Documentof The World Bank FOR OFFICIAL USE ONLY Report No. 36796-BO PROJECT APPRAISAL DOCUMENT ON A PROPOSEDCREDIT INTHE AMOUNT OF SDR 20.5 MILLION (US$30.0 MILLIONEQUIVALENT) TO THE REPUBLIC OF BOLIVIA FOR THE URBANINFRASTRUCTURE PROJECT October 13,2006 Finance, Private Sector and Infrastructure Department Country ManagementUnit for Bolivia, Ecuador, Peru and Venezuela Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. I t s contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (ExchangeRateEffective June 30,2006) Currency Unit = Boliviano 8 Bolivianos = US$1 US$1.47 = SDR 1 FISCALYEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS AASHTO AmericanAssociationof StateHighway andTransportationOfficials BDV UrbanUpgradingProgramin the Municipality of L a Paz (Barrios de Verdad) BRT Bus RapidTransit CAF AndeanPromotionCorporation(CorporacidnAndina de Fomento) CBR CaliforniaBearingRatio CUM Single Municipal Account DA DesignatedAccount EPSA Water and SanitationService Providers FEJUVE Federationof Neighborhood Committees FA FinancingAgreement FM FinancialManagement FNDR NationalFundfor Regional Development GEF Global EnvironmentalFund GMEA Municipal Government of El Alto GMLP Municipal Government of L a Paz GTZ GermanTechnical Cooperation IDB Inter-AmericanDevelopment Bank IFI IntermediaryFinancialInstitution INE National Statistics Bureau I S N Interim Strategy Note MdA Ministry of Water MDF Municipal DevelopmentFund NDP Bolivia's NationalDevelopmentPlan NMT Non-MotorizedTransport OMDUMA UrbanDevelopment and EnvironmentDepartment inthe Municipal Government of El Alto PPF ProjectPreparationFacility PCAG Coordinatingand Advisory GroupinOMDUMA PFM Public FinancialManagement PRUR Municipal UrbanRegulationPlan RIOCP Public Credit Operation Initiation Registry RF ResettlementFramework SAGUAPAC Water Supply and SanitationCooperativeof Santa Cruz SCA Subsidiary Credit Agreements SIDA SwedishDevelopment Agency SIRESE Sectoral RegulationSystem SISAB Basic Sanitation Superintendency VIPFE Vice-Ministry of Public Investment and ExternalFinancing VTCP Vice-Ministry of Treasury and PublicCredit Vice President: Pamela Cox Country Director: Marcel0Giugale Sector Manager: John Henry Stein Task Team Leader AlexandraOrtiz Co-Task Team Leader: Franz Drees-Gross BOLIVIA URBANINFRASTRUCTUREPROJECT CONTENTS A. STRATEGIC CONTEXT AND RATIONALE.............................. 1 1. Country and sector issues., ....................................................... 1 2. 4 3 . Rationale for Bank involvement., ................................................ Higher level objectives to which the project contributes..................... 5 B . PROJECT DESCRIPTION........................................................ 6 1. Lending instrument.,................................................................ 6 2 7 Project development objective and key indicators.............................. [IfApplicable] Programobjective and operations.............................. 3.. 7 4. Project components.................................................................. 8 5 . 11 6. Alternatives consideredand reasons for rejection.............................. Lessons learned and reflected inthe project design........................... 14 C. IMPLEMENTATION............................................................... 15 Partnership arrangements(if 15 Institutional and implementationarrangements.................................. applicable) .......................................... 2. 1. 15 3. Monitoring and evaluation of outcomes/results................................... 16 4. Critical risks and possible controversial aspects................................... Sustainability ........................................................................... 17 5. 17 6. Credit conditions and covenants...................................................... 19 D APPRAISAL SUMMARY.......................................................... 19 1.. 19 2. Economic and financial analyses................................................... Technical.............................................................................. 21 23 4. 3. Fiduciary............................................................................... Environment........................................................................... Social .................................................................................. 25 26 6. 5. 27 Policy Exceptions and Readiness................................................... Safeguardpolicies., .................................................................. 7. 28 Annex 1: Country and Sector or ProgramBackground.............................. 29 Annex 2: Major Related Projects Financedby the Bank and/or Agencies......... 39 Annex 3: Results Framework and Monitoring......................................... 40 Annex 4: Detailed Project Description.................................................. 45 Annex 5: Project Costs.................................................................... 59 Annex 6: Implementation Arrangements., ............................................. 60 Annex 7: Financial Management and DisbursementArrangements. ............... 67 Annex 8: Procurement...................................................................... 76 Annex 9: Economic andFinancial Analysis., ......................................... 81 Annex 10: Safeguard Policy Issues...................................................... 99 Annex 11: Project Preparation and Supervision.,..................................... 119 Annex 12: Documents inthe Project File............................................... 120 Annex 13: Statement of Loans and Credits............................................ 121 Annex 14: Country at a Glance.......................................................... 122 Annex 15: Wastewater Treatment Technical Aspects., .............................. 124 MAP IBRD #33374................................................................................................ 141 BOLIVIA URBANINFRASTRUCTUREPROJECT PROJECTAPPRAISAL DOCUMENT LATIN AMERICA AND CARIBBEAN LCSFW Date: October 13, 2006 Team Leader: Alexandra Ortiz Co-Team Leader: Franz Drees-Gross Country Director: Marcel0 Giugale Sectors: Sanitation and flood Sector Director: Makhtar Diop protection sector (20%); Sub-national government administration (30%) General transportationsector (30%) Themes:Access to urban services and housing (P); Municipal finance (P); Municipal governance and institution building (P) Project ID: PO83979 Environmental screening category: Partial Assessment Lending Instrument: Specific Investment Safeguard screening category: Credit Limitedimpact [ ] Loan [XI Credit [ 3 Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$M): 30.00 (20.5 million SDR) Proposedterms: Grace period: 10years Maturity: 35 years Commitment charge: a variable rate between 0 and 0.5% of the undisbursedcredit balance annually set by the Executive Directors of IDA. Borrower: Republic of Bolivia ResponsibleAgency: Ministerio de Planificacih del Desarrollo Viceministerio de Inversi6n Pdblica y Financiamiento Extern0 (VIPFE) Address: Palacio de Comunicaciones, Piso 11, L a Paz Telephone: (591-2) 23 1-7424/32 FY I 2007 I 2008 I 2009 I 2010 1 2011 I Annual 4.00 10.00 12.00 2.00 2.00 Cumulative 4.00 14.00 26.00 28.00 30.00 Does the project require any exceptions from Bank policies? [ ]Yes Ref. PAD 0.7 [XI No Have thesebeenapproved by Bank management? I s approval for any policy exception sought from the Board? [ ]Yes [ IN0 Does the project include any critical risks rated "substantial" or "high"? [XIYes Ref. PAD C.5 [ IN0 Does the project meet the Regional criteria for readiness for implementation? [XIYes Ref. PAD 0.7 [ IN0 Projectdevelopment objective Ref. PAD B.2, TechnicalAnnex 3 The projectdevelopment objectiveis to improvethe access to basic services to the urban poor in Bolivia's majorcities throughtargeted infrastructureinvestmentsand the provisionof technicalassistance to municipalities in the planning,expansion, and sustainability of urban service delivery. Projectdescription[one-sentence summary of each component] Ref. PAD B.3.a, Technical Annex 4 The project will finance three components: i)urbanupgradingin 16 poor neighborhoods inL a Paz; (ii) improvement of urban mobility in El Alto; and (iii) sanitation improvements in Santa Cruz. Which safeguardpoliciesare triggered, if any? Ref. PAD 0.6, TechnicalAnnex 10 Environmentalassessment, cultural property and involuntary resettlement. Boardpresentation: None Loadcredit effectiveness: - Subsidiary Agreements will have been executed on behalf of the Borrower and the Municipal -Government of L a Paz, the Municipal Government of El Alto, and SAGUAPAC; The Municipal Government of L a Paz, the Municipal Government of El Alto, and SAGUAPAC have adopted the operationalmanual on terms and in scope acceptableto IDA. Covenants applicable to project implementation: N/A A. STRATEGIC CONTEXT RATIONALE 1. Countryand Sector issues National context With a gross national income per capita of only US$910, Bolivia is the second poorest country in Latin America. The country has passed through a period of uncertainty since 2000 in which the existing economic model's ability to deliver sustainable poverty reduction has been challenged. In December 2005 a new government headed by Evo Morales, the first ever indigenous president of Bolivia, was elected with an absolute majority (54 percent of voters). With a strong mandate for a new approach to address the country's long-standing social problems, the new government has announced its intentions to prioritize constitutional reform and poverty reduction. At the local level the most pressing priorities, including basic urban infrastructure, transport and sanitation, have reflected higher level developmental problems such as urban marginality, urban vulnerability to natural disasters, urban transport congestion and limited access to and quality of basic urban services. The new National Development Plan (NDP), "Dignified, Sovereign, Productive and Democratic Bolivia, a plan for living well: 2006-2010" has three pillars: (i) productive development and emplo ment generation; (ii)justice and social inclusion; and (iii) macroeconomic stability. The NDP states that the indigenous communities will be the 7 main actors and beneficiaries of the plan. The first pillar includes five sectors: (a) surplus-generating activities such as hydrocarbons, mining, electric energy, forest, water, and biodiversity, areas in which the national government will have a stronger role; (b) job creating activities such as industry, tourism, agriculture, housing and the financial system, areas where the private sector will have a predominant role; (c) infrastructure for production, including irrigation, science and technology, information, and animal and plant health; (d) financial services for production and science and technology. The second pillar stresses the importance of social protection, health and education, water provision, sanitary services, housing, land, justice and national security. The Bolivian youth is expected to play a key role in the literacy and nutrition programs. The third pillar will enforce existing macroeconomic policies. In the short run Bolivians expect to reach a zero deficit in current expenses and a reduction inpublic external debt. Regarding international cooperation, the NDP states that in the long-run its financing should be completely based on internal resources. In the short run the government will seek external financing to priority areas. The NDP will be founded on a respect for interculturality and support to community development. Transversal themes are: gender, culture, society and environment. ' Thefollowing description of the NDPhas been based on an unwritten presentation by the government on May 23,2006. - 1 - With a 64% urban population, Bolivia is not as urban as some of its South American neighbors (Argentina 89%; Chile 87%). However two characteristics of the urban population are noteworthy. The first i s that the levels of urban poverty in Bolivia are extremely high both in relative and absolute terms. Despite fluctuations in the urban poverty rate during this period, it was higher in2002 at 53.9% than it had started in 1993 at 52%. In terms of absolute numbers, over half the poor (2.9 million) and 43% of the extreme poor (1.4 million) lived in urban areas in 2002, up from one third (1.8 million) and one fourth (800 thousand) in 1997, respectively.2 The second is that the country's rate of urbanization i s rising remarkably, from 56% in 1990to 64% in 2005. This i s due to the increased rural-to-urban search for opportunities as well as migration from small cities and mining areas to main urban centers since the late 1990s. From 1997 to 2002 urban migration doubled, as metro areas drew in low-income migrants coming from all regions at a current average annual growth rate of 3.2%. Although service coverage in transport, electricity, gas, water and sanitation and telecommunications has increased in the ast 15 years, Bolivia's per capita GDP i s no higher today than it was fifty years ago. 's This implies that the level of the existing infrastructure is not sufficient to sustain the economic growth necessary for the country's growing p~pulation.~Accordingly, despite coverage increase, significant challenges remain in terms of reaching the urbanpoor and unserved rural areas. The new Morales administration has announced that its public infrastructure investment policy will be to strengthenthe role of the state by using revenues from hydrocarbons in lieu of the private investment that accounted for over half of Bolivia's investments in transport, water and sanitation and other public services between 1993 and 2003. City context The municipality of La Paz occupies a total of 2,012 km2of which 1,832 km2 are classified as rural and 180km2as urban. UrbanL a Paz has a total population of 790,0005 inhabitants (compared with only about 3,700 inhabitants in rural areas), and is situated inside 5 major and some 200 minor drainage basins. About 35% of L a Paz's population i s classified as poor and i s concentratedon the northern, eastern and western slopes of the city where a lack of physical infrastructure compounds the risks associated with steep gradients. About 32% of the population living in these areas resides on slopes in excess of 45 degrees where frequent mud slides result in significant loss of life and property.6 2 2005 World Development Indicators 3 Namely, as a percentage of GDP, Bolivia's investment in transport, electricity, gas, waterhanitation and telecommunications has fluctuated between 3.5 and 8.5% while other South American neighbors remained under 6% and Colombia reached 7%. The public investment has represented 43% of total investment and has been directed towards roads (66%), electricity (15%) and railways (13%), while private investment has occupied the remaining 57% and has been divided between electricity (39%), telecommunications (37%) and water and sanitation (17%). 4 Easterly, William and Luis Serven, editors. 2003. The Limits of Stabilization: Infrastructure, Public Deficits, and Growth in Latin America. Co-publication of Stanford Social Sciences, an imprint of Stanford University Press and The World Bank 2001 Census data InJanuary 2006, for example, torrential rains caused severemud slides on the slopes of western La Paz. - 2 - Overall, about one quarter of L a Paz's urban population (almost 200,000 persons) are thought to live inareas at risk, with very limited access to basic services. In 2000 the Municipal Government of La Paz initiated an integrated urban upgrading program with the objective of improving these living conditions in the city's lowest- income and most risk-prone neighborhoods. Beginning with five marginal neighborhoods, the program subsequently expanded both innumbers as well as in scope, by addressing risk prevention and disaster management after a large scale landslide in 2002. Today the municipality's urban upgrading program known as Barrios de Verdud program (meaning real neighborhoods) is in its fourth of a total of seven phases that will ultimately upgrade 105 neighborhoods. The program's intervention i s based on a selection mechanism whereby neighborhoods present proposals that are evaluated according to their social and economic impact. This public competition for urban upgrading programs encourages wide-spread community participation and ensures that investments inpublic works respond to resident demand. Within the same metropolitan region, the municipality of El Alto is adjacent to La Paz. I t s current population totals 650,000, 8 1% of whotn identify themselves as indigenous of predominantly Ayniara origin. Yet it i s one of the fastest growing areas in the southern hemisphere,with an average yearly growth rate of 6.7%, unlike La Paz whose population growth is constrained b y its geography'. Given its flat topography and due to deficient land-management policies, rapid and uncontrolled urban sprawl in El Alto has been a constant over the last decades. As a result, El Alto is facing strong pressures and demands for the provision of public services, including transport services and road infrastructure. However, towering 3,962 meters above sea level, El Alto also controls the slopes and access into the capital, which i s located at 3,597 meters in a deep depression. Thus it is naturally a vital transport hub that features an international airport within its city limits (serving L a Paz), and connects via four highways with important regions of the country (La Paz, Desaguadero and Copacabana on the border with Peru, Oruro, Cochabamba and Santa Cruz and the municipality of Viacha). However, this system relies on the municipal urban road network which i s often poorly planned and developed. The municipal transport system is characterized by chaotic traffic flows and congestion in the main arteries, with pedestrians, hucksters and vehicles sharing the roads in many critical points (La Ceja for instance, which concentrates most of the economic activity of the city and is the main entry point from L a Paz). Contributing factors to this situation are: (i)inadequate infrastructure; (ii) increasing vehicle motorization; (iii) over-supply an of small capacity public vehicles: (iii) business scheme in the public transport industry a that promotes competition in the market and not for the market; (iv) lack of adequate infrastructure for non-motorized transport; (v) inadequate institutional management o f the public transport system including weak enforcement of transit laws and a lack of coordination mechanisms among different jurisdictions. InSanta Cruz, it is the sanitation sector that faces the most immediate challenges. Santa Cruz has a population of about 1.3 million, growing at an annual rate of over 6%.* '*2001Census data op Cit. - 3 - Sanitation services in Santa Cruz are provided by 10 cooperatives of which the largest i s SAGUAPAC, serving 65% of the city's area. Sewerage coverage in SAGUAPAC's service area is only ab,out 50%, giving Santa Cruz an overall level of sewerage coverage of only 32%. In addition to the immediate public health and environmental effects associated with low sewerage coverage, sewage infiltration into the city's main aquifer will result, within a few years, in irreversible damage. There i s therefore an urgent need to increase the coverage of Qanta Cruz's sewerage system to avoid the much larger investments associated with developing an entirely new water supply source for the city. The cooperative has served the city for more than twenty years and has beenrecognized as one of the best managed water and sanitation providers in Latin America. It i s runby a general assembly that names the top directors and their regulations grant the supervision council a veto right over the management council, which contributes to its stability. The cooperative has already received two Bank credits and technical assistance to train its staff, both of which have been used very effectively. Although its achievements have been impressive, its long term sustainability has beenhindered by the city's constant growth as well as its need to protect the aquifer by reducing the infiltration of raw sewage from housing units not connected to the sewerage system. 2. Rationale for Bank involvement In Bolivia, the Bank has experience supporting service delivery and infrastructure projects at the local level as well as through central government institutions. The urban focus of the proposed project also lends to the rationale for Bank involvement, as the Bank brings operational experience in urban development from Latin America and elsewhere, especially urban upgrading in poor neighborhoods, urban transport and sanitation. This experience allows the Bank to offer a flexible, comprehensive and articulated menu of investments and technical assistance at the city level. Benefits to the country will therefore derive from the Bank's comparative advantage in these sectors as well as the finance provided. Since the early 1990s the Latin American region of the World Bank has been actively pursuing projects of integrated upgrading of low-income human settlements, urban transport and sanitation. The upgrading projects have typically focused on the city level, taking a geographic approach to poverty targeting, and emphasizing the physical and social improvement of slum conditions. The Bank's city-based urbanupgrading projects take a macro perspective to effectively integrate often isolated, low-income communities into the overall fabric of the city. Regarding urbantransport both the Bank's lending and research programs have played a key role in the implementation of innovative solutions in client countries to deal with common urbantransport issues experiencedby most Latin American cities, with notable experiences in Bogoti, Lima and Santiago de Chile. Bank involvement in this project would allow bringing worldwide knowledge and best practices to: (i)structure transport systems that will provide direct benefits to the community and especially the poor; (ii) develop the institutional capacity of urban transport authorities; (iii)enhance the - 4 - regulatory frameworks to improve the quality of services; and (iv) strengthen the integration and coordination between transport, land-use and environmental policies, among others. Lastly, in the area of sanitation, the Bank i s one of the financial institutions with the longest lending history in Latin America. After a decrease in the late 199Os,lending has tripled over the past three years. In the Latin American region, assistance is being provided to 13 governments in the form of 34 projects (18 of which are underway), amounting to US$3 billion. The aim of these projects has been to improve the quality of life, health and environmental conditions through the provision of sustainable services through partnerships with governments, the private sector, and community organizations. 3. Higher level objectives to which the project contributes Between 2000 and 2005, Bolivia went through a period of extreme political instability, with riots, street blockades, strikes and massive mobilizations. In the last five years, Bolivia was ruled by five presidents, two of which were forced to resign due to social unrest. Regional differences between the poor highlands and the wealthier lowlands around Santa Cruz became more intense to the point that there were serious concerns that civil strife or a disintegration of the country could occur. As a result of this unrest, the composition of the political arena has been dramatically altered: the influence of traditional parties has significantly diminished and there are new actors, mainly from social movements. They are expected, by their constituents, to produce radical change, particularly improvements in inclusive growth, employment and the satisfaction of basic needs. Therefore, the government has a unique window of opportunity to build consensus around its national development plan. For the first time in over forty years, Bolivia has a government elected with a clear majority (54 percent of voters) and with control of Congress, meaning it will have the ability to move forward with reforms to improve growth, social outcomes, and poverty reduction. The proposed program to support Bolivia's development will be a two-year Interim Strategy Note (ISN) extending into 2008. The purpose of the I S N is to provide continued Bank support to Bolivia in key strategic areas as the new government consults on its recently launched development plan, finalizes its poverty reduction strategy and gets the Constitutional Assembly underway. Toward the end of this I S N period, the Bank expects to have the necessary framework required to design a CAS that will support the long term development objectives set by the Constituent Assembly. This ISN i s the product of a close partnership between the Bank and the Ministry of Planning to design short-term support to the country's ongoing developmental efforts in key sectors through lending, analytical work and technical assistance. Bolivia will also be a focus country for the World Bank Institute for the next two years. The ISN indicates that the Bank's main priorities in supporting the government's development plan will be: (i) fostering jobs-generating growth by aiming to develop a stable macroeconomic and financial framework, establish business-friendly practices and expand infrastructure and make it more efficient; (ii) giving better service to the poor by - 5 - delivering higher quality education and health, more transparent and accountable institutions and decentralization in service delivery; (iii) inclusion and opportunity in the rural areas by focusing on indigenous leadership, environmentally sustainable use of Bolivia's natural resource wealth and new public intervention policies for rural areas. The proposed project will be the Bank's first in Bolivia to apply the updated national priorities inurbanareas. As such, it will focus its actions on improving service provision to the urban poor. This challenge will be tackled by investments to expand urban infrastructure in the poorest areas and support to municipalities to improve service delivery. By having two cities and an important sanitation cooperative as well as three different infrastructure sub-sectors within the same project, it will be possible to ensure that urban growth policies are developed and tested. These policies could later be incorporated into a much neededlong-term national urbanstrategy. Furthermore, by lending to and working directly with municipal institutions, the project will support Bolivia's new stage of decentralization. Since the beginning of the decade the degree of success of the country's poverty reduction strategy has been determinedby the extent of municipalities' sound investments for poverty reduction. Moreover, the current mayors took office in January 2005 for a period of 5 years which gives the project the best chances of a successful and timely implementation. This project will focus on L a Paz, the country's capital; the adjacent city of El Alto, one of the fastest growing in the hemisphere; and Santa Cruz, Bolivia's largest city and commercial and industrial hub of the eastern lowlands, also experiencing rapid population and economic growth. It i s important to note that inthe case of Santa Cruz, the project will work with the city's largest sanitation cooperative, SAGUAPAC. When combined they represent Bolivia's largest and centrally important urban areas. The choice of cities i s driven namely by poverty-reduction, growth, participation and stability: (i) Poverty: addressing the high incidence of urban poverty in Bolivia's major urban centers by enhancing this population's access to basic urban services and thus achieving high impact; (ii) Growth: working with the country's fast growing urban centers, as the country's engines of growth; (iii)Participation: engaging with high-profile community participation initiatives such as L a Paz-El Alto's highly mobilized low-income, indigenous population as well as the Santa Cruz sanitation cooperative's thousands of community members; (iv) Stability: shifting attention towards municipal levels of governance in order to generate the stability the project needs to become "transition-proof' and that the newly elected government requires to respond to the electorate's exceedingly high expectations. B. PROJECTDESCRIPTION 1. Lendinginstrument The proposed lending instrument is a Specific Investment Credit, given that it is the first time that the World Bank will support urban infrastructure development in a decentralized way in Bolivia and that the prospects for country stability are still - 6 - uncertain. Nevertheless the three participating agencies are keen to continue a long-term relationship with the Bank and will most likely request repeater projects inthe future. 2. [IfApplicable] Programobjective and Phases Not applicable 3. ProjectDevelopmentObjective and key performanceindicators The Project Development Objective is to improve the access to basic services to the urban poor in Bolivia's major cities through targeted infrastructure investments and the provision of technical assistance to municipalities in the planning, expansion and sustainability o f urban service delivery. Specific Project Objectives are: i)to achieve sustainable improvements in the urban infrastructure and living standards in the poorest neighborhoods of L a Paz through comprehensive urban upgrading and neighborhood participation in project implementation; ii)to enhance mobility in the city o f El Alto, removing infrastructure bottlenecks and introducing measures to modernize public transport services and urban transport management; iii)to expand sewerage coverage in poor areas of Santa Cruz de la Sierra. Although the project covers three separate urban areas and three different infrastructure sub-sectors there is a common framework to the intervention. First, as reflected in the project's objectives, Bolivia's major cities are committed to developing sustainable urban growth policies. The current project will therefore be particularly instrumental in building a long-term relationship between the Bank and the municipal governments of these cities. Second, the infrastructure investments in the three cities have been targeted by sector and geographical area according to these cities' most vital needs, given that it i s impossible to intervene in every sector due to limited resources. Third, pressing actions will be complemented by long-term planning efforts rooted in technical assistance to municipalities as well as incentives for community participation. Fourth, in order to foster enabling conditions for a sustained and transparent process that will build on this initial specific investment credit, cost recovery and monitoring and evaluation will be emphasized. Annex 3 contains greater details on input, output and impact indicators for the various project investments. Amongst these performance indicators the following are most important: a Property values inparticipatingneighborhoods inL a Paz have increased by at least 30% as a result of improved access to basic services. Urbanmobility, measured through: average traffic speed, traffic flows inthe new paved roads and bicycle use, has increased inEl Alto. a Coverage of sewerage networks inSanta Cruz has increased by 3%, and capacity of wastewater treatment plants increased by 20% - 7 - 0 The average value of Nitrate (NO$ inwells 5, 14, 15, 13, PI-1, 20 of Santa Cruz will not surpass 8 mg/liter 4. Project components Component 1: Urban upgrading in La Paz (US$10.4 million, of which US$lO.O million IDA credit and US$0.4 million inlocal counterpart financing) 0 Sub-component 1A: Preparation (US$0.49 million of which US$0.47 million IDA credit). Sub-component activities include: (a) sub-project designs; (b) preparatory studies; (c) development of a communication strategy and operational manual; and (d) basic eq~ipment.~ 0 Sub-component 1B: Strengthening Community Organization and Development (US$0.96 million of which US$0.83 million IDA credit). Sub-component activities include (a) community participation during the entire project cycle, including the key operations of sub-project selection, maintenance and operation; (b) regularization of land tenure rights for area residents; (c) contingency planning for responding to disasters; (d) eligible resettlement costslo;and (e) supervision and audits of community development activities. 0 Sub-component 1C: Physical Infrastructure (US$8.95 million of which US$8.7 million IDA credit). The sub-component would finance a package of demand-driven local investments at the neighborhood level, comprising (a) basic access, i.e. primarily low-cost road paving, sidewalks, and public transport stops; (b) street lighting; (c) improvements to existing drainage infrastructure, new drainage networks, street drains; (d) risk mitigation works; (e) installation of sanitation facilities; (0 environmental protection through green area creation, reforestation and solid waste collection and disposal; (g) community recreation facilities including community services and childcare; and (h) supervision and audits of physical infrastructure activities. Retroactive financing might be used to start sub-projects, including physical infrastructure and community organization, inselected neighborhoods. Component 2: Urban transport in El Alto (US$ 10 million, of which US$10 million IDA credit ) 0 Sub-component 2A: Trunk Infrastructure Development (US$ 4.60 million including designs and supervision costs). The sub-component would finance infrastructure investments for trunk roads and associated drainage works in El Alto to remove bottlenecks and enhance the links between the southern and northern parts of the city. Investments would be directed towards the completion of the city's second ring road through: (a) the construction of a 3.7 km long trunk road (Avenida Litoral); (b) the 9Most of this sub-component is financed with a Project Preparation Facility (PPF). loConsultant services related to legal services and general technical assistanceto affected families. - 8 - construction of a 0.76 km long trunk road (Avenida Costanera), including the construction of about 1.2 km of a canal along El Alto's main river that runs parallel to this road (Rio Seco), and (c) the construction of a 2-lane bridge over the Rio Seco at the intersection of Av. Litoral and Av. Costanera. The road investments would include typical ancillary works, such as improved road drainage and street lighting. These interventions would improve the communication between the mainradial avenues in the city, (Av. 6 de Marzo towards Oruro, Av. Ladislao Cabrera towards Viacha, and Av. Juan Pablo 11) and provide an improved link for heavy goods traffic between the outer parts of El Alto and long-distance movements between the Bolivian hinterland and Peru. Inaddition, these improvements would promote the development of new economic and productive zones and reduce the concentration of activities in the congested "La Ceja" zone. Retroactive financing might be usedto start works inthis sub-component. 0 Sub-component 2B: Modernization of Public Transport Services and Urban Transport Management (US$ 4.14 million). This sub-component would finance the design and implementation of a series of initiatives to enhance public transport services in the city and increase efficiency with regards to urban transport management. Said initiatives include: (i). Modernization of the Public Transport System (US$ 2.23 million including supervision costs). This initiative includes the paving of dirt or gravel streets that currently carry high volumes of public transport vehicles. It would also include capacity building and technical assistance activities to support the preparation of a public transport modernization strategy for the municipality establishing the institutional, regulatory, social and technical bases for the implementation of a high-capacity transit system in the metropolitan area of L a Paz-E1 Alto (Bus Rapid Transit-BRT- system). Several initiatives are being initially financed through a Project Preparation Facility (PPF) including: (a) a six-month study to assess the needs of the city (street improvements, reorganization of routes, institutional measures, etc) and future steps required to transform and reorganize the current system of public transport with an aim to develop a transport strategy based on mass transit systems and (b) a series of technical assistance activities to initiate a process of consultations with public transport operators and community leaders. (ii).Non-Motorized Transport (US$ 1.4millionincluding designsandsupervision of works). A strategy is being developed, with funding from the Project PreparationFacility, to establish a policy and investment strategy for improving the conditions for pedestrian and bicycle movement in El Alto. Aside from ensuring the construction of paved sidewalks along Avenida Litoral (which has not been common practice in new road projects in El Alto until now), this sub- component would finance strategically located bikeways and improve sidewalk conditions inareas with many pedestrians. - 9 - (iii).OtherRoadNetworkImprovements(US$0.51million). These improvements include: (a) the definition and initial implementation of a traffic safety and citizen's education strategy, and (b) the elaboration o f traffic management (including traffic signals) standards and implementation of priority traffic engineering measures. 0 Sub-component 2C: Capacity-Building and Institutional Strengthening; (US$ 0.48 million). This sub-component would strengthen the institutional capacity inEl Alto for urban development and transport management (in areas such as planning, budget execution, project evaluation, design and supervision of works, maintenance of assets, environmental management, traffic engineering, monitoring and administration of public transportation services, etc). It would also include a long overdue re-engineering of the internal procedures and urban transport regulations of the municipality. 