I RETURN TO-~ 1 RESTRICTEDRET N To I Renort No PTR-88iE . vERTS DESK|

._~AINrI INIONF AP 1-This report wos prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTr8RNATIO0NAL BANK rOR RE1CONSTRUCTION ANYD DE'VE 'LOPMENT

ITNTER.N,ATIONAL DI VELOPMENTT ASSoCIATION

THE TRANSPORT SECTOR

OF

MEXICO

(in four volumes)

VOLUME IV

PART A - CIVIL AVIATION

PART B - URBAN TRANSPORT

May 13, 1971

Transportation Projects Department

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THE TRANSPORT SECTOR OF MEYICO

VOLUI-IE IV

TabUUle of Contents

MAP (IBRD 3146 - Mexico Transportation Network)

PART A - CIVII AVIATIOM

Page No.

I. INTRODUCTIONI 1

II. POLICY AND PLANNING 3

A. General 3B. Planning

TII. TRAFFIC AND FINAiiCES 11

A. Operations 11B. Financial Situation 13C. Other Airlines 16D. Aeropuertos Y Servicios Auxiliares (ASA) 16E. Radio Aeronautica Mexicana, S.A. 18

IV. INVESTMENT 20

A. Past 20B. Projected 21

V. RECOMMENTDATIOTS 24

A,NEX A - Civil Aviation Sector - Agencies InvolvedANNEX B - Mexico - The National Airport Plan

TABLES

1. Comparative Air Traffic Statistics - Aeronaves de Mexicoand Compania llexicana

2. Compania Mexicana de Aviacion. S.A.. Profit and LossStatements

3. Aeronnves de Mexico. S A.- Profit and Loss Statements4. Aeronaves de -Mexico, S.A., Balance Sheets

6. Empresas Alimentadoras, Statement of Profit and Loss7. !E..presas Alimentadoras, Balance Sheets

(Table of Contents Continued)

8. Aeropuertos Y Servicios Auxiliares, Profit ancd Loss Statements9. Aeropuertos Y Servicios Auxiliares, Balance Sheets

10. Radio Aeronautica Mexicana, S.A., Profit and Loss Statements11. Radio Aeronautie2 'Mepe..na- S.A.- Binncp Shee-f.s

PART B - URBAN TRANISPORTPage No.

I. Af.K.RrOUTJ\TD 1

A. The Fedor1 n; D-+trict /14txv- rco Ci r

B. Transport and thae "Urban Problem" 1C-. Population Growth 2D. Public Costs of Increasing Population 5E. Conclusion - Conseque-'es of Tlot Pl 5

TT T'M 'T ATl,DnDT SCE1ITh

A C, 4-.. 1 L41 ='--L

kio Spatial fdUr- l-d `Ld Movemuents B. Traffic Growth and Congestion 8Cj. t 9reetcarsD. Autobuses 11.I, CLdzis 14

F. The Metro (Sistema de Transporte Colectivo - SCT) 16G. Parking 20H. Traffic Engineering/Highway Plarning 22I. Surf ace Railways 23

II. TRANSPCjRT PLAU;.,TNING 24

A. The Federal Governmrent and Federal District 24B. The State of I,exico 26C. Comision Para El Estudio del Area Iietropolitana

de'l Valle de 11exico 30

IV. A PROPOSED PRCGRAMI FOR MORE COIlPREHiENSIVE PLANTNING STUDIES 32

A. General 32B. The Size of the Metropolitan Area 33C. The Land Use Plan: the Distribution in Space of

Homes, Jobs and Other Activities 34D. The Transport Plan 35

V. GUADALAJARA - THE CASE FOR A SUBW-AY 43

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PART A - CIVIL AVIATION

I. IN1W0ODUCTION

1.01 Air transport is growing in importance in Mexico's total passengertransport system. Between 1965-69, for example, the passen.ers carried1 onthe country's two main airlines (Aeronaves de Mexico - the wholly ownedGovernment airline - and Compania Mexicana de Aviacion - a private comoanywith some nominal Government shareholding) increased from 1.7 million to2.3 million, while the seat-kms sold by the two airlines rose from about1,800 million to 2,300 million. This increase in domestic and internationaltravel on the Mexican airlines, together with the greater number of toLristsarriving on foreign airlines (h5`O of all tourists arriVed by air in 1969)meant larger volumes of traffic through the nation's airports. At MexicoCity, for example, passenger movements rose by about 40, to 3.05 million(in and ollt) while at Guadalajara (0.45 million), AcapuJco (0.75 mnllion)and La Paz (Baia California) (0.15 million) the increases were in the 90%-100r% range. WJith few exceptions, similar increases were experienced at the28 other airports now onerated by the Kirnorts and Auxiliarv Services Autho-rity (ASA). The growth in traffic was made possible by, among other things,rising ineomes in both Mexico and the United States of Aimeric; fq1lino realprices of air travel as new jet powered aircraft came into greater use;.ur cps.Rfill t.rmrit. . HvPsrtAi ing cnmpnnigns! a fairlyr lihbrnl pnolicyr t.Towarrl1

charter flights, etc.

1.02 The increase in traffic and the larger, more technologicallycomplex aircraft in use has required substan.tial nmprovements in irportsand landing and route navigation aids. For example, whereas between 1953and 1964 about Pesos 262 million was 4.nr-tr-cn in +he const"rutio.n of run.ways and air terminals, in the last six years about seven times that sumTa= -inver-t-4 in- airfield an associated -inves+,ments. hrTtota in ve st;mentin aviation during 1965-70 by the public sector (including nearly Pesos1 nno0 million by Aeronaves) .as been about Pesos 3,200 r 'llo n r=lion):

Aviation Investment (1965-70) 1/

(Pesos Million)

Total

Ministry of Communications and Transport (SCT) 165 52.2Ministry of Public W:Jorks (SoP) 1,727 54.4Airport and Auxiliary Services Authority (ASA) 280 8.8Aeronaves de Mexico 976 30.7Radio Aeronautica Mexicana (RAMSSA) 24 0.9

Total 3,172 100.0

/ TnrI mInQ 1 070 1mrl

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!iout two-thirds of the total investment was in airports by SOP and ASA;30% by Aeronaves - mainly in aircraft anc servicing equin>aent and facili-ties; with the remaining 10` being mainly radio, navigational and otheraids.

1.03 Mexico is well on into the aviation age. About 1,2CO regis-tered airfields of various types exist in the country. Of these, 75 areincluded in a Nlational Airport Plan and will eventually come under thecontrol of ASA. Nine of the 75 (Acepulco, Guadalajara, La Paz, Eazatlan,i4erida, Mexico City, Monterrey, Puerto Vallarta and Tijuana) account forabout three-quarters of the total passenger traffic. In 1969 over 2,400civil aircraft were registered in the country of which about 230 werecorrmercial aircraft, with the remainder being plivate general aviationmachines. There were also about 280 offic al (non-military) aircraft inuse. The commercial aircraft include not only those of leronaves andMexicana but also equiDment belonging to the two seconda7ry airlines. thefeeder airlines (alimentadores in which Aeronaves has a 30;1 investment)as well as the local air-taxi service opertc)raos- TrI adiri+,inn tco t.he Mpyi-can aircraft using the nation's airports there were those of the over 25foreign carriers that serve the country together with nuimerous privatevisiting aircraft owned by businesses, clubs and indivi(luals in the U.S.A.

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II. POLICY AND PLANNIIG

A. General

2.01 Civil aviation in Mexico is further developed and technicallymore efficient than in most developing countries. In part, this is dueto the large spill-over and "feed-back" effects of the U.S. aviationscene. In part, it is also due to the Govermnent's liberal policy towiardsinternational and charter carriers so that tourism may benefit. It also,and largely, dervices from the Government's recognition that civil aviat-ion has great potential in the nation's overall development. Internation-ally, it can show the Mexican flao and generate foreign exchange as wellas facilitate the movements of the growaing tourist market. Domestically,on the trunk routes it can nrov-ide oiick ervinces reonired hv hmuine_szmen_tourists, Government officials and others who place a high value on time.Tn rtrail areas it c,n nrovide thb necessary feeprdr servn. for the inter-national and domestic trunk route services as well as assist administration,etc= Under the present dminnistration an imag natie policy has beendeveloped and which has been generally well executed.

2.02 Like most Governments, Mexico exercises three main policy instru-men+s,~~~~~~~~~~ ink~.f adito toJJ inesr.n appovl, to%.W.~ irr flLflenceL ..&il U4&Iio

development: route concessions; tariff measures; charter privilege grants.

negotiations with foreign Governments. These involve a fine assessment ofMscX.ca poli4 Wicall ad ecMo.m-ic advant-age (ir.cluding th e f ia,ca health

of Mexican carriers) and are clearly beyond the scope of this report. On"0111CA.3ulk roUtL,es, lunder.L t i.A±gU±4I1 LaW, Ul-±y Wit, LeUUU, UdU Uc beseVrze bLy olne

concessionaire (i.e., airline), although recently there have been a few "ad-t depart- es from4. t1is b c rule.

.03 In general the two Mexican trunk carriers enjoy equal considerationinsofar as route concessions are concerned. In 1969 Aeronaves had 34,860unduplicated route miles (domestic and international combined) and Mexicanahad 15,564. A substantial portion of the Aeronaves figure, however, isaccounted for by its transatlantic flights to Spain and France. 0lexicanadoes not operate outside the Western Hemisphere. Both airlines serve therinited States which is the main external market for air travel as far as'4exico is concerned. Mexicana reportedly, has been informally advised bythe Government that further expansion of its international route structure.Aill not be considered for the time being, except for route adjustments inconnection with existing service to the U.S. The general intent of this

restriction is to allow Aeronaves to develop as the main Mexican internatdonal.earrier.l/ 1ihere a second Mexican carrier is cranted traffic rights on adomestic route (i.e. by a 'permiso' rather than a 'concesion') some restric-iuion is placed on thi s carrier as to the number of flights or add-itionalstops allowed between the terninal points served. Since the constructionof the domestic air +ariff is lba seed noni a N-nnrl 1nrmnln crhnra (Pesos 5O

for jet aircraft) plus a fixed charge per passenger-k:m, there route restrictions have resulted in. some fare anomalies between terminal city pairs,which may adversely affect traffic.

2.04 At the base of the domestic industry are the certificated airta-isL In general, these are granted areas rather than point to poitcessions. As the taxi business grows route patterns emerge. 'T1hen thetraffic reach'es a level regarded as suff..Licerl b,L y tuh e Governmlent, polntto point concessions are then granted to the feeder airlines and consider-ation given to impro-ving the particular airports involved so as to facili-tate the feeder operations. After traffic has developed still furtherthe route may then be transferred to either a secondary or main trurnkline carrier. Assigrznent of a route to a trunc carrier takes into accountthe carrier s current ser-vices in tIhe area generally and the probable effecCon the competing carrier's route structure and revenues. Finally, when traf-fic reaches very high levels, both trunk carriers may be granted traffic

rights between the same city pair, e.g. the Mexico City-Acapulco route isnow served by both Aeronaves and Mexicana. This system of guided develop-ment has many advantageous features. It does, however, imply that Govern-ment can better judge the economics of a route, particularly the heavy routes.than the management of the airlines. This is not a self-evident assumption.The question of allowing more open routes, on a more flexibie equipment typeand tariff basis, would be well worth study to assess whether there are majc.,economic costs involved in the present policy.

2.05 Some Mexican airline and tourist officials question whether thepresent International Air Transport Association (IAA) fare structure andprocedures for scheduling flights may not be inhibiting the needed growth

1 / hi.Ls raises th1ie ±interes-ing ques-LL,on as to whethJer a C J i Mexico's

position can afford two international carriers. In the present circumstances,howiever, hLis is largely thleoretical. Thie Government Js r' kely to ±ba don

Aeronaves to the private sector, no matter, as shown below, how serious isits overall financial positioln. Nor is it likely to contemplate taking overMexicana to unify it with the offical national airline. Accordingly, everyeffort (as also indicated later) must be made to ensure that, in 'Le natictIV.interest, each operates as efficiently as possible. A case can well be madefor allowing a private airline to compete effectively against the nationalairline to spur it to greater efficiency.

il torism n MeY Ao, dsp+Jte thle use of off-seaason and ex--4 on fares.2hese officials recognize, and the mission agrees, there is no easy wayout other th-an by s0o m-d e^or.v. -4J"c an1a,lysis of 4the relativ-e coss and bene--- - ~ ~ ~ s.~~, ~rn ~~~~~ILLL. ~ ~ LQ W.J. VLI± .L r..Ld.LUJ. V~ cost U u) - LiA±U~fits and the use of steady bargaining pressures since any fare reductiorLon scheduled IDghs us e approac-- -hed cauti ously I 4 e 7 ico,'-0 s oT-w.c>rLr

are to become viable operations. IWith the current world-wide emphasis on+~~~~~~~~~~~~ - 1 l -'I - n 4no.1r - -b - - - 4. _. wr -- t5 A __ A 4-1_ tourism, however, and partJLicularly t1he com{PetiUtLi ve lature o tO V1 UU±U-i 1i iA

the Caribbean and Hawaiian islands, the potential dangers to Mexico canncotbDe over"look..JedU.

2.06 The M"exiU LuiiLuities fully recognize that tourism canbe increased by encouraging charter flights. As a result, the formerrestrict ve policy on air charters, particularly between the North Americanmarkets and Mexican tourist points, has been eased considerably. Althoutghthe position is not yet one of 'open skies', the number of charter authc'-rizations currently exceeds the number of charter flights being operated.To some degree this may reflect present economic conditions, but it mayalso be a consequence of alleged 'red-tape' delays in obtaining from theiMexican authorities multiple flight charter authorizations or authorizationssome years in advance of projected major conferences, etc. '^Thether currentadministrative procedures are diverting possible tourist traffic needsexamination.

B. Planning

2.07 The most critical shortcoming of the Mexican aviation scene isthe lack of a single, wiell-defined, entity with full authority and responsi-bility for coordinating the activities of the more than 20 Ministries,public, semi-public and private organiz?tpions that have an interest inaviation policy and its implementation..J The concerns of these agenciescan be broadly grouped into three categories: infrastructure planningand investment approval; flight operations activities; and regulatoryaspects.

(i) Infrastructure

a) Ministry of Public lWorks (SOP)b) Airports and Auxiliary Services (ASA)c) Radio Aeronautica Mexicana, S.A. (RAMSA)d) Ministry of the Presidency

(ii) Flight Operations

a) Aeronaves de Mexico. S.A. (Aeronaves)b) Compania Mlexicana de Aviacion, S.A. (Mexicana)

1/ Annex A lists the orgn zations having Adrect -nterests in ci-vil av.ation.

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c) Secondary and Feeder Air linesd) Foreign Airlinese) Tourists Agencies

(iiij Regulatory

a) Ministry of Communications and Transport (SCT)(i) Department of Civil Aviation (Aeronautica)(ii) Department of Tariffs (Tarifas)

b) Tourist Agencies

2.08 The Ministry of the Presidency (Presidencia) has to act as acoordinator of the groups most directly involved or responsible for thefunctioning of the civil aviation sector through its investment approvingrole. Because of limitations on its manpower in terms of numbers andexperience and its many other competing responsibilities, its coordinatingeffort is, at best, nominal in that it is more concentrated on investment,cecisions than on operating efficiency or pricing policies and practicesas -ways of improving efficiency or investment decisions.

(i) Infrastructure

2.09 The present excellent system of airports and related communicationsand navigational aid networks has been created within the framework of alational civil aviation program (Programa iJacional de Aeronautica), wJithinwhich a 1lational Airport Plan was the primary instrument. In 1965, theGovernm.ent, recognizing the need for a coordinated infrastructure develop-:nent program, established a 11ational Airport Plan in which 75 airports wereinitially selected for development (Annex B). Selection was based on thefollowing factors:

(a) the inflaence of air transDort on the socio-economicactivities in particular areas;

(b) the potential role of aviation in international com-mui C.cations;

(c) actu1a1 stnatistAcs nor the nirmbhPr off air pngcz rs;

(d) the numTlr and nature of e:sting routes and theprospects for establishing new links;

(e) a balanced geographic distribution of ai^rports; amd,

(f) the general economic development possibilities of each

, ThUe firstOU sua8tg eL uoithe PjLdlLLLIJqn VJwas prUoJpLy desrLgnedU LU Coll-

centrate on the country's main airports. By this means all jet-trunk route3

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uere establishec irnth a net;ork of efPfi9iPnt fPi-eerdr sePrvirpes into t1he trinroute structure. The airports selected were divided into thiree categorie!Slong rangne (essenti; lv fnr qsPring international mdium nc

and short range.

2.11 As indicated above, implementation of this progran has involvedCGoverir.ent ex^penditures Or some Pesos 2.0 billion (UJ$160 mrllion) by SQOIand ASA between 1965-70. Roughly, the same amount, Pesos 2.0 .oillion outof a total for thee sector of Pesos 3. ilin as 'been ter.tat-ive-lypr-grammed for the period 1971-75. The implications of this are discussedlater below. Corsideration is now b-eng given to the developm--ent of arural airport system to provide access to remote areas pending development4 suffic-.Lri dlemar.d to warra nthe construct'L.t of rodsU under W1 rLroad program. This is still in the conceptual stage and, therefore, nobudget has been developed. The idea is definitely worThy of furtherconsideration.

2 .12 The 1 965 National Airport 'lan which established the frameworkfor airport development was prepared by the 'Comision de Planeacion deAeropuertos. ' This Commission is a joint agency with SCT and SOP parti-cipation. Unfortunately it has been moribund since the preparation of theNational Plan. Since there is a need to re-examine the Plan in the highl;of experience and progress to date, and to take account changing trends,this Commission should be re-activated.

2.13 Legally, airports are to be designed and constructed by the SOP,in accordance wTith general planning ideas established by SCT. ASA is,with a few major exceptions, responsible for the operation of federally-owmed airports. Recently, however, ASA was specifically authorized bypolitical decision to design and construct some airport facilities. Jir.-port assets (new fields, runways, terninal buildings, etc.,) are transferredto ASA on their completion by SOP and are taken on to its "books" atconstruction cost. Those constructed directly by ASA itself are added toits capital assets in the same manner. User charges are set to cover ASAI'soperating costs as a whole (above half of the airports administered byASA made an operating profit in 1969, the rest incurred losses). It earneda rate of return of 6.8'; on its average net fixed assets in 1969. The air-port facilities are transferred to ASA "free and clear" as a Governmentcontribution on which no dividends or interest are to be paid. As a result,it has accumulated large surpluses wJhich have been reinvested in securitie>.There is no apparent reason why ASA should not pay the Government a reason-able return on the taxpayers' investment in this profitable agency or, asan alternative, why it should not be set free to operate as a "commercial"enterprise to generate the funds required internally for its airport invest-ment program without drawing on the Government budget. In this way, ASAcould play a role comparable to that envisaged elsewhere in the reDort forthe railways and, ultimately, by the proposed National Ports Council.

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2.14 Other agencies exist within the present goverriment framew?orkwhose "atribuciones" (terms of reference) require their par+icipation ;rthe coordinating and planning side of the civil aviation sector. Amongthese. for general conrdrnqtion and planning and inter-sector coorrinntionis the 'Comision Tecnica Consultiva de Vias Generales de CoRunicaciones.'Its termns of refPrente nllelw it.T+. to+4 participate in +Ine sty r a

_ '~~~~~~~~~~. - ' - V-~- - ~ . LJ LL.Y e -e.T n

planning of all phases of civil aviation, including regulatory, infra-stmltur, flghtopentios ad, n ad+io, -rsononel train -for 4he

sector. Except in a general way within the mandate of the "ComisionTeronicn aConIsultiv t, o4oth- _er A PA _singe _ -_- - - - v v V .1i AI4 D | *sr C; a6alluj LO J UbU1 L ;VU.LUJ "a1 aLvg.L

the activities of the groups responsible for providing flight servicesdomestical'~'y and4int e rr.a 4- nal'I-

(-ii =V4 a Uions

n n r, rnL_ 1__ I _ _s ,L. The two runiK carriers, Aeronaves and Iviexicana, operate modernjet aircraft over domestic and international networks. There are twosecondary carriers wnich, at present, are of only minor influence in tnedomestic air transport scene. Nevertheless, Servicios Aereos Especiales(SAE), which operates some fixed schedule services, may well developfurther and, more importantly, is the chosen instrunent of Aeronaves forthe eventual development of domestic and international charter servicesto ensure that a MIexican carrier obtains a reasonable share of this growi--gfield. It would be outside 1ATA, of which Aeronaves is a member. Theother secondary airline, Aerocarga, S.A., has not yet developed any realpotential in the air cargo field. In fact, this very important sub-sectorof air transportation is being sadly neglected in Mexico and is worthyof considerable more attention than it is now receiving. Mexico hasfruits, flowers and other perishables which could well be marketed abroad.Development of this business which is already under way, e.g. straw-berries to Germany, will require proper production, packaging andmarketing planning and controls. A study of the potential for airfreight of Mexican products is of priority.

