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Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 4255

PROJECT COMPLETION REPORT

HONDURAS: SIXTH HIGHWAY PROJECT(LOAN 896-HO)

December 30, 1982

Latin America and the CaribbeanRegional Office

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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FOR OFFICIAL USE ONLY

HONDURAS


SIXTH HIGHWAY PROJECT (LOAN 896-HO)

TABLE OF CONTENTSPage No.

Preface ....................................................... iBasic Data Sheet .............................................. iiHighlights .................................................... v


I. INTRODUCTION ........ ................................ 1

II. PROJECT PREPARATION, APPRAISAL AND NEGOTIATIONS ...... 1

III. PROJECT IMPLEMENTATION ...... .................. 5

IV. COST ESTIMATES, FINANCING AND DISBURSEMENT ........... 12

V. ECONOMIC RE-EVALUATION ........... ............... . 14

VI. PERFORMANCE OF THE BORROWER . . 15

VII. ROLE OF THE BANK ..................................... 17

VIII. CONCLUSIONS ................ 18

Annexes

1. Civil Works Other than Tegucigalpa-Talanga Road -Comparison between Appraisal and Revised EconomicReturns ............................................. 19

2. Feeder Roads to the Tegucigalpa-Juticalpa RoadStudied under the Project . . 20

3. Comparison between Appraisal and Final Costs ....... .. 21

4. Tegucigalpa-Talanga Road - Comparison between Fore-cast and Actual Traffic Volumes .................... 22

5. Tegucigalpa-Talanga Road - Comparison betweenAppraisal and Final Costs and Economic Returns..... 23

6. Borrower Comments .... 24

MAP

IBRD 10395 (PCR) - Honduras - Main Highway Network

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.

HONDURAS


SIXTH HIGHWAY PROJECT - LOAN 896-Ho

PREFACE

The following is a Project Completion Report on the Sixth HighwayProject in Honduras for which Loan 896-HO in the amount of US$18.8 million .wasapproved by the Board on May 30, 1973. The Loan was closed on June 30, 1980 andfinal disbursement was made on July 29, 1980.

This Completion Report was prepared by the Bank's Latin America and theCaribbean Regional Office and is based on information obtained from the file ofthe Bank's Record Center, the LAC Information Center, Appraisal and Supervisionreports for Loan 896-HO and on the final project report dated January 1979prepared by the Secretariat for Communication, Public Works and Transport(SECOPT).

In accordance with the revised procedures for project performanceaudit reporting, this completion report was read by the Operations EvaluationDepartment but the project was not audited by OED staff. The draft CompletionReport was sent to the Borrower, who expressed conformity by a telex datedNovember 24, 1982, annexed to the Report.

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HONDURAS


SIXTH HIGHWAY PROJECT - LOAN 896-HO

Basic Project Data

AppraisalItem Expectation Actual

Total Project Cost (US$ million) 25.8 25.8

Loan Amount (US$ million) 18.8 18.8

Disbursed as of December 31, 1979 (US$ million) - 18.6

Repaid as of October 31, 1979 (US$ million) - 0.340

Date Physical Components Completed 12/76 3/80

Economic Rate of Return 13% 19.7%

Financial Performance - Better

Institutional Performance - Same

Other Project Data

OriginalItem Plan Actual

First Mention in Files or Timetable - 9/69

Negotiations 4/73 4/2-4/5/73

Board Approval 5/73 5/24/73

Loan Agreement - 5/30/73

Effectiveness 8/28/73 8/27/73

Closing Date 6/30/77 6/30/80

Borrower Republic of Honduras

Executing Agency Secretariat for Communications,Public Works and Transportation(SECOPT)

Fiscal Year of Borrower January 1 - December 31

HONDURAS



Mission Data

No. of No. of Date ofItem Month/Year Persons Weeks Report

Identification 10/69 2 1 10/69

Preparation 1/ 2/70-10/72

Appraisal 11/12/72 3 2 5/73

Missions

No. of Date ofType of Mission Member of Missions Weeks Mission

Supervision Paraud 1 6/73

Supervision Chatelin/Paraud 1 1/74




Supervision Paraud/Woltman 1 8/75

Supervision de Castro/Paraud 1 1/76

Supervision Burns 1 5/76


Supervision Burns/Pinilla/Paraud 1 7/77


Supervision Burns/ Doyen/Pinilla 2 5/78

Supervision Pinilla 1 8/78

Supervision Pinilla/Nordin 2 6/79

1/ Project preparation carried out for the most part during supervision forthe Fifth Highway Project.

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HONDURAS



Country Exchange Rates

Name of Currency = L Lempira

Appraisal Year Average: US$1.00 = L 2.00

The rate of exchange of US$1.00 = L 2.00 has not changed during the project

implementation period.

HONDURAS



HIGHLIGHTS

The Sixth Highway Project achieved its main objectives of improvingthe Tegucigalpa-Talanga Road and feeder roads as well as of increasing SECOPT'scapabilities in the areas of transport planning and road maintenance at a costof almost 20% below that estimated at appraisal (para 4.01). Such savingswere largely due to the Government's decision, early in the project implementa-tion stage, to carry out a thorough review of the previously prepared engineeringof the Tegucigalpa-Talanga road, claiming that the average cost per km wasunacceptably high (para 3.02). The Government's view, although originallynot fully shared by the Bank, proved to be sound.

The Loan included a special contingency allowance because of uncer-tainties in the bidding outcome for the Tegucigalpa-Talanga road (para 2.04).Although the funds were not needed for the original purpose, their availabilityproved to be very fortunate since they were later allocated, on an emergencybasis, to repair the damages caused by Hurricane Fifi, which devastated theNorthern part of Honduras in September 1974 (para 3.06).

Surplus funds resulting from the 'low' cost of the Tegucigalpa-Talangaroad (para 3.04) and the lower design standard of the Bridge over the Ulua River(para 3.12) were used for new and/or increased project elements. These included:

a) additional works to complete the reconstruction of sections of theComayagua-La Libertad road which was not included in the originalproject (para 3.10).

b) inclusion in the project of the reconstruction of the most criticalsections (17 km) of La Ceibita-Santa Barbara Road (para 3.26).

c) assistance in implementing a feeder roads demonstration projectutilizing labor-intensive construction techniques (para 3.27).

The loan included financing of technical assistance to the threeGovernment agencies involved in transport planning and a training program formaintenance personnel (para 3.22, 3.23, 3.24 and 3.25). These institutionbuilding aspects of the project proved to be well chosen and resulted inlong-term improvements in the areas mentioned above, in spite of shortageof qualified personnel and frequent changes in staff assignments (para 6.02).

