El Salvador - Feeder Roads Program and Complementary Project

R E S T R I C T E D Report No. TO-191 A 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 APPRAISAL OF FEEDER ROAD PROGRAM AND COMPLEMENTARY PROJECTS EL SALVADOR December 22, 1958 Department of Technical Operations  CURRENCY EQUIVALENTS (Selling Rates) U.S. $1 * 2.50 colones I colon * U.S. $ 0.40 1 million colones - U.S. $400,000  TABLE OF CONTENTS Page I. Summary and Conclusions i II. Introduction 1 III. Background 1 A. General 1 B. Status of the Coastal Highway Project 1 C. Highway Organization and Maintenance 2 D. Preparation of the Project 2 IV. The Project 2 A. Description 2 B. Economic Benefits 3 C. Financing 5 D. Execution 5 V. Conclusions 6 Annex 1 - Cost Estimate Annex 2 - Map  I. SUNY A.D CONCIUJSTONS i. The Government of El Salvador has submitted to the Bank a high- way project consisting of two parts: a) A program for the construction of 21 feeder roads in the regions traversed by the Coastal Highway. b) Three comrplementary projects to the Coastal Highway: 1 The paving of the section La Libertad-Comalapa; 2. The construction of a bridge across the Rio de Paz on the border of Guatemala to connect with the Pacific Highway in that country; and 3. The extension of the Coastal Highway to the site of the above bridge. ii. The total cost of the project has been estimated at 25.0 million colones (US$ 10.0 million) of which the equivalent of Us$ 5.0 million would be in foreign currency. The local currency cost would be met from the na- tional budget. iii. At the time the Coastal Highway project (Loan 104-ES) was con- ceived, it was foreseen that a system of feeder roads would be required to obtain the full benefit from the Highway. The complementary projects were not included in the Coastal Highway loan project because of the lack of engineering information at the time the loan was made. iv. Preliminary engineering studies have been completed on part (a), while final plans and specifications have been prepared for part (b) of the Project. The design and supervision work will be carried out by the Highway Department with the assistance of consulting engineers. The De- partment is well organized and well administered. The construction work will be carried out by contractors on the basis of international competi- tive bidding. However, a few roads estimated to cost less than $700,000 may be built by the Department's owm forces. v. It is estimated that about four years will be required to complete the Project. vi. The Project is sound in its engineering and economic aspects and the return on investment is expected to be high. The design stand- ards are adequate. vii. The Project is suitable for a Bank loan of US$ 5.0 million. An appropriate term would be 15 years including a period of grace of four years.  II. INTRODUCTION 1. The Government of El Salvador has approached the Bank for a loan of US$ 5.0 million equivalent to cover the foreign exchange costs of a feeder road program, the completion of one section of highway, the extension of another section and the construction of a bridge over the Rio de Paz. 2. This appraisal of the Project is based on the findings of a Bank mission which visited El Salvador in ,lNay 1958 and on reports by a firm of consulting engineers, Tippetts-Abbett-McCarthy-Stratton (TASs), of New York, U.S.A., who were engaged by the Government to undertake the preliminary studies as well as the detailed planning, design and supervision of the ex- ecution of the Project. III. BACkGROUND A. General 3. During recent years one of the principal objectives of the Gov- errnment's economic development policy has been the increase and diversifi- cation of agricultural production through the opening up of new, under- utilized land. One of the last remaining areas in the country with unused agricultural potential is the plains along the Pacific Coast. Investiga- tions had shown that this area, which was practically inaccessible, would be suitable for crop cultivation, livestock raising and dairy farming if the necessary access was provided by an adequate network of roads. 4. The Bank agreed that the most appropriate layout for such a net- work would consist of a main highway through the Pacific coastal area (Coastal Highway) extending from the Guatemalan border to the Honduran border together with branch roads, some of which would provide connections with the Inter-American Highway. 5. In October 1954 a loan (Loan 104-ES) of U5$ 11.1 million equiv- alent was made by the Bank for the Coastal Highway. This highwIay which is over 300 Ic.s. long is now under construction. At the same time the Govern- ment undertook to plan and design a number of feeder roads branching off from the Highway and to be built either simultaneously with or after the end of construction of the Coastal Highway. The plans prepared by the Government are the basis of this loan proposal. 