0 Sub-component 2D: Proiect Implementation (US$ 0.78 million). This sub- component would finance the contracting of a Project Director, a Civil Engineer, an Economist and a Traffic Engineer, as well as support personnel, equipment and training to provide support to the Municipality for the implementation of the project. Through this component, the project audits are to be financed. All these will be contracted as part of project preparation and will continue working within the municipal offices throughout the duration of the project.'' Component3: Sanitationin Santa Cruz (US$ 10.0 million, of which US$lO.O million IDA credit) Sewerage and Wastewater Treatment The component would finance: (i)the construction of secondary sewerage networks in neighborhoods UV-106 (partially), UV-114, UV- 115, UV-l18A, UV-119, and UV-140 of Santa Cruz, which are of the poorest areas located between Anillos 4 and 5, thereby expanding service to 37,500 additional residents of the city; (ii)the construction of main collectors and a sewage pumping station in the neighborhoods to which the service is being extended, and interceptors which would connect these areas to the existing main conveyance systems which will transport the wastewater to the existing wastewater treatment plants; (iii) execution o f works for increasing the capacity of two wastewater treatment plants of Santa Cruz (Plant North 2 and Plant East) so as to enable them to process the increased wastewater flow which would reach them in the future; (iv) consulting services for project appraisal, to be financed retroactively; and (v) training in technical aspects of sewerage and waste water treatment. Retroactive financing might also be used to finance works and goods related to sub-components (i), (ii)and (iii). Attempts will be made to explore carbon finance opportunities for the project. If these are successful, the systems will include gas collection pipes aimed at collecting the Methane gas produced in the anaerobic lagoons and gas burners for flaring of the collected gas. The carbon finance opportunities were key indetermining the technology for gas collection and flaring. PPFfunds are assigned for this purpose. - 10- 5. Lessonslearnedand reflectedin the project design: Urban Upgrading (i) Community participation and cost recovery. Shared decision-making processes promoted b y the Barrios de Verdud urban upgrading program (BdV) have been very effective in ensuring allocation efficiency, community ownership of program deliverables, creation of local knowledge, better cost recovery, and ultimately improved operation and maintenance over time. Likewise, in this initiative and others, NGOs and CBOs have been valuable intermediaries for the community, assisting in articulating needs and preferences, sorting through tradeoffs and promoting cost recovery. Specifically, the program has also learned to promote participation more effectively and extensively by creating incentives basedon resident preferences, for instance, postponing unrelated community activities during the project and eliminating narrowly defined requirements or "minimumcoverage" practices. (ii) Land titling. Improving titling practices by reducing delays (as per the presentation of documents) and increasing the coverage of settlers has also proven effective in terms of promoting participation in the BdV program. Furthermore, the Bank's ongoing experience in urban upgrading projects in other countries in the Latin American region in the last decades has shown that granting full property rights to informal land occupants to the sites that they currently occupy generates the following six beneficial outcomes: (a) the value of the property rises and contributes to increasing the value of the assets of the poor; (b) house improvements follow with security of tenure; (c) the liquidity of the property rises, enabling easier buying and selling transactions, and therefore empowered command of the land market; (d) access to bank loans becomes possible due to use of property as collateral; (e) the possibility of passing it on the next generation as inheritance; ( f )increased citizenship rights and other qualitative benefits of formality. (iii) Comprehensiveupgrading. Thepresentcomponent designwasbasedonthe BdV's experience regarding the advantages of comprehensive neighborhood improvement in contrast with sector-specific investments: (a) comprehensive, cross- sectoral coverage of service deficiencies in given geographic areas; (b) reaching all residents within target neighborhoods; (c) creation of community ownership (d) on-the- spot coordination and execution of investments across sectors (re: installation of pipes, road works, drainage channels, etc.) which reduce costs and improve efficiency; and (e) high-visibility improvements across a targeted area. In the present project the focus on neighborhood improvement will be implemented in component 1, to maximize the advantages of a comprehensive geographic approach. (iv) Quality Control. BdV has also incorporated valuable lessons from its previous work with other partners, particularly from a previous stage of the same program with - 11- support from the National Fund for Regional Development (FNDR)12. The technical team highlighted that both the contracting and monitoring process had been key to ensuring the quality of the program inboth its social and physical dimensions. First,they suggested that construction companies need to be selected by quality as well as cost criteria. Likewise, respecting labor laws in subcontracting short-term labor from the neighborhoods, inregards to healthy work environments, schedules and salary ranges has been especially important. Second, they have found that monitoring indicators have benefited the program by enhancing beneficiary participation in the monitoring process as well as by reducing delays through the installment o f intermediate controls in the enforcement of the construction schedule. Urban Transport (i) Impactonqualityoflife. RecentBankexperiencehasshownthaturbantransport projects are a trigger for a more integrated improvement process in cities, when they are approached as an opportunity for creating a higher quality urban environment. Bogota's Bus Rapid Transit System (Transmilenio) for instance, is a clear example of urban modernization and development evolving around an urban transport project. This comprehensive approach has addressed infrastructure bottlenecks and dealt with public transport services, generating high impact and substantial benefits to the population. Prioritizing public over private transport has proven to be a successful strategy, when high political involvement and leadership is involved and the technical capacity to design, plan, control and regulate such system is in place. Reliable sources of funds are also a key element to ensure the sustainability of these types of long-term urban transport reforms. (ii)Non-motorized transport. Sector experience has shown that the following measures promote the use of non-motorized alternatives: (a) expansion of adequate sidewalks, footpaths, and other pedestrian facilities; (b) clear provision for the rights as well as responsibilities of pedestrians and bicyclists in traffic regulations; (c) explicit formulation of local plans for non-motorized transport as part of the planning procedures of municipal authorities; (d) provision of separate infrastructure where appropriate (e.g. safe movement and secure parking of vehicles); (e) incorporation of bicycle and pedestrian standards in new road infrastructure design; (0 incorporation of responsibilities to provide for non-motorized transport in road fund statutes and procedures; and (g) development of small-scale credit mechanisms to finance bicycles. Sanitation (i) Costrecovery. Experiencehasshownthattariffsthatrecoverfullaveragecosts are critical for the provision of sanitation services as they eliminate the need for operating subsidies from general government revenue and facilitate service expansion. Nevertheless, this process should allow flexibility to adjust tariff levels for poor ''FNDRi s an agency established in 1988 with a legal identity separate from that of the central government. Its main objectives are to promote investment projects in infrastructure and to channel local and external funds for these projects. - 12- ' households, depending on their ability to pay.13 Experience has also shown that capital investments of utilities, especially for wastewater treatment investments, have required government subsidies in both developed countries (Le. USA, EU and Japan) and developing countries. SAGUAPAC i s fully recovering O&M costs for water and sanitation, and also part of its investment requirement, however it cannot generate all sufficient income from tariffs to account for all its investment costs. It has never received any investment subsidy, and the only support it receives is goveimment credit guarantees, and even those are insufficient. (ii) Efficient management. It has been shown that efficient and professional management of water and sanitation utilities is vital in achieving financial sustainability, customer responsiveness and optimal use o f resources. It i s standard practice in the sector to gauge effective management through operational efficiency. Operational efficiency can be monitored by ratios such as staff per 1,000 connections. The staff ratios achieved by the top 25 percent of developing country utilities suggest that a target of 5 or fewer staff per 1,000 connections i s achievable. SAGUAPAC i s one of the most efficient utilities in Latin America, as manifested by a productivity of 3.5 employees/ 1000 connections. (iii) CustomerService. Bankexperience hasshownthat customer servicehasbeen enhanced by means of the easy access by the customers to service centers located in different parts of the city and the prompt attention to customers' inquiries and complaints. Hiring of private firms for billing and collection, and operation and maintenance of sanitation networks has been effective. Furthermore, in some cases establishing a sophisticated planning department and installing modern management information systems with the latest software has helped develop a transparent and accountable corporate culture. SAGUAPAC has a good planning department and modem information systems and provides excellent customer service. (iv) Expansion of services to poor areas. While the situation varies from city to city, the market for sanitation services exhibits the following characteristics: (a) Poor provider performance hurts the poor more thnn others. Poor maintenance of sanitation systems affects the poor disproportionately as they do not have the means to pay for alternative systems. (b) Thepoor ore willing to pay for sanitotion services. Despite the perception that the poor cannot pay for sanitation, there is increasing evidence that the poor do pay, and often pay more than the better-off consumers: for instance paying for sanitation from small-scale providers at a higher cost or paying fees for access to illegal connections to informal developers; (c) Ccish flow is a11 issue in buying sonitation services. Poor households on subsistence incomes find it difficult to pay large, infrequent bills. Likewise, high, one-time connection fees can be a deterrent to the poor who wish to connect to the network. (d) Land tenure is a constrnint to getting good senlices. The poor often reside in unplanned or informal areas, and they may lack the legal status to request, or qualify for, direct access to formal services under existing legal and l3"New Designs for Water and Sanitation Transactions: Making Private Sector Participation Work for the Poor", Water and Sanitation program-PPIAF, 2000. - 13 - regulatory frameworks. Therefore, providingbetter services to improve affordability and quality of service to the consumer confirms the status of the poor as legitimate customers.l4 6. Alternatives considered and reason for rejection Institutional arrangements This project has beendesignedto lenddirectly to two municipalities and one cooperative. Another option would have been to channel resources through the National Fund for Regional Development (FNDR). The reasons for rejecting this option have been both to support the country's national priority of regional and municipal autonomy as well as to increasethe efficiency and accountability of the implementation process. The first reason echoes the project's development objective which entails focusing the Bank's lending almost directly to municipal governments in Bolivia in a consistent manner as a way to enable a shift towards an effective decentralization model. On the other hand cities as large as L a Paz and El Alto and a cooperative like SAGUAPAC are entities that manage sufficiently large amounts of assets and could, on the basis of a solid financial management, access capital markets. However, there i s still an important market for FNDR inthe dozens of intermediate municipalities inBolivia. Lending instrument An Adaptable Program Credit was considered as a lending instrument but was discarded given the institutional transition Bolivia is likely to undergo over the next few years which makes the ex-ante definition of a long-term program more difficult. Instead a Specific Investment Credit has been pursued in order to develop solid, productive relationships with the cities during the next few years. Hopefully the quality and success of these interventions will generate repeater projects that will consolidate a long-term commitment. Coordination between components at the national level The Ministry of Planning rejected the idea of creating a coordination unit for the three components at the national level. This means that the Vice-Ministry of Public Investment and External Financing (VPFE) will be processing all the Bank-related procedures related to the three implementing agencies, while the Bank team will superviseeach component individually.l5 l4Ibid, pgs 2-3. Although VIPFE has been moved from the Ministry o f Finance to the new Ministry o f Planning, it will continue to perform the same duties regarding external financing. - 14- C. IMPLEMENTATION 1. Partnershiparrangements(if applicable) The project has several strategic partners whose contribution will complement the Bank's core investment: (i) i s supporting Phase 1 of the Barrios de Verdud program and IDB has provided valuable information for the Bank's project design; (ii)Cities Alliance would be contributing towards developing a technical, institutional and financial strategy for Barrios de Verdud.16 The strategy would aim to address both the stock of existing settlements and to develop landmanagementpolicies to increase the supply of affordable serviced land and thus help to prevent the formation of new informal settlements; (iii) The Andean Promotion Corporation (CAF) has provided to SAGUAPAC two loans each of US$ 5 million for expansion of secondary and primary sewerage networks, the first of which i s about to be completed and the second one of which i s under implementation; (iv) The EU i s financing the construction of sewerage networks in poor areas under the concession of other sanitation cooperatives in Santa Cruz; and (v) The Swedish International Development Cooperation Agency (SIDA) is interested in funding sanitation works in the poorest neighborhoods in Santa Cruz. They are currently defining, together with their partners -SAGUAPAC, World Bank and other sanitation cooperatives in Santa Cruz- whether to fund works within SAGUAPAC's concession area or in areas covered by the other cooperatives, with SAGUAPAC's support. 2. Institutionaland implementationarrangements The Republic of Bolivia, through VIPFE within the Ministry of Planning, will be the recipient of the proposed IDA Credit, which in turn will transfer credit proceeds to the Municipalities of La Paz, El Alto and SAGUAPAC, through Subsidiary Credit Agreements (SCAs). Each individual SCA, will establish the terms and conditions under which proceeds are going to be transferred to each jurisdiction and the distribution of responsibilities and functions of Municipal entities and SAGUAPAC to manage the transferred resources and execute the components. The transfer of funds will be made under the same IDA conditions. Each implementing agency will manage a special account. There is a law for water and sanitary drainage service providers (Law 2649 of 2004) that allows the transfer of public resources to public or private system operators, allowing for transfer of public funds directly to SAGUAPAC.I7Subsidiary agreements between the participating agencies and the central government will be put inplace. The Ministry of Planning through the Vice-Ministry of Public Investment and External Financing (VIPFE) will be responsible for acting as a permanent link between the Bank and the Municipalities of L a Paz and El Alto and SAGUAPAC. VIPFE will be incharge '' 16The Cities Alliance proposal is complete but requires an additional partner. GTZ has expressed reliminary interest. Law 2649, Article 1, (April 8, 2004) states that EPSAs may receive public credit and benefit directly from external funding for investment infrastructure development. - 15- of requesting, on behalf of the executing agencies, project extensions, amendments, changes indisbursement categories, and other operational processes, to the World Bank. Each agency has assigned its own staff to carry out the implementation of its component, which is in line with Bank guidelines (refer to Annex 6 for more details). Inthe case of L a Paz, the longstanding unit of the Barrios de Verdad program i s staffed by the municipal government that assigns a program coordinator, three managers in charge of supervising existing projects, overseeing the preparation of new projects, and ensuring that social accompaniment takes place throughout project preparation and implementation, respectively. A general secretariat unit i s in charge of legal aspects, monitoring and evaluation, administration and finances, and communication. Inthe case of El Alto, municipal staff from the Urban Development and Environment Department (Ofcialia Mayor de Desarrollo Urbano y Medio Ambiente, OMDUMA) has been assigned to the project. Four consultants (civil engineer, architect, economist and administrator) will be financed through a project preparation facility (PPF) to complete component preparation activities. Later on, a Project Coordinating and Advisory Group (PCAG), to be financed with credit proceeds, will support OMDUMA in the coordination and management of project activities. The PCAG will be headed by a Project Director who will report directly to the Oficial Mayor. The Project Director will be assistedby professional staff (a Civil Engineer, an Economist and a Traffic Engineer) and other administrative staff. SAGUAPAC in Santa Cruz has designated its Planning and Systems Manager as the Project Coordinator. Financial management and procurement arrangements are detailed inAnnexes 7 and 8 respectively. 3. Monitoringand evaluation of outcomes/results A results framework and monitoring strategy is included in Annex 3. This framework was developed in close collaboration with counterparts and support from Bank's monitoring and evaluation experts. Each implementing agency will submit monitoring indicators to the Bank twice a year. The primary sources of data include consultant reports, minutes of community meetings, financial reports, and surveys. In addition, an impact evaluation for the L a Paz component will be implemented using a Norwegian Trust Fund and a grant from Cities Alliance. The impact evaluation comprises two studies. The first i s a simple comparison of gains and losses within two of the three macrodistritos (larger groups of neighborhoods) targeted by the program. The baseline of this evaluation will be combined with the socio-economic assessment commissioned by the municipality as part of project preparation. The second will be a randomized evaluation of one of the program's key components: titling. This complementary design will address the substantial difficulties that evaluating the program as a whole poses by providing reliable estimates of the causal impact of one of the program's components. These studies are intended to produce results that could help the municipality of L a Paz in designing subsequent phases of Barrios de Verdad, which it definitely envisions. - 16- 4. Sustainability There is clear evidence of project sustainability. First, the municipal governments of L a Paz and El Alto have expressed their strong political support through their request for a PPF. This was supported by the national government, and a PPF legal agreement was countersigned by the new government in January 2006. Second, the project was designed on the basis o f existing expertise and/or experience with the infrastructure sectors addressed. Intwo out of the three cities where the project will be implemented it will work towards the expansion of services of previously existing endeavors, namely Barrios de Verdud in L a Paz and SAGUAPAC in Santa Cruz. Third, the project components are designed in such a way as to generate cost recovery which will not only create profitable investments but also ensure their sustainability and thus lasting impact for project beneficiaries. 5. Critical risksand possible controversialaspects The project team has identified six potential risks to the effectiveness and sustainability of the operation as well as feasible mitigation options given each context. Risk Mitigation RiskRating with Mitigation Overall Macroeconomic and This risk is considered high. However, although High Political Risk there has been significant upheaval at the national A new national government has level, the municipal governments in both La Paz and begun its term this year with El Alto were re-elected in 2004 with solid political high expectations for change mandates. In Santa Cruz the project would be both internally and implemented by the largest sanitation cooperative internationally. The (SAGUAPAC) with no dependence on the municipal announcement of profound government. During preparation, the team has political and economic changes, coordinated project design carefully with political including a Constitutional actors at both national and municipal levels and with Assembly, will involve high beneficiary populations. degrees of uncertainty. Countrv Financial Risk In spite of having three implementing agencies, Substantial Bolivia's country public project design is straightforward. Activities are financial management (PFM) clearly defined and to the extent possible, existing risk rating is substantial18.At structures and capacities are being used. When the sub-national level, there are needed, special technical assistance and training will still important shortcomings be provided with the PPF and/or credit proceeds, mainly related to the lack of both accompanied by close supervision. capacity, both to design and implement adequatePFM In the framework of the existing structures, and in systems, and to understand and view of the identified risks and weaknesses, specific comply with statutory FM arrangements have been designed for each requirements. Identified entity, keeping in mind two principles, simplicity weaknesses affect, budget and adequacy to ensure economic and efficient use management (execution and of funds. reporting), treasury arrears and public debt, accounting and 2004 Country Financial Accountability Assessment (CFAA), January, 2005 - 17- financial reporting, internal control and internal audit and the lack of effective oversight. Procurement Risk The risk assessment for SAGUAPAC is moderate, Moderate The procurement capacity while it is high for the GMLP and GMEA. assessment carried out for GMLP, GMEA, and The procurement activities will be carried out within SAGUAPAC concluded that the the framework of the existing structures of the three risk assessmentrating for the entities. However, in view of the identified risks first two is high while moderate and weaknesses, specific actions have been agreed for the latter. for each entity. Financial Risk in La Paz The municipality has committed to the following Moderate The Municipality of La Paz has conditions: (i) increase tax revenue to achieve 10% limited capacity to take on more of total revenue; (ii)gradual decrease of current debt until at least the year 2008. expenditure by at least 10% for the 2005-2010 This is due to debt service period; (iii) suspension o f any other new short-term payments in the Municipality of operation involving municipal debt; and (iv) gradual La Paz representing more than yet effective decrease of floating debt to less than half of current income for the 15% of current income by 2010. This will allow La most recent fiscal period as well Paz to take on an additional debt of up to $21.2 as high costs that La Paz faces million. when rolling over short term Given that the IDA credit will have a 10-year grace debt. period and a 35-year maturity and that La Paz's financial difficulties are related to short-term debt, the VTCP has issued a Public Credit Operation Initiation Registry (RIOCP), which is, in practical terms. an authorization to borrow. Imulementation Cauacitv in El The Bank has approved a Project Preparation High Alto. Facility (PPF) that includes technical training for the The municipality does not have municipal unit in El Alto and hiring of specialized its own facilities, but rather consultants to support the transport unit in El Alto. carries out its functions in During project implementation support to this unit borrowed community buildings. will continue through sub-component 2D. This lack of appropriate municipal offices and need of adequate computer equipment creates obstacles in fulfilling responsibilities. Moreover, the city government is greatly understaffed and lacks training. Comulexitv in Bank If at least two out of three components are Moderate Suuervision unsatisfactory, the project will be considered Bank supervision is complex in unsatisfactory. Otherwise the Bank team will use this project since it has three component ratings to signal problems. independent components without a central coordination unit. There is uncertainty as to the best measures to take if one o f the components lags behind. Overall Risk Rating High - 18- 6. Credit conditionsandcovenants There are no significant, non-standard conditions for Board presentation. Credit effectiveness conditions are: Subsidiary Agreements have been executed on behalf of the Recipient and the Municipality o f L a Paz, the Municipality of El Alto, and SAGUAPAC. The Recipient, the Municipality of L a Paz, Municipality of El Alto, and SAGUAPAC have adopted the operational manual on terms and in scope acceptable to IDA. D. APPRAISAL SUMMARY 1. Economicand financialanalyses Economic A complete cost-benefit analysis was conducted to determine the economic feasibility of the project. Since components are independent, in different sub-sectors and different cities, three different analyses were performed and there was no attempt to combine them. Based on these analyses, all three components are deemed economically sound. This section presents the results of these analyses. More details are included inAnnex 9 and the consultant reports that are on file. Evaluation of the L a Paz component The benefits of the urban upgrading intervention were calculated as the sum of the increase in property values and savings incurred by the Municipality by avoiding emergency operations. The increase in property values was calculated using a hedonic price methodology. The other benefits were calculated using data from the Municipality of L a Paz and estimates from the consultants. The costs of investment ( U S 9 million) and annual operation and maintenance (US$63,459) were itemized in order to apply conversion factors to eliminate distortions in market prices such as subsidies and taxes. The calculated economic costs were then converted into annual flows. The resulting economic indicators are: - Internal rate of return: 20.0% - Net present value: U S$794,442 Evaluation of the El Alto component The evaluation of the El Alto component only comprises its first sub-component: trunk infrastructure development. The other sub-components, modernization of public transport, capacity building and institutional strengthening, and project implementation are mostly technical assistance, training and consultancies that have not been yet defined in detail and therefore cannot be evaluated at this time. The benefits of the trunk infrastructure construction are divided in seven groups: (i) savings in gasoline for local car traffic; (ii)savings in gasoline for light traffic in transit; (iii) savings in gasoline for - 19- heavy traffic intransit; (iv) time savings for local users; (v) time savings for transit users; (vi) savings incurred b y avoiding emergency operations inthe Canal Seco area; and (vii) increase in the potential for residential development in adjacent areas. The calculations are based on traffic studies, data from the Municipality of ElAlto, and estimations by the consultants. The costs are investment ($4 million) and annual operation and maintenance (US$371,384). These costs were itemized in order to apply conversion factors to eliminate distortions in market prices such as subsidies and taxes. The evaluation statistics are: - Internal rate of return 16.1% - Net present value US$1 million Evaluation of the SAGUAPAC component In order to carry out the economic evaluation of this component the investments were divided in three groups (i)new sanitation connections; (ii)expansion of the primary sewerage network; and (iii) improvement in the capacity to treat wastewater. Each group of investments was treated separately in terms of benefits and costs. Benefits for item (i) were estimated using the hedonic price methodology. The economic costs were calculated as market prices but using conversion factors to adjust for distortions such as taxes and subsidies. Adding the benefit flows and the cost flows of the four items presented below, the economic indicators for the entire component are: - Internal rate of return: 98.4% - Net present value: US$48.8 million Capacity to Borrow In terms of financial analyses of the municipal institutions involved, a debt and debt sustainability evaluation was conducted for each of the institutions 4.e. the municipal government of L a Paz, the municipal government of El Alto and SAGUAPAC. The debt service capacity conclusions will thus be discussed by agency. The evaluation follows a standard methodology, and the data used for all three cases was provided by the database from the state General Accounting Unit within the Ministry of Finance as well as financial data from each agency. In spite of considerable debt stocks of $58.04 million inLa Paz, $25 million inEl Alto, and $35 million in SAGUAPAC, the entities under review all generated a positive primary balance for the fiscal year ended 2004, meaning that their operating savings are currently sufficient to cover debt service with a reasonable margin o f safety. Qualitative aspects such as the schedule of debt service payments, (quantity of short vs. long term debt) the type of the debt, (fixed rate vs. floating) and the nature of projections of future savings from operations will determine whether or not these entities are in a position to take on more debt. Although all entities under review are similar in that a majority of their debt is owed to the central government, and a great deal of revenues are due to intra-governmenttransfers, the debt sustainability profile o f each entity i s quite different. - 20 - Inthe case of the Municipality of La Paz, debt service paymentsrepresented more than half of current income for the most recent fiscal period. In addition, L a Paz has faced high costs in rolling over short term debt. The result of these factors translates into limited capacity to take on more debt. Nevertheless, L a Paz i s likely to meet the conditions of increasing tax revenue, decreasing current expenditure, reducing floating debt and suspending new short term debt. Under this scenario La Paz could borrow up to $21 million. In the case of El Alto, short term debt is relatively high at 9 percent of total debt, but given the fiscal surplus of $6 million generated during the last fiscal period and the healthy portion of current to total liabilities. El Alto is deemed capable of taking on $28 and $30 million, respectively, innew debt given neutral and optimistic scenarios. SAGUAPAC is the only entity under review that would maintain a small primary surplus even under a pessimistic scenario of future operations. With short term debt totaling only 4 percent of the total stock of debt and with the most recent fiscal exercises showing reduced operating costs and increasing revenues, neutral and optimistic projections yield debt carrying capacity of $11million and $26.8 million respectively. The Vice-ministry of Treasury and Public Credit (VTCP) is the entity, within the Ministry of Finance, that authorizes new municipal credit operations, through a document called Public Credit Operation Initiation Registry (RIOCP). Municipalities must submit the general balance, executed budget, and financial audit for the year 2005, the budget for 2006 and estimated disbursementschedule for the new credit. The VTCP uses two ratios to determine whether the municipalities can borrow in the amounts requested: (i)debt service ratio that results from dividing estimated debt payments (capital, interests and commissions of new debt plus existing floating debt) by current income and should be less than 20%; and (ii)debt present value that results from dividing the present value of debt payments by current income, and should be less than 200%. Both the municipalities of L a Paz and El Alto have receivedtheir RIOCPs. Inthe case of SAGUAPAC, the VTCP requests a standard letter authorizing the Ministry of Finance to debit its accounts in case of default. SAGUAPAC submitted this letter on May 4,2006. Since SAGUAPAC i s an income earning entity, a full financial analysis has been carried out and i s summarized inAnnex 9. 2. Technical Progress on the technical definition of the project can be summarized as follows for the three municipalities. In La Paz a neighborhood selection contest was launched in November 2005 for the Perifirica, Max Paredes and Sur macrodistricts according to the Municipality of L a Paz's strategy and intervention policies. One hundred neighborhood leaders requested application forms (7 different forms in total). An informational meeting was held and 25 project proposals were delivered on the deadline (11/25/05). The selection process was supervised by a jury composed by representatives of the - 21 - selection committee, the Federation of Neighborhood Committees (FEJUVE), sub- mayors of the macrodistricts and the coordinator of the municipal program. The following eligibility criteria were prioritized: characteristics of streets and pedestrian pathways, housing characteristics, rainwater drainage, number of families and inhabitants per family, overcrowding indicator, existence and characteristics of social and sporting spaces, vulnerability levels, consumption and access to electricity, a single legitimized neighborhood organization and community commitment statement, proportion of female headed households, in addition to points being assigned for presenting the proposal within the deadline and for multiple neighborhoods jointly participating in the contest (more details are included inAnnex 6). Using PPF funds the BdV i s undertaking various consultancies to carry out the physical designs in the selected neighborhoods and the corresponding social support. Additionally, the city i s applying for a grant from Cities Alliance for the preparation of an overarching integrated technical, institutional, and financial strategy for the Barrios de Verdud program. The technical team in the Municipality of El Alto has advanced substantially in its technical design of the project. Main findings from the traffic study and the economic evaluation indicate that the original design, which included the construction of dual three-lane carriageways inAvenidas Litoral and Costanera with rigid concrete pavement, i s unfeasible. An optimized design has been carried out which consists inupgrading and paving the Avenidas Litoral and Costanera over a total length of 4.46 km. Avenida Litoral will be 3.7 km-long dual carriageway, and Avenida Costanera will be a 0.76 km- long standard two-lane road. The structural design of the pavementshas beencarried out using the 1993 American Association of State Highway and Transportation Officials (AASHTO) Guide and considers the following parameters: (i)the bearing capacity of the existing sub-grade; (ii)the cumulative standard axle load repetitions that will occur on the pavement over a life period assumed to be 10 years; (iii) normal variability that the can be expectedfrom the performance of the pavement materials; (iv) and the confidence level chosen for the design (in this case 80%). Considering the above, the design calls for a flexible pavement consisting of an asphalt concrete wearing course 7 cm thick, overlying a 20 cm-thick granular base course and a 20 cm-thick granular sub-base, the whole structure resting on a previously prepared sub grade consisting of soils having a high soaked California Bearing Ratio (CBR) of 19%. The structural number of the proposed pavement will be in the order of about 3.2 and i s expected, under normal maintenance policies, to withstand adequately the estimated 500,000 equivalent standard 8.2 axles that will pass over the pavement during the 10-years life period. The remaining funds will be used to modernize public transport services in El Alto, which includes technical assistance in areas such as traffic management, non-motorized transport, and preparation for the implementation of a Bus Rapid Transit system. Pavement of secondary roads i s also included. InSanta Cruz the Bank credit will be contributing to an existing Basic Sanitation Project developed by SAGUAPAC and prioritized by national-level laws 2409 and 2649.19 Of 19 Law 2409, Article 1 (July 31, 2002) states that water and sanitation projects are a national priority for the city of Santa Cruz. Article 2 of the same law authorizes the executive branch of the national government to process and manage related financing. As,explained in a previous reference, Law 2649, Article 1, (April 8, - 22 - this $70M initiative, SAGUAPAC is now receiving a US$lOM credit from the Bank to increase the coverage of sewerage networks and the capacity of its wastewater treatment plants. The design, bidding, contracting processes and supervision of construction will be carried out by SAGUAPAC. The sanitation works include the expansion of secondary sewerage network and increasing the capacity of two of the existing wastewater treatment plants (Plant North 2 and Plant East). This expansion will entail provision of new sewage connections in a 596 hectare area. The new sewerage network will be connected to an interceptor which will be built using other funding sources and will convey the wastewater to the East plant. However, the project will finance an interceptor which will convey wastewater to the North plants, and for which there are currently no other financing sources. The sanitation works address the need to expand the sewerage system in the city. In addition to providing sanitation services to more residents of the city, the project will contribute to reducing groundwater contamination from raw sewage infiltration and thereby to support protecting the only water source of the city from getting more contaminated. However, to fully protect the aquifer, much larger investments are required. Interms of wastewater treatment capacity, the project i s introducing innovative techniques, which in addition to being low cost are extremely effective, easy to operate and very adequate for developing countries. In this sense, the project presents special wastewater treatment technologies, in a combination which does not exist yet anywhere else and therefore may be considered as a pioneer to be followed by future projects inBolivia and other countries.20The increase intreatment capacity will be larger than the required by the additional raw wastewater flow which will be generated as a result of the sewerage works financed by the project, however, it i s foreseen that SAGUAPAC would get access to additional financing sources to further increase the sewerage network coverage, and will therefore need the additional treatment capacity. Attempts will be made to explore carbon finance opportunities for the project. If these are successful, the treatment plants will include gas collection pipes aimed at collecting the Methane gas produced in the anaerobic lagoons (which form part of the treatment units) and gas burners for gas flaring. The carbon finance opportunities were key indetermining the technology for gas collection and flaring. 3. Fiduciary Financial Management In view of the implementation arrangements defined for the project, a financial management assessment was conducted for each one of the proposed implementing entities (GMLP Barrios de Verdad Program, GMEA, SAGUAPAC). The assessments were performed in accordance with OPBP 10.02 and the Manual "Financial Management Practices in World Bank Financed Investment Operations". The objectives of the assessments were to determine the adequacy o f the proposed implementing entities' capacity to properly manage and account for all project proceeds and to produce timely accurate and reliable financial statements for general and Bank special purposes. 