Colombia - Sixth Highway Construction Project

LO8,t 6V0-CO FILE COPY ItRESTRICTED Repor No. PTR-44a This report was prepar*4 for use within the Bank and its Afliated organizations. They do not accept responsibility for its occuracy or compless. The report may not be published nor may It be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCIION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF THE SIXTH HIGHWAY CONSTRUCTION PROJECT COLOMBIA April 28, 1970 Transportation Projects Department  CURRENCY EQUIVALENTSs February 1970 Currency Unit - Peso (pa.) U.S. $1.00 = Ps. 18.00 U.S. $1 million - Ps. 18 million Ps. 1 million - US$55,555 FISCAL YEAR January 1 - December 31 UNITS OF WEIGHTS AND HEASURES: Metric Metric: British/U.S. Equivalents 1 meter (m) - 3.28 feet (ft) 1 kilometer (km) - 0.62 mile (mi) 1 square kilometer (km2). 0.386 square mile (sq. mi) 1 metric ton (m ton) 1.1 US short ton - 0.98 long ton ABBREVIATIONS USED IN THE REPORT: ADT - Average Daily Traffic CNR - Colombian National Railroads DANE - National Department of Statistics INTRA - National Transport Institute MOP - Ministry of Public Works TAMS - Tippetts-Abbett-NkCarthy-Stratton (Consulting Engineers, U.S.)  COLOMBIA APPRAISAL OF SIXTH HIGHWAY PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ............. ..... . ,. ............ i-i 1. INTRODUCTION .. . ......... 2. BACKGROUND INFORMATION.. *........... 2 A. General ............ . . . .. . 2 B. The Transportation Sector .3 C. Transport Coordination. 5 3. THE HIGHWAY SECTOR ........................ 8 A. Highway Network . .8 B. Highway Administration . ........ 8 C. Highway Planning and Financing. 9 D. Highway Engineering . .10 E. Highway Construction. 10 F. Highway Maintenance .... .. .... ... 11 G. Characteristics and Growth of Road Traffic 11 4. THE PROJECT. .... 12 A. General Description.. ... 12 B. Bridge Construction . 12 C. Road Reconstruction and Improvement . 13 D. Consulting Services for Supervision. 13 E. Cost Estimates and Financing . .14 F. Execution ..... ............... 17 5. ECONOMIC EVALUATION ..18 A. General ...18 B. The Project Roads and Bridge. 19 6. RECOMMENDATIONS . . .21 This report was prepared by Messrs. Migliorini (engineer) and Shields (eco- nomist) on the basis of an appraisal mission during November/December, 1969.  TABLE OF CONTENTS (Continued) ANNEX A Bank Lending in the Colombian Transport Sector CHART 1. Organisation of Ministry of Public Works MAP 1. Location of Project Roads and Bridge (IBRD 2792R) TABLES 1. National Highways by District 2. Departmental Roads 3. Consultants Employed in the Project 4. Air Traffic 1964-1968 5. Imports and Exports Through Major Colombian Ports 1958-68 6. Sources of Revenue for 1969-72 Highway Program 7. Past and Projected National Highway Expenditures 8. Ministry of Public Works - Highway Design Standards 9. Vehicle Registration 1958-1967 10. Motor Fuel Consumption, 1958-1968 11. Project Design Standards 12. Paving Program 13. Weighted Vehicle Operating Costs on Good Paved Road Over Level Terrain 14. Operating Cost Coefficients for Different Highway Conditions  COLOMBIA APPRAISAL OF THE SIXTH HIGHWAY PROJECT SUMMARY AND CONCLUSIONS i. The Bank has been closely associated with highway development in Colombia since 1951, and the proposed loan will continue the upgrading of the national highway system. The project will include a major highway bridge, the paving of 1,618 Km of highway, the construction of 9.5 Km of highway and consulting services for construction supervision. The comple- tion of this paving program, which will add over 30% to the existing paved network (Tables 1 and 2) will provide, for the first time, paved links between all the major inland cities of the country and their.respective ports. The program will upgrade most of the heavier trafficked, presently unpaved, sections of the national network. ii. The total cost of the project, including contingencies, is es- timated at US$62 million equivalent. The Bank loan of US$32.0 million equivalent will finance the estimated foreign exchange cost of construc- tion and 50% of the cost of consultants' services. The remaining funds will be provided by the Government. The proposed participation in con- sultants' costs entails local currency financing of about US$0.8 million equivalent. iii. The project will be the sixth highway project financed by the Bank in Colombia since 1951. Bank/IDA financing has totalled $103.55 million equivalent. The Bank has also assisted the railways