2.16 Next in the air transport chain are the "alimentadores" or feedezairlines. Under a recent and well conceived reorganization of this sub-sector the rnuber of feeder airlines was reduced. Aeronaves has substantialholdings in most of the feeder airlines and exercises considerableadministrative and operational control over the group. rThe feeder airlinesare particularly important in the aviation sector as they provide'on-the-job' training for flight crews dhile simultaneously developingmarginal traffic routes to the point where they can be economicallyserviced by the secondary or trunk airlines. The final 'link in the chainis composed of the air taxi services. There are a large number ofindividunl air taxi comnnanies with fromi one to s; rn more single andtwin-engined propellor aircraft. The taxis provide a needed service butTminh grentes' usie could be made of them in developing comnnications .r+hisolated areas of Mexico which are not served only by foot or animal by

pVnrn4vrn 'a In docrtor'd and othI ngvA ^e serc-1

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2 .6o EtUiA 'Radio Aeronautrica tIexicana, S. *A.) is an important agencywith primary responsibilities in the operational area of civil aviation,especially its safety aspects. It is a private company but with majorGovernment participation and is responsible for air traffic control, ae:ro--nautical meteorological services, cormunications and navigational aids.The Government's share in RU.MSA will be increased by the value of the twomajor contracts for equipment now being carried out. RANISA's user charges,as established by SCT's Tariff Department, are based on recovering"out-of-pocket" operating costs and maintenance charges but not depre-ciation. The users, including foreign airlines, are accordingly subsidized.A review of the basis of such charges is recommended, especially in viewof the groving volume of funds that will be needed as technology developsand safety requirements increase.

2.17 Personnel training for the civil aviation sector is generallycarried out by CIAAC (Centro Internacionale de Adiestramiento de AviacionCivil) which at present is operated by the Government, although withfinancial assistance through scholarships arranged by the InternationalCivil Aviation Organization (ICAO). The school provides flight trainingprograms for Mexicans as well as instruction in non-flving activities sulchas aircraft maintenance, conmunications, air traffic control, etc., forboth Mexican and other Latin American nationals. ICAO participates onl;yin the non-flying side. Discussions have been going on for some timewith the constructive idea of expanding the school's activities andestablishing it as a true Latin American civil aviation training center,somewhat a-Long the lines of the regional school in Beirut nonrated byICAO.

2.18 Mexico's civil aviation sector is, to a large extent, developingwith a bhri3 mnnivimim onf ouitsirle t,-bhnir'_1 anrl nnnYr_toAn-as n oradvice. General assistance is received from ICA0 whose lIorth AmericanRegional Office is located n Inexico City; from ATrr, whose Reg onalRepresentative is located in Rio de Janeiro, and from the U. S. FederalAviation Av'nev's Tonhn-icnl A i.t.nro nff-ir'n Fnrorin fonqilt.nt.m arerarely used. Because of this independent effort there is a limitedexperience aboult the tecnical and plarnirng lessons gained on s?I ilarproblems in other areas, and this is reflected in some of the developmentwork now t_1,ing place For ex-ple, the facilI4ties for handling depar1ingpassengers' baggage do not anticipate modern trends which are movingto-rwazrd containerizOd. hLWnding; O sJizing of UA11LL . uildings a-ea is

not fully related to passenger traffic studies and aircraft movementforecasts, withL resU.J% t' 1nbal JancA.'. J.vos. . Basi c di ar.

operating procedures are based on ICAO and FAA reouirements but these,in t1hicanselves. establish 0,.l1Iy stan<rdMICs andu ne.tl dtaL;Z3_ied deOsIr'l IO crt;rla-cto be uncritically applied.

2.19 The twio major airlines, the secondary airlines and most of thefeeder airlines have a com0oTimOn arid stOrlg air crew uniion (ASPAI). Main-tenance and ground services for the two trunk carriers are manned by

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mem'bers of separate unions but, t n general, there is no sharing ofmaintenance or ground service facilities or equipment. This wculd offereconomies in some instances and should be studied.

2.20 In sum, the general framework of operation is soundly conceivedand is developing logically. The deficiencies that exist are more thoseof ensuring efficiency in operations than that of an inlappropriatestructure.

(iii) Regulatory

2.21 Primary responsibility for regulation and statutory ccatrol ofall civil aviation activities, including safety, lies with the SCT.Within the SCT, the Department of Civil Aviation is thei general regulatoryand licensing agency. It is well staffed and has a strong influence oninfrastructure planning. Both domestic air fares and airport user charges(including landing fees, concession rents) are established by SCT'sTariff Department. It does not, however, appear to use its pricing powersas a coordination or efficiency searching instrument. In the mission'sviews a thorough re-examination of both airline pricing for domesticservices and the role of the SCT vis-a-vis ASA in airport pricing shouldbe undertaken, with the objection of coordination and efficiency in mind.

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III. TRAFFIC AUMD FNITdICES

A Onprnati nns

(i Oerationsand Efficiency

3.0)1 Attached as Table 1 are traffic statistics For the tw,o major air-lines, Aeronaves de i5exico and ComTpania Mexicana for the years 1965 through1 The r a t of Aeronves in terms oZ a.1ailable se-Lm incrare

by 65% and that of i-eeicana by 49%. Seat-km sold however, increased by 48!joPor Aeonve and / -P-- forT--xcana. As a resu"t, ave-ae load factors de-

clined from 58.4% to 52.2% for Aeronaves and from 63.5% to 56.8% for Heiricana.These, hoUwever-, ar-eL)Lf cst .t Lisien -Iith1 mar-y oLLer a4r'ines in Le ids andshould result in a break-even or better position for the type of aircraft Inuse.

3.02 The number of passengers carried orn Aeronraves uincreasedby 290; from 0.85 million to 1.09 million, and from 0.83 million to1.19 million (a 4.3 increase) in the case of i4exicana. The averagedistance floujn per passenger increased from 1,130 to 1,305 len on Aeron<--vesTnis is heavily influenced however by its open-ng of routes to Europe. Onl4exicana the average fell from 1,017 krn to 982 lkn, reflecting an increasein its short haul domestic traffic. Cargo traffic increased less rapic;ly-21% for Aeronaves and 11% for 1,exicana.

3.03 From the preceeding figures it can be seen that the two airlinesare of roughly comparable size in terms of numbers of passengers carried,although Aeronaves is slightly larger in terras of carrying capacity. Wnfithplanned changes in Mexicana's fleet (phasing out of DC-6's and Comets andadditions of 8 Boeing 727-200's) this dispari-ty will substantially disappea.Passenger traffic over the period increased fairly rapidly for both airlines!10.5% p.a. [or Aeronaves and 8.5% p.a. for Tiexicana.

3.04 To give some idea of the relative efficiency of the two airlinestheir 1968 operating expenses per ton-km produced are sumnarized below to-gether vith comparable figures for Wgestern Airlines, a regional U.S. carrierwhich flies to Mexico City and Acapulco.

- 12 -

Costs per available ton-kIiAirline Aeronaves H4exi-cana a & rC&ern

(Pesos)

Flight Operations .726 .774 .4h1Maintenance .321 .443 .290Service to planes and traffic .232 .369 .356Sales and publicity .455 .316 .264Passenger services .217 .187 .203General and administrative .151 .128 .112Depreciation .182 .248 .241

Total 2.284 2.464 1.947

Available ton-km 248,786 177,090 2,346,900Number of employees 3,575 2,973 8,919Available ton-km per employee 69,590 59,566 263,130

3.05 Total costs per available ton-km are very similar for Aeronavesand Mexicana although maintenance costs, services to planes and traffic anddepreciation are significantly lower for Aeronaves than comparable Mexicanacosts. Depreciation rates are lower on Aeronaves than on both Mexicana andon U.S. airlines generally A!. Aeronaves depreciates its DG-8 aircraft over12 years and its DC-91s over 15 years (20'5 during the first five years, 3C%in the second five and LOS' during the last five vears?i. 1W1hereas Mexicanadepreciates its jet aircraft over a ten year period. As mentioned elsewherein this rpnort. cl3n tn t.hp fi nnnci;l nnn- t.i n of' Aprmnnave nePdrd er-nentii tair-to improve maintenance equipment and facilities held back through a shortag3of' fiinds. This, at least, to some extent expnlains the sm.aller expnenn i +.ivrveby Aeronaves on maintenance and services to planes and traffic. On the otherhand, as the national flag carrier Aeronaves tends to spend more on ZnTc ao.-;publicity than Mexicana and indeed spends proportionately more than a numberof U.S. tru-nk carriers w_hich operate internationaMl routes.

of sT q + lln - A4 T; t; a-n^4+<+^1-^qfi

3.06 ~ llv ThLoa ot e aalbetnl n Iesi Alr Lines are -lessthan both the Mexican carriers. To some extent this is due to economies of--al 4i ls a-out- 'en t4me lage tha the- 4eAicar co,,Haie 'though----

relatively small as compared -with the major U.S. companies) - particularlyin the case OLf maintenance and general and administrative expenses. Themost significant differences occur, however, in the costs of flight opera-tlons and is due mainly to the difIerent types of equipment flown. For

1/ The CAB proposes the following amortization periods:

DC-8 (12 yrs. (non-fan) -,

(14 yrs. (fan) l5, residualDC-9 14 ys. 15°5B-727 14 yrs. 15%

example, ]4exicana operated Boeing 727's, Comets and DC-6's in 1968, lWeslternAir-nes operated' Boeing 7 07's, 720's, 737's Ad -0--bnnA Electra. - cA.Average costs per passenger seat-km made available were considerably higher

LA +he Mexicana equdip,,ent +than t-hat of nlester. A-;r l-ines due to so.e -- +,n 4'~LA V~1c i &AJJI~AU U1L U~~U '~ VQUI A d i L .JLA %A ULA u WIA~ 1~%~L 1

to the greater average capacity and speed of the equipment of the latter.AJUlldIkY *

nfl -3 .l < - I. t

3.u0 *o achie-ve surite ecunorvres ol scale imrmeeiQaeely, thali1 wiuhoauwaiting to obtain them via traffic growth, consideration should be given tocom,bining the maintenance department and possibly some of the ground serviee.of Aeronaves and lexicana.

(ii) Operating Results

3.08 Attached as Tables 2 and 3 are Profit and Loss Statements for theyears 1965-69 for the two airlines. Net operating revenues of both haveimproved since 1965. The operating ratio has improved from 95.3% to 91.626in the case of Aeronaves and from 89.7% to 92.9% in the case of Mexicana.Despite increases in domestic air fares, however, Aeronaves gross revenueper ton-km produced has declined from Pesos 2.596 to Pesos 2.422, reflectinglower lead factors. Nevertheless, net operating revenues per ton-km produ-;,-'have increased from Pesos .121 to Pesos.203 as operating expenses, particu-larly maintenance and administrative and sales promotion expenses, haveactually declined per ton-km produced. 1Iexicana's net operating revenuasincreased from Pesos .033 to Pesos .185 per ton-km produced, reflecting boUincreased revenues and reduced expenses per unit of capacity made available.In the case of both airlines this has largely been due to the phasing outof propeller equipment and its replacement by more economical jet aircraf-X.

3.09 J3oth airlines have borrowed heavily to finance the acquisitiola ofexpensive iet aircraft. Interest expenses in 1969 amounted to Pesos 103.2million for Aeronaves. The heavy interest costs it has incurred turnedearnings from operations into net losses in 1965, 1966, 1968 and 1969 (in1967 there was an operating loss before interest charges).

3.10 Interest expenses of Mexicana are nuch less - for reasons discusse:.below - and amounted to Pesos 14.9 million in 1969. A non-recurring profitof Pesos 2:L.7 million on the retirement of equipment improved the operatingresults of iNIexicana in 1969.

B. Financ.al Situation

(i) Tariff Policv

3.11 Domestic air fares are based on a fixped termin21 cost per passenr--(Pesos 50 for jet aircraft) plus a charge per passenger-km (about Pesos 0.6).This nrodurces snme anomalies. For example, the Nwve,xicana jet fare frorm 4ey o

City to Cozumel via Merida is US$65.o4 while the Aeronaves fare via Acapulco,0Oaxaca anci ;eri is A s T *6. & The raticonale of -Ad-:n two .,or sector

lengths to give the higher Aeronaves fare is clear. It does mean howeverliha. passerngers whillo gu Lit,-, jbe jjdCU IA-.d t lo dt.)LtaU±i lonIger U.ILme .LVI Cfo al

terminal to terminal fare cannot do so. It is also possible that such ana-,,.oLLu f of which --ere are Lmany, re- sL 's i- le - load fac tor7_.

3.1 t sw.uai'r 'ares average Pesos 00440 per pdssenger-iu[i for Aeronaves (December 1969 rate) whereas, international rates (i.e. IATA agreed)averaged rPesoes 4.4) per passenger-kma. Average LaUres fur rIe.LcanLa iLL Ly(j,

were Pesos 0.425 per passenger-km. Passenger load factors were '2.2,O6 forAeronaves and 56.3%' fer Hexicana in 1969. These are fare levels and ratesof utilization which should perm-it both airlines to be v-iable operations.Average fares for tne Mexican airlines are about the same as comparable U.S.fares, e.g. Pesos 0.425 equivalent for Western Airlines and Pesos 0.429equivalent for American Airlines in 1969.

(ii) Balance Sheets

3.13 Balance Sheets of the two airlines are summnarized in Tables 4 and5. The balance sheet of Aeronaves is clearly that of a bankrupt. The short--term note holders, hoTwever, are mainly the i\iacional Financiera and the Govei-ment both of which have accepted short-term note;s from Aeronaves in returnfor paying its past debts to otlhers (e.g. Export-Import 13ank) as they camedue. The result has been a steady increase in the short--term debt of Aero-naves. The large interest charges that Aeronaves nOVT carries make it un-likely that it will become profitable. Apart from the effect on the moraleof top management, it has meant that ex-penditures needed to obtain the beie-fits of improved maintenance equipment, for example, have either been delaycdor reduced because of the shortage of funds. It has also meant that thedegree of financial autonomy ijhich the able management of Aeronaves couldreasonably expect in a profitable enterprise is lacking.

3.14 Aeronaves needs to be recapitalized. This could be done bycancelling the existing short-term notes, iwith the obligations being assumcdby Government. The balance sheet of Aeronaves (December 31, 1969 figures)would then be as follows:

Assets (lihllion Pesos)

Current Assets 213.3Current Liabilities 68.2 145.1Fixed Assets - net 761.9Deferred Chlarges 142.2

1,A09.2

- 15 -

Liabilities and Capital (Ilillion Pesos)

Long-term Debt 574.5Other Liabilities 70.9Government Equity h03.o

1,049.2

Debt/Equity Ratio 59:41

3.15 On this basis, Aeronaves could repay its debts without Governmentassistance and build uD. reserves for future investments. On the basis or1969 operating results, earning figures would be as follows.

Million Pesos

Net Operating Revenue 61.2Tntprest 'Expenses 16.0

Net InCome h5e2

Its cash f'low would be as follows:

Net Operating Revenue 61.2Add: Depreciation 52.3

113.5Less: Debt Service 75.0

Cash surplus for reinvestment or dividends 38.5

Times debt service covered 1.5 times

3.16 The Balance Sheet of Mexicana is somewvhat stronger than Aeronaves,although it has just beeen through a period in. vwhich payments to creditorswere suspended (September 1967 to August 1969). The Company also has ahiea.r-y LeLbj Lib L enJ LL LIA. The deb,/equ iyU/LL. ratio as 0f ±nec -U.Der 3. 'L.1 6J, 1969 wvas 7I -2:28

and loans of Pesos 265.6 million have been recently arranged in order toacq%uireu thre Bo-n 7e-20 I aijrcra°t-'-. A-ll. are -Iive year lIoan-Ls so tha.t- U-.future debt burden zill be very heavy. The 1969 debt burden was coveredas follows:

- 16 -

Niet Income 39.6Add: Interest expense 1I.9

Depreciation 43y

98.4Debt Ser-w.ice 70.1

Cash Surplus 27.3

Times debt service covered 1.4 times

C. Other Airlines

3.17 Attached as Tables 6 and 7 are Profit and Lcs.- Stat,-:a,ints for 1969and Balance Sheets as of the end of 1)69 for the five Aprcn-s Ali.¶entadorac(feeder Airlines). Each became an independent financial undertaking in 1,969starting -rith an initial capital of 3 million pesos. lach incurred signifi-cant losses in 1969 although Aeronaves absorbed part of the operating defi-cits for each line. Net losses totalled Pesos 12.1 million during the year-reducing the consolida,ted enu4tv of the five lines fron Pesos 15 million to3 million. Working capital at the end of 1969 wTas negative (Pesos 7.3million of current. nset less Peson 9.1 million of current liabilities) and

long-term debt for aircraft acquired totalled Pesos o.3 million. Long-terrdebt waS 73n of total canpitalization an.t ver-end. Sinc Government financialsupport will be needed, presumably for some time, for these lines a fullnsz,icza,ric,n+. nf' +.'hpi" ; nnPtn T.rMilrl sepe m

D. Aeropuertos Y Servjicios Auiliares (ASA)

~.4.. / ~ LA 'S . . . .

ports. Airport assets (new fields, runways, terminal buildings, etc.) are.44. is4. 4 UV to.)- ULI on [o etooL constructiLon andu are record in - ASUU ±L1 M

accounts at construction cost. Those built by ASA itself are added to itscapltal assets lnri the- sae m_ aH_. Theairpor- X facilit.-i are transferredto ASA as a Government contribution on which no dividends or interest areoaid. IA-A !S cf-ar<es are set to cover Lotuau operating costs incluuding de-preciation.

(ii) Cperations

3.19 Profit and Loss Statements for ASA for the years 1965 through 1969are given in Table 8. Excluding 1965 w'hen operations were just getting undex-way, ASA has generated and retained significant earnings which have been re-invested in securities and produced significant interest income:

- 17 -

(?TIillions of Pesos)1965 19666 1967 1968 1969

Operating Revenues 4.9 61.1 81.1 94.1 122.5Operating Expenses 1.2 37.0 57.3 66.9 78.5

Net Operating Revenue 3.7 24.1 23.8 27.2 44.0

Interest and Other Income _ 1.1 13.8 5.5 7.5

Net Income 3.7 25.2 37.6 32.8 51.5

In 1969 about one half of the ASA airports operated at a profit.

(iii) Tariff Policy

3.20 The major source of revenue for ASA is from landing fees and otherchi-iarges on air cr afLt. Tmihe Lo'llo-Vin[g p re d-es arue fL olledi in 1t.L ASA1t

charges:

(i) Total operating costs including depreciationare determined.

(ii) iHypothetical rates are set to recover thesecosts byr a variable charge on aircraft basedon the average flight distance and number ofseats on the aircraft. hates for each wTeightclass of aircraft are calculated so that eachseat-kilometer would generate roughly the samerevenue.

(iii) These hypothetical rates are then compared withsimilar fees in other airports and adjustmentsare made so as not to be out of line - this isthe reason for the doubling of rates whi'ch is totake place in stages between 1969 and 1972.

3.21 ls a result of the 1969 and proposed future increases, ASA willgenerate large surpluses in the ne.--t few years which will be available .orinvestment, presumably in new airport facilities. On the basis of the air-ports in operation at the end of 1969, some rough estimates were made cfASA's operating results for the years 1970, 1971 and 1972 taking intoaccount scheduled increases in charges:

(riif-lions of Pesos)

Actual possibie

1969 1970 1971 1972

Operating Revenues 122.5 1L4.8 167.7 190.7Operatilng Expenses 78.5 86.6 95.8 106.5 '

Net Operating Revenue 44.0 58.2 71.9 84.2

Interest and Other Income(net) 7.5 7.5 7.5 76 /5

TJP+. Tnrnrnp ~~~~ . .. 7.

INet Income 51 5 65 7 7, 9 1 . 7

( i v) Baln 1snnoc' Shets

3.22 Blance Sheets o~f ASA givern in Table 9 shnows that. its. financnial

position at the end of 1969 was very strong. Working capital amounted toPesos 167 rlllion (Tj`'$13.3 rillion eqivalent). Tinvest+.nts amounted toPesos 103 million (US&'8.2 million equivalent), and there is no long-termA 1'. l, 4-

V J I L1I~~

*. L XlIU !I1t ;:i2: U cl U<-All ;:>C::: 10 .. t L t'llA' lIl L OlUL L iV - -v V. v V

ment a reasonable return on the taxpayers' investment in airport facilities.As an al te-rnative lASAfi couLdU be required tLo oje r ate on a codamerci _L basis tgenerate the funds internally and borrow uhere necessary -to finance itsairport investment buuget. Based on the roughll estiImUates of ear-nings for1971-1972 shown above, ASA would generate some Pesos 215 million in thisperiod whnich Would finance about 40 of the airport development programin these years on a cash basis. Using borrowed funds it is probable ASAcould be still self-supporting, though this w-ould need examLination in detail -

E. Radio Aeronautica lIexicana, S.A.

(i) GeneraL

3.24 R.adio Aeronautica 'iexicana S.A. (RAwISA) is oTmed by airLines andthe Government. In 1969 it received certain assets which until then hadbeen operated by ASA. It is presently operating in 17 airports but has a

2/ Increases assumed in consonance with past experience.

2/ Investments financed by borrowing are not expected to increase on tneasslJption. surplus i4.yiII ha reinvested in airport facite

- 19 -

prograr. to operae in 321. F'ladio Co=,w,nica-Hons eqipmlentJ co,-ting abvout-, I-'esos

50 million and radio beacons costing approxirmately Pesos 35 ,nillion is cur-rently being installed at the 32 airports. T'4- wr i e_finished tlais year and the ownership will be transferred to RAMTSA by Govern-ment in exchange for additional RA-SA stockL, after uwhich thae Government wi Uown over 90% of RAMSA's outstanding shares.

(ii) Income Statements

3.25 Profit and Loss Statements for R.A:NSA for 1968 and 1969 are givenln Table 10). Results for years prior to 1965 were not given - operationsthen were conducted on a break-even basis for the benefit of the owner-users. Ne-t income in 1968 was Pesos 4.2 million and in 1L969 Pesos 5.2million. In the future, RA'SA will set its charges to cov3-. out of pocketoperating and maintenance costs but not depreciation on t,:o .- ;,iumption thatequipment would be replaced as necessary by the stockhoIlders. Thle userswill therefore be subsidized to some extent and RAMSA will not have theresources *to renew or replace its equipment as it becomes obsolete or wearsout. The need for major replacement is not expected to occur for ten yearsbut the rate of obsolescence for such equipment is high.

