Mexico - Earthquake Rehabilitation and Reconstruction Project

Doumen of The World Bank FOR OFFICIAL USE ONLY OZUtj. -2 &4 6 Arc- Report No. P-4252-ME REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$400 MILLION TO BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.N.C., I.B.D. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR AN EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT March 5, 1986 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Unit - Peso (Mex $) On February 24, 1986, the exchange rate in the controlled market was US$1 = MexS431.80; the free market exchange rate stood at US$1 = Mex$470.00. Fiscal Year January 1 - December 31 Minimum Wage in Mexico City Mex$42,690/month (January 1986) MEASURES 1 hectare (ha) = 10,000 m2 = 2.47 acres 1 square meter (m2) = 10.76 square feet ABBREVIATIONS BANOBRAS - Banco Nacional de Obras y Servicios Publicos, S.N.C., I.B.D. CAPFCE - Comite Administrativo del Programa Federal de Construccion de Escuelas (Commission for Administering the Federal School Construction Program) CONACYT - Council for Science and Technology DF - Federal District DDF - Department of the Federal District DPP - Directorate of Planning and Programming, Secretariat of Public Education EFF - Extended Fund Facility FONHAPO - Low Income Housing Fund FOVI - Fund for Housing Operations and Bank Discounting IDB - Inter-American Development Bank IMSS - Mexican Social Security Institute NAFINSA - National Finance Corporation NDP - National Development Plan QRs - Quantitative Restrictions RHP - Popular Housing Renewal Agency SCT - Secretaria de Communicaciones y Transportes (Secretariat of Communications and Transport) SEDUE - Secretaria de Desarrollo Urbano y Ecologia (Secretariat of Urban Development and Ecology SEP - Secretariat of Public Education SG - Secretaria de Gobernacion (Secretariat of the Interior) SHCP - Secretaria de Hacienda y Credito Publico (Secretariat of Finance and Public Credit) SPP - Secretaria de Programacion y Presupuesto (Secretariat of Programming and Budgeting) SS - Secretaria de Salud (Secretariat of Health) FOR OFFICIAL USE ONLY MEXICO EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT Loan and Project Summary Borrower: Banco Nacional de Obras y Servicios Publicos, S.N.C., I.B.D. Guarantor: United Mexican States Amount: US$ 400 million equivalent Terms: Fifteen years, including three years of grace at the standard variable interest rate. Relending Terms: The proceeds of the loan allocated to the Housing Rehabilitation and Reconstruction components would be relent by FOVI and FONHAPO on terms and conditions which vary with the type of subproject and the unit cost of the facilities. Project Objective and Description: The objectives of the proposed project are: to assist the Government in the rehabilitation (repair of damaged buildings) and reconstruction (complete rebuilding of structures) of the urban centers damaged by the earthquake of September 19, 1985, and to improve construction standards and planning through regulatory instruments at the municipal, state and national levels to protect urban infrastructure and superstructure from future earthquake tremors. The project would comprise: (a) Housing Rehabilitation and Reconstruction through rehabilitation of less heavily damaged dwellings, and complete reconstruction of destroyed dwellings in low- and middle-income residential areas; (b) Community Facilities comprising (i) reconstruction, rehabilitation and reinforcement of school structures; (ii) replacement of about 2000 general hospital beds; and (iii) replacement or partial reconstruction of about 13 municipal markets; (c) Demolition of public, residential, industrial, commercial and hospital buildings which were damaged beyond repair, and removal of debris, in the metropolitan area of Mexico City. and (d) Institutional Support by providing technical assistance and studies to (i) help strengthen a technical coordinating unit; (ii) assist the executing agencies with project preparation, implementation, and processing; and (iii) develop, at the national level, a set of measures to improve seismic-resistant building codes and technical procedures. Project Risks: The main project risks would be delays in project execution because of the large number of reconstruction activities to be carried out simultaneously in many locations, and insufficient preparation due to the urgency of the project. These risks would be reduced by: (a) relying on existing institutions of proven capacity; and (b) providing This document has a restricted distribution and may be used by recipients only in the performance of their official dutieL Its contents may not otherwise be disclosed without World Dhnk authorization. technical assistance. Coordination arrangements (e.g., establishment of a Technical Coordinating Group) especially established to carry out the reconstruction program would also minimize these risks. The high priority assigned by the Government to reconstruction efforts should reduce the risk of delays in the provision of counterpart funds. Estimated Project Costs: % of Total Local Foreign Total Project Cost US$ million I. Housing Rehabilitation 62.2 23.1 85.2 14.9 Reconstruction 143.5 50.4. 193.9 34.0 II. Community Facilities Health Care 49.3 36.2 85.5 14.9 Education 23.9 10.2 34.1 6.0 Public Markets 4.7 2.0 6.7 1.2 III. Buildings Demolition and Debris Removal 20.6 31.0 51.6 9.0 IV. Technical Assistance and Studies 10.4 1.8 12.2 2.1 V. Project Administration 5.0 - 5.0 0.9 Project Base Cost 319.6 154.6 474.2 83.0 Physical Contingency 35.3 16.4 51.7 9.0 Price Contingency 30.9 14.6 45.5 8.0 Total-Project Cost 1/ 385.8 185.6 571.4 100.0 Local Foreign Total FINANCING PLAN - -- --USS million -- Government 171.4 - 171.4 Bank 214.4 185.6 400.0 Total 385.8 185.6 571.4 ESTIMATED DISBURSEMENTS - -USS million Bank FY 1986 1987 1988 1989 Annual 92 170 106 32 Cumulative 92 262 368 400 1/ Figures do not add due to rounding. The project costs are net of duties and taxes. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.N.C.,I.B.D. WITH THE GUARANTEE OF UNITED MEXICAN STATES FOR AN EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT 1. I submit the following report and recommendation on a proposed loan to Banco Nacional de Obras y Servicios Publicos, S.N.C., I.B.D. (BANOBRAS) with the Guarantee of United Mexican States for the equivalent of US$400 million to help finance an Earthquake Rehabilitation and Reconstruction Project. The loan would be repaid over 15 years including 3 years of grace, at the standard variable interest rate. Proceeds of the loan would be provided to executing agencies on varying terms and conditions. PART I - THE ECONOMY 2. An Economic Report on Mexico (Mexico: Recent Economic Developments and Prospects, No. 4996-ME) was distributed to the Executive Directors on May 14, 1984. A new Country Economic Memorandum is scheduled to be issued by June, 1986. Recent economic developments and a provisional assessment of the consequences for Mexico of the recent sharp decline in oil prices are discussed below. Country data are provided in Annex I. Background 3. Following an inward-looking growth strategy, Mexico experienced some three decades of high and stable growth from the 1940s to the 1960s. By 1970, however, Mexico had largely exhausted the early and efficient possibilities for import substitution. Against the expectation of rapidly rising petroleum earnings, the Government attempted to foster growth through expansion of public sector expenditures, rising subsidies, and the protection of high cost domestic production. Public sector expenditures as a percent of GDP increased by more than half between 1970 and 1976, from 20.9% to 31.9%. In 1976, Mexico experienced a serious financial and economic crisis. Although an increase in oil revenues led Mexico to a quick economic recovery in 1977, it also removed the urgency of policy reforms. Starting in 1980, rapidly rising public expenditures unmatched by revenue growth led to increasing public sector deficits. While inflation rose, no significant pressure was felt to adjust the exchange rate, thanks to the oil earnings and the relative ease of obtaining foreign finance. 4. The crisis came to a head in 1982. Public sector expenditures reached the unprecedented level of 40.1% of GDP, while the deficit reached nearly 18% of GDP. In February, as capital flight intensified, the Bank of Mexico stopped supporting the peso, which then experienced a 40% devaluation in US dollar terms. A large wage adjustment and continuing slack in the oil market tended to undo the effects of the devaluation and kept the balance of -2- payments under strain. Consumer price inflation nearly quadrupled from 29% in 1981 to 99% in 1982. The international banking community declined to commit new funds to Mexico in the amounts required. These factors led to a second devaluation of 35Z in August 1982 and the suspension of amortization payments on most of Mexico's external public debt. Capital flight continued as private sector confidence was shaken by the nationalization of the banks in September 1982 and by the mandatorytonversion of US dollar deposits into pesos. Also introduced were exchange controls and quantitative restrictions covering all imports. 5. Beginning in late 1982, with the support of an Extended Fund Facility from the IMF, Mexico undertook a stabilization program based on drastic contraction of domestic demand, through fiscal, exchange rate, and monetary policy. The peso was depreciated to an unprecedented new low in real terms, and import controls were tightened. Public sector expenditure in relation to GDP declined over the period 1983-85, from the high of 40.1% in 1982 to about 33% by 1985. Non-interest expenditure declined to about 22% of GDP by 1985, a ten-year low. Public sector investment was cut from about 10% of GDP in the late 1970s to 6.6%, again a ten-year low, and non-interest current expenditure also declined, though more modestly, and remained still at the levels of the late 1970s. Real wages fell 20-25% between 1982 and 1984. Most public sector prices were raised in real terms. 6. The stabilization effort for 1983-84 was impressive. Imports fell 25%, non-oil exports (including border industries) rose 40%, and the trade balance showed unprecedented surpluses in 1983-84. Despite declining oil prices, net foreign reserves increased from a negative US$2.0 billion to $6.5 billion between the end of 1982 and the end of 1984. The 1983-84 performance was hailed by the international financial community as a model for other countries. A massive foreign debt restructuring was successfully nego- tiated. Total net foreign borrowing for the three-year period 1983-85 amounted to $4.5 billion, for an actual decline in the overall debt, in real terms, of about 4%. But the optimistic reaction to Mexico's success in 1983-84 overlooked the short-term focus of the stabilization program and the absence of long overdue structural reforms. Optimism turned to disenchant- ment a year later, when it became clear that stabilization in the absence of more fundamental structural reforms could not restore Mexico's creditworthi- ness, nor would sustainable economic growth be possible without such reforms. 7. Despite tight fiscal and monetary policies, inflation in both 1983 and 1984 turned out to be much higher than had been projected by the authori- ties, consumer prices rising by 80% and 59% respectively. The fiscal deficit fell substantially in 1983, to 8.5% of GDP, but then leveled off in 1984. GDP fell in both 1982 and 1983 (by 0.5% and 5.3% respectively), and recovered only partially in 1984 (by about 3.5%). GDP per capita by 1984 remained below the levels of 1980 and income per head lower still. By late 1984, as the Government prepared for the mid-term congressional elections of July 1985, fiscal policy began to ease, and public sector borrowing increased substantially. Monetary policy turned accommodating, the exchange rate appreciated further in real terms, and the fiscal deficit rose well above program targets. The demand-led growth spurt that resulted, accompanied by higher than projected inflation, was unsustainable and short lived. -3- Recent Developments 8. Most program targets were missed in 1985. The fiscal deficit rose to 9.8%, inflation increased to 63.8%, non-oil exports declined by over 10% from their 1984 levels, and most components of the balance of payments deteriorated. Foreign reserves declined by nearly US$3.5 billion. While external public debt actually declined during 1985, the domestic debt of the public sector surged back up toward the level of 1982. As a result, crowding out of the private sector in the credit markets was severe, as the share of the public sector in total credit reached an unprecedented high in excess of 75% in 1985. The brief spurt of GDP growth between mid-1984 and mid-1985 came quickly to a halt in late 1985. 9. In response to the emerging new crisis, the Government adopted during the course of 1985 a series of important corrective measures, includ- ing removing import licensing requirements from an additional 40% of merchan- dise imports, thus increasing the share of imports not subject to QRs to 63% of total imports. The controlled exchange rate was devalued by almost 20% in real terms, and the system of preafinounced fixed daily crawl was replaced by a more flexible managed float. Important economies were announced in the public sector, including the elimination of some 25,000 full-time positions and plans to privatize over 230 small state owned companies. The Government also started to rationalize parastatal operations. Further, aggressive adjustment of the controlled exchange rate and a consequent narrowing of the margin between the controlled and free rates, combined with tight domestic credit brought capital flight to a virtual halt in late October. 10. In spite of the reconstruction needs created by the September earthquakes (estimated at US$4 billion), the authorities prepared an austere budget for 1986. This budget signaled the commitment of the administration to renewed demand-management efforts to recover internal and external balance and move on to a sustainable growth path by the late 1980s. The budget aimed at halving the fiscal deficit to 4.9% of GDP, through sharp cuts in transfers and subsidies, smaller reductions in public investment, a surcharge on upper-income taxpayers, and large adjustments in official prices and tariffs. The 1986 program also stressed the importance of continuing policies to liberalize trade, and pushing ahead with other major reforms such as the restructuring/privatization of some parastatal companies and the easing of remaining restrictions to foreign investment. 11. The recent instability in the world oil markets has lowered the government's revenue projections for 1986. The expectation of lower prices and volume of oil exports for this year, despite its negative fiscal and balance of payments implications, has not affected the Administration's resolve to continue with the stabilization cum structural reform policy. The 1986 budget that is now being revised will undoubtedly reflect a larger public sector deficit and larger external finanding requirements. For the fiscal deficit, part of the loss from oil taxes will be offset by further trimming of subsidies and public expenditures. Similarly the increase in foreign borrowing requirements will be much smaller than the actual drop in -4- oil export receipts, as a result of foreign interest rates, imports and build-up in reserves all expected to be lower than the original budget assumptions. Hence, the picture for external financing needs, although some- what more difficult, should remain manageable barring further major declines in Mexico's oil export prospects. Medium-Term Prospects 12. Mexico's medium-term prospects for recovery and stable economic growth remain good, provided the Government is persistent in pursuing its current stabilization program accompanied by major structural adjustment policies (including trade liberalization cum non-oil export promotion, restructuring/privatization of parastatal companies), private sector confidence is restored, and the international environment remains reasonably favorable, including open markets for Mexico's non-oil exports. Restoration of private sector confidence is crucial, since only a strong and dynamic private sector will be able to raise investment and production from the present depressed levels and supply the increasing non-oil export surplus required for the resumption of growth and the attainment of sound balance of payments prospects. As regards the external environment, the international financial community should be prepared to provide financing in support of sound, growth-oriented economic policies. 13. Under moderately favorable external and domestic conditions, Mexico's economic growth could reach a sustainable 4-5Z a year toward t'le late 1980s. However, should a more outward-oriented growth pattern comprising fiscal discipline, improved domestic efficiency, and non-oil export development fail to materialize, Mexico could enter into a period of prolonged stagnation, characterized by insufficient labor absorption, domes- tic price distortions, and continued balance of payments difficulties. External Debt and Creditworthiness 14. Mexico's external public and private debt increased by about US$6 billion during 1983-84, and fell by US$1.5 billion in 1985 to US$92.8. With an international oil price of USS20/barrel, the net new borrowing require- ments are expected to average some US$2-3 billion per annum during the remainder of the decade, with the debt service ratio remaining a little over 50%. With an oil price of US$15/barrel, the net borrowing requirements would be an average of US$4-5 billion per annum during the same period, while the debt service ratio would be around an average of 55%. 15. At the end of 1985, the Bank's share in Mexico's public debt was 5.1%. The Bank's share in Mexico's total public external interest payments was 4.3%. The Bank's exposure in Mexico as of end-1985 amounted to 7.6% of its total. In view of the expectation that sound economic policies will be pursued in the future, Mexico is considered creditworthy for this loan. I -5- PART II - BANK GROUP OPERATIONS IN MEXICO Bank Operations 16. As of September 30, 1985, Mexico had received 91 loans from the Bank, amounting to US$7.72 billion, net of cancellations and terminations; of these, 59 loans totalling US$3.6 billion were fully disbursed. The Bank held US$6.1 billion, of which USS2.4 billion had not yet been disbursed. Some 40% of Bank lending has been for agriculture and rural development, 20% for industry, 9% for power, and 18% for transportation; the remaining 13% has been for water supply, tourism, urban development, and vocational training. Annex II contains a summary statement of Bank loans as of September 30, 1985. 17. Of the US$7.72 billion total lending, about US$4.7 billion was for establishing or strengthening institutions for channelling credit to areas where credit supply was deficient or non-existent, and setting up in the com- mercial banking system the ability to carry out project-related appraisal of investments in agriculture, industry, and tourism. These credit programs have facilitated lending to low-income farmers and small- and medium-scale industrial and tourism enterprises. 18. The Government arranged adequate budget financing in the years 1978 to 1981, which significantly improved project implementation. Government and Bank officials met periodically to review project implementation, and greater attention was focused on project monitoring. As a result of these measures, most of the Bank-assisted projects were being implemented satisfactorily until mid-1982, and disbursements rose from US$91 million in FY78, to USS448 million in FY82. However, the 1982 financial crisis again caused delays in the provision of counterpart funds; consequently, disbursements in FY83 declined to US$389 million. A Special Action Program (SAP) was established in early 1983 to help the Government by alleviating the counterpart funding constraints on development projects, and 18 Bank-financed projects are receiving support under the Program. Partly as a result of the SAP, dis- bursements during FY84 improved significantly at US$528.87 million or 35% over disbursements in 1983. The FY85 disbursement figure is USS787.93 million, 49% over 1984 or 100% over projected. IFC Operations 19. As of September 30, 1985, IFC had made investment commitments in 27 companies in Mexico, for a total of US$753.9 million, of which USS572.8 mil- lion had been sold, repaid or cancelled. A summary statement of IFC invest- ments is presented in Annex II. IFC has been working together with the Bank in preparing proposals to establish a facility for provision of foreign exchange financing to private sector companies, for the importation of machinery, equipment, and spare parts required for production of exportable products, for efficient import substitution, and for improvements in the utilization of their existing productive capacity. IFC approved a US$100 million facility (including funds mobilized from foreign commercial banks) in 1983, which is providing finance for fixed investments of a larger size than those assisted under the Bank loan for an Export Development Project. -6- Bank Strategy 20. The Bank's major objectives in Mexico prior to the 1982 crisis were to: (a) support policies and programs leading to a wider distribution of the benefits of economic growth; (b) help finance projects that, directly or indirectly, contributed significantly to output and employment; (c) help reduce Mexico's urban/regional imbalances; and (d) help free bottlenecks which prevent rapid growth. These continue to be important objectives of Bank assistance to Mexico. However, following the 1982 economic crisis, and a reassessment of the Bank's role in Mexico, the Bank Management concluded that: (a) increased Bank lending, critical to Mexico's recovery, must be linked to central policy reforms; and (b) the Bank should play a central role in assisting Mexico's return to voluntary lending. To prepare itself for this new role, the Bank has intensified and broadened its economic and sector work. Specific policy reforms that are presently being pursued through a dialogue with the Mexican Government cover priority macro-economic and cross-sectoral issues, such as trade liberalization, rationalization of preferential credit systems, improvement in public sector pricing and invest- ment and subsidy reduction. Traditional lending incorporating project- or sector-specific policy issues will be conducted in parallel with policy dialogue on cross-sectoral or macro-policy issues. 