x, 3 3§J -S~-'~-C- /17Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 12159-CH

STAFF APPRAISAL REPORT

CHILE

THIRD ROAD SECTOR PROJECT

NOVEMBER 29, 1994

Infrastructure Operations DivisionCountry Department ILatin America and the Caribbean Regional Office

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

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Currency Equivalents

Currency Unit: Chilean Peso (Ch $)US $1 = Ch $425 (July 1994)

Weights and Measures

Metric System

FLscal Year

January 1 - December 31

Abbreviations and Acronyms

ADT Average Daily TrafficBOT Build, Operate, TransferCONAF Corporaci6n Nacionai Forestal (National Forest Corporation)CONAMA Comisi6n Nacional del Medio Ambiente (National Environmental

Commission)EFE Empresa Ferrocarriles del Estado (State Railway C' npany)EMPORCHI Empresa Portuaria de Chile (Chilean Port Authority)ENAP Empresa Nacional de Petr6leo (National Petroleum Company)FERRONOR Ferrocarril del Norte (State-owned Northern Railway Company)HDM III Model Highway Design and Maintenance Standards Model HIIDB Inter-American Development BankIFS International Financial Statistics of the International Monetary FundIRI International Roughness IndexIERR Internal Economic Rate of ReturnJ-EXIM Export-Import Bank of JapanMIDEPLAN Ministerio de Planificaci6n y Cooperaci6n

(Ministry of Planning and Coordination)MINVU Ministerio de Vivienda y Urbanismo

tMinistry of Housing and Urban Development)MOP Ministerilo de Obras Pilbllcas (Ministry of Public Works)MIT Ministerlo de Transporte y Telecomunicaciones

(Ministry of Transport and Telecommunications)NPV Net Present ValueODEPLAN Oficina de Planificacion Nacional (National Planning Office)PCC Portland Cement ConcreteRE Road ExpendituresRON Research Octane NumberRUC Road User ChargesTA Technical AssistanceUMA Unidad del Medio Ambiente (Environmental Unit)UTMA Unidad Tecnica del Medio Ambiente (Environmental Technical Unit)VAT Value-Added TaxVialidad The Roads Directorate of the Ministry of Public Works

CHILETHIRD ROAD SECTOR PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Loan and Project Summary ....................... IV

1. THE TRANSPORT SECTOR . ................................. 1An Overview-The Economy ..... .......... ................. 1Infrastructure Investment .................................... 1Major Developments in the Tiansport Sector ........ ................ 2

Government Policy Toward the Tranport Sector .................. 2Roads ..................................... 2Ports ..................................... 3Railways ..................................... 4vlrban Transport ..................................... 4

Issuies in the Road Sector .................................... 5Road Infrastructure Deficiencies and Funding Shortfalls .... ......... 5Deteriorating Road Traffic Safety .................... 5i ...... S

Road Sector Expenditure Program and Cost Recovery .................. 7Experience with Previous Bank Lending in the Road Sector ............... 9

Lending Objectives .................................... 9Lessons from Past Lending Operations ........................ 9

2. THE PROJECT ....................... 11Project Origin and Objectives ................................ 11Radonale for Bank Involvement ................................ 12Project Description ................................ 13Project Cost and Financmg ................................ 13Economic Evaluation ................................ 16Environmental Impact ................................ 18Project Benefits and Risks ................................ 18

3. PROJECT IMPLEMENTATION . ............................... 19Organization and Execution . 19Procurement and Consultancy Sevices. 19Disbursements ...................................... 22Accounts and Auditing ..................................... 23Monitoring and Evaluation ................................... 23Agreements to be Reached and Recommendation ..................... 24

This report is based on the findings of: (a) an appraisal mission tbat visited Cile in November/December l992,wluchcomprised Messrs./Mmes. Kazuko Uchimura (mission leader), Sergio Miquel, Roberto Armijo and Susannah Hopkins(consultants); and (b) a post-appraisal mission comprised of Messrs./Mme Maria Lucy Giraldo (mission leader) andSergio Miquel (consultant) that visited Chile in July 1994. Messrs./Mmes. Ana Marfa Eigen, Susannah Hopkins, CraigLeisWer and Elizabeth Vargas helped with the preparation of this report. Mr. C6sar Queiroz was the Peer Reviewer.The Sector Division Chief, Projeca Advisor and Depatmental Director were Messrs. ALfonso Shnchez, Orville Grimesand Gobind T. Nankani.

ii

Annexes

Annex A: Supporting Tables and Charts .............................. 25Annex B: Legal and Institutional Framework for Privatization in the Road Sector .... 38Annex C: History of Bank Lending in the Road Sector ..................... 45Annex D: Organization of the Road Maintenance Program .................. 50Annex E: Program of Contract Maintenance by Area ...................... 55Annex F: Road Traffic Safety .................................... 58Annex G: Environmenta Impact Assessment and Momtoring ................. 67Annex H: Training Component ................................... 71Annex I: Economic Analysis ..................... 75Annex J: Efficiency Indicators and Monitoring Targets ................... 100Annex K: Documents and Data Available in the Project Files ................ 102

Tables in Text

Table 1.1: Evolution of Registered Road Miotor Fleet, i972-1992 .............. 6Table 1.2: Probability of Road Accident Death, 1985-1992 .................. 6Table 1.3: Actu Road Expenditures 1985-94 .......................... 7Table 2.1: Project Costs ....................................... 14Table 2.2: Summary Financing Plan ................................ 15Table 3. 1: Summary of Procurement Arrangements ....................... 21

Tables in Annexes

Table A.1: Road Network, Administrative and Surface Classification, July 1994 ..... 25Table A.2: Annual Average Daily Traffic and Composition by Vehicle Type at Major

Toll Stations in Selected Years, 1982-1993 . . .................. 26Table A.3: Evolution of the Registered Road Motor Vehicle Fleet, 1972-92 .. 27Table A.4: Structure of Retail Prices of Automotive Fuels in Santiago, July 1994 .... 28Table A.5: Fuel Consumption by Road Vehicles, 1972-92 .. 29Table A.6: Road User Charges (RUC) and Road Expenditures (RE), 1971-93 .. 30Table A.7: Actual Road Expenditures, 1985-94 .. 31Table A.8: Ministry of Public Works' Road Program, 1995-1998 . .32Table A.9: Financing Plan ..... 33Table A.10: Estimated Schedule of Bank Disbursements, FY1995-1999 .............. 34Table B.1: Public Works Concessions Program .. 41Table C.1: Bank Lending to Chile's Road Sector .. 45Table E. 1: Program for "Global Maintenance Contracting" 1994-1998 .... ....... 56Table F.1: Probability of Road Accident Death, 1985-1991 .. 58Table F.2: Urban/Rural Breakdown of Accidents ................... ..... 59Table F.3: Traffic Accidents by Region, 1992 ........ ....... . ........ . 59Table F.4: UrbanlRural Breakdown of Deaths From Accidents . ............... 60Table F.5: Accidents by Type of Vehicle ............................. 60Table F.6: Types of Accidents .. .. ...... .................... .... . 61Table F.7: Traffic Accidents by Type and Area of Occurrence, 1991 ........... 62Table F.8: Major Causes of Accidents ........ ............................... . 62Table F.9: Summary of Road Safety Program, 1994-1998 . .................. 66Table H.1: Summary of The Training Program l995-1998 ........ .......... 74

iii

Table 1.1: Analysis of Road Network, Recommended Expenditures,and Economic Indicators ................................ 79

Table I.2: 1994 Condition Status of Network .......................... 80Table 1.3: Identification of Homogeneous Links Asphalt Concrete (A) ......... .. 81Table I.4: Length of Roads by Surface Type and Condition ................. 82Table I.5: Asphalt Concrete Links Characteristics ....................... 83Table I.6: Unit Cost of MaintenanceOperations- Paved Roads ................ 84Table I.7: Unit Cost of Maintenance Oprations- Unpaved Roads .............. 85Table I.8: Maintenance Standards for Paved Roads ....................... 86Table I.9: Maintenance Standards for Unpaved Roads ..................... 87Table I. 10: Financial and Economic Unit Costs of Vehicle Fleet ............... 88Table I.11: Average Daily Traffic (ADI) for Asphalt Concrete Roads According to

Condition and ADT Range Including Annual ADT Growth Rate byVehicle hype .......... .................... I ........ 89

Table I. 12: Annual and Total Works Quantities and Expenditures for Different Typesof Maintenance Operations for Asphalt Concrete Roads .... ......... 90

Table 1. 13: Priortization of Maintenance of Asphalt Surfaced Links in Region IV .... 91

Fgures and Charts

Figure 1: Evolution of the Paved Road Network, 1982-1994 ................ 8Figure 2: Evoludon of the Total Road Network, 1988-1994 ................. 8Figure 1.1: Composition of Total Road Network According to Type of Surface, 1994 . . 92Figure I.2: Condition of the Paved Road Network, 1995 .................... 93Figure 1.3: Condition of the Unpaved Road Network, 1995 .................. 94Figure I.4: Physical Targets 19954-1998 ............................. 95Figure 1.5: Evolution of the Condition of the Road Network, 1995-1998 .... ...... 96Figure 1.6: Paved Road Network: 1995-2009 NPV vs. 1995-1999 Expenditures ..... 97Figure 1.7: Unpaved Road Network: 1995-2009 NPV vs. 1995-1998 Expendiures ... 98Figure I.8: Capital and Recurrent Costs, 1995-1998 and NPV, 1995-2009 .... ..... 99Chart A.1: Road Sector nstitutional Organization ........................ 35Chart A.2: Organizaion of the Mnistry of Public Works ................... 36Chart A.3: Organization of the Roads Directorate ............ 37Chart B.1: Organizational Framework for Road Concessions ....... .......... 42Chart B.2: Road Concession Operational Setup Within the Ministry of Public Works . . 43Chart B.2: Concession Process ........................... ........... 44

mapIBRD No. 26278

iv

REPUBLIC OF CHILE

THIRD ROAD SECTOR PROJECT

Loan and Project Summary

Borrower: Republic of Chile

[mplementingAgency: Ministry of Public Works

Beneficiaries: Not applicable

rPoverty: Not applicable

Amount: US$120 million equivalent

Terms: Repayable in 15 years, including five years grace period, with interest at theBank's standard variable rate.

CommitmentFee: 0.75 % on undisbursed loan balances, begipting 60 days after signing less any

waiver.

Thiancing Plan: See paragraph 2.15

Net PresentValue: Expected rates of return average 30 percent for investment components

representing about 41 percent of total project cost, and 50 percent formairntenance components represening about 52 percent of total project cost.

Map: IBRD No. 26278

1. THE TRANSPORT SECTOR

A. Overview-The Economy

1. 1 The structurl transformation of the Chilean economy has heen nearly two decadesin the making. Since the mid-1980s, the macroeconomic program has brought the countrysubstantial growth and price stability. During the 1990-93 period, Chile became one of the LtiWnAmerican countries that most successfully achieved economic reforms, from which the economygained noteworthy benefits. On the domestic front, GDP averaged 6.4% annual growth; aftercontinuously declining, inflation reached an annual rate of 12.2%; and unemployment fell to4.5% in December 1993, the lowest rate since 1975. Although the public sector balanceweakened on account of falling copper reve..ues and increases in social and capital expenditures,it continued to register a surplus. On th.e extemal front, the curret account deficit averaged2.1% of GDP for the period, largely due to falling export prices in 1993. Th balance ofpayments continued to register a surplus due to inflows of iong-tern capital an-d direct foreigninvestment. As a consequence, the Central Bank accumulated ample reserves of up to US$9.8billion (equivalent to 10 months of merchandise imports) by the end of 1993. The Chileaneconomy has the potential foi sustained growth averaging 5.5%-6% over the next decade,provided that savings and investment are about 2M% of GDP and there are no major domesticpolicy reversals. Exogenous factors such as the international price of copper and movementsin the terms of trade would also take on major importance in influencing growth performance.

B. Infrastructure Investment

1.2 rastucture in Chile experienced during the 1970s a considerable deterioratinprocess, especially in roads, ports, railways, water supply/sanitation, and irrgation. Tbisdeterioration process was partally turned around in the mid-1980s, but not to a degree sufficientto satisfy the growing needs of the rapidly developing economy. To ensure economic growthand to satisfy basic needs, the government increased capital expenditures during the 1990-93period, and concentrated on roads, tansportation infrastructure, and sanitary works in rural andurban areas.

1.3 Infrastructre investment incrased on average by 20% in real terms as aconsequence of an increase in road construction, tansportation, water and sanitation andregional/municipal investment. Duing the 1990-93 period, the public sector remained the majorfinancier of infatructure investment, while private sector investment was negliglible, accountingfor only 4.1 % of the total, mainly in roads, water and sanitation, ports, railways, and airports.Highway construction took priority over other infrastructure because tmderinvestment in the roadsector caused a low proporto of paved roads and poor road quaity. Average investmnt inroads by the public sector during 1990-93 accounted for 47.4 % of total irv*astructure investnt(only 0.3% of the total invested by the private sector). Investment in tansporion, espe yairports, ports, and railways (public and prvate sector) took second prority, and accounted forabout 8.6% of total infastructure. Water and sanitation investment (combined public andprivate sector) accounted for 15.2% of the total. Other infastructure investment (metro, publicbuildings, iraon, and others) was financed entirely by the pubLhc sector.

2 -

C. Major Developments In the Transport Sector

1.4 Chile has an extensive transport network consisting of 79,000 kilometers of roads,65900 kIlometers of railway track, 11 major state-owned general cargo seaports and a largenumber of specialized and private geneal cargo ports, a 622-kdlometer network of pipelines, andabout 21 commercial airports, of which seven are used for international flights. The tansportsystem is dominated by road transport, which carries about two-thirds of domestic freight,railways hauling around one-fifth, coastal shipping and oil pipelines carrying about one-teth andair transport handling less than 1%. Some 95% of intenational trade (expressed in tnnage) isseaborne. Passenger traffic is carried mainly by road.

Government Policy Toward the Transport Sector

1.5 Transport policy-making in Chile is officially the task of the Ministry of Transportand Telecommunications (KMl). The Ministry of Public Works (MOP) undertakes roadplanning and is in charge cf all transport infrastructure except urbar stmets. MOP is alsoresponsible for collecting road tolls and impleineiring the vehicle weight limit program in closecoordination with the National Police (Carabineros de C7dle). The M{inistry of Housing andUrban Development (AINVU) bears responsibility for the urban street network nationwide,except for a cental county in the city of Santiago. The Ministry of Planning and Coordinatio(MIDEPLAN) updates a rolling three-year plan every year and determines whether proposedtransport investments are justified according to its guidelines as well as whether they fit into thebroader planning framework. Chart 1 of Annex A shows the functions of key govenmntagencies in the tranwsport sector.

1.6 From the late 1970s through the early 1990s, the transport sector underwentconsiderable restructuring in line with the strongly market-oriented economic policies of thegovemment. Key policy changes in the sector included the elimination of subsidies, mostnotably in the railways, and increased private sector participation in investments in and operdonof ports, airlines, urban transport, and, mast recently, roads. Through this process, opeatonalefficiency has increased significantly in each of the subsectors.

Roads

1.7 Owing to the countuy's long and narrow configumaon, the road network isdominated by three major stetches of north-south road almost 5,000 kilometers in length: theLongitdinal Road from Region I to Region X, the Southern Road from Region X to Region X[,and Route No. 9 in Region XII. Of fte total of 79,000 kilometers, 13,000 kilometers are pavedeither with cement concrete or asphalt (Annex A, Table 1-1, MAP IBRk No. 26278).

1.8 The entire road network is publicly owned and opemted. Nonethes, MOP hasa tradition of conucting out civi works to the privte sector. Today, nearly 100% of newworks and 82% of mainten is undaken by private coactor. The policy of usingcontract maintenance combined with effective seon and incrasasd budgetary allocations

-3 -

to maintenance expenditures resulted in substantial improvements in the condition of the nationalnetwork (see para. 1.22).

1.9 MOP has also introduced the use of 'global' maintenance ccntracts, an innovadvepractice of contracting out road maintenance projects to private contractors under area-widecontracts at the provincial or sub-provincial level. IThis approach has the advantage ofconsolidating under a single contract a series of works that would have required a great numberof smaller contracts, thereby reducing the resources needed for their management andsupevision (see para. 2.4).

1.10 In 1991, the Government promulgated a law that makes possible a new form ofpublic/private partnership in the road sector-the concession of constructio, maintenance andopertion of toll roads, tunnels and other related infrastructure to the private sector under a BOTscheme. Under the proposed formula,2 individual toll roads are to be administered byconcessionaires entrusted by MOP for a specified period (20 to 25 years) with the task offinancing, constructing, maintaining and operating those roads and any relatea infrastructure.At the end of the concession period, the entire structure is to be returned free of charge to thI:national govemment. The concession would be governed by a contact encompassing technicalstandards, financizl terms, areas of activity and duration (see Annex B). It is expected that aransition to this system ef road concessions would be reasonably smnooth, given that toll roadsare not a novel concept for Chilean motorists: there are 2,255 kilometers of public toli roadsin use today.

Pori-*

1.11 Chile has more than 5,000 Elometers of coastline with more than 70 cargo portinstallations, of which 26 are commercial ports involved in interadonal traffic. Of these, 11are owned by the Chilean Port Authonty (EMPORCHI), a public enterprise reportng to M1i.The remainder consist of specialized ports (mainly minerals and petroleum) and a priMely-owned general cargo port at Lirqudn. In the 1980s, the public ports underwent a series ofinstitutional restructurings, a major outcome of which was the transfer of all operations (otherthan wharfage and storage) at publicly-owned ports to pte stevedoring companies underconcession agreements. EMPORCHI, which retains ownership of port infrastructure,coordinates the various users of port instaons. The sum result of these reforms is thatefficiency at public ports improved significantly between 1981 and 1989. As a matter of saedpolicy, the Governmnt encourages maximum private participation in the expansion of portcapacity, limiting its own role primarily to rehabilitation and maintenance of publicly ownedfacilities. Public investment in additional port capacity is to be made only when private capitalis not forthcoming.

tThis is indeed a very novel appoch to comtb maiteanc dat was pioneered in Bitish Colui, Cad

Thi fomula ws ued for MOP firat concesion project, Tue El Melon, aledy i execuio

-4 -

Railways

1.12 The railway system in Chile consists of several independent mining-company-owned railways, the privately-owned Antofagasta-Bolivia Railway (721 ian), the small state-owned FERRONOR (2,240 km), and the State Railway Company (EFE), (3,273 Ian) whichcovers the remainder of the network. Railway traffc, of which freight accounts for 70%, hasbeen declining in importance during the last two decades. However, viable operations arepossible in EFE's southern network for products such as logs, copper, coal, steel and cellulose.

1.13 In the early 1970s, EFE was large, overstaffed, and financially troubled, run onlarge national government subsidies of as much as US$50 million a year. After 1973, vigorousreforms of the railway system were initiated. The measures adopted in the period between 1973and 1990, including increases in tariffs and the elimination of subsidies, a reduction in staff, thephasing out of uneconomic lines, contracting out of some maintenance work to privatecontractors, and the sale of unremunertive assets, helped significantly to streamline EFE'soperations, reduce costs, and improve its financial position. However, in 1990 the railway hadaccumulated a debt of more than US$10 billion.

1.14 Under the Government which took office in 1990, a decision was rmade by theexecutive and legislative branches of government to privatize the railway sector. The approachtaken by the Government, and supported by a law approved in August 1992, was to verticallyseparate the physical network from services and to give current and future private operatorsequal access to the existing rail infrastructure. Under this scheme, EFE would own the paysicalnetwork (tracks and stations), and freight and passenger services would be sold off to privatecompanies. These companies would either own or lease the rolling stock and compete in therunning of these operations. Bids have been let for freight service; however, there would belittle interest in the non-profitable passenger services. If there are no offers from the privatesector, what remains of the passenger service would lilely remain with EFE.

Urban Transport

1.15 Urban transport in Chile includes private automobiles, private buses, shared andregular taxis, a private trolley bus system in Santiago and Valparaiso, bicycles (whose use theGovernment is encouraging) and a metro in Santiago, which is the oniy publicly-owned andoperated urban tranwsport service in Chile. In the late 1970s, the Government deregulated urbantransport almost enirely. As a direct consequence of this deregulation, there have beensignificant new enties in all market segments-buses, niicrobuses, taxibuses and sharedtaxis-with smaller vehicles increasing their market shares. The resultant congestion, surplusseating capacity in buses and the metro, pollution and excessive use of fuel have prompted thepresent Govemment to consider stronger measures to integrat the various urban transport modesand discourage unneeded buses in cental areas. Already, in the winter months, private vehicleaccess to downtown Santiago is regulated by license number. In April 1992, the Governmentauctioned off bus routes to a smaller number of private operators in order to reduce the numberof buses and raise occupanay rates. Implementation of this new system since October 1992 has

brought about a reduction of the bus fleet (13,000 to ll ,000 units), its significant mod n,and a reduction of fares in constant terms. The Govemment is also exploring the feasibility, inthe longer run, of using congestion pricw.g to regulate the volume of tffic in downtown areas.

D. Issues In the Road Sector

Road Infrsructure Deficiedcies and Funding Shortfalls

1.16 Chile faces a deficit in infrastrcture in general and in roads in pardcular. Largestretches of the national network are heavily travelled and in need of major improvements(i.e., cnanges in construction standards). Moreover, demand for investnents on the main tunkand latzal roads is ily to increase: within l0 to 20 years these roads would have to beconverted to expressway standards (dual cariageway expressways with full access control).Acccs control significantly reduces accidents, increases capacity and allows higher safe speeds(see paras. 1.18, 1.19). About 700-800 klometers of highways in the central part of Chile havetraffic volumes fast approaching levels high enough to justify upgrading them to expressways(Tsble A-2). This includes about 500 Iklometers of the north-south highway (Route 5) from ElMel6n to Chin, and ftree or four of the most impotant east-west laterals, such as Route 68from Santao to Valparso and the beaches in and near Vifia del Mar, Route 78 from Santiagoto the port of San Antonio, Route 60 from Vifta del Mar to La Calera, and Route 148 fromChilldn to Concepci6n. In the next four years, the Ministry esimates that at minimum, annualfundig would need to average US$500 million (1994 prices) to accommodate tee roadimprovement and upgradng requirements whie fully meetng maintenance needs. Given thecompetig demands on public funds, however, it is by no means certain that these allocatiwould be approved in full by the Ministry of Finance.

1.17 In this context, the Government has initiated a private highway concessionsprogram to capumre new sources of fnancing for infastructure investment (see para. 1.10). Ifthe concessionaires can finance their projects in the private capital market and repay thdrinvestors without recourse to scarce tax resources, total investnent in the highway sector canbe increased without raising additional taxes or increasing public sector debt. Equally important,the concessionaires are able to tap a new pool of private sector alent to manage the constuctio,maintenance, and operatio of their proects. If private manement increases the effiiencywith which new infsuctre is bilt and operd to improve general productivity, theprobability would increase that the new infrstructure could be financed without othwisestraining the Chilean economy.

Deteriorting Road Taffic Saety

1.18 Chile's rapid economic devlopment, accom d by steady growth inmotorization (see Table 1.1), has put a strain on the country's road infrastucr, manifestedin part by a marlkd d in road safety. Table 1.2 below shows tt the rate ofmotorization has risen steadily since the md-1980s, and with the risk of road fhtality gowingeven more rapidly during this period. Road tafic safety is ft becoming a major sci

-6-

concem in Caile. Presently, traffic accidents constitute the third leading cause of deat.Nationwide, in 1992, Chile registered one road accident cvery 12 minutes, one serious injuryevery 42 ninutes, and one road fatality every 5 hours. It ic estimated that th- cost (direct andindirect) of road accidents in monetary terms amounted to US$150 million in 1992.3

Table 1.1: V-ut%lon of Registered Road Motor Fleet, 1972-1992(in units)

Year Autos & Wagons Bsu Swce Vebides Truck ToWl972 216,031 15,773 79,567 75,989 387,3601982 542,134 21,173 239,432 78,073 PS,812

92 847,289 30,331 313,132 127,215 1,317,967

Annual Average Growth Rate (%)

s72-IM 7.0 3.5 8.4 1.7 6.41972-1982 9.6 3.0 11.6 0.3 8.6192-19"2 4.6 3.7 2.7 5.0 4.1

Sum.: SpporstiTable A-3a/ Savic Veie incld yanw. axis, ambuac, pps, and Saa SOd waer Uucks.

Table 1.2: Probably of Road Acdent Death, 198S-1992

Motorizaftion Re Risk of Road Accident DeathYear (vehides per 100 pao...) (road tnff-c datis per 100,000 pW,.)

1985 7.4 8.71987 7.4 9.61989 7.8 11.319% 8.2 11.91991 9.2 12.11992 9.9 17

Sm: Nadu Foale

1.19 The Govenment fully recognizes the magnitude of the problem. Nonetheless,intiuonal fragmentation prosents a formidable obstacle to the planning and implemen ofa consistent nadO'nal road safety program. Reponsibites and functions assodated with roadsafet cut acros. a number of public agenies. MIT is responsible for setting ovall plices

B.iWmatd by do Naiol Poli.

and norms for road safety. The National Police (see pam. 1.5) enforces traffic regultions,maintains and monitors information on road accidents, and carries out public educationcampaigns. MOP and MJNVU are responsible for incorpoating road safety features in theirinvestments in national networks and urban streets, respectively. In addition, a number ofprivate organizations are active in dnver and road safety education. Most of these insttutdischarge their responsiblities conscientiously in their respective areas, but cooperation andcoordination among them tend to be poor.

