Bolivia - Transport Sector Strategy Sector

Document of The World Bank FOR OFFICIAL USE ONLY CONFIDENTIAL Report No. 6882-BO POLIVIA TRANSPORT SECTOR STRATEGY PAPER July 10, 1987 Transportation Division Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by reelpients only In the performance of their officdal duties. Its contents may not otherwise be discosed without World Bank authorisation. CURRENCT EQIVLNT (at 5/31/87) 1.00 boliviano ($b) = US$0.50 2.00 bolivianos ($b) US$1.00 ACRONYM AND ABREVIATIONS AASANA Airports Authority ("Administracion de Aeropuertos y Servicios Auxiliares a la Navegacion Aerea") ADT Average daily traffic CORDECRUZ Santa Cruz Department Development Corporation CORDEPAZ La Paz Department Developoment Corporation LIT Comprehensive Transport Study ("Estudio Integral del Transporte") EITC Interprovincial Freight Transport Company ("Empress Interprovincial de Transporte de Carga") ENFE Bolivian National Railway ("Empresa Nacional de Ferrocarriles") ENTA National Road Transport Company ("Empresa Nacional de Transporte Automotor") FEPASA Sao Paulo State Railway ("Ferrovia Paulista, S.A.") GDP Gross Domestic Product IADB Inter-American Development Bank LAB Lloyd Aereo Boliviano MTC Ministry of Transport and Communications RFFSA Brazilian Federal Railway ("Rede Ferroviaria Federal, S.A.") RIC Reconstruction Import Credit SNC National Road Authority ("Servicio Nacional de Caminos") TU Traffic units UNDP United Nations Development Programme BvLLV IA TRANSPORT SECTOR STRATEGY PAPER Table of Contents Page No. SUMMARY ............................................... 1 I. GEOGRAPHIC AND ECONOMIC CONTEXT ......................... 8 Export Corridors ..................................... 8 Internal Geography .................................. 8 Economic Development ................................. 9 Present Economic Situation .......................... 10 Users' Expenditures on Transport ..................... 11 II. TRANSPORT SERVICES - USERS' ATTITUDES, REGULATION AND PRICING ***********************........................ 12 Trucking ********************OO..... .......... 12 The Railways' Competitive Position and Pricing ....... 14 River Transport .....*****.......................... 18 III. RECOMMENDED TRANSPORT INVESTMENTS ....................... 19 Priorities for Infrastructure Planning ............... 19 Constraints Determining the Transport Investment Budget ********............... 20 Recommended Investments: (i) Road Maintenance and Rehabilitation ................. ......... 21 Recommended Investments: (ii) Santa Cruz to Cochabamba 23 Recommended Investments: (iii) Export Corridors ...... 25 Projects Excluded or Deferred ........................ 27 Other Considerations ................................. 28 IV. INSTITUTIONAL WEAKNESSES ..................c..... 29 The Comprehensive Transport Study c.00............. 30 Organization of Transport Agencies .o*........o...e 30 (Continued) This paper was prepared by Messrs. Graham Smith (transport economist and mission leader), Robin Carruthers (transport economist, consultant), Jorge Lanas (highway engineer) and Noor Rasheed (financial analyst), on the basis of a visit to Bolivia in April, 1986. Tables of Contents (Contd.) Page No. . V. RECOMMENDED DEVELOPMENT STRATEGY AND PROPOSED BANK ASSISTANCE ............................................ 31 Recommended Strategy for the Government ............... 31 Bank Assistance Strategy .............................. 32 TABLES I Transport Sector Investment Plan, 1987 to 1990 Summary of 1987 to 1990 Investment Plan ............. 33 2a Transport Sector Investment Plan, 1987 to 1990 Servicio Nacional de Caminos ........................ 34 2b Empresa Nacional de Ferrocarriles ................... 36 2c Administracion de Aeropuertos y Servicios Auxiliares a la Navegacion Aerea ....................... 37 2d Lloyd Aereo Boliviano .............................. 38 2e Sub-Secretaria de Intereses Maritimos, Fluviales y Lacustres ..................... 39 3 Distances to Deep Water Ports ..............,,....... 40 4 Distribution of Land, Population and Transport Infrastructure ....................... .. .. 41 5 Total Expenditures by Transport Users ................. 42 6 Current (April 1987) Transport Tariffs ................ 43 7 Public Sector Consolidated Budget for 1987 ............ 44 8 Investments Proposed by Government in Santa Crus to Cochabamba Corridor ............................. 45 9 Investments Proposed by Government in Export Corridors. 46 10 Transport Studies Under Way or Planned ................ 47 MAP IBRD 20445 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER SUMMARY Outline of the Paper (i) This paper is designed to provide a basis for the World Bank's dialogue with the Bolivian Government on transport issues. It analyses the policies, planning priorities and institutional provisions which we believe stand the best chance of serving the Bolivian economy well in its present difficult circumstances; and within that framework, it identifies the investments which the Bank wo.:ld be willing to support financially. The paper does not aim to be exhaustive; it focusses on the issues we consider of broadest significance or on which we have most to offer. For these reasons aviation, notably, is only lightly touched upon. Chapter 1, intended primarily for Bank readers not familiar with Bolivia, reviews the country's economic geography and history, to explain the unusual importance of transport in Bolivia. Chapter 2 analyses present transport services by road, rail and river, and makes recommendations in two Key areas of concern to transport users: the regulation of road transport and railway pricing. Transport investment planning, arguably the most important issue, is analysed in Chapter 3. Institutional problems are examined briefly in Chapter 4. Finally, conclusions as to future World Bank involvement are set out in Chapter 5. The Problems (ii) Infrastructure: Bolivia faces huge problems of transport infrastructure: distances between cities are great, rural areas are thinly populated, mountains and rivers act as barriers, and the country has no direct access to the sea. These natural disadvantages are formidable and dictate that transport costs will be high throughout the economy. Bolivia has to spend considerably more on transport to produce every dollar of GNP than most countries. It is estimated that road users spend US$0.7-0.9 billion per year on vehicle operating costs, equivalent to 18-23% of GDP; the corresponding figure in many developing countries is only 10-12% (para 1.21). (iii) A further burden is caused by the collapse in recent years of the mining industries on which Bolivia has traditionally made its living. Future economic prospects require that the economic center of gravity shift from the Altiplano, where half of the population now lives, to the lowlands, still largely unpopulated and devoid of transport infrastructure. This requires major new investments as a prerequisite to economic recovery, since the existing infrastructure is, to a significant degree, in the wrong part of the country for future needs. (iv) Compounding these natural obstacles and the demands imposed by the rest of the economy are problems of the transport sector's own making. Maintenance of the road network has been very deficient. Lengthy sections of the once-paved Cochabamba-Santa Crus highway, the backbone of Bolivia's -2- transpo-t system, have been allowed to deteriorate to such an extent that it has proved preferable to rip up the asphalt and return the surface to gravel. Drainage has been neglected on many roads, in a land where sudden heavy ra-.s can, at the very least, render roads impassable for days on end and, at tne worst, completely wash away roads and bridges, the accumulated capital of earlier decades. And thirdly, planning of transport investments has been haphazard and poorly coordinated. As a flagrant example, 80 km of Zhe La Paz-Cochabamba highway, the other segment of the "national backbone", is still unpaved, while paved roads have been built elsewhere of far lower economic priority for the country. Likewise, incomplete improvements to several alternative export road and rail corridors have been undertaken, whereas concerted efforts to achieve one or two efficient routes would have been more profitable. (v) Policies: Before jumping to the conclusion that the answer lies in spending more on infrastructure, it is appropriate to ask whether the cost of transport could not be lowered by actions to make transport services more efficient. Such initiatives could come either from private operators themselves, or from the Government in its capacity as owner of the railway (ENFE) and national aitline (LAB), and as regulator of the private sector. The mission considers that in Bolivia, unlike the majority of developing countries, such problems are secondary as far as government action is concerned. Government policies, set out in the basic reform decree of the present administration (Supreme Decree 21060 of August 1985) are generally well-conceived and warrant support. Nonetheless the question deserves attention, since even small percentage improvements in the productivity of road transport (in particular) yield large savings in absolute terms. (vi) Regulation: With few exceptions, entry into road, water and air transport is free, and pricing is left to negotiation between operators and users. In principle this suggests that prices will reflect operating costs and move flexibly, and that a diversity of services will be offered in response to users' needs. In practice this does indeed seem to be the case. Users interviewed by the mission expressed concern about high transport costs, but it is the distances and the poor infrastructure that seem largely to blame. (vii) Trucking: The departmental transporters' associations ("sindicatos"), who until 1985 had a legal monopoly of road transport (freight and passengers), retain a strong "de facto" hold on trucing supply and are alleged to keep rates high. The toll barriers on all major roads, where sindicato representatives often station themselves in addition to the government personnel, appear to give the sindicatos a powerful instrument for deterring would-be independent truckers. Decree 21060 called for the barriers to be eliminated, so far without effect. On the other hand, current rates are not high by international standards for the relatively small trucks that predominate in Bolivia (para 2.6). Larger trucks, used intensively, could bring unit costs down, but the poor condition of many roads makes it infeasible to operate tractor-semitrailer combinations. At the same time, there is evidence to suggest that there is considerable excess truck capacity in the market, leading operators to charge less than what is needed for financing replacement of their aging vehicles. Under these circumstances new entry is unattractive. It cannot be said, however, that market torces are -3- not working; these developments are the consequence of earlier policies and the 25-30% contraction of demand since 1980. (viii) Railway: The Bolivian railway is one of the very few in the world whose revenues in 1986 fully covered its costs, including interest, without government subsidy. However, its freight rates are unusually high, for at least five reasons: (a) difficult terrain slows train speeds and limits line capacity; (b) traffic volumes are low, so that overheads are high per ton carried; (c) a high percentage of locomotives are out of service for want of repairs; (d) freight trains cross-subsidize passenger fares, which are so low that they do not even cover short-run variable costs; and (e) debt service obligations are substantial. The rpOlway's ability to survive financially despite these high rates seems to depend partly on the long haul distances, which intrinsically favor rail over the road competition, and partly the poor quality of the road network and the low tonnag3 capacity of the present truck fleet. As the roads and the truck fleet are improved in the future, the railway can expect to come under increasing competitive pressure, forcing it to concentrate on services where high volumes of bulk traffic can be achieved. (ix) Financing: The public officials who have to face these problems are severely constrained financially. Government revenues declined almost to zero during the hyperinflation crisis of 1983-85. The fiscal reform now underway is only just beginning to create a capac.ty to finance public investments. For now, Bolivia is heavily dependent on foreign aid. FortunaLely, it has been forthcoming from several different sources. Their very diversity, however, has the disadvantage of burdening public managers and planners with a complex task of cordination. The picture is further complicated by the determination of the regional ("departmental") development corporations, who retain 10 or 11% of all taxes and royalties collected in their jurisdiction, Zo undertake investment projects at their own initiative. Both ODRDEPAZ and ODRDECRUZ have already embarked on programs of road construction costing several million dollars per year, to open up new agricultural areas in the lowlands. (x) Human Resources: The same fiscal collapse has also hobbled the Government as to manpower. It cannot afford to pay decent salaries to attract and retain competent managers and planners. The Bolivian counterparts to the expatriate consultants who carried out the Comprehensive Transport Plan study ("Estudio Integral de Transportes" - EIT) between 1978 and 1983 have now all left the Government for privit consulting and teaching. The public sector has to make do with the few dedicated and overworked professionals it has; solutions to problems that would be "management-intensive" are doomed to failure, (xi) At the same time, the Government is under severe pressure to create employment for the many thousands of displaced miners. Public works are a popular option. How this can be reconciled with the Government's fiscal austerity policies is far from clear. -4- Recommendations (xii) Regulatory Policy: The provisions of Supreme Decree 21060 regarding road transport regulation should be sustained. There seems no case for the Government to intervene in the trucking market, other than (a) to ensure that existing operators do not intimidate prospective new entrants, and (b) to strengthen measures to promote vehicle safety (annual inspections and roadside checks). (xiii) The toll barriers should be abolished, as is already stipulated in Decree 21060. The Ministries of Finance and Transport should give thought to alternative ways of charging road users for the wear and tear they cause the network. The optimum is probably a combination of a charge on fuels and annual license fees graduated according to the axle loading of each vehicle type. Even though substantial resistance can be