Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 21501

IMPLEMENTATION COMPLETION REPORT(CPL-37170; SCL-3717A; SCPD-3717S; TF-23012; COFN-04180)

ON A

LOAN

IN THE AMOUNT OF US$ 150 MILLION

TO THE

REPUBLIC OF PERU

FOR A TRANSPORT REHABILITATION PROJECT

December 22, 2000

Finance, Private Sector and Infrastructure Sector Management UnitBolivia, Ecuador, Paraguay, Peru Country Management UnitLatin America and the Caribbean Region

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

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

(Exchange Rate Effective)

Currency Unit = Sol Nuevo1 Sol Nuevo = US$ 0,284

US$ 1 = 3,52 Soles

FISCAL YEARJanuary I December 31

ABBREVIATIONS AND ACRONYMSCEPRI - Special Privatization CommitteeCMCPL - Lima Municipal Bank for Popular CreditCOPRI - Commission for the Promotion of Private InvestmentCORPAC - Peruvian Airport and Commercial Aviation CorporationDGC - General Directorate of RoadsDGTA - General Directorate of Air TransportECLAC - U.N. Economic Commission for Latin America and the CaribbeanENAFER - National Railway CompanyFCC - Central RailwayFCS - Southern RailwayFCSO - South-eastern RailwayGDP - Gross Domestic ProductGTZ - German Agency for Technical AssistanceICAO - International Civil Aviation OrganizationICB - International Competitive BiddingIDB - Inter-American Development BankIERR - Internal Economic Rate of ReturnIMP - Metropolitan Planning InstituteIRI - International Rouglmess IndexKfW - German Development BankLCB - Local Competitive BiddingLIB - Limited International BiddingMEF - Ministry of Economy and FinanceMLM - Municipality of Metropolitan LimaMTCC - Ministry of Transport, Communications, Housing and ConstructionNGO - Non-Governmental OrganizationNMT - Non Motorized TransportPCU - Project Coordination UnitPPF - Project Preparation FacilitySINMAC - National Highway Maintenance SystemSOE - Statement of ExpenditureUCPP - Loan Coordination and Preparation Unit

Vice President: David de FerrantiCountry Director: Isabel Guerrero

Sector Manager Jeffrey GutmanTask Team Leader Paul Guitink

FOR OFFICLAL USE ONLY

PERUTRANSPORT REHABILITATION

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings I3. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 35. Major Factors Affecting Implementation and Outcome 106. Sustainability I 17. Bank and Borrower Perfornance 128. Lessons Learned 139. Partner Comments 1510. Additional Information 18Annex 1. Key Performance Indicators/Log Frame Matrix 19Annex 2. Project Costs and Financing 23Annex 3. Economic Costs and Benefits 25Annex 4. Bank Inputs 26Annex 5. Ratings for Achievement of Objectives/Outputs of Components 28Annex 6. Ratings of Bank and Borrower Performance 29Annex 7. List of Supporting Documents 30

Annex 8. Borrowers Report of Completion of the First Transport Rehabilitation Project 33

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not be otherwise disclosed withoutWorld Bank authorization.

Project ID: P008045 Project Name: TRANSP.RHBTeam Leader: Paulus A. Guitink TL Unit: LCSFTICR Type: Core ICR Report Date: December 27, 2000

1. Project Data

Name: TRANSP.RHB L/C/TFNumber: CPL-37170;SCL-3717A;SCPD-3717S;TF-23012;COFN-04180

Country/Department: PERU Region: Latin America andCaribbean Region

Sector/subsector: TH - Highways; TW - Railways; TY - OtherTransportation

KEY DATESOriginal Revised/Actual

PCD: 01/16/92 Effective: 07/26/94Appraisal: 01/17/94 MTR: 02/24/96Approval: 03/17/94 Closing: 12/31/99 06/30/2000

Borrower/lmplementing Agency: GOVERNMENT/MINISTRY/TRANSPORTOther Partners: Empresa Nacional de Ferrocarriles S.A. (ENAFER), Municipality of Lima,

Kreditanstalt fuer Wiederaufbau (KfW), OPEC, Japanese Trust Fund

STAFF Current At AppraisalVice President: David De Ferranti Shahid Javed BurkiCountry Manager: Isabel M. Guerrero Yoshiaki AbeSector Manager: Jeffrey Gutman Asif FaizTeam Leader at ICR: Paul Guitink Gerhard MenckhoffICR Primary Author: Oswaldo Patino

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L-=Likely, UN=Unlikely, HlJNHighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: M

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time: Yes

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The project was the first investment loan to Peru since 1986 and was designed to address needs thatwere critical to achieve a renewed economy and social development. Its main objectives were to: (1)rehabilitate essential transport infrastructure; (2) assist Government in implementing institutional reformsin the road and railway subsectors, aiming at improved resource use and sustainable development; and(3) lay the ground work for future projects focussing on strengthened road management, increasedprivate participation in the transport sector, and improved mobility of the poor.

3.2 Revised Objective:There were no revisions of the project objectives, which remained clear and unchanged over the life ofthe loan.

3.3 Original Components:To achieve the objectives described above, the project included the following components: 1. Roads. Thiscomponent comprised (i) the rehabilitation of six national road sections, totaling 725 km in length (45% oftotal project cost); (ii) a bridge rehabilitation program involving the acquisition of a minimum stock ofBailey bridges, recovery of Bailey bridges and the reconstruction of derelict old bridges; (iii) execution of apilot road maintenance program on about 620 km of roads feeding directly into Corral Quemado-RiojaTarapoto corridor; (iv) equipment to strengthen the national road laboratory; (v) a traffic safety program tofornulate a comprehensive traffic safety strategy, followed by the acquisition and use of urgently neededsafety materials in accordance with the strategy established; and (vi) a design of future road rehabilitationschemes to strengthen transport planning capabilities and design packages of future investment projects; 2.Railway Rehabilitation and Restructuring. This component had as an objective to prepare ENAFER, thenational railway company, for privatization through the execution of the most urgently needed investmentsto keep ENAFER operating during the preparation of its privatization including: track rehabilitation,locomotives and wagons rehabilitation, lengthening of switchbacks, telecommunications works andacquisition of track maintenance equipment; 3. Runway Rehabilitation at Lima Airport. This componentincluded the rehabilitation of the main runway with a projected 20-year lifetime of new pavements, theinstallation of new airfield lighting and instrument landing system, and the rehabilitation of the paralleltaxiway; 4. Pilot Project for Non-Motorized Transport in Lima. This component consisted ofconstructing four trunk bicycle ways together with bicycles-lanes to provide connections to low- andmiddle- income residential areas and parking facilities, providing sub-loans for the purchase of low-costbicycles, and canying out educational and promotional campaigns; 5. Technical Assistance and Training.Two main areas were identified for policy assistance: (i) improvements to road administration and financeand (ii) organizational reform of MTC. Also, the TA included resources for advisory services and trainingfor the agencies responsible for the highway, railway and non-motorized transport components and for theproject management program.

3.4 Revised Components:Without changing the project objectives, the project cost components and physical targets were revised andfunds reallocated in March 1996. The reallocation was required because of an increase of roadrehabilitation costs reflected in the bids and a restructuring of the proposed runway rehabilitationcomponet. The road component was increased from the original appraisal estimate of US$153.32 millionto US$227.94 million, while the airport component was reduced to US$11.65 million from the plannedUS$30.2 million. In addition, the road maintenance works program was cancelled and funds in the amountof US$10.8 million were reallocated. Only US$300,000 of this subccmponent was disbursed to finance apilot road maintenance program study.

-2 -

3.5 Quality at Entry:Quality at entry is satisfactory. The project objectives were consistent with the CAS, which supportedpolicies and investments aimed at sustaining stabilization and consolidating structural reforms, fosteringprivate development and public sector reform, and rehabilitating key infrastructure and redefining policiesrelated to its operation, maintenance and finance. However, being the first investment loan to Peru since1986, the project was demanding, complex and risky. It was demanding because it required coordinationbetween several implementing units and government institutions to execute physical activities andinstitutional reforms; it was complex because it addressed multiple modes such as road, railway and airportsub sectors, and it was risky because there was a lack of institutional capacity of the implementing agenciesarising from a long period of inactivity and because the infrastructure services were deterioratedenormously, during the 1980s, due to years of under investments, neglected maintenance, and inability tomake long-term plans. In the road sub-sector, this resulted in insufficient quality of feasibility studies, basicengineering designs and final designs for the roads to be rehabilitated. The designs did not take into accountthe challenging terrain and climatic variables in the project area which resulted in inadequate designs forcritical sections of the roads. To address these problems variation orders and additional works wererequired in the implementation phase of the works, resulting in significant cost overruns.

Despite its complexity, the project was generally well designed, although the limited amount of informationand lack of Bank staff experience in the Peruvian road sub-sector at preparation phase of the project wasevident in the limitations of the road feasibility studies and final designs.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:The first objective, to rehabilitate essential transport infrastructure, was achieved satisfactorily. Thesecond objective, to assist Government in implementing institutional reforms, was only partially achievedbecause the Government Plan for "Reform of the State" was never undertaken during projectimplementation period. And the third objective, to lay the ground for future projects focusing onstrengthened road management, increase private participation in the transport sector, and improvedmobility of the poor, was achieved satisfactorily.

Rehabilitate Essential Transport Infrastructure. The project achieved its aim satisfactorily. At projectcompletion, the project had addressed the core infrastructure deficiencies through rehabilitation componentsin the road, railway and airport sub sectors. In the transport sub-sector, the project supported therehabilitation of six key roads linking agricultural areas in northern and central Peru with the Coast. Onlyfive out of the six road subprojects were completed under the project with substantive impact in the roadnetwork system: Tarma-La Merced, La Merced-Satipo, Huanuco-Tingo Maria, Rioja-Rio Nieva and RioNieva-Corral Quemado. Preparation of the road rehabilitation component was unsatisfactory: at projecteffectiveness designs were not ready and their quality was inadequate. This resulted in initial procurementdelays of approximately 15 months and cost over-runs for civil works of approximately 83% due tounderestimation of construction cost during road design. Nonetheless, the project completed 81% of itsphysical targets, about 589 km of road rehabilitation and paving works. Achieving these road works waspossible,in part because the funds originally budgeted to the Tarapoto-Rioja road, the Road MaintenanceProgram subcomponent and the Runway Rehabilitation at Lima Airport component were reduced andreallocated to the road rehabilitation subcomponent and in part because the Government local counterpartcontribution increased from US$18.1 million to US$60.82 million. However, it is worth noting that thephysical targets proposed at project appraisal were based on cost estimates produced after a long period ofinactivity in road construction. With the revival of the industry and the economy, these estimated costs

- 3 -

were no longer valid as confirmed by cost overruns in other projects under implementation financed byother Multilateral Banks during the same period.

The project also supported the rehabilitation of 44 bridges, the recovery of 500 linear meters (I.m.) ofBailey bridges and acquisition of 500 I.m. of Bailey bridge stocks. The project objective was achievedmarginally satisfactorily through the installation of 15 Mabe Johnson bridges, the replacement of 37derelict old bridges and the recovery of 540 l.m. of Bailey bridges stocked to support emergencyintervention. The obtained stocks were timely and useful especially during the "El Nifo" Phenomenon,which destroyed a large amount of bridges in 1998. However, the derelict bridge works contracts could notbe completed fully before the closing date of the project, including the six months extension due toprocurement delays and two bidding processes. Thus, the project financed about 82% percent of the bridgephysical works. The rehabilitation of the derelict bridges was delayed mainly due to an assumed collusionbetween bidders. The cancellation of the original bidding process and the subsequent rebidding took aconsiderable amount of time, which delayed the initial rehabilitation works for about fourteen additionalmonths of the appraisal-estimated schedule. Rebidding took place based on postqualification instead ofprequalification used in the first bidding to avoid collusion, and this yielded prices that were almost half ofthose in the first set of bids. The Bank agreed to complete the financing of the two bridge replacementcontracts with funding from the El Nino Emergency Loan. As per October 31, 2000, there was animplementation progress of 91.40% (Maranon-Utcubamba) and 86.48% (Huallaga) of the physical works.However, because of scarce availability of counterpart funds completion of all bridge works before theclosing date of the "El Nino" loan is still uncertain. Remaining works mainly consist of access rampspavement which will be financed with Government funds if not completed before December 31, 2000. Asoftware Bridge Management System was also developed and staff was trained in applying the system.

In the SAR, the objective of implementing a Road Maintenance Program was addressed through a pilotroad maintenance component of 620 km, which should lay the foundation for a decentralized roadmaintenance strategy and strengthening of local institutions. The planning study for the pilot maintenanceprogram was completed as planned. In February 1996, the study results showed that 340.5 km neededroutine maintenance works while the remaining 294 km required major rehabilitation and reconstructionwith a preliminary cost of US$1.6 million and US$23.7 million respectively. Thus, the physical componentof 620 km of road maintenance could not be achieved because of the prohibitive cost of full implementationof the program. In addition, the inadequate design quality for the roads to be rehabilitated caused a highcost overrun in this component, which required the reallocation of the US$10.5 million originally assignedto the Road Maintenance Program component in the SAR. As a consequence of canceling the pilotmaintenance works, no results became available regarding (i) costs of contracting out maintenance, (ii) thecapacity of local micro-enterprises, (iii) durability of different pavement types under alternativemaintenance strategies, and (iv) training needs. Without these inputs, the formulation of a decentralizedroad maintenance strategy and strengthening of local institutions came to a halt.

