Mexico - Municipal Strengthening Project

Document of The World Bank FOR OFFCIAL USE ONLY Report No. 14749 JIMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (LOAN 2666-ME) JUNE 30, 1995 Environment and Urban Development Division Country 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 Equivalent Currency Units = Nuevos Pesos= 100 cents Average Exchange Rate* 1987 US$1 NPMex 2.20 1988 US$1 NPMex 2.28 1989 US$1 NPMex 2.47 1990 US$1 NPMex 2.57 1991 US$1 NPMex 2.85 1992 US$1 NPMex 3.00 1993 US$1 NPMex 3.05 1994 US$1 NPMex 3.38 * As of June 30, 1995 the rate for US$1 was NPMex 6.31 FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY Currency Equivalent Currency Units = Nuevos Pesos = 100 cents Average Exchange Rate 1987 US$1 NPMex 2.20 1988 US$1 NPMex 2.28 1989 US$1 NPMex 2.47 1990 US$1 NPMex 2.57 1991 US$1 NPMex 2.85 1992 US$1 NPMex 3.00 1993 US$1 NPMex 3.05 FISCAL YEAR January 1 - December 31 I 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 wiLhout World Bank authorization.  ABBREVIATIONS AND ACRONYMS BANOBRAS National Development Bank for Public Works and Services Banco Nacional de Obras y Servicios Pzublicos CETES Mexican Government Treasury Bills Certificados de la Tesoreria de la Naci6n CNA National Water Commission Comisi6n Nacional del Agua CUDs Development Agreements Convenios Unicos de Desarrollo FORTAMUN Municipal Strengthening Program Programa para Fortalecimiento Municipal GERP Guadalajara Emergency Reconstruction Program Programa de Emergencia de Reconstrucci6n de Guadalajara ICB International Competitive Bidding Licitaci6n Piublica Internacional IDB Inter-American Development Bank Banco Interamericano de Desarrollo LCB Local Competitive Bidding Licitaci6n Piublica Local SC Steering Conmmittee Comite Directivo SEDESOL Ministry of Social Development Secretaria de Desarrollo Social SEDUE Ministry of Urban Development and Environment Secretaria de Desarrollo Urbano y Ecologia SEDEUR Jalisco State Ministry of Urban and Rural Development Secretaria de Desarrollo Urbano y Rural del Estado de Jalisco SG Ministry of Governance Secretaria de Gobernaci6n SHCP Ministry of Finance and Public Credit Secretaria de Hacienda y Credito Piublico SOE -Statement of Expenditures Estados de Gastos SPP Ministry of Planning and Budgeting Secretaria de Planificaci6n y Presupuesto TS Technical Secretariat Secretaria Tecnica TSU Technical Support Unit Unidad de Apoyo Tecnico  IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Table of Contents Page No. Preface Evaluation Summary ............. i PROJECT IMPLEMENTATION ASSESSMENT A. INTRODUCTION. 1 B. ORIGINAL PROJECT .1 Original Project Objectives .1 Achievement of Original Project Objectives. 3 Major Factors Affecting Original Project. 4 Bank Performance under Original Project. 4 Borrower Performance under Original Project. 5 C. REVISED PROJECT. 6 Objectives of Revised Project. 6 Further Revisions of Project Objectives. 7 Achievement of Project Objectives. 7 Major Factors Affecting the Revised Project. 8 Bank Performance under Revised Project. 8 Borrower Performance under Revised Project. 9 D. PROJECT SUSTAINABILITY. 9 E. ASSESSMENT OF OUTCOME .10 F. FUTURE OPERATIONS . 1 G. KEY LESSONS LEARNED . 1  Table of Contents (Con't) Page No. STATISTICAL TABLES Table 1: Summary of Assessment .................................................... 13 Table 2: Related Bank Loans .................................................... 15 Table 3: Project Timetable .................................................... 16 Table 4: Loan Disbursements: Cumulative Estimated and Actual ........................... 17 Table 5: Project Costs (Original and Revised) .................................................. 18 Table 6: Project Financing .................................................... 19 Table 7: Status of Legal Covenants .................................................... 20 Table 8: Bank Resources: Staff Inputs ..................................................... 21 Table 9: Bank Resources: Missions .................................................... 22 Table 10: FORTAMUN: Total of Sub-projects ................................................... 23 Table 11: Sub-projects Financed by Water Supply & Sanitation Sector Project 3271-ME 24 Table 12: List of Activities in the Guadalajara Emergency Reconstruction Program ....... 25 Table 13: Works Completed in the First and Second Stage .................................... 26 Table 14: Executed Works in the Second Phase ................................................. 27 APPENDIX Aide-Memoire of Mission .29  IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Preface This is the Implementation Completion Report (ICR) for the Municipal Strengthening Project in Mexico, for which Loan 2666-ME in the amount US$40.0 million equivalent was approved on March 5, 1986 and made effective on September 10, 1986. The Loan was closed on December 31, 1994. Final disbursement took place on June 30, 1995, at which time a balance of US$0.3 million was canceled. The ICR was prepared by Mr. Luis Pereira, Task Manager, of the Environment and Urban Development Division (LA2EU) of the Latin America and Caribbean Regional Office, and reviewed by Mr. Ted Nkodo, Division Chief, LA2EU, and Ms. Kreszentia Duer, Project Advisor, LA2DR. Preparation of the ICR was begun during the Bank's final supervision and completion mission in August 1994. It is based on material in the project file. The Borrower contributed to preparation of the ICR by contributing views reflected in the mission's aide-memoire and by preparing its own evaluation of project execution that will be included as an appendix to the ICR as soon as they become available.   IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Evaluation Summary Introduction 1. This US$40 million loan, known as FORTAMUN, became effective in 1986. It was the fifth municipal development operation that the Bank supported in Mexico, and was intended to train federal and local government officials and establish a fund for municipal investments. It failed under its original objectives, despite a 1991 amendmnent to simplify administrative arrangements. This was mainly because municipalities had cheaper sources of funds available to them and therefore did not demand loan funds. The project lay dormant for five years. A total of only US$4.5 million had been spent by 1992, when the loan was amended twice to meet other objectives. First, a tragic accident in Guadalajara prompted a redesign of the project in 1992 so that funds could be channeled immediately towards reconstruction of damaged city infrastructure. Second, in 1994, a further restructuring of the loan allowed the government to use US$19 million from the loan to fund projects approved under the water supply and sanitation project (Loan 3271-ME). The modified project was successfully implemented. The project was closed in December, 1994 with US$0.3 million undisbursed. Total project costs finally amounted to US$316.7 million, of which US$39.7 million was from the Bank loan. Project Objectives 2. Original Project Objectives. The project originally aimed at supporting the Government's strategy of strengthening municipal institutions, to increase efficiency of urban service delivery. Specific objectives were: (a) building up the municipalities' organizational, administrative and fimancial management systems; (b) strengthening federal and state agencies to promote municipal development; and (c) assisting municipalities expand and upgrade urban infrastructure. The main project component was intended to support the establishment of a municipal development fund within BANOBRAS, to provide sub-loans to municipalities for investments in civil works, utilities, public transport, and municipal facilities (paras. 2-3). 3. Revised Project Objectives. The project was changed in response to a major explosion in Guadalajara on April 22, 1992. The accident, which was caused by gasoline leaking into the sewerage system, killed 214 people and injured 6,000 and resulted in substantial damage to infrastructure. The government asked the Bank to finance the first phase of their reconstruction effort, which aimed at restoring adequate sanitary conditions in the affected area, and basic pedestrian and traffic flows in the city (paras. 21-22). 4. In October 1993, some US$19 million remained in the project, and the legal agreements were again changed to allow the government to use the resources to finance sub-projects approved under the Water Supply and Sanitation Project, Loan 3271-ME. These amendments allowed Loan 2666-ME to be closed and provide additional financial support to Loan 3271-ME, under which BANOBRAS had approved more sub-projects than it had funds available (para. 23).  - ii - Implementation Experience and Results 5. Implementation and results of original project objectives. Only the infrastructure component was ever implemented, and that was minimal. The Steering Committee (SC) only approved ten sub-projects in total, and only seven were ever completed (Table 10) (paras. 9-11). GOM and the Bank amended the Loan Agreement in May 1991, to simplify administrative arrangements. This abolished the SC and passed responsibility for project execution to BANOBRAS. The changes did nothing, however, to increase demand for sub-loans. Complicated inter-ministerial decision-making arrangements in the SC had caused many delays, but the principal reason for the lack of demand was that other public sources were making softer funds available to municipalities (paras. 12-14). 6. Implementation and results of revised project objectives. In contrast to the project's failure to meet its original objectives, implementation of Phase I of the GERP was very successful. It took only two months, May 15-July 15, 1992 and used US$16.5 million from the Bank loan. The works completed under this section of the project were technically sound and made a major contribution to restoring the area to safe and operable conditions (paras. 24-27). Principal reasons for this success included: the prompt response of GOM and the State of Jalisco; the stakeholder group (patronato) forned at a local level to deal with the reconstruction; efficient arrangements for the private sector to construct civil works, including supervision and coordination; and the Bank's quick response, clear guidance and relaxed procurement rules (paras. 28-33). 7. Implementation of funds transferred to the water supply and sanitation sector project. US$19 million was used to help finance 393 sub-projects in Mexico with a total investment cost of US$191.6 million equivalent. For results of this project, see the Project Completion Report for project 3271-ME, document number [...] issued December 5, 1994. Summary of Findings, Future Operations and Key Lessons Learned 8. The project outcome under its original objectives is rated highly unsatisfactory with no sustainability. This is based on the almost non-existent implementation of the project. Under the revised objectives, however, the project is rated highly satisfactory, and sustainability is not an issue due to the emergency nature of the project. This evaluation is based on the GERP having met or exceeded each of its objectives. 9. The GOM and the Bank are currently preparing a State and Municipal Management Project taking into account the following lessons from FORTAMUN's failure: (a) Bank efforts at institutional development must be responsive to market demnand, even when the market consists of public sector institutions and relevant price signals are political. One of the main reasons FORTAMUN failed is that it could not find a market for sub-loans. As long as softer money was available, FORTAMUN's lending program was irrelevant to its market (para. 13). (b) Projects that deal directly with sub-national governments need to be designed with long implementation periods. This is to allow for the unpredictable but frequent problems that are  - iii - outside the project's control, such as changing political climates, and changing relations between levels of government (para.19). (c) Where various agencies deal with the same sector, and rivalry between agencies is strong, project design needs to reflect these realities. Project design should reduce these tensions wherever possible, for example by defining responsibilities clearly and simplifying approval procedures for sub-loans. It was clear in this project that the inter-ministerial steering committee resulted in the FORTAMUN having no owner nor institutional leader and left it vulnerable to inter- ministerial rivalries (paras. 12-13, 17, 19). (d) The extreme and mixed results of the project give further evidence that Bank assistance can only be effective when the government is committed and devotes the necessary administrative resources. If the project shows signs of lack of commitment at start up, as FORTAMUN did under its original objectives, the project should be restructured or canceled. If, on the other hand, the government is committed, as it was to the GERP, a project can show very good results quickly (para. 11). 10. The following lessons emerge from the success of the project under its revised objectives: (a) The broad definition of the original project design enabled the Bank to move money quickly in response to the Guadalajara tragedy (paras. 22-23). (b) Delegation of supervision responsibilities to local offices can speed up and improve implementation. The Bank contributed to the GERP's success by fully delegating supervision to the Resideint Mission in Mexico. The approval of non-routine procurement and disbursement actions, and the frequent field visits by headquarters staff also contributed to achieving project objectives (paras. 29-30). (c) The success of the Guadalajara Emergency Reconstruction Project, and the importance of the Bank's role in this project should dispel doubts expressed in earlier audit reports about the Bank's capacity to undertake emergency projects (see Audit Reports for the Guatemala (No. 6284) and Nicaragua (No. 6193) Emergency Reconstruction Projects).   IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) A. INTRODUCTION 1. This US$40 million loan became effective in 1986 to support the fifth municipal development operation in Mexico. The project intended to train federal and local government officials and provide a fund for municipal investments. It failed under its original objectives, despite a 1991 amendment to simplify administrative arrangements. This was mainly because municipalities had cheaper sources of funds available to them and therefore did not demand FORTAMUN loans. The project lay dormant for five years. A total of only US$4.5 million had been spent by 1992, when the loan was amended to meet other objectives. First, a tragic accident in Guadalajara prompted a redesign of the project in 1992 so that US$16.5 million could be channeled immediately towards reconstruction of damaged city infrastructure. Second, in 1994, a further restructuring of the loan allowed the government to use US$19 million from the loan to fund projects approved under the water supply and sanitation project (Loan 3271 -ME). Implementation of both modifications was successful. 2. Total project costs finally amounted to US$316.7 million, of which US$39.7 million was from the Bank loan. Total project costs were US$238.3 million higher than had been estimated at appraisal. This was caused by US$106.8 equivalent indemnization expenses incurred under the GERP, and US$151.3 million equivalent of local costs for the sub-projects financed under loan 3271-ME. The Bank's share of financing decreased therefore from the 51 % of total project costs expected at appraisal to 13% (Tables 5-6). The loan was closed on December 31, 1994, with US$0.3 million undisbursed (Table 4). B. ORIGINAL PROJECT Original Project Objectives 3. The Municipal Strengthening Project, FORTAMUN, was the Bank's fifth urban development project (Table 2). It was originally conceived in mid 1982 at the beginning of the country's decentralization process. This was a period of severe economic crisis. One of the government's first actions was to establish a general decentralization policy in 19851. This set a framework for increased state and local participation in programming and implementing investment decisions, and for greater coordination among central agencies and I Program for Decentralization of the Federal Public Administration, January 1985.  2 between federal, state, and municipal governments. The project was intended to support this policy. 4. The project aimed at emphasizing a process shift away from traditional approach of analyzing individual projects to one of institutional appraisal, focusing on the municipality as an important agent of national economic development. It was to support the Government's strategy of strengthening municipal institutions, in order to increase the delivery of affordable and efficient urban services. Specific objectives were: (a) building up the municipalities' organizational, administrative and financial management systems; (b) strengthening federal and state agencies that promote municipal development; and (c) assisting municipalities in expanding and upgrading urban infrastructure. The main project component was intended to support the establishment of a municipal development fund within BANOBRAS that would provide sub-loans to municipalities for investments in civil works, utilities, public transport, and municipal facilities. 