(iii) Balance Sheets

3.26 Balance Sheets for RAMSA are given in Table 11. At the end of 196''working capital was a healthy Pesos 8.4 million. Thle debt equity ratio was11:89 and this will improve further as additional equity investment is madeby Government in the form of the additional equipment referred to above.

(iv) Recommendations

3.27 As in the case of ASA, there is no reason why RAMSA should notoperate on a commercial basis and earn a reasonable return on the Govern-ment's investment (905i0 ownership) in the company. These earnings coulcd bereinvested in new equipment when it is required.

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IV. IWVESTEhNT

A. Past

4.01 During the period 1965-70 public federal investment in theaV;tio.n sector , T.7i be abou Pesos 318A r.11iion (TTU ,), ,milin)

(Pesos Million)

Source 1965 1966 1967 1?23 *-)a

SCT 5.3 7.4 9.9 23.4 314.3 68.3

SOP 30.2 131.0 351.8 377.4 371.7 464.8

ASA - 6.4 23.1 28.3 34.4 188.1

Aeronaves 11.2 191.2 256.0 392.8 61.1 63.4

RAMA - - - 3.2 5.5 15.6

Total 46.7 336.0 640.8 825.1 507.0 816.7

About Pesos 825 million (US$66 million) of the above has been financedbv external loans; with about 8';% heing for Aeronav.es. A further Pesos1 ,350 million was financed by internal loans, with almost all of it being fo-rSOP's airport nonstruetion aptivities. This hewvv recent investment hasbeen a major factor in Ilexico's advanced state of aviation.

I / ,._ ---I't aV F. |u sv

- 21 -

B. Projected

4.02 The following figures show the Presidency's tenta1 ieprogramming of public funds to the civil aviation sector fo- the periodl97l-1975 to complete the moderi zation process:

Civil Aviation - Proposed Investment by Agencyf(IQ71 -7c:)

('Pesos 1ail±icn)

Fiscal Self-Gnern+edInterra1 ].nr 1-

Resources Funds loans 7 L.ans Tot3):

SOP 84 - 1,286 - 1,370

SCT - - - 254 254

ASA _ 382 - 281 663

Aeronaves - 120 - 948 1,068

RA1YA - 43 - - 43

Total 814 545 1,286 1,483 3,398

4.03 Of the approximately Pesos 2,000 million for SOP and ASAas expenditures in infrastructure about Pesos 600 million represents apreliminary budget allocation for a new Mlexico City International Airportat Zumpango; Pesos 334 million is for maintenance and general airportimprovements; and Pesos 807 million for construction or major improve-ments at LI airports. Budget provisions have also been made for landacquisition, studies and design and supervision of construction. Whilethe amounts for maintenance and improvement may appear reasonable fora five-year program covering an infrastructure system in a country thesize of Miexico, the mission believes the case is not proven and requirescareful re-evaluation (see para. 5.o6).

4.04 The SOP program has apparently been prepared as an extensionof the existing development work and as such does not have adequate basisin feasibility studies, particularly traffic forecasts and market analyses.The picture is further complicated by the entry of ASA into the design

i/ Includes prov-isioun f0or ettJ-i.ler a new airport a-Ij ±'exico CLiUy adithe alternative of improving the existing airport.

- 22 -

and construction fie-d. Over "O' of the tentative budget for ASA is fornew airport construction (350 million pesos). Since the budget wasestablished the cost estimate for the airport at Zihuatanejo increasedfrom Pesos 55 million pesos for the five year period has increasedthree-fold because of design changes and other factors.

4.05 Expenditures for Aeronaves include about Pesos 950 millionas a tentative sum for conmnitment towards the end of the five-yearperiod to cover the possible acquisition of wide-bodied jet aircraft.Pesos 120 million is allotted to purchase an additional DC-9 aircraft toaccoimmodate forecast traffic increases. The Aeronaves management isquite properly cautious in its attitude towards the need for wuide-bodiedjet aircraft investment and, apparently has provided for such a programon the contingency grounds that competitive pressures may re-iiire invest-ment. The DC-9 purchase, however, is likely to be a necessity to maintainroute capacity. Both items are recognized by Aeronaves as nseding furtheranalysis to determine both justification and tining before finnm cormnit-ments are made.

4 .o6 Given the magnitude of the civil aviation budgets, greateremphasis on planning and inter-agency coordirnation is required. In themission's view there is a danger that the magnitude of the planningrequirements might be underostimated by officials who fleel they havesucceeded so far. The Government and private enJ;ities, however, shouldbe encouraged to avail themselves of the experience of the advisoryservices of various international agencies and private consultantsexperienced in the field. 1texican planners, designers and engineers areverv capable, but in the absence of experience developed internationallyin the civil aviation field in the past few years, this expertise is notbeing properly utilized nor are the results consistent with the effortand cost being applied. There is the added danger that, as with therailways, engineerine may out-run economics and finance and producetechnically high standard facilities that are of questionable justifica-tion (espnciallv in teYmns of timning) and viabilitty.

_n.07 TDetailed co.ment on the projected investments is di dffinilt inthe absence of adequate feasibility studies and organizational develop-men+. prorams Feasibility studs +.to dn+a hnae bhonn somewhatoursonry,and generally have not fully considered all aspects of the proposalsexamined For example, a study being coi-issioned for the possibleexpansion of the I'4exico City Airport was being so programmed that resultswere to som-e degree pre=established and adequate consideration of the fk11economic and technical aspects could not be accomplished in the short tine'Iowd ltor -. ,-Atfu dr,t;n 4f te, ..s of- refec for sch sudie

to ensure a balanced look at the problem and alternative solutions wouldprovide a firmer base for budgeting of funds. This major tyWpe of studyis an illustration of the work that could be overseen by the Pre-Investment0 LUUdies UiLL .111 Uwie I I esi -y VihichUI the ruission hdas .ecorLuLeniled elsewhIS4ere.

- 23 -

4.o8 S:,imarly, -4 4- aA deta:'e nay-4 of - e e-is-.n ca4b-iie andfuture requirements of the air carriers by experienced management con-

sutr.s-4 oul .e0 i -,- re4 eff-tlv ---nagmn _____4. Aeron-avesSU.lIL WCUU.U PJ±ILL.£U.L.L 14. ±: .LAti L..LVLI VIUJII '~UJI1IL, jJdL1W1 d.L'UlIVU

considered such an organization study recently but deferred its executionas a WUUoJA berL econor,-iiy m.easure. Ilili Mrib-SKiOn cUnsjiUUersj k/IIdL wU llUQ. _

management studies of both Aeronaves and Mexicana would most probably result-"I suffi-c1ent oper-atiLUnal saviLgs to more than pay- thLe cost of the studes.Such studies would also form a starting base for the broader consideratiorsof closer cooperation and coordination oI the two airlines and theirsubsidiaries.

4.09 Mexico's civil aviation sector is basically sound and is servedby organizations staffed with capable anid qualified personnel. A strongersectoral hand, however, should be able to exploit these existing capabiliti'zin a way that will permit civil aviation to continuously inprove itscapacity to serve Mexico's expanding domestic and international economyas a major means of communication. In addition, the development of wellstudied programs, based on up to date criteria, should permit the servicesto be provided without any unnecessary drain on the national resources.It is wzith this belief that the mission makes the recommendations of thefollowing Section.

- 24 -

V. RECOMMENDATIONS

5.01 The Government has recognized the potential of c vil aviationfor Mexico's development program. Most of the administrative andoperational structure necessary has been theoretically piovided for, andan increasing portion of the transport sector budget iS being channelledto aviation. Nevertheless, due to a lack of coordination in initialplanning, the overlapping of responsibilities in some areas and, stillworse, inadequate communication between the various agencies, the systemis not realizing its full potential either in service or efficiency.

5.02 Substantial increase in efficiency could be obtained within thepresent framework solely by improvements in the present coordination andplanning functions. Efficient coordination cannot be :imposed, however,on the diverse groupings which comprise the civil aviation sector inMexico. Rather. it Tmust depend on the nersuision. mnidance and dedicationof senior officials in all of the agencies involved. Firmer direction,however. could assist to bring this about. It is reccn-mended. therefore3that a Sub-Minister for Civil Aviation should be est:.1ished Lifaiiin themissionrs renonTmended new hiinistrv of Transmort. Hi--er.l of referenceshould make hin directly responsible for the foxmu1.a-.:,n and overallexnncution of AvintAn no]irtr in,l1iriCn .iicr' fri.rtth -_ tAriffs. Heshould represent the civil aviation sector in all ir.a . ers directly orindirectly involving the sector T In additionj. conŽciration should hpgiven as to whether he should be a senior member of the Technical Con-sultative ormmittee (Cc i-ssio-n Tenica Consrltiva), whih l l -shouldbe made more active and dominant in the area of inter-sector planning and-_cord i.aMt io n . He should be the Chai...a ofP the1 A-olsi d lreco

de Aeropuertos" which should be reactivated and staffed so as to becomea positi-v 1;>in thle in1frastruLctu,re pl anning f -, rie"-l . Q..e Su-.M-; "for Civil Aviation should, either personally or througl a senior subor-d.LLiiVa, be on1e VJ. LJV o UVf t U.LeJJ IJ C-ove n el mrlI Lers on JU.&1e BoaxUds of' th e va"J.r .Lious

public and private aviation corporations in which the Government is nowp par tngL ULL..±L dAtLUOUU*IIU S-uL1_MI.bL± neted not JIesUU beIUi ani expetIj in1

civil aviation, but should have an understanding of and ability to deal-W.w LAL b,o bad spectrum-w of technical, legal, ecooUmLc anu fii'acl±d mattersthat are involved in civil aviation. His staff should not be large, butconsist of a sma9ll group of highly qualified and experJLeIcUd aviationoriented personnel who would be capable of working through the existingagencies in the field.

5 03 Among his tasks should be to review the terms of reference forthe various commission, Government agencies and Government corporationsand make recommendations for such adjustments as may be necessary to

provide for adequate cooperation between the groups while, at the sametime, clearly defining the primary responsibility of each. Thereafter.,the Sub-Minister should, either directly or through monitoring officials;ensure that each group retains adeauate authority to enable it to meet itsassigned responsibilities.

5.04 Under the general direction of the Technical ConsultativeCommittee, the "Comision de Planeacion de Aeropuertos" should be maderesponsible for the general planning not only of new airports and extension<ito existing airportEs but also for all related investments such as COflMMU-nication and navaid ilstallations, airways systems and route structures;.This will; no doubtZ. entail ah broaden;no of the Colmit+e' bas to sncbludemembership from other agencies in the sector or from those affected byaviation onperations such as Tourism. The Airport Planning comm.issionn'afirst task should be a general review of the existing system and plansso as to establish nponer priorities for a technicallyr officint and tinR-phased further development. This work, it is suggested, probably shouldbe entrusted to an experienced consulting firm. under terms of referenceprepared by the Commission but agreed by a substantial majority of thea-iation sector partlcipants- and benefici-aries. The s+vudy hould -,, e~~vi ~~~ r ~ -- r- -~ 1 .~k *i t.J L J .UL jA-L-- --

all regulatory, infrastructure and flight operations as.ec-.-; It isproabe tthat the review T-41 -ident-ifyr +he need for n Aar 1 stuA ,+ -es

in, for example, development of an air cargo industry; revision of thedom.estic route and fare structu,'e; greater use ofA comr,n ground acby the Mexican trunk operators; consideration of a si.lge flag carrierin the 4nternational fifleld and possible establishment of a Latin Americanairline, or an airline group with Mexican participation, and the expansionofth pres ent Cer,t ' 'neriac-ornal de "destrardienlo deAvac'oionCIJl. Uie presen u In±U u ±L~.lod±JL It IRUJ1 . ui'dU±iI~ (2e AV±L C1U .LV±2-:

(CIAAC) to provide for all phases of civil aviation training not only forMIexico but for Latin America.

5.0) In general, a furtner major capital development program for thecivil aviation sector should await the recommnendations likely to arisefro,m tlhe invest-igatiors suggested in the previous paragraphl. Certaunactivities, however, will benefit from a more immediate handling of fourparticular problems:

(a) At present airport master planning and design iscarried out either by SOP or ASA almost entirelywith tneir own staff. wThile the staffs of bothagencies are well qualified technically, they areshort on experience in dealing with the operationalcomplexities of modern airports that have to dealwith very large volumes of passenger, aircraft andfreight movements. It is recommernded, therefore,that a much greater use be made of qualified inter-national consulting organizations to assist in

- 26 -

preparing any master plans, especially forMexico's major airports, and in developingdesign criteria, particularly with respect tothe terminal area requirements.

(b) The two trunk carriers, Aeronaves and .'exicana,should be encouraged to initiate a joint studyon the feasibility of achieving greater use ofcommercial ground facilities such as groundhandling at airports served by both carriers;Joint overhaul facilities and stores, takinginto account the different tvPes of aircraftinvolved; common flight kitchen facilities; andjoint computer flight operations and reservationsfacilities. The full support of Government shouldbe given to the imnnlpremntation of any ensringrecormendations. The technical and economicimpl le'.ations of a sin.gle flag carrier on inter-national routes to achieve economies should bereviewed as part of this study. RePnnnq5hilityfor final recommendations in this respect,howPv'r_ i p bette hn+' + t.d ton a

independent of Aeronaves and Mexicana.

(c) Aeronaves is burdened with an overwheThiing debtstylintnirp thatn+ affetcts +.he effiriency)rI o_ its

otherwise capable management group. It seems

tenance and administrative facilities are beingdeferMred L4n Cn effort _ s,o .. 'ak O± V.L pay=ments. less efficient operations than themnang-ement -is capable1 o-f res14 'tbeaue f4tU .L~J u V.L .1 OU..LV i1.1 " 0c Ul. A.J..t

understandable reluctance to incur further~ V ~.Li Li~UL~LL ± .L 4L,- --

for new or improved facilities. As a prelude tothe JoInt study reconrmended in (b) above, Aeronavesshould be recapitablized and placed in a moreequitable financial status to permit it to properlyrealize its full potential in a highly competitivefield.

(d) Tne domestic fare structure is irrational in manyrespects and produces some strange anomalies. Theairline user may be faced with the choice of delayinghis trip or paying additional fare to ride thealternate airline. A route and fare structure study

should be initiated at an early date to resolvesome of the anomalies and to put fares on a costreflecting basis. Such a study would be a properfield of enquiry under the proposed new Sub-M'iinisterfor Civil Aviation.

5.o6 Mexico's civil aviation sector has, with some minor exceptiors,both the agencies and qualified manpower to implement effectively andefficiently the National Aviation Policy. The primary need is for a strongcoordinator to direct and inspire the existing organizations to fulfilltheir terms of reference, in full cooperation with the rest of the sector.If given full Government support, such a man could play a major role inincreasing the efficiency of the civil aviation sector.

AN1PSX APage 1

CIVIL rrTA ATTOT Pt"'APO = At-zTMI'T1T TKtTrOT'T T)

GOVER:T,,ThT

Secretaria de la Presidencia Responsible for general oversightn-d bud get4 ' 'I ocaw4i-or. Fnall say-

on investment programs.

Secretaria de la Hacienda Responsible for budget disbursemenrtvand itiburule4r.tsi '- response toaniu U L'Uuru-ii-LZj -"

'p2iegost from organizations requir*-ing additional 1financial s-upport.

Direccion General de Tele- Licensing-of communicaticns equaiprimentcommunications, SCT used by RAMSA and other organizations

in civil aviation.

Secretaria de Obras Publicas Legally responsible for toe desieriand construction of airport facili-ties, exclusive of those for RAVSA.

Consejo Nacional de Turismo Policy planning and public relations.

Departamanto de Turismo Direct relations with organ-zat:Lonsinvolved in tourisr, industry and withtourists.

Customs, Health & Immigration Responsible for processing arrivingand departing international airpassengers.

GOVERNMENT SPONSORED

Centro Internacional de Aviation basic training center fc,rAdiestramiento de Aviacion Mexicrn and other Latin AmericanCivil (CIAAC) nationals.

Macional de Combustibles de Resnonsible for operation of POLAviacion, S.A. (NiACOA) installations at most federal air-

ports.

DIGAS POL responsible at limited number ofairports in Yucatan area.

PrEE,X Suppliers of aviation fuels andlubricants to NACOA, DIGAS and iirsome instances directly to users,,

H:i APa-'e 2

Camara Nacional de Trade organzal,ion of all ma-or auAerotransportes carriers, national and foreign.

ASPA Airline pilot's union.

INTERNATIOMAL AGENCIES & COMPANIES

International Civil Aviation Regional office in Mexico City.

Organization (ICAO) Provides scholership funds andassistance to CIAAC.

International Air Transport Responsible for international farestructures. Both major Mexicancarriers are members. Through jolrt.consultative committees providestechnical assistance in aviationplanning.

US Federal Aviation Assists in aviation planning onAgency (FAA) request.

Foreign airlines A minimum of 28 schedules carriersserve various points in Mexico.

Foreign tourist agencies & A number of foreign tourist agenc-i-'hotel operators and hotel companies have established

themselves in Mexico and are largelydependent on air transportation.

October 15, 1970

AJTI~TX B

Page 1MEXICO - TIiE NATIONAL AIRPORT PLAN*

One of the central objectives of the Federal Governnelit's t, c- _rt

policy is that there should be an adequate infrastructure of air traif'c.For this purpose, and to comply with the directives laid domn by the Presin.2tof the Republic, the Ministers of Communications and Transport and of Fijbl1c

W4orks set up an Airport Plamning Commission in 1964. Its work provided thebasis for the draft investment program designed to permit timely completicr.of the works in progress and the execution, in an order of priority, of thobe

which would be of immediate benefit to the community.

The program includes construction or modernization work at 75airports and provides in each case for the building of longer runways than

those had been usual to take into account the requirements for the type of

aircraft expected to be using the airports in the very near future. Becausean airport, whatever its type, is threatened with obsolescence as a resultof increased traffic and the need to serve more advanced types of aircraft.

than originally envisaged, the National Airport Plan is under constant rev'.ew.

This tn kes into accootLnt ehanging requirements ar. close observation of theresults obtained and is an effective instrument for the solving of thechanging problem.s and invariably involves close coordination with inter--national civil aviation at,thorities. On the basis of surveys, transportstatistics -and population and economic growt+h indices, the Plan drawn ur, hotonly determined the level and scope of service in each of the 75 airportsbut also laid dot.i, spec ific priorities in order to achieve some balanced

overall progress at all types of airport.

The airports were split into three categories, corresponding tolong, medium and short-distance aircraft. The group of ai rnorts for lorg-distance flights is made up of Acapulco, Gro.; Il4azatlan, Sin.; Monterrey,N.L.; Guadalajara, Jal.; MAerida, Y1uc.; Puerto Vallarta, Jai=; La Paz, T. B.CJ.Mexico City, D.F.; and Tijuana, B.C.

These nine airports in fact absorb over 75% of the total traffic0They also include the longest routes flown, both domestic and internationalThe original program accordingly allocated 42% of the total investment e-nvs-aged to this basic group. In this group .ore than in any o+he.r the need is toinsure that airport facilities not only meet present day requirements butalso respond to the medium. and even long-term. needs in view of the rapid!development of air transport.

The 22 airports forming the second group are located at Mexicali,B.C.; Hermosillo and Ciudad Obregon, in Sonora; Torreon, Coah; Culiaca., Si-i.;Leon, Gto.; Minatitlan-Coatzacoalcos and Veracruz, in the State of Veracruz;Oaxaca, 0ax.; Villahermosa, Tab.; Campeche and Ciudad del Carmen, in Canipech-;

Tapachula and Tuxtla Gutierrez, in Chiapas; and Chetumal and Cozum.el, inQuintana Roo. These 22 airports, for medium-distance flights, accounted fLr40% of the originally envisaged total investment.

The 44 airports comprising the third group not only serve to completethe tightly woven network but also help to compensate for the isolation ofcertain regions. They are intended to operate as development-promotingfactors and., in a number of cases, they will also provide much-neededfacilities for tourists. They are located at the following places:-

A.NITI BPage _.

Ensenada, Bahia de Los Angeles, San Felipe, San Lucas, San LuiL:Cionzaga and San Ouintin. in the State of Baja. California; Loreto, SantaRosalia, Bahia Magdalena, Mulege and Todos Santos, in the Territory of Bajaarlifornia! (Tnnnpn. Cuavmas and NoLales. in Sonora: Nuevo Casas Grandes.Chih.; Monclova, Piedras Negras and Saltillo, in Coahuila; Ciudad Nlante andGiiudnad Victorina in Tarnaulipas; Di-rango. Dgo.; San Luis Potosi and Tamuin,in S.L.P.; Zacatecas, Zac; Los Mochis-Ruiz Cortines, Sin.; Tepic, Nay.;Manzrri11n. Gol.;1~ Qetro Qnl o Am a 1salien-tes- Ags- ; Huetanmo Morelia

and Uruapan, in Michoacan; Distrito Federal; Jalapa and Poza Rica, inVeraeruz; Iguala nnd Zihuatane+n in Gerrepro; Pueb1a - I T'lxtnepc;- Oax.:San Cristobal and Palenque, in Chiapas; Chichen-Itza, Yuc. and Akumal and

program, whichincluded 21 airports, had a projected investment of the orderof I eo 00 rW Apllion. iI1; d4.± Uo LCiuId O Y c

Torreon, Chihuahua, Matamoros, Acapulco, Guadalajara, Mexico City, CiudadUJ CU'tr6e, I t6dLU.LcI, LiJuana, P rUeIr Uo Val.larltUa, ICUI±±plUV, Uxua.PnW, uU C±UIo,

Veracruz, Mexicali, I4onterrey, La Paz and Merida. The works carried outinclude both the building oi runways and the erecting of buildings forpassengers and freight, parking areas, taxiways, storage facilities, contrcltowers, fuel storage facilities, iarkcer cnU aerlal rUavlgaU±ofl aids, etc.