The Traffic Safety Subcomponent was implemented satisfactorily through the completion of the trafficsafety strategic study and the implementation of key road safety activities. This study allowed for andrecommended to the Government and MTC to create the National Road Safety Council (NRSC) and itsexecutive secretariat. During the implementation of the project, the Council was established and a trafficsafety unit, supported with project funds, was created. The unit has implemented priority road safety pilotactivities (e.g. accident registration and accident data collection, a National Traffic Sign Manual, Manualsfor Road Safety Education for primary and secondary schools including audiovisuals, technical feasibilitystudies for black spot improvements) and has identified, through consultant studies, priority road safetyinvestrnents to be financed under the proposed Second Transport Rehabilitation Loan. Furthermore, thecreation of the NRSC has brought about the following benefits: (i) enhancing Government officials'

- 4 -

awareness of the road safety problems, (ii) increasing the cooperation between various road safetystakeholders (police, health and education sector, SINMAC, bus owner association, etc), (iii) producing aninventory of road safety furniture of main national roads and (iv) identifying priority road segments toimprove road safety conditions.

In order to enhance quality control of road infrastructure feasibility studies, the project supported theacquisition of technical equipment for the MTC's transport laboratory of soils and mechanics. Thistechnical equipment has permitted the MTC transport laboratory to perform the role of quality controloffice providing services to MTC directorates, SINMAC, PERT and DGC in reviewing technical and finaldesign feasibility studies since 1998.

In the airport sub-sector, the Runway Rehabilitation Component achieved its intended physical targetssatisfactorily. The component, which included rehabilitation works on the runway and taxiway, wasredesigned when the detailed engineering and the actual performance of the runway showed that majorrehabilitation works were not needed and that with pavement repairs, the runway could provide adequateservice for a lifespan of at least 7 years instead of the 20 years initially planned for, reducing componentcost from US$30.19 million to US$11.65 million. ICAO's pavement expert performed this analysis andrecommended that with superficial repairs (resurfacing and crack sealing) the runway lifespan could beextended until a second runway is ready for operation. The main runway rehabilitation works wascompleted successfully within the planned time frame by the fourth quarter of 1998, without reducing theoperation of the Airport. The component was financed through the OPEC fund (US$5.4 million),Government counterpart fund (US$5.18 million) and with Bank funds (US$1.07 million). The loanproceeds were reallocated to defray the additional costs experienced under the road component. With fewerresources, the Runway Rehabilitation Component achieved its intended physical targets of rehabilitating therunway and taxiway.

Also, CORPAC has installed, with its own resources and MTC's funds, new ASR 12 primary radar,secondary radar, and a control center, which will provide good navigational aids and form the basis of thenational aeronautical communications network. An upgraded lighting and an instrument landing system,planned under the project, were installed and financed by CORPAC. The project also financed thedevelopment of a Master Plan for Civil Aviation, which was intended to provide the basis for strategicplanning in the aviation sub-sector. Based on the Master Plan, CORPAC has prepared individual masterplans for the regional airports.

In the railway sub-sector, the railway component achieved its intended objective satisfactory by transferringa restructured and functioning railway company to a private concessionaire. The decentralization ofENAFER management into three cost centers or entities and the staff reduction plan for the three entitieswere implemented as planned in the Privatization Strategic Plan proposed in the SAR. With respect to thephysical targets of the component, these were partially achieved mainly due to delays in the procurement ofthe sleepers and required spare-parts for locomotives and wagons. As a result, only 383 km out of the 600km of track rehabilitation, repair of 26 out of 36 locomotive and repair of 370 out of 391 wagons wereinstalled and completed. These assets together with the remaining sleepers and spare parts not installedwere included as part of the concession package. It should be mentioned that although the projectsupporte7a Privatization Action Strategy together with complementary investments, ENAFER's financialposition continued to be acutely questionable during project implementation. Operating revenues in 1998were about US$34.1 million, but operating and administrative costs amounted US$43 million, and financialand other costs added US$40.7 million to this figure. During the past ten years operating losses have beenfinanced by accumulating liabilities - either by not servicing the railway's debt or by deferring paymentsfor personnel-related contributions to social security, pension and health plans. ENAFER did not receive

- 5 -

any direct subsidy from the Government and, according to 1998-balance sheet, the accumulated lossesamounted US$191 million. These, together with the stagnant rail transport in the country, made theprospects for ENAFER's privatization challenging and Government had to absorb the accumulated losses.Nonetheless, the Government has successfully achieved the project aim through the concession ofENAFER, and from all accounts, with an attractive final bid.

Assist Government in Implementing Institutional Reforms. The original objectives of the projectinstitutional reforms were to help the Government - especially MTC and MEF - in identifying andselecting the best alternatives for (a) an organizational structure to manage and administer the national roadsystem effectively, and (b) a funding mechanism for adequately maintaining and improving the roadsystem. These institutional reforms were achieved marginally satisfactory despite its implementationdelays, not under the control of PERT or of MTC, but caused by slow progress in the underlying Reformof the State, as explained under 5.2 hereafter.

Nonetheless, MTC has made significant progress in increasing its efficiency towards: (i) designing a roadconcession program to mobilize private sector participation in financing and managing roads, (ii)developing new service performance-based maintenance contracts to be used in the road maintenancecomponent of the Second Transport Rehabilitation project, (iii) the reduction of road accidents, injuries andfatalities through the creation of the National Road Safety Council, (iv) rehabilitating and maintaining8,500 km of rural roads financed through Bank and IDB loans during 1995-2000, (v) addressing urbantransport problems in Lima-Callao through the creation of the Urban Transport Council for MetropolitanLima, (vi) strengthening its road network planning and environmental departments, and the transportlaboratory performing quality control at MTC, and (vii) developing a Bridge Management System for theGeneral Directorate of Bridges of MTC and SINMAC.

While the preparation of a decentralized road maintenance strategy and strengthening of locainstitutionswas not achieved, MTCC made good progress in establishing a regular road maintenance fundingarrangement for SINMAC through the creation of a 'Fondo Vial' with road toll revenues. Furthermore,under the loan covenants, there was a clause that stipulated that the Borrower would provide a budget ofnot less than US$50 million per year for road maintenance. Since 1995, this budget allocation to MTC hasbeen provided adequately, reaching US$55.6 million in 1999. As a result, the condition of the roadnetwork has improved, and 4,855 km of the 7,719 km total paved road network, equivalent to 63%, havebeen maintained in good condition.

Lay the Groundwork for Future Projects in Three Areas. Strengthened Road Management.Strengthening of road management is linked to the above-mentioned institutional reforms. The projectachieved its intended objective satisfactorily by improving capacity for long-term planning. Withcomponent funds for designing packages of future investment projects, PERT had completed the finalengineering designs for three road subprojects: Tingo Maria-Pucallpa, Chanchamayo-Villa Rica, andRioja-Tarapoto roads. The first two subprojects, worth about US$250 million, will be ready for financingunder a possible operation with the IDB while Rioja-Tarapoto road is already under construction financedby CAF funds. Furthermore, PERT completed the economic and final design feasibilities studies, includingthe environmental impact of the following roads: Tarapoto-Rioja, Tarapoto-Juanjui, Tarapoto-Yurimaguas,Juanju-Tingo Maria, Ingenio-Chachapoyas, and Chamaya-Jaen-San Ignacio-Rio Canchis. Of these roads,San Ignacio- La Balsa, Puente Ingenio-Chachapoyas, Tarapoto-Juanjui, and Naranjitos-Corontochaca,which will be considered for financing under a follow-on operation. Also, the project supported thepreparation of the feasibility studies for the Rural Rehabilitation Project, financed and approved by theBank in 1995, and for the proposed Lima Urban Transport Project.

- 6 -

Increased Private Sector Participation. The project objective achieved its intended objective highlysatisfactorily. Railroads. Except for some regional concentration, rail transport represents only a minorpart of Peru's transport system, both in terms of freight (less than 2%) and passenger services (less than3%). While the sector is likely to remain relatively small, rail transport still has to play an importanteconomic role in Peru due to its strategic role in transporting key exports products, such as minerals,petroleum derivatives, and other bulk commodities. Railroad privatization was formally included in thePeru's privatization program in 1993. The privatization committee focused on the most urgent measures tokeep ENAFER in operation with the support of the project. Since the Government wanted to maintain theownership of ENAFER's track, rolling stock and facilities, the committee opted for a long-term 30-yearasset management contract of ENAFER's infrastructure facilities with obligations for open access andleaseback of rolling stock to maintain open entry for other private providers. The concession process forthe railroads was undertaken in July 1999 and the winning consortium - Consorcio de Ferrocarriles dePeru--offered the Govermnent a canon of approximately 33% of its revenues as well as investments ofUS$30 million. Airports. On November 16, 2000, the Government awarded the airport concession toFrankfurt- Bechtel-Cosapi Consortium. The concessionaire will pay to the Government a canon of 46.51%of total operating revenues and provide investments of US$1.5 billion over the 30-year concession period.The investment program includes the construction of a new terminal and a second runway. Theconcessionaire will maintain the runway rehabilitated under the project. Roads. In 1999, the Governmentcommitted itself to expand private sector participation in the financing, construction and management ofroads through a series of laws and decrees with IDB technical assistance. MTC, through a specialcommittee for roads, identified 11 potential packages of roads consisting of 6,700 km of national roads aspotential candidates for toll roads with private sector participation. Of these, the first road package isscheduled for concession in the first quarter of 2001.

Improved Mobility of the Poor. This objective aimed at promoting the use of bicycles by low-incomeresidents and preparing the ground for expanding the use of an environmentally friendly and affordabletransport mode in Lima. The project included the provision of bicycle infrastructure connecting theLima-Callao industrial area with low-income residential areas, representing 20% of the metropolitan areapopulation, with lower than average family (US$355 vs. US$598 average per month) and per capita(US$83 vs. US$157 average per month) incomes. In addition, the project established a revolving fund at anon-profit bank to provide access to credits for the purchase of bicycles to low-income workers, and apromotion campaign to promote the program. The Project objective was satisfactory by constructing 48 kmof dedicated bicycle ways of the original planned 51 km at appraisal, and making available 4,632 bicyclesto low-income workers out of the 6,000 targeted through the revolving fund. Funds for the construction ofan additional 35 km of bike paths on service roads were reallocated during the execution phase to achievethe original objectives through modifications that created a basic bikepath network, ensured the cleaningand maintenance of the paths in this pilot phase, and strengthened the promotion campaign, which after aslow start, because of limited resources, has been successful during 1999, resulting in a rapid increase incredit applications. Annual savings in transport cost by bicycle users averaged 532 soles or $150.

4.2 Outputs by components:The project achieved its principal components in physical terms and value, and the overall assessment ofproject outcome is rated satisfactory. The principal achievement of the project is that there are now 589km of roads rehabilitated, 52 bridges replaced and improved, a runway and taxiway repaired andoperational at the Lima airport, and the Railway Company concessioned successfully. These componentsrepresent 86% of the total original cost of the project (84% of the total final cost).

The project also achieved its institutional development objective. Important contributions to the firther

-7 -

development of the transport sector include the development of a bridge maintenance system and a CivilAviation Master Plan, the strengthening of the Roads Laboratory, the establishment of a National RoadSafety Council, and assistance in the development of a new Transport Law. Although important sectorpolicy areas such as road user charges and financing of infrastructure investments under public/privateownership were discussed intensively, the political sensitivity of these issues lead to mixed results. Whilepackages have been prepared for private sector participation through road concessions, the issue ofdecentralization of road maintenance and rehabilitation has not been resolved yet.

By keeping ENAFER operational while the concession process was underway, the project made asubstantial contribution to its successful concessioning. Over the last years ENAFER had net operatinglosses of approximately US$10 million per year and accumulated losses of over US$191 million.

4.3 Aet Present Value/Economic rate of return:Upon completion, the Borrower, using the same methodology and parameters employed in the SAR,undertook ex-post evaluation analyses. The economic returns were re-evaluated on a set of investments,especially for road rehabilitation, bridge rehabilitation, railway and runway rehabilitation. (See StatisticalTables Annex 3 Economic Cost-Benefit Analysis).

