Municipal Compensation Fund. 27. Although there are no data available about the municipal investments in water and sanitation, the visits to the local water supply companies during the appraisal mission suggested that the volume of these investments are rather neglible, and that the water companies depend mainly on central government sources to expand their services. 2 In case, investments financed by INVERMET are included in local government finance, the share of local governments in financing local infstructure increases to 15 percent. MATRIX: INSTITUTIONS INVOLVED IN FINANCING INVESTMENTS IN THE WATER AND SANITATION SECTOR F~nancing Mechanism Geographcal Source of Funda Reovury of Funds Relationthip with øoundaries Priøriiation of Fundsø Loca Governments REGIONAL GOVRNMENT :_:__ Cooprmcion de Desar~ollo Lma Province Centrl Govemment Tnutr * Poverty Incidence rank Midenflction of project needs de Lima (CORDELIMA) xcl. Meropolftan Lima * FONCODES ' Lack of Interventions by municipa~tles • INADE (PEIS) Co-finncing of CORDELIMA * Possibility of Extemal Deb Fbnce projects by municipalities Coapuracon de ,Desarrollo Ca~ao Pronc Cantral Govemmet Transers Specl citter"a; populain, Gnt CORDECALLAO mains geopgrphcal ocation. re~lans with d~strict municipalities de Callo (CORDECALLAO> and aviblHiy of uesous Consej~s Transitorios de Reglons *Cntral Govement Trans~er Administracron Regiona (CTAR) Ptroleum Tax 'Grants • Poslity of Extemal Deb Finance LOCAL GOVaRNMENT ü:::__ District Munlipaltis Dstricts DOwn Resourcs FCM (80%) *PetroEn Tex *PdossMty nfiemal Debl Fice Provincal Municipaltes Provines *Own Resources FCM (20%) *Ptrolum Tax *Possiblty of intemal Deb Finnc _Poss~blity of intemal Deb Fnance CENTRAL GOVERNMENT MINISTERIO DE LA PRESIDENCIA A. VicMinistry of Infrastructure,- FONAVI National Payro vis Age of the pro~ct * Cedts to iocal communky *municipuliis can work m *(Conputsoy) Conbibons • Geographcal lotions grups (since Jan 1995 promotr for FONAVI proects *Lønn Repayments~ Po~lical directives othe secoveued thru mater supply *municipaltie arm not egible ,Governent transers President ofthe Repub~c enteres) for FONAVI funding • Ced~ to pub w ~ antarpdsee * Cedts to Speciul Decree PRONAP National *IDB-omn Priortiation on bases f IDB Grant 'Central Govemment TMure directives PRASBA Naonal FONAVI Prortization on basis f Grnt muncpmes can work as FONCODES promoters a, Vic-Mnletry of Socl~ Dev*lopment_._._1 FONCODES Nanal *IDB md IBRD-o3ns *Poverty levels *Grants municipalities can ad es executing *Ctal Govamment Transfer *L[ck of Intervfn s *Csredits, In case of prductiW ag ___________ 1~Age of the project projects___ __ __ __ COOPOP Nat Contml Govemmen Tnue~ a ieGrants C: Vice-MinIstry of Reonal D elopmnt INADE a) Programa de Emergenaa de National Extaul Grants GPovery Inc~dnce Gra * In many cases, mu*~a-tl* act Invers~on Social (PEIS) *Field Inspection Visits us xecung agencies • -ubprogm ms at strenathening of ocal govemments b) Proyecto Especial Sienu Departments of Ayacucho. Tmnfer~ of PEIS Govemment drectives based municipaltie can act as øxecuting Centr Sur (PESCS) Apumac Cu~co, *Tr~nsfe at Cental Govemment on regional and sectormi agencies Huancavancm *BD • grant de^vepment pians c) Proyectos Esra~e de Departments In tm *Centr. Govem n! Tranafera C sing pinlons of *Grrs *munMpanue iuence piodty SWarr y Selva Slen md Selva *FONCOES munr*p~*e Credits (in c ta. of ina- kseting *DB-Lo a struture projecs) nunicþagdes participate In poet Sguntion technical assltaneg to nmnkcip~Re -54- - 55 - PERU WATER UTILITY MANAGEMENT: BEYOND THE REFORM Annex 4 Assumptions for the FInancial Projections of Mediumn-Trm Investment Program 1. Basic Assumptions for the FInancial Projections 1. The financial projections for 10 water companies (i.e., Emusap-Abancay, Seda- Chimbote, Sedamhuancayo, Sedajuliaca, Sedaloreto, Sedapiura, Sedapuno, Sedaqosqo, Emapatacna and Emapatumbes) are based on the financial projections made by PRONAP/IDB'. The financial projections of Sedalib, Emapal and Sedapar have been based upon the financial statements and masterplans of these companies. The financial projections for SEDAPAL are based on an earlier study carried out for the Lima Water Rehabilitation and Management Project in 1994, and are not presented in this Annex. 2. Iblume of Vber Billed. The actual level of the volume of water billed has not been based on real consumption. Lack of metering, the widespread prevalence of rationing and insufficient insight in the real demand for water prevented such an estimation. The masterplans prepared by the water supply companies specify the investment plans and the consequent objectives with regard to water supply and sewerage coverage2. The per capita consumption is based on the minimum consumption levels set forth by the water supply companies. These minimum levels differ substantially. In Sedajuliaca, this consumption level is set at about 75 Icd, whereas in Piura this level stands at about 145 lcd. These consumption levels take into account the impact of water meters. 3. lblwne of Vrer Production. Given the lack of macrometering and demand studies, water production has been estimated on the basis of the existing capacity of the water sources or the capacity of the treatment plants and the volume of water billed. Due to the installation of water meters, the unaccounted-for water can decrease to 30 percent of total water production in 2000. 4. Opeining Revenues. Operating revenues consist of the tariff revenues and other operational revenues such as connection fees, meter rent, etc. As metering and service coverage will increase, so will the overall amount of water sold. The oroginal financial projections of PRONAP/IDB have bcen refined for the purpose of this study. 2 The district populations in the service areas of the water supply companies are assumed to increase with the growth rate that vas registered during the period 1981 and 1993. -56- 5. 7nfs. The tariff will increase progressively. The tariff increase will be such, that the tariff will cover at least operational costs and at the same time will generate at least sufficient funds to cover 25 percent of investment costs. 6. Operaning Costs. These costs include operational cost and administration costs. The operational costs vary with production levels. If the water supply companies change water sources (e.g., from groundwater to surface water), the operational cost per unit of water produced will change accordingly. The administration costs are gupposed to be constant over time. These costs include the contributions that the water companies have to pay to SNSS. 7. Depreciation. Depreciation is calculated on a straight-line basis. Depreciation is estimated to be 2 percent of total assets. 8. FInancial Epenses. These costs are based on the loans and credits that the water supply companies have and will contract in order to execute the investment program as set out in their masterplans. 9. Taxes. The income tax is set at 30 percent of net income after financial costs. 10. The financial projections of the 13 water supply companies under investigation (excluding Sedapal) have been summarized in tables 1 to 13. 2. Medium-term Investment Programs 11. The investment programs of the 10 water supply companies (i.e., Emusap- Abancay, Seda-Chimbote, Sedamhuancayo, Sedajuliaca, Sedaloreto, Sedapiura, Sedapuno, Sedaqosqo, Emapatacna and Emapatumbes) are based on the investment programs set out in the "Institutional and Operational Strengthening Project" financed by IDB. The investment plan for SEDAPAL has been based on the program set out in the "Lima Water Rehabilitation and Management Project" of 1994. The master plans of the remaining companies have been used to determine their investment programs. The tables here presented refer to the base case scenario, that is reflected in the existing master plans. This base case scenario presupposes an increase in water supply coverage to 74 percent in 2003, while sanitation coverage increases to 66 percent. 