21. Because of the difficult structural problems of agriculture and the sector's crucial importance for the one-third of the nation's population living in rural areas, the Bank has made agriculture the leading sector for its lending. The Bank's agricultural lending program in Mexico aims at (a) a more efficient and rational use of natural resources to increase production; (b) productivity improvements of cultivated lands, with emphasis on the productivity of small farmers; and (c) promotion of employment - generating investments in rural areas. To support these goals, infrastructure invest- ments in Bank-assisted projects have been complemented with support services, such as extension, marketing programs and credit. The Bank has made 10 loans in FYs80-85 totalling USS1,566.0 million for irrigation, rural and agricul- tural investment projects, and agro-industrial and livestock credit programs. A proposed loan for a Second Tropical Agricultural Project was distributed to the Executive Directors for consideration on March 4, 1986. Projects for irrigation rehabilitation, extension and research, seed multiplication, forestry, agro-industries and agricultural credit are in various stages of preparation. Special emphasis has been placed in recent years on the development of rainfed areas. 22. Bank lending for industry aims at: (a) improving competitiveness and export growth in selected industrial subsectors; (b) decentralizing industrial activities away from the major, increasingly congested, urban areas; and (c) promoting greater employment. Between FYs8O-85, seven loans amounting to USS947.3 million were approved in the areas of small- and medium-scale industry, mining, vocational training, development of capital goods industries, and promotion of exports. In response to the current needs of the industrial sector, several projects to support non-oil export develop- ment, acquisition of modern technology, financial restructuring of enter- prises, and industrial recovery and growth are in various stages of prepara- tion. A Trade Development Policy Loan (DPL) is now being appraised aiming at - 7 - supporting the trade liberalization process, assisting in the recovery of sustainable economic growth and facilitating the mobilization of commercial bank funds to cover part of the external financing needs for 1986. 23. Bank lending for transport has focused on regional development, strengthening of institutions and rationalization of public investment out- lays and pricing policies. Between FYs8O-85 six loans amounting to US$753.7 million were approved including two in each of the following three sub- sectors: highways, railays and ports. Additional projects to support the above goals were undertaken in the urban sector. During FYs8O-85 four loans were approved in the urban sector, totalling US$408.5 million in the fields of water supply and sewerage and urban development. Additional projects are under consideration in the transport and urban sectors aiming at strengthen- ing the various institutions in the areas of planning, management, and finance. 24. The Economic Development Institute (EDI) is assisting Mexico through various courses/seminars dealing with policy alternatives and insti- tutional reforms. EDI training is specifically directed at courses/seminars on water supply and sanitation sector management, transport policy, agricul- tural policy, industrial development and finance, and macro-policy analysis. 25. The Inter-American Development Bank (IDB) is the second largest source of multilateral aid to Mexico. The IDB has made loans to Mexico totalling US$3.4 billion as of September 30, 1985. Over 50% of the total has gone to agricultural and rural development projects, and the balance to transportation, industry, water supply and sewerage, tourism infrastructure, education, municipal development and pre-investment. The IDB and the Bank have coordinated their assistance on several projects. Each has made loans for the national integrated rural development program (PIDER), agricultural and livestock credit, small- and medium-scale industries development, and hotel development projects. The IDB is also providing a program of assistance for earthquake rehabilitation and reconstruction. The International Fund for Agricultural Development (IFAD) has approved a loan of US$22.0 million for a rural development project in the State of Oaxaca, which was appraised by the Bank's staff and for which the Bank is acting as cooperating institution for administering the loan. PART III - BACKGROUND The Administrative Structure 26. The Government structure in Mexico is highly centralized with the federal government selectively delegating power to the 31 states and 2,379 municipalities. Municipalities are the primary political and administrative units of government. Municipal governments are headed by mayors who, together with approximately 10% of senior municipal officials, are elected for three-year terms and are not eligible for re-election. In accordance with the recent modifications to Article 115 of the Constitution, municipali- ties are responsible for the planning and delivery of various urban services including: water supply and sewerage, drainage, solid waste management, roads - 8 - and streetlighting, retail and wholesale markets, slaughterhouses, parks and gardens, graveyards, traffic management and public security. Municipal governments have full authority to set and collect user charges and property taxes, to plan, finance and implement investments, and to operate and maintain basic municipal services. 27. At the federal level, various Government agencies are involved in overseeing policy and in providing technical assistance to municipalities. The Secretaria de Gobernacion (SG) is concerned with the jurisdiction, status and administration of local governments and their political relations with the Federal Government. The Secretaria de Hacienda y Credito Publico (SHCP) is responsible for revenue collection, for overseeing the financial manage- ment and revenue operations of local governments, for determining sources of financing at the federal level, and for the operation and management (includ- ing credit operations) of the Government's financial agents. The Secretaria de Programacion y Presupuesto (SPP) reviews and subsequently evaluates state and local budgets to ensure that their priorities are consistent with national and regional plans, programs and statutory requirements. SPP is also responsible for the federal budgetary allocations to municipalities. The Secretaria de Desarrollo Urbano y Ecologia (SEDUE) is the principal normative authority responsible for water supply, sewerage, solid waste and other basic municipal services. SEDUE is responsible for advising on and reviewing of land use plans prepared by state and local governments and for providing echnical assistance and support for all municipal and urban services. All of the Secretariats have regional offices in each state. The Earthquake Emergency 28. On September 19, 1985, Mexico was hit by one of the worst earth- quakes in its history, measuring 8.1 on the Richter scale. Approximately 8,000 people were killed and many more thousands injured. The epicenter of the earthquake was near the Pacific Coast in the proximity of the border between the States of Michoacan and Guerrero. The heaviest damage occurred in Mexico City and neighboring municipalities in the State of Mexico, although serious damage also occurred in eleven municipalities to the west and southwest of Mexico City in the States of Jalisco, Colima, Michoacan and Guerrero. The eleven municipalities were (i) in Jalisco - Gomez Farias and Cuidad Guzman; (ii) in Colima - Manzanillo; (iii) in Michoacan - Lazaro Cardenas, Cotdia and Coalcoman, and (iv) in Guerrero - Chilpancingo de los Bravo, Iguala de la Indepencia, La Union, Jose Azueta and Cohayutla de Guerrero. 29. Virtually all sectors of the economy were affected, including housing, health, education, telecommunications, production, public adminis- tration and tourism. The damage in Mexico City was particularly devastating because of the very heavy concentration of population, economic activity and buildings. The vulnerability was increased by the fact that the center of the city is built on highly compressible clay in an ancient lake bed. The loss of life would almost certainly have been more catastrophic but for the fact that the earthquake occurred in the morning, shortly after 7 a.m. when people were in transit, rather than at work. - 9 - 30. In Mexico City an estimated 60% of the Federal Government buildings were lost (970,000 square meters of floor space) with the consequence that 120 government agencies lost all or part of their office space, equipment and files; some 115,000 dwellings in Mexico City were destroyed or heavily damaged; most of the schools in the Federal District and many in the neighboring states were damaged, many so severely that they will require complete reconstruction or major repair. The damage to the telephone system was the largest ever to happen in the world to a telecommunications system. In the health sector, hospitals with more than 5,000 beds were destroyed or damaged; the four most important hospitals in Mexico City were lost. Water supply was interrupted in large parts of Mexico City and the other affected municipalities; however, overall damage to urban infrastructure, including water and sewerage, paving and street lighting, was minor when compared to the damage to buildings. Restoration of water and sewerage service to pre-earthquake levels is already nearing completion (which, however, will still leave severe water shortages which existed prior to the earthquake in many low income neighborhoods). Losses to small scale industry were severe; the garment industry was particularly hard hit, with the production facili- ties of approximately 500 firms destroyed. The tourism industry suffered major losses of hotel facilities in the Federal District and the tourist resort of Ixtapa. (See Annex XII: Photographic documentation and Map of Mexico City showing earthquake damage by city block). 31. The cost of earthquake reconstruction and rehabilitation work is estimated at about $4 billion, including essential repairs and strengthening of existing buildings, and relocation of some facilities. The cost estimate is based on higher construction standards using improved seismic-resistant methods. Government Response to the Emergency 32. While Mexico has experienced severe earthquakes in the past, notably in 1957 and 1979, the Government was not prepared for a disaster of the magnitude which struck in 1985, and adequate preparedness plans were lacking. However, relief operations were started quickly. The spontaneous response of the population was remarkable, showing great resourcefulness in organizing the rescue operations. Incidents of antisocial behavior were isolated events. The "extended family" was very helpful in providing emergency shelter and relief. Given the availability of food, clothing and medicines locally, the decision on the part of the authorities to request that relief aid be provided in cash was quite appropriate. This prevented clogging the airport--one of the few remaining points of contact with the exterior-and distorting the local economy by flooding it with items available in the country. 33. Immediately after the earthquake the President set up two Emergency Committees; one for the Federal Distict and one for the other affected areas. Both committees had as their objectives to evaluate building damage; assess needs for demolition or repairs; and identify, within the damaged areas, those buildings that were safe for immediate reoccupancy. The Com- mittees include representatives from the Department of the Federal District (DDF) and the municipal authorities in the affected areas, the Geophysics - 10 - Institute of the National University, the Laboratory of Soil Mechanics of the Polytechnic Institute, the Engineers' Association, the Architects' Associa- tion and the Mexican Association of Seismic Engineering. 34. On October 3, 1985, the President announced creation of a National Reconstruction Committee to determine and guide reconstruction policy. The committee is headed by the President himself and is composed of six sub-committees: (i) Reconstruction of the Metropolitan area of Mexico City; (ii) Decentralization; (iii) Financial Aspects; (iv) Social Assistance; (v) International Assistance; and (vi) Civil Defense and Disaster Prevention. A Reconstruction Fund was established in the National Finance Corporation (NAFINSA) to receive and channel emergency aid as agent of the Secretariat of Finance. Operation of the Fund is by a committee headed by the Secretary of Finance and includes representatives of the Secretariat of Planning and Programming, NAFINSA, the private sector and labor unions. 35. Given the large number of sectors and agencies involved, efficient cross-sectoral coordination is critical. For this purpose, an inter-disciplinary, inter-agency Technical Coordinating Group was established in December 1985. The Technical Coordinating Group operates under the Secretariat of Finance and is composed of experts in economics, law, urban planning, housing, health, communications, decentralization, programming, finance, and other areas required for the implementation of programs and projects. As required by the nature of the problems under consideration from time to time, representatives from other agencies are requested ta participate in the Group. 36. Specific responsibilities of the Technical Coordinating Group include: (a) Coordinating the different programs and activities included in the reconstruction effort; (b) Assisting the involved agencies in ensuring the compatibility of the reconstruction program with overall national economic policies; (c) Coordinating with the Secretariat of Planning and Programming (SPP) the allocation of local counterpart funding necessary for external financing; (d) Assisting the National Reconstruction Fund in the orientation and supplementing of external resources; (e) Advising and supporting the implementing agencies in the identification, preparation, presentation, and execution of projects; (f) Advising the executing agencies on aspects 3f project processing with the Bank and other international financing agencies (such as IDB), ircluding procurement and disbursement procedures; - 11 - (g) Coordinating the implementation of programs; (h) Evaluating the completion of works in each sector. (i) Assisting in the preparation of plans and programs for decentralization with a view to obtaining external funding to support their goals. 37. Actual execution of the reconstruction projects is the responsi- bility of the respective sector secretariats (Health, Education, Commerce and Industry, Transport and Communications, Housing and Urban Development), the Mexican Social Security Institute (IMSS), the DDF, and Popular Housing Renewal (RHP - a new organization established to coordinate the rehabilita- tion/reconstruction of low-income housing in the Federal District). Although there are variations among these agencies, they have, with the exception of RHP, long experience and are quite efficient in carrying out construction projects in their respective spheres of responsibility. The Decentralizatici Strategy 38. A key policy enunciated in the President's speech of October 3, 1985, was his announcement that the reconstruction process will be based on the strategy of decentralizing activities and functions from the Federal District to the states. For more than 10 years, the Government has been attempting to address the over-concentration of people and economic activity in Mexico City (and to a lesser extent in Guadalajara and Monterrey). During the previous administration (1976-82) a series of steps were taken to promote decentralization, including the creation of a new Secretariat of Human Settlements and Public Works, the issuance of new federal-state institutional procedures, and the creation of federal programs and special incentive schemes to attract investments in pre-defined priority regions. 39. President Miguel de la Madrid's administration has again assigned high priority to decentralization efforts. The constitution has been amended to increase the responsibility of municipalities in the planning, financing, implementing, operating and maintaining of basic municipal services, and the role of federal agencies has been modified to conform to the municipalities' increased responsibilites. The present strategy, unlike previous approaches which concentrated mainly on decentralization of physical facilities, emphasizes the delegation of responsibilities which were previously centralized in federal government secretariats in Mexico City, to either federal agencies operating at the state level or to state and municipal governments. 40. The Government is seizing the earthquake reconstruction program as an opportunity to accelerate the decentralization program. For example, instead of reconstructing office space which was destroyed or heavily damaged in Mexico City, staff and operations of various Secretariats are to be located in 20 selected cities in various regions of the country. The Govern- ment's objective is to address the decentralization program in these 20 cities in an integrated manner in which policy, financing and investments are coordinated at the federal level with state and municipal plans and - 12 - programs. Reconstruction plans in Mexico City take into account the reduced needs in sectors such as housing and health care resulting from the Govern- ment's decentralization program. The proposed project addresses the decentralization efforts in the housing and health care sectors by helping to replace some dwellings and hospitals which were destroyed in Mexico City with new dwellings and hospitals outside the city. 41. The Bank strategy supports the policy of decentralization and, since 1978, the Bank has assisted the Government in projects aimed at addressing spatial decentralization through the development of alternative growth poles and deconcentration of the Mexico City region. This assistance has been given through two urban development loans (1554-ME of September 27, 1978, and 1990-ME of May 12, 1982), a loan for rainfed agricultural development (1945-ME of March 2, 1981), a loan for the Deconcentration Program for the Mexico City Region (2194-ME of August 3, 1982) and a loan for a Low Income Housing Project (2612-ME of August 6, 1985). A series of Water Supply loans has also supported the decentralization efforts and more equitable regional distribution of benefits through assistance in medium-size cities. The Bank's most recent support for decentralization is through a proposed $40 million loan for a Municipal Strengthening Project and a proposed $25 million loan for a Solid Waste Management Project, which are being presented for consideration of the Executive Directors together with the proposed Earthquake Rehabilitation and Reconstruction Project. Mobilization of External Resources 42. Since the earthquake, the Government has actively sought emergency financial assistance from external sources, with considerable success. Following is a brief summary of funds already available or likely to become available in the near future from external sources other than the Bank (a more detailed discussion of the Bank's role follows): IDB - $300 million, of which a $100 million loan for rehabilitation and a $200 million loan for reconstruction of education, health, and telecommunications facilities (the division of assistance between IDB and the proposed Bank loan in the education and health care sectors is indicated in paras. 