Thle works uridertaken to 'ate have been rmore costly than plannedas a result of a) completion of final engineering; b) changes in designand other modiiLcations; e) price inllation, etc.

October 15, 1970

TABLE 1

MEXICO

CUU1iARTIVE. AiR TRAFFIC STATISTICS

Aeronaves de Mexico and Conmania Mexicana

1965 - 1969

1965 1966 1967 1968 1969

Thousands of Kilomlters FlownAeronaves 20,270 20,521 19,897 22,361 25,818Mexicana NA 18,631 20,061 17,846 20,753

Hours FlownAeronaves 54,293 59,150 50,805 46,704 43,230Mexicana 41,570 39,723 37,281 32,978 35,220

Thousands of Ton-Kms ProducedAeronaves 175,625 185,062 194,712 248,786 302,191Mexicana 149,816 150,958 189,784 177,090 219,591

Thousands of Ton-Kms SoldAero naves 97,609 103,670 98,8140 122,557 143,236Mexicana 85,109 85,338 95,746 94,290 113,749

Tons of Cargo TransportedAeronaves 9)532 9.709 9 5,66 1__2__ ll)j48Mexicana 13,067 12,434 12,409 12,459 14,037

Millions of Seat-Kms ProducedAeronaves 1,650 1,827 1,693 2,262 2,729Mexicnna 1,373 1,421 1,716 1,582 2,050

Millions of Seat-Kiss SoldAerornaves 964 1,021 977 1,196 1,425Mexicana 842 859 977 966 1,164

Number of Passengers CarriedAeronaves 847,164 852,176 850,620 1,029,107 1,091,914Mexicana 827,280 892,934 1,033,034 1,032,945 1,185,393

Seat. Ut 1 i z7ati onAeronaves 58.4% 55.9% 51.6% 52.9% 52.2%Mexicana 63.5% 68.0% 56.9% 61.1% 56.8%

Average Cost Per Seat-Km ProcducedAer naves .263 .26 .261 .250 .236Mexicana .273 .287 .276 .276 .260

Average Cost Per Seat-Km SoldAeronaves .440 .472 .505 .473 .453MexicAnno .L5 .474 .L81, .1,2 .457

Octcber 197C

TABLE 2

MEXICO

OO)PAXIA MIXICANi DE AVIACION. S. A.

Profit anid Loan Statements

For the Years &ided Deceaber 311 1965 throuzh 1969

(Pesos 000)

126i 1966 1967 i296 19629

Operating RevenuesPassengers 320.641 326,371 382.404 392,1149 49,980Cargo 45,244 42,924 46,061 50,651 59,941Other 12,617 14,407 1_ 4,795 16,168 17,858

378,505 383,702 443,260 458,968 572,779

Operating ExpensesFlight Operations 124,936 130,987 144,975 136,949 172,076Fligpt Operations 3,11to r'I -f au0,r1 D 7 onO , 00 -0-Maintenance 62,5'L4 228,lO 80,378 78,4 oo,0l3General Expenses 152,085 162,842 137,804 177,103 228,030Depreciation 33,970 39,279 43.R5 43j872

373,505 406,218 472,838 436,323 532,167

Net Operating Revenue 5,000 ( 22,516) ( 29,578) 22,645 40,612

Interest and Other Expenses (net) 2,060 11,706 10,794 14,324 967

Net Profit (Loss) 2,940 ( 34,222) ( 40,372) 8,321 39,645

Operating Ratio 96.7% 105.9% 106.7% 95.1% 92.9%

Passenger Revenue Per Seat-Km Produced .234 .230 .223 .248 .241Passenger Revenue Per Seat-Km Sold .381 .380 .391 .406 .425

Revenue Per Ton-Km Produced 2.526 2.542 2.336 2.592 2.608

Operating Exoenses Per Ton-En ProbccdFligit Operations .834 .868 .764 .773 .784Maintenance .417 .484 .424 .443 .402General Expenses 1.015 1.079 .990 1.000 1.037Depreciati on .227 .260 .314 .248 .200

2.493 2.691 2.492 2.464 2.423

Net Operating Revenues Per Ton-Km Produced .033 ( .149) ( .156) .128 .185

October 1970

TABL.

AJRONAVZS DE MEXICO, S. A.

_rofit ma, LozStSate menta

For the Year Ended December I. 1965 Thrm uh 1962

(Pescs OC )

1965 1966 1967 1968 1969

*erat4 n Pever.ePassengers 373,276 394,473 392,948 519,368 628,490Cargo 55,166 63,972 62,182 69,885 84,552Other 27,520 25,165 24,257 21,776 18,966

455,962 483,610 479,387 611,029 732,008

Operatine ExpensesFlight Operations 239,569 276,542 322,806 353,343 415,318Maintenance 97,803 98,617 92,442 101,715 114,945General Expenses 65,045 81,903 52,254 68,217 88,223Depreciation 32,352 25,277 28,692 45,275 52,319

4324,769 482,339 2496,194 568,550 670,805

Net Operating Revenue 21,193 1,271 (16;807) 242,479 61,203

Interest and Other Expenses (net) 38,906 10,964 74,639 80,414 110,115

Net Profit (Lose) ( 17,713) ( 9,693) ( 91,446) ( 37,935) ( 48,912)

Operating Ratio 95.3% 99.7% 103.5% 93.0% 91.6%

Passenger revenue per seat-ion produced .226 .216 .208 .230 .230Passenger revenue per nieat-km 0old -387 .386 .402 .24324

Revenue per ton-lo proOlced 2.596 2.613 2.462 2.2456 2.4,22

operating Eoenaes per ton-km ProducedFlight Operations 1.364 1.493 1.658 1=420 1-3724Maintenance .557 .533 .475 .409 .380Administrative and Sales Pro tion .370 .443 .268 .274 .292Depreciation .1824 .137 .11,7 .182 .173

2.475 2.606 2.548 2.285 2.219

Net Operating Revenues Per Ton-Km Produced .121 .007 C .086) .171 .203

October 1970

mawriW I±ADJ~ 4

MEXICO

UEJ, DE YUTCCO0 Se A

fl 0 1anon _~hee+a

Au ef flnpmher 1. 1QA thrneiih 1969

(Pesos 000)

ASSETS 196L 1966 1967 1969

Current Ass tsCash and bank deposits 46,327 20,022 8,957 9,826 10,429Accounts receivable 204,501 243,175 155,793 127,378 146,946Inventory of spare parts,

fuel and stores 35,894 33,876 .32,282 34,684 34,719Investments 8,047 9,838 5,318 6,781 21,227

294,769 306,911 202,350 178,669 213,321

Fixed -Assets = Net

Flight equipment 222,587 303,065 481,790 735,311 688,975rrou ' __.___ipmn nr' Qrl. 55 01 :? 7 1.A rL 4L L' n <lVJ U IiU UJL L L= L) U)L4 £),) 1714V7 U U1 ,)Uy W

Land and buildings 398 2,014 4,859 4,211 8,982

248,839 328,396 516,058 805,783 761,908

Deferred Charges 36,985 103,870 106,271 172,137 142,222

580.093 739.177 8.'4.679 1;156.589 1;117.l;45

LIABILITIES AND CAPITAL

Current LiabilitiesAmounts due agents and othera ) 80,321 68,175Notes payable and accrued interest) 731,167 787,971 825,829 890,517 1,035,429

731,167 787,971 825,829 970,838 1,103,604

Long-Term DebtNotes payable 89,026 230,536 195,797 695;589 574j1 3

Provision for repairs - - 19.938 27;928

Deferred Income 43,000 13,754 1.8,890 27,594 L3,006

EquitvCapital stock 124,669 124,669 124,669 124,669 124,669Accumulated deficits (407,769) (417,753) (640,506)(682,039) (756,269)

(283,100) (293,084) (515,837)(557,370) (631,600)

580,093 739,177 824,679 4156,589 1,117,451

TABLE 5

jV.rEsI w-

COMPANIA WEXICANA DE AVIACION? S. A.

Balance Sheets

As of December 31. 196' through 1969

(Pesos 000)

ASSETS 1965 1968 l

Current AssetsCash and banks 17,266 14,767 19,072 36,5co 74,182Accounts receivable 27,'L47 28,534 451,3'' 59,839 7,,1L2Inventory of spare parts,fuel and stwores 12,786 16,905 16,791 16,4 67 15,408

Investments 10,822 11,910 11,166 18,223 16,592

68,021 72,116 92,340 131,029 181,324

Fixed Assets - NetFlight and around eauiDrent 177.673 273,602 343,064 301,637 275,447Land and buildings 852 4,356 1,201 - _

178,525 277,958 344,265 301,637 275,447

Deferred Chargeg 5,264 8,551 15,720 13,757 11,242

251,810 358,625 452,325 446,423 468,013

LIABILITIES AND CAPIZIL

Current Liabilities 104,923 130,186 169,123 256,149 143,468

Long-Term Debt 62,476 141,437 226,953 145,454 241,947

EquityCapital strockI rv),00 1,000In( 1,000n 10,0 100nn,0

Reserves 8,358 10,171 19,791 - -Revaluation -1rplus - 35X000 35,000 35n clo 35,000Accumulated delfcits ( 23,947) ( 58,169) ( 98,541) ( 90,220) ( 52,402)

84,411 87,002 56,250 44,780 82,598

251,810 358,625 452,326 446,423 468,013

October 1970

TABLE 6

MET Crn

Empresas Alimentadoras

Staten et of Profit and Loss -YeaEer d DeceT1be- I 1969_

(Pesos OOO)

Aeronaves Aeronaves Aeronaves Aeronaves Aeronavesdel Centro del Sur del Este del Oeste del Norte Conso1idated

Revenue from services 4,288.9 7,121.1 2,336.8 4,310.7 3,270.8 21,328.3Operating costs 6,109.1 8,511.8 3,818.0 6,687.9 5,369.5 30,892.3

Gross Profit (Loss) (1,820.2) (1,390.7) (1,477.2) (2,377.2) (2,098.7) ( 9,164.0)

Administrative expensesCosts of selling 29.5 95.8 20.2 117.2 61.6 324.3Advertisi ng 488.6 884.7 316.6 259.- 210.9 1;760A3Administrative expenses 836.4 1,000.3 560.0 619.8 442.5 3,h58.6Other - 1.1 - - - 1.1

1,358.5 1,581.9 896.8 996.1 715.0 5,5L4.3

Prof it (Loss) beforef'inancial charges (3,174-7) (2,972.6) (2,378.0) (3,373-3) (2,813.7) (1,708.3)

Financial charges 403.3 476.3 231.3 3.1 3.1 1,117.1

Net Prafit (Lossj) (3,578- U3,L44.89) (2,605-3) ,.(L (2,816.8) (15,825.5)

Less: Operating deficit toSeptember 30, 1969 absorbedby Aeronaves de Mexico, S.A. 822.8 756.0 660.8 737.2 717.0 3,693.9

(2,755.2) (2,692.9) (1,914.5) (2,639.2) (2,099.8) (12,131.6)

October 1970

MEXICO

Fvr esaaUimitadora,s

Balamce Sheets as of December, 31, L969

(Pesos c0oo)

Aeronaves Aeroiaaves Aeronaves Aeroniaves Aeronaves,SSETSS del Centro del Sur dlL Este del este -del NDzte an DLit

Cu,rrent Assets

Caish and banks 50.8 LL2.0 194.0 .306.0 37.2 600.0Accounts receivsble 3,226.24 1,571.5 1,217.3 2,245.3 2,2143.4 6,093 41,/Stores 1~474.2 23.0 6.3 - 20.1 523.6Investwi te 19.8 LL.7 4.9 - - 35.4

.3,771.3 1,718.2 1,420.5 2,551.3 2,300.7 7,252.4

F'ixed Lssets_-Machinery, ecpipment and buildings (net) 6,222.9 4,1351.9 1,622.7 46.5 149.6 12,793.6

Deferrd Chares L, 433.8 1,333.9 607.8 ]L25.5 1'20.4 3,621.5

LL,428.0 7,904.0 3,651.0 2,723.3 2,470.7 23,657.5LIABILITIES AiD CAPITAL

Current. Lia L U tieI 7,589.0 3,:205.3 514.3 1,1&92.5 776.4 9,0458.0k/ProvisoA for gment RepAU 332.3 1335.3 293.9 827.4 6:16.4 2,905.3Deferred Rev4mue 55.8 12.2 72.2 42.6 177.7 3450.5Lopng-Term Debt 3,156.7 3,1467.1 1,677.3 - 8,301.1Capital Stocl

Social capital 3, 000 .0 3,00.0 '3, 000. ID 3,1000.0 3,000.0 15, 00. 0Deficit 2,705..8 2,615.9 1,906.7 2,639.2 2,099.8 11,967.4

294.2 384.1 1,093.3 360.8 900.2 3,AX)2.6

LL,428.0 7,5904.0 3,651.( 2,723.3 2,470.7 23,667.5

I/ Colurmns do not add across because inter-company obligations havebeien eliminated on consolidation.

October 1970

TABLE 8

MEXICO

AEsOurUBRTOS Y SKLv_CIOS AXILIARES

Trofit and Losa Statements

Fror the 'Lega- Ended December ,^ '965 throug' 16

(Pesos 000)

1965 1966 1967 1968 1969

Operating Revenue sCharges for landing, lights, etc. no 41,627 55,303 62,107 84,472Rents details 11,924 15,849 16,889 20,364Profits from handling fuel and lubricants available 4,555 6,051 7,983 9,132Other 2,949 3,910 7,156 8,539

4,889 61,055 81,113 94,135 122,507

Operating ExpensesSalaries, wages and otheroperating expenses 1,155 35,992 41,597 47,690 53,543

Depreciation and amortization - 970 15,713 19,223 24,902

1,155 36,962 57,310 66,913 7o,445

Net Operating Revenue 3,734 24,093 23,803 27,222 44,o62

Interest and Other Income - 1,106 13,769 5,535 7,483

3,734 25,199 37,572 32,757 51,545

October 1970

TABLE 9

MEXICO

AIEIOPI TOS I SERVICIOS AUZILIARBS

Balance Sheets

An of December 31. 126 through 1969

(D es osDW9

ASSETS 1965 1966 1967 1968 1969

Current AssetsCash and banks 13,626 11,624 5,057 10,4ih5 16,164Accounts receivable 15,420 5,436 31,560 52,210 38,421Stores 108 4,408 4,155 5,620 13,371Investments - 33,620 52,125 58,103 103,618

29,154 55,088 92,897 126,378 171,574

Fixed AssetsTan.d, runwayfs, t n-l.', -- AJ

equipment, (net) 7,391 12,577 573,906 599,791 690,571

Deferred Charges 143 736 2,059 2,063 1,955

Other Assets 20 230 903 992 10,121

36,708 68,631 669,?65 729,2:24 865,112

LIABILITIES AND CAPITAL

Current LiabLlties 63 5,005 3,112 1,958 4,516

EcuityCapit t ,e' ,189 600,643 Os,- 70a4,9"40Retained Earnings 3,734 28,437 66,010 114,331 155,648

36,645 63,626 666,653 727,266 860,596

36,708 68,631 669,765 729,224 865,112

Ort.nhpr 1 9'C)

TABLE 10

MEXICO

RADIO AERONAUTICA MEXICANA, S. A.

Profit and Loss Statements

For the Years Ended December 31, 1968 and l969

(Pesos 000)

1968 1969

Operating Levenues 34,806 44,312

Operating Ecpenses 25,536 36,363

Administrat,ive Expenses 2,993 3,386

28,529 39,7h9

Net Operatinig Revenmes 6,277 4,563

Other Costs (Income) 2,030 ( 633 )

h,2L7 5,196

Note: Resu2ts for the years 4,65 through 1967not I rovided - the ope-. ations were thenconducted on a break-se3n basis.

October 19'?O

TABLE 1]

HE2LCU

RADIO AERCKAUTICA MEXICANA, S. A.

Balance Sheets

An of December 31, 1961 througi 1969

(Pesos 000)

ASSETS 1965 i2 1967 1968 1969

Current AssetsCash and banks 1,059 1,379 770 1,828 2,908Accounts receivable 3,223 3,004 3,704 7,011 5,896Stores 324 355 385 853 1,763Investments 701 91 105 1,982 6,389

5,307 4,829 4,964 11,674 16,956

Fixed Assets - Net 3,784 2,880 2,730 3,338 19,364

Deferred Charges 191 1,079 910 292 472

9,282 8,788 8,604 15,304 36,792

LIABILITIES AND CAPITAL

Current Liabilities 3,523 4,176 4,624 6,840 8,549

Long-Term Debt 2,653 1,506 874 1,111 2,687

EqLuityCapital stock 3.106 3.106 3.106 3.106 15.317Reserves - - -_543Retained earnings - - 4,247 5,196

3,106 3.106 3,106 7,353 25,556

9,282 8,788 8,6o4 15,304 36,792

October 1970

PADP.. B 'v.r3AM rPttTSATT) POR

T n A rf Tf'OlATThNMLe| U1AJ.LUiWJ UI'VL'

A. The Federal District/1Mexico City

1.01 The Federal District of Mexi5o ("Distrito Feneral", orD.F.) covers an area of about l,500 km, - an d nas a populationt of some7.0 million people. It is surrounded by the State of Mexico, withits boundaries being fixed in the national constitution. Officially,it is a Department of the Government. The Mayor is appointed bythe President of the Republic and holds the rank of Cabinet Minister.The Federal District, therefore, has an importance and status unlikethat of Mlexico's other large citiesl/which are responsible to theGovernors of the State in which they are located.

1.02 Over the past 20 years, and particularly the last decade,there has been a rapid increase in population not only in the FederalDistrict but also in the suburbs and nearby urban areas lying withinthe State of MyIexico. This larger IIetropolitan Area of the Valleyof Mexico (as it is officially knoim, or more commonly-Mexico City)is a complex of about 9.0 million people and is increasing by some6.0% p.a. At this rate of increase it would double the populationin 12 years. As discussed below (Paras. 1.05-l.l0), semi-officialforecasts are for a population of about 20.0 million in the year 2,000.No matter, at this stage, what reasonable assumptions are made it isevident that the population of the Metropolitan Area will be vastlygreater by the end of the next 20 years.

B. Transport and the "Urban Problem"

1.03 The transport problem of Mexico City, therefore, is thatof adjusting to an inevitably much larger population than now exists.Transport, however, is only one (and, perhaps, not the most pressing)of a set of broader issues constituting the "urban problem". Amongother things, these broader issues include:

1/ For examnle. Guadalalara with 1.25 million Deonle and Monterrevwith 0.83 million.

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a) improving health, education, housing and social welfaregenerally;

b) raising economic productivity, creating new locationsfor economic activity and generating additional employ-ment opportunities;

c) providing adequate recreation and similar facilities; and,

d) alleviating the environment by reducing accidents,congestion, pollution, noise levels and such social illsas crime, etc.

1.04 The responsible authorities in the Federal District andState of M'exico governments are vitally concerned about these broaderissues. They recognize that transport, to a varying extent andnature, is related to the issues and must be a part of the programsfor their solution. They are particularly interested in the physicalarrangements of people, buildings and economic activity so that atransport system can be developed which can serve the area in anefficient, economical way. That is, they are seeking answers to suchquestions relating to physical arrangements as:

a) How large should the Metropolitan Area be in area andpopulation?

b') T;it. natttern shoulid it, take (Pe. star-shaned based onradial transport routes, clusters of satellites, etc.)?

c) t4Jhat should be the population densities of particularareas and thue, d ensity gradien bet+ween them?

, I C N * i. 4 CIIL LiC I i nl'J C lLi n "I V'-'n '-- IC a

housing, business, industry, recreation, etc.)?

e) Should the transport system be more of a linear, radial,- iUfo P grid o. -U-. -idJeu grid patl-1?

Depending upon the answers to such questions, they have to face policyUULisions si bUu -w;1 leL Ue uop er atu i ons o thLe t-1-t b-p- S 0syste sh-IUid

be more public or more private, and how much shouid be above or belowground. They will also have to produce institutional arrangements toachieve the changes needed to permit the efficient economic and socialfunctioning of an urban popuiation of perhaps twice the present sizebefore the end of the century.

C. Population Groiwth

1.05 Population in both the Federal District and the suburban andnearby urban areas within the State of Mexico has grown from 2.25 to8.76 million over the last 20 years, or over 3 million per decade;

Popilation(millions)

TotalFederal State of Mexico MetropolitanDistrict % inc. (urban) ', inc. Area % inc.l/

1930 1.14 - 0.20 - 1.34 h1940 1.65 46 0.26 28 1.91 431950 2.88 73 0.35 41 2.25 691960 4.67 63 0.73 99 5.40 671970 (est.) 7.00 44 1.76 140 8.76 62

1.06 Although most of the absolute increase has been in the D.F.itself, the population growth rate there seems to have been slowed doufnto about h% p.a. by 1970. By contrast, in the suburban areas which li.ewithin the State of Mexico, the population growth rate averaged 1h% p.a.between 1960-70. Most of this increase took place in four satellitecities:

Population( '000')

1960 1970 g inc.

