Mexico - Fourth Railway Project

Document af The World Bank FOR OEFICIAL USE ONLY Report No. 9087 PROJECT COMPLETION REPORT MEXICO FOURTH RAILWAY PROJECT (LOAN 1929-ME) OCTOBER 26, 1990 Infrastructure and Industry Operations Division Country Department II 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.  MEXICO FOURTH RAILWAY PROJECT (LOAN 1929-ME) CURRENCY EOUIVALENTS Currency Unit - Peso (M$) US$1 M M$ 23.0 (1980) US$1. M$ 23.0 (1981) US$1 _ MS 70.0 (1982) US$1 - M$ 120.0 (1983) US$1 _ M$ 165.0 (1984) US$1 - MS 215.0 (1985) US$1 _ M$ 970.0 (1986) ABBREVIATIONS BANOBRAS National Bank for Public Works & Services CTC - Csntralized Traffic Control DGP - General Directorate of Planning SCT DGT - General Directorate of Tariff SCT IMSS - Mexican institute of Social Security NdeM - Nacionales de Mexico NAFINSA - Nacional Financiers Development Bank 3CT - Secretariat of Communications & Transport SHCP Secretariat of Finance SPP Secretariat of Programming 1& Budgeting  FOR OMCIL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Ofice if Drectew-Gueral Opeuatomn Evahjatim October 26, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Mexico Fourth Railway Project (Loan 1929-ME) Project Completion Regort Attached, for information, is a copy of a report entitled "Project Completion Report on Mexico Fourth Railway Project (Loan 1929- ME)" prepared by the Latin America and the Caribbean Regional Office with Part II of the report contributed by the Borrower. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment 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.  FOR OFFICIAL USE ONLY MEXICO FOURTH RAILWAY JECT (LOAN 1929-ME) PROJECT COMPLETION REPORT Table of Contents Page No PREFACE ..........................................................i EVAIUATION SUMMARY ...............................................ii I. PRJECT REVIEW FROM BANK'S PERSPECTIVE . Project Identity .1 Background .1 Project Objectives and Description. 2 Project Design and Organization. 3 Project Implementation. 4 Project Results. 6 Project Sustainability .9 Bank Performance .10 Borrower Performance .10 Project Relationships .11 Consulting Services .11 Project Documentation and Data .12 II. PROJ= REVIEW FROM OROWER'S PERSPECTIVE .13 III. STATISTICAL INFORMATION .17 Related Bank Loans (Table 1) ..................... 18 Project Timetable (Table 2) .19 Estimated and Actual Disbursements (Table 3) .20 Project Implementation (Table 4) .21 Project Costs (Table 5(A)) .22 Project Financing (Table 5(B)) .23 Project Results (Table 6A) .24 Economic Impact (Table 6(B) .25 Income Statements 1981 (Table 6(C)) .26 Cash Flow Statements 1981-1985 (Table 6(C2)) .27 Balance Sheets 1981-1985 (Table 6(C3)) .28 Studies (Table 6(D)) .29 Status of Covenants (TabLe 7) .30 Use of Bank-Resources - Mission Data (Table 8) .31 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.  MEXICO FOURTH RAILWAY PROJECT (LOAN 1929-ME) PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Fourth Railway Project in Mexico, for which Loan 1929-ME in the amount of $150.0 million -was approved on December 15, 1980. The loan was closed on June 30, 1986, two years behind schedule, when US$149,880,712 was disbursed and an undisbursed amount of $119,288 cancelled. The PCR was prepared by the Infrastructure and Energy Operations Division of the Latin America and Caribbean Country Department II (Preface, Evaluation Summary and Par.3 I and III). On May 18, 1990 the Bank sent the Borrower Parts I and III with the request for comments additional to those already included in this report. These are now incorporated as Part II. This PCR is based, interalia, on the Staff Appraisal Report; the Loan and Guarantee Agreements; Supervision Reports; correspondence between the Bank and the Borrower; internal Bank Memoranda, reports/data received from the Borrower, and information available from the Project Files.  - ii - FOURTH RAILWAY pROJECT (LOAN 1929-ME) PROJECT COMPLETION REPORT EVALUJ5ION SUMMARY Obiectivel 1.- The main objectives of the project, the improvement of the operations and finances of the railway (para 3.01) were, in a large measure achieved. Traffic carried by NdeM increased substantially, although not to the extent forecast at appraisal. This, together with significant tariff increases during the project period, and several improvements in key areas of NdeM's operations, reduced the railway's deficits substantially and improved the Operating and Working Ratios of NdeM-almost in line with the targets indicated at appraisal (para 6.01). Implementation and Results 2. Implementation of the project was adversely affected by the down turn in Mexico's economy arising from the fall in oil prices and the substamcial devaluation of the Mexican peso (para 5.02). As a result of the austerity measures imposed, and also because traffic increases were lower than forecast, the project investments were reduced and spread over five years instead of the three years of thie original project (para 5.02). However, the implementation of the project was competently done, and the project was implemented at a cost approximately 20% lower than the estimated cost (para 5.03). The re-evaluated Economic Rate of Return (ERR) of the project is 25% compared with 22% de.termined at Appraisal (para 6.08). Sustainabilitv 3. The project had significant benefits inasmuch as the operational and financial performance of the railway improved, while at the same time an increasing amount of traffic was carried by NdeM thus avoiding diversion of bulk long distance traffic to the road where unit transport costs for such traffic are hieher. The satisfactory performance under this project and the basic charieteristics of the project, as a time-slice of an agreed investment program with a specific action program paved the way for appraisal of the Railway Sector Project as a follow up operation designed to further improve the performance and carrying capacity of NdeM, and to enhance its contribution to the Mexican economy. The Fourth Railway Project, therefore, is likely to maintain an acceptable level of nst benefits throughout its economic life. Findines aLg lessons Learned 4. Basically, the project produced -the expected results because the various project components and the Plan of Action were >..'sely linked to performance results, and the borrower and the Bank respoz_._ed promptly and  - iii - effectively to problems as they arose during the implementation of the project. The progressive adjustment of the investments and the project period averted over-investments, thus improving returns from the project. One lesson that emerges from this project (and, for that matter, frnm several other transportation projects) is that traffic forecasts shfuld be more carefully done. The other, although reflected in the greater emphasis on locomotive maintenance in the Railway Sector ?roject. is that this aspect of the railway's work should be vigorously monitored by future Bank missions. Finally, sustained efforts should be made to achieve cost-based tariffs and to give FNdeK greater autonomy to adjust its tariffs (para 6.06).  