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Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No: 482 12-PE
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$150 MILLION
TO THE
REPUBLIC OF PERU
FOR A
SAFE AND SUSTAINABLE TRANSPORT PROJECT
December 10,2009
Sustainable Development Department Bolivia, Ecuador, Peru and Venezuela Country Management Unit Latin America and the Caribbean Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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AAA AADT BCR
- CNSV CAF COFIDE CPS CREMA CY DGASA
DPL D.U. EIA EIRR ESAR ESMF
ESSMP
FEAP EIA EMP ESW FMA GAC GDP GIS GoP HDM IBRD
ICR IaDB IEG IFC IFR IIRSA
ILO
CURRENCY EQUIVALENTS (Exchange Rate Effective December 1,2009)
PEN 2-94 = US$ 1.00 US$ 1.00 = SDR 0.62
Currency Unit = Peruvian Nuevo Sol (PEN)
FISCAL YEAR January 1 - December31
ABBREVIATIONS AND ACRONYMS
Analytical and Advisory Activities Average Annual Daily Traffic Benefit Cost Ratio National Road Safety Council Andean Development Corporation Development Financial Corporation Country Partnership Strategy Contracts o f Rehabilitation and Maintenance Calendar Year General Directorate for Environmental and Social Affairs Development Policy Loan Emergency Decree Environmental Impact Assessment Economic Internal Rate of return Environmental and Social Assessment Report Environmental and Social Management Framework Environmental and Social Strengthening Management Plan Preliminary Environmental Evaluation Form Environmental Impact Assessment Environmental Management Plan Economic and Sector Work Financial Management Assessment Governance Action Plan Gross Domestic Product Geographic Information System Government o f Peru Highway Development and Management (model) International Bank for Reconstruction and Development Implementation Completion Report Inter-American Development Bank Independent Evaluation Group International Finance Corporation Interim un-audited Financial Report Initiative for the Integration of the South America Regional Infrastructure International Labor Organization
INC R\IDEPA
IPE IPPF iRAP IRF IRI ISR KSI LAC LPI MDBs MEF MINAM MoU MTC NPV OECD
OGA OGPP OSITRAN
PACRI PEN PPP RAP RED RED1
SAT SBD SEPA SIAF
SNIP SIM TORS VPd
National Institute o f Culture National Institute for the Development o f Indigenous Peoples Peruvian Economics Institute Indigenous Peoples Planning Framework International Road Assessment Program Involuntary Resettlement Framework International Roughness Index Implementation Supervision Report Killed and Seriously Injured Latin America and Caribbean Region Logistics Performance Index Multilateral Development Banks Ministry o f Economy and Finance Ministry o f Environment Memorandum of Understanding Ministry o f Transport and Communications Net Present Value Organization for Economic Co-operation and Development General Administrative Unit General Unit for Planning and Budget Peruvian regulator for public transport infrastructure Involuntary Resettlement Compensation Plan Peruvian Nuevo Sol Public-Private Partnership Resettlement Action Plan Roads Economic Decision (model) Recent Economic Development in Infrastructure Safeguards Advisory Team Standard Bidding Document Procurement Plans Execution System National Integrated System of Financial Management National System o f Public Investment Sector Investment and Maintenance Loan Terms of Reference vehicles per day
Vice President: Pamela Cox
Sector Director: Laura Tuck Sector Manager: Aurelio Menendez
Country Director: Carlos Felipe Jaramillo
Task Team Leader: Nicolas Peltier-Thiberge
FOR OFFICIAL USE ONLY
PERU Safe and Sustainable Transport Project
CONTENTS
Page
STRATEGIC CONTEXT AND RATIONALE .................................................................. 1 Country and Sector Issues ................................................................................................... 1
Rationale for Bank Involvement .......................................................................................... 3 Higher Level Objectives to which the Project Contributes ................................................. 5
I . A . B . C .
I1 . PROJECT DESCRIPTION .................................................................................................. 5 A . B . C . D . E . F . G .
I11 . A . B . C . D . E . F .
I V . A . B . C . D . E . F . G .
Lending instrument .............................................................................................................. 5
Government's Transport Policy Letter ................................................................................ 6 Governance .......................................................................................................................... 6
Project development objective and key indicators ...................... .'........... ............................ 7
Project components .............................................................................................................. 8 Lessons Learned and Reflected in the Project Design ...................................................... 10
Alternatives considered and reasons for rejection ............................................................. 11
IMPLEMENTATION ..................................................................................................... 12 Partnership Arrangements ................................................................................................. 12
Institutional and Implementation Arrangements ............................................................... 12
Sustainability ..................................................................................................................... 13
Monitoring and Evaluation o f Outcomes/Results ............................................................ -13
Critical Risks and Possible Controversial Aspects ............................................................ 14
Loadcredit Conditions and Covenants ............................................................................. 15
APPRAISAL SUMMARY .............................................................................................. 16 Economic and Financial Analyses ..................................................................................... 16
Technical ........................................................................................................................... 17
Fiduciary ............................................................................................................................ 17
Social ................................................................................................................................. 18 Environment ...................................................................................................................... 19
Safeguard Policies ............................................................................................................. 21
Policy Exceptions and Readiness ...................................................................................... 23
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This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties . I t s contents may not be otherwise disclosed without Wor ld Bank authorization .
Annex 1: Country and Sector or Program Background .......................................................... 24
Annex 2: Transport Sector Development Policy Letter ........................................................... 32
Annex 3: Major Related Projects Financed by the Bank and/or other Agencies .................. 44
Annex 4: Results Framework and Monitoring ......................................................................... 47
Annex 5: Detailed Project Description ...................................................................................... 52
Annex 6: Project Costs ................................................................................................................ 60
Annex 7: Implementation Arrangements .................................................................................. 61
Annex 8: Financial Management and Disbursement Arrangements ..................................... 62
Annex 9: Procurement Arrangements ....................................................................................... 74
Annex 10: Economic and Financial Analysis ............................................................................ 79
Annex 11 : Safeguard Policy Issues ............................................................................................. 87
Annex 12: Project Preparation and Supervision .................................................................... 106
Annex 13: Documents in the Project File ................................................................................ 108
Annex 14: Statement of Loans and Credits ............................................................................. 110
Annex 15: Country at a Glance ................................................................................................ 112
Annex 16: Maps ........................................................................................................................ -114
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PERU
PERU SAFE AND SUSTAINABLE TRANSPORT
PROJECT APPRAISAL DOCUMENT
LATIN AMERICA AND CARIBBEAN
LCSTR
Source BORROWER INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
Date: December 10,2009 Country Director: Carlos Felipe Jaramillo Sector Director: Laura Tuck Sector Manager: Aurelio Menendez
Team Leader: Nicolas Peltier-Thiberge Sectors: Roads and Highways (80%); General Transportation Sector (20%) Themes: Export Development and Competitiveness (P); Infrastructure Services for Private Sector Development (S); Injuries and Non-Communicable Diseases (S)
Project ID: P116929 Environmental Screening Category: B (Partial Assessment)
Lending Instrument: Sector Investment and Maintenance Loan
[XI Loan [ ] Credit [ ] Grant [ 3 Guarantee [ ] Other: Project Financing Data
Local Foreign Total 121.0 63.0 184.0 105.0 45.0 150.0
[NTER-AMERICAN DEVELOPMENT BANK Total:
105.0 45.0 150.0
33 1 .O 153.0 484.0
iii
4nnual Zumulative
Expected closing date: July 1,2014 Does the Droiect deDart f rom the CAS in content or other simificant resDects? r lYes TX1 N o
20.0 90.0 30.0 8.0 2.0 20.0 110.0 140.0 148.0 150.0
Does the project require any exceptions from Bank policies? [ ]Yes [XINO [ ]Yes [ IN0
I s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [XIYes [ ] N o Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ] N o Project development objective. Improve passenger and freight transport conditions in an efficient and safe manner along national road corridors that are essential to Peru’s competitiveness, in particular those included in the Government’s stimulus package in response to the global crisis. Project description Component 1. Road Rehabilitation, Upgrading and CREMA Pilot. Carrying out o f rehabilitation and upgrading works for at least four national road corridors along the following sections which represent approximately 183 kilometers: Road Ayacucho-Abancay: section 50- 98; Road Llama-Cochabamba; Road Cochabamba-Chota; and Road Puente Reither -Puente Paucartambo - Villarica; as well as any such other section which may be acceptable to the Bank in addition to, or in substitution of, the above sections, which may include the carrying out o f a pilot CREMA Contract. Financing o f a strategic environmental assessment o f the package o f works to be implemented under this component, to assess what would be the cumulative environmental impact and to provide recommendations for future design studies, as well as for supervision activities and works’ management. Component 2. Road Maintenance. Carrying out o f MTC’s outsourced, performance-based maintenance program, including: (a) periodic maintenance contracts on selected national roads; and (b) periodic maintenance activities included in mid-term, performance based, maintenance contracts on selected national paved or unpaved roads. Component 3. Road Safety Infrastructure. Financing o f priority c iv i l works to improve road safety on national roads that have been selected for their high levels o f road crashes, through the use o f the iRAP methodology, or any other methodology acceptable to the Bank. Component 4. Institutional Support and Transport Regulation. Provision o f institutional support to strengthen the capacity o f Provias Nacional to improve road asset management practices, bring innovation and build up i t s knowledge base, including: (i) the design and implementation o f a bridge management system; (ii) the implementation o f a pi lot program on improving the right-of-way on national roads, and the revision o f the applicable normative framework; (iii) the improvement o f the existing system to handle road emergencies; (iv) the carrying out o f road safety auditing and scaling up o f the road safety assessments using the iRAP methodology or any other methodology acceptable to the Bank; (v) the improvement o f contract management and monitoring o f results; (vi) the development o f technical standards applicable to urban and peri-urban roads; and (vii) the strengthening o f Provias Nacional’s capacity for environmental and social safeguards’ management. Provision o f institutional support to: (a)
Have these been approved by Bank management?
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OGPP, including: (i) the carrying out o f original destination surveys for freight transport; (ii) the update o f MTC’s GIs, with the acquisition o f a new cartographic database; (iii) the provision of an information system for interprovincial passengers’ transport; (iv) the design o f a safe corridors’ pilot; and (v) the design and implementation o f the national registry o f road crashes, in coordination with other relevant institutions; and (b) DGASA, including: (i) the dissemination of the Project’s safeguards instruments; (ii) the improvement o f coordination between DGASA and Provias Nacional, particularly regarding the environmental categorization and the scope of design studies, so that social and environmental issues can be addressed sufficiently early on in the project cycle; and (iii) the carrying out o f training o f MTC’s c iv i l servants on environmental and social safeguards (including resettlement and indigenous peoples), as well as training of consultants and contractors. Component 5. External Audits. Financing o f the financial external audits for the Project. Which safeguard policies are triggered, if any? Environmental Assessment Natural Habitats Physical Cultural Resources Involuntary Resettlement Indigenous Peoples Significant, non-standard conditions, if any, for: Board presentation: None Loadcredit effectiveness: The Operational Manual i s adopted in form and substance satisfactory to the Bank Covenants applicable to project implementation:
No t later than March 3 1, 201 1, the Borrower, through Provias Nacional, shall complete and submit to the Bank the strategic environmental assessment referred to in Part 1 (b) of the Project, in accordance with terms o f reference satisfactory to the Bank,
No t later than six months after the Effective Date, or a later date agreed with the Bank, the Borrower, through Provias Nacional, shall appoint independent auditors for the duration o f the Project under terms o f reference and with qualifications and experience satisfactory to the Bank.
Not later than the mid-term review o f the Project, the Borrower, through Provias Nacional shall submit to the Bank a report on the implementation o f the iRAP recommendations. N o reallocation o f Project funds from Part 3 o f the Project will be authorized by the Bank if the conclusions from such report have not been found satisfactory to the Bank.
No t later than three months after the Effective Date, the Borrower, through Provias Nacional, shall have completed the tailoring o f its accounting information system in order to submit project financial reports and customized statement o f expenditures.
Not later than September 30 o f each year o f project Implementation, the Borrower, through Provias Nacional, shall send to the Bank the draft budget for the following year o f Provias Nacional’s rehabilitation and maintenance works, which shall include the funds needed to finance signed contracts under the Project.
The Borrower shall comply with the Safeguard covenants set forth in the Loan Agreement. ’
V
I. STRATEGIC CONTEXT AND RATIONALE
A. Country and Sector Issues
1. Despite recent improvement, Peru’s relative competitiveness remains hampered by the poor quality of its transport infrastructure. Peruvian f i r m s rank the poor quality o f transport conditions as one o f the most limiting factors to business growth. Because o f it, f i r m s need to have high inventories, to account for contingencies. High inventories generate financial costs which in turns increase unit costs, lowering competitiveness and productivity. About 80 percent o f the firms surveyed by the World Bank Logistics Performance Index (LPI) initiative reported they believed the quality o f the transport infrastructure in Peru was low or very low. As a result, with about 32 percent o f product value, Peru’s logistic costs are among the highest in Latin America, far greater than the OECD average o f 9 percent. With 450 km o f paved roads per million inhabitants and only 11 percent o f paved roads out o f a total network o f 127,320 km, Peru i s one o f the last countries in the region with regard to i t s transport infrastructure stock. In comparison, the density o f paved roads achieves 1,713 km per million people in Argentina and 934 km in Chile. According to the latest road inventory assessment done in 2005, only 39 percent o f the Peruvian national roads are in good condition and at least 42 percent are in poor or very poor conditions. In Argentina, through an aggressive road asset management program, the National Road Agency has increased the proportion o f national roads in good condition to 91 percent over a 20 year period.
2. Road safety conditions are among the worst in the region, with road crashes having a substantial economic cost. With official reports indicating an annual 3,510 deaths and 49,857 injured, Peru ranks poorly with regards to road safety. When accounting for Peru’s low motorization rate, Peru has 42 deaths per 10,000 vehicles (the worst record in the region), compared to 12 for Colombia, 9 for Costa Rica, 8 for Chile, whose motorization rates are more than double that o f Peru. The fatality rate per 100,000 habitants i s equally worrisome, at 21.6; Peru i s second to Venezuela (21 .S), while Costa Rica (1 5.4), Chile (1 3.7) and Colombia (1 1.7) fare relatively better. A rough estimate o f the economic cost o f road crashes in Peru i s about 1.5 percent o f GDP. Driver behavior accounts for over 50 percent o f road crashes, and i s attributed to speeding, recklessness and inebriety. Studies also indicate that a lack o f effective regulation o f the vehicle fleet, particularly public transport vehicles, i s also a major contributing factor, as well as deteriorated or poorly designed transport infrastructure. According to a recent road safety assessment performed by the International Road Assessment Program (imp) and financed by the World Bank through the Global Road Safety Facility on about 3,000 km o f Peruvian roads, about 22 percent o f these roads can be considered highly dangerous for car users and 63 percent o f them for pedestrians. While road safety has been identified as a problem for many years, the Ministry o f Transport and Communications (MTC) has only recently placed a high priority on this issue, with the reactivation o f the National Road Safety Council and the endorsement o f a comprehensive National Road Safety Plan. This plan has set an objective o f reducing crashes by 30 percent over the 5-year period 2007 - 201 1 I However, i ts successful implementation wil l require solving s t i l l unaddressed bottlenecks such as the lack o f an effective lead agency that can set policy and direct implementation to oversee the achievement o f results, the absence o f a culture o f safe road design and usage, and the lack o f a results-focused approach.
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3. I n the context o f the global economic downturn, Peru’s stimulus package i s placing a high priority on improving the country’s transport infrastructure, with a particular focus on a few selected “mega-projects”. Although Peru i s less affected by the global economic crisis than other countries in Latin America, the growth forecast for 2009 has been reduced from 6 to 2.5 percent. There are signs that the Peruvian economy has hit bottom i s recovering slowly in the second semester o f 2009 so that economic growth could reach about 4.0 percent in 2010. To mitigate the risks o f any further deterioration o f i t s economic performance and support growth recovery, the Government has prepared a countercyclical stimulus package (“Plan de Estimulo Econbmico”) o f about US$3 bi l l ion for the years 2009-2010. Peru’s stimulus package has earmarked two thirds o f the resources for the infrastructure sectors, with an objective to double capital expenditures, compared to 2005. The Government’s response takes into account the lessons from the last macroeconomic crisis faced by Peru at the end o f the 1990s when infrastructure spending were severely downsized as part o f the country’s fiscal adjustment policies, resulting in a future loss o f competitiveness and growth. Public investment in transport in Peru only amounted to 0.09 percent o f GDP in 2001-6, far behind competitors in the region. Private expenditures - although higher than in neighbor countries, were not sufficient to fill the gap. The level o f public investment in transport has increased since 2007. The stimulus package will continue this trend by giving particular attention to a few selected “mega projects”. These include in particular the completion o f the URSA Sur road, the concession o f six regional ports, the concession o f the URSA Centro road, the concession o f six regional airports and the construction o f the infrastructure needed for the Tren Electrico, a new Lima urban transport system. Some o f these projects are sufficiently attractive so that private financing could be leveraged though Public-Private Partnership (PPP) arrangements, despite the current difficulties to access financial markets. However, several o f the prioritized projects do not have a clear financial profitability and the bulk o f the financing i s therefore expected to ultimately come from public sources. Past experiences have illustrated that contingent liabilities from the initial contracting arrangements o f “mega-projects” may often be underestimated. If this issue i s not properly addressed, it could create a growing financing need in the transport sector and a tension for the budget o f the Ministry o f Transport and Communications (MTC).
4. I n order to have the greatest impact on the performance o f the transport sector, the stimulus package must also improve the situation of road asset management and road safety. If the financing need created by the “mega-projects” i s not properly addressed, less politically visible - though essential, investments such as road rehabilitation and maintenance, may end up being downsized to give the fiscal space needed. Only a few road rehabilitation investments have so far been prioritized as part o f the stimulus package and the financing o f road asset management expenditures (rehabilitation and maintenance) i s therefore not fully ensured. Road maintenance i s particularly critical in order to avoid a deterioration o f road assets. I t also has the highest economic returns o f al l the various types o f road works. Between 1992 and 2005, it has been estimated that the lack o f maintenance has caused the rapid deterioration o f 1,357 km o f national roads, generating a loss o f US$718 mi l l ion for the GoP. Road maintenance i s also the most labor-intensive of al l infrastructure investments. A recent World Bank study3 has
~ ~~ ~~
’ Source, Calderon, Easterly and Serven (2003). ’ Source, Instituto Peruano de Economia (IPE).
Employment Generation. Tuck, L., Schwartz, J. and Andres, L. (2009) - Crisis in LAC: Infrastructure Investment and the Potential for 3
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estimated that, albeit limited in scope, routine maintenance works can generate up to 500 jobs per US$ mi l l ion invested and can act as a safety net mechanism for the rural poor, through the use o f specialized microenterprises.
5 . The capacity of the Ministry o f Transport and Communications, as well as several transport regulatory instruments, need to be strengthened so that the stimulus package can be effectively implemented. The stimulus package i s likely to result in a dramatic increase o f investments to be managed by the MTC. Provias Nacional, the agency in charge o f the national road network within the Ministry, has seen a doubling o f i t s budget in 2009 compared to the previous year, and a quadrupling since 2005. Provias Nacional has also been asked to rescue two faltering “mega projects” (“IIRSA Sur” corridor and Lima’s “Tren Electrico”). Nevertheless, Provias Nacional i s one o f the most efficient institutions in the Peruvian administration and, therefore, the counterpart entity, but also the construction sector which has been hit by the economic downturn, i s ready to move forward with a larger volume o f investments expected for 2010. However, the increase in works’ volume and the increasing focus on “mega projects” driven by the Government’s stimulus package, may progressively j am the absorptive capacity Provias Nacional and affect i t s capacity to implement important reforms in the transport sector, such as the design o f safer road standards, or the implementation o f sound road asset management activities. In addition, while Provias Nacional i s already a high-performing institution, other areas o f M T C that are relevant for the implementation o f the stimulus package (eg. planning, transport regulation, concessions, safeguards’ unit) are suffering from serious institutional shortfalls and lack o f resources. Maximizing the benefits o f the stimulus package therefore requires an extensive and comprehensive institutional strengthening program not only o f Provias Nacional but also o f these other areas o f the Ministry. In order to accelerate investments, the Government i s also revisiting and optimizing many o f i t s internal processes. As a consequence, many o f the internal mechanisms regulating the Peruvian public expenditures (such as the Sistema Nacional de Inversion Pziblica) have lost some o f their influence. While a deep reengineering o f the highly bureaucratic Peruvian spending processes is needed so that the stimulus package can quickly produce all i t s expected benefits, key mechanisms that ensure the quality o f public expenditures - such as proper planning and information systems - also need to be protected and even strengthened in order to improve the effectiveness o f the Government’s response.
B. Rationale for Bank Involvement
6. The Peruvian Ministry o f Economy and Finance (MEF) has requested Bank assistance in order to improve the design o f the Government’s stimulus package and help finance i t s implementation. In the road sector, a US$900 mi l l ion financing gap has been identified by MEF to be financed from external resources. While other financing institutions (eg. Corporacidn Andina de Foment0 - CAF) are focusing their efforts on the financing o f the Government’s “mega projects”, the World Bank and the IaDB have explored, together with the MEF and the MTC, an investment and technical assistance package that would secure and scale up road asset
MEF initially requested US$300 million to each of the three multilateral institutions active in transport in Peru (CAF, IaDB and the World Bank). On Dec. 23, 2008, CAF approved US$300 million additional to help finance the additional costs o f the URSA Sur project. MEF finally requested US$150 million to the World Bank and US$l50 million to the IaDB.
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management activities (in particular road maintenance), bring innovative practices (low-cost paving technologies, output performance-based contracts), initiate a road safety program and address institutional shortfalls so that the stimulus package can be implemented rapidly while bringing al l i t s expected benefits. The M T C i s particularly interested in the international best practice the two banks could bring to the design o f the program. The World Bank has proposed to use i t s experience on the following three issues to bring added-value in the design o f this operation:
(a) Road Safety. The Bank has financed a stand-alone road safety project in Vietnam and i s working with other countries to provide guidance on the implementation o f road safety policies. Two countries in L A C have taken the lead in this area (Chile and Costa Rica). Through a seat-belt campaign, Costa Rica has for example increased compliance from 24 to 82 percent and reduced fatalities by 13 percent;
(b) Output performance- based contracts. The Bank has financed a successful implementation o f rehabilitation and maintenance (CREMA) contracts in Argentina and Brazil;
(c) Low-cost paving technologies. Chile has been implementing a low-cost paving program to improve access on low-traffic roads in a cost-efficient way.
7 . The Bank has been involved in the transport sector in Peru for several decades, mostly in the design and implementation o f decentralized transport operations (Decentralized Rural Transport, Regional Transport Decentralization). The Peru Rural Roads Program, initiated in 1995, has been one o f the most successful Bank operations in rural transport and it has become a reference which has been replicated by other countries in the region. This program has developed low-cost rehabilitation technologies (gravel roads) that proved highly sustainable when combined with a permanent efficient routine maintenance mechanisms (implemented by the micro-enterprises). The program also supported the decentralization o f rural roads’ management at the provincial level. The last Bank-financed project targeting the national road network i s the 1994 Transport Rehabilitation Project. However, through i t s policy dialogue, the Bank has kept providing the Government with technical assistance, particularly in the areas o f concessions and PPPS.
8. In parallel to the proposed Safe and Sustainable Transport Project, the Bank i s helping the Government in other areas that are relevant for the design and implementation o f the stimulus package. One o f these areas i s PPP and the design o f Peru’s infrastructure fund. The Bank has been associated in the design o f Mexico and Colombia’s infrastructure funds and could facilitate twinning arrangements o f these countries with Peru. The PPP agenda in Peru i s mostly driven by Prolnversidn, although other institutions (MEF, MTC, OSITRAN) are also involved. The Bank has also financed the 2005 Peru Guarantee Facility, implemented by Prolnversidn. While this instrument has, so far, not been used by the Government, Bank guarantees could prove useful in the implementation o f the Government’s PPP agenda, particularly for those “mega-projects” that have the greatest economic returns but may not be sufficiently attractive to the private sector. Bank intervention i s this area would also depend on the operational and safeguards procedures applied to these investments. The Bank i s also exploring further support with subnationals (in particular at the regional level) and for the development o f decentralized infrastructure. Rural and regional roads, as well as other infrastructures, are particularly important to address Peru’s
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high rates o f rural poverty. However, institutional weaknesses have so far reduced the capacity of subnational governments to respond to the demand for increased access to infrastructure services. The Bank i s tackling these issues through i t s policy dialogue but also through various operations (IFC’s Peru Subnational Guarantee Facility, Vilcanota Valley Rehabilitation and Management Project, Sierra Rural Development Project, Decentralized Rural Transport, Regional Transport Decentralization Project, Rural Electrification Project).
C. Higher Level Objectives to which the Project Contributes
9. Alignment with the Bank Strategy in Peru. The proposed operation would support Cluster 2 (“Sustaining growth and widening i t s base”) o f Pillar 1 (“Economic Growth”) o f the World Bank Group Country Partnership Strategy (CPS) for Peru for the period FY07-11, discussed by the Executive Directors on December 19, 2006 (Report No. 3791 3-PE). These objectives would be achieved through enhancing the effectiveness o f infrastructure investments in transport and by generating employment opportunities for the poor, through the road maintenance activities. The CPS progress report for FY07-09 has highlighted “weak planning, design and implementation capacities” as a major bottleneck for the performance o f the infrastructure sectors. This issue i s particularly important for a successful implementation o f the Government’s stimulus package. To address this critical need, the proposed project includes extensive institutional strengthening activities, gathered under i t s fourth component.
11. PROJECT DESCRIPTION
A. Lending instrument
10. structured as a Variable-Spread Loan, repayable in 21 - 5 years with a grace period o f 8.5 years.
The proposed lending instrument i s a Sector Investment and Maintenance Loan (SIM),
11, Given the broad scope o f the proposed program and the need to align it in the most effective way within the Government’s stimulus package, the approach proposed for two o f the project’s components (component1 : road rehabilitation and upgrading; and component 2: road maintenance) has adopted a “program-based approach”. Procedures have been f i l l y harmonized between the World Bank and the IaDB, and the proposed project contributes to support the Government’s rehabilitation and outsourced maintenance program for 201 0. Traditional sector investment operations do not allow a development impact at the level o f the Government programs in the sector (“ring-fenced” approach), given the sheer size o f the programs and the need to focus attention on specific transactions, rather than program outputs. The program-based approach will allow better streamlining o f the proposed activities within MTC’s regular budget cycle. I t wil l effectively complement the primary focus o f the stimulus package on “mega- projects” by helping also emphasize the importance o f road asset management and road safety.
12. More specifically, the proposed project would support, under a program-based approach, two o f MTC’s programs for C Y 10. The first one i s MTC’s C Y 10 rehabilitation and upgrading program that should help improve the condition of 977 km o f national roads. The proposed project would finance at least the rehabilitation and upgrading o f 183 km o f national roads. The second one i s MTC’s C Y 10 outsourced, performance-based maintenance program, that should
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secure maintenance needs for 2,096 km o f national roads in the mid-term (5 years). Bank support will help improve the implementation o f these two programs, bring innovations based on international best practices and accelerate implementation in the broader context of Peru’s stimulus package. The proposed Bank loan’s disbursement profile i s also highly frontloaded in C Y 10 in order to better support the GoP in i t s response to the global crisis.
B. Government’s Transport Policy Letter
13: The M T C has prepared a draft Transport Policy Letter describing the short, mid and long- term objectives o f the reform program in the transport sector, in the context o f the Government’s response to the global crisis. The Transport Policy Letter sums up the existing legal framework for the transport sector. I t describes MTC’s strategy to improve road assets’ management through outsourcing, long-term maintenance contracts and the use o f innovative low-cost paving technologies. It emphasizes the need to better articulate the different planning levels (municipal, regional, national) for land transport and to build up information systems for more effective planning. I t also highlights the need to modernize the institutional framework in place and to promote public and private partnerships (PPP). Finally, it stresses the importance o f road safety and o f the protection o f the environment. The endorsement o f the Policy Letter i s a condition for negotiations.
C. Governance
14. Despite progress in the system o f check and balances, the situation o f governance in Peru continues to be a source o f concern. The issue o f corruption has acquired new prominence in Peru after a corruption scandal over o i l concessions in October 2008, which resulted in the resignation o f the entire cabinet. In response, the GoP has designed an Anticorruption Action Plan whose implementation i s being monitored, and which requires substantial technical assistance. A number o f the activities listed in this plan have already been implemented at the level o f different ministries and the Government has reaffirmed i t s commitment to fight against corruption. Another issue i s that the c iv i l service career system and policies suffer a number o f shortcomings, in addition to the public perception o f the state apparatus as overstaffed and highly inefficient. This has increased the difficulty o f retaining or attracting skilled labor to deliver better quality o f ,public services and implement adequate policies. In response, the Government created in 2008 the National Authority o f C iv i l Service (DL 1023). The National Authority i s responsible o f human resources management and policies in the public administration. Despite these advances, the c iv i l service reform continues to be a l o w priority in the government agenda.
15. In the transport sector, both issues are also a source o f concern. However, the risk i s partially mitigated by the systematic publication o f bidding documents in the Public Procurement Electronic System (SEACE), thus enhancing the transparency o f procurement processes. The particular status o f Provias Nacional, under the legal form o f “Special Program” within the organization o f the MTC, has also helped improve the management o f human resources. Provias Nacional i s currently seen as one o f the most efficient institutions in the Peruvian public sector.
16. The Bank i s helping the GoP address i t s governance shortcomings through a number o f Governance and Anti-Corruption (GAC) related activities. A series o f four Development Policy
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Loans (DPLs) i s supporting government’s efforts in the areas o f efficiency and quality o f fiscal management, competitiveness and procurement. In addition, a series o f three DPLs i s supporting the government’s program to strengthen the results and accountability framework o f Peru’s social sectors, in particular by introducing monitoring systems to track the performance o f health posts and schools. Finally, several Analytical and Advisory Activities (AAAs) and Trust Fund- financed advisory initiatives have been launched to reinforce and contribute to the reform agenda, especially in the areas o f performance-based budgeting, improving capacity o f central and sub-national governments to execute public investment, strengthening congressional budget commission oversight capacity, and identifying and addressing corruption risks in key sectors through a national observatory o f governance policies. The Bank i s also supporting the government’s justice systems through a technical assistance loan focused on the improvement o f service delivery and strengthening o f human resources management.
D. Project development objective and key indicators
17. The proposed project development objective i s to improve passenger and freight transport conditions in an efficient and safe manner along national road corridors that are essential to Peru’s competitiveness, in particular those included in the Government’s stimulus package in response to the global crisis. Specific objectives include: (i) improving the quality o f selected national roads, through a scaling up o f rehabilitation and effective maintenance, as well as the use o f low-cost paving technologies; (ii) generating employment opportunities, particularly for the rural poor; (iii) supporting the reduction o f road traffic fatalities and injuries (and resulting economic losses), on selected national roads, through the development o f “safe corridors” and the implementation o f an investment program prioritized through the application o f the iRAP road safety assessment methodology; and (iv) strengthening MTC’s institutional framework with a view to improve the effectiveness o f the Government’s stimulus package.
18.
OUTCOMES AND IMPACTS
Key performance indicators include the following:
0
0
Decreased vehicles’ operating costs on rehabilitated and upgraded roads
Decreased travel times on rehabilitated and upgraded roads
Proportion o f the national road network in good or regular conditions
Proportion o f the national road network receiving permanent and efficient maintenance through either concession or long-term performance-based maintenance contracts (CREMA or Proyecto Peru)
Proportion o f national roads that are paved (including low-cost paving) 0
OUTPUTS: 0 Number o f km o f national roads rehabilitated to agreed standards
Number o f rehabilitation and maintenance contracts using a CREMA approach
Number af km o f roads receiving periodic maintenance and that are maintained using performance-based contracts, according to agreed standards
7
e
e
e
e
e
e
E.
19.
20.