expected to further taxes in general and fuei price hikes in particular, the local cost needs of the investment program make further resource mobilization imperative. * (xiv) Railway Pricing: The railway needs to adopt a more market-oriented attitude, basing decisions as to which traffice to seek and what prices to charge on knowledge of the marginal (or avoidable) cost of providing each service. This requires implementation of the cost-accounting systems recommended by a 1986 consultant study, and restructuring of the freight and passuager tariffs. (xv) The Government should sustain its policy of not subsidizing operations, which implies raising passenger fares by 50-60% on average. This and various cost-cutting measures will allow ENFE to lower its wagon-load freight rates by 20-30% (para 2.25-27). (xvi) The mission reserves judgement on whether the Government should assume ENFE's past debt. In either case it should establish criteria to guide future sharing of capital expenditures between the railway and the Government. The mission recommends that investments needed to maintain the network at its present carrying capacity should as a matter of principle be the sole responsibility of the enterprise. If the Government wishes ENFE to undertake economically justified investments in new lines or major increments to capacity and ENFE is unable to borrow the financing needed, then the Government should provide partial financial support according to preestablished cost-sharing pe-centages. (xvii) Investment Priorities: The Ministries of Planning and Transport need to establish mechanisms and criteria for selecting investment projects from among the very long shopping lists put forward by the moial agencies. The total cost of wished-for projects in the transport sector far exceeds the Government's capacity to finance and implement them. Four priorities are suggested, in descending order: (a) maintenance and rehabilitation of existing road and rail facilities; - 5 - (b) integration of the three main populated areas of the country by the paving of sections still unpaved of the La Paz-Cochabamba-Santa Cruz highway; (c) upgrading of two priority export corridors, one to the Atlantic and one to the Pacific. The prime contenders are the road or rail from Arica to La Paz and the rail line from Santa Cruz to Puerto Quijarro/Cbrumba, together with port facilities on the River Paraguay and an intermodal terminal at Santa Cruz; and (d) construction of penetration roads to areas of high agricultural potential, likely to be concentrated in the eastern lowlands of Santa Cruz department. (xviii) These priorities coincide approximitely, though by no means completely, with the investment projects now under way and/or those with external financing already committed. On this basis the mission has identified a recommended transport investment program for the four years 1987-90 (Table 1). Its total cost would be about US$620 million, or an average of about US$155 million per year. This is equivalent to about 3.4% of GDP (assumed to average US$4.5 billion in 1987 prices). A further $10 million per year is recommended for routine road maintenance (0.2% of GDP). Table 2 lists the recommended projects. The modal shares in the investment program are: roads 82%, railways 13%, aviation 2% and waterways 3%. (xix) This level of investment, while substantially less than the Government's present declared intentions, nonetheless exceeds by US$20-30 million per year what the Bank would defend as a prudent allocation of resources over the longer term. It is also questionable whether the money can be found from either domestic sources (more taxes?) or external sources (more debt?) to cover the gap of nearly $80 million per year not yet assured of foreign financing. (xx) Almost all projects in the recommended program already have at least some foreign financing promised; those which have none are included because we consider them of highest priority. The international community needs to be persuaded to put a larger part of its financing into rehabilitation and maintenance and less into new construction. If the financing gap cannot be closed, we would argue for re-examining those projects which offer lower rates of return, or whose benefits are most uncertain or vulnerable to delays, and which have foreign financing promised for only a minor part of their cost or which could be reallocated. They should be re-examined with a view to slowing them down, reducing their scope, or adopting less costly design standards. (xxi) Two roads included because of their high economic priority, even though no foreign assistance is yet available, are: (a) Confital - Caihuasi, the "missing link" on the La Paz-Cochabamba highway (its design standards need to be modified to reduce its cost); and (b) Patacamaya-Tambo Quemado (the Bolivian portion of the La Paz-Arica road), though only bridges and culverts should be constructed for now to keep the road open year-round. -6- (xxii) The recommended program excludes a number of projects being considered by the Government, among them: (a) an interconnection of the Andean and Eastern rail systems; (b) a new runway for bchabamba airport; (c) rail or river-port facilities by which to export iron ore from Mutun; (d) new aircraft for LAB; and (e) various penetration roads in the northern lowlands. (xxiii) Resource Mobilization: The above strongly suggests that transport users should pay for infrastructure, wherever it is feasible and economic to do so. Specifically we recommend that the $28 million per year for routine and periodic road mwintenance should be recovered from road users (see para xiii). (xxiv) Employment Creation: The civil works should be carried out to the fullest extent possible by contract, for which there is adequate capacity if bidding is open to foreign firms (notably Brazilians). They would create about 18,000 manual jobs for the four years. Routine road maintenance (financed under the current budget) would add perhaps another 3,000. In addition, the Emergency Social Fnd could play a valuable role by funding river training works. $5 million spent on such works would employ about 2,500; there is ample demand for them in the mining region. (xxV) Strengthening Planning Institutions: The above investment choices require considerable strengthening of the planning unit of the Ministry of Transport, so that it can evaluate competing projects as to their contribution to Bolivia's economic goals, and in both the Transport and Planning Ministries, so th,' they can perform the iterative process of matching the size and timing of the investment program to available financing, internal and external. Stronger links also need to be established between the Ministry of Transport and the transport units of the regional development corporations, with the Ministry setting design standards and economic evaluation criteria to be met if the central government is to share in financing the investments. So long as government salaries remain at their present low level, much of this work will have to be contracted out to consultants. The Transport Institute of the University of San Andres in La Paz is a promising focus for building up a professional body of transport planners around the nucleus formed by members of the SIT team. Bank Assistance Strategy (xxvi) The Bank strongly supports the Bolivian Government's courageous efforts to recover from the economic crisis and endorses its policy of fiscal restraint coupled with deregulation of markets. At the same time we recognize the urgency of creating new employment and developing non- traditional exports. Transport undoubtedly has much to offer in lowering the delivered cost of exports (as well as imports) and generating jobs. The Bank -7- therefore looks on transport as one of the three key sectors for the short- and medium-term recovery program (together with agriculture and energy). (xxvii) In its operations the Bank intends to apply the priorities set out above (para xvii). Under the heading of maintenance and rehabilitation it is already financing $9.5 million cf spare parts and equipment for ENFE's locomotives, workshops and track under the first Reconstruction Import Credit (RIC 1). Under RIC II (approved in June 1987), a further $8.5 million for the same purpose (including technical assistance) is to be provided, together with $3.6 million for road maintenance equipment and spare parts and corrugated metal culverts, to be used by the Servicio Nacional de Caminos in an emergency rehabilitation program for the La Paz-Cochabamba highway and main roads feeding into it. Japanese co-financing is being arranged for a substantial part of this crash program. Beyond that a road project has been identified for rehabilitating secondary roads in the Altiplano using labor-intensive methods. It is hoped that it can be appraitid early in FY88; financing may be channeled through the Emergency Social Fund. (xxviii) There is a strong case for the Bank to help finance the upgrading of priority export corridors. Accordingly we intend to conduct a study starting in FY88 as part of our sector work program, with a view to identifying an Export Corridors Project for FY90S. In parallel with this, ENFE is preparing a proposal for a fourth railway rehabilitation loan, not at present foreseen in the lending program. Since the Santa Cruz-Corumba line is likely to feature in any export corridor project, and possibly also the Arica-La Paz line, it may be feasible to incorporate the essentials of the railway rehabilitation proposals into the export corridors project. - 8 - Chapter 1. GEOGRAPHIC ANP ECONOMIC CONTEXT Export Corridors 1.1 Bolivia is one of two land-locked countries in South America. It is bordered by five other countries: Peru, Chile, Argentina, Paraguay and Brazil. Bolivia's access to the ports of these countries is somewhat restricted (Table 3). The rail route to the Peruvian port of Matarani is relatively undeveloped. It has to use a ferry on Lake Titicaca between the Bolivian port of Guaqui and the Peruvian port of Puno, to join the narrow- gauge Bolivian railway to the standard-gauge Peruvian railway. Several agreements to improve the rail and port facilitiee have not yet been implemented. 1.2 Access to the Chilean port of Arica has until recently been exclusively by rail, although a paved road now exists from the port to close to the Bolivian border and plans exist for the completion of a paved road from the border to join the Bolivian main road network. The rail link is operated as two separate railways, one Chilean and the other Bolivian, although wagons are exchanged between the two systems. The line has severe gradients and tunnels on the Chilean section (over 40 km at 6% slope) which, together with limited locomotive availability, restrict capacity and cause high operating costs. 1.3 The alternative Chilean port of Antofagasta also has rail access, via the Bolivian state railway and the privately operated Antofagasta railway. Although the line is used for much of Bolivia's mineral exports, its distance from La Paz (1,800 km) involves high costs for products imported by this route. 1.4 The current principal access to the Atlantic is by rail to the Brazilian ports of Santos and Paranagua. The long distances involved, over 2,500 km from Santa Cruz, combined with port congestion and a low priority for Bolivian products in the ports, result in high transport costs. 1.5 There are Bolivian free zones in the Argentinian port of Rosario and the Urtiguayan port of Nueva Palmira (see map). Access to Rosario is by rail (2,100 km from Santa Cruz) or potentially by the Paraguay River (2,700 km from the proposed Bolivian river port of Quijarro), but access to Nueva Palmirs is only by river (2,400 km from Quijarro). The long distances again result in high transport costs for Bolivian imports and exports. The potential river routes to Rosario and Nueva Palmira nonetheless offer the best prospects of low transport costs for exports from eastern Bolivia. Interna Geography 1.6 The problems of access to deep water ports &re compounded by the difficult internal geography of the country and the distribution of the population between the regions. There are three distinct geographical zones: the highlands, the lowlands and the valleys which connect them. The total area is about 1.1 million km2 and the total population about 6.4 million. The overall population density of 5.8 people per km2 is the lowest in Latin America. * 9- 1.7 The highlands ("Altiplano") consist of two major Andean chains, with peaks rising to 6,500 meters and a plateau between them at a mean elevation of 3,700 meters. The Altiplano comprises one sixth of the land area but includes more than half of the population (Table 4). Vegetation is sparce but it supports a pastoral economy which, together with subsistence farming, provides the primary basis for the livelihood of most of the population. 1.8 The mountains contain mineral deposits, the mining and exporting of which once provided the basis of Bolivia's external trade. Some mineral processing industries have been established near to Oruro and Potosi as well as in La Paz, the administrative capital. Transport on the Altiplano is better developed than in the rest of the country; over a third of both the road and rail networks are located there. The high costs of production and transport have combined with low international mineral prices to reduce the volume and value of mineral output in recent years. 1.9 The tropical and subtropical lowlands ("Llanos") cover nearly two-thirds of the country, extending from the borders with Paraguay and Argentina in the south and south east, to the Brazilian frontier in the east and north and to the lower slopes of the Andes in the west. The southern lowlands are drained by tributaries of the Paraguay River the northern lowlands by those of the Amazon. The population density is very low at only 1.9 per kma, but recently it has shown rapid growth, with considerable immigration from the economically depressed Altiplano. 1.10 The northern lowlands have until recently only been accessible by river and air transport, which, together with their remoteness from markets for their potential produce, has limited their commercial development to forestry and some beef production. The southern lowlands are more accessible and more developed, producing beef and commercial crops (sugar, rice, cotton and soya). The Bolivian petroleum industry is based in the region around Santa Cruz, the rapidly growing commercial center of eastern Bolivia. 