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Document of The World Bank

Report No:ICR000075

IMPLEMENTATION COMPLETION AND RESULTS REPORT ( EXIM-04020 IBRD-42040 )

ON A

LOAN IN THE AMOUNT OF

US$ 76 MILLION

TO

ORIENTAL REPUBLIC OF URUGUAY

FOR

FOREST PRODUCTS TRANSPORT PROJECT

FEBRUARY 26, 2007

Sustainable Development Department Argentina, Chile, Paraguay and Uruguay Country Management Unit Latin America and the Caribbean Region

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CURRENCY EQUIVALENTS ( Exchange Rate Effective 09/15/2006 )

Currency Unit = UYU UYU 1.00 = US$ 0.04187 US$ 1.00 = UYU 23.885

Fiscal Year

January 1 - December 31

ABBREVIATIONS AND ACRONYMS AFE State Railway Administration ANP National Port Administration CAS Country Assistance Strategy DNV National Directorate for Roads ERR Economic Rate of Return FPTP Forest Product Transport Project GDP Gross Domestic Product GoU Government of Uruguay HDM Highway Design Model ICB International Competitive Bidding ICR Implementation Completion Report IRI International Roughness Index ISR Implementation Status Report M&E Monitoring & Evaluation MTOP Ministry of Transport and Public Works NCB National Competitive Bidding NPV Net Present Value OPP Office for Planning and Budget PAD Project Appraisal Document PDO Project Development Objectives STP Second Transport Project TIMRA Transport Infrastructure Maintenance and Rural Access Project TOR Terms of Reference

Vice President: Pamela Cox Country Director: Axel van Trotsenburg

Sector Manager: Jose Luis Irigoyen Project Team Leader: Jorge M. Rebelo

ICR Team Leader Jorge M. Rebelo ICR Main Author Vickram Cuttaree

Uruguay UY FOREST PROD.TSP

CONTENTS

1. Project Context, Development Objectives and Design............................................... 12. Key Factors Affecting Implementation and Outcomes .............................................. 53. Assessment of Outcomes .......................................................................................... 154. Assessment of Risk to Development Outcome......................................................... 235. Assessment of Bank and Borrower Performance ..................................................... 246. Lessons Learned........................................................................................................ 287. Comments on Issues Raised by Borrower/Implementing Agencies/Partners........... 29Annex 1. Project Costs and Financing.......................................................................... 31Annex 2. Outputs by Component.................................................................................. 32Annex 3. Economic and Financial Analysis ................................................................. 42Annex 4. Bank Lending and Implementation Support/Supervision Processes............. 55Annex 5. Beneficiary Survey Results ........................................................................... 57Annex 6. Stakeholder Workshop Report and Results................................................... 58Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 59Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 77Annex 9. List of Supporting Documents ...................................................................... 78

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A. Basic Information Country: Uruguay Project Name:

UY FOREST PROD.TSP

Project ID: P039203 L/C/TF Number(s): EXIM-04020,IBRD-42040

ICR Date: 03/29/2007 ICR Type: Core ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF URUGUAY

Original Total Commitment:

USD 76.0M Disbursed Amount: USD 70.5M

Environmental Category: B Implementing Agencies: MINISTERIO DE TRANSPORTE Y OBRAS PUBLICAS Administración de Ferrocarriles del Estado (AFE) Administracion Nacional de Puertos (ANP) Cofinanciers and Other External Partners: Japan Bank for International Cooperation (JBIC) B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 07/29/1996 Effectiveness: 12/29/1997 12/29/1997 Appraisal: 04/21/1997 Restructuring(s): Approval: 06/25/1997 Mid-term Review: 08/19/2002 Closing: 12/31/2001 04/30/2006 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

Moderately Unsatisfactory

Overall Bank Performance: Satisfactory Overall Borrower

Performance: Moderately Satisfactory

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C.3 Quality at Entry and Implementation Performance Indicators Implementation

Performance Indicators QAG Assessments (if any) Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Central government administration 8 1 Ports, waterways and shipping 10 1 Railways 37 3 Roads and highways 45 95

Theme Code (Primary/Secondary) Export development and competitiveness Primary Primary Regulation and competition policy Secondary Secondary E. Bank Staff

Positions At ICR At Approval Vice President: Pamela Cox Shahid Javed Burki Country Director: Axel van Trotsenburg Gobind T. Nankani Sector Manager: Jose Luis Irigoyen Asif Faiz Project Team Leader: Jorge M. Rebelo Jorge M. Rebelo ICR Team Leader: Jorge M. Rebelo ICR Primary Author: Vickram Cuttaree F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The original PDO was to "facilitate the cost-efficient transport of forestry products from forest to port-of-exit through the rehabilitation of transport infrastructure"; A subsidiary objective was to increase productivity in the road and port sectors and improve efficiency while reducing subsidies to the national rail carrier (AFE) through private sector participation in the operations of forest products transport.

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The key indicators are detailed in section 7.3 on Monitoring & Evaluation Design, Implementation and Utilization Revised Project Development Objectives (as approved by original approving authority) There was no revised PDO. (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Share of Forest Products Transported by rail as a % of total exports by the Port of Montevideo

Value quantitative or Qualitative)

18 30 11 11

Date achieved 06/01/1997 12/31/2002 12/31/2003 12/31/2004 Comments (incl. % achievement)

Lower than originally expected value but same as revised value. Since the reform in 2002, share has increased from 8% to 11% but the opening of M'Bopicua affected the results.

Indicator 2 : Forest Product Transported by AFE in 1000's tons/year for export Value quantitative or Qualitative)

100 1498 75 105


Values were formally revised to take into consideration the delayed railways reform and the impact of the economic crisis on exports of forest products. Final project value is 40% over target

Indicator 3 : Forest Products Traffic by the Port of Fray Bentos in 1000's tons/year Value quantitative or Qualitative)

226 2469 429 380.3


Value achieved in 2005 was lower due to the impact of M'Bopicua private port. Cumulative value of Fray Bentos and port of M'Bopicua is 575,057.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Percentage of Road Program Completed Value (quantitative 0 100 99%

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or Qualitative) Date achieved 06/01/1997 12/31/2005 08/31/2006 Comments (incl. % achievement)

Indicator 2 : Railway Institutional Reform Completed

Value (quantitative or Qualitative)

NO REFORM

SEPARATION OF INFRASTRUCTURE AND OPERATIONS COMPLETED

AFE VERTICALLY INTEGRATED

Date achieved 06/01/2005 12/31/2005 03/31/2006 Comments (incl. % achievement)

Following the decision of the new administration to revert the previous reform (separation of infrastructure and operations), AFE is now an integrated railway.

G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP

Actual Disbursements (USD millions)

1 10/20/1997 Satisfactory Satisfactory 0.00 2 10/23/1997 Satisfactory Satisfactory 0.00 3 03/31/1998 Satisfactory Satisfactory 3.99 4 06/29/1998 Satisfactory Satisfactory 8.83 5 12/18/1998 Satisfactory Satisfactory 11.86 6 04/02/1999 Satisfactory Satisfactory 15.73 7 04/21/1999 Satisfactory Satisfactory 15.73 8 09/14/1999 Satisfactory Satisfactory 17.97 9 11/05/1999 Satisfactory Satisfactory 19.40

10 12/29/1999 Satisfactory Satisfactory 20.66 11 03/01/2000 Satisfactory Satisfactory 20.68 12 05/24/2000 Satisfactory Satisfactory 24.66 13 11/29/2000 Satisfactory Satisfactory 31.83 14 06/12/2001 Satisfactory Satisfactory 35.36 15 09/26/2001 Satisfactory Unsatisfactory 35.36 16 12/13/2001 Satisfactory Satisfactory 38.35 17 04/24/2002 Satisfactory Satisfactory 40.60 18 10/30/2002 Satisfactory Satisfactory 41.15 19 11/23/2002 Satisfactory Unsatisfactory 41.74 20 02/21/2003 Satisfactory Satisfactory 42.66 21 07/29/2003 Satisfactory Satisfactory 43.64 22 08/28/2003 Satisfactory Satisfactory 45.28 23 12/09/2003 Satisfactory Satisfactory 51.75 24 03/23/2004 Satisfactory Satisfactory 54.61

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25 11/30/2004 Satisfactory Satisfactory 69.74 26 04/07/2005 Satisfactory Satisfactory 75.02 27 11/17/2005 Satisfactory Satisfactory 81.99 28 06/13/2006 Satisfactory Satisfactory 96.76

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

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1. Project Context, Development Objectives and Design (this section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative) 1.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance) The economic situation of Uruguay at the time of appraisal was very favorable forsupporting transportation investments, which would facilitate export of forest products.Over 1990-98, Uruguay's economy grew by an annual average of 4.4%, favored by trade,financial and state reforms. Moderate fiscal deficits (between 1% and 1.5% of GDPduring 1995-98) and a gradualist monetary policy helped reduce the rate of inflation fromover 40% in 1994 to single digits in the 1990s. Even before joining MERCOSUR(Mercado Comun del Sur) in 1994, Uruguay had unilaterally liberalized much of its trade regime, and under MERCOSUR the country freed inter-regional trade and adopted the common external tariff. The long-term forestry development policy put in place by the Government of Uruguay(GoU) in the late 1980s favored private sector investment in the sector. The legalframework for the forestry development in Uruguay was enacted in 1987 and wasfollowed by several regulations. The policy was designed to take advantage of the landsthat were suitable for this type of production through tax exemptions/reductions, costrefunds, credits for plantations, duty exemptions for the import of machinery, and fiscaladvantages for industrialization. As a result, there was a sustained long-term growth of planted surfaces, as well as an increase in the extraction, transportation, industrialization,and export of forestry raw material. Consequently, the quality of forest product transport corridors (roads and rail) and port handling was essential to enhance the export of forestproducts from plantation to port and their final destination. A World Bank review of the transport sector in 1996 indicated that the road network had been deteriorating fast mainly due to insufficient allocation of funds for maintenance.The railway network, which in principle could be capable of serving part of that potentialdemand on selected forest product corridors, did not have the necessary capacity due to the inadequacy of its rolling stock, obsolete and deteriorated track infrastructure, weakoperations management, and poor commercial orientation. The project was consistent with the Country Assistance Strategy (CAS) presented to theBoard in 1997, as it involved a key sector for enhancing and diversifying thecompetitiveness of the economy and where ongoing Bank involvement supported policychanges designed to increase private sector participation and decrease publicexpenditures. The project was designed to meet the CAS objectives by: (i) supporting theagricultural diversification objective by financing cost-efficient options for transporting the forest products; (ii) rehabilitating the basic road, rail and port infrastructure required to move the products; (iii) promoting the financial viability of public transport enterprisesand their reform by introducing improvements in the Administracion de Ferrocarriles delEstado (AFE); and (iv) reducing Government subsidies through better tariff policies and

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improved financial management. At the time of project preparation, the main transport sector issues identified in theTransport Sector Note on Uruguay (August 1996) included: • potential freight demand and capacity constraints due to a surge in forest products ; • insufficient road infrastructure investment and maintenance; • The Direccion Nacional de Vialidad (DNV) to contract out more routinemaintenance rather than using force account and embark on a staff rationalizationprogram; • railway restructuring of the railway along commercial lines, strengtheningmarketing and sales functions through private sector involvement, capitalizing on the boom in forestry products and the linkage to Mercosur, with needed identification ofroutes with comparative advantage over trucking; • port infrastructure investment and maintenance issues, including consolidating thegains of the past, enlisting the private sector to build and operate port facilities, maintainthe policy of eliminating restrictive labor policies, and to seek private sector participationin dredging activities; • institutional issues include better interinstitutional relations among transportation sector entities the Ministerio de Transporte y Obras Publicas (MTOP), the Oficina dePlaneamiento y Presupuesto (OPP) with clearer definition of responsibilities andaccountabilities,e.g., currently there is no agency in charge of overseeing the activities of ports and railways; • cost recovery and management issues include setting tariffs to recover costs,studying road user charges, and improving the financial management of the systems; • the need to strengthen MTOP transportation planning, and improving the data base as well as the economic and financial evaluation of new investments; and • optmizing Mercosur integration relative to the railways and road transport. In thecontext of the proposed project, the Government, under Ln. 3021-UR, undertook a transport user charge evaluation study as well as a study to evaluate the feasibility of privatizing AFE. These were key pillars toward the Government's intent, expressed inlegislation in 1993, to exploit the economic potential of forestry products in the country. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The original PDO was to "facilitate the cost-efficient transport of forestry products from forest to port-of-exit through the rehabilitation of transport infrastructure"; A subsidiary objective was to increase productivity in the road and port sectors and improve efficiency while reducing subsidies to the national rail carrier (AFE) through private sector participation in the operations of forest products transport. The key indicators are detailed in section 2.3 on Monitoring & Evaluation Design, Implementation and Utilization. 1.3 Revised PDO and Key Indicators (as approved by original approving authority), and

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reasons/justification There was no revised PDO. 1.4 Main Beneficiaries (original and revised briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project) The beneficiaries include forest product producers and related users of road and rail infrastructure, as well as the Ministry of Transport and Public Works (MTOP), the National Directorate for Roads (DNV) and the State Railway Administration (AFE). The road maintenance component would benefit the "departamentos" (intendencias) concerned, and especially their populations.

There were no revised beneficiaries. 1.5 Original Components (as approved) (a) Infrastructure and Equipment component (at a cost of US$ 144 million or about 95 per cent of the original project cost) to: (i) rehabilitate the road network infrastructure serving the main plantation areas; (ii) rehabilitate AFE's track infrastructure and equipment to be used by the forest products traffic; (iii) build the pier extension required at the port of Fray Bentos to handle the forecast forest products traffic; (iv) build/rehabilitate the transfer stations between the several modes at the plantation, railhead and ports; and (v) continue for one year the routine maintenance program initiated in the First Transport Project (Ln. 3021-UR), for a maximum of 10,000 km of selected gravel roads in participating departments (Intendencias) and annual periodic maintenance programs on about 2,000 kms of these gravel roads. This component was designed to improve the road, rail and port infrastructure and equipment which serve the forest products traffic. It was divided in the Loan Agreement into the following programs: (a1) the Road Subcomponent , (about 52 percent of the base project cost) consisted of: 391 kms of rehabilitated roads in the national network, 600 kms of rehabilitated roads in the departmental networks, 203 kms of forest roads in the departmental network; (a2) the Rail Subcomponent, (about 34 percent of the base project cost), included 300 kms of rehabilitated rail track infrastructure (in the Montevideo-Rivera and Florida-Blanquillo lines) and some rehabilitation/acquisition of railway maintenance equipment; and (a3) the Ports Subcomponent, (about 9 percent of the base project cost), consisted of the extension of the Fray Bentos quay and port handling equipment in the Port of Montevideo. (b) Institutional and Policy Development component (US$8 million or about 5 percent of

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the original project cost) to help: (a) reorganizing AFE and increase private sector participation in its operations and investments, especially in the movement of forest products; (b) introducing road-user charges which reflect the actual costs incurred by each mode; (c) undertaking a comprehensive study of the Uruguayan trucking industry; (d) preparing the economic, engineering and environmental analysis of civil works under the project and works that might be required for future expansions of the transport network; and (e) supervising works under the project. 1.6 Revised Components The project's components were revised several times, to take into consideration changes in the transport demand of forest products, the decision to delay the railway rehabilitation in favor of more road rehabilitation and Go U's request to change the allocation and include a sub-component. These revisions did not modify the Project's Development Objectives and did not require Board approval.

The number and definition of components remained the same, except for the inclusion of a new sub-component focusing on CREMAS (Road Maintenance Contracts). These performance-based maintenance contracts were first tested under the Second Transport Project, and the Borrower requested to expand this cost effective solution to a significant portion of the network after the fiscal space crisis hit the country. As a result, about 240 km of primary roads maintenance of uncompleted CREMA contracts were added from the Second Transport Project.

At the same time, the scope and funding allocation of the railway component and consultancy services were reduced. The reduction of the allocation of the railway component is a result of GoU purchase of rails from Russia using a debt owed by Uruguay and the decision of the Ministry of Transport to focus its limited resources on key road corridors, again after the strong budgetary constraints that followed the fiscal crisis. The allocation to the consultant services category was reduced because most of the studies included in the loan were completed with grants and GoU's own resources.

At the end of the FPTP implementation 94.6% of the loan funds, excluding the amount canceled, were allocated to road works, about 2.9% to rail works and goods, 1.6% to port works and the remaining 0.9% to consulting services. The latest allocation (loan) compared to the original one (PAD) is as follows:

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Component Original

Allocation (US$ million)

Latest Allocation

(US$ million) National Forest Roads 25.2 44.64 Departmental Forest Roads 2.77 0.23 Rehabilitation CREMA Contracts 0.00 4.52 Departmental Maintenance 6.00 17.61 AFE Subprojects 19.50 1.78 ANP Subproject 5.27 0.50 Goods under AFE 4.04 1.64 Consultant Services 3.55 0.08 Unallocated 9.65 0.00 Cancelled 0.00 5.00 Total 76.00 76.00

1.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) The project was approved by the Bank's Board of Directors on June 25, 1997 and became effective on December 29, 1997 - about six months after approval. It closed on April 30, 2006 after five extensions, for a total implementation period of 8 years and 10 months.

The extensions were mainly to accommodate the fiscal space constraints and the Bank's cautious approach of only providing a one-year extension at a time. The reallocations reflect the inclusion of JBIC financing to decrease the counterpart fund portion of GoU and also the emphasis on the road component agreed after the fiscal space crisis. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) The success of the Government long-term forestry policy created an urgent need for investment in transport infrastructure in ports and forest product corridors. As explained in section 1.1, the policy to support forestry development was successful but resulted in the need for cost-effective transportation from the plantation to the port. In addition, a major study of Uruguay's forestry production and transport infrastructure conducted by independent consultants (CSI) as part of the preparation for the Forest Products Transport Loan confirmed the need for rail, road and port infrastructure improvements to eliminate potential bottlenecks. The study estimated a growing demand for forest products that was to reach 7.9 million cubic meters in 2003, and 11.8 cubic meters in 2016.Finally, a Transport Sector Note on Uruguay was issued in August 1996 ("A reform Agenda for the Uruguayan Transport Sector", LA1 Economic Notes No. 13). This report identified short and medium term infrastructure capacity bottlenecks resulting from the expected

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growth in the transportation of forest products and proposed an action plan to eliminate them. Investment in ports and forest product corridors (roads and rail) was needed at the time of appraisal to increase the competitiveness of forest products and to ensure efficiency in transport infrastructure investment. The abovementioned Transport Sector Note identified several issues facing the transport sector, including (i) the need to restructure the railway along commercial lines, (ii) port infrastructure investment and maintenance issues, and (iii) cost-recovery and management issues including the need for setting tariffs to recover costs, and for studying road-user charges. In addition, DNV and the Office for Planning and Budget (OPP) estimated that if 30% of the wood was transported to rail heads by truck then to the ports, a total investment of US$ 190 million would be needed (US$ 150 million for the road network and US$ 40 million for the rail network), as opposed to US$ 600 million if all wood was to be transported to the port by road. The Bank's evaluation indicated that there were 2 main corridors for transport of forest products : The Fray Bentos port corridor and the Montevideo-Rivera corridor. In the Fray Bentos Corridor, the short distances from the plantations to the port gave trucking a competitive advantage over rail. In the Montevideo-Rivera corridor, a good rail operation had a competitive advantage over trucking. The emphasis on the rail concession was an attempt to improve operational level of service to a level substantially better than that offered by AFE. To satisfy the traffic in these two corridors, the "truck only scenario" (S1) included: i) investments in the roads leading to the Fray Bentos Port plus investments in routes 6 and 7 leading to Montevideo, but no immediate investments in the Rivera-Montevideo corridor. Over the 25 year life of the project there would be, however, heavy periodic rehabilitation investments in the national roads of the Rivera- Montevideo corridor, to compensate for the damage inflicted by the heavy trucks which carry the wood. In addition, there would be investments in the port of Fray Bentos and in the handling terminal of the port of Montevideo. The "rail plus truck scenario" (S2) included all the investments in S1 and, in addition, rail investments in the Montevideo-Rivera and Florida - Blanquillo. These rail investments are made to attract to rail 40-50% of the traffic in the Montevideo - Rivera road corridor, thereby saving considerably in the heavy periodic maintenance and reinforcing of bridges of the roads of that corridor. The main savings of S2 versus S1 come from the savings in avoided investments in road rehabilitation in the Rivera - Montevideo corridor, the operation cost savings and the savings in traffic accidents, congestion and urban maintenance of roads. These externalities accounted only for 3-4% of the benefits. The incremental rate of return and NPV@ 10% of the "rail plus truck option (S2) " compared to the "truck only (S1)" option are respectively 39% and US$104.6 million. When compared with the "do-nothing" situation the NPVs @ 10% of S2 and S1 were respectively US$632 and US$527.4 million.

