Mexico - Urban Transport Project

Document of The World Bank FOR OFFICIAL USE ONLY ;tv 2 82 V- <-f Report No.6487-ME STAFF APPRAISAL REPOP.T MEXICO FIRST URBAN TRANSPORT PROJECT April 29, 1987 Urban Projects Division Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS July, 1986 Curreitzy Unit: Peso (Mex$) US$1 = Mex$ 643 Mex$ 1 = US$0.016 GOVERNMENT OF MEXICO FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES 1 kilometer (Km) - 0.62 miles (mi) I liter (1) = 0.26 gallons (gal) 1 hectare (ha) = 2.47 acres (ac) 1 metric ton (Mton) = 2205 pounds (lbs) GLOSSARY OF ACRONYMS AND ABBREVIATIONS AADT Average Annual Daily Traffic ACF Average Cost of Funds (Federal Government Borrowings) (Costo Porcentual Promedio (CPP)) BANOBRAS National Bank of Public Works and Services (Banco Nacional de Obras y Servicios Publicos, S.N.C.) COTREM State of Mexico Transport Commission (Comision del Transporte del Estado de Mexico) CUD Comprehensive Development Agreements (State/Federal) (Convenio Unico de Desarrollo) DDF Department of the Federal District (Departamento del Distrito Fedcral) GIRA General Interest Rate Agreement GOM Government of Mexico (Federal) ICB International Competitive Bidding LCB Local Competitive Bidding SDUOP Secretariat of Urban Development and Public Works (State of Mexico) (Secretaria de Desarrollo Urbano y Obras Publicas) SEDUE Secretariat of Urban Development and Ecology (Secretaria de Desarrollo Urbano y Ecologia) SHCP Secretariat of Finance and Public Credit (Secretaria de Hacienda y Credito Publico) SOPT Secretariat of Public Works and Transport (State of Nuevo Leon) (Secretaria de Obras Publicas y Transporte) SPP Secretariat of Programming and Budget (Secretaria de Programacion y Presupuesto) SCT Secretariat of Communications and Transport (Secretaria de Comunicaciones y Transporte) STT State-owned Bus Companies (State of Mexico) (Sistema de Transporte Troncal) TSM Traffic Systems Management VCT Valle Cuatitlan-Texcoco (State of Mexico)  FOR OMCIL USE ONLY MEXICO FIRST URBAN TRANSPORT PROJECT STAFF APPRAISAL REPORT Table of Contents Page No, 1. LOAN AND PROJECT SUMMARY ....................... ,,,., i II. THE SECTOR............ 1 Urban Sector Background................. , , , ,. .... 1 BANOBRAS0*04 I Urban Transport Subsectorb s e ct.......... or........... 2 Cost Recovery and Pricing , ,,, 3 Nuevo Lo ......,,3 State of Mexico. ............ 5 Urban Transport I s s u e s 6 Government Strategy and Bank's Roee 6 III, THE PROJECT Project Origin 8.....8 Project Rationale and Objectives ..................... 8 Project Description ..............................., 8 Organization and Managemdnt .......................... 9 Implementation Schedule ........................... 10 Status of Project Preparation ........................ 10 Monitoring and Reporting Requirements 10 Project .............. ... .. 11 Financing Rln.........,12 on-lending to States ................. ,.,.12 On-lending for Bus Purchases ........................ 12 Financial Impact *............ 13 Procurement,................. ...................... . 13 Disbursements .................... 14 Accounts and Audits..u... 15 Economic Justification ...................... ,..... 15 Project Benefits .......... 15 Air Quality Impct. 16 Impact on Emo to y m e n t 16 Project Risks ......... 16 This report is based on the findings of an appraisal mission which visited Mexico in July 1986. The mission comprised Messrs. John Flora, (Mission Leader), William Thornhill (Transport Engineer), LCPUR and Steve Pereira, Martin Hyde and Donald Stout (Consultants). Ms. Martha Behar assisted in the production of the report. [his document has a restricted distribution and may be usd by recipients only in the perfonmanc of their official duties. Its contents may not otherwise be disclosed without World Bank authorzation.  Table of Content (Cont'd) Page No. IV. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS ........................ 17 Text Tables 111.1. Project Cost Summary ....... ..................... 11 I11.2. Procurement Arrangements ...... .................. 14 ANNEXES 1. Project Organization.................. **.................... 19 2. Detailed Description of the Project ....................... 29 3. Summary of Costs........................................ 32 4. Procurement Arrangements ... ..................**...... 35 5s, Disbursement Schedule ...................... . 