Honduras - Highway Construction Project

R E S T R I C T E D R e p o r t N o. TO-170a 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 A HIGHWAY CONSTRUCTION PROJECT HONDURAS May 1, 1958 FILE COPY Department of Technical Operations  CURRENCY EQUIVALENTS U.S. $1.00 s 2 Lempiras 1 Lempira a U.S. $0.50 1 million Lempiras = U.S. $500,000  H O N D U R A S APPRAISAL CF A HIGH'TAY CONSTRUCTION PROJECT TABLE OF CONTENTS Paragraphs I. Summary and Recommendations i - vi II. Introduction 1 - 2 III. Background A. Status of Present Loan Project 3 - 11 B. Other Present Road-Building Activity 12 IV. The Project A. Description 13 - 22 B. Status of Plans 23 C. Economic Justification 24 - 34 D. Financing of the Project 35 - 36 E. Execution 37 - 39 Annex 1 - Cost Estimate I 2 - Vehicles registered by Class It 3 - ivTap  H O N D U R A S Appraisal of a Highway Construction Project I. SUMMARY AND <C -.: jIIL,nTIONS i. The Honduran Government has submitted to the Bank a highway Project consisting of: a. the construction of a paved highway of 72 kilo- meters from Bufalo to Puerto Cortes which will connect the country-s most important port on the Atlantic coast, with the National highway net-work. b. the construction of bridges and culverts on the existing part of the WVestern Highway from Chame- lecon to Santa Rosa de Copan to provide an all- weather highway. c. the completion of the pavement of the Southern Highway from T'egucigalpa to the intersection with the Inter-American Highway. d. the preparation of final plans and specifications for the extension of the WNestern Highway from Santa Rosa de Copan to the Salvadorean border. ii. The total cost of the Project is estimated at Lempira 21.0 million (USt 10.5 million) of which the equivalent of US$ 5.5 million will be in foreign currency. The local currency cost will be met by a loan frcm the United States Development Loan Fund. iii. Plans and specifications are being prepared for the Government by a firm of consulting engineers. iv. The Project is sound in its technical and economic aspects. The design standards are adequate. v. As conditions to -the loan the Borrower should agree to (a) the employment of consultants for the supervision of the Project, (b) the continuation of the maintenance program under the supervision of the same or other consultants, and (c) a restriction on highway construction work outside the Project. vi. The Project is suitable for a Bank loan of 5 5.5 million. An ap- propriate term would be 20 years including a period of grace of 3 years.  II. INTRODUCTION 1. The Honduran Government has approached the Bank for a loan of 5.5 million U. S. dollars equivalent to cover the foreign exchange cost of (i) the construction of the Bufalo-Puerto Cortes Highway, (ii) the con- struction of bridges and culverts on the Western Highvway, (iii) the com- pletion of the paving on the Southern Highway, and (iv) the final en- gineering of the Viestern Highway Extension. 2. The appraisal of the project in this report is based on the find- ings of Bank Missions which visited Honduras in October 1957 and February 1958 and on reports by consulting engineers, Upham, Porter-Urquhart As- sociated who were engaged by the Honduran Government to undertake the de- sign and supervision of the Project. IIT. BACKGROUND A. Status of Present Loan Project 3. A Highway Department wvas established in 1910 but little prog-ess was made in developing go~od road maintenance during the s;ubsequent five years. The T)eoartrment wras poorly organized and lacked personnel with tech- nical and administrative abilities to carry out the work. MFost of its budget was spent on highway construction and betterment works vrith the resul-s that no adeouate maintenance organization with suitable wVarehouse, office and shop facilities was created. The maintenance equipment that was available was badly maintained and by 1955 was considerably deteriorated. The Government, wishing to correct these deficiencies, approached the 3ank in 1955 for a highway maintenance loan. 4. A loan of 4E_ .2 million was made in December 1955. The project provided for the following: a. Improvement of the highway organization through: (i) the reorganization and strengthening of the Highway Department; (ii) the acquisition of road maintenance equipment and materials; (iii) the erection and equipping of the necessary mainten- ance facilities; and (iv) the training of person- nel. b. The execution of a two-year program of highway repair and maintenance in the regions where field organizations were to be established. c. The conduct of a preliminary survey for the im- provement and completion of the Yr`restern Highway from Chamelecon to the Salvadorean border and of the Northern Highway from Comayagua to Puerto Cortes (see map Annex 3). The survey of the latter highway was later extended to Tegucigalpa.  5. It was further laid down in the Loan Agreement that the Government would employ Consulting Engineers to assist in the detailed preparation and execution of the Project'. The Consultants assumed their duties in February 1956. 6. Although the ability and quality of the work of the Consultants as to design of new roads, including those discussed in this report has been sa- tisfactory, this cannot be said of their past p rformance in the field of administration and organization of the maintenance program. Progress in es- tablishing and implementing this program has been slower than expected. This situation was aggravated by a lack of cooperation from the Highway Depart- ment. In April 1957 the Bank found it necessary to inform the Government that it could not consider a loan for a highway construction project until better performance had been obtained on the existing loan project. Subse- quently a number of changes were made in the Consultants' maintenance staff which have strengthened its technical and administrative competence, while at the same time the attitudle of the Highway Department gradually became more cooperative. 7. End-use inspections in October 1957 and February 1958 showed that though progress on the betterment work included in the program had not been favorable, progress has been made in routine maintenance since the previous visit in April. In addition considerable advances have been made in the administrative field such as accounting, cost control and warehousing. Al- though the progress made in the erection and improvement of workshops is still not very satisfactory, there is reason to believe that the present highway administration will speed up this work. 8. Since its initiation, sufficient local funds have been made avail- able to carry out the mainteenance program. Also, the 1958 highway budget provides sufficient funds for maintenance for the current year. About hO4 of the total highway budget has been allocated for maintenance. 9. Though the execution of the maintenance program has been slow, the overall results of the increased effort by Government and Consultants during the recent months have shown that the program can be successfully executed if the present rate of progress is maintained. A satisfactory basis now exists for considering the construction prcject discussed in this report. 10. It is evident that the maintenance program will not have reached satisfactory status by July 1958 when the Consultantst present contract terminates. The continuation of supervision of the maintenance program by the same or other consultants under terms and conditions satisfactory to the Bank is necessary for at least one more year and should be a condition to the proposed loan. 11. In April 1