public disclosure authorizeddocuments.worldbank.org/curated/en/347411468012294471/pdf/285… ·...

Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 28521-CL

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$6.1 MILLION

TO THE

REPUBLIC OF CHILE

FOR A

SANTIAGO URBAN TRANSPORT TECHNICAL ASSISTANCE PROJECT

APRIL 28,2004

Finance, Private Sector and Infrastructure Department Argentina, Chile, Paraguay and Uruguay Country Management Unit Latin America and Caribbean Regional Office

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(April 2 1,2004 Exchange Rate)

Currency Unit = Chilean Peso 601.7CLP = US$1

B2B BOT CAI CAS CGR co co2 Committee o f Ministers CONAMA

CONASET CPAR DDO EPA e-SEISTU FMRs GEF GEF grant GHG GoC IADB IBRD F C MIDEPL AN MINVU

CONAMA-RM

MOP MTT

NGO NOx OPBP PCF PCU PDO P M

FISCAL YEAR January 1 - December31

ABBREVIATIONS AND ACRONYMS

Business to business Build-Operate-Transfer Clean Air Initiative Country Assistance Strategy Contraloria General de la Repliblica Carbon Monoxide Carbon Dioxide Committee established pursuant to the Borrower’s Presidential Order No. 001 dated April 7,2003 Comisidn Nacional del MedioAmbiente - National Environmental Commission CONAMA Regi6n Metropolitana - CONAMA Metropolitan Region Traffic Safety Unit Country Procurement Assessment Review Deferred Drawdown Option Loan Environmental Protection Agency (USA) Electronic operational model to assure access via Intemet Financial Monitoring Reports Global Environment Facility GEF Air Quality and Transport Project for Santiago (GEF) PO73985 Green House Gases Government o f Chile Inter American Development Bank International Bank for Reconstruction and Development International Finance Corporation Ministerio de Planificacidn - Ministry o f Development and Planning Ministerio de Vivienda, Urbanism0 y Bienes Nacionales - Ministry o f Housing and Urban Development and Public Goods Ministerio de Obras Pliblicas - Ministry o f Public Works Ministerio de Transportes y Telecomunicaciones - Ministry o f Transport and Telecommunications Non Governmental Organization Nitrous Oxide Operational PoliciesBank Procedures Prototype Carbon Fund Project Coordination Unit Project Development Objective Particulate Matter


PPm PTUS

RPA SEA SECTRA

S E C K SEIA SEISTU SEREMITT

SERVIU

SIVU SOE s o x Subtrans TAL Transantiago-SE

Transantiago-PTUS

Parts per mill ion Plan de Transporte Urbano para Santiago - 2000 - 2010 Santiago Urban Transport Plan - Transantiago-PTUS Regional Procurement Advisor Strategic Environmental Assessment Secretm’a Interministerial de Planificacidn de Transportes - Interministerial Transport Planning Agency Sector Adjustment Loan System o f Environmental Impact Assessments Impact Evaluation System for the Urban Transport System Servicio Regional del Ministerio de Transportes y Telecomunicaciones - Ministry o f Transport and Telecommunications Regional Service Servicio Regional de Vialidad y Urbanism0 - Regional Service for Public Roads and Urban Development Information System for the “Single Window” function Statement o f expenditure Sulfur Oxides Undersecretary o f TransportMinistry o f Transport Technical Assistance Loan Executive Secretary o f the Committee o f Ministers for Urban Transport in Metropolitan Santiago Santiago Urban Transport Plan

Vice President: David De Ferranti Country Director: Axel van Trotsenburg

Sector Director: Danny Leipziger Sector Manager: Jose-Luis Irigoyen

Sector Leader: Juan Gaviria Lead Economist: James Parks

Task Team Leadermask Manager: Pierre Graftieaux

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed without W o r l d Bank authorization.


CHILE


CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE .................................................................. 3 Country and sector issues ........................................................................................................ 3 1 .

2 . 3 .

Rationale for Bank involvement .............................................................................................. 5 Higher level objectives to which the project contributes ............................................................ 7

B . PROJECT DESCRIPTION .................................................................................................. 8 Lending instrument ................................................................................................................ 8 Project development objective and key indicators ..................................................................... 8

1 . 2 . 3 . 4 . 5 .

Project components ................................................................................................................ 9

Lessons learned and reflected in the project design ................................................................. 10

Alternatives considered and reasons for rejection .................................................................... 11

C . IMPLEMENTATION ......................................................................................................... 12 1 . Partnership arrangements ...................................................................................................... 12 2 . Institutional and implementation arrangements ....................................................................... 12 3 . Monitoring and evaluation o f outcomedresults ....................................................................... 13 4 . Sustainability ....................................................................................................................... 13

5 . Critical r isks and possible controversial aspects ...................................................................... 13 6 . Loadcredit conditions and covenants .................................................................................... 14

D . APPRAISAL SUMMARY .................................................................................................. 15 1 . Economic and financial analyses ........................................................................................... 15 2 . Technical ............................................................................................................................. 15 3 . Fiduciary ............................................................................................................................. 15

4 . Social .................................................................................................................................. 15 5 . Environment ....................................................................................................................... -16

6 . Safeguard policies ................................................................................................................ 16 7 . Policy Exceptions and Readiness ........................................................................................... 17

Annex I: Country and Sector or Program Background .......................................................... 18

Annex 11: Major Related Projects Financed by the Bank andlor other Agencies ................. 23

Annex 111: Results Framework and Monitoring ....................................................................... 24

Annex IV: Detailed Project Description .................................................................................... 31

Annex V: Project Costs ............................................................................................................... 37

Annex VI: Implementation Arrangements ............................................................................... 38

Annex VII: Financial Management and Disbursement Arrangements .................................. 40

Annex IX: Economic and Financial Analysis ............................................................................ 48

Annex X: Safeguard Policy Issues .............................................................................................. 49

Annex XII: Documents in the Project Fi le ................................................................................ 52

Annex XIII: Statement of Loans and Credits ........................................................................... 53

Annex XIV: Country at a Glance ............................................................................................... 55

CHILE


PROJECT APPRAISAL DOCUMENT

LATIN AMERICA AND CARIBBEAN

LCSFT

Date: April 28,2004 Country Director: Axel van Trotsenburg Sector Mangermirector: Jose-Luis Irigoyen

Team Leader: Pierre Graftieaux Sectors: General transportation sector (100%) Themes: Pollution management and environmental health (P); Regulation and competition policy (S) Environmental screening category: Not required Safeguard screening category: N o impact

Project I D : PO86689 Lending Instrument: Technical Assistance Loan

[XI Loan [ ]Credit [ ]Grant [ ]Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 6.10 ProDosed terms: Variable Smead Loan. 15 vear maturitv including: 5 vears m-ace. standard terms.

Y d

Financing PIA (US$m) "

Source Local Foreign Total BORROWER 0.11 0.09 0.20 IBRD 5 .oo 1.10 6.10 Total: 5.11 1.19 6.30

Borrower: Government of Chile, Ministry o f Finance Teatinos 120 Santiago, Chile (56) 2 473-2517, [email protected] Responsible Agency: Transantiago-SE Nueva York, 9, piso 10 Santiago, Chile (56) 2 428-7900, [email protected]

1

Does the project depart from the CAS in content or other significant respects? Does the project require any exceptions from Bank policies?

[ ]Yes [x] N o [ ]Yes Ex] No

Have these been approved by Bank management? ]Yes IN0 I s approval for any policy exception sought from the Board? [ ]Yes [ IN0

[ ]Yes [XI N o [x]Yes [ ] N o

Does the project include any critical r isks rated “substantial” or “high”? Does the project meet the Regional criteria for readiness for implementation?

Project development objectives: To support the implementation, monitoring, evaluation and continuous planning o f the urban transport reform program To strengthen the capacity and improve the procedures to mitigate potential adverse impacts of transport infrastructure works

PROJECT DESCRIPTION

1. 2. 3. 4. capacity building. 5. the technical inspection o f the concession contracts. 6. 7. 8. 9. environmental benefits. 10. 1 1. travel cost, and number of transfers. 12. 13. 14. 15. 16. 17. 18. Which safeguard policies are triggered, if any? Significant, non-standard conditions, if any, for: Board presentation:

Loadcredi t effectiveness :

Covenants applicable to project implementation: Legal covenants: Within 12 months from the date o f effectiveness, finalization o f the revision o f the resettlement policy framework for Transantiago-PTUS; Within 12 months from the date o f effectiveness, finalization o f the revision o f the environmental management guidelines.

Survey regarding the perception o f the Santiago public transport system. Evaluation of the impact o f the increased number o f transfers on the public transport demand. Pilot testing o f the Transantiago user information system. Design and implementation o f an information system for Transantiago users with disabilities and

Design of a control mechanism and preparation of the respective laws and norms to carrying out

Impact analysis o f Transantiago on the transport demand. Impact analysis o f the Transantiago on urban development. Basic monitoring o f the air quality. Further development and validation o f social evaluation o f the project incorporating

Assessment of the changes in drivers? quality o f l i fe due to the implementation o f Transantiago. Fine-tuning o f the evaluation o f the impacts o f Transantiago, mainly in terms o f travel time,

Strengthening o f the current resettlement framework. Strengthening o f current environmental guidelines for the management o f public works. Capacity building, business creation and re-conversion o f transport sector workers. Design o f mechanisms for the co-ordination o f land use and transport planning. Periodic updating o f the Origin-Destination survey. Analysis and update o f the traffic forecast models. Design of a recuperation strategy for public spaces.

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A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

Country and city context. In Metropolitan Santiago about 5.3 mil l ion people live in 36 municipalities. This i s close to 40% o f the country’s population. The growth has slowed down to about 1.4% per annum, but the built-up area i s expanding in an extensive manner. Economic output o f the Santiago region i s close to half o f the gross domestic product (47%) and i t can be viewed as the country’s economic growth engine. Unemployment i s high, as i s income inequality. Spatial patterns reflect this, with low-income communities in the south and north-west of the city, and higher-income communities in the north-east. T h i s contributes to a relatively high amount o f cross-town travel.

Santiago i s served by a road and public transport system, which are generally well managed and continuously improved. The 40 km metro system i s an example o f efficient mass transit management and serves 747,000 passenger trips per day. The majority o f public transport passengers, about 4.5 mill ion per day (2001), travel on the 7,500 buses, which are mostly owned by individuals or very small companies. In addition, there are suburban railway lines, route taxis (cdectivos) and regular taxis. Modem traffic engineering techniques are applied to the street network.

Urban transport problems. Chile’s sustained rate o f economic growth resulted in an increase o f car ownership in Santiago from 320 cars per 1000 household in 1977 to 560 cars per 1000 households in 2001. During the same period o f time, the number of person trips (by all modes including walking) went up by 69%. T h i s growth in mobility, associated with an ever-higher share o f motorized trips by car (12.3% of motorized person trips in 1977 to 38.09 % in 2001) has been inflicting pressure on the urban transport system through ever-growing traffic and congestion. In addition, low levels o f safety, important air quality and noise pollution, economically inefficient overlapping and concentration o f bus routes, tortuous bus itineraries, passengers’ dissatisfaction with the public bus system, and low affordability also characterize the urban transport system for some o f the very poor.

Institutions. Due to the absence o f an elected metropolitan government and the fact that the Zntendente (Governor), appointed by the national government, does not have the resources to manage major functional programs, transport, as a service that transcends the functions or capabilities o f the individual municipalities, i s left with the national government and consequently decision-making for Santiago has been functionally very fragmented. The Ministry o f Public Work (MOP) and the Ministry o f Transport and Telecommunications (MTT) are responsible for roads o f regional and national importance, and for transport regulations, including bus and route-taxi franchising, respectively. The Inter-ministerial Transport Planning Agency (SECTRA), under the Ministry o f Development and Planning (MIDEPLAN), i s in charge o f strategic transport modeling and planning, and the National Environmental Commission (CONAMA), linked directly to the Presidency, o f urban air quality management. At the urban area level, a Committee o f Ministers on Urban Transport for Santiago was created by the President in March 2002, to implement the Urban Transport Plan for Santiago (PTUS) 2000-2010 (Transantiago-PTUS). The Committee i s presided by the Minister o f Public Works, Transport and Telecommunications; i t s Vice- President i s the Minister of Housing; and the other permanent members are the Executive Director o f CONAMA; the Chief Executive o f METRO; the Sub-secretary o f Transport; the Executive Director o f SECTRA; the Zntendente of the Metropolitan Region; and the Head o f Concessions o f the Ministry o f Public Works. The Executive Secretary o f this Committee i s Transantiago-SE.

2000-2010 Santiago Urban Transport Plan (PTUS). To mitigate these problems and improve the quality o f l i fe in Chilean cities along with their competitiveness, the Government o f Chile (GoC) has

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embarked on a nation-wide ambitious urban program in the context o f the 200" anniversary o f the country's independence in 2010. In this context, for Santiago, probably the most powerful and significant tool i s the 2000-2010 Santiago Urban Transport Plan (PTUS) - Transantiago-PTUS, which aims at turning the metropolitan area into a highly competitive world-class city. President Lagos gave priority to this comprehensive Urban Transport Plan, which i s expected to deeply change the way the city inhabitants move around, through measures partly inspired by international successes, such as the TransMilenio public transport system in Bogoth.

1.

2.

3. 4.

5.

6.

7. 8.

9.