The completion report identifies one lesson to be learned fromthis project, and that is the importance of the Bank maintaining a flexibleand cooperative attitude toward changes in project elements resulting fromsignificantly changed circumstances.

HONDURAS



I. INTRODUCTION

1.01 Since the early 1950's when road development in Honduras began toreceive priority attention, road transport has been the primary land trafficmode. The highway network, totalling about 5,600 km at the time of theproject's identification, was basically well developed but many primary routesneeded upgrading and new feeder roads were required to achieve full developmentof selected areas.

1.02 The Government's Six-Year Investment Program for 1972-77 totalledabout US$560 million equivalent with about 26% or US$145 million allocated tothe transport sector and 80% of that amount designated for highway upgradingand construction. The Government assigned first priority to improving theTegucigalpa-Talanga-Juticalpa road which passes through very mountainousterrain and carried up to 600 vehicles per day including a substantial volumeof logging trucks from adjacent forest areas. Also considered as high prior-ity was the construction of feeder roads to assist in the development offorestry and agricultural areas served by the Tegucigalpa-Talanga-Juticalparoad. Construction and studies of selected sections of these high priorityinvestments comprise the main elements in this project which is the sixth ina series of Bank-financed highway projects designed to assist the Governmentin its efforts to provide needed improvements and expansion of the road network.

1.03 This completion report is based on information obtained from thefile of the Bank's Record Center, the LAC Information Center, Appraisal andSupervision reports for Loan 896-HO and on the final project report datedJanuary 1979 prepared by the Secretariat for Communication, Public Works andTransport (SECOPT).

II. PROJECT PREPARATION, APPRAISAL AND NEGOTIATIONS

Preparation

2.01 Project preparation started in 1968 when, with financing providedunder the Fifth Highway Project (Loan 495-HO), feasibility studies of theTegucigalpa-Talanga-Juticalpa Highway (195 km) and for feeder roads to theWestern Highway were carried out by consultants. A draft report was submittedto the Bank in mid-1969 and finalized in January 1971 incorporating the Bank'sand Government's comments.

2.02 Detailed engineering of the Tegucigalpa-Talanga-Juticalpa Road wasfinanced jointly by the Central American Bank for Economic Integration (CABEI)and the U.K. Government. A contract for these engineering works, including

terms of reference acceptable to the Bank, was awarded in December 1971 toa UK consultant who prepared the feasibility study with detailed engineeringfor the highest priority section (Tegucigalpa-Talanga) to be expedited so thatit could be considered for the proposed Bank loan. At the same time theGovernment was preparing, through other consultants and with other sources offinance, the engineering of several secondary roads which they planned topropose for inclusion in the project.

Appraisal

2.03 Project appraisal was carried out in November/December 1972. Duringappraisal a change of government led to the removal of many of the seniorSECOPT officers and the mission was left to deal directly with consultantswho, of course, were unfamiliar with the position of the new government.Although officials of the new government negotiated the loan, subsequentfurther changes in SECOPT staff contributed to project delays resulting from areview of the main road design (para. 3.02) and addition of a new road (para.3.26) and changes in feeder roads for detailed engineering work (para. 3.20).Highlights of the appraisal were:

(i) The economic and engineering studies for the Tegucigalpa-Talangaroad were practically completed. The consultants, at CABEI'ssuggestions, had included about 16 km of climbing lanes whichwere deleted at the Bank's request because of insufficienteconomic justification.

(ii) Although the engineering for secondary roads was incomplete andfeeder road costs were estimated by consultants on a per kmbasis without any surveys and plans, the information was consideredadequate for appraisal.

(iii) As a result of discussions during the preparation missions, it wasagreed to include in the project two institution-building compo-nents:

(a) technical assistance for transport planning; and

(b) training for engineers and technicians.

2.04 The Issues Paper was circulated on December 29, 1972 and a decisionmeeting held on January 15, 1973. As a result, agreement was reached on themajor issue identified which was the recommendation to include a 15% specialcontingency allowance because of uncertainties in the outcome of the interna-tional competitive bidding for the Tegucigalpa-Talanga road. No major contract.for highway construction had been recently awarded in Honduras and it wasdifficult to judge the response of the market to the international tender.It was also agreed that the special contingency would be cancelled in totalif the lowest evaluated bid did not exceed the appraisal estimate for the road(excluding normal contingencies) and cancelled prorata if the bid was higher.

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Negotiations and Approval

2.05 Negotiations took place in Washington between April 2 and 5, 1973and on May 24, 1973 the loan amounting to US$18.8 million was approved by theExecutive Directors. The loan was signed on May 30, 1973 and became effectiveon August 27, 1973.

Project Description and Costs

2.06 The agreed project, as described in the Loan Agreement, is as follows:

Part A - The construction of a two-lane paved road between Tegucigalpaand Talanga (55 km).

Part B - Reconstruction to all-weather, gravel standards of the roadbetween Comayagua and La Libertad (45 km).

Part C - Construction of a 200 m long bridge over the Ulua River.

Part D - Improvement to gravel standards of about 80 km of feeder roadsaccording to an agreed list.

Part E - Feasibility studies of about 330 km of feeder roads accordingto an agreed list, and engineering studies of the technicallyand economically feasible roads.

Part F - Review and improvement of the Borrower's transport planningoperations, including, inter alia:

(i) review of the Six Year (1972-1977) Transport InvestmentProgram;

(ii) improvement of traffic data collection and evaluation;and

(iii) updating of the road inventory.

Part G - A training program in the fields of highway design, constructionand maintenance as well as in management, operation and mainte-nance of highway construction and maintenance equipment.

The project was expected to be completed by December 31, 1976.