2004) states that EPSAs may receive public credit and may benefit directly from resource transfers from external funding for the development of investment infrastructure. 2oPleaserefer to Annex 15 for more details. - 23 - Given that this i s the first time that the World Bank will support an operation that introduces municipal governments (except for Santa Cruz) as direct implementing agencies, it has required a straightforward project design so that requirements interms of implementation capacity are reasonable. This same premise has been applied for the design of financial management arrangements. To the extent possible, existing arrangements will be used, strengthening them as needed in order to guarantee its adequacy to ensure project funds are used economically, efficiently and for the intended purposes. Project's inherent risk is rated substantial and control risk i s rated moderate.*' However, these ratings can be affected if proposed mitigating measures are not implemented as expected and mainly if the implementing entities are not able to maintain the proposed arrangements, including qualified staff, throughout the project's life. In the framework of those existing structures, specific financial management (FM) procedures have been designed with each entity. Those specific processes and procedures include an adequate segregation of duties in terms of authorization and approval and including the necessary internal control mechanisms. Those arrangements and procedures will be part of the Operational Manual. Regarding disbursements, the following disbursement methods will be available to the implementing entities to withdraw funds from the credit: (a) Advance Method (through a segregated Designated Account for each implementing entity); (b) Reimbursement; and (c) Direct Payments to suppliers and contractors. To facilitate implementation a segregated Designated Account (DA) in US dollars would be opened for each implementing entity. DAs for L a Paz and El Alto would be opened and maintained in the Central Bank of Bolivia and payments will be processed through the Single Municipal Account (CUM) in the case of L a Paz, and through a local currency bank account in the case of El Alto, following the arrangements established by the Vice- Ministry of Treasury with the banking system. Taking into account that SAGUAPAC i s a private cooperative the special account SA will be opened and maintained in a commercial bank, on terms and conditions satisfactory to the Bank. On the basis of the review performed and the progress reached so far and the actions that are being taken to complete the pending requirements that will be followed-up during implementation, the financial management team concludes that the proposed financial management arrangements are acceptable to the Bank for the three implementing agencies. Finally, it is important to note that monitoring and supervision of the operation of the arrangements defined for each implementing entity, as expected, will be essential to guarantee the adequacy of the financial management system. *'Inherent risk is the susceptibility of project funds not being used as intended, if we assume that there were no internal controls. Control risk refers to the possibility that financial management controls are insufficient. - 24 - Procuremem A procurement capacity assessment was carried out for each of the three entities, aimed at reviewing their current capacity and assigning a level of risk to carry out procurement activities. The overall procurement risk assessment level was deemed as moderate. Specific recommendations on procurement issues have been discussed and are under implementation. The preparation of the procurement plan for the first 18 months of project implementation was requested for each entity. Such plans are consistent with the procurement arrangements defined under Section F of Annex 8 of this document. Also, the insertion of a set of special provisions in the Financing Agreement (FA)'s procurement schedule was agreed in order to avoid the risk of misprocurement. Additionally, it was agreed that there will be two procurement supervision missions per year and one special procurement supervision for ex-post review/audit. This project will be implemented by two municipalities and one cooperative. Each entity works within an established framework for administrative management, including financial management (budget management, reporting and auditing). The Bank has agreed, based on its assessment, to implement the project within their existing structure subject to specific recommendations, which are under implementation. The two municipalities Gobierno Municipal de La Paz (GMLP), Gobierno Municipal de El Alto (GMEA) and the cooperative SAGUAPAC, will be responsible for the implementation of procurement activities as defined in the Operations Manual. The adoption of an Operations Manual satisfactory to the Bank will be a condition of effectiveness. The procurement section of the Operations Manual will include, in addition to the procurement procedures, the Standard Bidding Documents to be used in each case, as well as documents/contracts for procurement processes to be awarded on the basis of quotations. Where no relevant standard document exists, standard forms acceptable to the Bank shall be used. 4. Social This section summarizes the main social dimensions of the Urban Infrastructure Project, based on the socio-economic studies for each component. These studies provide general information regarding the characteristics of neighborhoods, programs and service delivery. Surveys were carried out in each component's area, providing primary information about household size, income and expenses, classified by gender and age. There is also information regarding housing, migration and primary spoken language as well as access to water, health, education and other basic services. Detailed analyses of social impacts of the specific intervention ineach city were undertaken. The studies confirmed that the areas of intervention are very poor. Monthly income inL a Paz target neighborhoods i s estimated at US$145, inthe El Alto influence zone the figure i s $153 and SAGUAPAC's beneficiary population i s mixed, a common feature in Santa Cruz, with monthly income levels oscillating between $154 and $680. - 25 - There are significant differences amongst the three surveyed areas in terms of the population's ethnic composition, language, economic opportunities, market access, schooling levels, environmental risks and gender relationships. Inthe case of L a Paz the most important social aspects the project design needs to incorporate are: the composition of households as a result of migration patterns, the high level of informal employment, the need to award property titles to couples as opposed to male household heads only, high levels of crime and violence, and community participation in risk prevention activities. In the case of El Alto the main social issues are: a very high number of trips to work that originate from El Alto and conclude in L a Paz, traffic safety particularly for women and children, support to women to encourage participation in project implementation, and the high levels of street violence. In the case of SAGUAPAC the most important social aspect i s a communication strategy for subscribers and cooperative members to explain the project's scope, benefits, and connection fees. The main conclusions of each social study are in Annex 10. Details on the methodology, sample, questionnaire, and data analysis can be found inthe consultant reports on file. 5. Environmental According to Bank norms, the project has been classified as Category B from an environmental perspective. Components 2 and 3 are quite different than Component 1in the following way. The infrastructure projects proposed inComponents 2 and 3 are well defined in terms of what will be constructed and where, whereas in Component 1 the type of construction proposed is known though the specific construction in each neighborhood i s still undefined. Given the different characteristics of the various components of the project, Components 2 and 3 require an environmental evaluation for the construction proposed, while Component 1 requires an environmental management framework that in turn will be applied to each neighborhood that will eventually participate in the project after the corresponding selection process has taken place. The environmental study concentrates on: describing the impacts generated b y the infrastructure works and the mitigation measures; producing environmental handbooks that can build capacity at the municipal staff level, b y detailing the common impacts of the proposed construction projects, according to the Bank's experience; and detailing actions in case of eventual impact of the project on cultural property (i.e. archaeological and paleontological findings) ifhistorically or culturally valuable objects are identified during the implementation of the constructionprojects. The environmental assessment concluded that the works to be financed will generate positive environmental impacts. In the case of La Paz these impacts are: improvement of public health, stability of slopes, neighborhood safety, and provision of educational environments. In the case of El Alto the population will benefit from reduced air contamination, decreased risk of traffic accidents and flooding. In the case of SAGUAPAC odor nuisance generated b y the treatment plants will be reduced, public health risk will be diminished and the groundwater contamination rate will be reduced. Negative environmental impacts, on the other hand, can be identified, planned for, and - 26 - mitigated. These include, in the case of L a Paz, changes in land structure, generation of debris and increased noise during construction. In El Alto possible environmental problems are atmospheric and noise emissions, alteration of the landscape, loss of vegetable layer, partial obstruction o f public spaces, and risk of debris being disposed in drainages. For the SAGUAPAC component the risks are generation of debris and increased noise during construction, soil and water contamination, and impact on vegetable cover. Results of the environmental studies for each component are summarized inAnnex 10 and can be consulted inthe complete reports that are on file. 6. Safeguardpolicies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment Natural Habitats Pest Management Cultural Property Involuntary Resettlement Indigenous Peoplesz2 Forests Safety of Dams Projects inDisputed Areas Projects on International Waterways Although no resettlement is expected, subprojects related to Urban Upgrading (Component 1) and Urban Transport (Component 2) include neighborhood and city- level infrastructure works that in some very limited cases might entail population displacement. A Resettlement Framework (RF) was prepared in accordance to OP 4.12 "Involuntary Resettlement" instead of a Resettlement Plan, with the purpose of mitigating negative impacts generated by the taking of land and the associated involuntary displacement of yet unplanned subprojects and because the number of estimated cases is minimal or nil. The Bank's resettlement policy i s based on minimizing resettlement and, where absolutely unavoidable, offering choices to persons subject to relocation to restore or improve their socio-economic conditions. The guidelines for the RF have been based on the Barrios de Verdad program in L a Paz and the urban transport ,subproject in El Alto (Components 1 and 2). The sanitation works (Component 3) to be carried out by SAGUAPAC will not be considered for the RF guidelines given that the cooperative is not entitled to enforce procedures regarding technical-administrative issues, expropriation or property rights. That i s to say, SAGUAPAC will not carry out involuntary resettlement under any circumstances. Therefore the purchase o f any lots needed for the implementation of Component 3 will 22The indigenous people safeguard is not triggered although the project is benefiting indigenous people, becausethey are residing in urban areas and thus: (i)land where the families live does not correspond to ancestral territories; and (ii) income in urban areas does not originate primarily from subsistence-oriented production. - 27 - be carried out at market value and will be absolutely voluntary. On the other hand, the guidelines set out for L a Paz and El Alto will strengthen their institutional capacity to address future resettlement processes that might become necessary in the present and future projects. A summary of the resettlement framework can be found in Annex 10. The complete document i s on file. 7. Policy Exceptions and Readiness The project complies with all applicable Bank policies and does not require any exceptions. Fiduciary arrangements are in place and all preparatory studies have been completed. Disclosure requirements have been met for all applicable documents. Baseline data for results monitoring is being collected, and M&E capacity is in place. The procurement plans have been prepared and approved. - 28 - Annex 1: Country andSector or ProgramBackground BOLIVIA: UrbanInfrastructureProject Country Background (i) Overview at the nationallevel. Bolivia i s the second poorest country in Latin America, with a gross national income per capita of only US$910. Moreover, it ranks as having one of the most unequal distributions of income, i.e. one of the highest Gini Coefficients, in the Latin American region, behind only Chile Brazil. The new government headed by Evo Morales, the first ever indigenous president of Bolivia, has resolved to makepoverty reduction its priority, through a package of policies that aim to address what it identifies as the roots of inequality in the country. The administrations' new "model" aims to transform the former economic and cultural paradigm based on embeddedcolonial dynamics, so as to accurately represent the interests of their primarily indigenous population. This mandate won the government an absolute majority, after years of intensified social unrest which led to the resignation of the President's two predecessors. Nevertheless, despite the social and political instability in the last few years, Bolivia has managed to improve its macroeconomic indicators significantly, due mainly to higher revenues from hydrocarbon taxes and favorable external conditions. GDP growth was close to 4% during the last two years, duplicating the 1999-2003 average. The inflation rate averaged 4.8% in the same period. The external current account showed a surplus during the last three years due to record high exports which contributed to US$1.7 billion in net international reserves in 2005, also a record high. The financial sector also shows signs of recovery-bank deposits have increased gradually and non-performing loans have declined. The boom in hydrocarbons prices and exports and the introduction of the Direct Tax on Hydrocarbons (IDH) have increased tax returns thus contributing to a reduction in the fiscal deficit from 9 percent of GDP in 2003 to 1.6% in 2005. It is important to note that this economic recovery i s mainly due to favorable terms of trade. However, private investment has dropped dramatically from 18% of GDP in 1998 to 7% in 2004. Investment in the hydrocarbons sector alone declined from about US$605 million in 1998 to an estimated US$147 million in the first ten months of 2005. The new hydrocarbons law (Law 3058 of May 2005) as well as the nationalization of hydrocarbons announced on May 1, 2006 have raised concerns about the rule of law and have contributed to deterioration inthe investment climate. Looking forward, the new government offers opportunities for much-needed change in Bolivia. The Morales government faces a number of political, social and economic demands, which will eventually have to be channeled via the promised Constituent Assembly. The Assembly is expected to tackle fundamental issues on the structure of the Bolivian state and society, including increased participation of indigenous groups in the political system, departmental autonomies, land issues, and naturalresources, includingthe "nationalization" of the hydrocarbons sector and how to equitably distribute the resources. Nonetheless, some people in the eastern lowlands feel threatened by the Constitutional - 29 - Assembly and are pressuring for a referendum on autonomies. Finally, beyond these specific issues, the population i s demanding improvements in inclusive growth, employment and the satisfaction of basic needs. (ii) Country-level poverty-reduction strategy. The new government announced its National Development Plan to the international aid community in May of this year. The Plan titled "Dignified, Sovereign, Productive and Democratic Bolivia, a plan for living well: 2006-2010" prioritizes (i)productive development and job creation, (ii)social justice and inclusion (fairness) and (iii) macroeconomic stability. This i s a long-term plan that aims to set the development focus for the next 50 years. Its vision of wellbeing or "living well" i s based on a cosmocentric view of society that connects community values to every aspect of government policy. This vision will be operationalized through each pillar of the plan. Dignified living is based on social protection including health, education, water and sanitation, housing and land, as well as justice, national security and public safety, with a special focus on the country's youth. Sovereign living emphasizes the protagonist role of national representatives in the definition of international relations and trade policy vis-&vis commercial partners, while democratic living will seek a representative response to social needs. Productive living identifies productive associations, cooperatives and small/medium enterprises as main actors in the following priority sectors: (i)income generators will be hydrocarbons, mining, electric energy, forests, water and biodiversity, where the State will have a mayor role; (ii)employment generation championed by industry, tourism, agroindustry and housing, where the private sector will have a mayor role; (iii)productive infrastructure includes communications, roads, railways, electricity, gas and water; (iv) productive services including irrigation, technology, information and agriculture; (v) financial services. In this context, this project will take the lead in providing Bolivia's major urban centers with the support they seek in order to carry out this national mandate. Municipal governments and local social institutions, such as cooperatives, are the natural agents to operationalize this vision of socially responsive policies. This, project will support this vision by working with Bolivia's largest and centrally important urban areas, whose interest in working with the Bank, capacity to borrow, and will to tackle their urban problems make them optimal partners for this kind of project: L a Paz, the country's capital; the adjacent city of El Alto, one of the fastest growing in the hemisphere; and Santa Cruz, Bolivia's largest city and commercial and industrial hub of the eastern lowlands, also experiencing rapid population and economic growth. (ii) Urbangrowth. In terms of urban development the Bank's intervention responds more directly to rising rates of population growth than to absolute or relative levels of urbanization in Bolivia. A total of 64% of Bolivians live in urban areas and 40% live in cities of more than 200,000 inhabitants. The urban population has expanded at a faster rate than the national growth - 30 - rate -at an average of 3.6% per year in the 1990s- as a result of continuing migration from depressed rural areas. El Alto and Santa Cruz are two of the fastest growing urban areas. (iii) Infrastructuresub-sectors. Urban transport has played and continues to play a key role in the Bolivian economy. Throughout the 1992-2003 period, the transport sector (roads, railways, airports, ports, rivers and pipes) represented, on average, 8.8% of national GDP and about 33% of public investments (mainly roads). During the same period transport related activities generated approximately 6.6% of total employment in the capital cities23. In2003 approximately 33 million passengers and 7 million tons of cargo were transported through the various modes of transport within the country (as comparedto 14.5 million and 3.3 million respectively in 1992). Roads are the main transportation mode of the country concentrating nearly 91% of total passenger transportation and 59% of freight volumes. There is relatively little direct competition in cargo between the different modes, because the railways concentrate on bulk products and distances above 600 km. In terms of provision of sanitation services, the sector was reorganized as a result of the reforms that began in the mid 199Os, with a redefinition of institutional responsibilities in the interior of the country. The municipal governments took responsibility of providing these services through Water and Sanitation Service Providers (EPSA). There are currently four types of service providers: private concessionaires (only in L a Paz and El Alto), mixed regional and community corporations (inthe Chaco region and inthe Bustillo province north of Potosf), cooperatives (mainly in the eastern part of the country) and autonomous municipal companies in the western region of the country. Since January 2006, the Ministry of Water (MdA) has been responsible for policy making, and sector planning. The Superintendency of Basic Sanitation (SISAB) is responsible for the regulation of the sector, including the granting of concessions and licenses, monitoring the concessionaires' fulfillment of their rights and responsibilities, fulfillment of quality objectives, EPSA development, and the protection of the users. (v) Program background by city. The cities of L a Paz, El Alto and Santa Cruz face a number of development challenges including high levels of poverty, a lack of employment opportunities and precarious urban infrastructure, while they are tackling somewhat different urban infrastructure needs on the road to economic growth and poverty reduction. The municipality of L a Paz occupies a total of 2,012 km2 of which 1,832 km2 are classified as rural and 180 km2as urban. Its geological features are a crucial factor in understanding this city's urban development capacities and limitations. According to studies used by the municipal urban plan, approximately 17% of the land is considered suitable for construction (while 32% i s qualified as unfavorable, 11% has hydrological restrictions, and 40% is considered irremediable). These topological factors, the hydrological risks and the precarious living standards of the majority of the people living 23 Source:UDAPE(2005) - 31 - The 2002-2006 Municipal Development Plan (MDP) for La Paz was developed through a highly participatory process that included 543 diagnostic workshops, 18 gender workshops and 16 citizen thematic groups. Contrary to classic city development plans, the MDP combines a territorial approach with a strategic set of investments and actions, a financing plan, and a monitoring and evaluation system. It has four components: a) 62 large-scale structural projects to transform the physical conditions of the city: roads, a bus terminal, provision of trunk infrastructure in expansion areas, and parks. b) 30 strategic projects to promote improvements in daily city life through regulations, sub-sector plans, and administrative changes. The strategic projects are designed to respond to the following priorities: increase urban mobility (roads, mass transit, and traffic), provision of public space, decrease vulnerability to physical risks, improve basic service coverage, refurbishhealth and education facilities, and increaseopportunities for sports, recreation, and culture. c) 7 strategic municipal policies intended to make L a Paz a productive, livable, and financially sustainable city, with emphasis on cross-cutting themes like gender equity and a respect for a diversity of cultures. d) 20 strategic policies for interventions at neighborhood level, in order to transform the poorest humansettlements of L a Paz inlivable neighborhoods, with access to basic services, decreased vulnerability to risks, higher community participation, and greater integration to the city. In 2000, the Municipal Government of La Paz initiated an integrated urban upgrading program with the objective of improving living conditions in the city's lowest-income and most risk-prone neighborhoods. Beginning with five marginal neighborhoods, the program subsequently expanded both innumbers as well as in scope, by addressing risk prevention and disaster management after a large scale loss of homes in 2002. Today the Barrios de Verdad program (meaning real neighborhoods) is in its fourth of a total of seven phases that will ultimately upgrade 105 neighborhoods. The program's intervention is based on a selection mechanism whereby neighborhoods present proposals that are evaluated according to their social and economic impact. This public competition for urban upgrading programs encourages wide-spread community participation and ensures that investments in public works respond to demand by residents. While the neighborhoods initially have options within a long menu of infrastructure investments, in practice a handful of components comprise most improvement packages. These include walls to prevent landslides, stairs on steep slopes, drainage systems, roads (in general private minibuses step in to provide transportation once a key road is available), pedestrian walkways, a sports facility (essentially a small soccerhasketball court with bleachers) and a social center that serves a variety of needs in the neighborhood.26 Inneighborhoods that might already have one or more of these, the installations are improved. Within the same metropolitan area, the municipality of El Alto is adjacent to La Paz. Its current population totals 650,000, 81% of whom identify themselves as indigenous of 26During WB visits to the barrios, several neighbors explained that these centers are used for a wide range of activities. - 33 - predominantly Aymara origin. It i s one of the fastest growing areas in the southern hemisphere, with an average yearly population growth rate of 6.7%, unlike L a Paz whose population growth i s constrained by its geography27.Given its flat topography and due to deficient land-management policies, rapid and uncontrolled urban sprawl in El Alto has been a constant over the last decades. As a result, El Alto is facing strong pressures and demands for the provision of public services, including transport services and road infrastructure. However, towering 3,962 meters above sea level, El Alto also controls the slopes and access into the capital, which i s located at 3,597 meters. Thus it i s naturally a vital transport hub that features an international airport within its city limits (serving L a Paz), and connects via four highways with important regions of the country (La Paz, Desaguadero and Copacabana on the border with Peru, Oruro, Cochabamba and Santa Cruz and the municipality of Viacha). However, this system relies on the municipal urban road network which i s often poorly planned and developed. The municipal transport system is characterized by: (i) high traffic congestion levels on some parts of the street system; (ii) increasing vehicle motorization; (iii) over-supply of an small capacity public transport vehicles; (iv) chaotic traffic flows; (v) a business scheme in the public transport industry that promotes competition in the market and not for the market; (vi) inadequate road and pedestrian infrastructure; (vii) inadequate institutional management of the public transport system; and (viii) weak enforcement and coordination mechanisms. Several areas of El Alto are affected with high traffic congestion levels due to the lack of traffic lighting and signals, the location of small businesses on the streets, and bad conditions of the roads. The most congested area in the city is known as L a Ceja. It i s a centralpoint where all major roads converge (see map and photograph below) and the only point of communication to L a Paz. Traffic flows within El Alto, going from the south to the north and vice versa must go through L a Ceja. Finally all the traffic flows from Desaguadero, Copacabana, Oruro, Cochabamba, Santa Cruz, and Viacha have to go through L a Ceja. ''2001 Census data - 3 4 - Map of El Alto showing convergence of all main roads to L a Ceja The number of vehicles in El Alto has increased steadily along with its explosive population growth. According to data from 2000, there were a total number of 9,450 public transport vehicles, of which 62% were minibuses, 21% trucks serving as taxis for a reduced number of people, 5% individual taxis, and 11% buses. This distribution i s highly inefficient as a great quantity of small vehicles for public transport mobilize only few people. ElAlto has establisheda road infrastructure system as follows: - Metropolitan roads: Av. Panamericana(to Copacabana) Av. Buenos Aires (to Laja) Av. Ladislao Cabrera (to Viacha) Av. 6 de Marzo (to Oruro) - First order roads Av. PanorQmica,Av Perifkrica, Av. Bolivia, Av. Litoral, Av. Julio Cesar Valdez, Av. Nestor Galindo, Av. Civica, Av. Sucre, Av. Alcoche, Av. Santa Fe - Second order roads All roads from 18 to 30 meter width - Third order roads Streets and avenues with a 10-18 meter width - Fourth order roads Streets, alleys, with less than 10 meter width - 35 - - 3 b - The sanitation sector faces immediate challenges. Sanitation services in Santa Cruz are provided b y 10 cooperatives the largest of which i s SAGUAPAC. The cooperative's concession covers 24,695 Has within city limits. Interms of population, as shown in the table below, the concession provides sewerage to only about 50% of its concession area, giving Santa Cruz an overall level of sewerage coverage of only 32%. Inaddition to the immediate public health and environmental effects associated with low sewerage coverage, sewage infiltration into the city's main aquifer will result, within a few years, in irreversible damage. There is therefore an urgent need to increase the coverage of Santa Cruz's sewerage system to avoid the much larger investments associated with developing an entirely new water supply source for the city. SAGUAPAC is a well-managed utility. As can be seen in the table below, it has 3.08 employees per 1000 water connections which i s considered an excellent indicator by regional standards. Its average water tariff of US$0.3l/m3allows for operational cost recovery. SAGUAPAC i s expected to report a net profit of approximately US$1.23 million in 2005 and a free cash flow of more than US$12 million. This has been achieved at a time o f moderate GDP growth, social and political unrest and no real term tariff increase. During the 1991-1997 period, SAGUAPAC executed a project co-financed by the World Bank (US$13.82 million) to rehabilitate the water and sanitation system. From 1997 to 2001 full water coverage in the fourth concentric ring was achieved through a project co-financed by the Inter-American Development Bank (US$20 million). After 2001 SAGUAPAC has continued to make investments to improve its coverage and service level. These investments have been rather modest due to limited availability of funds for investment. SAGUAPAC estimates that it would need US$12 million to reach full coverage in water and sanitation in its concession area, US$10 million to improve its infrastructure and US$445 million to expand its services beyond its concession area. Despite its excellent operational and managerial results, SAGUAPAC faces a number o f major challenges requiring significant investment. SAGUAPAC identifies the unplanned growth of the city, the highnumber of service providers (other cooperatives) inthe city and their inefficiency, the low coverage of sewerage networks which constitutes a public health risk and a source of groundwater contamination, and the difficulty to obtain government support for large investments as the main challenges at present. - 37 - iAGUAPAC performance indicators2005 Indicators Unit Quantity Annual water use m3 49 Million Length of the installed water network Km 2,333 Number of connections -water connections 130,259 Population served - water residents 813,000 Length of the installed sewerage network Km 940 Number of connections -sewerage connections 64.556 Water treated % 100 Population served -sewerage residents 402.829 Water coverage % 99 Sewerage coverage % 49 Number of emp./l000 connection (water) employees 3.08 Number emp./lOOO connection employees 2.06 Staff employees 401 Average water tariff us$/m3 0.31 Average sewerage tariff US$/ m3 0.29 Unaccounted-for- water % 30 Yearly income Millions US $ 19.5 Map: SAGUAPAC concessionarea in Santa Cruz Annex 2: Major related projectsfinanced by the Bank and/or other Agencies BOLIVIA: Urban InfrastructureProject Project Name Decentralized Infrastructurefor RuralTransformationProject DecentralizationSecond ProgrammaticStructural Adjustment Credit I1 Bolivia Land for Agncultural Development Project Cities Alliance Grant Other Agencies UrbanTransportation Planning in La Paz (2005) Reactivationof the Center of La Paz (2004) Local Development and Fiscal Adjustment (2004) Water and Sanitation Millennium DevelopmentGoals for Bolivia (2003) Basic Urban Sanitation Program, PROSUB. Water and SanitationProgram Sanitation InvestmentProgram (PROINSA) Basic Water and Sanitation and Social Investment Support Program(PASBAIS) - 39 - Annex 3: ResultsFramework and Monitoring BOLIVIA: UrbanInfrastructureProject In addition to supporting physical infrastructure, this project supports the CAS goal of introducing high-visibility programs which address inequality, poverty and social exclusion. Urbanpoverty and basic service provision are high-visibility issues, especially ina time of politicaltransition andheightenedpopular activism. A. ResultsFramework PDO Outcome Indicators Use of Outcome Information The Project DevelopmentObjective is J Increased property values in YRl: Collect and validate to improve the access to basic services participatingpoor neighborhoods in La baseline information and set to the urban poor in Bolivia(La Paz, El Paz as a result of improved access to target values; gauge Alto and Santa Cruz) through targeted basic urban services municipal capabilities to infrastructure investments and the implement the project provision of technical assistanceto J Improvedurban mobility in El Alto, municipalities in the planning, especially for the urban poor, as a result YR2-3: Monitor project expansion and sustainability of urban of access to improved roads and non- implementation and inform service delivery. motorized transport alternatives mid-term evaluation process. 4 Increased coverage of Santa Cruz's sewerage networks in poor YR 4: Review outcomes neighborhoods, and increased and mainstream into project wastewater treatment capacity and impact evaluation J Reduced rate of groundwater contamination IntermediateResults One per ResultsIndicatorsfor EachComponent Use of Results Component Monitoring Component One: Comaonent One: Component One: Achieve sustainable improvements in tht J Percent increase of cadastrehousing YR 1-4: Indicators will be urban infrastructure and living standards value used to either validate the in selected very poor neighborhoodsin J Kilometers to nearest transport stop existing design or make La Paz through neighborhood J Number of temporary employments changes in sub- participation in the implementation of J Percent decrease of the citizen components. the project insecurity index for women and children J Number of constructed or improved vehicle roads, pedestrian pathways, public transport stops, constructed vehicle bridges, constructed pedestrian bridges and restored lighting points J Meters of constructed or improved rain drainage J Cubic meters of stabilization works J Square meters of forested green space J Meters of restored or constructed canals J Number of constructed recreational space - 40 - ComponentTwo: ComponentTwo: Component Two: Enhanced mobility in the city of El J Strategy to improve the efficiency of YR 1-4: Results Alto, especially for the urban poor, the public transport system designed. monitoring will flag any by removing infrastructure Non-motorized strategy design problems with the content bottlenecksand introducing J Number Km of paved roads and bike andlor delivery of training measures to modernizepublic paths and technical assistance. transport services and urban J Total area (m2) of constructed More TA to transport management: sidewalks municipalitiescan be J Increasedaverage daily traffic counts assigned as needed. inthe first and second ring J Number of bicycles on key arteries J Reduced travel times between Southern and Northern Zones of the city ComponentThree: ComponentThree: ComponentThree: Increasedcoverage of Santa Cruz's Secondary and primary sewage YR 1-4: Demonstrate sewerage networks, in the poorest networksconstructed in effective results inorder areas of the city neighborhoodsUV 106, UV-I14, to leverage further UV-115,UV-l18A, UV-119, UV-140 expansion of the sewerage Number of new users coverage in the city. -41 - E m B E, I dd \ \ I 0 @ 0 2 Annex 4: Project Description BOLIVIA: Urban Infrastructure Project 4.A. Component 1: Urban Upgrading inLa Paz Component location and coordination The municipality of L a Paz, the political and administrative capital of Bolivia, occupies 2,012 km2of which 1,832 km2are rural and 180 km2are urban. The urban population is over 800,000 inhabitants (compared with around 3,700 inhabitants in the rural area). La Paz i s located within 5 major and some 200 minor drainage basins. More than 35% of the population is classified as poor and is concentrated on the northern, eastern and western slopes (laderas), of the city. A lack of physical infrastructure associated with steep gradients (excess of 45 degrees) lead to frequent mud slides resulting in significant loss of life and property. Overall, about one quarter of the city's urban population (more than 200,000) are estimated to live in hazardous areas. The GMLP is implementing a program entitled "Barrios de Verdad" (BdV, meaning Real Neighborhoods) whose objective is to improve the quality of life of the inhabitants in poor neighborhoods. The BdV program contemplates the design and implementation of projects to improve physical infrastructure as well as to strengthen community organizations. The BdV aims to reach its target of upgrading 105 neighborhoods (21 urban and 2 rural districts) by 2010. The program is divided into 8 phases, and was initiated in 2000, (phase zero), when five neighborhoods were upgraded by an IDB-funded project. During phase one, another 10neighborhoods are being upgraded. The second phase has been fully designed and i s currently being implemented and financed by GMLP with its own resources. The third phase will be financed through the present Bank-funded project and implemented by the BdV program unit within the GMLP. Component Financing The current project will be the third phase of the Barrios de Verdad program. In this phase the project aims to upgrade 16 additional neighborhoods that will total US$10.4 million, of which GMLP has requested US$lO million in IDA credit, to complement the US$0.4 million in local counterpart financing, from the municipality's own resources. Beneficiary contribution in kind is expected to reach U$350,000. GMLP is also applying for a US$250,0000 grant from Cities Alliance, with the Bank's support, in order to develop an overarching integrated urban upgrading strategy for the entire city. Menuof investments The following list identifies the possible investments that organized eligible communities may choose from within the Barrios de Verdad program. Water and sanitation connections are not included because there is uncertainty about the future of the water company, Aguas del Illimani. Physical Component e Pavement of roads and sidewalks e Construction of transport stops e Construction of neighborhood access stairs e Improvement of drainages and construction of new ones -45 - Construction of retaining walls Creation of green areas and reforestation Construction of solid waste collection transfer points Construction or improvement of community centers and child care facilities Construction or improvement of sports facilities Installation of in-house sanitation facilities Provision of street lighting Small risk-mitigation works Community Development Component: 0 Strengtheningof neighborhood organization 0 Property titling e Training for emergency and natural disaster response 0 Yellowbook (documentation of project activities and final products) Eligibility Criteria The BdV has designed a participatory and transparent process to select neighborhoods (concurso). This process i s explained in detail in Annex 6. The eligibility criteria are divided in two: minimum eligibility criteria to be able to participate in the Concurso, and pre-selection criteria to be selected to participate in the program. Minimumrequirements for neighborhoods2': 0 Mustbelong to Perife'rica,Max Paredes, Zona Sur ,or SunAntonio 0 Musthave approvedtopographic plans (planimetria) 0 Musthave a legal representative (Junta de Vecinos) 0 Musthave at least 75% of water and sanitation coverage Selection criteria: 0 Composed by at least 100householdplots 0 At least 75% of the plots mustbe occupied 0 At least 80% of the plots must be occupied by the owners 0 The average family income should be less or equal to 3 minimum salaries 0 Legal recognition (personeriajuridica) of the neighborhood's representatives uunta vecinal) 0 The neighborhood representatives must not have any legal conflict 0 The community must participate inthe preparation of the application. 