Uruguay - Second Highway Project

Document of The World Banke Worlv FOR OFFICIAL USE ONLY Report No. P-2502-UR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLICA ORIENTAL DEL URUGUAY FOR A SECOND HIGHWAY PROJECT April 5, 1979 This doment has a restricted distibution and may be usd by recipients only in the performance of their officil duties. Its contents may not otherwse be disclosed withumt World Dank authorizstion.  CURRENCY EQUIVALENTS Currency Unit Peso (NUr$) US$1.00 NUr$5.49 NUr$1.00 US$0.18 NUr$1,000,000 US$182,000 WEIGHTS AND MEASURES Metric System ABBREVIATIONS DODE - Directorate of Economic Development Works MTOP - Ministry of Transport and Public Works Vialidad - MTOP's Highway Directorate GOVERNMENT OF URUGUAY Fiscal Year January 1 - December 31  FOR OFFICIAL USE ONLY URUGUAY SECOND HIGHWAY PROJECT Loan and Project Summary Borrower: Republica Oriental del Uruguay Amount: US$26.5 million equivalent Terms: Repayable in 15 years, including 3 years of grace, at 7.9% per annum Project Description: The proposed project would assist the Government in reconstructing the most heavily travelled portion (140 km) of Route 8, an important link with Brazil (the section to be reconstructed is Punta Rieles -km 13 from Montevideo- to Arroyo Marmaraja -km 153). It would also help finance consulting services for supervision of civil works, to prepare future highway rehabilitation and to develop a bridge improvement program, and technical assistance to strengthen trans- port planning. Benefits and Risks: The proposed project has the dual objective of improving the integration of the northern area of the country and the links from neighboring Brazil to Montevideo, Uruguay's capital and major port, and setting in motion an institu- tional effort to strengthen long term programming and executing capacity of road rehabilitation and recon- struction as well as of transport planning and coordi- nation. The procurement phase of the project presents no special risk. Past experience with similar projects in Uruguay, however, shows that delays in project imple- mentation of one or two years were common, mainly because of inadequate project management. To help overcome this problem, the proposed project includes strengthening of civil works supervision by an experienced consultant firm. This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Estimated Cost: Local Cost Foreign Cost Total Cost ---------US$ million equivalent------- Reconstruction of Route 8 (a) Civil works for 140 km 22.3 23.2 45.5 (b) Consulting services for civil works supervision 0.9 0.9 1.8 Highway Programs and Preparation of Future Transport Sector Management Consulting Services for: (a) Preparation of a 4-year program of rehabilitation, strengthening and recon- struction of national highways and a bridge improvement program 0.4 0.4 0.8 (b) Detailed engineering of about 200 km of roads included in the first 2-year period of program in (a) above 0.5 0.5 1.0 Technical assistance to strengthen and improve transport sector planning 0.2 0.6 0.8 Contingencies (a) Physical (10% of civil works) 2.2 2.3 4.5 (b) Price escalation (12%) 1/ 3.2 3.6 6.8 Total 29.7 31.5 61.2 Financing Plan: Bank - 26.5 26.5 Private Bank 2/ or Government - 5.0 5.0 Government 29.7 - 29.7 Total 29.7 3/ 31.5 61.2 1/ Based on estimated annual price increases of 7% for 1979-82. 2/ Co-financing arrangements currently under negotiation. 3/ Taxes are estimated to constitute 16% of total costs.  - iii - Estimated Schedule of Fiscal Annual Disbursements of Bank Year Disbursement Cumulative Loan (in US$ millions): 1980 0.5 0.5 1981 10.0 10.5 1982 14.0 24.5 1983 2.0 26.5 Rate of Return: 20% on 95% of project costs for which benefits have been quantified. Staff Appraisal Report: April 5, 1979 (No. 2329b-UR)   REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO REPUBLICA ORIENTAL DEL URUGUAY FOR A SECOND HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed loan to the Republica Oriental del Uruguay for the equivalent of US$26.5 million to help finance the proposed Second Highway Project. The loan would have a term of 15 years, including 3 years of grace, at an interest of 7.9% per annum. PART I - THE ECONOMY 2. An economic mission visited Uruguay in May 1978. The resulting Economic Memorandum (2241-UR) was distributed to the Executive Directors in December 1978. A summary of Country Basic Data is attached as Annex I. Economic Performance 3. After having become one of the most prosperous countries in Latin America in the first half of the twentieth century, Uruguay's economy deteri- orated steadily in the next two decades. This was the result of policies that favored urban consumption and high-cost industrial import substitution at the expense of investment, exports and growth. A well-educated and predominantly urban population generated increasing demands for high employment, better public services and social benefits. The attempts to meet these demands took the form of fiscal, exchange rate and price policies that resulted in a sustained transfer of income out of the resource-rich agricultural and livestock sector. Industrial sector development, initially stimulated by shortages of consumer goods during World War II, was fostered through a deliberate import substitution and protection policy during the immediate post-war era. However economic growth faltered as agricultural production, productivity and exports declined after the Korean War. Moreover, industrial import substitu- tion possibilities in the small domestic market were largely exhausted. Unemployment and underemployment rose sharply. Government policies aimed at maintaining urban income and consumption levels resulted in strong inflationary pressures, capital flight and serious misallocation of resources. During the early 1970s, political and social unrest marked by urban terrorism and labor strife further discouraged savings, investment and any initiative to expand output and exports. 4. Prior to the beginning of the above dislocations, Uruguay instituted comprehensive welfare legislation. Progressive legislation covering such areas as social security retirement and death pensions, job security, unemploy- ment compensation, free health and education services provided mechanisms for redistributing income. Uruguay was thus able to achieve a relatively high level of social progress as evidenced by an income distribution pattern which compares favorably with that of some developed countries with a similar  resource endowment, but considerably higher income per capita. Although Uruguay experienced a drop in per capita income during the 1960s and early 1970s, the country has attained levels that are comparable to those of some developed countries and above those of most developing countries in health (life expectancy at birth of 70 years), education (94% literacy rate), and nutrition (per capita intake of protein of 100 grams per day). 5. The redistribution mechanisms were not, however, immune to economic instability--and, in effect, contributed to it. The uncoordinated growth of the social security system and its liberal benefits, coupled with a stagnant economy and rapid inflation, caused increasing stress on the country's resources. Larger transfers from the Central Government were increasingly needed to provide decreasing real benefits to a larger number of people. In addition to the financial burden on the Government, the high level of contributions required by the system from employers increased the real cost of labor. This high cost, coupled with the incentives to the use of capital inherent in the import substitution strategy, acted as a brake on the creation of employ- ment. Moreover, the inadequate level of real benefits, together with the old age structure of the population, resulted in a large number of people working past retirement age and this further limited employment opportunities for the groups entering the labor force. 