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2.07 The cost table as shown in the Appraisal Report is:

US$ Million Equivalent % ForeignLocal Foreign Total Exchange

A. Civil Works

(i) Construction of the Tegucigalpa-Talanga Road (55 km) 3.40 10.30 13.70 75

(ii) Reconstruction of the Comayagua-La Libertad Road (45 km) 0.40 1.30 1.70 75

(iii) Construction of a bridge over theUlua River (200 m) 0.20 0.60 0.80 75

(iv) Improvement of about 80 km ofFeeder Roads 0.50 0.50 1.00 50

Subtotal 4.50 12.70 17.20

B. Consulting Services for

(i) Supervision of construction ofworks under A above 0.64 0.96 1.60 60

.(ii) Engineering studies for Items A(ii),(iii) and 45 km of (iv) above 0.08 0.12 0.20 60

(iii) Feasibility studies and, if feasible,detailed engineering for about 330 kmof feeder roads 0.20 0.40 0.60 60

(iv) Technical assistance for transportplanning - 0.10 0.10 100

Subtotal 0.92 1.58 2.50

C. Training Program for engineers,supervisors and technicians - 0.15 0.15 100

D. Contingencies

(i) Physical (about 10% of A) 0.45 1.27 1.72

(ii) Escalation (about 11% of A & B) 0.60 1.57 2.17

(iii) Special 1! (about 15% of A(i)) 0.53 1.53 2.06

Subtotal 1.58 4.37 5.95

Grand Total 7.00 18.80 25.80 73

1/ See paragraph 2.04.

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III. PROJECT IMPLEMENTATION

Construction of the Tegucigalpa-Talanga Road

3.01 Project implementation started even before loan negotiations, when,in March 1973, SECOPT initiated prequalification of contractors. Ten firmssubmitted prequalification documents and six were prequalified. The proceduresfollowed and the results of prequalification were agreed with the Bank.

3.02 In early June 1973, shortly after loan signing, SECOPT decided tocarry out a thorough review of the previously prepared engineering for theTegucigalpa-Talanga road claiming that the average cost per km (aboutUS$250,000) was unacceptably high. This decision caught the Bank by surprisesince the design consultant's work had been closely supervised by SECOPT andCABEI staff during preparation and had been accepted as reasonable by the Bankand Government as a basis for appraisal and loan negotiations. The reviewdecision caused protests from CABEI (who financed the engineering) and fromthe design consultant who wrote numerous letters to the Bank and SECOPT dis-agreeing with the latter's contentions and maintaining that the engineeringprepared by them was the most suitable for the difficult topography encoun-tered. Although the Bank felt that SECOPT had not revealed fully the reasonsbehind the design review, it had no choice but accept their decision andexpress its concern about the delays in project implementation which mightresult.

3.03 SECOPT engaged two local consulting firms to carry out a preliminaryreview of the design and determine what further action was needed. In August1973 the firms submitted their report recommending the study of alternativealignments along some sections and proposing a review of the cross sectionand the drainage systemS The report stated that earthworks could be reducedby as much as 876,000 m . SECOPT then appointed three local individual designengineers to carry out the detailed review which they completed in February1974. They proposed alignment changes along 65% of the road length, includingbypassing the city of Talanga, which would sho5ten the road by about two kilo-meters, reduce earthworks by about 1,000,000 m and lower the total estimatedcost by about 16% or nearly US$2.2 million. The Bank agreed with the proposedchanges.

3.04 The plans were revised by SECOPT staff under the direction ofthe three appointed engineers and international bids were invited in February1974. Because of the time lag between the date of prequalification (March1973) and the date of the invitations to bid, three of the six firms previouslyprequalified (para. 3.01) indicated no further interest. The invitation was,therefore, issued to the remaining three firms plus an additional firm whichprequalified later. Only two bids were received on the mid-May tender date:one for US$9.9 million equivalent by a Honduran/US joint venture; and one forUS$14.3 million equivalent by a US contractor. The Government estimate wasUS$11.5 million equivalent.

In view of the comparatively low bid, the Bank suggested a further investi-gation of the joint venture's prior performance and its financial and tech-nical capabilities. All information available indicated that the jointventure was made up of good and responsible firms and, on that basis, the Bankagreed to the contract award. Works proceeded smoothly and were satisfactorilycompleted on schedule in February 1977 only about 3 months later than thecompletion date estimated at appraisal. The quality of work was very good andfinal costs, including escalation and supplementary works, was US$11.2 million,about 11% over the original bid and some US$2.5 million (18%) below theappraisal estimate of US$13.7 million, without contingencies. The differenceof US$3.8 million between the low bid (US$9.9 million) and the appraisalestimate (US$13.7 million, excluding contingencies) created a "surplus" ofproject funds which was used later in part for carrying out additional works.The very good results from both a cost and time standpoint showed that SECOPT'sdecision to review and revise the original design was sound.

3.05 Initially, SECOPT intended that the original design consultant beretained to supervise construction. However, when the decision to reviewand revise the designs was taken, it was also decided to appoint a differentconsultant for the supervisory task. The Bank agreed to award of the supervi-sion contract to a joint venture of Honduras/Costa Rica/Nicaragua firms whoseperformance was generally satisfactory.

Special Contingency Allowance

3.06 As mentioned in paragraph 2.04, the special contingency of 15%(US$2.06 million) should have been cancelled in view of the fact that thelowest bid was well below the appraisal estimate. However, it was agreedto defer the cancellation for several months until construction work was wellunder way as a guard against any unusual and unexpected cost increases. Thisturned out to be a fortunate decision since it left funds available to allocateto repair of damages caused by Hurricane Fifi, which devastated the northerncoast of Honduras in September 1974, flooding roads and bridges and creatingchaos in the region. The Minister of Public Works asked the Bank to provideemergency funds for the repair works and the Bank agreed to the use of US$1.53million of the special allocation for this purpose. By letter of December 4,1974 the Loan Agreement was revised accordingly and emergency procurementprocedures were established. In June 1975 the Government asked the Bank toinclude two additional roads to the list of roads to be repaired with theemergency funds to which the Bank agreed and later formalized in its letterof February 5, 1976 addressed to the Minister of Finance. The following fourroads (including major bridges) with a total length of about 360 km wererepaired:

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Western HighwaySan Pedro Sula-Puerto CortesSan Pedro Sula-TelaTela-Ceiba

Repair works comprised mainly the reconstruction of road sections washed outby the floods, resurfacing and bridge protection; works were carried out bylocal contractors and by force account. All works were satisfactorily com-pleted in May 1978 at a total cost of about US$2,865,000.

Reconstruction of the Comayagua-La Libertad Secondary Road (45 km)

3.07 The feasibility study and preliminary engineering for this roadwas prepared in 1970 by a US consultant with financing by the Inter-AmericanDevelopment Bank (IDB). Reconstruction costs were estimated at US$2.9 millionand the benefit cost ratio was very favorable; average daily traffic (ADT) atthat time was 65 vehicles.