Employment opportunities created (annual equivalent)
Proportion o f the iRAP recommendations implemented
Number o f km o f “safe corridors” implemented in accordance with agreed multi-sectoral approach
Improved M T C capacity to handle social and environmental safeguards and improved coordination between General Directorate for Environmental and Social Affairs(DGASA), General Unit for Planning and Budget (OGPP) and Provias Nacional
New MTC’s GIS fully operational with updated information on roads’ condition
Road crashes’ database improved and regularly updated
Project components
The proposed project includes the following five components:
Component 1: Road rehabilitation and upgrading and CREMA pilot (estimated cost: US$ 177.4 million o f which US$ 103.3 million-would-be financed by the Bank). This component will support the carrying out o f rehabilitation and upgrading works for at least four national road corridors along the following sections which represent approximately 183 kilometers: Road Ayacucho-Abancay: section 50-98; Road Llama-Cochabamba; Road Cochabamba-Chota; and Road Puente Reither -Puente Paucartambo - Villarica; as well as any such other section which may be acceptable to the Bank in addition to, or in substitution of, the above sections, which may include the carrying out o f a pi lot CREMA Contract. CREMAs are long-term, performance based rehabilitation and maintenance contracts that have been successfully experimented by several countries (eg. Argentina and Brazi l in LAC). Associated with adequate contract supervision mechanisms, they allow transferring in a cost-effective way some o f the technical risks to the private sector. A strategic environmental assessment o f the package o f works to be implemented under this component, will also be financed to assess what would be the cumulative environmental impact and to provide recommendations for future design studies, as well as for supervision activities and works’ management. Design studies and safeguards instruments have been completed for the four identified road works. This component supports MTC’s road rehabilitation and upgrading program for 2010. This program aims at rehabilitating eight national road corridors, totaling sixteen road sections and representing 1,024 km. Six o f these corridors have been flagged as priorities in Peru’s stimulus package (D.U. No. 01 0-2009) and the remaining two had been prioritized prior to the design o f the package.
21. Component 2: Road maintenance (estimated cost: US$ 264.1 million o f which US$ 35.0 million would be financed by the Bank loan). This component will support the carrying out o f MTC’s outsourced, performance-based maintenance program, including: (a) periodic maintenance contracts on selected national roads; and (b) periodic maintenance activities included in mid-term, performance based, maintenance contracts on selected national paved or unpaved roads. Envisaged activities include 10 periodic maintenance and performance-based maintenance on 7.9 percent o f the total national network. The 2010 program aims at financing the maintenance o f 2,096 km o f national roads, including 712 km identified to receive a periodic maintenance and 1,384 km under a performance-based maintenance contract. This program i s
8
part o f the new strategy o f Provias Nacional to move away from force-account practices, transfer maintenance activities to the private sector (including emergency maintenance) with performance-based contracting arrangements, implementing low-cost paving technologies for low-traffic national roads (Proyecto Peru), and better ensuring the sustainability o f road investments by securing maintenance in the mid-term (5 years). Execution estimates for CY 10 amount to US$76.25 million, half o f which would be eligible to Bank financing, for up to US$35.0 million. The latest initial budget figures for CY10 for this program, as agreed between MEF and MTC, include PEN305 million (US$102 million) but this amount s t i l l needs to be approved by the Peruvian Congress. Some budget adjustments could also be made by the MEF during CY10, depending on budget execution progress. This component i s also expected to generate significant employment opportunities due to the labor-intensiveness o f routine maintenance activities. Job creation wi l l be monitored during implementation.
22. Component 3: Road safety infrastructure (estimated cost: US$ 20 million of which US$ 10 million would be financed by the Bank loan). This component wi l l support the financing o f priority civil works to improve road safety on national roads that have been selected for their high levels o f road crashes, through the use o f the iRAP methodology, or any other methodology acceptable to the Bank. The MTC i s planning to label some o f these roads “safe corridors”. The “safe corridor” concept goes beyond the improvement o f the sole infrastructure and i t implies working with other agencies and ministries in order to articulate a combination on road safety improvements (safer infrastructure but also more stringent enforcement, road safety education initiatives and more efficient emergency mechanisms) that could increase the impact to reduce road crashes. The iRAP assessment has been completed, with support from the Global Road Safety Facility, on 3,000 km o f Peruvian roads. Some o f the investments recommended by iRAP could also be included under an existing rehabilitation and maintenance contract under component 1 or 2, or outside o f the scope o f the proposed project. The actual implementation o f the iRAP recommendations wi l l be monitored, as one o f the project’s performance indicators and a legal covenant wi l l help restrict the reallocation o f loan resources for this component unless sufficient progress has been made in this area.
23. Component 4: Institutional support and transport regulation (estimated cost: US$ 3.3 million of which US$ 1.6 million would be financed by the Bank loan). This component wi l l support the provision o f institutional support to strengthen the capacity o f Provias Nacional to improve road asset management practices, bring innovation and build up i t s knowledge base, including: (i) the design and implementation o f a bridge management system; (ii) the implementation o f a pilot program on improving the right-of-way on national roads, and the revision o f the applicable normative framework; (iii) the improvement o f the existing system to handle road emergencies; (iv) the carrying out o f road safety auditing and scaling up o f the road safety assessments using the iRAP methodology or any other methodology acceptable to the Bank; (v) the improvement o f contract management and monitoring o f results; (vi) the development o f technical standards applicable to urban and peri-urban roads; and (vii) the strengthening o f Provias Nacional’s capacity for environmental and social safeguards’ management. This component wil l also support the provision o f institutional support to: (a) OGPP, including: (i) the carrying out o f original destination surveys for freight transport; (ii) the update o f MTC’s GIs, with the acquisition o f a new cartographic database; (iii) the provision o f an information system for interprovincial passengers’ transport; (iv) the design o f a safe
9
corridors’ pilot; and (v) the design and implementation o f the national registry o f road crashes, in coordination with other relevant institutions; and (b) DGASA, including: (i) the dissemination o f the Project’s safeguards instruments; (ii) the improvement o f coordination between DGASA and Provias Nacional, particularly regarding the environmental categorization and the scope of design studies, so that social and environmental issues can be addressed sufficiently early on in the project cycle; and (iii) the carrying out o f training o f MTC’s civil servants on environmental and social safeguards (including resettlement and indigenous peoples), as well as training o f consultants and contractors. The objective o f this institutional strengthening package i s to improve the institutional performance o f these agencies so that they can be the most eff icient and effective in implementing the Government’s stimulus package. While Provias Nacional’s capacity currently seems sufficient in order to implement the projected pipeline o f road investments, fewer resources become available for innovation and strategic initiatives. The proposed component therefore focuses on these specific needs. In case Provias Nacional’s capacity would be jammed during implementation, due to the additional activities generated by Peru’s stimulus package, a reallocation o f project resources would be performed to assign more resources to this component. Regarding road safety activities, the Vice-Minister o f Transport i s the President o f the National Road Safety Council (CNSV in Spanish) and his office wi l l be leading the national road safety agenda. Implementing the National Road Safety Strategy requires a strong road safety agency that i s s t i l l missing today although some early progresses have been signaled within the CNSV. The Bank, through i t s policy dialogue with the MTC, wil l continue to give technical assistance to help build up a lead agency that could effectively implement Peru’s road safety strategy. For example, a workshop was co-organized by the World Bank and the Vice-Minister o f Transport on September 22-23, 2009 in order to advance on those issues.
24. Component 5 : external auditing (estimated cost: US$0.2 million o f which US$ 0.1 million would be financed by the Bank loan). This component will finance the financial external audits for the project.
F. Lessons Learned and Reflected in the Project Design
25. in Peru or other countries:
The design o f the proposed project builds on the following lessons from other initiatives
a) Keeping infrastructure and services ready to run should be a priority in times of economic downturn. A ‘review by the Bank o f the stimulus packages o f seven middle- income countries highlighted that the proposed infrastructure spending - o f which transport took the largest share - represented on average 64 percent o f a total o f US$157 billion. While the global demand for transport services has been falling as a result o f the downturn, priority should be put on keeping transport infrastructure and service ready to run. In this context, the Bank strategy i s to work with i t s client countries in order to maintain a full operational status o f all assets to avoid any delay in recovery when growth resumes, This requires in particular maintaining transport infrastructure throughout the crisis as a matter o f priority. 5
Saghir, J. - Transport: Invisible Force - Visible Impacts; Presentation at the 2009 Transport Week.
10
Long-term, performance-based maintenance contracts, such as the CREMA approach, can produce significant efficiency gains for road asset management. Using CREMA contracts, Argentina’s National Road Agency has reduced i t s maintenance backlog from 35 to 9 percent over a 20-year period. Brazil has introduced the CREMA model in the early 2000s and it has progressively been extended to one third o f the federal network and more than 10 percent o f the states’ networks. An ex-post evaluation,
comparing objectively output performance based contracts to the traditional input- measurements approach, has shown that these contracts brought an overall improved efficiency to the road sector which translated to better road conditions at lower costs for the governments and a reduced management burden on the road administrations;
Low-cost paving technologies are cost-effective solutions for low-transit roads. Chile has been implementing a low-cost paving program (Programa de Caminos Bcisicos) to improve access on low-traffic roads, without jeopardizing the cost-efficiency o f such investments. Various technological alternatives have been developed, depending on the climate conditions and the availability o f local materials (eg. by-products from the mining industry). The use o f the alternative technologies has been highly successful but some technologies have been performing better in certain climatic conditions and may therefore not be replicated country-wide.
Strong political commitment, robust institutional settings and effective pilot programs are key ingredients for the success of a road safety policy. International and regional experience highlights that, in order to be successful, road safety programs require a strong lead agency, capable o f overcoming the coordination challenges triggered by the multidisciplinary nature o f road safety issues and accountable for delivering results. Sweden with i t s vision zero approach has emerged as a consistent leader in road safety. Other European countries implemented programs to enhance enforcement and enabled a reduction in fatalities. While s t i l l relatively new, the Province o f Cordoba in Argentina introduced a highway safety patrol, and witnessed a reduction in fatalities by 40 percent within i t s first few months o f operation.
Alternatives considered and reasons for rejection
Alternative interventions and approaches that have been considered for the project include:
a) Traditional, “ring-fenced” investment program. The choice o f a program-based approach versus a “ring-fenced” investment project i s justified by the objective to better streamline sound road asset management practices within MTC’s programs.
b) Financing of one o r two “mega-projects” o f the GoP’s stimulus package. This option was discarded because road asset management investments are considered o f greater priority than these “mega-projects”, due to their critical importance for road investments’
Meyer, A,, Lancelot, E. - Output performance based contracts in the road sector: Towards improved efficiency in 6
the management of maintenance and rehabilitation - Brazil’s experience.
11
sustainability. In addition, some o f the “mega-projects” (eg. IIRSA Sur) were not initiated using fiduciary and safeguards procedures that are compatible with Bank policies.
Channeling all the proposed road safety activities through a new lead agency. This option would have consisted in adding a third implementing agency to execute some o f the road safety activities. This agency could have been the National Road Safety Council (CNSV) or the recently-created Super-Intendencia o f Land Transport. This option was discarded in order not to add to the project’s overall complexity and considering pending uncertainties regarding the road safety institutional framework. Instead, the office o f the Vice-Minister o f Transport has been identified as one o f the beneficiaries o f the technical assistance activities to be provided under the project’s fourth component. In parallel, the Bank, as part o f i t s on-going policy dialogue in the sector, i s helping the GoP set i t s institutional framework for road safety by bringing best international practices and by advising the Vice-Minister o f Transport on assessing possible institutional alternatives. A workshop was for example organized by the Bank and the Vice-Minister o f Transport in September 2009 on the issue o f establishing Peru’s lead road safety agency.
111. IMPLEMENTATION
A. Partnership Arrangements
27. The proposed operation wil l be co-financed by the World Bank and the Inter-american Development Bank (IaDB). The co-financing arrangement i s parallel since no pooling o f funds wi l l be made and funds wi l l be disbursed directly to the Peruvian Treasury for expenditures advanced by MTC. The World Bank and the IaDB have worked together closely over the past f i f teen years, with at least six projects being joint-financed or parallel financed by the two MDBs in the transport sector. Such coordination has brought important benefits to both the GoP and the two development banks, among which: (1) reduction o f transaction costs for the client through the harmonization o f operational and reporting procedures; (2) improved coherence o f policy dialogue for reforms in the transport sector; and (3) increased frequency and quality o f supervision. In the case o f the proposed operation, the two banks and the GoP have agreed to use harmonized procurement and financial documents, define respective disbursement profiles, and supervise implementation through joint supervision missions.
B. Institutional and Implementation Arrangements
28. Transport and Communications:
The proposed project wi l l be implemented by two separate entities o f the Ministry o f
(a) Provias Nacional wi l l implement components 1, 2, 3 and sub-component 4.1. Provias Nacional is, within MTC, the agency in charge o f managing the national road network. The proposed project will finance three investment programs which fal l under Provias Nacional’s responsibilities (rehabilitation o f national roads, outsourced maintenance on non-concessioned national roads and road safety improvement works), as well as specific institutional strengthening and technical assistance activities related to the sound asset
12
management o f national roads. Provias i s a highly experienced agency with a satisfactory track record both in terms o f working with multilateral organizations (IaDB, CAF, WB) and in terms o f budget execution.
(b) MTC’s Office o f General Administration (OGA) wi l l implement component 4.2. The OGA i s a small unit which i s in charge o f handling fiduciary activities (eg. procurement o f goods and consultancies) for other entities o f MTC. These other entities include MTC’s General Unit for Budget and Planning (OGPP in Spanish), the General Directorate for Social and Environmental Safeguards (DGASA in Spanish) and the office o f the Vice-Minister o f Transport.
29. All infrastructure improvements wi l l be implemented by Provias Nacional. Other technical assistance activities wi l l be procured by OGA and wi l l benefit other areas o f the Ministry. For example, the development o f the crash data collection and analysis system wi l l be procured by OGA but handled by OGPP, in close coordination with CNSV.
30. A l l activities to be financed under the proposed project wi l l be included in the MTC’s budget and wil l have to follow existing procedures in vigor in Peru to control the quality o f public expenditures. A particularly important step i s the validation o f individual road improvement investments by the National Public Investment System (SNIP in Spanish) o f the Ministry o f Economy and Finance (MEF). All o f the identified works to be initiated in 2010 as part o f component 1 have already been cleared by the SNIP. Component 2’s activities (road maintenance) are considered current expenditures and do not have to be cleared by SNIP.
C. Monitoring and Evaluation of Outcomes/Results
31. Outcomes and results for most o f the project’s activities wi l l be primarily monitored by the lead implementing agency. Provias Nacional wi l l in particular report on the number o f kilometers o f roads rehabilitated or upgraded, and maintained, as well as on the employment opportunities generated. Road asset management indicators, such as the proportion o f the national network in good conditions, the proportion o f this network receiving adequate maintenance or the proportion o f the national roads that are paved, wi l l be monitored by Provias Nacional, in close coordination with the Planning and Budget Office (OGPP) o f MTC. The project, as part o f i t s 4th component, includes significant resources to improve the quality and reliability o f MTC’s and Provias Nacional’s information systems. The benefits o f road improvements for road users will be measured through specific user surveys to be performed by a specialized consulting firm. Particular attention wi l l be given to the monitoring o f the benefits o f the CREMA approach piloted under component 1, in order to facilitate the dissemination o f this experience.
D. Sustainability
32. The proposed project aims at improving the sustainability o f transport investments in Peru through the scaling up o f sound existing road maintenance practices (eg. five-year upgrading and maintenance contracts implemented under Proyecto Peru) and the piloting o f innovative long-term, performance-based maintenance contracts (CREMA). A Peruvian think
13
tank (IPE) estimated that between 1992 and 2005, the lack o f maintenance accelerated the deterioration o f 1,357 km o f national roads, resulting in a US$718 mi l l ion accumulated loss for the GoP. The proposed project will increase the quality and the sustainability o f public investment in transport and raise the proportion o f national roads that receive permanent and efficient maintenance from 32 to 89 percent. These maintenance practices wil l continue beyond the project’s closing date since the contracting period o f most o f the maintenance contracts (5 to 10 years) will exceed the project’s duration. Finally, by moving into longer-term maintenance contracts and demonstrating their benefits on the roads’ l i f e cycle, the project i s also expected to build and reinforce an “asset management culture” within M T C which should promote a greater sustainability for road investments. The institutional strengthening package designed under Component 4 wil l also contribute to develop greater capacity for sound road asset management. In order to gain in efficiency, Provias Nacional’s strategy for road maintenance i s moving toward longer-term maintenance contracts (CREMA, Proyecto Peru) and progressively phasing out force account practices.
E. Critical Risks and Possible Controversial Aspects
Risk
The performance o f the transport sector in Peru remains hampered by insufficient strategic framework, institutional limitations and an incomplete regulatory framework. The “mega-projects” draw al l the attention and resources o f MTC agencies, affecting the proposed investment program, based on road asset management and road safety.
Some “mega-projects’’ have serious implementation problems (social and environmental, governance) that affect the credibility o f the entire stimulus package.
Complex project for preparation and implementation
Mitigation
Sound leadership o f current Minister and good policy dialogue with the Bank. The Peru rural road program i s a best practice that can be built upon. Specific ESW (Peru REDI) to further policy dialogue with the sector.
The Transport Policy Letter will ensure that the proposed program has sufficient visibility and it i s expected to reinforce the political momentum. The monitoring o f employment generation will help demonstrate the side social benefits o f the proposed program. The program builds on the highly visible “Proyecto Peru” which benefits from a strong Dolitical s u ~ ~ o r t . The proposed program does not finance the implementation of the “mega-projects”. Instead, it aims at securing less visible activities like road maintenance that could be affected by the budget needs o f these “mega-projects”. The institutional strengthening and transport regulation package proposed under component 4 also aims at strengthening key Peruvian spending mechanisms (eg. planning, safeguards management) that can help protect the quality of public expenditures. The Bank aims at addressing the technical assistance and - possibly - financing needs generated by the “mega projects” investment package, through other means and instruments (eg. guarantees, technical assistance on PPP, etc.) The implementing agency i s one of the highest performing public agencies in Peru, as illustrated by i t s high execution rate (75 to 90 percent since 2005). An ambitious and comprehensive institutional strengthening package has been designed in order to address institutional shortfalls.
Moderate
Substantial
Moderate
Moderate
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Risk Mitigation Risk Rating with Mitigation
F. Loadcredit Conditions and Covenants
The lack of a strong road safety agency andor the lack o f political leadership and commitment hampers the ability o f the CNSV to coordinate with other institutions and ministries and implement the proposed “safe corridors” program.
The scope o f Peru’s stimulus package could overwhelm Provias Nacional and DGASA’s capacity to cope with the required social and environmental due diligence Financial management Procurement
Effectiveness Condition :
The Project Operational Manual has been adopted in form and substance satisfactory to the Bank.
Road safety i s currently high in the Peruvian political agenda due to the number o f serious road crashes that occurred lately in Peru. A growing demand for safer transport conditions i s likely to maintain this political interest in improving the situation. Resources have been included in component 4 to support the design o f the “safe corridor” pilot and the implementation o f a road crash database. A workshop to bring best international practices for road safety institutional arrangements has been organized by MTC with the assistance from the World Bank. The project, through i t s 4th component, will support the strengthening o f DGASA and Provias Nacional’s capacity to enforce its own environmental and social regulations and guidelines (that are up to Bank safeguard standards) to cope with these matters timely and effectively.
See annex 8 Moderate See annex 9 Moderate
Substantial
Moderate
Covenants: Not later than March 31, 201 1, the Borrower, through Provias Nacional, shall complete and submit to the Bank the strategic environmental assessment referred to in Part 1 (b) o f the Project, in accordance with terms o f reference satisfactory to the Bank.
Overall Risk Rating
Not later than six months after the Effective Date, or a later date agreed with the Bank, the Borrower, through Provias Nacional, shall appoint independent auditors for the duration o f the Project under terms of reference and with qualifications and experience satisfactory to the Bank.
Moderate
Not later than the mid-term review of the Project, the Borrower, through Provias Nacional shall submit to the Bank a report on the implementation o f the iRAP recommendations. No reallocation o f Project funds from Part 3 o f the Project wi l l be authorized by the Bank if the conclusions from such report have not been found satisfactory to the Bank.
Not later than three months after the Effective Date, the Borrower, through Provias Nacional, shall have completed the tailoring o f its accounting information system in order to submit project financial reports and customized statement of expenditures.
Not later than September 30 of each year o f project Implementation, the Borrower, through Provias Nacional, shall send to the Bank the draft budget for the following year o f Provias Nacional’s rehabilitation and maintenance works, which shall include the funds needed to finance signed contracts under the Project.
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0 The Borrower shall comply with the Safeguard covenants set forth in the Loan Agreement.
IV. APPRAISAL SUMMARY
A. Economic and Financial Analyses
N P V = US$210 million, EIRR = 21.8% (see Annex 9)
33. The economic evaluation covers the main c iv i l works components o f the project that entail capital costs: (i) road rehabilitation and upgrading program (183 km), (ii) periodic maintenance program (846 km) and (ii) the performance-based maintenance program (1,384 km). The main measured project economic benefits are the reduction in vehicle operating costs, passenger time costs and future maintenance requirements brought about by the improvement and maintenance o f the project roads.
34. The overall Economic Internal Rate o f Return (EIRR) for al l programs is estimated at 21.8 percent, 14.9 percent for the road rehabilitation and upgrading program, 25.3 for the periodic maintenance program, and 28.2 percent for the performance-based maintenance program. The overall Net Present Value (NPV) i s estimated at US$210 million, based on an 11 percent discount rate, consisting o f a contribution o f US$46 mi l l ion from the road rehabilitation and upgrading program, US$129 mi l l ion from the periodic maintenance program, and US$35 mi l l ion from the performance-based maintenance program. Three cases were considered for sensitivity analysis: investment costs increase by 20 percent, project benefits decrease by 20 percent, and investment costs increase by 20 percent meanwhile project benefits decrease by 20 percent. The corresponding overall EIRR i s 18.0, 17.2 and 14.0 respectively, which confirms that the project i s economically feasible. The switching value analysis shows that for the EIRR to fall to 11 percent, investment costs would need to be 1.8 times higher, or benefits 44 percent lower than estimated. A description o f the economic evaluation method and an analysis o f the results are provided in Annex 9. The following table summarizes the results o f the economic evaluation.
Ecoaomlc Evaluation Summary
Periodic Maintenance Program
35. As with regarding to MTC’s entire rehabilitation and upgrading program for CY10, corresponding to the rehabilitation and upgrading o f eight national road corridors, totaling sixteen road sections with a total length o f 1,024 km, the economic evaluation indicates a satisfactory economic justification for the overall MTC’s road rehabilitation and upgrading
16
program, with an overall EIRR o f 19.7 percent and all corridors yielding an EIRR higher than 1 I percent.
B. Technical
36. The characteristics o f the rehabilitation and maintenance activities to be implemented through the proposed project do not entail major technical difficulties. The proposed works wi l l involve upgrading and improvements to existing surfaces, drainage systems and retaining walls to ensure a level o f mobility tailored to the levels o f traffic. The design o f rehabilitation and maintenance works will follow national technologies and standards, as specified in existing norms. Low-cost paving technologies are expected to bring innovations to existing road standards in Peru and main require some adjustments to the existing national norms. These technologies are commonly used in other countries (eg. Chile) and MoUs have been signed by Provias Nacional with Peruvian academic institutions to monitor and assess the performance and sustainability o f such technical alternatives.
C. Fiduciary
37. Financial Management. The proposed project wi l l be partially financed by the Bank and implemented by the Ministry o f Transport and Communications through Provias Nacional and MTC’s OGA (in coordination with other MTC units - OGPP, DGASA and Vice-Minister o f Transport). The project i s part o f a broader program also partially financed by the IaDB. Components 1, 2, 3, 5 and sub-component 4.1, which represent almost the entire loan proceeds, wi l l be implemented by Provias Nacional while the MTC’s OGA will implement the sub- component 4.2, which comprise institutional strengthening activities. Provias Nacional wi l l be the project implementing entity responsible for project execution with a coordinating and oversight role over MTC’s OGA. As such, Provias Nacional will be responsible for the consolidation o f the financial and disbursements information o f the whole project. In addition, the IaDB and the Bank have worked jointly to define the most appropriate financial management arrangements and harmonized financial reporting and auditing arrangements. Inherent and control risk are rated as Moderate (M) and the Financial Management total risk i s considered Moderate. Nevertheless the Financial Management assessment has identified some areas which require to be mitigated for project readiness. On such basis, the most crucial actions which require to be completed by Provias Nacional include: (a) the completion o f the final Operational Manual; and (b) adjustments to the accounting information system to tailor project reporting requirements.
38. Retroactive Financing. Although no activity to be retroactively financed under the proposed project i s expected, retroacting financing would be allowed for expenditures occurred after the date o f November 13‘h, 2009, subject to compliance with Bank fiduciary, safeguard and anti-corruption provision, and within the maximum limit o f 20 percent o f the Bank loan amount (ie. US$30 million).
39. Procurement. Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement Under IBRD Loans and IDA Credits”, dated May 2004, revised October 2006; and “Guidelines: Selection and Employment o f Consultants by
17
World Bank Borrowers”, dated May 2004, revised October 2006, and with the provisions stipulated in the Legal Agreement. Procurement activities for Components 1, 2, 3 and subcomponent 4.1 wi l l be carried out by Provias Nacional and procurement activities for subcomponent 4.2 wi l l be carried out by MTC’s Office o f General Administration (OGA). Provias Nacional has a unit in charge o f Civil Works’ procurement and o f Consultants’ selection. This unit i s staffed with the unit’s director, four specialists - one o f them being a Procurement specialist with experience in Bank’s procurement procedures, and two technical professionals. An assessment o f the capacity to implement the project’s procurement activities was carried out by the Bank’s Peru Country Office (summary in project files). The assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and concluded that the unit has significant prior experience in implementing World Bank-financed projects, which ensures an appropriate level o f transparency and control while also facilitating a smooth implementation.
40. Key corrective measures agreed to avoid risks in procurement include: (i) an adequate update o f the Operational Manual (effectiveness condition); (ii) the development o f Bidding Documents before implementation begins (Standard Bidding Documents for CREMA pilots shall be developed before the first process i s launched); (iii) publication o f the Procurement Plan in SEPA (Sistema de Ej‘ecucion de Planes de Adquisiciones); (iv) as needed, reinforcing the number o f procurement staff; and (iii) procurement reviews conducted by independent auditors and/or Bank staff.
D. Social
41. The project i s expected to have short and long term positive social and economic impacts both, for rural areas (including indigenous communities) and towns and provincial cities. In the short and medium terms, i t w i l l provide significant number o f local jobs for skilled and unskilled workers and wi l l help alleviate poverty in rural areas that lack employment opportunities outside agriculture, including remote sites such as highland communities and upper areas in the Selva region. In the long run, the project wi l l provide the necessary infrastructure conditions for improving freight transport, tourist activities and tourism investment, improve prices for local crops, and have better access to education and health services for people living away from urban centers. In the short term however, there wi l l be adverse impacts in a minor scale to people’s assets such as houses, crops, grasslands and cultivated and non cultivated land due to the widening o f the road platform and overall improving o f road conditions. These adverse impacts wi l l be managed, mitigated and compensated through the application o f both social safeguard policy instruments.
42. Out o f the four initial road segments to be rehabilitated and upgraded as part o f component 1, two are located near areas where Indigenous Peoples live (see Annex 4). The road segments are Ayacucho - Abancay (section 50-98) and Pte Reither - Pte Paucartambo - Villa Rica and the communities are Quechua, and Ashaninka-Yanesha peoples respectively. The communities are relatively well integrated in regional markets and economic activities. Because o f this proximity, they perceive road rehabilitation as beneficiary to their economic activities and well being. Provias Nacional through i t s regional offices has developed good relationships with the indigenous communities’ country wide through the provision o f local employment for road
18
rehabilitation and maintenance as well as through the implementation o f the Local Development Window, a mechanism aiming at promoting the emergence o f productive activities in the areas where transport conditions have been improved.
43. Because some o f the proposed road works may affect the assets owned by families living on both sides o f the roads to be improved, OP 4.12 - Involuntary Resettlement i s triggered. During project preparation, a field visit was carried out by two consultants (one environmental expert and one social specialist) on a sample o f segments within MTC’s road rehabilitation and upgrading program, to gather first hand information on the potential impacts. The main finding i s that social impacts are minor and moderate because the civil works to be carried out are for the upgrading and rehabilitation o f already existing roads. No major resettlement wi l l take place, besides moving or rebuilding individual and dispersed affected houses in situ. Most affected assets are small and partial areas o f grasslands as well as plots (either cultivated or not), adjacent to road platforms as it has been the case in other similar projects that do not involve the construction o f new roads. However, given the number o f roads to be rehabilitated and their extension, a significant number o f assets will be affected (estimated 1,100 affected assets, out o f which 144 are rural houses and small rural shops).
E. Environment
44. Although the proposed project would generally produce positive social and environmental impacts related to the improvement o f the quality o f l i f e o f the population covered by the intervention and the extended lifetime o f the roads (due to sound maintenance procedures), there are potential negative impacts which trigger OP 4.0 1 (Environmental Assessment). Because the project may intervene in natural habitats o f particular environmental sensitivity or with cultural heritage value, Bank policies for Natural Habitat (OP/BP/4.04) and Physical Cultural Resources (OP/BP/4.11) have also been triggered. During project preparation, a series o f studies and instruments were developed in order to ensure the environmental sustainability o f the project, and to comply with the national environmental legislation, as well as with Bank Safeguard Policies. These studies and instruments were developed to comply with the Bank’s Safeguard Policies, and were agreed with the Government o f Peru through the “Ministry o f Transport and Communications - MTC” and “Provias Nacional - PVN”, institutions responsible for project implementation. A l l o f these studies requested by the Bank are available in Provias Nacional’s web page (http://www.proviasnac.nob.pe/loyros/bm) and in the Bank’s Infoshop, in compliance with the Bank’s Disclosure Policy.
45. The project was classified as a “Category B” according to the Environmental Assessment Policy (OP/BP 4.01). In general, the road works that would be financed by the proposed project do not have any significant environmental and social impacts that could create major risks to the natural and/or social environment. Nevertheless some o f the works present moderate environmental risks. These works will require an adequate environmental and social management to ensure their environmental and social sustainability, as well as their compliance with the national environmental legislation and the Bank’s Environmental Safeguard Policies. In addition to the social and environmental instruments developed during project preparation, a Strategic Environmental Assessment (SEA) o f the entire rehabilitation program would be
19
performed in the first year o f operation in order to confirm that the cumulative environmental impact o f this program i s indeed limited.
46. An Environmental Impact Assessment (EIA), including an Environmental Management Plan (EMP), has been prepared for each o f the four initial rehabilitation and upgrading works. In addition, during preparation, three o f these roads (Ayacucho - Abancay; Llama - Cochabamba; and Cochabamba - Chota) were visited by a Bank environmental consultant and no specific issues were identified. As a result o f this review, some recommendations were however formulated and taken into account in the final draft o f these environmental assessments. Key recommendations included: (i) specific measures in sensitive areas (paramos and punas) in the case o f the Ayacucho - Abancay and Otuzco - Cayacullh; (ii) inclusion in the EIA o f the Ayacucho - Abancay road, o f an archeological site identified during the field visit (Toccto Archeological site); and (iii) several recommendation regarding environmental passives that in two cases were not included in the documents and in the EMP. These recommendations were including in the EIAs in ways satisfactory to the Bank. A summary o f the main environmental issues i s included in the project’s Environmental Assessment Report (EAR). The EIAs and the EAR have been disclosed, both in country on November 23, 2009 and in the Infoshop on November 6, 2009 (EIA Ayacucho-Abancay), November 9, 2009 (EAR) and November 20, 2009 (EIAs Cochabamba-Chota, Llama-Cochabamba and Puente Reither - Villarica). An updated version o f the EAR was published in country on November 30, 2009 and in the Infoshop.
47. An Environmental and Social Management Framework (ESMF) has also been prepared for this project. This framework describes the environmental management procedures to be followed during implementation. I t would particularly apply to the already identified activities but also in case additional works from MTC’s road rehabilitation and upgrading program were to be financed by this project (in substitution or in addition to the four currently identified). This framework has been reviewed and was found acceptable to the Bank. It has also been disclosed, both in country on November 23, 2009 and in the Infoshop on November 9, 2009. An updated version was published in country on November 30,2009 and in the Infoshop.
