Ecuador - Second National Low-Income Housing Project

Document of The World Bank FOR OFFICIAL USE ONLY 41; 3@f- Report No. 6948-EC STAFF APPRAISAL REPORT ECUADOR SECOND NATIONAL LOW-INCOME HOUSING PROJECT December 15, 1987 Infrastructure and Energy Operations Division Latin America and the Caribbean Regional Office This document has a re;tricted 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 EQUIVALENTS Currency Unit = Sucre (S/.) Annual Average 1986 US$1 S/.151 Since August 14, 1986, the Ecuadorian currency has been floating. As of August 1987, th. rate was as shown below. US$1 = S/. 195 S/.1 = US$ .005 S/.1000 = US$ 5.12 WEIGHTS AND MEASURES 1 meter (m) - 39.37 inches i square meter (m2) 10.76 square feet 1 kilometer (km) 3 0.62 mile 1 hectare (ha) 2.47 acres 1 liter (1) 0.26 US gallon FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS BCE - Banco Central del Ecuador (Central Bank of Ecuador) BEDE - Banco Ecuatoriano de Desarrollo (Ecuadorian Development Bank) BEV - Banco Ecuatoriano de la Vivienda (Ecuadorian Housing Bank) GTZ - Gesellschaft fur Technische Zussamenarbeit (Society for Technical Cooperation - Germany) IDB - Inter-American Development Bank (Banco Interamericano de Desarrollo) IESS - Instituto Ecuatoriano de Seguro Social (Social Security Institute) JNV - Junta Nacional de Vivienda (National Housing Board) USAID - U.S. Agency for International Development  FOR OMCIAL USE ONLY ECUADOR SECOND NATIONAL LOW-INCOME HOUSING PROJECT STAFF APPRAISAL REPORT Table of Contents Iff, No. LOAN AND PROJECT SUIR*ARY *.................. ............. ii I* TBE SECTOR .......................................1 General .......................................1 Housing *....... ... ................................. Sector Institutions ...................................... 2 Problems ard Constraints in the Sector ......................3 Government Policies ......................... 00000000000004 International Lending in the Sector .........................4 Bank Sect~er Strategy .............................6 II. THE PROJECT 6 Project Origin ....,......................................6 Project Rationale 6 Project Objectives and Relation to the Sector 7 Project eclto7 Project Costs . linancing Plan ... OOoO,. ..o... 9 Status of Deeign Works ........... ............o.........10 Land Acquisition ........................100#000000*0*4000-0.10 Institutional and Legal Arrangements 10 Project Execution 12 ....... Procurement 1 Disbursements 00 Financial Analysls ................, 15 Operating Results ................. 15 Interest Rates 11 Construction Period ....17 Persotnel Expenses 18 Accounts and Audits 19 Cost Recovery 19 Benefits 2 Ecouomic Analysis ....... UbenPoefits Xp ............................................... ..#21 Urban Poverty Ipc..00.o00 Risks 02 III. AGREEMENTS REACHED AND RECOMMENDATIONS 23 Agreements Reached During Negotiations. .....................23 Conditions of Loan Effectiveness. ............................24 Conditions of Disbursement....0.. 000oo000000000000000 24 Reco _ ndation ******o***oooooo*ooooo025 This report is based on the findings of an appraisal mission which vislted Ecuador from January 26 - February 6, 1987. The mission was comprised of Messrs. T. Persaud and A. Zuniga (LCPUR) and Mr. P. Doty (Consultant). Ms. T. Carbonell assisted in the production of the report. 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.  - ii - ANNEXES ANNEX 1: Housing Sector Profile ANNEX 2 Table 1: Total Project Cost Table 2: Average Cost by Shelter Prototype Table 3: Estimated Schedule of Disbursement ANNEX 3: Construction Details and Materials ANNEX 4: Implementation Schedule ANNEX 5: Summary - Terms of Reference and Estimated Costs of Consultants for Technlcal Assistarce ANNEX 6: Summary of Personnel BEV and JNV, 1984-1986 ANNEX 7: Table 1: Condensed Balance Sheets 1984-93 Table 2: Condensed Statement of Results 1984-93 Table 3: Condensed Statement of Sources and Uses of Funds 1984-93 ANNEX 8: BEV-Unsecured Home Loans and Mortgage Loans ANNEX 9- New Lending System ANNEX 10: Action Program 1988 ANNEX 11: Economic Rate of Return Caletlations ANNEX 12: Price and Wage Index 1970-1986 Map: ~IBRD 18179  - iii - ECUADOR SECOND NATIONAL LOW-INCOME HOUSING PROJECT Loan and Project Summary Borrower: Republic of Ecuador Beneficiary,: Banco Ecuatoriano de la Vivienda/Junta Nacional de la V4vienda (BEV/JNV) Amount: uS$60.0 million equivalent Terms: Repayable over 17 years, including 4 years of grace, with interest at the Bank's standard variable rate. On-Lending Terms: The Borrower would onlend the entire proceeds of the Bank loan in Sucres to BEV at a variable rate established from time to time, equivalent to the rate paid by BEV on savings deposits (currently 20X). The Government would bear the foreign exchange risk. P-r2iect Description: The loan would finance a share of BEV's 1988-1993 investment program which would be implemented throughout Ecuador through BEV, JNV and private developers. It would also support adoption of new financial policies and instruments to improve resource mobilization and allocation and housing affordability in the sector and promote institutional reforms within BEV and JNV to make them more efficient. The loan would finance (i) approximately 12,000 serviced lots with or without dwelling units, (ii) about 15,000 home improvement credits (iii) vehicles and equipment for project implementation and (iv) technical assistance for project agencies. Benefits: Apart from the construction of shelter, a maJ.r benefit would be the introduction bv BEV of a long-term mortgage instrument bearing market-related variable interest rates and featuring partial capitalization of interest. This would promote mobilization of domestic resources for shelter while improving resource allocation and shelter affordability. As a result of the institutional restructuring of BEV and JNV, and the adoption of the above-mentioned mortgage instrurent, by the end of the project BEV would function more effectively as a financial institution, JNV would function more effectively as a developer, and BEV would mobilize a larger share of its rer-urces fror the market. The project would also encourage private developers to build low-income housing.  - iv - Risks: There is little risk regarding physical works; JNV has an adequate land acquisition program underway and ample experience with developing necessary services. Rome-improvement lending faces no particular physical risk. The main risk is that the new Government entering office in August 1988 may not sustain the financial and institutional policy reforms which underpin the project. The risk that this might occur is tempered by the fact that: (i) the proposed institutional reforms are extensions of ones which have already been accepted and are underway under previous Bank-supported projects in the sector; and (ii) the austere economic climate that will likely prevail during the life of the project will continue to require that the thrust of the proposed reforms be maintained. Estimated Project Cost: Local Foreign Total -- US$ million -- Land and Infrastructure 9.3 3.4 12.7 Home Improvement Loans 18.4 5.6 24.0 Housing Units 28.4 9.5 37.9 Technical Assistance 0.3 1.1 1.4 Vehicles and Equipment - 0.5 0.5 Project Administration 2.5 - 2.5 Base Cost (November 1987 prices) 58.9 20.1 79.0 Physical Contingencies 2.8 0.8 3.6 Price Contingencies 2.3 0.8 3el Total Project Cost 64.0 21.7 85.7 1/ Financing Plan: Local Foreign Total =---- tUS$ million IBRD 38.3 21.7 60.0 BEV/JNV 17,1 - 17.1 Beneficiaries 8.6 - 8.6 = - Total 64.0 21.7 85.7 Estimated Disbursements: Bank Fiscal Year 1988 1989 1990 1991 1992 1993 -