MEXICO FOURTH RAILWAY PROJECT (LOAN 1929-ME) PROJECT COMPLETION REPORT I. PART I PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Proiect Identity Project Name: Railways IV Loan No.: 1929-ME RVP Unit: Latin America and the Caribbean Country: Mexico Sector: Transportation Subsector: Railways 2. Background 2.01 Mexico has developed an extensive transport network which comprises over 200,000 km of roads, about 20,000 km of railways (all except 300 km being standard gauge), some 33 ports of which 13 serve international traffic; about 50 airports capable of handling medium or larger size aircraft; and over 20,000 km of pipelines for crude oil, refined products and gas. 2.02 The main objectives of Bank lending in Mexico were to (i) support policies and programs leading to a wider distribution of the benefits of economic growth; (ii) help finance projects with significant contributions to output and employment; (iii) help reduce Mexico's urban-regional imbalances; and (iv) remove bottlenecks to economic growth. In regard to infrastructure, the Bank focussed on investments in key areas, on institutional reforms, and on sector policies to improve pricing mechanisms, to generate additional resources for investment financing. 2.03 The Bank has provided broad support to the development of transport in Mexico, zo improve planning ard administration, with mixed results in the highways sub-sector and a greater degree of success in the railways sub-sector. For the railways, three loans helped to rehabilitate the infrastructure and improve operations, but the Covernment had been slow to act on tariff increases, although by the end of the third loan, an increasing awareness of the problem had become perceptible. The good relations established between the Government NdeM and the Bank and the general compatability of objectives meant that the size of the Bank's contribution to NdeM investment program financing was not a critical determinant of the level of cooperation enjoyed. 2.04 At the time this project was appraised, transport demand was expected to increase by 8% annually and with the Governm at's strategy of integrated regional economies, the demand for land transport was expected to affect the railways which would require judicious investments to expand their carrying capacity. A Bank mission in May 1979, referred to as the 'Transport Bottlenecks Mission' which visited Mexico at the request of the Ministry of Finance (SHCP), concluded that five years of real reductions in  -2- transport sector investments coupled with a surge in economic growth and large food-grain imports had led to serious bottlenecks in the rail system (with the Ports, at the time, a secondary problem). The mission highlighted the need for substantial investments to improve rail capacity which could be well justified and of high priority. A series of preparation missions visited Mexico in the second half of 1979 and early 1980 to prepare che project, which was appraised in May 1960. 2.05 During the preparation of the project, 1ldeM and SCT discussed the prospects of a Railway Sector Loan which would include not only NdeM's investments but also SCT's program of construction of new lines and realignment of some of the older lines to reduce the curvature and gradients. This would have neces3itated a Sector Loan format, as four different railway lines would be involved in the SCT program. On this basis, the Appraisal mission went to the field with the mandate of appraising a Railway Sector 2rojIct. However, dutrng Appraisal, SCT conveyed that it would not seek Bank funding for its investment program from the Bank as it had found other sources of financing. It was the perception at the time that the SCT was discouraged from participating by the prospect of a critical review of its investments and also felt uneasy with the Bank's interest in policy issues such as the aevel and structure of tariffs. The project consequently concentrated on NdeM, and a classical investment loan format was accordingly appropriate. 3. Proiect Obiectives and Descrintion 3.01 The project combined the 1981-1983 portion of NdeM's 1981-1985 Investment Plan with a Plan of Action aimed at improving the operating and financial performance of the Railway. The objectives were: (i) to augment the carrying capacity of NdeM by continuing the rehabilitation of the track, improvements in signalling and the acquisition of additional motive power and rolling stock; (ii) to improve the operating efficiency of NdeM in accordance with the targets set forth in the Plan of Action; (iii) to reduce NdeM's operating deficits and to improve its financial position with the objective of eventually reaching financial self sufficiency, and (iv) to provide improved information systems for the management of NdeM. 3.02 The estimated cost of the project was $1,526.7 million with a foreign exchange component off $535.8 million, of which $150 million would be financed by the Bank loan. The main project components were: (a) Rehabilitation of about 780 km of mainline track with new rails, sleepers and ballast, and about 560 km of branch-lines with second hand recovered rail, sleepers and ballast; (b) Provision of track maintenance machinery and equipment to accelerate and improve the maintenance of track; (c) Strengthening and where necessary, replacement of old bridges to carry heavier locomotives and freightcars for use on the system; (d) Lengthening of existing rail sidings and construction of additional sidings, where necessary, to augment line capacity.  -3- (e) Installation of centralized traffic control (CTC) on 960 kms of principal lines; (f) Acquisition of 192 mainline diesel locomotives, 50 shunting locomotives and 9,350 freight cars; (g) Replacement of old and obsolete workshop machinery and equipment; and (h) Technical assistance in the areas of (i) Cost of Services and Tariff increases; (Li) Hanagement Information Systems; (iii) Computerization of line and yard capacity analysis and planning; and (iv) improvement of train and yard operations and locomotive utilization. 3.03 The Plan of Action specified quantitative targets tn key technical, operational and financial areas, to be met during the years 1981-1985, as well as the steps to be taken to achieve them. 3.04 The project was expected to be financed as follows: NAFINSA $1,022.6 million BANOBRAS $ 284.1 million OTHERS $ 62.1 million FOURTH RLY LOAN (IBRD) $ 150.0 million OTHER BANK LOANS (IBRD) $ 7.4 million $1,526.7 million BANOBRAS was appointed as NdeM's financing agent. Even though the Government's share was small, it was expected to assume the debt service charges on behalf of NdeM. Parallel financing was expected from Eximbank (about $94 million) and international banks (about $127 million). through NAFINSA, to finance the purchase of locomotives and to complete the financial package of NdeM. 4. Proie-t Design and Organization 4.01 The project was designed as an integrated program of technical, economic and financial improvements, aimed at augmenting the carrying capacity of NdeM and at improving its operations and finances. The conceptual foundation for the project was thus clear, and was shared by the Borrower and the-Government. The project content was conventional although the combination of the investments and the extensive Action Plan was to some extent innovative inasmuch as the inve3tments were related to improvements in performance. The components chosen for loan financing was determined partly by the availability and fungibility of other sources of finance (Eximbank, etc) and by the comparative suitability of equipment financing for the Bank. The project was well prepared and the roles and responsibilities of the three main participants, NdeM, the Government and the World Bank, were clearly defined. 