48. As part o f the environmental due diligence process, a preliminary environmental assessment was carried out on a sample o f rehabilitation works included in Provias Nacional’s envisaged road rehabilitation and upgrading program for CY 10. This preliminary assessment applied the environmental instruments developed by the DGASA/MTC (Direccion General de Asuntos Socio-Ambientales) and by Provias Nacional. A field visit was organized for these sample o f roads (June 2009) and secondary information, such as environmental studies, was also reviewed, whenever available. The outcome o f the environmental assessment i s that all the proposed works would have a moderate environmental risk (Category B), according to the classification established by the DGASA and in accordance with Bank guidelines.
49. As part o f the environmental due diligence process, an analysis o f the institutional management capacity was carried out and an Environmental and Social Strengthening Management Plan (ESSMP) was developed for the DGASA and Provias Nacional, in order to continue improving the environmental management in the sector. I t i s important to mention that, as part o f the project’s environmental capacity building activities, a strengthening o f MTC’s
20
information systems wi l l be performed, so that social and environmental dimensions are better streamlined in the road planning process. To implement the mentioned Plan, an amount o f about US$270.000, has been budgeted.
50. In conclusion, the proposed project should be considered viable from the social and environmental point of view, and it complies with the Bank’s Social and Environmental Safeguards Policies. The DGASA i s highly experienced with Bank policies due in particular to past and on-going Bank engagement in the sector, and i t already counts on sound procedures and tools that should help ensuring an adequate socio-environmental management, in line with Bank Safeguards Policies. Activities envisaged under component 4 o f the proposed project wi l l help to go further in improving social and environmental management practices within MTC.
F. Safeguard Policies
5 1, The proposed Project triggers five Bank safeguards: Environmental Assessment, Natural Habitats, Physical Cultural Resources, Involuntary Resettlement and Indigenous Peoples. An Environmental Assessment Report, a Resettlement Action Plan and, when applicable, an Indigenous Peoples Plan have been prepared for each o f the four road rehabilitation and upgrading works identified at the time o f appraisal. In addition, an Environmental and Social Management Framework, an Involuntary Resettlement Framework and an Indigenous Peoples Framework have been prepared and would be applied to any other road improvement or maintenance works to be financed by the proposed project. Finally, a preliminary Environmental Assessment was also prepared for a sample o f MTC’s road rehabilitation and upgrading program scheduled for CY 10. All documents have been reviewed by Bank specialists and their comments have been integrated. All documents have been disclosed in country by Government agencies on November 23,2009, prior to appraisal, and in the Bank’s Infoshop between November 6 and November 23, 2009. An updated version for some o f these documents was then published on November 30,2009.
Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [XI [I Pest Management (OP 4.09) [I [XI Physical Cultural Resources (OP/BP 4.1 1) [XI [I Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OP/BP 4.10) [XI [ I Forests (OP/BP 4.36) [ I [XI Safety o f Dams (OP/BP 4.37) [ I [XI Projects in Disputed Areas (OP/BP 7.60) [I [XI Projects on International Waterways (OP/BP 7.50) [I [XI
52. Environmental Assessment (OP/BP 4.01) i s triggered because some limited environmental impacts could appear, principally during project execution that would have to be prevented, mitigated and/or compensated. Environmental Assessments have been prepared for the four road rehabilitation and upgrading works pre-identified to be financed under component 1. In case additional works from MTC’s road rehabilitation and upgrading program would also
21
be financed be the proposed project, an Environmental and Social Management Framework has been prepared. An Environmental Assessment Report has also been prepared for a sample o f works o f MTC’s road rehabilitation and upgrading program for CY 10.
5 3 , Natural Habitats (OP/BP 4.04) i s preventively triggered because other road sections located in sensitive areas could become eligible under component 1 . For these potential cases, the corresponding environmental studies would include the respective Environmental Management Plans in order to take into account the environmental and social considerations, as well as measures to prevent and/or to mitigate the potential negative impacts.
54. Physical Cultural Resources (OP/BP 4.1 I) i s triggered because Peru has an extensive cultural, historical and archeological heritage and because some o f the targeted road sections are located in the indirect influence zone o f archeological places. Although no significant adverse impact i s expected on these archeological sites, these works have to follow the review and authorization process o f the National Institute o f Culture (INC). Additionally, “Chance Finds Procedures” have been included in the ESMF to take into account these cases.
55 . Involuntary Resettlement (OP/BP 4.12) i s triggered because, although civil works wil l mostly take place within the existing right o f way, the project wi l l affect partial areas o f grasslands and also partially cultivated and non-cultivated plots. Works wi l l also affect houses or small buildings for which in situ reconstruction or cash compensation wi l l be implemented. For each o f the four initial road segments to be rehabilitated as part o f component 1 , a Resettlement Action Plan (RAP) has been prepared, following Bank policies. Based on the information provided in these plans i t i s expected that there wi l l be a total o f around 1 , 100 affected assets, out o f which 144 are rural houses and small rural shops. These numbers are subjected to change because several o f these assets are within the right-of-way o f the roads when in practice only those within the area o f construction are actually affected by the project. The consultation process i s described in each RAP. Each plan has been disclosed both on the MTC’s website on November 23, 2009 and in the Infoshop on November 19, 2009, except for the RAP o f the Ayacucho-Abancay road which was published on November 9,2009.
56. In case additional works from MTC’s road rehabilitation and upgrading program are financed by this project (in substitution or in addition to the four currently identified), an Involuntary Resettlement Framewark (IRF) has been prepared, following Bank policies. The IRF wi l l guide the preparation o f further RAPS if needed. The IRF has been disclosed both on the MTC’s website on November 23, 2009 and in the Infoshop on November 9, 2009. An updated version was published in Peru, on November 30,2009 and in the Infoshop.
57. Indigenous Peoples (OP/BP 4.10) i s triggered because two identified road corridors to be rehabilitated under the proposed project have the presence o f indigenous peoples. For each o f these road segments to be rehabilitated and upgraded as part o f the project, an Indigenous Peoples Plan has been drafted and published in country on November 23, 2009, prior to appraisal, and in the Infoshop on November 20, 2009 (IPP Sagazu community) and on November 23, 2009 (IPP Ocros community). The consultation process i s described in each IPP. Each plan has been disclosed both on the MTC’s website and in the Infoshop. In case additional works from MTC’s road rehabilitation and upgrading program are financed by this project (in
22
substitution or in addition to the four currently identified), an Indigenous Peoples Planning Framework (IPPF) has been prepared, following Bank policies. As part o f the preparation o f this IPPF, a social assessment o f a sample o f indigenous communities has been prepared for areas where the GoP might invest in road rehabilitation and upgrading in 2010. The IPPF has been disclosed both on the MTC’s website on November 23, 2009 and in the Infoshop on November 6,2009. An updated version was published in Peru, on November 30,2009 and in the Infoshop.
58. All these social safeguards instruments (plans and frameworks for resettlement and Indigenous Peoples) have been found acceptable to the Bank. In addition, the M T C (Provias Nucional and DGASA) has developed a comprehensive l i s t o f regulations and guidelines that address Indigenous Peoples’ issues, consultation protocols and resettlement related issues and compensations. These regulations and guidelines have been inspired by the Bank safeguard policies as well as by the I L O Convention 169 (a detailed description o f a l l these instruments i s included in each policy framework).
G. Policy Exceptions and Readiness
59. The proposed project does not require any exception from Bank policies or procedures.
60. The project meets all Regional criteria for readiness for implementation. All safeguards’ instruments have been prepared and disclosed. A final draft o f the project’s operational manual has been prepared and i s now pending formal approval by the two implementing agencies. The fiduciary procedures have been defined and there i s sufficient capacity in place to execute them.
23
Annex 1: Country and Sector o r Program Background
PERU: Safe and Sustainable Transport Project
The infrastructure Gap and its Consequences for Peru's Competitiveness
1. With 450 km o f paved roads per mi l l ion inhabitants and only 1 1 percent o f paved roads, Peru i s one o f the last countries in Latin America with regard to i t s transport infrastructure stock. Peru's road network consists o f 127,320 km, to which 10,367 km currently under works should be added. A road reclassification was recently passed, resulting in 28 percent o f the roads (26,377 km) being national roads (primary network), ' 30 percent (28,844 km) being departmental roads (secondary network) and 42 percent (82,467 km) being rural roads (tertiary network). There are only 13,487 km o f paved roads, o f which 11,370 km are national roads. The last road inventory and road condition assessment was done in 2005 (a new one i s scheduled for 2010). In 2005, only 39 percent o f the national roads were in good condition, 19 percent in fair condition and 42 percent in poor or very poor conditions. For the unpaved network, the situation was even worse with only 3 percent being in good condition and 34 percent in fair conditions. In comparison, the density o f paved roads achieves 1,713 km per mi l l ion people in Argentina and 934 km in Chile. In Argentina, through an aggressive road asset management program, the National Road Agency has increased the proportion o f national roads in good condition to 91 percent over a 20 year period, reducing road user cost savings by US$275 mil l ion.
2. The poor condition o f transport infrastructure i s a liability for Peru's competitiveness. About 80 percent o f the f i r m s surveyed by the World Bank Logistics Performance Index (LPI) initiative reported they believed the quality o f the transport infrastructure in Peru was l o w or very low. With about 32 percent o f product value, Peru's logistic costs* are among the highest in Latin America, well above Colombia (23 percent), Chile (1 8 percent) but also Brazil (26 percent) and Argentina (27 percent). In comparison, the OECD average for logistic costs i s about 9
Fol lowing a recent road reclassification process, about 9,000 additional km o f former secondary or tertiary roads have been reclassified as national roads.
Although there i s no precise definit ion o f logistics costs, they can generally be defined as direct transaction costs (transport but also trade-related costs l ike the processing o f permits, customs or standards) added to indirect financial costs (eg. inventory, storage, security) and non-financial costs (insurance). (Source. Guasch and Kogan, 2005).
7
24
percent. Because o f poor transport conditions, Peruvian f i r m s need to have high inventories, to account for contingencies. This i s particularly illustrated by the inventories o f raw materials for which the mean ratio to U.S. level by industry reaches 4.19, compared to 2.98 in Brazil, 2.22 in Colombia, 2.17 in Chile and 1.58 in Mexico. High inventories generate financial costs which in turns increase unit costs, lowering competitiveness and productivity.
The Deteriorated Situation of Road Safety in Peru
3. With official reports indicating an annual 3,510 deaths and 49,857 injured, Peru ranks disturbingly low with regards to road safety. When accounting for Peru's low motorization rate, Peru has 42 deaths per 10,000 vehicles (the worst record for the region), compared to 12 for Colombia, 9 for Costa Rica, 8 for Chile, whose motorization rates are more than double that of Peru. The fatality rate per 100,000 habitants i s equally worrisome, at 21.6; Peru i s second to Venezuela (2 1.8), while Costa Rica (1 5.4), Chile (1 3.7) and Colombia (1 1.7) fare relatively better (see charts below). A rough estimate o f the economic cost o f road crashes in Peru i s about 1.5 percent o f GDP. Driver behavior accounts for over 50 percent o f road crashes, and i s attributed to speeding, recklessness and inebriety. Studies also indicate that a lack o f effective regulation o f the vehicle fleet, particularly public transport vehicles, i s also a major contributing factor, as well as deteriorated or poorly designed transport infrastructure. A rough estimate o f the economic cost o f road crashes in Peru i s about 1.5 percent o f GDP. Driver behavior accounts for over 50 percent o f road crashes, and i s attributed to speeding, recklessness and inebriety. Studies also indicate that a lack o f effective regulation o f the vehicle fleet, particularly public transport vehicles, i s a major contributing factor in road crashes. Finally, deteriorated or poorly designed transport infrastructures contribute to Peru's road safety situation.
25 1 fatalities/lRJ,OW habitants fataiitlesll0,OW vehicles VI motorlzatlon rate
40
3 5
30
t l5 B 1; 1 10
5
0
4. According to a recent road safety assessment performed by iRAP and financed by the World Bank through the Global Road Safety Facility on about 3,000 km o f Peruvian roads, about 22 percent o f these roads can be considered highly dangerous for car users and 63 percent o f them for pedestrians. While road safety has been identified as a problem for many years, the Ministry o f Transport and Communications (MTC) has only given recently a high priority on this issue. The National Road Safety Council has been reactivated and a comprehensive National
25
Road Safety Plan has been prepared and endorsed. However, major bottlenecks s t i l l remain for the implementation o f this Plan. One o f the most critical i s the lack o f an effective lead agency that can set policy and direct implementation to oversee the achievement o f results. Other important issues include the necessity to build in Peru a culture o f safe road design and usage, and the need for a results-focused approach in order to achieve the long te rm vision o f the Plan and, in particular, i t s objective o f reducing crashes by 30 percent over the 5-year period 2007 - 201 1.
Peru’s Investments in Transport Infrastructure and the Expected Impact of the GoP’s Stimulus Package
5 . In Peru, the last significant increase in infrastructure spending occurred at the beginning o f the 1990s when the national road network was on the verge o f collapsing with only 12 percent o f the roads being in good conditions. This program almost quadrupled the length o f good condition roads in 5 years. Infrastructure spending was then severely constrained, in Peru as well as in other Latin America countries, during the economic downturn o f the late 1990s when capital expenditures paid the highest price in the fiscal adjustment that were implemented in response to the macroeconomic crisis (Calderh, Easterly and Serven, 2003). Peru’s public investment in transport infrastructure represented 0.34 percent o f GDP in 198 1-1 986 but only 0.09 percent in 2001-2006. This drop has been compensated by a significant increase in private financing that represented only 0.02 percent o f GDP in 1991-1986 but 0.28 percent in 2001- 2006. However, the total investment (public and private) in transport in Peru in 2001-2006 (0.37 percent o f GDP) remained, together with Mexico, the lowest rate in Latin America, far below Chile (1.69), Argentina (0.68), Colombia (0.67) and Brazil (0.41) (Calderon and ServCn, 2009).
1 6 1 4 1 2
1
0 6 0 4 0 1
0
o a
fnnsport infnstructun rxprnditunt ( p m m t of GDP) Public expenditures in transport infrastructure (1980-2006, percent of GDP) r 3
I b
L.d
. i
0 8
0
i n M t l i t o Peru U L
# I)Ubk 11981-86i 8 piivdtei1981-861
* jtiibllc 12001461 prl~nte~2001-2M)Gi
Source: Calder6n and Serven (2009).
6. Since 2007, road improvement expenditures have increased and this trend i s expected to further accelerate with the GoP’s stimulus package. Provias Nacional’s budget for national roads’ investment has been quadrupled between 2005 and 2009 to reach almost US$l , 1 billion in 2009. The execution rate i s high (75 to 90 percent) although it has been slightly decreasing recently, possibly due to some institutional limitations to absorb the additional workload. Nevertheless, after only 4 months, 29 percent of the 2009 budget had already been executed by Provias Nacional, despite the doubling o f budget resources compared to the previous year. The
26
most important increase o f this budget i s observed for the category o f larger infrastructure works (eg. IIRSA Sur road or Tren Electrico urban transport system).
Provias Nacional‘s budget for national roads‘ investments 1200
.- s *0° ~
5 400 1
, larger scale road works,
1000 I. - - - . .. __-I_ - construction and PPP
6: rehabilitation aiid upgrading - - .- E GOO ~
1
I long-term upgrading and inainteiiance coiitractr
I (Proyetto Peru) 200 1
0 1 other iriaiiitenaiice (iiiicro- 2005 200G 2007 2008 2009 enterprises, periodic
(actual) (actual) (actual) (actual) (initial) maintenance, force account)
7. The countercyclical stimulus package adopted by the GoP in response to the global crisis i s expected to further the trend, although the Peruvian package i s s t i l l in the lower range in the region, with US$3 bi l l ion or about 2.5 percent o f GDP. In comparison, Argentina’s package amounts to 12.5 percent o f GDP and the Brazilian package to 3.8 percent. Peru’s stimulus package plans to dedicate two thirds o f the resources on infrastructure and aims at doubling capital expenditures, compared to 2005. The Government’s package takes into account the lessons from the last macroeconomic crisis faced by Peru at the end o f the 1990s when infrastructure spending were severely downsized as part o f the country’s fiscal adjustment policies, resulting in a future loss o f competitiveness and growth.
8. The package gives particular attention a few selected “mega projects” - most o f them in transport. They include in particular the completion o f the IIRSA Sur project (US$900 million additional needed), the concession o f six regional ports (US$591 million), the concession o f the I IRSA Centro (US$220 million), the concession o f six regional airports (US$157 million) and the construction o f the infrastructure needed for the Tren Electrico, a new L ima urban transport system (US$lOO million). These “mega-projects” - except the IIRSA Sur and the Tren Electrico, as well as a few other road rehabilitation and bridge construction investments have been published in two Emergency Decrees: Decreto de Urgencia No. 047-2008, dated Dec. 18, 2008, and No. 010-2009, dated January 29, 2009. The proposed project will not finance the “mega projects” but will help finance some o f the prioritized road rehabilitation investments, as well as other priority rehabilitation and maintenance investments. As part o f the stimulus package, the Government has also announced the creation o f a US$lOO mi l l ion infrastructure fund, managed by COFIDE, in order to support some o f the PPP infrastructure investments.
Table: TransDort Investments Flagged as Priorities in Peru’s Stimulus Package.
27
I Rehab. Road Huaura - Sayan - Churin 1 US$90m I Rehab. Road Churin - Ov6n I U S $ I S ~
(C) These investments have already been contracted by Provias Nacional.
The situation o f Road Sssets Management
9. Planning. Public investments in transport are prioritized through different planning instruments. The most important i s the Intermodal Transport Plan 2004-2023 which sets the medium to long-term vision for the sector. Other planning instruments that are relevant for the national road network include the 5-year National Road Plan 2006-20 10 and the National Road Maintenance Plan 2000-2009. On the other hand, the Proyecto Peru program was launched through Ministerial Resolutions No. 223-2007-MTC-02 and 408-2007-MTC/02. The Proyecto Peru prioritized 35 road corridors (for a total length o f 12,500 km) and 4 river-based corridors that connect production centers with national and international markets.
10. Monitoring of road conditions. The last inventory o f national roads was performed in 2005 on the 17,000 km o f roads listed at that time in the national network. IRI data were collected and served as basis for the categorization o f national roads according to the condition (good/average/poor). A road reclassification decree (No. 0 17-2007-MTC) was published in 2007 and led to the expansion o f the national road network from 17,000 km to 23,000 km, before being further extended to 26,377 km. An updated assessment o f the national road network i s planned for 201 0.
11. Road maintenance. Road maintenance i s particularly critical in order to avoid a deterioration o f road assets. Between 1992 and 2005, it has been estimated that the lack o f maintenance has caused the rapid deterioration o f 1,357 km o f national roads, generating a loss o f US$718 mi l l ion for the GoP. Maintenance i s less politically visible than other larger-scale investments (such as the construction o f new roads) and, for, that reason, it i s often the first expenditure to be downsized in times o f budget constraint. However, road maintenance has the highest economic returns o f all the various types o f road works and it i s also the most labor- intensive o f al l infrastructure investments. Albeit limited in scope, routine maintenance works can even generate up to 500 jobs per US$ mi l l ion invested and can act as a safety net mechanism for the rural poor. The Ministerial Resolution No. 817-2006/MTCY which describes the main national policies applicable to the transport sector, assigns the greatest priority to the preservation o f existing transport infrastructure.
Source: lnstituto Peruano de Economia (IPE). 9
28
12. MTC’s strategy focuses on long-term maintenance contracts and the progressive phasing out of force account. Maintenance on national roads (mostly routine and emergency) i s s t i l l partially handled through force account although a phasing out process has been initiated. For a number o f national roads, routine maintenance has been outsourced to microenterprises constituted from poor people living aside from the road. 60 microenterprises have been created for this purpose. lo Periodic maintenance i s also outsourced to private contractors. Another maintenance model i s the use o f performance-based upgrading and maintenance contracts (Proyecto Peru), through which an upgrading (low cost paving) i s bundled together with maintenance for a period o f 5 years, for a package o f 200 to 400 km o f national roads. The contractor generally performs himself the larger scale works (initial upgrading, periodic maintenance), while routine maintenance i s subcontracted to microenterprises. This maintenance modality i s being rapidly scaled up by the MTC and will be further supported by the proposed project, the total length o f national roads maintained under the Proyecto Peru i s expected to increase from 3,233 km to 11,694 km between 2009 and 2012. A similar approach i s also being implemented by Provias Nacional through performance-based maintenance contracts that bundle together periodic maintenance, emergency maintenance and 5-years o f routine maintenance. Four o f such contracts have already been signed for about 1,500 km and contracts for an additional 1384 km wi l l be supported through the proposed project. Finally, for 4,987 km o f higher traffic roads, maintenance i s ensured as part o f a concession contract.
maintenance
13. Expansion of the Paved Network. Peru has one o f the lowest densities o f paved roads in the region. To tackle this problem, the MTC i s working in three directions: (1) ensuring the maintenance o f existing paved roads to preserve the existing stock o f infrastructure; (2) taking advantage o f the normal rehabilitation o f unpaved national roads to perform an upgrading o f road surface, whenever economically justifiable; and (3) piloting (before scaling up) the use o f low- cost paving technologies on low-traffic national roads. Low-cost paving works have recently been tested by the MTC as part o f the “Proyecto Peru” program and a specific monitoring mechanism (involving the civil engineering department o f a Peruvian university) has been established to verify that i t i s indeed a cost-effective and sustainable solution for lower-traffic national roads.
lo Microenterprises are widely used by Peruvian municipalities, with the technical guidance o f Provias Descentralizado. As o f 2008, 612 microenterprises, employing about 7,000 workers, had been created and were performing the routine maintenance o f about 15,000 km of rural roads.
29
14. Road Concessions. The Road Development Plan 1996-2005 envisaged the concessioning o f 1 1 road corridors, totaling 6,898 km. These corridors have high-traffic levels with at least 2,000 vpd and some sections exceeding 5,000 vpd. To date, 9 o f these corridors have been concessioned under a PPP approach, for a total o f about 4,987 km, including 2,593 km for the 5 segments o f the IIRSA Sur. As part o f the stimulus package, the GoP aims at awarding new road concessions, through PPP arrangements. However, under current traffic conditions, the “concessionable” part o f the national road network i s unlikely to exceed 7,000 to 8,000 km.
Concessionaire Road Length (km) I Characteristics Ancon-Huacho-Pativilca 182.66 25 year concession Norvial S.A.
US$6 1.4 million investment Basic toll: US$] . W a x
Eje Multimodal Amazonas Norte (IIRSA 955 25 year concesion Norte) US$280 million investment
Basic toll: USS 1 Sttax
US$157.7 million investment Basic toll: USS 1.5-tax
US83 million investment US$I 1 million annual operation
USS278 million investment Basic toll: U S 1 Sttax ’ USS40.7 million investment
Pucusana-lca 221.7 30 year concession
San Juan de Marcona-Nazca-Puquio- 757 25 year concession BOT Chalhuanca-Abancay-Cusco (IIRSA Sur- segment I) Urcos-lnambari (IIRSA Sur-segment 2) 300 25 year concession
Inambari-liiapari (IIRSA Sur-segment 3 ) 403.2 25 year concession
Basic toll : U S $ I +tax
US$205 million investment Inambari-Azangaro (IlRSA Sur-segment 4) 305.9 25 year concession
Institutional and Regulatory Rramework for the Transport Sector
IIRSANorte ‘ COVIPERU I
S.A i
Survial S.A.
Interocehnico Sur - Tramo 2
S.A. Interocehnico I
Sur - Tramo 3 S.A.
INTERSUR , Concesiones
15. Regulatory Framework. After the decade o f the 80s during which the Peruvian State intervened directly in most aspects o f transport policies, the 90s saw aggressive deregulation and liberalization reforms. Since 2000, important legislations were passed to ref ine the regulatory framework, better ensure the quality o f transport infrastructure and services, and reduce the high levels o f informality in the sector. The most important o f these legislations i s the General Transport Law, approved on October 8, 1999. This law obliges the State to promote free competition, while remaining in charge o f those functions that are socially important and which cannot be developed by the private sector. The law sets that all actors have to assume the costs associated with their decisions and that the prices o f transport services have to be real and competitive, with the exception o f corrections justified by negative externalities such as traffic congestion and pollution. Technical standards and regulatory measures should also promote the optimization o f traffic management.
827 ’ 25 year concesidn i 1 USS183.4 million investment Matarani-Azangaro-llo-Juliaca (IIRSA Sur- segment 5 )
Empalme 1 B-Buenos Aires-Canchaque 78.1 I5 1 ear concession Basic toll: USS I .5-tax
US$3 1 , l million investment
30
COVISUR
Canchaque S.A.
16. The Ministry of Transport and Communication (MTC). The MTC i s the Peruvian institution in charge o f defining strategies, policies and technical norms for the transport sector. The MTC includes a Vice-Ministry o f Transport, which i t se l f includes five general directorates: (1) the General Directorate for Civil Aviation (DGAC); (2) the General Directorate for Maritime and River-based Transport (DGTA); (3) the General Directorate for Roads and Railways (DGCF); (4) the General Directorate for Land Transport (DGTT); and (5) the General Directorate for Social and Environmental Affairs (DGASA). The Vice-Ministry also includes two operational units (“Special Programs”), one that i s in charge o f managing the national road network (Provias Nucionao and the other o f supporting the road decentralization process at the regional and municipal levels (Provias Descentralizado). A Planning and Budget Unit (OGPP) i s in charge o f managing the planning instrument and the budget process for the sector. Finally, a concession unit i s following MTC’s concession program (roads, ports airports) in coordination with the other Peruvian institutions in charge (OSITRAN, PROINVERSION)
17. Provias Nacional. Provias Nacional i s the entity in charge o f managing the national road network and i s therefore the legitimate counterpart for the proposed project. I t i s one o f the most efficient institutions in the Peruvian administration (with a 75 to 90 percent budget execution track record over the past 4 years). However, it i s now getting close to saturation and there i s a risk that this agency i s reaching i t s maximum absorptive capacity, considering the doubling o f i t s budget in 2009 compared to 2008, and the quadrupling compared to 2005, as well as the 2007 road reclassification that led to an increase o f the length o f the national road network by 35 percent. Provias National has a staff o f 980 (stable since 2002), 90 o f which are working in the regional bureaus (Unidades Zonules).
18. Road Decentralization. Since 2002, the management o f regional roads has been handed over to 24 regional governments, while the management o f rural roads i s now handled by 2,006 district and provincial municipalities. The decentralization process has produced highly positive results for rural roads, thanks to the use o f low-cost rehabilitation technologies (gravel roads), participatory road planning, effective routine maintenance (performed by microenterprises) and successful institutional arrangements (Provincial Road Institutes) that allowed overcoming the high fragmentation o f the municipal sector in Peru. However, the needs are s t i l l enormous with only about 30 percent o f the registered rural road network rehabilitated to date. The situation i s less advanced at the regional level, although a significant share o f public investments in decentralized transport, are now managed by the regions. Institutional weaknesses in the regional governments are s t i l l affecting the execution o f the investment program in regional roads. Two IaDB and World Bank-financed operations’ are currently supporting the road decentralization process at the regional and municipal level.
’ ’ Peru - Decentralized Rural Transport Project and Peru - Regional Transport Decentralization Project.
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Annex 2: Transport Sector Development Policy Letter PERU: Safe and Sustainable Transport Project
1. The Peruvian economy has been on a steady growth path for more than 90 months, with growth rates topping 9 percent in the past two years. Despite the persistent adverse global climate Peru’s economy-still among the fastest growing in the world-is set to continue expanding. Forecasts are calling for positive GDP growth in 2009 and over-5 percent increases on average for 20 10-20 12 (20 10-20 12 Multiyear Macroeconomic Plan - Ministry o f Finance).
2. The country’s social policy i s premised upon a move away from short-term piecemeal State efforts toward a long-range, comprehensive vision, pursuing phased benchmarkable goals. To that end the authorities have identified programs that can be amalgamated and new programs that would be coordinated and aligned to the State’s new social policy, specifying the roles and responsibilities that should fal l to the sectors involved so that resource (budget) allocations meet true requirements for program execution and target achievement.
3. At present the government’s efforts are focused on cushioning the impact o f the global cr is is on the nation’s economy and, particularly, on conserving recent poverty reduction gains that took the poverty rate from 48 percent in 2005 to 36.2 percent in 2008.
4. In the transportation sector, high-quality infrastructure and services are key to efficient operation o f markets, export and import growth, and successful social programs. Peru’s slower than desired progress in the transportation sphere has to do with a significant connectivity gap which the Peruvian Economic Institute ascribes to an infrastructure gap that would cost US$8.609 billion to close. This shortfall, coupled with inefficiencies o f nonintegrated transport services and institutional weaknesses both on the transport company operations side and the regulatory and compliance authority side, has created a transportation system that i s s t i l l too uncompetitive. The 2007-2008 Global Competitiveness Report te l ls the story in numbers: Peru ranks 10 1 st on the l i s t o f 13 1 countries rated for transportation infrastructure competitiveness.
5. Because o f their cross-cutting dimensions, transportation and communications activities unquestionably are fundamental for Peru’s sustainable economic and social progress, and more particularly the provision o f transport infrastructure such as roads, ports, and airports. Unless such activities keep pace-at the very least-with the country’s economic growth, in the near term transportation wi l l become a roadblock to the competitiveness i t needs to achieve to support sustained development and the competitiveness it ultimately must achieve if i t i s to reduce present levels o f poverty and inequality, among other goals.
ROAD TRANSPORT: BACKGROUND
6. Growth in the different components o f Peru’s transportation system has been uneven in recent years. Improvements on national highways and roads have been considerable-by 201 1, 90% o f these roads are expected to be in good and fair condition-but progress on regional and local roads i s slower. Consequently, the country’s road network cannot be considered an integrated system, that is, one whose operating efficiency levels satisfy accessibility, capacity,
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and serviceability requirements. Transport services still are o f poor quality; many are operating informally, have low logistical capacity and scant technological innovation, institutional weaknesses, and insufficient environmental and public health safeguards.
Type National roads Departmental roads Local roads Total
7. Executive Order 034-2007-MTC (Ministry o f Transportation and Communications) of September 2007, subsequently amended by E.O. 044-2008-MTC, reclassifies Peru’s roads system.
Paved Unpaved Planned Total 11,370 12,533 2,474 26,377
1,493 2 1,300 6,050 28,843 624 80,000 1,843 82,467
13,487 113,833 10,367 137,687
Peru’s Road System Classification - 2008 (in kilometers)
8. Peru’s road system i s made up o f the National Roads System (19 percent o f the country’s roads and highways), the Departmental Roads System (21 percent), and the Local Roads System (60 percent). The breakdown by traveling surface i s 10 percent paved, 83 percent unpaved, and 7 percent planned.
9. Breakdowns for each component o f the national network are as follows: national roads, 43 percent paved, 48 percent unpaved, 9 percent planned; departmental roads, 5 percent paved, 74 percent unpaved, 21 percent planned; and local roads, 1 percent paved, 97 percent unpaved, 2 percent planned.
10. Existing national roads comprise 23,903 km o f the National Roads System, o f which 4,987 km have been concessioned out and Provias Nacional operates the non-concessioned 19,013 km. In 2009, 8,486 km of the non-concessioned roads are paved, o f which 5,616 km i s in good repair, 594 km in fair condition, and 2,273 km in poor condition.
11, A total o f 2,174 km o f the unpaved network i s in good repair, 1,937 km in fair condition, and 6,412 km in poor condition, these involving primarily the National Roads System expansion pursuant to E.O. 044-2008.
12. present 8,486 km to 13,764 km.
By 2012 the non-concessioned paved National Roads System i s set to increase from the
TRANSPORT SECTOR DEVELOPMENT POLICY
13. Law 29370, the Ministry o f Transportation and Communications Act, states that the Ministry’s prime mandate i s to “develop, plan, direct, coordinate, deliver, enforce, oversee, and assess national and sectoral policy in matters falling within i t s purview, such policies being applicable to all levels o f government (national, regional, and local).”