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The economic evaluation of the two scenarios, under various assumptions (including externalities) resulted in a higher NPV for S2, which then justified the design originally presented in the PAD. As rail transportation is more cost-efficient for long distances, and the plantations were in many different locations, most of the forest product corridors consisted in roads, and two rail corridors identified during appraisal as efficient rail corridors. At the same time, an increase in private participation particularly in the railway and port sectors was judged necessary and supported by GoU, despite union resistance and limited precedents in the transport sector. This also reflected the shipper's concerns with AFE and port handling which in their opinion lacked commercial orientation. Since the port of Montevideo was the preferred choice for the export of forest products because it had no draft limitations, the Montevideo-Rivera and Florida-Blanquillo lines were identified as key land transport corridors, which would be best served by an efficient railway. The Transport Sector Note identified that the GoU could not provide adequate funds to public enterprises due to budgetary restriction and that private financing of infrastructure and equipment was a priority in every sub-sector. In addition, the high level of subsidies paid to AFE (US$ 18 million/year or US$ 8,352 per employee per year) strengthened the case for an increase of private sector participation in this operating agency. Although, at that time, private participation in transport infrastructure was limited to a road concession, a few management contracts for the maintenance of roads, and some success in a management contract for container handling in the port of Montevideo. The GoU supported the idea of increasing private participation in AFE by introducing a line item in the National Budget Law of January 1996, giving authorization to AFE, with previous approval from the Executive, to grant concessions for the execution of works and delivery of railway services, as a way of attracting private investment. Moreover, a letter of commitment for the implementation of the rail concession for the transport of forest products at AFE, signed by the Ministers of Transport, OPP and by AFE Board President was received by the Bank in January 1997. Although a national "plebiscite" annulled the privatization law approved by the previous government, the concession of operations was not challenged and was considered a viable avenue as current laws did not prevent public enterprises' infrastructure and equipment being operated under concessions, management contracts or any combination thereof. The participatory approach involving plantation owners contributed to including the concession for transporting forest products on AFE's track system in the project design. This was a second best alternative to a full concession of AFE which was politically unfeasible. The plantation owners had been stressing the need for much higher efficiency in the transport sector, which in their opinion could be achieved by increasing private sector participation in the rail operation. The terms of reference of the logistics study undertaken by CSI, which led to the proposed investment plan, took into account the results of interview with the stakeholders. Once the first draft of the report was ready, the Minister of Transport, on the "day of the Tree" in a public ceremony, described the conclusions and the proposed investment plan. Once the final report was completed, it was officially sent to the producers association who endorsed it.

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Finally, investment in ports other than Montevideo was considered necessary to further reduce transportation costs of forest products. The development of alternative ports to Montevideo was necessary, as the expected increase in traffic of forest products would put pressure on the already limited space of the port of Montevideo. One solution was to develop a new forest products terminal in the port of Montevideo and to extend the capacity of the port of Fray Bentos so that it could serve better its hinterland. The investment in Fray Bentos and in selected road corridors would have reduced the distance and cost of transportation between the plantation and port of exit for the forest products. As a conclusion, the decision to invest in multimodal transport infrastructure and increase efficiency through private participation was the result of a thorough project preparation and the boom in forest products plantation at the time of appraisal. The evaluation of the state of infrastructure at the time of appraisal and foreseen transport infrastructure bottlenecks based on current and projected trends in exports of forest products drove the need to investment in more than one mode of transport and prompted the project to include a road, rail and port components. In addition, the participatory approach contributed to the concession of AFE for the transportation of Forest Products. Although there was a risk of resistance to the concession of AFE, mitigation measures and the AFE's Board acceptance of the changes and GoU commitment to reform the railways were strong and appeared decisive. 2.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable) The project's implementation was impacted by a series of events and decisions, the most important being the strong fiscal space restrictions in Uruguay and particularly in the Ministry of Transport after the Argentine macroeconomic crisis, lower than expected world demand and international price for forest products, the hesitance of Government to move ahead with the partial concession of the railways (AFE); and later the competition from new private ports, which was positive for the country. This resulted in delays in implementation and several reformulations of the project until its closure in April 2006.

Economic crisis and limited fiscal space: The 2002 economic crisis in Uruguay had an extremely negative impact on the implementation of the FPTP. One of the main factors impeding implementation was the reduction in investment in the road sector that ensued due to the 2002 crisis. From the onset of the crisis, the fiscal consolidation efforts of the government resulted in reduced budget allocations, impacting on all existing loans, including the FPTP. The Ministry of Transport budget in which the FPTP was included was highly affected and the Minister had to make hard choices. This in turn negatively impacted disbursement. The economic situation in Uruguay began to deteriorate in the late 1990s, entering a prolonged recession over 1999-2001 that ended in economic collapse in 2002. The crisis

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can be partly attributed to deteriorating external conditions, specifically the sharp contraction in capital flows to the region, the strong real currency appreciation following the Brazil devaluation in 1999 and finally that of Argentina in 2002. The prolonged recession over 1999-2001 and the economic collapse in 2002 resulted in a contraction of GDP contracting by nearly 20% over 1999-2002. Fiscal deficits rose to just over 4% of GDP and, following the floating of the peso in mid 2002, the public debt-to-GDP ratio doubled to 104.4% in 2003. The GoG negotiated IMF emergency financing in reponse to the 2002 crisis—the largest ever IMF arrangement as a share of a country's GDP—tied to an economic stabilization and structural reform program. Other Government measures included a significant tightening of its fiscal policies through deep cuts in public investment expenditures and a strict freeze on public sector wages and indirectly on pensions. The economic crisis resulted in a reduced fiscal space impacting capital investment in transportation but increased at the same time the strategic importance of road corridors. In the road sector in particular, these drastic budget restrictions required DNV to manage its assets with half or less than the usual resources. Faced with a reduced budget, the MTOP reacted by giving strong priority to road maintenance at the expense of new investments in all transport sectors, a policy decision adopted to counterbalance the negative effects of the economic crisis. The priority was to maintain the condition and value of their road assets rather than expanding. This kept the road infrastructure deterioration relatively well under control, notwithstanding the country's extremely difficult economic situation. However, a direct implication was that MTOP could not initiate any of the proposed new investments in the road and rail components of the Forest Products project. At the same time, the need to reinforce the road corridors linked to forest products was even more important, as they were essential to economic recovery. This contributed to further delays in disbursement and the decision to allocate more resources to the road component of the project.

Lower than expected demand for forest products, resulting in a change in the type of demand for road/rail transportation: The world demand and price for forest products did not grow as projected and in 2004 total export of forest products from Fray Bentos and Montevideo was only 14% of the level projected. The price went down so much that in 2001-2002, it was better for producers not to harvest the trees. Unfavorable circumstances in the international market kept prices below expectations and prevented production and export growing as planned. Due to the nature of forest products, producers could keep the stock in their plantations and decided to do so. These changes in world demand and the strong increase in ocean shipping rates encouraged several foreign companies to set-up wood processing plants in Uruguay. The development of private ports and wood processing plants (such as M'Bopicuá) closer to the plantations contributed to the diversification of exports of forest products from Uruguay but resulted in a higher demand for road forest corridors, more cost efficient than railways for shorter distances. The impact of the changes in the type of demand for transportation of forest products contributed to the decision by the Bank team to agree on the request to reallocate funds from the railway component to the road component. Also it was clear that the Fray Bentos hinterland was the one where more plantations were active, making

10

the road corridors to Fray Bentos a priority over the longer rail corridors from Montevideo to Rivera. In his letter requesting the reallocation of funds from rail to road, the Minister of Transport indicated that there was a clear shift in demand location and that the hinterland of Fray Bentos was the most used by the plantation owners. Moreover, as shown in the next graph, exports of forest products have started to rebound and increased significantly since 2003 with more processing factories located in the country. Although this industrialization scenario had been considered during preparation, its probabilities were low before the Uruguayan currency devalued vis-a-vis the dollar.

Source: MTOP

Protracted reform process of AFE: Although prequalification and bid documents were ready almost after loan signing and there were three formal market expressions of interest in the concession of forest products in AFE, there was no call for proposals. This was due in part to AFE's reluctance in granting the right of operation to a company that would potentially be its competitor. Additional factors were the proximity of presidential elections and protests of the truckers who saw in the railway a government-financed competitor. One direct implication was that the Minister of Transport did not want to engage the project's resources for track rehabilitation without institutional reform of AFE. Another attempt was made in 2002 to reform AFE (detailed in Annex 4), resulting in the separation of railway's infrastructure from operations but the improvement in level-of-service did not come because no private operators expressed interest probably because of the condition of the track. Lack of counterpart funding: The shortage of counterpart funds led the Government to make hard funding choices that ultimately impacted the project's disbursement and allocation of funds. The GoU decided not to purchase rails with the project's resources, but to obtain them from a debt that the country had with Russia. This decision directly delayed the rail acquisition until 1998. In addition, the GoU decided to request a loan from JEXIM, afterwards renamed JBIC, which was granted early in 1998. This request resulted in the first reallocation of funds in March 1998, to adjust the percentage of disbursements in Category 5 (Goods) to the pari-passu of that loan. Out of the US$30 million of the JBIC loan, US$28.3 million or 19.7% of the final project costs was applied

11

by the government to the project payments of counterpart funds, a decision that reduced the direct contribution of the government to the project and alleviated the financial difficulties created by the crisis. Private investment in ports, partly substituting for the need for public investment started to appear closer to the plantations making road more competitive than rail in some corridors because of the shorter distances: The rising production of agricultural, forestry and livestock products bound for export markets outside of Mercosur was expected to increase the demand for competitive transport services, particularly ports. This required the development of efficient specialized terminals, not only in Montevideo, but also in other regions close to plantation areas. The private sector responded by taking the initiative to develop specialized terminals for forestry and other bulk cargo. Pioneer investments were made or are being considered and involve some of the largest firms in the world. As detailed earlier, Eufores opened its chipping plant in Peñarol in 2003 and Botnia is following with a cellulose plant involving investment of over US$ 1 billion. The proposed plant would multiply the volume of production eight fold and generate an important increase in the demand for transport. The development of private forest product's ports led to a diversification in ports of exports of forest products from Uruguay. Although Montevideo remained the main port for the export of forest products with a share of 57% of all exports of forest products, other ports such as M'Bopicua and Nueva Palmira are now contributing to 25% of total exports of forest products. This successful increase in private investment in the port sector, together with the lack of fiscal space for the project, prompted the GoU to reconsider some port investment, such as the extension of the port of Fray Bentos. However, the new administration decided ultimately to undertake the investment, as the private port development appears to be more a consequence of growth in world demand for wood, the weaker peso and growing private sector interest in locating ports closer to the plantations rather than problems due to inefficiencies of the state operated port. In addition, all forestry producers indicated that their decision to invest was prompted by the existence of a good road network financed by the project. M'bopicua is a complete integrated industrial park and its port focuses exclusively on exporting chips products processed within its industrial zone, whereas Fray Bentos is specializing in the export of unprocessed wood.

Export in Forest Products

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1997

19981999

20002001

20022003

20042005

Tons

Puerto de M'bopicuá(ENCE)Puerto de Fray Bentos

12

Source: MTOP Success and extension of output-based maintenance contracts: the Second Transport Project (STP) was approved in September 1998 and was completed in September 2003. This road-only project addressed primarily maintenance and without structural reforms in other modes as the FPTP. This project supported the road maintenance program of MTOP and especially the use of output-based maintenance contracts (CREMA). Following the success of the STP and the need for the GoU to focus its limited resources on road maintenance, it was decided to reinforce further the roads corridors by adding other CREMA contracts to the STP. As some CREMA contracts could not be completed when the STP closed in 2003, and it was already decided to refocus the investment on road corridors, these maintenance contracts were incorporated in the FPTP as they supported the cost efficient rehabilitation and maintenance of key forest product transport corridors. Impact on project and actions taken by the Bank: The abovementioned events severely impacted the implementation of the project as originally designed, and justified a stronger focus on the road corridors. In fact the best scenario faced by the country was neither S1 or S2 but something in between in which most of the demand was coming from shorter distances to new ports by roadwith a longer-term need to improve the railway so that it could handle longer distance transport from Rivera .The Bank exercised flexibility in order to maximize the project's developmental impact in the new context. The team avoided canceling the rail component and maintained close supervision, in order to keep the pressure on the need to reform AFE. In addition, it recognized the even more strategic role of the road corridors by agreeing to reallocate funds from the rail component to the road component, with the promise that the GoU would maintain itslong-term objective of rehabilitating the railway and reform AFE. The actions taken by the Bank are detailed in section 5 (Assessment of Bank and Borrower Performance). 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The PDO was "to facilitate the cost-efficient transport of forestry products from forest to port-of-exit through the rehabilitation of transport infrastructure". The 3 indicators in the PAD referring to PDO are (i) share of Forest Products Transported by rail as a % of total exports by the Port of Montevideo, (ii) Forest Products Transported by AFE in 1000's tons/year (all operators over AFE lines) for export, and (iii) Forest Products Traffic by the Port of Fray Bentos in 1000's tons/year. These three indicators were appropriate for measuring the impact of specific components of the project, which would in turn result in the achievement of the PDO. The increased role of AFE in the transportation of forest products (measured by indicator (i) and (ii)) would directly result in a more road plus rail cost-efficient transport of forest products, a proper measure of the S2 scenario. The contribution of the road rehabilitation and port investment was reflected in the indicator (iii), as, the improvement of road conditions would have benefited exports of forest products from Fray Bentos.

13

Although the M&E system was well designed to measure the impact of individual components as originally defined in the PAD, the changes in allocation made it necessary to add additional indicators to take into consideration the increased importance of road corridors and the development of private ports. A set of outcome targets to measure the overall achievement of the cost-efficient transport of forest products by all modes was introduced after the reallocation of funds from rail to the road component it was decided not to cancel the railway component but rather reallocate its funds, while maintaining the policy dialogue to ensure that some reforms would be implemented, the indicators measuring AFE's contribution to the export of forest products remained in the M&E system. At the same time, the client was asked to provide the exports of forest products from the port of Montevideo (not just transported by rail), in order to take into account the increased focus on forest road corridors. In addition, the positive increase in private participation in the road and port sector was not incorporated in the original M&E system but was tracked on a regular basis. The original M&E system would have benefited from road-specific indicators (as in a road-only project) and the inclusion of the total export of forest products from public and private ports. Following the lower demand for forest products and GoU's decision to delay AFE's track rehabilitation and reforms, the Bank agreed to review the values of key performance indicators which were rail-related in order to reflect the reality of the situation in 2002. As a result, the second and third target indicators (described earlier in this section) were formally updated to a lower value. The "Forest Product Transported by AFE in 1000's tons/year for export" was reduced from 1498 to 55 and the "Forest Products Traffic by the Port of Fray Bentos in 1000's tons/year" reduced from 2469 to 340. Although not formally included in the M&E system, the"Share of Forest Products in the export from the Port of Montevideo " was reported on a regular basis, and allowed better monitoring of the impact of the road component on exports of forest products. In summary, it appears that the M&E system designed at preparation was appropriate to monitor individual component and implementation, based on the rail plus road (S2) scenario chosen at appraisal. The emphasis on the rail participation was justified by the need to ensure the success of this component at the time of appraisal, but it was rightly maintained even after re-allocation of funds, to keep pressure on the need to reform the railway. In retrospect, following the changes in demand for transportation of forest products and project fund allocation, it would have been justified to have included indicators to measure the overall output of transport by all modes. Such an additional indicator was added when the reallocation from rail to road took place and allowed a measure of the overall contribution of all modes to the exports of forest products through the port of Montevideo. This indicator wastracked by the supervision team and periodically reported by the Borrower during supervision. However, the inclusion of all ports (public and private and not just Montevideo ) would have taken into consideration the positive impact of the road component of the project on total exports of forest products from private ports.

14

2.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) The project was rated as Category B in the environmental assessment. Two main reports were undertaken to assess the environmental impact of the project. There was a regular monitoring of the environmental aspect of the project during supervision and the triggered safeguards (the Environmental Assessment, Natural Habitats, Forestry and Involuntary Resettlement) were all rated satisfactory during the life of the project. There was no fiduciary and safeguard issue reported during the implementation of the project. Statistics on the number of hectares of forested and grasslands since 1990 were also provided by the Forestry Department of the Ministry of Agriculture. 2.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable) The transport infrastructure sector road reform benefited from institutional continuity with subsequent operations. In the road sector, continuity was ensured by the Transport Infrastructure Maintenance and Rural Access Project (TIMRA), approved by the Board in April 2005. The TIMRA's main objective is to "upgrade the country's transport infrastructure to a condition that facilitates the transportation of freight and passengers at a cost-efficient level of service". The project has also several subsidiary development objectives, including assisting MTOP in creating the enabling environment to consolidate its ability to attract more steady and reliable funding for the maintenance and rehabilitation of transport infrastructure and enhance infrastructure management services. The continuity for the railway reform was ensured through policy dialogue. The Bank investment and support did not result in the reform initially designed and agreed in the FPTP and the railway's structure was subsequently reverted to the vertically integrated public model although the 2005 budget law creates incentives for private sector participation.. However, the ongoing dialogue during the supervision of FPTP contributed in convincing AFE and the MTOP of the need to reform further the railways, and to continue investing in infrastructure rehabilitation and equipment. The GoU is investigating alternative models to reform the railways and is keeping the Bank informed of the discussions but it is not clear at this stage when the reform will be completed and what will be the model chosen, given the stronger role played by the railway union in the management of the railway in the present administration. However, it was decided that the TIMRA will not finance any railway investments until the GoU actually undertakes a reform that will make the railway more commercially-oriented and attractive to shippers. In terms of follow-up by the Bank, although a decision was made not to include a railway component in TIMRA, it is recommended to maintain our involvement in helping GoU

15

improve further the efficiency of the railways. There has been improvement in efficiency since 2002 and the current administration seems more aware of the need to further improve efficiency and to move ahead with reforms. As said earlier, railway reforms are known to be difficult and take time to implement, and an ongoing policy dialogue is likely to result in a solution acceptable to all stakeholders. The discussion evolved from a partial concession at the time of appraisal to a potentially unique institutional structure being currently considered by GoU which includes the private sector . At the same time, it is clear that the Bank should be even more cautious and wait to see concrete and clear steps before engaging in supporting future railway investments. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) The objectives were of high overall relevance at the time of approval and they have remained very relevant until today. As explained in section 1.1, the economic situation in Uruguay at the time of appraisal was very favorable for transportation investments which would facilitate the export of forest products. In addition the world market demand for wood for cellulose was also high, confirming immediate/early demand for transportation of forest products. Moreover, the project was clearly in line with the CAS objectives, as it contributed to enhancing the competitiveness of the economy and to support policy changes designed to increase private sector participation and rationalize public expenditures. In fact, even if the railway rehabilitation investment did not take place as planned in the FPTP, the outcome of the project reflect some forward thinking that is now being lauded by the producers because the transport network is well positioned to accommodate the upsurge of forestry investments in the region. The Bank consulted extensively with the Government and ensured a participatory approach to define the project objectives, design and implementation arrangements. The development objectives remained relevant, even after the impact of the Argentine economic crisis, as Uruguay needed even more than ever cost-efficient transportation services to support its recovery. The 2002 CAS Progress report noted that the 2000 CAS lending scenario was no longer appropriate and called for a program targeting three objectives including "increasing competitiveness". The CAS progress report noted that "increasing infrastructure access and maintaining existing networks will be important to support economic growth and foster integration of marginalized urban groups and rural populations". Thus, the operation remained important in achieving the country's development objectives during the crisis and it is likely that without the quality of road infrastructure financed by the FPTP, the economy would have suffered much more. 3.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2) The project substantially achieved its main development objective namely "to facilitate the cost-efficient transport of forestry products from forest to port-of-exit through the

16

rehabilitation of transport infrastructure". It also achieved its subsidiary objective of “increasing productivity in the road and port sectors and improving efficiency while reducing subsidies to AFE through private sector participation in the operations of forest products transport”. This was done despite the change in demand for transportation of forest products, combined with the fiscal constraints facing the GoU. The changing conditions during implementation made the need for investment in the port and rail sector not as important as initially planned and resulted in an increased focus of the project on forest road corridors in order to achieve the PDO. The principal PDO was achieved mostly through the road component, mainly by reducing the vehicle operating cost by 5-20% on the rehabilitated forest road corridors, and reducing GoU’s overall investment in roads assets through more efficient maintenance. The subsidiary objective was satisfactorily achieved in the road sector - through the subcontracting of road rehabilitation and maintenance - and in the port sectors - through increased private participation -, but only marginally in the rail sector through the support to the reforms that took place in 2002. The design of the project was made at appraisal to maximize the development objectives and mitigate the main risks. The economic analysis performed during appraisal and discussion with forest products growers demonstrated that a multimodal integration for each forest corridor would have maximized the project development impact. The partial concession of AFE for the transport of forest products was decided as a second best solution, taking into consideration GoU support for the reforms but also the reluctance of unions to accept change. The events that took place during implementation increased the strategic importance of forest road corridors, as explained in section 2.2. This situation, combined with the Minister’s decision not to invest in the railway without institutional reform, called for more investment in forest roads corridors. The Bank responded to GoU’s request and decided to change the project’s design to concentrate more on the road sector for the transportation of forest products. However, the changes did not require the Bank to modify the PDO and the due diligence done by the Bank following the GoU’s request introduced additional measures to maximize the project’s development impact in the new context. The proposed allocation became closer to scenario S1 (described in Annex 3), involving mainly road rehabilitation and maintenance, which was assessed during appraisal as an economically viable scenario. As the loan funds ended-up being mainly allocated to road works, there was a risk that the project would benefit corridors not mainly used for the transport of forest products. The team requested that only road corridors used for the transportation of forest products (identified as those with traffic composed of more than 25% of forest product during harvest time) be included. In addition, although the concession of AFE was not anymore expected, the project maintained the PDO (incl. reference to AFE’s efficiency) to insist on the need to reform the railway, which allowed to maintain policy dialogue with AFE during implementation. As there was no general indicator included in the original PAD that would measure the

17

achievement of the development objective by all modes, the evaluation considers the "Export of Forest Products from all Uruguayan Ports". This indicator is directly influenced not only by the quality and cost efficiency of the ports but also of land-transport assets, as forests are not located near the ports. This indicator would also measure the contribution of private ports, the development of which was partly supported by the project. Exports from all Uruguayan ports have increased significantly, from 558,673 tons in 1997 to 2,123,139 tons in 2005 (or an increase of 280%) and the increase has been exponential since 2001. Montevideo remains the main port for export of forest products with a share of 57% of all exports of forest products, but other ports such as Nueva Palmira and M'Bopicua are increasing in importance and representing respectively 15% and 10% of total export of forest products in 2005.