Box 1 : Key reforms of the PTUS program

Allocating and managing road space to maximize social gain through traffic management schemes that give priority to public transport vehicles, such as the implementation o f exclusive public transport axes during peak hours, and the establishment o f physically segregated bus lanes reserved full-time for public transport vehicles; Replacing the current approach to tendering bus services, where less-than-formal operators take both cost and revenue risks, by gross-cost contracting o f 15 relatively large contracts each requiring between 200 and 500 vehicles; Providing incentives to operators to bring in high-standard buses; Reconfiguring the bus route network into a two-tier system, the f irst tier consisting o f trunk lines, operating as far as possible on segregated busways, and the second consisting of collectioddistribution lines (services tendered separately); Introducing a unified fare system, including metro as well as bus services, with fares set to achieve financial equilibrium for the system as a whole without increasing the current average fare level; Separating fare collection as a separate competitively awarded concession (after an init ial period where the Santiago Metro Company would do the collection); Commissioning a public transport management and information center to control the bus flow; Establishing coordination mechanisms for transport and infrastructure planning at the metropolitan level: Providing training and other transition assistance for those who lose their jobs and for those who wi l l continue working in the public transport sector;

10. Coordinating land use and urban transport policies; 1 1. Improving conditions for cyclists and pedestrians; 12. Rationalizing freight-related traffic and improve i t s environmental performance; and 13. Promoting a culture o f rational private car use so that trip makers perceive the full costs o f car travel.

These policies and reforms w i l l be buttressed by a comprehensive infrastructure program mainly consisting o f (i) the doubling o f the current length of the subway system, (ii) the construction o f limited- access, urban toll roads as a public-private partnership, (iii) the gradual development over a period o f 15 years o f a system of approximately 300 km o f segregated busways, interchange stations, terminals, and underpasses, constructed by the private sector under concessions. The bulk o f the short-term investment in the busway systems and terminals i s intended for private sector finance through concessioning, while public sector finance w i l l mainly focus on metro extensions, bus stops and part o f the infrastructure maintenance.

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2. Rationale for Bank involvement

The Bank wi l l support Santiago’s urban transport reform via two Sector Adjustment Loans (SECALs) (total amount = US$ 100 million) and the proposed technical assistance loan (TAL) for an amount o f US$ 6.1 million. I t s intervention in this field i s justified by the fact that the reform i s in line with the priorities o f the 2002 Country Assistance Strategy (CAS) and the Bank’s recommendations for urban transport as expressed in the recent strategy paper “Cities on the Move”. See Box 2 for a detailed description of the proposed Adjustment Operation.

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The Government o f Chile has requested a US$lOO mill ion Sector Adjustment Loan, focusing on urban

public transport in i t s capital city, Santiago de Chile. Santiago has embarked on an ambitious program to

increase the quality o f l i fe o f i t s residents, and the efficiency, equity and environmental friendliness with

which its various systems serve the urban economy. Because some 70% o f public bus riders are from low-

income households, the improvements to the system wi l l have a particularly positive impact on the poor.

The program supported by the loan aims at balancing three major development objectives: (a) accelerating economic growth, which i s linked to city efficiency and attractiveness; (b) reducing inequality, tied to access and mobility o f low-income population; and (c) ameliorating air quality.

Proposed objective(s)

The main development objectives o f the proposed Sector Adjustment Loan for Santiago w i l l be to improve the level o f transport services to the residents (particularly low income residents) and businesses, reduce resource costs, and increase environmental quality. The specific objectives are to:

(i)

(ii)

(iii)

improve the competitive mechanism in public transport services in the direction o f for-the-market competition; introduce a unified and integrated pricing system for public transport services making access more equitable; concession public transport services, part o f the required infrastructure (mainly busways and bus terminals) and revenue collection function to the private sector, with accompanying risk-sharing arrangements; re-allocate the street space away from general traffic to exclusive use o f (bus) public transport vehicles; set up coordinated transport and infrastructure planning mechanisms at the metropolitan level; facilitate coordination between urban transport policies and land-use policies; significantly reduce public transport-related emissions o f air contaminants.

(iv)

(v) (vi) {vii)

Project Benefits

a.

b. C.

d. e.

f.

g.

h.

Resource savings due to the removal o f the revenue risk from operators, transferring the bus flows in major corridors to an exclusive space, the reduction o f bus vehicle-km on the street system; Environmental improvements due to better-quality buses and fewer bus-km; Increased quality o f service for passengers who live in the catchment areas o f the metro extensions and the new metro line; Increased comfort, safety and reliability for passengers on the bus network; Comprehensive coverage o f feeder routes particularly in poor neighborhoods to enhance social inclusion o f the poor; Savings stemming from the unified fare system, i.e. passengers not having to pay when transferring among bus and metro lines; Reduced use o f ‘road space’ by car drivers contributing to a reduction in congestion and more equitable distribution o f road space; Efficiency improvements, which w i l l contribute to the city economy and hence economic growth.

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The Bank’s value added, first o f all, stay in i t s long-standing involvement in similar urban transport projects in Latin America and i t s global experience and knowledge in the field. The Bank i s also in an excellent position to work across agencies, which i s important in a scenario that seeks the contribution o f a large number o f actors.

Moreover, the Bank’s involvement means a stronger push in favor o f public and non-motorized transport as well as institutional issues and intersectoral coordination. It wi l l also help to maximize benefits for low-income groups and people with disabilities, and to reach wider participation in reform decisions. Finally, it w i l l increase the robustness o f the overall project and thus i t s public acceptability.

I t must also be emphasized that the involvement in Santiago’s reform program wi l l also strengthen the Bank’s role as a force in furthering sustainable urban transport. Indeed, Santiago faces s imi la r issues as many medium to large cities in the developing world, with the evolution o f urban transport following comparable patterns across countries. What the Bank i s proposing to support, and what it w i l l learn from this experience, can and wi l l probably be replicated in many more developing counties, and thus should benefit other clients in the context o f future urban transport operations.

3. Higher level objectives to which the project contributes

The main direct objective o f this five-year TAL i s to provide technical support to the Santiago urban transport reform and to accompany the Santiago urban transport adjustment operation, which consists o f a US$ 25 mill ion two-tranche SECAL and a US$ 75 mill ion single-tranche SECAL with a DDO feature (see previous sections above). The reform o f the urban public transport sector in Santiagois rooted in the 2000-2010 Santiago Urban Transport Plan (PTUS) and i s supported by the TAL in the following areas: General Urban Transport, Public Transport, Environment, Land-use, Social Aspects o f Transport, and Mitigation of Potential Adverse Impacts o f Transport Infrastructure Works.

The higher level objective o f the proposed TAL i s to increase the quality o f l i fe o f Santiago’s residents and to improve their urban economy through a more efficient, equitable and environmentally friendly urban transport system. The TAL wi l l accomplish this goal through technical assistance (i) to develop and improve modeling tools, (ii) to prepare draft legislation, (iii) to analyze, evaluate and assess specific aspects of the urban transport system, (iv) to carry out training, and (v) to design other support instruments, strategies and measures.

The project i s consistent with the goals and strategic approach set out in the 2002 CAS because i t aims at enhancing sustained economic growth and social progress, fostering the inclusion o f the most vulnerable groups, improving environmental conditions in a city where pollution reaches very high levels and primarily affects the poor, and modernizing the State and building i t s capacity.

B y supporting the urban transport reform the TAL i s consistent with the goals and strategic approach set out in the 2002 Country Assistance Strategy (CAS). It w i l l (i) enhance sustained economic growth and social progress through increasing average speeds and improving accessibility, making the city more appealing and increasing the labor market size (Le., the number o f jobs accessible from any point o f the city). This w i l l increase the economic output o f a region which yields 47% o f Chile’s GDP, and should generate a trickle-down effect that w i l l most likely have a very positive impact on the poor. It w i l l also (ii) heighten the inclusion of the most vulnerable groups. A more reliable and quick public transport system i s expected to particularly address the mobility needs o f the poor through improved access to services and opportunities at affordable prices and reasonable travel times, hence contributing to a more socially inclusive growth pattern. The operation w i l l (iii) improve environmental conditions in a city where pollution reaches very high levels and primarily affects the poor. Reduction in emissions o f air

7

pollutants and GHG wi l l result from the introduction o f cleaner technologies and a less intensive use o f fuel, to be achieved through supporting measures to rationalize public transport supply, promote modal shift to public and non-motorized transport, increase utilization o f the electricity-powered metro, especially during off-peak hours, and relieve congestion through a more efficient use o f road space. The operation w i l l also (iv) promote public private partnerships through a renovated concession mechanism for private operators to provide public transport services and through the participation o f private investors in the infrastructure program, expected to be mainly financed without resorting to public funds. To end with, the operation w i l l (v) modernize the State and build its capacity: (a) i t w i l l increase the state capacity to handle public private partnerships, (b) it w i l l reinforce CONAMA’s capacity to deal with transport-related environmental issues and participate in the reinforcement o f the State technical capacity and i t s ability to enforce environmental regulations with minimal impact on the pace o f economic growth, (c) strengthen coordination between public entities in charge o f transport planning, urban planning and environmental management and (d) create the institutional background to assure the continuity and sustainability o f Transantiago-PTUS.

B. PROJECT DESCRIPTION

1. Lending instrument

The selected lending instrument i s a five-year investment loan to finance consultancy services, goods and training to support the Santiago urban transport reform program backed by the SECALs. The type o f investment loan selected i s a technical assistance loan because i t allows the Borrower to develop the tools and carry out the necessary analytical work to properly design, prepare and implement the reform, as well as to assess i t s impact and mitigate them through training and continuous adjustments. In addition, the proposed TAL wi l l help to improve local procedures to mitigate potential adverse impacts o f transport infrastructure works. The five-year duration offers the opportunity to ensure the Bank’s continued role in supporting the reforms, especially the institutional reforms, which take time to materialize. I t w i l l also help in providing continuity to the reform process.

2. Project development objective and key indicators

B y providing analytical support, monitoring, tools and training the TAL aims at consolidating and continuously fine-tuning the policy reforms required to implement Santiago’s PTUS. I t has a twofold objective:

0 To support the implementation, monitoring, evaluation and continuous planning of the urban transport reform program by financing analytical and preparatory work, training, strategy design, preparation o f legislation, and development andor refinement o f diagnostic tools and models. The key indicators are:

- -

SECALs benchmarks met (to the extent that they are supported by the TAL); Reform implementation, monitoring, evaluation and continuous planning based on the results o f the analytical work o f the TAL; Models and other tools developed or fine-tuned. -

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e To strengthen the capacity and improve the procedures to mitigate potential adverse impacts of transport infrastructure works through financing capacity strengthening and improving current procedures. The key indicators are:

- -

Capacity strengthening in these areas carried out; Existing procedures and strategies for resettlement plan implementation harmonized and improved; Resettlement policy framework revised, drawn upon Bank standards; Guidelines for environmental management o f urban infrastructure projects upgraded.

- -

3. Project components

Five o f the project components o f the TAL aim at directly supporting the urban transport reform agenda in the following crucial areas: general urban transport, public transport, environment, land-use and social aspects o f transport. These components address the pressure that increased mobility and car use and a reduced public transport share put on the urban transport system. They also focus on more quality and efficiency in the system, greater social inclusiveness, increased passenger satisfaction and enhanced affordability for the poor. The last project component aims at strengthening Chile’s capacities and harmonize and improve i t s procedures to mitigate potential adverse impacts o f transport infrastructure works, such as involuntary resettlement and environmental impacts.

The TAL wi l l provide technical support in the following areas:

0 General Urban Transport (US$ 3,063,000). The PTUS lays out a very ambitious and advanced urban transport reform program, the successful implementation o f which needs to be supported by analytical work, facilitated through legal changes and sound implementation strategies. This project component aims at developing, fine-tuning and certifying the tools to carry out reliable forecasts and analyses, implementing analytical work to obtain qualitative and quantitative information on urban passenger and freight movements, assessing the impact o f the new transport system on transport demand, focusing also on low-income households, preparing legislation for important legal changes, and designinghesting sound strategies for road space recovery, user information and the overall marketing o f the Transantiago-PTUS system.

0 Public Transport (US$ 260,000). Priority in this reform program i s given to public transport, which positions this sector in the spotlight and puts high expectation on it. Therefore i t i s extremely important to have an exact knowledge o f the users needs, expectations, priorities and preferences. Special emphasis w i l l be placed on users from poorer areas and low-income households. T h i s component w i l l allow collecting information on user perceptions o f the quality o f the public transport system. This information i s essential for the continuous improvement o f the quality o f the public transport system.

0 Environment (US$350,000). This component w i l l support the environmental dimension o f the urban transport reform by providing public transport users, the general public and those responsible for the operation o f the public transport system with regular data on air quality and noise levels necessary to monitor and maximize the positive impacts expected from the new public transport system. It w i l l design and implement an information system to make this information available to the different stakeholders.

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0 Land-use (US$680,000). For the urban transport system to be efficient there i s a need to consider i t s implications on the land-use dimension and to effectively coordinate transport and urban planning. This component w i l l allow for an analysis o f the transport and urban planning coordination entities, the assessment o f current obstacles and barriers, the identification of coordination and information needs and the design o f tools to facilitate this coordination. I t also implies an update o f the submodels o f MUSSA, a model to represent and forecast the real estate market, based on the results o f the 2001 Origin-Destination (OD) survey and the recalibration o f the ESTRAUS transport planning model. The model w i l l then be used to simulate the new equilibrium in the real estate market created by the introduction o f Transantiago- PTUS. Finally, this component includes the implementation of an Impact Evaluation System for the Urban Transport System (SEISTU), which w i l l allow maintaining the baseline for which the current transport system was planned and w i l l ensure that real estate developers pay for the negative externalities that they impose on the transport system.

0 Social Aspects of Transport (US$ 940,000). A modem transport system has to take its social dimension duly into account. This component deals with public transport users and workers. I t w i l l allow for the design and implementation of a strategy to increase public transport accessibility for people with reduced mobility. Measures include, for instance, signaling for blind people, ramps to access stations and reserved seats in buses. As far as public transport workers are concerned, this project component w i l l provide support to the implementation o f a training program for transit workers that w i l l be designed with GEF funds. T h i s programs aims at either providing transit workers with the necessary qualifications to fulfill the requirements of the new system, or at helping them to acquire different s k i l l s to create small businesses. T h i s component also finances an analysis o f the impact o f Transantiago-PTUS on the quality o f l i f e o f public transport workers and their capacity to adapt to the new situation, and w i l l design corrective actions should potential problems be identified.