3.08 In July 1973 the Highway Department (CAMINOS) invited consultantproposals for detailed engineering to gravel standards and, with Bank agree-ment, appointed a local firm who was later retained for construction super-vision. The cost estimate on the basis of completed detailed engineering wasUS$2.9 million, the same as for the feasibility study, but ADT in 1974 hadincreased to 190 vehicles. Thus, the economic justification of the road, asrequired by the Loan Agreement (para. 6.05) was easily confirmed.

3.09 However, since the Bank loan was based on an appraisal estimateof only US$2.05 million on the basis of reduced design standards (includingcontingencies) CAMINOS, with Bank agreement, decided to improve only themost critical sections (totalling about 25 km) and to construct all bridgesand the drainage system to ensure year-round traffic on the entire road.This first phase construction was estimated at US$2.1 million. Internationalbids were invited in April 1975 with the road divided into two sections andbidders given the option to bid individual sections or both as a "package."Three bids were received and contracts were awarded to two local contractorswho were the lowest bidders for each section: Section I - for US$1,180,000;and Section II - for US$949,000. The total of US$2,129,000 for bothcontracts was only slightly higher than the Government estimate.

3.10 In late 1975 when the contracted works were well underway, SECOPTrequested that about US$900,000 of the "surplus" funds from the low Tegucigalpa-Talanga Road bid (para. 3.04) be allocated to complete reconstruction of theroad sections not included in the previous contracts (about 20 km). Theeconomic evaluation of this additional work was favorable and, with Bank agree-ment, two contracts amounting to about US$440,000 each were negotiated withthe same contractors.

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3.11 All work of generally good quality was completed in August 1977,about six months behind schedule. The final cost was US$2.94 million, slightlyless than the contracted amount.

Construction of a Bridge Over the Ulua River

3.12 The design of the bridge over the Ulua River was prepared by anindividual consultant seconded to SECOPT by the IDB. The bridge, as designed,was 150 m in length and two lanes wide; it was estimated to cost US$970,000.However, a two-lane structure could not be justified because of low projectedADT volumes and, in order to meet the requirements for economic justificationspecified in Section 3.01(b) of the Loan Agreement, the bridge was redesignedfor one lane only. Bids were invited in February 1974 and in May 1974 acontract for US$321,500 was awarded to the lowest bidder, a local contractor,and a local consulting firm was selected for construction supervision.

3.13 The contractor was issued a notice to proceed in November 1974.Unusually heavy rains in late 1975 raised the river level to the top of thenearly completed abutments and piers which prompted a design revision result-ing in some time delay and increased costs.

3.14 Bridge works were completed in October 1976, about six months behindschedule. The final cost, including supplementary works and escalation, wasUS$450,000, about 40% over the original contract amount but well below theappraisal estimate of US$800,000 which was based on a two-lane bridge. Thequality of work was good and the consultant's supervision was entirely satis-factory.

Improvement of about 80 km of Feeder Roads

3.15 Feasibility studies for the 80 km of feeder roads to be improvedunder the project were prepared by a consultant with financing provided byIDB. The roads are:

Length Km

(i) Casa Quemada-Macuelizo-Azacualpa 11.5(ii) Western Highway-Pinalejo 7.0

(iii) Choluteca-Apacilagua 28.0(iv) Comayagua-La Paz 19.5(v) La Ceibita-San Nicolas 14.0

Total 80.0

3.16 At appraisal and negotiations it was agreed that detailed engineer-ing for 45 km of the above roads would be financed under the loan whileengineering for the remaining 35 km would be financed from other sourcesavailable to Government at that time. After the loan was signed, SECOPTinformed the Bank that financing from other sources was no longer availableand requested Bank financing for the engineering of the entire 80 km. The

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Bank agreed, and design contracts were awarded to two consultants: A USfirm for the first four roads totalling 66 km and a local firm for the lastroad of 14 km. It was agreed at negotiations that, as the feeder roadswere to be constructed to fairly low standards, the normal level of detailedengineering would be inappropriate and only "light" 1/ engineering would bedone which would provide a reasonable estimate of average cost per km and asuitable basis for preparing contract documents. The engineering for thefeeder roads was prepared on that basis.

3.17 Bids from prequalified contractors were received in March 1975 forroads (i) through (iv) and in late 1975 for road (v). In all cases the con-tracts were awarded to the lowest bidder and construction supervision wasprovided by the design consultants. Roads (i) through (iv) were completedon schedule in early 1977 and road (v) in early 1978. The quality of allconstruction and the consultant's supervision was satisfactory. Final costof works on the five roads was US$1,351,000, about 12% over the appraisalestimate of US$1,210,000 (including contingencies). The increase was causedmainly by construction of additional drainage structures and selected improve-ments of design standards. Annex 1 shows a comparison between the costs,traffic and rates of return for each road as estimated during appraisal (1972)with the same data after completion.

Feasibility and Engineering Studies for Feeder Roads

3.18 The project included feasibility studies for 14 feeder roads total-ling about 330 km serving the areas north of the Tegucigalpa-Juticalpa roadand engineering for those roads proven feasible. On the basis of expecteddevelopment and estimated traffic volumes, it was agreed at negotiations thatonly "light" engineering (para 3.16) would need to be prepared for nine roadstotalling 143 km but that normal detailed engineering would be required forthe remaining five roads totalling 190 km. The list of roads studies andgrouped by type of engineering is shown in Items A and B, Annex 2.

3.19 With Bank agreement a contract for the studies and the "light"engineering was awarded to a joint venture of US/Honduras consultants, andwork began in mid-1974. All work was completed by mid-1975 and showed ratesof return for individual roads ranging from 7.9% to 50% with only three roadshaving returns below 10% (Annex 2). Although it had a relatively lower rateof return than several other roads studied, the Government assigned highpriority to the improvement of the Juticalpa-Catacamas road (41 km) andrequested that detailed engineering be prepared immediately so that itsconstruction would be considered for inclusion in the then proposed SeventhHighway Project. The Bank agreed and the study consultant's contract wasextended to include this work. The road is presently under constructionas part of that Bank project.

1/ "Light" engineering means a reconnaissance only to identify principalimprovements needed, earthwork quantities based on minimum field surveys,standard designs and plans for drainage facilities together with speci-fications and bid documents.

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3.20 Unexpected delays were encountered in starting detailed engineeringfor the remaining 150 km. This was partly the result of several changes insernior SECOPT officials but was mainly caused by Government uncertainty aboutrelative priorities for feeder and developmental roads in the general area ofthe Tegucigalpa-Juticalpa road. In an effort to clarify the situation theBank agreed to SECOPT's proposal that feasibility studies be prepared for twoadditional roads; 88 km road serving the area south of Juticalpa, and a secondbypass of the city of Tegucigalpa, about 16 km in length (Item C, Annex 2).The work was carried out in 1977 by the same consultant who prepared studiesfor the originally agreed 330 km (para. 3.19).