Ec.atepe. 41 221 hi41<Naucalpan 86 372 355%1\TP+.a7.hi iln n -un.1_ 7

Thalnopantla 105 374 254%

1/ The apparent relative decline in overall growth, especially in the10ACc, sfiholdq not+. be g4inme +nto muirch T.Tn4eyl+ becnasel:n al +hn 1 _nc+.

official census (1970) has not yet been published; b) some areasr.ear JMAico City are st+l.]. officlally cl.assed as rura l4.., bUt h-ave

had significant population increases and are taking on an urbancharacter; and c) the figures include some official urban areas(e.g. Toluca) which though not physically in the officialrietropolitan Area are economically and socially closeLy linmedto it, but which have had slower growth rates which pull down

1…t o-verall a-verage.

14 -

Netzhuacoyotl, which is discussed as a separate important case below,did not exist as an official "municipio" in 1960, but about 60,000 weresaid to be living in the area. Its rate of growth to a city of majorsize has been a phenomenal 900% over the period 1960-70. The rapid andinnnlanned grnoith of such urhnn areas nnoAs eri ous plATning nroblems fortho future.

1.07 Of the 3.3 million population increase in the D.F, between1Q),n01960j 1 -' mnilliAn w,as acrfconte.A fnr by -vat r grro*h anci 2.0 million

by migration from elsewhere. Assuming the same natural growth betweennow an.d 19000 as took ploce betwTen- 10 and - o net v-+r-l g+ai+ n,w

place into the Metropolitan Area, then it would have a population of| bouAvS '2; ndllion_bly t 74oA_A48+1a Aend of 4te ce sntu / A mre Acuae A A_nstiM_te +AA+ awV Vu U L VsVL* L U.yL..Lv 1± LJ ± c VUL Dt Ufl A s 1. s U u'JJ/.] U w tii ci1 U'4w V., 1 .LIiLa u.s

is expected when the results of the 1970 census have been analyzed.

1.08 Such a figure of 20 million, however, implies a considerableslo-wiUngdow in tLliu Vver UUia c s te pai Ut decad tuU aoL)UUU _)/0%

per decade. If the total Metropolitan Area is to have less than 20I;LLL.L±on u1y t11e onVlo U.L J1 L I UiULly J d LUidlLU c d4 C11U -a. l.J± V IJu-

flow of younger people from the Area would seem necessary. Reducingnet immigration to the Area poses forrmidable problems. Inlduc_ing anet emigration is difficult to conceive in present circumstances.

1.09 Econometric studies eleewhere show that migrati.:in to a cityis positively correlated with its real income per head ^s c::. ared withother cities. This would seem, a priori, to be the case Li 1c xico Cityalso. The Metropolitan Area dominates the Ilexican econo)my in terms ofindustrial output, which is usually associated with higher per capitaincomes. Rough estimates suggest that around 50%, in value terms, ofall manufacturing production in Mexico and about; 45/ of all industrialproduction takes place in or around the Metropolitan Area. The onlypresently foreseeable counter-magnets for migrants from the rural areasare Guadalajara, where population increased by 75Za% between 1960-70, andMonterrey, which had a 50% population increase in the period. Ifthese and other cities are to attract migrants, substantial public andprivate investments which generate high per capita incomes will benecessary to avert the strong continuing drift to Mexico City. Avariety of measures will be required to bring a shift in migratorypatterns and volumes.

1/ If growth continued at the present rate, the population by the endof the centurv would be 38 million!

1.10 For the purposes of this report, an accurate forecast of theon gaw,. =-popt'a4n Js not necessary. TfVala seem s -nevita,ble over the

period of the next Presidential period to 1976 is that a much larger popu-.lation, per]aps one-tLrd, wILl exist. rTe feeding, ho-using, erip-Loyingand transporting of an additional three million or so people will preserAtser-ous plannIing proUlemns, at probablv in-creasing sociai or public costs,when seen in the context of the physical constraints on land and waters-upply.

D. Pu'Dlic Costs of increasing Population

i.11 Topography is one of the major factors likely to impose increasuigmarginal costs of growth in the Metropolitan Area. The principal reasonsfor believing that public costs of increasing population will rise steeplyare:

(a) The shortage of water is such that additional water mustbe brought from great distances.

(b) Soil subsidence is such (25 feet in this century) that itgreatly increases the costs, and reduces the possibility,of building upwards. It also increases the cost of tun-nelling for the Mletro; and of some roadbuilding.

(c) Water shortage and subsidence problemrs are likolv toresult in increased drainage and sewerage cos - .

(d) The mountains surrounding the valley of Mexico greailyrestrict and increase the cost of developing tle land suit-able for urban expansion. In the past expansion has tendedto be southwards and westwards of the old city in the ooreof the Federal District because the soil and subsoil condi-tions for building were better. Now,J in most directionsjurbanization has expanded as far as the mountains so thatthe future thrust is ulanned to be through the gaps in themountairns to the north (and south east) which will increaseinfrastructure costse

(e) The mounitains -n SO cause a smogproblem. It does not seemto be agreed how much this is caused by vehicles, and howmuch by dust. But itis probable that rapidly rising carownership could make this much worse.

E. Conclusion - Consequences of Not Planning

1.12 (a) Unless there is a very determined and carefully worked outplnn 'k to b41d up other citiles rap-ld tob efctv

polarisers of migration from the rest of Mexico (includingtheJ.~J2U ^-I..L.L ItJI e of leco CiAU y iJ. se Lf) thLe YletropoeliU udArea is likely, at the very least, to double in population to20 m llion, before the end of the centuty.

- 6 -

(b) W,Tithout deliberate planning, the growth of the city couldbe even greater than 20 mill-on.

(c) A population of 20 million itself poses formidable urban(including transport planning) problems. Without planning,more squatter cities like Netzhualcoyotl might be expectedto arise, iith the same problems followming in their wake.

(d) More than in most cities, there may be increasing diseconomiesof growth in Mexico City which are not passed on entirely toprivate decisionmakers.

- 7 -

II. THE TRANSPORT SCEUE

A. Spatial Pattern and Movements

2.01 rilen the Spaniards arrived in Mexico in the 16th Century a largepart of the Valley of' Mexico was lake (Lake Texcoco). They built their firstcity on roughly the destroyed Aztec city site. This area, around the maincathdral and national papace, is still the traditional and political centerof the city. Most of the streets are narrow and built on a rectangular gridsystem around the national square or Zocolo. As the lake dried out, theurban area grew slowly, but in the second third of this century the cityhas expanded rapidly in westerly and southerly direction where land was norasuitable for building. Elsewhere, and particularly in the east and north-easterly direction, the drying out of the lake has resulted in soils whichare not only saline and useless for agriculture but also liable to floodingand subsistence and rermain an obstacle to growth,

2.02 While there is no unique definition of "richer/poorer" againstwhich to classify residential and other zones in most urban areas, in theFederal District the general picture is a Z-shaped area, lying slightly tothe west of the old citY. in which the richer tend to live. work. shop andparticipate in recreational activities. Beyond this Z area, where carownership is rising most rapidlv. the noorer popul2tion live - esneciallyto its east and southeast.

2.03 An important study exists which throws light on the way the cityworks. Tt is a .cnple ninnmpratin of the home origin and work destinatio.'of 700,000 workers on the basis of social security records. It is thought-that it Govers about 7n% of the city's workers, ectives, pro-fessionals and self-employed. The information from the files is on theirjourney to work only. The city was divided into 111 areas chosen on thebasis of their apparent homogeneity from aerial photographs, but for variousreasor.s the-se aWere cor.-M-ined Qto 3 zones of -bi-Dh;e retan n6;- the L"'Lzones of destination. Casual inspection suggests that a diminishing prapor-tACoT eof nonnla f"rom. T,nn7 of' then originnatng zo,nesIa workv in) zonessucesiel

further away. But there are a number of zones especially in the southwest,southeast -nd east *w1er-e this usu' relations141p looks S 4-- t d0 no ho4- -'

In .an origin zone, for example, in the southeast, the largest numbers seam tor. al uc wo.rk ai th4e oJLd cente .. Y, Jthe .ULLO U. L,.Ld area -tLtG- -Ie n.:1o UrU11iJ;.wsU

around the refinery, the industrial area to the north and in the environs

depth is needed: is the City in disequilibrium in the sense that a highproportion ol people are travelling fUDr U r'ter 'Lo their work t'h ban tlhleley candbe imagined as holding when their incomes rise?

2.04 It is possible that because of the great poverty of many people,they have located where the land was cheapest at the edges of the city. ror

poor people living to the west and south, particularly, this means exception-ally long average journeys to work that involve spending from two to foar

- 8 -

hours a day in travel. The financ-ial costs of this to workers is low becausethe autobuses and streetcars have flat fares over long distances. The citymay thus be to some extent in spatial disequilibrium and as incomes risepeople will try to locate their homes or change their jobs so as to reduccthe journeys. This possibility needs consideration as an element in fubureplanring.

B. Traffic Growth and Congestion

2.05 There has not been a serious effort to measure the extent, mannerand costs of traffic congestion in the Federal District. Experience suggests,however, that it is severe on many streets and especially in the traditionalcenter of the town. In part, it is a result of the stead]y rate of increasein car ownership:

Year Vehicles Registered ('000)

1960 60l1960 v 19019565 3101970 500

20 6 A study carried out in 196 7 shows +he folloing flows in and outof the small city center between 6 a.m. ard 10 p.m.:

('000) 7 oT)00T

In Out % In Out %

Private Cars 113 97 56 201 178 1331 K1 cfP I,,

IL r u c 1Ks 16J ±7 19 4 5 4

Pedestrians - - - 260 265 141~~iAJai L114 £4) £~~~~) !~- ±e - ' UrTexis ~~~~44 43) -L3 I2 126 9

Buses 21 21 11 791 741 52Streetcars 2 2 1 102 98 7

Totazl 190 102 100 1,428 1,h66 lUU

The figures show first, that a high proportion of vehicles attempting to usethese streets are private cars, even with present levels of car ownership,and, secondl-, while private cars account for 56%' of vehicles they only carry13% of the people. Buses, by contrast, are 11% of the vehicles but carry i2%of the people.

- 9 -

2.07 The main public tranrsport peaks of the day are from 8 to 9 a.rn.,2 to 3 p.m. and. 5 to 6 p.m. of which the last is the grea-test. However,only lOl of the daily traffic is in the peak hour, which is much less thanis usual in a North American or European city. There is a much more evenspread of traffic through the day because, in effect, the start and end ofthe working day and of the siesta are staggered. This dispersion of trafficover the dav because of staggered w^zork hours and the siesta is probably amajor reason why transport is nostly profitable. Any movement towards theEuropean and North American pattern could have profound consequences and. ontransport grounds, at least, could affect the total cost of transport byreauirinz large amounts of equipment which is needed only in peak hours.

C.Streetc.ars

2.08 T'he compnny whir.h operates streetcas and trolley buses (Serviciode Transportes Electricos del D.F.) is ou'ned byr the Federal District. S,treet-car operations beg,i- -in 189Q and were +hJ only form of mass trqnqit until th2

appearance of a few buses betwieen 1910 and. 1920. The number of buses ir-creased much faster from the 1920s on u.ntil today- +tere are 263 9( r±.rArand 229 trolley buses which operate on 11 routes and in 1970 carried 550,000persons da;'l/. This contrasts with so,ne 7,200 a-utob-uses that carry perhfp25.5 million people daily.

2.09 T'he planning authorities of the Servicio de Transportes Electricrzdel D.F. appear to disagree with those in the State of Niexico on the futurpof streetcars. Whereas there is a view in the State of Niexico that streetca-'.may have a role to play in the poor urban satellite towns that have sprumgup, the company thinks they will die out in another five to ten years dueto the following factors:

(a) Difficulty of buying new streetcars and trolley buses - a-li:its cars are bought second-hand from abroad, usually afterhaving been operated for 15 to 20 years. They are then run

J/To get sorile perspective on the proportions moved by the different publictransport modes, the following (1564) figures froxi -the Direccion Generalare useful:

Dailbr Volume(thousands)

Urban Autobuses 5,335 76%Suburban buses 3004%Streetcars and Trolleybuses 600 9%Pesero taxis 160 2%Other taxes 636 9%

7,031TLV 196A figu1renc's from. +the 0~yn1 sar.eI so-urn+ 4 -9 in"O' prvate cted the-

percentages: Autobuses-65%, Streetcars-7T, Taxis-9%, Private Cars-19%.

- 10 -

in Mexico City for another 20 years or so. Supply, however,is becoming more difficult and the costs of transporting andmaking minor improvements to them are increasing.

(b) Very great difficulty in getting spares - the company resortsto cannibalism; and also buys up any old or scrap streetcarsit can get from abroad to use for spare parts. The resultinghigh costs of maintenance make its operations increasinglyexpensive.

(c) Losses due to inadeauate fares - as a nationalized concern,there is much greater pressure to keep its fares down. Atpresent they are fixed at 35 centavos flat fare (or underUS$¢3) which will buy Journeys up to 40 km long. TheyhelAieve that. the fnre P. owlrl have to doiible to about 75centavos for revenue to equal expenditure charges. TheirI nql:s nover +hp yeanrqs hae ben mp+. hbr non-interestf. hbarigrrreimbursable loans from the Federal District. Their totaldebt. ui-nry +this hea- is a t Pesos 1i50 millionn

(cd) npit21 inuPtmTn±t. 1in new nTowr siih-statinr,s to repplace sub-stations more than 50 years old - it is said that there arenot infrequen-t power failures bich halt al cars Lnvt-

ment is made to reduce risk of power failure, rather thanfor ar.y iaen 4,11y co,nsin Ared econorn;lc re.ason. They ,r a hav

to go to the Federal District for capital expenditure needs.

2.10 ,hJile it might be imagined that the very low fare on streetcarsbVUUJ.L ~ .LUu~L,y d.L.Le U LU1~~IU iL ~UJ. UI U LAIUJ. 111UUt.eO, _.U -.Li rt:;.LB-.L C.LJLwou-ld seriLously aff e ct 4the __Proiabl 4f oWher .,iodes-P _- , it is generall

thought that their slowier speed and the possibility of a power failure makethe_ -rc reasonable -o the " servi'ce of_.__ _ de Si__ lfic- -tlyX non I- teU11t: j.LJ.LUU UL L) UI~± lul UIIU _LVLL IJ. :L'U U. L.' _qI.L I L L;Wi -L~±y Iluilt 0±_ UlIl

other modes complain that they are undercut by the streetcar. Thus, thoughthe fare has niot been worked out on a marginal cost b-asis, it may not be un1-reasonable to ccntinue low prices on this basis until the company's servicesernd. In addition, as there are many very poor people in i,iexico City, theremay also be a social case for a minimum standard, low-priced service forsome years to come.

2.11 W-Ahile this mode of transport may be dying out in a number of cities',and especially in cases where a reserved track is not practicable, their obso-lescence may not be universally true. For this reason, an authoritative studvto reconcile the different views held in NIexico and make clear recommendationsas to the future would be desirable.

D. Autobuses

2.12 Bus transport activities in the Federal District are affectedby controls exercised by the Dlireccion - General de fTransito over entry intothe industry and fares.

2.13 Entry control began after the prolonged streetcar strike of1922. This, led to more buses appearing and an, allegedly, "anarchic" situa-tion with buses running wherever, whenever and at whatever fares the ownerliked. Initially, about 1,400 permits were issued. By 1950 the number hadincreased to 2,300, i.e., one bus per 1,200 inhabitants approximately. Thenumber of permits increased from 5,275 in 1963 to the present 7,200, i.e,one bus per 1,000 people in the Federal District or one bus per 1,200 peopleif the suburban areas are included. The Direccion-General de Transito re-cognizes the number of permLits issued is not "scientifically" based. Thereis, for example, no profound market analysis of supply and demand. Onecriterion employed is a, vague concept of an average level of profitabil.ftyper bus. it is questionable, however, whether adequate statistical andfinancial dlata exists to determine this in an accurate way.

2.14 Control over fares influences profitability directly and,indirectly, the flow of capital into the industry which is entirely priirat Vyowned. Fares have remained unchanged since 1958. The reluctance to allo37fare increases to meet rising costs is defended largely in welfare argurmentterms. i.e., Door people need cheap transoort. It is probable. however,that there has been some indirect subsidy or income transfer from bus on eisand driver. to industrial and cther employers. That is. if fare increaseshad been permitted, the profits of bus owners or the return of their capitn'may hauv hben maintained AnH/or d3rivers' conrition-s may have improved.Workers, through their unions, might have been expected to put pressure onempnloyers io inrease wages to meet the increase in the costs of going toand from work. This might have squeezed employer's profits or, in somecases, ninduced them to pro-vid-e bDu s tr anort for their oT. 4emrn plrytr=c

2.15 The present 7,200 buses are divided into trwn o groups - firstclass (5,600 buses) and second class (1,600 buses). The first class fareia fl at+ C ' -----.0 c nt (IT•).0) forn,n -v, rl4 As+ntranc inN -o 20 9rim. rn ti +vh ni adrl-r

tional 10 centavos for any further distance. Comparable second class faresare 10 nrA r 0 centavos. TA- see,n,s 4-1,h4- a - e authoritnes, 'ri 1a s

the public would like to eliminate the class distinction. There are politicalul 4- ultes, hoee,i asmltn teDofrs,srel s ierta%A.L.L.L L.i'UJ U-L~, LAIVViZ., L A UV LJ I VO, D iLLA1_, _L -L.o ~ V*~L

the second class fare would rise to the first class level. The difference is'l'arge.l.Y hi.,to0ric%-al- and not enirl men-fu nowI since-4 -- 4qupet sjQ ~ ~ IL) LU.LJA.O±.OIA ±uiin 1 U W11U M± L,y 1UUCLIJJ_1_U.. IIVJW D.JA: U1AVZ UqA_jI"1±U.LL kLQ.0:..

is fairly iniform - though low in quality. A passenger pays a new fare witlevery bus ch,ange - tere is no tran.sfer syst"er. within or btween buses ;,fthe two classes.

2,16 The present 7,200 buses reportedly have 4,5CO cwners - some, how-ever, are u u - (w_v, childrer, eU u.) W-i Utl hUIU U±V V tive n-UMber of1 o0ivncrprobably being around 3,000. The small scale of units derives from law and.

Ltie post revolutilOn-a ry ueleT to prevernt concentration of capitaL anu tihepromotion of the small man in transport as in agriculture. Originally de-signed to encourage and protect owner-drivers, it is probable tnat iess thGn50Q,S of the owners now drive their buses.

2.17 The buses are organized into 86 "lineas", or routes, which aremade up of some 500 sub-routes. Few routes have less than 30 buses; a fewhave more than 200. Slightly less than 100 per route seems to be average.Tne number of buses per route is approved by the Federal Distract authorities.Each "lineal' has a President, Vice President and Treasurer, with the exactinternal organization varying from route to route. Usually the driverscollect the fares, unsupervised, which are handed cver to the route's col-lector each night. A deduction is made for gasoline and other operatingcosts (including, sometimes, maintenance costs), the driver's earnings andthe "tlinea's" commission, with the balance being handed over to the ownerusually every ten days.

2.18 In some cases the owner is responsible 4.r hea:-rr inm.ntenance. Heis obviously responsible for the purchase of the bus, tha capital cost ofwhich he often borrows from a Government bank (12% current rate), as well asfor the licensing of the vehicle. For many owmers, therefore, duties areminimal and they are, in effect, investors not bu&inessmen in bus trarnsport.Bus permits are rarely "sold" in the market, with inheritance being the mailmeans of transfer. ItJhere they are transferred by a "sale1T, strict rulesapply as to whom they may be offered - drivers, other oTwners, etc. Prices,therefore, inadequately reflect their scarcity market value.

2.19 It ma-y seem doubtful that with an average utilization of 1,500passengers a day per bus and average fare of about 50 contavos that busuperations can be profitable. If it is assumed, however, that:

(a) a bus costs Pesos 600.000 and is amortized over 10 years(which apoears to be less than the usual life of vehicles);that there are 300 worki.ng days in the year -- then ssr-vicing the debt requires about Pesos 320 per day;

(b) about Pesos 40 per day are paid in overheads to the linea;

(c) gasoline, oil and minor spare parts total about Pesos 100per day; ard,

+ h Ae A Aa-; 1 . ..A4sv ;+ +,, - 4- ab-t p_ _ A n + fA nrG)A _44-1;, A_A 'J t4..± UtA K- DGO pVV GO QAt} OU W hi [ .L yW WI 61 ,

revenues of Pesos 750 (US$45) per day. A margin of aboult Pesos 150 per dayU'vO' ud appear- to be left, therefore, to neet heavier main1enanc, insurane,

- 13 -

licensing and profit. Whether the resultant net crofit. after tax. is anadequate return on investment is uncl.ear. It may be that some owners stayin the busiless in the exnectation of windfa1l canital gains. A thoroughexamirnation of the economics of bus operations and the relevance of thepresent svstem of nermits would now seem necessary.

2.20 The nr.sethbus system is u1nsatisfactory and still somewhat nnarchi,.There are no timetables. The public is uncertain as to the departure tinesof' t.he first or lacst busm on a rot Tri,rn" S+till -ra.ce eac'h o+the1r for pas-sengers. Crowding is intense at peak hours. Equipment is often in poornpyi.-cl Aonti tion m, YNrnI -A_ -Ae lo - -A 4--- + ;- . Cr~~~-- -v -- _ -k- - V- __ U_&vY _~ - - -sw -, -vs -i

of sinuous routings in a search for heavy passenger loads and the generalcongestion- . Buses ar-e annipostionab-elhy an 4 c4 -l 4 U theU-J high leve l

of noise and air pollution in the Federal District.