0 Mitigation of potential adverse impacts of transport infrastructure works (US$ 280,000). Although the Bank package (SECALs + TAL) i s not funding specific infrastructure investments, the Government w i l l carry out some infrastructure works to maximize Transantiago-PTUS’s benefits. Taking advantage of the fact that there i s a need to deal with involuntary resettlements and the environment under the urban transport reform program, this component aims at strengthening Chile’s capacity in this field as well as at harmonizing and refining the respective rules and procedures. Therefore, this component envisages an institutional strengthening program for agencies involved in involuntary resettlements. I t also includes the revision o f the resettlement policy framework drawing upon the Bank‘s safeguard policies and the establishment o f upgraded implementation rules and procedures for resettlement plans. Moreover, i t envisages the refinement and upgrading o f the environmental guidelines with the objective o f creating a harmonized set o f rules applicable to all urban infrastructure projects independently from the agency that carries them out.

4. Lessons learned and reflected in the project design

The lessons outlined below come from similar urban transport operations in BogotA, Mexico City, Lima as well as general operational experience in Chile. These lessons have been taken into account in the design o f this TAL and the implementation arrangement.

0 Urban transport development and air quality management involve long-term issues that require long- term responses. Changes in personal travel behavior - a key element to reduce traffic-generated air pollution - are unlikely to occur unless there i s a long-term government commitment to sustainable transport. This long-term vision has been spelt out in the 2000-2010 Santiago Urban Transport Plan and similarly also emerges from the Santiago’s air quality management plan.

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0 Planning for the long term, however, requires flexibility. The Mexico City experience has shown that, despite the best planning efforts in the preparatory stage, the need for adjustments to project activities becomes evident only during the plan implementation. Similarly, the Implementation Completion Report for the Bogot i Urban Transport Project states that “flexibility should be encouraged in some subcomponents, procedures or new technology areas”. This occurred in the case o f the Transmilenio components where adaptations had to be made in various areas, with very satisfactory results. Therefore, while each component o f the proposed project has been defined in considerable detail, the Loan Agreement should leave room for modifications during i t s implementation;

0 The Bank’s involvement should support an overall Government strategy. T h i s applies to most World Bank operations. The more successful urban transport and air quality projects, such as those o f Bogot i and Mexico City, as well as the Chile Urban Street and Transport Project, confirm this maxim. The proposed TAL supports the objectives o f Transantiago-PTUS by backing key elements o f existing policies and strategies, which are supported by al l levels of government;

0 Experience throughout the world demonstrates that there i s a need for strong political support in order to achieve urban transport reform. This i s clearly present in Chile, where the President i s personally supporting the implementation o f Transantiago-PTUS;

0 Capable institutions must be in place to implement urban transport reform. As demonstrated by the Curitiba and BogotB bus rapid transit (BRT) systems, important sector reforms and operational improvements as proposed under the Transantiago-PTUS project require visionary leadership with a willingness to take risks, long-term commitment and continuity. B y choosing a BRT system over a competing Light Rail Transit project, and by allocating adequate preparation resources, the Chilean Government has demonstrated its elected leadership and commitment. The TAL wi l l help to further define a process for the establishment o f coordinated urban transport and infrastructure planning mechanisms at the metropolitan level.

Lessons from recently completed Bank projects in Chile, including the Urban Streets and Transport Project, which closed in 1995, also indicate the importance of adequate supervision, especially for technical assistance projects, that by nature “involve uncertainty in the use o f resources, scope o f technical work, quality o f consultants, receptiveness o f the borrowing agency to TA inputs, and long-term commitment o f the implementing agency to follow-up”. I t i s suggested that “the best TA projects are those that are closely supervised and enjoy close technical (as well as managerial) interactions with the Bank throughout the duration o f project”. Other lessons that frequently arise point to the importance o f strong public involvement (e.g. dissemination and education campaigns), the great value o f “monitoring and evaluation, especially in the beginning o f reform efforts”, and the advantages o f the use o f executive decrees and regulation instead o f legislative actions to start reform measures.

5. Alternatives considered and reasons for rejection

Originally i t was envisaged to only go ahead with the SECALs. However, this would not have guaranteed that the sectoral institutions had the resources to carry out the analytical work necessary for the smooth implementation o f the reform and its sustainability. The TAL i s an excellent instrument to ensure the necessary resources for a rapid implementation o f the urban transport reform program. In addition, Chile was interested in the Bank’s follow-up o f the urban transport reform and the TAL seemed to be the best way for the task team to remain involved over a substantial period o f time and to maintain a technical and policy dialogue with Transantiago-SE.

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C. IMPLEMENTATION

1. Partnership arrangements

N o partnership arrangements are envisaged for this operation although, as pointed out in Technical Annex 1 that there are other institutions/agencies supporting or likely to support the PTUS.

2. Institutional and implementation arrangements

The government agencies beneficiaries o f this loan are Transantiago-SE, SECTRA, MINVU, SERVTU, SEREMITT-RM, CONAMA and MTTAJndersecretary of Transport (Subtrans). Transantiago-SE, the Executive Secretary o f the Committee o f Ministers for Urban Transport in Metropolitan Santiago, w i l l act as executing agency o f the project. It wi l l maintain a Project Coordination Unit (PCU), and w i l l be headed by a Project Coordinator and assisted by staff adequate in number, qualifications and experience. In this quality, Transantiago-SE wi l l be in charge o f the overall management and coordination o f the project. B y doing so it w i l l interact with the Bank and w i l l monitor and evaluate the project implementation. Transantiago-SE wi l l be responsible for the technical coordination o f the individual project activities and the interaction with the beneficiary agencies, which w i l l be responsible for the technical work o f their respective component or subcomponent The Ministry o f Foreign Affairs and MTT wi l l enter into an agreement with UNDP to define inter alia UNDP’s obligations to act as the Borrower’s disbursement and procurement agent for the project. Upon request from MTT, UNDP w i l l s i g n the contracts. Transantiago- SE w i l l coordinate among the different institutions, and wi l l fulfill the requirements for financial management, and reporting. In order to satisfactorily cope with these activities, Transantiago-SE has been strengthening i t s management and coordination structure by hiring new qualified management staff.

A new procurement assessment of Transantiago-SE, the executing agency o f this project on behalf o f MTT, was done during appraisal and resulted satisfactory.

In order to comply with Bank financial management requirements per OP/BP 10.02, a certified Financial Management Analyst carried out an assessment o f Transantiago-SE as a repeater project implementation unit based on the financial management assessment guidelines. The assessment covered the project’s financial management system (budgeting, accounting, internal control, auditing and reporting). The agency’s systems and staffing had already been evaluated when the GEF Chile Sustainable and Air Quality for Santiago Financial Management Assessment was performed in August 2003. At that time it was concluded that Transantiago-SE has institutional capacity to meet minimum financial management requirements.

The project components w i l l be implemented by the relevant government agencies under the coordination, management and supervision o f Transantiago-SE and with the assistance o f UNDP as project procurement and disbursement agency. The project financial transactions w i l l be recorded and controlled separately in Transantiago-SE’s accounting system.

Accounting reporting wi l l follow Chile’s public sector accounting standards and the accounting procedures set by the accounting division o f the Contraloria General de l a Rep6blica (CGR). Transantiago-SE wi l l provide, within six months o f the end o f each fiscal year an audit report, prepared by independent auditors satisfactory to the Bank. Transantiago-SE wi l l also be in charge o f supervising the technical assistance plan and monitoring key indicators for the project.

The Operative Manual approved by the Bank for the Chile Sustainable and Air Quality for Santiago w i l l be adjusted to include the procedures for this operation. This adjusted manual w i l l also cover the format and content o f the financial monitoring reports (FMRs) and the chart o f accounts. The audit terms o f

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reference wi l l be the approved for the existing operation. The assessment concluded that Transantiago- SE’s financial management system satisfies the Bank’s minimum financial management requirements. On the fiduciary risk, the assessment concludes that the inherent risk i s low due to country considerations discussed in annex 7 and the control r i sk related to the proposed project i s low at the time o f this evaluation. The overall risk assigned to the project i s low. The supervision plan i s designed to handle the risks identified.

R i S k S

3. Monitoring and evaluation of outcomeshesults

Risk Mitigation Measures

The project has been guided by a results framework to be used for project management and Bank supervision. Outcome indicators for each project development objective (PDO) and results indicators for each component have been identified and are included in Technical Annex 3. Transantiago-SE wi l l coordinate the informatioddata collection from the corresponding technical agencies (beneficiaries) to monitor the evolution o f the outcomes/results identified. Technical Annex 3 also sets up a schedule o f the advances expected for each PDO and component. T h i s wi l l serve as a guide for the supervision o f the TAL and as a mechanism to assess project performance during implementation and at the moment o f project completion.

4. Sustainability

The Borrower i s strongly committed to the urban transport reform with Chile’s President personally supporting it. The sustainability o f the reform i s based on a sound design, great experience and excellent capacity, and i s further supported by accompanying features, such as the engagement in a broad participatory approach, a commitment to continuous planning and special attention to safeguards. The Bank’s involvement per se should enhance the robustness o f the reform approach and to increase i t s acceptability/sustainability, while the proposed TAL has been designed mainly to support the implementation of the urban transport reform and thus further increase i t s sustainability.

5. Critical risks and possible controversial aspects

T o project development objectives Activities necessary to support the implementation, monitoring, evaluation and sustainability o f the urban transport reform not carried out in a timely manner and with the required quality Resettlement capacity not strengthened

Refined resettlement policy framework not implemented and proposed harmonized environmental guidelines

Advance preparation o f draft terms o f reference, monitoring of project progress and quality

Supervision o f the definition o f the staff profiles and the respective recruitment process, monitoring the selection o f the capacity strengthening activities and the quality o f resettlement policy framework and implementation procedures and strategies Involvement o f stakeholders in the refinement o f the guidelines

Risk Rating

with Mitigation

M

N

M

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Risk Mitigation Measures

existing agencies during project implementation

Risk rating: H (high risk), S (substantial risk), M (modest risk), N (negligible or low risk)

The TAL includes no particularly controversial issues that might pose reputational risk for the Bank.

6. Loadcredit conditions and covenants

Conditions for loan effectiveness:

0 Completion and adoption o f a project operational manual, satisfactory to the Bank, including inter alia, documents, procedures and requirements for procurement, the project accounting system (including chart o f accounts), internal controls, planning, budgeting, financial reporting (including FMR format), auditing (including terms o f reference to prepare a single audit opinion) and disbursing;

0 Execution o f an agreement with UNDP, under terms and conditions to be approved by the Bank, which shall include inter alia UNDP’s obligations to act as the Borrower’s disbursement and procurement agent for the TAL;

0 Auditors’ appointment by the Borrower according to Article V, Section 5.01. (c) o f the Loan Agreement;

0 Draft resettlement policy framework providing how potential resettlement under Transantiago-PTUS would be carried out finalized in a manner acceptable to the Bank.

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Legal covenants:

0 Within 12 months from the date o f effectiveness, finalization of the revision o f the resettlement policy framework for Transantiago-PTUS ; Within 12 months from the date o f effectiveness, finalization o f the revision of the environmental management guidelines.

D. APPRAISAL SUMMARY

1. Economic and financial analyses

Given the nature o f this TAL, a quantitative economic and financial analysis i s not an appropriate tool to assess the importance of the project. The pace and depth o f the reforms supported by this TAL wi l l ultimately determine the economic and financial benefits o f this loan.

I f the project i s carried out successfully, i t w i l l contribute to the successful implementation o f the urban transport reform and i t s future sustainability. It w i l l thus help to improve the quality o f l i fe o f Santiago’s citizens, enhance air quality and reduce noise, increase affordability for some o f the very poor, increase the economic efficiency o f the transport system and ultimately contribute to urban growth and prosperity.

2. Technical

The technical merits o f the project design have been examined by Bank staff over the course o f the project preparation and are considered to be sound and in line with international standards. The technical assessment w i l l continue throughout project preparation and implementation.

3. Fiduciary

On the Fiduciary Risk, the assessment concludes that the inherent r isk i s low due to country consideration. The GoC i s a sophisticated borrower with very capable institution and agencies and advanced procedures. Hence, i t can be presumed that the fiduciary responsibilities related to this project w i l l be assumed in a satisfactory manner. Chile i s acquainted with Bank rules, procedures, and bidding processes and it can be reasonably assumed that these w i l l be followed under this project. Transantiago- SE, as project executing unit, unites the appropriate technical, administrative, and financial management sk i l l s for the implementation. The overall r i sk assigned to the project i s low.

4. Social

The urban public transport reform has important positive social implications for the citizens o f Santiago as a whole, and for public transport users in particular. The r i sk o f adverse social impacts o f this reform are minor and a number of activities envisaged in the TAL have been designed to avoid or overcome these risks. Indeed, the TAL wi l l directly and positively impact on the social domain through capacity building and social work aimed at maintaining the standard o f l iving o f public transport workers, whether they continue working in the sector or leave it. I t also strives for greater inclusiveness in the transport system o f people with reduced mobility. Furthermore, the TAL wi l l foster participation and w i l l give a clear voice to Santiago’s citizens through the various surveys and participatory exercises. Finally, the social dimension i s also sustained through capacity strengthening and the refinement of rules and procedures in the field of urban infrastructure related safeguards, which w i l l ensure that the settlements related to the construction phase o f Transantiago-PTUS are carried out in a satisfactory manner.

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Key stakeholders, such as institutional actors (Central Government o f Chile, and municipalities), public transport operators and drivers, communities at the neighborhood level, NGOs, bus and equipment suppliers have been involved in the reform design and a participation plan has been prepared.

As far as the TAL i s concerned, the identification o f the individual project components has resulted from an interaction o f all major urban transport actors in Santiago.

5. Environment

The urban transport reform wi l l have net environmental benefits', and relative low potential negative impacts during the construction phase, which include nuisance associated to the levels o f noise, dust, air pollution, and traffic congestion.