1.20 To prvide the needed coordination to strehgthen national road safety effort, theGovernment created (through Decree 223, December 27, 1993), an nter-ministeral NationalCommission on Traffic Safety presided over by fte Minister of Trnsport andTelecommuimcations, assisted by an Executive Secretariat, which is Integrated by eihtinterdisciplinary professonals. Mixed work groups with professionals of other ministries arealready taclding speialzed subjects such as the transport of habrdous matials, rescuecoordination, and licensing. lme Executive Secretariat is also in charge of the pementaionof the Road Safety Diagnosis Study, initiated under the Second Road Sector Project (Loa 3120-CIfI).

E Road Sector Expendture Progm and Cost Recovery

1.21 Table 1.3 below shows MOP's road expenditures since 1985 expressed in currentUS dollars. Total expenditures in the road sector rose from US$175 million in 1985 to US$427million in 1994. A notable and encouraging irend in the Ministry's expenditure program is therapid increase in the share of mintece spending, which more than doubled from 27.2%of total road expenditures in 1985 to an average of 59% in the period 1988-94. This timidreflects an explicit policy on the part of MOP (supported by the Bank's First and Second RoadSector Projects) to corect an earlier bias toward new constcion. The underfni ofmaintenance acdtvities in the past resulted in the need for cosdy rehabilitain worlk from the1970s through the first half of the 1980s (see Table 1.3 and pam 1.23).

Table 1.3: Actual Road Expenditures 1985-94(millions of current US dollars)

1m5 1 1967 19"a n 9 1991 12 1 EXPENDITURES 175.4 1793 161.4 193.1 136.3 2013 238. 2983 335X 417.11

DIVESTMENT 120.6 90.a 67.0 62.6 63X 62.1 71.7 W. 121.9

MATENANCE 47.7 783 92.7 119.2 110.9 1243 1463 1772 184.4 2393

AMNSTRATION 7.1 10.7 8.7 113 11.9 15. 20.5 21.6 293 29A_tobuMAdobdobi" 4.0 6.2 5.0 4.7 5.0 6.5 8 7.S 12.2 10.4

MMatemm _ Admbdobidn 3.1 4.5 3.7 6.6 6.9 9.0 11. 13.8 17.1 19.2

_ "eo in TeldlBap_tm 272 44.0 55.1 61.7 59Di 9.8 61. " 55.0 51.R..d Urn aims 361.2 429.9 445.1 535.4 523. 619. 6.1 7539 776 -

S_0.: SOpp9fT7lbhaA,4ft8hA-7.

-8-

-1.22 This emphasis on roadmaintenance has brought about significant Poor 1lximprovements in the condition of the Po Onational network. The MOP survey of Fai 30Y/road conditions has been carried out F/// .biannually for the basic network since CGood 52Z1982, and for the entire network since Good 4X_1988. As seen in Figures 1 and 2, the 8.812kmtotal length of paved roads increased from 1982 12.O9tkin8,812 kilometers to 12,951 kilometers 1994between 1982 and 1994, and the share ofpaved roads rated "in good condition" Fnure 1: Evolution of the Paved Roadincreased from 34% to 52%. Between Network, 1982-19941988 and 1994, the length of the totalnetwork did not increase very much, butroad conditions improved significantly. F1%The share of roads rated "in good faircondition" increased from 6% in 1988 to Good 52%15%, those rated "in fair condition" rose e/from 31% to 55%, and those rated "inpoor condition" decreased from 63% tO Poor32% over the same period. 3 79,42km 32%

79,131km 7,2k

1.23 With respect to other 1988 1994categories of MOP's road expenditures Fgure 2: Evo}ution of the Total Roadshown in Table 1.3, the "investment" Network, 19881994category includes construction (e.g.,building of second carriageways in selected areas, construction or replacement of bridges,construction of bypasses and urban overpasses, and completion of the southern road program);reconstuction (already referred to in para. 1.21); and upgading (consisting mainly of pavingprimary gravel roads with taffic of more than 300 vehicles per day). In recent years, MOP hasbeen spending US$15-30 million annually to build a second carriageway on heavily traveUlledstretches of Route 5 and an additional US$15-20 million per year on bypasses for secondarycities, grade separations, and other miscellaneous improvements. These investments, however,have not kept pace with the growth of traffic in the national network over this period. This hasresulted in congestion and road safety problems in the central parts of the country.

1.24 Cost recovery in the road sector is fully atsfactory. Total revenues from roaduser charges comprise fuel aes, road tolls, and vehicle registraion fees. As seen in Table 1.3above, ese road user charges rose from US$360 million in 1985 to US$776 million in 1993,more than doubling total road xpenditures over this period.

9 -

F. Expeience with Previous Ba;Lk Lending in the Road Sector

Lending Objectives

1.25 The Bank has provided assistance to Chile's roads subsector since 1961, throughone credit and seven loans totalling US$540 million4 (Annex C). This long history can bedivided into two distinct phases. The first four lending operations (1961-79) were characteizedby implementation difficulties, slow execution of works and cost overruns, while the last fourprojects (1980-93) were implemented effectively at significantly lower cost and in a timelymanner, fully meetng their objectives.

1.26 The focus of Bank operations in Chle's roads sector has changed over the years.The earliest projects emphasized basic construction and reconstruction of roads devastated bynatural disaster, as well as on introducing an effective maintenance program (HighwayMaintenance Project, Loan 287-CH, and Highway Construction Project, Credit 4-CH). Thesubsequent Second Highway Maintenance Project (Loan 558-CH) developed the Bank's newfocus on implementing sound maintenance operations, while through the Second RoadConstruction Project (Loan 688-CH) road construction and reconstruction efforts continued.Despite these efforts, throughout the 1970s highway maintenance activities were seriouslyneglected by the Government, necessitating a major, if temporary, shift in project focus towardhighway reconstruction (First and Second Highway Reconstruction Projects, Loans 1927-CH and2297-CH), though the Bank's overaU goal continued to be improved maintenance operations.As reconstruction efforts progressed in the restoration of the basic network to an acceptablelevel, in the mid-1980s the focus of Bank operations began a return to the institutionalstrengthening of MOP's Roads Directorate (First and Second Road Sector Projects, Loans2589-CH, and 3120-CE. In conjunction with this goal, Bank operations have supported a shiftin the execution of maintenance activities from force account to private contracting, as well asthe promotion of maintenance and road pavement technology.

Lessons from Past Lending Operations

1.27 Lessons learned from the 25-year history of Bank lending to Chile's road sectorhave substantially evolved over the years. The PPARs for the Second Highway MaintenanceProject (Loan 558-CH) and for the Second Highway Construction Project ( Loan 688-Cconcluded that in.plementation of these projects had been affected and delayed by the politland economic instability of the country in the early 1970s, lack of Government commitment,inadequate financing (particularly for road maintenance), weak planning, and insufficienttraining.

1.28 By contrast, the recent consolidated Project Audit Report on the HighwayReconsction Project Loan 1927-CE), the Second Highway Reconstruction Project(Loan 2297-CI), and the First Road Sector Project (Loan 2589-CH) concluded that the heprojects have fully attained their objectives, that they belong to the very best series of roadsector operations analyzed in recent years, and that overall outcomes were highly satisfactory,institutional development was substantial, and sustainability is likely. It fiuther states that theexcellent project results are attributable to several factors:

4 After cmnella* of US$43.8 million of Lan 3120-CH.

- 10-

(a) strong and exemplary commitment by the Govemment, sector institutions andbeneficiaries;

(b) consistent project design, based on relevancy and feasibility of projectcomponents;

(c) effective Borrower-Bank relationship and quality and continuity of Bankproject staff; and

(d) favorable macroeconomic conditions.

1.29 Implementation of the Second Road Sector Project (Loan 3120-C was completedsaisfaorily according to schedule on December 31, 1993, achieving works execution of about20% above agreed tgets. However, the positive development of the Chilean economy and thesubstantial exason of foreign investment during project inplementation resulted in anunexpectedly strong flow of foragn currency into the country, which motivated the Governmentto take several measures to reduce foreign indebtedness and curtail internal inflaton.Simultaneously, the Government carried out successfuly a reform of the intrnal revenuesystem, which increased substantially the availability of local funding. In accordance with itspolicy of strict control of Government expenditures, the administration dedded not to increaseits expenditures, but to replace foreign with local financing. As a result of this macroeconomicpolicy, the Government decided to replace foreign financing by surplus local financing dutingthe last two years of project implementation, resulting in an accumulation of an undisbursed loanbalance of US$43.8 million., which was cancelled, at the Government's request June 22, 1994.An Implementadon Completion Report (ICR) on this project is in preparation; however, it canalready be stated that the excellent results of this project are attibutable to the same factrlisted above.

- 11 -

2. THE PROJECT

A. Pioject Origin and Objectives

2.1 The strongly market-oriented economic policies adopted by the Government in the1970s have tansformed policies and practices in the road sector. Key policies of MOP that havechamacterized its market-oented approach since the 1980s include: (a) the almost completereliance on private contractors for construction and maintenance acvities-the use of forceaccount by MOP has declined progressively from 65% in 1980 to 10% in 1993; and (b)promotion of private sector participation in the financing and opewation of road infrastructure.At the same time, MOP recognizes the need to (c) strengthen its capacity and activities in areaswhere the public sector must maintain primary responsibility, such as road safety andenvironmental protection. MOP has requested Bank assistance for a project designed to supportthese priorities.

2.2 The proposed project will, accordingly, seek to consolidate MOP's remarkableprogress in road maintenance adminitation (see Annex D) while Introducing additional policand insttional objectives. The objectives of the proposed project are: (a) to consolidate theroad m nce and pavement program financed under the First and SecondRoad Sector Projects; (b) to support the Government's priatitlonefforts In the road setorthrough (i) the use of "global" nnce contracts and (ii) promotion of BOT schemes forprivate sector financing of road and road-related investments; (c) to improve road traffic safetyon the national network; and (d) to strengthen MOP's environmental hnpact assment andmonitoring capacity in the road sector.

2.3 The consolidation of the road maintenance and pavement managementprogram will be accomplished by providing technical assistance and/or spialized keyequipment and fiurther training for the improvement of the maintenance contracting system, theupgrading and fiuther expansion of the pavement management system, the modeon of theweighing, toll and tnnel control systems, and the continuation of the cost accounting system forforce account maintenance operations.

2.4 The use of multi-year "global" conracts covering road maintenance acvitiesfor the entire network within specific areas will be expanded and upgraded to increase efficencyby allowing private contractors a longer dme horizon for planning and financing their activities,and for acquiring speialzed equipment to improve pucvity. This type of contract, manapdat province and subprince levels, also has the advantage of filiting the involvement of localauthorities in management and possEly co-financing, thereby expediting the proce ofdecentralizing maintenance responsibilities to local governments. After epimentng with ixpilot one-year contracts followed by six ongoing two-year, unit cost contracts (see Annex B),MOP plans to progress to multi-year "global" lump sum contracts suprised through compliancewith quality standards.

- 12 -

2.5 With respect to BOT concessions, MOP is expected to do some basic groundworkto persuade the private sector that these projects could yield attractve returns and that the riskare manageable. It is MOP which must identify candidate projects within the context of itssectoral planning and programming priorities, based particulariy on clear analyses of the relafivemerits and demerits of building new expressways versus upgading existing alignments to newstandards. The regulatory framework, as laid out in the bidding documents, must be consstentand clear. Tbe private fims also will require reliable basic information on identified projectsthat are based on well-designed feasibility and basic engineerng studies. The proposed projectwill assist MOP in carying out these multiple assignments.

2.6 Privatization in the road sector will enhance the critical importar:ce of theGovemment's planning, coordination and regulatory fnctions. The proposed priject willsupport MOP in two key areas of public action: the introduction and implementation of a roadtraffic safety program on the national network and the strengthening of MOP's environ timpact assesment and monitoring capacity.

2.7 Some 80% of reported traffic accidents occur an urban streets that fall within thejudsdiction of MINVU. At the same time, it is of serious concern to MOP that more than 50%of deaths due to road accidents occur on the national road network under its responsibility. Theroad safety program being formulated by MOP is limited to the national network, and attackthe traffic problems on three fronts: elimination of hazardous areas (black spots) thrugh thec, A works program, improvement of road sips, marldng and lighting, and st ng ofcoordination with the Executive Sectariat of the National Commission on Traffic Safety andwith the Nadonal Police. This program, while modest in scope, is intended to be the first in aseries of road safety initiatives that can be developed into a national program in collaborationwith MTI, MINVU, and other agencies responsible for various facets of traffic safety issues(see Annex F).

2.8 Currently, environmental impact assessment studies for MOP's road works arecarned out by the Environmental Unit (UMA) located withn the Subdirectorate of Developmin close coordination with the Environmental Technical Unit in the General Directoate of PubLHcWorks (UTMA), under the general oversight of the National Environmental Commission(CONAMA). The objective of the project's environen' hipact asessment and monioringcomponent is to further improve MOP's institutional capacity for environmental work,specfically to enhance the quality of its environmental impact studies and strengthen thenecessary linkages between the studies and the execution of works (see pam. 2.19 andAnnex G).

B. Rationale for Bank Involvement

2.9 The Bank's First and Second Road Sector Projects have been instrumental inintroducing sound road maintenance and pavement management practis to MOP."' tproposed operation will first seek to consolidate the gains made under the two earlier projecby futher advancg the use of the pavement management sytem and by promoting t'gobsWl

- 13 -

road maintenance (see paras. 1.9 and 2.4). Second, the Bank is in a good position to supportthe Government's efforts to secure private financing of road construction and opetation. TheBan'k can make a meaningful contribution in this area after having had the experene ofadministering the ongoing Japanese-funded technical assstance program for strengthening thelegal, financial and institutional framework for road concessions in Chile. Third, the Bank willbring to the project its international experience in the planning and implementation of road saftmeasures. Fourth, the Bank intends, through this project, to play a catalytic role incoordinang the many government agencies assocated with road safety that tend to operteindependently without adequate collaboraon among them (see para. 1.19).

C. Project Description

2.10 The proposed loan will assist MOP in the implementation of its proposed 1995-1998 Road Investment and Maintenance Program amounting to US$1.94 billion, which is shownin Table A-8. The proposed loan of US$120 million wil finance only specific key innovatvesubcomponents of the program involving the applicadon of modern techniques, specaledequipment or advanced know-how, closel asociated with the policy and institutional objectivesspecified above. These Bank-Ananced subcomponents are described in detail in paragraphs 2.16-2.20 below when discussing the project financing scheme. A general description of the projectcomponents follows.

2.11 Road Investment (40.6% of total project cost) includes road widening, roadupgrading, construction of bypasses, overasses and road safety infrastructure, and consgservices for engineering and supervision and preparation of BOT schemes. Road(52.5% of total project cost) includes periodic and routine maintenance works, equipmntacquisition, special maintenance operations (tunnels, weighing and toll systems, bzidges,nverbank defenses, and road signs), consulting services, and ang. Ad tionamountto 6.9%, of which 2.8% corresponds to investment and 4.1% to maintenance.

D. Project Cast and inacing

2.12 The total project cost (Table 2.1), including about US$330 million in identfibletaxes and duties and US$136 million in price contingencies, amounts to US$2,075 milion. Ofthis, the total foreign exchange component accounts for US$1.03 billion (50%). The projectbase costs by year are shown in Table A-8. The cost esdmates for invesments in civil waotare based on quanity esumates and current uimt pnces and are considered reasonable under thestandards proposed and the taffic expected. The mantenance cost estmates are based on asampling of recent contracts for similar progrms by region. The cost of consultmcy SWunder each component is based on MOP's recent experience in contracting Chilean consultsfor engineering and supervision services, and on prevailing fees for Chilean and intenaconsultants for a variety of other services. The cost of training was estimated from detiedcosting of traning activities by component, based on MOP's recent experience.

- 14-

2.13 To esdmate the foreign exchange cost of civil works, MOP utilized a computerprogram that calculates the foreign exchange cost for typical operations or programs on the basisof the established foreign cost for individual construction or maintenance items. The foreignexchange cost for consultant services was estimated cnder the assumption that contracts woudnormally be awarded to local firms with limited participation by foreign consultants. For goodsto be procured under the proposed project, the foreign exchange cost has been estmated at 72%,based on the cost, insurance and freight (CIF) prices at port of entry into Chile, and paymentby MOP of import duties, customs clearance alid port costs, and value-added tax (VAT). Thevalue-added tax of 18% was also applied to all civil works and consultant service contracts,foreign and local.

Table 2.1: Project Costs(Millions of US dolls, July 1994 prices)

Losl Foreign Total Foreign as % A ofCost Cost Cost of Total Total

INVESTMENT 369.5 418.2 787.7 S3 40.6Constucton Works 133.7 144.9 278.6 52 (14.3)Upgrudng Works 200.3 235.2 435.5 54 (22.5)Road Safety Works 21.2 31.9 53.1 60 (2.7)Conwsting Serices 14.3 6.2 20.5 30 (1.1)

MAINTENANCE 487.7 530.0 1017.7 52 5.SuPeciodic 307.0 360.4 667.4 54 (34.4)Routine 120.3 102.4 222.7 46 (11.5)Otier Maintenance 38.1 38.1 76.2 S0 (3.9)Equipmgmt 9.2 23.S 32.7 72 (1.7)Consulting and Training 13.1 5.6 18.7 30 (1.0)

ADMANISRTION 120.6 13.5 134.1 10 6.9Investment 48.2 S.4 53.6 10 (2.8)Maintenance 72.4 8.1 80.5 10 (4.1)

Tobl Base Cost 977.8 9CL7 19395 50 100.0Price Contingencies 685 67.3 135.8 S0 7.0Tota Project Cost 10463 1029.0 2075.3 50 107.0

2.14 No physical contngencies have been proUded beuse of the sectwal nature ofthe project and its relatively short implementation period. Any physical contingencies will beaccommodated by reducing the planned physical works under the program as necessary. Pricecontingencies, amounting to 7% of total project cost, have Leen detmined on the basis ofprevailing estimates of intemaional inflation: 3.4% for 1994, 2.0% for 1995, 2.5% for 1996,2.7% for 1997, 2.5% for 1998, and 2.6% for 1999.

2.15 The summary project financing plan is presented in Table 2.2 below. Theproposed Bank loan of US$120 million represents 6% of total project cost and 12% of theestmated foreign exchange cost. The remaining foreign exchange, and the local costs, includingUS$330 million in tes and duties, will be financed by the Government. The detailedfnancing plan of lhe project (rable A-9) shows the subcomponents to be financed under theproposed project, which can be grouped and costed by objectives, as described in paragaphs2.16-2.20.

Table 2.2: Sumumary Tnancdg Plan(Millions of US dols, July 1994 pices)

Local Foreip Total % of Cost ofCost Cost Cost Each Item

Government of Chile 1,046.3 909.0 1,955.3 94.2Investment 369.5 395.0 764.5 97.1Mainteance 487.7 441.1 928.8 91.3

Adminisation 120.6 13.5 134.1 100.0

Price Contingencies 68.5 59.4 127.9 94.2

World Bank - 120.0 120.0 S.8Iavestmt - 23.2 23.2 2.9

Maintennce 88.9 88.9 8.7

Adminiatafion - 0Price Cotingencies - 7.9 7.9 S.U

TOTAL 1,046.3 1029.0 2075.3 100.0

2.16 M ance subcomponents including. (a) civil works "global contrt" forexecution of periodic and rouine maintenance (US$166.0 million); (b) procurement ofspecialized maintenance equpment (snow clearing, shrub and grass mowing, patchingequipment, etc., (US$4.3 million); (c) procurement of state-of-the-art equipment (US$13.8million) for: (i) ventlation and taffic control in tunels, (ii) upgading, control and upgadingof weighing stations; and (iii) replacement of obsolete toll station equipment; and (d) consuingservices (US$3.8 milLon) for. (i) institutionalizng the existing cost accounting system for forceaccount maintenance opeaions, and the perfrmance indicators control system, (ii) consolidof the pavement management and of the Geogaphic Inormation systems introduced under theSecond Road Sector Prqject and their linage to the Highway Dein and Maintenance ProgramModel (IHDM), and (iii) improvement of the maintenance contacting system. Duringnegotations, agreement was reahed on the deailed 1995 road maintenance progam includingactivities programme under global maintan. Programs for subsequent years will be agreedduring the proposed annual reviews (see pam 3.14).

- 16-

2.17 Road Safety subcomponents including: (a) civil works for: (i) construction ofbike paths, pedestrian overpasses, sidewalks, guardrails and barriers, and improvement ofintsecions intended to reduce hazardous locaons (black spots) in the national network(US$53.1 million), and Ai) provision and maintenance of road signs, marldngs, and lighting(US$11.7 million); (b) procurement of guardrails, road safety auxiliary and emergencyequipment, and computer hardware (US$0.5 million); and (c) consulting services (US$1.2million) for (i) selected research on road traffic safety, (ii) support to the Executive Secretariatof the National Commission on Traffic Safety, and (iii) establishment of close worldng relationsat all levels with the National Police to strengthen coordination on general taffic control, vehicleweighing, toll collection, monitoring of road conditions, consolidation of exchange of road safetyinformation and preparation of public road safety educaton and enforcement campaigns. TMescope and content of the road safety subcomponent were agreed at negotiations.

2.18 Support to BOT Schemes (US$2.5 million), comprising quality control offeasibility studies and basic engineering studies for projects identified by MOP as candidates forsector concessions, as well as consultant services associated with the ongoing review of theregulatory framework and the promotion of individual concession schemes. During negoaions,agreement was reached on the program of studies to be financed in support of future roadconcession programs.

2.19 Environmental hnpact Assessment and Mouitoring (US$0.5 miion),comprising consultant services and training for (i) improving the guidelines and methodologiesfor classification and mitigation of environmental impacts; (ii) strengthening the environmentalsupervision of road works and extending it to road operations and to the road concessionprogram; (iii) preparing an Environmental Data Bank to be linked to the existing GeographicInformation System; and (:v) establishing Task Agreements with other public and privateorganizations. These arrangements were confirmed at negotiations.

2.20 Training, comprising: (a) a nadonal training program (US$2.8 million) whichwill continue the successful training efforts implemented under the First and Second Road SectorProjects, complemented by special courses on modemn maintenance techniques, road safety,envmronmental impact and BOT schemes; and (b) technical and study visits abroad for MOPmanagers and professionals (US$0.5 million) (See Annex H). Agreement was reached atnegotiations on the size and content of the training program.

E. Economic Evaluation

2.21 Ihe economic evaluations carried out by MOP for more than 200 subprjets tobe included in the road investment component (40.7% of the project's base cost) yield anindividual IERR from 18% to well above 55%. An economic analysis of the project's roadmaintenance component has been carried out (paras. 2.22 and 2.23). This component accountsfor 52.5% of the project base cost and absorbs 79% of the loan financing. However, asdescribed in parms. 2.1-2.9, the project will also support the Govemment's key policy objecesof promoting privatizaon and road safety, and will contribute to insitutional strengthening i

- 17 -

areas such as environmental protection. Consequently, the project's benefits will significantlyexceed the estimated returns on activities included in the 1995-1998 program.

2.22 The economic analysis for the main categories of the maintenance program wascarried out by staff of the Ministry of Public Works using the Bank's Highway Design andMaintenance Standards Model, version PM (HDM-III),5 on the Chilean national road networkof 75,588 kilometers, excluding 3,835 K, imaters of cement concrete roads. The HDM-Mmodel cannot be used for the concrete surface roads because it does not have submodels tosimulate rigid pavement deterioration. Accordingly, the analysis on concrete roads was madeusing a separate model developed for the Ministry of Public Works by the University of Chile.

2.23 The HDM model is designed to predict the life-cycle costs of different road designand maintenance options, including different time staging strategies for a specific road, or forgroups or links of an entire road network. It generates cost figures for large numbers ofaltemative maintenance policies on a year-by-year basis, and can therefore be used to identifyalternatives with the highest net present value (NPV) at given discount rates or the highestintemal economic rate of return (IERR). The objective is to come up with a combination ofmaintenance policies that results in the lowest life-cycle costs to society, both to road users androad authorities. Vehicle speeds and operating costs and road deterioration and maintenancecosts are generated by the model as a function of a given set of road design and maintenanMestandards, traffic volume, axle loads, and environmental conditions. The procedure forevaluating Chile's network with HDM is descibed in detail in Annex I. The IERR of the 1995-98 maintenance program is estimated at 55%, and the NPV at US$1,904 million. The IERRsand NPVs of different categories of the 1995-98 maintenance progm are shown in Table I-1.

F. Environmental Impact

2.24 MOP and the Roads Directorate, in particular, have shown an impressiveperformance in the assessment, prevention, or mitigation of environmental impacts (see AnnexF). A Bank mission in July 1992 made an assessment of the Roads Directorate's institudonalcapacity to carry out impact studies and monitorng and made recommendations to strengthenits organiztional structure, prcedures, and training. Subsequently, MOP commissioned itsown study on ways to strengthen its institutional capacity for environmental work. The pos-appraisal mission of July 1994 established ta the Roads Directorate has implemented the aboverecommendations, substantially upgraded its environmental impact assessment and preventioncapacity, and routinely conducts environmental assessments of projects. Further strengthenigis to be provided under the proposed project (para. 2.19). Consequently, it can be reasonablyexpected that environmental risks will be satisfactorily addressed under the proposed prqjecL

H UDM-Hf for Pdoal Comput_ adaptd to Chbea conditn

- 18 -

2.25 Most civil works involved in the proposed project (doubling exiting two-lanepaved roads to four lanes, paving existing gravel roads, construction of bypasses and overpasses,and general road maintenance works) have a low environmental impact. The exceptions to thisare new construction subprojects of: (a) a few penetration roads in the south, and (b) some majorroad works in suburban areas with high-risk potential for acoustic contamination and negativeimpact on land-use and population. Although these subprojects will not be financed by theBank, it was agreed at negotiation that the Road Directorate will provide the Bank anopportunity to comment on them.