2.21 The introduction of the Mietro is an especially opportune time for+Vl VeA--_e n__-4C&- -- _-- - re . t*__1__n_.:_ _ --- 4 U- A%l ..0L .IJi_ Ul _L U GUVoUeIUentU 4u d plIgll 1gvel VeniqUllIy JJ -L)W ull

operation and economics of the bus system. Some bus routes will have to berealigned because of the MIeuro. This could offer' an opportunitly not onlyfor seeking ways to speed up buses but also for examining the implicationsof settin.g up larger operating units -which may offer tne possibilities ofachieving economies of saale, etc. The new Labor Law (1970) which, amongothuer th.ings, is intenided to improve working conditions of drivers is alsoof relevance and will increase costs. A fare increase to meet these maybe necessary, but it w-ould have to take into account the present fare systemon the Metro (Pesos 1.20 per single journey; and Pesos 1.00 on bulk purchas.isof tickets).

2.22 ITnhile the above-recommended investigation is being considered andtaking place, some re-routing should be done on a gradual and experimentalbasis to test out the effects. Here, the interesting work being done at the^omputer Laboratcry of the Polytechnic University, which employs mathematicalmiodels to select time minimization routings, could usefully be extended andspeeded up. The Federal District authorities may wish to consider fin ncingthe additlonal origin and destination and modal split enquiries required. an-xensure that appropriate standard grid referencing and coding of the existinghighway network is undertaken to make the analysis comparable with otherurban studles. The Polytechnic is financing the present work itself. I,lhileimaginative, without outside help, the project is unlikely to have the re-sources needed to make it useful quickly. Because the Metro has meant theclosing or reduction of Services on some routes, and owners expect to beallocated compensatory profitable routes elsewhere, improvement of the sta-uistical base as an aid to decision making is urgent. The Metrots impact

means the role of buses as an element in the mass transportation system needsrethinking. Gn the basis of its limited examination, it would be imprucdentfor the mission to make specific recommendations.

14

E. Taxis

2.23 There are some 20,000 taxis licensed in the Federal District area.They are classified into six main types, four of which are licensed by theFederal District and two (tourist and airport cabs) by the Federal Govern-ment. The largest group are known as "Sitios" which operate from a particularstand or site. Officially, they are supposed only to pick up passengers forany destination in the city from these sites and supposed to charge by themeter (Pesos 1.50 for the first 225 metres and 55 centavos per km thereafter)plus an additional 50 centavos per trip. Negotiated special rates when demandis particularly high, e.g., a sudden rainstorm, is not uncommon.

2.24 The next largest group is known as "tLibresl. These are taxis with-out a fixed base which circulate freely in search of passengers. They chargeby the meter and at the same basic rate as the "sitios". but not the 50 cen-tavos supplement. Higher charges are permitted for night work and hiring atofficially hourly rates (Pesos 12) may be arranged.

2.25 A third. but smaller grouipn consists of Radio Taxis which oneratefrom fixed bases. They have the same basic meter and hourly rates as theprevious groups but add one or two extra pesos service charge per trip.Officially,they are not supposed to pick up casual passengers on the streetsin competit,ion with the "libres".

2 .2( The fnourt.h grorun iq nn impnrt.ant nd r nulsual c ategory m ia n _q

"Peseros". These vehicles shuttle back and forth between the termini on 26fixed routes Althougih there are marked pick-up -nd drorp-off pointsj drivpr.often stop at any point for a customer. For the major routes there is afixedor r-harge of one Peso ireseciv of- s -c tare Th oe cascale allows two and three pesos on some special cr longer routes. Theilpeserosi" are popeullar Mid are usedc byI 'knd of pe-p-1e because a) the-

offer an alternative to crowded buses at peak hours. They are remarkableexamples of intensive use of capital equ-pment nd reven-ue earnng, i.e.,drivers are seeking to have all five passenger seats filled at all times.On a 15-20 1LUlI route, for example, the driver m,1ay collect Pesos 20-25 perone-way trip when business is good.

2.27 Of the two groups licensed by the Federal Government, there areabout 1,000 Tourist Taxis. They also operate on the "sitio" or standprinciple with the stands most frequently being outside large hotels thatcater for foreign visitors. Rates are usually negotiated per trip and aremuch higher than by other taxis. The justification is that drivers need tospeak at least one foreign language and have passed certain tests as to thi'i-abilitv as guides, etc.

2.28 Finally, there are about 100 airport taxis which have a monopolyof traffic from the airport to downtown. They are not expected to bringtraffic back to the airport and, therefore, charge a one-wav fare of Pesos 17.In view of the limited numbers of such taxis, and the absence of an airlinebus service to a downtown air terminal. passengers arriving at the airpcrtin peak hours mnay experience significant delays or have to rely on privatetranrsort, which aridd to congestion in the trmirial areapnarking lot.

2.29 O+her tha. for th.e airport ta is for which the -Pn"o is collectat a booth at the airport exist, control over rates does not seem stringent0

mA 1ke_. 11 u t i xJ oD L II7 sV&A o& L. L I l v W S. IVIS a tlA I t..rhe+ i.a. we.>;1 M;1L Ik1 -Im e- S t - ecore

the political difficulties associated with officially raising prices.

2.30 As with buses, control over numbers is based on some rough cornceptO.f profitUa±± lU±± .y * O.±uU wfJih _he intUUcUtUIi Uo U±itif rL'zJuiL Uthe MerMnU the nLtinLdI

alternative profitable bus routes, the authorities seem to be consideringa restraint in thi grwthWjI li UXL IintUajxi nb er * U Thi culdU partic u' larl 0 y afet, a

the "Peseros" which ply the main through routes acting, in effect, as "mini-buses".

2.31 The profitability argument is complicated because of the differentinterests of owmers and drivers. Studies by the Direccion-General de Tran-sito suggest that taxi ownership is profitable (it is also reflected, pos-sibly, in the reportedly high free market rate for taxi plates when thesebecame available). This is achieved partly, at least, by drivers workinglong hours for very low incomes. Estimates suggest for a driver to earnPesos 1,000 per month (US$80) he must work a shift every day or some dayswith two shifts. The new Labor Law will affect taxi drivers also and islikely to generate a demand for increased fares to cover increased costs orreduce the number of marginal operators.

2.32 Since there is some evidence - though not strong - that taxi owner3are making significant quasi-monopoly profits (economic rents), the relaxingof control over taxi numbers should be examined. This need not affect theposition of drivers, i.e., more competition might squeeze the owners' economicrents leaving the driver's earnings unchanged, yet increase the service oftaxis to the public. Since the whole general situation of public transporthas been changed as a result of the Hietro, and there is a clear need to re-think policies towards bus operations, it would seem that a special grou pshould examine the taxi scene as part of the high level study recommendedearlier by the mission. There may well be a case for allowing free entiyinto the taxi industry, as in Washington, D.C., subject only to a physicalfitness and area la2owqledge test of the drivers and a safety inspection syLtuiover the vehicle. Fares could be on a km rather than zonal basis as inWashington.

- 16 -

F. The Metro (Sistema de Transnorte Colectivo - 3CT)

2.33 Technical studies of the nossibilitv of building a Metro in IvexicoCity were made privately as long ago as 195a. The City and Federal authori-ties graduallv ber.ame interested and actionr took nla.e rqicklv after a moreformal feasibility study was made in 1964-65. By the beginning of 1967 theproject had been examirned and acc.epted byv the Federal T)jatrict. the Presi-dencia and the Hacienda and a fiaal decision to proceed taken. ContractsaJere dratm in up by Jinm 196Q7. The first section of Line I of the 14ietro wasin operation by January 1970. The whole 42.2 km of the first phase of thesystem is expected to be in operation. by early 171, perhaps ev-tn by theend of 1270.

2.34 The original studies and design were made by a Miexican group,i U t UU1X U .±Io/1::.IVV U 1rA UU± %JPJL L UO.±I \ s.LJJ.IJ/X, WLUYL V A

electromechanical and operational work from the French firms SOFRETU and SGT2wh1ich are conn,rected with1± tlhue Paris MlUetro. TLIhe UoIntractI oU UO L'dLLu LV-s giLVenL

to a large liexican civil engineering group, ICA.

2.35 A specialized decentralized enterprise responsible to the Federaln4 4. _ _ 4E -w A -_ . 1- 2Y.zv_|Di sLL U I co U Go1vr1nent, UUU I.JWJ. co nUsUiderabdUJa aUtnUlUiyhaIiY L)een sed; L- ; UoJ supfr_

vise construction and operate the IMletro. Its budget and capital expenditureare examliLed and approved, and its senior personn1el appointed, by -the Fedelal

District and 'by the Presidencia and Hacienda in so far as they are part ofthe finances of the Federal District. The head of STC reports directly tothe Mayor of the Federal District.

2.36 The total capital cost of the MBletro is now expected to be Pesoss,163 million (US$4Li3 million), or about Pesos 125 miilion per kn (US$6.25

million per mnile). The original (1966/67) estimate was Pesos 2,350 million

but this figure excluded land costs and other compensat-ion; costS of dislo-

cating public services; waste disposal; financial commissions as well as

the administrative expenses of the S.T.C. I, would seern that the cost in-

crease can be accounted for roughly as follows:

Million Pesos

Original estimate 2,350

Omissions from original detailed

abn"l/ 1,150

Increases in compensation above

estimate 193

Cost increases because of changes

in desigr. and route 1,470

- This figure is a residual and has not been confirmed by STC.

- 17 -

2.37 The finaricing of the Metro is complicated. There are six majorsources from whi.ich capital has been borrowed (at three different intere,trates) and these have been complicated further by the devaluation of theFrench franc. Besides this the Federal District has made an (interest-free,gift of PeSos 1,739 million (US$139 million) for construction. The FederalGovernment has given a subsidr equivalent to 75 of all import duties.

2.38 The financial arrangements are such that it is planned to pay backborrowings over the period 1970 to 1985 and to have accumulated a balance ofPesos 3,90) million by 1985 en the basis of 1.20 pesos for ordinary faresand 1.00 pesos for multiple purchases, with an average revenue per journ2eyexpected of 1.06 pesos. The projections allow for increases in operatingcosts of a 2% annual increase in material costs and a 15%; increase in laborcosts every two years based on the labor contracts which are usually signedin Mexico. The employees are not unionized yet. As Federal employees, theyare not subiect to the labor laws and it is almost impossible for them tostrike. Thle depreciation periods assumed do not seem e-cessive:

Building and Civil Engineering 20 yea;-

Rolling Stock 203 yea--

Ellectromiechnical Installationsand Miscellaneous Equipment 10 years

Material and Cffice Equipment 10 years

2.39 Using the same assumptions about traffic estimates, fares, anddepreciation periods as above, the average financial rate cf return from1972 when the lines will be in full operation will be just under 12%. Anapproximate calculation on a discounted cash flow basis suggests an internalrate of return of about 10%.

2.40 Traffic estimates are crucial to those profit forecasts. Thesewere no-t done in a scphisticated marner. Judgment and so.ne info-rmaationwere used to fix the areas of greatest population density, the tLeavi-citfloiws of traffic on the streetcar, bus and pesero routes, and the routes ofgreatest congestion. The most important factor in fixing the route of thethree lines was, it seems, that these were the densest streetcar routes.

2.L1 There are obvious difficulties involved in this approach to trafficforecasting:

(a) It assumes that all the streetcar and bus traffic on theseroautes lrii stAtch to the Metro. In fact, this has beentaken care of by abolishing streetcar and bus services onstreets directly over the Metro routes- Tt. _ possible;

- 18 -

therefore, that the Hletro will acquire all this traffic.Although for most travelers the IIetro fare will be two orthree times what thiev were paving before and journev timeswill be almost proportionately shortened, the strong argu-ment that most peonle would have changed irn using the h'letrowithout closirg the streetcar routes irn view of the serviceadvantages may be contested. It ma7r also be asked if busrationalization had taken place first whether the comparativeadvantage of the lyiptro TTonl cl have been so great. Againstthis, however, is the fact that population and traffic areInnrensing so fast th;;t any atteprt to car7r t.hp yecnntedadded traffic byr buses and streetcars would have led to suchcongesriCon as t.o sloi dowTJn journers reasuraly on thesemajor routes.

(b) It assumes, without demonstration, that much traffic onnearb streets will sw,itch -to the WIetro -and th^at a prop or-tion of journeys now going by other means than streetcara~Ur bus JnL.L LU'so 14Lvert. VWha- U .LO her.IIO L1eL Ls a. IImod.aL

soli.t functior., that is a predicting equation, based onstu,diies, V1-lch "a - press-ct Ifor ;-eretrelative;V_ -Jo-eytim'es (and possibly wa-iting times) what proportions ofpassergers cf i-"fferent characteristics --w' -ll tr v by '-4fetro

VV a_Li UrL-.VtVL U~y rl-, u.rather than by car or sonie other mode. Over-estimation cftheU lietro proZportull ±N clearly posUible,5 cUialzly giVelthe growtlh of car owmership.

(c) It assumes that the routes peopple use - the flows - are agood indication of where they want to go - their desirelines. But as many transportation studies show people usea particular route ( to make a cdogleg Journey) because asuitable, more direct route does not exist. A comprehensiveorigin ard destination survey would have elther confirmed orimproved on the judgement made.

(d) Even if it is assumned that there is enough demand now to makethe hetro profitalble, the effect of trend changes and howthey may affect profitability is uncertain. The I'letro, forexample, has taken no account whatever of possible trafficincrease after 1S72. The 1972 level is assumed to continue to1985, at least. Any substantial increases in traffic over the1972 levels will require greater frequencies and more trainsand different operatiing and maintenance costs.

2.42 Silnce the Pietro and Federal District authorities are thinkdng ofpossible extensions when the present first phase of the systea is finishedin 1971, a number of steps would seem c1esirable in order to forecast theprcfitabllity and net social benefit effects of any such extensions:

4 f*

(i) A comprehensive origin and destination study is required.That is, even if tle hietro traffic and net revenues e reto cor,e fully up to expectations, it would be foolhardytC) pick new routes by the methods useci Defore. AS moreroutes are chosen, there is arn increasing danger that amistake may be made without, at `he very least, a conpre-hensive crigin and destination survey being undertaken.

(ii) Ani after, and if at all possible, a before hodal Splitstudy of hetro travellers is needed to find out:

(a) their income (social economic class);

(b) occupation;

(c) journey purpose;

(cd) origin and destination;

(e) travel mode on other legs of the journey;

(i') how they made the journey before unless itis a new journey;

(g) whether it has caused them to change job, homeor other origin or destination;

(h) the cost difference to them because of the1'etro; and,

(i) the journey time differenGe (mHd waiting timedifference).

(iii) A study is needed to get some feel of the effect of the presentlIetro linns in decongesting streets aa necessary preliminaryto planning and assessing extensions.

(iv) Future extensions of importance should be considered only inthe context of av m+voreeh l.4-d u-se trannsp ort1atlJA

study.

(v) The effects of the five main stations already opened on main-tenance co sts and tra-fic shoIdJ be mionitored to assess howfar it is right to continue the high architectural and aesthet:icst1ndards of the first part of the system -whe build ng an.yextensions.

- 20 -

G. Parkinrt

2 43 Parking policy ir the FedneraI nistrict is the resnonsi'ilitv of aseparate office in the Transit Department. On-street parling control comesinder the Traffic Engineering Division of the T affic P P r) L1 th.ough t.h' a

are many streets with signs forbidding or restricting parking, it is gene-'&1yronce de d that the reg" 1

g tn ; c- rS .n be fl 1 re,t ed fr e -e n1"r rwr +t rn- in : rcons.

_v. * 4444 V . U± 42.1 X 1 V UJ Ii FJ ¼1U± V.A. 42> I)r L^-~ f 4 ..U.J ._t4J5

.A .. CSL4 LJ U.,

2.X1 The&---4wi of on=street pa king is recognized 'by the aul+horit-Ie,

to be taking up too much street space which could be used to ease the flou~~ T4-r 4. . .C'.71- .4l.... -44- 4 - ...- 4- J .. 1- 4-,.. 4 ~

of 1oving vehicl t iL s felt, Ihlowever, Ulhau it is Uimvslble -Lsist

fully on the law until there is sufficient off-street parking space. As aresult of a law in 1560 requiring permits for ne b-uilding, a major efforthas been made to ensure adequate parking space is provided and the numberof registered off-street parking doubled by 1960:

SpacesCategory 1960 1968

In buildings only for parking 4,600 9,000In buildings partly for parking 1,800 2,900In private open space for parking 9,100 17,700

15,500 29,600

1While this is a creditable achievement, it has barely kept pace with theincreasing numbers and use of cars. As a result, no tendiency to a declinein on-street parking seems apparent.

2.45 The authorities recognize that a major effort is needed to provideeven more off-street parking before it becomes politically feasible to clearmany streets of freely parked cars. Yet so long as parking is largely free,there is little incentive for the oiners of nearby buildings to provide park-ing facilities or arrangements for parking. To break out of this circle thefirst of 1,700 metered spaces are now being put in a main boulevard (Pasec dela Reforma). Charges will be one peso per hour with a four-hour maximum.

2.46 There are mixed views as to parkirng meters in Mlexico City. Somehope that irn the end there will be very little on-street parking and arguetherefore that meters are an unnecessary, temporary expDedient. Others be-lieve that the public temperament is such1 that they will not accept payingfor what uintil now has been a right. ri rill i)se ingenuitv to defeat thesystem. Other skeptics argue it will be just another opportunity for pettynrimp modr ncorynintionr

- 21 -

2.47 Introducing parking meters is not easy and differences in attitudeshave to be recognized.l/ There is a strong economic case, however, for mlak-ing people pav for parking. It may be useful, therefore, to touch on somereasons why other major cities in the world have taken strong measures torestrain Darkina:

(a) it can increase highway capacity, but this is not alwavsthe case if there are many junctions and heavy crossflowsof traffic since canacity then is more a hmrtion of thejunctions than the streets between them. That is, c:learingalne ofl nf lp.rkpdi c-2rrsnq & niholb st-rPeet. crnp,aiytir hut still -- L- ------------ ,--d -_-…- _- -- _--F---

have bottlenecks at the junctions. The paradoxical resultof a sunne-l'l parking policy may be, therefore, more con-gested streets as vehicles fight their way to limited parlkingsnaces. That is, conge rrstio+n ;i shifd to+nl +th lca tion oA,f

the parking lots or buildings.

(b) Unrestrained car use can threaten public transport finances,especi~~ 'ly the mIeo RetrK c us, thrfoe sho'

improve public transport ridership ard firiances. In addition,4 - -- J_ .9____ _ _ _A__. 4 - 1_ __r

O;UJU 1iJ VV1x:ZX- Pu p6ytv c t; d.L't W11u _LnU.L SIU;: Ou-L.tmu vV 'U [V 1 Wa2e

spiral of deteriorating public transport and rising fares tomeet increasing costs as richer people spin OfII ilO cars,there is an economic welfare advantage.

(c) Urban road traffic is underpriced in that:

(i) It costs more to provide and operate (includingtraffic police) urban. roads than others.

(ii) ~Every aciditionial vehicle coming onto the roadslows down every other vehicle and increasestheir costs by a determinate amount (given thespeed flow function relevant). Thus the socialcosts exceed the private costs of his travel;and there is more congestion than if efficient.

(iii) The taxation on gasoline and vehicles may notbe enough to cover the costs of providing and opera-tirng the road system on average.

2.48 In the case of the Federal District, it seems to the mission thatpaying for street parking must be pressed, especially at key locations;ahether meters, a disc or other system is preferable is not the main issue.The recent effort to give a large boost to the supply of off-street parkingplaces must also be increased. In addition, parking policy should be re-thought in the light of overall policies towards the use of vehicles in the

- Te city of Pa 's, for example, recertly voted against theiri.

- 22 -

congested city cenrter and the external costs of noise and pollution involved.Finally, there is a strong case for an analytical study of highway and junc-tion capacity in the context of the general traffic engineering studiesdescribed elsewhere in the report.

H. 'Traffic Engineering/Highway Planning

(i) Traffic Engineering

2.49 Mhis is the responsibility of a small office in the Traffic PoliceDivision. 'While showing competence and vigor, not more than 20 professionalengineers are involved. Of these, three-quarters are employed on the install': tion and repair of traffic lights and other facilities. In other words, onlyfour or five are able to ponder a traffic engineering strategy. The staffneeds doubling or trebling if it is to cope writh a citv the size of theFederal District.

2.50 Fortunately, they have available a remarkable series of aerialnhotogranhs coverirxg the whole Npietropolitan Area, with T ner st. for eachdaylight hour. From- these, if the-y were carefully analyzed they could yieldmore information for r-iore streel Than pcssessed by Iry cit,v in the worThIt would be possible to deduce from these photogra-phs vehicle flows by typeot vehiclej their s s the percetage of left nd right trns at each'Junction, as wqell as a complete inventory of on-street and parking lot parl-

rP. heyr do rnota give ,n-r.o,Tvrn fasse,ngr,--r1 firato r nfln e serles. Bu

they are an invaluable base for any traffic and transport engineering studiesin the Federal District.

,, v U I AA'JL ULU1 C_ UC L'y ULu 1V . Vg i JI) AD VI C.AJ U1U 1 X 1 i 11 I EC £urs 'ave U Do1 I.U

been processed and these are the most crucial. Brief inspection of a selec-4ti4on by -h misslo suget - -4 h-at:- 4

u4 Ni u±tzZ- I ii.. l~u uL .Ld .U; 1 _Lb 1

(a) dJ .ere is --a-' lne w scXl4ir WLUit UUss U din ± ±lcuIUe

cutting across other traffic;

(b) there are many parked cars interfering with the flowof traeffic; ald,

(c) there is a possibility that traffic light settingsgive a weight to crossflow traffic out of proportion tothe nunbers involved.