12. In order to extrapolate the investment requirements to the rest of the country, per capita investment standards have been used. These per capita investment standards have been differentiated for investments in water supply and sewerage as well as rehabilitation and expansion investments. These pr capita investments have been based on a detailed study carried out by PRONAP based on an analysis of the exisiting master plans of a number of water supply companies. The data from this study are subsequently being set against parameters such as water supply and sanitation coverage, type and age of the production and distribution system, maintenance plans, and per - 57 - capita water consumption. On the basis of this analysis, the following assumptions have been made: * Investments aimed at institutional and commercial improvements show important economies of scale. The investment cost range from US$ 47 per customer in systems with populations less than 50,000 to US$ 8 per customer in system with population sizes exceeding 250,000; * Rehabilitation of the water supply distribution network is expected to cost about US$ 18 per customer, whereas general rehabilitation of the water supply system costs about US$ 12 per customer; * Rehabilitation of the sewerage distribution network is expected to cost about US$ 54 per customer, whereas rehabilitation of the sewage treatment plants is expected to cost about US$ 20 per customer; * Expansion of the water supply distribution network will cost US$ 70 per new customer, and a general expansion of the water supply system will equally cost US$ 70 per new customer; * Expansion of the sewerage system will cost about US$ 100 per new customer; an increase in the sewerage distribution network will be US$ 80 per new customer and an augmentation of the sewage treatment capacity will cost US$ 80 per new customer; 13. On the basis of these per capita investment standards, the investment requirements of the total urban sector in Peru have been calculated, after the needs for rehabilitation and expansion have been determined using the type of production system, its age, the present level of coverage, the current level of service delivery, and per capita water consumption. Thble 14 presents the investment requirements for the sector. 3. Medlum-tern Investment Financing 14. The financing of the investment programs has been based on the following assumptions: * Internal cash generation should be an important source of funding. It is assumed that the financial performance of the companies improves such that at least 25 percent of the investment programs can be financed through internal funds. It is obvious, that a further improvement in the financial performance of the water companies would result in increased possibilities to finance investment programs internally; * The government transfers through the Treasury should be kept at an absolute minimum, restricted to the first years of project implementation in order to assist the water supply enterprises in their process of financial adjustment; * The external funding through multilateral (i.e, IBRD and IDB) and bilateral donors have been included if these funds have already been committed. -58 - 15. On the basis of these assumptions, there is still a considerable gap between investment needs and their financing as can be seen in table 14. Internal cash generation will finance 38 percent of the total investment costs. The internal generation of funds of the water companies that have been investigated is slightly higher as these companies can benefit from econmies of scale in their operations. Already committed funds through external finance will contribute about 17 percent of total investment costs. The already committed government funds will contribute an additional 2 percent. Thus, leaving a financing gap of 43 percent in the base case scenario. As smaller companies have less access to external finance, their financing gap is subsequently much larger. 16. This gap could be financed through government funds, such as FONAVI and FONCODES. As has already been discussed in previous chapters of this report, the current funding mechanisms for the sector, in particular FONAVI and FONCODES, have to be reorganized in such a way that they support the sustainibility of sector invesmtents. FINANCIAL PROJECTIONS Table I . EMUSAP-ARANCAV. FINANCIAL STATEMENTS & MONITORING INDICATORS. Period 1994-2003 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 INCOIE STATEi%lENT Million S Opeating Revenues 0,39 0.46 0,48 0,68 1,01 1,09 1,29 1,' 44 1,54 1,73 Operating Costs 0,30 0,30 0,30 0,31 0,34 0,35 0.37 0,39 0,41 0,43 Income before depreciation 0,09 0,16 0,18 0,37 0,68 0,74 0,92 1,06 1,13 1,30 Depreciation 0,06 0,06 0.07 0,11 0.17 0.22 0,29 0,31 0,33 0,34 Operating Income 0,03 0,09 0,11 0.26 0,51 0,52 -063 0,74 0,81 0,96 riianciial rxpenscs 0,00 0,00 0,00 0,00 0.04 0,13 0.29 0.45 0,46 0,43 Naxes 0,01 0,03 0,08 0,14 0,12 0,10 0,09 0,10 0,16 Net Income 0_0_2_ 0,_0_7 0_08 0,18 0,32 0,28 0,24 0,21 0,24 0,37 FINANCING FOR TOTAL Million S Million S % INVESTMENT Investment 0,5 0,35 0.35 1.45 2.39 2.11 2.61 1.03 Or54 0,34 11_36 itemal cash 008 0,13 0,15 0,29 049 0,30 02 0,35 0,35 0,38 3,17 2% Fonavi 0,00 0,00 0,00 0100 0,00 0,00 2.00 0.60 0,00 0,00 2,60 23% Govenunent Donations 0,45 0,20 0,20 1,10 0,00 0,00 O00 0'0 0,00 0,00 1,50 13% IDU1 0,00 0,00 0,00 0.00 1,17 1,03 0,21 0,00 0,00 0,00 2,41 21% Other external (KFW, ghno fraices,..) 0,00 0.00 0 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0.00 0% Othecr sources -0,18 0,02 0,00 0,06 0,73 0,58 -0,12 0,07 0,18 0.16 1,68 I5% Total sources 0,35 0,35 0,35 1,45 2,39 2111 2,61 1,03 0054 0,54 11,36 100% M)NIT)IIING; INDICATORS Oprational: Total population Thousand 49,40 52,90 56,70 60,70 65,00 68,60 72,40 76,40 80,60 35,00 Water Service Coverage % 80% 81% 82% 83% 84% 84% 85% 85% 15% 835% Sewerage Service Coverage % 53% 58% 61% 63% 84% 84% 85% 35% 85% 85% Volume water produced (m3) iousand 2236 2274 2310 2441 2666 2850 3047 3258 3483 3723 Volume water billed (n3) Thousand 1406 1448 1490 1616 1846 1995 2133 2281 2438 2606 1 inaccounted for Water % 37% 36% 35% 34% 31% 30% 30% 30% 30% 30% Fin.aicial Average Tarif USS/m3 0,25 0.28 0,29 0,38 049 0.49 0,54 Or57 Or57 0.60 Average Operating Revenue USS/m3 0,27 0,31 0,32 0,42 0,55 0,55 0,60 0,63 0,63 0,66 Working Ratio % 77%/'. 66% 62% 46% 33% 32% 29% 27% 26% 25% Operating Ratio % 92% 30% 78% 62% 50% 52% 51% 496 48% 44% 1lCt Scrvice Cove:age times 12,24 4,94 2,79 1,53 1,32 1,50 Internal Cash Generatianfinvesutment % 22% 37% 42% 20% 21% 24% 20% 35% 66% 71% Твh1е 2.SF.11A-(:1111►1ПUТЕ . FINANCIAL 3ТА7'EMENTS дг М()N1TURIN(:1NUICATCIR3. Рег1о� 1994-200J SEUA-C111111111)'ГЕ Unldвdes 1994 1995 1996 l997 199а 1999 2000 2001 2002 200) 1NC'()1►1Г. S'1'А7'F.1►1F:N'Г 1111111on S ( alin 12evrnucs Э G8 5,19 5,61 6,23 6 89 7 19 7 64 7,78 7 91 8 05 ralin Cos1s 4,04 4 ОЗ 3,91 3,95 Э,93 Э,96 4 12 4,17 4 21 4 26 lгкмnе Ьеkие д ссгвtгмг -0 Эб f,13 1 70 2,28 2,94 Э 2Э З 32 3 61 3 70 З 79 l) eciaiion 0,22 0,)0 0,Э7 0 45 0,33 0,66 0 77 0,90 1 0S 1,25 ralin lпсмпе -0 58 0,83 1,73 1,В3 2 39 2 37 2 73 2 71 2 6S 2 S4 finaмia) 1; �а 0 19 0 1 S 0 24 0 45 0 31 0 44 0 47 0 61 0,64 1 16 'Гака 0 00 0 41 0,32 0,41 0,36 0 G4 0 68 0 63 0 34 0 41 Ne1 1псм11е -0 77 0 49 0 76 0 97 1 31 1 49 1 60 1 46 1 27 0 96 F1NAN('1N(: Fl)К 7'UTA1. Millioп S Mi11iм1 ! % 1NYES7'A1ENT lnveslment 0 49 7 14 2,90 ) 21 4 09 4 07 4 60 3 26 3 91 7 90 11 09 1л1етаl cash -) 02 О,Э2 0 бб O,BU 1 12 1 87 2 09 2 09 7 04 1,93 12 90 31 Ч° Falavi 0 00 0 00 2,16 Т 03 0 00 0 00 0 00 0 00 0 00 0 00 4 21 10!'• Govпnmenl Donaliau 0 00 2 82 0 00 0,00 0,00 0,00 0 00 0 00 0,00 0.00 2,В2 7•.: 1UU 0,00 0,00 0,00 U,00 0,00 0,00 1,В1 2,91 ),90 3,76 14,78 355: сw,п смп,lаl кгw, ь11о ггвг,с�,.. о,оо о,оо о,оо о,ио о,оо о,ло о,оо о оо о,оо о,оо о,0о us: (>111п sоигса 1 3U 0,00 0,09 O,1G 2,97 2,20 0 71 0,26 -0,02 0,21 6,78 16;: Q �1 и1а1 sources 0 49 3,14 2,90 З,21 4,09 4,07 4,60 3,26 3 91 7 90 41,09 10U!: С ЛlUN1TOlt1NC 1NЫCA'1'О!1S , ( кгаtiмlлl: То1л1 ulalion 1lausanJ З 1G 40 )21 90 ]27,50 J33 20 З)9 W 344 80 330 10 356 70 Зб2 SO Эб9 30 Wа1п Service Соь•сга с !: 8SY• 83% 8SЧ• 8S!4 85'rL В3'rL 8S'/• 8S'/• 8S9G 8S•ifi Sewпa е Service Covera е % 80% 80% 81% 80'/• 81% 81•/. 81% 81'/• 80•�f1 80•/i vоlппlсогЧа�п 1гмt11сга Зi�lгrгlЭ 2гз13 22зи9 22us4 22.i43 224ои 22s22 2з931 24З47 2477о 2sгоо vоlппlсог��аlпь�иса '1иоп��и 1ив0 119Зл 12г�4 13646 1s1u6 1s76s 167s2 17043 17Зз9 17640 Unaпouolcd fiп Wa1er •.: 49Ч• 4Тi 44% ЗЧ'/• 73% 30% ЗО'/• 70% 3U'/• 30% 1'111atN'1а1: Avcra с'1'лгiП' US51гr1J 0,35 U,42 0,44 0,44 0,44 0 44 0,44 0,44 0 44 0,44 A�rra е 1 кгаliп Rrrcnue USflгггЭ U,J2 0,4Э 0 46 0,1G 0,46 U,46 0 4G 0,4G 0 46 0 4G Wмki11 Raiio !4 110% 785; 70•/. 63% 37•/. 33•/. S4% 54SL 37•/. 53•�L ( кглliп Ка1iо !i 116% 84% 7G•/. 71!i 63•/i 64•rL 64% 6S•.L 67•�i 68•ii U.1d S.lvice Сиvпв е tinкs А 14 1 S1 1,92 1,75 1,R8 J GO 1,77 ]]) 2 82 2 J3 (nlernal Cash UencгaliмJlnvcslrne111 •.: -209!'