Document of

The World Bank FILE CV PYFOR OFFICIAL USE ONLY

Report No. 1721b-PA

STAFF APPRAISAL REPORT

FIFTH HIGHWAY PROJECT

PARAGUAY

February 8, 1978

Latin America and the CaribbeanProjects Department

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Currency Equivalents

Currency Unit = Guarani. (¢)US$1.00 = 1260¢1 = US$0.008¢1,000,000 = US$7,936.50

Fiscal Year

January 1 - December 31

System of Weights and Measures

Metric

1 meter (m) = 3.28 feet (ft)1 kilometer (km) = 0.62 mile (mi)1 square kilometer (sq km) = 0.386 square mile (sq mi)1 metric ton (m ton) = 1.1 US short ton (sh ton)

Abbreviations and Acronyms

AADT - Annual Average Daily TrafficADT - Average Daily TrafficANNP - Administracion Nacional de Navegacion y PuertosCNCE - Consejo Nacional de Coordinacion EconomicaDGT - Direccio'n General de TransporteDGV - Direccion General de VialidadER - Economic ReturnFLOMERES - Flota Mercante del EstadoGDP - Gross Domestic ProductIDB - Inter-American Development BankLAP - L;neas Aereas ParaguayasMOPC - Ministerio de Obras Publicas y ComunicacionesOCIPT - Office of Coordination and Integral Planning of TransportONP - Oficina Nacional de ProyectosPCAL - Presidente Carlos Antonio Lopez (railway)SAE-EIT- - Sociedad Argentina de Estudios - Estudios de Ingenieria yCONTEC Transportes - CONTEC Ingenieros Consultores (consultants)STP - Secretar'a Tecnica de PlanificacionTAM - Transportes Aereos MilitaresUNDP - United Nations Development ProgramVOC - Vehicle Operating CostsVPD - Vehicles per Day

FOR OFFICIAL USE L. iLY

STAFF APPRAISAL REPORT

FIFTH HIGHWAY PROJECT

PARAGUAY

TABLE OF CONTENTS

Page No.

I. THE TRANSPORT SECTOR ........................ *......... 1

A. General ...................... eevv4e*@ 14006.000

B. The Transport System .............. .C. Planning, Coordination and Financing ............. 3D. Recommended Sector Improvements and Developments . 4

II. TEE HIGHWAY SUBSECTOR ....... *........ .............. 5

A , The Higxhway Network ...............*so5....... 5B. Characteristics and Growth of Road

Traffic and Regulations ..................... 6C. Highway Administration O.. ....................... 7D. Highway Planning .... .............. * ......... ............. . 8

E. Highway Financing ........ ........................* 8F. Highway Engineering ........ .. ............................ . 8

G. Highway Construction ............................. 9H. Highway Maintenance ......... *.................. 9

III. PAST AND ONGOING ASSISTANCE TO THE HIGHWAY SUBSECTOR .. 10

A. Overview ..................... .................... 10B. Projects Completed ........ ....................... 10C. Projects Under Way ........ 0..0...................... 12D. Summary Assessment ...... ........ ... .. .......... ... . 13

IV., THE PROPOSED FIFTH HIGHWAY PROJECT ......... . ........... 13

A. Project Objectives and General Description . .... 13B. Cost Estimates and Financing .................... 15C. Execution and Procurement ........... o ......... 17D. Risks o ................. o ................. * .O.*....... .. 19

This report has been prepared by Messrs. Raul Paraud (Engineer), Robert Rafloski(Economist) and John Sargent (Economist) and edited by Miss Virginia Foster.

This docvment has a mtricted distr*ution ad Way be used by recipients only in the performanceol their olcial duies. Its contents ma, oe 0wrwtU b diKcosed without World Bank authorization.

,ABLE OF CONTENTS (Continued)

Page No.

V. UPGRADING OF THE CORONEL OVIEDO-SAN ESTANISLAO ROAD ... 20

A. Description .................... .................. 20B. Preparation and Engineering ...................... 20C. Project Impact . .............. ................... . 21D. Economic Evaluation .............. .. .............. 21

VI. THE HIGHWAY MAINTENANCE PROGRAM ................. ...... 25

A. Background and Preparation ....................... 25B. Description ...................................... 26C. Project Requirements ............................... 27D. Project Impact and Adequacy of Technology ........ 28E. Economic Evaluation v .. . . 29

VII. IMPROVEMENT OF TRANSPORT SECTOR MANAGEMENT ............ 33

A. Enforcement of Vehicle Weight Regulations .... ..... 33B. Technical Assistance to DGV ....................... 33C. Strengthening of Transport Planning ............... 34

VIII. AGREEMENTS REACHED AND RECOMMENDATION ................. 35

TABLES

1.1 - Average Transportation Sector Investment as a Percentof Total Public Sector Investment (1965-1980) .... 37

1.2 - Actual Estimated and Projected Road Network underMaintenance by MOPC (1970-1982) .... .............. 38

2.1 - Annual Average Daily Traffic by Type of Road Surfaceand Type of Vehicle (1976) ....................... 39

2.2 - Gasoline and Diesel Oil Consumption (1965-1975) .... 402.3 - Vehicle Registration (1969 and 1975) .... ........... 412.4 - Highway Expenditures and Road Users' Contribution

(1965-1976) ...................................... 42

3.1 - Data on Highway Projects and Other ProjectsIncluding Highways ............................... 43

4.1 - Estimated Schedule of Disbursement ................. 444.2 - Tentative Implementation Schedule ................ .. 45

5.1 - Design Standards for the Coronel Oviedo-Tacuara-San Estanislao Road ..... ......................... 46

5.2 - Summary of Construction Cost Estimates of theCoronel Oviedo-Tacuara-San Estanislao Road ....... 47

5.3 - Construction of the Coronel Oviedo-San EstanislaoRoad - Traffic Flows ............................. 48

5.4 - Coronel Oviedo-San Estanislao Road -Summary of Vehicle Operating Costs ............... 49

5.5 - Results of Economic Evaluation -Coronel Oviedo-San Estanislao Road .... ........... 50

TABLE OF CONTENTS (Continued)

Page No.

TABLES (Continued)

6.1 - Inventory of Roads Under Maintenance (1976) ........ 516.2 - Annual Cost of Maintenance per Kilometer

by Type of Road ..... *........................ *... 526.3 - Tentative List and Cost Estimate CIF Asuncion

of Maintenance Equipment ......................... 536.4 - Maintenance Budget Requirements - 1979-1982 ........ 546.5 - Benefit Cost Ratios for All Road Sections and for

Sections with the Highest and Lowest ADT .......... 556.6 - Total Benefits and Costs - 1980 ..... ............... 56

ANNEXES

1. Organization and Staffing of Project Unit ............ 57

2. Road Betterment Program .............................. 60

3. OCIPT Program of Activities and Cost Estimate for1978 and 1979-1981 ........ .. .................... . 61

CHARTS

World Bank 17310 - Organization Chart of the Ministry ofPublic Works and Communications

World Bank 17311 - Organization Chart of the Directorateof Highways

World Bank 17536 - Organization Chart of the Project Unit

MAPS

IBRD 12831 - Paraguay - Main Highway NetworkIBRD 12832R - Paraguay - Highway Network - Southern Region

This report is based on information provided by the Government,in particular, the Ministry of Public Works and Communications; by theconsultants Jorgensen (US)-Tecnipar (Paraguay) and SAE (Argentina) EIT-CONTEC(Paraguay) and on the findings of two appraisal missions in February and May1977 and a post appraisal mission in October 1977 consisting of Messrs. RaulParaud (Engineer), Robert Rafloski (Economist) and John Sargent (Economist).

I. THE TRANSPORT SECTOR

A. Geaeral

1.01 The Republic of Paraguay is landlocked in the middle of SouthAmerica; its most important transport link to the sea is provided by theriver system formed by the Paraguay River which flows north-south across thecountry to join the Parana River at the border with Argentina (Map IBRD 12831).About 80% of the country's population of 2.4 million and most of its economicactivity are located east of the Paraguay River in the "Triangulo" area,roughly defined by its corners at Asuncion (the capital), Encarnacion, andPuerto Presidente Stroessner. Since the country's economy is based mainlyon primary and processed agricultural products, transport improvements andmaintenance of the present system will be major factors in facilitatingfurther development. In order to develop Paraguay's agricultural potential,the Government is pursuing a policy of intensive internal colonization; roadshave been provided to support these efforts and also to integrate scatteredcenters of agricultural and industrial production into the national economy.The transport sector has recently been receiving the largest share of publicinvestments (Table 1.1), and the basic transport system--essentially roads--nowexists. However, continued emphasis on extending and improving the road systemis needed. Road transport is the main mode used for domestic freight andpassengers. River transport, except for small amounts of bulk cargo, is notsignificant, but it provides the most important link to the sea, carrying some80% of external trade.

B. The Transport System

(i) Highways

1.02 Paraguay's highway network, including the primitive track systemserving the Chaco, totals about 8,500 km, of which some 6,700 km are under thejurisdiction of the Ministerio de Obras Publicas y Comunicaciones (MOPC)(Chart 17310). Of the latter, some 87% are unpaved and susceptible to closurebecause of rain for up to 100 days per year. Road development has beenconcentrated on paving the more heavily trafficked roads and extending thesystem (Table 1.2). The network as a whole provides acceptable transport tomost populated areas of the country. However, due to the extent of theunpaved system, adequate maintenance is critical, and improvements are re-quired to meet growing traffic volumes and facilitate the development of newagricultural areas.

1.03 Given the nature of transport demand with relatively short distances,many scattered, low volume production centers and a few concentrated consump-tion areas, road transport is, in general, the most economic mode. Domestictrucking, which is growing rapidly, is highly competitive, loosely regulatedand handled by small local firms or individuals. Bus transport is also highlycompetitive but more closely regulated; companies are generally run by individ-ual owners or cooperatives. Available truck capacity appears underutilized,whereas buses maintain a high occupancy rate. More than half the traffic onthe system consists of buses and trucks. Paved roads carry an annual averagedaily traffic (ADT) of about 1,000, while gravel and earth roads carry onlyabout 100 vehicles per day (VPD). The highway subsector and its administrationare discussed in full in Chapter LI.

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(ii) River Transport

1.04 The Paraguay and the Parana are the principal navigable rivers ofParaguay and, with Argentina's Rio de la Plata, constitute a 1,600-km systemalong which the bulk of Paraguay's foreign trade is carried; most of thistrade is transshipped in Buenos Aires or Montevideo. A dredging program main-tains a navigable depth of 3 m. This has eliminated the costly lightering ofgoods during low water periods. Also, aids to navigation have been installed,and navigation at night is now possible.

(iii) Ports

1.05 Ports handle about 80% of Paraguay's international traffic. ThePort of Asuncion, improved with Bank financing (Loan 437-PA, US$2.8 million,December 1965), is by far the largest of the country's ports. It serves themost important productive areas and is the only port equipped with modernberthing facilities and cargo-handling equipment. It clears about 25% of thecountry's import volume 1/ and 50% of the export volume and river-bornedomestic trade. Port capacity at Asuncion is sufficient. Limited investmentsare needed to renew obsolete equipment and facilities. In addition to Asuncion,there are several minor ports which handle small volumes of local and inter-national traffic. Paraguay's ports are satisfactorily managed by the semi-autonomous National Administration of Navigation and Ports (ANNP).

(iv) State Merchant Fleet

1.06 The Flota Mercante del Estado (FLOMERES), a semi-autonomous Govern-ment agency, has a small and aging merchant fleet of 22 operating ships witha total carrying capacity of about 20,000 tons (capacity per vessel rangesfrom 250 to 1,100 tons), and two passenger ships. FLOMERES' traffic averagesmore than 150,000 tons annually, mostly on the Paraguay-Parana-Rio de la Platariver system; this represents about 20% of the country's total import andexport volume.

(v) Railways

1.07 The state-owned Presidente Carlos Antonio Lopez (PCAL) railway isrun by a semi-autonomous Government agency under the responsibility of MOPC.The railway crosses the "Triangulo" area from Asuncion to Encarnacion (376 km)and is linked by ferry with the Argentine railway. The neglected condition ofthe track and rolling stock has made railway service inefficient, unattrac-tive and uneconomic. Traffic has been generally declining since 1950, withpassenger traffic dropping from over 2.0 million p.a. at that time to about0.2 million in 1966, at which level it has remained fairly constant. Totalfreight in 1975 was only about 100,000 tons, a decline of 30% from 1974.This decline was due to the closure of the Argentine market for Paraguayanprocessed wood. In 1977, this market slowly began to open up again.

1/ Principal imports are crude oil, fuels and lubricants, which amounted to250,000 tons in 1975, or about 60% of total port imports. All arehandled at the private pier for the Paraguayan refinery (REPSA), atVilla Elisa, just south of Asuncion.

1.08 The continued operation of PCAL is a permanent tenet of Governmentpolicy. The railway does not attract sufficient traffic to be financiallyself-sustaining. In 1971, the Bank obtained a Government undertaking to limitrailway subsidies to revenues obtained from earmarked taxes on gambling andsocial insu-ance. Under this agreement, the deficit of the railway has beenmaintained at moderate levels, increasing from US$680,000 in 1971 to US$900,000in 1976. Several studies, including OCIPT's Transport Plan, have suggestedlimited track rehabilitation which would maintain the railway in operation atlesser costs and would allow it to increase its freight traffic slightly. TheGovernment is currently exploring the possibility of obtaining a loan of abouUS$20 million from Argentina for the modernization of PCAL. If applied to thelimited rehabilitation recommended by previous transport studies, such a loanshould allow PCAL to improve its service and to continue to provide an alter-native to river transport and trucking along the Paraguay-Argentina route. Itwould be important, however, to maintain a strict limit on the scope of theproposed improvements. The Bank, during negotiations, obtained an agreementwith the Government that, over the project period (1979-1982), it would (a)not undertake investments in PCAL's permanent way and rolling stock withoutprior review by OCIPT and (b) transmit the findings of the above reviewto the Bank in case of investments of more than US$5 million in any givenyear. Such review would include an assessment of the impact of the proposedinvestments on public finances.

(vi) Air Transport

1.09 Paraguay has two scheduled airlines, both of which operate agedaircraft. The largest, Transportes Aereos Militares (TAM), is state-ownedand provides scheduled domestic service. The other, Lineas Aereas Paraguayas(LAP), which is also operated by the Paraguayan Air Force, provides inter-national services to nearby Latin American countries. International passengertraffic is growing rapidly and has more than tripled since 1964. Domestic airtraffic, while low in terms of absolute numbers, is important because it oftenconstitutes the only means of transport among various sections of the country,especially during the wet season when many roads are closed.

1.10 Growth of domestic air transport is hampered by antiquated aircraft,inadequate air fields and poor navigational aids. The need for aviationinfrastructure and for fleet and institutional development is readily apparent.The Government, using funds from Credit 587-PA, is currently preparing aproject for the Bank's consideration which would include improvements to airfields, provisions for navigational aids and institutional reforms. A newair terminal at Asuncion (with capacity for 800,000 passengers p.a.) is underconstruction (financed by the Central Banks of Paraguay and Argentina and theBank of America).

C. Planning, Coordination and Financing

(i) Planning and Coordination

1.11 Modal agencies identify deficiencies within the submodes and preparea five-year financial program. Highway, shipping and rail plans are formu-lated through MOPC while the Defense Ministry controls air transport investment.

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The five-year investment plans are coordinated through the Secretariat Tecnicade Planificacion (STP), which is responsible for overall economic planning.This agency examines the economic viability of the investment plans on thebasis of expected economic and financial resources and of social, economic andpolitical goals. The draft plan is then submitted to the Consejo Nacional deCoordinacion Economica (CNCE). After approval by this council, which iscomposed of the President and the Ministers, the plan is submitted to Congressfor approval and becomes the planning guideline for the subsequent five years.