in Colombia, having provided loans totalling $94.6 million equivalent over the same period. The most recent highway loan was made in 1968 and is still under execution; progress is in general satisfactory, although construction is rather slower than expected. The Government has, during negotiations, given further assurances regarding reorganizing the Ministry of Works, which was initiated under the 1968 loan. iv. Consultants (mainly local, supplemented by US firms) have been responsible for the detailed engineering of the project. The same consult- ants will assist the Government in prequalifying contractors, analysing bids and supervising construction. The cost estimates are considered accurate and adequate contingencies have been included. v. The project is technically and economically sound. The economic rates of return for the different works range from 10% to 25%. vi. Construction contracts have been, or will be, awarded on the basis of international competitive bidding. Execution of the project will be the responsibility of the Ministry of Public Works.  - ii - vii. The possibility of imposing tolls on Barranquilla bridge traffic has been raised by the Government. The Government has agreed that, upon completion of the bridge, a study based on variations in rates will be undertaken to test the effect of different levels of tolls on bridge traffic. The Government will subsequently agree with the Bank on the criteria to be employed in determining the structure and level of tolls to be charged. These criteria will be consistent with achieving the economic benefits from the construction of the bridge which were forecast in the feasibility report. viii. The project provides a suitable basis for a Bank loan of US$32.0 million equivalent. An appropriate term for the loan would be 25 years, including a four year period of grace.  COLOMBIA APPRAISAL OF THE SIXTH HIGHWAY PROJECT 1. INTRODUCTION 1.01 The Government of Colombia has requested a loan to help finance a project (see Map) costing about US$62 million equivalent including (a) the construction of a major highway bridge, (b) the paving of 1,618 km of national highways, (c) the construction of 9.5 km of multi-lane highway and (d) consulting services for the supervision of the above works. 1.02 The Bank has been closely involved with the improvement of Colom- bia's transportation facilities since 1951, when it made a loan for the emergency rehabilitation of an important part of the national highway sys- tem. It has since made four other loans and IDA has made one credit for highways, and, in all, US$103.55 million has been provided for this purpose as follows: Loan/Credit Date Signed Amount Loan 43-CO 1951 $16.5 million fully disbursed Loan 84-CO 1953 $14.35 million fully disbursed Loan 144-CO 1956 $16.5 million fully disbursed Loan 295-CO 1961 $19.5 million fully disbursed Credit 5-CO 1961 $19.5 million fully disbursed Loan 550-CO 1968 $17.2 million; $6.0 million disbursed as of 3/31/70 TOTAL US$103.55 million 1.03 The history of Bank lending in the transport sector is described in Annex A. In brief, the Bank has tried to help create a viable national highway system and a healthy highway administration; the former aim has to a large extent been achieved, and present investment is mainly for improving the network to meet increasing traffic demands. As regards the administra- tion of highways, the Ministry is in the process of reorganizing itself following consultants' recommendations; this reorganization is being assisted under the most recent highway loan (550-CO in 1968) but progress has been uneven. During negotiations, the Government confirmed that it would continue to implement the Ministry reorganization. Progress otherwise under Loan 550-CO has been satisfactory although construction was hampered somewhat by bad rains in 1969 and is a little behind schedule.  -2- 1.04 This report was prepared by Messrs. Migliorini (Engineer) and Shields (Economist) on the basis of feasibility and final engineering studies prepared by Colombian consultants INGETEC (in association with TAMS, U.S.), INTEGRAL (in association with Gannett, Fleming, Corddry and Carpenter, U.S.), and several other Colombian consulting firms (see Table 3), and on the basis of an appraisal mission which visited Colombia in November/December 1969. 