proposed credit in the amount of sdr 64.7 ......linking the bolivian departments of beni, santa...

Document ofThe World Bank

Report No: 19086-BO

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED CREDIT

IN THE AMOUNT OF SDR 64.7 MILLION(US$88.0 million equivalent)

TO

BOLIVIA

FOR THE

ABAPO - CAMIRI HIGHWAY PROJECT

APRIL 28, 1999

Finance, Private Sector, and InfrastructureCountry Management Unit - LCC6CLatin America and the Caribbean Regional Office

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CURRENCY EQUIVALENTSCurrency Unit Bolivianos ($Bs.)LC $Bs. 1 US$ 0.18US$ I LC $Bs. 5.72 (Exchange Rate April 28, 1999)SDR 1 US$ 1.36202 (Exchange Rate Feb. 28, 1999)

BORROWER'S FISCAL YEAR: January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AADT Average Annual Daily TrafficACA-HP Abap6 - Camiri Highway ProjectADL Administrative Decentralization LawCABI Captainship of Upper and Lower Izozog County (Capitania de Alto y Bajo Izozog)CAF Andean Development Corporation (Corporaci6n Andina de Fomento)CAS Country Assistance StrategyCIDOB Federation of Indigenous Peoples of Bolivia

(Confederaci6n Nacional de Pueblos Indigenas de Bolivia)ECP Export Corridors ProjectEIA Environment Impact AssessmentEMP Environmental Management PlanENFE Bolivian National Railway (Empresa Nacional de Ferrocarriles del Estado)ERR Economic Rate of ReturnFONPLATA Financial Fund for the Development of the River Plate Basin

(Fondo Financiero para la Cuenca del Plata)GOB Government of BoliviaHDM Highway Design and Maintenance Standard ModelHIMP Highway Investment and Maintenance ProgramHIPC Heavily Indebted Poor CountriesIBRD International Bank for Reconstruction and Development (World Bank)ICB International Competitive BiddingICR Implementation Completion ReportIDA International Development Association (the Association)IDB Inter-American Development BankIRI International Roughness IndexMDE Ministry of Economic Development (Ministerio de Desarrollo Econ6mico)NCB National Competitive BiddingNGO Non Governmental OrganizationPAD Project Appraisal DocumentPADI Indigenous Peoples Development PlanPCD Project Concept DocumentPCU Project Coordination UnitPID Project Information DocumentSDC Departrnental Road Service (Servicio Departamental de Caminos)SNC National Road Authority (Servicio Nacional de Caminos)SRMP Second Road Maintenance ProjectVMT Viceministry of Transport, Communications and Civil Aeronautics

(Viceministerio de Transportes, Comunicaciones y Aeronauitica Civil)VOC Vehicle Operating Cost

Vice President: Shahid Javed BurkiCountry Manager/Director: Isabel Guerrero

Sector Manager/Director: Danny LeipzigerTask Team Leader/Task: Jos6 Maria Alonso-Biarge

BoliviaAbap6 - Camiri Highway Project

TABLE OF CONTENTS Page No.

A. Project Development Objective ......................................................... 2

1. Project development objective and key performance indicators ................ 2

B. Strategic Context .............................................................. 2

1. Sector-related CAS goal supported by the project ................................ 22. Main sector issues and Government strategy ...................................... 33. Sector issues to be addressed by the project and strategic choices ............. 5

C. Project Description Summary ............................................................ 5

1. Project components ...............................................................- 62. Key policy and institutional reforms supported by the project .................. 83. Benefits and target population ....................................................... 84. Institutional and implementation arrangements ................................... 8

D. Project Rationale .............................................................. 10

1. Project alternatives considered and reasons for rejection ......................... 102. Major related projects financed by the Bank and/or other development agencies 113. Lessons learned and reflected in proposed project design ........................ 124. Indications of borrower commitment and ownership .............................. 145. Value added of Bank support in this project ........................................ 14

E. Summary Project Analyses .............................................................. 15

1. Economic .............................................................. 152. Financial .............................................................. 153. Technical .............................................................. 154. Institutional .............................................................. 165. Social .............................................................. 166. Environmental assessment ............................................................. 177. Participatory approach .............................................................. 18

F. Sustainability and Risks .............................................................. 18

1. Sustainability .............................................................. 182. Critical risks .............................................................. 203. Possible controversial aspects ......................................................... 21

G. Main Loan Conditions .............................................................. 22

1. Effectiveness conditions .............................................................. 222. Other .............................................................. 22

H. Readiness for Implementation ............................................................. 23

I. Compliance with Bank Policies ............................................................. 23

Annexes

Page No.

Annex 1. Project Design Summary ................................................... 24

Annex 2. Detailed Project Description ................................................... 28

Annex 3. Estimated Project Costs ................................................... 34

Annex 4. Cost-Benefit Analysis Summary ............................................... 35

Annex 5. Financial Summary ................................................... 43

Annex 6. Procurement and Disbursement Arrangements .............................. 44

Table A. Project Costs by Procurement Arrangements ............................ 47

Table Al. Consultant Selection Arrangements . .48

Table B. Thresholds for Procurement Methods and Prior Review ................ 49

Table C. Allocation of Loan Proceeds ................................................. 50

Annex 7. Financial Management Assessment Summary ............................... 51

Annex 8. Environmental and Social Assessment ........................................ 53

Annex 9. Project Implementation Schedule .............................................. 60

Annex 10. Project Performance Monitoring Indicators .61

Annex 11. Project Processing Budget and Schedule .66

Annex 12. Documents in Project File .67

Annex 13. Statement of Loans and Credits .69

Annex 14. Country at a Glance .71

Maps No. IBRD 30220 and IBRD 30221

BoliviaAbap6 - Camiri Highway Project

Project Appraisal Document

Latin America and the Caribbean Regional OfficeCountry Management Unit - LCC6C

Date: April 28, 1999 Task Team Leader/Task Manager: Jose Ma. Alonso-BiargeCountry Manager/Director: Isabel Guerrero Sector Manager/Director: Daniel LeipzigerProject ID: BO-PE-55230 Sector: Transportation Program Objective Category: Economic ManagementLending Instrument: Specific Investment Loan Program of Targeted Intervention: [ Yes [X] No

Project Financing Data [ Loan [X] Credit [] Guarantee [] Other [Specify]

Amount (US$m/SDRm): US$ 88.0 million equ./SDR 64.7 millionProposed terms: [X] Multicurrency [] Single currency, specify

Grace period (years): 10 [] Standard Variable [] Fixed [ LIBOR-basedYears to maturity: 40Commitment fee Standard'

Service charge: 0.75%

Financing plan (US$m):Source Local Foreign Total

Government 28.0 4.0 32.0CofinanciersIBRDIDA 36.4 51.6 88.0Other (specify) 0.0 0.0 0.0

Total 64.4 55.6 120.0

Borrower: Government of BoliviaGuarantor:Responsible agency: Servicio Nacional de Caminos - SNC (National Road Authority)

Estimated disbursements (Bank FY/US$M): 2000 2001 2002 2003 2004Annual 16.8 25.4 26.1 13.0 6.7

Cumulative 16.8 42.2 68.3 81.3 88.0

Project implementation period: 10/01/1999 - 06/31/2003Expected effectiveness date: 10/01/1999Expected closing date: 06/30/2004

I A variable rate between 0% and 0.5% of the undisbursed credit balance set annually by the Executive Directors of IDA.

OSD PAD Form: July 30, 1997

A: Project Development Objectives

1. Project development objective and key performance indicators (see Annexes land 10):

The overall purpose of the project is to improve transport conditions along a strategic north-south corridorlinking the Bolivian departments of Beni, Santa Cruz, Chuquisaca, and Tarija and continuing to Argentinaand Paraguay. By rehabilitating and improving the Abap6-Camiri section of the Trinidad-Yacuiba Highway,the Project aims to:

(a) lower transport costs;(b) foster the economic development of the Project Area;(c) improve the income level of the indigenous peoples in the Project Area; and(d) establish economic transport links between the Borrower's territories and neighboring countries.

The project also aims to introduce comprehensive maintenance by contract of part of the national roadnetwork with two purposes: (i) to ensure that the remaining corridor and the roads feeding into it will be ingood condition when the project is completed; and (ii) to extend the program to the entire national network,if it proves successful, so contributing to solve the road maintenance problems caused by thedecentralization-recentralization process, still underway.

Key indicators of the project's performance will be: (i) year-round good condition for all sections of thecorridor and connected roads feeding into it; (ii) traffic volumes in the corridor increased by 80%; (iii)vehicle operating costs in the corridor reduced by 50%; (iv) transportation costs in the corridor reduced by20%; (v) average travel time between Abap6 and Camiri reduced by 3 hours; and (vi) maintenance bycontract extended to the whole national network and installed capacity in SNC to implement concessions.

B: Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project(see Annex 1): CAS document number: 17890B0 Date of CAS Discussion: June 16, 1998

• The project is consistent with the Country Assistance Strategy discussed by the Board on June 6, 1998.This document was formulated within a participatory framework both internally in the IDA and with theGOB, which has identified three priority focuses for the IDA's support: (i) opportunity; (ii) equity, and(iii) institutionality. Within each area, top three strategies to be pursued have been defined. Theproposed project responds to the highest strategic priority in the area of opportunity. Within thisframework, the project would create opportunities by improving the physical and productiveinfrastructure, particularly the Bolivian national road network, and ensuring adequate road maintenanceplanning, financing and execution.

* The project contributes to the objective of developing regions of high agricultural potential by facilitatingtheir access to the international markets. The project addresses those areas highlighted in the CAS forspecial attention.

* The poor condition of the Abap6-Camiri section is a major remaining constraint to achieving theintegration of Bolivia into the regional economic bloc (Mercosur) through the completion of theTrinidad-Yacuiba export corridor to Argentina and, in the future, Paraguay. When completed, togetherwith the West-East Corridor between the borders of Chile and Brazil, this corridor would link the

agricultural regions of Beni and Cochabamba with Santa Cruz and all of them with export markets inArgentina, Brazil and Paraguay. This would facilitate the diversification of agricultural production to non-traditional cash crops for export in order to meet the commitment to eradicate coca production. The SantaCruz-Abap6 and Camiri-Yacuiba sections of the corridor have already been completed; the Santa Cruz-Trinidad (Beni) section is under construction, and the construction of the complementary road fromBoyuibe to Hito Villaz6n, that connects with Paraguay, is expected to be financed by FONPLATA. TheCAS includes, in the transport program, the construction of the San Jose-Puerto Suarez section of the SantaCruz-Corumba (Brazil) highway to complete the West-East corridor. These two operations will assist theGOB in the timely completion of Bolivia's highest priority export corridors. The proposed investment hasbeen defined in close coordination with the Government, IDB, CAF, FONPLATA and other internationaldonors active in this sector.

2. Main sector issues and Government strategy:

Road Sector Issues: As a landlocked country with rugged topography, Bolivia sorely needs a wellfunctioning transport system to sustain its economic development. Distances between cities are long; ruralareas are thinly populated and lack access to markets due to high transport costs; mountains and rivers act asbarriers; and access to seaports is limited and costly. In the past nine years, the Bolivian transport sector haswitnessed important changes that have brought about, with IDA's support, reductions in the transport costsfor externally traded goods and commerce in particular in the western part of the country, where for the firsttime a paved road has been constructed connecting Bolivia with the port of Arica in Chile. The main sectorissues are:

* The geography of Bolivia, which spans from peaks of 6,500 meters in the highlands of the Andes to 200meters in the lowlands of the Amazon basin. As a consequence, Bolivia has to maintain all- weatherroads and spend more to sustain the road transport sector, compared to other countries.

* Road maintenance management and financing. Traditionally, external financing to SNC has beenmainly allocated for new construction and major rehabilitation programs. The implementation of theSecond Road Maintenance Project (SRMP), financed by IDA, marked a change in emphasis of activityof SNC, with a greater focus on maintenance. Maintenance and equipment management systems,designed and implemented under the Export Corridors Project, were extended to the old SNC's districtsand allocations for maintenance and the national budget substantially increased, following therequirements of the project covenants. Unfortunately, this process was interrupted by the administrativedecentralization of SNC and the entire network carried out in 1995.

The new government, which took office in August 1997, immediately recognized the weaknesses of theinstitutional framework. It passed Law 1788 on September 16, 1997 to restore responsibility for thenational road network to SNC. In essence, it aimed to recentralize the national network and rebuildSNC. Under this framework, the decentralized Servicios Departamentales de Caminos (SDCs) are tokeep responsibility for the secondary networks in their respective departments and the municipalities forthe rural roads. The human resources, equipment, most of the financial resources and materialstransferred to the departments under the decentralization will remain with the departments. Theproposed framework, according to Supreme Decree No. 25134, was officially approved by the Cabinet atthe end of August 1998. This establishes: (a) the National Road Network with approximately 10,000km distributed among 11 routes; (b) a Road Maintenance Account and, (c) that the resources SNC needsto take over the responsibility of the national network should come from tolls and funds from theNational Treasury. The government has decided that all maintenance works will be done by contractexcept for emergency works, but major tasks required to execute routine maintenance by contract are notyet ready. The GOB, based on the approved Supreme Decree, has already started to prepare thereorganization of SNC, which is expected to be completed by the end of 1999.

The government's intentions aim in the right direction, and SNC shows adequate capacity andmotivation to take control of the national network. SNC is taking over responsibility for planning,coordination, and supervision of the national road network, so that a consistent approach can be followedin the overall development of the system. Responsibility for the secondary network and rural roads is tobe left with the Prefecturas and Municipalities. SNC will be responsible for implementing projects withthe international agencies financing the national network and establishing national priorities in closecoordination with the Ministry of Finance. Maintenance of the national network is to be carried out bycontract. However, until now, there is no experience in Bolivia of maintenance by contract. Hence theimportance of including a comprehensive maintenance by contract program as a component of thisproject. Concerning the secondary network, a study, financed under the SRMP, is evaluating thesituation under the new administrative framework. The study is expected to be completed by June 1999.

Although road users pay substantial amounts of user charges and taxes, the system of reallocating themthrough the budgetary process has left substantial funding gaps. Ensuring an adequate flow of funds tothe road sector is one priority that has also been addressed in the new Supreme Decree, by establishing aRoad Maintenance Account (Cuenta de Conservacion Vial) to be funded mainly with resources fromroad tolls and, if necessary, complemented with National Treasury funds. Of the total tolls collectednationally and managed by SNC, 70% will be allocated to the main road network and 30% to thesecondary network.

Attention is also being given to the possible participation of the private sector in maintenance,rehabilitation and construction of roads. In Bolivia, given the current levels of traffic (which even if theyjustify an investment on economic grounds may not be enough to make it bankable exclusively on thebasis of tolls), it is difficult to envision a wide participation of the private sector in the construction orrehabilitation of roads. Nevertheless, the country should move in the direction of exploring ways toreduce the costs of maintaining the roads and doing it in an effective manner. For this purpose, theparticipation of the private sector will be explored in an incremental manner, beginning with amaintenance by contract program financed by the project and possibly expanding to concessions formaintenance and rehabilitation. Concessions for construction (or BOT projects) could also be exploredfor specific links on the basis of public-private partnerships. The IDB is financing a study on theprospects and framework for road concessions. The proposed project would provide technical assistanceto carry out the feasibility study on the Santa Cruz - Puerto Suarez concession initiative. Furthermore,the law that establishes the legal framework for concessions of transport public works (Ley deConcesiones de Obras Puiblicas de Transporte) was approved by the Congress on June 1998. Thebylaws of this law have been drafted and are expected to be approved in early 1999.

* The location of the existing road infrastructure, which, to a large extent, has been built in thewestern part of the country because, in the past, Bolivia mainly relied on mineral exports and thecorresponding transport network was developed to support this sector. The highlands, where the minesand much of the population are located, have one-sixth of the land area, but contain over one-third of thetotal transport infrastructure. With a decline in the dominance of the mining industry, future economicprospects require that the development emphasis shift to agricultural regions and growing of non-traditional export crops. Therefore, the eastern part of the country is expected to have most of theeconomic growth and future development. This would require the development of a road network,particularly in the valleys and the lowlands to link the rural agricultural communities with the mainexport centers.

While the above issues need to be addressed by furthering the process of reforms, the prospects for improvedsustainability of the institutional capacity are good and the government is already aware of the risks involvedin the more contentious aspects of the decentralization of road management. As noted above, thegovernment has already taken actions to recentralize the national network and improve the road maintenancesystem with the support of the on-going SRMP.

3. Sector issues to be addressed by the project and strategy:

The project would assist the Government in defining and implementing the agreed transport-sector strategy.It will contribute to: (i) support export corridors development; (ii) improve the interconnection betweencities and the integration of inter-regional trade and commerce; (iii) provide access to markets for regionswith high agricultural potential; and, (iv) through the program on road maintenance by contract and technicalassistance for a road concession program, provide an instrument to ensure adequate maintenance practicesand financing in the national network and increase the participation of the private sector.

C: Project Description Summary

The Santa Cruz-Yacuiba road is part of the Trinidad-Yacuiba "integration corridor" (so called by theBolivian Government) which is about 1,084 km long to the border of Argentina and provides an outlet toRosario, a port on the Parana River reached by ocean-going ships. The corridor has 8 sections. Two areunder construction and financed with CAF funds (Casarabe - San Pablo and San Pablo - Yotau). Five othersections are already paved and in service (Trinidad - Casarabe; Yotaii - San Ram6n - Pail6n; Pail6n - SantaCruz; Santa Cruz - Abap6; and Camiri - Yacuiba. The Abap6-Camiri section is the missing link. Thiscorridor also provides access to the regions between Santa Cruz and Cochabamba served by the East-Westexport corridor (between the borders of Brazil and Chile). Among those regions is the Chapare, where thecoca plant is grown and is being replaced by alternative crops, for which the natural market is Argentina.

The proposed IDA credit would finance the reconstruction and paving of the Abap6-Camiri highway, whichis 152 km long following Route 9, including the 7.3 km by-pass to avoid going through the town of Camiri.The project consists of reconstruction and paving of the existing road, which is now in poor condition, andconstruction of a new bridge over the Rio Grande of about 420 m. The road is currently a gravel road withgood geometric characteristics. However, it needs minor re-alignments and by-passes to avoid crossingsmall villages, resettlement and safety problems. The road would be strengthened to fully accommodategrowth in export traffic. Realignments and reconstruction works would meet the geometric and structuralstandards established for national roads in Bolivia, under which the Santa Cruz-Abap6 and Camiri-Yacuibasections were reconstructed. Land acquisition and people relocation will be financed by the Governmentunder a plan satisfactory to IDA. The engineering studies are already completed for Abap6-Camiri highwayand the access road to El Espino.

The project would also include a program of comprehensive maintenance by contract for the period 1999-2003. The objective of this program is to ensure that the remaining corridor and the roads complementing it,will be in good condition when the project is completed. The project would also provide technical assistanceto strengthen SNC's and VMT's institutional capacity, to study the feasibility of a Santa Cruz - PuertoSuarez highway concession initiative, support the Project Coordinating Unit (PCU) and training activities;and strengthen SNC's Environmental Unit.

The credit would provide US$88.0 million equivalent to finance the project, divided among the followingcomponents:

1. Project components (see Annex 2for a detailed description and Annex 3for a detailed cost breakdown):

Component Category Cost Including % of Bank- % ofContingencies Total financing IDA-

(US$M) (US$M) financing

A. Abap6-Camiri Highway: Physical 97.3 81.0% 77.8 80%

Reconstruction and paving of the Abap6- Camiri highway of 152 km. A two-laneroad, 7.3 m wide with two shoulders 1.5to 2.0 m each (depending on terraincharacteristics), fully paved and re-aligned. The indicative cost includes:* Direct costs,* physical and price contingencies, and* supervision.

The changes in alignments will allow aspeed of 80 km/h in the hilly terrain and100 km/h in the planes. The estimatedtime for construction is 36 months. Theproposed credit would finance 80% of thetotal cost for civil works and 80% ofsupervision.

The road will be split in the followingsegments:

(a) New bridge (420 m) over the Rio 4.9 4.0% 3.9 80%Grande in Abap6 incl accesses (0.44 kin)

(b) Abap6-lpita (63.5 kmn) 40.3 33.6% 32.3 80%

(c) IpitA-Ipati (49 km) including the by- 30.1 25.0% 24.0 80%pass of Gutierrez

(d) Ipati-Camiri (30.7 km) 16.6 13.8% 13.3 80%

(e) By-pass of Camiri (7.3 km). 5.4 4.5% 4.3 80%Construction and paving of a 7.3 kmbypass to avoid going through the town ofCamiri.