6. The structural changes in the world economy that emerged in late 1973 had a strong impact on the Uruguayan economy. The threefold increase in the price of imported oil (upon which the country is entirely dependent), substantial increases in other import prices, and the closing of the European Economic Community to meat imports contributed to a sharp reversal in the balance of payments, a precipitous deterioration of fiscal performance and to an acceleration of domestic inflation. The economic team appointed in mid-1974 recognized that long-term solutions to the country's economic problems went beyond stabilization and required a fundamental reorientation of economic management away from an inward-looking towards an export-oriented development strategy. The basic objectives of the new program were the improvement of resource allocation and productive efficiency through greater reliance on the price mechanism, and the promotion and diversification of nontraditional exports, i.e., those other than beef and wool. The achievement of these objectives required the freeing of domestic prices and the liberalization of the foreign trade and payment system from the burdensome controls instituted in the past. 7. The rapid implementation of export-oriented development measures yielded unexpectedly rapid and positive results in 1975-78, enabling Uruguay to surpass most of the performance targets embodied in three successive standby agreements with the IMF. Government economic policy during this period con- centrated on fostering growth in the commodity-producing sectors by eliminating various types of controls that distorted resource allocation, and by achieving a more realistic exchange rate in order to promote exports. Quantitative and financial import controls of raw materials and capital goods were eliminated; price ceilings on many domestic products were lifted; interest rates on de- posits and loans were freed; and nontraditional exports were successfully stimulated through a policy of minidevaluations and the establishment of a  - 3 - system of tax rebates. Reversing policies that prevailed for thirty years, the government eliminated controls on pricing and marketing of agricultural goods in the third quarter of 1978. While the immediate effect of the removal of the ceiling was to increase beef prices by about 20%, the difference between international and domestic prices, the measure should help to improve efficiency in the sector and lead to higher supplies, without undermining the Government's antiinflation program. In continuation of its liberalization policies, the government reduced maximum levels of import duties and surcharges in January 1979. 8. Despite the continuation of generally unfavorable external factors, the economy responded by achieving an annual average GDP growth of about 2.5% during 1974-78, compared with an annual decline of 0.5% during the previous four years. Production of nontraditional exports, particularly leather and textile manufactures, led the recovery of the economy and was instrumental in initiating a remarkable turnaround in the external sector which has continued since 1976. The improvement in the current account balance continued as the deficit declined from an average US$160 million in 1974-75 to US$70 million during 1976-78, which together with strong private capital inflows, resulting in increasing gains in net foreign exchange reserves of US$112 million, US$161 million and US$194 million in 1976, 1977 and 1978, respectively, compared with a loss of US$73 million in 1975. Moreover, the inflation rate had been reduced to 40% in 1976, from a level of 67% in 1975 and 107% in 1974, owing to a combination of more restrictive monetary management and incomes policy, and--above all--improving fiscal performance. The Central Government fiscal deficit was reduced from 4.5% of GDP in 1974-75, to 2.5% in 1976, surpassing the target of 3.4% stipulated in a standby agreement with the IMF. The marked fiscal improvement was brought about by a combination of increased collection of revenues from the value-added tax and IMPROME (a tax on imputed income on agricultural land), and the restraint of current expenditures to the real level of 1975. 9. The Central Government's fiscal situation continued to improve in 1977-78 (an average overall deficit of 1.2% of GDP). The policy of wage restraint enabled the Government to restrict current expenditures and finance a larger investment program. The Government's wage policy has also been instrumental in maintaining a relatively low level of inflation during 1976-78 as compared to 1974-75. The increased inflationary pressures in 1977, caused by a poor harvest and the monetary expansion resulting from accumulation of foreign exchange reserves, were controlled through monetary measures introduced in late 1977. As a result, the rate of inflation declined from 57% in 1977 to 46% in 1978. In all, real wages which declined during the stabilization''program reached their minimum level in November 1977. Economic Prospects 10. The Government is attempting to shift the economic structure towards a more open, export-oriented model. This shift is by no means easy in view of the deep-seated rigidities which Uruguay's economy has acquired over the last  - 4 - thirty years. High tariff protection and traditional public sector management continue to hamper growth. Nevertheless, the success in stimulating economic activity and turning around the balance of payments during the last four years attests to the economy's responsiveness to a consistent set of signals as the price mechanism is allowed to operate more freely. The key to sustained growth for the future will depend on the Government's ability to consolidate the recent gains through longer-term policies. Uruguay's long and difficult experience in pursuing income distribution policies in the face of a stagnant economy has led the authorities to give utmost priority over the coming years to sustained growth. As this goal is attained, the task of redistributing the resulting benefits should prove easier and more viable than in the past. 11. In broad terms, government policies aim to provide a propitious economic environment for the fuller use of such advantages as the country's highly literate labor force, its strategic location between Argentina and Brazil, and a natural resource endowment suited to export-oriented agricultural production, including the traditional livestock industry as well as the largely untapped potential in crop production, food processing and fisheries. 