1.12 One of the major problems in the transport sector has been the lackof overall sector policies and coordination of investment decisions. Decisionshave been made on a project-by-project basis without an understanding of anindividual project's impact on the transport sector or its implications forthe cost of transport. Since the share of transport sector investment willremain large in relation to total public sector investment (Table 1.1), theplanning and coordination of these investments should be strengthened. TheGovernment took the initial step in addressing this problem by creating theOffice of Coordination and Integral Planning of Transport (OCIPT) within MOPCunder the Bank's Fourth Highway Project (Loan 1059-PA) (Chart 17310 andparagraph 3.08). The creation of OCIPT was the major recommendation of theTranspor.t Survey which consultants BCEOM (France)/ENECOM (Brazil) completed in1973, with UNDP financing and the Bank as executing agency.

1.13 The creation and development of OCIPT under Loan 1059-PA has been afirst step toward establishment of adequate capacity to advise the Governmenton transport planning and coordination. The task of developing OCIPT is farfrom complete, and further strengthening would be included under the proposedproject. Although the Government has not indicated any intention to curtailOCIPT's development, the operating budget of OCIPT for 1977 was below require-ments, and OCIPT's ability to continue data collection and to carry out itsplanning function has been impaired. The Government confirmed, at the time ofnegotiations, that it would continue to support the development of OCIPT(para 7.03).

(ii) Financing

1.14 Government investment in transport infrastructure is budgeted by theMinistries, mainly the Ministries of Public Works and Communications and ofDefense, for allocation to the modal agencies. MOPC is responsible for civilworks pertaining to civil aviation, although this mode is under the juris-diction of the Ministry of Defense. Each Ministry submits its annual budgetto the Ministry of Finance every September, following the five-year planningguidelines approved by the Congress and CNCE.

D. Recommended Sector Improvements and Developments

1.15 OCIPT has been functioning since early 1976 and, with assistancefrom consultants SAE-EIT-CONTEC (Argentina/Paraguay), has prepared the feasi-bility studies for road projects and a ten-year investment program for high-ways, ports, river shipping and the railroad, as well as several road feasi-bility studies. OCIPT has also prepared a series of recommendations concerningrevisions to road user charges, maximum axle loads and truck sizes and improve-ments to truck and bus industry operations and organization. These studies

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are competent, and the recommendations appear well thought out. The OCIPTten-year program recommends that the Government address the following priorityareas.

(i) Highway Infrastructure

1.16 Network improvements should include the area north of the Asuncion-Puerto Presidente Stroessner road; the feeder road system should be expandedto link agricultural production areas to the Paraguay River; an earth surfacelink should be provided from Capitan Meza to Puerto Presidente Stroessner andaging paved roads should be resealed and strengthened as necessary. Theseproposed investments would require about 1.5% of projected gross domesticproduct (GDP) over the ten-year period 1977-1986. This is less than the 1.7%of GDP used for road investments over the ten years to 1976.

(ii) State Merchant Fleet

1.17 One of the more important studies carried out by OCIPT dealt withthe improvement of the river fleet operation. Most of the traffic handled bythe present fleet is carried by self-propelled ships, an expensive method inshallow river waters. OCIPT has recommended that a push-tow fleet, eitherprivate or state-owned, be put into operation. This would gradually replacethe existing fleet over a ten-year period.

(iii) Railways

1.18 Within the framework of the Government policy to maintain railwayoperations, OCIPT has devised a plan (total investment cost about US$21.5million) for rehabilitation of PCAL track and purchase of locomotives androlling stock. The plan would include improvements in the quality of serviceand would allow the railroad to be cost competitive with truck transport andattract a reasonable level of cargo.

II. THE HIGHWAY SUBSECTOR

A. The Highway Network

2.01 The inventory carried out in 1976 by consultants Jorgensen-Tecniparshows that the network under maintenance was about 6,689 km, of which only883 km, or 13%, were paved (Table 1.2). An additional 1,830 km, serving theChaco Region, are maintained by the Army. The network as a whole grew between1970 and 1976 at an average annual rate of 3.4%, and, between 1976 and 1982,the projected annual average rate of growth is about 4%.

2.02 Road development really commenced in the 1950s, when the totalnetwork was only about 850 km; by 1960, the network was about 2,165 km, ofwhich about 9% was paved. Efforts were concentrated on connecting the eco-nomic and population centers and on paving the most heavily trafficked roads.Most connections are still only to earthwork standards with no drainagestructures or pavement and have to be closed after rain to avoid major dete-rioration and subsequent repair. The average closure time per year is up to100 days, hampering communications and economic development of vast areas ofthe country.

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2.03 The area best served by roads is the southeastern part of the

country, east of the Paraguay River (Map IBRD 12832R), where the economicactivity is now concentrated. The two principal inter-urban routes, Asuncion

to Puerto Stroessner (about 376 km) and Asuncion to Encarnacion (about 370 km),

are paved all-weather roads. The rest of the paved roads are mainly withinand around Asuncion.

B. Characteristics and Growth of Road Traffic and Regulations

2.04 Existing historical traffic survey data show large disparities, owingmainly to the variety of their sources. The more consistent data are from the

UNDP-financed transport study (1973), MOPC's annual traffic counts (1973-1975)

and recent preinvestment studies. The proposed project would support thedevelopment of a systematic traffic counting system (para 7.06). The recent

traffic survey taken in 1976 indicates that the ADT on the system is about184 vehicles (Table 2.1). Paved roads carry an average of 1,020 VPD while

secondary earth, the least trafficked roads, carry about 11 VPD.

2.05 The composition of traffic and vehicle kilometrage by vehicle typeare fairly evenly distributed on the several types of roads, with light

vehicles accounting for about 45% of the traffic and buses and trucks about55%. There are no reliable data on traffic growth over the network as awhole but, when individual roads have been analyzed and traffic statisticsare available over a period of time, traffic appears to have been growing at

an average of about 7.7% p.a., ranging from 5% p.a. to 10% p.a. These rates

are consistent with fuel consumption statistics, which show annual growthrates of about 6.5%, with diesel fuel, used mainly by trucks and buses,averaging about 9% p.a. growth (Table 2.2).

2.06 Vehicle fleet statistics are not collected on a regular basis, and

no census of the operating fleet has ever been taken; all census counts todate have been made by tallying vehicle registrations. This system is notsatisfactory since vehicles can enter the country on a temporary license andremain indefinitely without being registered officially. Also, the system

does not account for vehicles removed from service. While the actual numberof vehicles may be questionable, the statistics indicate the broad picture,with registrations growing at about 12% p.a. (Table 2.3). Bus transport has

shown the highest rate of growth, with registrations growing from some 2,000

buses in 1969 to about 6,500 in 1975.

2.07 Road transport is regulated by the General Transport Directorate (DGT),which is under the responsibility of MOPC. DGT approves route licenses annually,regulates fares for medium and long-distance service for passenger transportand maintains operational standards for inter-urban buses. Only companies

ranging in size from 2 to 45 buses are permitted to carry passengers for hire.The law only requires licensing of international truck transport. Domestic

freight transport is practically unregulated.

2.08 Overloading of vehicles remains a serious problem in Paraguay,especially around the area where the Itaipu dam is being built. Trucks from

neighboring countries carry heavy loads for the construction works, damaging

the local network. Consultants SAE-EIT-CONTEC carried out a study of the

overloading problem, which showed that the legal axle load limit of 10 tons

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is exceeded, on average, by 40% by three axle single trucks and by a muchhigher percentage by the tractor and semi-tractor combinations. An economicanalysis prepared by the same consultants shows that an increase of the legalaxle load from 10 to 11 tons would be advisable and that, more important,stricter enforcement of the weight regulations is imperative. MOPC officialsfeel that an increase in the legal limit would lead to further overloading.They agree that the most pressing problem is to develop a more effectivecontrol system. The three existing weighing stations are insufficient, andtheir operation relies too much on the objectivity of the weighing stationattendants. The present project will provide for more effective enforcementof axle weight regulations (para 7.01).

C. Highway Administration

2.09 For administrative purposes, the highway network is classified intonational or primary highways, departmental or secondary highways and localor feeder roads. The Direccion General de Vialidad (DGV), which is one ofthe General Directorates of MOPC (Chart 17311), has overall responsibilityfor planning, constructing and maintaining all national and departmental roadsin the country (about 80% of the total network). MOPC's Directorate of LocalHighway Boards (Juntas Viales) ensures central coordination of constructionand maintenance of local roads. Construction and maintenance of some of thefeeder and development roads are entrusted to the other Directorates withinMOPC. In addition, construction and maintenance of agricultural feeder roadsare carried out by the Ministry of Agriculture, and the Army has constructed,and maintains, about 1,800 km of roads in the Chaco area. The only roadlocated in that region which is not under military jurisdiction is theTranschaco Road, of which about 300 km are being built by MOPC with financingprovided by IDB.

2.10 DGV was created in 1947 as a traffic regulatory body, but, in thelate 1960's, it was reorganized to assume full responsibility for preparingand carrying out highway programs and highway administration. Separatedepartments were created for engineering, maintenance, equipment and adminis-tration. The Director exerts strong authority over all the branches of theorganization. DGV has a staff of about 30 engineers, six of whom are in theAsuncion Central office. Because of the high demand for, and attractivesalaries offered to, qualified professionals between 1974 and 1976 by theItaipu (Brazil-financed) and planned Yacireta-Apipe (Argentine-financed)hydroelectric works over the Parana River, many experienced engineers leftVialidad's service; this has created a serious understaffing problem.

2.11 In an attempt to correct the situation, DGV engaged about sevenyoung engineers in 1976 and granted salary increases up to 25%. This increase,coupled with incentives such as housing facilities for field personnel, theuse of a Government vehicle and retirement plans, has reduced the exodus ofVialidad personnel. However, it remains difficult to attract experiencedengineers. The present project would include the establishment of a ProjectUnit (para 4.14), which would be in a position to offer competitive salariesto attract experienced engineers and managers necessary to launch the project.This temporary solution would provide the time necessary to study a permanentsolution based on an assessment of long-term compensation trends (para 4.15).

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D. Highway Planning

2.12 Until 1975, highway planning was the responsibility of MOPC's Planning

Unit on the basis of very limited data. The Unit never developed sufficient

capacity for the task. Under the Fourth Highway Project, the Government cen-

tralized all highway planning efforts under OCIPT. Since 1976, OCIPT has begun

systematic collection of data relevant to proper transport planning and has

undertaken a series of transport studies, including detailed feasibility

studies for about 400 km of roads. OCIPT also examined about 3,400 km of

roads for inclusion in the ten-year investment program, 1977-1986.

2.13 Highway investments have increased substantially from an average of

US$2.8 million over the period 1970-1975 to some US$23.0 million in 1976

(Table 2.4). The rapid jump in 1976 is due to expenditures for the Transchaco

route (US$9.0 million), the bridge over the Paraguay River at Villa Hayes

(US$6.0 million) and the two Bank-financed roads, Mbocayaty-Colonia Indepen-

dencia and Encarnacion-Pirapo (US$8.0 million). Construction expenditures

for projects under way through 1978 would average US$29.0 million per year.

OCIPT's plans for investment in highway construction commence in 1979, when

it is expected that the works committed thus far would be completed. The plan

wouLd require an investment in highway construction of about US$33.0 million

(1976 prices) per year through 1986. The plan considers that projected

revenues from road user charges would be adequate to sustain this level ofhighway expenditures. Increased importance would have to be given to the

financial programming of current and capital outlays for highways.

2.14 Consultants Jorgensen-Tecnipar have recently completed inventories

of the network under maintenance (Table 6.1), but an inventory of the overallroad network has not been carried out. Since such an inventory is essentialfor planning purposes, it would be carried out under the project not later

than the end of 1980. The Bank obtained assurances at the time of negotiationsthat such inventory would thereafter be updated at least every five years.

E. Highway Financing

2.15 Highway financing procedures are outlined in paragraph 1.14. Over

the period 1970-1975, about 40% of total highway construction, averaging about

US$1.1 million per year, was financed by external borrowing. The remainingfunds came from the general budget, with revenues from highway tolls beingearmarked for the Transchaco road and a portion of revenues from taxes on

fuels and the surcharge on imports earmarked for maintenance. Revenues fromroad user charges have been growing at about 13.5% p.a. since 1972 (Table 2.4).

The import surcharge constituted 57% of total road user taxes (US$19 million)

in 1975. Overall road user revenues for the ten-year period have been more

than double (US$11.7 million equivalent p.a.) all highway construction and

maintenance expenditures. It is estimated that, over the next five years,

proceeds from road user charges would be adequate to support increased highwayexpenditures, especially for maintenance.

F. Highway Engineering

2.16 In 1954, DGV adopted a set of design standards that has not sincebeen updated. Consequently, when major construction is to be carried out,

the consultants preparing the designs are requested to develop standards to

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fit the circumstances of the specific project. The standards for the proposedproject (Table 5.1) have been approved by the Government and are acceptable.However, for an orderly development of the highway network in the future, auniform set of design standards and construction specifications for the variouscategories of roads and topographic conditions is required and would be devel-oped under the project. During negotiations, the Bank obtained assurancesfrom the Government that, no later than December 1979, DGV would adopt a setof design standards and construction specifications after consultation withthe Bank.

2.17 DGV prepares designs for minor improvement of feeder roads, butmajor designs are normally carried out by consultants. The last five yearshave witnessed a rapid development of the local consulting industry. This isan outcome of Government policy (embodied in a Decree issued in 1972) foster-ing the participation of local consultants in Government-financed studies,particularly the major studies undertaken for the large hydroelectric works.The recently created "Chamber of Paraguayan Consultants" has already registered19 local consulting firms, four of which, normally associated with foreignfirms, are able to carry out highway design works. DGV usually employs con-sultants for supervision of large and medium construction projects. Government-financed minor construction works, either by contract or force account, aregenerally supervised by DGV staff.

G. Highway Construction

2.18 Because of the infant status of the road construction industry,major construction works have been carried out by foreign contractors withparticipation of local firms, mostly as subcontractors. The local constructionindustry has developed recently on a modest scale and principally as a resultof the hydroelectric works. At present, there are four local constructionfirms capable of carrying out small-scale road works and about 40 small firmswhich specialize in drainage structures, minor earthworks and supply of mater-ials. The local industry needs technical assistance for its further develop-ment; the Bank, under Loan 1059-PA, provided US$100,000 for engaging consul-tants to prepare an analysis of the shortcomings of the industry and to assistin work planning, equipment usage, costing and bid preparation. DGV recentlyretained consultants INCONAS (Argentina) for the task on the basis of terms ofreference agreed with the Paraguayan Chamber of Construction Industry.

H. Highway Maintenance

2.19 Highway maintenance is performed through four district offices whichare subdivided into sections according to maintenance needs (Chart 17311 andMap IBRD 12831). Routine maintenance works in these districts are carriedout by force account, while minor improvement works and supply of materialsare carried out by contract. Maintenance in the fifth district (the Chaco)is carried out by the army. DGV is expected to take over the maintenance ofthe Transchaco Road when it is completed (by late 1978). In addition tothese countrywide activities, the Juntas Viales and some agricultural coloniesmaintain local roads with equipment and financing provided by DGV.

2.20 The Government, with assistance from the Bank, has achieved substan-tial progress in highway maintenance over the last 15 years. The equipmentprovided in 1961 under the First Highway Project (Credit 12-PA, 1961 and

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Loan 396-PA, 1964) improved maintenance operations. The quantity of equipment

and the organizational capacity of DGV proved insufficient to cope with the

growing maintenance needs. Support for further improvements was provided

under the Second Road Maintenance Project (Loan 652-PA, para 3.06).

2.21 The growing traffic demand caused by the development of the economy,

further exacerbated by the construction of the two large hydroelectric projects,

has heightened concern in the trucking industry and Government circles about

the need for good maintenance of the road network. The Government's awareness

of the situation is reflected in the yearly maintenance allocations, which in-

creased from a 197 million in 1970 (US$1.5 million equivalent) to a 419 million

in 1976 (US$3.32 million equivalent) (Table 2.4).