B. Access Road to El Espino (38 km): Physical 8.5 7.0% 6.8 80%

Reconstruction and paving of an existingdirt road that runs parallel to the rail trackto Charagua, a two-lane road, 6.0 m widewith two shoulders 0.5 m each, to provideaccess to the corridor for the indigenouscommunities.

The indicative cost includes:* direct costs,* physical and price contingencies, and

Component Category Cost Including % of Bank- % ofContingencies Total financing IDA-

(US$M) (US$M) financing* supervision.

The proposed credit would finance 80%of the total costs for civil works and 80%of supervision.

C. Comprehensive Maintenance by Institution 12.2 10.2% 2.9 24%Contract: Building/

PhysicalA program of comprehensivemaintenance by contract for the period1999-2003. The indicative cost of thiscomponent includes supervision andtechnical auditing and encompasses about900 km of roads in the department ofSanta Cruz. The proposed credit wouldfinance:

(i) 20% of civil works, and(ii) 80% of supervision.

D. Institutional Strengthening: Institution 2.0 1.7% 0.5 25%Building/

Institutional strengthening of VMT and PhysicalSNC through the provision of technicalassistance for:

(a) Consulting services to:

(i) carry out a feasibility study for the 0.1 0.1 100%San Jose - Puerto Suarez highwayconcession initiative,

(ii) strengthen and operate the ProjectCoordinating Unit, SNC's 0.1 0.1 100%Environmental Unit, and providetraining to SNC, and

(iii) prepare technical and financialaudits

(b) Acquisition of goods 0.1 0.1 100%

(c) Routine maintenance program 80%0.1 0.1

(d) Implementation of the Resettlement 20%Plan, Indigenous People Development 0.2 0.1Plan, and the Community Relations Plan. 0%

1.4 0.0The proposed credit would finance:100% of consultants and services for (a);80% of goods and equipment for (b); and20% of maintenance works for (c).

Total 120.0 100% 88.0 73%

2. Key policy and institutional reforms supported by the project:

Reforms to carry out maintenance of the national road network by contract will be at the top of the project'sagenda, because neglect of road maintenance can ultimately result in high costs to restore infrastructure andin particular the proposed highway. As there is no current experience with contract maintenance, acomprehensive program will form part of the proposed project. If it proves successful, the program will beextended to the entire national network. This would substantially solve the road maintenance problemcaused by the decentralization-recentralization process, still underway. The Spanish Consultant Trust Fundhas financed the preparation of this program by consultants.

3. Benefits and target population:

As noted above (page 3), the project will remove constraints in transport and reduce transport costs for goodsand passengers. It will promote social and political interaction among the indigenous people and localcommunities. This will enable a higher level of economic activities and stimulate education, trade, exportsand the mobility of people. By reducing travel time and improving road alignments, the proposed projectwould upgrade transport communications between Santa Cruz and Yacuiba, the border with Argentina andalso with Paraguay, when the Boyuibe - Hito Villaz6n section is finished. Compared to the existing road, (i)average travel time would be reduced by more than 3 hours between Abap6 and Camiri; and (ii) cost pervehicle-kilometer for the vehicles using the new road would be reduced from US$0.55 to 0.19 for cars andfrom US$1.59 to 0.64 for heavy trucks (see Annexes 4 and 10). The reliability, safety and quality of freightand passenger transport services would be improved, and opportunities provided for increased education aswell as socio-political interaction among the communities along the entire corridor.

These benefits would accrue to two main groups:

First, the medium and long-distance users of the export corridor. The main beneficiaries are located in theChapare region of Cochabamba, the southern provinces of Beni, the entire Santa Cruz department, theHernando Siles and Luis Calvo provinces of Chuquisaca and the Gran Chaco province in Tarija.

Second, the beneficiaries of the access road to El Espino which are the agricultural population and localcommunities of the Santa Cruz, Rositas, Oquitas, Izozog, El Espino and the Ava Guarani indigenous peoplesettled in the vicinity of the Abap6-Charagua-Yacuiba railway. The representatives (Capitanes Grandes) ofthe Karaguazu, North Charagua and Upper and Lower Izozog ethnic groups have officially requested thatadequate access be provided, mainly to Santa Cruz, to benefit from the construction of the highway and theaccess to El Espino.

4. Institutional and implementation arrangements:

The Economic Development Ministry-MDE (Ministerio de Desarrollo Econ6mico) and in particular the ViceMinistry of Transport, has overall responsibility for the transport sector and the policy framework withinwhich the project will be implemented. SNC, the national road agency,will have the mandate to manage thenational road network beginning 1999 and would be responsible for the execution of the project.

During implementation of the Export Corridors Project (Credit 2012-BO) and the Second Road MaintenanceProject (Credit 2395-BO), SNC was strengthened with the development of: (a) maintenance and equipmentmanagement information systems, (b) organizational structure that gave proper emphasis to the maintenancefunction, and (c) processes that emphasize adequate consideration to planning and environmental control.The maintenance and equipment management systems were extensively used by the district offices to reportto SNC management on maintenance execution. Furthermore, traffic counters and axle-load controlequipment were purchased. This equipment allows SNC to control the overloading of vehicles (to preventpremature deterioration of the infrastructure), and, along with equipment that measures surface and structuralconditions, to build an information base upon which to establish investment priorities and plans.

In August 1995, the Administrative Decentralization Law (ADL) established a new institutional frameworkfor the sector, mandating the transfer of road management functions to the nine Prefecturas, along with asizable amount of human and financial resources (including road tolls). As the number of staff was reduced,SNC weakened and its budget was also cut. As described above, the Government has already dealt with mostof the problems caused by the ADL with the approval of the Supreme Decree that re-establishes the nationalroad network and clarifies SNC's role.

SNC is now being improved through the technical assistance component of the on-going SRMP project toassist the Government in a reorganization aimed at: (i) strengthening the role of the regional and localadministration in line with the new Decree; (ii) streamlining existing departments, (iii) strengthening SNC'scapacity to deal with environmental issues; (iv) training its personnel; (v) tightening up financial andprocurement procedures; (vi) developing a plan of action to deal with the shortage of technical personneland further improve salary policies, financial controls, and budget mechanisms; and (vii) shift the role of theVice Ministry of Transport to mainly deal with policy issues. The SDCs will continue to be in charge ofmaintaining the secondary network and the municipalities will be in charge of rural roads. The project willfinance a program to contract out comprehensive maintenance with the purpose of extending it to the wholenational network, if it is successful. Future financing of maintenance could be provided by the proposed roadmaintenance account, which has been designed with IDA's support and supervision.

Accounting, Financial Reports, and Auditing. For the purposes of carrying out the project, a SpecialAccount would be opened and maintained in US Dollars at the Banco Central de Bolivia on terms andconditions satisfactory to IDA. Deposits into the Special Account and their replenishments, up to theAuthorized Allocations set out in the Disbursement Letter, will be made initially on the basis of Applicationsfor Withdrawals (Form 1903) accompanied with the supporting and other documentation as specified in theDisbursement Handbook. Once the accounting and financial management systems of the SNC are deemedcompliant with LACI requirements, and are certified as such by IDA, a migration to a Project ManagementReports PMR-based type of disbursements may be implemented as described hereafter.

Since the project is to be administered by SNC, IDA conducted a review of the accounting, controls overdisbursements and resources, planning and budgeting, as well as, the level of administrative staff. It wasdetermined that SNC has in place accounting and internal control systems that accord with such accountingstandards or agreed format and that reliably record and report all assets and liabilities and financialtransactions of the project and the entity, including those transactions involving the use of Bank funds; andprovide sufficient financial information for managing and monitoring project activities.

Migration to LACI. During negotiations, it was agreed that within a year from the date of effectiveness SNCwould complete their action plan for the strengthening of its financial management system in order to enableit to prepare quarterly Project Management Reports (PMRs) which they cannot do at present. Each of thesereports would: (i) show actual sources and applications of funds for the project, both cumulatively and for theperiod, and projected sources and applications of funds for the project for the following six months; (ii) listseparately expenditures financed out of the credit during the period covered by the report and expendituresproposed to be financed during the following six months; (iii) describe physical progress in projectimplementation, both cumulatively and for the period covered, and explain variances between the actual andpreviously forecast implementation targets; and (iv) set forth the status of procurement under the project andexpenditures under contracts financed from the credit, for the period covered.

Audit Arrangements. An independent external auditing firm, satisfactory to IDA, would be hired to carryout annual audits of the project and the entity. IDA's Financial Accounting, Reporting and AuditingHandbook (FARAH), published in January 1995, would be used by external auditors, in accordance withexisting IDA procedures. Audit reports would be presented to IDA no later than six months after the closingdate of the previous fiscal year. It was agreed during negotiations that the financial audit will be contractedfor the total estimated period of project implementation and that the procurement process for the audit willstart as soon as the credit is effective.

D: Project Rationale

1. Project alternatives considered and reasons for rejection: The only alternative that could be considered isthe railway (ENFE - Empresa Nacional de Ferrocarriles) that goes from Abap6 to Yacuiba passing throughCharagua, which was capitalized through private sector participation in 1996 with the support of the ExportCorridors Project. With this capitalization, the GOB did not sell the company's assets but insteadcontributed to the formation of a corporation with a 50% participation of a private partner, an amount whichstays in the company, thus increasing its value. While the track and infrastructure have remained in thehands of the GOB, their maintenance and improvement have been carried out by the capitalized company. Inorder to use the railway effectively, it is necessary to have a complementary road transport system in place tobring produce from the farm to the railway's loading points. Taking advantage of its monopoly power onmany routes, ENFE keeps its tariffs high, causing non-traditional agricultural exports to be less competitive.Moreover, under the current structure, investments in the railway's maintenance, modernization andexpansion are dependent on the GOB's decisions and the willingness of the private partners to advancecapital. The GOB has continued to provide funds to meet ENFE's recurring resource gap, as itsperformance contracts with the Government have not yet worked well. The company needs additionalincentives and financial resources to operate effectively. Given this scenario, the railway can not beconsidered a viable alternative.

Concerning the proposed project, two alternative routes were considered: The first alternative was toupgrade the original road and, additionally, build and pave the existing access road to El Espino. The secondalternative assumed that the proposed road would not follow the original route and would include a diversionthrough El Espino - IpitA. This alternative would increase the total length of the main road by 10 km,significantly affecting the project economics, as proved by the economic analysis carried out. Furthermore,this alternative posed some serious environmental and social concerns. The preparation mission in February1998 suggested to the Government that it carefully internalized the cost of such concerns into the analysis.The resulting analysis showed that the cost of the diversion through El Espino would be high and its socio-environmental impacts would be adverse. Under these circumstances, the project would have had to beenvironmentally rated "Category A", which would have translated into additional cost and time to prepare.

The cost difference between both alternatives may well finance the access road to El Espino, while protectingthe benefits to the medium -and long- distance traffic. Taking into account these factors, the Minister ofEconomic Development sent a letter to the Bank, on February 27, 1998 expressing the interest of the GoB infollowing the first alternative. During the June 1998 preparation mission a meeting with the national,departmental and local authorities was held and the outcome of the meeting was a consensus of choosing thefirst alternative, under the following conditions: (i) that the access road to El Espino should be financed withIDA funds under the proposed project; and (ii) it should be reconstructed at the same time as the Abap6-Camiri highway.

2. Major related projects financed by the Bank and/or other development agencies (completed, ongoingand planned):

Sector Issue Project Latest Supervision (Form 590)Ratings

(Bank-financed projects only)Implementation Development

Progress (IP) Objective (DO)Bank-financedOverall terms project objectives. Bolivia Export Corridors Project (Cr. S SThe physical implementation. 2012-BO). Closed June 30, 1996Institutional capacity building Second Road Maintenance Project S S

(Cr. 2395-BO). Closing date:June 30, 2000 (two extensions with atotal of 24 months).

Other development agenciesIDB - Interamerican * Cotapata - Santa Barbara; 49.1 S SDevelopment Bank Road Km under construction; expectedConstruction to finish in June 2000

* Rio Seco - Desaguadero; 95.3 S SKm under construction; expectedto finish in Dec. 99

Technical Assistance - Studies . Ventilla - Tarapaya, 60 km; S Sstudies completed Dec. 98.Negotiated February 99. Boardapproval scheduled by May 99.

* Pail6n- San Jose; 219 Km, N.A. N.A.studies expected to finish inApril 99.

* Study on prospects andframework for road concessions,in the bidding process; finishedin Dec. 98.

CAF - Andean Development * Padcaya - Campanario; 25 Km N.A. N.A.Corporation under construction; extended toRoad Construction La Mamora; 23 Km, expected to

finish in Jan. 2000.

* La Mamora - Emborozu; 20 Kmunder construction; expected tofinish in April 2000.

* San Pablo - Casarabe; 88 Kmunder construction; expected tofinish in Sep. 99

. Yotau - Ascenci6n de Guarayos;48 Km under construction;expected to finish in Oct. 99.

Sector Issue Project Latest Supervision (Form 590)Ratings

(Bank-financed projects only)Implementation Development

Progress (IP) Objective (DO)

• Ascenci6n de Guarayos - SanPablo; 113.5 Km, underconstruction; expected to finishin Sep. 99.

* Yamparaez - Tarabuco; 35 Kin;under construction, expected tofinish Apr. 2000.

. Potosi - Cuchu Ingenio; 37 Km;under construction, expected tofinish Apr. 2000.

* Sunchu Tambo -PuenteSacramento, 17 Km; underconstruction, expected to finishNov. 99.

* Challapata - Ventilla 93 Km; tobegin construction.

FONPLATA * Abap6 - Camiri; 152 Km, S STechnical Assistance - Studies studies finished in Jan. 99.

• Boyuibe - Hito Villaz6n, 135Km studies ongoing; expected tofinish in March 99.

* Cuchu Ingenio - Villaz6n, 323Km studies ongoing; expected tofinish in Dec._99.

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

Prior to the Export Corridors and Second Road Maintenance Projects, the Bank Group's operations in thetransport sector were limited to five loans/credits during FY1972 to FY1978. Three were for railways(FY1972, FY1974 and FY1977), one for road maintenance (FY1978), and one for civil aviation (FY1977).SNC benefited from extensive financial and technical assistance provided by the US Government since 1964and by IDB in the 1970s. The absence of new operations between 1978 and 1986 reflected the deteriorationof the country's economic management during this period.

The Bank Group's first involvement in roads was the Highway Maintenance Project (Ln. 1567-BO) in 1978(Bolivia was an IBRD borrower prior to 1985, when it once again became eligible for IDA, because ofeconomic collapse between 1980 and 1985). The Export Corridors Project (Cr. 2012-BO) was approved inMay 1989 and closed on June 30, 1996, one year after the original closing date. The Second RoadMaintenance Project was approved in May 1992 and is still under implementation.

The ICR for the Export Corridors Project (ECP) was completed on May 15, 1997. This project was designedto: (a) upgrade key links in the transport network, particularly on those corridors connecting Bolivia to itstwo export railway routes, one to the Pacific (to the port of Arica in Chile) and another to the Atlantic (viathe river port of Puerto Quijarro on the Parana) and one export road to the Pacific (La Paz-Patacamaya-Tambo Quemado-Arica and its connection with Oruro and Cochabamba, the West-East corridor); and (b)strengthen the functioning of key transport sector institutions, particularly the national railway company(ENFE) to make it more market oriented and the national road agency (SNC) to improve road maintenance.The credit for the Second Road Maintenance Project (SRMP) was originally due to close on June 30, 1998but, to complete the works already awarded, a first extension (of nine months) was approved until March 31,1999; and based on GOB's compliance with 6 conditions that will contribute to achieving the project'sobjectives, a second extension of 15 months until June 30, 2000 was approved in January 1999. The projectwas designed to: (i) improve road conditions in order to reduce vehicle operating costs, improve access tomarkets and encourage trade development; (ii) improve the road maintenance budget process; (iii) improveroad maintenance management, planning and operations; (iv) improve investment planning; (v) assureadequate maintenance funding and financial self-sufficiency for the national road authority (SNC); (vi)strengthen the domestic construction industry; and (vii) transfer maintenance technology and organization tothe road regional districts of SNC.

The Export Corridors Project, with five different components in two subsectors and several implementingagencies, did not have a substantive impact on some of its objectives except in the road subsector, in whichthe El Alto-Patacamaya-Oruro highway was successfully completed on time, road maintenance andequipment management systems were fully implemented and the assistance to the Emergency Social Fundwas successful. The project was perhaps too ambitious because of the breadth of interventions. It isinstructive that to achieve a greater impact, either the objectives of particular project components need to beless ambitious or the number of sub-sectoral components must be reduced to allow for a sharper focus andmore specific and pragmatic interventions.

During the implementation of theses two projects, many components often suffered from continuousreshuffling of staff. Shielding project implementation from staff changes is not a simple task, but it could beimproved by:

(a) engaging key long-term consultants that sustain the implementation pace in spite of staff oradministration changes, though this approach may be to the detriment of achieving the intendedinstitutional development objectives;

(b) designing projects in an incremental or stepwise fashion in such a way that each stage must becompleted within a given governmental administration;

(c) subsequent stages are contingent on the accomplishment of the specified implementation anddevelopment indicators and benchmarks; and

(d) carrying out reforms in the civil service through which a more limited but well-remunerated humanresource base, subject to satisfactory performance, assumes the responsibility for managinginvestment projects in the public sector. This lesson is particularly critical in situations where themanagerial and technical resource base of the public sector is limited.

The experience of the implementation of the Bolivian institutional reforms confirms that reform processes,when undertaken without a clear consensus and no pre-defined strategies, rarely produces the intendedresults. The application of the Administrative Decentralization Law (ADL) to the road sector during theimplementation of the SRMP lacked a clear strategy. The experience shows that it is not enough to passlegislation, it is also necessary to internalize strategies and concepts, and to define an incremental processwhich would allow change to take place in the light of the acquired practice and institutional capacities.

In the road sub-sector, the lack of a pre-defined strategy and the sheer magnitude of the tasks required theissuance of a specific decree for the purpose of limiting the overall impact of the ADL and clarifying the newinstitutional structure. However, the decree attempted to achieve a compromise totransfer some functions to

the VMT which, in light of the capitalization of the public enterprises under its jurisdiction, was beingdivested of major responsibilities. The decree also established supervisory standards which require a stronginstitutional base and a clear structure of incentives. Most of them have not been implemented because ofthe weak institutional base and insufficient efforts to overcome it through institutional strengtheningprograms. Rushed approval of legislation and the lack of an integrated strategy to support the change, in acountry with limited institutional capacity, has led to an uncertain outcome.

Furthermore, the following issues (some of them not specifically identified in the appraisal report) havearisen during the implementation of the SRMP: (a) enforcement capacity in the central government formaintenance programs is inadequate; (b) commitment of central governmnent to implement a sustainablefinancing mechanism for maintenance is weak; (c) the financial and execution capacity of contractors islimited; (d) the project management and internal control capacity of the executing institution is inadequate;(e) civil works started late and some cost overruns occurred; and (f) severe storns during rainy seasonsaffected the pace of project management and implementation. The bad weather during part of projectimplementation, changes in government administration (in 1993 and 1997) and continuing difficulties withthe institutional framework have contributed to delays in project implementation.

The design of the proposed project adequately internalizes the lessons learnt from these projects. The projectis basically limited to three components (road and bridge construction, comprehensive maintenance, andinstitutional strengthening) and adequate technical assistance is being included to further the reform processinitiated under the previous and on-going projects to enhance sustainability. The technical assistance wouldbuild adequate capacity to enhance execution capacity in the VMT and SNC.

4. Indications of borrower commitment and ownership:

GOB's ownership of the project is confirmned by the priority given to the project in the NationalDevelopment Plan to the works already underway (to complete other sections of the corridor) and therequest for IDA support.

This project was identified by the Government as high priority in its development plan for its contribution topoverty alleviation, regional integration and promotion of non-traditional export crops. The project has beendiscussed at the highest level of the Government.

The road reconstruction works have been divided in five packages, and all of them are subject to pre-qualification of contractors. The pre-qualification process is underway.

5. Value added of Bank support in this project:

IDA support to the sector is critical both for timely and responsive funding for urgent priorities and for itstechnical cooperation and assistance. This response is being re-enforced by the on-going reform programand construction of other sections of the Santa Cruz-Yacuiba road financed by other donors, particularly IDBand CAF.

