Honduras - Second Port Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4253 PROJECT COMPLETION REPORT HONDURAS SECOND PORT PROJECT (LOAN 767-HO) December 30, 1982 Latin America and the 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.   FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT HONDURAS - LOAN 767-HO SECOND PORT PROJECT TABLE OF CONTENTS Page No. PREFACE . ................................................... BASIC DATA SHEET ........................................... HIGHLIGHTS .......... ....................................... v I. INTRODUCTION .......................... ....1 II. PROJECT PREPARATION AND APPRAISAL ..................... 1 III. PROJECT IMPLEMENTATION AND COST .................... 3 IV. TRAFFIC AND OPERATIONS ..... ...................... ... . 8 V. FINANCIAL PERFORMANCE . .............. ........... ....... 10 VI. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT ............. 15 VII. ECONOMIC REEVALUATION ...... ........ ..o .... .......... .... . 17 VIII. THE ROLE OF THE BANK ..................... %.........e*. 21 IX. CONCLUSIONS ........ ................................... 21 TABLES 1. Actual and Expected Project Implementation ............ 23 2. Actual and Appraisal Estimates of Project Costs ....... 24 3. Efficiency Indicators - Puerto Cortes ................ 25 4. Traffic - Puerto Cortes ................... ......... 26 5. Traffic - Amapala/San Lorenzo ........ ................. 27 6. Actual and Projected Revenues and Expenses (1971-1978) 28 7. Actual and Projected Revenues for the Project Ports ... 29 8. Actual and Projected Balance Sheets (1971-1979) ....... 30 9. Actual and Expected Financing During Project Period ... 31 FIGURES Figure 1. Schematic Layout, Puerto Cortes Figure 2. San Lorenzo Vicinity Figure 3. Schematic Layout, San Lorenzo ANNEX I: Borrower Comments I 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.   PROJECT COMPLETION REPORT HONDURAS: SECOND PORT PROJECT (LOAN 767-HO) Preface This is a Project Completion Report (PCR) of the Honduras Second Port Project for which Loan 767-HO for US$6 million equivalent was approved on June 25, 1971. Thereafter, in order to meet the increased cost of the project, the Bank made a supplemental loan of US$3 million, an amending agreement to Loan 767-HO was approved on July 30, 1975. Loan 767-HO was fully disbursed by December 31, 1978. In accordance with the revised procedures for project performance reporting this PCR was prepared by the Latin America and the Caribbean Regional Office and read in the Operations Evaluation Department (OED) but the project was not audited by OED staff. The draft PCR was sent to the Borrower for comments. The Borrower expressed his conformity with the report by a telex dated November 24, 1982, annexed to this report.   - ii - BASIC DATA SHEET Appraisal Actual or Item Expectation Current Estimate Project Cost (US$ Million) Puerto Cortes 5.9 5.7 San Lorenzo (Henecan) 3.9 14.2 Total 9.8 19.9 (Underrun)or Overrun % Puerto Cortes (4%) San Lorenzo 264% Total 103% Loan Amount (US$ Million) 6.0 9.0 (including supple- mental loan of 3.0) Disbursed 9.0 Canceled NIL Repaid to 3.31.80 1.225 Outstanding to 3.31.80 7.775 Date Physical Component Completed Puerto Cortes @ Dec. 74 April 75 San Lorenzo (Henecan) @ Dec. 74 Jan. 79 a/ Proportion Completed by Puerto Cortes 100% 70% San Lorenzo 100% NIL Time Overrun % Puerto Cortes 21% San Lorenzo 241% Economic Rate of Return % Puerto Cortes 40% 27% San Lorenzo 33% 8% b/ a/ There was a three year delay in the starting date of this component. b/ There were important changes in scope of project between Appraisal and Project Completion in 1979.   - iii - Cumulative Estimated and Actual Disbursements (US$ 000) FY72 FY73 FY74 FY75 FY76 FY77 FY78 FY79 Estimated 470 2,760 5,720 6,000 7,000 8,000 9,000 Actual 1,619 3,400 3,800 5,800 8,300 9,000 Actual/Estimated (%) 28 57 54 72 92 100 OTHER PROJECT DATA Original Actual or Item Plan Revisions Est. Actual First Mention in Files or Timetable 3/ Government's Application 3/ Negotiations 5/4/71 Board Approval 6/17/71 Loan/Credit Agreement Date 6/25/71 Effectiveness Date 9/23/71 12/22/71 2/22/72 Closing Date 6/30/75 9/30/78 12/31/78 Borrower Empresa Nacional Portuaria (ENP) Executing Agency Empresa Nacional Portuaria (ENP) Fiscal Year of Borrower January 1 - December 31 Follow-on Project Name Third Port Project Loan/Credit Number Loans 1396-HO/1395-T-HO, Credit 696-HO Amount (US$ Million) 17.0 Million Loan/Credit Agreement Date 4/22/77 MISSION DATA Sent Month/ No. of, No. of 2 Date of Item by Year Weeks - Persons Manweeks-/ Report Identification 3/ Preparation 3/ Preappraisal 3/ Appraisal IBRD 1/71 3 3 9.0 Total 3 9.0 1/ Number of 5-day weeks shown in the mission report plus travel. 