G. Project Benerits and R;sks

2.26 The project will improve road maintenance by further increasing pnvate sectorparticipation in the road sector and strengthen the institutional capacity of MOP in key areas ofpublic action that will assume increasing importance with greater private sectorparticipation-road safety measures, and the assurance of environmentally benign engineeringdesigns, as well as environmental impact assessment and monitoring. The resulting reductionof transport costs and economic losses will benefit the Chilean economy and increase theinternational competitiveness of Chilean products. Reduced deaths and injuries from trafficaccidents resulting from the project's road safety component would be another important benefit.

2.27 There are no major risks associated with the project. MOP's Roads Directoratehas a proven record of good implemention, and its firm commitment to sound roadnaintenance policies and practices has been evident under earlier Bank-financed rcad projects.

The 1995 Road Ivestmere and Maintenance budget has already been approved and is incompliance with the amounts established in the agreed 1995-1998 Program. At negotiations theGovernment confirmed that allocations for maintenmce in the years 1996 to 1998 will not beless than the amounts agreed for these years in the 1995-1998 Road Investment and MaintenanceProgram. With respect to road concessions, while BOT is a new concept, an adequate legal,financial and institutional framework is already in place. There are some uncertainties relatedto the road safety component, since this is an area where institutional responsibilities arefragmented, and coordination may be difficult. it will be possible to minimize risks by tinga phased approach to the development of a national road safety program, with the road safetycomponent under this project representing a first phase focused on MOP and its nationalnetwork, to be expanded in scope under subsequent operation_ Bank support to the road safetycomponent will also contribute to minimize these risks.

- 9-

3. PROJECT IMPLMENTATION

A. Organization and Execution

3.1 MOP has a strong and effective organization that has benefitted from a personnelpolicy that has ensured stability and condnuity while keeping the work force as small aspossible. Project exocudon will be the responsibility of MOP's Roads Directorate which hasfive operational subdirectorates-Development, Works, Urban Road Works, Maintenance andAdministraion. The Works Subdirectorate will execute road safety inftastructure works. TheMaintenance Subdirectorate will have responsibility for overseeing the project's maintenansubcomponent (including road safety) while the Directorate's 13 regional offices will be incharge of implementation. The environmental subcomponent will be administered by theDevelopment Subdirectorate. The newly-created Concession Department within MOP's GenealDirectorate of Public Works will administer the road concession subcomponent in closecoordination with the Roads Directorate. The Training Unit will be in charge of traing.Following the successful practice adopted under the First and Second Road Sector Projects, theRoads Directorate's Foreign Loans Department will serve as the overall project coordinationoffice. Charts 2 and 3 of Annex A show the organization of the Ministry and the RoadsDirectorate.

3.2 The Roads Directorate has a staff of some 4,900, of whom 630 are atprofessional levels (about 500 are engineers). Preetly, some 1,100 govemnment workers areengaged in road maintenance activities under force account (approximately 10% of the totalmaintenance budget), however, this work force is aepected to decline significantly over the netseveral years through attrition. Today, 100% of new constrction work is executed thrughcontract. The Roads Directorate's policy is to continue to increase the share of contractmaintenance, thereby making an orderly tansition to full contract maintenance.

B. Procurement and Consultancy Services

3.3 All procurement related to the project components financed exclusively by theGovemment (about 87% of total project cost) will be carried out by MOP following the sameprocedures used sucssfully for all procuranent under the last three Bank projects, with aninternational competitive bidding (ICB) threshold of US$5 million for civil works andUS$300,000 for goods. All civil works and 43% of goods contract above these thresholds areof a traditional naure and will not be financed by the Bank, but bidding will nevertheless beopen to foreign firms.

3.4 Table 3.1 summaizs the prcurement arrangements under tis proecLProcurement of Bank-financed works and goods will be carried out in a manner consist wifthBank Guidelines (May 1992). ICB procedures will be used for goods purchases costgUS$300,000 and more, totalling about US$10 million, for which MOP will use the standardbidding documents issued by the Bank, with such modificaionas the Bank may agree to benecessary for the purposes of the proect

-20 -

3.5 Works contracts costing between US$300,000 and US$5 million, totalling aboutUS$227 million, and goods contracts costing between US$50,000 and US$300,000, totallingabout US$7.8 million, will be procured through local competitive bidding (LCB) arrangementssatisfactory to the Bank. For these LCB procedures, MOP will use standard bidding documentssimilar to those used effectively in the past under Bank-financed projects,with successfulparticipation of foreign bidders. Works and goods contracts costing less than the above LCBlimits will be procured on the basis of intemational or local shopping, including a minimum ofthree quotations from qualified contractors or suppliers, subject to an aggregate limit of aboutUS$20 million for works and US$2 million for goods.

3.6 Consulting services to be financed by the Bank, totalling about US$8.6 million,will be contracted in accordance with Bank Guidelines for the Use of Consultants (August 1981).using the Bank's Standard Form for Contracts for Consultant Services for complex time- basedcontracts, and a simplified form for other consulting contracts.

3.7 Most of the civil works contr.:ts financed by the Bank are expected to be forsmall maintenance works scattered throughout the country over a four-year period. The size andpa- kaging of these contracts were agreed at negotiations taldng into account network, geographyand other local conditions. Goods account for less than 6% of items funded under the proect,and are limited to miscellaneous state-of-the-art maintenance equipment that would probablybenefit from being procured through ICB, as well as computers and miscellaneous equipmentassociated with road safety and traffic measurement, and equipment for modernization of tollstations and vehicle weight control stations, which will be procured through ICB or LCBprocedures. Maintenance equipment totaling about US$15 million will be financed exclusivelyby MOP.

3.8 Based on the large number of similar or repetitive contracts and on the experienceand capability of the Borrower in procurement matters demonstrated through successfulimplementation of the last four loans, the following procurement review arrangements wereagreed at negotiations. Prior review and approval by the Bank will be required for, (a) allgoods contracts and work contacts (if any) to be tendered under ICB procedures; (b) the firsttwo contracts for civil works estimated to cost more than US$300,000; and (c) all documentationfor consulting ser"ices to be financed by the Bank, esdmated to cost US$100,000 or more forfirms and US$50,OUO or more for individual consultants, and for the first two that are estimatedto cost less than these amounts. In addition, the Bank will review on ex-post basis, accordingto paragraph 3 of Appendix 1 to the Bank procurement guidelines (i.e. before submission of thefirst withdrawal application), all civil works contracts valued at US$2.0 million or more. Thesereview arrangements will cover about 50% of the total value of contracts financed by the Bank.

-21 -

Table 3.1: Summary of Procurement Arrangements(Millions of US dollaus quivalent)

IC!5 LCB Other NBF Total Cost

1. Works1.1 Infastucture

Consuction 298.1 298.1Upgrading - - 466.0 466.0Road Safety - 56.8 - - 56.8

(22.7) (22.7)1.2 Maintenance

Periodic & Routine - 160.0 17.3 775.1 952.4(64.0) (6.9) (70.9)

Bridges & Rivebanks - 55.3 55.3Tolls, Tunnels & Weighing - - - 13.7 13.7

Road Signs & Road Marking - 10.0 2.5 - 12.5(4.0) (1.0) (5.0)

2. Goods2.1 Equipmet

Road Maintenance 2.0 1.9 0.7 15.1 19.7

(1.4) (1.3) (0.5) (3.2)Toll, Tunnel, & Weighing Control 8.0 5.4 1.4 - 14.8

(5.6) (3.8) (1.0) (10.4)Road Safety - 0.5 - - 0.5

(0.4) (0.4)3. Consultances3.1 Design & Supervision - - - 29.9 29.9

3.2 Technical Assistance - - 8.6 - 8.6

(6.9) (6.9)

3.3 TrangLocal - - - 3.0 3.0

Abroad - - 0.5 - o.s(0.5) (0.5)

4. Administratdon - - - 143.5 143.5

TOTAL 10.0 234.6 31.0 1799.7 2075.3(7.0) (96.2) (16.8) - (120.0)

N.s.: Figr in parent anm mount finmnoed by th Bank loan NEP Not Bank financed.

-22 -

C. Disbursements

3.9 The proceeds of the proposed loan will be disbursed according to the folUowingcategories and percentages

Amount of the % of ExpendituresCay Ion Allocated IQ be Fianced.

(1) Civil Workcs 98,700,000 40%(2) Goods 14,000,000 100% of foreign expenditures, 100% of the ex-

factory cost of locally produced goods and 70%of other locally produced goods.

(3) Consultant 6,800,000 100% of foreign expenditures and 80% of localServices expenditures

(4) Training 500,000 100% of foreign expenditures.

TOTAL 120,000,000

3.10 The closing date for project disbursements will be June 30, 1999. On the basisof MOP's excellent implementation performance under earlier Bank-financed road sector loans,it is anticipated that full disbursement will be achieved within the programmed four-yearimplementation period. The estimated schedule of disbursements is given in Table A-10.

3.11 Considering MOP's impressive record in contracting and disbursement, it wasagreed to continue to use the approach that has worked well in the past. Withdrawals from theLoan Account will be made on the basis of statements of expendiur for expenditures undercontracs costing less than US$300,000 for goods, US$5,000,00 for works, US$100,000 forconsulting firms and US$50,000 for individual consulants. Supporting documentation will notbe submitted to the Bank. Instead, it will be retained by MOP and made available for reviewduring project supervision and audits. However, civil works contracts valued at US$2.0 millionor more will be reviewed ex-post by the Bank before submission of the first withdrawalapplication for each contract. These arrangements and other disbursement related matters wereagreed at negotations.

3.12 To maintain an adequate flow of funds to finance eligible project expenditureswith a minimum of adminisve delay, the Government will establish a Special Account in theCentral Bank, or a commercial institution acceptable to the Bank, under terms and conditionssatisfactory to the Bank. Upon the Government's request, the Bank will deposit an aggregateamount equivalent to a maximum of US$10 milLion (or the equivalent of 4 months' estimatedexpenditures) from the loan account into the Special Account Records of the Special Accountproceeds and oudays will be available for annual audits (see pam. 3.14).

-23 -

D. Accounts and Auditing

3.13 The Bank will require that an independent auditor: (a) undertake an annual auditof all project accounts in a timely manner; (b) consistently apply procedures and methodologiesconforming to generally accepted auditing standards acceptable to the Bank; and (c) render animpartial judgment in its auditing role. In past Bank-financed road projects, the ComptrolerGeneral's Office (Contralor(a General de la Repdblica) satisfactorily fulfilled the funcion ofindependent auditor. During negotiations, it was agreed tat Contralorfa could be the auditorof the project accounts as long as it continues to meet the Bank's criteria of independence,quality and timeliness.

E. Monitoring and Evaluation

3.14 Under this project, the Roads Directorate will prepare and send to the Bankquarterly progress reports starting May 15, 1995. In terms of their scope and content, thereports will be modeled on the quarterly reports for the first two road sector projects, whichhave proven fully effective for project supervision. To monitor progress towards projectobjectives, it was agreed that annual reviews will be held starting July 1995 to focus, inparticular, on:

(a) size of the Govemment's annual budgetary allocation for the subsequent year;

(b) status of implementation of the road investment and maintenance program;

(c) compliance with efficiency indicators and monitoring targets (Annex J);

(d) selection and status of Bank-financed subprojects;

(e) status of disbursements;

(f) road condition inventones (biannually in odd-numbered years);

(g) implementation of the trining component;

(h) progress in the execution of specific studies;

(i) progress on otlzar TA components; and

0) audit reports and consolidation of disbursement records against actualexpenditures.

- 24 -

F. Agreements Reached and Recommendation

3.15 During negotiations, agreements were reached on the following issues:

(a) a detailed 1995 road maintenance program including activities programmedunder global maintenance (para. 2.16);

(b) scope and content of the road safety program (para. 2.17);

(c) program of studies to be financed in support of future road concessionprograms (para. 2.18);

(d) scope and content of the program to strengthen the Roads Directorate'scapacity for environmental impact assessment and monitoring (para. 2.19);

(e) size and content of the training program to be financed under the loan (para.2.20);

(f) the Bank to be given an opportnity to comment on environmental assessmentstudies for subprojects not fmanced by the Bank (para. 2.25);

(g) amounts to be allocated for maintenance in the years 1996 to 1998 (para.2.27);

(h) use of Standard Bidding Documents for ICB for goods (para. 3.4)

(i) size, packaging and scheduling of civil works contracts (para. 3.7);

(3) modalities of disbursements applications (para. 3.11);

(k) special account arrangements (para. 3.12);

(1) auditing arrangements (para. 3.13); and

(m) efficiency indicators and monitoring targets (para. 3.14).

3.16 There are no conditions of effectivene for the proposed loan.

3.17 Subject to the above, the proposed project is suitable for a Bank loan of US$120million with a term of 15 years, including a grace period of five years, at the standard variableinterest rate.

ANNEXES

-25 - A ATable A-I

CHELETHMD ROAD SECTOR PROJECT

SUPPORTING TABLES AND CHARTS

Road Network, Ad nrative and Surface Claification, July 1994(in kilometers)

Paved Unpaved

BituminousConcrete and Natural

Cement Surface Engineed GravelClassification Concrete Treament Gravel and Earth Total

BASIC NETWORK 3,542 8,472 9,166 2,202 23,3

National Roads (A)' 2,356 3,104 1,150 0 6,610

Primary Regional Roads (B) 769 3,614 2,433 355 7,198

Secondary Regional Roads (C) 390 1,754 5,583 1,847 9,574

LOCAL NETWORK 293 644 23,072 32,032 56,041

Pidmar Local Roads (D) 192 428 12,05 11,860 24,495

Secondary Loc Roads (E) 101 216 11,057 20,172 31,46

TOTAL 3,83S 9,116 A 32,238 34,234 79,423

Souas: MOP, Vlidbd, July 1994.

1/ Loss AS, C, D ead E ocuaood to th esapeoti.degadwibhi MOP.l rd olaiaiosgmjl 5,992 km of bhtuminou coacg~ and 3,124 kml of mgOkoe daiDg.

-26- ATable A-2

CHILETHID ROAD SECTOR PROJECT

Annual Average Daily Tlraic and Composition by Vehicle Type at Major Toll Stations in SeectedYears, 1982-1993

ANNUAL AVERAGE DAILY TRAMCOn - -of vdes)

TOLL STATION 1982 1983 1984 1985 1986 1987 198 198 1990 199 199 199

Chacabawo 1,S02 1,728 1,738 1,726 1,526 1,934 2,374 2,793 2,908 3,332 3,687 4,162

Lamp& 3,242 3,186 3,220 3,172 3,608 3,750 4,27 4,814 5,224 5,526 6,632 7,249

Zapata 5,612 4,440 4,612 4,370 4,346 5,774 6,563 7,418 7,956 8,5 9,097 9,378

Pomare A/ 5,840 5,192 5,108 4,632 4,654 4,874 5,54 5,806 4,348 4,179 4,7 5,472

Angostu 8,474 7,624 7,948 7,838 8,284 9,042 10,369 11,456 11,875 12,759 14,8 15,262

Perqulauqm 2,423 2,201 2,340 2,3 2,532 2,826 3.191 3.598 3,774 4,062 4,549 4,926

TOTAL 27,398 24,371 24,966 24,024 24,950 28,200 329078 35,885 36,085 38,41 43,119 46,456

ANNUAL % CHANGE -3.4 -11.0 2.4 -3.8 3.8 13.0 13.8 11.9 0.6 6.S 12.2 7.7

COMOSITION OF VEMICLES

Pa_gerCmar 68 68 67 65 6S 66 66 68 68 69 69 69

Buses 12 It 11 11 10 10 10 10 9 9 9 9

Tncks 20 21 22 24 25 24 24 22 23 22 22 22

Two-Adr Tnwb (10) J 9) f9) (10) (1O) f9) ,9) (8) (7) (7) (7) f6)

:*. and More AxeTnrk (10) (12) (13) (4) (15) (1s) (15) (14) (6) (1) (1s) (16)

Soutces: MOP, Valdd July 194.

1/ Pomair stion chasbd to B hico ation as of 1989.

-27 -

Table A-3

CHILETHIRD ROAD SECTOR PROJECT

Evolution of the Registered Road Motor Vehicle Fleet, 1972-92w d Bo ,,,d .Autoobila and 8u and

Staon Wa_e Mstobusm Swwice Vekics / Thnasm Totld

YEAR Num_ % N _bw N Nub S Nubw % Nmber S

1972 216,031 - 15,773 - 79,567 - 7S,989 - 387,360 -

1973 22S,247 43 15,479 .1.9 82,503 3.7 78,794 3.7 403,023 3A.

1974 235,335 4.5 15,682 1.3 85,348 3.4 81,510 3.4 417,275 3.9

1975 248,231 S.5 IS,074 -3.9 77,669 -9.0 71,849 -11.9 412,823 .1.2

1976 264,118 6.4 15,413 2.2 105,480 35.8 81,234 13.1 466,245 12.J

1977 298,338 13.0 IS,S63 1.0 111,566 5.8 8S,290 5.0 510,757 9.

1971 340,050 14.0 17,13S 10.1 119,840 74 92,S57 8. S0,S12 11L5

1979 351,089 3.2 20,117 17.4 159,627 33.2 90,411 -2.3 621,244 9.1

19:0 409,196 16.6 20,734 3.1 181,300 13.6 8S,222 -5.7 696, 12.1981 S19,021 26.8 22,146 6.8 230,622 27.2 84,168 -1.2 855,957 22.9

1982 547,134 5.4 21,173 *4.4 239,432 3.8 78,073 -7.2 185,812 3!1982 565,231 33 20,034 -54 229,077 -4.3 76,932 -1.5 891,277 04

195 582,169 3.0 20,520 2.4 214,041 -6.6 63,745 -17.1 180,475 _41915 S84,227 OA 21,489 4.7 232,784 8.8 57,818 -93 896,318 1.

1966 614,806 S.2 20,690 -3.7 158,853 -31.8 68,215 18.0 862,564 .3.8

1987 640,290 4.1 22,417 8.3 175,872 10.7 83,463 22.4 932,042 61988 679,418 6.1 24,0S9 7.3 18S,163 5.3 98,772 18.3 97,412 7119"9 681,269 03 26,206 8.9 204,508 IOA 106,272 7.6 1,018,2SS 31

1990 703,460 33 27,724 5.8 233,822 14.3 109,222 2.8 1,074,228 SJ19l 786,671 11.8 30,369 9.5 277,141 18.5 119,043 9.0 1,UI3S 4 12.91992 847z289 7.7 30331 .0.1 313.132 13.0 127.215 6.9 1317.967 6

1972. 7.0 3.5 .4 1.7 6A1972-77 6.7 .03 7.0 2.3 5.7

1982 12.6 5.4 28* -4.2 IL7198247 3.2 2.8 6.4 2.1 0.9

Ann9 5'.7 6.0 14.0 6. '.

Sama: MIT aed Natioal Stl s _ a ltut July 1994.

y laldes vas, txis, ambuqame, pksp,mb and wat_ tncb

- 28 - AnucATable A-4

CHIETDM ROAD SECTOR PROJECT

Stucu of Retai Prices of Automotive Fuels in Santiago, July 1994 (n Ch pesos and US dollars per US gallon)

GaslinePranim (93 RON) h/ Regular (81 RON) Dlud

Ch S US S Ch S U 5S Cb S US S

Price at Concon Refinery 254.0 0.61 236.7 0.56 263.8 0.63

Specfc Tax (eWdse Ux) 2S7.S 0.61 257.S 0.61 110.7 0.26

Tax Law P 19030 0.0 0.00 0.0 0.00 0.0 0.00

TransportRefey Cty Gate 8.8 0.02 8.8 * )2 8.8 0.02

Dirbutos Mrgin 62.7 0.15 81.0 0.19 S7.7 0.14

Suaotal S82.9 1.39 S83.9 1.38 441.0 1.0O

VAT (18%) 0/ S8.6 0.14 58.8 0.14 59.5 0.14

Price to Public 641.4 L53 6447 L53 50.4 Lt

Scum: ENAP. July 1994.

1I USSI - aSSk/ RON - Rmmh Ocs. Num*w.g/ VAT - Vavsdd oux (S%); appw to 8dy V bayd. ad diudoaas

-29- _

Table A-5

CHIlLETHIRD ROAD SECTOR PROJECT

Fuel Consumption by Road VehIcles, 1972-92(thousands of cubic mets)

Gasoline

_ D Amud

(81 RO)I (3RO ) ROMeibYEAR RegWlar Psemiu V _01011 Grtow * Volum Growth S Towt

1972 1,369 4S5 1,824 - 317 - 2,141

1973 1,271 369 1,640 -10 352 11 1I99m -7.0

1974 1,234 260 1,494 -9 382 9 1mm75 -S.9

197S 1,017 19S 1,212 -19 402 s 1,614 -13.9

1976 986 207 1,193 -2 440 10 1,3 1.1

1977 988 288 1,276 7 455 3 1,731 6.0

1978 946 436 1,332 8 556 22 1938 12.0

1979 956 463 1,419 3 728 31 2,147 1OS0

1980 949 S31 1,480 4 854 17 2,334 8.7

9m 773 838 1,611 9 929 9 2,340 8.3

-98t 520 1,031 1,551 4 333 -t0 2,384 46.1

1983 394 1,095 1,489 -4 900 8 231i 0.2

1984 332 1,117 1,449 -3 90S 1 2,357 -1.3

1985 293 1,074 1X,67 .6 9S1 S 2,318 -1.7

1986 278 1,144 1,422 4 963 2 234 2.4

1987 223 1,270 1,498 5 1,083 12 2,531 8.7

1988 200 1,471 1,671 12 1,240 15 2Onl 12.3

1989 IS9 1,662 1.821 9 1,301 S 3,126 74

1990 142 1,740 1,332 3 1,231 .6 3,113 0A4

1991 13S 1,813 1,943 4 1,304 6 3,252 4.5

1 12 2,035 2,147 10 1,9 7

AUNUAL AVERAGE GROWTH IN 91

1972-92 -11.1 6.9 0.7 6.5 2.0

1972-77 -6.3 48.7 .6.9 7.5 .4.2

1978-82 -13.9 24.0 2.9 10.6 IO

193487 -12.3 3.3 0.2 4.7 2.0

Souic.: Co'ad Nade 4 .made 5.ogb .. bdmn w gde i.Sadk, 1972-l99Zupatat July 1994.

a/ RON - Ruaech Ocuum Nua*er.

-30- AzMM ATable A-6

THID ROAD SECTOR PROJECT

Road User Charges (RUC) and Road Expenditures (RE), 1971-93(at current prices in Millions of US dors at IFS iv average annual exchange rate)

VdmRe&bvAn ac as %

YEAR FNd Trn d bTo Fr Tota RUC _ahtm ILnwnlMms DdASwd* ToaRE .1R3

1971 583 6.2 14.1 78. 43.4 673 3.8 114.6 69

1972 60.9 4.4 17.6 8.9 03 433 5.4 98.0 85

1973 102.5 3.1 19.1 124.7 654 44.7 8.1 11.4 1

1974 232.7 5.0 10.2 2479 54.0 195.6 8.4 80 96

1975 165.6 7.3 6.9 179 17.3 34.1 4.0 MA 325

1976 239.9 9.4 6.7 2m5.0 21 35.9 S.7 3A 404

1977 273.5 13.1 18.4 305.0 25.0 374 5.3 67.9 449

1978 236.3 14. 16.9 2A7 31.0 41.4 5.2 776 345

1979 141.7 29.4 17.6 13.7 334 64.2 4.8 12 184

1980 220.2 38.7 17.9 276 76.4 8. 5.6 16 168

i981 287.0 45.8 21.8 is" 83.6 167.7 7.0 253 137

1932 320.3 36.5 30.2 387.0 57.7 1195 6.0 13.1 211

1i63 321.7 29.7 36.4 3S7J 45.4 128.9 17.0 191.3 203

1984 326.1 27.7 38.5 393 52.9 112. 24.4 1901 206

1985 308.4 20.4 32.4 31 47.7 1204 336 2829 179

1986 375.3 21. 33.1 429,9 78. 90.1 44.9 213 201

1987 389.6 21.7 33. 44 927 670 68.2 27.9 1

1988 4103 353 89.8 3A 119.2 2. 76.1 267. 208

1989 390A 40 92.2 g52 110.9 63 104.4 278 1

1990 471. 443 104.0 619.6 1243 62. 1143 301. 206

1991 474.2 46.1 82.8 mu. 146.3 71.7 122.1 341 177

1992 53 608 1178 79 177.2 95. 128 4015 1

1993 580. 71A2 1245 7763 170.0 14.7 M1 411 1f

Sma: MOP. DPU swAm yMsfw ew iJer. and 3Ss*eh ata*le 7, Se bst 1992.

k'1 Doe. nat incue fraba ted _i _ INVU @iftn _b1 Redg U*aaDsvhi*gI Inldes sai.aad Oup@p a.bauOWmt dpaiummofeqlp_

-31- _m ATable A-7

CHETHIRD ROAD SECTOR PROJECT

Actual Road Expendtures, 1985-94(Millions of current US dollars) a/

185 1986 1987 19m 1989 1990 1991 1992 1993 1994EXPENDrTURES 209.0 224.2 236.6 269.2 290.7 316.7 360.6 427.1 430.4 53L4(net of debt sevice) (17S.4) (179.3) (168.4) (193.1) (186.3) (20L9) (238.S) (29.3) (335.5) (427.1)

INVESTMEST 120.6 90.1 67.0 62.6 63.5 62.1 71.7 99.5 121.9 15.2Construction 41.1 70.2 50.7 41.8 44.3 35.0 55.4 65.6 S7.9 65.8Reconstucton 63.1 - - - - - - - -

Upgrading 14.1 17.7 13.7 18.0 16.6 24.8 12.6 25.5 55.9 88.3Consulting 2.3 2.2 2.6 2.8 2.6 2.3 3.7 8.4 8.1 4.1

MAINTENANCE 47.7 78.5 92.7 11.2 110.9 124.3 146.3 177.2 184.4 239.3

Peiodic MainL 15.3 19.8 23.9 28.0 28.5 86.2 103.9 123.9 102.2 169.5Routine faint. 18.1 25.0 32.9 49.9 26.4 26.4 33.9 44.1 67.9 56.3

Deferred MaintL 9.2 24.0 33.3 30.3 49.2 - -

Equipment Purchase 4.9 8.4 1.0 7.9 4.0 8.4 7.0 0.6 4.6 12.5Consulting 0.2 1.3 1.6 3.1 2.8 3.3 1.5 8.6 9.7 0.9

ADMINlSRALTION 7.1 10.7 .7 11.3 1L9 15.5 20.5 21.5 29.3 29.6

Inve.stent Admin. 4.0 6.2 5.0 4.7 5.0 6.5 8.6 7.8 12.2 10.4Maintenance Admin. 3.1 4.5 3.7 6.6 6.9 9.0 11.8 13.8 17.1 19.2

DEBT SERVICE 33.6 44.9 68.2 76.1 104.4 114.8 122.1 128.8 94U8 104.3

Soure: MOP, VU&a, July 1994.