12. Provided that the sound orientation of fiscal, monetary and trade policies already instituted is consolidated, the Uruguayan economy has the capacity to grow at faster rates than in recent years (possibly some 4% p.a. compared to about 1.0% during 1971-78). The expansion of both traditional and nontraditional exports should provide the main impetus for growth. Beef and wool exports will benefit from the recently enacted price and marketing liberalization measure, the reasonably favorable price outlook, and the successful penetration of new markets in recent years. Sustained growth of manufacturing output and nontraditional exports should be possible with the further development of such subsectors as leather products, textiles, processed foods, fish and other manufacturing goods. Private sector investment should provide the principal impulse for growth in the coming year in the form of the rehabilitation, modernization and expansion of existing production units rather than the establishment of new, large-scale ventures. The public sector is expected to play a key supporting role by channeling financial resources, rehabilitation of infrastructure and complementary services to the productive sectors. 13. Export expansion and diversification will require the modernization of the country's capital stock. This implies heavy import requirements for key infrastructure, new plant and equipment, rehabilitation of the existing stock, and for related intermediate inputs. A rapid growth in imports (including petroleum products) is to be expected under these policies possibly resulting in a trade deficit averaging about US$70 million during 1979-81. With the development of alternative energy sources the volume of petroleum imports may decline in 1982 and 1983 and together with the expansion of beef exports, result in a small positive trade balance by 1983. The above trade projections combined with steadily increasing net factor payments on public and private borrowing would result in a small widening of the current account deficit from an average of US$70 million during 1976-78 to an annual average of US$130 million in 1979-81. Expansion of beef exports in 1982-83 in conjunction with reduced petroleum imports may be expected to reduce the projected current account deficit to about US$50 million by 1983. The current account deficits  - 5 - projected are moderate and should lead to a further enhancement of Uruguay's creditworthiness and to more favorable terms on external credits than in the recent pact. The relatively moderate gross external capital requirements for 1979-83 (estimated at an annual average of US$220 million) can be expected to come partly from existing and new commitments of multilateral and bilateral agencies. Private financial institutions, suppliers' credits and Government bonds would provide the major portion of the remainder. 14. The remarkable turnaround in Uruguay's balance of payments since 1976 has enabled the authorities to amortize or refinance various commit- ments contracted on unfavorable terms during the previous years. The volume of commitments contracted during 1974-75, together with their relatively unfavorable terms, resulted in a debt service ratio of about 28% in 1977. However, expansion of exports reduced the debt service ratio to an estimated 19% in 1978. Under these circumstances, Uruguay would remain creditworthy for the amounts of external capital required to rehabilitate the country's capital stock and to achieve sustained economic and social progress. PART II - BANK GROUP OPERATIONS IN URUGUAY 15. Uruguay has received US$202.7 million (net of cancellations) in Bank loans. As of February 28, 1979, the Bank held US$96.1 million, including US$24.5 million undisbursed. On a sectoral basis, Bank assistance to Uruguay (14 loans in total) has mainly been for power (40%) and livestock (35%), with some lending for industry (10%), transport (10%) as well as vocational training and technological development (5%). IFC has made two loans in Uruguay: to Fabrica Uruguaya de Neumaticos S.A. (FUNSA) (US$3.8 million) to introduce radial tire production, increase tire manufacturing capacity and improve operating efficiency and product quality; and to Acodyke Supergas S.A. (US$950,000) to help finance a new liquid petroleum gas bottling plant. Execution of these projects has, on the whole, been satisfactory. Annex II contains a summary of Bank loans and IFC investments as of February 28, 1979, and notes on the execution of ongoing projects. 16. Bank lending to Uruguay in FY78 consisted of a loan of US$9.7 million equivalent for a Vocational Training and Technological Development project. In addition to the proposed project, a loan for a Fifth Power project is expected to be presented shortly to the Executive Directors. Work is also underway on ports and agriculture projects for possible consideration by the Executive Directors during the next two years. 17. The Bank, in its program in Uruguay, is trying to assist the Government in implementing an economic strategy designed to put the economy on a path of sustained growth. Towards this end, all operations are aimed at policies and programs which will support the continued recovery of the economy within a framework of financial stability. More specifically, the objectives of the Bank's program are to: (i) foster productive activities by promoting the expansion and diversification of export earnings; (ii) help strengthen the country's sectoral policies and public sector institutions; and (iii) improve and promote the integration of the economy with the large markets of neighboring Argentina and Brazil, as well as with overseas markets.  - 6- 18. The proposed project as well as those planned in transport is de- signed to support the Government's effort to improve the country's infra- structure to foster increased economic activity, rising income and employment, strengthening sector institutions and investment planning. The transport projects will also assist Uruguay's efforts to integrate with its neighbors (Brazil and Argentina), which are its major trading partners. Bank lending for power is aimed at helping the country meet its growing power demand, while increasing the country's reliance on local energy sources and improving the financial and institutional performance of the power company. Bank lending for agriculture is directed at increasing crop and livestock production to assist Uruguay in achieving self-sufficiency in grains and in increasing and diversifying its export earnings. Bank assistance for industry, including vocational training and technological development, is primarily designed to help expand non-traditional exports, the principal motor of economic growth; at the same time, the Bank will continue to emphasize the importance of dismantling and lowering the cumbersome tariff and import regulation structure which is necessary to increase the efficiency of the sector. PART III - THE SECTOR Background 19. With its economy largely based on primary and processed agri- cultural/livestock products, Uruguay is heavily dependent for its continued economic growth on the development of its transport sector. Bordered by the two largest countries in South America, Argentina on the west and Brazil on the north, and with more than half of its national boundary navigable coastline on the south and east, the country is geographically unusually well endowed for the export-oriented development strategy being pursued. The country's economic difficulties referred to above have, however, led to a general neglect of an adequate pace of maintenance and rehabilitation of infrastructure facilities. The concentration of Uruguay's commercial activity and population in the capital of Montevideo and the extensive agricultural and livestock development of its hinterland is reflected in the country's transport system. The