1.11 The valleys ("Yungas"), which make up the remaining one fifth of the land area, lie on the slopes between the eastern highlands and the lowlands of eastern and northern Bolivia. The terrain is generally rugged, but there are a few broad valleys in which economic activities based on agriculture and livestock have developed. The production of Bolivia's high-value crops such as coffee is concentrated in this region. Economic Development 1.12 Until the 1950's, the Bolivian economy consisted of little more than mining production, the benefits of which accrued to interests outside the country. Few resources were invested to develop transport infrastructure other than the railway lines built to service the mining industry and a few isolated lines built with financing from the adjoining countries as compensation for territory lost in birder disputes. 1.13 A revolution in 1952 provided the basis for the development of the modern economy. A land reform program provided an initial impetus for increased agricultural production, and the nationalization of the mines and railway system ensured that more of the wealth generated by the mining - 10 - industry remained within the country. Thereafter, agriculture and mining stagnated. The next major infusion of investment capital was associated with the oil, gas and commodity boom of the early 1970's. Huge investments were made in mineral processing plants, many of dubious validity and excessive size and most with inflated costs. In the mid to late 1970's, public-sector transport investment also boomed, peaking at 4.2% of GDP in 1978 and averaging over 20% of public-sector investment in the period 1974 to 1981. 1.14 The relatively easy access to foreign exchange in the 1970's allowed the country to follow policies which were detrimental to exporting and import substitution, Low domestic prices for primary products discouraged production and exports, resulting in substantial illegal trade with neighboring countries. In the mining sector, the taxation system dampened incentives for both exploration and development and has made unprofitable the processing of Bolivian ores, most of which are low grade and require more processing than higher grade ores produced by compc!ing countries. In the hydrocarbons sector, heavily subsidized domestic prices encouraged an excessive increase in consumption, thus reducing the volume of production available for export. The poor export performance was accompanied by a substantial increase in imports, whch, by the early 1980's, had become unsustainable. Metal prices failed to maintain their upward movement, which combined with high production and transport costs to make most Bolivian mines unprofitable. Being in the public sector, they nonetheless continued in production. 1.15 A new government formed in 1982 failed to resolve the chronic problems facing the economy. Industrial production was slowing down through a lack of spare parts and supplies. Private and public-sector enterprises were in a critical situation, as a result of increased financial charges following a drastic fall in the value of the peso, while consumer prices were held low. Mineral production was declining but labor costs were increasing. The consolidated fiscal deficit was more than 10% of GDP. Inflation passed 200%. 1.16 By 1985, the economy was close to collapse. Inflation was running at an annual rate of more than 20,000%; real GDP had shrunk for the fifth consecutive year; a grossly over-valued currency, combined with a virtual depletion of international reserves, had brought export production to its lowest level ever; and rapid accumulation of interest arrears resulted from an effective halt to servicing the international debt. Present Economic Situation 1.17 The new government formed in August 1985 confronted these problems by reversing many of the policies of the previous 20 years and hopefully provided the basis for economic stabilization and recovery. The principal elements of the new economic policy are a lack of exchange and price controls; tighter fiscal and monetary management, including a complete revision of the taxation system; more realistic public-sector pricing policies and a reduction in public-sector participation in the economy, with an associated reduction in the public-sector deficit as a percentage of GDP. 1.18 The task of the new government was made more difficult by the collapse of the international prices of tin in late 1985, and of petroleum - 11 - and natural gas in 1986. In 1981, tin represented 38% of exports by value, and natural gas a further 38%. By 1986, tin represented only 26% and natural gas had increased to 56%, although in absolute terms its value was little changed. A renegotiation of the natural gas contract with Argentina in 1985 resulted in payment of two thirds of the value being in the form of Argentinian goods. With the present Argentinian exchange rate policy, these are highly priced by international standards and therefore the gas contract is of reduced value to Bolivia in terms of purchasable goods. 1.19 It is within this economic context that the transport policy for the medium term needs to be formulared. The Government's plans are, however, very optimistic; many observers would call them unrealistic. The official target for growth in GDP is about 3.7% per year between 1986 and 1990. A four-year public-sector Transport Investment Plan produced for the Ministry of Planning in 1986 indicated a total investment of some US$1,500 million (equivalent to 8% of GDP per year) and even that plan excluded the most expensive project of all, the linking of the two parts of the rail system. When all projects planned by the transport agencies were included the total value was US$2,200 million, or 12% of GDP. If public-sector fixed investment reaches 10% of GDP in the period and if transport represents 30% of public-sector investment (both reasonable upper limits), an average of only US$135 million per year will be available. To reduce the four-year total to around US$540 million will require the exclusion of many economically justified projects which have assured financing from bilateral or international agency sources. 1.20 At the same time, the Government is under intense pressure to create employment for the many thousands of unemployed: miners, others previously dependent for their living on mining communities, and public-sector workers whose jobs have been abolished. Public works are a popular option. How this can be reconciled with the Government's fiscal austerity policies is far from clear. Users' Expenditures on Transport 1.21 It is therefore imperative to explore other ways besides infrastructure investments to increase the efficiency of transport services and lower their cost to users. It is estimated that road users (rural and urban) spend US$0.7-0.9 billion per year on vehicle operating costs (Table 5). Rail users spend a further $40 million. In total this is equivalent to 19-24% of GDP. In several developing countries for which comparable estimates have been made, transport users' gross expenditures are the equivalent of only 12-13% of GDP. 1.22 The statistical base for the estimate of road users' expenditures is weak, but it does serve to confirm several points. Firstly, transport plays an unusually large role in the Bolivian economy. Secondly, infrastructure is only a minor part of the total cost of road transport; potential savings from more efficient use of vehicles and fuel may be very large relative to expenditures on the roads themselves. And thirdly, users' spending on rural road transport is probably ten times greater than on rail transport, implying that the attention the Government has given to the railway has been disproportionate. - 12 - Chapter 2: TRANSPORT SERVICES - USERS' ATTITUDES, REGULATION AND PRICING 2.1 The present administration's basic statement of economic policy, and the foundation of the economic reform program, is Supreme Decree 21060, of August 1985. Among its many provisioas, it established unrestricted entry into road and air transport, and ruled that rates and faes should be set by negotiation between the carriers and their customers. The only exception concerns urban passenger transport pricing, authority over which it delegated to municipalities. The prices of transport fuels were raised to border prices (a liter of gasoline being priced at the equivalent of 30 US cents), and they have been kept high since then, while oil prices declined. The same decree reaffirmed government control over railway rates and fares and tied them to the US dollar. It also required that they not exceed those of neighboring countries' railways, an inappropriate and unworkable aim that has not been implemented. 2.2 In general, the deregulation of road transport is achieving its desired effect, but the transition has been slow from the previous monopolization of the market by a cartel of owner-operators. Transport users show widespread interest in this development. Is the monopoly still a de facto reality? If so, what could be done to increase competition? Is Truck capacity in short supply? Are truck rates unreasonably high? At the same time, railway pricing remains a problem: the present structure of tariffs is distorted, with high freight rates cross-subsidizing very low passenger fares. Thirdly, it is relevant to ask whether the lowland rivers offer a low-cost alternative means of transport that is being neglected. This chapter addresses these three issues. Trucking 2.3 Freight shippers generally now have three choices besides the railway. They may hire a truck from the local truckers' syndicate (an association of owner-operators) or from the local branch of the government- owned haulier, EITC (Empresa Interprovincial de Transporte de Carga); or they may buy and operate their own truck. So far only a few independent operators have ventured to challenge the syndicates' former monopoly. 2.4 The background of the syndicates is that, prior to 1985, licenses for almost all categories of commercial road transport, passengers and freight, were by law restricted to members of syndicates affiliated to the Confederation of Bolivian Transporters. Transport companies, defined as firms or co-operatives with more than two vehicles, were allowed to operate only in international and inter-departmental passenger transport and international freight. In 1979 there were 130 syndicates, each affiliated to a department-level federation, which in turn belonged to the national confederation. Of the syndicates, 44 were for urban passengers and the remainder for interurban passengers and freight. Some were authorized to operate between departments, others only within their home department. The organization remains essentially the same today. Each freight syndicate acts also as a broker for both its members and for out-of-town truckers seeking a return load. Dispatching is normally on a first-come-first-served basis; ideally half of all business is reserved for back-hauls. The confederation sets and publicizes rates; discounts are negotiated for some large contracts. - 13 - 2.5 The government-owned departmental trucking companies are off- shoots of a national-level company (ENTA) set up in 1983 to generate competition with the syndicates. Using salaried drivers, it was never successful financially, and under Decree 21060 it was broken up intG department-level units (under the EITC name). In some departments the companies have since failed entirely and their trucks have been sold off. A co-operative of private truck owners, recently established to compete with the syndicates and EITC, is charging basic cariffs very similar to those of the syndicates, but competing on the quality of service and by offering substantial incentives for large volume and regular freight movements. 2.6 The Ministry of Transport now publishes an indicative tariff. The rates, last up-dated in February 1986, range between 8 and 11 US cents per ton-km. The lowest apply to routes out of La Paz, on mostly paved roads carrying large volumes; the highest apply to routes in Potosi and Tarija departments, mostly unpaved and carrying small volumes. Rates actually charged in the La Paz-Cochabamba-Santa Cruz corridor in March 1987 were slightly lower than the indicative tariff, in the range 7-10 cents (Table 6). EITC, operating larger-than-average trucks, undercuts syndicate rates by 15-20% between Cochabamba and Santa Cruz; its supply, however, is limited. Tariffs for international traffic to Chile are much higher, at about 15 cents per ton-km, while tariffs to Matarani in Peru are little more than national tariffs. 2.7 These rates are relatively low. One might expect at least 10-15 US cents per ton-km, bearing in mind that the typical truck has no more than 12 tons capacity (2 axles), that most routes involve considerable rise and fall, pavements are rough (if not worse), and freight flows are too sparse to ensure balanced two-way loading. Annual mileage, though not documented, is thought to be low, so that fixed costs have to be spread over a limited tonnage. The available evidence indicates that the utilization of trucks is somewhere between 25,000 and 35,000 kma per year. This is attributable to two factors, the inefficient syndicate system, which still maintains an oversized fleet and results in trucks waiting long periods for return loads, and the frequent long interruptions to traffic in the rainy season when roads are washed out. 2.8 As to truck supply, data are very sketchy and unreliable. Before 1985 direct imports were forbidden, to protect the one assembly plant in Cochabamba, but large numbers of vehicles were smuggled in. Police registration statistics show about 28,000 trucks in 1984, their numbers having grown at less than 3% per year since 1980. There is anecdotal evidence that many are not in use. Truckers interviewed by the mission did not complain of difficulties of access to new vehicles or spare parts. Shippers interviewed expressed general satisfaction with the truck supply. 2.9 It is therefore reasonable to interpret these rates as the product of competition, albeit limited, in a market with excess capacity -demand is down 20-30% compared with the early 1980s- and in which most trucks are substantially depreciated. Present rates appear to allow no margin for financing replacement of the truck. This can be expected to persist either until demand recovers enough to pick up the slack, or a large part of the fleet reaches "retirement" age, perhaps in the early 1990s. One has also to conclude that the widespread complaints heard about "the high cost of - 14 - transport in Bolivia" either suffer from a lag in perceptions or refer to the great distances involved, rather than to the rates per kilometer. 