2.22 The soil composition and the frequent heavy rains in Paraguay make

it difficult to maintain the country's roads, which generally have poor

drainage and deficient surfacing. With the exception of a few gravel-surfaced

roads, the majority of the dirt road network (about 87%) is built on low

quality soils. The damage caused by the traffic on these roads, if closure

during wet weather were not enforced, would make them impassable and would

require expensive rehabilitation works. As a result of the closure policy

and prompt action of the maintenance crews, the affected roads are open to

traffic for about 70% of the year. However, road closures have a negative

impact on the country's economy, and the Government's long-term target should

be to eliminate closures, as justified by traffic. A growing effort is

required for adequate maintenance of the network and for keeping roads open to

traffic; such an effort has to be coupled with programmed renewal of equipment

and increasing budgetary allocations. Such an effort is the main objective of

the proposed project.

III. PAST AND ONGOING BANK ASSISTANCE TO THE HIGHWAY SUBSECTOR

A. Overview

3.01 Over the past 25 years, the Bank has been continuously Involved

with highway development in Paraguay (Table 3.1). Since 19619 four hlghway

projects (total lending about US$31 million) resulted in (a) upgrading of

more than 600 km of primary roads, that is, more than 65% of the network

presently paved, and (b) building up the maintenance capacity. Three agri-

cultural projects have provided US$17.5 million for improvement and maInte-

nance of more than 1,200 km of feeder roads.

B. Projects Completed

3.02 The Bank made its first loan with a highway component to Paraguay in

December 1951 (Loan 55-PA, US$5 million). This was basically an agricultural

project, but US$1 million of the loan amount was provided for equipineat to

build feeder roads. The equipment was well utilized, and the project was

completed satisfactorily.

3.03 Prior to the First Highway Construction and Maintenance Project

(Credit 12-PA, US$6 million, October 1961), coordination and control of

maintenance operations were largely ineffective. The 2,500-km road network

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did not, in fact, receive systematic and organized maintenance. Workshopsand repair facilities needed urgent improvement. The First Highway Projectincluded: (a) reconstruction and paving of the Paraguari-Encarnacion road(302 kni); (b) construction of a major bridge; (c) purchase of maintenanceequipment; and (d) preparation of a master plan for maintenance. However,redesigning of the road and bridge--to protect them from severe floods suchas those which occurred during the final design stage in 1963--resultedin undue delays and higher costs. Supplementary financing proved necessary,and the Bank provided the needed support through Loan 396-PA of US$2.2 millionin December 1964. Execution was further hampered by poor contractor performanceand by flooding in 1965 and 1966. The project was completed in 1970; its totalcosts came to almost 25% above the initial estimates.

3.04 The equipment provided under the first project did help to improvemaintenance operations. However, the quantity of equipment on hand wasclearly insufficient to cope with the growing needs. In spite of insufficientfunds and personnel, DGV developed its maintenance capacity and was able, in1968, to maintain about 3,900 km of roads out of a total network of about5,000 km. There was, therefore, a sense of urgency to undertake furtherimprovement of maintenance operations. The consultant firm Brown and Root (US)was retained under the first project for the preparation of a maintenancemaster plan, and it produced a first report in 1967. This report was updated

in 1969 and provided the basis for developing a four-year maintenance program(1970-1973) for the continued expansion and improvement of maintenance opera-tions. The program included the reorganization of the Highway Department aswell as related consulting services, equipment, personnel, shops, and funds.It defLned coherent standards of maintenance for the different types of roads,taking traffic volumes and climatic conditions into account. The consultants'master plan became an effective basis for the preparation and appraisal of thesubsequent Second Road Maintenance Project.

3.05 While implementation of the First Highway Project progressed withdifficulties over the period 1961-1970, the Second Road Project (construction)(Loan 443-PA, US$2.1 million, April 1966) was prepared and appraised. It pro-vided Eor: (a) the reconstruction and paving of a 43-km road section(Coronel Oviedo-Villarica); and (b) feasibility studies for 450 km of roadsin the "Plan Triangulo" area, identified under a UNDP study, and detailedengineering for about 260 km of those roads with the highest priority. Afterconsiderable delay, the Government selected consultants Louis Berger (US)in association with SAE (Argentina) to carry out these studies, which got underway in January 1969 and were completed in 1973; they were the basis for thepreparation of the Fourth Highway Project (para 3.08). The road constructionwork was satisfactorily completed in October 1969. Mainly because of theeffects of the 1965/1966 floods and partly because of inadequate design,additional work was required, which increased total project costs by almost25% above original estimates. This project was the subject of an OperationsEvaluation Department (OED) Audit Report (No. 558, dated October 30, 1974),

which concluded that it had been completed satisfactorily.

3.06 The Second Road Maintenance Project (Loan 652-PA, US$6.0 million,January 1970) helped to finance a four-year (1971-1974) highway maintenanceprogram, which was carried out with the assistance of consultants Jorgensen-Tecnipar. The project was instrumental in improving maintenance operations

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substantially. Some US$5.5 million worth of maintenance equipment was pur-chased. A central workshop and 13 district workshops were built, and a train-ing program for engineers, technicians, mechanics and operators was instituted.As noted in paragraph 2.21, maintenance allocations were increased throughoutthe project execution period in compliance with loan covenants. Although somedelays occurred during execution, the project, which was successfully com-pleted in 1975, created among the Paraguayan authorities, and within thetransport industry in general, a feeling of the importance, and the economicimpact, of good maintenance of the road network. The Project CompletionReport (PCR), detailing the above conclusions, was issued on December 9, 1976.The OED Audit Report is under preparation.

C. Projects Under Way

3.07 In 1974, IDA approved Credit 509-PA (US$11.0 million), the SmallFarmer Credit and Rural Development Project, to support a lending program tosmall farmers in three colonies located in the eastern region of Paraguay.The credit includes an important road component totalling about one-fourthof the total project cost of US$15.8 million and involves the constructionof about 250 km of earth roads, including bridges, and 36 km of all-weatherroads. A Second Rural Development Project (Loan 1418-PA, US$22.0 million)was approved in May 1977. The road component, amounting to US$9.1 million,includes the construction and maintenance of 99 km of all-weather roads and238 km of feeder roads. The project will be initiated early in 1978.

3.08 The Fourth Highway Project (Loan 1059-PA, US$14.5 million) wassigned on December 12, 1974 and became effective on March 11, 1975; totalproject cost is US$20.0 million, of which the Bank is financing the estimatedforeign exchange component. The project has three main components--theconstruction and reconstruction of two main roads totalling 102 km, technicalassistance for transport planning and highway maintenance and assistance tothe local construction industry.

(i) Road Construction

3.09 Construction contracts for the two project roads (Mbocayaty-ColoniaIndependencia, 26 km and Encarnacion-Hohenau-Pirapo, 76 km) were awardedthrough international competitive bidding respectively to Decavial (Argentina)-Wasmosy (Paraguay) and to Obayashi-Gumi (Japan)-Compania de ConstruccionesCiviles (Paraguay). Works on both roads are behind schedule, but correctivemeasures have been taken to improve performance by contractors. Completion isexpected by early 1979, which would not be more than six months behind theappraisal schedule.

(ii) Technical Assistance for Transport Planning

3.10 The project provided US$400,000 for technical assistance and logisticsupport to OCIPT. Consultants SAE-EIT-CONTEC were engaged in January 1976 fora period of 12 months to assist OCIPT in carrying out the program of transportplanning and project preparation mentioned in paragraphs 1.15 to 1.18 and 2.12.OCIPT successfully completed its first-year work program; its findings andrecommendations, presented in a report dated May 1977, are now being reviewedby various Government departments and agencies. Further support for OCIPT is

proposed under the present project.

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(i:Li) Technical Assistance for Highway Maintenance

3.11 The project includes an extension of the highway maintenance programinitiated under Loan 652-PA with the assistance of consultants Jorgensen-Tecnipar.The extension included two components: (a) the strengthening of the highwaymaintenance organization for a period of about two years, during which periodthe organization was supposed to be staffed and able to carry out all mainte-nance operations; and (b) the study of future maintenance needs. Regardingthe fLrst component, Loan Agreement No. 1059-PA included two covenants(Sections 4.05 and 4.06) setting forth the Borrower's obligation to (a) employpromptly as needed and to retain such qualified staff as required to strengthenthe maintenance organization and (b) to assume all highway maintenance oper-ations within two years from the effective date of the loan (March 1975). Thelatter covenant has been partially implemented, but the problem of the loss ofstaff to the hydroelectric projects has impaired DGV's capacity to retainexperLenced technical staff (para 2.10). The study of future maintenanceneeds was completed by consultants Jorgensen-Tecnipar in April 1977 and servedas a basis for the maintenance component of the proposed Fifth Highway Project.

D. Summary Assessment

3.12 The development of adequate maintenance capacity has been the over-riding concern of the Bank. Although much remains to be done, the seriesof highway projects has, over the years, transformed a modest and uncoordinatedmaintenance department into a dynamic countrywide organization which should,in the future, be able to cope with growing traffic demands within the limita-tion of a road network having less than 10% of its roads paved. The previousprojects have established an adequate organizational structure and logisticsupport (workshops, communications, etc.). Highway maintenance is recognizedby the Government as a matter requiring continuing attention and budgetarysupport. One of the objectives of the present project would be to upgradestaff and manpower further and to improve equipment management.

IV. THE PROPOSED FIFTH HIGHWAY PROJECT

A. Project Oblectives and General Description

4.01 The proposed project would assist the Government in: (a) streng-thening and expanding the capacity of MOPC to ensure an adequate level ofmaintenance of the national highway network; (b) upgrading a high-priorityroad; and (c) continuing the strengthening of transport planning and coordi-nation.

4.02 The maintenance component of the Second (Loan 652-PA) and Fourth(Loan 1059-PA) Highway Projects contributed to the buildup of MOPC maintenancecapacity through the establishment of field organizations, the acquisition ofequipment and the provision of adequate funding for maintenance operations.The proposed project largely reflects experience gained under the previousprojects; points of emphasis will be systematic equipment renewal, regularsupply of spare parts, training, strengthening of headquarters' staff andmore stringent enforcement of vehicle weight regulations.

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4.03 Specifically, the project consists of the following:

(i) Upgrading, including paving, of the Coronel Oviedo-Tacuara-San Estanislao Road (about 98 km)

- civil works and supervision of construction.

(ii) Four-Year Maintenance Program (1979-1982)

- resealing and partial strengthening of the Paraguari-Encarnacion road (302 km);

- acquisition of new maintenance equipment to meet themaintenance requirements of an expanding network for1979-1982 and replacement of units being retired fromservice;

- a program for betterment of about 5,200 km of roads;

- acquisition of workshop equipment for improvement ofmaintenance workshops;

- overhaul and intensive maintenance of about 260 equipmentunits;

- acquisition and use of mini-computers and other equipmentnecessary to achieve the mechanization of accountingoperations within DGV;

- strengthening of MOP headquarters' staff through theestablishment of a Project Unit for planning, programmingand supervising implementation of annual maintenanceprograms; and

- training for engineers, technicians and operators.

(iii) Transport Sector Management

- preparation and implementation of measures to improve andreinforce control of axle weights, including improvement ofexisting weighing stations and construction of new ones;

- preparation of a highway inventory and development ofdesign standards and construction specifications; and

- strengthening of OCIPT and provision of related equipment(traffic counters and miscellaneous vehicles).

Implementation of the project is expected to take about four years (1979-1982).A detailed description, economic evaluation and specific covenants concerningeach of the project components are provided in subsequent chapters.

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B. Cost Estimates and Financing

4.04 The total cost of the project is estimated at about US$48.1 million

with a foreign exchange component of US$38 million (80%) and a local componentof US$10.1 million. The proposed Bank loan of US$33.0 million amounts to 69%

of the total cost; it would finance the foreign exchange component of project

elements except civil works, to which the Bank would contribute 54% againstan average civil works foreign exchange content of 73%. The Government hasconfirmed that it would finance the local cost of US$10.1 million. TheGovernment expects to obtain financing from a private bank to finance the

US$5.0 million balance of the foreign exchange component. Such financingwould be applied to civil works and would result in 73% of it being financed

externally. Should the private bank loan not be made, the Government has

undertaken to finance this US$5.0 million of foreign exchange requirement.

UNDP has indicated that it would not have funds to finance any of the techni-cal assistance components of the project.

4.05 A summary of the project cost, based on a Government contribution ofUS$5.0 million to foreign exchange costs, is given on the following page. Theestimated costs of the Coronel Oviedo-Tacuara-San Estanislao and Paraguari-Encarnacion roads were prepared by consultants SAE-EIT-CONTEC on the basis of

quantities derived from detailed engineering and current unit prices forsimilar works. Cost estimates for consulting services are based on recent

contracts or man-month rates for similar services provided by joint venturesof Paraguayan and foreign firms. The costs for the road maintenance equipment,including spare parts, have been estimated on the basis of detailed listsprepared by consultants Jorgensen-Tecnipar. These costs include local prep-

aration and delivery charges, but exclude import taxes, as was the case under

previous and ongoing projects. The Government confirmed, at negotiations,that equipment would be exempt from import duties. The costs of the accounting

equipment, weight control scales and traffic counters are based on quotationsfrom suppliers, also excluding taxes.

4.06 The foreign exchange component of the civil works has been estimatedon the following basis: (a) 50% for small civil works contracts for installa-

tion of weighing stations, which would attract only local building contractors;

(b) 732 for major contracts to be awarded for works on the Coronel Oviedo-Tacuara-San Estanislao road; and (c) 80% for contracts to be awarded for works

on the Paraguari-Encarnacion road. The higher foreign component is due to theneed for increased amounts of bituminous materials for the resealing and surface

strengthening works. Contracts for these works would normally be awarded toforeign firms with some participation of local contractors, either in jointventures or as subcontractors, as was the case under previous Bank projects.

The foreign exchange component of consultant services has been estimated at 70%for supervision of construction while, for the technical assistance to DGV andOCIPT, it has been estimated at 80% because a larger foreign participation may

be expected. The cost per man-month is estimated to range from US$2,000 to

US$5,000 equivalent for technicians of different grades among Paraguayansand foreigners, with an average of US$3,000 per man-month. The various con-sulting services would require a total of about 590 man-months. The foreign

exchange component for the purchase of road maintenance and other equipmenthas been estimated at 95% of total costs.

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FARAUAY

FIFTH HIGHWAY PROJECT

Project Cost Estimates

Esti-atedForeign Bank ParticipationExchange US$

Local Foreign Total _iLocal Forin Total Component Millions /

(Otiaraniee Millions) CUSS Millions) .

