Nicaragua - Highway Extension Project

RETURN TO REPORTS DESK. T.O.,19 WlVTH i N RESTRICTED ONE WEEK This report is restricted to use within the Bank. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TECHNICAL REPORT ON THE APPRAISAL OF PROPOSED HIGHWAY EXTENSION PROJECT NI CARAGUA August 24, 1953 Technical Operations Department  CURRENCY EQUIVALENTS U.S. $1 u 7.05 cordobas 1 cordoba a U.S. $0.14 1 million cordobas a U.S. $141,844  APPFfoISAiL OF PROPuSiD HIGifiAY 0(TAJSION PROJECT - NICARAGUA I. Purpose and Scope of this Report This report covers a study of the technical, economic and finan- cial aspects of a proposed high-9-ay extension project in Nicaragua which represents the next portion to be executed in the long range highway pro- gram of the country, This project is complementary to that covered by the J3.5 million loan (Loan 45 NI) made by the Bank in 1951 for highway de- velopment. The report is based on field observations and on data provided by the iTinistry of Public 'lorks in Nicaragua. -l. The : -Isting Highway System The existing highway system in Nicaragua consists, in broad categories, of the following: 1. The Inter-American Highway and the Rama Road (Atlantic Highway). The former is 376 km in length running from the Honduras border, through l'anagua, to the Costa Rica border. The IRama Road, still under construction, will connect Rama, a Carib- bean port 60 miles upstream from the mouth of the Escondido River, with the inter-American HigThway. viork on both roads has been done xiith financial assistance of the U. S. Govern- ment, and it is expected that additional funds will be pro- vided by the U. S. for the completion of the remaining 100 km of the Rlama lRoad. 2. The National Highway System. This system consists of 1,664 km of which 825 km have all-weather surfacing and 79 km are paved. This system has been constructed over a period of years by the Department of Highways using local resources. 3. The Loan M0o. 45 NI Project. This project involves the construction of 266 km of primary roads designed to interconnect and extend the exist- ing system. This project wi'll not be completed until the end of 1955.  -2- III. Status of Work on Loan No. 45 NI Project The present project in which the Bank is participating will con- nect Mlanagua with the principal departmental capitals and the Pacific port San Juan del Sur and open up new areas for agricultural production. The total cost of this program is currently estimated at the equivalent of about ,5.2 million of which about $'3.5 million are required as foreign currency. As of ,.Tay 1953, about 60 km of highways had been completed, ex- cept for bituninous surfacing, and work was under nay on most of the roads in the project. The status of each road in the project is summarized below: Road Location Length Status (as of May 1953 No. 1 Matagalpa-Jinotega 35 km. 27 km completed; work underway on drains and grades on final 6 km. Project to be completed in August 1953. No. 2 flatagalpa-Tuma 40 km. Drains and bridges constructed on 2 km. No. 3 Mianagua.-i Iasaya 31 km. To be started upon completion of Projects No. 5, 6 and 7. Probable completion: end of 1954. No. 4 MIlasaya-Granada 15 km. Clearing and fencing 80% com- pleted; drainage 67% completed. No. 5 Ilanagua-Leon 80 km. 35 km completed; clearing and drainage 501% completed. Frob- able completion: April 1954. No. 6 Leon-Telica 8 km. Clearing, fencing and drainage completed. No. 7 Telica-Chinandega 27 km. Clearing and fencing completed. No. 8 San Jorge-San Juan del Sur 31 km. Work to start in September 1953 (upon completion of Project No. 1). Probable completion: April 1954. Disbursements on the loan as of May 31, 1953 amounted to about 01.47 million of which about 3; .68 million was for equipment and $r .79 million for materials.  -3- Progress on this project has been satisfactory. The quality of the work which has been completed is good and in line with good engineer- ing practice. M$aintenance of equipment has been adequate. The work is -well organized and the personnel involved are competent. IV. Description of the Proposed Project The proposed project consists of the construction of 40 km of primary and 687 km of secondary roads. The primary roads involved are as follows: (1) A highway, 21 kilometers in length, connecting E1 Ocotal, the capital of the Department of Nueva Segovia, with the Inter-American 1Highway. (2) A highway, 19 kilometers in length, connecting Boaco, capital of the Department of Boaco, with the iRlama Road. These highways will be paved and constructed to the same specifications as the roads in the current project being financed by the Bank. The secondary roads in the project, having a total length of 687 km are designed to facilitate the movement of agricultural products to market points, The specifications for all secondary roads will be the same except that asphalt wearing surfaces wi'll be provided only on sections where it is warranted by traffic density. The alignment and gradient of tne secondary roads will vary with the terrain through which the roads are constructed. The minimum standards provide for grades to be limited to 12% however, most of the roads will be constructed to much higher standards. The specifications adopted for this project are in line with good engineering practice and consistent with the requirements of the country. The project is considered to be technically sound. V. Estimated Cost of the froject As in the case of the current loan, the Bank has been requested to finance the imported equipment, materials and services required for the project. These have been estimated as presented in Tables II and HII. These are considered to be well balanced and consistent with the require- ments of the project. The total cost of the proposed project is estimated at the equivalent ofr ;517 million of which about bO35 million will be required as foreign exchange to cover imported equipment (;pl.5 million) and mater- ials and services (',2.0 million). A breakdown of the total cost is given  in Table I. The estimated costs of the imported equipment and materials are given, by principal items, in Tables II and III respectively. These estimaates are considered to be conservative on the basis of current prices. VI. Construction Schedule The execution of this project will require a five-year period. A detailed schedule has not yet been established. VII. Methods of Financing It is proposed that the foreign exchange requirements of the project will be the basis for a loan from the Bank of $3.5 million. Local currency requirements amounting to about 11.7 million cordobas (`1.67 million) will be provided according to the plan adopted in the project covered by the existing loan (45 NI) as set out in Sections 4.08 and 4.09 of the Loan Agreement. This requires that not less than 2,600,000 cordobas will be provided out of the funds of the jiecargos Cambiarios (surcharge on foreign exchange transfers) with the remainder to be provided by means of specific budget appropriations in annual amounts satisfactory to the Bank. These funds will be deposited in special accounts in the National Bank and are disbursed only to meet the expenditures incurred on the project. The aggregate amount in these accounts must be maintained at a level sufficient to meet estimiated expenditures over the next six-month period, This same formula appears to be feasible for the proposed loan. The average annual expenditures of local currency over a five-year period will be about 2.4 million cordobas. This amount would be provided by an immediate deposit from the Recargos Cambiarios and supplemented as required from budget appropriations. As of May 31, 1953, the Recargos Cambiarios fund amounted to 6.9 million cordobas; by December 31, it will increase to about 17 million. VIIT. Organization and Management The construction and maintenance of higbways in Nicaragua are under the Department of Iighways of the 11inistry of Development and Public Works. The M