interior, with relatively flat terrain, main rivers at boundaries, and low density agricultural activity lent itself to development of radial roads and rail networks, extending north, east and west from the metropolitan region around the seaport of Montevideo. Of the total freight traffic (in ton-km) carried within the country in 1976, roads accounted for about 73%, rail 20% and water 7%. The Transport System (a) Railways 20. The railway network of 3,000 km radiates in 5 lines from Montevideo. Passenger traffic has halved since the early 1950s to its lowest level in 1972 at 343 million pass-km. No substantial long distance passenger traffic exists  - 7 - today, with the major part of traffic consisting of suburban commuter-type demand, concentrated within 100 km of Montevideo. Freight traffic had, by 1975, fallen to 290 million ton-km compared with 445 million ton-km in 1965. Principal items of freight are calcareous rock, rice, and, of lesser import- ance, other g-iTas, sugar and fertilizers. Despite its deterioration, the railway network still carries 20% of Uruguay's freight and passenger traffic. The managerial and operating procedures of the government railway company are antiquated and inefficient. This, combined with the poor physical and largely obsolete condition of the system resulted in financial losses. These losses amounted to over US$7 million in 1976. A UNDP-financed trans- port survey for which the Bank was the executing agency was conducted in 1978. It concluded that all rail traffic could be carried more efficiently on roads. However, recognizing that complete closure of the rail system is a remote possibility the study recommended a further survey of limitation of the passsenger service to commuter lines near Montevideo and of freight service to specialized bulk cargoes such as minerals and fuels. (b) Air Transport 21. Air Transport has developed slowly in Uruguay, principally because of the concentration of population in the Montevideo area, the country's easy topography resulting in an abundance of surface transportation and the short distances involved. Domestic air traffic has increased considerably in recent years, but the total number of domestic passengers (60,000 in 1976) remains low. International traffic, mostly related to travel in the River Plate area, totaled about 620,000 passengers in 1976. Uruguay has only one functioning international airport, Carrasco in Montevideo. A military airport to the north (Durazno) has been upgraded to emergency alternative status. Maldonado, near the tourist resort of Punta del Este, has only daylight operations. Commercial airline operations are dominated by PLUNA, a state-owned company. Services to several domestic airports are provided in cooperation with TAMU (Transportes Aereos Militares Uruguayos). (c) Ports and Water Transport 22. Over 90% of Uruguay's foreign trade is handled by ports. Monte- video accounts for more than 70% of this traffic, while Colonia, Nueva Palmira, Fray Bentos and Paysandu handle the balance, mainly exports of cereals and construction materials to Brazil and Argentina. In 1977, the Port of Montevideo handled, in all, 2.9 million tons. This included 1.8 million tons of crude oil, discharged at the tanker berths of the oil refinery, which is being diverted to a new off shore mooring buoy. However, dry cargo traffic is expected to increase as a result of the Government's efforts to increase the export of grains and beef and to reduce import restrictions. The current system of ad valorem port charges, which dis- courages imports and encourages exports, and the shallow characteristics of the ports in neighboring Argentina have enabled Montevideo to become a lightening as well as topping off and bunkering port for ships destined to or originating in Buenos Aires. In the last few years, the National Port Authority has made considerable progress in certain area, such as: the  - 8 - removal of the penalty surcharge on international traffic that had been levied by major shipping conferences, as a result of better port operations and improved vessel dispatch since 1974-1976; reduction in the total number of port employees, from about 8,000 in 1972 to some 5,600 in mid-1978; and consistent reductions in total port operating costs in real terms between 1974 and 1978 notwithstanding increases in port traffic. Despite these improvements, the Port Authority's costs are still high, and efficiency is low. To overcome existing problems, the Port Authority has a development program for the Montevideo port for 1978-1982 and is preparing with Bank assistance a possible project that could result in Bank financing of portions of the program. The national maritime fleet of Uruguay consists of 19 vessels (ten seagoing and nine coastal). (d) Highways 23. The road network consists of some 50,000 km, of which 9,800 km are national roads maintained by the Ministry of Transport and Public Works (MTOP). One-third of the national network is paved and about 90% of this lies in the radial system originating in Montevideo. The remainder of the network, 40,000 km, consists of secondary and feeder roads largely maintained by the departments and municipalities. The coverage of the national road network is adequate, but the principal problem is its age and seriously deteriorated condition. This is particularly the case as regards the main international connections, which have considerable importance given the country's reliance on trade with its neighbors. Lack of timely periodic maintenance during the long period of economic stagnation has contributed significantly to this deteriora- tion. The departmental road network needs expansion mainly in the southwest, center, north and northwest Departments, which are areas with high agricultural potential. Only 2,000 km (5%) of the departmental network is paved; 4,000 km are tosca gravel and 34,000 km are earth roads. These departmental roads are of low standard, poorly maintained and offer restricted service ability during the rainy season. Recently, MTOP's Highway Directorate (Vialidad) has been helping the Departments to improve this situation. 24. Traffic growth in Uruguay has been low over the last decade. High average vehicle age, deteriorating road conditions, rising fuel prices (at present, the price per gallon of regular gasoline is US$1.50 equivalent) and the overall state of the economy have apparently restricted countrywide growth of traffic to negligible proportions. The trucking industry, domestic and international, is highly competitive with liberal entry. In the road trans- port industry, trucking companies with principally international operations are few, and they operate truck fleets which are reasonably modern but smaller than the average for Latin America. International freight rates offered by Uruguayan firms are competitive with those of Argentine and Brazilian operators. The level of service offered and the capacity of the truck and bus fleet is broadly adequate for the demand, although the average age of the fleet for short and medium haul trips is high; the longevity of the truck fleet is explained by the short distances, mild climate, easy terrain and import restrictions prevailing in the country. 