Road Rehabilitation. An economic evaluation using HDM III for the five road rehabilitated wascompleted. The internal economic rate of return (IERR) for the road rehabilitation (66 % of the totalproject cost) was calculated and found to be high and consistent with the SAR estimations, about 38. 1%confirming that the road rehabilitation subcomponent achieved an acceptable level of net benefits, rangingbetween 21.10% for Rioja-Corral Quemado and 50.10% for Tarma-La Merced. The main quantifiedbenefits are (i) the time saving for passengers, (ii) the vehicle operating costs saving due to roadrehabilitation and (iii) saving in routing maintenance. The five road sections showed rates of return greaterthan 20 percent. The 589 km are now maintained by SINMAC. However, for the long-term, SINMACshould move toward the use of performance-based maintenance contracts with the private sector andenhance the road user charges to improve funding of the Road Maintenance Fund (Fondo Vial).

Bridge Rehabilitation. Cost-benefit analyses were carried out for all bridges with an investment cost higherthan US$0.5 million (seven bridges), based on a condition of the loan agreement and as part of thepreparation of the proposed second Transport Rehabilitation Project. T he benefits considered in theanalysis are a reduction in vehicle operating costs, mainly for trucks, bv avoiding alternative routes whichwould need to be taken if the bridges were as severely restricted as they were. These alternative routes areusually much longer and sometimes in worse conditions. There are also some benefits from divertedtraffic. Bridge project costs include both the initial investment in bridge construction and the recurrentbridge maintenance cost. The estimated IERRs are extremely positive, ranging between 16% forCocahuayco Bridge of the Utcubamba valley and 257.5% for Filatobon Bridge of the Huallaga valley.

- 8 -

Railway Rehabilitation Although the ENAFER three cost centers did not improve their operation andefficiency, the net operating losses showed a tendency to decline during project implementation period,reaching on average per year an amount of US$10 million for 1995-98. In the SAR, the estimated overallfinancial rate of return for the railway rehabilitation works was 15 percent projecting improvements in thenet cash flow with the proposed investment package. The SAR analysis was made using two scenarios: anon-investment scenario that would generate a rapid increase in net operational losses and an investmentscenario that would mitigate the net operational losses while awaiting privatization of ENAFER. Thefinancial rate of return cannot be calculated because of the concession of the company. However, an IERRhas been calculated for the project investments from the point of view of the Government. The successfulconcession of ENAFER has brought to the Government the following benefits: (i) the concessionaire willpay to the Government 33% canon of the gross revenues; (ii) through a credit granted against the canonpayment, the Government has provided an incentive scheme to the concessionaire to make infrastructureinvestmnents during the first ten years of the concession. The estimated investment obligations, during thefirst five years, are 100% deducted for each dollar invested and, from the years 6 to 10, only 50% isdiscounted from payments due to Govermnent; and (iii) as the railroads were making net operating losses ofUS$10 million, the Government saves recurrent expense of around US$10 million per annum through thisconcession. Based on these benefits, a Net Asset Value of US$23.04 million was calculated, obtaining aninternal economic rate of return over the 30 year concession period of 17.33%. This analysis is notconsidering the accumulated liabilities of ENAFER, which have been absorbed by the Government, anassumption also made in the SAR analysis.

Runway Rehabilitation. The Borrower has carried out an economic analysis ex-post for the rehabilitationof the Lima International Airport runway based on a useful life estimate of 10 years instead of the 20 yearsoriginally planned for in the SAR. Although the original lifespan estimate for the redesigned runway was 7years (see page 5), based on the actual good condition of the runway CORPAC has upgraded this estimateto at least 10 years. The methodology for the economic analysis was based on a total cost for rehabilitationequivalent to US$ 10million. Benefits were calculated as the savings gained in maintenance with andwithout the project, an increase in passenger airport taxes for use of the improved airport infrastructure anda 30% increase in the number of passengers, and an increase in landing fees since the rehabilitation of therunway. The resulting IERR of the rehabilitated runway was 20%. The concessionaire of the airport willprovide the civil works routine and periodic maintenance of the runway, while the electrical works remainCORPAC's responsibility.

Bicycle component. The Borrower carried out an economic analysis ex-post based on a useful life of thebikepaths of 20 years, a discount rate of 15%, and including operational costs for cleaning and maintenanceof the bikepaths. Benefits are primarily based on transport costs savings, assuming an annual increase inbicycle use of 1% starting in 2001. Based on these assumptions, a Net Present Value of US$270,000 wascalculated, obtaining an internal economic rate of return of 16.9%.

4.4 Financial rate of return:The Financial Rate of Return was not calculated at appraisal and is considered not applicable.

4.5 Institutional development impact:The project provided significant contributions for the development of the transport sector in Peru. Inparticular, the project assisted in the development of a new Transport Law preparing the way for futurereforms, supported the creation of National Traffic Safety Council and its traffic safety unit, improvedbudgetary resources for maintenance of the road network during the project implementation, promoted

-9-

private sector participation in the railway sub-sector, developed a Bridge Maintenance System, developed aMaster Plan for Civil Aviation, and supported strengthening institutional capacity. In regard to the latter,the technical assistance component of the project assisted MTC and PERT in strengthening its roadnetwork planning capabilities and road environmental and safety analysis. As a result, MTC is carryingout road investment analysis and incorporating detailed economic analysis and environmental and roadsafety evaluations to define optimum rehabilitation standards, their associated economic worthiness,environmental conditions and safety standards for sustainable management of roads. Overall, the MTCimproved its capacity in contracting out feasibility studies, final design and supervision of works to theprivate sector companies using Bank procurement methods.

The difficult economic and political situation has caused uncertainty regarding a follow-up project, whichwill affect negatively the developed institutional capacity within PERT.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:Project implementation took place in a generally stable social environment. Under the bridge rehabilitationcomponent, there was an assumed collusion of prequalified bidders resulting in rebidding, which took aconsiderable amount of time. Furthermore, there was the "El Nino" phenomenon, and while this affectedthe works on some of the project roads, most of the impact was foreseeable and the Bank's El NinoEmergency Loan included a component to mitigate the negative impacts of this phenomenon.

5.2 Factors generally subject to government control:The slow progress in the Reform of the State has been the principal reason for the implementation delays inMTC's institutional reforms. Early in 1995, MTC made progress in designing a major reform that wouldbasically assign the responsibility of policy making, long-term planning and overseeing transport sectorperformance to MTC, and transfer the responsibility for managing the road network to an autonomousagency. These institutional reforms were proposed by an ad-hoc committee within MTC, assisted byinternational consultants and several transport seminars. Support for the restructuring plan was weakenedafter the Government Executive Branch did not pass framework legislation for the modernization of theState before the end of 1996 (the deadline for extraordinary powers entrusted to the President). TheGovernment Plan for "Reform of the State" was never undertaken and furthermore, an IDB loan to supportthis plan was canceled, reducing the possibilities of carrying out the institutional transport reforns needed.However, in 1998, the president of a Congress transport infrastructure committee requested the assistanceof MTC and the Bank to prepare a Transport Law. With technical assistance and the support ofinternational consultants, Congress approved the new Transport Law in October 1999, which in principlehad been envisaged since 1995. The Government still has to complete work on the By-laws that will definethe concrete reforms measures.

5.3 Factors generally subject to implementing agency control:There was a six-month extension of the closing date of the project requested by the Government to allowthe completion of the rehabilitation of the Maranon- Utcumbamba and Huallaga bridge packages.However, as of today the civil works have not been finished and despite the financial support from El Ninoloan, works will not be completed by December 31, 2000 due to lack of local counterpart funds.

The resources from the technical assistance component were insufficiently used during the first year ofproject implementation to strengthen the technical capacity of PERT to prepare terms of reference, reviewand approve feasibility and design studies, and prepare adequate civil works and supervision contracts.These factors affected the implementation of the road component.

- 10-

The complexity of the project required a large diversity in professional skills, (airport, railway, road safety,bridges, etc.). However, this diversity was not reflected in PERT staffing which had primarily roadengineering skills. This resulted in the lack of ownership for components that were not directly related toroad engineering.

Although quarterly project reports were prepared, these reports did not include an analysis based onperformance indicators that would have allowed PERT to have a management tool and assessment ofpotential problems and risks. Although not mandatorily required in bank projects at the time of writing, theSAR included key monitoring indicators and targets that covered achievements through the Mid-TermProject Review scheduled for 1996. It was expected that during this Review new indicators through 1999would be developed, but this was not done.

5.4 Costs andfinancing:On June 30, 2000, the closing date, the total project cost was about US$299.85 million, 123.9% of theSAR estimate made in March 1994. The most significant source of incremental cost was the high cost ofroad rehabilitation works. On average, the actual cost of road rehabilitation was about US$335,611 perkm, compared to an original estimate of US$149,393 per km. The project, at appraisal, was to be financed62% by the Bank, 20% by the Government and 18% by co-financiers; the final figures are 50%, 33% and17% respectively.

The project was restructured in March 1996 and loan amounts were reallocated. The loan amount budgetedto the road component was increased from the appraisal estimate of US$88.5 million to US$111.98 million,while the runway rehabilitation loan amount was reduced to US$1.07 million from the planned US$21.6million. The Govermment Counterpart funds increased from US$47.90 million to US$98.06 million tomainly finance road construction costs overrun.

6. Sustainability

6.1 Rationale for sustainability rating:The sustainability of the project is rated likely because: (i) the Government has promulgated a newTransport Law in 1999, which lays the groundwork for institutional reforms, to be concretized through thedevelopment of the regulations, (ii) the Loan Covenant on road maintenance created a positive roadmaintenance culture by clearly demonstrating to project executing agencies the viability of maintaining thephysical infrastructure rehabilitated under the project, (iii) the viability of road safety activities has beendemonstrated and will be supported further with IDB support and own resources, and (iv) the private sectoris participating in the railway and airport sub-sectors assuming the operation and maintenance of the assetsinvolved. On the other hand, the project implementation unit within MTCC was financed through theproject and without this support the professional capacity assembled in this unit may be lost.

6.2 Transition arrangement to regular operations:Upon completion, the 589 km of rehabilitated roads were transferred to SINMAC for maintenance.SINMAC generates resources for financing road maintenance through road tolls. However, these resourcesare insufficient to maintain the overall national roads network, and without an enforceable mechanism toensure sufficient maintenance funds, maintenance of project road depends on government priorities. Oncecompleted, the repaired and constructed derelict bridges will be transferred to the Directorate of Bridges ofMTC. The O&M of Road Laboratory equipment will be fully recovered through fees charged to privatefirms and budgetary transfers from MTC and Government funds. The Municipality of Lima will clean andmaintain the 48 km of dedicated bicycle paths constructed under the project with its own resources and willcontinue operating the bicycle revolving fund established through Caja Municipal and related promotion

- 11 -

activities. The Lima airport concessionaire will be in charge of the maintenance and operation of therunway rehabilitated while the Consorcio de Ferrocarriles del Peru will maintain and operate the equipmentand rail-infrastructure acquired under the project.

7. Bank and Borrower Performance

Bank7.1 Lending:The Bank's performance during project preparation is rated satisfactory. Eleven missions visited Limaduring the preparation, appraisal and negotiation phases, complemented by a mission of the borrower toWashington D.C. Appraisal was conducted by a highly qualify multi-disciplinary team consisting of atransport engineer, a transport economist, a procurement specialist, a non-motorized transport specialistand an environmental specialist. The timeliness of the project was not optimal: designs for the roadrehabilitation component were not ready before project effectiveness resulting in procurement delays forcivil works.

7.2 Supervision:Bank Supervision is rated satisfactory. On average, the Bank conducted two full supervision missions peryear. Sufficient resources were allocated toward project supervision, which allowed for the constantmonitoring of the project, including a budget of eight staff weeks a year of a project officer at the ResidentMission in Lima. Supervision compromised of 222 staff weeks. Although there was a task managerturnover, the project never encountered significant delays in obtaining "no objections" from the Bank teambecause the Resident Mission acted as a backup to the Task Managers while staff was away on missionsand gave continuity to project implementation.

During Supervision, the Bank staff tended to combine supervision with other transport missions in theCountry, which proved to be very cost-effective.

7.3 Overall Bank performance:Overall, Bank performance was satisfactory in terms of responsiveness to borrower needs. The operationwas prepared in line with the timing of regular investment projects, and, from 1995 on, the Bank wasprompt in responding to Borrower requests for " no-objections" from Washington by providing day-to-dayassistance in procurement and-institutional and policy issues from the Resident Mission of Lima. The localproject officer maintained a constructive working relationship with the Borrower, following up on tasks andaction plans agreed during supervision missions and overseeing resulting work. The Bank reacted rapidlyand favorably to the Borrower's request to restructure project components and to reallocate project fundswhen needed. Supervision reports carefully highlighted key project implementation issues and correctivemeasures agreed upon. Bank staff participated in several institutional reform seminars and other projectrelated activities.

Borrower7.4 Preparation:Borrower performance during preparation is rated satisfactory, although. the quality of designs for roadrehabilitation works was insufficient, resulting in substantial cost overruns. However, the Borrower,through -project technical team, was committed to preparing the project. The Borrower's staff spent asignificant amount of time with the Bank's team in Lima to complete the analysis and discuss projectscope, objectives, components and implementation arrangements, demonstrating a sense of ownership.