3.21 Finally, in mid-1978 SECOPT proposed and the Bank agreed thatdetailed engineering would be carried out for the following three roads total-ling about 158 km:

Telica-San Francisco de la Paz-Gualaco 58 kmGualaco-San Esteban 50 kmTalanga-El Provenir 50 km

These roads include substantial portions of roads originally proposed withextension to open new areas and connect with roads being constructed withassistance from IDB. The engineering work was carried out by three localconsultants and completed in mid-1980. The first and third roads listedabove are included in the ongoing Eighth Highway Project and the IDB isfinancing the construction of the second road.

Technical Assistance for Transport Planning

3.22 The project provided for technical assistance to the three govern-ment agencies involved in transport planning: the Central Planning Office(CONSUPLANE) and the General Directorate for Transport and the SectoralPlanning Office, both in SECOPT. Staff in all these agencies lacked trainingand experience in transport planning and there was little or no basic datawith which to work. In April 1974 SECOPT invited proposals from consultingfirms to carry out the assistance on the basis of terms of reference agreedwith the Bank. The joint venture of Honduras/US firms was selected and acontract was signed in September 1975.

3.23 The General Director of Transport in SECOPT was appointed as coor-dinator of the program and the consultant provided 40 man-months of assis-tance. Their project manager and transport economist remained in Hondurasfor the full contract period (10 months) and 8 experts in various fields wereassigned for shorter periods as required. In addition to providing much neededtraining to staff of the three planning agencies, the consultant preparedmanuals for feasibility studies, analysis of vehicle operating costs and busroute studies and made recommendations on tariffs, traffic regulations, atransport master plan and a program for data collection including computerprocessing of selected information.

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3.24 The Government was favorably impressed with the consultant's perfor-mance and asked the Bank to extend the original contract which, in fact, wasextended three times until May 1978 (the second and third extensions werefinanced under the Seventh Highway Project). The consultant's services duringthe contract extension were carried out by a full time transport economist andwere limited to the General Directorate of Transport. In addition to follow-upon the tasks initiated during the original contract period, the consultantprovided additional training for transport planning as well as advice andassistance for the preparation of a much-needed new transport law togetherwith implementing regulations. The new law was enacted in February 1976 andwas the basis for a November 1976 decree establishing regulations for enforce-ment of vehicle weights and dimensions. With the assistance of CABEI, SECOPTbuilt and equipped 13 weight control stations located at strategic pointsalong the most heavily trafficked roads. The stations began operations inJanuary 1977 and, after a short adjustment period, are working satisfactorily.

Training Program

3.25 The project helped finance a training program for maintenancepersonnel which was carried out with assistance by a US consultant under a15-month contract and that was later extended by an additional five months.Originally a total of 29 courses were listed for consideration with 15selected for preparation and use on the basis of priority and considering thetime, funds and staff available. The selected courses consisted of bothaudio-visual and field training and were presented in each maintenance districtwhich were supplied with audio-visual equipment and other necessary trainingaids. A training department was formed within SECOPT and two engineers weretrained as instructors in the consultants' home office. The ongoing SeventhHighway Project includes financing of additional technical assistance andtraining for maintenance staff and the same consultant has been retained toaid in implementation.

Additional Project Road

3.26 In late 1974 SECOPT requested the Bank's agreement to use aboutUS$3.0 million of the US$3.8 million "surplus" funds (para 3.04) to helpfinance reconstruction of the most critical sections (17 km) of the 60 kmLa Ceibita-Santa Barbara Road. The economic justification for the proposedimprovement was prepared by SECOPT's Sectoral Planning Office with detailedengineering carried out by a local consultant. The Bank found the economicand engineering information to be satisfactory but suggested delaying bids forthe work until construction of other project items was further advancedso that a more accurate estimate of available loan funds could be made.In February 1976 the Bank agreed to the additional road improvement andbids were immediately invited from prequalified contractors. Two contractstotalling about US$2.93 million were awarded to the lowest bidders; US$2,744,831for highway works and US$187,582 for construction of two bridges. The inclusionof this new project component required extending the closing date from June 30,1977 to December 31, 1978. All work was of good quality and construction wascompleted on schedule in late 1978. Supervision of construction was carriedout by a local consultant whose performance was satisfactory.

- 12 -

Development of Labor Intensive Technologies

3.27 In 1975 the Government requested the Bank's assistance in implement-ing a feeder roads demonstration project utilizing labor-intensive constructiontechniques. Although this item was not included in the original project, theGovernment requested, and the Bank agreed, that US$200,000 of the "surplus"loan funds (para 3.04) be allocated to this effort; this amount was matchedby the Bank from its research funds. Work started in April 1976 with assis-tance by a two-man consultant team and a new unit was created within SECOPTto manage the program.

3.28 The program has progressed well and Bank support and assistance wasextended via a special allocation of US$1.0 million from savings in construc-tion costs realized under the Seventh Highway Project. For further detailsreference is made to a report issued by the Bank's Transportation Departmententitled "The Study of Labor and Capital Substitution in Civil EngineeringConstruction" dated September 1978.

IV. COST ESTIMATES AND DISBURSEMENTS

4.01 A comparison between appraisal and final cost estimates (includingcontingencies) is shown in Annex 3. The final cost of original project itemswill be about US$19.2 million, some US$4.5 million (19%) less than theappraisal estimate, including normal contingency allowances. As explainedin preceding paragraphs, all remaining loan funds, including the specialcontingency allowance, were used for emergency damage repairs or for newand/or increased project elements. The original disbursement percentages wereretained throughout implementation and, therefore, the Bank's participationin the total project was the 73% estimated at appraisal.

4.02 Disbursements lagged behind appraisal estimates as shown in thefollowing table. The initial lag was caused by Government's decision toundertake a thorough revision of the engineering and cost estimates for theTegucigalpa-Talanga road which delayed commencement of project works for aboutone year. Decisions on use of the special contingency and "surplus" fundsresulting from the initial low bid were not taken until later in the implemen-tation period which also contributed to disbursement delays.