25. Overloading of vehicles does not appear to be a serious problem in Uruguay. A countrywide weight control program is being operated in an adequate manner. The present axle weight control law limits single axle weight to 10 tons, which is about the same as for Argentina (10.5 tons) and  -9- Brazil (10 tons). However, Uruguay limits gross vehicle weight to 36 tons, significantly below Argentina and Brazil, where gross loads are permitted up to 45 tons and 40 tons respectively. This regulation cannot be amended because of the large number of obsolete bridges along the Uruguayan road network. The proposed project thus includes the preparation of a bridge improvement program, which would also assess the proper limit to be set as gross vehicle weight and would review the efficiency of the countrywide vehicle weight control program (see paragraph 39 below). 26. Over the period 1972-1976, about 20% (averaging about US$3.6 million per year) of the national highway capital expenditures, was financed from external sources. The remaining funds came from MTOP's budget. Total road user revenues were growing at about 15% per year during this period and, by 1976, had reached over US$100 million per year, of which US$80 million were derived from fuel taxes. MTOP expenditure on roads for construction and maintenance was at less than half the level of user revenues, reaching about US$43 million in 1976. Total expenditure by MOPT on roads has been lagging behind revenues actually earmarked for roads by about 10% in recent years because of implementation delays. About 42% of the fuel taxes are earmarked for MTOP, which together with revenue from minor user taxes, represented about 75% of MTOP revenues in 1976. The remainder came from the national budget (17%) and from external sources (8%). 27. The 1978 transport sector study (see para. 20) concluded that, over the period 1978-1982, a highway investment program of about US$310 million (in 1976 prices), would be economically justified. While it is very unlikely that an amount approaching this could be expended on roads, con- sidering the sector's existing capacity it remains apparent that investment in roads over the next five years would be substantial. The transport study also underscored the priority of rehabilitation and reconstruction of the country's main international links. Consequently, planning of highway rehabilitation, strengthening and reconstruction is considered a high priority component of the proposed project (see paragraph 39 below). 28. Vialidad is responsible for planning, constructing and maintaining the national highway network through its headquarters in Montevideo and nine regional offices. All road construction by Vialidad is done under contract with private contractors. Contract construction has been performed satis- factorily but with some delays in work completion. 29. Maintenance of all national highways is performed by Vialidad, using its own equipment and a manpower of about 2,100 workers and 40 engineers. Maintenance is carried out by the nine regional offices super- vising 26 districts. Routine maintenance of trunk roads is generally acceptable. Periodic maintenance has historically been unsatisfactory, mainly because of budgetary constraints and poor planning. Although the organizational setup for maintenance of roads is generally adequate, the main problems are lack of equipment and lack of a labor force with suf- ficient skills and organization. Acquisition of new equipment and increase in labor efficiency are therefore of high priority. Consultants completed a study in 1977 of maintenance requirements under an IDB grant. This study identified and recommended equipment requirements for highway maintenance, reorganization of Vialidad and training needs. Implementation of these  - 10 - recommendations is being financed under an on-going IDB-loan (US$4.0 million equivalent). Vialidad is also negotiating with equipment dealers in Uruguay for the acquisition of an additional US$6.0 million worth of equipment. In line with the on-going efforts to improve road maintenance and Vialidad, assurances have been obtained that during the execution of the project, the Government will exchange views annuallly with the Bank on its overall road maintenance program and related budgetary proposals in order to review the adequacy of the programs of periodic maintenance for paved roads, renewal and acquisition of maintenance equipment and assistance to Departments for road maintenance (Section 4.04(b) of the draft Loan Agreement). To strengthen future planning of maintenance works, assurances have also been obtained that starting from 1980, Vialidad's accounting system will show itemized expenditures of routine and periodic maintenance, minor improvements, rehabilitation, major improvements and construction. (Section 4.02(b) of the draft Loan Agreement). Transport Planning and Coordination 30. MTOP was created in 1967 and is responsible for the development of a national transport policy, transport coordination and establishment of tariffs for transport services. The Ministry has some nominal jurisdiction over the investment plans and operational policies and practices of the modal agencies. In practice, however, their plans and policies are formu- lated independently of MTOP. Sector management and intermodal coordination have been badly neglected in the past. Lack of sectoral coordination has a long history, starting early this century with the parallel and often competitive development of the then foreign-owned railway and the national highway network. The almost complete absence, until the 1978 transport study, of data on transport costs and demand has preempted any efforts in this regard. To overcome the problem and help the planning of future maintenance, rehabilitation and reconstruction works, the proposed project includes a technical assistance component to provide for permanent traffic counting and an implementation program (see paragraph 41 below). Meanwhile, in recognition of the existing deficiencies in the transport planning mechanism, the Government has used the above-mentioned transport study to establish needs and current priorities of the transport sector and to identify the present project. This study identified as key development issues the need for strengthening of national transport planning; improve- ments in road rehabilitation and reconstruction, particularly of the inter- national connections to Argentina and Brazil; reductions of the railroad network, its operations and deficit; and port modernization. 31. As a first step toward improving transport planning and coordina- tion, in December 1977, it was decided to establish a Transport Advisory Council. This Council is led by the National Directorate of Transportation and includes the Railways Administration, the state airline (PLUNA), the Airports Administration, the Ports Authority and the Government Planning Secretariat. This Council is preparing a national transport plan, which is to be based largely on the 1978-1982 investment plan recommendations of the  - 11 - transport study. A transport planning unit within MTOP, staffed with counterparts from the sector survey, is currently assisting the Transport Advisory Council in preparing the national transport plan. The project would provide technical assistance by specialized consultants to strengthen this unit (see paragraph 41. below). Included in their program of work will be the comple- tion by June 30, 1981 of an intermodal comparison study, initiated by the trans- port sector survey, which would serve as the basis for coordination of transport policies and investments. The study will be the subject of an exchange of views with the Bank (Section 4.08 of the draft Loan Agreement). Past Bank Assistance for Highways 32. The Bank's only operation in the sector was a highways loan made in 1963 (Loan 324-UR, US$18.5 million equivalent) to help finance the improve- ment of Route 5 from Montevideo north to Rivera on the Brazilian border (about 500 km), strengthening of highway maintenance, including the purchase of equipment and a highway planning study. The improvement of Route 5 consisted mainly of paving and bridge replacement or improvement. The works were completed satisfactorily with a 14% cost overrun but not until 1971, five years behind schedule. The delay was mainly due to poor contractor performance. Traffic in 1971 showed an average increase of about 50% over appraisal estimates. 