Through its sequence of loans to the transport sector, IDA has built up credibility for its integrity, strongcontrol of funds, and avoidance of political interference. During the conception and execution of the project,it will contribute to ensure transparency in the bidding process and, therefore, better use of public resources.IDA involvement is also expected to benefit the design and quality of construction of highways, and fosterimproved practices in the areas of environment, land acquisition and resettlement. IDA will also bring tobear its extensive experience in similar projects in countries with institutional and maintenance problems atdifferent stages of decentralization.

The project is very costly relative to the internal resources the Government can devote to roads. IDB hasalready lent a large amount of its available resources for road construction in the past years; and CAF is nolonger able to lend large amounts due to debt reduction agreements, from which Bolivia is benefiting throughthe Heavily Indebted Poor Countries Program, that establishes limits on the amounts the country may borrowon commercial terms.

E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 12)

1. Economic (supported by Annex 4):

[X] Cost-Benefit Analysis: NPV=US$56.0 million; ERR= 19.1% []Cost Effectiveness Analysis:[] Other

The Abap6-Camiri section and the access road to El Espino, and all roads to be rehabilitated and/ormaintained under the comprehensive road maintenance program were evaluated using the Highway Designand Maintenance Standards Model (HDM), which simulates life cycle conditions and costs and provideseconomic decision criteria for multiple road design and maintenance alternatives, based on a survey of roadcharacteristics, traffic, and agency and user costs.

All sections to be paved on the Abap6-Camiri highway and all sections in the comprehensive roadmaintenance program yielded an economic internal rate of return (EIRR) greater than 12 percent. Thepaving of the access road to El Espino is expected to yield an EIRR of 10.5 percent based on lower vehicleoperating costs but it will also generate non-quantifiable social benefits to the indigenous communities in thearea (36,000 inhabitants in 2002), whose economic base is agricultural production.

The analysis yielded a project net present value (NPV) of $56.0 million at 12 percent discount rate and anEIRR of 19.1 percent. The highway component yields an EIRR of 19.1 percent and the road maintenanceprogram yields an EIRR of 19.4 percent. Around 50 percent of the benefits will accrue to low-incomegroups. The economic justification is robust; agency costs would need to increase by 69 percent or userbenefits to decrease by 41 percent to yield a zero net present value. A worst case scenario of increasingagency costs by 20 percent and decreasing user benefits by 20 percent yields an economic internal rate ofreturn of 13.5 percent.

2. Financial (see Annex 5):

A set of performance indicators is included (see Annex 10) to monitor adequate financing of the projectmaintenance activities, as well as the Road Maintenance Account set up by the GOB to finance maintenanceof the whole main road network.

Fiscal impact:

The direct total fiscal impact of the project is a domestic financed deficit of US$32.0 million. This is to befunded by the Borrower in the 1999 - 2003 period (calendar years, Borrower's fiscal years) as follows: 1999- US$2.7 million; 2000 - US$6.9 million; 2001 - US$8.9 million; 2002 - US$7.8 million, and 2003 - US$5.9million. This is a tentative schedule and may suffer changes. The counterpart funds, averaging US$6.4million per year, are equivalent to about 2.2% of the US$286 million, which is the fiscal deficit target (3.9%of GDP) agreed with the IMF for CY 1999.

3. Technical:

The design standards for the project roads are shown in Annex 2. Alternative pavement types wereevaluated. Cement concrete paving would be more resistant to rainfall but considerably more expensive,

even on the basis of life-cycle costing. The cost estimate for the major bridge assumes a post-stressedconcrete structure; bidders could be invited to submit alternative designs in accordance with IDA's standardbidding procedures. The term "comprehensive maintenance" includes not only routine and periodicmaintenance, but also user and maintenance management services, and emergency coverage.

4. Institutional:

a. Executing Agencies: SNC, the national road agency, will be responsible for managing the Boliviannational road network beginning 1999 and for implementing the proposed project. Law 1788 aimed torecentralize the naticnal network, as well as SNC. The GOB started preparing for the reorganization of SNCduring 1998. The government's intentions aim in the right direction, and SNC shows adequate capacity andmotivation to take control of the national network. Under this framework, SNC will also be responsible forexecuting the construction and maintenance of the main network with international financing agencies andestablishing national priorities.

b. Project Management: The Administration, which took office in August 1997, has approved newlegislation that will contribute to: (a) clarifying the institutional framework for the road administration; (b)tailoring the application of the decentralization to the capacities and resources of each SDC; and (c)promoting cooperation between SNC and the SDCs, to strengthen the technical, planning and administrativecapacities of both. Furthermore, the proposed road maintenance account will contribute to ensure sustainablefinancing of road maintenance.

5. Social (supported by Annex 8):

The project area of influence includes the agricultural regions of the country with the best prospects fordeveloping crops which could replace coca as a major source of export income. The United States and otherGovernments are fully supporting a program to help farms switch from growing coca to other alternativeproducts. By providing outlets to export markets, the project would provide incentives for the poor ruralfarmers to replace coca by non-traditional export crops. The project would also provide short-termemployment during construction and through small contracts for maintenance works once in operation.

As part of the Environmental Impact Assessment, a social impact assessment was carried out. Theassessment focused on the direct impacts on families that will need to be resettled and the potential indirectimpacts on indigenous communities in the project's area of influence. Consultations with civil societyrepresentatives took place during the assessment process. During the consultations widespread support forthe project was found and the potential positive and negative social impacts were discussed with theparticipants. The social assessment resulted in three specific action plans aimed at avoiding and/ormitigating possible negative impacts and enhancing access to the expected benefits of the project: (i)resettlement plan; (ii) indigenous peoples development plan; and (iii) community relations plan.

(i) Resettlement Plan

A total of 34 families would be resettled or relocated. Based on the degree of vulnerability, affectedfamilies would: (i) receive cash indemnification; (ii) be relocated within the same property; or (iii) beresettled to a new location in the vicinity. Among the families to be resettled, some have small shops. Inthis case, these families would also receive help to restore their economic activity. Also, there are about92 small merchants and service providers that would not need to be resettled but their economic activitieswould be affected by the highway construction. For these families special cash compensations would begranted. SNC would be responsible for the general implementation and supervision of the resettlementplan. Some specific activities would be decentralized to either contractors or local governments. Theresettlement plan would be launched before construction works begin and support to affected familieswould continue until the affected families have been satisfactorily reestablished.

(ii) Indigenous Peoples Development Plan

* Izozenio indigenous communities organized in three "Capitanias"(Kaaguasu, Kami and Charagua Norte)with a surface of about 455,000 Ha and 16,000 indigenous people live in the project's area of influence.Lack of regular transport has been a chronic feature contributing to the communities' poverty. Currently,indigenous communities in the area lack permanent and easy access to basic services and markets. Theindigenous people see the road to El Espino as an effective solution to their problems. However, they areaware of the potential negative impacts the road may have in terms of opening their lands to colonizationas well as the weakening of their social organization and culture. During the project preparation, severalmeetings were held with indigenous leaders from CABI and CIDOB (highly organized indigenousorganizations representing the communities in the project area) as well as with the communities living inthe project area of influence. In these meetings the potential impacts of the new road were discussed andan Indigenous Peoples Development Plan was agreed. The Plan comprises several activities rangingfrom support to land titling to bilingual education.

(iii) Community Relations Plan

* To facilitate communications and to avoid conflicts with the local community, a community relationsplan was developed as a result of the assessment. Also, specific recommendations on location ofworkers' camps, workers' code of conduct and indemnification procedures for potential damages wereintroduced in the Environmental Management Plan. The community relations plan involves: (i) theestablishment of a civil society consultative committee, (ii) procedures and mechanisms for informationdissemination and community access to project management and; (iii) support to local governments forurban planning initiatives.

6. Environmental Assessment: Environmental Category []A [X] B []C (Supported by Annex8)

The proposed highway reconstruction and paving will follow the existing gravel road alignment for the mostpart in an area of the southern part of the Santa Cruz Department where the natural vegetation has alreadybeen widely cleared. Direct environmental impacts will be road widening and realignment that may berequired in some sectors, which may cause the resettlement of a small number of dwellers (see previousparagraph). Direct impacts on vegetation and fauna will be minimal, as most areas have long beendeforested and local fauna has been driven to more remote areas. Erosion control and embankment stabilitywill be needed in some segments as the road crosses mountain range. Indigenous populations are mainlysettled in areas over 30 km from the road, though some do live close to the access road to El Espino. Indirectimpacts on these indigenous populations are expected to be minimal.

Additional pressures on natural resources (logging, colonization) are also expected to be small. There are nocritical natural habitats. The area has no known archaeological sites and the potential for chance findings islow. Local expectations towards this project are quite high specially among the indigenous communities.These communities want improved access to Santa Cruz for their products.

Based on the Environmental Impact Assessment, a detailed environmental management plan was preparedfor all road segments and by-passes. A summary of the EIA and environmental management plan ispresented in Annex 8. The plan includes:

(i) specific erosion and stability measures along the entire road segments, which have been included inengineering designs and budgets;

(ii) a community information and consultation program, which includes technical assistance to ruralmunicipalities to deal with land use planning, road safety, and re-ordering of economic activitiesalong road by-passes;

(iii) a detailed set of environmental specifications for contractors, including explicit environmentalbehavior guidelines for workers, restrictions regarding camp locations near rural communities andprocedures for chance findings of archaeological sites. Compliance with these specifications will beenforced by an environmental supervision team within the technical supervision arrangements;

(iv) a resettlement plan (see Annex 8); and

(v) an indigenous peoples' development plan, which includes measures to avoid major impacts fromhaving a major international road traversing their lands, and support to on-going initiatives for landtitling, commercialization and bilingual education.

This plan includes a detailed schedule for implementation, institutional arrangements, and budget.

Environmental management capacity in SNC is being strengthened through the on-going Road MaintenanceProject. The proposed reorganization of SNC (starting January 1999) will upgrade SNC's existingenvironmental unit to a higher hierarchical status within the organization reporting to the SNC's DeputyDirector. The project will provide additional support to SNC to strengthen environmental managementcapabilities.

7. Participatory Approach:

a. Primary beneficiaries and other affected groups:

The primary beneficiaries would be the direct road users of medium and long distance of the main exportcorridor whom would benefit from improved transport services, better safety, and improved access to newexport centers.

Indigenous populations are mainly settled in areas over 30 km. from the road. The extension to El Espinowill provide access to the regional markets for the indigenous communities and will be financed by the creditas a contribution of the project to the development of those communities. The indigenous communitiesarewell aware of the project and have been alerted to its potential impacts from its conception. They are mostinterested in the construction of the road to facilitate their access to markets. This interest has beenconfirmed by representatives (Capitanes Grandes) of the Kaaguasu, Kami, Charagua Norte and Upper andLower Izozog communities, who officially requested that the construction of the road go through El Espino,and also by the identification mission in informal meetings with the corregidor (the mayor) of thecommunity of El Espino

b. Other key stakeholders:

Other stakeholders are large land owners, menonite communities, local governments and chambers ofcommerce in the largest towns served by the road. All these actors have participated in a series ofconsultations that took place during project preparation as part of the EIA process. During theseconsultations, IDA missions cautioned the indigenous communities about some of the potential negativeimpacts if the Abap6-Camiri highway were to pass near El Espino, due to the potential risk of colonizationand encroachment, and emphasized the importance of land titling as a mechanism to prevent colonization. Itwas agreed that permanent consultation with CABI and CIDOB, as well as with the local communities andtheir leaders, would be essential to ensure that they were well aware and participated in the assessment ofproject alternatives and the design of appropriate measures to ensure that the indigenous communities wouldget all the benefits of the upgraded road.

F: Sustainability and Risks

1. Sustainability:

The sustainability of the project's physical investments is dependent on the quality of the initial constructionand adequate funding for future routine and periodic maintenance. The use of independent consultants for

construction supervision, technical audits and regular IDA supervision missions will help ensure qualitycontrol.

The government is taking a three-prong approach to improving project sustainability: (i) clarifying andstrengthening the roles of the VMT, SNC and the SDCs; (ii) developing strategies to enhance road sectorfunding and other maintenance policies; and (iii) developing a viable investment program (includingmaintenance) to further reduce transport costs.

* After the institutional changes generated by the decentralization process, in which several agencies werein charge of various aspects of the transport sector, the clarification of roles and strengthening of theseinstitutions was considered critical. The new SNC, a reorganized autonomous national entity, mustplan, supervise and enforce maintenance activities at the national level. In addition, SNC must lead thecoordination and monitor the implementation of technical assistance programs at sub-national level. Toachieve this, the government has recentralized the national network to supplement actions already takento revisit the institutional framework and devise ways to make it work.

* To strengthen the road sector funding and axle load control policies, actions are already being takenunder the on-going SRMP. These actions entail ensuring that the resources generated by road usercharges are reinvested in the road network so that its deterioration is stopped in time to prevent highervehicle operating costs and higher rehabilitation costs in the future. The new decentralized schemerequires fiscal discipline to enforce adequate maintenance of the network. The new decree establishesthat 70% of the tolls collected on the roads should be spent on maintaining the main network and 30%on maintaining the secondary network maintenance, but there is a need to ensure compliance and togenerate additional funds to cover the gap, so far financed by Treasury funds.

- IDB is financing the Government's initiatives to develop a transport master plan to define priorities forthe transport sector in the medium term. The objective is to continue to rehabilitate the national networkand construct key missing links along the main export and integration corridors in the country. Inaddition to seeking international financing, the government has started to explore the possibilities,however limited due to the low traffic levels, of incorporating the private sector into the financing andoperation of road investments.

* To complement the preparation of the master plan, SNC together with the SDCs should prepare acomprehensive maintenance program with time-slice targets. This would be complemented withinstitutional building programs to ensure: (a) the mechanisms developed under the Export CorridorProject and the SRMP are implemented; and (b) the progress achieved under the SRMP in themanagement of the national road network is effectively sustained. (These efforts would include theelimination of force account for non-routine or emergency activities in the departments). Furthermore,maintenance to be carried out by contract would take advantage of existing small local contractors. Itwas considered prudent that a program to test comprehensive maintenance by contract be included inthe proposed project for part of the Santa Cruz Department national network before it is adopted for theentire national network.

The sustainability of the decentralization process in the road sub-sector will be further improved by helpingbuild partnership between SNC and the SDCs. This requires SNC to make its pool of experts available to theSDCs and for the latter, to accept the role of SNC. These aspects are being addressed under the on-goingSRMP to further advance this agenda of reforms.

2. Critical Risks (reflecting assumptions in the fourth column of Annex 1):

Risk Risk Rating Risk Minimization Measure

Annex 1, cell "from Outputs toObjective

Delays in completion of civil works in the N The reconstruction and paving of the Abap6-Trinidad-Yacuiba corridor. Camiri section is the only one not yet started in the

entire corridor. The civil works of this sectionwill be executed by international and/or nationalcontractors. The experience with the constructionof other sections in the same and other corridorshas been satisfactory.

SNC's lack of management experience with M The program and the methodology to be used inprivate sector participation in road the program of comprehensive maintenance bymaintenance. contract has been prepared by consultants with

experience in other countries. The program itselfincludes advice for its implementation.

The road maintenance account is not M The new decree that establishes the roadimplemented yet and there is a chance that maintenance account has already been approvedthere will not be sufficient funds for road and the account opened. It proves that there is amaintenance. strong commitment by the Government to ensure a

satisfactory financing mechanism for roadmaintenance.

A legal and regulatory framework for road M The law for concessions of transport public worksconcessions has not been established and the has been already approved by Congress. IDB isbylaws for its implementation are not financing the preparation of the legal andexpected to be ready in early 1999. regulatory framework for road concessions. The

project includes technical assistance to carry out afeasibility study for the Santa Cruz - PuertoSuarez highway initiative.


Annex 1, cell "from Components toOutputs"

Delays in the final design for civil works. N Engineering designs have been completed by aconsulting firm contracted by SNC and financedby FONPLATA.

The land acquisition and resettlement plans N A land acquisition and resettlement plan inare not prepared on time. accordance with the engineering designs, and

satisfactory to IDA has been completed.

Delays in the "Declaratoria Ambiental' given N An environmental assessment has been preparedby the Ministry of Sustainable Development by the same consultants and under the sameand Environment. contract for the engineering designs. According to

the Bolivian Environmental Law, the Ministry ofSustainable Development and Environment will


issue the "Declaratoria Ambientar'.

Delays in availability of counterpart funds M It is important to ensure that the counterpart fundsduring implementation. In particular the are available on time. Particularly the financialfunds to be provided by the Prefecturas. resources needed for the first year of

imnplementation (1999). IDA required the GOB toinclude in the National Treasury Budget thecounterpart resources needed for 1999.

Overall Risk Rating MRisk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

This is the fourth IDAIIBRD-financed road project in Bolivia. It has been prepared on the basis of lessonslearned from the implementation of the ECP and the on-going SRMP. Under these two projects, institutionalreforms have been and are being implemented. The problems created by the decentralization-recentralizationare being addressed by the SRMP and the risks from the implementation and passage of the administrativedecentralization law have been minimized with the approval of the Supreme Decree, which re-established thenational road network and contributed to a better definition of SNC's roles and responsibilities.

There is a risk that the economic development objective, in contrast to the road improvement objective, willnot be achieved. The development of non-traditional exports depends on a range of actions, not only on thebuilding of a road, i.e. the GOB's actions to promote non-traditional exports and curtail the production ofcoca. The GOB is taking satisfactory actions to increase non-traditional exports. The project includes ananalysis of the linkage between the development objective and the project economic rate of return. Theanalysis shows that, if the development of non-traditional exports in the Chapare area does not occur, the rateof return of the highway component would be reduced from 19.1% to 18.6%, which is not a significantdifference.

The risk of delays in starting the physical works is being addressed by SNC's ensuring that the followingactions are taken before project negotiations: (i) prequalifying bidders for the civil works of construction andstarting the prequalification process for the comprehensive maintenance component; and (ii) completing theplan to start the acquisition of land for the right-of-way, and resettlement in accordance with the engineeringdesigns already prepared.

The main remaining risk is delay in bid awarding and contract signature, and cost overruns. This risk isproposed to be addressed through intense supervision and continuous dialogue with the implementingagency.

Bank-wide experience also shows that there is risk of over-estimating traffic growth, which is a keyassumption in estimating the project benefits. The economic evaluation of this project has consideredscenarios with low traffic growth, low generation of traffic and cost overruns (see Section E above).

3. Possible ControversialAspects:

The only controversial aspect of the project concerned the two design alternatives considered at thebeginning of project preparation, mentioned in section D. The first alternative was to upgrade the originalroad, and, additionally, rebuild and pave the existing access road to El Espino. The second alternativeassumed that the proposed road would not follow the original route but would include a diversion through ElEspino - Ipita. This controversy was solved during the follow-up mission in June 1998 in the way describedin Section D.

G: Main Loan Conditions

1. Conditions for Project Approval and Effectiveness-:

The four conditions for project approval have been met. There will be no specific conditions forproject effectiveness.

2. Other:

(i) The Borrower shall carry out, through SNC, the Environmental and Social Management Plan, inaccordance with its terms.

(ii) The GOB shall, open and thereafter maintain, until the completion of the Project, a Fiscal Account,under the terms and conditions satisfactory to IDA, for the purposes of managing all funds required tomake payments in Bolivianos under contracts to be financed out of the proceeds of the Credit;

(iii) The Borrower shall maintain or adjust road user charges at the level required to allocate each FiscalYear, as a minimum, the amounts for routine maintenance set forth in the Monitoring Indicators andTargets for each such Year.

(iv) SNC will consult with IDA before making any commitment under the project, if final designs ofsubprojects have resulted in cost estimates exceeding 20% (in US$ equivalent) those of the estimatedoriginal costs as approved by IDA.

(v) SNC, shall:

(a) not later than September 30 of each year of project implementation, furnish to IDA a report,containing: (i) information on: (A) the overall progress in the execution of the Project; and (B) theimplementation of the SNC Reorganization Plan, both for the immediately preceding semester; and(ii) proposals for: (A) a highway investment and maintenance program; and (B) a training programfor the institutional strengthening component of the Project, both for the upcoming Fiscal Year;

(b) not later than March 31 of each year of project implementation, furnish to IDA, a report, on: (i)(A) the overall progress in the execution of the Project, including an evaluation on the basis of theMonitoring Indicators and Targets; and (B) the implementation of the Reorganization Plan, bothfor the immediately preceding semester; and (ii) the implementation of the highway investment andmaintenance program in the previous Fiscal Year,

(c) review with IDA, not later than November 30 and May 31 of each year of Project implementation,starting in May 31, 2000, the immediately preceding reports and proposals referred to inparagraphs (a) and (b) of this Section.

(vi) The Borrower, through SNC, shall carry out the Reorganization Plan as approved by IDA.