I/ USSI - ChS at mid-yea, 160.5 191.0 220.0 24.0 260.0 300.0 33.0 390.0 4U 42.0except fot the 1994 fig.which correv0ond to th atued for budgettay pr*edom.

-32- _ ATable A-8

CELETMD lROAD SECTOR PROJECT

Minisr of PubLic Works' Road P am, 199S-1998(Millions of US dollars, July 1994 prices)

1995 199 1998 TotlEXPEND iiURES 450.0 472.5 46.1 520.9 1,939.5

INVESrNENT 19 1917 2013 21.8 787.7New Cbmsmicdon Worpt 72.4 70.1 70.3 65.8 27&6Upgrading Wore 100.0 105.0 110. 120.5 435.5Road S0ay 7.5 126 15.0 1&0 53.1Co.wuLam senvis 3.0 4.0 6.0 7.5 205

MAINTEANCE 236.0 248.1 260.5 273.1 1,017.7Perkidi Maintenae 152.8 157.0 173.1 184.5 667.4Routine Mainance 51.1 52.3 57.8 61.5 222.7Bridges wd Rivwrbak, 16.6 12.2 11.5 11.4 51.7Toalk, Tmels & WdghIng 3.5 31 3.1 3.1 12.8Roadsigs and Roadmnarkngs 1.0 2.9 3.5 4.3 IL7Equipmet z7.0 16.0 6.5 3.2 32.7Conuam Se-Wm and lhasing 4.0 4.6 5.0 5.1 1&7

AD)MI rtRATION 3L1 32.7 34.3 36.0 134.1Iniwulae 12.4 13.1 13.7 14.4 53.6Maineance 17 19.6 20.6 21.5 8QS

_rrwm*ffGw zxp _rdm 90.43 0.43 0.43 0.43 0.43ExThp_w Om57 0.57 0.57 05 07

Souma MM, VMaGdad, Novgw 1994.

-33-MTable A-9

CEETHtD ROAD SECTOR PROJECT

Fnandig Plu(Mfllions of US dollars, July 1994 prices)

Gov't of Chie mRD TotaAmount % Amout % Amount

N TMENTS 764.5 97.0 23.2 3.0 787.7CiWil Wor 7460 97.2 21.2 28 767.2

Construction 278.6 100.0 0.0 0.0 278.6Upgping 43s.5 100.0 0.0 0.0 435.5Road Safety 31.9 60.0 21.2 40.0 53.1

Consuanaies 15 90.2 2.0 9.8 20.SDeign & Supevision 18.0 100.0 0.0 0.10 18.0Conceaions .S 20.0 2.0 80.0 2.5

MAINTENANCE 928. 913 889 8.7 1017.7Ciwl Wo,* 85.3 927 71.0 7J3 963

Periodic & Routn Maint_e 724.4 100.0 0.0 0.0 724.4Global Maidenane 99.4 60.0 66.3 40.0 165.7Bridge and Riverb 51.7 100.0 0.0 0.0 51.7Tols, Tunnel & Weighng 12.8 100.0 0.0 0.0 12.8Roadaigna & Roadmadrng 7.0 60.0 4.7 40.0 11.7

Eqipmnr 19.7 60.2 13.0 39.8 32.7Traditional Manence Equipnt 14.1 100.0 0.0 0.0 14.1Special Maitnan Equipmn 13 30.0 3.0 70.0 4.3Tolls, Tumels & Wdging Equpn 4.1 30.0 9.7 70.0 13.8Road Sdaty Equimt 0.2 30.0 0.3 70.0 0.5

Consukandes 11.0 71.4 4.4 28.6 15.4Design & SuWersian 9.9 100.0 0.0 0.0 9.9Maiae Admisiamtion 0.8 20.0 3.0 80.0 3.8Road Safety 0.2 20.0 1.0 80.0 1.2Environment 0.1 20.0 0.4 80.0 0.5

T7hing 2.8 84.8 0.5 15.2 3.3Loca Train 2.8 100.0 0.0 0.0 2.8Inftmatona Traiin 0.0 0.0 O.S 100.0 0.5

134.1 100.0 0.0 0.0 134.1Ivestment 53.6 100.0 0.0 0.0 53.6

Maintac 80.S 100.0 0.0 0.0 8S

TOta DMs Costs 1,87.4 94.2 112. 5.8 1,93.5Price Coningene (7%) 127.9 94.2 7.9 5.8 135.8ToalPoject Cdst 1,955.3 94.2 120.0 58 2,875.3

Sout..: MOP, Nowbet 1994.Diff.awao di to rmaoi.

- 34 - Annex ATable A-10

CHILETHIRD ROAD SECTOR PROJECT

#able 10: Estimated Schedule of Bank Disbursements. FY 1990-93

FY and Quarter Disbursed In Cumulativeending Quarter FY Disbursement 6

March 31. 1995 3.0 a-/ 3.0 2.5June 30, 1995 2.0 5.0 4.2

September 30, 1995 5.0 10.0 8.3December31, 1995 6.0 16.0 13.3March 31, 1996 7.0 23.0 19.2June 30,1996 8.0 31.0 25.8

September 30, 1996 8.0 39.0 32.5December 31, 1996 8.0 47.0 39.2March 31, 1997 8.0 55.0 45.8June 30,1997 8.0 63.0 52.5

September 30, 1997 9.0 72.0 60.0December 31, 1997 9.0 81.0 67.5March 31, 1998 9.0 90.0 75.0June 30,1998 9.0 99.0 82.5

September 30, 1998 8.0 107.0 89.2December 31, 1998 7.0 114.0 95.0March 31, 1999 4.0 118.0 98.3June 30,1999 2.0 120.0 100.0

Completion of Works: December 1998

Source: MOP and Mission Estimatal Special Account US$3.0 million initial deposit out of a total of US$I0.0 million.November 1994

-35- \nnex AChart 1

Road Sector Institutional Organization

Normative Sector Agency i National Planning Agency

* makoes tranport polscy s d t updates a rolling three-year plan* establemh rot d traficg safetV dstdrmines whethet proposedpolicya st, acrosnd regumateons rgtransport investments are liucsied* establis r eha saety fetnorms

*in charao of road planning and ! noag furban toa networkI hreo oasi etatranspot kOwtucre {except (except central Santiago}i chareoradincntiaglurban s tats) r endsures tatd design of urban dntiaga collelad road tolls streets adheres to road saconform t in collabry loca* implement vehicle weiht limit slandads networkinitr roladboratipograthMOPprogram ... * hmplements vehicle inspeotion and11plans and controls maintenanocegmto,ad ralonii

for basic and prmuloary w netwr Isbsues local traffic regulatiorks* instaUs road sateW feature* ensures tha rood designs andaxis load nqulations conform tonational safety standards

Enforcement of Traffic Regulations

*assist MOP in collection of road tolls and knpWmtton of vehicleweigt pnwn* enforo 'traffic laws and ttbfonas* namabn nadoa idnfaom sym an trame accidentsQ_w__otpb auah c_-m m_t

-36- Annex AChart 2

QOranization of the Ministry of Public Works

Minister

Unoerser retary

MinisterialSecretariats

r--.-----.-.-_...._-.._._._.......I

( in u Genera General'iSuperimendency of | o Hydralics Directorate of Directorate of

Sanitation Sorvices ] 1 ~~~~~~~~~Public WrsWater l

Acoounting an PlanninigLeaConlCncsisFinance I

Directoat Of Roads irctorate Of Dietrt fDrcoaeoArchitecture AieioatrPrsooksrtisto

Doattd kne indcates coordination relatonship between MOP and autonomous orgonizntions.

-37- An3mex AChart 3

OrganizatIon of the Roads Directorate-Ministry of Public Works

National Director of Vialida

r I \ / I x, y \ _ I ~~~~~~~~~~~~~ OL n t

Dept. of Plans Dept. ofIUbn Works Jland Programs Crniaruoton Cnio

L~Lababt Dept. t Works T of

-~ -

-38-

CHILEROAD SECTOR LOAN

Legal and Institutional Framework for Privatizatlonin the Road Sector

Basic Objectives

1. Tbe first objective Xt the Government has in granting road concessions to theprivate sector is to secure new sources of financing for inhrastucture investment. Ifconcessionaires can finance their projects in the pnvate capital market and repay their investrswithout recourse to scarce tax resources, total investment in the highway sector can be ineasedwithout raising additional taxes or increasig public sector debt. A second and equallyimportant reason is that the private concessionaires are often better equipped than officialagencies to tap a new pool of talent to manage the construction, maintenance and operation ofinfrastructure projects.

Legal Framework

2. Road concessions must be carried out in Chile within the framework of the 1991Public Works Concession Law (DFL MOP No. 164) which modified and replaced an ealierbody of laws that established private sector concessions for public works and govened theprocess.' This legal framework is flexible, applicable to all types of works within thejurisdiction of MOP,2 permits participation by every type of investor and presents clear groundrules for the private sector.

3. The 1991 law and associated regulations (Supreme Decree MOP No. 240) set forththe general rules by which the construction, repair and maintenance of public assets are to beundertaken under private concession. Decree No. 240 details the principles and norms foroperating the concession system with respect to the following aspects: (a) bids for con tingconcession projects odginated by MOP or private parties; (b) content of technical and financialbids; (c) review, evaluation and selection of bids; (d) contracts and decree to formalize contraaward; (e) engineering designs and execution of works; (f) operation of assets; (g) sancdtns fornon-compliance with terms; (h) transfers and guarantees; and (i) suspension and cessation of,or intervention in concession contact.

4. The idea for the concession may onginate with MOP or with private contractors.The law and the accompanying rgulary decree stipulate ta the state Odelegates" to pivateparties the design, constuction, opeation and maintenance of the relevant infrstructure facilities

'Tb eadier concesso include the 1960 Law 15,4 d DIL No. 206, the 1982 DFL MOP No. 1.nd tte 1984 DS (prme Deem) MOP.

2 hcludng rad, tunels, bilding, ina*m cals, bddg and aipo.

-39- AnnexB

and the concessionaire takes on the responsibility for obtaining financing, contracing out works,and subsequently managing the operaton of the facility and collecting fees from users. Suchuser fees are to be subject to regulations laid down explicitly in the bid documents. Prospectiveconcessionaires need to meet minimum conditions with respect to their experience, financialposition, ability to contribute equity to the project and raise funds, and seriousness of intent.

5. After two years of practical application, the legal framework for concessions wasslightly modified by law 19,252, dated October 15, 1994, which modified the evaluation criteriafor the award of concession contacts and introduced other minor changes.

[nstitutional Framework

6. The authonty to set policies and develop road concession programs is vested in theMinistry of Public Works Concession Council, created by Supreme Decree MOP No. 112 of1992. The Council comprises the Minister of Public Works, Undersecretary of Public Works,Director General of Public Works, Chief of the Office of Ministerial Advisors, Chief FinancialOfficer, Director of Planning, and Chief of the Concession Division, who serves as theCouncil's secretary. MOP's other units and the regional offices provide input in the formuationof policies and programs through the Concession Division. Outside agencies that provide inputand support to the Concession Division include the President's Office, Ministry of Fiance,Ministry of Planning, Ministry of Trnsport and Telecommunications and other institutionsinvolved in the operation of public buildings, public transport, ports, irrigation and airports. (seeChart 1 of this Annex)

7. The functions of the Concession Division of MOP, as defined by Supreme DecreeMOP No. 112, are to: (a) promote and coordinate the bidding of public works through theconcession system; (b) supervise and manage the concession prmcess in general, and theawarding of contracts in particular; (c) establish and oversee uniform application of criteia andconditions for concession; (d) review, analyze and recommend possible candidates forconcesson; and (e) oversee aU manner of activities, procedures or task assoiated withconcession within the junsdiction of the D iectrte General of Public Works. The work of theConcession Division is supported by consultants from the University of Chile and otherindividual consultants. An executive committee for concessios was established to coordinateand supervise the activities of all the professionals involved (see Chart 2 of this Annex).

Concession Procedure

8. Chart 3 below indicates the concession process based on Supreme Decree No. 240.Regardless of whether the idea of the concession project originated with MOP or the pfivatesector, the Director General of Public Works initiates the process by calling for bids. Pror tothis stage, the Ministry of Finance would have approved the feasibility study and the Presiden'sOffice the concept and location of the project. Bidding documents for the project are publishedwith prior clearance by the Ministry of Finance and the Comptroler General's Office Whina pre-determined perod of time, potential andidates are allowed to seek claification from MOP

-400

on the terms and conditions specified in the bidding document. The andidates then submit theirbids by a date specified in the bidding document. On a given day, at a specified time, in a pre-determined place (all establifsed in the bidding document), the proposls are opened. Theproposals are then evaluated by an "evaluation commission' representing the Mnister, DirectorGeneral of Public Works and the Directorate of Roads, MOP. The evaluation takes into accountthe terms of financial offers as well as the technical content of the designs proposed. Thecommission awards the contact to the prospective concessionaire deemed to offer the bestproposal. Then a decree formalizing the contract award is issued.

tplementationl of the Concesion Program

9. To assist in the implementation of the concession program, MOP with Bankassistance obtained in March 1992 the Japanese Grant No. 21409-CH for Yen 98.4 milon tofinance studies required for the development of the system. Four studies by international andlocal consultants have been completed covering such diverse aspects as: strategy, financing,mnformation campaigns and evaluation criteria for concession schemes. Three further studies onupdating of the bidding documents, identification of candidate projects, and strategic analysis forconcessions along 1,500 kn of the Longitudinal Highway are in eaecution. Eight addidtoi tstudies are in preparation.

10. MOP has carried out two feasibility and engineeing stes for specific concessionprojects financed under the Secnnd Road Sector Project, Loan 3120-CH, and has carried out oris implementng under own financing 16 analytical, feasibility on engineering studies. It has alsoorawnized several local and intemational seminars and conferences to publicize its concessionprogram and has succeeded in generating substantial international intezest

11. The first road concession project, "El Mel6n Tunnel", including a tunel of 1,200meters length and access roads of 3.5 in, was awarded in June 1993 to a Chilean-Spanish jointventure at a cost of US$25.0 million. Construction strted in October 1993 and is expcted tobe completed by February 1996. A second concession project, -Southern Access toConcepci6n", was awarded in July 1994 to a Chilean joint venure at a cost of US$21 million,and construction has started. The bid for the concession project "Northern Access toConcepcion" (US$80 million), was opened November 15, 1994 with the paricipation of fourChilean joint ventures. Table B-1 provides an overview of the proposed program 1995-1998 forthe opening of bids for Public Works Concessions (MAP IBRD 26278).

12. The project will support tis concession progam by financing technil assitfor quality control of feasibility and basc enginering stdies for projects idenified by MOP ascandidates for public works concessons, as well as consultant serices associated with theongoing review of the regulatory framework and the promoton of individual concessionschemes.

-41- Anex BTable B-1

Public Works Concession ProgramSchuedule for Bid goenina

Year and Proiect Amount In US$ Million

I9 2mSantiago-San Antonio Expressway 95.0Puchuncavt-Nogales Road 7.0Talca-Chillan Expressway 75.0Termas de Chillin Road 5.0Access Road to Santiago Airport 6.0Iquique Airport 4.0El Loa Airport 2.0La Serena Airport 2.0Concepci6n Airport 5.0Puerto Montt Airport 5.0

1I A=1La Dorrnida and Route 68 Expressway 200.0Costanera Norte Expressway 120.0Chillan-Collipulli Expressway 100.0Collipulli-Temuco Expressway 129.0Los Vilos-Santiago Expressway 73.0Santiago-Talca Expressway (First Stage) 30.0Santiago-Los Andes Road 50.0Road Network Cartagena-Quintay 40.0Penco-Tacahuanco Road 6.0Bio-Bio Riverbank Defenses 33.0Santiago Airport 25.0Customs in Los Andes 5.0

1m Z=L0Chillin-Collipulli Expressway 100.0Collipulli-Temuco Expressway 129.0Great Pacific Road 500.0Customs in Chacalluta 4.0Container Terminal for Valparafso 9.0

1m 98JASerena-Los Vilos Expressway 143.0Santiago-San Femando Expressway 155.0Temuco-Rfo Bueno Road 70.0Rbo Bueno-Puerto Montt Road 83.0

TOTAL 22100

-42- AnnexBChart 1

Organizational Framework for Road Concessions

Council of Concessions

Executive Coninilttee

Organizations Within MOP f o C Organizations Extemal to MOP< Opartrnent otConcession

Coordinating Advisors President' Office (1)

- General Directorate of Water- Directorate of Planning MIDEPLAN (2)- Directorate of Accounting and

Finance- Legal Counsel- Directorate of Architecture Ministry of Finance (81- Roads Directorate- Directorate of Ports Works- Directorate of Irigation M T- Directorate of AIrponts MT

Regional Ministerial Secretaries (4O Other Ministries and relatedorgani2ztions with projects in the

Advisors; areas of:Regional Coordinators;Regional Planning Directors - Architecture

- TransportRegion I Region Viil - Ports WorksRegion 11 Region IX - IrrigationRegion IIl Region X AirportsRegion IV Region XiRegion V Region XIlRegion VI M.R.,eglon VIl

Notes:(I) The President's Office approves the invitaton for bids on works subject to a favorable roport of the Fnance Ministry,(2J Allocation of esourcs for preliminary studies for biddig on work and cons utancis is approved by MIDOELAN Incompance vwith its e¢onomic evaluation system.131 Approves resource ollocatin for prelmnary studies for Mhe concesson of wors and, in additon, aprovs the prospectut,feasibiity studV, and terms for biddig on works. Appoints represantatives to the Evalusaton Comnission.141 Planned.

August 1994

C

ISS4

ii'! ii3.

.4,

IiLJ-.�I- c�)I

fl! Iiii L...

a! I.

I S

-44- Anex BChart 3

Concession Process

Call for Bids

Epression of Interest by Potential Candidates

Consultation and Clarification of BiddingDocuments

Presentation of Proposal

Opening of Proposal

Evaluation of Proposal

Awarding of Contract

( Decree Formalizing Contract Award

Auust 1994

-45 - Aaex C(

CHILETDR ROAD SECTOR PROJECT

History of Bank Lending in the Road Subsector

1. The Bank has provided assistance to Chile's roads subsector since 1961, through onecredit and seven loans totalling US$540 million (see Table C. 1). This long history can bedivided into two distinct phases. The first four lending operations (1961-79) were characterizedby implementation difficulties, slow execution of works and cost overms, while the last fourprojects (1980-93) were implemented effectively at signifcantly lower cost and in a tmeymanner, fully meeting their objectives.

Table C.1: Bank lending to Chile's Road Sector

(USS Date of Last InJAmMoName Nmber Apod Date 1millim) Clong Date ln__ tSa"e

I H{ighway Maiateance Projoct' 287-CU 1961 6 1966 1966 TO

2 Highway Conatructio Praject 4-C 1961 19 1971 1971 283a/(ctedit) TOODA)3a

3 Second Highway Maintenance 558-CH 1968 13:2 1976 1978 PPAR (2318)Project

4 Second Highwvay Coutnaslioa 68$-CH 1970 10.8 1978 1979 PPAR (3258)Project_

' Highway Reconstuction 1927-CU 19S0 42 1984 1985 PAR (12983)'Projecf

6 Second Highway 2297-CH 1983 128 1990 1990 PAR (12983YReconstruction Project

7 Road Sector Project 2589-CH 1985 140 1990 1990 PAR (12983)'

8 Second Road Swecor Project 3120-CH 1989 180 1994 1994 ShZ (1790-CH)

Together originaly known as the Road PrcojCLSometinms referned to as the liW Wighway ProjetLSometimes rfrrnd to as the Fant Higghway Ro- -o"- 1 or the doPourth righay Poject.

'Sometimes referred to as the Fimt Road Seator ProjectConsolidated Project Audit Report for the tu. proets.

2. The focus of Bank opeaons in Chile's roads sector has changed over the years.The earliest projects emphasized basic construction and reconstruction of roads devasted bynatural disasters, as well as the introducdon of an effective maintenance program (HigwayMaintenance Project, Loan 287, and Highway Construction Project, Credit 4-H. Asubsequent project developed the Bank's new focus on implementing sound maintenanceoperations (Second Highway Maintenance Project, Loan 558-CH), while through the SecondHighway Constructon Project, Loan 688-CH road construction and onstructon effortscontinued. Despite these efforts, throughout the 1970s highway maintenance activities were

.46-

seriously neglected by the Government, necessitating a major, if temporary, shift in project focustoward highway reconstruction (First and Second Highway Reconstruction Projects, Loans 1927-CH and 2297-CH), though the Bank's overall goal continued to be improved maintenanceoperations. As reconstruction efforts progressed in the restoration of the basic network to anacceptable level, in the nid-l980s the focus of Bank opeations began a return to the institutionalstrengthening of MOP's Roads Directorate (Second Highway Reconstruction Project and Firstand Second Road Sector Projects, Loans 2297-CH, 2589-CH, 3120-CH). In connection withthis goal, Bank operations have supported a shift in the execution of maintenance aivies fomforce account to private contracting, as well as the promotion of maintenance and road pavementtechnology.

3. In 1961, the Bank provided US$25 million to the roads subsector dtrough Lon 287-CH for the Highway Maintenance Project and IDA Credit 4-CH for the BighM ConstmctionPrject. Together, these projects were to finance part of the cost of a road construction projectin the Southezn Zone of Chile, which had been devastated by earthquakes in May 1960, as wellas equipment and repair facilities for road maintenance operations in the entire country. Thescope of the projects was limited in part by the constraint of local funds availability and in partby a host of implementation difficulties caused by the fact that the road sector represented a newlending focus for the Bank in Chile. The Highway Maintenance Project was completed in 1966,while the Highway Constructon Project Credit was not fully disbursed until 1971.

4. Loan 558-CH, for the Scn=d Highway Maintenance ErdI, was approved in 1968as a follow-up project for Loan 287-CH. US$13.2 million' was provided to support Chile's1968-71 road maintenance program, with the goal of reducing the cost of road transport. Loancomponents included continued supervision of construction wo:ks under the then ongoing Credit4-CH, preparation of a new highway construction program, and provision of expert advice ontansport policies and investment planning. The main accomplishment of this project was theimprovement of maintenance operations, including the acquisition of one fixed weigh staton andeight portable weighing scales for the control of vehicle weight and dimensions. However,project implementation was seriously hampered by a number of external fiscal and politiclfactors, including two changes of government in 1970 and 1973, each with a totally differentsocial philosophy; institutional roganon, including the creation of M1T in 1974;government decrees reducing the size of the public sector, restricting the budget, and subdidingthe country into 13 administraive regions; and rampant inflation (which reached 520% by 1973).Proect execution took mne years rather than the four esmated at appraisal. The finadisbursem. ent was made in 1978.

5. Loan 688-CH for the Seod ig c n Eojt was approved in 1970.It provided US$10.8 million for the construcion or on of 165 km of roads andfeasibility and engineerig studies for another 500 kin, with Xt goal of reducing vehicleoperating costs. However, the disrpion stemming from drstic political and economic changes

'I M loan agreement wa amended in 1974 to inlud n addiona US$1.6 mllion

* 47-.

contributed to large cost overruns. To prevent exceeding of the project budget set at appraisal,modified project objectives were approved in 1974, including the construction or reconstructionof 96 kin of roads, and feasibility and engineering studies for a bridge rehabilitation program.The revised project was completed about four and a half years behind schedule (the finaldisbursement was made in 1979); project works were of a satisfactory quality.

6. Loan 1927-CH for the Highwy Reconstruton Erjct marked the start of a veryconstructive period for the Bank's interventions in the road sector. The loan was approved in1981, prov.ding US$42 million, mainly for the reconstruction of 250 klometers of Route Five.Financing also supported technical assisnce for maintenance and training, preinvestment studiesfor priority transport investments, and equipment purchases. The project &nieved its objectives,substantially improving traffic conditions and contributing to economic development. TheGovernment's program for the control of vehicle weights, including the installation of eightweigh-in-motion scales, increased fines for overweight vehicles, and stricter regulations forfreight-carrying vehicles, dramatically cut the incidence of overweight vehicles, from 25% to1%; in addition, the inciden'^e of axle load limit violations was reduced from about 10% of alltrucks in 1982 to less than 0.5% after 1985.

