Nicaragua - Third Managua Water Supply Project

Document of i The World Bank F L F FOR OFFICIAL USE ONLY Report No. 1669b-NI NICARAGUA STAFF APPRAISAL REPORT MANAGUA WATER SUPPLY III November 9, 1977 Water Supply and Sewerage Division Latin America and Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Cordoba (C$) US$1.00 =- $'?7.00 C$1.00 = US$0.14 C$1 million = US$142,900 ABBREVIATIONS AND MEASURES in = inch = 2.54 centimeters km = kilometer = 0.621 miles M gal= million gallons 3,785 cubic meters Mgd = million gallons per day = 0.044 cubic meters per second TUG = thousand US gallons = 3,785 cubic meters ABBREVIATIONS AND ACRONYMS AID = Agency for International Development CARE = Cooperative for American Relief Everywhere EAM = Empresa Aguadora de Managua DENACAL = Departamento Nacional de Acueducto y Alcantarillado IDB = Inter-American Development Bank MOH = Ministry of Pt'.bli.c Health PLANSAR = Plan Nacional de Saneamiento Ambiental Basico Rural PAHO = Pan American Health Organization FISCAL YEAR January 1 - December 31  FM OFFXCIAL Us o0LY NICARAGUA MANAGUA WATER SUPPLY III STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. I. THE WATER SUPPLY AND SEWERAGE SECTOR Background ......... .................................... 1 Population Served .... .....*. ............ .. 1 Sector Organization *... **.. . .. ................... 6 Sector Investments ........... .. . .. .. . .. . .. . .. .. . .. . .. . 6 External Assistance . *. .. ............... ...... .. .. 8 Government Objectives . ......................... . . 8 Bank Objectives in the Sector ...... ................... 10 II. THE BORROWER Introduction .............. ................................... 1 Previous Operations ....... . ........................... . 11 Organization and Personnel % ........................... 13 Accounts, Billing and Collecting ........ . ............ .... 13 Auditing .................................................... 15 Insurance ................... ...................... 15 III. DEMAND Introduction ................................................... 16 Population ...* ................................ ... ....... 0... 16 Demand Distribution by Zones .............. .. ** ... 17 Water Demand .* ............................ ............ 17 Population Served ........................................... 21 This project was appraised in March/April 1977 by a mission consisting of Claudio Fernandez (FNA) and Ernesto Maisch (EGR). I Thi document has a restricted distribution an may be usd by recipients only in the performance of their oScia dutis. Its contents may not otherwise be discosed without Worid Bnk authoriation.  TABLE OF CONTENTS (Continued) Page No. IV. THE PROJECT Existing Facilities ................................... 23 Project Objectives .................................... 26 Project Description ................................... 26 Project Costs ........................................ ..... 0..... 27 Financing ............................ * ........................ 29 Implementation ...... .................................. 29 Procurement ............. . ............................ 31 Disbursements . ......... ........... 33 V. FINANCIAL ANALYSIS Introduction .......................................... 35 Past Finances and Present Position .................. .. 35 Water and Sewerage Tariffs ........................... 36 Future Finances ............................................... 37 Financing Plan ........................................ 38 Monitoring Indicators ........ ................................ 39 VI. PROJECT JUSTIFICATION Introduction .......................................... 44 Least-Cost Solution ............................... . .. 44 Incremental Rate of Return ............................ 44 Marginal Cost Analysis . ....... . . . . ............................. . 47 Risks ................................................. 47 Environmental Implications ............................ 47 VII. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS .... ...... 49 ANNEXES 1. Assumptions for Financial Projections 2. Tariffs 3. Technical Assistance and Consulting Program 4. Additional Information in Project File MAPS 1. Managua Water Distribution System 2. Nicaragua  CHAPTER I THE WATER SUPPLY AND SEWERAGE SECTOR Background 1.01 The Empresa Aguadora de Managua (EAM) (Managua Water Supply Company), has requested Bank financing for the Managua Water Supply III Project. This project would be the fourth Bank operation in the sector. Previous operations include the expansion of Managua waterworks and the rehabilitation and expansion of the system after the 1972 earthquake. 1.02 The Managua Water Supply Project has a cost of US$13.8 million. The proposed Bank loan for this project is US$10.1 million, including financing of the foreign exchange cost of the project (excluding interest during con- struction). The project was prepared by consultants (Chang, Hazen and Sawyer) and presented to the Bank in October 1976. The project was appraised in March/ April 1977 by Claudio Fernandez, FNA, and Ernesto Maisch, EGR, LCPWS. Population 1.03 In 1976, Nicaragua had an estimated population of 2.3 million, of which 51.5% (1.18 million) lived in rural areas. 