0 The cost of the project must not exceed BS 3 million (US$375,000) Implementation schedule The component will be executed in three stages: (i)9 neighborhoods inMax Paredes, Perife'rica and Sur districts for which a concurso was held in November 2005 and for which preparatory studies and designs are being developed with a project preparation facility (PPF); and (ii)4 neighborhoods in the Sun Antonio district, for which a concurso is expected to be held at the end of 2006; and (iii)three additional neighborhoods still to be determined. The first phase will start implementation when the credit i s approved by the Bank, using retroactive financing. This i s expected to happen November 2006. The second phase will start 3 months after, and the third '*Collected and assessedby the BdV team - 46 - phase will start by mid 2007. With an estimated execution time of 18 months for each batch of neighborhoods, the physical implementation of the project should be completed inDecember 2008. Prouerty titling Property titling is a fundamental activity of the BdV program. The IDA credit will finance legal services. The beneficiaries pay all outstanding taxes, land partitions if wanted, and additional documents if required. In most cases the settlers are in fact owners of their properties only that they bought from illegal developers and therefore their titles do not have legal validity. This situation makes the property titling process relatively easy as compared with the case of other Latin American cities where there i s a great deal of property ownership conflict. The entire process, starting with the diagnostic period and finishing with cadastred and registered titles, already under implementation in previous phases of the BdV program, takes approximately 4 to 8 months. The following agencies participate in this process: the municipal cadastre office, the office of the Municipal Urban Regulation Plan (PRUR), and the Registry. These agencies have all signed agreements with the BdV program in order to expedite their corresponding processes. Operations and maintenance At the time of completing the physical works, the BdV program signs an agreement with the community (Acta de Aprobacidn de Vecinos) stating that the improvements are complete and of the expected quality. The agreement includes specific provisions for operation and maintenance. Neighborhood committees and training courses The following committees are formed in the intervened neighborhoods in order to ensure committed social accompaniment: (i)Junta de Obras with one representative per block to supervise physical construction; (ii)Comite' de Vigilancia to certify, at the end of the process, that the works are satisfactory; (iii)other committees as needed in different neighborhoods, like youth groups, elderly groups, women groups. Training courses include: (i)project information; (ii)environmental education; (iii) construction of sanitation modules; (iv) titling process; (v) cadastre certification; (vi) prevention of domestic violence; (vii) overall social accompaniment; (viii) solid waste collection; (ix) sustainability; and (x) emergency response. Cost recovery and community contribution Cost recovery in this component will take place through the increase of property taxes. Since the municipal cadastre is relatively up to date and property values will increase substantially after project implementation, a positive flow of funds is expected. The community will contribute in kind with the following activities: (i) application for the concurso, which requires extensive neighborhood data gathering; (ii)improvement of property facades; (iii)construction labor through micro- enterprises; (iv) piling up of materials; (v) demolition and cleaning of debris; (vi) labor for forestation; (vii) labor for installation of sanitation facilities; and (viii) cleaning campaigns. Beneficiaries Table 1 illustrates the conditions in four neighborhoods in the M u Paredes district, four in Perife'rica and one in Zona Sur, totaling a population of 7,719 people as program beneficiaries. The component will benefit more people as information for the remaining 7 neighborhoods is still pending. - 47 - Comuonent Costs According with previous experiences the following are the estimated component costs: GMLP counterpart 400,000 Operatingcosts of BdV prorated TOTAL PROJECTCOST . 10,400,000 - 49 - (ii) 4.B. Component 2: Urban Transport inElAlto Component Development Ohiective: The development objective of this component is to enhance mobility in the city of El Alto, removing infrastructure bottlenecks and introducing measures to modernize public transport services and enhance the efficiency of urban transport management. Component Description: Based on the above development objective the following four sub-components have been identified: (i) Trunk InfrastructureDevelopment; (ii) Modernization of Public Transport Services and Urban Transport Management; (iii) Institutional Strengthening; and (iv) Project Implementation. Sub-component 2A: Trunk Infrastructure Development (US$ 4.6 million). ElAlto's road infrastructure network has been developed mainly as a series of radial avenues that converge to an area in the eastern part of the city called "La Ceja", which is the main entrance point from L a Paz, and where most economic activities takes place. Given this radial distribution and the fact that in the middle of the city rests the airport that serves the city of La Paz, the l i n k s between the southern and northern parts of El Alto are not efficient as most traffic routes have to go through L a Ceja. The interventions included in this Sub-component are aimed towards completing the city's first and second ring roads (Av. Litoral and Costanera) that would expedite the communication between the main radial avenues (Av. 6 de Marzo towards Oruro, Av. Ladislao Cabrera towards Viacha, and Av. Juan Pablo II), as a means to divert heavy-load traffic that currently uses said radials due to the lack of alternative routes when passing through the municipality. In addition, this would enable better communication between the northern and southern parts of the city to promote the development of other economic and productive zones and avoid the concentration of activities inLa Ceja. Map: Main roads in El Alto - 50 - Physical investments would include paving and upgrading works for: (a) the construction of a 3.7 km-long dual carriageway (with two 3.60 m lanes each way) along the Avenida Litoral, and (b) the construction of a 0.76 km-long standard two-lane road along the Avenida Costanera (7.2 m wide between its intersections with Avenida Bolivia and Avenida Litoral); (c) the construction of a two lane bridge over Rio Seco at the intersection between Av. Litoral and Av. Costanera. Both avenues are located in a semi-urban environment, within the city of "El Alto" and about 2 kmwest of the Airport. The existing roads are unsurfaced and vehicles speeds are constrained to less than 13 km per hour. Traffic studies including estimates of traffic generated by the improvement indicate that the daily volumes will be relatively high when the upgraded roads are open to traffic: between 6,000 and 9,000 on the Costanera and between 10,000 and 11,000 on the Litoral. Most of the traffic comes from private vehicles and taxis or buses that carry passengers living in the city. The proportion of heavy vehicles i s approximately lo%, as commonly encountered in urban or semi-urban environment. Traffic growth projections suggest that the traffic will increase at an annual rate of about 4.5%. The structural design of the pavements has been carried out using the 1993 AASHTO Guide and considers the following parameters: (i)the bearing capacity of the existing sub-grade; (ii)the cumulative standard axle load repetitions that will occur on the pavement over a life period assumed to be 10 years; (iii)the normal variability that can be expected from the performance of the pavement materials; (iv) and the confidence level chosen for the design (in this case 80%). Considering the above, the design calls for a flexible pavement consisting of an asphalt concrete wearing course 7 cm thick, overlying a 20 cm-thick granular base course and a 20 cm-thick granular sub- base, the whole structure resting on a previously prepared sub grade consisting of soils having a high soaked CBR of 19%. The structural number of the proposed pavement will be in the order of about 3.2 and is expected, under normal maintenance policies, to withstand adequately the estimated 500,000 equivalent standard 8.2 axles that will pass over the pavement during the 10- years life period. The proposed improvement will help reduce roughness from 20 IRIto about 3 IRI and as result, increase dramatically the average speed at which vehicles travel on these avenues, Le., from a current 15 km per hour to about 50 to 60 km per hour. Prior to constructing the pavement, some earthworks will be carried out to prepare the sub-grade and provision is made to adequately address the safety issue, through the execution of horizontal markings and vertical signs as well as the lighting along the avenues. The construction of the Avenida Costanera requires also the construction of a concrete drainage canal along El Alto's main river that runs parallel to this road (Rio Seco) over a total length of 1.2 km. The construction of a bridge that connects the two Avenues will complete the project. Based on the preliminary designs and cost estimates, the total budget for the works i s of the order of US$ 3,740,000, corresponding to about US$ 200,000 per lane-kilometer which, for an urban road project, is quite acceptable. - 5 1 - Project Type of Works Total Length, in Total Cost cost US$ km US$ million million per 1ane-km Avenida Litoral Construction 3.7 0.18 Avenida Construction 0.76 2.7 0.20 Costanera Drainage Canal Construction 1.2 1.39 Bridge Construction Feasibility and 0.08 Supervision of 1 0.43 Total 4.6 Sub-component 2B: Modernization of Public Transport Services and Urban Transport Management (US$ 4.14 million). This sub-component would finance the design and implementation, including supervision, of a series of initiatives to enhance public transport services in the city and increase the efficiency with regards to urban transport management. Said initiatives include: (i).Modernization of the Public Transport System (US$ 2.23 million). This initiative includes the paving of dirt or gravel streets that currently carry highvolumes of public transport vehicles. It would also include capacity building and technical assistance activities to support the preparation of a public transport modernization strategy for the municipality establishing the institutional, regulatory, social and technical bases for the implementation of a massive transit system in the metropolitan area of L a Paz-El Alto (Bus Rapid Transit-BRT- system). Several initiatives are being initially financed through a Project Preparation Facility (PPF) including: (a) a six-month study to assess the needs of the city (street improvements, reorganization of routes, institutional measures, etc) and future steps required to transform and reorganize the current system of public transport with an aim to develop a transport strategy based on mass transit systems and (b) a series of technical assistance activities to initiate a process of consultations with public transport operators and community leaders. (ii).Non-Motorized Transuort (US$ 1.4 million). A strategy is being developed, with funding from the Project Preparation Facility, to establish a policy and investment strategy for improving the conditions for pedestrian and bicycle movement in El Alto. Aside from ensuring the construction of paved sidewalks along Avenida Litoral (which hitherto has not been common practice in new road projects in El Alto), this sub-component would finance strategically located bikeways and improve sidewalk conditions in areas with many pedestrians (including supervision of works). (iii).Other Road Network Imurovements (US$ 0.51 million) The improvements include: (a) the definition and initial implementation of a traffic safety and citizen's education strategy, and (b) the elaboration of traffic management standards (including the optimization of traffic signals) and implementation of priority traffic engineering measures. - 5 2 - Sub-component 2C: Institutional Strengthening (US$ 0.48 million). This sub component aims at increasing the efficiency in managing urban transport assets and services in El Alto, through the institutional strengthening and capacity building of four key Divisions within the Oficialia Mayor de Desarrollo Urbano y Medio Ambiente (OMDUMA) dealing with (i) planning and project preparation; (ii)traffic, infrastructure and environmental management; and (iii) supervision of works, within the urban transport system inElAlto. In this sense, this sub-component includes: (i)technical assistance and training activities in areas such as planning, budget execution, project evaluation, design and supervision of works, maintenance of assets, environmental management, traffic engineering, monitoring and administration of public transportation services, etc; (ii) technical assistanceto support a long overdue re-engineering of the internal procedures, to streamline time consuming administrative processes and achieve efficiency gains in the management of the Divisions; (iii)technical assistance for the .development of urban transport regulations of the municipality; and (iv) the acquisition of goods that would facilitate the Divisions' technological modernization to increase its productivity and strengthen its planning, supervision, and executing capabilities. Sub-component 20: Project Implementation (US$ 0.78 million). This sub- component would support the creation of a Project Coordinating and Advisory Group (PCAG) that will report directly to the OMDUMA to facilitate the coordination and management of all activities financed from Credit proceeds during project implementation. Among other activities, through this component the PCAG will be able to provide technical support to the OMDUMA for the coordination and supervision of project implementation, including: (i) preparatory activities for the procurement of works and services; (ii)supervision of works; (iii)coordination and supervision of technical assistance and training activities; (iv) monitoring the fulfillment of proposed targets and carrying out evaluations to assess the achievement of the project objectives; (iv) produce reports regarding progress in project implementation; (v) prepare instructions or guidelines neededfor proper program execution; (vi) prepare disbursement requests for external financing and the financial reports required by the Bank; (vii) prepare accountability reports of the project; and (viii) carry out project audits. T h i s Group would be headed by a Project Director and assisted by professional staff (a Civil Engineer, an Economist and a Traffic Engineer) and other administrative staff, all with qualifications and experience acceptable to the Bank, under Terms of Reference acceptable to the Bank. All these are being contracted as part of project preparation (under the PPF) and would work within the municipal offices throughout the duration of the project. - 53 - T 8Ea VI .I 8 Y a .I 8 Bbi8 Y 0 4.C. Component 3: SanitationinSanta Cruz Introduction Sanitation (and water supply) services in Santa Cruz are provided by 10 cooperatives the largest of which is SAGUAPAC, which serves 65% of the city's area. Sewerage coverage is only about 50% in the SAGUAPAC concession area, giving Santa Cruz an overall level of sewerage coverage of only 33%. In addition to the immediate public health and environmental effects associated with low sewerage coverage, sewage infiltration into the city's main aquifer will result in irreversible damage. There is therefore an urgent need to increase the coverage of Santa Cruz's sewerage system to avoid the much larger investments associated with developing an entirely new water supply source for the city. While SAGUAPAC is a well-managed utility, it faces a number of major challenges requiring significant investment. Santa Cruz also faces an institutional problem, in as much as sanitation services in some low income peri-urban areas are provided by small independent cooperatives, often with limited resources and technical capacity. The project would thus help SAGUAPAC face part of its major challenge, Le., to continue the expansion of sewerage networks into low-income areas and increase the capacity of its wastewater treatment plants. SAGUAPAC has recently updated its financial projections and long-term investment program and found that it will require financing in the order of US$70 million between 2005 and 2009. The present component can support only a small portion of these investment needs and would be targeted to lower income areas of the city, since the more consolidated central areas already enjoy full sewerage services. SAGUAPAC proposes the implementation of a $US10.0 million component financed by the Bank: Sewerage and Wastewater Treatment. This component consists of five main elements: (i)construction of secondary sewerage networks in poor neighborhoods of Santa Cruz; (ii)construction of section of main collectors required to connect these poor neighborhoods to the wastewater treatment plant; (iii)works for increasing the capacity of two wastewater treatment plants of SAGUAPAC; (iv) consulting services for project appraisal, to be financed retroactively; and (v) training in technical aspects of sewerage and waste water treatment. Retroactive financing might also be used to finance works and goods related to sub-components (i), and (ii) (iii). , The secondary sewerage networks will be constructed in neighborhoods UV-106 (partially), UV-114, UV-115, UV-l18A, UV-119 and UV-140 of Santa Cruz, which are of the poorest areas located betweenAnillos 5 and 6, thereby expanding service to 37,500 additional residents of the city. The sewerage networks will be based on gravity conventional improved sewers which is the standard technique used by SAGUAPAC and was selected on the basis of an extensive satisfactory performance experience of this type of sewers used by SAGUAPAC. The total length of the secondary sewers which would be installed i s about 92 km. The range of pipe diameters to be constructed is 150 mm to 400 mm. For small diameter sewers of 1.50 mm, PVC pipes will be used, while for larger diameters, reinforced concrete pipes will be installed. The wastewater collected in neighborhoods UV-106 (partially), UV-114, UV-115, UV-l18A, UV-119 and UV-140 (through the networks financed under the project) - 55 - will be conveyed to the Northern and Eastern wastewater treatment plant (Planta Norte and Planta Este). Part of the main conveyance system to this plant has already been constructed and part is under construction through financing of CAF (SAGUAPAC has two projects with CAF). So the conveyance system of the additional wastewater collected as a result of the project works to the Eastern wastewater treatment plant does not require the Bank's financial support. However, SAGUAPAC requires financial support for constructing part of the main wastewater conveyance system to the Northern treatment plants (Plantas Norte), to complement the portion of the main conveyance system investment financed by CAF. Since the overall objective of the project is to support SAGUAPAC in increasing wastewater collection, conveyance and treatment in the entire city, the project supports financing part of the main conveyance system to the Northern treatment plants. The main collectors financed under the project are in a diameter range of 400 mm to 1,100 mm, all reinforced concrete pipes. The total length of pipes to be installed is 4.55 km. Santa Cruz has three wastewater treatment plants constructedby SAGUAPAC: Planta Norte 1, Planta Norte 2 and Planta Este. The capacity of these plants i s approaching the design capacity, and it is required to increase their capacity so that they can cope with the increased flows which will reach them as SAGUAPAC increases the coverage of the sewerage systems in the city. The project will increase the capacity of the wastewater treatment plants in a unique and cost-effective manner. The three treatment plants, based on stabilization lagoon treatment technology, were originally constructed outside the city limits. Since their construction date the city grew and presently the plants are surrounded by residential areas. This creates two problems: (i) the plants present an environmental nuisance to the neighboring residents, mainly by generating offensive odors, since the lagoon technology based plants are not fit for location in vicinity of residential areas; and (ii)the conventional form of increasing the capacity of this type of plants is by increasing their area, however, this solution cannot be applied in Santa Cruz since there is no area available around the plants. To resolve the problems, three unique innovative technologies were adopted to be incorporated in the plants. The first technology is micro-screening. Rotating fine micro-screens will be installed at the inflow to each plant. In fact only two micro- screens installations will be constructed, one on the inflow canal to plant North 2 and the other on the inflow canal to plant East. The capacity of plant North 1 i s currently being increased utilizing the conventional method or expanding its area. Each micro-screening installation will consist of three micro-strainers, each of a diameter of 1.8 meters and screen opening of 2 mm.These micro-screens remove about 30% of the suspended solids and about 10% of the organic matter contained in the raw wastewater, thereby reducing sedimentation in the lagoons and reducing the organic load on the lagoons (Le. the load of organic matter that the lagoons need to decompose and remove). The second technology i s odor control in anaerobic lagoons by covering them. The anaerobic lagoons, which are the first type of lagoons in the lagoon chain in each plant, will be covered by geomembrane sheets which will prevent release of gases to the atmosphere and thus prevent generation of odors. The main source of odors in lagoon systems are the anaerobic lagoons and so covering them will eliminate, to a large extent, the odor problem and permit increasing the load on the anaerobic lagoons, i.e. increase the capacity of the plant. In addition, after covering the anaerobic lagoons it would be possible to collect and burn the methane gas produced in the anaerobic process before its discharge to the atmosphere. This will constitute a reduction in greenhouse gases and will support the global efforts to control the - 5 6 - climate change. Since the Plant North 1 is currently being upgraded using conventional technology of increasing lagoon area, financed by SAGUAPAC's own resources, there is no need to cover its anaerobic lagoons from the standpoint of increasing this plant's capacity, so only the anaerobic lagoon of plants North 2 and East, with a total area of 8 hectares will be covered by the project. However, attempts will be made to explore carbon finance opportunities for the project. If these are successful, the anaerobic lagoons of plant North 1 will also be covered. Gas collection pipes aimed at collecting the methane gas produced in the anaerobic lagoons will be installed on all the covered lagoons, as well as gas burners for gas flaring. The carbon finance opportunities were key in determining the technology for gas collection and flaring. The lagoons will be covered in an adequate manner, using geomembranes resistant to the gases generated. Additionally, a rainwater collection system will be included in the geomembranes so as to prevent storm water from damaging the system. The third technology involves uniquely designed wind operated slow mixers which will be installed inthe facultative lagoons. This will enhance the treatment capacity of these lagoons by preventing short-circuiting in these large lagoons and thus enhancing the efficiency of each of the layers formed in the lagoon (anaerobic, facultative and aerobic). The number of the mixers which will be installed in Plant North 2 is 30, and the number of mixers to be installed in Plant East is 24. To reach the final capacity of the plants, more mixers need to be installed in each one. However, the first stage covers the present quantities which are capable of attending the needs of the next several years. As the raw wastewater flow to the lagoons increases, the number of mixers will also increase. With these innovative techniques it will be possible to double the capacity of the treatment plants without increasing their area, all that at a cost much lower than required by other methods of increasing treatment capacity. Beneficiaries This component is aimed at benefiting poor neighborhoods located in the city's 5`h and 6`h urban rings, which are populated mainly by low income families. The estimated beneficiary population is approximately 37,500 over a projection of 6,228 connections in a 596-hectare area. This expansion will increase the proportion of the population covered from 49% to 53% in the SAGUAPAC concession area, and from 31% to 33% of the total population of the city. Estimated Pr0.iect Costs Detailed costs of the SAGUAPAC Component are presented in the following table. These costs include contingencies. - 57 - Detailed Costs of the SAGUAPAC Component u_~-~-w.w,~ -= S A O U A P A C -.- AUANTARILMDO SANlTARlO .I LlClTAClONES BANCO MUNDIAL - 58 - Annex 5: Project Costs BOLIVIA: Urban Infrastructure Project Project Cost By Component and/or Local Foreign Total US$ US$ US$ Activity million million million 1. Urban upgrading inL a Paz 9.45 0.0 9.45 2. Urban transport inEl Alto 6.64 2.25 8.88 3. Sanitation in Santa Cruz 7.18 1.75 8.93 Total Baseline Cost 23.27 4.00 27.27 Physical Contingencies 1.16 0.40 1.56 Price Contingencies 1.16 0.40 1.56 Total Project Costs2 25.60 4.80 30.40 Interest duringconstruction Front-endFee Total Financing Required 25.60 4.80 30.40 Note: Project costs by component including contingencies are: Component 1: Local US$10.4M Foreign US$OM Total US$10.4M Component 2: Local US$7.3M Foreign US$2.7M Total US$lO.OM Component 3: Local US$7.9M Foreign US$2.1M Total US$lO.OM -59- Annex 6: Implementation arrangements BOLIVIA: Urban Infrastructure Project The Republic of Bolivia, through the Ministry of Planning, will be the recipient of the proposed IDA Credit, who in turn will transfer credit proceeds to the Municipalities of La Paz, El Alto and the Cooperative SAGUAPAC of Santa Cruz, through Subsidiary Credit Agreements (SCAs). Each individual SCA, will establish the terms and conditions under which proceeds are going to be transferred to each jurisdiction and the distribution of responsibilities and functions of Municipal entities and SAGUAPAC to manage the transferred resources and execute the components. The transfer of funds will be made under the same IDA conditions. Each implementing agency will manage a special account. There is a law for water and sanitary drainage service providers (Law 2649) that allows the transfer of public resources to public or private system operators, covering the SAGUAPACcase. The Ministry of Planning through VIPFE will be responsible for acting as a permanent link between the Bank and Municipalities of La Paz, El Alto and SAGUAPAC. VIPFE will be in charge of requesting, on behalf of the executing agencies, project extensions, amendments, changes in disbursement categories, and other operational processes, to the World Bank. Each agency has assigned its own staff to carry out the implementation of their component, which i s in line with Bank guidelines. In the case of La Paz, the longstanding unit of the Barrios de Verdad program is staffed by the municipal government that assigns a program coordinator, three managers supervising existing projects, overseeing the preparation of new projects, and ensuring that social accompaniment takes place throughout project preparation and implementation. Inthe case of El Alto municipal staff from the Urban Development and Environment Department (Oficialia Mayor de Desarrollo Urbano y Medio Ambiente, OMDUMA) has been assigned to the project. Four consultants, civil engineer, traffic engineer, economist and administrator, to be financed through a project preparation facility (PPF) at first, and then through credit proceeds, will provide support to OMDUMA's staff. SAGUAPAC in Santa Cruz has designated its Planning and Systems Manager as the Project Coordinator. Financial management and procurement arrangements are detailed inAnnexes 7 and 8 respectively. 6A. Component 1: Urban Upgrading inLa Paz The urban upgrading component in L a Paz will be executed within the existing structure of the Barrios de Verdad (BdV) Program, within the Municipal Government of La Paz. The Barrios de Verdad Structure The BDV coordinator reports directly to the mayor, as illustrated in the organizational chart below. The unit i s divided in three units, one for supervision of on-going projects, one for planning of new projects and one for community development: These units are staffed with engineers, architects, sociologists and social workers. In addition to the technical staff, the unit i s supported by a general secretary who supervises a team consisting of one lawyer, a monitoring and evaluation expert, administrative and financial staff, and a communication specialist in charge of documenting the processes. The BdV unit will use the PPF to purchase computer - 60 - equipment, one vehicle, audiovisual media, and topographic equipment. The program estimates that no additional personnel will be required for project implementation. OrganizationaI structure Barrios de Verdad Program Municipal Council I Mayor I I I Executive secretary City Planning Department Contracts and Bids BdV Coordinator General secretary Legal advisor Monitoring and evaluation Administration and finances ICommunication and Supervision Planning Community coordination Development 4 engineers 3 engineers 2 sociologists 5 architects 3 architects 2 social workers Barrios de Verdad selection process The process to select neighborhoods is called a concurso. The BdV program has already carried out various concursos and these have gained popularity in the city. It i s a transparent process, with clear rules and established deadlines. The participating communities receive technical assistance throughout the process. The concurso includes seven steps as described in the table below. The qualification criteria and their corresponding scores and weights have been given to the Bank and are in the project files. 1. Identification of Macro Districts: Inaccordancewith equity criteria, the eligible macro districts for the selectionprocess are defined so as to distribute the 100neighborhoodsfairly and evenly. 2. Dissemination Stage: Once the contest is made public, the dissemination stage takes place throughopen macrodistrict meetingsthat gather together all neighborhoodassociationsin order to inform and encourage them to apply. 3. Preselection Stage: The Barrios de Verdad Program targets neighborhoodsbased on poverty and marginality indicators (Municipality of La Paz' poverty line). Once the neighborhoods are identified, the program verifies that they have fulfilled the program's minimum requirements (see Annex 4). 4. Technical Assistance Stage: The preselectedneighborhoods will receive training on how to apply for the selection process. The training aims to guide the community in its priority setting process, so as to benefit and engage the most people possible. 5. Validation stage: Once the applications are in, the program's technical staff will visit the -61 - Ineighborhood association in order to evaluate and validate the feasibility and estimated cost of the requested works. 6. Classification stage: In order to guarantee transparency, the program has set up a classifying commission (including a representative from the Monitoring Committee, Federation of Neighborhood Associations, vice mayors of the macro districts and the Barrios de Verdud program coordinator), that will be in charge o f (i)ensuring that the applications submitted by the neighborhoods meet the selection criteria (see Annex 4); and (ii)qualifying eligible applications with a scoring process that takes into account streets and sidewalk features, housing features, storm drainage, number of families and members of family, number of rooms per family, existence and features of social and sports facilities, vulnerability level, electricity consumption and availability, exclusive neighborhood association acknowledged by the community and submission of commitment agreement from the community. Furthermore, additional points are awarded to applications from joint neighborhoods, female headed households and for early submission of applications. 7. Announcement of winners and signing of agreements: the winners are announced in a ceremony presided by the mayor. Some weeks after the announcement, the Neighborhood Associations sign two agreements with the BdV program: (i)to agree to participate in the accompaniment activities and to establish their counterpart; and (ii)to sustain the effort through operation and maintenance. Project Implementation Process A detailed implementation plan is prepared by the BdV team and discussed with the community. The BdV team also develops a contingency plan in case adjustments are needed. The following are the project steps: i. TAforcommunityorganizationandsub-project selection. BdV officers will prepare policies, social intervention models and technical designs in order to discuss alternatives with neighborhood representatives. The implementing team aims to reach an agreement with the community to prioritize investments in the neighborhood and tailor social interventions, within the existing budgets. ii. Subprojectapproval Once the investments have been prioritized and the final cost has been calculated, the BdV officers will organize a workshop with the community to discuss the final design, costs and schedule. The neighborhood association ('junta vecinal) will represent the community in choosing the final design and costs. iii. Collectionofcommunitycounterpartcontributions. During the selection phase the community will present a proposal describing its contribution. During the investment phase, in close coordination with the community, it will develop a monitoring tool in order to follow up on community commitments. iv. Contracting for sub-project implementation. The TORS,written during the preparation phase, will be submitted to the Bidding and Contracts Department (Direccih de Licitaciones y Contratos). This department will prepare bidding documentation as well as the contracts. Two main contracts will be signed: one for physical works and one for community development activities. v. Contractor supervision and payment There are two levels of supervision: (a) a contractor, hired by the BdV program, will supervise and report the advance of the tasks to the BdV team; and (b) the community committee will also monitor the implementation and report to' the BdV team. Payments will be released by the GMLP administrative office after a clearance from the BdV's director. - 62 - vi. Operation and maintenance Inorder to guarantee the short and medium term maintenance of the program, it will: (a) develop a strategy to promote ownership; (b) facilitate the organization of committees for monitoring within the same community; (c) facilitate the creation of working groups in charge of specific tasks; (d) prepare and implement a strategy to collect neighbors' contributions to maintain and operate the improved infrastructure. Other agencies that uarticiuate inthe uromam The following agencies participate in the civil works sub-component: - City districts verify that neighborhood applications conform to the Annual Operational Plans - GMLP's Technical Department reviews that proposals had been prioritized. - GMLP's Watershed Departmentreviews proposed drainage works. - GMLP's Roads Department reviews proposed road improvements and new construction - GMLP's Green Space Enterprise reviews proposed reforestation works. - GMLP's Cadastre reviews and issues cadastre certificates - Registry reviews and issues registeredtitles - RegularizationProgram (PRUR)reviews neighborhood physical plans - Municipal Regulation system coordinates cleaning campaigns 6 B. Component 2: Urban Transport inElAlto The Municipal Government of El Alto, through the Urban Development and Environment Department (Oficialia Mayor de Desarrollo Urbano y Medio Arnbiente, OMDUMA) will be responsible for the execution of the proposed component. The Major of El Alto will delegate one permanent staff from OMDUMA as direct responsible for the implementation of the project. The Project Coordinating and Advisory Group (PCAG), to be financed with credit proceeds, will support OMDUMA in the coordination and management of project activities. The PCAG would be headedby a Project Director who will report directly to the Official Mayor. The Project Director will be assisted by professional staff (a Civil Engineer, an Economist and a Traffic Engineer) and other administrative staff, all with qualifications and experience acceptable to the Bank, under Terms of Reference acceptable to the Bank. The OMDUMA with the support from the PCAG will be responsible for the following tasks: 1. Act as permanent link between the Municipal Government and the Bank, including follow up on supervision missions and maintaining required contacts with VIPFE at the National level regarding the execution of the Credit. 2. Plan, coordinate, execute and supervise the projects under each of the sub- components of the Component. 