2.10 One measure the Government could take to increase competition in trucking would be to abolish the toll barriers in use on all major highways. The barriers, where syndicate representatives often station themselves in addition to the government personnel, give them a powerful instrument for deterring would-be independent truckers. Decree 21060 called for the barriers to be eliminated, but so far this has not been implemented. Such a measure would be justified by three arguments: firstly, the above; secondly, that a small tax on fuel and/or anqual license fees would be far more efficient than the tolls as road user charges; and thirdly, that it would eliminate needless delays on the road. 2.11 For the longer term, trucking costs can be lowered by more intensive utilization of each vehicle and a trading up to tractor-trailers. A reduction in the fleet size and an increase in vehicle utilization from 35,000 to 50,000 kms per year (still low by international standards, but a realistic expectation) would reduce operating costs by 15-202. However, this will only happen if roads are made more reliable yaar-round and the quality of pavements is improved. Inevitably, it will be a slow process. 2.12 One area in which more rather than less government intervention appears justified is that of axle-load controls and vehicle safety checks. There has been little effective control of vehicle axle loads. Although beneficial to the individual operator in the short term, overloading of trucks puts excessive mechanical strain on the vehicle, making for a potential safety hazard and resulting eventually in higher vehicle maintenance costs. Just as important, excessive overloading causes rapid deterioration of the road structure. This has been a particular problem in Bolivia where most of the paved part of the network has relatively light pavement. The Santa Cruz-to-Cochabamba road represents one of the few cases in the world of a major inter-urban route being allowed to deteriorate from a paved to a gravel state. Though there were other contributory factors (higher than predicted traffic levels, inappropriate design standards and under-maintenance of the road pavement in the expectation that an alternative route would soon be built), this deterioration ii partly attributable to the overloading of trucks. The Railways' Competitive Position and Pricing 2.13 Financial Situation: In 1986 ENFE was the only railway in South America, and one of very few in the world, whose revenues fully covered its costs, including interest, without government subsidy. Over the preceding decade its financial performance was generally good, with four years profitable and only minor losses in other years. Its working ratio has been consistently in the range 0.63 to 0.94, except for 1984 when it slipped to 1.39, but was soon corrected. However, its freight rates are unusually high, while passenger fares are exceptionally low. The freight rates are high partly because operating costs are high, but also because they have had to cross-subsidize the passenger fares, which are well below even short-run marginal cost. They also have to cover debt service, which is considerable (interest was 16% of ENFE's total expenses for 1986). - 15 - 2.14 Railway traffic can be broken down into four main categories: imports, exports, and domestic freight, and passengers. The share of each in total traffic units and revenues in 1986 was as follows: % of % of Avg Revenue TUI/ Revenue per TU (USc) Import freight 21 46 7.6 Export freight 11 16 4.9 Domestic freight, full wagon 8 20 8.6 Domestic freight, LCL 1 3 16.7 Sub-total, freight 41 85 27 Passengers 59 15 0.9 Total % 100 100 Units 1.12 billion TU $39.4 m 3.5 (1/ TU = net ton-km + passenger-km) 2.15 Factors Keeping Costs High: ENFE's operational productivity has been generally satisfactory, better than most other railways of Latin America. Three World Bank projects spanning the period 1972-85 helped to renovate track and upgrade rolling stock. In the early 1980s, years of hyperinflation and acute shortage of foreign exchange, the mechanical staff showed admirable ingenuity in keeping locomotives and rolling stock running despite lack of spare parts. 2.16 Several factors push up ENFE's costs. Firstly, the difficult terrain in major portions of the Andean network slows down train speeds and limits line capacity; and on the Eastern network wash-outs are a severe problem. Secondly, traffic volumes are low throughout both systems (averaging in 1986 about 290,000 TU per route-km on the Andean network and about 356,000 on the Eastern), so that overheads are high per ton carried. Thirdly, the availability of locomotives is low for want of repairs (their depreciation has nonetheless to be charged to users). Working costs per TU in the Andean network are about 25% higher than those on the Eastern network. 2.17 Competition: The fact that a relatively high-cost railway is able to break even is rare enough to call for comment. The explanation seems to be a combination of factors giving ENFE a cost advantage over the road competition: firstly, the largest traffic flows are bulks--mineral ores and grain- and secondly, both they and other important commodities (e.g. newsprint and sugar) move mostly as imports or exports over distances exceeding 500 km. Thirdly, as already discussed, the roads are poor; and fourthly, trucking, until 1985, was cartelized and uncompetitive. 2.18 Will ENFE retain these advantages in the future? On the one hand, the concentration on long hauls will not change and bulks will continue to predominate in the medium term (soya is the most pr cmising substitute for tin as the leading export). On the other hand, there are some prospects (and an urgent need) for high-value manufactures to grow in importance; they are - 16 - unlikely to prefer rail. The greater threat comes from improvement in the roads, allowing trucks to be used more efficiently and larger trucks to be brought into use. Equally significant, trucking generally is becoming more competitive. The railway can therefore expect to come under increasing pressure, forcing it to concentrate on services where high volumes of bulk traffic can be achieved, and to phase out less-than-carload operations. 2.19 Pricing: The high freight tariffs have resulted in much adverse comment from users. They contrast the high, unsubsidized Bolivian tariffs with the low subsidized tariffs in Argentina, Brazil, Uruguay and other South American countries. In these countries, rail freight tariffs are of the order of 2 US cents per ton-km. In Brazil, the low general freight tariff results from a relatively high traffic density, which keeps operating costs low, and a significant cross-subsidy from mineral traffic that earns high revenues yet has low costs. In Argentina and Uruguay the freight operations of the railway are highly subsidized by the State, although both countries now have policies to reduce or eliminate such subsidies. 2.20 The user resistance to high tariffs has had two important results. First, in Supreme Decree 21060, it was determined that rail tariffs would not exceed those of adjoining rail systems. If this part of the decree were to be implemented, it would imply a need for a substantial State subsidy, a result opposed to the spirit of most of the other measures in the decree. However, the reduction of rail freight tariffs to these levels remains official government policy and represents a considerable success for users' interests. 2.21 The second result of user pressure was the implementation in February 1986 of a tariff reduction of 30% for export traffic (bringing them down to average about 5 cents per ton-km). The justification for this reduction was the imbalance between import and export flows and the lower cost of transporting export freight in wagons being backhauled for higher-volume import traffic. In recent years import traffic on the railway has exceeded export traffic by a factor of almost four to one. It is a responsible commercial policy of the railway to try to increase its participation in export traffic by basing its tariff on the marginal cost of transportation, provided that the combined revenue of import and export traffic continues to cover the total cost. 2.22 The reliability of rail services in the last two or three years has declined to levels which in a more competitive environment would result in substantial losses of traffic. Locomotive availability in particular has declined to a level where it is no longer possible to offer a reliable service. A survey of the causes of the cancellation of 66% of programmed freight services on the Eastern Network in the first half of 1985 indicated that 9% of scheduled services were cancelled because of lack of tractive power and related causes. (A similar proportion were cancelled because of track wash-outs. A further 20% were cancelled because of labor disputes; these have been less frequent since the new economic policies were introduced). 2.23 If this level of unreliability of service continues into the period when road transport becomes more competitive, the railway will lose substantial volumes of traffic and find it difficult to maintain its present - 17 - financial viability. Users are more sensitive to reductions in the reliability of service than they are to small changes in the level of tariffs. IDA assistance under the First and Second Reconstruction Import Credits ($9.5 million in 1986-7 and $8.5 million in 1987-8 respectively) will pay for spare parts to rehabilitate up to 18 locomotives, 100 freight wagons and 25 km of track; it will also finance much-needed technical assistance and allow a reasonable level of routine maintenance to keep the freight fleet active. However, to provide a continuously reliable service, it will be necessary to maintain a regular supply of spare parts. Unless this can be assured and locomotive availability and reliability maintained, users will transfer to road transport when truck rates become competitive. 2.24 As part of the effort under way in the first half of 1987 to reactivate the economy, the Government has examined options for reducing ENFE's freight rates further. This preempted a restructuring of ENFE's pricing planned for late 1987, when costing information generated by a system set up in late 1986 is expected to be available. To advise the MTC, the Brazilian consultant who designed the costing system was brought back to ensure that any rate cuts would not be below marginal costs and would not jeopardize ENFE's financial soundness, particularly when salaries and wages had just been increased by 30%. 2.25 One option that the mission has no hesitation in recommending is to raise passenger fares to at least marginal cost, so that freight users are no longer required to cross-subsidize passengers. Taking the cost as 1.3 cents per passenger-km (ENFE's data) and assuming passenger demand elasticity to be in the range 0.4-0.6 (which needs to be verified), losses of LS$2.4-3.6 million would be avoided, implying that by this change alone freight rates could be cut by an average of 8-11%. 2.26 A second important option is to cut costs, by using equipment and staff more efficiently and trimming unprofitable services. It is hoped that the improved maintenance made possible by the two RICs will reduce operating costs by about 5-7%. Other savings will be made by cutting the labor force back 10%, from 7,200 as of December 1985 to 6,450 by June 1987. Thirdly, ENFE should consider trimming passenger services on lines adequately served by parallel bus routes, where the greatest loss of traffic can be expected following the planned fare increases. 2.27 The Government is also considering taking over ENFE's debt service, which cost about US$9.2 million in 1986. This would make room for a further cut in freight rates averaging 32% (on the levels prevailing after the above cuts, or 25% on present levels). The mission reserves judgiment on the wisdom of such a move. It is not clear that the general taxpayer is in a better position to service the debt than ENFE users, nor is it clear what effect it would have on future incentives for ENFE's managers. Where such a debt transfer has been made (as in the Brazilian national railway, RFFSA, and the Sao Paulo state railway, FEPASA), the strongest argument has been that the railway/government relationship was to be reformed, from one of dependence to one of autonomy, under which management is henceforth required to act commercially and be subject to commercial sanctions. ENFE is not yet in this situation: it is still relatively dependent and the Government does not seem ready to forego substantial control over ENFE as an instrument for pursuing national policies. If it does decide to assume ENFE's debt, it - 18 - should at the same time establish a policy and criteria to guide future sharing of capital expenditures between the railway and the Government, which would in turn determine responsibility for new debt. The mission recommends that investments needed to maintain the current network and carrying capacity should, as a matter of principle, be the sole responsibility of the enterprise. If the Government wishes ENFE to undertake economically justified investments in new lines for major increments to capacity and ENFE is unable to borrow the financing needed, then the Government should provide financial support according to pre-established cost-sharing percentages. 2.28 As to further cuts in freight rates, analysis of specific sub-markets may reveal traffics with a price elasticity greater than one, where, for example, a rate cut of 10% would attract more than 10% extra volume, so that total revenue would increase. This, however, is not enough to protect ENFE's profitability, since the extra traffic will add to costs. Rather, the guiding principle should be to maximize the net contribution to fixed costs from each traffic category, i.e. the excess of revenues over marginal cost. The ratio of revenue to variable cost should average about 1.5-2.0, with higher values for price-insensitive traffics and lower values for traffic more readily lost to road competition. This requires knowledge of the relevant marginal costs and the sensitivity of demand to price for each major submarket. Depreciation of locomotives, rolling stock, track and any other assets used in serving each traffic should be included in the marginal cost, wherever the additional volumes expected to be attracted by the rate cuts would require the renewal or expansion of those assets. 