1/ The country is divided into eight regions and 16 provinces. The average population density is 17.6 inhabitants per square kilometer, the lowest in Central America, but varies from 115 in Region II (Central Pacific) to 1.9 in Region VII (North Atlantic). Population growth averaged 3.2% p.a. in the period 1965-75. As in most developing countries, the urban population has been growing at a fast rate and, between 1965-75, the urban population almost doubled, reaching a compound rate of 4.8% p.a. and increasing the percentage of urban popula- tion from 42% to 48%. Present forecasts predict that the urban population will reach 52% of the total population by 1985 and 59% by the year 2000. The population growth between 1975-85 is estimated at 3.3% p.a. 2/ Population Served 1.04 The availability of water and sewerage services in urban towns ranks average in comparison to other Latin American countries, 3/ but their availability in rural areas ranks low, and only five countries in the Hemisphere have lower service levels. 1/ Urban towns, according to Nicaragua's Census Office, are villages with 1,000 or more inhabitants or, if less than 1,000, showing urban charac- teristics (streets, energy, services). 2/ "Demographic Trends and Urbanization in Nicaragua" by Robert W. Fox and Jerrold W. Huguet. 3/ Statistical data on the sector are poor.  -2- Population Served Government Target 1971 1975 1976 1981 Urban Population /_ Water % served by house connections 67 70 72 80 Sewerage % served by sewerage 33 35 38 70 % served by latrines 59 35 38 17 Rural Population /2 % served by standpipes 2 6 6 40 % served by latrines 14 11 11 48 /1 Source: MDH. See footnote to paragraph 1.03 for definition of urban areas. /2 PAHO figures are used in the report for consistency in comparing countries. For 1975 PAHO reports that 14% of the rural population was served by standpipes and 24% was served by latrines. 1.05 The province population and the number of water house connections in each province are as follows:  - 3- Population /1 Water Connections % Served by Province (June 1975) (December 1976) Connections (thousands) Managua 540 54,350 90 Leon 202 8,900 28 Matagalpa 186 2,598 9 Chinandega 182 6,683 23 Zelaya 164 1,015 4 Masaya 112 8,944 50 Jinotega 104 671 4 Esteli 90 1,122 8 Carazo 89 5,552 39 Granada 88 9,404 67 Rivas 88 3,688 26 Contales 80 2,993 23 Nueva Segovia 78 3,270 26 Boaco 75 2,189 18 Madriz 60 1,758 18 Rio San Juan 23 - - Country Total 2,162 /1 116,551 37 /1 Source: Nicaragua Census Bureau. Unadjusted data. 1.06 Health statistics are seriously distorted and should be used with caution (see Table 1.1). The main reasons are unreported deaths, especially infant mortality; mortality and morbidity which are reported where they are diagnosed, mostly in urban areas; and, finally, substantial seasonal labor migration for the cotton and coffee crops which distorts morbidity rates in the Pacific Regions. 1.07 There is no effective regulation for contamination control; sewer- age and industrial wastes are untreated and contaminate water resources, especially Lake Managua. A Managua sewage treatment project being con- sidered by IDB for financing is designed to solve this problem by 1982. Sewerage services are minimal and outside Managua exist only in six cities which have 7,946 connections for a (1975) population of 265,488 persons.  Table 1.1 NICARAGUA BASIC STATISTICS I II 11 IV V VI Vil VIII R E c I 0 N North Central South North Central South Nortb South T 0 T A L Pkcific Pacific Pacific Interior Interior Interior Atlantic Atlantic (1) POPULATION (thoUisanda) 1974 1/ e Urban 189.6 546.5 31.8 35.3 100.5 .50,1 18.4 22.6 994.8 Rural 182.6 233.1 54.2 99.5 274.8 126.9 55.6 65.2 1,091.9 Total 372.2 779.6 86.0 134.8 375.3 177 74 87.8 2,086.7 7 total papulation vith respect to the entire country 18 37 4 6 . 18 8 4 4 -- % Rural Population 49 30 63 73.8 73.2 71.7 75.1 74.3 52.3 7. Rural Population with " " ' ' " 17 21 5 9 25 12 5 6 100 SU RFACE Area in Km2 9,084 6,776 2,149 5,451 16,139 17,449 39,650 21,660 118,358 % Area 8 6 2 5 14 15 34 18 -- (I) DENSITY 1974 Population by Zone (Inhab/Km2) 40.97 115.05 40.02 24.73 23.25 10.14 1.87 4.05 17.63 Rural Population considering Zero Urban Area (Inhab/Km2) 20.1 34.4 25.22 18.25 17.03 7.27 1.4 3.01 9.23 (2) Rainy Season May/Nov May/Nov may/Jan may/Jan Months 6 6 8 8 6 to 9 6 8 + than 8 (2) Annual Medium Precipitation us. 2,200 1,750 1,500/2,250 1,000/3,000 1,000/3,000 1,750 2,500/3,900 4,000/6,000 ROAD NETWORK 1974 (km) paved 323.7 456.2 89.9 89.7 220.8 183.8 - 58.2 1,422.3 Repaved 188.1 145.6 51.3 78.5 316.5 235 145 25 1,185 All Season 880.60 786.2 222.8 425.3 1,520.7 710.7 447 73.5 5,066.8 Dry Season 1,935.3 3,066.7 683.5 470.6 1.471 1,025.9 176.3 76 8,905.3 Total 2 3,327.10 4,454.7 1,047.50 1,064.10 3,529.0 2,155.4 768.30 232.70 16,579.40 Road density Km/Km .37 .66 .49 .20 .22 .12 .02 .01 .14 CS) MIGRAIION WITHIN ZONES (1971) Immigrants from other regions 6,997 27,663 3,998 4,931 8,173 3,138 15,803 Emigrants to other regions 14,321 12,657 8,846 3,376 12,614 14,007 4,882 Net Product -7324 15,006 -4,848 1,555 -4,441 -10,869 10,921 (3) LITERACY (6 yra or +)(1971) Urban 73.3 79.7 73.3 63.1 67 66.7 75.3 75.9 Rural 53.8 42.2 44.3 25 23.1 23.3 24.1 30.3 Total 34.6 69.9 54.4 34.3 34.1 40.1 36.3 52.6  TBble 1.1 (Cont.) NICARAGUA BASIC STATISTICS (Cont'd.) I II III IV v VI .. VII VIII R E C I 0 N North Central South North Central. South N torth South - ~~~~~~~~~~~~~P-ci