7. Loan 2297-CH for the Second Hihway Reconstructon .Eect, approved in 1983,shared with the preceding Highway Reconstruction Project the sectoral objectives of assistingthe reorganization of the transport subsector begun by the Government in 1975, strengtheningMOP's physical and institutional capacity to upgade the national road system and improvemaintenance, and helping MT? to tackle overall sector and intermodal transport issues.Specifically, the loan provided US$128 million to: (a) arrest serious deterioration of somesections of the basic network; (b) implement a planning and management system for road andbridge rehabilitation and maintenance; (c) assist in the preparation of a multi-year road program;and (d) assist in the analysis of transport sector issues. Devaluation of the peso with respect tothe US dollar, efficient procurement, and keen competition in the construction industry resultedin project costs lower than anticipated at appraisal, thus enabling expansion of project objectvesto include the execution of emergency repairs to roads, ports, and railways damaged by floodsand an earthquake in 1984 and 1985. However, despite efficient execution of civil works forroads, expansion of the project and slow execution of emergency port works required extnsionof the project's closing date from 1988 to 1990. The project fully achieved all objectives. TheRoads Directorate established a balanced, roLlng four-year road program which inreasedmaintenance expenditures from 26% of total road expenditures in 1982-85 to 55% in 1986-89.

8. Loan 2589-C for the Eirst Road Sector Prasect was approved in 1985, and wasaccompanied by a US$300 million private banks B-Loan, of which the Bank guaranteed the outerUS$150 million. The loan provided US$140 million to help finance MOP's three-year 1986-1988 Road Investment and Maintenance Progm (US$565 million), and to assist in theexecution of its road reconstrction and rehabilition program, and with the establishmet of

2 Deteaioton bad occured in pat bocue MOP concated its financial reao on do constco of theSiago Meto beo 1976 and 1980.

-48-

an effectively functioning road mainxance organiztion. The project put particular emphasison improvement of the Roads Directorate's competence in the planning and economic evaluationof road maintenance and rehabilitation activities, improvement of maintenance executiontechniques, strengthening of the local road maintenance system, encouragng the pardcipationof municipalities in the maintenance of local roads, and execution of a comprehensive trainingprogram for the Roads Diretorate's staff. The Government realized shortly after negotiationsthat budgetary constraints due to reconstruction needs after the March 1985 earthquake wouldnot provide sufficient countrpart funds for project execution within the initally projected threeyears. It was therefore agreed to expand the project to a four-year progam with additionalphysical targets. Ihe project was closed in June 1990, according to the revised schedule.Project objectives were fully achieved. MTe Roads Directorate's maintenance capacity andpavement management system were strengthened considerably. This project was innovatve forChile, not only because it supported the continued shift from force account to contractmaintenance, but particularly b%ause it fostered MOP's commitment to apply the HighwayDesign and Maintenance (HDM) Model developed by the Bank for the planning of roadmaintenance and rehabilitation.

9. Loan 3120-CH for the Second Road Sector .wct was approved in 1989 for a totlof US$224 million, and was complemented by a J-EXIM US$150 million loan to finance MOP's1990-1993 Road Investment and Maintenance Program (US$907 million). In mid-1991, IDBjoined the parallel co-financing effort, approving a US$220 million loan. The main objectiveof the project was to continue to improve the execution of MOP's road investment andmaintenance program, as wenl as to establish an effectively functioning road maintenance andpavement management organizon. Specifically, the project was to help the Government: to)continue to strengthen the Roads Directorate's capacity through a more focused tainingprogram; (b) complete the effort to reach normal maintenance levels through a balanceddistribution of funds between road investment and maintenance; (c) reestabLish a functional localroad maintenance system with improved technical executon; (d) further improve the RoadsDirectorate's and ODEPLAN's competence in the economic evaluation of road construction andmaintenance acivities; (e) resolve major traffic congestion problems through a select progamof doubled roadways; (f) rehabilitate the main road bridges of the country; and (g) mobilizeexternal resources for guaranteed project implementation.

10. Implementation of the Second Road Sector Project (Loan 3120-CH was compltedsatisfactorily according to schedule on December 31, 1993, achieving works execuion of about20% above agreed trgets. However, the positive development of the Chilean economy and thesubstantial expansion of forg investment dunng project implementation resulted in anunexpectedly strong flow of foreign currcy into the country, which motivated the Governmentto take seveal measures to reduce foreign indebtedness and curtil intema inflaon.Simultaneously, the Government successfully carried out a reform of the internal revenue sytemwhich substnally increased the availability of local funding. In accordance with its policy ofurict control of Government expenditures, t administrtion decided not to increas itsexpenditures, but to replace foreign with local financing. The applicaton of this macroeconomicplicy to the proect during the last two years of project mplentation resulted in an

-49-

accumulation of an undisbursed loan balance of US$43.8 million, which was cancelled, at theGovernment's request, on Ju.ue 22, 1994.

Lessons from Past Lending Operations

11. Lessons learned from the 25-year history of Bank lending to Chile's road seow havesubstantally evolved over the years. The PPARs for the Second Highway Maintenance Project(Loan 558-CH) and for the Second Highway Construction Project ( Loan 688-CH) concludedthat implementation of these projects had been affected and delayed by the polidcal andeconomic instability of the country in the early 1970s, lack of Govemment cotment,inadequate financing (particularly for road maintenance), weak planning, and irsufficienttaining.

12. By contrast, the recent consoldated Project Audit Report (PAR) on the H4ghwayReconstruction Project (Loan 1927-CH), the Second Highway Reconstruction Project (Loan2297-CH) and the Road Sector Project (Loan 2589-CH) concluded that the three projects fullyattained their objectives, that they belong to the very best series of road sector opationsanalyzed in recent years, and that overal outcomes were highly saisfatory, institutionaldevelopment was substantial, and sustainability likely. It furth states that the excellent projectresults are attributable to several fictors:

(a) strong and exemplary commitment by the Govemment, sector institutions, andbeneficiaries;

(b) coherent project design, based on relevancy and feasibility of project components;

(c) effective Borrower-Bank relatonship and quality and continuity of Bank proectstaff; and

(d) favorable macroeconoric conditions.

13. An implementation completion report (ICR) on the second road sector project (Loan3120-CR is in prepaion. However, it can already be stated that the excellent result of thisproject are attibutable to the same fictors listed above.

-50-

THRD ROAD SECTOR PROJECT

Organization of the Road Maintece Progr

Background

1. The planning and control of road maintenance has traditionally been theresponsibility of the Road Maintenance Department of MOP's Roads Directorate, which wasupgraded to Sub-Directorate level in the reorganization of December 1991 (Annex A, Charts 1and 2). Road maintenance is executed by contract or force account through the RoadsDirectorate's 13 regional offices (each region includes two to seven provinces). In the early1980s, MOP's responsibility for road maintenance was limited to the basic network (about23,300 Idlometers). As a result of a move toward decentalzation of administrative services,the Government decided in 1976 to turn over responsibility for the primary and secondary localroad networks (about 56,000 ilometers) to the municipalities. However, the Roads Directoatenever completely relinquished responsibility for the local road network. Instead, it maintainedits local organizational stmcXture and retained some of its personnel.

2. Under the First Road Sector Project, Loan 2589-C, the Roads Direcrateresumedresponsibility for the maintenance of the primary local network (24,500 kdlometers) and, incollaboration with the municipalities, undertook spot interventions on the remaining, much lesstrafficked 31,500 kilometers of the secondary local network, whenever taffic flows wereseriously impeded. Under the Second Road Sector Project, Loan 3120-CH, the RoadsDirectorate substantially increased its maintenance efforts in the secondary local network, raisingaverage expenditures to about US$150 per kilometer, of which about 4% representedcontnbutions from some municipalities. The Roads Directrate was able to absorb this expandedresponsibility because: (a) maintenance expenditures had been rising since 1983 and areexpected to reach an average of US$3,000 per kilometer for the total network in 1994; (b) theRoads Directore strengthened its maintenance organiion (paras. 3-8 below); (c) a highpercentage of the expanded works program was undertaken by contact (par. 6); and (d) theRoads Directorate's staff and equipment fleet throughout the country is now sufficient for therequirements of the expanded maintenance program (pam. 7).

MOP's Road Main Organation

3. Continuing the momentum developed under the two Highway ReconstdconProjects and the First Road Sector Project (Los 1927-CH, 2297-CH, and 2589-CR), the RoadsDirectorate, under fte Second Road Sector Project (Loan 3120-CR, firther upgaded thetechnical capacity of its maintnance staff and imprved maintenance adminis nconsideraoly. The Maintance Sub-D itorate, led by an experienced engine with fiveassistants and 19 ort staff, is organiWzed as folows:

-51 - Annex D

(a) The Maintenance Deaent, headed by an experienced engineer with twosupport staff, is responsible for countrywide planning, budgeting, and executionof road maintenance operations. Its Mainteance Elanningub- (fourprofessionals and two employees) is in charge of: (i) continuous upgrading of theroad condition inventory; (ii) medium- and long-term plaming through intensiveuse of the HDM-I model based on actual roughness and road conditionmeasurements in the field; and (iii) prioritizing and budgeting maintenance worksin close collaboration with the Regional Directorates, the Development Sub-Directorate, and the Central Programming and Monitoring Unit. TheMaintenance Execution Sub tment (four professionals and two employees)is in charge of: (i) setting up standards, specifications, and contracfingprocedures for maintenance execution; (ii) analyzing, discussing and approvingannual maintenance programs preared by the Regional Directorate; (iii)allocating funds and resources to the regions; and (iv) monitoring the executionof agreed programs and the quality of contracted works. The Force AccountMaintenance Sub-Department (four engineers and three employees) is in chargeof: (i) supervision and control of annual force account maintenance programs ofthe regions; (ii) control of unit costs and the amount of monthly maintenanceoperations by regions; and (iii) control of works compliance with technical andadministrative standards according to current methodology.

(b) The Equipment Deartment, staffed by eight professionals and 62 supportpersonnel, is in charge of: (i) equipment administration; (ii) equipment and spareparts procurement and distribution to the regions; (iii) equipment maintenance andrepair in the Roads Directorate's central workshop; and (iv) supervision ofequipment maintenance in the regions.

(c) The Tolls Dtm=ent, staffed by 10 professionals and 351 support personnel, isin charge of: (i) planning the toll collection system, including research of newtechniques and improvements of the information and accounting systems; (ii)opang existng toll stations and safekeeping and submission of toll revenues;and (iii) programming the maintenance of toll stations and equipment.

(d) The Wighing DCpaitment, staffed by seven professionals and 103 supportpersonnel, is in charge of: (i) planning the vehicle weight control system usingstationary as well as mobile weighing scales, including research of newtechniques and development of an adequate infornation and monitoring system;(ii) collaboration with the police and preparation of public information campaigns;(iii) operation of existing stationary dynamic and static weighing scales andpreparation of weighing programs with mobile scales; and (iv) programming themaintenance of weighing staions and equipment.

-52 - Annex D

(e) The Road Safety Department, staffed by five professionals and 41 supportpersonnel, is in charge of: (i) carrying out studies and preparing programs onroad safety in general in collaboration with traffic police and other institutionsinvolved in traffic safety; (ii) preparing specifications and regulations forsignalization hardware and its use, in accordance with national and internationalnorms and agreements; (iii) technical support for other Sub-Directorates andRegional Directorates in the execution and maintenance of road signalization; and(iv) preparation and monitoring of country-wide programs for road signalizationand other traffic safety works. This Department has been recently strengthenedin preparation for assuming new responsibilities under the road safety componentof the proposed project.

(f) The Tunnels Maintenance Sub-Department, staffed by five professionals and ninesupport personnel, is in charge of: (i) operation of existing road tunnels; (ii)plaming, contracting and monitoring maintenance of tunnels and relatedequipment; and (iii) participation in the preparation and evaluation of engineeringstudies for tunnels and tunnel execution works.

4. Each one of the Roads Directorate's 13 Regional Directorates comprises: (a) anadministrative department; (b) a planning and engineering department in charge of overallmaintenance planning within the region and carrying out the necessary engineering, either in-house or by hiring consultants; (c) a force account maintenance departnent with equipment,workshops and personnel to carry out routine maintenance; and (d) a civil works contractsdepartment in charge of contracting periodic and routine maintenance with the private sector andsupervising contracts execution. Each region is divided into three to five distncts, oftencoinciding with the political division into provinces.

5. The Roads Directrate's physical infrastructure (office buildings, warehouses, andworkshops), its maintenance personnel, and its equipment and vehicle fleet, which has beenstreamlined and modemized under the two Road Sector Projects, are sufficient to cope with thedemands of the expanded mantenance program. Equipment availability and utilization haveincreased substantially, reaching levels comparable to those in developed countries. The careermaintenance staff is very knowledgeable and effective; well-targeted training programs haveincreased its technical capacity substantally. The Roads Directorate hires a great number ofconsultants to perform engineering and supervision work. Since most of the increase inmaintenance works will be carried out by contract, only part renewal of obsolete equipmentwill be needed over the next four years.

Road Mntenane Operations

6. The district offices within each region cary out the supervision of maintenanceconats as well as the execution of force account opertions in their respective areas. All

53- AnnexD

periodic maintenace is carried out by contract. About 50% of routine maintenmace is caidout by contract and 50% by force account. Overall, 82% of total maintenance works areexecuted by contract and 18 % by force account, compared to 65 % in 1980. Over this period,the labor force involved in force account operations has diminished by about 50%, butsubstantial productivity increases have kept force account output almost constant. Additionalcost savings in force account operations and the fivefold increase of total maintenanceexpenditures in the same period have resulted in the progressive reduction of the percentage offorce account expenditures mentioned above. The unusually high effciency of road routinemaintenance by force account in Chile is demonstrated by the fact that the reliable costaccounting system in effect since 1985 (pam 8 below) shows that unit costs for most routinemaintenance operations by force account are lower than the corresponding average unit pricesfor the same operations performed by contract.

7. Considering the high efficiency of its force account maintenance operations, theRoad Directorate wishes to keep them at their present level to enable quick response toemergency situations, as well as to provide a check for contracting costs. However, its laborforce is progressively diminishing due to attrition and the lack of interest from young people toenter this acdvity, given the better employment opportunities offered elsewhere by the Chileaneconomy. The innovative procedures for contracting road maintenance being introduced by theRoads Directore (Annex E) could contribute to further diminish its labor force or to redeployit to the maintenance of neglected secondary local roads.

Compliance with Targets and Development Objectives

8. The organizational and operational approach described above has enabled the RoadsDrectoate to comply with all targets for routine and periodic maintenance. The Directorate iscontinuously updating its road condition inventory, relying on modern equipment purchasedunder past projects for deflection, slkd-resistance and roughness measurements. It hasmaintained reliable traffic counts and taffic classification studies for more than 30 years. It alsomaintains satisfactory vehicle weight control on the main national roads, and is expanding itsweighing and control caacity to other heavily loaded roads in the main production areas. This,coupled with an internationally recognized pavement research and monitoring system, providedan excellent basis for the Pavement Management System established under the Second RoadSector Project, Loan 3120-CH. The Roads Dirtorate already has established an effectve costaccounting system for force account works, which takes into considert ion all cost factors,including equipment ownership and overhead costs. mhe training program, which includes well-tgeted taning abroad, in-house training and training in other local organizations, has beenhighly successful and has exceeded all agreed targets.

9. The proposed project will assist in fiuther consolidation of the above-mentonedachievements by providing technical assistnce and/or speialized key equipment and futertraining for.

- 54 -

(a) improvement of the maintenance contrating system;

(1) furthe expnon of the pavement management system;

(c) modernization of toll, tmnels and weighing control systems;

(d) expansion and improvement of the global" maintenance contcting system; and

(e) continuation and insttutonalizion of the cost accounting system for fore accountmaintnance opeatons.

. 55 -AnnexE

CHILETHIRD ROAD SECTOR PROJECT

Program of Contract Maintenance by Area

1. As stated in para. 6 of Annex D, all periodic maintenance and 50% of routine maintenanceis contracted out to private contactors. This, coupled with the fivefold increase in maintenanceexpenditures between 1980 and 1993, has prompted a substantial increase in the number of unitprice road maintenance contracts awarded by the Roads Directorate. By December 31, 1993,for instance, the Roads Directorate had 254 ongoing periodic maintenance contracts and about200 routine maintenance contracts, for a total cost of about US$72 million. Contracting andsupervising so many contracts, in addition to more than 100 ongoing investment contracts,substantially overburdens the Roads Directorate's contract management capacity.

2. In 1991, the Roads Directorate started to investigate the possibility of simplifyingmaintenance contracting procedures with the following objectives in mind: (a) simplifyingcontract administration; (b) strengthening privatization of road works execution; (c) allowingpnvate contractors a longer time horizon to pla and finance their activities and to give them thepossibility of acquiring specialized equipment to improve productivity; (d) facilitaing theinvolvement of local authorities in management and possibly co-financing, thereby expeditingthe decentralization of maintenance responsibilities to local governments; and (e) encouragingcontractors' participation in bidding for maintenance works in remote areas.

3. 'Global" maintenance contracts were found to be the most adequate approach-contractscovenng all road routne and periodic maintenance operations for an entire road network withina specific area. This approach has been introduced on a limited scale in France and Spain withinthe last 10 years, using unit price annual or multi-annual contracting by the road adminionorganizations of some of the 90 Departments in continental France and the Autonomous Regionsin Spain.

4. The boldest and most comprehensive experiment in global maintenance contracting wascarried out 1988 in the Province of Bridsh Columbia in Canada, where the tsks of managementand operation of most maint ce activities within the 28 geographical areas of the provincewere conted out under three-year, lump sum conats. About 75 bidders participated in thetendering, 18 contracts were awarded to 10 private con tors and 10 contracts were awardedto "employee groups' formed by former employees of the Highway Directorate, which in theprocess cut its personnel from about 2,500 to 200. The contracts included: (a) provisiregulating the transfer or rental of exisdng Highway Directorte equipment and physicalinstallations to the contactr; and (b) quality control regulations to ens contra complianceand to provide general oversight of the contractors' performance. This system proved hilysuccessfil, achieving an excellent level of maintenance of the total road network. In 1991, theHighway Directate called for new bids to award the 28 global maintenance contracts foranother three-year period, with the possibility of extending them to five years. Contractawarding was completed in January 1992 with substantial cost savings (compared to the odiginal

-56 - Annex E

cost estimates). This experience has shown clearly that the long-term responsibility for the

maintenance of an extensive road network can be transferred successfully and with cost savings

by the Government to the private sector.

5. After studying these precedents, and given the generally poor condition of the roads of the

local network, MOP's Roads Directorate decided to follow a more cautious approach to global

road maintenance by contracting, on a unit cost basis, a one-year pilot project, and gaining

experience through close monitoring of this contract. This pilot project, covenng the basic

network and the primary local network of the Province of Talagante in the Metropolitan Region,

was awarded in April 1992 to the lowest evaluated bid among 12 submitted. The project,

costing about US$1 million, comprised the routine and periodic maintenance of 178 kilometersof paved and 42 kilometers of gravel roads. It has been implemented successfully and has

allowed the Roads Directorate to gain substantial experience in this innovative contractingprocedure. The most important finding was that the introduction of global maintenance in Chile

requires first the preparation and implementation of a one-year contract to maintain and improve

the specific road network involved. Multi-annual contracts should only be awarded for such

improved networks. Based on this experience, the Roads Directorate is following the staged

procedure to implement, expand and refine global maintenance, described in paragraphs 6 to 8

below.

6. Between April and September 1993, the Roads Directorate contracted five more annual

global maintenance projects in five provinces distributed between the Sixth and Tenth Regions

and a two-year contract in the Province Talagante By June 30, 1994, three of the one-yearcontracts had been completed or were about to be completed. The Roads Directorate has started

the process of two-year conats for the same five areas mentioned above, and 13 new one-year

contracts throughout the country. (a IBRD 26278) The contracting of uglobalu maintenaee

schemes will be gradually expanded to reach 50 contracts in 1998, as shown in Table E-1 below.

Table E.1: Program for "Global" Maitce Contracting 1994-1998

Year Number of Expenditures Nework Covert Percage ofContrat of US$ Millions Total Network

1994 6 S.3 1,850 0.2

1995-99199S 19 243 C,mIO 7.7

196 26 29.8 6,800 8.6

1997 38 486 10,80 12.6

1998 5Q 63.0 13,200 16.6

Total 9i95-1998 -"5.7Source: MOP, August 1994

-57- An E

7. The gradual expansion of the global maintenance contracting system is not expected tohave substantial implications on the reduction of the Roads Directorate professiunal staff or itslabor force during implementation of the project. Its effect so far has been to ease the excessveworldoad borne by the scant maintenance staff and to offer possibilities of upgrading andstrengthening superision. Force account labor idled by the introduction of global maintenancecontracts is being usefuUy redeployed in improving the maintenance of neglected secondary localroads. During the gradual expansion of the global maintenance system under the proposedproject, the Roads Directorate will monitor the productive employment of its professional staffand labor force, and take the actions required to correct any subsequent imbalances.

8. Under the proposed project, the Roads Directorate will:(a) continue implementation of the global maintenance contracts already initiated under

the Second Road Sector Project;

(b) expand the program to other provinces;

(c) start preparing quality control regulations to ensure contract compliance and tosimplify supervision and payment procedures;

(d) based on accumulated experience, improve the bidding and contracting procedures;and

(e) monitor the useful employment of idled staff and work force, and take requiredactions.

- 58 - Ann

CHIETHIRD ROAD SECTOR PROJECT

Road Tfraic Safety

Existing Traffic Safety Situation and Proposed Program

1. Chile's rapid economic development, accompanied by steady growth in motorization,has put a strain on the country's road infrtrucure, manifested in part by a marked deteriorationin road safety. As shown in Table F. 1 below, the rate of motorization has risen steadily sincethe mid-1980s and the risk of road fatality has grown even more rapidly during this period.Road traffic safety is fast becoming a major social concern in Chile. Presently, traffic accidentsconstitute the third leading cause of death, after heart disease and cancer. Nationwide, in 1992,Chile registered one road accident every 12 minutes, one senous road injury every 42 minutes,and one road fatality every 5 hours. It is estimated that the cost (direct and indirect) of roadaccidents in monetary terms amounted to US$150 million in 1992.

Table F.1: ProbabiPl, of Road Accident Death, 1985-1991

Motori7ation Rate Risk of Road Accident DeathYear (veicles per 100 peroso) (road traffic deaths per 100,000 Peso)

1985 7.5 8.7

1987 7.4 9.6

19 7.8 11.3

1990 8.2 11.9

199 9.2 12.0

199Z 9.9 12.7

SCUM.: National Police.

2. Road accidents in Chile increasd from 35,279 in 1986 to 43,402 in 1992, at the rateof 3.5% annually, and the incidence of road faalities increased from 1,191 to 1,700, growingat around 6.1% per annum. An analysis of taffic accident data indicates some significanttrends. For a recent penod of five years, urban areas have accounted for close to 90% of allroad accdents (Table F.2). Santiago, Valparaso, Viiia del Mar and Concepci6n, the country'sfour largest urban agglomerations, together accounted for some 65% of all accidents in 1990(rable F.3). However, notwithstanding this significantly lower incidence of accidents, some50% of all traffic fatlities occurred in rual areas Crable F.4), the bulk of them presumably onthe main trunk roads.

-59 - Annœ F

Table F.2: Urban/Rural Breakdown of Accidents

Urban Rul

TOTAL NUMD Number % Number 1986 35S279 31,443 89.1 3,836 10.9

1987 32,774 28,975 88.4 3,799 11.61988 34,220 30,461 89.0 3,7S9 11.01989 37,217 32,969 88.6 4,248 11.41990 39,479 34,771 88.1 4,708 11.91991 40,3 3S,913 89.0 4,455 11.0

Table F.3: Traffic Acidents by Region, 1992

REGION Numuber PacentaTOTAL 43,40 100.0

Region 1 1,722 3.9Region U 1,229 2.8

Region m 894 2.1Rion V 626 1.4

Region V S,627 13.0of which VENa & Valraie 4,416 10.2

Metropolitan Regon 22.2S8 51.3Regin VI 1,513 3.5leion V 2,166 5.0Region VIm 3,383 7.8of whih Covnc 1,415 3.3

Region IX 1,664 3.8

Rqeon X 1,736 4.0

Regon Xl 211 0.5Reon Xff 373 0.9

-60-Anex F

Table F.4: Urban/Rural Breakdown of Deaths From Accidents

Urban Rural

TOTAL NUMB Number Number %

1986 1,191 630 52.9 561 47.1

1987 1,20 568 47.3 632 52.7

1988 1,248 690 55.3 558 44.7

1989 1,465 740 50.5 725 49.5

1990 1,587 800 50.4 787 49.6

1991 1,602 790 49.3 812 50.7

3. Table F.5 shows the classification, by type, of vehicles involved in accidents since

1985. The total number of vehicles involved in accidents increased from 52,237 in 1985 to70,854 in 1992. However, not all types of vehicles "contributed" equally to accidents. It shouldbe noted that whereas the share of cars and that of bicycles and motorcycles has declined

significanty over this period, the share of trucks, buses and taxis has increased markedly. This

trend is consistent with the brisk pace of urban growth and the overall expansion of economicactivity that has resulted in the substantal growth of freight trafic over this period.

