Peru - Highway Maintenance Project

RETIJZtl TR RESTR I C T E D |REPORT.5tq \ Report No. T.090-a IQNE \.NEEI( This document was prepared for internal use in the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT APPRAISAL OF A HIGHWAY MAINTENANCE PROGRAM REPUBLIC OF PERU July 27, 1955 Department Of Technical Operations  Currency: No official parity; from 1950 to March 1953 the rate fluctuated between 15 and 16 soles to the U. S. dollar; from April 1953 to January 1954 it went up from 16 to 22, then went down to 18 at the end of February and has remained stable at 19 since September. In this report conversions have been made on the basis of the average certificate rate for the year: i U.S. $ - 19.40 soles 1 sol (s/O) - 5 cents approx. 1 million soles = U.S. $50,000  REPUBLIC OF PERU APPRAISAL OF A HIGHRAY MAINTENANCE PROGRAM TABLE OF CONTENTS Page I. Summary and Recommendations 1 - 3 II. Purpose and Scope of the Report 3 III. Background 3 IV. Status and Needs of Peruvian Roads 4 - 5 V. Organization and YManagement of the Highway Department 5-6 VI. The Project 6-7 VII. Benefits 7 -$ VIII. Reconstruction of the Central Highway ANNEXES 1. Map: Primary Roads of Peru 2. Annual Expenditures for Road Construction and Maintenance, 1947-1955 3. Chart: Vehicle Registration in Peru 4. Chart: Annual Vehicle Miles Traveled in Peru 5. Estimated Annual Loss Caused by Poor Road Maintenance  REPUBLIC OF PERU APPRAISAL OF A HIGH4AY MAINTENANCE PROGRAM I. SUMMARY AN'D RECOMMENDATIONS 1. Since 1952 the question of a loan for maintenance equipment in connection with financing of new roads, has been the topic of several discussions between the Bank and the Peruvian Authorities, without leading to any agreement. A Bank mission as early as 1953 concluded that the an- nual local funds for road maintenance were inadequate and would have to be increased considerably. However, the Government of Peru was not able to provide additional funds for this purpose. 2. Early in 1955 the Peruvian Government asked the Bank to re- consider the possibility of making a loan for financing the import of foreign machinery and equipment for a maintenance program for Peru's highways, and at the same time to meet part of the cost of the recon- struction of the last 179 Km of the Central Highway from Aguaytia to Pucalpa. The mission which visited Peru in April and May investigated this proposal. As the result of their study, it was felt advisable to have a more thorough study completed of the Pucalpa-Aguaytia highway be- fore considerLig a loan. However, the mission felt that making this road into an all-weather highway was of high priority in Peruts road construc- tion program. Accordingly, it was suggested that the firm of consulting engineers to be retained for the maintenance program should make avail- able experts for the preliminary study of the proposed project, and that the extra fees payable would be provided for out of the proposed loan for the maintenance program. When completed these studies would form the basis for the Bank's consideration of a loan for the construction project. 3. Because of the topographic conditions in Peru an integrated railroad system has never developed. The highway system has become the most important link between the different regions of the country,and essential to the transportation of goods from the interior to the coast at a reasonable cost. 4. The present highway system in Peru consists of 2,800 Km asphalted roads, about 10,000 Km of gravel and stone roads, and about 7,000 Km of graded roads. Due to lack of proper maintenance, part of this highway system is in poor condition, increasing trucking time and transport cost, and shortening vehicle life.  - 2 - 5. The estimated annual saving in foreign exchange for the present vehicle fleet would amount to about $10 million equivalent if the exist- ing roads were properly maintained. Better maintenance would also pre- serve the very large investment made during the last years on improvement of existing roads and construction of new roads. 6. The Government of Peru has reouested that the Bank finance the foreign exchange expenditure estimated at $5.0 million equivalent for the purchase of machinery, tools, heavy maintenance materials, and for consultants' fees. 7. The Highway Department of Peru is well organized. The maintenance division has a nucleus of engineers, well educated and with long service. However, as none of the engineers has had adequate experience in modern routine maintenance of highways, expert supervision for the first years should be provided in order to teach them the best way to handle routine maintenance work. Technical assistance also will be required in selecting the proper equipment and in getting the maintenance program started ef- ficiently. 8. The maintenance program for highways and roads in Peru submitted to the Bank is sound and could be the basis for a loan in the amount of $5 millioc equivalent. Based on the useful life of the equipment, a term of nine years is suggested for the loan, with a grace period of three years. 