A. Upgrading Including Paving of the CDronelOviedo-San Estanislao Road

1. Civil Works 559.44 1,513.26 2,072.70 4.44 12.01 16.45 73 8.83 54

2. Superviston (Consultants) 50.40 115.92 166.32 0.40 0.92 1.32 70 U.96 73

Subtotal 609.84 1,629.18 2,239.02 4.84 12.93 17.77 9.79

B. Four-Year Maintenance Program

1. Equipmentload Maintenance 63.00 1,234.80 1,297.80 0.50 9.80 10.30 95 9.80 95

_ Workshop Equipment 1.26 26.46 27.72 0.01 0.21 0.22 95 0.21 95

_ Spare Parts for Preventive Matntenance i 10.08 182.70 192.78 0.08 1.45 1.53 95 1.45 95

- Spare Parts for Overhauls 6.30 123.48 129.78 0.05 0.98 1.03 95 0.98 95

- Accounting Equipment 1.26 17.64 18.90 0.01 0.14 0.15 95 0.14 95

24 Civil Works- Resealing of the Paraguari-Ehcarnacion Rogd 113.40 466.20 579.60 0.90 3.70 4.60 S0 2.48 54

- Supervision (Consultants) 17.64 40.32 57.96 0.14 0.32 0.46 70 0.34 73

3. Technical Assistance- Project Unit 97.02 41.58 138.60 0.77 0.33 1.10 30 0.80 73

- Training of Maintenance Personnel 5.04 20.16 25.20 0.04 0.16 0.20 80 0.14 73Subtotal 315.00 2 153.34 2 !46 8 34 17.09 T1 i 16.34

C. Sector Management

1. Equipment- Weight Control Scales 2.52 47.88 50.40 0.02 0.38 0.40 95 0.38 95

- Traffic Counters 1.26 11.34 12.60 0.01 0.09 0.10 95 0.09 95

2. Civil WorksWeight Control Stations 25.20 25.20 50.40 U.Z0 0.Z0 0.40 50 0.22 54

3. Technical Assistanee- Technical Assistance to lGV 3.78 18.90 22.68 0.03 0.15 0.18 80 0.13 73

- Technical Assistance to OCIPT 8.82 36.54 45.36 0.07 0.29 0.36 80 0.26 73Subtotal 41.58 13 9 .86 181.44 10 1 1.44 1.08

Base Cost (February 1978 values) 966.42 3,922.38 4,888.80 7.67 31.13 38.80 27.21

D. Contingencies

1. Phymical (about 107 of civil works) 69.30 201.60 270.90 0.55 1.60 2.15 1.15

2. Escalation J 6i4 R X 900.90 1.88 5.27 7.15 4.64

Subtotal 306.18 865.62 1,171.80 2 T6.7 9.30 5.79

Total' 1,272.60 4.788.00 6,060.60 1 10 38 00 48.10 33.00 69

Price Adjustment Rates as Follows: Civil Works Equipment ConsultantsLocal Foreign

1977-1979 12% 9% 7.5% 10%1980-1982 12% 8% 7.0% 10%

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4.07 A contingency allowance of 10% has been included to cover increasesin construction quantities. About 17% of the project base cost has beenallowed for foreign price variations and 23% for local prices over the imple-mentation period for equipment, civil works and consultants, assuming inflationrates as shown at the bottom of the cost table. They reflect guidelines ineffect throughout 1977 and are relevant to Paraguay.

4.08 In the event that private bank financing of US$5.0 million isobtained, the Bank would require that the Borrower provide satisfactory evidencethat the private bank funds have been used to finance project expenditureseligible for external financing (para 4.09). The Bank would require that thisbe a condition of withdrawal of Bank funds. Additionally, subject to avail-ability of private bank participation, the Borrower would be required tofurnish to the Bank quarterly progress reports certifying that the fundsdisbursed by the private bank have been used to finance eligible projectexpenditures and would indicate the specific items so financed and amountsdisbursed for each by categories specified in the Loan Agreement with theBank. These arrangements were discussed and confirmed during negotiations.

4.09 Project expenditures eligible for disbursement of the Bank loan aredefined as follows:

(a) 100% of foreign expenditures for direct imports or 90% oflocal expenditures for locally procured goods, for the purchaseof equipment, spare parts, signalization materials, accountingmachines, weight control scales and traffic counters;

(b) 54% of total expenditures for works on the Coronel Oviedo-Tacuara-San Estanislao road; the Paraguari-Encarnacion road;and weight control stations; and

(c) 73% of total expenditures for project administration 1/,construction supervision, and technical assistance to DGV andOCIPT and training of maintenance personnel.

Disbursements of the Bank loan would be made against normal documentation.Any funds remaining in the loan account on completion of the project might,with the Bank's prior approval, be used for project-related items such as thepurchase of additional equipment or the extension of consulting services.

C. Execution and Procurement

4.10 Execution of the project would be the responsibility of MOPC throughfour of its Directorates:

1/ For setting up and operating the Project Unit, the proposed Bank loanwould be disbursed against salaries of foreign and local staff. Theamount disbursed against local costs for the Project Unit would becompensated by the fact that the proposed Bank participation in financingof civil works is less than the estimated foreign exchange component.

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(a) DGV for (1) major civil contracts; (2) the highway maintenanceand betterment programs; and (3) related technical assistance;

(b) OCIPT for the transport planning component;

(c) the Directorate for Transport for implementing the trafficcounts in conjunction with the DGV maintenance districts;and

(d) the Directorate for Execution and Budgetary Control forimplementing the enforcement of regulations on weight anddimensions of vehicles.

4.11 Procurement under the project would be in accordance with the Bank's"Guidelines for Procurement" (March 1977). The procurement program for newequipment and parts indicating lot sizes, estimated costs and proposed excep-tions to international competitive bidding (ICB) would be subject to priorapproval of the Bank. Lots excepted from ICB with estimated costs of lessthan US$75,000 would be advertised locally in accordance with MOPC's regula-tions, which are satisfactory. These lots, with an estimated total value ofless than US$300,000 equivalent, would account for only a few items in thetotal procurement program. Parts for specific makes of existing equipmentwould be procured directly from established dealers in accordance withMOPC's regulations for individual orders of less than US$75,000 up to anaggregate amount of US$500,000. Construction of weighing stations would beadvertised locally.

4.12 Civil works for upgrading of the Coronel Oviedo-Tacuara-San Estanislaoroad and resealing of the Paraguari-Encarnacion road would be carried out onthe basis of unit price contracts awarded in accordance with ICB. For biddingpurposes, the Coronel Oviedo-San Estanislao road has been subdivided into twolots (Coronel Oviedo to Km 49 and Km 49 to San Estanislao). The Paraguari-Encarnacion road works would be tendered as one lot. Prequalified firms wouldbe allowed to bid for any one lot or more. DGV considered division intosmaller lots, but found that, while this would not increase local participa-tion, it might lead to implementation problems since local civil contractorsare mobilized on hydroelectric works and they have limited experience andciapacity for bituminous pavement works. Bidding and contracting proceduresw,ere reviewed and agreed during negotiations.

4.13 Terms and conditions for consulting services for supervision of con-struction and technical assistance to DGV and OCIPT were reviewed and agreedwith the Government during negotiations. The consultants selected for theseassignments should be acceptable to the Bank.

4.14 Because of the shortage of qualified personnel (para. 2.11) and theadditional workload resulting from the implementation of the proposed project,a Project Unit would be established within DGV to assist in carrying out themaintenance and construction components of the project. During its initialstage, the Unit would include three internationally recruited engineers, forperiods of about 12 months, to train local personnel and establish workingprocedures. The Unit would also comprise six local engineers and techniciansfor the overall project period (48 months): five of them for carrying out themaintenance component and one for the construction component (Chart 17536).

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The salaries of the internationally recruited and local staff would be financedunder the loan (para 4.09, footnote). Since the salaries to be paid would becompetitive with those paid in the hydroelectric works, DGV expects to attractwell qualified individuals. The composition, functions and operation of theProject Unit, as well as its terms of reference including its staffing plan,were discussed and agreed during negotiations (Annex 1). Its creation and therecruitment of at least one internationally recruited engineer and two localengineers not later than August 31, 1978 would be a condition for disbursingfor equipment and parts. The Project Unit would be fully staffed no laterthan March 31, 1979.

4.15 It is expected that, at the end of the project period, DGV wouldbe able to retain the Paraguayan members of the Project Unit and to integratethem into its expanded organizational structure. However, it is difficult atthis stage to foresee what the capacity of DGV would be in this respect. TheGovernment confirmed at negotiations that it would, before the end of the thir.'year of the program (i.e., 1981), consult with the Bank with a view towardagreeing on measures to ensure adequate staffing of DGV concerning, in partic-ular, the functions carried out by the Project Unit.

4.16 The implementation period of the project would be four years. Theupgrading of the Coronel Oviedo-Tacuara-San Estanislao road would take threeyears (1979-1981). The Paraguari-Encarnacion resealing program would take twoyears (1979-1980). The maintenance program covers the four years 1979 to 1982.The estimated schedule of disbursements is given in Table 4.1. The projectimplementation schedule is shown in Table 4.2; it was discussed and agreedduring negotiations.

D. Risks

4.17 Neither the reconstruction nor maintenance elements present specialrisks. All road sections have been engineered. The traffic forecasts for theCoronel Oviedo-San Estanislao and the Paraguari-Encarnacion roads are suffi-ciently conservative that the future economic development required to generatethese growth rates is not in serious question. Appropriate funding of currentexpenditures has been thoroughly reviewed and would be the object of specificcommitments which are well within the financial capacity of the Government.In view of the relatively good performance of Paraguay under similar projectsand the attention devoted during preparation to the question of increasedcurrent expenditure requirements and funding for spare parts and equipmentrenewal, the risks have been reduced sufficiently to allow a reasonableexpectation of success concerning the physical and operational objectives ofthe project.

4.18 A higher element of risk is attached to the institution-buildingobjectives. Although specific covenants would ensure continuing Governmentsupport for DGV and OCIPT through the project period, one should recognizethat the building up of DGV's management and the strengthening of )CIPT'stransport planning function are long-term processes depending largely on theavailability of qualified professional staff. Although the project objectivesconcerning DGV and OCIPT are realistic, a further measure of assistance may benecessary beyond the time span of the present project. Special attentionwould be attached to these aspects of the project during supervision.

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V. UPGRADING OF THE CORONEL OVIEDO-SAN ESTANISLAO ROAD

A. Description

5.01 The Coronel Oviedo-Tacuara road (about 91 km) is the backbone ofthe transportation system of the northeastern part of Paraguay, acting ascollector of the traffic with origin and destination in Asuncion and PuertoPresidente Stroessner, the two main economic and administrative centers ofthe country (Map IBRD 12831). The 7-km spur from Tacuara to San Estanislaolinks the main roads with the township of San Estanislao, an important regionalcenter. Its improvement to paved standards will enhance the economic develop-ment of the potentially rich area.

5.02 The Coronel Oviedo-Tacuara-San Estanislao road is an earth-surfacedroad which was initially built by the Army and progressively improved by DGV.The horizontal and vertical alignments are acceptable and would require minorrealignments to correct a few sharp curves and steep grades. Platform widthis generally acceptable, and few widenings are required. Drainage is prac-tically nonexistent. The present road, with its poor riding surface and theperiodic flooding of some sections, is no longer adequate for the growingtraffic demand (about 400 VPD); maintenance is becoming more and more expen-sive, and service is precarious because of lack of drainage and the deterior-ated wooden superstructures of the bridges.

B. Preparation and Engineering

5.03 The upgrading of the road was identified by consultants SAE-EIT-CONTECats one of the highest priority projects in the highway subsector. The sameconsultants completed the feasibility study in April 1977 with financingprovided under Loan 1059-PA, and they have completed the detailed engineeringwith financing provided by the Preinvestment Fund (Credit 587-PA).

5.04 The proposed work would consist of the upgrading of the existingroad into a two-lane paved road; minor realignments would be carried out,and the grade would be raised along the areas subject to flooding. Theclrainage system would be totally reconstructed; four temporary bridges(Tobatiry - 60 m, Hondo - 40 m, Mbutuy - 40 m, and Tapicuari - 60 m) and allculverts would be replaced by permanent concrete structures; no major foundationproblems are foreseen. Since the horizontal and vertical alignments aregenerally acceptable, the amount of earthworks is rather limited (about onemillion cubic meters), and the bulk of the work to be performed is basicallythe construction of the base and pavement (triple surface treatment); fourgravel quarries have been located, and average transport distances vary fromL.3 to 24 km. The design standards for the project road are shown in Table 5.1.

5.05 Cost estimates based on detailed quantity takeoffs (Table 5.2),dLraft drawings and a portion of the specifications and bidding documents werereviewed during appraisal and found adequate. The final drafts of thesedocuments, as well as final drawings, have been completed and reviewed by theBank. The average cost per km for the upgrading works (including bridgesbut excluding contingencies) is US$167,860, which is acceptable.

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C. Project Impact

5.06 The proposed highway project would provide less costly and morereliable transport services to the rich and developing agricultural areas ofthe north and northeast of the part of the country east of the Paraguay River.Despite a road system consisting entirely of dirt roads, subject to frequentclosure because of rain and flooding, the zone of influence of the project(including the Departments of Concepcion, Amambay, San Pedro, Canendiyu andpart of Caaguazu) has experienced rapid population growth (4%) over the period1962-1972, compared with a national average of 2.6% (immigration, both inter-nal and from Brazil, is an important factor). This trend is expected tocontinue and could raise the area's share of the country's population from14% (406,000) in 1972 to 22% (1,200,000) in 2000. Farming, mostly small scalebut with increasing use of modern methods, is the principal economic activityof the area, with forest exploitation also being important. While some rivertransport is used and part of the production finds its way directly acrossinto Brazil, the great majority of the agricultural production of the area, aswell as livestock and timber, is destined for southern Paraguay for domesticconsumption or export abroad. This traffic, consisting largely of truckscarrying timber, cattle, cotton, tobacco, soya, wheat, maize and sugar, isdependent upon the proposed project road for access to these southern markets.

5.07 The overall importance to Paraguay of facilitating the transport ofthese products is emphasized by the contribution of the project area, whichaccounted for about 28% of national agricultural output over 1965-1974. Thisproportion can be expected to increase as Government-promoted colonization ofthe area's Departments proceeds and more efficient methods are applied to therich and abundant land. Overall growth of gross product of the region isexpected to average about 6% through the 1980s, which is in line with theBank's projection of the national growth rate after the impact of the hydro-electric projects is exhausted. The proposed road project, in addition tofacilitating export of production, would significantly decrease the costs ofessential inputs required to expand production and increase yields and wouldprovide the people of the region with better general access to consumer goods.

5.08 The spur road to San Estanislao would have an important impact oneconomic, commercial and social activity in the farming area surrounding thetown. San Estanislao is the only large town in the area (population 17,000)and is the regional center for Government administration, commercial activityand much of the farming production from the area west to the Paraguay River.

5.09 The project would have no adverse environmental impact; on thecontrary, it would reduce the inconvenience caused by dust, which is severeduring the nine-month dry season and which is a health hazard for people wholive in the towns and villages along the road. During the constructionperiod, project works are expected to provide jobs to about 300 workers.

D. Economic Evaluation

(i) General

5.LO The economic justification of the proposed highway project is basedon the comparison of the following quantifiable benefits with project construc-tion costs:

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(a) reduction of operating costs to road users;

(b) travel time savings;

(c) elimination of road closures; and

(d) maintenance cost savings.

5.11 A possible alternative route, to provide direct access to Asuncionfrom San Estanislao without passing through Coronel Oviedo, was subjected toa preliminary appraisal. However, this route proved to be extremely costlyand clearly an inferior alternative to the improvement of the existing routethrough Coronel Oviedo.

(ii) Traffic

5.12 Existing traffic volumes on the Coronel Oviedo-Tacuara road wereestablished through a traffic survey conducted in March 1976 by consultantsSAE-EIT-CONTEC. Traffic count data prior to 1976 were useful only as a checkfor the 1976 survey since they were sporadic in timing and location. Seasonaladjustment of the March 1976 traffic volumes to estimate annual average dailytraffic (AADT) was achieved by applying deseasonalizing factors derived fromtraffic data on two toll bridges north of Tacuara. Traffic volumes in theopening year of the road (1982) were estimated using the growth rates describedin paragraph 5.13. Details of traffic flows are provided in Table 5.3. TheAADT for 1982 was adjusted by a factor to take account of the average numberof days (75) that the road is closed each year. Thus, the 1982 trafficvolumes adopted show daily traffic of 543 vehicles (58% heavy) on the CoronelOviedo-Mbutuy section (49 km), 401 (61% heavy) on the section from Mbutuy toTacuara (42 km) and 370 (46% heavy) on the Tacuara-San Estanislao spur.Traffic was assumed to operate on sections of road completed during the secondand third years of construction (25% of the road length in 1980 and 65% in1981). No diverted traffic was assumed since there are no alternative roadsnow or in the foreseeable future and diversion from river transport would benegligible.

5.13 Growth of normal traffic was estimated for a 22-year period (1980 to2001) at 5.8% for the Coronel Oviedo-Mbutuy section, 5.6% for the Mbutuy-Tacuaraand 5.7% for the San Estanislao spur. These growth rates are based on estimatedgrowth of population and per capita income in the region. Compared to previousproduction and traffic estimates made for the area, e.g., the 1973 ParaguayTransport Survey, they can be considered fairly conservative. They wouldresult in daily traffic on the project road of 1,900 VPD by 2001. The greatmajority of this traffic would, on the basis of 1976 origin and destination(0&D) surveys by the consultants, be "long distance" in the sense that "localtraffic," comprising existing and generated trips only along the project road,would be insignificant.