33. As a result of equipment purchases under the project, maintenance of the national network improved considerably and with the help of consultants employed under the project the quality of maintenance work performed in Vialidad's workshops was raised to a satisfactory level, and overall organi- zation was improved. PART IV - THE PROJECT 34. A report entitled "Staff Appraisal Report; Second Highway Project" (No. 2329b-UR) dated April 5, 1979 is being distributed separately. A Loan and Project Summary is being placed at the front of this report. A supplementary Project Data Sheet is appended as Annex III. The project was identified by the Government in May 1977 following the transport sector study, and subsequently prepared by consultants INVIAL (Uruguay) during 1977-78. The project was appraised in August-September 1978. Negotiations were held in Washington from March 19-27, 1979. The Uruguayan delegation was led by Mr. Eduardo Sampson, Minister of Transportation and Public Works. Project Objectives and General Description 35. The proposed project has the dual objective of (i) improving the inte- gration of the northern area of the country and of the link from neighboring Brazil to Montevideo, Uruguay's capital and major port; and (ii) setting in motion an institutional effort designed to improve long-term programming and executing capacity of road rehabilitation and reconstruction as well as of  - 12 - transport planning and coordination. Given the country's reliance on trade with its neighbors and the central role of the port in Uruguay's export-led development policy, the proposed project should enhance the competitiveness of the country's production, reduce transportation costs and provide more reliable transport services to areas producing significant proportions of the national outputs of rice, cattle and cereals. Exports of cement produced near Minas to Brazil (Rio Grande do Sul) would be facilitated, as would distribution of fish products to the interior and Brazil. Montevideo would benefit from easier flowing and less costly transportation, which would contribute to the development of its industry and enhance its role as Uruguay's leading port. 36. Specifically, the project would consist of: (i) Reconstruction of Route 8 (140 km) between Punta Rieles (13 km from Montevideo) and Arroyo Marmaraja (153 km): - civil works by contractors; and - consulting services for civil works supervision. (ii) Preparation of Future Highway Programs and Strengthening of Transport Sector Management: - consulting services for preparation of a four-year program of rehabilitation, reconstruction and strengthening program of national highways and a bridge improvement program; - consulting services for detailed engineering for about 200 km of roads included in the first two-year period of the program mentioned above; and - technical assistance to strengthen and improve transport sector planning. Reconstruction of Route 8 37. Route 8 is one of the main roads linking Montevideo to the interior and is an important connector to Brazil. It extends from Montevideo to the Brazilian border at Acegua (441 km) where it connects to the Brazilian highway system. At Treinta y Tres (271 km), Route 18 branches off Route 8 and crosses the border at Rio Branco (207 km) to form another connection with the Brazilian system (Map IBRD 14225). As indicated above, the proposed project comprises 140 km of Route 8 and the remainder is being rehabilitated and reconstructed with the assistance of an IDB loan. The present road has a relatively new four-lane divided highway (13 km long) ending in Punta Rieles on the outskirts of Montevideo where it links to a two-lane highway with design standards far below those required for present heavy traffic. The pavement and shoulders along the 140 km in the project are in a deteriorated state, despite constant and costly repairs, and are hazardous to traffic safety, especially during wet weather. The feeder roads in the area of influence of Route 8 are generally adequate for the current and foreseeable level of activity.  - 13 - 38. The 140 km of the project (Punta Rieles-Arroyo Marmaraja) would be constructed as a modern road, of which the first 17.5 km, extending the existing four-lane access road to the northeast of Montevideo, would be upgraded to four-lane standards. The remainder would be reconstructed to two-lane standards with design and structure characteristics closely reflect- ing projected traffic volumes which decrease from about 3,000 vpd (of which about half correspond to heavy vehicles) to about 500 vpd as one moves away from Montevideo. Preparation of Future Highway Programs and Transport Sector Management 39. The proposed project includes consulting services (about 135 man- months) over an 18-month period starting in January 1980 to prepare a four-year program of the rehabilitation, strengthening and reconstruction of national highways. The consultants would also prepare a high priority bridge improvement program. The program would mainly comprise bridges on the main national highways. Such a program is urgently needed, since most of the bridges were built 40 to 60 years ago and designed for traffic loads far below the present level. Vehicle weight and dimensions permitted in Argen- tina and Brazil could not use the existing bridges safely because of their obsolescence and insufficient capacity. Consequently, most of the trucks with international freight have to be off loaded at the Uruguayan borders or undertake a lengthy detour to the North. This problem contributes to high transport costs in Uruguay and in the Region, and constitutes an obstacle to the development of Uruguay's international trade. 40. The project would also provide consulting services (about 240 man-months) over a 23-month period, divided among 3 or 4 contracts, to prepare the detailed engineering for the roads included in the first two years of the four-year program mentioned above. But one firm can handle several contracts. It is expected that this component of the proposed project would involve about 200 km of roads selected from the international routes to Argentina, connecting Montevideo-Mercedes-Fray Bentos (Routes 1 and 3, 30.8 km), Montevideo-Paysandu-Salto (Route 3, 426 km) and Mercedes-Paysandu (Route 24, 120 km). These roads connect the four most important and populous cities, traverse the foremost agricultural zone and provide the only land connection with Argentina over the bridges at Fray Bentos, Paysandu and Salto (Map IBRD 14225). 