2/ Number of weeks times number of persons. 3/ Record not available.   - iv - Sent Month/ No f No. of 2/ Date of Item by Year Weeks Persons Manweeks- Report Supervision I IBRD 5/72 1 1 1.0 5/72 Supervision II IBRD 11/72 1 3 3.0 12/72 Supervision III IBRD 5/73 1 1 1.0 6/73 Supervision IV IBRD 11/73 1 1 1.0 1/74 Supervision V IBRD 7/8/74 1 2 2.0 v/74 Supervision VI IBRD 5/75 1/2 1 0.5 6/75 Supervision VII IBRD 2/76 1 2 2.0 3/76 Supervision VIII IBRD 5/77 1 3 3.0 6/77 Supervision IX IBRD 10/77 1 1 1.0 11/77 Supervision X IBRD 3/78 1 1 1.0 4/78 Supervision XI IBRD 4/5/78 1 3 3.0 5/78 Supervision XII IBRD 11/78 1 1 1.0 11/78 Total 15 28.5 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Lempira (Lemp.) A. Exchange Rate Appraisal Year Average (1971) US$l= Lemp. 2.00 Intervening Year Average US$l= Lemp. 2.00 Completion Year Average (1978) US$1= Lemp. 2.00 1/ Number of 5-day weeks shown in the mission report plus travel time. 2/ Number of weeks times number of persons.   HIGHLIGHTS The project was the second Bank loan to Honduras for ports; it followed the first project by a period of five years, focusing on the improvement and expansion of port facilities at Puerto Cortes on the Atlantic (Caribbean) Coast and the replacement of lighterage operations at Amapala by new deep water berthing facilities at San Lorenzo (Henecan) on the Pacific Coast. The project at Puerto Cortes provided for meeting the volume of containerized and roll-on/roll-off traffic that had begun to grow in the Caribbean Region, while the project at San Lorenzo was the building of an entirely new port to provide berths which permitted ships to be serviced better and faster by means of mechanized cargo handling equipment. The Puerto Cortes project component was finished satisfactorily with slight time and cost overruns (when compared with those estimated at appraisal); it was very timely since it enabled ENP to develop Puerto Cortes at the time that a modern container handling port was needed on the Caribbean Coast (paras 3.03 and 3.05). As for the San Lorenzo project component, there was a delay of about three years before the civil works commenced (1972 to 1975); construction and other difficulties extended completion of works by over a year (1977 to 1978) with significant cost overruns, due to port cons- truction costs rapidly rising between 1973 and 1975 and important changes in the scope of the works (paras 3.07-3.17). Actual port traffic at Puerto Cortes was close to the forecast while at San Lorenzo it was considerably lower than expected. This traffic shortfall was mainly caused by fewer lumber and cotton exports than expected and the attainment of lower general cargo imports (paras 4.01-4.02). Overall financial performance of the Port Authority has been satisfactory and has essentially complied with the various financial covenants included in the Loan Agreement (paras 5.01-5.12). The institution-building objectives of the loan have been achieved. The Port Authority has become a well run, appropriately staffed, operationally efficient and relatively autonomous enterprise with responsibility for all port subsector facilities (paras 6.01-6.05). The revised economic rate of return (RERR) for the Puerto Cortes project component is satisfactory (27%) while the RERR for the San Lorenzo project component is now only 8%. This low RERR is the result of lower than forecast traffic levels and cost overruns (paras 7.01-7.11).   - vi - The following points are of special interest: - Succesful realization of the institution-building objectives (paras 6.01-6.05). - Adequacy of the debt limitation covenant (paras 5.12 and 9.05). - Borrower's proposal for a revolving fund as a remedy for delayed payments (para 3.20). - Unexpected soil conditions (para 3.09).   