в 10Че 27•h 25!4 27% AG°.i 45°/i 40SL )47i 24•.L Table3 . SEIIAMIIIIA14CAVO. FiliANLIAI.STATEMIENTS&MONITORIN('INIJICAToIt& Period 1"4-2003 SEDANIIIUANCAVO Unldada_ 1994 1"s 19% 1997 1998 1"9 zoo 2001 2002 2003 A INCOME SUATWOENT Aluflon 5 ( ,cating Revcnists 2-12-9 229 2.47 2177 2,90 3,03 3,44 4,22 4,36 4,49 nwalifig Costs 1,45 1.43 1.43 1,96 1,95 1,?3 2,05 2,12 2,19 1,16 ljwuqjic Itclive c1cpteciation 0,84 0.84 1.02 0,91 0,95 1,12 1,39 2.10 2,17 3.33 Dereciatim 0,14 019 0.24 0.29 0,31 035 039 0-41 0,43 0.47 ( Vcfalillg Income 0170 0,65 0,78 0,63 0.63 0.77 1.00 1.69 174 219-6 Financial Expenm 0.00 0.00 0 ' 09 027 0135 0.35 0 ' 35 0-13-4 033 0,31 ,raxcs 0.21 0.20 021 0,11 0,08 0,12 0,20 0,40 042 0.76 Nct l1wonte 0.49 0,16 0.48 025 0.20 0.29 0.46 0.94 0,99 1,79 FINANCINU FOk TOTAL Million 3 Million S % INVFMMENT I I IfIved"WCni 0.01 2.00 2.00 1.50 1,50 1150 1130 1,01 0,81 I.Al 13.42 liatcmal casli 0.63 0,65 0,72 0.53 0.51 0,64 0,84 1.13 P1220 2,03 8.24 61% Fosisvi 0.00 0,00 0,00 0100 0,00 0.00 0.00 0.00 0 00 0.00 0.00 Ofs Gownumit Douslions 0,04 0.00 0100 0.00 0100 0100 0,00 0,00 0.00 0100 0.00 0014 1013 0.00 0.00 2.51 2,20 0.00 0.00 0.00 0.00 0,00 0.00 4,71 35% OdwF cxlemal (KFW, &!Lm Banccs,..) 000 0.00 0,00 0.00 0.00 0100 0.00 0100 000 0.00 0,00 oat Other sources -0166 1,35 -1.22 - I,Z3 0,99 0.96 0.46 -0-12- -0,39 .0,22 0,48 4% 1,01al Sources 0,01 21N 2,00 1,50 1,50 1.50 1.30 1,01 0,81 181 1342 1000A NIONITORING INDICATORS Olyratimal: Tulal 1XVIR11alion 'Ilxmsand 28400 294,40 304.70 313 39,70 35240 36570 37970 391,30 Walcr Service Coverage 14 96% 86% 94*4 89% 88% 89% 90% 90% A 90% Sc,.%crasc Service covef age % 79% 80% 79% 74% 74% 79% 80% 81% 91% 83% Volisnic of wafer prmbwcd (NIJ) I'laousaW 17611 17610 17619 18133 19915 19863 20837 21624 22452 23218 Volume of water billcd (W) 'llsomaxi 11741 11743 11745 12345 13051 13904 14596 1 15137 15716 16253 (111accotimcd rm watcr 33% 33% 33% 32% 31% 30% V304A J 306A 300A 30% Financial: Averagc Tmiff USS/n%3_ 0,15 015 0,17 0,18 0,18 0,18 020 0,24 0,24 0,24 Avef agc Opetating Revenue US$/nt3 0,20 020 0,21 0,22 0,22 0,22 0.24 0,29 028 0,29 Wotking Ralio % 63% 63% 59% 67% 67% 63% 600A 30% 504/0 2604 Operating Ratio % 691A 72% 69% 77% 79% 75% 71% 60% _ 6004 36% L)ctd Service Covaagt liorm #DIV/O! NDIVIOI 8.65 2.96 244 2,92 3,38 2,99 3,17 4.80 In1cmal C&A GcnetationtInvestinent % , 6304% 32%. 36% 35%._ 14% 43% 65% 112% 149% 112% Тв�1е 4. SF.1)A.IULUCA. f1NANCIAL 3'ГATF.MF.NT3 � MtiN1T(1R1NC 1NПIСАТONS. Рег�од U94-2003 SE1)AJlI1,1ACA Uпlдвдеа 1994 1995 1996 1997 1998 1999 2000 l001 !00! 2007 А U 1fVCU�1E S1'ATM:M11l's1V"1' (11(1Uun f alin Rпrnues 1 31 2 43 2 31 2 04 2,З0 2 9Э З 68 З 84 4 01 4 82 кгаliп Coata 114 1,24 1,28 1,Э3 1,Э9 143 130 134 138 162 liкопкlкГоге кiвliмг U,36 1,21 123 069 092 149 217 229 2,4Э З 0 Lh нкiаliм� 0,17 0,2З 0,29 О,З3 О,З9 0,48 0 37 0,61 0 63 0,68 ( �.а���� ькw,к о,2о о,98 о,9з о,эs o,s2 1,о2 1 бо 1,Ьв 17в 2 s2 F���>,к�а1 с са о,оо О,о0 о,0о o,OS о)б о,зо о,sЭ о ь9 о,7з о 7з Таха 0 ОЬ 0,29 0,2Е 0 09 0,11 0 22 0 Э2 0 ЗО 0 З 1 0 31 Ne1 1�ка�к 0 14 0 69 O,G3 0 20 0 26 0 31 0 73 0 69 0,7Э 1 26 FtNANC1N(; FUH'f()ТА1, Million S Million f •.: 1Г1VF.STMEN'f lnveatmm( 0,27 2,37 2,56 2,OS 19U ] JO 7,90 1 6! 1 37 U,92 20,J9 lidпnal cash 0,Э0 0,92 0 93 0,33 0,63 0,98 1 J3 1,18 0,90 1 40 8,Вб 4)•�: Fonavi 0 00 0,00 0 00 0 00 0 00 0 00 1 30 0 32 0 64 0 00 2 бб 1)!4 ' Govenикnt Uonatiau 0,00 1,63 0,70 0,00 0,00 0,00 0 00 0,00 0,00 0 00 2 l3 12% N 1UB 0,00 0,00 0,00 1,46 1,25 2 46 1 26 0 10 0 00 0 00 6 Sl Э2Ч. ' (lthп ехlсмаl kFW, 1мю Gа�ка,.. 0 00 U,00 0,00 0 00 0,00 0,00 0 00 0 00 0,00 0 00 0 00 ОЧ• (hlкг souroes -0 04 0,00 0 9 t 0,04 0 00 -0 14 -0 19 -0 1! O,OI -0 48 0 00 0•/. 7'о1а) sоигси 0 27 2 37 2 36 2 U3 1 90 З l0 З 90 1 63 1 S7 0 92 20,З9 100Ч. 1111)N1'I'U1t1NG 1N1)1СА'fO11S Кt в11(Ч1А1: •1-ма� г��а(�оп �iюоаа��е 170 ь0 178 40 186so 194,9о гОз 70 21 з оо 22z,эо 2зг,sо г4з бо 234,бо Wа1п Savice Covпe о % 39•/в 60!4 61•/в бб'/i 68% 68Si 70% 70•�i 70it 70•/. Sеи•ега е Sпviп Covпs е % 47% 46•/. 48•iG 31•�fi 3)•/в 33•/. 38% 679L 615L 62•h Vulunx of и•аlгг гмlисеJ �1З 1lюиsа»д 3792 6197 6J21 701Э 7Э84 78З0 8359 8926 9]Э2 9738 Volwne of walпbilled A1J '1lюиsид 4651 1938 30G5 5160 5Э90 5481 3991 6248 6532 68Э1 ипассо�иисд г« wa�« •i. 2оч. 20•ti 2ох 2s•А 27v. ]о•ti зо•,с зо•ti 7ох зоv. Fiuyкiвl: Аvпа с Tari(Г USf/nil 0,29 0,29 0,29 0,Э3 0,79 0,49 0 3д 0 36 0,36 064 А�•е» с alin Revenue USShnЭ 0,Э2 0,30 0,30 0,39 0 43 0 33 0,61 0 61 0 61 0 7! Ч'�xkin Ra1io % 7G% 31% 31SG ЬЬЧ• GOY• 49•ri 41•h 40% Э9Ч� Э4•h кгаlin Ка1iо % 87% 6U% Ь!•.L 8i!4 77•R 61SL 36:t 36% 3GSi 48% ueW Scrvice lovпa е linкs NUlV/01 N1)1V/0! NU1V/01 11 OS 5 13 4 Э2 З 3З 2 43 1 74 2 11 1п(emal Cash CпкralюtЛnvea�nrnl `/в 1) S•iL 3G'h ]7Ч• 27•/. З4% ЗО•/. З4!t 73SL 38!S 132Чв Table 5 AIRMALORETO. FINANCIAL grATEMENTS & MONITORING INDICATORS. Pe" 1"4-2003 SEDALORETO UnIdades 1994 1995 19% 1997 19" 19" 2000 2001 2002 1003 A B INCOMF STAMMENT Million S "vating Revenues 4,03 3,30 3,69 6,26 6,91 7,33 7,80 8,20 8,63 8,95 Operating Costs 3.75 3178 3,82 4 11 423 4.36 453 473 4.91 5,07 Inconte before depreciation 0.29 1,53 1.87 2.15 1.67 2.97 3.23 3.47 3.72 3,99 Delveciation 016 021 0.27 0,34 0,41 0,49 0,57 0,65 0,75 0,84 Operating Incorne .0,13 1,32 11-61 11-31 2,26 2,49 269 2,82 2,97 305 Financial Expenses 019 0,29 0,45 0,64 0,70 0,67 0,64 0,62 0,59 Taxes 000 093 3 0,39 041 0,49 0,54 0,60 0,65 0,71 P0,74 Net Income -0 , 06 0,78 0,92 0,95 1,13 1.25 1.41 1.52 1.65 1,72 FINANCING FOR TOTAL Million S Million S % INVESTMENT lnvcsbncnt 000 2 250 2$80 3,00 2'" 3,30 3,35 3,85 3,95 27,55 Internal cash -0.37 0,51 0.71 0,92 0.94 1.30 1,74 j 94 2.16 2,33 12,67 4616 Fonavi 0 .00 0,00 0.00 2.00 1,50 000 0 00 0-0-0- 0,00 0.00 3.50 13% Govenunent Donations 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0,00 0.00 0100 00/0 1011 OtOO 1,52 1.91 0,10 0,71 0.00 0.00 0.00 0.00 0.00 4,13 15% Other exlcrn&l (KI:W, JIM fF1UVCeS,..) 000 000 0.00 0,00 0,00 0.00 0,00 0,00 0,00 0,00 0,00 0% Other sources 037 -0,03 -0.02 -0.12 -0,15 1,40 156 141 1.69 1 52 7125 26% -ZL __U Toul 30UrCC3 0,00 2,00 2.50 2.80 3.00 2.90 _3,30 335 3.85 3.85 27.55 100% MONI-IORING INDICATORS 011cratimal: Twal jKlytolation '11wousancl 321,08 332,00 344,00 356,30 366,70 380,30 396100 40 _!03,00 418.00 430,00 Water Service coverage % 65% 65% 67% 69% 69% MA 710,16 72% 75% 77% Sewerage Service Coverage 33% 33% 38% 39% 40% 4 0% 40% 500/0 50% 50% Volume of water Fwoduccd (M) 1housancl 19976 18993 19132 21137 22052 23037 24652 26013 27471 28581 1 Volurne of water billed (M) lbousand 11441 11830 12909 13563 15106 16126 17256 19209 19230 20007 Unaccounted for Water % 39% 3 IMA 33% 3654 31% 306A 30% 304/ 304A 306A Finwicial: Average Tariff USS/m3 0,32 0,40 0,40 0,42 42 042 042 0,42 0,42 0,42 Average Lhmating Revame- USShn3 0.35 0.45 0,44 0,46 0.46 0,45 0#45 0,43 0.45 0.45 Wmking Ratio % 93% 71% 67% 66% 61% 590/0 58% 59% 3704 3714 (hVelaling Ralio 5& 970A 75% 72% 71% 67% 66% 66% 66% 66% 66% Mill Scn-icc covass! fitnes 0,43 1,75 1.93 1.89 1.75 1 2,61 2.93 321 3,55 3,84 Internal Cash Genevation/Invesfamcni % #DIV/Of P26% 29% 29-A 1 52% 1 53% _13lik- 56% 61%4 Table 7 SEDAPUNO. FINANCIAL STATEMENTS & MONITORING INDICATORS. Peeiod 1994-2003 SEDAPUNO Unidades 1994 1995 1996 1997 1998 1999 2000 2001 2002 20031 INCOME STATEMENT Million 5 Opyating Revenues 1,24 1,46 1,8-6 1193 2.08 23-3 2 3,25 3,40 3,46 Operating Costs 0,99 1,20 1,20 120 ,2 I 20 1.22 1,39 I,41 1,4 Income before depreciation 025 0.26 0,66 0.73 0.88 1.13 1,25 I 86 1.99 2. Depreciation 009 0,13 0,i9 027 0,31 0,36 0,41 04'9 0.52 0,56 Operating Income Orl6 0.13 0,47 046 0.57 0.7 0-.8.4 1.38 1,46 ,4_ Fmiauncial Expenses 0_00 0,00 0,00 0,08 0,20 0,27 035 0,42 0 Taxes 005 0,04 0,14 0,11 0,11 015 0,15 0 0,31 0,31 Net Income 0,1I 0,09 0.33 0,26 0,26 0.35 0,35 0,67 0 0,72 FINANCING FOR TOTAL Million S Million S % INVESTMENT Investmend 011 150 270 3.13 1,50 2P 2.00 3,00 I50 Ir50 18,83 Internal cash 020 0.22 0,52 0,54 06 0 0 6 I 1,13 32% Fonavi 0,00 0,00 0,00 1,36 0,00 0,00 0,00 0.00 0,00 0,50 1,86 10% (ovenment Donations 0,00 0,00 0,00 0,00 0.00 0,00 0,00 0,00 00 00 0% IDD 0,00 0,00 0,00 0,00 1,03 1,20 I,37 0,86 0,00 0.00 4,46 24% Other external (KFW, gimo frances,..) 0,00 0,00 0,00 0,00 0,00 0,00 000 000 0 000 0,00 0% Otler sources -0,09 1,28 218 1,24 0,01 0.20 -0,01 1,10 0,37 0.04 6,40 34% Total sources 011 fr50 2,70 3,13 150 200 2,00 300 150 10 18.33 100% MONITORING INDICATORS Operational: Total putlation 11tousand 136,0 139,00 141,60 144,10 146,80 149,60 152,30 155,10 158,00 161,00 Waler Service Coverage % 78% 78% 79% 79% 80% 30% 82% 81% 82% 82% Sewerage Service Coverage % 56% 56% 57% 64% 65% 65% 67% 66% 65% 67% Volunc ofwater produced (Af3) Tlhousand 5138 5118 5188 5188 5198 5242 3403 6878 7093 7228 Volune of water billed (M3) Thousand 3252 2556 2718 2819 3041 3407 3620 4746 4965 5060 Unaccounted for Water % 37% 51% 48% 46% 41% 35% 33% 31% 30% 30% Finrancial: Average Tariff USS/m 0.33 0.49 0.59 0,59 0,39 0,9 0-59 059 0,59 059 Aerage .rting Revenue USS/n 0,38 0,57 0,68 0,68 0,68 0,68 068 0,68 0,68 0.68 Working Ralio % 80% 82% 64% 62% 58% 52% 49% 43% 42% 41% Operating Ratio % g7% 91% 75% 76% 73% 67% 66% 38% 57% 37% Deb Service Coverage times 7,57 2,49 2,58 2,40 2.96 3,05 2,24 IntcmalCashGenerationVinvestncnt % 185%15% 19% 17% 31% 30% 32% 35% 75% 64% '/ &I ТвЫе 8 S1:1)ACUSCU. FINANCIAI, STATEIIlF,NT3 �г MUNITURINC 1N1/1CATURS. Рсгlоб 1994-2003 SEUA(:USC:O Uаlдвдн 1991 1995 1996 t997 1998 1999 2000 2001 2002 200Э А 8 1NCUt\1Е STATEAIENT П1110оп 3 ( ка1и� Ке�•rnип 4,1В 6,.12 649 10,08 1042 12 Е 1259 1290 1Э,04 1.1,58 (1 кглlih Costs 1,91 3,02 3,14 6.80 6,90 7,02 7 14 7 27 7.