5.14 Improved reliability and cheaper transport would facilitate thedevelopment of the project area and generate added production and consumptionof goods and services. However, since about two-thirds of existing trafficoriginates at varying distances to the north of Tacuara and average trips areon the order of 200 km, the paving of the 91-km Tacuara-Coronel Oviedo section

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would generate only limited traffic. The 24% decline in light vehicle oper-ating costs and 40% decline in bus operating costs over the length of the roadwould cause a first-year increase in passenger traffic of about 9% abovenormal traffic on the Coronel Oviedo-Mbutuy section and 10% on the Mbutuy-Tacuara section. These increases have been estimated using a price elasticityof demand between generated traffic and reduction in vehicle operating costsof -1.8 for light vehicles and -1.5 for buses.

5.15 Elimination of the average 75 days of closure on the road wouldfacilitate the completion of trips which would have otherwise been cancelledor delayed (para 5.19). However, other roads that feed the Coronel Oviedo-Tacuara route would still be subject to closures. Only 20% of the trafficwould be completely free of closures when the project road is improved. Theoverall effect of eliminating closures would be a first-year increase infreight (trucks) and passengers (cars and buses) of 3% above normal traffic.

(iii) Benefits from the Project

5.16 Quantifiable benefits from the proposed highway construction proj-ect are benefits to road users through vehicle operating cost savings, timesavings, benefits from elimination of road closures, and maintenance costsavings.

5.17 The new paved highway would allow higher average speeds, 1/ which,in turn, would cause significantly reduced vehicle operating costs (estimatedat about 24% for light vehicles and 40% for buses and trucks). Estimates ofvehicle operating costs were prepared by the consultants based on de Weille, 2/modified according to recent experience in Paraguay and using local prices(excluding taxes) to cost the various operating cost components. A summaryof the vehicle operating costs used for the project is shown in Table 5.4.Vehicle operating cost savings account for about 83% of total quantifiablebeneEits. Benefits derived from reduction in passenger travel time wereincluded in the evaluation. Value of time was based on estimates of hourlywork income for the working population in the zone of influence of the high-way. The final values adopted were USJ19/hour for work or business trips andUSO6/hour for other trips, which seem reasonable estimates. Based on theconsultants' O&D survey on the project road, 85% of all passengers in lightvehicles travel for work or business-related purposes. Passenger time savingsaccount for only about 5.5% of the total quantified benefits.

5.18 The maintenance cost savings included as a benefit for the projectmay prove pessimistic. To be consistent with the maintenance requirements andcosts prepared for the maintenance program component of the proposed project,

1/ Based on previous studies and surveys by the consultants, average speedsof light vehicles and buses would increase from 42 km/hour to 80 km/hourand 60 km/hour reApectively, while truck speeds would rise on averagefrom 39 km/hour to 58 km/hour.

2/ Quantification of Road User Savings, World Bank Occasional Paper No. 2,1968.

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the estimates of consultants Jorgensen-Tecnipar were used for this particularroad rather than the original higher estimates of SAE-EIT-CONTEC. The latterestimates place a greater saving in maintaining a paved road as compared to anearth surface than did Jorgensen-Tecnipar. Further, the Jorgensen-Tecnipa.estimates are derived from comparing a good condition dirt road with a pavedroad, whereas the Coronel Oviedo-San Estanislao road is now in very poorcondition and adequate maintenance in the future, including the bridges, couldprove very costly. This by itself could make the quantified maintenancesavings conservative.

5.19 The last quantified benefit derives from elimination of the averageannual 75 days of closure of the road due to weather conditions. Road closurecauses some light vehicle and bus trips to be postponed and some to be can-celled altogether. Truck trips are all assumed to be postponed. Only thevalue of trips postponed and eventually completed was quantified, and thebenefits were calculated as the vehicle and passenger time savings caused bypaving the road. Vehicle time savings make up about 80% of these benefits,and, as a whole, elimination of closure benefits constitutes about 11% oftotal quantified benefits. There would also be welfare gains to people inthe area to the north of the project road as a result of greater regularityof supply of farming inputs and manufactured consumer goods. A specificexample is fuel supply to provide electrical power to the city of Concepcion.Closure of the project road has caused disruption to power supplies inConcepcion and the surrounding area. Some additional fuel storage facilitiesare already under construction to ameliorate the problem, and paving of theCoronel Oviedo-Tacuara section of the road would obviously reduce futurerequirements for storage facilities.

(iv) Benefit Distribution

5.20 The benefits resulting from savings in vehicle operating costs areexpected to be passed on, in large part, to the consumers of transport ser-vices. This assessment is based on the highly competitive nature of thetrucking industry, as described in Chapter II dealing with the highway sub-sector. Those benefiting would principally be the rural residents of theareas along the project road and in the north and northeast of Paraguay,who engage in productive activities and trade. The population would alsobenefit through improved quality and reliability of service and travel timesavings. The benefits arising out of the project would therefore accruemostly to producers in the northeastern region, which has lagged behind thericher south and southeast regions.

(v) Overall Economic Return

5.21 The proposed road project is economically well justified, with anER based on generally conservative estimates of about 16% (well above theopportunity cost of capital, which is estimated at about 11% for Paraguay).Unquantified benefits, including environmental enhancement (dust abatement)and reduced disruption to incoming goods supply, suggest that this quantifiedER is conservative. Further, the traffic growth rates which form the basisof the quantified benefits can be considered minimum expected rates, andcalculated maintenance benefits may be conservative. Sensitivity analyseshave been conducted on the benefits and costs of the project and demonstratethat, even under adverse circumstances, the ER remains acceptable (Table 5.5).

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5.22 The 7-km spur section to San Estanislao has lower estimated openingyear traffic than the main road, 370 VPD in 1982, compared with 540 and 400 onthe Coronel Oviedo-Mbutuy and Mbutuy-Tacuara sections. The Government under-standably attaches great importance to the completion of this spur, whichwould link this important regional center with the main north-south road. Aseparate analysis has been undertaken, considering the spur as a marginaladdition to the main project. The engineers' estimates show that the marginalcost of the spur (i.e., not including mobilization, head office overhead)would be about 30% below average costs. The first year benefits would amountto about 12% of this cost, indicating that the inclusion of the section atthis time is justified. This alternative is preferable to attempting tomobilize a new contractor to build the spur a few years after the completionof the main road.

VI. THE HIGHWAY MAINTENANCE PROGRAM

A. Background and Preparation

6.01 The need for assisting Paraguay in improving its highway main-tenance operations has been felt by the Bank since it started highwayoperations in that country (paras 3.01, 3.02 and 3.04). Future growth ofthe network and increasing traffic volume would require a sustained increasein the maintenance effort. Considering that the maintenance equipment now inuse, financed under Loan 652-PA, is close to the limit of its economic life,it should be replaced shortly.

6.02 The 1979-1982 road maintenance and betterment program was preparedby consultants Jorgensen-Tecnipar under financing provided by Loan 1059-PA.The consultant carried out an inventory of the network under maintenanceindicating--for each road, district by district, by types of surface--thelength in good, fair and bad condition (Table 6.1). The inventory showed atotal length of 6,689 km under maintenance, of which 13% are paved roads, 16%gravel roads, 35% main earth roads and 36% secondary earth roads.

6.03 Traffic counts were also taken over the inventoried network. Atkey stations, these counts were for five 24-hour days, and, where trafficwas very low, the counts were for one 24-hour day; the average duration foreach count was 48 hours. From these data, the consultants prepared a programof maintenance service for the four types of road mentioned in paragraph 6.02;the estimated annual cost (in constant 1976 Guaranies) per km of road is givenin Table 6.2. These levels of maintenance, which appear adequate, have beendetermined by the type and condition of the roads and by the volume of averagedaily traffic.

6.04 On the basis of the equipment, materials and labor required to carryout the annual program of operations, the consultants prepared the four-yearmaintenance program and established the corresponding budgetary allocations.To determine the equipment needs, the consultants prepared a complete inven-tory of the existing fleet and reviewed the status of usage of the differentunits to ascertain the remainder of their economic life.

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6.05 During the final stage of preparation of the maintenance program, theGovernment realized that the Paraguari-Encarnacion road resealing program (302 km)would require a large lump outlay (roughly estimated at the time betweenUS$4 million and US$7 million), which could not be met from increases in DGVmaintenance allocations. Therefore, in May 1977, the Government requested Bankassistance in financing the resealing of this road. Consultants SAE-EIT-CONTEC(Argentina) carried out an engineering and economic study, necessary for thepreparation of this project component, over the period July to October 1977 withfinancing provided by the Preinvestment Fund (IDA Credit 587-PA). The consul-tants conducted traffic counts, undertook a detailed assessment of the condi-tions of the existing pavement based on systematic deflection measurementsand identified limited sections requiring strengthening. Detailed engineeringand economic evaluation were satisfactorily completed in October 1977.

B. Description

(i) The Four-Year Maintenance Program

6.06 The maintenance program would continue the institutional improve-ments carried out under previous loans, mainly in maintenance planning andtraining of DGV staff; these two activities would be carried out through,and under the supervision of, the Project Unit (paras 2.11 and 4.14).

6.07 The program would also include a road betterment element to becarried out simultaneously with the maintenance program. The bettermentswould be carried out on the road sections that cannot be efficiently main-tained through routine or periodic maintenance operations and are aimedmainly toward reduction of the length and duration of the closures duringheavy rains (para 2.22). The analysis prepared by the consultants shows thatabout 5,200 km of roads have to be improved, of which 880 are gravel-surfacedand 4,320 are earth-surfaced. During negotiations, the Government and theBank reviewed and agreed on a betterment program in accordance with selectioncriteria, scope of works, total lengths to be treated and overall budgetaryrequirements over the period 1979-1982 (Annex 2). DGV would hold advanceconsultation with the Bank on annual tranches of the program starting from1979.

6.08 A major component of the project would be to renew, overhaul andenlarge the DGV equipment fleet as necessary to enable it to expand itsannual maintenance program and carry out scheduled betterments. The tentativelist of equipment needs and costs is shown in Table 6.3. Procurement of theequipment is expected to be carried out over a two-year period (1979-1980).

6.09 A substantial part of MOPC's equipment fleet is in need of over-haul. The remainder of the fleet is approaching the end of its economiclife and would require intensive maintenance over the next few years. Theproject would provide spare parts to overhaul about 110 salvageable unitsand to reconstitute stocks necessary for the continued maintenance of about154 items of aging but still operating equipment. During negotiations, theBank obtained assurances from the Government that the overhaul of the equipmentwould be completed not later than December 31, 1980 according to a programacceptable to the Bank. The Government would, not later than September 30, 1978,submit a detailed overhauling program.

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6.10 The continuous expansion of DGV activities has shown that moreadvanced systems of cost accounting, budgetary control, inventories, etc., arerequired. Consultants Jorgensen-Tecnipar have carried out a thorough study ofthe problem and recommend mechanization of accounting operations, for whichthe purchase of mini-computers is proposed. DGV and the Bank agreed thatthis mechanization is urgently needed, and the present project includesUS$120,000 for purchase of the equipment. The equipment would be suppliedand installed by a specialized firm which would also carry out a trainingprogram for the accounting staff of DGV.

(ii) Resealing of the Paraguari-Encarnacion Road (302 km)

6.11 The Paraguari-Encarnacion road was built to its present two-lanepaved road standard over the period 1966-1968 under a previous Bank project(para 3.03). This was one of Paraguay's main trunk roads, and it receivedadequate levels of routine maintenance throughout the years, including patch-ing and pavement repairs. The initial pavement, which consists of a triplesurface treatment, has, after ten years of use, become worn out and needsresealing and partial strengthening. The structural assessment undertaken byconsultants SAE-EIT-CONTEC showed that about 240 km (80%) of the initialpavement was still in good condition and would, once resealed and protectedfrom water penetration, withstand projected traffic for the next ten years.The existing pavement requires strengthening by means of an overlay ofasphaltic concrete over sections totalling about 60 km. A short section (2 km)requires full reconstruction of the pavement structure. The above works wouldbe carried out under the project as a major civil works contract awarded onthe basis of ICB (para 4.12). Average cost per km would be about US$15,200 kmat February 1978 prices, excluding contingencies (resealing about US$8,000 perkm, overlay about US$36,000 per km, pavement reconstruction about US$150,000per km).

C. Project Requirements

(i) Current Expenditures

6.12 During recent years, the total yearly allocations for maintenancehave been increased substantially (Table 2.4). Such allocations have allowedfor fairly good maintenance of the road network, including some minor improve-ments. Further increases are needed to allow MOPC to expand the length of thenetwork under maintenance and to ensure improved serviceability in the face ofincreasing traffic volumes. Over the project period 1979 to 1982, maintenanceexpenditures would have to be increased gradually from the present US$3.3million equivalent to about US$6.33 million equivalent in 1982 (end 1976values). The proposed increases are in line with MOPC's absorptive capacityand have been agreed by the Ministry of Finance. During negotiations, theGovernment confirmed that it would continue to provide adequate funding forhighway maintenance. Minimum estimates of requirements during the projectperiod, including specific provisions for betterment, and spare parts andequipment renewal, were reviewed and agreed during negotiations. Table 6.4shows the consultants' estimates for the above items during the projectperiod; these estimates are reasonable and should provide the basis for agreedestimates of requirements.

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(ii) Supply of Spare Parts

6.13 Difficulty in obtaining spare parts has been a perennial problemfor MOPC. MOPC has had to purchase parts on the local market, which is notsupplied regularly and which bears substantial markups. To provide MOPC witha regular flow of parts, the Government confirmed, during negotiations, that,in the future, DGV would receive sufficient resources in its current budget,under a separate heading, to cover current spare parts requirements. TheGovernment also confirmed, during negotiations, that it would continue tofacilitate direct importation of spare parts by DGV, particularly by expe-diting the handling of related administrative procedures.

(iii) Systematic Renewal of Equipment

6.14 The Government does not have a systematic approach to the renewalof wornout equipment. Over the past ten years, MOPC has relied mostly onBank projects to effect large purchases every four to five years. Thispattern of lump renewal is not conducive to continuity in maintenanceoperations or to the adoption of improved fleet maintenance methods. Toprovide a planned basis for the systematic renewal of the fleet, the Govern-ment has agreed to establish an equipment renewal fund, under the authorityof MOPC, with annual allocations sufficient to ensure timely renewal of thefleet; such allocations would be no less than US$1.3 million (February 1978values) per year starting in 1981. During negotiations, the Bank obtainedassurances from the Government that such a fund would be established andmanaged in accordance with procedures satisfactory to the Bank; such proce-dures to be sent to the Bank for comment not later than December 31, 1979.

(iv) Planning of Periodic Maintenance of Paved Roads

6.15 The periodic maintenance of paved roads would, in the 1980's,constitute an important element of DGV's annual maintenance program since thepaved road network is being expanded and existing paved roads are aging. Inview of the time-critical nature of resealing and overlays and the fact thatthey represent large lump expenditures, DGV should develop adequate capacityto plan for future requirements. This would be done with the assistance ofthe Project Unit. At the time of negotiations, the Government confirmedthat, no later than the end of 1981, DGV would prepare an assessment ofrequirements for resealing and overlays for the next ten years.

D. Project Impact and Adequacy of Technology

6.16 Aside from the major quantified benefits mentioned below, the projectwould provide a more reliable transport service with increased safety andcomfort to the users. In addition, the project would significantly increasethe number and level of qualification of personnel employed in road maintenance,tlnereby contributing to the creation of permanent and productive employmentolpportunities. Total DGV personnel is scheduled to grow from about 1,300 to1,600 over the project period. Current and proposed maintenance and bettermentmethods generally represent an adequate combination of labor and equipment,considering the prevailing wages for labor and the relative scarcity of manpowerin areas yet to be developed. The resealing/partial strengthening of theParaguari-Encarnacion road would provide work for about 200 laborers, operatorsand technicians over a period of two years.