3. Preparedetailedengineeringdesigns for the subprojects to be executed 4. Prepare the documents required to carry out procurement and contracting activities for all the proposed projects 5. Submit projects, TORand technical analysis for Bank consideration when appropriate. 6. Coordinate all activities related to the biddingprocesses 7. Follow up compliance of contracts established under the sub-components - 63 - 8. Prepare information and documents needed to request payments to contractors 9. Prepare environmental evaluations and supervise implementation of environmental norms, through the existing environmental units. 10. Periodically evaluate results related to the execution of the subprojects 11. Determine actions to be undertaken to solve contract conflicts 12.Approve changes inwork execution methods 13. Follow up on all instances of work execution 14. Organize and maintain files containing all technical information about works developed 15. Periodically update the Procurement Plan 16.Prepare instructionsor guidelines neededfor proper program execution 17. Regularly prepare progress reports for each sub component under execution and the component as a whole. 18. Implement or define an internal control system for activities related to the program. Ensure that audit requirements for the project are followed up. - 64 - Organizational structure GMEA I Municipal Council Administrative support units Administrative support Oficialia Mayor Oficialia Mayor Planning and Economic and Environment Development Supervision of works Territorial Planning, Urban Administration and Cadastre Municipal projects Environment 6 C. Component 3: Sanitation inSanta Cruz SAGUAPAC was created in June 1979 and was officially recognized by the National Institute of Cooperatives (INACO) in August 1979. It i s the main supplier of water and sanitation services in Santa Cruz. The organizational structure of SAGUAPAC is based on a classical cooperative arrangement in which decision making is decentralized to its customers. The city is divided in 9 districts each of which has a District Council of 5 people and elects 3 delegates to the General Assembly. Elections take place every two years. The elections are organized by SAGAUAPAC with supervision from INALCO. The General Assembly has two principal functions: (i) it elects the members to the Administration and Control Councils; and (ii)it approves SAGUAPAC's main decisions. The Administrative Council meets twice a month. It elects its own president and administrative support and appoints the general manager.29 This component will be executed by the cooperative SAGUAPAC. For the execution of this component, SAGUAPAC will use its existing systems. Currently, SAGUAPAC is implementing works using its own resources and is also implementingtwo CAF projects. The World Bank project will be another one in the '`Nickson Andrew, OrganizationalStructure and PerformanceinUrban Water Supply: the Case of the SAGUAPAC Co-Operativein Santa Cruz, Bolivia, International DevelopmentDepartment, Schoolof Public Policy, The University of Birmingham, undated. - 65 - series of projects implemented by SAGUAPAC and will be treated in a similar way to the others. The component coordinator will be the Planning and Systems Manager of SAGUAPAC. He will be in charge of project execution and monitoring of progress, requesting Bank no objections, submitting periodic reports to the Bank on project implementation progress and monitoring and evaluation. He will also be in charge of procurement activities. The engineering unit of SAGUAPAC will be in charge of design of works and design modification, if required. The procurement unit of SAGUAPAC will carry out all procurement activities usingWorld Bank procurement guidelines. The works department of SAGUAPAC will be in charge of supervision of all the works. The administrative and financial manager of SAGUAPAC will be in charge of financial management activities, including documenting SOEs, management of the special account, monitoring of client connection and audits. The information management system of SAGUAPAC is capable of documenting and tracking all project activities according to Bank requirements. A similar approach of project execution was applied in the previous Bank projects of SAGUAPAC, with successful results. Organizational structure SAGUAPAC Administrative Vigilance Council Committee Commercial Manager Administrative and EngineeringManager Planning and Systems Financial Manager Manager - 66 - Annex 7: Financial Management BOLIVIA: Urban Infrastructure Project Executive Summary In view of the implementation arrangements defined for the project, a financial management assessment was conducted for each one of the proposed implementing entities (GMLP Barrios de Verdad Program, GMEA AND SAGUAPAC,). The assessments were performed in accordance with OP/BP 10.02 and the Manual "Financial Management Practices in World Bank Financed Investment Operations". The evaluations were carried out on site between November, 2005 and March, 2006, including several visits, field work, and follow-up activities with the preparation teams. The objectives of the assessments were to determine the adequacy of the proposed implementing entities' capacity to properly manage and account for all project proceeds and to produce timely, accurate and reliable financial statements for general and special Bank purposes. Overall Conclusion Bolivia's country Public Financial Management (PFM) risk rating i s ~ubstantial.~~ The advances reached towards improving the PFM, have been offset by several weaknesses found in the uneven application of the legal framework, particularly with regard to financial reporting and the internal control environment. The situation at the sub-national level is not really different. As this is the first time that the World Bank supports an operation with municipal governments (except for Santa Cruz) as direct implementing agencies, it has required a simple project design with flexible implementation capacity requirements. This same premise has been applied for financial management arrangements. Existing arrangements will be used as much as possible and strengthened as needed to ensure that project funds are used economically, efficiently and for the intended purposes. The design of the arrangements has also considered the associated risks and weaknesses that may prevent the implementing agencies from providingthe Bank, the Borrower and other interested parties (Municipal Councils, Supervision Committees) with accurate and timely information regarding project resources, expenditures and activities. Subject to the successful implementation of the proposed arrangements -including the mitigating measures-, the project's inherent and control residual risk rating are moderate. However, these ratings could be affected if the implementing entities are not able to maintain the proposed arrangements -including qualified staff- throughout the life of the project, and also, if mitigating measures are not implemented as expected. On the basis of the review performed and the progress reached so far and the actions that are being taken to complete the pending requirements that will be followed-up during implementation, the financial management team concludes that the proposed financial management arrangements are acceptable to the Bank for the three implementing agencies. Finally, it is important to note that monitoring and supervision of the operation of the arrangements defined for each implementing 3n2004 CFAA, January, 2005 - 67 - entity, as expected, will be essential to guarantee the adequacy of the financial management system. FINANCIAL MANAGEMENT ASSESSMENT Risk assessmentand Mitigation The following risk assessment constitutes a summary of the issues considered for the project as a whole. Risk Risk Risk MitigatingMeasure Incorporated Condition of Residual into ProjectDesign Negotiations, Rating Board or Effectiveness ( Y N InherentRisk Country SIL was chosen as lending instrument. Subsidiary Level In spite of having three implementing agreements including agencies, project design is straightforward providing for the Sub-national and this permits us to use the transfer of funds Level implementation capacity installed in the under the terms three agencies, strengthening as needed. defined in the Activities are clearly defined and to the financing extent possible, existing structures and agreement should capacities are being used. When needed, become an special technical assistance and training effectiveness will be provided both with the PPF and/or condition. credit proceeds. Y (Effectiveness) Entity level La Paz Component will be implemented The GMEA has through an already established completed the decentralized program with its own selection process of structure and operational procedures that the Administrative are being strengthened as needed. Officer under terms of reference In the case of El Alto, project design approved by the includes technical training for the municipal Bank. technical transport units and the hiring of specialized consultants, including an Administrative Officer that would undertake specific FM tasks, required by the WB. The component in Santa Cruz will be carried out by the largest sanitation cooperative that has developed appropriate capacity to comply with high level performance standards that led them to receive the ISO-9002 Certification. Project level M Given the decentralized feature of the Inthe framework of project, there are three different such design, and in implementing agencies. However, the view of the capacity design of all three components is constraints in L a straightforward; there are no multiple Paz and El Alto, donors or transfer of funds to communities simplified FM or beneficiaries, and there are a small arrangements have number of contracts under a well defined been agreed for and limited number of activities. each of the agencies, trying to avoid complex - 68 - makingsure adequate controls are in place. ControlRisk Budgeting M In the framework of the implementation Both La Paz and El Accounting arrangements defined for each component, Alto have worked Internal specific FM processes and procedures are on the designof Control being discussed and designed in order to specific processes guarantee its adequacy, so as to ensure and procedures, project funds are used economically and including internal efficiently. controls,to ensure the adequate use of Implementingentities will be strengthened projectfunds. with the contracting of qualified staff, as needed; namely a Procurement Specialist Those procedures for La Paz and an AdministrativeOfficer in will be reflectedin ElAlto. the Operational Manual. The implementation of a ring-fenced integrated systemis contemplated as part of the PPFfor La Paz. Funds Flow M Traditional disbursement method has been recommendedfor the three components. In the case of El Alto, direct payments would be selected as preferred disbursement mechanism for the infrastructure contracts, in case the established procedures do not operate as expected. Financial Under the three components, the content of Reporting M the financial reports is being defined so as to provide necessary information for monitoring purposes (component/ sub- component). They will all be prepared on the basisof the accounting records. Auditing M In the case of La Paz and El Alto, interim Audit TORSwill be audit visits will be required. preparedand agreed with the Bank six monthsafter implementation begins. Financial management implementationarrangements ,The results of the financial management capacity assessments conducted in each entity are presented below, including a general description of the arrangements to be followed by each agency SAGUAPAC The urban infrastructure component in Santa Cruz will benefit from the entity's existing performance, processes and procedures that have received the I S 0 9001 Certification. SAGUAPAC has been able to attract and maintain highly qualified professional who have developed important expertise in all financial management related tasks. - 69 - Programming and budget. The procedures established for the preparation of the annual program (PAO) and budget provide for a clear identification of project goals, responsible person, detailed implementation schedules, disbursements schedule, resources required and indicators. Although the entity has put adequate procedures in place for the preparation of reliable reports on the PAO's execution, these are prepared on excel spreadsheets through a comprehensive reconciliation process. Therefore, the implementation of the PA0 module in the recently implemented information system would certainly strengthen the entity's capacity to perform timely monitoring of the investment budget, including its correspondence with the procurement plan, timely registration of commitments and the preparation of specific reports that support the decision making process. Accounting - Znformation system. SAGUAPAC follows Generally Accepted Accounting Standards and their current accounting policies and procedures are acceptable. The entity has recently implemented an integrated system that would also be used to record projects' transactions. Consequently, SAGUAPAC has already defined the specific accounts that will be used to register project transactions in terms of funds received, advances and payments made. Written procedures. SAGUAPAC has prepared written administrative and finance procedures which have been formalized and approved through the corresponding levels. Those procedures provide for an adequate segregation of duties in terms of authorization, approval monitoring functions. These same procedures will be applied to the projects. Financial reporting. The core content of the interim financial reports has already been defined with the Bank and it includes: sources and uses of project funds, and a statement of investments by project component reporting to the current quarter and the cumulated operations. Arrangements for the issuance of the report from the integrated system have also been made. The interim unaudited financial reports would be submitted to the Bank on a quarterly basis. Audit. Given the size of SAGUAPAC's operations, this project would actually be considered non-material for auditing purposes. Therefore, it has been agreed that project's financial statements would be audited separately, under acceptable terms of reference by an acceptable private audit firm. Taking into account the entity's financial viability i s critical for project implementation; the Bank will also require copies of SAGUAPAC's audited financial statements. GMLPBarrios de Verdad Program(La Paz) Although this program has been operating since 2002, this i s the first time it will take the overall responsibility for the implementation of an externally financed project, including all related financial management tasks, from programming to financial statements and auditing. Barrios de Verdad is a decentralized Program of the GMLP, and it has been staffed with technical and administrative and finance staff, financed with counterpart funds. FM staff has developed important expertise in the municipal administration, but has no experience in the direct administration of externally financed proceeds. Therefore, technical assistance and close supervision will be required. -70- Programming and budget. The preparation of the annual program and budget will follow local regulations issued by the Ministry of Finance. However, those general procedures are being complemented by some specific guidelines to be followed by the Program in relation to the project, including adequate reviewing and approval procedures. The following issues will need to be addressed in order to allow an adequate budgetary control: 1) timely preparation of programming, budget and procurement plan, establishing a clear relation among them; 2) proper recording of the approved budget in the financial management system, not only following Government required classification (partidas por objeto del gusto), but also a classification by project component and cost category; 3) timely recording of commitments, payments and accruals as needed, to allow an adequate budget monitoring and also provide accurate information on project commitments for programming purposes. Accounting -Information system. Project transactions will be recognized following the cash basis of accounting, and it will initially use the Chart of Accounts issued by the General Accountant's Office, adequately adapted to reflect project components and cost categories. The Program will also benefit from the use of SIGMA and the Single Municipal Account (CUM) to process payments. However, before addressing its information needs, the Program has to ensure an adequate monitoring of project activities; it will also use a ring-fenced integrated system (budgeting, accounting and procurement). This system, used by other WB financed projects, allows the use of a customized classification of project expenditures and the subsequent preparation of project's financial reports and withdrawal applications. The basic arrangements in terms of accounting manual, chart of accounts, and specific format and content of the financial reports, have already been incorporated in the system. However, the full integration with the physical monitoringmodule i s still missing. In-kind contributions. The in-kindcontributions provided by the neighborhoods will be valued following the valuation criteria established by the Municipal Government of La Paz. They will be recognized on an output basis, based on physical progress reports approved by the Supervision Manager, and will be included in the project's financial statements. Written procedures. The program has also worked in the design of specific procedures to process payments, including the participation of the Municipal Treasury and providing for adequate segregation of duties, responsibilities and internal controls. Those specific procedures will be part of the Operational Manual. Financial reporting. The financial interim reports will specify sources and applications of project resources and a statement of investment by project component reporting the current quarter and the accumulated operations against on-going plans. The reports would include credit proceeds, local funds provided by the GMLP and the in-kind contributions provided by the neighborhoods, duly valued as described before. Taking into account the considerations made in the accounting section, the financial reports would be directly prepared from the integrated system. The content and format of the interim financial reports have already been agreed with the Bank. It has also been agreed that interim reports will be prepared and submitted to the Bank on a quarterly basis. -71 - Audit arrangements. Annual audit reports on project financial statements, including management letter should be submitted to the Bank, within six months of the end of Borrower's fiscal year (December 31). The audit should be conducted by an independent audit firm acceptable to the Bank and under terms of reference approved by the Bank. Audit cost would be financed out of credit proceeds and selection would follow standard Bank procedures. The scope of the audit would be defined by the Barrios de Verdad Program's team in agreement with the Bank based on project specific circumstances, features and responding, as appropriate, to identified risks. GMEA (El Alto) The infrastructure component in El Alto will be implemented through the Oficialia Mayor de OMDUMA with the support of the Oficialia Mayor de Administracicin y Finanzas (OMAF). Such arrangements will be strengthened with the contracting of specialized consultants, including an Administrative Officer that will assume specific FMtask inherent to WB requirements such as preparationof withdrawal applications, financial reports, etc. This role will require a continuing interaction with OMAF. Programming and budget. The project budget should be prepared following the classification required by local rules (Partidas por objeto del gasto) and the classification agreed with the Bank, in terms of components/categories established in the project documents. In the framework of such general procedures, the project team has worked on the definition of specific procedures to be followed for the preparation of the project's annual program, budget, and procurement plan, including the reviewing and approval processes up to its consolidation into the GMEA's general budget. The budget approval process will require the participation of OMDUMA, the GMEA's Planning Unit,and the Vigilance Committee. Accounting - Znformation system. In relation to the accounting arrangements, the GMEA applies the National Integrated Accounting Standards and the Chart of Accounts issued by the General Accountant's Office. However, the chart of accounts will be complemented with a more functional classification including project componentshb-components and cost categories as needed, that will be incorporated in the accounting system SINCOM, currently used by the municipal government. SINCOM is an integrated system developed for sub-national governments that has been periodically up-dated. Although the accounting system would allow keeping separate reports for the project, it will not allow the direct preparation of financial reports. These will be prepared by the Administrative Officer following the format and content agreed with the Bank and usingthe information provided by the accounting records. Written procedures. Although not formally approved, the municipal government has established certain internal procedures that govern its financial management function. In order to allow a smooth flow of funds and an efficient payment mechanism, specific procedures have been prepared in order to reflect the funds flow arrangements, taking into account an adequate segregation of duties between the project team, the Oficialia Mayor de Infraestructura Vial, and the Direccicin Financiera. Financial reporting. The financial interim reports will specify sources and applications of project resources and a statement of investment by project component - 72 - reporting the current quarter and the accumulated operations against on-going plans. The reports would include credit proceeds, and local funds provided by the GMEA. These interim reports, which format and content have already been discussed with the Bank, will be prepared and submitted on a quarterly basis. Audit. Annual audit reports on project financial statements, including management letter should be submitted to the Bank, within six months of the end of Borrower's fiscal year (December 31). The audit should be conducted by an independent audit firm acceptable to the Bank and under terms of reference approved by the Bank. Audit cost would be financed out of credit proceeds and selection would follow standard Bank procedures. The scope of the audit would be defined by the GMEA's team in agreement with the Bank based on project specific circumstances, features and responding, as appropriate, to identified risks. DISBURSEMENT ARRANGEMENTS Considering the results of the assessment in all three entities, the following Disbursement Methods may be used to withdraw funds from the credit: 0 (a) Reimbursement (b)Advance 0 (c) Direct Payment Under the Advance Method and to facilitate implementation, a segregated Designated Account (DA) in US dollars would be opened for each implementing entity. DAs for L a Paz and El Alto would be opened and maintained in the Central Bank of Bolivia and payments will be processed through the Single Municipal Account (CUM) in the case of L a Paz, and through a local currency bank account in the case of El Alto, following the arrangements established by the Viceministry of Treasury with the banking system. The DA for SAGUAPAC (as a private cooperative) will be opened and maintained in a commercial bank, on terms and conditions satisfactory to the Bank. The ceiling (maximum amount) for advances to be made into the individual DAs would be US1,000,000 per individual DA, estimated to be sufficient for project execution for each component for a period or at least 4 to 6 months. It is expected that eligible expenditures paid out of the DA be reported on a monthly basis by each implementing entity. Supporting documentation for documenting project expenditures under advances and reimbursement method will be: statements of expenditures (SOEs), and records (e.g. invoices, receipts, etc) for all expenditures above the following thresholds: payments for civil works against contract valued at USD1,000,000 or more for L a Paz and El Alto components, and USDl,500,000 for SAGUAPAC; payments for goods against contracts valued at USD 200,000 or more for L a Paz and El Alto components, and USD500,OOO for SAGUAPAC; and payments for consultant services against contracts for firms valued at USD100,OOO for L a Paz and El Alto component, and USD200,OOO for SAGUAPAC; and USD50,OOO for individuals for L a Paz and El Alto components, and USD100,OOO for individuals for SAGUAPAC. All consolidated SOEs documentation would be maintained by each implementing entity for post-review and audit purposes. - 73 - Direct payments supporting documentation will consist of records (e.g.: copies of receipts, supplier/ contractors invoices). The minimum value for applications for direct payments and reimbursements will be USD200,OOO. ALLOCATION OF CREDIT PROCEEDS 1. Goods, works, consultants' services and training under 6,500,000 100% comuonent 1 Notes : m e amounts in SDR were calculatedat the prevalentrate of this document (see page 1) b/ This category includesindicatively: -- Consultants'services:$1,650,000 Works $7,900,000 For a total of $9,550,000 c/ This category includes indicatively : -Works: $8,000.000 - Goods: $240,000 -Consultants' services:$1.100,000 -Training: $210,000 For a total of $9,550,000 d/ This category includesindicatively: -Works: $7,800,000 --- Goods:$2,000,000 Consultants' services: $200,000 Training: $20,000 For atotal of $10,000,000 e/ The PPFwas allocatedin the following way: - La Paz: $397,519 - El Alto: $440,000 - 74 - FINANCIALMANAGEMENT ACTION PLAN Issues that need to be addressed by each of the implementing entities are detailed in the attached matrix: Issue Action Responsible Completion Person Date GMLP Information Complete the implementation of the Barriosde November30, system physical monitoring module of the Verdad Program 2006 integratedinformationsystem. GMEA Limited Financial Submit a copy of the contract signed GMEA November30, Management with the administrative officer selected 2006 Capacity under the TORSapproved by the Bank. Capacity building Provide training and technical World Bank's Before assistance to Program key FM staff in FMand LOA implementation terms of financial management and Teams begins DisbursementProcedures GMLP GMEA SAGUAPAC - - Operational All financial managementarrangements GMLP Effectiveness Manual should be adequately reflected in the GMEA corresponding chapter of the SAGUAPAC Operational Manual that is being preparedby each entity Financial management supervision during implementation Considering the results of the assessments for each entity, the identified associated risks and the need of technical assistance, at least during the first year, FM supervision would include on site visits to L a Paz and El Alto and a desk review of financial reports and audited financial statements for the three entities. - 75 - Annex 8: Procurement Arrangements BOLIVIA: Urban Infrastructure Project A. General Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Financing Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank inthe Procurement Plan. The ProcurementPlan will be updated at least semi-annually. Procurement of Works Works procured under this project would include: - Construction of Sewer System Collectors - Civil Works, Equipment Installation and Complementary Works - Implementation Works for 16 neighborhoods - Two major construction works for the city of El Alto The procurement of works will be done usingthe Bank's Standard Bidding Documents (SBD) for all ICB, if any; and bidding documents for NCB and Request for Quotations documents agreed with or satisfactory to the Bank. Procurement of Goods. Goods procured under this project would include: - Project appraisal studies for component 3 (to be retroactively financed) - Equipment of "Militamices" for two PTARs (N2 and Este) - Mixing Equipment - Laboratory Equipment - Office Equipment and Vehicles for the GMEA The procurement will be done using the Bank's SBD for all ICB, if any, and bidding documents for NCB and Request for Quotations documents agreed by or satisfactory to the Bank. Selection of Consultant Services Consulting services will be contracted under this project in the following areas of expertise: - - Implementation of Community Development - Supervision of Works - Supervision Services - Transport Studies - Auditing - 76 - Short lists of consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Operating Costs: No operating costs will be financed by the project. Others: The Project Operations Manual consists of the procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works, goods, non-consulting services, consultant services, and a list of special provisions of the Local Legislation's practices and requirements which can not be used on the procurement of processes financed by the project. B. Assessmentof the agency's capacity to implement procurement Procurement activities will be carried out by three implementing agencies, two municipalities and one cooperative: (i)"Gobierno Municipal de L a Paz - GMLP' (Component l), "Gobierno Municipal de El Alto - GMEA" (Component 2), and (iii) (ii) SAGUAPAC de Santa Cruz (Component 3). (i)TheGMLPincludesthe "Unidad Barrios de Verdad" which is adecentralizedunit in charge of executing the program called "Mejoramiento de Barrios". This program started about six years ago with an Interamerican Development Bank (IDB) project through the "Fondo Nacional de Desarrollo Regional (FNDR)". This unit is under the responsibility of a Coordinator, who reports directly to the La Paz Mayor. The Unithas three sub-units: technical; community development; and an administrative-financial unit. Under the latter, a Procurement Specialist will be hired who will be responsible for all procurement processes financed by the project funds. (ii) The GMEA has a ProcurementUnit under the Oficialia Mayor deAdministracidn y Finanzas (OMAF) which is composed by a supervisor and four technical staff, of which, one will be in charge of carrying out procurement processes financed by the project funds. This person has attended a procurement workshop sponsored by the Bank; however, it is recommended that the evaluation committees be provided with technical assistance. (iii) SAGUAPAC has a Procurement Unit under the Financial Department; however, all procurement processes are carried out by the Planning and Systems Management Unit. This institutional structure has been in place for several years and has worked out well. Therefore, it is recommended that this structure be kept for the implementation of the project. An assessment of the capacity of the Implementing Agencies to implement procurement actions for the project was carried out by Alvaro Larrea inFebruary 2006, and reviewed by Keisgner Alfaro and Miriam CCspedes in April 2006. The assessment reviewed the organizational structure of each entity for implementing the project and the interaction between the project's staff responsible for procurement and the Ministry's relevant central unit for administration and finance. The key issues and risks with a direct impact on implementation of project procurement that have been identified are: (i)the lack of procurement staff in the Unidad de Barrios's PIU to carry out procurement functions and overall modest experience in use of Bank procurement guidelines and procedures; (ii)some uncertainty about the permanency of project procurement staff in all agencies due to political change; (iii)an - 77 - overall procurement environment relatively weak and vulnerable, particularly procurement planning; and (iv) the lack of an integrated project management information system capable of supporting project coordination, supervision, control and reporting tasks in order to enable decision making and corrective actions, when needed, and Bank project supervision and external audits. With respect of the project-specific risks, several corrective measures have been agreed to and will include (i)Bank prior review of both the Terms of Reference and the selection process for the GMLP Procurement Specialist (PS). The PS should have extensive knowledge of both Bank and Bolivian procurement rules; (ii)immediate involvement of this new recruit in the preparation and finalization of the procurement plan, standard bidding documents and Operational Manual for the project; (iii)local governments and the sanitation cooperative to be involved in project implementation shall commit to the Bank to avoid procurement staff turnover, unless poor performance determined through formal performance assessment, otherwise leads to that sort of findings; (iv) submission of each agency's procurement plans and consolidation into a single procurement plan for at least the first 18 months of project implementation. Such plans shall be consistent with the procurement arrangements defined under Section F of this Annex; (v) insertion of a set of special provisions not acceptable to the Bank in the FA'S procurement schedule in order to avoid the risk of misprocurement; (vi) preparation and inclusion in the Operational Manual of standard formats for bid evaluation and consulting proposals; (vii) consistent with the Bank intention of promoting the use of country systems, SAGUAPAC shall have its integrated project management information system fully operational not later than project appraisal mission; and both the MGLP and MGEA have contracted with PPF funds the development and implementation of their respective integrated financial management and procurement systems. Based on all the facts previously mentioned, it i s concluded that the risk assessment for the Cooperativa de Servicios de Agua Potable y Alcantarillado Sanitario de Santa Cruz (SAGUAPAC) for the correct implementation of procurement i s MODERATE;while the risk assessment for both the Unidad de Barrios de Verdad del H. Gobierno Municipal de La Paz and the H. Gobierno Municipal de El Alto is HIGH. The general assessment for all three entities is MODERATE. However, based on findings above, this assessment as well as the prior review threshold proposed ahead will be subject to revision, upon implementation of the action plan to build the procurement capacity in the implementing agencies. C. ProcurementPlan The three executing agencies, at the project appraisal mission, developed a procurement plan for project implementation which provided the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team onJuly 26,2006 and i s available at their offices. It will also be available in the project's database and in the Bank's external website. The Procurement Plan will be updated in agreement with the Project Team semi-annually or as required by either the Borrower or the Bank to reflect the actual project implementation needs and improvements in institutional capacity. - 78 - D. Frequency of Procurement Supervision In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended semi-annual supervision missions to visit the field, including the carrying out of ex-post review of procurement actions. E. Detailsof the Procurement Arrangements Involving International Competition 1. Goods, Works, andNon Consulting Services (a) List of contract packages to be procured following ICB and direct contracting: 2 3 4 5 6 7 8 Ref. No. Contract Estimated Procurement P-Q Dom Review Expected Description cost Method estic by Bank Bid- US$ Prefe (Prior / Opening rence Post) Date (yes/ no) B.2.1.1.1 Goods. Equipment 0.65 m. ICB No Prior of "Militamices" for two PTARs (N2 and Este). B.2.1.1.2 Goods. Mixing 1.45 m. Direct No Prior Equipment. Contracting (b) Contracts for goods estimated to cost above US$200,000 for Components 1and 2; and US$350,000 for Component 3 will be subject to prior review. Contracts for works estimated to cost above US$l,OOO,OOO for Components 1 and 2 and contracts with estimated value of US$3,000,000 or more for Components 1, 2, and 3, and the first 2 contracts to award with use of NCB procedures for Component 3, will be subject to prior review by the Bank. All direct contracting for all three Components will be subject to prior review by the Bank. 2. Consultant Services (a) List of consultant assignments with short-list of international firms. Transport Studies. (b) Consultancy services (firms) for Components 1 and 2, estimated to cost above US$lOO,OOO per contract; and consultant services (firms) for Component 3, estimated to cost above US$200,000 will be subject to prior review by the Bank. Consultant services (individuals) for Components 1 and 2, estimated to cost above US$25,000; consultant services (individuals) for Component 3, estimated to cost above US$50,000, will be subject to prior review by the Bank. All single source selection of consultants for all three Components will be subject to prior review by the Bank. (c) Short lists composed entirely of national consultants: Services estimated to cost less than US$200,000 equivalent per contract may be composed entirely of national - 79 - consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. F.THRESHOLDS FORPROCUREMENTMETHODS AND PRIOR REVIEW Thresholds recommended for the use of the procurement methods specified in the project procurement plan are identified in the table below, which also establishes the notional thresholds for prior review. The agreed procurement plan will determine which contracts will be subject to Bank prior review. Contract Value Expenditure (Threshold) Procurement Project Component Category (VS$OOO) Method Component = > 3,000 ICB All I All I 3,000 > Contr > 250 NCB 1.O million First 2 contracts < 250 Shopping (Price I I 2. Goods => 500 ICB All I All I 50 200 = > 350 < 50 Shopping (Price First two each year First two eachyear Comparison) and twice-yearly and twice-yearly procurementplan procurement plan 3. Consultant Services I Firms => 100 QCBS Contracts = > 100 Contracts = > 200 (including TOR, (including TOR, Short list, technical Short list, technical and final combined and final combined evaluation reports, evaluation reports, and draft contracts and draft contracts) TOR and all TOR and all contracts awarded contracts awarded under SSS under SSS. Twice- yearly review of selectionplan (including TOR, (including TOR, conditions of conditions of I Y I I contract) contract) < 50 CI and SSS TOR and all IITOR and all contracts awarded contractsawarded under SSS under SSS. Twice yearly-review of Total value of contracts subject to prior review: US$16,268,000 selection Ian Note: ICB = International Competitive Bidding NCB = National Competitive Bidding QCBS = Quality- and Cost-BasedSelection QBS = Quality-Based Selection FBS =Fixed Budget Selection LCS = Least-CostSelection CQS = SelectionBasedon Consultants'Qualifications - 80- Annex 9: Economic and Financial Analysis BOLIVIA: Urban Infrastructure Project A. Economic Analysis Introduction - A complete cost-benefit analysis was conducted to determine the economic feasibility of the project. Since components are independent, in different sub-sectors and different cities, three different analyses were performed and there was no attempt to combine them. This annex presents the details of these analyses, specifying the methodologies used, the estimation of benefits, the estimation of costs, and the results. Sensitivity analyses were carried out and are included in the consultant reports that are on file. 1. Evaluation of the L aPaz component The benefits of the urban