Mexico - Earthquake Rehabilitation and Reconstruction Project

Document of The World Bank FOR OFFICIL USE ONLY MICROFICHE COPY Report No. 10392 ]Report No. 10392-ME Type: (PCR) MAUPRIVEZ,/ X31709 / T9 079/ OEDD3 PROJECT COMPLETION REPORT MEXICO EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT (LOAN 2665-ME) FEBRUARY 21, 1992 Infrastructure and Energy Operations Division Department II Latin America and the Caribbean Region 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 Currency Unit - MXP (Mexican Peso) March 1986 1 US$ - 430 MXP October 1991 1 Un$ - 3,000 MXP GLOSSARY OF ABBREVIATIONS BANOBRAS Banco Nacional de Obras National Development Bank for y Servicios Pdblicos Public Works CAPPCE Comit6 Administrativo Federal Comittee for del Programa Federal de School Construction Construcci6n de Escuelas CONMAYIT Consejo Nacional de National Council for Science and Cisencia y Tecnologia Technology DF Distrito Federal Federal District of Mexico City DDF Departamento del Federal District Government Distrito Federal FONHAPO Fideicomiso Pondo National Fund for Low Cost Nacional de Habitaciones Housing Populares POVI Fondo de Operaci6n y Bank Housing Fund Financiamiento Bancario a la Vivienda IMSS Instituto Mexicano de Mexican Social Security Institute Seguro Social INAH Instituto Nacional de National Institute of Anthropology Antropologia e Historia and History INBS Instituto Nacional de National Institute of Fine Arts Bellas Artes MCMA Area Metropolitana de la Mexico City Metropolitan Area Ciudad de M6xico REP Programa de Renovaci6n Low-Income Housing Reconstruction Habitacional Popular Program SEDUE Secretaria de Ecologia y Minietry of Urban Development and Desarrollo Urbano Ecology SEP Secretaria de EducaAi6n Ministry of Education Piblica SHCP Secretaria de Hacienda y Ministry of Finance Cr6dito Piblico SPP Secretaria de Programaci6n y Ministry of Planning and Presupuesto Budget  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Oke o Director-Gral Opatkmw Evakutkim February 21,1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Mexico Earthquake Rehabilitation and Reconstruction Project (Loan 2665-ME) Attached, for information, is a copy of a report entitled "Project Completion Report on Mexico - Earthquake Rehabilitation and Reconstruction Project (Loan 2665-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 PROJECT COMPLETION REPORT MEXICO EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT (LOAN 2665-ME) Table of Contents Page. No. PREFACE . . . . . . ... . . . . i. . . . E.VALUATION SUMMARY . . . . .. . . . ii PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE . . . . . . . . . . . . 1 Project Identity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Project Background . . . . . . . . . . . . . . . . . . . . . . . . . . . Project Objectives and Description . . . . . . . . . . . . . . . . . . . 3 Project Preparation, Design and Organization . . . . . . . . . . . . . . 3 Project Implementation ... . .... .... ..... . ..... 6 Project Results ... .. ...... . . . . . . . . . . . . . . . . . 10 Poverty Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Project Sustainability ... . ............... 11 Bank Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Borrower's Performance . . . . . . . . . . . . . . . . . . . . . . . . . 12 Consulting Services .... . . ... . ... . . . . . . . ........ 12 Project Documentation and Data . . . . . . . . . . . . . . . . . . . . . 12 Findings and Lessnns Learned .... . . . . . ........... ... 12 PART II: PROJECT REVIEW FR'OM BORROWER'S PERSPECTIVE . . . . . . . . . . 14 PART III: STATISTICAL INFORMATION . . . . . . . . . . . . . . . . . . . . 17 Table I Related Bank Loans . . .. . . . . . . . . .... .. . .. . 17 Table 2 Project Timetable .... . . . . . . ... . . . . . . . . . . . 17 Table 3 Loan Disbursements . . . ..... ........ . . . . 17 Table 4 Project Implementation . . . . . . . . . . . . . . . . . . . . 18 Table 5 Project Costs and Financing . . . ....... ... . . . . . 19 Table 6 Status of Major Covenants . . . . . . . . . . . . . . . . . . . 20 Table 7 Use of Bank Resources . . . . . . . . . . . . . . . . . . . . . 21 This document has a restricted distribution and may he used by reeipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT COMPLETION REPURT MEXICO EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT (LOAN 2665-ME) PREFACE This is the Project Completion Report (PCR) fcr the Earthquake Reconstruction and Rehabilitation Project in Mexico, for which Loan 2665-ME, in the amount of US$400.0 million, was approved on March 25, 1986. The Borrower was BANOBRAS (Banco Nacional de Obras y Servicios Pfublicos) with the Mexican Government acting as the Guarantor. The loan was closed on December 31, 1990, one year behind schedule. It was fully disbursed and the last disbursement was made on Apr." 10, 1991. The report was pro jointly by the Infrastructure and Energy Operations Division, Departme; tL, Latin America and Caribbean Regional Office, (Preface, Evaluation Summary, Parts I and III) and the Borrower (Part II). Tne report is based, Inter alia, on the President's Report dated March 5 1986, the Loan, Project and Guarantee Agreements dated April 9, 1986, supervision reports, internal Bank memoranda, correspondence between the Bank and the Borrower, and a comprehensive report prepared by the Borrower in Spring/Summer of 1991.  - ii - PROJECT COMPLETION REPORT MEXICO EARTHQUAKE REHABILITATION AND RECONSTRUCTION PROJECT (OAN 2665-ME) EVALUATION SUMMARY Project Obiectives 1. The two principal objectives of the project were (a) to assist the Government in the swift repair, reconstruction and!or replacement of low-and medium-income housing, and community and social sector facilities damaged or destroyed by the earthquake of September 19, 1985, and (b) to contribute to lower and mitigate the risks of losses in human lives, community facilities, infrastructure and real estate that could be caused by future earthquakes, through improved p:.anning and construction standards and the preparation of appropriate regulations and procedures at the federal, state and local government levels. Implementation Experience 2. Approved by the Bank in March 1986, the Loan became effective in August 1986 and was fully disbursed by April 1991, one year behind schedule. This remarkable performance was accomplished despite the economic difficulties which Mexico was facing during the period. In general, the project can be credited with having made a significant contribution to the swift reconstruction of low-income housing neighborhoods and thus to have helped to mitigate and overcome social hardship. 3. The implementation of the project was excellent, thanks, in part, to the flexibility that both the Government and the Bank demonstrated to adjust the project to the evolving needs of Mexico's post-disaster recovery. No procurement issue arose. Delays in the implementation of some components occurred in the later years as a result of Mexico's difficult economic situation and the tight limits which the Government had to impose on public spending. Results 4. The project allowed for the repair, reconstruction or replacement of about 72,000 housing units, or around 55% of all the dwellings affected by the earthquake. A majority of these units were rebuilt Irn situ in the Mexico City downtown area and completed within the first two years of project implementation. The school reconstruction program saw its scope expanded and, as a result, focused primarily on reinforcement of existing facilities. Structural reinforcement was carried out in about 2,400 school buildings, or about 60Z of the facilities in need of such works in 10 states subject to high  - iii - seismic risk. For external reasons, primarily the country's economic problems and the ensuing limits imposed by the Government on public sector spending, the reconstruction program for health care facilities could not be finiahed as planned, but is now being completed with local resources. On the institutional side, the project provided significant support, through technical assistance and studies, for the preparation of a new building code for Mexico City, which went into effect in 1937. Proiect Sustainability 5. Because of its very nature, a reconstruction project is a one time operation and does not address sustainability as a primary issue. However, great attention was given to use the project as a vehicle to provide the population adequate safety from the effects of possible future earthquakes by developing new seism-resistant construction techniques for low-income housing, and protect school children and hospital patients from possible harm through the reinforcement of existing structures and use of more appropriate standards for new facilities. Findings and Lessons Learned 6. Natural disasters, like earthquakes, require an immediate and quick response and typically preclude the carrying out of lengthy preparatory studies. An inevitable consequence is that any reconstruction project has at times to be based on perfunctory, and often incomplete assessments of needs, both physically and financial. To allow for the necessary adjusttaerLts to the actual needs that arise during implemertation, a high degree of flexibility and willingness to make changes is required to achieve the objectives of such an operation. Readin.ss on the part of both the Mexican Government and the Bank to review the scope of individua'l project components and adapt implementation mechanisms and procedures whenever needed, was a key factor in the success of this project. 7. Because of the high degree of development and sophistication of its economy, Mexico was able to mobilize very quickly the considerable amount of human resources the reconstruction effort required nationally either in the public or the private sector. The Government wisely resisted the temptation to create new, bureaucratic structures for the mnanagement of the reconstruction effort and, instead, used the existing institutional framework or established bodies with a temporary mandate such as the Low-Income Housing Reconstruction Program (Programa de Renovacidn Habitacional Popular or RHP), that were dissolved upon completion of their tasks. 8. Rebuilding z' situ and relocating the low-income population victim of the disaster within their original neighborhoods proved to be the most efficient solution. It was in any event preferable to a socially disruptive resettlement in housing developments in the city's periphery. Converting former tenants into owners and associating them with the planning and design process facilitated the implementation of the program and had a positive effect of the rapid recovery of the population. However, this was only possible because of the Government's decisiveness in carrying through expeditiously a massive expropriation program.  