Appraisal Actual as % ofFY Estimates Actual Appraisal

--(US$'000 Equivalent)--

1974 3,600 0 01975 9,000 3,500 171976 16,500 9,100 551977 18,800 14,200 751978 18,800 17,500 931979 18,800 18,400 981980 18,800 18,672 1/ 99

1/ On November 7, 1980, undisbursed funds amounting to US$127,925.12 werecancelled.

- 13 -

4.03 The allocation of loan proceeds was revised six times as shownbelow to provide for emergency repair works, reconstruction of a new road andother project revisions.

-----------------Revisions--------------------------Original 1st 2nd 3rd 4th 5th 6th

Categories 5/30/73 12/4/74 1/14/76 6/10/76 2/16/77 10/4/77 6/30/80-----------------------US$000 Equivalent----------------------

I. Road Construction 12,700 14,230 14,230 14,230 14,785 16,230 16,500

II. Consultant Services

(a) for parts A, B, Cand D of the project 1,080 1,080 1,080 1,080 1,080 1,300 1,450

(b) for part E of theproject 400 400 400 400 400 650 564

(c) for part F of theproject 100 100 200 270 270 270 267

III. Training Program 150 150 350 350 350 350 341

IV. Unallocated 4,370 2,840 2,540 2,470 1,915 - -

18,800 18,800 18,800 18,800 18,800 18,800 18,672 1/

4.04 The closing date was extended five times, as follows, for a totalof three years:

Original Closing Date June 30, 19771st Extension (18 months) December 31, 19782nd Extension (6 months) June 30, 19793rd Extension (6 months) December 31, 19794th Extension (6 months) June 10, 19805th Extension (20 days) June 30, 1980

1/ See footnote on preceding page.

- 14 -

V. ECONOMIC RE-EVALUATION

Performance of the Economy

5.01 During the period 1967-1976, the real Gross Domestic Product (GDP)of Honduras grew at a slow annual rate of 3.5%. The economic situationimproved after 1976 and the real GDP increased by about 7.6% per year. Therate of inflation averaged 8% between 1973 and 1976.

GDP and General Price Changes - 1966-1976 in Percent

1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

Real GrowthGDP - +5.4 +6.3 +0.8 +3.7 +3.5 +3.7 +5.1 +1.6 +0.7 +4.5 +7.0 +8.2

GeneralPrices - - +1.9 +1.2 +3.6 +2.3 +3.4 +4.6 +13.0 +8.1 +5.0 +8.5 +5.7

ConstructionPrices - - - - - - - - +5.9 +6.6 +13.0 +8.0/1 +8.0/1

/1 Assumptions made for the reevaluation.

Sources: Memorandum on recent economic development and prospects of Honduras,January 10, 1978, through 1975, and Central Bank of Honduras for

1976-78.

Plan Maestro Vial de Honduras, December 1977.

Construction of the Tegucigalpa-Talanga Road

5.02 The traffic evolution along the Tegucigalpa-Talanga road reflectsthe general economic trend. Traffic growth on the old road was significantlylower than expected during the economic recession from 1972 to 1976 but openingof the new road in 1977, coinciding with the economic boom, generated increasedtraffic. As a result, the ADT in 1977 was 10% higher than estimated at appraisal(Annex 4). Marked changes in the composition of traffic also occurred between1973 and 1978: light vehicles, buses and light trucks increased their shareof traffic compared to heavy trucks.

5.03 The appraisal economic rate of return (ERR) resulting from a probabilityanalysis, amounted to 13%. The major benefits were vehicle operating costsand time savings, the latter representing 14% of total benefits. A SECOPTstudy in 1979 yielded a revised ERR of 13.6% by considering: (a) the final

- 15 -

construction and supervision costs, which were lower than expected; (b) theactual traffic; (c) the traffic growth rates predicted in the Appraisal Report;(d) the vehicle speeds measured on the new road, which are higher than expected;and (e) lower vehicle operating costs savings than estimated because of thechange in the composition of the vehicle fleet (Annex 4). Time savings werenot included as a benefit in SECOPT's study. Consideration of these savingswould have given an even higher rate of return. This shows that the investmentwas well justified (Annex 5).

Improvement of Secondary and Feeder Roads

5.04 The Appraisal Report considered a traffic growth rate of 5% p.a.for these roads. Recent counts show that, on the average, traffic has grownat higher rates (about 12% p.a.). For the 1978-1980 period, the 12% ratewas adopted consisting of a 5% rate of growth for normal traffic with theremainder composed of induced traffic. Between 1981 and 1985, no inducedtraffic is assumed and normal traffic is projected to grow at 5% p.a. similarto the appraisal forecast.

5.05 The revised ERRs were computed using vehicle operating cost savingscalculated by SECOPT in December 1978. Following a conservative approach,no time value for passengers and freight was taken into account and thevehicle composition used was that obtained from the latest two day manualtraffic counts. The resulting revised ERRs for the feeder roads averagedabout 26% indicating that, on an aggregated basis, investments in feeder roadswere sound. Should the value of time savings and/or residual value beenconsidered, the ERR would be higher.

VI. PERFORMANCE OF THE BORROWER

6.01 The performance of the Borrower was mixed but, under the circum-stances, can be rated as generally satisfactory.

6.02 One of the main causes for occasional less than satisfactory perfor-mance by SECOPT was a chronic shortage of qualified technical personnel andfrequent changes in staff assignments. Low salary scales is the underlyingcause and effort to focus Government's attention on the problem is being madeunder the ongoing Seventh Highway Project where a covenant requires furnishingthe Bank a detailed program of actions proposed to recruit and retain qualifiedkey personnel. The program was prepared in late 1979, but the government hasnot yet acted upon it. As an interim measure SECOPT was allowed to strengthenits capability by contracting advisors at higher than civil service salary scale.

- 16 -

6.03 There were frequent delays by the Borrower in processing paymentsto contractors and consultants. These resulted from the Borrower's overlycomplex procedures and documentation, particularly in the Ministry of Finance.Efforts to improve the situation are being made under the Seventh HighwayProject where an "Executing Unit" has been established in SECOPT to streamline

and expedite this and other aspects of project implementation.

6.04 The Borrowers compliance with the major loan covenants was goodexcept for road maintenance. Following are the major covenants and theBorrower's efforts to comply.

6.05 "Section 3.01(b) Without limitation upon the foregoing, the Borrowershall: (i) improve or cause the Municipalidad de Tegucigalpa to improve, ina manner satisfactory to the Borrower and the Bank, about 800 meters of asuburban avenue to provide the road included in Part A of the Project withaccess to and from the streets of Tegucigalpa and to complete such improvementprior to, or concurrently with, Part A of the Project; and (ii) not startexecution of Parts B and C of the Project, except as the Borrower and theBank shall otherwise agree, before furnishing to the Bank evidence satisfactoryto the Bank, based upon detailed engineering studies therefore, that thecarrying out of such Parts is technically feasible and economically justified."