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14. At the heart o f the transport sector policy roadmap approved in November 2006 i s a transformative shift in the traditional notion o f how the nation’s transport system operates, setting aside the prevailing infrastructure bias to prioritize instead transportation as a service. The following are the policy pillars:
0 A Comprehensive Vision of Transport Services and Infrastructure
15. The comprehensive vision should be shared and developed by all actors, authorities, and operators, the guiding principle being that infrastructure and infrastructure expansion are one component o f transport services.
User-Focused Integrated Transport System Management to Improve Transport Safety Conditions and Quality
16. The guiding premise being that transportation services should move people and goods efficiently and safely, resource allocation in transport system management needs to be more efficient, to deliver resources to infrastructure projects that take a preeminently multimodal approach, address transport safety issues, and wi l l enhance in-country integration by effectively articulating the National Roads System with regional and local road networks and with ports, airports, and railways.
Modern Legislation and Standards and Institutional Organization
17. Continue to build specialization capacity for the delivery o f transport sector functions, to equip the Ministry to provide leadership in policy, standards, and enforcement capacity, clearly distinct from regulatory and transport operations functions.
0 Adequate Funding for Transportation Infrastructure
18. Promote private sector participation in the delivery o f transport infrastructure and services, affording assurances o f stable policies and legislation and transportation pricing transparency and increasing public spending to help supply the demand for new project funding.
0 Priority Focus on Infrastructure Conservation and Expansion to Meet Demand and Accessibility Requirements
19. One transportation sector priority i s to instill a transport infrastructure conservation culture with an institutional base to make such conservation sustainable in the medium and long term. The Ministry has set a 2010-201 1 goal o f efficient National Roads System maintenance and a target o f over 60% o f the system in fair condition or better.
20. One o f the avenues to meet that target i s the ongoing “Proyecto Peni” road infrastructure project designed to promote private sector participation through three- to five-year performance- based road maintenance contracts, which wi l l actively involve 19 road corridors with a total length o f about 6,532 km. The planned interventions consist o f standards changes, periodic
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maintenance, minor rehabilitation works, routine maintenance, emergency work, and maintenance management.
2 1, (CREMA) for comprehensive road rehabilitation, improvement, and maintenance.
Another planned initiative i s a five-year pi lot rehabilitation and maintenance contract
ROAD TRANSPORT MANAGEMENT AND PLANNING
22. spread across the three levels o f government:
Road infrastructure and transport service management and planning responsibilities are
.
. . Ministry o f Transportation and Communications (MTC): interdepartmental and international transport services Regional governments: Departmental Roads System and interprovincial transport Municipalities: Local Roads System and urban and intercity transport.
National Roads System and
23. As one facet o f Peru’s decentralization process the M T C has completed the transfer o f eight specific transport functions to the regional governments (Ministerial Order 307-2008- MTC/Ol and others).
24. However, since the regional and municipal governments’ road infrastructure planning and management capabilities are s t i l l weak, the M T C through Provias Descentralizado i s operating the Departmental Roads Program to assist the regional governments with management o f the Departmental Roads System, and the Decentralized Rural Transport Program to help municipalities with local road asset management. These programs contain institution- strengthening components and provide cofinancing for road projects. The most significant achievements on the planning side are the 20 Departmental Road Plans produced.
25. The Provincial Road Plans developed under the Decentralized Rural Transport Program were put together with input from local community organizations under the leadership o f local government authorities. To date 94 such plans have been produced and 176 Provincial Roads Institutes have been created.
26. The road infrastructure management mandates o f the three tiers o f government are clearly spelled out in roads legislation but in practice the distinction i s not clearly understood or observed, primarily in district municipalities and among the general public. Moreover, the paternalistic criterion that sees the Executive (MTC) as having responsibility for everything continues to hold sway, aggravated by political differences between mayors and regional presidents.
27. To get road work done the different levels o f government round out their own efforts and resources, and projects where one level does not have a mandated responsibility are being carried out under interagency agreements. For instance, regional governments in regions that levy a mining concession tax are being allowed to co-fund National Roads System projects with the MTC, or a road i s temporarily reclassified from national to regional or local.
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28. Against this backdrop, work i s being done to strengthen and institutionalize strategic transportation planning. Infrastructure planning and programming, logistics platform planning, information management tools, and baseline studies are some o f the facets o f the envisaged comprehensive transport planning.
29. In i t s new transport services-focused vision the MTC sees logistics as a link between transport infrastructure and transport service. Here, logistics and logistics platforms become crit ical elements for transport sector development, contributing to efficient use o f transportation infrastructure.
30. A planned MTC study entitled “Transportation Logistics Services Development Plan” i s to produce a comprehensive analysis o f the features o f Peru’s logistics system, with an emphasis on operational demand and supply but integrating findings o f ongoing logistics infrastructure studies. The aim i s to come up with a proposal o f a package o f actions that can promote a sustainable, diversified, in-country supply o f value added logistics services and meet production sector needs, and thereby help build a more competitive economy and make more efficient use o f transport infrastructure.
3 1. The MTC also has been producing or commissioning logistics infrastructure studies dealing for instance with the Callao Logistics Platform, Paita Logistics Platform, Yurimaguas and Pucallpa Logistics Platform, and siting o f a logistics platform in southern Peru. According to the latter study an Urban and Regional Distribution Platform should be developed in the city o f Arequipa; a feasibility study i s now under way.
32. On the matter o f new information management tools, another planned MTC project wi l l update the satellite database and institutionalize the Geographic Information System (GIS) to better serve other Ministry departments and units and general users. This wi l l give continuity to the 2000-200 1 Geographic Information System Implementation project to improve regional transport and road planning and privatization studies, which updated digital maps o f Peru’s national and departmental road systems and set up a GIS in the Ministry. This i s part o f an initiative to enhance the Ministry’s information systems and solidify coordination mechanisms.
MODERNIZATION OF ROAD TRANSPORT MANAGEMENT
33. Having recognized transportation’s crucial role in sustainable development (transport management and operations responsibilities being shared by State institutions and the private sector), Peru has made significant efforts over the past five years as part o f i t s modernization o f the State process with cooperation support from multisectoral organizations to modernize transportation administration.
34. At the local management level, for instance, the new Executive Branch Act and Regional Government Act are regulating and modernizing State activities, their chief focus being to demarcate national and subnational government responsibilities. As this legislation has been implemented the Ministry has been able to spell out, in the regulations governing i t s organization and functions, the policy functions that fall within i t s purview: responsibility for policy and for
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technical standards and regulations for policy delivery and oversight rests with the MTC, and all levels o f government are required to adhere to i t s policies and standards.
35. The Regional Government Act, for i t s part, specifies the functions that are shared by the MTC and the regional governments. The Ministry now i s reconfiguring i t s management tools so it can continue to streamline i t s organization and rationally assign responsibilities across the different transport sector entities.
36. Some specific review and strengthening focuses are the eminently implementing role o f the Provias agencies and the planning and policy and standards functions o f core Ministry departments (Office o f Planning and Budget, Roads and Railways Directorate, and others). A Superintendency o f Overland Transport o f Persons and Goods has been created to bolster and build oversight and compliance specialization for overland transport, with two near-term aims: lower the levels o f “operational informality” in transport services and accord the necessary importance to the delivery o f overland transport policy and modernization o f the associated technical standards.
37. The guidelines for improving road transport management thus have been laid; the task now i s to focus efforts and cooperation assistance on building capacity to perform the assigned responsibilities and functions, principally to capture and adopt state-of-art technologies that wi l l ensure timely technical responses and reduce political discretion in road asset management decisions.
PUBLIC/PRIVATE PARTNERSHIPS AND ROAD TRANSPORT FINANCE
38. Infrastructure ventures require huge investments that can be funded only with a mix o f public monies and private capital. Accordingly, the Peruvian Government i s promoting private sector participation in infrastructure construction, particularly by way o f publidprivate partnerships (PPPs). PPP projects are long-term ventures that yield high social returns but low financial returns, so the State has to put in a share o f the funding.
39. A number o f recent laws and orders are facilitating this process, most notably the Framework Law on Publidprivate Partnerships for Productive Employment Creation (Legislative Order 101 2 o f May 13, 2008) which regulates private sector participation in public infrastructure operation or public uti l i t ies delivery under the Publidprivate Partnership (PPP) format, to make such ventures viable, create productive employment, and make the country more competitive.
40. In addition, Emergency Order 047-2008-one piece o f the government’s Economic Stimulus Package to manage the effects o f the global financial crisisnontains extraordinary provisions to facilitate PPPs. These helped put together concessions for the Trujillo-Sullana section o f Autopista del Sol and the Downtown Lima-La Oroya-Pucallpa and La Oroya- Huancayo sections o f the Amazon transport corridor.
4 1, At this writing PPP concessions have been awarded for 4,110 km o f roads and highways involving an investment o f US$2.286 billion. These include the Paita-Yurimaguas segment o f
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the North Amazon Corridor (955 km), the IIRSA South Interoceanic Transport Corridor (2,594 km), Road Network No 4 Pativilca-Trujillo (362 km), Junction 1 B-Buenos Aires-Canchaque Connecting Road (76 km), Ovalo Chancay/Dv. Variante Pasamayo-Huaral-Acos road (46.8 km), and Nuevo Mocupe-Cayalti-Oyotun road (76.5 km).
42. Concessions also have been let for 406 km o f roads under two projects not being cofunded by the State (self-sustaining) that call for investments o f US$302 million: Road Network No 5 Anch Huacho-Pativilca (223 km) and Road Network No 6 Pucusana-Cerro Azul-Ica (1 83 km).
43. Between August 2006 and December 2008 1,363 km o f roads were built, rehabilitated, and improved-646 km o f works paid for with public money and 7 17 km with private funding (concessions). The works targets for 2009-201 1 are 3,817 km o f road construction, rehabilitation, and improvements--1,029 km to be publicly funded and 2,787 km paid for with private capital (concessions). The end result in 2011 should be 3,902 km o f concessioned national roads duly paved and sustainably maintained.
MAKING ROADS SAFER
44. The transport sector policy aim i s to see quality transport services delivered efficiently and safely and in conformity with Peruvian law and applicable international standards. I t seeks to enhance the professionalism o f public and private transport operators to ensure safe, high- quality transportation services.
45. The following are the proposed overland transport strategies: Institute mechanisms to improve domestic and international overland passenger and freight transport monitoring, oversight, and compliance activities to ensure compliance with technical specifications and improve standards o f service; establish conditions for development o f an institutional apparatus for transport services; devise ways to help transport companies become more firmly established and more competitive and to operate formally; strengthen avenues for sectoral consensus- building on overland transport matters and promote a culture o f road safety and road safety education, coordinating these initiatives with other associated institutions; prescribe technical specifications for passenger and freight transport vehicles and institute appropriate compliance mechanisms; prescribe technical standards for vehicle circulation in order to improve transport safety and protect the environment; and promote modernization o f the passenger and freight vehicle fleet.
46. The proposed overall strategy for road infrastructure i s to achieve substantive improvements in road safety conditions, gradually creating “Safe Corridors” (pilot project) on national and city roads.
47. One Peruvian Government move to this end was the 2008 Executive Order 023-2008- MTC which gave the National Road Safety Council the formal mandate o f promoting and coordinating road safety activities in Peru. Headed by the Ministry o f Transportation and Communications, this body brings together representatives o f government agencies and private
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sector organizations. The 2008 Order’s provisions to strengthen Regional Road Safety Councils are enhancing regional-national coordination.
48. The 2007-201 1 National Road Safety Plan approved in 2007 makes safe roads a national priority and promotes improvements in safety conditions on Peruvian roads to preserve the lives and physical integrity o f those who travel them. The National Plan’s primary target i s to lower traffic accidents by 30%.
49. Action i s needed to remedy the chaotic and unsafe conditions o f Peruvian streets and highways. Behavior changes need to be encouraged to develop a culture o f respect for the norms o f social cohabitation in our society, in which considerable numbers o f people are disobeying elementary traffic rules codified in the National Traffic Regulations.
50. - -
The MTC thus i s modernizing overland transport legislation such as the following:
Law 29365 establishing a Penalty Points System for Driver’s Licenses (May 28,2009). Law 29380 creating the Superintendency o f Overland Transport o f Persons and Goods (SUTRAN) (June 16, 2009) as a specialized oversight and compliance agency for transport services (matters falling within the MTC’s purview) and ancillary services. Executive Order 0 16-2009-MTC approving the Consolidated Text o f the National Traffic Regulations-Traffic Code (April 22,2009). Executive Order 0 17-2009-MTC approving the National Transportation Administration Regulations (April 22, 2009).
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5 1. Among the matters dealt with in these pieces o f legislation are st i f fer penalties for traffic infractions and creation o f a single overland transport compliance authority. Important changes in the Consolidated Text o f the National Traffic Regulations include: a) a new penalty points system for traffic infractions; b) a streamlined penalty procedure; c) a registry o f drivers found operating under the influence o f alcohol or drugs; d) citizen reporting o f traffic infractions; and e) removal o f duplicate or nonapplicable infractions and toughening o f penalties.
52. The MTC i s working out an agreement with the Attorney General’s Office under which it would support, in areas falling within i ts purview, compliance activities to prevent traffic accidents countrywide.
53. To lower the number o f unregistered passenger and freight vehicle drivers and avoid overlaps Peru started a registry this year o f trained drivers who provide road transport o f passengers and goods.
54. A number o f initiatives have been launched to improve road safety education in schools and among the general public and to raise road safety awareness. Ongoing traffic ru le and accident awareness campaigns are reminding the public that they have obligations as well as rights. Some associated initiatives are driving schools being promoted in Lima and elsewhere in the country, driver training organizations, and the Travel Safely campaign that checks passenger and freight transport vehicles before they go onto national highways.
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5 5 . The Integrated Overland Transport Information System currently in development, consisting o f the National Driver Registry System, National Penalty Registry System, and National Transport Services Registry System, will be a tool to make sure that individuals, vehicles, and roads are driving or operating as they are supposed to and thereby minimize the chance o f harm to the collective.
56. Weak traffic rule enforcement i s one o f the most serious road safety issues. To bolster M T C and subnational government road transport service oversight and compliance capabilities a Superintendency o f Overland Transport o f Persons and Goods (SUTRAN) has been created to coordinate the actual operationality o f enforcement work with central government road safety departments and agencies and subnational governments. The National Road Safety Council, for i t s part, wil l scale up efforts to secure the genuine commitment o f its constituent institutions to implement designed activities and programs such as the International Road Assessment Program (iRAP) initiative that has operated on selected national roads and i s slated to run on others.
PROTECTING AND ENHANCING THE ENVIRONMENT
57. M T C policy dictates that care must be taken to prevent and minimize environmental impacts in transport infrastructure construction and operation and in transport services delivery. Specifically, the M T C has charted strategies to bolster social and environmental safeguards, ensure that transport infrastructure and services projects will be socially and environmentally viable, develop solutions for environmental liabilities, and prevent and curb moving-source environmental pollution, along with strategies to address the social dimension o f transport projects, such as involuntary Resettlement Action Plans and right-of-way release.
58. Environmental impact assessments (EIAs) for road projects should ascertain their potential positive and adverse effects on the environment. Measures have been established for that purpose to avoid, reduce, or mitigate environmental harm or, where no adverse impacts are anticipated, measures to make the most o f the environmental benefits the road project stands to yield. The environmental dimension i s to be addressed all along the project cycle, from the planning stage to studies and designs to project execution to operation o f the road. This requires information system coordination within the Ministry as well as interagency coordination.
59. The MTC’s Social and Environmental Affairs Directorate created in 2002 i s the transport subsector’s environmental arm. Two o f i t s functions are to monitor compliance with environmental conservation laws and standards to ensure that natural resources are properly managed during transport infrastructure construction and to direct expropriations and any ensuing resettlements o f area residents.
60. Road transport services are another focus o f M T C environmental protection work. Here the aim i s to renew the vehicle fleet by adopting tax policies that give incentives to buy new personal and mass transit vehicles and measures to rationalize the fleet by scrapping vehicles, along with vehicle technical inspections and energy matrix change.
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CROSS-BORDER PHYSICAL INTEGRATION
61. Peru i s an active party to South American physical integration movements, notably the Initiative for the Integration o f Regional Infrastructure in South America (IIRSA) and bilateral initiatives with Brazil and Ecuador, Bolivia and Colombia.
Peru i s involved in four IIRSA corridors or hubs: Amazon Hub (Peru, Ecuador, Colombia, Brazil) Peru-Brazil-Bolivia Hub Interoceanic Hub (Brazil, Paraguay, Bolivia, Peru, Chile) Andean Hub (Peru, Ecuador, Colombia, Venezuela, Bolivia. Chile)
Infrastructure projects in these hubs consist o f road and highway construction, rehabilitation, and improvement, river and ocean port terminal improvements, airport modernization and improvements, improvements in commercial navigability o f Amazon region rivers, and logistics development and energy integration projects.
64. The Peru-Brazil-Bolivia hub (IIRSA South Interoceanic Corridor) i s one o f the most important by virtue o f i t s anticipated development impact in the southern Peru macroregion, which wi l l open up trade opportunities with Brazil.
65,. The IIRSA South Interoceanic Road Corridor paving projects wil l improve and rehabilitate sections o f roads in the departments o f Madre de Dios, Cusco, Puno, Arequipa, and Moquegua. Under the terms o f the signed contracts work began in July 2006 with a scheduled completion time, in stages, o f 48 months; the stage one work i s now complete. To date 689 km o f the planned 1,009 km has been paved; the remaining work i s slated for completion in the first half o f 201 1.
66. A number o f road projects and other activities currently under way are the fruit o f the Peace Accord with Ecuador. The following are the ongoing initiatives in four o f the five transport corridors:
Road Corridor No 1 :
w International Bypass: Construction completed (8.82 km), cost S/. 122.9 million. . International Bridge: 80 m long; work under way. Cost S/.16.9 million. Scheduled completion October 2009. Binational Border Service Center (CEBAF): First-phase works 35.3% completed; expected completion second quarter 2010.
Road Corridor No 2: . Sullana-El Alamor highway: Call for tenders published in Development Business (IDB) Issue Number 748. Contract to be awarded this month (September). Financed by IDB loan 1827/0C-PE, National Highway System Serviceability Improvement Program. Cost S/.73,858,352; S/.28.9 million in 2009 budget.
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Road Corridor No 3: . Construction o f New Macara International Bridge and accesses (1 10 m). Ecuador i s responsible for studies, construction, and maintenance. Grant funding from the Government o f Japan. Three calls for bids issued; no contract awarded, bids having been over the reference cost. New negotiations are to be started with Japan and Ecuador. . Improvement o f Sullana-Puente Macara Highway, Dv. La Tina-La Tina feeder road (1 5.3 km). Part o f the “National Highway System Serviceability Improvement” project funded by the fourth IDB loan. The viability assessment required under the National Public Investment System i s under way. . Sullana-Puente Macara Highway (128 km). Periodic maintenance work in progress, cost U.69 million. Work slated for completion in January 201 0.
Road Corridor No 4:
Chamaya-Jaen-San Ignacio-Pte. Integracion Highway. Final studies are being produced for the Pericos (Puerto Cirue1os)-San Ignacio segment (55.5 km) and San Ignacio-Puente Integracion segment (48 km). Construction scheduled to start in second quarter 201 0.
. El Reposo-Durand-Sarameriza Highway, El Reposo-Durand section (89.24 km). Ongoing asphalt paving (Km O+OOO - Km 13+380) and double layer surface treatment (Km 13+380 - Km 89+240), total cost Y.232.6 million. At August 31, 2009 work i s 85.08% finished; expected completion January 20 10.
Duran-Urakusa Highway (1 20 km) serviceability. Serviceability improvement study under way; engineering study for the section (Km 87+740 - Km 208+670) completed.
BORDER CROSSINGS
67. To facilitate trade and deepen cross-border integration, countries need border crossings that reduce crossing time and costs. A diagnostic assessment o f the state o f al l Peruvian border crossings i s under way to identify current issues and come up with proposals to move ahead with the planned crossings and modernize current border posts, for which IDB and European Union cooperation support has been secured.
TRAFFIC ACCIDENT DATABASE
68. In light o f the high accident rates on Peru’s highways and city streets and as one component o f the sectoral policy to improve road safety conditions, transport authorities are addressing the need for substantive improvements in traffic accident data through a proposal for a traffic accident database that would take in national roads and highways and Lima streets.
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69. This f i t s into one o f the mandates o f the recently created Superintendency o f Overland Transport o f Persons and Goods (SUTRAN), a specialized oversight agency for overland transport services, which i s tasked with “ ... operating a current registry o f vehicles involved in accidents on national roads ...” At a first stage this information, along with L ima city accident data, will be entered into the proposed accident database, which ultimately would be scaled up to take in other Peruvian road systems and cities.
70. The database proposal should be tied in to the project to create the Transport Observatory. The plan in that regard i s to engage consultant services to determine the data to be compiled, mechanisms and sources; design the entity and establish i t s mission, size, equipment requirements, legal features and other requirements, and make recommendations as to i t s place within the transport sector’s organizational structure.
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Annex 3: Major Related Projects Financed by the Bank and/or other Agencies PERU: Safe and Sustainable Transport Project
1. The World Bank and the IaDB have a long history o f cooperation to support the GoP’s reforms in the transport sector. This partnership has been particularly successful in the area o f rural transport and decentralization, with three rural roads operations being implemented over the past 15 years. More recently, the Regional Transport Decentralization Project was approved to support a more efficient and decentralized management o f secondary roads at the regional level, following a new wave o f decentralization reforms that were passed by the Peruvian administration in 2002. Finally, the Bank i s also active in urban transport with the Lima Urban Transport project, s t i l l under implementation and for which an additional financing i s envisaged.
Sector Issue World Bank-financed
Contribute to territorial development and to the fight against rural poverty in the Borrower’s territory by improving access o f rural households and entrepreneurs to goods, social services and income-generating opportunities through reduced transport costs and better rural transport infrastructure.
Improve - through decentralization at the regional level - the prioritization, efficiency and effectiveness o f regional transport interventions and, hence, their contribution to regional development and policy reduction in Peru.
Assist the Municipality of Metropolitan Lima in enhancing the economic productivity and the quality o f l i f e within the Lima Metropolitan area through improving mobility and accessibility for the metropolitan population, especially in the peri- urban poor neighborhoods by establishing an efficient, reliable, cleaner and safer mass rapid transit system.
Pioneer public private partnerships in Peru for infrastructure projects. The GOP has identified enormous infrastructure investments, required to bring average coverage levels to adequate standards, decrease coverage gaps and inequity, and improve the country’s competitiveness by reducing logistical costs.
Improve the access of rural poor to basic social services, market integrating infrastructure and income-generating activities with gender equity, to help alleviate rural poverty and raise the living standards o f rural communities
Project
WB/IaDB: Decentralized Rural Transport Project
WBAaDB: Regional Transport Decentralization Project
WB/IaDB: Lima Urban Transport Project
Guarantee Facility Project
WBIIaDB: Second Rural Road Project
Latest Supervision (ISR) (W (DO)
S S
MU MU
S MS
Approved in April 2005; not effective yet
ICR ratings: Outcome: HS Bank perf.: HS Borrow. Perf.: HS
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Sector Issue
Provide a well integrated and reliable rural road system through rehabilitation and maintenance o f rural roads and key connecting links to the primary road system.
1) Rehabilitate essential transport infrastructure; (2) assist Government in implementing institutional reforms in the road and railway sub- sectors, aiming at improved resource use and sustainable development; and (3) lay the ground work for future projects focusing on strengthened road management, increased private participation in the transport sector, and improved mobility o f the poor.
Other Development Agencies
Objectives: 1 ) maintenance o f the paved road network, 2) rehabilitation o f the non paved road network with low-volume transit, 3) improvement o f critical sections. Components: 1 ) Rehabilitation o f the non paved road network, 2) Rehabilitation o f the paved road network, 3) Maintenance o f the rehabilitated road segments, 4) Institutional strengthening, including training in road management systems, maintenance management systems, and technical aspects related to the proposed works.
The Northern Amazon Hub i s an IIRSA integration corridor between the port o f Paita in the Pacif ic and the river Port in Yurimaguas over the Huallaga river that connects to the Amazon river. The project wi l l be carried out under a concession scheme and the construction payments wil l be deferred in annual payments once the construction period i s finished. To guarantee better financial conditions, the GoP wil l provide a guarantee from IDB to cover the annual payments for construction.
Finance rehabilitation and maintenance activities on selected segments o f the national road network and provide technical support to MTC
Expansion and upgrade o f 180 km highway tol l road system.
Project
WBllaDB: Rural Road Rehabilitation and Maintenance Project
Transport Rehabilitation Project
IaDB: National Highway System Serviceability Improvement Program (US$lOO million)
IaDB: Guarante for IIRSA Northern Amazon Hub (US60 million)
laDB: Road Rehabilitation and Maintenance Project (series o f 3 projects : US$2 1 Om, US$252m, US$150m)
IaDB: Red Vial 5 Toll Road (US$l8m)
Latest Supervision OSR)
IEG ratings: Outcome: HS Bank perf.: HS Borrow. Perf.: HS
ICR ratings: Outcome: S Bank perf.: S Borrow. Perf.: S
Approved Dec 18,2006
Approved Feb 1,2006
Respectively approved Nov 27, 1991,Nov23, 1994and Dec2 1998
Approved Sep 24,2003
45
Finance additional works IIRSA Sur (2)
Finance additional works IIRSA Sur (1)
Finance Segment 4 of IIRSA Sur
Tren Electric0 (Tramo Puente Atocongo - Hospital Dos de Mayo)
46
CAF (US$300 million)
CAF (US$300 million)
CAF (US$90 million)
CAF (US$300 million)
Approved Jan 9,2009
Approved Dec 19,2008
Approved Nov 28,2006
Approved Aug 18, 2009
Annex 4: Results Framework and Monitoring PERU: Safe and Sustainable Transport Project
Results Framework
PDO
Improve passenger and freight transport conditions in an efficient and safe manner along national road corridors that are essential to Peru’s competitiveness, in particular those included in the Govern men t ’ s st imu Ius package in response to the global crisis.
Intermediate Outcomes
Improving the quality o f selected national roads, through the implementation o f a rehabilitation program and the piloting o f long-term, performance-based rehabilitation and maintenance contracts (CREMA)
Project Outcome Indicators
Decreased vehicles’ operating costs on rehabilitated and upgraded roads Decreased travel times on rehabilitated and upgraded roads Proportion o f the national road network in good conditions (core indicator) Proportion o f the national road network receiving permanent and efficient maintenance through either concession or long-term performance-based maintenance contract (CREMA or Proyecto Peru) Proportion o f national roads that are paved (including low-cost paving)
Proportion o f the iRAP corridors labeled at least 3- stars for road safety
Intermediate Outcome Indicators
0 km o f road rehabilitated to agreed standards (core indicator) km o f road rehabilitated and maintained using the CREMA approach employment opportunities created (annual equivalent)
0
Use of Project Outcome Information
Assess benefits o f project’s road investments for road users
Assess impact o f project’s road investments on efficiency o f transport system Evaluate progress on quality o f national road assets’ stock
Evaluate improvements in road assets’ management for the national road network
Evaluate improvement of national roads’ standards to improve Peru’s situation relative to benchmark countries Evaluate improvement o f road safety conditions on corridors assessed by iRAP
Use o f Intermediate Outcome Monitoring
Measure implementation progress for road rehabilitation
Assess implementation progress for CREMA pilot
Evaluate contribution o f rehabilitation program on :mployment generation
47
Scaling up sound asset management practices, through upgrading o f road conditions, using low-cost paving technologies, combined with effective maintenance
Supporting the reduction o f road traffic fatalities and injuries (and resulting economic losses), on selected national roads, through the development o f “safe corridors”
Strengthening MTC’s institutional framework, with a view to improve the effectiveness o f the Government’s stimulus package
0 km o f roads maintained to agreed standards within a performance-based maintenance approach
0 employment opportunities created (annual equivalent)
0 proportion of the iRAP recommendations implemented
0 km of “safe corridors”
improved MTC capacity to handle social and environmental safeguards and improved coordination between DGASA/OGPP/Provias Nacional new MTC’s GIS fully operational with updated information on condition o f road network road crashes’ database improved and regularly update through coordination between MTC, Police and other relevant institutions lead road safety agency clearly established and fully operational
Measure implementation progress for road upgrading and maintenance
Evaluate contribution o f maintenance program on employment generation
Verify actual implementation o f iRAP recommendations
Measure MTC’s demonstrative road safety pilot program
Assess streamlining of social and environmental dimensions in road assets’ planning and management
Evaluate actual implementation o f MTC’s main information system
Verify improvement o f road safety statistics through improved inter-institutional coordination
Evaluate emergence o f a champion for road safety
Arrangements for Results Monitoring
1. Outcomes and results for most o f the project’s activities will be primarily monitored by the lead implementing agency. Provias Nacional will in particular report on the number o f kilometers o f roads rehabilitated or upgraded, and maintained, as well as on the employment opportunities generated.
2. Road asset management indicators, such as the proportion o f the national network in good conditions, the proportion o f this network receiving adequate maintenance or the proportion o f the national roads that are paved, wil l be monitored by Provias Nacional, in close
48
coordination with the Planning o f i t s 4‘h component, includes MTC’s information systems.
and Budget General Office (OGPP) o f MTC. The project, as part I significant resources to improve the quality and reliability o f
3. surveys to be performed by a specialized consulting firm.
The benefits o f road improvements for road users will be measured through specific user
4. Particular attention will be given to the monitoring o f the benefits o f the CREMA approach piloted under component 1, in order to facilitate the dissemination o f this experience, as well as to furthering the monitoring instruments already in place for the low-cost paving pilot, initiated by the Proyecto Peru program.
5. improve the existing road crashes’ database.
For road safety indicators, resources have been included in component 4 in order to help
6. Although Core Indicators are not mandatory for Bank operations in IBRD countries such as Peru, the proposed results framework includes two transport core indicators that are directly linked to the project’s development objectives. Those are: (i) km o f roads rehabilitated; and (ii) share o f the national road network in good conditions.
49
d d d
N
0 0 0
c c c
W W I) 0 O O
vi m = % 3
? N N
00 d
9 XI e 00
0 0 m
= m
e e 0
3 5 ; '5 z e o a
0 3 %
0 0
Annex 5: Detailed Project Description PERU: Safe and Sustainable Transport Project
Road Cochabamba - Chota
Component 1: Road rehabilitation and upgrading and CREMA pilot (estimated cost: US$ 177.4 million o f which US$ 103.3 million would be financed by the Bank loan).
1. This component would help finance MTC’s road rehabilitation and upgrading program for 2010 and help accelerate these investments as part o f Peru’s stimulus package. The proposed project i s expected to contribute to finance rehabilitation and upgrading works for at least four sections o f the national road network. However, depending on the availability o f resources and o f the evolution o f MTC’s priorities, additional works from MTC’s road rehabilitation and upgrading program for 2010 could be added or substituted to the proposed l i s t o f four road sections, provided these additional works comply with the project’s eligibility criteria and that Bank procedures are followed.
29.7 I Q2/2010-Q3/2011 I 35.9 I 247
2. The initial four road sections that would be rehabilitated and upgraded total 183.3 km. The total amount o f works has been estimated to US$177.4 million (ie. an average rehabilitation cost o f US$968,000 per km).
3. The proposed l i s t o f four road sections belong to a broader road rehabilitation and upgrading program that the MTC i s planning to implement in 2010. This program currently includes eight national road corridors, totaling sixteen sections and representing 1,024 km. The total amount o f the works has been estimated to US$811.5 million (ie. an average rehabilitation cost o f US$811,500 per km).