6. One section of the Highway (Comalapa-El Playon) was already in existence when the loan agreement was signed. Another section (La Libertad- Comalapa, see map) was not included in the first loan since it was already under execution. B. Status of the Coastal Highway Project 7. The Government engaged the consulting engineering firm of Tippetts- Abbett-McCarthy-Stratton (TANS) from New York for the preparation of plans and designs and for the supervision of construction of the Coastal Highway. The construction work was let in five sections.  - 2- 8. Work was carried out satisfactorily although somewhat behind schedule up to early 1958. At that time two of the contractors experi- enced serious financial difficulties and the work on the sections con- cerned began to fall seriously behind schedule. One of the contractors is to be replaced, and in the case of the second contractor steps have been taken by the bonding companies to provide additional working capi- tal. The consulting engineers expect that the Government will not suffer a financial loss because of the above problems, but the completion of the project will be delayed to late 1960, two years later than originally anticipated. 9. The Government was not able to complete the section La Libertad- Comalapa contrary to its expectations. UThile earthwork and structures on this section were completed, the base and pavement remain to be constructed. C. Highway Organization and Maintenance 10. The Highway Department of El Salvador is well organized and well administered, though it needs additional trained personnel. The existing main roads are maintained in a satisfactory state of repair although main- tenance of local roads could be improved. It is expected that the Depart- ment will be able to cope satisfactorily wfith the maintenance of the roads included in the Project. D, Preparation of the Project 1ll As agreed at the time the loan for the Coastal Highway was made, the Government of El Salvador has taken the first step to provide feeder roads. It engaged the consulting firn of TAMS to work out the preliminary layout and estimates for the feeder roads and their report was completed in the spring of this year. This study wIas discussed with members of the Bank staff and submitted in its final form in July of this year. 12. At the time of the signing of the loan agreement for the Coastal Highway it was intended to join eventually the Hignway at the Guatemalan border with the Pacific Hlghway in that country. However, negotiations with Guatemala regarding the location of the section near the border, par- ticularly the bridge over the border river, Rio de Paz, were only in a preliminary stage, and it was decided not to include the bridge and the adjacent section of the Highway in the loan project. 13. Agreement in principle has now been reached between the two countries with regard to the location of the bridge and the division of construction costs. Final plans and specifications for the bridge and the adjacent section of the Coastal Highway have been prepared by the firm of TA94S which acts also as consultant for the Government of Guatemala for the adjacent section of the Pacific Highway in that country. IV. THE PROJECT A. Description 14. The project consists of two parts:  - 3 - ) A program of 21 feeder roads of which all but three are branches of the Coastal Highway (see map). Pre- linminary engineering surveys have been completed on all the feeder roacs and preliminary alignments and gradients havre been determined. Thus information is available to commence the final design immediately. YMany of the roads would replace existing tracks and sub-standard earth roads which in the rainy season are only passable by ox-cart. T-t is almost impossible to maintain these roads in the rainy season because of their poor location wihich has caused the road level to fall below the surrounding ground through years of erosion. Three of the roads would form important connections to the Inter-American Highway and have been designed as secondary roads, A low volume of traffic is expected on the remaining roads. Design standards have been established in accordance with anticipated traffic volume, ii) Three complementary projects to the Coastal Highwiay con- sisting of: a) The paving of the La Libertad-Comalapa section of the Coastal Highway (Section L-6, see map). A contract for the repair of the earthy,ork, which is already completed, and for base and a double bituminous surface treatment has been awarded and work has commenced. b) The construction of a bridge across the Rio de Paz to connect the Coastal Highway of El Sal- vador to the Pacific Highway of Guatemala. The cost of the bridge is to be shared equally by E1 Salvador and Guatemala while adcinistration and supervision is to be carried out by the Government of