55 and 56, respectively); IMF - $300 million, representing an advance on the expected stand-by program for 1986; Assistance from bilateral government aid and private relief agencies - $100 million; Insurance coverage - $450 million. The Bank's Response to the Emergency 43. On the day of the earthquake Bank staff were in Mexico and were able to begin dibcussions immediately with the Government. A strategy for Bank assistance in reconstruction was discussed and agreed in principle with the Government, and this strategy was confirmed subsequently when the Secretary of Finance visited Washington. Bank staff continued to work closely with the Government during a preappraisal mission in October 1985, an appraisal mission in November, and in meetings with Mexican officials who - 13 - visited the Bank in December 1985 and January 1986. Bank staff have also coordinated closely with staff of IDB, IMF, and the United Nations in order to avoid duplication of effort and assist the efficient use of external resources in the reconstruction effort. In this process, considerable progress has been made in implementing the agreed strategy (para. 44). Strategy for Bank Assistance 44. The agreed strategy called for a two-pronged approach. First, there would be a Special Assistance Program consisting of adjustments to ongoing Bank loans which would address reconstruction needs In project areas and/or relevant subsectors affected by the earthquake; this would provide immediate "bridging" finance to meet some of the most urgent needs pending the availability of funds from other sources. Second, a Rehabilitation/ Reconstruction loan would be processed which would provide additional funds for rehabilitation/reconstruction works and assist the Government in handling reconstruction management, planning and financing issues stemming from the catastrophe. The proposed project emerged after assessing the most urgent needs based on a first-hand observation of the earthquake damage, a review of priorities with the Government, consultations with other international agencies concerning availability and possible application of external funds from non-Bank sources, and an analysis of institutional absorptive capacity (i.e., the capability in the various sectors to implement components and sub-components of the rehabilitation/reconstruction program). In addition, the forthcoming operations for FY86 and FY87 will examine reconstruction needs in their respective areas with a view to tailoring project designs to address such needs as necessary. Special Assistance Program (Amendment of Ongoing Loans) 45. Under the Special Assistance Program, approximately $173 million is being made available through amendments to five loans. In response to the Government's budgetary constraints and the problem of providing counterpart funds - which was already difficult before the earthquake emergency - the amended loans provide for financing of 70% of eligible expenditures over an 18-month period. Following is a summary of the amounts being made available by the amendments and the purposes for which the funds are being used. Loan 2331-ME Export Development Project $41.1 million made available for reconstruction, repair and replacement of telecommunication facilities and equipment ($30.0 million) and television facilities and equipment (S11.1 million); Loan 2281-ME Third Medium Size Cities and Sinaloa State Water Project - $17.5 million for repair and reconstruction of water and sewerage systems and related street paving in Mexico City and medium size cities in the affected coastal states; Loan 2450-ME Lazaro Cardenas Industrial Port Project - $19.0 million for repair and replacement of civil works and equipment at the Port; -14 - Loan 1945-HE Rainfed Agricultural Development Project - $14.0 million to replace lost office space in Mexico City with approxi- mately 50 additional centers outside the City (to support decentralization); Loan 1990-NE Second Urban and Regional Development Project - $81.8 million for reconstruction and rehabilitation of low income housing in Mexico City and Cuidad Guzman (State of Jalisco). 46. In addition, Loan 2428-ME (Second Highway Sector Project) was amended to provide assistance to the Secretaria de Comunicaciones y Transportes (SCT) in the demolition, rehabilitation and reconstruction of office space in Mexico City. In order to simplify disbursement and supervision efforts, Bank assistance to SCT was provided by increasing the disbursement rate to 70% in order to free funds for demolition, rehabilitation and reconstruction of office space. As with the above loans, this will ease the counterpart funding and permit quicker disbursement of these loans. Bank Experience in Reconstruction Projects 47. The lessons learned from the Bank's experience in other reconstruc- tion projects have been taken into account in the design of the proposed project. The Bank's experience indicates that reconstruction projects should address the specific nature of the emergency, i.e., concentrate on rebuilding essential physical assets; support the use of existing institutions to the maximum extent possible; avoid introducing major new policy initiatives; address the needs for cross-sectoral coordination; streamline administrative procedures including simplified procurement and disbursement procedures; and keep the implementation period relatively short. PART IV - THE REHABILITATION AND RECONSTRUCTION PROJECT 48. The proposed project was prepared by the Secretariats of Finance (SHCP), Planning and Programming (SPP), Urban Development and Ecology (SEDUE), and Education (SEP), and BANOBRAS, the Federal District Department (DDF) and the Mexican Social Security Institute (IMSS), under the general policy guidance of the National Reconstruction Committee headed by the President. Bank staff appraised the project in November 1985. In view of the emergency nature of the project and in line with similar cases in the past, an Appraisal Report was not prepared for this project. A supplementary project data sheet and other project details are provided in Annexes III to XII. Negotiations for the proposed loan took place ir Washington, D.C., from February 28 through March 2, 1986. The Mexican delegation was headed by Mr. German Sandoval of BANOBRAS and included representatives from SHCP, and SEDUE. Project Approach, Objectives and Rationale 49. The two principal objectives of the proposed project are (a) to assist the Government in the rehabilitation (repair of damaged buildings) and reconstruction (complete rebuilding of structures) of the urban areas damaged - 15 - by the earthquake, and (b) to improve construction standards and planning through regulatory instruments at the municipal, state, and national levels to protect urban infrastructure and superstructure from future severe earth- quake tremors. The first objective would be achieved through the demolition and removal of heavily damaged structures and the rehabilitation and/or reconstruction of community facilities and housing. The second would be achieved through a program for reinforcing school buildings in the Federal District (DF) and a program of technical assistance and studies designed to identify the earthquake hazard urban areas in the country and develop appro- priate damage mitigation measures and regulations, appropriate construction codes, and land-use and micro-zoning plans at the municipal level. This approach would support a coherent reconstruction process, provide a foundation for restoring a basic level of economic activity arid help to minimize the potential dangers of future earthquakes. The Project Description 50. The project would consist of the following components: Housing (58% - estimated cost, $334 million); Community Facilities (27% - estimated cost, $156 million); Buildings Demolition and Debris Removal (11% - estimated cost $62 million); and Technical Assistance (3% - estimated cost $15 million). In addition, the project would include Project Administration estimated at $6 million or about 1% of total cost. These figures are inclusive of contingencies, design, and supervision. A description of the components and subcomponents follows. A. Housing Rehabilitation and Reconstruction 51. The major part of this component consists of the rehabilitation and reconstruction of low cost housing in a heavily damaged area of 250 hectares in the center of the Federal District; this area is composed of some 4,320 parcels of land in 70 low-income neighborhoods which were expropriated soon after the earthquake. A new agency - the Popular Housing Renewal Agency (RBP) - was established in October 1985 under the Department of the Federal District (DDF) for the express purpose of undertaking the rehabilitation and reconstruction of this area. RHP would go out of existence when this task is completed. The two other parts of the housing component consist of rehabili- tation and reconstruction of housing in other parts of the metropolitan area of Mexico City and outside the metropolitan area. 52. Rehabilitation. Under this subcomponent, about 30,500 dwellings would be rehabilitated, of which about 15,700 would be undertaken by RHP. RHP would contract the structural improvements in appropriate groupings (about 400 to 500 units) of housing. The beneficiaries would be families where the income of the head of household is less than 2.5 minimum salaries. They would receive a minimal reinforced structural shell of about 40 m2 net area, along with building materials to finish their dwellings using supervised self-help labor or contract labor. The project would also support .the rehabilitation of about 8,000 dwellings with an average of 50 m2 for families in low-income (head of household maximum income 2.5 minimum salaries) neighborhoods on land not expropriated on the edge of the Central Business District. In addition, about 6,800 individual low and middle income - 16 - families (head of household income 2.0 to 7.4 minimum salaries) would be assisted in rehabilitating their dwellings which would have an average size of 60 m2; approximately three-fourths of these dwellings would be located in the metropolitan area and the remainder outside that area. 53. Reconstruction. About 39,270 dwellings would be reconstructed, of which about 26,870 are in the 70 low-income neighborhoods on the expropriated land. In groupings of about 400 to 500 housing units, RHP would use contrac- tors to build the structures and rough-in plumbing and electrical installa- tions. The beneficiaries (less than 2.5 minimum salaries) would receive the "shell" dwelling and be provided building materials through the RHP building materials depot. They would finish their dwellings through supervised self-help labor. Where appropriate, work space would be provided in the Popular Housing component specially for the garment "piece workers". RHP will certify as to the need for such space. About 7,400 dwellings with an average of 50 m2 would be reconstructed for low-income families (maximum of 2.5 minimum salaries) on land not expropriated. In addition, the project would provide about 5,000 modest 70 m2 apartments for low and middle income (2.0 to 7.4 minimum salaries) in low-rise (walk-up) buildings in condominium ownership as originally organized prior to the earthquake; approximately three-fourths of these dwellings would be located in the metropolitan area and the remainder outside that area. 54. For most of the above housing (i.e., all of the housing located or to be located in the central area of Mexico City), the site development plans would be set within the framework of a comprehensive Reconstruction Plan, including the existing Preliminary Land Use and Zoning Plans for the Central Area of Mexico City which is satisfactory to the Bank at present. However, the Bank, through the Technical Assistance component of the proposed loan, would be cooperating and assisting in finalizing the plans and the preparation of the related regulatory measures by December 1986. B. Community Facilities 55. Schools. The proposed project would provide for major reconstruction of heavily damaged public schools; rehabilitation of some 1,900 less seriously damages schools is being assisted by IDB. The proposed Bank project would include the reconstruction of 48 schools: 4 pre-primary, 17 primary and 11 secondary schools distributed throughout the Federal District, and 4 pre-primary, 8 primary and 4 secondary schools in the five states most seriously affected by the earthquake (para. 28). It would also include reinforcing the structures of about 950 schools in the DF in order to make them safer and better able to withstand future earthquakes. The Secretariat of Public Education (SEP) through its Directorate of Planning and Programming (DPP) has planned and designed the reconstruction for completion in 24 months. The Comite Administrativo del Programa Federal de Construccion de Escuelas (CAPFCE), as agent for SEP, and DDF would be responsible for constructing and equipping the schools. The Building Department of the DDF - 17 - is responsible for the supervision in terms of conformity to land-use plans, zoning and revised building code. The structural designs would conform to the newly approved Federal District Emergency Building Code and would be reviewed by one of the 400 Government approved structural engineering consultants. 56. Health-Care Facilities. The proposed project would assist the rehabilitation and reconstruction of health care facilities operated by the Mexican Social Security Institute (IMSS), while rehabilitation and reconstruction of facilities operated by the other major supplier of health care services, the Secretariat of Health (SS), is being assisted by IDB. The proposed Bank project would provide for the replacement of about 2,000 hospital beds in two sub-components. The first would provide about 1,200 beds in six second level (zonal) hospitals to serve an estimated population of 1.2 million in the periphery of Metropolitan Mexico, distributed in strategic locations throughout the Metropolitan service area. Each hospital would provide ambulatory and hospital services, including gynecology, obstetrics, pediatrics, general surgery, internal medicine, orthopedics, trauma, ENT (ear, nose, and throat) and ophthalmology. The second sub-component would consist of construction of five hospitals in different regions of the country with about 800 beds. The proposed regional hospitals would enable the five regions to become fully autonomous in the provision of all types of health care and would substantially reduce the need to transfer second and third level patients for treatment in Mexico City. This would improve the level of health services at lower unit costs. Costs would be recovered through user and employer contributions in accordance with established practice. 57. Municipal Markets and Ancilliary Services. About 13 municipal markets and related ancilliary services (paving, street lighting, etc.) distributed through the damaged zone of the Federal District would be rehabilitated and partially reconstructed. Consultant structural engineers using the new code would ptepare the final designs and the Public Works Directorate of the DDF would implement the works using local contractors. In accordance with established practices, costs would be recovered through taxes, rents and fees. C. Demolition of Buildings and Debris Removal 58. The earthquake left more than 1.2 million m2 of destroyed or damaged buildings in the Central Business District-including many thousands of dwellings, about 25 government buildings and about 165 private industrial and commercial buildings. The costs of demolition and debris removal for about 16,300 dwellings have been included in the proposed project, as well as the similar costs for the public and private buildings that are a public menace, in particular where the private owners are unable financially to undertake the task. Part of these buildings landed within the public right of ways and had to be removed at public expense. The project would also finance the procurement of heavy duty demolition equipment and materials; the equipment and materials would be procured and owned by DDF. - 18 - D. Technical Assistance and Institutional Support 59. This component would, under several sub-components, include techni- cal assistance and studies to (i) help strengthen the recently established Technical Coordinating Group; (ii) assist the executing agencies with project preparation, implementation and processing; and (iii) develop, at the national level, appropriate damage mitigation measures and improved seismic-resistant building codes, as well as land use and micro-zoning plans at the municipal level. 60. One sub-component would support the Technical Coordinating Group which has been established under the Secretariat of Finance to advise and assist in coordinating the overall rehabilitation and reconstruction effort. Funds would also be provided for consultants services to strengthen the executing agencies in project preparation, budgeting, programming and execution, supervision, quality control, accounting and administration. 61. A second sub-component would provide assistance for housing reconstruction. Assistance would be provided for institutional strengthening of SEDUE, the secretariat responsible for policy and coordination in the housing sector, which would support RBP in developing land use plans, programming and executing of housing and infrastructure, financial administration, and construction management. 62. A third component would provide technical assistance to DDF for studies to help develop seismic-resistant norms and regulations for the new building code. 63. A fourth component would support studies to develop a set of measures designed to identify earthquake hazard urban areas and develop appropriate damage mitigation measures and regulations. 64. A fifth sub-component would assist a program of t-aining addressed to the needs of the engineering and architectural professions, construction supervisors and workers, which is being prepared by the professional societies under the Council for Science and Technology (CONACYT). This program would also include training in self-help seismic-resistant construc- tion. Special consideration would be devoted to the need to improve techni- cal knowledge of seismic-resistant construction in the interior of the country. 65. Finally, an allowance has been made for needs for additional consulting services and technical assistance likely to arise as the project progresses. These needs have not yet been determined but will be defined in consultation with the Bank as the project is implemented. Project Costs and Financing 66. The total cost of the project, excluding taxes but including physical and price contingencies, is estimated at $571 million equivalent, - 19 - with a foreign exchange component of $186 million (see Annex IV, Table 2). Physical contingencies average 11Z. Base costs are estimated as of the end of December 1985, and price contingencies are based on Bank guidelines and allow for price escalation as follows: 7.2% in 1986, 6.8% in 1987, 6.8% in 1988, and 7.7% in 1989. Overall average price contingencies amount to 8.7% of total base costs plus the 11% physical contingencies. 67. The proposed loan of $400 million equivalent would finance 70% of project cost in order to help ease the counterpart funding constraint which is particularly serious in this case because the reconstruction burden is by its nature incremental, and comes on top of an already extremely tight fiscal situation. The proposed loan would finance all of the estimated foreign exchange component and the equivalent of about $214 million in local costs. The balance of local costs would come from budgetary allocations of the executing agencies, including amounts available from the Government's Recons- truction Fund (para. 34). The proposed loan would cover about 10% of the estimated total cost of the earthquake rehabilitation and reconstruction program, and about 25% of the total cost of rehabilitation and reconstruction works during the project period. Total external financial assistance in connection with the earthquake (including the proposed loan) is estimated at 40% of total cost of the program (see para. 42). The Borrower 68. The loan would be made to Banco Nacional de Obras y Servicios Publicos, S.N.C., I.B.D. (BANOBRAS), a public development bank and a financial agent of the Government for public works and services; such works and services would account for almost 80% of the goods and services to be financed by the proposed loan, and BANOBRAS has therefore been designated by the Government as borrower for the proposed loan. BANOBRAS operates several trust funds, each corresponding to a specific investment program. BANOBRAS also makes direct loans to states, municipalities, and other public sector enterprises and is the borrower for a number of Bank loans in the urban, water supply and transport sectors. Project Preparation 69. Because of the emergency nature of the proposed project, many of the works are already in progress. Demolition and removal of debris is well advanced. Ten construction materials depots have distributed tools and materials for the partial demolition and structural reinforcement of over 1,000 dwellings in low-income neighborhoods. Rehabilitation of less seriously damaged housing is proceeding with credits from FONHAPO and the commercial banks. Technical assessments of more seriously damaged buildings are also proceeding. More than 4,000 structural damage reports have been completed. These building surveys form the basis for rehabilitation or demolition of the individual buildings. Where complete reconstruction of housing structures is required, preparation of plans and designs has started. Similarly, thorough planning and structural designs have been started for schools, hospitals, and markets which would be reconstructed under the proposed project. Most of the housing, schools and hospitals would be built according to existing standardized plans. An exception to - 20 - standardized planning would be the five hospitals to be rehabilitated or reconstructed in the interior of the country (para. 56); these are not amenable to standardization and, to that extent, will require more preparation and entail slower implementation than the hospitals to be built in Mexico City. However, the executing agency for the health care component, IMSS, has the managerial and implementing capacity to carry out these works in an expeditious manner, and arrangements will be made to monitor these works closely to avoid construction delays. Finally, a number of studies which would be assisted under the technical assistance component of the proposed project (e.g., preparation of a comprehensive Reconstruction Plan including Land Use and Zoning Plans for Central Mexico City, and studies to help develop seismic-resistant norms and regulations for the new building code) have already been started. Project Execution 70. The project would be executed over a period of about 3-1/2 years within the framework of the institutional arrangements described above (paras. 