7.5 Government implementation performance:The government implementation perfornance was mixed. In terms of sector and institutional reforms, the

- 12 -

Government response showed lack of commitment in implementing the institutional reforms required to (i)reorganize and strengthen the Ministry of Transport and (ii) improve the organization and management ofthe road network. The Transport Law was approved practically at the end of project execution and theMTCC still has to prepare the regulations required by this Law. With the political situation and economicrestrictions, it is projected that the implementation of the regulations will take longer than expected. Interms of counterpart funding including road component cost overruns, bridge rehabilitation, traffic safety,runway rehabilitation and project management, the government performed satisfactorily, increasing its localcounterpart share from US$47.9 million to US$98.06 during project implementation. Furthermore, theGovernment showed its strong commitment to private sector participation in the concession of ENAFER ashad been agreed at appraisal.

7.6 Implementing Agency:The performance of the implementing agencies is rated satisfactory. The project-executing unit (PERT)provided smooth administration of the resources to the other project participants such as the Municipalityof Lima and ENAFER. PERT played a critical role in facilitating coordination among the differentimplementing agencies and departments of MTC and public institutions. Although there was a highturnover of the project coordinator position, project management went smoothly and provided technicalassistance to the other agencies, which lacked experience, throughout the project implementation period.

7.7 Overall Borrower performance:Overall Borrower performance is satisfactory. Throughout the implementation period, the Borrowermaintained a strong commitment to attaining the project objectives due to good project management andstrong commitment by the implementing agencies and other participants to achieve the project targets.

8. Lessons Learned

Key lessons learned from Peru Transport Rehabilitation Project are:

Project Design and Policy implications:

(a) Calibrate project complexity with existing institutional and professional capacity. The scope ofthe project was correctly identified and appraised but it was overly ambitious, addressing various modeswith components ranging from railways and airports sub-sectors to a transport sub-sector, and involvingseveral executing agencies with initial lack of experience in managing this type of project. The lack ofadequate professional capacity resulted in a slow implementation start of the project.

(b) Carry out the feasibility and engineering studies before project approval to ensure readiness forimplementation where feasible. The underestimation of construction costs during road design, and theresulting cost over-run during construction, to the extent possible, could have been avoided if detailedtechnical designs had been completed well in advance of construction. Experience has shown that unlessdetailed and updated road design studies are available before bids are requested, the financial bids receivedfrom contractors are often much higher than the previously estimated construction costs. Also, in thosecases where construction bids were based on uncompleted or outdated design studies, technicalspecifications needed to be modified during construction, which then resulted in higher-than estimatedconstruction costs.

(c) Ensure quality of designs by reviewing their consideration of terrain and climatical conditions.The extreme difficult terrain and climatical conditions in the Andean Mountains result in the occurance ofmultiple 'zonas criticas' which were not adequately addressed because of design/budget deficiencies and a

- 13 -

'tramo' rehabilitation approach. Future projects must opt for an approach that focuses on full rehabilitationof 'normal' sections and 'reduced' rehabilitation in zonas criticas, only assuring transitability of such zones.

(d) Include enforceable sustainability mechanisms in the project design. The Loan Agreement(Article 4.04) required an annual budget allocation of US$50 million for the purpose of financing themaintenance of national roads, other than the roads to be rehabilitated under the project. Over the life ofthe project, the Borrower has complied with this (enforceable) requirement, which contributed significantlyto the preservation of the national road network. However, taking into account (i) the actual economiccrisis, (ii) the insufficiency of financial resources for road maintenance generated through road tolls, (iii)the absence in the new Transport Law of a sustainable road maintenance financing mechanism, and (iv) thepostponenment of the Second Transport Rehabilitation Project which again included an (improved) roadmaintenance requirement, there is a high risk of deferring periodic road maintenance resulting in a rapiddeterioration of the national road network.

Project Implementation

(e) Follow through with the use ofproject monitoring indicators and select key measurableinstitutional indicators, and assign a monitoring and evaluation responsibility to the project-executingunit. Although the project included a set of monitoring indicators and targets, the implementation unit(PERT) did not use them for project management or as a monitoring tool as an "early warning device",thus hindering effective implementation of project staff monitoring, and progress in fulfilling thedevelopment objectives or the performance of the other project executing agencies, such as ENAFER,CORPAC, NRSC, and the Municipality of Lima. In addition, the project did not include appropriateindicators for the institutional reforms. The monitoring and evaluation of effectiveness of the institutionalreforms could have been improved with the inclusion of clearly defined and measurable indicators. Withoutthese indicators, it is difficult for Bank supervision teams to identify delays and issues early enough topropose timely remedial measures. Clear responsibility for planning and monitoring project performanceand targets must be included in the project-executing unit.

GO Develop andfollow through with a specific technical training program for local staff during thefirst year ofproject implementation for sectors with a long period of inactivity. Staff of project executingagencies must be qualified and trained to prepare terms of reference and to review and analyze technicalfeasibility studies prepared by extemal consulting firms during the first year of operation or, alternatively,to hire experienced international consultants to assist in the approval of the technical studies. Also,executing agencies must incorporate quality control mechanisms to ensure proper evaluation of technicalreports or feasibilities studies.

(g) Promote the use of a procurement method ofpost-qualification of bids instead ofpre-qualification where there are a limited number of local contractors. It was observed during theexecution of the bridge component that where there were a limited number of contractors, which had beenprequalified for a well-defined scope of work, and all participants' competitors knew the list of prequalifiedcompanies, the financial bids received were significantly higher than expected. Project managementsuspected exchange of information between pre-qualified contractors and decided for a subsequentrelaunching of bids introducing the method of post-qualification of bidders. This yielded prices that werealmost half of those quoted in the first set of bids. The appearance of new bidders, unknown to thelong-established local bidders, was certainly the main factor that brought about the lower bids.

(h) The existence of bikepaths is a necessary but not sufficient condition for the use of bicycles in acity such as Lima-Callao. Bikepaths protect bicyclists from traffic, but they do not provide security

- 14 -

against theft or -in the case of women- sexual harassment. Whenever the use of bikepaths needs to becombined with cycling along other main avenues where bikepaths are not present, and bikers share roadspace with motorized traffic, this represents a serious deterrent of bicycle usage for both men and women.The impact of bikepath construction on neighbors and residents needs to be taken into consideration in theirdesign. Furthermore, a participatory approach is necessary to this intervention, in order to generategoodwill toward the project and contribute to the creation -or strengthening- of a bicycle culture. Finally,the promotional and educational efforts are a critical component for the success of a non-motorizedtransport project. The communications campaigns needs to address the specific issues that concern menand women with respect to bicycle riding and handling, and to the use of bicycles and bikepaths.

9. Partner Comments

(a) Borrower/implementing agency:The Final Evaluation report prepared by the Borrower is included as Annex 8. Hereafter follows aninformal summary of the Borrower's report, prepared by the TTL.

Evaluation of objectives and goals of the Project

In the evaluation of the Project, it is very important to stress the high degree of complexity involved whileacting simultaneously adjusting to the Standards set by the World Bank and the reduced time framesurgently demanded by the country for its recovery, considering additionally that the Project had beendrafted with a multi-modal conception, which included in addition to the highways and bridges projects, thestudies and works of non-motorized, railways, civil aeronautics, urban metropolitan transportation androad safety.

Some external demands had to be overcome by the Project with the purpose of achieving the proposedobjectives and goals, among which we could mention as the more relevant ones, those derived from theampleness and particular characteristics of the regions where the works where done, as well as the differentclimatic phenomena according to the season, the different types of geology and existing geographicaccidents, as well as the variety of hydrology of the Peruvian territory.

However, in spite of the inconveniences faced, the adequate management of those responsible for theadministrative and operational aspects of the executing organisms allowed to reach satisfactorily the goalsestablished in the Project, which are shown in the Appendix and which are contributing substantially to thedevelopment of the country, turning the PRT-1 into a facilitator and integrator of development withalternate modes and ways which are more secure and faster, fostering growth of the differentsocioeconomic activities of each region, promoting the generation of work, the access to health andeducation services and helping in the reduction of the transportation costs which will drive commercial andtourism exchange.

Evaluation of results

PRT-1 contributed in a decisive way to the reactivation of the transportation and construction sectors,making4 possible the utilization of the machinery and personnel of the national engineering, providingdirect work to approximately 66,000 men/month, which equals a total of more than 5,500 man/year, anamount that is distributed in approximately 380 professionals, 620 technicians and 4564 assistants andworkers each year.

The benefits of the Project were highly profitable, initially with the dynamization of the economic activity

- 15 -

in the areas of influence through the generation of employment and globally through the direct benefits inthe operational costs of the vehicles with a significant profitability, especially in the roads that have beenimproved at the asphalt carpet level; and in respect to the indirect benefits (well being of population,improvement of competitiveness of the Peruvian export products and more economic stability within thecountry), which although are difficult to quantify, a substantial growth that has benefited the population asa whole has been observed.

Performance of the Borrower

Performance by the Borrower (Government, MTC, MEF, Executive Organisms) was rated satisfactory,reaching by the end of the Project the objectives and goals and execute almost in its entirety the availablefunds. The interest and responsibility showed in the technical and administrative aspects, and the permanentcoordination with the Bank, allowed to identify and solve timely the problems that in several instancesdemanded adjustment or modification of the goals in order to ensure the success of the Project.

Regarding the execution stage, compliance with the programs of activities developed for each component,as well as the follow-up of the key indicators of implementation and the operational indicators ofperformance, expedited the achievement of virtually all goals established or adjusted. During this stage, thegoals of the components and the assigned amounts were reviewed, and in accordance with the World Banksome goals were adjusted and others were moved to a next project, basically due to larger investment coststhan those initially considered, as a result of the Definitive Studies, Contests and Bidding performed.

The work teams conformed by the Executive Organisms to carry on the technical and administrativefunctions had a satisfactory performance, improving the quality of the results as the Project advanced. Itshould be stressed that at the beginning of the PRT-1, as a result of an omission by previous governmentsof development of transportation infrastructure, there was an evident lack of qualified human resourceswith experience to satisfy the integral requirements for the adequate direction and execution of the differentstudies, supervision and works that had to be performed.

This first Loan Agreement between the World Bank and the Government - Sector MTC (PERT-PRT),meant the implementation and mandatory compliance of the procedures established in the Bank Standards,which in those moments were not known nor applied in the systems of the transportation sectors, because ofwhich the Executive Organisms had to adapt, innovate and apply in all the activities andtechnical-administrative processes, the above mentioned standards in order to fully achieve the goals andobjectives established.

Performance by the Bank

The ongoing participation of the Bank during the preparation, evaluation and supervision stages was veryimportant for the achievement of the objectives and goals, providing continuous administrative andoperational advice at all levels, which helped to overcome setbacks and difficulties that rose throughout thedevelopment of the Project. In the same way, through the visits of the missions and communications fromWashin on, the officers of the Bank showed interest, experience and knowledge, coordinating andestablishing dialogue with the different Government Organisms and in specific cases taking part in workmeetings with the consultants, proposing actions and/or alternatives with the purpose of solving existingproblems.

From the preparation works, the Bank showed a wide identification with the objectives of the Project,which helped with the Integral Strategy of the Government to reactivate the transportation sector, which in

- 16 -

those moments was going through a collapse situation due to the lack of road infrastructure en goodcondition and at the same time setting up solid foundations for promoting the development of the country.

During the evaluation stage, through a multidisciplinary professional team, the Bank undertook a task ofanalysis and revision of the work perforned during the first stage, identifying the possible risks that wouldinvolve the execution of PRT- I and providing concrete solutions, obtaining as a final product theEvaluation Report No. 12309-PE from February 17 1994, in which the transportation sector and theeconomic situation of the country, the objectives and characteristics of the Project, the agreements reachedand recommendations for the optimum execution of the same are analyzed in depth.

During the supervision stage, the Bank assisted the Borrower through visits to the country by the missions,work teams and communications from Washington, evaluating the performance of the advances andprogress, cooperating to troubleshoot and solve problems, formulating recommendations and approvingrequirements, demonstrating promptness and flexibility towards proposals presented by the ExecutiveOrganisms in the best interest of overcoming difficulties and optimize execution of the Project. In specificcases, they promptly approved the partial or total modification of goals and the consequent restructuring ofcosts of the Project. Furthermore, the responses from the Bank to the requests for No Objection in terms oftime, mainly for issues regarding approval of additional budget for works and supervision, allowed thenormal development of the works.

Key lessons learned for future projects

In the formulation of the Feasibility Studies, Basic Engineering Studies and Definitive Studies, a goodquality control is critical giving special attention to the topographic, geologic, hydrologic, climatic andenvironmental studies, with emphasis in the field investigation phase, soil and subsoil testing (with backsideexcavations of 2 m depth as a minimum, in distances of no more than 200 meters); also, the solution ofcritical points should be considered, the stabilization of banks (upper and lower), appropriate emergencylanes, the design of efficient drainage, the mitigation of negative environmental impact and the optimizationof the road safety. The approval of the Definitive Studies must be very demanding, as that is a way ofensuring the successful completion of the works; if not done so, during the execution there could be defects,deficiencies or omissions, which could give rise to additional delays and budgets with very high percentagesin relation to the budget established in the contract, putting the objectives of the Project in risk.