ЗЗ 7 33 lncмne lкГаге дс ecialiлn , 2,27 1,29 1,З3 З 28 З,32 3,26 3 44 3 G3 5,71 Ь,ОЗ rпialion О,З3 O,BG 1 ОЗ 1,17 1,Э0 1,40 1,30 1 GO 1,70 1 80 га1�п 1nсп,�к 192 о,4з о з2 г,11 2,22 з,вб З 94 4 оз 4 ог 4 2з Finaгкial Е isн 0 00 0 41 1 00 1.29 1,44 1 46 1 42 1 ЗЬ ( 28 1 21 Таrн 0 37 0 01 0 00 0 24 0,27 0 72 0 76 0 80 0 82 0 9 t Nellrrcorгк 1 З4 O Of -0 68 0 37 O S3 1,6В 1 77 1 87 1 91 2 12 FINANCINC ГО1( ТОТА1, М1111оп S Million S Ч. l,vvFS'ГЛfLNr lnvestn►rnt З 97 20 43 6.77 3 46 3 19 З 97 З,97 З 97 З 97 З 97 37 70 1п1ппаl сиh 1,69 0,88 0 19 1,45 1,53 2,70 2,89 2 Э7 2,50 2 В1 17,З2 30% fm�svi 0,00 2,40 2 00 0,28 1,02 0,00 0,00 0,00 0,00 0,00 3,70 10•�G ио.пппкп(1ю�wl�wu г,бs s,4з 2,68 о,а4 о,84 о,оо о оо о,оо о,оо о,оо 9,во 17sc 1<)1) 0,08 1,17 2.00 2.87 U,00 0,00 0,00 0,00 0.00 0,00 6,00 10•А. � сnlкг гаlгпгаl t;rw, ыЮ гга�кн,.. О,оо 1о,9о о,0о о,оо о,оо о,оо о,оо о оо о,оо о оо 1о,9о 19ч. � ih)кr sоигсн -0 43 -0 29 -0 10 0 02 1,79 1 27 108 1 GO 1 46 1 16 7,99 t4•/. � Тда1 �rnпсн Э,97 20 43 6 77 3,4G 3 19 З 97 З 97 З 97 З 97 3 97 37 70 100•/. D1t)N1'1'1)1t1NC 1N!)1САТ1)цS U enUonal: Тда1 ulalion 71wu»ик! 280 9 290 6 297 4 ЗОЗ 5 З! 1 9 З 1 S б l26 0 ЗЗЬ,О З41 S З5Э Е Wa1er Sпvice Covera е Si 89SL 89'/. 89SG 909L 90•iL 90•.G 90% 90SL 90Х 90'�ir Sеи�сга е Sп��ice Сп�•па е !4 64!4 GG•/в 68••i 69•rL 70Ч• 71SL 72% 72••i 72% 72% \'оlитс оГwаlп x�xцiceJ А1) 7lюusand 10877 11З8З 11822 180G3 18444 18898 19Э75 19867 20076 2090З \'оlипкоГи•alcгMillcJ М1 llюusand 7120 8026 В042 12484 12911 1З229 17SЬЗ 1З904 1403З 146З2 UnaccoиdгJ Гог Wa1er •.G )3Si 29•/. З2SL 31SG ]0% ЗО•.t ЗО% ]0•.G ЗО•.i ЗО•/. Flnмггlвl: Аvггв е 7�ariR USцnt3 0 S3 0 G9 0 76 0 76 0 76 0 87 0 87 0 87 0 87 0 87 Avcra е ralin Revп�ue USS/nil 0,39 0 79 0,81 0,81 0 81 0 9З 0 93 0,9З 0 9З 0 9) Ч'orkin Ra1io % 46% 80•/. 79SG 67% бб% 37% 379i 36% SGY. 36•/. atin Ratio % 34% 93% 93•/i 79% 79•iL 69'/. 69% 69•b 69% 69•h рсЫ Service Соvпа е limes S65 32 З,14 1 16 1,91 1,88 2,47 2,61 1 96 2,05 2,21 1п1пnа) Сад� ticncraliм✓lnvсяlпкп( Ч• 4.1•iL 4Ч• .1Ч• 27% .11М/• 6R!t 71!4 ЬП•/. Ы•/. 71!�i '1 вЫе 9 tiИ:11A1.111. F'11VANt:1A1, 51'А'1'F MM:N'1'S a. M()N1'1'!)1t1N1: 1N1111'А'1'1/1tti. 1'нlод 1991-2WJ Table 9 SEDALIB FINANCIAL STATEMENTS& MONITORING INDICATORS. Period 1"4.2003. SEDALIH I"Al I"s 19% 1"7 19" 19" 2000 2001 2002 2003 A INCOMESTATEMENT Million Opeatinit Revenues 7194 1194 11197 12,15 12,47 1280 13,13 13,61 13,67 14.23 OperatinIt Costs 9110- 10,94 7,13 6,78 6,18 6.34 6,42 6,55 6.74 6,90 Income before depreciation -1.16 1,10 4.84 5.37 6.29 6.46 6.71 7,06 7.14 7.33 Dgweciation 0.gg 1.13 1.63 2,13 2.21 2.31 242 2,54 2,67 2,90 Operating Incotne -2,04 -000 3-12-1 324 407 4115 429 452 447 4.53 I-, -.L -Ztz 042 Financial Expenses 054 125 0,28 0,40 0,45 0,42 0,42 0.42 0,42 1 16 Taxes 000 000 0,gg 0,85 1,09 1,12 1,23 1,22 1,23 271 Net lfxvrm -2,58 -1.29 2.05 1.98 V4 2,61. 2.87 2.84 2.88 FINANCING FOR TOTAL Million S Million S Investment 690 10.00 20.00 20,00 3,23 3.89 4,30 4,92 5.11 5.52 76.89 Internal cash .1.96 -0.42 3,41 3.95 4,48 4.91 5.12 5140 5.50 1 5.67 37.92 Fonavi 0.20 0,00 0,00 0.00 0,00 0,00 0,00 0.00 0,00 0.00 0.00 Govammit Donations (INADE) 6,90 4.95 6,86 7,06 0103 000 0,00 0,00 0,00 0,00 18" 1 0.00 0,00 0.00 0.00 IDB 0,00 0.00 0.00 0,00 0,00 -LLZ.'L- 0,00 0,00 KFW 0.00 4,07 g,00 8,00 0,00 0.00 0,00 0,00 0,00 0,00 20.07 Odm sources 1.76 1,73 1.09 -1,26 -1,02 -0,82 -0.58 .0,15 0.00 Total sources 6.90 1000 20,00 20100 325 3,9-9 4,30 4.92 5.11 5.52 76,99 MONITORING INDICATORS I - Total population ThouswW 653,8 F670.7 699.1 706,1 724,11 744.0 7641 794,9 806,4 821,0 0 0 Water Service Coverage % 94% 94% 95% 95% 95% 95% 95% 95% 95% 95% 10 SeweraLe Service Coverage % 95% 93% 96% 96% 86% 86% 96% 85% 86% 86% Volurne of water produced (M3) T1mswW 35993 35551 42949 49969 50168 51804 52"1 54429 55523 57465 Volume of water billed (M3) ThousarW 32846 336" 33769 34279 33199 36121 37034 39400 39149 40225 Unaccounted for Water % 9% b5% , 21% 30% 300A 30% 30% 29% 29% 30% Financial: 0 15 Average Tariff USVm3 0.22 033 0,33 0,33 0,33 0,33 0,33 0,33 0,33 0,33 Average Operating Revenue USVm3 0.24 0.35 0.35 0.35 0.35 0,35 0,35 0,35 0.33 0.35 Working Ratio % 115% 91% 60% 56% 50% 30% 49% 49% 49% 49% Operating Ratio % 126% 100% 73% 73% 167% 68% 67% 67% 68% 69% Debt Service Covange times_ 4,46 0,73 7,24 1 6.70 1 7,20 1 12,42 12,94 1363 13,89 14,34 Internal Cash GencrationfinvesUnewd % -28% -4% 170A I 190A 1 139% 1 126% 119% 112% IWA 103% Table 10. SEDAPAR. FINANCIAL STATEMENTS & MONITORING INDICATORS Period 1994-2003 SEDAPAR Unidades 1994 1995 19% 1997 1998 1999 2000 2001 2002 2003 A I INCOME STATEMENT Million S Opeating Revenues 12,95 1577 16,67 18,08 19,94 21,66 23.15 24,04 2497 25,66 Operating Costs 11I,07 11,20 11.48 11,9 12,04 12,37 12,72 '13,08 13,46 13,74 Incomebefore depreciation 1_88 4_56 _ _19 6,19 7.90 9,28 1 1095 ISI II91 Depreciation 1,54 1,79 2,04 2,56 3,03 3.29 3 3,59 3,74 3,86 1 Operating Income 0,34 2,77 3,15 3.63 4,88 6,00 6,9 7.37 7,77 8,05 Financial Expenses 0,26 0, 07 1.34 1,69 1,80 1,75 164 1,52 1,41 Taxes 0,02 066 0,68 0,69 0,96 1.26 157 1,72 1,87 1,99 Net Income 0_0_6_ Ir53 1,59 1,60 2.23 2.94 3.67 4.01 4,37 4,65 FINANCING FOR TOTAL Million S Million S % INVESTMENT Investment 6,00 10,00 10,20 20,76 18,52 10,43 6,00 6,00 6.00 5,00 92,91 Internal cash 1,60 3,00 3,32 3.53 4.39 5,30 6,18 6,67 7,18 7,58 4 51% Fonavi 383 0,00 3.83 2.73 0,71 0,00 0,00 0.00 0100 0,00 7,27 8% Govenmment Donations 0,00 0,00 000 0,00 0,00 0,000 0 0,0 0 00 00 0.00 0.00 0% IDB 000 0,00 0.00 0,00 0,00 000 000 0,00 Or00 0,00 0100 0% KFW 3.02 8,73 0,81 11,69 12,09 5,56 0,00 0,00 0,00 0,00 38,88 42% Other sources .2,45 -1,73 2,24 2,81 1,33 -0,43 ,18 -.467 -1,18 -258 -041 0% Total sources 600 10,00 10,20 20,76 18,52 10,43 6,00 6r00 6.00 5,00 92,91 100% MONITORING INDICATORS Operational: Total population Thousand 713,60 728,60 747,60 766,60 786,30 806,50 828,30 850,40 873,50 897,30 Watcr Service Coverage % 81% 32% 83% 85% 36% 87% 88% 89% 90% 90% Sewerage Service Coverage % 67% 68% 68% 70% 70% 71% 72% 73% 74% 74% Volume of water produced (M3) Thousand 44949 45748 47344 49710 50601 52523 54540 56635 58825 60442 Volume of water billed (M3) Thousand 22840 26002 27494 29816 32891 35719 38179 39644 41178 42310 Unaccounted for Water % 49% 43% 42% 40% 35% 32% 30% 30% 30% 30% Financial: Average Tariff USS/m3 0,55 0,59 0,59 95 0,59 0,59 0,59 Average Operating Revenue USSm3 0,57 0,6I 0,61 0,6 0,61 0,6I 0,61 0,61 0,61 0,61 Working Ratio % 85% 71% 69% 66% 60% 57% SS% 54% 54% 54% Operating Ratio % 97% 82% 31% 80% 76% 72% 70% 69% 69% 69% Debt Service Coverage times 17,14 14.31 3 2,79 2,72 2,94 3r31 3,61 3r93 4.24 InternalCashGeneration/Investment % 27% 30% 33% 17% 24% 51% 103% 111% 120% 152% ТвЫе 11 F.11(APA-TACNA. FINANCIAI. S'ГATFMF.N'fB/� М()N1TURINC 1NU1CA7Y1R4. Рег1о� t9f4-200� Е1►1А1'А•TAI;(VA Unldades 1994 1995 1996 1997 1998 1999 2U[Ю 2001 2002 200З А р 1N(:()f11E Sl'А'1'E�1ENT (111111оп f atin Revemкs З 82 1,36 3,38 3,72 6 09 7 21 7 64 7 93 8 S8 В,82 хтаliп Coscs 2 31 2 46 2,4G 2,46 2,3З 2 81 2,91 2 99 З 14 3 20 liкmne 1кГwе дс cciation t 31 2,10 3,12 З 26 3 3S 4,42 4 73 4 96 3,44 5,62 Uc ecialion 014 0,20 0,32 0,49 0,69 0,88 1,U1 112 1,19 1,23 alin 1�коте 1.17 1 90 2 80 2,77 2,86 3 34 3 70 ' З 84 1,23 137 Fina�кiлl С �иа 0 13 0 33 0 41 0 67 1,OS 1 22 1,23 1 17 1 07 1 16 Тахи 0,Э 1 0,47 0 72 0 6Э 0,34 0 70 0,7Э 0 ВО 0 9S 0% Nсllпсоме 0 73 ( 10 (,67 1,47 1,27 1,62 1,71 1 87 2,22 2,25 FINANCINC FUR TU'ГА1. Million S 1NVES7'(ь1ЕNТ Million S •.: lnveslmrn( 0 00 2 4S 4,92 6 77 8,00 7 30 6,20 З 30 2,69 2 38 44,11 1пlегпаl cash 0 87 1,17 1,70 1,6Э 1,ЗЗ 1 В2 2 03 2 ЗО 2 З7 2,46 16 81 ]8•/. Гм�а�•i 2,10 1,41 0,41 J,66 O,GO 0,14 0,00 000 000 3,З0 932 21•h с;о�спи�кпllюпаl�от о оо о оо з,1о о,оо о,оо о оо о оо о,оо о,оо о,оо з 1о 7•i. а 11)� 0,00 0,00 0 00 1,61 З 00 2 63 0 00 0,00 0,00 0,00 7,26 16•А оо (»1кг сл,п,�а1 кгw Ww Garкcs,.. 0 00 о,0о о а► и оо о,оо о оо о оо о оо о оо о оо о,оо о•,с � (Я1кг агwгса -2,97 -0 О8 -0,ЗО -0 13 3 07 2 89 4 13 1 20 0 Э2 -З 38 7 72 17•/. 12да1 чииггs 0 00 I 43 4 92 6 77 8 00 7 30 6 20 ] 30 2 69 2 З8 4411 100'/. П111N 11'111t1 N(: 1 N D11;A7'111tS (1 ггвllоnаl: 7'otal и dation '11�аisюиl 189 30 199,50 209,3U 22U,1U 2Э2,30 243,40 239,20 274 00 290,80 Э08,80 Wa1cr Sпvке Сиvпа •/. 93% 91% 92% 91% 91% 92•/. 92SL 92•/. 92•iG 92% Sеи�пл е Smice Covera е '/• 93Ч• 91•/i 92'/• 91% 91 Si 92•/i 92% 92Ч• 92•/. 92!'. Vulunкofwaler скlисиl А13 '1lюиsапд 11340 13189 13189 13169 1Э890 1631Э 17446 18132 19573 201Э4 Volunм of walcr Ьi11сд М) 1Ъоиsид 7З86 801Э 891G 9140 9723 11339 11212 12706 1З701 14094 Uuacпи�Mcd fot Watп % 3G•/. 