35-37). A Technical Coordinating Group operating under the Secretariat of Finance would assist in the coordination and supervision of project activities. Technical support would be provided to executing agencies by the Technical Group. The executing agencies would be responsible for managing their respective components, including the preparation of detailed work programs, budgets and accounts, and for supervising work programs and expenditures. 71. The Bank would review land use and zoning plans in the project area and would ensure that clear land titles exist before beginning works to be financed from the proposed loan. In this regard, no difficulties are expected to result from the recent expropriation of the land which is the site of a major sub-component of the project, since the expropriation decrees were passed within the constitutional limits and in accordance with criteria set forth in the Expropriation Law. Construction in the project area would be in accordance with the emergency code for the Federal District approved and enforced as of October 1985. This would avoid serious damage to buildings if an earthquake with the characteristics of the September 1985 earthquake occurred in the future. This is satisfactory to the Bank at present. However, the Bank, through the technical assistance component of the proposed loan, would be cooperating and assisting in the development of a permanent code for Mexico City and other parts of the courcry where there is an earthquake risk. By December 31, 1986, this permanent code would replace the emergency code. 72. The Department of the Federal District (DDF) has a special interest and an important role in the execution of the proposed project, since most of the proposed project is located in the Federal District. DDF is organized into five Directorates: Government, Social Development, Public Works, Protection, and Legal Coordination. DDF is a long established, well staffed ageney with extensive experience in providing municipal services and - 21 - implementing projects. It is the institution responsible for the building and land use regulations, and for the planning, implementation, and supervision of some of the major public works and schools in the city. 73. DDF was in charge of the preparation of the emergency seismic- resistant building code for the Federal District approved in October 1985 and is now responsible for its enforcement. It is also in charge of the prepara- tion of the permanent building code, a task scheduled to be completed by December 1986. DDF is also responsible for the technical assessments of the damaged buildings on the basis of which the decisions are made concerning the feasibility for repairing buildings or the need to demolish them. In addition, it is the executing agency for the demolition and debris removal. 74. The implementing arrangements for project components and sub- components are described below. 75. Housing. The housing component would be executed as three sub- components described in para. 79. Funds would be channeled to these sub- components through two public trust funds - Low Income Housing Fund (FONHAPO) and Fund for Housing Operations and Bank Discounting (FOVI). 76. FONHAPO is a public trust fund administered by BANOBRAS that finances housing schemes for low-income workers whose housing needs are not met by other programs. FONHAPO's borrowers act as implementing agencies for sub-projects and are responsible for the allocation of individual housing units to final beneficiaries. Eligible borrowers include federal public sector entities, when their schemes and budgets have been approved by the Federal Government; state and municipal governments and their agencies; cooperative housing associations; and other legally constituted groups (including RHP) which are implementing programs consistent with the norms of FONHAPO. The income of the head of household of beneficiaries of FONHAPO must be no larger than 2.5 times the minimum wage. 77. FONHAPO is the executing agency for a low-income housing project financed by a Bank loan (2612-HE) which was approved by the Executive Directors in August 1985. When that loan was made, it was estimated that FONHAPO's capital recovery under a typical subloan made in 1985, calculated at the then prevailing projections of inflation, would be of the order of 70%. In addition, as a condition of effectiveness of Loan 2612-ME, FONHAPO was required to introduce modifications to its onlending terms which would slightly improve the expected levels of capital recovery. FONHAPO, therefore, on January 15, 1986, adopted a revised Statement of Policy, incorporating improved onlending terms. Most notably, starting interest rates were increased from a range of 9-12% to a range of 11-21% (adjusted annually by a factor of 1.1). These revisions to FONHAPO's onlending terms, which would be applied under the proposed loan, should result in approximately the same levels of cost recovery as had been estimated last year, notwithstanding less optimistic projections of inflation. 78. FOVI is a public trust fund administered by the Bank of Mexico. It coordinates and supplements the mortgage lending of commercial banks. FOVI - 22 - finances five categories of owner-occupied dwellings and one catagory of rental housing (See Annex VII, Attachment B). The proposed project would support only the three lower income catagories of owner-occupied housing as follows: Type 1 housing for beneficiaries where the income of the head of household is from 2.0 to 4.1 minimum salaries and the maximum dwelling price is $5,400 to $7,000; Type 2 housing for beneficiaries with head of household income 3.2 to 5.7 minimum salaries and maximum dwelling price of $8,400 to $11,000; and Type 3 housirg for beneficiaries with head of household income 4.8 to 7.4 minimum salaries and maximum dwelling price of $9,800 to $12,800. Subloans for reconstruction and rehabilitation of these types of housing would be made in accordance with onlending terms established under Regulation 1842, as amended, of the Bank of Mexico . Under the proposed loan, housing subloans extended by FOVI would provide for at least the minimum levels of cost recovery required for FONHAPO. 79. The three housing sub-components would be executed as follows: (a) Popular Housing Renewal (RHP). The renewal of 4,320 land parcels (250 ha of expropriated land) of urban blight involving about 42,570 dwelling units--heavily damaged by the earthquake--will be executed by the Popular Housing Renewal Agency (RHP) (para. 51). Funds for the RHP program would be channeled through FONHAPO. The technical standards of FONHAPO and the minimum requirements of designs, layouts and specifications conform to SEDUE's tested prototypes which are cost efficient and consistent with Bank experience in low-income housing projects. Local contractors would provide the structures, mechanical and electrical elements. From the construction materials depots, the beneficiaries would receive the required materials to complete their dwellings through supervised self-help labor. RHP with the assistance of DDF would provide daily supervision. In addition, technical control would be provided by SEDUE through an in-house construction management unit which would prepare weekly progress reports using agreed supervision and monitoring procedures, with special attention to cost and quality control. The Government would agree to establish and maintain this unit to supervise and monitor the execution of FONHAPO subprojects to be carried out by RHP. The receipt of evidence that such unit has been estalished on terms acceptable to the Bank, would be a condition of disbursement in respect of FONHAPO subloans made to RHP. RHP would go out of existence when the housing rehabilitation and reconstruction program in the expropriated area is completed, and adequate arrangements would be made for subsequent loan collections and administration. (b) For the low-income housing damaged by the earthquake, on land not expropriated, FONHAPO would provide financing and supervision for the rehabilitation of about 8,000 and reconstruction of about 7,400 dwelling units. This component was designed to serve the needs of the low-income private sector workers with incomes not greater than 2.5 times the minimum salary. FONHAPO is assisting in organizing the beneficiaries into groups of cooperative and condominium ownership for economical bid packages. (c) For the low and middle income housing areas (above FONHAPO income limits) damaged by the earthquake, the Fund for Housing Operations and Bank Discounting (FOVI) in cooperation with the commercial banks would - 23 - provide loans for the rehabilitation of about 6,800 and the provision of about 5,000 dwelling units. The loans would be limited to Types 1, 2 and 3 housing with a maximum value of $7,000 for Type 1, $11,000 for Type 2, and $12,800 for Type 3. For reconstruction of dwellings, loans up to 90% of sales value would be provided on present loan conditions with a maximum term of 20 years and a starting interest rate of 15%, 19%, and 25% for Types 1, 2, and 3, respectively. Terms for rehabilitation loans would be the same, except that the loan amount could not exceed 50% of the total value of the house. The monthly payments can not exceed 25% of the household income (see Annex VII, paras. 12-16). The commercial banks would be responsible for establishing creditworthiness and supervising the loans. FOVI would be responsible for ensuring that the loans conformed to the regulations and achieve the objective. 80. Community Facilities. There would be three executing agencies for this component. First, the Secretariat of Public Education (SEP), acting through its Directorate of Planning and Programming (DPP), would be the executing agency for school reconstruction, rehabilitation, and structural reinforcement. DPP would be responsible for planning, budgeting and supervision. Construction would be carried out by a special government unit, Comite Administrador del Programa Federal de Construccion de Escuelas (CAPFCE), which is responsible for managing the construction of all Federal schools and for assisting the Federal District and the various states, as necessary, in their school construction programs, and the Department of the Federal District (DDF). DDF would also handle reconstruction of the 12 markets and related ancilliary facilities in the Federal District. DDF operating through its Public Works Directorate would contract the actual construction work to private contractors and supervise the work with its own staff. 81. The executing agency for the health-care component would be the Social Security Institute (IMSS). IMSS is one of two main providers of health care in Mexico, the other being the Secretariat of Health (SS). SS is responsible for providing health-care to about 45% of the population who do not have health insurance, and do not have access to private health services, while IMSS provides care for about 40% of the population who have health insurance (the balance of 15% of the population has access to other federally funded services for the poor which are managed by IMSS, other prepaid plans and private sector services). As previously noted (para. 56), repair and reconstruction of damage to SS facilities is being assisted by IDB. The rehabilitation of IMSS facilities would be assisted under the proposed project. 82. IMSS was established in 1943 as an autonomous public agency and, during the last 20 years, has expanded health services by an average 5% per annum while decentralizing its operations through nine regional offices. In this process, IMSS has gained extensive experience in design, construction, and operation of health-care facilities. The immediate responsibility for implementing the project health-care component would be with IMSS's physical infrastructure unit, which would follow its standard operating procedures, which include contracting the actual construction work to private contractors and supervising the construction with its own resident supervisors and visiting inspectors. - 24 - 83. Demolition of Buildings and Debris Removal. DDF would also be the executing agency for this component. As in the case of reconstructing the markets, DDF, to the extent possible, would contract the actual demolition and removal works to private contractors and supervise the work with its own staff. 84. Technical Assistance and Institutional Support. The executing agency for this component would be SHCP, with advice and consultation as required from the other members of the Technical Coordinating Group. Funding for studies and technical assistance wo-Id be provided through SHCP. 85. The entire project would be implemented over a period of approxi- mately three and one-half -years. Final commitments of subloans by FONHAPO and FOVI/commercial banks would be by June 30, 1988. After allowing for implementation of the sub-projects, the project would be completed by June 30, 1989, and the Closing Date would be December 31, 1989 (see Annex V). Flow of Funds 86. BANOBRAS would enter into contractual arrangements with the Guarantor arranging for the transfer of loan funds to and repayment of the loan by the Guarantor. BANOBRAS, as Borrower and the financial agent of the Government, would handle all disbursements under the loan, and would further enter into the following contractual arrangements: (i) with the Guarantor and FONHAPO, through BANOBRAS as trustee of FONHAPO, for the transfer of funds allocated to the low income housing component (including those which would be onlent to RHP); (ii) with the Guarantor and FOVI, through Banco de Mexico as trustee of FOVI, for the transfer of funds allocated to the low/middle income housing component; and (iii) with the Guarantor and IMSS for the transfer of funds allocated to the health component. No additional contractual arrangements would be required for the transfer of funds allocated to reconstruction of municipal markets, demolition and removal of debris, and school reconstruction and rehabilitation and technical assistance since implementation would be carried out by the Guarantor. Execution of the above contractual arrangements would be a condition of effectiveness of the proposed loan. Procurement 87. All goods and services would be procured in accordance with the Bank's guidelines. The following table summarizes the procurement procedures to he applied to the various subprojects. - 25 - PROCUREMENT ARRANGEMENTS 1/ (in US$ nillions) Comparative Force Total Component ICB LCB Quotations Account Others Cost (a) Housing 138 164 32 334 (98) (116) (23) (237) (b) Community facilities 172/ 71 49 18 155 (13) (47) (35) (13) (108) (c) Demolition 162/ 35 10 61 (13) (23) (7) (43) (d) Technical asst. and studier 1 14 15 (12) (12) (e) Project Adm. 1 5 6 33 209 250 60 19 571 m%= =E= 0 (26) (145) (174) (43) (12) 400 Note: 1/ Cost figures shown in this table include contingencies. Cost figures shown in parentheses are the respective amounts financed by the Bank. 2/ Equipment only. 88. Because of the emergency nature of the works in a wide variety of locations, the grouping of small individual works to make them attractive for fnternational competitive bidding (ICB) has been precluded. Given the advanced degree of development of the construction industry in Mexico, all civil works contracts are expected to be won by local contractors. However, foreign bidders who express interest and comply with Mexican laws would be eligible to participate in LCB procedures, which have been reviewed by the Bank and found acceptable. The largest component of the proposed project is housing, which is composed of many small civil works contracts. The REP rehabilitation sub-component of 15,700 dwellings is distributed over 1,500 sites with an average civil works contract per site of less than $20,000. The RHP reconstruction sub-component of about 26,800 dwellings is distributed over 2,800 sites with an average civil works contract of less than $58,000. RHP will package these site contracts into about 90 bid packages of about $2 million each. These packages and individual civil works contracts valued at more than $200,000 would be procured through LCB procedures (individual contracts would range from $200,000 to $2.5 million). Civil works for components (a) through (c) in the above table costing less than $250,000 - 26 - equivalent and not exceeding an aggregate of $250 million would be procured through local comparative shopping (with a minimum of three quotations). Civil works valued at less than $25,000 per contract to be financed under FONHAPO subloans could be executed under force account. For civil works in respect of school rehabilitation, reconstruction and reinforcement and for demolition of buildings and debris removal, works could be carried out under force account without an individual ceiling. The aggregate ceiling for force account would be $60 million. Procurement of goods and works which would be financed by FOVI would be done by individual beneficiaries through normal commercial channels. 89. Equipment and goods, especially hospital machinery and equipment, exceeding $3 million per contract would be procured through ICB procedures. Hospital furniture valued at more than $200,000, but less than $3 million for any one contract, would be procured through LCB procedures, provided, however, that the aggregate amount so procured would not exceed $20 million. Miscellaneous goods and materials costing the equivalent of less than $200,000 up to an aggregate of $7.5 million for any one component (a) through (c) may be purchased through local shopping after obtaining a minimum of three quotations. Consultants would be contracted locally and internationally in accordance with Bank guidelines. Quarterly updating of unit costs and materials and equipment will be maintained along with close on-site supervision which will facilitate timely procurement. FONHAPO and FOVI for housing, IMSS for health-care, and SEP through CAPFCE and DDF for schools will have the primary responsibility for reviewing and approving contracts. For all contracts with an estimated value of $2 million or more, the Bank will review and approve procurement documents and specifications prior to bidding, and bid evaluation and award recommendations prior to the signing of contracts. Other contracts will be subjected to selective post award review. Disbursements 90. Disbursement of the Bank loan at the rate of 83% would be made against eligible project costs net of taxes for civil works, materials and equipment for demolition, rehabilitation and reconstruction of community facilities (health care, schools and markets) and under subloans for housing rehabilitation and reconstruction. Disbursement in respect of technical assistance and studies would also be made at the rate of 83% of total expenditures. Disbursements under individual contracts estimated to cost less than the equivalent of $500,000 would be made against statements of expenditures certified by the respective implementing agency. Documentation for supporting the statements of expenditures would be retained by the executing agencies for inspection by Bank supervision missions. All other disbursements would be fully documented. Retroactive financing of up to $70 million is recommended to cover eligible expenditures incurred after September 19, 1985. - 27 - 91. In order to help accelerate project implementation and lor.n disbursements, a special account would be established in BANOBRAS with an initial deposit of $40 million. BANOBRAS would forward disbursement applications to the Bank for replenishment of the special account. The special accounts would be separately audited by BANOBRAS' independent auditors and the corresponding audit reports would be forwarded to the Bank not later than six months after the end of each fiscal year. Accounts, Audit, and Reporting Requirements 92. BANOBRAS would maintain a separate project account to adequately reflect project expenditures. This account, together with the accounts of executing agencies, would be audited annually by independent auditors in accordance with Mexican laws and audit requirements satisfactory to the Bank. The audit reports would contain a separate opinion on the use of statements of expenditures. Audit reports would be forwarded to the Bank not later than six months after the end of each fiscal year. BANOBRAS would provide quarterly reports on progress of implementation in a format satisfactory to the Bank. Project Justification and Benefits 93. By assisting in the rehabilitation and reconstruction of damaged or destroyed physical assets-houses, public office buildings, hospitals, schools, markets--the project would contribute to the restoration of produc- tion, employment, income and government operations and would help minimize the economic and social consequences of the earthquake. The project would also assist the Government in developing improved seismic-resistant construc- tion codes. In addition, under the project the operating agencies would gain valuable experience in planning, management and implementation of reconstruc- tion activities. This qxperience would also strengthen the country's ability to cope with future earthquake emergencies. The project would also assist the Government's decentralization program. Risks 94. The proposed project would involve a large number of reconstruction activities which would have to be carried out simultaneously. Furthermore, because of the urgency of the project, the level of preparation of some of the proposed activities could be insufficient. The risk of delay in project execution that these factors imply would be reduced by by relying primarily on existing institutions of proven capacity and providing technical assistance. Coordination arrangements which have been especially established to expedite the Government's reconstruction program (e.g., establishment of a Technical Coordinating Group) would also reduce the risk of delay. The high priority which the Government attaches to the rehabilitation/reconstruction effort should reduce the risk of delays in the provision of counterpart funds. - 28 - PART V - RECOMMENDATION 95. I an satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed loan. A. W. Clausen President by Moeen Qureshi Attachments March 5, 1986 - 29 - MEXICO: EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT LIST OF ANNEXES MU Country Data I Statement of Bank Loans II Supplementary Project Data III Project Cost Estimate IV Implementation Schedule V Institutional Arrangements VI Housing VII Health Care VIII Education IX Technical Assistance X Emergency Building Code xI Photographic Documentation and Map showing Mexico City Earthquake Damage XII • ANI�;EX I - 30 - � Page L of б . iA�� 6�� ]в У АУввА(iв{ иоп смrт �sаит .