(vii) The Borrower shall not initiate any civil works under Parts A, B and C of the Project until theresettlement of the families affected by such civil works has been completed, to the satisfaction ofIDA, in accordance with the Environmental and Social Management Plan.

(viii) SNC will carry out a time-bound action plan acceptable to the Association for the strengthening of itsfinancial management system for the Project in order to enable the borrower and SNC, not later thantwelve (12) months after the Effective Date, to prepare quarterly Project management reports,acceptable to IDA.

H. Readiness for Implementation

[X] The engineering design documents are complete and ready for the start of project implementation.[X] The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.[X] The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

I. Compliance with Bank Policies

[XI This project complies with all applicabl IDA policies.

Task Team Leader/Task Manager: Jose o so-Biarge

Sector Manager/Director: D

Country Manager/Director: Isabel Guerrero

Annex 1

Abap6 - Camiri Highway Project (ACA-HP)

Project Design Summary

Narrative Summary Key Performance Monitoring and Critical AssumptionsIndicators Evaluation

Sector-related CAS (Goal to Bank Mission)Goal:

Freight volumes * Traffic statistics Allocation of sufficient funds to completeFoster economic between Santa Cruz and between Santa Cruz construction of the remaining integrationdevelopment of Bolivia Yacuiba increased by and Yacuiba. corridorswith the construction and 20%. * Cooperation betweenmaintenance of the export SNC and SDCs.corridor Trinidad- * Road networkYacuiba. statistics.

Project Development (Objective to Goal)Objective:

To promote export Year-round good * No traffic There are no delays in completion of civilopportunities and regional condition for all interruptions due to works in the Trinidad-Yacuiba corridor.development. sections of the corridor severe weather;

and connected ones, SNC has the institutional capacity toStrengthen the including secondary * Road Statistics; effectively manage private sectorinstitutional capacity of roads participation in road maintenance.the public sector and also * Capacity evaluations;promote private sector Maintenance by The Road Maintenance Account isparticipation in the road contract extended to the * National road network implemented, thus providing adequatemaintenance industry. whole national network maintained by financing for routine road maintenance.

and installed capacity to contract.implement road Legal and regulatory framework for roadconcessions. concessions is implemented.

Outputs: (Outputs to Objective)

1. 152 kms of high- 1.1 Traffic volumes in * Records on traffic SNC's acquires management experiencestandard, two-lane the corridor increased volumes and speeds; with private sector participation in roadhighway between Abap6 by 80% above the maintenance;and Camiri; current average 250 * Road usage surveys

vehicles per day; performed by SNC; The road maintenance account isimplemented and there will be sufficient

1.2 Vehicle operating * Vehicle operation funds for road maintenance;costs reduced by 50% costs analysis by SNC;of 1997 costs; A legal and regulatory framework for

* Technical audits; road concessions program has been1.3 Transportation costs established and the bylaws for itsreduced by 20-30%; * Good condition of implementation are ready in 1999.

roads connected to the1.4 Average travel time corridor. Budgetbetween Abap6 and allocations toCamiri reduced by 3 maintenance.hours;

2. Maintenance of the 2.1 Contract Program * Semi-annual reportswhole national road for Comprehensive onSNC does the contracting out ofnetwork, contracted out Maintenance signed and implementation; comprehensive road maintenanceby SNC; working; component on time.


2.2 Plan for SNCInstitutional Capacity . Progress Reports;Strengtheningdeveloped and under * Consultant'simplementation; evaluation;

3. Completion of the 3.1 Legal and fiscal * Legal information;feasibility study for the framework forSanta Cruz - Puerto concessions established * Technical reports andSuarez concession and working; contract traffic statistics.initiative; for consulting services

signed and studyprogressing

4. The local communities 4.1 Access for ruralhave access to markets communities providedthrough rural roads. by secondary roads

rehabilitation.

Project Inputs: (budget for (Components to Outputs)Components/Sub- each component)components: (see Annex2 for projectdescription)

A. Abap6-Camiri US$97.3 million * Highway construction There are no substantial changes in theHighway starting and final design of civil works;Construction and paving progressing as plannedof the Abap6 - Camiri in the PIP; Land acquisition and titling program ishighway of 152 km. The not delayed for extemal/political reasons;indicative cost includes: & Technical assistance* direct costs, according to the Ministry of Sustainable Development and. physical and price projections in the PIP. Planning issues the "Declaratoria

contingencies, and Ambiental" in due time;. supervision.The road will be split in No delays on availability of counterpartthe following segments: funds during implementation from the

central and departmental governments.(a) New bridge (420 m) 4.9over the Rio Grande inAbap6 including accesses(0.44 km)

(b) Abap6-Ipita (63.5 kmn) 40.3

(c) Ipita-Ipati (49 km) 30.1including the by-pass ofGutierrez

(d) Ipati-Camiri (30.7 km) 16.6

(e) By-pass of Camiri (7.3 5.4km). Construction andpaving of a by-pass toavoid going through thetown of Camiri.


B. Access Road to El US$8.5 millionEspino (38 km)Construction and pavingof an existing dirt roadthat runs parallel to therail track to Charagua, atwo-lane road of 6.0 mwide with two shoulders0.5 m each, to provideaccess to the corridor forthe indigenouscommunities.

C. Comprehensive US$12.2 million * Comprehensive No delays on availability of counterpartMaintenance by maintenance by funds during implementation from theContract contract pilot program central and departmental governments.A program of commencing andcomprehensive progressing as plannedmaintenance by contract in the PIP;for the period 1999-2003.The indicative cost of * Technical assistancethis component includes according to thesupervision and projections in the PIP.encompasses about 900km of roads in thedepartment of Santa Cruz.

D. "Institutional US$2.0 millionStrengthening

Institutional strengtheningof SNC and VMT throughthe provision of technicalassistance for:


(i) carry out a 0.1feasibility study forthe San Jose -

Puerto Suarezhighway concessioninitiative,

(ii) strengthen and 0.1operate the ProjectCoordinating Unit,SNC'sEnvironmental Unit,and provide trainingto SNC, and

(iii) prepare technical 0.1and financial audits

(b) Acquisition of goods 0.1


(c) Routine maintenance 0.2program

(d) Implementation of the 1.4Resettlement Plan,Indigenous PeopleDevelopment Plan, andthe Community RelationsPlan.

Annex 2

Abap6 - Camiri Highway Project (ACA-LIP)

Project Description

The proposed IDA credit would finance the reconstruction and paving of the 152 km Abap6-Camirihighway, which is the only missing section in the Trinidad-Yacuiba corridor to the border ofArgentina that provides an outlet to the port of Rosario. This corridor would also give access to theregions between Santa Cruz and Cochabamba served by the East-West export corridor (between theborders of Brazil and Chile), including the Chapare region, where the coca plant is grown and isbeing replaced (under active support from the US government) by alternative crops, for which thenatural market is Argentina.

The project consists of construction and paving of the existing road which is now in poor conditionand will also include the construction of a new bridge over the Rio Grande of about 420 m. Theroad is currently a gravel road and offers good geometrical characteristics. However, it would needminor re-alignments and by-passes to avoid crossing small villages, resettlement and safetyproblems. The road would be strengthened to fully accommodate growth in export traffic.Realignments and reconstruction works would meet the geometrical and structural standardconditions established for national roads in Bolivia, under which the Santa Cruz-Abap6 and Camiri-Yacuiba sections were reconstructed. The upgraded highway, together with the rehabilitation of theexisting access road of 38 km to El Espino, will serve the poorest communities of the region totransport the agricultural products to consumption centers. Land acquisition and people re-location,if necessary, will be financed by the Bolivian Government under a plan satisfactory to IDA. Theengineering studies are already completed for Abap6-Camiri highway, the access road to El Espino,the bridge over the Grande river and the Camiri by-pass. The project would also include a programof comprehensive maintenance by contract for the period 1999-2003. The objective would be toensure that the remaining corridor and the roads complementing it, will be in good condition whenthe project is completed.

Project Component A. Abap6-Camiri Highway - US$97.3 million (total cost of component).The proposed credit would finance 80% of the total cost for civil works and supervision.

The reconstruction and paving of the Abap6 - Camiri highway of 152 km. A two-lane road of 7.3m wide with two shoulders 1.5 to 2.0 m each (depending on terrain characteristics), fully paved andre-aligned. The indicative costs include:* direct costs,* physical and price contingencies, and* supervision.

Geometrical design is based on the SNC guidelines for Road Category II. The design parametersused are presented in the following table:

Design Parameters | Symbol Unit Terrain

Plane Hilly Mountainous

Vehicle speed S Kinh 80 60 40Minimum radius for circular curve Rmin m 229 123 47Lateral friction factor F 0.14 0.15 0.17Maximum radius requiring superelevation m 3,200 2,300 1,400Maximum radius requiring transition curves m 550 300 130Roadway width (2 lanes of 3.65 m each) m 7.3 7.3 7.3Shoulder width m 2 2 1.5

Extra width in horizontal curves EW m 0.5 0.8 1.6Minimum transition curve length Le m 58 49 50Minimum superelevation in circular curve E %8 8 10Lateral slope of roadway B % 2.5 2.5 2.5Lateral slope of shoulders %3 3 3Maximum longitudinal slope M % 5 6 8Minimum longitudinal slope in cuts % 0.5 0.5 0.5Minimum longitudinal slope in fills % 0.3 0.3 0.3Longitudinal friction coefficient Fl 0.3 0.33 0.37Minimum stopping distance Sd m 137 85 45Minimum passing distance Pd m 565 377 214Convex vertical curve parameter K 40 15 4Concave vertical curve parameter K 32 17 7

The changes in road alignment will allow a speed of 40-60 km/h in the hilly and mountainousterrain, and 80 km/h in the plane terrain. The estimated construction time is 30 months. In allsections, vertical and horizontal traffic signs will be part of the project.

Costs. Four project paving alternatives were considered: (i) asphalt concrete, (ii) double surfacetreatment, (iii) simple surface treatment, and (iv) gravel. Based on the analysis of the estimatedcosts for the 3 road sections and the bridge over the Rio Grande, the asphalt concrete alternativewas finally selected.

Road sections. The road will be split in the following segments:

(a) Bridge over the Rio Grande in Abap6 vicinity, including accesses. [US$4.9 million](420 m. span and 440 m. of accesses). Estimated time of construction: 24 months.

The proposed bridge is located in the progressive 0+127 in the Abapo - Ipita Section, in the Abapovicinity, and approximately 200 m apart from the existing railroad bridge. The bridge (420 m span)will have a total width of 10.6 m, with two lanes of 8 m total width each, and two sidewalks of 1.3m each side. Its superstructure will be divided in two sections: (i) the first 60 m will be a twoconsecutive sections, with beams of 30 m long and 1.6 m height, and a 20 cm reinforced concreteslab; and (ii) the remaining 360 m will be a continuous prestressed concrete structure composed byfive sections: two 51 m long on each end and three intermediate 86 m long sections. The bridgewill be constructed using the balanced cantilever segmental construction method and with avariable rectangular cross section (box girder of variable height). Its substructure will have twoabutments and six reinforced concrete piers of different heights, ranging from 9 to 14 m, withfoundations of 1.2 m diameter reinforced concrete piles. The bridge accesses of approximately 600m will be included in the bridge construction contract.

(b) Abapo-Ipita. [US$40.3 million](63.5 km.). Estimated time of construction: 30 months.

Along this section of approximately 63.5 km long, there are several private properties on both sides.In some parts, its topography is mountainous, it goes across many small rivers, and passes by theOpabusu lagoon near the Tatarenda Village.

There are 3 different sections: (i) the first section, of approximately 40 km located between Ipita andEl Limon ranch, has the terrain mostly plane; (ii) the second section of about 10 km from El Limonranch to El Algodonal ranch has a marked mountainous characteristics, and (iii) the third section ofapproximately 14 km between El Algodonal and the Abap6 village presents a mixed plane-rollingtopography.

The alignment goes through the existing dirt road and runs largely parallel to an oil pipeline. In thissection there are no bridges or other significant additional structures.

In this part of the road there are no towns or important concentrations of population. Thecommunities of Caraguatarenda, Tatarenda, Tatarenda La Vieja and Ipaticito del Monte are locatedcloser to IpitA where there is potential to develop agricultural activities.

(c) Ipita-Ipati including the Gutierrez by-pass. [US$30.1 million](49 km). Estimated time of construction: 30 months.

In this section of approximately 50 km, the road goes through a cattle raising area, along thePipirenda sierra where the town of Gutierrez is located and, after the Las Frias hill and a smallcommunity called La Herradura, the road reaches Ipati. Along the existing road there are manyranches and small communities for whom agriculture is their main activity. Ipati is the point inwhich the so called Diagonal Jaime Mendoza (that comes form the Chuquisaca department) linkswith the Santa Cruz - Yacuiba export corridor. For this reason it is a must that the road passesthrough Ipati.

In the first section of approximately 50 km, the terrain presents mostly rolling topography; and insome sectors a mixed plane-rolling topography.

(d) Ipati-Camiri. [US$16.6 million](30.7 km). Estimated time of construction: 24 months.

In this section of approximately 30 km, a higher traffic volume exists (compared with the othersections) mainly due to its proximity to the town of Camiri. A large part of the traffic flow isgenerated by heavy trucks transporting cattle, diesel, wood and many other commercial tradeproducts between Bolivia and Argentina.

In this section the road crosses the Urundaiti river several times and 4 bridges have been designedfor this purpose.

In this part of the road there are no adequate materials to construct the pavement structure, and thealternative of providing these materials from the Parapeti and Grande rivers (located in the projectextremes) is being considered.

The Itacua, Yrenda and Choreti as well as many ranches whose main activities are cattle raising andmaize production are located in this section. The commercial and industrial activities areconcentrated in the city of Camiri .

In this section the terrain presents mostly rolling topography.

(e) By-pass of Camiri. [US$5.4 million] (total cost).(7.3 km). Estimated time of construction: 18 months.

The 7.3 km by-pass to avoid going through the town of Camiri has the same design standard of allthe other sections of the Abap6 - Caminri highway. Its main objective is to provide a direct andsafer connection between the end of the Ipati - Camiri section of the proposed highway, and theCamiri - Yacuiba paved road. It will directly benefit the long distance traffic of the Santa Cruz -Yacuiba export corridor. Presently the traffic goes through Camiri and interferes with the localtransit of vehicles as well as pedestrians, and other urban activities.

Three alternatives were considered: first, the existing one that goes through the town, a second onearound the town which would generate the same problem in the short run (5-7 years); and the thirdalternative that goes beyond the urban development plans. The last was selected, being the onewith the least resettlement and expropriation needs and minimum negative impact for Camiri.

Project Component B. Access Road to El Espino (38 km) - US$8.5 million (total cost ofcomponent). The proposed credit would finance 80% of the total cost for civil works andsupervision. Estimated time of construction: 18 months.

The project consists of the reconstruction and paving of an existing dirt road that runs parallel to therail track to Charagua. Its main objective will be to provide safe and permanent access to Abap6and Santa Cruz (the consumption center) for the indigenous communities located along the roadand to promote greater economic activities in the area of influence through transport costsreduction. The road is currently a dirt road in poor condition but with good geometricalcharacteristics that would require only minor re-alignments. The indicative cost includes:* direct costs,* physical and price contingencies, and* supervision.

This road passes by the following villages and reference points: Puerto Viejo (km 4), first railroadcross section (km 5.3), Tacovo station (km 13.2), Nuevo Muchuri station (km 27), second railroadcross section (km 34), access to El Espino Viejo and the Itani stream (km 38). The topography ismostly plane with smooth slopes of a maximum of 2%. There is a need for a small bridge (20-30m long) to cross the El Limon stream.

The geometrical design for the 38 km access road is based on the SNC guidelines and the followingparameters.

Design Parameters Symbol Unit Terrain


Vehicle speed S Kni/h 80 60 40Minimum radius for circular curve Rmin i 229 121 47Lateral friction factor F 0.14 0.15 0.17Maximum radius requiring superelevation m 3,350 2,200 1,300Maximum radius requiring transition curves rn 550 300 130Roadway width (2 lanes of 3.0 m each) _ 6.0 6.0 6.0Shoulder width m 0.5 0.5 0.5Extra width in horizontal curves Ew i 0.52 0.81 1.63Minimum transition curve length Le m 60 51 41Maximum superelevation in circular curve E % 8 8 10

Design Parameters Symbol Unit Terrain


Lateral slope of roadway B % 2.5 2.5 2.5

Lateral slope of shoulders % __2.5 2.5 2.5Maximnum longitudinal slope M %/ 4 5 7Minimum longitudinal slope in cuts 0 0.5 0.5 0.5Minimum longitudinal slope in fills % 033 0.33 0.33

Longitudinal friction coefficient Fl 0.31 0.33 0.37Minimum Stopping Distance Sd m 165 98 51Minimnum Passing Distance Pd m 562 375 213Convex vertical curve Parameter K 40 15 4Concave vertical curve Parameter K 32 17 7

Four alternative types of surface layers were considered and based on the economic and financialevaluation it is recommended the construction with a double surface treatment. In all sections,vertical and horizontal traffic signs will be part of the project.

Project Component C. Comprehensive Maintenance by Contract - US$12.2 million (Total costof the component). The proposed credit would finance 20% of civil works, and 80% ofsupervision.

The project includes a comprehensive maintenance program, covering about 900 km of the basichighway network of the Departamento de Santa Cruz. Its components are roads of the nationalmain network which feed the Abap6-Camiri highway (see Table below). The terrn "comprehensivemaintenance" includes not only routine and periodic maintenance, but also user and maintenancemanagement services, including emergency coverage.

Table. Comprehensive Maintenance by Contract Program RoutesLength Width Traffic Condition Cost *

Route Start End (km) (m) Surface (ADT) Rating (US$000)

0004 Yapacani GuabirA 70.1 7.1 A.C. 2171 4 650.20004 GuabirA Warnes 27.2 7.8 A.C. 4794 3 & 4 211.50004 Warnes Sta. Cruz 26.0 12.0 A.C. 4258 3 & 4 318.80010 Okinawa GuabirA 41.1 6.2 A.C. 665 4 & 5 176.70009 San Ramon Los Troncos 54.2 7.3 S.T. 570 3 & 4 601.60010 Los Troncos Okinawa 30.7 8.5 Gravel 247 2 & 3 433.20004 Sta. Cruz Cotoca 14.6 7.3 A.C. 6560 4 167.40004 Cotoca Pto. Pailas 28.7 6.7 A.C. 5876 3 & 4 436.60004 Pto. Pailas Pail6n 14.5 6.6 S.T. 500 2 & 3 401.20009 Pail6n Los Troncos 62.1 7.3 S.T. 570 2 & 3 380.90007 Mairana Angostura 79.1 6.1 A.C. 644 2 & 3 & 4 1,683.40007 Angostura La Guardia 36.5 5.8 A.C. 1302 3 544.70009 Abap6 Km 13 125.8 7.5 A.C. 276 4 1,400.10006 Camiri Boyuibe 60.6 7.3 S.T. 175 2 & 3 2,262.10006 Yacuiba Boyuibe 184.1 7.3 S.T. 175 2 & 3 1,455.00006 Ipati Incahuasi 38.4 6.0 Earth 53 1 & 2 294.8

TOTAL 893.7 km TOTAL COST 11,418.2Supervision 811.8

TOTAL COMPONENT 12,230.0

Condition 1: POOR Condition 3: REGULAR Condition 5: GOOD

Notes:A.C. Asphalt Concrete.S.T.: Surface Treatment.

*Includes physical and price contingencies

The contract shall be of three years' duration, and its activities are grouped as follows: (i) routinemaintenance: operations that should be programmed and performed at least once a year; (ii)periodic maintenance: operations that can be planned for and which must be carried outperiodically, normally for periods exceeding one year, to ensure the adequacy of the conditions ofthe highways. Given the deficiencies presented by some of the sections of the contract's roads, aseries of priority actions to be carried out in the first year of the contract will be decided upon; (iii)emergency coverage: unforeseeable and occasional actions which must usually be carried outimmediately after noticed to restore the flow of traffic or to guarantee normal driving conditions;(iv) minor works: occasional activities aimed at correcting deficiencies or improving certain partsof the highway; (v) works management: all those tasks required to plan, monitor and document theexecution and evaluation of the work and activities carried out; and (vi) training in comprehensivemaintenance activities for maintenance professionals and specialists of the public and privatesectors.

Project Component D. Institutional Strengthening - US$2.0 million (total cost of thecomponent).