39•/. 32% 3!% ЗО•А ЗО•�L ЗО•b 30•h ЗО% ЗО% Иlпаnгlвl: . n�•п. с Та<�п usvn►з о 47 о,32 o,s7 o,s7 о s7 os7 о s7 о 37 o,s7 о s7 Аvпа е atin Revrnue USLmЭ 0 32 0,37 О,бЗ 0 ЬЗ 0,6Э 0 63 0,6) 0 6Э 0,63 0 63 1Vcпkin Ra1io % 6GSG 34% 44% 4Э% 42•/► Э9'/. 38% 78% 37% 76•�i ( кгаliп Ra1io % 69•/. 3R•.G 3U% 32% 3)•b S1•/. 32•�L 32•.: SO% SO•�G Uс1д Service Covera е li�na 7 91 З,2S З,44 2,63 1 79 1 96 2,06 2 24 2,1Э 2,12 иlппаlс,:nсlс��гаl�оппп�с�„�п�1 х aulvro! 46х ЗЗ•а 24•i. 1т•ti 24v. Ззх бб•i. я8•�с 1о4•ti 7•вЫг 12 .F.IИАРА=ГU111ПГS. F1NAN(:1A1..SГATE111BN7'S Аг 111UN1•1•UR1N(:1N1/1CA7•l1NS. Рег1о� t994-200) E1►1APA-TUM11Ut:S Uгддвда 1994 1995 1996 1997 1998 1999 2000 200t 200I 2001 А П 1N(:UM11E S•ГАТЕM1IЕNТ 111UOon S atin Revawes 1 49 2,29 З 32 З 90 4,24 4 74 4 91 3 10 3 28 3,48 к►агь со� 2 о4 z,o8 2,а г,о4 2,о7 г 1о 21З 217 2 го 2,24 1nсм�х 1кГоге дс xeciлliar -O,3S 0,21 1,28 1 87 2,17 2,64 2 7В 2,9] З,08 3,21 Uc ecialion 0,28 0,Э4 О,З9 0,44 0,48 0 31 0,34 0,38 0,62 0,66 ( nliu lпсооК -0,8З -0,13 O,R9 1,42 1,69 2,U 2 24 2 3S 2,46 2,59 Pinarкial С• х пкs 0,З1 O,G6 O,G9 0 75 0 77 0,74 0,69 U 64 0,38 0 S2 Таха 0 00 0,00 0,06 0,20 0,28 0 42 0 46 0 31 0 36 0 62 Nсllгкопк -) 16 -0,79 0 14 0,47 0,64 0 97 1 О8 1 20 1 З2 1 41 F1NAfVC1P1C FuR 7'UTAL Million S М�111огг j ц 1NVESTM1IENT " lnvcalrrrcrd 5 98 2,50 2 00 2 00 1 50 1 1 Э 1,27 1 42 1 S7 1 S9 14 98 1п1ппаl caslr -0,Вд -0 R2 0,13 0 48 O,G9 1 OS 1 19 1 З4 1 40 1 37 7 ОЬ 47;: Fonavi 3,61 0 18 1 0) 0 00 0,00 O,W 0 00 0 00 0 00 0 00 1 19 8•/в Gм•ennnпd !)onalimц 0,04 З 1 З 0 77 0 00 0,0о 0 00 0 00 0,00 0 00 0 00 З 90 26•/в 1D13 0,00 0,00 0,1Ю 1,ЗЗ 0,63 0,00 0,00 0,00 000 000 1,98 1З% � сw�п смс�гаl 1;rw г„,о ггата . о,оо о,оо о,оо о,оо о,оо о,ио о,оо о оо о,оо о,оо о,оо о•i. � лц�п sourcc� 1,21 о,о1 о о7 о,19 о,16 о ов о,ов о ое о 17 о о2 о as 6v. , •1•olal aources 3,9В 2 30 2 00 2 00 1 30 1,17 1 27 1 42 ' 1 37 1 39 14 98 100•h M11UN1TO1t1NC 1N111CA7ORS U nllonal: то�а1 laror, �1кгг�гд 129,1о 1зз 7о 1зв,sо 14З,4о 148,бо 134,2о 139 8о tбs 8о 171,so 17ь w Wа1п Cпvice С'оvпа с •/. 79Ч. 7Ч!: 79!i 77�: 79•/. 799G 79!: 79•/. 79•/. 80% Scwпa е Sпviп Covcts е •/в 44!L 44:4 44•/► 44•/. 65•/в 69•.G 73•/. 7G•/в 79'/. 84'/• VoluurcоГи•аlсг oJuccJ А1Э 1luwsatd 8289 8482 8786 909З 9427 9762 101З7 10318 1090З 11З24 Vohunc оГи•аlег billcd M11З '1Ъоиаагд 4476 4924 3272 3640 6127 6817 7093 7Зб2 76ЭЗ 7925 UuacnиudeJ Го► Wа1п '/в 46•/i 42'h 40•iL З8% З3•/в ЗOSfi )0'.L ЗО•/в ЗО% ЗО•/. 1' 1ПаПс 1а1' Avere е•1•uilf USS/nil 0 З 1 0 43 0,58 0,64 0,64 O,G4 0 64 0 64 0,64 0 61 Аvпа е ralin Reveuue USLпд 0,Э3 0,47 0 67 0,69 0,69 U,69 0 69 0 69 0 69 0,69 �цмkin Ra1io •,L 1З7•/. 91•/. 61•iL 32•iG 49'h 449L 4l•/. 4]9L 42•/. 41•А ( кглtiи Ra1io •h 1S3•/в 10G•/. 7З•h 64•/в GU°!• S5% 54'/в 34•А 3]•/в 3З•b lhЫ Scn•ice Соv�та е liuкs -1 G2 0 2) 1 14 1 41 1 17 1 89 2,06 2 23 2 24 2,49 1n1mm1 Cas1r Uaжatiw✓lnvcsUixnl •А -135( -ЗЗSG Е•.G 24•�L 1C.G 9З3f. 94SG 94!G •89•.i 99Х Table 13 ENIAPAI. FINANCIAL STATEME14TS A MONITORING INDICATORS. ire" 1"4.2003 FNIAPAI, Unldmdrs 1994 1995 19% 1"7 1998 19" low loot 2002 2003 INCOME STATEMENT hfullon S (hicating Revenues S.go 8.40 10,17 10.57 11.08 1171 12,27 12.64 13,02 13.42 (hicratilig Costs 5.49 5,50 6,59 6,67 6.82 709 .7,32 714- 7164 7,81 IISCOMC lk!fttfC dCI?(CCia1i0H 0,32 2.90 3159 3.91 4.27 4.63 4.95 5.16 5.38 3.61 Deptcciation 0,90 1,00 I'll 127 1,37 1,30 1,65 1,77 1.90 2.02 01mating Incom -059 1190 247 264 2." 3.13 3aO 3,39 3,49 3,59 FinAncial ExImmes 0.00 0,06 0.19 0,33 0,48 0,55 0,64 0,71 0,73 0,77 Taxes 0.00 0.55 0.68 0.69 0,73 0.77 0.80 0.80 0.92 0,85 Net Income -0.56 1.29 (.59 1.60 1.69 1.91 1.96 1.91 1,92 1.98 FINANCING FOR I OTAI, Million S Million S % INVESTMENT I I Investn"t 0100 4,00 Soo 600 6,00 5.00 45,00 _;. -M1- 4100 5100 3,00 310 Internal cash -1112 0,85 1127 143 1.63 3,30 3,51 305 3.22 3.40 21,67 48% Fona%i 0.00 0,00 0.00 0,00 0,00 0,00 0.00 0.00 0.00 0,00 0,00 0% Goverrunent Donalions 0,00 0.00 0,00 0,00 0.00 0,00 0,00 0,00 -0,00 0.00 0.00 0% IDI) 0,00 0,00 0100 0 DOO 000 0,00 0.00 000 000 000 000 0% Odwr extervial (KFW, g1mo frances,..) 0,00 3.10 3,30 4,30 2.00 1,80 2.70 1.50 1,30 1,00 21,20 47% Met smuces 1,12 0.05 0.23 0,27 0.37 -0,10 -0,21 0.45 0.48 0.60 2.13 5% Total sources 000 4,00 5100 .4100 2.00 3.20 3.30 .50 3.70 4.00 45,00 100% A -1( IN IT ORING INDICATORS Operallonal: *1 IkKISMI 706,40 728,90 750,30 773,20 796,90 921,30 946,30 972,40 999.10 926,60 Water Service Coverage % 71% 72% 74% 75% 76% 78% 79% 79% 796/6 79% semme Service comace % 71% 72% 74% 75% 76% 7rA 79% 79% 79% ig% Volume of .% m1cf produced (M3) 111011sand 32545 32750 43229 44029 45491 49067 50347 51977 53453 55079 Volunic of %vs1cF billed. (W) 11vousand 24481 25336 29228 30380 31844 33647 35243 36314 37417 39535 11itaccomiled ftw Water ts 25% 23% 32% 31% 30% 30% 30% 30% 30% 30% Flnanclul: A s-cirase Tariff USSlj9j3 0,20 0,29 0,29 0,29 029 0129 0.29 1 029 0,29 0,29 Average Operatilig Revenue uss/to 0 24 0,33 0.35 0.35 0,35 0,33 0.35 0.35 0,35 0.35 Wofkiiig Ratio I % L94% 63% 65% 63% 61% 60% 60% 59% 59% 39% Olventilig Ratio 110% 77% 76% 75% 74% 73% 73% 73% 73% 73% D,14 Scrvicc Coverage tisnes- 0 22 1.36 1,78 1,80 1 83 6,98 6.47 3.33 3,40 3,50 Internal Cash % 21% 23%,,. 24% 41% 66% 38% 61 @A 64% 69% Table 14. INVESTMENT REQUIREMENTS FOR THE SECTOR FOR THE PERIOD 1995 - 2003 WATER SUPPIL TOTAL. WATER SUPPIY SEWERA(GE ('OMIAN' Rehabi- Espansion Total Rehabi- Espanalon Treament Total leation itatlon EMUSAP-AlBANCAY 11,36 2,13 1,56 3,68 0,00 2,98 4,69 7,67 SEDA-CIIIMIUE 41,09 4,81 9,58 14,39 3,88 22,81 0100 26,70 SEDAMIlUANCAYO 13,42 1.84 q 8I 10,35 0,21 1,50 1.36 3.07 SEDAJULIACA 20,39 2,74 6,28 9,01 0,86 10,52 0,00 11,38 SEDALORETO 27,53 3,24 1189 17,13 0,07 10,36 000 10,43 SEDAPIURA 138,86 12.38 107,70 120,07 4,44 5,00 pr r SEDAPUNO 18,83 2,44 6.64 9,08 0,0 7,26 1,99 97 SEDACUSCO 57,70 5,9 43,09 49,06 2,72 3,12 0,79 8,64 EMAPA-TACNA 44,41 3,17 17,38 20,55 1,12 19,78 2,97 23,87 EMAPA-11MIJES 14.98 4,39 3,75 8,13 0,00 4,80 2,05 6185 SEDALIB 76,89 4,86 60,03 64,88 0,00 12,01 Or00 12,01 SEDAPAR 92,91 5,89 37,85 43,74 7,25 0.00 41,92 49,17 EMAPAL 44.93 0,00 19,32 19,32 0,00 IIr81 13,80 23,61 SEDAPAL 663,60 251,64 239,139 490,73 95,36 0,00 77,46 172.82 Sublotal 1266,93 307,4 572,71 116,41 113,95 156,37 386,73 Resto de Enpresas: > 30,000 IIADITANT 429,62 33.31 110.72 144,54 24.77 146,52 113,80 2835,09 10.000 A 30,000 IIA 386,16 53,22 211,56 264,78 49,58 164,64 107,16 321,38 2.000 A 10,000 11A3 403,65 41,74 133,56 195,30 40,22 98,45 69,68 203,35 Subltotal 1419,43 128,77 475,84 604,61 114 58 409,61 290,64 814,83 TOTAL 2686,36 436,25 1048,55 1484,80 23099 523,56 447,01 1201,56 Table 15. INVF.STMrlN FINANCI;N FORII TE SEFUR FOR TIE PERIO 1995 - 2003 WATER Invesf- Inernmal Ceograt liil) KFW France IIRI) Japan Fonavi Total U1I', nten eash G t Govt. Cov.t & CONMPANY generation ochera EMUSAP-ADANCAY 11,4 3,2 15 2,4 00 0,0 4 3 1l 4 SEDA-CIBIMUO1E A,1 .J29 218 14,4 0_0 0_0 11,0 41, SEIDAIIMANCAYO 13,4 8 2 0,0 4 713,040_0_ 0 5 SEDAJULIACA 20,4 8.9 2.3 6.5 0,0 0.0 2.7 204 SEDALORETO 27,6 02 41 0 0 0 0 10,8 27,6 SEDAPIURA 38,9 50,1 6 72,0 0,0 0,0 10,2 138.9 SEDAPUNO 18.8 55 0 0 4,7 0.0 00 87 i 8 SEDACUSCO 57,7 173 98 6,0 0,0 _0_9 13,7 57,7 EMAPA-TACNA 44,4 16.8 3,1 7 3 0,0 0,0 17,2 444 EMAIA-11JMlIES 15,0 7 3,9 2,0 0,0 0,0 2,0 15,0 SIDALl11 76,9 379 0,0 20,1 0,0 0,0 76,9 SEDAPAR 92,9 47,2 0,0 0,0 38,9 0,0 6 9 92,9 EMAPAL 44,9 12,0 0,0 0,0 18,6 10,0 4,3 44,9 SEDAPAL 663,6 317,0 0,0 0,0 0,0 00 150,0 76,2 120,4 .663,6 Sublotal 1266,9 556,7 48,9 124 77,6 20.9 150,0 76,2 212,6 1266,9 Resto de E nesas: > 30,000IIABIIAMI 429,6 188,8 0,0 0,0 0,0 0,0 0,0 0,0 240,8 429,6 10,000 A 30,000 IAB 586,2 1758 0,0 0 0,0 0,0 0,0 410 586,2 2,O A 10,000 IIAB 403,7 100,9 0.0 00 0,0 0,0 0,0 0,0 302,7 403,7 S14t1nt I4I9,4 465 5 00 00 0,0 0 0,0 9539 14194- TOTAL, 2686,4 ff1213 48,9 524 7 20,9 150,0 76,2 166,5 2686,4 - 73 - PERU URBAN WATER AND SANITATION SECTOR STRATEGY Statistical Appendix WATER AND SANITATION SECTOR' Thbles: 1. Urban and Rural Population by Department, 1993 2. GDP growth, 1950 - 1994 3. Principal Causes of Morbidity according to Tansmissable Diseases, 1981 - 1993 4. Cases of Cholera during 1991 and 1993 5. Infant Mortality by Department in 1992 6a. Water Supply Coverage by Type of Provision of Total Population in 1993 6b. Water Supply Coverage by Type of Provision of Urban Population in 1993 6c. Water Supply Coverage by Type of Provision of Rural Population in 1993 7a. Sanitation Coverage by Type of Provision of Ttal Population in 1993 7b. Sanitation Coverage by Type of Provision of Urban Population in 1993 7c. Sanitation Coverage by Type of Provision of Rural Pbpulation in 1993 8. Drinking Water Quality per Type of Service 9. Use of Surface Water in 1993 Regression: Water Supply Coverage and Infant Mortality Sewerage Coverage and Infant Mortality ' All data are from INE, unless specified otherwise. Peru Urban VAter and Sanitation Sector Strategy 6/28/95 3:08 PM � �� � � о -+� �"� ������ 6�� хл а� . Q .