Section km 78.5 - 172,4 *
52
Section Kishuara - Sahuinto bridge * Section Chongoyape - Llama * Section Llama - Cochabamba * Section Cochabamba - Chota *
61.7 4 2 12010 - 4212012
48.7 4 2 12010 - 441201 1 48.9 4 2 12010 - 441201 1 29.7 64.7 43 12010 - 4412011
54.0 4 2 12010 - 4212012
42.2 TOTAL 811.5
Corridor Chongoyape - Cochabamba - Cajamarca
4 2 12010 - 431201 1 Corridor Huaura - Sayan - Churin * Corridor Trujillo - Shiran - Huamachuco
Section Dv. Otuzco - Callayacullan * Corridor Chanchamayo - Vi l la Rica
Section Pte Reither - Pte Paucartambo - Villarica 4 2 I2010 - 441201 1
4. The selected road corridors have been prioritized in MTC’s national road planning instruments. MTC’s multi-annual rehabilitation program for 2009-20 1 1 includes 22 road corridors, totaling 36 sections and representing 1,915 km (7 percent o f the national road network and 17 percent o f the paved portion o f this network). The works for several o f these corridors have started in 2009, prior to the proposed project, and are outside o f the project’s scope. Instead, the proposed project focuses on the 201 0 rehabilitation program, to support the implementation o f Peru’s stimulus package that same year. 13 o f the 16 identified sections have been prioritized in the GoP’s stimulus package and published in Emergency Decree No. 010-2009. The remaining sections correspond to road corridors that had been declared a priority prior to the preparation o f the stimulus package.
5 . A CREMA pilot wi l l be initiated on at least one transport corridors. The CREMA pilot would involve the rehabilitation o f a paved road section and the maintenance o f that section for a period of 5 to 10 years. Contracting arrangements would be made, based on the Bank experience with CREMAs in Brazil and Argentina (see Box).
77.1
59.0 59.2 35.9 104.4
68.3
39.4 1,023.7
6. During project preparation, a video conference was held involving the Bank specialists involved in the Argentina CREMA program and Provias Nucional, during which issues in the contracting arrangements such as length o f contract, transfer o f risk and payment methods were discussed and are to be taken into consideration during project implementation. The envisioned CREMA in Peru will differ from the Brazil and Argentina experiences in that they plan to build on the successful program o f microenterprises for routine maintenance to which routine maintenance activities would be outsourced.
7. The cost o f design studies and supervision activities i s not included in this component which would only finance works. Studies and supervision wi l l be financed exclusively by MTC.
8. The program only includes rehabilitation works on existing national roads. Larger scale activities - such as construction or major improvement works - are not eligible because they! belong to a different investment program o f Provias Nacional.
9. Design studies for the four selected works have been completed, as well as the safeguards’ instruments (Environmental Assessment, Resettlement Action Plan and, when applicable Indigenous Peoples’ Plan).
53
Box: the experience o f CREMA contracts in Brazil and Argentina. CREMA contracts bundle rehabilitation works together with 5 to 10 years o f maintenance (periodic and routine). It i s a result-based contract: the contractor i s evaluated on the quality o f the road, regardless o f the inputs that are needed to upgrade and keep it in such conditions. Moreover, the contractor has the flexibility to determine what technology will allow to minimize the overall cost o f rehabilitation and maintenance (a “cheaper road” will require more maintenance but seeking to reduce too much maintenance needs will also require a much more expensive initial investment). Implementing CREMA contracts require finding the right contractual arrangements but also changing the way the Ministry o f Transport i s supervising the works.
As the CREMA system has been remarkably successful, particularly in improving the efficiency and public accountability of road maintenance expenditures, it i s enjoying wide acceptance in the LAC region and elsewhere, as i s seen with the introduction o f similar programs in Chile, Brazil, Uruguay, and through World Bank programs in sub-Saharan Africa. Two countries in LAC have moved ahead quite significantly with a CREMA program and could draw important lessons for Peru:
Argentina, emerging from depths o f unattended infrastructure, backlogs in early 90s, i s now regarded as one o f the highest performing countries in the region in road asset management. Since the early nineties, through reform and technical assistance as well as financing from the Bank, Argentina has successfully introduced a CREMA program, and now has the most extensive experience and coverage (1 1,OOOkm of network covered, with individual contracts of 100-3OOkm).
The road contracts include rehabilitation and maintenance over a period spanning 5 years, as well as provisions for emergency works in the event o f unforeseen events. Through the CREMAs risk and responsibility are transferred to the private sector (including requirements for compliance with environmental and social concerns). The roads are inspected regularly, contractor compliance assessed and payments delivered. As the contractor i s evaluated on the performance o f the asset, the standards must be clearly defined in the contract, and must be measurable to allow for objective evaluation. Some examples o f measurable performance indicators that contribute to user satisfaction, protection and costs: Roughness (vehicle operating costs); Potholesicrackingirutting (ride quality); Surface friction - (safety); Unobstructed drainage system (integrity o f structure, safety); Retro-reflexivity o f road signs & markings (safety); Removal o f fixed objects at roadsides (safety), etc.
The communities in the vicinity o f the road sections maintained through the CREMA process benefitted from employment generated due to the maintenance works required: about 5,000 jobs have been generated across all regions, every year. The CREMA programs also allow for the securing o f funds for road maintenance - which are always vulnerable when governments change fiscal policies in periods of crisis. Finally, the risk o f cost overruns was substantially reduced as the contracts are set at a fixed price -the cost overruns were found to be less than 3% (attributable mainly to climatic and force majeure events) - much lower than the 15% cost overruns witnessed in traditional road contracts.
Brazil has introduced the CREMA model in the early 2000’s. The use of this contract management model has progressively spread to reach, as o f today, 1/3 of the federal network and more than 10% o f the states’ networks, and expectations are for higher figures in the short run. The model was notably expected to bring rationalization, accountability and credibility to the sector at a moment when road maintenance, though a crucial issue when considering the networks’ characteristics and conditions, was not given sufficient consideration by the federal and state levels.
The comparison of output performance based contracts to the traditional input-admeasurements approach, showed that these contracts brought an overall improved efficiency to the road sector which translated to better road conditions at lower costs for the governments and reduced management burdens on the road administrations.
0
10. This component will also finance a strategic environmental evaluation o f the package o f works to be implemented under the proposed component. The objective o f this evaluation i s to assess what would be the cumulative environmental impact o f MTC’s rehabilitation program for 2010, and provide recommendations for future design studies, as well as for supervision activities and works’ management. This evaluation will be performed in 2010. Draft terms o f
54
reference have been prepared and are included as annex to the project’s Environmental Assessment Report. The estimated cost o f the strategic environmental evaluation i s U S $ l 00,000.
11. According to the latest disbursement profile for this component, most o f the amount financed by the proposed IBRD loan should be disbursed in 2010.
US$ million
Component 2: Road Maintenance (estimated cost: US$ 264.1 million of which US$ 35.0 million would be financed by the Bank loan).
2010 201 1 2012 I 44 ’ and beyond Q1 42 43 44 41 Q2 43
12. This component will help finance MTC’s outsourced, performance-based maintenance program in 2010. This program should help secure maintenance for 2,096 km o f national roads (7.9 percent o f the total national roads network).
13. At least 10 new maintenance contracts are expected to be launched in 2010 and would be eligible under the proposed component. The 20 10 program includes 6 periodic maintenance contracts and 4 performance-based contracts.
Table: Execution Schedule (2009-201 11
Total expected execution
Sub-component 2.2. Sub-component 2.1.
Cumulated execution WB loan disbursements
Cumulated disbursements
0 41.2 9.9 25.1 25.2 31.9 33.7 40.4 56.7 0 0 5.8 21 6.3 27.8 29.6 36.3 0 0 41.2 4.1 4.1 18.9 4.1 4.1 4.1 56.7 0 41.2 51.1 76.2 101.4 133.3 167 207.4 264.1 0 20.6 4.95 9.45 0 0 0 0 0 0 20.6 25.55 35 35 35 35 35 35
14. While the l i s t o f works expected to be financed under this component corresponds to the latest available information about the 201 0 budget for road maintenance (PEN305 mi l l ion envisaged), some modification or substitution could be made, on a case-by-case basis and subject to the Bank prior review o f eligibility conditions (technical, economical, fiduciary, safeguards). This could happen, for example, if the 2010 budget for MTC’s maintenance program was to be modified.
15. Routine maintenance activities are expected to be outsourced by private contractors to microenterprises constituted from poor men and women living aside from the rehabilitated roads.
Sub-Component 2.1. Periodic Maintenance. (estimated cost: US$ 126.7 million o f which US$12.0 million would be financed by the Bank loan).
16. This sub-component will finance periodic maintenance contracts on selected national roads. Provias Nacional i s planning to contract out in 2010 the periodic maintenance o f 846 km o f national roads (3.2 percent o f the total national road network and 6.3 percent o f the paved portion o f this network). These activities would be implemented under 6 potentially eligible contracts, for a total amount o f US$126.7 million. The average unit cost i s US$150,000 per km.
55
Table: Provias Nacionaf’s Periodic Maintenance Program to be Contracted in 2010.
Panamericana Norte (km 586.6 - 736.6)
Panamericana Norte (km 886.6 - 1033.4) Panamericana Norte (km 736.6 - 886.6)
TOTAL
27.3 Q1- 2010 325 27.3 Q1-2010 94 26.7 Q1 - 2010 88 126.7 846
Sub-Component 2.2. Performance-Based Maintenance Contracts. (estimated cost: US$ 137.4 million o f which US$23.0 million would be financed by the Bank loan).
17. on selected national roads. Roads can either be paved or unpaved.
This sub-component would finance mid-term, performance based, maintenance contracts
18. In the case o f unpaved roads, the proposed interventions will be handled under a specific program o f Provias Nacional named “Proyecto Peru”. This program has been testing low-cost paving technologies bundled together with a 5 year maintenance program, on l o w traffic national roads. Proyecto Peru i s currently maintaining about 3,233 km o f national roads. An additional 3,263 km are scheduled to be contracted by the end o f 2009 and M T C i s planning to expand this program so that 11,694 km (44 percent o f the national road network or about 78 percent o f the unpaved portion o f this network) would be covered under this modality by the end o f 201 1. When taking into account the concessioned network, i t i s estimated that 89 percent o f the national road network could have an efficient performance-based maintenance mechanism in place by the end o f the proposed project (2012). Road corridors included in the Proyecto Peru have been prioritized according to their importance to connect production areas with national and international markets. The complete l i s t o f these corridors has been published in Ministerial Resolutions No. 223-2007-MTC-02 and 408-2007-MTC/02. The estimated unit cost for Proyecto Peru works amount to US$98,300 per km (for 5 years). This average cost can be discomposed in US$22,300 per km for the f i rst year and US$19,000 per km for subsequent years.
19. In the case o f paved roads, the proposed interventions bundle together one periodic maintenance, emergency maintenance and routine maintenance for a 5-year period. Provias has been planning to implement 14 o f such maintenance contracts, for a total road length o f 4,886 km. Four o f them have been procured in 2009, prior to the proposed project and would therefore not be eligible.
20. The initial 2010 budget does not currently include budget resources for additional “Proyecto Peru” contracts. However, the 20 10 budget does include 4 performance-based maintenance contracts on paved roads that would be eligible to the proposed sub-component, with a total cost o f US$137.4 million, for 1,384 km. The unit cost (for 5 years) i s US$lOO,OOO per km.
2 1, Additional performance-based maintenance contracts (in particular under the modality o f “Proyecto Peru”) would be eligible if additional budget becomes available for MTC’s 20 10 maintenance program, subject to conformity with the agreed operational procedures.
56
Total estimated cost (5 years,
US%m)
Beginning date Length for works (W
El Reposo-Duran y Chamaya-Jaen-San Ignacio - La Balza Pta. Pejerrey-San Clemente-Ayacucho Ciudad de Dios-Cajamarca, Chilete-San Pablo and Trujillo-Lim. Regional Lambayeque
Pun0 - Desaguadero, Calapuja - L a Raya, Ilave - Mosocruz
22. The cost o f design studies and supervision activities i s not included in this sub- component which would only finance works. Studies and supervision will be financed exclusively by MTC.
23.5 Q1 -2010 245 40.2 Q1 -2010 402 38.0 Q1 -2010 3 80
35.8 Q1 - 2010 357
Component 3: Road Safety Infrastructure (estimated cost: US$20 million of which US$ 10 million would be financed by the Bank loan).
23. This sub-component would help finance priority c iv i l works on about 3,000 km o f national roads that have been selected for their high levels o f road crashes and for which the Ministry o f Transport and Communications decided to launch a “safe corridors’ program”. The road safety characteristics o f these roads have been assessed, using the iRAP methodology and a series o f corrective investments has been identified.
24. The top five countermeasures, with the greatest potential for reducing fatalities and serious injuries are (i) signalized crossing (161 sites); (ii) shoulder sealing o f less than 1 meter (398 km); (iii) shoulder sealing o f more than 1 meter (4 km); (iv) refuge island (403 sites); and (v) traffic calming (55 km).
25. The M T C i s planning to implement al l iRAP recommendations by either processing addendums to existing contracts, including them in the scope o f future maintenance or rehabilitation contracts (some o f which would be financed under components 1 and 2 o f the proposed project) or through separate, specific contracts (to be partially financed under this subcomponent).
26. case-by-case basis, to be approved by the World Bank.
Other road safety-related works could be financed by the proposed components, on a
Component 4: Institutional Support and Transport Regulation (estimated cost: US$ 3.3 million of which US$ 1.6 million would be financed by the Bank loan).
27. This component would finance a comprehensive technical assistance and institutional strengthening package for Provias Nacional (subcomponent 4.1) and other areas o f the M T C (subcomponent 4.2). The objective i s to improve the institutional performance o f these agencies so that they can be the most efficient and effective in implementing the Government’s stimulus package. The eligible activities, to improve capacity for management, monitoring and evaluation, are grouped under four overall themes: (a) improvement o f information management systems
57
(such as, road and bridge asset management, emergency and incident management, contracts management); (b) support for planning systems; (c) improvement o f road safety management and transport regulation systems; and (d) capacity building for improved management o f environmental and social safeguards.
Subcomponent 4.1. Institutional Support for Provias Nacional (estimated cost: US$ 1.34 million of which US$0.67 million would be financed by the Bank loan).
28. This subcomponent wi l l be implemented by Provias Nacional and wi l l support activities aiming to improve road asset management practices, bring innovation and build up Provias Nacional’s knowledge base. Examples o f activities that would be eligible under this sub- component include: (i) designing and implementing a bridge management system (estimated cost: US$500,000); (ii) implementing a pilot program on improving the right-of-way on national roads, and possibly revise the applicable normative framework (estimated cost: US$200,000); (iii) improving the existing system to attend road emergencies (estimated cost: US$200,000); (iv) road safety auditing and scaling up o f the iRAP assessments (estimated cost: US$250,000); (v) improving contracts’ management and monitoring o f results (estimated cost: US$50,000); (vi) developing technical standards applicable to urban and peri-urban roads (estimated cost: US$70,000); and (vii) strengthening Provias Nacional’s capacity for environmental and social safeguards’ management (estimated cost: US$70,000).
Subcomponent 4.2. Institutional Support for other areas o f the MTC (estimated cost: US$1.91 million o f which US$0.96 million would be financed by the Bank loan).
29. This subcomponent i s to be implemented by MTC’s Office o f General Administration o f (OGA in Spanish). MTC entities to be supported as part o f this sub-component would include, inter alia: the General Unit for Planning and Budget (OGPP in Spanish) and the General Directorate for Social and Environmental Safeguards (DGASA in Spanish).
30. Examples o f activities that would be eligible under this subcomponent include:
(a) for the OGPP: Information systems that relates to strategic planning in the transport sector, including (i) original-destination surveys for freight transport (estimated cost: US$550,000); (ii) updating o f the Ministry’s GIs, with the acquisition o f a new cartographic database (estimated cost: US$550,000); (iii) information system for interprovincial passengers’ transport (estimated cost: US$150,000); (iv) design o f a safe corridors’ pilot (estimated cost: US$250,000); and (v) design and implementation o f the national registry o f road crashes, in coordination with other relevant institutions (eg. the Police and the Ministry o f Interior, estimated cost: US$250,000).
(b) for the DGASA: Activities needed to systematize and improve the management o f social and environmental issues. This includes in particular: (i) Systematization o f the environmental and social instruments; (ii) streamlining the exchange o f information between DGASA and other areas o f the Ministry, particularly information that could be included in the GIS o f the MTC and be used for strategic planning; (iii) improving coordination between DGASA and Provias Nacional, particularly regarding the
58
environmental categorization and the scope o f design studies, so that social and environmental issues can be addressed sufficiently early on in the project cycle; and (iv) training o f MTC’s c iv i l servants on environmental and social safeguards (including resettlement and indigenous peoples), as well as training o f consultants and contractors. A preliminary budget for some o f these activities has been prepared (see Table).
Activities 2010 2011 budget budget
40,000 Strategic Environmental Assesment 100.000 Systematization o f the environmental and social management instruments
Total
100.000 40,000
Training o f M T C staffs Training o f the “Zonales” Training o f consultants, contractors and
14,000 14,000 28,000 12.000 12.000 24,000 8,000 8.000
Component 5: External Auditing (estimated cost: US$0.2 million of which US$ 0.1 million would be financed by the Bank loan).
other stakeholders Preparation o f a toolkit for resettlement planning
Total
3 1. This component will finance the project’s external audit.
50,000 50,000
174,000 26,000 250,000
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Annex 6: Project Costs PERU: Safe and Sustainable Transport Project
Local Foreign Total
$million $million $million Project Cost By Component and/or Activity us us us
~~~~ ~ ~ ~ ~~ ~ ~ ~~ ~~ ~~~ ~ ~~~~~ ~~ ~
Local Foreign Total Project Cost By Component and/or Activity us us us
$million $million $million
Component 1: Road rehabilitation 100.4 77.0 177.4 Component 2: Road upgrading and maintenance 200.0 64.1 264.1 Component 3: Road safety infrastructure 15.0 5.0 20.0 Component 4: Institutional support and 2.4 0.9 3.3 transport regulation Sub-Component 4.1 : asset management o f national 1 .o 0.4 1.4 roads Sub-Component 4.2: other institutional support and 1.4 0.5 1.9 transport regulation activities Component 5: External auditing 0.2 0.2
Total Baseline Cost 3 18.0 147.0 465.0 Contingencies (4%) 13.0 6.0 19.0
Total Project Costs 331.0 153.0 484.0
Total Financing Required 331.0 153.0 484.0 Front-end Fee 0 0 0
60
Annex 7: Implementation Arrangements
PERU: Safe and Sustainable Transport Project
1, Transport and Communications:
The proposed project wi l l be implemented by two separate entities o f the Ministry of
(a) Provias Nacional wil l implement components 1, 2, 3 and sub-component 4.1. Provias Nacional is, within MTC, the agency in charge o f managing the national road network. The proposed project wi l l finance three investment programs which fall under Provias Nacional’s responsibilities (rehabilitation o f national roads, outsourced maintenance on non-concessioned national roads and road safety improvement works), as well as specific institutional strengthening and technical assistance activities related to the sound asset management o f national roads. Provias i s a highly experienced agency with a satisfactory track record both in terms o f working with multilateral organizations (IaDB, CAF, WB) and in terms o f budget execution.
(b) MTC’s Office of General Administration (OGA) wi l l implement sub-component 4.2. The OGA i s a small unit which i s in charge o f handling fiduciary activities (eg. procurement o f goods and consultancies) for other general directorates o f MTC.
2. The implementation o f sub-component 4.2. wi l l require very close coordination with the benefiting entities and General Directorate involved (OGPP, DGASA, Office o f the Vice- Minister o f Transport). This coordination will be daily led by the OGPP as the entities in charge o f managing planning and strategies in MTC. The Vice-Minister o f Transport wi l l validate strategic choices to be taken for the implementation o f this sub-component. Since 2009, the Vice-Minister o f Transport i s also the President o f the National Road Safety Council.
3. A l l activities to be financed under the proposed project wi l l be included in the MTC’s budget and wi l l have to follow existing procedures in vigor in Peru to control the quality o f public expenditures. A particularly important step i s the validation o f individual road improvement investments by the National Public Investment System (SNIP in Spanish) o f the Ministry o f Economy and Finance (MEF). Most o f the works to be performed in 2009 as part o f component 1 have already been cleared by the SNIP.
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Annex 8: Financial Management and Disbursement Arrangements
PERU: Safe and Sustainable Transport Project
Executive Summary
1. An initial Financial Management Assessment - FMAI2 o f the project’s implementing entities Provias Nacional and the Office o f General Administration MTC’s O G A was conducted as part o f a preparatory mission conducted from May 4 to 8, 2009. The objective o f the FM assessment was to determine the entities’ capacity to implement the project, manage all project proceeds and produce timely reliable financial reporting and withdrawal applications for Bank special purposes. The FMA has been updated during the pre-appraisal mission o f July 13-18, 2009 and after subsequent missions conducted from September 9 to 18 and October 23, 2009.
2. The proposed project wil l be partially financed by the Bank and implemented by the Ministry o f Transport and Communications through Provias Nacional and MTC’s OGA (in coordination with other M T C units - OGPP, DGASA and Vice-Minister o f Transport). The project i s part o f a broader program also partially financed by the IaDB. Components 1, 2, 3, 5 and sub-component 4.1 which represent almost entire total loan proceeds will be implemented by Provias Nacional while the MTC’s O G A will implement the sub-component 4.2, which comprise institutional strengthening activities. In this regard, Provias Nacional will be the project implementing entity and main responsible for project execution with a coordinating and oversight role over MTC’s OGA. As such, Provias Nacional will be responsible for the consolidation o f the financial and disbursement information o f the whole project. In addition to this, the IDB and the Bank have worked joint ly to define the most appropriate financial management arrangements and harmonized financial reporting and auditing arrangements.
Overall Conclusion
3. Given Provias Nacional’s experience in implementing investment projects financed by multilaterals (IaDB and the Bank13), but also by other bilaterals (CAF, Japan Bank International Corporation), and other considerations such as: (i) well staffed Finance Department; (ii) reliable information systems such as the National Integrated System o f Financial Management - SIAF, and the complementary information system SIGA, which will be adjusted to project information needs; the Bank fiduciary experts concluded that Provias Nacional meets the minimum financial management requirements and therefore, implementation arrangements wil l rely on i t s existing installed capacity.
4. Taking into account that in Peru budget preparation and execution follows an orderly, reliable and transparent process with commitments and payment process conducted through the use o f the country integrated financial management system - SIAF and considering that loan proceeds will be reimbursed to the Government on the basis o f pre-financed expenditures under specific budget lines for MTC, inherent and control risk are rated as Moderate (M) and the
’ 2 Conducted in accordance with OP/BP 10.02 and the Manual on Financial Management Practices in World Bank- Financed Investment Operations. ’3 Transport Rehabilitation Project - IBRD 371 7, implementedfrom I994 to 2000
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Financial Management total risk i s considered Moderate. Nevertheless the Financial Management assessment has identified some areas which require to be mitigated for project readiness. On such basis, the most crucial actions which require to be completed by Provias Nacional include: (a) completion o f the final Operational Manual; and (b) adjustments to the accounting information system to tailor project reporting requirements.
Description of Risk
INHERENT RISK Country Level The government priorities could change at any time next year especially given the upcoming election year that could impact the resources allocated for this project during implementation.
Country Public Financial Management Background
Risk Mitigating Measures Residual Condition of Risk Effectiveness (Ym) Rating
M
An ambitious and comprehensive M N/A institutional strengthening package has been designed in order to address institutional shortfalls.
5 , Peru’s Public Expenditure and Financial Accountability (PEFA) report, published in June 2009 concluded that overall Public Financial Management in Peru is functioning well and that it i s in l ine with international best practices. In this regard, the country’s budget preparation and execution follows an orderly, reliable and transparent process. Moreover, the country has been implementing a series o f Public Financial Management reforms in the last few years, including the implementation o f the Treasury Single Account. Additionally, commitments and payment processes are conducted through the use o f the country integrated financial management system - SIAF which has proved to have adequate degrees o f transparency. Thus, there i s a degree o f confidence for the Bank that pre-financed expenditures to be reimbursed under the project, through loan proceeds, will be implemented following a credible financial management process applicable in the country and that, therefore, the fiduciary risk i s mitigated.
Risk Assessment and Mitigation
6. The following risk assessment comprises a summary o f the issues considered for the project as a whole. As mentioned above, the Financial Management risk rating for this project has been assessed as Moderate. Once there i s evidence that the mitigating measures have been implemented and are working as intended, the level o f Financial Management risk for this project will be re-assessed and revised accordingly.
63
Entity Level Sub-component 4.2 o f the project will be implemented by MTC’s OGA (in coordination with other units within the Ministry o f Transport); however, the OGA does not have experience implementing investment lending projects.
Project Level Project implementation (delays on disbursements). could be hinder by lack o f coordination between Provias Nacional and MTC’s OGA CONTROL RISK Budgeting: Budget ceiling for each o f the financed components, under the project, could be reduced or not approved to be executed as expected during the l i fe o f the project. Accounting and Internal Control
Funds Flow: There i s a risk o f (i) duplication o f expenditures when reported to the Banks; and (ii) reporting o f ineligible expenditures.
0 Provias Nacional will be the main responsible for project implementation and as such will have a coordinating and oversight role over MTC’s OGA.
0 The Bank will carry out supervisions not only to Provias Nacional, but also to the MTC’s OGA during project implementation.
Appropriate roles and responsibilities o f staff under each implementing entity are reflected in the Operational Manual.
The Operational Manual will include clear responsibilities and monitoring role o f project execution. Provias Nacional will coordinate budgeting status, on a timely basis, with MEF.
Governmental budget classification system and new accounting chart o f accounts has been implemented by Provias Nacional in line with local reforms.
Project Operational Manual will refer to specific Administrative and Functions Manuals of Provias Nacional.
0 The majority o f contracts under component 1 and 2 will be subject to prior review.
Customized SOEs will be accompanied by a detail of contracts status.
Adjustments to the accounting information system to tailor project reporting requirements, including customized SOE will be performed shortly before effectiveness.
M
M
M M
L
M
Adoption of Final Operational Manual by
the Borrower in form and substance acceptable to
the Bank.
Effectiveness cy)
Accounting information system i s adjusted to submit tailor project financial reports and customized SOE, not
later than three months after the Effective Date.
Dated Covenant (Y)
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Financial Reporting: The financial reporting system SIGA requires to be tailored to produce harmonized financial reports for the project.
Auditing: Possible delays contracting a timely audit firm for the project.
Total Risk
0 The project will utilize the National Integrated System o f Financial Management - SIAF and the complementary information system SIGA to adopt harmonized (IaDB and Bank) financial reports and customized SOE for the project.
0 An Information Technology Specialist i s being contracted to adjust SIGA information system.
0 Harmonized audit TORS will be submitted for Bank’s no objection after Loan Agreement signature.
The project will prepare the selection package for appointment o f audit firm and submit to Contraloria General de la Republica with sufficient time to request i t s consent to carry out the selection process and appointment o f auditors for the entire l i fe o f the project.
M
L
M
Audit firm i s appointed not later than six months after the Effective Date or
a later date agreed with the Bank.
Dated covenant Cy)
Strengths and Weakness - Action Plan
7. Provias Nacional is an implementing unit o f M T C which has an extensive experience in the implementation o f projects financed by multilateral organizations such as the IaDB and the Bank and bilateral institutions such as C A F and Japan Bank International Corporation. Furthermore, Provias Nacional has a well staffed Finance Department with qualified and experienced professionals. Moreover it counts with reliable information systems such as the SIAF and the complementary SIGA which will be adjusted for the purpose o f financial reporting for the proposed project. Besides, Provias Nacional has sound internal controls based on administrative and functions manuals.
8. Nevertheless, on the basis o f the assessment performed, the following key actions have been discussed and agreed with Provias Nacional to be completed by the deadlines established in order to declare the project readiness for implementation.
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I# Weakness Require to have o f Operational Manual for the Project.
Accounting information system needs to be tailored to submit financial reporting required for the project purposes.
Appointment o f Auditors
Actionls Prepare Project Operational Manual in form and substance acceptable to the Bank.
Contract Information Technology Specialist to adjust accounting information system in accordance to tailored chart of accounts and harmonized financial reports and customized SOE.
D Adjustments to information system are completed for project implementation.
D Submit harmonized audit TORS on time and send for Banks’ review. Appointment o f acceptable auditors.
Responsible Provias Nacional
Provias Nacional
Provias Nacional
Target Preliminary version October 16, 23 2009
Revised version November 16,2009 Final Operational
Manual adopted by the Borrower
By effectiveness
Information rechnology Specialist
Contracted for November 16,2009
Three months after the Effective Date.
Once the Loan Agreement i s signed.
Six months after the Effective Date or a
!ater date agreed with the Bank
Status Zompletec
2ompletec
Pending
2ompletec
Pending
Pending
Pending
Implementing Entity and Organizational Structure
9. The Safe and Sustainable Transport Project will be implemented by two different entities o f the Ministry o f Transport and Communications, Provias Nacional and MTC’s OGA. Provias Nacional will implement components 1, 2, 3, 5 and sub-component 4.1, which represent almost entire o f the total loan proceeds while the MTC’s OGA will implement the sub-component 4.2 comprised by institutional strengthening activities. The implementation o f sub-component 4.2. will require a very close coordination with other M T C units, such as General Unit for Planning and Budget - OGPP, the General Directorate for Social and Environmental Safeguards - DGASA and the office o f the Vice-Minister o f Transport.
10. Provias Nacional will be the project implementing unit and main responsible for project execution with a coordinating and oversight role over MTC’s OGA. As such, Provias Nacional will be responsible for consolidation o f overall project information, including financial and disbursements information for the whole project.
Provias Nacional
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1 1, Provias Nacional i s an implementing unit o f MTC with technical, administrative, financial and managerial autonomy. Provias Nacional has developed a significant experience in the implementation o f projects financed by multilateral organizations (IaDB, CAF and the Bank) and
PROVIAS NACIONAL ORGANIZATION CHART
Vice-Minister of TWiSDOTt
Institutional Control Executwe Lawyer Ad-Hoc unrt Directton
I Special Projects I ! off ice
Technical Concessions Of fkce
I t -
Plannlngand Monitoring Offke
1
Administrative and Account ing U n ft
Legal Advisov Unit
1
I I I
Studies WorksManagement Environment Operations Management Unit Management unlt I Management UnR unrt
Regional UnRs
implemented the IBRD 3717 - Transport Rehabilitation among 1994 to 2000. The current organization chart follows:
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12, The Administrative and Accounting Unit (UGA) comprises: an Administrative Manager, one principal Accountant one accountant assistant, two Finance Specialists, one Tax Specialists, three Accounting Analysts; four additional assistants and a Treasurer department. The Administrative and Accounting Unit i s responsible for budgeting, accounting, administrative and financial transactions, control, preparation o f financial statements, contracting, procurement and payments, and it i s expected to undertake overall responsibility for the project’s financial management tasks, in close coordination with the Planning and Monitoring Unit o f Provias Nacional. The Administrative Manager has confirmed the current team will in charge o f project implementation and has assigned: an accountant, one financial specialist; one treasurer. This staff has prior experience in implementing international IaDB and WB-financed investment projects. The financial management assessment determined that the current structure for the administrative unit can be considered adequate for project purposes.
ADMINISTRATIVE AND ACCOUNTING UNIT
Administrative Manager
Accountant Treasurer
Accounting Support
i I I - - 1 Financial Specialists Financral Speclatlsts Accouting Anallsts Specialist in
in Control (2) inTax (1) (3) Rendiciones (4)
I I
Assistant (1)
Assistants (3)
MTC’S Office o f General Administration (OGA)
13. MTC’S OGA i s an implementing unit of the M T C with administrative and financial autonomy and will be in charge o f implementing sub-component 4.2. M T C units to be supported by sub-component 4.2 include: the General Unit for Planning and Budget - OGPP and the General Directorate for Social and Environmental Safeguards - DGASA. In addition; the office o f the Vice-Minister o f Transport i s also expected to benefit from this sub-component. This subcomponent will finance activities (consultancies and capacity building activities) to improve the information system related to strategic planning in the transport sector and activities required to systematize the management o f social and environmental issues. The O G A administrative team will be in charge of coordinating operational procedures with Provias Nacional. In this regard, reports, supporting documentation o f eligible expenditures and operational procedures will be agreed with Provias Nacional and described under the Operational Manual.