upgrading intervention were calculated as the sum of the increase in property values and savings incurred by the Municipality by avoiding emergency operations. (i)Increase in property values To estimate the individual benefits of the urban upgrading a hedonic price methodology was used. The hedonic price function i s based on the housing market in which transactions can be observed. The welfare significance of the hedonic price function comes from the fact that people are revealing the marginal value of particular attributes (such as access to services, amenities, etc) that are not sold separately in the market, but are embodied in the unit and reflected in its price. The dependent variable is the monthly rent. A total of 353 observations were obtained, in a randomized sample. The sample includes housing units in the neighborhoods to intervene and housing units in neighborhoods already intervened. The functional form used was: P= e Z:PiXi+ Z ai Ln Yi+ Ei Where P is the property price, Xi are qualitative variables, Yi quantitative variables and E i s the error. Applying natural logarithms: Ln(P)=PiXi+Cai LnYi E + Various regressions were tried. Statistical tests were performed to ensure the significance of the variables, total regression fit, and lack of statistical problems such as collinearity and heteroskedasticity. Using the best fitting regression the following variables, related to the urban upgrading component, turned significant: (i)whether theneighborhoodhasbeenintervenedwithriskpreventionworks; (ii) whether the property has registered title; and (iii)whether the area surrounding the property has improved roads, sidewalks or stairs. The other significant variables are linked directly to the property such as the area of the lot, and the constructed area. The elasticities of the variables of interest are: 1.15, 1.23, and 1.27 respectively, meaning that having risk prevention works increases monthly rents by 15%, having title by 23%, and having improved roads, sidewalks, or stairs by 27%. Together these three variables have a joint effect of increasing monthly rents by 80%. These benefits were multiplied by the number of beneficiaries and then converted into annual flows. - 81 - (ii) Savings to the municipality incurred by avoiding emergency operations The annual cost of emergency operations in the areas of intervention averages US$160,000 per year. The addition of these flows yields total benefits per year. The costs of investment (US$9 million) and annual operation and maintenance (63,459) were itemized in order to apply conversion factors to eliminate distortions inmarket prices such as subsidies and taxes. The conversion factors used were: - National products and materials 0.84 - Foreign products and materials 1.16 - Equipment and machinery 1.16 - Qualified labor 0.44 - Semi-qualified labor 0.43 - Unqualified labor 0.23 The calculated economic costs were then converted into annual flows. The resulting economic indicators are: - Internal rate of return: 20.0% - Net present value: US$794,442 2. Evaluation of the ElAlto component The evaluation of the El Alto component only comprises its first sub-component: trunk infrastructure development. The other sub-components, modernization of public transport, capacity building and institutional strengthening, and project implementation are mostly technical assistance, training and consultancies that have not yet been defined in detail and therefore cannot be evaluated at this time. The benefits of the trunk infrastructure construction are divided in seven groups: (i) savings in gasoline for local car traffic; (ii)savings in gasoline for light traffic in transit; (iii)savings in gasoline for heavy traffic in transit; (iv) time savings for local users; (v) time savings for transit users; (vi) savings incurred by avoiding emergency operations in the Canal Seco area; and (vii) increase in the potential for residential development in adjacent areas. (i)Savingsingasolineforlocalcartraffic The savings are calculated taking into account the population, in the area of influence, that commutes on a daily basis, the average number of trips per day, the average distance traveled per day, the consumption of gasoline with and without the project. It was assumed that every year the population would grow by 4.5%. Savings start at US$38,369 in the first year and escalate to US$87,908 in year 20. (ii)Savings ingasoline for light traffic in transit The savings are calculated on the basis of the number of light vehicles in transit in the project's area of influence, the average number of kilometers traveled per day, and the consumption of gasoline at higher speed (with project) versus lower speed. A growth of 4.5% per year in the number of vehicles is used to calculate annual flows. Savings start at US$52,015 in the first year and go up to US$119,174 in year 20. - 82 - (iii) Savings in gasoline for heavy traffic intransit A similar calculation to the one in (ii)was performed. Savings go from US$64,088 in year 1 to US$146,835 in year 20. (iv) Time savings for local users Time savings were calculated using the population that commutes to work in the area of influence, the average number of trips per day, the average time per trip with and without the project, and the cost per hour estimated at the average hourly wage in El Alto. Using an annual growth rate in population of 4.5%, the yearly benefits were calculated. They start at US$154,832 in year 1 and go up to US$459,076 in year 20. (v) Time savings for transit users A similar calculation to the one in (iv) was performed. Savings start at US$77,116 in year 1 and move up to US$176,683 in year 20. (vi) Savings incurred by avoiding emergency operations inthe Canal Seco area Total costs of repairing the Canal Seco area during the rainy season, according to numbers from the Municipality of El Alto, are US$15,833 per year and for housing repairs (see point 1. (iii) for the methodology) US$12,439. (vii) Increase inthe potential for residential development in adiacent areas Increase in property values in the project's area of influence i s estimated at US$243,200. The costs are investment ($4 million) and operation and maintenance. These costs were itemized in order to apply conversion factors to eliminate distortions in market prices such as subsidies and taxes. The conversion factors used are: - National products and materials: 0.84 - Foreign products and materials 1.19 - Equipment and machinery 1.19 - Qualified labor - Semi-qualified labor 1 0.43 - Unqualified labor 0.23 The evaluation statistics are: - Internal rate of return 16.1% - Net present value US$l million 3. Evaluation of the SAGUAPAC component In order to carry out the economic evaluation of this component the investments were divided in four groups: (i) new sanitation connections; (ii)expansion of the primary sewerage network; and (iii) improvement inthe capacity to treat wastewater. li)Newsanitationconnections A total of 7,700 new connections are proposed. To measure the economic benefits the hedonic price technique was used. A total of 1,314 households were interviewed, as part of the combined socio-economic assessment, in seven areas of the city, including an area not benefited by the project. A linear regression of a constant elasticity function (CES) was performed. The original CES equation is: - 83 - where Y is the property price, K i s a constant Zi are the explanatory variables and E i s the error. Applying natural logarithms: Ln(Y)=Ln(K) + Ln(Zl) + p2 Ln(Zz).. ..+Ln(E) The variables used were: Y= monthly rent Zi= Area of the lot, infrastructure variables, locationvariables, roof material, existence of garden Infrastructure comprises the following variables: existence of sidewalk infront of the house, material of the road infront of the house, width of the road, sewerage connection. Two regressions were performed, one for residential properties and one for commercial properties. Statistical tests were performed to ensure the significance of the variables, total regression fit, and lack of statistical problems such as collinearity and heteroskedasticity. The regression coefficients corresponding to the existence of a sewerage connection were 0.29 for residential properties and 0.34 for commercial properties. Since the regression is logarithmic, the exponential of these coefficients gives the elasticity of the characteristic. This means that residential property values increase by 33% (1.33 elasticity) ifthey have sewerage connection, and commercial property values by 40% (1.4 elasticity). These elasticities are then applied to median monthly rents of properties that do not have sewerage and converted into annual figures. For residential properties the annual benefit of having sewerage is US$422 and for commercial properties it i s US$362. That annual benefit i s multiplied by the number of properties to be connected to the sewerage by the project. The economic costs are US$3.4 million distributed in the first three years, US$1,300 per year of operation and maintenance, and connections for US$475,600 distributed in the first three years. The economic analysis results are: - Internal rate of return: 68.7% - Net present value: US$17.1 million - Benefit cost ratio 6.1 - Investment recovery period 4 years (ii)Exuansionoftheprimarvseweragenetwork This expansion will benefit 10,500 new users in 2007-2008 when household connections will be built by SAGUAPAC under a different project. The benefits of this expansion are then calculated as US$422/user, but foreseeing 10,500 users in 2007-2008 period. The costs are the investment in the primary sewerage maintenance for US$2,300 per year . The economic indicators are: network, US$1.5 million distributed in the first two years and operation and - Internal rate of return: 94% - Net present value: US$6.1 million - Benefit cost ratio 5.7 - 84 - - Investment recovery period 4 years liii)Improvementinthecapacitytotreatwastewater The proposed investment will double SAGUAPAC's present cubic meter capacity of waste water treated, which in turn, will allow the connection of new 63,100 to the sewerage system in the period 2005-2025. The benefits of this item are then calculated as $422 per user per year, but foreseeing 63,100 users. The costs, which are extremely low because a new low-cost technology will be applied, are investment, and operation and maintenance. The economic indicators are: - Internal rate of return: 146% - Net present value: US$25 million - Benefit cost ratio 8.8 - Investment recovery period 3 years (iv) Overall economic analvsis for the SAGUAPAC component Adding the benefit flows and the cost flows of the four items presented below, the economic indicators for the entire component are: - Internal rate of return: 98.4% - Net present value: US$48.8 million - Benefit cost ratio 7.12 - Investment recovery period 3 years B. FinancialAnalysis of SAGUAPAC Since SAGUAPAC is an income earning entity, a full analysis of its financial situation was carried out. The repayment of the Bank loan will be SAGUAPAC's responsibility. This annex summarizes the financial assessment of SAGUAPAC, in particular, of their capacity to pay the debt. The analyses showed that the proposed financing scheme is robust under different sensitivity scenarios with no financial shortfall expected. This operation's loan will have a 10-year grace period, and 35-year repayment period. From years 11 to 20, 2.5% of the total amount of the loan of US$ 10 million will be repaid every year. From years 21 to 35, 5% of the total amount disbursed will be repaid every year. SAGUAPAC will not be charged any interest for the operation but there will be a disbursed charge of around 0.30% and a non disbursed charge of approximate 0.75%. PROJECT FINANCINGSTRUCTURE Financingand Countemart Funds Repaymentto the Bank IBRD US$ 10.00million . SAGUAPAC:All debt service (principaland financial charges of any kind) Total Project US$ 10.00 million - 85 - SAGUAPAC will generate a cash flow from its operations, mainly the selling of water & sewerage services to the population of Santa Cruz. Income is expected from: 0 Sewerage collection and treatment related services 0 Infrastructurecharge for the provision of connections to the services 0 Fixed charge which will be directed towards the operating costs (OPEX), the investment program (CAPEX), the coverage of all financial obligations and the legal and fiscal requirements of the Statutes of the Cooperative, the National Government, the Concession Contract and the Alcaldia. Current Performance In 2005, SAGUAPAC provided water and sewerage services to about 134,759 and 76,127 clients, respectively and billed around US$28 million per year, including the fondo de recupero de inversiones and the cuotas of the shareholders. 97% of SAGUAPAC customers are connected to the water networks, while only 55% are connected to the sewerage system. SAGUAPAC's tariff structure classifies its customers in four different groups, as follows i)residential; ii)commercial iii)industrial iv) public. It also allows cross subsidies between customer groups and within the groups, by increasing the marginal cost of the service over a given figure that in the case of SAGUAPAC is 15 m3/month. The fixed charge for water services i s US$4.35 for a consumption up to 15 m3/month and the marginal cost of a m3of water starts at US$0.33. Santa Cruz de la Sierra i s divided into UVs and each UV i s located in an area delimited by inner rings (known as anillos). SAGUAPAC is the main and nearly sole provider of services within the 4th ring, uncompressing all the population leaving within the anillos 1, 2 3 and 4. Most of the commercial activity is also located in this area and therefore, SAGUAPAC provides for their needs. Outside the 4th ring, the population leaving within the SAGUAPAC Concession area i s around 50% of the total area, and their annual income is lower than in the inner rings, meaning that those customers represents an important percentage of the lower income customer base of SAGUAPAC. The exception i s the new residential developments (condominios)located outside the 4Ihring. Regarding the different categories, the commercial sector represents around 29% of the total water revenue, while the industrial sector represents only 2%, which shows the high dependence of SAGUAPAC from its residential customers that account for 67% of the water bills. The remaining 2% are the public clients. It is noticeable the low level of industrial customers of SAGUAPAC. This represents an area where a more aggressive campaign and a future change in the tariff regime could potentially bring and expanded business for SAGUAPAC in the provision of water and sewerage services for industries. - 86 - As said before, the historical operational and financial performance of the company has been good. It also improved substantially in the last three years from a previous situation of alert, where unaccounted revenues and operational costs where going up. The company's management has accomplished this through its efforts to control operational costs (mainly labor costs) and enhance the commercial strategies and policies of SAGUAPAC through sound commercial and financial management, while generating increasing yearly surplus. SAGUAPAC i s expected to report a net profit in 2005 of around 1.23 US$ million and a free cash flow (including its financial monetary current assets) of more than 12 US$millions. This has all been achieved in a scenario of very low GDP increase in the country, social and political unrest and no real term tariff increase, all of this enhancing the sound management of the company. Financial Proiections Based on the current performance and the expected performance improvements inthe future, SAGUAPAC financial projections were prepared, which are presented in Attachment 1to 3 of this Annex ad the Base Case Scenario. The Base Case Scenario, i s conservatively assuming the following: (i)no real increase at all in the average tariff; (ii)gradual increase of 2% in the residential customer base (over the other type of customers), with higher increase in lower income customer groups; (iii)gradual deterioration of the collection rates of more than 14% from its present value of 96%; and (iv) gradual efficiency gains reflected in the operating cost reduction of 0.3% per year, among other considerations of this scenario. A more detailed summary of assumptions i s available in the Project Files for the full financial analysis of SAGUAPAC. Under the Base Case Scenario, SAGUAPAC financial situation will continue to improve each year, with no downturns expected. Because the company carried out a high level of capital investments and borrowed in the past from different international financial institutions to finance these investments, the debt service will remain high until 2008. Internal cash flow is generated from the first moment to cover its debt service requirements. The selected financial ratios are of this scenario are presented below: Main Financial Ratios, Base Case 2005 2006 2007 2008 2009 2010 2011 2012 Operating margin 13.6 12.15 12.43 17.03 18.03 18.27 18.39 18.14 Return on Equity 1.66 1.29 1.37 2.33 2.57 2.63 2.68 2.63 Current Ratio 4.97 3.65 3.33 3.88 4.28 4.65 5.15 5.51 Quick Ratio 4.35 3.01 2.69 3.25 3.65 4.02 4.53 4.89 Debt Ratio 0.35 0.38 0.40 0.36 0.33 0.31 0.28 0.26 Solvency Ratio 0.54 0.62 0.66 0.57 0.50 0.44 0.39 0.35 - 87 - Sensitivih,Analysis The eventual improvements in SAGUAPAC financial performance i s dependent on the following critical assumptions: (i) SAGUAPAC will maintain its sound and that conservative approach towards cost control on operational expenses, mainly labor cost, in line with productivity gains and the overall financial improvement of the company; (ii)that SAGUAPAC commercial performance (non collectable ratio) will not deteriorate further than the 14% allowed in the Base Case Scenario, from its actual value; and (iii) SAGUAPAC will be able to maintain its rights to adjust the that tariff inconstant terms yearly, as per its Concession Contract. In order to determine the impact of the main assumptions, a sensitivity analysis was carried out in all different variables, besides the three main issueshriables mentioned above, that are critical to the performance of SAGUAPAC. Attachment 4 present each case analyzed. The impact of the changes in the variables was measured and results were obtained for the main financial indicators of SAGUAPAC, mainly its ability to produce a positive cash flow each year (results are shown in Attachment 4), in order to serve its contractual, financial and technical obligation, at the same time that this operations remains feasible. The variables tested are summarized in the table below. The results of the different runs of sensitivity analysis are presented inAttachment 4. Note that most of the cases were developed with the proposed original amount of US$6 million loan from the Bank, while the last runs during sensitivity assumed an increased operation of a US$lO million loan. Variables . Indicators Collection rates -5% .. Free cash flow > 0 w Investmentcost +5% Return on Equity Operation and maintenance Minimum Current Ratio cost +5% Minimum Debt Service Coverage All three of the variables above together Exchangeratedevaluation - 15% at once a Reduction of the consumption 0.5% per year 1 Inability to maintain the tariff at constant levels for a given period of time (4 years, with a 4% inflation per year) Increase in the interest rates+ 300 bus . The main results of the sensitivity analysis can be summarized as follows: . SAGUAPAC free cash flow remains positive in all the sensitivity analysis considered, year after year. SAGUAPAC generates over the period of analysis, 30 years, a positive Net Present Value (NPV) cash flow in each scenario (ranges from US$ 250 million in the more favorable scenario to US$ 94 million in the less favorable case), in excess of the investment considered, that could be used to accelerate the investment program (the expansion of the coverage) after year 2010. - 88 - . The sensitivity runs that represent the most challenged situation to SAGUAPAC are represented by the (i) concurrent increase of CAPEX and OPEX costs by 5%, at the same time, than the Income is reduced 5% (shown in Attachments 5 to 7); (ii) inabilitytoadjustthetariffforfouryears(inordertomaintainitscurrent the . levels in constant terms), at the same time than a 4% inflation adjustment is presented in the costs. The operation is not very sensitive to mild variations in the exchange rate, neither . in the basic interest rate due to the nature of the World Bank Public operation and its reducedfinancial costs. As a result of the different runs, operational and financial indicators have been developed (Attachment S), which are meant to be used to monitor the implementation of the project and the fulfillment of the objectives of the program. The ratios for the different indicators have been obtained from each of the different runs of the scenarios considered, representing the most extreme situations that SAGUAPAC could face. Conclusions: The incoming loan of US$ 6 million reaches SAGUAPAC in a healthy financial situation, with an excess cash flow capable to cope with the need to invest its own funds and face the uncertainties, common to many of the Latin America water utilities, in terms of contractual risk that couldjeopardize its earnings. Under the different scenarios tested, the current financial situation of SAGUAPAC will allow the company to be cash flow positive and hence face all its financial obligations regarding this loan, should extreme events occur. The most extreme cases analyzed are represented by the contractual risk that could block SAGUAPAC of adjusting its tariff in constant terms as per the concession contract, to keep pace of the exchange rate and inflation. Should this event happen for four consecutive years, with an annual estimated inflation of 4%, SAGUAPAC will still be able to fulfill a1 its obligations and remain cash flow positive. The other extreme event that the company could face i s the generalized increase and overrun in OPEX and CAPEX costs, while its revenues deteriorate. Previous projects carried out by SAGUAPAC showed that this event do not appear likely since SAGUAPAC has always been able to execute more than 100% of CAPEX. However, should this scenario materialize, SAGUAPAC will still be able to get a positive cash flow and meet all its obligations. Cost control and close following of collectables will also be needed to secure a full viability of the operation. - 89 - Loss and Profit Account Years EndingDecember: 2005 through 2012 Inmillions of US$ dollars 20,502 20,970 22,084 23,002 24,140 25,034 25,865 26,526 (10,927) (11,060) (11,310) (11 593) (11.938) (12268) (12581) (12,821) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 aintenanceCosts (sa) 13s) (1,OlO) (1.0381) (1,Orn) (1,092) (1.IlG3) (1.133) lher I 0 0 0 0 0 0 0 0 (983) 11,001) (1,023) (1,048) (1.079) (1,109) (1,137) (1,158) (2Y8) (301) (308) (316) (325) (334) (342) (349) 0 0 0 0 0 0 0 0 (13,203) (13,360) (13,658) (13,996) (14,4W) (14,803) (15,177) (15,464) 7,299 7,610 8,426 9,006 9,731 10,231 10,689 11,062 (1,205) (1.315) (1,3721 (1,301) (1,231) (1,138) (1.035) (9411 87 130 162 161 140 129 139 162 (1,118) (1,185) (1,210) (1,141) (1,090) (1,010) (896) (779) (4 510) (5 061) (5 681) (5 0301 (5 378) (5 656) t5 332) (6 251) 1,670 1,364 1,535 2,776 3,263 3,565 3,860 4,031 (418) (341) 1384) (694) (816) (891) (965) (1 008) 1,253 1,023 1,151 2,082 2,447 2,674 2,895 3,024 CashFlow Years EndingDecember: 2005 through 2012 Inmillions of US$ dollars - 2.993 3.062 3.224 w 8 3.524 3.655 3.776 3.873 13 451 13.986 12.815 10.576 10.883 13 247 14.746 20.502 70.970 22.084 23 On3 24.140 25.034 25.865 2 6 . m 87 130 162 161 140 129 139 162 Revenue 32,305 37.113 39,456 39,337 38,381 39,700 42,028 45,307 ODeratlonal costs and taxes (13.621) (13,701) (14,042) (14,690) (15,225) (15,694) (16,142) (16,472) FinancialCosts I 11 7051 11.3161 (1.3721 f1.3011 (1.2311 11.138) 11.035) 19411 11,7051 (1.722) (2.159) 12.161) (2.598) ( 7 918) 12.6401 11.792) (2,910) (3.038) (3,531 (3,462) (3,828) (4,057) (3.675) (2.734) 15,774 20,373 21,884 21,185 19,328 19,950 22,211 26,102 0 0 0 0 0 0 0 0 Minimum dividends U U U U U U U U Changes in Inventory (538) (1.6611 13731 1.288 798 57 ill) f204) Changes in accounts receivable 16521 11711 14071 13351 1415) 1326) 13031 12411 815 2.495 565 (1.925) (437) I781 24 313 (374) 663 1214) (972) (555) (346) (290) (1321 n n n Remestmen1of worma cao tal h rt-t 1 . I1 0 0 0 0 0 0 0 0 1Ea:h ",%%!%kestrnent activltldL) 15,400 21,036 21,669 20,213 18,773 19,603 21,921 25,969 & 8,993 6,422 5,379 10,576 10,883 12,247 14,746 17,952 Long-term debt payments 3.959 7.564 7.436 0 0 0 0 , 12,951 U U U U 0 0 U U 13,986 12,815 10.576 10,883 12.247 14,746 17,952 - 90 - Balance Sheet Years EndingDecember: 2005 through 2012 Inmillions of US$ dollars ear u f i 3 q 130743 1-1 77fi.m- (17 R5RI -0) 17R fi9nr 134 067) 92.771 102.325 112.934 117,481 119.993 121.692 122.935 124.701 7.483 7.654 R.Ofil R39fi RR11 9 137 9441 9 6 e 13951 139Rfi 13R15 10.57fi 1 0 R R 3 13347 1474fi 17453 A 3 5 5 26.222 25.831 22.638 23.063 24.696 27.509 31,160 116.126 128.546 138.764 140.119 143.056 146.388 150.444 155.861 7fi 643 79 ~fifi ~3 334 ~ f i 7 4 9 90404 94 iRn 9- 0 0 0 0 0 0 0 0 1 x 4 3 7 ~ 7 R W R fin30 ~ 4 f i 7 iiid0 i4ndfi i 7 a 5 ~ _ 75.344 79.429 83.804 89.244 95,215 101.544 108.216 115.112 3087 41 93R 47305 45045 43447 3q539 3fiRR9 35.Q9.L t of Working Capital 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Afi95 7190 7755 5R30 5.393 5315 5339 40.782 49.118 54.961 50.875 47.840 44.844 42.228 40.749 116.126 128.546 138.764 140.119 143,056 146.388 150,444 155.861 - 91 - Sensitivity Analysis - SAGUAPAC Note that sensitivity cases 1 to 9 were all considered with a total project of US$ 10 million (a loan of US$ 6 million from the Bank), while Cases 10 to 11 corresponds to the analysis of a project of US$ 15 million, out of which US$10 million were envisaged from the World Bank loan. Base Case and Sensitivitycasesconsidered BASE CASE YES 9 Shortfall of EstimatedCash Flow US$ M 0 Tariff Increase 0% Income variation: 0% INVESTMENT Q1 expected US$M 39,2 OPEX variation: 0% INVESTMENT (natural populationincrease)Q2 a Q6 CAPEX variation: 0% US$M 142,2 Consumptionvariation: 0% Exchangerate variation: ADDITIONAL INVESTMENT AMOUNTS LIBOR variation +0% Obps (CONSTANT CURRENCY) Loan amount considered Q2US$M 9,9 CAF 11, US$5 M Q3US$M 31,l World Bank US$6 M Q4US$M 46,6 Q5US$M 61,9 Q6US$M 81,O 42 a 46, naturalpop increase + additional US$M 372. Feasibilityof the Operation SENSITIVITY CASE 1 YES Shortfall of EstimatedCash Flow US$ M 0 Tariff Increase 0% Income variation: 0% INVESTMENT QI expected US$M 41,1 OPEX variation: 0% INVESTMENT (naturalpopulation increase) Q2 a 46 CAPEX variation: 5% US$M 149,3 Consumptionvariation 0% Exchangerate variation0% ADDITIONAL INVESTMENT AMOUNTS VariationLIBOR +Obps (CONSTANT CURRENCY) Q2US$M 8,O Q3US$M 29,7 Q4US$M 45,2 Q5US$M 60,6 Q6US$M 79,6 42 a Q6, naturalpop increase+ additional US$M 372 Feasibilityof the Operation SENSITIVITY CASE 2 YES Shortfallof EstimatedCashFlow US$M 0 Tariff Increase 0% Income variation: -5% INVESTMENT Q1 expected US$ M 39,2 OPEX variation: 0% INVESTMENT (natural population increase) 42 a CAPEX variation: 0% 46 Consumptionvariation: 0% US$M 142,2 Exchangerate variation: 0% LIBOR variation + Obps ADDITIONAL INVESTMENT AMOUNTS (CONSTANT CURRENCY) Q2US$M 5.2 Q3US$M 25,6 Q4US$M 40,2 Q5US$M 54,7 Q6US$M 72,9 - 92 - Base Case and Sensitivity cases considered Results 42 a Q6, naturalpop increase+ additionalUS$ M 340,6 Feasibilityof the Operation SENSITIVITY CASE 3 YES Shortfallof EstimatedCashFlow US$ M 0 Tariff Increase 0% Income variation: 0% INVESTMENT Q1 expected US$ M 39,2 OPEX variation: 5% INVESTMENT (natural populationincrease) Q2 a 46 CAPEX variation: 0% US$ M 142,2 Consumptionvariation: 0% Exchange rate variation: 0% ADDITIONAL INVESTMENT AMOUNTS LIBOR variation + Obps (CONSTANT CURRENCY) Q2US$M 7 Q3US$M 27,9 Q4US$M 43,l Q5USsM 58 Q6US$M 76,8 Q2 a 46, naturalpop increase+ additional US$M 355 Feasibilityof the Operation SENSITIVITY CASE 4 YES Shortfallof EstimatedCashFlow Tariff Increase 0% US$M 0 Income variation: -5% OPEX variation: 5% INVESTMENT QI expected CAPEX variation: 5% US$M 41.1 Consumptionvariation: 0% INVESTMENT (natural populationincrease) Q2 a Q6 Exchangerate variation: 0% US$M 149,3 LIBOR variation + Obps ADDITIONAL INVESTMENT AMOUNTS (CONSTANT CURRENCY) Q2US$M 0,2 Q3 US$M 20,9 Q4US$M 35,3 Q5US$M 49.4 Q6US$M 67,3 Q2 a Q6, naturalpop increase+ additional US$ M 322 Feasibilityof the Operation SENSITIVITY CASE 5 YES Shortfallof EstimatedCashFlow Tariff Increase 0% US$M 0 Incomevariation: 0% OPEX variation: 0% INVESTMENT QI expected CAPEX variation: 0% US$M 39,2 Consumptionvariation: -0.5% yearly (I/p/d) INVESTMENT (natural population increase) Q2 a Q6 Exchangerate variation: 0% US$M 142,2 LIBOR variation + Obps ADDITIONAL INVESTMENT AMOUNTS (CONSTANT CURRENCY) Q2US$ M 9,l Q3 US$M 28,9 Q4US$M 42,8 Q5US$ M 56,l Q6US$M 73,O Q2 a 46, naturalpop increase+ additional US$M 352 ) - 93 - Base Case andSensitivity cases considered SENSITIVITY CASE 6 YES Shortfallof EstimatedCash Flow US$M 0 Tariff Increase 0% Incomevariation: 0% INVESTMENT Q1 expected US$ M 39,2 OPEX variation: 5% INVESTMENT (natural populationincrease)Q2 a Q6 CAPEX variation: 0% US$M 142,2 Consumptionvariation: 0% Exchangerate variation: 15% ADDITIONAL INVESTMENT AMOUNTS (net effect on repaymentof principal and interest only) (CONSTANT CURRENCY) LIBOR variation + Obps Q2US$M 7,3 Q3US$M 29,O Q4US$M 44,9 Q5US$M 60,3 Q6US$M 80,O 42 a 46, naturalpop increase additional + US$M 364 Feasibilityof the Operation SENSITIVITY CASE 7 YES Shortfall of EstimatedCash Flow US$ M 0 Due to the inability to proceed with the indexation of the tariffs in 2006 to 2009, the tariff increase will be -4% INVESTMENT Q1 expected US$M 39,2 annually and accumulated INVESTMENT (natural populationincrease)Q2 a Q6 A 4% yearly inflationis consideredinthis period. US$M 142,2 Tariff Increase 0% ADDITIONAL INVESTMENT AMOUNTS Incomevariation: 0% (CONSTANT CURRENCY) OPEX variation: 5% CAPEX variation: 0% Q2USS M -6,4 Consumptionvariation: 0% Q3US$M 11,8 Exchangerate variation: 15% Q4US$M 25,O (net effect on repayment of principal and interestonly) Q5US$M 37,7 LIBOR variation + Obps Q6US$M 54,8 Q2 a Q6, naturalpop increase + additional US$M 122,9 The maximum allowed annual inflationin 2006-2009 that will still make the case viable if indexation i s not permitted, will be 6% Feasibilitvof the Oueration SENSITIVITY CASE 8 YES Shortfallof EstimatedCash Flow US$ M 0 Tariff Increase 0% Income variation: 0% INVESTMENT Q1 expected US$ M 39,2 OPEX variation: 5% INVESTMENT (natural populationincrease)Q2 a Q6 CAPEX variation: 0% US$M 142,2 Consumptionvariation: 0% Exchange rate variation: 0% ADDITIONAL INVESTMENT AMOUNTS (net effect on repaymentof principal and interestonly) (CONSTANT CURRENCY) LIBOR variation + 300bps Q2US$M 8,7 Q3US$M 30,5 Q4US$M 46.4 Q5US$M 61,7 Q6US$M 803 42 a 46, naturalpop increase + additional US$M 370 Feasibilityof the Operation YES Shortfall of EstimatedCash Flow US$M 0 Fulfillinggoals DevelopmentPlan SAGUAPAC [NVESTMENT Q1 expected US$M 39.3 INVESTMENT (natural populationincrease)02 a 06 . . . - - US$M 258 - 94 Base Case and Sensitivity cases considered Results ADDITIONAL INVESTMENT AMOUNTS (CONSTANTCURRENCY) Q2US$M 0 Q3US$M 10,l Q4US$ M 24,l Q5US$M 52,8 Q6US$M 88,7 42 a 46, naturalpop increaset additional US$ M 423 Feasibilityof the Operation US$M 10 loan SENSITIVITY CASE 10 YES Shortfallof EstimatedCash Flow US$M 0 Project US$ 15 million. Increase in sanitationcollectors SAGUAPAC INVESTMENTQ1 expected US$ M 42,4 INVESTMENT expected Q2 a Q6 US$ M 253 %Water 98% % Sanitation 98% ADDITIONAL INVESTMENTAMOUNTS (CONSTANT CURRENCY) Q2US$M 4,3 Q3US$M 15,8 Q4US$M 23,2 QS US$ M 40,l Q6US$M 71,4 Q2 a Q6, expected additional US$ M 400 + Feasibilityof the Operation US$ M 10 loan SENSITIVITY CASE 11 YES Shortfallof EstimatedCash Flow US$ M 0 Project 15 million with sensibilities CAPEX t5%, OPEX t5%, INCOME -5% INVESTMENTQ1 expected US$ M 42,8 INVESTMENT expected Q2 a Q6 US$M 265.6 % Water 98% % Sanitation 98% ADDITIONAL INVESTMENT AMOUNTS (CONSTANT CURRENCY) Q2US$M 0 Q3US$M 4 Q4US$M 9,8 Q5US$M 24,8 Q6US$M 543 US$M 345 - 95 - Loss and Profit account Years EndingDecember: 2005 through2012 Inmillionsof US$ dollars 0 2 h J 0 (10,927) (11.6131 (11,875) (12173) (12535) (12881) (13210) (13.462) 0 0 0 0 0 0 0 0 I 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (990) (1.043) (1.08) (1,CO) (1,130) (l,l@) (1.1rn) (1,lW 0 0 0 0 0 0 0 0 (959) (1,551l 11,074) (1,101) (1.133) (1,164) (1.194) (1.216) (29.9) (317) (324) (332) (341) (351) (360) (366) I 0 0 0 0 0 0 0 0 Total Operationaland MaintenanceCosts (13,203) (14,028) (14,341) (14,696) (15,130) (15,543) (15,935) (16,237) Gross Revenue I 7,299 5,893 6,639 7,156 7,803 8,239 8,637 8,963 (1.205) 11.381) 11.441) (1,366) (1,292) (1,195) (1.087) (989) 99 144 165 140 93 57 43 41 (1,106) (1.236) (1.275) (1,226) (1,199) (1,138) (1,M4) (948) (4.510) (5 088) (5 740) (5.166) (5,468) (5,761) (6,050) (6,3863 1,682 (432) (376) 764 1,136 1,340 1,542 1,630 Income tax (421) 0 0 (191) (284) (335) (386) (407! Net income -J- 1,262 (432) (376) 573 852 1,005 1,157 1,222 CashFlow Years Ending December: 2005 through 2012 Inmillionsof US$dollars SAGUAPAC Cash Flow (US$ Thousands) 3 4 5 6 7 8 9 10 Year 2005 2006 2007 2008 I 2009 2010 2011 2012 Capital 2.993 3.062 3,224 3.358 3.524 3.655 3.776 3,873 Beginningof year cash flow Total Net Revenue Financial Revenue Revenue Operatlonal costs and taxes Costos Financieros Long-termdebt payments Total Debt Servlcing Cost Net Cash Flow Short-termdebt Minimum Dividends Changes in inventory (538) (1.891) (391) 1,353 312 60 (11) (215) Changes in accounts receivable 4 329 Chanaes in account DaVable 815 2,855 594 (2,021) (459) (81) Changes in Worklng Capital (374) 1,176 (184) (987) (541) (331) (274) (115) Work ng cap ta f nancmg 0 - u U U U U U U Rehestment of worn'na caD'tal Short-termdebt payme& ' Cash flow (excludlng investment activities) 775,573 2 1 , 2 1 0 , 5 6 5 15,738 12,1Y6 10.937 l U 0 1 3 . 1 W --- i~4n7\(15 ?d<\117 in<\ iin iicn iR7R4) 17 714) (7 sn?! ( ~ 4 1 8 1 6 5.864 2.461 5.620 3.911 3.213 3.617 4.682 Long-termdebt payments 1959 7564 7436 0 0 0 0 Cash flow -end 0 0 0 0 0 0 0 0 of period - 96 - Financial Projections -Balance Sheet Years EndingDecember: 2005 through 2012 Inmillions of US$dollars EZ'ZAPAC US$ Thousands) 578 17R 996 (13 ria (17 w j r1 ~ 6 PA ~ 5 2 11.74 wm ~ 4 o . 0 ~ 1(46-1 1 91.611 101.867 113.232 118.185 121.001 122.964 124.447 126.480 3 w n 41311 5 3n3 5 ~ 5 0 3537 3.477 3 . 4 ~ 8 3.703 5R 7976 R371 R 6 A O A969 9 19B 14 175 1343R 9A97 5630 3911 3913 3fi17 4fiA3 24.528 25.510 22.757 17.446 15.819 15.371 16.074 17.563 116.139 127.378 135.989 1 z 6 3 0 136.820 138.334 140.521 144.063 177fi 134s 969 IS43 3 394 3399 4556 5771) 75.357 77.986 80.835 84.766 89.142 93.803 98.736 103.831 7 41 A42 47.011 44743 49 015 3RRS1 36 179 34397 ~ ~~~~ 0 0 0 0 0 0 0 0 4-7.549 8.143 fi 133 Sfi63 SSR1 5.606 5 . m 40.782 49.391 55.154 50.864 47.678 44.532 41.785 40.232 116.139 127.378 135.989 135.630 136.820 138,334 140.521 144.063 OperationalIndicators Note: The values have beendetermined in each case, assumingthe most pressing sensitivity case for each variable, including the potential US$ 10 million loan operation scenario. * UFW(Unaccounted for water): Volume of treated water sealed/ volume of treated water produced. ** Continuity of the service: % of customers that receives a 24 hours per day service. - 97 - FINANCIALINDZCATORS Note: The values have beendetermined ineach case, assumingthe most pressing sensitivity case for each variable, including the potential US$ 10 million loan operation scenario. - 98 - Annex 10: Safeguard Policy Issues BOLIVIA: UrbanInfrastructure Project 1. Introduction T h i s note summarizes the main social dimensions of the Urban Infrastructure Project, based on the socio-economic studies for each component. These studies provide general information regarding the characteristics of neighborhoods, programs and service delivery. Surveys were carried out in each component's area, providing primary information about household size, income and expenses, classified by gender and age. There is also information regarding housing, migration and primary spoken language as well as access to water, health, education and other basic services. Detailed analyses of social impacts of the specific intervention in each city were undertaken. There are significant differences amongst the three surveyed areas in terms of the population's ethnic composition, language, economic opportunities, market access, schooling levels, environmental risks and gender relationships. Each component will adopt the appropriate methodology related to gender, intercultural and generational issues. In terms of their findings, all three identified differentiated opportunities amongst social groups based on income levels, temporary job opportunities, saving enhancement, better commuting times, judicial security, empowerment, and in the case of women, property titling. The studies confirmed that the areas of intervention are very poor. Monthly income in La Paz target neighborhoods is estimated at US$145, inthe El Alto influence zone the figure is $153 and SAGUAPAC's beneficiary population is mixed, a common feature in SantaCruz, with monthly income levels oscillating between$154 and $680. 2. LaPaz 2.1. Methodology In the case of La Paz, in order to establish a baseline to facilitate the project's impact evaluation, the sample was enlarged from 1,000 to 3,000 observations and the information was georeferenced. This sample was taken in 9 (out of 16) neighborhoods in the macro-districts of Max Paredes, Periferica, Sur and Sun Antonio that have already been chosen through a competitive selection process. The questionnaire was addressed to household heads and contained mainly close ended questions. 2.2. Beneficiary Population The specific social and economic evaluation of the Barrrios de Verdad shows that the migrants that settle there come from more distant La Paz departments in a migration process that started in the 1970s. The population is composed of adolescents and young boys between the ages of 10 and 19 who come from rural areas to live alone and attend urban schools. This situation is considered a specific risk and will therefore require a particular approach. - 99 - A significant proportion of residents work in informal jobs (24.5%) and a considerable portion are public employees (16.9%). The other categories are: salespersons (12.9%), employees in private businesses (12.9%), drivers (6.8%) and construction workers (6.5%). When the information i s disaggregated by gender, the findings indicate that most women are either students (39.9%), stay-home mothers (22.3%) or self-employed (17%), which means that they do not earn regular incomes and usually depend on others for their livelihoods. The information on poverty levels shows that 50.5% of all households live under US$1 per day and 83.8% under US$2 per day. There are important variations among neighborhoods, with Villa Cinco Dedos and Portada Triangular Bajo Lima being the poorest. On average 4.33 persons live in each household. Few households have female heads (18.4%). In terms of education, literacy rates are 97.3% amongst the men interviewed and 92.4% amongst the women. Almost half of the houses are constructed in brick or cement (46.6%), with the rest being built with less permanent materials like adobe. In 54.6% of the cases the floor i s of cement and in 16.2% in dirt. The major risks that neighbors perceive for their houses are: filtrations (66.4%), cracks (59.7%), skidding (47.1%), landslides (32.8%), sinking (32.7%) and floods (14.8%). In terms of property ownership, 61.8% declared being owners and of these, 73.8% said they have a registered title while 6.9% said that they were in the process of obtaining it. This confirms that: (i)there is a majority of property owners; and (ii) there will be relatively few cases of property titling in the project, as anticipated by the previous experience in the Barrios de Verdad program. Regarding water and sanitation, 80% of the interviewed households have in-house water connections, 11,l% have connections outside the house, and 9.8% obtain water from wells or cistern trucks. Although 80% of the households in the sample declared having a toilet, only 42.6% have it inside the house. 