� ��' �_� ��, ' � �� ��� � � � и � � � �� � .. .. � � � � � ��.. �.. .. �, �.. � � � �.. � � � �.. � � � � � � �.. �.. � � � � �.. .. � �: �������g���������3�й������������������������_� а � � ° -, ------ -- ---------- -�----------� ---- - � -�--- ...._.а � �� � � �',� � �у и �_ �� и � а _ _ г� ци�иуΡи�ии�иц�ив.вииииииаиициыwи_N�рΡNNаqNNNрΡ�NNN:•�_•�ц-';:•�;•:•:•.•:рΡ•�ц �q � й й� й316SFй�к��,кv'л�iSд�S��},�i9й�йойР����lп�iйхк�i�й�йSк16� �� � --•-------�------ --�--- ---- •-- О- � ч ОЧ V 0100ИииОФ W VO V � Фи+0 PuИtOФU0iDФ10 л ФФФ V 1.10иGФУ1010и W О � � ` �. � F 8rjj�� 5���'i�йwS�йgoim�S,�v:v�йTod�T � sу Si•"Pt��i�BRimi$�+'��iйййУа��i tл'Si'КlBSi.r. � � еФNN1��тоии�ЬиииооиигоиNвииоир��т�rоvр+иbов►титт иРФ О Р Ф� WФ+ ОУ♦ РЧ Ч ♦ ♦ Р♦ 01.1ФU�WN �а �� т ��к����f����,�����хх��г�����#�г�f�#��г��������к�х�_ .а.• � _"--------- -- - �- -- - � л й �, о _ а� �j�+ e_ рΡ� уΡ�_ � '�4 ййiоiSй�'Ч'��'i,°vidw����ŭi�o���atiiйiЬ'тf�i = g _ __ ы ЧуΡ _ _ _ _ _ Rp рΡ� ечирΡpуΡрΡ� уΡрΡ((�.►�ЧрΡ рΡ{�1иi�'{��в vрΡ1Vл'рΡ{.�� bi�'oрΡ1 1рΡ i�.рΡ�'рΡрΡ�1�+рΡ уΡ1 � U1ФОФ{11Ф1+41'.✓�Фи VN�O!"QNQPu}'�}'�OG�YPi �� V�Фи+� V�Р.1Ф��Ч Р/0(.1 � Ч О OOO�vN 1. Ч�У10.+в {.1 У1 И W N л N Р Og ФОр р ioiлboo'vb'vwЧитчi.iтЧnvииио�ЧвлiоиоиФ-�vуи-�iл�о'vuiom йоча�� � - - � • $ �� кsoiii'ii�iSi���oa�кб'йаК►b' йч,L�i�' й�Г' g о рΡрΡ рΡp ьb уΡа� oS p рΡ♦ уΡрΡ�S�уΡрΡ��рΡуΡ� G ; W в.�О�i�л (А�41�ОФФ W ФЧ�.Фj�рtl �ФОС ФP1.Obu00VONlNNNыNNLOp1plО:+р10�:10Ир1и0Ив!OOYы-�.1U�JWU �� VN Ou1J Р Ф и0 и ииФ Уи ♦ ♦ У л � ООа V W • � fiгf�i�fi�ff�iгf�iг��г�t�f��Riг����f��R���ff��г��i�ff��R� р_ � g ���fd��d��C�t�i�lR�Bt�Q�tS�SiB:�Gf�9Y '' ��������������������х�����:� - � уΡуΡ уΡрΡN иW s� ОЧ++0010+Ч��УИ+qА4+� �OYViN �Ч�О1 � � � � � � � � � � � � � � � � х � f � � � � � � � Table 3 ~pai Ca~ of Mo~ ~~ to Tranani~ Disa~L IMI - 1993 TRANSMISS~ REGI CASES - :: ','*. I .ý DISEASESý. 1111811 W,.- -.1991 .1992 clýaýt~ 0~ dieý dig~ 109,099 21.9% 209.985 21.^ 197,4= 16.8% 208,SW 18.9% 125.185 16.2% Hopa~ 7.801 1.6% 4,970 0.5% Z1364 0.2% 3.255 0.3% 3,3W 0.4% sal~ lo 4.352 0,9% 4.Z7 0.4% Z782 0.2% 3,267 0.3% 1,S52 0.2% o~ tery 4.417 0.9% 4,W 0.^ 3.141 0.3% 4,ZIG 0.4% Z577 0.3% AM~ Z370 0.5% 3.188 0.3% 3.080 6.3% 3.045 0.3% 1,871 0.2% Chøiere 0 0.0% 0 0.0% 32ZS82 Z7.1% 239,139 21.6% 71,448 9.2% T~ wato~ di~s« 125,039 25.7% 226,467 23.1% 531.857 44.8% 461,5n 41.a% 206.783 2&6% 370.9W 74.3% 752.512 76.2" 6W 488 568,125 73.4% 00.0%ý 1,~,;: 55.2% 1 W,350 58.2% 1 TAL 100.0% i 978.979 1 88. 100.0% 1 1.104,9= 100.0%1 773.9W 100.0% Sa~ Suffi~ Cm~urn 1993 - 1994. Volum l 0= an c~ of chol~ am hm WN~GESKRESACIDEC, 1994 T~ 4 ca~ or Ch~ ~IN im ~ i~ ØCIC~ 19,8N 6.138 29.510 ga 2n 417 a4 23,106 34.278 i57 62.740 22.3 3,= Z5a4 2" 8,481 8.5 9,; "18 3~ 16.421 5 M 6.5 CU=D 1:ý 7" 2U 6,414 2.0 K~M~ 03 8120 3,5= 3.0 ~ UM ý4. 1 1.175 a.= 4.0 a 2-8n ka 3,= 3,701 2.220 8.953 5.2 junin 9~ 5.043 3,163 17jn 5.4 La Lib~ 32.1135 12.500 2.M 44.187 LaMbo~ 18.429 8.813 1.012 24.W4 114.2W 129.215 32.248 275.6n 27,= 6.479 4.401 37.976 172 9 11 0 10 0.0 MO~ 623 1.354 1.011 2~ 7.7 412 209 258 967 1.3 NUM 23~ 7.9W 1,116 32.750 7.7 purm 241 in 418 831 C13 Sw Nlanln 9,M7 5.4a 2.5II> 17,975 104 Ta~ om 2~ 3.8 TW~ 1,165 141 3.287 6.9 ue~ g.= 14.01 ITOTAL 9.31 N~ k-04~ le de~ am tha -VM numbøw a~ par 1~ w*udýit~. T~ 8 ww* m~ i= led -,'-.:Water sann~ PN.... Anm~ 82 30.4% .5% A~ 78 50-9% 54.1% APU~ 109 30.7% 29.5% Ar~pa 66 77.5% 7ø^ Avec~ 107 47.1% 21.7% Ca~ m 25.6% 46.5% C~ 48 87.7% 89.0% C~ 117 46.5% 3å.5% iý- -, 121 2&8% 12.4% H~U00 87 30.3% 36.9% Ica se 713.7% 73.9% 1~ 86 58.8% 50^ La Ub~ 62 62.8% 67.5% Lamb~ ue m 67.5% 74.8% Utm 52 82.2% MI^ LOM0 T7 34.8% 48.5% Madre do 01~ 80 35.9% 56.7% Nb~ ma 68 74.8% 97.4% PZ~ ga 40.8% U.7% Pium 87 59.6% 50.Cý% Puna 106 29.9% 41.3% San MwUn 72 36.1% 63.3% Taem OG 83.3% 79.4% Tumboe 88 69.0% U.5% lucay06 1 771 27.7%1 54.3%1 Table Ca Watr Supply Coverag af Total Populaon by öepatment, 1993 DEPAYRTMENT TOTA IOS AD TAN1P2PE TOTA PTH.WEE.PENO -IV STTAL PIP VENOM PULATION CONNEC11ONS _ _ COVERAG WA Amazonaa 354,171 18.2% 12.2% 30.4% 16.0% 0.9% 47.3% Anca 983.546 42.8% .1% 50.9% 8.3% 2.8% 35.8% 2.4% Aprimac 396,098 19.2% 11.5% 30.7% 4.7% 1.1% 60.6% 23% Arsquipu 939.062 64.1% 13.5% 77.5% 4.1% 3.3% 13.1% 1.9% Aya5ucho S12.438 29.4% 17.7% 47.1% 4.4% 1.2% 43.3% 4.0% Cajamaa~ 1297.835 17.7% 8.0% 25.6% 25.2% 1.0% 48.8% 2.3% Callao 647.565 76.6% 11.1% 87.7% 1.7% 10.1% 0.1% 0.4% Cuzao 1.064.496 29.9% 15.6% 45.5% 4.6% 0.9% 4.5% 2.5% uancveIaa 400,376 13.0% 15.6% 28.6% 6.9% 1.1% 41.3% 2.1% Huanico 678,041 20.4% 9.8% 30.3% 10.7% 1.1% 5.,% 2.1% Ica 578.768 61.5% 14.2% 75.7% 11.2% 5.1% 4.6% 3.4% Junin 1,092.913 44.9% 11.8% 5.8% 7.7% 1.0% 29.6% 4.8% La Ubrtad 1.287.383 53.8% .1% 62.8% 15.9% 2.4% 173% 1.0% Lmbayqu 960.842 55.4% 12.2% 17.5% 17.4% 2.8% 9.0% 3.4% Lima 6.478,97 74.6% 7.6% 82.2% 4.6% 10.4% 2.5% 0.2% Lareto 736,11 28.4% 6.4% 34.8% 15.2% 0.8% 41.6% 7.3% Madre de Dos 69.854 19.3% 16.6% 35.9% 15.1% 0.6% 41.6% 68% Maquega 130.192 62.9% 11.8% 748% 1.7% 3.5% 14.7% 3.3% Paaco 239,191 26.3% 23.3% 49.6% 6.4% 1.9% 37.0% 5.1% Pluu 1,409,262 50.0% 9.% 59. % 7.4% 3.7% 26.5% 23% Puno 1,103.689 19.6% 10.3% 29.9% 45.2% 1.2% 22.3% 1.4% San Mrin~ 572.352 26.5% 8.5% 35.1% 21.4% 0.9% 39.4% 3.3% TacU 223.768 19.4% 13.9% 83.3% 3.6% 3.4% 7.3% 2.5% Tumbms 158,582 58.3% 10.7% 69.0% 3.6% 8.2% 11.6% 7.6% U 331.824 19.1% 8.8% 27.7% 36.7% 2.0% 28.5% 7.2% TOTAL. I 22.639,4431 49.5%I 10.1%I 69.% 11.1% 4.7% 22.2%2 Table Watr Supply Coveg Urban Populaon by Desertinent.1993 OUS TTOTAL WE.TH IPULTO~ C2 NC N -:.-Sa ::".HEVEAR Ama~ns 122,159 52.6% 25.8% 782% 5.0% 1sj% Anash 583,49 74.8% 9.8% 84.6% 2.9% 12.5% Apurmac . 138800 56.3% 13.1% 69.4% 1.8% 28.8% Arqp . 05298 74.6% 13.9% 88.5% 3.2% 8.3% Aycucho 245,049 62.9% 20.7% 83.5% 1.6% 14.9% Cajamara 318.190 71.9% 12.8% 84.7% 4.7% 10.6% Cua.o 647,068 76.0% 11.0% 87.0% 1.7% 11.3% C~ao 486,212 68.3% 23.3% 89.6% 1.3% 9.1% H uan~aveli 103,974 51.1% 26.4% 77.5% 3.6% 18.9% Huanico 258.775 53.8% 20.7% 745% 11.9% 13.6% la 483.633 73.4% 13.9% 87.3% 4.4% 8.3% Junin 703,275 71.0% 14.0% 85.0% 5.3% 9.7% La Ubeftad 882,765 77.1% 10.5% 87.1% 6.0% 6.4% Lamhayqu 734,343 72.0% 143% 86.% 3.6% 9.5% LMa 6.268211 76.2% 7.3% 83.5% 3.7% 12.8% Loreto 413.978 52.0% 11.1% 83.1% 22.1% 14.8% Madra do Cio 39.055 35.2% 29.3% 64.5% 18.8% 16.7% Mqugua 107.707 76.5% 11.6% 88.1% 0.8% 11.1% Peao 138.927 46.3% 33.6% 79.9% 4.3% 15.8% Piura 991.334 70.1% 10.9% 81.0% 3.0% 16.0% Puno 431.785 50.0% 19.4% 69.4% 24.2% 8.4% San Martn1 344.599 44.5% 12.1% 56.7% 20.1% 23.2% Tana 200,968 78.1% 14.8% 92.9% 1.1% 6.0% Tumb s 139,156 68.0% 11.2% 79.2% 1.5% 19.3% Ucay2li 212.970 3 0 .6 % 13.3% 4 4 . 0 % 45.7% 10.4% TOTAL 15.785.180| 70.8% 11.5% 82,3%75.1% 12.1% Tabe Cc Water Supply Cova*ge of Rura POpULa~to by Deparn t. 1993 ~EPART4NT RURRA4.. mU : ..· .5 . TOTAL P6P W POPUL&TOm CONNECTIONS. :: COVERAGE Amazoaa 232,012 0.0% 5.1% 5.1% 21.8% 73.1% Ana 419.597 0.0% 5.8% 5.8% 15.6% 7.6% Apiumac 257.298 0.0% 10.8% 10.3% 1.2% 83.0% Arequipa 133.764 0.0% 10.9% 10.% 9.3% 79.8% Ayacuaho 267.38 0.0% 15.3% 15.3% 7.0% 77.7% Cajara 979.645 0.0% 6.4% 6.4% 31.9% 61.7% caaa 497 0.0% 9.1% 9.1% 16.8% 74.0% Cuz 50.283 0.0% 9.3% 9.3% 7.4% 83.3% Huanmm~lc 29,42 0.0% 11.9% 11.8% 6.0% 80.0% Huanio 418.2m 0.0% 3.1% 3.1% 10.0% 88.% 96.133 0.0% 15.6% 15.8% 45.9% 38.5% Jnn 380.718 0.0% 8.4% 8.4% 12.1% 7.5% La Uh~etad 404,618 0.0% 5.6% 5.6% 37.3% 57.2% Lamy.qu 216.4m0 0.0% 3.0% 3.0% 64.0% 33.0% Unu 210.746 0.0% 13.3% 13.3% 29.8% 56.% Loreo 322.183 0.0% 0.9% 0.8% 7.2% 913% 9~dr de clo. 30,79 0.0% 1.3% 1.3% 11.0% 8?.% Mk~qugue 22.48 0.0% 13.0% 13.0% 6.4% 80.6% Pas~o 100.284 0.0% 10.0% 10.0% .4% 8.6% Piuam 417.828 0.0% .3% 6.3% 17.8% 76.1% Puno t71.04 0.0% 4.4% 4.4% 58.7% 3.% San Marn 225.753 0.0% 3.3% 3.3% 23.8% 72.% Tbmnm 22.800 0.0% 6.8% .8% 25.6% 67.6% Tumb 19.428 0.0% 9.0% 9.0% 18.8% 72.3% Uesyml 118.854 0.0% 03% 0.% 23.0% 76.2% TOTAL 6.54.263 00 6.%1 9% 2 69.4% Ta~e 7a S cwerage coverag or Total Popula~n by Depawtm~n, 1883 DEPART~~EN ,4 ITCTAL U YAR LATR~ TaTA Po_______CONNECTIONS: AUzona 354,171 14.1% 39.3% 53.5% An~h 983546 34.1% 20.0% 54.1% Apurimme 3M8.0M8 14.0% 15.5% 29.5% Aaquip~ .062 52.2% 25.9% 78.0% Ayacho 512,438 16.8% 10.8% 27.7% Caj~ara 1,2>7,83= 14.1% 32.4% 46.5% C~au 847,58 75.4% 13.8% 88.0% C~ 1.0m6,496 25.6% 89% 34.5% unv.I~a 400.378 6.4% 6.0% 12.4% Huanco 878.041 189% 16.9% 36.9% mae 578,7f 43.5% 30.4% 73.9% Junin 1,02.993 31.0% 19.8% 50.8% La itad 1.287.383 46.0% 21.5% 67.5% Lambayque 960842 43.7% 31.2% 74.8% Uma 6,478.57 71.0% 17.0% 88.0% t 736,161 27.1% 21.4% 48.5% M~adr de io. 69,854 172% 39.5% 56.7% Moquegua 130.192 57.4% 93% 67.4% Pasa 23.191 20.8% 7.7% 28.7% Pusm 1.408.282 31.1% 19.0% 50.0% Puno 1.103.8 15.4% 25.8% 41.3% San Mautin 572.352 19.0% .4% 63.3% Tana 223.788 68.1% 14.3% 79.4% Tumb~s 158.582 39.9% 29.6% 69.5% UayoU 331.824 17.