37 6. Monitoring and Evaluation ........ .......... ..... .......... 38 7. Financial Analysis .....* ................................ 46 8. Economic and Social Analysis............................... 54 9. Cost Recovery and Pricing .......................... . 62 10. Selected Documents and Data Available in Project File ........................................... 64 MAPS 1* Metropolitan Monterrey ....................... . 2. Valle Cuatitlan-Texcoco (VCT)-State of Mexico..............  - i - MEXICO FIRST URBAN TRANSPORT PROJECT PART 1. LOAN AND PROJECT SUMMARY Borrower Banco Nacional de Obras y Servicios Publicos, S.N.C., (BANOBRAS). Guarantor : United Mexican States. Beneficiaries : The States of Mexico and Nuevo Leon, private bus operators, and BANOBRAS. Amount : US$125.0 million equivalent. Terms : Fifteen years, including three years of grace at the standard variable interest rate. Relending Terms: The Peso equivalent of US$53.5 million and US$39.8 million would be made available to the States of Mexico and Nuevo Leon, respectively, on the same terms as the Bank loan and at an interest rate of 80% of average cost of funds (ACF)1/. The Peso equivalent of US$28.8 million would be made available to private bus operators In the project areas, under subloans which would cover at most 80% of the cost (net of taxes) of equipment for a term of three years and with no grace period. Subloans would be made at an interest rate of ACF through June 30, 1989 and ACF + 2 thereafter. Project The objectives of the proposed project would be to: (a) Objectives: improve the accessibility, quality of services, operational efficiency, and costs of public transport; (b) rationalize tariff policies, improve the financial and economic viability and sustainability of transport investments, and encourage private sector participation; (c) preserve transport infrastructure investments and reduce vehicle operating costs through implementation of adequate, cost-effective maintenance programs; and (d) strengthen institutional capability, at the local as well as national level, to provide effective policy development, planning, resource allocation, traffic system implementation and operation, and project replicability. Project The proposed project would consist of improvements to Description: initiate and support a system management approach to urban transport in the States of Mexico and Nuevo Leon. These 11 Average Cost of Funds to the Baiking System  - ii - improvements would include four integrated components: (a) corridor improvements; (b) public transport; (c) road maintenance; and (d) traffic systems management. The project would also p':ovide technical assistance to the Transport Technical Directorate in BANOBRAS to assist with project coordination and supervision and to analyze transport problems in secondary cities in Mexico. Project Risks: The major project risk is institutional. Previous BanK pro- jects have been adversely affected by institutional weak- nesses within BANOBRAS, the Borrower and the Federal entity responsible for overall project coordination and manage- ment. However, BANOBRAS has recently been reorganized, and a new Director-General has been appointed, to strengthen and expand its role as a Development Bank providing efficient lending support to local Governments. In addition, the pro- posed project would provide technical assistance to the pro- ject coordina.ing unit in BANOBRAS' Transport Technical Directorate to assist with project management. Finally, an interministerial committee, composed of representatives of SHCP, SPP, SEDUE, SEGOB, and BANOBRAS would provide regular monitoring of the project and of agency effectiveness. These factors, combined with intensified supervision during the early stages of the project, are expected to mitigate the risks of unnecessary delays in project execution, approvals and disbursement. Project Costs: Local Foreign Total ----- (U$ Millions)--- Corridor Improvements 51.2 27.6 78.8 Public Transport 47.7 31.8 79.5 Road Maintenance 28.7 16.1 44.8 Traffic Management 6.2 4.8 11.0 Technical Assistance, Studies, 1.4 1.3 2.7 Equipment (Fed. subproject) TOTAL BASE COSTS 135.2 81.6 216.8 Physical Contingencies 13.8 8.2 22.0 Price Contingencies 35.3 20.3 55.6 PPF 0.1 0.4 0.5 TOTAL PROJECT COSTS1/ 184.4 110.5 294.9 1/ Total project costs include US$44.2 million in taxes and duties.  - ili - Financirsg Plan: Local Foreign Total ---