2. BACKGROUND A. General 2.01 The Republic of Colombia occupies an area of more than one mil- lion km2, roughly equivalent to that of all six members of the European Economic CormAunity. It is bordered by Venezuela and Brazil to the east, Peru and Ecuador to the south and Panama to the northwest. It has coasts on both the Caribbean Sea and the Pacific Ocean. With 21 million people, it has the third largest population in South America and the growth rate of 3.3% p.a. will shortly make it secoud to Brazil. Urban population is now about 50% of total population and is growing much more rapidly than the national average. 2.02 Because of its topography, with altitudes ranging from sea level to almost 6,000 a, climate and vegetation vary widely. The greater part of both urban and rural populations is concentrated in the elevated Bogota- Cali-Medellin triangle which is about one-fifth of the country's area. The only other large concentrations of population occur around the Atlantic sea- ports of Cartagena and Barranquilla, where considerable industrial activity is located. 2.03 Agriculture accounts for nearly 30% of Colombia's GDP (compared with 37% in 1958). Manufacturing industry accounts for about 17% of total GDP. Commerce, with 14% is the next mDst important sector. Mining, ser- vices and other activities make up the remainder. The principal mineral resource so far discovered is oil, which at present supplies 10% of the country's total exports as well as domestic requirements. There are also extensive deposits of coal, which, in the area of Paz del Rio, where iron ore is also found, support a steel mill. 2.04 Colombia's GDP increased by almost 5% p.a. between 1958 and 1968, while the population grew at more than 3% during the same period. Per cap- ita income is presently estimated at about US$280. A shortage of foreign exchange persisted in the decade to 1969, due to the low level of coffee prices in that period. Rising coffee prices during 1969 and their probable continuation in the near term presage an improvement in the foreign exchange situation. The country's reliance on coffee exports has been steadily de- clining over the last decade, but this commodity still accounts for 64% of  - 3 - the total value of exports compared with 74% in 1958. There have been sub- stantial increases in other exports, notably in oil, cotton, sugar, cattle, and tobacco. The Government's present objective is to achieve a sustained growth rate of about 6% in GDP. This was almost achieved in 1968, and it has been estimated that a rate of at least 6.5% was attained in 1969. B. Transportation Sector 2.05 The three mountain ranges of Colombia present formidable barriers to movement between the main areas of population, which until recently de- veloped as separate, almost isolated communities. The advantage of having coastlines on both the Atlantic and the Pacific is offset by the difficulty of movement from the coasts into the interior. 2.06 The distribution of freight traffic between modes of transport in 1966, the latest year for which data are available, was as follows: Year Rail Truck River Coastal Shipping Air Pipelines Total 1958 10% 29% 12% 7% 0.8% 41.2% 100% 1966 10% 32% 10% 7.5% 0.6% 39.7% 100% Railways 2.07 The Colombian National Railroads (CNR) operate a network of lines totalling some 3,400 route km. The system has access to the Pacific at Buena- ventura and to the Atlantic at Santa Marta. Traffic from the other Atlan- tic ports of Cartagena and Barranquilla is transferred to the railway from road and water routes. The Atlantic line, financed by the Bank (Loan 199-CO) and opened in 1961, is the most important. Traffic on the main trunks aver- ages about 500,000 ton km per route km p.a. and in 1968 total traffic achieved a record 1,125 million ton-km. However, completion of some major highway projects, in particular the new Buenaventura-Cali highway in 1970, is ex- pected to result in substantial diversion of traffic from some routes. Pas- senger travel has been declining at 6% p.a. for several years, and the CNR is currently rationalizing its passenger services. About 260 km of apparent- ly uneconomic line are being studied for possible closure. A ten year rail- way rehabilitation program 1963-72, with partial Bank financing (Loan 551-CO) is in progress. The operating ratio for 1969 was 99 and, if pressure to increase social benefits to railway pensioners can be staved off, financial prospects for the next few years are, generally, favorable. Highways 2.08 Colombia has some 45,000 km of roads of which about 5,000 km are paved, principally with asphalt. The total number of road vehicles -- 260,000 in 1968 -- has been increasing by about 6% p.a. in recent years,  -4- and trucks by about 4% p.a. This is a fairly slow rate of growth compared with that in other countries at a similar stage of development, though there has been a slight trend towards larger vehicles, so that total trucking capacity has consequently been expanding at a somewhat faster rate than the number of trucks. On the major trunk highways, truck traffic predominates. 