PROJECT COMPLETION REPORT MEXICO EARTHQUAKE REHABILITATIONI AND RECONSTRUCTION PROJECT (LOAN 2665-ME) PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Prolect Id_ntitv Name Earthquake Rehabilitation and Reconstruction Project Loan Number 2665-ME RVP Unit Latin America and the Caribbean Region, Coantry Department I' Sector Infrastructure and Energy Subsector : Urban 2. Proiect Background 2.01 On September 19, 1985, Mexico was hit by an earthquake which had a magnitude of 8.1 on the Richter scale and the epicenter of which was located off the Pacific coast at a distance of about 400 kms from Mexico City. The first quake was followed on September 21 by a second one of a magnitude of 7.8 and a series of after-shocks. While the effects were felt over a wide area and severe damages occurred in several States in the vicinity of the epicenter (Colima, Guerrero, Jalisco, and Michoacan), the by far heaviest losses were experienced in Mexico City (Distrito Federal or DF) and the neighboring municipalities of the Mexico City Metropolitan Area (MCMA). Damages in the downtown area of Mexico City and, in particular in its historic center, were particularly devastating because of the specific features of the sub-surface geology (silt deposits on an ancient lakebed), as well as an urban occupation which in many places had developed in disrespect of most elementary provisions of building safety and land use regulat ons. Casualties amounted to over 4,000 dead, at least 15,000 injured, and over 50,000 homeless. Over 500 major buildings suffered severe damage or total destruction, and about 60Z of Government offices were lost. At least 30,000 dwellings were totally demolished and another 100,000 extensively damaged. Many schools and four major hospitals were destroyed, among the latter the National Medical Center (Centro M6dIco Nacional) with a total of 2,600 beds. Damage to buildings alone was estimated at between US$4 and US$5 billion and equaled about 2.5% of GDP for that year. 2.02 Despite a history of periodic recurrence of severe earthquakes, little had been done before 1985 to establish comprehensive preparedness programs and/or to set up post-disaster contingency plans either for the country as a whole or tho MCMA specifically. Although the authorities were ill prepared for a calamity of the magnitude of the 1985 event, they quickly rallied, and gained control over the situation. Immediate1y after the disaster, the Government created an Emergency Committee for the DF to assess needs and coordinate immediate relief operations, as well as a National Emergency Committee with similar responsibilities at a national level. A National Reconstruction Committee was formed at the beginning of October 1985  -2- to coordinate nationwide the reconstruction efforts deployed by Federal, State and local government authorities and private sector entities. Likewise, within three weeks the Government created the RHP to organize temporary shelter for the homeless, and manage the emergency reconstruction of low-cost housing areas in downtown Mexico City. Concurrently, to provide space for the reconstruction, the Government proceeded to expropriate 'n the downtown area about 4,300 properties consisting of buildings either uninhabited or damaged .eyond repair, or vacant plots. 2.03 Moreover, the Government seized the opportunity of the earthquake reconstruction program to revive and accelerate its administrative decentralization program whose implementation had been attempted, albeit with limited success, during the previous ten years. Instead of replacing In situ office space destroyed in the capital, units of several Ministries and other Government entities were moved to 20 other cities in various regions of the country. A similar decision was taken in the health sector where the Mexican Social Security Ins-itute (Instituto Mexicano de Seguro Social or IMSS) decided to stvengthen and/or expand its facilities in other regions and reduce the scale of its services in the DF. 2.04 The international community was quick in responding to the Government's calls for help and provided disaster relief supplies and rescue personnel. Financial resources were mobilized by multi-and bilateral sourct'. IDB made available emergency loans of a total of US$500 million. IMF provided US$300 million as an advance on the stand-by program for 1986. Assistance from bilateral and private sources was estimated at US$100 million. About US$450 million was paid out by insurance companies. 2.05 In addition to beginning immediately the preparation of the Earthquake Rehabilitation and Reconstruction Project, the Bank agreed to reallocate a total of US$91.2 million in funds from four ongoing projects towards the reconstruction efforts and, in order to ease rhe stringencies on counterpart funding, to increase the proportion of Bank financing to 70%. These loans were: Loan 1945-ME Rainfed Agricultural Development Project (US$14 million for replacement of Government office space in Mexico City and other cities) 11; Loan 2281-ME Third Medium Size Cities and Sinaloa State Water Project (US$17.5 million for repair and reconstruction of water supply systems) -/; Loan 2331-ME Export Development Project (US$41 million for repair and replacement of telecommunication and television equipment) 3/; Loan 2450-ME Lazaro Cardenas Industrial Port Project (US$19 million for repair and replacement of port equipment). 4/ 1/ Loan 1945-HE Rainfed Agricultural Development Project, FY81, US$280 sillion, Closings 06/87, PCRs 02(90. 2/ Loan 2281-ME Third 9iedium Size Cities and Sinaloa State Water Project, FY83, US$100 million, Closings 04/91, PCRa under preparation. 3/ Loan 2231-tE Export Davelopment Prolect, - Y83, US$350 million, Closing: 06 89, PCR: 06189. 4/ Loan 2450-ME Lazaro Cardenas Industrial Port Project, FY84, US$76 sillion, Closings 12/92.  - 3 - 2.06 A total of US$81.8 was reallocated from Loan 1990-ME (Second Urban and Regional Development Project and specifically targeted at housing reconstruction in Mexico City and the State of Jalisco. 5' 3. Pro1ect Obiectives and DescriDtion 3.01 The two principal objectivea of the project were to (a) assist the Government in the swift repair, reconstruclion and/or replacement of low and medium income housing units and community and social sector facilities damaged or destroyed by the earthquake, and (b) contribute to lower and mitigate the risks of losses in human lives, community facilities, infrastructure and real estate that could be caused by future earthquakes through the definition and enforcement of improved planning and construction standards, and the preparation of adequate regulations and procedures at the federal, state and local government levels. 3.02 To achieve these objectives, the project was to provide funding for the following activities: (a) Rehabilitation, reconstruction and replacement of about 72,000 housing units, primarily in low-income areas in downtown Mexico City; (US$334 million or 58Z of total project cost). (b) Reconstruction or structural reinforcement of community facilities (markets, schools and health care facilLties) in the MCMA and several other States exposed to high seismic risk; (US$156 million or 28Z of total project cost). (c) Demolition of damaged buildings and removal of debris; (US$62 million or 11% of total project cost). (d) Provision of technical assistance and o:her institutional support to strengthen technical coordination and project preparation, implementation and processing, to develop appropriate building codes and land use regulations at the federal, state, and local government level; (US$15 million or 3% of total project cost). 4. Proiect Preparation, Design and Orxanization 4.01 Project preparation started immediately after the disaster by several Bank staff who happened to be on missions to Mexico City. A reconnaissance/preappraisal mission visited Mexico City in October 1985, followed by an appraisal mission in November. Negotiations were held in Washington from February 28 to March 2, 1986. Board presentation was March 25, 1986, and the Loan became effective on August 8, 1986. 4.02 The project was prepared under the oversight of the National Reconstruction Committee, and the coordination of the Ministry of Finance 5/ Loan 1990-HE Second Urban and Regional Development Project. - Y82. US$164 uillion, Closings 0 /89, PCR is being issued separately.  -4- (Secretaria de Hacienda y Cr6dlto Publico or SHCP) by the Ministries of Planning and Budget (Secretaria de Programaci6n y Presupuesto or SPP), Urban Development and Ecology (Secretaria de Ecologia y Desarrollo Urbano or SEDUE), and Education (Secrecarla de Educaci6n Publica or SEP), as well as the Federal District Government (Departamento del Distrito Federal or DDF), IMSS, and BANOBRAS). Responsibility for the implementation of the school rehabilitation program in areas outside the jurisdiction of DDF was delegated by SEP to the Federal Committee for School Construction (Comit6 Administrativo del Programa Federal de Construccl6n de Escuelas or CAPFCE). Resources for the housing program were to be channeled throuph two sub-loans to the National Fund for Low-cost Housing (Fidelcomiso Fondo zional de Habltaclones Populares or FONHAPO), and the Bank Housing Fut ondo de Operaci6n y Financiamlento Bancario a la Vivienda or FOVI), with the technical responsibility for the reconstruction program in downtown Me:cico City being entrusted to RHP. 4.03 In retrospect, it is fair to say that the success of the projects's preparation and execution benefitted from a set of exceptional circumstances that make it difficult to compare its design features and implementation performance with those of other projects in Mexico, and most other projects in the Region. First, in keeping with its emergency character, the project had almost no policy and/or institutional objective, and thus was at no times dependent on the Government's agreeing to, zr carrying out specific actions in these areas. Second, the relatively high proportion of project costs to be financed by the Loan (i.e., 83X) largely protected the project from the budgetary effects of Mexico's economic difficulties. Third, the Government's ability to implement the project within the existing institutional framework, ailowed to contain the need for new executing bodies and arrangements, and thereby eliminated a potential source of difficulties and risks. 4.04 Housing: Assistance to the housing sector was to be extended following a three-pronged approach: (a) the RHP program to supply housing to households with an income not exceeding 2.5 minimum salaries built on expropriated land in the downtown area; (b) the regular FONHAPO program to provide credit for the repair or reconstruction of housing units on or in other than expropriated properties in downtown Mexico City, as well as in various localities of the State of Jalisco; and (c) the FOVI program, operated by the commercial banking sector, to provide credit to middle-income families for the reconstruction of damaged, or the purchase of new homes in the MCMA, but outside the immediate downtown area. 4.0:j, RHP was created as a temporary entity with a mandate of 24 months that would report to the authorities of the DDF and coordinate and manage social assistance, supply of emergency shelter, and reconstruction of housing units in the downtown areas