41. As mentioned above (para. 31), a transport planning unit within MTOP, staffed with counterparts from the transport study, is assisting the Transport Advisory Council in preparing a national transport plan. However, the unit would need technical assistance to pursue and develop its role as the focal point for keeping information on the transport sector and advising the Government on all matters related to transport planning policies. The proposed project would provide technical assistance by individual consultants and/or a consulting firm of about four senior experts for a three-year period with a total of about 108 man-months. Cost Estimates and Financing 42. The total cost of the proposed project is estimated at US$61.2 million equivalent and the estimated foreign component is US$31.5 million; of this, US$26.5 million (or 44% of the net of tax cost of the project)  - 14 - would be financed by the proposed loan. Taxes are estimated to constitute about US$4.7 million of project costs. The Government is currently negotiat- ing with the Bank of Nova Scotia (BNS) for an additional loan of about US$5 million, providing for better terms than could otherwise have been obtained, namely 10 years, including 5 years of grace and 7/8% above LIBOR. If such additional financing, however, is not obtained, the Government undertakes to provide the US$5 million itself. 43. When the additional loan from BNS is obtained, the Loan Agreement would be amended to include (i) a "cross-default" clause; (ii) a skewed amorti- zation schedule so that uniform semi-annual amortization payments would amortize both loans; and (iii) a provision that disbursements be conditioned on the co-lenders' loan having been fully disbursed for civil works under the project (this is expected to occur within the first year of the project period). An agreement would also be entered into beween the World Bank and the private Bank substantially in the form of earlier Bank agreements with commercial banks. 44. A contingency allowance of 10% has been included to cover increases in quantities usually expected in road works. About 12% of basic costs plus physical contingencies has been allowed for price variations assuming inflation rates as shown at the bottom of the cost table in the loan and project summary. These rates reflect recent worldwide estimates and are relevant to Uruguay. Since it is the Government's policy to adjust the Peso/US$ exchange rate in line with respective inflation rates, and since construction prices in Uruguay have moved in line with local inflation rates, a separate calculation for domestic prices has not been considered necessary. The cost per man-month for technical assistance and consulting services is estimated to range from US$3,000 to US$9,000 with an average of US$6,000 per man-month. Execution, Procurement and Disbursements 45. The execution of the project would be the responsibility of MTOP. Vialidad would be the executing unit for all project components except the one dealing with transport sector planning, which would be carried out by the National Transport Directorate. Vialidad has recently (1976) been strengthened by the absorption of the Directorate of Economic Development Works (DODE), a unit established within MOPT to execute major internationally financed works, including the first bank project. DODE increased considerably Vialidad's operational capacity. Even after the absorption of DODE, however, Vialidad still suffers from some scarcity of senior technical staff. Because of the extent of the roadworks under the proposed project, Vialidad would hire consultants, with qualifications, experience and terms of employment satisfacctory to the Bank, to supervise the civil works (Section 3.01(d) of the Loan Agreement). In addition, a project coordinator would be appointed by the Government, not later than September 1, 1979, to serve as liaison between Vialidad and other agencies involved in the project. The project coordinator would represent and be directly responsible to the Minister of Transportation and Public Works (Section 3.01(c) of the Loan Agreement). To assist the consultants employed for the supervision of civil works, the Government would provide within the Department of Works of Vialidad at least two experienced and qualified engineers as counterparts for the consultants  - 15 - (Section 3.01(d) of the Loan Agreement). As counterparts, on the other hand, of the consultants employed for the road rehabilitation and bridge improvement programs, the Government would provide in Vialidad not less than one highway engineer, one bridge structure engineer and an economist (Section 3.02(b) of tlh -oan Agreement). The hiring of the consultants for the supervision of civil works would be a condition of effectivenness (Section 5.01 of the Loan Agreement). 46. Procurement under the project would be carried out in accordance with the Bank's "Guidelines for Procurement". Civil works for reconstruc- tion of Route 8 would be carried out on the basis of unit price contracts awarded in accordance with international competitive bidding, procedures to prequalified firms. The estimated value of individual contracts would range from US$5 to to US$10 million, so that medium capacity local contractors would have an opportunity to bid. The civil works would be divided into four lots to be bid simultaneously. To facilitate participation by large contractors, bidders would be allowed one or more lots. 47. Project expenditures eligible for disbursement under the Bank loan would be defined as follows: (a) 42% of total construction costs for civil works; (b) 51% of total expenditures for the consulting services for (i) supervision and civil works in construction, (ii) prepara- tion of a four-year program of rehabilitation, strengthening and reconstruction of national highways and a bridge improve- ment program, (iii) detailed engineering for selected highways; and (c) 80% of total expenditures for technical assistance to improve transport sector planning. Economic Evaluation 48. The reconstruction of Route 8 would benefit road users through vehicle operating cost savings (73% of benefits), time savings (16%) and accident savings (4%). In addition, benefits would accrue through savings of road maintenance costs (7%). Given the highly competitive character of the trucking industry and the reasonable bus tariffs set by the Government, the benefits from savings in vehicle operating costs are expected to be passed by and large to the users in the form of reductions or more probably avoided increases in transport tariffs. 49. For purposes of computing the project's overall economic rate of return, the 140 km of the road to be rehabilitated were divided into nine sections. On this basis, the overall economic rate of return for the civil works component of the project (95% of the total cost) is estimated at about 20%, with the nine sections of the road ranging between 43% and 11%. These results were obtained on the assumption that all nine sections will be recon- structed commencing in 1980. In addition, a sensitivity test has been carried out assuming that the section with the lowest economic rate of return (section 9)  - 16 - would not be included in the proposed project. Under the conservative assump- tion that this would reduce the generated traffic of sections 1 to 8 only on the order of the traffic generated by section 9, the economic rate of return of section 9 would increase from about 11% to 14%, if the foregone benefits of sections 1 to 8 from the lost generated traffic were attributed to section 9. Sensitivity tests applied to the economic evaluation consider a 15% increase in costs, a 25% decrease in benefits, no time savings and a two-year delay in the completion of the project. In the various cases, the overall rate of return is 18% (cost increase), 15% (benefit decrease), 16% (time savings omission) and 15% (delay). The rates of return are furthermore insensitive to variations of the shadow exchange and wage rates that could be applied within a reasonable range. 