El Salvador - Third Highway Project

KLE~~~~~~~~~ Eu I T FiLE COPY RESTRICTED Report No P-411 This report was prepared for use within the Bank and its affiliated organizations They do not accept responsibility for its accuracy or completeness The report may not be published nor may it be quoted as representing their views INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CHANGE IN THE DEVELOPMENT CREDIT (NO 31-ES) TO EL SALVADOR December 11, 1964  INTERNATIONAL DEVELOPHENT ASSCCIATION REPOiRT AND RECONEYNDATION OF TIlE PREBSIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CHANGE IN THE DEVELOP ENT CREDIT (NO. 31-ES) TO EL SALVADOR I. INTRODUCTION 1. I submit herewith the folloTing report and recoi{mendation on a request from the Government of El Salvador for a change in the use of funds under Development Credit No, 31-ES for a highway project. It is proposed to delete certain roads from the Project, and to use the funds thus released, amounting to about $1l9 million, to raise the design standards on other roads on which the growth of traffic has been more rapid than anticipated. 2. On November 2, 1962, thie Association signed a Credit for $8 million with the Government of El Salvador for a project estimated to cost about $13.5 million. It consisted of: i) the improvement, construction or reconstruction of seven trunk roads and four feeder roads; ii) improvement of the maintenance organization for the Coastal Highway; and iii) engineering services required for the above. 3. The Credit became effective on April 8, 1963. Final designs for all project roads have been completed, and five contracts representing 70% of the trunk road construction have been awarded. Work on the trunk roads is presently somewhat behind schedule, but the delay is not expected to affect seriously the final completion date of the Project, scheduled V. for December 1966. No contracts for feeder road construction have yet been awarded. The implementation of the maintenance program of the Coastal Highway is also behind schedule but is presently showing satisfactory progress.  II. PROPOS5M CHA^NGES IN THE PROJECT t. The Government has asked the Association to agree to a revision of the design standards of the roads San Salvador - Acajutla and Santa Tecla - La Libertad, resulting in substantial additional work on these roads and increasing the costs; at the same time, the Government has re- quested the deletion from the present project of the four feeder roads for which about $1.9 m-l'ion had been allocated but on which work has not yet started. Specifically, the Government of El Salvador has requested the agreement of the Association to: i) raise the design standards of the eight kilometer section Santa Tecla - La Cuchilla to a divided four-lane highway on the San Salvador - Acajutla road; ii) upgrade the pavement from a bituminous double surface treat- ment to an asphalt concrete carpet over the two roads, in- cluding the section Acajutla - Santa Tecla and Santa Tecla - La Libertad; iii) improve the geometric design on the section La Cuchilla - Sonsonate of the San Salvador - Acajutla road; iv) improve the road junction at La Cuchilla; v) in order to reallocate the Credit funds to the above purposes, defer the construction of the four feeder roads included in the Project to the next stage of highway development. III. EFFECT ON COST ESTIMATES 5. The total cost of the project was originally estimated at $13.5 million equivalent of which $10.8 million (including 20% for contingencies) represented the preliminary estimated cost of construction of the seven trunk roads and four feeder roads. Original estimates were based on feasibility studies and preliminary engineering without detailed engineering. The table below shows the original cost estimates, the revised cost estimates after detailed engineering, and the final project including the proposed improvements. The cost of the seven trunk roads, on the basis of their original design standards, is still reasonably close to the original estimates after final engineering has been completed and construction work partly contracted. The higher costs of these roads in the revised project are due primarily to the proposed changes in design standards. Since the total cost of these roads would now come to $11.9 million (including con- tingencies) the Government at our request has confirmed its willingness to provide additional funds if required.  -3- EST I MATED COST (in thousands of U.S. $ equivalent) 1 2 3 Revised Final Preliminary Engineered Project Ref. Name of Road Project Project Including (see map) 1961 1964 _ Improvements A. Trunk Roads 1. San Salvador - Acajutla 1,700 2,300 4,420 2. Santa Tecla - La Libertad 1,100 1,470 l,775 3. Sonsonate - San Jorge 950 1,000 1,000 I44. Sitio del Nifio - Apopa 380 370 370 5. San Miguel - Agua Salada 1470 1,360 1,360 6. El Poy - Tejutla 1,400 l,500 l,500 7. El Jobo - Ahuachapan 380 460 460 7,380 8,460 10,885 Contingency 1,476 396 1,000 Sub-total 8, 856 8, 856 11,885 B. Feeder Roads 8. Juayua - Los Arenales 300 postponed - 9. Teotepeque - Santa Tecla 380 480 - 10. Santo Tomas - Cojutepeque 640 950 - 11. San Ram6n - Interamerican Highway 300 360 - 1.,620 1,790 Contingency 324 154 Sub-total 1,944 i,944 TOTAL 10,800 10,800 11,885 IV. TECHNICAL AND ECOl.NCNIC JUSTIFICATICNJ 6. When the project was appraised, it was assumed that the traffic on the trunk roads would increase by an average of about 10% per year between 1961 and 1970. On two roads, traffic has been increasing at a much higher rate:  -4 - Average number of Percent vehicles per day increase Project Ronads in 1961 in 19 4 per year A. San Salvador - Aca.jutla i. check point Santa Tecla 2,335 3fi928 19 ii. check point La Cuchilla 950 1,770 23 iii. check poinu Sonsonate 595 1,683 41 B. Santa Tecla - La Libertad i. check point Santa Tecla 720 2,138 43 ii. check point La Libertad 560 1,974 52 The increased traffic is partly due to the extensive industrial development which has been going on in the San Sal-v-ador area and at Acajutla, such as the establishment of a fertilizer plant, cement plant, oil refinery, glass factory and grain silos, and the construction of a 25 MZ thermal power plant financed by a Bank loan in June 1963. 7. The improved design standards as related to the traffic are tech- nically justified and consistent with sowud engineering practices. Up- grading the pavement on the San Salvador - Acajutla and Santa Tecla - La Libertad roads from a bituminous double surface treatment to an asphalt concrete carpet is necessary to accoimodate the expected uraffic and to keep maintenance costs down. If the Santa Tecla - La Cuchilla section of the San Salvador - Acajutla road is not built as a four-lane divided high- way, traffic will become congested very soon after this section is completed. 8. In the revised project, the increased costs of the San Salvador - Acajutla and Santa Tecla - La Libertad roads are generally more than offset by increased savings resulting from the larger growth in traffic than had been anticipated, so that returns on the investments tend to be higher than in the earlier estimate. 9. For the Santa Tecla - La Libertad section, the daily traffic in 1967 is now estimated at about 3,000 vehicles compared to less than 800 in the original project. This would result in an economic return of about 20% instead of the initial 10%. 10. The daily traffic on the La Cuchilla - Acajutla section is now estimated at 2,1400 vehicles in 1967, compared to less than 700 in the earlier estimate, This would result in an economic return of about 28%, instead of 18%. 11. For the Santa Tecla - La Cuchilla section, the daily traffic in 1967 is now estimated at 5,000 vehicles, compared to 3,500 in the original appraisal. In addition, the better alignment and larger capacity of the road will decrease vehicle operating costs by at least L17 US/ per kna,  - 5 - compared to a saving of 1.1/ on the earlier design. These two factors do not quite offset the increased costs of the project, but the rate of return on the investment still exceeds 20?, which is highly satisfactory. 12. During the appraisal of the original project, it was impossible to quantify the economic return to be expected on the feeder roads. Their deletion from the project appears justified in view of the very high economic returns on the above improvements of the trunk highways, although the developmental effects of these feeder roads are probably high, and enough to justify the investment. The Government considers that, in view of the temporary limitation on its resources, priority should be given to the two major trunk roads, which have a general impact on the whole economy and its import-export trade, over the construction of the feeder roads, the impact of which would be limited to a restricted zone. It is, however, preparing a new highway program for consideration by the Bank which would include financing for the roads deleted from the present project. 13. If the draft letter attached to this report is approved, correspondence will be exchanged to confirm the modifications in the project. V. RECOMMENDATION 14. I recommend that the Executive Directors approve the following resolution: RESOLVED: THAT the Association shall enter into an agreement with the Republic of El Salvador, amending the Development Credit Agreement between the Association and the Republic of El Salvador, dated November 2, 1962, -upon terms and conditions substantially in accordance with the terms and conditions of the draft letter which has been presented to this meeting. George D. Woods President by J. Burke Knapp Washington, D.C.  * - EL SALVADOR Credit No. 31-ES Cost estimates, allocation of funds, disbursements (in thousands of US dollars equivalent) 1 US$ f 2.5 colones Original Plan 1962 Revised Plan 1964 Credit 31-ES Disbursements through No. Item Gov't. IDA Total Gov't. IDA Total August 31, 1964 1 Construction 3,500 5,500 9,000 4,235 6,650 10,885 365 2 Maintenance 650 575 1,225 650 575 1,225 77 3 Consultants 500 700 1,200 500 700 1,200 260 4 Contingencies 850 1,225 2,075 115 75 130 Additional contingencies to be provided by Government if necessary (1,.000) (1,000) TOTAL 5,500 8,000 13s500 5,5M 8,,000 13,500 7 C2 (6.,500 (14,5T