The Definitive Studies in the case of highways, require additionally a specialized review in the aspects ofroad safety, with the purpose of decreasing the problems related to the designs, which will help to minimizesignificantly the possible future expenses for modifications or corrections after construction. It is importantto consider in the terms of reference for the Studies, the basic concepts of road safety and during theconstruction phase the application of audits.

For future contests or bidding processes, with the purpose of optimizing results and avoid jeopardizing thecompletion of the studies or works during the selection, we should:

a. Implement considerations that will impede awarding the contract to Bidders (Consultants orContractors) with a limited contracting economic capacity; requiring during the selection stage thesufficient liquidity that will ensure progress without depending entirely from contractual payments.b. Disqualify bidders who present offers below a reasonable margin with regard to the referentialbudget (offers below 90%).c. In the event that intemational companies bid, the mandatory direct participation should be required,through the assignment and permanent residence of its specialized technical staff (foreign) until the project

- 17 -

has been concluded.d. Program in the future the contests and bidding processes through the post-qualification modality,as the more flexibility of the submittal stage allows for a greater number of bidders, reducing thus thepossibilities of arrangements in prices.e. Distinguish in the terms of reference for the projects of highways the concepts and scope of theBasic Engineering Studies and the Engineering Projects, being convenient to separate them during theexecution and presentation phases.

This first experience has made possible the identification of procedures for future projects and theestablishment of the need to implement and operational handbook that will standardize the differentprocesses that are required during the execution of a project type PRT- l, defining the steps and time framesthat must be met for each of the activities, which should be adjusted to the real needs and futurerequirements.

It is critical to promote and sustain the maintenance plans of the recently rehabilitated highways that willensure continuity of the ways and avoid its progressive deterioration, for which it is necessary to have andstrengthen: i) assigmnent of the necessary funds through toll collection (auto-sustainable) and theobligatory nature of the fiscal contribution in case it is necessary to cover differences; ii) theimplementation of weighting controls of heavy vehicles that could endanger the conservation of highways;iii) establish a monitoring plan with the purpose of supervising the state of conservation of the rehabilitatedhighways and the routine and periodic maintenance programs. In the same way, it is necessary to fostercreation of local companies that perform the minor maintenance tasks of highways and bridges in theremote zones, where the presence of work equipment from MTC will be too limited, difficult or costineffective.

(b) Cofinanciers:The draft ICR report has been sent to the Cofinanciers, but no comments were received.

(c) Other partners (:NGOs/private sector):Not applicable.

10. Additional Information

Not applicable.

- 18 -

Annex 1. Key Performance Indicators/Log Frame Matrix

1. ROAD COMPONENT> Road Rehabilitation 725 Km 589,40 Km

Tarma - La Merced 72 Km 71,60 Km d- Pte. YanangoLa Merced - Satipo 122 Km 122,60 KmHuanuco - Tingo Maria 120 Km 120,60 KmnTarapoto - Rioja 135 Km CanceledRioja - Rio Nieva 100 Km 100,00 KmRio Nieva - Corral Quemado 176 Km 174,60 Km

A. Bridge Rehabilitation 44 bridges +repairs 52 Bridges + 540 i.m. B. recoveredAcquisition of Stock Stock acquired for 500 I.m. 540 i.m. bridges recoveredRecovery of Bailey 500 Il. 15 new Mabe JohnsonReplacement of Derelict 44 bridges 37 bridges permanentBridge Management Study 1 Study Management system acquired

. Road MaintenanceDesign of Pilot Program 1 Study 1 StuidyWorks & Supervision 620 Km Canceled

. Equipment for Road Laboratory Laboratory improvements Quality Control Office (Laboratory)improved

= Traffic Safety ProgramTraffic Safety Study Traffic Safety Road Study Study implementedEquipment and Works Safety Improvements Pilot Project Implemented & feasibility

studies for future investments

. Design of Future RoadRehabilitation Schemes

Tingo Maria - Pucallpa 255 Km 255 KmPte.Chanchamayo - Villa Rica 44 Km 44 KmOthers Roads 175 Km Tarapoto - Rioja

Olmos - Corral Quemado & others.Road & Traffic Surveys Studies Studies completed & preparation of 2°

Loan

2. RAILWAY PRIVATIZATION AND Restructuring ENAFER and ENAFER ConcessionedREHABILITATION privatization

3. RUNWAY REHABILITATION AT LIMA Rehabilitation of runway & parallel Runway rehabilitated & TaxiwayAIRPORT taxiway repaired

4. PILOT PROJECT FOR NON- 45 Km of dedicated bicycle paths 48 Km constructed & maintainedMOTORIZED TRANSPORT IN LIMA 35 Km of reconstruction of existing canceled

services roads6 000 Credits for purchase bicycles 4 580 Credits granted for purchase

bicycles & implementation of promotioncamoaing

5. TECHNICAL ASSISTANCE AND Institutional Reform & Road Institutional Strenghthening to MTC,TRAINING Management PERT, ENAFER, PMTNM

6. PROJECT MANAGEMENT Project Management

- 19-

1. ROAD COMPONENTRoad RehabilitationTarma - La Merced Km 72 71,60La Merced - Satpo Km 122 122,60Huanuco - Tingo Maria Km 120 120,60Tarapoto - Rioja Km 135 CanceledRioja - Rio Nieva Km 100 100,00Rio Nieva - Corral Quemado Km 176 174,60Bridge RehabilitationBailey bridges delivered I.m. 900 1 118Bailey bridges recovered i.m. 500 919Bailey bridges installed i.m. 600 538Replacement of derelict bridges l.m. 300 939New o rehabilitated bridges opened to traffic Unit 52 33Road MaintenanceGOP Road Maintenance budget US$Million 50 55.56Average Traffic Vehides per dayTarma - San Ram6n (IMD) 1 220 n.a. 1 826San Ram6n - La Merced 1 750 4 249 4 295La Merced -Pte.Chancahamayo 530 1 552 1 970Pte.Chancahamayo - Satipo 330 967 1 038Tarapoto - Moyobamba 620 n.a. n.a.Moyobamba- Rioja 560 n.a. n.a.Rioja - Rio Nieva 390 561 760Rio Nieva - Corral Quemado 340 390 689Huanuco - Tingo Maria 600 803_ _956 _

Average Road Roughness IRI ActualTarma - San Ramon 3 1.51San Ram6n - La Merced 3 1.51La Merced -Pte.Chancahamayo 3 2.32Pte.Chancahamayo - Satipo 3 2,32Tarapoto - Moyobamba 3 n.a.Moyobamba- Rioja 3 n,a.Rioja - Rio Nieva 3Rio Nieva - Corral Que,nado 3 1.74Huanuco - Tingo Maria 3Road Laboratory 1 997 1 999Essay number 721 36570Traffic Safety and Design of Future Road Schemes lTraffic Safety Council established Council 0 1Traffic Safety Unit functioning Unit 0 1Traffic Safety Study Study 1 lPilot Program Study 4l 4Traffic and Economic Studies for second Project BIRF Study 81 8

2. RAILWAY PRIVATIZATION AND REHABILITATION 1 999Railway renewed Km 600 382.7Locomotive repaired unit 36 25,5Wagons repaired unit 391 370Telecomunications System System 1 canceledCentral Railway (FCC) 1 999Locomotive availability % 66 60,35Wagon turnaround days 6,8 7,13Tons handled per year Thousand 814 377Ton-Km per year Million 163 82

- 20 -

Passenger per year Thousand 544 7,7Passenger-km per year Million 35 1,21Number of employees 12/31 Number 615 482Employees per km of track Ratio 1,3 1,39Traffic units per employee Thousand 322 171Southern Railway (FCS) 1 999Locomotive availability % 65 57,65Wagon turnaround days 15,0 16,35Tons handled per year Thousand 545 122Ton-Km per year Million 232 64Passenger per year Thousand 562 37Passenger-km per year Million 126 11Number of employees 12/31 Number 950 982Employees per km of track Ratio 1,0 1,07Traffic urits per employee Thousand 377 64South - Eastern Railway (FCSO) 1 999Locomotive availability % 66 61,83Wagon turnaround Days 6,0 7Tons handled per year Thousand 36 3,34Ton-Km per year Million 5 0,5Passenger per year Thousand 574 146Passenger-km per year Million 60 15Number of employees 12/31 Number 292 356Employees per km of track Ratio 1,7 2,07Traffic units per employee Thousand 223 42

3. RUNWAY REHABILITATION AT LIMA AIRPORTAnnual Traffic at Lima Airport 1 993 1 999Total international passengers Million 1,0 2,02Toiai domestic passengers Million 1,9 2,30Total freight Thousand tons 43,0 93,451*tal commercial aircraft movements Thousand 11,9 103Total private aircraft movements Thousand 0,6 4,02National airlines serving airport airlines 10 5 + smaller airlinesForeign airlines serving airport airlines 23 25Asphalt concrete overlay of thickness mm 220 75Wide runway mts 45 45

4. PILOT PROJECT FOR NON-MOTORIZEDTRANSPORT IN LIMABicycle Use Bicycle/weekday 1 999Avenida Colonial (22 Km) n.a. 2 160Avenida Universitaria (20 Km) n.a. 1 812Avenida Tipac Amaru (35 Km) n.a. CanceledAvenida Tomas Valle (3 Kmn) n.a. 588Bicycles parked at places of employment Number n.a. n.a.Data on bicycle accidents n.a. n.a.Use of Credit Scheme for Low - Cost Bicycles 2 000Bicycles purchased under credit scheme Number 6,000 4 580Amount lent to employees of formal sector US$ n.a. 379 000Amount lent to informal sector US$ n.a. 20 000Interest and repayments received US$ n.a. 354 000Administrative costs US$ n.a. 46 000Credits granted Number 6 000 4 276

-21 -

Institutional Arrangements of the Project

i--I vilay ENAFER___ Private ConcessionaireRunway Rehabilitation PERT- CORPAC Private Concessionaire

~11 ot Project for Norn-Motorized Transport Municipality of Lima - Caa Municipal Muniicipality of Limia - Caja Municipal

Coad Workos Costs Tables

T Wracfic -Satyio 12 na. Paving Rehabilitation n.Sa. 1313 97 959

t'o'a - Rio Nieva 100 na. Paving Rehabilitation na. 17,82 178 200Ruo Nweva - Corral Quemado 176 na. Paving Rehabilitation _n.a. P 43 69 248 RUNWAY & TAXIWAY OF 3,51 45 Asphalt Rehabilitation Overlay 30,19 8 608 497LIMA AIRPOR 1220 mm _____ I_ I____ ____

Po!apotks RCosta CaneeeROA REHABILITATON1 arma, -- La Mleced 712 6 6n.a. 6 Paving Rehabilitation Overay. 995 118 237350143l:3 MIercea - Satipo 1226 6n.a. Paving Rehabilitation Ovrlya.9 18,0 4147 0 33951iu,arnuCO - -i-ingo Maria 120,0 n.a. Paving Rehabilitation Overla 7,0 99 9l 22278 6

1arapoto -Rioja CaSna. Pv nc ehaiiatoe.ad3139 5

Rci110 - Rjo Nieva 100,00 6,00 y 6n60 Paving Rehabilitation Overlay> 99 mm 44,57 445 716Pi Nieva - Corral Quemado 174,60 6,00 y 6,60 Paving Rehabilitation Overlay> 99mm 65,69 376 205

; UNWAY & TAXIWAY OF 6, 45 Asphalt. Rehabilitation Overlay> 99 mm 11,65 3 328 571

LM IRPR 220 mm _

R OAD REHABILITATION 589 725 Rehabiliaton 1 108,1 33 6149393PROGRAM

u_~~~~~____ ___ __

Costt includes design, supervision, works and contingencies.