5. Evaluation of Original Project Objectives. The objectives were sound. Giving local governments greater autonomy is generally an effective means of increasing urban service delivery and efficiency. Municipal strengthening was and continues to be is crucial if Mexico is to make progress in decentralization. 6. Original Project Design and Organization. The project originally had five components: Municipal staff development and organizational strengthening that would support a coordinated training program for selected municipalities. Federal and state staff development and organizational strengthening. Infrastructure and related investment fund for municipal development that would support the establishment of a municipal development fund within BANOBRAS, to provide sub-loans to municipalities for investments in water supply, sewerage, roads, drainage, street lighting, markets, slaughterhouses, etc. Municipalities were to receive partial support for these sub-projects at levels depending on their financial needs.2 Project administration was to finance the salary and costs for of full-time staff of the Training Unit. 2 Matching grants were established to induce municipalities to rely on credit for financing infrastructure investments and to rechannel some current Government budgetary support to them. The proportion of the matching grants was established according to five categories based on: (i) size; (ii) deficiencies in provision of basic services; (iii) priority in the National Development Plan; and (iv) current revenues.  3 Physical decentralization of federal public administration. This component aimed to pilot the government's decentralization program in twenty selected cities in an integrated manner. 7. The central government established a framework for administering the project, involving many agencies. BANOBRAS controlled the project funding. A high-level inter- ministerial Steering Committee, ComWit Directivo (SC), led the project, headed by the Undersecretary of SHCP, and made up of senior officials from the Ministry of Governance (SG), the Ministry of Planning and Budgeting (SPP), the Ministry of Urban Development and Environment (SEDUE), and BANOBRAS. A Technical Secretariat, Secretaria Tecnica (TS), coordinated the whole government program, including allocation of project finances. A Technical Support Unit, Unidad de Apoyo Tecnico (TSU), was established to provide technical support to the training agencies, and was intended to form the nucleus of national centers to coordinate municipal training programs. Municipalities were to implement sub- project investments with assistance from SEDUE. BANOBRAS was to take responsibility for appraising municipal sub-projects, for credit operations and for monitoring and evaluation. 8. The total project cost, excluding taxes, was estimated at US$80.0 million, with a foreign exchange cost of US$18.3 million. The Bank loan of US$40.0 million was to finance 50% of the project cost. The Government was to provide the required counterpart funding through an annual budgetary allocation to FORTAMUN. Municipalities were to contribute the equivalent of US$12.2 million from their own revenues for investments in sub-projects. Achievement of Original Project Objectives 9. The project failed to achieve its original objectives. No training courses ever took place and municipalities only completed seven sub-projects. FORTAMUN, as it was originally designed, was too small to change the market it was entering, but too ambitious to sell in the market as it existed. 10. Only the infrastructure component was ever irnplemented, and that implementation was poor. Despite amendments to simplify administrative procedures, the SC only approved ten sub-projects in total: three in Sonora, three in Aguascalientes, one in Tamaulipas, one in Mexicali, one in Durango and one in Guanajuato. Only seven of these were completed. Two of the projects in Sonora and that in Durango were dropped, but the municipality completed one of the dropped projects in Sonora with local funds (Table 10). 11. In June 1988, the government's austerity program caused them to transfer the Technical Secretariat (TS) and the Training Support Unit to BANOBRAS. At this point, the TS effectively ceased to exist, had spent only 4.5% of the loan amount ($1.8 million) and had come almost to a complete halt. The government contemplated canceling the loan in late 1988, because it was concerned that the commitment fees on the undisbursed loan  4 balance far exceeded project disbursements, and the situation seemed likely to continue.3 In August 1989, however, it asked BANOBRAS to explore ways to revive the project. After consulting with the Bank, BANOBRAS suggested that it should take over the entire responsibility for project execution after abolishing FORTAMUN's mandate and dissolving the Inter-ministerial Steering Conmmittee. The Bank approved these amendments to the Loan Agreement, and they became effective in May 1991. The amendments did nothing, however to increase demand for sub-loans. Major Factors Affecting the Original Project 12. The loan was approved in March 1986 and signed on April 1986, but did not become effective until September of that year. Project execution moved very slowly during the first years, in part because of the complexity of the initial implementation arrangements, which required participation and consensus of several Federal, State, and Municipal agencies in the steering committee. The project suffered because it had no institutional owner or champion. While several agencies battled for control of the project, they delayed implementation decisions. This also allowed government budgetary restrictions to block the project's funding. 13. The principal reason for the lack of demand for sub-loans, however, was that other public sources were making softer funds available to municipalities. With near-market interest rates and a complex and time consuming appraisal system, FORTAMUN represented the most expensive, and least accessible infrastructure financing in Mexico. By the late 1980s, local infrastructure financing in Mexico was dominated by Development Agreements, Convenios Unicos de Desarrollo (CUDs), to which the federal government contribution is entirely on grant terms. IDB was also providing soft loans to municipalities. 14. Even if the Bank had recognized this problem, it would not have been able to resolve it. The Bank had separately negotiated a General Interest Rates Agreement (GIRA) with GOM, which prohibited new government-subsidized lending through any of the development banks under World Bank projects. Other causes of failure included poor promotion of the program, and the lack of effective programs to help the municipalities prepare urban plans (a prerequisite for receiving sub-loans). Bank Performance under Original Project Objectives 15. Preparation and Appraisal: Unsatisfactory. The Bank correctly highlighted sector policy issues, and quickly developed agreement with the Government on objectives. The Bank properly addressed the serious constraints affecting the efficiency in the correct use of resources and in the quality of the services provided by the municipal sector. The Bank paid adequate attention to the training program for municipal staff at all levels, particularly in the 3 Based on the arrangements outlined in the Loan Agreement, the accumulated and paid-up interest and commitment fees of FORTAMUN as of November 15, 1987 were US$0.8 and US$1.1 million, respectively. Informe de la Gesti6n del Mandato de FOR TAMUN, BANOBRAS, Mexico, D.F. November 1990.  5 area of financing management, as a precondition to strengthening municipal effectiveness in implementing and operating capacities. Bank management expressed concern about dealing with municipal financial system, and correctly identified the importance of the redundant federal subsidies to the states and municipalities through greater local finance mobilization, improved efficiency of financial resources allocation and better utilization of these resources. These concerns were, in retrospect, valid. 