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Programming and Budget
14. The preparation o f the annual program and budget will fol low local regulations stated by the Direccidn Nacional de Presupuesto Ptiblico - DNPP o f the Ministry o f Economy and Finance - MEF. Provias Nacional and the MTC’s OGA, in coordination with the General Unit for Planning and Budget - OGPP o f M T C will have to formulate the budget to the DNPP and set and agreed on priorities (budgetary lines) for external financing under the Safe and Sustainable Transport Project. The Budget i s operated under the National Integrated System o f Financial Management - SIAF. The budget assigned to the Program will be approved by the MEF and with the budget approved in the information system SIAF, the commitment and implementation o f activities comprised under the project will take place. The Bank will reimburse eligible project expenditures under the budgetary l ines defined and executed by the Program.
Accounting and information systems
15. The project i s using the new Governmental budget classification system and new accounting chart o f accounts which i s in line with local reforms o f January 2009. In order to produce project financial statements, the chart o f the accounts will be complemented in the accounting information system to obtain information by component, subcomponent and activities under the project.
16. The project will use the National Integrated System o f Financial Management - SIAF, which ensures adequate transparency and specific controls in budget execution; a new platform and design i s currently being developed for the SIAF. In addition to SIAF, Provias Nacional will also use the complementary information system called SIGA which receives information from SIAF through an interface.
17. The accounting information system will be adjusted to record project transactions and produce tailored financial reports (annual financial statements and interim reports) by components, subcomponents, categories o f expenditure and customized statement o f expenditures.
18. In order to revise the accounting information system so that it can produce project financial reports and customized SOE, Provias Nacional has contracted an Information Technology Specialist to adjust the system in accordance to project information needs. Moreover, the information system will have to be adjusted in order to account for the exchange rate differences originated by the Bank reimbursement o f local currency expenditures in US dollars equivalents.
Operational Manual
19. roles and responsibilities o f al l actors and units in charge o f project implementation; (ii) applicability o f appropriate internal controls for project implementation; (iii) project financial reports; (iv) funds f low charts; and (v) auditing arrangements. For the disbursement section, the Operational Manual will make reference to the Disbursement Letter. The Operational Manual
The Operation Manual includes project-specific Financial Management arrangements: (i)
69
provides information on existing administrative procedures for project implementation purpose to control, collect, record and generate financial information, paying special attention to the roles and responsibilities o f each unit, segregation o f duties, authorization o f payments/disbursements, etc.
Internal Controls
20. The Manual o f Process and Procedures sets the main policies and procedures to be followed by Provias Nacional. In addition, there i s a Manual o f Functions which describes main roles and responsibilities o f each post. The internal control environment o f Provias Nacional i s sound since there i s an adequate segregation o f responsibilities, recording has adequate support documentation and monthly bank reconciliations are prepared. MTC’s Internal Control Office (OCI), which depends from the General Controller Office o f the Republic o f Peru (CGR), will carry out operational audits o f Provias Nacional ’s activities.
Financial Reporting and Monitoring
2 1. Provias Nacional will have the responsibility for the preparation o f consolidated interim Jinancial reports and financial statements for the whole project. Supportive documentation o f financial statements will be available for decision-making, audits and supervision missions. The Bank and the IaDB have agreed on harmonized financial statements, interim financial reports and customized SOE to be used under for project monitoring purposes and which have been discussed and agreed with Provias Nacional. Considering that the exchange rate to be used will be the one originated by the Bank’s reimbursement o f local currency expenditures in US dollars equivalent, the project requires reflecting exchange rate differences for their reporting purposes.
22. MTC’s OGA will agree with Provias Nacional on the information and supporting documentation (related to activities under sub-component 4.2), required to consolidate project financial statements and these arrangements will be described under the Operational Manual.
23. The interim financial reports required for the project will be prepared on a semiannual basis joint ly with the project progress report and submitted to the Bank, not later than forty five calendar days after the end o f each semester. The interim financial reports will provide the following information:
Sources and uses o f funds, by category (for the reporting semester and for the cumulative period); and Uses o f Funds by project component/activity (reporting actual vs. planned investments, including analysis o f variances), for the reporting semester and cumulative period.
External Audit
24. be submitted to the Bank’s review, after the end o f each Borrower’s fiscal year.
In accordance with Banks’ procedures, annual audited financial statements are required to
70
25. Although the Bank financed projects in Peru require to apply the Memorandum o f Technical Understanding 14, which specifies that the Contraloria General de la Republica (CGR) i s responsible for contracting acceptable, independent private auditors; under the current Safe and Sustainable Transport Project - financed by the Bank and IaDB, the fol lowing arrangements will be applied: (i) harmonized TORs will be prepared by Provias Nacional under terms and scope acceptable for both Banks; (ii) at the beginning o f the selection and contracting process, Provias Nacional will request to CGR its consent to proceed with the selection and contracting process; (iii) Provias Nacional will be in charge o f contracting directly an independent audit firm acceptable for both Banks (iv) audited financial statements will be sent to the Banks not later than four months after the end o f each fiscal year or period approved by the Bank; and (v) audit costs will be financed out o f loans proceeds o f both Banks, and selection process will fol low the Bank Guidelines for the Selection o f Consultants.
26. Annual project financial statements will be audited in accordance with International Standards on Auditing (ISAs) issued by the International Federation o f Accountants (IFAC). The audited financial statements should reflect al l project activities and al l financing sources.
27. Audit TORs will be submitted for Bank’s no objection immediately once the Loan Agreement i s signed. Auditors are required to be appointed no later than six months after the Effective Date. Auditors are required to submit the following opinions: (i) on the project financial statements, (ii) on the statements o f expenditures, (iii) on the compliance with applicable laws and regulations and (iv) an internal control management letter. The scope o f the audit would include detail review o f internal controls, reimbursements and supporting documents o f the activities carried out by Provias Nacional and the MTC’S OGA. In addition to this, the auditors are required to carry out, on a sample basis, inspection o f c iv i l works. In order to comply with these requirements, the external auditors are expected to carry out at least three visits to the project during the fiscal year for the following purposes: (i) planning, (ii) preliminary work and (iii) final assessment.
Funds Flow and Disbursement Arrangements
28. The Bank will disburse the proceeds out o f the loan using the disbursement method o f “reimbursements” for Borrower’s pre-financed expenditures. Although the reimbursement method has been chosen for this project, Provias Nacional has the capacity to manage other disbursement methods such as advances to a Designated Account, considering i t s extensive experience implementing projects. Direct payments are not envisioned under the project as all activities to be financed under the Safe and Sustainable Transport Project will be pre-financed. Provias Nacional will consolidate the information o f pre-financed expenditures for the whole project, including the expenditures incurred by MTC’s OGA, under the sub-component 4.2. In this regard, Provias Nacional will be the entity responsible for preparing withdrawal applications to be sent to the Bank. Pre-financed eligible expenditures (budgetary lines agreed to be financed) under each project component, will fol low Bank acceptable procurement procedures. It i s important to mention that works contracts will fol low I C B method and will be subject to prior review by the Bank and IADB, which constitutes a mitigating measure o f the fiduciary risk.
~~~
l4 Signed in February 2007 between the CGR and the Bank.
71
29. Retroactive Financing. Although no activity to be retroactively financed under the proposed project i s expected, retroacting financing would be allowed for expenditures occurred after the date o f November 131h, 2009, subject to compliance with Bank fiduciary, safeguard and anti-corruption provision, and within the maximum limit o f 20 percent o f the Bank loan amount (ie. US$30 million).
30. Bank disbursements will be made against actual expenditures incurred by the project. Original supporting documentation will rest at each entity for ex-post reviews; however, a copy o f MTC’s OGA supporting documentation will be also available at Provias Nacional. The exchange rate to be used will be the one originated by the Bank’s reimbursement o f local currency expenditures in US dollars equivalent. The use o f this exchange rate i s based on majority o f expenditures are expected to be in Soles. Therefore, the withdrawal applications for payments in local currency (Soles) will be submitted separately from the application o f expenditures paid in US dollar The Bank would notify the project the exchange rate that will apply for their own reporting purposes. The project requires reflecting exchange rate differences for their reporting purposes and adjusting information system accordingly. Disbursements from the Bank will be deposited into an account o f the Banco de la Nacidn within the Treasury Single Account - as designated by MEF- and as indicated in the withdrawal application by MTC- PROVIAS.
FUNDS FLOW CHART PERU SAFE AND SUSTAINABLE TRANSPORT
PROJECT
WORLD BANK &
1AD.B MEF
PROVlClAS NACIONAL - MTC’S OGA
U
PROWAS 8 OGA HAVE i MEF APPROVES 4 BUDGET APPROVED BY MEF ;
DOCUMENTS TO THE
DOCUMENTATION
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31. The withdrawal application will be accompanied by a customized SOE which will be issued by the information system SIGAT and an annex indicating the detailed o f contracts under which payment i s being requested for reimbursement. The customized SOE has been harmonized with the IaDB and it will require to be adjusted within the information system SIGA (Disbursement module system). The form and content o f the agreed customized SOE will be attached to the Disbursement Letter. Withdrawal applications will be submitted for al l components, on a quarterly basis. This frequency will facilitate the project to gather the required documentation to support the reimbursement request and/or submit withdrawal application more often (either monthly, biweekly, etc).
Category Amount of the Loan Allocated
(expressed in USD)
103,275,000
35,000,000 10,000,000
670,000
955,000
100,000
(1) Works and consultants under Part 1 of
(2) Works under Part 2 of the Project * (3) Works under Part 3 of the Project * (4) Goods; consultant services and training
(5) Consultant services under Part 4.2 o f the
(6) Audit fees under Part 5 of the project
the Project *
under Part 4.1 of the Project
Project
Percentage of Expenditures to be financed (inclusive of taxes)
100%
100% 100% 100%
100%
100% I
32. Finally Provias Nacional will have to request access to Client Connection System, which i s a secure website that would offer the project implementing agencies useful information in a quicker access about their portfolio, disbursements status, withdrawal applications formats and guidelines. Upon Loan Agreement’s signature, Provias Nacional will request the Bank access to Client Connection and will request the forms to fulfill the information required.
I I
Supervision Plan
TOTAL AMOUNT
33. Financial Management supervision would include on-site and off-site supervisions. On site supervision missions will be carried out jointly with IaDB, twice a year to the extent possible, to review Provias Nacional and MTC”s OGA. The review will include transaction review to verify the eligibility o f expenditures. However, depending on the project performance and risks rating, supervision intensity could be modified during the project’s l i f e . Off-site supervisions will comprise desk reviews o f interim financial reports and audited financial statements. Desk reviews will be complemented through virtual communications to assure a correct implementation o f observations/recommendations and provide technical assistance during the project’s implementation period.
150,000,000
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Annex 9: Procurement Arrangements
PERU: Safe and Sustainable Transport Project
A. General
1, Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004 revised October 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan wi l l be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The proposed program-based approach enables Provias Nacional to institute a single procurement system, thus reducing the transaction costs o f parallel systems. Through the harmonization process, the World Bank i s working to reach agreements with the IaDB for high-value contracts.
2. Procurement o f Works: Works procured under this project would include: roads rehabilitation and upgrading, bridges construction and upgrading and roads maintenance. The procurement wi l l be done using the Bank's Standard Bidding Documents (SBD) for all ICB and National SBD agreed with or satisfactory to the Bank.
3. Procurement of Goods: Goods procured under this project would include computers, software and cartographic databases. To the extent possible, contracts for these goods wi l l be grouped in bidding packages o f more than US$250,000 equivalent and procured following ICB procedures. Contracts with estimated values below this threshold per contract may be procured using NCB procedures and standard bidding documents agreed with and satisfactory to the Bank. Contracts for goods which cannot be grouped into larger bidding packages and estimated to cost less than US$50,000 per contract may be procured using Shopping (nationalhnternational) procedures based on a model request for quotations satisfactory to the Bank. The procurement wi l l be done using Bank's SBD for all ICB and National SBD agreed with (or satisfactory to) the Bank in the operational manual.
4. Procurement of Non-Consulting Services: Non-consulting services procured under this project would include pilots o f Output performance-based contracts for roads rehabilitation and maintenance (CREMA). ICB procedures would be followed and Standard Bidding Documents (SBD) satisfactory to the Bank would be used.
5 . Selection of Consultants: Consultants services procured under this project wi l l include: Design studies, surveys, assessments, general studies, monitoring, dissemination and communications services, strategic planning studies and audits services. Short l i s t s o f consultants for services estimated to cost less than $350,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the
74
Consultant Guidelines. Where firms are not required, individual consultants will be hired according to Section V o f the Guidelines.
6. study tours required for the implementation o f the project.
Training: The project will finance all costs associated with training, workshops and
7. Operating Costs: N o t expected.
. 8. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured, are presented in the Operational Manual.
B. Assessment of the Agency’s Capacity to Implement Procurement
9. Following the implementation arrangements defined in Annex 6, procurement activities for Components 1, 2, 3 and subcomponent 4.1 will be carried out by Provias Nacional and procurement activities for subcomponent 4.2 will be carried out by MTC’s Office o f General Administration (OGA). The capacity assessment report i s part o f the project f i les.
10. The assessment looked into Provias Nacional and MTC’s Office o f General Administration (OGA): (a) organizational structure, (b) facilities and support capacity, (c) qualifications and experience o f the staff that will work in procurement, (d) record-keeping and f i l ing systems, (e) procurement planning and monitoring/control systems used, and ( f ) capacity to meet the Bank’s procurement contract reporting requirements. I t also reviewed the procurement arrangements proposed in the Procurement Plan.
11, The overall project risk for procurement i s Moderate. The level o f risk for this project will be reassessed and revised once there i s evidence that mitigating measures such as (i) the adequate implementation o f the Operational Manual; (ii) the development o f Bidding Documents for project implementation, and (iii) procurement reviews conducted by independent auditors and/or Bank staff.
C. Procurement Plan
12. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on November 24, 2009 and i s available at Provias Nacional, Jr. Zorritos No 1203 - Lima 01. I t will also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
D. Frequency of Procurement Supervision
13. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended annual supervision missions to visit the field to carry out post review o f procurement actions. The Bank will assist the
75
Borrower in the start-up activities by providing training to key staff in procurement under Bank procedures.
E. Thresholds for Procurement Methods and Prior Review
14. Thresholds recommended for the use o f the procurement methods specified in the project procurement plan are identified in the table below, which also establishes thresholds for prior review.
ICB = International Competitive Bidding NCB = National Competitive Bidding
DC = Direct Contracting QCBS = Quality- and Cost-Based Selection
QBS = Quality-Based Selection FBS = Fixed Budget Selection LCS = Least-Cost Selection
CQS = Selection Based on Consultants' Qualifications SSS: Single Source Selection
F. Details of the Procurement Arrangements Involving International Competition
1. Goods, Works, and Non Consulting Services
(a) List o f contract packages to be procured following ICB and direct contracting:
76
1 Ref. No.
I REHABlLlTAClON Y MEJORAMIENTO I 56'566'00 I I
2 3 4 5 Contract (Description) Estimated Cost Procurement P-
(000) USD Method Q
1 Ayacucho-Abancay (seccion 50-98) 1 ICB
Llama - Cochabamba
REHABlLlTAClON Y MEJORAMIENTO Cochabamba - Chota
REHABlLlTAClON Y MEJORAMIENTO 4
ICB 29,670.00
ICB 42,200.00
Prior
Prior
Post
Prior
Prior
Q12010
Q12010
Q3 2010
4 4 2010
Q4 2010
de Dios - Cajamarca, Chilete - San Pablo y Trujillo - Lim. Regional
Pte Reither- Pte Paucartambo - Villa rica
Mantenimiento Periodico Puente Stuart - Huancayo
Mantenirniento Periodico Urcos - Sicuani - La Raya
Mantenimiento Periodico Lambayeque - Olmos
Mantenimiento Periodico Panamericana norte (km S86t600 al
ICB 7,600.00
ICB 21,380.00
ICB 16,400.00
ICB 27,330.00
736t600)
Mantenimiento Periodico
6 Domestic
Preference (yesho)
ICB 27,330.00
No
lo
l2
No
Panamericana norte (km736+600 al
Mantenimiento Periodico Panamericana none (km 886+600 al 1033t400 Sullana) ICB
Conservacibn por Resultados E l Reposo - Duran y Chamaya - Jaen -
Conservacion poi Resultados Pta.
886t600) ICB 26,670.00
23,500.00
San lgnacio - La Balza ICE 40,200.00
No
13
No
No
No
No
Pejerrey - San Clemente - Ayacucho ICB 37,950.00
Conservacion por Resultados Ciudad
No
l4
No
Lambayeque IC8 35,750.00 Conservacion por Resultados Puno -
No
Desaguadero, Calapuja - La Raya, llave - Masocruz
No
ICB
No
No
No
(yesho)
Prior Q4 2010
Prior 4 4 2010 I Prior
Prior Q2 2010
Prior Q12010
Prior [ Q12010 I I (b) ICB Civ i l Works contracts estimated to cost above US$ 15 Mil l ions per contract and all direct contracting will be subject to prior review by the Bank.
(c) ICB Goods contracts estimated to cost above US$ 0.250 Mil l ions per contract and all direct contracting will be subject to prior review by the Bank.
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2. Consulting Services
I 1 2 3 4 5 6 7 Ref. Description ofAssignment I Estimated Cost I Selection 1 Review by Bank I Expected Proposals I Comments 1 I No. I 1000) USD Method (PriorPost) Submission Date
3
4
I 1 I SistemadeGesti6n de Puentes I 500.00 I QCBS 1 Prior I Q2 2010 I I 4 2 2010 Estudios de Trbsito 550.00 QCBS Prior
Actualizaci6n del SIG 555.00 QCBS Prior Q2 2010
(b) Consultancy services estimated to cost above USD 200,000 per contract and single source selection o f consultants ( f i rms) will be subject to prior review by the Bank.
(c) Short l i s ts composed entirely o f national consultants: Short l i s ts o f consultants for services estimated to cost less than USD 350,000 equivalent per contract, may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
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Annex 10: Economic and Financial Analysis
PERU: Safe and Sustainable Transport Project
costs
A. Beneficiaries
Performance-Based Maintenance Program 75 Total 3 84 Rehabilitation and Upgrading Program 133
1. The economic evaluation focuses on the three main c iv i l works components o f the project: (i) road rehabilitation and upgrading program that includes upgrading works on four national road sections, representing 183 km with an estimated cost o f US$177.4 million; (ii) periodic maintenance program on 846 km with an estimated cost o f US$126.7 million; and (iii) performance-based maintenance program for four contracts, representing 1,380 km with an estimated costs o f US$137.4 million. The main measured project economic benefits are the reduction in vehicle operating costs, passenger time costs and future maintenance requirements brought about by the improvement and maintenance o f the project roads.
Net Benefits
2. The overall Economic Rate o f Return (EIRR) o f a1 programs i s estimated at 21.8 percent and the overall Net Present Value (NPV) i s estimated at US$210 million, based on 11 percent discount rate. Three cases were considered for sensitivity analysis: investment costs increase by 20 percent, project benefits decrease by 20 percent, and investment costs increase by 20 percent meanwhile project benefits decrease by 20 percent. The corresponding overall EIRR i s 18.0, 17.2 and 13.0 respectively, which confirms that the project i s economically feasible. The switching value analysis shows that for the EIRR to fal l to 11 percent, investment costs would need to be 1.8 times higher, or benefits 44 percent lower than estimated. Table 9.1 presents the economic evaluation summary.
Performance-Based Maintenance Program 40 Total I74 Rehabilitation and Upgrading Program 46
I Table 9.1: Economic Evaluation Summary Benefits Rehabilitation and Upgrading Program I (MUS$) Periodic Maintenance Program
- - I (M US$) I Periodic Maintenancekogram I 90 I
(M US$) Periodic Maintenancekogram
Total
Periodic Maintenance Program 25.3%
Total 21.8%
Rehabilitation and Upgrading Program 14.9%
28.2%
B. Economic Evaluation Methodology
3. The economic evaluation was done using the Roads Economic Decision Model (RED) that adopts the consumer surplus approach to estimate project benefits that are comprised o f road user costs (vehicle operating costs, passenger time costs, and accident cost) savings, which are estimated using road user costs relationships from the Highway Development and Management Model (HDM-4) that i s a globally accepted key analytical tool for economic analysis o f highways investment alternatives, which simulates l i f e cycle conditions and costs and provides
79
economic decision criteria for multiple road design and maintenance alternatives. The RED Model i s customized to the characteristics and needs o f unpaved roads, such as the high uncertainty o f the assessment o f the model inputs in terms o f road condition and traffic, the different characteristics o f the dry and wet seasons, the importance o f speeds for model validation, and the need for a comprehensive analysis o f generated and induced traffic.
4 6 8 I O 12 14 16
4. The economic evaluation was done adopting 2009 unit road user costs based on average 2009 vehicle fleet characteristics and economic unit costs that are given on Table 9.2. Road user costs were estimated for seven vehicle types comprising passenger car, pickup, bus, and light, medium, heavy and articulated trucks. This information i s updated yearly by the M T C Direccion General de Planificacion y Presupuesto to be used on all economic evaluations in Peru. The value o f time for car passengers was estimated to be US$ 1.30 per hour considering an average income o f 1,000 Soles per month, 176 working hours per month, non-working time being 25 percent o f working time, and 70 percent o f work related trips. For bus passengers an average income o f 550 Soles per month was considered.
0170 0211 0772 0436 0 574 0 787 1022 0 179 0227 0 853 0490 0 639 0 866 I 0 9 0 0 196 0253 0958 0550 0 700 0 932 1 163 0218 0285 1090 0613 0 767 1013 1262 0243 0320 1236 0677 0 838 I 106 1375 0269 0354 I 3 9 0 0742 0 913 1205 1494 0295 0388 1547 0806 0 989 1307 1616
5.
Table 9.2: VI
Ye\+ Vehicle Cost (US$ vehicle) New Tire Cost (US$/tire) Fuel Cost (US$/liter) Lubricant Cost (US$/liter) Maintenance Labor Cost(US$/hour) Crew Cost (US$/hour) Passenger Time (US$/hour) Cargo Time (US$/hour) Interest Rate (%) Passengers (no) Kilometers Driven per Year (km) Hours Driven per Year (hr) Service Life (years) Gross Vehicle Weight (tons)
1 . I
ESA Loading Factor Source: OGPP - MTC -2009
icle Fleet Charaderistics and Economic Costs Light Medium Heavy Articulated
Car Utility Bus Truck Truck Truck Truck 12.006 18.561 89.700 69.000 86,250 103,500 120,750 38.30 0 383 3.639 2.24 0.00 1.32 0.00
11 3
25000 480
I O 1.37 0.00
66.30 0.383 3.639 2.24 0.86 I .32 0.12 11 3
40000 960
8 2.18 0.01
3 10.30 0.503 3.639 2.59 3.10 0.73 0.12
1 1 40
120000 2496
10 13.63 0.70
125.00 0.503 3.639 2.59 1.90 0.73 0.09
1 1 1
60000 1440
8 6.86 0.10
31030 0 503 3 639 2 59 2 41 0 73 0 09 11 1
90000 2400
I O 15 40 1.25
391 00 0 503 3 639 2 59 2 59 0 73 0 09
1 1 1
100000 2400
10 23 05 3 40
391.00 0.503 3 639 2.59 2.59 0.73 0.09
1 1 1
100000 2400
I O 38.35 4.63
Table 9.3 presents typical unit road user costs, in US$ per vehicle-km, for the different vehicle types and roughness levels.
6. Table 9.4 presents typical traffic composition per traffic range. The average annual traffic growth rate was estimated to be 4 percent per year for passenger cars and 5 percent per year for commercial vehicles based on past trends o f population growth for passenger vehicles and economic growth for commercial vehicles. The average growth in GPD per year from 2004 to
80
2009 in Peru was 5.4 percent. The generated traffic was estimated assuming a price elasticity o f demand equal to 1.0.
Traffic Range (AADT) 30 - IO0
Light Medium Heavy Articulated Car Utility Bus Truck Truck Truck Truck I 20 27 44 6 1 I
100 - 300 300 - 1000
7. Table 9.5 presents typical maintenance unit costs for paved and unpaved roads. Economic costs were computing removing taxes, subsidies and duties from financial costs. Economic costs for maintenance works represent around 75 percent o f financial costs and for upgrading and rehabilitation works 79 percent.
15 37 21 19 4 2 2 1 1 46 19 14 6 2 2
Financial Unit Cost
Economic Cost
C. Rehabilitation and Upgrading Program
Unpaved Roads Grading Spot Regravelling Regravelling Routine Maintenance Paved Roads Patching Reseal Overlay Reconstruction with DST Routine Maintenance
8. An economic feasibility study was done for al l road sections o f the MTC’s road rehabilitation and upgrading program for 201 0 that aims at rehabilitating eight national road corridors, totaling sixteen road sections and representing 1,024 km. The studies were done by different consultants over the last 5 years to assess the economic justification o f proposed investments, help select a recommended investment, and fulfill the norms o f the Sistema Nacional de Inversion P ~ b l i c a that requires that al l investment projects be subjected to an economic evaluation. The economic evaluations were done using the HDM-4 or the RED models and considered typically four possible project alternatives: (i) keep the road unpaved (without project alternative), (ii) improve to surface treatment standard; (iii) improve to asphalt concrete standard with a design l i f e o f 10 years, and (iv) improve to asphalt concrete standard with a design l i f e o f 20 years. The evaluations considered the current road condition and traffic characteristics o f each road and average unit costs o f road works in the area o f the project roads. All recommended investments achieved and EIRR higher than 11 percent, the discount rate used in Peru.
km 750 5 63 m3 30.0 23.0 m3 15.0 11.0
Km/year 2,500 1,875
m2 9.0 6.8 m2 1.5 1.1 m2 9.0 6.8 m2 19.0 14.3
Km/year 3,000 2,250
9. The economic feasibility o f the road sections was reevaluated for the project appraisal with updated estimates o f investment costs, common updated road user costs, current traffic data, and a common methodology. The RED model was selected because the project roads are unpaved in need o f upgrading. The without project alternative consists o f keeping the project road unpaved with minimum maintenance interventions consisting o f routine maintenance,
81
grading and gravel resurfacing. The adopted evaluation period i s 20 years and the discount rate i s 11 percent.
Road Name
10. Table 9.6 presents the average characteristics o f the four national road segments to be rehabilitated and upgraded with the project financing. All road sections are in bad condition with an average traffic o f 264 vehicles per day and 25 percent trucks.
2008 Length Width TrafTtc
Province (lan) (m) (AADT) Ayacucho - Abancay (Km 50 - 98 8) Llama - Cochabamba Cochabamba - Chota
Ayacucho 4 8 8 6 0 193 Lambayeque, Cajamarca 59 2 6 0 123 I Caiamarca 3 5 9 6 0 247
Total
1 1. Table 9.7 presents the proposed road works and the estimated road works costs per road section. The average upgrading cost i s around US$968,000 per kilometer to upgrade the roads to an Asphalt Concrete standard.
183.3 6.0 264
Road Name A\acucho - Abancab (Km 50 - 98 8)
New Surface Works Works Surface Thickness Cost cost
Road Work Type (m) (MUS$) (v S $ h ) Cueradine AC 75.0 56 6 1.159.836
12. The evaluation shows that the rehabilitation and upgrading program yields an overall EIRR o f 14.9 percent with a global NPV o f US$46 million. The EIRR falls to 12.5 percent with 20 percent increase in investment costs, to 11.9 percent with 20 percent decrease in project benefits, and to 19.7 percent with a combination o f 20 percent increase in project costs and 20 percent decrease in project benefits. The switching value analysis shows that for the EIRR to fall to 11 percent, investment costs would need to be 1.34 times higher, or benefits 34 percent lower than estimated. Table 9.8 summarizes the results that indicate a satisfactory economic justification for the program.
Liama - Cochabamda' Cochabamba - Chota Puente Reither - Pt Paucartambo - Villarica
Upgrading AC 75 0 48 9 8 2 6,5 2 0 Upgrading AC 75 0 29 7 826,462 Upgrading AC 75 0 42 2 1,07 1,066
Ayacucho - Abancay (Km 50 - 98.8) -2 10.6% 8.5% 8.1% 6.2% Llama - Cochabamba 11.4% 9.3% 8.8% 6.9% Cochabamba - Chota 1 1: 1 18.3% 1 15.5% 14.9% 12.4%
Road Name
Base Case EJRR Sensitivity Analysis (%) NPV ERR A: Costs B:Benefits
Ovl US$) (YO) +20% -20% A+B
13. The road section Ayacucho - Abancay (Km 50 - 98.8) has an EIRR slightly less than 1 1 %; therefore, i t s economic justification was confirmed by reviewing the economic evaluation o f the whole road corridor, which has an overall EIRR o f 13.5% for the four road sections that make up this corridor. Table 9.9 summarizes the economic evaluation results for the eight
Total
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46 I 14.9% I 12 5% 11.9% 9.7%
national road corridors, totaling sixteen road sections, which indicate a satisfactory economic justification for the overall MTC's road rehabilitation and upgrading program for 2010, with an overall EIRR o f 19.7% and all corridors yielding an EIRR higher than 1 1 %.
Table 9.9 Overall MTC's 2010 Road Rehabilitation Program Economic Evaluation
Corridor Section oun) ( MUSS) (AADT) ( %) Length Cost Tr f l i c ERR
Chamala - Jaen - San lgnacio Corridor Total 1030 I I san lgnacio - Puente Integracidn I 48.0 I 55 5 I 192 I 105% I
1025 260 16 3% ,
Quinua - San Francisco
Lima - Canta - La Viuda - Unish
Pericos - an lgnacio - 55.0 47.0 320 22.2% Corridor Total 146.4 95.7 196 19.5% km 26 - 78.5 52.5 32.6 353 31.2% km 78.5 - 172.4 93.9 63.1 109 12.4% Corridor Total 186.0 139.5 301 18.8% Canta- Huallay 114.0 91.2 99 9.4%
D. Periodic Maintenance Program
Ayacucho - Abancay
14. The periodic maintenance program will finance periodic maintenance works on six road sections, with an average length o f 119 km and average daily traffic o f 1,869 vehicles per day. Table 9.10 presents the average road section characteristics.
Lima - Canta (km 21.5-80 and 80-102) 72.0 48.3 620 33.0% Corridor Total 222.1 185.6 174 13.5% km 50 - 98 48.8 56.6 193 10.6%
Section Length Width Surface Roughness Traffic Trucks
Climate (Ian) (m) ?Lpe (IRI) (AADT) (%)
15. replace works. Table 9.1 1 presents the proposed road works and the estimated road works costs.
The program road sections are in fair to poor condition requiring overlays or mill and
Puente Stuart - Huancayo Urcos - Sicuani - La Raya Lambayeque - Olmos Panamericana Norte (km 586+600 a1 736+600) Panamericana Norte (km 736+600 a1 886+600) Panamericana Norte (km 8861-600 a1 1033+400) Total
Table 9.1 1: Periodic Maintenance Program Road Works
Section Work (MUS%) o]S$/km) Road cost Cost
Sierra 46 7 2 CA 6 0 300 29% Sierra 129 6 6 CA 4 5 550 25% Costa 90 7 2 CA 3 5 1,587 25% Costa 150 7 2 CA 3 5 2,700 26% Costa I50 7 2 CA 3 5 2,500 26% Costa 147 7 2 CA 3 5 2,200 26%
712 1,869 26%
1 Puente Stuart - Huancayo Mill and Replace SOmm 9.0 195,652 I Urcos - Sicuani - L a Raya Lambayeque - Olmos Panamericana Norte (km 586+600 al736+600) Panamericana Norte (km 736+600 al886+600)
Overlay 50 mm Overlay 50 mm Overlay 50 mm Overlav 50 mm
15.3 118,605 14.5 160,556 27.0 180,000 27.0 180.000
Panamericana Norte (km 886+600 al 1033+400) Overla; 50 mm 26.7 18 11406 Total 119.4 167,720
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16. The evaluation was done following the same methodology adopted on the evaluation of the rehabilitation and upgrading program. The evaluation yields an overall EIRR o f 25.3 percent and a total NPV o f US$129 mil l ion. The EIRR falls to 21.7 percent with 20 percent increase in investment costs, to 21 .O percent with 20 percent decrease in project benefits, and to 17.9 percent with a combination o f 20 percent increase in project costs and 20 percent decrease in project benefits. The switching value analysis shows that for the EIRR to fal l to 11 percent, investment costs would need to be 2.3 times higher, or benefits 56 percent lower than estimated. Table 9.12 summarizes the results that indicate a satisfactory economic justification the program.