- 22 -

Annex 2. Project Costs and Financing

1. ROAD COMPONETA. Road Rehabilitation 108,31 197,81 183B. Bridge Rehabilitation 27,79 20,14 72C. Road Maintenance 10,78 0,29 3D. Equipment for Road Laboratory 0,37 0,68 184E. Traffic Safety Program 1,22 2,09 174F. Design of Future Road Rehabilitation Schemes 4,84 6,93 143

2. RAILWAY PRIVATIZATION AND REHABILITATION 42,25 41,08 973. RUNWAY REHABILITATION AT LIMA AIRPORT 30,19 11,65 394. PILOT PROJECT FOR NON-MOTORIZED TRANSPORT IN LIMA 4 05 3,52 875. TECHNICAL ASSISTANCE AND TRAINING 7,06 5,07 726. PROJECT MANAGEMENT 5,13 10,59 206TOTAL BASELINE COST 242,001 299,85 l |TOTAL PRO0ECT COSTS 242,001 299,85 1 l

I___________ I____ ICB NCB Other NBF Total1,Works 92,80 23,20 2,00 40,10 158.10l____________________ l (71,30) (18,30) (1,60) (0,00) (91,20)2. Goods 35,40 7,50 3,10 46,00l____________________ l (26,50) (5,60) (2,50) (34,60)3. Services 29,70 3,10 32,80

l (24,10) (0,00) (24,10)4. Project 0,10 5,00 5,10Management (0,10) (0,00) (0,10)

TOTAL 128,20 30,70 34,90 48,20 242,00l___________________ l (97,80) (23,90) (28,30) 0 (0,00) l (150,00)

ICB NCB Other NBF Totalt.Works 116,00 4,33 71,74 193.05

(76,29) (3,81) (0.00) (80,05)2. Goods 31,33 5,25 3,67 40,25

(23_45) (4,09) (3,43) (30,97)3. Services 54,13 1,82 55,95

l (37,57) (0,00) (37,57)4. Project Management 0,21 10,39 10,60

_______l___ l_ (0,21) (0.00) (0,21)TOTAL 147,33 9,58 58,01 83,95 299,85

(99,74) (7,90) (41,21) (0,00) (148,85)

- 23 -

1. Road 88, 52 26,80 38,001119 03 55 2 6, 120,0Road Rehabilitation - 22 38,00 914 0,2_4,5 70 1360,0_Bridge Rehabilitation 22,19 5,60 12,35 6,460,0_ 1, _ _Road Maintenance 8,69 2,10 ___0,25 0,04 2,9 i1,9___ _Equip. Laboratory 0,31 0,06 0,50 0,18 161,3 300 0 _Traffic Safety Program 1,01 0,21 1,55 0,54 153,5 _295 _9_Design Future Road 4,11 0,73 4 78 2,15 116,3 294,5

2. Railway Privatization 31,71 10,54 _ -30,37 10,71 __ 95,8 -101, __63. Runway Rehabilitation 21,60 3,59 _ 00 1,07 5,18 5,40 5,0 144,3 _ 1084. Pilot Project For Non- 3,05 1,00 3,10 0,42 101,6 41,6

Motorized Transport5. Technical Assistance 5,01 0,95 _ 1 3,36 0,99 72 67,1 1104,2 65 56. Project Management 0,11 5,02 _ 08 109,1 207,0 __

TOTAL 150,00 47,90 44,10 148,85 98,06 51,79 99,2 204,7 117,4

- 24 -

Annex 3: Economic Costs and Benefits

l 1|1 I I | s___. . .......... ~~~~~~~~~~~~~~~~~~~~~~~~~~~........ < ~... .... J?

1.ROAD COM .PONENTTA. Road Rehabilitation 196,62 38.1% 356,24

Tarma - La Merced 7,10 38,70% 20,97 50,10% 84,76La Merced - Satipo 1480 3350% 4105 3060% 15760Huanuco - Tingo Maria 5 28,90% 21,95 26,60% 34,61Tarapoto - Rioja 10,90 30,80% CanceledRioja - Corral Quemado 49,80 21,60% 111,15 21,10% 70,07

Rioja_- Rio Nieva _44,27 17,90% 20,20Rio Nieva - Corral Quernado 66,88 24,10% 49 87

B. Bridge Rehabilitation lG4,00%Huallaga valley bridges

Canuto 198,40% 24,85Pulcachi 2 210,90% 23,32Filab _ _. 257,50% 23,46Volcancillo . 234,80% 23,39Shitari 253,20% 26,57Utcubamba valley bridges.Cocahayco _ 16,00% 0,83El Progreso 150,90% 14,70|C. Road Maintenance __ Pilot Maintenance Plan _ 91,00%/ 1,04 Canceled __

2. RAILWAY PRIVATIZATIONAND REHABILITATION_ _

3FCC 9,54 n.a.2 FCS _ , 2l 24 31,00%FCSO 4,2 19,00% Enafer 35,00 21,0 % 30.37 17.33% 23.053. RUNWAY REHABILITATIONAT LIMA AIRPORT | _ l_lTourist Traffic 25 00% - 13,00 _ _ _ _Airport Services _ 18,00% 6 00 _ _

4. PILOT PROJECT FOR NON- 16,89% 0,75MOTORIZED TRANSPORT INLIMA

- 25 -

Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle No. of Persons and Specialty Performance Rating

(e.g 2 Economists, 1 FMS, etc.) Implementation DevelopmentMonth/Year Count Specialty Progress Objective

Identification/Preparation11/91 2 TS, TG09/92 2 HE, TS12/92 5 TS, TE, 2 HE, ES

AppraisaVNegotiation01/93 1 TS

03/93 8 TS, RE, TE, 2 HE, ES, TG, FA,06/93 8 TS, ES, RE, HE, FA, NM, TE,

AS09/93 1 TS11/93 1 HE11/93 3 TS, RE, AS01/94 1 TS03/94 1 HE

Supervision04/94 1 RE06/94 6 TS, HE, RE, NM, FA, ES S S08/94 3 TS, RE, TG S HS09/94 4 TS, RE, NM, HE S HS03/95 1 RE S HS08/95 3 HE, RE, ID S S02/96 6 HE, TE, ES, NM, AS, ID S S04/96 1 RE U U10/96 5 HE, NM, NG, ID, TE S S07/97 7 2 TE, HE, NM, AS, ID, NG S S06/98 6 TS, NM, TG, ID, 2 RM S S12/98 5 TS, NM, 2 RM, PA S S05/99 3 TS, NM, RM S S12/99 1 TS S S06/00 1 TS S S

ICR11/00 2 TE, TS S S

Specialty Key:

AS - Airport Specialist ID - Institutional Development Specialist RE - Railway EngineerES - Enviromnental Specialist NG- NGO Coordinator RM - Resident Mission StaffFA - Financial Analyst NM - Non-motorized Transport Specialist TE - Transport EconomistHE - Highway Engineer PA - Project Assistant TG - Transport Engineer

TS - Transport Specialist

-26 -

(b) Staff.

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ (,000)

Identification/Preparation 363.6 616.5Appraisal/Negotiation 208.2 403.4Supervision 205.0 488.9ICR 6.0 37.5Total 782.8 1,546.3

1. During preparation and appraisal of the project a considerable amount of TF resources was used,amounting to 391.3 staffweeks at a cost of US$566,600.00

- 27 -

Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)Rating

El Macro policies O H OSUOM C N * NAX Sector Policies OH OSUOM C N O NAZ Physical O H *SUOM C N O NAE Financial O H OSUOM C N * NAE Institutional Development 0 H O SU 0 M C N 0 NAEl Environmental 0 H O SU O M C N * NA

SocialX Poverty Reduction 0 H SU OM C N 0 NAZ Gender O H OSUOM * N O NAD Other (Please speci) O H OSUOM C N O NA

Z Private sector development 0 H O SU O M C N O NAZ Public sector management 0 H O SUO M N O NAL7Other (Pleasespecify) H OSUOM C N 0 NA

- 28 -

Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bankperformance Rating

0 Lending OHS OS OU OHUi Supervision OHS OS OU OHU

E Overall OHS OS OU O HU

6.2 Borrower performance Rating

LI Preparation O HS * S O U OHUOI Government implementation performance 0 HS O S 0 U 0 HULI Implementation agency performance O HS * S O U O HU

O Overall OHS OS OU O HU

- 29 -

Annex 7. List of Supporting Documents

Decreto Supremo N° 010-96-MTC. Creaci6n del Consejo Nacional de Seguridad Vial. 22/08/1996

Reportes de la Estructura de Costo y Financiamiento del Proyecto. Muestra la ejecuci6n por componente al31/05/2000

Reporte del Proyecto por Fuente de Financiamiento Reprogramado al 21/02/96

Informaci6n proporcionada por Ing. Giselle Montoya sobre el estado de la red vial en los anos 1990, 1995y 1999

Reporte del Sistema de Finanzas de Gasto por Categoria al 02/08/2000, proporcionado por el area deContabilidad

Estimaci6n de niimero de vehiculos por ciclovia, proporcionada por el Ing. Luis Hernandez

Localizaci6n de los elementos Bailey para el Huallaga, entregado por el Ing. Marco Garnica

Longitud de Conjunto puentes Marafi6n-Utcubamba, entregado por el Ing. Marco Gamica.

Ejemplo de Cuadro de control situacional de adicionales y ampliaciones de plazo de obra, para la CarreteraLa Merced-Satipo, Tramo 1: La Merced -Shankivironi, y Tarma la Merced proporcionado por el Ing.Marco Garnica.

Relaci6n de destino y longitud de los Puentes Modulares Bailey y los Mabey Compact 200, proporcionadopor el Altnacen de Cantagallo.

Descripci6n de las rutas contempladas en el Plan Piloto de Mantenimiento Vial establecido en por la firmaCAEM Ltda.. Consultores. DeLEUW CATRE.

Valores del indice de Rugosidad (IRI):

Documento Carretera

Carta de CESEL Ingenieros del 14/09/1998 Tarma - La Merced

Fax de Camargo Correa del 09/08/2000 Corral Quemado - Rio Nieva

Documento de Evaluaci6n de Rugosidad La Merced -Shankivironi,

Documento de Evaluaci6n de Rugosidad Shankivironi,-Satipo

Carta de firmas SOTECNI, SPEA y BWAS encargadas de la recuperaci6n del conjunto de puentesHuallaga, solicitando pago por servicios prestados

Control de Desembolsos del Proyecto del Prdstamo del BIRF.

- 30 -

Desembolso realizados por el Banco Mundial en el componente Ferrocarriles

Decreto Supremo N0 134-98-EF de autorizaci6n al MEF de asumir obligaciones que mantiene ENAFERS.A. con COFIDE, el IPSS y las derivadas del convenio aprobado por la R.M. N° 225-94-EF/75 del31/12/1998

Convenio de asunci6n de obligaciones entre MEF y ENAFER S.A. por D.S. N° 134-98-EF, del11/03/1999.

Indicadores de Seguimiento de ENAFER S.A. remitida con oficio N° 473 -99/GG.OM.20.P del 15/04/1999del Gerente General Ing. Rail Rosales Trelles

Decreto Supremo N° 033-99-MTC aprobando la transferencia de bienes y derechos de propiedad deENAFER S.A. a favor del Ministerio, del 17/09/1999.

Metas de Enero 1999 a Diciembre 1999 de la Oficina de Control de Calidad, Direcci6n General deCaminos del MTCVC

Evaluaci6n proyecto rehabilitaci6n pista del aeropuerto internacional Jorge Chavez. Por el Sr. RolandoFlores Fiol

Estudio de Factibilidad Econ6mica. Segunda Pista de aterrizaje paralela para el aeropuerto intemacionalJorge Chavez. Por Birk Hillman Consultants Inc. del 01/1997.

Informes Trimestrales. Enero-Marzo 2000 del Prestamo Banco Mundial N° 3717-PE

Ayudas memorias de visita de funcionarios del Banco

Estados Financieros, Balance y Estados de Perdidas y Ganancias de ENAFER S.A., preparados a partir dedocumentos revisados.

Informe Final de Cierre Componente de ENAFER, preparado por ENAFER, 11 de Enero del 2000-11-17

Proceso de Privatizaci6n de ENAFER, preparado por ENAFER

Estudio de Evaluaci6n del Proyecto Piloto de Transporte No Motorizado en Lima Metropolitana.

Staff Appraisal Report Transport Rehabilitation Project, February, 1994.

Evaluaci6n Econ6mica Ex- Post de las Carreteras PRT- 1.

Evaluaci6n Econ6mica Ex-Post de la Rehabilitaci6n de la Pista de Aterrizaje del Aeropuerto.

Staff Appraisal Report Transport Rehabilitation Project II, 2000.

Informe Final de Cierre preparado por CNSV.

Memoria Institucional 1997 - 2000 - Consejo Nacional de Seguridad Vial, Documento de trabajo.

- 31 -

Estudio de Evaluacion del Proyecto de Transporte No Motorizado.

- 32 -

ANNEX 8

MINISTRY OF TRANSPORTATION, COMUNICATION,HOUSING AND CONSTRUCTION

REPORT OF COMPLETION

OF THE

FIRST TRANSPORT REHABILITATION PROJECT

(PRT - 1)

LOAN No 3717 - PE - BIRF

December, 2000

FIRST TRANSPORTATION REHABILITATION PROJECTPRT-I

REPORT OF COMPLETION OF EXECUTION

TABLE OF CONTENTS

I. EVALUATION OF OBJECTIVES AND GOALS

1I. EVALUATION OF RESULTS OBTAINED

II. PERFORMANCE OF THE BORROWER

IV. PERFORMANCE OF WORLD BANK

V. KEY LESSONS LEARNED FOR FUTURE PROJECTS

REPORT OF COMPLETION OF EXECUTION OF THE FIRST TRANSPORTATIONREHABILITATION PROJECT(PRT- 1)

1. EVALUATION OF THE OBJECTIVES AND GOALS OF THE PROJECT

The broad economic crisis of the country at the beginning of the 90's and the lack of a road policyoriginated a profound chaos in the communication network, a situation that had to be urgently reverted togive support to the economic recovery. Thus, it was determined the need to develop a Program that wasnamed "First Transport Rehabilitation Project" PRT-1, especially devoted to diminishing the costs of thetransportation and consequently the reduction of the prices of the products. This project was to befinanced by credits from the BIRF, the KfW, the OPEC and a Japanese Grant.