16. The Bank paid less than adequate attention, however, to other aspects of project preparation. It did not assess potential demand adequately, nor did it pay adequate attention to clarifying administrative arrangements. The Bank did not identify problems that might arise from BANOBRAS' capacity to manage its staff and to provide the equipment required at its branches, nor did it foresee the institutional rivalry among the five key agencies participating in the project. It should have been able to foresee these problems, as similar issues were plaguing other projects in Mexico during preparation of FORTAMUN. The Lazaro Cardenas Conurbation Project (Loan 1554-ME); and the Second Urban and Regional Development (Loan 1 990-ME), for example, were both experiencing disbursement problems because of inadequate coordination and technical-financial capacity at the state and municipal levels.4 17. Supervision: Deficient. The Bank did not properly evaluate or act upon several problems that arose soon after project effectiveness. These included: inadequate counterpart funding, staffing in the technical secretariat in BANOBRAS and institutional rivalries in the Steering Committee. The Bank should have taken appropriate actions, such as applying legal covenants or even canceling the loan at an early stage, especially once it became clear that changes in the Loan Agreement had not fostered rapid resumption of activities. The Bank hoped to keep the project alive in an otherwise weak project pipeline, and therefore pushed for changes that would enable the project to disburse. The Bank should have focused more on the institutional structure of FORTAMUN. It was clear that its institutional arrangements were not working properly. Different Bank staff supervised the project from those who had helped prepare it. This lack of continuity made supervision very difficult. In addition, the Bank dedicated inadequate time to sorting out this problem project. A total of seven supervision missions took place between 1986 and 1992, an average of one supervision mission per year. Time spent on these missions was also insufficient (average mission was one staff-week). More intensive supervision was needed in this critical period when problems became more serious (Tables 8-9). The Bank did not supervise the project for almost two years (August 1988-March 1990). Borrower Performance under Original Project 18. Implementation: Deficient. Organizational problems plagued the project after effectiveness. During the first six months, after project signing, BANOBRAS managed to fill only eight of the anticipated 40 positions in its technical secretariat. BANOBRAS approved its first sub-loan -- a road paving sub-project in Hermosillo -- a full eight months after the project became effective. 4 Project Completion Report (PCR) No. M87-1287 and PCR No. M93-0139.  6 19. During the initial phase of project implementation, there was intense rivalry among the institutions participating in the project. BANOBRAS, as borrower, argued that it should lead the project. SEDUE, however, as special advisor to the Secretariat, implied that it had the inside track on Bank projects, and went as far as preparing alternative Operating Guidelines for the project, this time placing SEDUE in the lead. SEDUE particularly insisted that it had political influence due to its prominent success in the Earthquake Rehabilitation and Reconstruction Project (Loan 2655-ME) . The Ministry of Governance (SG) argued that BANOBRAS was only the custodian of borrowed funds for the project, and that the FORTAMUN program belonged to all government agencies, so it (SG) was the best promotion agency. SPP also wanted to control the project, because of its position in allocation of counterpart funds. SEDUE proposed some changes in FORTAMUN's operating guidelines to the Bank. These aimed mainly at codifying its equality with BANOBRAS in the administration of the project. 20. BANOBRAS historically had not been a major lender to municipalities. They therefore did not promote the program sufficiently; but adopted a rather passive role in the municipal sector, providing information on request. After BANOBRAS took over FORTAMUN, it delegated analysis, supervision, and evaluation of sub-projects to its State Delegations. C. REVISED PROJECT Objectives of Revised Project 21. On April 22, 1992, several major explosions attributed to gasoline leaking into the sewerage system killed 214, injured 6,000, and damaged a large area of urban infrastructure in Guadalajara. In response, the Government developed the Guadalajara Emergency Reconstruction Program (GERP). GOM and the Bank decided to redirect the remaining FORTAMUN funds towards the first phase of this effort, and amended the legal documents accordingly. 22. The emergency works had the objective of restoring basic sanitary conditions to the area and restoring normal traffic flows to around eighty intersections. BANOBRAS assumed financial responsibility for the program. The State of Jalisco's Ministry of Urban and Rural Development (SEDEUR) was responsible for project execution. It had good technical experience and previously had undertaken civil works of comparable scale. The National Water Commission (CNA) provided technical support for the reconstruction of water sanitation infrastructure. To ensure rapid follow-up, the Bank delegated overall responsibility for project supervision to the Resident Mission in Mexico City. 5 Earthquake Rehabilitation and Reconstruction Project (Loan 2665-ME), Performance Audit Report No. SecM93-772, July 23, 1993.  7 Further Revisions of Project Objectives 23. In October 1993, additional amendments were made to the Loan Agreements to allow using the remaining project resources. This was to allow the use of funds amounting to about US$19.0 million still undisbursed from loan 2666-ME to finance urgent sub- projects approved under the Water Supply and Sanitation Sector Project, Loan 3271-ME. These amendments allowed Loan 2666-ME to be closed and provide additional financial support to Loan 3271-ME, which was 100% allocated and about 95% disbursed. Achievement of Revised Project Objectives 24. The project was highly successful in meeting its revised objectives. The project reestablished water supply and sewerage, replaced telephone services, rehabilitated high and low tension lines to the damaged area of Guadalajara. The repairs exceeded the expected quality and were implemented in shorter time than estimated (two rather than four months). Physical works were larger than planned, as it became evident that the explosions had caused more damage than originally estimated. Within the project, the capacity of the collector was increased 27 percent, and its joints were sealed with PVC. The number of storm drains quadrupled to resolve the traditional problems of capturing rainwater. Special installations were also built to house a monitoring system that is unique in Mexico, which guarantees monitoring of the water flowing through the system. The quality of the urbanization of the area was also improved through the installation of pavement made of hydraulic concrete, rather than asphalt, which had been used previously. Finally, a park was created Lhrough the reforestation of the sidewalks, and the public lighting system in the area was modernized and standardized. Tables 12-14 show the complementary works related to the reconstruction but implemented by other organizations. 25. The 1992 and 1993 rainy seasons in Guadalajara tested the new installations fully. The first rainy season tested the operation of the open canal, which handled a volume of 49 cubic meters per second after one storm. An exceptional storm in June 1993 (182 millimeters of rain fell in three hours) tested the collector at its maximum capacity. Its operation was wholly satisfactory as it handled the water without any difficulty. 26. In general the procurement process was satisfactory. Due to the emergency nature of the works, the Bank had agreed that international competitive bidding (ICB) would not be the most efficient method to procure civil works. However, ICB was maintained for the acquisition of goods. Despite the number of contracts for both works and acquisition of goods, no major procurement issue arose during implementation of the GERP. The emergency reconstruction works for Phase I started within 24 hours of the explosions, and nearly 75% of the project was completed by early July 1992. The govemment had already incurred a similar percentage of expenditure, which the Bank financed retroactively.  