Table 9.12: Periodic Maintenance Economic Evaluation Base Case ERR Sensitivity Analysis
A: Costs B: Benefits NPV ERR *20% -20% A+B
Section (MUSS) (%) (%) (YO) (%) , Puente Stuart - Huancayo
Lambayeque - Olmos Panamericana Norte (km 586+600 al736+600) Panamericana Norte (km 736+600 al886+600)
Urcos - Sicuani -La Raya 0 11.1% 9.0% 8.5% 6.6%
7 18.3% 15.6% 15.0% 12.5% 46 32.1% 27.8% 26.9% 23.1% 41 30.1% 26.0% 25.2% 21.6%
2 12.9% 10.6% 10.1% 8.1%
Panamericana Norte (km 886+600 al 3033+400) I 33 I 26.9% I 23.2% 22.4% 19.2% Total 1 129 I 25.3% I 21.7% 21.0% 17.9%
E. Performance-based Maintenance Program
17. The performance based maintenance program will finance routine maintenance, capital (periodic maintenance and upgrading), emergency, data gathering and overhead expenditures on four networks, with an average length o f around 346 km, over a 5 year period to be contracted in 2010. The actual road works to be executed in each o f the networks will be defined by the contractors that are required perform a detailed network road condition and traffic survey and to provide a given level o f service stipulated on the contract over a 5 year period. For a representative economic appraisal o f the program, the evaluation was done with estimates o f the capital road works needed and current traffic prepared by M T C for a sample o f ten networks being contracted in 2009 under the same type o f contract.
18. Each network was subdivided into homogenous road sections in terms o f condition and traffic and the estimated capital road works needed over the next five years were defined. Table 9.13 presents the basic characteristics o f the ten sample contracts.
Juliaca - Dv Huancane Emp Pe IN - Dv Otuzco Emp I S - Comas - Satipo Dv Paita - Sullana Ricardo Palma - La Oroya Lambayeque - Mocce Dv Bayovar - Bappo Guadalupe - Ica Dv. Las Vegas - Tarma , , ,
Total
439 334 473 438 349 262 253 379 230
3,462
363 296 473 3 04 349 262 253 379
29.0 0.0 15.3 0.0 36.3 1.9 11.3 3.8 10.6 1.5 9.7 0.7 4.7 0.4 11.8 0.7
12.8 9.8 17.7 18.3 16.5 6.6 7.7 13.2
I 4 0 5 5 7 12 5 37 6 I 6 3 72 2 I 4 6 47 9 21 4 50 0 6 4 23 3 9 1 21 9 12 2 38 0
29 1 472 I97 907
1,480 6,500 3,245 2,898
147 1 4.9 I .o 8.3 1 1 . 1 25.3 1 1,539 3,105 I 149.4 9.9 119.0 129.0 407.4 I 1,544
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19. The capital road works were classified in four categories: (i) periodic maintenance o f paved roads, typically a surface treatment with an average cost o f US$31,200 per km; (ii) road access for unpaved roads, typically periodic maintenance and heavy repair to provide basic all- weather access prior to upgrading works, with an average cost o f US$11,500 per km; (iii) rehabilitation o f unpaved roads, typically reconstruction to a gravel standard, with an average cost o f US$63,000 per km; and (iv) upgrading o f unpaved roads, typically upgrading to a slurry seal standard, with an average cost o f US$ 1 13,600 per km.
Table 9.14: Sample Performance-Based Maintenance Progrim Economic Evaluation Base Case ERR Sensitivity Analysis .
A G m B:Benefits Samplc NPV ERR +20% -20% A+B
Emp Pe 3s - La Quinua I 2 1 424% 349% 333% 269% contract (MUS$) (%) (%) (YO) 1%)
20. The evaluation shows that the capital road works on the ten contracts yield an overall EIRR o f 28.2 percent with a global NPV o f US$102 million. The EIRR falls to 22.5 percent with 20 percent increase in investment costs, to 21.3 percent with 20 percent decrease in project benefits, and to 16.2 percent with a combination o f 20 percent increase in project costs and 20 percent decrease in project benefits. The switching value analysis shows that for the EIRR to fall to 11 percent, investment costs would need to be 1.9 times higher, or benefits 46 percent lower than estimated. Table 9.14 summarizes the results that indicate a satisfactory economic justification the program.
12 14 18 2 6 18 8 4
21.8% 33.2% 23.4% 15.6% 24.2% 53.9% 46.1% 20.4%
Juliaca - Dv Hu&cane., . Emp Pe 1 N - Dv Otuzco.. . Emp 1 S - Comas - Satipo . , , Dv. Paita - Sullana . . . Ricardo Palma - La Oroya . , . Lambayeque - Mocce . , . Dv. Bayovar - Bappo , . , Guadalupe - Ica , . , Dv. Las Vegas - Tarma . , . Total i ++E-
16.7% . 15.6% 26.9% 25.6% 18.1% 17.0% 15.6% 15.6% 24.2% 24.2% 45.0% 43.1% 38.4% 36.9% 15.6% 14.6%
11.1% 20.1% 12.4% 15.6% 24.2% 35.6% 30.3% 10.4%
18.6% 17.5% 13.0% 22.5% 21.3% 16.2%
2 1. Considering that the performance-based maintenance program financed by the project wi l l total four contracts with an estimated total length o f 1,384 km and total cost o f US$137.4 million, the extrapolated NPV for the program i s US$35 million with an EIRR o f 28.2 percent.
F. Road Safety Improvement Works
22. benefit. For the top five countermeasures, with the greatest potential for reducing fatalities and serious injuries (KSIs) in Peru, a benefit-cost ratio (BCR) o f 10 to 28 has been estimated:
The iRAP methodology aims at prioritizing corrective investments with the greatest cost-
85
Estimated cost to build and maintain (20 years)
23. A number o f safety improvement alternative program have been evaluated. Each alternative program i s composed o f improvements al l o f which have a specified minimum benefit-cost ratio (1, 3 or 5). The program recommended by iRAP includes projects with a minimum benefit-cost ratio o f 5 for medium to high volume roads and projects with a minimum benefit-cost o f 1 for low-traffic roads. Such a program has an estimated 20-year cost o f S/89,000,000 and would, over a 20-year period, reduce 3,407 fatalities and serious injuries, corresponding to a benefit o f S/1,292,000,000 and a benefit-cost ratio o f 14.4 for the program as a whole. The program would thus provide 14.4 dollars for each dollar spent on safety improvement, and would reduce fatalities and injuries on the selected road network by 9 percent. The proposed project builds on these recommendations for medium and high-volume roads (national roads) while recommendations on low-volume roads (secondary and tertiary) will be explored with sub-national governments as part o f other Bank-financed operations (Decentralized Rural Transport Project and Regional Transport Decentralization Project).
Medium and High volume roads Low-volume roads 1 3 5 1 3 5
223,000,000 91,000,000 66,000,000 23,000,000 6,000,000 3,000,000
Table: Benefit-Cost analvsis for Several Road Safetv Alternative Programs
(SO KS ls saved (20 years) Value o f safety benefit
4,028 3,463 3,212 195 116 86 1,527,000,000 1,3 13,000,000 1,2 18,000,000 74,000,000 44,000,000 33,000,000
(20 years) (S/) Cost per KSI saved (S/) Overall program
55,479 26,134 20,67 1 120,396 5 1,653 34,7 16 6.8 14.5 18.4 3.2 7.3 10.9 I benefit-costratio (BCR) I
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Annex 11: Safeguard Policy Issues
PERU: Safe and Sustainable Transport Project
1. As part o f the environmental due diligence process o f the “Peru Safe and Sustainable Transport Project - PSSTP), a series o f activities, studies, and instruments were developed during project preparation, in order to assure the project’s environmental and social sustainability and to comply with Banks’ Safeguards Policies (World Bank and IaDB) and the national environmental legislation.
2. These requirements were agreed with the Peru Government and the institutions responsible for project implementation (Ministry o f Transport and Communications - MTC; Provias Nacional - PROVIAS NACIONAL). The environmental and social studies performed were: (i) Environmental Assessments, including an Environmental Management Plan, for each o f the four initial road rehabilitation and upgrading works scheduled to be financed under component 1; (ii) Resettlement Action Plans for each o f the same four road works mentioned above; (iii) Indigenous Peoples’ Plans for two o f the initial road rehabilitation and upgrading works scheduled to be financed under component 1 ; (iv) Environmental and Social Management Framework (ESMF); (v) Involuntary Resettlement Framework (IRF); (vi) Indigenous Peoples Planning Framework (IPPF); and (vii) Environmental Assessment Report (EAR). All o f these
(http://www.proviasnac.gob.pe/logros/bm) and in the Bank’s Infoshop, in compliance with the Bank’s Disclosure Policy.
documents are available in Provias Nacional’s web Page
3. The project has been classified as a “Category B” according to the Environmental Assessment Policy [OP/BP 4.011. In general, the road works that would be financed by the proposed project do not have significant environmental and social impacts that could put in risk the natural and/or social environment. Nevertheless the works present moderate environmental and social risks. These works wi l l require adequate environmental and social management to ensure their environmental and socially sustainability, as well as their compliance with the national legislation and the Bank’s Safeguard Policies.
1. BACKGROUND
4. The responsible agency for environmental and social management in the MTC, i s the “Direccidn General de Asuntos Socio-Ambientales - DGASA” which i s the sector environmental authority. This Direction was created in 2002 through Supreme Decree No 041-2002, The creation and the institutional strengthening o f the DGASA have been supported by the Bank and the IaDB.
5 . The DGASA has developed a series o f procedures, mechanisms and instruments to ensure the environmental and social sustainability o f MTC’s transport investments, and to comply with the national environmental and social legal dispositions, as well as to the applicable safeguards policies o f multilateral financiers.
87
6. The following presents an environmental analysis o f the following aspects: (i) Safeguards Policies triggered by the Project; (ii) Analysis o f the MTC/DGASA instruments o f environmental and social management; (iii) Summary o f the instrument developed during project preparation; and (iv) Results o f the project’s environmental assessment and o f a sample o f subprojects selected for this analysis.
2. ENVIRONMENTAL AND SOCIAL POLICIES TRIGGERED IN THE PROJECT
7 . The following Bank’s safeguards policies are triggered by the project: Environmental Assessment; Natural Habitat; Physical Cultural Resources; Involuntary Resettlement; and Indigenous Peoples.
a. Environmental Assessment (OPBP-4.01)
8. Although no significant adverse social and environmental impacts are expected, this policy i s triggered because some limited impacts will occur during project execution that would have to be prevented, mitigated and/or compensated. It i s important to mention that the types o f proposed works (improvement, rehabilitation and maintenance o f roads) involve the existing right-of-way and that no new roads construction i s envisaged. As mentioned before, the Project was classified as a “Category B” because the road works that would be financed by the project do not have significant environmental and social impacts that could cause major risks to the natural and/or social environment. Nevertheless the subprojects require the implementation o f environmental measures to prevent, mitigate and/or compensate the potential adverse impacts.
9. In l ine with Bank guidelines, Environmental Assessments have been prepared for the four initial road rehabilitation and upgrading works to be financed under component 1. These Environmental Assessments include for each road an Environmental Management Plan that describes the measures to be taken during the execution o f the corresponding road works.
10. For any additional road works that may be financed by the proposed project, MTC/DGASA has developed an updated Environmental and Social Management Framework (Marco de Gestidn Ambiental y Social - MGAS); and an Environmental Assessment Report (Informe de Gestidn Ambiental y Social - IGAS).
b. Natural Habitats (OPBP-4.04)
11. None o f the identified works crosses protected areas. Nevertheless, this Policy i s triggered in a preventive way, in case some new road sections that would be located in sensitive areas enter the proposed program. If this would occur, the environmental studies and in particularly the Environmental Management Plans would include measures to prevent and/or to mitigate the potential negative impacts in this sensitive or critical areas.
12. I t i s important to mention that the Environmental Impact Assessment not only assesses potential negative impacts but also potential positive impacts that could be fostered by the subproject through environmental planning or compensation activities.
88
c. Physical Cultural Resources (OP/BP-4.11)
13. This Policy i s triggered because Peru has an extensive cultural, historical and archaeological heritage dispersed in the whole country, and therefore potentially also in areas where the proposed project will intervene. This i s in particular the case for one o f the road rehabilitation and upgrading works to be financed under component 1 (Ayacucho - Abancay section 50 to 98.5 Km; Toccto Archeological Site). Although no significant adverse impact i s expected on these archeological sites, works have to fol low the review and authorization process o f the National Institute o f Culture (INC).
14. The EIA developed for this particular road investment identifies this area and proposes some measures in the corresponding Environmental Management Plan, to prevent potential negative impacts. Additionally “Chance Finds Procedures” have been included in the ESMF.
15. Peru counts on a sound legal and institutional framework for cultural and physical heritage. The I N C has developed an instrument for the early identification o f potential affectation (Certificate o f Archaeological Nonexistence - CertiJicado de Znexistencia de Restos Arqueoldgicos - CIRA), which have to be obtained for every infrastructure project, as part o f the ex-ante assessment process. Considering the importance o f this topic, Provias Nacional has recruited a technical specialist whose responsibility i s to ensure, in coordination with the DGASA, the fulfillment o f this legal request before the Environmental Certification i s issued.
d. Involuntary Resettlement Policy (OP/BP 4.12)
16. This policy i s triggered because the proposed road works will affect houses, lands or other properties located in project areas. However, these impacts are expected to be minor considering the nature o f the works, and it should be mitigated with adequate corrective actions. As part o f the preparation o f the project and in l ine with Bank guidelines, four Resettlement Action Plans have been prepared, one for each o f the four identified road rehabilitation and upgrading works to be financed under component 1. In addition, in case additional road works would be financed under the proposed project, the borrower has prepared an Involuntary Resettlement Framework (IRF, or Marco de Compensacidn y Reasentamiento Znvoluntario - MCRI), taking into account existing DGASA guidelines and practices, as well as former IRFs that had been prepared for previous Bank supported projects.
17. I t i s worth noticing that DGASA has a “Resolucidn Directoral” (R.D. No . 007-2004- MTC/ l6) , which includes guidelines for the elaboration and application o f Involuntary Resettlement Compensation Plans (Plan de Compensacidn y Reasentamiento Znvoluntario - PACRI) for transport projects. These guidelines aim at ensuring that people affected by specific projects receive fair and adequate compensation, returning in equal or better forms to the original conditions before the execution o f works. I t i s important to note that these PACRIs are based on the Bank’s Involuntary Resettlement Policy. The PACRIs provide detailed information on the socio economic characteristics o f the affected population, the process o f consultation that has been followed, as well as the rosters o f affected assets, the methodology for valuation o f assets, and the legal processes to fo l low to compensate affected people.
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18. The M T C has developed a large experience in dealing with resettlement related issues, and i s in particular strongly familiarized with the Bank policy. DGASA, through i t s Social Direction, i s the entity responsible to ensure that the PACRIs are included in the EIA (Environmental Impact Assessment). The entity responsible for the implementation o f the PACRIs i s Provias Nacional, which counts, just for this purpose, on a team o f 72 technicians (32 based in Lima and the difference based in the rest o f the country). While this team o f professionals has accumulated significant experience in this area, the actual implementation o f procedures can s t i l l be improved. Through i t s fourth component, the proposed project intends to support institutional strengthening activities, as well as training and dissemination o f best practices in this regard.
Phases Clearing o f Areas
Social and Economic Development Monitoring and Evaluation
19. The IRF includes a description o f the legal and institutional framework o f the country regarding resettlement and compensation mechanisms, as wel l as consultation procedures and value assessment methodologies. I t also explains the content o f the PACRIs and the steps the M T C takes to address resettlement-related issues during project preparation and implementation.
Projects Programs 1. Registry 2. Titling of property 3. Regularization o f the juridical condition o f actual owner 1. Direct negotiation 2. Asset valuation and compensation payments 3. Houses and fences reposition 4. Inscription and registry
I. Technical assistance for agriculture and handicraft confection I. Verification and rectification o f individual f i les 2. Monitoring and evaluation 3. Contingency program
1. Regularization o f land tenure
2. Acquisition o f affected areas
3. Social support project
4. Activities during the implementation o f civil works
20. The PACRIs are prepared through a phased process that includes the following: (a) Preliminary phase (desk work): gathering o f information (geographical charts, aerial
pictures, registries, topographic maps). Identification o f the information to be verified in the field. Field work planning.
(b) Field phase. Identification o f the affected assets in situ (houses, fences, cultivated gardens, plots). Gathering o f complementary information.
(c) Final phase (desk work). Processing o f the collected information. Preparation o f the technical f i les on compensation and o f Resettlement Action Plans.
21. The PACRIs are then implemented as follows:
e. Indigenous People (OP/BP 4.10)
22. Through a screening carried out by the team social specialist and later on through a field visit made by a local consultant to a sample o f roads, the presence o f Indigenous Peoples has been confirmed in several o f the segments that will be subject o f road rehabilitation and upgrading. Out o f the four initial road segments to be rehabilitated under the proposed project,
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two include areas where Indigenous Peoples live. These are Quechua, and Ashaninka-Yanesha peoples.
23. I t i s worth mentioning that during the latest indigenous protest in June 2009, one o f the main claims in the regions o f Abancay and Apurimac (where one road corridor i s located) was the completion o f roads paving. Therefore, no opposition i s expected to the rehabilitation o f roads where the majority o f the Indigenous Peoples i s located. As mentioned before these Indigenous farmer communities with links to the market economy favor the rehabilitation o f roads for these are positively perceived in terms o f improving their economic outputs (better prices for their products) and their general well being (easier access to health and education services).
24. As required by the Bank, the borrower has prepared an Indigenous Peoples Plan for each o f the two road works identified to be financed under component 1 o f the proposed project. Besides these IPPs, the PACRIs also referred to the assets being affected that belong to these Indigenous farmer communities. For the case o f the Ayacucho - Abancay (km 50-98) road, three communities have one piece o f natural grassland being affected, while a fourth community has 41 assets (grasslands and cultivated and non cultivated plots) and 10 houses. The Pte Reither- Vi l la Rica corridor i s the second road that affects one Indigenous community, and for which an IPP has been prepared as well.
25. In addition, an Indigenous Peoples Planning Framework (IPPF) has been prepared and would apply if additional road works from MTC’s rehabilitation and upgrading program are. substituted or added to the initial l i s t o f the four identified works. The framework includes a social assessment o f the sample o f routes visited during project preparation,. including demographic information and spatial occupation, with a description o f the potential adverse impacts and mitigating measures, as well as potential positive ones. This information i s based both on the actual studies carried out during the pre-investment phase as part o f the EIA for each route segment, as well as on the national census. The assessment also provides detailed recommendations and a specific protocol to deal with land acquisition issues where land i s the property o f indigenous communities.
26. The IPPF also discusses to a great length the national legal framework regarding Indigenous Peoples’ rights in the country, including I L O Convention 169, the new national law o f citizen participation, and the specific regulations and guidelines prepared by the DGASA for M T C and contractors for an adequate relationship with Indigenous Peoples.
27. The IPPF provides a detailed set o f recommendations and guidelines for the three phases o f the project cycle: pre-investment, implementation and operation. These recommendations and guidelines are based o n a Guideline prepared by DGASA (Marco de las Propuestas de Desarrollo de Pueblos Indigenas). The framework also addresses the process o f consultation and provides a set o f specific recommendations to improve the inter-cultural dialogue with Indigenous Peoples.
28. Finally the framework also deals with the issue o f compensation and acknowledges the fact that Provias Nacional intends to implement a Local Development Window mechanism
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(Ventana de Desarrollo Local) to facilitate the emergence o f productive activities in the areas where transport conditions have been improved.
3. ENVIRONMENTAL MANAGEMENT INSTRUMENTS
29. D G A S A has developed social and environmental management procedures, mechanisms and instruments applicable to MTC’s transport investments, in compliance with the environmental and social legal dispositions o f the Ministry o f Environment (Ministerio del Ambiente - MINAM), and, for externally-financed activities, with the social and environmental guidelines o f multilateral financiers. Main DGASA’s responsibilities during the project cycle are: (i) Screening and Scoping process (Environmental Categorization); (ii) Environmental Evaluation; and (iii) Environmental and Social Supervision.
a. Screening and Scoping Process: Categorization
30. DGASA applies a series o f key criteria to achieve an adequate environmental and social classification. These criteria are applied in the early phases o f review and evaluation o f the projects and are verified in the respective field visits.
Regarding the environmental aspects, the following criteria are used: (i) intervention level; and (ii) sensibility o f the territory. Regarding the level o f intervention, the request o f environmental due diligence i s the following: (i) for construction or new work: Detailed Environmental Impact Assessment (EIA-d); (ii) for improvement: Semi- Detailed Environmental Impact Assessment (EIA-sd); (iii) for rehabilitation: Environmental Impact Declaration (DIA); and (iv) for Bridges (rehabilitation or construction): Environmental Impact Declaration (DIA). The sensibility o f the site where the project is located can modify the type o f studies before mentioned, for example a DIA can be raised from an EIA-sd; or an EIA-sd to an EIA-d. The criteria that are taken into account include verifying if the project i s located in a protected natural area; in a buffer area; or in a fragile or sensitive area, according to available secondary information (Maps -SIG) and to the technical inspection o f the zone.
Relating to the social aspects the following criteria for the categorization are used: (i) existence o f affectations; (ii) presence o f indigenous people territories; and (iii) presence o f “campesinos” or “nativos” communities.
b. Environmental Assessment
31. Based on the Environmental Category, D G A S A drafts Terms o f Reference (TdR) to prepare the studies required by the national environmental legislation as well as any other complementary studies required to comply with DGASA’s guidelines (Resoluciones Directorales) and with Bank requirements. During the preparation o f the studies, DGASA carries out the activities’ review, and also hires consultants whenever needed. Finally, DGASA makes sure that the recommendations identified in the studies are included in the respective environmental clauses o f the contracts for the execution o f works.
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32. During this evaluation phase, DGASA coordinates very closely with Provias Nacional, specifically with the environmental specialist in charge, in order to ensure that the evaluation process i s framed in accordance with the national environmental legislation.
c. Environmental Supervision
33. D G A S A has developed a specific instrument named "Format to prepare the Environmental Supervision Report", which needs to be followed by works' supervisors. The purpose o f this instrument i s to identify adequate environmental measures that should be taken into account during the construction, rehabilitation and/or improvement o f roads. This instrument has been designed so that i t i s easy to use during supervision activities and that it i s compatible with the monthly reports that should be elaborated by the environmental supervision. If needed, supervisors can expand actions or recommendations. This instrument includes a review o f the different components o f works (camps, plants, quarries, among others) where environmental impacts can potentially be generated.
4. ENVIRONMENTAL ASSESSMENTS
0 TyDes of works
34. works (periodic maintenance works and performance-based contracts).
The Project will finance road upgrading and rehabilitation works; and road maintenance
35. In relation with the rehabilitation and upgrading works, the Project only includes works on existing national roads. Larger scale activities, such as construction or major improvement works, are not eligible because they belong to a different investment program o f Provias Nacional. The concept and the type o f works used in these kinds o f interventions are the following:
- Upgrading: Improving road specifications. Most o f the works are done on the existing platform or right o f way. Additional land acquisition may be needed. Type o f works: Widening shoulders; adding extra lanes in steep inclines; improving curves; and strengthening bridges.
- Rehabilitation: Bringing existing deteriorated roads to previous conditions. All o f the works are done on the existing platform. N o additional land acquisition i s .needed. Type o f works: improving drainage, slopes, embankments and/or other structures; strengthening pavements; complete resurfacing; and recuperating c iv i l works
36. In relation with maintenance works, at least 10 new maintenance contracts are expected to be launched in 2010 and would be eligible under the proposed component o f the Project. The 20 10 program includes 6 periodic maintenance contracts and 4 performance-based contracts. The roads can either be paved or unpaved. The concept and the type o f works used in this kind o f intervention are the following:
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- Maintenance: Routine or periodic works to maintain the road in working condition. All o f the work i s done on the existing platform. Type o f works: Routine works, patching potholes, clearing drains; and Periodic works such as resurfacing, line marking, bridge maintenance.
0 Applicable Environmental Criteria
37. environmental criteria have been established:
In order to select the road works that will be financed by the Project, the following socio-
- The project will finance subprojects among Category I1 and I (moderate and low environmental impacts);
- The project will finance roads improvement once P V N submits a socio-environmental study o f alternatives and has obtained the no objection from the DGASA and the Bank to the selected alternative;
- The project wil l finance roads expansion subprojects if the area o f construction i s ful ly released, and
- The project will finance subprojects located in buffer zones (Natural Habitats), only if it i s shown that the execution o f the works will not bring significant direct or indirect negative impacts to the environment.
0 General Environmental Analysis
3 8 . The proposed works are not expected to have any significant social and environmental impacts that could put in risk the social and/or natural environment. However, some works present moderate environmental risks and therefore require an adequate social and environmental management system in place to ensure the sustainability o f the works and to comply with both the national legislation and Bank guidelines. Next are summarized (i) the positive environmental impacts brought by the proposed investments; (ii) a l i s t o f the activities that are susceptible to generate negative environmental impacts at different stages o f the project cycle; (iii) an analysis o f the cumulative impact; and (iv) a description o f the Environmental Management Plan.
A) Environmental positive impacts:
39. include:
Some direct and indirect positive impacts are expected from the proposed works. They
(a) Recovery o f Environmental Passives: The rehabilitation and improvement o f roads can include actions and measures to protect and to improve the environmental conditions o f the influence area, among them: slopes management, recovery o f erosive processes, and reforestation. The contractors and the supervisors are responsible for the execution and the monitoring o f the environmental management plans o f the subprojects, which indicate the processing that should receive each environmental problem in the area o f influence o f the project, including the recovery o f the environmental passive when justified.
(b) Road Safety: Improving the conditions and physical characteristics o f the roads, as well as the associated complementary works (drainage, slopes stabilization, sign posting,
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among others). Accident rates o f the improved sections are expected to be reduced. The implementation o f the iRAP recommendations should have a measurable impact in this area.
(c) Greater access to the regional and international markets: The improvement o f the transport conditions on the selected secondary and primary road network should bring a greater and better access to the regional and international markets, which in association with the tertiary road network, will bring large benefits to small Peruvian towns.
(d) Greater opportunities o f employment: Through the realization o f the proposed road works, particularly road maintenance which i s the most labor-intensive road investment.
(e) General improvement o f the economic conditions in the influence areas: The rehabilitation and improvement o f the road proposed will enlarge the value o f the lands and properties, especially o f those that are in the direct influence area. In the agriculture sector, productivity gain and diversification outside o f subsistence agriculture are also expected.
B) Potential negative environmental impacts:
Activities that Could Generate Negative Environmental and Social Impacts:
40. Eventual negative environmental and/or social impacts depend on the type o f works. Project activities that could potentially generate adverse consequences are: (i) improvement o f affirmed roads; and (ii) rehabilitation o f paved roads.
4 1. Improvement o f affirmed roads: It i s understood by "improvement" the following types o f works: paving o f affirmed roads, construction o f drainage, enlargement o f shoulders, new rails in zones o f slope, improvement o f curves, reinforcement o f bridges, and recovery o f environmental passive. Most o f works are carried out in the existing platform or right o f way. Some limited acquisition o f lands may be needed in specific zones. Activities susceptible to generate environmental and/or social impacts include:
(a) During the phase pr ior to works execution, Selection o f camp location areas, equipment and asphalt plants; Selection o f quarries for the exploitation o f material; and Transportation o f fuels and lubricants.
(b) During works execution, Transportation o f material and flammable; Management o f oils, greases and fuel in equipment and plants o f asphalt areas; Operation o f asphalt plants that produce air pollution; Construction activities that can create dangerous conditions o f traffic when interfering with the normal traffic flow; Deposit o f waste materials toward areas o f final disposal; Solid waste disposal in the camps and places o f work; Movement o f lands in zones with high potential o f archaeological finds; and Exploitation o f quarries.
(c) During works closing, Waste material deposit places management; Reforestation o f the areas intervened; and Recuperation o f areas utilized for camp.
(d) During the operation phase, Control and monitoring o f the number o f accidents in the way, especially in urban areas where the rate o f accident can increase.
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42. Rehabilitation o f paved roads: I t i s understood by “rehabilitation” bringing an existing deteriorated road to i t s original conditions. All the works are carried out in the existing structure or in the right o f way. N o major land acquisitions are generally needed. Specific works include: Rehabilitation o f drainage, slopes, retaining walls, and other structures; Strengthening o f the pavement; Resurfacing; and Recovery o f c iv i l works. Activities susceptible to generate environmental and/or social impacts include:
(a) During the phase prior to works execution, Selection o f camp location areas, equipment and asphalt plants; Selection o f quarries for the exploitation o f material; and Transportation o f fuels and lubricants. (b) During works execution, Transportation o f material and flammable; Management o f oils, greases and fuel in equipment and plants o f asphalt areas; Operation o f the asphalt plants that produce air pollution; Construction activities that can create dangerous conditions o f traffic when interfering with the normal traffic flow; Deposit o f waste materials toward areas o f final disposal; Solid waste disposal in the camps and places o f work; Movement o f lands in zones with high potential o f archaeological finds; and Exploitation o f quarries.
(c) During works closing, Waste material deposit places management; and Recuperation o f areas utilized for camp.
(d) During the operation phase, Control and monitoring o f road safety conditions, particularly in urban areas where higher speed may increase the number o f accidents.
Environmental Negative Impacts:
43. Potential negative environmental and social impacts include:
(a) Air Pollution; Some works may increase the emission o f particles in the atmosphere that can affect the natural environment and the workers. These activities are: (i) operation o f machinery and equipment by the emanation o f gases due to the combustion; (ii) material banks exploitation; (iii) deposit o f material; and (iv) others.
(b) Traffic circulation: The works may affect the normal traffic f low o f vehicles, causing a discomfort to the users. Also, the works may affect traffic safety. Whenever needed, a Traffic Plan will have to be prepared to ensure an adequate management o f this issue.
(c) Solid Waste: Some contaminants may be produced such as residues o f material and residual products o f the machinery (filters, spare used, pneumatics, deposits o f oil, trash, among others).
(d) Noises and/or vibrations: The use o f machinery and equipment, material banks exploitation as well as traffic increase from road improvement, can generate noise levels that affect the workers and the population located in the influence area.
(e) Visual Contamination: The final disposal o f waste material in the right o f way may alter the landscape or existing scenic beauties.
( f ) Sensitive and protected areas: The works execution in zones declared under some state o f environmental protection or in zones o f highly sensibility require an integral management o f the area. Zones o f the right o f way that present certain characteristics that promote the development o f natural habitats used as biological corridors should be avoided.
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(g) Stabilization of slopes and eroded zones: Unstable zones, if affected, may aggravate the erosion processes o f these areas which could ultimately affect the natural environment and the traffic.
(h) Physical and cultural patrimony: The inadequate movement o f lands in zones with potential archaeological finds could present irreversible impacts, reason by which should develop an adequate strategy during the planning phase and construction to prevent this type o f impacts. (i) Occupational health and industrial security: The works may generate risks for the workers. Specific dispositions should be included during work execution to mitigate these risks.
(j) Presence of natural resources in the right of way: The inadequate use or application o f pesticides in the right o f way for the maintenance o f these zones could cause serious damages to the animals and surrounding vegetation. The use o f such pesticides is not permitted in the scope o f this project.
C) Environmental Cumulative Impacts
44. The proposed project would only finance works with l imited social and environmental impact and their cumulative impact i s expected to be non-significant. However, it wil l be important to monitor the impact generated by the proposed rehabilitation and maintenance works. A l i s t o f the indicators used for this purpose i s provided in the project’s EAR (Environmental Assessment Report, or IGAS in Spanish). In addition a Strategic Environmental Assessment (SEA) i s scheduled to be performed in the first year o f project implementation in order to evaluate globally the road rehabilitation and upgrading works financed under component 1, assess eventual cumulative impacts and formulate recommendations on how to improve environmental management practices in MTC. Draft Terms o f Reference for this SEA have been included as an annex to the project’s Environmental Assessment Report.