of Mexico City which had been affected by the earthquake. From the outset, the Government decided to rebuild in situ small- scale units rather than to plan for large-scale redevelopments and to allow former tenants to become owners of the newly built structures, a strategy that was supported by project. Reconstruction plans for the downtown low-cost housing areas were established with the assistance of more than 260 architectural and engineering firms and the active involvement of the  representatives of the communities affected. Individual programs were developed on the basis of a dwelling design of 40 m2 net area (izIcluding two bedrooms, living/dining room, kitchen and in-door bathroom) and four prototypes of 3 story earthquake resistant structures. Given the socio- economic profile of the program's target population and the fact that the Bank had already a low-income houaing project under implementation with FONHAPO (Loan 2612-ME) using this agency and its operating modalities to channel financial resources to RHP and administer the mortgage portfolio of RHP beneficiaries was considered to be the most efficient alternutive. The FONHAPO managed program included in the project was to be developed in accordance with the standards and procedures agreed upon by the Bank in connection with Ln. 2612-NE. The FOVI program originated in a decision taken by SEDUE immediately after the earthquake to give victims of the disaster preferential access to already completed housing units in developments implemented by public and para-public housing corporations in peripherr., areas of the MCMA. FOVI credits were to be extended to the eligible benefi Aries through the commercial banking system under terms and conditions acceptable to the Bank. 4.06 Community Facilities: Repair and reconstruction of markets was to be carried out directly by DDF under the supervision of its Market Management Department (Coordinaci6n General de Abastos), whereas the DDF Utilities Department (Dfrecci6n General de Servicios Urbanos) was to coordinate the implementation of demolition works and debris removal. To restore health services to an adequate level, IMSS opted no to rebuild the 2,600-bed National Medical Center (Centro M4dIco Nacional), but instead decided to decentralize its operations within and outside the MCMA. The program developed by IMSS's own planning and construction department proposed to build 5 smaller hospitals with a total of 1,180 beds within MCMA, and five other hospitals in regional centers (Le6n, Puebla, Ciudad Obreg6n, Veracruz, and M6rida) with a total of 838 beds. (In addition IMSS would replace another 600 beds through the construction, with its own resources, of the Centro l6d1co Slglo XXI). To address the needs in the education sector, SEP concluded an agreement with DDF and CAPFCE, whereby DDF would assume responsibility for the repair and structural reinforcement of all schools of primary and secondary education within the limits of jurisdiction, whereas CAPFCE would be responsible for the reconstruction of destroyed facilities within DF as well as the repair and structural reinforcement of school buildings in other states. 4.07 Studies and Technical Assistance: To secure adequate coordination among the various implementing agencies and act as a liaison with the Bank, a specific Technical Coordination Unit staffed with local consultants was set up within the Department for Relationships with Multilateral Agencies (Direccldn de Organismos Financieros Internacionales) of SHCP. Technical assistance support w'as to be provided through SEDUE to RHP to strengthen its engineering and technical supervision capacity. DDF was also to receive technical assistance support for the preparation of an updated seismic building code and specific land use regulations for the areas within the city that presented high vulnerability to seismic risks. Studies were to be carried out under the administrative and financial management of the National Science and Technology  -6- Council (Consejo Nacional de Clencia y Tecnologis or CONACYT) in collaboration with SHCP, SEDUE, DDF and the National Reconstruction Committee. Topics of investigation were to focus primarily on improving knowledge of effects of seismicity on building structures and the development of seismic earthquake resistant construction techniques. 5. Project Implementation 5.01 Throughout the entire life of the project, implementation progressed extremely well, primarily owing to a persistently strong commitment of the Government and the local authorities to the endeavor of reconstruction, and a continitously high attention on part of the Bank. Both the Bank and the Government showed a great flexibility regarding adjustments required in response to the evolving needs of the post-disaster recovery and several minor amendments were made to the Loan Agreement. Over 90% of the loan funds had been disbursed by June 1989--(the original closing date was December 31, 1989)--and the project waO fully completed with a one year delay, which should be considered as a very good performance, taking into account the extent of the damages and the economic difficulties that Mexico was then facing, principally the severe budgetary limitations on counterpart funding. The loan was fully disbursed by April 1991. 