2.52 The mission recommends a major effort be made to interpret theinformation available so that it can be a base or bench mark against which totest changes. in addition, two studies would seem urgent. First, to assesc-the measures, including computerized traffic l ight synchroniza-tion, thatcould be taken to increase traffic capacity. This must be done with full r-gardof the environmental irTplications involved. Secondly, a study of the possil- -lity of reserved lanes for buses and streetcars is needed.

- 23 -

(ii) hilgh-.Tay 2in,neeringa

2.53 The Federal Districtts Public Wiorks Department is well able todesign, contract for and supervise the construction of roads and streets.It is unclear, however, whether adequate economic studies ate undertaken todetermine the best construction solution and timing of the wforks it carriesout. This may be particularly important since traffic engineering measurescan relieve the pressure for new construction for some time. It is alsc,unclear whether sufficient attention is paid to the fact that widening somecongested roads is merely a shifting of bottlenecks, while generating addi--tional traffic. A network Dlanning analysis could avoid this. but such workhas not been done yet.

2.54 It also seems to tlhe mission that more "post-hoc" studies are re-quired to assess what has haprpened to traffic morvements and patterns as aresult of new constructions or major street widenings.

2.55 It is recormended that any major highway construction should becon Asidrered orl-my on the basis of -a cosrillet

eonrigin r.ad dest ination S- +y

and a more comprehensive land use study of the Federal District. There-- ears to be frew roadis -wherle safLe net scan b#-e 4dentif J r.; ow, eith-Li 'A''J LVV .. iAL V.V.V 004 441VV UIV" O~ W J V iL.L ~L Z;.' ."_ W 4

because their priority will depend upon the land use plan to be adopted int&h~e r.ea-r `fure or 4their efet on "he present !ietro, fu--_ _-4xtens4ns to UJLV ~lV0± iL LiU. V bJ. JA -± VIf V f Li l U VI± JJVVL l tZ ± .L-V Li) .LAUA.ILU. V V.&VV±IOJL.' OL i'. V~

and possibly surface railways. In other words, any proposals for futher~~~~. - -- -4 - -: 1 nT _' - - _- - 4. . - 71 -1 _ D__ r.. _ . L - 1 -3 1

miCaJuo hiLghlW<ay cUosUtrUUcUtlon i th Fuuedral DistUrict soulUU ue ap"prvd o.nly

after a more careful economic scrutiny of the costs - benefits and alternat2r-

I. Surface Railways

2.56 Mexico City is unusual in having a network of surface railwayswhich are not used for commuting at ail. They are assets wnich in part, atleast, the Mexican railways are not able to use profitably for other purposes.Some go near or through important residential areas (especially to the south-west and east). Cthers go through areas marked for developmertL to the north-west and north. As the city grows iarger it mignt be expected that part, o1 tL7traffic to and from Mexico City could be channelled along the railways.

2.57 Another possibility that seems worth exploring is using the railway(with a short offshort) as a high speed link between the proposed new airportand the city. It is recommended, therefore, that a study should be made tosee if there is benefit in running commuter services on some of these linesand what would be entailed in doing so.

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III. TRANJSPORT PLA1b!ETG

A. The Federal Government and Federal District

3.01 The Federal District initiates its own urban policy and projects.The Federal Government. however, exercises final control t'nrough its approvalof the District's current and capital budgets. Recurrent expenditure propo2aisare submitted to the Iiinistrv of Finance (Hacienda) for approval of detailedline items. Lkle ot-her branches of Government, the Federal District cannotch,npe the anrnrovsed line. items, wlthnito. nprmiasion from the Hncienda. In thisway, some control is exercised over such matters as the number of employees

nnd other issues ub-ich intepres. the Federal Government

3.02 The Pedmnl ThtrTirlts capital budg1oet is to 'hp submitted to boththe Ministry of Finance and the Ministry of the Presidency.Thi.s budIget+r includes the - o+n rnf 1AnnAor+ 0,-n ipq rf' t.hoFederal District, e.g. thle new iIetro, and joint ventures between the DistrictGOverrnMent -andpiaenee ,eg a pl -g ro,ects. Tlh.n P-eien4 nnc-7~flJ ~ £Uk'Lti -J. .V0. ~ J±U ± &0 4, ~ * .4 sJ ± ~ -± 1> J -'.". U * -LA'. J .. JL_l~

evaluates it for project justi fication and may significantly modify it afteriit- has been-~r exn od by%r a Sm., 1 1e+m of P"pp-sd.c,-e--r -,c other Federabr-1l Gorverrn,

ment officials. The H'acienda examines the proposed capital budget to ensur-that projects are s lf financing, or can be met fror the Lis-ic-'s resourrc:.and, if foreign borrowing is required, to assess the debt, servicing impli-cations, Un ; h se OrfU olthl0er Fedtercal a-i g en± cdies, thei0. 1ela d.L Go

is particularly concerned that any support from the central budget to theL 1' i0s 11LL1i.L1IiJL. UIUd Uo,Ly fo rU U± Vitie0 UofI.U p iLcdU nat,IionL lintere11 st0.0.

).0) ±ui lerge, uvell orgBni'.zed aunL:LI.LbJ.b bfJ_vi1 for ±uli.Lig 1110th cLity IepU-t

to the Mayor. Tho Departments are primarily responsible for transport mattca-s>

(a) The Transit Department (Direccion General de ',.ansito)winThicn has ::oficinas"' concerned w%rith road safei- generally;the control and inspection of vehicles; the ici--e of busand tadi permits; parking and traffic engineering. Theactivities of the traffic police are coordinated wzith thisDepartment. It also has a section concerned with moregeneral transport policy and planning that has initiatedsome useful surveys.

(b) The Public lWorks Department (Direccion General de ObrasPublicas) iwhich has of2ices dealing iwith the constructionand maintenance of roads and streets as well as that ofthe "City Planner".

3.04 These twTo Departments report to the Hayor through the secretary-general to the Federal District Government, whereas the t,wo decentralizedtransport organizations (the Metro and Streetcar Company) report directly tothe IMayor. That is, the largest passenger movers at present are under the

- 25 -

Transit Department, but the potentially large mover (the Metro) is not.This dichotomy is one aspect of a more general coordination problem.

3.05 Clearly, the activities of the different offices and agencie.simpinge on each other to varying degrees, for example:

a) Metro policy affects bus and streetcar routes and operatLLons;

b) highway construction and traffic engineering are inter-related and, in part, alternatives;

c) policy and planning for both public and private transportis affected by the City Planner's decisions as to land use;

d) important transport implications result from the HousingDepartment's programs; and,

e) the Federal Government's decisions as to main access rout;esto the city affect traffic volumes and patterns on keyroutes within the city.

3.06 It is possible to coordinate the decisions and activities of suchdifferent agencies through meetings and informal administrative arrangemenrt.3The price, however, can become high in terms of time spent an-d decisionsdelayed -- often because of differences in objectives.

3.07 The details of a reorganization to meet the challenge of growringand changing transport needs requires specific examination by the FederalDistrict authorities themselves. On the basis of the mission's briefexamination, detailed proposals would be inadvisable and not well founded.Three broad features, however, seem desirable:

a) There should be one nerson at the Directorate level withan overall responsibility for coordinating transportpolicy and planning and the phvsical development oftransport facilities. He should have a clearly definedposit-on vis-a-vis the Metro nnd the StreetcAr Co-nmpny.He should have a small, expert staff to assist him inpolicy forril.qtion so he nnn think nnd not. e lprrnioed inadministrative detail -- but for wyhich, however, he wouldstill be ultimatelv resnonsible.

b) The phvsical 1pln f'or the Federal Ti stric+ now beingprepared in the City Planner's Office should become:

(i) a more general planning document, coveringtrnsn qor+. inc jrhiii devielor+ment andhousing; and

(ii) a strategic policy document, with a strongeconomic anu financial content, so thatdecisions based on it relate to the strategicdevelopment of the Federal District.

c) TIere shouid be one office to coordinate generai urbanplanning wzith the responsibility for ensuring that thestudies done by different ofiices of tne DistrictGovernment relate sensibly and do not duplicate eachother. This office should also try to standardizeapproaches so that different studies use the samestatistical definitions, the same zones and similar codenumbers for data processing by computers, etc.

B. The State of !Ne1xico

3.08 Only a small proportion of the to'tal population of the MletropolitanArea lies in the State, but itL is in these areas that population is growinzfastest. In any case, relative shares of population do not reflect the natureor severity of the problems being faced. The State is particulary concernedwith the future pattern of development since the effects will be greatestthere. Accordingly, the new administration in the State has brought togeth,x.a lively, imaginative group of planners iwlho have gone an astonishing distanrcin a few- mon-ths. They are less concerned with transport policy issues andmore interested in anticipating and influencing -physical developments,including transport routes.

3.09 Their major interests are:

a) Possible long-run develonment patterns, i.e. whether theJ-.etropolitan Area should grow outwiards all around theFederal District or whether the present system of satellitecities should be further developed, Different spatialpatterns require different traxnsport arrangements. Fromthe State's viewpoint there is some support for:

(i) an outer beltwav (ring-road) linking poresentand future satellite cities; and

(ii) a hig'h speed road and/or rail link to theState canital in Toluca so that it canbecore a major development axis.

b) Shlorter-run pl2nning issues, i.e. to improvements in existingand ;resent. nl.nned develo-meorv-,c am-rncl the Fedepral Hisrict.sboundaries. iluLch of the recent developrnent in the State hasbPeen in housing for tirp very poor and very- rich. The firsti s and w.ill be a drain on. the State's linances for many yea-s,T-r<i'- In r-e pr-ncld Tnn-,r bvring cprm net+ cain +hvliroh ,c4i - reanv' ,c

- 27 -

the tax-base. A large part of the industrial developmentin tuie ietropolitan Area nas been tempted into tile Stateby liberal tax concessions and cheap land. The net inpactof ti-is on the Statets resources is unclear. The State,however, may find itself for many years in a position ofimporting some of the financial problems of t1he P-ederalDistrict.

3.10 These issues can be seen in the cases o0' present satellite cities:

a) Metzahualcoyotl

This is a city just over the State of i4e-ico boundary l1yn,;to the east of the airport and to the north of -the road fromHexico City to Puebla and south of Lake Texcoco. It hasgrown from almost nothing to a city of about 700,000 peoplEin 10 years. It has almost no made-up roads, water supply,drainage, garbage collection or other public services. Noindustry has grown up near it.

Of the appro)imately 200,000 daily journeys made in and outof the city, some 85,000 people went to Me'dco City -via tha"Glorieta Ir'nacio Zaragoza", a roundabout to the west of tt:.ecity; 10,000 went south to the areas lying south of the mainMexico City-Puebla Road; 5,cOo wient to the industrial areasbegiinning to develop some distance eastwards; and a further10,000 worked locally. The great majority went by bus.

Theoretically, there is a two-minute connecting downtow^nbus service in the peak, but other termini of the routesare far away in the Federal District and congestion on theroutes in the District tends to destroy the regularity ofservice. Wlithin Nletzahualcoyotl i-tself the appalling stateof the roads, the possibility that power lines may havefallen on the road, and other hazards make bus serviceirregular. It is at its worst when there is flooding.

Even though the buses in the satellite city are never morethan Live years old, the state of the terrain has made themold before their time. There is a high incidence ofmechanical failure. All this is reflected in the fareswhich are higher than in the Federal District, i.e. .50 to1.30 pesos per trip.

In addition. because of the ronnestion in the District, anrdthe considerable distance from home to work place it hasbeen estimated that the mr iority of worknr. srn-nd frnm ftw.o

to four hours a day travelling. This year (1970) the openingof t.he first line of the TJetro to Glorieta. Zragoza hasincreased accessibility of the area to the centre of Mexico

- 28 -

City, though at a substantial increase in cost to thepoor people living in Netzahualcoyotl.

The State authorities are concerned about the social,economic and political implications of the unplannedarea. To ease the transport problems iwithin the area,they have made an excellent cost benefit study analyzingalternati,ves. Six alternative solutions were considered.There were three modes: bus, trolley-bus and streetcar(fed by buses). Each was considered in relation to twosets of street inmrovement, differing principally ingeometric design. A mixed streetcar and bus service,at a cost of ahout ^,7 million) has the highp.t bene-fit cost ratio. The benefits which are a function oftirie savinrs onnlv are l1est for the nll ntreetnnralternative.

Capital costs are second highest for the streetcaral-.ernative chosen. Hlmever, (a) botlh buses and trolley-buses are argued to have much shorter lives: buses - 10y ar sj trc llerr-hI)e - I) i a ncompnred tvi- h 20 vears for(secondhland) streetcars; (b) the capital costs in generalnf qt+rPP4cs are asserd .much lorel becauseTof tk.e smnll

nuamber assumed needed (22) compared with 210 trolleJy-busesand 200 huqePq and (c) the operating consl.s are als nssmie,lower.

The investment would seem plausible in cost-beniefit termson the assui tions that (a) it i- possibl to provide 20-

year old streetcars which ill give a good enough service,at the predi ct cost; (h)' tlq econo;es fo'resen

possible and that their much higher loading will compensatefor lesser- freqiuencies at .lchte nlru;()epa-ment secondhand streetcars will be available in 20 yearstime9- (cl) 4the ecn.c 4of the- fedr u yse asbe

correctly evaluated.

The mission iwas impressed by the energy and imagination of4 ual u7-4 --I - - - - -i± -- 4-1, 4.LL , - L -UU UdLithe "ULtate p-lannersjZ -in Utach_lirig thisL Osate.L~tIels talUU.

planning problems, of which the transport oroblem is but'one partu. T'ie inge:-uity ar±c. self-help phiLosophy andpractices of the people living there offer some hope for

ui1rpIrveraenLs. The mission believes, therelore, thatassistance by the Bank could not only ease the problems,but also be an important demonstration project and iearningexperience for tackling a problem characteristic of muchof the Latin America capital cities. Accordingly, it

suggests that the Bank should sy,pathetically considerany recuest from the Mexican Governmaent to send a specialproject identification/preparation mission.

b) Other Satellite Cities

There are a number of other, but smaller satellite citiesaro-ald the Federal District and within the State of Mexico -e.g. Xochimilco, Chalpan, Texcoco, etc. with populationsof about 100,000. If the predictions of population growthfor the area are correct, some of these could increase tothe size of Netzahualcoyotl in the next Presidential period(to 1976). A high proportion of the growrth ill be poorpeople who need such land and services as they can afford.It is vital that the Netzahualcoyotl experience of unplanned;unanticipated and uncontrolled growth not be repeated. Thefundarnental mistake there is that a city has appeared withoutjobs.

In the future the State of Mexico intends to plan newsatellites which have a much better balance between homesand jobs. To do this, however, it is necessary to try tobuild workers' homes on land adjacent to existing industrial.areas. If land near industry is too dear for workers tobuy, z the lsnd will be necessary, at least for anumber of years, if workers are to live there. In addition,where there are now workcers' homes, but few jobs, industryhas to be persuaded to site itself not far from its workers.Care is need.ed because it is diff'icult to determine theminiimiml size of the subsidy needed -which would persuadefirms to locate wihere the planners want. Another alternatiwrewould be to tax less preferred locations.

It would be wrong to assume that merely by creating a toinwith balanced job/home ratio, it becomes or stays self-sufficient. In 20 or 30 years' time the gravity coefficien-sof trips to and from a new tow-n are likely to approzinatetowards those elsewhere in the metropolitan area. This meansthat: (a) it is unwise to plan as if there are not goUing tobe a substant-al increase in trips between these ne; -'-omsand the central area especially; (b) forecasts should bemade in the context of examining alternative land use plans -in particular it may be wrorth examining the advnntages oflocating new towns on railway lines; (c) it is sensible tomake predictions of the sensitivity of trip generation tolocating newz towns at greater distances from the alreadybuilt-up area.

C. Comision Para El Estudio del --rea !Ietro)ooli-ana (el Valle de bexico

3.11 Because the population of Mexico City now e:vtends substantiallybeyond the Federal District into the State of ' exico, there are alreadLyproblems ihich cover a wrider area than the Federal District and wihich reqtif-recoordination. In order to consider tlhese problem-, a Commission was set upin February 1970. It reports jointly to the IMinistry of the Presidencia,the Federal District and the Governor of the State of Mexico. It alsohas close relations with other Federal ministries concerned. And it hasits own technical team composed of people from all agencies with aninterest.

3.12 Its principal objective is to consider the feasibility and outlinethe methods by which a master development plan can be drawm up and made towork within the Yetropolitan Area. It is also to establish a system bywhich the activities of the different boclies can be coordinated. Thisiraplies first the e-change of information. The process is to begin with thenecessary studies which are to lead to recorimendations to be put to therelevant authorities. Proposals are to be made -for carrying out theserecommendations, and for coordinating the activi-t-es of the differentauthorities. The Commission is also to evaluate wAhat happens and keep acontinuing watclh on later developments.

3.13 The six major study areas are: population, physicalplanning (covering miiapping, spatial forecasts of future growrth, land useplanning and consideration of ownership matters), econoric planning(covering planning of the industrial, commaercial and other service sectors),infrastructure planiing (in which the most important items are cornmunication~,water, sewage and poi.er), structural planning (mainly concerned with locaL'o.;of future activities) and legal and administrative plamning.

3.lL The first step is a preliminary plan to be completed by the endof 1970 for discussion in 1971. In this first stage it is honed to achieve:

(a) a complete land use Dlan of the present 1Ietrooolitan !1rea:

(b) a land use and tenancy olan of thle area im,nediatelv sur-rounding into wlhich expansion will take place;

(c) a study of manufacturing industry which will include astudy of its ray material sources and markets, the trans-port modes used, its wrater consumnption, the pollution itcauses nad ot'.hRr mafttprs

(d~ ~) a i r r studyT Or food-~ produned annd cons.ed in the-

(e) nn nr;r gin and destati,-on -tudyof tral within the area

(f) a stc ofP wa~ter suples ~o.

- 31 -

(g) a special study of the crowded, central quarter aroundthe Cathedral/Zocolo areas.

3.15 In looking to the future, difficult problems exist at the polit-iraiilevel; i.e. whether any, change in relations is needed - at one extreme tli!case for a unitary authority or enlarged Federal District could be arguei.This would present formidable problems. A change in the Constitution tJOull'be needed. There would be a difficulty in deciding how much larger than thrpresent Federal District the new authority should be to allow for growth. ;

might, in fact, be unnecessary since cooperation and voluntary coordinat:Lonmay well succeed. it is over location policy that many cities have come togrief with their hinterlands, competing sometimes in an inefficient, bitterand wasteful way. A political resolution of tne broad policies and measuireswhich will influence the types of industry and population to settle in -.hefuture in the Federal District and the State of MDxico seems desirable.

3.16 The Federal District should be given the lead in transport planrJ.ngfor the who-Le metropolitan area (while leaving to the State the initiativein making proposals for transport wholly writhin its boundaries). Thus, '_t

might have the task of coordinating the transportation studies to be done Cr,the political level, because:

a) a high proportion of all traffic in the Metropolitan Areaoriginates in or is destined for or passes through theFederal District;

b) the most substantial means of transport in the area areunder its supervision. It would seem preferable to planthe transnort investments elsewhere as extensions to theheart system; and

c) while the areas within the State may become increasinglys.lf-suffiripn. in ichsj for mnn- vyers there is bound to

---- ~~ Job I - -

be a large number of people making journeys to work and forother purposes into the Federal District and this must be

allowred for in Federal District transportation planning.

3.17 Primacy for strategic land use planning should be given to theState. The exact way in whirh the growth areas should develo_ - whetherfinger plan, a satellite system, some twin city, etc. - is perhaps of molstinterest to the State of Nejdco since the grealtest nart of the develonmertwill be in its land area.

3.18 It cannot be pretended that there is any one agency which has 2.

natural primacy in location polic-. T+ interests the Federal Glovernmeznt,the Federal District and State of Mexico governments. It would seem, there-fore, that onlY good sense, within the broad objectives of the Feeral-Government for the country as a whole, is the only way in which key decisici-sCar be ar- LLc ablvl setele4.1

IV. A PROPOSED PROGRAW3 FOR N4ORE COCj T'EICJTIVE PLtI:nG STUDIS

A. General

4.01 IThile the standard of most of the studies that have been done ishigh, and sorre are especially original, they were done by a number of boa_e-sin a way which is only beginning to be coordinated and there are some gaps.Because of the high degree of interdependence of strateaic decisions for acity - one thing affecting another - there is a need for wphat is usuallycalled comprehensive land use transport planning.

4.02 The following paragraphs attempt to describe a comprehensive progra..Lof studies for land use/transport planning in the Valley of M,exico. The ccr-of this is the kind of forecasting nacka-e -which has been used in manY cit-es.but adapted to:

a) allow for the consideration of the right size of

b) to help comnnre alternative lnnd use strpategies;

G) to inrove the -- major transport alternativ.es to bconsidered by various prelimincary studies in relationto the more important modes;

g) t tio vi nul weconht tonor-car trainort tlternatives;

f) *-to try to allow for certain social cot an. beneits

of importance;

g) to tie in with economic forecasting for the Valley ofT,u co and

h) to- co si er vest -,uent -X n -1 the 1,4 'L g t o P S S b r C nU1. .j U JJ L.L .LJ. C kIIU _LI 11~ Ul J.SIU '- J Vi 0L&J-4.. P -_UL.r

and other relevant policies.

4.03 The studies are divided into three parts, although there areMti-er -ci nnecJtions. *LJoriie wVork.l is now belng, clone onU21 all t'hiree LDut f-uthler

development is needed. The three areas are:

a) The size of the IMetropolitan Area,

- 33 -

b) The Land Use Plan; the distribution in space of homes,jobs and other activities; and,

c) The Transport Plan.