The project has also an institutional strengthening component for SNC and VMT to providetechnical assistance for:


(i) carry out a feasibility study for the San Jose - Puerto Suarez highway concession initiative,(ii) strengthen and operate the Project Coordinating Unit, SNC's Environmental Unit, and

provide training to SNC, and(iii) prepare technical and financial audits

(b) Acquisition of goods

(c) Routine maintenance program

(d) Implementation of the Resettlement Plan, Indigenous People Development Plan, and theCommunity Relations Plan.

The proposed credit would finance:100% of consultants and services for (a);80% of goods and equipment for (b);20% of maintenance works for (c), and0% of the Plans in (d).

Annex 3

Abap6 - Camiri Highway Project (ACA-BIP)

Estimated Project Costs

Project Component Local Foreign Total------------------US $ million-------------

A. Abap6-Camiri Highway 46.4 36.4 82.8B. Access Road to El Espino 3.8 3.5 7.3C. Comprehensive Maintenance by Contract 4.6 5.6 10.2D. Institutional Strengthening 1.6 0.4 2.0E. Supervision Contracts 2.0 4.7 6.7

Total 58.4 50.6 109.0

Total Baseline CostPhysical Contingencies 4.4 3.6 8.0Price Contingencies 1.6 1.4 3.0

Total Project Cost 64.4 55.6 120.0

Annex 4

Bolivia: Abap6 - Camiri Highway Project

Cost-Benefit Analysis Summary

Net Economic Benefits (NPV) at 12%Discount Rate (M$)

Users 128.5Agency -72.5Project 56.0

Economic Internal Rateof Return (EIRR) in percent

Project 19.1

Project Components

A cost-benefit analysis was done for the civil works being financed under the project, whichrepresent 95 percent of the project costs and consists of: (i) upgrading the Abap6 - Camiri road,including the Bridge over Rio Grande; (ii) upgrading the access road to El Espino; and (iii) a roadmaintenance program in the project area. The current Abap6 - Camiri road was subdivided intofour sections (Abap6 - IpitA road, Ipita - Ipati road, Ipati - Camiri road, and Camiri bypass), basedon traffic and paving cost considerations, which were evaluated independently. The following tablepresents the evaluated project components.

Component Activity Length (km) Financial Base Cost(M US$)

Abap6 - IpitA Road * Upgrading 64.4 38.5IpitA - Ipati Road Upgrading 49.0 25.5Ipati - Camiri Road Upgrading 30.7 14.3Camiri Bypass Road Upgrading 7.3 4.6Access road to El Espino Upgrading 38.0 7.2Road Maintenance Program Maintenance 893.7 10.2Total 1,083.1 100.3

* Includes the Bridge over Rio Grande

The Abapo - Ipita road starts at the end of the Santa Cruz -Abap6 paved road, crosses the RioGrande River, and ends in the town of Ipita. The Ipita - Ipati and Ipati - Camiri roads connect thetowns of Ipita and Ipati and the perimeter of the town of Camiri. The Camiri bypass road connectsthe Ipati - Camiri road with the end of the Camiri - Yacuiba paved road bypassing the town ofCamiri. The access road to El Espino, not being part of the Santa Cruz - Yacuiba corridor,connects the town of Abap6, and Santa Cruz, with the town of El Espino to provide an all weatheraccess to the indigenous communities of El Espino and Charagua.

Project Main Objectives and Benefits

The project main objective is to reduce road transport costs on the Santa Cruz - Yacuiba corridorand maintain the road network in the area in an efficient and sustainable manner. The investmentswill: (i) reduce road user transport costs by lowering vehicle operating, accident, and travel timecosts; (ii) remove physical constraints to international road transport of goods and people in theregion; and (iii) allow for the provision of more reliable and safer transport services.

The Santa Cruz - Yacuiba export corridor (561.0 km connecting Santa Cruz with the border withArgentina at Yacuiba) is considered a national priority because it connects important agriculturaland cattle areas in the departments of Santa Cruz, Chuquisaca, and Tarija as well it is aninternational corridor by connecting extensive areas of the country with Argentina and, in thefuture, Paraguay. At the moment, the section of the Santa Cruz - Yacuiba corridor that has not yetbeen paved is the Abap6 - Camiri section (152 km) which is in very bad condition due to lack ofmaintenance and the fact that heavy traffic has increased in recent years due to the upgrading ofother sections of the corridor.

The Abapo - Camiri highway project has two complementary functions: (i) to drive the economicdevelopment of existing agricultural areas in the Chapare region in Cochabamba, the southernregion of Beni, and northern part of Santa Cruz that will have better access to markets, and (ii) toimprove the integration and interconnection of the Bolivian road network and the export corridors.The Abap6 - Camiri highway is part of the North - South corridor of South America, connectingSanta Cruz and Buenos Aires; at the town of Ipati it joins with National Route No 6 that goes to thedepartments of Chuquisaca and Potosi through important cities such as Sucre, Padilla, Monteagudo,and Muyupamapa; and at the town of Ipita it connects to Route 501 that goes to the Vallegranderegion.

The objective of upgrading the access road to El Espino is to: (i) provide safe and permanent accessto Abap6 and Santa Cruz for the indigenous communities in the area of influence of the project, and(ii) to promote greater economic activities in that area, which has a high potential due to the flatterrain, climate, and availability of natural resources, by reducing road transport costs and ensuringall-weather access.

Main Assumptions

Net benefits were evaluated using the Highway Design and Maintenance Standard Model (HDM),which simulates life cycle conditions and costs and provides economic decision criteria for multipleroad design alternatives.

The SNC estimated paving and maintenance costs in financial and economic terms (net of taxes andsubsidies). Economic costs are on average 84 percent of financial costs for paving and 87 percentof financial costs for maintenance activities, based on applying the following conversion factors setby the Ministry of Finance in 1998 for the economic evaluation of Bolivian projects.

Item Conversion FactorSkilled Labor 0.440Unskilled Labor 0.640National Materials and Equipment 0.840Imported Material and Equipment 0.886Fuel 0.877

The table below presents representative maintenance costs obtained from the MaintenanceDepartment of SNC.

Activity Financial Cost Economic CostUnpaved Road Grading ($/km) 109.6 95.4Unpaved Road Spot Regravelling ($/m3) 15.44 13.44Unpaved Road Regravelling ($/m3) 14.15 12.31Unpaved Road Routine Maintenance ($/km/year) 952 828Paved Road Patching ($/m2) 13.14 11.43Paved Road Double Surface Treatment ($/m2) 4.54 3.95Paved Road 4 cm Overlay ($/m2) 8.74 7.60Paved Road Routine Maintenance ($/km/year) 1138 990

SNC also defined representative vehicle fleet characteristics and road user unit costs for six vehicleclasses.. With this information, the HDM model computed road user costs with and without theproject, economic road user costs being on average 83 percent of financial costs. The table belowshows typical economic road user costs as a fimution of roughness, typical road user costscomposition, and the vehicle fleet characteristics and economic unitcosts adopted in the analysis. The value of time was defined estimating that, on the area ofinfluence of the project, the average hourly income is $ 1.63 for car passengers and $ 0.72 for buspassengers and 85 of the passengers are on work related trips. The value of leisure time was set to25 percent of the hourly income.

Car Pickup Bus Medium Heavy ArticulatedTruck Truck Truck

Economic User Costs per Roughness ($/vehicle-km)Paved road, 2 IRI 0.20 0.29 0.92 0.42 0.67 0.99Paved road, 4 IRI 0.21 0.31 0.93 0.47 0.71 1.05Paved road, 6 IRI 0.23 0.34 0.97 0.50 0.79 1.15Paved road, 8 IRI 0.26 0.39 1.02 0.56 0.88 1.26Paved road, lOIRI 0.30 0.46 1.10 0.62 0.98 1.39Unpavedroad, 18IRI 0.54 0.84 1.72 1.01 1.58 2.11

Road User Costs Composition for 2 IRI(percent)

Fuel & Lubricants 16% 32% 14% 29% 25% 25%Tires 1% 2% 5% 7% 8% 8%Maintenance Parts & 18% 20% 12% 20% 29% 31%LaborCrew Time 0% 0% 3% 7% 4% 4%Depreciation & Interest 34% 24% 29% 37% 34% 32%Passenger Time 31% 22% 37% 0% 0% 0%

Vehicle Fleet Characteristics and Economic Unit CostsGross Vehicle Weight (t) 1.5 2.8 17.0 15.5 10.7 42.7Standard Axle Load 0.0 0.0 3.9 2.7 4.6 5.3FactorNumber of Axles 2 2 2 2 2 5Number of Tires 4 4 6 6 6 18Number of Passengers 3 3 35Service Life (y) 10 10 10 7 7 8Hours Driven per Year 500 750 1000 1200 1280 1280(h)Km Driven per year 30000 45000 55000 60000 64000 64000(km)Interest Rate (%) 12 12 12 12 12 12Vehicle Price ($) 14135 21079 107683 44924 83862 111182Tire Price ($) 30.7 88.9 223.8 193.2 223.8 223.8Maintenance Labor ($/h) 2.05 2.05 2.05 2.05 2.05 2.05Crew Time ($/h) 0.00 0.00 2.00 1.41 1.54 1.86Passenger Time ($/h) 1.45 1.45 0.64 0.00 0.00 0.00Fuel Costs ($/1) 0.40 0.34 0.34 0.34 0.34 0.34Lubricants Costs ($/1) 1.62 1.62 1.62 1.62 1.62 1.62

The normal traffic growth rate was defined based on recent GDP growth rate data (5.0percent annual growth from 1988 to 1993 in Santa Cruz and 4.0 percent annual growth inBolivia on the same period) collaborated by other statistics. Traffic growth rate was set forall vehicles to 5.0 percent for the period 1999-2010 and 4.0 percent for the period 2011-2021, assuming conservatively a traffic growth elasticity to GDP growth of one andassuming that initially GDP will grow at a rate similar to the historic regional GDP growth

to finally stabilize at the historic national GDP growth. From 1992 to 1995, the annualgrowth of gasoline consumption was 4.8 percent for the districts of Santa Cruz, Camiri,Yacuiba, and Villamontes and the population annual growth rate of Santa Cruz was 4.2percent. Historic traffic counts indicate that on the Santa Cruz - Abap6 and Abap6 - Camiri roadstraffic has increased from 1984 to 1995 by around 90 percent corresponding to a 6 percent annualgrowth.

Upgrading Program

Each section to be upgraded under the project was evaluated, using the HDM model, with currentdata for existing road, traffic, vehicle fleet, and paving characteristics. To access the condition ofthe existing unpaved roads, a survey of speeds was undertaken in which the tags of vehicles passing

a control point were registered to determine their travel time to the next control point.Five control points were setup along the Abap6 - Camiri road, on average 37 km apart, and thefollowing average travel speeds were obtained.

Vehicle Average Speed Number of(km/h) Observations

Cars and Utilities 22 276Buses 20 185Medium Trucks 13 205Heavy Trucks 11 449Articulated Trucks 10 127

These average speeds include the time the vehicles stopped along the road for some reason andwere measured at the end of the rainy season (March 1998), but not on a particular critical period,when the road condition is not as good as the dry season. Nevertheless, these measurementsindicate the terrible condition of the existing road that is also substantiated by the IDA missionobservations.

Traffic origin-destination surveys and traffic counts were undertaken during 7 days, 24 hours perday, at the exit of Abap6, at the exit of Camiri, and at the middle of the Ipita - Ipati section. Thetraffic data indicates that the section with highest traffic is Ipati - Camiri with 332 vehicles per dayin 1997, followed by the Camiri bypass with 260 vehicles per day. The Abap6 - Ipita section has221 vehicles per day and the intermediate section Ipita - Ipati has 208 vehicles per day, while theaccess road to El Espino has 32 vehicles per day. On average, 44 percent of the traffic is composedof trucks, 20 percent of buses, and 36 percent of cars and utilities. Traffic is well distributed over a24-hour period, with 72 percent of the traffic travelling from 6 a.m. to 10 p.m..

Paving the roads, thus lowering transport costs, will generate some traffic that otherwise would nothave used the road. For passenger vehicles and medium trucks a conservatively assumption ofgenerated traffic due to lowering transport cost being 20 percent of normal traffic was adopted,considering that road user costs will decrease on average by 55 percent. For heavy trucks andarticulated trucks, generated traffic will occur due to lower transport costs and the economicdevelopment in the direct area of influence of the project and the area of Chapare where non-traditional exports are being encouraged. For these trucks, generating traffic was determinedevaluating the expected net increase, with the project, in agricultural and cattle productiondedicated to the market, and transforming this additional production into additional vehicles per dayconsidering, for example, that 20 tons of agricultural products equate to one truck or 20 cattle headsequate to one truck. The table below presents the resulting generated traffic for heavy andarticulated trucks as percent of normal traffic in 2002. On the Santa Cruz - Abap6 and Camiri -

Yacuiba highways, which were paved in recent years, an evaluation of historic traffic countsindicates that generated traffic was on the order of 60 percent of normal traffic.

Highway Generated Traffic as Percent of Normal TrafficSection in 2002 for Heavy and Articulated Trucks

Abap6 - Ipita Road 32.0Ipita - Ipati Road 35.0Ipati - Camiri Road 32.0Camiri Bypass Road 32.0

For the Abap6 - Ipita section, two project alignment alternatives were considered. Aside from thealternative of paving the existing Abap6 - Ipita road, it was also considered the alternative ofconstructing a new road and paving a parallel road to the east of the existing road to server thetowns of Espino and Charagua. The evaluation has shown that this alternative (Abap6 - El Espino- Ipita) has a greater length (72.0 km) compared to the existing Abap6 - Ipita road (67.0 km), has 3percent higher construction costs, higher environmental concerns, and a resulting lower economicrate of return. Therefore, this alternative was discarded and to serve the communities of El Espinoand Charagua, the upgrading of the access road to El Espino was proposed with a lower paved roadstandard (6.0 meter wide surface treatment road) due to the current low traffic level. The directarea of influence of the access road to El Espino will have around 36 thousand inhabitants in 2002,at the opening of the road, and now the economically active population is 48 percent, of which 54are occupied in the agricultural sector, 9 percent on the education and social service sectors, and 5percent on trade, restaurants, and logging. This indicates that the economic base of the influencearea is agricultural, which will benefit with an all-weather access.

Different surface layer alternatives were evaluated. The without project alternative includes routinemaintenance, spot regravelling at 30 m3/km/year, and gradings every 90 days. The four projectalternatives evaluated for each road are: (i) asphalt concrete paving, (ii) double surface treatmentpaving, (iii) single surface treatment paving, and (iv) regravelling the road with a 100 mm gravellayer each time the gravel layer reaches 30 mm. On all paving alternatives, paving starts in 1999and the construction duration is 3 years with an annual costs distribution of 40, 35, and 25 percentof the total project costs. After paving, the maintenance policy includes routine maintenance,patching, and reseals every seven years. The evaluation period is set to 25 years, the discount rateis 12 percent, and the salvage value is 40 percent of the project costs.

The table below presents the main section characteristics and the resulting economic internal rate ofreturn (EIRR) and net present value at 12 percent discount rate (NPV), for the correspondingproject alternative with higher NPV. For all roads between Abapo and Camiri the optimalalternative is asphalt concrete paving, while for the access road to El Espino, a double surfacetreatment paving is the optimal alternative.

Existing New Average 1999 Alternative Base BaseRoad Road Road Vertical Daily With Financial Financial

Section Length Length Gradients Traffic Highest Cost Cost EIRR NPV(km) (km) (%) (ADT) NPV (M$) (000$/km) (%) (M$)

Abap6 - Ipita 67.0 64.4 1.7 243 AC Paving 38.5 598 17.5 16.2Ipita - Ipati 50.0 49.0 4.0 229 AC Paving 25.5 520 18.3 12.5Ipati - Camiri 30.9 30.7 1.0 366 AC Paving 14.3 466 27.6 18.8Camiri 8.0 7.3 1.8 286 AC paving 4.6 630 18.3 2.4BypassAccess Road 39.0 38.0 2.0 35 DST Paving 7.2 189 10.5 -0.7El EspinoTotal 194.9 189.4 90.1 475 19.1 49.3

All sections on the Abap6 - Camiri corridor yield an EIRR higher than 12 percent on the base andsensitivity scenarios. The upgrading of the access road to El Espino yields an EIRR of 10.5 percentindicating that this component is not justified by only accessing resource savings in vehicleoperating costs and time for the expected normal and generated traffic. Considering that theobjective of this component is to provide all-weather access to the indigenous communities in thearea, which will bring many social non-quantifiable benefits, and that the economic return is veryclose to 12 percent, the component is expected to yield positive overall society benefits.

The overall EIRR of the upgrading program is 19.1 percent with a NPV of M$ 49.3. Six sensitivitytests were done: (a) a 20 percent increase in agency costs reduces the EIRR to 16.4 percent; (b) a 20percent reduction in benefits reduces the EIRR to 15.9 percent; (c) a 20 percent increase in agencycosts and 20 percent decrease in benefits reduces the EIRR to 13.7 percent; (d) eliminating thegenerated traffic originated by an increase in agricultural production in the region of Chapare,which represents 78 percent of the total generated traffic, reduces the EIRR to 18.6 percent; (e)eliminating all the generated traffic reduces the EIRR to 17.5 percent; and (f) reducing the trafficgrowth rate to 4 percent during the first 10 years and to 3 percent afterwards reduces the EIRR to17.6 percent.

EIRR SensitivityBase Costs Benefits Costs +20%

Scenario +20% -20% Benefits -20%Abap6 - Ipita 17.5% 15.1% 14.6% 12.5%Ipita - Ipati 18.3% 15.8% 15.3% 13.1%Ipati - Camiri 27.6% 23.9% 23.1% 19.9%Camiri Bypass 18.4% 15.8% 15.2% 12.9%Access Road to El Espino 10.5% 8.5% 8.1% 6.4%Upgrading Program 19.1% 16.4% 15.9% 13.5%

Base Generated Generated 4 % & 3%Traffic Traffic

Scenario Without Equal to Zero TrafficChapare Growth

Abap6-Ipita 17.5% 17.1% 16.2% 16.1%Ipita- 1pati 18.3% 17.8% 16.9% 16.9%Ipati - Camiri 27.6% 27.1% 25.6% 25.9%Camiri Bypass 18.4% 17.8% 16.8% 16.9%Access Road to El Espino 10.5% 10.5% 8.2% 9.4%Upgrading Program 19.1% 1 18.6% 17.5% 17.6%

The switching value analysis indicates that agency costs need to be increased by 71 percent or userbenefits need to be decreased by 42 percent to yield an EIRR equal to 12 percent, which is veryunlikely, therefore, the program is well justified.

Comprehensive Maintenance Program

The road maintenance program will fimd maintenance, for the next three years, for a road networkof about 900 km in the area of influence of the project. SNC estimates that periodic works,comprising asphalt concrete overlays, surface dressing, and gravel resurfacing will be needed on156.6 km of the network. All periodic works under this program were evaluated, using the HDMmodel, with current data for road, vehicle fleet, works characteristics, and costs. For paved roads,the with project alternative includes the proposed work occurring in year one as well as routinemaintenance, 100% patching and future 4 cm overlays when roughness reaches 4.0 IRI; and wascompared to a without project alternative consisting of routine maintenance, 100% patching, and, ifneeded, a future rehabilitation when roughness reaches 6.0 IRI. For unpaved roads, the withoutproject alternative includes routine maintenance and one grading per year and the with projectalternative includes gravel resurfacing in year one followed by routine maintenance and 4 gradingsper year. To approximately access the benefits of the program's recurrent expenditures to beapplied to all the network over the next three years, comprising of routine maintenance, emergencyactivities, and minor works, the HDM model was used considering that on the without projectalternative 50 percent of the potholes will be patched and with the project 100 percent of thepotholes will be patched, this being a surrogate to good and deficient recurrent maintenanceactivities. The table below presents the main section characteristics and corresponding results.