Exports of Forest Products from Uruguayan Ports

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1997 1998 1999 2000 2001 2002 2003 2004 2005

tons

/yea

r M'Bopicua

Nueva Palmira

Fray Bentos

Montevideo

Source: MTOP

Impact of individual components on the PDO (incl. subsidiary) Road Component: The contribution of the road component to the development objectives was highly satisfactory. The project directly contributed to a decrease of 5-20% in vehicle operating costs on key forest corridors and an increase in efficiency of expenditure in roads’ rehabilitation and maintenance through the subcontracting of these operations and private participation schemes (Megaconcession, CREMA and micro-enterprises). The project also contributed to strengthening DNV’s capacity to replace operations previously under force account by more cost-effective contracts with the private sector. As shown below, around 42% of the network managed by DNV was maintained under contract in some form of partnership with the private sector in 2004, compared to 19.4% in 1998.

18

Maintenance by Private Sector

19.40%

30%

39% 40%

36% 35%

42%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

1998 1999 2000 2001 2002 2003 2004

%

Source: MTOP

Railway Component: The railway component did not achieve its initial objectives despite strong supervision but supported the improvement of AFE’s efficiency. As demonstrated by the indicators measuring the impact of the rail component, the project failed to increase AFE's share in the transport of forest products because both the planned track rehabilitation and private sector participation were delayed or postponed by GoU. The share of AFE in transportation of forest products to be exported decreased from a 27% peak in 1998 to a low 8% in 2002, before increasing to 11% in 2004. However, although the project did not directly result in the increase in efficiency, the ongoing dialogue with GoU on the need to reform AFE supported the separation of infrastructure and railways, and the reduction in AFE's workforce. Since 2002, the performance of AFE improved due to an increase in revenues from transportation of freight and improvement in operating ratio of 277% between 1987 and 2005 (operating expenses over operating revenues). This resulted in total subsidies being reduced by more than 60% from US$ 17 million in 1997 to US$ 6.6 million in 2005. This was a major achievement in a railwaywhere little or nothing happened in the last fifty years. AFE is also now more aware of the need to further improve its efficiency and to be commercially oriented, as demonstrated by the current discussions taking place on future institutional reforms to be implemented as early as 2007. Port Component: The project had an indirect positive impact on the development of ports, mainly by supporting the development of private ports, which contributed to improvement in efficiency over the last five years. Such development, according to private port owners, was possible thanks to the reliability of the road network, which benefited from the rehabilitation and maintenance of the road component and, in some cases provided access links. Exports of forest products from the port of Fray Bentos and M'bopicua increased by 478% between 1997 and 2005 but were below the level initially defined during appraisal due to the lower than expected growth in trees harvested. Exports from the two ports have still increased by 378%, or an average of 47% every year, since 1997. As explained earlier, the development of private ports benefited from favorable GoU’s policy and the improved road network, and contributed to increasing the efficiency of Uruguayan ports while reducing the need for GoU to invest public funds in this sector. The increase in maritime shipping rates encouraged private companies to process wood into chips before exporting them, and contributed to the development of

19

industrial sites such as M'Bopicua, with its own port. The inclusion of exports from the private port of M'bopicua, which also benefited from the improved road access financed by the project, provides a better illustration of the achievement of the PDO.

Export in Forest Products

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1997

1998

1999

2000

2001

2002

2003

2004

2005

Tons

Puerto de M'bopicuá(ENCE)Puerto de Fray Bentos

Source: MTOP

In addition, the successful increase in private participation in the port sector was partly responsible for lower than expected exports from public ports. As explained in Annex 4, the decision to sign the contract for the extension of the pier of Fray Bentos was put on hold until the change in Government, following concerns about the need for such work given the development of a private port close to Fray Bentos. The recent increase in demand and request from producers other than the owner of the neighboring private port, led the new administration sign and initiate the contract for the extension of the pier which is underway. Finally, the project enabled the continuous operations of the port of Fray Bentos following an accident caused by a freighter. The project financed the rehabilitation of the existing Fray Bentos pier, following the accident that led to an interruption of operations. This support, while the GoU sought damages from the shipping line insurance, allowed a quick rehabilitation of Fray Bentos to continue operating and supported the increase in export from Fray Bentos. Once it received the insurance payments the amount spent on the rehabilitation was returned to the loan. 3.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return) The evaluation of efficiency for this project will be compared to what was expected for scenario S1. At the end, the quasi totality of funds was allocated to the road component (95%), which explains why the ex-post economic evaluation would compare the project to scenario S1 of appraisal instead of Scenario S2. The details of the economic evaluation are presented in Annex 5. The ex-ante economic evaluation for the project evaluated two scenarios: (i) the truck only scenario (S1) included investments in routes 6 and 7 leading to Montevideo, in addition to investments in the port of Fray Bentos, and (ii) the rail plus truck scenario

20

(S2) included all the investment in S1 and, in addition, rail investment in the Montevideo-Rivera and Florida-Blanquillo lines. The two scenarios (S1 and S2) were compared to a do-nothing situation (S0). In reality the latest allocation looks closer to S1 than S2 and it must be noted that scenarios S1 and S2 were both considered economically feasible in the PAD but that S2 was selected as the scenario resulting in the highest economic NPV. As the financial evaluation at appraisal was mainly based on the railway component and there was no investment in railways, it is not possible to estimate the ex-post financial rate of return. It is, however, possible to estimate the fiscal savings due to the railway streamlining which was induced by the project as explained later in this section. The ex-post Economic Rate of Return (ERR) is reasonably high, although below the one calculated ex-ante for S1 which had an ERR of 63%. The ex-post economic evaluation of the project resulted in an ERR of 24%, based on an investment of $US 64.3 million. The difference in ERR comes from the fact that the demand was not as high (lower forest products growth) as initially anticipated and occurred later rather than earlier (see section 2.2 for the details of events impacting implementation). As most of the investment resulted in the rehabilitation and maintenance of roads, the financial analysis was not applicable anymore and thus not calculated ex-post. The ex-ante financial analysis resulted in a net benefit of US$ 941 million (with a discount rate of 10%) or an IRR of 55%. The reduction in subsidies to AFE was important mainly due to staff reduction. The fiscal impact of the project, following the concession of AFE, was estimated at US$ 23.5 million in additional taxes and US$ 35.3 in savings in subsidies following the successful implementation of the project. The project contributed indirectly in improving AFE by pressing the GoU to implement an alternative reform for AFE and reduce its operating costs. The improvement of AFE's efficiency allowed the GoU to reduce the yearly subsidies by 60% from US$ 17 million in 1997 to US$ 6.6 million in 2005. In conclusion, it can be said that the project efficiency from an economic return standpoint was not as high as anticipated but remained high, as the investment in road rehabilitation contributed to achieving an Economic Rate of Return of 24%. In addition, the 60% reduction in yearly subsidies to AFE is a satisfactory financial achievement and can be directly linked to the project's intense pursuit of AFE's streamlining and institutional improvement through provision of technical advisors to AFE and MTOP and visits to other railways in the region which are concessioned to the private sector. 3.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating: Satisfactory The project is evaluated based on its primary objective, which is to "facilitate the cost-efficient transport of forestry products from forest to port-of-exit through the

21

rehabilitation of transport infrastructure". The subsidiary objective, which was to "increase productivity in the road and port sectors and improve efficiency while reducing subsidies to the national rail carrier (AFE) through private sector participation in the operations of forest products transport", is still considered important but should have a lower weight in the final rating based on the fact that it is a subsidiary one. As explained in section 3.2, the project achieved its development objectives mainly through the contribution of the road component and to a lesser extent through the port and rail components. The project development objectives were relevant at appraisal and, even after the severe economic crisis, remained relevant. In terms of efficiency, the project had a lower than anticipated Economic Rate of Return (24% vs. 63% in the PAD) but the result remains very robust given the lower than expected forest product growth. The reduction in yearly subsidies to AFE by 60% is another positive achievement of reforms pushed by the project. The development of private ports did also benefit from an improved road network, in addition to Government initiatives through Bank dialogue to increase private participation in ports and roads. As a result, the achievement of PDO is considered satisfactory essentially through the contribution of the road component of the project for the main project's objective (facilitate the cost-efficient transport of forestry products from forest to port-of-exit through the rehabilitation of transport infrastructure). The subsidiary objective was satisfactorily achieved for the road and port sectors but only marginally satisfactory for AFE. It is therefore concluded that the Overall Outcome Rating is Satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development The project is expected to have a positive impact on poverty by contributing to the facilitation of exports of forest products and providing employment. However, the reduction in transportation cost was the central theme of the project, as illustrated by the PDO. Poverty impact, gender aspect and social development were more a consequence of the project's success and were therefore not included in the M&E system. As a result, the assessment of poverty impact, gender aspects and social development assessment is not applicable for this project. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) This project had a substantial impact on institutional strengthening, especially in the road and port sectors. The impact on AFE was more limited than expected but remained positive. In the road sector, the project through its support to the contracting out of maintenance and rehabilitation works, strengthened the planning capacity of the MTOP, as well as the

22

companies involved in the CREMA contracts and Megaconcession (Corporacion Nacional de Desarrollo and Corporacion Vial de Uruguay). Furthermore, the project helped Uruguay in the preparation of an Agenda for Transport Reform with a clear definition of the main issues and options in the sector. The study on road user charges and the extensive reviews on trucking led to important trucking legislation and also to the acquisition of scales (not financed by the project) to control axleloads. In addition, it is worth noting that MTOP improved its environmental assessment and monitoring capacity during the life of the project and the Environmental manuals for roads, ports and railway greatly contributed to this effort. Unlike several institutions in Latin America, the Environmental Unit of DNV is composed of a group of people whose responsibility is to watch over the environmental and social management in each of the stages of the project cycle. DNV is developing a series of initiatives directed at enhancing technical capacity of its officials, including training activities and the implementation of changes in the organizational structure aimed at improving further environmental and social management. The project increased AFE's knowledge of options for private participation and contributed to giving it a more commercial orientation. Visits to neighboring, privately operated railways were organized for the Ministry and AFE's staff. Several options for private participation were analyzed during preparation and the policy dialogue during supervision contributed to the implementation of the separation of railway's infrastructure from operations. Finally, the recent exercise of rehabilitation applied the same principle as performance-based contracts, used on a regular basis in the road sector. This attempt, together with recent talks about reforms, is showing a change in attitude towards applying road maintenance and rehabilitation concepts to the railway sector. It is too early to say how this will move ahead, but it is clear that the current project and ongoing Bank's involvement in the road sector, have contributed to strengthening the institutions. (c) Other Unintended Outcomes and Impacts (positive or negative, if any) N/A 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) In order to measure the success of the concession of transport of forest products to the private sector in AFE, a survey was expected to be conducted every two years to check the views of the various stakeholders. As the railway rehabilitation and reform did not take place, the survey was not conducted in a formal way but the Project Implementation Unit made informal phone interviews on a regular basis to the producers and Association of Forest Products to identify their concerns and to suggest improvements. In the case of the railway, the main complaint continues to be slow operations and delays in making wagons available for loading. AFE is taking steps to improve operations management

23

and increase its fleet through rehabilitation and modernization.

4. Assessment of Risk to Development Outcome Rating: Moderate Railways reforms not taking place: If future reform of the railways does not take place, resulting in a higher share of forest products being transported by road, there would be an increasing burden on roads and negative impact on the transportation costs of forest products, particularly in the Montevideo-Rivera corridor. AFE has improved its efficiency in the last 3 years and the current administration seems keen on moving forward with institutional reforms to further improve it. However, AFE's share of transported forest products for export is currently around 11%, which means that there is currently an imbalance in favor of transportation by trucks, even for long distance. In this situation, and with exports of forest products increasing significantly in recent years, the burden of heavily-loaded trucks on the roads will require an increasing investment in road rehabilitation, which might raise the overall cost of transportation of forest products and the number of road accidents. The risk is assessed to be moderate, mainly based on the fact that the current administration is willing to reform the railway and appears more aware of the need to better integrate road and rail transportation particularly in the Montevideo-Rivera corridor. Lower future demand for wood products: This risk is considered Low. The government has a long-term interest in developing the forestry industry. The forestry law was enacted in 1987 and provided several incentives to increase private investment in this sector. Pioneer investments have been made in the industrial processing of wood, from pulp and cellulose to sawn-timber products. As shown in section 2.2, exports of forest products have been above US$ 140 million in 2004. The only risk that could potentially impact the development of wood-processing industry could be additional political tension with Argentina over the ecological impact of the construction of a cellulose plant in the industrial area of M'Bopicua. It is difficult at this stage to determine the implication on Uruguay 's attractiveness for private investment in this sector, but so far all big world forest corporations are flocking to Uruguay. Deterioration of assets due to lower funding available for road maintenance: This risk is considered moderate. Uruguay has demonstrated during the economic crisis its capacity of managing well its roads assets by adopting a strict policy of maintenance but such a policy cannot be sustained indefinitely and the recent levels of expenditure are not sufficient to ensure the adequate conservation of road assets. The lack of fiscal space and/or counterpart funding is a Medium risk identified during the preparation of the Transport Infrastructure Maintenance and Rural Access Project in 2005. This is mainly caused by the tight fiscal situation currently facing Uruguay. This risk is mitigated partly by the new Bank and IDB projects, which will contribute to financing part of the network rehabilitation, but the fiscal situation might also limit the availability of counterpart funding, thus impacting project's implementation.

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However, it is also a limitation in securing future financing from the private sector. In fact, the uncertainty regarding future budget allocations will be a strong deterrent for the implementation of some contractual schemes such as the Megaconcession depending on credible funding arrangements. The risk that the government might not honor its payment commitments to the private sector on schedule will certainly be reflected in the prices and could limit the success of these instruments. 5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Satisfactory The design of the project benefited from a thorough due diligence to maximize impact on lowering transportation costs of forest products. An in-depth sector analysis was done to determine the demand for freight transportation and issues facing the railways. Thisincluded the preparation of a Transport Sector Note on Uruguay, as well as a major study on Uruguay 's forestry production and transport infrastructure. Two scenarios wereidentified and an economic analysis was performed to determine the option that wouldmaximize the economic value of the project. In addition, the impact of several alternatives such as forest product industrialization (incl. construction of cellulose andchip plants) and the reduction of wood production were tested to ensure that theeconomic impact of the project would be satisfactory even in the worst case scenario. Finally, beneficiary groups were clearly identified during preparation and a participatoryapproach was undertaken from the early stage to better design the project. Previous experience was taken into consideration, risks identified and properly mitigated at entry. The PAD clearly spells out the lessons learned from the previous transportoperations in Uruguay. They helped identify some key risks, including the need forstrong support and difficulty of privatization in the transport sector, and the need to ensure that tariff levels would allow full recovery of long-run variable costs. This resulted in the design of specific components (such as the study of road user charges and thereview of trucking legislation) or mitigation measures for the railway component. Regarding Government support for the reform, the team obtained a letter of commitmentfor the implementation of the rail concession at AFE, signed by the Minister of Transport,the Budget Planning Office (OPP) and AFE Board President in 1997. A review of the concession process was also planned within one year of effectiveness. The design of the M&E system was well chosen to monitor individual components butadditional indicators could have been included to measure the overall outcome. This became relevant after the fiscal crisis prompted a more road-oriented project. As explained in section 2.3, the indicators designed during preparation were of very goodquality to monitor achievement of rail and port components. Indicators were however missing in the original PAD to measure the substantial achievement of the overall PDO

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and the direct impact of the road component because they were too rail-oriented. However, additional data was collected by the Borrower and allows for the determination of the project's contribution to its Development Objectives. The design included strong and practical support to railways reforms and management ofroad assets. There was a real attempt to fully support the railway reforms by involving all stakeholders in the design of the project. This included Ministries, AFE, the forestproducers and wood processing industry, shippers and truckers. In addition, theinstitutional development and policy component provided the bid documents to be used in the concession process and key advisors. These advisors worked with the Minister ofTransport and the President of AFE to further rationalize and streamline operations andmaintenance to decrease the perceived risks of the concession. The study of road-user charges was included to provide a rational basis for tariff setting and cost recovery (incl.operations and maintenance expenses, as well as investment requirements) and the studyon trucking led to important legislation. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory The Bank's supervision performance is rated satisfactory. The Bank's oversight andsupervision was very extensive with 28 missions recorded during the 9 years of theproject, and a minimum of 2 missions each year. The Bank supervision team showedcontinuity with the following operation in 2005 prepared by the same TTL, with lessonsfrom the project incorporated in the design. The missions were adequately reported inAide-Memoires and ISR that gave an up-to-date overview of all components of the project and included sector, safeguard and fiduciary specialists. More specifically, thechallenges faced in the railways reforms, views of the TTL, and options discussed withthe client were well reported during the life of the project. Although the loan was amended several times, the project components remained in linewith the development objectives. The design of the project was changed several timesfollowing requests from Government but the team ensured that the added components inthe road sector would involve sections used for the transportation of forest products.Despite the postponement of the planned rail concession and its substitution for aseparation of operations and infrastructure model, the focus remained on improving thecost efficiency of the transportation of forest products, which could still take place with astronger allocation to the road component. This explains why the primary and subsidiaryobjectives remained satisfactory over the life of the project. The team put a lot of effort in the supervision of the project, showing flexibility followingthe macroeconomic crisis, and on-going focus on supporting the railways reformsthrough policy dialogue and technical assistance. Following the macroeconomic crisisand the GoU request for re-allocation of funds from rail to road, the Bank agreed to thechanges and made sure they were included in the legal documents. The Bank alsorequested a detailed action plan with a commitment to improve the implementation of the

26

project. Although the initial request was for a two-year extension, the Bank agreed to one year, with the possibility of a second year depending on the performance, particularly ofthe rail component. This was subsequently granted following GoU effort to improveproject implementation performance (as described below). The flexibility to adapt theproject to the macroeconomic crisis was crucial to maintain the backspine of the country,its road network, which with the reformulation of the project was kept in good quality indire economic times. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The overall Bank rating is satisfactory. The project was well designed with thorough preparation. In addition, the supervision was done in a professional way despite theoccurrence of several events and decisions that impacted the project. The teamdemonstrated flexibility but remained focused on the development objectives to enable the project to achieve its development outcome and maintained close supervision,including strong position regarding the need to undertake reforms and improveimplementation. Finally, the rating is justified due to the Bank's performance at entry and performance at supervision being both rated "Satisfactory". 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory The Government performance was rated moderately satisfactory, mainly due to thelimited support during implementation for the concession of the railways, despitestronger support during preparation, and lack of counterpart funds. The reduction of fiscal space, following the impact of the Argentine crisis, made GoUfocus on maintenance instead of new investment in road assets. This impacted the project but this decision made sense due to the exceptional economic conditions that occurredand the slower than expected growth of the world market for forest products. The Government showed a very strong initial commitment to the development objectives and reforms. During project preparation, the Government showed strong support to theproject and its development objectives through (i) the legislation encouraging thedevelopment of plantations, (i) preparation of the Office of Planning and Budget of an infrastructure investment plan to move forest products, requiring a well-conceived intermodal mix, and (iii) provision to the Bank of a letter of commitment for theimplementation of the rail concession at AFE. However, it did not provide sufficient strength to overcome the opposition within AFEfor the concession to take place. The mission noted since 1999 that AFE's feedback onthe concession bid documents was taking too long and that the Ministries of Transport and Economy did not seem willing or capable of forcing AFE to undertake a restructuringplan. However, it must be recognized that the Ministry of Transport did not allow AFE to

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proceed with bids on rail rehabilitation without an institutional reform and threatened to cut the subsidies to the railway entity. And his stance was consistent until it approved theseparation of operations and infrastructure. But at that time its administration was ending. Finally, the current administration seems very aware of the need to reform the railways to improve its efficiency and increase its share of transport of Forest Products. TheGovernment is currently preparing a new reform of AFE and planning a rehabilitation ofits main network, to further support exports, including forest products. The objective of the institutional reform is to increase commercial focus and attractiveness of the railwaysto private participation. However, it is too early to tell if and when the reform will takeplace. (b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory Implementing Agency Performance

Dirección Nacional de Vialidad (DNV)

Satisfactory. The overall road component was satisfactorilyimplemented by DNV during the life of the project. Some delays occurred mainly due to procurement procedures and the lack ofcounterpart funding.

Administración de Ferrocarriles del Estado (AFE)

Unsatisfactory. Although AFE managed to improve its efficiencyduring the life of the project, the concession failed mainly due to resistance of the entity to see the initial reform implemented. It wasclear that AFE wanted the infrastructure rehabilitation but opposedthe institutional reforms to increase private sector participation in its operations.

Administración Nacional de Puertos (ANP)

Satisfactory. The implementation of the reconstruction of the FrayBentos port, following an accident caused by a freighter, went well.There was a long delay in the extension of the port but it was mainlydue to the Government decision not to move ahead following the construction of a private port just above Fray Bentos.

(c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory The overall rating of Borrower Performance is Moderately Satisfactory. The rating of implementing agencies was moderately unsatisfactory due to the resistance of AFE to thereforms and weak Government's pressure on AFE, which limited the impact of theproject on the overall reduction in transportation costs for forest products. However, it was also taken into consideration that a stronger road component would still achieve thePDO. Although the Government rating was moderately satisfactory and theimplementation agencies' rating was moderately unsatisfactory, the achievement of the development outcomes was in the satisfactory range, which justifies the final rating basedon the ICR guidelines (2006).