4.02 Coordination of work in connection with the implementation of the project was entrusted to the Planning Manager of NdeM, who coordinated the work with the enecuting departments of NdeM and with the different agencies  -4. of the Government. The cost and capacity analysis wing of the Planning Office, in particular, played an important role in the identification of problems and in making suggestions for cost savings and operational improvements. Bureaucratic procedures made the coordination work difficult and ic was on occasions necessary for Bank missions to play the role of mediator in controversies between the different departments of the railway or to expedite decisions and actions by sbe Government on subjects such as tariff increases. However, by and large, the project was managed well by the borrower, and despite the prodding that had to be done by the Bank missions to get the Government to take tariff acrions, the overall results of the project were good enough to justify the Railway sector loan in 1985 (pare 10). 5. Proiect ImRlementation 5.01 Loan Effsctiveness and Proiect Start-up: Board approval of tbe loan was given en December 16, 1980, the legal documents were signed on February 2, 1981 and the loan became effective on June 9, 1981. Between loan signing and Effectiveness, there was a Bank mission to Mexico in May, 1981, to set up reporting requirements for the project, to expedite legal actions required in Mexic.. to make the loan effective, and to supervise the Third Railway Project, from which $15 million of the Bank loan still remained to be disbursed. The year 1980 had been characterized by a huge increase in the number of foreign freight cars on NdeM (from US), and at one point this figure had reached 32,000, leading to P system-wide congestion and deterioration of almost all the operating indices. Fuelled principally by large scale ircreases in imports from US (mainly grain), it was aggravated by cumbrous custom formalities at border check points, unloading delays on the Mexican side, and inadequate yard capacity on the US side. NdeM responded by (i) placing an embargo on US freightcars, (ii) initiating construction of unloading facilities at delivery points and (iii) by the imposition of punitive demurrage charges for delayed wagons. On the suggestion of the Bank, the number of unit trains was substantially increased, thus improving locomotive and freighecar utilization, and a Joint Task Force was set up with US railroads for periodiic review of the freightcar situation on both sides of the border. As a result, the number of foreign cars in Mexico was brought down from a peak of 32,000 in 1980 to about 12,600 by May 1981, with further improvements to follow in later years (para 6.01). The Bank mission also finalized the Terms of Reference for a study to review NdeM operations and to suggest steps to ensure that with the additional equipment, rolling stock and line capacity works being undertaken on NdeM railway operations were conducted in such a manner that the best use was jade of the facilities, equipment and rolling stock acquired. 5.02 Implementation Schedule: Although the project as appraisee comprised the 1981-1983 portion of the 1981-1985 investment plan, by the time the loan be..ame effective it was already mid 1981. The second supervisi4n mission from the Bank Li August 1981, however, reported fairly good progress in project implementation. Traffic was increasing somewhat in excess of appraisal forecasts. Significant improvements nad taken place in the operations of NdeM (at least in part due to the 3rd Railway, Project which was nearing completion), and the number of foreign cars had gone down further to 9,300, thus easing the congestion and imprc.ing the fluidity of the yards and mainlines. Some tariff increases had been made and although  -5- these were still not sufficient to cover cost increases, NdeM's workir.g and operating ratio improved (para 6.01) because of increasing traffic volumes and better utilization of resources. Tha cost of service study was completed thus providing the groundwork for future tariff increases. A significant devaluation of the Mexican currency in February 1982 led to a wage-hike of 20% in NdeM, and substantial increases in the cost of imported matexials. This, accompanied by the fall in petroleum prices, led to the imposition of stern austerity measures in the expenditures of all public sector entities. For the NdeM, although the reductions in investment expenditures for 1981 had been relatively tinocuous, these became quite significant in 1982, with the result that a Bank mission was sent in March 1983 to reassess the investment priorities in the light of the budgetary cuts imposed by the Government. The result was a deferment of some of the expenditures. In effect the project was spread over a larger number of years, leading to a reallocation of loan funds in March 1983 and postponement of the loan closing date (in July 1984) to June 30, 1985. In June 1985, the loan closing date was further extended to June 30, 1986. 5.03 ZroiejjtCg=: The estimated cost of the Fourth Railway Project was about $1,52S.7 million (including contingencies), and it was to be executed during the years 1981-1983. The final actual cost of the project, in the years 1981-1985, was about $1,224.7 million as shown in Table SA Part III. The foreign exchange cost was about $596.2 million as against the Appraisal estimate of $535.8 million. The Bank loan contributed $150 million of the foreign-exchange costs. The local costs were $628.5 million as against the $990.9 million estimated at Appraisal. Thus, in terms of US dollars the actual project cost was about 80% of the SAR estimates, the foreign exchange costs about 111% of the estimates and the local costs 63% of the estimated cost. To a large degree these results reflecc the fmpact of the exchange rate policies followed during the period of project execution. The devaluations of the peso that took place (para 5.2) resulted in a lower dollar equivalent for the local costs than had been expected at appraisal. More specifically: (i) The Track program at $253 million cost 41% more than the original estimate of $179 million for the track rehabilitation works, bridges, _idings etc, mainly because more work was done. (ii) The Signalling and Telecommunications works at $43.8 million cost 3% less than the SAR estimate of $45.2 million. (iii) The LocomotiVe and Rolling stock program at $898.4 million cost about 13% more than the original estimate, because of the additional purchase of spare parts added ln 1983. (iv) The Engineering and Supervision services at $28.6 million cost 12% less than the SAR estimate of 32.4 million. (v) The consulting services at $0.9 million were only a fraction of the original estimate of $4.0 million, mainly because of the Government and NdeM's reluctance to use foreign consultants and the fairly effective use of NdeM "inhousew expertise for the studips and analysis (para 11).  -6- Details of the proposed and actual financing of the project are given in Table SB. 5.04 Pr2curement: Procurement of Bank-financed items proceeded on the lines of the list of goods foreseen at appraisal, with the amendments as made in 1983. As this was the fourth railway loan for Mexico and the third one of NdeM (the first one having been for the Pacific Railway), the railway had already acquired a degree of familiarity with the guidelines for procurement under Bank loans, but in spite of this, bidding documents had to be reviewed in the Bank with great care as intense worldwide competition was involved in some of the major items such as rails, freight cars, track machinery etc. In three major tenders the Bank did not agree with and objected to the recommendations for award made by NdeM, but when the Bank detailed the reasons for not agreeing with NdeM's recommendations for award, NdeM was responsive and modified its recommendations to be in accord with Bank guidelines. By and large, considering the complexity and size of the tanders, and the multiplicity in the types of equipments and spare parts purchased, the procurement work was very competently handled by NdeM. 5.05 Disbgrsements: Table 3 Part III indicates the estimated and actual schedule of disbursements. $7.1 million was disbursed in FY1981 the first financial y.ar of the project, $39.4 million in FY 1982, $13.5 million in FY 1983, $29.1 million in FY 1984, $16.7 million in FY 1985 and $44.2 million in FY 1986. The original disbursement schedule forecast $14 million to be disbursed in FY 1981, $52 million in Fy 1982, $55 million in Fy 1983 and $29 million in the final year FY 1985. The pace of disbursements was considerably slower than the appraisal disbursement schedule, mainly due to the financial stringancy faced by Mexico and the expansion of the project to cover two additional years (para 5.02). It is interesting to note that the actual disbursement schedule was closer to the standard disbursement profile for Mexico. 6. Proiect Results 6.01 Proiect Objectives: The main objectives of the project viz the improvement of the finances and operations of the railway were, in a large measure, achieved. The increase in the freight traffic carried by NdeH, although lower than appraisal forecasts, was still substantial, and rose from 55.1 million tons in 1980 to 60.4 million tons in 1985. The avevage distance for freight traffic also increased from 606 km to 621 km in the same period. This, together with the tariff increases made, improved the Operating Ratio of NdeM from 171 in 1980 to 107 in 1985, thus meeting the Bank targets. In 1984 the Operating Ratio at 91 bettered the Bank target of 114. The Working ratios in the same period improved from 138 to 72 having p -:ed at 62 in 1984. There were also significant improvements in opev.ations (Table 6A Part III). Most of the operating indices, excepting locomotive availability (para 9), improved. The number of foreign ca_.. on NdeM which had risen to a peak of 32,000 in 1980 was reduced to a little over 4,200 by 1985, which not only eased the congestion on the NdeM, but also reduced substantially the burden of rental charges paid to the US railroads for the wagons detained at various yards and sidings in Mexico. Locomotive utilization improved from 66,040 km per freight loco in 1980 to  .7 over 102,738 in 1985. Simultaneously average train loads increased from 1,276 tons in 1980 to 1,348 tons in 1985 while ton-kms per freight per day increased from 1,470 in 1980 to 1,780 in 1985. Overall productivity in traffic units per worker 1 improved from 586,000 in 1980 to 643,000 in 1985. However, the locomotives out of order position did not improve. With a gradually increasing fleet of over aged locomotives (67% of the fleet above 20 years of age, at the end of 1984), locomotive availability remained at an unsatisfactory level, necessitating greater actention from Bank missions during the later stages of this project and the development of an integrated locomotive recovery plan during the appraisal of the followup Railway Sector Project. 6.02 Phvsical Results: In terms of physical compliance of the components of the project, the various civil works and acquisition of motive power, rolling stock, machinery and equipment etc., was done in accordance with the pattern foreseen at appraisal, with the modifications from year to year to fit the more modest traffic growth, and the expanded time span of the project. A total of 938 kms of track were rehabilitated in the five years 1981-1985 instead of the 780 kms in the years 1981-1983. The number of bridges strengthened or replaced was about 640 instead of 510, and in addition, 217 culverts were also rebuilt or strengthened. In signalling works, CTC was installed in 612 kIs instead of 960 kms, postponing the remaining (Teotihuacan-Veracruz line) to the next railway project. The number of wagons purchased was reduced from 9,350 in three years to 8,358 in five years, due to the slower growth of traffic. There was, however, an increase in the number of locomotives procured, from 242 in 3 years to 317 in five years, mainly because of the scrapping of over 100 over aged locomotives during the project period, and the deteriorating av-ailability of the locomotives in the face of increasing traffic (para 6.01). 6.03 Financial Performance: NdeM's financial performance during 1981 to 1985 (tables 6C1 to 6C3 Part III) was much better than during the previous seven years. The operating ratios not only showed substantial improvement but surpassed the appraisal targets during 1983 and 1984 (1.16 and 0.89 versus the appraisal targets of 1.26 and 1.14). The Tripartite Commission formed in 1979 comprising the Controller General of Accounts (SCT), NdeM and NdeM's External Auditors to monitor Ndte's financial performance has contributed substantially to major financial improvements. Tariffs were substantially increased, almost 2,400 retired employees were transferred to the Social Security System (Instituto de Seguro Social), revaluation of fixed assets was reflected in the balance sheet and losses on mail services were reduced. The freight and passenger service Cost Study to guide management in the development of cost oriented tariffs was satisfactorily completed. NdeK's compliance with financial covenants was very good (Table 7, Part III). I/ Freight kms + Passenger kms divided by the number of workers on roll in NdeM. / The Railway Sector project was appraised in 1985 and is currently under implementation.  -8- 6.04 The following comparative analysis indicates that tariff increases during the 1981-85 period were higher than the inflation and NdeM's annual wage increase per employee: Freight Tariff 100% 154% 312% 655% 1,105% 1,933% Increase (cum.) Inflation (cum.) 100% 124% 194% 596% 1,015% 1,559% Wages/Employee 100% 132% 225% 316% 502% 1,081% 6.05 In spite of encouraging financial trends, NdeM was not free of problems. The major devaluation of the Mexican peso, rising inflation, increasing debt service obligations and increased depreciation accruals due to revaluation of fixed assets caused the operating costs of railways to rise by Mex$190.1 billion (from Mex$26.8 billion in 1981 to Mex$216.9 billion in 1985). Against these cost increases, revenues rose by Mex$183.8 billion. In late 1984 the price of diesel fuel went up from Mex$22.62/litre tp Mex$27.13/litre. This triggered price increases of other materials, further increasing railway costs. Consequently, the operating ratio started deteriorating from 1985. Due to the devaluation of the peso, debt service charges alone increased from Mex$11.0 billion in 1981 to Mex$94 billion in 1985, almost 50% of total revenue. As a result, there were signs that NdeM's financial position was weakening again at the end of the project period. 