A preliminary evaluation estimated the environmental health benefits o f the urban transport reform at US$ 17.6 millions per year in 1998 prices. The new public transport system i s also expected to make a major contribution to the improvement o f air quality and the reduction o f noise. The proposed TAL wi l l support this aspect through monitoring the environmental impacts o f the public transport system and the dissemination of the respective data. Moreover, the TAL wi l l also support the refinement and harmonization o f the guidelines for environmental management o f urban infrastructure works.

Environmental category o f this TAL i s rated C, since the project, by nature, w i l l have minimal or no adverse environmental impacts.

6. Safeguard policies

None o f the Bank safeguard policies w i l l be triggered by the project, given the nature o f a technical assistance project and the scope o f the activities to be supported.

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OPBP/GP 4.01) [I [ X I

Natural Habitats (OPBP 4.04) [I [ X I

Pest Management (OP 4.09) [I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [I [XI

Involuntary Resettlement (OPBP 4.12) [I [ X I Indigenous Peoples (OD 4.20, being revised as OP 4.10) E l [X I

Forests (OP/BP 4.36) [I [ X I

Safety o f Dams (OPBP 4.37) [I [XI

Projects in Disputed Areas (OPBP/GP 7.60) [I [XI

Projects on htemational Waterways (OPBP/GP 7.50) [I [ X I

~~~ ~

PMlo emissions from public transport are expected to be reduced by 75% and NOx emissions by 40%.

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7. Policy Exceptions and Readiness

No policy exception i s required to implement this TAL. The following terms o f reference for technical assistance activities that wi l l start in September 2004 are already available:

Testindfine-tuning and certification o f the economic model MODEC and quantification o f the environmental benefits o f Transantiago-PTUS Analysis and updating o f the socio-economic ESTRAUS models, development o f a model to forecast the income and motorization rate of households Impact Analysis of Transantiago-PTUS on urban development Institutional capacity strengthening in the area o f involuntary resettlements

All other terms of reference for activities to start in September 2004 are under preparation. Transantiago-SE i s currently executing the GEF project, which means that it already has experience with Bank rules and procedures. I t has also recruited additional staff to cope with the greater workload and i s ready to start functioning as soon as the loan i s approved.

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Annex I: Country and Sector or Program Background CHILE: Santiago Urban Transport Technical Assistance Loan

Economic Context

Chile’s macroeconomic policies and strong fundamentals have to a large extent insulated i t from regional crises and have allowed continued growth in recent years, albeit at lower rates than in the mid-1990s. Economic performance continues to outpace that o f the rest o f the LAC region, and compares well with growth rates o f the world’s top performing region, East Asia and the Pacific. In per capita terms, GDP growth has averaged 4% per year since 1990, versus 1% for the LAC region during the same period. The decline o f the economic growth rate over the past five years i s the result of generally less favorable external, as well as domestic, conditions.

To buttress i t s foundations for growth, Chile has continued to promote an impressive reform agenda to tackle the domestic obstacles to rapid growth and to place itself in a stronger position to reap the benefits o f a global upturn. The wide-ranging l i s t o f structural reforms covers a gamut o f topics, including among others state modernization and transparency, regulatory reforms to spur investment and growth, enhanced financial regulation and supervision, labor market measures, and a flock o f Free Trade Agreements with i ts main trading partners. The administration has also emphasized i ts commitment to further improving the already high quality o f education and health services and has several initiatives in place in these areas. The elimination o f extreme poverty i s a flagship endeavor o f the administration, and a comprehensive program to attain this goal i s underway.

City context

Metropolitan Santiago has about 5.3 mill ion people, l iving in 36 municipalities. This i s close to 40% of the country’s population. Economic output o f the Santiago region i s close to half o f the gross domestic product (47%) and it can be viewed as the economic growth engine o f the country. Unemployment and income inequality are high. Spatial patterns reflect this, with low-income communities in the south and north-west o f the city, and higher-income communities in the north-east. The sustained rate o f Chilean economic growth has led to a rapid expansion o f Santiago, placing increasing pressure on its transport infrastructure and services, and raising associated accessibility problems. Urban sprawl i s making the journey to work excessively long and costly for many urban dwellers, especially for some o f the very poor. Rising incomes, accompanied by increasing car ownership, have also led to increased congestion and traffic-generated air pollution, and threaten to overwhelm the existing transport infrastructure. Car ownership and the number o f person-trips have increased by 175 and 70%, respectively, over the last fifteen years.

The government’s urban transport plan for Santiago (Transantiago-PTUS) i s thus a response to the challenges raised by the city’s rapid growth, and by the need to ensure that Santiago i s well-positioned to meet the demands o f an increasingly global economy. The plan aims at reducing transport costs, not only in the financial sense, but also in terms o f time and environmental damage, and to increase transport efficiency, enhancing Santiago’s productivity, competitiveness and contribution to Chile’s economic growth. B y improving the coordination o f public sector activities in land use, transport planning, infrastructure investment, traffic management, and bus franchising, the plan w i l l make i t possible for Santiago to reconcile high mobility with high quality o f urban life. The plan i s also a partial response to some o f the more intractable problems associated with urban poverty and inequality, not only in terms of access to economic opportunities. Through improved access to schools, health facilities, and wider social interaction, the plan i s also a partial response in terms of broader social inclusion.

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Existing Regulatory Arrangements

The system for bus regulation was last reformed in 1992 and franchises were awarded for a 10-year period, recently extended unti l Transantiago-PTUS i s operational. At that time the decision was made that, in order to protect the environment o f the city, all services that crossed the center would be subject to competitive tendering. Total bus supply was limited and the conditions for selection o f successful bids included the quality o f the vehicles offered as well as the fare required.

Under that system, 77% of bus services - those which cross the central areas o f the city - are presently provided under competitively tendered franchises. The remainder are provided under conditions o f free entry subject only to qualitative standards. Inevitably, routes overlap substantially.

The franchises are granted for individual routes, calling for between 22 and 40 vehicles per route. They are awarded to “empresas administrutivas” which may then subcontract operations on the franchises to smaller units or individual owner operators. Most services are provided under such sub-contracting. Some vehicle owners employ two drivers per vehicle to keep the vehicle in service for at least 16 hours per day. Many other drivers, and some o f the owner operators may work for between 12 and 15 hours per day. The drivers typically are paid a fixed minimum salary o f CL$111,000 per month (approx. US$l85) plus 18%. In addition they receive a percentage o f the collected revenues. It i s believed that because o f the lack o f secure ticketing and revenue recording arrangements many drivers further supplement their incomes substantially by not turning in the full revenue collected, to take their monthly income to CL$300,000 (approx. US$500) to CL$400,000 (approx. US$ 665) per month. Because o f the nature o f part o f that income true earnings are not firmly known.

The criteria for selection o f successful bidders are formula based, with fares (flat fares being required) being the most significant component, but quality o f vehicle entering the equation. However, there i s a cap announced on the fares that w i l l be acceptable, which has recently been bid by al l bidders. This suggests either that there i s effective collusion (in the tendering o f contracts in Santiago in 1998, there was only one bidder for 76% o f route contracts and 97% of bids coincided with the maximum allowed tariff according to the bidding documents [Sanhueza and Castro, 1999]), or that the formula does not give sufficient weight to fares to make them an effective competitive instrument.

Existing Service Provisions

There are presently 387 urban routes o f which nearly three quarters cross the central area. The density o f the network permits the majority o f trips to be made directly on one service. Only about 8% of bus trips involve taking more than one vehicle (and paying more than one fare), though transfers do occur in the metro system and between buses (particularly metrobuses which feed metro stations) and the metro. The fare i s a flat fare, (presently 290 pesos, i.e. around US$ 0.48) with children in the f i r s t eight grades o f schooling carried free and senior schoolchildren and university students carried at one third the full fare.

The combination of the fragmentation of ownership, overlapping franchises, the form o f labor contracts and the lack o f effective supervision o f performance under the franchises has some striking effects on operational behavior. Drivers are induced to race for passengers, and to keep their vehicles on the road for the whole day, even where the license stipulates lower off-peak than peak frequencies. As a consequence there i s over-provision o f capacity off-peak and additional air pollution that could be avoided without deteriorating the quality o f the bus services.

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Existing Industry Structure

At present, the 7,700 buses operated by about 20,000 persons can be categorized as follows: single bus owners account for 3 1 % of the fleet; operators with 2 to 4 buses accounting for a further 37%; 18% o f the buses are in companies with between 5 and 20 vehicles and only 14% in companies with more than 20 buses. Each “empresa administrativa” arranges with smaller companies to provide the services. Almost all operators are members of one o f the four trade associations, which look after the members’ interests. These associations offer various services to members, including organizing bulk insurance contracts, and even offer a comprehensive medical service to bus owners and their families2.

Environmental Conditions

Air quality in the metropolitan region i s bad, but improving. CONAMA collects data automatically from a network o f 9 monitoring stations for air quality (7 fixed, 2 mobile) located at different sites within the city. The stations measure concentrations of PMlo, 03, NOz, SO2, and hydrocarbons (methane and non- methane). The number of days of pollution alert, emergency or pre-emergency has fallen steadily from 79 days per annum in 1997 to 25 days in 2003, but has now reached a plateau and has even started to slightly increase again. More detail, including details of global gas emissions i s contained in the Project Appraisal Document o f the GEF Air Quality and Sustainable Transport Project for Santiago, approved by the World Bank Board in November 2003 There i s considerable spatial variation in quality, with the worst conditions to be found in poorer areas such as Pudahuel and El Bosque and the least bad in richer areas such as Las Condes and Providencia. Of particular concern i s that the fraction o f fine particulates (PM2.5) which i s believed to be most damaging to health, i s very high. The annual average values in Santiago are nearly twice the norms proposed for this grade o f particulate proposed in Europe and the U.S (from 20-25 micrograms per cubic meter.) In relation to the national standards3 the region was declared as saturated in respect o f total suspended particulates, breathable particulate matter, carbon monoxide and ozone.

In attributing emissions to buses, CONAMA has used emission factors for EPA91, EPA94 and EPA98 vehicles from the US, using New York driving cycles. MTT intends to undertake dynamometer testing of heavy duty vehicles with local driving cycles to update the emissions factors for the next inventory. According to the CONAMA emissions inventory o f October 2000, buses were responsible for about 50% of the total ambient levels o f respirable particulate matter generated by the transport sector and about 25% of the total level. The bus-generated proportions were even higher for NO,, and a little lower for SO,. In contrast, gasoline powered private cars and trucks were responsible for the majority o f CO emissions (see Table 1). Chemical analysis o f particulates as a basis o f source attribution, not used in the inventory, suggests an even higher proportion o f the more damaging small particulate matter can be attributed to transport.

I t i s worth mentioning here that one o f the hypotheses to explain the appearance of a cartel and why deregulation did not lead to lower tariff, i s precisely that the associations were able to offer insurance and legal services at cheaper rates than what the market would offer. Thus an independent operator that did not follow the associations’ tariff policy would face significantly higher insurance and legal costs (“The limits to competition in urban bus services in developing countries”, Antonio Estache, World Bank Institute and And& G6mez-Lobo, University o f Chile).

See Anuario de calidad del aire. Region Metropolitana, 1999-2000.

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Table 1. Emissions inventory: October 2000

Source : CONAMA

The present bus fleet operating in Santiago i s almost exclusively diesel powered ranging in emission standard from Euro 1 (EPA91) to Euro 3 (EPA98), with recent purchases being exclusively Euro 3 standard. Due to heavy investment in bus replacement during the last decade, in 2003 about 20% of the buses were Euro 3 standard. With the present maximum sulfur content o f diesel at 300 ppm, (and average nearer to 200 ppm) and a government policy o f making 5Oppm sulfur available by June 2004, Euro 3 (EPA98), which incorporates catalytic converters and particulate traps, w i l l be the minimum standard required for new buses under the proposed franchising system for trunk routes. The continuation o f use o f Euro 2 (EPA94) vehicles i s likely to be permitted, but discouraged by the bidding criteria, for the feeder systems.

The published objective o f the government i s to reduce the level o f bus emissions o f PMlo by 75% and NO, by 40% between 1997 and 2005. NO, i s not only precursor o f ozone, the concentration o f which exceeds the norm with high health impacts, but also o f PM2.~. There i s scope for improvement associated with the change in technology proposed in the project, as well as that associated with the reduction in vehicle kilometers and the increase in bus commercial speed. For greenhouse gas emissions, the reduction w i l l depend on reductions in fleet and vehicle kilometers, on improved driving cycles resulting from reduced bus congestion; and on the introduction o f hybrid vehicles that may require up to 30% less fuel per km.

Private Sector Involvement

Bus services are entirely operated by the private sector and metro services by the public sector. This wil l not change under the proposed reform. However, i t i s now proposed that terminals, revenue collection services, the public transport management and information center and part o f the segregated busways wi l l be concessioned to the private sector who w i l l build, maintain and transfer said busways, thus significantly increasing the private sector role in urban public transport in Santiago. In the Bogota Transmilenio system, worldly considered as an urban transport best practice, the services are al l privately operated but private sector involvement does not go as far as it w i l l in Santiago since in Bogota the basic infrastructure was constructed on public account.