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6. Lessons Learned (both project-specific and of wide general application) The impact of funding constraints and fiscal policies should not be underestimated. The lack of fiscal space and/or counterpart funding remains a major risk for fiscally constrained countries. The financial crisis forced MTOP to slow down the implementation of various initiatives that were being tested with promising results. The execution of several contracts in the road sector was delayed due to budget constraints. The focus on road maintenance during the crisis was appropriate but it was also noticed that such a policy cannot be sustained without periodic rehabilitation of road assets. Moreover, this policy could not avoid the slight but progressive deterioration of road conditions, and a program of rehabilitation is still needed to avoid a decline in road assets value. While it was not possible to predict the economic crisis that hit Uruguay, projects in fiscally constrained countries should be designed to take into consideration past expenditure in rehabilitation and maintenance, in addition to the level needed to maintain the state/value of road assets. This has been the case in the Transport Infrastructure Maintenance and Rural Access Project, approved in 2005. If the country signs an agreement with the IMF and there is a Pilot Investment Program , the road rehabilitation projects should be strong candidates to avoid restrictions in budget allocation and have priority in disbursement. Multiple operations contribute to additional flexibility and long-term sustainability of investment. The ongoing involvement of the Bank on the theme of transport efficiency and sustainability allowed some flexibility between the Second Transport Project (STP) and the Forest Product Transport Project (FPTP). CREMA contracts were successfully tested and expanded through the STP. STP was completed before FPTP but some contracts financed under that loan remained uncompleted at its closing. Given that the resources of STP were exhausted at the closing, and given the impact of the economic crisis, the existence of FPTP allowed the unfinished CREMA contracts to be transferred to FPTP and the Bank team ensured during supervision that the road rehabilitation and maintenance would focus on road corridors. Finally, the fact that the Bank is having several operations on the topic of road maintenance supports the continuity of investment, especially given the fiscal constraints faced by Government. A multimodal transport project can maximize the development impact but requires flexibility during supervision. The FPTP was designed to maximize development impact by including investment in ports and railways, in addition to road rehabilitation and maintenance. As explained earlier, the project's design was appropriate for Uruguay and the inclusion of the railway component was not too ambitious, given the strong initial Government support. However, a more simple road-only project would have also contributed to the development objectives and would have been easier to implement as there was no reform of the railways involved even if the economic evaluation showed

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that the rail plus road project had a higher ERR. As explained earlier, the changes during supervision gave higher priority to road corridors, and given the decision not to undertake the rail rehabilitation and concession, the team demonstrated flexibility by allocating more funds to the road component. At the same time, it ensured that an alternative reform would take place by engaging on the railway component with the Borrower and maintaining pressure during supervision. This flexibility and strong supervision allows changes to occur in the project's design in order to maximize the impact on DO, given the different context from appraisal. Finally, as shown in the analysis of the M&E system, a multimodal/logistics project should have broad outcome indicators that measure the global output, and not just modal output. In the case of the FPTP, the contribution of the road component not only leveraged the investment in the public port of Fray Bentos, but also benefited private ports. The monitoring of total exports of forest products from public and private port was a good indicator to measure the overall contribution of the project to its development objectives. Maintaining a strong policy dialogue during supervision can significantly support reforms. This project gave another example of the difficulty of reforming railways, even if all the possible support was assured during preparation. Railways reform meets with a lot of resistance from the operating entity and requires decisive Government action to overcome it. However, the Bank team showed that with limited funds it is possible to support the improvement in efficiency, as showed in sections 3.2, 5 and Annex 4 and 5. During supervision, the Bank team maintained the focus on the need to improve the railways. When the GoU requested the re-allocation of funds, the Bank agreed but with an initial one year extension instead of two due to the slow reform of the railways. The decision to separate infrastructure from operations was also supported by a Bank's review of the AFE study. Although the reform did not take place as initially planned, operating subsidies per ton-km were reduced from 8 US cents in 2001 to 1.8 US cents in 2005. The design of institutional arrangements and forms of private participation should be adapted to the country's specificities. The concession of operation of forest products in AFE did not occur despite the need to improve its efficiency and strong initial support. AFE managed to improve its efficiency despite not implementing the proposed concession and is currently investigating institutional arrangement that would allow private participation with inclusion of capital and technical know-how, while maintaining the company a public entity. Although privatized railways tend to be more efficiently run than public ones, the resistance to the concession of AFE suggests that alternative models of private participation might be easier to implement in countries like Uruguay even if the level of efficiency is lower than those obtained in private concessions. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The Borrower did not have any comment on the ICR (b) Cofinanciers JBIC did not have any comment on the ICR.

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(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) N/A

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Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate (USD millions)

Actual/Latest Estimate (USD millions)

Percentage of Appraisal

INFRASTRUCTURE AND EQUIPMENT 124.90 141.80 113.53

INSTITUTIONAL AND POLICY DEVELOPMENT 7.10 0.20 2.82

Total Baseline Cost 132.00 142.00 Physical Contingencies 10.20 Price Contingencies 9.80

Total Project Costs 152.00 Front-end fee PPF 0.00 0.00 0.00 Front-end fee IBRD 0.00 0.00 0.00

Total Financing Required 152.00 142.00

(b) Financing

Source of Funds Type of Financing

Appraisal Estimate (USD

millions)

Actual/Latest Estimate (USD

millions)

Percentage of Appraisal

JAPAN: JEXIMBANK (UNTIED FACILITY) 30.00 28.00 93.33

International Bank for Reconstruction and Development

76.00 71.00 93.42

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Annex 2. Outputs by Component The project's components and amounts were changed several times until closure. The component description is as follows: A. Infrastructure and Equipment

• National forest roads rehabilitation and bridge reconditioning • Departmental Forest Road Rehabilitation Program • Crema Road Maintenance Contracts • Departmental Road Maintenance • Road Sector Management/Institutional Building • Rehabilitate AFE's track infrastructure and equipment • Build the pier extension at the Port of Fray Bentos

B. Institutional and Policy Development

• Support the reorganizing of AFE and increase private participation in its operations and investments

• Introduce if necessary a road-user charges system • Undertake a comprehensive study of the Uruguayan trucking industry • Prepare the economic, engineering and environmental analysis of civil works • Supervise works under the project

I. National forest roads rehabilitation and bridge reconditioning (PAD US$ 50,432,000; actual US$ 89,278,962). This component is rated highly satisfactory. In spite of budget reductions, 415 km of the national road network, including parts of important forest products corridors, were rehabilitated. This is about 100 km more than those included in the PAD, allowing to keep the progressive deterioration of the road network in general and the national forest roads in particular well under control. This was possible thanks to the re-allocation reductions from other project components, mainly the railways component and the unallocated category of loan funds. In addition, several bridges included in the Megaconcession were rehabilitated. The quality of the bridge rehabilitation works was good as far as widening and structural strengthening is concerned. The Table in the following page shows the roads and bridges rehabilitated under the project, their final status and their final costs. Routes 24 and 25, which are part of the Fray Bentos corridor between the cities of Guichon and Young and the Port of Fray Bentos , were improved under the project. This corridor is very competitive for trucks compared to rail given the short distances from the main plantations to the port. Also routes 7 and 6 leading to Montevideo , included in the original project program, were rehabilitated. The rehabilitation of all those routes is a significant contribution to establish a healthy forestry sector. The rest of the works were included in the project following a decision by the MTOP in support of the Megaconcession. Construction of these works started in December 2002, and the program developed well since then until its end. Part of the rehabilitated roads and bridges financed by the FPTP and showed in the Table

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below belong to the Megaconcession. It should be noted, however, that among the roads and bridges financed under the Megaconcession program, Routes 2 and 11 are also part of the corridor Fray Bentos-Montevideo and Route 3 is part of the corridor Montevideo-Port of Paysandú, which are important roads for forestry development.

Road and Bridge Rehabilitation Works Routes Section Km. Works Final Cost Length Status (US$) 1. Forest Products Corridors Works 7 Ruta 12 - Fray Marcos 14.90 Completed 6,019,273 7 San Jacinto - Ruta 12 27.80 Completed 11,653,564 24 Ruta 2 - Ruta 20 (N. Berlín) 21.80 Completed 6,876,744 24 Ruta 20 - Ruta 25 27.00 Completed 6,511,755

25 Ruta 24 – Young 24.00 Being completed 7,025,000

25 Menafra - Ruta 90 19.30 Completed 3,893,243 24 Ruta 25 - Ruta 3 Subtotal Works 134.80 41,979,579 2.Megaconcesion Works Roads 21 234km - A° Las Vacas 18.30 Completed 2,060,318 2 Mercedes - Pte. Gral. San Martín 28.30 Completed 4,028,973 3 472k 000 - Río Daymán 13.89 Completed 3,754,800 5 Sauce - 462k 000 9.95 Completed 2,400,030 8 Ao. Sarandí - Río Cebollatí 23.00 Completed 2,454,964 9 San Carlos - Rocha 37.50 Completed 3,849,088 11 Santa Lucía Villa Rodriguez 11.07 Completed 3,315,771

5 Acc. Norte Paso de los Toros - 270K000 43.78 Completed 6,026,421

11 Ecilda Paullier - Juan Soler 25.00 Being completed 3,314,000

11 San Jose - Villa Rodríguez 14.00 Being completed 2,978,000

3 Ruta 26 - acceso arroyo Guaviyú 26.70 Being completed 5,115,000

8 Minas (planta urbana) - Aº Marmarajá 29.00

Being completed 3,640,000

8 Rio Cebollati - Arroyo Piraraja Postponed 8 Aº Pirarajá - 235km100 Postponed Total kms of roads 280.49 42,937,365 Bridges

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1 (P) Río Rosario puente Completed 1,122,105

11 (P) Cda. Echeverría puente Being completed 251,000

11 (P) Ao. El Laurel puente Completed 127,590 6 (P) A° Sauce de Malbajar puente Completed 335,598 5 (P) Arroyo Bañado de Rocha puente Postponed 11 (P) A° Descarnado puente Postponed 11 (P) A° La Pedrera puente Postponed Sub total Megaconcessions 44,773,658 TOTAL 86,753,237

II. Departmental Forest Road Rehabilitation Program (PAD US$ 5,542,000; actual US$ 439,541). This component is rated marginally satisfactory, because the length of forest roads rehabilitated is shorter that the one included in the PAD. Nevertheless, this reduction in departmental forest roads rehabilitation was more than compensated by the substantial increase in rehabilitation of national forest roads and maintenance of national and departmental roads. The Table below shows the forest roads actually rehabilitated and maintained under this subcomponent.

III. Crema Road Maintenance Contracts (PAD US$ 0; actual US$ 9,041,498). This component is rated satisfactory and was transferred to this project after the closing of the STP, which introduced this type of contract in Uruguay , but was unable to complete part of the program by lack of financing, once the loan resources of that project were exhausted. These contracts were being executed simultaneously to the implementation of the FPTP, when the railway component implementation was lagging behind schedule and with very small disbursements from the loan. Therefore, the MTOP requested to transfer the completion of the CREMA contracts, which could not be completed under the STP, to the FPTP. In the framework of the STP, 123 km of the primary road network were rehabilitated and 856 km maintained under CREMA contracts, which was more than 30% above the original project target. In addition, DNV's further expanded this program and the Borrower was so satisfied with the results that it asked the Bank to support a follow-on operation to assist in the expansion of the program, which actually was approved in 2005 as the Transport Infrastructure

Forest Road Section Km. Works Final Cost (Intendencia) Starts at Length Status (US$) Paso de la Cruz (I. Río Negro) Km 25.0 of Ruta 69 28.80 Completed 239,000 Batoví (I. Rivera) plus Km 19.5 of Ruta 27 8.15 Completed Cementerio (Rivera) plus Km 29.5 of Ruta 27 6.15 Completed Tranqueras (Rivera) Km 468 of Ruta 5 7.20 Completed 199,641 Total Works 50.30 439,541

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Maintenance and Rural Access Project (TIMRA) and is already effective. The STP demonstrated that the use of CREMA contracts allowed DNV to assure road maintenance and rehabilitation in an effective and cost-efficient manner, despite the negative economic environment. Nevertheless, as mentioned above, not the whole program could be completed under that project, particularly some contracts originally included in that project, such as the contracts for 240 km in Districts II and X. Therefore, the MTOP decided to transfer those uncompleted CREMA contracts, comprising 240 km of primary roads, to the FPTP and were successfully completed in the framework of this project. The average annual cost per km for CREMA contracts, including rehabilitation and maintenance, was below US$ 10,000, which compares favorably with average annual costs in other countries. IV. Departmental Road Maintenance (PAD US$ 12,000,000; actual US$ 35,219,680). This component is rated highly satisfactory. It consisted of a road maintenance program directly financed by DNV and carried out through contracts with micro-enterprises constituted by former DNV staff, or directly by DNV's staff through force account arrangements. It built upon a departmental road maintenance program successfully carried out in the period from 1989 to 1996. It was resumed in 1997 with the support of this FPTP, and for the years 1998 to 2000 it was agreed, between the MTOP and the Bank, to provide also support for it under the STP. This Bank's support will continue under the new TIMRA. Since it is an annual program and the loan closing date was extended three years, the total amount allocated to this component was well above the estimate in the PAD. The gap in cost as a consequence of these extensions was financed with funds reallocated mainly from the railway component and the unallocated category. The project target of having a DNV financed program of regravelling yearly about 2,000 km and maintain about 9-10,000 km of departmental roads with micro-enterprises and force account has been largely achieved. Under the FPTP and STP a systematic and effective use of road planning and maintenance management systems, combined with innovative management concepts and better data and information collection was introduced. This allowed DNV to improve its efficiency in force account maintenance. It also impacted on its productivity targets for the principal maintenance activities that could be enhanced considerably. Budget cuts during the economic crisis affected particularly the Intendencias that had delays in the execution of their activities, but the majority of them reached or came very close to their annual targets, despite the budget cuts. V. Rehabilitate AFE's track infrastructure and equipment This component is rated marginally satisfactory. In the railway sector, the project included the rehabilitation of the railway network serving the forestry production areas in the north and center of the country; mainly in the Departments of Durazno, Tacuarembó, and Rivera. These consist of AFE's Montevideo–Rivera and Florida–Blanquillo railways. The Montevideo–Rivera railway connects Montevideo to the country's largest forestry production areas (Tacuraembó and Rivera). The Florida–Blanquillo railway connects to the Montevideo-Rivera railway, crossing the Departments of Florida and Durazno. Given that it does not serve any major population center, these lines primarily serve the forest products transport demand.

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In addition to the investments program, the project included the purchase of equipment for the maintenance of rehabilitated sections, as a way to promote the mechanization of activities and subsequent reduction in the labor force. Furthermore, the purchase of a modest quantity of wagons was included within the Project, as a component not funded by the Bank. The Project also included an institutional component (5% of the budget) consisting of technical assistance for studies, supervision of works, and the reorganization and institutional strengthening of AFE. In the railway sector, it was considered that the targeted investments, although necessary to upgrade the railway infrastructure to cater for the expected forest demand, would not be alone sufficient to stimulate the transfer of that demand to the system, since profound changes in the quality of service were also necessary. So, there was a consensus that the railway model had to be changed to inject more commercial orientation in rail operations. The railway investment program had little progress until 2004 due to the stance assumed by the Minister of Transport that no investments would be made in AFE without institutional reform. Although the bids were prepared and issued and in some cases awarded, the Minister only allowed two contracts for track-maintenance machines which were very important to keep the railway operating. Furthermore,: (i) the acquisition of rails was delayed until 1998 due to the GoU's decision not to purchase them with project resources, but to obtain them from Russia as payment for a debt that this country had with Uruguay; (ii) Although the two track-maintenance ( Plasser) machines were purchased with resources from the project, other maintenance equipment was not acquired due to the Minister's decision to wait until there was institutional reform, (iii) the purchase of second hand wagons was done by AFE' with its own resources. MTOP continued its stance that it was not advisable to involve any Loan resources in infrastructure investments without a major reform of AFE. In order to achieve the desired efficiency in the transportation of forest products, it was necessary to reorganize AFE and to increase private participation in its management and operations, through a concession. The Project included technical assistance and support in the process of reorganization of AFE all throughout the implementation up to the start of the concession. Once the separation of infrastructure and operations was completed, the Minister was ready to invest in the rehabilitation of AFE, but at that time with the macroeconomic crisis he felt that it was better to maintain the quality of the roads and seek private sector participation in a CREMA type contract to rehabilitate the track. Therefore, the planned track rehabilitation of the railway under the Forest Transport project has not been fully achieved due to longer than expected delays in the implementation of sector reform and the financial crisis that affected the government's fiscal space. Faced with budget restrictions, the GOU opted for investing its scarce resources on the maintenance of roads, thus delaying railway rehabilitation. In 2003, with he separation of infrastructure and operations, DNV became responsible in 2003 for the maintenance of railway infrastructure: railways, bridges, buildings, signage equipment, and crossings, and their renovation. It operated with 353 agents distributed across the entire active network. As it has been the case with road infrastructure, after assuming its new responsibilities over the railway network, DNV sought to mobilize private investment in the

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rehabilitation and maintenance of key railway infrastructure. As mentioned above, immediately after the reform was effective, the DNV called for bids for the rehabilitation and maintenance of the Montevideo-Rivera, Sayago-Minas and Toledo-Río Branco railway lines, including: (i) Metropolitan Area of Montevideo, 26 km; (ii) Railway line to Rivera (km 12–km 563); (iii) Railway line to Río Branco (km 25–km 459); (iv) Railway line to Minas (km 23–km 127). On these lines the rails would be changed on 530 km, making it possible to operate at speeds of 50 km/h or 60 km/h, and with 18 tons by axis. The contract also included the provision of 100,000 meters of rails for the DNV to undertake the rehabilitation of the Chamberlain-Algorta-Paysandú-Salto and Algorta-Fray Bentos railway lines directly. In addition, the contract included the following works to be carried out by the concessionaire: (i) reconditioning of the electric signaling system in the Metropolitan Area; (ii) rehabilitation of all crossings, including signage, fencing, and pavement, (iii) installation of new automatic barriers and signals and rehabilitation of the existing ones along 1,114 km of rail lines; (iv) construction of a central control facility to concentrate the operations of the three current posts; (v) adapting the radio communications system to allow for a direct link to train crews and providing the necessary computer equipment and software. The contract was meant to be awarded to the bidder willing to accept the smallest annual payment from the GOU for a period of twenty years starting on the second year of the concession. The maximum payment that the GOU was willing to provide was set at US$ 5 million. According to the terms of the deal, the concessionaire would invest US$ 50 million over the first four years of the concession and recover its investment with the proceeds from the GOU payment and tolls charged to railway operators. Two offers were received in March 2004 but later disqualified for various reasons. One offer was ineligible for not complying with some conditions of the bid, while the other considered an annual payment that widely exceeded the amount available to MTOP and also considered the amortization of project debt in only ten years. The ICB 22/2003 was thus annulled, forcing MTOP and the DNV to reexamine the short-term action plan. Some works were not executed by AFE. The include (i) the track rehabilitation between km 382,952 and 393 Piedra al norte, (ii) track rehabilitation of the line Rivera between km 410 and 420,147 Valle Eden al Sur, (iii) Improvement of lines Rivera, Rio Branco, Artigas and R. Piedra Sola and Fray Bentos, and (iv) rehabilitation of the line between km 208,789 and 219 Yi al norte. The final procurement plan for this component is as follows:

Activity Total Amount Equipment for the maintenance of tracks and works

US$ 2.07 million

Equipment and Goods used by AFE (on wagon rehabilitation and modernization)

US$ 0.534 million

Works (Rehabilitation of line Rivera km 439,822 to 444,742) and Rivera km 197-208

US$ 1.23 million

Source: AFE Note: to the above, one should add US$ 16 million spent on acquisition of the Russian rails and acquisition of second-hand wagons with GoU resources. In other words, the Bank loan share for the railway component was

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reduced but GoU bought most of the materials other than ballast and sleepers required for the rehabilitation of track and equipment. In summary, the resulted disbursement for the renovation of the railways reached US$ 2.03 million, consisting of US$ 0.66 million for rehabilitation works conducted by DNV (representing about 15 km) and US$ 1.37 million for the purchase of goods for AFE and DNV. With the exception of the Plasser machine, all goods were acquired between 2004 and 2005 by DNV (for the tracks) and by AFE (for the track and components to modernize the wagons). VI. Build the pier extension at the Port of Fray Bentos This component is rated marginally satisfactory, due mainly to delays in the completion of works. The Port of Fray Bentos was highly damaged by an accident caused by a freighter which, pushed by strong winds, hit the main piles of the quay. The Ministry requested the inclusion of the rehabilitation of the port in the loan under an accelerated procurement which the Bank authorized. The Bank also approved the paving of quays 1 and 2 of the port of the port of Montevideo but because the price was high and there was only one bidder, the Bank did not give the "no objection". Subsequently, ANP reissue the bids and obtained a good price and decided to finance the works with its own budget. The bid for the reconstruction of Fray Bentos was awarded and the reconstruction works are almost completed. The bid for the extension was issued but the Government adopted a "wait-and-see" position because the private sector was building a new port, just above Fray Bentos. The Government believed that there would not be a need for the full extension originally envisaged and a great quantity of the wood production would go to the new port of M'bopicua . However, the decision to allocate the contract was made following the change in Government and the latest extension allowed the disbursement of part of the money allocated to this component. The construction of the pier extension has started and is expected to be completed by the end of the year 2006. During the last supervision mission, the Bank team was told by producers of chips that additional investment could leverage further the investment to be fully used: (i) dredging of the river to allow full load ships (currently ships need to be topped off in Montevideo) to navigate from Fray Bentos and (ii) installation of a light system on the river to allow ships to navigate at night. The project also allowed the Port of Fray Bentos to continue operating, following an accident caused by a freighter, which led to an interruption of operations. This support, while the GoU sought damages from the shipping line insurance, allowed a quick rehabilitation of Fray Bentos to continue operating and supported the increase in export from Fray Bentos. Once it received the insurance payments the amount spent on the rehabilitation was returned to the loan. As the works for the pier extension are still being completed, it is too early to assess the impact of this component on export but the recent boom in exports from the Fray Bentos area (incl. M'Bopicua) suggests that the pier extension would allow the public port of Fray Bentos to support the export of forest products. VII. Support the reorganizing of AFE and increase private participation in its operations and investments This component initially concerned the preparation of bid documents to be used in the

