Panama - Second Road Project

R E S T R I C T E D Report No. T.0.235z This report was prepared for use within the Bank. It may not be published nor may it be quoted as representing the Bank's views. The Bank accepts no responsibility for the accuracy or completeness of the contents of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT APPRAISAL OF THE FEEDER ROADS PROJECT IN PANAMA August 10, 1960 Department of Technical Operations FILE COPY  CURRENCY EQUIVALENTS US $ 1 Balboa 1 Balboa US $ 1  APPRAISAL OF THE FEEDER ROADS PROJECT - PANMKA Table of Contents Page Summary i I. INTRODUCTION 1 II. HIGHWAY SYSTEM CO F 1MMA III. THE FIRST ROD PROJECT - IMON 123-PAN 3 Highway Department 3 Rehabilitation and Maintenance of Highways 4 IV. THE PROJECT 4 Description of Project 4 Design Standards 5 Cost and Financing 5 Proposed Construction Procedure 6 V. JUSTIFICATION OF THE PROJECT 6 VI. CONCLUSIONS AND RECOIMENDATIONS 8 Table : 1. CAM's Highway Budgets 1956 to 1960 2. Estimated Cost of Roads 3. Minimum Design Standards Annex I. Justification of Individual Roads (with statements of traffic density, vehicle imports and registration, and gasoline consumption). Map Existing Highway Network and the Feeder Road Project.  SUMARY i. The Government of Panama has requested a loan of USs7.2 million equivalent for the construction of feeder roads and for the paving of con- necting roads to the existing main roads. ii. The earlier Loan 123-PAN for ',5. 9 million of July 1955 wfas made to assist the Government to organize a highway department in the Comision de Caminos, Aeropuertos y Muelles (CAM), the entity within the Ministry of Public Works responsible for highways, and to provide for the rehabilitation and maintenance of about 1,000 km of highw#ays. The establishment of a proper highway department was completed in 1958. The road work was not completed when the Government repaid the loan in December 1958, but the program is still proceeding. It appears that the physical and financial resources avail- able to CAM during the next few years would be adequate to finish this proj- ect, and it should be completed. iii. In addition to the national highways CAI is responsible for muni- cipal streets, for which funds are included in global budgetary appropriations. CAM ought not to be responsible for the formal allocations to highways and streets; separate appropriations should be made by the National Assembly. iv. The new project consists of: a) the construction of 300 km of secondary and local roads; and b) the paving of 138 km of connecting roads. Completion of the project would add 438 km of all-weather roads to the existing system. Total estimated cost is USM1..5 million equivalent, which includes a 20% allowance for contingencies; the foreign exchange component of US,47.2 million, the amount of the Droposed loan, would be used for equip- ment, materials and services. The local currency component of US',D7.3 million eauivalent is to be provided by the Government who applied to the U.S.A. Development Loan Fund to cover part of the local currency cost. v. Preliminary studies of the project have been made by CAM with the cooperation of an experienced consulting firm. The final plans, etc., are to be completed in the same way and consultants would assist in the execution of the project, including the award of contracts which will be let on the basis of international competitive bidding. vi. The Inter-American Highway which will cross the country from Panama City to the Costa Rican border when completed in 1962, and the Trans- Isthmian Highway between Panama City and Colon (Canal Zone) are the basis of the Panamanian transport system. Roads feeding into this system have been improved under Loan No. 123-PAN, and the present project would provide access to consumption centers from additional areas. The immediate benefits of this project would be the reduction in transportation cost for agricultural prod- uce moving to market, and the enhanced production in existing areas from improved conditions. Additional benefits would be obtained in the opening up of about 135,000 hectares of land to agriculture and settlement, if suitable land legislation were to be enacted and progressive agricultural policies pursued. This subject should be explored during loan negotiations.  ii. vii. The project is technically and economically sound. Subject to agree- ment with the Panamian authorities on: a) completion of the road project of Loan 123-PAN; b) a separate annual budget appropriation for municipal streets; c) the retention of consulting engineers for the execution of the new project; and d) the availability of local currency, the project provides a suitable basis for a Bank loan of USd'' 7.2 million equivalent. An appropriate term would be 15 years including a four-year period of grace.  PA1'kAA AP._R-'LISAL 07 ' T-3 FE:iDER RCOIDS PROJECT I . IIV 2 .-CDUtCTICN 1. The Government of Panama has asked the Bank to provide financial assistance in the amount of US?7.2 rnillion equivalent to further the devel- opment of the highway system in Panama. This a,mount repre-sents the esti- mated foreign exchange cost of imnorted equinn,ent, materials and services for construction of the nroj.ict, which would be executed in four years. The borrower would be the Government. 2. This report discusses and assesses the works for which the loan has been recuested. It is based on field studies made by Bank missions which visited Panana in 1957 and August 1959, and data furnished by the Panamanian authorities and the Consultants. 3. In July 1955, Loan No. 123-PAN for US,5.9 million ecuivalent was made to the Republic of Panama. to ornanize a highwqay a3enartment in the Co- mision de Carminos, keropuertos y 1luelles (C.A.TI) and to improve connecting roads to the Inter- American iighvay. A highwa'r department has 'oeen organ- ized; the road work perforned is satisfactory. In December 1958 the Glovern- ment of Panama elected to prepay the outstanding amounts of the loan in full. II. HIGHW,1AY SYST71 O7 ' 2 14. Panama is traversed lengthwise by thle Ciontinental Divide, except where the Canal crosses the country between Colon and balboa. On the Atlantic side there is dense rain forest aind no substantial production other than bananas. Host of the extensive land area between Paniama City and the Colombian border is virtually unexolored jungle~, 14hic.h may later be opened for development by extension of the Inter-American Highway. The iknediate trcnsport problem is therefore concentrated in the region on the Pacific side of the Divide, between Panama City (the Canal Zone) and the Costa Rican border. A map is attached. 