6.06 Although Government agreed with the Bank on introducing reforms such as restructuring of tariffs in relation to costs, reducing/eliminating uneconomic freight and passenger services, and compensating NdeM for continuing serv.,.ce of the uneconomic passenger service, in reality, these were not fully complied. The good performance on tariff increases compared to the past was still on the basis of across the board increases, unrelated to costs, in spite of having successfully completed the cost of service study. The underlying rationale is believed to be that strict observance of the cost based principle would have led to unacceptably high increases for some tariffs and that a broadly based increase which was sufficient to maintain a reasonable NdeM financial position was easier to implement. Based on the lessons learned during this period of 1981-85, the remedial actions that could be taken to avoid repetition and to improve NdeM's financial condition, are as follows: (i) Tariffs should be cost oriented, should be adjusted in a timely manner, should be based on economic criteria, and should cover the long-run variable cost of each freight commodity particularly for bulk commodities like iron ore, coal, coke, limestone, cement and sugar cane; and (ii) The railway should have greater freedom to adjust its tariffs without going through cumbersome political procedures, and there should be flexibility to negotiate tariffs with large customers, to enable the railways to engage in a meaningful competition for freight with truckers.  -9- 6.07 Economic Re-evaluation: The project was justified at appraisal on the basis of avoidance of diversion of rail traffic to road, where the unit costs of transport are higher. There were three groups of investment to be financed: (i) locomotives and rolling stock, which would provide additional capacity to meet forecast demand; (ii) track and bridge rehabilitation and replacement, which would increase efficiency through avoidance of high maintenance costs and speed restrictions; and (iii) centralized traffic control, which would increase line capacity by avoiding the delays experienced with less sophisticated control systems. The economic rates of return were expected to be 18%, 17% and between 32% and 40% for the three groups, with an overall rate of 22%. 6.08 The Economic Re-Evaluation has been done using the same methodology as in the SAR, and the re-evaluated ERR's are summarized in table 6(B) Part III. Traffic did not increase as rapidly as forecast (para 6.01> and adjustments were made in the purchases of locomotives and rolling stock not only for the lower traffic increases but also for such factors as the poorer availability of locomotives, the accelerated scrapping program, and the overall expansion of the investment program to spread over five years instead of three. On the basis that the locomotive and freightcars were, for whatever reason, necessary to carry a proportion of the traffic which is equivalent to the share of the new rolling stock in total rolling stock (about 15%) the revised ERR would be 30%. This compares with 18% forecast at appraisal. The higher rate probably reflects the fact that because the locomotives and rolling stock on-line at appraisal contributed less than expected to freight traffic movement, and the new stock correspondingly more, the benefits attributable to the new stock were higher than expected per unit of investment. 6.09 For track relaying with new rail, the borrower has recalculated the ERR as 24%. However, this calculation does not take into account the appraisal assumption, which appears to remain valid that maintenance costs with nev rail, initially low compared to those with the rail being replaced would increase over a 10 year period with the consequence that the benefit per kilometer of new rail would gradually decline in real terms. Adjusting for this, the ERR is still acceptable at 19%. 6.10 For CTC (which was not financed from the loan, but was included in the appraised investment plan) a problem arises in retrospective analysis due to the long period (1979-85) over which investment took place and the difficulty of establishing the magnitude of benefits during that period. The borrower made the simplifying assumption that costs were incurred in 1985 and benefits started flowing in that year or later. On that basis, the borrower established an ERR of 73%. Employing the more realistic assumption that investments made prior to 1985 had an opportunity cost equal to the opportunity cost of capital in Mexico (assumed as 12%) increases the effective 1985 investment cost and reduces the ERR to a still satisfactory 40%. The investment in CTC is a relatively small proportion of the total and the choice of ERR makes little difference to the overall project ERR. The overall project ERR is a fully satisfactory 25% compared with 22% determined at appraisal. 7. Project Sustainabilitv 7.01 The project had significant benefits inasmuch as the operational and financial performance of the railway improved, while at the same time  - 10 - there was an increase in the traffic carried by NdeM, together with a significant improvement in worker productivity (para 6.01). The Mexican railways, despite their low share of overall traffic (an estimated 14% of all ton-kms or 23% of road and rail ton-km), have become crucial to the efficient functioning of several sectors, carrying 40% of all beans, 30% of all sorghum, 50% of all wheat and over 10% of all corn produced and imported by Mexico. The railways are also principal carriers of iron ore, coke, coal and sugar and are major carriers for fertilizers, cement and many steel products. This, together with the improvements made during the Fourth Railway Project, encouraged the Bank to appraise the Railway Sector Project in 1985, to continue the augmentation of railway capacity and the further improvement of its operating and financial performance. This project coveres both the activities essential to operation of the existing railway which are the responsibility of the rallway (NdeM later incorporating the other three minor railways) end expansion of the system through new construction and upgrading of structures which was in SCT charge and is financed by a Bank loan of $300 million, and is currently in progress. The fourth railway project therefore is likely to maintain an acceptable level of net benefits throughout its economic life. 8. Bank Performance 8.01 The project was the fourth in a series of operations to improve the railway's capability and performance. It started prior to the end of the third project and there was thus an overlap of almost a year between the third and the fourth projects, and there was enough time to research thoroughly the various components of the project. The Action Plan proved to be a useful instrument for review of performance even though not all its targets were achieved. The traffic forecasts at appraisal were, in retrospect, too optimistic, partly because of the unexpected economic downturn following the drop in oil prices, but at least in part due to the railways' anxiety not to be caught short of capacity in the face of steady increases in traffic over the past few years. However, over- investing was avoided due to the pr-vision in the loan agreement for annual reviews. Bank's insistence on the cost of service study to provide a technical basis for the tariffs (section 5.05 of Loan Agreement) proved useful in providing an intellectual basis for increasing tariffs (though the increases were still across-the-board) which (coupled with traffic increases) caused the financial position of NdeM to improve in accordance with the targets laid down (paras 6.03 and 6.04). Supervision reports also indicate that sustained attention was given by Bank missions to tariff issues, and meetings with the Director General for Tariffs (in the SCT) were held regularly, almost on every mission. However, although tariff increases were substantial, the progress in revising the tariff structure was limited because of governments' concern for holding down inflation. The Bank's response to the changes following the imposition of austerity measures was also prompt and effective, and led to important adjustments in the investment program thus improving the returns from the project. 