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concession process: (i) institutional and organizational arrangements, (ii) investment plan to be undertaken, (iii) evaluation of operating subsidies, and (iv) legal and administrative aspects for concession. It also included technical assistance until the concession, in the form of providing key advisors who worked with the Ministry of Transport and President of AFE to further rationalize and streamline operations and maintenance to decrease the perceived risks of the concession. This component is rated satisfactory. Even if the concessioning of AFE did not succeed, the technical assistant component of the loan provided adequate support to have allowed for successful completion of the reform. As explained earlier in the main document of the ICR, the failure of the concessioning of AFE was mainly due to a lack of political willingness and ability to find an agreement on the type of reform needed. The document and technical advice financed by this component were completed but it is difficult to assess the quality of the bid documents was very good, based on the Argentine and Brazilian experiences. The GoU introduced a declaration in the National Budget Law of January 1996 giving authorization to AFE, with previous approval from the Executive, to grant concessions for the execution of works and delivery of railway services, as a way of attracting private investment. For this purpose, in 1997 AFE summoned the private sector to present expressions of interest on the concession of the forest products transport railways Montevideo-Rivera and Florida-Blanquillo). Six consortiums presented their proposals, and three were selected to participate in the consultation stage. The selected groups were comprised of railway enterprises that operated in Argentina , Brazil and Chile . This was intended to assess the market's reaction to the proposed strategy, and toobtain feedback from potential participants on the options available for enhancing the concession model. Although only three consortiums were given access to the consultation stage, other companies that had not participated in the initial call for proposals or that participated but were not pre selected, could still enter the bid and compete under the same conditions as the pre-selected consortiums. According to the bidding document, only the concessionaire would have rights to the transport of forest products, machinery, materials or resources for forest activity on the two indicated rail lines. The concessionaire's rights extended to transporting these products to their destination if such were outside the lines Montevideo – Rivera and Florida – Blanquillo. AFE was to be in charge of the rest of the traffic along these lines. The concessionaire would have been allowed to reach an agreement with AFE to carry out such transport on the lines that are not under concession, and to undertake, under commission of AFE, the transportation of non-forest products on the lines of the concession. Traffic control would remain in hands of AFE. If the concessionaire became the main user, it would be his responsibility to take charge of the maintenance of the railways. AFE would assume responsibility for the rehabilitation of various sectors of the lines given in concession. Toll payment to AFE was established, by the use of granted network. Although bidding documents were completed, and the market showed high interest, MTOP/AFE never launched the bid. This was attributed to AFE's little interest in granting the

40

right of operation to a company that would potentially be its competitor, as well as to a certain lack of confidence by the MOPT on whether the chosen system of concession would be the best. Furthermore, the GoU could foresee that a concession that would give exclusive rights to a certain mode of transport could be perceived as a monopoly (despite the existence of competition from road transport) would encounter strong political opposition at the time of elections. Since then, several institutional changes occurred, resulting in separation of infrastructure from operation and later a return to the initial integrated model. The new administration is now considering a different option for reforming AFE in order to increase further efficiency through private participation and a more commercial focus. The financial performance of AFE, although still below most of its neighbors in Latin America , has improved a lot since 1997. Although this component did not result directly in the concession of AFE, it did provide the organization with the tools to move forward. Moreover, the ongoing policy dialogue and support with limited funds provided during supervision helped raise awareness in AFE and the Ministry of Transport to the need to improve rail efficiency to support the export of forest products. VIII. Road Sector Management/Institutional Building (PAD US$8,000,000; actual US$160,584). This component consisted of several sub-components that were mainly implemented with financing from other sources. Only a few of those subcomponents correspond to the road sector and are globally rated as satisfactory, even if most of them were financed by grants (PHRD, TDA). a) Study of a road user charges system This study was intended to address the entire transport sector to establish a system that reflects the actual costs incurred by each mode. Under the STP, the MTOP's Institute for Transport and Infrastructure Planning (IPTI), updated its databases and carried out several estimates of user charges, using the road user charge model (RUC), developed by the Bank in 1998. The most recent calculations of road user charges are based on 2001 figures and showed that the totalexpenses in the sector, including investments and debt service, amounted to US$ 466,160,000 and that the fiscal revenues from road users reached US$ 607,850,000, which gives excess revenues from road users of US$ 141,660,000. No other studies in this matter were carried out under the FPTP and therefore, no project resources were used for these activities. b) Undertake a comprehensive study of the Uruguayan trucking industry This study was done in-house by the IPTI and the actual output during the project life was a series of decrees of the MTOP regulating the trucking transport, among them one establishing rules to control truck overloading, control and enforcement of which was contracted with a private firm, which reports to the DNV and the National Directorate of Transport (DNT). c) Prepare the economic, engineering and environmental analysis of civil works These studies were carried out in combination with the STP, but were also prepared in-house with no significant external help and therefore, no project resources were used for this

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subcomponent. Consultants were hired to prepare road, rail and port environmental manuals. d) Surpervise works under the project Most of the monitoring work was done by DNV in-house, with the support of a few technical advisors, in particular two international experts on pavement performance and performance contracts respectively. These advisors were hired by DNV with its own resources to guide its staff. DNV's control and supervision arrangement, supported by this Advisory Committee, proved very successful because it set high standards for the measurement of results on the ground and achieved effective contract enforcement. In addition, carrying out this task in-house increased the ownership within the organization. However, as in the case of the STP with similar arrangements, it has to be emphasized that it was the well-established reputation for high integrity within DNV that was instrumental for the success of this kind of monitoring and supervision arrangement. So, in short, although most institutional building and studies were done, they used very few resources from the loan, which allowed their transfer to the road component.

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Annex 3. Economic and Financial Analysis (including assumptions in the analysis) The ex-ante economic evaluation for this project was done only for the road component as almost the totality of the loan funds (95%) were allocated to road works following the various changes in allocation. Also, in the original project, the financial rate of return was resulting essentially from the rail component, and is not applicable in the case of a road rehabilitation component (which account for the quasi-totality of the loan at project closure) because almost no investment was undertaken in the rail component. The reduction of the subsidies to AFE by 60% from US$ 17 million in 1997 to US$ 6.6 million in 2005 was however a significant financial gain for the Government. Moreover, the ex-post economic rate of return should be compared to scenario 1, evaluated during project's preparation. The ex-ante economic evaluation for the project distinguished two scenarios: (i) the truck only scenario (S1) included investments in routes 6 and 7 leading to Montevideo, in addition to investments in the port of Fray Bentos, and (ii) the rail plus truck scenario (S2) included all the investment in S1 and, in addition, rail investment in the Montevideo-Rivera and Florida-Banquillo lines. The two scenarios (S1 and S2) were compared to a do-nothing situation (S0). In reality the latest allocation looks closer to S1 than S2 but cannot be compared strictly to S1, due to additional road rehabilitation that took place. It must be noted that both scenarios 1 and 2 were both considered economically feasible in the PAD but that S2 was selected as the scenario resulting in the highest economic NPV. As the majority of investment resulted in the rehabilitation of roads, the financial analysis and the fiscal impact were not applicable anymore and thus not calculated ex-post. The initial PAD included the results of the financial analysis and fiscal impact. The ex-ante financial analysis resulted in an NPV of US$ 941 million (with a discount rate of 10%) or an IRR of 55%. The fiscal impact of the project was estimated in the PAD at US$ 23.5 million in additional taxes and US$ 35.3 in savings in subsidies following the successful implementation of the project. However, the project had a fiscal benefit to GoU. The ex-post review of AFE financial performance showed that GoU managed to reduce its yearly subsidies by 60% between 1997 and 2005, which is a significant achievement. Although the ex-post Economic Rate of Return (ERR) and Economic Net Present Value (NPV) are lower than the one calculated in the ex-ante, the ERR is still reasonably high. The ex-ante for Scenario 1 calculated an ERR and NPV at 10% of respectively 63% and $US 480 million. The ex-post economic evaluation of the project resulted in an ERR of 23.96%, with an NPV of $US 24.9 million, based on an investment of $US 64.3 million. The difference in NPV comes from the fact that the benefits were not as big as initially anticipated, following the impact of the economic crisis, and occurred later in the life of the project. Road Component

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This component consisted in the rehabilitation of 296,000 km of roads, corresponding to the following:

Road Description Length (km) 7 Ruta 12 - Fray Marcos 16.0 7 San Jacinto - Ruta 12 24.0 24 Ruta 2 - Ruta 20 (N. Berlin ) 21.6 24 Ruta 20 - 43 km 21.4 25 Menafra - Ruta 90 20.4 Access Port Boulevard (double lane) 0.95 21 234 k - A Las Vacas 18.4 2 Mercedes - Pte Gral. San Martin 28.3 3 472k 000 - Rio Dyaman 15.0 5 Sauce - 462k 000 11.2 8 Ao. Sarandi - Rio Cebollati 23.4 9 149k000 - Emp. Caracol Las Garzas 37.3 11 Santa Lucia - Villa Rodriguez 13.1 5 225k000 - 270K000 45.0 Total 296.0

The physical location of the various rehabilitation works is represented on the map below:

The highway network included in the rehabilitation component of the project belong to a key zone, influencing the forest road network and the export corridors, which attract a significant share of the movement of goods, demonstrating the fundamental importance of the regional road network for the national economy.

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The cost related to the movement of people and goods is closely linked to the state of the road infrastructure, thus to the preservation effort that takes place on the network. Model used and main assumption This economic analysis was prepared using the Highway Design and Maintenance Standards Model (HDM-III), which simulates life cycle conditions and costs and provides economic decision criteria. The ICR ex-post economic evaluation was done using the same model and following the same ex-ante methodology, but including (i) actual costs, (ii) actual traffic, (iii) actual road user costs, and (iv) actual timing and duration of road works. The project benefits are derived from operating cost savings for vehicles, time savings during the trip, maintenance and savings due to a reduction of accidents. Operating Costs figures were obtained from the model HDM III and are functions of the type and state of the surface, the geometric design and vehicles characteristics The Vehicle's operating costs are composed of:

• Travel Costs: fuel, oil, tires, upgrade and maintenance labor costs • Annual Fixed Costs: depreciation, interests, labor and administration

These costs are calculated for the various types of vehicles corresponding to each year's traffic. The benefits come from the reduction of the project's operating costs compared to the base scenario. The economic price was calculated from the financial prices by multiplying the latter by a conversion factor (CF or RPC). The financial cost was obtained from the computerized system of prices and budgets of DNV, with the physical quantities used in the various works. Investment Cost Analysis In several of the works, the real cost ended up beinglower than the estimated one and the total ended up at US$ 64.3 million or 96% of the estimated amount, despite the impact of inflation following the subsequent loan extensions.

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Año Estimado Monto Estimado Monto Contrato Año Real M. Fin. ContratadoRuta Descripción Long.(Km) Obra (Miles U$S) (Miles U$S) Obra (Miles U$S)

7 Ruta 12 - Fray Marcos 16.0 1997 3,122 5,021 1,998 6,0197 San Jacinto - Ruta 12 24.0 1997 6,569 10,418 1,999 11,654

24 Ruta 2 - Ruta 20 (N. Berlín) 21.6 1998 6,387 6,910 1,999 6,87724 Ruta 20 - 43km 21.4 1999 7,744 6,942 2,000 6,51225 Menafra - Ruta 90 20.4 2000 4,696 3,529 2,001 3,893

Accesos Rambla Portuaria (Doble Via) 0.95 1999 1,958 1,711 1,999 1,45021234km - A° Las Vacas 18.4 2,002 2,200 2,700 2,004 2,0602Mercedes - Pte. Gral. San Martín 28.3 2,002 4,415 4,615 2,003 4,0293472k 000 - Río Daymán 15.0 2,002 4,458 4,458 2,003 3,7555Sauce - 462k 000 11.2 2,002 3,929 2,961 2,003 2,4008Ao. Sarandí - Río Cebollatí 23.4 2,002 3,524 2,626 2,003 2,4559149k000 - Emp. Caracol Las Garzas 37.3 2,002 6,230 4,478 2,003 3,849

11Santa Lucía - Villa Rodriguez 13.1 2,002 4,375 3,665 2,003 3,3165225k000 - 270K000 45.0 2,002 7,250 5,558 2,004 6,026

Total 296.0 66,857 65,592 64,295 State of the roads The information was obtained from the DNV's road inventory, which is based on the permanent collection of information by the Department of Conservation. The inventory provides updated information on the physical characteristics of the network, such as location, type of road, existence of bridges, etc… The quality of movement and operating cost of vehicles on a highway depends on the surface quality of the road and characterized by its rugosity and measured by the International Roughness Index or IRI. DNV also uses an index measuring the state of the surface (Indice de Estado Superficial, or IES) which summarizes also the condition of the road surface. As illustrated in the table below showing the IRI for each section rehabilitated, the IRI and IES measured in 2004 are comparable to those initially forecasted.

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Antes - Obra Ind. Rug (IRI) Ind. Rug (IRI) Ind. Est.Ruta Descripción Long.(Km) Ind. Rug (IRI) Estimado 2004 2,004 2,004

7 Ruta 12 - Fray Marcos 16.0 6.2 2.30 2.13 83.00 7 San Jacinto - Ruta 12 24.0 6.1 2.00 1.99 89.00

24 Ruta 2 - Ruta 20 (N. Berlín) 21.6 5.2 2.00 1.94 92.00 24 Ruta 20 - 43km 21.4 5.2 2.40 2.20 80.00 25 Menafra - Ruta 90 20.4 5.5 2.14 1.85 98.00

Accesos Rambla Portuaria (Doble Via) 0.95 8.1 3.50 3.20 94.00 21 234km - A° Las Vacas 18.4 5.2 1.80 1.80 100.00 2 Mercedes - Pte. Gral. San Martín 28.3 3.2 1.90 1.80 100.00 3 472k 000 - Río Daymán 15.0 4.8 2.00 2.08 100.00 5 Sauce - 462k 000 11.2 4.5 1.90 1.99 91.00 8 Ao. Sarandí - Río Cebollatí 23.4 4.2 1.90 1.96 100.00 9 149k000 - Emp. Caracol Las Garzas 37.3 3.1 1.90 1.98 100.00

11 Santa Lucía - Villa Rodriguez 13.1 5.5 1.90 2.00 100.00 5 225k000 - 270K000 45.0 5.3 1.90 1.80 100.00

Total 296.0 Traffic Analysis The traffic count was based on average daily traffic figures provided by the Department of Traffic Security. It was assumed that traffic was composed of 30% of freight vehicles. From this group, 3 types of trucks: light were identified: light, articulated (used for the transportation of forest products) and heavy. It was assumed that traffic would increase from 3% to 5% for light vehicles and from 6% to 10% for heavy vehicles during the productive period and would thereafter stabilize at 3% for all vehicles. This growth in traffic was based on the average GDP growth in Uruguay during the last 10 years. The following table compares the ex-post and ex-ante traffic, together with the real ex-post increase in traffic, differentiated by type of vehicles. As illustrated, the increase in traffic until the inflection point (corresponding to the major increase in traffic) is higher for light trucks on most rehabilitated section. In the case of heavy trucks (transporting non-forest products), the rates of increase were negative on some section, due to the conversion of the truck fleet into articulated ones for the transportation of forest products.

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Tpda Tasa Expost Tasa Expost Tasa Expost Hasta Punto Luego Punto TpdaRuta Descripción 2,004 Livianos C. Articulado C.Pesados Inflección Inflección Año Inicial

7 Ruta 12 - Fray Marcos 1,066 16% 41% -6%s/d s/d 500 7 San Jacinto - Ruta 12 1,733 10% 21% 1%s/d s/d 995

24 Ruta 2 - Ruta 20 (N. Berlín) 922 4% 13% 6%5% liv-3 a 30 %pes 5% liv - 3% Pes 635 24 Ruta 20 - 43km 922 18% 20% 10%5% liv-3 a 28 %pes 5% liv - 3,5% Pes 300 25 Menafra - Ruta 90 602 11% 9% -5%5% liv-3 a 30 %pes 5% liv-2a 3% Pes 342

Accesos Rambla Portuaria (Doble Via) 17,993 6% 21% 11%s/d s/d 10,961 21234km - A° Las Vacas 780 8% 2% -1%3% liv - 6%pes 3% 652 2Mercedes - Pte. Gral. San Martín 2,049 -10% 11% -9%4% liv - 5 a 6 %pes 3% 2,643 3472k 000 - Río Daymán 1,024 0% 2% -1%4% liv - 5 a 8% pes 3% 1,026 5Sauce - 462k 000 1,106 3% 57% -16%3% liv - 6 a 10% pes 3% 1,103 8Ao. Sarandí - Río Cebollatí 781 12% -16% -7%4% liv - 6 a 9 %pes 3% 717 9149k000 - Emp. Caracol Las Garzas 1,879 5% -12% -11%4% liv - 5 a 6 %pes 3% 1,775

11Santa Lucía - Villa Rodriguez 2,390 3% 4% 3%4% liv y pesados 4% 2,178 5225k000 - 270K000 1,092 6% 9% 15%3% liv - 6 a 14%pes 3% 855

Tasa crecimiento Ex - Ante

Savings to users Following is a description of operating costs per type of vehicles in US$ by vehicle-km during one year, comparing the costs a year before the execution of work to a year after completion of works. Operating Costs: 1 year before execution of works

Antes - Obra costo de operación economico veh -km - inicialRuta Descripción Ind. Rug (IRI)Cat1-Livianos Cat2-Omnibus Cat3- C.Med.Cat4-C.SPes Cat5-C.Artic.

7 Ruta 12 - Fray Marcos 6.2 0.25012349 0.744520039 0.46283318 0.58923113 0.719457137 San Jacinto - Ruta 12 6.1 0.24904008 0.742353217 0.46124418 0.58742544 0.71714585

24 Ruta 2 - Ruta 20 (N. Berlín) 5.2 0.23928938 0.722851819 0.44694315 0.57117428 0.6963443624 Ruta 20 - 43km 5.2 0.23928938 0.722851819 0.44694315 0.57117428 0.6963443625 Menafra - Ruta 90 5.5 0.24253961 0.729352285 0.45171016 0.57659133 0.70327819

Accesos Rambla Portuaria (Doble Via) 8.1 0.2707083 0.785689657 0.49302423 0.62353914 0.7633713921 234km - A° Las Vacas 5.2 0.23928938 0.722851819 0.44694315 0.57117428 0.696344362 Mercedes - Pte. Gral. San Martín 3.2 0.21993243 0.68782153 0.41588537 0.53549394 0.654235793 472k 000 - Río Daymán 4.8 0.23473905 0.714401213 0.44058714 0.56395154 0.687099265 Sauce - 462k 000 4.5 0.23184995 0.708767476 0.43589236 0.55860671 0.680382118 Ao. Sarandí - Río Cebollatí 4.2 0.22888863 0.703494876 0.43126981 0.55326188 0.673953879 149k000 - Emp. Caracol Las Garzas 3.1 0.21913793 0.686376982 0.41436859 0.53368826 0.65235788

11 Santa Lucía - Villa Rodriguez 5.5 0.24253961 0.729352285 0.45171016 0.57659133 0.703278195 225k000 - 270K000 5.3 0.24037279 0.725018641 0.44853215 0.57297996 0.69865564











Operating Costs: 1 year after completion of works

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Luego - Obracosto de operación economico veh -km luego de la obraRuta Descripción Ind. Rug (IRI) Cat1-Livianos Cat2-OmnibusCat3- C.Med. Cat4-C.SPes Cat5-C.Artic.



Accesos Rambla Portuaria (Doble Via) 2.6 0.21523765 0.67958761 0.40656803 0.52458761 0.6430405421234km - A° Las Vacas 1.8 0.20945946 0.66969245 0.39363933 0.50956431 0.628017242Mercedes - Pte. Gral. San Martín 1.8 0.20945946 0.66969245 0.39363933 0.50956431 0.628017243472k 000 - Río Daymán 1.8 0.20945946 0.66969245 0.39363933 0.50956431 0.628017245Sauce - 462k 000 1.8 0.20945946 0.66969245 0.39363933 0.50956431 0.628017248Ao. Sarandí - Río Cebollatí 1.8 0.20945946 0.66969245 0.39363933 0.50956431 0.628017249149k000 - Emp. Caracol Las Garzas 1.8 0.20945946 0.66969245 0.39363933 0.50956431 0.62801724

11Santa Lucía - Villa Rodriguez 1.8 0.20945946 0.66969245 0.39363933 0.50956431 0.628017245225k000 - 270K000 1.8 0.20945946 0.66969245 0.39363933 0.50956431 0.62801724

Reduction in Operating Costs in % for each vehicles in the year following completion of works

Disminución del costo de operación economico veh -km Ruta Descripción Cat1-Livianos Cat2-OmnibusCat3- C.Med. Cat4-C.SPes Cat5-C.Artic.