5. Conditions in this area are favorable for -enerr!l aTrriculture, dairyine and cattle-raisinz, for suga cultivation near David, a-nd coffee and citrus fruits in certein localities. However, since the beginning of this century Panama has depended largely for economic develonment on ac- tivities generated by the Canal, and measures taken to stimaulate agricul- tur-1l production have had little effect. Such production reouires facil- ities for cheap and expeditious transportation to the centers of population. 6. During the neriod 1920-1936 a road was constructed between Panama City and David but it failed becauase of -ooor mainitenance, and did not there- fore make the expected contribution to develonment. From 1936 to 1946 some road sections (David-Ooncencion, Arraijan-Rio Hato and the Trans-Isthmian HighwTay from Panama City to Colon) were constructed oy United States agencies at no cost to Panama. After WPJorld War II a reduction of activity  - 2 - in the Canal Zone together with the rressure of rapidly increasing popula- tion, led to the realization that expansion of agriculture and imDrovemeflt of the incom,e of those enrmged in agriculture, about 55% of the total pop- ulation, were essential to economic progress. 7. The backbone of the nresent road system in Panana is the Inter- American Highway from Panama City to the Costa Rican border, -ihich is sched- uled to be completed in 1962. It wrill be a concrete surfaced hithway of about 480 km, and t-he cost will be almost US"hO million, of wlhich about two-thirds is borne by the UJnited States of America and the rsmainder by Panama. The next most imoortant highway is the Trans-Isthmian, between Panama City and Colon, a distance of 90 km; it also has a concrete surface. M. The oresent classification of roads in the highway stem is as follows: All Weather KM Concrete 296 Asphalt 476 Gravel 695 1,467 Dry Weather Earth 1,362 Total 2,829 9. Organized trucking is in its infancy a-d mainly operates on the Inter-American and Trans-_sthmian Highways. The trucking industry consists of: 1) One major freight company founded in 195h, which operates a large fleet of modern trucks and trailers on scheduled runs, and oublishes its tariff. Traffic, wqhich is mainly between Colon-Panama and Chorrera, increased from 5.3 million ton/km in 1954 to 12.5 million ton/km in 1958; 2) 37 passenger and 16 freight trinsport companies. These are small conmanies and not well orranized. Passenger services are scheduled and oo-)rate with official tariffs; the freight service is unscheduled and the rates charged vary with the circumstances; 3) Onerators who use trucks in their o-rm business and engage in transport for others as a side line. 10. Apart from the statistics kept by the major firm mentioned above, no records are available for tota_l road services. The !iinistry of Public Works is resoonsible for traffic control and is establishing a statistical  - 3 - section. The iinistry is also studying traffic regulations, in particular vehicle weight and size limitations with a view to requesting legislation. 11. Outside of highways,there is no major system of internal trans- port in Panama except for the Trans-Isthmian railroad from Cristobal to Panama (80 kn) which handles about 50% of the imported goods. III. THE FIRST RQAD PROJECT - LCAN 123-PAN Highway Department 12. For many years prior to 1955 there was no highway departrmient in the accepted sense of this term, and one of the objectives of Loan 123-PAN, dated July 1955, was to establish an effective highway department in CAM., which is responsible for highways, seaports and airports, within the Minis- try of Public Works. A team of foreign experts, whose services were paid for by the loan, was engaged for this task, and for the training of personnel for maintenance and construction of highways. After some major difficulties had been overcome, the advisers completed their assignment in 1958. 13. In the resulting organization, under the general supervision of GAM, an Executive Director and his Assistant direct the daily operations of the Department, which are carried out by Engineering, Planning, Bridge, laboratory, Equipment (including shops and warehouses) and Administration Sections. For maintenance and construction field operations the country is divided into three regional zones, each provided with camp facilities, shops and warehouses. The Department is well-organized and its operations are efficiently supervised. Most of the staff of Panamanian engineers was trained in the U.S.A. The Departmentts principal operational need is im- provement in the operation and maintenance of equipment. The assistance of I.C.A. and the U.S. Bureau of Public Roads is being sought for a training program for this purpose. 14. CA1Ps financial resources are supplied by the national budget There is no allocation of road user taxes to the Highway Department. How- ever, duties and taxes from road transport elements are substantial. Im- port duties on vehicles, spare parts, tires and gasoline produced g 3.2 million in 1950 and P 4.3 million in 1958, an average increase of 3.5% per year. An ad valorem duty of 20 to 40%/ is charged on passenger cars and 15% on trucks, and the duty on gasoline is B 0.12 per gallon. 15. Annual highway appropriations to CAM from the national budget have averaged B.2.5 million for the past several years, but they have not been sufficient to cover all requirements and because of this, improvement and rehabilitation have been delayed. A general statement of CAMI's highway budgets for the years 1956 to 1960 is given in Table 1. 16. In addition to national highways, CAN is responsible for the construction and maintenance of municipal streets for which funds are in- cluded in its annual global appropriation. Work in urban areas is increas- ing with their expansion, especially P