The reasoning behind the different approach in Santiago i s primarily concerned with the availability o f public funds for completing the segregated busways. The metro constructions presently underway, including the extensions to lines 2 and 5 and the construction o f the new line 4 involve public sector investment estimated at US$ 1600 mill ion over a period o f 5 years. The public sector costs o f the

21

public/private participation toll roads i s also US$ 120 mill ion for the Costanera Norte, the f i rst tol l road of seven to be opened over the next years.

The government program: 2000-2010 Santiago Urban Transport Plan

The plan i s partly inspired by international successes, such as Transmilenio in BogotA, with the ultimate objective i s to keep the public transport share at the current level or to increase it.

The key reforms o f this program, now in early stages of implementation, are summarized in session A.l of this PAD.

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Annex 11: Major Related Projects Financed by the Bank and/or other Agencies CHILE: Santiago Urban Transport Technical Assistance Loan

During the 80’s and 90’s the World Bank collaborated with the GoC in a number o f road sector and highway projects as well as an Urban Streets and Transport Project, all carried out in a satisfactory manner. When the latter terminated in 1997, the GoC advised the Bank that it no longer required i t s financial assistance in the urban transport sector, with the exception o f possible restricted technical assistance.

Only since 2001 the Bank has again stepped into this sector in Chile, working on a GEF Air Quality and Sustainable Transport project for Santiago, which was approved by the Board in November 2003. The purpose o f this US$ 6.980 mill ion grant, which w i l l close in August 2008, i s to help reduce greenhouse gases (GHG) from ground transport through the promotion o f a long-term modal shift to more efficient and less polluting forms o f transport, and the adoption o f sustainable low-GHG transport measures. To that end, the GEF project supports the implementation of the 2000-2010 Urban Transport Plan for Santiago and complements the proposed TAL under the social and environmental dimension.

The project team i s also in contact with the Carbon Financing Group at the World Bank to examine whether Transantiago-PTUS could benefit from carbon funding, either through the PCF or other potential carbon buyers. The discussion i s ongoing but expectations are modest since investors have been so far reluctant in relation to transport related carbon emission reductions for different reasons, such as the complexity o f establishing a baseline in the urban transport field and the magnitude o f transport investments. However, CONAMA i s currently funding a US$SO,OOO study to elaborate the Project Design Document that corresponds to the first step o f the validation and registration process o f any Clean Development Mechanism Project.

The International Finance Corporation (IFC) met with Transantiago-SEs General Coordinator and other managers to see how they could support the winners o f the various projects to be tendered, if appropriate. Information about IFC’s and products was made available in the data rooms for the various projects at Transantiago-SE’s request, but no formal request for financing from potentially interested companies has yet been sent to the IFC, probably because the bidding processes for both the infrastructure bits and the bus services are s t i l l in their early stages.

The Inter-American Development Bank (IADB) i s currently executing a $1,250,000 grant from the Multilateral Investment Fund to support modernization o f the surface mass transit system o f the metropolitan area o f Santiago. The resources have been used to develop the concept design and concession schemes for the restructured public transport system to be implemented under Transantiago- FTUS, and to launch some pilot training programs for transit workers to be employed under the new scheme.

The Clean Air Initiative (CAI) for Latin American Cities, a special initiative lead by the World Bank Institute (WBI) and the Latin American and Caribbean Region o f the World Bank to promote the dissemination of best practice and capacity building on air quality management in Latin American Cities. In Santiago, the C A I provided the opportunity for sharing the city’s experience in i t s air pollution decontamination plans among partner cities (Buenos Aires, Rio, Mexico City, Lima-Callao and Bogoth), and set the grounds for advancing with the Air Quality and Sustainable Transport Project. The Technical Director o f CONAMA chaired i t s goveming board until March 2004.

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Annex 111: Results Framework and Monitoring CHILE: Santiago Urban Transport Technical Assistance Loan

Intermediate Results Indicators for Results Each Component One per

Component

Results Framework

Use of Results Monitoring

To support the implementation, monitoring, evaluation and continuous planning of the urban transport reform

Component One:

proposedfine-tuned; - User surveys and demand forecast results available; - Transport planning models

- Strategies

To strengthen the capacity and improve the procedures to mitigate potential adverse impacts of transport infrastructure works

Component One:

- Monitor the quality'and progress in the respective activities; - Take corrective actions, if required; - Ensure that final products are available as planned.

YR1-5:

- SECALs benchmarks met (to the extent that they are supported by the TAL); - Reform implementation, monitoring, evaluation and continuous planning based on the results o f the analytical work o f the TAL; - Transport demand forecast models and other transport planning tools developed or fine-tuned. - Capacity strengthening carried out; - Procedures and strategies for resettlement plan implementation revised and harmonized; - Resettlement policy framework revised, taking into consideration Bank standards; - Upgraded and harmonized guidelines for environmental management o f urban infrastructure projects readv.

Use of Outcome Information YR1-3: Monitor the progress and quality o f analytical and preparatory work, training, strategies development, assessments, make sure that instruments necessary to refine the reform design are completed, and take Corrective actions, if required.

YR2-5: Ensure that strategies and instruments necessary to fine-tune the reform design and implementation are prepared and the necessary information available.

YR1: - Monitor the hiring process in Transantiago-SE, supervise the selection o f the capacity strengthening activities, gauge the quality and progress in the revision of the resettlement policy framework, the revision of procedures for the implementation o f resettlement plans and the refinement and harmonization o f the environmental guidelines; - Take corrective actions, i f required.

YR2-3: Ensure that the capacity strengthening exercise i s successfully completed, the resettlement policy framework and the procedures and environmental management guidelines upgraded and harmonized.

Component One: Fine-tuned and updated urban transport policy

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Results One per

Component Two: Improved knowledge on the quality / impact of public transport services Component Three: Information on the environmental benefits o f public transport in public domain

Four: Greater attention paid to land-use issues in transport planning

Component Five: Greater attention paid to social issues in public transport

Results Indicators for Each Component

updatedldeveloped; - Draft law prepared. Component Two: - User survey results available

Component Three: - Air quality and noise monitoring system to measure the impact o f transport in place; - Emission and noise reduction benefits o f the new public transport system measured and information disseminated. Component Four: - Land-use and transport planning model updated (MUSSA); - Information on equilibrium in the real estate market available; - Measures to facilitate transport and land-use coordination proposed; - Information System ( S N U ) and electronic operational model (e- SEISTU) implemented. Component Five: - Inf&"-itiodeducation campaign carried out; - Capacity building and training for transit workers carried out; - Impact o f the urban transport reform on the public transport workers and their adaptation capacity known; - Potential conflict areas identified.


Component Two:

- Monitor the user survey's quality and progress; - Take corrective actions, i f required; - Ensure that final results are available as planned.

YR1-5:

Component Three:

- Supervise the design and implementation o f the monitoring system to measure the impact o f transport and monitor the measurement o f air pollution and noise emissions; - Take corrective actions, if required; - Ensure that information i s made publicly available in the most appropriate manner.

YRI-5:

Component Four:

- Monitor MUSSA update; - Take corrective actions, if required; - Make sure that the proposal o f measures to facilitate transport and land-use coordination are available as planned, and that the Information System (SNU) and electronic operational model (e-SEISTU) are implemented.

YRI-5:

Component Five:

- Supervise the design o f informatiodeducation campaign for people with reduced mobility; - Monitoring o f the quality o f the training program targeting transit workers and o f the design o f the impact analysis; - Take corrective actions, if required; - Ensure that the informatiodeducation campaign for people with reduced mobility, the training program and the impact analysis are carried out in the most appropriate way.

YR1-5:

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Intermediate Results One per

Component

Component Six: Increased capacity in mitigating potential adverse impacts o f transport infrastructure works

Results Indicators for Each Component

Component Six: - Capacity strengthening carried out; - Procedures and strategies for resettlement plan implementation revised and harmonized; - Resettlement policy framework revised, drawing upon Bank standards; - Guidelines for environmental management o f urban infrastructure projects harmonized and upgraded.


Component Six:

- Monitor the hiring process in Transantiago-SE, supervise the selection o f the capacity strengthening activities, and gauge the revision of the resettlement policy framework and the procedures and strategies; - Take corrective action, if needed; - Gauge the quality and progress in the revision o f the environmental management guidelines, and take corrective actions, if required; - Ensure that the capacity strengthening exercise i s successfully completed, the resettlement policy framework revised, the procedures revised and the environmental management guidelines harmonized and upgraded.

YRl-5:

26

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Annex IV: Detailed Project Description CHILE: Santiago Urban Transport Technical Assistance Loan

Five o f the project components o f the TAL aim at directly supporting the urban transport reform agenda in the following crucial areas: general urban transport, urban public transport, environment, land-use and social aspects o f transport. These components address the pressure that increased mobility and car use and a reduced public transport share put on the urban transport system. They also focus on more quality and efficiency in the system, greater social inclusiveness, increased passenger satisfaction and enhanced affordability for the poor. The last project component aims at strengthening Chile’s capacities and procedures in the field o f urban infrastructure related involuntary resettlement and environmental management. The project components are:

1. Project component 1: General Urban Transport (US$3,063,000)

The Santiago PTUS lays out a very ambitious and progressive urban transport reform program, the successful implementation of which needs to be supported by analytical work and facilitated through legal changes and sound implementation strategies. T h i s project component aims at developing, fine-tuning and certifying the tools to carry out reliable forecasts and analyses, implementing analytical work to obtain qualitative and quantitative information on urban passenger and freight movements and on the impact o f the new transport system on transport demand, focusing also on low-income households, preparing legislation for important legal changes, and designindtesting sound strategies for road space recovery, user information and the overall marketing o f the Transantigo system. I t consists o f the following subcomponents:

Pilot testing Transantiago-PTUS’s communication, image building, marketing and user information strategy

This pilot test aims of assessing the impact o f the Transantiago-PTUS’s communication, image building and marketing strategy as well as i t s information system on a reduced scale. The results o f this pilot test w i l l allow evaluating the design solutions in a more precise and realistic way, providing valuable information on the needs and perceptions o f the end users to be incorporated in the final design. I t w i l l ultimately facilitate traveling within the system and consolidate the image and structure o f the new system in the community.

Design and implementation of a participatory approach to define a strategy for the recovery of the road space released through the reduction of congestion

The construction of several urban motorways, the rationalization o f public transport and other measures envisaged in the urban transport plan w i l l reduce congestion and make available some road space in the city of Santiago. This subcomponent w i l l ensure that the reallocation o f this space i s taken seriously and that citizens and other stakeholders have a say in defining the future use o f these spaces. I t w i l l imply the design and implementation o f a participatory strategy to’decide on the future use o f this space. This participation w i l l take place through surveys, meetings, workshops and table discussions, etc. In a second phase, the strategy for public space recovery w i l l be designed, taking into account the results o f the participatory process. Finally, a proposal w i l l be made to include this strategy as a new chapter o f MINVU’s Manual for Land-use and Construction. B y involving Santiago’s citizens in the recovery o f public spaces, the acceptability o f the urban reform wi l l be increased, and ultimately i t s smooth implementation facilitated.

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0 Analysis of the impact of Transantiago-PTUS on transport demand

Demand studies w i l l be realized through household panels, which allow to collect qualitative and quantitative data on mobility patterns in a certain area and information on how and why these patterns change due to the introduction o f different transport policies and projects. T h i s analysis w i l l provide better insights about the impact of Transantiago-PTUS on the users’ behavior (travel pattern), paying special attention to low-income groups.

0 Update of the Origin-Destination survey for passenger transport

This subcomponent wi l l update the Santiago Origin-Destination survey carried out in 2001. The findings o f this survey w i l l allow for the permanent planning o f the new transport system.

0 Origin - Destination survey for freight transport in Metropolitan Santiago

The objective o f this subcomponent i s to design and implement a survey that permits to identify the freight mobility patterns in Metropolitan Santiago based on SECTRA’s directory o f company location and activity type. Since the urban transport reform envisages the reduction o f freight vehicle use in Metropolitan Santiago, this survey w i l l provide the information on the characteristics o f freight transport supply and demand necessary to implement this policy objective.

0 Updating, testing and fine-tuning of the economic model MODEC and quantification of the environmental benefits of Transantiago-PTUS

The objective i s to update, test and fine-tune the economic MODEC model with regard to the social evaluation o f project environmental benefits, to test and validate it, and to obtain the necessary approval to use i t to quantify in economic terms o f the environmental benefits associated with the Transantiago-PTUS system.

Analysis and updating of the socio-economic ESTRAUS models, development of a model to forecast the income and motorization rate of households