9. Borrower Per2Lrmance 9.01 Railway affairs in Mexico during the Fourth Railway Project were characterized by a remarkable continuity in the management of NdeM. r a Director General of the Railway who was earlier been tlee President of :he Labor Union, had managed the NdeM almost since the end of the Second  - 11 Railway Project, with a remarkable absence of labor troubles and strikes which had characterized the previous administration's regime. Except for a few changes in senior management, most of the important managers, including the managers for Planning (the coordinator for the project) and Procurement continued right through the third and Fourth Railway Projects. Some of the key staff in the Planning Office received, on the suggestion of the Bank missions, training in the Bank's Economic Development Institute (EDI). There was thus a significant degree of understanding in respect of the criteria for appraisal, implementation and performance under Bank-financed projects. Despite this, there was, particularly during appraisal, and in the period of "affluence" accompanying the rise in oil prices, a tendency by NdeM to over estimate investment needs, necessitating a substantial amount of pruning, not only when the project was appraised, but also whenever the investment plans were reviewed. A succession of managerial changes in the department of "Fuerza Motriz" resulted in lack of continuity in the managemeuh. of locomotive maintenance and was an important contributory cause of the decline in locomotive availability (para 6.01). By and large, however, the project was managed well by the borrower, with serious attention to the various project components, and a certain amount of prodding by the Bank on sensitive issues such as tariff increases. 10. Proiecg Relationshios 10.01 The continuity in NdeM management was also accompanied by an exceptional continuity in the Bank team almost up to the end of the Fourth Railway Project. This assured a productive relationship between the Bank and the borrower, and the start of a dialogue with the Goverunent regarding the Railway Sector Project, covering not only the investment programs of both the SCT and NdeM, but also a closer and freer exchange of views on policy matters. 11. Consulting Services 11.01 The project provided for approximately $4 million in Consulting Services of which $2 million in foreign exchange was to be funded by the Bank loan. However, in keeping with a certain amount of reticence on the part of NdeM expressed during appraisal, in regard to the employment of foreign consultants, both the government and NdeM continued to have strong reservations on this subject. The unwillingness to employ foreign consultants was accentuated by the financial stringency imposed by the austerity measures, and a growing capability in the Cost and Capacity Analysis wings of the Planning office. As a matter of fact, NdeM did a competent analysis of the Cost of Services and Tariff Structure, which was the backup for tariff increases. NdeM also did a comprehensive "in-house' study of the Manpower Plan which was a continuation of the efforts initiated in the Third Railway Project and was responsible for improvements in labor productivity (para 6.1). The study in regard to improvements in operations and information systems was also done mostly "in-house," whereas the work in regard to computerization of yard and line capacity work was, in a large measure, included in the followup project. Summarizing the effort in the studies, it may be said that three out of the four studies were effectively done by NdeM wichout utilizing external help, and at considerable savings, whereas a fourth study was in a large measure, deferred for inclusion in the followup project. In retrospect, it would seem that NdeM has sufficient technical and analytical capability to be  12 - able to do most of its studies "inhouse", which in combination with a certain amount of Bank guidance, and a minimum of external help in new areas of activity, can be productive of satisfactory results, at the same time contributinp, to a sense of accomplishment in the staff who perform the work. 12. Proiect Documentation and Data 12.01 The legal documents for this project were the result of evolution over three previous projects and reflected a good compromise between the concerns and interests of the Bank and the interests of the borrower and the government. There was a considerable amount of discussion with the government representatives during negotiations, over the Tariff covenant, and although the borrower agreed to perform the Tariff Study, the government did not commit itself to authorize the tariff increases recommended by the study, "if the restructuring or increases sought by Nacionales would be inconsistent with broader national or sectoral objectives of the Guarantor...." (Sec. 3.02b of Guarantee Agreement). This in a sense left the commitment open, as rnot always was there complete identity between the Bank and the government in respect of the "broader national or sectoral objectives." As a result, extra effort had to be made by Bank missions to press for tariff increases which, it has to be said to the credit of the Mexican Government, were made in the spirit of the agreement and substantially in accordance with the requirements. 12.02 The periodic reports from NdeM were received regularly and the report and data received from NdeM for preparation of the PCR has been comprehensive, although lacking a critical assessment of the relationship with the Bank or of the performance of any of the parties involved, including cofinanciers. June 29, 1990  - 13 - FERROCARRILES NACIONALES DE MEXICO FOURTH RAILWAY PROJECT LOAN 1929-ME PROJECT COMPLETION REPORT PART II - PROJECT REVIEW FROM THE PERSPECTIVE OF F.N.M. INTRODUCTION Within the developmental policies and guidelines established by the Mexican Government in the 1980s, Ferrocarriles Nacionales de Mexico developed an Investment Plan to increase the capacity to offer railway transport services, with a view to support the country's economic growth. This Investment Plan encompassed the period 1981-1985 with an original amount of MEX$67,131.2 millions which, at the exchange rate of MEX$23 per US$1 equaled US$2,918.7 million. The Plan covered the comprehensive improvement of the railway company through rehabilitation and modernization of the infrastructure and equipment as well as better administration and operating procedures, which would be reflected in improved operational and financial indicators, as well as contribute to the sectoral and national goals. As part of the above mentioned plan, a prioritary investments project was established to be carried out during the period 1981-1982 with an estimated cost of MEX$35,115 million (US$1,526.7 million). The composition of these resources was estimated to be 65% in local currency and 35% in foreign financing. In this mannei, loan requirements