Table F.5: Accidents by Ty1p of Vehicle(in percentage)

TOTAL # OF VEHCLES Camr Bikes IMohces Tru Buse & Taxis Others

198S 2,237 48.3 6.3 12.5 23.8 9.2

1986 59,222 44. 6.8 15.3 24.5 8.7

1987 53,402 41.9 7.2 17.1 24.9 8.8

1988 55,509 41.9 6.8 17.1 25.4 8.8

1989 60,200 39.9 6.0 19.0 26.2 8.9

19 64,2 39.5 6.1 18.6 27.2 8.5

1991 66,104 40.7 5.9 18.7 26.7 8.0

1992 70,854 40.9 5.3 20.1 25.9 7.8

4. Tables F.6, F.7 and P.8 show the frequency of road accidents by type and area of

o=rrence and the major causes of accidents. In terms of the types of accidents, colliions

-61- AnnrF

(including collisions involving two or more vehicles as well as vehicles hitting siationaryobjects)' account for some 70% of the total. In recent years, this category has shown a slightlydeclining trend. By contrast, the share accounted for by vehicles running over pedestriansincreased from about 19% in 1985 to 24% in 1991, that of vehicles turning over increasedslightly from 3% to 4%, and that of passengers falling out of vehicles increased from 2% to 3%(see Table F.6).

Table F.6: Types of Accidents(in percentage)

1985 1986 1987 1988 1989 1990 191

TOTAL NUMBER 30,750 35,279 32,790 34,220 37,217 39,479 40,423Pedestrian Run Over 18.5 21.0 22.2 23.6 23.6 23.9 24.3

Collision 75.1 71.4 69.1 67.9 67.4 67.7 67.4

-Involving 2 Vehickles (47.9) (43.7) (47.1) (45.2) (40.2) (36.5) (32.6)

-Hitting a Statonary Object (27.2) (27.7) (22.0) (22.7) (27.2) (31.2) (34.8)

Pasenger Falling Out 2.4 2.9 :X.7 3.7 3.8 3.3 3.3

Vehicle Turning Over 3.4 3.4 3.8 3.8 4.2 4.2 4.1

Other 0.7 1.3 1.3 1.1 1.1 1.0 0.9

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0

5. Looking at the share of different categories of accidents by area of occurence(Table F.7), one is struck by the predominance of the category 'passenger falling out' in theSantiago metropolitan area and the frequency of 'cars overturning" in areas outside themetropolitan area. The first category is undoubtedly caused by passengers hanging ontocrowded buses on city streets, and the overturning of cars is probably caused most frequentlyby speeding, poor visibility and poor road designs on the national trunk roads. Pedestiansappear to be run over by vehicles with about equal frequency in city steets and on nationalroads.

I In Chile's legal terminology, accidelts involving more than two vebicles a fo rered toas 'coliona? whiethose involving a vehicle hitting a stationary object a refered to as 'dwqua.

-62 A= F

Table F.7: Tfflic Accidents by Type and Area of Occurence, 1991(in percentage)

TOTAL Metropolitan Area Rest of CountryTOTAL NUNMB 40,3C8 20,96 19,404Pedesrian Run Over 100.0 48.4 51.6CoDision 100.0 9.6 90.4

-Involvng 2 Vehicles (100.0) (47.6) (52.4)

-Hiting a Stionay Object (I00.0) (62.0) (3&0)Paseer Falling Out 100.0 67.4 32.6

Vehicle furning Over 100.0 18.8 81.2

Other 100.0 51.4 48.6

Total 100.0 51.9 48.1

Table F.8: Major Causes of Accidents(in percentge)

i1 98 197 18 19 190 11 19TOTAL NUMBER 30,71 35,279 32,774 34,20 3?,217 39,479 40M 43,a

DrerCondot 21.5 36.8 39.6 37.7 39.90 35.0 31.9 32.3

)wredla (.6) A6d) 06) 4.S) (4.9) (S±9) (5J (5.8).Other Drber Co0dt (18.9) (33.2) (36.0) X3.2) (35.1) (.) (V 64) (A5)

Pedestiam Coduct 7.5 12.3 13.1 IS.7 16.7 17.0 17.1 17.1

Road Sps 6.1 8.7 8.5 10.7 11.6 14.8 12.6 12.3

Oter 64.9 423 38.9 35.9 31.8 33.2 38.4 383

Tota 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

6. Table F.8 divides the major causes of accidents into driver behavior, pedestrianbehavior, and road signs. Driver behavior includes speeding, pasing recldessly, not maintiningsufficient distance from the vehicle ahead, ignoring right of way, driving against the tfic ona one-way steet, and driving under the influence of alcohol and drugs. The pedestrian conductwhich leads to accidents includes pedestrians crossing highways with high-speed traffic in areasnot marked for pedestian crossings, and frequently ignoring traffic lights and pedestioverpasses that are proded for the purpose. Accidents are also caused by the lack of,inadequate, or inap ia sips and signals on streets and roads. The data here indicate thatwhile the share of accidents due to driver conduct has remained more or less the same, the

-63 - Annex F

influence of pedestrian behavior and the conditions of road signs have assumed increasingimportance as causes of accidents.

Road Traffic Safety Adminitation

7. The authority for establishing overall road traffic safety policy, standards andregulations is vested in the Ministry of Transport and Telecommunications (MIT). However,the actual administration of road safety is spread over a number of central government agenciesand municipalities, and there is no formal mechanism for coordinating their activities. TheNational Police (Carabineros de Chile) is responsible for the enforcement of laws andregulations, and maintains a nationwide information system on traffic accidents. The Ministryof Public Works (MOP) is responsible for ensuring that road designs and axle load regulatonson the national network coirform to national road safety standards, and for installing various roadsafety features, e.g., signs, barriers, and overheads. Likewise, the Ministry of Housing andUrban Development (MINVU) is responsible for ensuring that the design of urban streetsconforms to road safety standards.

8. The municipalities axe authorized to issue their own local traffic regulations eitheralone or in coordination with contiguous jurisdictions. Responsibility for implementing vehicleinspection and registration as well as driver testing and licensing is delegated to municipalities;also, each local jurisdiction is authorized to set up its own system and rules within the limits ofnational policy and norms prescribed by MIT. Traffic accident insurance coverage iscompulsory for all drivers in Chile. In addition to an operator's permit and vehicle registrtion,every Chilean driver must obtain from the relevant local jurisdiction a circulation pernit whichhe or she must carry at aU times along with an insurance policy. Local courts hear trfficviolation cases and impose penalties (e.g., revoking licenses, imposing fines, etc.).

9. There are a number of private groups, e.g., Automobile Club of Chile, the TrafficSafety Club, the Red Cross and insurance companies, which actively promote road traffic safety.The National Safety Council, a non-profit private organization, was created by decree in 1952with the objective of promoting safety in the workplace as wel as road safety throughpublications, public education campaigns, workshops, and classes. With 40 major privateenterprises and government agencies represented on its board, the National Safety Council playsan important role in coordinating the activities of different players. The National TrafficEducation Committee brings all these private institutions together under the leadership of thepolice to promote specific actions in traffic safety education, such as preparation and printingof educational materials, organization of traffic patrols in schools, drivers' education, and publictffic safety education campaigns. There seems to be a certain degree of overlapping amongthese private institutions.

10. To provide the needed coordination to strengthen national road safety efforts, theGovernment created, through Decree 223 dated December 27, 1993, the National Commissionon Traffic Safety, integrated by the Ministries of the Interior, Education, Justce, Public Works,Health, Housing and Urban Development, Transort and Telecommunications, General

-64 - Annex P

Secretariat of the Govemment and General Secretariat of the Presidency, and the GeneralDirectorate of the Police. The Commission is presided over by the Minister of Transport andTelecommunications and acts through its Executive Secretariat, which is headed by a tanwsportengineer and has at present a staff of seven professionals from various disciplines. Mixed workgroups with professionals of other ministries are already tackling specdalized subjects such as:transport of hazardous materials, rescue coordination, public spaces and roads, licensing, etc.The Executive Secretariat is also in charge of the implementation of the road Safety DiagnosisStudy initiated under the Second Road Sector Project, Loan 3120-CH.

Leislation and Enforcement

11. The traffic laws and regulations are embodied in the 1984 New Traffic Law2,which consolidated and updated earlier legislation pertaining to road traffic safety. This law istruly comprehensive, covering all aspects of road safety: safety features on streets and highways,roadwortiiness of vehicles, competence of vehicle operators, and the conduct of driver,passengers and pedestrians. The enforcement of the law by the National Police appears to beboth rigorous and even-handed. Chile's traffic police enjoy a solid reputation forprofessionalism and competence.

Road Safety Information and Campaigns

12. The National Police maintain an information system on traffic accidents nationwide.To enable the police to keep track of accidents throughout the country, it is mandatory to reportall accidents to the National Police; even where injuries are involved, the Police must be notifiedfirst before the victims are taken to local hospitals or clinics. Their road safety information isinvariably up-to-date and its coverage appears saisfactory. Unfortunately, however, otheragencies involved in road safety admmistration do not have easy access to this valuableinformation. These agencies would need to work in closer coordination with the police to havethis information processed in formats that can be more easily fed into their own systems.

13. The National Police also carry out periodic public campaigns on traffic safety mles(on topics such as the use of seatbelts, speed limits, and driving under the influence.) Trafficsafety is taught in the school system and the Ministry of Education is required by law toincorporate appropriate matial on road safety into the primary education curriculum. TheNational Traffic Education Committee, in coordination wit the Taffic Safety Club, the NationalSafety Council, and various interested private groups, organizes workshops, puts out publicationsand promotes public campaigns on road safety.

' The law fiu appeare in Dj o kfldu (No.31.791) on Febuay 7, 1984.

-65- Annex F

Vehicle lnspection and Regsation

14. Vehicles (titles and tags) are registered with the Civil Registry Service, whichmaintains a computerized registry of motor vehicles. Municipalities are authorized to inspectvehicles that are registered in their jurisdictions and to issue "circulation permits" for thosewhich meet the technical standards. These technical inspecdons cover, among other things,alignment, steering, brakes, lights and fires and levels of emissions. The norms and proceduresfor inspecdons are laid down by MIT.

Driver Testing and licensig

15. The department of traffic and public transportaion in each municipality is authorizedby MTI to test and license drivers who reside in that particular jurisdiction. The criteria andconditions for licensing drivers are, however, specified in great detail by class of vehicle in the1984 New Traffic Law. In general terms, the driver, to be licensed, must be 21 years old, withmoral character and psychological and physical aptitude and proven sldlls to operate theparticular class of vehicle. The municipalities are also authorized by M1T to establish drivingschools and to determine the program, the method of training and the quaifications ofinstructors, provided that these meet with the general norms of MIT as specified in the 1984Traffic Law. MTr may at any time revoke the authority of municipalities to test and licensedrivers or to establish driving schools if they do not conform to national standards.

A Program to Improve Road Safety

16. The road safety program formulated by the Ministry of Public Works consists of sixcomponents:

(a) studies and civil works for reducing hazardous locations (black spots) on thenational network through provision of roadsigns, roadmarkings and lighting, andconstruction of bikepaths, vehicular and pedestrian overpasses, sidewalks, serviceroads, guard rails and barriers;

(b) studies, equipment and civil works to improve the maintenance of roadsigns androadmarkings;

(c) establ of close working relations between the Roads Directorate and theNational Police at headquarters, regional and pvcial level to strengthencoordination on: (i) vehicle weighing and toll collection acdvities, (u) general tafficcontrol, (iii) joint monitoring of damages to the road infrastructure and tafficcontrol devices, and (iv) preparation of public education campaigs on road safetyand taffic regulation enforcement dnves, and monitoring of the results;

(d) consultant services, equipment and training to consolidate the nation's road safetyinformation system managed by the National Police and the exchange of infomain

-66- A.F

on road safety involving: (i) statistical information on traffic accidents to be suppliedby the National Police to the Roads Directorate, and (ii) information on trafficvolumes and composition, and on road conditions, to be supplied by the RoadsDirect.orate to the National Police.

(e) consultant services to carry out joint studies agreed between MOP and the ExecutiveSecretariat of the National Commission on Tiaffic Safety; and

(f) technical assistance and training for MOP officials, including specific researchprojects on road safety, overseas field visits, workshops and seminars.

Although the entire program will be coordinated by MOP, the National Police will participatein the implementation of components (c) and (d) with project funds to be made available byMOP.

17. As part of this road safety program, MOP and the National Police will jointlyestablish a high-level task force on road safety, which, in addition to these two entities, will alsoinclude representatives from the Ministries of Transport, Housing and Urban Development,Education, and Health to help lay the groundwork for better interagency coordination.

Table F.9: Summary of Road Safety Program, 19941998

Amountite (US$ million)

Road Safet Infauctue 53.1

Road Signs and Road Marking 11.7

Miscellaneus Equipment O.5

Technical Assistane 1.2

TOTAL 66.5

-67- Aunex G

CHILTE3U ROAD SECTOR PROJECT

Environmental Impact Assessment and Monitoring

Background

1. Basic inructions on prevention of environmental risks had for many years beenincorporated into MOP's guidelines and specfications. Consequently, road construction in Chilehas not caused major disptions of the environment in the past. However, a systematicapproach to environmental risk assessment and prevention was startd only in 1990, promptedmainly by prqject eligibility criteria requested both by the Inter-American Development Bankand the World Bank.

Leal and Organiation Framework

2. The interminis National Environmental Commission (Comisi6n Nacional delMedio Ambiente, CONAMA) created by Supreme Decree No. 544 of March 20, 1992, is thehighest regulating authority on environment related mats. It is supported by an ExecutiveSecretariat which includes more than 30 interdisciplinary professionals and regulates andmonitors the environmental studies and actions of all other central and regional governmentagencies and those of the private sector.

3. The Ministry of Public Works (Ministerio de Obras Pdblicas, MOP) through itsRoads Diectorate (Vialidad) is in charge of planning constructing, maintaining and operatingall public roads in the country, except for urban streets. MOP's and Vialidad's responsibilitiesregarding environmental aspects of their respective functions are regulated by: (a) the generallaw on environmental mattes, Law 19300, -Bases del Medio Ambiente of March 9, 1994; (b)the general law on public adminion; (c) the law on central and regional adminis n; and(d) MOP's statutory law 15840 and Vialidad's organiztional decree DEL 206, both combinedunder MOP decree 294 of 1984. A general regulation on environmental assessment is epectedto be completed by December 1994.

4. MOP established in 1991 an Environmental Technical Unit (Unidad T&cnica delMedio Ambiente, UTMA) under the Vice Mhiister's office. The main function of this unit isto establish environmental norms and regulations for the sector, and to advise the minister andvice miLsw on poicy and strategy. In addition, UTMA prepares studies, eitherw ith its ownstaff (currendy five) or using consultants, about subjects related to environmental protecdon.A computzed information system has been organized that provides information for each regionof the country regrding envirnmental risksl and mitigating measures for all public works andfor the entire road network. This system is being complemented with the preparation of regionalmaps (scale 1 to 250,000) which identify road areas of environmental concern, such asarcheological sites and national parks. UTMA also prepawd Methodological Guidelines for the

-68 - Annc G

Environmental Evaluation of Public Works Projects, which were approved by MOP decree 951of March 10, 1994.

5. By decree D.V. 3034 of April 21, 1993, Vialidad gave legal existence to theEnvironment Unit (Unidad del Medio Ambiente, UMA), which had been functioning unofficiallyfor two years and is attached to the Design Department of the Subdirectorate for Development.UMA is headed by a civil engineer specialized in environmental assessment and presently hasa staff of three: one chemical engineer and two geography professionals.

6. The general functions assigned tc UMA are:

(a) coordinate Vialidad's actions for environmental protections in all road works andoperations;

(b) assist higher management in all environment-related matters and foster internal andexteral coordination;

(c) contract and supervise environmental impact assessments (ELAs) and specific studiesfor remedial actions;

(d) develop methodologies and procedures for mitigation of environmental impacts; and

(e) monitor compliance with environmental guidelines and with the recommendationsof specific environmental studies during execution of works and their subsequentoperation.

Environmental Risks of Roads Projects in Chile

7. The Chilean road network was fundamentally laid out in past decades and has grownvery little in the last 20 years, except for the Southern Road in the extreme south. As present,most road civil works involve doubling existing two-lane roads to four lanes, paving of gravelroads, construction of bypasses and overpasses, and general maintenance works. Theenvironmental risk of these works is small. However, some major road works in suburban areasrequire special studies for the prevention of negative environmental impacts, such as acousticcontamination and negative impact on land-use and population.

8. The most important road environmental study was undertaken in 1991 and 1992 forthe paving of the existng gravel road Arica-Tambo Quemado, an intnadonal link to Bolivia,the last 80 km of which cuts across the Lauca National Park (137,000 hectares) located in theChilean highlands, 4,200 meters above sea level. This study produced concreterecommendations for avoiding negative impact on the park's fragile fauna and flora, and on theindigenous population. These recommendations were strictly complied with during construction(financed under the Second Road Sector Project) and are being applied to regulate the operationof the road. All potential risks were successfully avoided.

-69-Anx1

9. The systematic assessment of environmental risks developed since 1991 by the UMAis a blend of the IDB's and the Bank's environmental guidelines. The process starts with areview of all road subprojects included in the next year's annual program, based on clearlydefined environmental cnteria. According to the result of this review, subprojects are classfiedas eite Class A, not requiring an Environmental Impact Assessment (EIA), but onlycompliance with general environmental guidelines, and Class B, requiing ELAs, which areranked according to their environmental impact.

10. An Environmental Data Sheet is prepared for each subproject needing an EIA todefine its raning, the level of studies needed (preliminary, medium or detailed) and the termsof reference required. Based on this information, the UMA prepares the documentation forcontracting EIAs required and supervises their execution.

11. The above procedures conform to well defined guidelines and criteria and are carriedout in a timely fashion. During the first semester of 1994, UMA reviewed the 76 roadsubprojects to be initiated in 1995 (4 new construction, 7 widening, and 65 paving sub-projects)and classified only 5 as Class B. By July 31, 1994, preliminary environmental stdies had beencarried out for 42 subprojects and terms of reference prepared for 16. The EIA's prepared byUMA or its consultants recommend in each case the specific actions to be taken and define ifthe supervision team for works implementaton should include an environmental speialit

12. UMA also supervised the implementation of the study on EnvironmentalStrengthening, financed under Loan 3120-CH, the recommendations of wbich are being cariedout as outlined in paragraph 14 below.

Supervision of Environmental Impact during Execution of Works

13. Since early 1993, UMA is also carrying out the supevision of the works executionfor the subprojects ranked as having higher environmental risk. This supervision is carried outin close coordination with the superision teams of each particular project, and UMA'srecommendations are given in the field or presented in writing thrugh the chain of command.In 1993, UMA supervised the execution of eight subprojects through 28 fieldtrips. Elevensubprojects have been selected for supervision during 1994.

)'urther Strengthening of Environmental Assessment and Monioring Capacity

14. The proposed project will enhance the coordination between UMA and UTMA underthe general oversight of CONAMA in accordance with the stipulations of Law 19300. It willfinance technical assistance and taining for furt strengthening of the Road's Diectoratenvironmental assessment and monitoring capacity through:

-70- Ag=Q

(a) improving the guidelines and methodologies for claication and mitigation ofenvironmental impacts;

(b) preparng an Environmental Data Bank to be linked to the existing GeographicInformation System;

(c) sening UMA's actions in the supevision of worlcs execution and extendingthem to road opadons and to the road conceson program;

(d) establishing Task Agreements with other Directrates within MOP or outsideagecies to promote joint action, similar to the ageement already established withthe National Forest Corporation (CONAF);

(e) promoting general environmental awareness in the road sector; and

(f) establishing a satsfactory taining program through local courses and visits abroadto: (1) upgrade the capacity of UMA's staff; (ii) convey basic environmentalknowledge to higher level staff at headquarters and in the regions; and (iii) trainrgular supervisory staff to expand their knowledge of environmental assement andimpact mitigation.

-71- AnneH

T1DM ROAD SECTOR PROJECT

Training Component

Objectives

1. The major objectives of the project's taining component are to:

(a) assist in furiher moderization of Vialidad's management and administrativeprocedures;

(b) further strengthen the performance capabilities of Vialidad's staff;

(c) train staff in new technologies such as: quality control of maintenance worms,preparation and supervision of concession projects, road safety and environmentalassessment; and

(d) consolidate training efforts successfully camed out under the First and Second RoadSector Projects (Loans 2589-CH and 3120-CH).

Description of the Training Program

2. The training program will assist in the modernization of Vialidad's management andadministrative procedures by offering courses to higher-level staff on management techniques,personnel management, cost accounting and control, and courses to high and mid-level staff onthe use and application of more sophisticated computer programs and familiariztion withgeographic information systems.

3. Performance strengthening will be geared to managers and professionals (level A),supervisors and administrative personnel, including secretaries (level B), and foremen andhelpers, including mechanics and equipment opators (level C). The program for managers andprofessionals will emphasize stae-of-the-an techniques for (i) road and bridge design andconstruction; (ii) maintenance contracting and supervision by quality standards; (iii) prepation,contracting and supervision of concession projects; (lv) analysis of and approaches to road safetyproblems; (v) design and execution of 'safe' roads and road featres and strures; and (vi)assessment, evaluation and prevention or mitigation of environmental risks. The middle leveland administrative prgram will be diversified according to needs of particular groups and willbe quality and production oriented. The C-level courses will be of a more prcal nature andwill be geared to stengthening technical sdills, improving quality, and raising productivity.

-72- Anne>H

Administration of the Training Program

4. The Road Directate has a well established Training Unit consisting of threeprofessionals, two support staff and a variable number of instructors. These instructors for in-house courses are regular Vialidad staff, who have been trained in the past as instructors andhave been reintegrated into the organization, but are available on call to act as instructors in theirspeialized fields, receiving an additional remuneration for performing training activities. TheTraining Unit has successfully carried out training programs for more than a decade. Itexceeded the targets set in both the First (1986-1989) and Second (1990-1993) Road SectorProjects by more than 50% and it is independently cafrying out the 1994 training program. Theextraordinary success of these training programs has been one of the main causes of the welldocumented progress achieved by MOP's Road Directorate.

5. The Traning Unit is attached to Vialidad's Sub-Directorate for Adminisation andPersonnel, but is supervised technically by the Training Committee comprising all Sub-Directorsand a representative of the Regional Chiefs. A Regional Training Coordinator in each Regionassists in the selection of regional training candidates, in expediting their participation, and inthe organization of regional courses.

Implementation of the Training Program

6. The training courses for the period 1995-1998 aim at improving therfoancecapability of about 3.600 people, representing 80% of the total Vialidad personnel. Becausesome will participate in more than one course, the total number of participants will be 6400(some 1600 per year, Table H-1). About 3000 will be tmined in courses organized byVialidad's own instructors and in its own facilities. About 3400 wiU be trained underagreements with local institutions and universities. However, in aU cases, course content willbe defined by Vialidad's technical specialists under the supervision of the Training Unit.

7. Table H-1 summarizes the 1995-1998 training program showing separatly thenumber of courses offered to professionals, and to administave personnel and opeators, aswell as the number of participants and the respective costs. The costs for the in-house coursesinclude: (i) operational costs of the Training Units, (ii) transporation and per diem costs for theparticipants, (iii) transportation, per diem and fees for the instructors, and (iv) training maters.The costs for the extemal courses are separated into administrative costs, corresponding to (i)and (ii) above, and the estimated cost for contracting the extemal courses, including the cost forparticipation of some foreign experts. This information is provided separately for each year.There will be a total of 615 courses, 6,400 participants and a cost of US$2.8 milLion. Thisincludes about US$45,000 for audio-visual equipment, and about US$55,000 for classomequipment and furniture, for the 1995-1998 training program to be carried out in Chile.

8. Following the positive expince of the three previous loans, selected personnelstaff will participate in training course and technical seminars abroad, to be trained in or obtaininformation on state-of-teart technologies needed to furhr improve the road sytem of the

- 73 - A=n

country and its management. Technical visits will also be carried out to other Latin Ameicn

countries to discuss issues related to intnational road linlcs and intermodal transportation, and

to exchange experiences on technical matus of common nterest. According to past exerne,

the cost for trasportation, per diem insurance, and registration fees amounts to about

US$500,000.

-74- Annex HTable H-1

CHILETHIRD ROAD SECTOR PROJECT

Swnmary of thn Traning Program, 1995-1998(Amounts in US$*000)

Professionals Administrators/ perators TotalNumber tid- Number Partici Number Partici

ot pan Amount of pa Amount of pants Amount

In-house courses 15 140 34.5 51 483 93.7 66 623 128.2External Courses-Admin. 61 632 151.6 26 345 54.8 87 977 206.4External Courses-Contracting 205.5 102.7 308.2Total 1995 76 772 391.6 77 828 251.2 153 1600 642.8

In-house courses 27 188 43.8 52 424 75.9 79 612 119.7External Courses-Admin. 38 603 147.2 36 385 60.8 74 988 208.0External Courses-Contracting 224.0 112.0 336.0Total 1986 65 791 415.0 88 809 248.7 153 1600 863.7

In-house courses 35 343 85.4 57 521 95.4 92 864 180.8External Courses-Admin. 24 331 77.5 41 405 64.7 65 736 142.2External Courses-Contracting 241.9 121.0 362.9Total 1987 59 674 404.8 98 926 281.1 157 1600 685.9

|1998In-house courses 27 300 76.2 61 586 108 88 886 184.2External Courses-Admin. 21 301 68.9 43 413 66.2 64 714 135.1External Courses-Contracting 258.9 129.4 388.3Total 1998 48 601 404.0 104 999 303.6 152 1600 707.6

1995-1998In-house courses 104 971 239.9 221 2014 373 325 2985 612.9External Courses-Admin. 144 1867 445.2 146 1548 246.5 290 3415 691.7External Courses-Contracting 930.3 465.1 1395.4Total 1995-1998 248 2838 1615.4 367 3562 1084.6 615 6400 2700.0

Audio-visual equipment 44.8Classroom equipment 55.2Total Training Program 2800.0

-75- Ana I

T FrIROAD SECTOR LOAN

Economic AnalysisGeneal

1. The main economic analysis of the 1995-1998 Road Maintenance Program wascarried out by the Ministry of Public Works using version m of the Bank's Highway Design andMaintenance Standards Model (EDM-l)1 on the Chilean national road network of 75,588kilometers,2 excluding 3,835 kilometers of Portland cement concrete (PCC) roads (Table 1.1).The HDM-M model cannot be used for cement concrete roads because it does not have sub-models to simulate rigid pavement deteroration. Accordingly, these roads were analyzed usinga separate model developed for the Ministry of Public Works by the University of Chile.