The basic objectives defined to be reached through PRT-1 were the following: i) rehabilitation of theessential transport infrastructure; ii) implementation of institutional reforms in the sub-sectors ofhighways, railways and airports, with the purpose of optimizing the use of the resources and achieve asustainable development; iii) establish bases for future projects that will improve the administration ofhighways, increasing private participation and more attention to the transportation infrastructure in thesectors with less income.

During the execution of the Project, permanently and with support from the periodic missions from theBank, the accomplishments and difficulties were evaluated; where the partial or integral modification ofany of the basic objectives of the Project was never needed. However, regarding the established goals, asa result of the improvement in the original design of the projects, higher costs of the works andavailability of economic resources, it was necessary to make adjustments en in other cases formulate newgoals.

Among the main modifications that were necessary to the goals of the Project, we have:- Postponement of the works of the Highway Rioja - Tarapoto- Transfer of the Program of Road Maintenance to the SINMAC, canceling the conservation works

planned and drafting only the Maintenance Pilot Plan SM- Suspension of works of the stretch of the cycle road Av. Tupac Amaru (35 km.)- Construction of the Yanango bridge- Development of studies for the Project of Urban Metropolitan Transportation Lima - Callao (PROTUM)- Drafting of the Master Plan of Civil Aviation and the Feasibility Study of the Second Road of the Jorge

Chavez Airport- Amplification of the Promotion of Credit for Acquisition of Bicycles Campaign- Redimensioning of the works and the efforts for recovery of the ENAFER fleet.

In the evaluation of the Project, it is very important to stress the high degree of complexity involved whileacting simultaneously adjusting to the Standards set by the World Bank and the reduced time framesurgently demanded by the country for its recovery, considering additionally that the Project had beendrafted with a multi-modal conception, which included in addition to the highways and bridges projects,the studies and works of non-motorized, railways, civil aeronautics, urban metropolitan transportation androad safety.

Some external demands had to be overcome by the Project with the purpose of achieving the proposedobjectives and goals, among which we could mention as the more relevant ones, those derived from theampleness and particular characteristics of the regions where the works where done, as well as thedifferent climatic phenomena according to the season, the different types of geology and existinggeographic accidents, as well as the variety of hydrology of the Peruvian territory.

Other exceptional factors that affected the normal development of the Project were the following: i) thethreats received in the camps of the contractors by the last terrorist groups that were still active indifferent regions of the Jungle; ii) the occurrence of strong rains with an intensity higher to thoseforecasted for the seasons between November 97 and April 98 and November 98 through April 99, as aconsequence of "el Nifno Phenomenon" which affected the whole country, with severe consequences tothe highway infrastructure, bridges and railway works; iii) the performance of some contractors andconsultants that did not act with the due celerity, extending the completion periods, thus jeopardizing thenormal development of the activities..

However, in spite of the inconveniences faced, the adequate management of those responsible for theadministrative and operational aspects of the executing organisms allowed to reach satisfactorily the goalsestablished in the Project, which are shown in the Appendix and which are contributing substantially tothe development of the country, turning the PRT-1 into a facilitator and integrator of development withalternate modes and ways which are more secure and faster, fostering growth of the differentsocioeconomic activities of each region, promoting the generation of work, the access to health andeducation services and helping in the reduction of the transportation costs which will drive commercialand tourism exchange.

II. EVALUATION OF RESULTS

The budget initially programmed was of US$ 242 million and the final costs of investment reachedapproximately US$ 287 million, as shown in the Appendix, which equal a 194% over the amountestimated in the preparation phase and which means a greater participation of Local investment whichexceeded US$ 93.5 million. It should be stressed though that the greater difference is found basically inthe increments of costs of the Components from the Highway Rehabilitation and Project Administration,due mainly to the introduction of additional improvements not included in the base projects, as aconsequence of inaccuracies and/or defects in the projects and due to the larger volumes of work thanthose initially foreseen as a result of climatic phenomena, sliding, collapse or undermining of platforms.

Additionally, it should be stressed that there were no significant changes or substantial variations in theunit prices of the goods and services foreseen in the projects during the execution stage, due to the factthat the budgets were expressed in American dollars and the inflation rates during this period wereminimal.

PRT-1 contributed in a decisive way to the reactivation of the transportation and construction sectors,making it possible the utilization of the machinery and personnel of the national engineering, providingdirect work to approximately 66,000 men/month, which equals a total of more than 5,500 man/year, anamount that is distributed in approximately 380 professionals, 620 technicians and 4564 assistants andworkers each year.

The benefits of the Project were highly profitable, initially with the dynamization of the economic activityin the areas of influence through the generation of employment and globally through the direct benefits inthe operational costs of the vehicles with a significant profitability, especially in the roads that have beenimproved at the asphalt carpet level; and in respect to the indirect benefits (well being of population,improvement of competitiveness of the Peruvian export products and more economic stability within thecountry), which although are difficult to quantiify, a substantial growth that has benefited the populationas a whole has been observed.

In the Project, the Highway Component was projected for the execution of activities in highways, bridges,road maintenance, equipment of the Quality Control Office (OCC) and road safety, being assigned an

original amount of US$ 153,3 million, programming rehabilitation of 725 km of roads, the definitereplacement of 44 bridges, maintenance of 620 km of highways, equipment of the Laboratory of theOCC, the dissemination of the values of road safety and design of future rehabilitation includingPROTUM.

During the execution phase, in addition to the reasons exposed in previous paragraphs, due to the state ofdeterioration of the highways compared to the situation during the preparation stage of the Project and theadditional expense that it represented, it was necessary to trim the rehabilitation of roads to 589 km,canceling the stretch Tarapoto-Rioja, the construction of only 37 bridges of the 44 programmed and theelimination of the program of 620 km of road maintenance; however the final cost reached US$ 2216.13million, that is a 40.95% over the estimated amount. The economic evaluation ex post of the highwaypackage for 20 years determines a Net Asset Value of US$ 356.24 million with a discount rate of 12, aTIR of 38.1% and a Cost/Benefit of 4.31; the same ex post evaluation considering only the benefitsgenerated during the period between the beginning of the works and the closing date of the Project, showsa favorable amount of US$ 83,580 million.

Within the Bridges Sub-component, the benefits were very important, being able to elaborate a newGeneral Bridges Regulations, a Bridges Management Computerized System SCAP, a General Inventoryof Structures at a national level, the acquisition and recovery of bridges and spare parts Bailey, as well asthe development of the works of the Groups of Bridges Marafi6n-Uctubamba and Huallaga, whoserehabilitation works was commenced on April 15, 1999, due to initial difficulties in the granting of thecontract, and completing a cumulative advance of 91.4% and 86.48%, respectively, by October 31, 2000.

The Highway Maintenance Sub-component was structured with an amount of US$ 10.78 million, whichincluded a Pilot Program Study and Maintenance Works of 620 km; the Study showed that themaintenance was only possible in 340 km, that is the 54% of the total objective, as the difference due tothe state of deterioration required rehabilitation works that meant an increase in costs, which demandedcancellation of the works. Regarding the maintenance of already rehabilitated highways through theProject, these have been transferred to SINMAC, as responsible for the development and execution of theconservation policies of the National Road Network, that is progressively implementing them withtechnical and material resources, for which a toll booth and weigh control installation program has beenestablished, as well as the application of random inspections that contribute to diminish the deteriorationof the roads.

The equipment of the Quality Control Office of the Roads General Management had a very importantsuccess, increasing the number of trials from 721 during 1997 to 36,570 in 1999, being the mainrequester, the state agencies for public works. Initially, a sum of US$ 682,960 was assigned, acquiringand renovating equipment oriented to the design and control of asphalt samples, bitumen and asphaltcontrol, chemical analyses, quality control on concrete and cement, pavement and geo-technical studies.

Within the scope of the Road Safety, the increase in road accidents during the last years had forced theGovernment to create the National Road Safety Council, reinforcing through this Organism the multi-sectorial policy of accident prevention, with the intention of reverting the occurrence and severity oftraffic accidents at a medium term, and consequently, the reduction of expenses that these accidents giverise to, Which amount annually ca. US$ 1000 million. This Sub-component with a global budget of US$2.1 million implemented with satisfactory results: i) Master Study for Road Safety in Peru; ii) Executionof four (4) Road Safety Pilot Projects (Coordination between CNSV, Education and Advertisement,Accident Data and Infrastructure); and iii) Preparatory actions for the application of eight (8) Road SafetyPilot Projects in PRT-2 (CNSV, Auto-sustainable Financing Mechanisms, Road Safety EngineeringActions, Evaluation of Driver Applicants and Granting of Driving Licenses, Institutional Reinforcementof the Police (PNP), Traffic Accident Information System, Education and Communication Programs).

The Railway Component had as its main objective, privatization of ENAFER; initially, it was foreseenthe execution of the works in a period of 2 years (1994-1996) and the transfer to private management bythe beginning of 1997, however, this was completed on 09/21/99, with the adjudication of the concessionto the Consorcio de Ferrocarriles del Peru, formed by eight companies, which subdivided the managementin: i) Central Railway (Minas Buenaventura, Mitsui del Peru, Estudio Olaechea; Inversiones Andino,Railroad Development and Commonwealth Rail Group) and ii) Southern and South-eastern Railway (SeaContainers and PeruVal). The executed investment reached the amount of US$ 40.83 million and required19 bidding processes (17 international and 2 national). The results obtained after 5 years and 3 months ofthe project were the following: 63.81% of rehabilitation (382.87 km of the 600 km programmed), 70.28%of rehabilitation of engines (25.5 units out of 36 units programmed) and 94.30% of rehabilitation of cars(370 units out of 393 units programmed). The main difficulties faced were: i) default on the provision ofsleepers; ii) prolonged process of adjudication of spare parts for engines; iii) non-completion of the worksof widening of the four zigzags of the central railway; and iv) cancellation of the telecommunicationsworks. From the ex post economic evaluation done during the first year of concession, with a projectionto 30 years, we obtain a Net Asset Value of US$ 23.04 million with a discount rate of 12% and a TIR of17.33%.

The Aviation Component obtained very satisfactory results; through Japan Consultant, the developmentof the Strategic Plan for the Civil Aviation in Peru was completed, a Plan that is being currently used byCORPAC and the Civil Aviation General Management; also, through Birk Hillmman, the FeasibilityStudy for a Second Road for the Jorge Chavez Airport was drafted; and the Rehabilitation of the Landingand Taxiing Roads of the Airport was done, which were initially programmed for the second semester of1995, but were delayed due to the lack of definition in the procedures and scope of the solution moreadequate that would allow to recover the roads without jeopardizing the daily operations and at the sametime with the future projection that the licensee had enough time for the new investments; afterwards, dueto the continuous requests by the airlines, justifying that they had previous commercial commitments,which influenced in the delaying of the works, until it was impossible to delay it more during 1998 due tooperational safety limits. The estimated initial cost of the Component was of US$ 30.19 million and thefinal expense reached the amount of US$ 11.65 million. This reduction was the result of the reformulationof the rehabilitation works in the landing road and taxiing ways by performing only major repairs that willensure an 8-year useful life, the time frame projected for the construction of a Second Road that willallow the definitive rehabilitation with the most recommended technical parameters. From the ex posteconomic evaluation performed for the first year of operation with a projection of 15 years, we obtain aNet Asset Value of US$ 3.74 million, with a discount rate of 12%, a TIR of 20,5% and Cost/Benefit of1,6

The Non-Motorized transportation Component, was experimentally implemented in the North Cone ofLima with the objective of promoting massive use of bicycles as an alternative popular and labor transportmedium, benefiting the user health and economy, while contributing at the same time with the protectionof the environment. It was executed with a total cost of US$ 3.43 million, among the main goals:construction of three stretches of cycle roads with a total length of 45 km; application of a credit programfor the acquisition of bicycles with a maximum fund of US$ 600,000, already having been purchased4,632 bicycles; development of promotional and educational campaigns about non motorizedtransportation; and monitoring of the progress in this component. During the execution stage it wasnecessary to apply corrective measurements that will allow the achievement of the goals established, thusthe construction of the cycle road in Tupac Amaru Avenue was cancelled (35 km.) and the following wereincluded: i) construction of the interconnection of the cycle roads in Av. Tomas Valle, ii) a maintenanceplan of the cycle roads for years 1998 and 1999 with the active participation of the District Municipalities,iii) implementation of a social communication campaign, iv) a cleaning program for cycle roads for the

years 1999 and 2000 (Av. Universitaria and Tomas Valle), v) extension of the Monitoring of the PilotPlan until year 2000 and vi) elaboration of the Evaluation Study of the PPTNM.