9. The following objectives should be taken into consideration if a loan is negotiated on this project: (a) The Highway Department of Peru should contract with a qualified consulting firm, acceptable to the Bank, for a period of at least three years, to assist the Highway Department: (i) in planning and starting up an effective maintenance program; (ii) in selecting and purchasing the maintenance equipment and materials; (iii) in establishing the necessary repair shops and in the effective upkeep of equipment; (iv) in training the operators of the equipment and the mechanics of the repair shops; (v) in training of laborers and technicians in routine maintenance work;  - 3 - (vi) in studying the reconstruction needs of the last 170 Km section of the Central Highway from Aguaytia to Pucalpa, and in preparing specifications and cost estimates. The study could serve as a basis for a request for a future loan. (b) The Government should provide sufficient local funds to carry out an adequate maintenance program and during the first few years make available approximately 80 million soles ($4 million) for this purpose. II. PURPOSE AND SCOPE OF THE REPORT 10. The present report is an appraisal of the Peruvian Governmentts program for maintenance of highways and roads. It is based on a report by a Bank consultant who visited Peru in 1955, and on the Technical Operations Department's previous report of July 30, 1953 (T.O.22). III. BACKGROUND 11. In 1952 the Peruvian Government requested a loan from the Bank for $16 million for road construction and $2.5 million for purchase of road maintenance equipment. A Bank mission, visiting Peru in 1953, came to the conclusion that sufficient roadmaking equipment was owned by the local contractors to carry out new road construction, but that an increased maintenance program for the existing roads was badly needed. The Bank suggested a loan equivalent to p5.5 million for imported maintenance equipment, provided the Government would increase the amount of local currency for maintenance from S/28 million to S/80 million annually, which was considered by the Bank as a minimum in order to protect the invest- ments to be made in new roads and to preserve the existing roads. 12. No further action was taken in 1953. In 1954 a Bank mission again discussed the question of road maintenance, and was informed that the Government's financial situation, at that time, did not permit the annual spending of S/8O million on maintenance work. 13. Improvement in the internal situation led the Government to request early in 1955 that the Bank reconsider a loan for financing the foreign exchange cost of a maintenance program for the highway system.  - 4 - IV. STATUS AND NEEDS OF PERUVIAN ROADS 14. The topographic conditions in Peru - the Andes Mountains dividing the country into three different zones: a narrow coastal strip to the west, a vast undeveloped tropical jungle area to the east, and a rugged mountainous area in between - has prevented the development of an integrated railroad system and has made roads the most important means of transport. Dependence on road transport will increase in the future, when the under- developed areas of the upper Amazon basin have been connected to the coast by new roads and a region with potentialities for agricultural production has thus been opened up. 15. There has been a steady increase in number of vehicles registered and the vehicle mileage covered during the years. The attached graph (Annex 3) shows the number of vehicles, trucks, and passenger cars re- gistered in Peru from 1945 with an indication of the expected increase in vehicles by 1961. 16. There was a remarkable increase in registered vehicles in 1950 from about 45,000 to nearly 60,000 in one year. From 1951 on, the number has increased steadily by about 7% yearly, reaching a total of 80,000 in 1954, out of which 43,000 were passenger cars and 37,000 trucks and other vehicles. The forecast till 1961 is made on a conservative basis, in- dicating a slowing down of the increase in the last years to about 5% an- nually, On this basis, about 115,000 vehicles would be registered in 1961. Annex 4 indicates each vehicle last year was running at an average mileage of about 10,000 miles per year. 17. Good communications are essential to Peru's economic develop- ment. An improvement of the roads through proper maintenance will de- crease the trucking cost and increase the economic life of the vehicles. It has been assumed that, under present conditions, trucks operating continuously on bad roads have a life of only about three years which could be extended to about four years, if the roads were properly maintained. 18. Today Peru's entire road system consists of about 32,000 Km of highways, roads and trails, which according to surface type can be broken down as follows: System Asphalt Gravel & Stone Graded Trails Total Primary 2,500 Km 4,200 Km - - 6,700 Km Secondary 250 5,900 7,400 Km - 13,550 Local - - - 11.600 Km 11.600 Total 2,750 Km 10,100 Km 7,400 Km 11,600 Km 31,850 Km  19. On the map (Annex I) the main highways are indicated. The only north-south land connection is the Pan-American Highway, which follows the coastline, connecting the important towns and cities with the capital, Lima. Other important roads are the Central Highway from Lima to Pucalpa via La Oroya and Cerro de Pasco, crossing the Andes Range at a height of 4,883 m (16,020 feet); the southern connection eastwards from Arequipa to Cusco; and the northern connection between the coast and the Amazon basin from Olmos via Bellavista to Moyobamba and Yurimaguas, only the first section of which has actually been built. 