1997 Financial FinancialSection Length Surface Traffic Work Cost Cost IRR NPV

(km) Type (ADT) Type (000$) (OOO$/KM) (%) (M$)San Ramon-Los Troncos 2.0 S.T. 570 Double Surface 54.4 27.2 15.6% 0.01DST TreatmentSan Ramon-Los Troncos 3.6 S.T. 570 Single Surface 68.6 19.1 14.3% 0.01SST TreatmentPto. Pailas-Pailon DST 4.3 S.T. 500 Double Surface 106.6 24.8 16.1% 0.02

TreatmnentPto. Pailas-Pailon SST 4.9 S.T. 500 Single Surface 84.1 17.2 15.0% 0.02

TreatmentPailon-Los Troncos DST 12.3 S.T. 570 Double Surface 335.4 27.3 15.6% 0.06

TreatmentPailon-Los Troncos SST 17.7 S.T. 570 Single Surface 336.4 19.0 14.4% 0.06

TreatmentCamiri-Boyuibe DST 25.6 S.T. 176 * Double Surface 700.1 27.3 13.4% 0.08

TreatmentCamiri-Boyuibe SST 25.5 S.T. 176 * Single Surface 484.2 19.0 14.9% 0.11

TreatmentYacuiba-Boyuibe SST 184.1 S.T. 176 * Single Surface 484.2 19.0 14.9% 0.11

TreatmentCocota-Pto. Pailas 0.7 A.C. 5876 Overlay 43.3 61.8 131.6 0.10

Mariana-Angostura 8.4 A.C. 643 Overlay 505.0 60.1 17.8% 0.03

Angostura-La Guardia 2.0 A.C. 1302 Overlay 113.3 56.7 47.4% 0.05

Ipati - Incahuasi 38.4 Earth 53 Gravel Resurfacing 650.1 16.9 38.1% 0.78

Los Troncos - Okinawa 10.6 Earth 247 Gravel Resurfacing 254.3 24.0 33.3% 0.08

Recurrent Activities 893.5 Recurrent Works per 2824.7 3.2 I N.A. 5.27Year

Road Maintenance 19.4% 6.69Program* Generated traffic is expected when the Abap6-Carniri road is paved.

The overall rate of return of the road maintenance program is 19.4 percent with a net present valueof M$6.7. Three sensitivity test were done: (a) a 20 percent increase in agency costs reduces theEIRR to 15.5 percent; (b) a 20 percent reduction in benefits reduces the EIRR to 14.7 percent; (c) a20 percent increase in agency costs and 20 percent decrease in benefits reduces the EIRR to 11.8percent. The switching value analysis indicates that agency costs need to be increased by 44percent or user benefits need to be decreased by 31 percent to yield an EIRR equal to 12 percent,indicating that the program is justified.

Distribution of Benefits

An evaluation of the upgrading program indicates that: (i) 88 percent of the program benefits aredue to a reduction on vehicle operating costs and 12 percent due to time savings; (ii) 13 percent ofthe road user benefits go to cars and pickups, 32 percent go to buses and 55 percent to trucks; and(iii) cars and pickups save 64 percent on road user costs, buses 47 percent, and trucks 56 percent.To estimate the proportion of the program benefits that will directly benefit low income groups, thefollowing assumptions have been considered: (i) none of the benefits for cars and pickups willbenefit low income groups considering the high income of passenger cars; (ii) 88 percent of thebenefits for buses will benefit low income groups considering that this is the proportion of lowincome population in the area; and (iii) 38 percent of the benefits to trucks will benefit low incomegroups considering that that is the proportion of the cargo that carries agricultural products andother goods of basic local consumption. The result of the evaluation is that around 50 percent ofthe program benefits will benefit directly low-income groups in the area of influence of the project.

Overall Project Benefits

The table below presents a summary of the overall project benefits. The overall project EIRR is19.1 percent. A 20 percent increase in agency costs reduces the EIRR to 16.4 percent. A 20 percentreduction in benefits reduces the EIRR to 15.8 percent. A 20 percent increase in agency costs and20 percent decrease in benefits reduces the EIRR to 13.5 percent. To yield an EIRR equal to 12percent, agency costs have to be increased by 69 percent or benefits decreased by 41 percent.These events have a low probability of occurrence indicating that the project economic viability isrobust.

Switching Values

Net Internal Increase DecreasePresent Value Rate In Agency in User

@ 12 percent of Return Costs to Yield Benefits to Yield(US$ Million) (%) NPV= 0 NPV = 0

Users Upgrading Program 118.6Maintenance Prograrn 9.9

Subtotal 128.5Agency Upgrading Program -69.3

Maintenance Progran -3.2Subtotal -72.5

Society Upgrading Program 49.3 19.1% 71% 42%Maintenance Program 6.7 19.4% 44% 31%Overall Project 56.0 19.1% 69% 41%

Annex 5


Financial Summary

Bank's Fiscal Years (July 1 - June 30)(In million US$ 1999)

Implementation Period |2000 2001 2002 2003 2004 TOTAL

Project CostsInvestment Costs 21.0 31.5 32.1 15.4 8.1 108.1Maintenance Costs 0.7 1.9 2.9 3.4 1.0 9.9Technical Assistance Costs 0.4 0.4 0.4 0.4 0.4 2.0

Total 22.1 33.8 35.4 19.2 9.5 120.0

Financing Sources (% of totalproject costs)

IDA 16.8 25.4 26.1 13.0 6.7 88.0

Government 5.3 8.4 9.3 6.2 2.8 32.0

User Fees/BeneficiariesOthers 0.0 0.0 0.0 0.0 0.0

Total 22.1 33.8 35.4 19.2 9.5 120.0

Annex 6

Abapo - Camiri Highway Project (ACA-HP)

Procurement and Disbursement Arrangements

Procurement

Procurement methods (Table A)

The Government agreed to use IDA standard procedures for goods and civil works under ICB inaccordance with the "Guidelines for Procurement under IBRD Loans and IDA Credits, January1995," revised in January and August 1996, and September 1997. For the engagement and use ofconsultants follow IDA standard procedures according to the "Guidelines Selection andEmployment of Consultants", January 1997, revised September 1997. Civil works are estimated toaccount for about 92.9% of total project costs, consulting services about 7.0%, and 0.1% in goods.Table A shows the distribution of the type of procurement appropriate for the acquisition of works,goods and services under the project.

Civil Works.

Prequalification.

Civil work contracts for Component A Abap6-Camiri Highway (Bridge over the Rio Grande,Abap6-Ipita, Ipita-Ipati, Ipati-Camiri), and Component C Comprehensive Maintenance will requireprequalification of contractors based on "Prequalification Procurement of Works, April 1993" anddefined in terms of minimum working capital, professional experience, volume and scope of similarworks. All contractors (foreign and local) interested in being prequalified will be evaluated on thebasis of "fail or pass evaluation criteria"; that is, only those complying with the minimum criteriawill be qualified.

International Competitive Bidding - ICB

Civil works contracts for Component A Abap6-Camiri Highway (Bridge over the Rio Grande, Abapo-Ipita,Ipita-lpati, Ipati-Camiri, and the Camiri By-pass) and Component B Access Road to El Espino Road, as wellas any civil works estimated to cost US$10 million or more, will be procured on the basis of ICB proceduresin accordance with "Bank Standard Documents for Procurement of Works (Major Works), January 1995".

Civil work contracts for Component C Comprehensive Maintenance, as well as any civil worksestimated to cost more than US$3 million and less than US$10 million, will be procured on thebasis of ICB procedures in accordance with the "Bank Standard Documents for Procurement ofWorks (Smaller Contracts), January 1995".

National Competitive Bidding - NCB

Contracts for works costing between US$3 million and US$250,000 will be procured under NCBacceptable to IDA. These will be based on standard bidding documents to be approved by theAssociation. The following principles will govern procurement under NCB: (i) foreign contractorswill be allowed to bid on all contracts and will not be required to be associated with localcontractors or suppliers; (ii) there will be no restriction on sources of labor or materials, except foruse of unskilled labor: (iii) invitation to bid will be advertised for at least three days in a newspaperwith wide circulation in Bolivia; (iv) no reference to minimum or maximum prices will be used for

purposes of evaluation of bids for supply of goods; (v) bids will be opened in public; and (vi)contracts must be awarded to the lowest evaluated bidder in accordance with criteria clearly setforth in the bidding documents.

Price Quotations

Routine maintenance works estimated to cost less than US$250,000 equivalent per contract will beprocured on the basis of price quotations acceptable to IDA. The price quotations should beobtained from three qualified local contractors (with experience and resources to successfullycomplete the contract) in response to a written invitation. The invitation will include a detaileddescription of the works, including basic specifications, the required completion date, a basic formof agreement acceptable to the Bank and relevant drawings when necessary. The award will bemade to the lowest evaluated bidder in accordance with criteria clearly set forth in the biddingdocuments.

Goods.

Goods and equipment costing less than US$50,000 per contract will be procured through localshopping.

Consulting Services.

Consultants for civil work supervision, technical assistance, training programs, engineering andauditing services will be selected and engaged following the January, revised September 1997 BankGroup consultant guidelines. The hiring of consultants will be made using QBCS, LCS and hiringof individuals will be made on Selection Based on Qualifications.

Prior review thresholds (Table B)

The Association will review ex-ante all procurement documentation (advertising, biddingdocuments, bid evaluation and contract award) under ICB as well as the first two contracts in eachyear under NCB. The documents for the remaining contracts under NBC will be subject to ex-postreview by the IDA. All other procurement documentation will be retained by the SNC and subjectto selective ex-post review by the IDA's supervision missions. The provisions of the ConsultantGuidelines requiring prior IDA review or approval of budgets, short lists, selection procedures,letters of invitations, proposals, evaluation reports and contracts shall not apply to: (a) contracts forthe employment of consulting firms estimated to cost US$200,000 equivalent or less each; or (b)contracts for the employment of individual consultants estimated to cost US$50,000 equivalent orless each. However, this exemption to prior IDA review will not apply to: (a) terms of reference forsuch contracts; (b) single source selection of firms; (c) assignments of a critical nature asreasonably determined by the IDA; (d) amendments to contracts for the employment of consultingfirms raising the contract value to US$200,000 equivalent or more; or (e) amendments to contractsfor the employment of individual consultants raising the contract value to US$50,000 equivalent ormore. Under these procedures, IDA's prior review will cover 98.6% of the total contract values.

Disbursement

Allocation of loan proceeds (Table C)

Disbursements will be made against the following categories of eligible expenditures: (a) 80% oftotal expenditures for civil works of road upgrading, and bridge construction; (b) 20% of totalexpenditures for the comprehensive maintenance by contract program, and routine maintenance

works; (c) 80% of total expenditures for civil works and comprehensive maintenance supervision;(d) 100% of foreign expenditures and local expenditures (ex-factory costs), and 80% of itemsprocured locally, for goods; and, (e) 100% of the cost for consulting services for technicalassistance to SNC and VMT, and technical audits. Table C shows the basis of loan disbursements.

The estimated schedule of disbursements is shown in Annex 5. The Government's aim is tosubstantially complete the project by December 2003, and the implementation schedule has beendeveloped on this basis. Experience shows, however, that some slippage is likely. The expectedproject closing date is June 30, 2004.

Use of statements of expenses (SOEs):

Disbursement requests in respect of civil work contracts over US$3,000,000; and consultantcontracts over US$200,000 for firms and US$50,000 for individuals will be fully documented. Inall other cases, disbursements will be made against statements of expenditures (SOEs). All SOEswill be transmitted through SNC, which will retain the supporting documentation in separate filesfor each SOE and make it available for examination by IDA staff during supervision missions.During project preparation, it was confirmed that there are sufficient and qualified staff in the SNCto record, handle and report on the SOE related transactions.

Special account:

A Special Account (SA) will be opened and maintained in US dollars in the Central Bank ofBolivia, and up to US$6 million can be advanced from the credit into the SA to facilitatedisbursements for the purpose of the project. The initial deposit will be limited to US$3 millionuntil the aggregate disbursed amount has reached US$12 million. IDA will replenish the SpecialAccount upon receipt of disbursement requests from the Borrower. The SNC will control the use ofthe Special Account and be responsible for preparing the disbursement requests on behalf of theBorrower. These requests should be submitted every month, or when the Special Account has beendrawn to 35% of its initial deposit, whichever comes first.

The operating arrangements for the Special Account have been agreed at negotiations.

Annex 6, Table A: Project Costs by Procurement Arrangements

(US$ million equivalent)

Total Cost

Expenditure Category Procurement Method (includingcontingencies)

ICB NCB Other N.B.F

1. Works 111.5 (82.3)a) Bridge in Abap6 4.6 (3.7)b) Abap6 - IpitA 38.0 (30.4)c) IpitA - Ipati 28.4 (22.7)d) Ipati - Carniri 15.7 (12.5)e) Camiri by-pass 5.1 (4.1)f) Access Road to El Espino 8.0 (6.4)g) Comprehensive Maintenance 11.5 (2.3)h) Routine Maintenance 0.1 (0.1) 0.1 (0.1)

2. Goods 0.1 (0.1)a) For SNC & VMT 0.1 (0.1)

3. Consulting Services 8.4 (5.6)a) Institutional Strengthening 0.3 (0.3) 1.4b) Supervision Civil Works 5.9 (4.6)c) Supervision Compreh. Maint. 0.8 (0.7)

4. Miscellaneous

Total 111.3 (82.1) 0.1 (0.1) 7.2 (5.8) 1.4 120.0 (88.0)

Note: N.B.F. = Not Bank-financed (includes elements procured under parallel cofinancingprocedures, consultancies under trust funds, any reserved procurement, and any other miscellaneousitems). The procurement arrangement for the items listed under "Other" includes civil worksprocured with price quotations.

Figures in parenthesis are the amounts to be financed by the IDA credit.

Annex 6, Table Al: Consultant Selection Arrangements

(in US$million equivalent)

Selection MethodConsultant Services Expenditure Total Cost

Category (includingcontingene

ies)QCBS QBS SFB LCS CQ Other N.B.F.

A. Firms 8.3 (5.5)Supervision Civil Works 5.9 (4.6)Supervision Compreh. Maint. 0.8 (0.7)T.A. Concession Project 0.1 (0. 1)Tech. & Finan. Auditing 0.1 (0. 1)Reset.&Ind.Peop.&Com.Rel. Plans 1.4

B. Individuals 0.1 (0. 1)PCU & EU and Training 0.1 (0. 1)

Total 6.8 (5.4) 0.1 (0.1) 0.1(0.1) 1.4 8.4 (5.6)

Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' Qualifications

Other = Selection of individual consultants (per Section V of Consultants Guidelines), CommercialPractices, etc.

N.B.F. = Not Bank-financed.Figures in parenthesis are the amounts to be financed by the IDA credit.

Annex 6, Table B: Thresholds for Procurement Methods and Prior Review

Procurement item as per the Procurement Plan

Review1.0 Civil Works Prior Review of all

prequalificationdocuments

Prior Review of allcontracts each year

Prior Review of first twocontracts each year

Post Review

20 Goods

Post Review of a sampleof contracts

3.0 Consultant's Services3.1 Firms Prior Review of

Consultants: all TORs,short lists (including fullreview of technical andcombined evaluations)

Prior Review of all TORsand short list

3.2 IndividualsPrior Review of all TORsand short list

Prior Review ofConsultants: CV's andTerm.s of Reference.Post Review ofConsultants: Contracts.

Prior Review: twiceyearly review of programof contracting.Post Review: randomsample of contractingdocuments.

Annex 6, Table C: Allocation of Loan Proceeds

Expenditure Category Amount in Amount in Financing PercentageUS$ million SDR million

1. Civil Works 74.30 54.60

a) Road upgrading and reconst. and bridge construct. 72.10 52.95 80%b) Comprehensive Maintenance Program 2.00 1.50 20%c) Routine Road Maintenance 0.20 0.15 20%

2. Consulting Services 5.50 4.07

a) Civil Works Supervision and Tech. Auditing. 4.60 3.4 80%b) Supervision of a Comprehensive Maintenance 0.60 0.45 80%c) SNC & VMT Institutional Strengthening. PCU, 0.30 0.22 100%

Environmental Unit & Concessions.

3. Goods 0.10 0.08 80% local expend., and100% of foreign expend.

4. Unallocated 8.10 5.95 74% (Average)

Total 88.00 64.7 73% (Average)

Annex 7

Abap6 - Camiri Project (ACA-HP)

SNC Financial Management Assessment Summary

The financial management assessment of SNC, which is a required component of the projectappraisal, was based on the findings of the external auditors for 1997 and work in process on the1998 and the review conducted during the missions of November 1998 and April 1999. Theconclusion of the assessment is that now that SNC has reconciled its assets accounts with subsidiaryrecords and performed the other reconciliations; the records can be considered reliable hence theirfinancial management is adequate.

The work taken to address the problem of reconciliation between the investment accounts in thegeneral ledger of the entity, which relate to the projects underway, and the subsidiary projectrecords kept in the Project Coordination Unit is now completed, will result in an improved opinionof the auditors, and provides a reliable link between the double entry entity wide accounts and theproject specific expense analysis, used to produced the external reports. Fortunately, the reportingsystems and other controls in place will support LACI, once minor modifications to the projectreporting are effected.

Organization and Staffing

The project will be administered within SNC's Financial Department and will be subject to all thereview and control of the operations of the entity including internal audits. The staff of SNC is ofsufficient size to permit proper segregation of functions and independent review. To achieve timelyexternal reporting and additional supervision over the operations, a Project Coordination Unit isstaffed and responsible for recording all project expenditures by credit agreement and preparing theindividual project external and management reporting in the format required by respective donors.

The administrative function is organized under the financial department manager (Jefe delDepartamento de Finanzas), and reporting to him are: the Head of the Accounting Department andthe Head of the Projects Unit. Additionally, there is an Internal Audit Department reporting to theExecutive Director. The background and qualifications of the staff currently appointed fully meetthe requirements for this responsibility.

Accounting System

SNC has a computer based double entry bookkeeping system designed to record all the entity'sactivity (i.e. all projects and regular resources) under the uniform government accounting system.These are the records that support the entity and the project external audit and are the source ofinput or compliance with the national accounts compiled by the Ministry of Finance. The SIIF(Sistema Integrado de Informaci6n Financiera) input is made directly from the system. However,since the transactions are coded in the books under the uniform account code, there is no reliablelink between these and the cost categories and components presented in the credit agreement,registered by the project reporting prepared by the Project Coordination Unit.

To address the external reporting requirements, the Project Coordination Unit processes all chargesto the project before they are actually disbursed and booked by Accounting, as such, they registerthese in their subsidiary project records in the exact format of the credit agreement i.e. by costcategory and component. This record is complemented by notations on the physical progress andthe contract status. This set of project financial and physical records by contract constitute anexcellent base for monitoring and would support LACI-PMR reporting

This approach of using subsidiary projects outside the official accounting has the advantage ofbeing flexible to accommodate the exact format of the credit agreement and being able to add nonfinancial data in the same records. This requires that these records be kept balanced to the entityaccounting records (general ledger).

Auditing Arrangements

SNC engaged external auditors for Credit 2395-BO who were satisfactory to the Bank and workedunder Terms of Reference acceptable to the Bank for both the project and the entity audits. It wasagreed during negotiations that similar arrangements will be followed for the proposed credit andthat the financial audit will be contracted for the total estimated period of project implementationand that the procurement process for the audit will start as soon as the credit is effective.

The project financial statements of Credit 2395-BO for 1997 received a clean opinion, while theentity audited statements were given an adverse opinion that arose from: (i) limitations in the scope,since the auditors were not appointed on time for the year end inventory taking, so they could auditthe stock taking; (ii) the fact that 80% of SNC assets relate to finished works which should havebeen passed to memo accounts and the lack of reconciliation between the asset balance and thecorresponding equity accounts; and (iii) the lack of reconciliation between the investmentaccounts, which relate to the projects underway, and the subsidiary project records kept in theProject Coordination Unit. SCN contracted in 1998 a team of professional accountants whoresolved the three issues mentioned as causes of the adverse opinion and implemented therecommendations presented in the report on internal control.

Disbursements, Funds Flow, and Cash Management

It was determined that the project will be funded through a Special Account operated in compliancewith the provisions of Operational Guidelines and Directives (OP/BP/GP 12.20) on the basis ofcash withdrawal requests supported by Statement of Expenditures for the first 12 months and thensupported by quarterly PMRs.

Funds will be drawn from the Special Account periodically and transferred to a disbursementsaccount in Bolivianos in a commercial account for exclusive use by the project. Disbursementsoriginate with the request of the technical staff, which is recorded as a commitment in theAccounting area and then processed for payment in Treasury following the review and approval byAccounting of the supporting documentation.

PMR Preparation

It was agreed that during the first year of the project SNC will take the following steps needed toproduce the PMRs in accordance with the LACI Handbook.

(i) Attend Bank workshop on LACI financial statement preparation. Aug./Oct. 1999

(ii) Develop customize Excel Spread Sheets in the Project Coordination Unit (Report 1) with linkto contract control (Report 3). Sept./Nov 1999

(iii) Develop reporting format for the Key Performance Indicators which are quantifiable and forwhich costs can be assigned (Report 2) Oct./Dec. 1999

(iv) Prepare PMRs for activity on 1999 parallel to SOEs already submitted 1st quarter 2000.