вхl,ихri г +ии�иг мсо0и сысаs икооis 3�аиs �aoL! 19таL�. rsтиипС! их. ys�uw ь иа �arrorr 6r. сsвив��rв .�. во ��, 19i1.! 1111.! 11N1.S . . �qn,1yw, Я3.3 11тб.А 17Y.S . . � � �м {рр) .. .. =3ь0.и 1в77.f 21и.] �[ 0�![Q• Al qгlп сsцооwв а ок1. вqОк,rцогр 3я.о » 3.а uw.0 и]л 11и.в г0iогiхтв ns +r�ь sm:sтia гоrиихк0м.lаs-егвв cawOwмu »от].о нив.0 тюи.0 Oew гОгОмхка ск Ог хоrвь) s0.в ».0 и.т и:т и:! rauusmn rвoosesmw � . гог0ыиаr sr tгквв 20оо с�аьW 1о�.а . . sтвт[ама гагог+►хtОв iн2W ' tя.0 . . гОг0ипо11 моiвrе0м 1.� . . гаиитtоll oersкsx гsв р. р1. и.в 2s.9 3ц.0 и.о ьа.т rQ !q. q1. AORi. БА1е 37.7 l2.в 7а.7 91.1 1бб.9 гогиитк0м �cs mucтurs с:) 0-1в ТУ аl.б ц.а Ч.а ]D.! J1.2 17�66 хО l1.0 а9.9 53.1 l7.1 бЕ.! Ч �МО YOrL ].3 3.! 3.а а.1 7.2 гоги.АткОr г•:ат1 в.п ся � mxAi. ].0 3.2 2.� 't.в 1.6 OsW1 а.в а.7 а.1 3.6 ].т cimOS цекм вбхs сга aious) аl.а и.. ]а.а ю.9 13.а a0os овпв ввп (гn тво0в) t:.1 9.т в.9 ь.о вл cиss твоаlеска. вбхs ].] 3.2 :.: х.0 1.! М1цLх rLA1MIIC АСи!'10tl, NO111AI. (xM00i) .. 2S.i IИS.o /c . Osw ск аг мбиг:а Уоiаи3 .. .. ]9.0 Т os.] .. r0as л0 iвлкк�ов 1NOis Ог 10о0 ROG. rLR ГJ1rIiA (19б9-71�100} 97.0 100.0 lOD.O 109.6 1u�.1 па игlтв :опсх ог слl.аквs ск аг lтоикwаитs) иа.о иа.а 119.0 1и.: u1s r:Отекме саwв ra о.х) бб.о вт.а 7т.о ь,r.а 9z.a ог wка .ru0�c л:0 пп.и 19.о и.0 1е.о �а ц.1 ]ь.! а1и свсn 1-а) os+ur еАп 1о.т 7.] 3.0 +.а а.т �вnаа LIr[ бlfC?. 112 цlп (х=Ав:) l7.0 61.1 бl.б Ьа.в 67.'l ItrA1R 10ц. вАх: (rR '!S(R�!) 9].0 7в.0 ц.0 l1r.7 ' !].] лcass т sвп wтп с:roг3 таи. ц.s и.о lе.о в!.] т0.1 Oaw� .. бвs • в1.• тьs еу.. WtAL .. 21.0 _ l1.0 ав.2 S7.Y лоаs: т виssтв аигоs.с cs а гогиип0м) . ТО'[AL .. 77А 1в ц.0 36.7 l9.6 Ов1611 .. б0.0 TL• l0.1 7].в 65.9 :11ввL .. а.0 � l].0 2l.S в7.б гогОСвткаг rs гмr:гскА11 16ю.0 и10.9 .. 190l.т 1т0.б гОг. гса 1�RS2rc гnsOn ]бlо.0 1]so.o .. бов.: тs9 s гог. гn 1w:rп�ь ак0 mSAL 7�0.0 970.0 .. ]62.0 ]2в.3 01W1 570.0 /f 1170.0 .. ьц.0 201.9 fOW. .. l]т0 А .. 2т16.7 аl19.7 АОК[::20вi га NDSrLTц. �Ф .. .. .. 27.! 20.0 � •9[iвС[ :Lц Ог ФОа1,1�СО . mSA1. !.в !.7 .. .. .. O�f6M !.7 !.Т .. .. .. tl1rA1. S.2 S.в .. .. .. Аvива ио. а гsstaisn0aм miA1. 2.9 2.! .. .. . • OtYN 2.6 2.2 .. .. .. 1YW. ].ь ].2 .. .. .. ги1�lкАа а awQSaкs vrn1 ак�т. ттвг. .. s6.� .. .. .. 0�lУ .. i0.7 .. .. .. 10iAL • .. I7.! .. .. .. 31 ANNEX I Page 2 of 6 (wcIGKM av u) KOST ism mcal m~ /b L ab= ~ lm~ IIDDU 11~ 197(41 iäýTE!äh LAT. ~ ch & ca KOMOK UTZOS Ma^ =AL 80.0 104.0 121.0 1UG.7 å91.9 K« 82.0 106.0 123.0 106.5 lob.2 VD~ 77.0 102.0 119.0 104.6 97.3 99CON~ B MÅL 11.0 22.0 54.0 44.2 57.3 14.0 26.0 54.0 42.7 b4.9 4.0 17.0 49.0 44.9 504 VMATIOML (Z Olv Seco~ 23.6 26.7 11.6 13.3 21.0 MPIL-TRACKER, RATW pax~ ".0 46.0 37.0 29.9 25.1 uzco~ 13.0 14.0 19.0 16.7 0.1 OG=~ PASSMIGER COSM19~ 9 ror L2.9 24.1 61.3.1L 46.0 54.z u910 RECZ1VERSMEMSAM pm 49.0 273.7 291.3 328.3 170.7 iv mccervm/Tmuff pop L7.3 58.5 109.4 112.4 149.3 MUSPAM (00AM czam thlulsT») CIRCULAUM PER Inco~ POPULATION 73.3 1310.7 51.1 W.u CIML AMML ATTEMM1CLICKVITå 9.8 4.9 3.% 2.4 Z.7 LAM ~6 TOM LASDL 10« (MM) 11191.0 14722.0 2219b.O PEKME (PUCENT) 15.z 17.4 20.5 23:6 X:3 AGRICULTMEL (PERCENT) 53.1 45.2 33.6 31.4 4uä Doa~ (PUCENT) 19.5 22.9 25. a 24.3 23.3 PAMTICIPATION RATE (PERCUT) T~ 30.2 28.8 29.6 33.5 43.1 K« 51.1 47.4 46.8 51.3 SS.L rh~ 9.2 10.1 11.9 15.9 31.4 zeenolac DEPEKop= um 1.6 1.7 1.6 1.3 0.9 z~S Gzortzermff PERCENT oir PaVATE [mm RECLIM w HIGHEST sz OF UDU~LDS NIGMT zoz 07 NDUSEomffi 61.1 ft 60.7 J:7 ft LOW9ST 20Z OF HOVSERLM 3.4 71- 3.3 m 7- Lowesr 409 av MuceoLDS 9.8 -rh 9.9 9.9 W nu= 11~ 6~ ESTLWED MSOLOTE P~ TI INCONE L&M (USS PER CAPITA) 2«.3 155.3 ZSTD~ RELATIft POVEM 16~ L&M (03 ra CAPITA) d~ 47 1.0 le 319.8 w~ 471.o 7e- 359.7 Z5TIKATED PM. MELOW ANSOLUTK P~ AVAXI,~ Wr APP1,1~ N 0 T Z 5 la_ The wc-p -~ for «ch bu&~ ~ pegel~-michccd artt~tic m~. Cowrep at c~ lem ~CaCom d~M cm avall blllcy of data &M la ~ zn~ och«~ ~. "Data for 196C rofor to my yonv be~lå 1939 ~ 1961-. 9~ for 1970« bet~ 1969 ~ 1971* ad d~ for 1~ 1~ ZscimtO bet~ igel ad 1n3. ýLc 1979; Ld 1977; on Sorved fum =rar mapply «d 196z; £L 1980; 2h 1963. junE. ins ANNEX I - 32- Page 3 of 6 DEFINiIONS OF SOCIAL 114DICATORS Noe Ahou the damam drewse from sa in aly jdidl the non authernause mw relablk a shou aso be om ta they my no be memmuoEml caprabecaus bm the lack of adariud dthaieas and ommpm =ed by disset counum is cllecing the dem. The doa m. a mmb w ful to descub.s45 elde f segitde,icl seds. and chareia certai emejo diumous. bas.en countEe The feo goups ave ( Ig se s comuny group of e subim coungr ad (2) a comuay rop wth smacwhat higher svrag ncsetn the commy grompdtasbjacousY (MRKsa s or -Hig lace Oil EpOMers" g1 whore Middle lncome Nonh Aric and Middle Ea" ischs beause ofusrow l.tin sltg la he umes group dm the average a populao maghed arthmetic mem for eah indicator ad ho oly whom ioisy ofcomwdmims isaup hasdas for hagdedimur. Sia the eerap of oes among the inia rdped on the avaimlity ofdue ad imes otuims.u , tan monm be sisel 'a nlaing averaeof oeinditaortomanothe. Them avras am only ueful incomparnag the value of on kadimor as a tume amon dhe omory md Imm groo AREA (thousand sq.kmL) Credr Ak: Rea (ps sted)-Number of live births in the year Trea-Total surface area comprising land asa and inland waters: per thousand of maid-year population; 1960. 1970. and 1983 data. 1950. 1970 and 1983 data. Crnd Dea lIve (per tersod)--Number of deaths in the year Ar.doo6rl-Estimate of agricultural area used temporarily or per thousand of mid-year population; 1960. 1970. and 1933 data. permanendy for crops. pastures. market and kitchen gardens or to Gra Apediwe A&-Average number of daughters a woman lie fallow. 1960, 1970 and 1982 data. will bear in her normal reproductive period if she experiences present age-specific fertility rates; usually five-year averages cading GNP PER CAPITA (RSS)-GNP per capita estimates as current in 1960. 1970, and 1983. market prices. calculated by same convers-on method as World F-mMdy j-Acceprms. Anme (eassmds-Annual num- Bek Atlar (1981-83 basis); 1983 data. ber of acceptors of birth-control devices under auspices of national ENERGY CONSUMPTION PER CAPITA-Annual apparent family plannaing program. consumption of commercial primary energy (coal and lignite. Fiy Phakr-Uses (prcer efaruled nr-The percen- petroleum. natural gas and hydro-. nuclear and geothermal dee- tage of married women of child-bearing age who are practicing or tricity) in kilograms of oil equivalent per capita: 1960. 1970. and whose husbands are practicing any form of contraception. Women 1982 data. of child-bearing age are generally women aged 15-49. although for some countries contraceptive usage is measured for other age POPULATION AND VITAL STATISTICS groups. TeS Plber, MAd- Yew (shesnds)-As of July 1. 1960.1970. FOOD AND NUTRITION and 1983 data. fadrs effood Padeclan Per Cpift (I9O7I - I@#)-index of per Ur6ls Pbpalee (prcar of i erdi -Rato of urban to total capita annual production of all food commodities. Production population different dctimions of urban areas may afect compar- excludes animal feed and seed for agriculture. Food commodities ability of data among countries; 1960. 1970. and 1983 data. include primary commodities (e.g. sugarcane instead of sugar) Papmioer al P*cdoe which are edible and contain nutrients (e.g. coffee and tea are Ibptuation in year 2000-The projection of population for 2000. excluded); they comprise cereals. root crops. pulses, oil seeds. made for each economy separately. Starting with information on vegetables. fruits. nuts, sugarcane and sugar beets. livestock, and total population by age and sex, lertility rates, mortality rates. and livestock products. Aggregate production ofeach country is based intermational migration in the base year 1980. these parameters on national average producer price weights; 1961-65. 1970. and were projected at five-year intervals on the basis of generalized 1982 data. assumptions until the population became stationary. Per Capire Supply OfCuries (percN efreaimWM3)--eCeomput- Stationary popukWon-Is one in which age- and sex-specific mor- ed from caloric equivalent of net food supplies available in country tality rates have not changed over a long period. while age-specific per capita per day. Available supplies comprise domestic produc- fertility rates have simultaneously remained at seplacement level tion. imports less exports. and changes in stock. Net supplies (net reproduction rate- 1). In such a population, the birth rate is exclude animal feed. seeds for use in agriculture. quantities used in constant and equal to the death rate, the age structure is also food processing, and losses in distribution. Requirements were constant. and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity size was estimated on the basis of the projected characteristics of and health considering environmental temperature, body weights, the population in the year 2000. and the rate of decline of fertility age and sex distribution of population. and allowing 10 percent for rate to replacement level. waste at household level; 1961. 1970 and 1982 data. PPadation Momentrr-Is the tendency for population growth to Per Capits Supply of Pmreim (reen per dA)-Protein content of continue beyond the time that replacement-level fertility has beten per capita net supply of food per day. Net zupply of food is defined achieved- that is. even after the net reproduction rate has reached as above. Requirements for all countries established by USDA unity. The momentum of a population in the year t is measured as provide for minimum allowances of 60 grams of total protein per a ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein. of which 10 grams the year t. given the assumption that fertility remains at replace- should be animal protein. These standards.are lower than those of ment level from year i onward, 1985 data. 75 grams of total protein and 23 grams of animal protein as an peflds D&dry average for the world. proposed by FAO in the Third World Food Prr sq.km.-Mid-year population per square kilometer (100 hec. Supply; 1961. 1970 and 1982 data. tares) of total area; 1960. 1970, and 1983 data. Per Capi r okas Supply Fom AmindandPate-Protein supply Phr sq.km. arkuhural lAd--Computed as above for agricultural of food derived firom animals and pulses in grams per day. 1961-65. land only. 1960, 1970. and 1932 data. 1970 and 1977 data. Popmae Age Sbcames (percotj)-Children (0-14 years). work- Chid (aes I-4) asto Rmar (per shesd)-Number of deaths of ing age (15-64 years). and retired (65 years and over) as percentage children aged 1-4 years per thousand children in the same age of mid-year populaion: 1960. 1970. and 1983 data. group in a given year. For most developing countries data derived Poplielion Growth Rat (pworea-feal--Annunl growth rates of from life tables; 1960. 1970 and 1983 data. total mid-year population for 1950-60. 1960-70. and 1970-83. HEALTH Ppikelom Grewth Rear (prmea)m -Annual growth rates Lfr Expecearcy or airsh (yns)-Number of years a newborn of urban population for 1950-60. 190-70. and 1970-83 data. infant would live if prevailing paterns of mortality for all people - 33- ANNEX I Page 4 of 6 at the dm of of ite birth wre to stay de samme throghout is if; Aph.reker Rasi# - prary. and zm r-Total studenti en- 1960. 1970 and 1983 data. roild in prinry and uecondary level divided by numbers of W ,... .Nuiber of ifn who dis teacher in the corresponding leis. befot eacing one y~a of ag per thomsad iva b~ithi a gvn year 1960, 1970 and 19g3 data. C001UBdFfl0 nwafss S r ut11r a mr pIIIII1- 1111, al011, a1 PM111111,01 Cds (pON ,dom pm å -Ps§enger cars cOM- ne-Nulmr of people (totaL, urban, and rural) with ionable Prim motor cms satng les than eight persons excludes ambul- sioen to sae water supply (in~de nessd t snr wa~ars or ae, heares and military vehicles. uam~d t~t esmaiauam d waer) ub as that fro proeckd m~ Mei ker (pRw 4Ws pe adw>--Al types of receivers borehole, upul~ and uanitae wel) a pä agom ir IU for radio broadcas to general public per thousand of populaion, tive p latioms. In an uban am a public foutaim or rmnipr e~ - receivers in counies and in years when located not maihan 2«" 0 meav us from a bom. my be conåidamd kstrion of radio sets was in efect data for recent years my as being within reasonble access.ofthat house. 1a rural umas nobec prbesia oscunisaoH dHein reasonable a s ould iMply that the houewi or mena of the . u be compeuable d= mo countrin &bolh licensing. honueolM do nt have to pnd a diMpIpottionisE part of the day TVsu~ We fprig~mdpspa~la >-TV receivers for broadcast in fetching e family's water med.. to g 1M pubic per homed po~hdatom; encludes un nd TV cAu~sto Ek~u~Wn (p~ ff p PIM wö. ewm~ in couatuies and in ysun wheta resaaion or Tv ets was amed awd-Number of people <total, urban, and rur.d served by in ct. excmta dispo~al au percentags of their respective populations. Ntwspal , r-~ (pr t~dp pti-Shows the aver- Excreta disposal -y include the collection and dispo~aL with or age ~ tion Of daily geeral inCTst nwspaper." delined as a without treatn~nt, of human excreta and waste.water by water- paiodial pubhcation devoted pnnarily ao ording genal news. borne systems or the ue of pit privies and similar inst ~na. It is Considd to be -daily" if it appem at ls four times a week. bpbiP e par p4&swi--puadWon divided by number of prac- -"" 3 '1S010 pr C&aP p. Y~-Based on the Phsingphyuicans quwii~ie from a medical school at university level. number of tickets sold durng the yar. inluding admissions to #bopIdas por Nä~ ls pierinn div by of drive-n cnemas and mobile unti. practicing make and femal graduae nurseg. assimtant nunes, pracical nurses and nurng ausilaaies. #bp a pff M ~ äl .-~ ~ =sf namma be L~ Mrie (NAM- >-Economically active persons. in- . and ~l) d~d by theere ~ jnber of d ing armned forces and unemployed but exduding house,,ves. hosta be avm l in PbliC afn and o- d student. etc.. covering population of an ages. Definitions in hospitals and rehabiltation centers. Hospital. aes ints various co i ar ot com b 1960. 1970 and 1983 data. permanently stalfed by at east one pbysician. Eabi tsemus prov ri (Pff~-=lale labor force as percentage of total labor iding princip.ny cnertoial ca are not included. Rura] hospitals. force. however include bealth and edical centers not permarmently staffed Agmiam e (pme L-Labor force in fareung. forestry. hunting by a physician (but by a medical assistant, nuse, midwife, etc.) and Eshing as percentage of total labor force; 1960. 1970 and 1980 which a~ler in-patie accommodation and provide a limited range data. of medical facilities. Indmsay (p~rc..r>-Labor force in mining. construction, manu- Adasmim pr 8ospi~ Bed-Total number of admissions to or facturang and electricity. water and gas as percentage of total labor dischargs from hospitals divided by the number of beds. force; 1960. 1970 and 1980 data. Hm.SNG pe. Mr (pOmer-sedar a.dfomekb-ricipation HOUSING or activity rates are computed as totm. male, and female labor force AMMr See of HawfrM (perses peraieM- arime, as percentages 3f total, male and femae population or al ages adrmA household cnmsiss of a group of individuals who shar respectively; 1960. 1970. and 1983 data. These are based on jLO's living quarters and their main meal. A boardersor lodger my or participation rates relecting ag~-se structure of the populatio. and May not be included in the household for asical purpoems. long time trend. A few estimates are from national sources. A rqw Namå of Pm~ per Roa-. ~ ardm, d nwed g e .e Depaudauey Rra Ratio of population under I5. and Average number of persons per room in all urban, and rural 65 and over. lo the working ag population (those aged 15-64). occupied conventional delings, respectively. Dwelings sctude mo-peen~ef structures and uncupd pt. INCOME DISTRIB TION ew rrq Mf Dun p £t0~ Emwdtry-e, r , ad 'id- Phm e of Tana Dirposaib u~[n r (adA n car* od kän£>- Conventional dwelings with electricity in living quartersas perc~m- Accruing to percentile groups of househods ranked by total house- tage of total, urban. and r..J dwellings respectivly. hold income. EDUCATION POVERTY TARGET GROUPS A4~ssd Emwesr RMw The following estimales are very approximate measures of poverty P r c - soud. made Nd fesit-Gross total, male and levels, and should be interpreted with considerable caution. feme enrollmu~ of all ag at the primary leve as percentages of EsiaAa see: e pWMarly u a~ L.@W (/SKpt espirw>-ac~), respectie primary school-agp pop~daioss While many countries ad wrud-Absute poverty income level is that income leve consider primary school ag to be 6-11 years, other do not. The below which a wnininal nutritionaly adequate diet plus essential differences in country practices in the ages and duration of school non-food requirements is not affordable. anreflected in the ratios g~n. For some countries with universal. F lIndR r hvmry Inomr Let (USg pr espireareu educatio. gram enrolhoent ay exced 10 percent si some d raE--Rurl relatmive poverty income leve is one-third of pupils anr beow or above the country's standard primary-school average per capita personal income of the country. Urban level is age. derived from the runal level with adjustment for higher cst of Scondalråseal - ~oal, naf andfesiaf--Compuaed as above; living in urban area. secondary education requres at lust four yemrs of approved pi- E.Ud hpn. Ben A sar hwry Ier f.r ea (pE~- mary is nn on provide. general, vocational. or teacher tainng cer-mrh a ,m -- Percent of population (urban and rurai instructions for pupils ually of 12 tn 17 years of ag con.espond- who ani aabsolute poor.% ence courses an genemaly ea-odd. Vocarwa~ Eurga~ {pormwmlf 2~cnd7>-Väcarxina i~stitu- Comparative Analysis and Data Division ions include scrical ~ indurria or other program which opera . Economic Analysis and Projsrtine Department inde ~eneny or as departmen of secodary kinains June 1985 11 ! mlilil l Eli gl! mg u i p nU a t Ep1år åi h bh flE.i å, NI.:..rs p p ·· o.....=usu 1...l heisnu'ssu s-ma * ut;si ir'an-isuu.us ii gase wF m assa;:=s u a ?N F .. VW 1.i0šš 5 8= s r.sp --pF.sp ..ss1. . Iitp te muÉu 2 M- R 1 rp id it e m.-ua it v bn .er sgs-hik 5r r. M •s - * |aipaizs= 3J=.! .. u u mssa mmi m su~ us vkskhbsh b 8 i t4iti%bt pp ;rF eo p:tå 8te = u =-. a Ppj u.u4RPPbrpg# ~ ~i lUij I, i i , i in i gi a s" g *:ta 8 298 sa gs - øIIi 3:z#uu ... .* z'! ø £ a n šš!‡èisäPi; "" ø * ~ IIh i!Esa "I*" i i i - I Ell: i " 3 .1! !u'. I I ø tW*I t '=1I IM - i i- i l *w s't - i ~ig s sii iii i elm- - 36 - ANNEX II Page 1 of 2 THE STATUS OF BANK GROUP OPERATIONS IN MEXICO 1/ A. Statement of Bank Loans (as of September 30, 1985) Loan Amount less Undis- No. Year Borrower Purpose Cancellations bursed 59 loans fully disbursed 3,611.19 1706-5 1979 NAFINSA Irrigation 92.00 40.53 1712-5 1980 NAFINSA Industry 175.00 22.60 1820-5 1980 NAFINSA Small/Medium Scale Mining 40.00 14.24 1858-5 1980 NAFINSA Irrigation 160.00 132.10 1881-5 1981 NAFINSA Small/Medium Scale Industry 100.00 0.46 1908 1981 NAFINSA Irrigation 23.00 1.70 1913 1981 BANOBRAS Water Supply 125.00 59.03 1929 1981 BANOBRAS Railways 150.00 36.45 1945 1981 NAFINSA Rainfed Agriculture 264.60 78.81 1964 1981 BANPESCA Port Development 5.45 1.51 1990 1981 BANOBRAS Urban Development II 164.00 115.49 2042 1982 NAFINSA Technical Training 90.00 1.01 2043 1982 NAFINSA Integra- d Rural Development 175.00 56.42 2100 1982 NAFINSA Irriga hon. Rehab II 65.00 56.26 2142 1982 NAFINSA Capital Goods Industry 152.30 103.62 2154 1982 NAFINSA Pollution Control 25.00 13.99 2191 1983 NAFINSA San Fernando Agri. 48.40 31.36 2194 1983 BANOBRAS Urban Engineering 9.20 6.11 2262 1983 NAFINSA Agri. Marketing 115.00 82.70 2281 1983 HANOBRAS Third Water Supply 100.30 81.52 2325 1983 NAFINSA Third Small/Medium Industry 175.00 98.94 2331 1983 BANCOMEXT Export Development 350.00 243.20 2428 1984 BANOBRAS Highways 200.00 139.08 2450 1984 BANPESCA Ports 76.30 68.44 2454 1984 NAFINSA Agricultural Credit 300.00 25.16 25253/ 1985 NAFINSA Chiapas Rural Roads 22.00 22.00 2526S/ 1985 NAFINSA Chiapas Agric. Dev. 90.00 90.00 2546S/ 1985 NAFINSA Small/Med. Scale Industry II 105.00 105.00 25593/ 1985 NAFINSA Vocational Education 81.00 81.00 2575'/ 1985 BANOBRAS Railways V 300.00 300.00 2610S/ 1986 NAFINSA Agricultural Credit 180.00 180.00 2612S/ 1986 RANOBRAS Low-Income Housing 150.00 150.00 TOTAL 7,719.74 Of which has been renaid to the Bank 1,544.13 Total now outstanding 6,175.61 Amount sold 92.34 of which has been repaid 92.34 0.00 Total now held by Bank 2/ 6,175.61 Tota-l undisbursed 2,438.73 1/ The status of the projects listed in Part A is described in a separate report on all Bank/IDA financed projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30, and October 31. 