PROJECT COMPLETION PEPORT I. INTRODUCTION 1.01 Honduras, the second largest country in Central America in terms of area, has two coast lines: the major one on the Caribbean Sea and a smaller one on the Pacific Ocean. Its terrain is mountainous and the climate is tropical. Bananas, lumber, coffee, cattle and sugar are the major goods produced. Ports play a key role in the country's international trade, handling nearly 95% of total imports and exports. Puerto Cortes on the Caribbean is the country's principal port, accounting for more than 70% of all seaborne traffic. Until this project, the small ports of Amapala and San Lorenzo on the Gulf of Fonseca had served as the gateway on the Pacific side. 1.02 In 1966, the Bank made Loan No. 463-HO to Empresa Nacional Portuaria (ENP) for the building of two deepwater berths and supporting facilities at Puerto Cortes. Even before the successful completion of these facilities in 1970, it was evident that the traffic, which was growing at a faster rate than had been forecast, would soon warrant further expansion of the port's capacity. ENP therefore commissioned a U.S. firm of consultants (who had provided engineering services for the first port project) to carry out a feasibility study. ENP also investigated the development for a deepwater port on the Pacific Coast through a study which was financed under Loan 463-HO and carried out by a Dutch firm of consultants. The recommendations of these two studies formed the two main components of the Second Port Project, which is the subject of this Project Completion Report (PCR). 1.03 The following are the sources of information on which the PCR is based: (a) Appraisal Report, (b) Supervision Summaries, (c) Quarterly Progress Reports, (d) LAC Information Center and Document Collection and (e) Draft PCR prepared by ENP. II. PROJECT PREPARATION AND APPRAISAL 2.01 The two studies referred to in paragraph 1.02, undertaken by ENP with the encouragement of the Bank, provided the basis for the preparation of the project. The project involved the expansion of capacity at the existing port of Cortes on the Caribbean Coast and the construction of an entirely new port at Henecan (3 km to the south of San Lorenzo) on the Pacific Coast. In the case of the expansion of Puerto Cortes, the project scope as appraised was largely along the lines of the recommendations of the consultants. For the new port at San Lorenzo (Henecan), however, the layout of the wharf as agreed during appraisal differed from that proposed in the study. The project provided for a T-shaped wharf 290 m long and 25 m wide with a central access bridge and transit shed on shore, whereas the study envisaged an L-shaped wharf 123 m x 75 m with an access bridge at one end and a transit shed 78 m x 35 m occupying a large area of the deck. Other components of the project were in accordance with the consultants' proposals.  - 2 - 2.02 The objectives of the project were: (i) to expand port facilities at Puerto Cortes to meet the require- ments of the growing volume and changing nature (roll-on/roll-off) of traffic; (ii) to replace the inefficient lighterage operations for the majority of vessels calling at Amapala by providing alongside deepwater berthing facilities at San Lorenzo. 2.03 The project as appraised consisted of: A. At Puerto Cortes (i) Construction of a new deepwater wharf 285 m long for banana and lumber loading; (ii) Procurement of a belt conveyor system for banana loading; (iii) Land reclamation of about eight acres and construction thereon of a new railroad yard to handle banana and lumber wagons; (iv) Construction of a roll-on/roll-off ramp at the junction of Government Wharves 1 and 2; (v) Construction of roads and parking and open storage areas; (vi) Procurement of a tugboat, pilot boat, forklift trucks and pallets; (vii) Acquisition of about 25 acres of land needed for the project; and (viii) Provision of engineering consultant services. B. At San Lorenzo (i) Construction of a new "T" shaped deepwater wharf 290 m long and 25 m wide for lumber and general cargo, with an access bridge 20 m long and 10 m wide; (ii) Reclamation of about seven acres of land for storage and parking; (iii) Construction of a transit shed, administration and operations buildings, utilities and fencing; (iv) Construction of an access road about 2.5 km long to connect the port facilities with San Lorenzo town; (v) Procurement of a pilot boat and cargo handling equipment; (vi) Procurement and installation of navigation aids; (vii) Acquisition of about 15 acres of land needed for the project; and (viii) Provision of engineering consultant services.  - 3 - 2.04 The identification and preparation of the project were timely, and the project was designed for adequately meeting the short term needs with suitable provision for improvements being made later for future demands. III. PROJECT IMPLEMENTATION AND COST 3.01 Tables 1 and 2 show the variations in the time and cost of project implementation between that envisaged at appraisal and that actually achieved. The circumstances leading to these variations are discussed in the following paragraphs. A. Delay in Loan Effectiveness 3.02 The Loan Agreement was signed on June 25, 1971 and normally should have become effective by September 23, 1971. However, this date was postponed three times initially because the newly elected Honduran Congress had not had time to consider the Loan and Guarantee Agreements, and later because the Congress gave only a conditional approval to the part of the loan relating to the construction of a new port at San Lorenzo. On November 25, 1971, the Congress passed a decree deferring its construction until there were assu- rances that the location fully responded to Honduran interests - territorial, economic, strategic and others - in the Gulf of Fonseca. On December 15, 1971, the Congress passed a new bill modifying the earlier decision and authorizing ENP to proceed with Part A (Puerto Cortes) of the project and directing ENP to undertake studies and investigations and to establish that construction of a port at San Lorenzo would fully respond to the country's interest in the Gulf of Fonseca before starting work on Part B (San Lorenzo) of the project. This decision was discussed at a meeting with ENP in Washington on February 19, 1972 when it was agreed that if, by July 31, 1972, ENP did not decide in favor of the port at San Lorenzo, the amount of US$2.4 million included in the loan for that work would be canceled. The loan was actually made effective a few days later on February 22, 1972. B. Execution of Works at Puerto Cortes (i) Execution Schedule 3.03 Because ENP could not initiate negotiations with the consultants until a clearance was given by the Congress on December 15, 1971, it was January 1972 before consultants were appointed to carry out the final design and bidding documents for the works at Puerto Cortes. Bidding documents were issued to qualified bidders in October 1972, and offers were received early in January 1973. The contract was awarded to the low bidder in February 1973, and work started in March 1973, more than a year behind the schedule envisaged at appraisal. The contractor maintained good progress and completed the works in April 1975 within the contract period of 670 days, although his work had been slowed down for a couple of months following the dislocation of transport due to Hurricane Fifi in September 1974. The new wharf at Puerto Cortes was inaugurated on March 21, 1975, only three months later than the appraisal target date.  -4- (ii) Revisions 3.04 Revisions agreed during execution related to the deletion of. the roll-on/roll-off platform, an increase in the width of the wharf at the west end and decking over a depression in the rear of the access wharf. All these revisions helped to improve the operating conditions without adding to the costs or time for construction. Because of the success of a United Fruit Company experiment with containerization of bananas, ENP also decided not to acquire the belt conveyor system. (iii) Cost 3.05 The bid of the successful bidder amounted to L 9,187,316. This amount included L 331,103 for repairs to lWharf No. 1, which were agreed to be carried out under the same contract although not financed by the Bank. The remaining amount, L 8,856,200 (US$4,428,100), was lower than the consultants' estimate of L 10,888,000 and just within the appraisal estimate (US$4,597,000) inclusive of contingencies) for civil works at Puerto Cortes. The foreign exchange component of the contract price was 66% (comprising 40% in Dutch Guilders and 26% in US$) as against the appVaisal estimate of 57%. The appreciation of the Dutch Guilder after bid opening (an estimated additional cost of US$177,000) raised the final cost ofi,the contract to US$4,605,100. 