2.09 About two-thirds of public investment in the transport sector is being devoted to highway construction and reconstruction. To a large ex- tent, the highway network has complemented the railway system rather than competed with it. As shown above, the railway's share of total traffic was the same in 1966 as in 1958. The provision of modern highways has resulted, nevertheless, in considerable diversion of traffic from rail to road in particular cases. In some cases this was due to the rundown condition of the railway; however, on the Paz del Rio-Bogota route steel traffic formerly lost is returning to rail now that a reasonable service can be offered. On the other routes, particularly Bogota-Espinal-Ibague, Cali-Medellin, and Cali-Buenaventura, improved road transport is likely to offer sufficient advantages for many products to attract more traffic from the railway. Dev- elopment of communications in southern and eastern Colombia will be in the form of highways, and the Government has prepared a feeder road program to complement the primary and secondary highway programs now underway. Air Services 2.10 Colombia's very difficult terrain encouraged the early develop- ment of air services for internal as well as international transportation. There are about 650 landing facilities in the country. In addition to the four international airports at Bogota, Barranquilla, Medellin and Cali, there are some 25 other airports each handling at least 1,000 passengers a month. Internal passenger traffic increased by 4.6% p.s. between 1964 and 1968, but internal air freight movement, as shown in Table 4, is negligible and static. In 1968, only 103,000 tons of traffic, generating 72 million ton-km, were handled. There is evidence of recent over-expansion of invest- ment in airport facilities, although selective investment (such as, at Medellin, where the present site is operationally difficult) can still probably be justified. In 1967, Avianca cancelled its Bogota-Popayan jet flight and the new airport at Popsyan is almost unused, because a good road now connects that city with Cali. Other recent improvements in sur- face transport facilities have led to a decline in air traffic on certain routes. Ports 2.11 About 86Z of dry cargo foreign trade is handled by the ports of Buenaventura on the Pacific and the three Caribbean ports of Santa Marta, Barranquilla and Cartagena. The tonnages involved for the period 1958- 1968 are shown in Table 5. Total exports have been growing at an average of 5.4% p.a. while imports have in recent years been substantially less than in the mid 1950's, reflecting both foreign exchange difficulties and  - 5 - import substitution effects. When present additions at Buenaventura and Santa Marta are in service, the Government considers that it will have adequate port capacity for the next ten years. There is evidence in the ports, particularly Buenaventura, of inefficient practices which lead to very slow truck turnaround time. During loan negotiations, it was agreed that the Government would undertake a study, to be completed by mid 1971, to determine methods of improving cargo handling operations in its major ports and especially reducing the turnaround time for trucks serving the port of Buenaventura. The Government will consult with the Bank on the recommendations resulting from the study and their implementation. River Transport 2.12 There are several navigable rivers in Colombia, but 96% of the inland shipping is on the Magdalena and most of the rest on the Cauca. River shipping is dependable in all seasons on the lower regions of the Magdalena, but upriver from Gamarra (478 km from the mouth) navigability is seasonal. The volume of traffic varies from year to year according to the condition of the river, and in recent years there has been competition from the Atlantic line of the railroad, over the whole haul but especially in the northern reaches of the river. Pipelines also provide competition for petroleum products, which constitute the main traffic on the river. Nevertheless, a