Ecuador - Highway Maintenance and Construction Project

FL, r- - / 7':a R E S T R I C T E D R e p o r t N o. TO-146b 4-S This report was prepared for use within 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 REPORT ON THE NATIONAL HIGHWAY PROJECT ECUADOR September 10, 1957 Department of Technical Operations  CURRENCY EQUIVALENTS US $1.00 a 15.15 Sucres 1 Sucre . US $.066 100,000 Sucres a US $6,600 100,000,000 Sucres . US $66,000  TABIE OF CONTENTS Paoe Summary and Conclusions i - ii I. INTRODUCTION 1 II. BACKGROUID 1 A. Description of the Present Road Network 1 B. The Existing Road Program 2 III. THE HIGHWAY PROJECT 2 A. General 2 B. The Highway Maintenance Program 3 C. The Highway Construction Program 5 IV. FINANCINIG OF THE PRWJECT 10 A. Estimated Rate of Expenditures 10 B. Provision of Local Funds 12 C. Cash Flow of Local Currency Expenditures 12 ANNEX I : Map - Ecuador, Main Highways ANMMEX II : Table - National Highways' Maintenance Program ANNEX III : Chart - Comparative profiles roads Quito-Latacunga-Quevedo and Quito-St. Domingo-Quevedo  ECUADOR `2PORTT 018 THIE NATIONAL HIGHWAY PR,OJTECT SUI1'VIRY AMISD CONCLUSIONS The Ecuadorian Government has submitted to the Bank a highway project consisting of a maintenance program and a program for the con- struction of four highways, both to be completed within four years. The programs were prepared for the Government by a firm of consulting engineers. ii. The total cost of the project is estimated at 485.6 million sucres, (USV32.1 million) of which the equivalent of US$14.5 million would be in foreign currency. iii. Originally the Government submitted tci the Bank a highway proj- ect consisting of a four-year maintenance program and a five-year program for the construction of six highways. During negotiations this project was withdrawn and replaced by the project menticr.ed under (i) while at the same time it was agreed to increase the estimates as originally submitted for the construction of the individual roads by 20%. iv. The reduction in the number of highways to be constructed under the Project will not materially affect the overall work program adopted by the Government as the highways left out were pl'1nned to be constructed in the last stage of the five-year program anyway. v. Taking into account the increase of 20% over the Governmentts estimates, the cost of the Project would 1be divided as follows: Maintenance Program: total cost 112.3 million sucres (US$7.4 million) including the equivalent of USt3.5 million for foreign currency expenditures; Construction Proaram: total cost 373.3 million sucres (US$24.7 million) including the equivalent of USll.O million for expendi- tures in foreign currency. vi. The Project is sound in its technical and economic aspects. The design standards to be applied to the design of the highways to be construct- ed or reconstructed are satisfactory. vii. The Government has advised the Bank that it will devote all the net revenue from the First Gasoline Tax to meet the local expenditures of the Construction Program. This is estimated to cover about 60% of these expenditures. The Government has indicated that the balance will be met by appropriations from the annual budgets. The local currency cost of the Maintenance Program will be met entirely by appropriations from the annual budgets.  ii viii. The Government has also indicated it will employ consultants satisfactory to the Bank to assist in the further preparation and exe- cution of the project and that it will use agreed-upon design standards.  ECUADOR REP?Or ON TEE VATION;AL HIGHWAY PROJECT I. IlTRODUCTION 1. This report is a technical and economic appraisal of a national highway project in Ecuador. The Bank has been approached by the Ecuadorian Government for a loan of US614.5 million to cover the foreign currency cost of the project which would include a program for the reorganization of the maintenance of the existing national highways and a program for the construc- tion and reconstruction of four highways of a total length of 524 kilometers. 2. This appraisal is based on the findings of a Bank mission which visited Ecuador in March/Apr4l of this year, and on a report by the consult- ing engineers, Rader and Associates, Miami, U.S.A., who were engaged by the Ecuadorian Government to undertake a study of the national highway program. II. BACKGROUND A. Description of the Present Road Network. 3. Ecuador is predominantly an agricultural country deriving 95% of its foreign currency earnings from the export of agricultural products such as bananas, cacao and coffee. 4. Geographically it can be divided into three zones: the coastal area from the Pacific coast to the foothills of the Andes mountains, with a tropical to sub-tropical climate; the Sierra or mountainous part, which includes the eastern and western ranges of the Andes, with a temperate climate; and the Oriente, east of the Andes at the head waters of the Amazon river, consisting mostly of tropical rain forests. 5. The export crops are raised mainly in the southern part of the coastal area, wiith Guayaquil as the most important port of export. How- ever, a number of smaller ports such as Manta, Bahia and Esmeraldas are regularly visited by ocean-going vessels to load agricultural products, particularly bananas. (See map, Annex 1). 6. The agricultural products raised in the mountainous zone are typical of a temperate climate. They consist of cereals, corn, potatoes and livestock, and are produced for the local markets. 