D) Environmental Management Plan
45. The EAR (or IGAS in Spanish), l i s t s the general social and environmental measures and in the EIAs includes the specific measures in the respective Environmental Management Plan (EMP), to prevent, mitigate and/or compensate the potential environmental and/or social negative impacts that could occur in the different phases o f the project cycle:
(a)Prevention and/or Mitigation: protection o f the biotic, physical environment and o f human interest, including activities o f Environmental Education and Environmental Signposting;
(b)Environmental Monitoring and Follow-Up: The purpose i s to verify that the corrective and preventive measures are complied with;
(c)Management o f Solid Waste: The purpose i s to achieve an adequate disposal o f solid residues generated by the project, in order to avoid pollution, deterioration o f the landscape, risk o f illnesses and other;
(d)Management o f Camps: The purpose i s to prevent or to reduce the environmental impacts that can be produced during the operation o f these installations; and
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(e)Contingencies: The purpose i s to establish the actions that should be set against the technical, accidental or human character events occurrence.
Road corridors to be rehabilitated
5. OUTCOMES OF THE ENVIRONMENTAL AND SOCIAL STUDIES AND PLANS OF THE INITIAL SET OF SUBPROJECTS
Environmental Length Environmental and Social (km) Studies Category* required
46. As part o f the environmental and social due diligence process, a preliminary environmental assessment was carried out on the four eligible road rehabilitation and upgrading works included in Provias Nacional’s multiannual planning. In addition, al l the Environmental and Social Studies and Plans have been reviewed in order to ensure that all o f these documentation i s acceptable to the Bank. The preliminary assessment applied the environmental instruments developed by the DGASA/MTC and Provias Nacional. A field visit was also organized for three o f the four proposed road rehabilitation and upgrading works.
Road Chongoyape - Cochabamba - Cajamarca 2) Section Llama - Cochabamba 3) Section Cochabamba - Chota
47. The environmental assessment o f the proposed identified subprojects to be financed concluded that all o f them a moderate environmental risk (Category I1 or B), according to the classification established by the DGASA and in l ine with Bank guidelines.
I1 59.2 EIA-sd I1 35.9 EIA-sd
Table No. 1 Subprojects Reviewed During Project Preparation
4) Section Pte. Reither - Villarica I1 39,4 EIA-sd
Road Ayacucho - Abancay 1) Section km 50 - 98,s I I1 1 48,8 1 EIA-sd
I I I
T O T A L * According with the national legislation and i s compatible with the WB Categorization EIA-sd: Semi-detailed Environmental Impact Assessment.
48. as a result o f the EIAs and EMPs o f each subproject.
The following presents a summary o f the main social and environmental issues identified
0 Road Ayacucho - Abancay (section km 50 - 98,s)
49. The section i s part o f the corridor that connects the cities o f Abancay and Cusco. The total length o f the section i s 48.8 km and the road i s generally in poor or regular conditions. The proposed works include the improvement o f the road but not the enlargement or change in alignment. 50. The road i s characterized by i t s undulating topography varying from colluvial and volcanic terrain, with some intrusive rocks. The road unfolds gently with slopes between 1 and 3
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percent. Drainage problems were identified in some sections, as well as the presence o f wetlands (‘bofedales’) in the sector.
5 1, From the environmental standpoint, the section across an area o f ‘(paramo” and ‘(puna”, which are considered sensitive areas from the environmental point o f view, not only for i t s richness o f flora and fauna, but also for the scenic beauty o f these places. In the past, explosive materials have been used during road construction in these areas (environmental liabilities). I t was requested that such construction techniques are not used in these areas in order not to cause further and irreversible impacts that may jeopardize the natural environment. The recovery o f past environmental liabilities was also included in the respective Environmental Management Plans. Regarding the socio-cultural and archaeological heritage, an archeological site called Toccto was identified near this road. The site will not be affected by the works execution,, however, the guidelines o f both I N C and the Bank will be followed and “chance finds procedures’’ will be adopted during works execution.
52. In relation with resettlement issues, there are 44 affected assets, out o f which 10 are houses. Three Indigenous farmer communities have one affected asset each (natural grasslands), while a fourth one has 41 affected assets.
53. Soles).
54. Once applied the Preliminary Environmental Assessment Form ESMF, it was concluded that the project has an Environmental Category I’
levels o f socio-environmental risk. Therefore, an EIA-sd has been prepared.
The budget to implement the EMP was estimated to about US$1.
Map No. 1
mil l ion (3,465,016
(FEAP) defined in I”, that is, moderate
Source: Gerencia de Estudios y Proyectos, Provias Nacional, julio 2009-07-28
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0 Road Llama - Cochabamba
55. The project i s part o f the corridor that connects the cities o f Chiclayo and Cajamarca. The section has a total length o f 59.2 km and the road i s generally in poor or regular conditions. The proposed works include the improvement o f the road but not the enlargement or change in alignment. The section presents a hil ly and mountainous topography. The potential negative environmental impacts are related to: (i) possible decline in air quality by the generation o f dusts, gases and noise; (ii) potential generation o f slopes' instability; (iii) possible soil pollution, water pollution and disturbance to natural drainage; (iv) possible disturbance to terrestrial and aquatic fauna; (v) possible direct damage to plants and reduced vegetation cover; (vi) possible alteration o f terrestrial and aquatic habitats; (vii) possible altered landscape; (viii) potential affectation to the health conditions o f local residents and workers and potential accidents for local workers; (ix) temporary disruption o f traffic and improved transport conditions (when in operation). The main positive impacts are employment generation, local economic revitalization and improved quality o f l i f e for local people.
56.
57. Soles).
Regarding resettlement issues, there are 443 affected assets, out o f which 30 are houses.
The budget to implement the EMP was estimated i o about US$S.lmillion (16,464,063
58. Once applied the Preliminary Environmental Assessment Form (FEAP) defined in ESMF, it was concluded that the project has an Environmental Category "II", that is, moderate levels o f socio-environmental risk. Therefore, an EIA-sd has been prepared.
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0 Road Cochabamba - Chota
59. The project i s also part o f the corridor that connects the cities o f Chiclayo and Cajamarca. The section has a total length o f 35.9 km and the road i s generally in poor or regular condition. The proposed works include the improvement o f the road but not the enlargement or change in alignment,
60. The potential environmental negative impacts in descending order are: (i) potential accidents; (ii) possible affections to the health o f workers; (iii) generation o f noise and vibration; (iv) possible disturbance to terrestrial wildlife; (v) generation o f dust and gases, (vi) possible pollution o f surface water pollution from soil compaction; (vii) possible disturbance to the landscape and relief; (viii) possible interruption o f vehicular traffic and direct damage to plants and reduced vegetation cover. Other minor impacts include: alteration o f terrestrial and aquatic habitats, alteration to the functioning o f schools, groundwater contamination, among others. The main positive impacts are employment generation, local economic revitalization and improved quality o f l i f e for local people.
6 1. plus 23 small rural shops.
Regarding resettlement issues, there are 433 affected assets, out o f which 8 1 are houses,
62. Soles).
The budget to implement the EMP was estimated to about US$3.lmillion (10,010,947
63. Once applied the Preliminary Environmental Assessment Form (FEAP) defined in ESMF, it was concluded that the project has an Environmental Category "II", that is, moderate levels o f socio-environmental risk. Therefore, an EIA-sd has been prepared.
M a p No. 3 Section Cochabarnba - Chota
Source: EIA Cochabamba - Chota, DGASA 2009
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0 Road Puente Reither - Pte Paucartambo - Villarica
64. This subproject i s part o f the road Chanchamayo-Villa Rica, which has a length o f 39.40 km and i s located in the Departments o f Junin, Province o f Chanchamayo, and the Department of Pasco, province o f Oxapampa. The proposed works include the improvement o f the road but not the enlargement or change in alignment.
65. This project i s located in a high forest area, which from an environmental perspective i s generally an area o f high biodiversity but also highly vulnerability; so infrastructure works in this area generally require a particular care. Additionally, the road passes through several towns (San Luis de Shuaro, Capelo Puente, Puente Paucartambo, the native community o f fiagazu and finally the city o f Villa Rica).
66. plus 55 small rural shops. One Indigenous community i s also affected.
Regarding resettlement issues, there are 182 affected assets, out o f which 23 are houses,
67. Soles).
The budget to implement the EMP was estimated to about US$0.6 million (1,971,502
68. Once applied the Preliminary Environmental Assessment Form (FEAP) defined in ESMF, it was concluded that the project has an Environmental Category "II", that is, moderate levels o f socio-environmental risk. Therefore, an EIA-sd has been prepared.
M a p No. 4 Section Cochabamba - Chota
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6. SAFEGUARDS FRAMEWORKS DEVELOPED DURING PROJECT PREPARATION
69. In compliance with Bank’s Safeguard Policies and the national environmental legislation, a series o f environmental and social studies and instruments have been developed. These are: Environmental and Social Management Framework (Marco de Gestidn Ambiental y Social - MGAS); Environmental Assessment Report (Informe de Gestidn Ambiental y Social - IGAS); Involuntary Resettlement Framework (Marco de Compensacidn y Reasentamiento Involuntario - MCRI); and Indigenous Peoples Planning Framework (Marco de Pueblos Indigenas - MPI).
70. During project preparation, a consultation process was performed with key stakeholders from Government agencies but also from civil society. First, with the TORS and the methodology used for each o f the frameworks (June 2009); and second, with the draft documents (August 2009). The evidence o f this disclosure i s present in Provias Nacional’s web page (http://www.proviasnac.gob.pe/lorrros/bm); including the documents prepared. Also all this documentation has been disclosed in the Bank’s Infoshop.
7. INSTITUTIONAL ASSESSMENT OF THE ENVIRONMENTAL MANAGEMENT
71. As part o f the environmental due diligence process, an analysis o f the institutional management capacity was carried out and an Environmental and Social Strengthening Management Plan (ESSMP) was developed for the DGASA and PVN, in order to continue improving the environmental management in the sector. I t i s important to mention that, as part o f the project’s environmental capacity building activities, a strengthening o f MTC’s information systems wi l l be performed, so that social and environmental dimensions are better streamlined in the road planning process. To implement the mentioned Plan, an amount o f about US$ 270.000, has been budgeted.
72. For the DGASA, activities needed to systematize and improve the management o f social and environmental issues. This includes in particular: (i) Strategic Environmental Assessment (SEA) for the Rehabilitation and Maintenance Program; (ii) dissemination o f the project’s safeguards instruments; (iii) streamlining the exchange o f information between DGASA and other areas o f the Ministry, particularly information that could be included in the GIS o f the MTC and be used for strategic planning; (iv) improving coordination between DGASA and Provias Nacional, particularly regarding the environmental categorization and the scope o f design studies, so that social and environmental issues can be addressed sufficiently early on in the project cycle; and (v) training o f MTC’s civil servants on environmental and social safeguards (including resettlement and indigenous peoples), as well as training o f consultants and contractors.
103
ACTIVIT IES MTC - DGASA 1. Strategic Environmental Assessment 2, Review and Systematization of environment and social management
3. Internal and External Capacitating instruments
2.1 DGSA 2.2 Zonales ( 1 7) 2.3 Contractors, Consulting, others
4. Guidelines for the PACRIs process Subtotal
4. PROVIAS NACIONAL Environmental and Social Strengthening Subtotal
MTC - PROVIAS NACIONAL
T O T A L
8. COMPLIANCE WITH THE NATIONAL ENVIRONMENTAL LEGISLATION
A M O U N T US$
50.000 40.000
28.000 24.000 8.000 50.000
200.000
70.000 70.000
270.000
73. The Peruvian Government has an extensive environmental legislation. The Annex 2 o f the REA l ists Laws, Regulations, Decrees and Ministerial Resolutions, that are applicable to the transport sector.
74. The environmental legal base in Peru includes in particular the National System o f Evaluation o f the Environmental Impact (Not. 27446) L a w published in the Official Newspaper “The Peruvian” April 23, 2001; and the General Law o f the Environment (Not. 28611) o f October 13, 2005, through which the National Environmental Authority and the territorial and sectorial authorities are created.
75. and are in the process to obtain the Environmental Certificate.
All the works proposed under the proposed project have been reviewed by the DGASA
9. ENVIRONMENTAL VIABILITY
76. The environmental due diligence process o f the proposed project was concluded in accordance with Bank guidelines. In conclusion, the proposed project should be considered viable from the social and environmental point o f view, and it complies with the Bank’s Social and Environmental Safeguards Policies. The DGASA i s highly experienced with Bank policies due in particular to past and on-going Bank engagement in the sector, and i t already counts on sound procedures and tools that should help ensuring an adequate socio-environmental management, in l ine with Bank Safeguards Policies.
77. All required EIAs and safeguards plans o f the subprojects proposed have been prepared and disclosed prior to project appraisal for the initial set o f four identified road rehabilitation and upgrading works to be financed under component 1 o f the proposed project.
104
78. The implementation o f the Environmental and Social Frameworks developed for the proposed project i s expecting to strengthen Provias Nacional 's social and environmental management practices. The Environmental and Social Strengthening Management Plan presented in the REA, as well as other technical assistance activities implemented under component 4 o f the proposed project should also help strengthening the social and environmental management in the sector. A monitoring o f the implementation o f the social and environmental f rm'ework and o f the Environmental and Social Strengthening Management Plan will be performed during project implementation as part o f the jo int World Bank / IaDB supervision missions.
105
Annex 12: Project Preparation and Supervision
PERU: Safe and Sustainable Transport Project
Planned Actual PCN review April 27, 2009 April 27,2009 Initial PID to PIC April 30,2009 May 20,2009 Initial ISDS to PIC April 30,2009 June 5,2009 Appraisal October 20,2009 November 24,2009 Negotiations November 2,2009 November 30,2009 Board December 22,2009 Planned date o f effectiveness January 31,2010 Planned date o f mid-term review November 1 5,20 1 1 Planned closing date June 30,2013
Key institutions responsible for preparation o f the project: - - Provias Nacional / Ministry o f Transport and Communications
Oficina General de Administracidn / Ministry o f Transport and Communications
Bank staff and consultants who worked on the project included:
Name Title Unit Fabiola Altimari Sr. Counsel LEGLA Rodrigo Archondo Callao Sr. Highway Engineer ETWTR Anthony Bliss Lead Road Safety Specialist ETWTR Stephen Brushett Lead Transport Specialist LCSTR Jean-Charles Crochet Sr. Transport Economist, Peer Reviewer M N S S D Richard Martin Humphreys Sr. Transport Economist, Peer Reviewer ECSSD Nelly Ikeda Financial Management Analyst LCSFM Ana Lucia Jimenez Nieto, Financial Management Specialist LCSFM Michel Kerf Sector Leader LCSSD Jerry Lebo Country Program Coordinator, Peer Reviewer EACNO Aymeric Albin Meyer Sr. Transport Specialist, Peer Reviewer LCSTR Licette Moncayo ET Temporary LCSTR Xiomara Morel Sr. Financial Management Specialist LCSFM Anna Okola Transport Specialist LCSTR Nicolas Peltier-Thiberge Sr. Infrastructure Economist, TTL LCSTR Pierre- Antoine Picand Project Management Analyst, Consultant LCSTR Francisco Rodriguez Procurement Specialist LCSPT Maria Marcela Silva Sr. Transport Specialist, Peer Reviewer LCSTR Tomas Socias Sr. Procurement Specialist LCSPT Juan Tapia Sr. Road Safety Specialist, Consultant LCSTR Francesco Totaro ET Consultant LCSTR Alonso Zarzar Sr. Social Scientist LCSSO Marco Zambrano Sr. Environmental SPecialist. Consultant LCSTR
106
Bank funds expended to date on project preparation: 1. Bank resources: US$237,425 2. Trust funds: Global Road Safety Facility US$150,000 for the Peru iRAP assessment 3. Total: US$387,425
Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$5,000 2. Estimated annual supervision cost: US$102,000
107
Annex 13: Documents in the Project File PERU: Safe and Sustainable Transport Project
Calderbn, C., W. Esterly, and L. ServCn (2003): Latin America’s Infrastructure in the Era o f Macroeconomic Crisis, in: Easterly et al.
Calderh, C. and ServCn, L. (2009): Infrastructure in Latin America: An Update (1 980-2006).
Easterly, W. and L. ServCn (Editors) (2003): The Limits o f Stabilization. Infrastructure, Public Deficits and Growth in Latin America, Stanford University Press and the World Bank, Washington D.C.
Fay, M. and Yepes, T. (2003): Investing in Infrastructure: What i s needed from 2000 to 2010?” Policy Research Working Paper WPS3102, the World Bank, Washington D.C.
Giugale, M., Fretes-Cibils, V. and Newman, J. (2007): An Opportunity for a Different Peru: Prosperous, Equitable, and Governable, the World Bank, Washington D.C.
Guasch, J.L and Kogan, J. (2005): Inventories and Logistics Costs in Developing Countries: Level and Determinants, A Red Flag on Competitiveness and Growth, Revista de la Competencia y la Propriedad Intelectual I(1). Guerra Garcia, G. (2008): Diagnostic0 y Propuesta de Politicas sobre las Capacidades de Planificacidn y Ejecucidn de Inversiones de 10s Sectores de Transportes, Energia y Saneamiento - Sector Transporte, Informe Final.
IPE (Instituto Peruano de Economia) y ADESEP (Asociacidn de Empresas Privadas de Servicios Publicos) (2003): La Brecha en Infraestructura, Servicios Ptiblicos, Productividad y Crecimiento en e l Perti.
Meyer, A,, Lancelot, E. - Output performance-based contracts in the road sector: Towards improved efficiency o f the management o f maintenance and rehabilitation - Brazil’s experience; the World Bank, Washington D.C.
MTC (Ministerio de Transporte y Comunicaciones) (2003): Plan Intermodal de Transportes (2004 - 2023), Lima, Peru.
(2005): Programa Quinquenal 2006-201 0 de Provias Nacional; Propuesta de Financiamiento, Lima, Peru.
(2009). Marco de Gestidn Ambiental y Social (Social and Environmental Management Framework).
(2009). Marco Conceptual de Compensacibn y Reasentamiento Involuntario (Involuntary Resettlement Framework).
(2009). Marco de Pueblos Indigenas (Indigenous Peoples Framework).
(2009). Reporte de Evaluacidn Ambiental (Environmental and Social Assessment
(2009). PACRI Ayacucho Abancay 50-98 (Resettlement Action Plan, road
Report).
rehabilitation and upgrading o f Ayacucho Abancay, km 50-98).
108
(2009). PACRI Llama Cochabamba (Resettlement Action Plan, road
(2009). PACRI Cochabamba Chota (Resettlement Action Plan, road
(2009). PACRI Pte Reither Pte Paucartambo Villarica (Resettlement Action
(2009). Estudio Ambiental Ayacucho Abancay 50-98 (Environmental Impact
rehabilitation and upgrading o f Llama Cochabamba).
rehabilitation and upgrading o f Cochabamba Chota).
Plan, road rehabilitation and upgrading o f Pte Reither Pte Paucartambo Villarica).
Assessment, road rehabilitation and upgrading o f Ayacucho Abancay, km 50-98). (2009). Estudio Ambiental Llama Cochabamba (Environmental Impact
Assessment, road rehabilitation and upgrading o f Llama Cochabamba).
(2009). Estudio Ambiental Cochabamba Chota (Environmental Impact Assessment, road rehabilitation and upgrading o f Cochabamba Chota).
(2009). Estudio Ambiental Pte Reither Pte Paucartambo Villarica (Environmental Impact Assessment, road rehabilitation and upgrading o f Pte Reither Pte Paucartambo Villarica).
(2009). Plan de Pueblos Indigenas Comunidad fiagazu (Indigenous Peoples Plan Community Gagazu).
(2009). Plan de Pueblos Indigenas Comunidad Ocros (Indigenous Peoples Plan Community Ocros).
Saghir, J. - Transport: Invisible Force - Visible Impacts; Presentation at the 2009 Transport Week; the World Bank, Washington D.C.
Tapia, J. (2008): Perti: Desarrollo Econbmico Reciente in Infraestructura - Sector Transporte, Informe Final.
Tuck, L., Schwartz, J. and Andres, L. (2009): Crisis in LAC: Infrastructure Investment and the Potential for Employment Generation; the World Bank, Washington D.C.
World Bank (2006): Peru: Country Partnership Strategy.
109
Annex 14: Statement of Loans and Credits
PERU: Safe and Sustainable Transport Project
Original Amount in US$ Millions
Difference between expected and actual
disbursements
Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d
PI01590
PI01471 PI01177
PO95563 PO95570 PO79165 PO90 I 16 PO78894 PO78813 PO88809 PO82625
PO82588 PO78953
PO73438 PO35740 PO65256
PO08037
2009
2009 2009
2009 2007 2007 2006 2006 2006 2005 2005
2005 2005
2004 2004 2003
1997
PE 2nd Prg Fiscal Mgmt & Comp DPL/DDO PE First Prog Environ DPLDDO PE-2nd Results & Accnt (EACT)DPLIDDO PE- (APL2) Health Reform Program PE Decentralized Rural Transport Project PE Sierra Rural Development Project PE Rural Electrification PE Real Property Rights II PE Regional Transport Decentralization PE lnst Capacity for Decent T A L PE Vilcanota Valley Rehab & Mgmt Project PE (APL2)Agric Research and Extension
SOC SCTR PE Justice Services Improvement PE L I M A TRANSPORT PROJECT PE NATIONAL RURAL WATER SUPPLY AND PE IRRIGATION SUBSECTOR PROJECT
PE-(CRL1)ACCOUNT F I DECENT
Total
700.00
330.00 330.00
15.00 50.00 20.00 50.00 25.00 50.00 8.80 4.98
25.00 7.80
12.00 45.00 50.00
95.26
0 00
0 00 0 00
0 00 0 00 0 00 0 00
0 00
0 00 0 00 0 00
0 00 0 00
0 00 0 00 0 00
0 00
0.00 0.00 0.00 630.00
0.00 0.00 0.00 330.00 0.00 0.00 0.00 330.00
0 0 0 000 000 1500 000 0 0 0 0 0 0 41 83 000 000 0 0 0 1850 000 000 0 0 0 3254 000 000 0 0 0 1733 000 000 0 0 0 4475 000 000 2 1 6 3 15 000 000 0 0 0 3 17
0.00 0.00 0.00 8.50 0.00 0.00 0.90 1.95
0.00 0.00 0.00 0.71 0.00 0.00 0.00 14.21 0.00 0.00 0.00 25.98
0.00 0.00 0.50 0.68
-70.00
0.00 0.00
0.00 15.16 6.86
-0.05 11.00 26.41
5.31 3.17
8.50 2.85
0.71 14.21 25.98
-9.08
0.00
0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 1.10
0.00 0.00 0.86
0.68
1,818.84 0.00 0.00 0.00 3.56 1,518.30 41.03 2.64
PERU STATEMENT OF IFC’s
Held and Disbursed Portfolio In Mil l ions o f US Dollars
FY Approval Company
Committed Disbursed
I F C IFC
Loan Equity Quasi Partic. Loan Equity Quasi Panic.
2006 I999 2005 2004 2002 2002 2002 2003
Agrokasa Alicorp COT. Drokasa EDYFICAR FTSA Gloria ISA Peru, SA ISA Peru, SA
15.00 0.00 6.41 1.92 5.89 23.64 15.28 0.20
0.00 0.00 0.00 11.00 0.00 0.00 0.00 0.00 20.00 0.00 0.00 0.00 20.00 0.00 0.00 0.00 0.00 6.41 0.00 0.00 0.00 0.00 1 .oo 0.00 1.92 0.00 1 .oo 0.00 0.00 1.50 0.00 5.89 0.00 1 S O 0.00 0.00 0.00 0.00 17.64 0.00 0.00 0.00 0.00 0.00 5.59 15.28 0.00 0.00 5.59 0.00 0.00 0.00 0.12 0.00 0.00 0.00
110
2001 2004 2002 2003 2005 2000 2004 I998 2002 2006 I999 2005 2003 1998 2001 1993 1996 2000 2001 1999 2005 2001 2005 1993
lnka Terra Interbank-Peru lnterseguro Interseguro lnterseguro Laredo Laredo Latino Leasing MIBANCO MIBANCO Mi I kito Miraflores Norvial S.A.
Paramonga Peru OEH Quellaveco Quellaveco Quellaveco Quellaveco RANSA RANSA Tecnofil S.A. USMP Y anacoc ha
4.75 40.00 0.00 0.00 0.00 4.29 0.30 0.83 0.33 29.08 5.50 10.00 18.00 10.26 5.50 0.00 0.00 0.00 0 00 4.38 10.00 3.15 9.00 0.00
0.00 0.00 4.00 0.59 0.60 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.67 3.98 0.45 0.57 0.00 0.00 2.00 0.00 0.33
0.00 0.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 8.66 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
4.75 0.00 0.00 0.00 0.00 4.29 0.08 0.83 0.33
29.08 3.50
10.00 5.90
10.26 1.50 0.00 0.00 0.00 0.00 4.38
10.00 3.15 4.50 0.00
0.00 0.00 4.00 0.59 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.67 3.98 0.45 0.54 0.00 0.00 2.00 0.00
0.33
0.00 0.00
0.00 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 8.66 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total portfolio: 223.71 17.19 30.50 14.25 150.81 16.56 30.50 14 25
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic.
2004 UPC I1 0.00 0.00 0.00 0.00 2005 Drokasa PCG 0.00 0.00 0.00 0.00 2004 CMAC Arequipa 0.01 0.00 0.00 0.00
Total pending commitment: 0.01 0.00 0.00 0.00
111
Annex 15: Country at a Glance
PERU: Safe and Sustainable Transport Project POVERTY and SOCIAL
La t in Lower. Amer i ca middle-
P e r u & Car lb . I n c o m e 2007 Population mid-year (millions) 27 9 GNIpercapita (Atlas method US$) 3 450
982
Average annual growth, 2001-07
Population (W 12 Labor force (W 2 6
M o s t recen t ert lmate ( la test year aval lable, 2001-07) Poverty (%of population belo wnationalpo vertyline) 53 Urban population (%of totalpopulation) 71 Life expectancyat birth (pars) 71 Infant mortalitylper 10001ive births) 21 Child malnutrition (%of children under5) Access to an improved water source (%of population) 84 Literacy (%ofpopulation age 15+J 88 Gross primary enro llment (% 0 f school-age population) m
Male 18 Female n
GNI (Atlas method US$ billions)
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1987 1997
GDP (US$ billions) 239 592 Gross capital formation1GDP 215 241 E q o r t s of goods andseniceslGDP 110 144 Gross domestic savingsIGDP 8 7 8 9 Gross national SavingslGDP 24 1
Current account balancelGDP -86 -57 Interest paymentslGDP 0 8 17 Total debt/GDP 731 501 Total debt servicelexports 35 6 Present value of debt1GDP Present value of debtiexports
1987-97 1997-07 2006 (average annual gm Mh) GDP 18 4 0 7 6 GDP percapita -01 2 7 6 3 Exports of goods andservices 7 3 8 3 11
563 5,540 3 1 8
13 2 1
78 73 22
5 91 90 18 PO 18
2006
93 2 198 28 5 28 8 22 0
2 8 16
302 P9 33 7
0 7 8
3 437 1887
6 48%
11 15
42 69 41 25 68 89
m 0 9
m
2007
n9 1 20 2 27 4 28 1 22 4
3 0
2007 2007.11
9 0 6 2 7 8 4 6 6 4 0 7
Deve lopmen t d iamond'
Life expectancy
Gross
capita enrollment
I*+?----- T primary
Access to improved water source
Peru - ~owr-middle-income group
E c o n o m l c ratios*
Trade
formation
Indebtedness
I Lower-middle-income group
STRUCTURE o f the ECONOMY
1987 1997 (%of GDP)
Industry 334 307
services 563 607
Household final consumption eqenditure 703 703
Imports of goods and services P 7 8 6
Agnculture a 3 8 7
M anufactunng 288 8 4
General gov't final consumption expenditure 0 0 9 8
(average annual gm Mh) Agnculture Industry
Services M anufactunng
1987-97 1997.07
2 6 4 2 2 7 4 3 12 4 2 11 3 8
Household final Consumption expenditure 12 3 5 General gov't final consumption eqenditure 2 6 3 8 Gross capital formation 6 1 2 7 Imports of goods and S B N I C ~ S 9 8 4 3
2008
6 8 37 5 8 4 55 7
617 9 6
8 6
2006
6 6 7 9 8 6 7 8
6 9 8 1
211 ne
2007
6 3 35 2 151
58 5
63 3 8 6
8 5
2007
3 0 4 2 2 5 119
9 5 0 9 P9 0 2
GCF -GDP
Growth o f expor t s and Impor t s (%)
U p o r l a -Inports
Note 2007 data are preliminary estimates This table was producedfrom the Development Economics LDB database 'Thediamonds showfourkeyindicators inthecountry(in bold)comparedwithtts income-groupaverage If dataaremissing thediamondwill
be incomplete
112
Peru
PRICES and GOVERNMENT F INANCE
Domestic prices (%change) Consumer prices Implicit GDP deflator
Government finance (%of GDP includes current grants) Current revenue Current budget balance Overall surpiusideficit
1987 1997 2006 2007 Inflation (%) IiO l e
1 4 1 6
1 2 l o
02 03 04 05 06 07
5 7 7 5 8 3
0.4 2.6 84 7
9 7 -5 0 -7 5
8 0 8 3 2 8 3 3 -0 8 24
156 4 1 0 8 GDPdeflator -CPI I
T R A D E
(US$ millions) Totalexports (fob)
Copper F is hmeal Manufactures
Totalimports (cif)
Fuel and energy Capital goods
Food
Export price index (200O=WO) Import price index (2OOO=WO) Terms of trade (200O=x)OJ
1987
2.70 562 223 762
3,215
7 5 976
1997 ,Export and Impor t leve ls (US$ mill ) ---l 6825 23800 32775 1096 6054 4362 1 4 0 0 0 0 1 1031 1 0 7 4533 30000 I I
0
2t?O 5,426 5529 8536 14866 22854 /20000
0 gz7 10000 803 2808 2893 1
2791 4145 4881
,
01 02 03 04 05 05 , 07 I 21) 221 1 118 99 ~ O I p o r t s olmporls 119
BALANCE o f P A Y M E N T S
(US$ millions) Exports of goods and services
Resource balance
Net income Net current transfers
Current account balance
Financing items (net) Changes in net reserves
M e m o Reserves including gold (US$ millions) Conversion rale (DEC local/US$)
Imports Of goods and SBNIC8S
1987
3,506 4,379 -873
-1,3't?
ICurrent a c c o u n t balance t o GDP (%)
8378 26251 29551 D842 8,266 22002 -2464 7985 5684
04 05 06 07
-1822 -7581 -7,852
5099 -5342 3863 -1733 2753 - 7 8 1
-2,067
919 I148
1 0 0 3 00E-5
11129 V.329 24,971 2 7 3 3 3 1
EXTERNAL DEET a n d RESOURCE F L O b
(US% millions) Total debt outstanding and disbursed
IBRD IDA
Total debt service IBRD IDA
Co mpo sitio n of net resource flo ws Official grants Official creditors Private Creditors Foreign direct investment (net inflows) Portfolio equity (net inflows)
World Bank program Commitments Disbursements Principal repayments Net flows Interest payments Ne1 transfers
IS 1987
8,483 1,2M
0
482 50 0
1997
29,653 2920
0
3,464 8 2
0
2006 2007
28 i74 2,633 2,649
0 0
3 746 356 391
0 0
G 3011 A 2 6 3 3 1
94 292
79 32 0
225 406 731
2,09 156
199 -438
61 3,467
182
0 507 325 250 I::.: 63 490 31 65 219 241 GI Short-term 32 425 -183 15 19 18 0 7 160 f3 308 -319 - 0 5
E-Blidwsl I 36 256 B . IDA D. Mher mrltiialetd F . Privale
Note This tablewas produced from the Development Economics LDB database 9/24/08
113
MAP SECTION