B. The Size of the MetroDolitan Area

h.0h To aid decisionmakers trvine to decide whether to restrainMexico City's growth and by how much, the following studies are needed:

a) The Public and Social Costs of Alternative Developments

Public Costs - The costs of providing water and drainage.,for exam.ple are exnected +o rise steeply as the cftyexpands, and,

(i) it is difficult politically to reflect rising

(ii) i ea singL ta toL -r cover these costs 'or along time distorts the incentives to business-mIen nd developers of reseLn11Uares.

The second best economic solution may be to try torestrain population and employment growth.

Social Costs - It should be possible to estimate thecosts of congestion and pollution as a function of risingpopulation and income.

b) The Relative Benefits of Agglomeration as Mirrored inAttitude Surveys

In order to measure the relative henefits ofagglomeration from the alternatives, discussions withrepresentative businessmen to find their reasons forlocating in Mexico City and how their views would beaffected by sharp increases in taxes to meet risingpublic and social costs would be worthwhile.

c) Population Forecasts for the Area

This is a specializationd' its own. Most crucialis a study of the causes of the migration pattern sincethis gives the most clues to policymakers.

d) Employment Forecasts

Most sophisticated forecasts of employmentl/ areimpossible on the regional level because of lack of data.An approximation to it is the differential shift annr^ac-,.

1/ eag., those done by Aruie for Stockhom Land Aawaii uing ixIVut-o-uAltpu,analysis4

One way of doing this is to postulate an o-rerall growthof G.N.P. for Mexico and derive from it na4,ionally, therate of growth of employment in different industries andother sectors. Then assume that output - labor ratiosremain constant and that Mexico City's share in the growthof each sector remains constant over the period. Thuscan be derived an estimate of the growth of employment inMexico City (when factored up to allow for tertiary employ-ment).

e) Efficient and Feasible Policy Measures to Restrain theGrowth of the City

If there is a high probability that a decision willbe taken to try to restrain the growth of the city, a studyof what policy measures will be efficient and feasible willbe needed.

C, The Land Use Plan: the Distribution in Space of Homes, Jobs andOther Activities

a) District Planning. and Engineering and Design Studies

Thqe nill he studies for new towmsn for the

expansion of existing towns, for urban renewal projects(e g. of the kind th-t the S+ate of Mexico has done forNetzahualcoyotl and which the Federal District has donewithin its hcmnrjeC)

b) Studies to Hel-p DetPrminJe the Developm,ent Alternative toFollow

The State of MIexico has put forward a number of pos-

i)considlerabl"e re-deve-lopm,e.t a ihrdniisij ' _uiLud cauJ.. %± LA'Uv~ ~

ii) peripheric gro-wth;

iii) a system of satellites;

iv) a large contiguous twin city;

v) a more distanced twin city;

vi) development in a different part of the nation forpart of the growth; and,

vii) a radial development.

4.06 Mapping these alternatives will give a number of variationson each. To reduce the n-umber of alternai-ves to a rianaigeable number,it is possible to use:

a) the cost-benefit framewfork as produced by the StatePlanners;

b) the Delphi Method whereby a large number of professionalsare asked to rank the factors they believe to be importantto the cdecision; a point system is then used to assignweights to those factors to narrow the possible alter-natives.

4.07 There are a number of urban models which can help to give som,.efeel of how workplac9 s, homes, and services would distribute themselvesin different cases,' and advice should be sought from experts. Thetransport implications may be very important since different land useconfigurations are likely to lead to very different patterns and volumesof tripmaking.

D. The Transport Plan

Short Term Studies?! Improving the Efficiency of Existing Arrange.ments

1. The Bus System

4.08 Adjustment to the Metro - To remove some bus services whichare competitive iith the Metro. it would be nossible:

a) To take the 700-000 Worker Origin qnd Destination Studyand using generalized costs as the maximand reassignneonle from the buses to the Metro. assuming that wheremore than a given number travel from a subzone to aMetro station it will be nrofitable to nrovide a feederbus to it.

b) To feed in the relation from the Modal Split Study todecide what traffic has transferred to the M.etro andwould transfer if more feeder bus services were run.

1/ A.G. Wilson and others, New Directions in Strategic Planning, Centrefor v-o-- 4r ' Studie, T -- o A 960 sec. 3.2. 4.

2/ To be completed witlhn six months to a year.

4.09 Slowness of Present System - The growth of the iletropolitanArea per se and thle begi-InIgs olf a VAsX UU v ue of time wit inommilitate against the slowness of the present system. In the long runthe perfect system will be one wi-ach has somle of the characteristicsof the present bus service at the origin and destination ends of thejourney for taKing people up and putting them down; but has a m-nuchfaster line haul journey in between.

4.10 Pioneering Work at the Polytechnic should be exterKcd:

a) Fist they need a complete road (and Metro) map of the Cityin the computer so that they are able to work out the jour%ebtime and cost implicaticns of different routings.

b) Using costs (generalized time and cther costs to the user,net revenue to the operator) they should then test outvarious patterns, predicting traffic that will use a tripon the assumption that the total of trips remains constant(or grows with population).

4.11 Then try rerouting some of the most promising routes in thisway to see if they get the traffic predicted. Testing of the two follow-ing variations are recommended:

a) A new route with as much sinnosity in the main pick up andput down areas as at present, but not on the main haul;

b) Another with much simplified and straightened routesthroughout. This would be some test of the effect ofsinuosity on traffic.

2. Road Congestion

Hopefully this can be dealt with by (a) better trafficengineer_ng, (b) reserved busways nn (G) possibly road pricing. Thisleads to another important area of study:

a) The Capacity of the Highway System

There seems to be a strong case for considering ina e ho- .mh sa ca..p citn,y ,c,n

1r. nlasd (a,n

investment avoided) as well as specifying the corridorson whil Wi±h Ld..I tiILUO U m tVdL,±J LICy Jhappi. LtU IILLLU Ube LWLLW-L

to do too much about increasing highway capacity untilthisi hias Ueeni cumpareu wUith otleVr soLUtioLnVs to uidL tranis-

port problem, because increases in highway capacity canat worst increase bottleenecks elsewr-4ere.

- 37 -

b) Effects of Metro on Road Congestion

Some study of the effectus of the MIetro on road congestionshould be given priori tv.

3. The Metro

4.13 A Modal Split, StiAdv of emisting HThtro nasseprngrs:

_) ton gto+.e relanti on bi t ween pop a.t i n+,4-ntions beforehandand what they actually do. (Some study on buses should bedone befoe at least one of the present ext ensions is opened. d

b) to help winth the bus-rerouting; and

p'h +.n h1rn1. -iri+.h+-l :1+.-rn+A n +.y'rl:r.ro±. ml n

h,_w. _ _ _ v _ _

L1. J) Resolre difference of opinion over -he future of streetcars of thlrStreetcar Company and the planners of the State of Miexico. There may be a

local bus services, carrying volumes of traffic w-ihich are too light toAu4.0 u.L± 4 C. a v 1 '.4 IJU U - -OV OILU.± aa -4 +1 U: 1tC..SVCI J

0.. Qnc/'I 4tJ

M3U1L, J. ±I U1 StdU.iU Ius " Ulated to LtLie SeleLcioU WLUn of). A u±ernai-)vte TLnd4. Use andTransport Proposals

1. Aerial Photographs

4.15 The following outputs from the aerial photographs are needed forthe traffi'c engineering study and others, for the effect on congestion ofthe public transport improvement study, and to provide a base for the largeradLu &ui±e pre5h LILLnary transportationu s±uduy.

aj fLLowLj on i*ialli ruads by vele., -typeU.L wu U.LfrPd-wje

U) speeds on main roads., peaki and offpeak;

cy speed flow relationship derived from (v); and.

uj average flows by district and speeds on the local network.

2. update Information on F0ows

4.16 Information now available on flowrs by pub-iic transport (e,xcell-Entfor the MNetro) may need to be updated by crude means.

3. 700,000 'vorker Origin and Destination Study

4.17 From the 700,000 Worker Origin and Destination Study, derive:

a) a table (matrix) showing flowrs between all pairs of zones(11 t).e

b) Gravity coefficients - These will suggest the relationshipbetwfeen populations, distance and the number of trips made.(This may be perverse for some originating zones - it mightbe sensible to calibrate different gravity models fordifferent income levels.)

c) Estimate of trip generation per head of population and howthis is related to i) population density, ii) income level,iii) car oimership. A very srall sample of w-orkers(stratified by areas of different population density) wqouldbe sufficient.

d) With (c) it would be possible to perform a crude test ofthe imip'lications of di2f''erent alternative land use plansto help the first sif-t of alternatives. A prediction ofthe gravity coefficients of workers' journeys 15 or 20years hlence could probably be made, and the travel patternsthat might be expoected to arise for different land use plansconsidered.V/ These wluid give a num,lber of tentativedistributions and assimn.nents of traffic to the existingtransport system f'or the alternative land use plans.

e) Some rough costing of additional transport facilities shouldbe done here. Unless there are cointervniling benefits. thismight lead to the eliimination of some alternatives.

1/ Tn d1o t.l1i s somp. met.hnd of mnovingr from iTnrkprq1 f1om!.T in the. nenk to tnioIlpealk 'lows would be needed. Perhaps the simplest method would be tocompare the flows on a snanple of roads in t1he nenk from erial hotor',r,an.with that from the Wlorkerso Origin and Destination Study. The study offlowrs into the central district couldl also be used. * lthougb there wrou~ldbe errors because of variat,-on in load factors, tirmings, etc., th1is shouldcti-ir nnn c r !nr crc' k'KI Tjlrli + r, 11'r'n O +c 'n n r'--I'-Ty-' t'I - y o rl .,`1 c Ic c + fi Infl

sorime f'eel of the journeys made by executives, self-employed and non-worl;-cIt vrculdA n--+, o-f couse, be orin -anrd des-,t J n-at- i o peclfi^; C a t

is some evidence from the flow charts thlat towards the w-es-t especially 17 eworJ±lcers ~ muiake sore u o ~ Ley v a v , oneI woldA have tos Ioo' at t'. e

relationships on roads nearer to and furth.er from the centre separat-ly.lForecast-ing 1lc' or 20 years ah>ead as r^ie eerspr'u rr;iof modal split. It might be. usef-uAl to makce distributions and assignmen' -,

to -1 test .t se-nai of.L -nl n o n IV; p-t is.xr' HctOOLtIIUAIS ci LAJL 0: sin ui Ci cL 1 J5C'5. ~'s~-3A--"A-- ~ '

5

to test the sensitivity of overloaCding of the network -to this.

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Longer Term Studies

1. Additional Data Collection

4.18 Jhat tends to take the most time and money is data collection, ,Tfemost important question for the transportation studies is to decide how muchmore data needs to be collected and -or what purposes. There is a groirLngfeeling among professionals that a 3X'o sample Origin and Destination Survrey.usually using a home interview technique is unnecessarily large, even iistarting from scratch. But in Medco City there is already the TWorkers'Origin and Destination Study, as well as first rate flow data.

4.l9 The analysis above should give some feeling of how uniform arelationship there is betwJeen the XTorkerst Origin and Destination matri.xand total fiows. The less uniform it is, the greater the case for sup-plementarv work. There are three areas worth considering:

2 Tn1½rm'+t.in on iournevs to wrork other than those ofindustrial and cormiercial workers:

i) For the richer people, a home interview studybasdc nn a qmpll sample drain from car registrationmaterial would be useful;

ii) For the workers wrho were not surveyed, the firstquestion is to as:c ITo they lvrer. A small homeinterview survey, perhaps biased towTards thosemost likely to have dii 'ffrent. travel patterns frontthose surveyed, might be the best approach.

b) Identification of peak journeys other than those to wTork.qom.Ie ofP t±1his .0,4ht be gott-en eas- ly, U.. I -- .

A sample interview of coammercial users might help: freightvez>cle, etc.Ah Kn-ve Jnr nM+jiiczu imdr1P-r+qk-jnQF til- prohnblvy

not be needed.

c) Journeys outside the peak. Perhaps the most important areafor -4rther information is jouneys ouside the peak. Inmany cities there is a strong case for treating these in airch less detailed way: but the e.istence t-f sevral peakvin iIeydco City may pose nore of a problem.17

1/ If it is supposed that the 7 to 8 a.m. and 4 to 5 p.m. peaks are doimTa4 Pdby-. worker ---u whos pe l; L--vrt enough -s h ^ thr is in t ohr.

that the 2 to 3 p.m. peak is dominated by others wiho have a very dife&fe:-;patter of travel, imposirng different directional loads upon the trcln rt

system, As these are more likely to use cars, the loads may be out ofproportion to th.eir nunbers. A home interview study of these peoplecould be amplified to give the information needed, but it might b;;necessary to supplement it t-ith a smaii sampile homie inter-view s-uve- of--the workers already surveyed to get some lmowledge of their offpeakmovemerLts.

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2. The Generation of Alternative Plans

4.20 Provided that all agencies have a forward looking urge, it issensibrle to nllrT +-them to conmte to so ent n puiitt ing fnrTJTrd nronpozc's.Combining mi:tures of proposals for specific modes into a multimode altel-native- is vn r.or d ff iiclt. Thls- -nl ben "ninh easier 1 -the oynirl nrPlirarpridistribution and assignment has been clone for the preselected land use pi.ans'.But a lot of jdemXn sbAldt onoteslcino rsotat

natives for each land use plan. It is important:

a) in each case have one alternative which is strongly roadand a otu he r , hlch,C1 iS >S t ro n g ly+ pu'; trnpr +nt n

) Uto seuiaU Uta te toUt.L Ulrlsportation cos. i e by" an

al-ternative is fiscally feasible.

3. Engineering and Costing Studies

4.21 Uhen the alt-ernatives have been chosen, engineering and costingstude ale:1O~U needued;

a) ILe Uj0 ' -

Some attention must be paid 'uo tne imrpact of u±i±erIentalternatives on the "off network". Quite often considerablesecondary investment on Uhis cani e u uUen away Wnd noU UroughtL

into the evaluation procedure.

b) Iaterials Already Assembled -

Some of the materials for evaluation have already beenassembled for other purposes:

i) values of time and other values affecting differencesin valuation of modes irill be derivable from theModal Split study described;

ii) information on operating costs of different kdndsof vehicle is presumed to be available;

iii) the costing of the transport proposals should alsoinclude estimates of operating and maintenance costs,including police and other traffic controls costs3

iv) some analysis is probably needed of how accidente perience varies on different facilities;

v) the pollution studies already mentioned should givedata on how car oTmership thirough car use is likelyto affect pollution;

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vi) the speed flow relations described above shoulcbe ideal for calculating congestion costs;

vii) noise may be important. Usually the best way ofdealing with noise is through the design standardsof freeways and the regulation of vehicles.i/

viii) pedestrian interference and environmental damageof other kinds (visual intrusion, neighborhoodseparation) are much harder to estimate. It maybe best to leave this to the political processentirely. They should not be neglected;

ix) ensure that the actual adding up and subtractingof surpluses is done correctly. This is almostnever done and can have serious effects on theoutcome.2/

c) Synthesis -

The next stage is that of synthesis, when the modelsnra ,.,, -i nn ,4- . -I-n n.nl 1 --r 11-m 4-ha +,.4rjc "n.nnav' or!we r A m nrlati^n vo each lar.d use the tisgenerated.,

distributed, modally split, and assigned. They are then

A) rn T- , n-4--4, nA +- D - 4owre ~ ~ ~ ~ ~ A 1 as QU1 of 5.. V C;-CLaut.. U ,

5.J± ~.LLLU.~ IJJ 1 . 1J L L,JJ. '-P 1. d,- . Lj A-4---4,54*L.C. J.1±V O.L VVJ-JV . LO d. O ..L.-j jU.LI. UL LV1Ld" L" OV.IL IJSJ JV . 6, Y.

4+.22 Thvbveiivasr4piv,o =twu- seem, to beau- taefor Mexico City, but which would have to be worked out in detail. If lessUL&On t.his is dUone th erte aure s(eveUre udaugers 'JlO be reckoned -widjh -. morlgllt thIe i fare:

a) an inability to tackle rationally the question of metropoUitan

b) acceptance of population projections without relatg the;-nto growth of enployment;

c) the choice of a land use pattern which is then found to impos:heavy transport costs (or some other costs);

1/ See C.D. Foster and P.J. Mackie, in Urban Studies, forthcoming.

2/ See H. Neuberger.

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d) the development of strategies for each mode independentlywhich may end with excess capacity and unnecessary financialburdens;

e) a too arbitrary selection of a public transport plan whichthien runs into difficulties because of rising car oinership;

f) a comprehensive land use transport plan wihich nobody believeoin.

How the Studied !ight Be Done

4.23 The study should not be entirely handed over to a firm of consultar.for the following reasons:

a) there are many ongoing studies being done by others;

b) a consultant would probably come from abroad and leava an in-adequate memory of the procedures;

c) not too many regular consultants appear flexible enough tosupervise such a program snecially tailroad for Niexico City- e ;.

d) the studies are a good educational process and wfill heln buldYup a number of land use and transport planners with these sk:l1.

4.24 There should be a strong Mexican and government; participation so th.Lthere wqfould be the closest interworking of administrators and professional.sthroughout. How-ever some skills may well have to come from outside. Innnrti culnr Hex-io rmLv be short of npeonle with mathematical and transportmodelling experience. It is recommended that a number of experts should heinvited t.o Twrite nnners on hoW the vnrioUs key as-pects of the more technic•.studies should be designed and that a conference should follow. It issuggested that the Ban ,m.nv wish to be nssocinted with this process of studydevelopment not only because investment requests may be contingent on thestudies, bht thiat. i- orta.t lessons for Alse..ThereY' in TAtAn AmepriGn mn- hpe

learned.

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V. GUADALAJARA - THE CASE FOFl A SUBIWAY

5.01 ad laan i nra is n-n:T A Citv of nhout I 5 ni llion. It has one ofthe fastest rates of grourth of population in 'exico, more than 7% per aninurm.It, is an old STP;5ish tvn. trvmI nd +.tnically th. largest. nart, of its area~~~~~~-a l - - - - r - - - v . -

still has a grid street system. All transport responsibilities seem -t,o OG1-reirnder the herl ofl f.he State nPnrn+tmPnt of Tirnns-i±. The Knvor is responsib'lefor city pL.unn.ing.

5.02 There are positive indications of the sufficiency of the present

a) The streets. uri,-r+-Afiil c1ogser civ,na mos- 0

the day. The staggering of working hours and the siestatends to spread th.e peak;s.

over 115 routes. These are organized into 8 "lines". Sever,of C ~ ths zre, ,-rnn e n-nit,A 4vo

4one, ,'n.- nv, th othe 4-r,v h-r farv thea

largest iith a quarter of the buses, is independent. Ho-, , ,1 1rirti -r,, V-Aj allwe mrhhneu Thecre is m,vore orFszC--l,

than in Iexico City:

i) There are ti-metables on each route;

ii) There are supervisors on route w^Ihose job it is!_ *_ sA _. L - - _- 1 - _ _ __ _... Az Io waJ4ysde IAUe.LliV±lU, L,U OWUi UIp UiJ LiVUl- UOU)U

if there are large numbers waiting;

iii) VIehicles are tested annually, as in Mexico City,'but more rigorously. The t%est tends to put offthe road most buses of more than five years' li.e.

iv) Drivers are tested annually, and are expected tohave had at least two years ' experiece dri vrnga car first (wdhich is not so in M14exico City).

5.03 The Transit Department indicated that the service was definitelyprofit able to the owners, even though the Iare Of 40 centavos had not risersince it was iixed six or seven years ago.

5.04 Various proposals have been put by Japanese, English and Germanfirms on their own initiative. Neither the City nor the Transit Departnenthave considered them formally and wrould not seem to be near making up the! Imind whether to pursue the matter. lThe various proposals vary from a oL5t-of about Pesos 3,000 to 5,000 million, depending on the length suggested(approxirmately 45 to 55 kmi) and the proportion on the surface and undergrcxrnd,

5.05 The demand studies were probably done as follows: Guadalajaragenerates about 11>s to 2 million itnrnevs q dnxr. Tking t.he nnn1qMti_ongroiwth predicted and increasing the trip generation rate per head to thatroughly of M-exico Citv. . 1980 trin volume is predicted. At prpAnrt thereare about 60,000 registered private cars. It is argued that the growth oi'private car traffi c p nci1 1lv ton lnr froflork, T will h-ve to be retrainedconsiderably. Thus, the present bus fleet and possibly a substantiallylarger one. Taight be all the streets coupl contain withou s conges';.and might well be fully employed carrying the increment in passengers by1980 Pnd thius l flre enuagh traffic over to r% e the Metro lines proposedprofitable.

5.o6 No immediate action is recormended on the Gua(lalajara subwiay. Eoret-tsoatorr tsev ar nede upr.s.>=ch o ase so Ilrge ar,eenie

a) .io origin a nd destination study has been done, though on.eis planned. It will be an improvement to consider possible

d~JLJ CLLgLi I~LU) -"I -Lt.dL I U-L u ut -L ±.L±~~ .dg~L ~±fiubL,a a' 6.L nm e -,. relation ayo desire 'Lines r-ather uhaxto flousTs .

b) A more exact atterrpt to predict the effec-t of 1980 flows onst-+retsed on two - - -_ 4ion4

Li X O UIL_1 ulzlcul ca o-n r I11- 114p r WlU-il'st wd | D1 Wt population and income;

ii) assuming that policies can be adopted tokeep cars off the roads, at leasb in thepeaks, so that the traffic goes mostly by bus,

c) Unless there was considerably more congestion, it wouldseermL the relative cheapness on the Dus solution snould beseriously analyzed before any commitment to a subwayuecision.