5.02 Because of the emergency nature of the situation, much of the demolition work was already in progress prior to the Bank's reconnaissance mission, and by the time the loan became effective basically all of it had been completed. Temporary reinforcements of dwellings in the low-income neighborhoods as well as schools, hospitals and public buildings were completed within the first month. To sustain the momentum of the reconstruction efforts, the Bank agreed to finance retroactively to the date of the disaster up to US$70 million equivalent of eligible expenditures. Also, to expedite the start of reconstruction activities, the Bank agreed in January 1986 to make available, retroactive to the date of the disaster, about US$82 million of unused funds from Loan 1990-ME for the repair and reconstruction of housing by RHP and FONHAPO. Projects funded with these resources were implemented as part of the programs financed with Loan 2665-ME. 5.03 Housing: The Housing component was by far the most successful feature of the project. While it took RHP longer to plan and mobilize the reconstruction operations than originally hoped, actual construction time proved to be much shorter than anticipated. The delays in preparation of the operations was primarily due to the need for a closer association of the future beneficiaries and/or their representatives in the planning and design process. Though time consuming and costly, an early and strong involvement of the beneficiaries was rightly perceived to be an indispensable prerequisite fcr helping preserve the original social fabric of the neighborhoods affected, ant an important condition for a subsequent smooth progress in the implementation. Another important factor that allowed RHP to expedite the implementation of its program was its ability to streamline the procedures for approval of building permits and reduce the delays from several months to, in most cases, a few days. An element that, in some cases, contributed to  lengthen the approval process was the existence among the expropriated properties of several buildings that had been declared historic monuments by either the National Institute of Anthropology and History (Instituto Nacional de Antropologia e Hlstorls or INAH)--for buildings up to the 19th century--or the National Institute of Fine Arts (Instituto Nacional de Bellas Artes or INBA)--for the more recent ones. Agreements that allowed to reconcile the necessity for preservation of the national cultural patrimony with immediate needs of reconstruction were sometimes difficult to reach, but were eventually successfully concluded and a total of over 100 buildings of historic value wete salvaged. 5.04 A noteworthy aspect of the early stages of implementation of the RHP program was the involvement of Non-Governmental Organizations (NGOs). Over a dozen of such organizations expressed interest in participating in the housing program, but almost none of them had any prior experience in construction management, let alone emergency reconstruction activities. Although, especially at the beginning, relations with RHP were sometimes tense, difficulties could gradually be overcome and about 2,100 dwellings or about 5% of the total, could be built by NGOs. 5.05 Over the two years of its duration, the RHP program saw a considerable evolution which reflected a continuous process of adjustment to the needs as they emerged. Initially, it had been estimated that the proportion of dwellings to be rebuilt would evolve around 40% of the total and that most of the housing units could be repaired by the occupants under self- help arrangements with technical assistance from RHP. In reality, the proportion of houses damaged beyond repair rose to close to 90%, essentially because in numerous cases upon a more thorough inspection the damages to old structures proved to be much more severe than previously thought. Under these circumstances repair works to bring the buildings up to acceptable seismic safety standards would have proven non economical. Moreover, frequently, the dwellings did not comply with the most elementary requirements of salubrity and hygiene and restoring them to their state prior to the earthquake would have been socially unacceptable as well as an inefficient use of financial resources. 5.06 In keeping with the dispositions taken at its creation, RHP was dissolved after two years of existence, and its assets transferred to FONHAPO's Phase II program (FASE XX), (see below para. 5.07). Under this arrangement, FONHAPO continued to administer the credit reimbursement for all the mortgages extended on RHP built housing units. Recuperation performance has been satisfactory. RHP's timely dissolution deserves to be highlighted as often "temporary" institutions find ways of extending their life after their original objectives have been met, and the Mexican Government deserves credit for not having allowed this to happen. 5.07 The FONHAPO program also underwent a series of adjustments to and extensions of its original design. The applications for credit rapidly increased and, in addition, a growing number of them originated from groups of tenants in the downtown area and, especially the historic center, which wanted  - 8 - to repair, improve and acquire the buildings in which they were living from owners who had lost interest in the properties because of rent controls. To satisfy this demand the FONHAPO program was reshaped and relabeled Fase II program, and substituted subsequently in 1987 by the program called CASA PROPIA. These two programs which were managed entirely by FONHAPO through a system of temporary trust funds, not only extended credit to interested groups of purchasers, but also provided technical assistance and legal support to the latter in their negotiations with the former owners. 