8 27. The US$19.0 million of funds transferred to the Water Supply and Sanitation Project helped finance 393 sub-projects throughout Mexico with a total investment cost of US$191.6 million equivalent (NPMex$584.3 million) (Table 11). The balance of US$151.2 million equivalent (NPMex$461.4 million) was financed by Federal and state governments. The results were, on the whole, satisfactory. For details, see the Project Completion Report. Major Factors Affecting the Revised Project 28. The success of the Guadalajara part of the project can be attributed principally to government commitment. Efficient arrangements for the private sector to conduct and implement civil works, including supervision and coordination also contributed to the success. The Bank's prompt response, clear guidance and flexibility in applying procurement rules also helped effective implementation. Bank Performance under Revised Project 29. Preparation: Highly Satisfactory. The Bank was supportive and responded expeditiously and flexibly to Mexico's needs in the aftermath of the Guadalajara disaster. It also brought sound engineering and technical expertise to the emergency reconstruction program. The Bank maintained a close relationship with all operating agencies at every stage, starting with the evaluation of the damage report, programming the reconstruction and organizing the construction management team. The Bank responded immediately to the Mexican request for support by accelerating project preparation, bypassing briefing and appraisal report stages, and presenting the necessary project amendments directly to the Board, three months after the disaster. 30. Supervision: Highly Satisfactory. The Bank delegated overall responsibility for the project supervision to its Resident Mission in Mexico. The Bank showed flexibility in its requirements for approving contracts to speed up the Guadalajara Emergency Reconstruction Project. These relaxed requirements were subsequently applied in other Bank projects in Mexico. The Mexican Government appreciated the Bank's understanding of the need to change during negotiation and implementation of the revised project, and its flexibility in agreeing to the amendments. BANOBRAS commented formally about the Bank's positive response to the Guadalajara Emergency Reconstruction Project, especially because of the efficient approval procedures and the delegation of authorities to the Mexico Resident Mission.6 Most implementation problems were resolved in the field, and the application of Bank procedures never delayed the implementation process. 6 Informe del Programa Emergente para la Reconstrucci6n de Colectores del Sector Reforma de la Ciudad de Guadalajara, Jalisco. BANOBRAS; Ayuda Memoria, Supervision Mission, August 19- September 2, 1994; and interviews with BANOBRAS' officials and Bank's Resident Representative at the time.  9 Borrower Performance under Revised Project 31. Preparation: Highly Satisfactory. For the GERP, the Government and all authorities at the federal, state, and local levels displayed a continuously high commitment to the reconstruction efforts, and provided full support to the project. They showed a high degree of flexibility for changing or bypassing established bureaucratic procedures, in order to speed up processing of permits and approvals, and were open to any adjustments, both technical and financial, as the need emerged during project implementation. BANOBRAS, as the financial intermediary for the project, played a critical role in maintaining the fast pace of reconstruction. 32. Implementation: Highly Satisfactory. The federal, state and local officials involved in the project continued to show high commitment, flexibility and technical excellence throughout implementation. It is noteworthy that the Mexican authorities decided not only to repair the damaged area in Guadalajara, but also to take steps to prevent future explosions in Guadalajara and other nationwide petroleum infrastructure facilities. The Mexican Government should be credited for keeping the needs of affected populations as a top priority and for sticking to the reconstruction without introducing additional secondary objectives. 33. The institutional arrangements used to handle the GERP at a local level also contributed to the success of the implementation. A forum, Patronato, was established, consisting of those affected by the explosions, and those in charge of addressing these demands. This turned out to be an excellent instrument for channeling demands and setting local priorities and for ensuring efficacy of the arrangements for private sector implementation of civil works, including supervision and coordination. 34. After the experience of the Mexico City Earthquake Rehabilitation Reconstruction Project (Loan 2665-ME), the housing loan, and the GERP, BANOBRAS had absorbed most of the Bank's procedures and thus was able to speed up the contract approval and reimbursements for the water sector loan (including using the funds transferred from this project). D. PROJECT SUSTAINABILITY 35. Not Applicable. Very few works were completed under the original project objectives. The GERP revisions involved one time emergency reconstruction of damaged infrastructure and so sustainability is not an issue. Physical facilities and equipment, which were incorporated under the project, have all been functioning properly. The government gave put high priority on using the project to reduce risks of future explosions, which they accomplished by developing strong and resistant construction techniques and the reinforcing the existing network structure. Mexican officials have taken preventive steps to eliminate  10 the risk that similar explosions may occur in the future. Petr6leos de Mexico (PEMEX) gasoline storage tanks have been moved outside the urban area of Guadalajara, and a firm contracted to review conditions and safety of all PEMEX's petroleum infrastructure facilities nationwide. 36. The Government has taken a more effective role in understanding that natural and technical hazard vulnerability must be addressed from the point of view of prevention and mitigation, which has become widely accepted in Mexico. Although this was not an explicit objective, the project has strengthened the Municipal Government of Guadalajara's management capacity and that of other non-governmental institutions for preventing potential hazard sources as a result of future natural disasters. 37. The principal environmental impacts of the project came from the reconstruction in Guadalajara, as there was so little activity under the original objectives. These impacts were mildly positive, as all inhabitants in the affected area have now higher quality and greater levels of water supply and sanitation services. Sanitary conditions in the area were not only restored, but improved in an area much larger than that affected by the explosion. 38. Sustainability of the works financed under the Water Supply and Sanitation Project is generally good. Details are in the Project Completion Report. E. ASSESSMENT OF OUTCOME 39. Overall Rating for Original Project: Highly Unsatisfactory. The project failed to achieve any of its major objectives and was never implemented. The project management arrangements exacerbated the institutional rivalry that hampered the project in its early stages. It was clear from the start that there was no market for any FORTAMUN loans, even if the institutional problems could have been resolved. Softer money was available from other sources and the Bank was constrained by other macro-agreements with Government of Mexico from changing the terms (paras. 13-14). 40. Overall Assessment of the Revised Project: Highly Satisfactory The project achieved its major objective and has achieved satisfactory development impacts. Project infrastructure is of a high quality and has restored normal conditions to the area. Local residents affected by the disaster have accepted the works implemented; they not only participated in their supervision and vigilance, but they now are sure that they can carry out their activities normally. 41. The success of the GERP can be attributed to the prompt response and high commitment of the Government of Mexico at all levels. The Patronato forum proved an efficient means to channel the demands of those affected by the explosions, and to supervise  I1 implementation of civil works by the private sector. A final reason for success was the prompt and flexible response by the Bank, which was present almost immediately to evaluate the damages and to prepare the information required for providing the funds necessary for the implementation of the reconstruction works. F. FUTURE OPERATIONS 42. GOM and the Bank are currently preparing a State and Municipal Management Project. This will pilot the development and use of Policy and Financial Management Plans (PFMPs) to be carried out by states and municipalities, which combine; (a) a statement of policy objective and timetable of proposed actions, including specific financial targets; (b) a municipal or state investment program for those investments, which fall outside existing Bank credit lines but are high priority; and (c) a program of technical assistance to support policy changes. The project objectives are to: (a) assist the Government in the definition of a fiscal incentive framework that is more conductive to increase local government autonomy and efficiency; (b) strengthen the operation and financial management of state and municipal governments; and (c) increase BANOBRAS's capacity to provide policy advice and technical assistance to state and municipalities. The project will take the lessons from FORTAMUN's failure into account. G. KEY LESSONS LEARNED 43. The following lessons emerged from FORTAMUN's failure: (a) Bank efforts at institutional development must be responsive to market demand, even when the market consists of public sector institutions and relevant price signals are political. One of the main reasons FORTAMUN failed is that it could not find a market for sub-loans. As long as softer money was available, FORTANMNN'R lending program was irrelevant to its market (para. 13). (b) Projects that deal directly with sub-national governments need to be designed with long implementation periods. This is to allow for the unpredictable but frequent problems that are outside the project's control, such as changing political climates, and changing relations between levels of government (paras. 