2.3. Participation Civic participation in the Barrios de Verdad neighborhoods is mainly concentrated in the neighborhood association. The table below displays the affirmative answers in terms of the percentage of resident participation. Only 6.8% of those surveyed affirmed that they participate in other social groups within the neighborhood. These rates are very low compared to participation rates in the neighborhood associations, which is above 50% in most neighborhoods. More than 70% of those interviewed have attended a meeting in the last month. The gender variable indicates that in five out of nine neighborhoods, women's participation is higher than men's. Inthe context of participatory planning established by the Popular Participation Law, neighborhood organizations collect information and perform the necessary tasks to meet the requirements of the selection process, which include among others, inhabitation of at least 75% of the land, existence of approved and updated plans, lack of representative disputes within the neighborhood and participation of the community in construction and maintenance activities. 2.4. Gender Imposed or self-afflicted downgrading of women away from representative decision- making is also linked to a higher level of illiteracy and lack of time to assume new - 100- responsibilities amongst women, less fluency in Spanish amongst migrant indigenous women, and the harassment or violence that they often experience when taking on public responsibilities. Other limitations that women endure in these neighborhoods are the lack of personal documentation that would empower them to exercise their citizenship as well as the public land and housing titles that limit their access to credit. It is well-known that urban women are also observed to take on innovative economic activities, stay in secondary and tertiary education levels, and display more responsibility and integrity in resource management and micro credit payments. In relation to property titles, when these exist, over 30% are registered exclusively under the husband's name, while in 11-5% of the cases the property i s registered under the wife's name. This information has prompted the program to apply a joint couple titling approach. - 101- 2.5. Violence The data collected in the areas surveyed reveals high levels of violence and civic insecurity. Violence towards women is especially widespread, as seven out of ten women have suffered some level of physical, psychological or sexual violence. The data reveals that in the last three months, 33.6% of those surveyed had been burglarized; 47.2% mentioned street mugging; 16.6% stated that there had been acts of sexual violence near their homes; 31.7% said that people had been hurt, attacked or threatened near their homes; and 47.6% recalled fights near their homes. Also, 67.9% of those interviewed identify a gang problem in their neighborhood, of which 46% deem it to be serious. 2.6. Suggestedmeasures Out of the three components, the one that seeks to achieve social objectives to a greater extent, in terms of opportunities, social inclusion, participation and empowerment i s the Barrios de Verdad Program. In general, the program aims to improve the standard of living of the residents of marginalized areas of L a Paz, by promoting their participation in the integrated development of their neighborhoods. The program promotes the participation of neighborhood organizations in implementing the project and sustaining the basic infrastructure improvements, and it already pays special attention to gender issues, violence and property titling. Therefore, no specific measures are recommended at this time. 3. ElAlto 3.1. Methodology A combined social and economic study was carried out that has effectively generated data regarding El Alto's urban context, political and administration organization, population data and levels of access to basic services. This primary data was provided by 350 heads of household (men and women) through a structured survey to neighborhoods adjacent to the Avenidu Litoral and the Rio Seco area. The population was stratified into three sections for the sample. Yet there are other products such as the findings to come out of interest groups and focus group perceptions of different social organizations (women's groups' representatives, neighborhood associations, monitoring committees, unions, productive associations and professionals, etc) that are still pending.This information is vital to sub-components related to modernization and strengthening of public transport system's management capacity. A SWAT analysis of the municipality's capacity to implement public transport policy i s also under way. 3.2. Beneficiary population With an estimated growth rate for the coming years of 4.4%, El Alto is the fastest growing city in Bolivia, according to INE estimations. Even though its pace of growth has been decreasing, it i s still far above the national average of 3.2%. Consequently by the end of 2006 over 800,000 new people are expected and 1.2 million by 2016. These figures seem more impressive when past figures are considered, such as El Alto's mere 11,000 inhabitants in 1952. Consequently, the urban transport infrastructure to be financed is considered to be strategic for the - 103 - Municipality of El Alto authorities, neighborhood representatives and residents of districts 3 and 4 of the city of El Alto. The city of El Alto has deficiencies in terms of service coverage. Only 1 out of 10 houses have kitchens while 9 out of 10 have a water connection. Sanitation access covers 82% of the properties, with only 55% of these cases corresponding to in-house facilities. Over a third of the houses in the project's area of influence (39%) are made of brick or cement, and 40% of adobe. In 62% of the cases the house floors are in cement and in 14% indirt. In terms of its composition and character, El Alto is primarily residential, as most of its residents commute to L a Paz to earn their livelihood, qualifying it as a "bedroom community". Moreover, according to the 2001 Census, 82% of the population is under age 40. In terms of labor, self-employment is predominant given that 70% of the population works in a family or informal business. These enterprises are mostly commerce and restaurants, followed by construction and manufacturing. Travel times to work or study averages about 33 minutes, but there is a highdegree of data dispersion with extremes at 18 and 59 minutes. Walking to bus stops requires on average 9 minutes but in 25% of the cases the time is 15 minutes and in 12% it is more than 30 minutes. Even though 40% of the households have bicycles, these are not used frequently as a mode of transport (only in 0.6% of the cases), as it is feared that they can be stolen at the destination point. Many of the women who work as housekeepers in the Southern District of L a Paz have to commute a substantial 51 minutes on average and wake up very early to avoid congestion. In terms of connections those who work in El Alto and L a Paz have to make 1.3 and 2.5 connections on average respectively. Interms of transport modes, 45% of the commuters go by foot (mostly students), 10% use microbuses, 42% minibuses and 3% use taxis or personal cars. On average a significant 16% of gross household income is used for transport expenses. One interesting outcome of the survey is the difference in income levels in the various areas of project intervention, particularly on the two sides of Avenida Litoral Poverty Levels in areas of intervention Area At indigence Below poverty Above poverty level level level Avenida Litoral 62.8% 85.1% 14.9% Border Rio Seco 49.5% 77.3% 22.7% Left side Av. Litoral 17% 68.1% 31.9% Right side Av. Litoral 69.8% 90.7% 9.3% Total 49.6% 79.3% 20.7% 3.3. Participation After the conflict known as the "Gas War" and the conflicts leading up to the resignation of former president Gonzalo SBnchez de Lozada, there have been studies about the participation of El Alto residents and their organizational structures. There are two main civic organizations in the city, the Federation of Neighborhood Associations (FEJUVE) and Regional Workers Central (COR). In FEJUVE there are 45 staff positions, of which 50% are held by women, however these positions are secondary and do not involve any leadership responsibilities. In terms of the COR in - 104- El Alto, members include workers, unionists and self-employed workers. Neighborhood associations as well as union organizations have compulsory participation in marches, assemblies and every public event. Attendance cards are used to enforce families' attendance. This compulsory nature of participation is considered part of community culture for some leaders and observers. Sometimes it goes as far as to threaten the cession of basic services if conditions are not met. The project survey indicates that when asked about participation within the neighborhood association, only 45-9% answered that they did engage regularly. Seven out of ten affirmed that they had attended a neighborhood association meeting in the last month. Spontaneously, only 3.4% of those interviewed admitted to participation in social groups within their neighborhood or area, naming religious groups, mothers' clubs, sports clubs, fraternities and neighborhood associations. In terms of women's participation, the Women's Federation of El Alto unites approximately 30 organizations including mother's clubs, day-care centers, unionists, military mothers, launderettes, policemen's wives, neighborhood association mothers. Hence alteAa women participate in activities that are linked to their reproductive roles, food production, formal politics, mobilizations and protests. However given this important participation of women, they do not reach executive positions, for instance only 5 out of 26 COR leaders are women. 3.4. Gender In households where only one parent is present, 70% are female headed households. This percentage is aligned with the national trend that indicates that most households are headed by women due to the voluminous migration of men to other regions or countries. Consequently data on production systems show that 41% of the work force is constituted by women. The female work force delivers its highest labor participation, up to 43%, in the small-scale commerce sector as saleswomen or service providers, while this figure is only 16% for men. Moreover, a predominantly female sector is domestic services. Out of the women surveyed, 66.7% of them stated that they work as housekeepers in the city of L a Paz. That means that a large proportion of the nearly 170,000 people who commute to and from L a Paz each day are women. They take an average of 51 minutes and 2.5 transport connections each way, which takes its toll on transport costs as well as child care. Since they are often the solely responsible for their households, their children are often alone while their mothers are commuting and working. While at home women take on their second work shift by preparing food, supporting their children's schoolwork, washing and cleaning in addition to attending neighborhood or union meetings. 3.5. Violence The data collected in the areas surveyed reveals high levels of violence and civic insecurity. Violence towards women is especially widespread, as seven out of ten women have suffered some level of physical, psychological or sexual violence. The data reveals that in the last three months, 47% of those surveyed had been burglarized; 54.7% mentioned street mugging; 15.6% stated that there had been acts of sexual violence near their homes; 30% said that people had been hurt, attacked or - 105 - threatened near their homes; and 45.3% recalled fights near their homes. Also, 68.8% of those interviewed identify a gang problem in their neighborhood, of which 41.4% deem it to be serious. Police sources corroborate the existence of 56 youth gangs in the surveyed neighborhoods. In terms of the factors underlying these trends, changes in social composition and foundations, including migration and commuting have been associated to increased domestic and neighborhood violence. The city's role as a "bedroom community" has been perceived as an influential factor on the rise in violence towards women of all ages, 3.5. Suggestedmeasures Participation i s active and widespread through political, civic and union organizations however there are some coercive practices that affect women since their compulsory community activities get tagged onto their work day and domestic responsibilities. Moreover, their community participation becomes "invisible" since women themselves and their organizations do not acknowledge their own contribution to collective actions. The Municipality of El Alto is recommended to prepare a Communication and dissemination policy that will (a) make women's participation more visible; (b) provide pertinent information on a permanent basis in order for citizens to express their demands in an informed and uninhibited fashion. Participatory design of a public transport policy is recommended due to the high number of vehicles, the lack of application of the norms in the use of fuel, the transport noise in the congested La Ceja and the increased traffic risks for women and children. Municipal programs focused on prevention of youth violence should be considered SAGUAPAC 4.1. Methodology Households and businesses served by the SAGUAPAC cooperative participated in a survey of 1,314 households that generated a useful comparison amongst the population residingin neighborhood units whose sanitation coverage will be extended (377 surveys) and the population located in the area that will benefit from the expansion of the capacity of the residual water treatment plants (43 1 surveys), as well as a comparison between each of these groups and the population that will not receive any benefit as a result of the works (279 surveys). 4.2. Beneficiary population SAGUAPAC serves the population that i s located between the central rings of the city of Santa Cruz. Therefore, the beneficiary population requires the least travel time between their homes and their places of work or study (approximately 21.5 minutes). On the other hand, the population that will benefit from the treatment plants -which will support future sanitation network expansions- reside outside the fourth ring and thus currently lack this service. These people must dedicate almost 70% more time - 106- than the current cooperative members in order to reach their daily activities (36.6 minutes). Nevertheless, their travel costs are not significantly different. Households in the component's area of influence are of 4.53 people on average, but it i s common to have two households living in one house. Expenses on public services reach 16.9% of gross household income. Inthe area where sanitation connections will be constructed, 65% of households use latrines, however 35% of these admitted to disposing of residual waters inthe street and 21% in their own backyard. 4.3. Participation In the case of SAGUAPAC, the degree of participation is limited to its communication strategies that inform users about their service innovations or basic use. Their main form of dissemination i s through assemblies in each served neighborhood. SAGUAPAC now implements a program called "SAGUAPAC in Your Neighborhoods" due to the findings of previous studies that concluded that the best way to communicate information in neighborhoods was through meetings with the community. The program disseminates information and provides training courses. Additionally, periodical newsletters are distributed along with service bills with environmental information, and an explanation of the bills. Television and radio announcements are also used to communicate messages to the community. Their interactive website is also available to users with internet access. 4.4. Gender SAGUAPAC's social evaluation i s disaggregated by gender, which will endow the client with a very useful database. Although the data analysis i s yet to be completed, a pertinent trend can be drawn. Women are deeply engaged in neighborhood improvement initiatives and consistently mobilize the community towards urban upgrading, service provision and communal project initiatives. Indeed a majority of members within these organizations are women. However, low female participation has been reported amongst the neighborhood association's higher level representatives. Apparently when voting for directors, male members assume that women would not have the time or the education needed to deal with authorities. 4.5. Violence In terms of resident perceptions of their area's security conditions, the city has a similar turnout throughout: 36% of respondents considered that they lived in a safe neighborhood; 3% that some precautions were needed to avoid robbery; 47% said that robberies or threats were common; and 29% said that people have been hurt or killed. Out of respondents from SAGUAPAC's concession areas, 27.9% classified their area as safe or very safe while 42.2% regarded it as unsafe or very unsafe. Households identified other problems such as noise, traffic, odors and stagnant water. 4.6. Suggested measures SAGUAPAC should focus more attention on the implementation, information and transparency strategies in order to disseminate the results of their actions, i.e. usingits communication strategy in order to inform members about the advantages of new services, and thus prevent and mitigate risks associated to the new interventions. For example, it is in SAGUAPAC's interest to communicate the following effects of the new works to be financed: (i)better service for the members of the cooperative by - 107 - generating a positive environmental effect, given that the underground water system contamination would be reduced; (ii)this project component emphasizes the economic returns of the sanitation and treatment process. The residents of the four areas will have to pay for sanitation connection charges and a monthly tariff that is estimated at US$3.12/month in residential sectors. SAGUAPAC's information databases show that this new cost would have a differential impact on households according to income, such that the connection charge would represent 2.0% of household income at the lower end of the spectrum and only 0.5% amongst households earning US$680. On the other hand, the cooperative has indeed initiated a social tariff in March 2006 that enforces a minimum charge of $1.9/month and waves user fees when consumption is less than lorn3. ENVIRONMENTAL 2. Introduction Incompliance with OP 4.01, a full environmental assessment was carried out for each of the three project components as part of project preparation to identify any potential negative environmental impacts associated with the subprojects and activities to be implemented and develop appropriate mitigation measures. The results of this environmental assessment have been included in the project's environmental framework, which has been operationalized in manuals to facilitate its implementation. The environmental framework i s based on Bank policy as well as requirements set forth in the Bolivian law. It establishes the strategy by which environmental assessments and management are to be incorporated in project design and implementation. The project's implementing agencies -Municipality of La Paz, Municipality of El Alto and SAGUAPAC- will be in charge of enforcing it. The project has been qualified as category B, which means that the risk involved is moderate in all three cities where the works will be taking place. This means that the urban development activities to be carried out by the three components have a low environmental impact. Basically, some minor environmental nuisance might be generated during the construction of works that can be minimized simply through the project's mitigation programs. Nevertheless the perceived or substantive risks respond to different ecosystems and geomorphological characteristics and have therefore been analyzed in each particular context. 2. EnvironmentalProceduresof the Project The project addresses environmental safeguards by implementing prevention and mitigation programs that propose a series of measures to prevent potential negative impact as well as corrective techniques when impact is inevitable. The objective is to develop an operational tool that will focus on environmental protection through the application of programs constructed by a series of preventative and mitigation measures for potential negative impacts generated by the project. These mitigation measures are detailed in the Environmental Assessments, which address issues such as transport, machine maintenance, construction material management, sanitation system management, liquid waste-fuel-oil-chemical management, hygiene, safety, land movement, and cleaning. - 108- Inorder for the mitigationplans to be properly implemented, the following manuals were prepared. It i s imperative that the content of these guidebooks be specified in the construction companies' terms of reference and contracts. Environmental Guide for Occupational Security in Infrastructure Works for La Paz (Mhximo Liberman) Environmental Guide for the Construction of Roads, Terraces, Drainage and Community Infrastructurefor La Paz (MhximoLiberman) EnvironmentalGuide for ArcheologicalRecovery for La Paz (Mhximo Liberman) Environmental Guide for the Construction of Roads and Drainage Systems for El Alto (Beta GamaConsultants) EnvironmentalGuide for ArcheologicalRecovery for El Alto (Beta GamaConsultants) EnvironmentalGuide for water networks, sanitation and archeological recovery for SAGUAPAC (Mhximo Liberman) Each of the three studies includes (i)a general description of the project context and specific characteristics of the project; (ii)a political and legal review of the existing national and municipal legislation and norms set to preserve and control the environment; (iii)description of the project's sphere of influence; (iv) Environmental Management Plan; (v) description of the programs that are included in the plan, including Liquid Waste, Fuel and Oil Management, Superficial Water Management, Social Management, Hygiene, Industrial security and Occupational Health; (vi) evaluation of environmental risks generated by the project as well as the impact of the environment on the project, mitigation measure and prevention plan; and (vii) environmental guidelines for use during construction. 3. Environmental benefits of the infrastructure construction works The description below will summarize the main findings of the three environmental assessments as per the environmental impacts and benefits that the urban infrastructure project is likely to generate. Although the project is classified as an urban infrastructure project, the outcomes sought are highly environmental. In the case of L a Paz, the project itself has been designed to address a host of environmental and physical risks that the population of the selected neighborhoods faces. The urban settlements have grown up towards the highest parts of the river basin, up to 4100 meters. These prominent slopes are home to a host of settlers who suffer natural land and water-based risks. Therefore the positive effects of the urban upgrading works are many. The flat city of El Alto is a gateway to La Paz and a strategic transport hub does not itself produce many topographic challenges. However the urban transport works will in turn protect the population from the physical and health risks associated to congested, unplanned traffic. In the area under the SAGUAPAC concession in the city of Santa Cruz, there is an significant concern about the limited groundwater source, which this project addresses directly. In this case the environmental benefits of the sanitation works are crucial outcomes of the project. - 109- Component ImDrovement in Derivedfrom La Paz 1. Population's health * canalization and tubing of creeks, improvements in solid waste collection and water drainage through the application of asphalt and cobblestone surfaces tubing and creek channeling and construction of public bathrooms 2. Stability of slopes the construction of retaining walls the steadiness of the slopes' new soil 3. Neighborhood safety construction of terraces installation of public lighting 4. Children's educational environment building a social center and technical school 5. Recreational environments for adults and pedestrian walkways children children's park sports field El Alto 1. Air contamination, specifically the quantity application of pavement of dust particles that passengers and residents inhale 3. Emission of combustion gas reduction of travel distances 4. Risk of traffic accidents construction of distributors 4. Risk of flooding, accidents and civic drainage and public lighting insecurity SAGUAPAC 1. Reducing the contamination of groundwater intercepting an additional por- tion of the city's raw wastewater and conveying it to the waste- water treatment plants, thereby preventing it from infiltrating to the local aquifers and reducing groundwater contamination. 2. Reduce odor generation from the plants, upgrading the capacity of the thereby reducing nuisance to nearby wastewater treatment plants neighborhoods 3. Emission of greenhouse gas covering the anaerobic lagoons by geomembranes 4. Supporting the global initiative for controlling climate change - 110- 4. Possibleimpacts and suggested mitigation measures A series of mitigation measures have been suggested to manage environmental impacts. Generally, good engineering and institutional practices are detailed in the environmental manuals that were prepared for each component. Some general suggestions include: - Possible Impacts Management of Environmental Impacts La ' Changes in the land structure: Caused by - Avoid leveling off land during works, mixing Paz cleaning, moving earth, channeling and concrete directly on the land, spilling fuel. tubing of creek water, this also includes Use household waste bins, reuse of material building infrastructure works such as dug up during excavations and disposal of latrines, community centers, etc. excess waste. Reuse hydraulic tests fluids (for example, to Solid waste creation: the generation of water cropdplants); to have chemical toilets solid waste could lead to a potentially for construction personnel. hazardous contamination of land during ' Do not store, even temporarily, excavation the execution stage and could take place materials in any part of the river; while installing camps and moving soil. immediately remove accidental spills with appropriate materials. Increasing noise levels: during the I Occasionally humidify internal pathways execution stage there will be an expected within the site; transport excavation material increase in the noise level due to on established pathways. machines used in construction, installations and excavation. 1Carry out excavation and tube installation tasks during daylight hours and keep vehicles inoptimum working order. Archeological remains could be found especially in La Paz since it is located 1Separate the organic material layer from the within a river basin. inert material; avoid weighing down the layer of earth with heavy machinery in and outside of the site. - El 1. Atmospheric emissions Management of construction material and Alto recyclable waste 2. Noise emission Construction material management Liquid waste-fuel-oil-chemical management 3. Creation and disposal of solid waste in Superficial water management drainage networks and surface currents. Vegetation management 4. Nuisance to pedestrians and site users . Machinery and equipment due to total or partial obstruction of Camps and shops public space (streets, sidewalks, etc.) Atmospheric emissions Signs and traffic management 5. Loss of vegetable layer Social communication Hygiene, industrial security and 6. Alteration of landscape occupational health - Santa I.Changesinthelandstructure Avoid leveling off land during works, Cruz mixing concrete directly on the land, 2. Solid waste creation spilling fuel. 3. Soil contamination Use household waste bins, reuse of material dug up during excavations and disposal of 4 Reduction in water quality due to excess waste. contamination by wastewater Reuse hydraulic tests fluids (for example, to 5. Health impacts related to the emission of water crops/plants); to have chemical toilets particulate matter for construction personnel. 6. Increasing noise levels: during the Do not to store, even temporarily, execution stage (there will be an expected excavation materials in any part of the river; - 111- increase in the noise level due to machines immediately remove accidental spills with used in construction, installations and appropriate-materials. excavation). Occasionally humidify internal pathways 7. Changing levels of shallow groundwater within the site; transport excavation levels material on established pathways. 8. Removal and impact on vegetable cover D Carry out excavation and tube installation tasks during daylight hours and keep 9. Infrastructure damage vehicles in optimum working order. 10. Water Contamination Separate the organic material layer from the inert material; avoid weighing down the layer of earth with heavy machinery in and outside of the site. 5. Institutional Framework In terms of assessing capacity and commitment of the institutions responsible for implementing and monitoring the agreed plans, each city has particular institutional arrangements to respond to these requirements. In the case of L a Paz, the environmental quality unit is in charge of supervising the fulfillment of environmental policy recommendations set forth by the project. The study suggests that the city contract two technical staff members for the duration of the project. One will take charge of the environmental monitoring and the other will provide environmental education focusing on solid waste management, sowing and the gardening in the selected neighborhoods. In El Alto, the environmental assessment identified that the municipality lacks approved environmental planning and norms. For that reason, the assessment includes a series of environmental management manuals for the city. However, since the different municipal units do not presently have the technical capacity to implement these new instruments, institutional strengthening is recommended on several levels. SAGUAPAC, on the other hand, does already have an Environment and Labor Security Department that will enforce the current environmental legislation as well as implement the specific environmental guidelines laid out by the manuals. Moreover, the project will be monitored during its execution by the Works Supervision Unit to ensure prevention and mitigation of risks. INVOLUNTARYRESETTLEMENT The Municipality of L a Paz (specifically the Barrios de Verdad program), Municipality of El Alto and the SAGUAPAC cooperative will coordinate the implementation of the project. Although no resettlement is expected, subprojects related to Urban Upgrading (Component l), Transport (Component 2) and Urban Sanitation (Component 3) include neighborhood and city-level infrastructure works that in some minimal cases might entail land taking and population displacement. Nevertheless the World Bank policy indicates that involuntary resettlements should be avoided or reduced to a minimum if at all possible, and thus requires that alternative designs -that do not affect housing or private property- be given priority. A Resettlement Framework (RF) was prepared inaccordance to OP4.12 "Involuntary Resettlement" instead of a Resettlement Plan, with the purpose of mitigating negative - 112- impacts generated by the taking of land and the associated involuntary displacement of yet unplanned subprojects and because the number of estimated cases i s minimal or nil. The RF i s based on minimizing resettlement and, where absolutely unavoidable, offering choices to persons subject to relocation to restore or improve their socio-economic conditions. The guidelines for the RF have been based on the Barrios de Verdad program in La Paz and the urban transport subproject in El Alto (Components 1 and 2). However, the sanitation works (Component 3) to be carried out by SAGUAPAC will not be considered for the RF guidelines given that the cooperative is not entitled to enforce procedures regarding technical-administrative issues, expropriation or property rights. That is to say SAGUAPAC will not carry out involuntary resettlement under any circumstances. Therefore the purchase of any lots for the implementation of Component 3 will be carried out at market value and will be absolutely voluntary. On the other hand the guidelines set out for L a Paz and El Alto will strengthen their institutional capacity to address future resettlement processes that might become necessary inthe present and future projects. 1. Objectives The main purpose of preparing and implementing resettlement is to mitigate and compensate the impacts caused by relocation, when this is inevitable and to reestablish and improve socioeconomic conditions of the resettled population. The specific objectives are (i)to characterize and evaluate the socioeconomic conditions of the resettled people through a census assessment; (ii)to evaluate the impact caused by resettlement in order to select the most appropriate option and the degree of compensation; and (iii)to compensate the resettled people and carry out the social support process in order for them to obtain equivalent or better living conditions. 2. ResettlementPrinciples Exceptionality -Resettlement will only be determined after having exhausted all other feasible and legal alternatives for permanence. Planning - When permanence is not an option, an abbreviated resettlement plan should be devised and executed. Participation - The affected population must participate in the different phases of the resettlement process and be consulted and informed about all the decisions that directly involve them. Women who show interest in the process will be especially encouraged to participate. Compensation - To ensure the rehabilitation or improvement of socio-economic living conditions previous to resettlement, the affected population will be compensated for all losses, damage and inconvenience. Concurrence - Solutions will be provided according to socioeconomic conditions as well as the degree of impact or distress. Equality - The interested parties must be treated equally and independently from the status of their landlord or proprietor Expeditiousness - The entities responsible for executing the actions and activities related to resettlement will allocate necessary physical, human, administrative and financial resources in the allotted period of time. - 113 - 3. Legal Framework and Compatibility between the Bank's Policy and the National Norms The Resettlement Framework is based on international and national norms, as well as on general legal principles, related to land acquisition and the protection of the people displaced by development projects, as well as the methodology to estimate the cost of affected assets. Bolivian legislation does not address resettlement specifically and thus does not have a resettlement policy nor authorities assigned to the subject. In any case there is no doubt that the execution of resettlement actions must abide by the Environmental Prevention and Control norm, D.S. 24176, subscribed to Environmental Law No. 1333, articles 25 (impact and participation), 29 and 30 (mitigation and compensationmeasures). Moreover, the Constitution affirms that Bolivia i s a Social and Democratic State of Law, which thereby obliges it to seek and defend social justice and thus avoid any harm that its actions could afflict on the rights of its citizens. Furthermore, there are a set of laws, decrees, jurisprudence and principles that protect urban and rural property, that regulate expropriation mechanisms and other protective property norms and rights of persons. 3.1. Norms related to Land Acquisition and Resettlement Constitution: Articles 7 and 22. Legal Norms: Administrative Procedure Law, Municipalities Law, Civil Code, Expropriation Law, Decree 14375, Regularization of Urban Property Right, Environmental Prevention and Control, Agrarian Reform Law, General Water Regulation , Contracting Norm and Transport ConcessionLaw. International Laws: United Nations Universal Declaration of Human Rights and Article 21 of the American Convention on Human Rights "Pact of San JosC, Costa Rica". The latter states that "everyone has the right to the use and enjoyment of his property. The law may subordinate such use and enjoyment to the interest of society. No one shall be deprived of his property except upon payment of just compensation, for reasons of public utility or social interest, and in the cases and according to the forms established by law." Principles 6, 7 and 8 of the United Nation's Guiding Principles on Internal Displacement must also be taken into account. 4. Preparation of the abbreviated resettlement plan (ARP) An abbreviated resettlement plan will be prepared given that fewer than 200 people would be displaced, which the OP 4.12 establishes as the decisive number to adopt a Plan. The guidelines for the ARP have been based on Components 1 and 2. 4.1. Composition of the resettlement team Depending on the magnitude of the resettlement, the resettlement teams would be composed in the following way for the cities of L a Paz and El Alto. Component 1: La Paz- The ARP would be developed by the Barrios de Verdud program's design manager or by a specialized consulting firm or professional - 114- contracted by the program under their supervision and coordination, according to the following distribution of responsibilities: - The Program will name or contract a specialized professional in charge of the - ARP design for the selected neighborhoods. The Municipal Government of L a Paz will produce a technical report, cadastral estimate and physical legal assessment of the estates that it deems will be affected by the project. - The specialized professional will coordinate activities with the program, process the systematized information, write a socio-economic assessment, identify the resettlements and other effects and propose solutions. He/she will produce a ARP that will be executed by the firm contracted to carry out the community development sub-component. Component 2: El Alto- The ARP will be carried out by carry out by the construction firm incharge of the infrastructure works inconjunction with the administrative units within the Municipality of El Alto. 4.2. Disclosure and Communication Strategy Inan effort to engage the stakeholders in the decisions that will affect them during each stage of the plan, the municipal governments and the executing firms will coordinate to provide them with information about the characteristics of the project, the technical and legal reasons behind the relocation, options and rights related to the resettlement. This disclosure and communication strategy aims to (i)provide information about the studies and procedures that will be carried out with the property owners, holders of property rights and residents of the possible estates to be purchased; (ii)alleviate the anxiety and stress that the potentially affected population may experience; (iii)introduce the community to the staff incharge of the community development and resettlement; (iv) establish communication channels to create a permanent consultation and grievance redress mechanism. 