T h i s project activity includes the development o f a model to forecast the income, the motorization rate and the size o f households. T h i s tool i s essential to correctly forecast the transport demand, which in turn i s of crucial importance in the planning process o f the transport system since the socio- economic characteristics o f passengers determine their travel behavior. The results obtained from the run o f this model wi l l be used us input o f ESTRAUS, SECTRA’s transport planning model, to forecast the transport demand and to continuously adapt the corresponding public transport supply.

0 Preparation of a draft law for congestion pricing

This activity aims at analyzing the current law on congestion pricing f i rs t debated by the Chilean Congress in 1991, reformulated in 1994 due to fierce opposition, and approved by the House o f Deputies in 1996, followed by the Senate in 1997. This law, however, has countless restrictions and provisions, and makes congestion pricing very difficult to apply. The analysis w i l l be based on the results o f the GEF-funded study on “Congestion Pricing in the City o f Santiago” and w i l l include a comparison of congestion pricing laws in other countries. The new draft law w i l l focus, among others, on privacy issues and eligible options to use tol l revenues. I t w i l l facilitate a possible introduction of congestion pricing in Santiago.

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2. Project component 2: Public Transport (US$260,000)

Priority in the Santiago urban transport reform program i s given to public transport, which puts this sector in the spotlight and places high expectation on it. Therefore i t i s extremely important to have an exact knowledge of the users needs, expectations, priorities, preferences and the impact o f the new system on them, especially on poorer households. A specific analysis to compare the impact o f the old and new system in terms o f travel times, cost and number o f transfers, focusing especially on people from poorer areas, w i l l be co-financed by local funds. In this respect, budget allocations for 2004 and 2005 have already been made. This component of the TAL wi l l mainly focus on the following subcomponent:

User perception survey of the new public transport system

This subcomponents w i l l allow to collect information on the user perception o f the public transport service quality. The sample w i l l include users from low-income areas. The survey w i l l also permit to separate the results by socio-economic categories. The collected information i s essential for the continuous improvement o f the quality o f the public transport system.

3. Project component 3: Environment (US$349,000)

This component wi l l support the environmental dimension o f the urban transport reform by providing public transport users, the general public and those responsible for the operation o f the public transport system with regular data on air pollution and noise created by the system.

0 Design and implementation of a monitoring and information system of the impact of the transport system on air quality and noise

This component wi l l finance technical assistance and equipment to monitor air quality and noise level o f the transport system. In this way the benefits of the new public transport system can be evaluated and w i l l be made available to the public.

4. Project component 4: Land-use (US$680.000)

For the urban transport system to be efficient there i s a need to consider i t s implications on the land-use dimension and to effectively coordinate the transport and urban planning functions. This component consist o f three main activities:

0 Impact Analysis of Transantiago-PTUS on urban development

The introduction o f Transantiago-PTUS i s expected to lead to important urban changes. The current tendencies in the localization o f homes and commercial activities may significantly change in line with the new public transport supply and the suggested regulatory measures for private and freight transport. Therefore this subcomponent implies an update of the submodels o f MUSSA4, based on the results o f the Origin-Destination Survey 2001 and the recalibration o f the ESTRAUS model (transport

MUSSA i s a software and a mathematical model, that represents the Urban Real Estate Market and allow planners to forecast and simulate its economic equilibrium under different demographic, macroeconomic and regulatory scenarios. With MUSSA, the user can simulate the Real Estate Market for these scenarios and make economic evaluations o f the impacts caused in the city. I t can interact with most transport models as to assess the impacts o f land use and transport projects and policies. See http:ttwww.mussa.cl/

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demand forecast model5). The model wi l l then be used to simulate the new equilibrium in the real estate market created by the introduction of Transantiago-PTUS. The results o f this analysis w i l l support the future planning in both the transport and the urban planning sectors.

Analysis of the transport and urban planning entities and design of instruments to facilitate inter-institutional coordination

The objective of this subcomponent i s the development of tools and procedures that facilitate the intersectoral coordination at all levels in order to implement and develop the transversal objectives o f MINVU and MTT, and harmonize land-use and urban transport policies. I t w i l l include an analysis o f the transport and urban planning coordination entities, the assessment o f current obstacles and bamers, the identification of coordination and information needs and the design o f tools to facilitate this coordination. I t w i l l define the scope o f the inter-institutional agreement (called “Convenio de Programaci6n”) that w i l l materialize the desirable coordination processes.

Technological and legal support for the development of the “one-stop process” (Ventanilla Unica) project

SEREMITT i s currently developing an Impact Evaluation System for the Urban Transport System (SEISTU, http://www.seistu.cl/seistu/definicion.asp). This system aims at assuring that the baseline for the transport system i s maintained, meaning that new real estate developments, not envisaged at the moment in which the baseline was established, w i l l not change the service level o f the infrastructure in relation to the standards for which it was planned. I t w i l l also guarantee that possible negative externalities o f such developments are minimized and that the cost o f these mitigation measures i s bome by those that generate the extemalities and not by the users o f the impacted infrastructure. This subcomponent includes the implementation o f the tools developed by SECTRA, necessary for SEREMITT-RM to carry out a “one-stop process” function in this field. This includes the Information System for the “one-stop process” function (SIVU) and the electronic operational model to assure access via Internet (e-SEISTU). It w i l l also lead to the preparation o f the draft legislation to allow for the application o f SEISTU and the functioning o f the “one-stop process”.

Project component 5: Social aspects of transport (US$940,000)

A modem transport system has to take i t s social dimension duly into account and this component supports Transantigo-PTUS as far as public transport workers and public transport users with reduced mobility are concerned.

Design and implementation of a communication and education strategy regarding Transantiago-PTUS’s accessibility features for users with reduced mobility

Santiago’s Program for the Modernization o f Public Transport aims at facilitating the integration o f marginalized people and groups, in particular for people with reduced mobility and includes a number o f specific measures to allow them to use the public transport system and reduce their difficulties. Such measures include, for instance, signaling for blind people, ramps to access stations and reserved seats in buses. This subcomponent w i l l support the design and implementation o f a strategy to raise awareness about these measures that strive to improve public transport accessibility for people with reduced mobility and, if necessary, provide training to make these people frequent users o f the system.

http://www.sectra.cl/productos_servicios/software/estraus.htm

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0 Capacity building, business creation and re-conversion of the workers in the transport sector

The urban transport reform wi l l introduce important changes for the current labor force and special attention has to be paid to potential negative effects. Therefore, this subcomponent aims at designing and implementing a training program for public transport worker to acquire the necessary qualifications either to fulfill the requirements o f the new public transport system, or to acquire different sk i l l s to create small businesses outside the transport sector, in line with the solutions designed in the studies financed with the GEF and the LABD grants.

0 Assessment of the change in quality of life for drivers due to the implementation of Transantiago-PTUS

In addition to train public transport workers and strengthen their capacity, it i s also essential to know how they adjust to the system in order to take appropriate measures and anticipate potential conflicts. Therefore, under this subcomponent the change in the quality o f l i fe o f public transport workers due to the implementation of Transantiago-PTUS wi l l be assessed. Focus w i l l be placed on the identification o f changes in their attitudes and aptitudes, the assessment o f their adaptation capacity to the new systems and the identification o f conflict potentials.

6. Project component 6: Mitigation of potential adverse impacts of transport infrastructure works (US$280,000)

Although the TAL i s not funding specific infrastructure investments, the authorities have indicated that some infrastructure projects w i l l be undertaken that would help maximize the benefits o f Transantiago-PTUS. Taking advantage o f the fact that there i s a need to deal with involuntary resettlements and the environment under the urban transport reform program, this component aims at strengthening Chile’s capacity in this field as well as at harmonizing and refining the respective rules and procedures.

0 Institutional capacity strengthening in the area of involuntary resettlements, including the updating of the revised resettlement framework

Chile has a law governing all involuntary resettlements resulting from expropriations based on public interest, which sets the legal framework to compensate or ensure that the livelihood conditions o f property owners are preserved. Other affected people (tenants, encroachers and other informal residents) can get compensation if ordered by a judge. All affected households are helped by SERVIU’s social specialists, to apply for housing subsidies or low-interest programs existing for low income population. To cover the cases not protected by the law, MOP uses the environmental legal framework to determine compensation for all other residents. All involuntary resettlements taking place as a result o f implementing the F’TUS wi l l be conducted by SERVIU, the regional service from the Ministry of Housing. SERVIU has already started collecting information about the type o f settlements present in the corridors where road upgrading may require expropriations. However, considering that the local law o f expropriation fa l ls short o f the Bank policies on involuntary resettlements, as reflected in the safeguard policies, this subcomponent envisages capacity and institutional strengthening in this field. As part o f the preparation o f this TAL, a dialogue on an improved resettlement policy framework was initiated. SERVIU presented to the Bank the proposed treatment o f involuntary resettlement cases, according to the local law, and the Bank provided information on the additional requirements to meet the Bank safeguard standards. A revised resettlement policy framework was prepared and i s on file.

35

The objective o f this subcomponent i s to strengthen capacity within the entities responsible for resettlement, to devise tools that facilitate the execution of involuntary resettlements, and to lay the groundwork for proper compensation for the loss o f goods, work, productive capacities, and their existing social network of those affected by the urban transport reform. The activities include a comprehensive institutional strengthening program in the area o f resettlement, targeting SERVIU and Transantiago-SE, the entities in charge o f carrying out the resettlement in the framework o f Santiago’s Urban Transport Plan. I t w i l l simultaneously aim, inter alia, at assessing the risks associated with the gaps identified between OP 4.12 and the recently adopted resettlement policy framework and propose measures to fill the gaps, particularly those concerning assessment and compensation mechanisms (including for persons without legal rights), consultation, participation and conflict resolution mechanisms. The finalization o f the revised and upgraded resettlement policy framework taking into consideration the above-mentioned issues i s made a legal covenant of this TAL, to be complied with one year after the effectiveness date o f said loan. In addition, adequate supervision o f the resettlement enhancement activities to be executed during the implementation o f the loans through the continuous implication o f the team’s resettlement specialist w i l l be assured.

Upgrading of the guidelines for environmental management plans of infrastructure works

Chile has a relatively high capacity and well-instituted system for environmental assessment o f projects with potentially high impacts regulated by Law 19.300. Depending on the type o f projects, and on the anticipated level o f impact, projects need to enter the national System o f Environmental Impact Assessment (SEIA) with either a full EIA or a Declaration o f Environmental Impact. SEIA i s a “one-stop process” system operated by the National Commission on Environment (CONAMA), where all relevant authorities and the public have the chance to provide feedback and recommendations on the proposed project. Projects with low potential environmental impacts, such as most investments under the Santiago urban transport reform program, are only required to follow the social and environmental guidelines that exist within MOP and SERVIU.

T h i s subcomponent aims at upgrading and harmonizing a set o f environmental management guidelines that can by applied by all entities involved in urban infrastructure projects. It w i l l include an analysis and comparison o f the manual on environmental, land use management and public participation for infrastructure projects that are currently only applied by MTT and the environmental guidelines used by SERVIU. It w i l l also include suggestions for refinement and wi l l culminate in a proposal for a harmonized set o f rules.

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Annex V: Project Costs CHILE: Santiago Urban Transport Technical Assistance Loan

Local Foreign Total U S $million US $mill ion US $million Project Cost B y Component and/or Activity

Project component 1 : General Urban Transport 2.70 0.36 3.06 Project component 2: Public Transport Policy Project component 3: Environment Project component 4: Land-use Project component 5: Social aspects o f transport Project component 6: Mitigation o f potential adverse impacts of transport infrastructure works Project Management and Coordination Transantiago-SE

Operating Costs Transantiago-SE Management and Operating Costs MINVU Financial and Procurement Audits

Total Baseline Cost Physical Contingencies Price Contingencies

0.26 0.26 0.12 0.23 0.35 0.48 0.20 0.68 0.80 0.14 0.94

0.18 0.10 0.28

0.25 0.10 0.35 0.15 0.15 0.09 0.09 0.08 0.08

5.1 1 1.13 6.24

Total Project Costs 5.1 1 1.13 6.24 Front-end Fee 0.06 0.06

Total Financing Required 5.1 1 1.19 6.30

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Annex VI: Implementation Arrangements CHILE: Santiago Urban Transport Technical Assistance Loan