2.29 ENFE's present rate structure differentiates among over 100 commodity categories, largely on the basis of value per ton, density and loading characteristics. The rates taper appropriately with distance, and terrain difficulties are taken into account by measuring di3tances in effective (or equivalent) km rather than actual km. No other cost differences are explicity taken into account. Some simplification of the commodity categories is called for, while greater differentiation is warranted to take account of differences in marginal costs between train-load, wagon-load and less-than-carload shipments, and in two-way traffic balance and seasonality. The diversity of cost circumstances and demand elasticity among different traffics could be taken into account most readily by a two-tier system: tapered class rates as the default option, and negotiated rates, discounted from the class rates, for large volumes on a case-by-case basis. For negotiated rates to succeed, however, profit targets must be given prominence and marketing must be organized so that those with negotiating authority can be held clearly accountable for their financial results. River Transport 2.30 No direct comments were received on users' opinions of river transport. However, the reduction in volume of river transport in recent years, as alternative modes have become available, is an indication that it is not providing the type of service which is required. Between 1982 and 1985 the total tons loaded and unloaded at the river ports of Trinidad and Guayaramerin declined by about 25%, while the reduction at Puerto Villarroel was almost 40%, due to the start-up of road transport operations. - 19 - 2.31 At present a sealed road is being constructed between Santa Cruz and Trinidad. 'T1hen this road is completed, it can be expected that Trinidad will lose at least 25% of its current river traffic and Puerto Villarroel yet more, as it will be by-passed by the new road. Such losses of traffic could be more than compensated by the provision of integrated road and river services. 2.32 River transport has been neglected in terms of development for at least half a century. River port facilities on the Ichile/Mamore and Bent River systems are little different from what they were fifty years ago. No system of feeder roads to the ports has been developed. Instead, investment has been made in providing new roads parallel to the rivers. While the latter undoubtedly provide faster transport, they do nothing to improve the basic inaccessibility of the potential productive regions of the North-East. An integrated feeder road/river transport system would provide such access. Given the shortage of funds for transport investment projected for the next four years, the development of such multimodal transport could be a viable and much less costly alternative to the construction of proposed roads parallel to the rivers. 2.33 It is possible that the first integrated river/road transport service will become operational in 1988. A ro-ro service between Trinidad and Puerto Villarroel is being considered, but this will be less attractive to users than a road service from Trinidad, once the new road to Santa Cruz is completed. However, should budget problems delay completion of the road, the proposed ro-ro service will provide a low-cost and effective alternative. If on the other hand the Trinidad to Santa Cruz road is completed as planned, the ro-ro service should operate instead between Trinidad and the smaller up-river ports close to the beef-producing areas. A waltimodal feeder road/river/road service will then be available to the more remote parts of Beni Department, making them reasonably accessible by surface transport to the main consuming areas of the country for the first time. Chapter 3. RECOMMENDED TRANSPORT INVESTMENTS , Priorities for Infrastructure Planning 3.1 The Ministries of Planning and Transport need to establish mechanisms and criteria for selecting investment projects from among the very long shopping lists put forward by the modal agencies. The total cost of wished-for projects in the transport sector far exceeds the Government's capacity to finance and implement investments in all sectors combined. Four priorities are suggested, in descending order: (a) maintenance and rehabilitation of the existing road and rail networks; (b) integration of the three main populated areas of the country by the paving of sections still unpaved of the La Paz-Cochabamba-Santa Cruz highway; - 20 - (c) upgrading of two priority export corridors, one to the Atlantic and one to the Pacific. The prime contenders are the road or rail from Arica to La Paz and the rail line from Santa Cruz to Puerto Quijarro/Corumba, together with port facilities on the River Paraguay and an iatermodal terminal at Santa Cruz; and (d) construction of penetration roads in the lowlands to areas of high agricultural potential. These are likely to be concentrated in the Santa Cruz departaint and serve the growing of soya. 3.2 These priorities coincide approximately, though by no means completely, with the investment projects now under way and/or those with external financing already committed. On this basis the mission has identified a recommended transport investment program for the four years 1987-90 (Table 1). Its total cost would be about US$620 million, or an average of about US$155 million per year. This is equivalent to about 3.4% of GDP (assumed to average US$4.5 billion in 1987 prices). A further $10 million per year is recommended for routine road maintenance (0.2% of GDP). Table 2 lists the recommended projects. The modal shares in the investment program are: roads 2%, railways 13%, aviation 2% and waterways 3%. Constraints Determining the Transport Investment Budget 3.3 This level of investment, while substantially less than the Government's present declared intentions, nonetheless exceeds by $20-30 million per year what the Bank would defend as a prudent allocation of resources over the longer term. It is also questionable whether the money can be found from either domestic sources (more taxes?) or external sources (more debt?) to cover the gap of nearly $80 million per year not yet assured of foreign financing. 3.4 For 1987 the total investment budget (all sectors) is US$640 million, out of which transport has an unusually large share of 30%, or about US$190 million (15% and 4.4%, respectively, of GDP of $4.3 billion). However, central government revenues for 1987 are not expected to exceed 14% of GDP in total, and they are more than fully committed for debt service (2% of GDP) and other current expenditures (12%). As Table 7 shows, investments by the central Government (e.g. SNC) will, in net terms, have to be financed entirely by external sources ($35 million), while those of the decentralized public sector (e.g. railways, airports and LAB, and the departmental development corporations) will have to rely on surpluses they can generate from their own operations (budgeted as $200 million in total) and on foreign debt and grants (for the remaining $410 million). 3.5 The Bank holds the view that, firstly, a minimum acceptable level of investment, such as to keep GDP growing st least as fast as the population, is about 15% of GDP. Secondly, *he Government's policy of cutting back the hitherto dominant role of the public sector argues for its share to be not more than 60-65%, i.e. 9-10% of GDP (well below the 15% planned for 1987). This may also be the upper limit of what can be financed. It is questionable whether Bolivia can service additional debt of some $400 million per year (9% of GDP) if it is on hard terms, or raise such - 21 - sums from foreign donors, year in, year out, on soft terms. Whatever cannot be raised externally will have to be met by increasing tax revenues from below 14% of GDP to closer to 20%; otherwise the investment program will have to be cut. 3.6 If transport's share of public investment is kept high at 30% of the total (which is arguably justified in Bolivia's exceptional circumstances), then transport investment should be about 2.7-3.0% of GDP. For 1987-90 this is equivalent to an average of $120-135 million per year. In contrast, the recommended program averages $155 million, of which $75 million (45%) is already committed by foreign sources or under negotiation, while the remaining $80 million has to be financed from domestic sources or additional external assistance. Almost all projects in the recommended program already have at least some foreign financing promised; those which have none are included because we consider them of highest priority. If the financing gap cannot be closed, we would argue for re-examining those projects which offer lower rates of return, or whose benefits are most uncertain or vulnerable to delays, and which have foreign financing promised for only a minor part of their cost or which could be reallocated. They should be re-examined with a view to slowing them down, reducing their scope, or adopting less costly design standards. Recommended Investments: (1) Road Maintenance and Rehabilitation 3.7 The first priority, we argue, should be maintenance and rehabilitation of the road and rail networks. Rail needs have already been touched on in para 2.23. The recommended program (Table 2b) includes rehabilitation of the Ipias-Robore section of the Santa Cruz-Corumba line ($16 million) and other sections ($31.5 million over the four years) to be selected under ENFE's general rehabilitation program ("Phase IV'). As for roads, the following dection sets out the case for an annual allocation of US$28 million for maintenance and rehabilitation: $18 million under the investment budget and $10 million under the current budget. 3.8 Bolivia's highway network is largely in its formative stage, its coverage is incomplete and most of the roads, including some primary links, have low standards. Many of these roads, normally engineered during construction, were originally built with labor-intensive methods (pick and shovel) and traverse the roughest terrain in South America. Narrow sidehill cross sections, sharp switchbacks, steep grades, numerous river crossings without bridges, locations in canyons subject to overflow or flash floods and unstable slopes, plus the lack of adequate drainage structures, make for heavy maintenance obligations and expenditures far beyond those required for roads with normal to moderate standards. 3.9 SNC's maintenance organization is basically sound. It is well balanced to perform the work but lacks funds. SNC's present annual maintenance program includes: (i) permanent maintenance on some 12,000 km of paved and gravel roads; (ii) temporary maintenance on 5,000 km of earth roads, and (iii) occasional maintenance on 25,000 km of earth roads. 3.10 Over the past five years road maintenance programs have been systematically late or postponed altogether, mainly because of volatile - 22 - political and economic conditions. Severe budget cuts arising from the very difficult economic and financial conditions in the country, combined with the irregular and untimely release of budgeted resources, have limited SNC's ability to maintain the roads cost-effectively. Furthermore, SNC's physical capacity for periodic maintenance on the paved roads, which was limited to begin with, has been seriously diminished by the diversion of maintenance equipment to force-account construction and rehabilitation works. 3.11 The ensuing postponement of routine and periodic maintenance has caused pavements to deteriorate severely. Information on the paved road network shows that only 30% is presently in good condition, 40% is in fair condition and the remainder 30% is so poor that it has to be rehabilitated. Because of lack of maintenance the situation is particularly critical in the Cochabamba and Santa Cruz districts. Although the condition of the gravel and earth roads varies widely, at least 60% of them lack adequate drainage and need rehabilitation before they can be maintained effectively. 3.12 To avoid additional costly investments at a later stage, it is clear that routine and periodic maintenance, as well as rehabilitation efforts, have to be stepped up. The short-range plans prepared by SNC to gradually improve the road network in the coming four years can accomplish little unless backed up by an adequate financial plan. For example, in order to achieve the following SNC's physical targets annually, US$28.0 million per annum would be a minimal requirement: (i) Routine maintenance of about 1,500 km of paved roads, 9,300 km of gravel roads and emergency works on the earth-surfaced road network (US$10.0 million); (ii) Periodic maintenance of about 150 km of paved roads and 200 km of gravel roads (US$5.5 million); and (iii) Rehabilitation of 150 ki of paved roads and 500 km of gravel roads (US$12.5 million). 3.13 At the above level of maintenance and rehabilitation over about four years, Bolivia's paved roads could be brought up to maintainable conditions and improvements could also be made in the serviceability of the gravel roads. The needed level of funding, however, would still be insufficient to address the needs of the lower-priority earth roads. 3.14 SNC's records show that the availability of equipment is 57% and its utilization only 37%. Among the reasons for this poor performance are lack of foreign exchange for necessary spare parts and materials, lengthy and cumbersome procurement procedures and poor equipment management practices. Equipment availability and utilization is expected to be substantially improved by the purchase of about US$3.6 million in spare parts, materials and some complementary equipment, financed under the RIC II. However, this will be only sufficient to address the present maintenance needs in the main transport corridor (La Paz-Cochabamba-Santa Cruz). The need to tackle the lack of equipment for road maintenance at the national level is, to a certain extent, addressed through specific loans of the IADB and CAF. However, because of the aging equipment fleet, a - 23 - replacement program amounting to US$15 million will be required in the next four years. 3.15 Improvement of the effectiveness of SNC's maintenance operations should include at least implementation of the following key actions: () Restore its organizational effectiveness by limiting the force-account construction and rehabilitation works to such an extent that routine and periodic maintenance are not neglected. Major road betterments and rehabilitations should be done by contract. Full efforts should be made to progressively develop local contractors. (ii) Allow a progressive participation of contractors in carrying out routine and periodic maintenance, whenever they offer comparative advantages. A balance should be sought between work executed by SNC's own forces and that doae by contract; and (iii) Strengthen its force-account establishment by setting up countrywide maintenance and equipment management systems, as designed by consultants under the Bank-financed Highway Maintenance Project (Loan 1587-B0). Recommended Investments: (ii) Santa Cruz to Cochabamba 3.16 As a second priority, we recommend the up-grading of surface transport links between the main cities, in order to promote national integration, In both a political and an economic sense. The most important such links are La Paz-Cochabamba and Cochabamba-Santa Crus. On the former, upgrading and paving the 80-km section of the highway between Confital and Caihuasi is undoubtedly justified economically. it is therefore included in the recommended program, even though foreign financing is not yet lined up. SNC's estimate of the cost ($63.6 million) is excessive. If the design standards are modified to reduce the need for earthworks, we estimate the cost at $30 million, of which $25 million can be spent by the end of 1990. 