% 40.7% 58.3% TO7AL 22.639,443 42.% 20.9% -3.5 Tahi76 werag Covcrag Urb~n poka by Dep~artnt, 193 OEPARTMENT UR Affl3WEAGE LATMUNE : o W7 U JPOPIL&TIO: 1.=VERAG Amazona 354.171 40.8% 36.8% 77.7% 22.3% 983.546 59.6% 16.4% 76.0% 24.0% Apuirnac 396.06 40.9% 9.7% 50.8% 49.4% A ~quipa 939.062 60.8% 24.3% 85.1% 14.9% Aycucho 512.438 35.9% 11.7% 47.5% 52.5% Caoaarca 1.297.835 57.4% 21.6% 79.0% 21.0% Calla 647.515 74.8% 13.4% 88.2% 11.8% Cuzco 1,06.496 56.8% 5.4% 62.1% 37.9% Huanca~.éica 400.376 25.2% 4.8% 30.0% 70.0% ~uanico 678.041 52.4% 21.8% 74.3% 25.7% la 578.76 51.9% 27.9% 79.7% 20.3% .wuin 1,092.93 48.9% 16.9% 5.8% 34.2% La Ubrtad 1.287,383 66.0% 18.5% 84.5% 15.5% Lambeyquo 960.842 56.8% 26.8% 83.6% 16.4% Uma 6,478.57 72.5% 16.5% 89.0% 11.0% Loreo 736.161 49.6% 24.5% 74.2% 25.8% hdr de Doa 0.854 31.4% 49.2% 80.6% 19.4% Mo~qugua 130.192 69.8% 8.3% 78.1% 21.9% Puaco 239.191 36.8% 5.5% 42.3% 57.7% Pham 1,409.212 43.6% 22.8% 86.3% 33.7% Puno 1.13,68 39.4% 16.2% 55.6% 44.4% San MariIn 572.352 31.8% 52.0% 83.8% 16.2% Taan 223.768 732% 11.0% 84.2% 15.8% Tumbm 158.582 46.5% 31.9% 78.5% 21.5% Ucaya__331.824 28.2 52.2% 8.5% l 19. TTAL 22.539.4431 r0.% 19.3% 80.2%1 19.8% Tale7c ewerage Coverage f Rua Popudn by Depumefint. 199 06PMETMNT .:IURAL : . :3EWEG A Amazonas 232.012 0.0% 40.9% 40.6% 59.4% Anch 419.597 0.0% 24.8% 24.8% 75.2% Apur~ma 257.298 0.0% 18.8% 18.8% 81.2% Arequip 133.764 0.0% 35.0% 35.0% 65.0% 267.389 0.0% 10.4% 10.4% 89.6% Cajarna 979,645 0.0% 35.% 35.9% 14.1% Ca~la 497 0.0% 23.5% 23.5% 76.5% Cuzco 580.283 0.0% 11.8% 11.8% 88.2% Huancave~ca 291.402 0.0% .4% 6.4% 93.6% Huanico 418,256 0.0% 14.0% 14.0% 86.0% lmc 96.133 0.0% 42.9% 42.9% 57.1% Junin 389.718 0.0% 25.7% 25.7% 74.3% La Laertd 404,618 0.0% 27.3% 27.3% 72.7% Lambayqu. 211.49 0.0% 46.2% 462% 53.8% Una 210,746 0.0% 25.9% 25.9% 74.1% Lo=o 322.183 0.0% 18.3% 18.3% 81.7% Mdr de Dia 30.799 0.0% 28.5% 28.5% 71.5% Maquegua 22.485 0.0% 18.1% 18.1% 81.9% Paco 100.264 0.0% 11.0% 11.0% 89.0% Pira 417,928 0.0% 9.3% 9.3% 90.7% Puno 671,904 0.0% 32.0% 32.0% 6.0% San Martin 225.753 0.0% 33.9% 33.9% 66.1% Tana 22.800 0.0% 44.8% 44.8% 55.2% Turmbes 19.426 0.0% 18.1% 18.1% 81.9% U 118.854 0.0% 22,9% 22.9% 77.1% TOTAL 6.854.263 0.0% 24.5% 24.5%' .5% 4 - I ~'fl * ;n §ge'Fj; 3 fl Z in ab neJ tu Oepartment T0 INFM COVERAGk POPULATION MORT WAER SUPPLY A Iapedwater Istandipes 1wells 'tota sewerage tlaruns. loa Amazonas 354,171 82 18.2% 12.2% 18.0%i , 46.4% 14.1% 39.3%1 53.5% Ancash 983.546 78 42.8% 8.1% 8.3%. 59.2% 34.1% 20.0%1 54.1% lApunmac 396.096 1091 19.2% 11.5% 4.7%! 35.4% 14.0% 15.5% 29.5% Arequipa 939.062 66 64.1% 13.5% 4.1% ( 81.6% 52.2% 253% 78.0%1 Ayacucho 512.438 107 29.4% 17.7% 4.4%i 51.5% 16.8% 103% 27.7% Cajamarca 1297.835 88 17.7% 8.0% 252% 50.8% 14.1% 32.4%o 46.5%, Callao 647,565 49, 76.6% 11.1% 1.7%! 89.5% 75.4%1 13.8%1 88.0% Cuzce 1.066.495 117 29.9% 15.6% 4.6% i 50.1% 25.6% 8.9% 34.5% lHuancavelia 400.376 121 13.0% 15.6% 8.9%1 35.5% 6.4% 6.0% 12.4% Huanuce 878,041 87 20.4% 9.8% 10.7% 40.9% 19.9% 16.9% 36.9% Ica 578,766 56 61.5% 142% 112% i 87.0% 43.5% 30.4% 73.9% junin 1.092.993 86 44.9% 11.8% 7.7% 84.5% 31.0% 19.8% 50.5% La Ubertad 1.287.383 82 53.8%1 9.1% 15.9%1 78.7% 4.0% 21.5% 67.5% ;Lamoay*que 950.842 66 55.4% 12.2% 17.4%! 84.9% 43.7% I 312% 74.8%1 Uma 8.478.957 52 74.6% 7.8% 4.6% 86.8% 71.0% 17.0% 88.0% Loreto 736.161 77 28.4% 6.4% 15.2%1 50.0% 27.1% I 21.4% 48.5% :Macev as os 89.854 80 193% 16.8% 15.1%1 51.0% 172% 3.5% 58.7%1 Moquegua 130.192 66 62.9% 11.8% 1.7%1 76.5% 57.4% 9.9% 67.4% Pasco 239.191 90 26.3% 23.3% 6.4% 1 56.0% 20.9% 7.7%1 28.7%1 iPiua 1.409.262 871 50.0% 9.6% 7.4%i 66.9% 31.1% 19.0% 50.0%| Puno 1.103,688 106 19.6% 10.3% 45.2% 75.1% 15.4% 25,8% 41.3%1 San Martin 572.352 72 26.5% 8.5% 21.4%( 56.4% 19.0% 44.4%1 63.3% !Tacna 223.781 66 69.4% 13.9% 3.6% 1 86.8% 65.1% 14.3% 79.4%1 !Tumbes 158,582 68 58.3% 10.7% 3.6%; 72.6% 38.9% 29.6% 8B.5%! Ucayall 331.824 77 19.1% 8.6% 36.7% i 64.4% 17.6% 1 40.7% a58.3%I Regression Analysis Infant Mortaty and Water Supply Coverage Regresson Outpuc Consunt 136.8678 Std Err of Y Est 12.9082 R Squared 0.5880 No. of Observations 25 Degrees of Freedom 23 Water Supply Coverage 88.1222 Std Err of Coaef. 15.3801 T-value -5.7296 Regression Analysis Infant Mortaity and Sanitadon Coverage Regression Ouut Constant 131.0024 Std Err of Y Est 7.1372 R Squared 0.8741 No. of Observations 25 Degrees of Freedom 23 Sanitation Coverage -91.4531 Std Err of Coef. 72387 T-value -12.639 -81- PERU URBAN WATER AND SANITATION SECIOR STRATEGY Statistical Appendix INVESIMENT AND IS FINANCE Tihbles: 1. Social Investment as a Percentage of GDP between 1985 and 1993 2. Investment in Water and Sanitation as a Percentage of GDP between 1985 and 1993 3. Sources of FONAVI funds between 1992 and 1994 4. Application of FONAVI funds by Type of Investment between 1992 and 1994 5. Application of FONAVI funds by Type of Borrower between 1992 and 1994 6. Application of FONAVI funds in Water and Sanitation Sector by Geographical Distribution between 1992 and 1994 7. Application of FONCODES funds by Type of Investment between 1991 and 1994 8. Application of FONCODES funds by Type of Borrower and Executing Agency between 1991 and 1994 9. Application of FONCODES funds for Water Investments per Department between 1991 and 1994 10. Transfers of Muncipial Compensation Fund by Department in 1994 Regression: Factor Income Labour and Fixed Investment and FONAVI payroll levy Poverty targetting of FONCODES funds Peru Urban Hkter and Sanitation Sector Strategy 6/28/95 3:10 PM Table I Social bnve~rnnt as Percentage of GDP Year Investmmnt ln nuevos soas GDP lnvestment as% ofCDP total. social. W&S In nuevos. soles tot.-: social • WS 1981 2,278 480 20 10,669 21.351 4.50% 0.18% 1982 3,633 700 18 17.903 20.29% 3.91% 0.10% 1983 7,663 1,298 14 32,450 23.61% 4.00% 0.04% 1984 16,964 2,844 56 72,366 23.44% 3.93% 0.08% 1985 44,314 7,385 84 197,989 22.38% 3.73% 0.04% 1986 76,685 16,599 721 373,851 20.51% 4.44% 0.19% 1987 131,215 23,635 1,616 738.594 17.77% 3.20% 0.22% 1988 716,710 140,704 24 4,936,982 14.52% 2.85% 0.00% 1989 17,348,000 3,532,000 177,685 115,048,860 15.08% 3.07% 0.15% 1990 1,136,970,000 215.646,000 9,096 6,802,712,934 16.71% 3.17% 0.00% 1991 3,523.790,414 955,046,000 42,067.296 32,932.620,690 10.70% 2.90% 0.13% 1992 7,078.185,423 1,785,160,000 144.518,082 52,045,481,050 13.60% 3.43% 0.28% 1993 11.267,01.000 n.d 403,036,128 81,645,000,000 13.80% n.d 0.49% Now. W&S r.s to Water and Smnitotion Seor Sou~. MIPREPRONAP. Edio Sua• S Samin Lima. Mnrch 1995. Table 2 Investment in Water and Sanitation Sactor Year Investn~t : westment hnestment 1: ln W&S : :: In W8S as Waterand Sanitatar rugsmmis inf GDP urban :ruraf 1981 57,442 0.18% 94.9% 5.1% 1982 35,712 0.10% 94.4% 5.6% 1983 14,524 0.04% 82.7% 17.3% 1984 24,617 0.08% 87.0% 13.0% 1985 14,755 0.04% 86.8% 13.2% 1986 51,675 0.19% 89.2% 10.8% 1987 48,964 0.22% 86.3% 13.7% 1988 47,478 0.00% 93.3% 6.7% 1989 33,771 0.15% 91.9% 8.1% 1990 17.598 0.00% 96.7% 3.3% 1991 43,820 0.13% 99.3% 0.7% 1992 88,661 0.28% 99.5% 0.5% 1993 18,591 0.49% 99.9% 0.1% MIPREPRONAP. Es~udio Soctonal - Sec~r SAm~nto. Lima. March 199$. Table 3 Sources of FONAVI funds (in US$ million) Sources of FONAVI funds 1992 1993 1994 Contributions 205.8 260.1 374.0 Transfers of BANVIP 2.7 0.0 0.0 Loan Repayments 0.0 3.5 34.4 Yields on transactions 13.2 38.5 9.5 Other 2.2 11.9 10.2 TOTAL 223.9 314.0 428.1 Not' BANVIPis ft Banco do I V)Wenda del Peru. which was liquidad in 1992. Sourca LMG Consullirias, La Siuacon FNinaM del Socor do SanemAient Peru. infann Prlininar, Decormro 1994. Table 4 Application of FONAVI funds by Type of Investment (in US$ million) Application of FONAVI funds 19921 1993 1994 Water and Sanitation 28.0 89.0 100.9 Electrification 16.2 57.3 73.6 Housing 0.0 0.0 113.5 Emergency Loans 4.2 27.1 21.2 Other 57.0 89.0 84.2 ITOTAL 105.4 262.4 393.4 Source .MG Consubos. La Siuacann Finciers del Sector do Sesmo Pen. Wie Pruoniner. December 1994. Table 5 Application of FONAVI funds by Type of Borrower (in USS million) Application of FONAVI funds- 1992 1993 1994. Local Communities - water and sanitation 5.8 51.7 67.6 - electrification 16.2 57.3 73.6 Housing Construction 0.0 0.0 113.5 Public Sector Entities: - SEDAS 12.5 26.0 24.6 -SEDAPAL 9.7 11.3 8.7 - ENACE, Banco de Matedales, etc. 55.8 41.9 68.9 Emergency Loans 4.2 27.1 21.2 Other 1.2 9.8 15.3 TOTAL 105.4 225.1 393.4 Source: LMG Consultnes. La Staiscion Financiers del Sector do Saneemient Peru. Inforis Prelinuar. December 1994. Table 6 Application of FONAVI funds In Water and Sanitation Sector Geographical Distribution (in US$ million) Application of FONAVI funds. . 