2/ Prior to exchange adjustments. 3/ Not yet effective. - 37 - ANNEX II Page 2 of 2 B. Statement of IFC Investments (as of September 30, 1985) Fiscal USS Million Year Obligor Tnpe of Business Loan Equity Total 1958/59 Industrias Perfect Circle, S.A. /1 Industrial Equipment 0.8 - 0.8 1958 Bristol de Mexico, S.A. /1 A.C. Engine Overhaul 0.5 - 0.5 1961 Acero Solar, S.A. /1 Twist Drills 0.3 - 0.3 1962/65/ Compania Fundidora Fierro 66/68 y Acero de Monterrey, S.A. Steel 2.3 21.4 23.7 1963 Tubos de Acero de Mexico, S.A. /1 Steel 0.9 0.1 1.0 1963 Quimica del Rey, S.A. /1 Sodium Sulphate 0.7 - 0.7 1964/66 Industria del Hierro, S.A. /1 Construction Equipment - 2.0 2.0 1970 Minera del Norte, S.A. /1 Iron Ore Mining 1.5 - 1.5 1971 Celanese Mexicana, S.A./l Textiles 12.0 - 12.0 1972 Promotora de Papel Periodico, S.A. de C.V. / Pulp and Paper /2 /2 /2 1973/79 Cemento Veracruz, S.A. Cement 15.9 - 15.9 1974/91 Cancun Aristos Hotel Tourism 1.0 0.3 1.3 1975/78 Mexinox, S.A. Steel 12.0 3.2 15.2 1978/81 /84 Papeles Ponderosa, S.A. Pulp and Paper 10.7 5.0 15.7 1978 Tereftalatos Mexicanos, S.A. Petrochemicals 19.0 - 19.0 1979/84 Cementos Tolteca, S.A. /3 Cement 160.0 7.9 175.9 1979/81 Hotel Camino Real Ixtapa,S.A. Tourism - 3.1 3.1 1979 Conductores Monterrey, S.A./3 Electrical Wire and Cable 18.0 - 18.0 1980 Industrias Resistol, S.A. /3 Particlehoard 25.0 - 25.0 1980 Vidrio Plano de Mexico S.A. /3 Flat Glass 114.9 - 114.9 1980 Minera Real de Angeles, S.A. de C.V. /3 Mining 110.0 -- 110.0 1981 Celulosiros Centauro, S.A./3 Pulp and Paper 59.5 - 59.5 1981 Corporaclon Agroindustrial, S.A. /3 Agri-Business 11.3 3.0 14.3 1984 Metalsa, S.A. Motor Vehicles and Accessories 3.0 1.4 4.4 1984 Capital Goods Facility Industrial Equipment 100.0 - 100.0 1985 Proteison Cotton Seed Flour 2.0 0.8 2.8 1985 Primex /3 16.4 - 16.4 Total Gross Commitments 705.7 48.2 753.9 Less Cancellations, Terminations, Repayment, and Sales 550.7 22.1 572.8 Total Commitments Nov Held by IFC 155.0 26.1 181.1 Total Undisbursed (including participants) 150.4 6.5 156.9 /1 Investments which have been fully cancelled, terminated, written off, sold, redeemed or repaid. /2 US$25,000. ff Gross commitment including amounts sold to participants. - 38 - ANNEX III Page 1 of 2 MEXICO EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT SUPPLEMENTARY DATA SHEET Section I. Timetable of Key Events (a) Time taken to prepare project: Three months (b) Agencies which prepared project: Secretariat of Finance, Secretariat of Planning and Programming, BANOBRAS, Secretariat of Housing and Urban Development, Secretariat of Public Education, Social Security Institute (IMSS), and DDF (c) Initial request for Bank Financing: September 19, 1985 (d) Departure of Reconnaissance Mission: September 30, 1985 (e) Departure of Appraisal Mission: November, 4, 1985 (f) Completion of Negotiations: March 2, 1986 (g) Planned date of effectiveness: April 1986 Section II. Special Bank Implementation Actions None. Section III. Special Conditions Assurances that: (a) The Government would, not later than December 31, 1986, put into effect an improved seismic-resistant building code (para. 71). (b) FONHAPO would agree to achieve with respect to reconstruction subloans under the proposed project, the same levels of capital recovery as required under the Low Income Housing Project (loan 2612-ME). FOVI would agree that capital recovery for its reconstruction subloans under the proposed project, calculated in a manner satisfactory to the Bank, would be no less than that required for FONHAPO's subloans (para. 77 and 78). (c) BANOBRAS would enter into contractual arrangements with the Guarantor arranging for the transfer of loan funds to and repayment of the loan by the Guarantor, and the transfer of funds to the executing agencies (para. 86). - 39 - ANNEX III Page 2 of 2 (d) The Government would establish and maintain in SEDUE, a unit adequately staffed to supervise and monitor the execution of FONHAPO subprojects to be carried out by RHP. The receipt of evidence that such unit has been established on terms acceptable to the Bank, would be a condition of disbursement in respect of FONHAPO subloans made to RRP (para. 79). March 2, 1986. F[�дIWs FN�1tQ1N� I�ЧЫLITAI'IfN k0 РlXI'�8lF1X.'l'IQt РlaOJFX.T Sl2f W!У С{)RC ESl'!?Ч1FS АУ Ql�R871S л/ nd111m Пев3�7n 7оtц 1+Р >; д Сlv11 9��1г �вtг1 5ирег- Яаве PF+y�alслl �i1r Pl�1oe 4fi Сеаг+оreчх Iа,л woekв I►,yu3pnent тоеаl мл. vislm саве гспс. Теел1 г�ггк. Тои1 геоfесс Tacel 1. FN3IlС Э3Э.56 5R.4 1.1 RfliMI1.ITATI(N + 74.75 - 74.75 4.49 5.9В R5.22 А.52 9З.74 N.l1 101.86 (1) Рс3+двг HasinR tlena+al (2п.зо)ы � 2о.е2 - 2п.Ах 1.z5 1.г� rэ.7з г.э7 z6.1o z.z6 2я.эб cii) и,-I„о� -1омнРо л� - z6.a2 - 26.42 1.s9 2.11 эо.1г Э.г11 зз.1э 2л7 эь.по (if!) POVI Тура I- tOM1APri - 27.51 - 27.5! 1.65 2.21 71.Э7 3.l4 Э4.51 2.99 Э7.50 1.2 t�olt81a1Cr[cN 17П.П5 - 17П.П5 [0.24 1Э.б2 193.A1 (9.Э9 213.ffi 18.44 2Э1.7П (i) гсриц,r наиеlпд Rв�ем+1 (37.А4)h/ 114.49 - 114.49 b.q7 9.1b lЭл.52 13.П5 14Э.57 12.40 155.95 (!!) la-Iп�ae � FC!>EIAPO д1 - 29.Па - 29.НЯ 1.АП 2.'i9 34.OR Э.41 Э7.49 Э.7b 4t1.75 (1!1) FQVI Туре I -- 25.f$ - 25.б8 1.57 2.(У� 29.27 2.9Э .12.?4 2.78 3b.98 2. a�WI1Y PACD.I'!'iFS . 15S.Ы 77.2 1 2.1 1FJ1I.'П1 GF� - 51.10 23.RR 74.9А 4.50 Ь.ПП fl5.48 12.А2 9Н.ЭП R.SП 1П5.ЯП r . О (!) Меее+сроl3еап Апеа 1irв�ttalя - 24.62 11.511 31i.12 2.17 2.89 41.18 6.18 47.36 4.09 51.65 ' 1 (!!) Re�дimsl Наврltаlл �-- 26.4А 12.Э8 :Чi.Аб 2.13 Э.11 44.Э0 6.64 50.94 4.41 55.i5 2.1 Ф11ГА1'IПN - 2Н.49 1.4b 29.95 1.79 2.N1 Э4.l4 3.42 Э7.56 Э.ц 4t1.R1 (!) Reametnкtian -- 1П.Эб 0.51 lП.й7 0.65 0.87 12.Э9 1.24 13.бЭ 1.1A 14А1 (1i) Relniгxm�ati - 1А.1Э П.95 19.ПЭ 1.14 1.5Э 21.75 2.1В 23.9Э 2.W 26.Пb ' 2.Э HMlCIPAL MAR�['9 - 1tP�Ql131Я1С1'i(N -- 5.87 - 5.Я7 А.35 П.47 б.б9 П.б7 7.35 П.б4 А.ОП 1. аlплnдв �.ITia лrа 1Р�ltls ieE?ЯиЧ. - бl.бз 10.8 З.! Dsolltlm --- 2П.21 19.П4 Э9.25 - Э.9Э 47.1А 4.Э2 47.50 4.11 51.61 э.г а�,тiе ил,�1 - 7.hz - 7.лz - п.76 а.зй, о.н4 9.n о.ео ln.гп а. тваиlсw.,►ssl.чгннх>: кл r�.rltn впlоlРк - и.42 л/ п.но 1х.2г - - 12.z2 1.22 1э.аа 1.1R 14.г�о 1а�,о 2.6 5. яаnхт �оrамsпиnтси eI с з.9э)1 П.9о а.яз о.19 - s.oz П.SП s.sz n.ae б.т бт !д 10TAL p11Q1Dfa' ФRf Э73.4Э 46.� 419.51 21.52 ЭЭ.17 474 20 51.70 525.9П 45.50 Я1.40 571.1П 1W.Ф в/ Caeb Мм1 nп U�eoerfee З[ � 19NS рдоев ц3tl� е�асИегре raee U3S1 � Мед $4Э�1. 11+ Psacequ3вlta Еаг ап+iкt +Wпlы1 - rot tлсцrlегl iл tкo.lect ao�t. �Н с1 Not pett д the вд+гnРгlatiПR Лесеее. � � � �� Q�r. у кер eutl-ci.e aiolecs sмписмс3ап 3л см яеспх.г3� д Finence, ыиnягGа, пор .м юi. А l1�кh 2. 1986 ~ � 41 Ann IV T~ z m~ Effamumm LIEN= AM mg r i RKu= w~ æff nmø= w »M~m FØKUMM W- umm IN A~ AW~ :Mø M2 Lwr a= Hw. =s si= MICE mm lam= <£ M2~ ngin 69»770 333.56 244.34 74 89.2 26 1.1 F2IAB113= (30.5W)- (101.86) (74.06) 73 (27.8) 27 (1) pq~ F~ Pler~ 15,700 40 1,M 28-% 22.69 80 S.P 20 (U) laf-~ - Fa~ 8,000 50 4,SW 36.00 27.00 75 9.00 25 (LU) m ~ 1, il ad m 6,800 60 5,515 37.M 24 X 65 13.13 35 1.211 ; -r øj (39,270) (231.70) (170.M) 74 (61.42) 26 (1) P~ %~ Ren~ 26,870 40 5,8M 155.97 116.98 75 38.99 25 (U) i~_imme - Fa~ 7,40n 50 5,5M 40.75 30.% 75 10.19 25 (Ift) FMI-4»e 1, n ~ M 5,000 70 6,975 34.98 22.74 65 12.» 35 2. Ca4om FACIL= 155.61 9B.24 63 57.37 39 2.1 MAM CAM - IEECNSnW= (2,018) (106J30) (64.07) 60 (42.73) 40 (1) Wtrmi~ Azæ Rosp~ 1,180 75 43,600 51.45 30.87 60 20-% 40 (11) RegL=i F4m~ &38 95 66,000 55-% 33.20 60 22.15 40 2.2 EWrA= (998) (40.81) (28.57) (12.24) ------ 48 30BW 14.81 10.V 70 4JA 30 (11) "pr I p - 950 27,400 26.00 IS.M 70 7^ 30 2.3 MMUMAL K4= - 13 '615,390 u 5.60 70 2.40 30 3. NJILDDW DRM1= 61.63 24.81 40 35.82 60 3.1 BM = b/ 1,7W-000ký 2q.M 51.61 17.81 35 33X 65 3.2 ~ AL 1,680,~ 5.% 10.02 7.00 70 3.02 30 4. MMCAL ASSISrMM 14.60 12.41 85 2.19 is YMM : ' ; 5. Mu= A 6.00 6.00 100 - - T3m saw am 571.40 385X 68 185.60 32 al Cæm I æ Dm~ 31, 19ffi prim vith ex~ rate USSI 430. T.'-Imm USS20 ~aft af uffliveent. %zd 2, 19% PFXICO: Earthquakie Rhahilitation and Reconntruction Projeet IYpEr u le tation Schedule 11NITS (1) DU (2)m2 FSTIMATED (3) Hoep. Rada roST CYf5 CY86 CY87 CYAS CY9 (4) Ochoola US$ Dill 2nd Se. lat Rep. 2nd Ram. lat Ren. 2nd see. lst sae. 2nd Xam. lat. sen. 1. HOUSING 1.1 REHARILITATION 3,n 8 6 12,5 4,3 . PopulArTHS-(RONR) 15,700 28.4 /////////////// //////////// . Lov-Income FONNAPO 8,000 36.0 ///////////////// . PoV-TYPP 1 6,800 37.5 ////////// 1.2 PECONSTRUCTION 483 59 3 32,3 16,1 . Popular HSC-RHP) 26,870 156.0 / /29 A 1 / ""'<"l"y////// ///// . 1Low-Income FONHAP0 7,400 40.7 144iiiiiiiif/l . F0V1-TYPE I 5,00 35.0 u / //////////ä///// /////////////////// //// 2. COtUNITY FACILITIES 2.1 HEALTH CARE 4.0 22,6 18,6 6,3 .Metro Area Nomp. 1.180 51.5 /ý //////////////////////// //// y .Regional Hosp. 838 55.3 //å ///////////////////////l//// 2.2 EDUCATION l.0 .a n. 5 . Reconstruction 48 14.8 1 / /////////////// /// //////////////// /// 2 0 . Reliorcement 950 26.n /// /////////////å//////////////// 2.3 MARKETS 2,0 4,0 2,0 . Reconstruction 13 R.O /// ///////////////// //////// 3. RUILDING DEMOLITION 15,0 36 6 3.1 Demolition 1,760,00<,2) 51.6 // ////////////////// 3.2 nebris Removal 1,680,000(m3) in.O /äl 2.0 6 2 5,a 1,0 4. TECHNICAL ABRIST. & REL. RTUD. 14.6 / / / ////////////// /// /, 5. PROJfECT AnHINTATRATInN 6.0 ///L/////////////////////// //////// // TOTAL 571.4 82.2 221.3 183.0 68.8 16.1 March 2, 1986 - 43 - ANNEX VI Page 1 of 4 MEXICO: EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT INSTITUTIONAL ORGANIZATION APPROACH 1. To the extent possible, the reconstruction project will not require the establishment of a new set of institutional arrangements; rather, the structure that will be used is already in existence in Mexico. However, although the project does not aim at institutional development as such, it is expected that the active participation of sectoral agencies in the planning and reconstruction activities, as well as the technical assistance to be provided under the project, will result in the strengthening of existing institutions. 2. The overall reconstruction policy will be determined by a National Reconstruction Committee already established and in function. Project cobrdination and support to implementing agencies is vested in a Technical Coordinating Group that operates through the Secretariat of Finance. The implementation of project components will be conducted by the relevant sectoral secretariats and agencies. THE NATIONAL RECONSTRUCTION COMMITTEE 3. At the global policy level the reconstruction process is guided by a National Reconstruction Committee set up by the Presidential Decree of October 3, 1985. The Committee was established as a mechanism to channel advice and inputs concerning reconstruction from a representative group of citizens and social organizations. The Committee is headed by the President of the Republic and consists of six subcommittees: (1) Reconstruction of the Metropolitan Area of Mexico City; (2) Decentralization; (3) Financial Aspects; (4) Social Assistance; (5) International Assistance; and (6) Civil Defense and Disaster Prevention. Reconstruction of the Metropolitan Area of Mexico City 4. This subcommittee is coordinated by the head of the Department of the Federal District, DDF. Its objectives are to facilitate the rehabilitation of public services; provide attention to earthquake victims with special emphasis on low-income groups; establish priorities in the program for the reconstruction and rehabilitation of housing; modify construction norms and standards in order to reduce risk; and promote investments geared to providing employment. -44 - ANNEX VI Page 2 of 4 Decentralization 5. This subcommittee is headed by the Secretariat of Planning and Programming, SPP. Its objectives are to promote the reorgantzation of public administration, keeping the State Secretariat in the Capital while decentralizing resources, functions and offices; facilitate the decentralization of higher education, industry, commerce and financial activities, and explore the absorption capacity for decentralization in the different cities in the country. Financial Aspects 6. This subcommittee is headed by the Secretariat of Finance, SHCP. Its objectives are to promote and mobilize internal and external resources for reconstruction; streamline mechanisms for housing finance; develop savings instruments to mobilize additional reconstruction resources; and define taxation incentives to facilitate the decentralization process. Social Assistance 7. This subcommittee coordinates the areas of health, education, employment and housing. ResDonsibility for the health sector lies with the Secretariat of Health and the objectives of this subgroup are the restoration of basic services and the reorganization of the health delivery system in the country with a view towards increasing its coverage and facilitating its decentralization. Responsibility for the education sector is located with the Secretariat of Education. The objective of this subgroup is to restore the normalcy in the schools; facilitate adequate functioning of the education facilities, promote structural reinforcement of existing schools to protect against future earthquakes, and contemplate the needs posed by the decentralization process. Responsibility for employment lies with the Secretariat of Labor. This subgroup has as its objective to reestablish employment for the affected population and coordinate the decentralization tasks by defining training needs and support required by the small and medium sized enterprises. Responsibility for housing lies with the Secretariat of Urban Development and Ecology, SEDUE. The objective of this subgroup is to respond to the housing needs of the earthquake victims through rehabilitation and self-help, giving priority to low-income groups, and provide support to the housing needs posed by the decentralization process. International Assistance 8. This subcommittee is coordinated by the Ministry for External Affairs. Its objective is to coordinate and ensure the adequate channeling of external aid. Civil Defense and Disaster Prevention 9. This subcommittee is headed by the Secretariat of Interior and has as its objective to diagnose potential risks from natural disasters in the country, make recommendations concerning rapid and adequate responses, and organize a National System of Civil Defense. -45- ANNEX VI Page 3 of 4 PROJECT CDORDINATION 10. Overall coordination of project activities has been vested on December 10, 1985, in a Technical Coordinating Group. The Coordinating Group operates under the Secretariat of Finance. The Technical Secretary of the Coordinating Group is the Director General of Public Credit in the Secretariat of Finance; the alternate Director is the Director of International Finance Organizacions in the Secretariat of Finance. The Technical Coordinating Group is composed of experts in economics, law, urban planning, housing, health, communications, administration, deconcentration, programming, finance and other areas required for the implementation of programs and projects. 11. As required by the technical nature of the problem, representatives from other agencies will be requested to participate in the group. 12. The Technical Coordinating Group will: a) coordinate the different programs and activities included in the reconstruction effort; b) assist in defining measures for external funding to complement internal resources and ensure the compatibility of the reconstruction program with overall economic policies; c) coordinate with the Secretariat of Planning and Programming (SPP) the allocation of local counterpart funding necessary for external financing; d) propose to the National Reconstruction Fund the orientation and supplementing of external resources; e) advise and support the implementing agencies in the identification, presentation, and execution of projects; f) propose measures to facilitate an adequate disposition of external resources; g) strengthen the capability of the executing agencies in procurement and disbursement procedures; h) coordinate the implementation of programs; and i) evaluate the works completed in each sector. - 46 - ANNEX VI Page 4 of 4 PROJECT EXECUTION 13. The works will be executed by the respective sector agencies: Popular Housing Renewal Agency, the Secretariat of Education, IMSS and DDF. These agencies will be responsible for: a) designing and managing the respective component; b) establishing work programs, budgets and accounts; and c) supervising work programs and expenditures. 14. The criteria for the selection of works by the sectoral agencies are the following: (i) confirmation of high priority by the government; (ii) reconstruction of assets of critical necessity in the initial reconstruction project; (iii) restoration of key social and economic activities in the areas affected; (iv) likelihood of efficient implementation and timely disbursement; and (v) no other financing committed. 15. The financial intermediary will be the Bank of Public Works, BANOBRAS. 16. Additional information on the institutional arrangements in the housing, health care and education sectors is given in Annexes VII, VIII and IX. March 2, 1986 - 47 - ANNEX VII Page 1 of 7 MEXICO: EARTHOUAKE REHABILITATION AND RECONSTRUCTION PROJECT Housing Sector and Program 1. The Secretariat of Urban Development and Ecology (SEDUE) is reponsible for determining the overall policy for housing and providing the institutional coordination of the sector. The Secretariat is headed by a Secretary and is organized under three Under Secretariats of: (a) Housing; (h) Urban Development; and (c) Ecology. The policies dealing with the reconstruction for housing affected by the earthquake of September 1985, are determined by the Under Secretariat of Housing. 2. The Government's statement of policy for housing reconstruction is based on the following guidelines: (i) To focus efforts and resources under the Government's emergency declaration to assist the population affected by the earthquake; to cover the needs of families living in housing administered by the Federal Government as well as other types of projects including private housing; (ii) From available resources, the damaged housing in the States of Mexico, Michoacan, Jalisco, Guerrero and Colima will be rehabilitated and rebuilt by the respective State Housing institutions in coordination with SEDUE; (iii) Financial resources will be promptly allocated to cover the urgent needs created by the earthquake; (iv) Housing Program has been divided into 2 main categories: Rehabilitation and Reconstruction; Cv) The government housing agencies will participate directly in the proposed Rehabilitation and Reconstruction program and will allocate immediately the available existing housing stock. FONHAPO, INFONAVIT, FOVI and FOVISSSTE will be empowered to allocate resources to the families of victims of the earthquake. (INFONAVIT and FOVISSSTE programs are not part of the Bank Reconstruction project); (vi) SEDUE will coordinate activities with the recently created Popular Housing Renewal (RHP) that operates under the Department of the Federal District (DDF) to solve the housing needs (in collaboration with the other concerned government agencies) of the victims of the disaster. RRP was created by the Presidential Decree of October 14, 1985 to deal with the 250 hectare expropriated area in the center of the Federal District. 3. Rehabilitational Reconstruction Program. For the two large scale high-rise housing projects administered by the Federal Government: (Nonoalco-Tlaltelolco and Benito Juarez), which were seriously damaged, - 48 - ANNEX VII Page 2 of 7 the rehabilitation and reconstruction activities will he developed and coordinated as follows: (a) SEDUE in conjunction with other institutions is assessing the damages, preparing technical diagnoses, demolition and rehabilitation requirements, size of damage payments to the families from insurance, allocation of new housing units to the victims, allocation of credits, etc.; (b) DDF is participating in the technical assessment and diagnoses along with SEDUE, while BANOBRAS assumed the main responsibility for insurance claims and payments; (c) demolition of buildings in the Benito Juarez complex has been completed by the DDF. In Nonoalco - Tlaltelolco complex, 27 buildings will be demolished, this work will be subject to financing by the CON; (d) FONHAPO has allocated about 10,000 recently completed housing units for Nonoalco-Tialtelolco victims and FOVISSSTE has allocated new housing for Renito Juarez victims. These two large-scale housing complexes do not form part of the Bank reconstruction project; they are financed from a separate Government fund. 4. Rehabilitation and reconstruction of low-income dwellings, affected by the earthquake (not part of the expropriation (decree) but in the center of the city would be financed through the normal line of credit from FONFAPO. In addition, reconstruction of private housing (not part of the expropriation decree), affected by the earthquake, in the peripheral neighborhoods: Roma, Cuahtemoc, Narvarte, Del Valle, Doctores, and Obrera in Mexico City, would be included in a line of credit from FOVI (see Para 12. for details of FOVI). The credits destined for reconstruction works, will be allocated for proven needs and in accordance with the norms and standards of the respective financial institutions. 