HDM HI Microcomputer Anaysis

2. The HDM model predicts the life-cycle costs of different road desip and1'tenance options, including different time staging strategies for a specific road or alignment,or for groups or UIinks' of roads. It estimates costs for large numbers of alteravemaintenance policies on an annual basis, and can thus identify policies with the highest netpresent value (NPV) at a given discount rate, or the highest internal economic rate of return(IERR). The objective is to identify a combination of maintenance policies that exacts the lowestlife-cycle costs from society, including both road users and road authonties. The modelgenerates vehicle speeds and opeatng costs and road detenioraton and maintenance costsaccording to a given set of road design and maintenance standards, traffic volume, axle loads,and environmental conditions. The IRR of the 1995-98 maintenance program is estimated to beabove 55% and the NPV at US$1,904 million (see Table 1'.1.

3. For the H1DM-i evaluation, the road network was disaggregated according to thefollowing characteistics:

(a) ge hic locagn (to capture climatic and soil effects), including four zones:north, central, south, and extreme south;

(b) su , including four ty: asphalt concrete, surface treatment, gravel, and earth;

(c) Matf, including five levels: low, medium, high, extra high, and special; and

'Von Thrs for Pern Compute, HDM-I-PC, adjustd to Cilan condition.

2Including 5,992 kilometr of asphalt oemmt, 3,124 kilomets of surice tet, 32,238 klomts of gavaland 34,234 klomeer of eah rads.

-76 - An%

(d) rad conditin, including ftree categories: good, fair, and poor. Table 1.2 andFigure 4 show the breakdown of all road types according to their condition as ofJuly 1994.3

This disaggregation identified 120 homogenous groups of roads, or links, suitable for evaluation.Table 1.3 shows the disaggregation of asphalt concrete roads into 34 links; similar disaggregationyielded 23 links for surface-treated, 48 for gravel, arid 15 for earth roads. Table 1.4 shows thedistribution of paved and unpaved links in the Central Zone according to surface type and trafficlevel.

4. The data for this analysis come from actual measurements taken in the field. Sincethe early 1960s, the Roads Directorate has been compiliiig and publishing statistics on trafficdensity and classification for all roads every two years. The 1992 data were used for thisanalysis. The 1992 classification of road conditions was based on an updated road inventory,visual assessment, and (for pavements) a detailed evaluation using roughness meters, an opticalperiilometer, and a deflectometer. Considerable effort was made to develop an informationsystem for pavement management, including the design of software to handle the data requiredby the HDM model, such as: (a) geometry and history of the road; (b) surface type, base type,pavement compositior. and strength; (c) incidence of pavement cracldng, rutting, raveling,potholes and other blemishes; (d) degree of strrface roughness and pavement deflection; and (e)shoulder and drainage conditions. Table 1.5 shows the average value of each road charactistcfor asphalt concrete links in the Central Zone. Surface condition for gravel roads was assessedaccording to the remaining thickness of gravel, .maximum aggregate size, plasticity index androughness. lIowever, as the surface condition of unpaved roads vanes with traffic volume andblading frequency, it was assessed according to the quality of road matials, mesured bymechanical soil testing. Year-round trafficability was also used to classify road corwition forboth gravel and earth roads.

5. Basic cost inputs were denved from experience gained under the First and SecondRoad Sector Projects. For pavecu roads, this included unit costs for routine maintenance, potholepatching, severa kdnds of surface dressings, overlays, and typical rehabilitation on asphaltconcrete or surface treatment (see Table 1.6). Similarly, for unpaved roads, unit costs forroutine maintenance, blading, spot regraveling, and full regraveling were derived from actuapast expenditure figures both by contract and by force account (see Table I.7).

6. Policy optimization for a given set of conditions was carried out first at the linklevel. In formulating maintenance policy alternatives for final evaluation, it was necessary totest a wide range of maintenance options. Table 1.8 lists 16 maintenance policies retined forpaved links after elimination of more than 100 used in earlier runs. The base case consists of:(a) basic routine maintenance; (b) patching when demand reaches 80 square meters perkldometer; (c) rehabilitation at high levels of roughness (Intemational Roughness Index (IRI) of

3 See footnote a of Table .2 for an explanation of thd cteia used to define road conditions.

77 - Annej

8 for roads with average daily traffic (ADT) less than 1,250 vehicles per day); and (d)reconstruction at MI 7 for roads with ADT higher than 1,250. In addition, maintenanceoperations on paved roads (in any condition) may include any combination of patching,resealing, overlay, and pavemenit reconstruction. The base is compared with these other policycombinations to evaluate the incremental benefits from increasing maintenance expenditures.

7. Table I.9 shows 12 maintenance policies evaluated for gravel and earth roads. Thebase case here includes: (a) nominal spot regraveling; (b) grading every 10,000 vehicle passesand at least once a year; and (c) for roads having an ADT higher than 300, paving when ADTreaches 900 vehicles per day or after the year 20O. The altemative maintenance policiesinclude: (a) spot regraveling and blading at various frequ ncies between 2,000 and 8,000 vehiclepasses; (b) spot regraveling and blading as in (a), but with regraveling of up to 15 cm of newgravel when gravel thickness has worn down to a nominal 5 cm; and (c) for roads having anADT above 300, paving when ADT reaches 450 vehicles per day or before the year 2000,whichever comes first.

8. Traffic composition was divided into five vehicle categories ranging from lightvehicle to bus. Detiled information on fuel type, gross vehicle mass, payload, equivalentnumber of axles per vehicle, normal vehicle service life, hours and kilometers driven per year,and average number of passengers per vehicle was gathered for each category. Finally, unitcosts of vehicle ownership, maintenance, and operation were calculated in terms of financial andeconomic costs (see Table 1.10).

9. Traffic volumes and classification were obtained from routine observation at tollstations and from biannual counts (see Table 1.1). Annual traffic growth rates were projectedfor each zone, each surface type, and each vehicle type, varying from 7% to 8% for lightvehicles, from 5% to 7.5% for buses, from 4% to 6.5% for light trucks, and from 4.5% to 6%for heavy trucks.

10. All relevant maintenance policies were tested on all links and evaluated over a 15year period, from 1994 to 2008, to obtain (a) the NPV of each altenative when compared withthe base case at a discount rate of 12%, and (b) the IERR. With no budgetary constraints, theoptimum policy for each link is that which maximizes the NPV.

Results of the Econcomic Analysis

11. The results of the HDM analysis are summarized in Table 1.1. For each surfacetype, length, expenditures for the 1995-1998 period, and the NPV and IERR computed over a15-year period are shown. Part A of the table shows the combination of technicallyrecommendable maintenance operations yielding the highest NPV. The 1995-1998 expendituresrequired for this combination, totalling US$1,175.7 million, exceed the amount considered inMOP's budgetary projecdons. Therefore, to reduce expenditures, lower maintenance policiesfor gravel and earth roads, which account for 71% of the total network but carry only 27% oftotal traffic, were selected (see Part B of Table 1. 1). The IERR is 51% for asphalt concrete,

-78-

60% for surface treated, and more than 55% for gravel and earth roads. An IERR of 54% forPortand cement concrete roads was obtained independently. The combined IERR of the totalmaintenanceprogram is above 55%. With total expenditues of US$890.1 million over the four-year period, the NPV computed over a period of 15 years is US$1,904 million. The HDManalysis also identified the need to upgrade 2,565 ldlometers of gravel roads to paved standardsover the four-year period, requiring an expenditure of US$378 million and yielding an NPV ofUS$680 miL1ion and an IERR over 55%. However, as this upgrading component is regardedas an investment operation, it has been included in the investment component financed entirelyby the borrower.

12. The HDM analysis predicts the annual quantity of works required for differentmaintenance operations and their corresponding expenditures. Table 1. 12 shows this informationfor asphalt concrete roads. The analysis can be used to establish relative priority among allmaintenance operations within each region as well as nationally. Table 1.13 shows the nationaland regional priontization of individual maintenance projects for asphalt cement and surfacetreated roads in the Fourth Region. The table also shows, for each project, the NPV, IRR,annual capital expenditures, recurrent expenditures, total expenditures over the four-year period,and accumulated length of works, NPV, and expenditures witiin the regin over the four-yearperiod. For planning purposes, this information (and even more deailed information such asthe foreign exchange component or a breakdown of current costs into labor, materials,equipment and overhead) can be ordered in any way to facilitate national and regional planning,allocation of funds, and many other praccal tasks.

-79 - Anme ITable I-1

THIRDROAD SECTOR PROJECT

Analysis of Road Network, commended Ependitures,and Economic Indicators

L0qth Ex -e NPVD JER(a (US$ m) (US$ Mi) %)

A WITHOUT BUDGErARY RESTRICTIONS

ASPEALT PAVED ROADS

Asphalt Conre S,992 215.1 577.0 51Surface Treat_nt 3,124 152.9 219.0 60Subtotal 9,1U6 368.0 796.0 54

UNPAVED ROADS

Gravel 32,238 300.7 277.0 5s

Earth 34,234 337.8 185.0 SSSubtotal 66,472 35. 4C2.0 55

PORTLAND CEMENT 3,83S 169.2 958.0 S4CONCRETE ROADS

TOTAL 79,423 1,175.7 2216.0 55

B WITH BUDGETARY RESFEICTIONS

ASPHALT PAVED ROADS

Asphalt Concete 5,992 215.1 S77.0 S1Surface Treatment 3,124 152.9 219.0 60

Subtotal 9,116 36.0 796.0 54UNPAVED ROADS

Gravel 32,238 211.7 90.0 SSEarth 34,234 141.2 60.0 SS

Subtota 66,472 3S2.9 158.0 55

PORTLAND CEMEN 3,835 169.2 958.0 S4CONCRETE ROADS

TOTAL 7.2 898.1 1.904.0 S 5

Som: MOP, VIldod, Aqu 1994.

' US$1 = Ch$425 for expendiures between 1995-1998.b Discounled 12% in the pedod 1995-2009.

-s8- _

Table 1-2

CHETHIRD ROAD SECTOR PROJECT

1994 Condtion Status of Network0(length in kilometers)

(Good %air Pbor TOTALPAVED ROADS

Asphalt Concrete 3,575 1,467 950 5,992Surface Treatmeto 1,560 720 844 3,124FCC 1,611 1,726 498 3,835SUBTOTAL 6,746 3,913 2,M92 12,951

52% 30% 18% 100%UNPAVED ROADS

Gravd 4,348 22,1S4 5,736 32,238Earth 1,019 15,515 17,700 34,234SUBTOTAL 5,367 37,669 23,436 66,472

8% 57% 35% 100%

TOTAL 12,113 41,582 25,728 79,423

15%z 52% 33% 100

Some: MOP, Valdad, AuSg 1994.

0: Paved made fie ofbblea ng m a uny iac Sn preventiveaiat e (cracig < 1 %, podho < 0.01S, andRm< 3). Unpaved gamvl rods with gavel thicns> 10cm needi oly rtin biaf and cpot apoiz (prhing), and wout overiemunal. Baith rade - thob gowt0 th yewt.

f&. Paved roade with u cm blmishes (crag < 30%, pohe < 0.1%, an MI betee 3 and 4) qng thin ovelays.Unpaved gravel roads wih a thickne < 10 cm sneedig mj biding andlor tegaveln, ad Ia than 50% of toa legt withoveuss mael. Bart teeds unpasesb ls ta five days per year.

hWy Paved rads with. n blem (cacking> 30%, potoes > 0.1%, and I > 4) requiig thick oveays atcongurtdc. Unpaved gave roads wih grve thckn < Scm neding profieS rforafion an reSrveing, and m than 50% of

towl leng witb oveize Barth toed u_psbb mo ta thrty day perw year.

-81- AnnA ITable 1-3

CHILETHIRD ROAD SECTOR PROJECT

Idenltifcation of Homogeneous LinksAsphalt Concrete (A)

Good Fair PoorADT Range (teno) (11a) (Mal)

NORTERN ZONE (N

< soo (L) NALB NALR NALM

500 - 1000 ( NAMs NAMR NAMM

> 1000 ( NAHB NARM NAHM

CENTRAL ZONE (C)

< 750 (L) CALB CALR CALM

750 - 1250 (M) CAMB CAM-

1250 - 2250 )CAR CAHR CACM

> 2250 CAXB CAXR CAXM

SOUTERN ZONE (S)

< 750 (L) SALB SALR SALM

750 - 1250 (H) SAME SAMR SAMM

1250- 2250 (H) SAHB SAHR SAHM

> 2250 (X) SAXB SAXR SAXM

EXTREME SOUTH ZONE (&USrRAL- A)

< soo (L) AAL - AALM

Source: MOP, VfS1did, Auh. 194.

-82 - Annex ITable 1-4

CH1SETDM ROAD SECTOR PROJECT

Length of Roads by Surface Type and ConditionCentral Zone(in kilometers)

AfT Rase God Ftir P= A .

PAVED ROADS

Asphut Cnl

< 750 491 31 29 551

750-1250 133 33 0 166

1250 - 2250 386 63 31 480

> 2250 553 135 32 720

Subtotal -I63 262 92 1917

Surface Treatment

< 750 239 60 77 376

750 - 1250 253 94 64 411

1250 - 2250 124 67 53 244

> 2250 90 48 36 174

Subtotal 706 269 230 1205

TfIal Pwwd 2269 -11 122 312Lm

UNPAVED ROADS

< SO 61 598 450 110950-100 43 788 209 1040

100 - 300 430 2018 502 2950

300 - 450 245 614 85 944> 450 154 416 21 591

Subotalo 933 4434 1267 6634

Emah

< SO 76 2650 3533 6259

50 - 100 85 1125 806 2016

100 - 300 151 1844 589 2584

> 300 52 248 132 432

Stota 364 5 0 1Tnf.l nmsed 1302 1ism] 611 1272

Soure: MOP, Vid, An 1994.

CHILETHIRD ROAD SECTOR PROJECT

Asphat Concrete Lnks CharaceristicsCeubW Zone

mmns 8333 IN 31 oufm 333& CtIVA LAMB 83t186 Pk (3 cUaR src 3OUG TOTAL NARROW ETiMv FMLOW To= WIP AtM VA"L lmuN VALL 1TM "DIT WDT LAM 8 S TUAL P= CRAM CAC WRAS MOLIM AV.L anNmD. lAS

b - - n - I 13 Smm S%m S#5s am Sam ua

CAtL POCK 29 483 42 450 45 50 7.0 2.0 2 10 1.81 3.7 28 23 6 0.35 0.2 0.17 17

CAM! FAIR 31 488 42 450 45 50 7.0 2.0 2 10 2.00 3.0 7 3 7 0.01 0.1 0.00 14

CALI GOOD 491 36 42 450 20 20 7.0 2.0 2 10 2.25 2.6 0 0 1 0.00 00 0.00 9

CAM FAIR 33 1000 42 450 20 40 7.0 2.0 2 10 2.S4 3.3 5 3 2 0.01 0.0 0.00 15

CAM GOOD 133 9M0 42 450 20 30 7.0 2.0 2 10 3.74 1.6 0 0 1 0.00 0.0 0.00 8

CAM POM 31 1251 42 450 30 20 7.0 2.0 2 10 2.96 4.0 52 31 1 0.02 0.2 0.12 1?

CAM FAIR 63 1670 42 450 45 20 7.0 2.0 2 1o 3.00 2.3 5 2 1 0.00 0.0 0.00 8

CAB GOOD 386 166 42 450 20 20 7.0 2.0 2 10 3.91 1.1 0 0 0 0.00 0.0 0.00 7

CAXl POOR 32 3S07 42 450 20 15 7.0 2.0 2 10 2.80 2.5 37 25 2 0.16 0.1 0.00 Is

CAX lAt 135 4501 42 450 30 15 7.0 2.0 2 10 4.00 1.9 9 4 3 0.0 0.1 0.00 12

CAR GOOD 55 4052 42 450 20 15 7.0 2.0 2 10 4.82 2.0 0 0 0 0.00 0.0 0.40 8

8mlMO rhA hq 1994.

OTAL LUIH., 1917 km

As N lAmo&ft;3:ddmm llCtsmlot L4w T=ft ; swb Tsaft ift No TomIL kwcm_ I. himB : , tcn"

-84- AnnexTable I

CHILETHIRD ROAD SECTOR PROJECT

Unit Cost of Maintenance Operations-Paved Roads(UJS dollars)"

Cost Foreign

MAINTENANCE OPERATIONS Unit Finandal Economic Foreign Component (%)

Patching xn2 11.56 8.27 4.39 38%

Slurry Seal m2 1.70 1.21 0.95 56%Fog Seal 0.55 0.40 0.31 57%Simple Surface Treatment m 2 1.70 1.21 0.88 52%Double Surface Treatment 2 .34 2.37 1.80 54%Overlay of 5 cm at 3 IRI m2 10.45 7.39 5.44 52%Overlay of 5 cn at 4 IRI 11.57 8.17 6.02 52%Overlay of 5 cm at 5 IRI i 2 12.67 8.95 6.59 52%Overlay of 8 cm at 3 IRI n2 14.22 10.04 7.39 52%Overlay of 8 cm at 4 MIR m2 15.34 10.82 7.97 52%Overlay of 8 cm at S 11? in 16.44 11.60 8.55 52%Reconstr. North Zone 6 cm M2 14.14 10.09 7.21 51%Reconstr. North Zone8 ncm 2 16.32 11.63 8.49 52%Reconstr. Other Zones" i2 26.75 19.60 11.77 44%

(Type 1)

Reconstr. Other Zonesc In2 29.13 21.31 13.40 46%(Type 2)

Rehabilitation with mi2 11.55 8.37 5.66 49%Surface Treatmnent

Routine Maintenanced

North Zonel km/yr 874.84 6S2.44 393.68 45%Central Zone km/yr 909.35 679.58 409.22 45%Southe Zones km/yr 964.90 72011 434,28 A45

Source: MOP, Vilidad, Augt 1994.

' UStl Ch$425b Type 1 - 10 cm (baw 5 cm and S cm waing courso).' Type 2- 13 cm (ba 8 cm and 5 cm wag coums).4

RoUtin mne : 50% by fo1c account and 50% by contQac* In the North Zone, pAcee have boon incroed by 50% duo to hig ptanost coat.

- 85 - Annex-ITable 1-7

CHILETHIRD ROAD SECTOR PROJECT

Unit Cost of Maintenance Operations-Unpaved Roads(in US dollars)8

Cost ForeignMAINTENANCE OPERATIONS Unit Finands Econonic Foreign Component (%)

Grading Only km 43.91 31.07 20.62 47%Grading and Compacting km 98.78 71.96 46.43 47%

North Zone

Grading and Compacing km 113.46 83.14 54.46 48%Centnd and Southern Zones

Weighted Average of Grading km 57.48 41.29 27.02 47%North Zone

Weighted Average of Grading km 61.13 44.16 29.34 48%Centrl and Southern Zones

Regraveling ln3 16.00 11.86 7.56 47%

Spot Regraveling ln3 5.28 3.96 2.21 42%

Paving (Upgrading) tn2 21.06 15.51 8.94 43%Graveling of Earth Roads km 33.10 24.13 15.21 46%Routine AMainternwe

North Zonec kmyr 90.00 67.23 24.30 27%

Central Zone kmlyr 157.36 123.34 44.06 28%Southern Zones km/yr 22S.82 171.04 63.23 28%

Source: MOP, Vualidad, Augt 1994.

'US$I - ChS42SbROutine Miens: 50% by or acoit nd So% by cOnuLin the Notdh Zone, pricem hao ben inceard by 50% due t Wie transport Coow.

-86 - Annex ITable I-8

CHILETMIRD ROAD SECTOR PROJECT

Maintenance Standards for Paved Roadsli; A4tman Ahi L A _imn -1aPBASE ?OLICY

Patching (ADT < 750 vpd) BAS1Rebabilitation with surfce treatment at 8 IRI BAS2(7S0 vpd < ADT < 1250 vpd)

Aspbalt reconsrcon Type 1 at 7 IRI BAS3(1250 vpd < ADT < 4000 vpd)'

Aspbalt rconstruction Type 2 at 7 IRI BAS4(ADT > 4000 vpd)

PROJECT POLICIESPOOR CONDmonY

Overlay 8 cm years to 4 Ovaisy 5 cm at 4 IRI RD#AReconstruction years 1 to 4 Overlay 5 cm at 4RI REJlAReconstuion Type 2 atS W!M RECS

FAIR CONDMTIONOverlay S cm yos I to 6 Overlay 5 cm at 4 IR RS#AOveday 8 cm yeas lto 6 Oveday S cm at4IRI RD#AReontuction Type 2 at 5IRP RECS

GOOD CONDMON

Slurry sad every 4 years Overlay 5 cm at 4 IRI PLC4Slurty seal' Overay S cm at4flM PLL2Surfce treatment 12 mm' Overlay 5 cm at 4 IRU PLS2Surface tratment 20 mmf Overay S cm at 4 MIR P1D2Overlay 5 cm at 4 RP RS40URamowWamn TM 29 ut -1 P_ ='

Smuts.: MOP, Vsilidad, Au_t 1994.

Mamm patchi* mtwBa policy: 80 2 /IkmnlyrOlew polici.e:15 a/mlWyr. Noddh Zos25 in/tknVyr. Cel Zoos20 oA=Iyt, Southr Zons15 012kfly21t, a Seou& Zone

Nodh Zoas Rcooulacdoa Type I -6 cam vinyRYo_ucioType 2 - 8 cm ovday

01kw Zoass Rwoao ctioo Type I - 10 cm (ase S am and ovity S om)Rw_SaucdonType2 - 13 c bta8 0cma advdy5 cm*

b The opendo wet defind with Ut objecdtve oa ompuing bowe c aternatv that s al coiliy foeible.* Moes opemtl a usal eotan 20% of th osseA awlk.

- 87 -AexTable I-9

CHELETHIRD ROAD SECTOR PROJECT

Maintenance Standards for Unpaved Roads

Grading FrequeyDescription (vehile passin) Regravding CodeBASE POLICY

Grading if ADT < 300 vpd 10,000 BAS1Grading and rqgravding if 4,000 15 cm if thickne BAS2

ADT > 300 vpd NU below 5 cmand paving when ADT > 900 vpd for inks with ADT < 300 vpd in I9Oor paving in year 2001 for links with AlT > 300 vpd in 1990

PROJECT POLICIES

Grading at 2,000 No PL02

4,000 No PLO4

6,000 No PL06

8,000 No PLOS

Grading and rwgraveling at 2,000 15 cm if thickns R102fails below 5 cm

4,000 * 104

6,000 R106

8,000 1R108

Paving in years 1 to 6b CST#Futnire paving if ADT > 4W PAVI

Scuae: MOP, Vuad, Auu 1994.

Maxmm pabting at: All poUci:3 fkmlyr, Noib Zoe5 =n/lr, Cel Zon7I m/hgyr, South Zones

Gdng at a im &queoyoftwico a moth and mii _qrayof oa ye.b Applcbirnb wilt AVr > 300 vpd.* Appfiosbe Bob with low uti. which may be paue in the Awn.

-88 - AnnexTable 1-10

TH IROAD SECTOR PNOJECT

lnanclal anmd Economic Unit Costs of Vehicle Fleet(US dollar)

Light Pkup Liht EavynTEM UNIT Vdidces Trucks Tru Trucks BusesFINANCLAL COSrS

New Veldce US$/veh 11,306 12,579 33,732 87,858 138,458Tires USS/tire 39.21 59.75 169.40 230.80 243.99

Maintenance US$/br 8.25 8.25 8.25 8.25 8.25Crew Tim US$/br 0 0 0 0 0Montsyear xnxths 12 12 12 12 12Gamsoline USS/It 0.39 0.39 - - -

Diesel Fdu US$/f - - 0.33 0.31 0.31Lubricants us$IIt 3.19 3.17 2.78 2.60 2.60ECONOMIC COSTS

Now Vehide US5/veh 8,918 10,079 27,196 71,748 110,601Tires USSt/fe 33.97 51.79 14S.60 198.47 198.53Maintenanc US$Ihr 6.99 6.99 6.99 6.99 6.99value of Tine US$/brlveh 5.97 8.31 4.48 4.48 30.89Crew Time US$/hr 0 0 0 0 0Mont"syear mnxths 12 12 12 12 12Gasoine USS/t 0.20 0.20 - -

Dines Fuel US$/It - - 0.20 0.20 0.20

udbicadnts U8$/t 2.80 2.78 2.44 2.28 2.28

US$1maa$42UScme: MOP, VIaldad, AUgM 1994.