5.08 The demand for FOVI credits proved to be far in excess of the resources available under the project, and despite a reallocation of funds in 1987, a considerable number of applications had to be funded by the banking system out of its own resources or with funding supplied by the Banco de Mexico. 5.09 Community Facilities: The market reconstruction and repair program in DF was withdrawn from the project and eventually had to be completed by DDF with its own resources. The reason for this decision came from the disagreement between SPP and DDF over the budgetary handling of resources provided by Loan 2665-ME. According to SPP, these funds had to be considered as a suostitute for resources otherwise by the Government to DDF as part of the regular annual budgetary allocation, whereas DDF wanted them to be seen as additional funding. While most visible in the case of DDF, the "additionality" issue surfaced in the implementation of most other components as well, and is still an issue that stands in the way of Bank lending for projects in the DDF. 5.10 For similar reasons, the school rehabilitation and reconstruction component underwent a significant evolution that again demonstrated the benefits of flexibility and adaptability for disaster reconstruction programs. Based on a rather perfunctory assessment, the component was initially designed to finance the reconstruction and repair of about 50 schools as well as the structural reinforcement of another 900 schools in DF and the neighboring municipalities. It became evident in the course of implementation, that DF was able to obtain a sizeable amount of resources for the reconstruction and repair of facilities in form of grants from other donors. The program of structural reinforcement of schools in DF encountered as in the above mentioned case of markets, the opposition of SPP to provide DDF additional resources to the authorized regular budget. As a consequence, the program in DF could only be partially completed and DDF had to carry out a complementary program for about 3,000 schools in the following years with its own resources. On the other hand, however, to respond to growing awareness of the Government of the need to protect children from the possible effects of future earthquakes, the Bank accepted that the project scope be expanded to allow reinforcement of existing schools in nine other States subject to major seismic risks. This program was entirely implemented by CAPFCE and benefitting from a reallocation of loan resourcos in 1989, was able to significantly exceed its original objectives. It also became the catalyst for the preparation of a national program which is still ongoing and will be supported, in part, by other Bank projects in Mexico such as the Primary Education Project approved in September 1991.  - 9 - 5.11 The program of hospital reconstruction also suffered some noticeable changes. Two hospitals were dropped from the initial program of six hospitals for the MCMA, principally for lack of appropriate sites. A reorientation of IMSS' health care system that placed a greater emphasis on outpatient services and ensuing changes in facility standards led to a further adjustment of the program. Budgetary restrictions imposed on IMSS in 1987 and 1988 caused the temporary suspension of construction works for two other hospitals in the MCMA and the postponement of equipment acquisition for most of the remaining units. (The resources required to complete the works and acquire the lacking equipment amounted by end of 1990 to about US$30 million equivalent and were included by IMSS in its 1991/92 regular investment program). 5.12 Studies and Technical Assistance: The implementation of the program of technical assistance and studies was severely hampered by the lack of counterpart funding in both DDF and CONACYT which reflected the lower priority attached by the Government to this component during a period of severe economic difficulties. The project was successful in providing financial support for the coordination of project activities by SHCP, and contributed extensively to the preparation of a new seismic building code. Assistance to SEDUE for the preparation of updated building codes in all States of the country also got stalled over the issue of counterpart funding and the question of "additionality" of loan resources. A program of fundamental research on seismicity, seismic effects on building structures, development of appropriate construction techniques, and other related topics was to be implemented by CONACYT, but could be carried out only partially. Out of a total of over 200 studies identified by CONACYT with the collaboration of academic institutions and/or individual researchers over the first three years of project implementation, only about 70 were eventually completed. Together with studies carried out in parallel with funding from the US National Science Foundation, they provided t1a groundwork for the preparation of a revised building code for DF which was formally adopted and put in force on July 6, 1987. As it became more and more unlikely that the resources of this component could be used fully, the Government requested in 1989 the reallocation of the unspent balance of about US$4 million to the school rehabilitation program implemented by CAPFCE, (see para. 5.10 above). In retrospect, the technical assistance and studies component of the project was probably oversized, too ambitious and reflected more the Bank's views of priorities than those of the Government of Mexico. 