Annex 8


Environmental and Social Assessment

Introduction

Most of the rehabilitation and paving under the project will follow the existing road alignment. Aninitial environmental screening of the project identified no potentially significant direct and indirectimpacts. No precedent setting or regional impacts of importance were envisioned. Most directimpacts will be related to erosion, slope stability and drainage concerns, easily dealt with throughthe engineering design. However, the screening also identified the need to deal with issues such as:(i) minor resettlement of rural and urban families along the right of way; and (ii) the definition of amajor alternative alignment proposed by indigenous communities that would go through or closerto their territories.

Although the project was classified as Category B for environmental purposes, and in order tocomply with national environmental assessment legislation, a full environmental assessment wasundertaken during project preparation. The terms of reference for this study were complemented tofollow Bank guidelines specially to deal with resettlement and indigenous people issues. As part ofthe EIA, an assessment of potential social impacts was completed (for a full description of the studyand its results see the Estudio de Impacto Ambiental Carretera Abapo-Camiri report, in ProjectFiles). The assessment focused on the direct and indirect impacts the project could have on familieswithin the project area of influence and on indigenous people communities.

Indirect Impacts

The EA report analyzed potential indirect or induced impacts at the regional level stemming fromimproved road conditions. These impacts were deemed of lesser magnitude and importance duemainly to the existing conditions and environmental setting of the project. Additional pressures onnatural resources (logging, colonization) are also expected to be of low magnitude because: (i) theexisting road has been operational for several decades with an existing traffic of around 300vehicles (mainly trucks) per day; (ii) oil exploration and exploitation have been important economicactivities in the area for many decades (Camiri is indeed an oil boom town) and the area is traversedby seismic lines, oil roads, and pipelines; (iii) the Santa Cruz-Abap6 link, as well as the Camiri-Argentine border segment, have already been paved (for over 4 years), the only unpaved sectionbeing Abap6-Camiri; (iv) soil conditions and negative water balance in the area preclude anyintensive agricultural activity; and (v) existing national parks and reserves are located at asignificant distance from the road and are well protected. In addition, the Santa Cruz Departmenthas prepared and is implementing a land use plan (PLUS) for the entire department, whichestablishes land use restrictions and infrastructure construction, extensive cattle ranching being therecommended use for the Abap6-Camiri area, with a watershed protective forest in the Abap6-EILim6n area (km 30-50 of the proposed road). Local expectations towards this project are quite highspecially in the indigenous communities. These communities want an improved access to SantaCruz for their products.

Alternative Alignments

Improved access to markets, mainly Santa Cruz, has been a long time aspiration of indigenouscommunities in the Charagua area. They proposed an alternative alignment through the El Espinovillage (some 35 km from Abap6), and then connecting back to the original alignment at Ipita. Thisalternative was viewed as a way to guarantee an access to indigenous communities to an improved

international road. However, this alternative alignment would entail: (i) going through a small, yetinaccessible watershed (Itani Creek), with high slopes and impressive scenery, but which stillmaintains relicts of native flora and fauna; and (ii) a higher risk of cultural impacts as the highwaytraffic would go closer to indigenous communities. The proposed alignment would also increasetraffic time and costs because of the geological restrictions. This alternative in itself would alsorequire a Category A classification according to Bank's EA policies. Public consultation meetingswere held, in which the benefits and negative impacts of both alternatives were presented to thecommunities. As a conclusion, the government agreed that the project would guarantee access tothe communities regardless of the alignment finally selected. The final alignment would follow theexisting road between Abap6 and El Limon. However, the government agreed that the Abap6 - ElEspino link will also be paved as a major component of an indigenous peoples development plan. Inthis manner, the indigenous communities will have access to project benefits but avoiding the mostpotentially negative impacts of their proposal.

Other alternative alignments considered included by-passing some of the communities in order tominimize resettlement needs and traffic safety concerns. In total, five by-passes will be built,including a 7.3 km by-pass at Camiri. These by passes, in turn, raised some concerns in localcommunities regarding the impact on roadside activities.

Principal Environmental and Social Impacts

The most significant and potentially adverse direct impacts identified by the study are related to: (i)the resettlement of families in the right of way and the potential economic affectation of smallbusiness; (ii) the interaction of workers with the local community and potential damages to privateproperty and community infrastructure, and nuisances to communities caused by constructionactivities; (iii) the potential impacts on indigenous communities due to increased risk ofencroachment on indigenous lands, both in terms of land security and cultural impacts; and (iv)localized environmental impacts due to new alignments and by-passes, road widening, andconstruction activities. Measures to avoid, mitigate and/or compensate affected families andcommunities were developed into specific plans.

Public Consultation

Consultation with civil society representatives and local community leaders throughout the processhelped with the identification of these potential adverse impacts, as well as with the definition ofthe mitigation/compensation plans. During the consultations widespread support to the project wasfound and the potential positive and negative social impacts were discussed with the participants.

Environmental Management Plan

The environmental and social assessment recommended four specific action plans aimed atavoiding and/or mitigating possible negative impacts and enhancing access to the expected benefitsof the project: (i) resettlement plan; (ii) indigenous peoples development plan; (iii) communityrelations plan; and (iv) environmental management of construction activities.

(i) Resettlement Plan

The Abap6-Camiri road passes through several small towns and hamlets. To avoid town crossings,multiple realignments and bypasses were introduced into the project design (Tatarenda Nuevo,Gutierrez, Ipita, Ipati and Camiri). According to Bolivian legislation, the road's right of way is 50m. to each side. Within the right of way more than 80 households were identified by the study.However, to minimize the affectations, the SNC allowed for a partial use of the "legal" right of

way, identifying only those dwellings that would be physically affected by the road platform, embankments,drainage and for road safety reasons, and reducing the actual right of way to 30 meters in key points alongthe highway, thus decreasing in that way the number of families that would be forced to move only to 34.

While the road realignments and bypasses helped to significantly decrease the resettlement needs, at thesame time they could have an impact on small merchants and service providers located at the side of theexisting road, by reducing traffic and business activities on existing routes through small towns. Thesemerchants will be affected as with the new road their potential clientele would have to take a detour to accessthem or passing by traffic would simple no longer stop. Some 92 small merchants and service providersunder these conditions were identified (see Box 1). The project will provide technical assistance to thesemunicipalities to identify alternatives for taking advantage of the new road conditions and by passes and there-establishment of economic activities for affected businesses.

Box 1. Impacts on Roadside Activities: Perhaps the most important community activities affected bythe new road conditions (by-passes, bridge) will be the crossing of the Rio Grande river at Abap6.Over 40 small poor family business (mainly food and refreshments, some stay-over "hotels") havethrived on the obligatory stop of buses and traffic to cross the river over a one-way railroad bridge.Most of small business have illegally occupied lands along the existing road and the access path to therailroad bridge. Traffic congestion is high and sanitary conditions are deficient. During publicconsultation meetings, municipal and community leaders expressed their fear of the loss of businessdue to the construction of a new bridge under the project. On the other hand, SNC wanted to avoid adisorderly "migration" of these business to the new bridge access or to other sites along the right ofway of the new road. In addition to a minor cash compensation to help their relocation, the project willprovide: the basic infrastructure (clearing, paving and drainage) of a roadside site provided by themunicipality next to a future toll booth at the town entrance (around two kilometers from new bridge).This infrastructure will be the first step towards the construction of a town rural market which is beingsupported by the municipality and the cooperative of small business in Abap6.

To mitigate and compensate for the affectations caused by the involuntary resettlement of families andbusiness loses, a resettlement plan was prepared (See Plan de Indemnizaci6n y Reasentamientos Humanos,PIRHon Project Files). The resettlement plan included different options based on the degree of vulnerabilityand affectation of the families: (i) cash indemnification; (ii) relocation within the same property; (iii)resettlement to a new location in the vicinity; (iv) cash compensation for potential business loses. Theresettlement seeks to improve the living conditions of the affected families, particularly of those morevulnerable and poor. In this regard, the plan comprises the construction of a basic rural dwelling which issubstantially better that the current houses these families occupy. Most of these cases are occupants with noland titles. The resettlement plan will provide then with secure land titles and better housing conditions.

Eleven families will receive cash indemnification, 18 families will be resettled to other location and, 5families will be relocated within their property. Also, the right of way crosses by 112 agricultural propertiesthat are affected in different degrees. Direct costs of the resettlement plan are US$ 415,663. Table 1,summarizes the types of affectations and amount of indemnification/compensation for each.

Table 1: Resettlement Plan: Type and Number of Affectations and Compensation Costs

Type of Affectation Number of CostAffected (US$)

UnitsDwelling affectation with cash compensation 11 111,736Resettlement to other location 18 62,663Relocation within the property 5 16,973Business with cash compensation 92 91,815Agricultural properties with cash compensation 112 62,976Staff, equipment and administration costs 69,500Total 415,663

The SNC would be responsible for the general implementation and supervision of the resettlementplan. The resettlement plan would be implemented by an executive environmental unit (UnidadAimbiental Ejecutora) and some specific activities would be decentralized to either contractors orlocal governments. The resettlement plan would be initiated before construction works begin andsupport to affected families would continue until the affected families have been satisfactorilyreestablished.

(ii) Indigenous People Development Plan

Indigenous populations are mainly settled in areas over 30 km. from the road. Some 16,000indigenous people from the "Capitanias Kaaguasu, Kami and Charagua Norte live in the project'sarea of influence. These capitanias have land claims over 455,000 Ha. However they do not haveland titles that would grant them land tenure security. Most of these communities survive fromagricultural and livestock production which are combined with seasonal wage-work. Incidence ofpoverty among these communities is high, much of their basic need are unsatisfied and their overallquality of life is poor. The lack of regular transport has been a chronic feature that has contributedto the communities' poverty. Currently, indigenous communities in the area lack permanent andeasy access to basic services and markets.

The indigenous people see the Abap6-Camiri highway and the access road to El Espino as aneffective alternative that could contribute to improve their quality of live and provide betteropportunities for economic development. The indigenous communities are most interested in theconstruction of the road to facilitate their access to markets. This interest was confirmed byrepresentatives (Capitanes Grandes) of the Kaaguasu, Kami, Charagua Norte and Bajo and AltoIzozog, communities that officially requested that the construction of the road goes through ElEspino, and also by the identification mission in informal meetings with thecorregidor (the mayor)of the community of El Espino. This access would follow an existing dirt road parallel to therailway, surrounding an area of indigenous settlements, although it is separate enough from themand would provide benefits to the indigenous communities without serious negative impact.

However, the indigenous communities are also aware of the potential risks the Abap6-Camirihighway and the access road to El Espino may have in terms of opening their lands to colonizationas well as the weakening of their social organization and culture. During the consultation processthe IDA mission discussed with the indigenous communities about these potential negative impactsand the indigenous leaders emphasized the importance of land titling as a mechanism to preventcolonization.

As a result of the assessment and through a process of consultation with indigenous representativesfrom CABI and CIDOB, as well as with the local communities living in the project area, anIndigenous Peoples Development Plan (PADI) aimed at ensuring that the communities would

benefit from the road was agreed. The PADI entails several activities ranging support to land titlingto bilingual education and support to handcrafts development.

Specifically, the PADI comprises four components (for details see Plan de Apoyo al Indigena,PADI, on Project Files). First, there is a land titling component that seeks to facilitate the landtitling process. Through this component funds would become available to the communities. Theseresources would enable the communities to get technical assistance and provide follow up the legalprocess. Second, the PADI entails an organizational strengthening component, which seeks to helpthe Capitanias of Kaaguasu, Kami, Charagua Norte to identify training needs and provide trainingto some 70 community leaders. Third, there is a bilingual education component that wouldcontribute to the training on bilingual educatioiu of rural school teacher and would provide bilingualteaching materials to the rural schools in the area. Finally, there is a handcraft developmentcomponent targeted to indigenous women to improve the quality of their products and help themwith their marketing. Table 2 summarizes the costs of the PADI by component.

The PADI would coordinated and supervised by a Board of Directors constituted by fourindigenous leaders (one from each of the three Capitanias and a representative from theAsociacidndel Pueblo Guarani), a representative for the SNC, a member of the environmental supervisioncontractor firm and the executive director of the PADI and PIRH. The PADI will be executed by acontractor (the same that will implement the PIRH).

Table 2: Indigenous People Development Plan: Costs by Component

Component Cost

Land Titling 38,050Organizational Strengthening 50,850Bilingual Education 67,050Handcraft Development for Women 57,850

Administration 82,650

Total Costs 296,450

(iii) Community Relations Plan

Road construction works may disrupt the communities in the vicinity of the right of way as therewill be an influx of workers increased traffic of heavy machinery, potential damages to privateproperty and conflicts with the local population. Further to the consultation process, specificparticipation mechanisms were identified and a committee with representatives from different civilsociety organizations was established. This committee recommended follow-up activities tofacilitate communications and to avoid conflicts with the local community. As a result of thisprocess a Community Relations Plan (CRP) was developed.

The CRP involves: (i) the establishment of a civil society consultative committee, (ii) proceduresand mechanisms for information dissemination and community access to project management and;(iii) support to local governments for urban planning initiatives. It also involves specificrecommendations regarding location of worker's camp, workers' code of conduct andindemnification procedures for potential damages which were introduced in the EnvironmentalManagement Plan. Technical assistance to local communities will also be provided in order to

support land use planning and identify alternatives to improve roadside activities under the newconditions of the highway and the by-passes. Table 3 below summarizes the main activities andcosts of the CRP.

Table 3: Community Relations Plan: Costs by Component

Component Cost

Public Information 11,600Environmental training 16,450Public safety outreach activities 37,600Support to Urban Planning 154,500Support to the Development of Marketing Strategies 52,850Staff and Administration 405,400Total Costs 678,400

A Board of Directors would be responsible for the execution of the CRP. The board, composed byrepresentatives from the SNC, six representatives of the local governments (Abap6, El Espino,lpita, Gutierrez, Ipati and, Camiri), a member of the environmental supervision contractor firm andan executive manager who would also be a board member.

The area has no known archaeological sites and the potential for chance findings is low. However,chance finding procedures for archaeological sites will be part of the environmental specificationsfor construction activities. In addition, the Board of Directors of the SRP will be also responsiblefor managing a contingency fund (US$20,000) for archeological salvage.

Environmental specifications for road design and construction

All mitigation measures for direct impacts (erosion control, embankment and slope stability,drainage) have been incorporated into project design and will be included in project costs. Inaddition, all the environmental requirements for road construction have been incorporated in anenvironmental annex which will be part of bidding documents. This manual establishes specificrules for minimizing environmental impacts during construction and provides guidance on thedesign of specific environmental mitigation measures such as slope stability, construction wastedisposal and erosion control. Examples of topics that are included in the environmentalspecifications annex are: (i) explicit prohibitions and environmental behavior guidelines for workcrews, specially along sensitive areas and near rural communities; (ii) proper selection andmanagement of quarries, borrow pits, gravel extraction sites in rivers and streams; (iii) therehabilitation of affected areas through soil replacement and revegetation; (iv) selection of campsites (with specific guidelines on distance to communities according to their population),management of camp wastes, and guidelines for camp dismantling and abandonment; (v) properdisposal of excavated earth and spoil materials to avoid pollution of streams; and (vi) properdisposal of wastes from construction machinery and equipment. The guidelines will also includechance finding procedures for archaeological artifacts. Enforcement of these guidelines will beunder the responsibility of the Supervision Engineering firm.

Institutional Capacity for Environmental Management

At present, SNC's capability to address environmental issues associated with road projectscontinues to be weak. However, environmental management capacity in SNC is being strengthenedthrough the ongoing Road Maintenance Project. The proposed reorganization of SNC (starting

January 1999) will elevate the existing environmental unit of SNC to a higher hierarchical statuswithin the organization (Division Level) and under the technical Sub-Directorate. The project willprovide additional support to SNC to strengthen environmental management capabilities.

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Annex 10


Project Performance Monitoring Indicators

The following set of Project Performance Indicators will serve as the basis for both the projectsupervision and evaluation. They have been organized in four groups: input, output, outcome andimpact indicators to link the project objectives and components (inputs) with the expectedprocesses, outputs and outcomes. They will provide the project implementers with a monitoringtool for ensuring proper use of project resources and that the goods and services the project isexpected to produce are delivered.

A. Input Indicators measure the quantity of resources provided for the project activities.

1. Project Resources (US$000).

Project Components IDA GoB Others TotalCivil Works 80.0 20.1 0.0 100.1Comprehensive Maintenance 2.2 9.2 0.0 11.4Supervision 5.4 1.3 0.0 6.7Goods 0.1 0.0 0.0 0.1Consulting services 0.3 1.4 0.0 1.7Total 88.0 32.0 0.0 120.0

2. Maintenance budget (US$ million) (not project financed)

Budget 1999 2000 2001 2002 2003(Calendary ea r)__ _ _ _ _ __ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _

Planned 20.0 21.0 21.0 22.0 23.0Executed I I_ _ _

3. Civil Works Cost. (including supervision and contingencies)

Projects Components Estimate Actual Differenc %d US$ US$ e

000 000(A) Abap6 Camiri Highway (cost per km) 640(B) Access Road to El Espino (cost per km) 224(C) Comprehensive Maintenance (cost per km-year) 4.6 =

* (CD) Maintenance cost per kilometer (periodic) 24.0* (CE) Maintenance cost per kIn-year (routine) 3.0

4. Disbursements (US$ million).

Bank's 2000 2001 2002 2003 2004FY

IDA GoB IDA GoB IDA GoB IDA GoB IDA GoBEstimate 168 5 25.4 .4 26.1 9.3 13.0 6.2 6.7 2.8

Actual

5. Average Supervision Cost as percentage of civil works contracts.

Bank's FY 2000 2001 2002 2003 2004Supervision cost/civil works cost (%/O)Supervision cost/compreh. maint..cost (%)

Estimate: 6% (Civil Works)8% (Comprehensive Maintenance)

6. Average percentage of physical contingencies in civil works .

Bank's FY 2000 2001 2002 2003 2004Physical Contingencies in Civil Works (%)Physical Contingencies in Compr. Maint.(%)

Estimate: 8% (Civil Works)8% (Comprehensive Maintenance)

7. Average percentage of contingencies in consulting contracts.

Bank's FY l 2000 1 2001 1 2002 J 2003 | 2004Contingencies in Consulting Contracts (%)

Estimate: 0%

8. Percentage of contracts completed on time.

Bank's FY r 2000 | 2001 2002 2003 2004Contracts Completed on time (%) ll

More than 80%: very satisfactory 60-80%: satisfactory 40-60%: unsatisfactory Less than 40%: very unsatisfactory

9. Percentage of contracts completed on budget.

Bank's FY 2000 2001 j 2002 2003 J 2004Contracts Completed on budget (%) I

More than 80%: very satisfactory 60-80%: satisfactory 40-60%: unsatisfactory Less than 40%: very unsatisfactory

B. Output Indicators measure the quantity of goods and services provided through the use ofinputs.

Project Components/Bank's FY 2000 2001 2002 2003 2004Civil Works (km)Comprehensive Maintenance (km)Supervision (% of cost)Goods (% of cost)Consulting services (% of cost)Total _

C. Outcome Indicators measure the quantity of direct results that have been achieved throughthe provision of project goods and services.

1. Vehicle Usage. Current and Estimated Future Traffic

Project ADT ADT (v.p.d) ADT (v.p.d)(v.p.d)

Components 1998 2001 2004Sections Current Planned Actual Planned ActualAbap6-Ipita 243 268 370Ipita-Ipati 229 252 350Ipati-Camiri 366 480 559Bypass of Camiri 286 379 441Access to El Espino 35 50 59

ADT = Average Daily Trafficv.p.d. = vehicles per day

2. Road Condition. Comprehensive Maintenance Component

Current and Future Condition of Roads in the Comprehensive MaintenanceComponent

1999 2000 2001 2002 2003Total Roads KM % KM KM KM KM

Condition 1 37 4 14 0 0 0Condition 2 147 16 120 50 0 0Condition 3 458 51 230 194 94 0Condition 4 252 28 450 450 500 520Condition 5 0 0 80 200 300 374

TOTAL 894 100 894 894 894 894

3. Progress of routine maintenance by contract.

Maintenance by ContractYear Km. US$ equiv.19992000200120022003

4. Road Condition. National Road Network

Current and Future Condition of the National Road Network1998 2001 2001

Planned ActualNational Road KM KM % KM Network (*)

* Paved 2,532 37* Gravel 3,853 56

Current and Future Condition of the National Road Network1998 2001 2001

Planned Actual* Earth 506 7

TOTAL 6,891 100

National Road KM % KM % KM%Network (*)

* Condition 1 213 3* Condition 2 2,204 32* Condition 3 3,130 45* Condition 4 1,292 19* Condition 5 52 1

TOTAL 6,891 100Condition 1: POOR Condition 3: REGULAR Condition 5: GOOD

(*) It includes only the "maintainable" sections of the network and excludes roads under constructionor non existing yet.