7 Ruta 12 - Fray Marcos 16% 10% 15% 14% 13%7 San Jacinto - Ruta 12 16% 10% 15% 13% 12%

24 Ruta 2 - Ruta 20 (N. Berlín) 12% 7% 12% 11% 10%24 Ruta 20 - 43km 12% 7% 12% 11% 10%25 Menafra - Ruta 90 14% 8% 13% 12% 11%

Accesos Rambla Portuaria (Doble Via) 20% 14% 18% 16% 16%21 234km - A° Las Vacas 12% 7% 12% 11% 10%2 Mercedes - Pte. Gral. San Martín 5% 3% 5% 5% 4%3 472k 000 - Río Daymán 11% 6% 11% 10% 9%5 Sauce - 462k 000 10% 6% 10% 9% 8%8 Ao. Sarandí - Río Cebollatí 8% 5% 9% 8% 7%9 149k000 - Emp. Caracol Las Garzas 4% 2% 5% 5% 4%

11 Santa Lucía - Villa Rodriguez 14% 8% 13% 12% 11%5 225k000 - 270K000 13% 8% 12% 11% 10%

As shown in the table above, there was a reduction in the vehicle operating costs, ranging from 3% to 20%, depending on the type of vehicle and road rehabilitated. Economic Analysis The economic analysis was performed on all sections described earlier and the ERR and IRR were calculated. The result indicated an Economic NPV of US$ 24.9 million and ERR of 24%. As said before, it is difficult to compare the actual ERR to the one assessed in the PAD.

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M. Fin. Contratado Van (Miles U$S) Tir (%)Ruta Descripción Long.(Km) (Miles U$S) Expost Expost

7 Ruta 12 - Fray Marcos 16.0 6,019 1,460 15.50%7 San Jacinto - Ruta 12 24.0 11,654 5,480 19.80%

24 Ruta 2 - Ruta 20 (N. Berlín) 21.6 6,877 710 13.90%24 Ruta 20 - 43km 21.4 6,512 360 13.30%25 Menafra - Ruta 90 20.4 3,893 230 13.70%

Accesos Rambla Portuaria (Doble Via) 0.95 1,450 590 20.10%21 234km - A° Las Vacas 18.4 2,060 180 18.90%2 Mercedes - Pte. Gral. San Martín 28.3 4,029 2,390 30.70%3 472k 000 - Río Daymán 15.0 3,755 2,390 27.70%5 Sauce - 462k 000 11.2 2,400 1,610 27.60%8 Ao. Sarandí - Río Cebollatí 23.4 2,455 1,600 30.70%9 149k000 - Emp. Caracol Las Garzas 37.3 3,849 4,410 39.40%

11 Santa Lucía - Villa Rodriguez 13.1 3,316 820 31.00%5 225k000 - 270K000 45.0 6,026 2,650 33.20%

Total 296.0 64,295 24,880 23.96% Overview of the Efficiency of the Railways The Railway System The Uruguayan Railway system has an extension of 2,993 Km and a total of 41 train stations. The railway network is a standard gauge of 1.435 meters, single track, except for 11 Km of double track near Montevideo Central Station. The system is operated by Administración de los Ferrocarriles del Estado (AFE), a state-owned company.

Table 1: Rail Network, 2002 Double Track 11 Km. Single Track 2,982 Km. Total Extension 2993 Km. Gauge 1.435 Mts. Number of Stations 41 Source: AFE, Annual Report 2003

The system connects to the Ferrocarril Mesopotámico (FCM) freight railway in Argentina, which in turns connects to the Presidente Carlos Antonio López Railway in Paraguay (both these railways are also standard gauge). It also connects with the meter gauge RFFSA railway of Brazil, at Rivera and Rio Branco.. However RFFSA has discontinued the line to the Uruguayan border at Rio Branco, and only the Rivera Santa Ana connection is in operation. Most railway lines in Uruguay were built at the lowest possible cost with minimum earthworks, leading to frequent short (1.5 - 2 percent) gradients and numerous curves and reserve curves that cause high operating costs. The permissible axle load is 18 tons except on lines close to the Uruguay and La Plata rivers, where tracks and bridges were built to 14 tons axle load standards. Despite the improvement of some sections in 1998, overall the network is in a very poor condition. The majority of wooden sleepers are either defective or completely rotten; rails are worn out and

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crippled at the ends; and ballasting, when it exists, is inadequate and thoroughly polluted. Speeds are kept low due to safety concerns and tracks are not adequately maintained, which both result in higher operational costs for AFE. Operating Performance and Productivity The number of passengers per train has continued to decrease as a result of the reduction in the number of services. On the other hand, in the period between 1995 and 2002, the productivity of freight operations has increased, as evidenced by the number of tons mobilized per employee. However, in the latest years, improvements in this indicator have had more to do with important cutbacks in AFE's workforce, than with increases in freight traffic. In addition, during the same period, there has been a reduction in the number of derailments, which can be attributed to the rehabilitation of some sections of the network after 1997. Nonetheless, the number of derailments continues to be high, considering that in 1985 there were only 25 derailments on the open track.

Table 7: Uruguay Railway Operations Performance Indicators 1995 1996 1997 1998 1999 2000 2001 2002 2003 Average cargo per train (Tons) 251 246 248 290 291 290 303 294 362 Average passengers per train 62 65 45 42 59 41 66 Derailments per million tons 66 60 48 40 42 45 41 43 33 Tons per employee 413 477 617 803 853 788 727 505 1593 Source: AFE Financial Performance The financial performance of the railways has improved since 1997. The operating ratio (operating expenses over operating revenues) has decreased significantly, especially since 2003. Before the separation of infrastructure from operation, this indicator was in the range of 4 and the minimum of 3.4 in 1999, was achieved thanks to a high level of freight transportation. The situation changed in 2003, when the operating ratio decrease to 2.8 and has continuously improved since then to achieve 2 in 2005. This major improvement in operating performance is mainly due to a reduction of labor cost, following the decision to reduce the number of employees following the separation of infrastructure from railways operation. This effort was financed through the sales of land.

AFE Operating Ratio (1997-2005)

4.8

3.93.4

4.1 4.04.2

2.8

2.0 2.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: AFE

51

The subsidies paid to AFE do not correspond exactly to the operating results but were reduced significantly since 1997. Some year, subsidies were more than the negative operating result and others lower. While the subsidies provided to AFE reduced since the separation of infrastructure from operations, the amount must be added to the investment made by DNV, which took over the responsibility for the infrastructure. Even in this case, the total subsidies were reduced in 2005 to one-third of the value in 1997. Finally, subsidies also decreased significantly when measured as per tons-km of transported freight. In this case the value decreased from US$ 0.075 in 1997 to US$ 0.018 in 2005.

Operating Results and Subsidies

0

5,000

10,000

15,000

20,000

25,000

30,000

1997 1998 1999 2000 2001 2002 2003 2004 2005

US$

000

Operating Results (Negative) Operating Subsidies

Operating Subsidies per tons-km

0.075

0.0550.058

0.0740.080

0.058

0.041

0.020 0.018

0.000

0.010

0.020

0.030

0.040

0.050

0.060

0.070

0.080

0.090

1997 1998 1999 2000 2001 2002 2003 2004 2005

US$

Source: AFE

The decrease of subsidies was significant since the reform and has shown a constant improvement since then. Financial indicators show an improvement in the efficiency of AFE, although still not profitable. There are additional opportunities for improving the financial performance of AFE. Oneoption could be the increase further tariffs. This was already done in 2006, without major impact on demand and it would certainly improve further the financial performance of AFE in 2006. The other possibility would be to reduce operating costs, which could be achieved through further rehabilitation of infrastructure and institutional reforms. The increase in tons-km of wood products transported could also increase and the potential to support the development of wood processing industry being developed in the littoral should be further investigated.

52

Railway sector performance in the international perspective Rail transport in Uruguay is still not as competitive as in other countries where private sector participation reforms have been adopted. Cargo traffic density (Ton-Km/ Network in service) is the lowest among the railway operations analyzed, even below that of ALL-M, which operates a similar network. The productivity of the National Railway Administration's (AFE) operations is lower than that of private rail operators in other Latin American countries

Railway cargo traffic and productivity, 2003

Country Operator Ton-Km Average

distance of cargo traffic

(Km)

Ton-Km per Km of operational railway

Ton-Km per locomotive in service

Ton-Km per wagon in service

FEPSA 1,155,356,000 409 451,311 76,351 525,162 NCA 3,714,074,000 460 928,519 93,973 993,599 FSR 1,644,333,000 377 620,503 99,151 719,306 ALL C 2,728,288,000 854 667,063 52,400 519,081

Argentina

ALL M 778,783,000 635 370,849 49,046 350,330 Bolivia FCO 681,762,000 213 548,040 68,512 513,566 Uruguay AFE 266,555,658 605 114,387 36,711 166,899 Source: Martinez (2004)

Railway productivity has improved as a result of the reform but remain lower than in comparable countries. In 2001, AFE's labor productivity was very low compared to other operators in Argentina, Bolivia, Brazil, and Mexico. In 2003, AFE reported a significant improvement in labor productivity, as the number of tons carried per employee increased from 505 to 1,593. This was the outcome of the separation between railway management and operations, which resulted in a large transfer of AFE's employees to the Ministry of Transport and Public Works (MTOP). Port Overview and Efficiency The improvement of the port efficiency was not a direct effect of the project and it would not make sense to monitor the improvement of efficiency of the Port of Fray Bentos and ANP. The investment in the pier extension of the port of Fray Bentos has just taken place and it's not possible to determine its impact on the volume of forest products transported and financial performance of the public port. However, the project allowed the port of Fray Bentos to continue operating following an accident. This directly contributed to the overall performance of Fray Bentos, as the port had to cease operating following the accident. Moreover, the project did indirectly contribute to the development of the export of forest products from Uruguayan ports, thus contributed to the improvement of ANP's financial viability. The development of private ports did also benefit from an improved road network, in addition to Government initiatives to increase private participation in ports. Exports from all Uruguayan ports have increased exponentially, from 558,673 tons in 1997 to 2,123,139 in 2005 (or an increase of 280%). Montevideo remains the main port for export of forest products with a share of 57% of all exports of forest products, but other ports such as Nueva Palmira

53

and M'Bopicua are increasing in importance and representing respectively 15% and 10% of total export of forest products in 2005.

Share of Forest Products Exported from Port of Montevideo

14%10%

17%

22.4%25%

27.8% 26.7%

40% 40%

0%5%

10%15%20%25%30%35%40%45%

1996 1997 1998 1999 2000 2001 2002 2003 2004

Shar

e of

tota

l exp

ort (

%)

Exports of Forest Products from Uruguayan Ports

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1997 1998 1999 2000 2001 2002 2003 2004 2005

tons

/yea

r M'Bopicua

Nueva Palmira

Fray Bentos

Montevideo

Source: MTOP

In addition, the ongoing reforms in the port sector (outside the scope of this project) contributed to increase private participation in the sector, lowering further transportation costs. Some initiatives put in place during the past years to increase the efficiency of Uruguyan Ports are described below. Staff Rationalization. With the incentives provided for in the Ports Law, a significant number of voluntary resignations took place in ANP's port staff, and ANSE stevedoring pool was virtually emptied. This led to the transfer of almost 20 million dollars to private activity which promoted the formation of about 48 companies acting in the various commercial ports in free competition terms, under the authorization system, thus giving place to the increase of productivity and supply of more services to handle freight. Private sector participation (PSP). The private sector, which had already developed outside the port premises in container operations through significant investments in yards and equipment, assumed the leading role in cargo handling inside the port, resulting in an important improvement in operation performance. Tariff reductions. The ANP's new organizational structure allowed it to implement a tariff reduction for imported goods in 1992. The next year, the second stage of tariff adjustment was undertaken through the re-organization of the whole system, thus allowing for a new global rebate of previous

54

tariffs. Traffic Gains. As a consequence of the above mentioned rebate of port costs and improvement of operational performance, there was an increase in certain traffics and a gain of new business, some of which were unthinkable until then. Such is the case of the almost 40 thousand cars in transit through Montevideo and Nueva Palmira in 1993, using an operating strategy which was economically impossible within the stevedoring system prior to the Ports Law. Productivity. The improvement in operational performance is equivalent to the improvement of port capability to deal with larger traffic volumes. This has a significant economic value as, in fact, it involved an extension of the port without any additional investment. ANP's Image. In summary, this change has led to an improvement in the image of the enterprise, both internal and external. Port Reliability. Insofar as reliability is concerned, the almost chaotic conditions mentioned above (20% of time lost by interruptions) has turned into a situation resulting from the joint effort of Directors, Managers and workers where, in spite of obvious approaching discrepancies, there have been no service interruptions in port operations during the last three years.

55

Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members

Names Title Unit Responsibility/SpecialtyLending Rodrigo Archondo-Callao Highway Engineer ETWTR

Raul M. Auzmendi Consultant LCSTR Economic Evaluation Louis H. Carbonnier Sr Forestry Spec. ARD Alberto Figueiredo-Nunes Consultant LCSTR Railway Procurement

Maria Lucy Giraldo Sr Procurement Spec. LCSPT Sergio S. Miquel Consultant LCSTR Highway Consultant Reynaldo F. Pastor Sr Counsel LEGLA

Jorge M. Rebelo Lead Transport Specialist LCSTR Task Team Leader

Graham Smith Consultant SASEI Peer Reviewer-Bank Staff

Louis Stanley Thompson Consultant DECRG Peer Reviewer-Bank

Staff Supervision/ICR Jose Alonso-Biarge Consultant LCSTR Highway Specialist Rodrigo Archondo-Callao Highway Engineer ETWTR

Antonio Leonardo Blasco

Financial Management Specialis LCSFM

Vickram Cuttaree Infrastructure Economist LCSTR ICR Main Author

Ana Maria Grofsmacht Procurement Analyst LCSPT Daniel R. Gross Consultant LCSEN Resettlement Specialist Juan Pablo Martinez Consultant LCSTR Railway Specialist Sergio S. Miquel Consultant LCSTR Highway Consultant

Jorge M. Rebelo Lead Transport Specialist LCSTR Task Team Leader

Luis M. Schwarz Sr Financial Management Specia LCSFM

Paul Edwin Sisk Sr Financial Management Specia SARFM

Alejandro Roger Solanot Consultant LCSFM Financial Management

Solange P. Van Veldhuizen

Language Program Assistant LCSTR

56

(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only)

Stage of Project Cycle No. of staff weeks

USD Thousands (including travel and

consultant costs) Lending

FY96 2.88 FY97 178.04 FY98 0.00 FY99 0.00 FY00 0.00 FY01 0.00 FY02 0.00 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00

Total: 180.92 Supervision/ICR

FY98 48.41 FY99 65.61 FY00 6 33.82 FY01 6 41.21 FY02 7 55.56 FY03 2 31.44 FY04 9 100.92 FY05 6 74.89 FY06 10 85.83 FY07 5 37.66 Total: 51 575.35

57

Annex 5. Beneficiary Survey Results (if any) N/A

58

Annex 6. Stakeholder Workshop Report and Results (if any) N/A

59

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR URUGUAY Ministerio de Transporte y Obras Públicas PROYECTO DE TRANSPORTE DE PRODUCTOS FORESTALES Préstamo BIRF 4204-UR - Préstamo de JEXIM a Uruguay REPORTE DE FINALIZACIÓN DEL PROYECTO

INTRODUCCIÓN

La República Oriental del Uruguay (ROU) ha sido, tradicionalmente, un país agropecuario con su producción enfocada principalmente hacia los sectores tradicionales de la ganadería extensiva. Sin embargo, en la década de los años sesenta, se empieza a percibir la necesidad de que el país incursione en la producción forestal.

Como consecuencia de esta primera inquietud, se aprueba en el año 1968 la primer Ley Forestal y es en el año 1987 en que a través de la Ley 15.939 del 28 de diciembre se impulsa el actual desarrollo y crecimiento que tiene la forestación en Uruguay. Esta ley declara de interés nacional la defensa, el mejoramiento, la ampliación, la creación de los recursos forestales, el desarrollo de las industrias forestales y, en general, de la economía forestal, otorgándoles exoneraciones tributarias y subsidios a las plantaciones. Como consecuencia de ella, se produjo un gran desarrollo del sector forestal, con un paulatino aumento de los saldos exportables de producción año a año.

En 1995 el saldo exportable de la producción fue de 380.000 toneladas, y las predicciones de producción de materia prima con destino final de exportación (con o sin procesamiento) fueron las siguientes:

Año 1996 1997 1998 1999 2000 2001 2002 2003 Siguientes Producción 600 520 480 1.090 1.360 2.390 4.380 7.150 Creciente en tasas del 1 al 3%

(Miles de toneladas)

Partiendo de estas premisas, el Ministerio de Transporte y Obras Públicas (MTOP) en el año 1996 contrató un estudio a la firma consultora "CSI Ingenieros", que fue financiado en el marco del Proyecto de Transporte I (Préstamo BIRF 3021-UR), para la preparación de un Programa de Infraestructura de Transporte de Productos Forestales. En este estudio se analizaron los diversos escenarios de transporte, su logística, y aspectos económicos y ambientales. Entre otras conclusiones del estudio surge la necesidad de la interrelación participativa de los modos carretero y ferroviario con la asociación del modo portuario.

Es en este marco que se solicitó al Banco Internacional de Reconstrucción y Fomento (BIRF) un Préstamo a efectos de financiar el Proyecto de Transporte de Productos Forestales (PTPF), El mismo, se financió por el BIRF a través del Préstamo 4204-UR (50%), cofinanciado por el Export -Import Bank of Japan (JEXIM) (Actual Japan Bank for International Cooperation (JBIC)) (19.74%), con una participación del Gobierno como Aporte Local (30.26%).

El Proyecto de Transporte de Productos Forestales fue diseñado tomando en cuenta las premisas principales que surgieron del estudio mencionado en el punto 1.4, y en concordancia con los objetivos establecidos en el "Country Assistance Strategy" (CAS) de fecha 25 de enero de 1994 para el sector, y

60

también con el CAS presentado el 26 de junio de 1997.

Con fecha 1 de julio de 1997 se firmó el Convenio de Préstamo 4204-UR entre la ROU y el BIRF; y con fecha 26 de diciembre de 1997, se firmó el Convenio de Préstamo entre la ROU y el JEXIM. Se firmaron también con la misma fecha, Convenios sobre los Proyectos entre el BIRF y la Administración Nacional de Puertos (ANP), y entre el BIRF y la Administración de Ferrocarriles del Estado (AFE).

Con fecha 29 de diciembre de 1997, se firmaron Convenios subsidiarios entre la ROU, representada por el MTOP y la ANP y la AFE.

El MTOP fue designado representante del prestatario a los efectos establecidos en la Sección 11.03 de las Condiciones Generales.

El monto total del Proyecto, y su financiamiento, se muestran en el siguiente cuadro:

TOTAL BIRF JBIC GOBIERNO

Convenio de Préstamo 152.000.000 76.000.000 30.000.000 46.000.000

Cancelación de u$s 10 millones 142.000.000 71.000.000 17/12/2001 28.026.000 28/06/2002 42.974.000 (Montos en u$s)

La cancelación del monto de u$s 10 millones del total del Proyecto que surge de la tabla anterior, obedeció, entre otros aspectos, a que el país adquirió por concepto de cancelación de deuda contraída por la ex Unión Soviética rieles de acero para vías férreas. Estos rieles, cuyo costo aproximado era de u$s 17 millones pasarían a formar parte de las licitaciones ferroviarias. La fecha prevista en el Convenio de Préstamo del BIRF para el cierre del Proyecto era el 31 de diciembre de 2001, mientras que el Convenio del JBIC establecía como fecha de finalización del Proyecto el 30 de junio de 2001, y para el último desembolso el 30 de junio de 2002. Durante los años 2001 y 2002, toda la región, y nuestro país en particular, afrontó una grave crisis económica y financiera que determinó que se debieran adoptar severas medidas de restricción presupuestaria en los topes de ejecución. Esto, sumado a los cambios estructurales que se verificaron tanto en el MTOP como en AFE, llevaron a retrasos en los cronogramas previstos inicialmente, por lo que fue necesario solicitar tanto al BIRF como al JBIC diversas enmiendas prorrogando la fecha de finalización del Proyecto hasta el 30 de abril de 2006 (punto 3.2.4.). A su vez, se solicitó y se nos concedió un período de gracia para justificar los gastos incurridos (hasta el 30 de setiembre de 2006).

OBJETIVOS DEL PROYECTO

Los objetivos generales del Proyecto, según se establecieron en el Convenio de Préstamo, fueron los siguientes:

(a) Mejorar, mediante los Sub Proyectos de Infraestructura, el transporte de los productos forestales desde el lugar de la extracción forestal al puerto de salida, a efectos de mejorar la relación costo -eficiencia del transporte.

(b) Mejorar la productividad de los sectores vial y portuario.

61

(c) Mejorar la eficiencia de AFE y reducir los subsidios asignados a este sector a través de la participación del sector privado en la operación y transporte de los productos forestales.

DISEÑO E IMPLEMENTACION

DISEÑO

El Proyecto fue diseñado según los escenarios planteados en el Programa de Infraestructura de Transporte de Productos Forestales mencionado en le punto 1.4.

En el mismo, se analizaron tres escenarios: Cero (S0), Uno (S1) y Dos (S2). La primera alternativa, S0, era la de hacer solamente aquellos proyectos incluidos en los programas ya aprobados de construcción de carreteras del país; S1 era una alternativa de inversión sólo en carreteras, con las correspondientes inversiones en caminos rurales, puertos y navegación, y S2 incluía carreteras y vías férreas como red multimodal de transporte terrestre, complementado por las mismas mejoras en caminos rurales, puertos y navegación.