record 2.8 million tons of river traffic was recorded in 1968. Passenger traffic has suffered much more from the improvement of road and rail services in the Magdalena Valley. In 1956, 363,000 passengers were carried on the river. In 1966, the last year of record, only 7,000 travelled by this mode. Pipelines 2.13 Petroleum products, Colombia's second largest export earner af- ter coffee, are mainly transported by pipeline. From the oilfields located near Barrancabermeja, crude oil pipelines supply five refineries, including one at Cartagena, whence- refined products are shipped via the Panama Canal to Buenaventura for distribution to western Colombia. The new Caldas line from Dorada to the Manizales area may affect this distribution pattern. Another line supplies crude oil to Santa Marta for export. Refined prod- ucts are also moved by pipeline from refineries to Bogota and Medellin, and from Buenaventura to the Cauca Valley. The Trans-Andean pipeline from the Orito field in Putumayo to the Pacific port of Tumaco was put into operation early in 1969. It was expected, within a year, to carry 100,000 (and ultimately 150,000) barrels per day, reversing a drop in Colombian exports of crude which fell from 31.1 m barrels in 1967 to 18.5 m in 1968. C. Transport Coordination 2.14 Responsibility for the administration of the transport system is divided among a number of agencies and decentralised organizations. The Ministry of Public Works is responsible for the national highway system and finances the construction and maintenance of national roads through the Na- tional Highway Fund. The Ministry is also responsible for the National  -6- Feeder Road Fund, although local Government bodies also contribute to this. The National Transport Institute (INTRA), created in 1968, is responsible for regulatory policy and its execution. Port construction and operation are the responsibility of the National Port Authority (COLPUERTOS). Transport on the Magdalena River is controlled by the National Shipowners Association (ADENAVI), which is responsible for maintenance and improvement of the river, most river ports and the Canal del Dique which runs between the port of Cartagena and the Magdalena. The National Shipping Company (NAVENAL) operates on the rivers in the eastern part of the country and on the Amazon. The Colombian National Railroads (CNR) are responsible for all railroads. 2.15 Decree No. 3160 of 1966 was an attempt to tie in the various en- tities responsible for transport with the Ministry of Public Works. How- ever, although the Minister is an ex-officio member of the boards of these agencies, there is no central coordination of the different modes, except through the Government's central planning department, Planeacion Nacional. Recently the responsibility for airport construction and operation was removed from the nominal control of the MOP and the Departamento Admininis- trativo de Aeronautica Civil (D.A.A.C.) was reconstituted as a separate entity. 2.16 In spite of the looseness of the coordinating machinery, major mistakes in investment planning have been avoided. The Government is aware that problems such as labour productivity and utilization of existing equip- ment are more serious than lack of capacity, especially in ports. In the current 1969-1972 investment plan, the need is acknowledged for studies prior to investing in extensions or improvements, particularly where there is close modal competition. INTRA and the recently established Highw-y Planning Office in the MOP should also contribute to improved coordination. Work is continuing on the development of a model to compare the system effects of alternative transport investment programs. This is a cooperative effort between the Planning Office, MOP, the University of Los Andes and the Bank, and it is hoped to have the model operative in Colombia in 1971. 2.17 In 1966, when the National Road Fund was established and new ad valorem gasoline and diesel taxes were introduced, road users were paying, in the form of these taxes, about 50% of the Government's national road expenditures. However, from 1970, due to the combined effects of inflation, failure to adjust the exchange rate applicable to payments to petroleum companies, and a greatly increased highway program, the contribution of these taxes to the highway account will be only 30% to 35% of total antici- pated expenditures on highway construction and maintenance. 2.18 The current pump price of gasoline, at US 15