17-19). (c) Where various agencies deal with the same sector, and rivalry between agencies is strong, project design needs to reflect these realities. Project design should reduce these tensions wherever possible, for example by defining responsibilities clearly and simplifying approval procedures for sub-loans. It was clear in this project that the inter-ministerial steering committee resulted in the FORTAMUN having no owner nor institutional leader and left it vulnerable to inter-ministerial rivalries (paras. 12-13, 17, 19). (d) The extreme and mixed results of the project give further evidence that Bank assistance can only be effective when the government is committed and devotes the necessary administrative resources. If the project shows signs of lack of commitment at  12 start up, as FORTAMUN did under its original objectives, the project should be restructured or canceled. If, on the other hand, the government is committed, as it was to the GERP, a project can show very good results quickly (paras. 11, 17). 44. The following lessons emerge from the success of the project under its revised objectives: (a) The broad definition of the original project design enabled the Bank to move money quickly in response to the Guadalajara tragedy (paras. 22-23). (b) Delegation of supervision responsibilities to local offices can speed up and improve implementation. The Bank contributed to the GERP's success by fully delegating supervision to the Resident Mission in Mexico. The approval of non-routine procurement and disbursement actions, and the frequent field visits by headquarters staff also contributed to achieving project objectives (para. 29-30). (c) The success of the Guadalajara Emergency Reconstruction Project, and the importance of the Bank's role in this project should dispel doubts expressed in earlier audit reports about the Bank's capacity to undertake emergency projects (see Audit Reports for the Guatemala (No. 6284) and Nicaragua (No. 6193) Emergency Reconstruction Projects). H. BORROWER'S FINAL EVALUATION REPORT 45. In accordance with OP 13.55, article 3, it is indicated that the borrower has not sent its final evaluation report.  - 13 - Table I IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Summary of Assessments A. Achievement of Objectives Achievement of Objectives Substantial Partial Neglible Not Applicable F G F G F G F G Macro policies V/ V/ Sector Policies V V Financial objectives V Institutional development V I Physical objectives V V Poverty reduction V V Gender issues V Other social objectives V Environmental objectives V V Public sector management V/ Private sector development V V Other V. F = FORTAMUN G = Guadalajara Emergency Reconstruction Program  - 14 - B. Project Sustainability Project sustainability Likely Unlikely Uncertain FORTAMUN Guadalajara Emergency Construction Program C. Bank Performance Bank Performance Highly satisfactory | Satisfactory | Deficient F G F G F G Identification / / Preparation assistance / / Appraisal / / Supervision D. Borrower Performance Borrower performance J Highly satisfactory Satisfactory Deficient F G F G F G Preparation I/ / Implementation / / Covenant compliance / / Operation | E. Assessment of Outcome Assessment of outcome I Highly satisfactory | Satisfactory Unsatisfactory | Highly unsatisfactory FORTAMUN I / Guadalajara Emergency | Reconstruction Program  - 15 - Table 2 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Related Bank Loans Loan Year of Amount Description Status Approval US$million Lazaro Cardenas 1978 $16.5 Provide infrastruture, community Completed June 1983. PCR Conurbation Project (1554- facilities and low-cost housing. No. M87-1287, November ME) 9, 1987 Second Urban & Regional 1981 $164.0 Credits for productive enterprises to Completed December 1988. Development Project (1990- complement expanding economic Amount canceled US$22.4 ME) activity in growiing peripherial million. PCR No. M93- regions of Tabasco, Veracruz and 0139, January 12, 1993. Chiapas. Deconcentration Program 1982 $9.2 Support preparation of a pre- Completed December 1987. for the Mexico City Region investment stage of a Amount canceled US$4.8 (2194-ME) deconcentration program for the million. PCR No. M90- Mexico City region. 0790, May 23, 1990. Low Income Housing 1985 $150 Financing low income housing Completed December 1992. Project (2612-ME) investments outside Mexico City PCR No M91-1360, region. October 15, 1991.  - 16 - lTble 3 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Project Timetable item Date Planned Date Revised Date Actual Identification August 10, 1984 August 10, 1984 Preparation September 4, 1984 May 23, 1985 Appraisal August, 1985 August, 1985 Negotiations January 18, 1986 February 18, 1986 Board Approval March 5, 1986 March 5, 1986 Loan Signature April 9, 1986 April 9, 1986 Effectiveness Date July 10, 1986. August 10, 1986 September 10, 1986 Completion Date June 30, 1994 December 31, 1994 Loan Closing December 31, 1994 December 31, 1994  - 17 - Table 4 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Cumulative Estimated and Actual Loan Disbursements (US$ million) FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 Appraisal Estimate 7.0 16.5 26.6 35.3 39.2 39.2 Actual 2.0 2.1 3.5 3.8 4.5 4.5 22.5 37.5 39.7* Actual as % of Estimate 28.5 12.7 13.2 10.7 11.5 11.5 57.4 95.7 99.9 * US$19.0 million were disbursed for Loan 3271-ME Date of First Disbursement: April 30, 1987 Initial Loan Closing Date: June 30, 1994 Actual Loan Closing Date: December 31, 1994 Date of Last Disbursement: June 30, 1995  Table 5 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) PROJECT COST (US$ million) Estimate Revised Actual Project Components Local Foreign Total Local Foreign Total Local Foreign Total A. Municipal Staff Development 6.4 1.3 7.7 1.5 1.5 1.5 - 1.5 1. Staff Training 5.1 0.1 5.2 0.03 - 0.1 1.5 - 1.5 cc 2. Technical Assis. & Promot. Activit. 1.0 1.0 0.7 - 0.7 0.7 - 0.7 3. Equipment & Materials 0.3 1.2 1.5 0.73 - 0.7 0.7 - 0.7 B. Federal & State Staff Development 4.7 1.3 6.1 1. Staff Training 1.1 1.1 2. Training of Trainers 3. Technical Assis. & Training 3.6 0.8 4.4 4. Information Systems and Studies 0.4 0.4 5. Equipment & Materials 0.2 0.2 C. Infrastruct.& Related Investments 45.8 15.2 61.0 180.2* - 180.2 315.0** - 315.0 D. Project Administration 1.1 1.1 0.2 - 0.2 0.2 - 0.2 Contingencies 2.0 0.4 2.4 TOTAL PROJECT COSTS 60.0 18.3 78.3 181.9 - 181.9 316.7 316.7 Preliminary data * Includes indemnization for US$106.8 rnillions equivalent under the Guadalajara Emergency Reconstruction Program ** Includes US$151.3 million equivalent of local financing for 393 subprojects under Loan 3271-ME  - 19 - Table 6 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Financing Plan (US$ million) [ Estimate Revised Actual Sources of Funds Local Foreign Total Local Foreign Total Local Foreign Total Bank 20.8 18.3 39.2 39.7 - 39.7 39.7 - 39.7 Government 39.3 - 39.2 34.6 - 165.7* 277.0 - 277.0** Total 60.0 18.3 78.4 74.3 205.4 316.7 - 316.7 * Include indemnization for US$106.8 million equivalent under the Guadalajara Emergency Reconstruction Program (GERP) * Includes local costs of the 393 subprojects for US$151.3 million equivalent under Loan 3271-ME.  