El Proyecto tomó el escenario del modo carretero con mejoras en caminos rurales, junto con el ferrocarril y pequeñas rehabilitaciones portuarias (Escenario S2).

Se determinaron dos corredores principales: el de Rivera - Montevideo, y el conector hacia el puerto de Fray Bentos. En este último, al encontrarse cercano a las plantaciones, se contaba con una ventaja comparativa del modo carretero frente al ferroviario, por lo que se priorizó rehabilitar las carreteras de esa área. En cambio, en el corredor Montevideo - Rivera, un buen servicio ferroviario competiría en situación ventajosa frente al camión.

El Proyecto planteó en consecuencia, rehabilitar rutas en el área de influencia del Puerto de Fray Bentos, sumando algunas rutas secundarias de acceso a Montevideo e inversiones ferroviarias en las líneas Montevideo - Rivera y Blanquillo - Florida con el objetivo de en un futuro poder captar mas de un 40% del tráfico maderero con el consecuente ahorro en el mantenimiento de las rutas, disminución de accidentes y congestionamiento urbano de tráfico.

El Proyecto también fue diseñado teniendo en consideración lecciones aprendidas de Proyectos anteriores que fueron incorporadas en él, según se detallan a continuación:

a) La reforma portuaria mostró que la concesión a privados de ciertas áreas conllevaba a mejores prácticas, lo que pese a la resistencia a la privatización de servicios proporcionados por agencias estatales, fue reflejado en el diseño del Proyecto, estableciéndose la conveniencia de realizar una concesión de la operación del transporte forestal de AFE.

b) De acuerdo a lo que surgió del estudio de Cargas a los Usuarios, el sector transporte debería ser fortalecido para promover la integración intermodal y minimizar las ineficientes distorsiones impositivas que pudieran existir.

c) El gerenciamiento de AFE debería reestructurarse a efectos de incorporar prácticas comerciales que permitieran a través de la tarifa y del involucramiento del sector privado recuperar los costos operativos y en el largo plazo eliminar los subsidios estatales.

d) Continuaría con el financiamiento del Programa de Mantenimiento de Caminos Departamentales

62

iniciado en el Proyecto de Transporte I, que resultara tan beneficioso para nuestro país.

e) Se realizarían estudios previos (factibilidad económica, ambiental y de detalles de ingeniería) a efectos de facilitar el inicio de los proyectos.

f) El Proyecto debería contar con la flexibilidad necesaria para evitar que retrasos en la obtención de fondos de contrapartida conllevaran a dificultades en la obtención de los objetivos del mismo.

IMPLEMENTACIÓN

La implementación del Proyecto estuvo bajo la responsabilidad de la Unidad Coordinadora de Proyectos (UCP) del MTOP. Se crearon además, dentro de la Dirección Nacional de Vialidad (DNV), AFE y ANP, Unidades de Implementación (PIU) a efectos de implementar los respectivos componentes.

Para la implementación del Proyecto se contó con fondos de una Donación el Gobierno de Japón por un monto de u$s 1:034.000 (Trust Fund Nº 027089) que fue administrada a través de un Convenio del MTOP con el Programa de Naciones Unidas para el Desarrollo (PNUD). Esta Donación financiaría las siguientes actividades:

a) Preparación de diseños, especificaciones técnicas, dibujos y documentos de licitación para:

- Rehabilitación y/o construcción de infraestructura ferroviaria, portuaria o vial a ser financiada por el Proyecto de Transporte de Productos Forestales - Equipamiento ferroviario requerido en el Proyecto

b) Realización de un modelo de simulación para determinar los correspondientes niveles de cargas a los usuarios y para los niveles de tráfico de madera en el Puerto de Montevideo

c) Realización de un estudio del marco institucional de AFE analizando las distintas opciones para promover la participación del sector privado en las operaciones y, como resultado de éste, proponer un nuevo marco regulatorio.

Se realizaron los estudios que se detallan a continuación:

Estudio Cosultoría Costo final (u$s) Contraparte Gestión operativa ferroviaria Ing. Alvadalejo 14.434 AFE Concesión líneas ferroviarias Ing. J.P. Martínez 32.750 IPTI - MTOP Asesoramiento en proyectos ferroviarios Ing. Preziosi 12.000 IPTI - MTOP Proyecto Ejecutivo – Tramo I vía férrea (línea MVD – Rivera) Ing. Piazza 61.000 AFE Proyecto Ejecutivo – Tramo II Ing. Granato 68.000 AFE Proyecto Ejecutivo – Tramo III Ing. Nunes 86.000 AFE Proyecto Ejecutivo – Tramo IV Ing. Herrera 84.400 AFE Elaboración Manual Ambiental Ingendesa 14.150 MTOP Proyecto ejecutivo para ampliación Puerto de Fray Bentos Cotec – Planave 190.000 ANP Estudio suelos Puerto Fray Bentos Ing. Servan 99.180 ANP Proyecto Ejecutivo Ruta 24 CSI Ingenieros 270.009 DNV - MTOP Sistema informático para UCP Netmasters 27.040 MTOP

63

De los estudios realizados se destacan los Manuales Ambientales para obras viales, ferroviarias y portuarias, los que constituyeron una excelente herramienta para el correcto análisis y mitigación de problemas ambientales. Estos Manuales Ambientales fueron aprobados por el BIRF y forman parte de todas las licitaciones y llamados que se efectúan. Los proyectos ejecutivos para el Puerto de Fray Bentos y para la Ruta 24, fueron utilizados como base para los llamados a licitación por parte de la ANP y la DNV respectivamente. En cuanto a los proyectos ejecutivos realizados para los 4 tramos de vía férrea en la línea Montevideo (MVD) - Rivera, AFE resolvió no utilizarlos por considerar que estaban proyectados técnicamente para un estándar de vía superior al requerido lo que implicaba un monto de inversión superior al financiamiento con que se contaba. Además de esto, un cambio en la estrategia de gestión determinó que se priorizara el llamado a licitación para que los privados rehabilitaran la vía férrea. Durante la implementación, se realizaron varias enmiendas al Proyecto, ajustando varios de su componentes, y si bien los objetivos generales se cumplieron en alguna medida, no todos se realizaron a través de la financiación Proyecto. El cuadro adjunto describe las enmiendas que se efectuaron durante el ciclo de vida del Proyecto:

BANCO MUNDIAL JBIC Fecha Enmienda

Fecha Extensión

Fecha enmienda

Extensión (último desembolso)

20/03/1998 Realocación 26/06/1998 Realocación

17/04/2001 Realocación 25/04/2001 Realocación

17/12/2001 Extensión y cancelación de u$s 5.000.000 31/12/2002 28/06/2002

Extensión y cancelación de u$s 1.974.000 30/06/2003

8/10/2002 Extensión y realocación 31/12/2003 30/06/2003 Extensión y realocación 31/12/2003 23/10/2003 Extensión y realocación 31/12/2004 29/12/2003 Extensión y realocación 30/06/2005 9/12/2004 Extensión y realocación 31/12/2005 30/6/2005 Extensión y realocación 30/4/2006 3/6/2005 Realocación 7/12/2005 Extensión, realocación y

modificación de paripassu 30/4/2006

DESCRIPCIÓN DEL PROYECTO Para el cumplimiento de los objetivos del Proyecto (punto 2), se establecieron dos componentes principales que actuaron interrelacionados: Infraestructura y equipamiento (95% del costo base del Proyecto): El componente de Infraestructura comprendía las siguientes áreas. a) Rehabilitación de rutas primarias y secundarias vinculadas al tráfico forestal de acuerdo a las normas del MERCOSUR y de aquellas conectoras de las principales zonas forestadas con las zonas de acopio y salida de la exportación. b) Rehabilitación de las principales vías férreas vinculadas al tráfico forestal, y adquisición de equipamiento para AFE.

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c) Mejoramiento del desarrollo de los puertos vinculados a la exportación de madera, principalmente el de Fray Bentos y obras complementarias en el de Montevideo. d) Estudio de localización y realización de una Estación de transferencia intermodal (plantación -ferrocarril - puerto). e) Mantenimiento del Programa de Mantenimiento de Caminos Rurales Departamentales a través de Convenios Anuales con las Intendencias Municipales participantes. f) Adquisición de equipos para AFE a efectos de reforzar y mejorar el parque rodante y para la ejecución de trabajos de mantenimiento y adquisición de equipos y/o maquinaria para apoyo en las tareas del puerto de Montevideo. Políticas institucionales (5% del costo base del Proyecto): El componente de Políticas institucionales comprendía los siguientes ítems: a) Reorganización de AFE e incremento de la participación del sector privado en las operaciones e inversiones, en especial en el sector vinculado a la forestación. b) Promoción de la mejora en las políticas de tarifas a través de la introducción de un sistema de Cargas a los Usuarios. c) Preparación de un estudio integral sobre el sector de transporte de mercancías por carretera. d) Preparación de análisis de aquellas obras civiles que pudieran ser necesarias para futuras expansiones de la red de transporte, desde el punto de vista de la ingeniería, económico y ambiental.

Descripción por modo de transporte Componente vial. El objetivo del programa incluido en este componente era la rehabilitación de carreteras y la realización de los trabajos de mantenimiento necesarias para atender el daño adicional que el transporte forestal pudiera ocasionar en las redes de rutas seleccionadas, de modo de bajar los costos de explotación y mantenimiento de los vehículos. El programa tenía 3 componentes: a) el transporte desde las plantaciones a través de caminos forestales departamentales hasta su sitio de acopio o hasta encontrar rutas nacionales, b) el programa de mantenimiento de los caminos departamentales, y c) el transporte por rutas nacionales hacia los puertos, o eventualmente hacia las plantas de procesamiento. En relación a los caminos forestales departamentales, el tipo de trabajo y la frecuencia de realización de los mismos, dependió del estado de los caminos y de la demanda de tráfico existente en ese momento. Este componente se llevaba a cabo este componente a través de Convenios entre el MTOP, la Intendencia Municipal correspondiente, y los productores forestales involucrados. El Programa de Mantenimiento de los Caminos Departamentales, fue la continuación del programa iniciado en el Proyecto de Transporte I, y tuvo como objetivo la ejecución por parte de las Intendencias Municipales participantes de tareas de mantenimiento vial en ciertos caminos departamentales de su jurisdicción, con apoyo y transferencia de tecnologías por parte de la DNV. En total se atendieron 9.000 kms de caminos por año, además de las obras de arte. Inicialmente se previó la ejecución de este componente por un año (1997), pero a partir del año 2002 se continuó con el financiamiento del mismo. En relación a las rutas nacionales, se preveía la rehabilitación de tramos de rutas de la zona forestal del litoral de nuestro país conectoras con el puerto de Fray Bentos, (rutas 24, 25 y 90), y rutas

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secundarias conectoras a Montevideo desde la zona noroeste del país (rutas 6 y 7). Durante el período de ejecución del Proyecto, por prioridades de gestión, la Ruta 90 y el tramo de Ruta 6 fueron desafectadas, si bien con posterioridad algunos tramos fueron ejecutados con otra financiamiento. Los Contratos de Rehabilitación y Mantenimiento (CREMA) fueron incorporados al Proyecto en la Enmienda de fecha 23/10/2003. Se trataba de contratos de mantenimiento por niveles de servicio, para una determinada red de carreteras y por un período de 4 o 5 años a cargo de una empresa contratista y con supervisión de la DNV. En total fueron 4 contratos que se venían ejecutando con el financiamiento del Préstamo BIRF 4395-UR (finalizado el 30/9/2003), y en los cuáles se encontraban tramos de rutas pertenecientes a la red forestal. La rehabilitación de rutas y puentes pertenecientes a la Megaconcesión también fue incorporada en la Enmienda de fecha 23/10/2003, ante la necesidad del Gobierno de mantener el financiamiento de la contrapartida local que debía realizar de acuerdo al Convenio suscrito entre el MTOP y la Corporación Nacional para el Desarrollo (CND) de fecha 5 de octubre de 2001 a través del cuál las partes acordaron dar y recibir en régimen de concesión los estudios, proyectos, construcción, mantenimiento, operación y explotación de las obras públicas de infraestructura según se detallaron en un anexo del mismo. La Megaconcesión surgió como una solución ante la escasez de recursos públicos para llevar adelante las obras de infraestructura imprescindibles para evitar el deterioro de la red vial nacional. Se concedió por 15 años la gestión de 1272 kms de carreteras de la red primaria (51% de la red primaria y 15% de la red nacional) y de 38 puentes (17% de los puentes de la red nacional). Era una concesión de costos compartidos, no pagaba canon y parte de los costos eran asumidos por el Concedente. El Concesionario contaba para financiar las obras con los ingresos generados por los peajes; por pagos fijos por kilómetro mantenido y un ingreso mínimo garantido por el Concedente, limitado en monto y duración para cubrir posibles disminuciones de los ingresos por peajes. A su vez se emitirían bonos en el mercado para la mayor participación de los privados. A partir del año 2005 con el cambio de Gobierno en nuestro país, y con la asunción de un nuevo Directorio en la CND y por consiguiente la CVU S.A. el Convenio tuvo algunas modificaciones, aunque esto no afectó a la marcha de las obras financiadas por el Proyecto. Componente ferroviario. Se previó la ejecución dentro de este componente de la rehabilitación de 2 tramos de vía en las líneas: Montevideo - Rivera y Florida Blanquillo, y también la adquisición del equipo de vía necesario para el mantenimiento de las mismas. El componente ferroviario en el transcurso del ciclo del Proyecto se vio afectado por varios cambios, tanto del punto de vista estratégico como el punto de vista estructural, lo que originó modificaciones en las obras de rehabilitación realizadas y también en las adquisiciones que se incluyeron en el Proyecto. El cuadro adjunto ejemplifica el tráfico de productos forestales transportado por tren durante los últimos años.

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1997 1998 1999 2000 2001 2002 2003 2004 2005

Madera aserrada Ton. 10.800 9.092 14.085 12.930 13.980 13.290 23.670 17.490

Madera en rolos Ton. 78.519 73.902 78.185 49.795 39.253 16.266 53.293 78.036 87.858 Total por tren Ton 78.519 84.702 87.277 63.880 52.183 30.246 66.583 101.706 105.318

Pese al aumento progresivo de la exportación de madera, el transporte por ferrocarril no obtuvo gran crecimiento, incluso disminuyó en algunos años, notándose una recuperación en los últimos dos años. Ante esta realidad el Gobierno optó por darle un cambio institucional de la empresa a través de cambios normativos. Fue a través de la promulgación de varias leyes y decretos que se procesó el cambio institucional de AFE, que conllevo a una modificación sustantiva en sus potestades. A continuación se enumeraran las principales leyes que influyeron en este componente. - Ley 17.243 (29/6/2000) - Se autorizó al Poder Ejecutivo a otorgar el acceso de empresas privadas al modo ferroviario y se dispuso transferir al MTOP una parte del subsidio antes destinado a AFE. - Ley 17.556, Art. 150 (18/9/2002) - Se traspasó al MTOP los cometidos, facultades y bienes relativos a la infraestructura ferroviaria. - Decreto 404/003 (1/10/2003) - Definió las líneas férreas económicamente sustentables. - Resolución s/n (27/11/2003) - Marco Regulatorio del Sector Ferroviario que estableció la nueva organización institucional del sector y definió las atribuciones que la DNV y la DNT ejercieron a través de las gerencias especializadas creadas en ambas Direcciones para ocuparse del modo ferroviario. - Ley 17930 (19/12/2005) (Presupuesto período 2006-2010) - Artículo 179 - AFE reasumió la responsabilidad de todas las actividades relativas a la infraestructura y el control de la circulación. Art. 180 – Autorizó a AFE a promover esquemas de asociación público – privada. Es en este contexto normativo en que a partir del 1 de enero de 2003 se efectivizó la separación del gerenciamiento de la parte de operaciones de la infraestructura: Esta reforma requirió que AFE actuara como una empresa comercial, financiándose con los ingresos provenientes del tráfico y con un subsidio estatal gradualmente en disminución, pasando el gerenciamiento de la infraestructura y las tareas regulatorias al MTOP. En el MTOP el manejo de la infraestructura ferroviaria se organizó dentro de la DNV en dos Gerencias: Explotación Ferroviaria y Vía y Obras, a las que correspondió la rehabilitación y el mantenimiento de los tramos de la red ferroviaria considerados económicamente sustentables. En cuánto a la regulación, estuvo a cargo de la Dirección Nacional de Transporte (DNT) Este esquema se llevó a cabo entre los años 2003 - 2005 inclusive, en el cual se hicieron varios llamados para rehabilitación de vía férrea y para la adquisición de maquinaria y repuestos. El MTOP realizó también en el año 2004 un llamado a licitación para la rehabilitación y mantenimiento de 1100 kms de vías férreas (las definidas previamente como económicamente sustentables). El llamado procuraba que empresas privadas se hicieran cargo de la inversión para la recuperación de esta red. Se presentaron dos consorcios con firmas extranjeras, pero la licitación fue declarada desierta.

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Finalmente, de acuerdo al artículo 179 de la Ley 17930 mencionada, AFE reasume la responsabilidad de todas las actividades relativas a la infraestructura y el control de circulación. Esto se hizo efectivo a partir del 1 de enero de 2006 con lo cual nuevamente AFE actúa como único organismo rector de la operación e infraestructura. Es en este marco en que actualmente AFE está trabajando en varios esquemas de Asociación Público Privada (APP), a efectos de conseguir inversión para la rehabilitación de tramos de vías y el aumento del volumen de carga a través de los operadores. Componente portuario El reporte final del Estudio del Programa de Infraestructura de Transporte de Productos Forestales (punto 1.4), basado en las proyecciones de demanda propuso y evaluó las inversiones consideradas necesarias en los puertos involucrados en el transporte de la producción forestal. Se consideró como premisa, que el transporte de la madera sería, principalmente en forma de troncos. En esa situación, consideró como puertos principales para la exportación de la madera, el Puerto de Fray Bentos y el Puerto de Montevideo, ambos bajo la jurisdicción de la Administración Nacional de Puertos (ANP) Las expectativas de exportación de la madera previstas en el mencionado estudio no se cumplieron por diversos factores de índole interno y externo, estando actualmente previsto el pico de la demanda para el año 2010. Pese a ello la exportación de madera por los puertos esta creciendo de manera paulatina y con la inclusión de otros puertos, según se muestra en el cuadro adjunto: Puerto 1997 1998 1999 2000 2001 2002 2003 2004 2005 Montevideo 433.322 315.852 362.441 391.383 373.841 354.443 676.085 941.584 1.207.730 Fray Bentos 125.351 170.080 182.834 284.357 332.357 400.496 450.662 413.148 380.391 NuevaPalmira 7.398 15.660 41.615 86.132 197.997 298.740 315.608 M bopicuá 161.909 219.411 TOTAL 558.673 485.932 552.673 691.400 747.813 841.071 1.324.744 1.815.550 2.123.140

(*)Valores en toneladas (**) El total por puerto incluye la madera en rolos, aserrada y chips

El componente portuario tuvo durante el período de ejecución del Proyecto algunos cambios que motivaron un lento avance de la ejecución financiera del componente. Esto fue motivado, entre otros factores, por la construcción dentro del área de influencia de Fray Bentos de un puerto privado (M'bopicuá) para la exportación de madera a cargo de la empresa ENCE de capitales españoles. Asimismo se inauguró una planta chipeadora en los alrededores de Montevideo y se realizó un llamado para el uso del Puerto de La Paloma para la exportación de chips que finalmente no se concretó. De esta manera, la inversión privada coadyuvó al cumplimiento de los objetivos generales de este componente del Proyecto establecidos en el Project Appraisal Document (PAD). En cuánto al Estudio para la localización de una Estación de transferencia intermodal (punto 4.1 d) surgido para permitir una racionalización de las conexiones con el sistema ferroviario como medio relevante en el transporte de la madera, fue postergado entre otros motivos por no cumplirse la demanda de la madera de la forma estimada.

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ANÁLISIS DE LA EJECUCIÓN Componente Vial Rutas y Puentes Se analiza aquí la ejecución de las rutas previstas originalmente dentro del Proyecto, así como también la ejecución de las rutas y puentes incluidas posteriormente (Punto 4.3.1.3.2.): Ruta Nº Tramo Long. aprox.