7. Because of the geographical conditions of the country, road development in Ecuador has been slow and only recently have efforts been made to improve the road system. Despite these efforts, there is today still no suitable all-year-round connection for motor vehicles between the populated mountain area around Quito, and the tropical coastal region, with Guayaquil as its most important town and port. 8. Ecuador's present network of national highways amounts to about 3,200 kms of primary and secondary highways. In addition there are a number of dirt tracks, passable only during the dry season. Annex 1 shows the most  2. important of these highways, some of which are at present under construc- tion or reconstruction. TLhe backbone of the network is formed by the Pan American highway, iith a total length of 1,100 ims which is transitable the year around between Ibarra and Loja. 9. Of the 3,200 kms of existing national highways only 330 kms are asphalted and about 690 kms have a cobblestone surface. The rest of the roads are gravel roads, most of which are in poor condition due to the lack of proper maintenance. 10. Great road improvement activity is shown by some of the provincial governments. Outstanding in this respect is the "Comite de Vialidad" of the Guayas province, to which the Bank made a loan in 1954 of TJS$8.5 million for the construction of a number of roads, among others the roads between Guayaquil and Empalme (Quevedo), Nobol and Portoviejo, Duran and Babahoyo, and Guayaquil and Progreso. it is estimated that the Conite's program will be completed in 1961. B. The Existing Road Program 11. Wvhen the present Government came into office in September 1956, it was confronted with a badly-planned and over-extended road-building program set in motion byo the outgoing Government in 1954. A large number of contracts for the reconstruc-,ion of existing roads and the construction of new roads had been placed simultaneously with local contractor,. In order to do more work than was estimated could be done with the proceeds of the First Gasoline Tax (see paragraph 64) the previous Government paid the contractors only half the amount of the contracts in cash and the remainder in 10-year dollar bonds bearing 5% interest. The bonds are to be redeemed between 1954 and 1964 from revenues accrued from the First Gasoline Tax. 12. Following the recommendations of a Bank mission which studied -the national highways in 1955, the present Government's first step towards a sounder and more realistic road program was to negotiate the liquidation of all but a few of the outstanding contracts, to refrain from issuing further dol- lar bonds, and to restudy the countryts road projects. III. THE HIGHRAY PROJTECT A. General 13. The consulting firm of Rader and Associates was engaged to prepare a new road program within the scope of local funds available, most of which would coae from the revenues of the First Gasoline Tax. The funds available from these revenues for construction are limited due to the fact that until 1964 the bonds mentioned in paragraph 11 will have to be serviced from the same revenues. The Government has indicated its intention to appropriate additional amounts in the annual budgets.  -3 - 14. As a result of tne Consultants' recommiendations the Government has formulated the following two programs: a. A Highway i.aintenance Progran to reorganize and re-equip the maintenance organization for the natoional highTays; b. * Highw-ay Construction Prograri comorising six roads of a total length of' amproximately 682 k's to be constructed in a recommended order of priori-tny, in five years. 15. The Government submitted both these programs to the Bank. During negotiations it wjas decided to substitute a reduced construction progran coriprising four roads with a total length of approximately 524 krs. The reduced ^program rierely excludes the two roads wrhich were to be constructed during the last stage of the original five-year program. Tt does not tlherefore affect the criginally planned tiiie schedule. However, it does limi' the time for the cor,moletion of the .roject to four years .hile the total amount of foreign exchange involved is being reduced from US$17.9 million to Tj1,L.5 million. . The Highway Maintenance Program The Present IIaintenance Facilities 16. The poor condition of most of the Ecua(dorian national highways todaly is due to neglect of proper maintenance. Laclk of funds, of adequate equipment and of an effective rmainteinance organization have been the principal reasons for their deterioration. 17. The miaintenance of thne national highways is the responsibility of the Maintenance lieiartrment of the Iiinistry of lPblic 'Works in Quito, headed by a Chief Engineer of `aintenance. There are at present 16 field offices, each headed by a Zcne EnThineer who is responsible for an area which usually coincides with a province and who reports d.irectly to the Chiief Engineer. 18. '!orkshops exist in Quito and in less than hlalif of the field installations and are inadequately equipped. 'iaJor repairs cn existing equipment camnot he performed due to a lack of s&pace, funds, and the most essential tools anid eqaipment. 3pare parts are nearly nonexistent and caniiibalizing of still useful equipmient is common. 19. The -uarehousing systerm used is inef