from abroad reached US$535.8 million, from which US$150 million were obtained through Loan 1929-ME granted by the World Bank. The rest of the financing was obtained from other international financing institutions such as the Eximbank. The World Bank's Loan 1929-ME was approved on December 1980 and became effective on February 12, 1981. It was originally estimated that the project would be completed on June 30, 1984. However, because of different conditions that at that time affected our country's economy, two extensions were negotiated on the original completion date, thus, the project was completed on August 30, 1986 (Annex V-6). Loan 1929-ME provided an important support to the completion of the above mentioned investment project, fostering the development of the railways sector, and, consequently, of the Mexican economy as a wnole. EXPECTATIONS OF FERROCARRILES NACIONALES DE MEXICO WITH REGARD TO LO. 1929-ME To partially finance the cost of the railway project 1981-1983, Ferrocarriles Nacionales de Mexico and the Federal Government deemed it necessary to request the support of the World Bank through a loan which would be basically used to acquire materials and import equipment such as: new tracks and wagons, as well as to carry out studies and projects using foreign consultants (Annex I-1).  - 14 - As a result of negotiations carried out by the Government of Mexico and Ferrocarriles Nacionales de Mexico with the World Bank, the WB granted FNM Loan No. 1929-HE in the amount of US$150 million, which amounted to 28% of the US$535.8 million required by the original project in foreign financing. With respect to total project cost--US$1,526.7 million- -Loan 1929-ME contributed 9.8% of the total cost. Within the Investment Plan 1981-1985, whose estimated cost was US$2,918.7 million, composed by US$2,022 million from domestic financing and by US$896.7 million from foreign financing, the loan granted by the World Bank represented 5.14% of total requirements and 16.73% of foreign credit needs (Annex I-2). With the development of the Investment Plan 1981-1985 and, specifically, with the execution of the Project 1981-1983 which included the most urgent needs, Ferrocarriles Nacionales de Mexico expected to perform works, at a minimum, to rehabilitate 782 km with new rails and 559 km with second-hand rails; improve the loading capacity of bridges and major and minor structures, and expand the capacity of the main lines through the improvement of grades, strengthening of embankments, and improvement of radiocommunications and signaling system, as well as to improve the facilities on yards, workshops, buildings and track equipment fleet. In the area of motive power and the wagons, it was estimated that the needs included the acquisition of 242 locomotives, 8,650 wagons, 8,000 sets of axles and bearings, and the selective acquisition of machinery and spare parts for the workshops. The completion of studies, engineering, and supervision was also considered important to support railway modernization (Annex III-5). With all of this, it was expected t^ increase railway traffic from 33,400 millions of ton-km in 1980 to 40,500 million of ton-km in 1983, i.e. 21.3% equivalent to an average annual growth rate of 7.1%. For the period 1981-1985, the increase in traffic was estimated at 37.4% with an average annual rate of 9.4% (Annex IV-3.2). Thus, the improvement of infrastructure and equipment, as well as in administration and organization between 1981-1983 and 1981-1985, were expected to be reflected in substantially improved working and operating ratios vis-a-vis those of 1989. The ratios, calculated according to the agreements with the World Bank, would indicate the improvement of Ferrocarriles with regard to financial soundness and pre4uctivity (Annex IV-2). In view of the above, FNM's expectations as to utilization of the foreign credit, in general, and Loan 1929-ME granted by the World Bank, in particular, were to achieve significant improvements during the period 1981-1983 basically through recovery of its installed capacity through modernization. Its short run goal was to reach a higher degree of development that would allow it to increase its participation in the growth of the transport sector and support the country's economic development.  - 15 - With all of the above, added to the relative advantage of World Bank loans as to maturity terms, interest rates, and technical assistance, Loan 1929-ME was to be an important contributor to the development of the railway project herewith discussed. REPULTS OBTAINED BY FERROCARRILES NACIONALES DE MEXICO AS A RESULT OF LOAN 1929-ME As to the physical results obtained by FNM during the periods 1981-1983 and 1981-1985, we feel that they have been adequately detailed by the World Bank on parts I and III of the Project Completion Report. In addition, FNM can state thac, notwithstanding the changes registered in costs as well as in the targets and the original execution dates agreed with the World Bank, in a qualitative analysis additional benefits were obtained to those calculated in economic terms. Through previous negotiations with the World Bank as well as in the relations developed during the execution of the credit, experience was gained both in the planning area as well as in the programming and control of investmerit results. This experience is being applied in the short and medium term, with a vision of what should be the Mexican Railway System in the future. Likewise, the World Bank provided technical assistance and. established controls to monitor the use of the loan proceeds and showed understanding of the specific situations which could interfere at certain moments with the original commitments, reviewing them and if need be, modifying them. These actions make the financial relationship established between this enterprise and the Bank to be considered of great support to the development of the overall Mexican economy, leaving, as a result, a railway transport system significantly improved vis-a-vis the situation existing before the execution of Loan 1929-ME. CONCLUSIONS Completion of this project greatly helped the improvement of the Mexican railway sector. In part, it made possible, during the period 1980-1985, the cargo traffic increase of 12.3% measured in ton-km from 33,400 million of ton-km in 1980 to 37,500 million of ton-km in 1985 (yielding an average annual rate of growth of 2.5%) (Annex IV-3.1). As to the working and operating ratios, even though the original projected figures were not achieved (Annex IV-2), by restricting the growth in staff and increasing the volume of traffic (Annex IV-3.1), together with implementation of the authorized rate increases (Annex V-4), the results obtained were considered satisfactory. Account should be taken that our country's economic situation was in a critical condition since 1981, which brought about a strong devaluation of the Mexican Peso against the U.S. Dollar, from MEX$23 per US$1 in 1981 to MEX$215.5 per US$1 in 1985. This devaluation and the ensuing internal inflation reflected in considerable increases of current expenditures and other factors such as the lack of enough motive power reflected in a decrease of locomotive availability from 74.7% in 1980 to 62.7% in 1985 (Annex IV-1), as well as congestion of foreign wagons on Mexican lines which became apparent since 1981, affected the programmed objectives.  - 16 - Notwithstanding the noted problems, the combination of authorized rate increases and the larger traffic movement, produced unprecedented increases in operational income, which grew almost eleven times during the period 1981-1985. On the other hand, operational expenses grew only 8 times during the same period (Annex V-1). The investments made during the analyzed period, partially financed with the proceeds of Loan 1929-ME, generated economic benefits which result in an internal rate of return of 30.5% for all of the investments involved in the project (Annex VI-1). In summary, we can state that execution of the project partially financed by the World Bank allowed a substantial physical improvement of the railway infrastructure and equipment, as well as better administration of the company. As a consequence, we were able to ensure the necessary transport capabilities to handle cargo generated by the development of the Mexican economy. This was done notwithstanding the critical situation faced by our country during the analyzed period.  - 17 - I ~ ~ ~ ~ ~ ~ ~ ~ ~ IXZ STATISTICAL INFORkIATION  - 18 - PART III - TABLE I HEIC FOURTH RAILAY PROJEC1 (LOAN 1929-ME) PROJECT COMPLETION REPORT Related Bank Loans Yea-. of Original Title Loan No. Approval Amount Disbursed Commencs 1. Pacific Railway 0103-0 1954 61.0 61.0 2. Second Railway Project 0825-0 1972 78.0 75.0 3. Las Truchas / Sceel 0934-0 1973 70.0 70.0 4. Third Railway Project 1232.0 1976 100.0 100.0 5. Fourth Railway Project 1925-ME 1980 150.0 150.0 Subject of this PCR 6. Sector Railway Project 2575-HE 1985 300.0 164.0 * Project in progress currently Source: IBRD Statement of Loans, January 1990 * Aof ......., 1990.  - 19 - PART III - TABLE 2 MEXICO FOURTH RAILWAY PROJECT (LOAN 1929-ME) S.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. PROJECT COMPLETION REPORT 2. Project Timetable Date Date Date Item Planned Revised Actual Identification Nov. 21, 1979 April 1, 1980 April 1, 1980 Preparation July 11. 1979 Nov. 2. 1979 April 10, 1980 Appraisal Mission April 27, 1980 May 6, 1980 May 12, 1980 Loan/Credit Oct. 6, 1980 Oct. 27, 1980 Nov. 24. 1980 Negotiations Board Approval Dec. 15. 1980 Dec. 15. 1980 Dec. 15. 1980 Loan/Credit Feb. 12, 1981 Feb. 12, 1981 Feb. 12, 1981 Signature Loan/Credit March 9, 1981 June 9. 1981 June 9. 1981 Effectiveness Loan/Credit June 30. 1984 Dec. 31. 1985 June 30, 1986 Closing Loan/Credit Dec. 31, 1984 June 30, 1986 Dec. 31. 1986 Completion  - 20 - PART III - TABLE 3 mExIco FOURTH RAILWAY PROJECT (LOAN 1929-ME) PROJECT COMPLETION REPORT 3. Estimated and Actual Schedule of Disbursements IBRD Fiscal Appraisal Revised Actual Actual as Z of Year Estimate Estimate Disbursements Revised Estimate 1981 III June 1981 14.0 7.1 7.1 100 1982 T September 1981 28.0 20.6 20.6 100 11 December 1981 42.0 27.1 27.1 100 III March 1982 54.0 31.7 31.7 100 IV June 1989 66.0 46.5 46.5 100 1983 T September 1982 81.0 45.0 52.4 116 II December 1982 96.0 50.5 56.0 111 II March 1983 109.0 53.5 56.0 105 IV June 1983 121.0 55.9 60.0 107 1984 I September 1983 134.0 60.0 70.8 118 II December 1983 147.0 70.0 76.4 109 II March 1984 150.0 75.0 78.9 105 IV June 1984 80.L 89.1 105 1985 I September 1984 90.0 87.2 97 I1 December 1984 100.0 101.0 101 III March 1985 110.0 102.4 93 IV June 1985 125.0 105.8 85 1986 I September 1985 135.0 117.5 87 II December 1985 150.0 135.7 90 Ill .arch 1986 141.6 94 IV June 1986 150.0 100 SOURCE: Bank missLon reports and N de H data.  - 21 - PART III - TABLE 4 MIEXICQ EOURTH RAILWAY PROJECT (LOAN 1929.ME) PROJECT COMPLETION REPORT Proiect Implementation Indicator Appraisal Estimate Actual 1. Track Rehabilitation with new rail 780 kms 938 kms 2. Track Rehabilitation with 2nd-hand rail 560 kms 583 kms 3. Strengthening of bridges 510 bridges 857 bridges 4. CTC 960 kms 612 kms 5. New Locomotives 242 units 317 units 6. New freight cars 9,350 8,358 7. Workshop Machinery various procured 8. Track Machinery various procured  - 22 - PARM III TABLE 5(A) MEXICO FOURTH RAIlLWAY PROJECT (LOAN 1929-ME) a_ _ PROJECT COMPLETION REPORT 5. Project Costs and Linancing A. Project Costs (USS millions) Appraisal Estimate Actual CostS Foreign Foreign Local Exchange Local Exchange Item Costs Cost Total Costs Cost Total (USSm) (US$m) Track and Structures 121.5 57.5 179.0 167.7 P'.3 253.0 Signalling and 23.1 22.1 45.2 26.6 17.2 43.8 Telecomuanications Locomotives and 442.9 350.9 793.8 408.2 490.2 898.4 Rolling Stock Engineering and Supervision 31.7 0.7 32.4 25.1 3.5 28.6 Consulting Services 2.0 2.0 4.0 0.9 0.0 0.9 TOTAL COST EXCLUDING 621.2 433.2 1054.4 628.5 596.2 1224.7 CONTINGENCIES: Contingencies: Physical 9.5 4.9 14.4 - - - Price 360.2 97.7 457.9 - _ - TOTAL: 9909 535.8 1526.7 628 .5 596.2 1224.7 SOURCEs SAR and N de M.  - 23 - PART III -TABLE 5(B) MEXICO FOURTH RAILWAY PROJECT LOAN 19229-ME) PROJECT COgPLETION REPORT 5. (B) Prolect Financing (Dollars, millions) Appraisal Source Estimate Actual IBRD (1925-ME) 150.0 150.0 IERD (other loans) 7.4 32.1 NAFINSA 1,022.6 357.1 BANOBRAS 284.1 126.3 EXIMBANK- 205.5 Others (including 62.6 358.6 government) TOTAL 1,526.7 1,229.6 Source: N de M  PART III - TABLE BA MEXICO FOIRTH RAILWAY PROJECT (LOAN 1929-ME) PROJECT COMPLETION REPORT 6. ProJect Rosults A. Principal Indicators . (Plr of Action) I 9 7 9 1 9 6 1 9 0 1 1 9 8 2 1 9 8 3 1 9 6 4 1 9 a 6 _________ ---------____ ----_--- ---- - - - - - - -- - - - - - - - ------ - - - - - -- -- -- ------- -----------------_________ hoy Indicators Actual Target Actual Target Actual Target Actual Target Actual Targot Actual Targot Actual a) Operating Ratio 134 164 171 144 160 131 16 126 116 114 91 107 1to b) Loco io per year per *3,109 - 06,040 85,000 67,401 94,00 U4,946 95,60 93,639 166,m 99,416 106,000 102,731 freight loce Is service N c) Locowotives out of Order (3) 26.C - 23.3 23.0 27.9 22.0 33.9 21.6 34.5 26.0 36.0 19.6 29.8 d) Toa-he/frelght car/day 1,016 - 1,476 2,108 1,389 2,20f 1,486 2,309 1,686 2,46M6 1,767 2,6s0 1,7U a) Avorago turnaruntd of 16.67 - 23.2 12.4 22.4 12.1 19.2 11.9 19.28 11.7 17.1 11.5 18.0 treight cars I) Freight care out of 6.4 - 6.6 6.0 6.6 6.9 4.6 6.0 6.1 6.l C.3 6.0 5.C order (X) 1/ g) Number of foreign care 11,698 - 16,000 10,000 12,633 9,000 1,796 6,66 2,440 7606 2,763 7,0N0 4,216 en line h) Productivity (in traffic 61,080 - 688,000 - 618,000 - 646,000 - 628,0o - 628,900 - 643,000 units per worker) 1/ lkeoe are average liguros for the yeor. At one polnt In 1980, hbo figure reached a peak of 32,000. SOUCEt Miselon Reports end N de t data.  - 25 - PART III TABLE 6(B) MEXIGO FOURTH RAILWAY PROJECT (LOAN 1929-ME) PROJECT COMPLETION REPORT 6. (B) Economic ImDact Economic Rate of Return Appraisal Re-evaluated Item Estimate 1. Track Rehabilitation 17% 30% 2. Locomotive and Rolling Stock 18% 30% 3. Centralized Traffic Control Systems (CTR) 32-40% 40% Overate Project 22% 25% Ass=mtions: A/ The project was justified at appraisal on the basis of avoidance of diversion of rail traffic to road where unit transport costs are higher. b/ Locomotives and rolling stock provided additional capacity to meet increasing traffic demand. S/ Track and bridge rehabilitation increased efficiency through avoidance of high maintenance costs and speed restrictions. W Centralized traffic control increased line capacity by avoiding the delays experienced with less sophisticated control mechanisms.  {|ze_s ~ uu s5 ~n-| v ~~~~~~~~~~Got w4w** 60*5 go* *s* z ,*, *@5 u C*5 et* (ts*s t,*s ii*is}{@tI_@ Of 0 ad Oa' tog e tse o I s ItsI It la' I iiut~z) OlIZI'S) foi,gi (s,s** C Eaaset (loturn euu)9 (wif*uJ euoisI usr`p 0 tolt' eso.d ls