Guate,.aala. The superstructure steel of the bridge has already been purchased by (3uatemala. c) The extension of the Coastal Highway, 3.8 km to the site of the Rio de Paz bridge on the Guatemalan border. B. Economic Benefits 15. Coffee, by far the most important crop, is produced adjacent to the Inter-American Hlighway on the volcanic soils of the higher slopes of the foothills to the Pacific Coastal plain. Lower down the slopes and on the coastal plain itself the major land use is extensive cattle grazing. How- ever, the flatter lands accessible to transportation are used for cash crops of cotton and food crops, mainly corn, sorghum and rice. There is also scattered production of subsistence food crops. The production of cotton, food crops and livestock has already increased along the partly completed Coastal Highway.  - 4 - 16. The proposed feeder roads are vwell located to provide access to the areas of highest agricultural potential of the coastal plain and the lower slopes of the foothills. These roads should within a few years lead to an increase of about 10% in the overall area used for livestock or agri- culture. Howvever, a more important result would be a change-over from ex- tensive cattle grazing to cultivation and intensified livestock production. The main increases would be in cotton, corn, rice, track crops, dairy and meat Droduction. The roads would have therefore relatively little ef- fect on coffee output, but the Government's objective to diversify agricul- tural =nr tionard to lessen dependence on coffee would be achieved. 17. The best new agricultural land is on the plain south of the coastal Highway in the Zacatecoluca area (Priority Area I on the map). The best land for inteensification of livestock is Priority Area II. The total area under the three main crops, cotton, corn and rice, is expected to increase by roughly 20,000 hectares. Some 16,000 hectares should be within Area I, some 3,000 hectares in Area II and about 1,000 hectares in Area III mhich is already quite intensively cultivated. Area IV, which is in mountainous country, is an important coffee area while the production of corn is ex- pected to increase on the lower slopes. 18. The estimated increase in production for the three main crops, tabu- lated below, makes allowance for some increase in yields of presently cul- tivated land as well as production from new land valued at May 1958 prices. These figures are consistent with the observed increase in agricultural production along the partly completed High.way. Increased Annual Production of I!;iain Crops, Five to Ten Years from Com- pletion of Roads (Equivalent millions of dollars) Priority Areas I II III IV Total Cotton 4.9 1.3 o.6 - 6.8 Corn 3.0 1.3 2.1 0.3 6.7 Rice 2.7 0.3 - - 3.0 Total io.6 2.9 2.7 0.3 16.5 190 Anticipated increases in other crops and livestock production have not been included. These would raise the annual value of increased pro- duction to the equivalent of around UStj 20 million within five to ten years, which w'ould provide a high return on the estimated investment of about US,j 33 million equivalent for the Coastal Highway and the feeder roads. Foreign exchange earnings should increase by the equivalent of about US&, 7 million because all of the additional cotton would be available for export. There would also be considerable savings of foreign exchange in food imports, which recently have been at the annual rate of about USti 16 million. In addition, more vork would be provided for a relatively large underemployed labor force in the area as well as for workers from the densely populated central plateau.  - 5 - 20. The conditions to achieve the expected agricultural development are favorable. lechanization is common on larger faxms and the use of ferti- lizer is increasing rapidly. The present land tenure situation in the areas concerned, mainly large estates operated by tenants, has shortcomings from the social viewpoint but would not pxevent expansion of production. Univer- sity level agricultural education was commnenced in 1953 and an agricultural high school in 1956. The extension services already reach about 20Hu of the farmers and credit is available for commercial agriculture. Under these conditions production has already expanded rapidly with the construc- tion of the Coastal Highwvay. 21. Continued governmental support of farm development can be expected for the area to be served by the feeder roads. Help will, however, also be needed in constructing minor farm access roads and in clearance of new lands. Farmers can arrange for land clearing to be undertaken by the machinery pools of the Ilinistry of Agriculture and for minor road con- struction by the TTinistry of Public -Forks if they provide labor and pay part of the machinery costs. 