5. Financing of Maintenance

Routine Road Maintenance Account (US$ millions)Calendar year 1999 2000 2001 2002 1 2003Budget Needs (US$) 20 21 21 22 23Account Funds (US$) 14.0 16 18 20 23

D. Impact Indicators measure the degree to which project objectives are being achieve throughthe direct outcomes of project activities.

I1. Objective: Improve Level of Service. Indicator: average speed on theAbap6-Camiri Highway.

Average SpeedVehicle Type Current Expected*

(Km/h.) (Km/h.)Cars and Utility Sport 33 76Buses 30 72Medium Trucks 20 52Heavy Trucks 17 64Articulated Trucks 15 56

* When the civil works for Abapo-Camiri are completed.

2. Objective: reduce road user cost. Indicator: cost per vehicle-km on theAbap6-Camiri Highway.*

US$ per veh-km.Vehicle Type Curre Expected*

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ n tCars 0.58 0.19Utility Sport 0.85 0.19Buse5 1.73 0.88Medium Trucks 1.01 0.40

US$ per veh-km.Vehicle Type Curre Expected*

fitHeavy Trucks 1.59 0.64Articulated Trucks 2.13 0.94

* When the civil works for Abapo-Camiri are completed.

3. Objective: improve road safety. Indicator: Accidents (injuries andfatalities) on the Abap6-Camiri Highway.

Accidents/Bank's FY 1999 2000 2001 2002 2003Accidents per 100 million veh-kmInjuriesNeh-kmFatalitiesNeh.-km

4. Objective: Improve Maintenance Efficiency. Indicator: Percentageallocated in the Comprehensive Maintenance by Contract Program

Percentage per Maintenance TypeType of Maintenance 1999 2000 2001 2002 2003

* Periodic (includes resurfacing) L_X_I* Routine |_|

* Emergencies _

* Minor WorksL Training _

Total Comprehensive

Estimate: US$million 12.2 (Total Comprehensive) [100%]

(Routine) [26.9%]; 5.7 (Periodic) [47.9%l; 0.3 (Emergencies) [2.5%1; 0.4 (Minor Works) [3.4%1; 2.3(Training) [19.3%]

5. Objective: ensure adequate financing of maintenance. Indicator: planned,allocated and spent resources for maintenance in the national road network.

Type Resources allocated to Maintenance (US$ million)Of CY1999 CY2000 CY2001 CY2002 CY2003

Maintenance P A D P A D P D, P r D

Routine 20 21 21 22 23Periodic 10 10 10 10 l1Emergencies 1 1 1 1 1 1Total 31 _ 32 _ 32 _ 1 . 3_3 |l34l

* P = Planned A = Approved D = Disbursed

Annex 11


Project Processing Budget and Schedule

A. Project Budget (US$000) Planned Actual(At final PCD stage)

IDA Budget 200Spanish Trust Fund 100

B. Project Schedule Planned Actual(At final PCD stage)

Time taken to prepare the project (months) 15First Bank mission (identification) 10/07/1997 10/07/1997Appraisal mission departure 02/21/1999 02/21/1999Negotiations 03/08/1999 03/30/1999Planned Date of Effectiveness 10/01/1999 10/01/1999

Prepared by: Bank staff in coordination with SNC personnel.

Preparation assistance: Spanish Consultant Trust Fund

Bank staff who worked on the project included:Name Specialty

Jose Ma. Alonso-Biarge Senior Highway Engineer/Task ManagerZia Mian (until 5/31/98) Senior Operations/Officer/Alternate TM

Alberto Nogales Infrastructure Project OfficerJuan D. Quintero Environmental Specialist

Estanislao Gacituta-Mari6 Social SpecialistRodrigo Archondo-Callao Economic Analysis

David Varela LawyerPaul Sisk Financial Management Specialist

Paul Vandenheede Disbursement OfficerRauil Auzmendi Consultant, Transport Economist

Salvador Pou Consultant, Maintenance Specialist

Annex 12


Documents in the Project File*

A. Project Implementation Plan

* Plan Preliminar de Implementaci6n del Proyecto Carretera Abap6 - Caminri, S.N.C.,Departamento de Planificaci6n, La Paz, Diciembre, 1997.

B. Bank Staff Assessments

* Country Assistance Strategy of the World Bank Group for the Republic of Bolivia, C.M.U.Bolivia, Paraguay and Peru, May 21, 1998.

* Bolivia, Country Assistance Review, Operations Evaluations Department, Report No. 17957,June 5, 1998.

* Bolivia, Transport Sector Strategy, Infrastructure Operations Division, Department III, ReportNo. 11899-BO, June 30, 1993.

* Implementation Completion Report - ICR for the Export Corridors Project, InfrastructureOperations Division, May 15, 1997.

C. Other

* Terminos de Referencia - Estudios de Factibilidad Tecnico - Econ6mica, Impacto Ambiental yDiseino Final de Ingenieria de la Carretera Abap6 - Camiri, S.N.C. Departamento de Planificaci6n,La Paz, Agosto 1994.

* Decreto Supremo No. 25134 sobre la definici6n de la Red Vial Fundamental y la Constituci6nde la Cuenta de Conservaci6n Vial, Presidencia de la Repuiblica, Gaceta Oficial de Bolivia No.2081, Agosto, 1998.

- Documento de Precalificaci6n, Proyecto de Carretera Abap6 - Camiri, Obras Civiles yPavimentaci6n de Carretera, S.N.C. Agosto 1998.

* Documento de Precalificaci6n, Proyecto de Carretera Abap6 - Camiri, Componente deMantenimiento, S.N.C. Agosto 1998.

* Dialogo Nacional "Bolivia hacia el Siglo XXI" Informe y Conclusiones, RepuTblica de Bolivia,La Paz, Octubre, 1997.

* "Bolivia hacia el Siglo XXI", Documento presentado por el Gobiemo de Bolivia al XI GrupoConsultivo, Paris, Francia, Abril, 1998.

* Corredores de Integraci6n, Plan Quinquenal de Pre-Inversi6n e Inversi6n 1997 - 2002,Secretaria Nacional de Transportes, S.N.C., La Paz, Septiembre 1997.

* Decreto Supremo No. 24327 que establece la normativa sobre el "Control de Cargas" para losvehiculos de transporte que circulan por las carreteras, Gaceta Oficial de Bolivia No. 1942, La Paz,28 de Junio de 1996.

* Ley No. 1874, Ley General de Concesiones de Obras Publicas de Transporte, HonorableCongreso Nacional, Repuiblica de Bolivia, La Paz, Junio, 1998.

* Ley No. 1788, Ley de Reorganizacion del Poder Ejecutivo, Honorable Congreso Nacional,Repuiblica de Bolivia, La Paz, Septiembre, 1997.

* Informe de la Fase I de la Re-Estructuraci6n del S.N.C., Consultora Booz Allen & Hamilton -CAEM Ltda., La Paz, Noviembre, 1997.

* Inventario Vial de Mantenimiento de la Red Fundamental, Tomos I y II, S.N.C., Departamentode Mantenimiento, Julio, 1998.

* Estudio del Financiamiento del Mantenimiento de Carreteras, S.N.C., CAEM Consultores, LaPaz, 1997.

* Estadistica Vial - 1996, SN.C., Departamento de Planificaci6n y Estudios, La Paz, Octubre,1997.

Documentos del Proyecto Carretera Abap6 - CamiriElaborados por PCA lngenieros Consultores S.A, 1998-1999

* Memoria Descriptiva. Estudio de Factibilidad Tecnico - Econ6mica, Impacto Ambiental yDisefno Final de Ingenieria de la Carretera Abap6 - Camiri, P.C.A. Ingenieros Consultores S.A.,Santa Cruz, 1998.

* Contrato OC- 1: Tramo Abapo-Ipita, pliego de condiciones: Voluimen I: Condiciones Generales(Documento Preliminar)* Especificaciones del Proyecto, Volumen III.

TOMO 1: Especificaciones Tecnicas GeneralesTOMO 2: Especificaciones Tecnicas EspecialesTOMO 3: Especificaciones Tdcnicas AmbientalesTOMO 4: Servicios de Campo para el Ingeniero

TOMO 5: Construccion de Estaci6n de Pesaje* Estudio de evaluaci6n socio-econ6mica del estudio de factibilidad tecnico ecomomica, impacto

ambiental y diseijo final de la Carretera Abap6-Camiri.Anexo I. Resultados Modelo HDM

* Estudio de evaluaci6n socio-econ6mica del estudio de factibilidad tecnico ecomomica, impactoambiental y disefio final del "Ramal Acceso El Espino".

* Estudio de evaluaci6n socio-econ6mica del estudio de factibilidad tecnico ecomomica, impactoambiental y disefno final de la "Circunvalaci6n a Camiri".

* Evaluaci6n socio-econ6mica de la Carretera Abap6-Camiri.* Evaluaci6n socio-econ6mica del "Ramal Acceso El Espino".* Estudio de evaluaci6n de impacto ambiental consolidado incluyendo la carretera Abap6 -

Camiri, el camino de acceso a El Espino y la Circunvalaci6n a Camiri.* Presupuesto, precios unitarios y costo de obra, La Paz, Enero 1999

*Including electronic files.

Annex 13

STATEMEN OF LOANS AND CREDITS

As of 12-Apr-99

Difference Betweenexpected

Original Amount in US$ Millions and actual

Fiscal disbursements a/

Project ID Year Borrower PurposeIBRD IDA Cancellations Undisbursed Orig Frm Rev'd

Number of Closed Projects: 55

Active ProjectsBO-PE-57030 1999 REPUBLIC OF BOLIVIA REG REFORM ADJ CREDI 0.00 41.78 0.00 19.81 -2.30 0.00

BO-PE-40085 1998 REPUBLIC OF BOLIVIA PARTICIP RURAL INV. 0.00 62.80 0.00 60.98 -.34 0.00

BO-PE-40110 1998 MINISTRY OF FINANCE (MOF) FIN DECEN & ACCT 0.00 15.00 0.00 11.47 -.42 0.00

BO-PE-55974 1998 GOVERNMENT OF BOLIVIA BO EL NINO EMERGENCY 0.00 25.00 0.00 16.06 2.54 0.00 0Q

BO-PE-57396 1998 REPUBIC OF BOLIVIA REG REFORM TAC 0.00 20.00 0.00 20.22 .93 0.00 (B

BO-PE-6204 1998 GOV OF BOLIVIA EDUCATION QUALITY 0.00 75.00 0.00 72.33 11.25 0.00

BO-PE-6186 1996 REPUB. OF BOLIVIA ENV.IND.& MINING 0.00 11.00 0.00 8.89 3.60 0.00

BO-PE-6191 1996 GOVERNMENT POWER SCTR REF TA & 0.00 5.10 0.00 1.66 1.96 0.00

BO-PE-6202 1996 GOVERNMENT OF BOLIVIA RURAL COMMUNITIES DE 0.00 15.00 0.00 .82 1.95 0.00

BO-PE-6206 1996 GOVT OF BOLIVIA RURAL WTR & SANIT 0.00 20.00 0.00 9.74 8.93 .67

BO-PE-6181 1995 GOV OF BOLIVIA EDUCATION REFORM 0.00 40.00 0.00 19.95 7.61 0.00

BO-PE-6197 1995 GOV OF BOLIVIA LAND ADMINISTRATION 0.00 20.40 0.00 6.41 -1.69 0.00

BO-PE-6205 1995 GOV'T. OF BOLIVIA JUDICIAL REFORM 0.00 11.00 0.00 4.55 3.65 0.00

BO-PE-6190 1994 GOVMT OF BOLIVIA MUNICIPAL DEV 0.00 42.00 0.00 8.27 7.63 0.00

BO-PE-6196 1993 GOV OF BOLIVIA INTEGRATED CHILD DEV 0.00 50.70 20.25 18.32 30.82 0.00

BO-PE-6180 1992 GOV'T OF BOLIVIA A RD MAINT 0.00 80.00 0.00 19.15 16.92 8.07

Total 0.00 534.78 20.25 298.63 93.04 8.74

Active Projects Closed Projects Total

Total Disbursed (IBRD and IDA): 212.68 1,157.97 1,370.65

of which has been repaid: 0.00 294.96 294.96

Total now held by IBRD and IDA: 514.53 841.00 1,355.53

Amount sold 0.00 .05 .05

Of which repaid : 0.00 .05 .05

Total Undisbursed : 298.63 3.20 301.83

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.

Note:Disbursement data is updated at the end of the first week of the month and is currently as of 31-Mar-99.

STATEMENT OF IFC's

Held and Disbursed PortfolioAs of 31-Mar-99

In Millions US Dollars

-----------Held ----------- -----------Disbursed----------------------IFC ---------- ----------IFC----------

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic

0 Minera 0.00 3.40 0.00 0.00 0.00 3.40 0.00 0.001976/88/90/91/95/98 BISA 12.00 4.70 0.00 0.00 12.00 3.16 0.00 0.001989/92/94/96 COMSUR 10.79 0.00 2.14 2.50 10.79 0.00 2.14 2.501991 Bermejo 0.00 5.90 0.00 0.00 0.00 5.14 0.00 0.001991 Central Aguirre .60 .35 0.00 0.00 .60 .35 0.00 0.001992 Inti Raymi 5.00 0.00 5.00 0.00 5.00 0.00 5.00 0.001993 GENEX .36 0.00 .72 0.00 .36 0.00 .72 0.001996 Mercantil-BOL 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.001996 Telecel Bolivia 10.00 0.00 5.00 20.00 6.67 0.00 5.00 13.331999 Los Andes 2.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Portfolio: 50.75 14.35 12.86 22.50 45.42 12.05 12.86 15.83

Approvals Pending Commitment

Loan Equity Quasi Partic

1999 ILLIMANI 15.00 1.00 0.00 0.00

Total Pending Commitment: 15.00 1.00 0.00 0.00

Annex 14

Bolivia at a glancePOVERTY and SOCIAL AmerI middle.

8odhlib & Carib. icome Dewelopment diamond'1997Popuation, midyear (millions) 7.8 404 2.285 Life expectancyGNP per capita (Atlas method, US$) 950 3,e80 1.230GNP (Atlas method, US$ billions) 7.4 1,917 2,818

Average annual growtth, 1991-97

Population (%J2.4 1.7 1.2 G GLabor force (%) 2.6 2.3 1. GNP Gross

per primaryMost recent estimate (laltet year avaftabe, W9917) cap ta enrollment

Poverty (% of populatbn below mnatlolpoeW wy ) 87Urban population (% of total population) 59 74 42LiUe expectancy at birth (years) 61 70 69Infant mortality (per 1,000 rie bitths) 67 32 38Child malnutrition (% of childrw under 5) 9 .. ,, Access to safe waterAccess to safe water (% of population) 60 73 S4Illiteracy (% of population age 15+) 17 13 19Gross prinary enrollment (% of schotl-age populaibon) 91 t11 111 via

Male 95 18 - Lower-middle-income groupFemale 87 .. 113 . .

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1976 19S6 1996 1997- Economic ratics

GDP (US$ billions) 2.2 4.0 7.2 .7.8Gross domestic investment/GDP .. 13.6 16.6 19.8 TradeExports of goods and services/GDP .. 21.3 22.9 21.0TGross domestic savingsGDP .. .. 11.2 12.3Gross national savings/GDP .. .. 16.6 15.0

Current account balance/GDP -2.6 4.1 .5,3 -8.3 DomestiInterest payments/GDP 1.8 2.8 2.3 2.2 Savc InvestmentTotal debtVGDP 58.6 140W8 72.1 67.6 Savings Total debt serviceexports 21.5 35.0 29.8 30.5Present value of debtWGDP .. .. 46.4Present value of debtlexports .. .. 241.4

Indebtedness197W6 1¶9747 1996 1997 199S42

(average annual growth)GDP -2.7 4.1 4.1 4.2 5,3 -BollviaGNP per capita .. 1.9 2.8 1.4 2.S Lower-middle-lncome groupFxports of goods and services -5.0 8.6 .6.7 *0.5. 8.7

STRUCTURE of the ECONOMY1976 1966 1996 1997 Growth rats ot output and Investment(%)

(% of GDP) 45Agriculture .. 28.5 14.1 14.1Industry .. 51.9 29.2 27.9 3o

Manufacturing ,, ,, 17.0 157 15sServices .. 19.6 56.7 58.0 o'

Private consumption .. 81.4 75.6 74.0 .-1 L 93 2 ss " 97General govemment consumption .. 9.4 13.1 13.7 GDI - | GDPImports of goods and services .. 25.7 28.3 28.5

(average annual growth) 197646 1987-97 1996 1997 Growth rtes of exports and Imports (%

Agriculture .. 3.3 3.6 4.9 7-Industry 4.5 3.4 15 Is

Manufacturing .. 4.3 3.9 4.2 10Services *- 3.9 4.4 4.5

Private consumption -0.5 3.0 2.4 3.9 o . _-, ,_ , , _

General government consumption -4.4 2.9 1.0 3. . 2 95 89Gross domestic investment -4.1 7.8 20.9 23.8Imports of goods and services 1.6 6.0 9.7 10.3 - Exports lmportsGross national product .. 4.4 5.1 3.8 . _ _ .

Note: 1997 data are preliminary estimates.The diamonds show four key indlcators in the country (in bold) compared with its inrome-group average. If data are missing, the diamond willbe incomplete.

Bolivia

PRICES and GOVERNMENT FINANCE1976 1986 1996 1997 Inflation (%)

Domestic prices 20 (% change) 0

Consumer prices .. .. 7.9 6.7 15Implicit GDP deflator . 211.4 8.9 7.9 10

Government finance 5

(% of GDP, includes current grants) oCurrent revenue 18.7 26.3 24.1 92 93 94 95 96 97

Current budget balance .. 1.4 6.3 3.0 GDP deflator CPIOverall surplus/deficit .. -3.3 -2.0 -3.3

TRADE

(US$ rnillions) 1976 1986 1996 1997 Export and Import levels (US$ millions)

Total exports (fob) .. 588 1,132 1,167 2,000Tin 104 86 81Fuel 334 153 200 1,500 ElManufactures . . 144 183

Total imports (ci .. 674 1,568 1,810 1°000 tFood - 148 188Fuel and energy .. . 86 349Capital goods .. .. 586 734 o

91 92 93 94 95 96 97Export price index (1995=100) .- 156 104 106Import price index (1995=100) .. 50 109 110 *Exports PImportsTerms of trade (1995=100) , 310 95 96

BALANCE of PAYMENTS

(US$ rnv/lions) 11976 1986 1996 1997 Current account balance to GDP ratio (%)

Exports of goods and services 623 704 1,318 1,362 0Imports of goods and services 658 816 1,779 2,050Resource balance -35 -112 -461 -688

Net income -36 -309 -168 -212 -4Net current transfers 14 99 245 252

Current account balance -57 -321 -384 -648

Financing items (net) 113 432 726 751Changes in net reserves -56 -110 -342 -103 -10 I

Memo:Reserves induding gold (US$ millions) .. 505 1,125 1,192Conversion rate (DEC, local/US$) 3.00E-5 1.9 5.1 5.3

EXTERNAL DEBT and RESOURCE FLOWS1976 1986 1996 1997

(US$ millions) Compositlon of total debt, 1997 (USS millions)Total debt outstanding and disbursed 1,290 5,575 5,200 5,284

IBRD 31 235 61 37 G: 426 A: 37IDA 53 97 843 930 B:930

Total debt service 137 251 413 453 F: 504IBRD 4 38 32 24IDA 1 2 8 10 C:248

Composition of net resource flowsOfficial grants 11 147 394Official creditors 104 229 196 220 E: 1,421

Private creditors 143 -4 44 -29Foreign direct investment -8 10 426 591Portfolio equity 0 0 0 0 D.718

World Bank programCommitments 68 72 59 15 A -IBRD E - BilateralDisbursements 16 7 100 136 B-IDA D- Other multilateral F - PrivatePrincipal repayments 2 19 28 23 C - IMF G - Short-termNetflows 14 -12 72 113Interest payments 2 20 12 11Net transfers 12 -32 59 102

Development Economics 10/1/9B

IBRD 30220

680 660 -- 640 620 60O 1 0O

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