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E. Economic Evaluation

(i) The Four-Year Maintenance Program

(a) General

6.17 The economic evaluation of the proposed maintenance program isbased on the difference in cc-ts to the economy assuming that no maintenanceis undertaken as compared to the proposed program being executed. The follow-ing benefits were quantified:

(1) Vehicle operating cost savings;

(2) Time savings of road users through the reduction of roadclosures;

(3) Time savings of road users through the prevention of roadclosures; and

(4) Protection of investment.

6.18 The economic evaluation justifies the costs for a designated year(1980) of a maintenance program that includes: the purchase of new equipment;spares and technical assistance proposed for financing by the Bank and alsothe continued use of present equipment throughout its useful life; thelabor and materials required; and administrative costs directly associatedwith maintenance.

6.19 The costs (and benefits) were aggregated on a link basis by districtand include the total costs for routine as well as minor betterments requiredto bring roads tc a maintainable standard. In addition to these costs, aconsideration (about 15% of total) was applied as a contingency for washoutand erosion control. Only a benefit-cost ratio was produced since annualbenefits exceed the annual cost (and would do so in all years of the program).

(b) Traffic

6.20 Existing traffic volumes on the inventoried road network wereestablished through traffic surveys conducted in 1976 by consultants Jorgensen-Tecnipar (para 2.04 and Table 2.1). Confirmation of these surveys and cor-rections for seasonal variations were undertaken by comparison with tollstation data, ferryboat operations and prior census counts taken by MOPC.The figures have been adjusted, as noted, to take into consideration thoseperiods when roads are closed because of rain. Indicators of traffic growthfor autos and buses were population growth, projected rate of increase ofgross domestic product (GDP) and rate of increase of income per capita, allby department. Truck growth rates are based on the projected rate of increaseof GDP by Departments. The methodology selected for rates of growth is con-sistent with that of the UNDP-financed Paraguay Transport Survey of 1973(BCEOM France-ENECON Brazil), for which the Bank was Executing Agency. Usingthese indicators, the average tariff growth by type of vehicle was estimatedto be 7.5% for light vehicles, 5.2% for buses and 6.3% for trucks. Because

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of the nature of the project, neither generated nor diverted traffic was

considered. Traffic was projected to January 1979 and December 1980 in orderto analyze the effect of its growth on the costs of the program.

(c) Benefits from the Project

6.21 Vehicle operating costs savings were determined by comparing thecosts of light vehicles, buses and trucks running on the three main types of

surfaces--paved, gravel and earth--with the surface condition in either agood, fair or poor state. For each section, the ADT of that section wasused, and the vehicle operating cost savings of keeping the section fromdeteriorating from adequate to fair (if the road was in fair condition) andfrom adequate to poor (if the road was in poor condition) were compared against

the estimated cost of achieving these improvements in surface condition. Manyof the trunk and secondary earth roads are effectively closed to traffic forlong periods after rains have ceased, mainly because of poor drainage. Better-

ment works included in this maintenance program would improve the drainage andallow better maintenance. The consultants estimate that the actual closuretime after the rains would be reduced from 5% to 20%, depending on the extentof the necessary betterment works.

6.22 Time savings associated with vehicle operating costs (wages, interest,insurance, and administration costs) and vehicle passenger time savings weretaken as benefits to the economy from the reduction in road closures due tothe betterment works and improved maintenance. The value of passenger timesavings used for business trips was the average annual income per capitadivided by the average number of hours worked. For non-business trips, 30% ofthis amount was used. O&D surveys indicate that some 85% of the passengertravel is business-related and 15% is for non-work reasons; this is probablybecause of the relatively primitive nature of the network. The following twobenefits, time savings for road users through the prevention of further roadclosures and protection of investment, do not provide realizable resources tothe economy unless the project is not carried out.

6.23 The benefits from the prevention of further road closures are cal-culated considering the fact that inadequately maintained roads deteriorateprematurely and require earlier reconstruction. The costs to the users arethe increasing time costs as the road deteriorates and traffic must decrease

its speed. If there were no investment in maintenance, the three types ofroads--paved, gravel, and earth--would deteriorate at different levels untileach type was impassable and required reconstruction. The estimate made bythe consultants of this rate of closure, by type of road with no maintenance,is two years for earth, five years for gravel and ten years for paved. Thepercentage of deterioration per year varies according to the type of road:26.5% for earth, 16.15% for gravel and 6.77% for paved. The benefits con-sidered for prevention of closures are passenger time savings and vehiclerunning cost savings. The cost of reconstruction for each type of road wastreated over ten-year reconstruction cycles, and the construction costs foreach type of road were converted to an annual basis using the present worthfactor (10%) and the capital recovery factor (10%) for the ten-year period.Benefits from protection of the investment occur from the prevention ofreconstruction through proper maintenance.

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(d) Benefits Distribution

6.24 The major benefit from the maintenance program is avoidance ofhigher transport costs. Since truck transport and bus transport are highlycompetitive,, the tariffs charged to farmers, manufacturers, and passengersfor goods and services would reflect the lower costs or avoided increases.The benefits attributed to the reduction of closure of roads measure onlythe quantifiable economic costs. The nonquantifiable benefits directlyperceived by the users due to this reduction are very important, particulariLwhen these users are stranded for several days at a time.

(e) Overall Economic Return

6.25 The proposed road maintenance program is well justified, with abenefit cost ratio of about 2.9:1 in 1980 considering only vehicle operatingcost savings, passenger time savings and reduction of closure benefits (Tables6.5 and 6.6); including prevention of closure and protection of investmentbenefits, the benefit cost ratio is about 6.6:1. Benefits on the individualroad sections range from a high of 110:1 to a low of 1.4:1. Further benefitssuch as reduced spoilage of agricultural products and increased comfort andsafety to road users have not been quantified. To this extent, the benefitcost ratios are conservative estimates.

(ii) Resealing of the Paraguari-Encarnacion Road

6.26 The resealing of the Paraguari-Encarnacion road represents a lumpexpenditure which, nevertheless, falls within the general framework of themaintenance program recommended by Jorgensen-Tecnipar. Consequently, it hasbeen evaluated economically as a separate project component.

6.27 The economic justification of this component, which is basicallyconservation of previous investment, rests on the level of existing andprojected normal traffic and savings in subsequent maintenance costs. The302 km of the project road represents the major part of the 365-km linkbetween Asuncion and Encarnacion, the two largest cities in Paraguay. Theroad crosses the southeastern region, which is the most highly developed partof the country, rich in agricultural production (wheat, maize, rice, soybeanand cotton) and raising of livestock. With its large and relatively denselypopulated area of influence, the road represents the only reliable connectionfor producers, exporters and consumers. In addition, there exists importantcommercial and tourist traffic with Argentina (at Encarnacion-Posadas througha passenger/cargo ferry service).

6.28 Historical traffic data are not useful since counts were sporadic,conducted on varying sections of the road, and consistent methodology was notused. The Bank's appraisal report of 1961 (Credit 12-PA, paragraph 3.03)estimated 1965 traffic at 100 VPD, rising to 175 by 1971 (excluding generatedtraffic). Although there are no actual counts for this period, the PCEOM-ENECON study (1973) produced counts for 1972 on two sections o! the road. Thesecounts suggest that traffic had reached about 250 VPD by 1972, implying thatthe appraisal estimates were conservative. The traffic counts conducted bySAE-EIT-CONTEC in September 1977 on eight sections of the road over a one-weekperiod provide a good estimate of the 1977 traffic. This estimate of 550 VPD,

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when projected at the growth rates assumed for the study, would result in ADT

of around 650 VPD in the opening year of the project, 1980. The estimate

appears consistent with traffic growth projections estimated for recentprojects in Paraguay. The deseasonalization of the counts employed factorsconsistent with other recent highway studies in Paraguay.

6.29 Traffic projections were derived from forecast growth of per capita

GDP in the area of influence. The latter were prepared by SAE-EIT-CONTEC for

the ten-year transport program in March 1977. However, the consulltantsprojected additional normal traffic which would result from two investmentsnot directly related to the proposed road expenditure i.e., construction of

the Yacyreta Dam and the Encarnacion-Posadas Bridge. Both works are expectedto be completed in 1984. It was assumed that tourist traffic would be boosted

by completion of the bridge and that truck traffic would be enhanced only during

the construction period of the dam and bridge. This additional traffic wouldadd from 2% to 4% to "base" traffic over the project period. Overall annual

growth rates assumed over the ten-year project period were about 7% for light

vehicles, 5% for buses and 6% for trucks. In light of anticipated economicdevelopment in the area of influence of the road, these growth rates canreasonably be regarded as minimum expected rates. Since there are no alter-native routes and since the present condition of the paved road is quite good,it was assumed that there would be no diverted or generated traffic.

6.30 Quantified benefits were vehicle operating cost savings, passengertime savings and maintenance savings. Time savings, because of the expectedgood speeds obtainable on the road with or without the project, are small.Therefore, although calculated by the consultants, time-saving benefits havenot been included in the economic returns given below. Vehicle operating

costs for the project were calculated using the same methodology as for theCoronel Oviedo-San Estanislao upgrading (para 5.17). It was assumed that, inthe "with-project" case, vehicle operating costs would remain at about theexisting level. The "without-project" case, based on the intensive routine

road maintenance policy explained below, considered that vehicle operatingcosts would gradually increase by about 12% over the period 1980-1989. Thesecosts would eventually reach the level of operating costs on a gravel roadwhich, based on recent Bank experience elsewhere in Latin America, would bethe approximate condition of the road. The savings then calculated represent

about 66% of total benefits. The ER from vehicle operating cost savings only

is 49%.

6,.31 Maintenance cost savings were calculated as the difference betweennormal routine maintenance with the project (the cost of necessary periodicresealing was included in the project cost streams in 1983) and the cost of anintensive routine maintenance policy. The cost in 1976 of such a policy forthis road was estimated by the Jorgensen-Tecnipar study at US$1,600 per km.Consultants SAE-EIT-CONTEC assumed that this cost would increase at a steady

rate to US$5,200 per km in 1984. Maintenance expenditures were assumedto remain constant thereafter until the end of the project period in 1989, bywhich time the road, still a paved surface in 1984, would have deteriorated to

the equivalent of a gravel surface. Maintenance benefits, calculated as thesavings due to the project, represent 34% of total benefits.

- 33 -

6.32 This proposed project component, being basically conservation of anexisting fairly heavily trafficked road, has high economic returns. The ER isestimated at well in excess of 50%. A sensitivity test, assuming much highercivil works costs which would result if substantial additional resurfacingwere found to be required, showed that the project would still be justifiedwith an ER of over 50%. This is well above the estimated social opportunitycost of capital for Paraguay (11%).

VII. IMPROVEMENT OF SECTOR MANAGEMENT

A. Enforcement of Vehicle Weight Regulations

7.01 Previous loans included covenants for the enforcement of weightregulations, but such enforcement has not been effective. Three fixed scaleswere installed in 1969, and, under Loan 652-PA, portable scales were purchased,but scale operators have not proven sufficiently reliable. MOPC, with assis-tance of consultants Jorgensen-Tecnipar, has studied the problem and proposedthe purchase of automatic fixed scales which would print cards with vehicleweights. The proposed project would provide for the purchase of sevenautomatic scales (three of which would replace the existing manually operatedscales) and for the construction of the stations. The study prepared by theconsultants recommended the location of the stations and proposed revisionsto the Decree, dated October 1968, which established the weights and dimen-sions of vehicles as well as updating of current regulations. The study,however, did not include the design of the stations, nor the staffing, oper-ational procedures, policing, etc. These questions have to be examined if theenforcement is to be carried out on a rational basis. The project wouldtherefore also include a study of the regulatory framework and institutionalarrangements for effective enforcement of vehicle weight regulations. Thisstudy would be carried out by DGV with technical assistance provided under theproject following terms of reference acceptable to the Bank. At the time ofnegotiations, the Government confirmed that the study would be initiated bySeptember 30, 1978 and that, by December 31, 1979, it would adopt an enforcementprogram acceptable to the Bank. Adoption of such a program would be a conditionfor disbursing for the scales and weighing stations.

B. Technical Assistance to DGV

7.02 In order to carry out the highway inventory mentioned in paragraph 2.14,DGV would require technical expertise and logistic support; these would beprovided under the project. Two experts would be needed for a total of about24 man-months, and the equipment would include two specially equipped pickups.DGV would also need the service of one experienced highway engineer for aboutsix months to develop design standards and construction specifications, asmentioned in paragraph 2.16. The technical assistance required for the highwayinventory and for the design standards and specifications would be provided byindividual consultants or a consulting firm under terms and conditions accept-able to the Bank. DGV would also carry out the study for the design and opera-tion of weight control stations (para 7.01), which would be implemented byMOPC's Directorate for Execution and Budgetary Control (para 4.10(d)).

- 34 -

C. Strengthening of Transport Planning

(i) Support of OCIPT

7.03 As mentioned in paragraph 1.13, OCIPT would need further technicalassistance to pursue and develop its role as the central unit for planning andmanagement of the transport sector. The proposed technical assistance wouldcontinue on through late 1979, at which time it is hoped that OCIPT would havesufficient experienced staff. A stronger measure of Government support wouldalso be necessary to allow OCIPT to become more independent of external exper-tise and therefore achieve a greater degree of integration into MOPC. Thework program of OCIPT for the period 1978-1981 and related resource require-ments have been reviewed and tentatively agreed with MOPC and are presented inAnnex 3. During negotiations, the Government confirmed that it would, in thefuture, provide OCIPT with necessary resources. The OCIPT work program forthe period 1978-1981 and the related staffing and budget requirements wereconfirmed during negotiations.

7.04 The project would include technical assistance to OCIPT for thestudy, inter alia, of road projects as part of the updating of the transportprogram. OCIPT, as part of its work plan for 1978-1981, would develop atransport model to project flows of cargo and passengers between distinctzones in the country and to allocate this traffic among the different modesservicing the distinct zones. This network approach would permit identifica-tion of specific projects for more detailed study and would also provide thebasis to plan further upgrading of the road system.

7.05 OCIPT is proposing to undertake identification and economic evaluationstudies identified in the previous highway network analysis and having a highprima facie justification of the following routes:

(a) Concepcion to Route 3 100 km

(b) Concepcion to the Transchaco route 150 km

(c) Asuncion-Pilar-Itapiru 200 km

(d) Villarica-Coronel Bogado(a rail/road comparison) 1/ 200 km

(e) Mbutuy/Tacuara-Salto del Guaira 250 km

These studies, plus those planned during 1977, may, after review, offer thebasis for the development of future highway projects. Engineering (preliminaryand detailed as appropriate) for specific projects could be financed under thePreinvestment Credit (Credit 587-PA).

(ii) Traffic Counting

7.06 The present project would also provide the necessary facilities(two pickup trucks and 25 traffic counters) to establish a permanent program

1/ Updating of feasibility study carried out under the Second Road Project.

- 35 -

of traffic counts, which is a basic requirement for proper highway planning.A more systematized method for collection and analysis of traffic data isrequired. Consultants Jorgensen-Tecnipar have recommended a system of annualtraffic counts, including the use of automatic traffic counters, which wouldprovide the data required to administer the maintenance program properly.The Directorate General of Transport, in coordination with DGV, would carryout the permanent program of traffic counts. During negotiations, the BankobtaiLned assurances from the Government that it would establish a programof traffic counts according to an agreed timetable (para 2.04).