3.06 The execution of the works at Puerto Cortes was quite satisfactory, with marginal variation from the appraisal estimate with regard to time as well as cost. C. Execution of Works at San Lorenzo (i) Execution Schedule 3.07 At the request of ENP, the Bank agreed to extend the deadline for a decision on the construction of a port at San Lorenzo from July 31 to October 31, 1972. In the last week of October, ENP informed the Bank that the Government had finally decided against a port at San Lorenzo and wanted instead to develop Amapala as the deepwater port on the Pacific Coast. Consequently, it was agreed that ENP should request cancellation of US$2.4 million earmarked in the loan for San Lorenzo less US$200,000 to cover the cost of a study for developing Amapala. Before this proposal was processed in the Bank, there was a change of Government in Honduras in December 1972 and a new Board of Directors was appointed for ENP. The new Board decided, with the approval of the Government, against the earlier decision for developing Amapala and to go ahead with the original proposal for a port at San Lorenzo. Accordingly, ENP contracted consultants in June 1973 for preparing the final engineering and bidding documents and for super- vision of construction. Although the consultants had agreed to get the bid documents ready in five to six months, they took nearly 12 months to complete this work, mainly because the soil investigations which were to be carried out with the equipment and operators of the Government's Highway Department were delayed. Invitations to bid were issued in October 1974, and five bids were received, the lowest being for a sum of L 20.6 million (US$10.3 million) as against the consultants' estimate (May 1974) of US$6.0 million and the  appraisal estimate of US$3.14 million (inclusive of contingencies). Because of the high prices, which were attributed mainly to worldwide increases in the prices for heavy civil works (which had exceeded the general increase in prices since the appraisal in 1971), ENP decided, with the agreement of the Bank, to cancel the bids and to negotiate with the low bidder on the basis of some changes in the scope and specifications of the work. After obtaining the necessary Presidential Decree, ENP completed the negotiations and signed a contract for a sum of L 18.12 million (US$9.06 million) on October 18, 1975, with a completion period of 700 days ending on September 18, 1977. 3.08 In order to meet the increased cost of the project, ENP requested additional financial assistance from the Bank. The Bank made a supplemental loan of US$3.0 million, after a review of the economic evaluation had indicated that the project yielded an acceptable economic return of 11% even with the substantially higher investment. An amending agreement to Loan 767-HO was signed on July 30, 1975. 3.09 The progress of the contractor was beset with delays from an early stage because he ran into several problems in the off-shore work on the wharf construction. The new, self-elevating pontoon, on which a piling rig was mounted, developed teething troubles which delayed the start of the piling work. The pontoon later suffered accidental damage, which held up the pile driving for two and a half months. After about half the piles had been driven, the work was again slowed down because of high resistance encountered. Investigations by the consultants showed that the difficulty was caused by the unexpected presence of a layer, about 1/2 to I m thick, of compact volcanic ash which was highly resistant to the impact of a pile. The soil investiga- tions carried out prior to final engineering had not revealed this unusual stratum because the composition of the ash layer was said to be such that it could be easily disintegrated and penetrated by a boring tool. Fortunately, only the southernmost third of the pier was affected by the ash layer so that the contractor was able to avert complete stoppage of work. The affected part of the wharf was redesigned as a structure carried on end-bearing piles of concrete , but, in the portion close to the berthing face, the concrete piles were replaced by heavy tubular steel piles. The late delivery of the tubular piles further added to the delay. Completion of the works envisaged under Loan 767-HO (i.e., excluding the extension of wharf and sugar handling facil- ities contracted later as part of the project financed under Loans 1395-T-HO, 1396-HO and 696-HO) was essentially achieved in October 1978, about one year after the end of the contract period. Most of the delay was covered by extensions certified by the consultants from time to time. (ii) Revisions 3.10 Before starting work on final engineering, the consultants recommended a revision of the wharf layout as envisaged at appraisal. In their view, the layout proposed in the original feasibility study was preferable to that of the appraisal report for the reasons that (a) adequate