50. An incremental analysis has been carried out for the first three sections (totalling 17.7 km) for which a four-lane divided highway is proposed. Two alternative design standards were compared with constructing a four-lane divided highway: (i) staged construction: Stage I - completion of earthworks and construction of one two-lane carriageway; Stage II - completion of construction and addition of the second carriageway in year 2, 5 or 10 after completing of Stage I; and (ii) constructing only a two-lane highway parallel to the existing road. The incremental analysis demonstrated that constructing a four-lane divided highway is economically superior to alternatives (i) and (ii), and thus constitutes the optimal solution for the project. Risks 51. Particular attention was given during project preparation to the major sources of implementation problems encountered in past highway con- struction projects in Uruguay. The procurement phase of the project presents no special risk. Past experience with similar projects in Uruguay, however, shows that delays in project implementation of one or two years were common, mainly because of inadequate project management. To help overcome the problem, the proposed project includes strengthening of civil works supervi- sion by an experienced consultant firm. PART V - LEGAL INSTRUMENTS AND AUTHORITY 52. The draft Loan Agreement between the Republic of Uruguay and the Bank, and the Report and Recommondations of the Committee provided for in Article III, Section IV (iii) of the Bank's Articles of Agreement are being distributed to the Executive Directors separately. 53. Special conditions of the loan are listed in Section III of Annex III. The hiring of the consultants for the supervision of civil works in the construction would be a condition of effectiveness (paragraph 45).  - 17 - 54. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMENDATION 55. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments April 5, 1979  ANNEX I - 18 -Pan 1 URUGUAY -WmL INDICATORS DATA SHET URUGUAY nFEUNCE GROUPS (ADJUSTED AVRGZS LAND AREA (THOUSAND SQ. 1K1.) - MOST RECENT ESTIMATE) TOTAL 177.5 SAME SAME NXT NIGHER AGRICULTURAL 154.4 MDST RECENT GEOGRAPHIC INCOME 1NOOE 1960 fb 1970 /b ESTIMATE Lb REGION /c GROUP Ld GROUP Lj GNP PER CAPITA (US$) 630.0 900.0 1450.0 1066.7 1796.4 2839.0 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 825.0 930.0 942.0 911.1 1525.0 2376.4 POPULATION AND VITAL STATISTICS TOTAL POPULATION. MID-YEAR (MILLIONS) 2.5 2.7 2.8 URBAN POPULATION (PERCENT OF TOTAL) 72.6 78.1 80.6 57.9 52.2 POPULATION DENSITY PER SQ. KM. 14.0 15.0 16.0 25.6 27.6 55.8 PER SQ. KM. AGRICULTURAL LAND 16.0 17.0 18.0 77.6 116.4 83.6 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 28.0 28.3 28.0 42.0 34.8 40.0 15-64 YRS. 64.0 63.5 63.5 52.2 56.0 55.3 65 YRS. AND ABOVE 8.0 8.2 8.5 3.7 5.7 3.8 POPULATION GROWTH RATE (PERCENT) TOTAL 1.5 0.6 /f 0.4 /f 2.7 1.6 2.9 URBAN 2.8 1.2 1.0 4.3 3.4 CRUDE BIRTH RATE (PER THOUSAND) 23.0 22.1 20.4 35.8 27.0 31.7 CRUDE DEATH RATE (PER THOUSAND) 9.5 9.2 9.3 9.1 9.9 7.9 GROSS REPRODUCTION BATE 1.4 1.4 1.4 2.6 1.9 1.6 PAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. .. USERS (PERCENT OF MARRIED WHOMEN) .. .. .. 15.1 19.3 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1970-100) 90.0 100.0 99.1 102.1 103.8 114.7 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 115.0 114.0 116.0 103.9 110.4 113.4 PROTEINS (GRAMS PER DAY) 93.0 96.0 98.1 60.3 77.7 89.9 OF WHICH ANIMAL AND PULSE 60.0 64.0 62.6 26.7 22.2 48.0 CHILD (AGES 1-4) MORTALITY RATE 1.8 1.3 1.1 8.7 1.9 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 67.2 69.3 69.8 62.6 63.0 60.2 INFANT MORTALITY RATE (PER THOUSAND) 47.4 42.6 48.1 56.9 38.2 22.1 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 92.0 98.0 60.7 67.7 83.0 URBAN .. 100.0 100.0 78.0 83.5 100.0 RURAL .. 59.0 87.0 34.9 41.5 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 82.0 83.0 61.1 70.3 57.8 URBAN ., 97.0 97.0 80.3 90.7 99.3 RURAL .. 13.0 17.0 25.4 38.3 POPULATION PER PHYSICIAN 1100.0 /g 940.0 910.0 /h 1899.3 1310.8 976.9 POPULATION PER NURSING PERSON 7680.0 3340.0 3530.0 /h 1220.1 849.2 676.1 POPULATION PER HOSPITAL BED TOTAL 180.0 150.0 .. 422.3 275.4 325.8 URBAN .. .. .. 258.2 129.9 250.0 RURAL .. .. .. 2281.6 965.9 770.0 ADMISSIONS PER HOSPITAL BED .. .. .. 25.6 18.9 18.7 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 3.8 L .. .. 5.2 3.9 URBAN .. .. .. RURAL .. .. .. AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 1.5 ft *- * 2.0 0.9 URBAN 1.5 /t .. .. 2.1 0.8 RURAL .. .. .. 2.7 1.0 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 78.0 t .. .. 51.2 59.2 URBAN 88.0 L .. .. 77.3 78.0 RURAL 29.0 t .. .. 12.8 12.5  ANNEX I - 19 - P 2 URUGUAY - SOCIAL INDICATORS DATA SHEET URUGUAy REFERENCE GROUPS (ADJUSTED AVERAGES - OST RECENT ESTIMTE) SANE SAXE NEXT HIGEER MOST RECENT GEOGRAPHIC INCOME INCOIIE 1960 /b 1970 /b ESTIMATE /b REGION /c GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 111,0 106.0 95.0 103.5 97.6 104.1 FEMALE 112.0 103.0 94.0 102.9 87.4 120.3 SECONDARY: TOTAL 37.0 57.0 62.0 37.2 47.8 44.7 FEMALE 38.0 63.0 68.0 37.9 42.6 46.0 VOCATIONAL (PERCENT OF SECONDARY) 23.0 21.0 19.0 14.7 22.7 18.7 PUPIL-TEACHER RATIO PRIMARY 31.0 29.0 23.0 32.8 25.4 30.6 SECONDARY 13.0 .. .. 17.8 24.9 16.3 ADULT LITERACY RATE (PERCENT) 90.0 91.0 94.0 74.9 96.3 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 39.0 45.0 55.0 26.9 32.3 53.4 RADIO RECEIVERS PER THOUSAND POPULATION 285.0 346.0 495.0 173.5 201.9 195.5 TV RECEIVERS PER THOUSAND POPULATION 9.0 52.0 116.0 69.4 97.7 108.4 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION .. 140.0 .. 72.8 70.9 108.0 CINEMA ANNUAL ATTENDANCE PER CAPITA 9.0 .. .. 4.3 4.4 EMPLOYMENT TOTAL LABOR FORCE (THOUSANDS) 1000.0 /i 1020.0 1200.0 FEMALE (PERCENT) 24.6 27.5 28.5 21.4 17.4 26.9 AGRICULTURE (PERCENT) 18.0 17.0 13.2 37.8 38.4 25.7 INDUSTRY (PERCENT) 29.5 31.2 PARTICIPATION RATE (PERCENT) TOTAL 40.1 38.6 38.5 30.8 33.7 40.1 MALE 60.6 56.4 55.5 47.2 50.8 55.8 FEMALE 19.7 21.1 21.8 13.2 12.6 24.7 ECONOMIC DEPENDENCY RATIO 1.0 1.0 0.9 1.7 1.4 1.6 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 19.0 /j 28.9 20.2 HIGHEST 20 PERCENT OF HOUSEHOLDS . 47.5 1J .. 57.7 47.9 LOWEST 20 PERCENT OF HOUSEHOLDS . 4.4 .. 3.2 3.2 LOWEST 40 PERCENT OF HOUSEHOLDS .. 14.2 /1 10.7 13.7 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN 2. .. . 251.9 RURAL 183.0 200.6 157.9 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. . 551.0 403.1 448.8 RURAL . 257.0 258.0 313.1 ESTIMATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) URBAN . .. 26.0 24.8 23.2 RURAL . .. 30.0 65.2 54.5 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1973 and 1977. /c Latin America & Caribbean; /d Upper Middle Income ($1136-2500 per capita, 1976); e High Income (over $2500 per capita, 1976); /f Due to emigration during 1960-70 and 1970-75, population growth rate is lower than rate of natural increase; /f 1962; /h 1972; Li 1963; aj 1967. Septeaber, 1978  Z a = OC C OC; 8 a E0 cV3n o a-