The avenue designated in Item (i) was improved to four-lanestandards in mid-1975, about 1-1/2 years before the Tegucigalpa-Talanga road was completed. The Borrower complied fully withItem (ii) and all information needed to establish feasibilityof the proposed roads was furnished the Bank (para 3.08).

6.06 "Section 4.03(a) The Borrower shall: (i) cause all national roadsof the Borrower to be adequately maintained and cause all necessary repairsthereof to be made, all in accordance with sound engineering practices;(ii) cause all road maintenance equipment and workshops of the Borrower to beadequately maintained and cause all necessary repairs and renewals thereof tobe made, all in accordance with sound engineering practices; and (iii) provide,promptly as needed, the funds, facilities, services and other resourcesrequired for the foregoing." Item (iii) was the subject of a SupplementalLetter dated May 30, 1973, which specified annual amounts to be budgeted forroad maintenance during 1974 and 1975.

Compliance with Items (i) and (ii) was not entirely satisfactorydue mainly to shortages of equipment and inadequate maintenanceof what equipment was available. As the loan did not providefinancing for equipment or workshop improvements, the Bank wasunable to exercise much leverage for improvement. However, theongoing Seventh Highway Project includes equipment financingwhich is helping improve the situation. As for Item (iii), theyearly allocations for maintenance have exceeded the amountsspecified in the Supplemental Letter.

- 17 -

6.07 "Section 4.03(b) Without limiting the generality of the foregoing,the Borrower shall take all necessary action to: (i) cause the dimensionsand weight of the vehicles using the national roads of the Borrower to be keptwithin the limits provided by the laws and regulations of the Borrower;(ii) ensure permanent and consistent enforcement of the Borrower's laws andregulations governing inter alia the dimensions and weight of vehicles; and(iii) exchange views with the Bank on any proposal to amend or supplement suchlaws and regulations."

The Borrower has complied satisfactorily with this covenant.Thirteen permanent weighing stations have been established andregulations on vehicle weight and dimensions are being enforced(para. 3.24).

VII. ROLE OF THE BANK

7.01 The Bank contributed significantly to project identification andpreparation by inclusion of feasibility studies under the preceding FifthHighway Project and by participation in review of subsequent designs andstudies which were financed by others. The project's scope and size wereappropriate for SECOPT's capacity although shortages of key technical staffwere a problem throughout implementation. The original implementation schedulewas reasonable but unexpected major changes in project scope required severalextensions of the closing date.

7.02 The institution building aspects were well chosen and have resultedin some important improvements in road maintenance operations and transportplanning. In spite of some staffing problems, the Government actively supportedand participated in these efforts and assistance in these and other areas isbeing continued under the Seventh Highway Project. At the Bank's suggestion,SECOPT encouraged and received much greater participation of local consultantsunder this project than in the past. Eight local firms either working aloneor in association with foreign firms, were engaged for construction supervisionor for feasibility or engineering studies; in the past such services wereprovided solely by foreign firms.

7.03 There were 14 supervision missions during the approximately six-yearimplementation period. The type and timing of these missions was appropriatein view of the several changes in project scope effected during implementation.The working relationship between the Borrower and the Bank was good throughoutthe project and this resulted in no small degree from the Bank's willingnessto consider use of "surplus" loan funds for new and/or revised project elementsand the Bank's quick response to Government's request to use the specialcontingency allowance for hurricane damage repairs.

- 18 -

VIII. CONCLUSIONS

8.01 The project was successful and met its main objectives of upgradingthe highest priority section of the Tegucigalpa-Juticalpa road and feederroads and improving SECOPT's planning and road maintenance capacity. Theadvances made are being consolidated and extended under the follow-up SeventhHighway Project, although the main problem encountered in project imple-mentation, shortage of key local staff, still persists. Through a fortunateset of circumstances, loan funds were available to help repair roads andbridges damaged during a 1974 hurricane and to participate in reconstructionof an additional secondary road.

8.02 There are no particular lessons to be learned from this projectexcept possibly to emphasize the importance of the Bank's maintaining aflexible and cooperative attitude toward changes in project elements resultingfrom significantly changed circumstances.

HONDURAS



Civil Works other than Tegucigalpa-Talanga road

Comparison Between Appraisal and Revised Economic Rates of Return

Costs in current Lempiras Costs in Lempiras of year of Appr.

ADT Year (including all contingencies) (including physical contingencies) ERR%

Length Appr. Final of Appraisal Final Appraisal Final Increases or

Project Component Km 1/ 197821 Completion L'OOO L'OOO L'OOO L'OOO Decreases % Appr. FinaLe/

A. Comayagua-La Libertad 45 125 231 1977 4,120 5,870 3,740 4,284 +15 14d/ 134/ 10;/

(Secondary road)

B. Feeder Roads1. Casa Quemada-Azacualpa 11.5 105 141 1976 278 686-6 253 540 +113 18 0

2. Western HighwayQuimistan-Pinalejo 7.0 269 360 1975 194 212 165 181 +10 29 45

3. La Ceibita-SanNicolas 14.0 130 174 1977 378 82G=' 330 598 +81 29 8 '

4. Choluteca-OrocuinaApacilagua 28.0 120 161 1976 882 440 803 346 -57 10 42

5. Comayagua-La Paz 19.5 273 366 1976 688 544 627 428 -32 29 53

Sub-total 80.0 2,420 2,702 2,178 2,093 - 4

C. Bridge over theUlua River - - - 1977 1,940 900 1,760 657 -63 12 20

D. La Ceibita-SantaBarbara 17.0 187 249 1978 5,000 5,780 5,000 4,379 -12 16 20

1/ ADT 1972; (except for item D- ADT 1975).2/ Appraisal estimates of ADT.because no new traffic counts are available (except for ADT 1978 of item A based on a 1974 ADT estimate).

3/ VOC savings according to appraisal report adjusted for inflation to years of completion of the different works.

4/ With time savings representing 20% at total benefits.5/ Without time savings.6/ Substantial cost increases on roads Nos. 1 and 3 were caused mainly by the need of additional drainage structures.

In addition, the original design for road No. 3 was for an improved track but in view of the growing traffic

demand, the construction was carried out on the basis of upgraded design standards.