The government agencies beneficiaries o f this loan are Transantiago-SE, SECTRA, MINVU, SERVIU, SEREMITT-RM, CONAMA and MTTNndersecretary o f Transport (Subtrans). MTT through Transantiago-SE, the Executive Secretary o f the Committee o f Ministers for Urban Transport in Metropolitan Santiago, w i l l act as the executing agency o f the project. I t w i l l maintain a Project Coordination Unit (PCU), and wi l l be headed by a Project Coordinator and assisted by staff adequate in number, qualifications and experience. In this quality, Transantiago-SE wi l l be in charge o f the overall management and coordination o f the project. B y doing so it w i l l maintain a policy dialogue with the Bank and w i l l monitor and evaluate the project implementation. Transantiago-SE wi l l be responsible for the technical coordination o f the individual project activities and the interaction with the beneficiary agencies, which w i l l be responsible for the technical work o f their respective component or subcomponent. The following table gives an overview o f the technical responsibility for each subcomponent.

Project subcomponents

38

Transantiago-SE wi l l be assisted by UNDP as project procurement and disbursement agent. For this purpose the Ministry o f Foreign Affairs and MTT will enter into an agreement with UNDP to define inter alia UNDP’s obligations to act as the Borrower’s disbursement and procurement agent for the project. UNDP wi l l s i g n the contracts upon request of MTT. Transantiago-SE wi l l coordinate among the different institutions, and wi l l fulfill the requirements for financial management and reporting.

MTT (Transantiago-SE)

( P W Project Execution, Coordination,

Supervision, Financial Management and Reporting

The following graph shows the institutional arrangements for this project.

UNDP Procurement and Disbursement

Agent

Institutional Arrangements

Seetra MINW SERVIU CONAMA SEREMITT- RM

MTT I Subtrans

39

Annex VII: Financial Management and Disbursement Arrangements CHILE: Santiago Urban Transport Technical Assistance Loan

The project components w i l l be executed by the relevant government agencies, under the overall coordination and supervision o f MTT through Transantiago-SE, the Executive Secretary o f the Committee o f Ministers for Urban Transport in Metropolitan Santiago. I t w i l l be assisted by UNDP as the project procurement and disbursement agency. Transantiago-SE i s also implementing the GEF-financed project on Sustainable Transport Air Quality for Santiago, the Financial Management Assessment o f which i s used for this assessment.

Transantiago-SE, the executing unit o f this operation, has the requisite institutional capacity and the human resources required for the project administration. In order to assure that Transantiago-SE wi l l be fully capable to undertake the financial management responsibilities as the project execution unit, a detailed Action Plan was prepared and agreed with the counterparts to be fully implemented by effectiveness. The main issue to be completed and presented to the Financial Management Team by effectiveness related to financial management i s the adjustment o f the existing project operational manual to include the following:

0

Adapt the existing financial information system to project requirements (adjust chart o f accounts); Agreed the Financial Monitoring Report (FMR) formats for monitoring and evaluation purposes; Adjust the existing Operational Manual for this operation.

The action plan i s part of the financial management assessment included in this document.

Executing Agency and the Project

Transantiago-SE, as Project Implementation Unit (PlU), w i l l be responsible o f the general coordination and the financial management arrangements. I t wi l l be assisted by UNDP in the procurement and disbursement functions. The financial management arrangements include accounting, budgeting, internal control, external auditing, financial monitoring reports reparation and disbursement.

Staffhg

Transantiago-SE has provided evidence of the assignment o f skilled staff to the financial management functions fulfilling the organizational structure designed for the project.

Financial Management Information System

Transantiago-SE’s Administrative Coordination w i l l maintain the accounts for the project separately in i t s own accounting system, with the chart o f accounts reflecting the categories and components of the project (this i s part o f an Action Plan). Also Transantiago-SE wi l l maintain an adequate asset register for the project.

The accrual basis w i l l be used for internal reporting and the FMRs.

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The public sector accounting rules are comprehensive and consistent with public intemational standards. They are set by the CGR and entities are responsible for developing and maintaining their own accounts within the rules6. Transantiago-SE wi l l prepare the following FMRs:

0

0 Procurement monitoring reports, and 0

A summary o f uses and sources of funds and a statement o f uses by project activity;

Output monitoring reports, all in accordance with formats to be agreed upon at effectiveness, the completion o f which wi l l be part o f an Action Plan.

Additionally, Transantiago-SE wi l l prepare annual financial statements in line with the Bank requirements. I t w i l l be responsible for the financial management o f the project (including accounting, timely submission o f the Financial Management Reports - FMRs, annual audits and disbursements). The FMR wi l l be submitted semiannually to the Bank, jointly with project progress reports. The physical progress indicators wi l l be consulted with the Task Team Leader (TTL) to ensure the usefulness o f the FMR in the overall project supervision.

Flow of Funds - Payments and Operation of Bank Accounts

The project w i l l not use a Special Account because the proceeds o f the Loan wi l l be transferred directly to UNDP from the Loan account in the World Bank (as direct payments). The local counterpart funds wi l l be transferred to the UNPD to be available as counterpart funds. To execute the project, MTT through Transantiago-SE wi l l request direct payments to UNDP equivalent to six months o f forecasted disbursements.

The financial management and reporting system for the project meets the requirements o f the Bank. They include the accounting and budgeting, preparation o f financial reports, and auditing in accordance with intemational accounting and auditing standards.

Justification on the use of funds to the Bank wi l l be made based on the format o f traditional Statements o f Expenditures (SOEs). All support documentation w i l l be maintained by Transantiago-SE for post- review and audit purposes for up to one year after the final withdrawal from the loan. Reimbursement requests should be sent to the Bank on a monthly basis.

Applications for replenishment would be submitted quarterly. The initial deposit w i l l be estimated to last for the first six month o f planned expenditures. Withdrawal applications w i l l be on the basis o f Applications for Withdrawals (Form 1903) accompanied with justification o f expenditures made during the period. The project wi l l request access to Bank’s Client Connection webpage to get the 1903 Form from the web and to perform on a periodic basis the reconciliation process between their bank account and the resources received from the different sources.

Chile: Report on the Observance of Standard and Codes - Fiscal Transparency Module, IMF, August 2003

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Audits

Entity Specific

Project Specific

Control Risk Financial Management System

Internal Control Framework

Transantiago-SE wi l l be responsible for preparing financial statements for the project. The project w i l l be audited annually following Terms o f Reference acceptable to the Bank by auditors considered acceptable to the Bank Guidelines (Annual Financial Reporting and Auditing for WB-financed activities, FM Board, June 2003). The Terms o f Reference w i l l correspond to a single audit opinion due to the assessed low level o f risk. The project w i l l prepare these Terms o f Reference and submit them to the Bank for clearance. Regarding the choice of the auditors, two options are envisaged: either the Supreme Audit Institution o f Chile, the Contraloria General de la Repu’blica, or the auditor to be chosen by UNDP as a result o f UNDP’s own rules regarding financial audits.

L o w

Low

Low

Low

Risk Analysis

Transantiago-SE financial systems were assessed and found acceptable, although the project specific general ledger has to be set up. Control risk can be considered low on the basis o f the strengths o f the systems and the oversight from Transantiago-SE’s financial systems and Intemal Audit. Hence the control risk i s considered low.

Comments Secondary sources indicate good performance o f Chile’s public sector in budget management; also it has an excellent record in execution of Bank projects. Subject to rigorous control o f Chile’s financial management arrangements. FM operations are not o f a complex nature; they w i l l be carried out by Transantiago-SE. Management has some experience in project execution and i s very conscious in financial management matters.

Not yet in place. Reporting format, accounting system, and Chart o f accounts to conditions o f effectiveness. Transantigo-SE wi l l be subject to Ministry o f Transpoisupervision (Intemal audit control). A specific consultant firm w i l l be hired to assess and provide technical assistance in Transantiago-SE internal organization.

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Action 1. Administrative Operative Manual approved by the Bank, including inter alia:

0

0

0

Chart o f accounts approved by the Bank FMR format approved by the Bank. Terms o f reference to prepare a single audit oDinion

Supervision P TvDe

Responsible Entity Completion Date Transantiago-SE Before Effectiveness

Transantiago-SE Before Effectiveness

Transantiago-SE Before Effectiveness Transantiago-SE Before Effectiveness

Visit Timing General Supervision Twice a year for first year, once a year for the following years With each report

Once a Year

FMR Review

Mechanism Objective Integrating supervision Review FM system; missions at least one time each Supervise Specid Account; semester Reconciliation. Use of funds;

0 Follow up on External Auditors recommendations/ raised issues; Review staffing.

Over the FMR submitted to the 0 Review FMR information Bank consistency;

0 Raise issues disclosed in FMR. Over the Audit Report 0 Review Audit Report; submitted to the Bank Raise issues disclosed in Audit

Report.

Audit Review

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Annex VIII: Procurement CHILE: Santiago Urban Transport Technical Assist. Loan

Goods and services w i l l be procured in accordance with the provisions o f the “Guidelines for Procurement under IBRD Loans and IDA Credits” dated January 1995 and revised in January and August 1996, September 1997 and January 1999. Procurement o f consultant services w i l l follow the “Guidelines for the Selection and Employment o f Consultants” published by the Bank in January 1997 and revised in September 1997, January 1999 and May 2002.

The provisions o f Schedule 4 o f the Loan Agreement shall also apply.

Procurement Responsibility

Under the GEF Air Quality and Transport Project for Santiago coordinated by Transantiago-SE, UNDP has been acting as disbursement and procurement agent and w i l l do so also under the proposed TAL. Therefore, before project effectiveness, the Ministries o f Foreign Affairs and Transport and Telecommunication w i l l enter an agreement with UNDP, approved by the Bank, to define the respective rights and obligations. A satisfactory procurement assessment o f Transantiago-SE was done during appraisal. The previous assessment was carried out for the GEF grant.

Procurement Planning

An overall procurement plan had been prepared in draft by Transantiago-SE and the task team and was revised and finalized during appraisal. A detailed procurement plan for the f i rs t 18 months o f project implementation was also agreed during project appraisal.

The procurement plan w i l l be reviewed annually, no later than January 31 of each year during project implementation. Plan updating may be useful with greater frequency during the f i r s t two years after loan effectiveness as and when requested by the Bank. T h i s w i l l provide an effective project management practice tool to ensure timely and efficient delivery o f annual plans. Training on preparation and use o f procurement plans should be also provided by the Banks not later than the project launching date.

Procurement Arrangements

Table A shows the project costs and procurement arrangements.

Goods and Services

Goods and services procured under this project include the Passenger Origin Destination Survey (which w i l l be contracted through ICB with prequalification) and the contracting o f training for public transport workers. For such services with an estimated value o f more than US$ 100,000 but not exceeding US$ 350,000, National Competitive Bidding (NCB) procedures w i l l be used with standard project bidding documents agreed in advance with the Bank. Contracts for training services which are estimated to cost less than US$ 100,000 per contract may be procured using national shopping procedures based on at least three quotations, satisfactory to the Bank. Goods include also environmental monitoring equipment estimated to cost less than US$400,000 per contract, which the Bank agrees can only be purchased from a limited number o f suppliers, and may be procured under Limited International Bidding.

44

Consultant Services

Consultant services wil l be selected following QCBS as the preferred method. Services estimated to cost less than US$lOO,OOO per contract may be selected under the Consultants Qualifications method. The Freight Origin Destination Survey and the Financial Audit wil l be selected following LCS. Individual Consultants shall be employed for consultant assignments requiring specialized expertise following the provisions set forth in Section V o f the Bank Selection Guidelines.

Prior Review Thresholds

Table B summarizes the prior review thresholds. Prior review i s applied to all contracts for goods and services procured under International Competitive Bidding (ICB). For contracts procured under Limited International Bidding, National Competitive Bidding and International or National Shopping only the f i rs t contract or bid package w i l l be subjected to prior review.

For consultant services awarded to firms, prior review w i l l be needed for all contracts awarded sole- source and for those valued at US$ 200,000 or more, including TOR, RFP, short list, full review o f technical and final evaluation reports, and negotiated contract. For individual consultants, prior review i s required for all contracts costing US$ 50,000 equivalent or more. Prior review i s also required o f all TORS for consultant services awarded to f i rms, estimated to cost less than US$200,000.

Special Provisions on Procurement to be included in the Loan Agreement It was agreed that Special Procurement conditions would be included in the Loan Agreement in order to avoid conflicts and misunderstandings arising from current procurement practices in Chile during project implementation. The proposed Special Conditions are as follows:

a) For the procurement o f goods and services (excluding consultants’ services), the two-envelope system defined in footnote 18 of the Guidelines wi l l not be authorized;

b) Consulting f i r m s shall be selected on the basis o f short-lists and not subject to an open competition selection process;

c) The evaluation process and the related documents shall be kept confidential until the contract i s awarded.

45

Table A: Project Costs by Procurement Arrangements (US$ mill ion equivalent)

Procurement Method'

Expenditure Category ICB NCB Other2 N.B.F. Total Cost 1. Works 0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00) 2. Goods and Services 1.11 0.70 0.79 0.00 2.60

(0.1 1) (0.70) (0.79) (0.00) (2.60) 3. Consultant Services 0.00 0.00 3.41 0.00 3.41

(0.00) (0.00) (3.24) (0.00) (3.24) 4. Miscellaneous 0.0 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00) 5. [Operating costs] 0.00 0.00 0.15 0.00 0.15

6. [Audits] 0.00 0.00 0.08 0.00 0.08 (0.00) (0.00) (0.08) (0.00) (0.08)

(0.00) (0.00) (0.14) (0.00) (0.14)

7. [Front-end fee] 0.00 0.00 0.06 0.00 0.06 (0.00) (0.00) (0.06) (0.00) (0.06)

~

Total 1.1 1 0.70 4.49 0.00 6.30 (1.11) (0.70) (4.3 1) (0.00) (6.1)

lFigures in parentheses are the amounts to be financed by the {Loan/Credit/Trust Fund}. All costs include contingencies.

2Includes civi l works and goods to be procured through national shopping, consulting services, services o f contracted staff o f the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

46

Table B: Thresholds for Procurement Methods and Prior Review Contract Value