The application of the Technical Assistance and Training Program reached a total amount of US$ 5.07million and contributed favorably to the final result of the Project, allowing to support and promotepromulgation of a new Transportation Law, modernization and organizational reforms in the sector,strengthening of the entities related to the PRT-1, preparation of future projects as the case of RuralRoads, Road Maintenance, Environment and CNSV; it also allowed contracting of consulting firms andskilled professionals to provide technical assistance to the offices of MTC, PRT, ENAFER, PPTNM,SINMAC, CNSV, among others. Additionally, small training programs were organized for the technicaland administrative staff of the participating organisms of the Project, which facilitated optimization of theresults, introducing new technologies along with updating and improvement courses both in othercountries as well as within the country.

III. PERFORMANCE OF THE BORROWER

It is important to stress the decision of commitment from the Government of Peru with the World Bankfor the design and execution of the First Transportation Rehabilitation Project PRT-1, as well as thecompliance with the obligations established in the Loan Agreement, especially those related tomacroeconomic aspects, transportation sector policy and institutional reform, driving the optimization ofthe administrative effort and the recruitment of efficient professional staff, looking for financialimprovements within the fiscal and user rights aspects.

It's been rated satisfactory the performance by the Borrower (Government, MTC, MEF, ExecutiveOrganisms), reaching by the end of the Project the objectives and goals and execute almost in its entiretythe available funds. The interest and responsibility showed in the technical and administrative aspects,and the permanent coordination with the Bank, allowed to identify and solve timely the problems that inseveral instances demanded adjustment or modification of the goals in order to ensure the success of theProject.

It should be stressed that the preparation of the Project was highly complex, due to the fact that the socialand economic conditions that the country was going through were deemed very critical. An intense andclose coordination activity between the Organisms involved from the State and the Bank was required,considering the urgency of the Government to reactive the economy of the country and on the other handthe prolonged procedures established by the Bank Standards. Notwithstanding, it was possible to assignprudent time frames that allowed having the files from the priority activities and perform the respectiveevaluations in the technical, economic, financial, institutional and environmental areas. Also, with thepurpose of ensuring results, specialized consulting services were contracted to support the management ofthe Project, in the drafting of the Terms of Reference and Bases, in the development and review of theStudies for the execution of the works.

Regarding the execution stage, compliance with the programs of activities developed for each component,as well as the follow-up of the key indicators of implementation and the operational indicators ofperformance, expedited the achievement of virtually all goals established or adjusted. During this stage,the goalX of the components and the assigned amounts were reviewed, and in accordance with the WorldBank some goals were adjusted and others were moved to a next project, basically due to largerinvestment costs than those initially considered, as a result of the Definitive Studies, Contests andBidding performed.

The work teams conformed by the Executive Organisms to carry on the technical and administrativefunctions had a satisfactory performance, improving the quality of the results as the Project advanced. It

should be stressed that at the beginning of the PRT-1, as a result of an omission by previous governmentsof development of transportation infrastructure, there was an evident lack of qualified human resourceswith experience to satisfy the integral requirements for the adequate direction and execution of thedifferent studies, supervision and works that had to be performed.

This first Credit Agreement between the World Bank and the Government - Sector MTC (PERT-PRT),meant the implementation and mandatory compliance of the procedures established in the BankStandards, which in those moments were not known nor applied in the systems of the transportationsectors, because of which the Executive Organisms had to adapt, innovate and apply in all the activitiesand technical-administrative processes, the above mentioned standards in order to fully achieve the goalsand objectives established.

IV. PERFORMANCE OF THE BANK

The ongoing participation of the Bank during the preparation, evaluation and supervision stages was veryimportant for the achievement of the objectives and goals, providing continuous administrative andoperational advice at all levels, which helped to overcome setbacks and difficulties that rose throughoutthe development of the Project. In the same way, through the visits of the missions and communicationsfrom Washington, the officers of the Bank showed interest, experience and knowledge, coordinating andestablishing dialogue with the different Government Organisms and in specific cases taking part in workmeetings with the consultants, proposing actions and/or alternatives with the purpose of solving existingproblems.

From the preparation works, the Bank showed a wide identification with the objectives of the Project,which helped with the Integral Strategy of the Government to reactivate the transportation sector, whichin those moments was going through a collapse situation due to the lack of road infrastructure en goodcondition and at the same time setting up solid foundations for promoting the development of the country.

During the evaluation stage, through a multidisciplinary professional team, the Bank undertook a task ofanalysis and revision of the work performed during the first stage, identifying the possible risks thatwould involve the execution of PRT-I and providing concrete solutions, obtaining as a final product theEvaluation Report No. 12309-PE from February 17 1994, in which the transportation sector and theeconomic situation of the country, the objectives and characteristics of the Project, the agreementsreached and recommendations for the optimum execution of the same are analyzed in depth.

During the supervision stage, the Bank assisted the Borrower through visits to the country by themissions, work teams and communications from Washington, evaluating the performance of the advancesand progress, cooperating to troubleshoot and solve problems, formulating recommendations andapproving requirements, demonstrating promptness and flexibility towards proposals presented by theExecutive Organisms in the best interest of overcoming difficulties and optimize execution of the Project.In specific cases, they promptly approved the partial or total modification of goals and the consequentrestructuring of costs of the Project. Furthermore, the responses from the Bank to the requests for NoObjection in terms of time, mainly for issues regarding approval of additional budget for works andsupervision, allowed the normal development of the works.

V. KEY LESSONS LEARNED FOR FUTURE PROJECTS

During the phase of preparation of the projects for the restructuring of the activities schedules (studies andworks), reasonable and flexible deadlines should be taken into account so that they allow the propercompliance with the required works within prudent time frames (not adjusted deadlines). In the specificcase of the highway projects, those located in the mountain and jungle regions, it is convenient to limit the

stretches for contracting of works to distances not to exceed 45 km, with estimated deadlines between 12and 18 months, as that allows a better management and the compliance with contractual obligations; inaddition, the reduced level of performance of qualified labor force in the rural areas should be evaluated,as well as the periods of strong rain.

In the formulation of the Feasibility Studies, Basic Engineering Studies and Definitive Studies, a goodquality control is critical giving special attention to the topographic, geologic, hydrologic, climatic andenvironmental studies, with emphasis in the field investigation phase, soil and subsoil testing (withbackside excavations of 2 m depth as a minimum, in distances of no more than 200 meters); also, thesolution of critical points should be considered, the stabilization of banks (upper and lower), appropriateemergency lanes, the design of efficient drainage, the mitigation of negative environmental impact andthe optimization of the road safety. The approval of the Definitive Studies must be very demanding, asthat is a way of ensuring the successful completion of the works; if not done so, during the executionthere could be defects, deficiencies or omissions, which could give rise to additional delays and budgetswith very high percentages in relation to the budget established in the contract, putting the objectives ofthe Project in risk.

The Definitive Studies in the case of highways, require additionally a specialized review in the aspects ofroad safety, with the purpose of decreasing the problems related to the designs, which will help tominimize significantly the possible future expenses for modifications or corrections after construction. Itis important to consider in the terms of reference for the Studies, the basic concepts of road safety andduring the construction phase the application of audits.

For future contests or bidding processes, with the purpose of optimizing results and avoid jeopardizingthe completion of the studies or works during the selection, we should:

a. Implement considerations that will impede awarding the contract to Bidders (Consultants orContractors) with a limited contracting economic capacity; requiring during the selection stage thesufficient liquidity that will ensure progress without depending entirely from contractual payments.b. Disqualify bidders who present offers below a reasonable margin with regard to the referentialbudget (offers below 90%).c. In the event that international companies bid, the mandatory direct participation should berequired, through the assignment and permanent residence of its specialized technical staff (foreign) untilthe project has been concluded.d. Program in the future the contests and bidding processes through the post-qualification modality,as the more flexibility of the submittal stage allows for a greater number of bidders, reducing thus thepossibilities of arrangements in prices.e. Distinguish in the terms of reference for the projects of highways the concepts and scope of theBasic Engineering Studies and the Engineering Projects, being convenient to separate them during theexecution and presentation phases.

Other alternatives to be evaluated for the future development of studies and works that ensure continuity,could rise fostering contracting through:

a. Qesign-Construction System, in the modality of lump sum turnkey, that aims to avoid work add-ons, where the contractor performs the final designs and constructs, for which it receives the basicengineering studies from the selected consultant, which will supervise afterwards the construction. Aminimum maintenance of two years should be considered after finishing the works (post-construction).b. Total Responsibility System, through which the Entity would grant the execution responsibility ofthe public work to one contractor, which will be in charge from the design of the Project, construction andtotal operation (including maintenance) for periods of 15 years or more.

The policy of reduction of the state machine and more opportunities for the private sector companies andinstitutions should stay in effect, fostering additionally the participation of the national companies in theproject execution (studies, works and supervision), making it possible the technical and economicstrengthening and an increase in the degree of efficiency and competitivity. In such sense, during thephase of selection (contest or bidding process), the bases could include dispositions that promoteformation of consortiums of national or combined companies, granting them special bonuses in the scoreof pre-qualification.

On the medium term a "National Transportation Investment Plan" should be implemented, which willoptimize the operational, maintenance and rehabilitation areas, helping in the reduction of transportationcosts and consequently with the reduction of prices of goods for domestic consumption as well as forexport. In such sense, it is imperative on the short term to elaborate and manage a "Central InformationBank", which will gather data from all the projects executed and still under way, including the problemsand solutions applied, analyses of estimated and/or proposed cost structures, offers presented by thecontractors and validations during the execution of the works. Likewise, it is necessary to have a "ProjectPortfolio" that will make possible the efficient availability of technical and financial information aboutthe Projects that are ready for execution, sorted by priority and matching the different requirements for itsexecution with the respective procurement plans.

The ongoing elaboration and updating of technical publications should be favored, the same which shouldtry to set standards and expedite the management and best results of the studies and works, consideringamong those with higher priority the handbooks titled: "Cost standardization for the design of highways","Geometric Design of Highways", "General Technical Specifications for the Construction of Highways","Measurements and Budgets in Road Issues", " Work Supervision", "Studies Supervision", "NationalStandards for Road Signaling" and "Environmental Protection Standards".

This first experience has made possible the identification of procedures for future projects and theestablishment of the need to implement and operational handbook that will standardize the differentprocesses that are required during the execution of a project type PRT-1, defining the steps and timeframes that must be met for each of the activities, which should be adjusted to the real needs and futurerequirements.

For the procurement of materials, from the experience gathered in the rehabilitation of ENAFER, duringthe process of acquisition of spare parts for engines and cars, with the modality of open purchase and perarticle, when possible the contracts should be entered into with the manufacturers of machinery andequipment, avoiding negotiations with intermediaries or dealers that in some instances provide articles inbad conditions or out of the range of need.

In the field of economic evaluations, both ex ante and ex post, of rehabilitated highways and bridges, forthem to be comparable and in order to obtain optimum results from the benefits reaped, it is necessarythat the traffic counts be done in similar stations (geographic points) and that the traffic studies employadequate and updated factors of seasonal correction, the same that will avoid distortion in the values ofthe indicators of profitability and negative effects in the generation of benefits.

In the training aspect, with the purpose of optimizing future efforts, it is advisable to invest and studydeeply especially such critical points as:

a. Significant training programs at a national and intemational level aimed towards professionalsand technicians from the executive organisms, for the knowledge and application of new

technologies of construction and maintenance; as well as administrative procedures, givingspecial attention to the organization of files, add-ons, extensions and others.

b. Foster periodic training and updating of the professionals and technicians of the privatecompanies that provide services or are interested in doing so, like project contractors, constructors,supervisors and other modalities.

It is critical to promote and sustain the maintenance plans of the recently rehabilitated highways that willensure continuity of the ways and avoid its progressive deterioration, for which it is necessary to have andstrengthen: i) assignment of the necessary funds through toll collection (auto-sustainable) and theobligatory nature of the fiscal contribution in case it is necessary to cover differences; ii) theimplementation of weighting controls of heavy vehicles that could endanger the conservation ofhighways; iii) establish a monitoring plan with the purpose of supervising the state of conservation of therehabilitated highways and the routine and periodic maintenance programs. In the same way, it isnecessary to foster creation of local companies that perform the minor maintenance tasks of highways andbridges in the remote zones, where the presence of work equipment from MTC will be too limited,difficult or cost ineffective.

The PRT, as a specialized organism in the development of transportation investment programs, sponsoredby international financial entities such as the World Bank, require that in the Organization of the ProjectManagement BIRF a professional or team of professionals be included permanently, which will beresponsible for the management of the preparation, follow up, monitoring, coordination, control, reportsand filing of the different activities and progress of the Projects type PRT-1, as well as the respectiveclosing processes. As background, with very effective results we can cite ENAFER and the MetropolitanMunicipality of Lima, the functions performed by their Coordination Units (provided in the LoanAgreement), that constituted a permanent and efficient liaison between the Bank, the Borrower and theExecutive Organism.