3.17 Options for the Cochabamba-Santa Cruz link are far more complex, requiring detailed consideration of both rail and road alternatives, as follows. 3.18 Rail Access: The Bolivian rail network comprises two separate parts, the only connection between them being a 600-km route via Argentina. The operating agreement between the Bolivian and Argentinian railways makes it difficult to use this link for the transfer of Bolivian traction and rolling stock. The Bolivian railway therefore operates as two separate systems with a central administration in La Paz. Each part has its own fleet of locomotives, wagons and passenger vehicles and its own maintenance workshops. 3.19 In addition to the inefficiencies, inflexibility in the use of traction and rolling stock and other operational problems caused by the physical separation of the two networks, the railway cannot transport freight and passengers between Santa Cruz and the cities of the Altiplano. The - 24 - possibilities of developing international transit traffic between Brazil and the Pacific ports of Peru and Chile are also inhibited. In an attempt to overcome these problems, an intermodal service has been inaugurated between Santa Cruz and Cochabamba, using trucks contracted from EITC to provide the road service. The intermodal facilities are under-developed, although plans exist to provide more appropriate terminal facilities at both Santa Cruz and Cochabamba. The 1987/1990 Transport Sector Investment Plan includes a total of US$14 million for the improvement of multimodal services on this route (Table 8). 3.20 It has long been the intention of the railway to join the two networks with a direct rail link. Studies of the alternative routes made by the Estudio Integral del Transporte (para 4.4) indicated that a 184-km link from Aiquile on the Andean network to the Eastern network would cost about US$600 million (at 1981 prices). More recently, bilateral aid from Brazil has been provided to allow photogrammetric surveys to be completed, but no commitment has been made to finance construction. 3.21 Brazil would be a clear beneficiary of the construction of the link, being then provided with direct rail access to the Pacific. This would facilitate the export of soya and maize from the states of Mato Grosso, Mato Grosso do Sul, and Rondonia to Japan. There would also be a possibility of exporting iron and other ores from the Brazilian deposits at Mutun, on the Brazil/Bolivia border. 3.22 However, the high capital cost of the link would be justified only by a very high level of traffic combined with high tariffs. At an initial cost of US$600 million, the annualized capital costs alone would be of the order of US$60-US$70 million. At a traffic volume of 10 million tons per year, close to the capacity of the line, this would add US$7 per ton to the cost. The total cost of transport from Corumba to Arica would be of the order of US$50 per ton at a traffic level of 10 million tons per year but US$150 per ton at 1 million tons per year. These costs will need to be compared with the costs of transport to Brazilian ports plus the cost of the longer sea voyage. 3.23 A demand study, taking account of the costs of using alternative routes for the transport to Japan of Brazilian grains and minerals, will need to be completed before any commitment to investment is made. Any projection of demand for the route will include a substantial volume of generated freight and freight diverted from very different routes, and will for this reason be very subjective. The subjectivity will be reduced if there is a higher volume of traffic using the route already. This will be possible if the present multimodal service is further developed. The success of this multimodal service in attracting Brazilian transit traffic will provide an indication of the attractiveness of a through service using the new link. 3.24 Road Access: There are two current proposals for improving the road access between Santa Cruz and Cochabamba. The original paved road was built to low design standards and proved incapable of sustaining the high volumes of traffic that have made use of it, now about 500 trucks and buses per day. Furthermore, the overloading of trucks was not sufficiently taken into account in the determination of pavement stretgth and the geometric design standards are inappropriate for large trucks. Maintenance of the - 25 - surface has been repeatedly deferred in the expectation that an alternative alignment would be constructed shortly. This neglect has left the road with effectively a gravel surface. 3.25 One of the proposed projects for the corridor is to rehabilitate this road with a light overlay, without changing the geometric standards. The cost would be of the order of US$16 million and the work would take about two years. The road passes through a region of considerable economic development and its rehabilitation would benefit many communities along the line of the road, as well as perform the basic function of providing a reasonable standard road between Santa Cruz and Cochabamba by late 1989. 3.26 The second project, whose construction is nearly half complete, is a new road along a new alignment, via Chimore and Yapacani in the lowlands (see map). This route will cut 100 km off the road distance between the two cities and at least 4 hours driving time, making the trip possible in one working day rather than two. It passes through a region of sparse economic development and one of the anticipated benefits of completing the road is the increased agricultural development of the region. It involves the construction of 151 km of new road at a total cost of US$166 million (about US65 million to complete) and the reconstruction of some 288 km of access roads at each end at an estimated cost of US$70 million (not yet started). The project is unlikely to be completed until mid-1991, though some traffic may start using it sooner. Despite the high cost, it is believed that the savings in vehicle operating costs and travel times will provide a satisfactory rate of return. The savings will be considerable if full advantage is taken of the higher geometrical design standards, and five-axle semi-trailers or truck/trailer combination vehicles with a payload capacity of about 28 tons are used on the route instead of the usual two-axle, 12-ton trucks. 3.27 The resources required to complete both routes within the next four years will consume a disproportionate share of the available transport investment budget, about 20%. It appears that an irrevocable commitment to complete the new route has been made, and financing has been secured from IADB and CAF for almost 75% of the total cost. This leaves only the option of deferring the rehabilitation of the existing route. However, we estimate that this rehabilitation would pay for itself in only two years. If, therefore, it can be completed by late 1989, we recommend that it be done; otherwise it should be postponed. Recommended Investments: (iii) Export Corridors 3.28 As a third priority, we recommend investments which will lower transport costs for exports. The most important ports used by Bolivian imports and exports are Antofagasta (Chile), and Santos and Paranagua (Brazil). Bolivia has the use of duty-free zones in the ports of Rosario (Argentina) and Nueva Palmira (Uruguay), but for various reasons these are little used. There is only one Bolivian river port usable for international traffic at present, Puerto Suarez on the Paraguay River. 3.29 There are some exports to and imports from neighboring countries which do not need to make use of ports. The most important routes for this - 26 - category of trade are through Puno to Peru (road and, indirectly, rail), through Villazon to Argentina (road and rail), through Yacutba to Argentina (almoet exclusively rail but with some road) and through Corumba to Brazil (rail only). 3.30 There are proposals to develop all of these routes but little idea at present of relative priorities. Many of the proposed projects are to provide alternatives to existing modes of access to ports. There are long- standing plans for improvement to the transfer facilities at Guaqui and Puno on Lake Titicaca on the rail route to Matarani in Peru, and there are proposals to improve the road route in Peru (the road from La Paz to the border has already been up-graded). There is a proposal to provide a sealed road in Bolivia to the border at Tambo Quemado on the route to Arica and another proposal to improve the operating efficiency and capacity of the rail route to the same port. There is a proposal to improve the Bolivian part of the rail link to Antofagasta to better compete with the road link. The Department of Santa Cruz is supporting a proposal to complete a sealed road south to the Argentine border at Yacuiba (projected cost US$200 million), which will compete with the existing rail route to Rosario and Buenos Aires. The existing rail route to Corumba, currently used for exports to and through Brazil, is being improved and there are plans for further improvement. The completion of a paved road from Santa Cruz to Corumba (projected cost US$160 million) is also supported by the Department of Santa Cruz (though neither of the latter road projects is supported by the MTC). There are two projects for building port facilities at Puerto Quijarro, near Corumba, one private and the other public. It is difficult to see how investment in all of these competing projects can be justified, especially in the short term, with a low limit on available investment funds. 3.31 There is competition not only between modes to a particular port, but between the ports themselves. This is particularly true of the Pacific ports of Matarani, Arica and Antofagasta. In respect of the Atlantic ports, the proposed new road to Yacuiba would provide access to the northern Argentinian river ports of Formosa and Barrenqueras, competing with the routes to Puerto Quijarro and to Rosario and Nueva Palmira. All developments of routes based on the Paraguay River will compete for access to the Atlantic with the present route through Santos and Paranagua. 3.32 While a certain amount of competition between modes and ports is desirable and necessary, investment in new modes or routes to new ports should not be undertaken without consideration of the impact on existing routes. The provision of access to a number of different Atlantic ports by different modes could result in all of them being financially dependent on subsidies, whereas concentration of traffic on fewer modes and ports could make them financially independent. 3.33 The present high cost of access to deep water ports from the Bolivian border makes many potential exports unprofitable, whereas with lower access costs they would be profitable. This is particularly clear in the case of soya production in the Department of Santa Cruz. The present world price for soya is of the order of US$175 per ton. The production cost, excluding transport, is US$85 to US$95 per ton. The transport price from the area of production to the border at Puerto Quijarro is about US$35 per ton, leaving only US$45 to 55 per ton for transport from the border to the port, - 27 - sea transport and profit. The margin available for transport from the border to the deep sea port is less than US$15 per ton for a distance of at least 2,500 kms. Only bulk river transport can achieve this low cost and then only if return cargoes are available. River transport from the Department of Santa Cruz to Atlantic ports is not available at present. The small volume of soya produced (about 70,000 tons per year) is transported by rail to Santos. The total production cost, including land and sea transport, substantially exceeds the market price of the product. 3.34 The feasibility of large-scale soya production for export from Santa Cruz therefore depends on the availability of river access to the ports of Rosario and Nueva Palmira. The diversion of any potential traffic, particularly imports, from this route will increase the costs of transport and keep soya production unprofitable. Similar arguments can be made for , other agricultural products for export through Atlantic ports. 3.35 The high cost of production of Bolivian minerals and the current low prices for most of them make their profitability very sensitive to transport costs. Consideration of import traffic alone might indicate that the Arica rail route was the least costly, but when imports and mineral exports are considered together, it is possible that the route via Antofagasta has the least overall cost. At present, Arica concentrates on import traffic (2/3 of its total) and Antofagasta on exports (2/3 of its total, which is similar to that for Arica). The importance of Matarani for Bolivian trade has diminished with the closing of the Matilda mine (north-east of Lake Titicaca), which once provided over 70% of the Bolivian traffic through Matarani. The present volume of traffic (20,000 tons per year) is insufficient to justify further investment and could be carried at lower cost if combined with the traffic of one of the other Pacific ports. 3.36 Before commitments are made to investments in particular export corridors, a review of the routes which would produce the least overall costs should be made. The total proposed investment in export corridors is over US$600 million (Table 9). There is a risk of the available funds being spread over too many projects, each of which wil.l have a high probability of delayed completion because of a shortage of funds. Commitment is required to * fewer projects, with a higher probability of each one being completed within a short time. There is some urgency in reducing the current high costs of Bolivian international traffic and a review of export corridor investment needs to be completed as quickly as possible. 