20. The type of maintenance necessary for the coastal region, with little or no rain, differs from that of the western slopes of the Andes Mountains where the roads encounter steep grades, high elevation and some rainfall; again, the eastern slopes of the mountains, with tropical vegetation and heavy rainfall, demand more heavy and expensive precautions to prevent roads from deterioration. 21. The Highway Department of Peru, under whose jurisdiction all the highways and roads come, has since 1947 spent an amount of more than one billion soles (<$50 million) on construction of new, and improvement of existing roads, and nearly a quarter billion soles ($12.5 million) on road maintenance (See Annex 2). 22. Before 1951 all construction and maintenance was carried out by the Highway Department itself; since then, arrangements have been made with local contractors to carry out construction work. 23. Because of the shortage of maintenance equipment, the Highway Department has recently been compelled to let out contracts of routine maintenance work, which has proved to be both costly and inefficient as there is no proper way by which routine maintenance can be handled by contract. 24. Due to inadequate funds and equipment, the Highway Department has not been in a position to carry out the proper routine maintenance work for a number of years. Consequently, a great part of the Peruvian highways and roads are today in a poor condition, except for the new stretches built during the last years. Most of the roads need surface re- pair or resurfacing. Ditches, culverts and bridges need to be rehabilitated, slopes and shoulders to be repaired. V. ORGANIZATION AND MANAGEMENT OF THF HIGHWAY DEPARTMENT 25. The Highway Department of Peru is part of the Ministry of Development and Public Works and, as such, is responsible for the con- struction and maintenance of all roads. The Highway Department has  - 6 - special divisions for maintenance, planning, construction and bridges. For administrative purposes, the country is divided into six zones and further subdivided into twenty-one regions, each supervised by a civil engineer. 26. The technical staff and field engineers are in general well educated, but they do not have adequate experience in modern maintenance practices. Their work has been severely hampered by the absence of a proper maintenance policy and by lack of necessary funds and equipment. Therefore, to get the maintenance work started on a sound basis, it is important to have foreign consultants engaged to help in: (a) organizing a survey of the present condition of highways and roads, and establishing an effective maintenance program for the coming years, so as to make the best use of funds and equipment available; (b) selection and purchase of the necessary equipment; (c) establishing the necessary repair shops in connection with a long-term plan for the proper upkeep of equipment; (d) training of operators and mechanics for handling the equipment and for repair; (e) general training of laborers and technicians in routine maintenance work. VI. THE PROJECT 27. The program for the proper maintenance of Peru's highways and roads has been presented by the Ministry of Public W.orks and was discussed with the Bank mission visiting Peru in April/May this year, The Bank has been askeci to finance the foreign exchange for the maintenance equip- ment, tools, spare parts, repair shop machinery and materials to be imported, as well as the cost of foreign technical assistance,over a period of three years. 28. The details of the program have not yet been established. The first tasks will be to study the condition of highways and roads in detail; to establish a plan of work consistent with the funds available; and to decide what equipment, materials, etc. will be needed.  - 7 - 29. The erection of stationary and mobile repair shops should be included, and also a program for the proper upkeep of the equipment and tools in connection with a training program for operators and mechanics. 30. The Highway Department and the Bank mission estimate that $5 million equivalent will be required for the purchase of the necessary maintenance equipment, spare parts, shop tools, heavy maintenance materials and service fees. 31. The program provides for reasonable maintenance of the main roads. A larger sum could be expended and more equipment used to extend the scope of the program, but the sum proposed is adequate to cover the most urgent immediate needs. Therefore a loan can be made before the detailed list has been drawn up by the consultant as it is certain that all of the loan can be used effectively. 32. The amount of $5 million for which a Bank loan has been requested, can be broken down into the following main items: Equipment, spare parts, repair shop machinery $ 3,800,000 Heavy maintenance materials 500,000 Consulting engineers' fee 300,000 Contingencies 400,000 Total $ 5.