5. The 250 ha of expropriated land, which comprise the RHP rehabilitation and reconstruction program in the traditional "Barrios" located in central area of the D.F., Tepito, Morelos, Guerrero, Buenos Aires, and others have been included in the approved RHP program. The objectives of the Program are to: (i) rebuild the blighted areas affected by the earthquake in the expropriated area of the D.F.; (ii) establish a policy of social development based on community participation that respects the traditional community values and provides rehabilitated urban infrastructure along with new housing; and (iii) control land speculation and promote appropriate land-use development; 6. REP as a public, decentralized body is entitled legally to carry out the following functions: (a) Promote and execute programs for low-income housing; (b) acquire land and buildings, subdivide, reform, and build in the earthquake-affected areas; - 49 - ANNEX VII Page 3 of 7 (c) build the necessary infrastructure; (d) promote and provide credits that conform to the legal prerequisites and income of the beneficiaries; (e) establish systems of financial and technical assistance for self-help and cooperative programs; and (f) promote community participation in the processing, planning and financing of construction works. 7. The RHP agency is governed by a Board of Directors. The President of the Board is the head of D.D.F., with the Secretary of SEDUE as vice-president, and representatives from SPP, Finance, BANORRAS and Bank of Mexico as members of the Board. SEDUE's Under-Secretary of Housing is the Technical Secretary. RHP started its operations on October 24, 1985, and according to its regulations has to complete its tasks within fifteen months from that date; however, the tasks may take considerably longer - perhaps 2 1/2 years to complete successfully. The registration alone of over 40,000 condominium properties (after renovation) is a formidable task. 8. The execution of the program of Popular Housing renovation involves: (i) Land acquisition. On October 24, 1985, the Expropriation Decree covered the private property of 4,323 land parcels including buildings occupied for rental housing. The properties are being [ transfered by Decree to the D.D.F and are currently administered by RHP. (ii) RNP staff are assessing the social and economical diagnoses from a sample survey of 2,000 families. Technical studies of planning, design and engineering are currently underway. The preliminary plans will be ready by the end of March, 1986. (iii) Rehabilitation of damaged units and reconstruction of new housing units, will be designed by RRP's technical staff and consultants. In addition to the housing needs, many of the dwellings served as production centers of handicraft for which space must be provided. (iv) Execution of civil works involving structural, plumbing and electrical elements will be contracted with construction companies (using LCB), SEDUE and FONHAPO will provide assistance to RHP. SEDUE will assist RHP through an in-house construction management unit during the entire planning, design and implementation of the project. Financing will be provided through FONRAPO. The infrastructure and services will be implemented under "convenios" between DDF/RHP with BANORRAS. The DDF will be in charge of demolition, debris removal and approval - 50 - ANNEX VII Page 4 of 7 of all designs and engineering for structural reinforcement. The FIDEICOMISO of Housing and Urban Development in the DDF (FIVIDES) will be responsible for minor repairs and rehabilitation, and the depot centers of building materials for individual credits; (v) RHP will function as promoter and social organizer and under the technical advice of SEDUE and DDF, it will also develop implementation plans while FONNAPO will prepare the financial plan; (vi) final beneficiaries of the Program, after the rehabilitation and reconstruction, will be constituted into the "condominium" or horizontal property ownership; (vii) dwelling units will be allocated through public raffles conducted by the homeowners condominion association; (viii) responsibilities for maintenance and repairs of the properties will be transferred to the homeowners association; (ix) FONHAPO will administer the mortgage loans, and the DDF will have an overseeing responsibility until the families/beneficiaries have completed their mortgage payments; (x) RHP will disappear legally upon completion of the work program. The responsibilities of REP to the "renewal" barrios and homeowners associations will be transferred to DDF upon completion of the project. 9. In October, 1985, to begin'operations the DDF allocated from its operating budget 2,500 million pesos (US$5.8 million) to RHP. To pay for the expropriated land of 250 ha, the Minister of Finance has issued 25,000 million pesos (US$58.1 million) in Urban Renewal Bonds (Bonos de Renovacion Urbana-BORES DP). The BORES bonds carry the guarantee of the Central Bank of Mexico and the Government of Mexico. This sum is adequate to cover the fair market values for the land and improvements (demolished or damaged old buildings) on 4,323 land parcels. In addition, 2,500 million pesos (US$5.8 million) have been allocated from the 1986 Federal budget, to support this component. Eligibility Criteria for the RHP Program. 10. The beneficiaries must fulfill the following prerequisites: (i) househlders (survivers of the earthquake) who are preferably non-government workers; (ii) less than 2.5 minimum salaries (on the regional scale); (iii) not a land owner in the "barrio" except within the Urban Renewal Program; - 51 - ANNEX VII Page 5 of 7 (iv) economic dependents; (v) guaranteed to use the renovated unit as his duelling; (vi) personal roots in the barrio, except in programs of rental housing; (vii) no other financing or credits from other housing organizations. 11. Low-income familites in dwellings affected by the earthquake, but not part of the expropriate decree, would be organized into cooperatives or condominium groups with the assistance of FONHAPO. FONHAPO would ensure that the final beneficiaries are the pre-earthquake households that occupied the site. The rehabilitation and reconstruction components involving 15,400 dwellings are spread throughout the earthquake damage zone - in the center as well as the peripheral neighborhoods. Construction contracts would be grouped into hid packages following the norms of FONHAPO. FONHAPO sub-loans agreements would incorporate onlending term and procedures established on January 15, 1986 (Para. 77 of President's Report). FOVI Housing Finance System by the Commercial Banking System 12. The system relies on mandatory Central Bank Regulations by which Commercial Banks have to allocate a predetermined proportion of their assets to social housing loans. Were the Banks to fail to respond they would be required to deposit the equivalent amounts with the Central Bank at zero interest. The organization in charge of managing the system is a trust fund within the Central Bank (recently renamed "Fondo de Operaciones y Financiamiento Bancario de la Vivienda" (FOVI)). FOVI provides additional financing at favorable terms to top up the Banks' own resources. FOVI is primarily capitalized by a credit-line from the Central Bank (complimented by budgetary contribution of the Central Government SHCP) In 1985 the Banking System (now about 20 Banks) lent MexP 271 billion (US$1.12 billion) to which FOVI financing contributed 19%. Regulatory Provision 13. The basic principles guiding Banks in their lending are embodied in Central Bank regulations (Circular 1842 as amended). FOVI's own scope of activities is embodied in its new trust contract of May 21, 1985. The following requirements are set for the Banks: (a) Five percent of bank assets has to be lent for social housing; (b) Terms and conditions of mortgage loans for owner occupied as well as rental housing; (c) Design standards and maximum cost per type of housing and per geographical region; and - 52 - t' ANNEX VII Page 6 of 7 (d) Targetting in terms of minimum salary ranges. 14. The new trust contract for FOVI specifies its capital structure as well as its basic tasks of: (a) evaluating, coordinating and supervising the operation of the system; (b) providing supplementary (bridge) loans to the banks for owner occupied as well as rental housing; (c) sharing the credit risks with the banks by assuming responsibilities of any loan balance that remains unpaid after 20 years. 15. FOVI, with a staff of about 100, participated directly with its financing in the completion of about 25,000 housing units in 1984, a substantial increase from the level of 9,000 in 1982. For 1985 and 1986 FOVI estimates to complete about 25-30,000 per annum, in effect maintaining its 1984 performance. The substantial jump in operations occurred from 1983 to 1984 when FOVI loans to Banks tripled in nominal terms (from MexP 10.7 to 32.0 billion) or over 90% in real term. Type of Mortgage Credit 16. The financial authorities recently introduced a new financial plan to achieve several objectives. First, the scheme had to be retargetted to social housing. Second, mortgages had to be affordable initially and throughout the repayment period. Third, any a3justment mechanism had to avoid setting a precedent for financial sector wide indexing. Fourth, ultimately lending rates had to spproach market rates. Consequently, after extensive consultations with the commercial banks a new scheme was introduced in 1984 with the following features. (a) Housing programs are targetted to reach the range from 2 to 10.0 minimum salaries; (b) Affordability is guaranteed by requiring a maximum 25% of the borrowers' income dedicated to the monthly payment; (c) The monthly payment (including interest and principal) is fixed initially as the urine obligation and is adjusted annually in terms of 70% of the percentage change in the minimum salary in the Federal District; (d) Initial interest rates range from 15-35% and are applied to the outstanding balance of the loan. Interest can be capitalized up to 70% of the initial loan amount. Interest rates are also subject to annual adjustment in terms of 15% of the annual percentage change in the minimum salary. The ceiling interest rate is however the CPP (Costo Porcentual Promedio de Captacion - Average Cost of Funds). It is important to note that if - 53 - ANNEX VII Page 7 of 7 borrowers pay regularly the monthly payment and do not prepay, no matter how much additional interest accrues as a result of the above adjustments, no additional payment obligation is incurred. Any outstanding balances of principal or interest due to the banks aftqr 20 years will he paid by FOVI (see also Attachment B). March 2, 1986 ~xvil -54 - Attach.et A NMCI: BARIn~E AimGMLTrATEN RI W17XTRCr PRMC= 1 CWI/(iDERcråL M S - RISD FDNEE SY'! Alicet aii Sources of teri ACIL - ----ESD PR 1984 1985 1986 Mx.B1. % Mex.14131. - Me.U. 2 A. Alcertn of Rxrs 174 100 271./ _100 421 100 of~ hiv-FI .32 18 i>/ 19 an 19 - BaniM Systen 142 82 220 81 341 81 B. Sourcsof lIs 174 100 271 100 421 l( of ~hich fran: (1) FMI - 32 18 51 19 Fl 19 Centralan ~Loans 31 17 41 15 66 16 Feeral R~rget/Own Resaurces l 1 10 4 14 3 (2) awn Systen Relar Resærcs 142 32 220 81 341 81 Aumal G~æuh Rates 135t 56% 55% 8/ Fdvalent to abut USS1.0 billion. / Equivalent to about USS 190 millien. March 2, 1986 - 55 - AMEX VII Attachment B M!IO: FEGIAmE RI!HMa2DEHE JMD IIRUCrD PWl!C BæD IMC ilCM- (DtRL ME| Mey Lom Chrateri~tics Ouner ro~f of Retal ShaEer Y : TETPE TWPE TE TE TIPE 1 2 3 4 5 ir_ (I) K tbe f FI Fincing Yen yes Ye wo No yen (2) ~n-be RngeD TMes) 2.0 -4.1 3.2 - 5.7 4.8 - 7.4 6.3 - 10.0 7.2 - 11.5 3.2-5.7 (3) Maxmuk oft Sae Prce(US 5.4-7.0 8.4 - 11.0 9.8 - 12.8 11.2 - 14.6 13.9 - 17.8 8.4-11.0 (4) Um to Vale atio() 90 90 90 80 70 70 (5) YAx~umLm mut (L=SS00) 4.8 - 6.2 7.6 - 10.0 7.8 - 10.2 9.0 - 11.6 .7 - 12.5 7.6 (6) ler t Pt mtial ( p.a.) 15 19 25 30 35 14 Ye.rly Mjtnt 15% of Perm~e Omm of D - i- LTerM t CP ~P7 Pmfinm~M of Iteet Up to 70% of Orialul Lem Aut n.a. (7) r~tehy Pamet (Tne~at and Afxtiolai) 25! cf Pni~hd KSW Terly Mjustce 7ME of Per~ Ot~ of PMD a. md~ No. of MOnthy Payments 240 180 (8) Upfrt mLn e Z) 2 3 4 5 5 3 (9) Me=~ Tn.cn. lea (= p.a.) 0.75 n.a. (10) Latt Pan Chrie --ditionl 1/20 aE telem=nt litt r.l. (11) coi1ela~ s te Pch1 2, 196 - 56 - w 'ii Attachest C MIMOD: EAIlIUAKE IERABMIIATI(K AID IiI'CTION PilBCI Shelter Units FinmceW ACHIAL ESrDMT PIKQlEC=E AB2 1983 1984 1985 1986 (1) Units under comtruction at begirairng of year 30,000 48,000 67,000 58,000 56,000 (2) Units initiated during year 22,000 32,000 16,000 28,000 20,000 (3) Units ampleted during year 9,000 13,000 25,000 30,000 25,000 (4) Units under construction at year end 4 67.000 5 5 5 March 2, 1986 ANNEX VIII Page 1 of? MEXICO : EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT Health Care Program Background 1. . The earthquake that hit Mexico in September of last year produced extensive damage to public health facilities in Mexico City. More than 3,000 SS hospital beds were affected. Of IKSS's 4,756 hospital beds 2,600 beds in IMSS's Centro Medico Nacional (CN) in Cuauhtemoc or slightly more than one half of IMSS's hospital bed capacity in the Metropolitan area had to be evacuated and will be demolished. Other facilities will have to be rehabilitated or entirely rebuilt. SS has obtained financing for its reconstruction needs from the Interamerican Development Bank. IMSS has requested similar financial assistance from the World Bank. Reconstruction Plan 2. IXSS's 1985-1990 originally planned regular investments amounted to US$523 million equivaleLt. Additional investments to replace capacity lost to the earthquake amount to US$182 million equivalent. The total investment requirements amount to USS705 million equivalent. IMSS'still has not identified the sources of finance for its planned regular investments. With regard to the CNN, INSS wants to replace the 2,600 beds that were lost to the earthquake by: (a) rebuilding on its present site a smaller 600-bed CMN exclusively dedicated to the most sophisticated tertiary health care services; (b) transferring 1,180 beds to'six secondary level hospitals to be built in the periphery of the Metropolitan area; and (c) transferring a further 838 beds to five secondary/tertiary level hospitals to be built in the interior of the country. IMSS will rebuild the CNN with its own resources. The proposed health care sub-project would consist of the two remaining building components. Objectives 3. The proposed investments would have three main objectives: (a) rapidly replacing lost hospital bed capacity which is urgently needed and for which there is no alternative financing available; (b) allocating tertiary and secondary hospital care to separate facilities to increase cost effectiveness; and (c) transferring hospital services closer to the target population to increase access and reduce costs. 4. The first objective is the most important in the short term. The CNN services were working at between 80% and 100% capacity before the earthquake. Since other IKSS, SS and private hospitals in the metropolitan area were also working at more than 80% capacity and suffered similar capacity losses, they will not be able to absorb more than a small proportion of displaced IMSS patients. The previously existing capacity at the CNN must, therefore, be quickly restored. 5. The second objective is important in the medium term. The CH was built and equipped to provide the most sophisticated tertiary level -58- ANNEX VIII Page 2 of 5 hospital services. However, about 40% of the volume of demand was of a less sophisticated nature, requiring lower intensity of care. General (second level) hospitels could meet this demand at a lower-unit cost per intervention. IMSS had prior plans to bring about a restructuring of services in line with the demand profile, but had been hindered in these efforts by lack of funds and by the strong resistance of its staff, which preferred to work in high4technology centers. The destruction of the CEH by :he earthquake provides the opportunity to carry out long needed reform. 6. The third objectite of the proposed plan is long term in nature, and would help IMSS's ongoing decentralization efforts. About 40% of ISS hospital beds are in the city center, and are more than two hours away for 7 of the 10 million IMSS beneficiaries who live in Metropolitan area. Long distences increase the costs of transportation and of time lost for beneficiaries, makes scheduling of hospital visits and hospitalization more difficult and delays service response in emergency cases. The situation is worsening because most new beneficiaries live in the periphery of the metropolitan area at progressively longer distances from the center, or in the interior of the country, which requires the transfer of patients over long distances. Decentralization of hospital facilities is a major long term goal to improve access and efficiency which could be served under the reconstruction project. Proposed Investments and Estimated Costs 7. There are two proposed groups of investments. The first would be the construction and equipping of six "second" level (zonal) hospitals to serve an estimated population of 1.2 million in the periphery of Metropolitan Mexico. Five 164-bed, and one 360-bed, hospitals would provide the following ambulatory and hospital services; gyneco-obstetrics, pediatrics, general surgery, internal medicine, orthopedics, trauma, ENT (ear, nose and throat) and ophthalmology. The required one bed per 1,000 population was estimated on the basis of IKSS experience and takes into account projected limited resources. The technical and operational parameters for this type of hospital are in the project file, and the plans and specifications are in the working files. Plans and specifications are in line with the main IMSS goal of maximizing the use of paraprofessional staff, who are the most expensive recurrent input. 8. Building and equipment cost estimates, net of taxes and land costs, are based on 75 square meters per bed; and on December, 1985 physical plant costs of US$292 per square meter and equipment costs averaging 42% of physical works, for a total cost of about USS415 per square meter or US$31,100 per bed. These estimates were based on regional and local cost analyses for the whole country, cross referenced with detailed construction estimates for the support areas of a 120-bed hospital and compared with IMSS estimates for three different types of hospital facilities. Estimates of unit costs were updated based on IYSS analyses of past and expected price escalation in building materials and equipment. On these bases, the average total cost per 164-bed hospital would be USS5.1 -59- ANNEX VIII Page 3 of 5 million, and the cost of the 360-bed hospital would be US$11.2 million, for a grand total cost in this category of US$44.8 million including price contingencies for the specific inputs. 9. The second group of investments would consist of the construction, remodelling and upgrading of five secondary-tertiary level regional hospitals of different sizes totalling an estimated 838 beds in the cities of the Ciudad Obregon, Veracruz, Leon, Puebla and Merida. The proposed hospitals would enable the five health regions to become fully autonomous in the provision of all types of health care and would substantially reduce the need to transfer third level patients for treatment in Mexico City. Bed costs are estimated on the basis of 95 square meters per bed. The average constructon cost was estimated at US$292 per sq. meter and the average cost per bed at US$27,740. Adding equipment costs estimated at 65% of the cost of civil works; and adjusting for the impact on unit prices originating in regional price differentials and soft overall demand for construction materials in the interior of the country would result in total costs per bed of USS45,770. On these bases, the total cost of these investments would be US$48 million. 