3.37 In the meantime, it looks unlikely that the Government can gain full control over the Arica-La Paz railway, an important (probably essential) step to increasing the line's throughput and lowering its cost. Therefore, our recommended program includes a start on construction of the Patacamaya- Tambo Quemado road (the Bolivian portion of the road from La Paz to Arica). However, we argue for construction now of only the bridges, culverts and other drainage structures to permit year-round operation. Earthworks not essential for drainage and the paving should be postponed until such time as the traffic justifies it and funds come available. Projects Excluded or Deferred 3.38 What does the recommended program exclude? Firstly, there is clearly no room, and probably no economic justification, for the missing rail - 28 - link between *,he Eastern and Andean networks, estimated to cost at least $600 million. Our view is that an efficient road/rail intermodal terminal at Santa Cruz would serve the economy much better; its capital cost (about $5 million) is included. Nor does t1e program include any provision for a rail line from the iron ore deposits at Mutun to Puerto Busch on the Paraguay River or port facilities there. The Bank's industrial specialists are pessimistic as to the prospects for Bolivia's finding profitable markets for this ore. The program does provide for facilities at Puerto Quijarro ($8.5 million), intended primarily for soya exports, which could also serve for small quantities of ore as an interim solution; anything more should be evaluated as an integral part of the mining project and budgeted as such. 3.39 Thirdly, as regards aviation, the new runway for Cochabamba is excluded, even though Italian financing for two-thirds of the cost appears to be available (Table 2c). The economic rate of return is believed to be well below the 30-50% opportunity cost of capital implied by the present financing constraint. If it does go ahead, the project should be phased so as to yield benefits as soon as possible, e.g. by bringing the runway into use while deferring new terminal buildings. Likewise, the proposed new airports for Cobija and Riberalta are excluded. Their economic justification needs to be reviewed in the light of progress being made with penetration roads that for the first time will link them to the rest of the country. 3.40 A fourth important exclusion concerns a number of road projects in the northern lowlands and the southern Altiplano, away from the main La Paz-Santa Cruz axis. The financing constraint leaves little choice but to defer them beyond 1990, unless the departmental development corporations (strong advocates of such projects) are able to fund them fully from additional local revenues. Since most of these roads will serve only small traffic volumes, their design standards even then should be modest and asphalt paving is probably not justified. The main problem on these roads is drainage; an interim solution would be to install only culverts and a few major bridges. In the fragile ecology of the northern lowlands, particular caution needs to be exercised to assess the environmental impact of such roads before work begins. 3.41 The mission has little information on the justification for LAB to purchase new aircraft, estimated at $65 million (Table 2d). These are excluded on the assumption that leasing can be arranged instead. Other Considerations 3.42 Resource Mobilization: The above strongly suggests that transport users should pay for infrastructure, wherever it is feasible and economic to do so. Specifically we recommend that the $28 million per year for routine and periodic road maintenance should be recovered from road users. 3.43 Employment Creation: The civil works should be carried out to the fullest extent possible by contract, for which there is adequate capacity if bidding is open to foreign firms (notably Brazilians). They would create about 18,000 manual jobs (15,000 on roads and 3,000 on the railways, all at $1,800 per job per year) for the four years. Routine road maintenance (financed under the current budget) would add perhaps another 3,000. In - 29 - addition, the Emergency Social Fund could play a valuable role by funding river training works. By this is meant the construction of gabions (wire baskets filled with rocks) along the banks of rivers upstream from bridges and parallel with low-lying roads and rail lines. Wages would make up 60-65% of the cost; extensive annual flood damages would be avoided. $5 million spent on such works per year would employ about 2,500; there is ample demand for them in the mining region. Chapter 4: INSTITUTIONAL WEAKNESSES 4.1 Chapter 2 concluded that the present government's policy of minimal intervention in road transport has been, to judge from its effects, generally appropriate. Reinforcing this view is the fact that the Government has only very limited capacity to formulate and implement interventionist policies, if it wished to do so. The less it attempts, the better. Chapter 3 has shown that investment planning, in contrast, is a rather different proposition. It is clear that there is room for doing it better, and that it is important to do so, but how is less obvious. 4.2 A critical problem for transport planning in Bolivia is the shortage of qualified people in government service. Salaries are low -many professional posts in the central government pay no more than $100 per month-- and budgets are necessarily very tight. The Government can not afford to pay high enough salaries to attract and retain competent managers and planners in adequate numbers; it has to rely on the few dedicated and over-worked professionals that it has. This limited capacity is something with which any planning and policy initiatives have to reckon; "management-intensive" solutions are doomed to failure. 4.3 The main weaknesses appear to be that: (a) no rate of return or other consistent criteria are applied in evaluating investment proposals; (b) the procedures for preparing the investment budget fail to reconcile requested expenditures adequately with expected income; and (c) there are inadequate mechanisms for resolving conflicts between the priorities of the central government and those of the departmental development corporations. The Comprehensive Transport Study 4.4 Between 1978 and 1983 some $2 million were spent on consulting fees to carry out a comprehensive transport study of Bolivia (the "Estudio Integral del Transporte" - EIT). Financed jointly by the World Bank (under the Third Railway Project) and UNDP, the consultant team prepared a national transport plan and, in so doing, set up and trained on the job a team of 12 Bolivian professionals. The study was competently executed and the transfer of technology to the counterpart team was of undoubted value. However, the - 30 - seed fell on stony ground: the study was completed in a period of accelerating economic crisis, and the Government lost the entire team to the private sector. 4.5 All is not lost, however. For one thing, the EIT has at last been formally established (in 1987) as the planning and studies arm of the MTC, with a modest budget for up to four professionals. For another, many former members of t'e counterpart team are available as consultants, working either on their own or in the Transport Institute attached to the University of San Andres, in La Paz. Provided that the Ministry can maintain a basic minimum staffing of core professionals, contracting out studies is an efficient modus operandi, avoiding the inflexibility of a permanent staff of specialists who are probably not needed full time. To date, however, the Ministry has been unable to recruit and hold even the basic core. 4.6 The EIT has a work program of studies for 1987, relevant to current transport planning issues (Table 10). Funding for the consultants needed is available through December 1987 from the World Bank's Highway Maintenance Project (Loan 1587-BO), and administered by UNDP. So far, however, progress has been disappointing, apparently for lack of professional staff in EIT to hire and supervise the consultants. It is hoped that the approval in May 1987 of the budget doubling the professional posts from two to four will ease this bottleneck. Organization of Transport Agencies 4.7 Another factor complicating management of the transport sector is the division of responsibilities among three ministries, not off-set by a strong planning ministry. The Highway Authority (SNC) and railway (ENFE) report to the Ministry of Transport and Communications, while the national airline, LAB, and the airports authority (AASANA) report to the Ministry of Aviation, and waterways are the responsibility of the Ministry of Defense (the Sub-Secretariat for Maritime, River and Lake Interests). 4.8 This separation need not be the cause of poor sectoral planning, provided that appropriate criteria and procedures are in place to coordinate the evaluation of investment proposals put up by the various implementing agencies. This is one of the responsibilities of the Ministry of Planning, as codified in the National System of Projects in law since 1974. The reorganization of the Planning Ministry under way in May-June 1987, including the appointment for the first time of a director-general for public investment and aid coordination, is an appropriate and long-overdue step to address this problem. The combination under one director of investment planning and aid coordination is particularly relevant, as long as foreign sources continue to finance more than half the investment program. The new directorate will have to pay close attention to (a) ensuring that all transport investments show a satisfactory economic rate of return, using consistent methods and unit costs, etc.; (b) programming the economically justified projects to match, individually and cumulatively, the supply of financing available, internal and external; and (c) encouraging international donors to support rehabilitation and maintenance projects rather than new construction. -31- 4.9 Stronger links also need to be established between the Ministry of Transport and the transport units of each departmental development corporation. The Ministry should set design standards and economic evaluation methods to be followed and evaluation criteria to be met if the central government is to share in financing investments sponsored by the corporations. Chapter 5: RECOMMENDED DEVELOPMENT STRATEGY AND PROPOSED BANK ASSISTANCE Recommended Strategy for the Government 5.1 The Bank strongly supports the Bolivian Government's courageous efforts to recover from the economic crisis and endorses its policy of fiscal restraint coupled with deregulation of markets. At the same time we recognize the urgency of creating new employment and developing non-traditional exports. Transport undoubtedly has much to offer in lowering the delivered cost of exports (as well as imports) and generating jobs. The Bank therefore looks on transport as one of the three key sectors for the short- and medium-term recovery program (together with agriculture and energy). 5.2 Summarizing the conclusions of the earlier chapters, we recommend that the Government maintain its non-interventionist policy towards transport markets and its pricing policy for transport fuels. As exceptions to the general strategy of non-intervention, more attention should be paid to road safety, vehicle inspections and axle-load controls. A modest capacity to maintain statistics on road transport (vehicle numbers, size, age and utilization) is also recommended; it would provide valuable inputs for formulating and monitoring transport policies (see para 1.22). 5.3 As regards the railway, we hold that the greatest benefit to the economy overall will be obtained if ENFE is required to operate on commercial principles in competition with other modes; Government intervention should be limited to strategic guidance. It would be well to embody this policy in a performance contract in which the Government sets out its expectations as to the financial performance and any strategic objectives it wishes ENFE to aim for; in return ENFE should be given the freedom to set rates and fares and offer services (or withdraw them) according to its commercial judgement. 5.4 Investment strategy in transport requires considerable strengthening of planning staff in the Ministry of Transport, as well as more cooperation between MTC and the Planning Ministry and the departmental development corporations. As set out in greater detail in para. 3.1, we recommend that priority among investments be given -in descending order- to (a) maintenance and rehabilitation of existing assets; (b) up-grading of the transport links connecting the principal cities; (c) improvements of selected export corridors within a co-ordinated plan; and (d) limited construction of penetration roads to lowland areas of high agricultural potential. To reduce capital costs, every effort should be made to keep design standards modest, and to phase projects so that benefits begin to flow as soon as possible; drainage structures should receive priority, in order to keep roads and rail lines open year-round. Investments will be carried out more efficiently and - 32 - the domestic construccion industry (and hence sustainable employment) will benefit by the contracting out of civil works for all but routine maintenance. Bank Assistance Strategy 5.5 Previous Bank Projects: The Bank's previous transport operations in Bolivia are limited to five loans or credits signed in the period FY72-78. Three were for railways (FY72, '74 and '77), one for road maintenance (FY78), and one for civil aviation (FY77). SNC had enjoyed extensive financial and technical assistance from the US Government since 1955 and from IADB in the 1970s; hence the Bank's late entry into the roads subsector. The crowding of transport projects into a short period, followed by no new operations until FY86, reflects the deterioration of economic management during the early 1980's. In what were intended to be the last years of the third railway, highway maintenance, and aviation loans, disbursements were suspended during the worst of the crisis (November 1983-July 1984). Because of the radical change in economic policies since then, the experience of these earlier projects has only limited lessons to offer for the future. On the favorable side, the implementation oapacity of both ENFE and SNC (broadly speaking, the engineering) has been generally good. On the unfavorable side, the economics has been weak; over-designing has been a common failing. 