Threshold Procurement Method Review (US$ thousands) (US$ millions)

Contracts Subject to Prior Expenditure Category

1. Works 2. Goods Contract = >350

350 > Contract > 100 Contract = < 100

3. Services Contract = >350 350 > Contract > 100

Contract = < 100

4. [Consulting Contract = >200 Services: Firms]

Contract < 200

Contract < 100

5. [Consulting Contract = >50 Services: Individuals]

Contract < 50

ICB NCB

International or National Shopping

ICB NCB

International or National Shopping

QCBS and LCS (only the Freight

Origin Destination Survey)

QCBS

CQ and LCS (only the Financial Audit)

IC

IC

All First Contract First contract

All First Contract First contract

All TOR, RFP, shortlist o f f i rms , full review o f technical and final evaluation reports, and final negotiated contract

TORs only

TORs only

All TOR, CVs and Form o f Contract

None 6. [fill in]

Total value o f contracts subject to prior review: US$3,4 mill ion Overall Procurement Risk Assessment: Average Frequency o f procurement supervision missions proposed: One every 12 months (includes special procurement supervision for post-review/audits)

Table C: Allocation o f Loan Proceeds Expenditure Category Amount in US$ mill ion Financing Percentage

Goods and services 1.99 100% of foreign expenditure and 95% of local expenditure

Consulting Services 3.55 95 % Training 0.07 100% Operating costs 0.14 95% Unallocated 0.29 95%

Total Project Costs 6.04

Front-end Fee 0.06 Total 6.10

Interest during construction

Use o f statements o f expenditures (SOEs): Yes Special Account: N o

47

Annex IX: Economic and Financial Analysis

CHILE: Santiago Urban Transport Technical Assistance Loan

NOT APPLICABLE

48

Annex X: Safeguard Policy Issues CHILE: Santiago Urban Transport Technical Assistance Loan

Although the SECALs are not funding specific infrastructure investments the authorities indicated that they wi l l be carrying out some infrastructure works to maximize Transantiago-SE’s benefits. These works include (i) road upgrading to segregate busways (in the comdors Santa Rosa: Alameda-Calle Placer; and Pajaritos), including adequate pedestrian areas and bus stops; (ii) building o f modal transfer stations; and (iii) road connections (Blanc0 Encalada - Arica and Suiza - Departamental) to improve the connectivity o f the network and make possible a better spatial distribution o f bus routes.

Santiago’s urban transport plan wi l l have net environmental and social benefits, and relatively low potential negative impact associated with the construction phase. Environmental impacts w i l l mainly result from nuisance associated to the levels o f noise, dust, air pollution, and traffic congestion during works. Some involuntary resettlements wi l l also result from the road upgrades.

Chile has a relatively high capacity and standards for managing environmental and social safeguards. There i s a well-instituted system for environmental impact assessment o f projects with potentially high impacts, regulated by Law 19.300. Depending on the project type and the anticipated level o f impact, projects need to enter the national System o f Environmental Impact Assessment (SEIA) with either a full EIA or a Declaration of Environmental Impact. SEIA i s a single window system operated by the National Commission on Environment (CONAMA), where all relevant authorities and the public have the possibility to provide feedback and recommendations on the proposed project, and i t s environmental impact assessment.

Projects not considered as o f high potential environmental impact, and therefore not required to enter SEIA, w i l l have to follow environmental and social guidelines existing at both the Ministry o f Works and SERVIU (local implementation service o f the Ministry o f Housing). This i s the case o f most investments to be implemented under the Santiago Urban Transport Plan. These guidelines are to be followed by contractors, who have to prepare environmental management plans and contingency plans, and aim at mitigating environmental impacts of infrastructure works. In addition, MOP’S practice includes environmental impact assessment o f some o f the urban infrastructure works to be allocated to concessionaires (under BOT schemes). SERVIU has environmental guidelines, too. The guidelines for mitigating environmental impact during construction w i l l be upgraded under the proposed TAL and a harmonized set o f rules drafted.

For evaluation o f urban transport plans, programs, and policies, Chile has started a process o f Strategic Environmental Assessment for Urban Transport Plans for the Metropolitan Area o f Santiago, and it aims at institutionalizing a more permanent mechanism, s imi la r to SEIA. The GEF Air Quality and Transport Project wi l l fund, within the next 6 months, studies for the next phase o f the Santiago Urban Transport Plan’s SEA, including capacity strengthening, citizen participation and institutional strengthening strategies.

Regarding involuntary resettlements, there i s a Law o f Expropriations under which all property owners and dwellers with legalized titles are compensated according to market value o f land and property. Other dwellers can go to court for settlement of disputed cases. Also, al l households l iving in the area and not compensated are always assisted to participate in government programs for housing subsidies targeting the poorest segments o f the affected population. SERVIU i s the authority in charge of handling most involuntary resettlements in the Metropolitan Area of Santiago, except in some cases where concessions are implied and therefore managed by MOP.

49

The involuntary resettlements under Santiago’s urban transport plan w i l l be handled according to the following strategy:

[i] definition of immediate corrective actions which are already included in the resettlement policy for Transantiago, dated March 2004, and which reflects the on-going dialogue with SERVIU, the entity in charge o f the resettlement policy;

[ii] a US$ 200,000 resettlement component to be funded under this operation. I t includes a comprehensive institutional strengthening program in the area o f resettlement, targeting SERVIU and Transantiago-SE, the entity in charge o f implementing Santiago’s Urban Transport Plan. It w i l l simultaneously aim, inter alia, at assessing the risks associated with the gaps identified between OP 4.12 and the recently adopted resettlement policy framework and propose measures to fill the gaps, particularly those concerning assessment and compensation mechanisms (including for persons without legal rights), consultation, participation and conflict resolution mechanisms. The finalization o f the revised and upgraded resettlement policy framework taking into consideration the above-mentioned issues i s made a legal covenant o f the Technical Assistance Loan, to be complied with one year after the effectiveness date o f said loan;

[iii] adequate supervision o f the resettlement enhancement activities to be executed during the implementation o f the loans through the continuous implication o f the team’s resettlement specialist.

50

Annex XI: Project Preparation and Supervision CHILE: Santiago Urban Transport Technical Assistance Loan

Planned Actual PCN review 10/02/2003 10/02/2003 Initial PID to PIC Initial ISDS to PIC Appraisal Negotiations Board/RVP approval Planned date o f effectiveness Planned date o f mid-term review

021 13/2004 03/08/2004 04/0 1/2004 09/30/2004 03/3 1/2007

02/ 12/2004 02/ 12/2004 03/18/2004 04/ 1 9/20O4 06/0 1/2004

Planned closing date 07/3 1/2009

Key institutions responsible for preparation o f the project: MTT, Transantiago-SE, and SECTRA

Bank staff and consultants who worked on the project included:

Name Title Unit

Elisabeth Goller Transport Specialist TUDTR Gerhard Menckhoff Consultant LCSFT

Jaime A. Roman Lead Procurement Specialist LCOPR Judy Baker Senior Economist - Poverty Specialist TUDDR Zeinab Partow Country Economist LCSPE Juan Lopez-Silva Senior Environmental Specialist LCSEN

Luz Meza-Bartrina Senior Counsel LEGLA Morag Van Praag Senior Finance Officer LOAG3 Ken Gwilliam Consultant SASE1 Andres Mac Gaul Procurement Specialist LCOPR Slobodan Mitr ic Consultant ECSIE Richard Podolske Consultant ECSIE Jitendra Shah Senior Environmental Engineer EASES

Pierre Graftieaux Urban Transport Specialist, TTL LCSFT

Antonio Leonard0 Blasco Financial Management Analyst LCOAA

Margarita Rosa De Castro Illera Resettlement Consultant LCSFT

Anna Wellenstein Senior Urban Specialist LCSFU

Bank funds expended to date on project preparation: A. Bankresources: 0 B. Trust funds:O C. Total: o7

1. Estimated annual supervision cost: 70,000

The expenses for the preparation of this TAL are covered by the lending budget of the attached adjustment operation.

51

Annex XII: Documents in the Project File CHILE: Santiago Urban Transport Technical Assistance Loan

A. Project Implementation Plans

Procurement plan. Revised resettlement policy framework.

B. Bank Staff assessment

Initiating Memo o f the Chile CFAA. Financial Management assessment. Assessment o f Agency’s Capacity to Implement Project Procurement

C. Other

Mission reports (in parallel SECALJiles):

Back to office report o f identification mission - March 17-25,2003 Back to office report of identification mission - April 29-May 2 and May 7-9,2003 Back to office report of identification mission -June 9-13, 2003 Back to office report o f preparation mission - August 4-1 1,2003 Back to office report o f preparation mission - November 13-14,2003 Back to office report o f preparation mission - January 26-30,2004 Back to office report of appraisal mission - March 26-31,2004

Resettlement policy for Transantiago / Politica de Reasentamiento en el marco del Plan Transantiago, dated March 2004

Background documents:

Chile: Report on the Observance o f Standard and Codes - Fiscal Transparency Module, IMF, August 2003 Project Appraisal Document for the GEF Project, Santiago Sustainable Transport and Air Quality

52

Annex XIII: Statement of Loans and Credits CHILE: Santiago Urban Transport Technical Assistance Loan

Original Amount in US$ Millions

Difference between

expected and actual

disbursements

Project F T Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. ID Rev’d PO82037 2004 CL-Social Protection 10.71 0.00 0.00 0.00 0.00 10.71 0.00 0.00

PO77282 2003 CL-Science for the 25.26 0.00 0.00 0.00 0.00 25.01 2.99 0.00

PO69259 2002 CLPubExpenditure 23.23 0.00 0.00 0.00 0.00 17.47 5.24 0.00

PO68271 2002 CL-Lifelong Learning 75.75 0.00 0.00 0.00 0.00 71.17 24.01 0.00

PO55481 1999 CL-HIGHER 145.45 0.00 0.00 0.00 0.00 56.18 49.35 0.00

TA Loan

Knowledge Economy

Management

and Training

EDUCATION PO55480 1999 C L M U N I C D E V T I I 10.10 0.00 0.00 0.00 0.11 1.66 1.77 -0.70

Total: 0.00 0.00 0.00 0.11 182.20 - 0.70 290.50 83.36

53

CHILE STATEMENT OF FC’s

Held and Disbursed Portfolio In Millions of U S Dollars

Committed Disbursed

IFC IFC N Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. Approval

~

1991193 1999 198919 1 I99 1996 2003 1994196197 1994 1996 2000

Aconcagua CBTI Escondida FEPASA Lan Chile Moneda Mgt Pionero Fondo Proa Fund San Antonio

0.00 0.00 0.00 1 1.60 30.00 0.00 0.00 0.00 35.00

0.45 0.00 0.00 0.83 0.00 16.66 5.60 0.00 0.00 0.00 0.13 0.00 3.77 0.00 6.64 0.00 3.70 0.00

0.00 0.00 0.00 4.68 0.00 0.00 0.00 0.00

65.00

0.00 0.00 0.00

1 1.60 0.00 0.00 0.00 0.00

24.15

0.45 0.00 0.00 5.60 0.00 0.13 3.77 6.64 3.70

0.00 0.83

12.91 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 4.68 0.00 0.00 0.00 0.00

44.85 0 TFSA 0.00 4.44 0.00 0.00 0.00 4.44 0.00 0.00 2003 TRANSELEC 60.00 0.00 0.00 0.00 60.00 0.00 0.00 0.00

Total portfilio: 136.60 24.73 17.49 69.68 95.75 24.73 13.74 49.53

Approvals Pending Commitment

FY Company Loan Equity Quasi Partic. Approval

2002 San Vicente 0.02 0.00 0.00 0.02 2003 Thames Chile 0.04 0.00 0.00 0.04

Total pending 0.06 0.00 0.00 0.06 committment:

54

Annex XIV: Country at a Glance CHILE: Santiago Urban Transport Technical Assistance Loan

Latin Upper- POVERTY and SOCIAL America middle-

Chile &Carib. income 2002 Population, mid- year (millions) 156 GNi per capita (Atlas method, US$) 4260 GNi (Atlas method, US$ billions) 66 4

Average annual growth, 1996-02

Population p') 13 Laborforce (%) 20

M o s t recent estimate (latest year available, 1996-02)

Povett y (%of population below national po verty line) l7 Urban population (%of totalpopulation) 86 Life expectancyat birth (years) 76 Infant mortality (per 10001ive births) 9 Child malnutntion ("of children underg 1 Access to animproved watersource (%ofpopulation) 93 nliteracy (%ofpopularionage t5+) 4 Gross pnmary enrollment (%of school-age population) 6 3

Male io4 Female 61

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1982 1992

GDP (US$ billions) 243 419 Gross domestic investment/GDP 1E3 238

Gross domestic savingslGDP 9 4 252 Gross national savingslGDP 215

Current account baianceiGD P -95 -23 Interest paynents/GDP 80 2 7 Total debt/GDP 711 457 Total debt servicelexports 20 8 Present value of debtlGDP Present value of debt/exports

Eworts of goods and servtcedGDP 8 4 307

1982-92 1992-02 2001 (average annualgrowth) GDP 6 8 50 2 8 GDP oercamta 5 0 36 15

527 3,280 1727

15 2 2

76 71 27 9

86 11

M) u 1 P 8

2001

66.5 m.7 347 22.7 8 8

-19 2 7

57.8 29.5 56.6

-672

331 5,040 1668

12 18

75 73 B

90 7

135 136 x15

2002

642

2 5 63 0 331

2002 2002-06

2.1 4.0 0.9 3.0

STRUCTURE o f the ECONOMY

(%of GDP) Agriculture Industry

Services

Private consumption General government consumption Imports of goods and services

Manufacturing

(average annual gro Wrh) Agriculture Industry

Services

Private consumption General government consumption Gross domestic investment Imports of goods and services

Manufacturing

1982 1992

55 9.9 34.7 38.1 8.5 20.5

59.8 52.0

75.3 65.2 15.3 9.7 21.3 29.3

1982-92 1992-02

7 A 1.8 5.7 5.1 6.4 3.1 5.7 3.6

5.4 5.8 1.5 3.6

14.6 5.0 9.4 8.4

2001 2002

8.8 34.3 15.8 56.9

65.3 P.0 32.7

2001 2002

6.5 2.1

-0.3 2.9

3.0 2.7

-B.8 -13

>evelopment diamond'

Life expectancy

;NI Gross ier primary :apita enrollment

1

Access to improved water source

-Chile

>evelopment diamond'

Life expectancy

;NI Gross

.apita nroilment ier primary

Access to improved water source

-Chile Upper-middle-income group I __

Economic ratios' c Trade

Economic ratios'

Trade

+ Investment Domestic savings

Indebtedness

-Chile - Upper-middle-ncome group I Indebtedness

-Chile - Upper-middle-income group

-GDI -GDP I Growth of exports and imports (%)

20

m 0

-M

-20

2

55

Chile PRICES and GOVERNMENT FINANCE

Domes t i c p r ices (%change) Consumer prices Implicit GDP deflator

Government f inance (%of GDP, includes current grants) Current revenue Current budget balance Overall sumlusideficit

TRADE

(US$ millions) Total eqaorts (fob)

Copper

Manufactures Total imports (cif)

Food Fuel and energy Capital goods

FNitS

Eqaort price index (1995=00) Import priceindex(895=00) T e n s of trade (1995=WO)

BALANCE o f PAYMENTS

(US$ millions) w o r t s of goods and services Imports of goods and services Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

Memo: Reselves including gold (US$ millions) Conversion rate (DEC, local/US$)

1982

9.9 8.5

1982

3,706 1685 375

1207 4,094

590 632 697

1982

-2,304

50.9

EXTERNAL DEBT and RESOURCE FLOWS

(US$ millions) 1982

7 ,38 IBRD 200 ID A 20

Total debt outstanding and disbursed

Total debt service IBRD IDA

3,676 28 I

Compositionof net resourceflows Official grants 7 Official creditors -69 Private creditors 1,497 Foreign direct investment 401 Portfolio equity 0

WorldBank program Commitments Disbursements Principal repayments

0 32 14

1992

15.4 118

22.9 5.0 2.3

1992

x),007 3,686 1,005 4,031 x),183

108 2,540

75 86 87

1992

t2,364

544

-1881 376

-957

3,455 -2,498

9,009 362.6

n , a o

1992

19,a 1,928

13

2,693 3 P

1

56 54

532 935 338

3 0 200 8 8

2001

3.6 15

22.8 3.2

-0.3

2001

18,050 6,746

116 9,070 6,334

2,589 3,418

65 1l7 55

2001

22,315 21221 1,094

-2,757 422

-1243

2,363 -It20

8,331 834.9

2001

38,398 728

7

6,648 182

1

23 -P1

1461 4,476

-219

0 39 119

2002

3.0 2.6

22.8 2.4 -1.1

2002

8 ,03 7,151 1182 9,614 7,?51

2,718 3,589

66 P7 53

2002

23,019 20,6?3 2,400

-2,808 -529

-165

7,495 688.9

2002

40,432 555

6

7,702 252

1

0 -313

1,385 0 0

0 28

202

In f la t ion (X) I

97 98 99 00 01 0

-GDP deflator -CPI

I Export and impor t leve ls (US$ mill.)

I 20.000

15,wO

10,000

5.030

0

i O2 I 96 97 98 99 03 01

Exports Imports

I Current account balance t o GDP ( O h )

0

1

-2

-3

-4

.5

-6

:ompos i t ion of 2002 debt (US$ mill.

F 36,400

h - IBRD E- Bilateral B - IDA D - Other dtilateral F - Private

G - Short-lei C - I M F

S

56