Table 7 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Status of Legal Covenants Agreement Section Covenant Present Original Revised Description of Covenant Comments Type* Status** Fulfillment Fulfillment Date Date Loan 3.03 (b) F CD 3/31/1988 7/22/1988 Amount of Grant made during any given calendar year shall not exceed 16% of the amount disbursed out of the Mandate account for part C of the project during year in question. Loan 3.03 (c) F C 3/31/1988 3/31/1988 Borrower shall review the appropriateness of limits for Grants established in the paragraph 3 of schedule 5. Loan Sched.5 C C 3/31/1988 3/31/1988 Amount of Grants for each subproject shall not exceed the equivalent of 30% of the funds provided for such subproject other than the funds provided by the municipality out of its own resources. Loan 4.01(b)ii A C June of June 1989 Borrower shall furnish to the Bank no later than six months each year. after the end of such year: (a) certified copies of its financial statements; and (b) report of such audit by said auditors. Loan 4.01 A C monthly June 1989 Borrower shall furnish to the Bank each month certified (b)iii statements of the Special Account. Guarantee 3.03 M n.a. during n.a. Guarantor shall maintain until completion of the project the It was not longer applicable after project Technical Secretariat fully staffed with qualified and Technical Secretariat was transferred execution experienced personnel. to BANOBRAS. Loan Schedule M n.a. during n.a. Provision of full-time staff, materials, and equipment to the same as above. 2 project TS. execution * Types: A=accounts/audits; F=financial performance; C=counterpart funding; M=management; E=environment; **Status: C=covenant complied with; CD=complied with after delay; CP=complied with parity; NC=not complied with  - 21 - 'Ibble 8 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Bank Resources: Staff Inputs Staff Weeks Stage of Project Cycle Planned Actual Through Appraisal n.a. 39.8 Appraisal--*Board Approval n.a. 34.2 Board Approval-Effectiveness n.a. n.a Supervision n.a. 81.3 Total 155.3  - 22 - Table 9 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Bank Resources: Mission Activity Month/Year No. of No. of Specialization Staff Rating Date of Type of Weeks Persons Weeks Status Report Problem Identification August 1994 2 2 E,F 4.0 n/s 8/27/84 n/s Preparation May 1985 2 2 E,F 4.0 n/s 5/23/85 n/s Pre-Appraisal July 1985 2 2 E,F 4.0 n/s 7/5/85 n/s Appraisal August 1985 2 2 E,F 4.0 n/s 3/5/86 n/s Post-appraisal September 1985 1 1 F 1.0 n/s 9/17/85 n/s Supervision May 1986 2 2 E,F 4.0 2 5/8/86 M,F Supervision Scptember 1986 1 1 E 1.0 2 9/3/86 M,FP Supervision Mamh 1987 2 2 E,F 4.0 n/s 3/17/87 M,F,P Supervision May 1987 1 1 E 1.0 3 5/5/87 M,F,P Supervision August 1988 2 2 E,F 4.0 n/s 8/15/88 M,F,P Supervision March 1990 1 1 E 1.0 3 3/1/90 M,F,P Supervision April 1992 1 3 E,F,Ec 3.0 3 4/27/92 M,F,P Supervision April 1994 1 1 E 1.0 1 4/6/94 E Supervision August 1994 2 1 Ec 2.0 n/s 9/11/94 F Specialties: F=Financial Analyst; E=Engineer; Ec=Economist; Training:T TyIpe of problem: M=Managerial; F=Financial; P=Political; n/s= Not Specified  - 23 - Table 10 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) FORTAMUN: Total of Sub-projects State Location Loan Purpose Loan amount Aguascalientes Tepezala street cleaning equip. NPMex$ 65.180 Aguascalientes Rincon de Ramos street cleaning equip. NPMex$ 22.233 Aguascalientes Calvillo street cleaning equip. NPMex$ 210.362 Sonora Hermosillo road paving NPMex$ 497.532 Guanajuato Irapuato paving & sidewalk NPMex$ 2,992.000 Mexicali Naucalpan paving & sidewalk NPMex$ 1,000.00 Tamaulipas Tampico paving & sidewalk NPMex$ 2,554.000 Source: BANOBRAS  Table I 1 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT LOAN 2666-ME Total Subprojects Financed Under Loan 2666-ME for Water Supply and Sanitation Sector Project* (NMex) Number Bank of Amount Loans Local State Projects Original Additions Total 2666-ME 3271-ME Total Financing AGUASCALIENTES 3 4,389,650 1,967,074 6,356,724 682,800 2,490,690 3,173,489 3,818,907 BAJA CALIFORNIA 11 17,307,523 1,854,971 19,162,494 2,259,650 4,859,615 7,119,266 13,959,478 BAJA CALIF. SUR 3 1,031,089 54,525 1,085,614 52,726 430,162 482,888 711,287 CAMPECHE 6 10,611,148 62,707 10,673,855 839,050 3,733,443 4,572,493 7,168,748 COLIMA 2 2,665,706 0 2,665,706 151,866 772,212 924,078 2,008,199 CHIAPAS 17 83,718,928 2,220,085 85,939,013 11,755,303 10,377,762 22,133,065 72,399,849 DURANGO 2 447,154 0 447,154 67,073 0 67,073 424,797 GUANAJUATO 10 15,200,534 531,443 15,731,977 1,102,640 4,404,000 5,506,640 11,798,535 GUERRERO 3 6,189,038 0 6,189,038 928,356 0 928,356 5,879,586 HIDALGO 7 3,817,200 426,312 4,243,512 524,477 1,360,877 1,885,355 2,782,509 JALISCO 60 113,949,432 7,442,816 121,392,248 10,679,973 28,368,233 39,048,206 94,483,267 MEXICO 47 74,643,935 7,495,664 82,139,599 5,526,352 14,988,270 20,514,622 69,838,937 MICHOACAN 16 31,079,005 3,898,724 34,977,730 1,985,152 9,368,852 11,354,004 27,121,499 MORELOS 4 4,425,556 818,121 5,243,677 327,117 1,553,752 1,880,869 3,887,176 NAYARIT 9 4,996,280 52,112 5,048,392 304,973 154,234 459,208 5,094,024 NUEVO LEON 69 47,738,271 2,449,567 50,187,838 7,586,659 9,180,239 16,766,898 38,439,724 OAXACA 3 1,771,576 163,579 1,935,155 299,839 536,475 836,314 1,292,357 PUEBLA 12 10,041,956 162,628 10,204,584 1,416,044 3,135,205 4,551,249 6,673,794 QUERETARO 10 5,635,497 70,000 5,705,496 1,440,023 860,756 2,300,779 3,975,267 QUINTANA ROO 2 2,113,141 727,273 2,840,413 1,308,369 0 1,308,369 1,816,085 SINALOA 6 13,506,971 1,028,913 14,535,884 879,642 4,196,272 5,075,913 10,913,559 SONORA 37 36,918,989 2,755,612 39,674,601 3,511,456 10,172,534 13,683,990 29,958,071 TABASCO 12 9,346,302 1,775,987 11,122,289 951,099 3,878,273 4,829,372 7,405,146 TAMAULIPAS 11 24,227,379 353,633 24,581,012 1,285,311 2,271,177 3,556,488 23,482,626 TLAXCALA 19 7,429,597 611,730 8,041,327 503,151 3,171,414 3,674,565 5,170,895 VERACRUZ 1 6,226,516 0 6,226,516 228,064 2,591,495 2,819,559 4,029,609 YUCATAN 4 1,648,354 252,386 1,900,740 548,790 0 548,790 1,542,024 ZACATECAS 7 6,061,991 0 6,061,991 893,253 477,596 1,370,849 5,297,341 TOTAL 393 547.138,717 37,175,864 584,314,581 58.039,207 123.333,539 181,372,746 461,373,293 * Preliminary Data Source: BANOBRAS  - 25 - Table 12 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECr (Loan 2666-ME) List of Activities in the Guadalajara Emergency Reconstruction Program 1. Federal Conmnission of Electricity * Rehabilitation of 2,200 meters of high and low tension lines. * 185 high and low tension connections for users. * Delivery and installation of 85 streetlamps of 500 and 1,500 watts for emergency public lighting. * 5,200 meters of distribution networks of high and low tension lines. * Placement of 209 low tension poles. 2. Telephones of Mexico * Re-establishment of service to 1,187 private homes, businesses, industries and public offices. * Replacement of 130 telephone poles and 14,000 meters of telephone wire. * Installation of 450 meters of fiber optic cable and seven distribution boxes. * Provision of emergency support services, like a telephone mailbox, which allowed the transmission of taped messages to family members and friends within the city, in the rest of Mexico, and abroad. In sum, 4,242 messages were passed on in 16 days. * Installation of public telephones in the shelters and help centers. 3. Petr6leos Mexicanos (PEMEX) * Repair the 8-inch gas pipeline that provides fuel to the industrial zone of the city. 4. Ferrocarriles Nacionales * Rehabilitation in its railroad yards the new tracks that connected western Mexico with the capital. * Participation in designing and in implementing a water management plan for the area.  - 26 - Table 13 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Works Completed in the First Phase of GERP Primary and Secondary Sewage Lines Demolition of Houses 66,500 m3 Excavation 575,800 m3 Protection of Embanckments with 95,078 m3 Reinforce Concrete Sandbagging Placement 854,000 pieces Vehicular Bridges 13 Pedestrian Bridges 27 Rehabilitated Principal Intersections 6 Works Completed Previous to the Secondl Phase of GERP Supply and installation pipes 4,834 meters Installation of concrete pipes for 4,006 meters Secondary sewage network Potable water network 3,720 meters Sewage network 6,920 meters Potable water & sewage connections 830 pieces Pavement and sidewalks 43,200 m3 Public lighting 3,915 meters Source: ReconstrucclOn de Colectores Sector Reforma Uu-adalajara, Jalisco  - 27 - Table 14 IMPLEMENTATION COMPLETION REPORT MEXICO MUNICIPAL STRENGTHENING PROJECT (Loan 2666-ME) Executed Works in the Second Phase of GERP Principal and Secondary Sewage Lines Placement of concrete for the principal 39,600 m3 sewage line Installation of double line of concrete 1,794 meters pipes for the principal sewage line Installation of concrete pipes for secondary 1,566 meters sewage lines Potable water network 6,480 meters Sewage network 9,990 meters Potable water & sewage connections 1,610 pieces Paving and sidewalks 64,000 m2 Public lighting 9,700 meters Source: Reconstrucci6n de Colectores Sector Refornma Guadalajara, Jalisco  APPENDIX  - 29 - AYUDA MEMORIA PROYECTO DE FORTALECIMIENTO MUNICIPAL PRESTAMO 2666-ME 1.