-89 - Annex ITable I-lI

CHILETHIRD ROAD SECTOR PROJECT

Average Daily Traffic (ADI) for Asphalt Concrete RoadsAccording to Condition and ADT Range

Incuding Annual ADT Growth Rate by Vehicle TypeCentral Zone

Light Pickup Light HeavyADT Range Vehdies Trucks Trucks Trucks Buses TOTAL

POOR CONDITION

< 750 157 186 70 23 47 483

1250 - 2250 629 503 232 169 175 1,708

> 2250 1,569 1,012 394 711 524 4,210

FAiR CONDMIION

< 750 183 176 69 12 48 488

70- 1250 373 318 174 66 69 1,000

1250 -2250 610 332 181 396 151 1,670

> 2250 1,956 957 462 694 432 4,501

GOOD CONDTIION

<750 130 134 51 24 28 367

750- 1250 390 309 139 68 74 980

1250- 2250 685 433 191 244 133 1,686

> 2250 1,726 906 397 635 388 4,052

ANNUAL ADr GROWTH RATE

8.0% 7.5% 6.5% 5.5% 7.5%

Soure: MOP, Vialidad, AAug 1994.

-90- Ane ITable 1-12

CHBJETHIRD ROAD SECTOR PROJECT

Annual and Total Works Quantities and Expenditures for DifferentTypes of Mintenance Operations for Asphalt Concrete Roads

YearTota

Description 199s 1996 1997 1998 Period

LENGTH IN KILOMETE

Seals 353 370 386 420 1,529

Surface Treatnen_ 32 39 39 39 149

Overlays of S an 59 66 69 69 263

Overlays of 8 an 348 403 652 707 2,1O

Rehabibltation 227 227 48 0 Su0

TOTAL 1,019 1,105 1,194 1,235 4,5

EXPENDiTURES IN US$ MILLION

Seals 4.2 4.4 4.6 5.0 18.2

Surface Treatme 0.4 0.5 0.5 0.5 L9

Overlays of S an 4.8 5.3 5.6 5.6 213

Overlays of 8 an 37.0 42.8 69.3 75.2 2243

Rehabilitation 30.0 30.0 6.3 0.0 66.3

TOTAL 76.4 83.0 86.3 863 332.0

Sounr: MOP, Vialdad, AMus 1994.

CHILETHIRD ROAD SECTOR PROJECT

Tabe H.13: Pdod.zaton of Maintenance of Asphalt Suled Links In Region IV; Expenditumes a NPV In US Dolblmults$=425 Ch4)

PRIORITY CAPITAL EXPENDITURESCON TOTAL TOTAL ACCUM TOTAL

ROAD LNGTH DITO LINK POLIC tPV/ NPV RECUR CAP+REC LNWTH ACCUM ACCUMNAT RES CODE "m ON ADT CODE Y INV LINK tRR I%I YRI YR2 YR3 YR4 TOTAL EXP EXP (km) NPV EXP

2 1 64AO6 3 R 16056 CAXR RD4A 9.6878 3.5070 65 0.000 0.000 0.000 0.322 0.322 0.0108 0.3328 3 3.61 0.332816 2 64A006 tO B 86s6 CAX PnL2 5.1305 4.8483 >100 0.000 0.000 0.000 0.000 0.000 0.0360 0.0360 13 8.36 0.368817 3 64A005 I B 8656 CAXB Pnu2 5.1032 0.4848 >100 0.000 0.000 0.000 0.000 0.000 0.0036 0.0036 14 8.84 0.372470 4 640036 5 B 4000 CAXB Pnu2 2.3685 1.1203 >100 0.000 0.000 0.000 0.000 0.000 0.0180 0.0180 le 9.96 0.390471 5 646010 4 B 4000 CAXB PLI-2 2.3849 0.8963 >100 0.000 0.000 0.000 0.000 0.000 0.0144 0.0144 23 10.68 0.4048102 6 64C486 2 B 3358 CAXB PnL2 1.9906 0.S762 >100 0.000 0.000 0.000 0.000 0.000 0.0072 0.0072 25 11.23 0.412011S 7 64AOOS 4 R 3119 CAXR RD4A 1.644 0.9083 65 0.000 0.000 0.000 0.429 0.429 0.0144 0.4434 29 12.14 0.8554li6 8 84A0OS 2 R 3119 CAXR RD4A 1.8769 0.4542 65 0.000 0.000 0.000 0.215 0.215 0.0072 0.2222 31 12.60 1.0776117 9 84AO05 2 R 3119 CAXR RD4A 1.8769 0.4542 66 0.000 0.000 0.000 0.215 0.215 0.0072 0.2222 33 13.05 1.2998118 10 84AOOS 4 R 2146 CAHR RD2A 1.6665 0.9061 41 0.000 0.429 0.000 0.000 0.429 0.01o2 0.4442 37 1as6 1.7440119 11 04AO05 2 R 2146 CAHR RD2A 1.s611 0.4641 41 0O30 0.21S 0.000 o.oo0 0.215 0.0076 0.2226 39 14.41 1.9666122 12 84AOOS 2 B 3119 CAXB P1±2 1.8487 0.3494 >100 0.000 0.000 0.000 0.000 0.000 0.0072 0.0072 41 14.76 1.9738123 13 84AOO6 23 B 3110 CAXR PLU2 1.8476 4.0165 >100 0.000 0.000 0.000 0.000 0.000 0.0832 0.0832 i4 16.78 2.0570126 14 84AOOS 3 9 3119 CAXB PLL2 1.8464 0.5241 >130 0.000 0.000 0.000 0.000 0.000 0.0108 0.0108 67 19.30 2.0878128 1t 84AO0 9 R 2090 CAHR RD2A 1.8156 1.9981 41 0.000 0.968 0.000 0.000 0.966 0.0344 1.0004 76 21.29 3.0682134 18 84E801 I B 3000 CAXM PLL2 1.7695 0.16t1 >100 0.000 0.000 0.000 0.000 0.000 0.0036 0.0038 77 21.46 .07181ss 17 84AOO5 2 B 2156 CANS PLC4 1.S684 0.1537 37 0.024 0.000 0.000 0.000 0.024 0.0072 0.0312 79 21.61 3.10301s5 18 64A006 2 R 1804 CAHR RD2A 1.6s27 0.3813 41 0.000 0.215 0.000 0.000 0.215 0.0076 0.2226 81 22.00 3.3256157 19 84A006 2 R 1804 CAHR RD2A 1.5627 0.3813 41 0.000 0.215 0.000 0.000 0.216 0.0076 0.2228 63 22.38 3.S462 01o6 20 64A00S 46 B 2140 CAHl PLC4 1.6523 3.7472 37 0.5683 0.000 0.000 0.000 0.663 0.1776 0.7606 132 26.12 4.3066 -161 21 64AOOS 7 S 2148 CAHB PLc4 1.6s16 O.653 37 0.083 0.000 0.000 0.000 0.083 0.0252 0.1082 139 26.66 4.4170163 22 64A006 16 R 2663 CAXR RD4A 1.5409 2.9740 66 0.000 0.000 0.000 1.717 1.717 0.05668 1.7736 155 29.63 6.190816s 23 64AOO 6 R 2526 CAXR RD4A 1.6237 0.9203 65 0.000 0.000 0.000 0.537 0.637 0.0176 0.6546 160 30.6s 6.74S4166 24 84AO06 2 R 2628 CAXR RD4A 1.5211 0.3681 65 0.000 0.000 0.000 0.21S 0.216 0.0072 0.2222 162 30.92 6.9676167 25 84AOO 2 R 2628 CAXR RD4A 1.6211 0.361 65 0.000 0.000 0.000 0.215 0.215 0.0072 0.2222 184 31.23 7.18981s8 26 84AOOS 17 e 258 CAXM PLU2 1.5129 2.4312 >100 0.000 0.000 0.000 0.000 0.000 0.0618 0.0616 181 33.72 7.2514169 27 64Aoos 23 8 2090 CAMS PLC4 1.5105 1.7114 37 0.273 0.000 0.000 0.000 0.273 0'n136 0.3566 204 35.43 7.6080172 28 84AOOS 2 B 2528 CAXB PLL2 1.4094 0.2832 >100 0.000 0.0( 0.000 0.000 0.000 0.0072 0.0072 206 3S.72 7.6152178 29 64D419 4 8 2000 CAMS P1C4 1.4457 0.28's8 37 0.048 O.XOO 0.000 0.000 0.048 0.0144 0.0624 2t0 36.00 7.67761s6 30 640041 6 8 2392 CAXB Pnu2 1.41t0 0.8040 >100 0.000 0.000 0.000 0.000 0.000 0.0216 0.0216 216 36.60 7.6992200 31 84AO06 7 R 2262 CAXR RD4A 1.3659 1.1528 65 0.000 0.000 0.000 0.761 0.751 0.0248 0.7766 223 37.96 8.4750202 32 M4ACOS 13 R 2262 CAXR RD4A 1.3664 2.1410 65 0.000 0.000 0.000 1.395 1.396 0.0464 1.4414 236 40.10 9.9184206 33 646041 6 R 1543 CAtHR RD2A 1.3411 0.8154 41 0.000 0.637 0.000 0.000 O.S37 0.0192 0.S662 241 40.91 10.4726206 34 84AOOS 0 S 2262 CAXB PL.2 1.3409 0.7603 >100 0.000 0.000 0.000 0.000 0.000 0.0216 0.0216 247 41.67 10.4942207 36 84AoOS 2 e 2262 CAXB PL12 1.3407 0.2534 >100 0.000 0.000 0.000 0.0o0 0.000 0.0072 0.0072 249 41.93 10.6014212 36 64AOOS 11 9 104 CANB PLC4 1.3035 0.7065 37 0.131 0.000 0.000 0.000 0.131 0.0400 0.1710 260 42.63 10.6724214 37 64AOOS 3 B 1804 CAMS PLC4 1.3020 0.1927 37 0.036 0.000 0.000 0.000 0.036 0.0108 0.0468 263 42.63 10.7192215 38 MACOS 6 B 1804 CAHB Pc4 1.3020 0.3854 37 0.071 0.000 0.000 0.000 0.071 0.0216 0.0926 269 43.21 10.8118221 39 648043 3 M 1524 CAHM ROtA 1.2937 0.4722 >50 0.322 0.000 0.000 0.000 0.322 0.0116 0.3336 272 43.80 11.t4S4232 40 646043 2 R 1416 CAHR RD2A 1.2268 0.299' 41 0.000 0.215 0.000 0.000 0.216 0.0076 0.2226 274 43.98 11.3680233 41 646o43 2 R 1416 CAHR RD2A 1.2268 0.2991 41 0.000 0.216 0.000 0.000 0.215 0.0076 0.2226 276 44.28 11.6906234 42 646043 2 R 141S CAHR RD2A 1.2258 0.2991 41 0.000 0.215 0.000 0.000 0.216 0.0076 0.2226 278 44.68 11.8132240 43 648043 3 M 1416 CAHM ROtA 1.2014 0.438 >60 0.322 0.000 0.000 0.000 0.322 0.0116 0.3336 281 45.02 12.1468242 44 4AOOS 8 R 1876 CAHR RD2A 1.t961 1.1626 4t 0.000 0.s66 0.000 0.000 .6s8 0.0304 0.8884 289 4eWtR 13.0352243 46 MACOS R R 1375 CAHR RD2A 1.1961 0.7266 41 0.000 0.537 0.000 0.000 0.537 0.0192 0.5562 294 46.91 13.5914

-92- Annex IFigure 1

ComRosition of Road Network According to Type of Surface

i1 9

Gravel 41 %32238 km

Asphalt Concrete 7%5992 km

Surface Treatment 4%3124 km . 'n

W ~~~~~~~~~~~~~Portland Cement Concrete(PCC) 5% 3835 km

(not analyzed with HDMlIl1-

Earth 43% CH)34234 km

Total Road Network 79,423 km

Condition of the Paved Road Network 1995

TOTAL Paved Roads Asphalt Concrete12,951 km 5,992 km

POOR POOR2292 km 950 km

18%_|l _ 16 % _

GOOD0 FAIR6746 km 1467 km

152%A 24% GOODFAIR 3575 km

3913 km 8~~~~~~~~~~~~~~~~~~~~0%30%

Surface Treatment Portland Cement Cotcrete (PCC)3,124 km 3,835 km

POOR498 kmPOOR 4tOkm

844 kmn 13%27% ~~~~~~~~~~~~~~~~~~~~~GOOD

1611 km'1%

GOOD1560 km

50%

FAIR ~~~~~~~~~~~~~~~~1728 km720 km 45%

23%

i i

Condition of the Unpaved Road Network 1995

TOTAL Unpaved Roads Gravel66,472 km 32,238 km

POOR GOOD5736 km 4348 km

18% 13%

GOOD5387 km

8%POOR FAIR

23438 km _ 22154 km315% 69%

Earth CD

34,234 km

GOOD

_ IR t~~~~AI 31°9k37669 km

57%

POOR FAIR

17700 km | 1555 km52% 4S%

CDED

-95- AnnextIFigure 4

Physical Targets 1995-1998(in km)

Asphalt Pavement

Surface 'reatment149 km

3%

Seals1529 km

34%Overlays2373 km3

52% - - --.---

Reconstruction502 kn

11%

Portland Cement Concrete (PCC) Pavements

ovordays lReconstruction432 km 218 km23% 11%

Underdrains1279 km

68%

Unpaved Roads

;6 Graveling ofEarth Roads

Upgradng t 640 kmUpgrdingg -. 1%

26_5 km E S

4%

62597 km79%

-96- Annex IFigure 5

Evolution of the Condition of the Road Network 1995-1998

1995 1995Asphalt Paved NetwQrk Unpaved Network

POOR GOOD1797 km 5367 km

20% POOR 8%

FAIR GOOD 23436 km O FAlR2187 km 51 35 km3%

24% 56% FAIR

37669 km67%

1998 1998

POOR POOR

FAIR 628 km 11045 km GOOD1914 km 7% 17% 19737 km

21% - 29%

~~ ~ GOOD-: :-~6576 km FAIR

72% 35690 km

54%

FJot includv*g PCC rosad

i,,w sns us se..nnpuodx3 B6s-968L

OL6 OZC OLZ OZZ OL L OZ L OL

tw - ----- --- -- ------ - / - - - --- -- 069

I I~~~~~~~~~~~~~~~~~~~~. ..................... -

.,~~ ~ ~~~~~~~ ~ ~~~......-........ ..... .. ..........

. K .~~~~~~~~~~~~~~. .~~~~~~~~~................ .. . .... ... 089

.......~~~~~~~~~~~~~~~~~~~~~~~~~~~~.~~--- ----- .............

I==,. _...... ............ ............. ......... -.. ....... . 06t

0vts

1w fsn uj M%ZI) AdN

sUsn)lipusax3 866bSL 'SA AdN 8OOZ-V66L :)IJOmIN p9oU POA9,

muw *Sn Ut sbOnNUodx3 866 t-966 I

099 009 Ogg 009 09t 00t o0e oo0

! | i zzz8m t 0

4 ~~~I 1 I 11

------------t-----~ ~ --- -t- -.------ 100/4

!~ ~~~~~~~~~~~~~~~~~~ iw i T Ni a

...... . .. .............. ............ ... ...... ...... .... ... ...... ..... .... . .......................... . ------........................... ..

IIIW s Sfl on(%aL N

seJn}!PUeOx3 8661-966L SA AdN 6OOZ-966L )IJ0M^9N peou pe^Aefll

-99- AnnexIFigure 8

Capital Costs (Us$ mill)

400 -- 7-

332

300

Recurrent Costs (US$ mill)

200- 200 -

150

100- _ 100 -___ _50 E 1

0~~~~~~~~~~1995-19981995-1998

Net Present Value (US$ mill)

1000 958

796-Capital and Recurrent Costs 800

(US$ mill) 680

400 - 6e 8 0

300 400-

200 -

200100

0 0 1995-1998 1995-2009

Asphkt PCC Unpaved UpOrading|

-100- Ann

CHILETHIRD ROAD SECTOR PROJECT

Efficiency Indicators and Monitoring Targets

A. Administration Efficiency Indicator

By June 30 each year starting in i995, the Road Directorate would submit tothe Bank a complete statistical analysis documenting that during the previous yearthe following efficiency Indicators were maintained below their respectively indicatedcei!;ngs: (I) Administration expenditures as percentages of total expenditures 9%

(ii) Supervision costs as percentage of respective civil works costs 8%(iii} Average percentage of physical contingencies in civil works contracts 8%(iv) Average percentage of ohysical contingencies in consultingcontracts 8A6(v} Calendar days elapsed between opening of bid andcontract award: for civil works contracts 28 days

for consulting contracts 30 days

B. Maintenance Efficiency Indicators

Not lasr than August 15 each year, starting In 1995, the Road Directorate would submitto the Bank a statistical analysis documenting compliance with the following tasks andindicators during the previous year:

(i} Road Maintenance Expenditures, (including Maintenance Administratior.Expenditures), as a percentage of total Road Expenditures to be higher than 56%Oii) Estimate of real unit costs of all routine and periodic maintenanceoperations performed by force account, disaggregated Into labor, equipment,fuel, rnaterials and overhead costs, established in accordance with thecost accounting system already in use under the First and Second RoadSector Projects(iii) Analysis and justification of annual Increases experienced by theabove unit costs(iv) Force account maintenance expenditures as percentage of totalmaintenance expenditures to be each year less than 18%Iv) Disaggregation of maintenance expenditures among the Basic Network,the Primary Communal Network and the Secondary Communal Network

-101- ADM

CHILETHIFRD ROAD SECTOR PROJECT

Efficiency Indicators and Monitofing Tares

C. Physical Taraets for the 99S-1998 Road Poargm

InvestmentsRoad Widening (two to four lanes) km 20 10 10 10 50Paving of gravel roads km 500 600 650 550 2100

Periodie Maintenance of Paved Roads:Seals and Surface Treatments km 386 409 425 459 1678Overlays km 479 556 84t 922 2805Rehabilitation kin 290 282 99 47 718

lili 1im Jifl 1mGlobal Contracts

Contracts in execution number 19 26 38 60 -Length of roads under maintenance km 6.080 6.800 10,000 13.200Expenditures US$mililon 28.4 35.5 42.3 69.5 166.7

Road Safety InfrastructureBike paths km 37.0 41.0 46.0 51.0 175.0Vehicular Overpasses number 3.0 6.0 6.0 9.0 24.0Pedestrian Overpasses 430.0 660.0 650.0 560.0 2200.0Roadsigne and Roadmarkings US$miliion 0.5 3.3 3.7 4.2 11.7

BQT Concession ProaramOoncession bids to be opened number 10 12 5 4 31Amount (US$ million) US*miilion 206.0 811.0 742.0 451.0 2210.0

D. PhysicEI Taroets for Routine and Periodic Maintenance for 199(By August 1 5 each year. new targets would be agreed for the following yesr)

By Force By99 Aeount Cgontrt TotalRoutine Maintenance

Right -of-Way clearing m2 1.800,000 7.000.000 8.800.000Cleaning of ditches m 700,000 600.000 1,300.000Gravel roads patching m3 100.000 120.000 220.000Grading of roads km 130,000 556000 1856000Maintenance of timber bridges m 12.000 200 12.200Sealing of cracks and joints 60,000 600.000 650.000Patching of paved roads and shouders m2 100,000 100.000 200.000

Periodic MaintenanceRegraveling km 900 1,000 1.900

- 102 -

Documents and Data Avaiable in the Project -ile

1. Road Tansw(a) Repdblica de Chile, MOP, Decreto 331 de Diciembre 9, 1991, "Establece

Organizaci6n y Funciones de la Direcci6r. de Vialidad .(b) Organizaci6n del MOP y de la Direcci6n de Vialidad.(c) Oscar E. Cdceres "Maintenance by Contract in Chile".(d) Vialidad: "Contrato de Conservacidn Global de Caniinos".(e) Vialidad: "Programa de Inversi6n Contratos Globales 1995-1998".(f) Vialidad: "Prposicin Distribuci6n Monto del Pr6stamo".

2. ession Progm(a) Repdblica de Chile, MOP, DFL MOP No. 164 de 1991, "Ley de Concesio'ies de

Obtas Pdblicas".(b) Repdblica de Chile, MOP, Decreto Supremo MOP No. 240 de 1991, "Reglamento

Ley de Concesiones de Obras Pdblicas .(c) Rep6blica de Chile, MOP, "Sistema de Concesiones de Obras Pdblicas Fiscales

Chileno .(d) Alejandro Magni "Grant Japonds Estado de avance y Financiero de las actividades

al 30 de junio de 1994'.(e) Plan de Concesiones. Programa de Estudios Perfodo 1995-1997.

3. Road Safe(a) New Traffic Law NO 18290, February 7, 1984.(b) Anexo N" 2 a la ley "Cuestionario Base .(c) General Eduardo Nuftez "Evoluci6n, Causas y Consecuencias del Accidente de

Trinsito en los dltimos veinte afios" 23 de Noviembre de 1992.(d) General Eduardo Nuflez "Informaci6n adicional sobre accidentes de trdnsito", 17 de

enero de 1993.(e) Vialidad "14 Tablas Estadfsticas sobre accidentes de trinsito en Chile".(f) Vialidad "Informacion Estadfstica Accidentes de Trdnsito en Chile Perfodo 1982-

1990'.(g) Vialidad: *Programa de Seguridad Vial en Chile Perfodo 1995-1998".(h) Minuta NO 409 "Actualizacidn Programa de Seguridad Vial".(i) Decreto 223 de 1993 "Crea Comision Nacional de Seguridad de TrAnsito".

4. Enxirmenl(a) Inforne Final del Estudio de Fortalecimiento Ambiental "EFA"; Tomo I "Resrmen

Ejecutivo', Tomo II Organizaci6n de la Actividad Ambiental en la Direcci6n deVialidad", Tomo m -Hr ntas para Preparaci6n de Estudios, and Tomo IV"Estudio de Casos*.

(b) Vialidad: "La Gesdon Ambiental de la Direccion de Vialidad del MOP".

-103 - Anex K

(c) "Resumen Ejecutivo de Informe Gesti6n Ambiental Aflo 1994".

5. Training(a) "Informe Gesti6n Capacitaci6n Aflo 1993 y Resumen Periodo 1990-1993".(b) "Componente de Capacitaci6n del Tercer Proyecto Sectorial de Carreteras".(c) "Actualizaci6n del Programa de Capacitaci6n 1995-1998"

6. Economic Evaluation.(a) "Tercer Proyecto Sectorial de Carretera, Analisis Econ6mico 1995-1998" (Agosto

1994).

7. Efficiency Indicators and Monitoring Targets(a) "Pargmetros de Evaluaci6n de Avance 1993", April 1994.(b) "Indicadores de Eficiencia y Metas de Monitoreo".

I ~~~~~~~~~SOULIcJ.o5d~ J5kPo~ 0.M0oni- A M AMERICA _

OSob~~~~~~~o,.a ~~~~~~~~J \ MIL'HILA ~~~~~~~~~~~~~~~~~.-. 20 20~~~~~~~~~2

- ,, p . CARDDNAi f 0./

-. -s / 1--~~~~~~~~C -

Z29

o REGIDN I _ 60D

|or - ~ MoroM BOLIVIA | t O _ ,

tollooro I< /l z o o 6 r o | W-oc> |~~~bPko d~~~~~~~~Poro ~~~~~~p <I~A RGENTINA

-, ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~_

ji~~~~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~ T. S. Rd..4&boIs

QANgoo -EGION 11 \Rxs MAttKOREGION XII

Tooo#flo ROoo6o~~~~~~~~~. / 6X\.1

Ct EooPt 1; il

REGION II MA OSECC

B. Ei t 9 o Twlb ~~~~~~CAUTIN gW lE! A . 2 8*gs$ g(9a40s=r. ' i

<

ui o I 4 VAIDIVXA - p

--, E, A /

Ut E-S: ./ ~~~~~~~~~~~~~ *1~~I < 6=_Z1i.eo

B Soo Sk'lR

FMotOOo ffi od.Os o 1&c4_t,> Tpcoo LL4NIHJUE CHILE

LA. 1 /J P EGI 1E *-. THIRD ROAD SECTOR PROJECTK \ U 'REGION i

CIII 9+* 111 / Rw ; ., . | |> : BOT CONCESStON PROGRAM:

, * .1 N t< t \. TUNNEL

.oll° Losisoor £t 4.Q>>, C AIRPORTS

27 ,It } ' \ :Yc 9,:570Y ^ ~~~~~~~~~ ~~~~~CLISTOMSCVolloro, J ~~~~~~~~~~~~~~~~~~~~~~CONCESSION ROADS IN EXECLMIONC

I " ' 7 T>bnbs r j _ -1 \ CONCESSION ROADS

o> t\~ooSP (PROJECTS PROGRAMMED)

f ~~ ARGENTINA1995 GLOBAL MAINTENANCE PROGRAM:

ffto. h- 8 ~. ' _' 2AREAS IMPILENTED

AREAS TO BE IMPLEMENTED ON

EXISTING BASIC ROADS:

¢ t >P*ie ! ' w t ~~~~~~~~~~~~~~~~~~~~~NATICNAI\LIQ<=>LtMARI REGION Xi57S - MAIN REGONAL

----- I' SECONDARY ROADS RNt ~~~~~~~~~~~~~~~~~~~~~~~~~~~MAIN RAILROADS

tO N 1 i Arv* RI~~~~~~~~~~~~~~~~~~~~~~~~~~~~PVERS

0?. INTERNATIONAt AIRPORTS

'-h- % CebNl ;MAJOR PORTS

1 SE 16°1 O N V \_ SAN FELIPE f ' i s NATIONAL CAPITAL

I REGION CAPITALS

V. SELECTED CITIES

VCDE N=S REGION BOUNDAPIES

- -- INTERNATIONAL BOUNDARIES =

r ^;gt K $; TAtAGANTE .. . . ,10 25 50 75 ILD KII

IL MEUPIUA _2zf > / \ *0 25 50 75 10TrSI OV;! , \27 >7RQnCQ9W \ . X ' _ _; *

_ Xt~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'