(km) Código Contratista Costo final (*) (u$s)

Obras previstas originalmente

7 Ruta 12 – Fray Marcos 14,90 FC 01 Hernández & González 6.019.273 7 San Jacinto – Ruta 12 27,80 FC 02 Techint 11.653.566 24 Ruta 2–Ruta 20 (N. Berlín) 21,80 FC 03 Colier 6.876.744 24 Ruta 20 – Ruta 25 27,00 FC 05 Colier 6.511.755 25 Ruta 24 – Young 24,00 FC 06 Hernández & González 6.306.870 25 Menafra – Ruta 90 19,30 FC 08 Colier 3.893.863 5 Pasaje ferroviario FC 14 Saceem 120.160 - Rambla portuaria 0,54 FC 15 Stiller 1.450.274 Total kms de rutas 134,80 Rutas Convenio MTOP-CVU 21 234km – Ao. Las Vacas 18,30 FC 16 Colier 2.471.556 2 Mercedes–Pte.San Martín 28,30 FM 01 R. Alvarez 4.290.777 3 472km000 – Río Damián 13,89 FM02 Hernández & González 3.958.434 5 Sauce – 462km000 9,95 FM 03 R. Alvarez 2.512.852 8 Ao. Sarandi– Rió Cebollatí 23,00 FM 04 Tracoviax 2.561.852 9 San Carlos – Rocha 37,50 FM 05 Tracoviax 3.951.413 11 Sta.Lucía- Villa Rodríguez 11,07 FM 06 E. Díaz Alvarez 3.293.063 5 P.de los Toros–270km000 43,78 FM 07 Colier 6.692.125 11 Ecilda Paullier–Juan Soler 25,00 FM 09 Colier 3.482.411(**) 11 San José– Villa Rodríguez 14,00 FM 10 R. Alvarez 1.973.977(**) 3 Ruta 26–Acc. Ao. Guaviyú 26,70 FM 36 Tracoviax 5.549.728 8 Minas- Ao. Marmarajá 29,00 FM 37 Tracoviax 4.943.412 Total kms de Rutas 280,49 Puentes Convenio MTOP-CVU

1 Río Rosario puente FM 11 Saceem 1.156.962 11 Cañada Echeverría puente FM 13 Bersur - Orinoco 166.968 11 Ao. El Laurel puente FM 14 Bersur – Orinoco 133.656 6 Ao. Sauce de Malbajar puente FM 22 Incoci 342.944 5 Ao. Bañado Rocha puente FM 16 Ptes. & Construcciones 222.096(**)

(*) El costo final incluye en algunos casos el uso de imprevistos y ampliaciones de Contrato (**)Obras no finalizadas. Valor financiado por el Proyecto

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Contratos de Rehabilitación y Mantenimiento (CREMAS) En el cuadro siguiente se describen los contratos financiados dentro del Proyecto:

(*) Costo de la certificación financiada en el Proyecto Mantenimiento de Caminos Rurales Departamentales Se continuó con los cometidos de los Convenios inicialmente financiados por el Proyecto Transporte I (Préstamo BIRF 3021-UR) pero fue objeto de sucesivas mejoras a lo largo de los años. Se realizó el mantenimiento de aproximadamente 9.000 kms de caminos departamentales de grava por año, mas la ejecución de obras de arte, lo que equivale a un 33% del total de la red vial de cada departamento. Estos Convenios se han ejecutado en forma ininterrumpida todos los años, siendo financiados por el Proyecto los correspondientes a los años 1997 y 2002 al 2005 inclusive. En estos años se ha mantenido un nivel de ejecución por parte de las Intendencias muy bueno, salvo alguna excepción puntual, oscilando éste en un orden superior al 92% de cumplimiento del total previsto por año. Caminos forestales (Convenios) De este componente se concretaron dos Convenios entre el MTOP, las Intendencias Municipales de Rio Negro y Rivera y los Productores forestales involucrados, para ejecución de caminos rurales de penetración a las plantaciones:

Intendencia Año Km. Costo (u$s) Río Negro 1999 27 240.000 Rivera 1999 24 294.000

En el caso del departamento de Río Negro, se financió la realización de un camino de penetración de la plantación con la Ruta 25; mientras que en el departamento de Rivera se realizaron 4 caminos de conexión de las plantaciones con la Ruta 5 y con la Ruta 27. Componente ferroviario Rehabilitación de vía férrea. El PAD preveía la rehabilitación de aproximadamente 300 kms de vía férrea en la línea Montevideo -Rivera y la línea Florida - Blanquillo.

Descripción Rutas Long. aprox

(km) Empresa Costo final (*) u$s

CREMA II y X 93, 99, 10, 37 y 104 240 CVC 7.258.834 CREMA VII 21, 22, 50 y 54 145 Temifax 212.435 CREMA IV 5, 43 y 20 207 Colier 1.487.382 Accesos a Montevideo 31 Cons. Mant. Vial 284.068

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Si bien se realizaron los proyectos ejecutivos para cuatro tramos de la línea Montevideo - Rivera (punto 3.2.2.4.), estas obras de rehabilitación no se llevaron a cabo por las cambiantes circunstancias coyunturales que sufrió AFE en todo este período. En cuánto a la línea Florida - Blanquillo, las restricciones financieras y presupuestarias que debió afrontar el MTOP, determinaron que esta línea que sólo servía para el transporte forestal, no se considerara prioritaria. Sí se realizaron, una vez efectuada la separación de la infraestructura y de las operaciones (Punto 4.3.2.4.), varios llamados de licitación con procedimientos del BIRF, de pequeños tramos de vía (entre 5 y 10 kms) en la línea a Rivera y adquisiciones, con el objetivo de ganar experiencia en la gestión, monitorear el mercado y establecer precios testigo para las provisiones habituales destinadas a la infraestructura. Los llamados fueron los siguientes:

Obra Tramo Licitación Contratista

Monto Contrato u$s

Costo final u$s

Renov. de vía – Durazno 203km–208km LPN 24/03 MONALI 486.173 Ampliación " " " 197km–203km LPN 24/03 MONALI 483.548

898.510

Renov. de vía – Tacuarembó 440km–445km LPN 32/04 Perforac. del Litoral 391.534 340.673

Renov.de vía – Piedra Sola (**) 382km–393km LPN 5/05 - 838.608 (*) - Renov. de vía – Valle Edén (**) 410km–420km LPN16/05 - 823.330 (*) - Renov.de vía – Rio Yi al N. (**) 208km–219km LPN 29/05 - 930.616 (*) - Mejoramiento en tramos red activa (**) Varios LPN 22/05 - 1.715.280 -

(*) Monto de la Adjudicación (**) Obras adjudicadas, posteriormente desafectadas por AFE

Tal como surge del cuadro se rehabilitaron aproximadamente 16 kms de vía en la línea Montevideo -Rivera, quedando desafectada la ejecución de los otros tramos por parte de AFE, al traspasarse el mantenimiento de la infraestructura nuevamente a ésta a partir del año 2006.

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Adquisición de bienes Se detalla a continuación el listado de adquisiciones que se realización con financiación del Proyecto.

Licitaciones AFE

Descripción Licitación Contratista Costo final u$s

Adquisición de maquinaria ANA y PRB LPI 27/97 Plasser y Theurer 829.491 Adquisición de 28 conjuntos de frenos de aire LPN 32/05 Knorr Bremse 97.901 " " " (AMPLIACIÓN) " " Knorr Bremse 20.978 Adquisición de 175 estabilizadores hidráulicos LPN 33/05 Geotec 27.978 Adquisición de componentes de circuitos de freno LPN 37/05 Ameco 92.105 " " " " (AMPLIACIÓN) " " Ameco 46.652 Adquisición de frenos de aire comprimido para vagones LPN 38/05 Ameco 104.812 Adquisición de 288 estabilizadores hidráulicos LPN 39/05 Geotec 95.644 " " " (AMPLIACIÓN) Geotec 47.822 Licitaciones DNV Adquisición de 10.000 m3 de balasto de vía LPN 27/04 H. y González 324.807 Adquisición de pequeño material de vía LPN 5/05 Servitec SRL 110.804 " " " (AMPLIACIÓN AFE) (*) Servitec SRL 55.402 Adquisición de soldadura aluminotérmica de rieles LPN 8/05 Railtech SRL 135.742 Adquisición de motores e insumos para zorras (Traspasada a AFE) (*) LPN 14/05 Modern Track Mach. 105.897 Adquisición de motores e insumos para zorras (Traspasada a AFE) (*) " " Ameco 36.327 Adquisición de motores e insumos para zorras (Traspasada a AFE) (*) " " Bartet & Ferraz 65.150 Adq. de repuestos e insumos para herramientas de vía (AFE) (*) LPN 17/05 Geismar, Railtech, 32.539 Adq. de repuestos e insumos para herramientas de vía (AFE) (*) " " Railtech 16.211 Adquisición de 3 cargadores frontales con retroexcavadora LPN 19/05 Tornometal SA 163.604

(*)Licitaciones llamadas por la DNV y traspasadas a AFE

Componente portuario Se detallarán de este componente los llamados llevados a cabo por la ANP en el marco del Proyecto. Extensión del Muelle del Puerto de Fray Bentos. La obra consiste en la extensión del muelle principal en 75 mts con el consiguiente refuerzo de las estructuras y bitas de amarre. La licitación para esta obra fue realizada en el año 1999 y adjudicada en el año 2000. No obstante esto, su ejecución se vio postergada hasta principios del año 2006, en que la obra fue incluida dentro del Convenio de Concesión entre el MTOP y la CND. El desarrollo de importantes inversiones privadas en el área de influencia de Fray Bentos especializadas en el tráfico maderero, sumado a que las condiciones del mercado internacional de productos forestales no crecía con el volumen esperado, determinó que Administración del momento no considerara prioritaria esta obra por lo que su inicio fue postergado. A partir del año 2005 la nueva Administración revió esta situación, y determinó la necesidad de continuar con la licitación. Los trabajos se iniciaron en marzo de 2006, estando prevista su finalización para enero de 2007. El contrato lo lleva a cabo el Consorcio ANHSA - Puentes por un monto total de unos U$S 5,5 millones. Reparación del muelle de Fray Bentos El impacto del buque maderero de bandera noruega "Rosita" mientras realizaba maniobras contra el

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muelle del Puerto de Fray Bentos en enero de 1999, le ocasionó importantes daños en el muro, la plataforma y la cimentación de pilotes de la esquina exterior del área cercana al punto de impacto. Para atender el costo de las obras de reparación y a efectos de una pronta respuesta, se solicitó al BIRF su financiamiento el cual fue otorgado. Los trabajos fueron ejecutados por la empresa Stiller. Una vez hecho efectivo el cobro del seguro correspondiente, la ANP reembolsó el importe financiado. Acondicionamiento en muelles 1 y 2 del Puerto de Montevideo. Esta licitación tenía como fin el lograr aumentar el ancho operativo de los muelles 1 y 2 para pasar de 10,4 mts a 16 mts, mediante la demolición de tinglados de los depósitos y del puente de unión entre ambos y la pavimentación total en concreto asfáltico de la zona existente de adoquines, mas el área anexada por la demolición de los tinglados. A la licitación se presentó un solo oferente con un precio final de un 100% superior al estimado de oficina por lo cual el BIRF recomendó la cancelación de misma y efectuar un nuevo llamado. Asistencia técnica. En el marco de las Asistencias Técnicas financiadas por el Proyecto se destacan las siguientes: Estudio del haz de vías en el Puerto de Montevideo. Este estudio tuvo como objetivo la identificación de los requerimientos de infraestructura ferroviaria en la interfase puerto-ferrocarril del Puerto de Montevideo y la elaboración de un anteproyecto de haz de vías para maniobras ferroviarias en el interior del recinto portuario que resultara adecuado para el tráfico previsible vinculado al transporte de productos forestales. Este estudio fue realizado por el Ing. Juan Tassano según el contrato firmado el 28 de enero de 2000. El estudio de fecha mayo de 2000 fue de recibo por la contraparte (Grupo de Trabajo de la Interfase MTOP-OPP-AFE-ANP). Si bien se enviaron al BIRF todos los requerimientos formales para su financiamiento con fondos del Proyecto, por razones administrativas ajenas al mismo, la consultoría fue financiada a través del PNUD. Este estudio de anteproyecto de opciones es una herramienta base para cuando la ANP decida realizar un proyecto definitivo. Estudio para la reparación del muelle del puerto de Fray Bentos Como consecuencia del impacto del buque mencionado en el punto 5.3.2. en el muelle del puerto de Fray Bentos, se necesitó con urgencia la realización de estudios para la evaluación de daños y la determinación del tipo de reparación requerido. La consultora Cotec - Planave que estaba realizando el Proyecto Ejecutivo para la ampliación del puerto fue contratada en forma directa para realizar los estudios. El BIRF dió su no objeción a esta contratación, pero finalmente fue financiado con fondos propios de la ANP. Estudio de actualización de demanda de transporte de productos forestales. Debido al tiempo transcurrido desde el momento en que se realizó el estudio previo al PTPF realizado por la Consultora CSI (año 1996), y a los cambios producidos en los escenarios forestales, se estimó conveniente la contratación de una Asistencia Técnica para realizar un Nuevo diagnóstico del sector forestal uruguayo a efectos de su actualización y revisión.

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Este estudio revisaría la información sobre plantaciones , producción, industrialización, exportación y transporte; actualizaría la información sobre los proyectos de inversión realizados y en estudio; revisaría los estudios anteriores y establecería las diferencias entre la realidad y lo proyectado y sus causas; plantearía un diagnóstico de la situación del sector y plantearía los escenarios futuros más probables del mercado internacional y del sector uruguayo, y efectuaría proyecciones tentativas en las diferentes fases de la actividad forestal que fundamenten las decisiones de inversión en el sector transporte. Este estudio fue adjudicado a la consultora Pike & Co. con la aprobación del BIRF, pero debido a que no se pudo concluir durante la ejecución del PTPF se solicitó y fue concedida su financiamiento con cargo al Préstamo 7303-UR. Está prevista la entrega del mismo para el segundo semestre del año 2006. Estudio de prefactibilidad de uso del embalse del Río Negro. El MTOP a través de la DNT, se abocó a la realización de un estudio de prefactibilidad de utilización del embalse del Río Negro y sus afluentes como infraestructura de soporte de las operaciones de transporte de la producción forestal. La importancia de este estudio radicaba en la necesidad de incorporar un modo de transporte alternativo a los caminos departamentales como conectores entre las plantaciones y las carreteras y eventualmente el ferrocarril, con los consiguientes altos costos de mantenimiento que implicaban. Dicho estudio fue adjudicado a la consultora Ariel Nieto y Asociados, habiendo sido realizado en el primer cuatrimestre del año 2006. Si bien los resultados del estudio se siguen evaluando, la factibilidad económica de la incorporación del modo fluvial al transporte de la madera, no surge rentable en primera instancia. De todos modos ahora se cuenta con una muy buena identificación y relevamiento de la infraestructura actual y proyectada en la zona de influencia del proyecto, así como también de normativa jurídica, de componentes económicos y ambientales. Empresas forestales y de producción importantes como la sueca Stora-Enso mostraron su interés en los resultados de dicho estudio, dado su interés en ubicarse en esa área de influencia.

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EJECUCIÓN FÍSICA - FINANCIERA Y DESEMBOLSOS DEL PROYECTO La tabla que sigue muestra el detalle de los componentes ya analizados, y que fueron financiados dentro del Proyecto, discriminando la inversión final entre el aporte del BIRF, del JBIC, y el Aporte Local:

INVERSIÓN FINAL

BIRF JBIC GOBIERNO TOTAL 1.A. Obras MTOP – Rutas Nacionales 44.582.193 17.569.559 29.864.160 92.015.912 1.B. Obras MTOP – Caminos Forestales 229.914 90.770 51.072 371.756 1.C. Contratos CREMA 4.652.114 1.800.821 2.790.800 9.243.735 2.Mantenimiento de Caminos Departamentales 17.670.309 6.976.495 10.650.024 35.296.827 3. Obras AFE 656.965 260.649 558.354 1.475.968 4. Obras ANP 1.111.687 5.900 474.820 1.592.408 5. Bienes AFE 1.371.083 413.203 454.750 2.239.037 6.A. Consultorías MTOP 6.B Consultorías AFE 37.559 1.196 16.632 55.387 6.C Consultorías PCU 6.D Consultorías ANP TOTAL 70.311.824 27.118.593 44.860.612 142.291.030

(montos en u$s) El avance físico - financiero del Proyecto por año, se muestra en el cuadro siguiente:

Año BIRF JBIC GOBIERNO Total invertido por año

Total invertido acumulado

1997 0 0 0 0 0 1998 8.028.347 2.690.088 5.221.859 20.584.463 15.940.294 1999 5.489.732 2.146.715 3.794.086 11.287.050 27.370.827 2000 8.172.059 3.725.428 5.358.891 20.221.648 44.627.205 2001 1.666.598 594.350 1.725.291 1.752.955 48.613.444 2002 3.741.741 1.338.164 2.817.476 7.062.476 56.510.825 2003 6.570.673 2.263.307 5.012.341 12.421.528 70.357.146 2004 14.913.139 5.608.210 8.148.198 31.151.981 99.026.693 2005 14.419.152 5.029.207 8.581.403 25.799.334 127.056.455 2006 7.310.383 3.723.126 4.083.000 19.617.655 142.172.964

(Montos en u$s) Desembolsos estimados y desembolsos reales BIRF:

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Estimado PAD anual 21.3 11.6 22.1 21.0 Estimado PAD acumulado 21.3 32.9 55.0 76.0 Real 0.0 10.0 5.5 11.2 0.6 3.7 6.6 15.9 12.9 3.9 Real acumulado 0.0 10.0 15.5 26.7 27.3 31.0 37.6 53.5 66.4 70.3

(Montos en millones de u$s)

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DESEMPEÑO DEL BIRF El relacionamiento con el BIRF, a través del Jefe del Proyecto y de los distintos técnicos que han participado en las distintas instancias durante la vigencia del Proyecto, le proporcionó tanto al MTOP como a los otros entes participantes (AFE y ANP), importantes aportes en el desarrollo de las políticas de transporte en general y de infraestructura y gestión en particular. El prolongado período de ejecución de este Proyecto (1997 - 2006) determinó que se requirieran varias modificaciones y ajustes en sus componentes a efectos de adaptarlo a los cambios de escenarios planteados. El BIRF participó activamente aportando su vasta experiencia en las áreas involucradas y mostrando a lo largo de toda la vida del Proyecto gran receptividad y flexibilidad .

El BIRF colaboró técnicamente con el Gobierno en la evaluación de las distintas alternativas presentadas para el transporte de los productos forestales.

DESEMPEÑO DEL PRESTATARIO Durante el período de vigencia del Proyecto, la ejecución no fue regular. Este desempeño se puede visualizar a través de las tablas incluidas en el punto 6. Le ejecución en los años 1987 y 1998 se comenzó a un ritmo mas lento del proyectado debido fundamentalmente a que los componentes ferroviario y portuario fueron postergados en el tiempo por decisiones estratégicas. En el año 2001 el Proyecto tuvo también una disminución importante en su ejecución motivada por la crisis económico-financiera que empezó a sufrir nuestro país que tuvo su punto mas alto en el año 2002 con una significativa reducción de los topes presupuestarios y de inversión . A partir del año 2003, y con la finalización del Segundo Proyecto de Transporte (Préstamo BIRF 4395-UR), se comenzó a ejecutar el componente vial con un ritmo ascendente y constante que se mantuvo hasta la finalización del Proyecto. En el año 2000 el MTOP se abocó a plantear una reforma estructural del modo ferroviario (punto 4.3.2.3) para tratar de lograr una mayor participación del sector privado. Respecto al componente portuario, la certeza de la concreción de puertos privados en el litoral para la exportación de productos forestales, postergó la obra de la extensión del muelle del puerto de Fray Bentos. Estos motivos llevaron a que en el año 2002 se le planteara al BIRF una reformulación del Proyecto a efectos de adecuarlo a los nuevos escenarios y a la realidad económica y financiera imperante en ese momento, y a partir de allí y hasta el final de la vida del Proyecto se adecuó el ritmo de ejecución y desembolsos con las metas planteadas. La UCP cumplió sus funciones en forma satisfactoria, siendo importante su rol en el relacionamiento con el BIRF y con las diferentes entidades involucradas tales como la DNV, DNT, AFE y ANP entre otros. Se presentaron al BIRF semestralmente los informes de seguimiento requeridos, incluyendo la información de la ejecución física y financiera y de los indicadores de gestión. Anualmente se envió la información estadística forestal. En cuanto a la presentación de los Informes de Auditoria de los Estados Financieros elaborados por el Tribunal de Cuentas de la República, los mismos fueron remitidos en tiempo y forma.

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ANÁLISIS DE RESULTADOS Las proyecciones realizadas por el Programa de Infraestructura de Transporte de Productos Forestales no se dieron en los hechos. Se habían estimado para el año 2004 que las exportaciones totales de los productos forestales llegarían a 4.2 millones de toneladas anuales, cifra no alcanzada. El déficit se debió a circunstancias desfavorables que ocurrieron en los mercados internacionales y que mantuvieron los precios por debajo de las estimaciones originales, lo que desestimuló la producción y por ende las exportaciones. En consecuencia, el tráfico de madera no ejerció excesiva presión sobre la infraestructura existente, y lento ritmo de ejecución del Proyecto, fundamentalmente del componente ferroviario, no tuvo efectos negativos en la obtención de los objetivos establecidos. Esta situación ha comenzado a cambiar, y las exportaciones de productos forestales están creciendo en forma significativa, no sólo en Montevideo, sino también en los otros puertos. (punto 4.3.3.2.). En general, el tráfico de productos forestales en el sistema portuario uruguayo creció más de un 50% en el año 2003, convirtiéndose así en la principal carga despachada, y este crecimiento se ha mantenido durante los años siguientes. También se produjo una modificación en cuánto al tipo de producto forestal final a transportar en relación al previsto en el Programa de Infraestructura de Transporte de Productos Forestales, motivada por la existencia de plantas de producción de chips. Independientemente de que los resultados en cuanto a la exportación de productos forestales no resultaron de acuerdo a lo previsto, la plantaciones siguieron creciendo a un ritmo constante y pese a tener un leve decrecimiento entre los años 2001 y 2003, los nuevos escenarios forestales (instalación de dos plantas de celulosa, con la posibilidad de una tercera) han hecho retomar los niveles de forestación, alcanzando en el año 2005 las 700.000 hectáreas plantadas.

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders JBIC did not have comments on the ICR

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Annex 9. List of Supporting Documents Uruguay Country Assistance Strategy (1997, 2000, 2005) and CAS Progress Report (2002) Uruguay Forest Products Transport Project Appraisal Document, 1997 Project’s ISR and Aide Memoire (1998-2006) Project’s Progress Report (Semi-Annual, produced by Client) Uruguay Transport Infrastructure and Rural Access PAD, 2005 Uruguay Second Transport Project ICR, 2004 Uruguay Policy Notes on Transport Sector, 2004 World Bank Report: A Reform Agenda for the Uruguayan Transport Sector, 1996