depths (for 7 m draft vessels) would be available without requiring dredging; (b) the wharf would have sufficient width for efficient handling of cargo on both sides; and (c) transit storage would be provided on the wharf, making it possible to  - 6 - reduce on-shore storage which would be costly because of the poor soil condi- tions. After discussing the pros and cons of the consultants' proposal at a meeting in the Bank with ENP and the consultants, it was agreed that the basic concept of the appraisal report layout, viz., locating the transit shed and storage on shore and leaving the wharf unobstructed, was the right one. It was agreed, however, that the width of the wharf and approach bridge had to be larger to facilitate handling of extra long bundles of lumber and the turning of trucks and trailers. Thus, an open pier 140 m x 50 m with a 15 m wide approach bridge was agreed upon and this adjustment was not expected to result in any significant increase in the cost of the wharf. It was understood that the width of the pier was tentative and would be revised after a review of the operational requirements. As a result of such review, it was decided later to reduce the width to 37.5 m. 3.11 Instead of a single transit shed as envisaged at appraisal, three separate sheds for general cargo, cotton and lumber have been provided for operational and security considerations. 3.12 Since most of the traffic to the port would be using the Pan American highway, the access road to the port has been connected to that highway instead of the town of San Lorenzo. 3.13 In view of the substantial increases in project cost, the procure- ment of equipment which had not been ordered was deleted from the items to be financed under Loan 767-HO when the supplemental loan of US$3.0 million was made; these items were later financed under the following loan for the third port project. 3.14 Following the approval of the Third Port Project (Loans 1395-T-HO, 1396-HO and Credit 696-HO), major additions were made to the scope of the works at San Lorenzo, including (a) extension of the pier to the north by 145 m, (b) provision of a sugar shed and molasses tanks with pumping system and (c) deepening of the access channel and turning basin to 28 feet. The time and cost implications of these additions have not been taken into account in the foregoing observations since they form part of another project. However, they have been taken into account in the economic reevaluation (Chapter VII). (iii) Cost 3.15 The civil works at San Lorenzo, as envisaged in Loan 767-HO, were estimated at appraisal to cost US$3.14 million (including contingencies), while the cost as executed (excluding the items included in the Third Port Project) amounted to US$12.39 million, an increase of 295%. Similarly, the cost of engineering services went up from an estimated US$0.3 million to an actual US$1.8 million. The most important factor contributing to this very substantial increase was the rapid rise in port construction costs from 1973 to 1975. The delayed decision to finally put the port at San Lorenzo (instead of Amapala) resulted in bids being received only in January 1975. The bid results were consistent with the experience in two other Bank-financed port projects in Latin America which were appraised in 1971-1972 but were taken up for execution in 1975. In Nicaragua (Second Corinto Port Project), the increase in cost was 295%, while in Brazil (Santos Port Project), the cost went up by  - 7 - 280%. On the other hand, at Puerto Cortes where the bids had been received early in 1973, the cost compared reasonably well with the appraisal estimates. The other factor to which a part of the cost increase must be attributed is the unexpected presence of volcanic ash, which necessitated a change in the design of the wharf. 