22. Although the main purpose of the feeder road program is agricultural development, eight of the roads would also provide a cross connection to the Inter-American High-w-ay, thus greatly improving highway communication in the southern half of El Salvador. Route A-17 to San miguel is the most important of these connections, facilitating communication between the Pacific plain and the Honduras border via the Inter-American Highway. In addition to the above mentioned increases in agricultural production, con- siderable benefits vvould result to the economy of El Salvador in reduced cost of vehicle operation by the inprovement of these roads as well as in- tangible benefits in increased reliability of communication and easier ac- cess to the rich agricultural coastal plain. C. Financing 23. A cQ3t estimate has been prepared (Annex 1) on the basis of the preliminary engineering report on the feeder roads and final plans for the complementary projects. The total cost of the Froject is estimated at colones 25.0 million (US$ 10.0 million) of which the foreign exchange com- ponent is 50 or the eouivalent of USt7 5.0 million. The latter includes the estimated foreign exchange cost of depreciation and maintenance of con- tractors, equipment, imported material, fuel and lubricants, and the esti- mated e-nst of foreign personnel, fees and overhead of the contractors and consultantst fees for both design and supervision work. The estinate con- tains a contingency item of about 25% of which 8% is for expected increases in prices during the execution of the work. In these circumstances, the estiTnates are reasonable. 24. The local currency cost iould be met by appropriation from the na- tional budget to a special fund set aside exclusively for the Project. D. Execution 25. Final plans, specifications and contract documents have been prep- ared for the pavement of Section L-6 and for the extension of the Coastal  -6- Highway to the Rio de Paz. Final plans and specifications have also been prepared for the Rio de Paz bridge and approved by both the Governments of El Salvador and Guatemala. 26. The Highway Department, wihich with the assistance of TAMS made the preliminary engineering studies of the feeder roads, will carry out thle final designs in the same manner. Construction work will be super- vised by the consultants with the exception of the paving of Section L-6 which the Highway Department will carry out itself on a trial basis. The work would be carried out by contractors on the basis of international competitive bidding and contracts would be of the unit price type, The work would be let in several sections of various sizes in order to provide bid opportunity for qualified small, medium and large contractors. The Department may construct a few of the roads costing less than $70,C000 with its own forces. 27. In the case of the feeder roads, it is planned to have design work completed by August 1959 so that contractors may be selected and construction started by the end of the rainy season in late 1959. It is estimated that in all about four years will be required to complete the feeder road program. V. CONCLUSIONS 28. The Department is well organized and well administered. The construction work will be carried out by contractors on the basis of international competitive bidding. However, a few roads, estimated to cost less than $700,000 may be built by the Depertment's own forces. 29. The Project is sound in its engineering and economic aspects and the return on investment is expected to be high. The design stand- ards are adequate. 30. The Project is suitable for a Bank loan of US$ 5.0 million. An appropriate term would be 15 years including a period of grace of four years.  Annex 1 EL SALVADOR COST ESTMI;E, Feeder g.oad Program and Complementary T[orks (U.S. dollars equivalent) Local Cur- Foreign Cur- Total rency Cost renc-y Cost Cost Feeder Poad Program Construction 2,639,000 3,072,000 5,711,000 Conplementary '!orks-Construction 361,000 575,O00 936,COO Consulting Engineering - Feeder Road Program and Complementary WNorks 220,000 353,000 573,000 Local k6ministration and Engineering 86o,oco - 860,000 Contingencies (including 8% for price increases during execution of the project) 920,000 1,000,000 1,920,000 Total 5,0o00, 00 5,000, COO lo0, o, o000''* 1 22,500,000 colones 7S; 25,000,000 colones  EL SALVADOR FEEDER ROAD PROJECT E Roblon6e AGRICULTURAT. REGIONS MAIN ROADS Al I dnta:: _Coffer Inter-A.eican Highway 0 ~~~~~~~~Cottas aof Coaspled pogl ion I_____ J3Coastal Highway under Forests in ,oun.tamnos construction 4, Jd --py a...s Other paved roads Coastal Areas and All weather roads Priority Ramhero ~proposed Feeder Roads Coropltnentary Projects ol', } )/, RAILROADS 4 ,,< w; L v _oC~~~~~~~~~~~~~~~~HALA TENA WGO S j g Xy ~~~~~~~~~~~ErriS 2 ~~~~ t;; ; < % i % ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~RANCISCO A-j.t1 Irso Z -Z ~~ -~~ 18RO-4 8O MaY 1958~~~~~~~~~~~~~~~~~~~~~b