1992 1993 . 1994 Lima - local communities 3.3 15.3 20.0 -SEDAPAL 9.7 11.3 8.7 Other provinces - local communities 2.6 36.3 47.5 - SEDAS 12.5 26.0 24.6 TOTAL 28.1 88.9 100.8 % of Lima in total investment 46.3% 29.9% 28.5% Source LMG Consulonas, La Situacson Financier del Sector do Sandernient Pers. Intorwe Preliminar. December 1994 Table 7 Application of FONCODES funds by Type of Investment between 1991 and 1994 (in USS million) Application of FONCODES funds 1991 1992 1993 1994 Water 0.5 7.7 18.0 5.7 Sanitation 0.0 4.4 12.2 2.4 Other 12.1 108.9 173.3 68.4 TOTAL 12.6 121.0 203.4 76.Y Not. 1994 refnet pmned unal August 1994. MIPREMOPNAP. Estmacio do kwerm on el sector Sonearient. Potiao 1994 - 20 Urn. Jamnuary 1995. Table 8 Application of PONCODES funds by Type of Borrower and Executing Agency between 1991 and 1994 (in USS million) Executing agencies/ Local -NGO`s Municipalities Other Govt -. Povertyl communities Institutions Very Poor. 16.8% 4.0% 4.3% 2.2% 27.2% Poor 15.8% 2.4% 1.4% 1.6% 21.2% Average 9.0% 2.3% 1.4% 0.5% 13.2% Acceptable 11.6% 3.6% 0.6% 0.7% 16.5% Multiregion 15.2% 4.7% 0.0% 2.1% 21.9% TOTAL 68.3% 17.0% 7.6% 7.0% 100.0% soures Unversidd dei Pacioo. Car do rwostigam. Fvnansmei do Irwsones do Capal. Uma Febuay 199. Table 9 Application of FONCODES funds of Investments in Water and Sanitation Sector by Geographical Distribution (in USS'000) Department.. FONCODES investment Poverty level: Total. water supply .sanitation total :Irtant mortality' population: Amazonas 1,535 1,420 2,955 82 354,171 Ancash 4,049 1.131 5,180 78 983.546 Apurimac 920 363 1,283 109 396,098 Arequipa 433 2.474 2,907 66 939,062 Ayacucho 1,750 347 2,097 107 512,438 Cajamarca 5,131 1,685 6,817 88 1,297,835 Cuzco 3,364 2,581 5,945 117 1,066,495 Huancavelica 1,936 303 2,239 121 400,376 Huanuco 541 350 892 87 678,041 Ica 1,368 1,037 2,404 56 578.766 Junin 1,995 1,235 3,229 86 1,092,993 La Ubertad 1,625 1.248 2,873 62 1,287,383 Lambayeque 569 315 883 66 950,842 Lims (inc. Calao) 1,764 1,335 3,099 52 7,126,522 Lorto 383 6 389 77 736,161 Madre de Dios 178 535 713 80 69,854 Moquegua 14 80 94 66 130,192 Pasco 37 68 104 90 239,191 Piura 2,382 740 3,122 87 1,409,262 Puno 1,213 685 1,897 106 1,103,689 San Martin 641 740 1,381 72 572,352 Tacna 33 0 33 66 223,768 Tumbes 103 202 305 66 158,582 Ucayali 3 76 79 77 331,824 TOTAL 31,964 18,955 50,919 - 22,639,443 Source: UIPREPRONAP. Estimav do Invorsones an ol Sector Saneamiento. Peedo 1994 - 20. Uma. January 1996. Table 10 Transfors of Municipial Compensation Fund by Dpartment for Capital Expendlture, (in USS million) Department 138 198 199 Tota A l tranafer. MCF per capita _________actua projecte actua___ population 1993-. 1994" Amazonas 1.63 4.37 3.28 354,171 4.60 9.26 Ancash 4,39 12.78 9.58 983,546 4.46 9.74 Apurmac 1,58 6.40 4.80 396,098 3.99 12.12 Arequipa 4.01 9.55 7.16 939,062 4.27 7.62 Ayaccho 2.77 9.96 7.47 512,438 5.41 14.58 Cajamar a 4,55 15.84 11.73 1,297,835 3.51 9.04 Cuco 4.28 17.08 12.81 1,066.495 4.01 12.01 Huancav~dlca 1.62 7.66 5.75 400,376 4.05 14.36 Muanuco 2.52 7.84 5.88 678,041 3.72 8.67 Ica 2,10 5.00 3.75 578,766 3.63 6.48 Junin 4,71 12.65 9.49 1,092,993 4.31 8.68 La Ubed 4,37 11.40 8.55 1,287,383 3.39 6.84 .amnbayqu 3.20 9.87 7.40 950,842 3.37 7.78 Lima (ncl. Cal~ao) 33.93 45.90 34.43 7,126,522 4.76 4.83 Loreto 4,21 9.78 7.33 736,161 5.72 9.96 Madr de os 0.73 1.55 1.16 69,854 10.45 16.61 Moquøgua 0.64 1.44 1.08 130,192 4.92 8.30 Pasco 1,15 4.04 3.03 239.191 4.81 12.67 Plura 5.12 19.08 14.31 1,409,262 3.63 10.15 Puno 4.30 17.14 12.85 1,103,689 3.90 11.64 San Martn 2.22 5.48 4.10 572,352 3.88 7.16 TUn 1,13 2.55 1.92 223,768 5.05 8.58 Tumbes 0.60 1.50 1.12 158,582 3.78 7.06 Uy 156 3.53 2.65 331,824 4.70 7.99 TOTAL 932 242.171 181.63 22,69,443 4.30 8.02 N~as Thi rmlrst ele serIod unrh N 194. SThis æan W bamed on sosidan figu r 1do3, and hrm siglily doermui.g Ca~ p~e fl~. uniiø.rsidad del Pacinlco. Cehnso de inesdgacion. PInanciarniento de inwrsons ds Capta. Uima. Pobraury 1995. Department Total Benificlarles Infant FONCODES unds (In '000 S$ Per Capita Funds (In US1) ..._____._._____ water sewerage mortality water sewerage total water sewerage total Amazonas 154,375 41,995 82 1,534.8 1,420.2 2,955.0 9.94 33.82 15.05 Ancash 451,340 27,362 78 4,049.1 1,131.1 5,180.2 8.97 41.34 10.82 Apurimac 117,677 10,858 109 920.1 362.7 1,282.8 7.82 33.40 9.98 Arequipa 28,888 28.251 66 432.6 2.473.9 2,906.5 14.98 87.57 50.87 Ayacucho 148,858 7.875 107 1,750.0 346.8 2,096.8 11.76 44.04 13.38 Cajamarca 753,225 45.215 88 5,131.3 1,685.3 6,816.6 6.81 37.27 8.54 Cuzco 333,376 68,909 117 3,363.9 2,581.1 5,945.0 10.09 37.46 14.78 Huancavelica 252,092 5,721 121 1,935.8 302.9 2,238.7 7.68 52.95 8.68 Huanuco 132,723 10,841 87 541.3 350.4 891.7 4.08 32.32 6.21 Ica 72.596 21.011 56 1,367.7 1,036.5 2,404.2 18.84 49.33 25.68 Junin 218,988 33,334 86 1,994.9 1,234.5 3,229.4 9.11 37.03 12.80 La Libertad 236,317 23,593 62 1,624.7 1.248.0 2,872.7 6.88 52.90 11.05 Lambayeque 55,680 8,512 66 588.6 314.8 883.4 10.21 36.98 13.76 Lima 72,074 19,937 52 1,763.9 1,335.2 3,099.1 24.47 66.97 33.88 Loreto 2,786 27 77 383.1 5.9 389.0 137.51 218.52 138.29 Madre de Dios 215,489 5,461 80 177.7 535.2 712.9 0.82 98.00 3.23 Moquegua 1,166 1,937 66 13.5 80.1 93.6 11.58 41.35 30.16 Pasco 1,749 2,191 90 36.7 67.6 104.3 20.98 30.85 26.47 Piura 177,330 27,084 87 2,381.7 740.0 3,121.7 13.43 27.32 15.27 Puno 221,436 24,317 106 1,212.5 684.7 1,897.2 5.48 28.16 7.72 San Martin 42,242 13,328 72 640.9 740.0 1,380.9 15.17 55.52 24.85 Tacna 559 0 66 32.8 0.0 32.8 58.68 0.00 58.68 Tumbes 3,763 2,559 66 103.2 201.9 305.1 27.42 78.90 48.26 Ucayali 0 218 77 3.1 76.2 79.3 0.00 349.54 363.76 Regression Analysis FONCODES funds and Infant Mortality Regression Output Constant 217.149 Std Err of Y Est 1859.147 R Squared 0.05561 No. of Observations 24 Degrees of Freedom 22 Infant Mortality 23.27257 Std Err of Coef. 20.44706 T-value 1.138186 Regression analysis per Capita FONCODES funds for water supply and Infant Mortality Regression Output Constant 43.2775 Std Err of Y Est 27.9667 R Squared 0.0424 No. of Observations 24 Degrees of Freedom 22 Infant Mortality -0.3034 Std Err of Coef. 0.3076 T-value -0.9865 Regression analysis per Capita FONCODES funds for water supply and Infant Mortality Regression Output Constant 112.8963 Std Err of Y Est 73.8650 R Squared 0.0226 No. of Observations 24 Degrees of Freedom 22 Infant Mortality -0.5794 Std Err of Coaf. 0.8124 [T-value -0.7132 78° 74° 72° ' о° ''--'f. 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VERY H1GH . > 85% 5ап �и° � � �а�, „r,.= +г ��� � ' .� � �г` w( 4�� �6 � • ;гp '1 r/ - H1GH : 70 - < 85% � � 'f ., 1 � : { `'�' .у' � : у Р �. :. � %� � ! гоkе D 'ryi:�`;i; .i[.i�л_.. I � а 1ь° MODERATE : 55 - < 70% ' I 'А R Е Gl'l��P�, �='?�' • �У �'"�'"r .. _ � о Гг�сосо 16° Nл �. н�, iw °,J ЮW : 40 - < 55� � _ Г� _. ;.г.аЭ -`g. � tT.' ,',,�� _i ' �^ VERY LOW . 0 - < 40% _• �: •' r� � 1гд' ! ��� -__ ..' � , пТ �1г _ " ' '" _ г�• Gu°qui i$���.°� 1 r... л! '. U� О о so гоо rso zoo 2sa ,� sI KILOMETERS . '• . - �� -.�• д!?���w I °" � �' • ,г .мг R'� I��'�^ г4д;1 г . ` , гА�. ' �8i ° 0 т Тhв Ьоипд°гies, со1°rs, депотiп°n°пs апд °пу orher iп1°гтвбоп � ) о O1 ,моwп оп г6„ тоР до пог;тРу, оп rмв рогг oF n,в w ю вопt огоиР, 1 у � g, °пу judgmeпr оп гhе 1eg°7 sюrus of °пу гвпгогу, ог °пу епдосsетвлг •`.` г g° я ,� °г огсергапсе °f such Ьоипдагiег. г;.; �,, г„.• 7 о _ •� N � � ао° 7в° 7ь° 74° 7г° дг�с 7о° LH1LE о 닙 7772 0.1 -2 | TUMR IQUITOS Cono TUMBES aMncor ~ R EZ T El Alt. L.. Tin- Li O R "T . .o. I-IAUCERCAroU2sC0 P.ä. Sur. >n hlcns aob PIURAnc U S mA W SELECTED CITIES AND TOWNS 6 BCHC DP T N S . DEPARTMENT CAPITALS LA BY UEý Currv P PAVED ROADS Lambyequ HCs A N OTHER ALL-WEATHER ROADS ARMUARTooc "'AM''AC C ARTRAILROADS Mag ...n.r." .. RAILFERRY Pocosmayooroo n Chicam 1. AIRPORTS L A AD T~.PORTS TRUagbLk Nuev _.. -_ RIVERS PUCA.LIPA. --DEPARTMENT BOUINDARIES -a- INTERNATIONAL BOUNDARIES ANC SH Ti HUARAZ, HUA UC 0 Re. UCAYAtI P A i / sRRDE xapmpaB R A Z l L A~o c6 I Fc - EROD HM-.h S.tip. O~~~~ C M A T-LO~yJN X1Ch,c HUANCi0 y 12- LIMA ea- Lang. y~~oCcaab PUERT QuillbarnoMADIONAJ HUAN ELICA CUZCO Cerr Az-l San.Vicente.dedCoete , C-sorvireyn AYACUIC M-hupkcchu.Prleopa Chinch Alnn CUZC P -a rmo Son M."ri Y .. . , P E R U fC RIMAC URBAN SANITATION COVERAGE' C A AYCCO Ch10oc BY DEPARTMENT, 1993 Ouu.Yl URBAN SANITATION COVERAGE INDEX:Hocn VERY HIGH : > 80% S.n Juan A riuco HIGH :70- <80 % chi .k. l> MODERATE : 60 - < 70 % A ; I ~I Q PUN-c -16° pi. * 16- LOW : 50-<60 % Cotorade Y-r VERY LOW : 0- <50 % AREUi 0 50 100 150 200 2S0 M-t-rn~r atLOMETERS MO UEG4 show-o this m.p d. not imply, on the part .f The Word B-nk Grop, Mi Il- z -racptanc of-suh boundari-s .- B cdl R.o N 80° 78- 76° 74- 72° 70° CHI|L E CATALOGUERS/FILE CONFIDENTIAL Report No: 14539 PE Type: SR