5.6 In its present and future operations the Bank therefore intends to apply the priorities set out above. Under the heading of maintenance and rehabilitation, it is already financing $9.5 million of spare parts and equipment for ENFE's locomotives, workshops and track under the first Reconstruction Import Credit (RIC I). Under the Second RIC, approved in June 1987, a further $8.5 million for the same purpose (including technical assistance) is to be provided, together with $3.6 million for road maintenance equipment and spare parts and corrugated metal culverts, to be used by the Servicio Nacional de Caminos in an emergency rehabilitation program for the La Paz-Cochabamba-Santa Cruz highway and main roads feeding into it. Japanese co-financing is being secured for a substantial part of this crash program. Beyond that a road project has been identified for rehabilitating secondary roads in the Altiplano using labor-intensive methods. It is hoped that it can be appraised early in FY88; financing will probably be channeled through the Emergency Social Fund. 5.7 There is a strong case for the Bank to help finance the upgrading of priority export corridors. Accordingly we intend to conduct a study starting in FY88 as part of our sector work program, with a view to identifying an Export Corridors Project for FY89 or FY90. In parallel with this, ENFE is preparing a proposal for a fourth railway rehabilitation loan, not at present foreseen in the lending program. Since the Santa Cruz-Corumba line is likely to feature in any export corridor project, and possibly also the Arica-La Paz line, it may be feasible to incorporate the essentials of the railway rehabilitation proposals into the export corridors project. TABLE 1 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER TRANSPORT SECTOR INVESNT PLAN, 1987 TO 1990 SUMARY OF 1987 TO 1990 INVESTMENT PLAN PROGRAM PROGRAM FOREIGN I OF UNFUNDED A 8 FUNDING PROMA Sul Sector US$ US$0 US$a US$3 Roads 1244.58 504.89 218.87 81.87 288.83 Ra I Iways 884.12 77.52 34.57 12.54 50.75 Airports 76.53 13.35 34.18 2.16 9.50 AirlInes 78.99 3.01 0.00 0.49 3.01 River 18.87 19.37 8.77 3.13 12.80 TOTAL 2303.09 817.94 294.38 100.00 362.48 PROGRAM A Al Transport Sector Projects PROGRAM 8 Projects selected to f it Mdget Constraint NOTE: Foreign Funding includes funds for projects not Inclied In Program 8 or for funding in exess of that reqired for Progrem B. Hence sum of. Foreign Funding plus Unfunded, exceeds total of Program B. NOTE: Foreign Funding ranges from firm committents to out! Ine agreements. 34 - TABLE 2a Page 1 of 2 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER TRANSPORT SECTOR INVESTWIN PLAN. 1987 TO 1990 SERVICIO MACIONAL DE CAMINOS PROGRAM PROGRAM FOREIGN FOREIGN UNFUNDED A B FUNDING FUNDING PROJECT US$ thou. US$ thou. US$ thou. SOMCE US$ thou. Studies (Pro Investment) 1 Padoya Bermejo 505 505 400 105 2 San BorJa Trinidad 848 848 800 FONPLATA 48 3 San Iuenv CabIja 485 465 410 108-CAF 55 4 Ruta d Iloe Libertadores 800 800 720 80 5 Santa Crun Yaculba 850 850 850 6 Tarija VIl labontes 2,000 2,000 2,000 7 Angostura Aranl 25 25 25 8 V.Tunarl San Igacio 650 850 650 Sub total 5,943 5,943 2,130 3,813 Studies (Final Design) 9 Chal lapata Tarapaya 704 704 840 FONPLATA 64 10 Huanti Ipatl 2,301 2,301 INALPRE 2,301 11 S.Barbara B. VIsta 2,100 2,100 1,700 W GERM 400 12 S.Ana R10 Yata 225 225 225 13 UndavI CuluanI 80 80 80 14 San Bueny Chive 1,200 1,200 1,200 15 RIo Ichoa Tijere 215 215 215 S.b total 6,825 6,825 2,340 4,485 Investment (laintenance and Iprovement) 16 La Paz Autopista 1.200 1,200 17 Pilot MaIntenane Plan 1,800 1,800 IBRO 1,800 18 Rehab.Saalp Taruma 1,800 1,800 1,500 10B 300 19 Overlay Cbba Santa Cruz 15,950 15,950 15,950 20 Reseal La Paz Oruro 933 933 933 21 San Jul lan Project 5,500 5,500 2,500 W GERM 3,000 22 Soutrn Districts MaIntenance 32,242 32.242 32,242 CAF 23 Rehab.Acoes.ChIore Yapacanl 70,000 55,000 31,000 10B 24,000 24 lIp. TarIJa VIIlamantes 2,740 2,740 2,740 25 Palos Blancos Cam.Pajose 275 275 275 26 National Maint. Program 188,000 72,000 3,600 18w 88,400 Stb total 300,440 189,440 70,842 117,398 TABLE 2a Page 2 of 2 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER TRAIMPORT SECTM INtESTENT PLAN. 1987 TO 1990 SERVICI0 NACIONAL VE CAMINO PROGRAM PROGRAM FOREIGN FOREIGI UNFUNDED A 8 FUNDIND FUNDINI PROJECT USl thou. UJS$ thou. US$ thou. SURCE US$ thou. Investment (Nw Constructlon) 27 La Paz Cotapata 4,650 4,850 4.650 28 8.Vista quiubey 2,589 2,569 2,569 29 Natoial Transort Prog-.a 89,480 89,480 58,000 Ice-CAF 13,480 30 YuM P.Sa Ineas eto 800 800 800 31 S. Ros Riberalta 3,496 3,486 3,498 32 Chiare Yapaani 78,282 65.000 58,500 I 8,500 33 Santa Cruz Trinidad 27,830 27,830 12,630 FONPLATA 15,2W: 34 Ccblja Chive 7,200 35 Rura Roads I 2,200 2,200 2,200 36 Rural Roads II 11,100 11,100 8,090 USAID 3,010 37 Rural Roads III 13,789 13,789 1,185 IM-CAF 12,04 38 Rural Roads huquisac 260 280 260 39 Rural Roads as 1,388 1,368 1,388 UNOP St total 223,024 202,542 135.773 88,769 40 PataaMya Talbo Qusade 121,800 18,000 16,000 41 Couf Ital Caliuses 63,800 25,000 25.000 42 San Sorja Trinidad 18,200 43 San Mnv Chivs 18,900 44 El Honds Puerto Rico 2,500 45 Cotapata Santa Barbara 30,000 46 Santa Barbara B. Vista 35,400 47 Padoaya Bermajo 120,000 48 T=etltas San Lorezo 3,000 49 Potosi Setaos 22,500 50 Sure 1.200 1,200 51 Mechaoaarea Chilapata 28.300 52 lawourre t wt 5,500 53 Rio Seao Desaudero 38,000 54 Sucre Tarabuo 20,500 55 Rio Caine AMaid 9,820 58 Yaculba Palar Grands 5,000 57 Cotagalta S.J. de Oro 5,000 5.000 1,780 FICA 3,220 56 Alto Beni Consolidation 11,786 6.000 4,000 IBB 2,000 59 Natioal Bridg Const. Program 5,910 5,910 5.910 s0 Puente Ian 600 800 600 61 Puente Chos 30 30 30 82 Puente Tuimla 200 200 200 SLb total 584,348 59,940 5,780 54,180 83 Oevelopmnt Corporatios 144,000 40,000 40,000 TOTAL INVESIENT USft USSM USa US" Pro investment 5.94 5.94 2.13 3.81 Final Dsig 8.83 6.83 2.34 4.49 Investment (Mint. and Improve.) 300.44 189.44 70.84 117.40 Investment (Now Construction) 787.37 262.48 141.55 120.93 Development CorporatIons 144.00 40.00 0.00 40.00 TOTAL 1244.8 504.69 216.87 288.83 - 36 - TABLE 2b BOLIVIA TRANSPORT SECTOR STRATEGY PAPER TRANSPORT SECTOR INVESTlNt PLAN, 1987 TO 1990 EPRESA NACIONAL DE FEMOCARRILES PROGRAM PROGRAM FOREIGN FOREIGN UNFUNED A 8 FUNDING FUNDING PROJECT US$ thou. US$ thou. US$ thou. SOtCE US$ thou. Studies 1 Santa Cruz Cbba 500 500 500 2 litun Puerto Busch 50 50 50 Sub total 550 550 550 Maintenance 3 ipias Robore 11,774 16,000 8,801 JAPAN 9,199 4 Diesel LocaotIves 2,137 2.137 2,137 l GERM 5 Phase IV Rehabi litat ion 60,000 31,500 31,500 6 Communloations 1,000 1,000 1,000 7 RIC II 8,500 IBRD 8,500 Sub total 74,911 59,137 8,938 50,199 New investment 8 Santa Cruz Terminal 10,430 5,000 9,800 ARS 9 New Wagon 3,830 3,830 3,830 AR 10 Ratibuses and Spares 8,000 5,000 8,000 AG 11 Interbadal Services 4,078 4,000 4,000 ARG 12 Sub total 28,338 17,830 25,630 13 Muntu Puerto Busch 78,019 14 Cbb Santa Cruz 600,000 15 Mamare Yapacani 31,000 AR 18 Manre Trinidad 45,000 ARG 17 Gumal V iacha 20,000 PERU 18 Locoastives 10,300 Sub total 782,319 TOTAL INVESTMENT US" US$a US%. USM$ Studies 0.55 0.55 0.00 0.55 Maintenance 74.91 59.14 8.94 50.20 New investment 808.66 17.83 25.63 0.00 TOTAL 884.12 77.52 34.57 50.75 ' - 37 - TABLE 2c BOLIVIA TANSPORT SECTOR STRATEGY PAPER TRANSPCRT SECTOR ;INESTNT PLAN, 1987 TO 1990 AOMINISTRCION DE AEROPERTOS Y SERVICIOS AUXILIARES A LA NAVEGACION AEREA PROGRAM PROGRAM FOREIGN FOREIGN UNFUNDED A 8 FUCING FUNDING PROJECT US$ thou. US$ thou. US$ thou. SOURCE US$ thou. Studies 1 National Airport Plan 500 500 500 2 La Paz 1,500 1,000 1,000 3 Re-organizatIon Plan for AASANA 200 200 200 4 National Maintenance Plan 300 5 Information System Plan 450 e Fea. Radar Network 100 100 100 7 Feas. .S 5 8 Fes. Extenslon WFAiF 20 9 Fem. Radio Aldo Stage II 10 SW total 3,085 1,800 1.800 Inestnt 10 Trinidad 654 654 654 11 CabliJa 14.600 7,702 MRAZIL 12 Yaculba 2,280 1,140 1,140 13 Exteslon of Vf nework 150 150 150 14 Renewal WF-AWtwr 90 90 90 15 Terminal ADS 10 10 10 16 PAPI (SCZ) 40 40 40 17 Secondary Airports 4,400 4,400 4,400 18 Cochabsba 29,000 19,000 ITALY 19 La Paz 4,400 3,625 JAPAN 20 TarIja 2,000 1,000 1,000 ARG 21 PotosI 3,500 1,750 1,750 ARD 22 Riberalta 10,000 Sw total 71,124 9,234 33,077 6,484 23 1E 250 250 250 24 Radio Aide 414 414 414 25 La Paz M.S 300 300 300 26 La Paz Radar 1.310 1,310 1,100 SPAIN 210 27 Security systems 44 44 44 Sub total 2,318 2,318 1,100 1,218 TOTAL INVESTMENT USSR USIl US$m US$m StudIes 3.09 1.80 0.00 1.80 New Investments 73.44 11.55 34.18 7.70 TOTAL 78.53 13.35 34.18 9.50 -38 - TABLE 2d BOLIVIA TRANSPORT SECTOR STRATEGY PAPER TRA"SPCT SECTOR INESTEI PLAN, 1987 TO 1990 LLOYD AERED BOLIVIAND PROGRAM PROGRAM FORE IGN FOREIGN UNFUNDED A B FUNDING FUNDING PROJECT US$ thou. US$ thou. US$ thou. SOURCE US$ thou. Studies 1 Bulding Desigi 40 40 40 su total 40 40 40 Investment 2 Component BuIlding 493 493 493 3 Coap. Air System 50 4 MaInt. Apron 1,000 1,000 1000 5 Admin. Bulding 1,000 6 Reneal Telecoa 200 200 200 7 Freight Terminal (SCZ) 65 65 85 8 Store (PSZ) 7 7 7 Si total 2,815 1,765 1,765 9 Maint. Hangar 1,000 1,000 1,000 10 Cap. Air Syste 200 200 200 11 Water Supply 592 12 Equip. Components Building 3,647 13 Waste Water Syst 1,700 14 Repair Center 4,000 15 New AIrcraft 65,000 sub total 76,139 1,200 1,200 TOTAL INVESTMENT US$ US$m US$11 US" Studiles 0.04 0.04 0.00 0.04 Investment 78.95 2.97 0.00 2.97 TOTAL 78.99 3.01 0.00 3.01 - 39 - TABLE 2e BOLIVIA TRANSPORT SECTOR STRATEGY PAPER TRANSPORT SECTOR INVESTWNT PLAN, 1987 TO 1990 SU-SECRETARIA OE INTERESES MARITIMS, FLUVIAL Y LACUSTRES PROGRAM PROGRAM FOREIGN FOREIGN UNFUNED A B FUNDING FUNDINS PROJECT USI thou. US$ thou. US$ thou. SOURCE US$ thou. Studies Puerto Busch 2,000 2,000 BRAZIL Puertoe ichile/MIAore 300 300 300 Feas. Rio BSen/Pt.Riberaita 400 400 400 Feas. of Dv. of Minor Ports (Rio Beni) - 300 300 300 Feas. Rio Desaguadero 250 250 250 Feas. of TranPort of LPG 350 350 350 Sub total 3,600 1,600 2,000 1,600 investments Clearing Ichlie/Maaore 8,772 6,772 8,772 BELGIUM Puerto 8usch 8,000 Clearing R.BenI 1,000 1,000 1,000 Puertos Ichi le/aore 800 800 800 Transort of LPG 700 700 700 Puerto QuI Jarro 8,500 8,500 Sub total 15,272 17.772 8,772 11,000 TOTAL INVESTMENT US$m US$ US$m US$m Studies 3.80 1.60 2.00 1.60 Imnstivents 15.27 17.77 6.77 11.00 TOTAL 18.87 19.37 8.77 12.60 - 40 - TABLE 3 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER Distances to Deep Water Ports Distance (ka) Origin Port Road Rail River La Paz Arica 580 460 - Antofagasta - 1,800 - Matarani 740 829 - Potosi Arica - Antofagasta 870 900 - Santa Cruz Santos - 2,500 - Rosario 2,800 2,100 2,350 Buenos Aires 3,200 2,400 2,770 Nueva Palmira 3,100 - 2,700 - 41 - TABLE 4 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER DISTRIBUTION OF LAND, POPULATION AND TRANSPORT INFRASTRUCTURE Unit Total Altiplano Y4ngas LLanes Land km2 a 1.098 16 20 64 Population (1985) a 6.429 51 27 22 Road Network ke 39,824 36 43 21 Rail Network ke 3,643 39 23 38 -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 42 - TAM 5 TRANSMl SECfR SRA1EGY PAPER Total ipitures by Road sers 1. Vehicle Fleet Approach (urban and rural) Avg. Fin. nul cp. Cwt 1984 Distanoe 1984 per veh-lan Ttal Flet (000) Driven veh-lan (US ents, Op. cots 1979./ 1984 2, (000 lm) 31 (nd11næ) 1986 prics) 4/ (US$ d.l1æ Cars 27 46 10 460 15 69 ans & Pic-up 34 56 20 1,120 25 280 Buses 6 9 30 270 50 135 Trucke 25 28 30 840 65 546 Official Vddcles 8 9 10 90 15 14 Subtotal/Avg. 149 19 2,780 38 1,044 etorcycles _29 46 ibtal 129 195 2. Rod Network Approach (rural only) Avg. Fin. Op. coat Road Anual per ve-ka btal langth Avg Veh-la (US cents, cp. ~osts (ku) 5 AM 6/ (WJ11oq) 1986 prics) 4/ (US$ milh1æ) Paved 1,512 710 392 35 137 Gravel 9,281 90 305 50 153 Farth 30,393 20 222 60 133 Tbtal/Avg. 41,186 60 919 47 423 Source: 11 lr, Final Report, Vol 2, Table 16-2 2/ "Bolivta en CIfr', Tble 175 (police registration) 3/ biasma estinmtes 4/ issiæ estimates, base a "Proyecto de Desarrollo Interad de la gion de San Benaventura", Final Report, Transport Sector, Annex 5 6_/ EIT, Final Report, Vol. 2, Tales 11-12 (paved roads, 1980 AlD) and 11-9 (unpaved ras, 1977 AlM) gmlhe vehicle fleet approach, ~sirg reistratio statistics and onervative estimates of a driven each year, gives total anmal travel of about 2.8 billion veh-an. It is unerstood that the registraton data do not eliidneate vehicle n~ they have been scrapped, but at the san time a great many vehicles have been a~mgled in since 1980. In oitrast, the road netrk pproach, based an traffic couts in 1977 and 1980, indicates total non-urben travel of abut 0,9 billim veh-an. xIternational æperisons sqgest that the urban/rural split of ve-la is ab~ut 40/60, ~hich ~old put total veh-a by this approach at nly 1.5-1.6 billion. Traffie vol~æ are believed to have grom little ar even deelined betee 1980 and 1986. ~onclulo: up-to-date data need to be collected; in the nmantime It mny be stated that estimt total e nttures by road users a vehicle operati lie in the rage US.6-1.0 billio. - 43 - TABLE 6 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER CURRENT (APRIL 1987) ROAD AND RAIL FREIGHT RATES Distance Sealed Gravel Rail Rail Road Road (Grain) (Mineral) is US cents/ US cental US cents/ US cents/ ton ks ton ks tan s tan ks 100 9.73 10.62 24.0 9.1 200 9.73 10.15 19.0 7.0 300 9.73 10.00 17.0 6.2 400 9.73 9.92 15.0 5.9 500 9.73 9.87 14.0 5.7 600 9.73 9.84 14.0 5.5 Sources: Road Transport Syndicates ENFE Tariff Tables, May 1987 9 - 44 - TAlE 7 l01VIA TRASO1' SECIMR $11IAGY PAPER Public Sector amsolidated BUdget for 1987 US$millima As % of GDP 1/ Umtral Gmtral Govt. other Total Govt. Other Total A. Grrant Account Inco Taxes & earnings 310 1,603 1,913 7.2 37.3 33.5 Transfers 296 99 395 6.9 2.3 9.2 Total 606 1,702 2,308 14.1 39.6 53.7 otays Operatig ependitures, etc. 367 840 1,207 8.5 19.5 28.0 Transfers 139 459 598 3.2 10.7 13.9 Debt Service 104 204 308 2.4 4.7 7.2 Total 610 ~1$503 =.N . Surplus/deficit on current a/c -4 199 195 -0.1 4.6 4.5 B. O2pital Account Investoent 31 608 639 0.7 14.1 14.9 (of 4 ich Transport) (188, (4.4) New debt: danestic 2 28 30 0.7 New debt: foreign (inc. grants) 33 381 414 9.6 Total, deficit financing 35 409 444 0.8 9.5 10.3 1/ Taken as US$4.3 billion Source: -Proyeeto del Presupuesto Gaeral de la Nacion, 1987" Huller & Machicado Assoc. - 45 - TABLE 8 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER Investment3 Proposed by Government in Santa Cruz to Cochabamba Corridor Total Years to Cost Proposal kus Complete US$m Reconstruction of existing road 500 2 16 Construction of new road, Chimore-Yapacani plus accesses 439 4 220 New rail link from Aiquile 178 8 600 Intermodal rail facilities - 1 14 TABLE 9 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER INVESTMENTS PROPOSED BY GOVERNMENT IN EXPORT CORRIDORS Invntset Corridor Road Rail River TOTAL US$s US$s US$$ USSA La Paz Arica 160 7 167 Matarani 20 20 Antofagusta 5 5 Santa Cruz Corusba 160 40 10 210 Yacuiba 200 200 Total 520 72 10 602 - 47 - TABLE 10 BOLIVIA TRANSPORT SECTOR STRATEGY PAPER Transport Studies Under Way or Planned IBRD Complete, Implemented contribution May Task by (US$) 1987 1. Up-date recommendations of EIT EIT - 10 2. Redesign transport statistics BC 5,520 0 3. Diagnostic of surface links H. Revuelta 23,750 30 (BC) 4. Road user charges (resource BC - 0 mobilization) 5. Up-date of road VOC's ITVC 66,123 40 6. Analysis of intermodal system, BC - 0 Cochabamba-Santa Cruz 7. Options for expanding BC 19,320 0 river transport 8. Install HDM3 ITVC 10,000 60 9. Institutionalize EIT EIT - 100 10. Up-date INECO study for railway BC 4,840 100 rehabilitation, Phase IV 11. ENFE's costing & restructuring of 0.Regazzini 24,700 100 its pricing (FC) 12. Prepare program of labor-intensive Bocarejo 43,100 0 road maintenance and rehabilitation Pereira (FC) Key EIT: Estudio Integral de Transportes (division of Ministry of Transport and Communications)* BC: Bolivian consultant FC: Foreign consultant ITVC: Transport Institute of the University of La Paz ("Instituto de Transportes y Vias de Comunicacion") IBRDZ叫ds 叫 JU鉀19日才