4.2. Eligibility for relocation Relocation will be determined on an exceptional basis when there is no other viable project design alternative. De facto occupants are also eligible to receive compensation for construction and improvements, though not for the public property, and they will be supported in order for them to reestablish their socio-economic conditions. The cut-off date for eligible people will be determined through a public announcement regarding the implementation of the project in the designated population's reference sites. Duringcorresponding informative meetings a public list will be displayed with the names of the eligible people and a 15-day grace period will be allowed to make adjustments that were not taken into account inthe census. 4.3. Checklist for the preparation of an ARP Each municipal government is responsible for contracting the executing agency for the preparation of an Abbreviated Resettlement Plan and to guarantee that it be adequately implemented, while the Bank must give clearance to the proposed Plan. - 115- Activity Responsibleparty Plan with the Municipal Government 2. Provisionof informationto stakeholders Consultant and Municipal Government 3. Collectionof information (census and socio-economic assessment,topographic Consultant incoordinationwith the Municipal assessment,titling study, estimates, Government filling of forms) 4. Analysisof information,impact identification,compensationdefinition Specializedconsultant or firm 5. Agreement subscriptionor commitments about the resettlementalternatives Specializedconsultant or firm 6. Coordinationof timing amongst the beginningof technical-administrative Specializedconsultant or firm in coordination processes, expropriationor limitations to with the Municipal Government propertyrights. 7. Approval and no-objection Municipal Government and World Bank 5. Implementation of Abbreviated ResettlementPlan 5.1. ARP Coordination. The execution of the ARP involves providing the affected people with alternative solutions that had been previously subscribed in agreements and carrying out complementary activities that guarantee a just compensation. The execution of the plan will in effect be part of the construction firms' Terms of Reference. Company and supervision contracts should consider the need for coordinating mutual obligations to achieve resettlement objective. 5.2. Information and participation. This activity guarantees that stakeholders have an adequate, pertinent and permanent flow of information about the ARP and that they actively participate in decisions that involve them. The participation of female household heads and vulnerable population should be a specific priority. The team is responsible for conducting meetings with stakeholders each time a new stage of the process begins. House visits, meetings and informative workshops will be documented. 5.3. Monitoring. In order to verify the level of reestablishment of the living standards of the displaced population, a monitoring mechanism will be put in place to assess the advances regarding the following variables: housing, basic infrastructure services, employment, income and access to education and health. The process will include the following variables in order to monitor economic and business activity: shop for economic or business activities, basic infrastructure services, sales and net income. Municipal governments are committed to sending the Bank monitoring reports. - 116- 5.4. Ex Post Evaluation Checklist Household name Number of members Household - 117- ages 5 and 25 linked to - 118- Annex 11: Project Preparation and Supervision BOLIVIA UrbanInfrastructure Project Planned Actual PCNReview August 4,2005 August 4,2006 Initial PIC to PIC August 9,2005 August 9,2006 InitialISDS to PIC August 16,2005 August 16,2006 Appraisal April 24-28, 2006 April 24-28, 2006 Negotiations July 12-13, 2006 July 24-26,2006 Board/RVPapproval November 21,2006 Planneddate of effectiveness February28,2007 Planneddate of mid-term review June 15,2008 Plannedclosing date October 30,2010 Bank Staff and consultantswho worked on the project included: Name Title Unit Alexandra Ortiz Task Team Leader LCSFU FranzDrees-Gross Co-Task Team Leader LCSFP MenahemLibhaber Lead SanitaryEngineeringSpecialist LCSFW Marcela Silva Sr. Transport Specialist LCSFT RuthLlanos SocialDevelopmentSpecialist LCCBO LourdesLinares Financial ManagementSpecialist LCSFM KeisgnerAlfaro Sr. ProcurementSpecialist LCSPT Miriam CCspedes ProcurementSpecialist LCSPT Alvaro Larrea ProcurementSpecialist LCSPT Jorge Kamine Counse1 LEGLA FabiolaAltimari Counsel (alternate) LEGLA Xiomara Morel Sr. FinanceOfficer LOAGl R.EnriqueAsturizaga UrbanSpecialist LCSFU Kimberly Vilar UrbanConsultant LCSFU MarianelaZeballos Coordinator inL a Paz LCSFU GerhardMenckhoff Sr. UrbanTransport Consultant LCSFT Jorge Villegas Involuntary ResettlementSpecialist LCSFU Juan David Quintero Sr. EnvironmentalSpecialist LCSEN GiancarlaLens Administrative Support in El Alto LCSFU Silvia Delgado ProgramAssistant LCSFU M6nica Claros Team Assistant LCSHD RosaBellido Language ProgramAssistant LCSFU - 119- Annex 12: Documents in the Project File BOLIVIA UrbanInfrastructure Project Marco de Reasentamiento Znvoluntario, Guido Montafio (Beta Gama) and Juan Manuel Garcia (Econometria) Estudio Ambiental de La Paz, Mhximo Liberman Estudio Ambiental de El Alto, Maria del Carmen Rocabado, Beta Gama Consultants Estudio Ambiental de Santa Cruz, Mgximo Liberman Estudio Socio Econdmico de La Paz, Eduardo Pando and Ernest0 Marconi, Beta Gama Consultants Estudio Socio Econdmico de El Alto, Beta Gama Consultants Estudio Socio Econdmico de Santa Cruz, Juan Manual Garcia, Econometria Evaluacidn de Capacidad de Endeudamiento y Sostenibilidad de la Deuda, JosC Antonio Terhn Financial Study of SAGUAPAC, Sergio Sour Financial ManagementAssessment,Lourdes Linares Procurement Assessment, Miriam CCspedes and Alvaro Larrea Estudios de Trafico para el Componentede El Alto, Grupo TEC - 120- Annex 13: Statement of Loans and Credits BOLIVIA UrbanInfrastructureProject IBRD/IDA/Grants OperationsPortfolio Difference between OriginalAmount in US$ Millions expectedand actual disbursements ID FY Project Name IBRD IDA GRANT Cancel. Undisb. Orig. Ll:d BO Decent lnfras for Rur PO73367 2003 Transformation 20.00 20.24 14.62 BO First Programmatic Bank and PO82781 2004 Corporate 15.00 15.00 20.68 19.85 BO Institutional Reform (OLD CIV PO62790 1999 S) 32.00 1.83 2.92 3.05 -0.47 BO Participatory Rural Investment PO40085 1998 Project 62.80 3.33 9.59 9.97 5.78 BO Road Rehab. & Maintenance PO68968 2002 Project 77.00 45.50 29.55 PO83051 2005 BO RuralAlliances 28.40 28.14 PO06204 1998 BO- EducationQuality 75.00 0.35 1.35 PO74212 2001 BO-HealthSector Reform APL II 35.00 11.91 6.30 GEF BO-Sustainabilityof Protected PO60474 2001 Areas 15.00 0.58 0.62 Total: 15.00 345.20 15.00 5.15 139.91 85.30 5.31 Statementof IFC's Held and DisbursedPortfolio InMillions of US$ Committed Disbursed FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1995 BISA 0.00 0.54 0.00 0.00 0.00 0.54 0.00 0.00 1998 BISA 0.00 0.09 0.00 0.00 0.00 0.09 0.00 0.00 2001 Banco Los Andes 0.15 0.00 0.00 0.00 0.04 0.00 0.00 0.00 2003 Banco Los Andes 6.60 0.00 0.00 0.00 6.60 0.00 0.00 0.00 2003 Banco Sol 4.00 0.00 0.00 0.00 4.00 0.00 0.00 0.00 1999 CBTI 0.00 0.00 0.83 0.00 0.00 0.00 0.83 0.00 1994 COMSUR 0.00 0.00 1.30 0.00 0.00 0.00 1.30 0.00 1991 Central Aguirre 0.00 0.24 0.00 0.00 0.00 0.24 0.00 0.00 2001 Central Aguirre 1.69 0.00 0.00 0.00 1.69 0.00 0.00 0.00 1999 Electropaz 18.04 0.00 0.00 0.00 18.04 0.00 0.00 0.00 2003 FIE 1.25 0.00 0.00 0.00 1.25 0.00 0.00 0.00 1993 GENEX 0.10 0.00 0.00 0.00 0.10 0.00 0.00 0.00 GTFP Mercantil 0.05 0.00 0.00 0.00 0.05 0.00 0.00 0.00 1999 Illimani 3.84 0.00 0.00 0.00 3.84 0.00 0.00 0.00 Minera 0.00 3.40 0.00 0.00 0.00 3.40 0.00 0.00 2001 PQB 10.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2003 PRODEM 2.45 0.00 0.00 0.00 2.45 0.00 0.00 0.00 2003 TDE S.A. 13.32 0.00 15.00 0.00 13.32 0.00 15.00 0.00 TRECO 0.00 1.16 0.00 0.00 0.00 1.16 0.00 0.00 2001 Telecel Bolivia 3.89 0.00 5.00 2.14 3.89 0.00 5.00 2.14 2005 Transierra 47.00 0.00 0.00 91.00 47.00 0.00 0.00 91.00 Total Portfolio: 112.88 5.43 22.13 93.14 102.27 5.43 22.13 93.14 No approvalspendingcommitment - 121- Annex 14: Country at a Glance BOLIVIA UrbanInfrastructure Project Latin Lower- POVERTY and SOCIAL America midde- Bolivia 8 Carib. income Developmentdiamond* 2004 Populataon, mid-yew @%i!ltms) 9 0 541 2 430 GI4 per capits @Wasme 980 3 800 1 5&0 Lifeexpectancy T GNI (Anas method US$ b, 8 6 1 948 3,847 Average annual growth, 1998-04 PopulatPotn(%1 2 0 1 4 1 0 L&Wforce @) 2 5 0 9 a 7 GNI Gross per prmialy Moat recent estimate (latestyear available. 199s-04) camta enrdiment Poverty(SS ofpopu)sfroo$ekw notmd pow!@Jme) 63 UrbanpopulatronI%of totali0r"pUatim) 4 77 49 Ltfe ewedmcy BL btrth(yeem) E4 71 7@ infantnimlity fperI0%IJW $!rfh.s,I 53 28 33 Chtldma'nutntion of chr/dmunder 5) 5 11 Access to improvedwater source Accessto an improved water source (% ofpopurPhon) Literacyp dpopulalron age ISs) I - 85 89 87 8% aY@i Grosspnrnaiyenrollnaent (% ofschookge popdatmj 115 923 t 64 -m#vro Male 116 126 1E5 Loiver-m&!i?-!ncome group Female 115 122 113 KEY ECONOMIC RATIOS and LONG-TERMTRENQS 1984 1994 2003 2004 Economicratios' GDP (US%bi#:msi 2.7 8 0 8 1 6 8 Gross caplial fmairolllGDP 19.7 144 108 13 3 Exportso'goods and 9erIticeaGDP 23.7 21 7 23 1 24 G Trade Grcxss domestic savfngsiGDP 17.5 a 4 122 24 z Grassnatnonalmaving@GDP 12.0 104 14 0 16 1 T Current account batanceGDP 5.0 -40 0 4 2 6 InterestpaynientslGDP 7.9 2 5 1 5 1 8 TotalaebffGDP 159.3 51 5 70 1 67 6 TotaIdebt sewicekxports 63.0 3 6 ill1 23 2 Presentvalueof d&t/GDP 35 8 Presentvalueof UebUe~ports S42 ? 19e4-94 1994-04 2003 2004 200COE 2 9 3.0 28 3 6 3 6 0 6 0.9 0 4 1 6 1 8 8.3 5.0 101 8 8 2 7 STRUCTURE of the ECONOMY 1984 I994 2003 2004 I?6of GDP) Growth of capital and GDP (%) 1 AgDcwiture 228 17 1 144 Inddotry 333 31 E 29 1 fdanufoctunng 120 187 14 4 services 439 51 3 56 5 Hwsehold finel cofisuinptronexpmditure BY2 776 7 1 6 715 Generalgo,/%ffnal consumptionexpenditure 133 13E 16 1 14 4 lmpwtsof g d s and servrces 258 272 21 6 239 I GCF -DP I 1984-94 1994-04 2003 2004 (averageannud gbrowfhJ Growthof expotts and imports (%) Agncuiture 2 6 2 3 I 6 0 Industry 3.1 3.6 1 3 Wanufactumg 2.9 2.7 2 7 SSNlCeS 2.4 38 3 1 Householdfinel coiisuinptirrriexpendifure 3.0 2 9 0 % 0 7 GeneralgoVt final consumptionexpenditure -0 3 2 9 3 2 -2 9 Gross tapria!farmation 3.J -01 -17 I 6.0 lniport5sf g d s and seryices 6.4 3 2 -2 7 -0 9 The diamonds ohow four key indacatonin the country(in t\oM) comparedwth it8 incomagroup average Ifdata are missing,the diamond W I ~ be incomplete - 122- PRICES and GOVERMMEHT FIPJAFKE 1984 1994 2003 2004 Doniesbc prices (76 chaoge,l Coneun-er onces 2,t77.3 8.5 18 5 3.6 lmolicit GDF deflator 1,4434 5 0 6 1 8.5 Gownnent Imance f% of GDP,ncirnc(escurrent grants) Currentrevenue 25.5 24.0 22.6 Currentbudget balance 5.7 0 2 0.5 Overallsur~Iuslde6ut -3.0 -7 9 -5 6 I TRADE 1984 1994 2003 2004 (US5 fflfirons) Export and importlevels(US$ mill.) Total exports (*ob) 724 995 1,573 1,824 zinc 37 105 123 Silver 21 63 75 ZSCU Mnuiachires 393 278 1.EM Sola1tinports (cif) 489 1.196 7 609 1,692 Food 54 69 1.c(M Fueland energy 2 57 1a5 tW Capitalgoods $85 383 451 n Expor: price index 120t70=IPOj t 85 106 102 107 lmoort pnceindex (2000=700) 58 36 100 106 Terms of trade (2~-:001 317 110 102 101 BALANCE of PAYMENTS 1984 1994 2003 2004 I (US5 ffIf/CrnI Exports of goodsand %ewices $22 1.157 $872 2,143 IniDortsof goods and services 594 1.485 1.976 2,077 Resource balat~e 218 -329 -104 66 Net income -441 -302 -247 n ~15*9 Net Gtnent tnnafem 89 279 442 Currentaccoun! balance -235 -235 36 244 3 Financingiten- Iiiet) -8c _ * I 361 57 -299 Changesin net reserves -148 -123 -93 55 -10 Memo: Reswes includinggold 'US$ mri'l~a~sl 503 902 1434 1,041 Conversionrate{DEG,kxa!,VSS) 7.14E-3 4 6 7 1 7cr EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 (US5 mdftofls) Cornpositionof 2004 &eM (US$ mill.) Total debt outstandingand disbursed 4 317 4.577 5,675 5.947 16RD 176 116 0 0 IDA 94 648 157'1 1.750 t 118 Total debiservice 537 348 432 536 IBRO 31 35 0 0 ID4 I 7 14 20 E = Compositionof net rewurcefmvs Gffwalgrants 89 281 451 Offiaal credhrs 101 215 529 313 Pnvate cfedilofa 4 t 6 128 -152 Foreqndirect mvse+nient(net tnfiowsl t3 130 167 Portfolio equity(net tnnovis) L3 0 0 World Bank prqrorn Commrtmenrs 0 157 94 - Disbursements E Bilaierar 16 80 143 Pnnapaalrepawients 14 26 6 G - Showem ?JetRows 2 53 133 117 interestpaymen$ f8 15 8 12 Net truzelers -17 38 128 105 ~ The 'florid Bank Group. Thas WJC'waspreaaiedby countryunit staff,figures maydiffer hmr other 'WorldBank publisheddata. &'Zr??M5 - 123 - Annex 15: Wastewater Treatment Technical Aspects Increasingthe Treatment Capacity of the Existing Wastewater Treatment Plants of Santa Cruz BOLIVIA: Urban Infrastructure Project Introduction The current total population of Santa Cruz is about 1.3 million and it keeps growing at a high annual rate of about 6%. Forecasts indicate that by 2025 the city's population will be about 2.76 million and in 2039 it will reach about 3.7 million. Within the concession area of SAGUAPAC the population is currently about 850,000 and will, according to forecasts, grow to about 2.0 million by 2025 and to about 2.8 millionby 2039. Currently the coverage of sewerage networks in the concession area of SAGUAPAC is about 5376, Le., about 450,000 inhabitants are connected to the sewerage network. The collected wastewater is conveyed to three existing municipal wastewater treatment plants: Plant North 1 (denominated plant Nl),Plant North 2 (denominated N2) and Plant East (denominated Plant E).The location of these plants is presented in Fig 1, which also indicates the location of future treatment plants. When the three plants were constructed they were located outside the city limits. As a result of the city's growth, they are currently located within the city and are surrounded by residential neighborhoods. Fig. 1 represents in fact the city's wastewater master plan, according to which, 4 additional treatment plants will be constructed in the future, in the North, North-East, East and South. The secondary (within neighborhoods) and primary (main collection and conveyance) sewerage systems are being designed in according with the location of the existing and future treatment plants. According to the master plan, the capacity of three existing treatment plants, which were designed to serve a population of 450,000 and currently serve such population, need to be increased so that they will be able to serve the entire current population in the concession area of SAGUAPAC, i.e. about 850,000, while the future population will be served by the new four treatment plants. The three treatment plants of SAGUAPAC are stabilization lagoons (also known as oxidation ponds) treatment plants. They are based on a conventional process of a series of three types of lagoons in series: (i)anaerobic lagoons; followed by (ii) Facultative lagoons; followed by (iii)polishing ponds. In the anaerobic lagoons about 60% of the organic matter contained in the raw wastewater is decomposed by anaerobic bacteria to Methane and water, in an oxygen void environment. - 124- The facultative lagoons contain three distinct layers: (i)at the bottom, an anaerobic layer which functions as the mentioned anaerobic lagoon; (ii)above it, a shallow layer with low oxygen content, known as the facultative layer, inhabited by bacteria that can survive both in anoxic and aerobic conditions; and (iii)above it, an aerobic layer which contains dissolved oxygen at concentrations higher than 2 mg/l, inwhich aerobic bacteria decompose the organic matter originating from the wastewater to carbon dioxide and water. To decompose the organic matter, these bacteria need oxygen. The oxygen in the aerobic layer (and in aerobic lagoons in general) i s supplied by algae that develop in the lagoon and use the carbon dioxide generated by the aerobic bacteria and sunlight to produce Oxygen through the photosynthesis process. The capacity of Oxygen production is limited by the photosynthesis process, i.e. by the area of the lagoon, so to achieve higher levels of organic matter removal, larger lagoons are required. Facultative lagoons remove additional 20-3096 of the organic matter contained in the raw wastewater. The polishing ponds are fully aerobic lagoons, usually with high oxygen concentrations. They function under the same principles of the aerobic layer of the facultative lagoons, as described above, Le., through provision of Oxygen by algae. They further reduce the organic matter content, and also remove pathogenic organisms which were contained in the raw wastewater, mainly through the UV radiation of the sun. Common values of detention time in the anaerobic lagoons are 0.5-4 days, in the facultative lagoons 5-10 days and inpolishing pond 5-20 days. Each lagoon treatment plant is usually constructed of several identical or similar modules operating in parallel, each module containing the three types of lagoons. This is done to control the size of lagoons and avoid constructing huge, difficult to control lagoons. Topographical conditions permitting, the modules are identical, otherwise, the shape and size of each modules might be different. The Eastern plant of Santa Cruz (Plant E) consists of three identical modules in parallel, as seen in Fig. 2 Each module consists of one anaerobic lagoon, two facultative lagoons and one polishing pond. The flow is divided equally among the modules, i.e., each one receives 33.3% of the raw wastewater flow. The Northern 2 plant of Santa Cruz (Plant N2) consists of two non-identical modules in parallel, a seen in Fig. 3. Again, each module consists of one anaerobic lagoon, two facultative lagoons and one polishing pond; however, the flow is not equally divided between the modules, so that one module receives 66.6% of the flow and the other receives the remaining 33.3%. Lagoon treatment plants can function well, especially in hot climates, they are appropriate for developing countries since that they are simple to operate and of low costs, both in investments and O&M. - 126- high quality effluents in stabilization lagoons plants, since the effluents usually contain significant amounts of suspended solids in the form of algae, or in other words, large areas are required to achieve higheffluents qualities and that elevates the treatment costs. Santa Cruz is a city too large to be served by stabilization lagoons; however the decision to build the plants was made long ago, when the city was much smaller, and now these plants are a fact. Nevertheless, there is some justification to the use of stabilization lagoons in Santa Cruz. Bolivia is a poor country and access to financing in this poor environment is limited. SAGUAPAC has not even succeeded in fully completing the construction of the sewerage systems and certainly cannot afford costly treatment processes. Stabilization lagoons technology is an affordable low cost process, appropriate for the high ambient temperatures of Santa Cruz. SAGUAPAC has also adopted a reasonable approach of constructing several treatment plants, each of a reasonable size of serving about 300,000 users, instead of one large, difficult to manage plant. The topography of the city allows such an approach and the wastewater collection and conveyance system was designed to split the wastewater among the plants. The use of stabilization lagoons technology for treatment of the wastewater of Santa Cruz, both in the current and future plants, is therefore a reasonable solution for the city of Santa Cruz. Inspite of the above, the existing plants present some problems. The capacity of these plants is approaching the design capacity and it is required to increase their capacity so that they can cope with the increased flows which will reach them as SAGUAPAC increases the coverage of the sewerage systems in the city. The three treatment plants were originally constructed outside the city limits. Since their construction date, the city grew and the plants are today surrounded by residential areas, as can be seen in Fig. 2. This creates two problems: (i) plants present an environmental nuisance to the the neighboring residents, mainly by generating offensive odors, since the lagoons technology based plants are not fitted for location in vicinity of residential areas; and (ii)the conventional form of increasing the capacity of this type of plants is by increasing their area, however, this solution cannot be applied in Santa Cruz since there i s no area available around the plants. Increasing the capacity of the existing treatment plants is therefore a challenge. This Annex sets out the concepts, principles and processes adopted for increasing the capacity of the plants, provides details on dimensioning of the expansion works which will be financed under the project and presents related costs information. - 128 - Increasing the Capacity of the ExitingMunicipal Wastewater Treatment Plants of Santa Cruz The current capacity of the three treatment plants and the increased capacity to which SAGUAPAC wants to upgrade the plants are presented inTable 1. Table 1: Current and Required Capacities of the Three Existing Wastewater Treatment Plants of Santa Cruz Plant North 1 North 2 East Current Wastewater 8,000 30,000 19,000 Flow (m3/d) Current Population 51,724 240,817 151,466 Served by the Treatment Plants Incremental 38,280 127,815 2 12,470 Additional Population to be Served Total Population to be 90,004 368,632 363,936 Served After the Increase of Plant Capacity to the Required Design Capacity Design Flow After the 15,525 62,353 65,885 Increase of Plants Capacities to the Required Design Capacity (m3/d) To achieve such a capacity increase without increasing the plants area, an innovative strategy was adopted, base on a series of unique innovative technologies which will be incorporated inthe plants, as follows: (i)Installingpreliminarytreatment oftherawwastewater bymicro-screeningpriorto its discharge to the anaerobic lagoons. Rotating fine screens will be installed at the inflow to each plant. In fact only two micro-screens installations will be constructed, one on the inflow canal to plant North 2 and the other on the inflow canal to plant East. The capacity of plant North 1 is currently being increased utilizing the conventional method or expanding its area, so it does not require additional capacity increase. Micro-screens with a screen opening of 2 mm will remove about 30%of the suspended solids and about 10% of the organic matter contained in the raw wastewater, thereby reducing sedimentation in the lagoons and reducing the organic load on the lagoons (Le., the load of organic matter that the lagoons need to decompose and remove). (ii)Covering the anaerobic lagoons for the purpose of odor control. The anaerobic lagoons will be covered by geomembrane sheets which will prevent release of gases to the atmosphere and thus prevent generation of odors. The main source of odors in lagoon systems are the anaerobic lagoons and so covering them will eliminate, to a large extent, the odor problem and allow increasing the load on the anaerobic lagoons, i.e., increasing the capacity of the plant. In addition, after covering the anaerobic lagoons it would be possible to collect the methane gases produced in the - 129- anaerobic process and burn it before its discharge to the atmosphere. This will constitute a reduction in greenhouse gases and will support the global efforts to control the climate change. Attempts will be made to explore carbon finance opportunities in turn of elimination the methane gas. (iii)Installing uniquely designed wind operated slow mixers inthe facultative and polishing lagoons. This will enhance the treatment capacity of the lagoons by preventing short-circuiting in these large lagoons, thereby enhancing the efficiency of each of the layers formed inthe lagoon (anaerobic, facultative and aerobic). (iv) Recirculating the effluent of the second facultative lagoon to the entrance into the first facultative lagoon, at a ratio of about 1:2 in relation to the raw wastewater flow, so as to introduce large quantities of Oxygen to the Oxygen void effluent that arrives from the anaerobic lagoons, thereby avoiding release of odors and increasing the treatment capacity of the facultative lagoons. (v) If necessary, supplying additional oxygen in the facultative and polishing ponds to supplement the Oxygen produced by the algae and improve the treatment process. This does not refer to changing the process to mechanical aeration without the use of algae but rather to gentle introduction of Oxygen which does not disturb the lagoon treatment process. With the application of these innovative techniques it will be possible to almost double the capacity of the treatment plants without increasing their area, all that at a cost much lower than required by other methods of increasing treatment capacity. The flow diagram of the proposed process is presented in Fig. 4. This process i s unique in the sense that its components have probably never been installed in one same treatment plant, so its installation in Santa Cruz will be the first time that these components function in coordination in one treatment plant. Two of the main problems in wastewater treatment are high energy consumption and production of large quantities of sludge, both leading to high O&M costs. The advantages of the proposed process are that it consumes only little energy and does not generate sludge, so its O&M costs are low. In fact it produces methane gas which can be used to generate energy. It is also very simple to operate process and of low investment costs. These advantages make it very appropriate for developing countries. The experience which will be gained with this project will pave the way to possible use of this process in the future 4 additional plants which will be constructed in Santa Cruz and perhaps to other similar projects in Bolivia and elsewhere. - 130- Fig. 4: Flow Diagram of the ProposedWastewater Treatment Process for the Santa Cruz Plants Recirculation Stream Mixers / reated ffluent Rotating `Overed First Second Polishing Microscreens Anaerobic Facultative Facultative Pond Lagoon Lagoon Lagoon Following are additional details bout each of the technologies which will be used. Rotating Fine Screens: Lagoon plants usually include only coarse screening as pretreatment. Recently, innovative, automatic and efficient equipment for preliminary treatment has been developed. The coarse screens have been replaced by rotating fine screens. A typical rotating fine screen is presented in Fig. 5. The operation principle is self explanatory. Screen opening i s offered in the range of 0.2-2.0 mm according to requirement. The screened material is compacted by a press and discharged to a container, from which it is removed to a solid waste deposit site (sanitary landfill or alike). Reduction of up to 50% of particulate COD (Chemical Oxygen demand, representing organic matter content) and up to 30% of total COD have been achieved for the lower range of screen opening. The smaller the screen opening, the larger is the amount of solids and organic matter removed from the raw wastewater. Recent investigations indicate that addition of organic coagulant to the raw sewage entering a fine rotating screen of 0.2 mm mesh sieve, achieves about 75% reduction of total COD. However, in the case of Santa Cruz it is not beneficial to achieve high removal rates in the fine screens since high removal rates generate high quantities of sludge which needs to be removed. Screen opening of 2 mm was deemed to be adequate for this case. Such screens will remove all the coarse, non-biodegradable materials and will prevent them from filling up the lagoons. It will also remove about 30% of the suspended solids and about 10% of the organic matter contained in the raw wastewater. - 131- Fig. 5: Preliminary Treatment by Rotating Fine Screens The reduction of about 10% of the organic matter contained in the raw wastewater will somewhat reduce the organic matter load on the lagoons and will increase their treatment capacity. However, most of the suspended solids. Le., those which not be removed by the screening process, will settle to the bottom of the lagoons and will undergo there an anaerobic decomposition process. Covered Anaerobic Lagoons: Covering lagoons with geomembrane sheets i s a relatively new technology. It has been considered for the project since it was found that local contractors offer this technology at a low cost of about US$ 12.5 per square meter. The geomembrane will be resistant to the gases released in the anaerobic process. The installations will include a gas collection system and a burner of the collected gases. At a later stage, the option of generating energy from the collected gas might be explored. In additions, the geomembrane will include a rainwater collection and removal system, which will prevent damages from rain and storm water. Covered lagoons, gas burner and rainwater removal system photos are presented inFigs. 6,7, and 8 respectively. - 132- Fig. 7: - 134- Processand Equipment Dimensioning and Development Stages The pace at which the flow of the wastewater reaching the existing wastewater treatment plants will increase with time i s unknown since it depends on the availability of additional funds for expansion of the sewerage networks in Santa Cruz to reach a coverage of more than the 34% (for the entire city) which will be reached with the current project, and SAGUAPAC has not yet managed to secure such funds. Consequently, it is neither known what i s the required pace of upgrading the capacity of the three treatment plants. The approach adopted under this project was: (i) to find out what needs to be done in order to upgrade the treatment plants to the design capacity as defined in Table 1, Le., to the capacity of serving about 90,000 users in plant N1, about 370.000 in Plant N 2 and about 364,000 in plant E; (ii)and then, figure out, on the basis of the financing availability under the current project, what can be constructed under this project as the first stage of upgrading the existing treatment plants. Plant N 1 is undergoing upgrading works financed through SAGUAPAC's own resources and using a conventional capacity upgrading process of a lagoon plant. i.e. increasing the area of the lagoons. Land was still available around this plant so SAGUAPAC added to it an additional polishing pond and also cleaned the existing ponds by withdrawing from them the sediments which accumulated over the years and made some additional improvements. With these works, Plant N 1 is expected to reach the design capacity and no additional works are planned for it under the proposed project, except the installation of fine rotating screens equipment. This will be done since there i s a common inflow pipeline to plants N 1 and N2. The installation of this equipment will support increasing the capacity and will improve the performance of plant N1. At any rate, the main purpose of the project in terms of wastewater treatment is to support in upgrading plants N 2 and E. Rotating Fine Screens: This equipment will be installed on the inflow channels to plants N 1 N 2 and E. As explained above, the optimal screen opening for the Santa Cruz Plants is 2 mm. The equipment type and size was established on the basis of the design flows and manufacturers' design curves. As a result of this design procedure it was established that each fine screening installation will consist of three rotating screens, each of a diameter of 1.8 meters. Each installation will remove about 30% of the suspended solids and about 10% of the organic matter contained in the raw wastewater. Several design alternatives were developed for installing the fines screens and the most appropriate one will be decided upon on the basis of the equipment which will be selected. One of the alternatives for plant E is presented, as an example, in Fig. 11. Anaerobic Lagoons: First it was verified that even after the increase of the raw wastewater flows in plants N 2 and E to the design flow, the loads on the anaerobic lagoons will not be more than 4,000 kg BOD/day/ha (which is considered the upper load limit) so the lagoons will function properly. In addition, the geomembrane covers will prevent odor generation. The total area of the anaerobic lagoons of plants N 2 and E which need to be covered is about 8 hectares. Preliminary designs were prepared for the covering of the anaerobic lagoons, including all the protection systems like gas collection and burning, and rain water collection and disposal. These designs will serve as the basis for preparing the specifications and the bidding process for selection of the contractor. - 136- Facultative and Polishing Lagoons: Calculations showed that after the increase of the raw wastewater flows in plants N2 and E to the design flow, the organic loads on the first facultative lagoons and on the entire facultative plus polishing lagoons system will be too high. i.e. more than 400 kg BOD/day/ha on the first facultative lagoon and more than 200 kg BOD/day/ha on the sum of facultative and polishing lagoons (values which are considered the upper load limit for these types of lagoons). Installations of mixers in these lagoons will certainly be necessary and if those would not solve the problems at maximum flows, recirculation and supply of additional oxygen by blowers might be necessary, however, these action will be required, if at all, only several years down the road. A large number of alternatives to improve the performance of the facultative and polishing lagoons was studied, based of various modifications of the configuration of the lagoons. The alternative selected i s the following: Fig 11: Installing the Rotating Fine Screens in the Inlet Channel to Plant E k, I Inplant N2 a total of 44 mixers need to be installed, distributed among the lagoons as indicated inFig. 12, in which each point represent one mixer. - 137- Fig. 12: Location of the Mixers in the Facultativeand Polishing Lagoons of Plant N2 Inplant E a total of 54 mixers need to be installed, distributed among the lagoons as indicated inFig. 13, in which each point represent one mixer. A total of 98 mixers is therefore required for plants N2 and E. The cost of that number of mixers i s beyond the financing capacity of the project. On the basis of availability of funding under the current project, it was established that a total of 54 mixers can be purchased under the project, to serve as the first stage of upgrading of the existing treatment plants capable of attending the needs of the next few years. The number of mixers will be increased with time, as the raw wastewater flow to the lagoons increase. It was decided that the number of mixers which will be installed in Plant N2 is 30, and the number of mixer to be installed in Plant E is 24. In plant N2, the 30 mixers will be installed in module 1 (which receives 2/3 of the flow), in all its lagoons, according to the locations presented in Fig. 12, Le., 12 in the first facultative lagoon, 12 in the second facultative lagoon and 6 in the polishing pond. No mixers will be installed in the module 2, which receives 1/3 of the flow. In this manner, it will be possible to compare the performance of two identical modules, one operating with mixers and one without mixers, and study the impact of the mixers. In plant E, the 24 mixers will be installed only in the first facultative lagoons, 8 in each module, so as to alleviate the problem in the most critical lagoons. - 138 - Fig. 13: Location of the Mixers inthe Facultative and Polishing Lagoonsof Plant E Development Stages: The works and equipment described above will be installed in the first stage and financed under the project. Subsequent stages will be developed at the required pace, in accordance with the expansion of the sewerage network. They will include installation of the additional required mixers, recirculation of effluent, and finally, if required, supplementing Oxygen in the facultative and polishing lagoons through the use of blowers and distribution systems which are not discussed here since they cannot be financed under the project. The following table sets out the works according to development stages. Table 2: Stages of Development of the Existing Wastewater Treatment Plants of Santa Cruz UnitProcess Plant N2 Plant E Installation of Rotating Fine X (first Stage) X (first Stage) Screens Covering the Anaerobic X (first Stage) X (first Stage) Lagoons Installation of Mixers in X (first Stage, partially, to be X (first Stage, partially, to be Facultativeand Polishing completed in subsequent completed in subsequent Lagoons stages) stages) Recirculation of Effluents and X (SubsequentStages) X (SubsequentStages) Supply of Oxygen Economic Aspects It is difficult to calculate by exactly how much would the capacity of the treatment plants increase after executing the works under the project. It is estimated that with the project, the plants will be able to treat the wastewater of an additional population - 139- of about 200,000. The cost of the proposed works is estimated at US$ 3.1 million. This results inan investment of about US$15 per capita. Such an investment is a very low investment in wastewater treatment. The cost of conventional Activated Sludge treatment i s about US$lOO per capita, and even the cost of lagoons treatment system i s about US$30 to 40 per capita. In addition, the O&M costs of the proposed treatment plants are low, since they consume only a small amount of energy and do not produce sludge, so there are no sludge treatment expenses. The O&M costs can still be further reduced by: (i) obtaining carbon fund compensation for reducing the emission of Methane gas, which can offset O&M costs; and (ii) generating energy from the Methane gas produced in the process. SAGUAPAC will follow up on these two issues. In summary, it is considered that the proposed wastewater treatment system is very cost effective, - 140- IBRD 33374 70°W 65°W BOLIVIA SELECTED CITIES AND TOWNS B R A Z I L DEPARTMENT CAPITALS NATIONAL CAPITAL To RIVERS Porto Velho 10°S Abunã MAIN ROADS RAILROADS Miles PA N D O DEPARTMENT BOUNDARIES Riberalta Cobija Madre de Dios INTERNATIONAL BOUNDARIES Asunción Asunción 60°W This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Puerto Heath Yata Guaporé Group, any judgment on the legal status of any territory, or any Lago Lago endorsement or acceptance of such boundaries. Madidi Huaitunas Rogaguado P E R U Beni Magdalena Lago B E N I Rogagua Santa Ana Lago de Yacuma San Luis Reyes Apere amoré San Apolo M Trinidad Paraguá San Borja S an 15°S L A PA Z Puerto Miguel Blanco Martín 15°S Acosta Lago Nevada Caranavi Ascención Ascención Titicaca Ichoa To Illampu Puno (6,362 m) Guaqui Quiquibey Concepción Concepción LA PAZ AZ Nevada Las Petas Viacha Illimani pay) (6,462 m) Chapare Gran d e San Ignacio C O C H A B A M B A Ichilo Yapacaani (Gu Cochabamba Montero S A N TA C R U Z Desaguadero San José de Chiquitos José Oruro Santa Cruz To Nevada Sajama Arica (6,542 m) Cordiller O R U R O Banados del Lago C o rdiller Aiquile Roboré Roboré Izozog Puerto Poopo Sucre Santa Suárez Suárez Salar de o Ana Coipasa Potosí Potosí To 20°S Iquique O Central Tarabuco C h a c Salar de C Pilcomayo G r a n To Campo Grande Carniri 20°S na Uyuni H Uyuni U Q U I S PA R A G U AY ce Pila y a A C A P O T O S Í To O C H I L E ccidental Villa Montes Mariscal Estigarribia Pacific To Calama G ra n d eeLd Yucuiba Tarija ípez TA R I J A Viljazón iljazón To Tartagal To BOLIVIA Abra Pampa 0 50 100 150 Kilometers To San Ramón de la Neueva Orán 0 50 100 Miles A R G E N T I N A 70°W 65°W 60°W SEPTEMBER 2004