5.13 Procurement: Because of the emergency nature of the works to implemented in a wide variety of locations, the Bank agreed that international competitive bidding (ICB) was not the most efficient method to conduct the civil works. ICB was maintained for acquisition of goods, however. Despite the considerable number of contracts for both works and acquisition of goods, no major procurement issue arose during the implementation of the project. This could largely be credited to the fact that the national procurement law which the Government had introduced earlier, made local contracting procedures consistent with the guidelines issued by the Bank.  - 10 - 6. Prolect Results 6.01 The project successfully assisted the Government in overcoming quickly and efficiently the effects of the disaster. It decisively contributed to avert the risks of major social disturbances which often come in the trail of such events. An important result was that it contributed tai maintain the affected population within their original living spaces and thus avoid creating large groups of displaced persons which in many other countries has shown to be one of the most critical problems in post-disaster recovery. Creation of employment was another benefit, which was particularly important as the economy was facing a severe recession. Over a two year period, the reconstruction effort- provided a total of about 175,000 jobs, in vast majority for unskilled labor. Moreover, the project succeeded in serving as a catalyst for the inflow of other foreign assistance resources, and, especially in the education sector, was instrumental in laying the foundations for a national seismic protection and safety strategy. 6.02 Housing: The project fully achieved its original objectives as demonstrated in the table below. With loan resources totalling US$226.8 million (plus US$81.8 million from Loan 1990-ME) it provided for the repair and reconstruction of over 70,000 housing units, or around 55% of the estimated total of dwellings affected by the earthquake and benefitted a population of possibly in excess of 400,000. An aspect that warrants to be highlighted in particular, is the project's major contribution to the preservation and restoration of Mexico City's cultural patrimony. Close and continuous collaboration between RHP, FONHAPO (Fase II) and INAH and INBA allowed to fully reconcile the social objectives of a rapid provision of shelter with the imperatives of the preservation of a unique urban landscape through careful design of architectural features, choice of colors, and skillful organization of exterior spaces. SUMMARY OF HOUSING RECONSTRUCTION AND REHABILITATION No. of Dwellinzs planned Actual RHP 42,600 42,500 FONHAPO - FASE II 15,400 12,900 FONHAPO-CASA PROPIA - 2,500 FOVI 11,800 11,300 JALISCO - 3.200 TOTAL 69.800 72.400 6.03 In the education sector, the project provided for the reconstruction and structural reinforcement of a total 2,142 school facilities in 10 States or about 60% of all the facilities considered in need of reinforcement. The lag in the completion of the works for health sector  - 11 - facilities was essentially the result of external factors beyond the control of IMSS, the implementing agency. At the conclusion of the project, in December 1990, 700 beds or about 30% of the original program were in service and another 300 were to enter in service during the first half of 1991. 6.04 On February 6, 1987, the International Union of Architects awarded its Sir Robert Mayhew Gold Medal to the Government of Mexico for the reconstruction effort and declared it "...the best piece of work on human settlements carried out internationally in the previous three years...". Similarly, the 4th World Architectural Biannual Congress he.ld in Sofia, Bulgaria in the summer of the same year awarded RHP a honorary award for the quality of its reconstruction work and the innovativeness of the architectural solutions it had devised. 7. Poverty Impact 7.01 Because the areas that had suffered most from the disaster were primarily im%abited by low-and lowest-income families, the project had a significant poverty impact. Over 50% of the households benefitting from the project had monthly incomes that did not exceed 2.5 minimum salaries, and about 25% of all households were headed by single women. 8. Frolect Sustainability 8.01 Because of its very nature, a reconstruction project must be considered as one-time effort that does not address sustainability as an issue. However, great attention was given to use the project as an vehicle for providing the population improved safety from the effects of future earthquakes by developing new and innovative seism-resistant construction techniques for low-income housing, and protect school children and hospital patients from possible harm through the reinforcement of existing structures and the use of strict standards for the construction of new facilities. Also, to avoid creating additional bureaucratic bodies, programs such as RHP were set up with a temporary mandate and promptly dissolved upon achieving their objectives. Handling of credit recuperation by FONHAPO was easily absorbed within its existing structures and did not create a significant additional burden. Reinforcement of schools did not create any additional maintenance costs and thus had no effect on the operating budget of SEP. Hospital reconstruction iid not increase operating costs for IMSS, rather it contributed to lower them by replacing older, inefficiently organized facilities with new and more rationally designed ones. 9. Bank Per