- 20 - ANNEX 2

HONDURAS



Feeder Roads to the Tegucigalpa-JuticalpaRoad That Were Studied Under the Project

A. Roads Requiring "Light" Engineering Studies Rates ofLength (km) Return %

1. Cedros-San Ignacio 13.7 18.0

2. Coyol Solo-El Porvenir 7.1 50.0

3. El Porvenir-El Terrero 5.2 50.0

4. San Francisco-San Luis 13.7 7.9

5. Access to Orica 28.3 18.5

6. Access to Concordia 13.7 29.4

7. Access to Salama 32.5 8.8

8. Salama-Silica 3.8 8.8

9. San Francisco de La Paz-Manto 25.0 21.8

143.0

B. Roads Requiring Detailed Engineering Studies

10. Talanga-Cedros 24.5 23.1

11. Cedros-Minas de Oro 44.8 20.0

12. Juticalpa-Catacamas 40.7 22.0

13. Catacamas-Dulce Nombre de Culmi 58.9 31.5

14. Telica-San Francisco de La Paz 21.1 21.8

190.0

Sub-Total 333.0

C. Studies of Additional Feeder Roads Also B/C RatioCarried Out

15. Santa Maria-Seale-Azacualpa-Juticalpa 88.0 1.7

16. Guangalolo-Rio del Hombre 16.0 1.1

104.0

Total 437.0 km

HONDURAS



Comparison Between the Appraisal and Final Costs

(Listed in the Same Order as Shown in the Appraisal Report)

Project Components Total Costs Increases(Including Contingencies) or

A. Civil Works Appraisal Final Decreases Comments

(US$ Thousands)

(i) Construction of the Tegucigalpa-Talanga Road 16,600. 11,200 -35%

(ii) Reconstruction of the Comayagua-La Libertad Road 2,060 2,936 +42%

(iii) Construction of a Bridge Overthe Ulua River 970 450 -54%

(iv) Improvement of About 80 km ofFeeder Roads 1,210 1,351 +11% Details in Annex 1.

(v) Reconstruction of Sections of theLa Ceibita-Sta. Barbara Road - 2,891 - New project component.

Sub-Total 20,840 18,828 -10%

B. Consulting Services

(i) Supervision of Construction of

Works Under A (except item v) 1,760 1,929 +10%

(ii) Engineering Studies for Item A(ii)and 45 km of A(iv) above 220 166 -32% Engineering was prepared for the

(iii) Feasibility Studies for about 330 km 80 km mentioned in A(iv).

and,if feasible, detailedengineering. 660 916 +38% Feasibility Studies for 434 km and

(iv) Technical Assistance for Transport detailed engineering for 190 km.

Planning 110 314 +185% Additional consulting services were

(v) Supervision of Construction of work required.

under A(v) - 406 -

C. Training Program 150 141 -6%

1D. Special Contingency 2,060 2,865 +39% The special contingency was allocated

to carry out emergency repair workcon roads and bridges destroyed by

hurricanes.

E. Hand Labor Studies and Works - 200

25,800 25,765. b~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.

- 22 -ANNEX 4

HONDURAS



Tegucigalpa Talanga Road

Comparison Between Forecast and Actual Traffic Volumes

Appraisal Report: 1/Years ADT Estimate Actual ADT -

Old Road New Road Old Road New Road1972 460 0 460 01976 57 627 495 01977 60 671 50 2/ 7371978 63 718 - 3/ 900

1/ Source: SECOPT2/ Rough Estimate3/ No maintenance is provided to the old road; traffic is almost nil.

Traffic Projection (According to the Appraisal Report)

Annual Traffic Growth RateYears %

1976-1981 + 71981-1986 +101986-1995 + 7

Estimated Vehicle Operating Costs SavingsVOC Savings

(in centavos per vehicle - km) Traffic CompositionAppraisal Report SECOPT %

1973 1978 3/ Appraisal Report SECOPTWith Time Without Time Without Time 1973 1978Savings 1/ Savings Savings

Private Carsand Pick-ups 8.9 6.8 8.3 39.0 44.0

Buses 28.0 19.6 18.3 5.6 9.0Trucks II 36.3 30.8 18.2 8.2 35.0Trucks III 47.3 40.2 40.4 47.2 12.0

Weighted 2/ 29.38 25.43 16.52 100.0 100.0

1/ The cost of time represents 23% of the total cost for private cars, 30% forbuses and 15% for trucks.

2/ Weighted by the corresponding traffic composition.3/ In centavos of 1978: 1 centavos 1978 = 0.68 centavos 1973

- 23 - ANNEX 5

HONDURAS



Tegucigalpa Talanga RoadComparison Between Appraisal and Final Costs and Economic Rates of Return

Costs(Lempiras Millions)

Appraisal Final Decrease Inflation Decrease(1973) (1978) % (1973-1978 in Real

Terms

Total Costs (including physicalcontingencies and supervision) 32.7 22.4 -32 +49 -54

Economic Rates of Return

Appraisal FinalEstimate(SECOPT)

Average vehicle operating costsavings: Lempiras per vehicleand km 0.2938 0.1652

Economic Return % 13 -/ 13.6 -/

1/ Including time savings.

2/ Excluding time savings.

- 24 - ANNEX 6

NOVE,TlER 24, 1982

IIR. SHIV S. i' ,1'URACTTIG DlRElCT'OR-CLElERALOPErATION.S EVALUATIONINTBAFRADWASHINGTON DC

REFERENCE YOUR LETTERS 01' SEPTEtSER ;7 AND 10 1982, REGArDING PROJECT

PERI'ORI'IANCE REPrCT OF HONDURAS SIXTHI-IIGIIWAY PROJECT (LOAN IB-896-HO) A,ND

PROJECT PERFORI',ANCE REPORT ON HONDURAS SECOND PORTS PROJECT (LOAN IB-76 7-HO)

WISHi TO INFOR1i YOU 17E AIRE I.. AGrEElMNT WITHl THEM. REGARDS,

RODOLFO HIATA 'OROSSUBSECRETARIO DE HACIEND' YCREDITO PUBLICO

(UNDER-SECRETARY OF FINANCE ANDPUBLIC CREDIT)

IBRD-10395(PCR)RD9 T8'7 oo* TRIO MAP IS BASED ON IBRD 10395, MARCH 1973 DEOCEMBER¶A79

SR. <f-s ~~~~~~~~~~~~~~~~~~~~~~~~~~ONE PORTION OF TRANSPORTATION PROJECT SCR

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