VIII. AGREEMENTS REACHED AND RECOMMENDATION

8.01 During negotiations, agreement was reached with the Government onthe following:

(a) over the project period, the Government (i) not to undertakeinvestments in PCAL's permanent way and rolling stock withoutprior review by OCIPT and (ii) to transmit the findings of theabove review to the Bank in case of investments of more thanUS$5 million in any given year; such review to include anassessment of the impact of the proposed investments onpublic finances (para 1.08);

(b) road network inventory, to be carried out under the projectnot later than the end of 1980, to be updated thereafterat least every five years (para 2.14);

(c) DGV, no later than December 1979, to adopt a set of designstandards and construction specifications after consultationwith the Bank (para 2.16);

(d) bidding and contracting procedures (para 4.12);

(e) terms and conditions for consulting services for supervisionof construction and technical assistance to DGV and OCIPT;consultants selected for these assignments to be acceptableto the Bank (para 4.13);

(f) composition, functions and operation of the Project Unit(para 4.14);

(g) the Government to consult with the Bank, before the end of1981, with a view toward agreeing on measures to ensureadequate staffing of DGV (para 4.15);

(h) project implementation schedule (para 4.16);

(i) road betterment program in accordance with selectioncriteria, scope of works, total lengths to be treatedand overall budgetary requirements over the period1979-1982 (para 6.07);

- 36 -

(j) equipment overhaul to be completed not later than December 31,1980 according to a program acceptable to the Bank; theGovernment to submit a detailed program not later thanSeptember 30, 1978 (para 6.09);

(k) the Government to continue to provide adequate funding forhighway maintenance; minimum estimates of requirements,including specific provisions for betterment, spare partsand equipment renewal, were reviewed and agreed (para 6.12);

(1) DGV to receive sufficient resources in its current budget,under a separate heading, to cover current spare parts re-quirements; the Government to continue to facilitate directimportation of spare parts by DGV (para 6.13);

(m) the Government to establish a fund for systematic renewal ofequipment and manage it in accordance with procedures satis-factory to the Bank; such procedures to be sent to the Bankfor comment not later than December 31, 1979 (para 6.14);

(n) no later than the end of 1981, DGV to prepare an assessmentof requirements for resealing and overlays for the nextten years (para 6.15);

(o) by September 30, 1978, DGV to initiate study for weightcontrol program following terms of reference acceptable tothe Bank, and, by December 31, 1979, the Government toadopt an enforcement program acceptable to the Bank forvehicle weight regulations (para 7.01);

(p) the Government to provide OCIPT with necessary resources;OCIPT work program for the period 1978-1981 and the relatedstaffing and budget requirements were confirmed (para 7.03);and

(q) the Government to establish a program of traffic counts accord-ing to an agreed timetable (para 7.06).

8.02 Creation of the Project Unit and the recruitment of at leastone internationally recruited engineer and two local engineers should becompleted not later than August 31, 1978 and would be a condition for disburs-ing for equipment and parts (para 4.14).

8.03 Adoption of an enforcement program for vehicle weight regulationswould be a condition for disbursing for the scales and weighing stations(para 7.01).

8.04 The proposed project provides a suitable basis for a Bank loan ofUS$33 million equivalent to the Republic of Paraguay. The loan would havea term of 17 years, including a grace period of four years.

February 8, 1978

- 37 - TABLE 1.1

PARAGUAY

FIFTH HIGHWAY PROJECT

Average Transportation Sector InvestmentAs a Percent of Total Public Sector Investment

(1965-1980)

1965-70 1971-74 1975-80

(actual) (actual) (forecast)

I. Transportation 37% 26% 33%

Roads 26 21 23Airports and Airlines 4 1 8

Railways 1 1 1Ports, River and Sea 6 3 1

II. Other Economic Infrastructure 34 37 29

III. Primary Sectors 7 11 11

IV. Social Infrastructure 16 20 21

V. General Administration and Others 6 6 6

T o t a 1 100% 100% 100%

Source: Economic Mission Report No. 899-PA

April 1977

TABLE 1.2

- 38 -

PARAGUAY

FIFTH HIGHWAY PROJECT

Actual Estimated and ProjectedRoad Network Under Maintenance by MOPC

(1970-1982)

TotalYear Paved Gravel Earth (km)

1970(A) 838 523 3,738 5,099

1976(A) 883 15090 4,716 6,689

1977(P) 883 1,090 4,716 6,689

1978(P) 883 1,090 4,716 6,689

:L979(P) 895 1,090 4,835 6,820

L980(P) 1,190 1,150 5,170 7,510

L981(P) 1,660 1,200 5,425 8,260

L982(P) 1,685 1,247 5,611 8,543

(A) = Actual Inventory Annual Average Growth(P) = Projected

Actual 1970-1976 = 3.4% p.a.Source: MOPC Projected 1976-1982 = 4.2% p.a.

March 1977

TABLE 2.1- 39 -

PARAGUAY

FIFTH HIGHWAY PROJECT

Annual Average Daily Trafficby Type of Road Surface and Type of Vehicle

(1976)

Light Vehicles Buses Trucks Total

Paved 461 205 354 1,020

Gravel 45 15 39 99

Trunk earth 34 12 36 82

Secondary earth 5 1 5 11

Average fornetwork 82 34 67 184

Source: Consultants Jorgensen-Tecnipar

April 1977

TABLE 2.2

- 40 -

PARAGUAY

FIFTH HIGHWAY PROJECT

Gasoline and Diesel Oil Consumption (1965-1975 )('000 liters)

Years Gasoline Diesel Oil Total

1965 52,847 49,505 102,352

1966 54,213 52,340 106,553

1967 52,314 64,106 116,420

1968 60,716 77,383 138,098

1969 62,916 85,581 148,497

1970 66,439 89,866 156,305

1971 70,010 93,686 163,696

1972 77,223 100,610 177,833

1973 84,854 118,928 203,782

1974 62,808 128,683 191,491

1975 75,989 129,634 205,623

Annual Average Growth Rate

1965-1975 3.3% 9.1% 6.5%

1970-1975 2.8% 7.6% 5.6%

Source: Ministerio de Industria y Comercio, 1976

March 1977

TABLE 2.3- 41 -

PARAGUAY

FIFTH HIGHWAY PROJECT

Vehicle Registration(1969 and 1975)

Type of Vehicle 1969 1975 Annual Average

Light vehiclesi/ 13,342 23,884 10.2%

Buses 1,969 6,526 22.0%

Trucks 3,213 6,973 13.8%

Sub-Total 18,524 37,383 12.3%

Motorcycles 7,182 14,688 12.7%

T o t a 1 25,706 52,071 12.5%

1/ Includes passenger cars, jeeps and small trucks

Source: OCPIT

Narch 1977

PARAGUAY

FIFTH HIGHWAY PROJECT

Highway Expenditures and Road Users' Contribution(1970-1976)

(Millions of Guaranies)

1970 1971 1972 1973 1974 1975 1976

A. Highway Expenditures

(i) Construction: Local 184 395 132 137 257 173 923Foreign 1/ 94 71 126 117 130 329 1931

Subtotal 278 466 258 254 387 502 2854

(ii) Maintenance: Local 197 226 226 257 297 330 419Foreign 2/ 13 176 302 82 285 390 106

Subtotal 210 402 528 339 582 720 525

(iii) Administration: Local 27 31 37 43 46 50 55

Total 515 899 823 636 1015 1272 3434

B. Road Users' Contribution

(i) Fuel Taxes 646 659 715 791 628 841 942(ii) Road Tolls 59 63 64 69 70 87 86

(iii) Vehicles Licenses 23 27 24 26 26 27 38(iv) Tax on Vehicle Sales 22 22 24 26 28 30 38(v) Import Charges on Vehicles

and Parts 629 688 602 924 1304 1391 1400(E)(vi) Municipal Registration Fees 40 43 42 50 59 63 65(E)

Total 1419 1502 1471 1886 2115 2439 2569(E)

Sources: For A, Ministry of Public Works and CommunicationsFor B, Central Planning Office

1/ Includes financing from IBRD, IDB and USAID.

2/ Includes financing from IBRD for purchases of equipment and spare parts (Loans 652-PA and 1059-PA).

(E) Mission estimate

August 1977

PARAGUAY

FIFTH IIlGHWAY PROJECT

Data on Highway Projects and Other Projecte Including Highways

LOAN/CREDITmoun.ts PROJECT NAME PRESENT STATUS CONSTRUCTION MATNTENANCE

US$millien Name of thc Road Length Rm Tech. AsSist. REqipment EcaoMi. RHturs Y

No. Date Total Road Primary Feeder Man-Month Total Cost Appraisal

Signed Component USS million Estimate

55-PA 12/51 5.0 1.0 Agricultural Development Completed Network within Agricultural -- 750 n.a. 1.0Colonies

12-PA 10/61 6.0 6.0 Road Construction and Mainteance

Project. Completed Paraguari-Encarnacion 307 -- n.a. 1.1 12 (n.a.)

396-PA 12/64 2.2 2.2 Road Project J

443-PA 4/66 2.1 2.1 Second Road Project Completed Coronel Oviedo-Villarica 43 - - 12 (12)

652-PA 1/70 6.0 6.0 Second Read Maintenance Project Completed All Road Network -- -- 150 5.5 51 (72)

509-PA 8/74 11.0 3.5 Small Farmer Credit and Rural To be c.mple ed Network within Agriceltural 36 250 --

Development Projeet by 12/78 i Colonies

1059-PA 12/74 14.5 14.5 Fourth Highway Project To be completed i) Mbocaysti - Col. rndepen- 26 -- 48

by 12/78 denciaii) Encarnacion - Hohenau - 76 -- __ 21 (n.a.)

Pirapo

1418-PA 5/77 22.0 9.1 Second Rural Development Project To be compjted Network within Agricultura1 99 238 _- __

by 6/NI81 Celonies --

Totai for Highways 44.4 Totls 587 1.238

1/ Under Loan 652-PA, 321 units were purchased

2/ For the Road Component only

Source: Bank Reports

A.gust 1977

_ 44 _

TABLE 4.1

PARAGUAY

FIFTH HIGHWAY PROJECT

Estimated Schedule of Disbursement(US$ Millions)

Disbursed in CumulativeIRBD Fiscal Year Quarter Disbursements

1978

June 1978 0.2 0.2 1

1979

September 1978 0.6 0.8 2December 1978 0.8 1.6 5March 1979 1.1 2.7 8June 1979 1.5 4.2 13

1980

September 1979 1.7 5.9 18December 1979 2.2 8.1 25March 1980 2.2 10.3 31June 1980 2.2 12.5 38

1981

September 1980 2.2 14.7 45December 1980 2.2 16.9 51March 1981 2.2 19.1 58June 1981 2.2 21.3 65

1982

September 1981 2.2 23.5 71December 1981 2.2 25.7 78March 1982 1.7 27.4 83June 1982 1.7 29.1 88

1983

September 1982 1.3 30.4 92December 1982 1.3 31.7 96March 1983 1.3 33.0 100

Assumptions: Loan Signature: March 1978Invitation to Bid: April 1978Award of Contract: September 1978Commencement of Works: November 1978Completion of Construction: December 1981Completion of Maintenance Program: December 1982

Source: Mission's Estimates

February 1978

PARAGUAY

FIFTI UIIGHWAY PROJECT

Tentotive Imple.ent.tion Schedulo

Responsible 1978 1979 1980 1981 1982Project Components Agency J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N Di J F M A M J J A S O N D J F M A M J J A I O N I

1,. Upgrading of the Corcnel Ov&edo-Ta.uara-San Estanislao Road

1.0 - Prequalification Govt1.1 - Invitation to Bid, Submission and Analysis

of Bids, Award of Contract Govt/Contractors j1.2 - Construction Govt/Contractors1.3 - Supervision ConsulEant_

2 - Eour-Year Maintenance Program

2.0 - Preparing Specifications, Invitations toBid and Award of Contracts Govt/Suppliers

2.1 - Delivery of Equipment Suppliers _ _ _2.2 - Overhaul of Worn-Out Equipment Govt ___2.3 - Resealing of the Paraguari-Encarnacion Road

a. Prequalification, Bidding and Contract Award Govt/Contractorsb. Construction Contractorsc. Supervision Cnnsult.nt.

2.4 - Project Unit Govt

3 - Sector Management

3 0 - Technical Assistance to DGV Consultants i_i_ _3.1 _ Technical Assistance to OCIPT Consultants _________________________________________ ______

Source: Mission Estimates

November 1977

TABLE 5.1-46 -

PARAGUAY

FIFTH HIGHWAY PROJECT

Design Standards for the Coronel Oviedo-Tacuara-San Estanislao Road

Flat Rolling

Design Speed kmph 100 80

Radius of Curvature Minimum m 400 220

Desirable 600 350

Maximum Grade % 3 5

Platform Width m 9.20 9.20

Shoulders m 1.50 1.50

Pavement Width m 6.20 6.20

Superelevation (Max.) % 8 8

Sight Distance - Stopping m 160 110

Passing m 680 540

Axle Load Design (Road) m Ton 10 10

Axle Load Design (Bridges) m Ton HS-20-44* HS-20-44*

Surface: Triple Surface Treatment

*AASHTO

Source: Consultants SAE-EIT-CONTEC

August 1977

- 47 - TABLE 5.2

PARAGUAY

FIFTH HIGHWAY PROJECT

Summary of Construction Cost Estimates(at February 1978 Prices)

of the Coronel Oviedo-Tacuara-San Estanislao Road(excluding contingencies)

(IJS$ Equivalent)

A. Coronel Oviedo-Mbutuy (49 km)

1. Mobilization 238,2002. Clearing and Grubbing 73,2003. Earthworks 2,963,2004. Bridges and Drainage 1,124,7005. Base and Bituminous Surface 3,586,7006. Miscellaneous (signalization, fencing,

camps, etc.) 229,200Subtotal 8!215,200

B. Mbutuy-Tacuara-San Estanislao (49 km)

1. Mobilization 238,4002. Clearing and Grubbing 66,4003. Earthworks 3,235,9004. Bridges and Drainage 1,107,0005. Base and Bituminous Surface 3,400,4006. Miscellaneous (signalization, fencing,

camps, etc.) 186,700Subtotal 8,234,800

Total 16,450,000

Average cost per km = US$167,860

Source: Consultants

November 1977

PARAGUAY

FIFTH HIGHWAY PROJECT

Construction of Coronel Oviedo-San Estanislao RoadTraffic Flows (AADT)

Actual 1976 Opening Year 1982 Estimated 2001 Average Annual Growth________ ________ _______ ___ ____ _______ ________ _______Rates 1982-2001 ( )Traffic Light LightLihLgtSection Type Length Vehic Buses Trucks Total Vight Buses Trucks Total Vight Buses Trucks Total Vehic Buses Trucks Total

Coronel Oviedo- Normal 55.4 126 34 183 343 181 46 253 480 488 111 641 1,240Mbutuy Generated 27 5 - 32 38 9 - 47 100 16 - 116

Eliminationof Closures 8 3 - 11 11 5 - 16 38 18 - 48

Total 161 42 183 386 230 60 253 543 626 137 641 1,404 6.2 5.4 5.6 5.8

Mbutuy- Normal 35.8 86 32 141 259 123 43 190 356 336 93 452 881Tacuara Generated 19 5 - 24 27 7 - 34 73 15 - 88 *

Eliminationof Closures 5 3 - 8 7 4 - 11 22 9 - 31

Total 110 40 141 291 157 54 190 401 431 117 452 1,000 6.2 4.9 5.2 5.6

Tacuara- Normal 6.7 109 33 86 228 156 43 117 316 424 96 282 802San Estanislao Generated 24 5 - 29 33 7 - 40 92 14 - 106

Eliminationof Closures 7 3 - 10 10 4 - 14 27 10 - 37

Total 140 41 86 267 199 54 117 370 543 120 282 945 6.2 4.9 5.3 5.7

Source: MOPC Traffic Surveys, Paraguay Transport Survey (1973), SAE-EIT-CONTEC Feasibility Study and Mission Estimates

Ottober 1977

PARAGUAY

FIFTH HIGHWAY PROJECT

Coronel Oviedo - San Estanislao Road

Summary of Vehicle Operating Costs

Excluding passenger time costs (atOctober1977prices)

(0/km)

Ttem Light Vehicles Buses TrucksEarth Paved Saving Earth Paved Saving Earth Paved Saving

1/Running costs 11.17 8.06 3.11 34.86 20.42 14.44 37.58 21.08 16.50

Time costs 2/ 5.59 4.61 0.98 16.39 11.64 4.75 20.99 14.00 6.99

Total 16.76 12.66 4.10 51.25 32.06 19.19 58,57 35.08 23.49

1/ Running costs comprise: fuel, lubricants, washing and greasing, routine vehicle maintenance, tiresand tubes and depreciation (100% for commercial vehicles and 66% for light vehicles).