10. The estimated costs by year are given in Attachment A. Project costs per bed are well below international standards for the proposed types of facilities. Projected savings would be made because IMSS would be the general contractor (which would save an estimated 15% to 20% of costs), would make use of its preeminent positin in the building sector to contract work at preferential rates, and would practice its customary strict cost controls. The sub-project's base cost of US$93 million was increased by f5% to cover physical contingencies (mainly related to the hospitals in the interior, see below), for a total estimated sub-project cost of USS106.8 million. Bank Participation 11. About US$43 million or 40% of estimated component costs would be in foreign exchange and the balance of US$64 million would represent local costs. The Bank would finance US$75 million or 70% of total construction and equipment costs, which would cover all foreign exchange needs and about one half of local costs. Procurement 12. Roughly 75% of the investment expenditures would be made for civil works and 25% for the purchase of machinery, equipment and furniture. Procuredent would be made on the same bases as for the proposed reconstruction project as a whole, which are similar to lESS's normal procurement procedures. The construction industry in Mexico is well developed and would be capable of building the proposed hospitals. Civil works would be carried out by private builders following LCB procedures which would not exclude foreign contractors who follow Mexican law. ICB procedures would be followed for the purchase of machinery and equipment. Purniture would be purchased under LCB procedures. IMSS has a long - 60 - ANNEX VIII Page 4 of 5 tradition of contracting and supervising the construction of health care facilities, and doing so efficiently. Its long experience with private builders, the regular updating of suppliers lists, the quarterly updating of unit costs-of materials and equipment for all regions of Mexico, and close on-site supervision would facilitate timely procurement. Implementation 13. INSS's physical infrastructure unit would be fully responsible for implementing of the health care sub-project. The key to successful implementation would be IMSS's well proven capability for building hospitals efficiently and in a timely manner. Plans and specifications for the proposed woks are the most adequate for the purposes intended. The .proposed investments would be made over a two-and-a-half year period beginning in April, 1986. About USS48 million would be spent in the first year of implementation, US$42 million in the following twelve months and USS2.5 million in the last six months of implementation. Important factors that will facilitate timely implementation are that all construction sites have been purchased, soil and other tests are being made on seven of the eleven construction sites and IMSS's construction staff are already being allocated to the areas. Beneficiaries 14. All IMSS's patients will benefit from the proposed investments. The project will have a special impact on the Mexican poor, both because ISS covers 40% of the population, and because 80% of IMSS's beneficiaries have incomes which are less than twice the minimum salary. Access to hospital beds and to outpatient clinics will be increased nationwide. This is particularly important in the case of emergency services, which are among the highest priorities and are available both to the insured and the non-insured. 15. IKSS will also benefit from the proposed investments through a more rational distribution and use of secondary and tertiary levels of care, which should reduce unit costs. IMSS will also profit from the lessons learned from the earthquake. The proposed facilities are smaller, will be located in areas of less risk of future earthquake damage and their structures will be reinforced to better withstand future earth tremors. Risks 16. The risks would be reasonable for an emergency operation of this kind. The most Important element in reducing risks is the IMSS itself. IMS's organization, management and past performance are of high quality and eliminate the need for any institutional changes to carry out the component. INSS's long term programming of capacity expansion would facilitate the proposed investments and bring them in line with medium and long term needs of the ageAcy. The detailed construction proposals are an excellent basis for implementation. The volume of proposed works is similar to past IMSS construction levels and should present no special problems. -61-- ANNI VIII Page 5 of 5 17. The only outstanding risk originates in the diverse nature and complexity of the proposed construction, rehabilitation, remodelling and upgrading of hospitals in the interior of the country, which are not amenable to standardization and, to that extent, will require more preparatibn, and entail slower implementation than the second level facilities planned for the Metro periphery. The proposed works are the most cost-efficient, because they would make maximum use of existing infrastructure, but their execution will require close monitoring to avoid construction delays. March 2, 1986 -62'"- -vm Attat A MEXICO : EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT HEA2 CAtE (in US$) 1986 (1 IES at HP 431) 1987 (1 IUS at 1P 535) 1988 (1 ES atP 608) WM (6) HZ's 15S20,120,000 13,804,000 33,924,000 (5) oW's =S 6,254,000 27,804,000 2,458,000 36,516,000 TriTA CIVIL TRImS USS26,374,000 41,608,000 2,45B,00D 70,440,000 (6) HZ's Eus$10,849,000 10,849,000 (5) OW's 1S$11,618,000 11,618,000 7Our, apnlr US$22.467,000 22,467,000 TCrjL C. W. & I. 1S$68,841,538 41,608,155 2,457,776 92,907,460 + 15Zph6ysical t. 1 ,1 IJS$ 106,843,580 March 2, 1986 - 63 - ANNEX IX Page 1 of 2 MEXICO EARTHOUAKE REHABILITATION AND RECONSTRUCTION PROJECT Education Sector Sector Damage and Issues 1. The education sector suffered complete or partial destruction of 54 public schools for which reconstruction costs are estimated to total about US$15.7 million. Additionally, at least 1,935 schools plus the National Politechnic Institute received varying degrees of reparable damage for which repair cost estimates total US$49.2 million. This catastrophe has made the Government keenly aware of the need to provide as soon as possible additional structural reinforcement for 25,000 existing schools in earthquake-prone areas to protect buildings and student lives from future tremors of this nature. This reinforcement program is estimated to cost US$43.4 million. 2. Initially, some 680,000 students in the Federal District alone were displaced from schools which were damaged or destroyed by the earthquake. Most of the damaged schools are continuing to operate by combining two or more classes of students into single classrooms which are considered to be safe. As most schools were already overcrowded, this more than doubles the normal classroom capacity in many cases and places a heavy burden and intense stress on both teachers and students. Some of the damaged schools have been able to use facilities of nearby private schools on a part-time basis while others have been provided with temporary classrooms of various types, including discarded metro-buses. Approximately 66,000 students were still out of school as of mid-November and will be able to return to the education system only gradually as their schools begin to be rebuilt. Education Component 3. The project would include the reconstruction of 48 schools: 4 pre-primary, 17 primary and 11 secondary schools distributed throughout the Federal District and 4 pre-primary, 8 primary and 4 secondary schools distributed throughout the affected states. The estimated costs including contingencies is USS14.8 million. In addition 950 schools - primary and secondary in the Federal District will be structurally reinforced for an estimated cost of USS26.0 million including contingencies. The structural designs would conform to the newly approved D.F. Emergency Building Code and would be reviewed by one of the 400 Government approved structural engineering consultants. In addition, the reconstruction costs of one secondary and 5 primary schools would be financed by private donations. The National Reconstruction Fund and an IDB emergency loan will cover part of the repairs to 1,935 damaged school buildings not financed by this project. - 64 - ANNEX IX Page 2 of 2 4. The Secretariat for Public Education (SEP), acting through its Directorate of Planning and Programming (DPP), will be the executing agency. The DPP will have overall responsibility for planning, budgeting, coordinating, and reporting on reconstruction activities for both Federal and State schools under the project. Actual impelementation will be carried out by the Comite Administrador del Programs Federal de Construccion de Escuelas (CAPFCE) which is responsible for construction and equipping all federal schools and for assisting the Federal District and the various states, as necessary, in their school construction programs. 5. The SEP is responsible for all levels of federally-supported education (pre-school through university) which includes 67% of the nation's students and accounts for 78% of all education expenditures. State-supported schools, with 24% of the student population, are responsible for 15% of all education expenditures, while private schools with 8% of the students and municipal schools with 1% of the students account for 6% and 1%, respectively, of expenditures in the sector. 6. The DPP, as a department of the Undersecretariat for Educational Planning, is responsible for planning and programming education sector investments, for making recommendations on budget allocations, and for supervising the investment program. Thus, ultimate responsibility for project control is with the DPP. March 2, 1986 - 65 - ANNEX IX Attachment A EARTHQUAKE RECONSTRUCTION COST ESTIMATES Education Sector (Millions US$) Required Construction a/ Estimated Cost A. Total Reconstruction Federal District 3 Preprimary 1.1 d/ 9 Primary 3.5 d/ 3 Secondary 3.3 d/ States (None) R. Partial Reconstruction Federal District 1 Preprimary 0.1 dl 13 Primary h/ 2.0 e/ 9 Secondary c/ 3.0 d/ States 4 Preprimary 0.2 d/ 8 Primary 2.0 W/ 4 Secondary 0.5 d/ 15.7 C. Damage Repair 310 Schools (major repair - D.F.) 15.0 1,313 Schools (minor repair - D.F.) 19.9 304 Schools (general renair - States) 9.1 7 CONALEP Schools 1.9 1 National Politechnical Institute 3.3 Damage Repair Total 49.2 D. Structural Reinforcement 950 Schools - within the DF - at US$27,400/school 26.0 d/ 9,990 Schools - outside the DF - at USS 1,732/school 17.3 TOTAL EARTROUAKE RELATFD COSTS 108.2 a/ Foreign exchange costs for construction are estimated at 30% h/ Of which 5 schools are being financed by private donation. c/ Of which 1 school is being financed by private donation. d/ Financed in part by the Bank Loan. March 2, 1986 - 66 - ANNEX X Page 1 of 2 MEXICO: EARTHQUAKE REHABILITATION AND RE"ONSTRUCTION PROJECT TECHNICAL ASSISTANCE Objectives 1. The objective of the proposed project component for technical assistance and studies is threefold: (i) to help in setting up an agile and efficient coordinating technical unit; (ii) to assist the executing agencies with project preparation, implementation, and processing; and (iii) to develop a set of measures to improve seismic-resistant building codes and technical procedures. A preliminary cost for this component has been estimated at US$25 million. 2. As with the other project components, overall supervision of this component would be under the Technical Coordinating Group set up under the Secretariat of Financ:. Funding for studies and technical assistance would be channeled through SEDLI, DDF, and the Council for Science and Technology (CONACYT). CONACYT would be in charge of coordinating the efforts to be undertaken by the College of Engineers, the Autonomous University of Mexico, UNAM, the Polytechnic Institute and other relevant institutions. Support for the Technical Unit 3. About US$1.0 million would be used to support the Technical Coordinating Group that will operate under the Secretariat of Finance and to contract consultants to strengthen the executing agencies concerning project preparation, budgeting, programming and execution, supervision, quality control, accounting and administration. The Technical Group will consist of c staff of about 12 professionals. (The composition of the Technical Coordinating Group is given in Annex VI, para. 10). Technical Assistance for Housing Reconstruction 4. Overall, the project would not require the establishment of a new set of institutional arrangements. However, institutional strengthening would be required by SEDUE. It is estimated that US$1.0 million would be utilized for this purpose. In the case of low-income housing destroyed in the central area, a new organization is being established, Popular Housing Renewal (RHP), to operate under the Department of the Federal District. Arrangements to provide support to RHP concerning its implementing capacity are being made. Thus, help would be provided to strengthen this agency on aspects related to building plans, specifications, site development plans, construction documents, programming and execution of housing and infrastructure, and financial administration. RHP would be assisted by SEDUE through a special unit for construction management which would provide cost and quality control and detailed construction schedules with experienced quantity surveyors and field inspectors. They would be responsible for preparing weekly progress reports. - 67 - ANNEX X Page 2 of 2 Support for the Department of the Federal District (DDF) 5. About US$9 million would be required to strengthen the capacity of the DDF to implement the project. The breakdown of this amount is as follows: (i) Projects and studies required for the demolition assessments - US$4.0 million; (ii) studies of emergency seismic-resistant norms and regulations for the new building code and soils and sub-soils for the micro-zoning regulations for the Federal District - US$3.0 million; and (iii) consultants services to assist in preparation of land use and zoning plans and regulations as part of the Comprehensive Reconstruction Plan for the Central Area of Mexico City - US$2.0 million. Studies and Training of Seismic-Resistant Construction Methods 6. A program of training addressed to the needs of the engineering and architecture professions, construction supervisors and workers is being prepared by the professional societies under the Council for Science and Technology (CONACYT). This program will also include training in self-help seismic-resistant construction. Special consideration will be devoted to the need to improve technical knowledge concerning seismic resistant construction in the interior of the country. It is estimated that approximately US$2.0 million would be devoted to this subcomponent. Other Studies and Technical Assistance 7. It is expected that additonal needs for consultants and technical assistance would arise as the project progresses. An amount of US$1.6 million is budgeted for other studies and technical assistance. The needs defining the allocation of these funds will be identified as the project is implemented. March 2, 1986 - 68 - ANNEX II Page 1 of 2 MEXICO: EARTMqUAKE REEAILITATION AND RECONSTRUCTION PROJECT EMERGENCY BUILDING CODE, ITS IMPLEMENTATION AND PREPARATION OF NEW CODE 1. Although the damage observed in most of the case* was a consequence of a combination of a series of factors, the main factor was that the buildings were designed and constructed based on codes which were formulated on dynamic characteristics of ground motions (intensity and duration) that were significantly exceeded during the September 19, 1985 Mexico Earthquake. This was immediately recognized by the Mexico Goverment who appointed a Special Committee to revise the 1976 Code that was the one enforced in the Distrito Federal. The committee formulated significant changes to the 1976 codes which recognized the reasons given for the observed damage. An Emergency Code was approved and has been in force a:s of October 19, 1985. 2. It should be noted that this Emergency Code is for the Distrito Federal. There is a need to revise the earthquake codes in the other states where severe damage occurred during the September 19, 1985 Mexico Earthquake. The changes introduced in the Distrito Federal if strictly enforced will avoid serious structural and nonstructural damages to buildings in the Distrito Federal, if an earthquake ground notion of the same characteristics as the September 19, 1985 earthquake occurs in the future. Although the Emergency Code is a sound one, it should be recognized that while the existence of a sound code is necessary it is not sufficient. What is equally important is the way that buildings are constructed and maintained during their service life. Thus strict implementation of this emergency code is essential. ImDlementation of the Emergency Code for the Distrito Federal 3. The authorities of the Distrito Federal as well as the earthqUake engineering community in the D.F. are conscious of the importance of the strict implementation of the emergency code and have already started to develop a series of programs to assure suci implementation. For example the Instituto Mexicano del Cemento z del Concreto (IMCYC) has already organized a seminar on "Evaluation and Repair of reinforced Concrete Structures (which is based on the Emergency Code)." Similar seminars will also be organized by the Colegio de Ingenieros. Suggestions for effective implementation of the emergency code are given in Attachment A. It is recommended that the activities suggested be developed not only in the D.P. but in all the cities of the other states that could be affected by severe earthquake ground motions. The duration of the workshops (which should concentrate in specific subjects) can vary from 2 to 5 days. The duration of the courses can vary from 2 weeks to 4 months depending on the intensity of the activities during the day as well as the subjects to be covered in the course. It should be noted that already there are in Mexico different institutions that have offered in the past such workshops and courses. For example the "Instituto de Ingenieria" de la UNAM and the INCIC have in the past organized short courses and workshops for professionals, engineers working in earthquake engineering. The "Instituto de Capacitacion de la Industria de la Construccion" has courses for supervisors, technicians and employees working in the construction industry. - 69 - ANNEX XI Page 2 of 2 Therefore all that is needed is to coordinate these already existing activities and modify and/or introduce new courses according to the changes introduced in the code and the practical requirements of the new code and new methods for earthquake-resistant design and construction. Development of the Rev Code 4. Already a Committee has been appointed to develop a new code by December, 1986.Although the approved emergency code conceptually is a sound one, some of quantifications (numerical coefficients, and empirical expressons) can be questioned due to the lack of reliable data. Therefore it is of paramount importance that Mexico's researchers and professionals carry out the necessary studies to obtain the needed data. Some of these data can be obtained only through measurements in the field from instruments that need to be installed. Other information can be obtained through integrated analytical and experimental studies to be conducted in the laboratories of research institutes. Examples of needed studies follow: (a) Microzoning Ordinance. To improve present classification of soil and sub soil conditions in the D.P. as well as in other cities (Lazaro Cardenas, Ciudad Guzan, Acapulco) it will be necessary to conduct boring (drilling) to determine the variation of soil profiles and depths of the different soil layers. (b) Response Spectra. To be able to formulate more reliable design spectra, it will be necessary to record ground motions. (c) Efficient Structural Systems. Experimental and analytical studies are required to determine the efficiency of present structural systems that are used (example, can the flat or waffle slab system be used efficiently? What has to be done to improve their seismic response). (d) Quality of Materials. Economical ways of improving the aggregates (fine and course) that are used in the production of concrete. (e) Determination of More Reliable Design Excitations. For example the case of live load that should be used in combination with seismic effects. (f) Proper Foundation Systems: Friction vs Bearing Piles. Use of Balanced Foundation. - 70 - MEXICO: EARTHQUAKE RERABILITATION AND RECONSTRUCTION PROJECT ANNEX XI Attachment A Implementation of Building Codes Suggestions To organize workshops and courses where not, only recognized authorities in the different fields or aspects involved in seismic-resistant construction will discuss and illustrate the different subjects but also will prepare notes with specific examples of applications. These workshops should he organized for the different professionals, technicians, and governmental officers and representatives of the industry involved in construction of buildings. 1. Inspectors: Capable Engineers would he exposed to all the aspects of earthouake design (modeling, numerical analysis, proportioning, and detailing of memkers and their connections and supports), construction and maintenance, and their importance. 2. Designers: Architects would study the importance of prover selection of building configuration, structural layout (regularity) as well as the significant effects of the so called "non structural" components. 3. Structural Engineers: They would study methodologies to improve the selection of structural systems as well as of the "non structural" components, and of proportions and simple detailing for large "ductility" which can he carried out in the field. a. Contractors: They would study the importance of auality control of materials, workmanship, prover construction of scale building models that have been designed, curing, etc., during period of construction. 5. Technicians: Construction superintendents, would study all the aspects indicated for the Constructors. 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