- La Misi6n del Banco Mundial integrada por el Sr. Edgard Martinez visit6 Mexico del 19 de Agosto al 2 de Septiembre de 1994. 2.- El objetivo de la Misi6n, fue la evaluaci6n de las actividades alcanzadas del proyecto de Fortalecimiento Municipal (2666-ME) para la preparaci6n del informe final del proyecto (Implementaci6n Completion Report, ICR) y realizar un intercambio con los funcionarios responsables dentro BANOBRAS, Comisi6n Nacional de Agua (CNA), y otros funcionarios participantes dentro la ejecuci6n del proyecto. Asimismo, revisar el estado del cumplimiento de las condiciones para la efectividad del Proyecto Sectorial de Agua Potable y Saneamiento (3751-ME). 3. La Misi6n se entrevist6 con funcionarios de BANOBRAS, CNA, Secretaria de Desarrollo Urbano (SEDEUR) del Gobierno del Estado de Jalisco, Centro Nacional de Desarrollo Municipal (CENADEM) de la Secretaria de Gobernaci6n, y la firma consultora Instalaciones, Ingenierias y Servicios de Jalisco S.A.(INSERJALSA). Proyecto 2666-MI 4.- La Misi6n tuvo la oportunidad de revisar la informaci6n obtenida para la preparaci6n del informe final mencionado anteriormenMe, as! como intercambiar experiencias con todos los funcionarios responsables del mismo. 5.- Se calcularon los costos preliminares del proyecto, incluyendo aquellos llevados a cabo con aporte local. Asimismo, se obtuvo un detalle de los costos por rubro de financiamiento y por cada uno de los sub-programas y las actividades realizadas dentro el periodo de implementacion del proyecto 1986-1994. 6.- Como es conocido, los objetivos del proyecto fueron modificados a partir del 5 de Agosto de 1992 como consecuencia del Programa de Emergencia para la Reconstrucci6n del Sector Reforma de la Ciudad de Guadalajara. La Misi6n pudo observar que estos objetivos fueron debidamente alcanzados y en un tiempo menor al previsto originalmente. A este respecto, la Misi6n not6 con gran satisfacci6n, que tanto el personal de BANOBRAS como de CNA, realizaron valiosos esfuerzos para lograr debidamente el cumplimiento de los objetivos.  - 30 - Aide Memoire Asimismo, es importante mencionar el gran grado de coordinaci6n llevado a cabo para realizar eficientemente las labores de reconstrucci6n en las obras en Guadalajara. 7.- Se verific6 que gran parte del 6xito en el logro de este objetivo, fue como consecuencia del grado profesional de los diferentes funcionarios pertenecientes a los organismos responsables dentro el proyecto, asi como tambien la rapida toma de decisiones en las inversiones y la eficiencia en la administraci6n de los recursos que se usaron durante el periodo de ejecuci6n de todas las inversiones del programa de reconstrucci6n. Asimismo, SEDEUR responsable de la coordinaci6n de las obras de reconstrucci6n, que demostr6 gran capacidad en sus labores de coordinacion y contrataci6n de los trabajos de construcci6n. 8.- BANOBRAS manifest6 a la Misi6n, la rapida y eficiente cooperaci6n del Banco Mundial para atender a la emergencia en Guadalajara, especialmente en la autorizacion y desembolsos de los recursos provenientes del pr6stamo 2666- ME, asi como tambien, el grado de descentralizaci6n que el Banco experiment6 en delegar a sus of icinas en Mexico las autorizaciones correspondientes. Todo lo anterior tambi6n fue factor contribuyente al exito en el logro del objetivo arriba mencionado. 9.- Con relaci6n al componente original del proyecto FORTAMUN, se realizaron siete sub-prestamos con un monto aproximado de US$4.7 millones, de los cuales el Banco financi6 US$2.5 millones (53.2%). Las labores de Asistencia Tecnica se concentraron a programas de capacitaci6n, que fueron llevadas a cabo con la colaboraci6n de CENADEM. Los costos de estas actividades sumaron aproximadamente US$37.4 miles y el Banco financi6 US$25.2 miles. El componente relacionado con el Programa de Reconstrucci6n de Guadalajara ascendi6 aproximadamente a US$180.3 millones; del cual alrededor del 10.0% (US$18.1 millones) fue financiado por el Banco, 11.9% (US$21.4 millones) por el BID, y el resto 78.1 % (US$ 140.8 millones) con recursos locales. BANOBRAS entreg6 el cuadro con la relacion de contratos de agua potable y alcantarillado que fueron financiados parcialmente con recursos de este prestamo. BANOBRAS enviara en breve al Banco los datos de personal de BANOBRAS (ver rubro 13). 10.- Al 22 de Agosto de 1994, el total desembolsado del prestamo suma US$38.2 millones. Para el 31 de Diciembre de 1994, BANOBRAS ha estimado desembolsos adicionales de aproximadamente US$1.4 millones, asimismo, la cancelaci6n de fondos restantes del prestamo por US$0.3 millones. El plazo de desembolso del prestamo es el 31 de Diciembre de 1994. BANOBRAS no ha estimado solicitar al Banco un periodo de  - 31 - Aide Memoire pr6rroga adicional para los desembolsos del prestamo en referencia. En forma anexa se presentan el estado de desembolsos del prestamo por categorlas de gastos. 11.- La Misi6n, en companiia del Sr. Geoffrey Kirkman, consultor de las oficinas del Banco en Mexico, visit6 Guadalajara los dias 25 y 26 de Agosto de 1994. En este periodo, la Misi6n tuvo la oportunidad de conocer y observar ampliamente las obras realizadas en la ciudad de Guadalajara e intercambiar opiniones con los funcionarios de SEDEUR, INSERJALSA, CNA y BANOBRAS que participaron directamente en la ejecuci6n del proyecto. Se visitaron el lugar de las obras y tambi6n mediante diapositivas y fotos se pudo observar el nivel de los dafnos causados por las explosiones en las redes de alcantarillado. Durante esta misma visita, la Misi6n analiz6 detalladamente los costos de las inversiones, tanto las provenientes con recursos locales, como aquellas provenientes con recursos del Banco y BID. Nuevamente, se pudo verificar el grado de colaboracion y ayuda manifestado por todas las diferentes instituciones que participaron en el proyecto de reconstruccion de las obras. 12.- La Misi6n tuvo la oportunidad de proveer un temario basico a BANOBRAS para la preparaci6n de su informe final que incluye aquellos aspectos necesarios en el informe. Asimismo, la Misi6n pudo asesorar a BANOBRAS en la forma de preparaci6n y de disefio del mismo. La Misi6n manifesto que dicho informe no debera ser mayor a diez paginas, y que debera tambien incluir un resumen del mismo (ver anexo del ayuda memoria). 13.- La Misi6n solicit6 los datos relacionados con el total del personal de BANOBRAS durante los ultimos cinco afios, sin embargo estos datos no han sido proporcionados. Vale la pena mencionar que dichos datos tambien fueron solicitados durante la evaluaci6n del proyecto 3271-ME y no fue proporcionada. 14.- La Misi6n tuvo la oportunidad de visitar CENADEM e intercambiar opiniones con los funcionarios de ese centro, que tambien facilitaron informaci6n sobre los diferentes programas del centro. La informaci6n relacionada con la actividades del FORTAMUN no pudo analizarse debido a que los funcionarios que fueron responsables de esas actividades ya no pertenecen al CENADEM. Sin embargo, los funcionarios del centro prometieron enviar alguna informaci6n al Banco.  - 32 - Aide Memoire Proyecto 3751-ME 15.- Con relaci6n a las dos condiciones de efectividad del prestamo 3751-ME, BANOBRAS informo a la Misi6n que la SHCP y BANOBRAS estan analizando la forma de derivaci6n de recursos con el fin de que BANOBRAS adecue el contrato de apertura de credito entre el propio Gobierno Federal y BANOBRAS y esperan llegar a un acuerdo previo al convenio contractual requerido para la efectividad del prestamo. 16.- Con relaci6n al la segunda condicionalidad del prestamo, BANOBRAS inform6 a la Misi6n, que actualmente se esta en proceso del establecimiento del Sistema de Informaci6n Gerencial (MIS) y que ya se ha seleccionado el personal para la Unidad Ejecutiva de Coordinaci6n (ECU). Toda la documentaci6n final y requerida serl presentada al Banco durante la visita oficial que funcionarios de BANOBRAS realizaran a la sede del Banco del 5 al 9 de Septiembre de 1994. Igualmente la relacionada con el rubro anterior. 17.- La Misi6n agradece todas las atenciones, cortesia, y colaboraci6n recibidas en todo momento, de parte de funcionarios de las entidades anteriormente mencionadas. zilJICO IIDMD . BANOBRAS 40" _ aCC-  -33- JBANCO NACIONAL OS O-RAS Y SERVICIOS PUELICOS, S.N.C. a @~~~~~~~~~~~~~NOTITUC1ON ON E*f4C 0- OSSAWWiLLO TECOYOTITLA No 100 COL. FLORIDA C P 01030 MEXICO. D F BANOBRAS DIVISION DE DESEMBOLSOS BID-BIRF PRESTAMO BIRF : 2666-ME FORTAMUN-BANOBRAS CATEGORIAS: 1, 2, 3, 4 Y_5 DESEMBOLSOS AL 22-AGOSTO-1994 (U.S. DLS.) I