2/ Time costs comprise: interest, salaries of bus and truck drivers, administration expenses, insuranceand depreciation (33% for light vehicles).

Source: SAE-EIT-CONTEC Feasibility Study and updated costs from Consultant during appraisal and post-appraisal

November 1977

PARAGUAY

FIFTH HIGHWAY PROJECT

Results of Economic Evaluation: Coronel Oviedo-San Estanislao Road

Economic Returns (7) 1st Year Returns (%) Sensitivity Analysis

Road Sections Length Economic Including Exclud. Includ. Exclud. Economic Returns (%)(km) Cost all Passen. all Passen. Construc.Costs Traffic Growth Rates

($million) Benefits Time Benefits Time +15% +15% -15%Savings Savings

Coronel Oviedo- 49.0 9.31 17.4 16.9 13.3 13.1 15.2 19.4 15.4Mbutuy

Mbutuy-Tacuara 42.3 8.00 14.4 13.3 10.8 10.2 12.5 16.0 12.8

Coronel Oviedo- 97.8 18.66 15.8 15.1 11.9 11.5 13.7 18.1 13.4San Estanislao

1/ Basis for estimates: (i) annual traffic and growth rates as per table; (ii) costs and benefits in October1977 prices; (iii) project gradually open to service 1980-1982; (iv) economic life of proJect, 20 years;(v) passenger time savings account for about 6% of total quantifiable benefits.

Source: Consultant SAE-EIT-CONTEC and Mission estimates

November 1977

A

U,

PARAGUAY

FIFTH HIGHWAY PROJECT

Inventorv of Roads lnder Maintenance (1976)(Kilometers)

T Y P E 0 F S U R F A C E

Earth

Paved Gravel Main Roads Secondary Roads

Good Fair Bad Total Good Fair Bad Total Good Fair Bad Total Good Fair Bad Total

District 1 526 137 15 678 201 532 35 768 106 440 101 647 52 309 147 509

District 2 51 44 - 95 266 363 55 684 107 126 139 371 1

District 3 205 205 57 57 80 537 56 673 355 513 163 1031

District 4 84 85 169 45 214 52 311 61 188 241 490

Total 731 137 15 883 336 718 35 1089 497 1554 264 2315 575 1136 690 2401

Source: Consultants Jorgensen-Tecnipar

June 1977

PARAGUAY

FIF1b hIGhWAY PRAJECT

Annual Cost of Maintenance per Kilometer by Type of Road(in 1976 #

Paved Gravel Trk E a r t h Secondary Average cost per km.Year Excluding Cost of Excluding Cost of Excluding Cost of Excluding Cost of Without With

Equip. Equip. Equip. Equip. Equip. Equip. Equip. Equip. Deprecia- Deprecia-Deprec. Deprec. Deprec. Deprec. Deprec. Deprec. De,;,rec. Deprec. tion tion

1978 173,167 26,492 41,547 13,491 46,467 15,009 17,412 6,010 51,962 65,425

1979 177,322 27,019 44,537 14,659 50,992 16,709 20,788 6,773 55,378 69,440

1980 173,270 26,519 41,606 13,510 46,470 15,009 18,240 5,872 55,405 68,638

1981 171,040 26,314 41,536 13,487 46,468 15,009 18,699 6,021 61,037 74,941

1982 173,287 26,515 41,535 13,487 46,467 15,009 18,699 6,021 61,253 74,853

Note: Equipment depreciation is not included in MOPC's Maintenance Budget

Source: Consultants Jorgensen-Tecnipar

April 1977

- 53 - TABLE 6.3

PARAGUAY

FIFTH HIGHWAY PROJECT

Tentative List and Cost Estimate CIF Asuncion of Maintenance Equipment(At February 1978 Prices)

Number Costof Per Total

Items Units Unit CostUSs US$

(i) Maintenance Equipment

Trucks with asphalt patching equipment 5 30,800 154,000Asphalt mixing plants - 9 ton 4 35,300 141,200Asphalt mixing plant - 50 ton 1 184,700 184,700Belt conveyors with screeners 4 40,700 162,800Dump trucks - 4 m3 99 15,400 1,524,600Motorgraders - 115 hp 70 42,700 2,989,000Water tank trucks - 6,000 L 23 20,000 460,000Tractors with bulldozer - 120 hp 28 60,300 1,688,400Front-end loaders - 1.1 m3 25 34,300 857,500Tandem rollers - 8-10 ton 6 24,500 147,000Rubber-tired rollers - 9 wheels 24 25,700 616,800Asphalt spreader 5,000 L - truck mounted 7 32,400 226,800Asphalt spreader 1,500 L - truck mounted 4 15,500 62,000Self-propelled aggregate spreaders 2 35,900 71,800Mechanic broom - towed 2 4,400 8,800Platform truck 4 tons - diesel 32 12,000 384,000Lane-painting equipment 1 7,800 7,800Air compressors - 1.0 m3 per minute 1 17,200 17,200Pneumatic drills 2 800 1,600Station wagons 20 7,800 156,000Pick-up trucks - 1/2 ton 23 7,700 177,100Asphalt finisher 1 103,100 103,100Water tanks - 2,000 Lit - trailer mounted 12 10,200 122,400

Subtotal Maintenance Equipment 10,264,600

(ii) Equipment For Sector Management

Pickup trucks for road inventory 2 10,000 20,000Pickup trucks for traffic counting 2 7,700 15,400

Subtotal Equipment for Sector Management 35,400

(iii) Spare Parts (about 15%)- Subtotal 1,530,000

Grand Total 31,830,000

Source: Consultants (Jorgensen-Tecnipar)-November 1977

PARAGUAY

FIFTH HIGHWAY PROJECT

Maintenance Budget Requirements1979-1982

(in thousands 1976 ¢)

Routine and Periodic Maintenance

Year Labor Equipment!/ Materials Subtotal Betterment Subtotal Administration Total

1979 85,022 197,232 95,487 377,741 48,290 426,031 129,430 555,461

1980 90,526 205,864 119,701 416,091 88,530 504,621 134,140 638,761

1981 105,369 239,639 159,159 504,167 76,150 580,317 154,260 734,577

1982 108,699 247,365 164,773 520,837 109,030 629,867 167,430 797,297

1/ Excludes depreciation of equipment.

Source: Consultants Jorgensen - Tecnipar

June 1977

M-

PARAGUAY

FIFTH HIGHWAY FPROJECT

Benefit Cost Ratios for All Road Sections and for Sections With the Highest and Lowest ADT1980

Section 1 (Asuncion- Section 418 (Ruta 10-All Road Sections San Lorenzo 15 km) Rio Corrientes 4.2 km)

1980 1980 1980(ADT 19.563) (ADT 3)

Primary BenefitsV.O.C. Savings 2.58 70.0 0.02Passenger Time Savings 0.34 17.4 --

Sub-total 2.92 87.4 0.02 n

Reduction of Closure 0.03 0.0

Total Primary Benefits 2.95 87.4 0.02

Secondary BenefitsPrevention of Closure 0.76 19.7 0.01Protection of Investment 2.90 3.3 1.42

Total Secondary Benefits 3.66 23.0 1.43.

Total Benefits 6.61 110.4 1.45

Source: Consultanta' Estimates (Jorgensen-Tecnipar)

June 1977

TABLE 6.6-56-

PARAGUAY

FIFTH HIGHWAY PROJECT

Total Benefits and Costs1980

(Millions of 1976 0)

Benefits for 1980 All RoadPrimary Benefits Sections Link 1 Link 418

Vehicle Operating Cost Savings 1,871.0 217.0 - - 4/

Passenger Time Savings 246.8 53.8 - - 4/

Subtotal 2,117.8 270.8 - - 4/

Reduction of Closures 20.4 0.0 - - 4/

Total Primary Benefits 2,138.2 270.8 - - 4/

Secondary Benefits

Prevention of Road Closures 550.6 60.9 0.1

Protection of Investment 2,096.2 10.4 1.0

Total Secondary Benefits 2,646.8 71.3 1.1

Total Benefits 4,785.0 342.1 1.1

Cost for 1980

Routine and Periodic Maintenance 1/ 515.5 3.1 0.1

Betterment 2/ 114.5 0.0 0.6

Administration 3/ 94.0 0.4 - - 4/

Total Costs 724.0 3.5 0.7

1/ Includes equipment depreciation of 0 99.4 million.2/ Includes equipment depreciation of ¢ 26.0 million.3/ Only overheads directly associated with maintenance estimated

at 70% of total administration.4/ Less than 0 50,000.

Source: Consultants Jorgensen-Tecnipar

August 1977

- 57 -

ANNEX I

PARAGUAY

FIFTH HIGHWAY PROJECT

Organization and Staffing of the Project Unit

1. This annex sets out details of the organizational assignment andreporting responsibilities, functions, staffing required and schedule forestablishment of the Project Unit referred to in paragraph 4.14.

A. Organizational Assignment and Reporting Responsibilities

2. The organizational assignment is in accordance with OrganizationChart 17536 contained herein. The Project Unit is under the authority of theDirectorate General of Highways (DGV) in the Ministry of Public Works andCommunications. Seven of the total of eight engineers in the Project Unitand the Accountant/Administrator report to the Chief of the Highway Mainte-nance Department who is simultaneously the Chief of the Project Unit. TheConstruction Engineer reports to the Chief of the Highway EngineeringDepartment.

B. Functions

3. The Project Unit will assist DGV in carrying out the national roadmaintenance program and the construction works. In particular, the ProjectUnit will execute the following:

(a) prepare lists of required equipment and spare parts anda schedule for purchase and use thereof;

(b) prepare necessary bidding documents for items under (a),study proposals and make recommendations for selectionof successful bidder. Supervise acquisition of equipmentand related parts and their entry into operation;

(c) prepare the yearly work programs for the maintenance districtsand sections, including the proposed yearly maintenance budget;

(d) review the quarterly work programs to be prepared by thedistricts on the basis of the yearly programs;

(e) estimate and provide, in agreement with DGV, the staff, equip-ment and facilities required by the districts for carrying outtheir yearly programs;

(f) guide and assist the district engineers in the procedures andpractical rules for carrying out their work programs;

- 58 -ANNEX 1

(g) guide and assist the district engineers in the preparationof their reports on work performed and resources utilized;

(h) evaluate compliance with the work programs and suggestimprovements whenever necessary;

(i) oversee punctual submission of reports from all districtoffices so that the data can be aggregated in timelyfashion and overall results analyzed;

(j) provide training for DGV's engineers, technicians andoperators;

(k) provide necessary input of the Ministry of Public Works andCommunications into the civil works components of the project.

C. Staffing Required

4. The project provides for operations of the Project Unit during theproject execution period. The professional titles and expected duration ofthe members of the Project Unit over the project period will be the following:

Internationally Recruited Man-Months

1 Maintenance Planning Engineer 91 Field Maintenance Engineer 121 Equipment Engineer 12

Internationally or Locally Recruited Man-Months

I Chief of Project Unit (Chief of theHighway Maintenance Department) 48

1 Maintenance Planning Engineer 401 Field Maintenance Engineer 401 Equipment Engineer 481 Training Specialist 401 Construction Engineer 481 Accountant/Administrator 48

5. The duration of service for each of the members of the Project Unitwas discussed and agreed during negotiations (para 4.14). DGV will providethe Project Unit with all necessary supporting staff, vehicles includingoperators, office requirements and miscellaneous requirements.

D. Schedule for Establishment

6. The Project Unit will be regarded as established when one interna-tionally recruited consultant, viz., the Equipment Engineer and two localpersonnel, viz., the Chief of the Project Unit (Highway Maintenance Department)and a Maintenance Planning Engineer, are in place. These three staff, whoshould be hired not later than August 31, 1978, will initially be occupiedprincipally with items (a) and (b) of the functions listed under Part B.

- 59 -

ANNEX 1

7. The remaining staff, who will be hired not later than March 31, 1979,will commence work as required by the functions listed in Part B. Followingitems (a) and (b), the next function to be undertaken will be (c) and (d).Item (e) will then follow and items (f) to (i) inclusive follow in logicalsequence. Item (j) may commence at any appropriate time within 12 monthsafter the effective establishment of the Project Unit. Item (i) will commenceeither simultaneously with the establishment of the Project Unit or withinthree months after such establishment, as deemed appropriate by the Directorof DGV.

January 1978

_ 60 _

ANNEX 2

PARAGUAY

FIFTH HIGHWAY PROJECT

Road Betterment Program

1. The Road Betterment Program under the project will be carried outsimultaneously with the maintenance works according to the tentative scopeof works and yearly targets set forth below in accordance with the study datedApril 1977 entitled Technical Economic Report on a Maintenance Program andStudy of Maintenance Needs for 1979-1982 prepared by consultantsJorgensen-Tecnipar.

2. The selection criteria for the betterment works to be carried outis that such works will improve the condition of road sections which cannotbe maintained efficiently through routine maintenance operations; these workswill not include major reconstruction or upgrading of design standards. Onthat basis and as a result of a detailed inventory of the road network undermaintenance, DGV has determined that the aggregate length of roads requiringbetterment over the period 1979 to 1982 totals about 5,200 km. In addition toperiodic regraveling, the tentative amount of works to be carried out overthat length is:

(a) construction of culverts M.L. 14,000(b) earthworks m3 1,100,000(c) construction of about

50 small wooden bridges

3. The tentative length of roads, in km, to be improved during theproject period is year by year:

1979 8001980 1,4201981 1,2701982 1,710

5.200

January 1978

- 61 -

ANNEX 3

PARAGUAY

FIFTH HIGHWAY PROJECT

OCIPT Program of Activities and Cost Estimate for Consulting Servicesfor 1978 and 1979-1981

I. 1978

A. Program of Activities

1. Updating of Ten-Year Transport Investment Program and RelatedFinancing Requirements.

2. Preparation of a Transport Model for Paraguay.

3. Program for International Road and Rail Links with NeighboringCountries.

4. Identification and Economic Evaluation of Highway Improvements.

5, Identification and Economic Evaluation of Port and RiverTransport Investments.

6. Development of a Data Collection System for the TransportationSector.

7. Study of the Transport Sector Tariff System.

8. Updating of Transport Costs for the Different Modes.

9. Work on the Introduction of a Permanent Traffic Census System.

10. Continuation of Monitoring Performance in Motor VehicleRegistration.

11. Updating and Study of Road User Taxes.

B. Cost Estimate (Foreign Currency Only)

1. Cost of Professional Services (28 man-months) US$134,895

2. Cost of Support Services US$ 32,654

3. Total US$167,549

- 62 -

ANNEX 3

II. 1979-1981

A. Program of Activities

1. Updating of Transport Investment Program.

2. Identification of Traffic Capacities and Levels of Serviceof the Country's Major Highways.

3. Identification and Economic Evaluation of Highway Improvements.

4. Further Development of a Data Collection System for theTransport Sector.

5. Updating of Transport Costs for the Different Modes.

6. Highway and Transportation Conferences.

7. Continuation of Motor Vehicle Registration Census.

8. Updating and Study of Highway User Charges.

B. Cost Estimate (Foreign Currency Only)

It was possible to forecast costs only for 1979.

1. Cost of Professional Services (14 man-months) US$69,977

2. Cost of Support Services US$ 8,940

3. Total US$78,917

December 1977

PARAGUAYFIFTH HIGHWAY PROJECT

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|MINISTER OF PUBLIC WORKS l

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World Benk-17310

PARAGUAYFIFTH HIGHWAY PROJECT

ORGANIZATION CHART OF THE DIRECTORATE OF HIGHWAYS

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