3.16 The increase in the cost of engineering services was proportionately even greater than that of the works. Lengthening of the construction period by a year, the necessity for additional investigations and design effort because of unforeseen soil conditions and an unfavorable variation in the exchange rate of the lempira vis-a-vis the Dutch guilder were the main reasons for this increase. D. Reporting 3.17 The reporting requirements were understood well and were, on the whole, met satisfactorily by the Borrower, although there were delays in the submission of the reports because of administrative difficulties. E. Procurement 3.18 The borrower had no difficulty in following the Bank's procurement guidelines. In the case of the procurement of a tugboat, which was required urgently, ENP requested and obtained Bank approval to purchase a used tug. F. Disbursements 3.19 Because of the delay in the startup of the project, the disburse- ments were much slower than had been expected at appraisal. There were no major delays in the processing of withdrawal applications, but, during the initial stage of the civil works contract for Puerto Cortes, some delays occurred because the Borrower asked for reimbursement of 100% of the foreign cost whereas, under the Loan Agreement, he was entitled to only 57% of the total cost. The problem was resolved quickly when the discrepancy was pointed out and corrected. 3.20 As a remedy for delayed payments, the Borrower has suggested in its draft PCR that the Bank should consider establishing a revolving fund to be placed at the disposal of the Borrower and recouped from time to time as project expenses are incurred. Such an arrangement would amount to making the loan funds available on an advance rather than on a reimbursible basis and might, therefore, be unacceptable. In addition, the monitoring of the revolving fund would be more complicated and also possibly more expensive to administer. Nevertheless, some system for improving disbursement procedures should be sought in order to reduce the borrower's working capital needs, which can be substantial.  -8- G. Performance of the Borrower 3.21 The Borrower's performance with regard to the implementation of the project was consistently good. During the execution period, the management of ENP was changed three times with each change in Government. Fortunately, all the managements attached high priority to the handling of administrative matters relating to the project. They were all receptive to the suggestions of the consultants and the Bank and were sincere in their efforts to comply with the Bank's guidelines and requirements. They maintained good relations with the consultants and contractors. Despite the significant increase in the cost of the project, the Borrower was able to provide the counterpart financing without assistance from the Government. 3.22 The Borrower was late in complying with the covenant for reducing the free time for the storage of import cargo to 10 days. The delay, however, did not materially affect the operations at Puerto Cortes, which did not experience any problems due to uncleared cargo during the intervening period. IV. TRAFFIC AND OPERATIONS A. Traffic (i) Puerto Cortes 4.01 For the appraisal of the project at Puerto Cortes, tonnage was forecast for the ten-year period 1971-1980. Total tonnage (exports plus imports and excluding petroleum and petroleum products which are handled at Texaco's private pier to the west of the main Government wharf) was forecast to increase from a total of 877,000 tons in 1970 to 1.68 million tons in 1980, an average annual rate of increase of about 9.1%. Actual traffic, excluding petroleum and petroleum products in 1979, the last full year for which actual traffic data are available, reached 1.6 million tons, which, through extra- polation, is about the total that was forecast. During the intermediate years, traffic never fell below about 90% of the forecast except during 1975 and 1976, when it remained relatively constant. Thus, the overall total projec- tions of cargo have largely materialized. With respect to individual commo- dities, the forecasts were considerably less accurate. Banana, lumber and, to a lesser extent, mineral (zinc and lead) exports grew much slower than expected while coffee and other dry cargo exports, such as cement, and such imports as fertilizers, chemical products and iron and steel substantially exceeded the forecast. The serious shortfall in banana traffic at Puerto Cortes (about 50% of the forecast in 1979) is explained by the fact that Standard Fruit Company decided to divert all its banana traffic from Puerto Cortes to Puerto La Ceiba. 1/ In the case of lumber traffic (about 65% of 1/ This decision was initially made following the 1974 hurricane.  the forecast in 1979,) national production generally declined as the struc- ture of the industry changed from private to mainly public ownership. Petro- leum traffic, which is not included in the above figures, fell substantially below the forecast (about 48%), essentially because of Texaco's decision, based on t