Mexico - Highway Sector Project

Document of c p The World Bans k. FOR OFFICIAL USE ONLY Report No. P-2483-ME REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS S.A. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR A HIGHWAY SECTOR PROJECT March 7, 1979 This doument as a restrited distrlbtlo and may be sed by recipie_t only In the performnce of their official dutid. Its etousb my dt oherwie be dibeod without Wol Bak authorztIon.  CURRENCY UNIT - PESO (Mex$) The fixed exchange rate of US$1 - Mex$ 12.5 which had prevailed since 1954 was abandoned on September 1, 1976 and the Mexican peso has been floating since then. Since June 1977, the rate of exchange has fluctuated around Mex$ 22.6 to the US dollar. On February 27, 1979, the peso traded at 22.77 per US dollar. FISCAL YEAR January 1 to December 31 ABBREVIATIONS BANOBRAS - National Bank for Public Works and Services (Banco Nacional de Obras y Servicios Publicos, S.A.) SPP - Ministry of Programming and Budgeting (Secretaria de Programacion y Presupuesto) SCT - Ministry of Communications and Transport (Secretaria de Communicaciones y Transportes) SAHOP - Ministry of Human Settlements and Public Works (Secretaria de Asentamientos Humanos y Obras Publicas) NdeM - National Railways of Mexico (Ferrocarriles Nacionales de Mexico) PEMEX - Mexican Petroleums (Petroleos Mexicanos) IDB - Inter American Development Bank  FOR OFFICIAL USE ONLY MEXICO HIGHWAY SECTOR PROJECT LOAN AND PROJECT SUMMARY Borrower : Banco Nacional de Obras y Servicios Publicos, S.A. (BANOBRAS) Guarantor : United Mexican States Project Executing Agency Secretaria de Asentamientos Humanos y Obras Publicas (SAHOP) Amount US$120 million Terms Repayable in 17 years, including four years of grace at an interest rate of 7 percent per annum. Project Description : The project is a part of SAHOP's 1979-1982 highway program. The program components supported by the loan are: (i) construction, rehabilitation and expansion of federal and state highways and urban bypasses; (ii) construction of SAHOP regional centers; (iii) purchase of maintenance equipment and vehicles; and (iv) consultants' services. Subprojects to be assisted under the loan will be submitted to the Bank for approval. The project will (a) help modernize, expand and maintain the road network; (b) help assess the regional develop- ment impact of highway investments and the long term perspectives of road transport; (c) promote improved sector policies; and (d) strengthen local capabilities to plan and manage highway sector programs. The highway sector now carries some 90 percent of inter- city passenger traffic and about 75 percent of intercity freight transport. Project benefits will accrue to the economy at large in the form of savings in vehicle operating costs. Time savings are also important benefits. Stepped up maintenance and timely pavement strengthening will result in savings in future reconstruction requirements. While the impact of the project will be-felt first by road users, benefits would be broadly distributed. Given the experience of the executing agency and the flexible implementation format of the project, risks attached to physical implementation are lower than usual. Risks attached to the treatment of sector policy issues will be minimized by careful follow-up and exchange of views with the Government in the context of a framework established under the loan. 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.  - ii - Estimated Cost The total cost of SAHOP's 1979-1982 highway investment programs (excluding maintenance and administration) is about US$1.1 billion, with a foreign exchange cost estimated at US$530 million equivalent: Local Foreign Total ---(Million of US$)-- Federal Roads 411 336 747 Purchases of Maintenance Equipment 23 75 98 Urban Bypasses 24 20 44 SAHOP Centers 11 10 21 State and Rural Roads 111 89 200 Total 580 530 1,110 The total estimated cost of Bank-supported subprojects is US$230 million of which US$120 million in foreign exchange. Financing of SAHOP's % Total 1979-82 Highway Investment Investment Programs: Local Foreign Total Progtam Proposed Bank Loan - 120 120 11 Bank Seventh Highway Loan - 50 50 5 IDB - 60 60 5 Government 580 300 880 79 Total 580 530 1,110 100 Estimated Disbursements : Year Annual Cumulative